Good afternoon. Thank you for standing by. Welcome to Allison's first quarter 2026 earnings conference call. My name is Shamali, and I will be your conference call operator today. At this time, all participants are in a listen-only mode. After prepared remarks, Allison executives will conduct a question-and-answer session, and conference call participants will be given instructions at that time. As a reminder, this conference call is being recorded. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the conference call over to Jackie Bowles, Executive Director of Treasury and Investor Relations. Please go ahead, Jackie.

Thank you, Shamali. Good afternoon, and thank you for joining us for our first quarter 2026 earnings conference call. With me this afternoon are Dave Graziosi, our Chair, President, and Chief Executive Officer, Scott Mell, our Chief Financial Officer and Treasurer, Fred Boley, Allison's Chief Operating Officer and Allison Transmission Business Unit Leader, and Craig Price, Allison All-Pyway Business Unit Leader. As a reminder, this conference call, webcast, and this afternoon's presentation are available on the Investor Relations section of allisontransmission.com. A replay of this call will be available through May 18th. As noted on slide 2 of the presentation, many of our remarks today contain forward-looking statements based on current expectations. These forward-looking statements are subject to known and unknown risks, including those set forth in our annual report on Form 10-K for the year ended December 31, 2025. 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 expressed today. In addition, as noted on slide 3 of the presentation, some of our remarks today contain non-GAAP financial measures as defined by the SEC. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures attached in this appendix to the presentation and to our first quarter 2026 earnings press release. Today's call is set to end at 545 p.m. Eastern Time. In order to maximize participation opportunities on the call, we'll take just one question from each analyst. Please turn to slide four of the presentation for the call agenda. During today's call, Dave Graziosi will provide a business update and briefly review the company's performance. Scott Mell will then discuss Allison's segment reporting structure and further review Allison's first quarter 2026 financial performance and Allison's full year guidance update prior to commencing the Q&A. Now I'll turn the call over

to Dave. Thank you, Jackie. Good afternoon and thank you for joining us. Please turn to slide five of the presentation for our first quarter business update. First, I want to recognize and thank our global employee base for all the work done so far this year. Our teams have been working diligently on integration and value capture within both Allison business units. Our execution has tracked closely with our planning and the integration process is proceeding in a disciplined and structured manner. Having said that, it has not been without a tremendous amount of effort by the Allison teams to arrive at where we are today. As our teams more closely coordinate efforts, we are beginning to see the initial phases of synergy realization take shape across several key areas and expect to begin to see financial benefits later in 2026. It's been encouraging to see the groundwork laid prior to the transaction translate into real momentum and reaffirmed guidance in achieving our target of 120 million of annual run rate synergies. We remain confident in our acquisition thesis, accelerating sales growth through the strategic combination of the two business units, strengthening our localized production footprint, and generating sustainable cost reductions that enhance long-term shareholder value. Allison's reach is now greatly expanded with our global operations allowing for more localized production and opportunities for cost reduction. By leveraging increased purchasing scale and utilizing manufacturing in best cost countries, we expect to drive value creation and margin improvement across our business. I want to give another welcome to our new colleagues around the world and thank you for all that you do. It's been a productive first quarter and exciting times for Allison as we enter this new chapter. Moving now to a brief update on first quarter sales performance and end market outlooks for both of our business units. Please turn to slide six. Starting with our legacy Allison Transmission business, first quarter net sales were $733 million, a year-over-year decline of 4% when compared against a robust first quarter of 2025. For the North America on-highway end market, we continue to view the truck market with cautious optimism. Although order trends have shown strength and imply a slight ramp throughout the year, we believe there is still uncertainty surrounding geopolitical impacts, including tariffs and final rulings on emissions regulations that are hindering end users' new vehicle purchasing decisions. Continuing with the Allison Transmission business unit, the defense and market had an extremely strong first quarter with revenue up 64% year over year. We continue to see strength from international customers primarily in track programs with both legacy and new products, including our 30-40 MX cross-drive transmission. We hold a favorable outlook for the defense and market as national security becomes even more relevant to nations around the world, leading to increased budgets and new programs being funded. Please turn to slide seven. The Allison Off-Highway Business Unit generated $673 million of sales in the first quarter with continued growth in the mining and market driven by elevated commodity prices including gold, copper, and rare earth minerals. The construction and material handling and market also performed in the first quarter as global construction markets are seeing steadier investments and positive developments, particularly in Europe. In the agriculture and market, while commodity prices remain a driving factor, there are early positive indicators in certain sub-segments and regions, for example, the low horsepower market in India, but overall a fairly muted environment even prior to the start of the conflict in the Middle East. On that topic, the conflict in the Middle East currently has undetermined impacts and implications, both favorable and unfavorable, from multiple end markets across Allison business units. While the duration of the conflict remains uncertain, we have not seen any material disruption to our business at this time. We recognize the potential for indirect impacts across our supply chains, energy markets, and broader macroeconomic conditions, and our teams are actively monitoring and maintaining close coordination. In summary, integration is progressing as expected and value capture is materializing. End markets, although impacted by uncertainty in some aspects, are steady, if not showing signs of recovery. To everyone across our organization, thank you for the extraordinary commitment, resilience, and teamwork you've shown. Your efforts have laid a strong foundation for Allison's futures. To our investors, we are confidently positioned to unlock meaningful synergies, accelerate growth, and create lasting value. Now I'll pass the call over to Scott for a review of Allison's segment reporting structure, first quarter 2026 financial performance, and full year guidance update.

