Acquisitions and Divestitures - Regal Rexnord Corporation signed an agreement to sell its industrial motors and generators businesses for a total price of $444.0 million, with the transaction closing on April 30, 2024[23]. - The acquisition of Altra was completed on March 27, 2023, for a total purchase price of $5.1 billion, enhancing Regal Rexnord's automation portfolio and industrial power transmission capabilities[25]. - The acquisition of Altra contributed $442.5 million to net sales growth, while the divestiture of the industrial motors and generators businesses negatively impacted sales by $342.7 million[204]. - The company plans to continue making acquisitions as part of its growth strategy, but successful integration and profitability of these acquisitions are not assured[94]. - The success of acquisitions, such as the Altra Transaction, relies on realizing anticipated benefits, which may not be guaranteed[90]. Financial Performance - For the year ended December 31, 2024, Regal Rexnord Corporation reported annual net sales of $6.0 billion, a decrease from $6.3 billion in 2023[181]. - In 2024, consolidated net sales were $6,033.8 million, a decrease of $216.9 million or 3.5% compared to 2023, driven by a 5.0% organic sales decline and a negative foreign currency translation impact of 0.3%[204]. - Gross profit for 2024 increased by $123.7 million or 6.0% to $2,191.0 million, primarily due to $175.2 million from the acquisition of Altra[204]. - Operating expenses decreased by $129.2 million or 7.6% to $1,561.0 million, mainly due to the divestiture of the industrial motors and generators businesses[204]. - The effective tax rate for 2024 was 20.0%, a significant improvement from (3,293.8)% in 2023, reflecting lower US tax on foreign earnings[209]. - Diluted earnings per share for 2025 are expected to be between $4.42 and $5.22, based on an effective tax rate of 21.5%[201]. Market Strategy and Growth - The company aims to double its new product vitality in the medium term, focusing on serving secular growth markets and enhancing energy efficiency[21]. - Regal Rexnord's strategy includes raising exposure to markets with secular growth tailwinds, such as residential HVAC and alternative energy[21]. - Approximately 40% of Regal Rexnord's sales are derived from the distributor channel, reflecting less cyclical aftermarket transactions[22]. - The company expects to maintain strong free cash flow generation, supporting post-acquisition de-leveraging and funding inorganic growth initiatives[29]. - Regal Rexnord maintains a strong portfolio of highly-engineered products and trusted brands, investing in product development to meet customer needs[21]. Research and Development - Regal Rexnord's research and development efforts are focused on energy efficiency, embedded intelligence, and variable speed technology solutions to enhance product offerings[34]. - The company is investing in new technologies and product enhancements, particularly in IoT and AI, to maintain competitiveness in evolving industries[64][65]. Workforce and Community Engagement - The company employed approximately 30,800 associates worldwide as of December 31, 2024, with 30,300 being full-time[43]. - In 2024, over 95% of full-time professional associates participated in the performance management process[45]. - The company allocated $1.1 million in 2024 to support charitable organizations in the communities where associates live and work across the US, Mexico, and Canada[50]. - The company emphasizes diversity, engagement, and inclusion as core values, seeking a workforce that reflects the communities in which it operates[48]. - The company has established a robust training and professional development program to help employees achieve their career objectives[44]. Environmental and Regulatory Commitments - The company aims to achieve carbon emission neutrality in its operations across scopes 1 and 2 by 2032, and net-zero across scopes 1, 2, and 3 by 2050[51]. - The company has committed to achieving Scope 1 and Scope 2 carbon emission neutrality by 2032 and net zero across all scopes by 2050, which may increase operational costs[87]. - The company is subject to various environmental laws and regulations, which could impose significant costs and liabilities if not complied with[137]. - Known environmental liabilities may adversely affect the company's business, with potential undisclosed conditions also posing risks[139]. Risks and Challenges - The company is dependent on a limited number of suppliers for key materials, which may affect its business if those suppliers fail to meet commitments[60]. - Significant portions of revenue depend on key customers and distributors, and any loss or reduction in purchases from these parties could materially impact the business[68]. - The company faces risks related to climate change, including increased costs and operational disruptions due to regulatory developments[83][84]. - The company may incur significant costs related to product recalls or liabilities, particularly for high-volume applications, which could adversely affect financial results[74]. - Cybersecurity threats pose a risk to the company's information technology infrastructure, which could lead to unauthorized disclosures and significant financial liability[131]. Operational Efficiency - The company leverages a flexible global manufacturing presence to navigate disruptions and improve service levels, including higher product availability and shorter lead times[21]. - The company continuously evaluates its property portfolio to ensure efficient use of facilities[41]. - The company operates 143 facilities in the IPS segment, with a total of approximately 10.4 million square feet, of which 31% are leased[160]. - The PES segment includes 56 facilities, totaling approximately 4.7 million square feet, with 28% leased[161]. - The AMC segment has 72 facilities, covering approximately 3.2 million square feet, with 58% leased[163].

