Good morning, everyone. Thank you very much for joining us. I'm Jerry Revich, from Goldman Sachs, and I'm really excited to have with me here Jim Umpleby, Chairman and CEO of Caterpillar, and Ryan Fiedler, Vice President of Investor Relations. Jim, Ryan, Caterpillar team, thank you very much for joining us. We're gonna run this conversation in fireside chat format. Before we dive in, Ryan has a few disclosures on forward-looking statements, as do I. Great. Thanks, Jerry. Really appreciate the opportunity to be here today. During today's discussions, we'll make forward-looking statements which are subject to risks and uncertainties. We'll also make assumptions that could cause our actual results to be different from the information we're sharing with you. Please refer to our recent SEC filings and the forward-looking statements reminder in our filings for details on factors that individually or in aggregate could cause our actual results to vary materially from our forecasts. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. We'll also refer to non-GAAP numbers. For a reconciliation of any non-GAAP numbers to their appropriate U.S. GAAP numbers, please see the appendix of the earnings call slides. I'll turn it back over to you, Jerry. Great. Let me just add to the legal discourse just for fun. We're required to make certain disclosures and public appearances about Goldman Sachs' relationships with companies that we discuss. The disclosures relate to investment banking relationships, compensation received or 1% or more ownership. We're prepared to read aloud disclosures for any issuer upon request. However, these disclosures are available in our most recent reports available to U.S. clients on our firm portals. Disclosures and updates to these disclosures are also available by ticker on the firm's public website at gs.com/research/hedge.html. All right, with the lawyers now satisfied, Jim, I'm wondering if we could start the conversation. Six years since you became CEO, the company's doubled its earnings power, delivering sharply higher margins in construction and resources in particular. I'm wondering, to frame the conversation looking back at the past six years from your seat, you know, what have been the two or three most significant drivers of that performance? Well, thank you, Jerry. It's great to be back here at CONEXPO again, after the last three years. We introduced a new strategy for profitable growth back in 2017. It was based on a number of elements. The framework we used is what we call the Operating & Execution Model, which requires that our leaders look at our business at a much more granular level, understand by product, by market, by application, where we're creating shareholder value and where we're not. By providing that visibility, shining a light on each product, application, and market, we were able to challenge our leaders to improve the financial performance of those products that were underperforming in our view. I think our team's done a very good job of improving the financial performance on a number of the products and businesses. There was a few where we concluded that they were not either strategically or financially aligned with where we wanted to go, and so we made some divestments there. Even more importantly, that framework gives us the ability to bias our resources, investments in capital expense and management attention in those areas that represent the best opportunities for future profitable growth. I believe that Operating & Execution Model has played a large part in our improved financial performance over the last few years. We also had three other major pillars in that strategy. One is operational excellence, which is safety, quality, lean, and a competitive and flexible cost structure. Talk about that for a moment. We're continually looking for ways to reduce our structural costs to allow us to be more nimble in the future, to free up resources to invest, again, in those areas that represent the best opportunities for future profitable growth, and also to help us deal with changes in business dynamics as well, to make us more nimble in the cycle and improve our performance over time. Another element there was services, and we've, of course, talked a lot about services. We established a goal to double services, and we are increasingly confident in our ability to do that, and I'm sure you'll ask some more questions about that later, I'll hold that. The last is expanded offerings. Traditionally, Caterpillar has been known for having the highest quality, most productive pieces of equipment. Always wanna have the best quality, what we were doing in some cases is we were discounting the most productive piece of equipment to capture what we call lifecycle value customers. When you stop and think about the most productive piece of equipment, that's one that can move, let's say, the most material in a 24 hr period. Even the one customer might decide to have the most productive premium product at the job site where it's operating 24 hrs a day, seven days a week. If you have a machine in the back that operates 2 hrs a day, maybe you don't need that. We were discounting those premium products to capture those lifecycle value customers. Now what we're doing is we are designing products specifically to capture those lifecycle value customers, the GXs, the GC product lines, and that's all part of the strategy as well. Again, really, it's a combination of things. We also have now added sustainability as a focus area to our strategy gear, and we can talk more about that as well. Again, I think those are the things that have really primarily led to improved execution over the last few years, and I give great credit to the Caterpillar leadership team and all of our employees for what they've accomplished in the last six years. Jim, can we expand that conversation around the different product ranges for different customer segments? Mm-hmm. Where are we in that journey? Are we complete, or is there more to do in terms of additional, product categories where we need to apply that? Yeah, I'd argue in product development, it's never complete. It's a never-ending journey. We continue to introduce products at the top end of our range, the most productive piece of equipment, and we're gonna be showing some of those here at the show today. We also continue to introduce products that allow us to capture those lifecycle value customers. Again, it's a never-ending journey on both ends, and we continue to invest in. Just to shift gears on your progressive margin framework. Yes ... just really interesting, right? Because if you're in a normal economic environment where you get 5% growth, it implies you have to improve margins by, you know, nearly a point. Mm-hmm. How long can you folks deliver that? 