Q1 2024 Allison Transmission Holdings Inc Earnings Call
Good afternoon. Thank you for standing by welcome to Allison transmissions first quarter 'twenty 'twenty four earnings conference call.
Doug: My name is Doug and I'll be your conference call operator today.
Doug: At this time all participants are in a listen only mode.
Doug: After prepared remarks, Allison transmission executives will conduct a question and answer session.
In our conference call participants will be given instructions at that time.
As a reminder, this conference call is being recorded.
Doug: If anybody should need operator assistance at any time, you May press star zero on your telephone keypad.
Doug: I would now like to turn the call over to Jacky balls Executive director of Treasury and Investor Relations go ahead Jackie.
Jacky: Thank you Doug good afternoon, and thank you for joining us for our first quarter 2024 earnings conference call.
Jacky: With me. This afternoon are they've got the ERP, our chair and Chief Executive Officer, and friendly our senior Vice President Chief Financial Officer and Treasurer.
Jacky: As a reminder, this conference call webcast and this afternoon's presentation are available on the Investor Relations section of Allison transmission Dot com.
Doug: A replay of this call will be available through May nine.
Doug: As noted on slide two of the presentation. Many of our remarks today contain forward looking statements based on current expectations.
Doug: These forward looking statements are subject to known and unknown risks, including those set forth in our first quarter 2024 earnings press release, our annual report on Form 10-K for the year ended December 31st 2023.
Doug: The other general economic factors.
Doug: 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.
Doug: In addition, as noted on slide three of the presentation. Some of our remarks today contain non-GAAP financial measures as defined by the SEC.
Doug: You can find reconciliations of the non-GAAP financial measures. The most comparable GAAP measures attached as an appendix to the presentation into our first quarter 2024 earnings pressure.
Doug: Today's call is set to end at 545 P M Eastern time.
Doug: In order to maximize participation opportunities on the call. We'll take just one question from each analyst.
Doug: Please turn to slide four of the presentation for the call agenda.
Doug: During today's call Fred will review, our first quarter 2024 financial performance and full year 2020 for guidance.
Dave will then close with an update on recent announcements across our business prior to commencing the Q&A now I'll turn the call over to Fred Tuomi.
Fred Tuomi: Thank you Jackie and good afternoon, and thank you for joining us.
Fred Tuomi: Building on our record performance in 2023 first quarter 2024 result demonstrates.
Fred Tuomi: It demonstrates the continued momentum in our business first quarter net sales were a record $789 million an increase of 6% from the same period in 2023.
Fred Tuomi: Our year over year top line increase was driven by robust global on highway demand as well as strength in our defense and outside North America off highway end markets.
Fred Tuomi: Please turn to slide five of the presentation for the Q1 2024 performance summary.
Fred Tuomi: Year over year net sales increased 6% from the same period in 2023 to a record of $789 million. The increase in year over year results was led by a 12% increase in the North American on highway end market driven by strength in denim in demand for class eight vocational and medium duty trucks and price increases on certain products.
Fred Tuomi: Our defense end market net sales increased 78% from the first quarter of 2023.
Fred Tuomi: Since were driven by higher demand for tracked vehicle applications.
Fred Tuomi: Year over year year over year results increased 83% and our outside North America off highway end markets, principally driven by strength in demand from the energy mining and construction sectors net sales in the outside North America on highway end market increased by 6% leading to record first quarter.
Doug: Net sales principally driven by higher demand in Asia and price increases on certain products, partially offset by lower demand in Europe.
Doug: Gross profit for the quarter was $366 million, an increase of $5 million from $361 million for the same periods in 2023. The increase in gross profit was principally driven by increased net sales and price increases on certain products.
Doug: Partially offset by higher manufacturing expense, including $13 million of non reoccurring UAW contract signing incentives and higher direct material cost net income for the quarter was $169 million a decrease of $1 million from the same period in 2023, the decrease was print.
