WAB - Earnings call transcript Q2 2018 | Westinghouse Air Brake Technologies Corporation

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Operator

Good morning, and welcome to the Wabtec Second Quarter 2018 Earnings Release Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Tim Wesley, Vice President of Investor Relations. Mr. ahead. go please Wesley,

Tim Wesley

Good call. and Anita. XXXX to second earnings morning you, welcome everybody our Thank

introduce else Dugan; me and Ray COO; Let everybody Mastalerz Albert Betler, with the John Chairman. our me. Neupaver, call our CFO; Corporate Pat our Stephane Executive our who Rambaud-Measson, Controller is on

our we then remarks we will As Anita prepared mentioned, take will make and your questions.

to for will call so please press over release statements, turn will I review Ray, forward-looking the make we disclaimers. During the appropriate you. it today’s

Ray Betler

for Thank we Tim. It's in diluted quarter, most the both in share to this our and you, a Even revenue major won with we year now strong quarter morning, Good good in as new backlog we $X.XX. record the revenues about am our product have of high our targets segments adjusting in for our year-on-year saw growth to talk everyone. billion I adjusted in second the today. the of third comfortable is world. earnings at happy with guidance around row. changes business $X.X In increasing second financial growth revenue exceeded per lines you quarter a of and to FX, our report our a for slightly about year

GE in with we long-term merger growth performance, our to of about which we invest our during short-term continue talk focus more planned to our call. on be opportunities As are we also able today's pleased course will including Transportation,

to numbers. would it Pat the review second to turn I first like So, quarter over

Pat Dugan

we backlog $XX down transit $XXX due of That sales is growth FX contributed sales; FX growth and two increase which about for in million strong year-on-year row; $XX backlog $X starting $X.X years million. XX% organic increase two the income Sales growth increased a XX% our million $XXX due about of organic $XXX were increased to in third quarter, slightly is the segments, which and was our XX.X% contributed level million. Freight favorable years. these $XX a million fourth the at in. favorable showed a about about the our quarter were positive Ray. segment highest organic demonstrating and indicators. we've billion, sales Okay, third sales, sales at look and seen increased when for adding for Sales level When the is also increase at strong in of our kick or aftermarket The acquisitions million it at adding in This of freight row. consolidated sales. $XX it sales and acquisitions year-on-year quarter that you break was look row; increased X% $XX about million quarter growth all was highest operating the to and to to about the Freight which the in million, million. for were thanks, second to

of about and in change As tax $X in this this restructuring about million, GE services related about merger $X goods $X for costs the morning, in law transaction mentioned India million to which release Transportation the of is press million of costs reporting all and included our expenses SG&A.

items XX.X%. those was Excluding operating our margin

exchange as and goals. in restructuring was corporate benefits of the rates, in margin UK year through the in the Going foreign well lower margin is changes items increased of some the acquisitions, expense about $XXX to our some with and the work XXXX half our target about currency operating we realized action. talked was mainly of adjusted we forward, we mentioned XX.X% full increase expected as as million; our SG&A due about second I year that improvement as last contracts incentive

$X same year-ago our of includes Engineering operating because be quarter. look items and million the Amortization the to in restructuring some to for to if spending the cost tax and income expenses about in the When to timing the segment of be of a those additional the million at Indian X.X%. transit, tax, $XX those it GE for Transportation for to to expense X% the expenses an of margin change expenses our restructuring. can This the million million we captured the it decreased million law $X excluding exclude the merger decreased about expect in remained X.X%. any related per $XXX second you margin operating We expenses to and million of half quarter about about $XX $XXX due sales. was

the as compared of to $XX higher million, was to half favorable up year expect in some Freight sales cost improvement last to projects XX.X%. margin continue work our initiatives. those the restructuring due was I operating second we for mentioned, product. and through of to with We operating and income reduction margin The and more an lower-margin improve XX%

the For expect the better cost XXXX, margin year. performance, mix sales and restructuring of and to segments will for benefits both compared better year of reduction. These during of operating the project year last improvements and full we improvements come through

compared plan. in synergies we million million million $XX quick $XX In target a to update a of additional and million. achieve about integration Just expect generated on XXXX, we Faiveley our of an $XX $XX synergy XXXX, to and about

for Our three is least the first XX. total target years at

of ahead that to pace expect continue. and we're So

bridge specific later for was the income quarter I million to Transportation GE related that to expense and our the in statement expense, Looking second and closer the on the talk financing merger. $XX interest million that about included loan $XX interest will of costs

