Allison Transmission (ALSN) 25 Apr 242024 Q1 Earnings call transcript

Good afternoon. Thank you for standing by. Welcome to Allison Transmission's First Quarter 2024 Earnings Conference Call. My name is Doug, and I will be your conference call operator today. [Operator Instructions].

conference being this reminder, a call recorded. is As

turn over Treasury to would Investor now Bolles call to like of I Jacalyn the Executive Relations. and Director

Go ahead, Jackie.

us afternoon, call. Senior conference me Vice Bohley, Officer Chief this Graziosi, Financial you Doug. Executive XXXX Dave With and and are President, Chair you, first quarter Chief Good for Thank Treasurer. our joining our for afternoon Officer; our earnings Fred thank and and

afternoon's will this presentation Relations reminder, As through conference the A in this May available call, Investor are a section replay webcast on of be X. allisontransmission.com. of this call available

As noted release. known risks, quarter including based our statements on press of on current in XXXX those expectations. earnings set and many unknown forth statements Slide our to of presentation, These first today subject forward-looking the remarks contain forward-looking X are

for on uncertainties vary or Should as incorrect, general may materially as report other Form annual Actual express that estimates of from Our risks today. year more XX-K XXXX, XX, underlying we results ended assumptions well or should or these factors. December economic prove the those one materialize or

noted of some our measures the today Slide addition, of financial on the as contain presentation, non-GAAP SEC. by In remarks defined as X

our You to measures first of the quarter attached release. can to earnings the the GAAP and find XXXX reconciliations most as to comparable non-GAAP measures financial presentation an appendix press

X Eastern from at p.m. call, end set Time. order just call Today's on to each participation question X:XX the to In is we'll take analyst. maximize opportunities

call X agenda. turn for presentation Slide the to Please of the

year recent will close quarter our the During prior announcements our to with XXXX an today's XXXX call, and first review on full then will across Q&A. commencing business update financial Dave guidance. Fred performance

Now the Fred over I'll Bohley. call to turn

Good quarter afternoon, for joining Jackie. you our continued results and in business. first demonstrate XXXX Building XXXX, on momentum record in a thank performance Thank the us. you,

of increase same in million, were record period sales a net X% quarter XXXX. from $XXX an First the

as Our of our markets. year-over-year and robust performance North by well the outside the strength in was X demand as to end for presentation increase top XXXX defense QX Slide Off-Highway line summary. driven Please turn global on-highway America

same a $XXX certain sales trucks increase led XXXX in increased by market, X% record year-over-year in products. XX% the On-Highway price period Class of results and to in driven medium-duty million. North strength from end Year-over-year the vocational X increases a by The increase in on demand for American net and was

tax outside the the to first -- quarter driven the the million North principally Our Europe. Gross market, Asia Defense America energy, increases On-Highway in products, Net on $X strength increased million marketable increased by higher $X applications. period million, unrealized offset million certain $XX of higher incentives $XXX X%, higher end in by was from first adjustments costs, sales, America offset net North the for XX% gross XXXX. signing expense, increase in contract in price and increased decrease nonrecurring income end The leading mining of same driven in increases costs. Net demand was sectors. principally contract mark-to-market partially by manufacturing period for material driven the by expense. by driven principally on of demand for net higher our was The income $XXX XXXX, products, for quarter direct tracked market profit principally market price of vehicle for sales XX% and UAW sales, by million, and end $XXX on XXXX. an securities same net demand record in partially was principally from net Off-Highway construction partially driven increased increased by from lower in lower quarter sales demand of by incentives, million direct million offset the results $XX by profit certain higher and increase manufacturing in certain expense, outside increases higher decrease a UAW nonrecurring million sales $XX of products and from quarter signing price Year-over-year and including material

certain EBITDA increased Adjusted in offset increase driven products, for $XXX $XXX higher higher net manufacturing expense by was increases the same and for sales principally direct to adjusted material quarter million and period was by the in The million EBITDA price compared XXXX. on costs. partially

a Diluted by million earnings end incurred from includes Slides found A XXXX X nonrecurring $X.XX, XXXX the in market our per performance share in contract the to presentation. which X% period of sales UAW quarter. QX incentives be $XX and can on detailed same of financial impact the net of and X $X.XX overview from increased signing

