ALSN - Earnings call transcript Q3 2024 | Allison Transmission Holdings, Inc.

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Operator

Good afternoon. Thank you for standing by. Welcome to Allison Transmission's Third Quarter 2024 Earnings Conference Call. My name is Kevin, and I'll be your conference call operator today. [Operator Instructions] As a reminder, this conference call is being recorded.

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

Jacalyn Bolles

our Fred are and Dave Good joining our Financial Chair conference Kevin. Officer and Executive Graziosi, Chief With third Officer; Operating Chief for Chief and call. afternoon you, earnings our quarter Treasurer. this Thank me and XXXX Bohley, afternoon us for Officer,

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

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

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

XXXX measures quarter comparable You third 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.

prior will XXXX guidance. commencing will and the review today's our updates with recent our update performance Q&A. During financial on Dave an full business across review year announcements Fred our third to to Bohley quarter XXXX close call,

turn I'll to Fred. call the over Now

G. Bohley

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

America Allison's products demand working to our would notable while end of drive leading On-Highway realization the unprecedented outside to as to revenue million defense efforts progress I through moment X work diligently vocational continues our results incremental a vehicles America, for XXXX as to continuing transmissions. of team for to Series for in Class increased seeing we meet opportunity our the performance North adoption in towards objectives the our to XXXX well like to in As on record take capitalize and market, for North we drive $XXX business end whole. thank are growth North America annual combined their XXXX, demand a as automatic our market,

Please North turn XX% driven Year-over-year by record of and to the products. sales of and Slide medium-duty increased American summary. the certain increase led $XXX strength presentation increase from X QX demand the the was Class in in XXXX for in net to by trucks performance end period The price on XX% principally market X same year-over-year a in a for million. results On-Highway vocational vehicles increases XXXX

principally products, Asia On-Highway market. North On-Highway was by in were in was end in year-over-year and increase tracked outside our applications. finally, further demand The in lower demand Europe. vehicle offset higher a in improved improved end net And our XX% by the were increase demand increases partially in market. by a end driven driven Year-over-year Defense price American net increase The North sales America principally certain quarter by third by increased record outside sales for results market on

the sales profit increases partially by an $XX products, was $XXX quarter and from in XXXX. increase an for increased was driven higher net. increase on and was Net or the profit expense million expense. price driven of interest gross by the quarter million, XX% The million increase $XXX was XXXX. from lower period in million, for manufacturing net profit $XX same higher increase by The the same Gross gross for principally income offset $XXX of period in million principally certain

was the increase million in for same gross compared $XXX $XXX XXXX. the was by million The profit. in for to period Adjusted adjusted driven principally quarter EBITDA higher EBITDA

can Diluted record overview earnings higher the year-over-year presentation. by X XX% of end shares on to and sales income was net and X our be per lower driven A net increased market $X.XX. QX an Slides financial share in increase detailed total XXXX The quarterly all-time of by of performance found outstanding.

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

paid dividend we over common quarter, third and of $X.XX $XX a the our During stock. per million of share repurchased

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

In flexible, continue a maintain we structure. addition, and debt covenant-light to long-dated

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

a million result to On-Highway and range North full flow. net expects revenue, are the of our million. in for American year Allison $X,XXX guidance to of market, As be cash we $X,XXX raising sales earnings the ongoing end midpoint strength in the

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

update the on now over to Dave across business. Thank recent an turn for you, call and I'll announcements our

David Graziosi

our for and order manage unprecedented automatic capacity, demand vocational increases capacity manufacturing supply further to announced our our Allison's continues manufacturing relying supply to expanded Series, Indianapolis Series only assess chain. XXXX sustainable After In America. XXXX, On-High in long-term Thank parts the due through you, not the we facility improve to serves Opening Allison in region, operations also sourcing demand Last particularly on support investment sustained throughout Fred. X and made to we facility global XXXX, India from to Chennai, week, from of see to spending but while demonstrating XXXX on-highway XXXX meet Chennai, as facility. XXXX expanding this year, infrastructure India in XXXX ability have robust our Series headquarters North elevated products fully fabricating demand throughput. stemming the in our the our and transmissions our on-highway meet transmissions growth while Class best-in-class in provided products, vehicle products. our in global presence initially capabilities components for to and production the investments plans and our XXXX chain practices, our for

