Earnings call transcript Q1 2023

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Operator

Good afternoon. Thank you for standing by. Welcome to Allison Transmission's First Quarter 2023 Earnings Conference Call. My name is Camilla and I will be your conference call operator today. At this time, all participants are in a listen-only mode. Transmission conference conduct given call that Allison answer question instructions remarks, time. and session participants prepared executives a will and at After will be

is reminder, recorded. conference a call As this being

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

Jackie Bolles

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

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

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

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

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

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

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

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

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

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

to Dave. the Now over I'll turn call

David Graziosi

the results first in Good you record Jackie. show Thank for afternoon, Allison our After exciting for us. and year for start you, XXXX, XXXX a come year quarter an a business. for thank strong and joining to

first increase of X% - record growth growth quarter, of performed quarters, to During unlike operating $XXX demonstrating sales we commitment revenue has EPS Allison's the and achieved margin EBITDA growth from by Not previous in was performance. XXXX. million, out an

In to year-over-year. the grew first we up EPS XX% quarter, $X.XX

Our strength our also quarterly end-markets, but with of and in America, the get the work done demonstrate results durability Allison value to not proposition only transmission, automatic of the our core fully enables quality, promise. North customers more reliability which particularly

throughout to Allison's the providing prices value market price. an and well share, as increases As vehicle cost industry, inflate, realize continues proposition opportunity inflation further increase as

the margin XXXX. first in of we compared to XXX same quarter, expansion gross the achieved period points, basis For

and operating in by conventional performance has us to allocation priorities Allison's Our propulsion maintain investing products. capital enabled our to next-generation

committed capital program. our to We through and returning to shareholders also quarterly dividend remain share repurchase

outstanding the quarter, per capacity. authorized our of During increased of first with to IPO We of share shares repurchased we $X repurchased of XX% by increases. the quarterly our with first dividend dividend of Also the since billion we X% outstanding XXXX. consecutive year share, approximately quarter, repurchase Allison's quarter in shares the during marking our ended fourth XX% $X.XX

progress Allison Institutional Conference, initiatives. Raymond mining quarter, Investors where China, highlighted the the During attended wide-body growth James we our dump of

as as million adoption well as opportunity the Chinese gained series annual the revenue in resized from markets. million has our XXXX Allison have quick Automatic $XX We to $XXX export market,

the through success mining global SANY, growth with export manufacturer As Initiative early markets. initiatives the over on equipment, a we with mining XX% April, call, our in of the early are dump another we discussed pleased the wide-body for conference share market last In we heavy XX for the gaining earnings and months. partnership construction announced

for This ton fast to transmission will X-speed an this growth series our vocation. wide-body, for XXXX in our market India dump success expanding Allison's truck mining commitment developing in mining wide-body dump the and penetration of supply to create SANY’s ecosystem partnership to the demonstrates India innovation global intent on XX market. draw of letter Chinese market in joint Our our the

XXXX On our we Cab Cummins Cascadia Allison's the available DDXX Class reiterated for announcement the truck. Hall diesel also to Regional DTNA's we last of now natural paired earnings like paired series would DTNA's X Today, being available Detroit Freightliner order that with engine. award-winning transmission by announce gas is call, MX engine Day XXXX in the with model in

the at and The the announcements up is fleet segment commitment and than transmission meet our help and agnostic by of economy represents XXXX customers of up the solutions to goals. provides to including improved regardless type. lighter to fuel competitor products the fuel the Allison's OEMs XX% The nature closest fuel evolving propulsion to lightest in X% benefits sustainability numerous

quarters States all few like heavier Defense made we this end-market to HEMTT the our and than Military. we announcements wheeled have would and the continue more than our tactical used by the United defense We US and time armored end-market provide some take market. Department and in vehicles of vehicles to attributable primarily strategy combat opportunities half to defense of in numerous were to transmissions the cells unique for the outline Allison's today last Historically, for

Army. the of are specialty we for XXXX was by choice with JLTV remain JLTV that proud has for Allison AX of the this the AX. XXXX propulsion JLTV announced In the US and series will the award our the solution contract program been propulsion since February, supplier the AX

the QX of XX,XXX over the delivery AX vehicles Defense forecasting AX first JLTV US next Department two decades. The in XXXX and JLTV - Department with expected is

war, Department by spending priorities. shifts on partnership capture rise, with the our defense increasing to while Dynamics the by the continuing Ukraine international Defense, our modernization diversifying our sources revenue in poised this sales. driven long-standing Today's the Department by is is Allison Global growth Defense U.S. in US geopolitical cycle and of of

protected million we our in army's annual revenue and MXX drive Starting firepower years, such defense Abrams continuation MPF, growth the mobile recovery few incremental in programs of next already or announced of end-markets. have U.S., the we contract. the In vehicle as expect the the $XXX to this AX the several

