Regal Rexnord Corporation (NYSE: RRX) is a leading global manufacturer of electric motors, electrical motion controls, power generation, automation and power transmission products and components. The company's diverse portfolio of highly engineered solutions power, transmit and control motion across a wide range of industrial, commercial and residential applications.

In the fiscal year 2023, Regal Rexnord reported annual revenue of $6,250.7 million, a net loss of $57.4 million, annual operating cash flow of $664.2 million, and annual free cash flow of $545.1 million. The company's first quarter 2024 results showcase its continued transformation and strong operational execution.

Business Overview

Regal Rexnord operates through four key segments: Industrial Powertrain Solutions (IPS), Power Efficiency Solutions (PES), Automation & Motion Control (AMC), and Industrial Systems. The IPS segment designs, produces and services a broad portfolio of highly-engineered power transmission products, including mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and gear motors, clutches, brakes, and industrial powertrain components and solutions. The PES segment focuses on fractional to 5 horsepower AC and DC motors, electronic variable speed controls, electronic drives, fans and blowers, as well as integrated subsystems. The AMC segment designs, produces and services conveyor products, conveying automation subsystems, aerospace components, precision motion control solutions, high-efficiency miniature servo motors, controls, drives and linear actuators, as well as power management products. The Industrial Systems segment designs and produces integral motors and alternators for industrial applications.

Q1 2024 Performance

Regal Rexnord delivered a strong first quarter 2024 performance, with net sales increasing 26.4% year-over-year to $1,547.7 million. This growth was driven by a 36.1% contribution from acquisitions, partially offset by a 9.6% organic sales decline and 0.1% negative foreign currency impact.

The Industrial Powertrain Solutions (IPS) segment reported a 55.3% increase in net sales, with 58.7% coming from acquisitions and a 3.4% organic decline. Gross profit for IPS increased 49.3%, with margins of 41.2%. The Power Efficiency Solutions (PES) segment saw a 17.9% decline in organic sales, leading to a 15.6% decrease in gross profit and margins of 25.8%. The Automation & Motion Control (AMC) segment reported a 96.9% increase in net sales, with 98.1% from acquisitions and a 1.5% organic decline. Gross profit for AMC increased 112.1%, with margins of 40.0%. The Industrial Systems segment reported a 13.3% organic sales decline, with gross profit increasing 5.4% and margins of 24.5%.

Adjusted EBITDA margin for the quarter was 20.5%, up 100 basis points year-over-year on a pro forma basis, driven by $26 million in synergies. Excluding the Industrial Systems segment, adjusted EBITDA margin was 21.5%, up 80 basis points. The company delivered $64.6 million in adjusted free cash flow in the quarter.

Outlook

For the full year 2024, Regal Rexnord expects adjusted earnings per share in the range of $9.60 to $10.40, with adjusted free cash flow of approximately $700 million. This guidance reflects the divestiture of the Industrial Systems business, as well as updated expectations for the remaining segments.

In the Automation & Motion Control (AMC) segment, the company anticipates full year 2024 sales to be flat compared to pro forma 2023 results, with adjusted EBITDA margins in the range of 24% to 25%. For the Industrial Powertrain Solutions (IPS) segment, Regal Rexnord expects full year 2024 sales to be flat compared to pro forma 2023, with adjusted EBITDA margins between 25.5% and 26.5%. In the Power Efficiency Solutions (PES) segment, the company now expects full year 2024 sales to decline at a mid-single digit rate, with adjusted EBITDA margins between 16% and 18%.

Geographic and Segment Performance

Regal Rexnord's first quarter 2024 net sales were diversified across its geographic regions. North America accounted for 66.3% of total sales, Asia 8.3%, Europe 19.0%, and the Rest of World 6.4%.

By segment, Industrial Powertrain Solutions (IPS) contributed 41.6% of total sales, Power Efficiency Solutions (PES) 24.9%, Automation & Motion Control (AMC) 25.8%, and Industrial Systems 7.7%.

The company's organic sales decline of 9.6% in the first quarter was primarily driven by weakness in the Power Efficiency Solutions (PES) segment, which saw a 17.8% organic decline, as well as a 12.6% organic decline in the Industrial Systems segment. This was partially offset by a 1.0% organic decline in the Industrial Powertrain Solutions (IPS) segment and a 1.5% organic decline in the Automation & Motion Control (AMC) segment.

Liquidity

As of March 31, 2024, Regal Rexnord had total debt of $6.25 billion and net debt of $5.7 billion. The company repaid $135 million of gross debt during the first quarter. Regal Rexnord expects to use the net proceeds of approximately $355 million from the sale of the Industrial Systems business, as well as its $700 million in anticipated 2024 adjusted free cash flow after dividends, to pay down approximately $900 million of debt in 2024.

The company's strong liquidity position and cash flow generation provide flexibility to continue investing in growth initiatives, while also deleveraging the balance sheet. Regal Rexnord remains committed to maintaining a disciplined capital allocation strategy to drive long-term shareholder value.

Conclusion

Regal Rexnord's first quarter 2024 results demonstrate the company's successful transformation into a more durable, higher-margin and cash-generative enterprise. The divestiture of the Industrial Systems business, coupled with the integration of the Altra acquisition, has positioned Regal Rexnord with a portfolio focused on higher-growth, higher-margin automation and power transmission solutions.

Despite near-term headwinds in certain end markets, the company's guidance reflects confidence in its ability to navigate the current environment and capitalize on long-term secular trends. With a path to 40% adjusted gross margins and $1 billion in annual adjusted free cash flow, Regal Rexnord is well-positioned to continue creating value for its shareholders through profitable growth, debt reduction and strategic capital allocation.