Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the Regal Rexnord Corporation Second Quarter 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would like now 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 Second Good to Earnings Call. XXXX morning, Regal

today our Joining and Louis are me Pinkham, our Financial Rob Chief Chief Officer. Rehard, Officer; Executive

we for shortly our area will know advance morning. started, you to patience I'd are Before that the that thereafter. rejoin this the event thank some earnings disrupted in we in note we during And get the that We in blackouts do scattered are disruption your event like call we occurs. in the experiencing please call, this

I would related today's hear and like to to you statements during operations. remind plans you forward-looking results, business call, that our financial future may

which from projected SEC detail differ actual greater regalrexnord.com due and we in may today's Our press factors, available our are or website. the describe those with results reports filed release in to materially the implied on in which of a variety

we that GAAP reconciliations these certain non-GAAP state the have materials. presenting included information that between are are On and release press investors, in we presentation our the and believe Slide to financial we X, and we measures equivalent the financial in non-GAAP useful

X. Slide to Turning

for his Let financial will guidance. the Louis review update our agenda off an more to detail with in call. XXXX results me provide lead our opening briefly will Rehard Rob quarter comments. today's then second and provide

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

Louis Pinkham

on Regal and your Thanks Great. an quarter us to to business Thanks, joining discuss for for update second everyone. in earnings Rexnord. Rob, interest good our get continued morning, and our

for an exciting the Rexnord The Regal second quarter team. one was

the Regal profound Bringing X-plus colleagues years been for together steady full first Altra significant a another has transformation. on milestone and marks with quarter Our what journey from Rexnord of last new Altra. our together

mindset. forward continuous for We powerful for driving charting have path Rexnord improvement concept In we From-To. call but Regal our short, our and a simple what a at

where investments, We current future the the and and journey. challenging XX/XX the prioritization navigate they to and From-To functions should where From-To, are, they take our an their go, define add, I are state must regularly driven supported to then that businesses, initiatives and Or mindset state and they actions data. identifying associates with by to plan

I growth As I a today, on legacy reflect $X on to to business was growth had vitality, secular where with that significant more has doubling above to sales billion are by from on think double A where which today in focus business RRX and stagnant we in sales, we billion. focused markets our after XXXX. From-To $X.X expect XXXX which a XXXX business annual about XXXX,

business go and that that a an treated equally XX/XX but customers, adjusted margin year had be adjusted over I on margins this to dramatic From-To. on, gross just pretty in through XX% about customers track all short, in gross margins XX% business use that really could business to lens. all opportunities XX%, A gross X. one a products now quarter with A products,

our which share a to on are journey pleased start. and am our even I teams that great will more Legacy way, transformation did to and had The business we off really fit. months steps next Regal. have X the great By so be The Altra, with our Altra first together through exciting, Regal a a come together well. Operationally, exceeded cultural Legacy Altra Legacy quarter, the are great expectations. Rexnord second

on the well initial actions are Integration and a opportunities. have started synergy track, already teams pipeline of activities building healthy both and cross-marketing

months in. of dollars a wins fact, have just seen already In we few X million

our on of our see quarters the combination having further benefits the forward sharing in results. in and to future updates look future I progress you

solid very with last quarter. doing are executed out the adjusted a we performance laid sales EBITDA, we that both on all to of modestly with addition expectations tracking our also ahead second In quarter Altra, and teams

quarter the organic or versus forma the up a Sales in prior were XX.X% year down on basis. X.X% pro

decline aggregate XX%. residential being the moderate growth are parts single-digit driven aside, X-year of and The channel segment For stack against other organic weaker general decline was our demand anticipated segments is organic of destocking market sales compare sales organic PES our AMC. headwinds. by led HVAC commercial a by and in weakness as context, this facing Putting PES low in posted fully

orders. to Turning

orders should X-year and supply line a stocking levels. stack a This XX% a with down to performance in is global our XX.X%. were of consistent expectations, with and coming more return typical compare the considered daily of normalizing Our be context in in chain customer

in quarter a year-to-date above at orders and approximately resulted normal book-bill levels, backlog in sales the performance X.X our that XX% quarter a approximately basis. is end Our and on with

