Allison Transmission Holdings, Inc.

Good evening, ladies and gentlemen. Thank you for standing by. Welcome to Allison Transmission's first quarter 2022 earnings conference call. My name is John, and I'll be your conference call operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, the management team from Allison Transmission will conduct a question and answer session, and conference call participants will be given instructions at that time. As a reminder, this conference call is being recorded. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I'd now like to turn the conference call over to Mr. Ray Posadas, the company's managing director of investor relations. Please go ahead, sir.

Thank you, John. Good evening, and thank you for joining us for our first quarter 2022 earnings conference call. With me this evening are Dave Graziosi, our chairman and chief executive officer, and Fred Boley, our senior vice president, chief financial officer, and treasurer. As a reminder, this conference call, webcast, and this evening's presentation are available on the investor relations section of our website, allisontransmission.com. A replay of this call will be available through May 4th. As noted on slide two of the presentation, many of our remarks today contain forward-looking statements based on current expectations. These forward-looking statements are subject to known and unknown risks, including those set forth in our first quarter 2022 earnings press release and our annual report on Form 10-K for the year ended December 31st, 2021. Uncertainties related to the war in Ukraine, the COVID-19 pandemic, and related responses by governments, customers, and suppliers, and other factors as well as general economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those that we expressed today. In addition, as noted on slide three of the presentation, Some of our remarks today contain non-GAAP financial measures as defined by the SEC. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures attached as an appendix to the presentation and to our first quarter 2022 earnings press release. Today's call is set to end at 545 p.m. Eastern Time. In order to maximize participation opportunities on the call, we'll take one question from each analyst. Please turn to slide four of the presentation for the call agenda. During today's call, Dave Graziosi will review highlights from our first quarter 2022 results and provide a brief operational update. Fred Boley will then review our first quarter financial performance and affirm full year 2022 guidance prior to commencing the Q&A. Now, I'll turn the call over to Dave Graziosi.

Thank you, Ray. Good evening, and thank you for joining us. I'd like to begin by acknowledging the tragic events that have unfolded in Ukraine. In compliance and support of the actions taken by the United States and its allies, we have seized all operations in Russia and associated regions. Russia and Ukraine accounted for less than 1% of Allison revenue in 2021. We do not have a manufacturing presence in the region nor any direct exposure as it relates to sourcing of raw or direct material. Turning to the quarter, I'd like to thank the Allison team and our partners for their outstanding efforts in delivering the solid execution and strong performance we are reporting today. Following a notable year in 2021, first quarter 2022 results continue to demonstrate momentum for Allison's growth objectives. Net sales accelerated to $677 million in the first quarter, returning to pre-pandemic levels and producing the third strongest revenue quarter in Allison's history. Strong customer demand in our global on-highway end markets continues to drive us this unprecedented recovery despite persistent and global supply chain challenges. In particular, the outside North America on highway end market, which was the first end market to reach pre-pandemic levels and led to recovery in 2021, achieved record quarterly revenue during the first quarter of this year. And this end market remains positioned for further growth, driven by multiple initiatives around the world. Allison's strong recovery and post-pandemic results are largely attributable to the teams operating experience and persistent and disciplined execution through multiple cycles across all of our end markets. Today, we are realizing the benefits of Allison's growth objectives and our continued success remains aligned with our long-term strategy of continuous global market leadership expansion. Last quarter, we discussed several initiatives that are supporting Allison's long-term growth objectives. Among them was Allison's award-winning 3414 Regional Haul Series fully automatic transmission for the North America heavy-duty regional haul and day cab tractor market. Currently released with Navistar, Daimler Trucks North America, and Volvo Trucks North America, the 3414 RHS expands our addressable market, enables the pursuit of market share growth, and represents an incremental revenue opportunity of $100 million annually for Allison. Earlier this week, we announced one of the largest private fleets in North America, and a major wholesale restaurant food distributor has selected the 3414 Regional Hall Series transmission for its fleet. The 3414 RHS will be integrated into Navistar's RH Series trucks, designed to provide customers with optimal productivity and maneuverability, and represents an annual purchase of up to 450 units. Elsewhere in North America on highway end market, the Allison 3000 rugged duty series fully automatic transmission will now be offered in the MAC MD series. This release broadens MAC's medium duty product portfolio to include heavier applications that require increased power and vehicle weight ratings. It also expands the MD series addressable market to vocational customers and applications such as refuse, recycling, propane delivery, and construction. Allison's 3000 series rugged duty is the third transmission option in MAC's medium-duty product portfolio. Allison's 2500 series is currently standard on MAC's medium-duty line, and the Allison 2500 rugged duty series is optional. Another growth opportunity introduced last quarter was the wide-body mining dump truck initiative in China. This program leverages Allison's existing and proven 4000 series fully automatic transmission and represents more than $50 million annually in incremental revenue potential for the outside North America on highway and market. During the first quarter, multiple awards were announced in support of this initiative. These awards included domestic opportunities with Haitian Fleet, a renowned mining and infrastructure company based in Xinjiang, China, and Lugang Mining Machinery Company in support of the Chinese export market. During the first quarter, we also announced the start of production for Allison's next generation electronic controls platform built on decades of technology evolution and application experience and combined with a state-of-the-art microprocessor and software operating system. This next generation platform features advanced communications functional safety, cybersecurity, and over-the-air programming capability. OEMs such as Freightliner Custom Chassis, Mack Trucks, Prevo, and MAN are leading the transition to this next generation of Allison Electronic Controls in an effort to realize the state-of-the-art capabilities enabled by this platform. Next, we are excited to unveil Allison's new Innovation Center in March. located on the campus of our headquarters and primary manufacturing complex in Indianapolis. An all-new engineering center of excellence will promote innovation and collaboration and features enhanced product and technology development and validation capabilities to support Allison's customers, industry partners, and suppliers. Allison's innovation center will further the evolution of next-generation commercial vehicle propulsion. This includes Allison's eGen Flex electric hybrid propulsion system, which received its inaugural certification from the California Air Resources Board earlier this year. Introduced into revenue service in 2021, Allison's eGen Flex has demonstrated the ability to operate in full engine off mode for more than 50% of its time in operation across multiple routes within one of North America's largest transit fleets. In the United Kingdom, Allison was recently selected to provide the propulsion system for the country's first hydrogen fuel cell electric-powered refuse collection vehicle. The vehicle will be built on a Mercedes-Benz ECONIC hydrogen chassis and is the latest development in Aberdeen City's Hydrogen Aberdeen Initiative, which aims to bring about a hydrogen economy in the city's region. In 2018, the Aberdeen City Council deployed the UK's first hydrogen-powered sweeper vehicle, which also features an Allison propulsion solution. And in two weeks at the Advanced Clean Transportation Expo in Long Beach, California, we will be announcing an exciting new strategic partnership featuring Allison's eGen Power family of electric axles. As we have often said, there are more growth in technology initiatives happening at Allison today than at any other time in our history. We look forward to sharing this news along with more of our team's accomplishments in the coming months and quarters. Turning to the supply chain, we continue to anticipate broad challenges that will impact the commercial vehicle industry's ability to align with customer demand for the foreseeable future. Despite these persistent challenges, as well as uncertainties surrounding various macroeconomic and geopolitical factors, end user demand remains strong. Production remains limited by input constraints, and the Allison team will continue to monitor the environment and take actions to address and mitigate production challenges. Thank you, and I'll now turn the call over to Fred.