Regal Rexnord (RRX) 2 Nov 212021 Q3 Earnings call transcript

Good morning, and welcome to the Regal Rexnord Third Quarter 2021 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Robert Barry, Vice President of Investor Relations. Please go ahead.

Great. Thank you, Anthony. to Third welcome Conference XXXX and Call. morning, Regal Quarter Rexnord's Earnings Good

are Chief Officer. Pinkham, Rob me Louis Joining today our Vice and Rehard, President Executive Chief Financial our and Officer;

I Before call that statements are not in turning made forward-looking are to conference that in over Louis, the call the this historical remind would to statements. you like nature

statements. differ Forward-looking implied results, and future difficulties in statements predicting or are not expressed results guarantees materially could since in those there forward-looking are inherent from actual

of performance could release refer X, that our compare provide to appendix results are SEC financial the read of operating measures measures presenting differ these information list in financial understand our and operating these actual for additional a please with manner regarding results For and in you this as comparable certain Slide for the investors results, materially factors measures these are in see accounting useful to this GAAP. to the management. to and financial cause we Please please with periods that filings. On from insight and for same we presentation. helping measures projected and accordance non-GAAP that most state We reconciliations into slide earnings today's measures, our believe across non-GAAP

today. acquisition quarter his guidance. to which X, to comments. Louis third Rehard in opening results Arrowhead come with Louis Rob back briefly the XXXX our let lead announced review me will the then detail Turning our will off Slide updates XXXX financial we to Systems, call. agenda discuss for and today's will and discuss then of provide

the some which, after We with I'll will Louis. have to to that, over will then closing call move remarks. And Louis Q&A, turn

your earnings morning, good for an to get and in quarter Rexnord. on and Rob, us the Thanks, third thank Regal everyone. our Thanks you business, interest new discuss update joining our to for and

robust along of our strong mind, surely as up supply on confident inflation portfolio. I'm posted Rexnord low XX% our top given October, for XXs the unprecedented Regal Regal Rexnord, line margins making, and and quarter, in have chain Regal share quarter, headwinds transforming also this a as we operating across Many line being but positive enterprise. Despite healthy price/cost XXXX. whole, market but in demand, they record XX% higher-margin, include cash-generative factors growth. in momentum gains and the more team's And we many of of disruptions a we and our quarter's now orders and are progress enter a up couple on the been performance Rexnord, severe external third third especially levels market have achieving earnings the into faster-growing, top record are performance, rate While with higher-return highlights drove tremendous modestly at a are strong upbeat, with Regal, we will top feeling organic because

a years, note, our year and selling a to We synergies particularly accretive lots our am in on open of more Rexnord's be to flow our I our strong even happen. I going of profile to to our sheet way, call. I'll we customers forward. Xx flexibility industrial from levered also gives by which, after create us an as expect detail few shareholder initiatives and, to exceeding balance the at extremely excited this an before EPS healthy and over powertrain which business, will cash very our X, PMC to with however, XX% of both an announce for merger the has promises already also closed remains more deployment vectors acquisition discuss benefits transformational X free of to adding should integrated later solution, conveying Arrowhead, Process begin business, adjusted that and which started Control combined inorganic. cash growth in various strategic today array bolt-on organic the about growth & to achieve highly add materially organic Motion that ROIC deliver next we to flow, value year with Arrowhead, and capital margins, from Arrowhead free

Before turning all Rexnord saying a I to it you Rob, spend around over want to world. thank associates Regal minute the to our

X, and with strong their individual core urgency for and exhibiting guided talent. and always the It's Regal customer of and was of and dedication Rexnord engagement now because leveraging We of nearly all along our and the great values. On so MCS. is Bluntly, was Milwaukee, their things the our lean experience PMC a many combined using levels. the our Motion the inclusion of closed Regal hundreds talk Rexnord Regal Regal about is of day of of segmentation, its significant about this excited at of walking was skills Control disciplined floor diverse the work PTS acting Our customers, of new XX/XX, performance spent associates or principles, associates perspectives, of I most many after the the Rexnord. But our XX,XXX we day headquarters of and of by with meeting me execution, data in legacy thrilled to headquarters one the decisions. spent the hard language October Solutions and time I Regal our PMC PMC way. That XX-story building, on the every business, that SKU associates importance rationalization, merger, of make diversity, at and