Margins in the strong. quarter were

mix in over XX%. from the margin of to gross just came our positive adjusted products. new and Our launch Margins XX/XX efforts continue benefit

up margin year XX XX.X%, the basis quarter XX forma adjusted approximately on second was prior basis. points versus up pro The EBITDA a or basis points

pursuing XX/XX positive coming exposure and million and think excess and was raising balance transformation business secular year quarter. $XXX first lean. sheet In that synergies is teams from free end M&A in Rexnord doubling and combination it of down strong this half us to continuing very product focus and period advance is a our I working cross-marketing debt Finally, quarter $XXX.X cash on deploying allowed million, quarter, prior flow integration our Everyone vitality, at base hard standout pay in cash to the drive whether our synergies, our reflect market demonstrates our executing short, and continuing working execution Regal very or to a The performance. our solid the management. significantly at in capital our our flow by cash team's by one up to

stronger their and to more execution becoming are all higher-margin, for I cash Regal generative to for We dedication Rexnord thank faster-growing, a their enterprise. day. associates our making disciplined want every

better our principal we investors AMC with we help way a together profitable better Altra, last introducing minutes growth As spend appreciate to to to plan businesses. are positioned is few quarter, accelerate how I mentioned one

will discuss Linear This quarter, I Motion.

Our division segment, which self-actuators Rexnord's devices These and well-established components Delevan subsystems. transmission applications. enable differentiated portfolio power Linear Thomson-Nook products within that broader in AMC and Motion that and other technology-rich precision engineered perfectly machines, of Regal are includes highly related movement and components and brands the automation inside fit the

significantly to our the this customers. adviser of Linear becoming trusted In a portfolio regard, advances our Motion strategy

Medical, On the name to Linear this the Defense & the are of including few. right-hand examples Agriculture markets of business serves, slide side Intralogistics, and Aerospace end Motion a

in of enable, products such packaging a flaps. automation the kind movement precision arrows each The line the or lowering illustrates our and as yellow wing picture aircraft of raising

often for need and Some relevant across these common with accuracy include in an along conditions, harsh applications characteristics precision. absolute reliability,

In which applications users. Linear components the they the to critical the short, our and applications Motion in in cases, many safety functioning of are to reside, the proper of

indicated levels. left-hand application channel business As side record high strong as Motion has its of our itself leading supports expertise the on and presence through proprietary performance lower provider track slide, and achieved established service of a technology, deep the customer that a online leveraging Linear by

in onshoring class tailwinds, that aircraft some as the global products. for and to markets processes businesses or market-specific electrification, a driving middle and some factors secular and related to automating e-commerce rising strong end of trends is end macro as labor-intensive have Most growth demand also agricultural growth such such

and growth The organic into motor the by that significant digits We leveraging and customers mentioned our broader sales offering we power to business portfolio high-efficiency electric strength high and plus accelerate force of of transmission X-year opportunities, going cross-marketing can that channels our the Regal single of by increasing Rexnord this exploiting adjacent I X%. Linear a solutions. secular automation, CAGR supported value-add Motion believe solutions our tailwinds for a growth roughly forward

to I to power the Rexnord take Regal portfolio. want broader a moment of the emphasize

had engineered already For precision value-added motion enable other components customers' and customer AMC example, in solutions power strong linear relationships our The subsystems needs. a of our other play. transmission more portfolio offering and along addition conveyance Intralogistics, of divisions a motion and to portfolio, complete best strong with Legacy specific from and with in Regal

cost AMC's dig market. we and approaching Similar revenue. opportunities business is annual which to aerospace exist quarter, defense the into Aerospace next in will even marketing expanded greater million in extent now $XXX deeper an And

market of Regal Lastly, X% which now has that Rexnord a exposure, I'd been our medical priority reached sales. expand has note to for us

Our using and sales the are discussing teams an XX/XX enhanced focused on customers of have power portfolio the Regal with they Quad one. approach, Rexnord

longer of initiatives funnel, these early While nature, begun by cycles, already am still are, the sales opportunity teams it building are and we what a by seeing. excited and have sales is I days, many very

Linear in portfolio. technology believe ability Regal accelerate bit Motion hope more Linear I our transmission, differentiated Rexnord of can how and sell provides the automation scale enhance color we broader help motor growth high-efficiency this little how and power our to a Motion on

now over I our will With turn call through our to take second segment latest discuss performance financial that, guidance. and quarter you to the Rob