Thank you, Dave. And thanks to those of you joining us on the call. please turn the slide 8 of the presentation before we begin with segment and consolidated results I want to quickly go over some housekeeping items and outline our new reporting structure first quarter results now include segment reporting for Allison transmission Allison off highway and Allison central group the Allison transmission business unit is the company's legacy business, excluding certain costs, now accounted for within the Allison Central Group, while the Allison Off-Highway Business Unit reflects the business acquired from Dana at the beginning of the year. Allison Central Group is a centralized cost center, which includes certain functional costs that support the company's global operations. Now, on the left-hand side of slide 8, we provide sales, operating profit, and adjusted EBITDA by segment. Segment operating income flows over to the consolidated table on the right, with further detail down to net income and non-GAAP financial measures of adjusted diluted EPS and consolidated adjusted EBITDA. Please note that first quarter gross profit in the Allison off-highway segment was negatively impacted by approximately $76 million of one-time acquisition-related purchase price accounting items. On a consolidated basis, first quarter net income decreased year-over-year to $112 million, driven by the addition of costs from the Allison Off-Highway Business Unit, including approximately $76 million of expenses related to the stepped-up basis in inventory and incremental depreciation expense related to the stepped-up basis in fixed assets and an additional $22 million of intangible asset amortization expense. The year-over-year decrease in net income was also driven by higher interest expense net, along with approximately $17 million of one-time acquisition-related integration expenses, moving down to per-share earnings. First quarter diluted EPS was $1.33. When excluding the effect of non-cash, non-recurring, infrequent, or unusual items, including the cost associated with the acquisition of the Allison Off-Highway Business Unit, adjusted net income, and adjusted diluted EPS, for $216 million and $2.57 per share, respectively. As a reminder, reconciliations for non-GAAP financial measures can be found in the appendix of the first quarter earnings presentation and earnings press release. There will also be more detail provided in our 10-Q to be published later this week. Please turn to slide 9 of the presentation. First quarter adjusted diluted EPS of $2.57 increased 6% year-over-year, and we expect the acquisition of the Allison Off-Highway Business Unit to be accretive to earnings on a full-year basis. Adjusted EBDA for the first quarter was $362 million, increasing 22% year-over-year, with adjusted EBDA margin at 26%, reflecting disciplined execution across our business units despite the less-than-ideal operating environment. As we have discussed previously, we believe that improving in-market conditions in both business units will have a favorable impact on margins. Our value capture and synergy realization will also provide an uplift to our margins with our target for adjusted EBITDA margin in the 27% to 29% range. Cash generation continues to be a key attribute of Allison with the ability to generate substantial cash flow while successfully integrating the Allison off-highway business unit and navigating uncertain in-market environments, including geopolitical policies and conflicts. Now, I will briefly highlight our capital allocation priorities. we continue to invest for long-term and sustainable growth across our business units with new products and initiatives targeting identified growth opportunities. We are also focused on debt reduction to achieve our near-term leverage targets while simultaneously returning capital to shareholders through share repurchases and our quarterly dividend. At the bottom of the slide, you can see how we allocated capital in the first quarter. During the quarter, we repaid $150 million of the $300 million of outstanding borrowings under our revolving credit facility, which were used as part of the funding for the Allison Off-Highway