Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to Wabtec's Second Quarter 2023 Earnings Conference Call. [Operator Instructions].

I would like to turn the call over to Ms. Kristine Kubacki, Vice President, Investor Relations. Please go ahead, ma'am.

Kristine Kubacki

operator. you, Thank and Call. everyone, Wabtec's Quarter Second Good welcome Earnings XXXX morning, to With Rafael Mastalerz. and Olin; President us are today CEO, Vice of and President Santana; Finance, John Senior John CFO,

release Today's along to website wabteccorp.com. Investor today slide earlier on disclosures can accessed tab with earnings our be presentation, and Relations were and our posted financial on

today. our the world of statements making we're view are Some our forward-looking business best and based on and

the disclosures For risks, see forward-looking and statements, presentation. related and assumptions our our more to in detailed uncertainties release earnings please

We will you consider and carefully also discuss metrics and you non-GAAP reconciliation to encourage financial these as disclosures read metrics. our tables

I to Rafael. will over the now call turn

Rafael Santana

Thanks, Kristine, morning, and good everyone.

quarter, start an long-term X. move our our then and value Slide creation Let's framework, the will update progress with financials. to cover the and against business, I'll on John on my perspectives

robust billion, quarter, strong. growth. were and the another $X.XX strong from We We was our from year. both up segments. cash operations Overall, driven by these Freight remained Revenue flow evidenced economic financial despite achieved $XXX share strong was Total delivered and volatility performance which versus XX.X% continued million. by Transit position earnings prior and per Sales was challenges. sales

L&M, allocation returning We executing for of shareholder the our cash to on like framework future to the against continued and our value execute acquisition capital recent growth, maximize shareholders. to by investing strategic M&A

first momentum signifying second backlog XX-month strong Wabtec visibility The a delivered was the billion, XXXX. Overall, growing the marking and billion. team business. quarter, of $X.X XX%, up total good $XX.X backlog across The multiyear was half a

momentum even is to by challenging amidst encouraged continue the driving robust across business. the Wabtec growth I'm well-positioned forward, a economy. profitable underlying strength Looking and

focus our X. Slide Shifting to

XXXX our talk -- Let's end market more for details. in expectations about

across in quarter but continue our anticipated North parkings metrics be better than and prioritize business, opportunities customers moved down up the had business by underlying fluidity. pipeline and we at remain Freight the exited robust to geographies. we America quarter, momentum we look carloads service second and slightly we as encouraged key of our As across as locomotive the

significant across for new and reliability, to efficiency. our in demand to customers solutions locomotives, productivity the opportunities globe continue that invest continue as solutions and drive We see digital fuel modernizations in

Looking and opportunity for growth. momentum demand railcar about the industry at North builds with believe digital railcar be solutions. for sales, we to modernizations, to American locomotive significant to building delivered. cars XXXX continue for builds, long-term new have continues growth railcar Overall, an is XX,XXX we show outlook The in

strong are as significant and is a activity in such and core Internationally, markets, Brazil, supporting upgrade expand region, to order international infrastructure pipeline. strong India, the very Australia, investments CIS

sector, the solutions and clean, the the Finally, transportation Transit need in globe. driving efficient mega place, the safe for trends moving to remain around

after the X to XX locomotives we for and several turn a XX that discuss wins, including end XX recent our key program In for Canadian to new let's closed business secured National the an for from and Next, order few highlights. locomotives preowned modernizations order Slide North certified quarter. under of America, orders

for region. a in commodities agricultural CBH, In XX the recently which growth of support strategic won order Australia, will the we locomotives continued from

remove ore with train, pull the our to also signed will carbon, largest locomotives portfolio, is of zero drive and to recently a X XX,XXX of cars XX,XXX per expected order regards with year. emissions flex the And These equivalent tons we strategic for locomotives. world's passenger Vale iron

and passenger supply a information up In XXX cars Transit, to major we systems order stabler to Austria. for for Germany Pentagraphs won and

transfer and enhance in portfolio, This installed will L&M. a domestic mining, growth. platform Wabtec's heat June, bolt-on during the finally, strategic base solid existing providing extend we for completed will And we of and acquisition acquisition international our profitable

