Regal Rexnord Corporation · NYSE:RRX
Regal Rexnord — Investor Day (September 2022)
111 slides from Regal Rexnord's investor day presentation, Sep 13, 2022
Slide 1: A Growth Transformation Story
A GROWTH TRANSFORMATION STORY 9.13.2022 1
Slide 2: Agenda
AGENDA TIME TOPIC PRESENTER 8:00 – 8:05 Welcome, Agenda, Safety Message Rob Barry, VP IR 8:05 – 8:40 Strategic Overview Louis Pinkham, CEO 8:40 – 8:50 Human Capital Management Cheryl Lewis, CHRO 8:50 – 9:00 Regal Rexnord Business System Gennaro Colacino, VP RBS 9:00 – 9:45 Motion Control Solutions K
Slide 3: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which reflect Regal Rexnord’s current estimates, expectations and projections about Regal Rexnord’s future results, performance, pro
Slide 4: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We also periodically disclose certain financial measures in our quarterly earnings releases, on investor conference calls, and in investor
Slide 5: Strategic Overview
STRATEGIC OVERVIEW Louis Pinkham, CEO 5
Slide 6: Exceeded 3-Year Targets Set at 2020 Investor Day
EXCEEDED 3-YEAR TARGETS SET AT 2020 INVESTOR DAY Organic Adj. Adj. FCF ROIC Capital Revenue CAGR Operating Margin EPS CAGR Conversion Improvement Deployment Target 2 – 3% 300 bps 8 – 10% >100% 250-300 Leverage bps <2.0x* 192% (’20), Current1 ~5% +450 bps ~22% 110% (’21), ~500 bps 1.5x ~100% (’22) Ou
Slide 7: Transforming Into a Higher-Performing Enterprise
TRANSFORMING INTO A HIGHER-PERFORMING ENTERPRISE Adjusted Gross Margins 1,2 From 3 Segment P&Ls To 18 BUs Decentralized And >60 Plant-Level & Product P&Ls ~33% 30.3% 28.7% Embedded In The Fabric 27.5% 80/20 Of Everything We Do >50% Of RRX’s Business Unit New Leadership Leaders New Since 2019 Detaile
Slide 8: Regal Rexnord Values
REGAL REXNORD VALUES • Integrity • Innovation With Purpose • Responsibility • Continuous Improvement • Diversity, Engagement & Inclusion • Performance • Customer Success • Passion To Win …All With A Sense Of Urgency Our Values Provide Consistent Guideposts For How We Run Regal Rexnord 8
Slide 9: A Balanced Portfolio
A BALANCED PORTFOLIO 1 General Industrial 12 12 Consumer 20 2 Non-Residential New Construction 2 Food & Beverage MCS 3 3 Commercial 21 % Sales By 46 Climate % Sales By Metals/Mining Commercial 4 Aerospace Segment 4 Market 16 Residential New Construction Industrial 5 Hospitality Warehouse 8 Alternati
Slide 10: Global Manufacturing Presence
GLOBAL MANUFACTURING PRESENCE 1 Mexico ~13,000 133 50% North America Total Associates U.S. ~6,000 Global Sites 21% Asia ~29,000 China ~3,000 24 17% Europe India ~3,000 Oceania, South America, Rest Of World ~4,000 Countries 12% Africa 1September 2022 Data 10
Slide 11: Segment Snapshots
SEGMENT SNAPSHOTS SEGMENT % OF SALES 1 BRANDS Motion Control Solutions 46% Climate Solutions 21% Commercial Systems 21% Industrial Systems 12% 12021 Data, Pro Forma For Rexnord PMC & Arrowhead Transactions 11 11
Slide 12: Industry Trends Driving Growth
INDUSTRY TRENDS DRIVING GROWTH ENERGY EFFICIENCY REGULATION ELECTRIFICATION DIGITAL ESG Focus By All Global Defense Production Act Emissions Reductions Digital Adoption Industrial Companies (DPA) Driving Clean In Response To Climate Increasing In Industrial Energy Standards Change Applications Most