Doug: This was driven by higher manufacturing expense $14 million of non reoccurring UAW contract signing incentives.
Doug: $10 million of unrealized mark to market adjustments for marketable securities and higher direct material costs, partially offset by increased net sales price increases on certain products and lower income tax expense.
Doug: Adjusted EBITDA for the quarter was $289 million compared to $276 million for the same period in 2023.
Doug: The increase in adjusted EBITDA was principally driven by increased net sales and price increases on certain products, partially offset by higher manufacturing expense and higher direct material cost.
Doug: Diluted earnings per share increased 3% from the same period in 2023 to $1.90.
Doug: Which includes a 13th cent impact from $14 million of non recurring UAW contract signing incentives incurred in the quarter.
Doug: A detailed overview of our net sales by end market in Q1 2024 financial performance can be found on slides six and seven of the presentation.
Doug: Please turn to slide eight of the presentation for the Q1 2020 for cash flow performance summary.
Doug: Adjusted free cash flow for the quarter was $162 million compared to $169 million for the same period in 2023. The decrease was principally driven by higher cash incentive compensation payments.
Doug: Non reoccurring you UAW contract signing incentive payments.
Doug: Partially offset by higher gross profit and lower capital expenditures.
Doug: During the first quarter, we paid a dividend of 25 cents per share and repurchased $52 million of our common stock. We ended the quarter with a net leverage ratio of one seven times $551 million of cash and $745 million of available revolving credit facility commitments. In addition, we can.
Doug: Continued to maintain a flexible long dated and covenant light debt structure of our $2 4 billion of outstanding debt 518 million.
Doug: Dollars is subject to variable interest rates of which $500 million. These hedged, resulting in nearly all of our debt being fixed through the third quarter of 2025.
Doug: Please turn to slide nine of the presentation for the 'twenty 'twenty four guidance.
Doug: We are reaffirming our full year 2024 guidance provided to the market on February 13th.
Doug: Allison expects net sales to be in the range of $3.050 billion to $3.150 billion. In addition to Allison's 2024 net sales guidance. We anticipate net income in the range of 635 million to $685 million adjusted EBITDA in the race.
Doug: <unk>, a $1.070 billion to $1.130 billion.
Doug: Net cash provided by operating activities in the range of 700 million to $760 million and capital expenditures in the range of 125 million to $135 million.
Doug: And adjusted free cash flow in the range of 575 million to $625 million.
Doug: Thank you I will now turn the call over to Dave for an update on recent announcements. Thank you Fred we continue to make investments and realized initiatives in order to grow our business in new markets and regions, where automatic transmission penetration remains low today I would like to highlight a few recent announcements relating to our outside North America on high.
Dave: Wei and market in.
Dave: In 2022, we highlighted our growing presence in South America, the South American agriculture sector since our entrants in 2015 at the time, we noted that leading Oems in Argentina selected the Alex in 2003 thousand series transmissions for use in their agricultural sprayers due to the.
Doug: Enhanced performance in soft soil, which is critical in this application today in Argentina. Most AG sprayers are now equipped with Allison fully automatic transmissions, where traditionally hydrostatic or manual transmissions were used.
Doug: During the first quarter, we announced that the first Allison equipped agricultural sprayer built in Brazil was showcased at an industry trade show in the region after adoption in Argentina, our successful entry into the Brazilian AG sprayer market is a milestone in our strategic initiatives as we target growth in.
Doug: New markets and applications around the world, we look forward to expanding our global presence as we enter a new application in south America's largest agricultural economy.
Doug: Also on our outside North America on highway end market. We recently highlighted our collaboration with Utah, a leading Chinese bus Oems and their delivery of transit buses to Rwanda.
Doug: Ron just capital City will once again upgrade its fleet with Allison equipped buses, Utah buses utilizing Allison fully automatic transmissions have been in service in Rwanda, since 2014 enable enabling easy and efficient operation, while optimizing the drive draw.
Doug: River and rider.
