Good morning, ladies and gentlemen and thank you for standing by. Welcome to Allison Transmission’s Fourth Quarter and Full Year 2020 Earnings Conference Call. My name is Melissa, and I will be your conference call operator today. At this time, all participants are in a listen-only mode.

After the prepared remarks, the management team from Allison Transmission will conduct a question-and-answer session and the conference call participants will be given instructions at that time. As a reminder, this conference is being recorded. .

Thank you, Melissa. Good morning, and thank you for joining us for our fourth quarter and full year 2020 earnings conference call. With me this morning are Dave Graziosi, our President and Chief Executive Officer and Fred Bohley, our Senior Vice President, Chief Financial Officer and Treasurer.

As a reminder, this conference call webcast and this morning’s presentation are available on the Investor Relations section of our website, allisontransmission.com. A replay of this call will be available through February 25.

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 fourth quarter and full year 2020 earnings press release, our Annual Report on Form 10-K for the year ended December 31, 2019, and our quarterly reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, uncertainties related to the COVID-19 pandemic and related responses by governments, customers and suppliers and other factors as well as general economic conditions.

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. In addition, as noted on Slide 3 of 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 as an appendix to the presentation and to our fourth quarter and full year 2020 earnings press release. Today’s call is set to end at 8:45 a.m. Eastern Time.

In order to maximize participation opportunities on the call, we’ll take one question from each analyst. Please turn to Slide 4 of the presentation for the call agenda.

During today’s call, Dave Graziosi will provide you with a brief operational update; Fred Bohley will then review our fourth quarter financial performance and introduce full year 2021 guidance. Finally, Dave will conclude the prepared remarks prior to commencing the Q&A. Now, I’ll turn the call over to Dave Graziosi..

Thank you, Ray. Good morning and thank you for joining us. Before I begin the operational updates, I would like to mention our announcement earlier this week at Larry Dewey has notified Allison’s Board of Directors of his decision to not stand for re-election at our 2021 Annual Meeting of Stockholders.

On behalf of the Board of Directors and the entire Allison organization, we are extremely grateful for app for Larry’s leadership and dedication to the company. I would also like to personally thank Larry for his mentoring and guidance, as I’ve transitioned into the CEO position.

In recognition of Larry’s many years of service, the Board of Directors has named him to the honorary position of Chairman Emeritus of the Board following the 2021 Annual Meeting of Stockholders..

Thank you, Dave. Following Dave’s comments, I’ll discuss the Q4 2020 performance summary, key income statement line items and cash flow. I’ll then introduce full year 2021 guidance before turning the call back over to Dave. Please turn to Slide 5 of the presentation for the Q4 2020 performance summary.

Net sales decreased 13% to $535 million compared to the same period in 2019, principally driven by the continued effect of the pandemic on the global economy. However, net sales increased $3 million on a sequential basis as the recovery and customer demand, and the global economy that began in the third quarter continued through the end of the year..

Thank you, Fred. in the past, I’ve mentioned that Allison has more opportunities to invest for growth than at any other time in its history. Earlier, I noted that we are positioned to capitalize on growth opportunities across all of our end markets.

And Fred just discussed how consistent investments through the pandemic, along with planned increases in 2021, we’ll continue to fund product development initiatives and supportive long-term growth. One of the key areas where Allison has been investing extensively for decades is an electrified propulsion.

In the last three years alone, Allison has made approximately $250 million in direct investments to advance electrified propulsion technology.

We have fully funded state-of-the-art, and proprietary manufacturing and development infrastructure in place, including our recently completed electric axle development and manufacturing facility in Auburn Hills, Michigan, and our recently unveiled vehicle environmental test center here in Indianapolis.

These investments and capabilities combined with our decades of experience with vehicle propulsion, extensive knowledge of vehicle controls technology, our vocational and duty cycle expertise, our customer relationships, our brand promise and our service network are formidable differentiators and emerging industry attempting to serve uncompromising end users.

