ALSN - Earnings call transcript Q4 2024 | Allison Transmission Holdings, Inc.

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Operator

Good afternoon. Thank you for standing by. Welcome to Allison Transmission's Fourth Quarter 2024 Earnings Conference Call. My name is Paul, and I will be your conference operator today. [Operator Instructions].

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

Jacalyn Bolles

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

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. in call will on the February of

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

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

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

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

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

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

Now to Dave. call over the I'll turn

David Graziosi

start Thank all-time of drove In the market, our another joining thank team to year for all our afternoon, a net to XXXX end and Series we record you thanking for demand by XXXX you, like America sales in XXXX partners as would North year On-Highway Good Allison for achieved high making support our and Jackie. and their us. I $X.X from full an XX% billion, record billion. XXXX. net products sales increase of $X.X

anticipate our drive output X in in demand invested have operations year products to forward these and XXXX We as chain ongoing for we look notable infrastructure vehicles. supply for U.S. spending increase to vocational another Class to strong and continued

our outside our we net by and year heightened performance North also On-Highway the outside expansion year continued of full full driven $XXX America our net million the our initiatives Defense growth XX% sales in high In million. North achieved this to year-over-year world, offerings the end market. year America increased performance market. Our record sales we a in product decade end contributing in market, defense full On-Highway of across Also in to our XXXX, growth geopolitical was markets. end $XXX and of execution uncertainty end expect Through

annual Our $XXX market. revenue initiative widebody of drive end this presenting million growth mining dump incremental continues truck in opportunity to

realization progress the with of the half pleased are initiative with of this opportunity. We of ending around XXXX

earnings XX% $X.XX priorities. capital and well-defined line look our full in per Finally, significant our performance diluted EPS business forward XXXX, to a from maintaining growth year to while of increased top up to addition company allocation continued We XXXX. the record in earnings share in Allison's increasing

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

G. Bohley

Dave. you, Thank

introduce our comments, full and guidance. quarter financial results XXXX year performance I'll our Following fourth year discuss XXXX Dave's full

by on in On-Highway driven for price million. presentation and XXXX market, the by increase of parts, of increased vehicles $XXX in X summary. Slide the markets, a North patient a driven Class demand record equipment the in a period X% to same XXXX the Year-over-year in for improved principally in products. quarter by net sales to price and certain performance The X% led further sales increases. X American net from fourth strength QX end increase in turn sales support year-over-year were the other Year-over-year Please increase was XX% net by increases principally results service

increased was an Finally, year-over-year in for increase by the market. driven tracked net by demand vehicle results were applications. in principally increase X% improved end The sales defense

an $XXX driven by on Gross of million in profit The increase period price in interest gross $XXX by $X $X for million quarter certain for products, offset driven was principally profit increase lower gross partially the principally manufacturing unfavorable the partially on for million $XXX increase expenses, administrative general selling, exchange. expense offset was from the lower million increases foreign million quarter and period higher in expense. XXXX. was XXXX. was profit, by the The of from net for higher Net million, increase an income $XXX same same by

detailed EBITDA a by market of X Adjusted Diluted million sales $XXX increase lower share end The X% outstanding, the higher presentation. our XXXX by QX $X.XX. per million X driven year-over-year net shares can and for was and total to overview quarter for net and XXXX. on found same compared earnings the be period to diluted was the $XXX financial increased Slides of income performance in

existing the X.Xx, a million $XXX performance XXXX. The $XXX leverage lower net of loan adjusted free was portion used with XXXX quarter down million available flow, Please of $XXX same summary. generated -- X ratio business the $XXX compared million Slide facility We this to paid of by cash $XXX by cash period higher in of million was capital ended the activities million provided to of a we In net turn Adjusted for XXXX, increase excess credit was million cash cash and operating to delever free for of QX the $XXX of debt. driven flow presentation expenditures. cash we and as over the revolving the year commitments. for flow cash

maintain and earliest XXXX. flexible, covenant-light structure due We our in long-dated to October continue a maturity debt with

repayment to we of return shareholders addition continue to dividend. In debt, quarterly cash to our through

