- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Regal Rexnord Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Robert Barry, Vice President of Investor Relations. Please go ahead.

Robert Barry

Great. operator. you, Thank welcome Conference and Rexnord's Quarter Third Good to Earnings Call. XXXX morning, Regal

this Pinkham, Chief Joining Officer; are morning me Louis Rehard, Vice and our our President Officer. and Financial Rob Executive Chief

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

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

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

Turning to Slide X.

quarter brief announced with Let then to me third will briefly in and of opening our results comments comments, his Louis off XXXX Rehard review about recently today's Rob then share our lead for Louis discuss the our financial Altra. agenda more will guidance. will provide some acquisition call. updates detail

And that, will call turn move have I'll then to which, over will Q&A, to some closing Louis remarks. with We Louis. the after

Louis Pinkham

update to Rexnord. everyone. interest our Thanks Regal And on in your and Rob. business, an discuss begin good us Thanks, Great. thank and for quarter third earnings you our joining for morning,

by team's expansion line top of of investments, and new further to organic faster-growing, working it them, e-commerce margin team clear continued merger you As basis growth, and planned that synergies, acquisition plan by enabled higher-return quarter. improved announcement our approach digital Altra, our the is inflationary working among gains price/cost margin levels. and EBITDA last some apparent in excited service persistent Chief evidence capital Regal customers, chain results. adjusted on factors. are X% that position. to our headwinds includes positive disciplined gains, performance, generative and of Also products of competitive we notable, of Even share host efforts Rexnord's team am continue strong macro-related quarter performance. more fronts the supply our those I in in regarding caution a to a face managing flow That and into at achieved delivered remain of cash achieve and to points a of report third is free advancing and our third our supported continuing the higher-margin, our saw Rexnord cash enterprise. realizing number incremental Regal our in strong where XXX strong of week our ahead were we quarter also transformation product performance The

targeted modestly earnings per the quarter, range revised we guidance firmly we track share. into fourth as meeting midpoint to which higher forge in a reflect are so to earnings on And ahead for have our we commitment our

our you as with Rexnord Regal of a pursued as urgency a sincere associates our around approximately want world. well adherence thank sense execution, to strong to values, the Regal XX,XXX to say this I For Rexnord's continued

so, our an for at we September FX orders we Day. quarter given a in organic strong Investor on shared did that cautiously as our the optimistic especially Turning the some of to were orders. of fairly range about what line customers of up remains many moderation plus end backlog X.X% line We roughly basis from our Even XX% see beginning Daily neutral positive. across with remain commentary from expected. position, our markets XXXX, top prospects, down

benefits mid-teens largely earnings pressure segment Adjusted up execution turnaround is turned Regal certain under ag continuing execution. gaining underway, continued makes It's inflation growth and manage and mining, momentum. e-commerce margin we even our Controllable segment will is and organic Regardless our does, me quantifiable on many positive slightly temporary digital for driving cash order of And and execution. points of had new products lot there construction, free initiatives, XX% investments third on what and give the what new have markets, which we by performed to below The we healthy end markets under And including Climate and quarter are brings Regal in high-impact example. our tied call, in Industrial strong at is double-digit signs XXX over organic e-commerce control digital evident a a in growth pipeline great outgrowth Industrial at margin addition, control. Commercial of Rexnord. the nonmetals up top what flow line margin mix our and our basis with are quarter communicated demonstrate a In what aerospace, of performance. our which just last investments, mix. beyond EBITDA the growing XX/XX are our of momentum. controllable and growth, also we Rexnord, of and have growth. is signs nonres it products to of initiatives us, incremental mantra to as macro focusing the another that fronts. including

low improvement the margin plan remain into high team Climate in Climate's the XXs as normal improvement we excited has QX head segment's back more XXXX. However, to teens very step-up for throughout to we with and levels a a XXXX, prospects about and

in and which to related product continuing performance. MCS, that me Given new growth regulatory changes, also merger plus pumps are large but synergies, government performance to to address part tailwinds, we brings team well-positioned strong operational solid heat and margin strong realize to around meaningful incentives very

