Westinghouse Air Brake Technologies (WAB) 23 Oct 242024 Q3 Earnings call transcript

Good day, and welcome to the Wabtec Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I now would like to turn the conference over to Kyra Yates, Vice President, Investor Relations. Please go ahead.

Thank you, operator. welcome Third and Call. XXXX everyone, morning, to Quarter Wabtec's Earnings Good Mastelers. us CEO, Vice and John and are President Santana; Finance, With President Olin; Rafael today CFO, John of Senior release Today's and our slide earlier can Relations the and accessed today with tab. presentation, our website financial were posted along disclosures to on Investor be earnings

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

everyone. good and morning, Kyra, Thanks,

business, our by Let's and margin financials. the Slide earnings move will cover value John solid long-term start quarter, to evidenced sales I perspectives our progress my quarter X. against on framework, delivered another the with and will flow. growth, and creation We strong then cash increased on update expansion, an

were the quarter versus Revenue and by the nearly ago the from driven nearly increased growth by cash segments. was billion, the prior both X.X% and XX% which was margin for Sales $XXX and EPS was expansion. quarter year. Transit year Adjusted up from was sales Total flow driven Freight up $X.X operations million.

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

quarter $XX signifying Overall, behind third billion, on X.X%, the across $X.X continued was delivered multiyear business. backlog up team focus intense a the total billion. and XX-month was execution. momentum And The an the Wabtec backlog solid visibility

across growth the and underlying ahead, positioned Wabtec business Looking the ahead. for believe continued encouraged strength and is by momentum profitable I'm

X. Slide to focus our Shifting

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

markets encouraged of underlying of opportunities across international by While remain geographies. key of we the business, strength across business momentum our the the continued robust and our our are mixed, Freight metrics pipeline

carload third be growth. Wabtec's up was despite when year's in locomotive The fleet flat continued the this largely quarter. and active quarter last carloads American to North industries to compared

American North year's be industry the which last raised XXXX the down cars, the from of at build. cars. to XX,XXX been has XX,XXX cars by was to now build railcar industry quarter, delivered, Last sources for Looking outlook XX,XXX

seeing we're the which robust and In This international supporting significant years. investments been upgrade prices upgrade and Internationally, last has is continue fleet. are X to over infrastructure, and borders to strongest expand to refresh locomotive it the mining, activity a support aging the fleet an commodity pipeline. truck

indicators continue factor customer initiatives be to growth. push with Transit Ridership moving for renewals. There increasing key on regulation with sustainable levels strong a in underlying transportation expansion see the Finally, the solutions. to continues are to and also along we fleet and decarbonization and geographies,

locomotive in order worked orders few discuss strategic in KTZ, MOU a Slide Company for we multiyear associated announced time, billion. million. third let's X have that for quarter, over MOU, to a new to Next, highlights. turn with with Kazakhstan, that signing $X the Railway Since the to $XXX we the Last year, business KTZ with of finalize a National

and China connects the route international to Caspian Europe. effectively support demand provide operational the reliability Trans growing will locomotives These the efficiency, that savings on to

million we passenger with a XX to information Moving railroad $XXX signed We with Munich parts Transit, for secured to Mobility the trains. North systems long-term over contract supply million. Siemens a America. bond agreement In for S Class $XX X for

agreement $XX we million. locomotive our This And contract expands Railways into earlier part southern service the Indian in for the country. quarter, the service another capabilities expanded Wabtec's of with

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

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

Thanks, and hello, Rafael, everyone.

X, Slide will results review I detail. third our to more Turning in quarter

as margins. Our expected out planned revenue and third better our with with than largely we results quarter operating played

last As growth half, the the the a in pace call, expected half in we to margin the growth discussed be first half to with than in experienced we than be second more the and first quarter second both at we much higher tempered in revenue half.