'Cause, you know, presumably we're not talking 15- 20 years. Can you just talk about, how long is that vision feasible? Mm-hmm ... and, you know, how do we get there? When we introduced our strategy for profitable growth back in 2017, we talked about the fact that our measure of profitable growth is OPACC, which is operating profit after capital charge. We're really focused on ensuring that we get a return on every dollar of capital that we invest. We understand that we also need to invest for the long term. We do that as well. Again, we're very capital disciplined. Having said that, we did establish margin targets, as you discussed, and they are progressive, meaning that the higher levels of sales and revenues, we expect to get higher margins. The way we do that is through increased operating leverage. If we get more sales and we're in a good shape, we're in good shape from a manufacturing footprint perspective. In certainly in the short term, medium term, we don't expect to have to make any kind of long-term, any capital investments for, to increase long-term production. Again, higher sales and revenues, more operating leverage, higher margins. We did adjust our margin targets over the last, well, during the last year or so because in fact, when we set those margin targets, we were in a low inflationary environment. What we've seen, of course, over the last year or so is much higher inflation to a relatively larger percentage of our sales increase came from price as opposed to volume. When a larger percentage comes from price versus volume, you don't get that additional operating leverage to increase margin. That's why we changed our margin targets. Again, we'll look at that continually. Again, we should get additional operating leverage as we increase volume, which should allow us to increase margins. Just to shift gears to talk about the products, Jim, Sure ... you know, obviously everyone's out here at the show. What are the one or two things that you want people to focus on? Well, you know, we have a whole variety of things that we're focused on. You know, we have a technology area where we're really talking about the some of the great technologies that are allowing our customers to become more productive, allowing operators to become better operators, even if they have less experience. We also have a big focus on services as well. You know, we're helping our customers with things like remote diagnostics. We have 1.4 million connected assets now, and we're using AI and leveraging that to help our customers avoid unplanned downtime, to maximize availability and to really be more successful. Again, we also have some battery-powered prototypes out there which we can talk about. Again, a lot of exciting product developments. Sounds good. You know, obviously pretty active week in the U.S. economy, unfortunately. Yeah ... heading into the show. You know, over the past six years, we've seen really high economic volatility. Can you just talk about from a Caterpillar standpoint, how are you folks approaching managing the cycle given this seeming dynamic of shorter and more volatile cycles that we've seen over the past six years? Well, in answer to your first question, I talked about that competitive and flexible cost structure and how important that is. So we believe we've done a much better job in the last few years of being nimble and being able to react more quickly. Really to put it in perspective, since we've introduced our new strategy in 2017 through last year, we've produced $5 billion-$6 billion of free cash flow every year except for 2020, where we had more than a 20% decline in our top line that was pandemic induced because of COVID. Even in that year, even in 2020, we produced $3 billion of free cash flow, even though we lost 20% of our top line. I'd argue that many people, if they look at Caterpillar historically, would have been willing to bet that we wouldn't have been able to do that. A big part of managing the business, of course, is being more nimble, really focusing on structural cost, focusing on having as much flexibility in our cost structure as possible, and being able to react quickly. We also have working very closely with our dealers and we have a new SNLP process where we really work very hard to stay in touch with what's happening in the marketplace to ensure that not too much product's being built, again, trying to forecast what's happening. Again, all those things have played into that improved performance. You know, in terms of this economic cycle in particular, pretty unusual to see, you know, weak U.S. housing demand, weak demand for construction equipment in China and, you know, the industry and you folks seeing such strong demand for your products. Can you just weigh in on your view of this economic cycle given all of these moving pieces? I'd be happy to. We said in our last earnings call that we expect our performance to be better than last year, and last year was a very good year for us. We expect this year to be better, both on the top and the bottom line. Just to describe it, some of the dynamics there, and you talked about housing. Well, in North America, we expect construction to continue to be strong. Non-residential is improving, and non-residential represents about 75% of Construction Industries