Good morning, everyone. I'm Courtney Yakavonis, Morgan Stanley's US machinery and construction analyst. This morning, we have Wabtec, a leading provider of locomotives, rail equipment systems, and services for the global freight and passenger transit markets. The company completed a transformational merger with GE Transportation in 2019. I'm pleased to have with us this morning Rafael Santana, Wabtec's President and CEO, and Kristine Kubacki, VP of IR. Before we begin, please note that for important disclosures, see the Morgan Stanley research site at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I'm going to kick it off with some questions, but for those of you who are joining via the web class, I would encourage you to submit questions, and we will get to those during the presentation. Rafael, if you can just start off, Wabtec had its first quarter of positive organic growth in nearly two years this past quarter and is in the midst of a broad-based recovery across freight services, components, and transit. Can you just comment a little bit on the outlook for the company today and how it compares to the outlook when the GE deal was announced several years ago? What are you most excited about today? Well, good morning, Courtney. Good morning, everyone. Courtney, last month, we celebrated 2.5 years since the GE deal, and I'm really proud to see what the team has been able to accomplish in that timeframe. I think it's just to start with the resilience on really integrating three multinationals. At the same time, we have to navigate through trough levels in our business, and we're continuing to work through COVID. That resilience really ultimately was evidenced by strong cash generation by the business. We've stayed ahead in terms of delivering on the synergies that we have planned for the $250 million. We've successfully executed the transition service agreements that we had as part of that. We've continued to execute on the transit turnarounds. I think most importantly, we have stayed committed on investing in the business, so we could really have technologies that would set us up for growth ahead. That's one of the things that I'm really excited about, is the opportunity to accelerate growth and really do that with the technologies that are differentiated. We can lead here both the elements of decarbonization and efficiency for our customers moving forward. Wabtec's in a stronger position, and we expect to continue to drive shareholder value. Great. North America OE is one of the few markets that still remains weak. You've been pretty explicit that you're going to deliver zero North America locos this year from about 100 last year. When do you expect North America loco demand to come back? Does it have to for freight revenues to surpass 2019 pro forma levels of about $5.9 billion? Courtney, we had to navigate through unprecedented volume levels. That has made us to really had to look and relook at efficiency across the company, which really sets us up for profitable growth ahead. I think I'd start there first. You're right. The fact that we're delivering zero locomotives in North America, I think that's a significant opportunity for us for growth ahead. I'd also want to mention that through this timeline, the resiliency that we have demonstrated in terms of our portfolio, I think it's significant. This year, with all of that in mind, we're growing our services business close to 18%. We're growing our transit business about 14%, and we see significant opportunities for us to work through. You talked about starting to receive some inquiries for 2022 North America loco orders. Do you have a sense, are those largely replacement orders? Is that instead of taking locos out of the parked fleet? To what extent have fuel and ESG benefits been driving a lot of this recent interest due to the more efficient loco that you're producing today? Courtney, a couple elements there. We're staying in really close contact with our customers in terms of discussing some of their fleet strategies moving forward. That really goes around not just new power, new locomotives, it goes around some of the elements of modernization. I think the demand for reliable power continues to be out there, and customers will need to invest in their fleets. I think as you look at the second half of this year, there's certainly a lot of elements of disruption tied to weather, tied to supply chain, and customers are really having to relook at their fleets. A piece of it comes on really with the velocity of the network has come down and dwell times are up. The demand for reliable power is up, and we're working with them on that regard. Maybe if we can move over to parked locos. Nearly all of the public Class I railroads have called out bringing them out of storage over the past few quarters. UNP was here talking about taking hundreds of locos out of storage. Can you quantify a little bit of the revenue opportunity that Wab gets from a loco being unparked? How has that impacted your aftermarket and services revenue? Courtney, we're still working back towards what I'll call pre-COVID parking levels. That is still an element that's under works. When you look at especially going to the second half of the year, we did expect some slowdown in terms of the pace of growth. That was simply a function of the comps that you had versus last year as well. I think what we're saying that it's driving some of the things you just described, there's an element there of just the weather and some