- Earnings call transcript Q3 2022

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Operator

Good afternoon. Thank you for standing by. Welcome to Allison Transmission’s Third Quarter 2022 Earnings Conference Call. My name is Shamali, and I will be your conference call operator today. [Operator Instructions] After prepared remarks, Allison Transmission executives will conduct a question-and-answer session and conference call participants will be given instructions at that time.

conference being this reminder, a call recorded. is As recently like the Executive conference Instructions] has of I over turn now would been who Relations, Bolles, [Operator call role. to to and Investor to appointed the Treasury Director Jackie Please go ahead, Jackie.

Jackie Bolles

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

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

the Form these or on or results and factors. uncertainties ended our customers prove March third governments, by As well today. those the year forward-looking expectations. our ended our XX-Q December uncertainties or many in These of vary contain more unknown set suppliers may XXXX, quarter assumptions from geopolitical as responses related on are or of one other forth we and materially general earnings quarterly on the express XXXX and noted annual of XX-K Should as remarks to subject risks should report XX, current on Form our statements economic actual underlying that Slide risks including materialize XXXX, for known estimates presentation, release, report press forward-looking X incorrect, quarter those today statements XX, based for

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

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

will and operational highlights our our the will updates Graziosi During performance results then today’s from guidance a to quarter brief Dave XXXX financial quarter commencing the prior XXXX review third Q&A. call, and third review to update. Fred review Bohley provide

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

David Graziosi

Thank thank you, afternoon, Good for and us. Jackie. joining you

remains strong, foreseeable have Though demand the excess income team take uniformly current returns customer revenue We primarily will quarter which and and robust are ongoing markets demand and the support actions The limited of demand in end per the continues our be constraints. uncertain challenging. that to pleased customer for environment was allocation team continued sales environment third $XXX report is net that focus Despite quarter. our future. results, as drive improved, anticipate persistent demonstrated mitigate even in up supply of results, and a third resiliency sales XX% capital reflect to the operating slowdown and growth. in to remains disciplined in by to supply production address stronger share year-over-year the diluted chain of in our operating to though with strength to continue by production million increase We net EPS, Allison for continues to concerns a Allison’s Notably, continues approach chains year-over-year not net of and growth XX% the economic activity, challenges. end-user complex industry surpassed well-defined by growth

August are raise guidance off-highway strength result a pleased market X. Allison’s markets the As the provided to the year we full of end while in narrowing the on- to guidance global on ongoing and ranges

XXXX overall not Directors to complement who recruit of current new but The Board with the at standing members August serving changes their our directors the Board X process a changes by During to our by will the out X deliberate of quarter, mix term, reflect meeting. perspectives. early knowledge, adding members new and skills annual for refresh announced reelection we in experience

pleased who annual potential bring and areas growth In a our to conventional in will experience we that million emphasized directors, in revenue $XXX outstanding great programs are gained Allison. be traction each business are revenue. in identified have quarters, to relevant independent X extensive opportunity that We incremental assets driving business have we and our with prior growth combined

propulsion dump previous electrified opportunities conventional mining update In our will addition an quarters. FracTran we Regional as our China to XXXX in for Today, and highlight provide on the Haul, products initiatives new portfolio. widebody covered well as

been announced, market. outstanding the we crane in performance world construction application the integrated to the in On-Highway new is already of all-terrain top Allison one has leading of as Outside cranes growth exclusive and named North transmissions transmission largest dozens provider the manufacturers XCMG machinery As the seeing Allison has Specialty into XXXX its all-terrain of recently for America XCMG’s continued X

