Q3 2024 Regal Rexnord Corp Earnings Call Transcript
Key Points
- Regal Rexnord Corp (RRX) achieved a record adjusted gross margin of 38.4% and a record adjusted EBITDA margin of 22.8%, up 110 basis points from the previous year.
- The IPS segment showed strong performance with positive organic growth and record adjusted EBITDA margins, driven by successful synergy initiatives.
- Orders in the third quarter increased by 2.5% on a daily basis, led by the IPS segment, indicating potential for better top-line performance in 2025.
- The company realized $27 million in synergies during the quarter and is on track to achieve $90 million for the year, with an additional $120 million expected in 2025 and 2026.
- Regal Rexnord Corp (RRX) generated $126 million in adjusted free cash flow, contributing to debt reduction efforts.
- Overall third-quarter sales were down 2.7% on a comparable organic basis, primarily due to headwinds in the AMC and PES segments.
- The AMC segment experienced a 4.1% decline in net sales on an organic basis, with weakness in discrete automation and larger-than-expected foreign exchange pressures.
- PES segment sales decreased by 6.2% year-over-year, impacted by weakness in non-US commercial HVAC markets and slower-than-expected capacity ramp in residential HVAC.
- The company revised its full-year sales outlook downward due to weaker performance in PES and AMC, with adjusted EBITDA margin expectations reduced to 22%.
- Free cash flow guidance for the year was lowered to approximately $600 million, reflecting lower EBITDA outlook and higher inventory investment.
Good morning, and welcome to Regal Rexnord third-quarter 2024 earnings call. (Operator Instructions) Please note, this event is being recorded.
I would now like to turn the conference over to Rob Barry, Investor Relations. Please go ahead.
Great. Thank you, operator. Good morning, and welcome to Regal Rexnord's Third Quarter 2024 Earnings Conference Call. Joining me today are Louis Pinkham, our Chief Executive Officer; and Rob Rehard, our Chief Financial Officer. I'd like to remind you that during today's call, you may hear forward-looking statements related to our future financial results, plans and business operations.
Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the SEC, which are available on the regalrexsnord.com website.
Also on this slide, we state that we are presenting certain non-GAAP financial measures that we believe are useful to our
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