Westinghouse Air Brake Technologies Corporation · NYSE:WAB
Westinghouse Air Brake Technologies — Q4 2022 Earnings Presentation
30 slides from Westinghouse Air Brake Technologies's earnings presentation, Feb 15, 2023
Slide 1: Fourth Quarter 2022 Wabtec Financial Results and Company Highlights
1 F O U R T H Q U A R T E R 2 0 2 2 Wabtec Financial Results and Company Highlights
Slide 2: Forward looking statements & non-GAAP financial information
2 Forward looking statements & non-GAAP financial information This communication contains “forward-looking” statements as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litiga
Slide 3: Today's participants
3 RAFAEL SANTANA President and Chief Executive Officer W A B T E C Today’s participants JOHN OLIN Executive Vice President and Chief Financial Officer KRISTINE KUBACKI Vice President, Investor Relations 3
Slide 4: 4Q 2022 overview
4 4Q 2022 overview Increased sales were driven by strong Freight segment growth … excluding impacts of FX, sales were up 15.7% YoY Op margin lower despite higher sales growth and increased productivity … offset by unfavorable mix and higher input costs GAAP EPS down 15.7% YoY on higher restructuring
Slide 5: 2023 Market Expectations
5 3.2% 5.1% 20.2% (0.1%) (4.9%) (3.7%) (3.3%) 0.2% (0.8%) 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 F R E I G H T NA Carloads ↔/- Locomotive and Railcars Unparkings ↔/- International Freight Volumes + NA Railcar Deliveries + Mining Commodities ↔/- T R A N S I T Infrastructure Investment + Global
Slide 6: Executing on our value creation framework
6 DRIVERS OF PORTFOLIO GROWTH RECENT WINS Secured additional tier 4 new locomotive orders in North America now totaling over 100 units …. delivery in 2023 and 2024 Signed key international orders for locomotives and kits Signed multi-year international locomotive service contracts (South America and
Slide 7: Resilient portfolio through the cycle
7 Strong 12-month and multi-year backlog provides resiliency and visibility despite macro volatility Significant recurring revenue base drives ~60% of profits W A B T E C Resilient portfolio through the cycle Favorable end-markets Robust backlog & recurring revenue Demonstrated execution S T R O
Slide 8: Increasing visibility into 2023 and beyond
8 Current active main-line locomotive fleet size Increasing visibility into 2023 and beyond WABTE C N O R TH AME R ICA LO CO MO TIVE S N E W & MO DE R N IZATIO N S DE LIVE R IE S >500 units per year <300 units per year W A B T E C 2008 2017 2023 - 2025 ~16K ~25 years >600 locos N O R TH AME R ICA LO
Slide 9: 4Q 2022 financial summary
9 STRONG SALES GROWTH DESPITE DISRUPTIONS AND MACRO VOLATILITY (1) Adjusted numbers represent non-GAAP financial measures. See Appendix for additional details and reconciliations 4Q 2022 financial summary W A B T E C OP INCOME/OP MARGIN 11.2% INCREASE $264M 12.7% 2021 GAAP SALES EPS $2.07B 2021 $2.3
Slide 10: 4Q 2022 sales
10 W A B T E C 4Q 2022 sales P R O D U C T L I N E 4 Q 2 2 Y O Y Equipment $430 14.1% Components $241 10.6% Digital Electronics $225 34.7% Services $773 16.6% Freight Segment $1,669 17.1% Transit Segment $637 (1.7%) T O T A L S A L E S $2,306 11.2% E Q U I P M E N T Significantly higher internationa
Slide 11: 4Q 2022 consolidated gross profit
11 W A B T E C 4Q 2022 consolidated gross profit 4 Q K E Y D R I V E R S 2 0 2 1 G R O S S P R O F I T $652 $657 % Gross Profit Margin 31.5% 31.7% Volume ↑↑ ↑↑ Mix/Pricing ↑ ↑ Raw Materials ↓ ↓ Currency ↓ ↓ Manufacturing/Other ↑ ↑ 2 0 2 2 G R O S S P R O F I T $652 $683 % Gross Profit Margin 28.3% 2
Slide 12: 4Q 2022 consolidated operating income
12 2 0 2 1 O P I N C O M E $264 $334 % Operating Margin 12.7% 16.1% Gross Profit - 26 SG&A (8) - Engineering (8) (8) Amortization (1) - 2 0 2 2 O P I N C O M E $247 $352 % Operating Margin 10.7% 15.3% W A B T E C 4Q 2022 consolidated operating income (1) Adjusted numbers represent non-GAAP financial
Slide 13: 4Q 2022 Freight segment performance
13 (1) Adjusted numbers represent non-GAAP financial measures. See Appendix for additional details and reconciliations (2) Freight segment operating income was positively impacted by below-market intangible amortization of $14 million; flat versus 4th quarter 2021 (3) Foreign exchange negatively imp
Slide 14: 4Q 2022 Transit segment performance
14 (1) Adjusted numbers represent non-GAAP financial measures. See Appendix for additional details and reconciliations (2) Foreign exchange negatively impacted Transit sales by $71 million; Foreign exchange rates had a negative $203 million impact on segment backlog 4Q 2022 Transit segment performan
Slide 15: Integration 2.0 on track to deliver savings by 2025
15 W A B T E C Integration 2.0 on track to deliver savings by 2025 C O N S O L I D A T E F O O T P R I N T 15+ facilities Headcount redundancy Office/facility rationalization S T R E A M L I N E M A N U F A C T U R I N G Restructure NAM distribution Reman localization Best-cost-country capacity expa
Slide 16: Resilient business allows for execution on financial priorities
16 W A B T E C Resilient business allows for execution on financial priorities STRONG FINANCIAL POSITION LEVERAGE FOCUSED ON CASH CONVERSION (1) CASH FROM OPS RETURN CAPITAL TO SHAREHOLDERS 4Q cash generation of $410M … cash conv of 147% YoY cash conversion impacted by proactive inventory build ahea
Slide 17: 2022 overview
17 2022 overview Increased sales were driven by strong Freight segment growth … excluding impacts of FX, sales were up 10.8% Op margin up from higher sales growth and improved productivity … partially offset by unfavorable mix and higher input costs EPS driven by strong Freight segment sales … GAAP
Slide 18: 2023 outlook and guidance
18 Adjusted operating margin up - Favorable productivity/absorption offset by mix - SG&A as % of sales down - Engineering as % of sales flat Tax rate ~25.5% Capex ~2% of sales W A B T E C 2023 outlook and guidance R E V E N U E S $8.7B to $9.0B (1) Cash from operations conversion % is defined as GAA
Slide 19: Key takeaways
19 W A B T E C Key takeaways 02 Well-positioned to drive profitable growth with strong momentum across the portfolio and increased multi-year visibility 03 Continuous cost improvement combined with initial realization of Integration 2.0 savings driving margin expansion 04 Strong long-term business f
Slide 20: Income statement
20 Income statement Appendix A ( 1 of 2) 2022 2021 2022 2021 Net sales 2,306$ 2,073$ 8,362$ 7,822$ Cost of sales (1,654) (1,421) (5,822) (5,453) Gross profit 652 652 2,540 2,369 Gross profit as a % of Net Sales 28.3% 31.5% 30.4% 30.3% Selling, general and administrative expenses (272) (264) (1,029)
Slide 21: Income statement (cont.)
