Financial Data and Key Metrics Changes - Sales in the third quarter were $2.9 billion, an increase of 8% compared to the prior year [4] - Adjusted EPS rose by 16%, driven by increased sales and margin expansion [5] - Total cash flow from operations for the quarter was $367 million [5] - The twelve-month backlog was $8.3 billion, representing an increase of 8.4% [5] - GAAP operating income was $491 million, with an adjusted operating margin of 21%, up 1.3 percentage points from the prior year [16][23] Business Line Data and Key Metrics Changes - Equipment sales increased by 32% year-over-year, driven by higher new locomotive deliveries [19] - Services revenue decreased by 11.6% due to planned lower modernization deliveries [18] - Digital Intelligence sales grew by 45.6%, primarily due to the Inspection Technologies acquisition [20] - Transit segment sales were up 8.2%, with adjusted operating income as a percentage of revenue increasing to 15.5% [26] Market Data and Key Metrics Changes - North America traffic was up 1.4%, but active locomotive fleets were slightly down compared to last year [6] - Railcar builds in North America were revised down to approximately 28,000 cars, a 34% reduction from the previous year [7] - Internationally, strong activity was noted in markets such as Asia, India, Brazil, and CIS, with significant investments in infrastructure [7] Company Strategy and Development Direction - The company is focused on enhancing competitiveness and driving innovation through integration initiatives and cost efficiencies [12] - The strategy includes portfolio optimization and accretive bolt-on acquisitions to strengthen the business [13] - The company aims for leadership positions in segments with clear differentiation for long-term success [13] Management's Comments on Operating Environment and Future Outlook - Management expressed caution in navigating a volatile economic landscape while remaining optimistic about the strong pipeline of opportunities [6][31] - The company raised its full-year adjusted EPS guidance to between $8.85 to $9.05, reflecting confidence in future growth [32] - Management highlighted the importance of product innovation and disciplined cost management in driving ongoing success [31] Other Important Information - The company secured a historic $4.2 billion order with Kazakhstan's National Railway, the largest single rail order in history [8] - The integration of Inspection Technologies is progressing positively, with expectations for cross-selling opportunities [94] Q&A Session Summary Question: Concerns about organic growth being in low single digits - Management noted that the twelve-month backlog growth has outpaced last year, indicating a stronger coverage for future growth [37] Question: Expectations for services growth in 2026 - Core services are expected to grow in the 5% to 7% range, driven by fleet age and innovation [41] Question: Thoughts on backlog and upcoming acquisitions - Management indicated stronger coverage for 2026 and expects acquisitions to be accretive to margins and EPS [48] Question: Impact of tariffs on cash flow and P&L - Tariffs are impacting cash flow, with a lag in their effect on the P&L expected to be two to four quarters [57] Question: Update on regulatory environment and advanced technologies - Management sees positive momentum in regulatory support for advanced technologies, which will contribute to digital business growth [92] Question: Details on the Kazakhstan contract - The contract includes 300 locomotives over ten years, along with service agreements for existing locomotives [87]

Financial Data and Key Metrics Changes - Sales in Q3 2025 were $2.9 billion, an increase of 8% compared to the previous year, driven by growth in both freight and transit segments [3][10] - Adjusted EPS rose by 16%, attributed to increased sales and margin expansion [3][11] - Total cash flow from operations for the quarter was $367 million, reflecting a decrease year-over-year due to higher tariffs and increased working capital [20][21] - The 12-month backlog reached $8.3 billion, up 8.4%, while the multi-year backlog hit an all-time high [3][10] Business Line Data and Key Metrics Changes - Equipment sales increased by 32% year-over-year, driven by higher new locomotive deliveries [12][14] - Digital intelligence sales surged by 45.6%, primarily due to the acquisition of Inspection Technologies [14] - Services revenue declined by 11.6% from the previous year, expected to continue decreasing in Q4 due to lower modernization deliveries [12][14] Market Data and Key Metrics Changes - North