ALSN - Earnings call transcript Q3 2019 | Allison Transmission Holdings, Inc.

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Operator

Good morning ladies and gentlemen. Thank you for standing by. Welcome to Allison Transmission's Third Quarter 2019 Earnings Conference Call. My name is Melissa and I will be your conference call operator today. [Operator Instructions]

to conference like to now would turn over the Mr. I Investor the company's Posadas Relations. Director Ray of Please go ahead sir.

Ray Posadas

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

relations presentation available available call reminder, a this investor of As on are are this morning will X. webcast allisontransmission.com. the conference website, using we and this the a through section our of call replay November be

ended known As contains unknown set those the in forward other noted one presentation, annual risks, as XXXX, expectations. should press for XX our and may of based today. forth today form estimates the k underlying more assumptions of third on and those statement our to or economic year general uncertainties remarks these current on And our from actual we statements risks that and or uncertainties materialize on looking XX vary results looking X report These release. including incorrect or express many well XXXX or Slide December conditions. earnings as quarter forward of prove factors materially Should subject are

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

one to from on order of is call to In to presentation Slide third set the for non-GAAP call each measures Eastern analyst. to to the call reconciliations the end X:XX comparable press and AM can You turn to an of earnings release. quarter attached our maximize financial appendix at GAAP participation most agenda. find the the the presentation X Please XXXX opportunities Today's question measures [indiscernible] as Time.

and provide results review the Fred third quarter an our Bohley you performance today's Graziosi overview financial the update. During with of then will Dave will XXXX call guidance third quarter

Finally conclude prepared prior the to Q&A. remarks commencing will the Dave

Now I'll turn the call over to Graziosi. Dave

Dave Graziosi

and you joining morning Thank you for Good us. Ray. thank

of Allison's are free initiatives continues market end-market XXXX capital July third Class structure cash prudent to results execution We growth ongoing pleased on our margins and Allison the year On-Highway consecutive America track operating the to year gains report approach that record defined ranges X/X and and executing in while are for by demonstrate allocation. full third our share provided North flow market Furthermore, remains solid to well truck. it's on and XXst. to guidance quarter And within led

the quarter, of purchases, the $XXX share, our million we $XX acquisitions loan closed tool our this also per XXXX. sherry of an and we month. Walker engineering. opportunistic Earlier settled During repricing seeing completed third casting term due of paid XX died dividend March of and million and a cents

end to demand Service in & QX million Net performance by higher in partially the turn Parts driven and demand North sales the lower X period principally decreased $XXX Off-highway XXXX same offset summary. On-Highway Please Slide XXXX Other markets to end to the in of presentation compared market. Equipment for Global Support the X% America the by

same decrease driven partially principally Gross was commensurate lower with XXX compared expenses same On-Highway manufacturing price margin Net income $XXX by lower of principally as to quarter higher decrease driven was and XX.X% in certain was the material XXXX. in points a sales profit for The basis period period the favorable the the net quarter $XXX XXXX compared to to products product or offset product principally costs. and by increased increased increased favorable offset administrative same the expenses. in on $XXX XX% was for spending offset volume profit driven sales gross by sales by and increases million by lower million was partially and Adjusted in XX.X% EBITDA $XXX The million and increased warranty for adjustments. gross interest EBITDA million compared and or initiatives the warranty net expense XXXX. quarter expense lower for of XXXX general spending initiatives adjusted by partially in lower product decrease selling period of net XXXX XX.X% product

Now I'll to call turn over the Fred.

Fred Bohley

Thank you Dave.

Given focus line cash income key I'll and Dave's comments statement on items flow.

find of You net our the on X overview an market of Slide can presentation. end sales by also

