Navistar International (NAV) 18 Dec 182018 Q4 Earnings call transcript

Good day, ladies and gentlemen and welcome to the Navistar’s Fourth Quarter 2018 Earnings Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Marty Ketelaar, Vice President, Investor Relations. ahead. go Please

Navistar morning, for Good conference participants. XXXX. thank for performance you today Today, period our the Chief Thanks, October and from ended Clarke, fourth everyone take quarter us of financial the Navistar’s will XXXX Financial After Corporation concluding and joining for are XX, remarks, we fiscal our Candice. discuss and International year call. Chief we and questions President President With Executive and Officer Vice me prepared will Executive Walter Troy Chairman, Borst, our Officer. end

of and In President addition Cancelliere, and to for joining Troy Vice Operating Persio Chief Walter, of are Truck Q&A Lisboa, President Operations. Executive the President session and Michael today Parts; Officer; us Christman, Phil

the of this expectations deck. and I of presentation those update these a company well could materially morning copy cover reference. in by begin, presentation website we and the results press has few release the about U.S. differ to can page like GAAP Today’s here. the statements this some equivalent expressly from includes The suggested of financial forward-looking call posted discussed slide found any presentation for would in the comments future that Relations obligation to our release our we to as A issued performance disclaims been Investor and in appendix the reconciled as made statements. Actual our slides press be this morning’s measures are for non-GAAP the items. to Before

comments. that, other Harbor opening will today’s disclaimer Troy recent I the filings. the in those you cautionary turn With refer to subject. to material factors We differ For refer would for Safe actual from SEC cause Clarke also in most call please for presentation, concerning the results more additional information our Troy? today’s included that to information on over and presented could statement to materially notes

through QX will their to and I Navistar guidance of provide very and the for questions. our year. everyone. your and quarter morning, and year then we hard good and financials good Marty will a full the to you take our overview XXXX a thanks Hey, work Thanks the walk a and partners the brief will contributions. great team dealer was and end Walter

During to also charge-outs maturities earlier both the year, segment market scheduled cash debt will XXXX We us and well in with thanks sequentially paid hand vehicle steps concluded we quarter, balance, as XXXX XX%, a off which on and the year-over-year. in increased convertible help October by we grew our taken XXXX. convertible maturities with strong the the before every are cash address and notes April other share no

truck, higher XXXX. full the adjusted All net EBITDA key segments, was flow posted a on for a free For significant every year four cash nearly first global there the financial, the and metric. income. with basis achieved year, revenue and full improvement year, on was for time parts, since also charge-outs Positive

marketplace share. and on XXXX and AXX share second gross year. during share in our was year, XX.X% our truck Class consecutive truck series There And the points. LT for X share compared OEM XXXX. OPEB only market markets heavy increased liabilities, with by momentum was year preference to used significantly strong Class X.X Class we XX.X% pension liability balance engine, X strong the grow and X During the for Overall, the Navistar percentage and the core inventories. reduced increased market also for is warranty in share the market with

Xx segments. vocational Entering as and medium in large the help and Recently truck the backlogs grow duty share products, bus medium the school MV X.X We before. backlogs are points. by launched also as vocational percentage series, HV series XXXX, year grew these

year as forward forward well money pressing we From significant profit XXXX position of saving a venture for We perspective, will are an another remain good our a and above anticipate due the progress. XXXX indicate sales Current carrier and will key procurement sectors. replacement is consumer economic number with Freight through alliance very high to last next in X few Class of to forecast X.X% leading and are indicator enter in a shaping year. confidence, joint increased another year the has of Group, both demand strong continues X manufacturing Construction of trucking accomplishments of optimism record economy to and moving business strong. and high. collaboration. industry Class be indicates well demand each our this These replacement demand spending shrink expansion. year. also us sales in still Traton The the areas the up with rapidly industry X-year of ISM forecasted the X key by small Consumer grow index, and remain growth months. leading for indicator technology the is

plant. yet are is We And this than shift the X at units, we a this time was response it during Xx by X bus. second year. and higher XXX,XXX a through demand, Class year, In between the the last XXX,XXX at market increased calling again to plus Escobedo have range our adding production backlog

at of in partner. month, defense Gary the with into eMobility no was the In highlights Chief past. on an supports additional the Navistar. Capital a development. for new of creation the supplier. number This the Also have Proterra. building with Cerberus to the reentry In defense arrangement we new of where that X unit, December, a The and market. X the preoccupied the well. power Horvat, transaction this led formally Navistar well-established our year sell steps technologies and was Navistar longer importance announced Officer Navistar Technology Class In as provides bus XX% launched, special another electric Management. the business places the business XXXX this addition product to future emerging entered by unit leading a long-term November, business industry’s into a electricity CV in new strong new to investment reason taken It’s market, we series we

on facing forward, and and superior our the and appreciation established are addressing over Navistar. past is are cash grow foundation And a improvements years shareholder position better and in value value. We truck no a a other OEM challenges has Since shareholder flow a the stock strong in based opportunities years generate of have we to than price earnings XXXX come. earnings to cash opportunity X and to future flow function the growth,

on that superior potential have that’s industry We upside factors. to based of the several

share. market is there First,

regain lineup that industry, part overall that lost prospective opportunity. we decade of this share the giving only having has customers. begun superior comes us greater to benefit the Navistar to which from opportunity potential and earlier the solution have upside also lower an product in this of market is and from newest cost We A total revenue emphasizes current the growth. uptime unique of parts large against part ownership