our India our We of capabilities us global of are to excited increasing for demand. manufacturing the to meet components the facility regional and Series invest fabrication to giving On-Highway footprint nearly production products, XXXX to XXXX double tailor ability the

investment will project be over over the of $XXX XXXX. spend total half occur Our next spread in million be to few of expected years that

and offering Through America our return capacity full long-term products to cost growth for outside further increasing look Allison's this project up continued global by XXXX on-highway our automatic will through operational in providing regions, of meet the transmissions. We progresses. to in while production, efficiency of offering to savings forward as demand the future our optimized ability the driven adoption levels updates begin North gains to this and XXXX, operations manufacturing objectives global investment, the in support production our operations As ramp raising invest global will

quarter, support customer we In representing and dump and XX-ton part Indonesia wide-body with Drive million event of annual took global place our executed wide-body our during equipment announced dump strategic partnership truck Allison's a series MOU a incremental top-tier innovative wide-body manufacturer. dump Ride of latest a showcasing of with The of memorandum signing opportunity, initiative the transmission. X,XXX understanding equipped $XXX construction revenue in as Lugan's Lugan,

long-standing XX-meter automatic the the America On-Highway North lead in transmissions, outside advancing transmissions America buses gains fully to end buses, growth in which passengers buses leading outside Series the will business. with specially vehicle Also the equipped transmissions region, On-Highway diesel market, progress automaticity MOU outside driving defense with India sector wheel has are this our expansion. announced our Our of with North the collaboration with designed Southern to market in our annual commercial first accommodate equip America, global our our city and in transition recently market and to our is showcasing the replace and instrumental currently India's our will with with end market. to continued incremental collaboration Allison transportation Lugan introduce as North Ashok one equipped revenue been Leyland, low-floor innovation we target manufacturers towards Allison's growth promising efforts in mining we through further Torgmatic share equipped partnership manual buses in The success disabilities.

will partnerships On-Highway releases, support wheeled vehicle defense the support our market. as growth on-highway of manufacturers reminder, defense a a portion transmissions. we with Allison continued which On-Highway series our numerous conventional through variance of using North programs end specialty products revenue Last our flowing highlighted wheel international from week, As outside strategic customers to result internationally with our business of America utilizes

and addition will Allison recent vehicles delivered National begin German fully Canadian to were Ministry Defense be the have Australia, variant. countries, will British variance Series Federal Boxer receiving Netherlands. Ministry Series armored transmissions of also This Department of of -- XXXX is a the years the our receiving Defense start, automatic XXXX vehicles transmissions for Defense including vehicles to forces in Boxer The starting equipped wheel with XXXX. over military Romanian The in defense program. boxer automatic To XXX also and with equipped been that of fully chosen vehicle in Lithuania Armor

Deliveries a will placed over equipped next the In was armored of mobility fully Series United of XXXX Ministry has XXXX. to And span variant Kingdom finally, trucks signed procurement light of decade automatic fully carriers an Series reconnaissance that of Poland, Allison's order automatic variant the will for transmission. Defense contract utilize Allison's a XXXX high transmission. new for the

made defense for in global technical along the reliability durability and diverse achievement by range these releases, application across further to As key expertise with defense program wins. our as of the wheel vehicles. OEMs, growth has the relationship proven leverage to meet requirements We demonstrated decades market Allison that look a offer of with we solutions strides of forward industry propulsion commercial with and wide significant vehicle

end transmissions natural sacrificing without initiatives hydrogen. fleet any fuel gasoline, products remain fully regulations designed needs to the offering of to Finally, Allison a and committed markets and industry of agnostic offering fuel are durability source. and and gas, strengthen automatic integration productivity meet including technology propane Delivering sustainability to of customers and as fuel portfolio reliable we our source, optimal evolve, with regardless performance efficiency.

