And I think that’s a key piece, without really making sure you don’t lose sight of the development of what I call zero emission technologies, which plays into the battery electric. It plays ultimately into utilizing higher and higher hydrogen mix, which could lead to fuel cell. But some of those are much farther out in terms of the opportunity to adopt, in terms of the maturity of the technology. and in terms of the economics that it needs to get to.
James Heaney: Got it. Thanks for the color. And as a follow up, I kind of wanted to go back on the margins again. So, back in Investor Day, you kind of talked about expanding margin by 250 to 300 bps in the next five years, but given such a strong margin performance in first quarter 2024, despite like more temporary expectation for the back half, are you kind of thinking differently about the long-term margin target, or are you still kind of like looking for 250 to 300 bps margin expansion? Thank you.
John Olin: Yes, James, as we look forward in the business, we believe we see the mid-single digits on the revenue side and the double digits on the EPS side. Nothing has changed based on our performance of this year or last year in terms of our longer-term view of the industry and our performance within that industry.
Rafael Santana: I think we continue to see opportunities to drive a profitable growth ahead. I think that’s important. And at the same note, you’re going to have, again, variation. What if it’s quarter to quarter, half over half, but there’s strong momentum here in both the pipeline, and both North America and internationally. And I think the other piece we sometimes don’t talk enough is just the ongoing lean initiatives, the progress on integration 2.0, the portfolio optimization efforts. I mean, those two things combined really provide us an opportunity here for both margin and revenue expansion.
James Heaney: Great. Thank you.
Operator: The next question comes from Adam Roszkowski with Bank of America. Please go ahead.
Adam Roszkowski: Hi, it’s Adam Roszkowski on for Ken Hoexter. Question for John, could you provide an update on the $75 million to $90 million run rate cost savings by 2025 and where you are now?
John Olin: Yes, Adam. We are – when we look at the cost from a cost standpoint, we are about $125 million down the runway of what we were expecting of $135 million to $165 million, and that’s kind of realized in the first two years. And from a standpoint of savings, we were on a run rate savings base at $22 million a year as we exited 2023. And with that, Adam, we are ramping up to that $75 million to $90 million that you mentioned as we exit 2025. So, we would expect an escalation of the 60, midpoint, 60 65, wherever the midpoint is, over the next couple years, and would expect that to be somewhat linear. But most of the projects have all been approved and are in different phases of execution, and some are actually completing as well. And so, we would expect those savings to ramp pretty quickly over the next two years.
Adam Roszkowski: Helpful. Thank you. And then you’ve given some good kind of one, half second half margin and profit commentary. Given the sort of elevated impact from last year, you called out about a third of the game was due to that one-time item. Should we expect the same magnitude of freight margin kind of year-over-year expansion to continue into the second quarter? Should that drop off a bit? Any color you could give us there? Thanks.
John Olin: Yes. Well, when we look at, from a growth perspective, margin growth perspective, we would expect the preponderance of that growth to be in the first half. We do expect growth, Adam, in the back half, but not nearly at the level that we’re seeing in the first half. And again, the first half is aided by the fact that revenue is going to be significantly – the significant majority of revenue will be in the first half. And therefore, the P&L leverage will follow that. And as we’ve talked about, mix is going to be favorable in the first half and the second half. So, we will see a step down in the revenue growth. It will grow, and we’ll see a step down in the margin growth. But on a full year basis, we’ll exit at our revised guidance, and we feel good about that.
When we look at the second quarter, we expect the second quarter to be a strong quarter, again based on the production shifts that we’ve made, as well as the mix that we’ve talked about. I don’t think it’ll be at the same level of revenue growth or margin growth, but it’ll be certainly a good quarter. And then again, back half will be more tempered growth.
Adam Roszkowski: Thank you.
Operator: The next question comes from Steve Barger with KeyBanc Capital Markets. Please go ahead.
Steve Barger: Thanks. If we do get an accelerated domestic locomotive cycle driven by regulatory changes, would you anticipate change orders and cancellations for mods, or would you think that would all be additive to the backlog?
Rafael Santana: There’s certainly a choice to be made, but it’s really very customer-specific. So, I wouldn’t say there would be necessarily a complete reversal of that. And I do not expect cancellations in that regard, but there would certainly be an element of more thoughts towards really moving forward with the newer technology, especially as we include in that technology, the ability to take on those alternative fuels, take that, really provides the customer here what I’ll call the safe net to transition over time with the reversibility they need.
Steve Barger: Understood. Thanks. And Rafael, following up on the hydrogen conversation, you said Wabtec is pacing investment to market adoption rates, but it’s also come up several times on this call. Do you expect to see hydrogen equipment on track within the next, say, five years? Or is that mainline hydrogen equipment more 2030 and beyond? Just to kind of level set expectations.