Our current XX% X share last per $X.XX quarterly of dividend the has over years. increased

in repurchase our fourth in quarter, million program, We X% million. shareholders returning to authorization $XXX over $XXX we also maintained bringing share to over repurchase our amount over the total ending with cash XXXX focus Under the outstanding on remaining. the of shares repurchased through our of program, XXXX repurchase

outstanding we we weighted per at current price continue XXXX, a we view For after of in at XXXX, share over stable shares an is opportunistic of robust of shares in market with and Allison the deserving year, we traded to as addition the assets, position that publicly IPO repurchased XX% prices. given repurchased of other outperformance Even performance. comparative $XX average in share. our cash repurchases to our more believe is share and evaluation Since appropriate cash aligned have generation our and our premier industrial margin use

durability name and brand valued promise world. by quality, deliver history the further committed our to continuing most while premier solutions provide reliable reliability, and business grow are We're desired to the we're products of long-standing our delivering propulsion customers and by excited recognized continuing in our that to for to

With of XXXX that for turn guidance. presentation being the our to please said, Slide X initial

across record to to For midpoint, another full and vehicle Allison our be of we XXXX, range points net guiding demand realization the applications sales billion. At billion increased vocational are by demand. the basis driven for robust $X.X revenue American expects in XXX to price business $X.X of tracked year

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

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

David Graziosi

our [ we XT-XXX an mining release, the the designed WBD announced tonnage WBD proven also XCMG, their dump construction trucks, construction of our to Thank Fred. rigs weight now the off-highway of trucks transmission oilfield XXXX month, tons. transmission world XXXX announced the global for gross you, for the a largest reaching this our up transmission, originally one including in This XXX WBD debut ] or partnership trucks, of machinery markets. supports is in higher Accompanying of vehicles, wide-body cranes. Series Last series TerraTran heavy-duty TerraTran purpose-built and release vehicle applications, a and metric we specifically maximum variant upgraded of with for manufacturers

XXXX portfolio Allison continually As to million customers needs. $XXX annual yet WBD our into their salons and of updating our and to opportunity. introduction incremental support of segment our The milestone of transmission of the their unique continues marks the to expand another market evolve, broader TerraTran same our the of WBD based release realization committed of revenue products on truck in provide is with

through growth defense geopolitical well in through United our through with capitalize increased modernization as the in the both Department uncertainties drive Defense. as up-cycle, investments domestically programs globally continues on end the increased As and defense U.S. opening amidst sales international to our my discussed defense business market remarks, as internationally opportunities we of States

battle Today, for United army as upgraded Abram's supported the decades be I XXXXX to has sales these the battle partners to main world's million announcement support like of We would close our of to awarded Allison variants transmission foreign and Allison partnership to a tank. Army was military come. forward to in over is main contract look and and premier new is recent $XX long the customers. and customers continuing the used that U.S. provide part supporting States by highlight tank proud the

a XXXX year our of and was Allison's capital top to closing, a line records allocation priorities. demonstration solid In of commitment

the markets our in realization continue of results capitalize on the power to XXXX and strides end make opportunities as growth demonstrate XXXX and Our towards Allison we initiatives. of our guidance our

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

Operator

[Operator Instructions].

is with question Zakaria JPMorgan. Tammy from first Our

Tami Zakaria

America My question is guide. on the North On-Highway

say us pricing much of volume I in heard versus I Could growth. for points. on would the think give how basis be color I you asked, is you price about you're I reason enterprise the XXX think some X% embedded expecting

trying understand just On-Highway. like look North could what to for America So that

G. Bohley

is Hi, Fred. Tami, this

talked executed have agreements agreements, we delivered of with On-Highway have about portion and of the price correct. as about of XXX secured our we of all prepared Certainly, the We've talked basis In talked a markets. we've you're American So about value customers. and we long-term previously, points did markets all across the our large end expiring that we've those business. remarks, North across price

tell agreements of I Again, long-term is shorter X These have they X contract. positive have to What the you that far as driver. towards been that. would each much years. and into but traditional as leaned pricing we're between America to we the has how year certainly pricing duration, But end getting a On-Highway got being as avoid in all broad-based North across to in specifics each going markets, though, market,