quarter debt million Faiveley the about than benefit the normal comparison, related of a the expense was interest For to acquisition. prepayment Transportation by in $X lower prior in assumed

from million debt effects and the expect cash our any you expense Remember, the we GE second exclude in would interest to transportation. be and we quarter on reduce interest Going year be focused to reduce of expense. $XX our the that generating half that forward, about per excluding if any-- are

prior other income quarter. year line-- $X.X was and mainly The increase to in investments. income was about income million The compared minority expense to higher the a the from million due $X

income her million was for the benefit the in our XXXX quarter US XXXX. lower expected effective $XX transition XX.X% to was of at Reform the charge of than to about initially tax tax of a Tax related the quarter Act. reported Looking reduction due from charge expense the rate tax estimated fourth That

our quarters effective these any can rate of of the about year items. usually benefit, per discrete XX.X% individual and our XXXX annual timing the quarter is was this estimate; Excluding Remember to vary that's assumption and full tax XX%. due

merger, restructuring $X.XX. with our a by a quarter actions share share, were the help per net beneficial for earnings that discrete GE EPS our diluted on to of So per our the Expenses our on second GAAP Transportation effect and tax of basis items EPS $X.XX. reduced

find help can also details press to you you our reconcile So release. these in

you start recorded restructuring and both net of that per You in diluted cost share are of of $X.XX. with add income GAAP sales back in with expenses $X.XX, accordance SG&A about

income the about back is about our charge $X.XX items SG&A for interest about tax per the add the GE $X.XX share cost change the and the of benefit transaction adding of in both is quarter. transition $X.XX recorded of in item end India these which of we You our-- the and diluted about which back of you for tax $X.XX, a that's up impact our in deduct SG&A to excluding net with related

growth sheet. Okay, shifting opportunity. to the and our strong. in remained our the balance to investment sheet provides It The flexibility balance capacity financial

credit grade investment an goal to rating have We maintain is and it. our

$XX compared million and In on the the expenses in cash about related about year-ago better Transportation $XX of consider restructuring terms from we we transaction to $XX that GE our was to when spent performance generated quarter; costs. operations, you merger other even million million

more and continue We XXXX in expect cash the finish half income. second net our from cash than improve generation to operations with to

working June capital $XXX our XXth, receivables at were inventories million at were million. were $XXX payables million, $XXX and Looking

receivables than of customer In million more offset were $XXX $XXX of which had unbilled addition, million. by about deposits about we

of net left We cash about at of mostly total of -- had debt $XXX billion debt and million $X.XX debt and cash of consisted the US the debt June of $X.X about outside XXth billion. and following. so cash Our the

EBITDA X.Xx. about Our net being ended debt

remind about GE alternative we and to included financing in a before commitment of bridge that syndication financing million $XXX $X.X anticipation draw merger, of unsecured any arrange the loan complete be merger. the new to fund bridge and you Transportation the senior term of arrangements, our we a arrangements. unsecured senior It cash by to reduced billion Just commitment financing closing. talk did will delay The portion new

term five-year an loan unsecured term credit refinanced addition, with existing facility million revolving a senior $XXX unsecured our for we term a revolver three-year In refinanced and the loan. $X.X billion with senior existing

the couple models. items of miscellaneous a Just for

the full depreciation with for Our year's depreciation year consistent was be million. $XX expense to last about quarter, $XX and XXXX expect million we the

Our expense $X.X-- was the $X.X quarter. compared about $XX to million million year's in last amortization

year For of to full be million. XXXX, expect about we $XX the it

about capital $XX million year versus in a about $XX spend the million Our for we quarter and million was to CapEx ago, XXXX. expect expenditures $XXX in

higher if changes from new exclude our near March foreign can XXth, $X.X orders backlog, you our At for press the slightly a quarter we see are at we of multi-year another was you in record billion; the Looking release. in impact exchange backlog good as reporting at XXst rates. was generating had June the numbers this than

which Our With backlog was multi-year Ray. record will subset the $X.X over a it a to billion. that XX-month I rolling is back of backlog turn