These differentiators are why multiple major OEMs representing over 70% of the North America – North America on-highway revenue have already chosen to integrate Allison’s eGen Power electric axles into their electric and hydrogen fuel cell truck development and validation program.

They are also why we are consistently engaged in senior level discussions with many more new and established OEMs that have expressed interest in Allison electric propulsion solutions.

collectively, these opportunities span a broad range of markets and duty cycles, including the Class 8 line-haul market, where Allison’s eGen Power is ideally suited to meet the demands of heavy duty class 8 tractors while expanding Allison’s addressable market.

Allison’s eGen Power 100D electric axle unveiled late last year during HINO Trucks Project Z, path to zero emissions initiative is one of the most powerful and fully integrated electric axle systems in the world.

It features multiple electric motors and a two-speed transmission integrated into the central housing, facilitating a high starting great ability, increased top speed and superior efficiency. The eGen Power 100D is a highly engineered and fully integrated solution that eliminates many of the inefficiencies of competitive electric axles.

These performance and efficiency advantages translate directly to wide ranging duty cycles and increased range capability, or a reduction in battery pack size for the electric truck optimizing the economic value delivered to the end user..

Thank you. our first question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question..

Yes. Good morning, everyone. And then Dave, congratulations on your new responsibilities.

I’m wondering if you gentlemen can talk about your market position as a component supplier to the new start-up companies that some which have been listed, some which are on their way to being listed, where – what proportion of them are you working with sort of similar to the 75% number, Dave that you shared in your prepared remarks? And I’m wondering if you could touch on what sort of electric powertrain contribution does your 2021 revenue guidance on that?.

good morning, Jerry and thank you. It’s Dave.

A couple of things, as we’ve indicated on some of the prior calls, our team is engaged broadly across the industry, whether that be with established OEMs or some of the new OEM, shall we say? I would tell you that that engagement is broad-based, but very much focused on the eGen Power line-up at this point.

So having said that, we’ve had a number of discussions around volume and timing to be blunt; what we’ve found is frankly, whether it’s established OEMs and some of the newer ones, there’s a wide range on volumes. There’s also a wide range on timing.

So, we need to do more work frankly, in response to your question there about ultimately, what does that mean from a near-term perspective, as well as what I would define as the more mature market outlook in terms of share and what those vehicle line-ups ultimately are? I think it’s fair to say there’s a lot of good intentions and statements that have been made about what could be, but we’re very much focused on probable outcomes at this point and that’s – that requires a very focused approach.

So that’s where our team is spending the majority of their time, but I would ultimately expect that, we’ll have share with a number of different OEMs, but those will be, I think, very focused and consistent with our goals, which is immature view.

And I think frankly, production level vehicle releases ultimately, because these are very complex systems and don’t lend themselves to what I would define as prototype to ultimately, a regular production transition that get very complicated, very costly and timely to ultimately implement..

Okay. Thank you..

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

Hey, good morning all. And it’s actually a similar question to Jerry’s. To the extent you can, can you talk about what is the scope of opportunity for you within new powertrains, e-axle is obviously, you’ve made a big push.

And then Dave could you define – I’m sorry, maybe, I missed the context around the 75%, but could you just kind of define and I know you just touched on this with Jerry, just what that comment was, and then just maybe, any more color on how many competitors you’re facing and what you’re doing and how you look like you stack up now? Thank you..

Good morning, Rob. Thank you. Look, I think the comment you made is that our position is very similar to what we talked about with the Q3 call in terms of who we’re working with at this point. I think we’re certainly confident in what those efforts pretend to be. Ultimately again, focused on where we are from an e-axle perspective.

I would say what’s continuing to evolve in a number of discussions with OEMs and evaluations is a focused effort around what is today. And I think this is important, when you think about what exists today with conventional, there’s a fairly team level of desire and focus around proliferation.

