07147c9066a4cc0c7cadb5b96a719a1dd3f300ab8a50eec7437657207f36e1bd

e9b4f42a53f596f194968de9408a70dcad4eca172eb3707a78a75e4a6e884270

Adjustments for Non-Cash Items (USD, millions)

Stock-Based Compensation (USD, millions)

Changes in Working Capital (USD, millions)

Capital Expenditures (CapEx) (USD, millions)

Proceeds from / Repayments of Debt (USD, millions)

Share Repurchases (USD, millions)

Dividend Payments (USD, millions)

Net Change in Cash (USD, millions)

79569a364806a77aa21796770a71d7c39451d701b7f18afef61246e3cb545b34

Regal Rexnord Corporation (NYSE: RRX) is a global leader in engineering and manufacturing solutions that power, transmit, and control motion. Headquartered in Milwaukee, Wisconsin, the company specializes in providing sustainable and energy-efficient products and systems to customers across diverse industries, including industrial automation, HVAC, aerospace, and data centers. Regal Rexnord's offerings include electric motors, power transmission components, automation systems, and specialty electrical components, designed to enhance operational efficiency and sustainability.  **[0000082811-24-000210_rbc-20240930.htm:37]** **[0000082811-24-000035_rbc-20231231.htm:52]** **[0000082811-24-000035_rbc-20231231.htm:5]** 

1. **Industrial Powertrain Solutions (IPS)** - Designs, produces, and services highly engineered power transmission products, including mounted and unmounted bearings, couplings, gearboxes, gear motors, clutches, brakes, and industrial powertrain components. Serves markets such as general industrial, metals and mining, agriculture, construction, food and beverage, energy, and alternative energy.  **[0000082811-24-000163_rbc-20240630.htm:34]** **[0000082811-24-000163_rbc-20240630.htm:17]** **[0000082811-24-000035_rbc-20231231.htm:5]** 

2. **Power Efficiency Solutions (PES)** - Specializes in fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, electronic drives, fans, blowers, and integrated subsystems. Applications include residential and light commercial HVAC, water heaters, commercial refrigeration, building ventilation, pool and spa, irrigation, and agricultural uses.  **[0000082811-24-000163_rbc-20240630.htm:34]** **[0000082811-24-000163_rbc-20240630.htm:17]** **[0000082811-24-000035_rbc-20231231.htm:5]** 

3. **Automation & Motion Control (AMC)** - Focuses on conveyor products, conveying automation subsystems, aerospace components, precision motion control solutions, miniature servo motors, controls, drives, and linear actuators. Also provides power management products like automatic transfer switches and paralleling switchgear for industrial automation, robotics, aerospace, medical, and data center markets.  **[0000082811-24-000163_rbc-20240630.htm:34]** **[0000082811-24-000163_rbc-20240630.htm:17]** **[0000082811-24-000035_rbc-20231231.htm:5]** 

4. **Industrial Systems** - Designed and produced integral motors, alternators, switchgear, and transfer switches for industrial applications. Served markets including agriculture, marine, mining, oil and gas, food and beverage, data centers, and healthcare. The majority of this segment was divested on April 30, 2024.  **[0000082811-24-000210_rbc-20240930.htm:37]** **[0000082811-24-000163_rbc-20240630.htm:34]** **[0000082811-23-000040_rbc-20221231.htm:54]**

8d5a5fd43db7a9941540444b0d13b76e8d59b2beabd80edeb5f078e4758dc1a5

| Name                | Position                                             | Start Date         | Short Bio                                                                                                                                                                                                                     |
|---------------------|-----------------------------------------------------|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Louis V. Pinkham   | Chief Executive Officer                              | April 2019         | Joined RRX as CEO in April 2019. Previously held leadership roles at Crane Co., Eaton Corporation, ITT Sherotec, and Molecular Biosystems, Inc. Holds degrees from Duke and Northwestern Universities.  **[0001308179-24-000119_lrrx2024_def14a.htm:14]** **[0000082811-24-000035_rbc-20231231.htm:17]** **[0000082811-23-000040_rbc-20221231.htm:20]** **[0001308179-23-000211_lrrx2023_def14a.htm:12]**           |
| Robert J. Rehard   | Executive Vice President, Chief Financial Officer    | January 2015       | Joined RRX as VP, Corporate Controller, and Principal Accounting Officer in January 2015. Promoted to CFO in April 2018. Previously held financial leadership roles at Eaton, Baxter, Emerson, Masco, and Cooper.  **[0000082811-24-000035_rbc-20231231.htm:17]**          |
| Thomas E. Valentyn | Executive Vice President (Transitional Role)         | December 2013      | Joined RRX as Associate General Counsel in December 2013. Became General Counsel in May 2016. Transitioning to retirement, with a transitional role until July 12, 2024.  **[0000082811-24-000035_rbc-20231231.htm:17]** **[0000082811-24-000080_rrx-20240423.htm:1]**                                                |
| Tim A. Dickson     | Senior Vice President, Chief Digital & Information Officer | October 2023       | Joined RRX in October 2023. Previously served as CIO at Generac Power Systems and held leadership roles at Astreya, Laureate International Universities, Motorola Solutions, Dell, and IBM.  **[0000082811-24-000035_rbc-20231231.htm:17]**                               |
| Cheryl A. Lewis    | Executive Vice President, Chief Human Resources Officer | March 2020         | Joined RRX in March 2020. Previously held HR leadership roles at Illinois Tool Works, Alcan Packaging, and Panduit Corporation.  **[0000082811-24-000035_rbc-20231231.htm:18]** **[0000082811-23-000040_rbc-20221231.htm:20]** **[RRX_3271244_8]**                                                                                    |
| Brooke E. Lang     | Executive Vice President & President, Power Efficiency Solutions Segment | July 2022          | Joined RRX in July 2022. Previously held various roles at Eaton, including VP and General Manager of the Power Components Division.  **[0000082811-24-000035_rbc-20231231.htm:18]**                                                                                       |
| Jerrald R. Morton  | Executive Vice President & President, Industrial Powertrain Solutions | February 2015      | Joined RRX in February 2015 as part of Emerson's Power Transmission Solutions acquisition. Held various leadership roles and assumed his current role in March 2023.  **[0000082811-24-000035_rbc-20231231.htm:18]** **[RRX_3401764_9]**                                                   |
| Kevin J. Zaba      | Executive Vice President & President, Automation & Motion Control | October 2021       | Joined RRX in October 2021. Became President of Automation & Motion Control in March 2023 after the Altra Industrial Motion acquisition. Previously held leadership roles at Rockwell Automation.  **[0000082811-24-000035_rbc-20231231.htm:18]** **[0001104659-23-037123_tm2310500d1_ex99-1.htm:2]**                      |
| Hugo Dubovoy, Jr.  | Executive Vice President, General Counsel, and Corporate Secretary | April 23, 2024 (expected) | Appointed EVP, General Counsel, and Corporate Secretary effective April 23, 2024, following the retirement of Thomas E. Valentyn. Previously held other leadership roles within RRX.  **[0000082811-24-000080_rrx-20240423.htm:1]** **[0000082811-24-000082_xslF345X02/wk-form3_1714424791.xml:0]**                                    |

