Westinghouse Air Brake Technologies Corporation · NYSE:WAB
Westinghouse Air Brake Technologies — Q2 2023 Earnings Presentation
27 slides from Westinghouse Air Brake Technologies's earnings presentation, Jul 27, 2023
Slide 1: Second Quarter 2023 Wabtec Financial Results and Company Highlights
1 S E C O N D Q U A R T ER 2 0 2 3 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: 2Q 2023 overview
4 2Q 2023 overview Increased sales were driven by strong growth across the Freight and Transit segments Operating margin benefited from higher sales growth and lower SG&A as a percentage of sales, offset by mix GAAP EPS up 16.5% YoY … Adjusted EPS up 14.6% YoY from higher Freight and Transit sales O
Slide 5: 2023 Market Expectations
5 20.2% (0.1%) (4.9%) (3.7%) (3.3%) 0.2% (0.8%) (3.2%) (4.7%) 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 F R E I G H T NA Carloads - Locomotive and Railcars Parkings ↔/- International Freight Volumes + NA Railcar Deliveries + Mining Commodities ↔ T R A N S I T Infrastructure Investment + Global Ri
Slide 6: Drivers of portfolio growth and recent wins
6 DRIVERS OF PORTFOLIO GROWTH RECENT WINS Won strategic order for 30 new locomotives in North America Won largest Certified Pre-owned program order of 69 locomotives from Gennesse & Wyoming 60 modernization order with Canadian National in 3rd quarter Strategic order in Australia for 17 narrow gauge
Slide 7: Wabtec is the best technology partner for the industry
7 W A B T E C Wabtec is the best technology partner for the industry • Age of Fleets - 16K locomotives - 25+ years old KEY CUSTOMER CHALLENGES • NA carloads vs ‘22 - Overall (4%) - Intermodal (10%) • Regulation - FRA … Safety - STB … Service - EPA/CARB … Emissions • Price pressure - Intermodal back
Slide 8: 2Q 2023 financial summary
8 STRONG SALES AND EPS GROWTH DESPITE MACRO UNCERTAINTY (1) Adjusted numbers represent non-GAAP financial measures. See Appendix for additional details and reconciliations 2Q 2023 financial summary W A B T E C OP INCOME/OP MARGIN 17.5% INCREASE $264M 12.9% 2022 GAAP SALES EPS $2.05B 2022 $2.41B 2023
Slide 9: 2Q 2023 sales
9 W A B T E C 2Q 2023 sales P R O D U C T L I N E 2 Q 2 3 Y O Y Equipment $415 8.9% Components $288 23.1% Digital Intelligence $195 18.9% Services $810 13.9% Freight Segment $1,708 14.6% Transit Segment $699 25.3% T O T A L S A L E S $2,407 17.5% E Q U I P M E N T Higher international locomotives sa
Slide 10: 2Q 2023 consolidated gross profit
10 W A B T E C 2Q 2023 consolidated gross profit 2 Q K E Y D R I V E R S 2 0 2 2 G R O S S P R O F I T $645 $647 % Gross Profit Margin 31.5% 31.6% Volume ↑↑ ↑↑ Mix/Pricing ↓ ↓ Raw Materials ↔ ↔ Currency ↓ ↓ Manufacturing/Other ↓ ↓ 2 0 2 3 G R O S S P R O F I T $723 $731 % Gross Profit Margin 30.1% 3
Slide 11: 2Q 2023 consolidated operating income
11 2 0 2 2 O P I N C O M E $264 $340 % Operating Margin 12.9% 16.7% Gross Profit 78 84 SG&A (26) (26) Engineering (3) (3) Amortization (1) - 2 0 2 3 O P I N C O M E $312 $395 % Operating Margin 12.9% 16.4% W A B T E C 2Q 2023 consolidated operating income (1) Adjusted numbers represent non-GAAP fina
Slide 12: 2Q 2023 Freight segment performance
12 (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; up $1 million versus 2nd quarter 2022 (3) Foreign exchange negat
Slide 13: 2Q 2023 Transit segment performance
13 (1) Adjusted numbers represent non-GAAP financial measures. See Appendix for additional details and reconciliations (2) Foreign exchange positively impacted Transit sales by $2 million; Foreign exchange rates had a positive $87 million impact on segment multi-year backlog 2Q 2023 Transit segment
Slide 14: Resilient business allows for execution on financial priorities
14 W A B T E C Resilient business allows for execution on financial priorities STRONG FINANCIAL POSITION LEVERAGE FOCUSED ON CASH CONVERSION(1) YTD CASH FROM OPS RETURN CAPITAL TO SHAREHOLDERS YoY cash generation impacted by higher working capital investment … in particular, higher receivables and i