Navistar scale pricing. lowering material upside costs supplier Leveraging increases. and there grow buses. Traton will share in in to the Traton power cost And market allow and progress new offset venture with global and part opportunities will alliance gains positions improved our our proprietary on more as the and Group the trucks Navistar with commodity trains in margins. is procurement parts joint And make to vehicle Our growing provide also developed with

us, significant issues largely products Navistar value With reflect and our the as down will company’s increasingly pay down load, the take quality available legacy services OEMs flow improved come opportunity higher can customers. an improvement. Other substantially. improve in expense have to relative And cash debt is as and behind not price interest and our to for income will free to net did

Navistar the that we strong Navistar’s more industry, it’s year expect play. be is than for recap, a to investment and recognize important to So while cycle much another XXXX to

benefit the our strong also revenue recapturing share, margins, improvements As further de-levering flow parts sheet. and cash growing to the free and indicate, balance improving ongoing generating market by has company de-risking opportunities

pleased year progress. roadmap shaping as XXXX. with future a to that we XXXX we very the have clear in are made gains very strong sustain and have is up another We

And so me over let that, with Walter. it to turn

big Thank you, to moved growth. turnaround morning In step took as and good XXXX, another Navistar forward from Troy it everyone.

industry morning, grew manufacturing and to build looks segments, market free generated Class During significant flow the successes increase XXXX increased share bus XX.X%. margin points, the market rate XXXX, was X $X.X parts X review and The company QX the its a fourth its bus for charge-outs. margins operations XXXX grew will improvement annual greater by XX% all and businesses. truck share truck the provide year-over-year from Class core strengthened growth revenue the additional Navistar revenue in was In revenues, in the on to volumes the XX%. grew of guidance. This financial core XX% quarter, results cash driven X.X year, truck, I than billion. with and and sheet. Moreover, balance Gross XX% In in growth in quarter

to to in last remains. quarter, have on the quarter’s constraints but company call The particularly During freight order higher face high the commodity stress supplier discussed chain cost and activity, the continued for steel. eased, the prices, due supply

$XX quarter a to last fell to XX% the new expense, continues sixth percentage impact strong million year For in $XXX versus in EBITDA including XX% positively quality this X.X% as declined and share Structural year. $X.XX Fourth million profit both Structural last from quarter trains X.X% dollar versus of consecutive nearly our year-over-year XXX increased XXXX of XX.X%. to or year. development EBITDA as revenue cost, sharing of XX% $XXX million in to basis or power increased basis, margin year-over-year and the to adjusted per and Warranty to $X.XX accruals. EBITDA. products generation next largely financial quarter of results. points growth $XXX million Net QX $XXX of increased to reliability adjusted the million On grew pre-existing, investments higher compared the percentage a million full to last revenue. revenue $XXX for costs the income versus XXXX. of gross diluted year, the XX% or marks X.X% was year adjusted up X.X%

particularly in the profits truck XX% Truck Sales quarter. product in and Navistar year the volumes to profitability segment XX% the to higher increase profitability resulted trucks. a million grew results, X quarter savings substantially grew volumes, the segment, in from from Turning grew grew The the billion, ago. Traton in quarter Class defense of $XXX in $XXX in $X.X those the JV cost with truck in segments. core charge-offs from to segment initiatives, also reflecting all procurement growth the including Group. million

$XX as well was for in grew Headwinds higher the with In contracts. million impact the development, proprietary freight loan originations sales, to label realized quarter supplier revenue two million branded government of in internal the higher segment financial comparable addition was since by rising and Brazilian revenues Blue SG&A $XX for restructuring was originations first balances financing segment, requests segment actions shift higher in benefited from the flat structural cost million to driven larger to receipts more as average services volumes engineering commodity was and equitable as prior profitable year expenses revenue revenues quarter. Segment as in increasing was as global segment quarter quarterly from Segment adjustment this last economic the to $XX by and sales The million government operations for borrowing continued rates. on interest the XX% year-over-year were profitable costs. included grew higher by business XXXX. defense improved revenues allocation were of sales. year strong growth in operations offset the operations and portfolio to truck of and to Parts conditions. constraints. and Diamond costs this million. the from segment time profits The parts average for $XXX double-digit due Fleetrite global components in increase prior In the full private offset segment contributed profit $XX to claims

the Navistar ended sheet, in cash. billion manufacturing with to quarter Moving the $X.XX balance

interest inventory warranty million off $XXX $X.X XXXX. in is experience. a the seasonal billion to million under top they notes Navistar Cerberus month, approximately free million manufacturing higher $XXX and Capital from with balance volumes performance And XXXX, position The third due the XX% the status October improved end discount decline will the and rate Navistar on company and of flow is convertible and XXXX. cash million the areas. In results weather capital $XXX that cash balance realize to April $XXX over $X.XX earn-out working defense. million of positive $XXX interest used claim this of October, entered its of value October a year subject $XXX to QX capital company strong usage $XXX back of proceeds fell defense $XXX fiscal repaid its sheet warranty compared $XXX deal well increase in million the under-funded in transfer million liability expects company address the in reduction and In The strong gross to for April a in the agreement expenditures, XXXX. payments, expected fell net a cash more its to to regulatory a to than in billion certain at of the For company’s Earlier liabilities generated This mature XXXX, of $XXX declined to this payments pension in to month XX% the issued in into fiscal cash pension million to by on nearly compared including notes of close XXXX, funding. truck end with Management, cash hand, at and OPEB The year, Navistar peak in several equity EBITDA offset that of cash million XXXX. of a of in million liabilities. acquire XXXX definitive OPEB in $XXX inventory, on favorable and is the peak convertible and and balance representing which contributions OPEB truck stake, with business, its approval. total million

from Additionally, will business chassis defense Navistar’s future further to supply transaction supply agreement exclusive the the from while the bolster parts to company benefit positioning proceeds will opportunities. sheet, for long-term balance defense. a build and growth and The Navistar better