392a7bff1ff3f7feff70d124a45990379e18e8d279ede6a385789967798d5341

1. Given the ongoing uncertainties in the market and the company's expectation of limited organic growth in 2025  **[RRX_3405749_7]** , what specific strategies is management implementing to drive growth and mitigate these headwinds?

2. With the challenges faced in ramping up capacity to meet the surge in residential HVAC demand  **[RRX_3405749_10]** , how is the company improving its demand forecasting and supply chain coordination to prevent future delays and potential loss of market share  **[RRX_3405749_22]** ?

3. The European and Chinese markets continue to experience pressures with ISM below 50 and no significant improvement expected in 2025.  **[RRX_3405749_17]**  How does the company plan to offset these headwinds and drive growth in these regions?

4. Free cash flow was disappointing this year due to timing differences, yet management expects to exit next year at an annualized rate of $1 billion.  **[RRX_3405749_9]** **[RRX_3405749_19]**  What gives you confidence in achieving this target, and what are the key risks that could prevent you from reaching it?

5. With the shift in AMC towards longer-cycle projects and extended backlogs, leading to a larger spread between orders and revenue growth  **[RRX_3405749_8]** , how is management addressing potential revenue realization delays and what steps are being taken to synchronize orders and revenue growth more effectively?

f1a5f4da550576da12a612675cc533c9b76f8785274a16d190692078f14f0d6d

### Regal Rexnord (RRX) Guidance from the Last Four Earnings Calls

---

#### **1. Q3 2024 Earnings Call**
- **Issued Period:** Q3 2024  
- **Guided Period:** FY 2024  
- **Guidance:**
  1. **Sales Outlook:** Reduced due to weaker performance in Q3 and expectations for Q4, primarily in PES and AMC segments.  **[RRX_3405749_5]** 
  2. **Adjusted EBITDA Margin:** **22%**, reflecting lower sales volumes and a weaker mix.  **[RRX_3405749_5]** 
  3. **Adjusted Diluted EPS:** Range of **$9.15 to $9.45**, with a midpoint of **$9.30** (reduced by $0.30).  **[RRX_3405749_5]** 
  4. **Adjusted Free Cash Flow:** Approximately **$600 million**, representing a **10% free cash flow margin**.  **[RRX_3405749_5]** 
  5. **Effective Tax Rate:** Decrease by **2.5 points** due to a one-time tax benefit in non-U.S. operations.  **[RRX_3405749_5]** 
  6. **Interest Expense:** Decline of approximately **$50 million**.  **[RRX_3405749_6]** 
  7. **Cash Flow for Next Year:** Exit rate of about **$1 billion** in free cash flow.  **[RRX_3405749_9]** 
  8. **Debt Reduction:** Majority of free cash flow to be deployed for debt reduction.  **[RRX_3405749_4]** 

---

#### **2. Q2 2024 Earnings Call**
- **Issued Period:** Q2 2024  
- **Guided Period:** FY 2024  
- **Guidance:**
  1. **Sales Guidance:**
     - **AMC:** Full-year sales expected to be **down low-single digits** (revised from flat growth).  **[RRX_3395898_6]** 
     - **IPS:** Full-year sales expected to be **roughly flat**.  **[RRX_3395898_7]** 
     - **PES:** Full-year sales expected to **decline at a mid-single-digit rate**.  **[RRX_3395898_7]** 
  2. **Adjusted EBITDA Margin Guidance:**
     - **AMC:** Approximately **24%** (low end of prior target range).  **[RRX_3395898_6]** 
     - **IPS:** Approximately **26%**.  **[RRX_3395898_7]** 
     - **PES:** Approximately **16.5%** (near lower end of prior target range).  **[RRX_3395898_7]** 
  3. **Adjusted Diluted EPS:** Range of **$9.40 to $9.80**, reduced from **$9.60 to $10.40**.  **[RRX_3395898_6]** 
  4. **Adjusted Free Cash Flow:** Approximately **$700 million**.  **[RRX_3395898_6]** 
  5. **Debt Reduction:** Plan to pay down approximately **$900 million** of debt.  **[RRX_3395898_6]** **[RRX_3395898_5]** 
  6. **Interest Expense:** Forecasted at **$376 million**, reflecting upward SOFR rate revisions.  **[RRX_3395898_6]** 
  7. **Segment-Specific Q3 2024 Guidance:**
     - **AMC:** Sales of approximately **$420 million** and adjusted EBITDA margin of **24%**.  **[RRX_3395898_6]** 
     - **IPS:** Sales of approximately **$655 million** and adjusted EBITDA margin of **26%**.  **[RRX_3395898_7]** 
     - **PES:** Sales of approximately **$455 million** and adjusted EBITDA margin of **18%**.  **[RRX_3395898_7]** 

