Westinghouse Air Brake Technologies(WAB) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights CEO Commentary CEO Rafael Santana highlighted strong Q2 2025 with margin expansion, double-digit EPS growth, and strategic M&A investments for shareholder value - CEO Rafael Santana noted a strong Q2 2025 with margin expansion and double-digit EPS growth[3] - The company committed $3.5 billion to M&A investments expected to create immediate shareholder value, with projected accretive growth profiles, higher adjusted EBITDA margins, increased adjusted EPS in the first year, and improving ROIC[4] - Despite an uncertain economic environment, Wabtec is committed to maintaining discipline and achieving its goals[5] Key Financial & Operational Highlights Wabtec reported strong Q2 2025 results, with GAAP diluted EPS up 19.5% and adjusted EPS up 15.8%, achieving margin expansion and raising full-year guidance Q2 2025 Key Financial Highlights | Metric | 2Q'25 | Change YOY | | :--- | :--- | :--- | | Sales | $2.71B | +2.3% | | GAAP Diluted EPS | $1.96 | +19.5% | | Adjusted Diluted EPS | $2.27 | +15.8% | - GAAP Operating Margin at 17.4%; Adjusted Operating Margin Up 1.8 pts to 21.1%[6] - Strong 12-month backlog growth of 11.9%[6] - Returned $94 million to Shareholders via Dividends and Share Repurchases[6] - Raises 2025 Adjusted Diluted Earnings Per Share range to $8.55 - $9.15[6] Consolidated Financial Performance Q2 2025 Consolidated Performance Wabtec reported 2.3% net sales increase to $2,706 million in Q2 2025, with improved GAAP and Adjusted Gross/Operating Margins, and strong GAAP/Adjusted Diluted EPS growth Q2 2025 Consolidated Financial Results | Metric | 2025 (Millions) | 2024 (Millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,706 | $2,644 | 2.3 % | | GAAP Gross Margin | 34.7 % | 33.0 % | 1.7 pts | | Adjusted Gross Margin | 34.8 % | 33.3 % | 1.5 pts | | GAAP Operating Margin | 17.4 % | 16.3 % | 1.1 pts | | Adjusted Operating Margin | 21.1 % | 19.3 % | 1.8 pts | | GAAP Diluted EPS | $1.96 | $1.64 | 19.5 % | | Adjusted Diluted EPS | $2.27 | $1.96 | 15.8 % | | Cash Flow from Operations | $209 | $235 | $(26) | - Sales increased 2.3% compared to the year-ago quarter driven by higher sales in the Transit segment partially offset by lower Equipment sales. Freight revenue was adversely impacted by timing of locomotive shipments[9] - Both GAAP and adjusted operating margins benefited from higher sales and improved gross margins[9] Segment Performance Freight Segment Freight segment net sales were flat at $1,919 million in Q2 2025, with services growth offset by lower locomotive deliveries, while GAAP and Adjusted Operating Margins improved Q2 2025 Freight Segment Financial Results | Metric | 2025 (Millions) | 2024 (Millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,919 | $1,920 | (0.1)% | | GAAP Gross Margin | 36.3 % | 34.8 % | 1.5 pts | | Adjusted Gross Margin | 36.4 % | 35.1 % | 1.3 pts | | GAAP Operating Margin | 21.6 % | 20.4 % | 1.2 pts | | Adjusted Operating Margin | 25.0 % | 24.1 % | 0.9 pts | - Services sales were up 6.0% due to higher parts sales and modernization deliveries[10] - Lower locomotive deliveries in the quarter due to a supplied part issue and lower mining sales largely offset services growth; these deliveries are expected to shift to the 2nd half of 2025[10] Transit Segment Transit segment net sales increased 8.7% to $787 million in Q2 2025, driven by higher OE and aftermarket sales, significantly improving GAAP and Adjusted Operating Margins Q2 2025 Transit Segment Financial Results | Metric | 2025 (Millions) | 2024 (Millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $787 | $724 | 8.7 % | | GAAP Gross Margin | 30.7 % | 28.3 % | 2.4 pts | | Adjusted Gross Margin | 30.9 % | 28.6 % | 2.3 pts | | GAAP Operating Margin | 13.9 % | 11.3 % | 2.6 pts | | Adjusted Operating Margin | 15.2 % | 12.7 % | 2.5 pts | - Transit segment sales for the second quarter were up 8.7% driven by higher OE and aftermarket sales[15] - GAAP