Core Insights - Allison Transmission reported revenue of $814 million for the quarter ended June 2025, a slight decrease of 0.3% year-over-year, while EPS increased to $2.29 from $2.13 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $794.43 million, resulting in a positive surprise of +2.46%, and the EPS also surpassed the consensus estimate of $2.20 with a surprise of +4.09% [1] Financial Performance Metrics - Key metrics indicate that Allison Transmission's stock has underperformed, returning -10.5% over the past month compared to the S&P 500 composite's +0.6% [3] - Net Sales by End Market showed varied performance: - Global Off-Highway: $16 million vs. $18.45 million estimate, underperforming [4] - North America On-Highway: $417 million vs. $441.84 million estimate, a decline of -8.6% year-over-year [4] - Service Parts, Support Equipment & Other: $176 million vs. $162.13 million estimate, an increase of +6% year-over-year [4] - Outside North America On-Highway: $142 million vs. $123.26 million estimate, an increase of +10.9% year-over-year [4] - Defense: $63 million vs. $52.25 million estimate, a significant increase of +46.5% year-over-year [4]

Financial Data and Key Metrics Changes - Year-over-year net sales for Q2 2025 were flat at $814 million compared to the same period in 2024 [23] - Gross profit increased to $402 million, up $8 million from $394 million in Q2 2024 [25] - Net income for the quarter rose to $195 million, an increase of $8 million from $187 million in Q2 2024 [25] - Adjusted EBITDA for the quarter was $313 million, reflecting a 4% year-over-year increase [25] - Diluted earnings per share increased by 8% year-over-year to a record $2.29 [26] Business Line Data and Key Metrics Changes - Defense end market net sales increased by 47% year-over-year [23] - Outside North America on-highway end market achieved record quarterly net sales of $142 million, an 11% increase year-over-year, driven by higher demand in South America and Europe [23] - Service parts, support equipment, and other end market net sales increased by 6% year-over-year, primarily due to higher demand for service parts and price increases [24] - Global off-highway end market net sales decreased by 30%, and North America on-highway end market net sales decreased by 9% [24] Market Data and Key Metrics Changes - The company noted a significant increase in demand in South America and Europe, contributing to the growth in the outside North America on-highway end market [23] - The North American on-highway market is experiencing layoffs and production adjustments due to elevated dealer inventories and reduced demand [39][40] Company Strategy and Development Direction - The acquisition of Dana's off-highway business for approximately $2.7 billion is expected to enhance Allison's global footprint and operational capabilities [17][19] - The company anticipates $120 million in annual run rate synergies from the acquisition, primarily through operational efficiencies and procurement [18][21] - Allison aims to leverage Dana's technology centers for local development and cost synergies, enhancing product innovation and engineering capabilities [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed that current market conditions are viewed as a deferral of demand rather than a permanent decline, with expectations of improved conditions in 2026 [70] - The company is closely monitoring regulatory changes, including EPA emissions regulations, which may impact customer purchasing behavior [70] - Management remains optimistic about the defense market and expects continued growth in that segment [55] Other Important Information - The company revised its full-year 2025 guidance, expecting net sales to be in the range of $3.75 billion to $3.175 billion [28] - Capital expenditures are anticipated to be between $165 million and $175 million, with adjusted free cash flow expected in the range of $620 million to $660 million [28] Q&A Session Summary Question: Can you expand on the potential for inorganic growth post-acquisition? - Management indicated that the acquisition provides opportunities for bolt-on acquisitions and organic growth due to a larger global footprint and enhanced capabilities [30][31] Question: What areas are driving the guidance change? - Management noted significant revisions in North America on-highway build rates and OEM responses to market demand conditions as key factors influencing the guidance change [37][39] Question: Can you discuss margin guidance and pricing expectations? - Management highlighted that pricing was strong in the quarter, with expectations for continued positive pricing tailwinds, although volume deterioration is anticipated [48][50] Question: What is the outlook for the service parts business in the second half? - Management expects stable trends in service requirements, although demand for support equipment may decrease due to lower volumes [72]