Doug: Experience, we are pleased to collaborate with global Oems and customers showcasing allison's commitment and initiatives towards growth in global export markets, continuing and our outside North America on highway end market last week, we announced the expansion of our partnership with <unk> to provide our 4000 series specialty.
Doug: <unk> transmissions for integration into their 500 ton all terrain cranes are partnership with Sonic spanned several construction and mining applications, including signing 60 ton crane and wide body mining dump trucks are proven performance in severe duty cycles in harsh conditions will.
Doug: Increased productivity and maneuverability for cranes operating in remote areas of China, including Desert and mountain terrain. We are pleased to expand this partnership and look forward to continued success with our products across <unk> portfolio.
Doug: For our defense end market, we maintain our outlook and target for realization of $100 million of incremental annual revenue as we capitalize on the defense up cycle, both internationally through increased defense investments globally amidst geopolitical uncertainties and domestically through opportunities.
Doug: With the United States modernization programs as well as increased international sales to the U S Department of defense in support of our International Defense growth in our 100 million incremental annual revenue opportunity last week, we announced delivery of the first X 1100 Cross drive.
Doug: Missions to Turkey further firtina self propelled howitzer program partnering with the H S T automotive.
Doug: Allison's licensed manufacturer in Turkey, Allison's X 1100 transmission will be utilized by the Turkish armed forces and their next generation tracked vehicle is.
Doug: Part of the initial delivery 10 transmissions have been successfully provided to Turkey with several already installed in vehicles full production of the new vehicle is scheduled for mid 'twenty 'twenty four with a total of 140 for Tina Howard's there's expected to be delivered to the Turkish armed forces.
Doug: Finally in our North America on highway end market in the last few years, we have made numerous announcements of transit properties across the United States selecting the Allison EJ and flex electric hybrid system for their city buses.
Doug: During the first quarter, we added the New Orleans Regional Transit authority or RTA to list.
Doug: Emergency preparedness is critical for the New York, New Orleans, RTA enduring a natural disaster access to the electrical grid can be disrupted leaving fully electric vehicles, no ability to charge DJ and flex hybrid system does not face the same limitations and can continue to operate using diesel fuel and.
Doug: Patients were grid accessibility may not be available as well as the battery system for fully electric engine off propulsion.
Speaker Change: We were pleased to add the New Orleans RTA to our list of transit properties.
Speaker Change: In states, such as Indiana, Wisconsin, Nevada, California, and Texas that recently selected the EJ and flex as their propulsion solution of choice. We are excited for this partnership and remain committed to collaborating with transit agencies nationwide to support them and both emissions reduction go.
Speaker Change: <unk> and emergency preparedness plans.
Speaker Change: Just this week also in our North America on highway end market, we announced that the Allison 34, 14 regional haul series and 4000 series are available to order as the exclusive fully automatic transmission and Navistar internationals RH and H F series trucks, respectively.
Speaker Change: We've previously launched the 34 in 2014, our Hs with Navistar in 'twenty 'twenty paired with the <unk> six engine and I've seen adoption by some of the largest fleets in North America, including leading wholesale food distributors. We are proud to collaborate with international truck to further release spoke of 34 14 Army.
Speaker Change: Chess and 4000 series transmissions in the new Navistar.
Speaker Change: 13 engine and we look forward to further success in adoption across the regional haul market.
Speaker Change: Also during the first quarter, we completed a refinancing of our revolving credit facility and term loan as part of the refinancing we increased commitments under our revolving credit facility.
Speaker Change: $750 million extending the maturity date to 2029, and refinanced $518 million of term loan debt paying down $101 million of existing term loan debt and extending the maturity to 2031, we maintained our long standing commitment to prudent balance sheet management and our.
Speaker Change: <unk> focus on our low cost flexible and pre payable debt structure with long dated maturities. In addition to our commitment to prudent balance sheet management, we remain.