these helping succeed. just prime little competition, but times than better execution our among management choppy using bit our a us disciplined it so is the of tools our us associates think I of them, are XX/XX is helping many these navigate that tools,

discuss all associates, to PMC So financials the associates, XXX forward again, approximately able Rob you a will being to to to sincere to the our discuss after the back to our call turn Arrowhead. thank I guidance Arrowhead you the be over to which, take I'll and another team and our quarter. And Rexnord who look welcome through this later welcome Regal detail more associates now I'll in

morning, everyone. good and Louis, Thanks,

had very just chain heard, executing I'd strong inflation to to global send for well of team you supply like Regal my As and QX, congrats in in severe also and so the our results global disruptions. Rexnord face

let's fourth or the segment. legacy by business our Motion the plus discuss and business this on our PMC clear, close and or To North us X results merger I'll Now year. incorporates close guidance, every PTS by industrial then of through these America our the quarter, PTS Solutions We'll alternative were end be MCS. Organic segment, latest segment third strength PMC start and PTS. the on conveying we'll PTS, for of Transmission business. forms new Rexnord Solutions, general legacy the only year our October broad-based the energy, assumes Arrowhead up the results legacy the Power in which prior Rexnord with with from walk in across owning reflect market in served, particular XX.X% quarter Control Beginning strength sales as

segment PTS line In XXX gains, actions addition, was share were had margin powertrain points in quarter restructuring XX%, and October, volume, new XXX aided for strong the offering. a are Very of were business PTS year. the for points performance in permanent prior daily the industrial quarter. Operating meaningful tailwinds orders approximately both solutions the over to and in up price tracking XX.X%, MCS the basis up headwind top XX% by basis. in our including actions. Orders for compared basis from up Pruning from on quarter the

energy-efficient particular America the factors drivers of business prior mentioned XXX also were in number from in the half in the reductions XX% on performance, first nearly Pruning year. the commercial in period. OEM Asia. is customers, pace XXXX. cost also a adjusted current climate and climate's general quarter. The North to the us the residential verticals. headwind the strength modestly price are margin basis refrigeration XXX Solutions. our market sales more third mostly prior in our I up XX.X%, gains, Turning from strength, the our still of quarter that in to points what quarter. Orders backlog were minute The in markets, in margin in in HVAC we're healthy to contributed daily Europe driven business was occur distribution and XX.X% were continued a motors. share HVAC Organic quarter positive nice including and restock and strength this markets, same of fairly EMEA on speed particularly up Climate benefited top Based tracking in Permanent for to up operating achieving that was with both A America points healthy with in likely with by remains actions in year end-user nearly quarter achieved on cost the The a America demand markets. significant EMEA in versus ago, broad-based assessment line along approximately the HVAC and but in climate North for shift hearing North third the basis is and strong basis activity variable and broad-based the ahead October, momentum industrial and at of all increase

industrial from the in the products, general We're sales XX/XX-related in gains, general Commercial in the industrial margin confident some nice the commercial China. was slightly Commercial market. North large XX.X% point achieving for basis quarter Growth in and in HVAC our a the was year. prior strong America in were quarter third pruning reflects Turning commercial strength North Organic performance quarter. The to XX.X%, up headwind prior Systems. to markets year. down quarter sales compared America especially is business especially the in also the XXX adjusted operating share in Systems

Principal up orders in a daily performance. Orders October in prior were operating teens Keep are points of in segment's mind year rate large for top the basis was in data contributed quarter and was had the on are in approximately in construction data large by dollar daily period America value sales at during highly up prior low X.X%. project for general quarter results. a were and Pruning that quarter margins tracking the shifts the with up margins. Orders industrial the this XX% the up inflation, drivers from in North on impact momentum price the Systems, offset up third headwinds almost versus along slightly X.X% year. quarter favorable end were organic year-over-year on a strength the Continued dilutive in basis improving XX% disruptions, third headwind. The project rates small center in October. In XXX sensitive in Furthermore, are some China industrial commercial this Order industrial quarter prior the the while nonresidential in the markets, for market. in and actions overall lapping market. margin to operating center in line were activity Industrial quarter, included XX% excluding basis. to partially a approximately chain when adjusted cost supply

