Full Year 2025 Allison Transmission Holdings Inc Earnings Call

February 23, 2026

Speaker #1: Good afternoon. Thank you for standing by. Welcome to Allison's fourth quarter 2025 earnings conference call. My name is Paul, and I will be your conference call operator today.

Operator: Good afternoon. Thank you for standing by. Welcome to Allison's Q4 2025 Earnings Conference Call. My name is Paul, and I will be your conference call operator today. At this time, all participants are in a listen-only mode. After prepared remarks, Allison 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, please press star zero on your telephone keypad. I would now like to turn the conference call over to Jackie Boles, Executive Director of Treasury and Investor Relations. Please go ahead, Jackie.

Speaker #1: At this time, all participants are in a listen-only mode. After prepared remarks, Allison executives will conduct a question-and-answer session and conference call participants will be given instructions at that time.

Speaker #1: As a reminder, this conference call is being recorded. If anyone should require operator assistance, please press *0 on your telephone keypad. I would now like to turn the conference call over to Jacalyn Bolles, Executive Director of Treasury and Investor Relations.

Speaker #1: Please go ahead, Jacalyn.

Speaker #2: Thank you, Paul. Good afternoon, and thank you for joining us for our fourth quarter 2025 earnings conference call. With me this afternoon are Dave Graziosi, our Chair, President, and Chief Executive Officer; Scott Mell, our Chief Financial Officer and Treasurer; Fred Bohley, Allison's Chief Operating Officer and Allison Transmission Business Unit Leader; and Craig Price, Allison Off-Highway Business Unit Leader.

Jackie Boles: Thank you, Paul. Good afternoon, and thank you for joining us for our Q4 2025 earnings conference call. With me this afternoon are David Graziosi, our Chair, President, and Chief Executive Officer; Scott Mell, our Chief Financial Officer and Treasurer; Fred Bohle, Allison's Chief Operating Officer and Allison Transmission Business Unit Leader; and Craig Price, Allison Off-Highway Business Unit Leader. As a reminder, this conference call, webcast, and this afternoon's presentation are available on the Investor Relations section of allisontransmission.com. A replay of this call will be available through 9 March. As noted on slide 2 of the presentation, many of our remarks today contain forward-looking statements based on current expectations.

Jackie Bolles: Thank you, Paul. Good afternoon, and thank you for joining us for our Q4 2025 earnings conference call. With me this afternoon are David Graziosi, our Chair, President, and Chief Executive Officer; Scott Mell, our Chief Financial Officer and Treasurer; Fred Bohle, Allison's Chief Operating Officer and Allison Transmission Business Unit Leader; and Craig Price, Allison Off-Highway Business Unit Leader. As a reminder, this conference call, webcast, and this afternoon's presentation are available on the Investor Relations section of allisontransmission.com. A replay of this call will be available through 9 March. As noted on slide 2 of the presentation, many of our remarks today contain forward-looking statements based on current expectations.

Speaker #2: As a reminder, this conference call webcast and this afternoon's presentation are available on the Investor Relations section of allisontransmission.com. A replay of this call will be available through March 9.

Speaker #2: As noted on slide 2 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 risks, including those set forth in our annual report on Form 10-K for the year ended December 31st, 2024, and quarterly report on Form 10-Q for the quarter ended September 30th, 2025.

Jackie Boles: These forward-looking statements are subject to known and unknown risks, including those set forth in our annual report on Form 10-K for the year ended 31 December 2024, and quarterly report on Form 10-Q for the quarter ended 30 September 2025. 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 that we express today. In addition, as noted on slide 3 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 Q4 2025 earnings press release. Today's call is set to end at 5:45 PM Eastern Time.

Jackie Bolles: These forward-looking statements are subject to known and unknown risks, including those set forth in our annual report on Form 10-K for the year ended 31 December 2024, and quarterly report on Form 10-Q for the quarter ended 30 September 2025. 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 that we express today. In addition, as noted on slide 3 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 Q4 2025 earnings press release. Today's call is set to end at 5:45 PM Eastern Time.

Speaker #2: 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 that we expressed today.

Speaker #2: In addition, as noted on slide 3 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 fourth quarter 2025 earnings press release.

Speaker #2: Today's call is set to end at 5:45 PM Eastern Time. In order to maximize participation opportunities on the call, we'll take just one question from each analyst.

Jackie Boles: In order to maximize participation opportunities on the call, we'll take just one question from each analyst. Please turn to slide 4 of the presentation for the call agenda. During today's call, Dave Graziosi will reaffirm strategic opportunities presented by the acquisition of Dana's Off-Highway business, and introduce Craig Price, Allison Off-Highway's President. Following remarks from Craig, Dave will present the Allison go-forward business unit reporting structure prior to reviewing the highlights from Allison Transmission's full year 2025 results. Fred Bohle will review recent announcements across our business. Scott Mell will end the prepared remarks with a review of Allison Transmission's Q4 2025 financial performance, and Allison's full year 2026 guidance prior to commencing the Q&A. I'll turn the call over to Dave.

Jackie Bolles: In order to maximize participation opportunities on the call, we'll take just one question from each analyst. Please turn to slide 4 of the presentation for the call agenda. During today's call, Dave Graziosi will reaffirm strategic opportunities presented by the acquisition of Dana's Off-Highway business, and introduce Craig Price, Allison Off-Highway's President. Following remarks from Craig, Dave will present the Allison go-forward business unit reporting structure prior to reviewing the highlights from Allison Transmission's full year 2025 results. Fred Bohle will review recent announcements across our business. Scott Mell will end the prepared remarks with a review of Allison Transmission's Q4 2025 financial performance, and Allison's full year 2026 guidance prior to commencing the Q&A. I'll turn the call over to Dave.

Speaker #2: Please turn to slide 4 of the presentation for the call agenda. During today’s call, Dave Graziosi will reaffirm strategic opportunities presented by the acquisition of Dana’s Off-Highway Business and introduce Craig Price, Allison Off-Highway’s President.

Speaker #2: Following remarks from Craig, Dave will present the Allison Go Forward Business Unit Reporting Structure prior to reviewing highlights from Allison Transmission's full-year 2025 results.

Speaker #2: Fred Bohley will then review recent announcements across our business. Scott Mell will end the prepared remarks with a review of Allison Transmission's fourth quarter 2025 financial performance and Allison's full year 2026 guidance.

Speaker #2: Prior to commencing the Q&A, now I'll turn the call over to Dave.

Speaker #3: Thank you, Jacalyn. Good afternoon, and thank you for joining us. In January, we announced the completion of our acquisition of the Off-Highway Drive and Motion System Business of Dana Incorporated.

David Graziosi: Thank you, Jackie. Good afternoon. Thank you for joining us. In January, we announced the completion of our acquisition of the Off-Highway Drive and Motion Systems business of Dana Incorporated. I would like to welcome our new colleagues around the world. We are excited to bring these two world-class businesses together with 14,000 employees operating in 25 countries, creating a truly global leader in the end markets we serve. In late January, we welcomed our new colleagues and celebrated our combined company through nearly 50 events across our global sites. I want to thank everyone who participated in these events, marking our first opportunity to come together as one Allison team. The sense of unity across our sites was clear and encouraging.

Speaker #3: I would like to welcome our new colleagues around the world. We are excited to bring these two world-class businesses together, with 14,000 employees operating in 25 countries, creating a truly global leader in the markets we serve.

Speaker #3: In late January, we welcomed our new colleagues and celebrated our combined company through nearly 50 events across our global sites. I want to thank everyone who participated in these events, marking our first opportunity to come together as one Allison team.

Speaker #3: The sense of unity across our sites was clear and encouraging. Together, we begin this journey with a substantially expanded market reach and much broader portfolio of high-quality and reliable products, creating a platform that will continue to deliver strong financial performance from both organic and inorganic growth.

David Graziosi: Together, we begin this journey with a substantially expanded market reach and much broader portfolio of high quality and reliable products, creating a platform that will continue to deliver strong financial performance from both organic and inorganic growth. Our talented colleagues are dedicated to helping support our customers and their end users as they continue to respond to the global mega trends shaping the modern industrial world. On slide five of the presentation, we outline attributes strengthening our position as a premier industrial company. As a combined company, Allison will leverage an expanded global footprint for more local, for local production, with increased proximity to customers and markets, providing advantages in meeting both commercial and government customers' requirements. Allison will also utilize our global technology centers for local development, with realization of cost synergies through combined engineering, research, and development.

Speaker #3: Our talented colleagues are dedicated to helping support our customers and their end users as they continue to respond to the global megatrends shaping the modern industrial world.

Speaker #3: On slide 5 of the presentation, we outline attributes strengthening our position as a premier industrial company. As a combined company, Allison will leverage an expanded global footprint for more local-for-local production, with increased proximity to customers and markets, providing advantages in meeting both commercial and government customers' requirements.

Speaker #3: Allison will also utilize our global technology centers for local development, with realization of cost synergies through combined engineering, research, and development. We believe that complementary technical knowledge within the combined business in areas such as software and controls, fully integrated commercial-duty propulsion solutions, and electrification will accelerate product innovation and progress on key engineering capabilities and initiatives.

David Graziosi: We believe that complementary technical knowledge within the combined business in areas such as software and controls, fully integrated commercial duty, propulsion solutions, and electrification will accelerate product innovation and progress on key engineering capabilities and initiatives. We will continue our long history of engineering expertise, delivering products known for quality, reliability, and durability across diverse drivetrain components and work solutions. With greater purchasing scale, as well as vertical integration opportunities in manufacturing in best-cost countries, Allison expects opportunities for synergy realization and cost reduction initiatives within our operations. Finally, while our focus over the last two months post-close has been on successful combination and integration of our businesses, our teams are working diligently on synergy capture and growth initiatives.