---

#### **3. Q1 2024 Earnings Call**
- **Issued Period:** Q1 2024  
- **Guided Period:** FY 2024  
- **Guidance:**
  1. **Debt Reduction:** Plan to reduce debt by approximately **$900 million** in 2024.  **[RRX_3386961_7]** 
  2. **Adjusted Free Cash Flow:** Expected to be **$700 million**.  **[RRX_3386961_7]** 
  3. **Adjusted EPS:** Range of **$9.60 to $10.40**, with a midpoint of **$10**.  **[RRX_3386961_7]** 
  4. **Sales and EBITDA Margins by Segment:**
     - **AMC:** Q2 sales of approximately **$410 million** with EBITDA margins of **23%**; full-year sales expected to be flat, with adjusted EBITDA margins of **24% to 25%**.  **[RRX_3386961_7]** 
     - **IPS:** Full-year growth rates based on 2023 pro forma results.  **[RRX_3386961_7]** 
     - **PES:** Margins expected to improve to mid-teens in Q2 and high teens in the second half.  **[RRX_3386961_6]** 
  5. **Impact of Industrial Systems Sale:** Headwind to sales of approximately **$345 million**, but a benefit to adjusted EBITDA margin of **70 basis points** for the year.  **[RRX_3386961_7]** 
  6. **Order and Book-to-Bill Ratios:**
     - **AMC:** Book-to-bill ratio of **1.08** in Q1.  **[RRX_3386961_5]** 
     - **IPS:** Book-to-bill ratio of **1.06** in Q1.  **[RRX_3386961_6]** 

---

#### **4. Q4 2023 Earnings Call**
- **Issued Period:** Q4 2023  
- **Guided Period:** FY 2024  
- **Guidance:**
  1. **Adjusted EPS:** Range of **$9.75 to $10.55**, with a midpoint of **$10.15**.  **[RRX_3372585_7]** 
  2. **Revenue:** Expected to be **slightly down**, approximately **$6.65 billion**.  **[RRX_3372585_7]** 
  3. **Adjusted EBITDA Margin:** Increase by **just over 100 basis points**, reaching approximately **22%**.  **[RRX_3372585_7]** 
  4. **Free Cash Flow:** At least **$700 million**.  **[RRX_3372585_7]** 
  5. **Net Debt to Adjusted EBITDA Ratio:** Decrease from **3.8** to approximately **3.0** by year-end.  **[RRX_3372585_7]** 
  6. **Industrial Motors and Generators Businesses:** Contribute **$500 million in revenue** and **$40–$45 million in adjusted EBITDA** for the year.  **[RRX_3372585_19]** 
  7. **Interest Savings from Debt Paydown:** Annualized savings of approximately **$26 million**.  **[RRX_3372585_19]** 
  8. **Segment-Level Guidance:**
     - **AMC:** Low to mid-single-digit sales decline in Q1, with modest margin growth; full-year modest sales and margin growth.  **[RRX_3372585_7]** 
     - **IPS:** Low to mid-single-digit sales decline in Q1, with flat margins; full-year sales down low single digits, margins up **200 basis points**.  **[RRX_3372585_7]** 
     - **PES:** Low double-digit to low teens sales decline in Q1, with margins up **300 basis points** to mid-teens; full-year sales flat, margins up **50 basis points**.  **[RRX_3372585_7]** 
  9. **Destocking and Market Dynamics:** Destocking in residential HVAC and factory automation expected to persist into H1 2024, with improvement in H2.  **[RRX_3372585_9]** 

--- 

d7072cc1d9e58c7e3c7c2cd54184f2d81ad6e5862001f8ea2e2f4e2709464c85

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

| Program Details         | Program 1       |
|--------------------------|-----------------|
| **Approval Date**        | **October 26, 2021**  **[0000082811-24-000210_rbc-20240930.htm:58]** **[0000082811-24-000210_rbc-20240930.htm:24]**  |
| **End Date/Duration**    | **No expiration date**  **[0000082811-24-000210_rbc-20240930.htm:58]** **[0000082811-24-000210_rbc-20240930.htm:24]**  |
| **Total Additional Amount** | **$500.0 million**  **[0000082811-24-000210_rbc-20240930.htm:58]** **[0000082811-24-000210_rbc-20240930.htm:24]**  |
| **Remaining Authorization** | **$145.0 million** as of September 30, 2024  **[0000082811-24-000210_rbc-20240930.htm:58]** **[0000082811-24-000210_rbc-20240930.htm:24]**  |
| **Details**              | Authorized by the Board of Directors; no expiration date  **[0000082811-24-000210_rbc-20240930.htm:58]** **[0000082811-24-000210_rbc-20240930.htm:24]**  |

e62ccfbf4baed8d0eadd5b811ce3ac09c552bc20eeecff0aa96255a3e9e3a42c

Raw Material and Work in Process (%) [0-7]

Finished Goods and Purchased Parts (%) [0-7]

2a6e6bba0415236a4e8493dbc8b7b67b8049295ef50c191b3fecb26a19c7d7df

North America

Asia

Europe

Rest-of-World

- United States

- Rest of the World

Total Revenue

715276edf5748add61f7f1bf9d045eeb3bf49f613db1402ba43c78d8dc7f07ff

3df7ca1909bbf3d99a4cb3a47b278ca33ca5af3b987e8a4e36b4ba5f713f75a2

- **Regal Rexnord reduced its full-year 2024 guidance**, lowering adjusted diluted EPS by **$0.30 to $9.30** and revising free cash flow down to **$600 million**, due to weaker-than-expected performance in key segments, particularly PES and AMC. Additionally, the company is planning for **limited growth in 2025** due to persistent headwinds in several end markets, suggesting ongoing challenges in core markets.  **[RRX_3405749_5]** ,  **[RRX_3405749_7]**
- The company was **unprepared for the surge in residential HVAC demand** due to prebuy activity ahead of regulatory changes, leading to an inability to ramp capacity fast enough and hurting service levels. This may risk damaging relationships with OEMs or losing market share. Furthermore, the prebuy surge is weighted towards smaller HVAC systems, where the company has less exposure, and may lead to softness in 2025 as demand is pulled forward.  **[RRX_3405749_10]** ,  **[RRX_3405749_4]** ,  **[RRX_3405749_16]**
- **Continued weakness in important end markets**, such as discrete automation, commercial HVAC outside the U.S., and general industrial markets, with the company **not expecting significant improvement in 2025**, could lead to ongoing revenue and margin pressures. The company noted that discrete automation short-cycle orders remain weak and that they **do not forecast an improvement**. They also stated that the European and China markets remain under pressure with ISM below 50 in both regions, and they **do not see a lot of line of sight to great improvement** in these markets in 2025.  **[RRX_3405749_11]** ,  **[RRX_3405749_17]**

