Regal Beloit(RRX) - 2025 Q2 - Earnings Call Presentation

Q2 2025 Performance - Net sales decreased by 1.2% organically, aligning with expectations, with large project timing headwinds in Metals & Mining and temporary rare earth magnet availability issues, offset by strength in Residential & Commercial HVAC and Aerospace[10] - Daily orders were down 2.5% year-over-year, but flat when factoring in a $35 million data center order in AMC received early in July[10] - Adjusted gross margin was 38.2%, impacted by temporary rare earth magnet availability[10] - Adjusted EBITDA margin was 22.0%, including $17 million in synergies[10] - Adjusted EPS increased by 8.3% to $2.48[10] - Adjusted free cash flow was $493 million, with $469.8 million used to pay down gross debt and $368.5 million contributed by a new receivables securitization program[10] Segment Performance - Automation & Motion Control (AMC) net sales decreased by 2.6%, with organic sales down 3.4%, driven by Medical, Data Center project timing, and rare earth magnet availability, partially offset by Aerospace[21] - Industrial Powertrain Solutions (IPS) net sales decreased by 3.8%, with organic sales down 4.4%, primarily due to Metals & Mining[25] - Power and Efficiency Solutions (PES) net sales increased by 5.9%, with organic sales up 6.5%, driven by R-HVAC and C-HVAC[29] Debt and Leverage - The company closed on a $400 million accounts receivable securitization facility maturing in 2026, with initial proceeds of $368.5 million used to repay bank debt[31] - The securitization facility is expected to provide ~$4 million in net annualized interest savings and improve debt to equity and leverage ratios[31] - Net debt at the end of Q2 2025 was $4.5347 billion[46] - Leverage ratio (Net Debt to Adjusted EBITDA including synergies) decreased to 3.34[30] 2025 Guidance - Sales guidance is rising to ~$5.95 billion due to FX and tariff pricing impacts[32] - Organic growth is expected to be approximately flat to low single digits[32] - Adjusted EBITDA margin guidance is down ~50bps to ~22.5% due to larger FX headwinds, tariffs, and lower AMC margins (rare earth magnet costs, latest mix impacts)[34] - Adjusted EPS guidance is reaffirmed at ~$10.00, with a narrowed range of $9.70-$10.30[32]