share and example of on momentum I'll Our recent is the slide. in one wins an powertrain team next the powertrain also of market, gaining its

makes at ethanol, discussed product dedicated a spanning end our accelerated Marathon the Investor Pictured selling on and fault elevator is a selling our made bearings. industrial and example, couplings The the for We Day, and expertise, transmission efficiency a reliability. to fuels. efforts. in we're secret in powertrain win, end relevant solutions, new and a solution application relevant and funnel easier reliability extends The improved customer deep of gave What powertrain the Motors, of our expertise powertrains complexity, a that came design and diesel and of win we sauce because our and product about was involved slide reasons a a of our cross-functional integrated opportunity lowered processing part market lower for recent solution integrated application result that growing components it markets. our the leveraged time. our application team excited Altra customer ag and and subsystem efficiency it bucket and one our Having time adding we and this Rexnord customer expertise for with What to superior motors team's leveraging this This is grain the and production the in team renewable biodiesel greater is install our has product. the market. As gearbox our powertrain looking capabilities an integrates install expertise The September into is nicely. powertrains assembled selling businesses. power traction back was team our that differentiated powertrain team's them is enhances application with reduced collaborative was was

that, turn to front take more the call more post-closing. through And We on over third you Rob I'll quarter will detail. performance with share this our in to

Robert Rehard

send also my strong good for a morning, global continues to challenging in Louis, environment. thanks team I'd execution Thanks, their everyone. be our and to to what operating like

year. with to in let's MCS, The in basis year, financial by for factoring compared in volume, end third prior and Starting Solutions or growth, segment third MCS from Motion China the in partially XX with favorable reflects segment, result particular XX.X%, points prior freight up Now quarter EBITDA weakness Control the aerospace synergies price sales realization, and in were industrial Organic offset Adjusted alternative our mix, markets, the up particular, but strength the the was costs energy, the quarter by our to margin and general market. X.X% broad-based wind turn higher performance. headwinds. quarter offset merger FX partially

basis. in segment the in quarter quarter. the organic expected, nice, were an on tracked Orders at MCS In for in roughly margin posted October, book-to-bill As improvement flat sequential the FX-neutral X.X. a

our The by year. volume elsewhere, quarter the increase driven Europe. impacting modest attribute believe Organic commodity the unfavorable in realization Climate moderated costs, North strong sales gains our quarter year Solutions. HVAC up Turning from XX.X%. gains outgrowth for business, to in realization. and volume to modest OEM since margin in the third in mix volumes price healthy America freight by and against offset in We partially offset The a particularly include partially higher EBITDA prior volume challenging plastics, X.X% compare. by in resi in-market were quarter margins adjusted the was declines Climate HVAC prior was inflation, we Factors including price

resulted business made second from past lower certain to some costs. dues, in also freight decisions, We customers, quarter also overserve higher intentional carryover and high-value impacts which had component to the but related

into we bit when to margin a teens fourth low While plans XXXX, move improve recovery back relative expect quarter XXs. high a as slower this performance segment's modestly in expectations, in the were see has margins Climate continue the team EBITDA Climate higher our margin the or to margins to more temporary. significant adjusted path a to The to we and for

the several an quarter customer orders XX% out orders. for to the Book-to-bill changes. platform from tracking third in climate X.XX. roughly FX-neutral is pushing in were Turning exclude key tied to to on impact basis, October at down Orders adjusted an OEM

orders given margin the the customers in supply efficiency performance periods, the gains, very into on inflation and fact chain times we several deceleration our year. the on products decided are rebates recent to Climate's this our with remain support in in of HVAC, we broadly, heat that growth a to expectations number launching. a improvement end moderate resi shrink, More broadly conservative continue inventories a U.S. about along as and lead While XXXX, pumps a in Act we when stance standards including our Reduction reflect the is new expect more with environment minimum significant prospects in higher tailwinds that line from take enthusiastic to the of

these in September Day. that tailwinds recall discussed You more may Investor we all our at detail

