Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. Thank you for standing by. Welcome to the Allison Transmission's Fourth Quarter 2022 Earnings Conference Call. My name is Camilla and I will be your conference call operator today. [Operator Instructions].

conference being this reminder, a call recorded. is As

turn call of over would Jackie. and now Jackie conference to like ahead, go Director I to the Bolles, Relations. Please Investor Treasury Executive

Jackie Bolles

afternoon, you, quarter fourth conference and Thank earnings Good thank for for XXXX joining you call. our us Camilla.

and Senior With Chief Vice Chairman Graziosi, Financial me and Officer; Officer Dave are Executive this Treasurer. President, Fred afternoon and our Chief Bohley, our

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

noted presentation, release, are ended forth fourth quarter on today current on remarks as As risks, quarterly to X XX, Slide our for based XXXX These Form XXXX, in our December quarter annual expectations. report well on ended unknown other of set earnings subject many economic report of the XX-K on March those XX, statements for forward-looking press factors. the known year the our general statements and as XXXX, forward-looking Form XX-Q our and contain including

one estimates Should results incorrect, these more today. vary materialize or we may that from express prove materially those actual assumptions underlying or or should uncertainties of or risks

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

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

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

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

update. results an introduce the full review then Graziosi our Q&A. commencing highlights Dave fourth full year quarter operational year call, and and XXXX Bohley from guidance XXXX to performance our review today's prior will financial will provide Fred During

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

David Graziosi

moment taking delivering year to Allison to for would dedication promise. Thank this for brand you joining I our Allison us. partners by you, Jackie. start in team Good and the afternoon, a like their thank support and thank and the

our We XXXX. in global XXXX for objectives. continued markets our sales an year net full of sales, of record growth end from net billion, XX% to quarter on-highway was realization fourth and record a increase driven in record achieved demand the by and our leading business, off-highway of year $X.X strength

we sales net income demonstrated, performance net once As even have our diluted up surpassed and stronger growth XX% again was by EPS XX%. in consistently up

a but allocation growth EPS our priorities. capital Our is also performance, testament not to our opportunistic operating only

committed of with During total repurchased common for $X to to $XXX fund our XXXX, the representing and capital ended share returns our of authorized a of returning balance of repurchase of cash capacity. business million We appropriate business, generating to allocation approximately remain of investing we the to and outstanding the priorities year stock, cash shares X% grow billion of our shareholders. shares our

sales X, $X.X straight end In markets, X day net XX% and XXXX. led markets Class from demand America cab share Class X, billion, Class On-Highway gains in our North X to and a increase strong

has from announcement North Truck model that the become our in order Cascadia with day for America's Regional option engine Class Class customers about Freightliner available now compelling The excited cab cab the XX-liter Cummins. recent is XXXX are for in a XXXX the We day transmission Series Daimler gas natural X our X Haul market. award-winning paired RHS

customers their footprint our and performance to well lightweight economy as industry-leading carbon enables and the superior while maintaining durability emissions reduce performance. fuel The as

many in of of to end in previous partnerships fruition. as Focusing and on have our made outside quarters come the announcements North America we initiatives market, our awards regions On-Highway several

increase an proven $XXX a of durability achieved with America automatic very in growth locations On-Highway a proud This North year-over-year growth led value our Allison this of the fleets differentiated shows has nearly and record million provides into and and of XX% full year sales outside team's track net in trends proposition team as am is The record impressive multiple XXXX. reliability, achieving OEMs of which regions across market. and to success I the in end products. make push the

vocational in market Specifically increase wheel vehicles, an defense for trucks increased of our which leverage recovery net sales XXXX. region, variance East led by our year from on-highway This and by Europe, accelerated driven Middle sales Africa was the strong XX% in products. and

use revenue fire, for In growth Turkish for wheel continue specialty addition, applications coming programs provide opportunities will in we new to construction and and OEMs during XXXX, European that the we releases over defense with refuse years. vehicles and OEMs European secured for expect defense

the China, than truck led contracting increase by market In despite strong a in bus Allison commercial widebody by and dump XXXX, more in XX% XX% sales, net export cells. and bus realized mining

leverages received in new automatic which already Series existing has share Allison dump quickly. fully awards this our traction mining gaining estimate wide-body and multiple Our approximately We XXXX transmission, in XX% a China, is market. that initiative has

Last line our presence our in the we our since the engine XX% saw and touched region by America in Also led a agriculture quarter, growing in North America increases XXXX. increase bus in outside driving sales front net sector South top market, on wheel defense entrance On-Highway year-over-year, end markets.