In other words, the lack thereof and as we look at the space as you see it evolving the EV space today for commercial vehicle, it’s – there are a lot of different discussions, component systems being evaluated, but the industry really doesn’t lend itself to that level of proliferation.

So, I think the way we are considering this space is ultimately having a foundational design or frankly, a base model, if you will, that’s capable of covering a wide range different duty cycles, and vehicle sizes and ratings.

So that’s really what the focus is currently is providing that type of solution that ultimately addresses the proliferation question; at the same time, delivers what I would define as at or better than conventional performance today.

The fact is end users’ OEMs, – or are – we all are really come accustomed to a high level of uptime and reliability, and cost definition and ultimately, certainty. That’s going to be required over time to be successful.

And that’s really what our focus is, but the audience that we’re targeting continues to be the same, I would say, what is – what has changed and is evolving for us, is this broader objective about a full range covered by essentially a base architecture with some variation, but very limited from that perspective..

That’s a fascinating answer.

I know I’m supposed to do one, is the industry yet focused on that proliferation issue that you mentioned, and I understand it well, and your point there, and then do you have enough data or knowledge of where the industry is going to know that your product is right within the band of what people are wanting and I will stop. Thank you so much..

Not, because the – a couple of things, the proliferation issue again, you get so close to things. Sometimes you need a lower perspective and that’s where we are with conventional, we’re so close to what we’re used to it. I personally do not believe that the industry is fully come to grips with what that means and what that ultimately leads to.

And we’re – there’s a lot of things I would not focus on necessarily, what’s first is ultimately what is the mature objective and that’s the way we think about it. I think the short answer to your question is I’m not sure the proliferation issue has really been fully captured.

But ultimately, I would say based on the amount of inquiries and interest that we’re receiving, there’s a signal there that I think they’re starting to be some sense or broader sense of what that mature view is. And again, it’s evolving and it’ll continue to change.

but I would not describe the voice of customer at this point, as highly matured to a level that you could, I think may vary from decisions, ultimately, a range that addresses proliferation, and it has performance that is at or better than conventional experience..

Thank you..

Thank you. Our next question comes from the line of Larry De Maria with William Blair. Please proceed with your question..

Thanks. Good morning, everybody. Can you talk a little bit about market share in 2020? Obviously, I think you’ve done this in protocols – I’m sorry, 2021, not 2020.

I’m curious how you did, and then also if you think about over the next three to five years, because I know you’ve been gaining share last few years, how do you think about attrition to EV over the next few years compared to what you have now, just trying to understand how you think you might lose a little bit over the next few years? Thank you..

Hey, Larry, it’s Dave. let me start and I’ll let Fred finish. As I – to your question on share estimates, it’s really focused on the on-highway business, as we think about what occurred in 2020, where I’m certainly very proud and pleased what our team accomplished despite the conditions that everybody’s dealing with.

But I would say from a share perspective, overall, good outcome for us as we largely maintained, or I would argue improves in certain cases. to your question on what that means relative to potential EV attrition, there’s a number of forecasts by various parties that are out there. I would offer that we view the November 2020 U.S.

election results as providing potentially, the opportunity to accelerate the pace, at which end markets evolve to what we’re – I think what everybody’s looking for to answer your question, which is sustainable demand, given what we believe is the – that the governing impact on consequential commitments, by all parties that are involved.

In other words, as I mentioned earlier, when you look at what’s being proposed by a number of OEMs on potential ranges of programs et cetera. our experience, I would say, they’re at least to date, there are very wide ranges of volume, which probably tells you something.

There’s also timing that in many cases, it’s certainly set out to be, I think, what everybody wants to do, but ultimately is getting in many cases delayed for a number of valid reasons, point being is that all of that is going to impact the answer to the question that you asked, which is attrition.

And I think my – our view is a lot more needs to be understood about ultimately, the cost of these systems and when they are economically viable within the addressable spaces that we participate in with and without any type of subsidies. I mean, the fact is, again, I think there’s a lot of optimism around what the elections last November could mean.

