Allison Transmission Holdings Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Consolidated net sales reached $1,534 million, a 121% year-over-year increase, driven by the addition of the Allison Off-Highway business unit acquired on January 1, 2026, which contributed $653 million.
• Net income was $191 million (12.5% of net sales), up $54 million from $137 million in the same period in 2025.
• Diluted EPS was $2.30 (up 41% year-over-year); adjusted diluted EPS was $2.90 (up 59% year-over-year).
• Adjusted EBITDA was $400 million (up 56% year-over-year), representing a 26.1% margin of net sales.
• Gross profit was $505 million (33% margin), an increase of $175 million from the prior year period.
• Net cash provided by operating activities was $343 million, a 50% increase year-over-year.
• Adjusted free cash flow was $278 million, a 51% increase year-over-year.
• Total debt stood at $4,012 million with net debt at $3,515 million; the company ended the quarter with nearly $500 million in cash and cash equivalents and $996 million in available borrowing capacity.

Guidance and Future Outlook:

• Full-year 2026 consolidated net sales guidance raised to $5,975–$6,075 million.
• Full-year 2026 consolidated net income guidance raised to $645–$685 million, subject to purchase price accounting completion.
• Full-year 2026 consolidated adjusted EBITDA guidance raised to $1,530–$1,580 million.
• Full-year 2026 net cash provided by operating activities guidance raised to $1,110–$1,140 million.
• Full-year 2026 adjusted free cash flow guidance raised to $850–$900 million.
• Full-year 2026 capital expenditures guidance raised to $240–$260 million.
• Net income guidance includes approximately $125 million of one-time pre-tax expenses related to the separation, integration, and restructuring of the Allison Off-Highway business unit, including $65 million for stepped-up basis in inventory.

Business Segments and Product Lines:

• Allison Transmission: Net sales of $881 million (up 27% year-over-year), a record quarterly revenue. Gross margin was 46%. Segment operating profit was $300 million (34% of net sales). Adjusted EBITDA was $333 million (38% margin). Demand accelerated for medium-duty and Class 8 vocational trucks, particularly in the North America On-Highway end market.
• Allison Off-Highway: Net sales of $653 million. Gross profit was $98 million (15% margin). Segment operating profit was $32 million (5% of net sales). Adjusted EBITDA was $83 million (13% margin).
• End Market Performance: Mining end market momentum remained robust; Construction & Material Handling delivered year-over-year growth across all regions. Industrial and Agriculture end markets remained subdued due to geopolitical developments.
• Allison Central Group: A centralized cost center accounting for certain functional costs supporting global operations.

Market and Competitive Landscape:

• The company operates in vital sectors including infrastructure, mining, energy, agriculture, construction, transportation, and national security across over 150 countries.
• The acquisition of the Allison Off-Highway business unit from Dana Incorporated on January 1, 2026, significantly expanded the company's footprint and revenue base.
• Management noted favorable end market demand conditions and operational execution driving strong results.

Risks and Challenges:

• Ongoing geopolitical developments continue to temper customer purchasing activity in Industrial and Agriculture end markets.
• Third quarter performance reflected customary seasonality, including the impact of European holidays, representing the softest quarter of the year.
• Risks include integration costs and challenges associated with the Allison Off-Highway business, supply chain disruptions, labor disputes, and cyclical industry conditions.

Management Commentary and Tone:

• David S. Graziosi, Chair, President, and CEO, stated that results reflect continued strength across the majority of end markets supported by disciplined execution.
• Management highlighted strong cash generation supporting debt reduction, with over $400 million of debt repaid year-to-date.
• The tone was confident, citing "favorable end markets demand conditions" and "operational execution" as key drivers.

Other Key Points:

• The company repurchased $57 million of common stock during the quarter, with $1,068 million of authorization remaining.
• A quarterly dividend of $0.29 per share was paid, totaling $23 million.
• Selling, general, and administrative expenses included $4 million of one-time acquisition-related expenses.
• A $17 million charge was recorded for optimization activities within the Allison Off-Highway business unit.
• The acquisition is expected to be accretive to net income and diluted EPS in 2026 despite one-time costs.