sales and about 25% is residential. Again, improving non-residential construction activity, a lot of it being driven by healthy backlogs. We expect the various legislation that's passed over the last year to start helping towards the end of the year as well. Residential, although there's been some moderation, it's still at healthy levels, so that's positive as well. As we think about the other elements of our business in mining, one of the things we've been talking about for quite some time and predicting is because our customers are displaying capital discipline, a more moderate, steady increase in business year-over-year, and that's exactly how it's playing out, and we expect that to happen again this year. Again, business is improving, and well, I'm sure we'll talk about the energy transition in a moment here, but, you know, there's We believe that's a tremendous opportunity for profitable growth for Caterpillar. If you look at the mining industry, there's high utilization of our equipment. There's a low number of parked trucks, parked mining trucks, and those trucks are aged. Again, those things combine to make us feel good about what's happening in mining. Energy & Transportation, a lot of positive things happening there. In power generation, that business continues to have momentum and is improving due to a whole variety of factors, but one of them is data centers, which continues to be quite strong. Order rates are quite robust for Solar Turbines. They have a good backlog and orders are strong there as well. In Caterpillar Oil and Gas, also robust orders. That's strong. Energy & Transportation is improving as well. You mentioned China. Yes, China we expect to be lower this year than last year. We had a couple of very strong years in China in 2020 and 2021. There was a drop-off in 2022, and we expect it to be further weaker this year. China represents 5%-10% of our total sales in a given year, depending on where you are. As you can imagine, kind of where we're towards the lower end of that range today. Asia Pacific, outside of China, we expect to grow. Europe, Africa, and the Middle East, Middle East is quite active, quite strong, which will offset some uncertainty in Europe. Again, all in all, when you step back and look at the individual elements of our business, there's a lot to be positive about. Again, that's why we expect this year to have a better top and bottom line than last. Jim, you mentioned being nimble around moving pieces. You know, obviously, question marks around the Silicon Valley Bank read across. Can you just talk about what signposts are you folks looking at to think about, "Hey, you know, should we take a more cautious approach to our production plan?" Any key variables that you'd share with us that you're monitoring? Let me mention Cat Financial first. Cat Financial is very conservatively managed. you know, we only loan money to customers that are buying Caterpillar equipment, and of course, we have that equipment as collateral for that loan. We match assets and liability in duration, that's very important. Again, it's a very conservatively managed operation. In terms of looking for signposts, Well, sorry, one more comment about Cat Financial. One of the things we do monitor as a signpost is past dues, and those are near record lows. Looking at that, what that tells us, our customers financially are quite healthy. Other signposts we look at in the business, obviously lots of conversations with our dealers. We look at order rates. We look at Sales to Users. We look at quotation activity that's occurring. Again, everything that we see is very consistent with that landscape that I described for you earlier in terms of what we see in the marketplace. Again, we watch a lot of things very closely, but again, past dues near record lows for Cat Finance, you know, healthy STUs, healthy order rates. We feel good about the business. you know, I'll add one more data point too. The line of credit that you folks have at Cat Financial covers 150% of your commercial paper borrowings, too. Yes. Good point. In terms of the comment you made earlier, Jim, just tweaking at times products where you're starting to see, you know, rising supply. You mentioned that earlier. What falls into that category today? What kind of products fit that narrative based on how fast you've been able to scale up supply? Certainly, you know, we've talked a lot about the supply chain, and I've been quite reluctant over the last few years to actually predict exactly when things will get solved because I've seen a lot of CEOs do that and have to walk back those words. I'm still gonna be a bit cautious here. We have seen improvements in some areas in the supply chain, although some pockets of real challenge remain. As an example, you know, semiconductors, we've seen an improvement there in some areas, and much has been written about the fact that the semiconductor shortage is over. Well, that's not really true. On the high end, certainly things have improved. High end meaning the more sophisticated latest technology chips that are used in iPads and smartphones and tablets and all the rest. For the chips that we use, we tend to utilize the same pool that auto manufacturers do, and that's still, it's gotten a bit better, but it's still not what it was pre-pandemic. If you look at our product line, there are certain products which are still certainly demand, excuse me, supply chain constrained. There's a number of those that are out there, some of our smaller products, BCP line, larger engines that we build, the 3,300, 3,600, those are still, again, supply chain constrained. In other areas, the situation's improved. It's still a mixed bag, but still, as you know, as we mentioned in our last earnings call, our sales would have been higher in the fourth quarter and in 2022 if not for the supply chain constraints that we still continue to navigate. Super. Why don't we shift gears and talk about automation? It's been a really key priority for you folks. Can I trouble you just to touch on the level