Regal Rexnord (RRX) 11 May 192019 Q1 Earnings call transcript

Company Profile

Participants

Robert Cherry	Vice President of Business Development and Investor Relations
Jonathan Schlemmer	Chief Operating Officer
Louis Pinkham	Chief Executive Officer
Robert Rehard	Vice President and Chief Financial Officer
Ashay Gupta	Goldman Sachs Group Inc.,
Patricia Gorman	KeyBanc Capital Markets Inc.,
Michael Halloran	Robert W. Baird & Co. Inc.
Scott Graham	BMO Capital Markets
Julian Mitchell	Barclays Capital, Inc.
Bhupender Bohra	Wolfe Research LLC
Robert McCarthy	Stephens Inc.
Christopher Dankert	Longbow Research LLC

Call transcript

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Regal Beloit First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rob Cherry, Vice President of Investor Relations. ahead. go Please

Robert Cherry

Good Quarter operator. welcome Regal to Thank Earnings morning, Conference First XXXX Call. Beloit's you, and

Joining me Rehard, today Jon are Louis Pinkham, our Chief and Financial Officer; President Schlemmer, Chief Operating and Vice Rob our Chief Officer. our Executive Officer;

Louis, in over you statements statements. nature this are the in like that call the would to forward-looking turning to I Before are made conference call remind that not historical

are materially inherent actual Forward-looking those difficulties predicting statements since are in and differ not future implied results or there could from guarantees expressed results, statements. in forward-looking

certain factors to For investors results see a please presentation. same to this could list with provide release additional On we measures for regarding comparable and results for actual that non-GAAP to believe insight compare most today's We helping for presenting we to materially of and are please slide you financial management. in results, financial these that projected of measures these X, useful the reconciliations accordance cause and SEC appendix the financial our filings. that Slide the in from our with these earnings differ state refer measures periods information non-GAAP operating GAAP. measures, operating into manner in read this accounting and understand the our Please as measures performance across are

operating first provide then on Jon our of call. on lead update three segments off will outlook. review Afterwards, Louis financial with provide briefly markets. today's remarks. color the me will for let opening Rob agenda and performance XXXX our Now will the review results our our his review an quarter and

and results will quarter's the to we summarize then move will and XXXX Q&A. Louis outlook, Finally,

Louis. the will I call turn Now to over

Louis Pinkham

for morning, everyone. interest Regal's you your and Thanks, in you thank first quarter Rob, joining Regal. earnings conference call, and for good Thank

strong I'm Regal the team I and a company like be that truly CEO. a fifth Before with to is performance momentum. share you we discuss Regal's would honored and to solid with quarter, humbled

wish Our solutions, this We connected to provides differentiated products Mark like value will he him our CEO the to also highly best and I and engineered Mark the opportunity technology for to outstanding role overview some increasingly continued not improving the outstanding lead. the cycle management in and Gliebe contributions customers' would like for world. very brief team success, his and to take Regal, to in be conservation-minded of customers. also an positioned is approaching now would an I observations. systems retirement. our built to to provide value his thank that life the a how also and deliver and I business energy-efficient share fortune I of of have only initial

three Regal's associates our our with with been reporting of to segments. for opportunity incredibly number with and performance drive growth have opportunity customers, to I a First, been weeks, the job of only while many I have I associates for review our organization have our and and the impressed our visited facilities, shareholders. of profitable met five our on our talent have had the

Our the Regal tomorrow improvement, and objectives. integrity and for make our always increasingly as efficiency Regal, our style of are accountability aligns exceeding relationships believe to It with role products customer but are is energy we perfectly management is strong was today. culture. opportunity simple. deep. differentiated, starts boundaries to at and push There the It better than and continues My IoT-oriented, with are while

on regular meet track. corrective we'll ensure level get organization, operational at performance track overall and to develop we or will cadence, objectives. performance and company on to expectations We our we'll every will are back financial of back tie set a actions that measure the to Through expectations we

continue of the to Fortunately, the will this organization. is Regal's successful approach, momentum leverage I which

business. coming share to and look more on in about my Finally, the meeting the background analysts views forward to and investors I with weeks,

our As in we we saw for our to that were an C&I which basis and the In quarter a down EPS and growth able by on segment, X% PTS adjusted delivering the improved increase performed an expected. to pullback overall XX% segments by clearly led and outlook first the few points, some sales XX%, adjusted end for a for year, quarter. organic however, overall Climate margin we return of key well markets, solid as operating Despite Regal. rate, XX sales, the

further over to proceeds us adjusted we also We our from million The X.X. to reduce EBITDA a by continue continued the divestiture projects. divestitures debt with debt in strengthen of as our ratio balance our $XX to helped net our sheet on execute quarter,

In recently raised dividend our addition, we X%. by quarterly

are the reaffirming we our earnings outlook Finally, year. adjusted for

and We low through pruning continued will risks political and products new are growth, activities. doubt expect productivity, price, single-digit while macroeconomic given the margins sales uncertainties. improve our no global There

which start in this more guidance, on targets performance. XXXX are an C&I to you segment, on share who on increase feel Regal's the the that pace to Investor we've at XX% our Even Rob, call reflects turn basis. in per a Day. financial at time, will our to now I with financial reach earnings over details committed the provide will the we we slower However, comparable of confident midpoint at adjusted a