da108308e8d160cfb54398ce009df31327117222d76ee3d6a60d1b4bc2b864b1

- Regal Rexnord's Automation and Motion Control (AMC) segment is experiencing strong order growth, with **AMC orders up 12% in Q2**  **[RRX_3395898_6]**  and **up roughly 10% in July**  **[RRX_3395898_8]** , indicating positive momentum and setting the stage for revenue growth in the second half and into next year. Management noted that about one-third of these orders are expected to convert to revenue in the second half of 2024, with the remainder in 2025.  **[RRX_3395898_17]**
- The company anticipates a significant improvement in **margins** in the second half due to a favorable **shift in mix towards higher-margin businesses within AMC**, such as discrete factory automation and medical.  **[RRX_3395898_12]**  Management expects **AMC adjusted EBITDA margins to increase by approximately 100 basis points from Q3 to Q4**, driven by higher volumes and improved mix.  **[RRX_3395898_11]**
- The Power Efficiency Solutions (PES) segment is showing signs of recovery in the **residential HVAC** market, with **orders up low-single digits** in the quarter  **[RRX_3395898_10]** , and sales in the third quarter are forecasted to be **up low-single digits**.  **[RRX_3395898_10]**  As a **leader in the variable speed motor market** in residential HVAC, Regal Rexnord is well-positioned to benefit from the rebound in this market.  **[RRX_3395898_10]**

71ac44e94977685db2b7ed7e63a333c05f30e0b131bc44f28bbcdf44e77ad47a

1. **Margin Expansion Trajectory**  
   **Q:** How will margins expand over the next years?  
   **A:** Management expects margins to improve through internal actions. Starting from 2023's **35% gross margin** and **21% EBITDA**, industrial lifts them by **100 basis points** on both. Synergies add **250 basis points**, with **$90 million** in synergies this year and **$65 million** next year. An additional **1–1.5 percentage points** come from new product development, 80-20 initiatives, and mix. After reinvesting **100 basis points** back into R&D, they achieve **40% gross margins** and **25% EBITDA margins**.  **[RRX_3386961_11]** 

2. **Second Half Outlook and Guidance**  
   **Q:** What's your confidence in second half guidance?  
   **A:** Management is cautiously optimistic about the second half, expecting a **48-52 split** between the first and second half. For the **52%** in the second half to materialize, they need PES sales, particularly residential HVAC, to rebound. Book-to-bill coming out of Q1 was **1.1**, and April orders were down **2%** in PES, providing some confidence. They also feel positive about order rates in factory automation, with the funnel up **50%** and win rates significantly higher, supporting confidence into the second half and **2025**.  **[RRX_3386961_10]** 

3. **AMC Organic Decline and Outlook**  
   **Q:** Is AMC facing mid-teens organic decline in Q2?  
   **A:** AMC is experiencing pressure due to comparisons and weakness in discrete automation, possibly leading to a mid-teens organic decline in Q2. While orders are improving, benefits are expected in the second half and into **2025**. Accelerating markets like medical, data center, and the Arrow acquisition give confidence for improvement in the second half of this year.  **[RRX_3386961_21]** 

4. **PES Market Share and Outlook**  
   **Q:** Are you seeing share shifts in PES due to regulations?  
   **A:** Management feels good about their share position in PES, believing they've retained the share gained during COVID. Regulatory changes like the **2025 GWP regulations** require OEMs to redesign products, favoring Regal's energy-efficient motors. While there's some 80-20 pruning, it's not a major factor. They note a disconnect between OEMs' consumer demand and their own demand, leading them to be cautious about recovery expectations.  **[RRX_3386961_15]** 

5. **Free Cash Flow Outlook**  
   **Q:** How will free cash flow progress this year?  
   **A:** The company expects **$700 million** in free cash flow for the year, with cash flow building from a slower start in Q1 to stronger inflows in late Q3 and Q4. While there's a working capital headwind this year compared to last year's **$250 million** benefit (expecting about **$50 million** this year), improvements come from higher EBITDA, lower cash interest expenses, reduced cash taxes, and lower restructuring costs.  **[RRX_3386961_19]** 

6. **Factory Automation Leading Indicators**  
   **Q:** Are there signs of improvement in factory automation?  
   **A:** In factory automation, which comprises **35%** of the segment, leading indicators are positive: the sales funnel is up **50%**, win rates have increased by **300 basis points**, and the book-to-bill ratio is **1.08** coming out of Q1. These factors provide confidence for improvement in the second half.  **[RRX_3386961_22]** 

7. **IPS Mix and Margins**  
   **Q:** What's driving IPS positive mix and margins?  
   **A:** The positive mix in IPS was driven by strong distribution sales over OEM sales in Q1, benefiting margins. This mix strength isn't expected to continue into Q2. However, synergies are building, with **$26 million** achieved in Q1 and on track for **$90 million** for the year, supporting margin expansion.  **[RRX_3386961_16]** 

8. **PES Q2 Outlook and Restructuring**  
   **Q:** Why is PES guidance cautious for Q2?  
   **A:** Management remains cautious on PES for Q2 due to previous false starts in forecasting recovery. While a book-to-bill of **1.1** in Q1 and orders down **2%** in April give some confidence, they're waiting for more data. Restructuring savings are embedded in the guidance but are not major drivers of margin improvement, which is expected to come more from volume and mix enhancements.  **[RRX_3386961_17]** 

9. **Conveying Products Margins and Growth**  
   **Q:** Can you discuss margins and growth in conveying products?  
   **A:** The conveying products business, with **$400 million** in sales, has margins above the segment average, with equipment and systems margins comparable to component margins. Installation and project management make up about **5%** and are growing. Growth is driven by rebounds in food, beverage, and warehouse sectors, strengthened by the Arrowhead acquisition and their strategy of offering complete industrial powertrain solutions.  **[RRX_3386961_20]** 