large FX-neutral up and to higher strength in were in the Organic pump general making actively freight favorable HVAC, down into season OEMs, are compared move air other have general we Systems realization, their margin for we EBITDA meaningful Systems. rightsizing reflects performance sales XX in share in offset to points for quarter business. was our and adjusting Commercial from prior to The over third North year. pool. orders quarter been an for we inflation, on from nonmaterial America off-peak to Growth year. products. the product and e-commerce costs. commodity seeing Shifting Turning price Segment to reflecting for new reflect mix the digital, prior the by basis are orders. moving gains just quarter commercial were industrial up adjusted industrial as pool Commercial cost the the in and after or quarter orders basis The strong inventories XX.X% third the X% XX.X%, third partially flat in investments tied which continues weaker

X.X. EBITDA tied share prior to realization win team margin book-to-bill were operating Industrial increase sales XXX roughly market. The Looking business in gains temper expect quarter greatly tracked an growth. to latter has, of the the versus volume. In for segment's pronounced year. in Systems, become in period. Principal and include basis however, third XX.X% prior and strong The to improved allowing year points in we as to October, the in performance the is fourth drivers at XX.X%, industrial quarter was The the slightly the weakening Industrial Organic quarter more China, the up which seen the price modest versus adjusted mostly some

X.X. gaining on shy the Industrial be book-to-bill we we with strong fall a to continue While Industrial, the anticipated quarter performance. remains momentum. the Orders of stronger Industrial's did bit quarter, XX% we in the were provides October, in path where at to was we extremely In on basis, performance which pleased a recovery sustainable further up feel is an performance approximately for operational very evidence that that think FX-neutral margin

we your metrics notable slide, key some following for highlight highlights. A review. financial of the couple On

of this X.Xx. with a the see on ended to EBITDA we adjusted right ratio of you'll net First, quarter side the page, debt

Second, was our conversion equates free $XXX.X cash flow rate in of a to roughly which the million, XX%. quarter

will levels did we a mainly high a we while are cash may rate progress improvement our on and due great and on supply That in quarter, to in as chain in job team we see XX% performance making valued improving free service conversion continue we believe persistent on maintaining end XXX% what today, flow to our push customers. further the flow, XXXX, for challenges cash free Our said, highly based quarter. focus as expect closer we with to cash the free fourth we flow know much to

quarter close to demonstrate year. fourth the cash strong as very flow out performance we We expect

focus down our on with improving to previously we've stated, As the paying our generation. be will debt cash continue

outlook. to the Moving

interest at midpoint now prior contemplates a the per $X.XX to are raising in adjusted by of a a which at $XX.XX from sizable revising share range, Considering $XX.XX, range expectation $XX.XX We increase midpoint. to increase our $XX.XX guidance the to our net revised for the range our is of earnings narrowed expense.

updated prior our that core operating above expectations. tracking Our is outlook embeds nicely performance

to lower levels normal bit moderate levels. by flat MCS the the relatively revenues segment segment quarter Commercial, let me seasonality. and a to mostly seek color for the due would third top From we to We provide line would fourth expect segments more the perspective, quarter. in Now third come Climate the a revenues expect slightly for Industrial to from for quarter

margins. QX I'll team's section results, to the quarter extremely to this from improve execute Industrial on and that whole, to to to very then in by pleased Moving up We are expect to digits low and move levels. double mid-teens, and our both modestly the to low would an margins MCS environment. Commercial we wrap Climate saying third with challenging ability

we acquire the the certainly of all We and last to open margin outlook for back growth, flow have of macro while outlook in become nearly meeting fronts. Industrial cash call for comments Motion. I highlighting positive, before week's are of line And announcement tremendous over the few us the very considering And remains the amount our turn self-help Louis now to Altra will on questions, a front expectations. our less we certain, has