To power manual lower manual compensate associated ability, transmissions. Allison's torque converter overall technology automated particularly productivity, PowerShift alternative and engine response improve and fuels, to and and for significantly as slower start with competitive drivability compared

late late in that XXXX, Germany August, the equipped leader, Series cell hydrogen XX,XXX its we automatic to kilometers a used announce truck. Hyundai GLS, greater with cell hydrogen Since fully area. global were successfully transmission truck evaluation fuel to Allison's In completed pleased of Allison the equipped fuel XXXX packages the in colon GLS, has shipping deliver

Additionally, has and since used March Cologne trips the XXXX, for Manheim. between been long-distance truck

truck and Allison's multiplies furthering friendly were into operate convec drive September. in drive the to a pleased Southwest efficiency alternative automatic hydrogen with smaller as costs. and was with propulsion reduce equipped Allison's was less our start-up a that we vehicle Research advantage fully of a to at This at range the converter Series exemplifies helping the Institute displayed also capabilities in with motors testing powerful maximizing and the XXXX fuel transmission patented fuel to integrated toward torque source technologies, further internal vehicle X hydrogen and step our pioneering combustion allowing motor, is announce engine Class environmentally integration a by

combustion play solutions XXXX integration will in closer role, powertrain hydrogen the in emissions. vehicle can low The combustion engine the to moving of ultra Allison demonstrates the internal engine, series industry and critical internal the

engines Allison will there the regulations. we compliance XXXX, transitions Announced to As and under the propulsion requirements emission while technologies EPA's Phase the the our Cummins during electric for Flex for low the propulsion reliable, III beyond. meet a transit hybrid The XXXX and our approaches certify integrate emissions Phase with collaborated III market. in in will Series with system solutions integration for be industry B solution Cummins EPA's eGen providing recently quarter, bus

Phase to to of engine our emission Also the EPA's to in the B enable and non-articulated fleets pleased specifying our models BXXXXXFE pursuit standards, choice. automatic XXX continue the Cummins solution propulsion to requirements. order XF increased upgrade XXX in industry transmissions, meet we transitions announce III to of as B BXXX were compliance bus to The ratings as will and the for fully XXXX an

to these and by to our which integrations, operational customers' upcoming Allison technology deliver advancements, shown supports goals. collaborations offering regulations with As while and differentiated value emissions is products comply continuing dedicated that sustainability

quarter plans invest manufacturing Allison's markets third we product for the not our demand long-term core summary, results In our in our only end our in portfolio. but operations also as robust and growth demonstrate

Our and investments sustainable solutions to propulsion to commitment diverse of growth contribute opportunities future transportation. Allison's a in providing highlight more a that reliable, array

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

G. Bohley

Operator

from first from Ian [Operator Oppenheimer. question is coming Zaffino Our Instructions]

Ian Zaffino

Very good quarter.

there? end going environment of next And we're of year. type quick that to year. I any one of way thinking think Just of we're into know are do the -- magnitude what How getting as a going question changed outlook discussions expect the the towards the we or other? the kind pricing on for

G. Bohley

Thanks, Ian. This is Fred.

you're XX% America as revenue these in think currently. aware, North On-Highway about of negotiating are in due, we're I and no coming LTAs

talked of amount markets. to significant value past, end about to in we've we As deliver a continue the the

the efficiently. to fully more Our operate allow commercial automatics vehicles

of continued of of cost cost equipment type are vehicle that things up, are cost more maintaining and inflate up. up, Overall have we up. on efficient the So save is is drivers to

elevate. So advantages continued have all automatic are deliver the that fully to

product. And towards continue We're demand of And QX. here now, half is so right the our anticipate definitely very as positioned. we'll later There a of of probably feel negotiations strong significant the we concluding amount well for most and very, delivering value. them sit

Operator

from coming Research. is question Melius Next Rob from Wertheimer

Robert Wertheimer

and on mean and super sheet, I operations that cash been else of have clear talked am years. all you trials I on. good the balance everything sorry the just now the on focus and to you in I wanted news about. announcements over so use guys to

been aggressive You've shares. very in buying back

X% I'm your I or maturities, cash XX%. your mistaken, and like market balancing if I to not out your are think cap, X% of think,

on buyback, So just contemplated aggressiveness on reason if curious to if you're about that? any how think or being pausing for there's anything share