momentum is the growing pipeline to to most on the team's on, of demonstrates that we address for continue innovative relentless Wabtec strong customers business, continue the delivering execute and needs. customers' well-positioned opportunities pressing growth our All focus of technologies scalable a to our across this profitable and with capture

meet that more shape efficient while to strong is reduction goals, Turning their like developing consumption, to by highlight and fuel fuel customers technologies efficiency. to efficient rail solutions Slide how and haulageability safety, a improved I'd to future across adaptable customers Wabtec our provide X. our will positioned by rail returns the providing for solutions inventing and decarbonization investment to the sustainable and leading improving industry. while provide reducing their productivity, customers driving Wabtec of with given reliability, uniquely for carbon

solutions. already Ultimately, there renewable the investing network get rail started with help laying new and to leading advancements and utilizing towards lead in we hydrogen have we path that through of zero-emissions in in range locomotives, digital industry will battery a and modernizations applications, wide a providing electric biofuels, technology,

quarter, turn to results and overall the to over John John? segment performance. I'll the that, call review With financial our

John Olin

Rafael, and hello, Thanks, everyone.

strong delivered Turning our through detail. X, operational strengthening first of half the review will performance Slide year. We more to business of and quarter another momentum the quarter in results financial I second with underlying

Sales Sales which growth across lines. XX.X% product prior major were second billion, were a quarter driven for by increase the versus all reflects $X.XX year. the strong

operating between were year. was X.X income down sales $XX the mix XX.X%, sales. higher rich million, higher versus sales of QX benefits points by within offset The segments. Adjusted percentage by a For was in of less the GAAP margin and up quarter, driven operating prior

diluted a GAAP per up an $X.XX, earnings second quarter ago. which was the were share XX.X% year versus

million to primarily of Wabtec's our was operations we drive quarter, Integration which $XX initiative charges rate million run to further XXXX. $XX the $XX million of and to by X.X to integrate related had restructuring for savings During pretax

share $X.XX, prior In year. the quarter, versus adjusted the earnings per diluted up were XX.X%

are for adjusted a Overall, our good strong We demonstrating and and of raising we and Wabtec executed year business a our and result, expectations, outlook strength a the half of earnings. XXXX. outperformed first quarter full underlying momentum as sales

Slide to turning X. Now

more product detail. in Let's review lines our

consolidated year's up strong, sales Equipment quarter locomotive quarter X.X% up XX.X%. due quarter. were higher were to second sales very versus sales this Second last

by XX.X% market year, last increased the OE due up an driven industrial build largely and versus in were demand railcar with along share for sales Components availability, to products. our product increase higher

L&M in the closed acquisition the not which on the quarter, during also have strategic late of quarter. sales did We an impact components

for contribution Digital year. of up driven along revenue QX XX.X%, were the sales Intelligence PTC, in which demand by robust last was and with locomotive acquisitions international products from onboard

Services XX.X% Our driven Sales by was increased increased sales. sales parts from growth grew higher and modernization deliveries and sales

locomotive a efficiency, reliability, to recognize performance, their and Our customers continue serial Wabtec availability across fleets.

versus secular were up OE segment, Segment accelerate aftermarket million. decarbonization this sales such to urbanization and The our $XXX for strong infrastructure. in significantly in increased last Transit is year. core sales the and need as as drivers segment our markets sustainable across XX.X% Across momentum investments

XX. Slide to Moving

and by margin locomotives Mix strong rich As sales slightly segment. basis. segment of year-over-year and the manufacturing the mix higher lower, driven while unfavorable was a was costs, and Raw driven modernizations by within a on new were largely higher less flat elevated, Freight profit forecasted, gross costs. sales from Transit still material

profits by and it by was $X exchange point, million our gross X.X percentage currency quarter reduced $X second sales unfavorable million. or Foreign to

than by cost by absorption Finally, inefficiencies facility fixed more at manufacturing manufacturing were costs favorable offset positively Erie in our impacted June.

productivity mitigate by driving to to impact Our lean team cost of and pressures the continued operational continues well initiatives. execute