Taiwan quarter, new the FVR to high and to features the XXXX in FVR enhanced increase the and efficiency, proven heavy automatic Isuzu designed XXXX demands environments. in maneuverability urban medium-duty to speed new stop-start the that loads ability X making to fuel numerous The Allison their Isuzu was Series ensure duty-cycles application transmission. move propulsion unveiled truck During Series tackle truck Allison choice of

fleets we to will are superior Isuzu and Allison confident pleased deliver outstanding Taiwan. combination our to value economic and are that across continue We partnership, the

drivers solutions, rating propulsion, commercial XXXX XXXS in introduction in leading designed be XXXX our vehicles agricultural unique family, and we the is soil, agriculture automatic ag the in addition expand Europe by -- includes we Asia pleased XXXX. we Outside to axle latest approach capable growth well gross benefited in Additionally, the to to the eGen the source family integrating the Allison’s pair e-axles Pacific challenges Conference and XXXX. implementation markets. weight cell in John manual electrification from often of the new sustainability North vehicles to continue our in a Power participating made their fuel XXXD to fuel from solutions, and in XX-ton exciting to look propulsion eGen the The Deere an entering America Allison’s transition our transmission growth hydrogen drive Power opportunity eGen and Conference, of testament to are that transmissions vehicle to sprayers e-axle energy-agnostic, for family now and continues electrification our the the vehicles. Allison in Power representative Series with of introduced providing required global sprayer, quarter electric meet for growth XXXD designed heavier we customers of customers both includes that Furthering and XXXD and the vehicle market Pacific America this including IAA transmissions, deliver our environmental Power sector came America, lineup the FCEV have at opportunities utilize Transportation eGen eGen for operate propulsion for we The of announced enhanced transmissions September, to in South Allison energy. vehicle. was Quantron’s our the industry. the and vehicle critical will Hanover, of any fully where have The this capabilities axles, testing which agri Asia of Transportation cell South the e-axle XXXS, electric fuel Power Germany, since to for portfolio to electric Allison, initiatives center in market, development The electric alternative Also business and support joining cell which In new into of IAA XXXD portfolio. Metalfor In XXXS is the transmissions supply The the and is the support OEMs, European performance Allison markets. vehicles chosen announced is the additional in application. see the and to fully components both key announced of XXXX, solution On-Highway fuel OEMs due Quantron have to introduced as we the solutions in which in electric the test as the support soft XXXS forward specifically providing of of chosen

fuel excited to OEM expand as the are and develop submissions. to facilities intended reduce support optimize our offerings We customers alternative capabilities they to

our bus Anadolu truck quarter, and manufacturer. the with strategic leading announced agreement cooperation Turkey’s we Isuzu, During

the scalable in making both electric optionally the Power selected truck battle system, has American the our Force. platforms solutions $X.X requirements Center. million eGen to of propulsion The used vehicles, applications. solution well. excited more relationship into eGen as experience also tank Force for delivering to Allison’s This transmissions conventional tracked program to the to it been contract be been our eGen Anadolu portfolio, than of Vehicle Army’s combat award the continue our to design, for eGen and Army’s award designed new electric Ground by the announced combined the a for main of meets testing from as vehicles, quarter, XX-ton is in midibus we has innovative U.S. the the the vehicle Isuzu’s future solution hybrid to and develop XX-ton customers. vehicles refuse, Force support for for their development Early newest will we eGen U.S. the Allison’s part and light-duty the incorporated Systems be offering hybrid of XXXS tracked its expand solutions addition have decades Allison of our public fighting will and preferred manned meeting Force and a capable long-standing transportation are As a agreement, and propulsion eGen Rheinmetall and vehicle. requirements for platforms decade, bus distribution Lynx

with Santa the of to buses XX% We system. full duty capable zero-emission announced cycle in fleets and its of that largest Flex, the eGen the of share United transit recent across gain the propulsion Finally, up the next-generation hybrid awards for eGen hybrid our fleet for optionality in buses. Transportation This Authority provides of continues electric nationwide the States. order equipped has of Allison’s properties recently system the selected with system that a Clara bus most engine series electric electric to for represents Flex transit Valley propulsion

today history. happening any there at have often in we technology at growth in than time As other our said, are more initiatives Allison

to continue call to the you, across now over portfolio deliver I’ll to invest value turn our to propulsion our solutions and growth We and of Fred. markets. end drive Thank all