Speaker Change: Committed to returning capital to shareholders through our share repurchase program and quarterly dividend during the fourth first quarter, we repurchased nearly 1% of our outstanding shares and increased our quarterly dividend by 9% to 25 per share the fifth consecutive annual increase to our quarterly dividend and <unk>.
Speaker Change: Allison's first quarter results demonstrate not only the current strong performance of our business, but the notable growth opportunities to come we continue to invest in our business in order to achieve our growth ambitions, while returning capital to shareholders and delivering on our brand promise to improve the way the world works.
Speaker Change: This concludes our prepared remarks, Doug please open the call for questions.
Doug: Thank you, ladies and gentlemen at this time well be conducting a question and answer session.
Doug: If you'd like to ask you a question you May press star one on your telephone keypad.
Doug: A confirmation tone will indicate your line is there any question queue.
Doug: You May press Star two if you would like to remove your question from the queue.
Doug: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Doug: One moment, while we poll for questions.
Doug: Our first question comes from the line of Anne Zaffino with Oppenheimer. Please proceed with your question.
Ian Alton Zaffino: Okay great.
Ian Alton Zaffino: Nice quarter guys congratulations.
Ian Alton Zaffino: Question would be on.
Ian Alton Zaffino: The on highway business, specifically in North America.
Ian Alton Zaffino: Very very strong how are we looking at it throughout the year, Okay can we maintain that strength.
Ian Alton Zaffino: Throughout the throughout the second.
Ian Alton Zaffino: Quarter, maybe the back half of the year and then also.
Ian Alton Zaffino: On the re negotiations I know you've been honoring pre COVID-19 contracts and a lot of that business have you started any of those negotiations yet talking about what the pricing is going to look like when those contracts expire.
Ian Alton Zaffino: Or any other kind of detail you could give us and if you could remind us what that benefit might be.
Ian Alton Zaffino: How should we can we negotiate these get kind of the pricing that you've been honoring previously thanks.
Ian Alton Zaffino: Hey, Ian it's Dave Good afternoon, and thank you for the questions. So on the North America on highway.
Dave: Timing I guess as you as you laid out your question comparing Q1 to the balance of the year.
Dave: As we said on our fourth quarter call, we were expecting relatively strong conditions entering the year for both medium duty and class eight vocational that certainly has played out.
Dave: As other.
Dave: Public Oems have already reported and Youre receiving other commentary. So I think we're our view has not changed in terms of the strength of the underlying markets.
Dave: We continue in certain cases to see some level of supply chain.
Dave: Chain challenges out there so I think that mitigates.
Dave: Some level of extrapolating the first quarter through the balance of the year. So I think overall there is also seasonality as you know.
Dave: With some of the underlying <unk>.
Dave: Users of medium duty and obviously class eight vocational so.
Dave: Having said all of that we continue to stay very close to the.
Dave: The Oems as well as end users with the underlying demand for the products you know our expectation at this point as we see the year play.
Dave: Playing out as you know.
Dave: Our strong first half as you know seasonality kicks in and typically in the fourth quarter, there's less production days because of holidays et cetera, We don't think that's going to be different for Q.
Dave: Q4, this year as it has been slightly.
Dave: <unk> cycle there the last few years, just because of the displacement from the pandemic, we see the market.
Dave: Normalizing more in that direction from a seasonality.
Dave: Perspective, so as we think about the balance of the year again, what I would think about and stay focused on is really the first half second half I'd also say our understanding at least from meetings with Oems and otherwise thats a relatively consistent.
Dave: <unk>.
Speaker Change: On your second question in terms of.
Speaker Change: Long term agreement negotiations for North America on highway it's still really relatively early in the year for that a majority of them are calendar year agreements. So we will get to that as we get further into the year I think to Fred's comments on our fourth quarter call the point Stan.
Speaker Change: <unk> in terms of your ask there and trying to quantify what the potential impact is we have not in a position to quantify that at this stage, but worth repeating though.
Speaker Change: Roughly 60% of that North America book of business.