XX. Turning to Slide

versus which SG&A sales. was up $XXX GAAP last margin of versus For were of percentage operating XX.X%. both which adjusted points year, down operating as the while margin declined percent was second flat $XXX million, adjusted quarter, but XX.X%, million, the significantly and was a X.X year, to was SG&A prior

from increased last X.X%. plan, yet points down percentage as X.X was sales a at expense according Engineering percentage to year of

current but in importantly, investing We decarbonization utilization in safety. our are as continue the capacity that our we to and customers' business invest future resources and in engineering leader technologies digital productivity, more improve opportunities and

look a the segment starting at the segment. Now XX, Freight let's with results Slide on take

As segment I was of for operating fixed as well Freight nonrecurring revenue increased offset GAAP SG&A million, the an segment was prior year. margin versus for negotiations segment were from XX% $XXX of of strong Freight operating operating last year. were higher flat prior XX.X%. versus X.X our as income for percentage with benefits $XXX at segment including income Freight Adjusted percentage The the operating sales up quarter, absorption expenses XX.X%, already a mix as unfavorable lower XX.X%. labor modernizations was in by and million sales, the the cost The and Adjusted margin discussed, of up from year Erie. locos points international up in sales

in of the show over XXXX. over from last Finally, order segment up last year, QX was from XX-month by year's Union X.X% backlog Conversely, driven the billion, to multiyear was significant down modernizations. continues billion, the the backlog end was beyond same period. reduction The for $X.X year-over-year while the Pacific of momentum XX.X% XX-month lapping $XX.X backlog billion backlog $X multiyear

up by benefits operating costs. of sales Slide of Adjusted to restructuring from increased and in by higher up X.X XX. and activities, up Integration operating strong OE a $XX million, operating driven last was turning income adjusted and income aftermarket X.X resulted result XX.X%, GAAP sales our year. was point as up $XX income million operating Now offset XX.X% higher margin This partially XX.X%. was sales. segment segment percentage Transit from XX.X%, GAAP were which

a billion, Finally, quarter Transit ago. was segment $X.X multiyear backlog versus for the up XX.X% year

operations financial was position XX. million. Slide our to turn from $XXX let's on cash We QX Now

While conversion a higher, driving benefited drive we we toward capital the continuing growth, from cash XX% working to continue for particular, is inventory. full flow receivables higher in in cash are year. businesses invest Despite earnings, that, which than to greater the and

was quarter, Our ratio flat end which debt to prior the primarily versus the L&M. the of leverage acquisition year, due was second X.Xx of at

senior we note draw to We our $XXX X.XX% have look into roll due a we August. term that As intend debt facility. in million delayed coming forward, at

I'd some moment color spend a L&M. additional on on providing like to just

of This As cash, calendar million completed the and million. the mining. XXXX bolt-on for business acquisition extend premium strategic $XXX purchased of have acquisition L&M. complement about the Rafael of portfolio is will transfer mentioned, We L&M quarter, $XXX sales in our in solutions expected and year during heat we to

million we repurchases through back dividends. of and capital shareholders quarter finally, in returned share to And $XXX the

As to returns. a balanced you can strategy in our continue allocate and see is results, maximize financial capital these we strong, position to in shareholder

back With that, I'd over Rafael. call to like to the turn

Rafael Santana

John. Thanks,

updated guidance. underlying the XXXX discuss Slide to demand solutions and financial to our our business. We flip products growing customer across that believe for is Let's our XX

to rest . backlog Our the order pipeline strengthen, and for profitable growth visibility beyond. providing continued for of and XXXX solid XX-month

The team top costs. growth is committed to line driving while strong managing

driving adjusted margin committed challenging XXXX also a expansion in are environment. We so macro to despite

and now up XX% billion, previous $X.X year $X.XX billion and in per these expect mind, the the to midpoint. XXXX sales we XX% increasing $X.XX adjusted up from With be factors midpoint our at share, guidance. are EPS of to last between $X.XX We at

We flow than to conversions greater also cash expect be XX%.

up wrap let's Now on Slide XX.

our you environment. today, uncertain strong team an volatile our year large another to base, installed and on to our Thanks our world-class in innovative delivered quarter team, focus customers. relentless part As resilient solutions heard the despite and

we remain maximize Day a our rigorous on for through X-year strengthening across us outlook order long-term with track year, on focus shareholder increased drive profitable item portfolio, on our deliver execution to well-positioned to growth strong Our Wabtec and visibility our last at and results Investor that the returns. is provided pipeline,

call time you I'll of want Kristine? turn this our the to I discussion. that, With Kristine to portion the to begin morning. Q&A now your for thank And over