But you still need to address all the issues that your – everybody is familiar with in terms of performance, cost, infrastructure, et cetera.

So, the answer is, I think, as we look at it, many of the ranges that we’ve seen tie out to say 2020, 2025, post-2025, in terms of any, I would say level of volume that’s discernible within the spaces that we see and even then, they seem, they’re relatively small in comparison to the broader space, which creates its own challenges, as you know.

So, with that, I’ll turn it over to Fred in terms of the market share point here..

Sure. Larry, relative to 2020, we’ve been on really, multi-year gaining share, the biggest share jump there for us was Class 8 Straight up from 2019 levels, 75% penetration of all transmissions, total share in Class 8 Straight up to about 80. thinking about 2021, our assumptions in the guide is basically neutral on share gain, no loss, no gain..

Okay. That’s great. Thanks for all that. Would you guys host an analyst meeting to go through all this long-term strategy and EV at some point? and I’ll leave it there. Thanks very much guys..

Certainly, that’s in the mix. we have a tremendous amount going on from a technology standpoint that we’d like to lay out to the investment community..

Thanks. Good luck, guys..

Thank you. Our next question comes from line of Courtney Yakavonis with Morgan Stanley. Please proceed with your question..

Hi, thanks guys. Maybe, just a follow-up to that, I know you mentioned the Class 8 Straight share, but if you could talk a little bit about school bus, I think that’s a place, where you’ve been losing share. It seems where that is where a lot of the electrification, adoption might be happening a little bit sooner.

So, if you could just reference what your expectations for share there are in 2021. And then going back to your R&D increase of about 30%, it’s baked into your guidance for 2021.

I think that’s going to get your R&D, close to 8.5% sales based on your sales guidance, which is significantly higher than we’ve seen historically and obviously, understandable given the investment that you’re doing in the eGen platform.

but as we look longer-term, is that the right level that we should be thinking about? Or should that be kind of continuing to increase with this double-digit rate for the next couple of years.

So, just try not to frame where R&D should be in the medium term?.

Sure, Courtney. this is Fred. I’ll take the first part relative to our expectations on school bus share.

And we have a basically neutral in 2021 from 2020 levels, and Dave you want to respond to the R&D questions?.

Courtney, good morning. It’s a couple of things; with R&D, as we’ve mentioned before, it’s very much tied to market opportunities, right. And this goes beyond the EV to – frankly, all of our end markets and I’m certainly again, recognizing our team’s efforts to drive growth.

And that’s really, the outcome is what you see is the investment in R&D and the increases; there is a combination of electrification, as well as other initiatives in our broader end markets and markets portfolio.

That being said, I wouldn’t assume to your point in terms of – I would not really look at it as a percent of sales, although I can appreciate the fact that it’s – it does facilitate some level of modeling and such. But the way I would think about that is it’s ultimately market-driven.

And if you break down what’s happening in 2021, the name off of that base, the expectation is I think over time, it’ll moderate ultimately.

at the same time, we’re also doing a fair amount of investment, have done a fair amount of investment in capital investments around our technical capabilities, and I would again see that very much moderating after this year.

the balance will come to us with market demand frankly, and, and those investment analyses will be made and we’ll make appropriate decisions. but it’s clear from our comments and our actions that we are investing in growth opportunities across the entire portfolio.

And then to the extent that there’s more opportunities, there were inappropriate returns, we’ll fund accordingly. but I can certainly assure you the investments are there. The team is very much engaged and we look forward to bringing these things, these programs ultimately to market and looking beyond those in terms of what’s next..

Great. Thank you..

Thank you. Our next question comes from the line of Ian Zaffino with Oppenheimer. Please proceed with your question. Mr. Zaffino, your line is live. Sorry, thank you. Our next question comes from the line of Jamie Cook with Credit Suisse. Please proceed with your question..