acquisition. During the quarter, we also increased our quarterly dividend for the seventh consecutive year. Currently at $0.29 per share, our quarterly dividend has nearly doubled over the last seven years. And finally, we maintained our commitment to share repurchases with $20 million of our common stock spot back in the first quarter. We ended the first quarter with approximately $1.2 billion of share repurchase authorization remaining. Even with the recent appreciation in our share price, we continue to view our stock as undervalued relative to the underlying strength of our business units and long-term earnings potential, and believe share repurchases remain an attractive use of capital at this time. On the right side of slide 9, you can see Allison's liquidity and leverage metrics at the end of the first quarter. We ended the first quarter with $311 million of cash on hand and approximately $845 million of available revolving credit facility commitments. Our net debt is just under $4 billion, resulting in a pro forma net leverage ratio below three times when giving consideration to a full year of earnings from the Allison Off Highway acquisition. In the near term, we plan to reduce our net leverage to a target of two times. Through a recovery in our end markets, along with margin improvement through value capture and synergy realization, we will reduce our leverage ratio through both increased earnings and a concerted effort towards debt reduction. Before moving on to the 2026 guidance update, building on Dave's comments, I want to summarize our financial performance. In summary, our businesses are performing well. Macroeconomic clarity across our end markets would be well-received and likely drive increased volumes with favorable drop-throughs to margin performance and per-share earnings. Importantly, we continue to generate substantial cash flow and invest for long-term growth while also reducing debt and returning capital to the shareholders. please turn now to slide 10 for a review of our full year 2026 guidance first quarter results and taking into consideration current macroeconomic and geopolitical uncertainty we are reaffirming our full year 2026 guidance provided to the market on february 23rd the 2026 revenue we expect consolidated net sales in the range of 5 billion 575 million to $5,925,000,000. This includes net sales for the Allison transmission business unit in the range of $3,025,000,000 to $3,175,000,000 and net sales for the Allison off-highway business unit in the range of $2,550,000,000 to $2,750,000,000. For earnings, we expect consolidated net income in the range of $600 million to $750 million, subject to the completion of purchase price accounting associated with the acquisition of the Allison Off-Highway Business Unit. Our net income guidance for 2026 includes more than $100 million of one-time pre-tax expenses associated with the separation, integration, and restructuring of the Allison Off-Highway Business Unit. Despite these one-time costs, we expect the Allison Off-Highway acquisition to be accretive to net income and earnings per share in 2026. Further, we expect consolidated adjusted EBITDA in the range of $1,365,000,000 to $1,515,000,000. At the midpoint, this implies a 25% adjusted EBITDA margin. For our 2026 cash flow guidance, we anticipate consolidated net cash provided by operating activities in the range of $970 million to $1,100,000,000. Consolidated capital expenditures in the range of $295 to $315 million, including one-time separation and integration capital of approximately $45 million and consolidated adjusted free cash flow in the range of $655 to $805 million. Please note that our consolidated net cash provided by operating activities guidance includes approximately $55 million of one-time cash outlays associated with our acquisition of the Off-Highway Business Unit. This concludes our prepared remarks. Shemali, please open the call.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, we do ask everyone in the queue to please limit themselves to only one question to allow others a chance to ask. Our first question comes from the line of Rob Wertheimer with Milius Research. Please proceed with your question.