and adjusted operating margins were up as a result of higher sales and improved gross margins[15] Backlog Backlog Overview Wabtec's 12-month backlog grew 11.9% to $8,210 million at June 30, 2025, providing strong near-term revenue visibility, despite a slight decrease in total multi-year backlog Consolidated Backlog Comparison (June 30) | Backlog | 2025 (Millions) | 2024 (Millions) | Change | | :--- | :--- | :--- | :--- | | 12-Month Backlog | $8,210 | $7,334 | 11.9 % | | Total Backlog | $21,828 | $22,075 | (1.1)% | - The 12-month backlog was $876 million higher than the prior year period[12] - The multi-year backlog was $247 million lower than the prior year period, and excluding foreign currency exchange, it was $448 million lower, down 2.0%[12] Cash Flow and Liquidity Cash Flow and Liquidity Summary Q2 2025 cash from operations was $209 million, down due to higher working capital; the company maintained $4.09 billion in liquidity and returned $94 million to shareholders Q2 2025 Cash Flow and Liquidity | Metric | Amount (Millions) | | :--- | :--- | | Cash provided by operations (Q2) | $209 | | Cash, cash equivalents and restricted cash (period end) | $1,500 | | Total debt (period end) | $4,780 | | Total available liquidity | $4,090 | | Dividends paid (Q2) | $44 | | Shares repurchased (Q2) | $50 | - Cash provided by operations was $209 million versus $235 million in the year ago period partially due to higher working capital, affected by higher inventories due to the delay in Q2 locomotive deliveries and timing of customer deposits[16] - Total available liquidity was $4.09 billion, which includes cash and cash equivalents plus $2.25 billion available under current credit facilities and $350 million borrowings available under our Revolving Receivables Program[16] 2025 Financial Guidance Updated 2025 Guidance Wabtec raised 2025 revenue guidance to $10.925B - $11.225B and adjusted EPS to $8.55 - $9.15, driven by strong performance and M&A, with operating cash flow conversion expected over 90% Updated 2025 Financial Guidance | Metric | New Guidance Range | | :--- | :--- | | Revenue | $10.925B - $11.225B (Up $200M at mid-point) | | Adjusted EPS | $8.55 - $9.15 (Up $0.20 at mid-point) | | Operating Cash Flow Conversion | > 90% | - Revenue guidance increase largely reflects the acquisition of Evident Inspection Technologies Division completed on July 1, 2025[16] - Adjusted EPS guidance increase is driven by first half performance, M&A, and focus on prudent cost management[6][16] Company Information About Wabtec Wabtec is a global leader in equipment, systems, and digital solutions for freight and transit rail, mining, marine, and industrial markets, committed to sustainable rail worldwide - Wabtec Corporation is a leading global provider of equipment, systems, digital solutions and value-added services for the freight and transit rail industries, as well as the mining, marine and industrial markets[22] - Wabtec has been a leader in the rail industry for over 155 years and has a vision to achieve a sustainable rail system in the U.S. and worldwide[22] Conference Call Information Wabtec hosted a conference call for analysts and investors on July 24, 2025, with a webcast and audio replay available on its investor relations website - Wabtec hosted a call with analysts and investors at 8:30 a.m. ET, today (July 24, 2025)[24] - To listen via webcast, go to Wabtec's website at www.WabtecCorp.com and click on 'Events & Presentations' in the 'Investor Relations' section. An audio replay is also available[24] Non-GAAP Financial Measures & Forward-Looking Statements Non-GAAP Financial Information Wabtec's earnings release includes non-GAAP measures like adjusted gross profit, operating margin, and EPS, which are supplemental to GAAP and reconciled for clarity - Wabtec's earnings release mentions non-GAAP financial performance measures including adjusted gross profit, adjusted operating margin, adjusted EPS, EBITDA, and operating cash flow conversion[25] - These