Speaker Change: Is subject to those otas. So I think you can.
Speaker Change: Ron your own sensitivities in that regard and I think it goes also without saying that as we've said before we sell our products based on the value that they deliver.
Speaker Change: It's clear that the.
Speaker Change: Services provided by those vehicles are up labor rates are up so.
Speaker Change: Inflation underlying from those services reflects the additional value that our product provides relative to safety driver training reliability uptime.
Speaker Change: Total cost of ownership et cetera, so and very much aligned with what you've seen in terms of vehicle pricing.
Speaker Change: Great. Thank you very much.
Speaker Change: Our next question comes from the line of Robert Wertheimer with Melius Research. Please proceed with your question.
Speaker Change: Hi, everybody. This is Jonathan Pellegrino on for Rob. Thanks for taking our questions. We were just curious if you could kind of dive into gross margin a little bit more it was down a little bit. This quarter. We're just hoping if you could maybe talk about some mix or different.
Speaker Change: Things that were going on in on the gross margin line. Thanks.
Speaker Change: Sure Jeff This is Fred.
Fred Tuomi: As you mentioned.
Fred Tuomi: You know down.
Fred Tuomi: Gross margin down and I think the one thing you need to take into consideration is that.
Fred Tuomi: Through gross margin run say UAW contract.
Fred Tuomi: Signing incentives that was $13 million. So if you are.
Speaker Change: If you exclude those and you look at our gross margins on a sequential basis theyre actually up 10%.
Speaker Change: And then if you look at EBITDA margins on a.
Speaker Change: The sequential basis.
Speaker Change: Our EBITDA margins are up.
Speaker Change: Yeah.
Speaker Change: 90 basis points, though so gross margin up 10 basis points.
Speaker Change: Excluding the signing bonus.
Speaker Change: And.
Speaker Change: Yeah.
Speaker Change: And then up 90 basis points.
Speaker Change: EBITDA margin.
Speaker Change: Wonderful thank you.
Speaker Change: Our next question comes from the line of Tami Zakaria with Jpmorgan. Please proceed with your question.
Tami Zakaria: Hi, Thank you so much.
Tami Zakaria: So my first question is could you provide some pointers.
Tami Zakaria: Regarding how to think about the second quarter.
Tami Zakaria: Sales and margins versus what we saw in the first quarter.
Tami Zakaria: Yes, Tammy. This is this is fred.
Tami Zakaria: Yeah.
Speaker Change: And data.
Fred Tuomi: Two kind of timing earlier, the biggest end market in North America on highway.
Speaker Change: But as we have.
Tami Zakaria: Things laid out from a from a margin profile.
Tami Zakaria: We have EBITDA margin.
Tami Zakaria: In the second quarter very close to what we saw in Q1.
Tami Zakaria:
Tami Zakaria: And then we have things software in the back half of the U year particular Q4, just based on an expectation that there's going to be lower topline revenue.
Tami Zakaria: From a from a cost standpoint.
Tami Zakaria: Things feel fairly fairly stable clearly we understand our.
Tami Zakaria: Hourly labor cost.
Tami Zakaria: We anticipate anticipating SG&A being relatively.
Tami Zakaria: Flat for the year.
Tami Zakaria: Engineering R&D.
Tami Zakaria: We'll probably step up a little bit off of Q1, but.
Tami Zakaria: No.
Tami Zakaria: Pretty close to what you saw in the.
Tami Zakaria: The back half of 2023.
Speaker Change: Got it and so from a top line perspective should we expect also.
Speaker Change: <unk>, a similar number and I'm just trying to understand first half versus second half the second half to Zika is to kill sort of.
Speaker Change: In line with the run rate we saw in Q4 sales.
Speaker Change: Yes, Directionally, obviously, its still so quite a bit to go in Q2, but I think that's a good.
Speaker Change: Expectation is that it will be in line with Q1.
Speaker Change: And really looking relatively consistent across the first three quarters with the fourth quarter being.
