Caterpillar Inc Alliance Bernstein 2022 38th Annual Strategic Decisions FiresideChat with Jim Umpleby June 1, 2022Chad Dillard:Hi. Good morning, everyone. My name is Chad Dillard. I am the lead analyst here at Bernstein for theU.S. machinery sector, and I'm really pleased to have Caterpillar here, and joining me from Caterpillar isRyan Fiedler, the director of investor relations, and Jim Umpleby, chairman and CEO. We're going tostart off with Ryan reading off some disclosures, and then we'll move into a quick presentation by Jim,and then we'll dive right into a full-on Q&A session. Without further ado, let me pass it off to Ryan.Ryan Fiedler:Thanks, Chad. And really appreciate everyone being here today, both in person and watching virtually.I'm Ryan Fiedler, head of investor relations at Caterpillar. I'm just going to hit a couple key items beforewe get started here, today. First, we may make forward-looking statements, and they are subject torisks and uncertainties. For a full list of risks and uncertainties that could cause our actual results to varymaterially from any forward-looking statements we make today, please refer to our most recent SECfilings, our 10K for 2021, and our most recent 10Q for the first quarter. Second, we'll be posting theslides on With that, I'll turn it back over to Chad and Jim, our chairman andCEO of Caterpillar.Chad Dillard:Over to you, Jim.Jim Umpleby:Good morning, everyone. Thank you for joining us. Certainly, appreciate your interest. I'm going to runthrough, very quickly, a few slides to set the stage, and then we'll open it up to the Q&A. We introduceda strategy for profitable growth back in 2017 based on three main elements. One is operationalexcellence, which includes safety, quality, Lean, and a competitive and flexible cost structure. We knowwe can't control market dynamics, but we certainly can control the way we perform at those varioussales levels. Expanded offerings includes our ability to develop and introduce machines that'll allow us tomeet various customer price point expectations. Previously, Caterpillar traditionally has been known forhaving the highest quality, most productive piece of equipment, and we still have the highest quality,but now we've introduced a line of products that allows us to capture customers that we call lifecyclevalue customers, who are more interested in first cost, then productivity. And then last is services, whichis a great opportunity for us to profitably grow our company, which I'll talk more about later. And, ofcourse, it's all towards the idea of profitably growing our company.Jim Umpleby:Just a word about that services target. In 2019, we put out a target to double services from 14 billion to 28 billion in 2026, and we even told our investors at our recent investor day that we're increasinglyconfident in our ability to meet that target for a whole variety of reasons that I'm sure I'll talk aboutPage 1 of 17

during our discussion, here. At our investor day a couple of weeks ago, one of the things we did is, weadded sustainability as one of our core focus areas, because we do believe that represents anoutstanding opportunity for us to profitably grow our company. The energy transition is expandingCaterpillar's total addressable market, that and growing global energy demand, as well. Stop and thinkabout electric vehicles, the number of autos that are being put on the road, and the other ways that oureconomies are being electrified. That represents a great opportunity for our mining business. A typicalEV takes six times the minerals as a conventional automobile, and again, we make the mining equipmentthat allows our customers to produce those commodities that are required for the energy transition.That growing global energy demand also represents an opportunity for us, including things like theincreased interest in liquified natural gas, or LNG, because Caterpillar plays across a wide portion of thatnatural gas value chain. As more renewables are added to the grid, that creates some grid reliabilityissues. That represents an opportunity for us to sell more gas turbine generator sets and reciprocatingengine generator sets to help provide that grid stability, and our gas turbines and recip. engines havethe ability to burn a wide variety of fuels: natural gas, biofuels, 100% hydrogen.Jim Umpleby:That's also an opportunity, and also infrastructure. You stop and think about the investments that needto be made, either as a result of the energy transition, or just the infrastructure bill, that represents anopportunity for CAT as well, and it's lots of expanding service opportunities that I'm sure we'll talkabout. Again, I won't read this whole chart to you, but we do believe that our total addressable marketis increasing for the reasons I've explained, primarily the energy transition and growing global energydemand, and it provides an opportunity for us to grow original equipment and services across ourportfolio. And, with that, we'll open it up to your questions, Chad.Chad