RBC Bearings (RBC) 1 Nov 242025 Q2 Earnings call transcript

Good morning, and thank you for joining us for RBC Bearings Fiscal Second Quarter 2025 Earnings Call. I'm Rob Moffatt, Director of Corporate Development and Investor Relations. And with me on today's call are Dr. Michael Hartnett, Chairman, President and Chief Executive Officer; Daniel Bergeron, Director, Vice President and Chief Operating Officer; and Rob Sullivan, Vice President and Chief Financial Officer.

As a reminder, some of the statements made today may be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. materially of projected factors. differ to implied may variety a results from or those due Actual of could We filings results for discussion with you and the risks refer to SEC a RBC financial condition. more future the company's impact Bearings' recent the operating that detailed These also to now I'll turn the call over listed press a along with that, factors between information. GAAP With are Dr. reconciliation and in release non-GAAP financial the Hartnett. Thanks.

today's high-level start with Good and our us. detailed the of and I'm then it following remainder review morning, our a the industry XXXX. the thank joining of hand more to everyone, color on over quick for I'll you going finish thoughts and call Rob financial results, to for numbers. I'll for with outlook some on Sullivan

came on industrial sales side performance continued by at with we believe and outperformance in year, XX.X% the up a on commercial was segment, what XX.X% XX.X% $XXX aerospace. A&D strong last over year-over-year, growth X.X% the defense and the net on continued quarter side. peers Second Total increase sales driven were in growth A&D our million, versus

industrial side, OEM X.X% came aftermarket down the X.X% down X.X%. year-over-year sales with down segment and the On

XX.X% of go side spend the deep I on business. are growth you I sales X last organic quarterly on strength versus defense wanted the Year-to-date a at results, Before too into to the or year. statement impressive an minute seeing the stands currently

that We provide are where additional [indiscernible] business there is seeing strong can multiyear backlog our exceptionally demand in growth.

category. wing continued urgent and munitions guided our seeing for and fixed also are strong We missile demand

the demand year next into of the current political the backdrop, With this for are planning remainder continuation this of through we on.

or over. plant of in impacted to the unexpected week. in performance the Boeing The our sales, summer's saw absorption events million the shutdown We're These a of projects period. Well, to ongoing during resulted we Hurricane basis that the Ashmore, revenues $XXX.X through a at margin and year-over-year. be XX.X% on in in headwinds the impact million period. and $X by drivers wide XX-point of came from dodge aerospace our period, range at a increase Beryl. continue million capacity, a smaller Carolina of moving North defense of we quarter over ] synergies to process. margin to RBC Gross the a for Later expansion [ increased of now the management plant-by-plant continue biggest in strike identify During $X

came compares performance. They translated that acknowledge comparison. up behind They adjusted timing Cash of to deliver and the per foundation million operations force biggest the and continuous these like into share culture last $XX of income year-over-year payments an that of I'd of compared and $X.XX $XX improvement. are our from for as year's at $X.XX this X% million million scope year-over-year, Net was the teams share. cash projects year, driving results. factor last thank are to $XX EPS the our to of and in per in with the tax

in to Xx continue taking debt of [indiscernible]. rise leverage deleverage to cash the our $XX sheet of approximately million the to use We reduction balance trailing net over our quarter,

our below year, targeting for we further allow million the reduction for a nicely positioned acquisition sheet the million which to exit debt $XXX year turn balance are to interests. Xx reminder, a $XXX the us leaving well As should mark,

outlook. our to Moving

strong. A&D side, demand On the remains very

production plan all of step expect our not year the clear us of events, this of an continue As we Boeing this and quarter role smaller balance over And we go to strike up a this and consequently, are to and the in at at planning to frame time. our business accordingly. XXX When the their how into revenues, result increasingly is playing recent next. in is

desperately. course, set ship production production need of in perfect is XXX aircraft backlog substantial. Their the some their know by customers stand management. for the any XXX to unaffected. Of rate support do We We remains that the a position

in ending expect these matters are support currently clarification on through rates the XXXX. for that few production next now busy negotiating contracts regarding and Boeing production weeks We will and

business the Using the deliver our the able already these growth for I to assumptions first and year, with to full delivered strong in believe low the results half mid-term of be A&D year. should

second results we beverage On and industrial including grain, pleased was strength I power the the quarter, continued the saw side, the food and with in in generation.