XXXX both use enhanced which the in soil, the selected in and in performance OEMs agricultural Series this due Argentina transmissions their and in leading Allison to critical is Brazil soft Series have XXXX sprayers application. mentioned, for As

Systems and testing Army's eGen force. from our support Last market. Ground the on to eGen the award the $X the of portfolio, the design, Vehicle Moving defense to used we announced contract has quarter, development to the addition end newest been of Center, which U.S. over million

meet fighting system As for selected a Linx solution new U.S. has reminder, the requirements XX-ton and Army's electric optionally track been as for manned the hybrid Romaco's the force eGen will is vehicle vehicles and American propulsion vehicle. designed

in year, making Allison U.S. that as a of Army U.S. as announcement presence Abrams the is life. XXXXX-XbX of recent prevalent to Australia transmission throughout was Abrams continuous tanks vehicles, our main capable well. increases has its of requirements it partner XX-ton its expanding allies. meeting we X early Taiwan, future been tracked to battle Late announced tank tank nations. The battle defense sales awarded contract to world, scalable in well the free Poland for $XX production the The is tank force XXXXs the and support most for main subject improvements capability eGen and million the U.S. the service Abrams introduced to last as

its is innovative defense demand and Similarly, customer with to Allison enhancements and proud transmission U.S. ensuring world's Army relationships manufacturers. the meet of while to vehicle longevity the develop performance. continues Allison

have mobile for Hercules Our internal or the led market. fire Abrams, investments which the vehicle, MXX also the drive in defense as the we last revenue to and MPF the future X growth U.S. only vehicle well newest AX power expect but protective to Army's light end recovery new as months contracts the tank not in

approximately Allison's Internationally, FICVs in programs Allison's that vehicle is MPF fighting of support infantry that XXXX vehicle the vehicles and procure decades. used is of with Tuborg combat designed currently which for FICV continue defense FICV growth tracked transmission, next propulsion X future to is FICV. selected we just the announced MX armored infantry the will proven to stated recently over India's solution several replace or Army's as The international Larson India's in aging The fleet XXX a the to Indian business. intention Army's BMP one U.S.

next as With geopolitical is COVID of well a years, the several as and defense equipment production every following idleness the due entering market defense period defense sustained to uncertainties revenue a to launching programs leading period increased spending of utilizing believe forces growth. defense for we now year new

to in and and we technologies our the development also earnings drive in future all end continue revenue By markets record across invest products of share delivering sales growth. to of XXXX, per new

to Allison demonstrate initiatives meet ensure as Our propulsion our growth continue we next our the realize action generation tomorrow XXXX growth for of results business. challenges to solutions sustainable and of take of develop that and the the power

turn Thank you, to and over I'll now call Fred. the

Fred Bohley

Dave. you, Thank

key QX statement comments, performance summary, line XXXX introduce Dave's flow. and income guidance. discuss year I'll items Following XXXX XXXX full cash then full year results the I'll

of XX% quarter net of in X year-over-year Year-over-year fourth by the Slide in record the for presentation driven end a by summary. QX increased and strength a performance to led continued the vocational to was The XXXX million. results increase increase period XX% XXXX turn customer for $XXX same market, American On-Highway in last trucks. demand North sales regional in the from haul Please delivery, mile the

driven a of On-Highway Europe, market, end Year-over-year to XX% year North growth outside South also record full continued Asia and sales in by by America and quarterly improved results America. the the increase in net were leading execution initiatives revenue, in

certain price fourth net year-over-year the service in principally Finally, in to and also products a end the contributed by quarter support increase sales on market, Allison's in driven other net X% parts, equipment increases sales. increase

for higher million, by The the Gross $XXX and increased material profit quarter increase an sales, the was The the driven million XXXX. for was $XXX driven quarter and for higher compared partially was gross and income offset period tax higher expense, expense. million in period same certain direct by XX% products, principally offset by principally same in increases for profit general income Net increase lower increase net was administrative $XXX the XXXX. on price selling, partially from million $XXX by costs. to

overview be by X found period same same quarter net by period the presentation. outstanding. share driven the higher for detailed XXXX. the market XX% compared to net A was on million our from $X.XX end to gross the in lower EBITDA in increased by XXXX and sales The increase Diluted million income higher principally Slide for $XXX can profit. total of Adjusted driven earnings shares per was $XXX of

turn were expenses. driven XXXX, X to administrative in XXXX the increased for principally and quarter general essentially presentation. X Engineering Please of expenses period in Selling, and same from financial spending activity research same the commercial development the product turn from the the for and expenses XXXX. warranty period performance to QX the by flat summary. increased presentation $XX Please higher million and of Slide Slide

expenditures. flow X million higher higher to profit same by for flow was lower The Please capital in XXXX turn to free the working for by driven presentation QX cash partially was operating gross million XXXX. of Adjusted increase requirements, and Slide $XXX quarter compared period summary. cash capital the the performance offset $XXX the for

ratio IPO share million commitments. XX% quarter, share of fourth we X% our dividend Since in credit $XXX XXXX, of a million total leverage repurchase in quarter the in revolving shares facility million $XX available $XXX of repurchased amount a X.Xx, net of of and paid of of XXXX, repurchases for ended cash with we per $X.XX a settled shares the nearly outstanding. and outstanding. We During million representing $XXX

maturity fixed earliest our the resulting maintain In addition, to which variable XX% and outstanding million in subject $XXX $XXX covenant-light a million billion debt with in debt, our continue through are XXXX. is debt of of long-dated being due XXXX. quarter Of we of third hedged, rates, the flexible, structure to in interest $X.X

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

net XXXX, billion execution $X.XXX of certain to on of products our range all reflecting and sales demand growth initiatives, price sales $X.XXX to markets, For strength be net leading record Allison in in to continued increases in the expects of billion, continued end year. another PAUSE the

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

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

Operator

[Operator our Cook Suisse. Instructions] with question Jamie And from Credit first is

Jamie Cook

Congrats because you heavy-duty on medium-duty a guess, terms from on obviously you that I just of in about a you're prioritizing medium-duty what be nice would side? one, talk positive OEs for seeing production can quarter. the on versus

low assumptions just, high incremental Fred, at my And end of quite margins the at some then there's the variability second on your end. and question, a around lot

of getting from to of your what higher there end embedded sort the in you normalized So range? preventing

David Graziosi

question. it's Jamie, you for Thank the Dave.

OEMs the you question of last supply is, number think know, on higher-margin were prioritization, medium you terms duty. around OEMs, a in products, mentioned calls That created reasons, year. for also your year, on several favoring we if obvious for gaps of So as may will, I of the have last as

those certainly, time that demand of So right medium components the the subject with the And aligned of feeling is will this a fair we're availability -- the PAUSE lines. I see need they what year. again, is, think now, our hearing that's OEMs all bit duty, having to

year. with You -- said receive that, certainly, certainly, medium-duty we oriented but strong side terms with see heavy-duty conditions fairly the vocational our attention our this also that, as of know there's continue level as from markets heavily some side, perspective, very to in the know, HD, seasonality market will of medium-duty you a high expectation will the in market production, the that our Having vocational, towards well.

So for that certainly that purposes, relatively with made I market. implies remarks bit a quite pent-up we're think guide from were year the our to the prepared supported expecting well the comments demand the busy as in a in of

Fred Bohley

revenue the many year, your question guide at there. by there. majority margins driven the and the demand that can on increase price. Jamie, is We've is Obviously, vast real the this our is we is vehicles the Relative have midpoint produce? of in Fred. the to OEMs question at The how that range looked out

some So offset standpoint, increases driver continue is cost to from volume the a that while to priced lift, we bigger see. there's

XXXX relatively just from flat movement exclusively with in by is an the numbers. amount to small SG&A and increased this At a -- profit. an from R&D XXXX those driven almost The standpoint inflation of expense, midpoint EBITDA we point, engineering an gross from

to is to XXXX. ability could meet biggest variance challenge a drive which clearly, up those industry's thing of ramp demand, what to obviously all and and to sales guide, net be As been the has the going

have think things flat I relatively commodities, we year-over-year. modeled

up influence could So definitely as well. or movement there the numbers down

Operator

Zakaria with Morgan. question is And our next Tami from JP

Tami Zakaria

be seasonality similar we in XXXX how it So about year? this of quarter? Should terms to think by [indiscernible] should

David Graziosi

Tami, 'XX on comments, to is typically OEMs that. from the you Fred's different for perspective, than are answer don't to short Thank dating business. The it's we're we our we dependent question. seasonality Having and XXXX produce, availability component made we'll largely react Dave. from carry in be 'XX the to point expect right? experience going a issue able to from the to obviously what that So

able Our sense being vehicles. that, aligned with perspective. different I of align not is, don't -- said, seasonality plan, going produce what's I to offer expect that's a certainly think answer about to as seasonality there's change. I QX. market scheduling on that to comments the if positioned to things with year of are in the totality, year supply a to from aligns the a ultimately a available can Fred's around and there well you we as do We're number fair to typically would with drive can bit the what be Subject as QX weight overall,

there. similar So answer basis. we year-over-year And a don't a on QX again, I you then expect, as think outcome into a different more get

Tami Zakaria

on Got could Circling That’s And margin helpful. the follow-up. EBITDA guide. very EBITDA a I ask it. if back quick guide,

really down at I is be would drive that? – the and margin if what think to seems wrong, EBITDA me like midpoint, I’m going correct it to slightly year. flattish And this

price than slightly offset of EBITDA Like just SG&A due to down should or about the [indiscernible]? that margin gross to at but due tailwind, by rate up think rate driving up What’s we margin – point? GM more

Fred Bohley

Fred. Tami. price by We’ve is it’s look This the at cost from and to driven we continue labor supply The revenue. gross really results, and And all you when Sure, profit. see incremental within increases got the chain inflation. primarily –

ahead far But – not of cost. XX%, gross we’re well XX% margins, of the that we’re So when you ahead make cost.

as margins, gross revenue and the is flat up price and But So cost dilutive generation and the gross that EBITDA have point EBITDA basically cash absolute increases. is year-over-year. to outrunning we incremental slightly profit is gross margin is margins,

Operator

Sherif El-Sabbahy And Bank our of from next America. with question is

Sherif El-Sabbahy

OEMs and that What ask, mining. seeing markets year? this you markets, off-highway your see single-digit to to low in and demand in dealers energy course strong we've wanted indicate over are particular, from growth seen seems just I the of

David Graziosi

as Appreciate Sherif, it's things, that Really, question. Dave. mentioned. of a number we

very outcome allocation. users to you're what that If I be, being disciplined regulatory there. when capital to North you to allocation, largely frac, is markets, look is, capital which others as that out end you're sure intention going I And would term, you're generally be the like being America to capital intensity would I'm think aware, your your of our stated hydraulic what you're putting around at what considerate, tied the constrain outcome told is

really components you're seeing, of replaced. expecting, rigs and not expecting real are more what What And any rigs capacity we're additions. what even sustainment sustainment new on So side, having is you're is seeing versus being built. a seeing necessarily you

at a from least to is So the if North holding that is will, perspective. of you frac for the guide net capacity more all a relative serve, America of

where in -- bit of think is America a a demand there dynamic meeting have had, different the of bit terms North challenge for Outside around I to you continue equipment. a

still that's catching and market up -- a So with really that's itself.

outside So we North both demand that market. expecting America off-highway for for mining construction are energy and stronger of

again, the you've and seen. with regional -- So I think consistent issues that

those there's and been say, reopenings and such. variability, think really I closing would reopening more regions I and a reasons to number tied of for in

a as path market as that's in North that's probably down ways. not So the far many America

Operator

There Instructions] at comments. would to time. to like closing the floor this questions back turn David are [Operator further Graziosi for no I over

David Graziosi

evening. and Well, Camilla. our you, thank like next appreciate and in dialing to participants call. Allison all certainly quarterly call to for your look Thank forward participating. in interest continued We the Enjoy we'd your

Operator

does today's conclude This teleconference.

your disconnect may You time. this Thank participation. lines at your you for

Allison Transmission (ALSN) 15 Feb 232022 Q4 Earnings call transcript