Power Systems Growth and Capacity Expansion

Strong revenue growth, improved EBITDA margins, and diversified demand drivers (including data centers, heavy industrial and mining) with ongoing capacity investments and incremental operational improvements. " " " "

Robust growth with 19% YoY revenue increase, significant operational improvements, doubling of capacity by early 2026, and a two‐year backlog for larger engine orders. " " " " "

Continued positive momentum with an increasingly aggressive capacity expansion strategy and focus on operational efficiency and backlog management. " "

Cost Management and Pricing Flexibility

Consistent focus on operational efficiencies, cost reductions, tariff mitigation strategies, and strategic pricing improvements across segments, leading to improved margins despite economic headwinds. " " " " "

Emphasis on targeted restructuring to optimize operations, active tariff mitigation, and effective pricing in multiple segments (Power Systems, light duty engines, Distribution) to support improved margins. " " " "

Stable approach with slight adjustments to address ongoing tariff challenges while maintaining strong pricing leverage and cost discipline. " "

Tariff Uncertainty and Its Impact on Margins

Discussion on tariff-induced uncertainty with minimal impact in Q1 yet recognition of potential future cost pressures; passing costs to customers was mentioned as a mitigation strategy in earlier periods. " " " " " "

Clear negative impact with tariffs costing about $22 million in Q2, active negotiations for tariff recovery, and expectations for price‐cost neutrality by Q4, though near-term pressures remain. " " "

Heightened near-term pressure from tariffs with stronger emphasis on mitigation and passing on costs, as well as clearer expectations for improved neutrality later in the year. " "

Regulatory and Emissions Compliance Challenges

Regulatory uncertainty around 2027 emissions standards and NOx limits, with active engagement with the EPA, product launch plans (e.g. new engine platforms) and discussions on extended warranties and evolving greenhouse gas rules. " " " " " "

Continued uncertainty with regulatory issues affecting product launch timing (e.g. delayed X15 launch), significant investments in new platforms to meet 2027 regulations, and efforts to engage with regulators on clarity of requirements. " " "

Persistent challenges remain; the focus is on strategic investments in compliance technologies and regulatory engagement even as product launch timing is adjusted due to these uncertainties. " "

North American Truck Demand Trends

Consistent reports of softening heavy-duty demand with production declines, mixed signals in medium-duty segments, and cautious outlooks impacted by economic uncertainty and tariff-related delays in order flow. " " " " " " "

Significant decline noted with heavy and medium-duty truck volumes falling (e.g. 27%-36% drops), compounded by economic uncertainty, tariff and regulatory issues, with forecasts of further declines in upcoming quarters. " " " " "

Downward momentum persists with demand weaknesses continuing due to economic and regulatory headwinds, though hints of potential future prebuy activity may offer limited recovery. " "

Strategic Capital Allocation and Investment

Emphasis on disciplined capital deployment with strong shareholder returns, significant investments in new products and manufacturing capacity, and initiatives to optimize financial leverage and operational efficiency. " " " " "

Continued commitment to returning at least 50% of operating cash flow via dividends and buybacks, with substantial investments in capacity expansion (e.g. doubling Power Systems capacity), Accelera investments, and North American manufacturing. " " " " " "

Consistent and disciplined approach with maintained or increased investment levels amid challenging market conditions, balancing short-term cost management with long-term growth initiatives. "

Proactive Product Launches and Backlog Management

Proactive new engine introductions (e.g. X10, B7.2, X15) and effective backlog reallocation strategies, especially in the Power Systems segment, ensuring resilience despite some delays and uncertainty. " " " "

Focus on new platform launches remains with some delays (e.g. X15 postponed due to regulatory/tariff uncertainty) while maintaining a robust, two‐year backlog and active order reallocation to meet demand. " " "

Ongoing innovation with operational adjustments as product launches are recalibrated for regulatory/tariff conditions while backlog integrity remains strong. " "

Emerging Low‑Emission Engine Technologies and Destination Zero Strategy

Consistent investments in low‑emission technologies via HELM platforms, acquisitions (e.g. First Mode), and strategic partnerships (e.g. Amplify Cell, Accelera initiatives) highlighted in multiple calls as key for decarbonization. " " "

Continued focus on low‑emission tech with introduction of new products (e.g. S17 Sentum genset), heavy investments in engine plant upgrades for 2027 regulations, and additional R&D amid adjustments in launch timing. " " " "

Steady commitment to the energy transition with evolving product portfolios and new platform introductions alongside some delays; the Destination Zero strategy remains central to future growth. " " "

Accelera Segment Headwinds

Headwinds noted in previous calls with challenges in reducing losses, restructuring charges, and uncertain market demand for zero‑emission technologies, though some progress with reduced EBITDA losses was reported. " " " " " "

Continued slowing trajectory of growth in Accelera with ongoing efforts to reduce losses and restructure the business, while working with partners like Amplify Cell to pace investments in an evolving market. "

Persistent challenges remain in the Accelera segment despite some improvements, indicating ongoing headwinds as the segment works toward profitability. "

Global Supply Chain Disruption Concerns

Previously addressed concerns about tariff-induced supply chain delays and freight disruptions, with mitigation strategies including domestic manufacturing to reduce exposure, though impacts were variably highlighted across periods. " " " "

While not explicitly emphasized in Q2, discussions about the negative tariff impacts on supply chain decisions (and efforts to optimize operations) hint at continued challenges in managing global sourcing. " "

Relatively muted discussion in Q2 compared to earlier periods; ongoing mitigation via domestic sourcing, suggesting a focus on controlling exposure rather than a new surge in disruptions. " "