Group 1 - Regal Rexnord Corporation appointed two new directors, Rashida A. Hodge and Gerben W. Bakker, effective February 17, 2025, with terms continuing until the 2025 annual meeting of shareholders [1] - Rashida A. Hodge is currently Microsoft's Corporate Vice President of Customer Success – Azure Data and AI, with prior experience as Global Vice President at IBM [2] - Gerben W. Bakker serves as Chairman, President, and CEO of Hubbell Incorporated, with a career at Hubbell starting in 1988 [3] Group 2 - Regal Rexnord's CEO, Louis Pinkham, expressed excitement about the new board members, highlighting their experience in technology, AI, and global manufacturing [4] - Anesa Chaibi is retiring from the Board effective February 17, 2025, after over ten years of service, and the Board size will increase from ten to eleven directors [5] Group 3 - Regal Rexnord employs 30,000 associates globally, providing sustainable solutions for motion control and power transmission [6] - The company operates in various end markets, including factory automation, food & beverage, aerospace, medical, and alternative energy, benefiting from strong secular demand [7] - Regal Rexnord consists of three operating segments: Industrial Powertrain Solutions, Power Efficiency Solutions, and Automation & Motion Control [8]

Financial Data and Key Metrics Changes - Fourth quarter sales decreased by 1.4% year-over-year on an organic basis, with adjusted gross margin at 37.1%, up 60 basis points from the previous year [15][17] - Adjusted EBITDA margin was 21.7%, down 80 basis points year-over-year due to lower volumes and foreign exchange pressures [18] - Adjusted earnings per share for the quarter were $2.34, reflecting a 2.6% increase compared to the prior year [18] - Generated $185 million of adjusted free cash flow in the fourth quarter, contributing to a total debt reduction of $205 million [19] Business Line Data and Key Metrics Changes - **Automation and Motion Control (AMC)**: Net sales down 2.3% year-over-year, but orders increased by 8.8% on a daily basis [30][33] - **Industrial Powertrain Solutions (IPS)**: Net sales decreased by 1.9% year-over-year, with orders up nearly 4% [35][38] - **Power Efficiency Solutions (PES)**: Net sales slightly increased year-over-year, driven by strong growth in residential HVAC, which grew at a low 20% rate [39][41] Market Data and Key Metrics Changes - Global general industrial markets faced challenges, particularly in China, impacting overall demand [12][13] - North American core business remained nearly flat, with customer pushouts affecting all segments [13] - Orders in January showed a positive trend, with daily organic orders up 1.4% [16] Company Strategy and Development Direction - The company announced a partnership with Honeywell Aerospace to provide solutions for the advanced air mobility market, focusing on electromechanical actuator solutions [21][27] - The strategy emphasizes moving up the value chain and providing integrated solutions to enhance customer value [27][28] - The company aims to achieve a targeted annual run rate gross margin of 40% by the end of the fiscal year [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged persistent market headwinds and rising foreign exchange pressures but expressed cautious optimism about growth prospects in 2025 due to improving order momentum [20][59] - The company expects a stronger second half of 2025, driven by positive order trends and backlog characteristics [59] Other Important Information - The company paid down $938 million of debt in 2024, exceeding its goal [19] - The 2025 guidance midpoint assumes flat organic growth with a modest headwind from foreign exchange [49] Q&A Session Summary Question: Should we think of the upside to synergies in 2024 as a pull forward of the sales synergies or upside to the total opportunity? - Management clarified that the synergies realized earlier than anticipated are not pulled forward from 2025, with a goal of $54 million for 2025, reduced from $65 million previously [64] Question: Can you level set us on your manufacturing footprint in Mexico with all the tariff talks? - Management stated that they are closely tracking tariff impacts and have a cross-functional team assessing various impacts to prepare for potential implementations [67][70] Question: What is driving the outgrowth and confidence in one point of outgrowth in 2025? - Management highlighted new products in PES, integrated solutions in AMC, and significant growth in IPS as key drivers for outgrowth [76][78] Question: Can you discuss the sequential cadence through the year? - Management indicated that the first quarter is typically the low point, with expectations for improvement in the second half of the year based on longer cycle projects [90][91] Question: What is the visibility for improvements in PES? - Management expressed cautious optimism for improvements in residential HVAC, expecting a progressive improvement throughout the year [131] Question: Can you clarify the FX pressure on margins? - Management explained that while the weaker peso could provide benefits, hedging positions currently place them in an unfavorable position regarding FX impacts [134]

Creating a better tomorrow™… Fourth Quarter 2024 Earnings February 6, 2025 Louis Pinkham, Chief Executive Officer Industrial Rob Rehard, Executive Vice President, Chief Financial Officer Motion Control Solutions Systems 4Q 2024 FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES All statements in this communication, other than those relating to historical facts, are "forward-looking statements." Forward-looking statements can generally be identified by their use of terms such as "anticipate," "believ ...