Speaker #3: We will continue our long history of engineering expertise delivering products known for quality, reliability, endurability across diverse drivetrain components and work solutions. With greater purchasing scale as well as vertical integration opportunities in manufacturing and best-cost countries, Allison expects opportunities for synergy realization and cost reduction initiatives within our operations.

Speaker #3: Finally, while our focus over the last two months post-close has been on successful combination and integration of our businesses, our teams are working diligently on synergy capture and growth initiatives.

Speaker #3: In this transformational moment, in Allison's history, we are confident in our ability to combine the two businesses while realizing annual run rate synergies and maintaining our focus on solid financial performance and continued growth as a premier industrial company.

David Graziosi: In this transformational moment in Allison's history, we are confident in our ability to combine the two businesses while realizing annual run rate synergies, maintaining our focus on solid financial performance, and continued growth as a premier industrial company. With regards to our reporting structure, as described in the press release announcing the acquisition close, the combined company will be comprised of two business units: Allison Transmission and Allison Off-Highway Drive & Motion Systems. Allison Transmission will be led by Fred Bohle, and Allison Off-Highway Drive & Motion Systems will be led by Craig Price. Both hold the title of President and Business Unit Leader, reporting to me. Fred will continue to serve as Allison's Chief Operating Officer. Craig, if you'd like to say a few words?

Speaker #3: With regards to our reporting structure, as described in the press release announcing the acquisition close, the combined company will be comprised of two business units: Allison Transmission and Allison Off-Highway Drive and Motion Systems.

Speaker #3: Allison Transmission will be led by Fred Bohley, and Allison Off-Highway Drive and Motion Systems will be led by Craig Price. Both hold the title of President and Business Unit Leader, reporting to me.

Speaker #3: Fred will continue to serve as Allison's Chief Operating Officer. Craig, if you'd like to say a few words.

Speaker #4: Thank you, Dave. Good afternoon, everyone. I am honored to step into the role of Off-Highway President and excited to be part of this pivotal moment in Allison's history.

Craig Price: Thank you, Dave. Good afternoon, everyone. I am honored to step into the role of Off-Highway President and excited to be part of this pivotal moment in Allison's history. With the close of the acquisition, we are entering a new chapter focused on sustainable growth, disciplined execution, and long-term value creation. From my earliest conversations with Allison's leadership team, it was clear that our businesses share a strong alignment around innovation, operational excellence, and delivering meaningful value to customers and shareholders. This combination brings together highly complementary strengths. The Off-Highway business contributes deep end markets expertise, a proven track record, and a highly capable, engaged team. Together, we are positioned to leverage enhanced scale, resources, and global platforms to accelerate growth opportunities. As we move forward, our priorities are clear: seamless integration whilst maintaining disciplined execution.

Speaker #4: With the close of the acquisition, we are entering a new chapter focused on sustainable growth, disciplined execution, and long-term value creation. From my earliest conversations with Allison's leadership team, it was clear that our businesses share a strong alignment around innovation, operational excellence, and delivering meaningful value to customers and shareholders.

Speaker #4: This combination brings together highly complementary strengths. The Off-Highway Business contributes deep end-market expertise, a proven track record, and a highly capable, engaged team. Together, we are positioned to leverage enhanced scale, resources, and global platforms to accelerate growth opportunities.

Speaker #4: As we move forward, our priorities are clear. Seamless integration whilst maintaining disciplined execution. We are confident in our ability to implement our plans and look forward to updating you on our progress in the quarters ahead.

Craig Price: We are confident in our ability to implement our plans and look forward to updating you on our progress in the quarters ahead. Dave?

Speaker #4: Dave?

Speaker #3: Thank you, Craig. Moving on to Allison Transmission's full-year 2025 performance highlights. Before I begin, please note that these 2025 results do not reflect the financial results of the Off-Highway Business we acquired from Dana on January 1st.

David Graziosi: Thank you, Craig. Moving on to Allison Transmission's full year 2025 performance highlights. Before I begin, please note that these 2025 results do not reflect the financial results of the Off-Highway business we acquired from Dana on 1 January 2025. The year began with strong momentum. However, as the year progressed, our performance was negatively impacted by broader macroeconomic factors, including global trade policies, uncertainties, and sluggish economic growth in most of the regions in which we operate. Despite these external headwinds, we remain disciplined, focusing on cost control and execution. Although full year revenue was down 7% year-over-year, we increased full year adjusted EBITDA margin by 140 basis points year-over-year to 37.5%.

Speaker #3: The year began with strong momentum. However, as the year progressed, our performance was negatively impacted by broader macroeconomic factors, including global trade, policies uncertainties, and sluggish economic growth in most of the regions in which we operate.

Speaker #3: Despite these external headwinds, we remain disciplined, focusing on cost control and execution. Although full-year revenue was down 7% year over year, we increased full-year adjusted EBITDA margin by 140 basis points year over year to 37.5%.

Speaker #3: With recent events providing improved clarity on the timing and impact of tariffs and emissions regulations, we are beginning to see early signs of demand improvements within our largest end-market, North America, on highway and a rebound from the trough in the third quarter of 2025.

David Graziosi: With recent events providing improved clarity on the timing and impact of tariffs and emissions regulations, we are beginning to see early signs of demand improvements within our largest end market, North America, on highway, and a rebound from the trough in Q3 2025. We enter 2026 confident in our ability to navigate ongoing uncertainty. In addition, we are pleased with the ongoing performance of our defense end market, which for the year increased revenue by 26% to $267 million. We have now achieved our $100 million incremental annual revenue objective for this end market and remain focused on further growth opportunities, given substantial increases in global defense spending commitments. Throughout the year, we are also satisfied our capital allocation priorities.

Speaker #3: We enter 2026 confident in our ability to navigate ongoing uncertainty. In addition, we are pleased with the ongoing performance of our defense end-market, which for the year increased revenue by 26% to $267 million.

Speaker #3: We have now achieved our $100 million incremental annual revenue objective for this end market and remain focused on further growth opportunities, given substantial increases in global defense spending commitments.

Speaker #3: Throughout the year, we also satisfied our capital allocation priorities. For the full year, we repurchased $328 million of common stock, representing 4% of outstanding shares.

David Graziosi: For the full year, we repurchased $328 million of common stock, representing 4% of outstanding shares. We also increased our quarterly dividend in Q1 2025 to $0.27 per share. The ability to complete an acquisition while simultaneously returning capital to shareholders underscores the strength of our balance sheet and the resilience of our cash flow. We remain focused on maintaining our shareholder-aligned capital allocation priorities as we progress with the integration of the Allison Off-Highway business segment. In summary, although 2025 was challenging, we exited the year with reaffirmed confidence in our business, and we look forward to the future as we enter a new chapter in Allison's over 110-year history. Now, I'll pass it over to Fred to review recent announcements across our business. Fred?

Speaker #3: We also increased our quarterly dividend in the first quarter of 2025 to $27 per share. The ability to complete an acquisition while simultaneously returning capital to shareholders underscores the strength of our balance sheet and the resilience of our cash flow.

Speaker #3: We remain focused on maintaining our shareholder-aligned capital allocation priorities as we progress with the integration of the Allison Off-Highway Business segment. In summary, although 2025 was challenging, we exited the year with reaffirmed confidence in our business, and we look forward to the future as we enter a new chapter in Allison's over 110-year history.

Speaker #3: Now, I'll pass it over to Fred to review recent announcements across our business. Fred?

Speaker #4: Thank you, Dave. Good afternoon, everyone. In early December, we outlined our expanding footprint and investment in India with strategic initiatives spanning multiple sectors, starting with defense.

Craig Price: Thank you, Dave. Good afternoon, everyone. In early December, we outlined our expanding footprint and investment in India with strategic initiatives spanning multiple sectors. Starting with defense, we recently signed a memorandum of understanding with Armoured Vehicles Nigam Limited, a government-owned defense manufacturer. The multi-phase agreement marks a significant step toward establishing a maintenance, repair, and overhaul center in India to service current and future Allison Cross-Drive transmission programs. This partnership aligns with India's broader defense modernization and localization efforts, including the ongoing Future Infantry Combat Vehicle program, utilizing our 3040 MX Cross-Drive transmission. In the India mining sector, Allison's industry-leading value proposition continues to drive business expansion by contributing to the nation's infrastructure development and resource extraction efficiency.

Fred Bohley: Thank you, Dave. Good afternoon, everyone. In early December, we outlined our expanding footprint and investment in India with strategic initiatives spanning multiple sectors. Starting with defense, we recently signed a memorandum of understanding with Armoured Vehicles Nigam Limited, a government-owned defense manufacturer. The multi-phase agreement marks a significant step toward establishing a maintenance, repair, and overhaul center in India to service current and future Allison Cross-Drive transmission programs. This partnership aligns with India's broader defense modernization and localization efforts, including the ongoing Future Infantry Combat Vehicle program, utilizing our 3040 MX Cross-Drive transmission. In the India mining sector, Allison's industry-leading value proposition continues to drive business expansion by contributing to the nation's infrastructure development and resource extraction efficiency.

Speaker #4: We recently signed a memorandum of understanding with armored vehicle Nigan Limited, a government-owned defense manufacturer. The multi-phase agreement marks a significant step toward establishing a maintenance, repair, and overhaul center in India to service current and future Allison CrossDrive Transmission programs.

Speaker #4: This partnership aligns with India's broader defense modernization and localization efforts, including the ongoing future infantry combat vehicle program utilizing our 3040 MX CrossDrive Transmission.

Speaker #4: In the India mining sector, Allison's industry-leading value proposition continues to drive business expansion by contributing to the nation's infrastructure development and resource extraction efficiency.

Speaker #4: End-users are expanding their fleets of wide-body dump trucks equipped with our 4,800-series fully automatic transmissions. Citing the consistent, reliability, and performance of Allison products in challenging environments.

