What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-22 compared with 2025-07-24 · 170 added, 147 removed, 338 unchanged (48% of the section changed)

3 unchanged sentences

Our highly engineered products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger transit cars and buses around the world.

Our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles.

Our core products and services are essential in the safe and efficient operation of freight rail, passenger transit vehicles and other modes of transportation.

Wabtec is a global company with operations in over 50 countries and our products can be found in more than 100 countries throughout the world.

In the first six months of 2025, approximately half of the Company’s Net sales came from customers outside the United States.

In the first nine months of 2025, approximately half of the Company’s Net sales came from customers outside the United States.

Business Update

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On July 7, 2025, the Company announced a definitive agreement to acquire Frauscher Sensor Technology Group, GmbH ("Frauscher"), a global market leader in train detection, wayside object control solutions and axle counting systems, for approximately € 675 million.

The acquisition positions Wabtec for accelerated, profitable growth, and further strengthens the Company’s Digital Intelligence business by adding highly attractive and complementary railway signaling technologies.

The acquisition positions Wabtec for accelerated, profitable growth, and further strengthens the Company’s product portfolio by adding highly attractive and complementary railway signaling technologies.

Additionally, during the first quarter of 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers for approximately € 890 million.

Dellner Couplers is a global leader in highly engineered safety-critical train connection systems and services for passenger rail rolling stock.

The acquisition brings highly attractive and complementary technologies to the Transit business and provides synergies by complementing our core transit systems portfolio.

The acquisition brings highly attractive and complementary technologies and provides synergies by complementing our core transit systems portfolio.

Both announced acquisitions are subject to customary closing conditions and regulatory approval.

Transaction costs incurred during the three and six months ended June 30, 2025 related to completed and announced acquisitions were approximately $25 million and $35 million, respectively.

During the first six months of 2025, Wabtec signed a $140 million new locomotive order with a North American Class I railroad, signed new locomotive, mining and service orders in the Asia-Pacific region totaling $127 million, signed two multi-year transit platform door contracts valued at $85 million, and secured a $47 million order to provide brakes and couplers for servicing a North American customer.

Wabtec also continued to drive recurring revenue in the global market by winning a new service contract in Kazakhstan worth $299 million.

Additionally, in March of 2025, Moody's upgraded the Senior Notes ratings to Baa2 from Baa3 and changed the outlook to stable from positive, and S&P Global Ratings reaffirmed Wabtec's credit rating at BBB with a Stable outlook.

Transaction costs incurred during the three and nine months ended September 30, 2025 related to completed and announced acquisitions were approximately $9 million and $44 million, respectively.

On September 22, 2025, Wabtec announced an agreement with National Company Kazakhstan Temir Zholy ("KTZ"), the national railway of Kazakhstan, to deliver Evolution Series locomotives and provide long-term service support.

The multi-national order, valued by the Company at approximately $4.2 billion, marks the largest locomotive agreement in Wabtec's history.

Wabtec also continued to drive recurring revenue in the global market by winning a new service contract in Kazakhstan worth $299 million earlier in 2025.

Additionally in the Freight Segment, during the third quarter of 2025, the first Simandou locomotives reached Guinea, marking the first exports from the Company's India locomotive facility.

During the first nine months of 2025, the Freight Segment also signed a $140 million new locomotive order with a North American Class I railroad, signed new locomotive, mining and service orders in the Asia-Pacific region totaling $127 million, and signed a $125 million ultra class mining order.

During the three months ended September 30, 2025, the Transit Segment signed $140 million in new Transit brake orders.

Additionally, during the first nine months of 2025, the Transit Segment signed two multi-year transit platform door contracts valued at $85 million and a $47 million order to provide brakes and couplers for servicing a North American customer.

In March of 2025, Moody's upgraded the Senior Notes ratings to Baa2 from Baa3 and changed the outlook to stable from positive, and S&P Global Ratings reaffirmed Wabtec's credit rating at BBB with a stable outlook.

Wabtec is focused on driving operational efficiency and improving profitability while reducing manufacturing complexity.

As a result, there are restructuring initiatives, including Integration 3.0, Portfolio Optimization and Integration 2.0, aimed at achieving these focus areas.

During the first six months of 2025, Wabtec incurred $15 million of restructuring costs related to programs under these initiatives, primarily for employee-related costs.

Future macroeconomic volatility, changes to tariffs and trade policies, supply chain disruptions, and labor availability could cause an impact on revenue and cost increases resulting in an adverse effect on the Company’s operating results.

During the first nine months of 2025, Wabtec incurred $21 million of restructuring costs primarily for employee-related costs on programs under these initiatives.

Future macroeconomic volatility, changes to tariffs and trade policies, supply chain disruptions, and labor availability, amongst other things, could cause a negative impact on revenue and cost increases resulting in an adverse effect on the Company’s operating results.

Additionally, broad-based inflation, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results.

The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility.

These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through our strategic initiatives.

During the first quarter of 2025, Company Management determined that certain businesses within the Services product line would be better aligned with Management oversight in the Components product line.

The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility, including the impact of current tariffs.

These actions include implementing price escalations and surcharges, driving operational efficiencies through various

cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through our strategic initiatives.

The Company has experienced increased tariff costs which unfavorably impacted our cash from operations for the nine months ended September 30, 2025.