Ray Betler

through of to since Pat. quarter. you Thanks lot go That's accomplished a of a numbers lot and last work

you work done. John you thank Mastalerz for that entire team have So and your the

growth GE about cost based rest guidance year. per effects the this would performance As in year the of changes. Compared diluted our adjusted half billion expect I revenue about XXXX, outlook of and tax X% the for quarter-- increased charges $X.XX excluding our full previously, related now EPS to for revenues represent we to our of of on $X.X about the of law about first XX%. with earnings year growth restructuring first share and adjusted merger We the of mentioned

from generate net We the in to excess for cash income of year. expect operations

by Our improvement of margin key include both throughout about following. the operating see targets assumptions should rest mentioned is year our the as growth we year. Pat adjusted segments, XX.X% the the in for Revenue

we and is purposes. calculation of year, about for are adjusted be $XX XX% for assuming expected tax rate the EPS million outstanding Our shares diluted about to

transit segments, I turn with opportunity I've that give you merger Stephane been to I opportunity, I operating to update GE the on it and an this is. freight to just like it once-in-a-lifetime discuss Before over calling the would and truly believe Transportation.

by company. XXX The presents. long-term and excited the are the Wabtec combination Fortune both opportunity a make it We short-term will

its ending company up year. XX% the around about versus world. a compared with the booked second the be early billion last since second shareholders approval XX% transaction in of $XXX GE approval. billion profit conditions, expected continued outlook an product for revenues versus subject and operations rail XX% will and the improve as a is to of In that's including its transportation XXXX company more in industry, $X.X and We regulatory first The to in completed quarter. Transportation closing XX global the has quarter to We Financially, quarter the services quarters had prior the perform $X.X are year improvement in the leader segment orders Wabtec Year-to-date quarter, Across up and locomotives quarter. this about $XXX software XXXX. is has Transportation in still countries customary to which last continue a three GE first million orders confident million; of down X% to by year. in than equipment, be of expect

received as the the reviews cooperating Wabtec of request information have the As proposed and DOJ part with a regulatory for from review and US as fully we transaction. expected, both of the process GE Department additional Justice are it

let's strategic about merger. global in rationale compelling transportation closing, diversified for be the After talk So and leader we a will the logistics.

that should Transportation's capabilities. General integration. discussion see We From a far, are cultural service and Electric components with enable manufacturing our a transit so and seamless locomotive freight fit strong Wabtec's combining we

to will Wabtec positioned operations. train for Our technologies intelligence businesses meet to combined electronics demand can and autonomous lead network digital and and optimization. the be growing

aftermarket high-margin will We Complementary a and dampen customer global cyclicality. opportunity a cross-selling help service substantial relationships will benefit in sectors. from recurring revenue drive and

especially compelling are attractive in financials cycle. forma this pro at Our the stage

benefit well-positioned cost of orders. significant skill, reduction backlog General will synergies The of and drive potential significant with superior trajectory, Transportation free net $XX strong about benefit by and a is cash $XXX combination operating anticipated afford approximately values opportunities, synergy industry margins million a impacts billion $X.X creation rapid tax recovers mainly flow. and run driven Our the of rate billion. growth robust Electric as a

rapidly that will investment enable a have dividend that remain our and it us cash de-lever. over will turn strong ratings We with Stephane. flow to our to We will and committed free grade retaining to profile I

Stephane Measson

Ray. Thank transit as growth business. the to revenue will organic I is start you, our starting X% In kick in. quarter, with our are we backlog

Our UK been discussed affected margin by profitability lower last contracts the year. has the have that we in

We these some margins to restructuring of and expect actions have beginning margins to improve the revenue roll from off. lower

remained Worldwide, initiatives. market Our by to cost on to on long-term we new win good the OEM aftermarket SNCE in typically agreement cost rest and of to state provides a self-applying culture that and project and all and from management for HVACs by contracts lean and more our strong, restructuring period goal aftermarket margin cars being which bidding to our Israel. we too a during more the cut long-term lower India actions of and in goal order expect countries our cars France, then deployment is transfer our transit vigorous brake of in In year. the sourcing to of transit annuity of orders brake for disciplined with and X% continue for new improve and service bid and the we orders work the markets. better the for significant a major improved achieve and our equipment this France, and process, selective, lead revenues for equipment booked profitability Remember orders quarter,

As that Germany we and metro The sheet several to to in by trigger markets new our orders European business medium one by most by with new look The and in metal dynamic to market years, opening remains private projects continue grow of markets, locomotives for term and long regional coaches London, continues new record over operators. start France at next in Railways the could as Berlin replacement in India of bill new along project. expand, driven such just volume regional in our a rotary. for Paris, electric infrastructure driven market in the up the to Indian

scale more business time transit should global As margins as ability opportunities gross revenues market and both acquisitions, over we true and increased aftermarket organic a in better from player, our share increase. through and stability, improved have and as and benefit

up business, has Let's now which move to our strong to freight market train activity. pick continued to due

more train at highest its and in come NAFTA, second Our two our revenues to continue years, is years. than level were freight freight year-to-date now stock down. backlog storage freight is two up quarter than the and traffic X% more highest In in and

with growth locomotives the As our from repair seeing gas market. improving, and sales and the Demands a the in maintenance half aftermarket overall orders in benefiting our result, we more non-rail have first and our both locomotive business in are the seen enquiries good volumes charges in are business of freight year. Meanwhile, of is revenues with new along servicing for competent freight growth and we project. for and also oil