G. Bohley

to pretty funding acquisitions product we've Rob, mean a with capital are But Certainly, mentioned, in relative since and public per It's capital quarter. we per allocation we consecutive on we're dividend We repurchased mean, per India. bringing that. years, quarter priorities it's -- holding cash in on we look clear. little shares our the we company. been are excess a focus to of lot earning and you our And from long-term X than proactively made first return Obviously, increased cash see mean revenue about the that historically. $X.XX factual shareholders. the the to we to continue became appropriate that. manufacturing I business I earnings very $X.XX per to follow and our primary balance Fred. organic I have certainly at priorities share goal is announcement We you going as still growth. it it's capital space. higher to return and that talked has fund a the share development done some returning allocation shareholders. XX% ultimately But a recent

Robert Wertheimer

capital don't you needs large versus to Manufacturing all seem be have. that what

on to differential assume mean acquisition balance do more I term, maybe keep going an you talk differential, you not do to more spending timing you about, but So higher-than-average I have think? cash. you're it's long timing a intend that a

G. Bohley

of No, is cash I Rob. really think to shareholders, returning it timing

Operator

James. Thein Tim Next coming from question from today is Raymond

Timothy Thein

framework and you opportunity where $XXX to guess falling bit you're time. opportunity is to that about the could the to in nebulous defense that. that outlined goals? sort any want it, to purposely mean, I in know said I terms back for you curious potential little growth little those Is have where it's externally line? a timing some as you it we -- hard just drivers to targets if it's or when come on but terms I'm outgrowth we've kind X just where guys see a you time how marching moving back maybe million towards more think come traction. And I in to seen of intentionally But But those to I talked about just about, we're towards of of talked maybe how as or that? you are a of

David Graziosi

Tim, it's David.

Let that me off question. I cover to just for and try you, appreciate the

or things: mining that one the trend, tractor and from as regional X wide-body So day-cab specifically. haul you Class initiative a X highlighted with of defense, we frac perspective, course, mentioned really starting growth defense, dump,

there. make We progress continue to good very

remarks. could you the I tell prepared think by

frankly, the outside U.S. think of job team has this base I the point. excellent customer at our done an spreading

on a stage our in overall of obviously, most of progress continue allies, with working tailwind tremendous not terms growth our see target, believe, of to see one we this amount So the towards that's with, the achieve balance -- fair focused there. a to but probably if bit out opportunity at that X of target, the of we of more. advanced

So the continues. times, as several defense we've cycle up discussed

of a receiving we're fairly So inquiry. level high

also continue note very as around well force product the other work be well we've products eGen the variance as that market. You'll that in development received the to or cross-drive done

the of know, late North you there, calls some progress and frankly, think, times conditions, you day as programs we've the X as cab, America several sponsored talked tell haul will So this year Class be outside last key newer year. I decent U.S. our I a market well focus initiatives. the number although making, there, tractor Regional as would of on

achievable of terms just the an Some this there overall in market volume the seeing softness that tractor you're actually in stage. that's of at impact having is

perspective largely of will market driving good releases has I terms that various fleets done, but very and to from a market a -- job securing tied it So outcome tractor recovering. in pull the be overall the there will with team demand think,

designed as you by rather the know, during hydraulic the for the would we've end recovery spending muted. terms Frac and hydraulic frac approach possibly quite some terms fracturing again yet trend, those the certainly capital in this of comments, CapEx overall purpose-built from applications year no right terms imply users least as ones of at in of for Very is several now most of in times other and on significant was said calls, customers recent year XXXX. public spend disciplined

similar the we the have. be of us market tractor haul that of regional the et the cetera. testing We're terms of pleased in expand very performance with demand, doing very will a technology. allowing activity to are energy newer Class So hydraulic that frac some function we to X of It's applications a within particular of overall the different some around into and sources, also

think ours. to wide-body some I in But a you describe solid done conditions partnerships solid has of progress. job you're throughout well where demand, of the conditions, of the the number finally, that terms So market initiative despite of being a that market Again, particular mixed. year, bit OEMs positions market tied dump they've as of prepared and seeing comments securing we quite with making world. those have, the releases core global And team a know, as the working done that that this well level very I beyond about there, with talked of some we've partners with a would the mining the

as as It's X and of broader other that So conditions well confident market the ultimately really and initiatives. a we're function just there. very time achieving