Although we do not expect a material impact to our results of operations in 2025 because of mitigation efforts, due to the volatility of trade policies, we are unable to reasonably predict the future impact.

During the first quarter of 2025, Management determined that certain businesses within the Services product line would be better aligned with Management oversight in the Components product line.

As such, Sales by product line for 2024 and 2023 have been recast to conform to the current period presentation.

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Consolidated Results

SECOND QUARTER 2025 COMPARED TO SECOND QUARTER 2024

THIRD QUARTER 2025 COMPARED TO THIRD QUARTER 2024

The following table shows our Condensed Consolidated Statements of Operations for the periods indicated.

Three Months Ended

September 30,

In millions 2025 2024

15 unchanged sentences

Interest expense, net (65) (52)

Other income, net 24 4

Other expense, net (1) (3)

Income before income taxes 425 378

3 unchanged sentences

Net income attributable to Wabtec shareholders $ 310 $ 283

The following table shows the major components of the change in Net sales in the three months ended June 30, 2025 from the three months ended June 30, 2024:

The following table shows the major components of the change in Net sales in the three months ended September 30, 2025 from the three months ended September 30, 2024:

In millions Freight Segment Transit Segment Total

Second Quarter 2024 Net sales $ 1,920 $ 724 $ 2,644

Third Quarter 2024 Net sales $ 1,930 $ 733 $ 2,663

Acquisitions 128 6 134

Portfolio Optimization (Divestitures/Exits) (7) (6) (13)

Foreign Exchange 1 22 23

Organic 41 38 79

Second Quarter 2025 Net sales $ 1,919 $ 787 $ 2,706

Net sales for the three months ended June 30, 2025 increased by $62 million, or 2.3%, to $2.71 billion compared to the same period in 2024.

Organic sales increased $24 million which was attributable to the Transit Segment, partially offset by the Freight Segment.

Transit sales increased from higher demand for Original Equipment Manufacturing and Aftermarket products and services driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased passenger ridership levels.

Freight Components sales decreased primarily due to lower North America rail car build and the exit of low margin business offerings through Portfolio Optimization.

Freight Equipment sales decreased primarily due to lower mining sales and lower locomotive deliveries due to a supplied part issue.

Freight Services sales increased from higher deliveries of locomotive modernizations and higher parts sales.

Sales from acquisitions contributed $27 million, and favorable changes in foreign exchange increased Net sales by $11 million.

Third Quarter 2025 Net sales $ 2,093 $ 793 $ 2,886

Net sales for the three months ended September 30, 2025 increased by $223 million, or 8.4%, to $2.89 billion compared to the same period in 2024.

Organic sales increased $79 million which was attributable to both the Freight and Transit Segments.

Freight Equipment sales increased primarily due to higher North American locomotive deliveries.

Freight Services sales decreased from lower deliveries of locomotive modernizations and engine overhauls.

Transit sales increased from higher demand for Aftermarket and Original Equipment Manufacturing products and services driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased passenger ridership levels.

Sales from acquisitions contributed $134 million, primarily from Inspection Technologies in the Freight Segment, and favorable changes in foreign exchange increased Net sales by $23 million.

Cost of sales

Cost of sales for the three months ended June 30, 2025 decreased by $2 million, or 0.1%, to $1.77 billion compared to the same period in 2024.

Cost of sales as a percentage of Net sales was 65.3% and 67.0% for the three months ended June 30, 2025 and 2024, respectively.

The improvement in gross margin is attributable to favorable mix within the Freight Segment, strong productivity and cost management, Integration 2.0 and 3.0 savings, and the exit of low margin business offerings through Portfolio Optimization.

Costs of sales for the three months ended June 30, 2025 and 2024 included $3 million and $6 million, respectively, of costs related to restructuring initiatives.

Cost of sales for the three months ended September 30, 2025 increased by $101 million, or 5.7%, to $1.88 billion compared to the same period in 2024.

The increase is primarily due to the increase in Net sales.

Cost of sales as a percentage of Net sales was 65.3% and 67.0% for the three months ended September 30, 2025 and 2024, respectively.

The improvement in gross margin is attributable to strong productivity and cost management, Integration 2.0 and 3.0 savings, and the exit of low margin business offerings through Portfolio Optimization, partially offset by unfavorable mix within the Freight Segment.

Cost of sales for the three months ended September 30, 2025 included $24 million of costs related to purchase price accounting for the step-up of Inspection Technologies inventory to fair value on the date of acquisition.

Cost of sales for the three months ended September 30, 2025 and 2024 included $2 million and $7 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Total operating expenses increased $22 million, or 5.0%, for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to the increase in Net sales and transaction costs associated with announced acquisitions.

Operating expenses as a percentage of sales were 17.2% and 16.8% for the three months ended June 30, 2025 and 2024, respectively.

Selling, general and administrative expenses ("SG&A") increased $31 million for the three months ended June 30, 2025 compared to the same period in 2024.

The increase is primarily from transaction costs associated with announced acquisitions and costs incurred to support the higher sales volume, partially offset by the impacts of Integration 2.0.

Transaction costs associated with announced acquisitions included in SG&A were $25 million for three months ended June 30, 2025.

SG&A for the three months ended June 30, 2025 and 2024 both included $3 million of costs related to restructuring initiatives.