Robert Rehard

decreased first Thank organic of exited Businesses Sales be in good negative the X.X%. divested was or year. were contributed foreign from X%, year. X% quarter morning, prior down you, Acquisitions the was a in from quarter. currency Louis, X.X% everyone. to $XXX.X a X.X% negative and and prior Therefore, the sales XXXX million, the

in margin first XX%. the quarter was operating adjusted Our

saw volume we this a on headwinds, non-core continued Also and sales slightly the partially our compared are in this million. year. small timing improvements market early offset business our have project productivity PTS the April These Our the growth business. in PTS was from and have and conditions benefits Overall, tougher operating approximately cost. to information segments, prior commercial $XX in guidance. points Climate XXXX Margins and basis results on and divested despite in in were our by all XX in price benefited our we across improvement segments This margin up previously margin were industrial not included part been from favorable results XXXX. was transmission included business our business quarter. of segment. this marine excluded I business slide, The Annual of topline

and additional the the on for As we've all as each divestitures included diluted the well way a the from as full-year adjusted related per reminder, full-year. to past, are income these adjusted of treated quarter the operations the tables, and in this appendix included for sales presentation. we've segment consistent In net impact and with in earnings divestitures details for by share

business. ongoing can you the So of clearly these divestitures on impact see our

earnings Our first first a GAAP were reported per basis GAAP $X.XX. quarter on There quarter. were four adjustments XXXX share in the EPS to

share. restructuring related $X.XX million $X.X per was and adjustment of or costs first The

second The was a divested a million and exited adjustment $X.XX be business per gain assets share. to $XX.X on or of

transition basis the per was the representing of or be million of share divested CEO fourth share. from $X.XX per adjustment or comparable to $X.X the was businesses to were third from million income exited to year. Net a these prior on $X.X net $X.XX, a the adjustment related for of adjusted The quarter earnings related the adjustments, increase $X.XX costs share. or first XX% And per

financial will metrics. Now few a key summarize I

were first expenditures $XX.X the capital million Our quarter. in

million of full-year capital expect to expenditures continue XXXX. We the $XX for

Our million Simplification restructuring of costs first quarter. activities and the resulted in in related $X.X

information. tax $XX We million rate we upper-right the and expect our quarter continue effective full-year to of show costs the in for first ETR related The quadrant, restructuring the In XX.X%. XXXX. was adjusted

first quarter presentation the exited. to of the adjusted the be the in to reconcile the businesses and are effect tax and the both We've for ETR the assets GAAP this We ETR. adjusting table full-year a divested to appendix provided ETR of

we XXXX. to continue XX% lower-left our XXXX present to the the full-year quarter first for We information balance ETR sheet. our approximate expect In on quadrant, adjusted

total negative Our X.X. adjusted free posted first of We EBITDA net the on of flow was and net cash million debt with information first ended present lower-right a flow. quadrant, debt quarter cash $X,XXX,XXX,XXX, quarter. ratio the million. In was $X.X to $XXX in the our debt We we free our

free seasonal to cash due you'll flow normally is quarter in usual first our the As the bill. recall, lower

year, Additionally, was in flow strategic of this inventory. first free in investments impacted cash by two quarter the

mitigate mitigate July. expected The help impact made of was half capacity the China the first the upcoming made to in of the tariffs, to constraints due second investment regulatory was to investment in change year second and the the FER

in Excluding the would line with cash flow quarter free first be prior year cash investments, flow. quarter these two free in

adjusted expect continue the free We cash income XXXX. exceed net our flow for to to full-year XXX% to

our provide Now guidance full-year on an I for will XXXX. update

Our sales growth guidance for assumes organic single-digit the full-year. low

year consecutive see all the adjusted Simplification from our in expecting improvement continued XXXX, continued the We're expecting and operating segments margin are making improvements full-year this third for price. margin efforts to expansion. in three productivity, We of

cash adjusted exceed We net flow full-year. for are to free income expecting the

on Our over is on GAAP full-year midpoint per guidance for convert up to summary, a basis totaled shown comparable update full-year on key in this year the expected basis, an GAAP $X.XX guidance, reaffirming this to appendix $X.XX. guidance our this after EPS $X.XX the included is in the adjusted of for presentation. an the On or our expected are assumptions XXXX adjusted our is our prior your reference the the reference. XXXX be adjustments to are $X.XX. we some impact share, exits XX% EPS EPS listed for Also slide at and adjusted the divestitures to EPS In X% adjustments The XXXX guidance. of your included accounting slide full-year EPS of and $X.XX of on to these

call turn will I the Now Jon. to over

Jonathan Schlemmer

sales large, everyone. prior performance. details to each Approximately sales timing $XXX organic and related and organic with Industrial margin segments decline adjusted was sales were of morning, year. I'll half through on of projects. sales higher-margin organic the from some the decreasing power and X.X% Systems, the give Good Rob. of more million, Commercial operating generation walk In Thanks,

the do in these the the full-year. expect of While this for our sales projects not an we expect impacted XXXX, realize second half results, issue quarter from we first to and

markets, due number We end demand distribution, included Tailwinds America, across quarter also America market in in In pump including the conditions. the commercial North industrial weather we and quarter market Asia, China North weakness the particularly in HVAC to industrial. general mainly in in also Europe. experienced the of strength in and pool experienced weaker

adjusted a unit the down expected prior volume In addition, year, the primarily are due half large, XXX margin was occur quarter. to to in generation margin neutral C&I, market price on this X% Adjusted the impact of and performance. the timing conditions. our sales points by the was challenging XXXX, programs by operating prior on along with timing our driven the for Simplification driven of Productivity of project in basis sizable project quarter recognize lower impact Price/cost the over was margins. our a had power and primarily the second sales, up which We positive year. the was sales, to a improvements had of large both sales, higher-margin difficult that which

are segment C&I second In residential expecting FER our digits up in the with regulation. Climate pre-build adjusted sales HVAC demand OEM upcoming the to X.X% sales benefited improve prior to of residential prior in were organic strong year. America, North million, our increasing believe year in from demand. the sales single Solutions, In We high a HVAC with We were margins for half from year. $XXX

strength over commercial Middle sales Europe. the and through offset up East North was experienced America in and in refrigeration also was China, headwinds strength The the We share in prior partially year. growth, by price

a We was tariff in offset we a demand America and price expect also products was and basis to margin It operating the of points and the our was pre-build. residential XXX as FER quarter. margin slightly productivity from strong the incremental good year. low adjusted quarter, HVAC XX.X% which start We're represented the accounts, demand for inflation expenses. a expecting sales to second the a favorable the from headwind year Climate continue from positive Price/cost on Volume, North also margins. business. market high-efficiency to in commodity pruned up Adjusted some improvements all mix impact had sales, prior minimal

the As $XXX and Climate impact we the half adjusted expect have basis, we see stated, incremental meaningful million, forecasting result full the XXXX, Transmission segment was we distribution, number increasing markets, $XX including implemented as up and annual oil of impact campaign of our were result a to expect in also as the change. headwinds million XXXX, Agriculture consistently were strength a metals. over were X.X% we in We're the organic from second beverage to of In in sales quarter. FER sales in sales. of gas the and prior down on year. renewable Solutions an quarter the Power see prior and first of In a Solutions, the energy would quarter, with Sales Price in sales incremental by the in across experienced of of end a increases year quarter. fourth XXXX.

very margins sales was impact up business. the to points have and the did and sales, was year. more XX.X% market, in a sales distribution solid productivity we're from mix margin improvements strength we than strong volume, on was benefit year had also offset It start and However, prior commodity for a to positive expecting basis this PTS Price our for tariff higher operating margins. XX The the full-year. from inflation a expenses. Adjusted adjusted and the of orders

the the full-year expecting the we're we expect for higher due was forward, mix. quarter than continue. to rate strength stronger The to first margin the in sales would distribution Looking

to the and the China improvement are expecting mitigate tariffs investments impact one expected inventory investment to capacity constraints second the due we However, in first year. FER upcoming a of XXXX mentioned quarter, to made prior the investment to continue change. two help to in the Rob mitigate we margins the the show over strategic

On to China our call, been tariffs, platform. had of facilities the mitigate in the facilities, as mitigate third inventory year, business. chain investments good I previously U.S. one and the the and in to quarter mentioned to our We but additional market. we to making in supply China motors making our the improve in help first begun manufacturing quarter on impact, global our our motors leveraging global footprint These we leverage the of the the industrial the strength now of margins up to vertically have that of for increased we're positioned customers one the to and progress. very helped our integrate our we've new manufactured Last us design C&I that tariffs, We're earnings production not Mexico investments support Mexico. impact serve in ramped they only better been

products the inventory FER, new in to of of from mix ramping in first better second in We including in To standard the serve we're year. are With number Climate half an production production and managing on demand of expect in motors to made products, the products, our variables, new pre-build. build we decision OEM and eliminate motors up ensure that our high-efficiency our customer the a position we added shift rates existing the to a the through a both quarter. to the inventory some business

and call We the this back expect quarters. to through the over I'll third we reduce as second work now turn inventory Louis. to

Louis Pinkham

Jon. Thanks,

growth solid perspective. a let PTS execution Now from expansion. recap me margin and an was what positive Both had organic quarter Climate strong and

Commercial the margin in and expansion helped able were our in a some total increase despite challenges to basis business. adjusted company, expand X Using Industrial share. XX% we strengthened margins down reduced have per drive in over paying the operating proceeds divestitures, from X.X. points The For however, by sheet topline our and balance XX to adjusted the This quarter leverage debt some earnings million shortfalls. by $XX did, from we

Our growth and its operating was negative C&I declined. margin sales

reversing were and timing-related, our attention. results mainly relentless these While them will market have

part thesis, builds. key the inventory negative of which to was some due strategic a Lastly, free cash flow, our is Regal investment

XXXX results on for We The quarter are have cash from adjusted greater us metric XXXX. for confident income on and full-year midpoint a per on open free track Operator, now that share of basis. net this XX% than an may the the the generate we are flow will increase would our lines you we the deliver key questions. which earnings guidance, up comparable overall at for be full-year. adjusted the And reaffirming

Operator

question-and-answer session. We first with Sachs. Instructions] come will Joe begin question the from Ritchie today now [Operator Goldman Our will

Ashay Gupta

Hi, is good Ashay This morning, Gupta on Joe. for everyone.

Louis Pinkham

Ashay. morning, Good

Ashay Gupta

If with you role. because inventory for implications housekeeping ask the cash Could associated project, congrats on also there's size like if and Louis. it, power-gen have Welcome, and you the us the could flow stock? Yes, just first new question. I a EBIT

Jonathan Schlemmer

Ashay, this the the Jon. I'll is on revenue impact. margin and comment

to if and I of large sales those decline decline of mentioned the timing on the C&I the the projects organic the So as half related represented call, the segment. about sales in

idea So of that size will on give the standpoint primary you a well. the the impact of And relative it as for a margin from revenue decline was first quarter. the the driver

of decline sales decline C&I of margin margin to particular - want on specifics don't segment. the those performance as organic both I particular while projects, primary the the as the was So get it for the well that driver into

Robert Rehard

just And quarter. cash side. Ashay, I say comment flow cash in I'll this would flow it's Rob. on minimal on the is the

Ashay Gupta

follow-up, mid-single-digits I think. down growth I little which Could forecast from And declined comment I it. a end took in guess, driving bit you to last a you that are the just low this high organic Got guess, single-digits —I markets the level. saw expectation? on to quarter, low

Jonathan Schlemmer

again. Jon Ashay, this is

still about XX% right be that But very now March. so to XX% expected So impact talked specifically as industrial had about - increase remaining full-year tariffs and We we're - also in markets. comment growth. our our markets, and That's we very assumption low have right then the our international guidance that early markets in C&I our for guidance predominantly, our X in would closely. the in is that expectation And List that from the the at other currently global guidance is list the they'll watching organic driver and in called the now, what's single-digit I segment, dynamic previous the our industrial is XX%.

Ashay Gupta

your to in but buybacks guide just you have included the deployment, follow-up. And continues leverage come so down, just On yet. don't last it. Got capital

last have the like months over versus around capital how today. and thoughts like deployment on is toggle just So between M&A evolved what the few your buybacks curious

Louis Pinkham

Yes.

Historically, includes This the in has paying changing. down allocation Ashay. dividend, Louis. that taken business, share capital investing is debt. very balanced not approach approach M&A is and That Regal a repurchases,

in that differentiation We drives in will, profitable for a own technology preference our strong customers investing have growth. product and however, our and organic

Ashay Gupta

you. Thank good. Very

Jonathan Schlemmer

Thanks Ashay.

Louis Pinkham

Askay. Thanks

Operator

Our with Jeff comes next KeyBanc. from question Hammond

Patricia Gorman

This for Gorman Trish on is Jeff.

Can of on the a expect year, long-term more we out margin little segment, specifically of of drivers throughout the expansion can on you margins. broken kind maybe the the by just cadence bit about the So how targets, and that? talk

Jonathan Schlemmer

Trish, this is Jon.

So about anything. would add see and a to that bit I'll if Rob like talk little

are as are improvement overall first we're mentioned, topline, - we overall, quarter. pleased We first derive expecting Regal our in in we performance we So the the - expecting XX headwinds on the we of able of Despite basis expansion quarter. with margin points year. were expecting through third the were for some the margin the to

three-year from to have we're the expect that Clearly, We after some to businesses, and targets businesses. are those PTS, that going and performing we and we Climate. progress in deriving those that to XXXX. targets pretty were out making to consistent three-year been continuing XXXX in in XXXX those good we're still well The in start good be strong markets off PTS performance laid

some half. We overcome until those first the second sales projects have quarter with on start. project timing we won't realize those C&I sales, the the large challenges in to The from

kind included thought of continue present in year, margin about C&I. to our in that but that it thinking quarter guidance from put So for how that of we're But for that the and challenges all and we've second some will through standpoint. that's a us for the

Patricia Gorman

PTS. divestitures? kind then you business non-core Okay, any Have candidates? guys divestiture sale of other And I the on you And any that's updates mentioned marine identified from of a transmission helpful. know

Robert Rehard

So this is Rob. Trish,

we be our And period. about strategy, in commented million businesses you innovate as in million date, underperforming this simplify a pruned our XXXX up that and As of our as focus, would pruning non-core far $XXX we Day, sales. annual to with over know, Investor to update, we've $XXX three-year

continue a evaluate opportunities. So but new to we target, do we're providing at this time, not

Patricia Gorman

Thanks Great. Okay. guys.

Louis Pinkham

Thanks Great. Trish.

Operator

Our next Mike Baird. from with question comes Halloran

Michael Halloran

welcome everyone. morning, aboard, And Louis. Hey, good

Louis Pinkham

Mike. Thanks Good morning.

Michael Halloran

kind some of $XX Obviously, the the million as on the FER laid cumulative benefit. questions side. So you've out

kind that the it do just transition? - benefit can incremental from that's the include benefit mean layer just it you transition through you. you does third, half what are disassociate pre-buy year? any Or is the given to anticipating activity? one? year? If back pre-buy the with for the And in Does And Second, then, of how expect that Thank gaps the the that you volumes with activity? the terms associated of of

Jonathan Schlemmer

Mike, I'll all sure hit make I those questions.

through if walk tell it, you Let I anything me there's kind there. just missed then of and me

sales all, first the impact not the pre-build. So incremental the $XX include of of does of million

laid of that impacts saying out the Regal. always we've the change So annualized that's for

see full still Climate first business helped we even had on first-half pre-build of certainly then We dynamic North the that the company. by timing by be solid that have for be in business. the the see million. half, trying see pre-build benefit impact of in realize the Now And second the a guidance think about a second will the standard But we've second exact to to we'll that recognize from it will we're some from know will benefit the the pre-build, some out in from believe It's expecting sales can't the on pre-build for in we of benefited will have impact that. that We as on will FER this demand year, in impact divided have half the in XXXX, $XX - overall understand and because we're the will clearly, pre-build in We quarter. because our pre-build without the products two that standpoint, and that half. $XX incremental million the the are demand come But our we first half the you included second we'll but Climate our half half. and to a sales going little that in of the first do America. the we impact solid

for our we now range pre-build the going size would second had north saw first slightly range quarter. expect $X to be million see million the the of incremental we it's in help the $X impact some sales to that the what be half of previously first XXXX, on and that, from quarter. To on also demand in thinking to based the in we're pre-build happening estimated of We that

topic. me FER, about really revenue Let about position the second very feel for on we comment good our We the On just a incremental there. while expectation. million we're feel good $XX

our of in products All new are place.

serve. capacity is of ready a to Our differentiated new some there. got suite there, very We're products We've technology. great

inside we're install. product entry-level then very technology solution, difficult efficiency help position have has highest-performing solution them DEC energy the inventory, noise with product that product and helps our the applications of with Near the to end leveraging the FER. offers Our customers - has uses that the installed lowest Star the we our And an that in We've spectrum axial programming, product on our put high base. reliability. Communication other our highest with into our think most Field industry-leading capability help We with to with customers

solution we've got that a would think in we're a we customer good position, So believe. every really need, we and

Michael Halloran

about back Thanks through as you you've then seeing decline, back the you've that year? talk Jon. signs what international the progressed through if for all into of that other of any the or the and May you the C&I the projections how half seen the here, stability gotten move means as bases April organic quarter, the in we're Maybe markets. you And the Yes, halves and hit that, just in of there. side from about talked

Louis Pinkham

Sure.

So at you C&I look the business.

in market, in we North China, Europe. full quarter. agriculture, Southeast Again, with across walk particularly I And the industrial saw we that headwinds So some of weakness and PTS. in the primarily through, just back America, the just on Asia, to of let the - of side Asia, global me they those all, also business were on markets in of kind with and what I'll the through all weakness commented in we had had had similar first the those first pump markets, quarter. again. We the go in

say was and of off terms head weak, start our bit I a month we're saw what seeing and QX we year little uptick into and as March. In January pretty of would the as order trends here, weakest we that in February we

at flat total prior As And entered company. the overall, we as look is would early talking pretty of year now order I they're we to second saw quarter. much, April what rates the I'm say, kind we've

year. got a order for our versus Climate. we've PTS up, prior seeing then based slightly the You've basis entered forecast we C&I but is the good the And Climate's strength on some quarter down as quarter, feel year-over-year on for the still improvement see going a C&I. I but be in we will quarter. say facing a have we still did little that still difficult of market second bit some Asia, conditions, sequential in we're we're quarter here we second - to believe, in about

Michael Halloran

That's helpful, Jon. Appreciate it.

Jonathan Schlemmer

Thanks Mike.

Louis Pinkham

Thanks Mike.

Operator

Capital Markets. Our next with question comes from BMO Graham Scott

Scott Graham

Louis. the good board, Hi, Rob Jon. Hey, Hi, and morning. Welcome

Louis Pinkham

Scott. Thanks,

Scott Graham

question - very things. overarching simple sort of maybe a have on I a So

organic not It us we're little a also so business. So the largest margin margin much. international's lowest expansion really helping looks we've relying business, out guidance and the lowered although that on our is bit, in sales like

some Or comfortable? these maybe perhaps to are the lower you're more puts that and of the would still thinking that higher that mid with of how? if - you end or So here, takes guidance so, the and say be where can it you fair do is

Louis Pinkham

Scott, of we're our now, mid holding the Right guidance. to

you, tell their also our as with well the on pleased we help C&I not value PTS approach business, perspective, facilities, the I'll chain but in this focus and and And products will the margins second managing and slower organization performance to productivity productivity our customers. a also supply with segments. our little margin supply the Climate in this from the to that for power-gen manufacturing half, I've But start right however, in in in half. the our project We're segment as outlined, the the shipments as in both the for newcomer timing absolutely pricing, impressed get been that as power-gen as driving second a Jon quarter, a pricing in the very year. you're bit second improvements, So ensuring has to in we the both

right midpoint we're to So guidance. the holding of now,

Scott Graham

fair. other of had in weaker here. you. Thank Europe two We That's Two the follow-ups three Asia segments. and

can more those the what a half you bit color hoping for and Climate, on give little you're year. of kind second and the us of Just both markets thinking C&I in

Louis Pinkham

so Climate Climate. I that let think - me with in - start Yes,

they some you're about they - didn't Scott, between were international - dynamics markets and PTS. C&I. comment So similar right, the Climate for a I were lot similar

the but PTS that big of segment Europe when we weakness PTS markets around conveying. across international saw focused for much Climate marine business at all the Asia's that's the business, look a for a bit markets. some the contributor not business, okay and pretty But overall. end more you like actually was

that exposure in Now is in we markets, the contributor more know It's weakness a saw But America Middle of big international overall for for international North the Climate. and our business. weakness that Europe. had a weakness business in in we saw you China, revenue some not saw we in East we

business. see through to the In because - to in Now the we progress we more time C&I these we've had through have we're half the C&I, headwinds year some Middle certainly in first going for comparisons we're favorable here as we'll China and continue Climate to now. some going headwinds East, believe the for

Our exposure to infrastructure C&I the industrial in as products are and products investments the of well. side. Asia industrial is large and often related on markets our mostly Most

questions. if So all that I'm answered not your sure

some of color kind those that's additional on markets. So

Scott Graham

that was Jon, great. No,

segment last quarter; can comment possible. on just filter it is if if in even perhaps price/cost the you the Just down by question

Jonathan Schlemmer

Yes.

through all So quarter. slightly the mentioned, neutral I first in segments to price/cost the the had overall were quarter. as we we in positive in walked positive three was segments,

good see. XXXX. to to what That deliver continues very were that's able we So from in

in in just think in neutral in terms In it, company C&I, slightly quarter. you price/cost, and PTS, about how favorable of slightly favorable the overall Climate positive

year, we're positive the the for For to remain slightly XXXX. full-year neutral expecting to

Scott Graham

for Jon. one a in great, That's sneak Can XX,XXX-foot here, more basis? Louis, maybe on I

Louis Pinkham

Sure.

Scott Graham

saw just appointment. the been I'm margin because before just Industrial sketch that help the margins that? Can that's So is the you you with first of is business that that lowest the margins, Commercial And you is - in your you not for the us sub-XX it one combination and if out Even process guessing of Louis? there, plan you those a out - the it's things is when want. even which with largest began general What time. some

Louis Pinkham

early Sure, absolutely correct. in process, but you're Scott. a bit It's the

I really the my improve weeks, like coming of did my to to assessments honestly we believe, is there improve. actually, to in we Regal it and don't as Beloit into As a margin first that to try well. most have position continue I five opportunity want

our in potential early our And What for it so a It's at to would An bit clarity business is of be coming specifically. expansion continue me plans, too is C&I Regal little more will I our margin our in year. the definitely will tell they and important strategic third there. for part take? through cadence the plans have the us long-range or you to quarter.

to in outline much that a will our so after as our you can focus C&I better portfolio I'll steps. margins. of this I position be improving is But business, organization at be our assure for a and next the And looking is well as the

Scott Graham

Thank you. that. Appreciate

Louis Pinkham

Sure.

Robert Rehard

Scott. Thanks,

Operator

comes question Julian with Mitchell ahead. next Barclays. from go Our Please

Julian Mitchell

welcome and Thanks, Louis. too,

of your much portfolio I around on is thoughts at get on year, And then and at impressions think necessary or your portfolio it those were like strategy to that we goals a simply guess, - sequence of terms you've sounds laid Regal. you first desirable question right as the understand XXXX any hitting the three priority ago? for surgery sort of is end the In update you see and the just them, to how it on think initial to two out priorities had trying first years you, may Louis, maybe of a is maybe that bigger

Louis Pinkham

the for the evaluate and great as not and to specific Julian that XXXX business giving Yes, To with is a given was and XXXX encouraged strategy, along question, for to well our my is assess me absolutely, me welcome. thanks, that brings they our customers, our hit guidance to any mandate other Investor Day. to our in The associates shareholders. have value the the answer portfolio your guidance strategy than as priority my time take Board

crystallizing early that will through we my will that in is, of sharing and this we this be is through intent be that intent this investment will and year, the go - year XXXX Our I likely with clearer community. as through as become end go the that year

So From will that's you to it's to focus But early again be just be too right within talking our actions that about far perspective, be value assured to now. our can it our bring about how pruning I'm of thinking portfolio a shareholders. for me any portfolio. kind surgical

Julian Mitchell

in as much. there's very follow-up one of a prosaic And more maybe then question, my fair going distribution PTS amount a business Regal as C&I channels. you well around just through Thank

complained channel have Some manufacturers recent months. in the about in destocking distribution

of And with how levels. inventory recently? Just Regal it much is has comfortable channels, wondered the in assesses destocking those where seen its levels it

Jonathan Schlemmer

this on that. Julian, I'll Jon, comment is

industrial I'll and talk So side from both about HVAC the side. the

for an impact. how up a HVAC, channel the believe say always weather on And our is it's do through, and affect the it's XXXX month end a are I fairly late finger year and had that would in weather that drivers a what we mild from So pretty in standpoint. inventory us we cold slightly much started the likely weather, heating hard December Then that in the way. But in came has although to that we but heating did with season. the off put

significant we market we and So we HVAC - the solid don't had driver. feel America quarter because there, We think about residential believe in good it's but be impact the in North had there there. we the demand could a quarter, an second

have on can and the On industrial that's from see, we going dynamic also levels pricing. but increased, with side, inventory there's the both industrial tariffs what

with to that and much that both price. the And tariffs be versus see end the so to difficult could demand inventory market channel, of that's increase it's how due in us impact of for the dynamics, the

we but that. - have So seen

seen industrial an have in inventory channel. uptick and distribution the levels We

Julian Mitchell

much. very Great. Thank you

Jonathan Schlemmer

Thanks, Julian.

Louis Pinkham

Julian. Thanks,

Operator

Nigel Our next with ahead. Coe Research. go from Wolfe Please question comes

Bhupender Bohra

This Nigel. for is Bhupender here

Jonathan Schlemmer

morning. Good

Bhupender Bohra

Hey.

it look two the the you on here, Jon, how cadence pretty like go - and want in things like again, the just can you think just to I through pre-build So about go margins Solution quarter which through seems strong happened, were the Climate too. pretty too, as in margin, that margins say mentioned impact Climate but you will I strong pre-build actually you how the was were pretty PTS the and side Thanks. of happen? mean, the half Climate back strong those in margins the

Jonathan Schlemmer

sure, Bhupender. Sure,

start So with year. of margin the of a I'll margins let very me both prior Climate walk main side. basis three over little points good up We business that those drivers overall XXX for had mix kind on We did and a have been leverage Really, area positive in margin a expansion. that the quarter just making bit. overall. the improvements We had had was productivity just of business - of good third volume. we our then in terms the And high-efficiency investments very on we've number the improvements, from products. to productivity

And was so quarter, - price/cost favorable. we of first we've that's the because in of off of margins without FER slightly feel business the in the - and our those started three half all so and helped still we're the benefit first in course,

many have headwinds price/cost. related didn't we So to

the year from So a a good to margin standpoint. start

full-year margin we're for for the are say for expecting Climate in company, total full-year We for margin and XXXX. the expecting I expansion expansion would

us from how was for quarter. pre-build impact regulation. here from exact get believe number versus product the sometimes cadence, strength pre-build, not an first of from walk only some for much and we benefited in of kind we single-digit impact North quarter, how market, what back of in the of benefited pre-build terms It's In through saw kind was from pre-build but residential market I've mix, that happened me much FER the upcoming - difficult the to was some with That know America the let high commented do the also our FER but first that. HVAC.

from some the that terms I in on quarter. we'd million products, range, the million That year. north we slightly come so sales Climate. demand was that also out We're estimate would I a pre-build We in the $X second I of we'll had million in our pre-build impact million previous have from that range that we $X range on that previously at the standard demand $X half. on be as that And know - our idea second earlier back $X better demand we of first exactly the in impact to see of that's through estimated - think the the of that of expect looking performance first-half what be half quarter, incremental to mentioned say, get the estimate. to to

impact products. an out million we're the the on to then XXXX. see we expecting this on but That's that FER-related will expect the sales we'll annual up to in second and year, see expect We'll basis. see of $XX pick in We half, second half to start the come some meaningful the demand in that of then impact that of full incremental

Bhupender Bohra

Thank you it. got Okay, so much.

kind I of on The million long-term already question done. other a question mean like have right, - to you to you've bucket, of the follow-up divestiture just medium plus about target other $XXX

give that? think here assets the or months businesses or numbers, nine some XX the which in sense like you the to I would You And don't us on line non-core six could want have color the but like any be months. to a on of just wanted get of months next

Louis Pinkham

Louis. is this no that on right Bhupender, color Yes. now. Really, honestly,

six hit overall we is divestitures, at the roughly that objective be specifics again, already Certainly, months, But million. drive we the shareholder outlined to assessing of So And with Rob in over our give the I'll nine to business. next none time. $XXX to working value. the have any this goal team on

Bhupender Bohra

Okay.

it. got Okay,

the the quarter. year the we you EPS at - just for in want How to number have, Thanks. should EPS finish think first Lastly, that? about with GAAP the saw rest $X.XX. of We restructuring I $X.XX

Jonathan Schlemmer

have linear comment would somewhat about on I the that the the should expected that Rob way And that that year, to estimate but spend. say we think right through still full-year, just that Bhupender. Robby, I that, right, number say it I of cadence think think. is would Yes, the for right the gave that's Is I

Robert Rehard

I would agree.

Bhupender Bohra

Okay, Thanks guys. lot got it. a

Robert Rehard

Bhupender. Thanks,

Jonathan Schlemmer

Thanks, Bhupender.

Operator

go McCarthy Our Please next with ahead. Instructions] from [Operator question comes Robert Stephens.

Robert McCarthy

you're McCarthy. McCarthy for How doing? It's Robert on Robert

Louis Pinkham

Rob. morning, Good

Robert McCarthy

the I think guys very - of timing. obviously first some the is, rather, that you very Four happened the first I think highlighted in challenges much well, the Good morning. quarter, questions,

very share quarters recent to in well you these so, you some think that's Do the of out? share that any combat soft? pretty that that your are businesses, you like call doing across do So has loss, would if are explained. been the there you fact think loss what given And numbers

Jonathan Schlemmer

from loss first Yes. and quarter markets organic we main Rob America a there quarter. meaningful don't mainly I C&I, drivers the performance. on quarter, half look that I'll impact we in talked I in business the in industrial from comment believe the sales, as performance North well as impacted had sales. do first share of of at that our share we market on that would that large first say, the markets - general the pool the and as international the then the which were about, the project that And the timing is about believe in

in in first drivers and closely, those segment believe we it at looked We quarter. it. walked C&I we the So are main the our

We continue at look to situation. the tariff

size a where may that net the continue we right as long-term. on a exact a or We us now product-by-product basis of I continue that's some would impact year over they for in But may for company. difficult where benefit say it's be next it's net really like there the to benefit headwinds Regal see for the terms for because us. feel on that to overall, positive to

Robert McCarthy

to term, seen points actions? that longer flow pricing from cost the question, terms and that it, kind what other so the we've kind administration, reassessing geographic the incremental you're that combat And missed might on you of to do second over contemplate, that expecting footprint? of existing at terms And of I on you you point, the in think amplify and Trump my the call, third of news just think my then comments could the your maybe Yes. impact, your have to said outset of in I tariff

Jonathan Schlemmer

Yes.

on touch then to if I'll So and would anything. like or Rob add that, Louis

chain. impact go the the to footprint into we good and tariffs leveraging well. mitigating been global that when about and through footprint position the So been feel bit position a in we is a about feel have with just our good tariffs. scale we how back supply the that there, with as year have standpoint little pretty our We've that let just manufacturing place. came we really of manufacturing competitive consistent the last And me from we've One

example, So there other where there we moved that leveraging mentioned is industrial a to product the have business of number our of And make product. motors investment I continued footprint. we've we've products. number reposition a that And to moves done in that

fully expectation our from year, is X do tariffs increase had price China XXXX, lever handle to done to the of the into Tariffs. second XXX last and expected as we've price. expectation in the half year. the - that the Section as our through on entered And XX% the now feel we've to to then our had duo, that early so would we was to with entered needed XXXX. mitigate the impact We as second of that to appropriately it pull We and way initial List mitigate and needed the the That's And been really communicated, - footprint actions tariffs tranche in impact. was those we set called for have that The we've good XX% been was well March. price the that have guidance. very and between what able about When we how

of over dynamic that subject course, the lot right that's been news didn't There's few happen. last a a days now. Of very

going doesn't do moves they're here tell much. of a that I'll at probably to that to the our to on what But terms go We're XX%, treating and price appropriately. they price in we We're it the like it actions, terms and do is you, the side. in footprint. are there's managing then managing we'll to stay, actions leverage footprint of we're tariffs our If accelerate, change couple we'll remain to assumption really need XX%. current Our that continuing

Louis Pinkham

just I'll Maybe add Yes. there.

and an it's differentiator. scale answering did competitive coming absolutely question a that Jon for question. great job strength outsider think our Regal, I the From no is core a a in, there's

able global to the supply and going be ourselves so And best chain position we're our grow. footprint to to leverage to global

Robert McCarthy

which And back will the to question, Great. question. then last go XX,XXX-foot the

probably I views it And suffice some I to portfolio and flow half on think the timing Julian portfolio, the early about timeframe. some a to say, going XXXX think, kind asked get it questions XXXX, we're of news like back and the of XXXX - some sounds then for good certainly in review. Scott of incremental

guess, beat a portfolio, things strategic your specific to tatted is there. are some you the what very and focus our because but I done addressing not you standpoint, I'm cutting the checks, horse highly your you've specific accomplishments going So career, well of got from you in you've through specific came in it people channel in certainly Louis, think to excellent challenges you. from serve this going all, around and of that kind dead

You guys execute well.

reason, product of in with to You take really set. come particularly that's increasing at forward the a look wide path and this taking in competition, lot of that costs out. for environment an you But a were portfolio trying brought for makes for this a and sense

talk - three be set businesses processes or shine lens portfolio up that with to that you that's success? things either maybe could for the the critical or really to think will about going very a you you're So on two the you bring, and going

Louis Pinkham

on I'm share in I But And and and of a fairly - as outgrow think We've I'm well had that we the what products. company. engineer and to needs or marketplace, is clear throughout as within for hey, say already to believe product, as so value my technology. the with management organization by even to I'll I've I their had strategically Robert, for out will think I and investing focus emphasis. I acquisitions. technology I've strategically so understand I a number our of positioning need this the the focusing by services weeks, relentless believe product strongly share, education. be experience that's be we'll is That positioning over I've about three, divestitures markets then able can fully in solve career. record a portfolio and solid Two, get customer I a it, growth. differentiate track engineering and few all you us message portfolio In love that in organization. to customer. our share. those would and to with more. it our road, And we organic markets, I starts doing a an differentiate the I a those an on will actually you for believe can technology a trying it in get the in problems next will to made I've problems. made case, our started around to provide grow customer our goal will By That and solve on few win all that differentiate XX%. that, Regal products believe on one. be focus,

growth will path priority, look but profitable a And we forward. organic the so portfolio as decide a be will well at and

So a a gives to hopefully, you come that of little more but bit this Rob, topic. on taste,

Robert McCarthy

May. on investment comment sitting with have forward the to look down measure cut the once. of community only you I rest a in I'll and thrice, negatives, late

Louis Pinkham

Rob. Thanks Okay.

Operator

Our next question comes ahead. with go from Chris Please Dankert Research. Longbow

Christopher Dankert

Hey, and again, welcome everyone, good morning, Louis.

Louis Pinkham

you. Good morning. Yes. Thank

Christopher Dankert

can R&D you going kind next-gen just product, kind and thinking I feel you about Star FER stuff guess, guess, majority shipments, the that the you pre-build is pipeline like in here. Do of forward? those and of is comment I - think how that about DEC the the changeover of the

Jonathan Schlemmer

this Jon. is Chris, So

Star. So the pre-build DEC product definitely involves

about customers be in are they July. change essentially So building when think to prior that the pre-build, the would we selling it's products regulatory that

and a existing the more offerings. of the product standard bit product it's So offerings

So pre-build. that's what's of majority the impacted by the

it's Now we've pretty of not basis, sales Climate but DEC wide some the side. only does that's million DEC the range into incremental we of that existing Star, for Star. $XX about got a space products products that the include price solutions. on the been annual an heating When We've but they're range on for selling a us, think time of

a one is it I entry fact, energy-efficient highest on which performing Star. others that think, show that the were from summarizes But high-efficiency product products we that there high offering in few to way to that the we and - well. product, kind showed three level of we're as customers all an slide, the DEC

you, you of DEC help and that some is us and of good Star It's component, products a for particular, technology. around just those we've number them solve really help where if to problems it on a the tell industry-leading changes markets. And suite I'll been a part into we've gives will, FER the your product about new of if So that's of at been Climate, introducing When customers our that good it's leveraged really like and, at other growing. And can applications. come feel it ECM DEC is the product of potential. our And we develop working another our was we million question, is in really business, sales. customers Climate a small will, that into toughest Star, of a we've in call on relatively and our on programs the where we're feel still had Climate, believe you a great the do to a product that have FER. goal. portion, supply solution opportunity play, as $XX that but lot to I we has I on development. believe I what an with while always technology our incremental we position we're Chris, high-efficiency on of we're about technology, it another

Christopher Dankert

Got it.

Louis Pinkham

And be differentiate I'm I It's the I've just products about marketplace. focus the opportunity the a then believe and excited right that solutions I'll product funnel. of Chris, that the about on sure. us, review and focused for understanding relentless our us funnel your in providing new that each things. And had all the add quickly. customers, for we're will segments. development in to

Christopher Dankert

would to clarification additional be the of opportunity thoughts thanks And specifically, And you it. high like on faster? hear then what a Simplification to but your run to Glad some thoughts for picked with kind or Just guys. narrow opportunities in, quite bit any there level any the Louis, brain we've great. here,

Louis Pinkham

already too Chris, not more than Simplification early. perspective, much a really shared. I've From it's

have shared customers I'd we're decisions the made to direction helps it going that Nothing that a that make and be I'd understanding our a us and on that highly I've driving the teams the in profitable think will it change that focus the up, I Again, organic supportive in so of. not of historically growth lot marketplace. sense, I'm differentiate how today. much That's more. sum

Christopher Dankert

it. Got guys. much Thanks so

Jonathan Schlemmer

Thanks, Chris.

Louis Pinkham

Chris. Great. Thanks,

Operator

over I would like to Louis This question-and-answer concludes the for our any session. turn Pinkham back closing to remarks. conference

Louis Pinkham

XX% in our adjusted delivering quarter Thank was you, solid sale Overall, QX return of a call. on joining thank you for operating quarter operator, margins of first adjusted an and Regal for all an XX EPS. with basis on improvement points, an XX% and increase

X% leader to Climate Regal, which am and this well, thrilled for sales a I'm overall markets, of am strong organization. Thank margin with the growth have and for organic our segments Although I to led performance, a and and saw excited about in down delivering you all expansion. organic good of opportunities new be team's honored some the proud our few and segment our your for end interest I future. day. growth overall Regal, pullback our performed an sales in C&I positive both PTS

Operator

now conference presentation today's The now disconnect. you Thank you attending may and concluded. has for

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.