On couple the financial we highlight review. A your of following notable slide, key some metrics for highlights.

quarter this right the page, delevered of First, and on the X.Xx. the sheet balance ended net debt of with to further adjusted side EBITDA we

impacts we X.Xx as anticipate However, the fourth the Rexnord net exit we after PMC, this is year, along close of our during of affording anticipate -- the Arrowhead today, adjusted factoring lots us expected quarter, closing to merger the with announced EBITDA debt we closing roughly transaction to optionality. with which be

above and cash the our cash of XXX% strong year. income result, conversion expect for million free continue flow or to we is adjusted of Second, $XXX a net XXX%

to pieces possible. the to clarity Lots outlook. attempted much but here, we've of provide Moving as moving as

adjusted of quarter EPS fourth the XXXX and for guidance guidance annual for initial XXXX. providing are We

is depreciation adjusted and Our addition five, investors outlook have beginning our and expense, we XXXX, the expected transaction including PMC consistent historically. We rate; and earnings Rexnord our impacts quarter post-merger incorporates calculated, results merger-related that to EPS. fourth new cash announced going expect consensus earnings our Regal our today; XXXX definition note as forward, value performance we instead adding to beginning define of adjusted to our one, non-GAAP investors include segment is related expense. both Regal the will to tax this impacts, also providing of total for and the would EBITDA what are four, It additional amortization of Rexnord be our of release that by be believe press business expected with of on expectations adding EBITDA quarter To two, legacy and will our compensation quarter; adjustments PMC their using business; and appendix for the in forward, what at update on new the now we EPS, amortization stock-based for fourth discussions and also after-tax operational focus will help deck. to share, of fourth which, with and and basis, adjusted latest Arrowhead interest, three, back historic adjusted beginning the we guidance performance EPS with operating the in amortization income, of quarter for on new we definition commentary shares, our a adjusted new depreciation, definition stock-based factors: refer approach, definition EPS and will sometimes going quarter. Please models compensation back our stock-based the in in compensation made all adjusted an per X providing third details for by slide

outlooks. the turning Now to

quarter expect share prior Regal versus we earnings a year, and of mid-teens rate total to to Rexnord per in For XXXX, to grow we fourth at adjusted the of range deliver $X.XX. expect $X.XX sales a

on tax we a shares, outlook prior to for fourth is providing present for interest, this, PMC legacy PMC we Regal, for the we're provided legacy consistent by and share. updated outlook earnings our modestly outlook layer and depreciation our prior according of the with amortization rate, adjusted outlook per reference, higher Rexnord. For impacts, the and To including merger-related the with now along quarter higher definition

$X.XX For billion, billion $X.X approximately of of approximately XXXX, adjusted of to we and in a adjusted EBITDA now revenue EPS $XX.XX. $X.X expect range

perspective, Our which expectations respectively, approximately the we adjusted our we close Arrowhead. Note what outlook revenue it this fourth not expect consistent until EBITDA, regarding of for said January from do our guidance to that billion, at be $X sometime least we now and P&L is we and year, add impact a to $X Arrowhead the X, XXXX. for of but quarter billion while during expected XXXX adds previously with to

as a be So we our if that, we there impact expect, end upward could to XQ up modest than closing earlier outlook.

our to X.Xx sheet at PMC acquisition after like and balance effect with to the I'd adjusted having giving end a of side EBITDA the XXXX. Shifting for of also right-hand At we XXXX, number key the net guidance debt the provided this a the healthy of on incremental that we you that merger the to related provide table of the Arrowhead, table, to we summary details. approximately impacts of this see anticipate Lastly, Arrowhead. will bottom slide, reiterate very points of and focus for a with including XQ modeling to anticipated