Fred Bohley

Thank Dave. you,

spending. driven and increased I’ll to die XXXX driven $XXX the cast markets, then the by from a lower and America. price same results in increase detailed million to partially of driven X for end vocational the as the driven for increase North continued the by shares spending. $XXX driven compared components, in income Engineering period capital QX end the increase development also and full from our The $XXX record other by driven net flow. direct activities. on period provided and million revenue loss applications Allison’s increased updates and in the $XXX service Following a customer American discuss quarter the repurchased found Year-over-year execution period marketable performance of quarter net product during third by turn the increased On-Highway allocation, increased by price Europe, in profit, summary, Selling, Off-Highway XXXX by increased the strength driven outstanding commercial in commercial compared results offset And was by driven South the million for principally increases Please million the quarter activity on XX% financial income for fracturing net higher in with net flow North $XXX million million review $XX common net $XXX million by cash summary. $XXX period for increased XXXX partially spending. our $XXX Year-over-year increase A growth initiatives. higher sales net higher as the support activity compared the the the initiatives $X in cash $XXX continued sectors. on for equipment and initiatives the the as by in by ratio gross driven demand to a of and Adjusted the Asia the Slide QX line approach same $XXX XX% commitments. earnings Dave’s can and mining million sales for cash market, well increase was increase a leverage X period higher spending. the service end demand of an XXXX same Slide $XXX and of XXXX. demand, haul to and from year for presentation with hydraulic to principally disciplined in turn the of of of in presentation X.Xx, XX% general securities the Slide comments, trucks. Outside and was QX the well by cash was same outstanding. million XXXX. the in product representing stock higher shares. offset period energy $X.XX XXXX. We sales and flow increased period revolving by increase we XXXX, Net share credit EBITDA XXXX. total delivery, $XX to end items X driven for The unrealized X% for million as same commercial net of turn Slide of aluminum sector guidance. million demand XXXX, last-mile the presentation net by of principally and was summary. The sales in XXXX I’ll expenses per XX% Diluted well-defined market, be costs. the Adjusted continued year-over-year administrative parts, execution million, million partially The a Global the period expenses in customer available ended sales research Please to gross in The offset by QX initiatives XX% driven were activity product a by resilient for higher led lower presentation. was initiatives and regional the in same the in by sales, material driven income market to by principally in equipment growth higher profit quarter from and expenditures for facility XXXX net same key Consistent was improved support certain same by and quarter XX% operating and products, of construction principally increase Please to quarter, the and million On-Highway parts increase in performance was cash overview to X performance increases statement XXXX, in was $X for performance global America market, million capital and free end increased from quarterly Gross profit, summary. principally in by

In addition, structure a to with long-dated maintain debt flexible, the we and in maturity covenant-light due earliest continue XXXX.

Finally, repurchase quarter we $X.X ended approximately turn the presentation with the update. guidance of Please Slide capacity. billion share the X of to XXXX for authorized

the given As ranges market the XXXX pleased we Dave mentioned, while raise to narrowing and third end full are market year August conditions, current quarter guidance to on guidance the X. released results

be billion net billion. of in $X.XX expect to for We sales the XXXX to range $X.XX

products parts, demand on of XXXX our certain the and Our support guidance growth and increases as service in well Off-Highway net execution as initiatives. reflects equipment customer sales On-Highway, higher other Global end markets and price Global continued

concludes call to million net remarks. we the provided the million, adjusted million $XXX million, of $XXX in to $XXX in of net Thank sales for the million range range $XXX open million, adjusted range you. million in to EBITDA to range $XXX This to addition capital million guidance, expenditures of our $XXX Allison’s operating in to million. the flow XXXX income and please of $XXX $XXX anticipate Shamali, free the by In in million activities $XXX cash $XXX net cash the of range prepared questions.

Operator

comes question Ian [Operator with of Zaffino Instructions] And our the from line first Oppenheimer.