we noted growth. also be QX, the driven fourth this to half that by in still come This during mix. We growth we what down revenue expect group reverse the saw regarding business is last call to in second QX the within QX case. we quarter's than expected quarter's the year, greater of the Sequentially, the of from margins third

versus margin we comes growth, margin, result QX, a which equipment down timing largely production of was lower our business, locomotives, was overhauls. the services at prior saw of while which new modernizations year. In between higher robust at comes and This the a engine a

levels. headwind, a QX, will mix temper than operating In higher modestly be significant expect ago which we margins adjusted year to QX

increased double-digit Group a the of deliveries while sales to sales be QX. production on basically expect to digit our in in locomotive timing expected double our Equipment basis, down growth due We are reverse year-over-year services

reflects Sales the both year. versus Freight segments. Transit driven third growth prior X.X% were for and quarter Sales the in the the was by $X.XX a billion, which quarter increase

driven increase productivity. points $XXX improvement percentage was improved XX.X%, This QX operating operating focus by unrelenting gross and was sales, year. GAAP X.X margin margin the income Adjusted was The versus X.X For an in driven of higher margin gross points. the improved prior was by million. and up continuous on quarter, increase percentage

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

for X.X primarily our further integrate charges initiative During to optimization of were portfolio our and and operations. million the Wabtec's streamline which restructuring, integration had we related to pretax quarter, net $XX

million by revenue eliminate portfolio of manufacturing $XX may X.X low expected drive margin, roughly of rate to will is million our reducing recall, Integration nonstrategic you to $XX $XXX As And savings complexity. optimization initiative while million run XXXX.

delivered another year. solid In Wabtec diluted was quarter, share Overall, versus the of strength quarter, adjusted underlying earnings XX.X% the demonstrating up the per the business. $X, prior

Slide to Turning X.

detail. more in lines product our review Let's

were Third X.X%. quarter up consolidated sales

driven down year's last digital were partially driven in of Equipment third by our the decline services, quarter. Transit businesses, locomotive This results offset and from quarter sales by our XX.X% by and growth was timing new business. planned Equipment intelligence Our deliveries. were

we X% sales reverse to XXXX freight which mentioned sales double car freight be digit. Equipment industry up last was versus this expected up American is in build growth. build. to to product expect Freight be Component with last QX, forecasting were As international by X.X% sales industrial to earlier, and due higher The lower North down offset year. the car from car year

next-generation sales last by products. driven were products sales from This growth of was digital mining onboard and up PTC, year. Intelligence XX.X% Digital our in international

growth Our year-over-year Sales services grew by driven XX.X%. higher sales primarily overhauls. was modernizations and

reverse we in and mentioned our service of earlier, the resulting deliveries to and As expect revenue production our be overhaul year-over-year double and QX timing down digits. mods in to

In our Transit up segment, X.X%. sales were

OE a drivers grew we constant sales for currency revenue in in quarter, The our the accelerate such investments to and grew basis, the decarbonization as continues sustainable saw XX.X%. the momentum as X.X%. segment positive urbanization secular need Transit On During remain infrastructure.

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

higher between sales, the business margin favorable gross groups. In addition benefited to from mix

by mods deliveries. Freight expected in better quarter, business and the and partially to in offset planned services segment locomotive in a the growth than timing due overhauls behind production our was decline within of Mix the

Foreign as operating currency gross slight margin as exchange well profit in headwind quarter. a was to revenue the and

quarter lapping we as portfolio quarter, the year's last the optimization well that a XXXX. benefits of productivity strike increased During X.X integration also efforts from portion ran as the and benefited third and of of our Erie

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

Now turning XX. to Slide

points Adjusted improved X.X as revenues. GAAP margin operating the year, percentage largely and quarter, which XX.X%, SG&A engineering prior was were versus year. For last up points third to margin a but of percentage GAAP was flat adjusted and X.X up versus expenses operating percentage XX.X%.

$XX lower Engineering than QX year. slightly last million, expense was

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

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

already margin I for the million versus income X.X $XXX points percentage As up Freight quarter. GAAP discussed, operating up during were sales XX.X%, X.X% year. was segment of last an operating segment

to was $XXX segment year. included in of prior GAAP costs million income portfolio Freight the XX.X%, restructuring points the the up margin year. versus $XX prior and X.X from optimization. the related XX.X% integration was Freight primarily up operating million, percentage income for operating operating X.X segment Adjusted Adjusted

of strike margin same increase engineering we as and last execution, a by was time, gross slightly mix, year's inefficiencies caused expense At revenue. integration percentage and X.X driven in operational were manufacturing strong by as lower Erie. behind favorable improved The savings lap the SG&A the business