gas, [indiscernible]. of I organic period return relentless markets and as new build primarily at industrial end believe some a year the our as concentrated rollup of inventory market, and end weakness the driving a during back to intents. of business in half our growth into our result oil these focus corrections the of on All was X for at and can

begin plants, defense Looking significant statements demand incremental forward owing XX RBC and revenues, investment see, rigs we at operating XXX Strong XX% engine aerospace work our revenues, jet pushing the acquisitions lineup to increasingly new next rate Dodge for playing by one, develop synergies number and continued demand impactful European for products we our role reassuring of products towards led tooling community. testing in 'XX. expansion increasing an of as demand and as and strengthening the year, of important at in both we cycle components ended from some budgets our products based rate old an today, of and repairs,

the now details Rob that, call on more With over financials. for turn to I'll

Thank you, Mike.

X.X% challenges This X.X% period. the gross short-term Dr. As see our the onetime points margin reflected expansion achieved. growth drove Industrial growth another percentage strong year-over-year was synergies indicated, Hartnett was basis segment, to of RBC of with we and this the gross Net Dodge sales year-over-year for of XX where quarter in despite and of continue benefits primarily execution in margin expansion. margin strong

force personnel to costs includes the support existing for as such new that expansion highlighted. in international line, On well the investment we as our our growth. in continued future as we SG&A investments talent previously additions sales This resources

addition, the $XXX.X to in year-over-year period. during back comp, was XX%, office and against the In million, of EBITDA which points led still tough and margin. XX.X% above full up down travel of our continued we fees year-over-year an X.X% and including basis XX IT This had margin but professional year investment support, EBITDA adjusted incremental XXXXs adjusted

year-over-year, revolver Interest and our rate quarter cross to Altogether, XX.X%, some This benefits term of year's representing last and the EPS interest variable diluted was the rates adjusted in short-term the was consistent expense rate our our this with and $XX.X XX% of $X.XX, was growth adjusted down debt an million. from EPS The impressive repayment loan the the on of tax of rate ongoing lower swaps. currency our led reasonably result quarter. in calculation X.X%, year-over-year rate in XX%. of headwinds given reflecting

fiscal generated terms flow In free $XXX.X from cash million we net of of through conversion cash have of months in operations, approximately cash X XXXX, the income. first flow with of XXX%

free portion which cash the leased. quarter a tax for was impacted purchase mortgage X.X%. certain was second of was the the million a of payments by A XX-year previously timing financed of with building during this quarter, and flow Our Switzerland approximately at $X in

results has flow growth cash X-month during primarily income the by Our XX.X% increased driven period. net free year-over-year,

large will payment sheet. during million We the close. the of million another of after we to repaid meaningful days balance wire a usual, debt use the portion generated over with quarter $XX continue X the the deleverage $XX cash quarter's crossing As to

convertible forward, generation is basis. takes If X.X% our going stock include not accretive to preferred our reduction free free fiscal This you EPS, debt our by payment, flow is mandatory of roughly on only outlays it in of terms flow. $XXX.X cash payment, XXXX cash automatic year-to-date of XX to cash future total annualized but also dividend the our that total removes conversion total million. A million And Series cash an reducing $XX approximately slightly the October

when the approximately reflected anticipate of the and net income full we all million to shares approximately $X outstanding full additional the X.X include The calculating the third shares in to quarter, when reduced by dividend period. quarter cost impact million are be be conversion. will diluted EPS In fourth the of from for they the EPS,

million, we of to growth the third $XXX year-over-year into Looking of $XXX to quarter, expect X%. million X.X% revenues representing

many our selling our our days plants, to third typically fiscal includes and year. of fewer holidays quarter As is the due a lightest reminder, quarter of

be that XX we at projecting are market margins the which basis margin revenue should of to XX.X%, This in the the of comparable compared QX year-over-year be side, an as calling gross midpoint. on the trends headwind XXXX and to primarily guidance ongoing pointed headwinds Our day for out by aerospace the that Dr. flattish OEM strength -- sales is increase and driven broader selling that XX.X% despite to is gross roughly despite points Hartnett would earlier. industrial

third With leveraging sales call high and SG&A is free to a On product growth, focused side, levels and flow In of engineering, XX% XX.X% expect organic our excellence please manufacturing inorganic core as operator, for during development the we drive margin be to in the open that, of in continued strengths both cash for and quarter conversion. the closing, on another quarter. to remain RBC. strong We the this SG&A percentage range Q&A.