Rob Rehard

Louis, by I'll our team. good Thanks, and everyone. also global morning, thanking begin

lot performance not second build team's the Rexnord. quarter very and on, going the a only have Regal drove and work We execution hard higher-performing disciplined but strong helping is

segment. by performance operating our review let's Now

sales in Starting headwinds AMC, markets and from Center acquisition, Altra by timing the end or the Control, the quarter, year, Medical project reflecting the up with Aerospace, the organic forma Motion were market. beverage strength in for and prior second X% in Automation Data pro tempered

to useful is at growth which first was look basis. a in it half, pro headwinds, AMC's timing project organic X.X% forma Given the on

margins. with quarter AMC ahead of price cost which, along growth, and margin the justifies technology reflects as a businesses XX.X%, customers valued and and with Adjusted at in Altra's the a product of volume reinforcement Data that EBITDA Regal's Conveyance are favorable reminder, gross and and nicely expectation was Center is our business our Aerospace, strong by a highly Control combination along Automation and

pro basis lead expected book-to-bill on XX% order in book-to-bill quarter second This on Orders reduction as a at were is a supply roughly basis chains times daily and X.X. in reduce. normalize down tracked at forma as organic AMC the July, roughly X.XX. In with

of is and X-year roughly our normal the XX% stack second of AMC's For segment's above decline quarter quarter against is perspective, the a level. at backlog XX% order end second

feel about next we growth XXXX prospects So and the into early in AMC good for year.

Energy by from in EBITDA strength in Solutions offset quarter XX.X%, was Marine price reflects basis the partially market from Mining, points year. for Turning in XX prior cost. energy from markets, projects. end sales and with the reflects quarter end line the were the IPS the and quarter Metals weakness in the second to first volume Industrial the impacts renewable and timing expectation forma up and in Growth Powertrain of Adjusted our margin benefits & agriculture IPS. Pro organic in or

the reinforces slide, you, of PMC synergies. this which side was XXXX, margins Legacy remind the Regal IPS strength Altra in as to the synergies the EBITDA further improve of our IPS of QX and opportunity the I'll and the business Altra indicated EBITDA before right on XX.X% acquisition, with

main supply global with chain approach the and Our XX/XX along manufacturing drivers. our scale, are

Pro in orders July, a and in X.X down second book-to-bill were roughly X% book-to-bill at also X.X. the quarter daily forma in tracked IPS basis, organic quarter. In the was on

against XX%, order stack at quarter XX% above second the of our roughly segment's is IPS' the of perspective, decline quarter For backlog and is a second level. nearly X-year end normal

outlined or a Organic Solutions in XX.X% second demand we directionally in Efficiency destock the by fully weaker significant call. activity, quarter was in and anticipated with the Power market PES. from last This to is pressure decline were lesser The down earnings residential channel consistent HVAC and in prior the to destocking China. driven America our extent, sales along the with weakness was year. expectations Turning North

to Note to the behind destocking to was price/cost, was quarter us favorable mostly EBITDA compared in performance partially Key fourth as be lesser adjusted The margin operational lower enter from mix and for second the of somewhat a quarter but that the degree expect PES further the margin destocking our we contributors headwinds quarter. XX.X%, expect we to performance, quarter and modestly ahead offset the by in PES expectations. which volumes. were third

Orders performance on daily half, in at level. in PES XX.X% basis, and in better moderate of potentially a second versus to than for the the quarter level tracked the to the in were Book-to-bill down back July. second X.X orders. quarter with slightly Shifting expect our quarter was upside expectation. We margin continue this X.X

on For is X-year perspective, orders the stack quarter XX%. second

which a you'll updates on period. coming page, ended prior reference. of from quarter. some $XXX was of On slide, the year cash $XXX.X in the quarter end the in total Free reduction right versus additional of the flow highlight your this we the financial for with in very the $XX.X side million billion, Notably, million $X.XX debt quarter first the million, see at strong, up we following is

flow improving job The cash lowering driven teams capital by continue to part inventories. in do a in particular, free and working by performance great improving

continue XXXX to in opportunities inventory. We cash further flow to increase lowering significant see by our

on than greater this increase $XX now are flow free million to estimate. of of track prior an our year, We from generate $XXX million cash

we remain As to paying heavily allocation weighted stated down previously, debt. will capital our