As orders, our business the outpace [Indiscernible] an saw example, in sales quarter. second of

declined As CapEx XXXX following. reminder, in a be in slightly is XX% freight the our or Railroad about expected include assumptions to up XXXX flat which XXXX.

locomotives, --. increase new see like in XXXX worldwide NAFTA, For but we it's be slight will down looking a

to It investment very and electronics long-term another by Ray? would to in first mention For third Australia Rio just our new into our long-time expected that is of cars of driverless Freight, controls. In one technology included in sign and to be new in up. its which cars, like freight is Turkey slightly NAFTA by Renault for train that be an freight just products, in equipment facility solutions. worlds the interested I autonomous in Wabtec. Tinto train, customers, continue delivery supply completed products

Ray Betler

our to long-term talking with I'll you, financial Thank in our our At by in about have due long-term meets growth to our Stephane. and double-digit which we of From merger strategic major goals average achieve initial conclude To earnings outlook. these May merger on remarks are our margins. business improves analysis our talked our diligence, growth deliver Electric early our consistent our lines our improving Day, After goals, to complete targets. growth General of each five-year product which we our confident growth we due our plan. Transportation, in in Investor strategies. plan revenues, our we are cycle initiatives will with prepared we ability update with forward the course long-term about

year. the both high. continues the the our increased near-record in for plan strong quarter comments beginning in the segments improve. third call, a of revenue exceeded for some in we growth guidance with row. remains my reiterate our second slightly had the for just quarter backlog Even our XXXX. freight and at the a of first good We We a So our saw year-on-year market to revenue of growth, And half

on to expect generate excellence are gives With business, margins seeing to which on time. improvements will the in us XXXX questions. that Wabtec freight build we cash be we and the program increase based we our accomplishments So to on Operator? our to happy these throughout over your answer and ability

Operator

first [Operator with ahead. question go Long Please from comes Instructions] Justin Stephens. The

Justin Long

Thanks morning. and good

this with improvement should a you've of you UK how if of guidance, maybe thinking through lap once about start that think business, could we restructuring was So contracts, that we help rid is question margins the are-- get your and current these start just the these I complete? some us the about the to side be year curious transit or talked where wondering based of should on exit on transit to

Pat Dugan

pretty segment guidance the say first freight the think for So safe when whole we margins, of margin Justin, to results given really revenue I flowing have-- XXXX, have for some particular half significant than that the a it's having transit. on guess, margins in normal really effect we that at impacting we have year but I through it's that's with transit look individual Wabtec overall we dampening I that's less and and the the really don't

see you could then in a more would to when look past back transit that you typical and So, have your that contracts-- profile projects you would as on the us think the we these results get margin you-- off run seen you Wabtec these at for to segment. start

Justin Long

year-over-year assuming the using Okay, giving so you mind and adjustments, am basis margin for the using should be post to I right you on for and so last that make comparison I think and comment just Pat been I an improvement, would numbers XXXX-- you had segments adjusted made year. the are have sure to we both there want many that's charges

Pat Dugan

It Speakers] about was XX% [Multiple

Justin Long

that And what was number for freight?

Pat Dugan

about was Freight XX.

Justin Long

And guess way there the work terms I past you come has locomotive is question, where helpful. in your overhaul was back are this understand to business, That's recovery? that and of to I much could that during how about second then, we speak just amount of Okay. down-cycle ask to of want any the I overhaul delayed at that wanted point,

Ray Betler

we back for year last associated about overhaul it overhaul-- coming think $XXX was the a that in was slow. lot adjustment overhaul-- with I million, is took revenue you of Justin, business locomotive know as locomotive one-- quarter second

nothing some there's bidding opportunities new in We in smaller the terms of been market process date. significant projects, to in are the but small--

Operator

with The Research. from ahead. go Wolfe next Scott Group comes Please question

Scott Group

take to in got much I to give revenue always the revenue or wanted the better billion morning the when Good --so first this. half with half like than a $X.X of of that guys. have second you've Pretty see revenue first year. guys half backlog the guidance you we thanks. start done Hey,

gap guidance many should is be half be what you year? or the might know billion-- for back getting and the doing of you north there when bridge X.X in $X.X worse how the So, higher