of automation adoption that you're seeing, construction, E&T, and, you know, what does that product path look like over the next 5- 10 years in terms of capability set? Yeah. We continue to invest in our products to make them easier to use. Again, everything we do is based on making our customers more successful. That's what we're focused on. We've done a number of things over the last few years to make our customers' job easier. One of the things we talked about is that, you know, for a piece of construction equipment, we now can take a relatively inexperienced person. In a day or two, they can be productive using some of our latest technologies, where in the past, you would need an operator that had many, many years of experience to get to that point. One of the things we're doing through Cat Grade and there's a whole variety of technologies that we're displaying at the show, we're making it easier for operators to operate our machines. We're doing things in Energy & Transportation as well, in terms of automation, things like our Frac Fleet Optimizer, which really, you know, optimizes and automatically controls a whole variety of well servicing trailers at a site. It helps our customers reduce fuel and lower their carbon footprint as they produce oil and gas. Of course, in mining, we have our autonomous mining trucks, which we've talked a lot to you about. Very excited about that solution. It's making our customers up to 30% more productive in the compared to the best manned site. Importantly, in 10 years of autonomous mining truck operation, we've had zero recordable injuries that we're aware of. Again, very, very pleased at that as well. We're now at a point in I believe we're past the tipping point in autonomy for mining. One of the things we've worked very hard with our customers on is to reduce the amount of capital that needs to be invested to make autonomy work. It used to be you had to be a relatively large mine with a lot of trucks to make it pencil. Now, if you have 10-15 trucks, we believe that it warrants the capital investment to put autonomy in. We're also now starting to expand autonomy. We received our first order from a company called Luck Stone, a family-owned company for Quarry and Ag, where we'll be putting autonomy in that non-mining application. There's a whole variety of things that we're doing in terms of semi-autonomy. You know, you can operate now, you know, three or four dozers remotely at the same time. If you get out to our booth, we'll let you operate some machines remotely as well. There's a whole variety of things that we're doing to make our life easier for our customers. Hope you guys are insured. You know, Jim, you touched on applying resource technologies into Construction Industries. Mm. Is that a big roadmap because you guys have been at it for a while in resource, you know, the construction process is a little different, but to what extent can you leverage the same core technologies? Certainly it is different in that there's more variability in a typical construction site than there is a mine site. But having said that, as I mentioned earlier, we are starting to apply some of those technologies in Construction Industries to make, you know, certainly a lot of repeatable tasks, right? Where you can use autonomy or semi-autonomy to help customers be more productive. Yes, there's a natural transition going on there, but even within mining as well, we continue to develop autonomy in different products. We now have an autonomous water truck, which, you know, in the MineStar system senses the level of moisture on the road. It'll autonomously put water in the right place. If its tank runs low, it'll go back to the filling station to fill itself up. It'll give itself its next assignment. If there's enough moisture in the road, the truck will park itself. We've got autonomous drills as well. Again, semi-autonomous dozers. Again, we're continuing to expand that technology as it makes sense in both RI and now starting in CI as well. If we could just talk about parts and service when you rolled out the target, $28 billion by 2026. Mm. $14 billion in 2016. You know, you're up about $8 billion. Off of that base. Can you just talk about what initiatives or part of the plan have had an outsized impact on the journey so far, and, you know, the visibility that you have on the next leg to get to the full target? Yeah. There's a whole variety of things that we're doing. Of course, services is one of the main elements of our strategy we introduced back in 2017. Services is everything we do to help a customer be successful after the initial sale. Working very closely with our dealers, again, always with the mind of making our customers more successful, but done right, increasing services, it's good for the customer, it's good for the dealer, and it's good for Caterpillar. It's a whole variety of things that we're doing, everything from connecting assets. We now have about 1.4 million connected assets, which gives us the ability to leverage AI, to leverage a whole variety of technologies that we continue to develop to make our customers more successful, avoid unplanned downtime, maximize availability, be more productive. We are utilizing AI. We have things called PSEs or Prioritized Service Events, which allow our dealers to have leads to help our customers prevent a downtime, to help them in a very timely manner. We've invested a lot in our digital capabilities, including in eCommerce. That's coming along very, very well. The team's done a great job there. We're making it easier for our customers to buy parts and service from us. Again, part of it also is sitting down and with our teams internally and with the dealers and a bit of a culture change. You know, our culture is one of we're very, very good at developing the very best products in the world, and we have the best distribution in the world, still have that through our dealers, but we're much more purposeful now about thinking about ways we can grow services. We sit down and talk to our dealers, particularly