Allison Transmission Announces Second Quarter 2023 Results

Allison Transmission Holdings Inc. (NYSE: ALSN), today reported second quarter net sales of $783 million, an 18 percent increase from the same period in 2022 and diluted EPS of $1.92, a 52 percent increase from the same period in 2022.

David S. Graziosi, Chairman and Chief Executive Officer of Allison Transmission commented, “We are pleased to report record quarterly net sales as demand remains strong across our largest end markets and the Allison team remains focused on realizing our growth initiatives. Year over year net sales growth of 18 percent was surpassed by even stronger growth in diluted EPS, up 52 percent. Furthermore, our gross margin expansion of 190 basis points year over year demonstrates our continued efforts toward price realization and cost mitigation in an inflationary environment.”

Graziosi continued, “We remain committed to our capital allocation priorities by investing in the business while returning capital to shareholders through our quarterly dividend and share repurchase program. During the second quarter, we paid a quarterly dividend of $0.23 per share and repurchased over 2 million shares of our common stock, representing over 2 percent of shares outstanding. Given second quarter results and current end markets conditions, we are raising our full year 2023 net sales guidance to $3 billion at the midpoint.”

Second Quarter Financial Highlights

Net sales for the quarter were a record high of $783 million. Year over year results were led by:

• A $57 million increase in net sales in the North America On-Highway end market principally driven by strength in customer demand for medium-duty and Class 8 vocational trucks and price increases on certain products,
• A $43 million increase in net sales in the Service Parts, Support Equipment and Other end market principally driven by higher demand for global service parts and support equipment and price increases on certain products, and
• An $18 million increase in net sales in the Outside North America On-Highway end market driven by strength in customer demand in Europe and Asia, the continued execution of our growth initiatives and price increases on certain products.

Net income for the quarter was $175 million. Diluted EPS for the quarter was $1.92. Adjusted EBITDA, a non-GAAP financial measure, for the quarter was $288 million. Net cash provided by operating activities for the quarter was $141 million. Adjusted free cash flow, a non-GAAP financial measure, for the quarter was $122 million.

Second Quarter Net Sales by End Market

End Market	Q2 2023 Net Sales ($M)	Q2 2022 Net Sales ($M)	% Variance
North America On-Highway	$397	$340	17%
North America Off-Highway	$25	$20	25%
Defense	$33	$29	14%
Outside North America On-Highway	$123	$105	17%
Outside North America Off-Highway	$24	$32	(25%)
Service Parts, Support Equipment & Other	$181	$138	31%
Total Net Sales	$783	$664	18%

Second Quarter Financial Results

Gross profit for the quarter was $381 million, an increase of 23 percent from $311 million for the same period in 2022. The increase in gross profit was principally driven by price increases on certain products and increased net sales, partially offset by higher manufacturing expense.

Selling, general and administrative expenses for the quarter were $92 million, an increase of $14 million from $78 million for the same period in 2022. The increase was principally driven by increased commercial activities spending, incentive compensation expense and product warranty expense.

Engineering – research and development expenses for the quarter were $47 million, an increase of $1 million from $46 million for the same period in 2022.

Net income for the quarter was $175 million, an increase of 43 percent from $122 million for the same period in 2022. The increase was principally driven by higher gross profit partially offset by increased selling, general and administrative expense.

Net cash provided by operating activities was $141 million, an increase of $77 million from $64 million for the same period in 2022. The increase was principally driven by higher gross profit and lower operating working capital requirements partially offset by higher cash income taxes and increased commercial activities spending.

Second Quarter Non-GAAP Financial Measures

Adjusted EBITDA for the quarter was $288 million, an increase of $61 million from $227 million for the same period in 2022. The increase in Adjusted EBITDA was principally driven by higher gross profit partially offset by increased selling, general and administrative expenses.

Adjusted free cash flow for the quarter was $122 million, an increase of $88 million from $34 million for the same period in 2022. The increase was driven by higher net cash provided by operating activities and lower capital expenditures.

2023 Guidance Update

Given first half of 2023 results and current end markets conditions, we are raising our full year 2023 guidance. Allison expects 2023 Net Sales in the range of $2.96 to $3.04 billion, Net Income in the range of $575 to $625 million, Adjusted EBITDA in the range of $1.05 to $1.11 billion, Net Cash Provided by Operating Activities in the range of $675 to $725 million, Capital Expenditures in the range of $125 to $135 million, and Adjusted Free Cash Flow in the range of $550 to $590 million.