Kristine Kubacki

you, Thank Rafael.

our Operator, [Operator for we We question. on are first now will now Instructions]. ready move questions. to

Operator

Instructions]. [Operator

First question from Justin will Stephens. be from Long

Justin Long

wanted a you you're on they'll on Do back better and . share be anticipating expecting you guidance, earnings and fourth or in just think understand the the deliveries, year of look timing third quarter you're Based think you else updated if to anything mindful relative cadence was could we revenue I I when look of quarter perspective? wondering a that about from mix, basis. the the should to half? similar full how

John Olin

is This Justin. Great, John.

orders again, is to slightly this the got little look we come well quarter of production as we fourth have easier the that the the with way as is come scheduled the to half in back due third the benefit revenue our over expect would comp and we growth lapping revenue a from quarter. Justin, majority when versus in revenue, at a And cadence, a standpoint. starting

growth in quarter. expect to come side equation, of the fourth easier quarter. a third the third the have side in comp We the at our would of or opposite look we earnings expect of we last year When simply or that would Justin. fourth the growth the is And we're the quarter much we earnings margin see the opposite, in majority margin because quarter versus our than lapping the

Justin Long

Okay. That's very helpful.

if the in there way if some second was you We I quarter. strength And us the you're are than growth was can I Is you assuming then locomotives segment. getting hearing mods? the think storage. like share from exclude locomotive question you saw a for rails were in maybe forward, utilization. parkings that going sounds Freight had help bit into there wondering some we're could notable segment better of thought, put about Services Second what that on a but the you It little

So to trends. X I those kind just wanted of marry

Rafael Santana

Justin, you're right.

as we half acceleration half, into of think you'll and go So services. I growth second I think beyond see the see, the the we'll especially in of year, second

it some you mean, Some that of that, with announced order recent see we here. I

a continuing be positive. moving so case growth to to continues that So us mods is forward, a

to efficiency, fleet to but better is which than When on the the there down steady both We every really, a to our out in here. significant fleets. we it in our that's element any within stand really and of And compared about really competitors' benefits staying than customer availability, average active the with fleet year, comes services call, terms reliability, focus on stamps side, significant more feel very our one really feel providing single of X% good fuel of fluctuation seeing element We're continues, parkings, platforms. I'll when

no we any eater. on significant So fleet that don't signs of expect changes active

Operator

of be Citi. from next Our question Wetherbee will Chris

Unidentified Analyst

of us versus the about It's think 'XX? 'XX Rob conversion How it obviously, just a terms in Could we Chris. in you over of months give sequentially. backlog, increased on sense XX the should for that kind

Rafael Santana

I the pipeline strong opportunities Yes. I backlog. I'll very feel start feel on. just about working overall with, of about the team good that our is

underlying overall fundamentals business the growth also the of strong. think I is

XX the accelerating. months XX%. quarter was said, Last you up As It's is X.X%.

is backlog also The healthy. total current

Union team. order it's auto I we opportunities the and it were down the now conjunction auditor multibillion-dollar worked got X.X%, at Pacific billion while that with right the from So look in multiyear $X with and being

good supports see see momentum It's continuing we positive. North our and We progressing, and it. So we're We're to America. internationally. grow it in pipeline

you continue months, provides a In we the terms convertibility, the the into XX strength see of pipeline. already view to 'XX, in and

Unidentified Analyst

And just helpful. piggyback Justin's That's on question.

expecting said response thought -- of services you Your saying you're I acceleration I you heard growth. that

back stepping from XQ you in that the if about year. provide roughly little you half And XX% did the context. of think bit I a could maybe should So up guys in the more

Rafael Santana

I First half half the versus second of the year. comment. where made That's

Unidentified Analyst

Okay. services That's helpful. are thinking about . And how growth longer term? you

Rafael Santana

It as continues. we I the have saw, solutions think be continues I robust. lot there to of the mean, a for you demand

part We have significant modernize a the opportunity to of an there. fleet

looking I into it. really think are customers

your of are see savings, looking the power. on You build driving, customers, just for that growth on to numbers the made the well. you're of as of reducing reliability, the on on based and fundamentals yesterday. fuel pulling new to are these some that not the I will you're announcement fleet significant think but And When modernization the quality continue of XX% XX% XX% units providing demand service in at really for terms your costs. we improvement compelling Those .

