Allison Transmission Holdings, Inc.

Good afternoon. Thank you for standing by. Welcome to Allison Transmission's second quarter 2024 earnings conference call. My name is Diego, 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 Bold, Executive Director of Treasury and Investor Relations. Please go ahead, Jackie.

Thank you, Diego. Good afternoon, and thank you for joining us for our second quarter 2024 earnings conference call. With me this afternoon are Dave Graziosi, our Chair and Chief Executive Officer at and Fred Boley, our Chief Operating Officer, 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 alicentransmission.com. A replay of this call will be available through August 8th. 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 risk including those set forth in our second quarter 2024 earnings press release, our annual report on Form 10-K for the year ended December 31st, 2023, and 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 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 second 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 Boley will review our second quarter 2024 financial performance and review updates to our full year 2024 guidance. We will 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.

Thank you, Jackie. Good afternoon, and thank you for joining us. Closing out the first half of the year, we are pleased to report record revenue of $816 million for the second quarter of 2024. Demand for Class VIII vocational vehicles intensified during the quarter, leading to record quarterly revenue of $456 million in our North American on-highway-in market. Year-over-year top line results were also improved by increases in our defense and outside North American on-highway-in markets as we continue to execute on our growth objectives. Please turn to slide five of the presentation for the Q2 2024 performance summary. Year-over-year net sales increased 4% from the same period in 2023 to a record of $816 million. The increase in year-over-year results was led by a 15% increase in the North American on-highway in-market, principally driven by strength in demand for Class VIII vocational vehicles and medium-duty trucks and price increases on certain products. Year-over-year net sales were further improved by a 30 percent increase in our defense end market. The increase was principally driven by increased demand for tracked vehicle applications. Finally, year-over-year results were improved by a record second quarter in our outside North America on-highway end market. The increase in net sales in the outside North America on-highway end market was 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 $394 million, an increase of $13 million from $381 million for the same period in 2023. The increase in gross profit was principally driven by price increases on certain products and increased net sales partially offset by higher manufacturing expense. Net income for the quarter was $187 million, an increase of $12 million from the same period in 2023. The increase was principally driven by higher gross profit, lower selling general and administrative expenses, and lower interest expense net, partially offset by a non-cash defined benefit pension plan settlement charge incurred in the second quarter of 2024, and unrealized mark-to-market adjustments for marketable securities. Adjusted EBITDA for the quarter was $301 million compared to $288 million for the same period in 2023. The increase in adjusted EBITDA was principally driven by higher gross profit. Diluted earnings per share increased 11 percent from the same period in 2023. Second quarter EPS of $2.13 was driven by higher net income and lower total shares outstanding. A detailed overview of our net sales by end market and Q2 2024 financial performance can be found on slide six and seven of the presentation. Please turn to slide eight of the presentation for the Q2 2024 cash flow performance summary. Adjusted free cash flow for the quarter was $150 million compared to $122 million for the same period in 2023. The increase was principally driven by lower cash income taxes and higher gross profit, partially offset by higher net working capital funding requirements. During the second quarter, we paid the dividend of 25 cents per share and repurchased over $31 million of our common stock. We ended the quarter with a net leverage ratio of 1.6 times, $648 million of cash, and $745 million of available revolving credit facility commitments. In addition, we continued to maintain a flexible long-dated and covenant-like debt structure. Please turn to slide nine of the presentation for the update to our 2024 guidance. As a result of the ongoing strength in our North America on-highway in-market, we are raising our full-year guidance for revenue, earnings, and cash flow. Allison expects net sales to be in the range of $3.9 billion to $3.170 billion In addition to Allison's 2024 net sales guidance, we anticipate net income in the range of $650 million to $700 million, adjusted EBITDA in the range of $1,085,000,000 to $1,145,000,000, net cash provided by operating activities in the range of $715 million to $775 million, capital expenditures in the range of $125 million to $135 million, and adjusted free cash flow in the range of $590 million to $640 million. Thank you, and I'll now turn the call over to Dave for an update on recent announcements.