Dillard:Sounds good. Jim, I want to start off just with some near-term questions, and then we'll go into more ofthe longer-term strategic questions. But, over the last several weeks, there's been a growing concernabout potential slow down. Recession's been thrown around. I just want to ask you directly, are youseeing any indications of activity in your core markets starting to slow, anything signaling a recessionahead?Jim Umpleby:We haven't seen that. Our demand still remains quite strong. Last year, in 2021, we increased our salesby more than 20%, and we had told our investors that our sales would've been even higher if not forsupply chain constraints. And, in the first quarter of this year, our sales were up double digits. And again,we told investors that our sales would've been even higher if not for those supply chain constraints. Wehaven't seen signs of slowdown in our markets. The vast majority of the markets we serve are still quitestrong.Jim Umpleby:And our challenge, at the moment, quite frankly, is supply chain, our ability to supply enough equipmentto meet all the demand that's out there. We haven't seen that slow down. The one area where we havetalked about with our investors is in China. We had two extraordinarily strong years in 2020 and 2021,and in China, that market for Caterpillar, is primarily hydraulic excavators 10 ton and above. And we'vetold our investors that we believe that the market this year will be slightly less than it was in 2019, butPage 2 of 17

we've known that for a while. That's not that new, but in the other markets that we serve, demandcontinues to be quite strong, and we have not seen a slowdown in demand.Chad Dillard:Okay. And so, let's just hypothesize here. If we do go into recession, are there any structural changesthat you've made in your business that you'd potentially call out that could actually make the cyclicalamplitude lesser, or even the trough earnings level higher?Jim Umpleby:We introduced some Investor Day targets back in 2017, and then we upped the ante in 2019. And weknow, again, we can't control the market, but what we have said in our 2019 Investor Day is that wewould achieve adjusted operating profit margins 300 to 600 basis points above what we did between2010 and 2016 at similar levels of sales. And frankly, there was a bit of skepticism when we rolled thoseout. You said, "Okay, you've demonstrated on the way up, but can you really do it on the way down?"And in 2020, unfortunately, we had a COVID-induced downturn, where our top line fell 20% in one year.Despite that 20% decline in sales, we still met our operating margin targets. I believe we havestructurally changed our company, and for the last five years, since we introduced our new strategy, wehave met our investor day targets for improved adjusted operating profit margin every year, including ayear when we had a 20% downturn. We do believe we have the ability to perform better during adownturn.Chad Dillard:Okay. At the Analyst Day a few weeks ago, you gave a guidance that implied incremental margins in the30% to 40% range. Do you think you're going to be able to capture enough pricing this year to get youback on track to hitting your targets as we go into 2023?Jim Umpleby:And the way we look at this is, we really don't talk about incremental margins quarter-to-quarter, oryear-to-year. Again, what we talk about is those adjusted operating profit margin targets, 300 to 600basis points based on that reference period of 2010 to 2016. We believe we will meet those targets thisyear, and we fully intend to meet them moving forward. Having said that, we also. Again, we see thatour total addressable market is increasing. We know we have to make increased investments in someproducts, but we believe, based on everything we see. Again, our intent is to invest more. Our totaladdressable market is increasing. We'll maintain our margins, meet those margin targets, which shouldincrease our free cash flow as related to the top line.Chad Dillard:During the Analyst Day, you talk a lot about how CAT will operate in the energy transition. And so, myquestion is more about, what is the correct revenue growth algorithm? Because if you look back to theearly 2000s to the 2010s, Caterpillar grew at high single-digit levels. It's a little bit more towards midsingles most recently. But as we embark on this transition, how should we think about your revenuegrowth potential going forward?Jim Umpleby:Yeah. I'll refrain from making an absolute top-line prediction, here. That wouldn't be a wise thing to do.But I will talk about some of the dynamics that are driving what we believe, again, is this increase in ourPage 3 of 17