Now outlook. moving the to

several of of making adjustments for now $XX.XX prior to the our $XX.XX share, to which versus a range $XX.XX. in earnings are We range per guidance adjusted to is $XX.XX

the You of will expense midpoint approximately net is which higher down interest reflects higher depreciation see and of that our million. $X by range roughly of prior $X.XX, $XX expense coming million primarily

change Rexnord based anticipated expense synergy interest along higher of increase primarily a acquisition-related rate footprint the step-up depreciation both, reflects SOFR cadence investments, to related PMC with capital to to curve. The latest expense depreciation on change The and rates, true-up realization. the reflects actions interest an latest assumed related many forward

also will lowering the range. are we high see of our You end that

HVAC over through recovery certain our in likely. as slower our In as performance. we are including markets. visibility the ranges And U.S. industrial appear short-cycle we high assumptions consumer year, expected of pool a now prior have modeling in Given well markets, assume end particular, now of just halfway the behind residential pace better now believe we less some into we and

no China are addition, longer recovery meaningful In in we this a expecting year.

the the our and Finally, we and cross acquired slide, cost Regal the acquisition, teams performance marketing we through Altra Legacy bottom added roughly below-the-line summary, this well. quarter. are at line the pleased the synergies. executing Rexnord business We Both, and In items. newly performed are with modeling effectively our of XX% top the of in very present standard on both, our

our have we We continuing XX/XX creation, the profitable with call can into and meaningful our to like And so doubling under to shifting drive that, more product would across questions. I markets ranging growth lots to from to the and to turn vitality continue of value businesses. take control and levers lean over secular Operator? to now our drive back operator accelerate

Operator

first Instructions] from Baird. question Mike Our Halloran [Operator comes with

Mike Halloran

resi you track seeing bit dig back you and of look new your industrial pieces some year So little could you granularity what into demand how whether of it's with pieces, short the think there? an big some perspective of as to to business, think just see the the you you are about type half the from underlying any a as the orders you're going dynamics chunks and

Louis Pinkham

question first over Yes. to half Mike, this is the second Louis. To answer about the then go -- thinking how on and your we're answer markets.

So be the of QX profiling year-over-year up to and mid-single being That's year. we're orders in how QX digits digits. mid-single rebound we're down expecting rest to the to

commercial. around pace So A how general the it from we and are perspective? a thinking slower in market bit half, little of second specifically about HVAC, recovery pool resi,

late like our we mid, What pretty is about and though, early balanced portfolio, cycle. we're

the Strength. to accelerating growth; a that markets, nice is be though, second Strength tends Aerospace, other we're pressure A half been And non-res lumpy, construction in are but in Medical, Alternative to non-res and forecasting than Energy, and in pretty us, we're We has it have Energy. view solid construction. did strength some headwind Alternative see little Data for expecting, we in Center, China

still seeing we standpoint, distributors. up with nicely. the we're tell that growth you you because, North Our have is steels construction From distribution relationships an know, I'd non-res as industrial American our end strong

and strong. management, And in share a down. into little distributors still well bit continued sales orders. from so There of the QX, was filled orders are inventory expect we going as openly so as -- we out out our quite And

in the space. demand distribution profile about industrial that overall, feel But I good

markets, view gives than we're our positioned. our mid how So of more that we're Again, hopefully, markets Mike, like of our thinking one you a of that tell cycle exposure. about not XX% late how I'd And early, we sales. you, of distribution and up make

Mike Halloran

confident about then quarter if a sequential little couple fourth a in that feel on you And with from just basis, demand plus and just you are helpful. transition trends sequential the normal little bit hit an mid-single very cumulatively seeing stronger this as XQ a things perspective? underlying relatively think a markets an destocking quarter, Or is is orders maybe digit mid-single-digit that's maybe No, you to down fourth expectation that there of more in? the normalizing

Louis Pinkham

I No, spot that's pretty think on.

We expect some continued destocking through XQ.

any going demand We be fourth be do QX We behind end expect a for either, expect the China perspective. to to we expect pretty than but strength we longer really in any as little by And in recovery before, from we're year. that it significant I of bit slight a anticipated. expecting us the not XQ, necessarily quarter, taking into said muted not strong

summarized way spot So overall, the it you is on.