our highest priority dealers where we think we have the biggest opportunity. All right, what is the biggest opportunity in your territory? Meaning that there are some customers that own Caterpillar equipment that choose not to get their parts and service from Cat. There's what do we need to do to capture that business? What does Caterpillar need to do? What do the dealers need to do? Put together short-term action plans to go capture that business. Very much focused on by our leadership team, by our dealers. The great news here is that certainly with our dealers, our economic interests are aligned. This is good for them. It's good for us. Again, we always strive to do this in a way that's good for our customers, so it's a win-win-win. A lot of activities going on. I could talk for an hour about a lot of the different services initiatives, but again, a big focus, a big area of commitment. When we threw out that target by 2026 a few years ago, you know, I think a lot of people were quite pessimistic. The reason we picked a big number was we wanna get our teams energized and put a big number out there. We weren't sure exactly how we were gonna get there and drive for it. Now, based on the progress we've made, as you mentioned, $22 billion last year, based on the technologies that we're developing, based on the traction that we're getting, we're increasingly confident in our ability to meet that target. You know, what's been really interesting is the growth in Prioritized Service Events and other connectivity areas, you know, those aren't slowing year two, year three after the rollout. Can you just talk about the momentum that you're seeing from customers that, you know, have tried the product and, you know, how much visibility do you have to get to the targets just by essentially having seen this journey for other customers that are later in the adoption phase? Yeah. We think we've just scratched the surface in a lot of these technologies, and we're very excited about what is possible. Everything's like, you know, we have what's called Cat Central now, which is an app which makes it easier for customers to do business. One of the things that we're really focused on is our smaller retail customers as well, and becoming easier to do business with. Traditionally, our dealers have done an excellent job servicing our bigger customers, our mining customers, our big construction customers, oil and gas customers. Oftentimes, those smaller customers, it's been more difficult sometimes to serve them. Now we're starting to leverage technology to make it easier for us to serve those customers and make them more successful. If you're a small customer now, let's say you have 12 machines or whatever, you bought your 13 machines, now you buy one and it has a QR code on the machine. We have an app, you can scan that QR code, and it allows you to purchase the right part to get the support from the dealer. Our customers don't have time, especially if you're a small customer. You're doing, a lot of times, a small contractor, you're doing everything yourself, and you're very, very busy. By putting this technology in the hands of our customers, we and our dealer are becoming much more, much easier to do business with. That's part of the goal. I need that QR code for my printer, Jim. Yeah, I know. Can we talk about the spread between your dealers that are farthest along on this digital journey versus the laggards? You know, what sort of incentives are you folks putting in to drive, you know, call it the bottom quartile adoption group? Well, as I say, you know, the good news about growing services is our economic interests are aligned. We actually, yesterday, here at the show, we had an award ceremony for those dealers that have produced the most services growth over the last few years, and it was kinda like an Academy Awards. We gave shows, we gave awards, and I gave the, a couple of awards, and my colleagues did as well. Again, you know, those kinds of events help. Again, face-to-face conversations. Again, our dealers are very much supportive of what it is we're trying to do. You know, as, as is the case with any group or organization, some are farther along in some areas than others. The same thing within Caterpillar as well. You know, we're farther along in some groups than we are with others, but we're all focused on the goal, and we're making good traction. We're making good progress, which is borne out by our numbers. Can we talk about alternative energy? You, you folks had a really interesting rollout at Tucson. Yeah. 793 mining truck battery electric prototype. Can you just talk to us about the value proposition for customers? You know, what do the economics look like versus diesel based on where we stand today? You bet. Let me step back for a moment and talk a bit about the Energy & Transportation. And everyone knows, I believe, what the forecasts are for the amount of electric vehicles that are going on the road, that are forecasted to be on the road over the next few years, and all the other elements of the energy transition. We firmly believe that the energy transition is increasing Caterpillar's total addressable market. If you stop and think about the commodities that need to be produced to support the energy transition and the infrastructure investments that need to occur, Caterpillar is very well positioned to benefit from that. As an example, an average automobile that's an electric vehicle versus an internal combustion engine automobile takes 6x as many minerals. 