WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP Q1 FY2025 earnings call

• Strong start to the year with sales of $2.6 billion, up 4.5%, adjusted EPS up 21% from year-ago quarter, and total cash flow from operations $191 million. • Twelve-month backlog was $8.2 billion, up 6%. • Key business highlights included a $300 million multiyear service agreement in Kazakhstan, a $140 million order for new locomotives in North America, $130 million in orders in APAC, $85 million in transit platform door contracts, and a $50 million order for brakes and couplers in New York City. • International markets have strong pipeline and higher profitability, with growth in Europe, CIS, Sub-Sahara Africa, APAC, and South America. • Freight segment realigned businesses for better focus, services sales up 16.9%, equipment sales down 9.5%, component sales down 0.8%, digital intelligence sales up 2.8%, and transit segment sales up 5.3%.

Freight segment sales were up 4.2%. GAAP segment operating income was $420 million, driving an operating margin of 22.1%, up 1.9 percentage points versus last year. Adjusted operating income for the Freight segment was $488 million, up 11.2% versus the prior year. Adjusted operating margin in the Freight segment was 25.7%, up 1.6 percentage points from prior year. Twelve-month segment backlog was $6.07 billion. Transit segment sales were up 5.3% at $709 million. When adjusting for foreign currency, transit sales were up 7.9%. GAAP operating income was $90 million. Restructuring costs related to integration and portfolio optimization were $6 million in Q1. Adjusted segment operating income was $103 million. Adjusted operating income as a percent of revenue was 14.6%, up 1.9 percentage points. Transit segment twelve-month backlog for the quarter was $2.13 billion, which was up 2.2% on a constant currency basis. The multiyear backlog was up 5.1% on a constant currency basis.

• Revised adjusted EPS guidance to $8.35 to $8.95, up 14% at the midpoint. • Revenue and cash flow conversion guidance remains unchanged. • Approaching the year with caution, discipline, and focus on delivering against commitments in an uncertain economic landscape.

• Uncertain economic environment with volatility. • Tariff activities in North America posing risks to business. • Potential impact of reciprocal tariffs and supply chain disruptions. • Need to manage costs and navigate tariff-related challenges.

Q: Rob Wertheimer asked about North America's dynamics, how it shows in business, pipeline, etc.

A: North America lags internationally, but fundamentals are strong with quality backlog, better visibility, and higher margins.

Q: Adam Roszkowski asked about tariff impact and margin progression.

A: Tariffs on Canada, Mexico, steel/aluminum, and China are built into forecast; mix favorability in first quarter won't repeat in second quarter.

Q: Jerry Revich asked about customer feedback on tariffs and integration 3.0.

A: Working constructively with customers and suppliers, evaluating sourcing strategies, and integration 3.0 strategy remains same.

Q: Daniel Imbro asked about tariff impacts and free cash flow.

A: Tariff impacts not disclosed due to volatility; free cash flow affected by securitization timing, but future securitization changes won't impact operating cash.

Q: Angel Castillo asked about margin backdrop and quantification.

A: Mix favorability, timing of expenses, productivity, and proactive cost management drove first quarter margin, with second quarter expecting different mix.

Q: Bascome Majors asked about supply chain balance in international markets.

A: Balancing local fabrication and global component leveraging, with North America largely localized.

Q: James asked about international vs North America margins.

A: International margins higher due to structural cost advantages and productivity, expected to continue.

Q: Oliver Holmes asked about pricing pass through and customer reaction.

A: Managing supply chain shifts, using multiple levers including USMCA and pricing actions.

Q: Tami Zakaria asked about FX headwind and pricing repricing.

A: Guidance includes current view on currency, and managing pricing across various customer contracts.