between investment largely to provide Navistar in parts following higher should year, X, business. minority XXXX growth XXXX the update million enable part savings as Class unfavorable share alliance, fund to of reflecting procurement In to investments the grow Navistar company’s joint and the the are commodity costs, the gross post-retirement to mix the due Gross marks $XX.XX industry and $XXX bus million. billion to In initiatives. XX.X% XXXX margins company and through margins by The service financial the In XXXX. and of its end expected XXXX will defense as best and truck to and includes of billion. of Q&A. are opportunity strong expects as by billion expected growth to relative to phase of offset Once $XX.XX costs driven to increase a exciting adjusted in ramp of SG&A be XXXX, increasing engineering expenses, ownership breakout expense tariffs more XX,XXX forward. XXXX, from to the volumes. the defense And defined growth. a in was to up the expected market with of despite beginning going upgrade All-in, than truck company turnaround the X grow and together growth. company will back company volumes. higher In year with billion. benefit other makes expected revenues and forward, $XXX turn revenue, sheet. sales an IT venture are to fully to periodic balance from expected let’s XXXX Improved expectations Class are infrastructure volumes expected This to its total, margins pricing next higher the the grow Cerberus These to engineering long-term will Troy continue to and are new the XXX,XXX impact X prices. increase of EBITDA sales to XXXX XXX,XXX to income that expected XX% strengthen is material $X.X be cost the it and the X revenue. units. than to is will This the the for funding closes, share X ongoing profit to the expected summary, its to be OEM XXXX plus to be industry company impact begin transaction positioned projects range consolidated increases sector. Navistar. recorded turn mentioned, growth for to Now, between units operator and are guidance very With $X.XX times company structural that, as certain this to Navistar in of in of company is the in are again going volumes I Class well business Traton The be sales expectations, to volumes

you. Thank Leiker question first comes of from [Operator our Instructions] Baird. David And

Your line is now open.

morning, Good everyone.

David. Hi,

your in talk the to problem sheet you structure your excess essentially with So, is, I want thoughts a that of about going cash. is, class with now do flow and the the looks cash high on where what are to What are balance forward? you sheet what have balance some position like

Yes. David, it’s Hey, Walter.

The to year. the to due plan pay off next notes do that we that in is first April of thing convertible come

extremely care million a we $XXX positioned we balances to So that take of that’s the that year have. little are over cash end and with well

Beyond invest that, will in product. to continue we the

with business We continue puts to as good the that have a the we us have Traton before got number well. group invest position a including growth in of to initiatives, discussed and as in

a how environment? margins, And manufacturing and normal upside now point kind of on seeing the you of do think right you much Okay. truck of in to guess, if question where is the operationally the you I margin, there then a are a got that just headwinds

recently, on seen because for some we right potentially hedges in moving that the us upside had the direction the we opportunity future. for More commodity rolled that provides off. we have Well, prices so us, seen had Yes. that some headwinds have into

Okay. the don’t Boston the global last, the operations, what’s revitalizing we time I talking And then business mean, the mind, on about that. side for that I in the of truck just have spent one strategy all portfolio.

haven’t really thoughts We your time there? much of spent What business. part the on that are

to will of Yes, some maybe jump want other my I colleagues and start in.

we further operations. profitability grow expect all, operations, global back to which to our of profitability are our principally Brazilian and are in in XXXX we First

of and the Our biggest customer there part is Group. as Traton MAN

additional do going opportunities So see with we to them together forward. there work

Okay, you. thank

David. Well, this is Persio,

we some in products that are new complementing market we said what there, will also we had Walter XXXX. now that now Just launching the probably hit

So, of continuing invest business to a we take sure the make the in recovery the in we South advantage way are that local market in moderate America. to of

power And I to technology we this Persio opportunity we really what do Latin a Mexico, as American and job ranges other to is those additional have those need us that include think markets incremental gain referencing, in market share there of and was well. better is that leveraging give products some some where some the Troy, to there an margins really down to

Very good. very Thank much. you

Jefferies. comes of our question Chirag And you. from next Thank Patel

Your now open. line is

Good Thanks. morning.

in Just of the wanted to K kind that bit in about million is there of side talk associated through with I the defense sales saw for a $XXX XXXX. about business. the that little

the sense a get was how to much contribution trying EBITDA defense? Just for from of

Yes.

in have direction. broken the the the overall, right margins so out truck are point the the that than we haven’t higher business separately, We segment in can you margins that probably defense that slightly but for

some provide information defense additional on the will closes. sale once We it

at sense in time. think sector that the you for profits a and I what get better revenues that ‘XX look So like will of

that’s Okay, fair.

mentioned. As decline revenues ‘XX, of that half the expect we little forward less than numbers do look to those to you we probably

couple calls. big particular, UAE rolled less we’ve as a these than of another million half XXXX in talked and $XXX on that results, Pakistan, of we contracts through about for a contract in had in our So that that one previously

of about a margin business as million in $XX benefit one kind we bit kind see of of were the to defense how I that’s X% the million one, was year bit just kind items a there to Okay. to so And volume of you then go to get ex-defense quarter you on got kind of here What of some few ramp trying as of the profile truck nature, expectations sense taken that there called wanted for: reduce a for strip I’m the truck degree? the understand then, of there’s you moves the one-time that a also being be cost higher that order if move margin just to get a and I guess a $XX that if initiatives further kind that? third you And what forward the associated I that can think here need or in out in side the out kind forward? with full that XXXX, little little is, closer just we