total addressable market. We talked about the energy transition already, how the fact that ourcustomers need to help the world produce more commodities as the world electrifies, more minerals forEVs. Again, average EV takes six times as many minerals as a conventional car. Think about all the otherelements of the energy transition, what's going on with LNG infrastructure. We do believe there is asignificant opportunity for our market to grow, and we're certainly committed to continue to invest toensure that we remain competitive through that. I'm reluctant to give you a number, but again,regardless of exactly how the energy transition plays out, we believe we're in a very good position tobenefit.Jim Umpleby:If you look at the IEA sustainable scenario, the stated policy scenario, total energy demand is expectedto grow 16% between now and 2040. Oil is expected to increase. Natural gas is expected to increaseeven more than that, and renewables are expected to more than double. We can all have our ownopinions as to exactly how that will play out. Will renewables go up even faster? Will they be a bitslower? Will natural gas be a bit lower than anticipated? Will it be higher? The good news is that,regardless of how that plays out, Caterpillar is well-positioned to benefit from those changes that'll takeplace. Again, our mining business, and our recip. engines and gas turbines, benefit from morerenewables, and more EVs. Again, the increased interest in LNG drives more natural gas production intransmission. We're very well-positioned for that, because we do play across a wide portion of thatnatural gas value chain.Jim Umpleby:Our engines are used for natural gas drilling. And now, as opposed to flaring, we have the ability to burnfield gas and use batteries to reduce our oil and gas customers' carbon footprint. We have a wellservicing solution now that goes from the trailer to the wellhead because of the acquisitions we'vemade, and the internal investments we've made, as well. And we're helping our customers, again,reduce their carbon footprint there, as well. Our Solar gas turbines drive solar centrifugal natural gascompressors to compress gas down the pipeline. Again, we play across a wide portion of that valuechain. Again, more renewables, that's good for us as well. We feel we're very well-positioned, regardlessof one's opinion as to exactly what the percentage is that will be here, and how quickly this will play out.We believe we're well-positioned to benefit.Chad Dillard:Actually, I should have mentioned this at the beginning, but if you have any questions, please feel freeto log into Pigeonhole, ask your question, and then I'll be more than happy to ask Jim. Just carrying on,within resource industries, the energy transition is actually somewhat of a double-edged sword. On onehand, you've got coal demand, which will likely sunset, while mineral demand will probably increasedriven by EVs, as you pointed out. Can you talk about how CAT plans to navigate this transition and towhat extent will it be a net positive for CAT?Jim Umpleby:Yeah. And some of it I've already talked about, again regardless of how the energy transition plays outwere well positioned to benefit. Coal represents three to five percent of our total sales. So it's relativelyminor in the bigger scheme of things. And again, we're well positioned to benefit from increasedelectrification, renewables, all the things that have to be . the minerals that have to be mined. But also,Page 4 of 17

we're well positioned to help our oil and gas customers reduce their carbon footprint as they producemore oil and gas.Chad Dillard:Right. Okay. So as your mining customers decarbonize, how does this change the energy demand profileat the mine site? And then, to what extent does this transition expand your E&T business opportunity inmining? And maybe you can talk a little bit about how CAT’s products are differentiated to support that.Jim Umpleby:Yeah. There's been a number of announcements by our major mining customers as to how we areworking with them to help them meet their sustainability objectives. We are investing in newtechnologies, we're investing in batteries, we're investing in hydrogen, we're doing a whole variety ofthings to help our customers achieve those objectives. At the same time, we believe we're uniquelypositioned among our mining equipment competitors because of our energy and transportationportfolio. We have gas turbines, we have recip. generator sets. We have distributed power capabilitiesthat when we're working with our customers to figure out how, as an example for electrification, howthe mine site gets electrified. One of the things that I think a lot of people don't have a good sense of ishow different an electrified piece of construction or mining equipment is from, let's say a car, anautomobile.Jim Umpleby:With a big mining truck, you fill the tank with diesel fuel and that mining truck will run 24 hours a daybefore you have to fill it again. With a battery-powered machine, it'll run about two hours. So, one ofthe things that has to be put into our mining customers’ planning process as they electrify their minesites, is figuring out how their mining trucks will get recharged. If it's hydrogen, how that will work. So,it's quite complex. And we do believe, again, because of our power management, our powerdistribution, the