Hi, good morning and congratulations, Dave. I guess two questions, one first, the implied incremental margins on your guidance, I think are ranging from 20% to 40% understanding R&D is part of that, but is there anything else you can point to whether it’s COVID challenges or supply chain, and I guess how conservative that guide is.

And then my second question you’ve talked a lot about the organic growth initiatives.

I’m just wondering how you’re thinking about inorganic opportunities and opportunity in terms of M&A, and whether there’s an opportunity for you get into – to get into adjacent products, whether it’s power electronics, battery packs, I’m just trying to understand how you could somewhat broaden your product offering if there’s an appetite to? thanks..

Hi, Jamie. this is Fred. I’ll take the first part of that question. Relative to the implied incrementals, at the midpoint, the 32% incremental on a drop through realizing that we’ve got Engineering-R&D up 30%, absent that increase in R&D that drop through would be about close to 50%.

So certainly, it’s fairly attractive performance from a gross margin standpoint and we’re funding the business.

on a year-over-year basis, you’re really looking at the additional spend on R&D, you really get at this point, you have a par payout on extending comp rolling through that is really somewhat offset by the unfavorable policy warranty adjustments in 2020.

We do anticipate getting priced, 50 basis points to 75 basis points, but there’s a lot of cost pressures with the supply chain challenges. So, we’re typically price cost positive. This year, we’re anticipating being closer to neutral.

Certainly, the price is there, but the expedited freight, the commodity pressures, we definitely will attempt to mitigate those, but the other thing you have rolling through just when you think about 2020, just a lot of spend, it just couldn’t happen.

So, there’s a little pressure upward on SG&A, as your economy opens up and you’re able to begin travel..

Jamie, thank you and good morning.

In terms of your question on the organic growth or supplementing that, I guess through potentially M&A and across whether it’s EV or conventional adjacencies to your point, we are actively engaged in assessing external investment opportunities to further enhance our position electrification as well as expanding our addressable markets.

I think to your point, whether it’s electrification, which, we obviously have done a few things in 2019 and continued to be very engaged, I would note, for, as you think about electrification to the – in our prepared comments, this point about collaboration is important, because I don’t know as to the answer necessarily is absolutely control everything.

I think that’s, that’s challenging to do, especially when you think about a relatively immature voice, a customer and a number of other frankly attributes that need to be addressed and ultimately answered too.

We believe ultimately there’s collaboration that will be required, that that could take the form of a number of different partnerships, arrangements, et cetera. So it’s not only from an M&A perspective as we’re approaching the market. It’s also from a collaborative perspective.

And I think at some level, leveraging investments that have already been made in trying to do that, and then from a view of capital, efficiency and ultimately, the most appropriate application of existing technology or other opportunities.

that being said, the adjacencies, a point that you raised, as we’ve thought about that and continued to look at the market opportunities, we believe they are there whether those are in ultimately, conventional or EV, I would say on the conventional side as you think about what’s happened even over the last year, year plus, there’s a number of issues that have been raised relative to supply chain and more broadly, the sustainability of that supply chain going forward, just given the amount of demand that was there and then the pandemic, and then recovering from the pandemic.

So, we believe there’s opportunity there as well to look at the market. In addition, our relationships over the years in certain adjacencies are proving to be attractive as well in terms of potential opportunities.

So, as we think it, it’s broad, as I think we should be open-minded, but as part of our capital allocation priorities, M&A is certainly at the forefront to ultimately, support growth whether that be through organic initiatives that are underway or ultimately, broadening our adjacencies..

Okay. Thank you..

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

Hey, good morning everybody..

Good morning..

Good morning..

Hey, I was hoping you could maybe, give us your thoughts around international opportunities. On one hand, you have tightening emission standards in places like China, I would assume that would be a positive for you all equal, but obviously, electrification is accelerating quickly.

There also, you still see some incremental opportunities on a shift toward automatic transmissions, or just more EV effectively, cannibalize that and if you could just help us think through your approach and thoughts, that will be super helpful..