Engineering expenses decreased $7 million due to the timing of investments in new technology.

Total operating expenses increased $64 million, or 14.3%, for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to the increase in Selling, general and administrative expenses ("SG&A").

Operating expenses as a percentage of sales were 17.7% and 16.8% for the three months ended September 30, 2025 and 2024, respectively.

SG&A increased $57 million for the three months ended September 30, 2025 compared to the same period in 2024.

The increase is primarily from incremental expense from acquisitions, transaction costs associated with completed and announced acquisitions, and costs incurred to support the higher sales volume, partially offset by the impacts of Integration 2.0 and 3.0.

Transaction costs associated with completed and announced acquisitions included in SG&A were $9 million for three months ended September 30, 2025.

SG&A for the three months ended September 30, 2025 and 2024 included $4 million and $5 million, respectively, of costs related to restructuring initiatives.

Engineering expenses increased $9 million due to incremental expense from acquisitions.

Interest expense, net

Interest expense, net, decreased $3 million to $46 million for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to interest income earned on cash balances.

Other income, net

Other income, net increased $20 million to $24 million for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to a $32 million gain on mark-to-market derivatives in the current period associated with the anticipated acquisition of Dellner Couplers, partially offset by lower equity income and higher foreign exchange losses.

The effective income tax rate was 24.8% and 24.5% for the three months ended June 30, 2025 and 2024, respectively.

The year over year increase in the effective rate was primarily driven by the jurisdictional mix of earnings.

Interest expense, net, increased $13 million to $65 million for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to higher average overall debt balances in the current period, primarily related to the Inspection Technologies acquisition.

Other expense, net

Other expense, net decreased $2 million to $1 million for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to lower foreign exchange losses, partially offset by a loss on mark-to-market derivatives in the current period associated with the anticipated acquisitions of Dellner Couplers and Frauscher.

The effective income tax rate was 26.4% and 24.2% for the three months ended September 30, 2025 and 2024, respectively.

The year over year increase in the effective rate was primarily driven by audit closures that occurred during the third quarter of 2024 and the jurisdictional mix of earnings.

Freight Segment

1 unchanged sentence

Three Months Ended

September 30,

In millions 2025 2024 Change % Change

11 unchanged sentences

Income from operations (% of Net sales) 19.8 % 20.2 % (0.4)

The following table shows the major components of the change in Net sales for the Freight Segment in the second quarter of 2025 from the second quarter of 2024:

Second Quarter 2024 Net sales $ 1,920

The following table shows the major components of the change in Net sales for the Freight Segment in the third quarter of 2025 from the third quarter of 2024:

Third Quarter 2024 Net sales $ 1,930

Acquisitions 128

Portfolio Optimization (Divestitures/Exits) (7)

Foreign Exchange 1

Organic changes in Net sales by Product Line:

Components (30)

Equipment 163

Services (98)

Digital Intelligence (15)

Second Quarter 2025 Net sales $ 1,919

Freight Segment organic sales decreased by $8 million driven primarily by Components sales from lower North America rail car build and the exit of low margin business offerings through Portfolio Optimization and Equipment sales from lower mining sales and lower locomotive deliveries due to a supplied part issue.

This was partially offset by increased Services sales from higher deliveries of locomotive modernizations and higher parts sales.

Sales from acquisitions contributed $18 million, and unfavorable changes in foreign exchange decreased sales by $11 million.

Components (9)

Third Quarter 2025 Net sales $ 2,093

Freight Segment organic sales increased by $41 million driven primarily by Equipment sales from higher North American locomotive deliveries.

This was partially offset by decreased Services sales from lower deliveries of locomotive modernizations and engine overhauls, decreased Digital Intelligence sales from softness in the North American market, and decreased Components sales from lower North America rail car build and lower maintenance of way sales.

Sales from acquisitions contributed $128 million, primarily from Inspection Technologies, and favorable changes in foreign exchange increased sales by $1 million.

Cost of sales

Freight Segment Cost of sales decreased $29 million, primarily from the exit of low margin business offerings through Portfolio Optimization, and Cost of sales as a percentage of Net sales decreased 1.5 percentage points.

The improvement in gross margin is attributable to favorable mix within the Freight Segment product lines, strong productivity and cost management, and Portfolio Optimization.

Cost of sales for the three months ended June 30, 2025 and 2024 included $2 million and $5 million, respectively, of costs related to restructuring initiatives.

Freight Segment Cost of sales increased $86 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased 0.8 percentage points.

The improvement in gross margin is attributable to strong productivity and cost management and the exit of low margin business offerings through Portfolio Optimization, partially offset by unfavorable mix within the Freight Segment.

Cost of sales for the three months ended September 30, 2025 and 2024 included $1 million and $2 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Freight Segment Operating expenses as a percentage of Net sales were 14.7% and 14.4% for the three months ended June 30, 2025 and 2024, respectively.

Freight Segment Operating expenses increased by $4 million, primarily driven by higher SG&A expenses resulting from acquisitions, partially offset by a reduction in research and development costs and lower amortization expense for intangibles associated with the GE Transportation acquisition.

Freight Segment Operating expenses as a percentage of Net sales were 16.0% and 14.8% for the three months ended September 30, 2025 and 2024, respectively.