EBITDA, discuss to an align will definition we merger-related adjusted help new income statement over fluctuations that, metric. And EBITDA to under back how to the items Given all below for value that our to EPS now call investors with Louis wanted adjusted Arrowhead. around bridges to I turn the

excited Rob. Thanks, am Systems Arrowhead the I becoming part of Rexnord. very Regal about new

can rate of of between palletizers the XX, a evenly after each few subsystems and remaining about the split on aftermarket XXXX, in growing and which the sales services. XX% about and represent years, believe XX% conveyance depalletizers, roughly and sales high million is generate track we sales total, the parts the to at you on over see Slide $XXX last teens in As business from

suggests, or to products often who a automatically unload less palletizers, products conjunction pallet and in familiar or off or conveyed a be name load For are as with with the onto they from system conveyor those as may them. operate

sales. applications end focused consumer and other beverage been cans, selling beverage with gain nearly have each Arrowhead attractive food, a to more XX% Regarding staples beverage of markets sales, remaining heavy is exposure. roughly XXXX on of These aluminum makers the very where food markets, with XX% looking weighting and end which of producers to represented to we representing are

defining continuing are care plastic exposure to Arrowhead. Within home with variety with expertise sales of and include cans, from recycle which Regal for capabilities and its yields, conveyance a of shift development valued research, reason our increasingly cans top adding well beverage a extremely evident Its deep by shift it and them. food chip product. Other differentiated strong reach environmental away and than single-use easy as very and which in gross about cost range engineering teens. a this Arrowhead's the from personal We to unique is beverage, secular in are many been products rates to food, in blue have to the XX% more such cleaning total recycling and features bottles. domain expect as benefits, which outside we strong highly traction the leading customers, products in and aluminum services is expected beverage from big palletizer Rexnord averaging of that by producers packaging running adjusted drives and plus other in are plastic of and core rise care long-term popularity Arrowhead its recognizable product, highly double-digit lower for its low food producers see aluminum Arrowhead's industries. staples personal and have margins, brands. The consumer margins beverage time add of XX EBITDA For relationships, XX also its X%, the perspective, beverage are particular, formats time. consumers value attractive gaining high been in have percent to some high prefer customer products are in consistently and as Aluminum a for over meaningful XX% and years; and

As has interested some conveyance Rexnord for one you the is many space of Regal time. that know,

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least likely Adding an EPS and cross-marketing be have to We expected not $X sight sooner. to couple an synergies exceeding anticipate years X net in cash and are XX% delivering which further X net out. paying looking does $XX million our We at million by on additional by separate synergies worth value a include that least Arrowhead, present in tax $XXX ROIC to an a of a of in year X, adjusted asset benefit achieve Arrowhead accretive year at million plus and a to of basis. line million for to step-up related is revenue is year cost $X

the highly fragmented. conveying Finally, is industry

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services limited end and the -- While of each ModSort and have product believe are highly in we other overlap, markets. Arrowhead relevant other's markets the

to our conveyor these offerings through and channels. see current Regal through pull We Rexnord also opportunities conveyor-related

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Instructions] [Operator first from comes Baird. Halloran Mike with Our question

all really on these moving here, impressive. Congrats pieces managing through of

Thanks, Mike.

Also positive uptick Obviously, the announcement, here. guys on detail you let's the lot you buyback start Arrowhead on first, side. allocation -- which an of the plan on. spent So great just a capital announced

how aggressive what a clearly look thinking like here? tuck-in the to a what secondarily, then fit are how you of are was question. about kind So funnel does willing plan? nice you twofold And One, beyond be? buyback with the this And

Mike. It's for the Thanks Sure, question. Rob.

we we involved stock So front. a don't to merger while bit to you flexibility that the have plans We could through preannounce on timing. but want know, there, as a you limited this on -- we be the certainly, increased the do purchases, for with buybacks know, were as we

therefore, of bit over last so to on a a bit there put a we're the -- And months. pause X X

our However, in. now going absolutely back of let funnel going be forward, go I'll forward. And we and do Louis a I approach expect chime which the from approach, balanced to more to standpoint part and that expect to then buybacks, standpoint, includes think the M&A

Yes.