fact that we have microgrids, the fact that we have reciprocating engines, we have gasturbines, that we are uniquely positioned to help our mining customers electrify their sites. Maybe justanother word of kind of about electrification. The other thing to think about is, as we work with ourcustomers and we are investing, we will have battery-powered machines.Jim Umpleby:We already have a battery-powered underground loader that is being operated by a customer. So again,we're already starting to introduce these products. But stop and think about a hydraulic excavator that'sin the middle of nowhere, regardless of where it is. It's building a highway, there's no grid, there's noinfrastructure. It's very isolated and it's got a battery in it. How does that work? So, when the batterygoes dead at two o'clock in the afternoon, what is the solution? There's no grid, so do you fire up adiesel-powered gen set to fast charge it? Which probably reduces the eliminates the benefit ofhaving a battery-powered machine. Do you have an extra excavator? Do you try to change thebatteries? What is it you do? So, there's a lot of complication that goes into this.Jim Umpleby:I believe that the adoption of alternative drivetrains in construction and mining equipment will vary byapplication, and it'll vary by geography. So, one can very readily see a situation relatively quickly. Withina decade, let's say in the island of Manhattan, that for construction equipment that digs.pavingequipment that digs up the street, they'll all be battery-powered. That's easy to visualize and easy toPage 5 of 17

understand technically how that would occur. More challenging again, to build that highway in themiddle of nowhere where there's nothing, there's no infrastructure. How does that work?Jim Umpleby:So again, we'll have to, I believe the. and also what happens in Manhattan and what happens in themiddle of a very remote place in Africa or Australia, or even the United States. You know, I think it'llvary. So again, we're committed to working with our customers to figure this out. We're investing in thetechnologies, but a lot of times people will make a one-to-one analogy between automobiles andconstruction equipment. It is quite different, and we'll have to work our way through that. For thesmaller machines, much easier to envision how that would work. For very large pieces of equipmentthat operate in remote locations. It'll be more complicated.Chad Dillard:Okay. So, you spent some time talking about grid modernization at the Analyst Day. I was hoping youcould maybe expand on that. How does grid modernization expand your addressable market?Jim Umpleby:So as more renewables get added to the grid, it has created stability issues and more in somegeographic areas than others. And we're already starting to see that play its way out. And if one looks atthe aspirations by governments to add even more renewables, arguably, that will increase theopportunity for us. Because we do build, again, as I mentioned earlier, we have reciprocating enginepowered generator sets and gas turbine-powered generator sets that can be installed in the grid toprovide that grid stability. And those engines have the ability to burn a whole variety of fuels. They canburn natural gas, they can burn biofuels. We've demonstrated both in our gas turbines and ourreciprocating engines, the ability to burn 100% hydrogen. So as this energy transition occurs, we havethe ability to provide these generator sets, both gas turbine and recip. engines, that will help providethat grid stability.Jim Umpleby:So that's what we really see when we talk about grid modernization and grid stability, that's what wereally mean. We've had the ability to burn hydrogen in our gas turbines.we started that in the eighties,as an example.Jim Umpleby:Maybe just one sustainability example there in China, we've sold a number of gas turbines that burncoke oven gas. So traditionally coke oven gas is a natural byproduct of steel making, and traditionallycoke oven gas was vented to the atmosphere, and it has a very detrimental greenhouse gas effect. So,we were able to modify our gas turbines to burn that coke oven gas to produce electricity. So, it has adouble environmental benefit. It prevents the coke oven gas from being vented to the atmosphere, butit also negates the ability, the need for that electricity to be generated in another way, because we burnin our gas turbine and produce electricity. So, this is an example of one of the many sustainabilityexamples that we have, given that energy and transportation portfolio. And we're quite excited aboutthe opportunity to move forward.Chad Dillard:Page 6 of 17