of the elements of the disruption you've seen in supply chain and ability to actually deal with some of these peaks. I think that's an opportunity and one that we're continuing to work well with customers. There's always going to be some level of variation, and that sometimes takes a little bit of time to be reflected in some of our financials. We have a question from the audience just on what growth do you see for the group over the next five years, and can you talk about any tailwinds versus headwinds? Courtney, we are going to do our Investor Day in the first half of next year. We want to do that in person. We're going to lay out a lot of that framework towards the next five years. I'll tell you, right now, I think we have invested in a number of things in the business, like I highlighted in the beginning, that allows us not just to take advantage of any elements of the cycle, but we have stayed ahead in the technology front. The demand for what I call some of the products where we have in digital electronics, the products that we have that touch decarbonization. We've stayed ahead on these trends. We're committed to lead in that front, and that has really positioned us well. Whether if you talk about new OE, whether if you talk about elements of services with mods and upgrades that will drive efficiency for our customers. With the digital electronics platform, we have a proven product portfolio, one that we have invested over time. I think that sets us up for good dynamics ahead. You mentioned mods, and you've historically talked about the opportunity to modernize the fleet by about 500 units per year on average. Can you talk a little bit about what the mod pipeline looks like today? If you think international could actually be more of an opportunity over time, given the younger age of the fleet, when that opportunity might actually be able to materialize. Courtney, the significance and the importance of the installed base we have in terms of an opportunity to upgrade is really significant. I don't think we have quoted any specific numbers in terms of the expected number of locomotives that we would be modernizing on any given year. That's, I think, an opportunity that we have to continue to expand, especially internationally. There is follow-up deals on the international landscape that the team is working to convert as we speak in terms of modernizing fleets that are out there. Modernization will continue to be an opportunity for us to grow. A lot of that comes with some of the investments we've made on systems that will allow customers to be more fuel efficient, that will help customers to drive more productivity. We have successfully executed through the 1,000th unit. We have some of these fleets operating at less than one failure per year, which is really remarkable, and we've been doing that consistently with a number of customers. Maybe switching over to international locos. That was a key point of optimism in the past quarter. You talked about receiving the key international loco order from South America and talking about a pipeline of multi-year international orders across Asia, Australia, Russia, and CIS that are under negotiation and beginning to convert. Can you just talk a little bit about the timeline and when you expect some of these orders to materialize over the course of 2021 and when those deliveries would be expected to occur? Courtney Yakavonis, we saw that pipeline started to really strengthen in the fourth quarter of last year. That has continued to be the case for the first half of the year. The team is working on converting those orders. They're real, and we're in contract negotiations. We do expect to a large extent, I think the biggest impact from these orders coming into 2023, there's going to be also an element of 2022 into that. Our pipeline continues to strengthen internationally. It's just good to see the progress. Can you just remind us of your expectations for international loco deliveries on a year-over-year basis this year? What the business is looking for next year? Are you confident that we can see growth in deliveries in international next year? Courtney, this is an all-time low for us in terms of locomotive deliveries, and it comes with the fact that we're not delivering any locomotives in North America. Do we have an opportunity here to grow when you think about the 2022, 2023 time frame? The short answer is yes, and that's even in despite of North America not necessarily rebounding into next year. This will come as a function not just of, I think, some of the international orders, but we do expect North America to ultimately be recovering, and we're well-positioned for that. We have another question from the audience on FLXdrive loco profitability. Can you talk a little bit about how the profitability of FLXdrive compares to your current loco offering? Courtney, we really like the product and the value it can bring for both our customers and for ourselves. Even when we compare it to the traditional products that we have out there. This week, we got our first international order, so that speaks to a lot of the interest. We've talked about it before. We're continuing to work with customers in terms of where that product would have a better application for them right now. The opportunity is real. We have really tested this product early in the year with a customer in revenue services. We have really exceeded a lot of the elements of what we thought we could get there, and we've stayed on working