10. **Copper Prices and Stranded Costs**  
    **Q:** Is rising copper impacting margins, and are there stranded costs?  
    **A:** The impact of rising copper prices on margins is minimal due to lag in two-way material price formulas and hedging strategies. Regarding stranded costs from the industrial segment divestiture, there are estimated costs of less than **$5 million**, partly covered by TSAs, which they plan to eliminate through productivity actions within **12 months**.  **[RRX_3386961_18]** 

cdc6d44dce415276bbd173b70a3793be4d511e46d665e2284153c63de79f1e5b

1. **Free Cash Flow Outlook**  
   **Q:** What's the outlook for free cash flow next year?  
   **A:** Despite timing differences this year, management believes they have a good path to end next year at an exit rate of about **$1 billion** in free cash flow, as previously communicated.  **[RRX_3405749_9]**  Primary drivers include decreasing cash interest and taxes, reducing cash restructuring, and expected working capital benefits.  **[RRX_3405749_9]** 

2. **EBITDA Margin Expansion Next Year**  
   **Q:** Is a 200 bps margin expansion next year realistic?  
   **A:** Management confirms expectations of approximately **200 basis points** of EBITDA margin improvement next year.  **[RRX_3405749_14]**  This includes around 100 bps from synergies and additional gains from volume leverage and lower interest expense.  **[RRX_3405749_14]** 

3. **Residential HVAC Demand Surge and Preparedness**  
   **Q:** Why weren't you prepared for HVAC demand uptick?  
   **A:** The sudden surge in residential HVAC demand was unexpected after two years of weak demand and false starts on recovery.  **[RRX_3405749_10]**  Capacity ramp is lagging, but they expect to catch up by end of the fourth quarter.  **[RRX_3405749_10]**  OEMs kept their strategies around the 2L transition under wraps, limiting visibility.  **[RRX_3405749_10]** 

4. **Cross-Selling Synergies in IPS**  
   **Q:** What benefits are you seeing from cross-selling in IPS?  
   **A:** Cross-selling and industrial powertrain initiatives contributed about **1 to 2 percentage points** of growth in IPS this quarter.  **[RRX_3405749_12]**  Only 15% of customers buy two or more products, so there's significant opportunity for further growth.  **[RRX_3405749_12]** 

5. **European and Chinese Market Outlook**  
   **Q:** What's the outlook for Europe and China markets in PES?  
   **A:** Management sees continued pressure in Europe and China, with ISM indices below 50 in both regions.  **[RRX_3405749_17]**  They don't expect significant improvement in these markets next year and plan to be measured in their approach for 2025.  **[RRX_3405749_17]** 

6. **Discrete Automation Orders and Outlook**  
   **Q:** What are you seeing in discrete automation orders?  
   **A:** Longer-cycle orders are strong, with increased win rates and funnels, giving confidence into 2025.  **[RRX_3405749_11]**  Short-cycle orders remain soft, and interest rate cuts haven't spurred expected capital projects due to market uncertainty.  **[RRX_3405749_11]** 

7. **Residential HVAC Sales Growth Clarification**  
   **Q:** Was the 10% revenue increase in resi HVAC year-over-year?  
   **A:** The **10% increase** mentioned was sequential, indicating ramping improvement.  **[RRX_3405749_15]**  Management expects continued sequential growth into the fourth quarter.  **[RRX_3405749_15]** 

8. **Resi HVAC Inventory Levels and Next Year Outlook**  
   **Q:** Are higher inventories at OEMs affecting next year’s outlook?  
   **A:** Higher inventory levels, especially in smaller systems, may soften next year’s demand.  **[RRX_3405749_16]**  Management doesn't expect significant growth in 2025 due to inventory resets and flat end-market demand.  **[RRX_3405749_16]** 

9. **AMC Margins and Discrete Automation Outlook**  
   **Q:** Was the third quarter the bottom for discrete automation?  
   **A:** Management believes the third quarter was likely the bottom for discrete automation.  **[RRX_3405749_13]**  They expect sequential margin improvement in the fourth quarter due to backlog, cost synergies, and better sales leverage.  **[RRX_3405749_13]** 

10. **Long-cycle Orders in IPS and 2025 Outlook**  
    **Q:** Do strong long-cycle orders in IPS suggest strength into 2025?  
    **A:** Longer-cycle orders, particularly in AMC sectors like factory automation, give confidence into 2025.  **[RRX_3405749_18]**  IPS continues to outperform despite macro indicators like ISM below 50, reinforcing the value of recent acquisitions.  **[RRX_3405749_18]** 

11. **Commercial Aspects of PES and International Performance**  
    **Q:** What's impacting international commercial and general commercial in PES?  
    **A:** General commercial (31% of PES) correlates with ISM and is under pressure.  **[RRX_3405749_21]**  Commercial HVAC outside North America (23% of PES) is down high single to low double digits in EMEA and Asia.  **[RRX_3405749_21]**  Residential HVAC improvement is expected to uplift the segment into Q4 and 2025.  **[RRX_3405749_21]** 

12. **Fourth Quarter Forecast for PES Segment**  
    **Q:** How does the fourth quarter forecast look for PES?  
    **A:** Management forecasts mid-single-digit growth for PES in the fourth quarter.  **[RRX_3405749_20]**  While last year had an OEM shutdown, they expect the quarter to be up year-over-year, noting the historical seasonality of Q4.  **[RRX_3405749_20]** 

13. **Risks from Lagging Deliveries to Resi HVAC OEMs**  
    **Q:** Are there risks from delayed deliveries to OEMs?  
    **A:** Management doesn't foresee material impact from lagging deliveries.  **[RRX_3405749_22]**  They maintain strong relationships with OEMs and continue to grow in air moving solutions, feeling positive about long-term partnerships.  **[RRX_3405749_22]** 

14. **Order-Revenue Gap and Business Cycle**  
    **Q:** When will the gap between orders and revenue align?  
    **A:** The business has evolved, especially in AMC, which now has a backlog of around six months.  **[RRX_3405749_8]**  Longer-cycle businesses like data center and aerospace have over a year of backlog, affecting alignment between orders and revenue.  **[RRX_3405749_8]** 

