Allison Transmission Holdings, Inc.

Good afternoon. Thank you for standing by. Welcome to Allison transmission's first quarter 2024 earnings conference call. My name is Doug and I will be your conference call operator today. At this time, all participants are in listen only mode. After prepared remarks, Allison transmission executives will conduct a question and answer session and a conference call participants will be given instructions at that time. As a reminder, this conference call is being recorded. If anybody should need operator assistance at any time, you may press star zero on your telephone keypad. I would now like to turn a call over to Jackie Bowles, Executive Director of Treasury and Investor Relations. Go ahead, Jackie.

Thank you, Doug. Good afternoon, and thank you for joining us for our first quarter 2024 earnings conference call. With me this afternoon are Dave Graziosi, our Chair and Chief Executive Officer. and Fred Bowley, our Senior Vice President, Chief Financial Officer, and Treasurer. As a reminder, this conference call, webcast, and this afternoon's presentation are available on the Investor Relations section of allisontransmission.com. A replay of this call will be available through May 9th. 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 2024 earnings press release, our annual report on Form 10-K for the year ended December 31st, 2023, 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 first quarter 2024 earnings press release. Today's call is set to end at 5.45 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, Fred will review our first quarter 2024 financial performance and full year 2024 guidance. Dave will then close with an update on recent announcements across our business prior to commencing the Q&A. Now, I'll turn the call over to Fred Foley.

Thank you, Jackie. Good afternoon, and thank you for joining us. Building on record performance in 2023, first quarter 2024 results demonstrate the continued momentum in our business. First quarter net sales were a record $789 million, an increase of 6% from the same period in 2023. Our year-over-year top line increase was driven by robust global on-highway demand, as well as strength in our defense and outside North America off-highway in markets. Please turn to slide five of the presentation for the Q1 2024 performance summary. Year-over-year net sales increased 6% from the same period in 2023 to a record of $789 million. The increase in year-over-year results was led by a 12% increase in the North American on-highway end market, driven by strengthened end demand for Class VIII vocational and medium-duty trucks, and price increases on certain products. Our defense end market net sales increased 78% from the first quarter of 2023 to principally driven by higher demand for tract vehicle applications. Year-over-year results increased 83% in our outside North America off-highway end market, principally driven by strength in demand from the energy, mining, and construction sectors. Net sales in the outside North American on-highway end market increased by 6%, leading to record first-quarter net sales, principally driven by higher demand in Asia, and price increases on certain products, partially offset by lower demand in Europe. Gross profit for the quarter was $366 million, an increase of $5 million from $361 million for the same period in 2023. The increase in gross profit was principally driven by increased net sales and price increases on certain products, partially offset by higher manufacturing expense, including $13 million of non-recurring UAW contract signing incentives, and higher direct material cost. Net income for the quarter was $169 million, a decrease of $1 million from the same period in 2023. The decrease was principally driven by higher manufacturing expense, $14 million of non-recurring UAW contract signing incentives, $10 million of unrealized mark-to-market adjustments for marketable securities, and higher direct material costs partially offset by increased net sales, price increases on certain products, and lower income tax expense. Adjusted EBITDA for the quarter was $289 million compared to $276 million for the same period in 2023. The increase in adjusted EBITDA was principally driven by increased net sales and price increases on certain products, partially offset by higher manufacturing expense and higher direct material costs. Diluted earnings per share increased 3% from the same period in 2023 to $1.90, which includes a 13-cent impact from $14 million of non-recurring UAW contract signing incentives incurred in the quarter. A detailed overview of our net sales by end market and Q1 2024 financial performance can be found on Slides 6 and 7 of the presentation. Please turn to slide eight of the presentation for the Q1 2024 cash flow performance summary. Adjusted free cash flow for the quarter was $162 million compared to $169 million for the same period in 2023. The decrease was principally driven by higher cash incentive compensation payments and non-recurring UAW contract signing incentive payments, partially offset by higher gross profit and lower capital expenditures. During the first quarter, we paid a dividend of 25 cents per share and repurchased $52 million of our common stock. We ended the quarter with a net leverage ratio of 1.7 times, $551 million of cash, and $745 million of available revolving credit facility commitments. In addition, we continue to maintain a flexible, long-dated, and covenant-like debt structure. Of our $2.4 billion of outstanding debt, $518 million is subject to variable interest rates, of which $500 million is hedged, resulting in nearly all of our debt being fixed through the third quarter of 2025. Please turn to slide 9 of the presentation for the 2024 guidance. We are reaffirming our full-year 2024 guidance provided to the market on February 13th. Allison expects net sales to be in the range of $3 billion $50 million to $3,150,000,000. In addition to Allison's 2024 net sales guidance, we anticipate net income in the range of $635 million to $685 million. Adjusted EBITDA in the range of $1,070,000,000 to $1,130,000,000. Net cash provided by operating activities in the range of $700 million to $760 million. and capital expenditures in the range of $125 million to $135 million, and adjusted free cash flow in the range of $575 million to $625 million. Thank you. I will now turn the call over to Dave for an update on recent announcements.