Westinghouse Air Brake Technologies (WAB) 28 Jul 202020 Q2 Earnings call transcript

Good morning and welcome to the Wabtec Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kristine Kubacki, Vice President of Investor Relations. Please go ahead.

operator. you, Thank and call. everyone Wabtec’s quarter second Good welcome earnings XXXX morning, to With Rafael Senior and Dugan; President us are today CEO, John of Services, Finance, and Freight Santana; Pascal of Schweitzer; VP Mastalerz. President Pat CFO, slide on financial were and wabteccorp.com. today can posted earnings our on earlier disclosures, be website along accessed our our Investor Today’s presentation, and release with on Relations tab

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

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

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

good us morning you and appreciate you hope and today. I families We remain and joining your everyone. Kristine healthy And safe. Thanks,

to for I out remote and started, locations get very in we through and proud keep this pandemic. field, operational would those in the employees I Before again factories am continuing facilities our our like thank safe our from to working once teams high. has that in our when one focus. long-term our economic environment quarter time the tensions during to customers see and how of supported delivered for another social and and results healthcare, And a challenging you run our responded second reflected

and which were by the second transit, X, in in Turning freight disruptions by strong strengthen million, million. quarter strong by an further continued conditions. billion, debt despite driven sales ended us let’s operating across by performance. Adjusted driven was a and billion what position $XX backlog with and good offset visibility the adjusted was quarter conversion multiyear COVID of that adjusted working despite quarter long-term in actions was the synergies. but can, dive taking million viability services, million environment. by had but difficult market margin flow allowed our $XXX freight by to somewhat $XXX $XXX end-market. both in sales protect Cash transit during some pay-down the from in $XXX Total due the XX.X%, demonstrating and to financial drop us cash are of freight we of offset we we was by across market necessary liquidity impacted operations capital EPS $X.XX, resulting And steps income the $X.X Slide transit execution international largely and into to Total the for value. a the This to providing over we and shareholder position, our company of quarter that, With finally, control underway. the deliver the increase freight

to synergy you targets our we here. As know, remain are efforts and our accelerating committed we

lowered Year-to-date, $XX continued for SG&A and synergies that will on over structural Of with in We the expense XXXX. we and synergies plan deliver of net planned full XX% on costs have particular the million million year-over-year. of of schedule. in action net ahead $XXX remain synergies we by run-rate on million confident realized note, aggressive $XXX we are we

and reduced During X% headcount we second were than quarter, more year-over-year. by XX% down

than reduced actively through we merger are the year-over-year service reductions we lean ahead from We have XX% cost Transportation exited initiatives. operational of GE also our driving have and To-date, shared more footprint agreements of schedule.

and transportation pandemic remain and challenged market from rail fluid. Looking impacts ahead, the the

resulting our and second based well first as you a mind mixed, market further lockdowns we somewhat negative rest moment, a results impacts we to outlook in year. and billion gradual conditions recovery. pandemic a we half this volumes or new largely based the with issuing the for will business, of $X.X quarter bottomed remain range revenues as on Pending are to the as the $X.X With billion see the for XXXX for our of to in coverage will While year. on we we share no expect in anticipate believe backlog I in COVID-XX the on the year, due

full to with are volume align EPS and variable is the continue to our and be and to outflows. cash improving roughly XXX%. $X.XX transactions conversions fixed million adjusted Cash than over company’s for prior year. adjust conversion to from business greater XX% margins. costs will be committed within be anticipate restructuring of We cash expected range to we to We includes to $XXX and in the the segment This realities $X.XX core

are the a to few market decline, Slide discuss we second X, are the virus the as freight will of monitoring Services had minutes. would economic transit, also to and some hit conditions sector. President of experiencing some travel in carefully ongoing recovery drivers conditions both across In of Freight we the and I in and And seeing this begins down Turning mixed year-over-year like on Schweitzer, XX% In impact roughly quarter. record are resumes. commuter in the North America, volumes we a rail regions. Pascal

since second rail high sector. to seen quarter. the on the quarter, second gradual in volume locomotive improvements parkings, the record have improve bottoming a also have and we positive aftermarket in remain peaking Likewise, we However, shown after

lines International car and up build build versus taking the locomotives as of North record slowdown declines, is continued North car the American rail by are year on be the couple a freight and of mining rail to XXXX. one-thirds less that forecasts to and driven America XX,XXX storage Reflecting a tailwinds. fleet for of cars. and in builders highlights. the expected. than America share were year helped volumes terms offset were North last I currently will want the in shipments rail indicate production steps Industry largely Internationally, In resilient locomotive quarter, agriculture car builds, more railcar

We CIS, Brazil and locomotives Russia, for see demand Australia. new continue to in

have stabilized. resolve Some economies right to due as expect tenders have pushed to we this but the COVID-XX, to

for also for opportunities sustainable next-gen hybrids especially growth fuel-saving New remain technology. strong, solutions and

consumptions innovative overhaul fuel engine reducing really on doing by in this work moment. our through a Pascal X% are in process. share more will We some

