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Wabtec Delivers Strong Third Quarter 2023 Results; Raises Full-Year Guidance

October 25, 2023 6:30 AM

PITTSBURGH--(BUSINESS WIRE)-- Wabtec Corporation (NYSE: WAB) today reported third quarter 2023 GAAP earnings per diluted share of $1.33, up 51.1% versus the third quarter of 2022. Adjusted earnings per diluted share were $1.70, up 39.3% versus the same quarter a year ago. Third quarter sales were $2.55 billion, up 22.5% versus the third quarter a year ago, driven by strong sales across the Freight and Transit segments. The Company generated strong operating cash flow of $425 million resulting in a cash conversion of 116% for the third quarter 2023.

“The Wabtec team delivered a strong quarter as evidenced by increased growth in sales, margin, earnings, and operating cash flow,” said Rafael Santana, Wabtec’s President and CEO. “Demand remained strong, including international markets, where our pipeline of future opportunities continues to strengthen. With our team’s relentless focus on execution, we delivered for our customers and shareholders despite an increasingly volatile macro-economic environment.

“Looking forward, we are confident that the breadth of our products and technologies combined with our ability to maintain resiliency during economic uncertainty will provide us with a solid foundation for growth and continued momentum as we close out this year and move into 2024. These factors, among others, give us confidence to raise our full-year 2023 guidance. Wabtec is well-positioned to continue driving profitable growth and maximizing shareholder value.”

2023 Third Quarter Consolidated Results

Wabtec Corporation Consolidated Financial Results

$ in millions except earnings per share and percentages; margin change in percentage points (pts)

Third Quarter

2023

2022

Change

Net Sales

$2,550

$2,081

22.5 %

GAAP Gross Margin

31.0 %

31.1 %

(0.1 pts)

Adjusted Gross Margin

31.5 %

31.4 %

0.1 pts

GAAP Operating Margin

14.5 %

12.5 %

2.0 pts

Adjusted Operating Margin

17.9 %

16.4 %

1.5 pts

GAAP Diluted EPS

$1.33

$0.88

51.1 %

Adjusted Diluted EPS

$1.70

$1.22

39.3 %

Cash Flow from Operations

$425

$204

$221

Operating Cash Flow Conversion

116 %

72 %

2023 Third Quarter Freight Segment Results

Wabtec Corporation Freight Segment Financial Results

Net sales $ in millions; margin change in percentage points (pts)

Third Quarter

2023

2022

Change

Net Sales

$1,890

$1,531

23.4 %

GAAP Gross Margin

32.3 %

32.5 %

(0.2 pts)

Adjusted Gross Margin

32.4 %

32.7 %

(0.3 pts)

GAAP Operating Margin

17.3 %

15.2 %

2.1 pts

Adjusted Operating Margin

21.2 %

19.9 %

1.3 pts

2023 Third Quarter Transit Segment Results

Wabtec Corporation Transit Segment Financial Results

Net sales $ in millions; margin change in percentage points (pts)

Third Quarter

2023

2022

Change

Net Sales

$660

$550

20.0 %

GAAP Gross Margin

27.3 %

27.4 %

(0.1 pts)

Adjusted Gross Margin

29.0 %

27.5 %

1.5 pts

GAAP Operating Margin

10.3 %

9.6 %

0.7 pts

Adjusted Operating Margin

12.5 %

11.0 %

1.5 pts

Backlog

Wabtec Corporation Consolidated Backlog Comparison

Backlog $ in millions

September 30,

2023

2022

Change

12-Month Backlog

$7,091

$6,267

13.1 %

Total Backlog

$21,483

$22,610

(5.0) %

The Company’s multi-year backlog continues to provide strong visibility. At September 30, 2023, the 12-month backlog was $824 million higher than September 30, 2022. At September 30, 2023, the multi-year backlog was $1,127 million lower than September 30, 2022 and excluding foreign currency exchange, the multi-year backlog decreased $1,383 million, down 6.1%.

Cash Flow and Liquidity Summary

2023 Financial Guidance

Forecasted GAAP Earnings Reconciliation

Wabtec is not presenting a quantitative reconciliation of our forecasted GAAP earnings per diluted share to forecasted adjusted earnings per diluted share in reliance on the unreasonable efforts exemption provided under Item 10(e)(1)(i)(B) of Regulation S-K. Wabtec is unable to predict with reasonable certainty and without unreasonable effort the impact and timing of restructuring-related and other charges, including acquisition-related expenses and the outcome of certain regulatory, legal and tax matters. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our Consolidated Statements of Earnings.

