Allison Transmission Holdings, Inc. (NYSE:ALSN) Q2 2023 Earnings Call Transcript

But suffice to say, I think we’re certainly the preferred solution from a transmission perspective with natural gas engines.

Jerry Revich: Thank you.

Operator: Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Please proceed with your question.

Rob Wertheimer: Hi guys. Thanks for the follow-up. Just a quick one just for grounding. What has changed in margin structure from the kind of pre-COVID levels, I’ll call it peak, but I’m not sure it’s a very high peak in your end markets. Is there anything that’s structurally down shifted for you in margin? Or is that something you hope to win back over time as price and volume catch up?

Fred Bohley: Yes, Rob, I mean, probably the only thing that’s changed structurally would be the acquisition of Walker Die Cast and the portion of that business that’s been is represented in outside sales and parts. That’s not – that’s a lower-margin business than the balance of our parts business. But really, beyond that, I think we’ve had a high-class problem in the – you have roughly 50% margin. So in order to maintain those margins for every dollar of cost you get, you got to get $2 in price. Clearly, we’re price/cost positive, and we’re making more on everything that goes out the door when you think about gross margin or gross profit per unit, we’re making more, even though you’ve seen margins — the gross margin is down a couple of hundred basis points from peak.

But we’re certainly, as I talked earlier with the pricing opportunity that’s out there is, certainly something we’re focused on. But for us, the real focus is always EBITDA really is a proxy for cash and how much cash can we generate. And the good news is we are generating more cash on what’s going out the door now relative to what was pre-COVID.

Rob Wertheimer: Okay. Thank you.

Operator: Thank you. We have reached the end of our question-and-answer session. I would now like to hand the call back over to David Graziosi for closing comments.

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

Operator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.