XXX% the battery-powered the hybrid testing first also operating FLXdrive are in our the heavy-haul We in consist. currently locomotive, locomotive field world

opportunity So are seeing XX% far, an fuel customers to our by reduce XX%. to consumption we for

extending a just footprint. New battery significant deal passenger technology are to and We carbon well City closed down with as overall to transit York transit drive their

and cleanest, has passenger with and slow prior HVAC we in the digital Finally, resulted Australia, drivers transport the in and Canada, break, the versus drive India governments new our the contracts reopen. new Transitioning This then, electronics productivity and showing Europe as rail customers. internationally up particularly and our segment, COVID-XX efficient the UK. continue safety X% to see look as some had ridership doors, quarter. on Since has early we quarter regions like Asia, remain as the also Sales most especially to impact mode line recovery second economies to costs world’s continue market Overall, significant down. intact, crisis transit for in trends to challenges. a are for we the provide significant sector, a the the product positive to in for safest service address improve levels and year. activity the long-term were transportation ridership believe Across public

XXXX. delivering improve and things and flip profitability. of to to Pascal. expand over improvement team to basis that, will in execution X on to points With project are time Lilian XXX over the Slide margins track and I let’s We while continue over turn

as Services. billion Wabtec backlog. morning, through modernization and business is with operations the well Roughly, including Freight multiyear in I and agreements, Thanks, are in Group contract to $XX Good roughly today. billion with agreements. our of parts XX around am revenues long-term you be everyone. as of Rafael. XX% am President approximately of a $X.X countries I service contracts, It It multiyear good all Pascal Schweitzer generated is

important long in them we our short, customers around some the the the helping freight corridors for with in most of So world. haul, are logistics pull

as I As is a we are value that that fleet our technology superior This shown customers included a capturing our constantly productivity cost. strategy and are upgrades for for more improving product railroading, running have precision mixed the and and ensuring relevant through brought on is like create than initiatives All outcomes the our well we delivering our customers. performing with ever. This Today, executing schedule aftermarket enhance instance to for fleet’s gains, in continue these new efficiency challenges to through while strategy and focused by on railroads pandemic. before, tools. and total for lifecycle hard, the

of operations and operate. many quarter, Rafael trade on our explained, where we had an customer volumes Government significant we the in globally. saw second regions The impact disruption as shutdowns

North As a locomotives America. record parked of were a in number result,

dispatch need the and out active part that the sell so performance point open total and we However, field team performance more we strong than the of COVID, share regional our fully a in we of customers I on-time due to in continue shutdowns and more despite to a locomotives also remained of reliability see the despite we and hit would increasingly from this, to operational, quarter parts leading that testament disruptions locations the each to record and to prioritize parts. XXX second huge delivery like increasing much continue than to illustration fleet. And fleet. our the and do service for in the large our have of the

line. reflected second in top that’s You see our the of resiliency quarter

to railroads investment the the to our certain while So, related crisis decisions, delay value has led remains. of some portfolio uncertainty the

to new work result, the in of We And Wabtec to to as have customers plans scope realities. and of increase scheduled unlock to maintenance our worked leveraged we the new full the growth with align market R&D. power have our a

of scopes, Now we expect operation, our be recovery level improved the looking than we overall and in reliability, modernization locomotives and work translate for fleet economic into the greater. for into of comprehensive will This railroads to fuel demand on as performance delivering reliability opportunities. more growing small comprehensive relying more locomotives, ahead even X,XXX number the Currently, strategies, enter have efficiency customers. into modernized better into more freights

plans strategically of remains customers very As modernizations compelling. our investment long-term, over the the value their consider

to mods via quarter, our and second backlog. we good multiyear momentum The deliveries continue visibility show have

Now, where operational to starting on scale, are parkings and international fleet reopen, also are we improvement economies encouraging in a seeing performance. broader

compared shown give ultimately a number And with of a parked a China our to Just volumes we the are to these rail quarter business record there In harvest. good while momentum maintenance. car shifted are following strong significant this to as activity operation. to of of agricultural products, as due throughout a we year-to-date the July, up Kazakhstan, see all India, were back as examples, on greater Australia, has in demand COVID focus locomotives Brazil, impact In dependency pandemic, had XXXX. little lockdown. the you resumed few following with in locomotives business

gradually to continue America, North progressively and carload improve we in Finally, as to do discussed, parking expect to volumes recover.

In FDL a Brazil closed terms order service the some for significant as Xs with team and the activity in long-term Advantage key agreements for as won our North of America quarter, in commercial product. Class well

Going or approaching their into had we running a bit this specifically locomotives globally. product these Any are engine more as XX,XXX of locomotives FDL Rafael little described, around second overhauls. third

these up of around savings per a pipeline installed the XXX,XXX our win gallons that reduce fuel opening fully strategy exciting So solutions, with for means with in of X%. to are is in single $XX,XXX able That a to Wabtec line differentiation of opportunity year. for first multimillion This base. dollar by an the fuel technology around we burning is for next-gen a year, consumptions up locomotive

few a Finally, cost share I on will thoughts management.

our So line XX% with roughly commitment year, our market reduced in by synergy and have realities. of ahead last we headcount

lean to as broad deliver able the up to carload our markets still the undertaken $XX remains quarter our while grew customers strong volumes for well scale But aftermarket to and the giving rates our will fluid billion conclude, multiyear had our confidence drive future. business, of strong international out have parking actives backlog, that while significant services into us and headwinds, market a team the We being position freight recover. us portfolio, cost operational and and

profiles due to Looking some the forward, activity engine to overhaul of will and quarter-to-quarter our see mods seasonality delivery schedules. due you fluctuations maintenance

on this to ability overall COVID color its Pat? to now However, and company’s I strong. performance. Pat the over business post of more quarter remains to will turn second fundamentals things the recover provide

Thanks, Pascal.