Slide 13: We Create a Better Tomorrow
BUSINESS PURPOSE WE CREATE A BETTER TOMORROW By Energy-Efficiently Converting Power Into Motion™ Our Purpose Underpins All New Product Development 13
Slide 14: Environmental Social Governance Strategy
ENVIRONMENTAL SOCIAL GOVERNANCE STRATEGY Growth Addressing Rising Demand For More Energy Efficient Sub-Systems E Impact Committing To Achieve Net Zero (Scopes 1 & 2) By 2032 Growth Building Diverse, Engaged & Inclusive Teams To Drive Innovation S Impact Decentralized Charitable Giving & Planned Comp
Slide 15: Net Zero Goals
NET ZERO GOALS We Target Carbon Emission Neutrality We Target Net Zero Across On Scopes 1 And 2 By 2032 Scopes 1, 2, And 3 By 2050 Significant Investments To Aligned With Science Improve Operational Efficiency Based Targets Talent Development Focused On Talent Development In Waste Carbon Reduction A
Slide 16: Mission
MISSION TO BE THE MOST COMPELLING CHOICE FOR OUR KEY STAKEHOLDERS… We Will Measure Progress Towards Our Mission On Clear, Quantifiable Metrics – With Customers, Based On Market Share And Gross Margin, With Associates, On Retention, Engagement, And Performance, And With Our Shareholders, On Achieving
Slide 17: Shifting to Growth
SHIFTING TO GROWTH Talent + RBS 80/20 + Digital Customer Intimacy Secular Market Market Continuous FCF Generation & Exposure Outgrowth Improvement Capital Deployment Growing Position In Differentiated Solutions, Regal Rexnord Strong FCF And Prioritized Secular NPD, Sub-System Focus, Business System,
Slide 18: Experienced Global Leadership Team Driving Strong Performance
EXPERIENCED GLOBAL LEADERSHIP TEAM DRIVING STRONG PERFORMANCE1 KEVIN ZABA ROB REHARD Segment President VP & CFO Motion Control Solutions 7.5 Years 8 Years JERRY MORTON TOM VALENTYN President, Integration VP General Counsel & Secretary Motion Control Solutions 8.5 Years 30 Years AUDEY CASH CHERYL LEW
Slide 19: 80/20: Pursuing Our Best Growth Opportunities
80/20: PURSUING OUR BEST GROWTH OPPORTUNITIES Focus Resources Where There Is Strong Alignment Between RRX Offering And What A PRODUCTS B PRODUCTS Customers Value – Quad I HIGHLY VALUED CUSTOMERS (A) • Align Operations To Over-Serve Quad I Quad I Quad II The Focus Of Migrate To Everything “A” Product
Slide 20: Digital Customer Intimacy
DIGITAL CUSTOMER INTIMACY Enhancing eCommerce Capabilities On RegalRexnord.com • End-to-End Customer Lifecycle Omni-Channel Enablement • Lowers Cost To Serve Quad 3, Expanding Addressable Market • High-ROI Digital Marketing • Expands Geographic Reach Digital Investments Are Making It Easier For Cust
Slide 21: Shifting Growth to More Secular Markets
SHIFTING GROWTH TO MORE SECULAR MARKETS FOOD & BEVERAGE WATER ~11%* MSD** ~4%* MSD** ALTERNATIVE ENERGY WAREHOUSE, eCOMMERCE ~4%* HSD** ~3%* MSD** AEROSPACE OTHER SECULAR (Pharma, Data Center) ~4%* MSD** ~5%* HSD** * % Of RRX Sales. ** End Market Growth CAGR. 21 21
Slide 22: Differentiated Motors
DIFFERENTIATED MOTORS Our Motors Portfolio Has Evolved, With A Focus On Energy Efficiency, Durability, Sub-System Solutions, And Differentiated Service Levels 33 • Industrial Powertrain Is A Tremendous Opportunity That Leverages Our Motors And Power Transmission Portfolios % Of • Special Purpose Mot