[Operator Instructions].

first Our Truist Michael Ciamoli from question Securities. comes with

margins. that combination revenue on called strike the may way to the impact. -- the strike I hurricane, I Any guess had of impact out the you gross think the implications, quantify have

way I to it Look that, mean mean that -- do now. but here a I obviously, and do there's Yes. can't there's

If of it's of gross products. of reflective the those you kind at just look margin, consolidated

gross would I expecting EPS, So that I've been just using the what are that's fair. -- as for contributed we margin, would have to think contribution consolidated

Okay.

Okay.

a inventory. are I mean well? incorporate terms still you Boeing guys too period? a be like start for Okay. But exposure said this always any headwind elongated if thoughts now? times even of was I any does has the mean, build Mike, they maybe I inventory again? definitely Are of to I at going once guess, you position -- on And lifted. strategic there cap and Fair have I first products. in further I the enough. lead built to as your down you Spirit to And But ship of some rate are once a that strategic that color you there's much? then, know destock you destock sort at of out to get know Is think now. ramping

the mean that I we're we've down in it. terms supplying we've of see products. don't whole food at sort what chain -- of nadir, I been

into think a get So I I think production on the once towards system. that XX heading pull and back number, they're to vacuum going start they big

Okay.

just demand domestic could and there prime provide it. And if the a guess, for one. pipeline last fixed Got mean, newer just maybe of Europe from the mean, helpful. programs, munitions. detail seeing of it I platforms these of then lot you're Any wing I different you recapitalizing? the just I That's -- kind [indiscernible] contractors, even mean, more Okay. there? urgent Is any NATO all for domains. some a of flowing we through I new looks across Any like detail what seeing keep lot more development

lot the I supply detail U.S.-made a over -- And because shoulder there's out precision chain bearings. we there's of or but to weapons there many weapons the is production be We're just and secrets know is there minister demand. U.S.-made the they're of telling bearings, are service have And to and them defense miniature bearing it of there's school think mean not defense bearings miniature not I'm these U.S.-made not not in atrophied bearings I reasons, we're are aware products, for those miniature guided bearings, what special Well, but I has now, bearings, other that particular production sufficient bearings capacity participating departments use and that of we it. offering and it. last here, those mounted -- about and incentives increase any to mean generation. And

from comes Alembic Peter Global. question with next Skibitski our And

we -- year, the the Boeing if kind quarter? lingering impacted us the I but second how a the it, sorry think you guess, in, Can the negatively of give I the I IM Sorry Asheville half of quantify maybe sense And I back how about strike should industrial. much impact? quantified impact if missed know you of

it's yes, being And of Well, having of that back think year, and half one supply I -- conservative X. the it. right production chain our month and strike is will the be This I Boeing, assumption requirements make now read seemed our the when to I It for the -- on the we although it number? the journal. today the is is in as know. November made out for looms, don't maybe progress based

our out numbers, of one into so boiled it. is what month So yes, operating

Okay.

revenue aero commercial your sequentially should assuming be you're down quarter? So third in the

Yes.

Was I Okay. I some and -- about backlog think aerospace X.X%. And sequentially, wide-body don't this I that then orders? increase maybe just commercial lot -- know, of you had a mean, nice

the of lot a side. would Pete, but of side defense been aerospace, A our business. have heavy, been on would Certainly, the that, have of defense lot defense it segment

Okay. this continuing my sort -- into well, third question in is from which here resolution for CR. maybe sit can we DoD, quarter-to-date ongoing, you we've that in last we as right, results seen Got heading bookings was it. defense That slowdown got the Have then, November, quarter. your any surmise of

are Yes. I'm if trying seeing that. we to think

Our part, of those most the are are, the OEMs. defense for part bookings significant with

of with Defense. not Department they're the So

still it many months. firm And contracts orders I the years. reflected think are So bookings purchase our over extended are is often what's in or XX backlog that

Okay.

not feeling yes. So We're it. not No, it. -- seeing we're

comes Raymond question from with James. Thein next Our Tim

first the heard expected there third Rob's terms with outlook the the be industrial I hear commentary -- did of to Was on in you you the say second I quarter, one that at quarter. thought Or.. that for correct? was flat But JJust I that end. Rob, the

lot plus minus. right QX, we're or like That's it looking should look sequentially, at Yes, what now. a

Okay.

all right. So

if you're year-over-year the not were for seeing case and So but calling to to that's you that's the that than growth. hold penny,

Right.