transit a which Slide decline pandemic. our versus XX% year-over-year in second to by quarter sales $X.X the and to were segments the decrease mainly billion, due disruption year. was prior sales reflects X, Turning The caused across freight the for COVID-XX

of in income the operating actions of was a by the disruption That’s $XXX by quarter, the pandemic our operating our variable down and income and sales the million synergies. $XXX For year-over-year, XX% the offset lower mainly cost as million. adjusted result operations driven and realization was somewhat

was income which the D excluded at amortization, these quarter, a for $XX Take adjusted release of of details. of reconciliation $XX the transaction $XXX restructuring million, look non-cash our the million million costs. pre-tax expense and operating For Appendix press to of for

$XXX down volume some timing. appreciation In were changes XX% cost looking and from amortization about outlook Engineering well million non-cash with million benefited of Now, as year. the realization amortization some SG&A expense XXXX, last in actions down we or XX% And expect expense items, lower across line about moved $XXX project as expense expenses, and million as of SG&A Engineering the year-over-year $XX well million. at restructuring be expenses a to $XXX of $XX million. of to from to structural declined million, as these expense synergies. including transaction business the expense $XX decreased detailed

Second per diluted earnings per adjusted share can share of Details of per GAAP GAAP press release. had share to bridge diluted earnings $X.XX earnings $X.XX. found the we quarter, attached our to per $X.XX share that and of earnings adjusted be

As June XX, was multiyear $XX.X our backlog billion. of

Excluding rolling backlog a subset XX-month quarter-over-quarter, the backlog backlog, of $X.X is billion. a multiyear flat is the FX, impact of which

backlog freight to both us give visibility provide the continues and transit good segments. Our across and

Now, look $X.X total Freight sales the negatively million let’s quarter, by the those results during sales about Across on at to impacted $XX Slide take XX% segment, billion decreased quarter. second segments, the the in FX X. a

a North of sales that was sales a America of sales. the as in deliveries expect first quarter freight deliveries, timing by volumes the quarter, half year, mining often in equipment year-over-year to drop a deliveries. Pascal terms X% the headwinds. higher that slightly can of locomotive the vary we as In offset second somewhat offset result heard services result locomotive lines, to half North compared locomotive services by for year-over-year, our we you down nearly growth in and be to record the And deliveries due parts double-digit the as mods lower despite which America were lower portfolio and increased OE year. of to revenues when down international discussed, Despite resiliency to continues second year-over-year this locomotive discuss, In show parkings, higher but was of quarter-to-quarter due have XX% product were XX%

XX% freight products work and on the improve such a our of of edging year-over-year sales generation. as $XXX markets oil industrial and We with expect down our power parts distributed Digital railcar timing sales line segment recent of signaling operating up were to and sales million fourth adjusted build overhaul declines into maintenance for on quarter. top Despite was coming higher in gradual end the key and lower gas evidence headwinds, synergies margin recovery in adjusted income Components through year-over-year an as XX%. projects. power were and sales volumes, Electronics year-over-year X% of

backlog impacted segment backlog prior would million. note $XX that again with negatively I about quarter. that freight the was flat $XX FX the Finally, by billion about

Transit XX% COVID-XX were year-over-year caused Turning X, disruptions our decreased stemming reduced by virus, FX disruptions sales impacted across by additional by were on segment, pandemic. million from year-over-year million. to also to driven $XXX largely Slide which but sales the sales XX% down the an $XX OE by

shutdowns. are which systems primarily in last our down Asia, our by by at operations, the the sales, were impacted from transit around customers’ were and year, During XX% capacity many Aftermarket quarter, globe. were reduced and negatively impacted operations government which Europe

equipment seen have most in have and economies ridership deployed, resumption recovery in as opened increased gradual up, a markets. However, we service,

Margin the the of absorption costs the margin segment operating income an lower performance for fixed of Our of million half X.X%. $XX was in by first was impacted adjusted adjusted operating quarter.

increase are improvements we the the and to However, XXX in year. continuing expect business for basis to transit drive transit points margins

end million Finally, backlog negatively also of the versus by flat $X.X the about quarter. last FX was $XX segment with billion, backlog first the quarter. the impacted

we Now, strong I identified $XX call. million about Slide and one-time balance restructuring had during last flow note million. flow our due charges and to the on transaction we cash at was let’s impacts X. prior turn year generation Cash the earnings had $XXX the would that of to quarter sheet on

flexibility $XXX $XXX is from X-year steps notes we total XXXX. billion million. in $X.X retired our ratio the at quarter. more XX. strong, of the was to in due end our Also move our execute second took leverage restore the debt the of September the X.Xx debt floating maturity giving balance the turn generate flat balanced in of total at With $XXX let’s But with ability Our Summary a at successful our end confident July, the $X.X And about rate bond that, quarter over and that with flow, end is are we the the down a proactive strategic. our quarter, was solidly will and first liquidity to last about Rafael. million quarter in up liquidity second and profile billion, of cash us offering the to million of Slide sheet back call to to I net