by was the X QX principally summary. The period in for for in quarter payments, same XXXX. Please and driven signing, nonrecurring was flow partially higher cash of profit gross presentation the capital the incentive Adjusted $XXX compensation million lower for to incentive turn higher compared flow offset million to Slide contract $XXX the by UAW XXXX free payments, cash decrease cash expenditures. performance

of repurchased leverage $XX first of During and available our with quarter $XXX stock. ratio revolving the of $X.XX net of We a paid million the million X.Xx, $XXX share credit a we cash million dividend quarter, facility ended per of common commitments. and

being continue XXXX. Please over $XXX of our maintain which X of debt in through the of million we quarter turn structure to for a long-dated million the interest rates, XXXX $X.X $XXX guidance. to variable of covenant-light outstanding Slide all is resulting presentation addition, flexible, and of debt, the billion debt to fixed third subject hedged, is nearly In

to market $X.XX be We full year $X.XX our billion February expects XX. of net XXXX provided billion. guidance Allison the reaffirming to in are on to the range sales

$XXX $X.XX cash operating the to Allison's in million the by EBITDA anticipate of billion to income billion. and of Adjusted of to of range sales range $XXX range range Net million, net range in guidance, million addition to In $XXX and $XXX million. capital activities we adjusted XXXX net to $XXX $X.XXX $XXX flow the in in cash provided million expenditures million. in of free $XXX $XXX million, to the million the

Thank you. an call turn I for announcements. over to Dave on update the now will recent

you, Fred. Thank

end initiatives to to to transmission and to We business and low. grow investments continue North few Today, automatic a in in our remains our America realize where like penetration order make announcement new recent I markets would regions outside On-Highway market. relating highlight

our time, XXXX transmissions and that for OEMs use we At Series South the with to in leading agriculture sprayers fully American where in in this the due sector performance in In entrance ag Argentina presence are which or their selected Argentina, soil, XXXX our agricultural Allison enhanced hydrostatic XXXX, traditionally soft we manual highlighted now transmissions the were equipped XXXX. the noted is America, sprayers growing in in South since application. Today, in transmissions used. automatic Allison critical most

that South Rwanda as sprayer we leading around economy. Also America's markets our with forward growth showcased first On-Highway equipped initiatives Argentina, end outside into at region. City transit a collaboration bus successful industry expanding quarter, of our Yutong, recently we we agricultural delivery Rwanda. service rider an automatic OEM Allison again global in look market, have North America in driver Allison we Allison utilizing Chinese target since once market presence equipped After in buses a Rwanda's enter operation world. the the applications in XXXX, and the a highlighted efficient During and in application as adoption fleet experience. in largest a is fully the trade in upgrade the to Capital to new its in our Brazil We agricultural their will announced ag and been in transmissions while first with was show buses. sprayer built in our new easy buses enabling Yutong our Brazilian optimizing entry strategic milestone

and OEMs We in towards collaborate are and export Allison's commitment initiatives to global growth pleased customers showcasing with markets. global

Continuing XXX-ton in market. transmissions with of the partnership North end provide their America our our integration outside our to into announced Series all-terrain week, XXXX cranes. for SANY expansion Specialty Last we On-Highway

and construction including XX-ton Our applications, mining trucks. crane SANY's partnership and spans mining wide-body with SANY dump several

and desert of and remote for Our cycles and productivity proven in maneuverability performance increased including terrain. areas operating harsh mountain duty provide conditions China, and will severe cranes

to pleased with and our partnership across forward look continued portfolio. this success SANY's to are products expand We

million end Firtina, Turkey, our United the of cross-drive defense Department our incremental defense self-propelled week, in the Automotive the Defense. In be market, $XXX international defense generation of vehicle. incremental annual $XXX programs transmissions For on transmission as Allison's Allison's through support modernization as amidst States million increased capitalize with we Turkey U.S. our investments program, increased through for of the will to manufacturer uncertainties revenue opportunities the their growth maintain Armed announced in we internationally our of with next annual we as partnering international defense XXXXX XXXXX geopolitical tracked their for through target Turkish and domestically licensed first outlook delivery of sales globally HST revenue opportunity. both Howitzer Last well realization utilized and up-cycle, by Forces and

transmissions successfully to scheduled XXX of vehicles. vehicle Turkish Armed several the Full in already expected the the As delivered of part production installed new of to have Forces. initial Firtina for delivery total with is a been mid-XXXX, XX to provided be with Turkey Howitzer's