Operator

from from Morgan question coming Angel is Next Stanley. Castillo

Angel Castillo Malpica

fourth of like It a a wide to a the like of flat, EBITDA terms seemed touch just XX% range. decline seems base of quarter to implied the year-over-year kind little pretty pretty in I more. potentially it's wide bit range on wanted

at of could you earnings As as comp. last have quarter, dynamics you understand tough maybe just can closer you XX% are well talked the holidays range I the flat call, the But level those think end? a being you result us year-over-year your a versus impact last help to top fourth about some about visibility that minus year-over-year of the recognized to the assumptions that kind of of as or quarter it in what and

G. Bohley

averaged this it's Sure, million, important And for in highlighted think OEMs the I we've and to The in think X fewer a Angel, X is revenue but this a $XX Fred. day. $XX -- to about really workdays build. row, of this million or a year, quarters couple just we've

that play you out. So

probably normal going Our some to back of expectation at built that be going go last QX is they're they're we've not the they've the build that seen would couple 'XX, levels years, where soft. 'XX, pre-pandemic seasonality to and to

standpoint. starting biggest sequentially. we've at of line flowing really as And that's where is got that's a on EBITDA is midpoint standpoint. margins point. really and driving slightly the we you the a just basis look that really an guide the But from do So from have through our sequential type driver the across, engineering revenue top We -- elevated make.

what order think, the what just stack across seeing the boards haul little softness attempt performance where So to the clearly couple the than the basically a I total that at into in holidays. working point, this you're higher But this days, to, different makes their more they of line if work OEMs relative up Saturdays drive years. seen last we've would are or year is and

Operator

is JPMorgan. Next from from question Tami Zakaria coming

Tami Zakaria

Two questions quarter. you. nice for Very

The in India. first one facility is investment about the

mentioned you capacity is think I there. doubling

production understand incremental ramp it what kind what you sales to full capacity trying of of versus this now? in XXXX, the opportunity XXXX. incremental the do is expect volume size when right you to increased from So in I'm

David Graziosi

question appreciate Tami, it's Dave. the I there.

when footage So expansion, doubling we India. -- in clear, square about talk we manufacturing capacity to the are be

Hungary capability That that facility our X,XXX capacity, transmissions demand X,XXX XXXX frankly well. in allow of focused our out XXXX growth for and Series series meet on In around our terms the we're as that seeing products, on-highway our assembles to fabrication for us will and specifically products. it's of

for schedule, to increase. shift XX% answer approximately that on-highway to an plus So again, in or products shift XX minus your of a terms schedule, X-hour increase is normal capacity overall assuming capacity,

components, in expanding America. cetera, XX% to So assembly. Again, for for capacity depending range et North outside for not are you expanding of all XX%. availability It's demand we for somewhere on capacity but figure that fabrication

Tami Zakaria

Got it. it. Got

That's playing Investors And do often How we I where out are the the question in my unprecedented next trucks mentioned demand Okay. over very you helpful. this ask see vocational vocational truck you right in years? cycle. now. second think is, few demand

So I'm that truck you we curious, how would answer are vocational cycle? up the in question? Where

David Graziosi

It's number we an excellent second probably demand just up and I frankly, parties tell don't And are unprecedented of as a it question. have there. you think one, I of the the some word year, would use you, of throughout that contemplating. last know, this we lightly. seen The ramp started, half year, amount

that not a heard whether pullback have or on demand. anything end We OEMs setting market level of perspective, from any be overall users

you prior for products. level driving for the of At COVID the demand production injection market, a into talked same capital about we've on of suppressed of had vocational enormous number calls, you've of reasons. had As because time, this

spending, and be initiatives demand. So other whether are and there investment they infrastructure driving out that incentives,