Slide 23: Robust New Product Development, Informed by VOC
ROBUST NEW PRODUCT DEVELOPMENT, INFORMED BY VOC, FOCUSED ON ENERGY EFFICIENCY Global Motorized Variable Speed SyMAX-I Pro High-Speed Complete Impeller Pool Pump Motor Hybrid Compressor Global Premix Blower Fragmented Seals Intelligent Gearbox Drive Breather Sub-System Development Increasing Vitality
Slide 24: Industrial Powertrain and Perceptiv
INDUSTRIAL POWERTRAIN AND PERCEPTIV® Intelligent Powertrain Motor And Components That Connect To The Work Being Done – Plus IoT Functionality • Provider Of Complete Industrial Powertrain Solutions • Components Engineered To Optimize System Performance • Perceptiv Technologies Providing Intelligent S
Slide 25: Regal Rexnord Business System (RBS)
REGAL REXNORD BUSINESS SYSTEM (RBS) Anchored By Our Values, The Regal Rexnord Business System (RBS) Is Our Framework For Continuous Improvement • 80/20 Directs Us To Our Most Valuable Opportunities • 100+ Lean Tools Help Us Consistently Remove Waste, Variation And Overburden • 80/20 & Lean Tools Lev
Slide 26: Margin Drivers
MARGIN DRIVERS Merger Synergies Accretive 80/20 NPD Price/Cost Volume Discipline Productivity RBS Lean Many Levers To Drive Further Margin Gains 26
Slide 27: We Manage by Gross Margin
WE MANAGE BY GROSS MARGIN We Measure Our Differentiated Value-Add Using Gross Margin Adjusted Gross Margin1,2 ~37.0% • Reflects Our Scale And Best-Cost Position 28.7% ~33% • We Deliver Unmatched Value To Our Customers 30.3% 28.7% 27.5% • We Will Build Our Competitive Advantage Through VOC-Driven NPD
Slide 28: Incremental Earnings Potential from M&A
INCREMENTAL EARNINGS POTENTIAL 2025E EPS FROM M&A 3.5x Leverage 2.5x Leverage 50% Of Free Cash Flow For M&A 2022E ~$15 Adj. Adj. EPS 1 $10.20 Organic - $10.80 EPS $7.01 to $7.61 GAAP EPS Strong Free Cash Flow, Ample Balance Sheet Capacity, And Proven Integration Capabilities Enable Significant EPS U
Slide 29: Expected Regal Rexnord in 2025
EXPECTED REGAL REXNORD IN 2025 Capex <2% ~$1B Of Sales Annual FCF Revenue Adj. Gross Margin Adj. EPS >$6B, ~37% ~$15 Secular End Market Exposure GDP+ Growth (Low DD CAGR) Adj. EBITDA >35% (4 – 6% Organic) Margin ~25% Of Net Sales Vitality Another ~28% A Compelling Investment Thesis For All Of Our St
Slide 30: Human Capital Management
HUMAN CAPITAL MANAGEMENT Cheryl Lewis Chief Human Resources Officer 30
Slide 31: Focused on Talent to Drive Best-in-Class Results
HOW WE THINK ABOUT TALENT We Define GREAT Through FOCUSED ON The Lens Of Our Values. RRX Associates: TALENT TO DRIVE • Put Safety First BEST-IN-CLASS • Act With Integrity…Always RESULTS • Have, Seek, And Leverage Diverse Perspectives • Embrace An 80/20 Mindset • Have A Continuous Improvement Mindset
Slide 32: Talent as a Strategic Growth Enabler
TALENT AS A STRATEGIC GROWTH ENABLER Stretch Assignments; Mentorship; Talent Talent Driven To Strategy: “Fail Fast” Culture Development Planning Resourcing To Ensure Strategic Success Disciplined Talent Management Succession Talent Individual Associate Road Maps Planning Approach Acquisition Critica
Slide 33: New Talent for a New Regal Rexnord
NEW TALENT FOR A NEW REGAL REXNORD * Executive Leadership Team – 47% New P&L Leaders (VP/GM) – 56% New Vice Presidents – 43% New = New To RRX New Perspectives Are Accelerating Our Business Transformation * New Since January 2019 33 33