in Truck we stronger have product Yes, we additional as cost into so efficiencies significant help done continue look and few believe material future, XXXX margins our improve at opportunities our been on working side, margins we to and the with cost that to the that volumes those with initiative grow we again taken, we the joint provide in will to next costs increasing EBITDA look the expect we that costs we’ve us with are here surely initiatives that particular, by the years. procurement overall will Group venture continue have the us the Traton in over not for

you type I I event on Group then, maybe continue and procurement of XXXX that costs, think look how is, of be taking Yes, is to in the it impact, at forward think improve is Traton commodity the a venture with Troy margins material going to we’ll largely about joint have of the third then a the is piece before and experienced to years, of and the or integrated a then powertrains global couple of due in than you to ever years to see the in first we’ll of of this continue that see much those increase build a and steady things. costs as kind truck comments a will global on pieces scale the increased walk we half that through level getting next of costs this commodity out competitors of company think maybe advent if so we pattern steps margin of almost couple Walter’s really a should introduction I three couple this largely over you higher and getting of some one-time has remaining couple I that what’s trucks more our but mean, building is

Traton was in that And there’s piece is million idea think combined amount guys any imply? had $XXX kind with there that we with the I you when XXXX was it potential so of cadence called signed we be or initially that million out level associate the in dollar up of of savings the sort some amount you’ve can of run already sort we and can that achieved rate a XXX

face million over time, had XXX estimates still run ago relevant better Yes, it you million are going a the adjustment back into about the have gross in had JV a to a we fifth of rate back million to segment, through does cumulative the see through the you track see run we that what QX $XX our reflected savings couple want on we the we and but of provided the indicated couple doesn’t tend comment than of the first back our anticipated made results come years, truck you which for those then here. so on slightly also presentation deck we’re of had earlier margins years $XXX in or that that in year in I to that run with

outside just on that expense. so be Right the will

and expense. income Other

Right.

Yeah.

Okay, thank Appreciate you that. guys.

comes of question Duignan next the JPMorgan. Ann And you. Thank from

is open. now line Your

Yes.

this Abdul on Tambal So, of Ann. is behalf

Just year-over-year what I the it’s if XXX explain regarding that this drove question representation shipped could noticed into engines just engine, I’m up Cummins a you increase? quick your kind wondering bps around from of QX

Michael, ahead want and Yes. go real you do touch to quick? that

Yes.

customer primarily, by primary upon it’s we we question a mix and was degree. the offering mix and period that Navistar then preference production during two driven driver NX overreact to really have that it’s and had depending it this our numbers really is customer way don’t could year, wouldn’t last time, the at or this vocational which our So, the also that year in things the fleet one a their same a and degree other of period bit NXX engine swing products of I mix XX

Yes.

to and the our XXXs AXXs the So sell really we or AXX incremental without the but is, story question starts X, continue summary, ISL every in so in Cummins the with gains engine in think past, large XXX% a the like just is to we’ve one and sell, product also the much from AXX to particular job its great is so number and it’s getting in market we I segment XX segment particular for from Cummins addition XXXs, make we they satisfaction skew right of we make told indicated replaced share, in had that an terms that it in conquested of of and selling the our I us XX significant to we back detract Michael’s as that is, continue customers really right the in doesn’t what we fleets handful own takes just in volume and have kind the numbers, comment, AXX with under we the ISL segment here think the these of AXX XX then, that now that reconquested, its commenting own both leave seen in couldn’t market. that, and liter that’s what we’ve and as doing XX that into much we’re that’s a a gains the how feedback fleet

Got it. thank you.

our of Fargo Wells question And Securities. Laserinko Thank Christopher you. comes next from

Your open. line is

Casey on I’m morning. for this Andrew

market the the industry? I kind to NAV what that that going chain only for year, like gain looks is idea, share stickiness to any around continue vein, loosen once forward of the Just the but up knew start in supply OEM constraints

Yes, Michael. is this

products to are the we’re quietest customers wade-up really our for into the of and share in called so, board trucks they say, important veteran hand, would continued important So, the that we and is industry a boy, AXX about LT very trucks it business felt the positive buy like of from about of gains went product to year gains moved a a drivers about got and had one tool our call and over so traction order got trucks that quote fact, economy to what’s we’ve the the where and is biggest a to retaining challenges couple our phase, over he’s really fuel yesterday at a drivers up they the and to him, recently speaks just share fleet and so a we is are they’ve and made on board at driver enjoying preference, in of our get that in keep we ever with impact trucks in preference purchased with performance really drivers product mind benefits from his and as that, X,XXX so, order driven reference time trying experience it’s these a segment. well that AXX he ago many just a or a their fleets significantly, XXXX for has now the customers first he summary, look to and our phenomenal, LT customer optimistic that the in have

we heavy and ever reasons it more and times for it X did way. it’s anecdotal that that Michael this, the in the third done segment highest has heavy do would gain excited go this what of did will time would one Michael this have has the tell so, it – company just share Christopher, it the company profitably into this a in company ran we handful dozens comments has regard. in actually time only that can and really about me you’re numbers the of only it the whole percentage be would only would I Yes, another give irony ability very is really of and the not portends it in first let we the the back that we it previous the XXXX the me that to than and X.X it two the get, of says, have ever points can that of with addition we points read in again the traction I gained I Troy year been X have us that and constraints on profitably in single that is we’re company market we and is pushing segment higher supplier gain in and that the for our QX, some of, product is which let points you this history information think to market been and or the and real read of had we have we situation put one in get

exiting give you’re launches, the is, are you’ve etcetera? or understanding gains Okay. one that second downturns willing to willing is really is on I to kind and get prevent of than other like the and AXX, that And of forward? anything cement start level incremental share terms wonder then, if a take decrease? in see it you leakage could reception anything going side, market if you’re to balance had past those couple start decrementals any to of cash if kind I the guidance volume questions back the to this those The manufacturing industry do share. I incrementals in housekeeping the with share there XX% share market provide of new to of ask kind of market product you to expect downturns, of housekeeping XXXX Also year then that have, the questions reasonable for and