American traffic rose by 1.4%, although Wabtec's active locomotive fleets were slightly down compared to last year [4][5] - The North American railcar build forecast was reduced to approximately 28,000 cars, a 34% decrease from the previous year [5] - Internationally, strong activity was noted in markets such as Asia, India, Brazil, and CIS, with significant investments in infrastructure [5][6] Company Strategy and Development Direction - The company is focused on enhancing competitiveness and driving innovation through integration initiatives and portfolio optimization [9][10] - Wabtec aims to maintain leadership positions in segments with clear differentiation, targeting long-term success [9] - The strategy includes disciplined capital allocation to maximize shareholder returns while pursuing bolt-on acquisitions [21] Management's Comments on Operating Environment and Future Outlook - Management expressed caution in navigating a volatile economic landscape while remaining optimistic about the underlying business momentum [4][22] - The company raised its full-year adjusted EPS guidance to between $8.85 and $9.05, reflecting confidence in continued profitable growth [22][23] - Management highlighted a strong pipeline of opportunities and a commitment to product innovation and cost management [22][23] Other Important Information - The company secured a historic $4.2 billion order with Kazakhstan's National Railway, marking the largest single rail order in history [6][7] - The integration of Inspection Technologies is progressing positively, with expectations for cross-selling opportunities [66] Q&A Session Summary Question: Concerns about organic growth being in low single digits - Management noted that the 12-month backlog growth has outpaced last year, indicating stronger coverage for 2026 and a positive pipeline of opportunities, particularly in international markets [28][30] Question: Insights on services and modernization expectations - Management expects core services to grow in the 5% to 7% range, with variations tied to capital expenditure allocations between new locomotives and modernization [31] Question: Backlog and upcoming acquisitions - Management confirmed that the backlog is stronger for 2026 than the previous year, with acquisitions expected to provide inorganic growth [34][36] Question: Impact of tariffs on cash flow and P&L - Management explained that tariffs impact cash flow first, with a lag before affecting the P&L, and outlined a four-pronged approach to mitigate tariff impacts [41][43] Question: Digital product penetration and international growth - Management indicated that there are opportunities for digital product penetration in international markets, particularly in Kazakhstan and CIS countries [83]

Financial Performance - Wabtec's Q3 2025 sales reached $2.89 billion, an increase of 8.4% year-over-year[7] - GAAP earnings per share (EPS) increased by 11.0% year-over-year to $1.81, while adjusted EPS increased by 16.0% year-over-year to $2.32[7] - Operating margin was 17.0% on a GAAP basis and 21.0% on an adjusted basis, benefiting from sales growth and improved gross margin[7] - Cash flow from operations was $367 million, impacted by increased tariffs and higher working capital[7] - The company's 12-month backlog increased by 8.4% to $8.27 billion, providing strong visibility for 2025 and beyond[7] Segment Performance - Freight segment sales were $2.093 billion, up 8.4% year-over-year[35] - Transit segment sales were $793 million, up 8.2% year-over-year (5.2% on a constant currency basis)[35] - Freight segment operating margin was 19.8% on a GAAP basis and 24.5% on an adjusted basis[45] - Transit segment operating margin was 14.5% on a GAAP basis and 15.5% on an adjusted basis[48] Financial Outlook - Wabtec updated its 2025 financial guidance, projecting revenues between $10.925 billion and $11.225 billion and adjusted diluted EPS between $8.55 and $9.15[57] - The company expects a cash conversion rate of over 90%[57]