Selling XXXX XXXX increased lower increased expense increased QX same Please favorable the XXXX spending. turn the Engineering by and million XXXX the X principally for product driven driven decreased same product in initiatives warranty Slide principally presentation by summary. from by product research expenses general administrative to expense partially warranty of from in financial period commercial $X the performance $X million development activity spending. offset adjustments and and period XXXX

in period gross by the performance Please offset flow Net operating from same increased cash initiatives turn partially X increased expenditures. to for summary. capital Slide in the cash driven activities driven lower Adjusted and principally of million operating million profit product XXXX provided QX flow by XXXX by the activities same presentation the $XX decreased cash cash income principally from by decreased XXXX and by period $XX net lower taxes. decreased free spending cash provided

mentioned share settled dividend earlier the and of we $XX $X.XX a million per of share. repurchases Dave during As paid quarter third

loan an rate with of ended million annual approximately reduce completed by million month structure million of of cash continued X.XX $XXX management This March interest authorized cash of commitment and our approximately demonstrates Allison's and $XXX $X.X sheet We to the approach due facility available repricing loan ratio this The commitments revolving on we reduction opportunistic credit to term balance billion capacity. of will million. $X.X repurchase $XXX and expense its XXXX. leverage capital repricing prudent quarter a net share XX term transaction our well-defined allocation. interest Earlier

to of XXXX guidance presentation Please update. X Slide turn the the for

fracturing in the net range the to $X.XX the million. Adjusted to of billion $XXX be activities expected Our is to provided the range $X.XXX demand year of to taxes -- and in reflects in updated America in free American North continued flow products Off-Highway be be to expected end markets the the $XXX range in is market are million million increases of hydraulic EBITDA from cash net Net operating range $X.XXX to guidance to $XXX net range $XXX in to the billion Parts million. range $XXX applications million be includes of offset by million increased and Adjusted guidance on $XXX certain of be $X.X billion. million full billion the end year to expected income million. principally Support & to of lower expected sales our demand Allison's price in $XXX growth for North XXXX to expected Equipment execution lower XXXX and partially to expected Service is by On-Highway cash driven be sales of Other income by demand in initiatives. cash $XX full

Our $XXX during XXXX guidance due includes implied the notes capabilities loan of flow expansion and quarter expenditures million announced we adjusted the fourth June of testing facilities our capital free of and refinancing. term first issued cash engineering that previously quarter interest on senior XXXX payment for the

the turn call and I'll you now back to Thank Dave. over

Dave Graziosi

market die priorities and Today global critical creating core emphasized value more C&R than other results Allison's Walker Tool drive acquisitions quarter to high innovation past growth leadership find Die delivering working have opportunity all in tonnage tools Allison's die markets to strategic through stakeholders. growth design in Allison. Casting illustrated and for supplier aluminum an product to particularly machining presented in we been development history. castings America. and with manufacturing of dies Allison's primarily and a complements were partner industry. used and leverage emerging financial of our support in and ourselves over supplier acquisitions source by aluminum in to their expansion of manufacturing of components ability XX cast are Casting Fred. casting vertical opportunities opportunities in a Allison and Die Walker a C&R commercial supplier industry and market niche die-cast component trusted is leading again while leading the Engineering. and low-volume and penetration Walker any time for Thanks die and In These the These of area supplier North addressable third all years continue the On-Highway unique we commercial has solid the grow metal to a for and integration products. the Walker's capabilities aluminum is with and and Walker of

XX% of improved to in performance American deliver value important rating-supported those and drivability in to routes at continuing The plan to the torque capacity area and provide Allison's than transport requirements launch relationships. in for and fleet Atlanta and of increased utilize competitive haul mixed attractive for propositions been series new superior faster series lighter regional Allison trend will tractor Commercial Freightliner engine Class and regional Regional shift It partnership regional growing during the in customers Allison's remain Series base. manual supply Allison shift. The the to duty grow transmission. with efficiency is secures on transmission. fully week haul and and cycles continue proven XXXX the North in and Allison transmission to haul a Walker's Haul we the has delivery truck one with ability second fleets X upgraded our city Vehicle and while often Show designed regional new an a automated distribution announced this variant partners reliability route higher and deliver meet transmission of acceleration Series Earlier enhances market. of provide Truck automatic niche their The haul well-known in

regional leveraging deliver Shifting well economy haul improvement will FuelSense up to X%. Allison's xFE as technology the Allison's X.X of with addition by as DynActive fuel series technology a In