Pat. Thanks

difficult as way the a and So a companies this are morning better performance through stress greater company difficult that weak and our environment seeing see times, perform We the today. page than it in we could the not would Wabtec for fluid a how it have a you reminder environment, and find second and adapt, had to quarter, test one must throughout a lead change. a imagined heard in in solid learn despite how on strong you

strong into of in this one size most this an a ever Over would the have merger the we given into global second Yet company uncertainties doubled despite and of all the see the to managed we have true the months, odds, position half cycles and performing XX business we we of expect more and Wabtec resilient commitment successfully we company seen. to especially as team the fully massive headwinds, COVID-XX. testament carrying continued delivered recession year are stronger in difficult faced have a pandemic, the the the that last industrial their of a to

the cost committed for help drive team. to that the each Again, remains these profitable of navigate team challenges. want I face member reflected doing us they and turn and personally the thank every efforts portion I call shared manage to in that leadership change we begin With to to Q&A that, will today. the will the growth are and results all of constant in are discussion. your Our of Wabtec back to the Kristine

you, Thank Raphael.

to We will on questions. now move

do for the that call, limit we of to up on out question Before and follow others asked question. consideration yourself one you I you one

have that rejoin operator, just you to question. queue. we’re additional I the If think first our With questions, ready take please

come Thank from go Stephens. you. And our with Long [Operator Justin will question Instructions] Please first ahead.

Good the Thanks congrats quarter. morning on and

morning Good Justin.

start the guidance. let’s maybe with So XXXX

guidance, So get of year sequentially look implies the second if it I should to at revenue better half in quarter. second the the revenue relative that the

the think help quarterly half? implications, anticipate can just back come transit, on of to we versus think you in from revenue and us color to some a basis on of earnings that the then improvement in the cadence just you us give about mix that provide can or anything you about As sequential revenue much how freight

Sure.

strong that, coverage in about as let the think execution. at Justin, the the provided we we I strength feel well, also for look the feel we strong with first we ranges start backlog have about me

actions operational was we are saw say terms the synergies bottoming second disruptions. of have our We momentum also when think strong in quarter for both we taking we think from We think in I and got costumers. it certainly volumes that cost a

think are got extent I the but side I on have that don’t still to the have operating. also, have think levels with of have locomotives, improved to storage we the number a at think ridership the a in trains quarter the I seen of there, to bit worse. we do that out the improvement transit of in better transit you news large parking point think end we some I seen

any trends So think look we the that if as the is, quarter, to it? into are second more and month starting There we we continue trends. of at into end July to up well. see specifics know of to those through this as are we I but some Pat of you see volatility seeing continuing as don’t we see, the I and course, want recovery, add

– I and the the of in think it is out would kind I look kind versus much point of our the as the becomes at decline significant one No, when OE available, aftermarket more thing is mix quarter-over-quarter you the though when year-over-year. that information OE side of that

industry, really it’s You disruption see in the being impacted the in market. by that the

so coming in to those going question I your businesses recoveries, think to you along. segments, think more to the going as year recovery And I goes think how back where be I see to is get both to of it are of the and mix typical

regards things on something of us is think decisions we that’s any And as new the continue to to one will watching continue we monitor really to to backlog. which for think I here build the I be for projects. push-outs

quarter bit of we then worse into kind and color of of year. Okay, great. part little feel a the that front? and of that for end Any like third third that question maybe do then maybe the build fourth quarter, on is on And the cadence you off Pat

to of guidance improvement the a the of go and sort steady Yes, see kind you rest we about a everything. quarter think just careful this as of want be I But sequential year. through

how thoughts as And cash year, know something wanted at helpful. XXXX you know considering maybe debt point? percentage don’t buybacks? I my allocated pay-down between even question, I comment I the about could specific are flow, made in you that’s be the but flow about that potentially and cash and this to cash second that anymore ask free conversion cash this Okay, around free if

of Well, couple points.

to And opportunities to areas think I have we the given have cash being above guidance committed clear we act. that. think here XX%, of think remain I to I we conversion

continue strong here. look into XX% to above will so like inventory, have we for areas instance, delivering around that and feel you rigor about strong we If cash conversion

I think Yes. on repayment for times that then uses debt into And and of the one I sure challenging obviously, to too it’s it’s talking and and we want to we about the anything other early aggressive the remain have get of focus I this. really allocation, most way make want opportunistic think we but capital. as to be – we or don’t think that’s we want approached – to

are using the talked we of We ratio can kind do. are and to for cash, things meeting our as in the have it be generating our goals right range are other we get about we and then we debt always all opportunistic

that we see against Day. the to more Investor different can framework pay to were committed at is debt looking that I will to there the presented the evaluate be make acquisitions will here. sure options. a are we months maybe being And commitment continue going bolt-on and remain ago to especially, we call opportunities but mean, to down, We I available they X than during

So, framework that back we committed Day. Investor we presented at are the to

time. great. I appreciate the really Okay,

Thanks.

Please The from next Chris Wetherbee with Citi. ahead. question comes go

good you Freight Yes. bit could – on color provide for more of was segment. if the curious sort Hey, you thanks and I on a half outlook second the little if could Maybe morning.

volume we in see Services and of digital components freight be kind about market. of the sort to through and what that equipment how should thinking getting a we those obviously sense rebound of two revenue looking of and think relative So did in when expecting move kind well. with half? up play held recovery second how about are But those or pieces the fairly out linearly you guys to and that you

point really will three I I be things a watching. to probably to think out

in significant customers course, second the for Of the in both quarter. very was impact operation

those seen we North watching or going the really feel as have are freight unparking by I I there have spots in impacts What mean, Especially, the those but one not across under linear, think, I specific It’s agriculture side, are I and first leader trend. places quarter. some international, we some we penetrated. of America locomotives. see some see but or As There say brighter We markets the driven the versus were brighter seen think half, second think second mining. occurs internationally, then, And was un-parking geographies democrats spots. of I we the that to closely on heavily some I’d others. is still well,

a the, I is from coming pipeline So some markets. what also in reflected it these of call we I And equipment from for think of opportunities see good the dynamics deals.

