Westinghouse Air Brake Technologies Corporation

Good day and welcome to the Web Tech second quarter 2025 earnings conference call. All participants will be in a listen-only 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. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Kyra Yates, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Good morning, everyone, and welcome to Wabtec's second quarter 2025 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. Some statements we are making are forward-looking and based on our best view of the world and our 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, Kyra, and good morning, everyone. Let's move to slide four. I'll start with an update on our business, my perspectives on the quarter, and progress against our long-term value creation framework. And then, John, we'll cover the financials. Before we get into the numbers, I'd like to highlight a couple points. We had a strong first half of the year where we were able to achieve better than expected margin expansion, as well as double-digit adjusted earnings per share growth during a volatile and uncertain economic environment. This is a direct result of our team's continued discipline and unrelenting focus on taking actions to manage outcomes and to deliver against our commitments. As I look ahead to the second half, I'm encouraged by the continued demand for our core products and services. Momentum remains strong across our end markets and pipeline, both international and domestic opportunities, with significant activity underway in key businesses. even as we navigate a persistently volatile global economic and geopolitical environment. We are entering the second half with a strong momentum reflected in our organic revenue forecast, a healthy 12-month backlog, and continued margin expansion. That said, I'm also very excited to bring the inspection technology business into Wabtec. following the closing of that acquisition on July 1st. With that, I'd like once again to welcome those employees to WAPTEC. We have adjusted our guidance to reflect the business expected financial performance with our company. With the progress we've made and the strong opportunities I had, I'm confident that WAPTEC's well-positioned to drive sustained long-term profitable growth. Having said that, sales in the second quarter were $2.7 billion, which was up 2%. Adjusted EPS was up 16% from the year-ago second quarter. Total cash flow from operations for the quarter was $209 million. And the 12-month backlog was $8.2 billion, up 11.9%, reflecting continued momentum and visibility ahead. Shifting our focus to slide five, let's talk about 2025 and market expectations in more details. While key metrics across our freight business remain mixed, we are encouraged by the strength of our pipeline of opportunities across the globe. Despite the strong momentum that we're experiencing, we continue to exercise caution as we navigate a volatile and uncertain economic landscape in the second half of the year. North American traffic was up 2.5% in the quarter. Despite this traffic growth, the industries and Watex active locomotive fleets were down when compared to last year's second quarter. However, the active locomotives are running harder than in the previous year. As we look forward, we continue to see significant opportunities in demand for new locomotives and modernizations as well as digital technologies. Due to our customers investing in solutions that continue to drive fuel efficiency, reliability, productivity, and safety. Looking at the North American railcar built, last quarter we discussed the industry outlook for 2025, which was for approximately 35,000 cars to be delivered, and which now has been reduced by industry sources to approximately 29,000 cars. This forecast represents a 31% reduction from last year. Internationally, activity is strong across core markets such as Africa, Asia, Brazil, and the CIS. Significant investments to expand and upgrade infrastructure are supporting a robust international locomotive backlog and orders pipeline. In mining, an aging fleet continues to support activity to refresh and upgrade the truck fleet. Finally, moving to the transit sector, we continue to see underlying indicators for growth. Ridership levels are increasing in key geographies along with fleet expansion and renewals. Next, let's turn to slide six to discuss our recent M&A activity. In addition to the core business strength, I'm very proud of what our team has been able to accomplish. with the acquisitions of inspection technologies, downer couplers, and Frauscher sensor technology. Each one of them has a rich history of innovation and hold the number one market position within their respective markets. Over the past six months, we have committed $3.5 billion in investments to acquire three high-quality businesses, which are expected to deliver immediate shareholder value. Each company is expected to deliver accretive growth, accretive adjusted EBITDA margins, accretive adjusted earnings per share in the first year, and accretive ROIC over time. In aggregate, these acquisitions are expected to generate first-year annualized revenues of $850 million producing an expected EBITDA of $217 million at an EBITDA margin of 25.5%. We expect significant growth in margin expansion over the next three years, which includes the expected realization of $60 million of run rate synergies. As I mentioned earlier, Inspection Technologies joined the company at the beginning of this month. Frauscher Sensor Technology is expected to close by the end of the year, and Delnutt Couplers is expected to close in the first half of 2026 as we finalize customary regulatory approvals. While these acquisitions provide very attractive financial metrics and returns, The most exciting aspect is the strategic fit that they bring to our existing technologies, our existing customers, and our existing business model. These strategic acquisitions align with our value creation framework, and WAPTAC will grow faster and more profitably because of them, which will, in turn, make us stronger and even more resilient. With that, I'll turn the call over to John to review the quarter segment results and our overall financial performance. John?