XX-month multiyear up the billion, year period The was backlog Finally, same from a year. segment was $X.XX X.X% billion, up backlog $XX.XX ago. from prior X.X%

segment XX. X.X% Transit foreign up to Turning for sales When million. sales up currency, were Slide X.X%. Transit adjusting at were $XXX

Restructuring income a million. points. XX.X%, as were GAAP was QX. operating percent percentage was operating costs adjusted million operating segment revenue related $XX income was X.X Adjusted $X to $XX in up income integration million, of X.X

integration behind the partially lower During offset as expenses and SG&A revenue. was Margins unfavorable also down gross a mix, X.X modestly engineering margin from percent by benefited of adjusted quarter, being savings.

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

Slide XX. our Now financial let's to on turn position

operating was cash cash in quarter another Third for coming at with $XXX the quarter flow million. highlight

from During borrowings. the of benefited flow cash higher higher earnings quarter, $XX securitization million and

for expect XX% We continue conversion than the cash greater year. to full

quarter a billion; first, debt at at and sheet be which our ended quarter to by: as ratio, balance lower year and was evidenced our continue financial which same very quarter $X.X the third the which Our ago at net debt liquidity X.Xx the versus X.Xx, position, position leverage. leverage ended strong

We returns for shareholders. capital maximize to allocate our continue to

talk $XXX turn call During our financial I'd guidance. shares in million that, Rafael our like paid With million the over to to we XXXX dividends. back quarter, repurchased $XX about to and of the

John. Thanks,

XX to Now let's XXXX full discuss to Slide turn guidance. year our

was guidance. of Consequently, up our to we third $X.XX be our As heard EPS XX.X%. today, ahead midpoint, our the to $X.XX, expectations. at We expect now EPS which previous are the a increasing you adjusted delivered of solid range in team quarter, adjusted

revenue and Our remain cash guidance unchanged. conversion flow

Looking into beyond. confident drive well profitable is ahead, XXXX and to Wabtec growth I'm positioned that

up wrap XX. Slide let's Now on

to with returns. technologies on innovative our planning continue for while growth double-digit to consistent we in value world-class with EPS cost mid-single-digit part installed drive our horizon, and you As on through solid and resilient customers our base, framework heard on improvement our focus team, previous our guidance, team in continues thanks our underlying our shareholders' thereby technologies to growth focus continuous organic maximizing to today, driving and continued our large products deliver demand creation management, rigorous our expect

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

Thank you, Rafael.

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

question Instructions] Morgan [Operator Angel today's . with Castillo Stanley. first comes And from

wins at that wanted on But least the these directionally, your turning know of you're maybe preliminary tell does What necessarily based continuing backlog terms strong on as you thoughts. backlog? I to Congrats terms kind to grow maybe provide orders. contract price, provide quarter. any start just that you in sense could of to margins, in see I MOUs curious, guidance for 'XX. volume don't you getting on are your preliminary you and of

one early across certainly growing. on single what are I'll as the of strong. are double But are really up into up And digit. is guidance. board finish the Well, guidance consistent given previous finishing orders 'XX with we've providing Profitability the fundamentals with well. business Year-to-date first, with businesses our it's We're for every 'XX. to be

organic while mid-single-digit through growth double-digit EPS We continue drive to growth our horizon. to delivering planning expect

Integration million little $XX maybe versus And switching what's the X.X. to million of far wanted run get over color And maybe just shaping rate on to target? $XX Understood. out. bit more just to kind thus I maybe a that's how that

Great.

to and as million. were we of know, As a savings of looking $XX.X to out you came get were Integration we million, midpoint X.X, last $XX year,

we Angel, And actually what exceeding $XX So a a track and driven see, are tell as of it's getting a and we bit bit. over-delivery 'XX our little anticipated, our earlier. bit you, ramp 'XX. in kind fourth is than I'll we're a we coming on the quarter. really to but that that third little over expectations quarter, seeing And quarter. we X.X in Not inflection is raising the that on of Part are only you into more million and we're And compound the Integration that guidance. the of by that leaves expect third

today. $XXX at on of the our range. of feel quarter spending. where about of with the low us. We the Most we million really spending good we're So end That's to behind finished program is date

a the on on have spending We bit And go, to little savings expense will more well a little side. side. but tracking the bit ahead on

next Boroditsky Jefferies. Saree the from comes And with question

the on of strong very quarter. than Congratulations obviously, margins, little XX%, kind a bit talking better freight your expectations. Maybe just again about more at