Mike Halloran

cross-selling. pace here maybe merge what on working put the to you And early And last from continue qualitative of the as perspective? joint you a see two Great. think an do and R&D a on one, get these some context then businesses just of can basis? basis on you What's efforts kind progression more

Louis Pinkham

I’m great Mike. motors be offering in the out rounded gearing clutch our more there’s – a brake on time global We industrial Bauer our in powertrain spending would strengthened position side, the with brand coupling with then particular, geared definitely and I the and excited, with we opportunity and our there. thought lot a business. brand, and

excited I’m there. so And

as quickly AMC the total business. our excited to I didn’t business, so leverage is expect with strength so Rexnord What able Regal the going of be we’re the how be about to to A&S traditional

with level accelerate. and we of that is early growth. portfolio customers think of now $XXX positioned offering it’s And our the to we we’re and higher of much cycle at and Our its today business the a have, Regal Aerospace talking million because

positive for say, we and just – Regal an us would the – big for potential future. that’s now and scale a our So scope of been example the I of and we’re

Operator

Julian Barclays. Mitchell Our next comes question from with

Julian Mitchell

little if to a possible. keep questions Maybe concise, my trying

The of sort EPS. third and one, sales of cadence out first half sort really, sales fourth guidance between to $X.XX-ish calling we you're of the of Any quarter about and $X.X margins? billion second and as think us

Rob Rehard

is Sure, This Rob. Julian.

what you ahead third the that I'll give through in quarter. the move possible. Let and -- through this looks think me to segments color like you sense give go And of we a best the

the in we in quarter. margins quarter, in with For the third so $XXX high teens, the range revenues margins similar expect the to PES million segment, to million of the $XXX would second

On the revenue out less pointed the that's improvement do I we a slight side, the second you'll based as mix. and destocking -- number, on better versus see quarter, better seasonality,

to Industrial $XXX million we move about you As Industrial, at $XXX see million. to

similar quarter there, very double So margins low the and to second the digit.

Moving to the relative $XXX line, maybe to flat in second the $XXX -- from of AMC. million quarter, relatively Relatively the to revenues top range million.

to quarter-to-quarter. very in the bit. that's have there impact volumes so margins when third. applies And But quarter to similar although I when flat is it's that, the repeated driving to stub second an is a down mid-XXs, and obviously back remember, about relatively you the quarter. a both, fairly period AMC, piece say think IPS. AMC And Now not of that that, in to flat, the of you again the Synergy in second

Margin about million. Moving is to to million $XXX IPS. $XXX

the agricultural don't you So down period industrial a that a that and impact low continues by short-cycle to the the margins mid-XXs, quarter third and of line destock. way, there. to because have -- bit Again, top in headwind be the on stub

line as third $X.XXX the range margins the about XXs. on billion with in top low the billion a in that's overall, $X.XXX to So quarter,

about the we're way it quarter. the that's in So thinking third

be the stronger implied of quarter course, the is the then, that would fourth than third. And absolutely

the backlog book-to-bill that third some us That about in a comments, month What can X.X logical prepared be: some of I'll holding talked of gives confidence the that gives that next good that the our us I kind as talked visibility. at now answer exiting pretty I most quarter. so that question backlogs us be might July. businesses And up? into nice the have gives my we're by confidence we're saying do about we And fourth that elevated as in

chain good like normalize, can into better rising supply Our us we some visibility, that lumpy things deliver that gives continues And we then -- do visibility and project orders, have more some that to PES in and that talk we in of slight our confidence Center see third Renewables some behind fourth. believe, demand that. improvement then we quarter, us will destock, in in and like about Data the be the the And we'll finally, backlog.

to So that's cadence what the QX and we're from of detail. the QX seeing QX

Julian Mitchell

And think today? the sort the the destocking helpful. QX follow-up very Industrial acute? by destocking of Are then What done areas you areas pace And short-cycle markets. of industrial are sort of That's get elevated in are short-cycle main it's which through left amount any just where what's at your inventories on on the still and most a those? we we

Louis Pinkham

had to course, by HVAC, Yes. we’re but part significant really of start the of has pool. destock. Pool, Julian, expect still working through is it Yes, through this Louis. We pretty be do is resi, a of QX. a Regal, small

impact And Industrial clear well, an And no we’re by reduction question support a we continuing QX and inventory as then – But our to times And of has and expecting then had the back to some into levels. able normal of reducing channel. as and so said again, balancing expect that are getting it in QX QX. to QX. there’s I that being lead like end before, there’s distribution up distribution, the in in

Operator

comes question from of next Glynn Oppenheimer. The Christopher

Christopher Glynn

pretty any But A book-to-bill, you anything surprised if quarter? kind of the to curious lot in maybe transparent. so have if patterns. digest. markets there's pretty doesn't really just with the I here the It and curious any residential situation channels good unstable or information of transparency, and is easy seem was that

Louis Pinkham

years. there. been But look have little on on. pretty of a surprised seeing more by my At forecast that. doesn't nothing rebound. forward China year, beginning a history over I bit commented our China with Chris, not was of I Maybe the already than have much improvement faster just on rebounding based any the the bullish we've China

really Beyond that, everything to expectations. our played

So nothing more than that.