Slide 34: Elevating Human Resources
ELEVATING HUMAN RESOURCES HR Leaders Technology Are Business Investments 100% Partners, Have Intentional Focus To Make Talent Of The Senior HR Culture Of On Developing A P&L Mindset, And Performance Leadership Team Inclusion Leadership And Align Talent Management Are New Capabilities With Business P
Slide 35: Building More Diverse, Engaged and Inclusive Teams
A CULTURE OF INCLUSION BUILDING MORE Driving Innovation, Performance, And Employee Satisfaction DIVERSE, ENGAGED AND • Building Pipeline Of High-Quality Diverse Talent INCLUSIVE TEAMS • Employee Resource Group (ERG) Expansion & Cultivation • Invest In Communities Where We Live And Work • Raise Aware
Slide 36: Regal Rexnord Business System
REGAL REXNORD BUSINESS SYSTEM Gennaro Colacino VP Regal Rexnord Business System 36
Slide 37: The Regal Rexnord Business System
THE REGAL REXNORD BUSINESS SYSTEM Stakeholder Success: • Associate Engagement • Customer Focus • Maximize Shareholder Value RBS Team, Tools And Processes Drive Efficiencies And Accelerate Growth 37
Slide 38: 80/20 Growth Framework
80/20 GROWTH FRAMEWORK STRATEGIC INTENT SIMPLIFICATION CYCLE INVEST TO GROW Voice Of The Product Customer Excellence New Product Development Organic 80/20 Data Growth Analytics Operational Excellence Effective Product Annual Segmentation Margin Strategic Plan Expansion M&A Strategic Commercial Visio
Slide 39: Policy Deployment (PD)
POLICY DEPLOYMENT (PD) X-Matrix Tool For Managing PD Performance Business Level Improvement Priorities Executive Planning Process • Strategic Plan Annual Targets To • Talent Management Breakthrough Improve Objectives • Policy Deployment • Annual Operating Plan 3 Year Strategic Objectives Enterprise-
Slide 40: Motion Control Solutions
MOTION CONTROL SOLUTIONS Kevin Zaba President MCS 40
Slide 41: MCS Segment Overview
MCS SEGMENT OVERVIEW Components – 85% Leading Product Positions • Broad Portfolio Of Leading Brands Associated With Quality & Reliability Drive First-Fit Specification Aero Seals / Bearings Gearboxes Industrial Chain Intelligent Products • Leading Channel Positions Enable Consistent High Margin Afte
Slide 42: MCS Sales Segmentation Detail
MCS SALES SEGMENTATION DETAIL * 27 66 51 7 4 19 % Sales By % Sales % Sales 4 End Market By Region By Channel 7 9 14 9 9 16 9 49 General Industrial Food & Beverage NA OEM/Direct Metals & Mining Marine & Power Gen EMEA Distribution Aerospace Warehousing/Logistics APAC Forest & Wood Products Renewables
Slide 43: Record Historical Performance
RECORD HISTORICAL PERFORMANCE Strong Financial Performance, With Record Adjusted Net Sales ($M) 1,2 Sales & Adjusted EBITDA Margins In 2021 $2,242 +HSD% • 80/20 Differentiated Service Model With Highly Valued $2,216 $2,019 Customers Driving Wallet Share Gains • Powertrain Wins And Merger-Related Cro
Slide 44: Fragmented Markets Leave Room to Grow
FRAGMENTED MARKETS LEAVE ROOM TO GROW Highly Fragmented Market Creates Room For Additional Core Growth End Market 2022 - 2025 Growth General Industrial LSD-MSD % Available Market Segmentation Food & Beverage MSD % Highly-Fragmented Space ~$30B Major Industrial Metals & Mining MSD % Suppliers (incl.