Freight Segment Operating expenses increased by $53 million, primarily driven by higher SG&A costs from higher costs to support increased sales volume and incremental SG&A and engineering expenses from acquisitions.

Transit Segment

1 unchanged sentence

Three Months Ended

September 30,

In millions 2025 2024 Change % Change

6 unchanged sentences

Income from operations (% of Net sales) 14.5 % 10.8 % 3.7

The following table shows the major components of the change in Net sales for the Transit Segment in the second quarter of 2025 from the second quarter of 2024:

Second Quarter 2024 Net sales $ 724

The following table shows the major components of the change in Net sales for the Transit Segment in the third quarter of 2025 from the third quarter of 2024:

Third Quarter 2024 Net sales $ 733

Acquisitions 6

Portfolio Optimization (Divestitures/Exits) (6)

Foreign Exchange 22

Organic changes in Net sales by Product Line:

Original Equipment Manufacturing 25

Aftermarket 26

Second Quarter 2025 Net sales $ 787

Transit Segment organic sales increased by $32 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for products and services due to fleet expansion and renewals and increased passenger ridership levels, and increased investments in sustainable infrastructure.

Original Equipment Manufacturing 12

Third Quarter 2025 Net sales $ 793

Transit Segment organic sales increased by $38 million driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased demand for products and services due to fleet expansion and renewals, increased passenger ridership levels, and increased investments in sustainable infrastructure.

Sales from acquisitions contributed $6 million, and favorable changes in foreign exchange rates increased sales by $22 million.

1 unchanged sentence

Transit Segment Cost of sales increased by $15 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased by 3.5 percentage points.

The increase in gross margin was attributable to increased productivity and the benefits from structured cost actions taken through prior years' restructuring and integration projects, primarily Integration 2.0 and 3.0.

Transit Segment Cost of sales for the three months ended June 30, 2025 and 2024 both included $1 million of costs related to restructuring initiatives.

The increase in gross margin was attributable to increased productivity and the benefits from structured cost actions taken through Integration 2.0 and 3.0.

Transit Segment Cost of sales for the three months ended September 30, 2025 and 2024 included $1 million and $5 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Transit Segment Operating expenses as a percentage of Net sales were 16.8% and 17.0% for the three months ended June 30, 2025 and 2024, respectively.

Transit Segment Operating expenses as a percentage of Net sales were 17.2% and 17.4% for the three months ended September 30, 2025 and 2024, respectively.

Transit Segment Operating expenses increased by $9 million as compared to the prior year.

Higher SG&A expenses to support higher sales volume were partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit SG&A expenses for the three months ended June 30, 2025 and 2024 included $4 million and $3 million, respectively, of costs related to restructuring initiatives.

FIRST SIX MONTHS OF 2025 COMPARED TO FIRST SIX MONTHS OF 2024

Higher SG&A expenses to support higher sales volume were partially offset by benefits from structured cost actions taken through Integration 2.0 and 3.0.

Transit SG&A expenses for the three months ended September 30, 2025 and 2024 included $2 million and $3 million, respectively, of costs related to restructuring initiatives.

FIRST NINE MONTHS OF 2025 COMPARED TO FIRST NINE MONTHS OF 2024

The following table shows our Condensed Consolidated Statements of Operations for the periods indicated.

Six Months Ended

Nine Months Ended

September 30,

In millions 2025 2024

15 unchanged sentences

Interest expense, net (157) (148)

Other income, net 22 2

Other income (expense), net 21 (1)

Income before income taxes 1,301 1,126

3 unchanged sentences

Net income attributable to Wabtec shareholders $ 968 $ 844

The following table shows the major components of the change in Net sales in the six months ended June 30, 2025 from the six months ended June 30, 2024:

The following table shows the major components of the change in Net sales in the nine months ended September 30, 2025 from the nine months ended September 30, 2024:

In millions Freight Segment Transit Segment Total

First Six Months of 2024 Net sales $ 3,744 $ 1,397 $ 5,141

First Nine Months of 2024 Net sales $ 5,674 $ 2,130 $ 7,804

Acquisitions 161 23 184

Portfolio Optimization (Divestitures/Exits) (34) (17) (51)

Foreign Exchange (36) 27 (9)

Organic 148 126 274

First Six Months of 2025 Net sales $ 3,820 $ 1,496 $ 5,316

Net sales for the six months ended June 30, 2025 increased by $175 million, or 3.4%, to $5.32 billion compared to the same period in 2024.

First Nine Months of 2025 Net sales $ 5,913 $ 2,289 $ 8,202

Net sales for the nine months ended September 30, 2025 increased by $398 million, or 5.1%, to $8.20 billion compared to the same period in 2024.

Organic sales increased $274 million which was attributable to both the Freight and Transit Segments.

Freight Services sales increased from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales.

Freight Equipment sales decreased primarily due to lower locomotive deliveries and lower mining sales.

Sales from acquisitions contributed $50 million, and unfavorable changes in foreign exchange rates decreased Net sales by $32 million.

Freight Services sales increased from higher deliveries of locomotive modernizations and engine overhauls.

Freight Equipment sales increased primarily due to higher North American locomotive deliveries.

Freight Components sales decreased due to lower North America rail car build, lower maintenance of way sales, and the exit of low margin business offerings through Portfolio Optimization.