Financial Data and Key Metrics Changes - Fourth quarter sales decreased by 1.4% year-over-year on an organic basis, with adjusted gross margin at 37.1%, up 60 basis points from the previous year [11][12] - Adjusted EBITDA margin was 21.7%, down 80 basis points year-over-year, while adjusted earnings per share increased by 2.6% to $2.34 [13][14] - Generated $185 million of adjusted free cash flow in the fourth quarter, contributing to a total debt repayment of $2.05 billion [13][30] Business Line Data and Key Metrics Changes - Automation and Motion Control (AMC) net sales decreased by 2.3% year-over-year, but orders were up 8.8% on a daily basis [20][22] - Industrial Powertrain Solutions (IPS) net sales declined by 1.9% year-over-year, with adjusted EBITDA margin at 26%, up 200 basis points [23][24] - Power Efficiency Solutions (PES) net sales grew slightly year-over-year, driven by residential HVAC growth of low 20% [25][26] Market Data and Key Metrics Changes - Significant pressure observed in global general industrial markets, particularly in China, while North American business remained nearly flat [9][10] - Orders in AMC were up nearly 9%, while IPS orders increased by nearly 4% [11][22] - Daily organic orders in January were up 1.4%, indicating a positive trend moving into 2025 [12][29] Company Strategy and Development Direction - The company announced a partnership with Honeywell Aerospace to provide solutions for the advanced air mobility market, focusing on electric vertical takeoff and landing (eVTOL) aircraft [14][15] - The strategy emphasizes moving up the value chain and providing integrated solutions to enhance customer value [17][18] - The company aims to achieve a targeted annual run rate gross margin of 40% by the end of the fiscal year [12][36] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about growth prospects in 2025, citing improving order momentum and a strong backlog [10][38] - The company anticipates a stronger second half of 2025, driven by long-cycle projects and improving market conditions [38][39] - Management remains measured in their approach to guidance, considering current market conditions [38][39] Other Important Information - The company paid down $938 million of debt in 2024, exceeding its goal, and plans to continue prioritizing debt reduction in 2025 [30][36] - The effective tax rate is expected to be 22.5%, down from previous estimates, due to identifiable tax benefits [34] Q&A Session Summary Question: Should we think of the upside to synergies in 2024 as pull forward of the sales synergies or upside to the total opportunity? - Management clarified that the synergies realized earlier than anticipated are not pulled forward from 2025, with a goal of $54 million for 2025 [40] Question: Can you level set us on your manufacturing footprint in Mexico with all the tariff talks? - Management stated they are closely tracking tariff impacts and have a cross-functional team assessing various impacts to prepare for potential implementations [42][43] Question: What is driving the outgrowth and confidence in one point of outgrowth in 2025? - Management highlighted new products in PES and integrated solutions in AMC as key drivers for outgrowth, with significant potential in cross-selling opportunities [48][52] Question: Can you discuss the sequential cadence through the year? - Management indicated that the first quarter is typically the low point, with expectations for improvement in the second half of the year based on order trends [56][58] Question: What is the visibility for improvements in PES? - Management expressed cautious optimism for North America but noted continued weakness in Europe and China, with expectations for gradual improvement in residential HVAC [84][86]

Financial Performance - Fourth quarter diluted EPS was $0.62, with adjusted diluted EPS of $2.34, up 2.6% year-over-year[4] - Sales for the fourth quarter totaled $1,461.1 million, down 9.1% year-over-year, and down 1.4% on an organic basis[4] - Adjusted gross margin for the fourth quarter was 37.1%, an increase of 60 basis points compared to the prior year[4] - Net income attributable to Regal Rexnord Corporation for Q4 2024 was $41.2 million, compared to a net loss of $57.4 million in Q4 2023[18] - Net income for Q4 2024 was $42.0 million, a decrease of 25.9% from $56.6 million in Q4 2023[32] - Total Regal Rexnord Net Sales for the year ended December 2024 reached $6,033.8 million, compared to $5,876.0 million in 2023, representing an increase of 