Yes.

to quarter, probably point than third see just for what distributors, back guess than improvement. they're in that this And terms into third down from you better your from bearing And peers, fiscal Okay. from less suspect industrial seen -- public I a ties not at that from every look you by I'm the curious Got or haven't your -- outperformance others. but heard way we you'll I'm you maybe the calling commentary as that -- in of I is the I of of much interested one it. the least believe saw the

some I paying can of what's driving curious side. you the a the is of distributors? Maybe just of some from this the you're was maybe color terms terms you this So benefits wallet of in guys in industrial outperformance share Dodge are give -- gaining what it higher seeing? Is off on with just

our Outperformance peers? relative to

did if yes exactly. Yes. I you Yes. mean

relative Okay. to Because outperformance I don't think our plan. it's

Got it.

I behind are I'd -- a It's our plan. mean peers know behind to more about why we're I little falling have our than

that was it do what But with the know I us. problem description where -- I of are. fits that our So is. they're don't didn't performance think we you think

a wasn't are That flattery. -- It It I was mean, industrial a -- just is was about talking I I or less. don't down others all. revenue point think

Okay.

and I'm to maybe expectations, your you others. terms suspect, just maybe you'll And seeing -- peers. of improvement, is see than asking better just the not in speak extent I your I'm again, lagging but are to what I it's for from

are you're commentary how So those progressing? it where you and and initiatives where around you internally was put just your any if you've had some what of the -- forth seen

I mean, year, these of year-over-year we [indiscernible] we and that say is in quarter, the there's performance end that improvement would tail our with And was -- because second I Well, fighting the still last of quarter second chain that supply first tail. -- showing an quarters, were there's problems. had --

be So we shipped should have little needed couldn't to been needed but bit -- didn't finish year they all of because which have because a various be assemblies. the those shipped, made stronger quarters effectively products we parts that last than to

So comp. -- have difficult not we're -- don't so now, that we quarter-to-quarter

so market more pure relative it's demand. now to performance a And operating

Got it.

margin be side? just on improvement last forecast you the the the Do year you still then full may points quarter, -- XXX on is I to closer that think gross basis today? that -- margin Okay. the commented And had

the Yes. forecast. It is

So Yes.

Okay. it. it. Got Got

I'll Okay. And last and one, move on.

some Just the that Marine sit highlighted precluded I don't been qualitatively, marine competitive company it's for maybe backlog as size you size time. segment, here know divulging within total that of calling you've it. I it's within terms of in any backlog, even if Any if today? A&D of But the context you from think just the for on -- that reasons, you're

meaningful couple mean I Yes. the of to backlog a it's a million. hundred net tune hard

question next Sparenblek William Blair. comes Our from Instructions] Ross with [Operator

kind you Maybe to where just be how of and it the would muscle outlook, growth stable. great new the we the of starting business with strategy But thinking Dodge, has timing stand thinking longer-term R&D should be the through been hear getting that working? on about product

moving production. from Yes. through Well, several initiatives new have into we product R&D

some new a it's mean, start this of over will I year -- probably product. think there I normal period. generate first so the for year, a a the million few full And dollars

that say next million an new to $XX on Dodge basis out I $X would million. products year So of annualized

Okay.

So feel years? this and getting like to is from the of snowball really you're buy-in do in starting couple next you workforce potentially the

think we the sharp I Well, be I equation. the people well end market think enough, have Yes, have if contributors. Yes. meaningful pretty it's those identified should demand think we I working of some at

great hear. picking Dodge's couple project greenfield That's then seen that and that maybe warehousing maybe just might that been hearing performance but about signs be then activity anything Anything of activity It's has from up. business. a And thinking tougher to your it customers? call just around is you years, on

of saw some this in some quarter. here business I showed the positive effects last that think side

years seriously player. allow a address new So at a it's to that us in take product development be the to should We coming probably going back which will slowly. few significant we're to market, line probably it. but looking we're and develop a more

want strategy away I of is your oriented, conveyor still any give Okay. ask? you can to there, it I but don't Yes.