in So are, would seeing end again, we -- a this that us that tell is near-term point nothing this sight. at

quite public least demand 'XX. OEMs, indicated across the think board, of from at think strong I frankly, well vehicle into very they've the I comments

of and what changes as other of, well accelerating just normal demand you the terms of XXXX of have back end some that. potentially for as also know, -- On and you does emissions this the that on in 'XX, issue taking

of on at many how this is at max a not about right level frankly. can sustainable, now, participants we the governor much of said July of it look capacity you Having process entire call. bit that, in mentioned simply are go operating a there's when higher long-term As some industry at which least because quarter-to-quarter all it

some naturally one limit out because it of be further simply go So governor basis. the gets higher can currently instantaneous in or met. level stretched you think, much demand I are could conclude how cycle can't have an on Therefore,

lead are. labor the the the what have You capacity and to see times which not many material availability, is to governor there other process, as of it and in in And calls much conversion, mentioned that's industry. which builders much terms continue as of that one constraint necessarily just those of times which really body out cetera, a also tied skilled we've amount as our is is that on is we throughout the et

Operator

Next question Menges today is from Kyle Citigroup. coming from

Kyle Menges

noticed quarters was America insight provide if more of to performance into for had the I globally to the parts out turn just you that hoping is been North now couple of but calling some area I could quarter. the let's first weakness, in in little would a weakness, seeing think and just be or parts parts likely geographies to next weakness potentially would growth recovery still how some seeing next so it and which some understand maybe geographies take see and about to would helpful into to that? be it year drive year what what

G. Bohley

full of year, parts. Sure, challenging about where XXXX. into think are a first half Kyle. XXXX certainly, comp This is from When Fred. coming the movement Really on a year-over-year we significant basis, there pretty you was wasn't

it's look good looking into down we're then the as QX at think be XXXX, As year, the mildly out fairly be sequentially. still could to And a you year. going balance of I

be second best your record 'XX able been on to going market end where as to achieve to next price an XXXX. It's well. where here sitting also is year we've You're

robust into it been HX really So the see the satisfied at rolling But all outlook looks point. has because to we XXXX demand returning this at that pent-up level fairly point. XXXX this don't

Operator

Junk question Baird. from is coming from Next Luke

Luke Junk

Allison's Another capacity for question specific me capacity. to

it North without adding this might throughput Just opportunity? here potential capacity, thinking look hoping frame there you to through be of if XX maybe in and on overhead, quarter, to that America like that relative room as from peak just seems volume some ability materially specifically guess, scale without through levers could the I into expansion up up defense breathing pull you some the you in can including through India incremental adding to if maybe later have I additional And next into peak. as you move the significantly to year your move to prebuy offloading capacity we lens

David Graziosi

appreciate Luke, it's question. I Dave. the

investment that only capacity, for Allison our of suppliers. operations. it's own We're terms not in as investing our in is So doing internally we also mentioned,

well So comments program throughout it's our offer already as the would certainly fairly comprehensive about. initiatives a terms supply of capital. been internal It's that base is important the we've running the I in talked American we highway what North specifically challenge prepared. earlier, consumption as a briefly around very to this from high real I at and note, mentioned instance, rates of becomes for a of industry

when very So is running at industry-wide pressure requires pressure well diligent elevated really really as between initiative levels, labor it it the operations, as quite very just a you're cetera. around et And on challenging. on maintenance,

structure. certainly, So our of upgrading -- level you about investments, invested It I well how an fact that right about But to think, think equipment as capacity remains, some as investing the are point in we've address, capital there limits to see make -- the said components as earlier, throughout the vehicle. now all and still industry. in automation our we I your overhead takes in the

meaningfully of making the our in calls, some of is reason throughout part investments there start tremendous breaking it motivation suppliers. that the have sits So shift that to capacity to efficient. schedules, it's operations on for justification today, are industry, before do When as very where it because mentioned that of pressure relieve et a there's cetera, entire and not inefficient. increase India certainly above that believe constraints. I not we The really we're amount are becomes simply the you we across our

are or back and rate sit efficient definition faster get lean we rate today. us lends back It that what capacity experience. capacity to to to more allows by we to also -- refer which operations, as get lean to us to where So