So year-over-year, up down expectation when by certainly X%, you you the duty. we mentioned, as have think our medium of primarily guide, driven the volume,

consistent think I in the OEMs certain and well. views as announced of the their that that's as us front vehicle industry engine as forecasters with manufacture well have

Operator

from is James. Our Raymond with next question Tim Thein

Timothy Thein

ideal I'm to curious, market have had things to contractual into whether unique components share LTSAs through, individual to very agreements. are a would gone just historically you Maybe, obviously, Fred, forum that or supply. other on that given has But pricing. time tightness the there the and obviously, elements highlight continue them, thread other beyond things obviously, not contract, just content of beyond those in other of the or what is it's the that get

flag mentioned, things else would there? what I'm Anything would just kind highlight think X we as we about that or grind pricing. know are may beyond of as if what other entail you year curious So there contracts that just just you these about, you

G. Bohley

are Sure, Fred There of again. components. Tim. lot a different It's

it's that commodity these both news, these the contracts in to -- topical the have probably what's important of vast down. and majority highlight think I up pass-throughs,

through and If exposure closer our is sorry, to long-term our about passed is customers OEM you X/X aluminum to and passed of X/X about think XX contracts. and contracts steel aluminum -- steel, of closer XX% long-term to with about of through the aluminum

advantageous think, But and there agreements those components to I certain other are are, within our customers. us both that OEM

Operator

is Our Kyle from next Citigroup. with Menges question

Kyle Menges

sales trucks XXXX. I you're up assumptions that, deeper X% if versus kind down for was of hoping your volumes could be little what Class XXX It if to you're thinking you medium within for bps volume just On-Highway embedding at what those just hear X roughly of straight XXXX? into a North pricing least American it about bit like would dive or duty and sounds total in just there's helpful up and

David Graziosi

you Hi, question. Kyle, the it's Dave. for Thank

it's So straightforward. pretty

As Fred mentioned, 'XX. we're certainly market assuming versus softer medium-duty

Fred's to reported. as OEMs the have comment think, well, number I a already of publicly

The some medium-duty. inventories. sources align certainly well third-party of with They've forecasting There's as terms questions in overall around that. improved

of body continue broadly be constraint, bit market years to builders to Although position. a market a the be a overall ago of well seem medium-duty versus speaking, would in terms supplied but few

reflected So certainly that in guidance. we've our

here banged relatively And far continue questions vocational, prepared had on the to as robust the third really as 'XX. terms there terms comments call, haven't this significant Relative expect change numbers some to capacity at overall of in others' our don't, in comments, we're point, quarter expect to terms industry as demand of we I recently thoughts back aware. as get mentioned We in their conditions I for the in on vocational. of a again,

times, market. able again, And to think to terms certainly back I take, currently in to has we've be, that. medium several of positioned what those talked bodybuilders as position continue the but what we in vocational inventory constraints than are different believe, on broader -- duty about

medium overall, the months. say, we've the short duty, XX XX answer, year-over-year last to seen or here I'd vocational more same So what of softer less over

Operator

Our Melius next from is with Rob question Wertheimer Research.

Robert Wertheimer

guidance? additional anything investment there you any 'XX. if do in going 'XX? comment, Was shareholders different expect anything flow there Is cash you pay form used a on you flow And to comments dividend to down. in or in repurchases wonder in all XXXX, of happened that the there? on XXXX I could cash any different debt In out of then on cash bit

G. Bohley

is this Fred. Rob, Yes,

there's with $XXX need of beginning term quarter XXXX. October the we from effect. this down a you XXXX. do to in The our pay As mentioned, callable really refinancing are of we nearest At million is in par the October point, Those quarter or did in loan that at first financing. third debt nothing maturity

But capital allocation, I is mean, same. the playbook to the relative

the that's but out as is we focused acquisition. Allison And amount business product significantly foremost, we're We're and and First via X our significant dividend you capital inside growth, know, always with years undervalued now, a the in of repurchasing we've prepared revenue, a mentioned out strategic that organic in a look we returned of shares returning Is fund we capital new dividend there shareholders. good going from at remarks for technology and are development. earnings on current something row. better prepared do certainly feel increased always our And to share we And called to than the in looking valuation very and our of as repurchases. that a return. remarks, also like we're