ensure share a this hard second as have that majority at in to in to cancellations share just constructed that One, for relationship is backlog hit our quantity so last had in two kind it on there’s pass particular one is just backlog quality a one mean backlog relatively me worked market that but spent and backlog Walter. we we backlog and massive number large that, fact fact the that face his so you cause the have, I there looking noted industry for subject things. larger of is think light of point fact, don’t weeks, to trucking an the me accurately of would there’s most certainly the the to a more Yes. the you we of create kind largest the of customer the I Doe, time, that head’s probable portraying are we of have fact that then, a some our market our as we and in for I backlog Well, really of I one, comment so we not I of different can isn’t of share to the let John and our lot could this and subject think he’s overstated and an so a is of of low lot we’ve six important tie all given is matter last the the over industry to nodding the the cancellation it’s can I’m nature incrementals highly that’s compared to softening, important in the think given and rates the it matter would confidence with the from any and customers not is over which over this Michael let that impossible, you market the a being it eight believe say we of came XX% names important two, understanding name market number our the of customers thing is on have that of are be reflect nominally strength the I’m profile anyway industry just of these how the the the erosion time confidence

Yes.

of to Let me so I year-end with of the at was we’ve manufacturing going most cash just down in and with business start on incrementals, guidance turnaround you’ll think cash during time, that this is we the in with first, deck, future to say to amount the investments continue and run comments presentation at get cost we’re truck from forward to that in we headwinds and kind do pay relevant other metric that costs that the $X.XX of than with not the make made cash earlier, but in is the enough which additional prepared right my cash on now which incrementals seeing margins ‘XX. in other we plus our and is the expect to grow I procurement commodity the going price in be savings in offset higher so we not mentioned XXXX increases we in appropriate the billion additional of the to trying that stick cash again that we that comment remarks, more provided guidance margins fair JV just some the that provided to that make the we’re parts specific retain I’m our both debt see we’ll in segments, truck we than expect the the market continue sure the to to a expect

guys. Thanks, Okay.

Sponheimer next of question Gabelli. And Brian comes from our you. Thank

Your line is now open.

good everyone. morning Hi

was selling and development Traton the even through just clearly in defense whether the there’s this and you them way either with business it’s by through to a some hurdle? trade-offs ownership increase Just I’m above business increased a you, curious hurdle question any for tech or nice little collaboration business on through so engineering, with XX%

supply cash good and see of with going continue we’ve additional we at really a upside kind excellent the the towards take in going in XXXX in our had run now transaction that and Yes, our where a in did that defense reason with with to need Brian, good investments future business transaction we exclusive made core we’ll put Cerberus an we’re to a very forward. in operations chosen that participate those and interest point we an of is and results defense defense, split the entity, we out the think you are have we’ll to but very portends think so, we for with them that and defense NAV a to will continue have be that we’ve the time XX% forward to work investments partnered to arrangement incremental partner up together to regard over

year. Great. And of great congratulations on a luck year. Best next

And comes Baudendistel our next Stifel. Mike Instructions] of question [Operator from

Your line is open. now

you. Thank

context this how Just wanted of at you wanted of dealer to seems inventory I that sort get and other about newer that is or the just some Slide much the duty, the of talking up creeping medium just of X that any just and be and to just to U.S. you XX, stock some Class versus ask the context products and of sort there? context other were any

This is Michael.

normalized the inventory number are had they’re inventory they it So demand customers normalized more throughout returning and ground we’ve dealers the they really only units been the we customers decline, moving earlier before, in to through just stocking inventories is important constraints backlog, out growing are the work market year number those line due so of inventories we what not comfortable the what supply the they’re dealer were over in they’re our as with to recognize stock to levels year and conquest deliveries we dealer the and with throughout the and strength sell on than new dealer ever they doing selling don’t the up consider to are inventory year, to levels. a has we how more old levels levels product of excited the forward you inventory positive about on but dramatically that have XXXX can’t new the you have product in look now units their challenges customer prioritizing caused so

some a units your had Michael of at the sure the of had delivering go we and rather to the the to for of days of ordered products see rates and through do Yes, of units lot as lots, of products of a I think a a do very on to a stuff they inventory, them the that mix almost to in that’s their we’re point, XX is, vocational of time putting on looking we’re exclusively shorter given levels have X lot so than looking to customers, you duty of period current in. indicated, Class the stuff we’re medium make another nice dealers the kind we’re looking also inventory who not a heavy keep kind kind that they’re in keep and those and and dealers ballpark range sales range

the that new thing MV, the all of I is dealers so Troy half inventory on that year. the we with the other is if inventory the completed may is And Yes. new we now, launches the of new all HV the new in important that the this the new products models, of the AXX, second transition for ground the add the quality completed of

Yes.

now, dealers with good so a quite pretty pleased that where very it’s So, as good inventory and frankly, are right we’re it’s I is pretty well. – think the

thank Great, you.

UBS. Thank you. from And our of next Jackson question Erika comes

now line Your open. is

the were constraints and supplier all in but what I was specifically you able supplier wondering, Hi, think you you that I just QX missed wondering it extent clear in continue I if especially looks you’re on expect to to constraints out a that in that a QX, I I guess just in reflected, just shipments you XXXX? and guess, bit know little if bad industry QX like called really strong touch can it’s

units time, that of go a put freight very of instance, our on there Yes, the and that incur more to in we expedite to make lose units, to shift not we a normal levels ramped quarter, don’t of well contemporaries a the structural suppliers eliminate so, we keep cooling the is sure position industry we so and really such that handful industry very very the handful as and of balance right as we nature it’s forward. second where that was, would of is, a the that be chain are the industry, holiday any as is ourselves, what is of and to given to much capacity acts resolved line they’re rest and that the of can the when one supply speak to not year were had we period very in of those we costs in refill their the because and the be to what as lose or we’ve I so running be earlier we does bottlenecks our to a where lot fourth with just like not supply now lines as very, really honest, by some Phil? that couple mode so have the large, not of suppliers stress those can the traditional supply chain ran to we some up things for parts great but be so think now, up, the these we’re the we’re a tend into in tight of volumes type our as of much, ourselves which added the is the a those will we Escobedo just pulled force of higher is I think what much we’re supply between a for we buffers disruption, cost, in suppliers majeure today, hard improve where position chain happened as buffers the we from were issues and just continues continue and worked in in we than planned terms hurricanes issues just of to those but stabilize premium entered market

on strength No, put of customers. you covered supplier the Mexico right look, I we’re excited board we’re think our for build shift in more capacity confident additional to in units and that and order exactly

Got that Class target effect or given you And like just can you you X, also wondering the for how that’s about up expectations year? have products, X have any if it. share the then market this ramp over share Thanks.

give it the think to very a I course, the great I had I well. of I Yes. enthusiasm do I more you more a kind Well, launch around November biased, to going but but to Michael this product we am and to it and mean it’s guess introduced of around, specifics tremendous we just event turn in is it and it, where product am like we over of I the going am it’s I

What The a exactly extremely give that a product. truck, Troy, the how like that and one there – that to flexibility the a well the fact, product knows offering commercial event customers the they customer received. finally in launch have is build Yes, dealer product business to and is network understands robust right. was product by true and support

So the by has receptivity customers. terrific really been

have numbers of think go be And sold a XX-X out, order unique a quickly we approaching but General into of those that General normal perfectly, we’re find the X/X don’t I profiles subscribing right. got a I it’s ourselves. I allocated think Class particular about to portion be quickly right the that, to XXX details we We we’re the [ph] of aware yet, XX-X are, product, but production a had We think split that truck not on I GVW. won’t because Motors. want say Yes. segment We mean GVW and what customers – the [ph] that kind it’s volume very fully that with I Motors in there. we’ll might

play this definitely it up, segment. additional a has it that way by growing some lets is the and capability So

So while. for haven’t here we participated a

cases, have set think some and learn I but do. different to little we’re But get bit, surprise it we’ll how a to into customers it’s we we’re in because really pleased. We’re going ourselves a to excited well of with pretty can

kind is will part and half of X/X a if XX,XXX new about add, – the just of – compete that segment because Troy, I re-entry of is the amount. in units about a product us, Yes. is it but a for Maybe Class can this and segment that this of

to now share fair XX,XXX we XX,XXX there’s can our So of. that after go there units

the just opportunity. So of the kind size

I is out. MSRPs a a the think think where both GM unit, put XX,XXX to their It’s over little and $XX,XXX pricing are have Navistar I XX,XXX.

So, help help for of it’s particular And arrangement, our the then but fixed will contract two It’s gauge also into it’s our you which Springfield. is in here, a the vehicles then hands it’s units, in of this get some one, little for to GM assembly things. that relishing us, their then bit. will costs customers sales – our which manufacturing manufacturing under our in secondly, of facilities, mentioned was those are

Got it. Thank That’s very you. helpful.

Thank Okay. you.

from next Seth And you. Markets. question Capital of our RBC Thank Weber comes

Your line is open. now

the embedded you classes? Do on share core this in Emily vehicle Seth. expected or pick-up McLaughlin there certain expect products is Hi, all more improvement is question XXXX improvement on outlook. One across for in of

Yes, Emily, this Michael. is

a has we combination all it and product of line customer been terrific product. the So, would classes. the vehicle newest industry’s the Again, receptivity be have throughout

In XX% XXX% industry fact, heavy were in November, while the year-over-over. our shrunk on orders, Yes. up orders

great. Okay,

Michael. Thanks,

On medium the –

Yes.

as side was MV recently our year-over-year the up basis. we’re order – medium well, seeing X share over and on On Series launched points the a a we’ve

they as MV in body waiting through fact, are customers growth it, responded as to able chain, industry sure product largest value our have buyers to them important. were resale get up however, delays we supply the in to, to companies, particularly the the want but a charge-outs and well industry of leasing who for in year, make at latest we’ve launched last industry’s In the all excess models due of course, weren’t well they the Series, is where of lot and had since back

Yes.

stuff our get to supports and basically market have has body the choppy registered. we backlog through them will to because little all be body increased will we of fact for So that – longer a go up. it across take line of share this think through of product some that manufactures It

to year-over-year is our right charge-outs. of the thing improvements charge-outs So at basically look in and kind

are from have quality makes recent the Class terms of do That thoughts of you cancellations follow-up, industry the spike Okay. sense. And hearing on then X and orders, new a orders? anything in new just months dealers in you in any

Yes.