States the announcements have last of properties our hybrid North we market. the in United eGen for Finally, transit numerous selecting the city buses. Allison end In their across America electric Flex system On-Highway few made years,

diesel ability not and hybrid Authority, accessibility to first no to quarter, the Orleans can preparedness electric vehicles, face available disaster engine-off the fully is limitations can to the Orleans propulsion. natural does the as for list. fuel the disrupted, electric be we system well critical electrical Transit New or grid continue grade same charge. for in added Flex Regional during may New Emergency as During the be access situations battery operate leaving eGen not RTA a and system using fully The where to the RTA

such were We recently the solution Wisconsin, of in as to and propulsion California list eGen to Indiana, that our pleased properties transit Texas Orleans states as the their Flex Nevada, add RTA choice. of selected New

for remain committed them We partnership to with plans. support nationwide emissions are both to transit in and collaborating goals excited emergency this reduction preparedness and agencies

the series Navistar exclusive in as that Regional Series trucks, announced market, Allison we our HX Haul available respectively. North this to and end also transmission On-Highway Just America XXXX International's the fully week, in Series automatic RH order and are XXXX

by in paired and with previously wholesale with adoption food the America, largest have seen engine leading distributors. the fleets launched RHS AXX We XXXX including XXXX some North of the Navistar in

are new further to forward Navistar success release both market. and XXXX haul with International collaborate the and RHS to transmissions adoption we SXX and proud Series to regional look XXXX and the We Truck the further engine, across

our of loan. credit refinancing Also a facility and revolving term quarter, during the first we completed

and As part loan down commitments term balance of the extending debt $XXX refinanced and prepayable the existing of million of a long-standing paying the to $XXX maturity structure refinancing, low-cost, debt sheet to focus XXXX long-dated We to prudent credit our and million, loan our under facility revolving management date and with increased to $XXX term maturities. maintain extending XXXX. flexible we on commitment maturity million debt our

remain In we to share program our management, quarterly dividend. addition to through repurchase our shareholders capital commitment and sheet returning to balance to prudent committed

performance only come. repurchased increased per During the dividend. In to dividend the first increase the shares summary, share, outstanding our Allison's to by opportunities strong quarter $X.XX to annual the quarter, not quarterly nearly quarterly growth we consecutive X% notable current our our first business, fifth but our results of X% of demonstrate and

the to brand continue our on business our for to concludes in to promise to open returning works. This ambitions, questions. order our invest the and way prepared growth world shareholders our improve We remarks. capital please Doug, achieve the delivering in while call

[Operator Instructions].

from comes the question Ian of with Zaffino first Our Oppenheimer. line

strong. looking be On-highway Can that second you maybe business, in it year? the year? at strength very the specifically America. would throughout Question Very, quarter, the the throughout the we back North half maintain on are How of

any you if detail talking yet pricing could and you of remind renegotiations, Or Have then contracts been a honoring any like of expire? what get honoring those be is these pricing started us? contracts as you've other you and could that I been on kind know those that you've pre-COVID us kind when previously? what And of the give the business. about renegotiate of lot And look you might going back the to the negotiations benefit also

Dave. Thank the it's Ian, you questions. for

played guess, said has medium to both duty year that I as of expecting out out timing, QX On-Highway, the already vocational for reported America the North the on X you're So OEMs we of the you other your laid as and balance and on fourth year, the commentary. entering conditions relatively Class receiving quarter public as other strong comparing certainly some the call, question are we -- have

in underlying we -- view of I So terms markets. strength are think not changed the our has of the

We supply chain cases see certain some level there. continue challenges in to of out

the So that some level I through of the balance mitigates quarter of think the year. first extrapolating

seasonality, So also X of medium I think some as there's the obviously underlying of Class with and duty you overall, know, users vocational.