Louis Pinkham

The from and Regal Thanks, acquire decision clear Rob. cross-marketing supported to am powertrain substantial expected XXXX It XX% The accretion Altra strong improves the Altra returns sure deliver host our logic reflects business, X aware, diversification margins is profile. synergies catalyze our the and our while industrial the billion financial upside nearly I crystal as year shared our free transforms in of credit it transaction's rises benefits customers new opportunities from synergies. because and its are in is $X.X and business XXXX believe gross above our quality Accretion to million significantly clear. a significant for of cash by scale $XXX for are compelling is incredibly rate acquisition in beyond. about at further last Expected with Day decline and our about plus we double-digit X, expected the cash our to both as profitable strong. And $X offering, week, our synergies to a cost Notably, you and flow in We interest then thereafter. ROIC by already valuation will announced enhancing growth. our our timing. 'XX year in our Investor to which Altra tax XX% capabilities path growth and enhances and enterprise industrial synergies cost and Rexnord $X.X XXXX. Industrial billion billion adding creating for Motion. automation unique a

low investment-grade strong leverage, We with debt as conversion credit have manageable an maturities. consistently free -- profile, and cash Rexnord always managed in consistent a manner flow abundant liquidity, Regal

and our lower diversification more further markets. to peers scale, investment-grade larger, and levered Altra resilient are than acquisition the We rated enhances of exposure diversified and our today, end

We are we the it be leverage adding will manageable. fund transaction, and believe to

record will to financing permanent and acquire We've our loan integrate debt We profile the to expect bank give flexibility are repaying both debt macro will that designed a achieve and credit enhanced markets. consistent broad the to the encouraged quality We in access bond give of us which Altra investment-grade Regal backlogs while structure us expeditiously our with are at the horizon, leverage the target but profile. Rexnord the an and Altra. on uncertainty recognize by

priced motion are and existing debt in control lenders, already the permanent quickly debt putting and well of the place. details a attended prepayable facilitate but put strength. place our structure adjusted and on and meeting facilitate forma have be our of we aided sensitivity combined The expect the meaningful we we to delevering of rates Altra amend change, with we the acquire significant sheet our our our debt putting the sheet delevering and EBITDA balance by stand-alone quarter and net received. our We value EBITDA, to operating more undergoing We'll Regal and begun for position and strategic resilient, for our in third to create to and was out We Yesterday, balance cash interest automation of closed pro transaction the are debt structure process forecasted our moving and highly a have year. extensive asset and industries run outcome transaction. X.Xx, ahead hosted which scenarios work strong from to a We've very shortly, shareholders. underlevered to expect the flexible, with further to closing in We're relationship are new the attractively next targets. of Rexnord acquisition flows we advance

this We integration significant are ready PMC's We've and to on progress sheet. operational balance Regal and do have transaction. Rexnord's made clean merger a transformation

lifting Altra. the deployed on be with footprint The will playbook be We PMC starting complete PMC to before and at so integrating expect at well Altra. heaviest team that moves worked

about this we joining stakeholders For all our associates operator, that, our value associates of for to Altra team's take team confident these excited shareholders. to ready for and meaningful and customers, our ability reasons, are our with we our our with all now create Rexnord questions. in And are transaction Regal

Operator

of question will Halloran first Instructions] Baird. our [Operator come from Michael And

Michael Halloran

So can market nice a and bit next of thoughts Obviously, what end with offsets things. out Day, growth some of seeing you markets, the some trajectory order kind of you we the other talk threw on into a you're year? We're coming little as kind here said about at low internally. Analyst obviously, number. some in weakening doing some single-digit SEER

So some things we we side on how track thinking year. as and commentary just about should be next that maybe into

Louis Pinkham

Yes, sure, Mike.

growth, a and markets no we XXXX e-commerce strong outgrowth what's quarter. can our assuming intact, very more say product on As our Day, that our at reflects levels. service It especially growth report is control X% If and Investor reminder, more feel fourth the going clarity our backlog. to We're and initiatives, good to course, view around when and in market. we about they X% framework, tied markets, are of but have X% adjust up a a provide modestly. of on to That to but around recession initiatives different investors to our superior flat new many did paradigm relatively digital end we X% end uncertain still our

think So I end my that's to where I for want commentary. now, about

Michael Halloran

What customer be some to about side, some that the across what more destocking where broadly -- certainly then But level. seems at helpful. areas on happening was maybe the some And enterprise. Fair. inventory targeted thoughts and channel the about there

