WAB - Earnings call transcript Q4 2024 | Westinghouse Air Brake Technologies Corporation

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Operator

Good day, and welcome to the Wabtec Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kyra Yates, Vice President of Investor Relations. ahead. Go

Kyra Yates

everyone, Wabtec's Good Earnings Quarter welcome Call. and Operator. Fourth to XXXX Thanks,

are Rafael Mastalerz. and Olin; us President With today CEO, Vice of and President Santana; Finance, John Senior John CFO,

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

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

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

will to also Rafael. these the reconciliation as discuss encourage We turn non-GAAP financial to consider read tables and metrics you metrics. you now over and I will our disclosures call carefully

Rafael Santana

everyone. good and morning, Kyra, Thanks,

like ] Before the thoughts I John the this X year, details and into share I'd [ to on get best quarter, and of years. the year next some fourth the

another Wabtec and foundation The of line to operating solid for of team our X%, look has the lay as build to of team cash us Overall, of we strong points, company. delivered top the saw realize of on a year. XX%. growth EPS growth basis potential conversion expansion We margin continued very to XXX adjusted XXX%

XXXX momentum Looking continued profitable of our growth team's improvement fifth ahead, and guidance well consecutive BPS to deliver expansion, our drive excited customers. mid-single-digit is financial positioned which our of includes and by margin year delivering I on ahead. driving our [indiscernible] that I'm business the for focus revenue and the will unrelenting continued believe growth. growth end, Wabtec To

report than that X-year I'm was and today we years did largely into X XXXX. X-year years ago. guidance, more just to that our even long-term issued to we years. X-year goals X we in we opportunity early in our Consequently, are have new are guidance have long-term value achieved pleased drive we currently announcing X Finally, our

efforts next years. to our optimize of XXX by of the will These support over Integration points our the basis X evidenced X.X which launch over opportunities portfolio, continuing and are improvement margin

Our financial strong. remains position

our We and our returning execute maximize to shareholder for against to continue framework shareholders. to capital value future investing by growth value allocation

confidence And performance our repurchases, December. our as another and share Directors has future, and in of Board dividend our a of $X increased the billion has by in announced in 'XX which our XX% result authorized we for

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

was Total $XXX was operations backlog businesses. were XX-month strong We quarter. Sales flow and billion, adjusted the year strong million, up momentum from The conversion delivered visibility across a representing a billion, of cash and ago XXX%. $X.X cash EPS for $X.X the signifying fourth from quarter. up which continued over was was X% X% quarter the

focus our Slide X. to Shifting

Let's our XXXX in more about details. talk expectations and market

encouraged While market key business our pipeline opportunities our geographies. we remain strength of across mixed, our business metrics of current by are international activity freight the and across

fleet the active quarter. flat for growth this quarter. be Wabtec's Despite the carloads American North up industries fourth were to continue compared and locomotive year's last to carload the when largely

down outlook and railcar to North approximately was for compared builds, industry XX%. XXXX. for landed new for down Demand The is nearly American cars XXXX Looking the railcars 'XX XX,XXX be at at to

fleet. upgrade mining, pipeline. and such an the refresh activity to Africa, international supporting Internationally, are Latin Significant as to aging core fleet commodity infrastructure to Asia and orders CIS. expand In America, a locomotive markets continued and prices across activity support is strong robust investments and truck upgrade

renewals. indicators continue to fleet in increasing key are with the sector. for moving transit growth. and geographies, along levels we to see expansion Finally, underlying Ridership

highlights. to turn let's business a few to Next, Slide X discuss

$X the over time. secured in Mods within to their With $XXX converted quarter, new locomotive our in Class million order demonstrate that including America, North we fleets months billion we the in modernization to customers first quarter, continue These X and invest context, of for need pipeline with in orders. This FeraMAX]. the orders [ over

quarter Fourth various million growth and strong international several support markets. won orders. locomotives a international also These customers. was locomotives orders new the totaling quarter mining for We help $XXX for agricultural with will in

$X We continue won In capture this highlight where in that senior when Africa, like for demand the productivity, durability opportunities to which and our the This ] international to [ worth our for would opportunities. will the region. mining largest be growth billion Simandou project equipment best-in-class These is you reliability support to and services undertaken customers. project another combine the solutions we context, we drive order over project Albert demonstrate significant region. in wins that

$XXX signed Moving to automation totaling contracts advanced we group's million transit North our our business. for solutions. customers train billion. finally, is customers. our Class digital X for orders over won signaling intelligence We $X significant with digital strongest This orders, year with America And approximately for handling

across strong which the we to execute continue our focus of team's on on. pipeline this relentless businesses, execution opportunities, underlying strength the of All demonstrates and a

to Moving Slide X.

sustainable Before to our strong John, over want results. discuss to turning ability it to briefly I and deliver

favorable us We geopolitical of a management hyperinflation believe enable through other significant record resilient more last demonstrated will dedicated markets issues, profitable. and our years, managing to Over disruptions. the X remain challenging markets, solid leading and solutions end technologies team, our and Wabtec track has and

market recurring North despite revenues economy. macro high that our provides to for XX-month level of visibility in American the a in Our marketplace. the has of the over command rail billion backlog The products XX-month is part growth. due volatile This X consistently a grown $X.X and backlog weaker and support past years

flows over expansion X is with cash to strong deliver And Our averaging last track we our and operating finally, demonstrated to consistently have value conversion years. across for productivity, cash evidence price XX% we record of margin our strong of ability manage the business ability also generate costs the deliver. the

combined profitable superior the driving and of leading being strength and that shareholder business, products review results call TAP returns. the our over expect With will and our segment economic with technologies John John? I'll to overall in our that, turn growth result We quarter, cycles, financial to the a through performance. resilient execution, delivering