Our 2023 net sales guidance reflects higher customer demand in the Global On-Highway and Service Parts, Support Equipment & Other end markets, price increases on certain products and the continued execution of growth initiatives.

Conference Call and Webcast

The company will host a conference call at 5:00 p.m. ET on Thursday, July 27, 2023 to discuss its second quarter 2023 results. The dial-in phone number for the conference call is [phone] and the international dial-in number is [phone]. A live webcast of the conference call will also be available online at http://ir.allisontransmission.com.

For those unable to participate in the conference call, a replay will be available from 9:00 p.m. ET on July 27 until 11:59 p.m. ET on August 10. The replay dial-in phone number is [phone] and the international replay dial-in number is [phone]. The replay passcode is 13739627.

About Allison Transmission

Allison Transmission (NYSE: ALSN) is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles and the largest global manufacturer of medium- and heavy-duty fully automatic transmissions that Improve the Way the World Works. Allison products are used in a wide variety of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (school, transit and coach), motorhomes, off-highway vehicles and equipment (energy, mining and construction applications) and defense vehicles (tactical wheeled and tracked). Founded in 1915, the company is headquartered in Indianapolis, Indiana, USA. With a presence in more than 150 countries, Allison has regional headquarters in the Netherlands, China and Brazil, manufacturing facilities in the USA, Hungary and India, as well as global engineering resources, including electrification engineering centers in Indianapolis, Indiana, Auburn Hills, Michigan and London in the United Kingdom. Allison also has more than 1,600 independent distributor and dealer locations worldwide. For more information, visit allisontransmission.com.

Forward-Looking Statements

This press release contains forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although forward-looking statements reflect management’s good faith beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements speak only as of the date the statements are made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to: increases in cost, disruption of supply or shortage of labor, freight, raw materials, energy or components used to manufacture or transport our products or those of our customers or suppliers, including as a result of the war in Ukraine and the COVID-19 pandemic; global economic volatility; the duration and spread of the COVID-19 pandemic, including new variants of the virus and the pace and availability of vaccines and boosters, mitigating efforts deployed by government agencies and the public at large, and the overall impact from such outbreak on economic conditions, financial market volatility and our business, including but not limited to the operations of our manufacturing and other facilities, the availability of labor, our supply chain, our distribution processes and demand for our products and the corresponding impacts to our net sales and cash flow; our participation in markets that are competitive; our ability to prepare for, respond to and successfully achieve our objectives relating to technological and market developments, competitive threats and changing customer needs, including with respect to electric hybrid and fully electric commercial vehicles; the highly cyclical industries in which certain of our end users operate; uncertainty in the global regulatory and business environments in which we operate; the concentration of our net sales in our top five customers and the loss of any one of these; the failure of markets outside North America to increase adoption of fully automatic transmissions; the success of our research and development efforts, the outcome of which is uncertain; U.S. and foreign defense spending and the timing of defense programs; risks associated with our international operations, including acts of war and increased trade protectionism; general economic and industry conditions including the risk of recession; the discovery of defects in our products, resulting in delays in new model launches, recall campaigns and/or increased warranty costs and reduction in future sales or damage to our brand and reputation; our ability to identify, consummate and effectively integrate acquisitions and collaborations; labor strikes, work stoppages or similar labor disputes, which could significantly disrupt our operations or those of our principal customers or suppliers; risks related to our indebtedness; and other risks and uncertainties associated with our business described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviation will not be material. All information is as of the date of this press release, and we undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations and risks related to our indebtedness.

Use of Non-GAAP Financial Measures

This press release contains information about Allison’s financial results and forward-looking estimates of financial results which are not presented in accordance with accounting principles generally accepted in the United States ("GAAP"). Such non-GAAP financial measures are reconciled to their closest GAAP financial measures at the end of this press release. Non-GAAP financial measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures of other companies.