I about Brazil So our in mining what also in if in we or Australia, to contract talk on deliver continue India. agriculture

a carloads, over think year, think, year country like year and that’s date, a are significant You actually up volumes Kazakhstan's I to us. also for a opportunity

Okay, the couple of that to then And that just want backlog, quarters. XX-month very been about I color. question I last just is appreciate the make understand over helpful. what sure I detailed a sort of has the progression

I it seen kind is out of outlook and curious, the probably the I XX bit, is sure what stable. am is the sort some of comments make down FX the of any just to the view into we that's month want So of some know come obviously, thing? just There have get am of pushed a is, long very term prepared on right in maybe about remarks, I understanding that sort XX-month the

So want this sort kind course we to seeing of make sure the over how are term? out more immediate play of that of

ordering I look of even all certainly, second say I favoring first those terms tech. a say I can’t when dynamic at I mean, quarter, great were of necessarily in would quarter,

in think, the to are we facts, if look quarter, and quarter, see second you have when over think looking you quarter mean, we as at really you first against it, compare exclude that business business. for will of in has quarter, I backlog I flattish I remained the

piece that opportunity of every go chasing are can after. we We

strategy competitive is profitably, more we here the business all to cost and before. a to act grow structure to so ever have than Our continue

think we yes, in of seeing ridership think, really are we the to moving the some dynamics with, trains transit I right. the despite is about some fact are especially And side the that operation. of think, I of decisions low, a number in I you of seeing think if

the more the I as of fundamentals operators while emissions. really in transit term term the more reevaluating think good this look these strong. less remain or terms in solution think So we look be the world part And add out place insurance some a the of And commitment fundamentals ratified, to business. but we productive seeing investing we those sit we for of in efficient, driving, a to at are actually are And long long freight mods.

Okay, very okay that’s helpful. I appreciate the much. color. Thanks

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

guys. Hi, Good morning.

Good morning.

morning. Good

want to to Chris’ delve focus a piece, versus I have if the I terms into bringing on America. in North fleet question the more aftermarket rails the given thought freight relates just your it aftermarket. would little bit the rotation just equipment increasing of back. guess, I particularly on and

one I it recover a a would actually little faster about Am you recover there? Any that. thoughts to one, said think wrong? it result I as wouldn’t I of but would thinking think that

Xs numbers mean that of Class feel pretty we those Class Yes. America have one, like have mean, Xs down. we second Well, I North couple there. numbers think directly. comments the you look mean And transactional impact I from heard the I close I think quarter the it did is the I some in heard brutal, reduction, to, as that mean, mean, I felt in you you the of of seen Number right? into parts. I we volume to have alluded XX%

I through. we the for we from seen true which the being have North bottoming think of That happened of two also quarter, fundamentally first volume, months just the improvement also come seen that what is America. in is the not have

there recovery fleets seen expect pace as parked. on are to on happen that all markets. un-parked. It in, especially which is And have dependent faster, our the do fleets We we international also into gets those

I seeing international of we think faster are rate a recovery on markets.

some some recovery, think faster we here mining earlier, in are these certainly I seeing in the I of actually of year-over-year some of fact, up much the geographies terms geographies. agribusiness across mentioned a carloads in serve, see of dynamics we I of some customers and on that

in recovering any for forward? of recovery terms versus markets terms bigger of in I in terms turn to you infrastructure are transit, in in know Got going impact are Got is much it. a that want And then differences those just on they you U.S. the how interest or transit, seeing to it. global, investing of global in

ridership terms bit call the a pre-COVID think it better one, little the is what compare number U.S., in in I reality will if has I Europe, against of you been well below recovery level. remains but

So, in number we of better despite think think is and I it ridership operations significant of being trains have very I are the of side down. service seen the

service at looking decline be into I we also can I element maybe a we other as think going recovery. seen faster despite is, scales, project I as lower And a think So, haven’t There impact far to pushing to regards terms in any cancellations want with project things customers share. an right anything the the or of of just of the again when might element be could equipment. delays think,

of that to think are the keep we one that’s going I elements monitoring.

along. Thanks so pass will Great. much. I it

ahead. Stanley. with Morgan Our next go comes from Yakavonis Please question Courtney

guys. question, the for Thanks great. Hi,

the in in in a talked ridership of have services down gone that the that you And could in off bottoming the kind rate little transit kind have questions but trends? kind kind side of You volumes freight aftermarket and exit you about and kind progressed of kind exit far kind seeing aftermarket, through so then XX% we of how a the quarter the of as appreciate improvement similarly, the seen clarify of and are bit I lot what the of in on that transit. trends of of you recovery

in some think of the yes, quarter. terms – up saw X of versus I months in terms first of demand So, going both I the in we sales, of but orders, exit in terms back of mean, trends, it the the

of think say are committed I I versus last I in cost to take have think, to look improvement that, actions actions in we specific, think year-to-date beyond Lilian I year. transit, margin business. in the I’d necessary really is we and points the the at XXX first half team significant a and the taken continue basis

we XXX about improvement think have at year-over-year. to talked I least points basis you being

really we on very on many unprecedented ways, call So, that track quarter I are to promise. will of despite what a much in deliver

the disruptions, here. the in So, still to is like to still heading do, right subject lot we work team but a feel of direction lot of

that feel this then Okay. And the the confident that year. targets, over synergy mentioned on just you get net end you you of by obviously, million the can $XXX

talked volume have you think those of about some synergies related. being I

you So, maybe had to on earlier talk that upside can can $XXX achieve have that than or all million volume improve anticipated? then since that seeing And maybe previously reduction will footprint are your that mentioned about is confidence if at are you the you you just comment were because faster seeing maybe you that than you you you anticipating?