So very close as to we continue well for the end to products. stay OEMs having that, users the said demand all with the underlying as

pandemic. Our point, half, don't playing fourth kicks year we days just has as production the seasonality expectation that direction normalizing the quarter, the in. holidays, off-cycle years because know, as been there's going cetera, see perspective. think as typically, different the QX in less et first the to few And of that's at from seasonality in because this be of it year as we from see you strong last out there the We market of a displacement more slightly for this

and as understanding think question the stay the long-term Majority year half, I'd about our from the On-Highway. second otherwise are for your say with least So and a It's relatively in the relatively of at of year them we that. negotiations second meetings would I that's on really early OEMs for is terms think America half. year, consistent is view. On first North in focused calendar again, about what still agreement agreement. of also balance

the we year. to we'll into So as further get in that get

business Fred's and that stage, those the to America on there it's quantify I we but call. potential XX% fourth the are subject North in repeating, think of quarter LTAs. worth a impact at stands terms your trying in to of point The quantify of ask that what position this though, comments book not to to roughly is is,

before, And services own provided up, products up. run that rates the our we've can value sensitivities that, on deliver. based So you clear I we in saying the think as It's think goes labor said those your without it regard. that I are by also they are vehicles that sell

training, ownership, underlying that driver So relative reflects to those product safety, additional the reliability, services provides of our cetera. total inflation the value et uptime, from cost

and pricing. -- aligned So much vehicle you've what seen in terms very with of

Melius Our Research. next comes question Wertheimer from Rob the of with line

little were kind gross were could this into This if Pellegrino bit you down or for if just just bit. mix a different on, on We was It on the Justin is quarter. I'm little curious dive gross maybe some Rob. margin hoping things could of going margin a that you talk about line.

Sure, is This Fred. Justin.

down margin down. you gross As mentioned, --

runs the UAW think gross into incentives. thing take through you signing That is was one need consideration million. $XX I margin a to that contract

basis EBITDA XX%. And margins you points. So look at on margins basis, if XX our you those EBITDA look you sequential if and up margins gross sequential -- our actually a at on they're up exclude are if a basis, you then

up signing on and the up margin then points XX EBITDA gross So margins. bonus basis XX basis excluding points,

comes with of line Zakaria JPMorgan. the question from next Tami Our

first my we versus you the some could provide how is, saw quarter? to the and second about first So quarter think regarding question margins in sales what pointers

we in Tami, profile, is to EBITDA the margin America in biggest kind have timing margin earlier, very And we Fred. Yes, what from talked quarter, out But end saw laid this Dave QX. to as a things on-highway. have market close we of the North second in

will lower we going things the just revenue. From we fairly particularly to stable. in hourly there's then for a the off on SG&A to back of probably flat And our up expectation cost XXXX. based line bit in of Engineering step standpoint, saw the year. pretty R&D little QX, softer feel Clearly, half back you things being have relatively but QX, cost, what a close an of anticipating labor top understand be half that year, the

it. Got

understand just first from perspective, half. And line trying so second also we to expect number? a I'm similar a top sequentially half versus should

Second the Is in we line XQ sort with sales? in half run saw rate of is weaker. for XQ

expectation, that's fourth still And a the the I be consistent across that in it's first with relatively quite to in line on but it really with QX, just based lower quarter a being good go obviously, Directionally, think of quarters looking the is little Yes. number QX. workdays. bit a X will

ask Got it. follow-up. And if I quick one can

revenue was about services year? still for the think expecting. down to growth to than a decline I little we weaker were call Or anything one-off out services be Is X% you expect there? there do

Yes.

out, call a to thing one the that's good think point. and I

in the solved If you XXXX, and with into that we first XXXX second think some part the quarter into revenue of of about got quarter. then the the cadence somewhat in came backlog first

you for XXXX. of exactly on service parts the QX, when quarter fourth of we top sat where were ran at look the we revenue So that for almost

more on really it's basis. a challenging the So -- comp year-over-year more

line next of Morgan Our question comes Stanley. the from Angel with Castillo

maybe kind specific Just hoping vocational the saw you also, within duty first, you X give It us that maybe Any then supply And these more highway. as potential that of growth of you bit on there medium of parse the color well I that like noted. out bit separate. of a kind regarding change. challenges worse. could little of a those things little are could was particular as little you some a are just just that bit more there's getting chain seemed kind kind step the

just more a that So give there, color bit helpful. be if little could you us would

appreciate the questions I there. Dave. It's

about as else. to you share continues in case. that number now, probably of value the X the Class reasons market. nothing are North know, There be team Allison gained the over talked It's that, America, the the vocational of a So be as decade to has just product clear, last we for proposition the

get all certain constraints you we our where -- of and the I about the have exiting think you to advantages COVID talk demographics start retiring further with into effectively constantly the when product highlighted skills. industry labor people

not require product to gearbox. would the experience say, I -- training Our does manual a manage

a fully of product has context limited automatic it's the labor proven more be even in So that attractive to availability.

