RBC Bearings Incorporated (NYSE:RBC) Q1 2024 Earnings Call Transcript

Michael Hartnett: Pete, I never broke it out. I do know that, a lot of our businesses, particularly Dodge, it was very supply chain dependent. And we saw substantial price increases from our supply chain for materials. And I know the pricing that we put through to the marketplace, to the best of our ability was it to at least neutralize what we saw for material increases. So, I mean that is all I have to say on that.

Peter Skibitski: And then just shifting to SG&A, you guys are running kind of 15-ish percentage of sales last year in SG&A and you are at 16.7 here in the first quarter and you are guiding into the 60s in the second. It just seems like something kind of flipped here on SG&A, I don’t know if it is an R&D bump or something, but could you give us some color there on what is been going on and if that is expected to kind of continue through the midterm?

Michael Hartnett: Yes. So, what we are seeing through SG&A is again, just some investment in organic growth throughout the different cost centers. We should see some leverage on that as we enter into the second half of the year. But in terms of what falls down to the operating income EBITDA line, if you look at adjusted EBITDA quarter-over-quarter even versus Q4, you are seeing 40 basis points of increase. So it is not all getting caught up in SG&A, it is flowing down.

Peter Skibitski: I guess last one for me, why did you guys decide for the first time to give full-year revenue guidance? Just I think I know the reason, but I’m just curious as to your thinking there. And I guess we are still expecting, I assume, kind of double-digit growth at A&D netting out and I don’t know, mid-single-digits or so at industrial. Is that kind of the way you are thinking?

Michael Hartnett: Yes, that is the way we are thinking. Every year we get into this situation where we have our second quarter and our third quarter are typically week quarters for us just because of the number of days, the number of vacations, the number of holidays, and so on and so forth. And so we end up explaining that to everybody ad [indiscernible]. And so we thought that it would be better just to say, hey, look at relax, full-year looks healthy. We have got two quarters that are typically weak and we know that, and we are expecting to have a very powerful fourth quarter bringing us to those kinds of numbers. So, we just wanted to sort of take a more offensive position on explaining, how the year’s laid out.

Operator: Our next question comes from the line of Steve Barger with KeyBanc Capital Markets.

Steve Barger: I have a gross margin question too. Mike, for the year, you said low to mid-40% range, which is incredible because that obviously includes 44% or 45 that would be a huge win relative to 43.4 this quarter. So can you talk about what the upper limit is when you say low to mid-40%?

Michael Hartnett: I’m going to let Rob do that, because he is always pulling on my collar.

Robert Sullivan: Look Steve, I mean, if you look even versus where we were at the end of Q4 and now where we are into Q1, I mean, we are seeing some significant step up and in gross margin. We feel 43 is a comfortable spot for us at this point. Obviously you have seen our playbook, we will continue to push the limits where we can. But that is kind of why we are saying low to mid at this point.

Steve Barger: Well, I know segment margins come in the queue, but with a 52% incremental operating margin this quarter, one or both of the segments must have been exceptional. Can you tell us which was the real outlier?