Christopher Glynn

industrial any then on process? the And Okay. update

Louis Pinkham

Yes.

So we’ll of to in progress, a good next months. and position the be lot we’ve a more share in couple of made we believe

Operator

Instructions] Nigel next of Coe question Our [Operator comes Wolfe from Research.

Nigel Coe

from too so Good not here, side. details my much

the back that of be off said color, Rob. low on -- And Maybe also Just What for from the you PMC from just cadence obviously should us Altra, synergies XQ XQ a cost then XQ? point IPS, expecting you on can final and remind from just transaction. we the and but to mid-XXs.

So would that what saw be XQ? with sort of in flattish we

Rob Rehard

Similar to in million and QX, you synergies on yes. synergies. give me about quarter, detail saw incremental both, which the Altra. And second then let the We of $XX includes the PMC

million down, If $XX you $X break and million to million, about PMC then about million you to think Altra. $XX $X for that is

get million. how $XX that So that's you

expect we next. Altra with through the So through P&L the the flow 'XX $XX $XX in to million and about P&L about incremental in to PMC XXXX from million from flow

about get Altra you there rate annually. $XX from an million means that exit So

$XX the So total impact is about in P&L 'XX million.

the coming might $X million through to commented and then I rate on fourth. the $X count next we we see expect quarter, in million on to above in quarter. closer We that something can and second maybe or might quarter You saw exit synergies improving that what increasing that the each

Nigel Coe

on? the is wouldn't expect depreciation to down now? from pinch Okay. here accounting be You settled much them pretty highlighted, And too many now you this changes then

Rob Rehard

something additional but to to that going slight going be, any would degree that expect we true-ups forward. not it's not could I would tweaks be Might anything absorb. material us expect see to material I Yes. and

us yes, accounting So is behind at time. this the largely

Nigel Coe

Okay. seeing now from in short-cycle this perch, we But right few that have. Great. And is, see [indiscernible] the you've expect a my emerging say where weakness businesses. and when you'd we're is and of therefore, durables weakness some longer consumer cascade then is cycles cycle seen of then into your to which follow-on some all obviously the the Louis, Industrial,

Energy, based can suggests are strong for non-res, remain you So your different maybe that on time perhaps seeing longer? experience, cetera, that this et something

Louis Pinkham

a thoughts are It’s now It’s great strategic and Yes. right year. for our next are planning something we lot as that our obviously about question, a thinking prepared period we Nigel. moving getting into on

good things in look cycle pretty longer For the now, businesses.

backlogs orders bigger opportunities. and Our honestly, are the accelerating strong, are some of and in projects our

what energy I helped stimulus us. think major drivers can’t Regal, think of around regulatory the opportunity efficiency, – of our And getting and as the electrification, some about are These quite and Act. has then the believe directly onshoring pinpoint, drivers. trend been I benefits and driving strong, and for Infrastructure the business but mining Investment towards we We has performance out automation. we’re Jobs

forward, as we Science the businesses. And – the Conveyance we expect Act move even AMC the and CHIPS and Automation help will

to and early help in there think rebound I businesses are our resi as commercial. darn cycles and cycle should no feel So bottom and some things close later that the pool keep strong there’s question, we like pretty we’re

have said just really about growth Aerospace, markets, I the before, Medical, Alternative Energy. there, excited as we accelerating then And we’re

progress year us, you So the how be and end of all ‘XX the this should do more – perspective color of these, pretty guidance hopefully, that a into think of and this we we’re into solid as for Nigel of thinking. and give We next. provide on we’ll beginning year

Operator

comes question Walter next from Liptak Seaport. from Our

Walter Liptak

bit bonus capital. to you beefed I capital. there? little a thinking wanted color more Any from to Was what the Is are I that compensation were line up ask quarter, still The little of out? last working comes related you And or with guys kind you kind remember in working of better? that on came there -- the bit inventories a stronger. down