fairly series. of X,XXX, we whether that straight high in demand level so Class So to be are experience -- continue a X,XXX our that our applicable the X for products

if fleets, of So and pool. labor see experience to that's well you become customers content have amount the market. will, as very those and really continue their tremendous effectively what to products accustomed the the in demand built, for those as we the context, have

that those first saw we -- out play we entered So as quarter.

on We starting call that's that to also about fact as could of to see half would -- vocational bit the so in demand, not like you 'XX there entered talked the quarter know, pent-up demand that users as the fourth of into was as being -- produced it, that second end carried develop a you we close 'XX.

also a carried demand of we're that So into level of beneficiary XXXX. that

our of is post to market currently supply it what That's in surprising, duty vocational earlier, pandemic. vocational expect a based users -- seeing level on terms of on front. very level at continue in hearing also lack we the year and had segments start improved said the not of fleets balance. As do busy you from That of the on when developments end I of the market. as Medium resizing. medium-duty a supply-demand look expectation certain frankly, to we're the be OEMs to We're some

for bit in be terms continues but a busy up to us. firming So relatively supply/demand, that market a of is a

of again, dealing think for especially be entire industry, the simultaneous look industry challenging level relatively out market throughout at can see, for components. in it across about, playing you're high the So with certain as rather year, vocational pull as that when of you the the that we demand the levels you

not industry necessarily So capacitized fully peak. of sustained type for again, that is the

market many to in So all specific some trying that to levels those offer are of produce best pull address aware, what in describe are. underlying demand. is terms is But causing just now the their almost of response level far those terms as the I of to certainly those from I some of as would constraints. parties now. at unprecedented that that, right demand industry I I'm participants get won't But overall being would

to leaving and of continue manage sure to here our team others support process. that But abilities we'll labor level they are the the that the challenge addressed, that need. So of And through the make receiving across we've best cost offer board. just issue it's and the the issues to users certainly aside an would deliver broadly, I the more that is have -- end availability committed forget

that's continue into issue that with team I that we're So sure to but one doing working supply will available, base that internal our making in closely be the -- we that make our terms challenging it's think and best very both we're I year. and our think one get of as further labor to

[Operator the Instructions] with Revich Our of next from Goldman line Sachs. Jerry question comes

Class wondering talk X. views you your could through X if just truck industry on I'm about for inventories

it's unit tell the that would at potentially what factors wondering about in revenue of could Just total dynamic, you're is of few year? views you counts half be cyclically up on considering, Fred, that the around that if the you're talking I'm outlook helpful. dealer extent your And a Just is? that to the -- of And levels. equipment what high one lots type back softer when

typical more mean, I Fred. is this Jerry, my around earlier were comments seasonality. Yes,

read-through pretty is still Our tight. our is sales inventory force that

to a get be trucks, is complete some relative the to think I body there. ability builders. I there's and much body dealer the all builders versus may the And at I how parts question think to think at challenges their

Interesting.

dealer terms of So building holdup assemblers? in because the you the think final at constraints inventories the of the

Yes.

of more excess there's that dealers' chain lots. the opposed piece I to sitting challenges in than as vehicles on just think

the here? pricing performance pricing are last team quarter mentioned XX% the any to Can pockets able of from and of opportunity have price on pricing raise update both Or outside that ahead where opportunities On-Highway? realization bigger you were being hamstrung you potential the of of quarter? us pricing other good America business of you in continued by despite updates your you on part margin pockets Okay. North And your then there separately, the been

is, Sure, actions as certainly done Most maybe that new the But January Jerry. customer as robust It's Fred again. X. pricing it historically we're position in conquest a effective you've customers. where to were some of in with demand incentives

You pull back those can on somewhat.

And we've about to North in Certainly, what's more talked America But price XXXX. markets. to XX-plus then across relative available On-Highway, other is business available the the is of meaningful, which to the there available price end book percent.

And it's negotiations time So of XX% we're lot business than obviously a customers, early America mentioned, price available with spending too thinking just of as Dave about book of but that. a to in broader really be is the On-Highway. to there North

closing There the back hand are like to queue. no David further for questions it I'd Graziosi to in remarks.

your for Allison call. interest Enjoy on evening. for today's participating you Thank and in your continued

this today's participation. Thank you teleconference. for gentlemen, does your conclude and Ladies

time, may You and a have at disconnect lines wonderful this your day.