So just moving over to China. So, with the lockdowns we're seeing in the country, how much visibility doyou have into your large excavator market? And maybe you can just remind us about just the revenueexposure that you have there.Jim Umpleby:So again, I mentioned that we expect China in this year to be slightly less than 2019 levels. And again,2020 and 2021, were extraordinarily strong. So, we do believe we're well positioned in China. It'scertainly still an important market to us, but it is softening a bit. And it's for a whole variety of reasons, itisn't all just lockdown. It's.part of it's the economic cycle, part of it's how much equipment was boughtover the last two years, and there's kind of a natural flow there as to how that works. Now, it remains tobe seen of course, much of what happens in China is driven by, of course, government policy. We seesome stimulus coming, but again, we don't see .our view currently is that market will be slightly below2019 levels.Chad Dillard:So, at the Analyst Day CAT talk about scaling its autonomous mining capabilities going from offering a 25haul truck down to 12 haul trucks. By how much does this expand your market? And how does thisimprove the range of applications that can use this sort of technology?Jim Umpleby:Thanks, Chad. Well, this just may be a level set for everyone. We've been on the autonomy journey forquite some time. We've been investing in this technology for more than 20 years. And our autonomousmining trucks have driven a hundred million miles. It's pretty incredible, much more than any carmanufacturer by a long shot. One of the things that had limited the adoption of autonomous miningtrucks in the past was the mine had to be a certain size for it to make sense. Just given the capitalinvestment required in the infrastructure and the mine site to have that penciled out. And so, whatwe've been able to do and working with our customers and continuing to invest, we've been able tobring down from about 25 trucks to now, we're saying 10 to 15 trucks. If a mine has 10 to 15 trucks, itcan make sense to have an autonomous investment, to have those products run autonomously. Andwe've had customers publicly say that they achieved a 30% productivity increase versus their bestmanned sites. You say, well, why is that? Well, one of the things is that autonomous mining truckdoesn't make a mistake. Autonomous mining truck, it never gets tired. It doesn't need a break. You don'thave to fly someone into a remote mine site. You don't have to put them up, you don't have to feedthem. It's always repeatable. And, and one of the things we've also been able to do is take thatautonomous technology and put it into other products at the mine site as well.Jim Umpleby:So, as an example, we have one of our large mining customers, the first autonomous water truck isoperating. We have drills, we have dozers, and we have semi-autonomous products as well. So, a lot ofthat is starting to come into other products and parts across our portfolio, just example of semiautonomous now and also remote control.Jim Umpleby:We have the ability now, we've demonstrated this, where an operator, you know, Chad, you could sithere in your chair, in New York, and control machines anywhere in the world. And you have the abilityto control autonomously dozers. You can control up to five dozers, because they are in a semi-Page 7 of 17

autonomous mode, in different parts of the world. Think what a game changer that is for our customers,just particularly today with the labor shortages that we have. The ability to have one operator operatingin one place and remotely operating multiple machines. So, we're very excited about this opportunityand what it's going to do to increase the productivity of our customers and how much more flexibility itgives them over time.Chad Dillard:Okay. So just sticking with autonomy. The overarching question for me is just how does this have thepotential to change the business model for CAT? So, I'm thinking about the replacement, demandcadence, parts intensity, service opportunity and is there anything else you would call out which couldstructurally change kind of how CAT goes to market?Jim Umpleby:Well firstly, we believe, we feel pretty strongly that we have the best mouse trap in the industry. Wefeel very good about our autonomous capabilities, and I believe that our customers are voting with theirdollars just in terms of how many projects that we're capturing. And autonomy is not only for newtrucks, but it's also for retrofit as well. So, we've gone into existing sites and put in autonomouscapability as a retrofit.Jim Umpleby:In terms of the other things that go around that, typically when we sell on autonomous truck, there's ahardware element, there's a software element, there's a recurring license element. But one of the thingsthat it really allows us to do is to work more closely with our customers. When we sell an autonomoussolution, Caterpillar employees are typically at the mine site working with a customer.Jim Umpleby:And that allows us to become much more of a partner with our customers to make them successful. So,they have them embedded, sitting there and if we do our jobs right, and we provide that incrementalvalue, we make our customers more successful. That positions us very well for the next time apurchasing decision is made for new trucks. It positions