Slide 45: MCS Market Outgrowth Playbook
MCS MARKET OUTGROWTH PLAYBOOK 80/20 Differentiated Service Model Increase Secular Double New Product Expand Digital Differentiate With Market Exposure Vitality Experience & Solutions Industrial Powertrain Expand Component & Launch Our Strong Establish A Continuous Leveraging Strong Sub-System Offeri
Slide 46: Increasing Secular Market Exposure
INCREASING SECULAR MARKET EXPOSURE MCS Mix % Over Time Shift Drivers Conveyance • Fueled By eCommerce, Packaging Trends, ESG • NPD Focused On Components, Powertrain, And 39 48 Sub-Systems 55 M-HSD • Cross-Marketing Initiatives Aerospace • Lifted By Steady Travel Recovery, ESG • NPD Vitality 2X Histo
Slide 47: Doubling New Product Vitality
DOUBLING NEW PRODUCT VITALITY 1 2 New Customers Or Markets 70% Of Investment In Strategic Or Breakthrough Innovations 5 1 Breakthrough McGill/Rexlon Cam Follower ModSort Triple Divert Customer Excellence Grease-Free. Synergy Development High-Speed Parcel Sorting 2 6 Strategic 3 4 Strong 3 Pipeline G
Slide 48: Accelerating Digital Experience
ACCELERATING DIGITAL EXPERIENCE Customer Digital Twin Enhancing The End-To-End Customer Value Chain with Our Expanding Digital Capabilities Personalized Experience For Multiple Customer Personas Omni-Channel Enablement Expanded Tool Set for Each Step Of Value-Chain Seamless Integration Across RRX Sy
Slide 49: Accelerating Digital Solutions
ACCELERATING DIGITAL SOLUTIONS Connected Ecosystem Addressing Motor Coupling Gearbox Bearing Status Status Status Status Most Common Failure Modes…. • Lubrication • Lubrication • Lubrication • Lubrication • Alignment • Alignment • Alignment • Alignment • Overload • Overload • Overload • Cyclical Loa
Slide 50: Untapped Industrial Powertrain Opportunity
UNTAPPED INDUSTRIAL POWERTRAIN OPPORTUNITY With Powertrain, We Have The Opportunity To Change The Landscape • Powertrain = Electric Motor + Engineered Components Powering An Application • 60% Of The Regal Rexnord Portfolio Addresses Powertrain, A ~$15-20B Opportunity • The Evolving Needs Of Our Cust
Slide 51: Differentiating with Industrial Powertrain
DIFFERENTIATING WITH INDUSTRIAL POWERTRAIN RRX Has Unmatched Capabilities Across The Industrial Powertrain = RRX Offering = Competitor Offering - No offering • Merger Increased Scale And Product Breadth, Enabling More Complete Solutions • Flexible Tiered Approach • Bundled • Optimized • Intelligent
Slide 52: Early Powertrain Wins
EARLY POWERTRAIN WINS COOLING RESOURCE WASTEWATER BULK MATERIAL FOOD PRODUCTS ROLLING TOWERS RECOVERY TREATMENT CONVEYORS EXTRUDER MILLS TIER EMPHASIS Optimized Intelligent Bundled Bundled Intelligent Optimized POWERTRAIN CONTENT ADDITIONAL SERVICES Legend Motor Spindle/Coupling Gearbox Bearing Inst
Slide 53: M&A Integration
M&A INTEGRATION Jerry Morton President Integration 53
Slide 54: Raising Merger Synergy Targets
RAISING MERGER SYNERGY TARGETS Year 3 PMC Run Rate Cost Synergies (2024, $M) $140 - $160 Integration $45 $120 Outperforming $40 $50 …In A Tough $40 SG&A Macro Environment $40 $55 Footprint Procurement Original Revised Hitting 3rd Year Run Rate In Year 2, Proving Strong Merger Integration Capabilitie
Slide 55: Introducing Robust Revenue Synergies
INTRODUCING ROBUST REVENUE SYNERGIES Enabled By: Sales Synergies ($M) • Minimal OEM Overlap ~$125 • Conveyance Sub-System Capabilities • Industrial Powertrain Solutions • Combined Manufacturing Capabilities ~$30 ~$10 Original Revised Target 2022 2022 2025 Cross-Sell All All Only Commercial Commercia
Slide 56: Growth-Focused Acquisition Serving Secular Markets
GROWTH-FOCUSED ACQUISITION SERVING SECULAR MARKETS Robust NPD Pipeline Transfer & Diverter Legacy Arrowhead Automation Station Offering Solutions Business Unit (ASBU) NPD MCS MCS Conveying - Now MCS Conveying – 2025E Expected To Drive 2X % Sales 25% % Sales 25% Growth Over The Next 35% % Sales 3 Yea
