Regal Rexnord Corporation (NYSE:RRX) Q1 2023 Earnings Call Transcript

Louis Pinkham: Yeah. So I will hit warehouse first, to your point, it’s about 5% of our sales. We are forecasting it to be down low-teens and so we do feel pressure coming from the warehouse markets in 2023. But what I love about the space is, we have great differentiated product and we are winning against our competitors because of our technology, but from a macro market perspective, we are expecting to be down. For general industrial, I will tell you, you got to again remember that, within that space there’s a lot of different markets and there’s short-, mid- and late-cycle. Now from a distribution standpoint, we don’t expect there’s a lot of destocking left to do here. We definitely think, from that perspective that, the inventory normalization will occur in Q2.

So like I said, our distributors are seeing — still seeing sales growth, so therefore, demand. They are lowering their inventory, but there’s not a big adjustment that’s needed. So — at least for our products. And so we would say if there’s a slight decline, it’s going to be Q2 with recovery going forward.

Julian Mitchell: That’s great. Thank you.

Louis Pinkham: Sure.

Rob Rehard: You bet.

Operator: Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to CEO, Louis Pinkham for any closing remarks.

Louis Pinkham: Thank you, Operator, and thanks to our investors and analysts for joining us today. I hope a key takeaway from today’s presentation is that Regal Rexnord has transformed into an enterprise position to deliver faster growth higher margins and greater cash flow. With Altra, we are clearly on a path to outgrow our markets, raised our gross margins to about 40%, our adjusted EBITDA margins to 25% and generate substantial free cash flow, allowing us to rapidly reduce our net leverage. Thank you again for joining us today and thank you for your interest in Regal Rexnord.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.