6x as many for the EV as the internal combustion engine. Obviously, we produce the products that allows our mining customers to produce that increased commodity. Even if you don't believe all the forecasts from the automobile companies and you give it a haircut by 10%, 20%, 30%, 40%, it's still a tremendous increase in commodity demand that we are very well positioned to satisfy. If you stop and think about the fact that we have, in our view, the best autonomous solution, we feel quite strongly about that, and our customers are voting with their purchase orders on that and demonstrating that, we're very well positioned to benefit from that. Other parts of the business as well, Construction Industries, just thinking about the infrastructure investments that need to occur to install the solar panels, the transmission lines, the charging stations, again, a great opportunity there. As more renewables are added to the grid, that does create instability issues, which creates opportunities for our Energy & Transportation portfolio, both our reciprocating engines and our gas turbines, which burn a whole variety of fuels. They can burn natural gas, biofuels, hydrogen blends, and all the rest. Again, we believe the energy transition represents an outstanding opportunity for future profitable growth. In terms of batteries and machines, I believe that the adoption of batteries versus in diesel engines will vary pretty dramatically by product, by geography, by application. Right now, the biggest demand or pull we're getting for battery-powered machines is from our mining customers. Our largest, probably the largest mining customers in the world are very focused on reducing their carbon footprint. We're working very closely with them. As you mentioned, last November, we were very excited to have a demonstration of a prototype of a large battery-powered mining truck for our customers, and it was fully loaded. 37 mi per hour, fully loaded on the flat, demonstrated the fully loaded truck going up a 10-12 degree grade. Basically demonstrated diesel performance in that battery-powered prototype. One of the things that we're excited about is, this is a real change. If you If you stop to think about a mining site, it's not just about putting batteries in the machine. The mine site has to change dramatically as well. We're uniquely positioned because of our Energy & Transportation portfolio, microgrids, reciprocating engines, gas turbines, all the other elements that we have there to help our customers electrify the mine site, if you will, because a battery in a fully loaded mining truck will run down in maybe 90 min. Battery technology is always changing, that's probably where we're close to where we are now. You have to figure out a way to dynamically charge the truck in the mine site, and that requires a whole different setup by our mining customers, and we're very committed to help them with that. In construction, again, I believe the rate of adoption of battery-powered machines will vary significantly by geographic area and also by application. One could envision a situation where in Western Europe or in North America, in a certain city, a city may dictate that per city project or even altogether, we don't want any diesel engines in the city, whether it's an automobile or a piece of construction equipment or anything else. Our strategy is to have the products ready, and so we have some prototypes here at the show today to support those customers if they need those battery-powered products. However, we're not walking away from all of our other customers, and we'll continue to invest and support our customers that have products with diesel engines around the world. What happens in Manhattan, what happens in Asia, Africa, or even Kansas, could be very, very different just based on the application. If one is building a road in the middle of nowhere in across Nebraska, as an example, it's not easy to charge a machine. What do you do when the battery runs out? Do you have a fast charge with a diesel engine which kinda negates the purpose? Do you have an extra machine? Do you try to change? It's a complicated issue. I do believe that the transition, particularly in construction, is going to be a relatively long road. I think this is gonna take a long time before a significant percentage of our machines that are shipped have batteries on them. Again, we'll be ready. It's really based on customer pull. When our customer wants a battery machine, battery-powered machine, we'll have it for them. If they want a diesel-powered machine, we'll have it for them. One of the things that's really important as well is, we are producing machines now with different technologies, different transmissions, different engines that lower our customer's carbon footprint. Some of the products that we're introducing can reduce fuel burn by 19% and 20%, which has a corresponding positive impact on greenhouse gas emissions as well. It's not just about batteries and machines. For internal combustion engine machines, we're very focused on improving efficiency and reducing emissions as well. you know what's interesting, if we got to a fracking site that has your autonomous solutions on it, we're gonna see Cat employees there running- running those operations. Is that where mining with battery electric trucks is headed? You mentioned dynamically charging. I mean, that's sounds like a pretty complex process. Well, we already have Caterpillar employees and dealer employees on site in autonomous solutions. We have over 500 mining trucks now operating in the world, and there are Caterpillar employees at those sites helping the customer to be successful. Yes, as you mentioned, we now have, you know, both in our, in oil and gas, we have Caterpillar and whether it's Solar Turbines employees or Cat Oil and Gas, helping our customers be more successful. Certainly, as the technical solutions be more complex and it transitions from just being about a product you build in a factory to shipping, to things that have to happen at the site on an ongoing basis, there's an increased need for us to become more involved. Again, our goal is to increase the value that we provide to our customers every single day. If we do that, if we're successful in adding that additional value, that makes us more of a partner with our customers as opposed to just a supplier, which I think is a good thing for us long term. Again, if we do our jobs right, I think it's very good for our competitive position as well. Essentially, just to put the pieces together, yes, diesel