Fred Bohle: End users are expanding their fleets of wide body dump trucks equipped with our 4800 Series fully automatic transmissions, citing the consistent reliability and performance of Allison products in challenging environments. The integration of local production and global sales is underscored by Allison's strategic position within India's export hub. Daimler India Commercial Vehicles has begun shipments of Allison's 3000 Series fully automatic transmissions integrated into Fuso's medium-duty trucks exported to South Africa. These developments are supported by Allison's capital investments in the region. The company's state-of-the-art facility expansion in Chennai, announced in late 2024, is operational and will ramp to full capacity in 2027. In addition, we are excited for the opportunities presented by our expanded footprint and presence in India, with 4 manufacturing plants and around 4,000 employees joining Allison from the Off-Highway Drive and Motion Systems team.

Fred Bohley: End users are expanding their fleets of wide body dump trucks equipped with our 4800 Series fully automatic transmissions, citing the consistent reliability and performance of Allison products in challenging environments. The integration of local production and global sales is underscored by Allison's strategic position within India's export hub. Daimler India Commercial Vehicles has begun shipments of Allison's 3000 Series fully automatic transmissions integrated into Fuso's medium-duty trucks exported to South Africa. These developments are supported by Allison's capital investments in the region. The company's state-of-the-art facility expansion in Chennai, announced in late 2024, is operational and will ramp to full capacity in 2027. In addition, we are excited for the opportunities presented by our expanded footprint and presence in India, with 4 manufacturing plants and around 4,000 employees joining Allison from the Off-Highway Drive and Motion Systems team.

Speaker #4: The integration of local production and global sales is underscored by Allison's strategic position within India's export hub. Daimler India Commercial Vehicles has begun shipments of Allison's 3,000-series fully automatic transmissions integrated into Fuso's medium-duty trucks exported to South Africa.

Speaker #4: These developments are supported by Allison's capital investments in the region. The company's state-of-the-art facility expansion in Chennai, announced in late 2024, is operational and will ramp to full capacity in 2027.

Speaker #4: In addition, we are excited for the opportunities presented by our expanded footprint and presence in India, with four manufacturing plants and around 4,000 employees joining Allison from the Off-Highway Drive and Motion System team.

Speaker #4: Our strategic investments not only reinforce Allison's ability to meet increasing demand across global markets, but they also solidify the company's role as a key partner in India's industrial growth.

Fred Bohle: Our strategic investments not only reinforce Allison's ability to meet increasing demand across global markets, but it also solidifies the company's role as a key partner in India's industrial growth. With more local for local production and partnerships with OEMs supporting the Made in India framework, Allison's opportunities are expanded and our competitive advantages are strengthened. Thank you, and I'll now turn the call over to Scott for a recap of Allison Transmission's Q4 2025 financial performance and introduction of Allison's 2026 guidance.

Fred Bohley: Our strategic investments not only reinforce Allison's ability to meet increasing demand across global markets, but it also solidifies the company's role as a key partner in India's industrial growth. With more local for local production and partnerships with OEMs supporting the Made in India framework, Allison's opportunities are expanded and our competitive advantages are strengthened. Thank you, and I'll now turn the call over to Scott for a recap of Allison Transmission's Q4 2025 financial performance and introduction of Allison's 2026 guidance.

Speaker #4: With more local-for-local production, and partnerships with OEMs supporting the made-in-India framework, Allison's opportunities are expanded and our competitive advantages are strengthened. Thank you, and I'll now turn the call over to Scott for a recap of Allison Transmission's fourth-quarter 2025 financial performance and introduction of Allison's 2026 guidance.

Speaker #3: Thank you, Fred. Please turn to slide 6 of the presentation for the Q4 2025 performance summary. Year-over-year net sales of $737 million were down 7% from the same period in 2024.

Scott Mell: Thank you, Fred. Please turn to Slide 6 of the presentation for the Q4 2025 performance summary. Year-over-year net sales of $737 million were down 7% from the same period in 2024. In the outside North American on-highway end market, we achieved record Q4 revenue, leading to record full-year revenue of $507 million. In the defense end market, we continue to execute on our growth initiatives with Q4 net sales of $73 million, up 7% year-over-year. Although Q4 net sales were down year-over-year in our North America on-highway end market, the sequential improvement of 10% from the trough in the Q3 demonstrates the positive impact that improved clarity has had on end user purchasing decisions.

Speaker #3: In the outside North American on-highway end market, we achieved record fourth-quarter revenue leading the record full-year revenue of $507 million. In the defense end market, we continued to execute on our growth initiatives with fourth-quarter net sales of $73 million up 7% year-over-year, although fourth-quarter net sales were down year-over-year in our North America on-highway end market.

Speaker #3: The sequential improvement of 10% from the trough in the third quarter demonstrates the positive impact that improved clarity has had on end-user purchasing decisions.

Speaker #3: Net income for the quarter was $99 million, a decrease of $76 million from $175 million for the same period in 2024. This year-over-year decrease in net income reflects two meaningful one-time items.

Scott Mell: Net income for Q4 was $99 million, a decrease of $76 million from $175 million for the same period in 2024. This year-over-year decrease in net income reflects two meaningful one-time items. First, we recorded a $29 million impairment related to our investment in electrification. Second, we incurred approximately $26 million of expenses related to the Dana Off-Highway business acquisition. When adjusting net income for the impairment loss and the acquisition-related expenses, our Q4 net income was $141 million, with diluted earnings per share of $1.68. Despite a net sales decrease of 7% year-over-year, adjusted EBITDA margin increased over 200 basis points to 36% for Q4.

Speaker #3: First, we recorded a $29 million impairment related to our investment in electrification. Second, we incurred approximately $26 million of expenses related to the Dana Off-Highway business acquisition.

Speaker #3: When adjusting net income for the impairment loss and the acquisition-related expenses, our fourth-quarter net income was $141 million, with diluted earnings per share of $1.68.

Speaker #3: Despite a net sales decrease of 7% year-over-year, adjusted EBITDA margin increased over $200 basis points to $36% for the fourth quarter. Net cash provided by operating activities for the quarter was $243 million, an increase of $32 million from the same period in 2024.

Scott Mell: Net cash provided by operating activities for the quarter was $243 million, an increase of $32 million from the same period in 2024. The increase was principally driven by lower cash income taxes, reduced engineering R&D spending, and lower operating working capital funding requirements, which more than offset lower gross profit and $17 million of payments for acquisition-related expenses. Our cash generation remains a key strength of our business, with adjusted free cash flow of $169 million in Q4. We continue to maintain solid operating cash flow, reflecting in the resilience of our operations and disciplined cost management. We expect to continue to generate substantial and sustainable free cash flow as a combined business, with our robust cash generation ensuring our capital allocation priorities remain intact.

Speaker #3: The increase was principally driven by lower cash income taxes reduced engineering, R&D spending, and lower operating working capital funding requirements. With more than offset lower gross profit and $17 million of payments for acquisition-related expenses.

Speaker #3: Our cash generation remains a key strength of our business, with adjusted free cash flow of $169 million in the fourth quarter. We continue to maintain solid operating cash flow reflecting in the resilience of our operations and disciplined cost management.

Speaker #3: We expect to continue to generate substantial and sustainable free cash flow as a combined business, with our robust cash generation ensuring our capital allocation priorities remain intact.

Speaker #3: We will continue to invest in our businesses to drive long-term growth and innovation, with accelerated debt reduction, which will allow us to reach our leverage targets in the near term.

Scott Mell: We will continue to invest in our businesses to drive long-term growth and innovation, with accelerated debt reduction, which will allow us to reach our leverage targets in the near term. We have already started to pay down debt incurred for the Off-Highway acquisition and will continue to provide updates as we progress. Importantly, Allison remains fully committed to returning capital to shareholders through ongoing share repurchases and consistent dividend payments, reinforcing our disciplined approach to creating long-term value. A detailed overview of Allison Transmission's net sales by end market and Q4 2025 financial performance can be found on Slide 7, 8, and 9 of the presentation. Please turn to Slide 10 of the presentation for Allison's 2026 guidance. Before I cover our 2026 guidance, I want to highlight that starting with our Q1 2026 10-Q, we will be providing 2 segment reporting.

Speaker #3: We have already started to pay down debt incurred for the Off-Highway acquisition and will continue to provide updates as we progress. Importantly, Allison remains fully committed to returning capital to shareholders through ongoing share repurchases and consistent dividend payments, reinforcing our disciplined approach to creating long-term value.

Speaker #3: A detailed overview of Allison Transmission's net sales by end market and Q4 2025 financial performance can be found on slide 7, 8, and 9 of the presentation.

Speaker #3: Please turn the slide 10 of the presentation for Allison's 2026 guidance. Before I cover our 2026 guidance, I want to highlight that starting with our Q1 2026 10Q, we will be providing two segment reporting.

Speaker #3: One for the Allison Transmission business unit, which will for the most part reflect the historical Allison Transmission's business, and one for the Allison Off-Highway Drive and Motion Systems business unit, which will reflect the business acquired from Dana.

Scott Mell: One for the Allison Transmission business unit, which will, for the most part, reflect the historical Allison Transmissions business. One for the Allison Off-Highway Drive and Motion Systems business unit, which will reflect the business acquired from Dana. In addition, we will report financial results for the Allison Group, which will include primarily functional costs that support both business segments. We will provide additional details on this reporting structure as we move forward. For the full year 2026, we are providing the following guidance: consolidated net sales in the range of $5.575 billion to 5.925 billion.

Speaker #3: In addition, we will report financial results for the Allison Group, which will include primarily functional costs that support both business segments. We will provide additional details on this reporting structure as we move forward.

Speaker #3: For the full year 2026, we are providing the following guidance. Consolidated net sales in the range of $5 billion, 575 million, to $5 billion, 925 million.