Rob Rehard

a of in Yes. to Thanks, Walt, here the million inventory and as good in to hear saw from the just quarter. you. of million reductions. We $XXX saw, We $XXX the million, benefit We now, about somewhere quarter. another $XX $XX million specifically second range first estimate for ‘XX that in from reminder,

track, originally a had expected we ahead but your to on little largely point what there. of even we’re So bit

expect also another $XXX million we XXXX. Now $XXX to million coming in

sorts of So the months. add control to our next is the to million continue to that then kind tied some over of small that about supply of out $XXX the up, chain million to castings well. But you electronics challenges areas Obviously, precise the and of and XX things. as degree normalizing also and have we that’s a if it’s to XX all in – those since of $XXX timing

looks But the picture overall, that’s what like.

about we is ability to excited a debt to a that and we’re standpoint. continue from use So our great the to allocation see down that pay capital benefit that,

Operator

The question Hammond KeyBanc Capital from of Markets. comes next Jeff

Jeff Hammond

like that's So bit that margin in expectation? nice know maybe I what worse. dig don't seems the PES, your there And up step little little a of then mix just a if some and just It of IPS better sense want really Altra doing a to differentials. running your of and doing on little versus drove lower. Legacy a

Louis Pinkham

Yes.

that, and really Jeff, with couldn't this and more very with performance be I Really journey indicative take start of strong Louis. well in lean pleased we've performing the PES. Israel. PES. our starts It is me Let on. XX/XX I'll of the with operations that been

we're So are even when executing well. volumes down,

that positive benefit of Mix And from to our nonmaterial new to continue some had versus through definitely business inflation. to we've seen segment aftermarket priced distribution helped us mix some that we've as additional overall. the has that mix cover we've OEM. launched Now is get a benefits products the and

and I really the well when for very doing business rebound. does positioned think is nicely demand

mix much there. bit cycle be There a expected. performed us. performance solid notably about. would a talked short distribution was you, pretty tell so for as headwind, know, that And destocking we PES. I IPS we a of mix that to in positive margin you really So as the was tends IPS --

really though, for labors, supply to constraint. IPS' chain pleased performance. sure, definitely certain continue I'm with pockets castings metal Overall, been see We inflation, some of and casting alloys, a

We and then levers have improvement, vitality the our margin future on margin investment in positive XX/XX more doubling and drive to our synergies, to launching -- many pull product. continued in mix margin

overall, expectations. our So spot really on to

Jeff Hammond

something debt. with in cash, want of understand, then would Great. assuming second you like else? debt paid interest expense, better free I pay And bit looks rate or Is Okay. the a half. just I'm just quite down is which the the it down it in higher something just to coming dynamic your

Rob Rehard

here. million the dynamic. we the raise curve primarily I the mean fairly a it's it dust both, more as and the the primarily small income. dollars. related everything There's for to bit settling it's net did of related interest said, getting interest to little of the was the inched Yes, in down $X It's that's in about that's relative the up of I I mean terms interest steeply. a rate -- expense in still change And but SOFR the tied that acquisition, to year

about. increases in on related what's beyond talking been a above So I bit true-up. cash it's expect we've And based we actually where additional continue beat to some don't to built curve, it we SOFR would and that the of to see to that come with today, it if flow in primarily see opportunities potential

Jeff Hammond

Okay. just one. And then last

you -- talked and Just on gross adjusted gross to the be of how charges to margin I get to able of flow they through want kind versus kind about. gross of SG&A that XX% back kind just margin,

Rob Rehard

I There the can quite And as Jeff, some I we the answer. offline. it’s certainly in few or we may workbook simple a on simple that that’s recommend play Yes. that one. to. There not It’s would the follow the easier – that. dynamics one, up X-K think are in to that through a on talk way back get not of as schedules are

Operator

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

Louis Pinkham

to us Thank and our analysts you, today. for operator. And thanks joining investors

us front opportunities so in As value you creation key many enhance heard stakeholders. this our morning, there to for are of

Rexnord differentiated we great player level, about we high and pursuing are team discipline, As interest and opportunities always day. Rexnord. scale a Have that of a in strong execute technologies, markets our in with a Regal accordance Thank urgency with financial ample these to us again for resources values. continues today, good with your serve for excited and a channel a positions, in at thank you sense you joining the Regal

Operator

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

now may You disconnect.

Regal Rexnord (RRX) 1 Aug 232023 Q2 Earnings call transcript