Allison Transmission Holdings Inc Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Dave Graziosi: 2024 was a record year with all-time high net sales of $3.2 billion. North America on-highway had record sales, defense end market saw significant growth, and outside North America on-highway had strong performance. Earnings per share reached a company record of $8.31. Announced the debut of the 6,000 series transmission for widebody dump applications and partnership with XCMG, as well as a $80 million contract for upgraded transmissions for Abrams Main Battle Tanks.
• Fred Bohley: Fourth quarter 2024 net sales were $796 million, a 3% year-over-year increase. Gross profit was $373 million, net income $175 million. 2025 guidance includes net sales range $3.2B - $3.3B, net income $735M - $785M, adjusted EBITDA $1.170B - $1.230B, etc. Discussed cash flow, debt repayment, dividends, and share repurchases.

Segment Performance

• North America on-highway: Full year 2024 net sales reached a record $1.8 billion, a 15% increase from 2023. Fourth quarter 2024 net sales saw a 10% increase, led by strength in Class 8 vocational vehicles and price increases.
• Defense: Full year 2024 net sales were $212 million, a 28% year-over-year increase, reaching a decade-high.
• Outside North America on-highway: Full year 2024 net sales were $493 million, driven by the wide-body mining dump truck initiative, with around half of the $100 million incremental annual revenue opportunity realized. Fourth quarter 2024 net sales increased 8% due to increased demand for tracked vehicle applications.
• Service parts, support equipment, and other: Fourth quarter 2024 net sales increased 5% primarily due to price increases.

Guidance

• 2025 net sales expected to be in the range of $3.2 billion to $3.3 billion.
• Net income anticipated in the range of $735 million to $785 million.
• Adjusted EBITDA expected in the range of $1.170 billion to $1.230 billion.
• Net cash provided by operating activities expected in the range of $800 million to $860 million.
• Capital expenditures expected in the range of $165 million to $175 million.
• Adjusted free cash flow expected in the range of $635 million to $685 million.

Risks

• Forward-looking statements are subject to known and unknown risks, including those set forth in the fourth quarter 2024 earnings press release and Annual Report on Form 10-K for the year ended December 31, 2023. Actual results may vary materially if risks or uncertainties materialize or assumptions prove incorrect.

Question and Answer

Q: On the North America on-highway guide, could you give color on volume versus price?

A: Fred Bohley mentioned 400 basis points of price across all end markets, with North America on-highway being a driver. Volume expectations are down year-over-year, primarily driven by medium duty.

Q: In 2024, you used cash on debt paydown. Do you expect to flow all cash out to shareholders in 2025?

A: Fred Bohley stated the playbook is to fund the business, return capital to shareholders via dividend and share repurchases, and view share repurchases as a good use of cash at current prices.

Q: What are the FX headwinds/tailwinds?

A: Fred Bohley explained FX impacts balance sheet revaluations, with 2024 having more negative FX than normal due to dollar strengthening and foreign currency asset revaluations.

Q: Could you talk about potential investments for growth and operational efficiency?

A: Fred Bohley discussed investment in India for capacity expansion, operational efficiencies, and positioning well relative to new administration policies.