Speaker #3: This includes net sales for the Allison Transmission segment in the range of $3 billion, 25 million, to $3 billion, 175 million. And net sales for the Allison Off-Highway Drive and Motion System segment in the range of $2 billion, 550 million, to $2 billion, 750 million.

Scott Mell: This includes net sales for the Allison Transmission segment in the range of $3.025 to 3.175 billion, and net sales for the Allison Off-Highway Drive & Motion Systems segment in the range of $2.55 to 2.75 billion. Consolidated net income in the range of $600 to 750 million, subject to the completion of purchase price accounting associated with the acquisition of the Allison Off-Highway segment. Our net income guidance for 2026 includes approximately $70 million of one-time pre-tax expenses associated with the pardon me, separation, integration, and restructuring of the Allison Off-Highway segment. Even with these one-time costs, we expect the Allison Off-Highway acquisition to be accretive to net income and earnings per share in 2026.

Speaker #3: Consolidated net income in the range of $600 to $750 million, subject to the completion of purchase price accounting associated with the acquisition of the Allison Off-Highway segment.

Speaker #3: Our net income guidance for 2026 includes approximately $70 million of one-time pre-tax expenses associated with the separate—pardon me, separation, integration, and restructuring of the Allison Off-Highway segment.

Speaker #3: Even with these one-time costs, we expect the Allison Off-Highway acquisition to be accretive to net income and earnings per share in 2026. Further, we expect consolidated adjusted EBITDA in the range of $1 billion, 365 million, to $1 billion, 515 million.

Scott Mell: Further, we expect consolidated adjusted EBITDA in the range of $1,365 million to 1,515 million. At the midpoint, this implies a 25% adjusted EBITDA margin. Our adjusted EBITDA margin guidance assumes continued softness in the North America on-highway end market, particularly for medium-duty trucks, with no meaningful recovery model for Class A vocational trucks. Also, key Allison Off-Highway end markets are expected to remain at or near trough. As previously communicated, we expect to capture approximately $120 million of annual run rate synergies over the next few years. Once the full synergy capture is realized and we see moderate improvements in end market conditions, we expect consolidated adjusted EBITDA margins in the range of 27% to 29%.

Speaker #3: At the midpoint, this implies a 25% adjusted EBITDA margin. Our adjusted EBITDA margin guidance assumes continued softness in the North America on-highway end market, particularly for medium-duty trucks, with no meaningful recovery modeled for Class 8 vocational trucks.

Speaker #3: Also, key Allison Off-Highway end markets are expected to remain at or near trough. As previously communicated, we expect to capture approximately $120 million of annual run rate synergies over the next few years.

Speaker #3: Once the full synergy capture is realized, and we see moderate improvements in end market conditions, we expect consolidated adjusted EBITDA margins in the range of $27 to $29 percent.

Speaker #3: For our 2026 cash flow guidance, we anticipate consolidated net cash provided by operating activities in the range of $970 million, to $1 billion, 100 million.

Scott Mell: For our 2026 cash flow guidance, we anticipate consolidated net cash provided by operating activities in the range of $970 million to $1,100 million. Consolidated capital expenditures in the range of $295 million to $315 million, including one-time separation and integration CapEx of approximately $45 million, and consolidated adjusted free cash flow in the range of $655 million to $805 million. Please note that our consolidated net cash provided by operating activities guidance includes approximately $55 million of one-time cash outlays associated with our acquisition of the Off-Highway Drive and Motion Systems business unit. In addition to our financial guidance, slides 11 and 12 in the presentation provide commentary on our 2026 outlook for the Allison Transmission and Allison Off-Highway end markets, respectively.

Speaker #3: Consolidated capital expenditures in the range of $295 million to $315 million, including one-time separation and integration CapEx of approximately $45 million, and consolidated adjusted free cash flow in the range of $655 million to $805 million.

Speaker #3: Please note that our consolidated net cash provided by operating activities guidance includes approximately $55 million of one-time cash outlays associated with our acquisition of the Off-Highway Drive and Motion Systems business unit.

Speaker #3: In addition to our financial guidance, slides 11 and 12 in the presentation provide commentary on our 2026 outlook for the Allison Transmission and Allison Off-Highway end markets, respectively.

Speaker #3: This concludes our prepared remarks. Paul, please open the call for questions.

Scott Mell: This concludes our prepared remarks. Paul, please open the call for questions.

Speaker #4: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. In the interest of time, we ask that participants limit themselves to one question. One moment please, while we poll for questions. Thank you. Our first question is from Rob Wertheimer with Melius Research.

Speaker #4: A confirmation tone will indicate your line is in the question queue. You may press star two (*) to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #4: In the interest of time, we ask that participants limit themselves to one question. One moment, please, while we pull for questions. Thank you. Our first question is from Rob Wertheimer with Melius Research.

Speaker #5: Hi. Thanks. Could you talk just briefly about what your pricing expectations are for 2026? What's your rate of inflation is, and just kind of what your competitive and the ever-changing tariff situation?

Rob Wertheimer: Hi, thanks. Could you talk just briefly about what your pricing expectations are for 2026, what your rate of inflation is, and just, you know, kind of what you competitive in the ever-changing tariff situation? And just for clarity, when you do disclose the segment data, you will do an EBITDA by segment or operating income by segment, and any comments on, you know, kind of the core legacy business, whether profits are up or down in your embedded guide. Thank you.

Speaker #5: And just for clarity, when you do disclose the segment data, you'll be doing EBITDA by segment or operating income by segment? And any comments on the core legacy business—whether profit is up or down—in your embedded guide?

Speaker #5: Thank you.

Speaker #6: If you want to pick the first piece and maybe I'll chime in toward the end, Scott.

Scott Mell: Yeah. Take the first piece, and maybe I'll chime in toward the end, Scott? Yeah. I'll take the first question, which I think started with pricing, and led into tariffs. I think as we've talked about before, you know, given our LTA negotiations over the last few years, we expect to continue to, you know, see meaningful year-over-year pricing. I think we've also said it certainly may not be at the rate that we've seen in the last few years. You know, I think somewhere between 250 and 400 basis points of pricing is probably directionally where we'll end up. I think us, like others, you know, are facing substantial inflationary pressure across not only people costs, but, you know, material costs or otherwise.

Fred Bohley: Yeah. Take the first piece, and maybe I'll chime in toward the end, Scott?

Speaker #5: Yeah. Yeah. I'll take the first question. Which I think started with pricing. And led into tariffs. So I think as we've talked about before, given our LTA negotiations over the last few years, we expect to continue to see meaningful EORI or pricing and I think we've also said it certainly may not be at the rate that we've seen in the last few years.

Scott Mell: Yeah. I'll take the first question, which I think started with pricing, and led into tariffs. I think as we've talked about before, you know, given our LTA negotiations over the last few years, we expect to continue to, you know, see meaningful year-over-year pricing. I think we've also said it certainly may not be at the rate that we've seen in the last few years. You know, I think somewhere between 250 and 400 basis points of pricing is probably directionally where we'll end up. I think us, like others, you know, are facing substantial inflationary pressure across not only people costs, but, you know, material costs or otherwise.

Speaker #5: I think somewhere between 250 and 400 basis points of pricing is probably directionally where we'll end up. I think us, like others, are facing substantial inflationary pressure across not only people costs, but material costs or otherwise.

Scott Mell: you know, I, I would point you to sort of what you're seeing in, in, you know, inflationary, forward indicators as what we're experiencing. Then obviously on the, on the tariffs, you know, I haven't been online today, so I'm not sure where we're at. I, I think, you know, we expect to recover a meaningful amount of our tariff on a year-over-year basis through pricing actions that we've taken. But it certainly will be a net drag on margins on a year-over-year basis. I think that answered the beginning of the question, Fred, wasn't it?

Speaker #5: I would point you to sort of what you're seeing in inflationary forward indicators as what we're experiencing. And then obviously on the tariffs, I haven't been online today, so I'm not sure where we're at, but I think we expect to recover a meaningful amount of our tariff on a year-over-year basis through pricing actions that we've taken.

Speaker #5: But it certainly will be a net drag on margins on a year-over-year basis. I think that answered the beginning of the question fairly well.

Fred Bohle: Well, I guess I would say that Scott's comments relative to pricing were for the Allison Transmission business unit. We'll obviously be combining, you know, in looking at pricing in total. To his point, you know, we do have customers we put on LTAs, and we do expect, you know, better than, you know, traditional pricing that we've done in the past of 50 to 100 basis points. Then the other question really was on level of reporting, Scott, down to.

Fred Bohley: Well, I guess I would say that Scott's comments relative to pricing were for the Allison Transmission business unit. We'll obviously be combining, you know, in looking at pricing in total. To his point, you know, we do have customers we put on LTAs, and we do expect, you know, better than, you know, traditional pricing that we've done in the past of 50 to 100 basis points. Then the other question really was on level of reporting, Scott, down to.

Speaker #6: Well, and I guess I would say Scott's comments relative to pricing were for the Allison Transmission business unit. We'll obviously be combining and looking at pricing in total.

Speaker #6: And to his point, we do have customers we put on LTAs and we do expect better than traditional pricing that we've done in the past of 50 to 100 basis points.

Speaker #6: And then the other question really was on level of reporting, Scott, down to.

Scott Mell: Oh, yeah. I, I, you know, I think the expectations is you'll see from net sales down through an operating profit level with enough detail around, you know, depreciation, amortization that you can get to an EBITDA number. You know, there'll probably be some cash flow metrics as well. I think you'll certainly have enough detail as we report the Q1 here, to be able to distinguish between the two business segments.

Speaker #5: Yeah. So I think the expectation is, as you'll see from net sales, down through an operating profit level with enough detail around depreciation and amortization that you can get to an EBITDA number.