John Mastalerz

and Thanks, everyone. Rafael, hello,

will segment. fourth X. the was in Slide the reflects quarter which in $X.XX quarter versus detail. growth I quarter billion, to review more X.X% Sales results the our increase Turning by the for Sales Transit driven were fourth prior year. a

Excluding sales nearly the of currency, were X%. up impact

margin improved XX.X%, flat which the the $X.XX, on Adjusted diluted the was ago to share year. increase was GAAP margin QX was as million, was sales earnings by versus year operating For continuous for focus prior GAAP was income was up largely X.X% higher quarter, in productivity. and quarter. operating gross we $XXX which driven per improvement

and quarter, the initiatives and the demonstrating charges of integrate business. we strength $X.XX, to net further for prior diluted portfolio the to quarter, Wabtec's earnings had of the $XX was operations. restructuring integration million delivered X.X primarily year. In Wabtec Overall, optimization During underlying adjusted the up which X.X% pretax were versus our streamline related quarter, another share per solid

Slide XX. to Turning

in quarter up detail. lines product our Fourth were review sales consolidated Let's more X.X%.

quarter as business. in the expected, call. we our was moderations reverse and and our the as quarter services services in of the sales XX.X% we third for and of were Our saw third timing by This overhauls the growth down was driven discussed that

year, of full services growth the had For X.X%. revenue

fourth last increase what XX.X% saw up the was were from sales third was Equipment the also This year's we reverse and in quarter. expected quarter. of

to was year were growth, the due and by Component X.X% which the up The railcar a equipment sales sales offset For up versus partially year, were freight international lower very a Products American last build. car North sales XX.X%. strong higher Industrial

in was by our next-generation from partially Intelligence sales international up onboard were This year. and mining segment, was In North which Digital America, our sales sales of offset were down last X.X%. products digital by driven Transit products. X.X% softness PTC,

was XX. points Slide GAAP X.X points percentage XX.X%, year. Adjusted up was was margin the to gross during X.X which quarter quarter. last percentage fourth gross from margin Moving up

driving initiatives. to productivity continues and by team execute Our operational lean well

Turning to Slide XX.

last GAAP was percentage versus expense $XX quarter, QX fourth year. prior The and lower year. the largely margin up X.X adjusted XX.X%. million, year-over-year were margin year. million operating than Engineering flat was Adjusted [indiscernible] expenses was last which up For XX.X%, SG&A $XX at points was versus the operating

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

The As the quarterly to to I the quarter already sales of discussed, quarter. impacted Freight in fourth production were our by an load during level a shift segment sales our largely were production. mod flat and first locomotive effort half

was income to income primarily million, operating portfolio of optimization of X.X percentage our operating $XXX margin $X GAAP GAAP operating versus last XX.X%, related and restructuring costs initiatives. year. million an points driving X.X included integration segment up

in margin even X.X significant headwinds from X.X% was driven offset The a expressed segment Freight XX.X%, the increase in similar the for Adjusted was income improved $XXX percentage year. despite Freight operating operating prior percentage largely versus year. operating margin, up by as and gross million, of expenses revenue. increase by up segment our points prior a was mix Adjusted the

billion, currency was of while our a was backlog on multiyear billion up segment basis, XX-month $X.XX backlog X.X%. was XX-month $XX Finally, constant backlog X.X% up

QX. $XXX currency, Slide and adjusting Restructuring optimization sales for costs $XXX Turning income operating in X.X transit up X.X% Transit at When related were million X.X%. portfolio were were million. was GAAP to foreign to XX. integration sales segment million. up $XX

points. percent was Adjusted income XX.X%, segment of a X.X operating income was operating $XXX up percentage million. Adjusted as revenue

adjusted of being by the up expenses quarter, Integration were margin savings. operating X.X as offset gross was a and revenue. higher During margins mix favorable behind partially Gross percentage

for Finally, Transit quarter backlog $X.X XX-month segment was billion. the

multiyear up X.X%. up was the X.X% XX-month Our a backlog was constant basis, backlog currency while on

an of position million from total flow Now quarter XX. of very generation $XXX resulting financial billion, increase operations let's XX.X%. strong Fourth turn cash was $X.XX year to in our Slide cash on at

During the the income tax net of working year, and a receipt higher benefited from improved refund. capital significantly cash flow

ratio, Our at our very ended our net continue as and quarter leverage which billion position quarter fourth the by strong evidenced to $X.XX position, at and debt be which the liquidity ended X.Xx. balance sheet financial first,

reduction [ XX, year-end the the that was half which we of anticipation of division first in in the in is close cash expected to Evidence Technologies of Inspection funding leverage on the increase our The ] year-end ratio January our announced and year. acquisition of