engines are profitable parts of our parts stream, but on the flip side, in a battery electric environment, we're gonna have more ability to add value on the site infrastructure and support side. That sounds like more than offsets the potential parts headwind of not having those diesel engines in the field. Well, we think there's a lot of opportunity around battery-powered machines. One thing to keep in mind, the difference between, let's say, a Caterpillar machine and an automobile is the number of hours it runs. Think about undercarriage wearing out. Undercarriage is still gonna wear out. You still have tools in the dirt. They're gonna wear out. It's a very different situation than an automobile. One of the things to keep in mind, again, is think about the number of machines that Caterpillar has around the world globally. It's a very large number. Think about just from a timeline perspective, as I mentioned, we expect, particularly in construction, that timeline to be quite extended. Yes, again, our strategy is to have those battery-powered products ready for those customers that want them, along with traditional machines that have better fuel efficiency and lower emissions. Having said that, this is a process that's going to take a long time, in my view. Again, our strategy is, it's always difficult to predict how quickly these things will evolve, but our strategy is to have the product ready, and the customers will decide how quickly this transition occurs. Super. Jim, if we just shift gears to talk about, earlier, you know, we spoke about the Operating & Execution Model. Mm-hmm. You know, you folks, to get to the margins where you are, as you said, you've exited, some areas. How sizable are the opportunities in front of us to do that continued type of culling of the portfolio or, you know, are we past the low-hanging fruit? I would say that we continually evaluate the financial performance of our existing portfolio, and importantly, think about, again, how do we bias the investment of our resources to those areas that represent the best opportunities of future profitable growth, which is one of the reasons we're so focused on services, as an example. you know, we're again, we're continually evaluating our product line. We, you know, we made some decisions in the last couple of years. We'll continue to evaluate the product line. That's how I'll answer that question. There's always opportunities. Right. Okay. From a capital allocation, standpoint, really strong balance sheet, strong cash return- Right. to shareholders, you know, bolt-on MA instead of sizable M&A. Is there any scenario that you could think of where, you know, we're sitting here in the next ConEXpo and, you know, you folks have found a meaningful new M&A opportunity or? If so, you know, what are the key parameters that we should be thinking about? Yeah. We continually challenge our leaders to look for M&A opportunities in their various areas. What you've seen over the last few years is relatively small compared to the past acquisitions that provide technology as an example. If you think about CarbonPoint Solutions, Tangent. We did buy Weir Oil & Gas, and, like, you know, that we bought that at, in my view, a very good time in the cycle, which has allowed us to expand our Oil and Gas portfolio and also help our customers lower their carbon footprint through eFrac and some other issues. I'll never rule anything out, but if your question is, are we out there elephant hunting? The answer is no. If the right opportunity, obviously, if the right opportunity presented itself where we could get a return on the premium that we would pay in that business, we'd be open to it, but we're not out looking for it. You know, having a strong balance sheet, you know, certainly was very beneficial as we went into COVID. You recall the early days of COVID, where a lot of companies were figuring out, all right, how do I secure funding to ensure I meet payroll? I didn't have any sleepless nights. We have a strong balance sheet, and that's not a bad thing to have during periods of uncertainty. You didn't get caught with the variable rate move either. We didn't. Yeah. That's correct. That's correct. Can we talk about resources? Jim, you mentioned a steady recovery from here. I'm wondering if you just rank order for us, which regions or commodities are the strongest in that mix. Yeah. If you stop and think, well, for us, it's generally copper, iron ore, gold, coal. Those are some of the commodities that are most important for us. Again, if we stop and think about the energy transition and just the amount of commodities that need to be produced. If you look at commodity production today and you look at EV projections and the aspirations of net zero in 2050, the investment that will need to be made in infrastructure and in commodities is very, very big numbers. Again, even if a certain percentage of that occurs, we think we're very well positioned for that. As I say, right now, commodity prices are continuing to be supportive of continued investment by our customers. They are, both our oil and gas customers and our mining customers are displaying capital discipline, and I think that's really a good thing for us, right? Because in many areas, again, we're still dealing with supply chain challenges. It, you know, when demand spikes up and then comes down very quickly in a couple of years, that makes it very tough for our customers, it makes it very tough for us. I'm really encouraged that the scenario is playing out much as we've been predicting for the last few years, is that moderate increase year-on-year as we produce more products for our mining customers. You know, with mining trucks, you know, the bigger the truck, the higher the Caterpillar market share. You know, over the past couple of years, we've seen demand for smaller trucks just by virtue of where commodity demand has come from. Any opportunities for you folks to sharpen the pencil on smaller mining trucks to essentially improve where that share position is for the small