So did at the walk this? through upside bit what little and sustainability maybe the at level this And a surprise? Freight much then XXXX? just you sets that on drove to mix for margins contribute How how up maybe

being Saree, mix look it it X.X we areas, X cost. and the was our percentage was this higher driven the is points, in than When one expectations, is other Saree. up on is John. on margins up at and Number

services in was in higher the production were expecting the of sales favorability our produced expense in there quarter OE. was pretty be we the more knew mining mix little that overhauls, First, some mix bit of business, we of as we at aftermarket OE in going the margin the towards our lean which more group additional third in didn't on. to a well on planned come while What because side. the the margin our And -- we a in as locals equipment there coming than on was favorable at at mix, good a we

on quarter. expect transcend we the mix to the third that So And that's side. into don't the quarter fourth from

the One well. is X is to not for Every we very the And on and and strong during improvement and there's we're cost elements the The that, They're side, additional supply productivity. chain continuous day, that. on certainly running to second was piece system productivity. the quarter, productivity got it getting of a extremely manufacturing rewarded the folks.

coming the just quarter. and combined benefited better the mix The And spoke the benefit faster will is the and integration us cost I'm combined in and fourth in expected. items at what margin are quarter, those of to Angel of EPS about what increase the quarter overhauls. second fourth we're is is Both quarter midpoint third reverse look of we When sorry, is of the I than to the those the now the on will digit. down area cost -- at services expect side got to we X.X cost saw we the the be $X.XX. mods, production third fourth in the digits will that double between in the be And going double in what see quarter with in up equipment and and that, a a the locals X higher

we to nothing this pressure. So that amount new going mix talked are is have about. And significant of we've a

demand. be expect would going slightly the half to fourth with factories. -- as is amount a more fair but mix, And in this quarter. a the by we do unfavorable produce load margins overall Again, could sequentially this second underlying down that, about to how what's that we it but nothing The drive and level the basis, the so into really we as would be with we higher It's year-over-year our on year to fourth has move and quarter. all

P&L versus color. in the I just Transit are then And into margins there. the on you translates on coming that appreciate just margin some update grew the the more. higher-margin backlog despite backlog one and to the in in that transplant the you margins focusing products quarter Can are projects expansion? transit that us The current how

with progress business. the take I'll overall continue I'll in pleased the and one, to be we this start with

further drive Our They're and significant on really the margins. continuing teams simplification are to improving sustaining footprint.

I projects. to will mix by variation deliver and see to continue I driven of be growth. transit to But quarter-to-quarter, profit timing on think going expect some you're

on You projects. asked about selectivity

look at up. I is look best that's for of the think way us the profitability the to at it when and we backlog,

So Saree, continue to to they're that not, improve margins. business on is and expand And to track mid-teens on there. from continue

they plan ahead. about have So strong we the feel

quarter. Congrats on the

of from comes question next Bank the Hoexter America. And with Ken

on And the recently. international lot break out Can so general understand the locomotives much? and splits. when the think talk to you you is why I contract, that should some you American a just Is international clarify, mentioned announcements. backlog that North gross the just margins? -- maybe job then back about margins kind don't about the in about I'll intra-quarter how we but know Can service contract double out building on let digit, of by of revenue down seeing it announcements you go maybe talk great John, balancing to And mods production? down we're that that versus

international is often of. that higher question. areas America, international others and we're the with international we're is country And whether working versus to the some question some were we is get North have it the specific Starting that that lower, than North first investing are Yes. we margins, Ken, some that are America, contracts really not. the off that in,

simple it's is it's come is to that margin. as So contracts saying not this have. regards when get we It really to that with that going as at we the various international revenue,

to into growth our I a more across well as value everything to pleased couldn't perspective. that how having we're our that a get And we international with suffice be continue deliver more customers margin backlog go we the to our think do perspective and is from view business as as say forward. from revenue our built that we