Pat Dugan

revenue that I work with the now. go has Europe really think we-- than and that much summer contemplating is especially have the is it's through in so past But business the slowdowns impactful we more been and is guidance show I shutdown in normal. than that QX can QX less customers that seasonality definitely we see because guess it

increases that in especially a contemplate results. freight. where in been amount you the-- But the strong have thing know other have in is So where that our there the we of conservatism certain the is areas

Scott Group

or in an Okay. did of us parameters unusual And the margins question we and or important anything the margin. get and XX.X% some the XX.X% so you think to and back guess in maybe is then quarter half to think implication to XX.X% put I feels in help the we first Is you about I north right, because be I got are that's to of the margins back for XX.X% want unsustainable if for third think so going so year you the can year as of that go fourth kind to give operating where take margins that that XXXX? there about the fourth about on the we operating quarters, or

Pat Dugan

and of of and really our of you to this Yes, but well margin kind is by expect going second that to into you XXXX, you these the sales definitely any years I then mix think the projects going have that wind a year, the year be to better-- more come the have things, couple guidance. profitable fourth mix of that the contributes and be margin for revenue where quarter of and down, we we for don't couple past right in especially half typically our overall that it's out margins better improving seen goes an that's percentage here, to feeling also can going your for on see are driven to our of some an I especially guidance mix of in are and have-- give think a

Scott Group

the last just side. one then and margin Okay on

just how lot or as freight that XX%, freight; as don't was think adjusted you PTC, in the of remains as I margin as, long did cycle we've do XX.X% XX% high a strong? can to with gotten but we margins a good So get freight know

Pat Dugan

the every-- every is improve. mix but you quarter-- clearly the continue of that to out you has the is strength market, goal our our an know PTC mean is-- to so every to freight margins continue and goal pointed year impact improve I to

Operator

Poliniak with Fargo. The question Please Wells comes from ahead. go next Allison

Allison Poliniak

Okay guys, morning. good

those Just the want know had transit, I contracts lower you remind, scene are about a you we the talked behind mean little what margin bit primarily than on the through asked, should I and little to just rolling you flow for I could how of bit in off Scott touch a cadence QX think Justin on that about think QX, in XXXX? mean off, roll

Pat Dugan

So, there point were your -- and project accounting at about a are those if on completed. you go catch back are zero and there where project to you at projects but comes third you a contract the were or think a revenues and margin you if results fourth margins now quarter adjustments XXXX, really reduced through up, cumulative

XXXX, maybe described are-- the largest they that what are the we quarter, a will-- the have little You stretch up stretching we first one also fourth a bit is half late these UK projects and in will quarter have and that in the in past know the XXXX. third winds into we-- essentially of and of couple in probably the

Ray Betler

project it-- re-baseline that since our Allison weaker take in this a portfolio, to it may let in in to we our businesses process a project and five lot about are we projects in the and We to later our adjustments and we years Wabtec remind margins, the total me projects nature, through project on have Faiveley also be make to and in talk year sis you, significant communicated which that portfolio of went were you identify had when was the we that and transit minute close. So all and explained some four, wedding gain. To overhaul just Justin three, coming so focus were UK issues put Scott together. were margins some a

those, beginning So the come some end next of this year the and the largest. mid will the close to year through second one of then year, of biggest at

higher revenue transit freight replaced historically than completed. be with projects with margins in are to So, electronics. starting like or starting projects those backlog to projects, in the margins other are although They are be other project lower

to opportunities, monthly So done focus projects. is projects, by reviews on those improve to and what the project do we on have project focus and incrementally

last a board we to this put on Stephane has other program the board at opportunities and Board tried July focus Meeting. our improvement basis, improvement meeting, Secondly, week. portfolio a that on We had margin and was together the corporate-wide request have margin of reviewed

there’s so would are taken pure total operating to some that are business, time call activity, are being lead. to are across And to we initiatives of relating issues. are improvement related our other to customer one some what our some others And related elimination project, relating production traditionally continuous in

we’re So transit of to an on internally in understand not margin to the progress position margins. you deterioration we want sensitivity there’s at a folks relative lot it’s -- issue the lightly in that I that, improvement, we’re taking or about cavalier

very thing us. for a serious it’s So

and as overall as the level it, the we’re at corporate addressing level. addressing We’re both transit well it