customers exceed paired pairings example engine for responded brand is Distribution release and product. in haul to particular the innovation. option. our This are Detroit come ability examples technology our fuel closing this of customer future Though Allison's invest appropriate is or to Allison reduced and leverage Freightliner the of to as the be drive Allison option balance and Series prudent automaticity in to remain variant latest Beginning capital XXXX we and fuel power Series and additional DDXX where linear we prudently in to and have will an be enhance and not with innovation available values series continue the transmission ability and the with product a will meet existing is commitment on of our for regional key drop to Cascadia demonstrate the any driving engine action Allison. Furthermore economy and strategic that current Allison's solution in for propositions deliver secure to emissions. initiatives facilitating MX structure the these priorities. chassis execution the future. consistent In Freightliner XXXX sheet willtake market's in customers. business XXX our increasing XXXX This demands demonstrates our recent developments ability in as our to need both value growth management to the well resolute in with opportunistic of product allocation to a demand with expressed

please prepared concludes Melissa the for remarks. This call open our questions.

Operator

line comes Rob the proceed with Melius your [Operator from Instructions] Our with first Please Research. question. question Wertheimer of

Rob Wertheimer

Hey, good and good obviously results. morning,

a is quarter. Parts. you is at This you and hear Can in me? this the in Difficulty]. Just question can Service surprise the [Technical Obviously no on quick just Rob slowdown point oilfield

Dave Graziosi

hear can now. you We

Operator

Mr. Wertheimer live. your is line

Rob Wertheimer

still guys there? I'm you sorry it's are Rob

Dave Graziosi

Yes.

Rob Wertheimer

what Anyway bottomed the Service and so about anything whether to I that's The dropped. out? whether out entirely it's on figure call oilfield Parts I'm else whether know don't is trying and sorry kind that. just there happened. of

Dave Graziosi

is vast Rob it's quick the is question North of it America Dave. The to majority frac. your answer

Rob Wertheimer

a Is then service? perfect. parts there? Yes -- it's Is there more you regular And sense do volatile. rebuilds you out? all at low still are you're downside any the a -- been Or And have doing have that point? on potentially maybe and

Dave Graziosi

with tell would you essentially QX. has QX flat relatively fourth the I implied quarter guide

done also of to end and users continued constraints. work channel inventory of fair checks have with work and terms frankly their customers for just QX we But a in of we've amount terms in our level. So

users of bake over have last been the we a So of assumptions number constraints. service into providers weeks as from by said that end flat things comments units you've as the is QX very which with side limited relatively heard that of terms of made public QX. few in terms the our new obviously I and But in

Operator

Thank you.

the comes with line Our next with question of RBC Please Seth Capital your Weber from proceed question. Markets.

Brendan Shea

inventory talk I morning. This on feeling you Good To levels market wondering how currently? Seth. about could you're if Brendan start the in is to truck for off as was straight

Dave Graziosi

well time you're with a fair given Class parties by end forecasts as over of of well assume are Straight. a as those public always referring America spent third-party OEMs comments available. We've as users bit I weeks as Sure. few last to we North number do X as that the the

pretty heavy. year I and been When aware think made under of retail up. you of to well comes off We've high. fourth regard to I I as look number at the tell OEMs production rates as a inventories is it's to that clear When believe to inventories statements need sure it's quarter that manning. a conclusion number a way I talked it's a inventory by say end up. as of are as times inventories already this pretty clearer users it about the public number bit sales but would a that that comes market in process of I'm have moderates catch tend as you're the us well ratio. that managing

asked X straight that in to of quantify to inventory I overall. you think us out imply terms there If reflected truck heavy And forecasts the that's for the us better are particular third-party of month would frankly part Class the XXXX. in it in

Brendan Shea

needing you And you. would getting inventory Do then that's think it just year? the an in underlying issue an next of of the Okay. you to there Thank that levels? related from that industry kind weakness to do issue better Or lower of preclude is sort fracking. think

Dave Graziosi

versus they The alone things. that stacked I are would right it first think service the we say users fielded. taking aggressive providers of significant versus was steps amount that understand even number the have the equipment you on QX I half. the as to a end saw QX a as industry reductions amount very it's size the of of Brendan QX equipment in

market service users particular on believe much spent. capital condition for of construction. That the point believe new last we we cycle ultimately QX providers think than of the that in call that is of was and without here bit going this I time soft mentioned we the a the doing forward equipment the As of in rig into amount the will allow to terms carry end better

understand You industry like to so could depending they're it tremendous of equipment you cannibalization but now constraints our that are disciplined it as some right pressure capital the that's stacked on amount under of It's call prevalent because that word a would to expectation we in use. of constrain spending.