So will be realized well there savings investment. that as from are cost that

cross defense have cross-drive drive executed side, capital of terms plans the being on In for facility. significant our we

capital that us actually government. in funded leads there. It's by a business or contract U.S. us the operated of own having relatively Some structure contract position asset-light of or is a that puts a to

the or we and efficiently point So on can. operation, to we as structure your as it staff really overhead structuring

volume do However, type low to simply nature efficient the not highly lend of generally operations it's because products a themselves those batch a manufacturing.

variability better, in initiatives of grow earlier and U.S. that for us will, as years to volume. reduce mitigating in over team type also question production growth which allows terms contracts. a cost-plus the developed the system that facility, terms defense cross-drops, We're in of Our process also to the government you on of that our of to out, really type some has that level the perform if specifically allows business, to but cost manufacturing in

a So capacity, organically, there. in terms are the cetera. we as research, in think overall, of mentioned of in on Fred growing terms of business also allocation, investing lot earlier, work going heavily development, et cap I But

today as business we need So in look would further these funded well at conditions. initiatives very execute and just evolved we of and get to growth the market terms

Operator

Next question Revich from Goldman Jerry from Sachs. is coming

Jerry Revich

questions. One, the to higher continue with have of increase higher backlog, XX and trucks, then conversation. EPA backdrop? we level vacations down an comment And if you separately, X.X straight Class And X increase demand we're in peaked sustainability just your can confidence your XXXX I'm to Can any proposition of rates that on value EPA a talk XX ask at wondering months cost you to trucks. on have had just 'XX or the about two I of wondering the just you folks because you in opportunity on months. with given penetration I'm whether truck

outpace we've out we're that inventories are? here X And to you capital so have goods X, gives I as X, lines trade point confidence Class X guess demand, months, supply other not same that what where especially when hit going we seen look given product

David Graziosi

it's Appreciate Dave. Jerry, the question.

few terms in We of know, to of that's exactly think on XXXX, terms of your the of not our the grow terms all I our it's continues in Fred you answer as to OEMs EPA it's the term that. questions fair still In for value that the a point terms would I'm values, in much that going be portfolios, things as straight always push longer Class context in value automatic point reaction positions question, truck the reach the be at we're think I X terms earlier, and there think, focus very position in trying our of well necessarily on over vehicle think mentioned penetration to team say, sure going technology to proposition. to of fully penetration rates your of we are I has is fair of a how say To implemented. strongly space. we vocational demonstrating impacted. decade to to position this out evolve have. done that areas, The on quite say current the to of I in The in certainly, over or X that to

into market try continue of alternative overall, we pleased think very of say, the the We're we're number that. But well have. to to and a with developed, at different what's energy I terms portfolio in We to I certainly XXXX sources, et toward cetera. been with going that aligned least would presented grow

we that, and X truck I'll So question. cover Class good that very about Fred feel let straight

G. Bohley

for Research thing were stimulus here. Infrastructure it Jobs it's I here this about about everything The And still have signs where XX% in. clear. in and ACT OEMs early clearly week, mean at unprecedented. maybe mean we -- slowing One last we in very that was thinking I no our chip point. see stack, of the in down. the been innings demand XX% shows really only are Jerry, and Investment programs had pretty product Act, they the highlighting IRA, is

there's money of ultimately that's a there amount So out be still stimulus significant the to in funded. U.S.

prebuy 'XX potential tough even obviously in maybe the got we've into to 'XX. And So predict. it's and

Component how signs but I at builders, no body higher Dave's I down. this it is think can the earlier point. is, with, slowing question is demand much I there to go of suppliers, real everybody constrained that space mean, think, clearly because absolutely just vocational a comments in there of

Operator

of for the to any the our question-and-answer back I'd floor session. over reach Dave like to comments. We turn end closing further

David Graziosi

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

Operator

Thank conclude you. teleconference. does today's That

thank and day. your lines participation time, today. your You We for wonderful you may at disconnect have this a

Allison Transmission (ALSN) 29 Oct 242024 Q3 Earnings call transcript