question, quarter. in Ken, on is fourth second revenue the service the The

there, and line. the as the you to Let's fourth and production quarter the facility on third down the -- same been We we mods down locals take know, and you've together. do

we equipment and we're new logos, we favorable reverse So the to there's into consistently more different basis the and as fall or that a less it. new see to together run in going we variation like favorable as just to run But mix nothing locos have loaded the falls quarter There's it -- these falls third that the And had, as in fulfilling into to to more product. simply for shift of much happened We quarter. we've But we're in given demand can a going the group quality still groups, from different aspect how order we're those, the into that, customer because group, typically some fourth quarter but that year-over-year orders how that more service level that's Mods going productivity products, and to there's demand. on third fourth we the less how the than we the produced plan production. just the mods for the nothing with in and quarter. the with just

-- Okay. left And optimization? the on what's the portfolio the just to shutdown understand

So we We to that talked a it's good we -- February more in do execute lower year, we'll A this about tracking got well. the million. in all and this revenues mostly the but lower that and quarter fourth going in as well, into of $XXX executed. to both a little result of very is were bit 'XX, revenues, 'XX see it, all some portion that's

question next Inc. Imbro Stephens with comes Daniel the And from

you think density should different, cost add add last as understanding countries these this dig It markets? scale international all something you and accelerating? answer as to is say how wins and that question international feel Is how it in does becoming guys maturation I'm accelerating specifically. it Or markets you as you about you more mentioned into And the about incremental but growing that keep want more backlog margins your the we think those differently? doing Maybe is countries, more that should to there? like are then why Is fair it a of lever we And are just is growth? to this should are these frequent. improve curious more contract your

just we of the growth the really when So think -- we dynamics business, internationally continues. about

international So We've we're I got projects of in think markets. bullish Africa. taking elements some on key place

going from you're to I see there. some think wins us continue to

discussions and on continuing 'XX, on some locomotive here Kazakhstan South I Australia. in continues the here news Caspian projects, America routes and and of the 'XX. a into the demand there good to positive. go some mean well I So into 'XX. of that's expand as We're discussing And well. these We're deliveries to speak

experience availability think, a comes having down our are I with to reliability. both productivity, that that's, So and positive fleets and it the customers in driving regard,

some often us there's expand. is Optimizer, that. on emphasis I technology, well what to continuing element we mentioned So We we'll significant the about actually the Kazakhstan. here, here don't have modernization, an products area done in but talk about that talk the and certainly as continue investments accelerate give for that's digital PTC going the see we an some continue more We this We often think how being sometimes brought the of next drive of a innovation see to really into on continue we opportunity we've that expanding early of just our to Trip of talked on you're to we're order opportunity locomotive not we this we'll same mix. with about kinetics are to some year,

and see I there. positive -- a growth So it we think continue to see profitable we'll as

those of mentioned. I Some markets

were more markets mature. Our

a that really So best class got are products to we've in of lot compete.

And maybe balance a on follow-up, just as side. sheet Helpful. then the

year of M&A more markets curious some has looking low that sellers that that maybe M&A the at to of bottom this and in like just the you're targets market, spend side. in has freight as evolve the you're seeing brought conversion But what we cash bounce you'd of any on market? in accelerated buybacks 'XX. the driven to year-to-date And how So terms the cash

If we share for business. be way are changed, on just We'll won't shy as and strongest when think about there. M&A about much doing the we've on M&A, focused the certainly that. fast allocation opportunistic When look at well. We're best at on they're We we'll pipeline by to going the we very right? us. And here. organic be to the we're is continue We're driving inorganic, I to sure this focus hasn't continue profitable not, had The on think look question I returns. to making returns it. be a that this strategy, is growth our of capital answer

within Ken, function we is then, really quarter, repurchased a the the And that you flow of cash $XXX that mentioned. million

have We up over $X.X year-to-date and cash year ago. billion XXX% versus of a had that's

absence share we we the form which be in we and pleased So of to do M&A, prefer, repurchases, that. in the of couldn't the shareholders returned more would value to our

And question Majors the next comes of from Susquehanna. Bascome

X one of Class are point of next Yesterday, cycle that's to customers your the bulk in American or term were the in growth in international stretching to that wonder the we thoughts on years? of reducing where plateau term. at could their suggested the North some interested drive locomotive going locomotive any market? I on the specifically near replacement that. kind if you out short starting broadly, But modification Just CapEx is X of either and comment over maybe not more the