Felix, good morning, it’s Dave. So to your question, it’s really there are, we believe significant opportunities out in emerging markets for ultimately, fully automatic solutions. There, those markets have many of the same demographic attributes and challenges that you would argue more established developed markets do, whether that’s the U.S.

or Europe or others at this point. So, there is going to be demand there, because of a lack of skilled drivers for manuals that’s the demand ultimately, for fully automatic solutions.

But I think your point on emissions as well taken, if you think about all the work that we’ve done in partnership and collaboration with the entire powertrains that’s going to be required to meet a number of tightening situations globally. And I think we’ve – we obviously have experienced with that and we’ll continue to drive that.

But to your point, certainly, EV in China for instance, is very heavy in bus. Truck has proven to be, I think, much more challenging for a number of reasons.

They’re moving around some subsidies there, but the fact is it will be a bit of a reach we believe in terms of total cost of ownership, especially when you think about the challenges of addressing the need for automation in those same vehicles today and the cost challenges.

So, I think the long answer to your question is we still, I believe there’s significant opportunity for growth in those markets..

Thank you. Our next question comes from line of Ann Duignan with JPMorgan. Please proceed with your question..

Yes. Hi, good morning. Just back to the base business for a moment, for your on-highway North American business, can you just talk about the cadence of sales that you’re anticipating, do you expect all quarters will be up year-over-year and then within your core markets in on-highway.

Could you just talk about maybe, the differences or the similarities in terms of the growth rates that you’re expecting there? thank you..

Good morning, Ann, it’s Dave. To your question, as we think about the quarters just describing, looking at them on a year-over-year basis for North America on-highway, I would expect Q1 to ultimately be a bit lower than last year on a quarter-over-quarter basis.

We expect Q2 and Q3 to be better on a year-over-year basis, and then Q4 probably slightly positive again, to your point cadence though everything I’ve just said with the caveat of the various supply chain issues, and I’m sure you’re well, probably too well versed in at this point and to what we commented, including Fred’s detailed commentary there, that’s an open switch, frankly, and it’s one that is taking a tremendous amount of time from our team to ultimately look to address, I will also offer relative to the supply chain issue, that potentially has impact throughout a number of different end markets, because we’re seeing lead times be impacted and specifically, around the availability of certain raw materials, et cetera.

So, the caveats of – caveats apply, but to your question there, that’s the way we would see ultimately, the year breaking out from North America on-highway to your – I think second part of your question, as we think about the individual components of North America on-highway.

medium duty, as you know, continues to be strong given the lack of inventory, whether new or used and the strong order boards and backlogs, and I think frankly, sets up for a reasonably positive 2022, interestingly enough at this point. Lease and rental key segment for us.

We believe those fleets at this point, they’re either right or undersized, and they’re continuing to experience high utilization rates. Muni is mixed.

But I would say overall, you’re continuing to see strength in residential rescues, decreased bus utilization, tax revenues depends on regions, obviously in terms of how they’ve responded to the pandemic. I think this weather that we’re experiencing in many parts of the U.S.

right now is consuming budgets at an alarming rate for some of these municipalities. So that’ll be an issue as to how they look at their budgets for the balance of this year, in terms of both maintenance and equipment. Oil and gas is an interesting one, because we’re certainly starting to see utilization rates go up.

And the impact of that’s starting to flow through with higher energy prices, dealers are certainly, concerned around the deficiencies that they’re experiencing and struggling to maintain a manageable level of stock inventory, bodybuilder lead times are out there.

They’re really extending now at this point, but I would say overall, the positive momentum carried from certainly, Q1 into or Q4 into Q1. But there’s the supply chain issues that I mentioned earlier are really going to have a number of us working extremely hard to try to manage from at least into, I think the first half of the year..

Okay. And just as a quick follow-up, you didn’t mention school buses, couldn’t you go back Fred or you didn’t tell us what your school bus market share was in 2020. You just said flat in 2021. And then do you expect school bus demand be up flat or down in 2021? Thank you..

