Skip to content
    ALSN
    Earnings call· Mar 2026(Q1 FY26)

    Allison Transmission Holdings Q1 FY26 earnings call ALSN

    May 4, 2026 Source

    Executive summary

    Allison Transmission Q1 FY26 — Integration Progress and Reaffirmed Guidance

    Allison Transmission reported a productive first quarter, marked by disciplined integration of the Off-Highway business unit and initial synergy realization, reaffirming its $120 million annual run rate synergy target. Despite ongoing geopolitical uncertainties and mixed end-market conditions, the company maintained its full-year guidance, demonstrating resilience and confidence in its strategic combination. Management emphasized continued cash generation, debt reduction, and shareholder returns while actively monitoring external headwinds.

    Highlights

    5

    • Defense end market revenue increased 64% year-over-year in Q1 FY26.

    • Adjusted diluted EPS rose 6% year-over-year to $2.57 in Q1 FY26.

    • Adjusted EBITDA grew 22% year-over-year to $362 million in Q1 FY26.

    • Repaid $150 million of outstanding borrowings under the revolving credit facility in Q1 FY26.

    • Increased quarterly dividend for the seventh consecutive year to $0.29 per share in Q1 FY26.

    Concerns

    5

    • Allison Transmission business unit net sales declined 4% year-over-year to $733 million in Q1 FY26.

    • Allison Off-Highway segment gross profit was negatively impacted by approximately $76 million of one-time acquisition-related purchase price accounting items in Q1 FY26.

    • Consolidated net income decreased year-over-year due to $22 million of additional intangible asset amortization expense and $17 million of one-time acquisition-related integration expenses in Q1 FY26.

    • Geopolitical impacts, including tariffs and emissions regulations, are hindering end users' new vehicle purchasing decisions in North America Off-Highway.

    • The conflict in the Middle East has undetermined impact and implications across multiple end markets, with potential for indirect impacts on supply chains and energy markets.

    Guidance & targets

    10
    CategoryTargetConfidence
    Consolidated Net Sales
    $5.575 billion to $5.925 billion
    high materiality
    High
    Allison Transmission Business Unit Net Sales
    $3.025 billion to $3.175 billion
    medium materiality
    High
    Allison Off-Highway Business Unit Net Sales
    $2.55 billion to $2.75 billion
    medium materiality
    High
    Consolidated Net Income
    $600 million to $750 million
    high materiality
    High
    Consolidated Adjusted EBITDA
    $1.365 billion to $1.515 billion
    high materiality
    High
    Consolidated Net Cash Provided by Operating Activities
    $970 million to $1.1 billion
    high materiality
    High
    Consolidated Capital Expenditures
    $295 million to $315 million
    medium materiality
    High
    Consolidated Adjusted Free Cash Flow
    $655 million to $805 million
    high materiality
    High
    Adjusted EBITDA Margin
    27% to 29% range
    high materiality
    High
    Net Leverage Ratio
    2x
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Allison Transmission Business Unit
    Net sales declined year-over-year against a robust Q1 2025. Defense end market showed significant strength from international customers, particularly in track programs with legacy and new products.
    Defense end market revenue growth: 64% YoY
    		$733 million-4%——
    Allison Off-Highway Business Unit
    Generated sales with continued growth in the mining end market and strong performance in construction and material handling in Europe. Negatively impacted by approximately $76 million of one-time acquisition-related purchase price accounting items.
    		$673 million>10%——

    Operational metrics

    21
    Adjusted Net Income
    $216 million
    Q1 FY26

    Excluding noncash, nonrecurring, infrequent or unusual items.

    Adjusted Diluted EPS
    $2.57up 6% YoY
    Q1 FY26

    Increased year-over-year, excluding the effect of noncash, nonrecurring, infrequent or unusual items.

    Adjusted EBITDA
    $362 millionup 22% YoY
    Q1 FY26

    Reflecting disciplined execution across business units.

    Adjusted EBITDA Margin
    26%
    Q1 FY26

    Reflecting disciplined execution across business units.

    Share Repurchase Authorization Remaining
    $1.2 billion
    End Q1 FY26

    Remaining authorization for common stock repurchases.

    Debt Repaid on Revolving Credit Facility
    $150 million
    Q1 FY26

    Part of the $300 million outstanding borrowings used for the Allison Off-Highway acquisition.

    Quarterly Dividend Per Share
    $0.29increased for 7th consecutive year
    Q1 FY26

    Nearly doubled over the last 7 years.

    Share Repurchases Executed
    $20 million
    Q1 FY26

    Common stock bought back in the first quarter.

    Cash on Hand
    $311 million
    End Q1 FY26

    Liquidity metric at the end of the first quarter.

    Available Revolving Credit Facility Commitments
    $845 million
    End Q1 FY26

    Liquidity metric at the end of the first quarter.

    Net Debt
    just under $4 billion
    End Q1 FY26

    Resulting in a pro forma net leverage ratio below 3x.

    Pro Forma Net Leverage Ratio
    below 3x
    End Q1 FY26

    When giving consideration to a full year of earnings from the Allison Off-Highway acquisition.

    Allison Transmission Price Realization
    325 bps
    Q1 FY26

    Expected to be in this range for the full year.

    Allison Off-Highway Sales Growth
    >10%YoY
    Q1 FY26

    Combination of currency factor and strong demand.

    Acquisition-Related Purchase Price Accounting Items Impact
    $76 million
    Q1 FY26

    Negative impact on gross profit, related to stepped-up basis in inventory.

    Intangible Asset Amortization Expense
    $22 million
    Q1 FY26

    Additional expense contributing to year-over-year decrease in net income.

    Acquisition-Related Integration Expenses
    $17 million
    Q1 FY26

    One-time expense contributing to year-over-year decrease in net income.

    Allison Central Group Costs
    $12 million
    Q1 FY26

    Reasonable run rate on an annualized basis for EBITDA after carving out nonrecurring and noncash stock comp.

    One-Time Pretax Expenses (Acquisition)
    more than $100 million
    FY26

    Associated with the separation, integration and restructuring of the Allison Off-Highway business unit, included in net income guidance.

    One-Time Cash Outlays (Acquisition)
    $55 million
    FY26

    Associated with the acquisition of the Off-Highway business unit, included in net cash provided by operating activities guidance.

    One-Time Separation and Integration Capital
    $45 million
    FY26

    Included in consolidated capital expenditures guidance.

    Industry KPIs

    4
    MetricValueDetails
    Tariff cost impactuncertainty
    Parts aftermarket businessfairly steady
    Incremental margin operating leveragefavorable impact
    Order backlog order intake by segmentstrength

    Deals & partnerships

    1
    DanaAcquisition of Allison Off-Highway business unit

    Allison acquired the Off-Highway business unit from Dana at the beginning of the year. Integration is progressing as expected, and value capture is materializing.

    Risks & headwinds

    7
    Geopolitical impacts and regulatory uncertaintyongoing

    hindering end users new vehicle purchasing decisions

    Mitigation: Leveraging expanded global operations and localized production footprint to address and mitigate impacts.

    Middle East conflictongoing

    undetermined impact and implications, both favorable and unfavorable

    Mitigation: Actively monitoring and maintaining close coordination, recognizing potential for indirect impacts across supply chains, energy markets, and broader macroeconomic conditions.

    Purchase price accounting itemsQ1 FY26

    approximately $76 million negative impact on gross profit

    Mitigation: One-time impact related to stepped-up basis in inventory.

    Intangible asset amortization expenseQ1 FY26

    $22 million additional expense

    Mitigation: Impact of acquisition, contributing to lower net income.

    Acquisition-related integration expensesQ1 FY26

    approximately $17 million one-time expense

    Mitigation: One-time costs associated with the integration of the Allison Off-Highway business unit.