Ross. away, want then [indiscernible] me And give to Perfect. you

cards. of but aerospace, that. the works the progression with was and second margin or that the in is X on XXX may up, still Boeing breaking thinking kind about previously ramp, be in half Conversations XXX the On phone

Just or maybe expectations second year? any even there, fiscal next half

and Well, beyond be per should $XX And rolling month that's I build rate. budgets troubles that basis think operating next for sort moving will year, the into we ship these in into operating production of year. of our we're that be what next together expectation. terms and our of That's budget

need I right, are that mean supply lot published problems there's A that of to objective know At they of -- had and year. XXs objective financial we them certainly you moving into XX that. chains the that chain. Clearly, the the of them had And a they to sell are exactly backlog Boeing our not -- objective the shape. them. and need customers and Airbus' had we an the we a per of had need X needs of have collect to sold try the month. They in point, They they what product their really upon do reboot last the lot their of before an based their Boeing are tough good. given it's ships we of health suppliers, and survey pretty receivables if because supply

we we know tough know a have we so And time.

there, market to incremental at willingness to your juncture? gains share look might Got better angle diversification be this for call Anything feels I it. the maybe guess, on out with like Boeing,

Can Ross? that you again, say

you fruit guys potential direction? but building mean opportunities maybe mean want in that know on a I hanging diversify away I if would I from share you to market saw move you low bit,

world hanging projects only to and that like of There's breach big of be is producers. are projects them, the in in with I have going we the mean, right -- lot of low the guys survivor. Boeing we X both companies. both now in whole practical a And There's Yes. fruit. these

put way. reaching harvest, it some are that And lets

Epstein Bank Our next Ron with of question America. comes from

of Does properties up opened on you the Boeing some there Is world? opportunities? caused anything Has has are stress M&A there out stress seeing are priced? market? the maybe How the the sort that suppliers? What in some that

should all the we Yes, to we we we in side business, the to coming and understand the world the participate -- try see and of auction. things market M&A or on in particularly A&D whether not the time,

you competitive of and we complete is aerospace we difficult. sometimes sometimes equity these are a the businesses has hungry us we're and been attractive nature that What interest seeing private competitive do in And that? So to companies, don't. if

And with to problems some of these big solve. businesses come

with many them. of these to any of whoever big cases. So a involved in tools because have acquisitions one lot fix to toolbox gets a employ needs

along Ingalls makes it very another think sort And similar having different reported I kinds that when but Yes, sense. then lines, Huntington maybe evident of issues. of yesterday maybe all became that question, they're

kind good help. I in and Are don't there end supply naval opportunities to know, share, naval a of it that are really that's for market there mean supply particular something specifically opportunity inorganically a because I either chain executor. to happening like in struggling for do for the seems company in Is of up is troubles or execute you guys the pick there an to guys organically that chain. you all that

right rate, focus certainly quickly on the is navy rate looked meet production order as that bring our we And has the of production the to now, our rest to Ron. at book Well, up say the and to our double the industry as it, I'd for our trying actually, and product. has we our possible current objectives have executing

really been we've that. busy So doing

of the enough plant or but have in offered the have things over lot base wasn't to Connecticut it, on support that big isn't build the on machinery enough And the with expressed. -- we of and to to it a We forth. industrial to the build-out complained there strong talked some barge and and so we've that some the of could people do the Graton appropriate interest waterfront equip so and and --

right. Yes. unfortunate. All It's

Ritchie our from question comes Joe next Goldman with Sachs. And

This is question Rick on Joe. end the first market. Shrivastav industrial for on is My

to would growth. to about X% X% quarter next XQ. imply sales organic compared You talked about industrial This

trying that original you next expect equipment what So do to number to both positive is understand to aftermarket return and driving one, quarter? And just confidence? growth

we're on just we're the side seeing seeing the still and both markets -- to good -- on MRO mining of and the mining, for the side beverage multi-industrial, and your on on food end all aggregate OEM softness end some activity this the on So business question, that warehousing, the of markets. understand those kind on and and side, them the of of

So we or now, in see back QX. same movement signs first is maybe or some it's starting come that and we're our mixed starting quarter, in could that see we side it's a some fourth our QX, with that which different But positive gas, expecting the show bag to oil should to quarter MRO just our actually average of on are driving growth. semiconductor, markets

Very helpful.