non-GAAP measures are useful supplemental measures but are not presented in accordance with GAAP and should not be considered in isolation or as a substitute for GAAP results[25] - Wabtec is not presenting a quantitative reconciliation of forecasted GAAP earnings per diluted share to forecasted adjusted earnings per diluted share due to unreasonable efforts exemption, as the impact and timing of certain charges are uncertain[23] Forward-Looking Statements Disclaimer Forward-looking statements are subject to risks including economic conditions, acquisitions, regulatory changes, and cybersecurity, which may cause actual results to differ materially - Forward-looking statements concern future circumstances and results, including expectations about future sales, earnings, cash conversion, market conditions, and benefits from acquisitions[26] - Important factors that could cause actual results to differ materially include changes in economic/industry conditions, customer financial condition, unexpected costs from acquisitions, inability to retain key personnel, evolving legal/regulatory regimes, changes in project timing, decrease in freight/passenger rail traffic, increase in manufacturing costs, actions by third parties, impacts of public health crises, global military action, and cybersecurity risks[26] - Wabtec does not undertake any obligation to update any forward-looking statements, except as required by law[27] Condensed Consolidated Financial Statements (Unaudited) Statements of Income Wabtec's Q2 2025 net sales increased to $2,706 million, with gross profit rising to $938 million (34.7% of sales) and diluted EPS reaching $1.96 Condensed Consolidated Statements of Income (Q2 2025 vs 2024) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | | :--- | :--- | :--- | | Net sales | $2,706 | $2,644 | | Gross profit | $938 | $874 | | Gross profit as a % of Net sales | 34.7 % | 33.0 % | | Income from operations | $472 | $430 | | Income from operations as a % of Net sales | 17.4 % | 16.3 % | | Net income attributable to Wabtec shareholders | $336 | $289 | | Diluted EPS | $1.96 | $1.64 | Condensed Consolidated Statements of Income (YTD June 30, 2025 vs 2024) | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | | :--- | :--- | :--- | | Net sales | $5,316 | $5,141 | | Gross profit | $1,838 | $1,689 | | Gross profit as a % of Net sales | 34.6 % | 32.8 % | | Income from operations | $946 | $842 | | Income from operations as a % of Net sales | 17.8 % | 16.4 % | | Net income attributable to Wabtec shareholders | $658 | $561 | | Diluted EPS | $3.84 | $3.17 | Segment Information (Q2 2025 vs 2024) | Segment | Net Sales (2025) | Net Sales (2024) | Operating Margin (2025) | Operating Margin (2024) | | :--- | :--- | :--- | :--- | :--- | | Freight | $1,919 | $1,920 | 21.6 % | 20.4 % | | Transit | $787 | $724 | 13.9 % | 11.3 % | Balance Sheets As of June 30, 2025, total assets increased to $20,391 million due to higher cash and receivables, while total liabilities rose to $9,546 million from increased long-term debt Condensed Consolidated Balance Sheets (June 30, 2025 vs Dec 31, 2024) | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $1,499 | $715 | | Total current assets | $6,354 | $4,943 | | Total Assets | $20,391 | $18,702 | | Current liabilities | $3,606 | $3,792 | | Long-term debt | $4,784 | $3,480 | | Total Liabilities | $9,546 | $8,569 | | Shareholders' equity | $10,801 | $10,091 | | Total Liabilities and Equity | $20,391 | $18,702 | Statements of Cash Flows YTD Q2 2025 net cash from operations was $400 million, down due to working capital; net cash from financing was $454 million, significantly increasing cash and equivalents Condensed Consolidated Statements of Cash Flows (YTD June 30, 2025 vs 2024) | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $400 | $569 | | Net cash used for investing activities | $(98) | $(57) | | Net cash provided by (used for) financing activities | $454 | $(523) | | Increase (decrease) in cash | $784 | $(25) | | Cash, cash equivalents and restricted cash, end of period | $1,499 | $595 | - The decrease in net cash provided by operating activities was influenced by higher receivables and inventories[35] Non-GAAP Reconciliations & Supplemental Data Reconciliation of Reported to Adjusted Results (Consolidated) This section reconciles Wabtec's GAAP to non-GAAP adjusted results for various periods, adjusting for restructuring, transaction costs, and non-cash amortization to show underlying operational performance Q2 & YTD 2025 Q2 2025 Reconciliation to Adjusted Results | Metric | Reported (Millions) | Adjustments (Millions) | Adjusted (Millions) | | :--- | :--- | :--- | :--- | | Net Sales | $2,706 | — | $2,706 | | Gross Profit | $938 | $3 | $941 | | Operating Expenses | $(466) | $97 | $(369) | | Income from Operations | $472 | $100 | $572 | | Wabtec Net Income | $336 | $53 | $389 | | EPS | $1.96 | $0.31 | $2.27 | YTD 2025 Reconciliation to Adjusted Results | Metric | Reported (Millions) | Adjustments (Millions) | Adjusted (Millions) | | :--- | :--- | :--- | :--- | | Net Sales | $5,316 | — | $5,316 | | Gross Profit | $1,838 | $6 | $1,844 | | Operating Expenses | $(892) | $185 | $(707) | | Income from Operations | $946 | $191 | $1,137 | | Wabtec Net Income | $658 | $118 | $781 | | EPS | $3.84 | $0.71 | $4.55 | Q2 & YTD 2024 Q2 2024 Reconciliation to Adjusted Results | Metric | Reported (Millions) | Adjustments (Millions) | Adjusted (Millions) | | :--- | :--- | :--- | :--- | | Net Sales | $2,644 | — | $2,644 | | Gross Profit | $874 | $6 | $880 | | Operating Expenses | $(444) | $74 | $(370) | | Income from Operations | $430 | $80 | $510 | | Wabtec Net Income | $289 | $57 | $346 | | EPS | $1.64 | $0.32 | $1.96 | YTD 2024 Reconciliation to Adjusted Results | Metric | Reported (Millions) | Adjustments (Millions) | Adjusted (Millions) | | :--- | :--- | :--- | :--- | | Net Sales | $5,141 | — | $5,141 | | Gross Profit | $1,689 | $12 | $1,701 | | Operating Expenses | $(847) | $151 | $(696) | | Income from Operations | $842 | $163 | $1,005 | | Wabtec Net Income | $561 | $121 | $682 | | EPS | $3.17 | $0.68 | $3.85 | FY 2024 & FY 2023 FY 2024 Reconciliation to Adjusted Results | Metric | Reported (Millions) | Adjustments (Millions) | Adjusted (Millions) | | :--- | :--- | :--- | :--- | | Net Sales | $10,387 | — | $10,387 | | Gross Profit | $3,366 | $37 | $3,403 | | Operating Expenses | $(1,757) | $321 | $(1,436) | | Income from Operations | $1,609 | $358 | $1,967 | | Wabtec Net Income | $1,056 | $268 | $1,324 | | EPS | $6.04 | $1.52 | $7.56 | FY 2023 Reconciliation to Adjusted Results | Metric | Reported (Millions) | Adjustments (Millions) | Adjusted (Millions) | | :--- | :--- | :--- | :--- | | Net Sales | $9,677 | — | $9,677 | | Gross Profit | $2,944 | $38 | $2,982 | | Operating Expenses | $(1,678) | $339 | $(1,339) | | Income from Operations | $1,266 | $377 | $1,643 | | Wabtec Net Income | $815 | $251 | $1,066 | | EPS | $4.53 | $1.39 | $5.92 | EBITDA Reconciliation Wabtec provides EBITDA and Adjusted EBITDA reconciliations, with Q2 2025 reported EBITDA at $611 million and Adjusted EBITDA at $608 million, adjusting for restructuring and transaction costs Q2 2025 EBITDA Reconciliation | Metric | Reported Income from Operations | Other Income (Expense) | Depreciation & Amortization | EBITDA | Restructuring & Transaction Costs | Adjusted EBITDA | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consolidated Results | $472 | $24 | $115 | $611 | $(3) | $608 | YTD 2025 EBITDA Reconciliation | Metric | Reported Income from Operations | Other Income (Expense) | Depreciation & Amortization | EBITDA | Restructuring & Transaction Costs | Adjusted EBITDA | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consolidated Results | $946 | $22 | $234 | $1,202 | $14 | $1,216 | Q2 2024 EBITDA Reconciliation | Metric | Reported Income from Operations | Other Income (Expense) | Depreciation & Amortization | EBITDA | Restructuring Costs | Adjusted EBITDA | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consolidated Results | $430 | $4 | $116 | $550 | $5 | $555 | Sales by Product Line Wabtec's Q2 2025 Freight segment sales were $1,919 million, led by Services, while Transit segment sales increased to $787 million from OE and Aftermarket growth Q2 2025 Sales by Product Line (Millions) | Segment | Product Line | 2025 | 2024 | | :--- | :--- | :--- | :--- | | Freight | Services | $781 | $737 | | | Equipment | $546 | $570 | | | Components | $401 | $414 | | | Digital Intelligence | $191 | $199 | | | Total Freight Segment | $1,919 | $1,920 | | Transit | Original Equipment Manufacturer | $353 | $310 | | | Aftermarket | $434 | $414 | | | Total Transit Segment | $787 | $724 | YTD 2025 Sales by Product Line (Millions) | Segment | Product Line | 2025 | 2024 | | :--- | :--- | :--- | :--- | | Freight | Services | $1,644 | $1,475 | | | Equipment | $1,022 | $1,096 | | | Components | $782 | $798 | | | Digital Intelligence | $372 | $375 | | | Total Freight Segment | $3,820 | $3,744 | | Transit | Original Equipment Manufacturer | $675 | $620 | | | Aftermarket | $821 | $777 | | | Total Transit Segment | $1,496 | $1,397 | Reconciliation of Reported to Adjusted Results - By Segment Segment-level reconciliations show Q2 2025 Freight adjusted operating margin at 25.0% and Transit at 15.2%, after adjusting for restructuring and transaction costs Q2 2025 Freight Segment Adjusted Results (Millions) | Metric | Reported Gross Profit | Adjusted Gross Profit | Reported Income from Operations | Adjusted Income from Operations | | :--- | :--- | :--- | :--- | :--- | | Freight Segment | $697 | $699 | $415 | $480 | | Freight Segment Margin | 36.3 % | 36.4 % | 21.6 % | 25.0 % | Q2 2025 Transit Segment Adjusted Results (Millions) | Metric | Reported Gross Profit | Adjusted Gross Profit | Reported Income from Operations | Adjusted Income from Operations | | :--- | :--- | :--- | :--- | :--- | | Transit Segment | $241 | $242 | $109 | $120 | | Transit Segment Margin | 30.7 % | 30.9 % | 13.9 % | 15.2 % | - Adjustments for Freight segment include restructuring and portfolio optimization costs, transaction costs, and non-cash amortization expense[49] Reconciliation of Changes in Net Sales - By Segment Q2 2025 consolidated net sales increased by $62 million (2.3%), driven by acquisitions, foreign exchange, and organic growth, with Transit growing and Freight remaining flat Q2 2025 Net Sales Change Reconciliation (Millions) | Factor | Freight | Transit | Consolidated | | :--- | :--- | :--- | :--- | | 2024 Net sales | $1,920 | $724 | $2,644 | | Acquisitions | $18 | $9 | $27 | | Foreign Exchange | $(11) | $22 | $11 | | Organic | $(8) | $32 | $24 | | 2025 Net sales | $1,919 | $787 | $2,706 | | Change ($) | $(1) | $63 | $62 | | Change (%) | (0.1)% | 8.7 % | 2.3 % | YTD 2025 Net Sales Change Reconciliation (Millions) | Factor | Freight | Transit | Consolidated | | :--- | :--- | :--- | :--- | | 2024 Net sales | $3,744 | $1,397 | $5,141 | | Acquisitions | $33 | $17 | $50 | | Foreign Exchange | $(37) | $5 | $(32) | | Organic | $80 | $77 | $157 | | 2025 Net sales | $3,820 | $1,496 | $5,316 | | Change ($) | $76 | $99 | $175 | | Change (%) | 2.0 % | 7.1 % | 3.4 % | Cash Conversion Calculation Wabtec's Q2 2025 operating cash flow conversion was 46% ($209 million cash from operations / net income + D&A), a decrease from the prior year Q2 2025 Cash Conversion Calculation (Millions) | Metric | Value | | :--- | :--- | | Reported Cash from Operations | $209 | | Net Income | $339 | | Depreciation & Amortization | $117 | | Cash Conversion | 46% | YTD 2025 Cash Conversion Calculation (Millions) | Metric | Value | | :--- | :--- | | Reported Cash from Operations | $400 | | Net Income | $666 | | Depreciation & Amortization | $237 | | Cash Conversion | 44% | Q2 2024 Cash Conversion Calculation (Millions) | Metric | Value | | :--- | :--- | | Reported Cash from Operations | $235 | | Net Income | $291 | | Depreciation & Amortization | $118 | | Cash Conversion | 57% |