Yes. Hi. Thank you. Good evening. There's been a lot that's changed in the world since you announced the deal and even since you closed. I wonder if you could kind of talk about what versus your deal model has changed most of the positive and most of the negative, if you would.

Rob, it's Dave. Thank you for the question. So to your point, and I think we made this comment on the last call when we were asked about tariffs. And so, you know, we just got on the call. We haven't checked the news in a minute or two to see what happened. That, you know, continues, right? The rate of change and volatility in the overall market every day is truly an adventure. Having said that, you know, we're very pleased with the acquisition, frankly. I think we would assess it currently as exceeding expectations in terms of the additional capabilities and, and frankly, I think the attributes that are required to really excel in this type of market with the level of volatility that we're seeing, the operational footprint flexibility that we now have, the additional talent in multiple regions to really address and try to mitigate at the same time, I think, as you know, with trade developments being what they are and some of the regional realignment that's going on, a broader footprint is really much more to our benefit than, frankly, we had anticipated when we originally put the deal thesis together. Having said all that, you know, currently the team is very engaged in dealing with those developments, but also, as I mentioned in the prepared remarks, working on value capture as well, one thing that's become clear as we're dealing with various issues is other opportunities as well that are arising out of that, that again, if we go back to pre-acquisition, the ability to deal from an Allison perspective would have been, I think, a bit more challenged, frankly, just given the rather limited footprint we had at that stage. So I'd say in summary, very pleased 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. Okay, that's helpful. So more internal

capability and flexibility that's more beneficial in this changed world. And then on end markets, I mean, you inherited some trophy-ish end markets. Any change, you know, overall in where you see those either standing or going? And I'll stop there.

No, it's good in terms of an update there and, you know, between the prepared remarks and, you know, what we had listed out in the press release as well as the IR package. I would say overall, you know, our view on that in terms of end market conditions haven't really changed. I think to use your word, trophy, that still really is our view. If nothing else, I think it's really pointing out, again, some further opportunities as I think we hopefully get some clarity, all of us, in terms of these geopolitical developments, what the future holds. But it's very clear equipment in our end markets continues to be utilized. then that will always lead to demand. It's just a question of when exactly that will happen, but we feel very good about overall the point that we entered the markets.

Thank you. Our next question comes from the line of Tim Thine with Raymond James. Please proceed with your question.

Thank you. Good afternoon. The question is on the target for adjusted EBITDA margins of 27% to 29%. Dave, just curious in terms of your internal model and when you see that as a potential realization and to the extent has that moved up or down in terms of as you close the acquisition, Essentially, the timeline to hit that, has it changed, and how you're thinking in terms of realization of that target?

Tim, I appreciate the question. So, I would say overall, very comfortable with the target range that you mentioned from a timing perspective, given a few of the near-term issues that have arisen that I just mentioned, And really having no, I think, longer-term impact in terms of our timing. So I think, as we said, at the time of the acquisition announcement and close, we still feel that's, you know, very attainable within a few years. So one thing I would certainly repeat is the work that the team has been doing on value capture and synergies with some of these market condition changes have really pointed out, again, and a number of other areas that, you know, the team is diving into as well. So, again, feel very good about the range, and I would say both the target range as well as timing being realized over the next handful of years.

Thank you, Dave. Thank you. Our next question comes from the line of Ian Zafino with Oppenheimer & Company. Please proceed with your question.