Ian Zaffino

we magnitude pricing, some fourth key of lot talk what what’s beyond pricing maybe a quarter? on in you of and of areas? And pricing can the still Glad in saw continuing. for the quarter standpoint? maybe a like to about your just you And the Can strength see from outlook

Fred Bohley

Ian, this Fred. is

quarter, million. the a was $XX favorable pricing For on basis, year-over-year

pricing. As we year previously point, look full at points about of basis XXX this at talked

the basis year within taken price. of are about some anticipating have now We pricing points and XXX

in year-over-year on roughly million $XXX a So basis. price

transmission OEMs vehicles price able It those talked value our from work done. productive, As And standpoint, the more previously of a fuel makes the more of our to on more calls, about just we vehicles. get raise continue they’re earnings as transmissions. increases to efficient

So inflationary in capture continue to feel we to price this certainly positioned well environment.

Operator

from with of question the Our next comes Citi. line Thein Tim

Tim Thein

you that. aboard Dave, and to for the when adjusting not that? is quarter, And Maybe in industry. the wins even I even Jackie. currency the do which some attribute on-highway China, But welcome for actually Great. that amount Global what on just Well, of It’s much is that but would maybe there, you On-Highway, would the you flatter think, quarter saw obviously, more presumably in this gotten China? strength strength worse there’s contract of have headwind

is the your visibility or driving country that market space, are or And a challenge you the what of you How in in of of forward -- you you continued always terms kind -- So what to highlight but have specific rather? ‘XX? the not that in the looking areas country what strength, that of do in on-highway kind up? do world that size strength

David Graziosi

You’re welcome, Tim.

me let here quickly. around go the So just world

North I’m some already conditions read reporters public that America with So would America, market the being disagree out North with are that I believe the their don’t relatively general is, strong. we are sure of comments. which described you’ve is for

in to North supporting Outside portfolio, our our some we at legislation to business back a all America, prior a really to for expectation strong of market solid broad It that I number ‘XX the healthy job I know, markets are us, team stage. from know this think as America be overall, us, take supports North It’s market strong has say, that’s actually relatively our XXXX because terms in and over bit of right of at significant passed near You but continues do for term. space medium for this the pretty of supporting to with would that’s -- been into fair pretty be vocational continues infrastructure a production relatively a you perspective, the to although, of that a of have customers in of very dating different market. now done stage. a hold, backlogs this the the attributes lack to certainly

Asia along know, you asymmetric have occurred As familiar interim talked with. stops some you’re in we’ve the that about I’m reopenings way sure the also that

I I’ve up broadly try of, would but users But there keep to market of running, end have we’ve I as America said, OEMs describe both I say enough would been outside the supportive that a think the and that’s the there also weak. to make they product extremely out really vehicles. components to certainly North isn’t and extent to that

I It’s -- think them get the to relatively guide. are strong. all we’ll of XXXX

quarter. you As the the fourth quarter in do always know, first we call with

ahead conditions which at jump I that won’t of I broadly, some would this to displacement we do this at continued heading expectation tailwind again, is, stage broader our that challenges without in does So more have of but ‘XX. say terms a supply macro chain, subject broadly a stage, decent more market into expect

areas, mining, a far had including be, you to continues have I good on prepared pretty China, continues to well. of a beyond -- the decent we number that but team the remarks, the so. They’ve of initiatives job those, outcome. -- that export against combination we the a for a referred bus supporting with so the side do market or pleased the as as domestically executing very we’re I to Specific So truck year and they us, growth that, in think to, in as mentioned,

but we again, think, on of strong is eye end into relatively the as overall. market a I close year, the we’ll that, the head Beyond keep things

Operator

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

Jamie Cook

guess just business the I X and me Sorry. up parts the One, XX%. struck this questions. strength in service quarter,

the to pricing? margins? And that just just just how sort question, given How you level across the sheet the the Dave, -- what just for of balance with accretive opportunities? relative if So sustainable is opportunities is And drivers you’re coming to flow terms was and seeing to us versus market more and update your behind M&A history? second it’s can to that? you, there cash then in of acquisitive much Allison probably market, could of you strength and be in my the valuations And on is

Fred Bohley

and parts, Fred. driven was equipment primarily to strength had, but service is a Relative the support the by Jamie, parts, on service unit strong this other obviously, we the also volume.

used to die equipment were was installation up support the And So initial also the cast aluminum with we components. support up.