2.7%[31] - For the year ended December 31, 2024, net sales totaled $6,033.8 million, representing a growth of 2.2% from $6,250.7 million in 2023[46] Debt and Cash Flow - The company paid down $205 million of gross debt in the fourth quarter, with a net debt/adjusted EBITDA ratio of approximately 3.6x[4] - Cash and cash equivalents decreased to $393.5 million at the end of Q4 2024, down from $574.0 million at the end of Q4 2023[19] - Long-term debt decreased to $5,452.7 million in 2024 from $6,377.0 million in 2023[19] - Net cash provided by operating activities for the year ended December 31, 2024, was $609.4 million, down from $715.3 million in 2023[20] - Adjusted free cash flow for Q4 2024 was $185.3 million, compared to $170.9 million in Q4 2023, reflecting a 8.1% increase[38] Sales and Growth - Daily order growth improved to 4.4% in the fourth quarter compared to the prior year, with the AMC segment orders up nearly 9%[3] - Organic sales growth for the three months ended December 31, 2024, was (1.4)%, while acquisitions contributed 36.7% to the overall sales growth[21] - Organic sales for the year ended December 31, 2024, were $5,610.0 million, indicating a decline of 5.0% compared to the previous year[46] Margins and Profitability - Adjusted EBITDA for the year ended December 2024 was $1,310.2 million, slightly up from $1,307.1 million in 2023, indicating a growth of 0.2%[28] - The adjusted operating margin for the year ended December 31, 2024, was 13.0%, compared to 12.5% in 2023, indicating a slight improvement[21] - GAAP Operating Margin % for the year ended December 2024 was 10.4%, compared to 6.0% in 2023, showing an improvement of 4.4 percentage points[28] - Adjusted Operating Margin % for the year ended December 2024 was 12.7%, compared to 12.3% in 2023, indicating a slight improvement[28] Strategic Initiatives - The company announced a strategic partnership with Honeywell to collaborate on electric aircraft (eVTOL)[4] - Regal Rexnord achieved $101 million in synergies for the year, exceeding the target by $11 million[4] - The company expects to realize synergies of $85.0 million within the next 18 months, which would improve the adjusted EBITDA to $1,395.2 million[37] Costs and Expenses - The company incurred restructuring and related costs of $0.44 per share for the three months ended December 31, 2024[22] - Restructuring and Related Costs for the year ended December 2024 totaled $91.6 million, up from $84.4 million in 2023[28] - The company incurred transaction and integration-related costs of $96.7 million for the year ended December 2024[28] Guidance - Full year 2025 guidance for GAAP diluted EPS is projected to be in the range of $4.42 to $5.22[2] - The company provided 2025 GAAP diluted EPS annual guidance ranging from $4.42 to $5.22[24] - The adjusted diluted EPS annual guidance for 2025 is projected to be between $9.60 and $10.40[24]

Core Insights - Regal Rexnord reported $1.46 billion in revenue for the quarter ended December 2024, reflecting a year-over-year decline of 9.2% [1] - The EPS for the same period was $2.34, compared to $2.28 a year ago, indicating a slight increase [1] - The revenue fell short of the Zacks Consensus Estimate of $1.49 billion by 2.01%, while the EPS also missed the consensus estimate of $2.46 by 4.88% [1] Revenue Breakdown - Automation & Motion Control (AMC) revenues were $409.80 million, exceeding the three-analyst average estimate of $400.67 million, but showing a year-over-year decline of 2.6% [4] - Industrial Powertrain Solutions (IPS) revenues were $635 million, below the estimated $648 million, representing a year-over-year decline of 2.3% [4] - Power Efficiency Solutions (PES) revenues were $416.30 million, missing the three-analyst average estimate of $438 million, with a year-over-year change of -0.4% [4] Adjusted EBITDA Performance - Adjusted EBITDA for Industrial Powertrain Solutions (IPS) was $165.30 million, slightly below the estimated $169 million [4] - Adjusted EBITDA for Automation & Motion Control (AMC) was $88.50 million, compared to the two-analyst average estimate of $93 million [4] - Adjusted EBITDA for Power Efficiency Solutions (PES) was $63.80 million, missing the two-analyst average estimate of $75 million [4] Stock Performance - Regal Rexnord shares have returned -0.8% over the past month, contrasting with the Zacks S&P 500 composite's +1.7% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Financial Performance - Regal Rexnord reported quarterly earnings of $2.34 per share, missing the