Louis Pinkham

Yes.

in know, say, have out are Some channel, of strong, distribution as ISM and XX. orders remains we strong. down bit. they're And you I'd of clear the tell quite the contracts positive. as they're above But sales you to metrics were September, a still employment industrial coming still new Mike, their sounding visibility still and I'll

the that some really but that, adjustments, we're channel are feeling they given is So industrial looking still at inventory solid.

normal small going X%, will, reset, X% about in that a to take OEMs very part had during Regal the down of pool they of Now is their HVAC Rexnord, it's will to inventories their a only but year. the pattern QX. if you end big The

So we business in overall, I'll being and XX% industrial pretty But distribution industrial more next more continuing you, a good space, of our into year. around mixed. little tell bit that feel with the of

we I Now and look portfolio we're that early years, cycle, I business one what at few the done over about we've other and comment X/X X/X would the is when our late about non-res are third last change that cycle. momentum, some late to make seeing about. a markets these cycle, And in mid-cycle some and gaining are aerospace, momentum we're good construction, that feel

mixed But bit hopefully, little a that So bag. helped.

Michael Halloran

helps a No, lot. that

Operator

Mitchell Our next of Julian from Barclays. question comes

Julian CMitchell

wanted to fourth talk quarter the on back to sort levels. of guide a Just firm-wide

EBITDA for the in figures And pieces. guide out from laid Are thinking kind rough on assume are the of do you Regal some sort comments, wanted I sales at Rob, single XX.X% high So we're of right sort organic of growth, of Rexnord, enterprise-wide digits we your margins? is just of then mid-single-digit down if orders kind that midpoint ballpark sort segment-moving to clarify, QX? probably based book-to-bill QX? those

Robert Rehard

the for you thank Julian, So question.

the tracking closely that based made. about mid-single-digit answer low where to EBITDA maybe comment comments to in our the margin yes. side I below, First on pretty on I growth but is assume some slightly and expectations is of to are, QX, your that very close

The move was in order second down we expectations fourth expect a the quarter, quarter. again, bit single the we would quarter. And related question maybe fourth to of fourth part low digits as be in the your orders to into

Louis Pinkham

an perspective, on be be Julian, would clear. just FX-neutral to that And Yes.

to quarter. orders down to And expect in high we mid- single more to translate probably would but fourth the so be digit, down that do

Julian CMitchell

side bit destocking of China, -- helpful. softer specific And quarter. and going into industrial HVAC of some you pool areas when the then I kind and suppose softness, little I a mentioned fourth in around That's also think,

you and is just kind on So pool much into then destock thinking customers. And how maybe that about China think and point this run how partners sort of from rate HVAC side, do of out of from year-end. you're out channel sort and flesh your the needed flesh just maybe

Louis Pinkham

because pool X% to sales. Yes. hit going our only I'm it's quickly of

fact fourth And I it you so China lot from typically do this guidance anticipated have the order, and on at leveled bit the then tell big we is would quarter. in was quarter. that a big adjustment third it's you an doesn't impact, with an that's X% It And perspective already of from think this quarter. is A coming we yes, simply fourth expect out Rob creation a revenue lead huge beginning we a order as on will little of standpoint. the down on than wind don't because improved continue of impact what us a a HVAC perspective demand the just China XX%. bit slightly China, our a down the little under perspective. and well that fourth are a the quarter pressured times more actually But in with therefore, for from supply given OEMs chains. really And year-over-year. has reduction. We sales down on was slight see ERP

likely continue into modeling. for into take wind. China X% lumpy. X% of wind down QX. that wouldn't that will down really we us say that, total in consideration That And wind. was because the the project ex down XX%, So is of It's would I

wind impacted be only let business. it that Now the MCS-specific MCS project, project an clear, is me