pretty broad-based. it strong It definitely So quarter. a was was

running Candidly, within But challenges forecasted get all obviously, longer more labor we strong You we needed. to channel continue see, anticipated when Obviously, little the things. done. repairs a stronger quarter. that to from trucks definitely a some standpoint than had a

David Graziosi

Jamie, it’s Dave.

to or on continue allocation I and a opportunities, So indirectly directly stay contracts. your guess, sheet to market our relative or to balance M&A we the close cap of question, very number

activities of I think number in a in and our broader Allison number more transmissions. us are a the that we than context. of more ourselves continues beyond you business, market thinking followed for know, of involved terms to were a of you company and broadly transmission as years, is that become

the we for our of and point here So said that, number value there’s disciplined. -- Having to team believe very I add are would shareholders. we certainly patient bunch opportunities to a for a

in same we will with at the it busy us. So I we would terms our markets. also the about as do in where more opportunities valuations, time cycle -- think broadly at expect is this you appropriate of the be point there market as market of core the is, broadly more

just seen, the tell, busy. relatively do I everybody mean a What will think said, I I of as is, market best be are given near being number that by whether conditions. remains opportunities, to there or that those term not is broader So be can

it’s the on, disciplined about patient thinking backdrop, of challenges So very broadly and given about some opportunities. something well be how we more continue as markets, we’re think familiar I to with, but in focused as a plus that very the financial you’re

Operator

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

Rob Wertheimer

I where powertrain an growing real if is, if and don’t expand on with know that’s things, to two wanted hybrid And of or and whether a Flex a just it’s One ask or I I could about eGen don’t continue generally legacy you guess, know the, transmission fleets I and update. that’s on the whether I’d have the side. it just I love update guess, just advanced you kind if a growth. adopted replace market then us market it, more give an to have it

You’ve been state very active and buying across win, the advanced general market want powertrain market, on the where of customers your see you win your whether you development. state where efficiency, that see the of positioning, are you to the just rates for things

David Graziosi

it’s Dave. You for Rob, questions, the

So eGen I years. was very point. understand legacy XX just product I mean on dates at unique the it back the of that Flex, about that

eGen the up that The or full the over there’s what added in point. known of up a a and refer was around on that at of is with to cycle duty is HXXXX. big as used EV systems we think mode to in next really running -- et XX difference X,XXX we those of miles generation I to this market XX% globally The Flex to cetera. the Flex number eGen the attributes EV capability

think a it’s solution, emission I zero would advanced. product responsive So I and [indiscernible] around the But say, much customer also very zones. to certainly more

successor really marketplace. a number to that the of responsive it’s So as the think that that, with long a product of are about all improvements is, you

if you will, really legacy think of you dealing but if the it’s that about future, more marketing want it So way. to with position,

broader In at. and advanced looking terms we’re number powertrain space question of on of your the opportunities a that

was to traffic fairly other of Power receive of quality are We our prepared team they when in and to think of our We -- a our of a meetings, show itself. I booth I at of our out there, very mentioned interest eGen tremendous the I e-axles. solutions number attention compared parties remarks, of, to lineup I well in number a lot the in of very had products, level Hanover, especially continue high -- the a good our paid in a amount marketplace. showed think,

in are with quality -- about around that the our are frankly, of really all also that thinking but know, being and alternative to focused point. this about at being consistent we’re who selective the we’re our focused Quantron mentioned that And it’s I in we’re solutions So high effort, of products, The Allison choosing field powertrains focused standard on conventional prepared believe being remarks, brand as you and a we’ve efforts meet the is work relatively power gist promise going agnostic, advanced extremely which, have or going are terms for reputation to the exceed and to reliable. we powertrains, that, anything created. with

any really the we’re point. having So that’s this engagements at focus of

electrification investments that been the very think with we’re also think the I that So ability have to I way but in again, team very And we continue Hills, partner unique made center a years it’s acquisitions, facilities added, brought we also accelerated in Auburn and over given team’s on but to the be now the pleased also reception leverage vehicle that which the very a through last then, whether it’s the talent to the an us in marketplace Indianapolis, here and and our few we’ve environmental number the -- test progress facility, of are parties. we’re since in also making.