Speaker Change: A little lower just based on the number of workdays.
Speaker Change: And if I can ask one quick follow up I think services revenue decline was a little weaker than we were.
Speaker Change: <unk> is there anything one off to call out there or do you still expect services to be about down 2% for the year.
Speaker Change: Yes, I think the one thing to call out.
Speaker Change: That's a good point, if you think about the cadence of revenue in 2023.
Speaker Change: We came into the first part of 2023 with some backlog that got solved.
Speaker Change: In the first quarter, and then somewhat into the second quarter. So when you look at the service parts revenue that we ran for Q1 set almost exactly on top of where we were for the fourth quarter of 2023.
Tami Zakaria: So it's really more the the more challenging comp on a year over year basis.
Speaker Change: Okay wonderful thank you.
Tami Zakaria: Yes.
Tami Zakaria: Our next question comes from the line of Angel Castillo with Morgan Stanley. Please proceed with your question.
Angel Castillo: Hi, Thanks for taking my question just first maybe on on highway I was hoping you could kind of parse out a little bit more kind of a specific growth that you saw within vocational as well as you know the medium duty kind of those two separate and then also could you just give us a little bit more color just regarding the supply chain challenges that you noted.
Angel Castillo: Any particular kind of step change it it seemed like there was maybe potential that there's some of these things are getting a little bit worse. So if you could just give us a little bit more color there.
Speaker Change: That'd be helpful.
Speaker Change: Steve I appreciate the questions there so north America just to.
Steve: Be clear.
Steve: You know the Allison team over probably the last decade now has.
Steve: Gained share in the class eight as.
Steve: Vocational market.
Steve: There are a number of reasons for that is we talked about the value proposition of the product that continues to be.
Steve: The case, if nothing else I think COVID-19 further highlighted the.
Steve: The advantages of our product when you start to get into we all talk about labor constraints constantly.
Steve: The demographics, where you have people retiring and.
Steve: Effectively exiting the.
Steve: The industry would certain skills.
Steve: Our product does not require.
Steve: Steve.
Steve: I would say training.
Steve: Experience to manage a manual gearbox, so it's a fully automatic products.
Steve: That has proven to be even more attractive in the context of limited labor availability. So we continue to experience.
Steve: A fairly high level of demand for our class eight straight products, so whether that be the that are applicable in our 3004 thousand series. So that's effectively what we continue to see and experience in the market trend.
Steve: A tremendous amount of demand for those customers have become very accustomed to those products and have really built.
Steve: If you will their fleets the context to content as well as the labor pool. So.
Steve: We saw those that play out as we entered first quarter. We also talked on the fourth quarter call about the fact that there was.
Steve: A bit of pent up demand as you know a vocational not being produced.
Steve: Close to demand as end users would like at that so we entered you could see that starting to develop in the second half of 'twenty three that's carried into 'twenty four or so.
Steve: We're also a beneficiary of that level of <unk>.
Steve: Demand that carried into 2024 as I said earlier, our expectation currently based on what we're hearing from.
Steve: Oems and end users as we expect it to continue to be.
Steve: A very busy year on the vocational.
Steve: And on the vocational front medium duty had also a level of lack of supply post.
Steve: Post the pandemic that that market is.
Steve: Proved in terms of supply demand balance we're seeing.
Steve: Fleets do some level of.
Steve: Re sizing.
Speaker Change: That's not surprising.
Speaker Change: Frankly, when you start to look at the developments in certain <unk>.
Speaker Change: Segments of the medium duty market. So that is firming up a bit in terms of supply demand, but continues to be a relatively.
Steve: As we think about again that playing out throughout the year.
Steve: <unk>.
Steve: When you look at the level of simultaneous demand that you see especially in the vocational market across the entire industry.
Steve: It can be rather challenging for the industry as youre dealing with relatively high levels of.
Steve: Poll for certain components, so again.
Steve: The industry is not necessarily fully capacity wise for that type of sustained peak. So that is now certainly.
