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]

Core Viewpoint - Allison Transmission (ALSN) is anticipated to report a year-over-year increase in earnings despite a decline in revenues for the quarter ended June 2025, with the actual results being crucial for its near-term stock price movement [1][2]. Earnings Expectations - The consensus estimate for Allison Transmission's quarterly earnings is $2.22 per share, reflecting a year-over-year increase of +4.2%, while revenues are projected to be $802.93 million, down 1.6% from the previous year [3]. - The consensus EPS estimate has been revised 0.77% lower in the last 30 days, indicating a reassessment by analysts regarding the company's earnings prospects [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Allison Transmission is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.75%, suggesting a bearish outlook from analysts [12]. - The stock currently holds a Zacks Rank of 3, complicating predictions of an earnings beat [12]. Historical Performance - In the last reported quarter, Allison Transmission was expected to post earnings of $1.97 per share but exceeded expectations with actual earnings of $2.23, resulting in a surprise of +13.20% [13]. - Over the past four quarters, the company has consistently beaten consensus EPS estimates [14]. Conclusion - While the company does not appear to be a strong candidate for an earnings beat, it is essential for investors to consider other factors when making decisions regarding the stock ahead of its earnings release [17].

Core Insights - Allison Transmission has secured a new order for 3,040 MX™ cross-drive transmissions for Poland's Borsuk Infantry Fighting Vehicle (IFV) program, which is expected to drive growth in the defense market [1] - The partnership with Grupa Zbrojeniowa (PGZ) aims to enhance cooperation on tracked vehicle programs and expand Allison's service network in Poland [1] Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for both commercial and defense vehicles, and is the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [5] - The company has a presence in over 150 countries and operates manufacturing facilities in the USA, Hungary, and India, along with regional headquarters in the Netherlands, China, and Brazil [5] Product Advancements - The 3040 MX transmission features improved maneuverability with high-speed reverse, integrated steering, better acceleration, and enhanced fuel economy [2][3] - It is based on Allison's proven X300 propulsion system, which has been utilized in European CV90 and Warrior IFV drivetrain solutions for over 30 years [3] Production and Future Plans - Huta Stalowa Wola (HSW), a subsidiary of PGZ, is part of a consortium that will produce over 1,400 Borsuk tracked vehicles over the next 10-15 years [4] - The Borsuk is designed to replace the BWP-1 vehicle as the Polish military's tracked IFV and has been in testing since 2017, leading to a 2023 agreement with the Polish Ministry of Defense [4]

Core Insights - Allison Transmission's eGen Flex hybrid propulsion system has been selected by the Maryland Department of Transportation for use in New Flyer buses in the Baltimore metropolitan area, with production set for 2025 [1][4] - The eGen Flex system aims to enhance public transportation efficiency and assist cities in reducing their carbon emissions [2][3] Technology and Benefits - The eGen Flex system features innovative geofencing technology, allowing buses to operate up to 50% of their route in engine-off mode, significantly lowering emissions and noise [3] - The system also provides improved fuel economy, achieving up to 25% better fuel efficiency compared to traditional diesel buses, which offers financial advantages for municipalities [3] Company Overview - Allison Transmission is a leading designer and manufacturer of propulsion solutions for commercial and defense vehicles, and is the largest global manufacturer of medium- and heavy-duty fully automatic transmissions [5] - The company, founded in 1915 and headquartered in Indianapolis, Indiana, operates in over 150 countries and has regional headquarters in the Netherlands, China, and Brazil, along with manufacturing facilities in the USA, Hungary, and India [5]