    Higher interest expenseQ1 FY26

    year-over-year increase

    Mitigation: Contributing to lower net income.

    Uncertainty regarding EPA '27 engine regulationsH2 FY26 and into 2027

    impact on cost of engines and potential for prebuy/non-compliance fees

    Mitigation: Monitoring for modifications to warranties and potential market impacts.

    What to watch in Q2 FY26

    5

    Medium-Duty Market Recovery

    Q2 FY26 and H2 FY26
    Currentextremely soft in Q1 FY26, some signs of optimism
    Targetbottoming out and improving in a larger way, sequential step-up in H2 FY26

    Why it matters

    Recovery in the medium-duty market is crucial for the Allison Transmission business unit's performance and overall volume growth.

    Relative to medium duty, the first quarter was still extremely soft. I will say we're starting to see some signs that would give you some optimism there relative to sort of the lease rental guys, some of them leaning into the market a little bit.

    Q&A highlights

    5

    How has the changed global environment, including volatility and tariffs, impacted the acquisition thesis for the Off-Highway business, both positively and negatively?

    Management stated that the acquisition has exceeded expectations, providing additional capabilities and operational flexibility that are beneficial in the current volatile market. The broader footprint helps address regional realignments and mitigate issues, which would have been more challenging with the legacy Allison footprint. End market conditions are still viewed as 'troughy-ish' but equipment utilization continues to drive future demand.

    “So I'd say, in summary, very pleased from with what we've seen and what we continue to work on, but also our ability to deal with the volatility in the broader markets.”

    asked by Rob Wertheimer · answered by David Graziosi

    2 min read5 chapters

    Detailed Narrative

    01

    Acquisition Integration and Synergy Realization

    The integration of the Allison Off-Highway business unit is progressing as planned, with initial phases of synergy realization taking shape. Management reaffirmed its target of $120 million in annual run rate synergies, expecting financial benefits to begin later in 2026. The acquisition has expanded Allison's global operational footprint, enhancing flexibility and providing opportunities for cost reductions through increased purchasing scale and utilization of best-cost countries.

    02

    End Market Performance and Outlook

    The North America Off-Highway truck market is viewed with cautious optimism, despite order trends showing strength, due to geopolitical uncertainties and emissions regulations. The defense end market experienced an extremely strong quarter with 64% year-over-year revenue growth, driven by international customers and new products. The mining end market continues to grow due to elevated commodity prices, and construction/material handling performed well, particularly in Europe. Agriculture remains muted overall, with some positive indicators in specific subsegments like low-horsepower in India.

    03

    Financial Performance Highlights

    Consolidated net sales for Q1 FY26 were $1.406 billion. Adjusted diluted EPS increased 6% year-over-year to $2.57, and adjusted EBITDA rose 22% year-over-year to $362 million, achieving a 26% margin. The Off-Highway acquisition is expected to be accretive to earnings for the full year, despite Q1 being negatively impacted by $76 million in purchase price accounting items, $22 million in intangible asset amortization, and $17 million in integration expenses.

    04

    Capital Allocation Strategy

    Allison continues to prioritize long-term growth investments, debt reduction, and returning capital to shareholders. In Q1 FY26, the company repaid $150 million of its revolving credit facility, increased its quarterly dividend for the seventh consecutive year to $0.29 per share, and repurchased $20 million of common stock. The company ended the quarter with $311 million cash on hand and $845 million in available revolving credit, targeting a near-term net leverage ratio of 2x from its current pro forma level below 3x.

    05

    Sequential Business Outlook

    Management expects the Allison Transmission business to step up sequentially in Q2 FY26 from Q1, with Q4 potentially stepping down slightly due to fewer days. The Off-Highway business is also projected to see a step-up in Q2, followed by a decline in Q3 and Q4 due to European holiday schedules. The Service Parts business is anticipated to remain fairly steady, and global Off-Highway is expected to see upside in mining and hydraulic fracking.

    AI-generated summary of the company’s earnings call. Not investment advice.