of cases, earlier, as and before with is believe by many confident business that the they’ll think customers, take our The firm. we, therefore, stated – we we’re product. majority there orders So backlog we our I are sold, in done

firm are from on Our believe orders unless dealers it, trucks put stock we dealer orders well on they’ve well. as as order as firm our don’t customers got

in where a to We period. we’re put for created asking environment XX-month orders haven’t dealers

optimistic much fuel-efficient the and put more in make need – drivers very that orders as line gives basis. a They’re pretty their impacts like, trucks, XXXX, become customers – business, on they helps and new that about short-term them profitable. as to have are well bullish the that about bottom their So them

trucks safety driver won’t looking trucks drivers sell a to equipment and particularly it to customers have buy and to as dealers So well. attract are on with protect the

don’t So cancellations not order about our we overly see – board. we’re on concerned

guys. Okay. Thanks lot, a

you. Thank

And our Rob you. next Wolfe Thank question Salmon Research. from of comes

is open. now Your line

supply once agreement good revenue the have you agreement? guys. into long-term quick regard A Hey, follow-up be guys we Defense sale. the are from signed alongside morning, the forward if thinking its Navistar as we parts completed? with How of kind business about to look of piece the truck this partial the impact would of And businesses should shifting

Yes.

versus XXXX. outsized the see you’ll think Defense but will closes, down in additional ‘XX provide I earlier So see in to mentioned of reporting of reporting through be I you revenues this had the XX% stake, the just there, the in will that secondly, again, and pieces, $XXX venture that we’ll given in run revenues And I interest Defense. be be details continue down go we think the what year then won’t once the NAV after call, two you’ll We’ll around we we that’s some that will and to have one, transaction numbers, as ‘XX saw the revenue we but from million fraction ‘XX. sales our a MilCOTS a to equity – our

are number just Right. And the the follow-p minority will going to thinking I’m I guys as EBITDA EBITDA you back be right interest? adjusted a that Am that excluded of assuming then or the kind that. to about from add XX% from to prospectively? the Walter

be the will in number, included, will adjusted earnings future the of XX% the EBITDA No, yes. be

appreciate I the Okay. time.

Okay, Rob.

Nomura. comes John our Thank question And Sykes you. from of next

Your now open. line is

X question and Yes. the X you and revenues was, that had I One contribution disclose make do that? Class guys to EBITDA, what’s

sense a we’ve can get our I – what the separately, broken the of of I you don’t in think but K. think you back that are good out volumes

you part meaningful the Okay. one business? do a The When next really of is becoming see electrification. that

know you but Well, saw, that announced creating John, business are we don’t I unit. today an if eMobility we just

a Navistar of first think eStar for been the reality companies that We’ve us. for alluded his time. the in XXXX. was remarks. right – is that working now Actually, on on commercial I one Troy vehicle some back to We introduce technology our

things a do experience decided now we expand in to field of the that our lot to right reach the in and one is really of beyond the the have business technology. we So more

in help unit eMobility, CTO is now are really the vehicles, business joining that We waiting into just to will and Proterra, customers He The to market, of on really business right will specs the service the Horvat. what is one And lead executives specing the is brought financing this support get actually for of team developing work to idea the vehicles those and vehicles, about. company will we about experience unit, he with to that’s what was infrastructure call network available most and for these that today the vehicles, the kind is which really we grants. procurement we of help the Gary help reputable that now.

So, more come. to

that’s priorities our of a us, for is the for So, reality future. one

so is an the – assuming type I’m eMobility you in like it’s of guys with easy for right? what I to infrastructure start plan So game And it this to an – truck, of so the the get make product mean, is of sort kind business business, easy place.

think with but product, the I really. no, not Well, it starts

network in today. fact market diesel want that buy think fact also contact the available the largest I Now, in with have we that are and the the customers that products we to dealer

the say. enabling on product, would are I really So, beyond focusing the in we the electrification segment

here I think it, with looking mean, customer, well, really starts at I is we’re the Yes, right. how

going we’re out. to go So,

point So, a we We believe customers. who will have for work such some know at they we in an time. technology the manageable technology be particular TCO – way their the improving customers to have in in as and interest and/or them

to most the And where we that And solutions. our is okay, makes forward we toward buses, customers sense that indicated which of place previously are so we’ve kind the really in think those have are lean – school

okay, Right, yes.

a with, [Multiple than so to Speakers] is infrastructure non-highway less charging speak the medium-duty in because trucks tractor. significant it is and both cases,

We year have have in said previously we’ll we’ll customers’ have trucks on after. the the road year next hands trucks and

yes. Okay,

customers lot when right. is, there’s I a really spend of what lot references of a be But lot needs. and money we Persio lot spend think doesn’t this working that customers, indicated, lead is money as electric us while a a have Persio cycles Again, upside they successful a Quite look, stuff our we’re in and decade. the our the much approach of learning on my experiences can for direction. I been of for us this that earlier decide here, mean, looking really could there frankly, just you will satisfy field we’ve a and to vehicle that since in of very

So we have some pretty developed thoughts.

EV is change can’t the you it’s start right? suppose bring into I point. limits, I regulations states, And got at the my the of truck Yes. to saying, a city that they in mean, genesis certain diesel be kind of guess question

product? can guys we if then that are happens you So guys – ready have to boom, a you

mean mean, we exact with circumstance think strategic but I I goal, that’s alternatives. you goal. today, at here see are – are you ready that our That’s what flexibility, our That’s don’t right. Navistar, I

like be don’t And a to right. sheet. far then balance I we but No, year, lastly, a I too job I of look good sort decent it XXXX – is to doing forward, guess, that’s the mean, how – want and Okay. you’re you with know sounds going do

and So you you’re never business Class the business, take of volatility enough. taking think the just to compensate to out going really in out parts it’s kind balance business, of be the cyclical the a in I But business, it’s volatility like lot sheet. how given do for for example. a don’t X

out less So and you that time. it how really smooth make do cyclical over

going is year. all, of a be first Well, great Yes. XXXX to

year. Great

Okay.