Financial Data and Key Metrics Changes - Year-over-year net sales for Q2 2025 were $814 million, flat compared to the same period in 2024 [20] - Gross profit increased to $402 million, up $8 million from $394 million in Q2 2024 [22] - Net income for the quarter was $195 million, an increase of $8 million from $187 million in Q2 2024 [22] - Adjusted EBITDA for the quarter was $313 million, a 4% increase year over year [22] - Diluted earnings per share increased 8% year over year to a record $2.29 [23] Business Line Data and Key Metrics Changes - Defense end market net sales increased 47% year over year [20] - Outside North America on-highway end market net sales reached $142 million, an 11% increase year over year, driven by higher demand in South America and Europe [20] - Service parts, support equipment, and other end market net sales increased 6% year over year, driven by higher demand for service parts and price increases [21] - Global off-highway end market net sales decreased by 30% [21] - North America on-highway end market net sales decreased by 9% [21] Market Data and Key Metrics Changes - The company noted a significant decrease in North America on-highway build rates, with OEMs responding to near-term market demand conditions [39] - The defense market continues to show growth, with expectations for improvement in both wheeled and tracked vehicles in the second half of the year [55] - The service parts business is expected to remain stable, although demand for support equipment may decrease due to lower volumes [72] Company Strategy and Development Direction - The acquisition of Dana's off-highway business for approximately $2.7 billion is expected to enhance Allison's global footprint and operational capabilities [15] - The company anticipates $120 million in annual run rate synergies from the acquisition, primarily through operational efficiencies [15] - Allison aims to leverage Dana's global technology centers for local development and cost synergies [18] - The focus post-acquisition will be on combining the two businesses while maintaining solid financial performance [19] Management's Comments on Operating Environment and Future Outlook - Management expressed that current market conditions are viewed as a deferral of demand rather than a permanent decline [40] - The company is closely monitoring the impact of tariffs and regulatory changes, particularly regarding emissions regulations [70] - Management remains optimistic about the defense market and expects continued growth in that segment [55] Other Important Information - The company ended Q2 2025 with a net leverage ratio of 1.38 times and $778 million in cash [25] - Full year 2025 guidance was revised to net sales in the range of $3.75 billion to $3.175 billion [26] - The company plans to maintain its capital allocation strategy, balancing share buybacks and debt repayment [62] Q&A Session Summary Question: Can you expand on the potential for inorganic growth post-acquisition? - Management indicated that the acquisition provides opportunities for bolt-on acquisitions and organic growth due to a larger global footprint [29] Question: What areas are driving the guidance change? - Management noted significant revisions in North America on-highway build rates and OEM responses to market demand [39] Question: Can you discuss margin guidance and pricing expectations? - Management expects pricing to remain strong, with anticipated impacts from tariffs but limited exposure due to North American sourcing [51] Question: What is the outlook for the service parts business in the second half? - Management expects stable trends in service requirements, although demand for support equipment may decrease [72]

Q2 2025 Performance - Net sales were $814 million, a 0% variance from Q2 2024 [19] - Gross profit increased by 2% to $402 million, driven by price increases, offset by lower volumes and unfavorable material costs [19, 22] - Net income increased by 4% to $195 million, primarily due to higher gross profit and unrealized mark-to-market adjustments [19, 22] - Adjusted EBITDA increased by 4% to $313 million, with an Adjusted EBITDA margin of 38.5%, a 160 basis points increase [19, 22] - Diluted earnings per share increased by 8% to $2.29, driven by higher net income and lower diluted shares outstanding [19, 22] End Market Performance - North America On-Highway net sales decreased by 9% to $417 million, due to lower demand for medium-duty trucks [21] - Outside North America On-Highway net sales increased by 11% to $142 million, driven by higher demand in South America and Europe [21] - Global Off-Highway net sales decreased by 30% to $16 million, due to lower demand from the energy, mining, and construction sectors outside North America [21] - Defense net sales increased by 47% to $63 million, driven by growth initiatives [21] - Service Parts, Support Equipment & Other net sales increased by 6% to $176 million, driven by higher demand for service parts and price increases [21] Dana Off-Highway Acquisition - The total transaction value is approximately $2.7 billion, representing 6.8x Adjusted EBITDA (LTM 12/31/24) of ~$400 million or 5.2x including estimated run-rate synergies of ~$120 million [13] - Expected net leverage of less than 3.0x at close with near-term target of less than 2.0x [13] - Anticipated closing in late Q4 2025 [13]