Speaker #5: So there’ll probably be some cash flow metrics as well. But I think you’ll certainly have enough detail as we report the first Q here to be able to distinguish between the two business segments.

Speaker #4: Thank you. Our next question is from Tim Theme with Raymond James.

Fred Bohle: Thank you.

Rob Wertheimer: Thank you.

Operator: Our next question is from Tim Thean with Raymond James.

Speaker #7: Thank you, good afternoon and congrats on getting all this work done and behind you. Just on the I recognize that there's always challenges in fixing to a midpoint, but just if we did that, if you think about the kind of the midpoint EBITDA estimate of a billion four, if we assumed it's probably not the right assumption, but if we assume that the Allison business is flat year-over-year, despite growing on the top line, that would imply that the Off-Highway business is doing something like 11, 12 percent EBITDA margin.

Tim Thean: Thank you. Good afternoon, and congrats on getting all this work done and behind you. I recognize that there's always challenges in fixing to a midpoint, but just if we did that, if you think about the kind of the midpoint EBITDA estimate of $1.4 billion, if we assume, and it's probably not the right assumption, but if we assume that the Allison business is flat year-over-year, despite growing on the top line, that would imply that the off-highway business is doing something like a, you know, 11%, 12% EBITDA margin on, call it, on the $2.6 billion in revenues. Are there things we should think about? Is that, I don't know, some one-time items flowing through there?

Tim Thein: Thank you. Good afternoon, and congrats on getting all this work done and behind you. I recognize that there's always challenges in fixing to a midpoint, but just if we did that, if you think about the kind of the midpoint EBITDA estimate of $1.4 billion, if we assume, and it's probably not the right assumption, but if we assume that the Allison business is flat year-over-year, despite growing on the top line, that would imply that the off-highway business is doing something like a, you know, 11%, 12% EBITDA margin on, call it, on the $2.6 billion in revenues. Are there things we should think about? Is that, I don't know, some one-time items flowing through there?

Speaker #7: Call it on the $2.6 billion in revenues. Are there things we should think about? Are there, I don't know, some one-time items flowing through there, or maybe just help us there in terms of the implied EBITDA of the acquired business?

Tim Thean: Maybe just help us there in terms of the implied EBITDA of the acquired business. Thank you.

Tim Thein: Maybe just help us there in terms of the implied EBITDA of the acquired business. Thank you.

Speaker #7: Thank you.

Speaker #5: Well, this is Scott. Thank you for the question. I think as you try to do your math there, I would encourage you to keep in mind that while we're going to have sales growth on the top line, as we start to look at the end markets in particular, the Class 8 straight, we are going to have a substantially different mix than we had in 2025.

Scott Mell: Well, this is Scott. Thank you for the question. You know, I think as, as you try to do your, your math there, you know, I would encourage you to keep in mind that, you know, while we're gonna have, you know, sales growth on the top line, as, as we start to look at the end markets, in particular, the Class A straight, we are gonna have a substantially different mix than we had in 2025. As Fred mentioned, or Dave mentioned on the call, you know, 2025, the Q1 into the Q2 was, was stronger, in the North America on-highway end market.

Speaker #5: And as Fred mentioned or Dave mentioned on the call, 2025, the first quarter into the second quarter was stronger. In the North America, on-highway end market.

Scott Mell: We're, as I mentioned in our call, not expecting a meaningful improvement, and we're modeling it, or we're looking at it closer to kind of where it was in the second half of last year. That will impact the margin outlook for the traditional Allison Transmission business.

Speaker #5: And we're, as I mentioned in our call, we're not expecting a meaningful improvement. And we're modeling it or we're looking at it closer to kind of where it was in the second half of last year.

Speaker #5: So that will impact the margin outlook for the traditional Allison Transmission business.

Speaker #7: And then we still have to work out on allocating—on-highway forecast is assuming kind of run rate where you exited the year. Is that right, Scott?

Fred Bohle: We still have to work out on allocation.

Fred Bohley: We still have to work out on allocation.

Tim Thean: Your North American on-highway forecast is assuming kind of run rate where you exited the year. Is that right, Scott? Thank you.

Tim Thein: Your North American on-highway forecast is assuming kind of run rate where you exited the year. Is that right, Scott? Thank you.

Speaker #7: Thank you.

Fred Bohle: I'll, I'll take that, Tim. This is Fred. Yes, I mean, what we're seeing and what we said in our prepared remarks is very, very soft conditions relative to dude. You know, we have not modeled any meaningful recovery in Class A straight. To Scott's point, on a year-over-year basis, you know, that would be negative from a mix standpoint because the first half was very, very robust from a Class A straight truck. Then really getting down into each segment's margins at this point is challenging because there's still a lot of work being done here relative to how, to how corporate costs are gonna be allocated.

Fred Bohley: I'll, I'll take that, Tim. This is Fred. Yes, I mean, what we're seeing and what we said in our prepared remarks is very, very soft conditions relative to dude. You know, we have not modeled any meaningful recovery in Class A straight. To Scott's point, on a year-over-year basis, you know, that would be negative from a mix standpoint because the first half was very, very robust from a Class A straight truck. Then really getting down into each segment's margins at this point is challenging because there's still a lot of work being done here relative to how, to how corporate costs are gonna be allocated.

Speaker #5: I'll take that, Tim. This is Fred. Yes. I mean, what we're seeing and what we said in our prepared remarks is very, very soft conditions, relatively, and we have not modeled any meaningful recovery in Class 8 straight.

Speaker #5: So to Scott's point, on a year-over-year basis, that would be negative from a mixed standpoint because the first half was very, very robust from a Class 8 straight truck.

Speaker #5: And then really getting down into each segment's margins at this point is challenging because there's still a lot of work being done here relative to how corporate costs are going to be allocated.

Fred Bohle: That work still yet to be done in the, you know, in Q1 and will be, you know, represented in the results that we post up in May.

Speaker #5: And that work still yet to be done in the first quarter and will be represented in the results that we post up in May.

Fred Bohley: That work still yet to be done in the, you know, in Q1 and will be, you know, represented in the results that we post up in May.

Speaker #7: Thank you.

Tim Thean: Thank you.

Tim Thein: Thank you.

Speaker #4: Our next question is from Ian Zafino with Oppenheimer & Company.

Operator: Our next question is from Ian Zeffino with Oppenheimer and Company.

Speaker #7: Hi, Greg. Thank you very much. Why don't you drill down on the acquisition? I guess you've been operating it for a couple of months now.

Ian Zaffino: Hi, great. Thank you very much. You know, wanted to drill down on the acquisition. I guess you've been operating it for, you know, a couple of months now. How should we think about synergies? I think you initially outlined, I think, $120 million or $125 million. You know, how do you feel about it now? What amount of that is actually in guidance, and how do we think about kind of the cadence of that? Thanks.

Speaker #7: How should we think about synergies? I think you initially outlined, I think, $120 or $125 million. How do you feel about it now? And then, what amount of that is actually in guidance?

Speaker #7: And how do we think about kind of the cadence of that next?

Scott Mell: Ian, appreciate the question. It's Dave. In terms of the synergies, back to the prepared comments and what we actually talked about when we announced the acquisition, that $120 million run rate of synergies a few years out, that's exactly where we sit today. The, you know, the team, and I say that both Allison Transmission and the Off-Highway segment are very engaged right now at a functional level.

David Graziosi: Ian, appreciate the question. It's Dave. In terms of the synergies, back to the prepared comments and what we actually talked about when we announced the acquisition, that $120 million run rate of synergies a few years out, that's exactly where we sit today. The, you know, the team, and I say that both Allison Transmission and the Off-Highway segment are very engaged right now at a functional level.

Speaker #5: Ian, appreciate the question. It's Dave. So, in terms of the synergies—back to the prepared comments and what we actually talked about when we announced the acquisition—that $120 million run rate of synergies, a few years out, that's exactly where we sit today.

Speaker #5: The team and I say that both Allison Transmission and the Off-Highway segment are very engaged right now at a functional level. Analyzing what you would expect.

David Graziosi: ... analyzing what you would expect. I believe you're, you were kind in two months with the company, if you actually think about just closing and getting, getting the teams organized. You know, it's been a very busy 40 to 50 days. Despite that, I give the team a tremendous amount of credit in really digging in on the synergies work that was outlined. As you would expect, from our perspective, operations, procurement, engineering, and some SG&A are really the, the focus areas for our team. We're certainly excited about that when you think about the global footprint that we now enjoy, especially in the context of some of these trade policy developments that are out there. Frankly, I think the, the team is very engaged in analyzing some broader opportunities there.

Speaker #5: So I believe you were kind in two months with the company if you actually think about just closing and getting the teams organized. It's been a very busy 40 to 50 days, but despite that, I give the team a tremendous amount of credit.

Speaker #5: And really digging in on the synergies work that was outlined. As you would expect, from our perspective, operations, procurement, engineering, and some SG&A are really the focus areas for our team.

Speaker #5: So we're certainly excited about that when you think about the global footprint that we now enjoy especially in the context of some of these trade policy developments that are out there and frankly, I think the team is very engaged in analyzing some broader opportunities there.

David Graziosi: , we really have scratched the surface in terms of other synergies as well. So, as the year progresses here, we will be providing some level of update. To answer the last part of your question, we have not assumed any synergies in the 2026 guide at this point. To Scott's comments, I think it is important when you look at the recurring business guidance that is being provided, is really the, I think, the go forward in terms of setting expectations where we are. But there is a tremendous amount of work that the global team is undertaking this year, as you could imagine from some of the investments that we announced

Speaker #5: I would also offer we really have scratched the surface in terms of other synergies as well. So as the year progresses here, we'll be providing some level of update to answer the last part of your question.

Speaker #5: We have not assumed any synergies in the 2026 guide at this point. Scott's comments, I think it's important when you look at the reoccurring business guidance that's being provided is really the, I think, the go-forward in terms of setting expectations where we are.