Sure, Ann. Our 2020 school bus penetration is 84%. We have school bus, and I think it’s somewhat a wildcard house going play out, but we have school bus modeled slightly down in 2021..

Okay. Thank you. I appreciate it..

Thank you. Our next question comes from the line of Brett Linzey with Vertical Research Partners. Please proceed with your question..

Hi, good morning, everyone..

Good morning..

Hey, I wanted to come back to the e-axle initiative and the electrified powertrain understanding you’re building off a base architecture, but could you just talk about your technology, where you think you differentiate versus peers in that category? And then is there anything you can share along the lines of the number of customers engaged or pilot programs underway to help frame that progress?.

Sure. This is Dave. Again, in terms of the technology, as I think we covered in some of the prepared remarks, the level of integration that the e-power – the eGen Power ultimately, offers is we believe that at a level of performance that is unique in the marketplace currently.

So, what do I mean by that? Again, if you think about conventional experience today, when we talk about gradability and performance, those are all attributes that are taken for granted. There are with very few exceptions right now, at least in terms of what is available that meets those requirements.

And I use the word uncompromising in the prepared remarks for a reason, because that’s what everybody is used to. We are taking again, the ultimate focus and objective is meeting or exceeding conventional experience. And that really has been the focus of the eGen Power development program.

So to your question, in terms of a number of parties we’re working with, et cetera, beyond the point mentioned about, the 70% or so of our North America on-highway revenue.

I would also tell you there’s parties outside of North America that we’re talking to as well, and considering those development programs, again, back to what I mentioned earlier, which is really focused in probable engagements, meaning the ranges that are being provided, whether those be volume or timing, become relevant as to where anybody’s going to spend their time at this point.

And I think without more certainty, there’s going to continue to be a fairly high level of variability around what you hear and over what period of time. we’re focused on what we’ve really probable outcomes.

And that’s important because every one of these, whether you have one unit running or a thousand is a significant undertaking in terms of time by both parties. But the more important thing is customers are not interested in, explaining why things don’t work to the expectations that they have.

We are certainly intending on meeting or exceeding current performance that they’re experiencing with our brand and conventional and that is really uncompromising. So, as we focus on it, the right parties ultimately with probable outcomes.

And frankly, I think the market will sort through that as – I think, as everybody knows the market, doesn’t like chaos. And this is one that I think will bear itself out over time is, really a focused approach to probable outcomes that deliver our brand promise and I think that’s probably the most concise way to describe it..

Okay. Helpful color. And appreciate the thoughts on the M&A strategy on different pockets of opportunity.

But as you think about balancing capital deployment, is there room to do both share repo in deals or is M&A the priority and you toggle to repo, if discussions aren’t progressing, just trying to understand, how much stock you could maybe buy this year and the next couple of years, while you’re doing things and pursuing inorganic opportunities?.

Yes, Brett. This is Fred. I mean, in the middle of a global pandemic 2020, we generated over $450 million in free cash flow. So, we’ve laid out our capital allocation policies and we were fortunate in that. We generate so much cash. we’re in a position to fund all of those priorities.

You’re seeing it, we’ve funded organically for revenue and growth, and we’re funding for product development and technology, Dave mentioned, pursuing strategic opportunity, we’re returning capital shareholders. In the last four years, we’ve repurchased over a third of our shares.

We just raised our dividend by 12%, and then we’ve got the balance sheet in really great shape. And again, we’re always focused on maintaining that low cost, flexible, prepayable debt structure. So, we are positioned on a go-forward basis to fund all of our capital allocation priorities..

Yes. Absolutely. Okay, great. Thanks. Appreciate the color..

Thank you, ladies and gentlemen. That concludes our question-and-answer session. I’ll turn the floor back to Mr. Graziosi for any final comments..

Thank you, Melissa and thank everybody for their continued interest in Allison and for participating in today’s call. Enjoy the rest of your day..

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation..