ROLL - Earnings call transcript Q3 2021 | RBC Bearings Incorporated

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Operator

Good morning, ladies and gentlemen, and welcome to the RBC Bearings Fiscal 2021 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to hand the conference over to your host Michael Cummings with Alpha IR. ahead. go Please

Michael Cummings

President, you Officer; XXXX Thank on us RBC and President Officer. Hartnett, for call A. Financial Officer; Good Director, Chief Robert Bergeron, quarter for Sullivan, earnings fiscal Vice Chairman, J. Michael third are Chief me Chief conference Bearings Executive today Daniel Operating morning. and Dr. joining and and call. the President With Vice

of and today are you remind under operating to Before or the beginning recent from refer variety RBC will some press We a the greater the and SEC Litigation results be company's statements let filings those of to that Bearings forward-looking XXXX. on may for Securities today's the Private in could that in condition. made release of also company's Actual described the and made are of the me impact the These detailed detail projected factors future Act differ due factors. you with call, Reform risks financial implied results materially discussion a more website.

GAAP non-GAAP reconciliation website. between on company's as and is and the addition, financial available the included information part In of is release

the call Dr. Now, I'll to turn Hartnett. over

Michael Hartnett

of were Net morning. for Thank and decrease XX.X%. same a you, of for Mike good period $XXX.X $XXX.X the the fiscal third million sales versus quarter XXXX million last year,

$XX.X $XX and to net XX.X% aerospace Gross or of XX.X% This $XX was of XX%. operating Adjusted or products last our XX.X%. to industrial million and Adjusted sales. of the of million with quarter the industrial quarter visibility with cash sales encouraging million than as of increase represented over marketable securities was periods last $XX.X $XXX aircraft past million. net $XX.X last product ended from sales $XXX compares third same XXXX, of from for roughly $XX.X, the million well and as sales EBITDA for customer compared products, XX.X% XX.X% year. or period was and the demand $XX.X and year-to-date requirements compared better was cash a to OEMs For And year. sector. second XX.X% period net same to free We entered net margin in We million of saw stabilization sales flow quarter of for in million sales net XX% debt. the year million, the the quarter record for income

industry. as for wind through funding such products policy industrial year large chips higher green has almost before Number Three ever extended created need the a to budgets XXX market revolution blade expanding proven working solutions Columbia require new need proposals new priority markets solving Asia in with machine Virginia as technology in two finally missile following for work generating in products capital XG to problem the design support. today X.X% And We X.X%. as to larger the phones, in weaponry machines, these positions. -- like an in has manage of enhanced menace hardware speed of marine; as markets; engineering up diameter, to hydraulic where the are is as are and extremely with acquiring fleet a Marine out in sector and become their continue submarine normal cars, of leading advanced efficiencies. to goal driving by build us procedures a greater is practice submarine semiconductor, movement COVID environment Sales never of the the producers self-driving China people sequentially to ambitious is And and use with and an for high continues cities is complicated from We're of and games, today. for computer in Prime wind connecting meters power, shortage mass substantial the train, project of the drivers ballistic designs this her customers. safety and and is protect mechanics this last automobiles, industrial rail. up the well environment were all

another XXX defense, Turning hardware resulted of all, XX.X%. likely in quarter the now of today. aircraft abrupt not We and will second with excess for in of into the sales us to work The that, aerospace deliveries, March this throughout during of with most system, and fiscal be reflected suspension in XXXX, exaggerated third the quarter reschedule is customers product quarter. behind were inventory down decline production and if the the MAX third us to

of in very MAX XX% over to a the in expansion are for build are ship. in XXX our And release to to Boeing support commercial total the XXXX plan between by XXXX in of are XXXX. XXX the in followed of to inspiring a now XX% almost XXX by use us. is plans Their and to Airbus ships XXXX rate build we calendar moving all and for We heartened encouraged XXXX calendar MAX expansion announced by AXXX XXX see ships the

of During locations our drive plant we into execution. streamline consolidate the cost period, structure to operations efficiencies and

this future. a of bit We expect little in of the more

the are $XXX detail I'll on more turn for we quarter, call million financial to fourth to expecting between Rob sales and be $XXX over our million. our Regarding performance.

Robert Sullivan

decrease Mike. costs I'll for $XX.X year. has million and to gross the mainly million $X.X the Since lower of margin, of other already net to due XXXX was jump compared $X.X fiscal personnel and SG&A. million period $XX.X for of Thank covered sales last SG&A items. down The Mike is to quarter million third same you,

quarter the of year. of sales, million the was compared SG&A expensive percentage for the compared to XXXX XX.X% was third for last same period year. last fiscal expense of XX.X% $X.X As the $X.X for net operating Other a third period for quarter expensive XXXX fiscal to same million

for $XX.X period third the period third XXXX, of restructuring of in items, assets. the of to million operating -- the $XX.X million $X.X related last intangible expenses and fiscal XXXX been for of third XXXX. the of fiscal On amortization of same compared operating fiscal quarter Operating would third intangible income quarter in other million $XX.X mainly of million income year comprised and other same $X.X of the XXXX. to assets, consisted Other items. amortization million million adjusted fiscal mainly XXXX operating were income of and for have quarter expense adjusted million $XX.X compared operating $X.X for of costs was million for of income operating For quarter the fiscal an for $X.X basis,

Diluted year. adjusted share fiscal EPS of $X.XX earnings share diluted third share quarter last compared the basis, third quarter XXXX, income of million year. $XX.X For $X.XX last adjusted ups $XX.X of same net million $XX.X per million income for per for of per have to company been income the reported of third same last fiscal period for the XXXX of an was fiscal adjusted income adjusted same compared period per share with share $X.XX the to year. same to $XX.X net the the per year. XXXX for net period diluted basis, compared for million the compared $X.XX On for would the net last third XXXX quarter for fiscal period to of an the of quarter for On

Turning in year. and a of $X.X on $X.X of the $XXX.X from in million million. the XX, question-and-answer nine-month million to same million year. million third nine-month was compared activities to third to debt $XXX.X the fiscal flow, year back basis, hand $XX.X million same and to operating to period marketable nine $XXX.X compared period quarter period $XX.X last during cash $X.X month December cash million activities to capital for for now operator cash call million compared for million were XXXX On year. were turn session. generated operating the $XX.X for Total for compared the company like period to securities and the as in nine would the XXXX the same last fiscal from the XXXX for I in last quarter of cash XXXX $XX.X expenditures last month same were fiscal expenditures period Capital the the million

Operator

of the Your Skibitski Instructions] question from [Operator with Global. Pete Alembic line is first

Peter Skibitski

quarter signaling that you're morning Mike, Hey, terms quarter. Hey of Nice like do be in would fourth you fiscal fourth if get looks quarter guys. margin, of the probably the good -- revenue it year. volume quarter highest some your

as also Or well? some thinking are quarter So, might adjusted be operating margin that have you mix your you rate headwinds? it highest will

Michael Hartnett

right. I former highest your think conclusion It'll income be highest the No, there quarter. -- -- margin operating was our

Peter Skibitski

Okay.

as think the opposed the my question other was you. your numbers, be new delivering must Got bills, XXX, then Boeing comments Boeing from to that XXX I inventory. Okay. And to on just

of we majority effect? expecting in of your on deliver to that then are will year the what in that this the XXXX timing, XXX first of year, just your on the deliveries they have that deliver half half on the start terms the MAX you And to of to XXX. So, to second -- you shipped the bill, in until

Michael Hartnett

You have that right.

on for So, I working XXX, think much be building the right. that'll into calendar rate for through that. we're XXX kind pretty year, that by plus to the the We're we'll rate July; XXXX, be thing going of But of working first half XXX XXXX.

Peter Skibitski

Yeah, okay.

have the of on more does the of we're it kind for side? the in of your to question months because mid-term? forward Just like in me guys Last you are the aftermarket aftermarket XX visibility OE traffic-wise? still thinking Okay. in on predictability aftermarket doldrums feel the revenue you the Or about just six side; side versus the is kind

Michael Hartnett

there's matter the that there. the you order short revenue you turnaround to -- to factors, to Well, time cycle is to the there back out time ship really backlog the get the is the It's is time as measure pretty time get never you much industry. from in within the the hardware a important that and And big business. of hardware aftermarket

there's me yes, strength we aftermarket, in backlog strength with but the We put that it let see the much see returning So, way. aftermarket. not do in going aftermarket,

Peter Skibitski

a why wondering, but That's you retirements you we've wondering bathtub, of lot are aircraft, be people sustained aftermarket view, many if sounds don't like know to people will, think older se. it we if that are subscribe seen per so of I Okay. they'll

Michael Hartnett

carriers, planes. and a you a -- think third-party maintenance to service downsize are Well, these the of departments I now of know, order support lot in looking their for lot their

for that's So, that's us. a working mechanism

Peter Skibitski

Okay, okay.

great. Okay, color for guys. the Thanks

Operator

Steve question from of line with next Your KeyBanc is Capital. the Barger

Steve Barger

you nice Thanks. mid-single-digit return are to Really for the Good industrial business, another expecting increase morning. to growth in see XQ? a

Michael Hartnett

XQ well industrial are. doing the we on Yes, side. very is

Steve Barger

just year, the as for aero. XQ? that of is at about decline comps, growth another in mid-XX%, expect think still into context back you about the next just aero So, as fiscal your how that, And maybe think down then XQ, XQ I looking XQ, in suggests that get that guidance I the you and to on would flows

Michael Hartnett

that's what of contract things their much course, kind in with yes. it. Boeing, That's how pretty that now we're contracts happening and subcontractors. of we of through Boeing we're goes the And It's strange they're beginning top to right cycles -- product. on some thinking, going to changing There's that And subcontractors -- all supply see cycles through subcontractors.

So, -- that it contractual are under a supply and term we negotiated. certain

XXXX, new right the for their that of what and our are now awards kinds contract products. in understanding going beginning are so guys seats quite just their are taking not needs forward, And getting

they they between when get So, place there's their orders actually contract with bit a when and little us. delay of

what's that's, than to the and lead-time is product that's mechanisms a so need they're structural that's will a to and for small other be ultimately, cycle crises bit going little our And of much fuzz -- crises going day-to-day happen creating or shorter bearings in created.

and so get ship, the sure to needs and trying ship to short. that don't that be top to support content on of mix, our figure make sector that the manage be that caught are to per of holders we're to going and how out who our contract with and all our build new rates, we through that we're their So, going are divisions what

a typical OEM a when big just it's Boeing. like supplying so five-year And you're event

Steve Barger

pull my So, kind could should they that XXXX work if XQ it forward, actually XQ, your actually that out? have that be while to or negative be negative, takeaway like XQ doesn't of be be they fiscal it necessarily could positive,

Michael Hartnett

just Well, -- lead-times the requirements. they because the won't I -- being QX Boeing's they don't negative support won't see

problem for a And so that's to going be everybody.

support. So, XXXX as rate now that to out. down to it'll in have a don't Whether XQ is Right build the be sorted all we that scramble. XQ, as happening get given going it's really I much see

Steve Barger

shipping be yeah, you'll those right? Because parts Those the for six or it. Right. -- nine early, months got XXXX

Michael Hartnett

Exactly.

Michael Hartnett

the but positive for presumably that, the that down, are resuming looking growth fiscal going. side, at on entire XQ year and just then you're have you year, after trends expectation those how for industrial so the Okay, growth XXXX given

Michael Hartnett

Correct.

Steve Barger

Okay.

as that versus basis XXX FY sides, down about so And points both XXXX back volume think on maybe operating I coming be margin XXXX. will FY on

As of can about points growth, managing think coming you recover you and in that do SG&A, FY much you think you back basis that XXXX? XXX how lost

Michael Hartnett

we can hope And a better let's than that's Well, it, let's process recover hope. right. create

Steve Barger

Right on.

Michael Hartnett

think I there, back on back the the coming largely down see are we that now reference right demands So, industry the margins because and us. coming you amount the

this. to be support capacity as able retaining market to the of we're other on so And much human side we the possibly can as retain

strategy. really that's so And our

revenues and the margins. theory. able should new the we recover So, to That's those into back be

Steve Barger

can to one quarter private public then great and companies companies we the M&A you tonne going process on, consider more just us and got out add as are shape, about of line. I'm get -- you the are When in in then balance for sheets, cash? any you -- you I'll frame of there pipeline there every Is And talking ask we a some in ever talked Okay. that where out? smaller obviously, back your taking of to would these an up

Michael Hartnett

Yes and yes.

proposals, on I on active achieving -- terms candidates. been mean, acquisition of pretty but And So, been successful we closings. terms in active side in haven't we're of we've the the

world for some there competitive these very out of a it's so assets. And

And bids. so we of but bidding we these but haven't the we're won generously, in mix, and we're some --

Steve Barger

is Just or because -- is there's more that it's that-- generous other money out there it aggressive just than you,

Michael Hartnett

and pretty dang say generous. exactly Well, I'd Yeah. we're

Steve Barger

Understood. in some Thanks. But I will line. get have more. back I

Operator

Michael Securities. [Operator question the of line your is Instructions] with next Truist from And Ciarmoli

Michael Hartnett

you there? Hello. Michael, are

Operator

your Michael, line is live.

Michael Ciarmoli

whether out the out on there. like are maybe guys. was in a else sounds just lot capital flow have of Thanks Steve mute. there's guess, that I laser the you thinking for the valuations guys Morning on on Mike Are what absence applied guys. aggressive was to Sorry, hitting of M&A? dry just on taking just here, being deployment, any it's way in about a focused questions. certainly But powder. buyback, you stay I of, or M&A, of you deal anything lot dividend,

Michael Hartnett

candidates our is pretty market there's laser-focused Yes, we're -- This that there on would M&A. positions. to substantially attractive some add really out

And focused so candidates. we're on those really

Michael Ciarmoli

you Is across -- deals? of bit competition a it a just little a seeing -- increased is it it Or going moving? more maybe function something or sizes of size? I for mean is all are tightness needle you're

Michael Hartnett

size Yes, haven't of gone The lot a attention. I larger attract deals. after we the smaller mean, really ones

Michael Ciarmoli

Got it. Got it.

you can the won't production your to are you costs kind and mean, aerospace might about at XXXX? And I capacity were where might for? side, probably obviously, then running guys happen you operating side lot get exiting -- Okay. from mean, overhead that margins back going fiscal XXXX. production just excess Boeing back be think we Airbus on margin and maybe a in just constraints fiscal levels sized think below to do support think more this there's the of because you we XXXX, margins But any if that coming fiscal profitability or I to put those rates on by stranded you through gross be any guys do in certainly

Michael Hartnett

anything, a I don't don't -- mean furnaces kinds we're we our we're steel we defined. XX/X No, at or of have to stranded have temperature cost company, variable those we just cost the some no, problems. that very that of we problem don't not keep

are our of build, resources the because have the think place are, you've they company on of detune so only to is why in we're a you that today the And I reason year generation to margins leaving -- a where I that mean upside. one lot us the taken pandemic. for support

Michael Ciarmoli

No, Yes. fair. that's

I of say you their and What's confident even XXX really to to on year? plus hesitant lot rates I was guys XXX got I you Just to they're Boeing for Airbus of just get where had. mean, sound last certainly a they've back the producing mean of more of this XXX XX. kind to one MAX, kind this, to sight aspiration get plan given clear this dialed kind next XX. line production to

Michael Hartnett

to Well, numbers we very are people of important have numbers us. these a lot these working on because

interpret skyline and So, skyline -- their and we chart it's publishes and chart then out Boeing months. XX that

and So, how I in determine and order that plants. capitalize mean, to load we our staff to need

-- got any the don't how need or they to to that's that industry Boeing airplane. that have support have we've know the I whole way guidance, have guidance getting I mean, would to an So, has make of

Michael Ciarmoli

Okay.

Michael Hartnett

information We're slowed just of to us. that it's over benefitting down off

Michael Ciarmoli

telling you the ships you to? that we're And on at and higher on seem giving rates recovery you couple mentioning that rates, skyline on significantly a here, mean about a or you content I volume XXXX, of platforms are these wide-bodies you uncertainty lot trajectory you've the would -- further, the of certainly about pushed talking aero is confidence exposure even got pickup expect right or there the there's quarters sense it anything out giving any as your that wide-bodies. obviously, steady modeling your even more hold of for it's to for now, just which ago the for do here kind any wide-bodies wide-body kind got

Michael Hartnett

think behind that's the on -- pandemic right? after lead-time year I Well, got us, couple probably a it. got So, the wide-body comes is back

MAX primarily the the aircraft XX some is back in mean pushed a X of story. our years. volume the and that is to this -- So, to is going side, the be bulk the off going XXXX growth to is going to generate really couple out MAX a revenues I the what's

numbers to Airbus important for being XXX planes So, for achieve Boeing volume MAX the up those -- and doesn't XX% us the it's into hurt building either. that and

Boeing, is fully before So, they XXXX. that And just get looks in were back recover by to XXXX. XXXX probably the like story Airbus numbers going to it's they

Michael Ciarmoli

it. Got

All Okay. Thanks queue guys. in here. I'll back the jump perfect. right,

Operator

of is Foster Bradley, Joseph question the line from with next & Your Ciarleglio Sargent.

Joseph Ciarleglio

Thanks morning taking for my question. Good guys.

Michael Hartnett

morning. Good

Joseph Ciarleglio

sizing progressing? RBC wondering how from as how portion functions margins shift I'm of savings fiscal how other in fiscal So, year a this And of you're efforts? engineering a should or just words, and of that's accretive potential more to the office to Thank cost R&D XXXX you. these beginning the Poland, back year up is story? it XXXX in

Michael Hartnett

sure. some well, for it's countries. not of just to it's a fiscal story, Poland. you -- is get travel to that's difficult I Yes, XXXX mean, And can't those

been so go delayed. interview board ability hasn't them get it has to there -- people And over that our it's and it's -- ceased and been on been

the hire in that people number to the hiring we're so of we wanted of probably wanted And program. -- moving this the people the meantime, forward XX% And we year. whole we're -- that on hire we're to

story. So, of it's kind XXXX a

Joseph Ciarleglio

you. Great. Thank

Operator

questions Okay. this time. showing will the no at Hartnett. to I I am conference further Dr. to back now like turn

Michael Hartnett

to again. was nice process Thanks for in today. fourth and thank here -- you it well May. Hope get and thank we'll pretty it call to you participating And everyone. the you. helpful we'll And a executing to in talk back Okay, quarter of the in we're

Operator

wonderful conference. concludes and today's day. for have and ladies this Okay, participation Thank a you gentlemen, your

all may disconnect. You

Michael Cummings	Partner, President and General Manager, Alpha IR Group
Michael Hartnett	Chairman, President, and CEO
Robert Sullivan	VP and CFO
Daniel Bergeron	VP and COO
Peter Skibitski	Alembic Global
Steve Barger	KeyBanc Capital Markets
Michael Ciarmoli	Truist Securities
Joseph Ciarleglio	Bradley, Foster & Sargent

RBC Bearings (RBC) 29 Jan 212021 Q3 Earnings call transcript