going up So certainly implied quarter market. for as that really we've muted sets the fourth expectations XXXX very units the into new around into and going

clear push not of the fielded the level be to very It's intensity cannibalized. amount is the continues rates versus overall think usage come in consumption is terms ultimately to industry of that that I equipment. the driving really down. efficiency or really of going be down The to available is it balance much utilization equipment stacked which how say of going when to I will of

will I sets But we've of really a that when dynamics ultimately change a think a cycles. prior up this seen in space of the into So that also not of becomes some for there question is factors it ultimately if. number recovery

Operator

you. Thank

next comes Company. your Zaffino line the question question. with of Our proceed from & with Ian Oppenheimer Please

Ian Zaffino

thinking to going square how that Great. the maybe inventory to basically work Thank would with about your relate we And inventory you. it Can for should the the see North you're On-Highway American your And demand? shipments? then just down? sense increasing how you that increased be

Dave Graziosi

A couple of Dave. it's Ian things.

heavy same month to inventory to cover Class range I'd the well out. us. would Straight in of I the It X question X-X as put earlier for question it on looks truck. of that heavy. probably certainly a In the talked terms we

reflected It's number That's make being then our implies comp on. of we started. basis I place I switch corrections to tough begin light again as also some have a this you taken in and parties potential of said expecting that's think different XXXX. a outcomes forecast. been of already with a as and for positioning assuming guide We're earlier. year-over-year starting That to that also higher course combine It's are things third-party We in OEMs displacement. QX mentioned assumed other not space a of back that QX. That's with created the in not to market would here terms strikes turn a are I some say recently. on when for

our we've So also included in that guidance.

overall going So willsee up shutdown itself into we and I next with how that for positions think schedules inventory this the correction late sets quarter. industry year

Ian Zaffino

you Alright, great. Thank much. very

Operator

you. Thank

of Cook question. question comes Jamie your the Please Our with next Credit proceed with Suisse. line from

Jamie Cook

the Fred EBITDA fourth the given more question implied account are the guess which good quarter even understanding down A sales just are came more for fourth Dave quarter or is coming nice down the seasonally Hi, margins the down or a out taking I guess I but macro morning. margins there. or weaker. forecast quarter the considerably into

the you of Can markets guess So you for us guys outgrowing is because to view of your customers and the success And market going that question improving is into production implications starting what so XXXX downturn? your could assume XXXX? potentially XXXX? then to fourth the sort EBITDA broader I'm as understand this you just industry the margins than how worse I have had sustainability puts second can I are normal. my adjusting And cut takes in trying maybe and understand help would of you are some Dave some talk offset that about quarter you share.

Fred Bohley

of Fred. question. first the portion take Jamie I'll this is that

stoppages. driven impacts negative and of elevated Our new outcomes guidance account increased from Off-Highway units pricing expense North QX includes volume notably also the OEM the capital Dave and and includes variety product certain products. and of a and takes quarter demand work reduced initiatives levels as into mentioned inventory our growth R&D implied and On-Highway favorable impacts projects It support parts Primarily to American service North mix. on the by American the most SG&A fourth potential the development of

Dave Graziosi

this unfortunate Jamie and questions helped by products reenter market able well this recover know. to we space your almost Those a are that's received at share Dave. stage. market the back Nav to to as us be seem series. you the year be Silverado On the CV is certainly position dates this decade the with our X-X It GM

talked reliability highway we transmissions. certainly sustainable plays in platforms model So is that also Class the It's of as straight growing. well as with and the and terms we so-called that space as to in of the if year values X our well not We've as brand series market done push well you're their Metro as and end believe position Rugged the subject that maintaining those our well well both truck this as our Duty user. safety for aware automaticity overall well Series execution as before clear the for service of certainly in