Thank you very much. I just wanted to ask on the medium-duty side, you know, So when do we think that starts bottoming out and, you know, improving in a larger way? And then when we think about just the business in general, you know, what could potentially offset that as far as, like, vocational? Any other color you could give us there?

Sure, Ian. This is Fred. Relative to medium duty, the first quarter was still relative to sort of the lease rental guys, some of them leaning into the market a little bit. I think kind of the unknown for the second half of 26 is really where do we end up on medium-duty engines, which I think we need, you know, some direction from the EPA and how that's going to impact the cost of engines going into 2027. We've had the year modeled. We have had and continue to have the second half stepping up somewhat from the first. Relative to Class 8 straight truck, I would say it was, you know, a little stronger in Q1 than our initial expectations and continues to remain, you know, steady demand.

Thanks. And then just as a follow-up on, you know, use of capital or use of cash flow. You know, I know you talked about buybacks and dereverging. How are you kind of prioritizing one versus the other? Because I know the stock is cheap, but at the same time you want to derever. And then are we kind of done on the M&A side for the foreseeable future, just given you're in the midst of integrating a very large one and, yeah, just any kind of other things.

Yeah, it's Scott. On the capital allocation, I think, as I mentioned on the call, I mean, fortunately, we haven't had to, you know, make overly challenging decisions on the allocation of capital. We feel very comfortable with the cash-generating abilities of both the business units and the enterprise overall. So, you know, we've talked about this year, you know, targeting getting down to a two-times net leverage multiple here in the very near future, next couple of years. You know, we paid $150 million off in the first quarter. I think we should anticipate to see that rate somewhat continue as we go throughout the course of the year. And, you know, obviously we're still in the market repurchasing shares. Obviously, you know, at share prices where they are today, it's not as, you know, dilutive to the shares outstanding, but still demonstrative of our ability to continue to buy that share. So that's not going to change. So I think what you saw in the first quarter is a good precursor to what we expect to see over the course of the rest of the year.

And the second question. And, Ian, on your second question there, in terms of, you know, future inorganic opportunities or otherwise, you know, we continue to be active assessing different opportunities. So our capital allocation model that Scott went through, overall leverage targets, et cetera, the ability of the business, the new business, so to speak, to generate cash, we're continuing to be active looking at different opportunities. So that being said, as you know in your comments there, the team is very engaged working on a sizable acquisition with our new team members. So in the meantime, we're also assessing as part of the combined business what other opportunities could present themselves from an inorganic perspective. So we, as I said, in summary, remain engaged in that process and will certainly provide an update should one be necessary.

All right, great. Thank you very much.

Thank you. Our next question comes from the line of Jerry Ravage with Wells Fargo Securities. Please proceed with your question.

Yes, hi. Good afternoon, everyone. I'm wondering if you could just talk about your expectations for sequential performance in the business. I think normally for both the Allison and the Dana-off hiring business, we have production ramping up sequentially, 2Q versus 1Q, and margins up sequentially. Is that how we should be thinking about this year? And then separately, can you just comment on your expectations of synergy capture as we go through the year? Do you expect any cost benefits, 2Q versus 1Q?

Sequential, Stan, we do expect things on the transmission side to step up sequentially. And, you know, as we have it modeled, you know, we have Q2, you know, up off of Q1, and then Q number of days. I think, you know, the driver there will really be whether there's a meaningful pre-buy in Q4. And, Craig, maybe you want to talk a little bit about what you're seeing sequentially?

So from the off-highway side, there is a European, you get into the European holiday mode, so it can tend to go down for us, but that's the picture from the off-highway.

Oh, no, perfect. You read my mind. I was going to ask this sooner to capture part of the question.

Yeah, Scott, Gary, you know, as Dave and I mentioned, like, you know, look, We're starting to get a much clearer line of sight relative to the specific opportunities, size, timing, everything that you need to start to see that impact through the financials. What I will tell you is our expectations on the amount of opportunity and the timing of the opportunity has not changed whatsoever. And, you know, as we go throughout the course of the year, I think you should expect to see and hear from us relative to providing more detail on impact and, you know, updates on kind of when we think we'll get to full run rate of those impacts.