Moving on to pricing.

Just trying the to Aerospace understand And then And thinking that? what's there? Defense. how on much about for in view talked you coming contracts Any January of on put your you've list pricing up on about pricing and renewal? how you're and in contracts color

this have I Well, were that today, XX%. we is XXXX, with XXXX. lot relates of would and price contracts defense, a and various in up And aircraft say it to between XXXX as the people, producer is signed the index

old The but that And that in we the have prices change. years change that do, readjusted been negotiating the in have the PPI, adjustment ones where them -- don't have the were reflect new order needed to reflect have of we're contracts so and new contracts prices ago many new these the set don't

That's very helpful.

is now more see your And XXXX your quickly of maybe color backlog on Just normalized? levels? in that Industrial to Or some think backlog backlog you within do still normalizing? industrial on last risk is backlog Any Industrial. question trending how like you compared

the you much chain during do the I carried considering that price big supply just than today. they worth tell The XXXX backlog was that's on a industrial would is backlog the heavier takeaway Dodge

more normal So would of backlog Dodge our turn business today, of to which part the that's on has expect. And market meaningful side. really the gone a in a RBC, the reflects type [indiscernible] you industrial classic backlog. quarter in normalized book which is our on lower business, not really much The back an reflected their It's so overly also and

from Steve Barger with question And KeyBanc our Capital next Markets. comes

similar. in side, On industrial The XQ the industrial expect is positive. XQ you certainly comp percent growth in seems X-ish for the

to reasonable run meaning in a the So is that rate inflection you're from and think your consistent has here, year-over-year Industrial you growth? back business for happened

I want clear. to just be

that look lot QX So said a was like what or it I could minus. sequentially, plus

could days, mean the with ever fewer that down So slightly. so

So I we X% next didn't want say just grow... to quarter.

I dollars Do mean you rate? growth know mean

do didn't expect we say We but growth, X%. Yes. sequential

growth Sequential in rate, growth not dollars?

industrial. Industrial. In

sequential you're I sequential understand, dollars, growth not growth gets it. saying Got saying rate the in but you're better.

exactly. Yes,

to want percentage defense running across the consider make as sure of segments? would do the Okay. Mike, maybe what of classify portfolio everybody the strong, now you XX% understood you What Yes. X portfolio, plus? Just And exceptionally as percentage

Aerospace So that in about Defense total of within X/X is the and Defense just segment, segment.

okay. some But X/X in have Aerospace, industrial you and defense as well.

We No. No. -- aerospace and it development. we in all have

it. Got

would and you of second the strong? part lines Okay. And exceptionally talked overall you Mike, exceptionally some for the about that question, strong business portfolio of What being consider of had right now. percentage of the

RBCs be before was to traditional acquired -- XX% The of RBC which revenues RBC It's we used A&D, traditional, Dodge. industrial

exceptionally of So total is revenues XX% strong. it's

Got have of I strong in in to the What ex impact million customers. XX%. one able related other to strike $X you to demand $X And one. one impact would been revenue plant, it. were from just million mitigate heard last That's you great. strike? weather say the XQ the

rate? build what At

I the the build was guess, that strike. occurring rate to prior

This is it's into forward-looking. especially we're Rob to Moffatt. hypotheticals I third quarter, don't think going the on get since

been would lost XQ, have looking production you of only Well, because I it weeks was what XQ? of couple actually in for a

and you the that from of strike January itself, There's impacts down You or level Then the content. But blowout. plug many just right? then high had the you side, too the had really impact had X door entertain. Boeing original narrow you on variables to

And session. the of for question-and-answer the Thank now call remarks. to the end Dr. turn Hartnett And you. we have reached will I now closing over

to questions call you, good quarter. Appreciate talking to Okay. our look participation Well, all you the and again. this second concludes everybody's the and thank for and conference forward