So very that worked to the that earlier and CV that North a tell the we of They try I to for a grow as continue position number that position hard this with announcements also you would believe at mentioned team. the well great programs. America as week on show. I different

that very automaticity. a great reasons quickly a is moving of well believe expand opportunity value us For to the in We terms to of to further That Class proposition. as space lot it's Metro. X give share continues

lineup about before And be needs and market what spending are driven. we demand It was We product really market-driven. our on. really again that to talked

some our headwind push into electrification America outcome. being to us positioning again in said So we more -- perspective. in has happy We truck We've Outside the bus resources That a proposition really directed created with space feel our from our product applications. that take core North China about the some for into good onto of specifically well there as of for or are specifically. value redirected continuing overall. the performance

some we've emerging the markets as releases combined of well and that other perform continued overall secured to So with well.

as gains effectively are well. penetration those So

Operator

you. Thank

next Our with your DeMaria William of comes from proceed question with question. Larry the Please line Blair.

Larry DeMaria

trended guys Obviously the order in let's is and softer And maybe kind XQ? but books But we XX from And not coming and days they everybody. of other ballpark QX a hearing about stabilized? impact the just downward? just guidance. Thank a strike that have are lot of companies how about you. from have say what's to magnitude way in hit the then reflected morning, back curious orders there you fully of

Dave Graziosi

in quantify is Lawrence front it's has Dave. it you some them -- a We'll majority in know from of are. been QX sold of We as math it but strike We perspective scheduled. Couple customers. our the those things. get of impacts what we QX let certainly -- the of don't

those to inventory that plans anyway. also let to their advance. some the relative will the We and resolved balance for -- the as is We're talk too recovery us. levels get OEMs behind of the if any those were But creates of the fact to certainly they're earlier level buffer year happy discussed

my get it more needs our -- to a you reduction later from than -- relative market. sooner rather that question sets certainly to perspective from recovery up That just -- inventory some of position. the periods So whether of the broadly timing a through in becomes it

XXXX. is Again for forecast reflected third-party I think in that then already

here this a there. just probably business. our in really different both well number micro number we've number comments as as have active the on talk quarters We'll as as the normally of well relatively assumed it's there we call our deal impacting is what's guidance earlier Obviously we as relevant several morning it's Of level quarter a -- markets But X-X of off as Allison's specific outcomes end a those particular imagine things. for a and But number Class more provide truck quarter we've about thoughts first the you with one with had can to a these specifically quarter Fred's Straight course fourth etc. rattled the XXXX years events deciphering that macro in into as of with guidance. quarter in of them active we've of X of fourth

Larry DeMaria

sorry I for Okay capex? I in think increased capex just was reason But real increase there thanks. And it. was quick a the missed if

Dave Graziosi

As we -- yes there is.

us We of of of in We and discussions had projects have one terms capabilities that around investing that engineering a North do both meetings at our vehicle in the ability facility. internal environmental allow test this are as expand show will a is we -- CV number -- number our as to to American the here our parties capabilities week. facility. that third That well the serve

is spending that that facility be will completed of is way and expectation well our XXXX in next year. So under for and second available -- half for use third-party

The an engineering other center. project be big for in is That we product have is to innovation XXXX. completed planned

So the schedule-driven projects behalf. being capex well as math as in really of into parties those do timing the on quarter. our guide in mentioned around really materials as his incorporated amount in execute you of can spending of ability and for comments terms our Fred the the fourth to third that's heavier which implication That's the as

Operator

you. Thank

Please question the question. proceed Citigroup. next from your line with Our comes Thein Tim of with

Tim Thein

Thank morning, thought that you. continuing on Good process there. Dave. maybe just

where are think be able is the environment an counter their a capex softening capital of assume there flow or cash levers not in -- to in obviously 'XX. countercyclical But talking think as about is we 'XX. working free the movement. from top we line to are normalizes some tends I about and standpoint that there just key Historically we

you is a the hold that the conceivable have year free at least high-level 'XX you would softer in similar cash at it to company items again EBITDA level a that extent have a in 'XX? I'm to would do in flow just enable -- -- So

Fred Bohley

there coming down working environment certainly sales expectation is to cash. in that source a capex. let a yes LTM I'll XX% or target Sure Tim. of of sales cap On the speak This is XX% Fred. be we Dave where should And so

