Regal Beloit(RRX) - 2025 Q1 - Quarterly Results

Regal Rexnord Q1 2025 Financial Results First Quarter 2025 Highlights Regal Rexnord reported strong Q1 2025 results, driven by 0.7% organic sales growth, a 7.5% increase in Adjusted Diluted EPS to $2.15, and $85.5 million in free cash flow, while reducing debt and seeing positive order momentum Q1 2025 Key Financial Metrics (Values in Millions, except per share and percentages) | Metric | Q1 2025 Value | Change vs. PY | Note | | :--- | :--- | :--- | :--- | | Sales | $1,418.1M | -8.4% | +0.7% on an Organic Basis | | Adjusted Diluted EPS | $2.15 | +7.5% | +10% excluding Industrial Systems | | GAAP Diluted EPS | $0.86 | +186.7% | - | | Adjusted EBITDA Margin | 21.8% | +30 bps | - | | Free Cash Flow | $85.5M | +32.4% | - | | Gross Debt Paid Down | $164M | - | Net Debt/Adj. EBITDA at ~3.6x | | Daily Orders | - | +3.3% | Excluding currency impacts | CEO Commentary CEO Louis Pinkham highlighted all segments exceeded guidance, expressing optimism for organic growth despite macro uncertainty from U.S. trade policy, with plans to achieve tariff cost neutrality by 2025 and margin neutrality by mid-2026 - All segments exceeded guidance, with PES achieving 8.0% organic growth and AMC returning to growth in discrete automation[2] - The company is cautiously optimistic about an organic growth inflection, supported by several quarters of positive orders growth and a sense that most end markets are at or near trough demand levels[2] - Recent shifts in U.S. trade policy and tariffs have heightened macro uncertainty, but the company has aggressive mitigation plans and expects to achieve tariff cost neutrality in 2025[2] 2025 Financial Guidance The company updated its 2025 GAAP Diluted EPS guidance to $4.49-$5.29 due to a Q1 asset sale gain, while reaffirming full-year Adjusted Diluted EPS guidance at $9.60-$10.40, expecting tariff impact neutralization through mitigation actions 2025 Full-Year Guidance | Metric | Guidance Range | | :--- | :--- | | GAAP Diluted EPS | $4.49 - $5.29 | | Adjusted Diluted EPS | $9.60 - $10.40 | - The company expects to neutralize the impact of current tariffs on its 2025 Adjusted EPS through mitigation actions[4] Segment Performance In Q1 2025, segment performance was mixed, with Power Efficiency Solutions (PES) leading at 8.0% organic growth, Automation & Motion Control (AMC) showing 0.4% organic growth, and Industrial Powertrain Solutions (IPS) declining 3.4% organically but maintaining a strong 26.9% adjusted EBITDA margin Automation & Motion Control (AMC) The AMC segment's net sales decreased 1.0% to $396.3 million but achieved 0.4% organic growth, driven by aerospace & defense and discrete automation, offsetting headwinds in other markets, with an adjusted EBITDA margin of 21.8% AMC Q1 2025 Performance | Metric | Value | | :--- | :--- | | Net Sales | $396.3M (-1.0% YoY) | | Organic Sales Growth | +0.4% YoY | | Adjusted EBITDA Margin | 21.8% | Industrial Powertrain Solutions (IPS) The IPS segment reported net sales of $612.7 million, a 4.8% decrease (3.4% organic), primarily due to weakness in metals & mining and machinery/off-highway markets, partially offset by energy growth, while maintaining a strong adjusted EBITDA margin of 26.9% IPS Q1 2025 Performance | Metric | Value | | :--- | :--- | | Net Sales | $612.7M (-4.8% YoY) | | Organic Sales Growth | -3.4% YoY | | Adjusted EBITDA Margin | 26.9% | Power Efficiency Solutions (PES) The PES segment delivered strong results with net sales of $409.1 million, an increase of 6.2% (8.0% organic), primarily driven by the North American residential HVAC market, achieving an adjusted EBITDA margin of 14.2% PES Q1 2025 Performance | Metric | Value | | :--- | :--- | | Net Sales | $409.1M (+6.2% YoY) | | Organic Sales Growth | +8.0% YoY | | Adjusted EBITDA Margin | 14.2% | Financial Statements Condensed Consolidated Statements of Income For Q1 2025, Regal Rexnord reported net sales of $1.42 billion, down from $1.55 billion due to divestiture, but net income attributable to the company significantly increased to $57.3 million from $19.8 million, resulting in diluted EPS of $0.86 compared to $0.30 in Q1 2024 Q1 2025 vs. Q1 2024 Income Statement (in Millions, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $1,418.1 | $1,547.7 | | Gross Profit | $527.6 | $553.1 | | Income from Operations | $159.7 | $133.9 | | Net Income Attributable to Regal Rexnord | $57.3 | $19.8 | | Diluted EPS | $0.86 | $0.30 | Condensed Consolidated Balance Sheets As of March 31, 2025, the company's balance sheet shows total assets of $14.03 billion, stable from year-end 2024, with cash and cash equivalents decreasing to $305.3 million from $393.5 million, total debt reduced to $5.30 billion from $5.46 billion, and total equity increasing to $6.43 billion Balance Sheet Highlights (in Millions) | Account | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $305.3 | $393.5 | | Total Current Assets | $2,753.4 | $2,751.3 | | Goodwill | $6,513.2 | $6,458.9 | | Total Assets | $14,032.3 | $14,033.7 | | Total Current Liabilities | $1,218.4 | $1,215.7 | | Long-Term Debt | $5,291.8 | $5,452.7 | | Total Equity | $6,430.4 | $6,267.2 | Condensed Consolidated Statements of Cash Flow In Q1 2025, net cash provided by operating activities increased to $102.3 million from $83.1 million, resulting in $85.5 million in free cash flow (a 32.4% YoY increase), with $192.5 million used in financing activities, primarily for debt repayments Q1 2025 vs. Q1 2024 Cash Flow (in Millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $102.3 | $83.1 | | Net Cash Used in Investing Activities | ($3.5) | ($17.5) | | Net Cash Used in Financing Activities | ($192.5) | ($168.0) | | Net Decrease in Cash | ($88.2) | ($112.9) | - Free cash flow (Net Cash from Operations less Capex) was $85.5 million for Q1 2025, compared to $64.6 million in Q1 2024[35] Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including Adjusted Diluted EPS, Organic Sales Growth, Adjusted EBITDA, and Free Cash Flow, by removing effects of intangible amortization, restructuring, and non-recurring items to offer a clearer view of ongoing operational performance Adjusted Diluted Earnings Per Share The company reconciled its Q1 2025 GAAP Diluted EPS of $0.86 to an Adjusted Diluted EPS of $2.15, primarily by adding back intangible amortization ($0.97), restructuring costs ($0.18), and share-based compensation ($0.13) Q1 2025 GAAP to Adjusted EPS Reconciliation | Description | Per Share Amount | | :--- | :--- | | GAAP Diluted EPS | $0.86 | | Intangible Amortization | $0.97 | | Restructuring and Related Costs | $0.18 | | Share-Based Compensation Expense | $0.13 | | Transaction and Integration Related Costs | $0.08 | | Gain on Sale of Assets | ($0.07) | | Adjusted Diluted EPS | $2.15 | Organic Sales Growth Total company net sales declined 8.4% YoY due to a 7.9% divestiture impact and 1.2% negative currency impact, resulting in 0.7% organic sales growth in Q1 2025, led by PES (+8.0%) and AMC (+0.4%), despite an IPS decline (-3.4%) Q1 2025 Organic Sales Growth by Segment | Segment | Net Sales Growth % | Foreign Currency Impact % | Divestitures % | Organic Sales Growth % | | :--- | :--- | :--- | :--- | :--- | | AMC | (1.0)% | (1.4)% | — % | 0.4% | | IPS | (4.8)% | (1.4)% | — % | (3.4)% | | PES | 6.2% | (0.9)% | (0.9)% | 8.0% | | Total Regal Rexnord | (8.4)% | (1.2)% | (7.9)% | 0.7% | Adjusted EBITDA Total company Adjusted EBITDA for Q1 2025 was $309.5 million with a 21.8% margin, comparable to $307.2 million (21.5% margin) in Q1 2024 (excluding divested Industrial Systems), with IPS contributing the largest at $164.9 million (26.9% margin) Q1 2025 Adjusted EBITDA by Segment (in Millions) | Segment | Adjusted EBITDA | Adjusted EBITDA Margin % | | :--- | :--- | :--- | | AMC | $86.5 | 21.8% | | IPS | $164.9 | 26.9% | | PES | $58.1 | 14.2% | | Total Regal Rexnord | $309.5 | 21.8% | Debt to EBITDA As of March 31, 2025, the company's total gross debt was $5.30 billion and net debt $4.99 billion, resulting in a Net Debt to LTM Adjusted EBITDA ratio of 3.83x, which improves to 3.62x including $75.0 million in expected synergies Debt Metrics as of March 31, 2025 (in Millions, except ratios) | Metric | Value | | :--- | :--- | | Total Gross Debt | $5,296.9 | | Net Debt | $4,991.6 | | LTM Adjusted EBITDA | $1,302.3 | | Net Debt/Adjusted EBITDA | 3.83x | | Adjusted EBITDA (including synergies) | $1,377.3 | | Net Debt/Adjusted EBITDA (including synergies) | 3.62x | Company Information and Disclosures This section provides an overview of Regal Rexnord's global operations and segments, alongside crucial disclosures regarding forward-looking statements and associated risks, including those related to acquisitions and divestitures, substantial indebtedness, supply chain disruptions, and trade policy and tariffs About Regal Rexnord Regal Rexnord is a global company with 30,000 employees providing sustainable power, transmission, and motion control solutions across three segments: Industrial Powertrain Solutions, Power Efficiency Solutions, and Automation & Motion Control, serving diverse end markets - The company is comprised of three operating segments: Industrial Powertrain Solutions, Power Efficiency Solutions, and Automation & Motion Control[11] - Key end markets include discrete automation, food & beverage, aerospace, medical, data center, energy, residential and commercial buildings, general industrial, and metals and mining[10] Forward-Looking Statements This section cautions that the report contains forward-looking statements subject to risks and uncertainties, including the ability to achieve synergies from acquisitions and divestitures, substantial indebtedness, supply chain disruptions, and changes in trade policy and tariffs - Forward-looking statements are subject to risks, including the ability to achieve expected benefits from the Altra acquisition and Industrial Systems divestiture[12] - The company's substantial indebtedness is cited as a risk factor affecting financial flexibility[12] - Uncertainty in trade policy, including tariffs on imports and export restrictions, is highlighted as a significant risk[12]