Westinghouse Air Brake Technologies Corporation

Hello, and welcome to the Web Tech Third Quarter 2022 Earnings Conference Call. All participants will be in the Sonali mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To throw your question, please press star, then two. Please note, today's event is being recorded. And now I'd like to turn the conference over to your host today, Christine Kabaki, Vice President of Investor Relations. Ms. Kabaki, please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Wabtec's third quarter 2022 earnings call. With us today are President and CEO Rafael Santana, CFO John Olin, and Senior Vice President of Finance John Mastelers. Today's slide presentation, along with our earnings release and financial disclosures, were posted to our website earlier today and can be accessed on the investor relations tab on wabtechcorp.com. Some statements we're making are forward-looking and based on our best view of the world and business today. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. I will now turn the call over to Rafael.

Thanks, Christine, and good morning, everyone. Let's move to slide four. I'll start with an update on our business, my perspectives on the third quarter, and progress on our long-term value framework. John will now cover the financials. We delivered a strong third quarter, which is evidenced by strong sales growth, and an increase in adjusted earnings per share. We achieved this despite significant headwinds, including the loss of business in Russia, supply chain disruptions, and negative FX. Sales were roughly $2 billion, which was up 9% versus prior year. Revenue was driven by strong performance across the trade segment, but partially offset by unfavorable FX. Total cash flow from operations was $204 million, which brings year-to-date cash flow to $628 million. Overall, our financial position remains strong. We continue to invest for future growth, reduce leverage, and return cash to shareholders. Total multi-year backlog was $22.6 billion, up $767 million year-over-year, and excluding the headwinds from foreign exchange Backlog was up $1.5 billion, or up 7% from last year. We continued our progress against our long-term strategies as evidenced by continued expansion in the total backlog versus last year. Overall, we have a strong quarter, which was very much in line with our plan for the year. We continue to invest for the future as we execute commercially and operationally with discipline and rigor. and we're well positioned to continue to drive long-term growth, even with near-term uncertainty and volatility in the global economy. Shifting our focus to slide five, let's talk about our end market conditions in more details. As we look at key metrics across our trade businesses, we are encouraged by underlying business momentum and strong pipeline of opportunities. North America car loads were up slightly in the quarter after being down for the four previous quarters, and locomotive parkings are down from the same time last year despite lower year-to-date freight traffic. We continue to see significant opportunities in demand for new locomotives and modernizations as our customers invest in their aging fleets and place a greater focus on reliability productivity, and fuel efficiency. When it comes to the North American railcar build, demand for railcars is increasing from what we believe were trough levels in 2021. Railcars in storage are below pre-COVID levels with about 17% of the North American railcar fleet in storage. As a result, industry orders for new railcars continue to improve and the industry outlook for 2022 is for about 40,000 cars to be delivered. Overall, we believe we have an opportunity to continue building significant long-term momentum with growth in modernizations, in new locomotive sales, in rail car builds, and in rolling stock. Internationally, freight activity also continues to show positive signs. We have been growing our international fleet in the mid-single digits on average over the last five years, and we continue to execute on a strong pipeline of border opportunities. This strength is reflected in this quarter's equipment sales growth of 32 percent. Finally, transitioning to the transit sector, the long-term secular drivers are positive as the industry continues to trend towards clean, safe, and efficient transportation solutions. Next, let's turn to slide six to discuss a few recent business highlights. During the quarter, we signed a strategic $600 million MOU with KTZ, the national railway company in Kazakhstan. This agreement will bring state-of-the-art technologies to both their yards and mainline operations that will significantly reduce greenhouse gas emissions and operating costs. This historic framework includes 150 flex drive battery electric shunters along with kits to convert the traditional diesel locomotives to LNG. We will also collaborate on digital solutions for the fleet, beginning with Trip Optimizer. We also recently signed two key deals in Australia to deliver additional locomotive kits. These locomotives will be built in Australia and sold to various eastern Australian railroad customers. We also closed an order for new locomotives in Africa during the quarter. Finally, in transit, we secured a key order to supply platform doors for Panama's monorail station, which marks WAPTEC's first transit project in Central America. We also signed a strategic five-year services contract with ACHIEM, a leading European rolling stock leasing company, which provides the critical maintenance for hundreds of locomotives in France and in Germany. Turning to slide seven. Before turning it over to John, I want to briefly discuss our ability to deliver predictable earnings through the economic cycle. During our investor day earlier this year, we talked about our track record of managing through challenging markets and significant disruptions. As a company, we are uniquely positioned to deliver resilient and predictable earnings given our favorable end markets, a robust backlog, a high level of recurring revenues, and disciplined execution, all of which drives profitable growth and value for our shareholders. We believe our favorable end markets, combined with our leading technologies and solutions, will enable us to remain resilient during times of increased volatility. In freight, the demand continues to accelerate the need to grow and refresh our expansive global install base, accelerate the adoption of next-gen technologies, and expand our international footprint. In transit, the investment in green infrastructure continues, with structurally high energy prices and climate change making the need more urgent. Our multiyear backlog of over $22 billion provides significant visibility and support for long-term growth. The backlog has consistently grown over the past two years, despite the challenging economic backdrop. In addition, we have a strong level of recurring revenues, which is overshared in its profit contributions of approximately 60%. And finally, we have consistently demonstrated our ability to execute our strategies and deliver growth. Our track record of strong operating margin expansion across the business is evidence of our ability to realize price, deliver productivity, and aggressively manage costs. Our execution, combined with the strength of our business, leading products and technologies, result in Wabtec being resilient to economic cycles, delivering predictable earnings and superior shareholder returns. With that, I'll turn the call over to John to review the quarter, segment results, and our overall financial performance. John?