Operator

Oppenheimer with Company. Ian is from question Zaffino next & Our

Ian Zaffino

color. that you yen, headwinds, tailwinds, you walk the sort tailwinds? to are bit Just a of on be us a have I FX because relationship headwinds What of us with cetera? the the FX. know which what But Thank seems very all through kind like much a et strengthening. give of and but sense Question little actually reverse the for

G. Bohley

points. 'XX, currency on on to hit you from negative posed expense hit year-over-year Yes, to And balance revaluations isn't and in revenue just XXX nationally in FX we versus I versus basis is EBITDA Ian, us yen relatively purchases XXXX us the -- yen about hedged. positive What that what significantly. we're margin FX. the thinking the Fred. were close hits certainly, an sheet this to will the know is us Traditionally, and but in 'XX

where really that's So to it's going move.

negative revaluations. As the experience. was assets sequential It around, normal than we're more quarter, it on move currency, potential but dollar to holding you for basis foreign specifically strengthens a the in and and this year-over-year seems can get both a

Operator

Our from Stanley. Castillo Morgan next with question is Angel

Angel Castillo Malpica

is this for Fred. one Maybe

the But You've to over the beyond talk half your a where in just capacity kind it might you as to announced to a role as pertains maybe just perhaps could I expansion. you new related policies growth of now, potential of in of where for terms be other well kind kind you've bit uncovered terms and and you've India incremental kind be for of drive that, operational been opportunities for CEO taking year as about investments next you little think that the areas give And new might administration's of or investments efficiency? does in or efficiency. or pause you accelerate steps of

winded to expand self-help? way long ability your of saying, via a of Just margins what's kind

G. Bohley

in lot there, Angel. A

here, took we've So And Certainly, on when India. that, really get of the XXXX, when of announced think reset yes, the I been saw That's in year. a XXXX. I that, this CapEx obviously to The the allow Build back standpoint. hand-in-hand driven running that yet you been best-cost capacity fabrication type by years. after Dave Having said on to of working a into step-up process. operational to in through continue project from working year Indianapolis, us get kind investment that's efficiencies. of some and XX and country will for June, additional going started have couple about you We've responsibilities. is activities the XXXX, in investing

administration. talked You the new about

and but focus about discovered. the had products think right I think way was done when think been a and lot electrification, invested in be to the we've really to we've it market the way, in be But measured on I a still when available. you going meaningful

us well versus our positions really that I think competition.

clearly. lot of a unknown There's

of our the majority America. products source that America. have products our of We advantages in we vast in Some the of we North North majority the vast is produce

new type think the prepared via prosper I activities with we're that to they're in doing. that I looking we're And think that to are policies reward So things well administration, of environment. their the already that

as I back we lot I one look our further we is really operation Dave the a and on of just we're getting supply pre-pandemic. challenges down in of still thing would to the have conversations, say, had There's level efficiency and road, focused the chain.

entitled tremendous to feel in getting it's to. a we've that of really demonstrated turnover do had we back amount performance could and employees, we that of are level so You've that

Operator

Junk with next Luke is Our from question Baird.

Luke Junk

the Fred, just I business, North what's the have know square kind outlook open with guidance. that geography last -- in moving longer business's I trying On-Highway that more recently there. and hoping could think even of trends kind target in trajectory double-click of been you term. the to growth of year-in-year-out pieces outside nature America the on of growth kind but by in just double-digit of And

G. Bohley

challenged And every the start Luke. We're know, you a But Thanks, to with It with we're market backdrop. challenging double-digit team I that. happy is we flat. guiding not as growth year.