us very well for service opportunities as well,because our employees are there again, helping our customers avoid unplanned downtime, beingproactive about repairs, they can help utilize our AI tools to help them as well. So again, a lot ofopportunity here that we're quite excited about. It really is, it really truly is a game changer.Chad Dillard:So, I'm actually going to take some questions from online. And just a reminder, if you'd like to have yourquestion asked, please log on to Pigeonhole and back it out. Are you seeing improvement stability ordegradation in the supply chain? And what actions are you taking to reorient the supply chain toalleviate any of those challenges?Jim Umpleby:Yeah, it's a very good and topical question. We haven't seen a degradation, nor have we seen animprovement in our supply chain situation. Semiconductors continue to be a challenge, with othercomponents, we will resolve one issue then one will pop up some other place. Again, hasn’t gottenmaterially worse, hasn't gotten materially better.Page 8 of 17

Jim Umpleby:Having said that, certainly we're working to put more resilience in our supply chain, everything fromdual-sourcing to thinking about where we source. We're a global manufacturing company, so wemanufacture in many different parts of the world. We're working to ensure that we have multiplesources in various places, hopefully close to where we build the end product. But again, I think thislesson over the last few years has taught us the importance of resiliency. Cost is so important, butresiliency is there as well.Jim Umpleby:Geopolitical tensions, just distance, port issues, issues with transportation, I think it's let allmanufacturing companies just step back and think about how they want to do this. And certainly, this isnot a situation where you flip a switch, and it changes overnight. We've already started to make somechanges, but this will be something that will evolve for some time as we think about, again, resiliency asbeing very important part of the equation.Chad Dillard:Next question for you, as China slowly reopens, how do you expect the cadence of reopening to playout? And are you starting to see any evidence of this flowing through your results, such as your orderbook?Jim Umpleby:Yeah. Again, there's a lot of dynamics here. Again, when you think about our business, we just don'tthink about shutdowns, we also just think about the market dynamics of the last few years and the factthat our demand was extraordinarily strong in 2020 and 2021. Again, what we see is that total industry,10-ton hydraulic excavators and above, being slightly below 2019 levels, and we still expect that to bethe case. Again, not a change from where we see it as a result of what's happening with COVID.Chad Dillard:Okay. And then can you talk about just CAT's approach to succession planning?Jim Umpleby:Sure. That's a loaded question. CAT's board of directors takes their succession planning responsibilitiesvery seriously, it's something the board is continually focused on. The board, again at every boardmeeting, has that conversation both with the CEO and without the CEO. We look at talent within alllevels of the organization. We believe that we have a strong bench strength of executives who areworking to continually enhance the capabilities and experience of those executives and looking one leveldown and two levels below that, so it isn't just for the next CEO succession, but it's for the one afterthat, and the one after that, looking at talent in all levels of the organization. Obviously, a big focus ondiversity as well, as we work to advance our diversity objectives. But again, something the board's veryfocused on and it's a big part of their job.Chad Dillard:Okay. Can you talk about CAT's role in lowering the carbon footprint of oil and gas extraction? And onething I'm curious about, the customers that you serve in that industry, would you characterize it more asa push or more as a pull?Page 9 of 17

Jim Umpleby:Yeah, it's really become a pull. It's transitioning from push to pull. Our oil and gas customers are veryfocused on reducing their carbon footprint because their customers are really focused on that issue aswell. It's flowing its way through the supply chain.Jim Umpleby:And as I mentioned earlier, we've made a number of both organic investments in our capabilities, aswell as investments, which has allowed us to help lower our customers oil, gas, and carbon footprint.Many examples, I mean, Solar turbines. One of our divisions has a methane abatement system, whichthey can sell to customers. We've introduced what we call a DGB, or a dynamic gas blending engine,which allows the cus

Caterpillar's total addressable market, that and growing global energy demand, as well. Stop and think about electric vehicles, the number of autos that are being put on the road, and the other ways that our . and our gas turbines and recip. engines have the ability to burn a wide variety of fuels: natural gas, biofuels, 100% hydrogen. Jim .