RBC Bearings(RBC) - 2025 Q1 - Quarterly Results

Financial Highlights and Performance Summary Overall Performance RBC Bearings reported strong operational performance in Q1 FY2025, with a 5.0% increase in net sales to $406.3 million, driven by significant growth in the Aerospace/Defense sector. Profitability saw notable improvement, with gross margin expanding to 45.3% from 43.4% year-over-year. Adjusted diluted EPS grew by 19.2% to $2.54, and free cash flow conversion was robust at 144.0% Q1 FY2025 vs. Q1 FY2024 Financial Highlights | Metric | Q1 FY2025 ($) | Q1 FY2024 ($) | % Change (GAAP) | | :--- | :--- | :--- | :--- | | Net Sales | $406.3M | $387.1M | 5.0% | | Gross Margin | $184.0M | $167.9M | 9.6% | | Gross Margin % | 45.3% | 43.4% | +190 bps | | Operating Income | $97.5M | $85.0M | 14.7% | | Net Income | $61.4M | $50.0M | 22.8% | | Diluted EPS | $1.90 | $1.52 | 25.0% | | Adjusted Diluted EPS | $2.54 | $2.13 | 19.2% | - The company achieved strong growth in adjusted EBITDA (11.3%) and adjusted diluted EPS (19.2%) for the quarter[4] - Free cash flow conversion significantly improved to 144.0% in Q1 FY2025, compared to 110.0% in the same period last year[2] - Profit performance was driven by increased absorption of aerospace and defense capacity and continued synergies from the Dodge acquisition[4] Segment Performance The company's revenue growth was entirely driven by the Aerospace/Defense segment, which saw a substantial 23.7% increase in net sales year-over-year. In contrast, the Industrial segment experienced a slight decline of 3.5% Net Sales by Segment (in millions) | Segment | Q1 FY2025 ($) | Q1 FY2024 ($) | % Change | | :--- | :--- | :--- | :--- | | Aerospace/Defense | $149.1 | $120.5 | +23.7% | | Industrial | $257.2 | $266.6 | -3.5% | | Total Net Sales | $406.3 | $387.1 | +5.0% | - The CEO highlighted that customer demand for capacity in the Aerospace and Defense end market remains robust[4] Detailed Financial Results (Q1 FY2025) Operating Expenses SG&A expenses increased by $2.9 million to $67.6 million but remained stable as a percentage of net sales at 16.6%. Other operating expenses rose slightly to $18.9 million, primarily consisting of $17.8 million in amortization of intangible assets SG&A Expenses | Metric | Q1 FY2025 ($) | Q1 FY2024 ($) | | :--- | :--- | :--- | | SG&A | $67.6M | $64.7M | | SG&A as % of Net Sales | 16.6% | 16.7% | Other Operating Expenses | Metric | Q1 FY2025 ($) | Q1 FY2024 ($) | | :--- | :--- | :--- | | Amortization of Intangibles | $17.8M | $17.5M | | Other Items | $1.1M | $0.7M | | Total Other Operating Expenses | $18.9M | $18.2M | Profitability and Earnings Operating income grew to $97.5 million from $85.0 million year-over-year. Net income attributable to common stockholders increased by 25.7% to $55.7 million, resulting in a diluted EPS of $1.90. Interest expense decreased to $17.2 million, while the effective tax rate rose to 23.1% Profitability Metrics | Metric | Q1 FY2025 ($) | Q1 FY2024 ($) | | :--- | :--- | :--- | | Operating Income | $97.5M | $85.0M | | Net Income Attributable to Common Stockholders | $55.7M | $44.3M | | Diluted EPS | $1.90 | $1.52 | - Interest expense, net, decreased to $17.2 million from $20.5 million in the prior year[6] - The effective income tax rate for the quarter was 23.1%, up from 21.9% in the same period last year[6] Key Business Metrics and Corporate Developments Backlog The company's backlog continued to grow, reaching $825.8 million as of June 29, 2024. This represents an increase from both the previous quarter and the same period last year, indicating sustained demand Backlog Trend (in millions) | Date | Backlog ($) | | :--- | :--- | | June 29, 2024 | $825.8 | | March 30, 2024 | $821.5 | | July 1, 2023 | $765.2 | Preferred Stock Conversion The Series A mandatory convertible preferred stock is scheduled to automatically convert to common stock on October 15, 2024. This event will eliminate the quarterly $5.7 million preferred dividend, resulting in $23.0 million of annual cash savings and a pro-forma increase in diluted EPS - The mandatory conversion of Series A preferred stock is set for October 15, 2024[9] - Post-conversion, the company will save $23.0 million annually from the elimination of the 5.0% preferred stock dividend[9] - If the conversion had occurred in Q1 FY2025, diluted EPS would have been $1.96 (vs. $1.90 reported) and adjusted diluted EPS would have been $2.56 (vs. $2.54 reported)[9] Forward-Looking Guidance Q2 FY2025 Outlook For the second quarter of fiscal 2025, the company anticipates net sales to be between $395.0 million and $405.0 million, which represents a year-over-year growth rate of 2.4% to 5.0%. Guidance for gross margin and SG&A as a percentage of sales is also provided Q2 FY2025 Guidance | Metric | Guidance Range ($) | | :--- | :--- | | Net Sales | $395.0M - $405.0M | | YoY Growth Rate | 2.4% - 5.0% | | Gross Margin (% of