Thank you. And, Fred, can I just ask a clarification? You mentioned we'll see what the EPA wants to do. What's the range of outcomes? Is there a scenario under which EPA 27 is delayed, or considering the timing of engine rollout, is there a potential for higher pre-buy and medium duty? What's the range of outcomes that you alluded to that you think is reasonable?

We're not expecting a question.

This question comes from the line of Tammy Zakaria with J.P. Morgan. Please proceed with your question.

Hi. Thank you so much. So the $673 million of off-highway revenue this quarter, could you tell us how that compares to last year? And really related to that, price realization, could you comment on price realization by segment on highway and off highway, please?

I'll take the price one first and then let Craig, this is Fred, I'd let Craig, you know, roll through what he's seeing kind of in generalities on a year-over-year basis. But from a price with, you know, Allison transmission, you know, in the quarter we generated about 325 basis points of price. We expect to be in that range for the full year. And then, as we talked about on the last earnings call, anticipating price for out and off-highway to be neutral year over year.

And then from the off-highway end market year over year comparison, so I would say that we were up probably about 10% year over year, just over 10%. There was a combination of currency factor, given the footprint of sales in Europe. Obviously, we went from a Euro conversion of 107, 108 to 117. But we also saw a significant strong demand across a number of our segments. As Dave alluded to in his prepared remarks, we saw the construction market that was positive for us in Europe, but was slightly negative in North America. Agriculture was a positive trend as well for us. The different sub-segments of business in Europe was strong. Also, the low-horsepower business out of India came in strong. And then, obviously, the mining segment was up significantly as well, obviously driven by the higher commodity prices that are seen.

Understood. Thank you.

Thank you. Our next question comes from the line of Angel Castillo with Morgan Stanley. Please proceed with your question.

Hi, good evening. Thanks for taking my question. Just was hoping to go back to the end market discussion. I think, Dave, you mentioned that end market views haven't really changed, But it sounds like at least in North America on a highway, there's some pockets that maybe are coming in a little bit better than expected. And, you know, fully understand, I guess there's still a lot of uncertainty in the second half. But as you think about the unchanged, you know, full year guide, could you just go through the other transmission end markets? You know, any others where you're seeing particular kind of pockets of maybe better performance? I don't know if the fence looked like it was a pretty good quarter here. Are there any others that maybe are offsetting that and where you're seeing a little bit more weakness? In particular, we'd love any kind of commentary you have in terms of order books or customer commentary.

Thanks, Andrew. This is Fred. So I think we've sort of already covered North America on Highway, the largest in market, but you mentioned DeSend. I mean, it was an amazing quarter, revenue up 64%. And we do anticipate, you know, the balance of the year looking a lot like Q1. You know, I'd say relative to the quarter, things were a little softer outside North America on highway than what we had initially modeled. We do have that, you know, stepping up sequentially into Q2. You know, expect the service parts business to be, you know, fairly steady. You know, and Craig mentioned what he's seeing from a mining standpoint in his BU. I think we do have some upsides in our global off-highway relative to mining as well as hydraulic fracking.

Got it. That's helpful. And maybe just some housekeeping questions just as we, you know, try to kind of model the pro forma business. I guess the $12 million of corporate, I think, that was on the first quarter, Is that a good run rate for how we should think about that part of the business, the central group, on an EBITDA basis? And then will you be giving the end markets that you gave for off-highway historicals for 2025?

Yes, Scott. Question first. We do not intend to provide that level of detail for the business since we did not own it. And relative to the center group function, EBITDA number of 12, when you carve out the nonrecurring and the noncash.com, I think that's a reasonable number to apply on an annualized basis. So, yes.

Thank you. Our next question comes from the line of Luke Young with Baird. Please proceed with your question.