products specifically? We continually evaluate our competitive position and where we should invest dollars. Again, we're always looking at. We do feel quite good about our competitive position in mining. Again, a lot has to do with our autonomous solution. We feel very good about that. Again, we continually evaluate the breadth of our product portfolio and where we think the market is moving, and we'll make investments based on that. Jim, can we go back to a comment you made earlier in terms of, being able to reduce upfront investment for automation in mining, so you could run, you know, a 15 truck fleet? Can you expand on how you folks were able to do that? Is there a runway to continue to drive that lower? Well, it's something we continually focus on. Again, a lot of it has to do with technology, us getting better at this, our customers getting better at this, changes in technology. But again, part of it's just this experience curve that we've been on. By learning more about the different elements and components that need to go into that autonomous mining site, we've been able to get down that, it's not surprising, get down that cost curve. Now it's 10-15 trucks where it makes sense to make that capital investment. Again, if you stop and think about a potential 30% productivity increase, it's pretty unbelievable. You add that to the fact that zero injuries in 10 years. One of the things as we think about battery-powered trucks, it goes hand in hand with autonomy, because I don't think you can really divorce the two. One of the things that we believe will our Energy & Transportation portfolio help our competitive position as our mining customers start to adopt battery-powered trucks, but our autonomous solution is very important as well. 'Cause you mentioned earlier the complexity of that electrified mine site. Autonomy, of course, seems to be a big part of that. Having the best autonomous technology, along with battery technology, we believe will provide a tremendous competitive advantage for us moving forward as mining customers electrify their fleets. In terms of the adoption curve that you see ahead for Construction Industries moving towards automation, how long until, you know, the level of adoption is similar to where the mining industry today and, you know, your developed construction equipment market's based on the product path? Well, again, I think, you know, in construction, there's a lot more variability, both in the task that the construction customer is performing and also in what happens at the site. I think it'll be more a situation of, as opposed to a complete construction site that's autonomous, certainly I think that's a long way away, but having autonomy built into certain products for certain repeatable tasks, and whether it's putting in a pad for a wind turbine, let's say, where it's pretty repeatable, things like that, I believe that's shorter term. A complete autonomous site, I think is farther away in construction just 'cause of the variability of the different projects. If we could shift gears to talk about within Construction Industries, the end market outlook in terms of regions where you're most positive hearing some interesting things about accelerating investment in Middle East. I'm wondering if you could just comment on as you look at the global heat map, what does that look like for you? You bet. Well, starting with North America, again, you know, we feel good about non-residential in North America. We think that the business has been improving and will continue to improve. A lot of that's driven by infrastructure projects, we expect later this year to start seeing the positive impact of the legislation that's been passed based on that. Residential is moderating a bit, but it's still at healthy levels. Again, as I mentioned earlier, 75% of our Construction Industries business globally is non-residential versus 25% residential. In the Middle East, there is a lot of activity. Of course, oil prices are relatively elevated. There's a lot of economic activity. That's driving a lot of construction activity, a lot of infrastructure in the Middle East that's quite strong. Latin America, flat, maybe just slightly down this year. Still early to tell. China, as I mentioned earlier, we do expect it to be slower this year. A couple of very strong years in 2020 and 2021. Down in 2022. We expect it to be down below 2019 levels in 2023 in China. Outside of China, in Asia, good activity, good construction activity that's actually expected to be quite healthy. In... I think those are the major areas, I think. Super. You know, your competitors are enviable of how much you folks have been able to ramp up supply and actually rebuild some dealer inventories in 2022 using the global manufacturing base. I'm wondering, as you think about dealer inventories over the course of this year in the guidance that you laid out, are you factoring in any production adjustments to make sure we don't build dealer inventories again, now that we're at a healthy level? You know, are there pockets where demand's actually incrementally accelerating now and supply has improved? Our dealers are independent businesses, and they make their own decisions about their inventory. Having said that, we do work very closely with our dealers, and we all try to predict what's happening with demand. There are still certain products where our dealers wish they had more inventory. We still have certain demand supply-constrained products where we wish, and they wish they had higher inventory. I expect there's some of that. In some other areas, they feel that they're at a relatively healthy level. Again, it's always a dynamic situation, but one that we really focus on, I think. Again, right now, as we sit here, business looks good. As I mentioned, the macro level drivers are positive, and we expect a better, higher top line and bottom line this year than last. Super. Jim, Ryan, Caterpillar team, thank you very much for the time and insights. Thank you, Jerry. Appreciate your time. Thank you. Thank you.