Sales from acquisitions contributed $184 million, primarily from Inspection Technologies in the Freight Segment, and unfavorable changes in foreign exchange rates decreased Net sales by $9 million.

Cost of sales

Cost of sales for the six months ended June 30, 2025 increased by $26 million, or 0.8%, to $3.48 billion compared to the same period in 2024.

Cost of sales for the nine months ended September 30, 2025 increased by $127 million, or 2.4%, to $5.36 billion compared to the same period in 2024.

The increase is primarily due to the increase in Net sales.

Cost of sales as a percentage of Net sales was 65.4% and 67.2% for the six months ended June 30, 2025 and 2024, respectively.

Cost of sales for the six months ended June 30, 2025 and 2024 included $6 million and $12 million, respectively, of costs related to restructuring initiatives.

Cost of sales as a percentage of Net sales was 65.4% and 67.1% for the nine months ended September 30, 2025 and 2024, respectively.

Cost of sales for the nine months ended September 30, 2025 included $24 million of costs related to purchase price accounting for the step-up of Inspection Technologies inventory to fair value on the date of acquisition.

Cost of sales for the nine months ended September 30, 2025 and 2024 included $8 million and $19 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Total operating expenses increased $45 million, or 5.3%, for the six months ended June 30, 2025 compared to the same period in 2024, primarily due to the increase in Net sales and transaction costs associated with announced acquisitions.

Operating expenses as a percentage of sales were 16.8% and 16.5% for the six months ended June 30, 2025 and 2024, respectively.

SG&A expenses increased $57 million for the six months ended June 30, 2025 compared to the same period in 2024.

The increase is primarily from costs incurred to support the higher sales volume, transaction costs associated with announced acquisitions and higher employee compensation and benefit costs, partially offset by the impacts of Integration 2.0 and 3.0.

Transaction costs associated with announced acquisitions included in SG&A were $35 million for six months ended June 30, 2025.

SG&A for the six months ended June 30, 2025 and 2024 included $8 million and $6 million, respectively, of costs related to restructuring initiatives.

Engineering expenses decreased $9 million due to the timing of investments in new technology.

Total operating expenses increased $109 million, or 8.4%, for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the increase in SG&A.

Operating expenses as a percentage of sales were 17.1% and 16.6% for the nine months ended September 30, 2025 and 2024, respectively.

SG&A expenses increased $114 million for the nine months ended September 30, 2025 compared to the same period in 2024.

The increase is primarily from costs incurred to support the higher sales volume, transaction costs associated with completed and announced acquisitions, incremental expense from acquisitions, and higher employee compensation and benefit costs, partially offset by the impacts of Integration 2.0 and 3.0.

Transaction costs associated with completed and announced acquisitions included in SG&A were $44 million for the nine months ended September 30, 2025.

SG&A for the nine months ended September 30, 2025 and 2024 included $12 million and $11 million, respectively, of costs related to restructuring initiatives.

Interest expense, net

Interest expense, net, decreased $4 million to $92 million for the six months ended June 30, 2025 compared to the same period in 2024, primarily due to interest income earned on cash balances.

Other income, net

Other income, net, increased $20 million to $22 million for the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a $32 million gain on mark-to-market derivatives in the current period associated with the anticipated acquisition of Dellner Couplers, partially offset by lower equity income and higher foreign exchange losses.

The effective income tax rate was 24.0% and 24.1% for the six months ended June 30, 2025 and 2024, respectively.

The year over year decrease in the effective tax rate was primarily driven by the jurisdictional mix of earnings.

Interest expense, net, increased $9 million to $157 million for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to higher average overall debt balances in the current period, primarily related to the Inspection Technologies acquisition.

Other income (expense), net

Other income (expense), net, increased $22 million to $21 million for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to a $30 million net gain on mark-to-market derivatives in the current period associated with the anticipated acquisitions of Dellner Couplers and Frauscher, partially offset by lower equity income and higher foreign exchange losses.

The effective income tax rate was 24.8% and 24.1% for the nine months ended September 30, 2025 and 2024, respectively.

The year over year increase in the effective tax rate was primarily driven by audit closures that occurred during the third quarter of 2024, non-deductible transaction related expenses in the current year and the jurisdictional mix of earnings.

Freight Segment

The following table shows our Condensed Consolidated Statements of Operations for our Freight Segment for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

In millions 2025 2024 Change % Change

11 unchanged sentences

Income from operations (% of Net sales) 21.1 % 20.2 % 0.9

The following table shows the major components of the change in Net sales for the Freight Segment in the first six months of 2025 from the first six months of 2024:

First Six Months of 2024 Net sales $ 3,744

The following table shows the major components of the change in Net sales for the Freight Segment in the first nine months of 2025 from the first nine months of 2024:

First Nine Months of 2024 Net sales $ 5,674

Acquisitions 161

Portfolio Optimization (Divestitures/Exits) (34)

Foreign Exchange (36)

3 unchanged sentences

Digital Intelligence (18)

First Six Months of 2025 Net sales $ 3,820

Freight Segment organic sales increased by $80 million driven primarily by Services sales from higher deliveries of locomotive modernizations and engine overhauls and higher parts sales.

This was partially offset by decreased Equipment sales from lower locomotive deliveries and lower mining sales and decreased Components sales from lower North America rail car build and the exit of low margin business offerings through Portfolio Optimization.