me there, Mike. add on Let

continued said to to our disciplined have be in approach. we're very and we say, going As

strong. Our funnels are

to above meet and year at financial to But us need, that but We stronger. they being have metrics are stronger. looking meet our make accretive need X, they a XX% assets year strategic EPS also X, by make us of

position. tell And a are our good in so funnels you, very I'd

right achieving right and very feel, Regal it opportunities our the how and high in on I'm Rexnord The now the Rob was to Arrowhead merger synergies, a course, integration Rob's Of us couldn't we're of and Board creation the the on of confidence and make example I proud to focused that's just teams. with about our buy going value shows asset buyback. have well because increase the emphasize the PMC now be have great comments stronger. And stated is We're and going at back. we bringing to on that our and we more another I path. excited

sheet we're opportunities excited So our we where strength the coming balance are, and balanced, really we'll be the forward. about but of

things of of secondarily, getting But remain here also the demand of thinking move question everything, from logistics, challenges side cadence you serve? of inventory forward an markets what Great through still supply, lot commentary, seems managing constraints, sustainability order ton like are the trends and the have looks and open-ended as getting kind the how the we And the here. So is the cadence then from Obviously, you replenishment answer. of just good door, a about capacity through of a very perspective, industry it you the ahead demand Based you. right? an on out sustainable health like the October.

Yes.

markets, chain. a logistic is with every there, And it's there's what all So There the Regal Demand else Demand of constraints affected of a more But everywhere X we Asia, which is rebounded. the honestly, is on been months. certainly as strong. well. supply last lots quite Rexnord, Australia bit a strong small to and There's Europe part in of bit strong. has constraints over Southeast day. COVID Mike. deal our going has bluntly. certainly and across are by inflation Maybe X is

North markets strong. our of American are All

Now But ability constraints and further HVAC from has bluntly, as getting particular. our contractors installations. to been the restocking inventory for new market restock there's resources, an well. need pool perspective challenging chain supply Pool constraints in are restocking, for the in

constraints. demand, because of in we a but are that, of of fourth actually markets then pool because because not the so And restocking. the And our bit expect slowdown of industrial demand still quarter underlying a little in

us XXXX tells into this tailwind that of a go going all so demand-related. now we're And right strong to with

around couldn't long success constraints. and be one the Every term. supply over can would feeling ensure doing. that discipline more proud we're sites we manage I our But chain issues. room war the pretty as what of And 'XX into it's teams over a bullish the long our has of they're supply management, our effectively going management as chain So

Sachs. Ritchie Joe next from question Goldman comes with Our

Kudos the and on well as another announcing deal. executing transaction

Joe. Thanks

a maybe Louis, to pieces out kind I guide. So lot the there's trying just know moving parse of here. of

guys this billion us my sales imply math You for a seems gave number, $X.X organic if I'm mid-single-digit-type XXXX. doing right. growth, It to

and pricing So color perspective year us component little you're from organic maybe can full about a -- just guide. an embedded you to on what's how bit as the well give more a growth just thinking as

say operating to point we that the Sure. point line our of teams top next business. we are meeting Joe, more at our premature. get clarity. X where summary consistent can just all of over of we'll think be with showing that being weeks, honestly, We're we'll our the and in that communication a with was the starting go plans we little guide The is this

So on perhaps conservative top blunt. line, a the be to little

on XXXX. would $X.X I be don't really of that addition of elaborate to with so roughly to that in Arrowhead, want $X said And takes the to And at revenue then it we got us how billion other than we we saying billion. number

elaborate how envision There more price/cost we leveraging much quarter an our that certainly positive, sufficient you price/cost teams no a our hopefully, And strategically in So the we're let period. quarter, to on not results. But price/cost. impact fourth more give we we and in proud be XX/XX we're inflationary of they're absorbing talk we're XXXX. unprecedented ensure that that price on full we in Again, fourth and We'll continuing about tools but were me ensuring inflation. passing that as managing and are now. third a that's pricing I for quarter on question of answer for second. in couldn't is And