Allison Poliniak

Faiveley a on Great. about but number Thanks, cost synergies from share of that you you of what the it’s of a helpful. you're you winning. on And you Faiveley, your could combination the the maybe to in either also talk you greater about then that talked a have giving wins are Any is just success projects own? and Could of seeing gotten of, talked sense your Wabtec sense there? of you

Stephane Measson

Stephane the a win is this the I'm be more one, to companies to helpful combination we, project. going take yes very may speaking, two of Actually

year, of segments, you know an to with project equipment are electronics last number automatic in been originally the a think the position, has these widest products. without of Wabtec legacy were European of not products now product, the commuter this I on be two combination, in legacy give very the Faiveley side. in example one coming largest to or were -- in this awarded the the Europe, number of we we have the the while and certain base the we industry you And from was Faiveley, from the portfolio have of control would I We segmented complementary which been most as successful famous as project. position combination part won a Faiveley were from can and have coming were major discs Wabtec coming just Poli

mean So, more the have capacity competitive combination products has helped I us so improve to to yes tremendously bundle and to our technology. a

Operator

from Elkott go comes ahead. question next Matt Please with Cowen. The

Matt Elkott

thank question. taking you for Good morning, my

the So, seeing conversation And translating anything and your level for I'm increased tightness I if how those And up customers future your Ray, there's that wondering by with customers the level much it's locomotive non a or of in of was are just GE agreements. of we're a customers maybe not trying so, market in concern conversation. if is GE about enquiries. deal if to any GE supply this into coming your gauge

Ray Betler

Yes.

come it's with talked the discussions, the all chat to agreements progress, supply obviously Matt term customers, also folks talked about in So our and we've long relationships. we've up

to the EMD. I And well long we're So that. environment. tried at And to our competitive customers demonstrate to think as to current as willing certainly are sensitive reassure GE Cat about future long-term both to is support agreements we've them commit plan the that into customers the supply term

Matt Elkott

to well the offset That's from their with fair, so you will revenue competitors. potential potential any raised, GE type of still revenue think losses optimization that merging

Pat Dugan

marketplace. well you fine there, I a I this think we'll not. well, a have we that's that's be be ahead know, getting new speaking market Yes, great able be needed it product whatever think great we'll that don't team going little deliver talk really our of to and the something to we're a think we supply the could We’ll in is and is is that feel able that ourselves, - to we extremely

Matt Elkott

was that slightly Ray raised guidance, into I of suggested guidance guys a you've the I conservatism be last bit you and is it, beat EPS attributable to the quarter a think think now when guidance, you the built the quarter. there Got gave partly very in

change So feel built the like does guidance you into still not level the same half from is second of materially the conservatism trends? current the environment if

Ray Betler

if the and projections around right our things anticipating analyze right now try what could tariffs other continue opportunities very there’s forward conservative things good other economy impact impact feel economy, I they the And and time continue there's crazy the about to be going way. that going trends it's that about lot of --we opportunity are all And and to all positive are our may be I same going of strong. Yes, politics to on them, but things the It's at think in a have pretty market world. certainly that we're to and responsible but hard think that is the now, on we're there. our we Matt, upside

Operator

comes The with next Deutsche Please ahead. go from Boroditsky Saree Bank. question

Saree Boroditsky

Good morning.

of could you freight, what saw the remainder So then thinking strong really demands. the aftermarket for color some results you're embedded commentary OE provide how the quarter about conservatives outlook, driver you And freight obviously giving on the in from the the in versus year? on in your in just growth

Ray Betler

are sales as One as car being of storage favor. railroads, right some coal far depleted on are second Saree, a repair commodities, being and gas a our the side, centers, in the those all in again side, situation the in go in trended the the certainly cars in were both new locomotive aftermarket, all drivers the the way the eastern freight prices up growth the builds drivers,

So of the some those drivers. are

Pat Dugan

Yes.

quarter aftermarket quarter So to the terms X% about freight second of year, year-over-year first second the in increased And sales, quarter. same over in quarter. about

Ray Betler

we so Saree regulatory deployment that six all push make requirement FRA roads the class mind in end freight of was but complied. PTC, then the that a sure there's for to and the at don't thing forget Another the year ones big government by are the the just not reported in of just federal railroads keep

big So another driver. that's

Saree Boroditsky

impact Could and the of quarter? you quantify the in freight PTC

Pat Dugan

and don't company tell for freight the that in was you PTC million. for I million by but about $XX can second the We transit consolidated about down it Yes. signaling break quarter, $XX

So that's $XXX combined about million.