Steve: Is causing many parties to address some of those underlying constraints.
Steve: Constraints I won't get specific in terms of what those are but I would just offer that as.
Steve: As far as I'm aware all the industry participants are trying their best to produce to those levels of demand, but I would describe.
Steve: That demand at some level being almost unprecedented in terms of overall.
Steve: Response pull from the market right now so.
Steve: We'll continue to manage through that process and the team here is certainly committed to deliver to the best of our abilities and make sure that the end users are receiving the level of support that.
Steve: They need but I would just offer the labor issue more broadly.
Steve: Forget, leaving aside the cost issues that we've and others have addressed it's an availability challenge across the board so and I think that's one that we're.
Steve: We're working very closely with.
Steve: Both our internal team and our supply base to make sure that.
Steve: We're doing our best in terms of making that labor available, but it's one that one issue that I think we will continue to be.
Steve: Be challenging as we get further into the year.
Speaker Change: Very helpful. Thank you.
Steve: Okay.
Steve: As a reminder, it is star one to ask a question. Our next question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question.
Jerry David Revich: Hi, good afternoon, and good evening.
Jerry David Revich:
Jerry David Revich: I'm wondering if you could just talk about your views on truck industry inventories for class five through seven the total unit counts on dealer lots is cyclically.
Jerry David Revich: Cyclically high levels and I'm wondering if you could tell what type of equipment that is to what extent, it's factors that you're considering Fred when you were talking about potentially softer revenue outlook in the back half of the year, just if you could share your views around.
Jerry David Revich: That dynamic that'd be helpful.
Jerry David Revich: Yes, Jerry this is Fred I mean, my my earlier comments were more around typical seasonality.
Jerry David Revich: You know our.
Jerry David Revich: Are you now a read through.
Fred Tuomi: Through our sales force is that.
Jerry David Revich: Yeah.
Jerry David Revich: So inventory is still pretty tight I think.
Jerry David Revich: The question May be.
Jerry David Revich: How much is that a dealer versus versus at bodybuilders and I think you know relative to body builders and their ability to get all the parts to complete the trucks I think there's some challenges there.
Speaker Change: Oh interesting.
Speaker Change: I think the hold up in terms of the building dealer inventories because of the consumer.
Speaker Change: Constraints.
Speaker Change: Uh huh.
Steve: Final assemblers.
Steve: Yes, I think there's more challenges in that piece of the chain as opposed to just excess vehicles sitting on dealers' lots.
Steve: Okay.
Steve: And then.
Steve: Separately.
Steve: Continued good margin performance by the team despite being hamstrung on the part of your business, where you haven't been able to raise pricing outside of North America on highway are there any other pockets.
Steve: Pricing opportunities from here can you update us on your price realization.
Steve: In the quarter.
Steve: Central pockets pricing updates or.
Steve: 25 ahead of the.
Steve: Bigger pricing opportunity that you mentioned last quarter.
Speaker Change: Sure Jerry as Shred again, most of the pricing actions were effective January one.
Jerry: But with demand as robust as it is we're certainly in a position where.
Jerry: Some in customer incentives that are maybe you have historically done two to conquest, new customers unique and you can pull back on those somewhat.
Steve: And then relative to the book of business available to price in 2025 clearly we've.
Steve: Talked about what's available North America on highway, which is meaningful the 60 plus percent, but but there is more available to price.
Steve: Across the other end markets.
Steve: So you know.
Steve: We're we're obviously spending a lot of time thinking about that and as Dave mentioned, it's a it's too early to really be in negotiations with customers, but there is a broader book of business available payable to pricing just the.
Steve: 60% of North America on highway.
Speaker Change: I appreciate it thank you.
Steve: Yeah.
Steve: There are no further questions in the queue I'd like to hand, it back to Dave <unk> for closing remarks.
Dave: Thank you for your continued interest in Allison and for participating on today's call enjoy your evening.
Dave: Okay.
Dave: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.