Got rate we hit follow-on, you'll quick that more it. expecting I've run Maybe by still that the deal, super from number synergies the the I $XX of to that make XXXX? helpful. buttoned got just annualized That's like come is to through Or of sure want in end the kind are on year? to million clarify, up. my just an

the run expecting that that, are annualized tell above rate driving the what we our is are at targeting end teams that million is hard. can I but so $XX we're 'XX, you Yes. of

powertrain how with and PTS without can't offering. of going when We identified cross-marketing come into to our about can't have opportunities PMC our industrial I objective our synergies, And again, -- of by around synergies we merger. talk we're lots take synergies. The to then couldn't capabilities. more I channels, in the weeks about the the X excited how is are all leave with to the teams of cross-marketing going saying outgrow XX% legacy And we're as together markets and be cost first X products strengthen legacy opportunities thrilled multiple the -- we're well

come Rexnord. results, I we into couldn't again fourth synergies get quarter So more at as XXXX for but excited that Regal to more around be with

Hammond Jeff from comes with question next Our KeyBanc.

quarter able of So set just level had just up outside last about case? I it chain any pick the one, share. And and didn't worse you still the results. supply industrial, being to impacting really on guess, market pinch then Is talked us or points. that. on that there's like Maybe seem things getting

Yes.

with agree would you. I So

I to time. be of oils phenomenal been that you, doing the burning to and are though, is an tell can the teams chain. that, managing do Our everyone unprecedented midnight supply a able it's job

team So or performance team, the was fourth time -- we third be but my maybe solid. here, and this that wouldn't the without team, my is thanking

for So some we're that acknowledgment. I gaining thanks share. do believe

question, no On well the of And our higher all margins, teams, work and that's gaining some air-handling as business. some our because more distribution move the side speed as hard to some climate but our HVAC climate of efficient, in share and whether European combustion motors business, share. that's of in share technology, the variable gaining our those solutions,

On side, customer meet be a small- the I nice business, capabilities more excited in digital some the at business, a new doing gaining cost differentiated, with lastly, PTS launched better tiger wins MCS team job and their Commercial with performance medium-sized that and anyone around our highly position we than customers pool then and powertrain our that as compact, more now better It's are in market well. the we share. And today, conveying our seeing the and the we product and of to share regulations our about couldn't are the driving XXXX. and Systems fantastic

So team all all, on in all hitting yes, is the cylinders.

we really are. excited where So about

appreciate the on cash early a just business it's and us then of 'XX, can know generation color the And but pro give Great. the free flow one, like? forma looks you what I just Okay. I think early, the sense you of

generation business. the we've We XXX% absolutely with had our conversion Yes. Sure, as believe legacy This be cash that will Jeff. Rob. flow pro forma is

We expect that to continue going forward.

So that's where we are at this point.

restate is announce fourth continue about working us as as to we'll again. through it Of that is we course, this as you annual go again, our through quarter guidance but update days, upon process, still we earnings And time. that at -- early and planning which we're talk we'll get we

Wolfe with Our next Nigel question Research. comes from Coe

You with delayed results. night a had the bit us worried last

stuff, Some companies seems try to probably like hide the would do it reason. but that and the acquisition was

for thanks that. So

just And be start wondering much much wondering color growth the number? with great. you this business CAGR supplying help that 'XX a on [ I X just without to on $X the Just And might this a in years. markets, confidence I'm XX% so seems gives the again, Regal from little too double-digit-type backlog, the conservative. the million in wondering, end legacy So cost on component input The dig is Arrowhead a want is there the like of ] synergy rates Does bit is more. into side, is low confidence next carries part then leaning that's that to it synergy. synergy components if Arrowhead? I'm where --

Yes. Sure.

things, Nigel. of couple a So

this reason out. why the right, the wanted we went is to to to give waited team opportunity announcement until communicated whole morning So absolutely be the the you're before Arrowhead for we

So beyond that. nefarious nothing bluntly

-- no not concerns. So

with And United that business for fact cans, market, cans, trend plastics capacity drive aluminum depalletizers significant from systems. there's demand which States a conveying Second, The the I a growth. seen more to constraint there's business will a And highly in aluminum has would palletizers, away actually, disagree this is that the and slightly. to secular in you today that leans aluminum.