[Second Quarter 2025 Financial & Operational Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20%26%20Operational%20Highlights) Allison Transmission reported Q2 2025 net sales of $814 million, record diluted EPS of $2.29, and announced the acquisition of Dana's Off-Highway business - Announced a definitive agreement to acquire Dana Incorporated's Off-Highway business for approximately **$2.7 billion**, with the transaction expected to close in late Q4 2025[2](index=2&type=chunk) Q2 2025 Key Financial Metrics | Metric | Value | YoY Change | | :--- | :--- | :--- | | Net Sales | $814 million | -0.2% | | Net Income | $195 million | +4% | | Diluted EPS | $2.29 (Record) | +8% | | Adjusted EBITDA | $313 million | +4% | | Adjusted EBITDA Margin | 38.5% | +160 bps | - Continued strength in the Defense end market and record quarterly net sales of **$142 million** in the Outside North America On-Highway end market were key top-line drivers[2](index=2&type=chunk)[3](index=3&type=chunk) - Repurchased **$102 million** of common stock during the quarter, representing over **1%** of outstanding shares, with year-to-date repurchases amounting to **3%** of outstanding shares[3](index=3&type=chunk) [Financial Performance Analysis](index=1&type=section&id=Financial%20Performance%20Analysis) Net sales were flat at $814 million, with Defense and Outside North America On-Highway growth offsetting North America declines, leading to a 4% net income increase [Net Sales by End Market](index=1&type=section&id=Net%20Sales%20by%20End%20Market) Q2 Net Sales by End Market ($M) | End Market | Q2 2025 | Q2 2024 | Variance ($M) | | :--- | :--- | :--- | :--- | | North America On-Highway | $417 | $456 | ($39) | | Outside North America On-Highway | $142 | $128 | $14 | | Global Off-Highway | $16 | $23 | ($7) | | Defense | $63 | $43 | $20 | | Service Parts, Support Equipment & Other | $176 | $166 | $10 | | **Total Net Sales** | **$814** | **$816** | **($2)** | - Key drivers for sales changes include: **Defense** increased by **$20 million** due to execution of growth initiatives; **Outside North America On-Highway** increased by **$14 million** from higher demand in South America and Europe; **North America On-Highway** decreased by **$39 million** due to lower demand for medium-duty trucks, partially offset by price increases[6](index=6&type=chunk) [Key Financial Metrics (Income Statement & Cash Flow)](index=2&type=section&id=Key%20Financial%20Metrics%20%28Income%20Statement%20%26%20Cash%20Flow%29) - Gross profit increased by **$8 million** to **$402 million**, primarily driven by price increases on certain products, which offset lower volumes and unfavorable material costs[8](index=8&type=chunk) - Selling, general and administrative (SG&A) expenses rose by **$20 million** to **$102 million**, principally due to **$15 million** of expenses related to the announced acquisition of the Dana Off-Highway business[9](index=9&type=chunk) - Net income increased by **$8 million** to **$195 million**, driven by higher gross profit and unrealized gains on marketable securities, partially offset by the increased SG&A expenses[10](index=10&type=chunk) - Net cash provided by operating activities increased by **$13 million** to **$184 million**, mainly due to lower working capital requirements and higher gross profit[11](index=11&type=chunk) [2025 Guidance Update](index=2&type=section&id=2025%20Guidance%20Update) The company revised its full-year 2025 guidance, reflecting market conditions, acquisition expenses, and tax impacts, while maintaining its Adjusted EBITDA margin midpoint Revised Full Year 2025 Guidance ($M) | Metric | Range | | :--- | :--- | | Net Sales | $3,075 - $3,175 | | Net Income | $640 - $680 | | Adjusted EBITDA | $1,130 - $1,180 | | Net Cash from Operating Activities | $785 - $835 | | Capital Expenditures | $165 - $175 | | Adjusted Free Cash Flow | $620 - $660 | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including Statements of Operations, Balance Sheets, and Cash Flows, for Q2 and YTD 2025 versus 2024 [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Unaudited, $M) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net sales | $814 | $816 | $1,580 | $1,605 | | Gross profit | $402 | $394 | $780 | $760 | | Operating income | $256 | $263 | $505 | $497 | | Net income | $195 | $187 | $387 | $356 | | Diluted EPS | $2.29 | $2.13 | $4.50 | $4.05 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (Unaudited, $M) | | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $778 | $781 | | Total Current Assets | $1,587 | $1,538 | | TOTAL ASSETS | $5,411 | $5,336 | | **LIABILITIES & EQUITY** | | | | Total Current Liabilities | $472 | $506 | | Long-term debt | $2,394 | $2,395 | | TOTAL LIABILITIES | $3,658 | $3,685 | | TOTAL STOCKHOLDERS' EQUITY | $1,753 | $1,651 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Unaudited, $M) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net cash provided by operating activities | $184 | $171 | $365 | $344 | | Net cash used for investing activities | ($33) | ($20) | ($59) | ($32) | | Net cash used for financing activities | ($132) | ($54) | ($316) | ($218) | | Net increase (decrease) in cash | $25 | $97 | ($3) | $93 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section details adjustments from GAAP to non-GAAP measures, including Adjusted EBITDA and Adjusted Free Cash Flow, for Q2 2025 and full-year guidance Q2 Reconciliation of Net Income to Adjusted EBITDA ($M) | | Three months ended June 30, | | :--- | :--- | | | **2025** | **2024** | | Net income (GAAP) | $195 | $187 | | Income tax expense | $47 | $47 | | Depreciation & Amortization | $30 | $29 | | Interest expense, net | $22 | $22 | | Acquisition-related expenses | $15 | $— | | Stock-based compensation | $8 | $8 | | Other adjustments | ($4) | $8 | | **Adjusted EBITDA (Non-GAAP)** | **$313** | **$301** | Full Year 2025 Guidance Reconciliation ($M) | | Low | High | | :--- | :--- | :--- | | **Net Income to Adjusted EBITDA** | | | | Net income (GAAP) | $640 | $680 | | Adjustments (Taxes, Interest, D&A, etc.) | $490 | $500 | | **Adjusted EBITDA (Non-GAAP)** | **$1,130** | **$1,180** | | **Operating Cash Flow to Adj. FCF** | | | | Net cash provided by Operating activities (GAAP) | $785 | $835 | | Additions of long-lived assets | ($165) | ($175) | | **Adjusted free cash flow (Non-GAAP)** | **$620** | **$660** |

