Financial Data and Key Metrics Changes - Third quarter sales increased by approximately 2% year-over-year, with orders up about 10% [12] - Adjusted EPS for the quarter was $2.51, an increase compared to the prior year [16] - Adjusted gross margin for the third quarter was 37.6%, down 80 basis points from the prior year [16] - Free cash flow generated in the third quarter was $174 million, with no variable rate debt at the end of the quarter [16] Business Line Data and Key Metrics Changes - Automation and Motion Control (AMC) sales were down 1% year-over-year, primarily due to project timing and challenges in sourcing rare earth magnets [27] - Industrial Powertrain Solutions (IPS) sales increased by 1.6% year-over-year, driven by strength in energy and metals and mining [30] - Power Efficiency Solutions (PES) sales were up just under 1% year-over-year, with strong growth in pool and commercial HVAC [31] Market Data and Key Metrics Changes - Orders in AMC were up 31.7% year-over-year, with a book-to-bill ratio of 1.23 [29] - IPS orders increased by 2.3% on a daily basis, marking the fifth consecutive quarter of positive orders growth [30] - PES orders were up 1.7% on a daily basis, with a book-to-bill ratio of 1.02 [32] Company Strategy and Development Direction - The company is focusing on expanding its data center business, which is expected to significantly contribute to enterprise sales growth [25] - Investments are being made to enhance manufacturing capacity and support new product offerings like modular electrical pods (ePods) [22] - The company aims to achieve margin neutrality on tariffs by the end of next year and is optimistic about growth in 2026 [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about order strength in the fourth quarter, setting the stage for solid growth in 2026 [14] - The company anticipates challenges from tariffs and rare earth magnet sourcing to persist into early 2026, but expects to see benefits from backlog reduction thereafter [28] - Management highlighted the importance of their strong technology team and disciplined execution in navigating current challenges [12] Other Important Information - The company announced a succession plan for its CEO, with a transition expected to take about four to six months [99] - The board is conducting a comprehensive search for a new leader, focusing on candidates with strong operational and growth leadership skills [105] Q&A Session Summary Question: Can you discuss the sequential changes expected in the fourth quarter? - Management expects residential HVAC to decline in the fourth quarter, while data center orders are anticipated to increase significantly due to backlog timing [51][52] Question: What is the outlook for the data center business? - The data center business is projected to grow significantly, potentially doubling over the next two years, contributing meaningfully to overall growth [60] Question: How will tariffs and rare earth challenges impact margins? - Management expects to achieve margin neutrality by the end of next year, with some margin pressures anticipated in the first half of 2026 [79] Question: What is the expected contribution of the new facility? - The new facility is expected to begin shipping products by mid-2026, with contribution margins anticipated to be accretive to the overall business [107]

Core Insights - Regal Rexnord reported revenue of $1.5 billion for the quarter ended September 2025, reflecting a year-over-year increase of 1.3% [1] - The company's EPS was $2.51, slightly up from $2.49 in the same quarter last year, but below the consensus estimate of $2.56, resulting in an EPS surprise of -1.95% [1] - The revenue exceeded the Zacks Consensus Estimate of $1.49 billion, indicating a positive surprise of +0.28% [1] Revenue Performance by Segment - Industrial Powertrain Solutions (IPS) generated revenues of $662.3 million, surpassing the average estimate of $660.13 million, marking a year-over-year increase of +2.8% [4] - Automation & Motion Control (AMC) reported revenues of $402 million, slightly below the estimated $406.08 million, with a minimal year-over-year change of +0.1% [4] - Power Efficiency Solutions (PES) achieved revenues of $432.7 million, exceeding the average estimate of $423.71 million, reflecting a year-over-year increase of +0.3% [4] Adjusted EBITDA Performance - Adjusted EBITDA for Industrial Powertrain Solutions (IPS) was $174.6 million, below the average estimate of $177.76 million [4] - Adjusted EBITDA for Automation & Motion Control (AMC) stood at $82.6 million, also below the average estimate of $86.41 million [4] - Adjusted EBITDA for Power Efficiency Solutions (PES) reached $82.2 million, exceeding the average estimate of $74 million [4] Stock Performance - Regal Rexnord's shares returned +0.9% over the past month, underperforming the Zacks S&P 500 composite's +3.8% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]