Zacks Consensus Estimate of $2.46 per share, but showing an increase from $2.28 per share a year ago, resulting in an earnings surprise of -4.88% [1] - The company posted revenues of $1.46 billion for the quarter ended December 2024, missing the Zacks Consensus Estimate by 2.01%, and down from $1.61 billion year-over-year [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.15 on revenues of $1.43 billion, and for the current fiscal year, it is $10.35 on revenues of $6.06 billion [7] - The estimate revisions trend for Regal Rexnord is currently unfavorable, leading to a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - Regal Rexnord operates within the Zacks Manufacturing - General Industrial industry, which is currently ranked in the bottom 30% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of Regal Rexnord's stock may be influenced by the overall outlook for the industry, as empirical research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Core Insights - Regal Rexnord Corporation reported a weaker-than-expected top line in Q4 2024, with sales of $1,461.1 million, down 9.1% year-over-year, and down 1.4% on an organic basis [3][8] - The company achieved an adjusted gross margin of 37.1%, up 60 basis points from the previous year, and surpassed its annual synergy target by $11 million [3][8] - For 2025, Regal Rexnord provided guidance for GAAP diluted earnings per share in the range of $4.42 to $5.22 and adjusted diluted earnings per share in the range of $9.60 to $10.40 [2] Financial Performance - Q4 2024 GAAP net income was $42.0 million compared to $56.6 million in Q4 2023, while adjusted diluted EPS was $2.34, up 2.6% year-over-year [8][22] - The company paid down $205 million of gross debt in Q4 and $938 million for the full year, exceeding its targeted reduction [3][8] - Cash from operating activities was $213.2 million, with adjusted free cash flow of $185.3 million, an increase of 8.4% compared to the previous year [8] Segment Performance - The Automation & Motion Control segment reported net sales of $409.8 million, a decrease of 2.6%, while the Industrial Powertrain Solutions segment had net sales of $635.0 million, down 2.3% [9][20] - The Power Efficiency Solutions segment saw net sales of $416.3 million, a slight decrease of 0.4%, but experienced growth in residential HVAC markets [9][20] - Adjusted EBITDA margins for the segments were 21.6% for Automation & Motion Control, 26.0% for Industrial Powertrain Solutions, and 15.3% for Power Efficiency Solutions [9][20] Strategic Initiatives - The company is focusing on growth, margin improvement, and debt reduction initiatives, with a notable partnership announced with Honeywell to collaborate on electric aircraft [3][8] - Regal Rexnord is on track to achieve a 40% adjusted gross margin by the end of 2025, following a year of transformation that included the divestiture of the Industrial Systems business [3][8] - The company is cautiously optimistic about 2025, citing improving orders and growth prospects, particularly in the latter half of the year [3][8]

Company Overview - Regal Rexnord Corporation has 30,000 associates globally, providing sustainable solutions that power, transmit, and control motion [4] - The company offers electric motors and air moving subsystems, along with a portfolio of highly engineered power transmission components and subsystems [4] - Regal Rexnord's automation offerings include controls, actuators, drives, and precision motors for various applications [4] Market Segments - The company's end markets include factory automation, food & beverage, aerospace, medical, data center, warehouse, alternative energy, residential and commercial buildings, general industrial, construction, metals and mining, and agriculture [5] - These markets benefit from significant secular demand tailwinds, indicating strong growth potential [5] Financial Reporting - Regal Rexnord plans to release its fourth quarter 2024 financial results after the market closes on February 5, 2025 [1] - A conference call to discuss the earnings release will take place on February 6, 2025, at 9:00 am CT [2] - Webcast and telephone replay options will be available for three months following the earnings conference call [3] Operating Segments - Regal Rexnord operates through three segments: Industrial Powertrain Solutions, Power Efficiency Solutions, and Automation & Motion Control [6] - The company is headquartered in Milwaukee, Wisconsin, with manufacturing, sales, and service facilities worldwide [6]