Core Insights - The article emphasizes the importance of thorough analysis during earnings season, highlighting that successful investing requires more than just surface-level metrics and press releases [2][3] Company Analysis - Allison Transmission Holdings Inc. (ALSN) has demonstrated consistent growth, with revenue and net operating profit after tax (NOPAT) increasing by 4% and 9% compounded annually since 2014, respectively [6] - The NOPAT margin for Allison Transmission improved from 15% in 2014 to 25% in the trailing twelve months (TTM), while invested capital turns increased from 0.5 to 0.8 during the same period [6] - The return on invested capital (ROIC) for Allison Transmission rose from 8% in 2014 to 19% in the TTM, indicating enhanced operational efficiency [6] Valuation Insights - At a current price of $95 per share, Allison Transmission has a price-to-economic book value (PEBV) ratio of 0.9, suggesting that the market anticipates a permanent decline of 10% in NOPAT from TTM levels, which appears overly pessimistic given the company's historical growth [8] - Even with a conservative estimate where NOPAT margin falls to 22% and revenue grows by only 3% compounded annually through 2034, the stock could be valued at $127 per share, representing a 34% upside [9] Financial Adjustments - Significant adjustments were made in financial filings, including nearly $150 million in income statement adjustments, resulting in a net effect of removing under $100 million in non-operating expenses [10] - Over $2 billion in adjustments were made to the balance sheet to calculate invested capital, with a net decrease of over $600 million, particularly notable for deferred tax assets [11] - Valuation adjustments totaled under $4 billion, leading to a net decrease of over $2 billion in shareholder value, with significant adjustments for total debt and excess cash [11]