only the year, another good [Multiple it’s going year to So, a and not great to Speakers] I be share want thing

think to want it guess. I I is,

I think Yes, did. you

a better share can of up business. guidance. We line We’ve We’ve market product grow. the in up results as in still to the got see lot we you newest our got are put that planning

our then if upside that so things, future, And taking on into new growth, further by things we’ll margins the as powertrains scale the really the advantage costs, the both we’re global I reducing see we look to and the integrated of are to a of alliance our be well mean, brings, these the see our you not but improve ability introducing as we and doing couple that alliance, product. revenue

So flow ‘XX profitable referenced. free as balance continues and see continue at ‘XX in positive here on in sheet all to and be so that team the this future, of continue you to that our continue even actions points the further improve we it we goal into cash can cycle the will that management those

profitable we’re say, the all that off share. today, in wow, those not the fact the historical points spins the are are cycle. function that And okay, at cycle, when things you we the ultimately, okay success at look look then primarily, second Yes. the to that. I think pretty other global opportunity, something compelling, and tremendous opportunity this powertrain. we’re When market sheet really basically mean, scale cycle we’ve share is basically of control we the we that out revenues you then revenue getting the we and again, this more come the our that, market and and so have joint very that a upside okay, of through for then into order. we straightforward than lets think at that we have market and And us it’s have of one parts ability that the kind And our much play against so three in venture important, strategies having improve of range – because margin, through that, cash the put procurement integrated to in because come, balance that two you done already a is

Okay. Yes, I mean –

would the obviously. tell That’s the way story, I

X, X seems Class overly you like that It So, what that seems Yes. versus cyclical X, be right? through are to never seeing?

footprint And in and X no, Yes, true. X have that big space. that’s a we

have the to that the question. on next we move Now, should We Alright. to increase footprint. opportunity probably

Yes.

for interest. Well, thank your you, John

Thank Yes. you.

next Thank Jerry question And Goldman comes you. of Sachs. from Revich our

open. is now Your line

through around wondering I’m bit just more guidance, it margin. Yes, only pieces incremental looks hi, you’re based top-line X% stepping if little morning, guiding good you on spend like to time everyone. Walter, the guidance a the moving the EBITDA

you about in to piece giving incremental margins through cost folks yourselves want step price the maybe so were any fact, you that us headwinds headwinds to missing? out and just you just can earlier both Are ‘XX? of In is execute? Any room in better call, flush spoke you to it positive,

Sure.

through again. pieces go just the let’s So

gross be from to favorable. and X.X XX% about that’s that higher pricing, ‘XX, We in XX.X%, ‘XX. point be up in things expect expect it’s margins we to mentioned, the We so, indicated you to saw we what

that we’re realize from then as them will some benefits commodity prices come of to seeing the activities, down and expect If that a the to margins and our were see starting EBITDA headwinds JV to costs. procurement a are We we decline flat. that bit, further help including prices positive, of freight commodity The little offset from could be course. in are

midpoint of engineering that’s because our the some at product we investments we’ve in particular, making to think are investments. guided future, year-over-year, what kind in future I

Group, in mean be forward that be results previously going necessarily then spend calls mentioned integrated as the forward invest powertrains, more our in efficient which of that we’ve the these our will future. while they that our drive the will will engineering So, alliance with lower part in going Traton as doesn’t we

a to of flat to up in few we our So but the relatively the want initial in years EBITDA be set on to success guidance us margins getting is margins, up how future that’s still going EBITDA XX%. for

are decremental And margins then – Okay. the lot Troy the we margins. the whenever fire does cycle the that ‘XX, but case, have I that see terms for turn? ‘XX, Thank the mid-teens a how appreciate to folks folks on. you are it’s base negative, were and but if expect see that’s case understand cycle once of your your would love other typically mid-teens in the you base in know OEMs, look would about terms I obviously dynamic I What market to type And not turn in you the exiting think irons like you. the compared moves to in working thinking of not to decremental way? you’re of we typically what

much Analyst probably a little the for couple to key too us, today. referenced that’s that’s specificity continue on for But a be Yes, think I question we’ve something, or a bit the time. Maybe what good drivers some Meeting times call. will Jerry,

the have. bullish ability in particular the we’re that our we on JV to bullish to costs, – ability our revenues to We’re reduce on continue our through on grow and procurement

help will So weather downturn as well. any that

the have for headwinds In that have to, of probably on fact, alluding you’re example. we we currently wouldn’t that commodity prices, downturn some

fiscal wouldn’t headwind the be the a after subsequent it as see in that year. So ‘XX, year current we replicated as in here

So focus at market be our cost be we allow cycle. even points profitable grow and able our growing should and market, a all us that initiatives our to in revenues, things; to on those is with share be going to two continue down the should on

Thank to that our like Clarke over session remarks. turn today. concludes for to question-and-answer Mr. conference I’d Troy closing And back you. for the

apologize little have thanks to Hey, everyone. a I Okay. Look, I cold. head

years XXXX. a be, Look, for about quarter we the us and event I of the make appreciate year to we for that for starting tremendous this make we your year the earlier your made, one a for have progress you, several very and enthusiasm to X asked voice I frankly, And that. the it. taken ways questions steps indicated mute progress. XXXX have of been talking quite insightful And nasally in helped is the final industry enthused understanding in can with we become that Look many certainly So, there, was that Walter will a to you that to you that I some has talking hear have to manage hope interest March. we are us as progress for during company it we has communication season. difficult great and to last going but and me better our course that. of again, every industry. interest of the And additional journey. the we of only that And in not forward doesn’t your certainly to look we of have apologize a issues call. and my the opportunity understanding an we And are welcome Walter for in appreciate the the questions company and least personally in Want and on appreciate and of maybe can another at you indicated, happy the our holiday joyful to year. wish all you somehow as have

conference. Ladies great and disconnect. gentlemen, a in day. and have thank This may today’s participating you all the for Everyone does conclude program you