I to demand. America, at mods. we but to looking new we specifics North continue both for continue for customers locomotives to see see on mean, That's be mixed. here. you've and got

for continuing overall It's customers to It's It's it's you our investing. customers growth. it's for necessarily improved invest car think if for of revenue the I not loan for costs, are for most efficiency. think not reliability, growth. time about

at and excited continue here will comments think they're opportunity you've to we're made at it that's to the have improve end we the investing sure at customer about. end really of So look that innovate to I at levels return a And some the where That's their specifics help that to got of product how is railroad. the for service back the OR look getting coming I improve day, the in here earlier more make the we but and efficient day,

from Jerry question Sachs. Revich Goldman And the next with from

a just we if wondering for moment. your receivables I'm about talk

So your digit year-over-year. interesting, including total receivables, securitizations are mid-single down really

opportunity on significant what's to more line just that an about talk nearly to top And in DSOs. up you Your a improvement do you Can LTM improvement? lower? continue have XX%, how DSOs . driven really drive folks is basis that's much

don't on Overall, about more up you think up basis, you receivables nearly picking are revenue receivables they year-to-date matching the a that the rate on Actually, But you're some adjust of we've I X.X%. point, the of And the up see but all to securitization, receivables if X.X%. basis are a got year-to-date up there, your growth of the the company. for would X.X%.

John, Okay. $X.X more billion you're that I including XQ? I third quarter because securitization, because in so XQ year you maybe over you saying quarter thought than a you're securitize . receivables, were at ago, obviously, seasonality up the number guess, versus in there's

Yes.

and would for the the we ended funds the X. that, securitized. to we the quarter we for cost million lower And So securitization, a of the at with but it's quarter Jerry, reason at $XX $XX We do is quarter us, ended at we prefer borrow million. that, started

million. I'm to -- headwind in a that a $XXX the was that was sorry, So benefit our flow cash of the quarter

been quite or to They're quarter third the provide number a ex benefit last the the a have million were did within of securitization down would are from that receivables flow XXX%. it year-over-year end But on borrowings some conversion where cash down the $XXX quarter, bit. the securitization the Now at the year. and cash we basis,

Yes. Okay.

Let's well think the separately, to as improvement. continue spoken XX How on to year about at targets we a about next about achieved you the think a at your to And follow at looking it early thinking here. couple clip a performance that Day year-over-year the drive had long-term plans we the for margin opportunity steady margin years since XX XX wondering same terms you Analyst as these points up ahead for we've because of you are of Rafael, basis. And expansion the per I levels in margin organization. I'm months? back already basis I'm off-line of folks off of look plan are XX,

we still. here think significant have I momentum

think actions to the to continue I that, business. And to continue across teams we the have the business. expansion. driving opportunity here Our simplify continuous improvement They're margin with drive

So portfolio John just margin as at think we'll productivity lean benefit rates in our integration continue with from overall business, optimization. mentioned to efforts all. to I not

continue and to go drive are here committed So I growth momentum into we as significant profitable opportunities 'XX think to to here drive beyond. we and we have

Research. question Wertheimer next from comes the And Melius with Robert

if So you questions kind to Kazakhstan number on or the whether came backlog quarter. I order rail just quarter ability that had backlog reported know order and in big American in say is the in this It of pipeline. you In And clarify, to backlog, North the at backlog don't the slide into much. the for have willingness the July. on you all the

XX-month remarks, you 'XX your a 'XX activity having stand prepared you good I after and as it? the how on mean, as I bunch. but characterize backlog. delivery ever? preorders in repeat pipeline setups it's to that and you would Or then where of had your make still kind not is for think thoughts And Rafael,

Let with the backlog me start question.