Operator

question will Wertheimer Research. Next from be Melius

Robert Wertheimer

. else gross So there margin? segment? within headwinds just still? was the down drag then entire segments Transit the gross on obviously, mix Or within. anything a between and mentioned driver clarify to there of that or up you any a you to Is And as price/cost mix margin, mix had is catch

John Olin

Okay, Rob, this John. is

in in point. came X.X we quarter, down margin the came XX.X%, -- at Looking percentage

flat expected half in be to about margin. earlier quarter, talked first we on we the the As

The than that, we of the expected. was were a driver key our experiencing the little down margins we're inefficiencies Rob, Erie behind bit in at facility strike. more So

So that is the biggest driver.

mods The at mix Erie. in facility But the groups the mean, at guidance. anticipated, and the original within mix anticipated I really difference we the York at we is -- the on locomotives inefficiencies our

Robert Wertheimer

Perfect.

market and then different expectation the And have it. make. and can you ore one, validation in hybrid Okay. the of wind, I the any future ask I your the biggest potential if of orders world. maybe? what you what Got train can don't that the testing iron pace mining, comments is for electric, size if on know a wonder I

Rafael Santana

make continuing We're first battery do. on to progress I electric.

supply We're with a order that to think around We're America in that the North customers, actively a it sure overall example next is both happening I great of chain year. developing are product first continuing to and that. reliable make . internationally. make really we deliveries work

that We're sure we it. of is customers. element of Fuel There further be cost as a to, use step pace significant with make of expand to course, really working demand the continues technology. our we there to customers the into out for

really grow to different we're piece. I going specific specific is for I we into think that, It's grow customer continue to to exciting there a That's segment. significant it a as or demand one one pace and around opportunity us the geographies. not think

also apply have battery call, there came from I just hybrid we well. well. back significant but as in with, I'll it, conjunction systems an for opportunity product, what as not think opportunity to call hybrid concept and recently Europe I that us we there's, a

Operator

Boroditsky from Our next question be Jefferies. from will Saree

Unidentified Analyst

This on Saree. is James for

wanted Integration I to touch So X.X. on

provide an XXXX? Integration should how X.X think And is how update into you progressing? about we on can cost So savings

John Olin

James. Great,

great million. ahead of the which start thing. bit was schedule, is investment at 'XX a We're about end as a off the of little and So a $XX million out, we a over a that expect to announced savings $XX as ongoing we've million ago talked $XXX invest million we Integration year when would of good to bit to talked we X.X little $XXX

doubled will the a of through year, our the to of this we've million million. that, at XXXX, over And trajectory and months and well $X rate amount continue through as $XX add year, had run the remainder margin In incremental to X as back $XX up that savings that in XXXX we XXXX. were to as ended run fair the million of we've we head in as we half rate last

Unidentified Analyst

Erie Great. on the That's strike. helpful. just up plant following And

So can mix production was more for you provide like and affecting given international components strike a is focused the that bit like how and like little more like the locomotive on the facility schedule customized revenue on that locomotives? electric detail

Rafael Santana

an our X start of agreement with, reached all and I'll the successfully have nonunion years, with last over we side. union

So optimistic with that the remain a reach on plan in . can the not a remain here year we We agreement From workforce and that, to working manner. contingencies committed collaboration. for to financial realize of outcomes We timely to and any impact full mistake do we're perspective, an here a we revenue. variety

Operator

next Poliniak of will from Our Allison be question Fargo. Wells

Allison Poliniak

quick on question the outlook. A

revenue growth. X% X% growth Your at earnings

really any So that lack situation of it leverage that. of sort walk if on simply Just mix -- you driving that implies revenue. that's Is that? us through could a just

Rafael Santana

quarter? within talking Allison, you're about the

Allison Poliniak

revenue No, just a line to just purely of that . of guidance something sort for understand the just incrementals mix, want with year, there. full that's the guide, lower raise, that raised implies revenue if else within in driving I just but incrementals. guidance EPS the nice really that's if there's lack