Speaker #5: But there's a tremendous amount of work that the global team is undertaking this year, as you could imagine from some of the investments that we announced.

Speaker #7: All right. Thank you very much.

Operator: All right. Thank you very much. Our next question is from Jerry Revich with Wells Fargo Securities.

Ian Zaffino: All right. Thank you very much.

Operator: Our next question is from Jerry Revich with Wells Fargo Securities.

Speaker #4: Our next question is from Jerry Revich with Wells Fargo Securities.

Jerry Revich: Yes, hi, good afternoon and good evening. Congratulations on the closing. I want to ask Fred, as we think about the margin profile for the legacy Allison business going forward, are the 40% EBITDA margins that we saw the business hit in 2018, 2019, are those feasible in this coming cycle, the way you see the business setting up? Can you just give us an update on if we think we can go back to those margin levels? Then Craig, just to follow up on the last question, would you mind just sharing your maybe top 2 or 3 priorities for the business over the next 12 months? Thank you.

Speaker #8: Yes, hi. Good afternoon and good evening. Congratulations on the closing. I want to ask Fred, as we think about the margin profile for the legacy Allison business going forward, are the 40% EBITDA margins that we saw the business hit in 2018, 2019, are those feasible in this coming cycle the way you see the business setting up?

Speaker #8: Can you just give us an update on if we think we can go back to those margin levels? And then Craig, just to follow up on the last question, would you mind just sharing your maybe top two or three priorities for the business over the next 12 months?

Speaker #8: Thank you.

Fred Bohle: Jerry, this is Fred. You know, clearly, you look at the performance we had in 2025, revenue down 7% and, you know, EBITDA margin up 140 basis points. You know, with, you know, a significant amount of, you know, cost pressures relative to tariffs, to the extent that, you know, you get a lift in the top line, and we've made investments such that, you know, we are bringing on additional capacity. We're growing the business outside North America. Record record revenue outside North America in, you know, 2025, again, with some choppy end markets. The opportunities that we have relative to the combined footprint that Dave talked about, and the ability to just leverage and optimize a much larger global footprint.

Fred Bohley: Jerry, this is Fred. You know, clearly, you look at the performance we had in 2025, revenue down 7% and, you know, EBITDA margin up 140 basis points. You know, with, you know, a significant amount of, you know, cost pressures relative to tariffs, to the extent that, you know, you get a lift in the top line, and we've made investments such that, you know, we are bringing on additional capacity. We're growing the business outside North America. Record record revenue outside North America in, you know, 2025, again, with some choppy end markets. The opportunities that we have relative to the combined footprint that Dave talked about, and the ability to just leverage and optimize a much larger global footprint.

Speaker #5: Jerry, this is Fred. So clearly, you look at the performance we had in 2025, revenue down 7%. And EBITDA margin up 140 basis points.

Speaker #5: With a significant amount of cost pressures relative to tariffs, to the extent that you get a lift in the top line, and we've made investments such that we are bringing on additional capacity, we're growing the business outside North America—record revenue outside North America.

Speaker #5: In 2025, again, with some choppy end markets, the opportunities that we have relative to the combined footprint that Dave talked about and the ability to just leverage and optimize a much larger global footprint, the fact that our products are very well received—our largest, obviously, driver in North America, on-highway, Class 8 straight truck—share last year was up 1%.

Fred Bohle: You know, the fact that, you know, our products are very well received. You know, our largest, obviously, driver in North American on-highway, Class A straight truck, you know, share last year was up 1%. We've been able to pass on price. We've been able to, actually, you know, increase share. We have a significant value proposition. So I certainly would not, you know, rule out returning to, you know, those peak margins, 40%. I think what needs to be understood is, we are making peak earnings on everything we send out the door. We saw significant cost increases, and, you know, we haven't been able to, you know, price it, you know, $2 for every $1 of cost increase.

Fred Bohley: You know, the fact that, you know, our products are very well received. You know, our largest, obviously, driver in North American on-highway, Class A straight truck, you know, share last year was up 1%. We've been able to pass on price. We've been able to, actually, you know, increase share. We have a significant value proposition. So I certainly would not, you know, rule out returning to, you know, those peak margins, 40%. I think what needs to be understood is, we are making peak earnings on everything we send out the door. We saw significant cost increases, and, you know, we haven't been able to, you know, price it, you know, $2 for every $1 of cost increase.

Speaker #5: So we've been able to pass on price. We've been able to actually increase share. So we have a significant value proposition. So I certainly would not rule out returning to those peak margins 40%.

Speaker #5: I think what needs to be understood is we are making peak earnings on everything we send out the door. So, we saw significant cost increases, and we haven't been able to price it $2 for every dollar of cost increase.

Speaker #5: Obviously, margins compressed on a percentage basis, but absolute margins on what we sell have never been higher, and the team's very focused on getting after cost, best-in-quality, and continuing to grow outside North America.

Fred Bohle: Obviously, margins compressed on a percentage basis. You know, absolute margins on what we sell is never been higher. The team is very focused on getting after cost, best in quality, and, you know, continuing to grow in, you know, outside North America. Again, that doesn't always come with, you know, with the same margins initially. Sometimes there's an element of penetration pricing. You know, the short of it is, you're putting it all together. I think, you know, 40% is achievable, but from our standpoint, it is, what's the dollar amount of EBITDA we make? Ultimately, how much of that can we convert to cash? That's truly what the team is focused on.

Fred Bohley: Obviously, margins compressed on a percentage basis. You know, absolute margins on what we sell is never been higher. The team is very focused on getting after cost, best in quality, and, you know, continuing to grow in, you know, outside North America. Again, that doesn't always come with, you know, with the same margins initially. Sometimes there's an element of penetration pricing. You know, the short of it is, you're putting it all together. I think, you know, 40% is achievable, but from our standpoint, it is, what's the dollar amount of EBITDA we make? Ultimately, how much of that can we convert to cash? That's truly what the team is focused on.

Speaker #5: So again, that doesn't always come with the same margins initially. Sometimes there's an element of penetration pricing, but the short of it is you're putting it all together.

Speaker #5: I think 40% is achievable, but from our standpoint, it's what is the dollar amount of EBITDA we make, and ultimately, how much of that can we convert to cash?

Speaker #5: I mean, that's truly what the team is focused on.

Speaker #4: And Jerry, to answer your question for Craig, the good news is his top three priorities are the same as everybody else in Allison.

David Graziosi: Jerry, to save to your question for Craig, the good news is his top three priorities are the same as everybody else in Allison, which is meeting customer commitments, seamless integration, and combination, which is a tremendous amount of work this year, and execution. You know, as Fred mentioned, you know, as we're right back into it here, many of the end markets that we're dealing with are at or coming off trough levels. There'll be a fair bit of work continuing to be highly aligned with our customers around return of volume, managing the supply release, et cetera, and so forth. A lot of work there to be done this year, but again, it's really back to meeting customer commitments, the separation, integration work, -

Speaker #4: Which is meeting customer commitments, seamless integration and combination—which is a tremendous amount of work this year—and execution. As Fred mentioned, we're right back into it here.

Speaker #4: Many of the end markets that we're dealing with are at or coming off trough levels. There'll be a fair bit of work continuing to be highly aligned with our customers around return of volume, managing the supply base, etc., and so forth.

Speaker #4: So, a lot of work there to be done this year. But again, it's really back to meeting customer commitments, the separation integration work, and most importantly, just execution across the board.

David Graziosi: Most importantly, just execution across the board.

Speaker #8: Thank you.

Fred Bohle: Thank you.

Jerry Revich: Thank you.

Speaker #4: Our next question is from Tammy Zakaria with JP.

Operator: Our next question is from Tami Zakaria with JP Morgan.

Tami Zakaria: Hey, good afternoon. Thank you so much. I wanted to clarify two things. The first one on off-highway drive and motion segment guide. That guidance, the midpoint, how much is Dana off-highway growing, like for like, year-over-year, embedded in that guide?

Speaker #9: Hey, good afternoon. Thank you so much. I wanted to clarify two things. The first one, on off-highway, the drive-in motion segment guide—that guidance, at the midpoint—how much is Dana off-highway growing like-for-like, year-over-year, embedded in that guide?

Speaker #5: Tammy, it's Dave. Did you look at it? And again, like for—

David Graziosi: Tami, it, it's Dave. If you look at it, and again, like for like, understanding the 2025 results are not out there on a, I would say, an apples to apples basis for what we as Allison have as Allison Off-Highway now. I would put it in the, you know, on a year-over-year basis, mid-plus single-digit rate on a year-over-year basis, that top line.

Speaker #1: Or like understanding the 2025 . Results are not out there on a , I would say , an apples to apples basis for what we as Allison , have as Allison off highway now .

Speaker #1: But I would put it in the you know , on a year over year basis mid plus single digit rate on a year over year basis at top line .

Speaker #2: Understood. That's helpful. And then the second question: I hear the 25% EBITDA margin guide for the year. How should we model the seasonality between the four quarters, and related to that?

Tami Zakaria: Understood. That's helpful. Then the second question, I hear the 25% EBITDA margin guide for the year. How should we model the seasonality between the four quarters? Related to that, how should gross margin be throughout the year versus the high 40 that you ended with last year?

Speaker #2: How should gross margin be throughout the year versus the high 40 that you ended with last year?

Speaker #1: Tammy . Steve , let me take the first part of that . And then Scott can chime in in terms of seasonality , it's interesting when you look at the way , you know , our guide is built this year , it's really not I would say very uneven quarter at this point , just given the nature of the two segments , we now have .