Conference Call Information

Wabtec will host a call with analysts and investors at 8:30 a.m. ET, today. To listen via webcast, go to Wabtec’s website at www.WabtecCorp.com and click on “Events & Presentations” in the “Investor Relations” section. Also, an audio replay of the call will be available by calling 1-877-344-7529 or 1-412-317-0088 (access code: 7429760).

About Wabtec

Wabtec Corporation (NYSE: WAB) is revolutionizing the way the world moves for future generations. The company 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. Wabtec has been a leader in the rail industry for over 150 years and has a vision to achieve a zero-emission rail system in the U.S. and worldwide. Visit Wabtec’s website at www.wabteccorp.com.

Information about non-GAAP Financial Information and Forward-Looking Statements

Wabtec’s earnings release and 2023 financial guidance mentions certain non-GAAP financial performance measures, including adjusted gross profit, adjusted operating expenses, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted effective tax rate, adjusted income tax expense, adjusted income from operations, adjusted interest and other expense, adjusted earnings per diluted share and operating cash flow conversion. Wabtec defines EBITDA as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is further adjusted by restructuring costs. Wabtec defines operating cash flow conversion as net cash provided by operating activities divided by net income plus depreciation and amortization including deferred debt cost amortization. While Wabtec believes these are useful supplemental measures for investors, they are not presented in accordance with GAAP. Investors should not consider non-GAAP measures in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. In addition, the non-GAAP financial measures included in this release have inherent material limitations as performance measures because they add back certain expenses incurred by the Company to GAAP financial measures, resulting in those expenses not being taken into account in the applicable non-GAAP financial measure. Because not all companies use identical calculations, Wabtec’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. Included in this release are reconciliation tables that provide details about how adjusted results relate to GAAP results.

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 Litigation Reform Act of 1995, including statements regarding the impact of acquisitions by Wabtec, statements regarding Wabtec’s expectations about future sales and earnings, statements regarding order pipeline expectations, statements regarding anticipated cash flow generation with operating cash flow conversion, and statements about the impact of evolving global conditions on Wabtec’s business. All statements, other than historical facts, including statements regarding synergies and other expected benefits from acquisitions; statements regarding Wabtec’s plans, objectives, expectations and intentions; and statements regarding macro-economic conditions and evolving production and demand conditions; and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue,” “target” or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) changes in general economic and/or industry specific conditions, including the impacts of tax and tariff programs, inflation, supply chain disruptions, foreign currency exchange, and industry consolidation; (2) changes in the financial condition or operating strategies of Wabtec’s customers; (3) unexpected costs, charges or expenses resulting from acquisitions and potential failure to realize synergies and other anticipated benefits of acquisitions, including as a result of integrating acquired targets into Wabtec; (4) inability to retain and hire key personnel; (5) evolving legal, regulatory and tax regimes; (6) changes in the expected timing of projects; (7) a decrease in freight or passenger rail traffic; (8) an increase in manufacturing costs; (9) actions by third parties, including government agencies; (10) the impact of epidemics, pandemics (including the COVID-19 pandemic), or similar public health crises on the global economy and, in particular, our customers, suppliers and end-markets, (11) potential disruptions, instability, and volatility in global markets as a result of global military action, acts of terrorism or armed conflict, including from the imposition of economic sanctions on Russia resulting from the invasion of Ukraine; (12) cybersecurity and data protection risks and (13) other risk factors as detailed from time to time in Wabtec’s reports filed with the SEC, including Wabtec’s annual report on Form 10-K, periodic quarterly reports on Form 10-Q, current reports on Form 8-K and other documents filed with the SEC. The foregoing list of important factors is not exclusive. Any forward-looking statements speak only as of the date of this communication. Wabtec does not undertake any obligation to update any forward-looking statements, whether as a result of new information or development, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,

2023

2022

2023

2022

Net sales

$

2,550

$

2,081

$

7,151

$

6,056

Cost of sales

(1,758

)

(1,433

)

(4,971

)

(4,168

)

Gross profit

792

648

2,180

1,888

Gross profit as a % of Net Sales

31.0

%

31.1

%

30.5

%

31.2

%

Selling, general and administrative expenses

(295

)

(260

)

(843

)

(757

)

Engineering expenses

(53

)

(54

)

(157

)

(149

)

Amortization expense

(74

)

(73

)

(222

)

(218

)

Total operating expenses

(422

)

(387

)

(1,222

)

(1,124

)

Operating expenses as a % of Net Sales

16.5

%

18.6

%

17.1

%

18.6

%

Income from operations

370

261

958

764

Income from operations as a % of Net Sales

14.5

%

12.5

%

13.4

%

12.6

%

Interest expense, net

(60

)

(48

)

(163

)

(135

)

Other income, net

10

4

17

15

Income before income taxes

320

217

812

644

Income tax expense

(78

)

(54

)

(204

)

(162

)

Effective tax rate

24.5

%

24.7

%

25.1

%

25.1

%

Net income

242

163

608

482

Less: Net income attributable to noncontrolling interest

(2

)

(3

)

(8

)

(7

)

Net income attributable to Wabtec shareholders

$

240

$

160

$

600

$

475

Earnings Per Common Share
Basic
Net income attributable to Wabtec shareholders

$

1.34

$

0.88

$

3.34

$

2.60

Diluted
Net income attributable to Wabtec shareholders

$

1.33

$

0.88

$

3.33

$

2.59

Basic

178.6

181.3

179.1

182.6

Diluted

179.2

181.9

179.7

183.1

Segment Information
Freight Net Sales

$

1,890

$

1,531

$

5,164

$

4,343

Freight Income from Operations

$

327

$

233

$

825

$

655

Freight Operating Margin

17.3

%

15.2

%

16.0

%

15.1

%

Transit Net Sales

$

660

$

550

$

1,987

$

1,713

Transit Income from Operations

$

68

$

53

$

203

$

168

Transit Operating Margin

10.3

%

9.6

%

10.2

%

9.8

%

Backlog Information (Note: 12-month is a sub-set of total) September 30, 2023 June 30, 2023 September 30, 2022
Freight Total

$

17,614

$

18,336

$

19,173

Transit Total

3,869

4,095

3,437

Wabtec Total

$

21,483

$

22,431

$

22,610

Freight 12-Month

$

5,282

$

5,318

$

4,567

Transit 12-Month

1,809

1,902

1,700

Wabtec 12-Month

$

7,091

$

7,220

$

6,267

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2023 December 31, 2022
In millions
Cash, cash equivalents and restricted cash

$

392

$

541

Receivables, net

1,714

1,519

Inventories

2,246

2,034

Other current assets

282

233

Total current assets

4,634

4,327

Property, plant and equipment, net

1,419

1,429

Goodwill

8,590

8,508

Other intangible assets, net

3,267

3,402

Other noncurrent assets

890

850

Total assets

$

18,800

$

18,516

Current liabilities

$

3,891

$

3,467

Long-term debt

3,288

3,751

Long-term liabilities - other

1,254

1,151

Total liabilities

8,433

8,369

Shareholders' equity

10,326

10,102

Noncontrolling interest

41

45

Total shareholders' equity

10,367

10,147

Total Liabilities and Shareholders' Equity

$

18,800

$

18,516

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,

2023

2022

In millions
Operating activities
Net income

$

608

$

482

Non-cash expense

372

355

Receivables

(214

)

(39

)

Inventories

(201

)

(401

)

Accounts Payable

(50

)

232

Other assets and liabilities

-

(1

)

Net cash provided by operating activities

515

628

Net cash used for investing activities

(336

)

(149

)

Net cash used for financing activities

(323

)

(395

)

Effect of changes in currency exchange rates

(5

)

(43

)

(Decrease) increase in cash

(149

)

41

Cash, cash equivalents and restricted cash, beginning of period

541

473

Cash, cash equivalents and restricted cash, end of period

$

392

$

514

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 viewed in addition to, and not as an alternative for, Wabtec's reported results prepared in accordance with GAAP.
Wabtec Corporation
Reconciliation of Reported Results to Adjusted Results
(in millions) Third Quarter 2023 Actual Results
Gross Operating Income from Interest & Noncontrolling Wabtec
Net Sales Profit Expenses Operations Other Exp Tax Net Income Interest Net Income EPS
Reported Results

$

2,550

$

792

$

(422

)

$

370

$

(50

)

$

(78

)

$

242

$

(2

)

$

240

$

1.33

Restructuring costs

-

13

-

13

-

(3

)

10

-

10

$

0.06

Non-cash Amortization expense

-

-

74

74

-

(19

)

55

-

55

$

0.31

Adjusted Results

$

2,550

$

805

$

(348

)

$

457

$

(50

)

$

(100

)

$

307

$

(2

)

$

305

$

1.70

Fully Diluted Shares Outstanding

179.2

Wabtec Corporation
Reconciliation of Reported Results to Adjusted Results
(in millions) Third Quarter Year-to-Date 2023 Actual Results
Gross Operating Income from Interest & Noncontrolling Wabtec
Net Sales Profit Expenses Operations Other Exp Tax Net Income Interest Net Income EPS
Reported Results

$

7,151

$

2,180

$

(1,222

)

$

958

$

(146

)

$

(204

)

$

608

$

(8

)

$

600

$

3.33

Restructuring costs

-

25

7

32

-

(8

)

24

-

24

$

0.13

Non-cash Amortization expense

-

-

222

222

-

(56

)

166

-

166

$

0.92

Adjusted Results

$

7,151

$

2,205

$

(993

)

$

1,212

$

(146

)

$

(268

)

$

798

$

(8

)

$

790

$

4.38

Fully Diluted Shares Outstanding

179.7

Wabtec Corporation
Reconciliation of Reported Results to Adjusted Results
(in millions) Third Quarter 2022 Actual Results
Gross Operating Income from Interest & Noncontrolling Wabtec
Net Sales Profit Expenses Operations Other Exp Tax Net Income Interest Net Income EPS
Reported Results

$

2,081

$

648

$

(387

)

$

261

$

(44

)

$

(54

)

$

163

$

(3

)

$

160

$

0.88

Restructuring costs

-

5

4

9

-

(2

)

7

-

7

$

0.04

Non-cash Amortization expense

-

-

73

73

-

(18

)

55

-

55

$

0.30

Adjusted Results

$

2,081

$

653

$

(310

)

$

343

$

(44

)

$

(74

)

$

225

$

(3

)

$

222

$

1.22

Fully Diluted Shares Outstanding

181.9

Wabtec Corporation
Reconciliation of Reported Results to Adjusted Results
(in millions) Third Quarter Year-to-Date 2022 Actual Results
Gross Operating Income from Interest & Noncontrolling Wabtec
Net Sales Profit Expenses Operations Other Exp Tax Net Income Interest Net Income EPS
Reported Results

$

6,056

$

1,888

$

(1,124

)

$

764

$

(120

)

$

(162

)

$

482

$

(7

)

$

475

$

2.59

Restructuring costs

-

12

8

20

-

(5

)

15

-

15

$

0.08

Non-cash Amortization expense

-

-

218

218

-

(54

)

164

-

164

$

0.89

Adjusted Results

$

6,056

$

1,900

$

(898

)

$

1,002

$

(120

)

$

(221

)

$

661

$

(7

)

$

654

$

3.56

Fully Diluted Shares Outstanding

183.1

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 viewed in addition to, and not as an alternative for, Wabtec's reported results prepared in accordance with GAAP.
Wabtec Corporation
2023 Q3 EBITDA Reconciliation
(in millions)
Reported Income + Other Income + Depreciation & = EBITDA + Restructuring = Adjusted
from Operations (Expense) Amortization Costs EBITDA
Consolidated Results

$370

$10

$124

$504

$10

$514

Wabtec Corporation
2023 Q3 YTD EBITDA Reconciliation
(in millions)
Reported Income + Other Income + Depreciation & = EBITDA + Restructuring = Adjusted
from Operations (Expense) Amortization Costs EBITDA
Consolidated Results

$958

$17

$367

$1,342

$24

$1,366

Wabtec Corporation
2022 Q3 EBITDA Reconciliation
(in millions)
Reported Income + Other Income + Depreciation & = EBITDA + Restructuring = Adjusted
from Operations (Expense) Amortization Costs EBITDA
Consolidated Results

$261

$4

$117

$382

$9

$391

Wabtec Corporation
2022 Q3 YTD EBITDA Reconciliation
(in millions)
Reported Income + Other Income + Depreciation & = EBITDA + Restructuring = Adjusted
from Operations (Expense) Amortization Costs EBITDA
Consolidated Results

$764

$15

$354

$1,133

$20

$1,153

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
SALES BY PRODUCT LINE
(UNAUDITED)
Three Months Ended September 30,
In millions

2023

2022

Freight Segment
Equipment

$

615

$

443

Components

307

232

Digital Intelligence

181

187

Services

787

669

Total Freight Segment

$

1,890

$

1,531

Transit Segment
Original Equipment Manufacturer

$

302

$

264

Aftermarket

358

286

Total Transit Segment

$

660

$

550

Nine Months Ended September 30,
In millions

2023

2022

Freight Segment
Equipment

$

1,423

$

1,098

Components

874

695

Digital Intelligence

563

504

Services

2,304

2,046

Total Freight Segment

$

5,164

$

4,343

Transit Segment
Original Equipment Manufacturer

$

909

$

815

Aftermarket

1,078

898

Total Transit Segment

$

1,987

$

1,713

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
RECONCILIATION OF REPORTED RESULTS TO ADJUSTED RESULTS - BY SEGMENT
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,

2023

2022

2023

2022

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

$

611

$

327

$

497

$

233

$

1,632

$

825

$

1,414

$

655

Freight Segment Reported Margin

32.3

%

17.3

%

32.5

%

15.2

%

31.6

%

16.0

%

32.6

%

15.1

%

Restructuring costs

2

3

4

5

8

11

7

8

Non-cash Amortization expense

-

69

-

69

-

206

-

204

Freight Segment Adjusted Results

$

613

$

399

$

501

$

307

$

1,640

$

1,042

$

1,421

$

867

Freight Segment Adjusted Margin

32.4

%

21.2

%

32.7

%

19.9

%

31.8

%

20.2

%

32.7

%

20.0

%

Transit Segment Reported Results

$

181

$

68

$

151

$

53

$

548

$

203

$

474

$

168

Transit Segment Reported Margin

27.3

%

10.3

%

27.4

%

9.6

%

27.6

%

10.2

%

27.6

%

9.8

%

Restructuring costs

11

10

1

3

17

21

5

10

Non-cash Amortization expense

-

5

-

4

-

16

-

14

Transit Segment Adjusted Results

$

192

$

83

$

152

$

60

$

565

$

240

$

479

$

192

Transit Segment Adjusted Margin

29.0

%

12.5

%

27.5

%

11.0

%

28.4

%

12.1

%

27.9

%

11.2

%

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION
RECONCILIATION OF CHANGES IN NET SALES - BY SEGMENT
(UNAUDITED)
Three Months Ended September 30,
In millions Freight Transit Consolidated
2022 Net Sales

$

1,531

$

550

$

2,081

Acquisitions

45

-

45

Foreign Exchange

2

30

32

Organic

312

80

392

2023 Net Sales

$

1,890

$

660

$

2,550

Change ($)

359

110

469

Change (%)

23.4

%

20.0

%

22.5

%

Nine Months Ended September 30,
Freight Transit Consolidated
2022 Net Sales

$

4,343

$

1,713

$

6,056

Acquisitions

77

-

77

Foreign Exchange

(28

)

(3

)

(31

)

Organic

772

277

1,049

2023 Net Sales

$

5,164

$

1,987

$

7,151

Change ($)

821

274

1,095

Change (%)

18.9

%

16.0

%

18.1

%

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 viewed in addition to, and not as an alternative for, Wabtec's reported results prepared in accordance with GAAP.

Wabtec Corporation
2023 Q3 Cash Conversion Calculation
(in millions)
Reported Cash ÷ (Net Income + Depreciation & Amortization) = Cash Conversion
from Operations
Consolidated Results

$425

$242

$125

116%

Wabtec Corporation
2023 Q3 YTD Cash Conversion Calculation
(in millions)
Reported Cash ÷ (Net Income + Depreciation & Amortization) = Cash Conversion
from Operations
Consolidated Results

$515

$608

$371

53%

Wabtec Corporation
2022 Q3 Cash Conversion Calculation
(in millions)
Reported Cash ÷ (Net Income + Depreciation & Amortization) = Cash Conversion
from Operations

Consolidated Results

$204

$163

$119

72%

Wabtec Corporation
2022 Q3 YTD Cash Conversion Calculation
(in millions)
Reported Cash ÷ (Net Income + Depreciation & Amortization) = Cash Conversion
from Operations
Consolidated Results

$628

$482

$359

75%

Wabtec Investor Contact

Kristine Kubacki, CFA / [email protected] / 412-450-2033



Wabtec Media Contact

Tim Bader / [email protected] / 682-319-7925

Source: Wabtec Corporation

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