John Olin

Sure, Allison.

continued year. midpoint of half into to this experienced, XX%. raise thrilled the And we're of we've last our first the momentum back be driven up through yes, X% by right? the from from underlying able to So And half guidance that's -- the year the to of up revenue that

at look of earnings was the guide, it or XX% we midpoint up up XX%. from When up a to X.XX%

of is things. So seeing a what we're couple

in technology. One X And in first software additional some dispatch investment You're software. had revenue the our for reasons. our not earnings. in in through PDS next-generation Allison, we the coming for that's is that's quarter, increase seeing

down a that's will kind earnings full onetime so on And that event bring of year basis. a the

quarter. driver of Rafael we in it second strike the the And second revenue some the that have also we The any does a but quarter, cost cost. does that on in That have the in impact we'll had first third the but costs -- in year, mentioned, don't is in Erie. costs. have expect for

in So well, as that's onetime more included on again, side. that the

higher interest is area third cost. the And

we've you We be but of see up higher L&M the behind expect was interest As well. about some in refinancing quarter, million. partly can to the the debt as half $XX do. interest acquisition, to come got back that would in XX% and the also

when growth growth of between those the you and rate Allison, that's of the So difference take things earnings. revenue X rate the

Allison Poliniak

Great. sort than understand and sort this That's if so trend. digital investment? on to side, been seem would Is customers that investment sort even exhibit. change helpful. you've prior are it cycles they of same gain Just your the -- maybe sort of Is it that of very in it's how trend And always pushing why I that's product? doesn't I trying the be that exhibiting efficiencies a more, approaching through a sensitive in then recall, cyclically more or cyclical how done that can book very did to of they they're say, that

Rafael Santana

couple here, Allison. of points a So

has you the backlog First. A mean, as X I a last really drilling the positioned orders, somewhere buildup we I order international that chunk good of year years perspective. from significant agreements. was saw, my well. mean, had business in

you As more international, lumpy. more bit a it's go

no years. continue auto we we different the need drive expect convertibility So deliver different over I previous quarters. the than make and the into shorter-term out on -- that would that results. to orders the play the year comment to But would to really

to better lumpy. business, But not had We be coverage would we've of than backlog but before. the it fundamentals is like the

Operator

will question Research. next Scott from Group of Wolfe Our be

Ivan Yi

Ivan It's Scott. Yi for on

of at updated implies revenue billion much that of sales all, How is year. midpoint how increase XX% in First volume this is a guidance total increase much price? versus XX% the that your of to $X.X

John Olin

full basis a range. on the price to be X% at X% year in to look would We

Ivan Yi

can lastly, XX mods 'XX? secondly, is you in timing provide the of some how CN? And What what in the did can do you're absolute many background And are of meaning then modernizations, 'XX? mods And for pace on 'XX? you the Perfect. locomotive talk you expecting about

Rafael Santana

any into specifics of get 'XX. not we're think I So

that. early sort Of course, of it's for

portfolio. that. We you momentum expect see modernization growing And

and see beyond. see the think that, 'XX 'XX. asked momentum It's that really just we to much momentum of as you about part and We growth order that going CN. into I going

good just So backlog. a .

Operator

Our will of Jerry be next question from Sachs. Goldman Revich

Jerry Revich

could and I'm quarters where if Are quarter. just top now, to for wondering in about runway line quarter grow, strong pickup more the words, The you you've momentum at in be? are In based see had we business more need John, bookings the line point the talk bookings is top we has this earned now on Transit? there Rafael a this really substantial margins the Transit, that other where them and could in this X continue for the you inflection to right performance and

Rafael Santana

Jerry, for the first, remain strong. the fundamentals business

the of competitive look ratios I The environment, I multiyear are The I'll X, think with book-to-bill tell but the more us while the ahead is digits. there, XX-month variation you, margins. double there's sustain pleased mandates quarter-to-quarter we backlog to up But work executing despite We're margins. X%. footprint and progress, to of on significant our going up simplify over to is is improve and have at a expanding the team further

the we business. we're building competitiveness And feel in

drive growth. So we ultimately profitable

feels to perspective. good that to it we're that from So going continue there. And drive

to continue have opportunities. We

Jerry Revich

top back backlog, continue we're So that line the growth. the half? putting into north up like, based of the sounds It point where on XX% should

Rafael Santana

at some the also of . associated overlapping last not also we we think what just had strong, disruptions supply is you backlog we're remember, had, chain, but the but that year. point, you about easy comps if just from line, top the all incident. cyber a with if So

Jerry Revich

obviously contributing what because about And some environment factors an growth by performance very really if sales Service in ex a mods? of be not performance year-over-year dramatic all Can service ramp. have business was impressive mods, for the Freight, pretty your in been would volumes are just where good. are talk the that That freight to in you driven

So is mind, versus don't you ex business just you if freight the pretty I'm comment that well Rafael. doing the mods feels volumes. like could gap it core wondering on if given

Rafael Santana

we different right? say, Australia. hard, running or markets serve, It's active. is Kazakhstan We the Fleet

I think look of when there's at the demand out strong opportunities. just there pipeline you

are things those think I So connected. ultimately

where America, could that fleet. change the in In active you expected North have

the think right in with of of I fuel really that's we haulage It's again think critical I and both now. And to significant our holding, terms back advantage in our strong. terms fleet it's capability, services. to holding customers stand savings, focus on reliability. in And a

Operator

from Markets. KeyBanc Our will next Capital question be Steve Barger,

Robert Barger

talk about you're the XX-month backlog? old margin business? the new then margin the relative for higher generally, booking profile to you business next margin profile than business new And looking Can just . in is

John Olin

Yes. We've a bringing is over up profit. at this is of couple Absolutely. function better Steve, watched our years, that last the in and margins of John. orders come higher

higher revenue in And is margin booked And so the from not the will the standpoint seen as we about, than profitability a to it also it overall, about we backlog at a we've great drive standpoint. we've of look feel the talked forward it but only past. in a future, from

Robert Barger

signing of in the out has contracting not Would I backlog year? expect of and new the been total contracted. half. versus And couple what's it's much, it. to it's quarters you to about Got the now. but of know When you size backlog scheduled continue you're come think pipeline, . it the back a this deals

Rafael Santana

being It's you could I'll tell We've [indiscernible]. so I'll deals. those, use as is those Yes, total the Steve, worked multibillion-dollar of couple lumpiness. than be going backlog now, got more call some down. right drive we a to lumpy have that

the XX as sure convertibility course, into XX XX you I of think and months. focus forward. our is look convertibility here the moving months, months And got we've that making

track really and that working deals pipeline to feel it's of So about strong the we're on, by our that grow very and the we and that, really . we we're pipeline. that. And it's in continuing supported

Operator

from Our next will America. of Bank [indiscernible] be question of

Unidentified Analyst

geographies you Hoexter. the just broadly in pipeline. or verticals there on a [Indiscernible] share anything of covered can interest for to space? on lot. We've touch Maybe M&A Ken this Is about

Rafael Santana

course, we're not I mean, go into Of going the here. to specifics any of

for We Wabtec they to They very be drive acquisitions. We're a ROIC, opportunistic value. will will be increase accelerate continuing here. bolt-on explore higher profit are to strategic, going ultimately shareholder

that. I L&M a great of is example really think

So we're find we active, that sure . trying opportunities. those to make really

Unidentified Analyst

over then And Transit. just going to maybe

in You've a the target margin mentioned mid-teens past.

Just versus over next than initial us -- a achieved we Any the of how are expectations? view coming initially trending maybe give earlier thought. Maybe sense that there could be years?

Rafael Santana

on and I'll it I'll maybe John. start, to pass

I about opportunities drive and We continued of There's feel that a on way, about but and it. feel It's some really the mandate. think the on working to competitiveness lot we the the trajectory. and we're strong simplification here. strong always study bumps continuing continuing along team the never [indiscernible] business . precise. improving

John Olin

And The earlier to on our going Integration I on the We're Transit of majority as to see the accrue continue ramp. mentioned to right? that group. will benefit Yes. question X.X,

the Transit results that So to part benefit to And of great feel happening margin in and integration quarter and here it's we due we the saw X.X. spin. in starting in Integration about growth consolidation was that's the the

the the other question one And is, backlog. regards with to the other

to Group. margin. focused in very that versus making higher bringing And coming revenue in volume are continue bring it at we we're We good, in the is sure the backlog, business in in on focused on profitable a Transit

Operator

Matt will question next Cowen. from Elkott, be TD Our

Matthew Elkott

insight of an if mods? you some do least the kind to locomotives, profiles forward? going on at margin if certified relative revenue you foresee like any On provide maybe the locomotives, of And on similar XX opportunities and guys basis, preowned to not those absolute can

Rafael Santana

cascade you, But program that I'll to, to that down. products provides we as it's a our for those going us number about think significant of one, opportunity tell specifics we how products, what get not into the I'm program.

that here to with not they're a fleet in got more. locomotives an we causes lines down there. often dialogue in core out focus mainline, we lot running auto to of number opportunity efficient, a around emissions, and cascade locomotives just fleet less short running of that yards, There's So on we a that's more XX,XXX pull see able the antiquated it

that's spare there we So building and in our it and for lot providing And again, there as fundamentals. terms I those significant at like Services a things of look same of will be parts strength think that. pull provides, a where a business

sure. that on So about really momentum excited gaining front,

Matthew Elkott

new that to and these not done kind the meaningful for is fairly of you guys it a actively have also And it's any units. certified this Rafael, extent preowned past area you, sounds in like

Rafael Santana

we've class older bringing, and nice ones, technology. into call, modernizing for I'll the some say done AC especially I'd of Dash that what those

line. we like think first is I significant there. And there a do time opportunity think short with it's a I the

So about you're that. right

Matthew Elkott

are Okay. guidance think raise these And this then partly -- got, part is I it that order you month? . the you last got because in of

Rafael Santana

to the bit beyond. momentum about for and that I come be There'll we've not to say there, us growth the say would fill. 'XX in overall be continues It's extent guidance, last talked future to a we I look backlog not. year as at the It'll the -- the of impact and continues to drive Matt. underlying little to the but an would on more

John Olin

Exactly.

Matthew Elkott

just Got it. in And one then America. XX question new orders the loco on North

America North that to what back come over You new means? called the tell given new the And mod you what build to them or starting us year versus fact does year? so, mix it's to orders next past in Can mean strategic. that for good see the that

Rafael Santana

validates I dynamics it modernization as the we've come saying, really solution will in cases, for some in to got, at they've new just going been of some fleet mean, look cases, think some other I locomotives. it's what a better with customers

the you see that. so I and think that continue we And to active, fact see both

a terms that's think of I in the into dynamics market. we're really looking that the North positive America

the are that this decades. of at stage continue in at there to couple a a commitment at is drive fleets So oldest really to in really the levels service to invest least

a here. good So opportunity

John Olin

standpoint, it's a about revenue a And and with a margin. modernization comes new with a from talked right? We or pretty a new, we're higher whether higher modernization indifferent Matt, financial

And they're overall, pretty indifferent we're as as locomotives, long Wabtec so we're good.

Matthew Elkott

And I it, just missed a is diesel say technology there if are locomotives of These replacement? for what guys Or did those? the you purpose element?

Rafael Santana

mean, here, I freight certainly efficiently there. pull both. be there's think to more there's going technology a they're element I to about and really used

Operator

Steve Capital from Markets. be will Barger, question KeyBanc Next

Robert Barger

a clarification. quick Just

thought you you that it think I onetime. say the in said a but would the be factor I be swing I situation back also could half, Erie heard

expected back range? So are you the . excluded can clarify from half or that costs included in EPS if

Rafael Santana

guidance, in absolutely our are revised Steve? They included

Operator

remarks. go session. concludes Please call like I'd closing That to turn back the to ahead. you. our Kubacki Thank Ms. question-and-answer for Kristine over

Kristine Kubacki

with for quarter. and Thank to you, operator. you, talking we appreciate We forward And look thank everyone, next your it, you today. Goodbye. time

Operator

has Thank presentation. now attending The conference today's concluded. for you

disconnect. now may You

Westinghouse Air Brake Technologies (WAB) 27 Jul 232023 Q2 Earnings call transcript