sales) | 43.00% - 44.00% | | SG&A (% of sales) | 17.25% - 17.75% | Financial Statements Consolidated Statements of Operations This statement details the company's financial performance for the first quarter of fiscal 2025, showing revenues, cost of sales, operating expenses, and net income compared to the same period in the prior year. Key results include a 5.0% increase in net sales and a 22.8% increase in net income Consolidated Balance Sheets The balance sheet presents a snapshot of the company's financial position as of June 29, 2024. Total assets stood at $4.70 billion, with total liabilities at $1.89 billion and total stockholders' equity at $2.80 billion. Cash and cash equivalents increased to $76.8 million from $63.5 million at the end of the previous fiscal year Key Balance Sheet Items (in millions) | Account | June 29, 2024 ($) | March 30, 2024 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $76.8 | $63.5 | | Total current assets | $994.2 | $965.5 | | Total assets | $4,696.5 | $4,678.6 | | Total current liabilities | $330.3 | $294.3 | | Total liabilities | $1,892.6 | $1,926.7 | | Total stockholders' equity | $2,803.9 | $2,751.9 | Consolidated Statements of Cash Flows For the first quarter of fiscal 2025, the company generated $97.4 million in cash from operating activities, a significant increase from $61.7 million in the prior year. Cash used in investing activities was $9.0 million, while financing activities used $74.7 million, primarily for term loan repayments. The quarter ended with a $13.3 million net increase in cash Summary of Cash Flows (in millions) | Activity | Q1 FY2025 ($) | Q1 FY2024 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $97.4 | $61.7 | | Net cash used in investing activities | ($9.0) | ($6.5) | | Net cash used in financing activities | ($74.7) | ($63.6) | | Net increase/(decrease) in cash | $13.3 | ($8.7) | Reconciliation of GAAP to Non-GAAP Measures Net Income and EPS Reconciliation Reported GAAP net income of $61.4 million was adjusted for items such as M&A related amortization ($16.4 million) and stock compensation ($6.5 million) to arrive at an adjusted net income of $80.2 million. This resulted in an adjusted diluted EPS of $2.54, compared to the GAAP figure of $1.90 Reconciliation to Adjusted Net Income (Q1 FY2025, in millions) | Description | Amount ($) | | :--- | :--- | | Reported net income | $61.4 | | M&A related amortization | $16.4 | | Stock compensation expense | $6.5 | | Amortization of deferred finance fees | $0.6 | | Tax impact of adjustments | ($4.7) | | Adjusted net income | $80.2 | | Preferred stock dividends | $5.7 | | Adjusted net income attributable to common stockholders | $74.5 | EBITDA Reconciliation Adjusted EBITDA for the quarter was $134.0 million, an 11.3% increase from $120.4 million in the prior year. The calculation starts with GAAP net income and adds back interest, taxes, depreciation & amortization, and other non-cash or non-recurring items Reconciliation to Adjusted EBITDA (in millions) | Description | Q1 FY2025 ($) | Q1 FY2024 ($) | | :--- | :--- | :--- | | Reported net income | $61.4 | $50.0 | | Interest expense, net | $17.2 | $20.5 | | Provision for income taxes | $18.5 | $14.0 | | Depreciation and amortization | $30.0 | $29.7 | | Stock compensation expense | $6.5 | $5.4 | | Other adjustments | $0.4 | $0.8 | | Adjusted EBITDA | $134.0 | $120.4 | Appendix Non-GAAP Financial Measures Definitions The company uses several non-GAAP financial measures, such as Adjusted Operating Income, Adjusted Net Income, and Adjusted EBITDA, to provide investors with a clearer view of ongoing business performance by excluding items management believes are unusual or non-cash in nature, like acquisition-related amortization and restructuring charges - Non-GAAP measures are used to help investors better evaluate ongoing business performance by excluding unusual or non-cash items[11] - Adjusted Operating Income and Adjusted Net Income exclude items such as acquisition expenses, restructuring charges, and amortization of acquired intangible assets[12][13] - Adjusted EBITDA is used to show unleveraged, pre-tax operating results and aids investors in understanding compliance with debt covenants[15] Safe Harbor Statement This section contains a standard forward-looking statements disclaimer, cautioning that actual results could differ materially from projections. It highlights various risks and uncertainties, including general economic conditions, geopolitical factors, market activity, and risks disclosed in SEC filings, that could impact future performance - The press release contains forward-looking statements, including the 'Outlook' section, which are subject to inherent risks and uncertainties[18] - Key risks include general economic conditions, geopolitical factors, aerospace/defense and industrial market activity, raw material pricing, and interest rate changes[18]