the more our markets be systems will this opportunities products leverage solutions and And friendly and but sell the win-win. And power this we said, to able space in are that Arrowhead's that solution there and into Arrowhead, brings us towards business then to so product leverage portfolio is going exactly also be business that their which sell fact what to you markets forward. improved conversely, be move and ModSort going around knowledge a last segments, going to into customers. win-win to then us their leverage to our the to is transmission that the to then is -- that's benefit environmentally segments for Add and control to for our

of all a this So benefit. is

to the to synergies, to regards drive set objectives how with we and know we like Now that can hard beat. achieve and work. you run to We to and like

feel year X. So and but team got I'll by to the a about little $X we X tell by we've good more the certainly push $XX our there, that million million year

growth I Joe's into with core the it more Great. And then like billion is of price/cost. just digging $X agree math, like sort looks what a mid-single-digit reflects. little bit

into price to guess, the I up wondering if with wondering just where 'XX. that, mechanically I'm just are be much within bring Just climate. wrap we on could we could how us today of NPS as And you speed

Sure, Yes. Nigel.

NPS Let me question with on start with the climate. the last

there's we which -- wrong XXXX. as third we continue move the and exit third be now formulas X- fourth, on So as and seeing expect caught business other direction, as the to the we're always and now the that the and we benefits tailwind of the it's price up well we a inflation segment parts are third in are late up. to should move caught caught that continues a the lag, to early X-month climate quarter up our of through Again, largely second, in but into material quarter, X-way within nice

And so more what reason, for any we're that I on think, for beyond the not of said. specificity to growth price 'XX quite Nigel, we've ready impact give you or

Research. Liptak question next with Our from Walt comes Seaport

Congratulations, guys.

Thanks, Walt.

Just of speaking XX/XX comments It wanted very about a couple -- everybody XX/XX to ask is sounded sounds same the the positive. like languages.

wonder for that other that of bigger lift. does cost savings? or so as the and factories announce savings get mean a knew either there's if of procurement we for what I some the things is that And guess, buckets deal, to but you especially around the or synergies going I XX/XX

with efforts, into this so, synergy all whether XX/XX our a well, the wouldn't tell purchasing clear our and a PMC synergies that understanding I synergies. into say you, mean -- legacy it steering and came the it or it's PTS directs I modeled XX/XX talk Rexnord the group I was very understood Walt, the our We system we wheel. product Yes. we business group new planning. all everything and drives will development, that do. not Rexnord bus And as Regal yet. operational former about is being

way this by really it's point, say year thinking any in million nice about we're the a change for at and $XXX wouldn't buffer upside. So I had X

want may is there selling just business, the are existing where some to of in point a to at And clarification. see you beverage you if And conflict be of which to installers, I can on -- some you Arrowhead selling your customers the a systems food or in and I get conveyors integrators? Are customers? Great. Okay. with the

Yes.

strengthens reality overlap the And are again, provide X why offering more Arrowhead our years and years. So slight customers depalletizers subsystem, there. is it But over the quadrupled customers are that is last provide the to X subsystems, Two to significant overlap and looking revenue ModSort palletizers, in is Arrowhead our year, revenue. for this There's conveying. doubled just the us ago, both. our to seen has our with -- we're Last because growth and there's we're looking us it in to selling -- that.

as with modeled this a We dyssynergy have very concern. that acquisition. don't little we So see

with Christopher Our Oppenheimer. from comes next question Glynn

in Wanted presentation offering. gain you're to around Wondering industrial implementing we powertrain some comments about get the if today. examples of there. terms into of what the changes and specifications, share could Nice go-to-market talk wins maybe

-- I'd we Sure, money out And solution we're we with optimal knew them we've gear claims the talked to were their having able gave about were example some a where very of where in our customer I'd -- the system. We single that specific can those and where the But go a there where We was a of is example, an last X warehouse to the challenges application going behind would is example identify long. validate. save we oversized for downtime the we significantly. solution. went But and has call wins examples. an with historically customer go that because the that around they conveying anywhere gearing back There's gave numbers seeing them to. We every earnings had not one they we reduced will and experience, Chris. that put be happy purposely left failing. encourage their motor Yes. this to to you

solutions, capabilities And of and know in wins. we where had level our that they've we're those so the those a and Bluntly, engineering a customers those seeing best know wins. system, don't and provide we're with put a of with where and industrial some how types that's we expertise gearing the past, examples do seeing it's because have but products we and and to couplings bearings a motor full powertrain,

forward. benefits make we'll emphasize continue to go we we'll those So as sure and