Sales from acquisitions contributed $33 million, and unfavorable changes in foreign exchange decreased sales by $37 million.

First Nine Months of 2025 Net sales $ 5,913

Freight Segment organic sales increased by $148 million driven primarily by Equipment sales from higher North American locomotive deliveries and Services sales from higher deliveries of locomotive modernizations and engine overhauls.

This was partially offset by decreased Components sales from lower North America rail car build, lower maintenance of way sales, and the exit of low margin business offerings through Portfolio Optimization.

Sales from acquisitions contributed $161 million, primarily from Inspection Technologies, and unfavorable changes in foreign exchange decreased sales by $36 million.

Cost of sales

Freight Segment Cost of sales decreased by $12 million, primarily from the exit of low margin business offerings through Portfolio Optimization, partially offset by higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.6 percentage points.

The improvement in gross margin is attributable to favorable mix within the Freight Segment product lines, strong productivity and cost management, Portfolio Optimization, and Integration 2.0 and 3.0.

Cost of sales for the six months ended June 30, 2025 and 2024 included $4 million and $8 million, respectively, of costs related to restructuring initiatives.

Freight Segment Cost of sales increased by $74 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.4 percentage points.

The improvement in gross margin is attributable to strong productivity and cost management, Portfolio Optimization and Integration 2.0 and 3.0.

Cost of sales for the nine months ended September 30, 2025 and 2024 included $5 million and $10 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Freight Segment Operating expenses as a percentage of Net sales were 14.3% for both the six months ended June 30, 2025 and 2024.

Freight Segment Operating expenses as a percentage of Net sales were 14.9% and 14.4% for the nine months ended September 30, 2025 and 2024, respectively.

Freight Segment Operating expenses increased by $65 million, primarily driven by higher SG&A expenses resulting from higher costs to support increased sales volume, higher employee compensation and benefit costs and incremental expense from acquisitions.

This was partially offset by a reduction in research and development costs and lower amortization expense for intangibles associated with the GE Transportation acquisition.

Transit Segment

The following table shows our Condensed Consolidated Statements of Operations for our Transit Segment for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

In millions 2025 2024 Change % Change

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Income from operations (% of Net sales) 13.7 % 11.0 % 2.7

The following table shows the major components of the change in Net sales for the Transit Segment in the first six months of 2025 from the first six months of 2024:

First Six Months of 2024 Net sales $ 1,397

The following table shows the major components of the change in Net sales for the Transit Segment in the first nine months of 2025 from the first nine months of 2024:

First Nine Months of 2024 Net sales $ 2,130

Acquisitions 23

Portfolio Optimization (Divestitures/Exits) (17)

Foreign Exchange 27

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Aftermarket 62

First Six Months of 2025 Net sales $ 1,496

Transit Segment organic sales increased by $77 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for products and services, due to fleet expansion and renewals and increased passenger ridership levels and increased investments in sustainable infrastructure.

First Nine Months of 2025 Net sales $ 2,289

Transit Segment organic sales increased by $126 million driven by strong Original Equipment Manufacturing and Aftermarket sales primarily as a result of increased demand for products and services due to fleet expansion and renewals, increased passenger ridership levels and increased investments in sustainable infrastructure.

Sales from acquisitions contributed $23 million, and favorable changes in foreign exchange rates increased sales by $27 million.

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Transit Segment Cost of sales increased by $53 million, primarily due to higher sales volume, and Costs of sales as a percentage of Net sales decreased by 2.7 percentage points.

The increase in gross margin is primarily attributable to increased productivity and the benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit Cost of sales for the six months ended June 30, 2025 and 2024 included $2 million and $4 million, respectively, of costs related to restructuring initiatives.

The increase in gross margin is primarily attributable to increased productivity and the benefits from structured cost actions taken through Integration 2.0 and 3.0.

Transit Cost of sales for the nine months ended September 30, 2025 and 2024 included $3 million and $9 million, respectively, of costs related to restructuring initiatives.

Operating expenses

Transit Segment Operating expenses as a percentage of Net sales were 17.2% and 17.1% for the six months ended June 30, 2025 and 2024, respectively.

Transit Segment Operating expenses as a percentage of Net sales were 17.2% for both the nine months ended September 30, 2025 and 2024.

Transit Segment Operating expenses increased by $27 million as compared to the prior year.

Higher SG&A expenses to support higher sales volume and higher employee compensation and benefit costs were partially offset by benefits from structured cost actions taken through Integration 2.0 and prior years' restructuring and integration projects.

Transit SG&A expenses for the six months ended June 30, 2025 and 2024 included $8 million and $6 million, respectively, of costs related to restructuring initiatives.

Transit SG&A expenses for the nine months ended September 30, 2025 and 2024 included $10 million and $9 million, respectively, of costs related to restructuring initiatives.

Liquidity and Capital Resources

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The following is a summary of selected cash flow information and other relevant data:

Six Months Ended

Nine Months Ended

September 30,

In millions 2025 2024

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Financing activities $ 907 $ (1,209)

Operating activities In the first six months of 2025, cash provided by operating activities was $400 million compared to $569 million in the first six months of 2024.

Significant changes to the sources and (uses) of cash for the six month periods include the following:

Operating activities In the first nine months of 2025, cash provided by operating activities was $767 million compared to $1,111 million in the first nine months of 2024.