on the next generation of that product. You'll see this as an opportunity that we continue to invest in. In fact, the whole decarbonization opportunity, which looks not just at battery electric, but alternative fuels with alternative gases, it is something that we already do today. We have got locomotives running in North America with LNG. We are working in terms of making hydrogen and other alternatives a reality for customers. Moving on to digital, it sounds like there's still some challenges in increasing your digital revenues this year due to some project push-outs. How are you thinking about digital electronics being a 10%+ CAGR business over the next four years, as you outlined at IR yesterday? Critical platform, Courtney. If you talk to our customers in terms of how you're going to drive fuel efficiency moving forward, how are you going to drive decarbonization? I'll find it hard of them not mentioning our portfolio. It's one that we've invested over time. It's one that it's proven technology, that it's out there. It's one that connects very well to your last question, which was tied to the battery electric locomotive. This is ultimately going to come to be an element of how you manage energy throughout your consist. You're going to need the products like we have with Trip Optimizer to be able to manage efficiently how you're moving your trains from point A to point B. I think we have a strong platform to build on the top of it. We are expanding that product line internationally. I think the greater news there is we're expanding not with the exact same technology. We're investing on the next generation, which allows us to continue to upgrade the installed base that we currently have. We do have some challenges this year, as you mentioned. Some of this thing is tied to the fact that you're delivering no locomotives to the North American market this year. Our team is heavily focused on finding convertibility for the year, that continues to be an element of challenges. We're committed, and we really see this as a key part of how we're going to grow our business forward. Can you talk a little bit about Trip Optimizer Zero-to-Zero? I believe you got your first order. Can you give us a little bit of a framework around the revenue opportunity of both Trip Optimizer Zero-to-Zero's ramp and how it could compare to how you saw Trip Optimizer ramp? Courtney, the best way to answer that question is really looking at the installed base we have of Trip Optimizer around the world, which really it's significant. You should be thinking of that it's close to 13,000 units that are out there, and we have the opportunity to build on that entitlement. That's how you should think about it. Can you also talk about how much recurring revenue you have within the digital business today, and how we should think about the margins of some of that recurring revenue versus more of the one-time revenues that you see in that division? That's one of the focus areas for that business is to make sure that we drive more recurring revenue. Software as a service, that's a significant part of it. Today, it's around about 20%, Courtney. We have opportunities to grow that. I think we're exploring different business models with customers, and that will include some of the products that we're launching out there. It's an area that we'll stay focused. More than that, I think there are elements of recurring revenues across our entire franchise. I think that was a key element of the resilience we demonstrated last year, even when you were looking at ridership in transit below 50% levels, when you saw some of the slowdown in really locomotives around the world. I think our services business really has demonstrated a strong resilience. What products are the 20% recurring revenues associated with? It's really a spectrum of products, Courtney. I think it's less important to highlight what those products are than the opportunity to expand on that, to be very honest. It cuts across a number of different products. Some of that comes also with the fact that you've got some customers that would rather adopt certain business models versus others. We often get the question of insourcing on Class Is. What is their motivation to use your systems versus investing in developing some of their own solutions? If you can also comment at all on how your digital offerings were complemented by the GE transaction. Courtney, first, it comes through the value that we drive, right? If you're going to outsource, you ultimately are getting more reliability, you're getting more value, whether it's on the reliability, on the costs, on the product that you're receiving. Some of your question around digital electronics, we started to invest on a digital electronic portfolio back in the 1990s, and I think we've been really determined to lead a lot of the elements there. We worked very closely with our customers in terms of understanding what some of the challenges are, it comes down to our ability to bring technology, our ability to innovate, our ability to deliver on reliable solutions for them. As long as we stay ahead of that, I think there's always going to be an element of why customers will look at us. We can talk a little bit about PTC. You've started to talk about how you've expanded PTC to three countries outside of the U.S. How big should we think about the international opportunity for that being? It's significant, the opportunity, Courtney. We're present in a lot of key markets out there. We