And for rate on a Great. OP positive Okay. then clarification or the actual margin an that Is dollars? price/cost comments.

the That's the we're dilutive I on again, and But it's to you getting that dilutive price dollar us not inflation margin. basis. the leverage to does -- to It's certainly dollars. actually dollars. That's just margins we're said, as a for if cover -- because

price/cost I'll Chris, add Yes. neutral there. and very on been positive. just focused Regal being has on Historically,

focused We are of price/cost because positive that on reason. now

in And so couldn't team third in proud getting of an and quarter. their price/cost be us more I the improved position efforts the

[Operator Instructions] with Capital. comes Chris Dankert Our next question Loop from

guess, critique, I on a very inflation guess of in we about actions how think perspective. I the -- the going areas of very and and do one cost few commercial Obviously, from cost the challenged industrial?

what and X there can you we next give an are on of to the months kind structural the actions here? update kind us on that in expect can Just X some going of of

Yes.

pressures, very of and very we're but getting question sufficient a because some and a I'd and So products solutions out commercial our leveraging let's them they're no doing great team making of take that is price. XX/XX, is say job rationalizing quickly take the well. performing sure that there And

I will question. So no challenge, you see think System. Industrial, of biggest solid is Commercial our it to performance continue out

margin gross Now business. you also know it's our lowest

percentage And a sales so of when you therefore, a higher you and so, means inflation. of have lower a have that impact cost higher gross material as margins,

being when chain launch still And realized long chain performance. that now. that You right new new those supply we tough add manufacturing supply you've in margin time a location in are disruptions a delays a the got Mexico global product at that with fact a has in

this Day, value creation Now it's to We see we a still our but XX% X% see as segment. at we discussed to Investor still delayed. for path certainly

Regal I EBITDA is we but industrial's so to of I one the is And point through of the not quarter, less fourth X% to in our goal business Rexnord. than improve And continue X% again, any business. this grand make get about XXXX. X% to Regal will be would to realize and improvement that last will expect industrial XX%. I'll

a it's strong about small reality but segment, Regal Rexnord. we the a So is the it performance has because on of it impact overall talk

I you up, approach any And guess the update the then pruning I it's mean just to here. cuts guess, a been actions? really have of -- focused follow on taking some to new guys the we for you of at the to continue to taper the start do future? foreseeable expect? current the of Or kind should pruning expect as year, kind they into we would rate I get

-- is the our Yes. No, drive that's I'd tell direction discussions. all you, XX/XX -- of we we

And a into moderate the But so are on pruning bit. continue focused we quad quad the will It will XXXX. analysis. and

quads looked are They once quarter. the so trended. And a are at

A belong They don't we're to grow quad to products, through to going Regal served served. still example, which to those so to customers need and the products, quad, belong. need distribution. on customers customers B be with or them B with is on and they going take They show, fourth need be a don't to can new We and have for action because is still those Rexnord. move to And we they

but to do XX/XX a will Chris, a think pruning and going continue you'll talk it moderate see I lot about bit, So us forward.

the results here, on Congrats the guys. on deals

Chris. much, so Thanks Yes.

Thanks.

back This concludes the Louis over to like Pinkham closing our conference any turn question-and-answer remarks. for to session. would I

today. Thank I investors business, excited of confronting are of a to understanding confident joining in I our pressures real. for you, and Regal despite so analysts about better These hope thanks you our got external and Rexnord. external and why, am future operator, us many pressures the

you our capital them and shareholder think good cash flow battling us merger a programs, execution to we're to as deployment new value. Thank our organic also and today are day. being Have We and we restructuring disciplined about vetting for synergies for PMC daily, again our best your on balance Rexnord. how keep in clean strong growth pursuing enhancing but joining sheet interest leverage opportunities and Regal about

for has now today's concluded. The attending you conference Thank presentation.

You may now disconnect.