Significant changes to the sources and (uses) of cash for the nine month periods include the following:

• $125 million from increased Net income, partially offset by $(30) million for a non-cash gain on mark-to-market derivatives;

• $(97) million from changes in receivables driven by the timing of collections from customers;

• $(60) million from changes in inventory primarily driven by the timing of locomotive deliveries due to a supplied part issue;

• $(276) million from changes in receivables driven by higher sales and the timing of collections from customers;

• $(113) million from changes in inventory due to increased raw material costs and tariffs and to support higher sales;

• $(65) million from changes to employee related benefit payments.

Investing activities In the first six months of 2025 and 2024, cash used for investing activities was $(98) million and $(57) million, respectively.

During the first six months of 2025, Wabtec used $(83) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes and used $(21) million for acquisitions.

During the first six months of 2024, Wabtec used $(77) million for additions to property, plant, and equipment and received $20 million of proceeds from disposals of property, plant and equipment.

Financing activities In the first six months of 2025, cash provided by financing activities was $454 million which included $735 million from net changes in debt, $(148) million in stock repurchases, $(87) million of dividend payments, and $(39) million of payments for income tax withholding on share-based compensation.

In the first six months of 2024, cash used for financing activities was $(523) million, which included $(58) million from net changes in debt, $(375) million in stock repurchases, $(71) million of dividend payments, and $(23) million of payments for income tax withholding on share-based compensation.

Investing activities In the first nine months of 2025 and 2024, cash used for investing activities was $(1,887) million and $(106) million, respectively.

During the first nine months of 2025, Wabtec used $(1,755) million for acquisitions, primarily for Inspection Technologies, and used $(138) million for additions to property, plant and equipment for investments in our facilities and manufacturing processes.

During the first nine months of 2024, Wabtec used $(123) million for additions to property, plant, and equipment, used $(13) million for acquisitions, received $17 million of proceeds from dispositions of businesses, and received $13 million of proceeds from disposals of property, plant and equipment.

Financing activities In the first nine months of 2025, cash provided by financing activities was $907 million, which included $1,235 million from net changes in debt, $(148) million in stock repurchases, $(130) million of dividend payments, $(39) million of payments for income tax withholding on share-based compensation, and $(6) million for distributions to noncontrolling interest.

In the first nine months of 2024, cash used for financing activities was $(1,209) million, which included $(62) million from net changes in debt, $(974) million in stock repurchases, $(106) million of dividend payments, $(42) million of contingent consideration payments related to the GE Transportation acquisition, $(24) million of payments for income tax withholding on share-based compensation, and $(6) million for distributions to noncontrolling interest.

During the second quarter of 2025, the Company entered into the 2025 Credit Agreement, which amended and restated the 2022 Credit Agreement and refinanced the 2024 Credit Agreement.

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The Term Loan Facility was utilized to refinance (i) $250 million of the outstanding Delayed Draw Term Loan under the 2022 Credit Agreement and (ii) $225 million of the outstanding term loan under the 2024 Credit Agreement.

After June 30, 2025, the remaining $250 million under the Term Loan Facility was drawn and utilized as part of funding for the Inspection Technologies acquisition.

During the third quarter of 2025, the remaining $250 million under the Term Loan Facility was drawn and utilized as part of funding for the Inspection Technologies acquisition.

Also during the second quarter of 2025, the Company issued $500 million of Senior Notes due in 2030 and $750 million of Senior Notes due in 2035.

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Proceeds from the 2034 Notes, combined with the proceeds from the term loan under the 2024 Credit Agreement and cash on hand, were utilized to repay the outstanding amount of 2024 Notes at maturity.

As of June 30, 2025, the Company held approximately $1.50 billion of cash, cash equivalents and restricted cash, of which approximately $976 million was held within the United States and approximately $523 million was held outside of the United States, primarily in Europe, India, and Brazil.

As of September 30, 2025, the Company held approximately $528 million of cash, cash equivalents and restricted cash, of which approximately $45 million was held within the United States and approximately $483 million was held outside of the United States, primarily in Europe, India, Brazil, and China.

While repatriation of some cash held outside the United States may be restricted by local laws, most of the Company’s foreign cash could be repatriated to the United States net of any tax impacts.

As of June 30, 2025, approximately $13 million of the Company's $1.50 billion cash balance was classified as restricted.

As of September 30, 2025, approximately $28 million of the Company's $528 million cash balance was classified as restricted.

We or our affiliates may, from time to time, seek to retire or purchase outstanding debt through negotiated or open-market cash purchases, exchanges, or otherwise, and such transactions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

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Effective January 1, 2025, the Company utilizes its Revolving Receivables Program to request borrowings from a financial institution against certain collateralized receivables for up to $350 million.

During the third quarter of 2025, the Company amended the Revolving Receivables Program to increase its availability from $350 million to up to $450 million.

The Company collateralizes certain receivables through our bankruptcy-remote subsidiary on a recurring basis.

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Net cash proceeds received from the sale of receivables in exchange for cash equal to the gross receivables sold are included in cash from operations within the Condensed Consolidated Statement of Cash Flows.

During the six months ended June 30, 2025, the Company borrowed and repaid $350 million against the collateralized receivables.