Thanks for taking the question. Maybe just continuing on that defense thread. Fred, I'm wondering how you think about the interplay between defense and North America on highways. The latter comes back later this year. As we look, historically, there's been a level of interrelationship there from a supply chain standpoint, at least to some extent in the past. But maybe looking forward, that relationship's not as strong or as relevant in the current geopolitical environment. Can you just talk about that interplay a little bit?

Yeah, I would say a lot of the growth of the non-U.S. government outside North America volume, and we talked about the successes we're having, you know, with Hanawa and Korea, with their canine house, our 3040MX and our 4040MX, you know, new products for us, with the Barzook out of Poland, Zuckercut out of Turkey, BAA Hagelin. So there's a lot of to sit here. I mean, there's a really good backdrop for defense. We've invested in these products, you know, beginning, you know, even pre-pandemic. They're coming to market. We're extremely excited about them and expect to have, you know, a great year in defense. So I would not, though, just based on the fact that, again, it's primarily driven by outside North America, see much connectivity back into the North America on-highway end market.

And maybe just related to that, is any of this going through the outside North America on-highway system? I know you can tend to pick up some commercial terms that are better there. Are we seeing any of that in that part of the business?

We do flow the wheeled portion of the defense through the outside North America on highway, primarily because we're selling a lot of times through the same OEM to wheeled volume. We're also seeing some strength in Europe from a vocational standpoint as well.

Very helpful. I'll leave it there. Thank you.

Thank you. Our next question comes from the line of Kyle Emendez with Citigroup. Please proceed with your question.

Great. Thank you guys for taking the question. I just wanted to go back to some of the pricing comments and how to think about price versus cost for the two business units for the year, the 350 or so basis points for the Allison transmission piece of the business. at that level? Are we price-cost positive for the year? Are we confident in that? And then I guess it sounds like for the off-highway business, if price is flat, I would assume

cost inflation is greater, so then the price-cost would be negative in that business for the year?

Yeah, so it's Scott. I'll try to answer, and then I'll let Greg and Fred lean in if they'd like. But on the Allison transmission business, I mean, yes, we do anticipate our year-over-year price to cover our inflationary cost factors with, obviously, the delta in the first quarter being the volume and mix impact there. On the off-highway side, you know, while they obviously have less pricing leverage, they certainly have shown the ability to take cost down on a year-over-year basis relative to, you know, either operations or purchasing. But I think that may be something, Craig, you can expand on a bit.

Yeah, sure. I would classify it as pretty neutral. I think that, to Scott's point, there's some, let's say, minor price givebacks of it.

Helpful. Thank you.

Thank you. Our next question comes from the line of Sharif El-Sabahi with Bank of America. Please proceed with your questioning.

Hi. Good afternoon.

Just looking at the first quarter, adjusted EPS was up about 6% year-over-year, and adjusted fee cash flow is down about 34%. I understand Reaffirm Guide calls for both to grow on a year-over-year basis for 2026, but can you give us some color on the seasonality of working capital for a new business and what Allison's free cash flow profile looks like now through the year?

Yeah, so a couple questions in there. I think the cash flow profile is going to be very similar to what you experienced prior to the acquisition, with it being said that the first quarter for the off-highway business segment or business unit is obviously a substantially meaningful user of cash during the quarter, just given some of the seasonality and the fact that it's a European-centric organization. But I think as you think about your modeling on a go-forward basis, you should expect to see the quarterly and quarter-to-quarter trends that you've seen in the past in terms of Q1 being a use of cash, Q2 turning the other way, Q3 kind of turning back, and then Q4 as we get to the end of the year, generating cash as we get to the end of the year.

Thank you.

Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to David Graziosi for closing remarks.

Thank you, Shmali. and thank you for your continued interest in Allison and for participating on today's call. Enjoy your evening.

Thank you. And this concludes today's conference and you may disconnect your lines at this time. We thank you for your participation.