We use Adjusted EBITDA and Adjusted EBITDA as a percent of net sales to measure our operating profitability. We believe that Adjusted EBITDA and Adjusted EBITDA as a percent of net sales provide management, investors and creditors with useful measures of the operational results of our business and increase the period-to-period comparability of our operating profitability and comparability with other companies. Adjusted EBITDA as a percent of net sales is also used in the calculation of management’s incentive compensation program. The most directly comparable GAAP measure to Adjusted EBITDA is Net income. The most directly comparable GAAP measure to Adjusted EBITDA as a percent of net sales is Net Income as a percent of net sales. Adjusted EBITDA is calculated as the earnings before interest expense, net, income tax expense, amortization of intangible assets, depreciation of property, plant and equipment and other adjustments as defined by Allison Transmission, Inc.’s, the Company’s wholly-owned subsidiary, Second Amended and Restated Credit Agreement. Adjusted EBITDA as a percent of net sales is calculated as Adjusted EBITDA divided by net sales.

We use Adjusted Free Cash Flow to evaluate the amount of cash generated by our business that, after the capital investment needed to maintain and grow our business and certain mandatory debt service requirements, can be used for the repayment of debt, stockholder distributions and strategic opportunities, including investing in our business. We believe that Adjusted Free Cash Flow enhances the understanding of the cash flows of our business for management, investors and creditors. Adjusted Free Cash Flow is also used in the calculation of management’s incentive compensation program. The most directly comparable GAAP measure to Adjusted Free Cash Flow is Net cash provided by operating activities. Adjusted Free Cash Flow is calculated as Net cash provided by operating activities, after additions of long-lived assets.

Attachments

• Condensed Consolidated Statements of Operations
• Condensed Consolidated Balance Sheets
• Condensed Consolidated Statements of Cash Flows
• Reconciliation of GAAP to Non-GAAP Financial Measures
• Reconciliation of GAAP to Non-GAAP Financial Measures for Full Year Guidance

	Allison Transmission Holdings, Inc.
	Condensed Consolidated Statements of Operations
	(Unaudited, dollars in millions, except per share data)
			Three months ended June 30,						Six months ended June 30,
			2023			2022			2023			2022
	Net sales		$	783		$	664		$	1,524		$	1,341
	Cost of sales			402			353			782			710
	Gross profit			381			311			742			631
	Selling, general and administrative			92			78			179			153
	Engineering - research and development			47			46			91			89
	Operating income			242			187			472			389
	Interest expense, net			(28)			(30)			(56)			(59)
	Other income (expense), net			2			(3)			12			(13)
	Income before income taxes			216			154			428			317
	Income tax expense			(41)			(32)			(83)			(66)
	Net income		$	175		$	122		$	345		$	251
	Basic earnings per share attributable to common stockholders		$	1.94		$	1.26		$	3.79		$	2.59
	Diluted earnings per share attributable to common stockholders		$	1.92		$	1.26		$	3.75		$	2.56

	Allison Transmission Holdings, Inc.
	Condensed Consolidated Balance Sheets
	(Unaudited, dollars in millions)
			June 30,			December 31,
			2023			2022
	ASSETS
	Current Assets
	Cash and Cash Equivalents		$	351		$	232
	Accounts receivable, net			381			363
	Inventories			278			224
	Other current assets			59			47
	Total Current Assets			1,069			866
	Property, plant and equipment, net			761			763
	Intangible assets, net			855			878
	Goodwill			2,076			2,075
	Other non-current assets			95			89
	TOTAL ASSETS		$	4,856		$	4,671
	LIABILITIES
	Current Liabilities
	Accounts payable		$	238		$	195
	Product warranty liability			25			33
	Current portion of long-term debt			6			6
	Deferred revenue			46			38
	Other current liabilities			182			208
	Total Current Liabilities			497			480
	Product warranty liability			35			24
	Deferred revenue			93			93
	Long-term debt			2,499			2,501
	Deferred income taxes			517			536
	Other non-current liabilities			159			163
	TOTAL LIABILITIES			3,800			3,797
	TOTAL STOCKHOLDERS' EQUITY			1,056			874
	TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	4,856		$	4,671