So backlog the received first that a which million is against we've order in is MOU for third $XXX-plus million, the $XXX the quarter.

we backlog to that that is inclusive of So the numbers $XXX you million. read all

rest will those We orders that on to the over continue of come work will time.

goes momentum, a up markets are it the of million to strong. With every single We the the really I translates I the digits. again, are our all that's for some one about -- Orders not mean, here, feel 'XX we mentioned growth, The business, into businesses with, -- double 'XX regards of especially there fundamentals into 'XX to, and strong growing. that so I international us. are guess, is of positive finishing pipeline just

is really said, I return. me And in pipeline there, America, strong. customers So for the innovation. momentum the positive as are is makes what about demand is even feel that but investing the North And

the into we of customers sure As availability ability of next that and process, and making operating are fleets existing improving that level to and more start talk through that accelerating detail and the year ratios fleet. drive efficiency you productivity, in improving their is of the the will to reliability

So all to continue horizon. growth as mid-single-digit through in said, all, we I growth to delivering double-digit organic EPS while planning the expect drive

Scott with And the next question comes Wolfe from Research. Group

help think think hurt has and headwind? going hard a But hurts, there's it helping aggregate it's next tailwind be answer. and be may hey, -- QX. get in so is quarters in totally to we not in that early, some quarterly either a mix, I reason like quarters or mix a swing do is and to Or I in year? it's -- So but know XXXX there it QX it's you volatility about net-net, again, there's When some it big to more, think

little a standpoint wouldn't the to not as is We probably, expect of bit in a it production early more had more XXXX. We in probably from activity XXXX. about components 'XX. talk shifting had Scott, Yes, shifting much -- we've

will take XXXX overall to the and think how to, margins were really we're think expecting and I work improve or the against. are to we into we where way about guiding that's

any anything then of highlighting. worth million $XXX color the hearing there's KTZ, BPA car any to or just parts, million $XXX were if And know then the update And I those don't contracts? on on separately, duration you're

but. years million largely how exactly $XXX the and term. of I'm will a will delivered many longer KTC And backlog be longer The Okay. be frame. agreement That not is order 'XX sure time over the over term. 'XX service a

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different So the in available in California might parts than America. other might that and Brazil North be of fuels be

products best-in-class see things we and feel having any we given very So to a regulation like strong here play that as validation that. the and really changes about

So that's us. a for positive

with from And KeyBanc question comes Barger the Capital next Steve Markets.

M&A of use was said preferred a you John, capital.

at opportunistic to the is how overall about the primarily you're more in or portfolio? look Or Freight strategy Transit the you you talk on Just focused today, build based? just you do want As it? -- approaching portfolio you are returns out Can additions?

digital others on. I think adjacencies. there's area we're One near-in the a that couple and are is of areas, Steve, focused

that other added be a over fifth And adjacency or as of was couple to interested in to a did we to and such key We'd mining, a Of business. in great acquisitions ed that got a would elements X years. we it We've ago. year course, we're But example existing adjacencies. organs mining near good digital always in digital, of L&M on L&M acquisition. right? expect then say see near bolt-ons about market. we've last a our the truck, we than foothold that, now near-in couple when a more. I things in adjacencies the again, a with had And And done of think vital

returns, we here going are and maximizing high recurring is related. And pipeline. to just recurring, ultimately will I those. with here right It's focus we strong we're bolt-ons, reside about to that if only Those call I'm on opportunistic, but digital not, certainly, share the ultimately, think sure shy color sure to And be we preference the not add service streams, of the making returning Our that buybacks. a have additional that, bulk best your revenue returns making have.

you of do stronger beginnings Yes. And Or that trend international in in had a a digital was see said the consistent one-off? I quarter. more portfolio. more would to see you that that, think internationally? digital Was this everyone And the like in

I elements X think there's there.

America as momentum of very within continue see softer to market. there's making call the kinetics more sure also Digital see revenues. continue PTC we is what element from But we there. sales and there. to gaining strong portfolio to is North think those of I'll onetime recurring certainly an Internationally, one I products move a we

the that's business. the of about element transformation So

you some but to into that the element business North potentially given and seeing, extent, And we're of business things. the about America we're of I think happy transforming of ahead productivity. has momentum big committed as gaining see markets efficiency, drive other and an given automate to a and regulation second opportunity moved it's international think we're to quarter, goal North since element to some it. We driving it that, see as

So all to highly continue that in we're business. positive, committed all, it's and to a grow

the would any question-and-answer for session. Yates this back And to like I Kyra comments. closing concludes to turn the floor

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

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

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