David Graziosi: Tammy, it's Dave. Let me take the first part of that, and then Scott can chime in. In terms of seasonality, it's interesting when you look at the way, you know, our guide is built this year. It's really not an, I would say, very uneven quarter at this point, just given the nature of the two segments we now have. If you broadly looking at sales, first half, second half, very similar on a total Allison basis. As you know, historically, Allison's had some level of seasonality in Q4. The last few years have changed that dynamic a bit. I would say, generally speaking, as you think about the year from an overall pace perspective, as we sit today, relatively level, so. Scott, on the margins.

Speaker #1: So if you broadly looking at sales first half , second half , very similar on a total Alison basis . So and as you know , historically Alison's had some level of seasonality in the fourth quarter , the last few years have have changed that dynamic a bit .

Speaker #1: So I would say, generally speaking, as you think about the year from an overall pace perspective, as we sit today, relatively level.

Speaker #1: So and Scott , on the margins , yeah , I mean , I , you know , working toward an annual midpoint of 25% , I , you know , I don't think you're going to see to Dave's point , substantial swings in , in margins is given some of the the nature of the sales , which are going to be even over the course of the year .

Fred Bohle: Yeah, I mean, I, you know, working toward an annual midpoint of 25%, I, you know, I don't think you're gonna see, to Dave Graziosi's point, substantial swings in, in, in margins, just given some of the, the nature of the sales, which are gonna be even over the course of the year. I wouldn't build in any substantial changes in margins, although I would, would say we, you know, as we get to the second half of the year, on the transmission side, you know, we're cautiously optimistic that we'll start to see some improvement in, in, medium duty demand, potentially. That might, you know, be a driver in the second half of the year.

Scott Mell: Yeah, I mean, I, you know, working toward an annual midpoint of 25%, I, you know, I don't think you're gonna see, to Dave Graziosi's point, substantial swings in, in, in margins, just given some of the, the nature of the sales, which are gonna be even over the course of the year. I wouldn't build in any substantial changes in margins, although I would, would say we, you know, as we get to the second half of the year, on the transmission side, you know, we're cautiously optimistic that we'll start to see some improvement in, in, medium duty demand, potentially. That might, you know, be a driver in the second half of the year.

Speaker #1: So I wouldn't build in any substantial changes in margins , although I would would say we , you know , as we get to the second half of the year , you know , on the transmission side , you know , we're cautiously optimistic that we'll start to see some improvement in medium duty demand , potentially so that might , you know , be a driver in the second half of the year

Speaker #2: Understood . Thank you

Tami Zakaria: Understood. Thank you.

Speaker #3: Our next question is from Angel Castillo with Morgan Stanley.

Operator: Now, our next question is from Angel Castillo with Morgan Stanley.

Speaker #4: Hi . Good afternoon . Thanks for taking my question . Just was hoping you could unpack the market guidance in a little bit more I guess I'm a little bit surprised .

Angel Castillo: Hi, good afternoon. Thanks for taking my question. Just was hoping you could unpack the end market guidance in a little bit more detail. I guess I'm a little bit surprised, just the, the, the assumptions around no recovery in Class A trucks, and I think you mentioned that, you know, assuming off-highway remains kind of at or near trough. Just, you know, when I think about, you know, versus what we're hearing from either other OEMs on the truck side or even on, you know, construction or ag side, it seems like there's a little bit more kind of upbeat sentiment, that there could be a little bit of more recovery or improvement, at least in the second half. I think you had mentioned, you know, you mentioned very soft conditions, I think, in the vocational market.

Speaker #4: Just the assumptions around . No recovery in class . Eight trucks . And I think you mentioned assuming off highway remains kind of at or near trough .

Speaker #4: Just , you know , when I think about , you know , versus what we're hearing from either other OEMs on the truck side or even on construction or AG side , it like there's a little bit more kind of upbeat sentiment that there could be a little bit more recovery or improvement , at least in the second half .

Speaker #4: And I think you had mentioned , you know , you mentioned very soft conditions . I think in the vocational market . So just could you unpack that a little bit more , to what degree is it that you're seeing something in kind of the latest order books that seems to suggest a little bit more cautiousness is warranted versus maybe just it being early in the year .

Angel Castillo: Just, can you unpack that a little bit more? Like, to what degree is it that you're seeing something in kind of the latest order books that, you know, seems to suggest a little bit more cautiousness is, is warranted versus, maybe just it being early in the year, you know, versus what other people are seeing?

Speaker #4: You know, versus what other people are seeing.

Speaker #1: Angel , this is Fred . I'll take on the the Allison transmission portion and then Dave will go through the , the Allison off highway Start with our largest and market , North America on highway again .

Fred Bohle: Angel, this is Fred. I'll take on the Allison Transmission portion, and then Dave will go through the Allison Off-Highway. Start with, you know, our largest end market, North America on-highway. Again, we are seeing very, very soft medium duty activity. A lot of that's driven by, you know, the large lease rental players. They have really not reentered the market. You know, Class 8 straight is, I would call it, steady. There's still a decent amount of uncertainty as to whether there's gonna be a pre-buy in the second half of the year. We have not modeled in that pre-buy. Really, when you look at it on a year-over-year basis with the strength we had in the, you know, in the first half, certainly, you know, unit volumes for us are down.

Fred Bohley: Angel, this is Fred. I'll take on the Allison Transmission portion, and then Dave will go through the Allison Off-Highway. Start with, you know, our largest end market, North America on-highway. Again, we are seeing very, very soft medium duty activity. A lot of that's driven by, you know, the large lease rental players. They have really not reentered the market. You know, Class 8 straight is, I would call it, steady. There's still a decent amount of uncertainty as to whether there's gonna be a pre-buy in the second half of the year. We have not modeled in that pre-buy. Really, when you look at it on a year-over-year basis with the strength we had in the, you know, in the first half, certainly, you know, unit volumes for us are down.

Speaker #1: We are seeing very, very soft medium duty activity. A lot of that's driven by the large lease rental players. They have really not re-entered the market.

Speaker #1: You know, Class 8 straight is, I would call it, steady, and there's still a decent amount of uncertainty as to whether there's going to be a pre-buy in the second half of the year.

Speaker #1: We have not modeled in that pre-buy . So really , when you look at it on a year over year basis , with the strength we had in the , you know , in the first half , certainly , you know , unit volumes for us are down now .

Speaker #1: That's being offset by , you continued momentum in defense primarily outside North America . And non-U.S. government sales volume . You know , going to hanawa out of Korea with their canine howitzer , the the poll in Brazil , the Turkey kerkut some programs that we've talked about that are , you know , have been announced , but are now generating revenue .

Fred Bohle: Now, that's being offset by, you know, continued momentum in defense, primarily, you know, outside North America and non-US government sales. You know, volume, you know, going to, you know, Hanwha out of Korea with their K9 Thunder, the, the, the Poland Borsuk, the Turkey Korkut. Some programs that we've talked about, that are, you know, have been announced but are now generating revenue. We definitely expect defense to continue to accelerate. A decent portion of the that we have in the plan as well is, is going in that direction. You know, outside North America, again, record in-... you know, 2025, but we expect, you know, continued growth. We're seeing some strength in vocational truck in Europe, wheeled defense.

Fred Bohley: Now, that's being offset by, you know, continued momentum in defense, primarily, you know, outside North America and non-US government sales. You know, volume, you know, going to, you know, Hanwha out of Korea with their K9 Thunder, the, the, the Poland Borsuk, the Turkey Korkut. Some programs that we've talked about, that are, you know, have been announced but are now generating revenue. We definitely expect defense to continue to accelerate. A decent portion of the that we have in the plan as well is, is going in that direction. You know, outside North America, again, record in-... you know, 2025, but we expect, you know, continued growth. We're seeing some strength in vocational truck in Europe, wheeled defense.

Speaker #1: So we definitely expect defense to continue to accelerate, and a decent portion of that—we have in the plan as well—is going in that direction.

Speaker #1: You know , outside North America , again , record in , you know , 2025 . But we expect , continued growth . You know , we're seeing some strength in vocational truck in Europe .

Speaker #1: We’ll defend, as Dave mentioned. Japan was, you know, really dealing with, you know, Australian vehicle regulations, which were a little soft last year.

Fred Bohle: As Dave mentioned, Japan was, you know, really dealing with, you know, Australian vehicle regulations, was a little soft last year. Some of that volume was pulled into 2024, so we had that in our favor, and that's a market that, you know, in certain classes, we have over 60% share. China, forward momentum on the wide-body mining dump business, vocational haul, fire crane. South America, you know, we penetrated school buses. We're seeing success in vocational truck. Walk through the end markets, you know, outside North America, up, defense, up. You've got, you know, lower volume assumptions in North America on highway. With that, Dave, do you want to comment on off-highway?

Fred Bohley: As Dave mentioned, Japan was, you know, really dealing with, you know, Australian vehicle regulations, was a little soft last year. Some of that volume was pulled into 2024, so we had that in our favor, and that's a market that, you know, in certain classes, we have over 60% share. China, forward momentum on the wide-body mining dump business, vocational haul, fire crane. South America, you know, we penetrated school buses. We're seeing success in vocational truck. Walk through the end markets, you know, outside North America, up, defense, up. You've got, you know, lower volume assumptions in North America on highway. With that, Dave, do you want to comment on off-highway?

Speaker #1: Some of that volume was pulled into 2024, so we have that in our favor. And that's a market that’s, you know, in certain classes we have over 60% share.

Speaker #1: You know, China forward momentum on the wide body mining dump business, vocational, haul, fire, and praying. And South America. You know, we penetrated school buses.

Speaker #1: We're seeing success in vocational truck . So , you know , walk through the end markets outside North America up defense up . But then you've got , you know , lower volume assumptions in North America on highway with that , Dave , you want to comment on off highway Angel it's Dave .

David Graziosi: Sure. Angel, it's Dave. Just on off-highway, just to level set, if you think about the 5 end markets for off-highway that we list in the call presentation, the largest of those is construction and material handling. Right behind that would be service parts, specialty, and other, and then agriculture, and then, obviously, industrial mining.

