Allison Transmission Holdings, Inc.

Good afternoon. Thank you for standing by. Welcome to Allison Transmission's third quarter 2022 earnings conference call. My name is Shamali and I will be your conference call operator today. At this time, all participants are in a listen-only mode. After prepared remarks, Allison Transmission executives 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 would now like to turn the conference call over to Jackie Bowles, Executive Director of Charity and Investor Relations, who has been recently appointed to the role. Please go ahead, Jackie.

Thank you, Shamali. Good afternoon, and thank you for joining us for our third quarter 2022 earnings conference call. With me this afternoon 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, broadcast, and this afternoon's presentation are available on the Investor Relations section of allisontransmission.com. A replay of this call will be available through November 2nd. 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 third quarter 2022 earnings press release, our annual report on Form 10-K for the year ended December 31, 2021, and our quarterly report on Form 10-Q for the quarter ended March 31, 2022. Geopolitical uncertainties and related responses by governments, customers, and suppliers, as well as other general economic factors. 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 third 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 just 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 third quarter 2022 results and provide a brief operational update. Fred Boley will then review our third quarter financial performance and review updates to the 2022 guidance. prior to commencing the Q&A. Now, I'll turn this call over to Dave Graziosi.

Thank you, Jackie. Good afternoon, and thank you for joining us. We are pleased to report our third quarter results, which reflect ongoing strength in our end markets and the continued focus of our team to drive results, though the operating environment continues to be challenging. The resiliency of customer demand is demonstrated by a 25% year-over-year increase in revenue to $710 million for the third quarter. Notably, year-over-year net sales growth was surpassed by even stronger growth in diluted EPS, up 63%, as Allison's disciplined and well-defined approach to capital allocation continues to support per-share returns in excess of net sales and net income growth. Despite concerns of a slowdown in economic activity, customer demand remains robust, with industry production limited primarily by persistent supply chain constraints. We anticipate that the current complex and uncertain operating environment will continue for the foreseeable future. Though supply chains have not uniformly improved, end user demand remains strong and the Allison team continues to take actions that address and mitigate production challenges. As a result of the ongoing strength in Allison's global on and off highway end markets, we are pleased to raise the full year guidance while narrowing the guidance ranges provided to the market on August 3rd. During the quarter, we announced changes to refresh our board of directors by adding four new members in early August, with four current members serving out their term but not standing for reelection at our 2023 annual meeting. The changes reflect a deliberate process by the board to recruit new directors who will complement the overall mix of skills, knowledge, experience, and perspectives. We are pleased that we have identified four outstanding independent directors who each bring extensive experience in areas relevant to our business and will be great assets to Allison. In prior quarters, we emphasized programs that have gained traction in our driving revenue growth in our conventional business with a combined potential incremental growth opportunity of $250 million in annual revenue, in addition to the 3414 Regional Hall Fractran and China wide-body mining dump initiatives covered in previous quarters. Today, we will highlight new opportunities for our conventional products, as well as provide an update on our electrified propulsion portfolio. As we recently announced, Allison has been named the exclusive provider of transmissions for XCMG's all-terrain crane application. As one of the top three largest construction machinery manufacturers in the world, XCMG has already integrated the Allison 4970 specialty transmission into dozens of its new all-terrain cranes and is seeing outstanding performance, leading to continued growth in the outside North America on-highway market. During the quarter, Isuzu unveiled their new medium-duty FVR truck in Taiwan that features the Allison 3000 series six-speed automatic transmission. The new Isuzu FVR truck was designed to tackle high stop-start duty cycles and numerous application demands, making the Allison 3000 series the proven choice of propulsion to ensure fuel efficiency, enhance maneuverability, and increase the ability to move heavy loads in urban environments. We are pleased to continue our outstanding partnership, and we are confident that the Isuzu and Allison combination will deliver superior economic value to fleets across Taiwan. Additionally, in our outside North America on highway market, we continue to see growth opportunities in the agriculture sector since entering the market in 2015. In South America, leading OEMs, including Cayman, John Deere, and Metal 4, have chosen the Allison 2000 and 3000 series transmissions for their agricultural sprayers. As OEMs have made the transmission, Transitioned from manual transmissions, customers and drivers that operate ag sprayer vehicles have benefited from integrating the Allison fully automatic transmissions due to enhanced performance in soft soil, which is critical in this application. The agribusiness in South America continues to be an exciting growth opportunity for Allison, and we look forward to providing transmissions designed to meet the unique challenges of the industry. In September, Allison participated in the IAA Transportation Conference in Hannover, Germany, where we announced the latest addition to our e-gen power family, the 130S, joining the e-gen power lineup of electric axles, which includes the 100D, introduced in 2020, and the 130D and 100S, both introduced in 2021. The 130S includes new key components designed to specifically support the heavier 13-ton gross axle weight rating often required by commercial vehicles in the Europe and Asia-Pacific markets. The introduction of the 130S is representative of Allison's global approach to electric vehicle propulsion, and we are pleased to expand our e-gen power family of e-axles to deliver additional fully electric solutions for the European and Asia-Pacific markets. Also at the IAA Transportation Conference, we announced the eGen Power 130D e-axle was chosen as the propulsion solution for Quantron's new fuel cell electric vehicle. The Quantron FCEV will utilize the 130D to support sustainability initiatives of customers and drive growth in our electrification portfolio. The implementation of the eGen Power family into fuel cell electric vehicles is a testament to Allison's energy agnostic e-axle portfolio of propulsion solutions which pair well with any source of energy. Furthering our capabilities to support the development of alternative fuel vehicle solutions, we announced this quarter that our vehicle electrification and environmental test center is now capable of both testing and providing hydrogen supply for fuel cell vehicles. We are excited to expand the facility's capabilities to support our OEM customers as they develop and optimize alternative fuel offerings intended to reduce emissions. During the quarter, we announced our strategic cooperation agreement with Anadolu Isuzu, Turkey's leading bus and truck manufacturer. As part of the agreement, Allison's eGen Power 100S will be incorporated into Anadolu Isuzu's light duty truck and midi bus platforms for refuse distribution and public transportation applications. Allison's conventional transmissions have been a preferred solution for their bus platforms for more than a decade, and we are excited to expand our offering and continue our longstanding relationship by delivering innovative solutions to our customers. Early in the quarter, we announced the award of a $6.5 million contract from the U.S. Army's Ground Vehicle Systems Center. This award will be used to support the design, development, and testing of our newest addition to the EGEN portfolio, the EGEN Force. Allison has combined its decades of experience in both combat vehicles and electric hybrid propulsion solutions to develop the new EGEN Force electric hybrid system. Designed for 50-ton tracked vehicles, the EGEN Force meets the requirements for the U.S. Army's optionally manned fighting vehicle program, and has been selected as the propulsion solution for American Rheumatau's Lynx vehicle. The eGen Force is also scalable to 70-tonne tracked vehicles, making it capable of meeting future main battle tank requirements as well. Finally, the eGen Flex, our zero-emission capable electric hybrid system that provides bus fleets with the optionality of full electric engine-off propulsion for up to 50% of the duty cycle, continues to gain share across transit properties in the United States. We recently announced that the Santa Clara Valley Transportation Authority has selected the eGenFlex propulsion system for its fleet of transit buses. This order represents the largest and most recent in a series of nationwide awards for buses equipped with Allison's next-generation electric hybrid system. 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 continue to invest across our portfolio to drive growth and deliver value propulsion solutions to all of our end markets. Thank you, and I'll now turn the call over to Fred.