have ongoing discussions in that regard. We've announced three countries other than the U.S. where we're implementing PTC. We've got ongoing discussions with some other countries, and more important to what I highlighted to you before, is the fact that we're working on the next generation of PTC, which will allow for things like virtual coupling, will allow things like moving block, and it's making sure we're building on those capabilities and, ultimately, offering that as an upgrade for our customers around the world. Can you expand a little bit more on what the next-gen system will enable in terms of moving block and virtual coupling versus block signaling that you have today, just for those who are not familiar with those terms? Yeah. Courtney Yakavonis, I think the simple way of answering that question is we work with our customers every day to look at how do they drive productivity, how do they drive efficiency. The systems, we look at it's how do you move things in a more efficient way. That comes down to increasing the speeds in the network. It comes down to really minimizing some of the elements of disruption on any failures that might not be anticipated as they're executing for their customers from day to day. The way you should think about it, those are all technologies that will speed up, really, velocity on the network. It will speed up efficiency on how customers move, and will make it a more seamless and more interconnected rail network. On synergy achievement, you've talked about reaching your $250 million target this year, about a year ahead of schedule. Can you comment at all about what the next steps are? Are you continuing to evaluate your footprint consolidation, and what other margin opportunities are there after reaching this target? Courtney, we are going to be meeting that goal here in the second half of this year. I think more importantly, I think the team is really embarking on what I'll call the next journey here, which is what we're calling Integration 2.0 internally. It comes down to really continuing that integration of the businesses, looking at the footprint we have, continuing to drive efficiency and continuing to drive scale. Really comes down to specific, I'll call, plans that have been laid out by product line. We have some good benchmarks out there. We've got good amount of opportunities here to improve. A lot of that will drive what I call continuous improvement across the company. The fact that we rationalize the footprint, we've got a number of lean initiatives that are being implemented. It's really part of this mindset around continuous improvement, and it's something that we'll never stop. It's really a mindset and a cultural change for three multinationals that are coming together. Your synergy target initially was predicated on some revenue synergies as well. How are you thinking about revenue synergy potential today? I think there were some smaller parts of our synergies that were based on that, Courtney. The good news is, I think we've been able to expand on the cost synergies on things that we control, and I think the team has done a real nice job on looking for offsets despite of the headwinds we had with COVID on that regard. On the revenue side, some of that, just to be very honest, has taken a little bit more time to materialize because it comes with really changing some products for customers. We are doing that in the new platforms that are being developed. We're incorporating a lot of really Wabtec technology into products. Think of a lot more vertical integration from that perspective. We are working with a number of customers to continue to drive value and alternative for them on some of the systems. It has taken a little bit longer and, well, we are seeing the impact, but it's smaller than potentially we would have anticipated at this point. Along the same lines, the synergy improvement has not been as apparent in the margin profile as we would have thought, just based on the number alone. Can you just comment on why that's the case and when we should start to see that margin growth? Courtney, some of that comes with the unprecedented trough levels that we saw for the business. That has really forced us to have to relook at efficiency and productivity across the business. It doesn't stop there, right? If you look at right now, a lot of the headwinds we have with inflationary pressure, supply chain pressure, I think the good news is our team has looked for different areas to mitigate some of those, and that's going to continue to position the business stronger in terms of the opportunity to drive profitable growth ahead. That's one of the areas that I actually think the team did a real nice job on making sure that despite of the headwinds, that we're looking for alternatives, and as we do that, we're going to continue to drive margin expansion for the business. You brought up supply chain headwinds. That's been a big topic at the conference thus far. It seemed like most of your supply chain disruptions were isolated to India. Can you just talk more broadly, where were the pressures that you were seeing? Are they any worse today than they were back on the earnings call? Any additional thoughts on when we could see relief? Courtney, they are worse today than they were six months ago, and I don't think they're about to improve anytime here in the near term. As I had mentioned, some of that comes with tight labor markets. There's inflationary pressure. There's delays in terms of our