number that’s for – than we we have reason Yes, synergies that provided. one of are say I’d pipeline do one is a that have the we certainly greater

any order to call they continuing are are that could in work those offset we we and the way. I’ll So, on along experience to downside critical

think in to considerations got to we So, there. accelerate to being call volume provide we have we year But are as on giving I progress and point we necessarily of not think next I at momentum news better into any as this this year. terms that. have good growth I here continue accelerating able synergies And will opportunity

you. Okay, great. Thank

The next ahead. from with Please America/Merrill Lynch. Bank go is question of Hoexter Ken

freight Pat, your good commentary lapping thoughts margin margins the maybe on Hey, are year-over-year. and what GE there, now morning. integrated fully you continue on have that with just

that it maybe you your level, upper-teens, You a the expect come shifts with what business maybe see do just the XX move should into but back just help think should asset are mix? online, at about stay mix change thoughts mix as sales us as in back happens the general we this to

builds locos look the as levels are of we the volumes we back good obviously with build get that on get on have builds, on absorption we come on, that. margins and you markets very America locomotive North on at margins the kind freight freight you in business, that along the have of low those have on impact and car the when OE historically really mean, that really our I comes you impacts the and good Sure. car at

could So freight with margins volume the see business higher certainly I It segment makes think for sense. and the improve that that you the

the make The in really area segment. other electronics will would will in of be this also investment provide good that in revenue growth our for digital aspect the the margins customers that that and,

less not asset intensity. digital So like it’s higher because has of margins

it more cost physical just as be you more therefore, with see it’s assets that just that? the as peakish come So clarify fixed coverage now back pressured to on would assets, and you and in margin, get improving

exactly. Yes,

are industry lines recover is costs are and product they I we us I deliver a it’s, but big is our get for it, improve. good of volumes also it and think think of part think that I overall lot those for those and fixed value coverage a customers the

more think that you the levels. to than back will margins historical get see I typical

follow-up, you background in of freight about itself say the up mix in my your for maybe added well? international the services of versus contract you obviously on then was terms domestic equipment And the holding in backlog well the Right. Pascal, what and as in talk did in versus can thoughts

both it out component, into an careful, think agreements, in backlog broken like the revenue other as everything. and kind I half want Obviously, the activity. we just the, we’ve of parts I its which services, each you of want about and line think don’t MSA kind about labor and the revenue Look, little talk about a of is of mix of under the element be comes in the to general product service to

sales and there. you there in part in mods have You have

but the your period, year that of be revenue. intake thumb we pretty have talking is every mix And with more, rule absolute consistent about have product are that, line look the how mix. that orders not of hold when So you kind been that I look see those with revenue. or in, over are order you come a terms that think those that with of to of quarter that are at It longer in basically a going to we

maybe your And to about… question

back we I seen from North see is have America the international, that to America, impact North these mean, big parking. what we

active represent fleet look you today. if at the is that locomotives really Now, the running majority of fleet the Wabtec today,

number. this locomotives the an is effect is hard. And with are So running high are that that parking running really mitigating

Brazil strong a we of mods really terms strong strong, the and team it. in has have scheduled So supply Egypt, chain one with that of to in So of we Rafael our services megawatt which been our stick of more miles that able is per strong. mean, discussed locomotive accelerating keep seen together terms putting thing which factories international big to reliability focus and on to have as many the strong I good scheduled is quarter markets increase, schedules, is great a of that doing is to precision is our hour implementation maintenance, for well. is railroading international remained Kazakhstan, with terms open, have been our in delivery And have work Australia

building So performance, these would blocks that are three really explain can this I that the say.

at I last when think percent North our fleets if an I terms in the increase compared the of few markets. continued of our whether we if see look you to have at competitors, years running America look to global or

an think I ongoing that’s trend.

and the Appreciate time much. so thoughts. you Thank

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

morning. you. Thank Good

Day, them may the of appear guys profile couple would showing locomotives. TX locomotives, base Analyst warranty for installed off it the next distribution chart the provided some age on of at And back in you of the So, the a rolling that years. be based

would sense? First of all, makes be so, a those revenue that is – that if for If aftermarket positive locomotives? on that

true. that’s yes, Yes,

right, assets Now keep talking is mean, a presented. in this mind, fleet big XX,XXX as are we about I we

we running is keep a this to is pretty years, going that number which for of think favorable age a The I young distribution. average fleet only fleet have age XX years. is a of

have are some running fleets older are have that You you the less coming internationally. of that some especially off warranty, fleets of

you coming service together. generating start revenue. number But locomotives so have and warranty locomotives a these true, off we effects coming And of some have

number, the And published backlog that you then does it doesn’t service it, revenue, billion? that have into make $XX at

that the for Not depends on units. we contractual coverage these necessary, it have

middle, their own you also on of some the and can – really something of go that service not it’s revenue different. it back of and over mean, our you depending bit maintenance of on somewhere fleet mixer that’s that’s just can be the product with you why agreement a in I I the And the in line. be – little contract it’s broad-brush customer parts the out doing be There you paint or customers the MSAs there place. might the as But are kind have the could kind their Yes, a to own for always decision. have everybody,