15. **Growth Outlook for Next Year**  
    **Q:** Is the 'limited growth' comment about organic growth?  
    **A:** Yes, the limited growth comment pertains to organic growth.  **[RRX_3405749_7]**  Management plans to approach next year incrementally measured due to market uncertainties and the election results.  **[RRX_3405749_7]** 

ced33f44cf026920b9145125f67dab28af52e1fb8abf8a5a80e504fc872e57d8

- **Continued weakness in the discrete automation market** is exerting pressure on the **Automation & Motion Control (AMC)** segment, with expectations of **mid-teens decline in organic sales** in Q2 2024. The company acknowledges that the **order book improvement is more second half weighted**, indicating near-term challenges.  **[RRX_3386961_21]**
- **Persistent headwinds in the Power Efficiency Solutions (PES) segment**, notably in **residential HVAC markets**, are leading the company to **lower its sales outlook** and remain cautious about near-term performance. The company is witnessing **channel destocking** and weaker demand, and is being cautious about guidance due to uncertainties in market recovery.  **[RRX_3386961_17]**
- The **Industrial Powertrain Solutions (IPS) segment** benefited from **favorable mix** due to strong distribution sales in Q1, but the company does **not expect this strength to continue in Q2**, which may lead to **margin pressures**. The positive mix impact from distribution over OEM sales in Q1 is not expected to persist.  **[RRX_3386961_16]**

a4934993ba3a9a4b6a2d66c46cda4298595777541c009695d1efe5f753fc84d7

- **Regal Rexnord expects adjusted free cash flow to increase to about $800 million in 2025**, up from approximately $600 million expected for this year, driven by lower cash interest, cash taxes, reduced restructuring expenses, and working capital improvements.  **[RRX_3405749_9]** **[RRX_3405749_19]**
- **EBITDA margins are projected to improve by about 200 basis points in 2025**, benefiting from cost synergies and lower interest expenses, indicating stronger operational efficiencies and profitability growth.  **[RRX_3405749_14]**
- **Cross-selling and industrial powertrain initiatives in the IPS segment are contributing 1 to 2 percentage points of growth**, with only about 15% of customers currently buying two or more products, highlighting significant potential for future revenue growth.  **[RRX_3405749_12]**

10c8a31d3d006a861536e6ad615567e57ace0c879c1296b0d3b91eb9679332bf

1. **2024 Guidance and Destocking Impact**  
   **Q:** Has anything changed in your guidance; what's the impact of destocking?  
   **A:** The main change is the continued destocking in residential HVAC, which is extending beyond our initial expectations and will likely continue into 2024. We expect residential HVAC, about **30%** of the PES segment, to be down **15–20% in Q1** and improving through the year but down overall. We anticipate destocking to end in the first half, both in residential HVAC and factory automation, with a slight uplift in the second half. First-half sales growth will be down year-over-year, while second-half growth will be up year-over-year.  **[RRX_3372585_9]** 

2. **Conservative Resi HVAC Outlook vs. Customers**  
   **Q:** Your resi HVAC outlook seems more conservative than customers like Carrier; why?  
   **A:** Markets are still murky, and we're not seeing trends that support volume growth in 2024 yet. We're taking a prudent approach based on current market conditions. While Carrier may be guiding for mid-single-digit volume growth, we're planning for resi HVAC to be down and are not factoring in any impact from GWP implementation at this time. Any upside from market improvements will be reflected in future guidance when we see consistent trends.  **[RRX_3372585_11]** 

3. **Confidence in 25% EBITDA Margin by 2025**  
   **Q:** Are you confident in achieving a 25% EBITDA margin by 2025?  
   **A:** Yes, we are confident in reaching a **25% EBITDA margin exiting 2025**. For 2024, we expect a margin of **22%**, with the Industrial exit adding about **100 basis points** of uplift to approximately **23%**. In 2025, we anticipate another **$65 million** of synergies, market growth, and continued improvements through 80/20 initiatives, lean operations, and new product development, all contributing to our margin expansion.  **[RRX_3372585_13]** 

4. **Free Cash Flow Guidance**  
   **Q:** Why is free cash flow guidance $700 million instead of $800 million?  
   **A:** We're being conservative in our 2024 free cash flow guidance. The decline from $800 million is partly due to our outperformance in 2023 on inventory reduction, where we generated **$255 million** versus the expected **$200–$225 million**. We expect another **$50 million** in 2024, which is a year-over-year headwind. Despite this, we anticipate free cash flow per share of about **$10**, with a free cash flow yield of over **7%**.  **[RRX_3372585_15]** 

5. **Sale of Industrial Business Impact**  
   **Q:** Is Industrial included in your guidance, and how does its sale affect debt?  
   **A:** Yes, the Industrial Systems segment, contributing about **$500 million** in revenue and **$40–$45 million** in adjusted EBITDA for 2024, is included in our guidance. Upon closing the sale, expected in the first half, we anticipate net proceeds of approximately **$360 million**, which we'll use to pay down debt. The loss of EBITDA will be offset by interest savings of around **$26 million** annually, resulting in a net impact of about **–$0.10** to our guidance.  **[RRX_3372585_19]** **[RRX_3372585_22]** 

6. **IPS Margin Progression and Synergies**  
   **Q:** How will IPS margins progress amid mix headwinds?  
   **A:** While some mix headwinds will dissipate, the primary driver of margin uplift in IPS for 2024 is the realization of **synergies**, particularly in gross margin. We're seeing **75–80%** of our synergies in the IPS segment through footprint rationalization and product line simplification, which will enhance margins despite any mix challenges.  **[RRX_3372585_17]** 

7. **Plant Move Costs Now Behind**  
   **Q:** Are the plant move costs impacting margins now behind you?  
   **A:** Yes, the costs associated with plant moves are now behind us. In Q4, we incurred **$4 million** in costs, below our initial expectation of **$6 million**. We do not expect these costs to repeat as we move through 2024.  **[RRX_3372585_14]** 

8. **Restructuring and Integration Costs**  
   **Q:** Were the heavy restructuring investments in Q4 all integration-related?  
   **A:** Mostly, yes. The restructuring in Q4 was primarily related to integration activities for IPS and AMC. There were some additional costs in PES due to product line setups associated with rationalization efforts, but overall, it was focused on integration, contributing to the targeted **$90 million** of synergies.  **[RRX_3372585_12]** 

9. **End-Market Variables from Q1 to Q2**  
   **Q:** What are key demand variables as you move from Q1 to Q2?  
   **A:** Key variables include general industrial markets—if destocking improves faster, we could see uplift. Residential HVAC could also show improvement from Q1 to Q2. We have strong momentum in medical, data center, and aerospace markets. Additionally, if alternative energy incentives are clarified and projects released, this could contribute positively between the two quarters.  **[RRX_3372585_20]** 

10. **Cautious on January Order Improvements**  
    **Q:** January orders were better; why not adjust guidance?  
    **A:** One month doesn't make a trend. While January was a bit better, we prefer a prudent approach, planning for orders to be down mid-single digits. If positive trends continue, we'll reflect that in future guidance, but currently, we're not modeling an improvement based on a single month.  **[RRX_3372585_23]** 

11. **Managing Organizational Strain**  
    **Q:** How do you manage strain as you drive the organization hard?  
    **A:** We focus on living our values and over-communicating our goals and objectives. We address challenges and headwinds by working with our teams to develop mitigating plans. We have a plan-do-check-act culture, ensuring we execute on plans while maintaining engagement with our **35,000 associates worldwide** for successful outcomes.  **[RRX_3372585_21]** 

b7ca931fd8a260302edd67f77e8dcb402c24261ac01335cf835be1aeae63e9ff

- The company **expects orders to decline** in the near term, planning for orders down mid-single digits, reflecting **continued uncertainty and lack of visibility** in the market. Despite a slightly better January, management is not modeling an upturn, indicating potential weakness ahead.  **[RRX_3372585_23]**
- **Continued destocking and weaker demand** in the North America residential furnace market are causing significant headwinds for the **Power Efficiency Solutions (PES)** segment. Organic sales in PES were down **16%** in the fourth quarter, and the company expects furnace destocking to remain a **headwind in the first quarter**, with uncertainty about when demand will recover.  **[RRX_3372585_5]** **[RRX_3372585_11]**
- Ongoing **softness in the short-cycle discrete factory automation business** is impacting the Automation and Motion Control (AMC) segment. The company **does not expect growth** in short-cycle automation until **later in 2024**, indicating sustained challenges in key end markets.  **[RRX_3372585_5]** **[RRX_3372585_10]**

e29f4811c3d0a06bd93aaf78fe26495f612675ada4910e12beb0634fc8ffe675

- **Strong Free Cash Flow Generation Enabling Debt Reduction**: Regal Rexnord generated **$683 million of adjusted free cash flow in 2023**, nearly double the prior year level.  **[RRX_3372585_7]**  For 2024, they expect to generate **at least $700 million of free cash flow**.  **[RRX_3372585_7]**  The company plans to use this cash, along with proceeds from the sale of its industrial motors and generators businesses, to **pay down most of their variable rate debt in 2024**, reducing their net debt to adjusted EBITDA ratio from **3.8 at the end of 2023 to approximately 3x by the end of 2024**.  **[RRX_3372585_7]** **[RRX_3372585_5]**
- **Margin Expansion Despite Market Headwinds**: In Q4 2023, Regal Rexnord realized **40 basis points of adjusted EBITDA margin expansion on a pro forma basis**, achieving an adjusted EBITDA margin of **21.5%**.  **[RRX_3372585_1]** **[RRX_3372585_2]**  For 2024, they are guiding for adjusted EBITDA margin to increase **over 100 basis points to approximately 22%**.  **[RRX_3372585_7]**  This improvement is driven by cost synergies, with **$65 million achieved in 2023** and plans to deliver **another $90 million in 2024**.  **[RRX_3372585_2]**
- **Potential Upside from Conservative Guidance**: Management is taking a **conservative approach to 2024 guidance**, especially in the Residential HVAC segment, due to ongoing destocking and uncertain market conditions.  **[RRX_3372585_11]**  Analysts note that this guidance is more conservative than customer outlooks, such as Carrier's **guidance for mid-single-digit volume growth** in 2024.  **[RRX_3372585_11]**  If market conditions improve beyond current expectations, Regal Rexnord could outperform its guidance, presenting potential upside for investors.

fd897c36e8b44fecb0f413060228954f2d3a955389071b7d515223ef6f4e19d3

- Regal Rexnord's factory automation segment shows strong indicators for the second half of the year, with the funnel up **50%**, win rates up about **300 basis points**, and a book-to-bill ratio of **1.08** in Q1, increasing confidence in second-half sales.  **[RRX_3386961_22]**
- The company is on track to achieve **40% gross margins** and **25% EBITDA margins** through internal actions such as synergies worth about **250 basis points**, 80-20 initiatives, and mix improvements, demonstrating strong margin expansion independent of revenue growth.  **[RRX_3386961_11]**
- The conveying business is performing strongly, with margins **above average**, and growth driven by rebounds in the food, beverage, and warehouse sectors. The integration of Arrowhead and Industrial Powertrain Solutions enhances their ability to win more business by providing total solutions.  **[RRX_3386961_20]**

a9881544c263741a47bedbd561908bd77553dd9b3c3024ab388dc5ce2e2fe1ed

1. **Medium-Term EBITDA Margin Aspirations**  
   **Q:** Is the 25% EBITDA margin target still achievable?  
   **A:** Management feels confident about reaching a **25% EBITDA margin** and **40% gross margins**.  **[RRX_3395898_12]**  Despite potential top-line volatility, they have control levers like 80/20 initiatives and lean practices to drive margins. They ended Q2 with **38.1%** gross margins, and synergies over the next 1.5 years will help achieve the 40% target.  **[RRX_3395898_12]** 