Core Viewpoint - Allison Transmission Holdings, Inc. is expected to report second-quarter 2025 results on August 4, with sales and earnings estimates of $794.43 million and $2.20 per share respectively [1][8] Financial Performance - The earnings projection indicates a year-over-year increase of 3.29%, while the revenue estimate suggests a decline of 2.64% compared to the previous year [2] - In the first quarter of 2025, Allison reported adjusted earnings of $2.23 per share, exceeding the Zacks Consensus Estimate of $1.97, and reflecting a 17% year-over-year increase. However, quarterly revenues of $766 million fell 3% from the previous year and missed the consensus estimate of $775 million [2] Market Demand and Outlook - Strong demand for Class 8 vocational vehicles in the North America On-Highway market is driving revenue growth, with expectations to continue this trend into 2025. The company anticipates adjusted EBITDA between $1.17 billion and $1.23 billion for 2025, an increase from $1.165 billion in 2024, and net income projected between $735 million and $785 million, up from $731 million in 2024 [3] R&D and Cost Pressures - The company's electrified propulsion initiatives are expected to increase spending levels, impacting cash flows. R&D costs rose approximately 3% year-over-year in 2024 due to higher spending on product initiatives, and further increases in R&D expenses are anticipated in 2025 [4] Earnings Prediction - The current model does not predict an earnings beat for Allison in the upcoming quarter, as it lacks the necessary combination of positive Earnings ESP and a favorable Zacks Rank [5] - Allison has an Earnings ESP of -0.41% and currently holds a Zacks Rank of 3 [6]

Core Insights - Allison Transmission has launched the Allison 4000 Series™ fully automatic transmission, now compatible with the CARB low NOx compliant PACCAR MX-13 engine for Kenworth T880 and Peterbilt Model 567 trucks, aiming to optimize performance while reducing NOx emissions [1][2]. Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles, recognized as the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [6]. - The company was founded in 1915 and is headquartered in Indianapolis, Indiana, with a presence in over 150 countries and regional headquarters in the Netherlands, China, and Brazil [6]. Product Features - The Allison 4000 Series transmission is designed to balance performance and fuel efficiency, utilizing a torque converter to significantly enhance engine torque, improving startability and overall productivity [4]. - The transmission is available in various configurations, offering six or seven forward gears depending on the model [3]. Fuel Efficiency Technology - Allison's FuelSense® 2.0 technology is available on the Peterbilt Model 567 and standard on Kenworth T880 models, designed to optimize performance in automatic transmissions for commercial vehicles [5]. - This technology can provide quantifiable fuel savings of up to 6% by dynamically adjusting shift points and torque based on load and driving conditions [5].

Core Insights - Allison Transmission has been awarded a multi-million contract for Phase 2 of the Next Generation Electrified Transmission (NGET) program, focusing on enhancing power capabilities and noise reduction in combat vehicles [1][2] - The advancements in the eMachine and Inverter system aim to provide flexible power modes, improving the performance and efficiency of modern armored combat vehicles [2] - The eGen Force system, part of Allison's broader propulsion solutions, features a high-efficiency range pack and is designed for silent mobility, reducing thermal and acoustic signatures [3] Company Overview - Allison Transmission 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 [5] - The company has a presence in over 150 countries, with regional headquarters in the Netherlands, China, and Brazil, and manufacturing facilities in the USA, Hungary, and India [5] - Founded in 1915 and headquartered in Indianapolis, Indiana, Allison has approximately 1,600 independent distributor and dealer locations worldwide [5]

Company Overview - Allison Transmission Holdings Inc. 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 [3] - The company was founded in 1915 and is headquartered in Indianapolis, Indiana, USA, with a presence in over 150 countries [3] - Allison has regional headquarters in the Netherlands, China, and Brazil, and manufacturing facilities in the USA, Hungary, and India [3] - The company operates approximately 1,600 independent distributor and dealer locations worldwide [3] Upcoming Financial Results - Allison Transmission will hold its second quarter 2025 financial results conference call on August 4, 2025, at 5:00 p.m. EDT [1] - Key executives, including the Chair and CEO, COO, and CFO, will review the company's financial performance during the call [1] - A news release announcing the financial results will be issued post market on the same day [1] Conference Call Details - The dial-in phone number for the conference call is +1-877-425-9470, with an international number of +1-201-389-0878 [2] - A live webcast will be available online, and a replay will be accessible from 9:00 p.m. EDT on August 4 until 11:59 p.m. EDT on August 18 [2] - The replay can be accessed using the dial-in number +1-844-512-2921 and the international replay number +1-412-317-6671, with a passcode of 13754959 [2]