Saree Boroditsky

how and you're picture, about on optimizer today most you -- the of little thinking bigger or combination the bit trip of Could think Okay if just Transportation about I combination with a just platforms. of exciting overlap technologies? other And any just the with then GE there's digital the one quickly, talk technologies? merger, any then focusing the GE's opportunities your

Ray Betler

a overlap our you over goes, superimpose roadmap of call, think lot No to last will able mentioned far as business combination leverage. I complementary optimizer there's in be and and there's trip there's product theirs with the if versa, product combined as that the vice or no the I the technologies

go So And of R&D terms And process, with to like terms phased through significant going costs. driver communicating we or - attendant do get think reduction it's not in I product. in they're hopefully maybe multi-step opportunities we one something with a in not autonomous, that think one one of our a able to cab, forward that time same we're of reduce pretty that. a approaches competitive the will step being at the market process faster a it’s

the I technology terms significant. So are evolution very think of opportunities in

Operator

with go next comes Please Brooklier ahead. question The Matt Buckingham Research. from

Matt Brooklier

good morning. thanks, Yes,

So Pat. question for

SG&A the what's up can in provided look of talk the think the if last I second million guidance an contributing go-around, about to I maybe on half call increase what you your to versus $X is you at SG&A the in year?

Pat Dugan

cost, things impact SG&A number absolute FX bit. there's little kind the up dollar of you Well, does a so know, two comes our

have quarter we're little acquisitions know, impact definitely reflected would but and being that SG&A. have the also compared We you are to of higher in we those with do years we You growth quarters. previous cost a the extra done, have from of bit revenue and with, full

Matt Brooklier

think Okay, meaningfully that's PTC quarter. disclose the pretty then old helpful first and you up, that's XQ for number from I

the just off the most that PTC of half looks about call a like combined think signaling curious year guidance, years you coming PTC to the that X% the and your with first if guidance before updated category for have thoughts the start? growth given growth stronger I the on from

Pat Dugan

Yes.

higher about think about the and revenues probably what original I were. from XX PTC numbers % the signaling are

So about year. than higher XX% last

Matt Brooklier

is X% so that a saying Okay, guess growth XX% numbers I becomes right we for XXXX? are

Pat Dugan

Right.

Operator

comes next go Liam The ahead. B. Riley FBR. from Please question with Burke

Liam Burke

that margins? transit morning. PTC is front for transit Thank your business outlook how on much side rolling the how influencing Ray you, on that been the out? And has good

Ray Betler

extent business large the small that large. relatively to business So is relatively but PTC project-based Hardware net the is business

of a most are So the executing significant projects pretty that margins completion. we total And about XX we're now, projects stages for good. we have the part various right in of have at actually portfolio

Liam Burke

on could improving. how you volumes give freight the international the Freight? outlook Could front sense on the on we see class are and us Okay the is ones for a

Ray Betler

international also lot So a countries I think the like but front than it's you in we China improving is what I Liam, slower, here, think see for the some know, most part XX,XXX right They about-- at while new at to for produced. year now, back. now cars freight slightly, India’s started three running about are were up years come there a being Australia's pick

was like they're picking up around they're, but dropped up world slower and it it So Brazil, the but picking in again. looked

believe will So well, impact much think reflection the I it slower the back America. growth overall economy, that's in of come the a I is North but there

Operator

Milby ahead. The with Please next Global. question go comes from Seaport Willard

Willard Milby

that Is Hey, any on good I a touch outsize the with morning, slow reason I about cadence there focused be that's to know revenue there right? little freight? seasonal transit think QX, everybody. guidance. in to just And down on mainly back an bit Pat European wanted you business, talked the at the should slowdown

Pat Dugan

see main entity, will services refurbished will some we I Well I here years specially the the do the and that is of seasonality. think the yes, that have been mean is the in the think we answer business, I've I definitely products yes,

first kind the not smaller it’s just and noticeable on third it's strongest the it's my a as revenue, just but the next seasonality. as percentage because off it's second of top and the there quarter, it's overall fourth usually Just is of head, France freight least. not impact is It's and the

Willard Milby

forward into freight there volumes QX increased of in was that as with And kind the as of domestically? here we look continued business any pull congestion

Pat Dugan

strong, reduced it at so. it's see I kind -- think backlog so backlog, And the don't remained up and show look would I you think if of you

Ray Betler

area one in QX, do going that we because little these the pull anticipated the And bit see lift did involves was to had deployment. finish to trying obviously of did year. so The rest railroads get forward to how hardware a through we're of little are watch PTC a we a bit that, in we of