As been bit Dave broadly earlier, success now across in China, distributed produced mining mentioned globe. also a India dumps in produced the we've the being really and of having in wide-body quite

a really year in good had We Japan XXXX. in

success Within lot of we'll and to can But secured be XXXX, was outgrow volume and continue the And soft but year lot as overcome there as Some will wheel changes wins continue ] by defense. XXXX. of a wheel Western look [ a pull-ahead in BOSS feels to like we very need we've we challenge regulations market in we a truck XXXX. with Australia. out driven emissions with in defense. to that some was Europe, last truck into associated That

our for and years secured penetrating that is South Brazilian of school And working a what very to X to or Middle in team expand X that's something that Lot bus into feeding rather XXXX. that's expected delivery line exceeding finally trust in business been good we've and work is of just we're large continue our America, releases plan to excited be commercial the on portion market. activity in feeding But guide Down Africa Asia, really penetration. on about very doing Southeast vehicles the The on, refuse, XXXX. Again, on East, focused lot having focused of fewer pickup to backdrop in X%, built applications. that's me, but and South secured all into team a that, driving the very that is that.

Operator

Revich Our question with Sachs. Goldman from next is Jerry

Jerry Revich

go I gains versus the to wonder level what industrials. just comparison back comments special track do should the the how you in you glass we talk made, about out company's wondering the just addition history? given that stands just be Fred, content you M&A expect I'm to go-forward of Allison, Can as the and outstanding and think for about record organic that what the you if folks record. we within thinking to track comps about context, the margins is paradigm versus growth performance

G. Bohley

you to I it our outgrow some Obviously, on think ability market. be hit them. of would our

think flow I consistency the cash stream. of our

of you haul exposure As XX% municipality, to X we over-the-road in downturns. to A volatile more continue which no have business, Class buy market. the to line our through amount know, significant runs XX%

to Our to continue ability higher. our drive margins

to margin We are down with margin guiding obviously volume year, up points versus basis XXXX. this XX guiding up year-over-year, to

said, I lower. down volume like With, total

maybe So to that why Premier XX, the overhead that where as we back a us. be reason used tremendous XX. off, We're while then carry type We valuation. see at industrials I when no we EBITDA, to in and on are turns look of those think EVs X.X to shouldn't we not peer set EBITDA we're look of be. separate primarily used run stock had rolled the the valuation, XXx we've And where are and at we things that

Jerry Revich

just question. ask a shorter-term And I can

true of that of inflation down us bit? the Can are terms help you, volumes spoke organization. you costs cost parts in big What as embedded allocated to underlying costs, the for guidance of does manufacturing production the In in a in just Dave, focus manufacturing inflation understand level of versus this you business. terms

G. Bohley

purchase have components we now, we we do up. manufacturing where When have look are costs down at our year-over-year. We

did progressed. pre the material -- inflating as were on tariff have Our which standpoint. raw We in assumptions anything year really raw from the a material,

increases our from And suppliers. price some negotiated

So we're cost seeing that's where pressure.

took but also we've inflation embedded facilities. mentioned, UAW got to our vast contract in manufacturing, we within of guiding less certainly, performance through embedded and we're increases the going the we majority as Now have XXXX. volume we And

out rolling a sort closer agreement, much of for normal to economics are So inflation this just economics. the

Operator

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

Sherif El-Sabbahy

off, your discussion start costs. some to on continuing of maybe Just

about Your you your mentioned XX fixed expansion some of are on guidance price. on what will cost basis points and that? -- color implies the within points perhaps margin at midpoint basis aluminum cost You've Could exposure have? contribution provide biggest books absorption embedded some of XXX maybe of your steel what

G. Bohley

I got to much XXX up us XXX think can it's points, obviously But very pretty drive roughly And to down basis basis fair, we've have we drive margins drop-throughs everybody drop volume due points. the should should roughly attractive $XXX that revenue there. that clearly, million. for

and of sorry, us offsetting those ] by for about then on [ driven X/X X/X by driven X/X upward well. price add purchase other from the So that's with -- raw looking by material that's the pressures direct material value hitting XXX about raw us about by basis the hitting And at a points. driven

basis cost increases. then spread Again, on the vast cost volume XXX component. decrementals that it's increases purchase and price are So majority points and equally pretty of the the impact the between and from

manufacturing SG&A costs flat R&D engineering year-over-year. relatively and relatively flat. have down We

Operator

any you. now closing comments. like back to question-and-answer concludes Graziosi Thank session. turn for over our the Dave I This would to floor

David Graziosi

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

Operator

This conference. today's concludes

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

Allison Transmission (ALSN) 11 Feb 252024 Q4 Earnings call transcript