Speaker #1: So just on off highway just to level set . If you if you think about the five end markets for off highway that we list in the call presentation , the largest of those is construction and material handling .

Speaker #1: The the right behind that would be service parts specialty and other . And then agriculture . And then obviously industrial mining . So I think to your comments in terms of what some of our customers are saying in terms of relevant to those individual end markets , I would offer as we think about starting with construction and material handling , although construction markets , you're seeing , I would say a steady level in terms of civil engineering and and some of the infrastructure work that's going on .

David Graziosi: I think to your comments, in terms of what some of our customers are saying in terms of relevant to those individual end markets, I would offer, as we think about, you know, starting with construction and material handling. Although construction markets, you're seeing, I would say, a steady level in terms of civil engineering, and some of the infrastructure work that's going on, the fact is, residential is still relatively weak, as we know, given its rate sensitivity. If you think about the material handling side, again, very much subject to what's been going on in the trade space, as we mentioned earlier.

Speaker #1: The fact is , residential is still relatively weak , as we know , given its rate sensitivity . If you think about the material handling side , again , very much subject to what's what's been going on in the trade space as we mentioned earlier , you know , I would certainly provide some some backdrop to that by saying , you know , the team , I believe overall , the guidance that we're providing on this call for 2026 , we're taking a prudent approach .

David Graziosi: You know, I would certainly provide some backdrop to that by saying, you know, the team, I believe overall, the guidance that we're providing on this call for 2026, we're taking a prudent approach. I would say the same thing, frankly, when you start thinking about agriculture. A lot of moving pieces there. As you know, if you look through the public comments from customers, there's many assumptions that are going into that at this point. There's bifurcation in terms of equipment sizing, where the market is, where inventory levels are. Commodity prices, certainly, a bit challenged right now for a number of reasons.

Speaker #1: So, I would say the same thing, frankly. When you start thinking about agriculture, there are a lot of moving pieces there, as you know. If you look through the public comments from customers, there are many assumptions that are going into that at this point.

Speaker #1: There's bifurcation in terms of equipment sizing, where the market is, where inventory levels are. Commodity prices are certainly a bit challenged right now for a number of reasons.

Speaker #1: There are some assumptions that some are making around farm subsidies, etc., that drive that market as well. But margins are still very challenged for farming overall.

David Graziosi: There's some assumptions that some are making around farm subsidies, et cetera, that drive that market as well, but margins are still very challenged for farming overall. The team has taken that into account. Beyond that, industrial, they certainly expect to benefit from some of these larger projects that are tied to industrial output and manufacturing. Finally, mining, we, you know, have some assumptions there around just giving commodity prices for things we find most or at least relevant to our off-highway business, being gold, copper, rare minerals, et cetera. We are certainly assuming some growth there, directional with what you've heard from some. Again, that's a bit of a first half, second half story as well, in terms of overall approach or expectations for the year.

Speaker #1: So the team has taken that into account. Beyond that industrial, they certainly expect to benefit from some of these larger projects that are tied to industrial output and manufacturing.

Speaker #1: And finally mining . We have some assumptions . There around just giving commodity prices for things . We find most or at least relevant to our off highway business being gold , copper , rare earth minerals , etc.

Speaker #1: we are certainly assuming some growth there directional with what you've heard from some . But again , that that's a bit of a first half , second half story as well .

Speaker #1: In terms of overall approach or expectations for the year

Speaker #4: Very helpful . Thank you

Fred Bohle: Very helpful. Thank you.

Angel Castillo: Very helpful. Thank you.

Speaker #3: Our next question is from Luke Young with Baird.

Operator: Our next question is from Luke Junk with Baird.

Luke Junk: Good afternoon. Thanks to take the question. Just hoping we could maybe discuss pricing in the off-highway business that you acquired, both in the nearer term. I would assume there's probably some tariff impacts and recovery in the business this year, but also be curious just to get your bigger picture thoughts on aspirations for pricing in that business longer term as well. Thank you.

Speaker #5: Good afternoon . Thanks for taking the question . Just hoping we could maybe discuss pricing in the off highway business that you're that you acquired both in the near term , I'd assume there's probably some tariff impacts and recovery in the business this year , but also be curious just to get your bigger picture thoughts on aspirations for pricing in that business longer term as well .

Speaker #5: Thank you .

David Graziosi: Yes, Luke, it's Dave. Appreciate the question there. I would say for 2026, as we've done with the Allison Transmission business, as we've discussed, the team's approach certainly is to mitigate the tariffs, so that's, that's incorporated into some of the top-line changes you see from 2026 versus 2025. I would say overall, for the off-highway business, in totality, price relatively neutral year-over-year, with the exception of some of the tariff activities that I mentioned. You know, the approach, as you know, for Allison, is to sell our products based on value. I think the off-highway team certainly is aligned with that approach historically. I think some of that, frankly, in terms of our expectations, are really tied to overall market conditions.

Speaker #1: Luke and Dave . I appreciate the question there . So I would say for 2026 , as we've done with the Allison Transmission business , as we've discussed , the team's approach , certainly is to mitigate the tariffs .

Speaker #1: So that's that's incorporated into some of the top line changes you see from 26 versus 25 . I would say overall for the off highway business in totality , price relatively neutral year over year with the exception of some of the tariff activity that I mentioned .

Speaker #1: You know , the approach , as you know , for Allison , is to sell our products based on value . I think the off highway team certainly is , is aligned with that approach .

Speaker #1: Historically , I think some of that , frankly , in terms of our expectations are really tied to overall market conditions as , as , you know , as we mentioned , relatively trough levels almost across the board .

David Graziosi: As, as you know, as we mentioned, relatively trough levels almost across the board. You know, we would expect commensurate with those market conditions improving, some, some improvement in terms of overall price. As we again entered the year, top priority being meeting these customer commitments, we're, you know, obviously staying close to overall volume expectations and developments.

Speaker #1: So , you know , we would expect commensurate with those market conditions , improving some some improvement in terms of overall price . But as we again entered the year top priority , being meeting these customer commitments , we're obviously staying close to overall volume expectations and developments

Speaker #3: Our next question is from Kyle Menzies with Citigroup.

Operator: Our next question is from Kyle Menzies with Citigroup.

Kyle Menzies: Thanks for taking the question. I was hoping we could revisit the cost synergies. It sounded like that there were no cost synergies embedded in your guidance. Just wanted to clarify that. Just would love to hear what cost synergies you're targeting for the first 12 months, and how to think about the magnitude of impact that could potentially drive. Thank you.

Speaker #6: Thanks for taking the question. I was hoping we could revisit the cost synergies. It sounded like there were no cost synergies embedded in your guidance.

Kyle Menges: Thanks for taking the question. I was hoping we could revisit the cost synergies. It sounded like that there were no cost synergies embedded in your guidance. Just wanted to clarify that. Just would love to hear what cost synergies you're targeting for the first 12 months, and how to think about the magnitude of impact that could potentially drive. Thank you.

Speaker #6: Just wanted to clarify that, and then just would love to hear what cost synergies you're targeting for the first 12 months, and how to think about the magnitude of impact that could potentially drive.

Speaker #6: Thank you Kyle .

David Graziosi: Kyle, it's Dave. On synergies, again, very confident in the $120 million annual run rate that we've talked about. There's a tremendous amount of work going on amongst the global team. You can imagine the scope of that undertaking, just given the amount of facilities, different products, et cetera. We're taking, as best we can, a very thoughtful, measured approach, by functions, whether it's operations, procurement, et cetera, is being very deliberate about stepping through that. That is why to answer your question there in terms of, 12-month assumption really aligns with our 2026 guide.

Speaker #1: It's Dave. So, on the synergies again, very confident in the $120 million annual run rate that we've talked about. There's a tremendous amount of work going on amongst the global team.

Speaker #1: You can imagine the scope of that undertaking just given the amount of facilities different products etc. . So we're taking as best we can a very thoughtful measure approach by functions , whether it's operations , procurement , etc.

Speaker #1: , as being very deliberate about stepping through that , that is why to answer your answer , your question there , in terms of 12 month assumption , really aligns with our 2026 guide .

Speaker #1: The answer is we've not assumed any for that reason was we get as as mentioned earlier . Further into the year , and certainly for 2027 guidance , we can provide a pretty fulsome update at that point .

David Graziosi: The answer is we've not assumed any for that reason, was we get, as I mentioned earlier, further into the year, and certainly for 2027 guidance, we can provide a pretty fulsome update at that point. I would tell you, just given the amount of activity that's being undertaken around separation, that does involve a number of agreements, et cetera, there, there's a fairly high level of work that's involved there. This is, you know, the same group of people doing many, many things right now. We're gonna do it right and make sure that, you know, we have the outcome that we're looking for. There's certainly no doubt from the Allison team's perspective that we are committed to deliver those synergies.

Speaker #1: But I would tell you, just given the amount of activity that's being undertaken around separation, that does involve a number of agreements, etc.

Speaker #1: There's a fairly high level of work that's involved there. So this is the same group of people doing many, many things right now.

Speaker #1: So we're going to do it right and make sure that, you know, we have the outcome that we're looking for. But there's certainly no doubt from the Allison team's perspective that we are committed to deliver those synergies.

Speaker #3: Thank you. That is all the time we have for questions today. I would now like to pass the floor back over to David Graziosi for any closing comments.

Operator: Thank you. That is all the time we have for questions today. I would now like to pass the floor back over to David Graziosi for any closing comments.

Speaker #1: Thank you for your continued interest in Allison, and for participating on today's call. Enjoy your evening.

David Graziosi: Thank you for your continued interest in Allison and for participating on today's call. Enjoy your evening.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Full Year 2025 Allison Transmission Holdings Inc Earnings Call

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