Angel Castillo: Very helpful. Thank you.
Operator: Our next question comes from Scott Group with Wolfe Research. Please go ahead.
Ivan Yi: Good morning. This is Ivan Yi on for Scott Group. Wanted to touch on pricing here, and I know you guys don’t really give out any core pricing numbers, but can you directionally talk about how the pricing trends are kind of going, and what are your expectations for pricing sort of the rest of this year? Thank you.
John Olin: Hi, Ivan. when we look at overall pricing in the quarter, pricing was up slightly and our costs were slightly favorable. And so, that helped provided a little bit of margin improvement in the quarter.
Operator: The next question comes from Matt Elkott with TD Cowen. Please go ahead.
Matt Elkott: Good morning. Thank you. Rafael, I think you mentioned industry locomotive fleet in North America was down, but Wabtec was up. Is this just a matter of what we already know, the railroads are coalescing behind Wabtec locomotives increasingly? How much is trip optimizer a factor in that? And any other thoughts on that would be helpful.
Rafael Santana: So, I think first, Matt, I think there’s certainly an element of, I’ll call it overall lifecycle cost that those units provide, and that’s how you’ve got to keep that in mind. And those are investments that have been done over time that have really positioned our fleets to number one, be the most efficient fleets at an engine level. So, it starts there. It’s continuous if you think about our ability to provide service and support to those fleets. So, our customers ultimately get not just the fuel efficiency, but they get the reliability and availability of those units, and that goes with significant investments we’ve made over time on an engineering team that are able to really drive what I call continuous improvement to those fleets over time, and really the service network that we’ve gotten and our ability to support customers across the globe on that.
On top of that, you include some of the elements of really the digital investments we’ve made, and we continue to make to help customers improve not just fuel efficiency, but to improve safety and to improve the various elements that they need. So, I think this is really a validation of the investments we continue to make and the differentiation we continue to create in the product.
Matt Elkott: Got it. That’s very helpful. And just one follow-up question. I think, John, back in February at the plan tour, you mentioned $110 million of revenue this year that could be discontinued to optimize margins. Could you provide an update on that?
John Olin: Yes, we’re moving forward with the exit of what we call low margin revenue from the business, right? So, Matt, when we look at that midpoint of our new guidance at 7.5%, it actually is higher than that, given the fact that we’re taking out that $110 million. The majority of that will come out this year, but some of it will move into next year are we’re working through exit strategies for different product lines.
Matt Elkott: Great. Thanks, John. Thanks, Rafael.
Operator: The next question comes from Jerry Revich with Goldman Sachs. Please go ahead.
Clay Williams: Hi, this is Clay on for Jerry. Quick question on the transit segment. You’ve had steady margin improvement in transit over the last couple of years. Do you view the bulk of the operational improvement in the business is now complete?
Rafael Santana: No, we don’t. In fact, I think there’s continued opportunity here to drive profitable growth in the business. First, some comments in the quarter. I think they were very much in line with the expectations we had, and those were some of them tied to the higher OE growth. We had high input costs and some of that was offset by integration 2.0 savings. But in one end, while we’re pleased with the overall progress that the business has had, we are continuing significant work there to simplify the footprint, to farther improve and sustain margins. So, I think you’re going to continue to see that variation quarter to quarter, but the team here is very much committed to continue expanding margins, taking action to drive profitable growth and being more selective too in terms of the opportunities we tackle, in terms of the differentiation we’re able to provide in the products that we have.
Clay Williams: Thanks. And along the same lines, in transit on topline, you’ve had solid book-to-bill for a while now. Based on your out-coming bids, what level of sales growth is sustainable for the segment over the next couple of years?
Rafael Santana: As we look at longer term and over time, it’s probably a range of 3% to 5%. It’s probably a range that we should keep it in mind, but we continue to see favorable book-to-bill there, and I just would emphasize the first comment I made in terms of us being more and more selective about the opportunities that are out there.
Clay Williams: Thanks. I’ll pass it on.
Operator: The next question comes from Saree Boroditsky with Jefferies. Please go ahead.
James Heaney: Good morning, this is James on for Saree. Thanks for taking questions. So, I wanted to go back on alternative fuels here. So, I think rails are – I mean, while rails are focused on reducing CO2 emissions, I think fuel cost and efficiency also play a critical role here. So, can you kind of talk about the economics of using alternative fuels such as biodiesel and renewables?
Rafael Santana: They vary really across the globe, depending on both the availability and the elements of, I’ll call subsidies, that could play out there. And I think that’s really been a key piece of our strategy, which is ultimately making sure that we’ve got that flexibility to support customers. So, you might have a renewable diesel available in a certain part of the country. You might not have it in all parts of the country. How you make sure you ultimately have an engine that’s agnostic to that. And playing right into it, we’re seeing also government support in terms of creating potentially some areas where you might have hydrogen. That might play a role. And we look at this being again how you help our customers transition as some of that, I’ll call plates over time with reversible technology.