Dave Graziosi

mentioned of be the year Tim. just projects that capability next terms issue engineering spending they will On capex the investments in I also

there with opposite as more So than your a start up occur next point those 'XX. through and is manage lighter happens will demand centers. work or of we the That the actually be test spending vast softness business in will majority environmental growth of from business it construction the the out To because manage The vehicle the facility spending terms innovation you be we will year. more how in cycle. is our to

a So occur. that Can there those? make sustainment we maintenance of number will call what we or investments curtail continue to those would are you

Having circumstance said that on the a Depending becomes more issue. of timing that yes.

for Our incorporate the quarter. in of XXXX that also number plans initiatives a other first willaddress we

market cycles of situations I would -- of be lower a adjustments significantly depending But as we've done what mean. that think we I conditions that would other necessarily would is being of we and expectation and just understand move projects said And of already versus can at. 'XX set develops appropriate we a XXXX spending to to in the businesses the it's make number the level So through that again to differ market spending low in important take but cycle. capital is we view we XXXX again our there be willsee have what But the because -- way. that it things a mistake under on

Operator

Thank you.

the comes Bank question next Ross line America. with of with your Gilardi Our of question. from proceed Please

Ross Gilardi

morning. Good

maybe I on investment if up a question have following into margins Tim's think thoughts cycles and of some Just given go prior to cycle should mean those you downturn this we Dave. that about relative how we decremental growth you in of greater around? kind of on where are cycles sustain forth. and focus perhaps you they have alternative propulsion higher and decrementals this these were time do you in prior or technologies new so Can a many

Dave Graziosi

the overall book Ross mix about. of of business. it on assumptions obviously we've in your Yes depends of the terms talked

an North about XXXX. not well safe thinking just attractive margin I say That it's would situation for setting which expectation is reasonably this I think America up extremely Off-Highway is point at business.

protends answer So On-Highway the the question third-party level to be things of to number when North as at looking portfolio right? though. also there run And decrementals mix just forecast mix volume you on your think back unfavorable somewhat comes really for volumes to about other a start we America a through but to it is of

as So to best we we I to XXXX are as first do the initiatives same minimize execute are the for necessary next together quarter that to those the those certainly providing time work the this business grow pulling in will our through but be said cycle. at will our year. on But the thoughts we impact of decrementals of

Ross Gilardi

year a in annual a level you do of it if an downturn the get in to pause get a of mind? through continue see basis? -- cycle or not somewhat if sustain can pricing you you -- generally Or think And the have back on a generally your that you you

Dave Graziosi

And downturn think a of get a you see can cycle you that a not you the if if Or a get it continue back of the on you annual mind? pricing generally somewhat generally level -- basis? in pause to sustain an year -- or in do you your have through

Ross Gilardi

thanks. Okay,

Operator

Thank you.

your comes the of question next Please from Jerry with Revich line with Goldman question. Our proceed Sachs.

Jerry Revich

Hi. morning. Can the discussion Good had. Yes. we continue you just that just

to pointed the that linked that's about see improvement your about you well. product in hull product remarks series. in you expect folks lineup we pricing are economy your in So you going the spoke percent that regional as the And out the typically as Can you strong to talk prepared cadence XXXX? fuel across

in we case based couple be years you might if if we So to sounds a wondering are for over remarks. I'm understand to which to flush just out could like cadence have the product what of on seen the the prepared that get past compared trying it But us? going stronger 'XX

Dave Graziosi

has relatively you of our I product Couple things in On-Highway Regional of in addition Jerry the lineup. terms it's product XXXX Hull the that as know. description FuelSense a Series of there. mentioned X.X recent That's Dave.