Slide 15: 2023 updated financial guidance
15 Adjusted operating margin up - Favorable productivity/absorption offset by mix - SG&A as % of sales down - Engineering as % of sales flat W A B T E C 2023 updated financial guidance(1) (1) See Forward looking statements and non-GAAP financial information (2) Cash from operations conversion % is d
Slide 16: Key takeaways
16 W A B T E C Key takeaways 02 Growing momentum across the portfolio and strengthening order pipeline increases multi-year visibility 03 Productivity driven by continuous cost improvement combined with initial realization of Integration 2.0 savings 04 Wabtec is well-positioned to drive higher retur
Slide 17: Condensed consolidated statements of income
17 2023 2022 2023 2022 Net sales 2,407$ 2,048$ 4,601$ 3,975$ Cost of sales (1,684) (1,403) (3,213) (2,735) Gross profit 723 645 1,388 1,240 Gross profit as a % of Net Sales 30.1% 31.5% 30.2% 31.2% Selling, general and administrative expenses (285) (259) (548) (497) Engineering expenses (53) (50) (10
Slide 18: Segment and backlog information
18 2023 2022 2023 2022 Segment Information Freight Net Sales 1,708$ 1,490$ 3,274$ 2,812$ Freight Income from Operations 271$ 233$ 498$ 422$ Freight Operating Margin 15.9% 15.7% 15.2% 15.0% Transit Net Sales 699$ 558$ 1,327$ 1,163$ Transit Income from Operations 66$ 50$ 135$ 115$ Transit Operating Ma
Slide 19: Balance sheet
19 WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, 2023 December 31, 2022 In millions Cash, cash equivalents and restricted cash $ 371 $ 541 Receivables, net 1,698 1,519 Inventories 2,317 2,034 Other current assets 277 233 Total current asse
Slide 20: Cash flow
20 WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 2023 2022 In millions Operating activities Net income $ 366 $ 319 Non-cash expense 245 238 Receivables (150) 45 Inventories (248) (256) Accounts Payable (5) 185 Ot
Slide 21: EPS and non-GAAP Reconciliation (1 of 2)
21 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 22: EPS and non-GAAP Reconciliation (2 of 2)
22 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 23: EBITDA reconciliation
23 Set forth below is the calculation of the non-GAAP performance measures included in this press release. We believe that these measures provide useful supplemental information to assess our operating performance and to evaluate period-to-period comparisons. Non-GAAP financial measures should be vi
Slide 24: Sales by product line
24 Sales by product line Appendix F In mill ions 2023 2022 Freight Segment Equipment 415$ 381$ Components 288 234 Digital Intelligence 195 164 Services 810 711 Total Freight Segment 1,708$ 1,490$ Transit Segment Original Equipment Manufacturer 325$ 259$ Aftermarket 374 299 Total Transit Segment 699$
Slide 25: Segment adjusted results reconciliation
25 In millions Gross Profit Income from Operations Gross Profit Income from Operations Gross Profit Income from Operations Gross Profit Income from Operations Freight Segment Reported Results 541$ 271$ 493$ 233$ 1,021$ 498$ 917$ 422$ Freight Segment Reported Margin 31.7% 15.9% 33.0% 15.7% 31.2% 15.2
Slide 26: Segment sales reconciliation
26 In millions Freight Transit Consolidated 2022 Net Sales 1,490$ 558$ 2,048$ Acquisitions 11 - 11 Foreign Exchange (9) 2 (7) Organic 216 139 355 2023 Net Sales 1,708$ 699$ 2,407$ Change ($) 218 141 359 Change (%) 14.6% 25.3% 17.5% Freight Transit Consolidated 2022 Net Sales 2,812$ 1,163$ 3,975$ Acq
Slide 27: Cash conversion reconciliation
27 Cash conversion reconciliation Appendix I Wabtec Corporation 2023 Q2 Cash Conversion Calculation (in millions) Reported Cash from Operations Consolidated Results $115 $193 $123 36% Wabtec Corporation 2023 Q2 YTD Cash Conversion Calculation (in millions) Reported Cash from Operations Consolidated
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