Logo
ALLISON TRANSMISSION HOLDINGS INC

ALLISON TRANSMISSION HOLDINGS INC (ALSN) Q1 2026 Earnings Call Transcript

Neutral Auto Parts 9.90B USA
Next Earnings
2026-04-29

Allison Transmission Holdings, Inc., together with its subsidiaries, designs, manufactures, and sells fully automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S. defense vehicles, and electrified propulsion systems worldwide. The company offers transmissions for various applications, including distribution, refuse, construction, fire, and emergency on-highway trucks; school and transit buses; motor homes; energy, mining, and construction off-highway vehicles and equipment; and wheeled and tracked defense vehicles. It provides its transmissions and electric propulsion solutions under the Allison Transmission brand name; and remanufactured transmissions under the ReTran brand name. The company also sells branded replacement parts, support equipment, aluminum die cast components, and other products necessary to service the installed base of vehicles utilizing its solutions, as well as defense kits, engineering services, and extended transmission coverage services to various original equipment manufacturers, distributors, and the U.S. government. The company was formerly known as Clutch Holdings, Inc. Allison Transmission Holdings, Inc. was founded in 1915 and is headquartered in Indianapolis, Indiana.

Allison reported 2025 revenue down 7% with margin expansion, completed the Dana Off-Highway acquisition, announced a $120 million run-rate synergy plan, and issued 2026 guidance with two-segment reporting and a target of ~25% adjusted EBITDA margin at midpoint.

⭐ Key Highlights

Acquisition and integration
Completed the Dana Off-Highway Drive & Motion Systems acquisition in January 2025, creating a two-unit structure (Allison Transmission and Allison Off-Highway) and initiating full integration efforts.
Full-year 2025 performance
2025 revenue declined 7% year-over-year, but adjusted EBITDA margin expanded 140 basis points to 37.5%, with defense revenue up 26% to $267 million and ongoing strength in the defense end market.
Capital allocation and shareholder returns
Returned $328 million to shareholders via share repurchases (4% of outstanding shares) and raised quarterly dividend to $0.27 per share in 2025.
Synergies and cost discipline
Maintained a run-rate synergy target of $120 million annually from the combination, with ongoing focus on cost reductions, procurement, and SG&A improvements; no 2026 synergies embedded in guidance yet.
2026 guidance and segment reporting
Provided 2026 guidance for two reporting segments (Allison Transmission and Allison Off-Highway Drive & Motion Systems) and the consolidated Allison Group, with net sales guidance of $5.575–$5.925 billion and adjusted EBITDA of $1.365–$1.515 billion, implying about 25% margin at midpoint and potential upside from synergies.
Strategic priorities and geographic expansion
Emphasized seamlss integration, continued global footprint expansion (including India), and local-for-local production to enhance proximity to customers and unlock growth opportunities.

✔Positive Signals

  • Defense end market revenue increased 26% to $267 million for 2025, contributing to a diversified growth mix.
  • Adjusted EBITDA margin expanded by 140 basis points in 2025 despite revenue decline.
  • Record fourth-quarter North America On-Highway revenue and ongoing pricing power (LTA-driven pricing ahead of inflation).
  • Significant capital returns to shareholders (share repurchases of $328 million) and increased dividend.
  • Clear multi-year synergy plan of $120 million annual run rate from the acquisition.

✖Negative Signals

  • 2025 net sales declined 7% year over year, indicating persistent macro weakness.
  • Acquisition-related expenses (~$26 million) and an impairment charge ($29 million) reduced quarterly net income.
  • Tariff-related headwinds expected to remain as a drag on margins year over year.
  • No meaningful near-term recovery assumed for North America Class 8 On-Highway; end-market demand remains soft.
  • Guidance currently excludes embedded 2026 synergies and assumes ongoing integration risks and costs.

📊Financial Results

  • Q4 2025 net sales: $737 million, down 7% YoY.
  • Q4 2025 net income: $99 million, down from $175 million YoY; adjusted net income excluding impairment and acquisition costs: $141 million.
  • Q4 2025 adjusted EBITDA margin: 36%, up over 200 basis points YoY.
  • Q4 2025 operating cash flow: $243 million; adjusted free cash flow: $169 million.
  • Full-year 2025: revenue down 7%; adjusted EBITDA margin 37.5%.

🔮Future Guidance

  • 2026 consolidated net sales guidance: $5.575–$5.925 billion (Transmission $3.025–$3.175b; Off-Highway $2.550–$2.750b).
  • 2026 consolidated net income guidance: $600–$750 million, excluding purchase price accounting effects; includes about $70 million of onetime separation-related expenses.
  • 2026 consolidated adjusted EBITDA guidance: $1.365–$1.515 billion (midpoint implying ~25% margin).
  • 2026 cash flow guidance: operating cash flow $970–$1,100 million; capex $295–$315 million (including ~$45 million onetime separation/integration capex); adjusted free cash flow $655–$805 million.
  • No embedded 2026 synergies in the guide; management expects run-rate synergies of about $120 million to be realized over the next few years.

💡Interesting Insights

  • The company will begin two-segment reporting (Allison Transmission and Allison Off-Highway) starting Q1 2026, with a separate Allison Group for shared costs, signaling a more granular view of performance post-acquisition.

Detailed Analysis

AI-generated summary of ALLISON TRANSMISSION HOLDINGS INC earnings call transcript.

Allison closed the January 2025 acquisition of Dana's Off-Highway Drive & Motion Systems, forming two reporting units and accelerating integration efforts. Despite macro headwinds, the company posted a 7% annual revenue decline in 2025 but grew adjusted EBITDA margin by 140 basis points to 37.5%, supported by cost discipline and favorable defense demand (up 26% to $267 million for the year). The management highlighted strong free cash flow generation (adjusted free cash flow of $169 million in Q4) and capital returns, including $328 million in share repurchases and a higher dividend. Aiming to realize roughly $120 million of annual run-rate synergies from the combination, the company emphasized ongoing integration work across operations, procurement, and SG&A. For 2026, Allison provided guidance across two segments and a consolidated framework, with net sales of $5.575–$5.925 billion and adjusted EBITDA of $1.365–$1.515 billion (about 25% margin at the midpoint), noting no embedded 2026 synergies in the guide yet but committing to pursue them. The company also announced a broader strategic emphasis on expanding local production, leveraging a larger global footprint (including India), and maintaining shareholder-friendly capital allocation while continuing to fund growth initiatives.

Get Real-Time Earnings Call Alerts for ALLISON TRANSMISSION HOLDINGS INC

Create a free MarketAlerts account to add ALSN to your watchlist and receive instant AI-powered alerts when new earnings call transcripts, insider trades, and technical signals are detected.

Create Free Account Browse All Companies
Other MarketAlerts Features
Technical Recognition Insider Signals #1 Stock Watchlist AI-Powered Signals Smart Screener AI-Trade Search