suppliers, and that's also causing pain, of course, to our customers. We've seen some of the on-time delivery that traditionally have operated in the nineties, coming down, in some cases, to the eighties, in some cases to the seventies. I think that continues to be an element of pressure. With that being said, the team continues to really make sure that they stay ahead of that. They've looked for ways to partially mitigate some of those pressures. With that being said, we're committed to deliver on the framework that we highlighted at the end of the second quarter. I think that's one of the areas the team has really done a nice job. On margins overall, you commented last quarter that you expect to see 50 basis points margin expansion in the second half. Can you just clarify whether that was supposed to be year-over-year or first half over second half? What are the main drivers of the growth, and how should we think about margins heading into 2022? Courtney, we're committed to expand margins this year. We're committed to expand margins moving forward. The team's committed very much to the framework we highlighted during the second call earnings. Do we have more headwinds to that with everything that's going on? Yes. We're committed to deliver on that framework. You also talked about a 25% incremental margin framework in freight. Should we be thinking that that is the right framework heading into 2022? Given the amount that's been weighed down by under absorption, is there a potential to exceed that as loco delivery is recovering? Courtney, margin expansion on, I'll go all the way to say in both segments, whether if you're talking about transit, whether if you're talking about freight, and that's the framework we're pursuing for this year. It's a framework we'll continue to pursue moving forward. Maybe moving on to FLXdrive. Can you talk a little bit about the ramps that you're expecting, I think into 2023, and early 2024 is when we should start to think about those deliveries. Just talk a little bit about the test that you did in California and the next generation, and what the feedback you've seen from some of your customers has been. Courtney, the test we did in California was really keen on proving a technology. Going from what I call invention to really a product that could run in revenue services and that we could prove a lot of the assumptions we had behind the case. I think we've successfully proven those assumptions. We've continued to work in the next generation of that product. That product only had about 2.4 MW. We are working on a product that's got more than 7 MW, and that's going to be part of, well some of the things that we're going to be delivering for customers. We announced this week, our first international order on that regard. It's real, the opportunity. Battery electric can and will drive significant efficiency for certain routes and customers. That's a reality and something that we're committed to continue to work. The framework for decarbonization is not limited to that. We have talked about really a portfolio of solutions that will help customers decarbonize and really move towards what I call a zero-emission trains. Battery is a piece of it, fuel cells are a piece of it, the elements of alternative fuels, including hydrogen. Those are things that we're actively working with customers, so expect to see more and really working with customers on adopting some of these technologies and testing them out in their operations. Good segue into your hydrogen partnership with GM. Can you talk a little bit about your end hydrogen offerings? I believe you also are thinking about a retrofittable solution. How are you thinking about the long-term viability of hydrogen versus battery electric for Locos? I think there's two elements there. One of which is, if you think about batteries, it's very much a needed solution if you think about fuel cells and your ability to ultimately drive that efficiency and drive a system that works well for our railroads. The other piece is looking at hydrogen beyond that. That comes to utilizing hydrogen in the combustion engine that we have today. If you have a hydrogen that's competitive in terms of pricing, that can help customers on both lowering their cost in terms of fuel, but also helping them in terms of driving the ESG framework. We have the experience on that. It's something that we've really taken to heart in terms of leading. We're going to continue to lead there. Today, we operate locomotives in North America with LNG, so that's very much tied to some of the opportunity to expand that into hydrogen. Then, just in our final minute, a question from the audience. Can you discuss the sale of FLXdrive to Roy Hill? Say that again, please. Can you discuss the sale of FLXdrive to Roy Hill? This is, as I had mentioned before, we have a number of customers internationally that are looking at this as a significant opportunity to drive their commitment on the ESG framework. This is really a first order. We're working on expanding that. As I have said before, this is a product that will help customers drive that framework. Customers there are committed to the ESG framework. They will be looking at solutions like battery electric. They will be looking at alternative fuels, and we're working with these customers, Courtney. Great. Well, that about wraps it for us today. Thank you so much, Rafael and Kristine, for joining us, and thank you to everyone for participating on the webcast. Thank you so much.