2. **AMC Margin Improvement**  
   **Q:** How will AMC margins improve in the second half?  
   **A:** AMC margins will benefit from a mix shift toward higher-margin businesses like factory automation and medical.  **[RRX_3395898_11]**  The margin uptick is also supported by synergy improvements, contributing to an increase of about **100 basis points** from Q3 to Q4.  **[RRX_3395898_17]**  Factory automation orders were up **9%** in Q2, signaling stronger margins ahead.  **[RRX_3395898_11]** 

3. **Third vs Fourth Quarter Earnings**  
   **Q:** What's the expected EPS for Q3 and Q4?  
   **A:** Q3 EPS is expected to be about **$2.50**.  **[RRX_3395898_12]**  Earnings will ramp up in Q4 due to higher sales and margin improvements, with margins improving by about **100 basis points** from Q3 to Q4.  **[RRX_3395898_12]**  The improvement is driven by mix shift and synergies, with no significant changes below the line except for a slight reduction in interest expense.  **[RRX_3395898_12]** 

4. **AMC Revenue and Margin Outlook**  
   **Q:** Will AMC revenue improve after Q3?  
   **A:** AMC revenue is expected to be relatively flat sequentially into Q3, with a step-up in Q4.  **[RRX_3395898_17]**  Orders support this outlook, with AMC orders up roughly **10%** in July and a book-to-bill ratio over **1.1** in factory automation.  **[RRX_3395898_17]**  Margins will improve due to mix shift and synergies.  **[RRX_3395898_17]** 

5. **Order Dynamics and Back Half Expectations**  
   **Q:** Are orders meeting expectations for the second half?  
   **A:** Orders met expectations in Q2, with AMC orders up **12%**.  **[RRX_3395898_8]**  July orders continue to be strong, with AMC up roughly **10%**, IPS up **3.5%**, and overall orders up about **5%**.  **[RRX_3395898_8]**  The timing of orders affects backlog placement, but underlying market demand remains solid.  **[RRX_3395898_8]** 

6. **Automation Improvement and Macro Outlook**  
   **Q:** Is automation improving despite macro headwinds?  
   **A:** Management is confident about automation improving in the second half, with orders in discrete factory automation up **9%** in Q2.  **[RRX_3395898_15]**  The book-to-bill ratio in factory automation was over **1.1**.  **[RRX_3395898_15]**  They expect both sequential and year-over-year improvement, reflecting current macroeconomic conditions.  **[RRX_3395898_15]** 

7. **July Orders Conversion to Revenue**  
   **Q:** How much of July orders will convert to 2024 revenue?  
   **A:** About **one-third** of July orders will convert to second-half 2024 revenue, with the remaining two-thirds flowing into 2025.  **[RRX_3395898_16]**  The backlog is filling nicely, and no significant lift in orders is needed to achieve Q4 guidance.  **[RRX_3395898_16]** 

8. **IPS Outperformance and Growth Drivers**  
   **Q:** How is IPS outperforming the market?  
   **A:** IPS is outperforming due to cross-sell synergies and Powertrain growth initiatives, contributing about **2%** to performance.  **[RRX_3395898_9]**  Cross-selling opportunities are up **190%** year-over-year, with only **10%** of customers currently buying two or more products.  **[RRX_3395898_9]**  This strategy strengthens their position despite weak end markets.  **[RRX_3395898_9]** 

9. **PES Segment Outlook**  
   **Q:** What's the outlook for the PES segment?  
   **A:** PES performed slightly above expectations in Q2, with residential HVAC orders up low-single digits.  **[RRX_3395898_14]**  Q3 sales are forecasted to be up low-single digits in resi HVAC, supported by a book-to-bill ratio of **1.02**.  **[RRX_3395898_14]**  The rest of PES, including general commercial, still faces pressure.  **[RRX_3395898_14]** 

10. **PES Sales Step-Up Visibility**  
    **Q:** Is there visibility on the PES sales increase from Q2 to Q3?  
    **A:** The company expects a PES sales increase of about **$30-35 million** from Q2 to Q3.  **[RRX_3395898_14]**  They have confidence due to the short-cycle nature of the business, with backlog covering about **two months**.  **[RRX_3395898_14]**  Q2 residential HVAC orders were up low-single digits, and the book-to-bill ratio of **1.02** supports the expected Q3 increase.  **[RRX_3395898_14]** 

11. **IPS Market Dynamics**  
    **Q:** What's the impact of different markets on IPS?  
    **A:** Agricultural and construction markets are down high-single digits, likely due to demand constraints rather than destocking.  **[RRX_3395898_18]**  Marine, power generation, and metals and mining are up high-single digits.  **[RRX_3395898_18]**  Cross-selling activities help IPS outperform despite ISM and PMI indices below **50**.  **[RRX_3395898_18]** 

12. **Discrete Automation Revenue Bridge**  
    **Q:** How will discrete automation revenue change from Q2 to Q4?  
    **A:** Discrete automation is expected to improve in the second half, with revenues around flat to low-single digits.  **[RRX_3395898_19]**  Factory automation orders were up **9%** in Q2, and the AMC segment is guided to be down low-single digits for the full year.  **[RRX_3395898_19]** 

d39ff627e5d6f4fcebad4d7f35df19e7963ea6ddc37e4d8fd9a71659a7288f76

- **Delayed Revenue Recognition in AMC Segment:** Despite increased orders in the Automation and Motion Control (AMC) segment, approximately **two-thirds of these orders are scheduled for delivery in late 2024 or early 2025**, which may delay revenue recognition and impact near-term growth.  **[RRX_3395898_16]**
- **Reduced Sales Outlook for AMC Segment:** The company has **reduced its full-year sales outlook for the AMC segment**, now expecting sales to be **down low-single digits** instead of flat, due to a softer second-half ramp with delivery dates on new orders shifting into 2025.  **[RRX_3395898_6]**
- **Weakness in Key End Markets Impacting IPS Segment:** The Industrial Powertrain Solutions (IPS) segment is experiencing weakness in the **agriculture and construction equipment markets**, which are **down high-single digits**, potentially reflecting demand constraints and impacting overall performance.  **[RRX_3395898_18]**

9115ff4f4f5d923d2408780dd31c81ad21c73058b669a4f43a026d49e3b11074

Regal Rexnord Corp (RRX)

Financials