21Appendix A ( 2 of 2) Income statement (cont.) 2022 2021 2022 2021 Segment Information Freight Net Sales 1,669$ 1,425$ 6,012$ 5,239$ Freight Income from Operations 209$ 207$ 864$ 717$ Freight Operating Margin 12.5% 14.5% 14.4% 13.7% Transit Net Sales 637$ 648$ 2,350$ 2,583$ Transit Income from Oper
Slide 22: Balance sheet
22Balance sheet Appendix B December 31, 2022 December 31, 2021 In mill ions Cash, cash equivalents and restricted cash 541$ 473$ Receivables, net 1,519 1,477 Inventories 2,034 1,689 Other current assets 233 193 Total current assets 4,327 3,832 Property, plant and equipment, net 1,429 1,497 Goodwill
Slide 23: Cash flow
23Appendix C Cash flow 2022 2021 In mill ions Operating activities Net income 641$ 565$ Non-cash expense 506 571 Receivables (52) (76) Inventories (368) (41) Accounts Payable 306 109 Other assets and liabilities 5 (55) Net cash provided by operating activities 1,038 1,073 Net cash used for investing
Slide 24: EPS and non-GAAP Reconciliation (1 of 2)
24 EPS and non-GAAP Reconciliation Appendix D (1 of 2) Wabtec Corporation Reconciliation of Reported Results to Adjusted Results (in millions) Gross Operating Income from Interest & Noncontrolling Wabtec Net Sales Profit Expenses Operations Other Exp Tax Net Income Interest Net Income EPS Reported R
Slide 25: EPS and non-GAAP Reconciliation (2 of 2)
25 EPS and non-GAAP Reconciliation Appendix D (2 of 2) Wabtec Corporation Reconciliation of Reported Results to Adjusted Results (in millions) Gross Operating Income from Interest & Noncontrolling Wabtec Net Sales Profit Expenses Operations Other Exp Tax Net Income Interest Net Income EPS Reported R
Slide 26: EBITDA reconciliation
26 EBITDA reconciliation Appendix E Wabtec Corporation 2022 Q4 EBITDA Reconciliation (in millions) Reported Income Other Income Depreciation & Restructuring Adjusted from Operations (Expense) Amortization Costs EBITDA Consolidated Results $247 $14 $119 $380 $29 $409 Wabtec Corporation 2022 Q4 YTD EB
Slide 27: Sales by product line
27 Sales by product line Appendix F In millions 2022 2021 Freight Segment Equipment 430$ 377$ Components 241 218 Digital Electronics 225 167 Services 773 663 Total Freight Segment 1,669$ 1,425$ Transit Segment Original Equipment Manufacturer 280$ 299$ Aftermarket 357 349 Total Transit Segment 637$ 6
Slide 28: Segment gross margin & operating margin reconciliation
28Segment gross margin & operating margin reconciliation Appendix G In mill ions Gross Profit Income from Operations Gross Profit Income from Operations Gross Profit Income from Operations Gross Profit Income from Operations Freight Segment Reported Results 482$ 209$ 454$ 207$ 1,896$ 864$ 1,667$ 717
Slide 29: Segment sales reconciliation
29 Segment sales reconciliation Appendix H In mil lions Freight Transit Consolidated 2021 Net Sales 1,425$ 648$ 2,073$ Acquisitions 21 1 22 Foreign Exchange (21) (71) (92) Organic 244 59 303 2022 Net Sales 1,669$ 637$ 2,306$ Change ($) 244 (11) 233 Change (%) 17.1% -1.7% 11.2% Freight Transit Consol
Slide 30: Cash conversion reconciliation
30 Cash conversion reconciliation Appendix I Wabtec Corporation 2022 Q4 Cash Conversion Calculation (in millions) Reported Cash from Operations Consolidated Results $410 $159 $120 147% Wabtec Corporation 2022 Q4 YTD Cash Conversion Calculation (in millions) Reported Cash from Operations Consolidated
Westinghouse Air Brake Technologies — Q4 2022 Earnings Presentation on 6ix