During $XXX dividends. we shares billion and $X.X the million in our nearly paid year, of repurchased

in early Board of a the increase repurchase share result approved our in existing XXXX, authorization in our confidence billion. our quarterly performance and a by the $X XX% December, dividend As in Directors and increased future, of our

capital shareholders. disciplined maximize our to allocate returns way to continue of a We in

million, million of $XX end anticipated to cost $XX of million between that by expenses million $XXX that onetime touch Slide run to to to like X.X, the restructuring X.X With Integration and to portfolio a recall initiatives. I regards XX. against was progress Moving that we this made program would on would the $XXX of an Integration optimization rate incremental our XXXX. yield savings

of estimated run With expenses program achieved XXXX rate $XX rate as we savings expect now savings million run to we exited the cost million exit date at we restructuring an of million, $XXX as of $XX million. and $XXX of we XXXX

Regarding the expansion position improve versus with earlier. our our nonstrategic X.X that Wabtec help portfolio the happier our that realize expected million all initiative, program, goals. Overall, against It expenses planned million. optimization the focus our complexity. and an have reducing we and multiyear Integration have against has of executed $XX product manufacturing margin were mentioned incurred Under helped dispositions optimization team lines of while we we made not to be Rafael could progress $XX the identified portfolio profitability to

the resiliency to XX provides to stakeholders. by team foundation all by our solid a back call EPS the robust cash Overall, flow quickly revenue us Rafael. as to enter XX.X%. The adjusted With X.X%, growth generated with year. grew points, we Now delivered for over growth execution expanded I'd Slide of of like a and XXXX. drove to for our X.X the strong great recap margins and operating that, profitable percentage turn moving We year the business

Rafael Santana

Thanks, John.

discuss the and let's Now across customer business. products We Slide believe to solutions turn for outlook guidance. to that XXXX demand our our XX continues underlying and the

to ahead. XX-month The provide remains pipeline growth in is international for committed backlogs strong margin driving XXXX. in and team expansion top multiyear visibility line growth our Our and profitable

from With billion expect up $XX to at between billion, midpoint these adjusted we $X.XX, year factors the midpoint. $X.XX between the in XXXX sales and which XX% EPS mind, is to of and up $XX.X at last X% be

well expect delivering shareholder conversion We profitable the maximize positioned I'm cash despite in in prior is drive XX% that than to growth greater confident also be conversion XXX% Wabtec year. and returns cash flow beyond. XXXX and to

in guidance. And like because future, to of update long term opportunity our our confidence take the I'd the to

XX. Slide to Moving

in plan X-year new more our discuss Let's details.

X-year shareholder previous growth. balance ahead and the business We last apply strengthened executed we in maximizing sheet and strong for cash of plan the returns. X expectations. years, our Over invested the cash generated flows that We towards future

forward, priorities Looking our remain creation framework our unchanged. value and

will leadership deliver continue industry organic than leverage we to As faster our growth. look business expect our to our team forward, mid-single-digit position, and grow top the we to line

over expect we basis committed XXX of to that over EPS growth achieve expansion points double-digit to driving are We and margin period.

also expect average through greater cash that will generate XX% cash we conversion flow Finally, XXXX. to strong than

Page move let's Now to XX.

Let's minute next we spend expect our grow average growth, annual rate X organic expect to and revenue terms margin expansion of revenue over mid-single a with an growth what discuss revenue in to we to growth achieve years. the of Starting incremental digits. at

mid-single-digit this We growth. to see X drivers reach

the organic single First in underlying low industry's rate growth is the digits.

international in modernization growing opportunities the year. next oldest the of North the with over world. sales drive has Second, This combined and will one locomotive America suites

our that improved the and their for cycle an value efficiencies driving we Finally, enhances innovation ultimately provide attractive by investment. customers delivering life return to

Next, expansion. let's talk about margin

combined As we capital expect cost over Through projects more X pricing focus improvement continuous in simplification our to see next strong drive the value, years than greater improvement investments and next with on basis margin we X years years. high-return we XXX in mentioned earlier, the points of ago. for did opportunities and even than X

discuss XX. XXX Page to initiatives like I'd expansion. points our to portfolio basis margin the greater integration X.X to and as Moving enabler the new optimization than

details Integration simplifying, this as effort discussed, have operations. initiative. consolidating we The seen X.X this momentum our we into and was and our and move on As of streamlining on focus X.X a are page Integration success, have will we

rate we first and goals, $XXX learned $XXX on to these execution achieve run from of program million we continuous mindset to To XXXX. will goal what strong take by of our deliver additional leverage and improvement million a our savings between

optimization. announcing today portfolio second our We're also phase of

focus prune of sales not reducing we will XXXX Sales while lines, from continue margin lines manufacturing lines complexity. strategic improve represented about profile. that and will to million product fit. a totaled By are our We product those $XXX a exiting product these in lower-than-average profitability and

wrap Slide let's XX. on Now

on to on we you continuous team, returns. framework, for focus our part world-class thereby to technologies strong team about maximizing rigorous With improvement value customers. products thanks demand and installed underlying today, the in creation our our continues As solid and our on our innovative heard cost our management, resilient continued large deliver and future, shareholders' and technologies feel focus base, company's our

With this to that, team I'd our Q&A our their like quartile thank the begin portion top Kyra turn now drive and commitment year for work I the to to their discussion. continued to Kyra? of will returns. over great call

Kyra Yates

Thank Rafael. you,

ask But on yourself of to the and question. follow-up out consideration will move We questions. now one others I limit question call, we to before on for you and one that do

are If Operator, you we the our now question. first please ready have additional queue. questions, rejoin for

Operator

Melius from first comes with Instructions] Rob Research. The question Wertheimer [Operator today

Robert Wertheimer

start to long-term with on framework. one wanted your out question I actually a strategic