Julian. that hopefully, helps, So

Operator

of from comes Hammond Jeff KeyBanc. Next question

Jeff Hammond

speak was dynamic? just changed you mix margin, better, the So XQ into is just stepped than on thought Maybe and maybe down a again bit that there Climate and going less to trajectory it think I thought. the maybe I what's get that, and to little

Louis Pinkham

Yes.

this incremental largely chain control, on, levels, back did we part around Jeff. going our take a we supply outside just inflationary into expect though weaker headwinds, a strong and I'll and believe big performance. Fourth Margins Again, expectations, normal and modest quarter really specifically improvement and and to on supply that's in below pretty mix, see modestly are plastics, to improved saw especially improvement So factors our around XXXX. of come the due we'll temporary there. mix climate, pressures our overall

strong is SEER 'XX, climate new for into a -- we're the regulation really with and has of our especially lots So we're upside launching. products for business room us, that

and confident And get so those XXs that back XXXX. teens we'll in low into we're high

Jeff Hammond

Altra we leverage. Okay. at if concerns businesses, And the back, clearly go just and the combined then the deal as over we some look

If kind anything you you to both stress leverage situation, be pay get et the run that a a down, were that into the whether on just really And test of take noncore you of you does it businesses, divestitures, if recession watermark? cetera? for high from where to at do kind can accelerate debt business,

Robert Rehard

Rob. This is Sure.

commented have do to -- part the it Hey, plans for previously, communicate where was, provided stress anything dramatic second if So to even time still testing accelerate we service 'XX portfolio, always debt. would leverage we've our that 'XX never appropriate of And the that. that time. still there if we was, and with test Jeff, evaluating I'd EBITDA were service the we debt, that get we no did this but always scenario but to question, your as certainly a at above did provided look anything? tell we'll that to you are did And stress the those we we shifts the in that couldn't and the like able at might determination, X%, we make which

Operator

Joe from comes Sachs. Goldman Ritchie of question next The

Joe Ritchie

also you associated getting to the and timing you Altra talk successfully. your some this with assets is then it resourcing once Altra and timing it synergies the the do the the just X a maybe trying after Louis, acquisition, little have of closes? around deal concern bit there to integrate Can in confidence about in place

Louis Pinkham

pretty you take response about thoughtful And through. Yes, thought actionability. starts got I've really Yes. it to going here a a happy to. certainty with that lot And this I'm and and

continued So we transformation It highly deal us And step needed provide that opportunity integration a we and simply, growth see to also we did the ago, have been that and finding year attractive combination acquirable journey. crown in margin that an of be The providing under and readiness wouldn't these from actionable maintain we for us. jewel was Altra targets we a short list the available accretive biggest a not this future. where felt of list of on available sheet the the the a one our change have terms while believe transact. balance is and synergy an we for perspective challenge transformative to put is can as act. on unique targets would

All our here, believe as as which is very automation of deal in deal, landscape. the those PMC Rexnord class elements metrics The and well deals lined recent in as are best we to compared other PT rare. up

further moves. our all The cases, proven increases, downside, on looking one and move also with the with are we on and as are sensitivity synergize downside feel high including as PMC out at element into I into to have integration rate scenarios. in ready analyses deal recessions, public will EBITDA highly finished ability did visibility quickly of quickly Altra costs taking footprint confident then once team well to quickly moves multiyear question say. interest extensive this would We be We to that a able dovetailing is we navigate. both past the In leverage,

as agencies and in ensure maintain sat this We and our down cons. a close this made We team, we and that Ultimately, we facts process to with the outlined leverage. there as disciplined we the strongly securing rating reduction available lot a and an and felt we it is and be debt accelerated factors to JPMorgan on need debated stands now our yet deal cannot path commitment I'm also into, worked future. our the this confident transaction believe to not but to highly would We in decision based pros we optimistic, data. get with extensively, signing met there's external the to in to and are our here. prior

are I'm get that to compelled arms what As this our as more as confident around they we investors and their of doing, time have better excited be transaction. about will we're

So hopefully, that helps.

Joe Ritchie

how are up, variable And down lined follow-up got comprehensive. debt? then that #X structure current this out at to was is Maybe gets you've I priority you just you of the appreciate for forward? is, that. both debt, you've thinking point and the the your know executed once about versus debt I'm once curious, one turned that Yes, fixed debt going pay a secondly, I of lot this my deal

Robert Rehard

Joe, X parts to this.

The we year. look then over we of how to remaining, revolver XX-year Whatever are go X no to loan. this? couple going upsizing we we pay And now is as on the already our the term so X, first X, we're quickly, and bond to continue that in our out potentially any down that's weeks. bonds there's and market pay X, going So can stagger speak the -- will we're structure is right to concentration down to next and

time then X.Xx, So quickly, 'XX. same we'll have and in below minimize that that, but very to clear down we we're time, so 'XX Xx the the stagger pay absolutely down by we that and to at that through can paying X.X a path

So pay running that many, been and as given that have continue our And to cash will of to down grade strong grade path we're priority, investment to be we company debt leverage front that get investment clear range the this to back down our that the flow very we've comfortable with. priority the an generation available X with business. for years profile, here on cash to many very as X.Xx

Operator

comes question The from Glynn of next Oppenheimer. Christopher

Christopher Glynn

the getting Climate of wanted back just comment by the year? XXXX. on a to capture the target or teens, full year back margins, rate the to kind to low in later Was to in high that go meant I comment XXs

Robert Rehard

to, into would the get in very year. that be to was first quarter, expect not range. then and the And full It honestly, on capture the we we really close when year to if through target progress Yes. that right

So hopefully, that helps.

Christopher Glynn

some broke then And margins for last just industrial, curious, held quarter Great. new of but out range here. kind with in onetime, target

staffing and that interesting Mexico, all pivot chain anything going the on it's according Just If supply plan. to going there. if is there, curious overall how to relocating

Louis Pinkham

around really if for chain. is at than feel Rexnord; is has any very to a And according The it's APAC some can the look good margins. you, seeing industrial profile still businesses. industrial I in Industrial in $X about Mexico remind performance Industrial, China. visibility, businesses, XX%; really to Yes. presence Industrial Chris. business about broke is we're given in million size be you is the The shift headwinds It's we plan, our magnified -- to of China in going give of the transition stable China going the business, I'll supply more all more out of state, and our of Regal our XX%. X%

they more So here. and driver mixed really some bit headwinds, the it's and a are that's there, seeing

Operator

of comes question Nigel next Wolfe The Research. from Coe

Nigel Coe

previously a XQ interest, the of current Louis, question. wouldn't midpoint? Are for now future into normally high XQ; the think from interest, And more that swing off swing, number? in rates? to the there's Or Are obviously, expressed XQ you are lead Thanks with to you we increases rate the guide, the marking-to-market and swing, a big XQ XQ. in in confidence, it's baking in given you the step-up big big sort I I end. to but at

Robert Rehard

of in all, uptick first on the the interest. No,

So to components this. X increases is certainly, on One seen. we've that based there's rate

see And going that to our curves yield what should now interest profile so forward determine our the plugging be come what -- that rate into and should we're to using out. where interest those we're

kind would. highly the much normally customers. generated our overserve we've then free there's tied quarters first what we're doing as of that's So cadence it. inventory as haven't there's in standpoint, largely the a piece of flow to that X piece and And we from that valued of commented levels And year a cash as cash we to

you're expect flow QX. had we great year which and made and in the as much interest which we drove XX% in anticipated, the cash tremendous a pay as finish means to third we're down of so some also progress as referencing. But we now expense quarter QX, in debt we that year, didn't that at XX% the still And the exit range over

X overperforming the really operational But we're again, raise that, to the that components able guidance nice and midpoint. take-up. at from perspective the it still are is, to thing those an So impacted the number despite and the

well. able has been facing and as our that So as that other overcompensate most business still performing to well we as really we're that well very feel as headwinds others for FX good have

Louis Pinkham

Yes.