These programs vehicle Department all track addition to to there numerous Defense, tracked which the in where continue of with mentioned drive growth these years. expect wheeled we programs are US coming are see most to the programs programs the will growth in vehicle

with are last the All and expected of to these Department Defense. continue US long-standing of Allison's programs partnership decades

XXXX, In portion expect coming We of the the as international result of a we growth end-market defense defense accounted sales a in opportunities. in than also will our years, expect to revenue end-markets. more XX% strategies. to significant international from the In international for grow of these come XX% revenue

such XXXXX First, in as the the battle tanks. of of main products Abrams expansion sales our existing

three next Australia the Taiwan, government and to the Over plans US to years, tanks Poland. more Abrams sell XXX than

with in becoming sales the markets through partnerships armored as howitzer and defense of and one Korea’s Thunder global combat led has international defense Allison's to to vehicles Hanwha Poland sales such our of Egypt to defense its OEM. South KX largest Hanwha increased Second, Aerospace. self-propelled global Hanwha a OEMs leader is both

variants in self-propelled the development which such our for Firtina MX cross-drive as since and selected XXXX the the XXXXX Turkey Turkish for gaining such gained program and developed as products Abrams interest howitzer new medium-weight has and programs in of finally, around already program, US are the The And product Army's has countries India. such as traction world. been transmission variant XXXX new the MPF Poland, MX

summer eGen over already selected and units opportunity the optionally end-markets. by manned next combat we OMFV Last in American XXXX, or force utilizing an vehicle for electric estimated eGen approximately force decades, system Army mentioned vehicle by India's in vehicles, XXX startup our XXXX propulsion followed in forward planning FICV to longer we testing new has quarter for with to opportunities the are the The future been fighting the looking the Rheinmetall hybrid Allison, term Allison infantry select production growth even down With US XXXX. or combat two our defense track for this MX.

and The aftermarket being to and and most years, for armored is prior timelines to with between defense production. unique production that industry uncertain requires idea often from This opportunity X XX selection self-invest vehicle final programs. to typically with vehicle the programs, decades-long production, in the end-market take

committed defense spending. global pursuing order growth in and capture end-market our multi-year providing in forward we expected investing to is defense look increasing in an And to to the specific Allison opportunities milestones. of from updates

our first Allison's but summary, quarter notable opportunities success In demonstrate come. results the to only the current growth not of business,

achieve our works. our the in invest improve order while returning to continue in promise our delivering on to shareholders growth world the way and to to capital business brand We ambitions

Fred. you. I'll the over And Thank to turn call

Fred Bohley

Thank you, Dave.

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

Slide to the of X QX XXXX presentation the performance Please for turn summary.

from a of a million in to million. other the period First led XXXX million. quarterly end-markets year-over-year $XXX increase quarter by net same increased sales $XXX the equipment to was leading in record in increase parts, $XX The results in support service, record of sales X%

The for certain products. vocational increase and die on on-highway higher cast increases demand aluminum principally service price customer $XX trucks medium products. duty in in American demand by increase North sales and net components for demand increases million by price for X was global Year-over-year driven improved in were Class certain by driven strength also on results the end-market, and higher parts and equipment, support

on Gross higher for The cost. price principally million, increases period expense profit for from XX% partially the manufacturing offset certain driven and in $XXX by increase the million increase direct was products, material was same $XXX a XXXX. by quarter

Net quarter from by for selling, the principally XXXX. partially same to million was increased in period Adjusted higher to expenses. and in million, offset compared by principally quarter profit. the $XXX increase was XXXX. was was EBITDA The profit, gross $XXX general driven increase by $XXX for compared driven income $XXX million same for gross higher the period administrative The the million,

increased share per XX% earnings in the XXXX. same Diluted from period

lower can detailed outstanding. of overview net the net EPS quarter X of total $X.XX A be on found end-market and sales of by our First Slide driven shares higher presentation. was income by

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

the activities, by flow performance driven partially expenditures. Please compared period XXXX. increase offset million flow quarter cash higher the The from turn the of cash principally was to net Slide XXXX free provided cash Adjusted same capital million, for operating was increased $XXX presentation in X to by the for by summary. QX $XXX

dividend. our we XX% marks to This $XX to dividend our quarter, repurchasing We the the our returned share. increased capital quarterly further fourth by of per by million During common annual consecutive shareholders stock. $X.XX to increase

the For in shares our outstanding quarter, since this of X% repurchased with XXXX. XX%, IPO of outstanding represents shares Allison's our

ratio We quarter of $XXX available the X.Xx, million with a net leverage of cash revolving $XXX and ended credit commitments. facility of million

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

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

of results X% on, growth increases net another XXXX and billion. continued on anticipated range Allison $X.X represents our expects record demand sales midpoint certain year-over-year continued price raising $X based leading in we our Given the in conditions, sales the end-markets, to products be end-market of over XXXX in full initiatives, guidance. At first to execution strength year. to billion quarter net year the this are and current growth

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

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

Operator

[Operator Instructions]

you. Thank

Our with Thein first question Citi. is from proceed with Please your Tim question.

Tim Thein

leverage. periods And service the years envision guys. where attributed, or this at equipment curious as that on is you look some can through balance to over the year kind that some what maybe get that of - and quarter business foresee pricing you part for where you the going and growth. of the outsized just of Hey Good get of little part question support more afternoon. we I'm can The that a is that the is bit parts the business

a Or to directionally first they role driving of part in curious, of I the play question flow this else quarter? you the just part to the So business would bigger Or second at kind deliveries? something expect and is, the guess of least business maybe with is I'm new did the that there business? on-highway

- I'm that open do business? is of of just to question the in particular to that part deal? is kind Or the further the momentum one-time see a spirit trying of this Thank you. you

David Graziosi

Tim, Good you it's thank question. Dave. and the for evening,

that So, think and a saw rebuilds result a coming then, with assuming being that and few particular we market of course, number ago. things a units bit some ebb before really you years results, you're flow that run the an of terms driving referring that probably of new of QX and items in familiar those some that fleet as to replaced activity terms units is that. being and and six five, And increases ago such increases. a its really for size the I two in you're with years referenced course years was of of of in I'm off-highway

overall you're certainly I quarter. and really has that you second in say And to results constrained We constraints improvements more into take, even well of aware, our entered industry been a parts. XXXX. starting improvements fourth I as of quarter half some reflect to we labor mostly the and the degree some meaningful we number into fourth think going were a by the As year would hold actually, last saw started input if inputs, at look those of the to

needed that the stacked the The up. channel really is what's of time, we've terms seen of work some with channel. the improvement At able to by catch delivery supplier in up with some they've ultimately same

I attributes, of think the well that of we balance and QX of So, of the about we those you when a improvement. believe, think of is number expect one as continuation to done level question results about, reflect as your year, the as some

for impact to the Some the see, some some more in of of back levels. quarter. first would industry to quarter and it that expect ultimately burning backlog normalized in through we is that get your the second But

you a the be As seen also last strong XX fleet role a market what there. what price will the it continue for to aging know of well, we believe way is XX It's that also range the is, over months, to pretty aftermarket which us. a increases market as is playing

my to I think of beyond, comments those business. on-highway vast are are really directed the really, the majority

really And offer to to refer high also which aftermarket, about unit I which this as mentioned is is sales. to would tied think about just you as being support the again you tied we as units, point new equipment, what well,

are, support So the up which increased extent that that volumes our they some guide through certainly are equipment as implies well. pull sales, will

Tim Thein

Very color. good. Appreciate the you, Dave. Thank

David Graziosi

Welcome.

Operator

you. Thank

proceed your Please with Research. is Melius question. with question Wertheimer Rob next Our from

Rob Wertheimer

wide-body I dump months. million guess, characterize the if heavy us just you and I I new the you over Thank squeeze of together detailed prepared that business, of revenue. SANY announcements, two to XX I and can in of remarks market into you. expand, last, in many kind $XXX released I wonder can India. think give on opportunity annual wonder you as the your some kind XX you if The

And with is growth update anything wonder up give an and rate. I annually us the a charted wondering how years it'll revenue AX that comes? was current an shift it that. state compares just, I them on there. design if if you version there could to couple the launch, long-term take when the of us you can know just of prior JLTV, The I if and when opportunity the if of tell version don't

David Graziosi

evening. Rob It’s good Dave.

let that me me cover Let off material.

a It's, the been So, elsewhere. produced with you new actually - new. vehicle se. being reference the announcement Thus per dump, know, mining having that relatively not said so India chassis that's to vehicle that's the or it's wide-body produced a

take idea to release that India. have ultimately the there is start place So, ultimately in to

been you than the in of particular know But India. in fair Having certainly as had build that of certainly continue the our expecting markets. upon we calls - OEMs, to as well market. as we've success. be growth number end-users to looking engagement were So a a relatively mentioned of we with with that market, to it's faster as in of a comments the export for well that, think to said days early is your I pleased other initiative realization and level there that - and China it's certain - prepared bit successes as bit also the question with And

efforts team's as look is export India, well as believe more early at start which then directly days. like we markets, The relatively market

$XXX with on the application. depend we incremental vehicle that the say target largely at the particular in will of that end-users growth penetrate OEMs initiative of the to get ultimately So, which pace think to terms ultimately million I success

and On the transmissions identical. the AX are your question, the AX JLTV between

So, the only essentially OEM making that's difference is, the vehicle. the

So - are pleased terms OEMs very the out to delivering those that the continuation of were of commitments we're to vehicle the and program there. at as look demand of with that lineups working in and this remarks in both our point, with forward

of to size extend time, XX But to demand. rather end-user we're ultimately demand. and program schedules and it prepared are continue over is the supply large. when platform OEM something subject to of But be the it's that in can pleased relative a That you certainly to again period really

Rob Wertheimer

Great. Thank you.

Operator

Cook next [Operator Instructions] Thank with is from proceed Credit Please with question. your Suisse. question Jamie Our you.

Jamie Cook

with visibility order the it my your open order the evening. XXXX you're looks book that? the just have can implied to then and two to just regards then off second like I for quarter first just is, XXXX? tapers guess, about when you book from for good One, is how about probably much and there. question How and Hi, you incrementals the you talk thinking And it strongest start questions.

So on Fred you any Thank color that? could you. give

David Graziosi

and Jamie, hand good Dave, over start it I'll then It’s to Fred. evening.

as order you is other book the mentioned, So consistent XXXX is really comments. with company public

already heard terms relatively strong of in demand. You've

guide vocational America to look that and duty dynamics - I we North supplying say, underlying the as to of continue would So forward strong. to be medium right to now, our continue demand. implies

are relative expectations to hearing are we least rather - at what So, OEM ‘XX. for what full the year we're

think forecast. a early it's ‘XX little a to call I

there, say, build are broader number industry's forecast said much both then required components I to ability The situation. the supply we’ve know, of of as you them third-party dependent the really on out last course providers well over it's few constrained in would be a to years, very going to certainly quarters and as now their

improvement. as would We level describe some of

though I other what think continue see we have in first provided lack comments I offer the would the market. companies that's calendar their to with public consistent for of buffers a quarter. in

does So it some short of relatively a level create notice disruption basis. on

and broadly think continues to So we're course, I constraint. a labor, that, be still is some of seeing of -

demand. So strong ‘XX,

‘XX some to in that to subject produce. certainly market to to as for question. We of over again ultimately expect suppliers, ability as it carryover the hand other the your OEMs overall Fred I’ll of well

Fred Bohley

was it it XXX XXX up profit on-highway being driving EBITDA offset Thanks, mix you price XXX expenses a Favorable of and Jamie. by the And strong increases basis. the and North points, mentioned, QX. that quarter. - on a over basis cost on points margins Higher higher a to in the SG&A the, America with in gross basis. year-over-year parts XX.X year-over-year basis as certainly

EBITDA at million we As $XX $XX revenue through at we midpoint, dropping updated guidance think of by that a midpoint. with a updated million the the about

comment through incrementals, through, drop capped relative there. in drop the certainly And that XX% So and robust it clearly mid point. so on then,

QX to QX. XXXX. points off to of have up QX performance the We would margin to basis QX versus you strong down have XXX Still implied well of the in QX guide close

Jamie Cook

Thank you.

Operator

you. Thank

from James. Our Raymond with Boeschen Felix next is your with Please question proceed question.

Felix Boeschen

afternoon, Hey, everybody. good

Fred Bohley

Good afternoon.