Financial Data and Key Metrics Changes - Sales for Q2 2025 were $2,710,000,000, reflecting a 2.3% increase year-over-year [6][13] - Adjusted EPS increased by 15.8% to $2.27 compared to the previous year [16] - Total cash flow from operations for the quarter was $209,000,000, lower year-over-year due to higher working capital [26] - Twelve-month backlog reached $8,200,000,000, up 11.9% [7][27] Business Line Data and Key Metrics Changes - Services revenue increased by 6%, driven by higher parts sales and modernization deliveries [18] - Equipment sales decreased by 4.2% due to a supply part issue, which shifted approximately $60,000,000 of revenue to the second half [18][14] - Transit segment sales rose by 8.7% to $787,000,000, supported by elevated infrastructure investment and global ridership [24] Market Data and Key Metrics Changes - North American traffic was up 2.5%, but active locomotive fleets were down compared to last year [8] - The forecast for North American railcar builds was reduced from approximately 35,000 cars to 29,000 cars, representing a 31% reduction from last year [9][10] - Internationally, strong activity was noted in markets such as Africa, Asia, Brazil, and the CIS, with significant investments in infrastructure [10] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions, including Inspection Technologies, to enhance its product offerings and drive growth [5][12] - The strategy includes maintaining a disciplined approach to capital allocation while pursuing M&A opportunities to maximize shareholder returns [44] - The company aims to leverage its strong backlog and pipeline to drive profitable growth into 2025 and beyond [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position to drive sustained long-term profitable growth despite a volatile economic environment [5][6] - The company anticipates stronger revenue growth in the second half of the year, driven by the resolution of supply issues and increased locomotive deliveries [15][49] - Management highlighted the importance of ongoing cost management and operational efficiency to navigate economic uncertainties [22][31] Other Important Information - The company repurchased $50,000,000 of its shares and paid $44,000,000 in dividends during the quarter [28] - The net debt leverage ratio ended the quarter at 1.4 times, below the stated range in anticipation of funding acquisitions [27] Q&A Session Summary Question: Insights on rail industry dynamics and potential inefficiencies - Management sees significant opportunities for increased rail volumes, which would be beneficial for the industry [36][37] Question: Demand in international markets and impact of geopolitics - The pipeline remains strong, with a twelve-month backlog exceeding $8,000,000,000, indicating solid coverage into 2025 [42] Question: Capital allocation strategy and future plans - The focus remains on M&A to drive shareholder returns, with plans to reduce net debt leverage following acquisitions [44] Question: Shape of the back half of the year regarding revenue and margins - Strong revenue growth is expected in the second half, with adjusted operating margins increasing year-over-year [48][49] Question: Update on tariffs and customer behavior - Tariffs are expected to have no material impact on 2025 earnings, with ongoing efforts to manage supply chain shifts [71] Question: Customer response to the Inspection Technologies acquisition - Customer feedback has been positive, with strong demand anticipated for the integrated business [74] Question: Regulatory environment and potential for automation - Management is closely monitoring regulatory changes and sees opportunities for increased efficiency and safety in rail operations [60][99]

Core Insights - Wabtec Corporation has completed the acquisition of Evident's Inspection Technologies division for $1.78 billion, enhancing its Digital Intelligence business and expanding its market reach [1][10]. Financial Details - The acquisition was financed through cash on hand, newly issued term notes, term loans, and short-term borrowing [2]. - The purchase price represents an estimated multiple of 12.0x projected 2025 EBITDA, adjusted for transaction costs, anticipated tax benefits, and projected cost synergies of $25 million [3]. Strategic Impact - The acquisition is expected to generate immediate shareholder value with a high single-digit revenue growth outlook and accretive adjusted earnings before interest and taxes margins [5]. - Wabtec's total addressable market is expected to double from nearly $8 billion to $16 billion, significantly enhancing growth opportunities [6]. Operational Enhancements - The deal strengthens Wabtec's product portfolio by integrating advanced automated inspection capabilities, enhancing predictive maintenance capabilities through advanced analytics, sensors, and AI technology [7]. - The acquisition aligns with Wabtec's long-term vision to lead in innovation within the rail, mining, and industrial sectors [4]. Market Performance - Wabtec currently holds a Zacks Rank 2 (Buy) and has seen its shares gain 10.4% year-to-date, outperforming the Zacks Transportation - Equipment and Leasing industry and the S&P 500 [8].