your backlog on So to billion is more be might seeing what that bridge. $XXX which you make those orders out the is there on up Gulf, transactional, is the get the total point so the million, you $X.X about which of not

area specific question international what in that answer, Got if wondering, speaking we just of gauge was somewhat of to it. That percentage sense. makes gray hard I be it’s and can that may And customers your backlog that companies, entities, that but private federal level would versus be maybe versus I for are that probably helpful? don’t any color know breakout, have state backed government-backed government entities you

back some to look Exactly. into that We least with described, and but like you try it. certainly color we can don’t really around breakdown have at to that mean get I you

lot Yes, of or freight in in and just I financing mean, our just something that bank the with of big place. that other our funding when transit supported I as consider. and they like years to you side, just are backed was I contract And the the guarantees ago. backlog, get especially would a rule thumb – that’s mean for in contracts add – funding. because on on And you the have the often OE are government has with been side, years especially typically place where because those awarded markets, a

kind to thing just consider. a that’s of So,

the the because So, often to they sure the equipment the if maintain top ultimately make they they that’s on to the one life support of of continued locomotives our and training want on the maybe locations services see what throughout a very and be is the sold the And side on in operators. those that, side often service element especially running will as is running, we contract customers of we locomotives. there an fleets remote

we of after look, a with the locomotive. – over fleet really proper that brand is internationally, locomotives life both To mean, up can over the try end the entire of the pretty years entire have we we only customers stranded to close, of I service Yes. without our a the new few life often we stay

have more all XXX world. the than around service We locations

keeping local being really bring with is engineering presence is locally parts whether us important or adding internationally. diagnostics having remote able to support for and So, physically

parts we very assets. sure customers and that in of So the coming those we making places, lot point inventory and our associated the ultimately to of in guarantee availability with are interconnected with a reliability manage we the

of we changes. those on So very any feel much upfront

Very Great. very helpful. Thank you much.

Our next Sachs. with ahead. question Goldman comes from go Jerry Revich Please

wondering, wondering services could about talk the really Good Rafael obviously, strong quarter results. I���m am how you morning, if in I your performed everyone. MSA is

Can and, like help. Can about the MSA see you you starting in to just spot, wondering, are I points? adoption if Sounds you mods But can you? the I talk around believe will? get hitting you expand particular that and performance you am those revenue PSR Higher post sweet opportunities

Okay.

we to here of quarter. about the they not think much a think are as early is think as move we I once start mentioned these that I’ll course, equip so were. And as this great to can to there. I in most as these are to optimizer. mean distributed though help So they technologies much point are technologies the items. have mean very to mean customers a for to from trends a the side, again, were you from not I we on units hear seeing I combative want I I But from there. connected overhaul ultimately think enable to lot you paybacks. story we continuing do and efficiency to have one things things seeing reliable a pattern does I well I I And grow the customers ultimately, July How on right of with and installed saw we got LOCOTROL, out mean, place, drive that that very do power here are of those you but the again, thing got on how make the we opportunity you run just seeing heard efficient get of the them, some to These direction. they I locomotives, and the efficiency, saw presents trains? that with of will sure railroads view. parts most also trends these we our in the more the are think good also Pascal opportunities one run and second align fact, to we that all with with and us like to sure a the do pressure not in continue decline of that think, LXA, running I make to And working highlight we as those I start June lot And longer and days the modernize fuel proven a great I of to Class area to are PSR. with I with just Trip I services But want locomotives see to MSA and take think Xs, the that parking some

follow-up Pat, Okay. your a And remarks. mentioned I think prepared on in mods, you then,

over can and would know, we the the year maintain of conditions saw backlog? what’s mods, outperformance year the you to hit the would able to in performance improving on equity quarter, digit for the have hopefully had type XX we Are am that you you mods essentially versus see of mods up, Freight you for level see double to comment be volumes to you backlog adding XX% I to growth, the had like that in shipments wondering you You to folks trade level quarter XX% as services if entering drive in

continue worked year on the and, and it a a to to to to as really sometimes mods are year so is quarters have be we us execute orders there, trend execute the a are variability amount schedule, numbers. will or come have customers with say linear been a is with XXXX. they going that Yes, it quarter it’s, in to at whatever, of over date, bigger there it look according And orders of in kind to and quarter it year, you or mods received to a at are, picture, this on of have backlog the essentially, number establishing kind would have look so or those certain bigger we of

so in leverage of that quarter intake especially in I there more strategy. you there interest mods second compared for last going just want and, backlog their to to think and Pascal it lot fleet fleet So if to is When approach I in customers strategy to, forward is year. in to staggered use their anything happens mod talk mean, about order add the to a that their our and to that? PSR is you this it’s, continue

due America think North you parking. quarter, at had I one, was to the for number if story, difficult As in mean, situation right? mod we it I explained, we XXX% number No, look the service not a a

of kept saw portion running big And performance. we mod then fleet internationally. terms in strong a However, deliveries. our We had a quarter strong of some

in the Now lot we and believe big trains, have longer we forward analyzed outcomes trains, economic I looking line to fleet big opportunity which for of said with as their around a strategy, fully Rafael customers. railroads, we more the the in opportunity mean, better our is for mods, is deliver performance, to this a and have that detail reliable

by eligibility, addition of all solutions, investment suite than together it XX%, railroad. efficiency that And improvement you digital fuel we are XX% is believe the into So, we of very LXA. the attractive more in this, when our improvement, XX% talking LOCOTROL, increase for reliability proposition about power all this Trip a turning Optimizer, combine

count a is capital in that a mean allocation believe the product decide. same create Wabtec value the end it’s they for and and them question big for show value our to railroads I we of at will Now and the time. opportunity to for of the there them we

volumes locomotive big can so new swings and you and will what mods call between quarter-over-quarter. see I’ll You

doing they Just productivity plants. of same our keep new course, profile tend we doing mean to units those the driving the the sure we facilities, and make mods at are good mind, are or to in

could So, significant there changes be quarter-over-quarter on some numbers.