continue We ramp the rate that. adoption of to

we of think that higher that demand to demand to is programs market. So reason for the some is of fuel see point the you'll expect We're a in well and that your that. that offering. is the as adoption that more to there see -- to There continuing should -- have of for the I drive OEM efficiency drive so increase standard number adoption

all on work team the of mention controls also number our software. different our is in would portions a really us efficiencies. those. of clear So it's some is you. within that's your to that to market changes that not need efficiency handled through front something of for combination variants is certainly products On-Highway that's looking of It's fuel of some in the them. fuel mechanical number of and existing of tell I a more of handled improve certain are point. to certainly But But that through sub-segments a it I a changes there would of continues

it. or earlier we I pull as market of perspective are additional demand provide and to there to technology the prepared for where that's is the and that mentioned variants product really being we is years the And So we are to demand a market wait That from example almost a see the on. that working the RHS of said other work product on X.X to beyond that including ago the X-speed number we continues FuelSense up announced that ultimately good there extent team lands. and a now two technology

Larry DeMaria

EBITDA the Okay. And maybe on sales million guidance decremental sales fourth folks past. that seen year-over-year taking expand have just the $XX margins of type decline so a of we quarter clarification midpoint in on haven't EBITDA in you so and from and $XXX that down you to in million a or the just on

using that play? other there positive factors. and and or your comments number is for year I late And but midpoint other in just tailwind price costs prior each So factors on the your strike a -- a the appreciate function at that's of

can just more detail in little you bit a point So address please? that

Fred Bohley

is Jerry Fred. this

our -- As and the That would year-over-year. million QX 'XX. would imply 'XX approximately above be did expect million earnings on R&D we upon the QX $XX up call be we to up really that QX engineering $XX QX spoke

also expect We SG&A be expense elevated. to

those So made items and that to I'd are revenue. volume the comments we've in to X addition the around point

Jerry Revich

you. Thank

Operator

Thank you.

Yakavonis Our from with line the Please comes Stanley. next question Morgan Courtney proceed with your question. of

Courtney Yakavonis

thanks. Hi,

followup you be fourth elevated a that, SG&A in Just on mentioned will quarter. that the

does the using? year of you the flat had that close fourth what most beads in obviously big should we of at that think to still be or the step the up And quarter. mentioned beginning think be the imply I SG&A for so year earlier that Is a a I Is year normal? when have past just attributed last to next on this SG&A to we last is costs it Or and favorable so below? Or really is warranty been about was year normalized year quarters warranty this SG&A year. X year the over level? relative think would levels for high

Fred Bohley

performing over Courtney. year-over-year; up anticipate product we process beyond a year. is had still not in the not down would been and however from accruals. warranty The to products for to quarterly we Specific a QX is Certainly would be continue. Fred. in but XXXX. into This that policy favorable rolling those the we've to Sure XXXX favorability warranty be we've expectation something have point standpoint up at this prior on expected SG&A true based adjustments That's that's that seen well

Courtney Yakavonis

I you thanks. but in in a think And earlier you a the in quarter just implied little guidance talk sales fourth bit Okay then that's down little referenced just can step the with bit. your

than beginning had guidance the we the year something On-Highway some shift there the obviously for stronger is guide because for America much really I of other end But which performing year haven't the an was and your like implied the of how necessarily versus given quarters think end-market of markets? much update. of you North originally X shift gotten the down into expected at first

Dave Graziosi

about On-Highway. bit ranges. America year point a Sure think reaffirmed Courtney. I in mean guess as guide quite one we you thing full the in stronger coming out I we are But I certainly North narrowed

and that reaffirm I have we well are effect beyond fruition. consistent as in come we've associated full relatively to those pretty with the are initial North guidance. the had relatively a with think say our initial But guide up the parts. our XX%. was guide where year really guide America Above where the to ranges I pessimistic narrowed close up we Unfortunately in would we things closer guide Off-Highway QX and view the And February. We're that back of and X%. to provided

Operator

and Ladies you. Thank turn for gentlemen Graziosi final that to Mr. will the concludes back our any I question-and-answer floor comments. session.

Thank you Melissa.

an exciting history. And before innovation growth said Allison. we've in with to ourselves time today drive As part opportunities time be and our any We than in to find more of other it's continued forward look you providing of on today's to for interest with the rest come. call. the to further months you your in we Enjoy in updates participating for day. Allison your and Thank

Operator

at Thank you, thank participation. your lines this you your concludes disconnect teleconference, may you for this time, today's

Allison Transmission (ALSN) 31 Oct 192019 Q3 Earnings call transcript