	Allison Transmission Holdings, Inc.
	Condensed Consolidated Statements of Cash Flows
	(Unaudited, dollars in millions)
				Three months ended June 30,						Six months ended June 30,
				2023			2022			2023			2022
	Net cash provided by operating activities			$	141		$	64		$	334		$	226
	Net cash used for investing activities (a) (b)				(19)			(30)			(41)			(68)
	Net cash used for financing activities				(115)			(56)			(174)			(162)
	Effect of exchange rate changes on cash				-			(1)			-			(1)
	Net increase (decrease) in cash and cash equivalents				7			(23)			119			(5)
	Cash and cash equivalents at beginning of period				344			145			232			127
	Cash and cash equivalents at end of period			$	351		$	122		$	351		$	122
	Supplemental disclosures:
	Income taxes paid			$	119		$	58		$	121		$	59
	Interest paid			$	35		$	31		$	64		$	57
	(a) Additions of long-lived assets			$	(19)		$	(30)		$	(43)		$	(50)
	(b) Business acquisitions			$	-		$	-		$	-		$	(23)

	Allison Transmission Holdings, Inc.
	Reconciliation of GAAP to Non-GAAP Financial Measures
	(Unaudited, dollars in millions)
			Three months ended						Six months ended
			June 30,						June 30,
			2023			2022			2023			2022
	Net income (GAAP)		$	175		$	122		$	345		$	251
	plus:
	Income tax expense			41			32			83			66
	Interest expense, net			28			30			56			59
	Depreciation of property, plant and equipment			27			26			53			53
	Amortization of intangible assets			11			12			22			23
	Stock-based compensation expense (a)			6			6			11			9
	Unrealized (gain) loss on marketable securities (b)			-			(4)			(3)			11
	Technology-related investments gain (c)			-			-			(3)			(6)
	Unrealized loss on foreign exchange (d)			-			2			-			3
	Acquisition-related earnouts (e)			-			1			-			2
	Adjusted EBITDA (Non-GAAP)		$	288		$	227		$	564		$	471
	Net sales (GAAP)		$	783		$	664		$	1,524		$	1,341
	Net income as a percent of net sales (GAAP)			22.3%			18.4%			22.6%			18.7%
	Adjusted EBITDA as a percent of net sales (Non-GAAP)			36.8%			34.2%			37.0%			35.1%
	Net cash provided by operating activities (GAAP)		$	141		$	64		$	334		$	226
	Deductions to Reconcile to Adjusted Free Cash Flow:
	Additions of long-lived assets			(19)			(30)			(43)			(50)
	Adjusted free cash flow (Non-GAAP)		$	122		$	34		$	291		$	176

(a)	Represents stock-based compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development).
(b)	Represents (gains) losses (recorded in Other income (expense), net) related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.
(c)	Represents gains (recorded in Other income (expense), net) related to investments in co-development agreements to expand our position in propulsion solution technologies.
(d)	Represents losses (recorded in Other income (expense), net) on intercompany financing transactions for our India facility.
(e)	Represents expenses (recorded in Selling, general and administrative, Engineering - research and development) for earnouts related to our acquisition of Vantage Power Limited.

	Allison Transmission Holdings, Inc.
	Reconciliation of GAAP to Non-GAAP Financial Measures for Full Year Guidance
	(Unaudited, dollars in millions)
				Guidance
				Year Ending December 31, 2023
				Low			High
	Net Income (GAAP)			$	575		$	625
	plus:
	Depreciation and amortization				170			170
	Income tax expense				171			181
	Interest expense, net				118			118
	Stock-based compensation expense (a)				22			22
	Unrealized gain on marketable securities (b)				(3)			(3)
	Technology-related investments gain (c)				(3)			(3)
	Adjusted EBITDA (Non-GAAP)			$	1,050		$	1,110
	Net Cash Provided by Operating Activities (GAAP)			$	675		$	725
	(Deductions) to Reconcile to Adjusted Free Cash Flow:
	Additions of long-lived assets			$	(125)		$	(135)
	Adjusted Free Cash Flow (Non-GAAP)			$	550		$	590

(a)	Represents stock-based compensation expense (recorded in Cost of sales, Selling, general and administrative, and Engineering – research and development).
(b)	Represents a gain (recorded in Other income (expense), net) related to an investment in the common stock of Jing-Jin Electric Technologies Co. Ltd.
(c)	Represents a gain (recorded in Other income (expense), net) related to investments in co-development agreements to expand our position in propulsion solution technologies.

 

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The Allison Transmission Holdings Stock at the time of publication of the news with a raise of +4,33 % to 54,25EUR on Lang & Schwarz stock exchange (27. Juli 2023, 22:14 Uhr).