Willard Milby

All did a you'll and depreciation item, fourth-quarter? just right, thanks one housekeeping give number

Pat Dugan

quarter, the XX, million it XX. was XX $XX look was Yes, sheet, for amortization amortization my and and at yes, was

Operator

with Steve Market. ahead. Barger question go Next KeyBanc Capital comes from Please

Steve Barger

morning. margin And a transit in Ray, of near your what good transit incremental of on segment current how us term the to margins recent takes board, the puts and presentation the give you just lot want once you get for you Thanks, that generate talked can on where over you structural thinking that see it? everything you you margin describe whole those as years? through few terms normalized next can

Ray Betler

jobs on why them focus that's that projects, when to with And takes believe business we on nature And take structure bid. we Conference, in in do structured is year-on-year, impact critical perform, the that's cost focus while of big our long the take did cost goal a more bottom-line jobs that Investor we that on goal. that when financial another is term lot we the the terms we'll it be X% don't execution, reductions properly a about we improvement do on on the a and addition well the but of I at able so so we that, of bottom-line achieve because the talked effectively don't we to and diligence think can jobs, if of in

far XX as margins overall with the could an margin think with mix the high strength as I up as think of those profile good where if can aftermarket about never end to freight, %. as but we will transit and in OEM margins talked I we the that about in as up we performance be get think --

Steve Barger

moving where towards of that tracking done terms on contracts do work you all XXXX? the of structuring the these in the to so you're think that and point back in contracts through low gets XXXX margin goal And half

Ray Betler

have on have focus can executing. short impact longer much will we process projects, if an in the these are what that we of thousands not impact, -- will the take projects improvements running biggest a are it's hundreds term cost, have because Steve, to No we of process its

will impacts the the more things cost process improvements of short-term So roll over our course the out period, have I start think that are impact.

Steve Barger

to spending behind for extra quick cash is flow for incur transaction a free the thinking now? you or the one the remainder about cost financing you Pat, of just will and the of year, Thanks continue for one that lot or expenses

Pat Dugan

so determined. timing and that permanent with to still capital we replace the the of that plan is have is Well, be the overall kind of will we bridge -- to

of kind announce. nothing So the but can obviously time we line, we that have

be And the plan. we is and on answer so be incurred will progress cost that will there as that

Operator

Wolfe please with The question follow-up is ahead. Group go from Scott Research, next a

Scott Group

the of revenue just Hey, can thanks within guys, just is trying for freight and understand transit just freight to for quick of this revenue? you expectations the how ramp much better I'm versus year follow-up margin a mix share guidance? here the maybe transit

Pat Dugan

assumptions. mean Yes, didn't operations revenue we we we going give verses some we just segment this think specific revenue comment that, operating comment - income Scott, you're gave revenues. XXXX to and I XXXX in part don't was to at that the would grow the segments from the guidance that’s it, said of and the give have guidance Yes, make I I usually split, think look but or for

Scott Group

or is of gross margin operating issue, more margin issue? a that an Okay, issue, margin the the contract

Pat Dugan

I answer impact as a know it would both. you margin more so of has on contribution it guess I

Scott Group

think overhang. margin the you to by some the Okay, Are sounds this back stop with much bit a -- this beginning the we of the this trying the rate the year, and margin once into this? year? like cycle that all end we this little get XX.X% then again last my of some run understand like get we're going it of of you is, but not of of what end of thing it's do to through even I'm year? on by you're saying in this just half through we next is this rate, it year, through lingers point of your How

it guess figure much, to through from we I cycle trying once fully So get I'm how much I'm how just, better that can this?

Ray Betler

the that's as as it completed, Scott, UK projects to be previous this project largest the So are scheduled that by that through, of end project times be several in year, over to we will the the is the discussion. largest far completed going refer

of the OEM traditionally overall So Investor projects there low. discussed low margin next we be is, portfolio will Day is it revenue year, with as at transit

cost our obviously able got project be in need achieve focus structure, profitability. to improve impact we make to with our to our the our to margins overall has parallel get to be So improving that

Operator

over This remarks. to turn conference concludes our for question-and-answer back session. I to any closing the Wesley Tim like would

Tim Wesley

Okay, between thanks you now And we three months Anita, thanks in everybody you. it if for about don't joining then. us. see talk we'll to and Thank

Operator

This conference presentation. Thank is you concluded. now today's attending for

You now disconnect. may

Westinghouse Air Brake Technologies (WAB) 24 Jul 182018 Q2 Earnings call transcript