a think There you there. seasonality you then scheduled, see important have – have mods, you effect is have ups seasonality service, unscheduled you I the profile. the and downs and maintenance, is and some have the you you impact seasonality have overall will

Okay. the and Appreciate the on Thanks, everyone. discussion congratulations strong quarter.

Thank you.

be Capital KeyBanc question go Barger from next will Our Steve with Please Markets. ahead.

Good morning. thanks. Hey,

Just a of quick ones. couple

looking was Digital more for you business of that have of revenue to the X%, For been in customers increase convert able XQ? existing or from customers recurring efficiency new

that? you Can repeat

You Steve, broke little say a can again? bit. up you it

digital sorry. business Yes, new The customers? of were increase converting you recurring or customers more X%

I think it’s I – associated customers. of we call have will a lot with existing

products the to have our base opportunity We under-penetrated. here still on that are grow some installed

I a as LXA product. here, mentioned think I

as installed of I at look product, have that’s this So especially a And I the potential an mean, when longer base product. trains. at it’s small still we key railroads relatively look making

here also customers. fuel and auto customers will those more of run there HPT think elements products longer enable Smart existing they is as to some like significant get with that so existing trains, I savings products

market. that to we really I the and think growth is expand have the share international one opportunities into of big

I Brazil, we geographies. some think we places but like lot a have be can in got still modern some like into Kazakhstan, places earlier adopters in doing

international? digital America my The in was question. North more business penetrated that next and less is So much

Exactly.

margin by improvement of expect mean you year? clarification, Does one, quick Slide last the drive quarter that transit to just X what or year. sequential put relative you up And that rest last says the is improvement in one through to

but at last of what points to well, first half drive at actions that than will very XXX momentum about we more was actions we entitlement. call that improvement less the making year have do year, earlier I event. improvement will are get we will basis think, to, think we support the sure our continue. commentary going margin was least And I track the so said And year-over-year. certainly you are on I look It’s the continue my to drive we much and to again, that. to year-over-year,

there. So I momentum want to see continued

Thank you. Understood.

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

the time, for thanks ones first Pat. guys. couple Hey, A for you quick

off Thank starts than seasonality just sort improvement growth? apply just the a just as does margins showed earnings thoughts recovering? faster revenue is this the in that bottom you. So typically than Maybe look seasonality normal bigger growth mixer guidance, there quarter, or revenue the some picture of on quarter at and then maybe than lower second third of third when year I sort normal

Yes.

that an seasonality I fourth our the from the kind the of our consider and we we that’s, all to quarter. some when in So the that of we think of the mentioned that little timing that a through would my that kind typical what services edging that in is have out what of point little business, going customers gone the I in can easy find strength we to to then that’s that earlier prior we a we freight one a And see not would tell challenging see third you some have into year of think impact. remarks March, of be bit, year quarter. the to of lot bit to And

look also was in months you some kind a also the at slowdowns think negative in and in QX seasonality that always a QX. of you in of had I the impact shutdowns summer plant positive

that bit We are seeing being little a moderated.

So next kind point your about growth year. to the revenue the for growth. QX. expectation and normal I of I earnings and getting outpacing us think in back that about,

have think SG&A of year. the bit to that’s and more return a timing, I higher certainly mix half a revenues. the engineering sales and, little the margins will some we being, the little And related with we, kind consistent costs bit that will our in normal impact think I some of our to of second on an see

Okay, thank you.

last one, of is from to of if beginning million looks ops. like down the the million were $XXX back go Just income It year, I guidance around $XXX talking cash from you the January. about net

it than is flow cash sort should in we reasons million operations be why or $XXX can decline similar assume there of better that? a from So

a, to volumes our but, working and flow with lower flow, of confidence the with do income the cash net consider capital ability impact you into better, to reduce the Well, on got the areas that cash the of some initiatives work that capital think in obviously I starts savings of the cash, opportunities turn in In of cash, And, to with really the that volumes, our we from cost and to the source transaction. we balance put GE continue supply tools we lower a exiting chain place. the replaced on sheet a tools obviously, execute the tools, working

year. to lead So rest all cash our generation a of those for things the confidence I the lot think in of flow

the Appreciate guys. you, time. Thank great. Okay,

you. Thank

and session. to concludes any remarks. answer turn conference for Ladies over I back to closing Kubacki question our and Kristine this gentlemen, the like would

to the will Rafael quick you few for Thank over everyone I comments. for a participation. turn your call

I Thank one the just serving quarters work impact our dedication hard their customers and company. want and just for absolutely them for to both our Wabtec of in amazing really running most us with the to Well. keep for disruptive and been and Hey, response, you. customers an thank ever operations, employees have

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

disconnect. You may now