] you XXX for bps clarity, Just [ now. have

X was updated, 'XX base the right, XX on and the it from year ] at the [ is think last midpoint 'XX. to I framework

along So versus that million]. improvement sort of margin $XXX from million with the the [ ] stack the $XXX [ period

where that's the That's embedded. Slide question. from revenue bps, of I all that bps sure and guess more you margin that's And then look pricing walk growth. strategically, XX XX, not one I'm you XX expansion at have on if is pricing.

feel room about are I'm embedded that's thinking that pricing the your in just strategically? so to fully flex? curious you Do hitting guide? have And Do pricing. how you power about you like

Rafael Santana

here. improve. 'XX, XX% of single start every were then strong. have in growth. a fundamentals than with higher quality out business our and going to backlog I'd cost has we one XX%, XX and Orders our say the of coverage XXXX. The there's forger the profitable pass start, driving is to finished are me I'll let We of But simplification, sense strong business business. to across continued John I'll Rob,

The profitable this Wabtec. cycle drive of our momentum growth is for on and there, will

got payback. portfolio I significant that's provide positioned to a a think well we've customers

shrink are old. Our fleets

price to to terms the coverage. to visibility opportunity here value there, we that we for that deliver of have in continue out continue we expand a and So significant

with see The this we coverage we margin first really And had as we've ] X provide [ expansion some the for for this that years. had year the the us is companies of stronger I of aligned previous guidance, year. John? starting here

John Mastalerz

right, in Rob, margins long-term plan. All let's talk about the

truncated that in we another we're at XXXX that at of years, X-year next absolutely points first you're Rob. the When XXX overachieved right. years, we were versus than -- look now X we for kind XXX looking a and points deliver midpoint XXX X. plan base, X the period we expecting So as And of a using basis to of time the that's more X-year basis the

point I more did experience opportunity X in the last we that out been think it, see we've of years. see and point lot got is of of grow the to than here to with years a margins. biggest terms that that we We've we X through ability our ago opportunity now more today

real we So good feel that. about

Rob, how you points. little XXX asked basis a bit to going the deliver we're about

years basis our do -- and And of to in You it, management. driven that X/X I'd the on with we the started it about the last the the cost be points is when side it way X at go over we're flavors. is by did back talk comes to that but first way is a XXX bit going about focus several we out to look pricing, cost the like little is going on similar to

propagation as finally, well we One absorption organization. also continuous be time at our lean SG&A will and well grow to the of, and aware a as we over and get improvement very of slower expect Integration, the rate then further that period benefit our throughout revenue. than you're now of X.X And that's

third. leaves that So other the

And return by which to would value. us that I drive allows continue investment them and really to innovate for our say, for they're and a that Rob, And would ability innovation. Rob, and is pricing increased to on will products we to other looking for bring -- to is the X/X call, value drive that value out the what customers our driven and

have price pricing other built revenue. as is inflation. that cost of talked our we've that escalators part we recovery a about, into XX% lot is over And The of of from automatically really across

good we see at ability So XXX what versus ago basis again, the we our to that X today we're today, where what in real saw about years feel in drive we points next years. several over

Operator

The Castillo with next Angel question comes Stanley. Morgan from

Angel Castillo Malpica

million, back plus I -- wanted kind kind $XXX side, you kind the early, it's you to expansion. that to the incremental lay out to drive $XXX the know leverage you go noted, think as incremental to see when of or you of buckets opportunities, just maybe those the just bucket for margin so about extent more opportunity, do but to on kind just you Can upside? announced to of you million margin maybe us? focused of I see just more drive what

Rafael Santana

Angel, with which that. visibility have, just strengthening let beyond just strong in start really of strong we we're pipeline provides coverage 'XX, really not but me opportunities the the

fourth mean, saw, locomotives over quarter alone, got we've modernizations. $X billion of in and orders the for you As new I

us. market it's growth, demand that for strong a really very International continues. So

continuing winning winning. momentum. moving and in Brazil Africa, are A strengthens into lot and forward. that in Kazakhstan the 'XX to we're We here of 'XX, Australia. growth, And drive especially in winning and international XX visibility We're Chile

continue we America, Mods. demand and see on new to locomotives the North In

invest in there. the improved reducing sitting markets is continued of the continue to to for serve and cost one for Our relevant fleets customers here North oldest need reliability America invest we and for costs.

other I backlog. think the quality piece is It's of the stronger. the

in think overall really benefit business, that. from I the the margin we'll rates

another driven Wabtec. that opportunities cost-out will the been top cycle cost X.X driving like On profitable simplification. about and significant stronger drive John of of and the portfolio spoke really lean optimization, keen you really of by actions Integration that, sense fact this add and renewed a for on efforts, with growth we've

with quarters, momentum but we'll on continue we So to and see variation strong that, progress continues. see

Angel Castillo Malpica

Is any clarify equipment of helpful. very anticipate last of of locomotive a the demand. change That's continuation that maybe in in on kind what it replace X%. the historical that X% do you've the to And Are to to basically you just there? -- you is years? And strong seen the kind of North levels of Or desire renewal of couple returning activity just terms the or step seeing America to replacement?

Rafael Santana

very there. me be just Let specific

combined, still growing really but at you customers and element new there mods investing there some investing are What new, single is for If changes really go digits as new, the context. volumes a now that at locomotives and customers we that the when and mods from from that's into in an look XXXX. high that's change buy not of going it's to it

So the digits. to continued combination of both grow for North single high the in America

In of in forward, to and described, I to -- see which saw advantage X% going as like you're he to going get of efficiency. locomotives, the invest EVO the what look fuel of a platform, to we're the FDL modernization of you're proposition going bigger terms as in of better technology, to up terms value continuing John

there. build opportunity as an that we see to momentum actually to continue So

Operator

The next comes question with from Saree Boroditsky Jefferies.

Saree Boroditsky

a kind trying of bit digital. just little Maybe to

for North here? outlook has Can America. the And demand contemplates why market us North been digital drive for you softer what feedback long-term [ America been provide 'XX growth? has Your on what the this can ] in and

Rafael Santana

close think I strong first, business. Well, for our

orders. year with think about softer The market, churning we've international how really been we've American mining think with the this the North technologies I locomotive of X demand America. in in but years, higher in talk see onboard for the business continued to demand. that about despite As $X closed around digital stronger and That's I a last demand of we North strongest billion one softer products,

in products, softer the onboard OpEx it, that's U.S. and think of signaling both element about is a with see demands from to the here And had impact the locomotive the when demand commuter some discretionary international, the the we PTC, and we've of from [indiscernible] really continue you higher business.

be revenues recurring profitably growing continue and in short-term focus again and grown profitably really it's last think has to a I this here XXXX. But area. year, to off business comparability

dynamics leading positive International So there. growth the really here.

Saree Boroditsky

bit And Freight margins. of little maybe just a

been weaker in fourth guiding the You quarter. the have

it's So the how the not think does first But step-up results I months just about given locomotive about that surprising. And margins shipments the you guess really Freight first new how it fall strong the year think since of XXXX? lower the you year. I for about mix in Can X in talk quarter and expectation higher full months? do and

John Mastalerz

This is John.

the Sorry, as in the exactly that out. along we profitability through I'm kind the first -- been and We've a so that what quarter, glad amount of the the of you fourth expected. of following had get expected certainly we cadence half in fair we pointed and year it's

momentum from the here? underlying would financial very growth does But ] fourth back [ everyone momentum. encourage that, question strong. is we kind from go exit underlying to with The your margins to with gets I divorce Saree, to where regards as quarter of And it also the

quarter We forward amount schedule the margin the is back at the the off. And quarter. XX.X%. quarter. would Remember out that cadence goes of with expect We pop we third and fair back a this quarter to finished pulled into into fourth to this production quarter, why our of as mix it that down what? third

or fourth sequential So expect third next quarter, which into third the we we quarter decline would we expected. the to -- the from that year. in of saw pop back first And the that

Operator

next The Ken America. from question Hoexter Bank comes with of

Ken Hoexter

but want you've I talk outlook, the I about now range. XXXX I guess, the $X.X into X-year, midpoint backlog And think that downside given over upside, given of about. of delved which you XX-month a range I you've the just said bunch, about, which the your XX% think is billion, the revenue talked to not So maybe the at

question, the on out those Maybe through just that? base the talk last upside, the downside move And the maybe a smooth then little year. about to of your --

more we based just you XQ level quarter kind You anticipated of gave XQ, do given on in dips mix thoughts. still year? the that Should Or of kind a have see any flow? throughout

John Mastalerz

Ken, this is John.

Let's particular, glad our did a out with mods next we cadence in of of that the operations kind and did is locals. great lot factories and I'm pointed we the a spent in XXXX, you job. more And earnings energy job start for loading year. And a of and our time -- team level fantastic

So does half, XXXX, the that As expect balanced cadence look kind balanced growth. revenue first of of ration to what of very going equal level be mean between very we to expect but We're a going that we growth forward? or we half at of would second have first revenue, the half. a would always

the first half. than tempered. will be more earnings we in The half first look When be more the second of for at earnings, is going -- tempered reasons A to half that. is couple to going growth

And look as Integration our look in others such programs, build year had percentage throughout at we in growth and percentage we half. and the the year. see X.X ago, productivity continue a As is, the we X.X programs, the margin first reason as that half strong at second of margin we'll X.X very to back

fourth what year were basis but again, tempered quarter. the between quite line first going the So in question, sequential you ago. we'll the that they rise on more expect first again, when first at Saree's first a to with half be significantly a half. quarter, see we'll growth, margins we see and back to look And margins quarter than second should the And

Ken Hoexter

Great. And thoughts on the backlog versus the total?

John Mastalerz

I'm sorry, Ken?

Ken Hoexter

your XX% of is the I total. backlog terms of guess about upside, the in right, -- downside,

to So downside the thoughts maybe your that? on upside, what's

John Mastalerz

Yes.

well, -- that So that of as kind we X.X% could of will we right? coverage that backlog. look of the that that a We're provide basis on number. have with in of So set backlog, XX% in that the orders, feel that variation the stability about some very we number is comparable one, some forward. good of against at XX-month and

that through down is freight with part right? business. a little got build. of is XX% And to business, our we piece of industry when the a or other The and that various that expect And be look And -- car we we've flow the that big expecting a at flow things that, bit.

So a comes depending be car headwind and little on how of bit the out. build variation some may there there

other various is out expect and aftermarket business that. largely growth The flow whatnot, we of of part in and the parts

the we real variations, normal about going So we But as feel see mid, which we 'XX. have but that good feel very around good X%. in there that move with we into we we're in put out the is backlog guidance the to

Ken Hoexter

you can clarify? Did the from inspection just just the as or revenues you exclude well? And outlook your acquisition evidence

John Mastalerz

Ken. Evident there. the this There's expect after towards What at quarter. is to we all. that we on the second latter second the transaction update not that guidance would do included we will we guidance Thanks, and we close will morning is in -- be of part the that in provided our nothing probably

million. that, could expect the of we're $XXX adjustment you over buying because 'XX asset revenue With had of a amount that in revenue, fair in right,

year So that. we plus a there about on get in half growth the

EPS. that interest. will the in EPS right? We're a in year, the In we'll affect of fair that In year, increase first But EPS, of more a to that the very accretive but the wouldn't amount so half. slight with even more pleased Rob transaction first terms and of much growth, again, first be have

Operator

Daniel Imbro Next from question Stephens. with comes

Daniel Imbro

side. more dig into we could the growth if John, revenue a little

here. as the that decelerated quarter? just we in at organic look that pricing fourth kind that what is it growth behind deceleration, of does When we fourth look quarter, in slowing bit a So Or was lap inflation? growth the like

up lower-margin bit talked of mentioned you you improved. from year similarly, X%, another Is that away but the backlog, decel. ending then And about business. just know the quality I Rafael, just guys the walking a you has

of So expand think growth that be ex and could if right maybe you you just why out on were we factors? should if some has those what slowed level to the of

John Mastalerz

we delivery. have simply the produced right, I'll and business on fourth cadence What to products, not take of growth slowing. the are in seeing our With revenue Daniel. We're momentum we part slowing. growth the the seeing we're and production of how mods seeing first revenue regards quarter locals in is the the particular, not that, slowing

And they when we were so in producing what this going be were of to ago Actually, those the we quarter year. all were X fourth expected quarters knew expected. of

is that line simply our mods momentum the X of top production of we the locals. and consistent business the But you're throughout growth seeing at that about we and largely indicators but what moving year, underlying growth that on lead sales And is we is have So that future comparable the good growth And feel been on backlog the the have, next underlying X.X%. very quarters has the at the X%, right? are mentioned. you into headline of real those

point the in terms right expect of And talked this year. got the way in back the line going would been That's that we it at strong very we coverage. about that's years. We've the in of what has coverage last comments to comparable with a X to

we as us So into of XXXX. a move that lot gives confidence

year. this XX.X% up were orders the mentioned, had Rafael as And

we mentioned that us highlights, alone. as over we of forward-looking the quarter So in gives the in momentum local billion mod that $X orders key fourth had and

to what's seeing shipped the what consumed. growing accounting mid-single-digit versus regards what that the fourth expect in in being would direction quarter to with momentum regardless the that with that moving of is that we on kind range, view the continue is of you're underlying everything of So in we

Rafael Santana

transit. keeps bit takes a it's businesses, the view really the as take little of you And the specific on there. If comments, improving board, across my backlog, the per yes, margin the

question I the margins. improve early room last was still got I on, think year, to there

improvement that So points margin XX basis goes year. of last with

Growth the prudent with another here. strong to In you there the is on profitable digital, in transit got the there team a and continue of waters last to significant the and growth the We'll ahead selective be margin still there. off team look eye was is despite at slight X%. volume strength the growth but was bit year, ball that which growth, maybe a

running. running On are the service front, They locomotives hard. are

service we understand It's that that agreements, well above that the so have in last well. sell. It's the both saw and connected maintenance for that's very We total we reflected the parts the locomotives over business year. reflected into -- growth you XX,XXX

there. strong feel we So

growing. fleets International are

X.X% I there. think we've highlighted cash before,

that's So positive. a

business on business year of really a there and based only CapEx the business another was on the combination that market going pressure, that mods even balance continues to pressures. there face. the really after think we growth last all the and saw year. the realities change And with that components I of grew they profitable team we're The despite

So is cycle. business drive and strong growth all to in really profitable and the another all, I think really strong significant momentum, ready

Daniel Imbro

question all John, follow-up the a earlier. maybe strategy on or pricing And then,

equation, pricing talked value pricing support peers, levels you you but costs the guess, and of do higher growth for adding over then since of What cost You growing I the that organic differentiation guess, you before inflation at? cost the your is right stubborn, the technology increase takeout versus increasing? underlying time think would level inflation And CPI of why I is value. just the as cost that underlying and increase is about you're not you're what side the obviously, on remain doing?

Rafael Santana

Okay.

of Let me unpack that in a things. couple

of First say piece you're value is and product. when price for a we part improving that is we the

So previous you same is value really in fundamentals call it the return did delivering I'll you're that for And core the the delivered the to, not there year. tied drive product more because up customers, reliability is fuel [indiscernible] able North our we're you're not that's in to growth, efficiency, better invest. haul customers and America. necessarily why which especially is seeing It's

I And our it's cycle competition. competitors are We're very positive when various just to that of it's really, the very that's winning. stand see life And against of positive. think really you against internationally, winning products there, where out we're and cost think

for that, cost feel agreements efforts come of on there, about of look John did and do how do productivity, through and efficiency, calluses strong a contracts inflation When driving escalation. cost, actions. our got escalation and inflation elements at we we and out, When we ahead mention of price we about number the I've designing you continuing those having that. we talk to

see, the very of strong margin expansion. based As we in on terms guidance, you long-term start the

a footprint really to that's the go simplify just and for me that. there, off 'XX we build out for of drive cost-out identify We continue function to of the projects, teams continuing

execute direction to towards. So is plus the really continue that XXX basis will the mile here

Operator

next Goldman Jerry Sachs. question with from Revich comes The

Jerry Revich

for that Can in you gains point business the cadence you but of be X-year you that laid total? time performance quarter quarter basis the tends XXX transit do in over folks be frame margin the points this in basis thinking quarter. we to expect to we line 'XX outsized should outperformance fourth and to just talk generally, sequential your really strongest then relative about the that relative transit folks How about margin out XXX delivered

John Mastalerz

transit the let margin Rafael Jerry, and question take more performance, of future. on kind with the of me then into QX regards to the move can share

transit that margins absolutely customer, Jerry. QX tend products. over quasi to partly our be cadences. their some operating left and get and what's up our business, fair higher-margin And have that's And and time higher. amount typically right, the they a or due of government You're to agencies of Businesses within they spending tend are to government customers end fact budgets on

see we why that. that's So

aftermarket, that about was up is look well, of by was of One very still important talked the part jury that, mix. XXX fact the were see was you'd up drivers when fourth that favorable discussion of some aftermarket to the fold. about, that a the the mix we And amount, up grew more if that OE Rafael mix, a that Having quarter, we show where dynamics. couple And good while you points And XX.X%. said selectivity XX.X%. in basis that

pushed that was up, to of that. part so XXX basis the margins due that And points and

and on margin The that that which we been the we've we're for about other the in that move And has what hold in spot future. of time of enjoying some the lift, as really will We're lodging into ramp. X.X. X/X is that ramp, talking been sweet certainly Integration about transit business,

Rafael Santana

The work competitive variation footprint mean, continue The margins. and teams the improve I more see and becoming to business significant more to before, continuing to is described further are the simplify we're quarter-to-quarter. as going

mix. projects. It it mentioned, John could timing of As be be could

take margins We'll segment 'XX. continue selective going and wealth team on see some and is committed, well track and in was stronger. action, are The to business is from book-to-bill benefit the year. is to to in continuing profit you're year and as full but this the backlog growth X.X be will portfolio they again we significant closed about positive The growth optimization as to Integration

to continuing for the playbook So execute that we're business.

Jerry Revich

just about so how does like that is that seasonality business has the see versus thinking What the services, variation about Super. stayed in strip services on a talk for baseline 'XX? see constant? you if And that the look Has we John, the little we 'XX different been to services were can just out I ask you core how 'XX Can bit 'XX. quarter-to-quarter. can And for mods? to relative relatively just performing. seasonality [indiscernible] are Again, we

John Mastalerz

services quarter. third right? basis that's Jerry, look, What a particular, between and in is when fourth more are Yes. the of normal the core, it. to total the done when very parts XX% business, you growth look a the the numbers that's measured got cadence rebalancing When on you the at some business, look of we we've you seeing of at and And our XX% that or that

out our services. driven XX%, other that's the coming of revenue which by So mods is

that quarters. we As we X expect growth be the move steady underlying next into the across year, to

However, going But manufacturing, still that much on still have our very can see same manufacture we do because at we're to we expect combined to depending and be when the we variation we would as consistent. locals, like product. look customer to the to how mods going as with mods. runs Overall, we're times we

the we a times more well-performing business. locals we'll to the what the third But saw overall, piece consistent little and And the P&L equipment see in bit a new where quarter flip-flopping mods. see things between and fourth we're and with is going at is at underlying

Operator

Bascome comes question from Susquehanna. next The Majors with

Bascome Majors

to roughly single-digit each break what Can that from you like year growing mods. combination and out high earlier, contribution Rafael, talked units about us between this of logos how and growth pricing you a the are this year? new looks

in cadence the how And in of more about through about talk and end believe of ] extending accelerating your XXXX [ in you America the are where you I you both contracts beyond? of largest steady MoD this and those feel Can pace are year. agreements of a midterm, to growth North

Rafael Santana

mods active with, North got new ]. both I'll customers units America [ start with discussions and we've for Bascome, X in

that's that's on mod to is which side. what customers more heavy the you've continuing, I than and a going saw and some very framework you much what to connected investing especially 'XX, side, on it in the got seeing different is you're So specifically unit new described

element So mix shifting to the about just from customers North an it's in is less that of specific other one America.

the We about tied they on cost just to of is return operate the piece of continue strong [indiscernible], really of the that all that really the some to these the see think electronics interest investment. get product, elements to A and that's there, and elements.

we that So see demand continuing.

innovation. Earlier going talked fleet. fuel start to next you into the savings on, take points. modernizing it I up That's looking about here as cloud, mention, to and did X we especially evolution did mention to And the I

where we're the taking that's business And significant. very that's So next.

numbers. specific the on Now of elements

not number for or of traditionally both number year. high have growth of single-digit mods into translate of units, We the commented this still a new the but combination

Jerry Revich

you the the results How fully would are do expect launch you commercial product? your evolution testing? to that been? fleet, as the to in on point when a And And where

Rafael Santana

So we end next that fully commercialized. by expect the year be of to

'XX. to of So seeing going really that the full impact

that the So to is really product there of availability continue tested. being sales, of to the same the you and expanding for and the really value out ultimately, fleet and sure customers. number units product reliability continue currently drive making We're we translate modernize that's

Operator

The from next Ivan with Yi Wolfe question Research. comes

Ivan Yi

points loaded First, that back-end or through calling you're annual it XXXX? loaded annual on Or the more more basis XX rate run Is for a is good average long-term front-end guidance, of improvement. target?

Rafael Santana

clearly it's I start mean front-end more I'll there. loaded.

with, for the XXXX, improvement guidance You see is to how continuous again, we're it this has do and starting it process. a

got team's the clear been operationalized. So that's a back

been back on we'll the delivering has it. into projects provided, that's work look but guidance translate expand that that we continues. that we And on into of continue to So as

Ivan Yi

gross Canada, impact much COGS have materials profit? are your China ultimately your potentially imported? [ countries ] And other from raw Mexico, would your how What and then on of tariffs and

Rafael Santana

that over on expanded With our tariff being fluid, with right? while managed But plan not well. So happening changing margins. tariffs [ successfully continues we've the included to in past all be, guidance. call quite it, inflation, was basis. the a sells we've that had years, X ] day-to-day That's It's said, I'll

So -- we've on dynamic I be in we to committed demonstrated think environments. ability our to drive really and on outcomes very continue positive

there could while any on quarters. be impact, specific So an

through before, us. done with we've As outcomes stakeholders various navigate to we would time challenges collaboration over in expect with these positive

Operator

The next Instructions] [Operator question from comes Barger Steve with KeyBanc.

Steve Barger

about America digital for growth digital? international versus North think your international, rate international? with market Rafael, you And how intelligence shifting in size the do about can penetration towards you talk

Rafael Santana

here. So of We've typically picking the there of one, across a going that very We're got we that. a on drive It's really is a discussions up automation. a And international. interest compelling discussed a strong couple to of I terms there. how you significant. momentum really continue points customers Number with in geographies all see very PTC offer. number seeing really

trip and With traditional most, to all things. optimizer and significant still, of more of in adoption penetration especially X other we America, North that including call I'll here, high have that and the X opportunity course, said being products for

think seen I weeks that's we've goes think in last One North we're is that the to and here back going I to really it really seeing thing at couple least some us really really to more recently safety a plan the seen railroads. is of for just America and the we've encouraging. positive positive for speaks mean, FRA, the not which I and one waiver progress

call it to that brake run we on this that elements will allow for automation have of customers. evolution it our air [indiscernible] next just step is products on the ultimately to that again, continue which efficiency in will case a not control optimizer of also is, and that platform the I'll to ultimately customers us expand speaks and It safer product, advance

after it's to a that of no? years, progressing So see good couple

Steve Barger

think include PTC's if evident? point the inspection And just incremental is progression and you recurring that about long-term expect then that for as the So applications. is target you products acquisition of you which same technology the North and revenue sell America the legacy did maybe what kind had, do landing you that's the right,

Rafael Santana

Yes.

in XX% is I past If [indiscernible] we the journey that's services, to of point. it, mean, there revenues We ultimately really XX% about over going get and to be mix range. which to has I not is And I higher below this a really business. connected. think with to call much you a I'm [indiscernible] be think this mean XX% of with I'm software to grown more function started to, and started horizon of goal it, going this recurring very going goal the

speak call, Movement top being and I next the I'll to driving lower the think Planner, products automation, railroads you can speaks of if number about about the how their commercialized, which of of really, the mean, lot you of terms that, ultimately think efficiency, in can generation of if it the that's of to do a we build on PTC that in a terms driving cost into operations. how

that's path. on direction has the we're go. to that that business So got exactly And

make and it ahead. as here before, significant of business margin, certainly I we of it's fundamentals our that continue is for M&A, high at looking think opportunities got any element growth here at is and look allocation, revenues as you to look some the we the recurring discussed which go whenever digital we're an to into with really area that capital

grow ] our Evident [ end will business elements with And meets those all markets.

evidence in-house. end opportunity lot Our we markets, capabilities we've business got and from of will group a have leverage business here on the to opportunity unlock a that significant significant serving

Operator

America. from comes question with Hoexter Ken next The of Bank

Ken Hoexter

Rafael, I morning. stocks bid this X% down the guess

what there's upper I digit. growth think which closer generating, been has versus maybe a mid-single-digit concern to the outlook or digit revenue on even double been single you've

it just take opportunity questions So your that's Maybe M&A? think an away conservative this on on you why throw take at is pricing. outlook? a and missing of I growth X% the backlog do want you're of getting on that. opportunity Is lot you to a to kind thoughts

Rafael Santana

Okay.

really It's function M&A of looking as that what incorporated we're I mean X clear. a been right? has I'll very at on So organic. things. call [ Number not one, desk],

So want I there. start just to

missed, into goes not which top we've do right is piece, to second also line you're think I there. continued portfolio be is our that it The impact optimization. to of the $XXX seeing probably There million

context. well So in not hopefully, missed that as being that's

it's each and operating one what the When to the we plans of from provide that's we're what to ultimately providing. guidance, we businesses, aligned have guides

is it, coverage last As year. coverage had said we've aligned the very much we with

continue that, regard. we to what fighting to If down starting opportunities as wallet think how you for we we here to on about think long-term our the I that provided. guidance, have have I we accelerated think, deliver our look we we've are teams share every With form, year, much to do really guided day. guidance an no are in from and products, drive, committed very accelerated that into increased of the we're that the And intention slow to in and that's

Operator

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

Kyra Yates

and for We thank your Betsy, speaking to you with everyone, participation quarter. Thank you, you, today. again next forward look

Operator

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

disconnect. You now may

Westinghouse Air Brake Technologies (WAB) 12 Feb 252024 Q4 Earnings call transcript