brand some summary to is And things solutions for we those we’re still our the promise. with opportunity lot prepared relatively are. there. note, of general. consistent the early in with think see of overall patient days powertrain pleased So a where and would But do be it’s I also way, I We right

Operator

line comes the James. question from with Our Felix of Boeschen next Raymond

Felix Boeschen

revenue a of from opportunities about the some I’m curious perspective.

the dump You’ve called out initiative in the the FracTran. regional and body China haul,

about it’s million all think I opportunity $XXX in. a revenue

can may Just give versus in numbers or an curious maybe update in be come to those if super not may kind of X already launches, slated helpful. of sort the what’s us what would you be on years online coming

Fred Bohley

for seen notable is OEMs. Fred. at mining there dump haul all FracTran, achieved And couple a out they’re we’ve which The to Felix. standpoint. what’s stages. the This We’ve couple Navistar, VI you regional widebody a still can there in different The is imagine, The -- has fast Certainly, adoption China, fairly Volvo. Daimler, as there. Sure, go with X releases really then from stages years. you a is of launch been some early

widebody been So there’s We no really the run see at The it opportunity $XX the million. revenue FracTran, really be interesting how the we dump, There’s within $XXX quick finished million that from to year. targeted will rates. adoption. mining

have there. what may And I is. be opportunities we think we’ll potential there undershot halfway probably

to customers we we’ve which that. the units, releases. at in tried the a that look XX X, So lot of normal haul pretty is continue have Regional got We’ve is key got America, coming conventional probably market, for as users especially we are where stand far conservative $XXX in XX% second, million, the that North third versus do back But as that purchase. there. end

still of there. On-Highway, prepared record front business, lot as significant is North us. Defense And there in then Outside amount is of mean, we’ve about lot remarks, I a America this made investments ongoing. Dave of the talked a in So activity a that’s of

to other general, equipment lot conflict a of that the theater in anybody Obviously, in been of lot there sources. in some rebuild coming -- looking just And in for MXX, MPF. Ukraine. put that’s those Russian the the been in cases, a us has in historically to the used is, Western Ukraine fleets the are in the driving programs European of OEMs And fruition with their

So bit of opportunities. quite a

but on opportunity this a not There’s We’re conventional those to pace of continue amount drive very significant X, we’re to done. business forward. we’re pleased with the with

Operator

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

Tami Zakaria

rate gross quarters. how gross fourth Because several finally seems quarter should had erosion rate So and the it margin has about the in we like third my inflected, your after leverage first margin in you is, question quarter? think

on about thoughts any So thinking margin the some then year, how And in maybe fourth are you’re coming gross quarter? next the commodity given prices of down. also

Fred Bohley

of we how we prices anticipated quarter the Tami, days I’m kind fewer the we’ve look at quarter fourth implied some the this year. just done math as of this of And into fourth off. see Really, Fred. that softest do the to probably at it, is We because roll is sure you’ve the quarter, of -- fourth started the one is commodity holidays. quarter. number as look and with the on we guide Traditionally, production

So the to favorable price/cost in expect quarter. certainly fourth be

continue definitely QX guide. As we’ll We around results in to line amount XXXX, and work the we’re initial getting relative XXXX our when significant price top commentary model cost on that with structure, and of to XXXX. doing but the put anticipate a provide out February we that

Tami Zakaria

growing That’s year-over-year? in business? one the When How it. can squeeze one. to expect think start I should that If Got Defense quick you do again helpful. about we

David Graziosi

Dave. it’s Tami,

So to programs a on. working that of comments, we’re Fred’s number

the New U.S. -- some through the -- well programs and for outside both government as America. North as

working XX-plus market to ago, years the versus subject to is referring programs, North funded year The X, programs answer growing Middle in well America both think and really outside get a out created, would should you meaningful tracked X with volume. for terms your if on increase. ramp unfortunate as back as being specifically I’m largely our Ukraine start it, on the U.S. East, situation within is X very Fred’s with X the you history has once -- was frankly, a the which in our presence space last has largely say, the point, aggressively activities the actually to Defense wheeled Allison. new occurring time, team look I in of you at years, business, next to it’s pretty I or see spent to question -- to it years, Defense the the call

well, is our that significant Defense as on we’re portfolio engaged growth but So process in this from to at forward the stage. certainly looking team also --