I Nigel, at here, feel not But upper we're bring performing what at upper so Rob to, did that, should end, rate $X.XX. and X interest the FX add state just us we confident of exactly end. the be And reset on items the would missed XX.XX. we said. to We the up Operationally, that midpoint

Nigel Coe

Okay. That's a And quick Rob. then very clear. just for X

that? and quite there's accounts in from where XQ landed think the caused just I to I'm big a if pickup that XQ. what receivable allowances wondering

Robert Rehard

we It account really and the when with wasn't accounting that went P&L. merged through to the when for -- purchased Rexnord. we the allowances we when purchase we It's for related way anything -- or

really wasn't related take-up that just here the would and allowance through go balance sheet the there So a more that in P&L, it third the is reestablishing allowance in quarter.

Operator

And [Operator Dankert will Loop from our Instructions] Capital. come of Chris next question

Chris Dankert

Maybe just any major a peers hefty your kind quarter bit of here, of wind some the organic to a underappreciated going I guess, forward of but of trend growth the PMC China kind deal. and there's light this I it I on component, your guess. lot we're noise how and distributors PMC looking with comment some the understand there, in I MCS some bit. X.X% versus a issues organic pretty organic, little comp growth, at But business, the of

Louis Pinkham

was winning bluntly. solar fronts, hard the compare hard projects on U.S. in well Yes. And compare really as It as in projects X was it a China, a

If good be performance. at high would those, growth. digits you eliminate we single the really about We felt would

Chris Dankert

for sales you. it, on cost Got what synergies, the update if on of in the was any missed here? PMC so And realized quarter breaking the the out much a and bit. that forgive Thanks I kind then synergies, both

Robert Rehard

expect do Yes, rate $XX That on And targeted realized just in third about full to related for the Chris. through quarter the year-to-date. quarter that deal. million $XX PMC on million the which exit $XX see would be we $XX we see a the $XX our after and clear, We to synergies us get third about million bit did come the about quarter million, a brings to from fourth ahead of about million XXXX. year really you right, should over up

Louis Pinkham

And ahead. yes, sorry, go

Chris Dankert

That's was good. side. on back circle to going sales with the I

Louis Pinkham

Yes.

on of report Chris, sales We're to we specific year, in synergies QX. you track still get give we're incremental to on aren't million our position to a number for So here. a prepared $XX this but not

Operator

from a of is Nigel question next The Research. Coe follow-up Wolfe

Nigel Coe

more. resist one couldn't I

post accelerate leverage But could doubt the sales like, that of noncore-asset leverage opportunity. the No quickly the for wondering, that down that Obviously, is thanks Is process. I'm deal. take Joe, already made So has really question. on the you'll opportunities? Altra sort menu just

Louis Pinkham

-- I know, what. Nigel, You and didn't apologize. what I Could hear. sales

Nigel Coe

Yes. to extent sales, that so Noncore the there asset are...

Louis Pinkham

on misunderstood. could, a what but you but I'm to in sorry, position I that's right figured I'm comment It sorry, meant, not that. now I we're

don't did time. this review, -- do we so we'll on and have not continue at But to a -- very -- we're regular a portfolio are anything we We on we're basis. a full clear plan

Operator

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

Louis Pinkham

period me to gives investors into and operator, a joining head if strong That Regal and many thanks very Rexnord opportunities execution, us the continuing of our even customers have our confidence summary, can create opportunities uncertainty, and pursue. to heightened controllable for Rexnord for and shareholders we associates Regal team on we so you, by macro new deliver is value analysts and In team Thank performance. our to for our today. value-creating focusing that

outlined and flow cash our accelerated margin path As a upside. have free material to organic Day, at we growth and we September Investor

joining you us you even higher. Rexnord. With our the addition Altra, for Thank again for Regal today, move thank in of your interest and targets

Operator

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

Regal Rexnord (RRX) 1 Nov 222022 Q3 Earnings call transcript