Felix Boeschen

to the up mind maybe don't globally, remarks. think in we Transmission just higher. substantially you do I more I'm open, expand made is on I of a proposition that if idea? of what really or think maybe expanding vehicle think degree would vehicle And could prices you you Allison the value about your cycles. with to what appreciate should curious verticals guess, penetrated some just on an under pricing I'm I about But comment wondering it. really that curious Hey, makes that you it could prepared I'm opportunity

David Graziosi

try Good to evening Felix. cover It’s Dave. I guess, me that. let

– savings, quality, sets, end-user attributes, life briefly which just you maintenance get very efficiency, really value. mentioned cycle, we safety, training, productivity, you Its to multiple our about when into right? get So, value our skill at shift residual proposition, think cost, fuel, driver as

wages, the are the up, versus attributes it given to cost number repairs, market of skilled know, done, transmission has of manual those, you, just cetera. proposition the As you work automatic whether the all I be fully the times inflation repairs, value look in get to for well the price inflation the that actually all of at et mentioned, vehicles, a impacted vehicle when operate a downtime dynamics other product drivers a availability actually lead of of

in as the fully certain training So product shorter the time manual. necessarily vocations. a automatic would And the automatic performance ultimately can expect an of you versus which be

think of has So, in the of increased. you necessarily and them have that's the when the terms Allison to of question, you, when focus. gone all And all about proposition your value those cost, up attributes really

other certainly comment some think by COVID. markets, Dynamics of I in accelerated we've with seen and outside opening up terms America of your North was of even the that

There in manual is that same U.S. are the also with thing terms that relative the drivers is regions of transmission. skilled to struggling

penetration fully is checked. for inflation, we last time is automatic all and the given So, think it global the which cost more up opening just certainly opportunities I

throughout You world. the proposition have an improved value

based to cost. on that And obviously is not to a solution. why better end-user, So, we the sell Allison out the is the opportunity taking value point our continue to we've said team times many

you through point has that So, a achieving are get Allison conclude value Allison - of where to for or the everything you product And I we certainly certainly marketplace. pushes you up. the in certainly the we rolled the value as gone the could should, that just more

Felix Boeschen

Thank you.

Operator

Thank you.

next from with Zakaria JP question question. Please Our your with Morgan. is Tami proceed

Tami Zakaria

on congrats results. first question Hi, thank and excellent the on segments. you Defense My so much is

first expecting of I throughout Are still X% growth sort the the think you the could saw in growth year? if it quarter. a of negative so, And that what cadence in segment? growth be

David Graziosi

it’s We are timelines cases of tracked Tami I is Dave. those. would duty point type question. least you subject say try this understand generally of best. the doesn't broader many products. for low you with programs our Defense, a industry Thank number the to anything at speaking, with and - challenged program execution volume in the requirements control heavy But generally at pretty that's Allison

So, working a constraints, well number of we is team the as OEMs. through here - the as

would certainly I our look when of as you the an quarter, at describe First of outlier in the terms expectations. balance year

overall, that still with minus or at - look if comfortable certainly we're I guide the year-over-year. would plus you X% So,

just to on I side track number expect heavier be for first you schedules would of reasons. half point the to second a given than half that we

your hopefully that answer to So, question.

Tami Zakaria

in much. It you was already if am price the general in was did in quarter? answered what does. what repeating earlier. the And give quarter? helpful. But And you That's Thank pricing cost impact very what I apologies you so

Fred Bohley

Tami. in price in We is Sure, realized the Fred. quarter. $XX This million

had XXXX. price throughout you to in look as So price. that over when points we realize actions years - the important XXX you multiple it’s basis of But

guidance, easiest on we're clearly closer is XXX at first price we of full from pricing based quarter are price. in we've about looking we So XXX initial ended we points as comp our being standpoint. points when February, basis up basis with anticipating year, a to where out came the Yes, were

We million in and were a But certainly, price have up standpoint about year-over-year a material cost volume was at manufacturing was basis. cost cost, up cost. manufacturing material dollars excluding unfavorable $XX million. significantly from and $X outrunning point or Direct this significantly a cost QX on

Tami Zakaria

the of a three positive that And like is remaining it. sort runrate cost? quarters, for Got price fair

Fred Bohley

the the be will the we're It cost balance for to is year. definitely tied price of what anticipating

Tami Zakaria

Got it. Thank much. so you

Fred Bohley

You're welcome.

Operator

at to turn Thank you. over Dave are Graziosi like would closing time. further I There for floor questions to no comments. back this the

David Graziosi

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

Operator

teleconference. This concludes today's

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

Allison Transmission (ALSN) 27 Apr 232023 Q1 Earnings call transcript