Tami Zakaria

that. Got on it. congrats great quarter, And

Operator

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

Jerry Revich

deliveries? midpoint you worse if the fourth just just of end And can specifically than a at about sales a outlook we’ve seen I’m expecting execute? the quarter think lower the on wondering be question of markets talk over wondering, the chain are I supply years. down which number margins. is where of mid-single allowing Or function digits sequentially, I’m similar range, to room is seasonality you’re there that any you’d

driving implies to to given you sequentially. And execute is about discrete that wondering basis items just XXX there the can provide margins midpoint supply down are are room the So again, that? points talk Or environment. I’m if

Fred Bohley

Jerry, this Fred. is Yes.

million, cash, revenue our was certainly, our at year look we quarters unusual quarter. revenue us, history. for seasonality, to as in closer is, QX of strongest from I say, as think with one strongest both down, to at really although which look and have being QX, normal $XXX QX. specifically is We did thing guide QX have we do I is and last one would but revenue important earnings revenue increase we a much QX

that And impact strong necessarily your at for as we say very support reduced just on you repeating was get mentioned, back to us then be of do to the in markets expect question don’t function to be QX. quarter-over-quarter. quarter it’s a anything various And out. Specifically, anticipate I revenue associated of America when equipment QX, I margins, at really end stands it’s other Off-Highway for and drop-throughs looking down level. primarily QX We the common North -- Parts lowest really, of margin wouldn’t in year. and the and

Jerry Revich

that? a sorry, the Just where die support piece? equipment just you’re with part little part anticipating context Fred, And of more on What cast piece, off-highway the there. of a the clarification is

Fred Bohley

a I think we global on- off-highway. in strength and have of lot

an Jerry. outlier So it was really quarter,

not that’s the So recurring anticipating that in QX. we’re portion

Jerry Revich

Super. Nice quarter.

Operator

from next America. our And comes Bank El-Sabbahy with question of the Sherif of line

Sherif El-Sabbahy

return within see to that us you sort break bit through you of walk historical a and to Just those cyclical some have out margins do or gross levels? could more drive margin changes structural? wanted what moving pieces, And discuss years past coming then more of the impacted broadly. what’s to margin few that Could over the back more them by gross

Fred Bohley

the basis of don’t have should business It have through sort material pass previous then would primarily provide is -- raw on And have go long-term margins. lift about Fred do -- point but pass-through increases, within raw we And mean back. to margins with we of our if XXX%. the -- I we’ve what with this pre-pandemic the on agreements, about Sherif, commodities, to returning a biggest don’t we which began we And talked depends significant far you material. see calls, again. you on how really challenge have been with cost levels, that entire on our supply gross a we supply XXX book agreement. long-term methodologies those of to XXX lot

we’ve through as methodology. And X via materials that’s XX passed to raw So increased, about months. only our surcharge traditionally XX% lagged have

then we don’t to pass to be it on. $X.XX are the when you the do, starting term, dollar. roll. In will have And those we commodities a short been So impact. ultimately, That’s see on biggest

challenges creates both thing would supply in operational for the the want be to manufacturing to inefficiencies customers they what facilities. build general with suppliers second our just It chain, The for and of just inefficiencies challenges the our that’s occurring our build.

get think that I that all supply move So Those are look we removing. I chain. as to forward you strength within more costs through and think

Operator

the we the will end of I closing to And reached the session. question-and-answer call Graziosi remarks. for have over now turn David back

David Graziosi

participating evening. for interest for on Allison and continued Enjoy in Shamali, today’s you, and participants I your Thank thank of the call. your call all

Operator

today’s concludes This remarks.

disconnect If your participation. Thank time. -- lines you you your for at this may have any you

Allison Transmission (ALSN) 27 Oct 222022 Q3 Earnings call transcript