There were no receivables sold during the six months ended June 30, 2025.

Net cash payments included in cash from operations from the Revolving Receivables Program was $(20) million for the six months ended June 30, 2024.

During the nine months ended September 30, 2025, the Company borrowed and repaid $800 million and $600 million, respectively, against the collateralized receivables.

There were no receivables sold during the nine months ended September 30, 2025.

Net cash proceeds included in cash from operations from the Revolving Receivables Program was $75 million for the nine months ended September 30, 2024.

Additional information with respect to the Revolving Receivables Program is included in Note 2 of "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this report.

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The components of total available liquidity were as follows:

In millions June 30,

In millions September 30,

2025 December 31,

Cash and cash equivalents

$ 1,486 $ 706

Revolving Credit Facility 2,000 1,500

Term Loan Facility 250 —

Revolving Receivables Program

Total Available Liquidity $ 2,750 $ 2,556

On July 1, 2025, Wabtec acquired Inspection Technologies for $1.78 billion, which was financed through a combination of cash on hand, proceeds from the 2035 Notes, and borrowings under other sources of available liquidity.

On July 1, 2025, Wabtec acquired Inspection Technologies for approximately $1.788 billion, which was financed through a combination of cash on hand, proceeds from the 2035 Notes, and borrowings under other sources of available liquidity.

On March 18, 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers, with a purchase price of approximately €890 million.

In connection with the announced definitive agreement to acquire Dellner Couplers, the Company

entered into foreign exchange contracts for a notional amount of €440 million to mitigate foreign currency exposure associated with the acquisition.

In addition, on July 7, 2025, Wabtec announced a definitive agreement to acquire Frauscher Sensor Technology Group, with a purchase price of approximately €675 million.

In connection with the announced definitive agreements to acquire Dellner Couplers and Frauscher, the Company entered into foreign exchange contracts for a notional amount of €890 million to mitigate foreign currency exposure associated with the acquisitions.

Wabtec intends to finance these acquisitions using cash on hand, together with a mix of short- and long-term borrowings.

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Parent Company and Guarantor Subsidiaries

In millions Six Months Ended June 30, 2025

In millions Nine Months Ended September 30, 2025

Net sales $ 4,663

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Parent Company and Guarantor Subsidiaries

In millions June 30, 2025 December 31, 2024

In millions September 30, 2025 December 31, 2024

Current assets $ 1,395 $ 1,624

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Parent Company and Guarantor Subsidiaries

In millions Six Months Ended June 30, 2025

In millions Nine Months Ended September 30, 2025

Net sales to non-guarantor subsidiaries $ 699

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Parent Company and Guarantor Subsidiaries

In millions June 30, 2025

In millions September 30, 2025

Amount due to non-guarantor subsidiaries $ 7,205

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Issuer and Parent Company (Guarantor)

In millions Six Months Ended June 30, 2025

In millions Nine Months Ended September 30, 2025

Net sales $ 436

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Issuer and Parent Company (Guarantor)

In millions June 30, 2025 December 31, 2024

In millions September 30, 2025 December 31, 2024

Current assets $ 282 $ 546

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Issuer and Parent Company (Guarantor)

In millions Six Months Ended June 30, 2025

In millions Nine Months Ended September 30, 2025

Net sales to non-guarantor subsidiaries $ 28

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Issuer and Parent Company (Guarantor)

In millions June 30, 2025

In millions September 30, 2025

Amount due to non-guarantor subsidiaries $ 8,758

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Proceeds from the 2030 Notes and cash on hand were utilized to repay the outstanding amount of the 2025 Notes at maturity.

As a result of the foregoing, as of June 30, 2025, contractual obligations related to the repayment of long-term debt decreased for 2026-2027 from $1,520 million to $1,270 million and for 2028-2029 from $1,475 million to $1,250 million, and increased for 2030 and beyond from $500 million to $2,225 million.

On July 1, 2025, the Company utilized cash on hand, together with the proceeds from the 2035 Notes, and borrowings under other sources of available liquidity to fund the acquisition of Inspection Technologies at closing.

During the third quarter of 2025, the remaining $250 million under the Term Loan Facility was drawn and utilized as part of funding for the Inspection Technologies acquisition.

As a result of the foregoing, as of September 30, 2025, contractual obligations related to the repayment of long-term debt decreased for 2026-2027 from $1,520 million to $1,270 million, and for 2028-2029 from $1,475 million to $1,250 million, and increased for 2030 and beyond from $500 million to $2,475 million.

Company Stock Repurchase Plan

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Purchases of shares may be made by open market purchases or privately negotiated purchases and may be made pursuant to Rule 10b5-1 plan or otherwise.

As of June 30, 2025, approximately $852 million was remaining under the stock repurchase plan.

As of September 30, 2025, approximately $852 million was remaining under the stock repurchase plan.

Forward Looking Statements

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• availability of credit or difficulty in obtaining debt or equity financing;

• changes in market consensus as to what attributes are required for projects to be considered "green" or "sustainable" or negative perceptions regarding determinations in such regard with respect to our Green Finance Framework or ESG strategy;

• changes in the ESG topics that have the highest relative priority for Wabtec's external stakeholders;

• changes in the sustainability topics that have the highest relative priority for Wabtec's external stakeholders;

Operating factors

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis