WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP

Wabtec is a global provider of value-added, technology-based locomotives, equipment, systems and services for the freight rail and passenger transit industries, as well as the mining, marine, and industrial markets and applications. The Company primarily serves the global freight rail and passenger transit industries, and its operating results are largely dependent on the level of activity, financial condition and capital spending plans of freight railroads and passenger transit agencies around the world. The Association of the European Rail Industry, UNIFE, publishes a biennial market study that concluded the global rail market grew 2.7% in the 2021 to 2023 period and forecasts the industry to continue with a compound annual growth rate of 3% through 2027. Trends such as urbanization and growth in developing markets, sustainability and environmental awareness, investment in technology solutions, an aging equipment fleet, and growth in global trade are expected to drive continued investment in freight rail and passenger transit.

Wabtec operates in a highly competitive marketplace. Within North America, New York Air Brake Company, a subsidiary of Knorr-Bremse AG, and Amsted Rail Company, Inc., a subsidiary of Amsted Industries Corporation, are its principal overall OEM competitors. Its primary competition for locomotives is Progress Rail, owned by a subsidiary of Caterpillar. Outside of North America, Knorr is its main competitor. Wabtec's competitive strengths include an iconic legacy and strong reputation with a history of over 150 years of innovation, a breadth of product offering with a stable mix of OEM and aftermarket business, leading design and engineering capabilities, and an installed base of nearly 24,600 locomotives. The Company believes its key strengths, strategic partnerships and operational excellence, coupled with an experienced management team, enable it to compete effectively.

Wabtec generates revenue through two principal business segments, the Freight Segment and the Transit Segment. The Freight Segment primarily manufactures new and modernized locomotives, provides aftermarket parts and services, supplies rail control and infrastructure products, and provides software-enabled solutions. The Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles. In 2025, the Freight Segment accounted for approximately 72% of Wabtec's total net sales, with approximately 60% of its net sales in the U.S. and approximately 58% of the Freight Segment's net sales in the aftermarket. The Transit Segment accounted for approximately 28% of total net sales, with approximately 17% of its net sales in the U.S. and approximately 56% of the Transit Segment's net sales in the aftermarket. Sales of aftermarket parts and services represent approximately 60% of total net sales.

The Freight Segment's primary products and services include Equipment such as diesel-electric and liquid natural gas powered locomotives, engines, electric motors, and marine and mining products; Digital Intelligence such as Positive Train Control equipment, railway electronics, signal design and engineering services, train performance systems, transport intelligence, transport logistics, network optimization, nondestructive testing, and train detection systems; Components such as freight car trucks and braking equipment, air compressors, HVAC systems, heat transfer components, custom engineered burners, turbochargers, and maintenance of way equipment; and Services such as freight locomotive overhauls, modernizations and refurbishment, master service agreements, unit exchange of locomotive components, and long term parts arrangements. In 2025, the Freight Segment had net sales of $8.036 billion ¹ and income from operations of $1.567 billion ², representing 19.5% of net sales ³.

The Transit Segment's primary products and services include railway and freight braking equipment, friction products, HVAC equipment, access doors and platform screen doors, pantographs, auxiliary power converters, passenger information systems, signaling and railway electric relays, doors, window assemblies, accessibility lifts, ramps, and electric charging solutions for buses. In 2025, the Transit Segment had net sales of $3.131 billion ⁴ and income from operations of $422 million ⁵, representing 13.5% of net sales ⁶.

During 2025, Wabtec completed several significant acquisitions. On July 1, 2025, the Company acquired Inspection Technologies for approximately $1.788 billion ⁷. On December 1, 2025, the Company acquired Frauscher for approximately $792 million ⁸. Also during the first quarter of 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers for approximately €890 million ⁹, which subsequently closed on February 10, 2026. In February 2025, Wabtec announced Integration 3.0, a three-year strategic initiative to target incremental run rate synergies currently estimated to be between $115 million to $140 million ¹⁰ by 2028. During the fourth quarter of 2025, Wabtec signed $2.2 billion ¹¹ in new locomotive orders in North America, which included $1.3 billion ¹² for locomotive modernizations and $0.9 billion ¹³ for new locomotives. In the third quarter of 2025, Wabtec announced an agreement with KTZ to deliver Evolution Series locomotives valued at approximately $4.2 billion ¹⁴. During 2025, the Company repurchased $223 million ¹⁵ of stock and paid $173 million ¹⁶ in cash dividends. As of December 31, 2025, approximately $777 million ¹⁷ was remaining under the Company's stock repurchase plan.

For the fiscal year ended December 31, 2025, total net sales increased by $780 million, or 7.5%, to $11.167 billion ¹⁸ compared to $10.387 billion ¹⁹ in 2024. Net income attributable to Wabtec shareholders was $1.170 billion ²⁰ in 2025, compared to $1.056 billion ²¹ in 2024. Diluted earnings per share was $6.83 ²² in 2025 versus $6.04 ²³ in 2024. Gross profit was $3.806 billion ²⁴ in 2025, compared to $3.366 billion ²⁵ in 2024. Income from operations was $1.793 billion ²⁶ in 2025, compared to $1.609 billion ²⁷ in 2024. Cash provided by operating activities was $1.759 billion ²⁸ in 2025, compared to $1.834 billion ²⁹ in 2024.

Wabtec's growth strategy includes accelerating innovation of scalable technologies, with a significant portion of investment expected to be focused on three customer-centric areas: advanced supply chain visibility, automation and digitization, and low-to-zero emissions operations. The Company is focusing on technological advances, especially in the areas of electronics and alternative fuels, including hydrogen technologies. In the Freight segment, Wabtec is targeting markets that operate significant fleets of locomotives and freight cars, including Australia, Brazil, India, South Africa, Kazakhstan, and other select areas within Europe, Asia and South America. In the Transit segment, the Company is focused on mature markets such as Europe and emerging markets such as India. The Company also intends to increase sales through direct sales of existing products, developing new products for new geographic markets, making strategic acquisitions, and through joint ventures.

Wabtec is pursuing growth through strategic acquisitions, evidenced by the completed acquisitions of Inspection Technologies for approximately $1.788 billion ³⁰ and Frauscher for approximately $792 million ³¹ in 2025, and the announced acquisition of Dellner Couplers for approximately €890 million ³², which closed on February 10, 2026. The Company's focus has been on bolt-on and near-in adjacencies. The acquisition of Inspection Technologies is expected to significantly expand Wabtec's capabilities, adding advanced automated inspection capabilities. The acquisition of Frauscher further strengthens the Company's product portfolio by adding highly attractive and complementary railway signaling technologies. The acquisition of Dellner Couplers adds a global leader in highly engineered safety-critical train connection systems and services for passenger rail rolling stock.

Wabtec is focused on driving continuous operational improvement to improve margins. The Company announced Integration 3.0, a three-year strategic initiative to target incremental run rate synergies currently estimated to be between $115 million to $140 million ³³ by 2028. The scope of the review includes consolidating the Company's footprint via value chain improvement and facility rationalization, reducing headcount, expanding operating capacity in low-cost countries, and streamlining administrative and commercial activities. The Company anticipates that it will incur charges of approximately $125 million to $155 million ³⁴ related to this initiative, of which approximately $80 million to $100 million ³⁵ are expected to be one-time restructuring charges. For the years ended December 31, 2025 and 2024, Wabtec incurred $75 million ³⁶ and $65 million ³⁷, respectively, of restructuring costs primarily for employee-related costs and asset write downs.

Wabtec's operational outlook includes a focus on driving continuous operational improvement across the organization by sharing best practices, instilling a culture of learning, and driving standard operating practices. The Company is using Lean principles to help examine processes and continuously improve them. The Company's Lean transformation model focuses on driving process improvements and management systems to maximize the flow of value produced for the customer, remove waste, empower employees and optimize the enterprise. The Company has operations in over 50 countries and has a global workforce of approximately 31,000 employees ³⁸, excluding contingent workers. The Company is focused on strengthening its LEAD program to support its global talent pipeline.

For the year ended December 31, 2025, Wabtec invested $223 million ³⁹ in engineering for product development and improvement activities. Capital expenditures for additions to property, plant and equipment were $260 million ⁴⁰ in 2025. As of December 31, 2025, approximately $777 million ⁴¹ was remaining under the Company's stock repurchase plan. On February 6, 2026, the Board of Directors reauthorized the stock repurchase program and refreshed the amount available for stock repurchases to $1.2 billion ⁴² of the Company's outstanding shares. The Company has historically paid quarterly dividends to shareholders, currently at a rate of approximately $212 million ⁴³ annually. Cash dividends paid in 2025 were $173 million ⁴⁴.

Wabtec faces headwinds from macroeconomic volatility, including changes to tariffs and trade policies, supply chain disruptions, and labor availability. The Company has experienced increased tariff costs which unfavorably impacted its cash from operations for the year ended December 31, 2025. Broad-based inflation, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations continue to impact results. The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility, including implementing price escalations and surcharges, driving operational efficiencies, strategically sourcing materials, and accelerating integration synergies through restructuring programs. Due to the volatility of trade policies, the Company is unable to reasonably predict the future impact.

The Company's business is subject to cyclical variations in the railway and passenger transit markets and changes in government spending. Reductions in freight traffic may reduce demand for replacement products. New passenger transit car orders vary from year to year and are influenced by factors including major replacement programs, the construction or expansion of transit systems by transit authorities, and the quality and cost of alternative modes of transportation. To the extent that future funding for proposed public projects is curtailed or withdrawn as a result of changes in political, economic, fiscal, or other conditions beyond the Company's control, such projects may be delayed or canceled, resulting in a potential loss of business. The Company's backlog of $27.4 billion ⁴⁵ at December 31, 2025 is subject to standard industry cancellation provisions, and completion may be delayed or canceled.

Wabtec is dependent upon key customers, with its top five customers accounting for approximately 30% of net sales ⁴⁶ in 2025, and the loss of any one or more key customers or a reduction in their demand could materially adversely affect the business. The Company operates in a highly competitive industry and faces substantial competition from established competitors, some of which may have greater financial resources. A significant portion of sales, approximately half of consolidated net sales ⁴⁷, are derived from international operations, exposing the Company to risks including currency exchange fluctuations, foreign trade restrictions, and economic and political instability in emerging markets such as Brazil, India, and Kazakhstan. The Company's indebtedness of $5.5 billion ⁴⁸ at December 31, 2025 could increase vulnerability to adverse economic conditions and require a substantial portion of cash flow to be dedicated to debt payments. The integration of recent acquisitions, including Inspection Technologies for approximately $1.788 billion ⁴⁹ and Frauscher for approximately $792 million ⁵⁰, may not result in anticipated improvements or operating synergies and involves risks such as diversion of management attention and unanticipated costs.

Management's message emphasizes Wabtec's long-term financial goals to increase revenues through a focused growth strategy, including product innovation and new technologies, global and market expansion, aftermarket products and services, and strategic acquisitions, to increase margins through strict attention to cost controls, to drive improved efficiencies across the business, to drive strong cash flow conversion, and to maintain a strong credit profile while minimizing overall cost of capital. Key strategic priorities emphasized for the period ahead include accelerating innovation of scalable technologies, growing and refreshing the expansive installed base of nearly 24,600 locomotives ⁵¹, driving efficiencies through emerging technologies, expanding high-margin recurring revenue streams which represent approximately 60% of total net sales ⁵², and driving continuous operational improvement. Management also highlighted the announcement of Integration 3.0, a three-year strategic initiative to target incremental run rate synergies currently estimated to be between $115 million to $140 million ⁵³ by 2028, and the completion of significant acquisitions including Inspection Technologies for approximately $1.788 billion ⁵⁴ and Frauscher for approximately $792 million ⁵⁵.