Slide 57: Investment Thesis
INVESTMENT THESIS • Positioned To Amplify Secular Growth Tailwinds In Aerospace, Food & Beverage, Intralogistics & Renewable Energy • Opportunities For Market Outgrowth Tied To Doubling Product Vitality, Perceptiv Digital Platform, And Expanding Served Markets • Differentiated Industrial Powertrain
Slide 58: Climate Solutions
CLIMATE SOLUTIONS Audey Cash Interim President
Slide 59: Climate Solutions Segment Overview
CLIMATE SOLUTIONS SEGMENT OVERVIEW Components – 75% • Technology Leadership In Energy Efficiency And Emissions Reduction • Superior Aftermarket Channel Positions A/C & Heat Outdoor ECM Commercial Retrofit • Leading Service Levels Pump Fan Refrigeration Replacement ECM Motors Motors ECM Motors ECM Mo
Slide 60: Climate Solutions Sales Segmentation Detail
CLIMATE SOLUTIONS SALES SEGMENTATION DETAIL * 14 11 9 87 % Sales By % Sales 75 % Sales End Market 7 By Region By Channel 25 8 7 50 2 5 Consumer Resi New Construction NA OEM Commercial Non-Residential EMEA Distribution Food & Beverage Hospitality APAC Other Aggressively Broadening Our Customer And Ge
Slide 61: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE Net Sales ($M) 1,2 Record Sales & Adjusted EBITDA Margins In 2021 $1,031 +HSD% $946 • Technology Leadership And Superior Service $847 Levels Driving Share Gains • Winning In Higher-Value Electronic Motors And Sub-Systems 2019 2020 2021 2022E • Inflation, Over-Serving Key
Slide 62: Attractive End Market Growth Outlook
ATTRACTIVE END MARKET GROWTH OUTLOOK Reliable Long-Term Growth Characteristics In U.S. Resi HVAC Replacement (Consumer) Tied To Demographics And Rising Energy Efficiency Levels • Improving Position In Non-U.S. Markets And Adjacent End Market 2022 - 2025 Growth Product Categories, Including Water Hea
Slide 63: Many Growth and Outgrowth Drivers
MANY GROWTH AND OUTGROWTH DRIVERS Secular Mix Shift Sub-System Decarbonization Across Installed Base Opportunities To Energy Efficient Technology Leadership Driving Significant Electronic Motors, To Pursue Attractive New Market Where We Lead Opportunities Globally Opportunities Heat Pump Technology
Slide 64: Sizable U.S. Resi HVAC Installed Base Shifting to Electronic Motors
SIZABLE U.S. RESI HVAC INSTALLED BASE SHIFTING TO ELECTRONIC MOTORS ECM Less Than 30% Penetrated Today • Proprietary Programmable Motor Technology Driving Contractor Aftermarket Share Gains RRX ECM Growth Outpacing Industry* • ECM Made Easy • Outgrowing The Market In ECM, Driven By Leading Unit Incr
Slide 65: Globalizing Sub-System Offering
GLOBALIZING SUB-SYSTEM OFFERING Advanced Blower Sub-System Supports Global Migration To Efficient Water Heating + • Precisely Optimizes Flow Of Air And Gas Into Combustion Chamber Intelligent Gas Premix Sub-System • Reduced Emissions • Leading Share In N.A. & Rapid Expansion Into Europe Leveraging P
Slide 66: Regulatory Changes Expected to Accelerate ECM Motor Adoption
REGULATORY CHANGES EXPECTED TO ACCELERATE ECM MOTOR ADOPTION • SEER 2023 Minimum Efficiency Standards Should Accelerate ECM Motor Adoption, Particularly In Air Handlers North Region (SEER 14 To 15) South Region (SEER 15 To 16) Technology Leadership And Global Scale Position Us Well 66
Slide 67: Expanding Beyond Motors to Controls
EXPANDING BEYOND MOTORS TO CONTROLS, LEVERAGING PROPRIETARY TECHNOLOGY Proprietary Solution To Help OEMs More Cost- Effectively Meet Higher Energy Efficiency Standards • Patented Compressor Drive And Fan Motor Fan Motor Controller • Proprietary Compressor Drive Algorithm • Enables Most Efficient Var
Slide 68: Capitalizing on Shift to Heat Pump Water Heating
CAPITALIZING ON SHIFT TO HEAT PUMP WATER HEATING Residential Water Heaters Expected To Migrate Towards 100% Heat Pumps (HP) RRX Servable RRX Servable ~9M Units ~5M ~5M Migration To Units Units Heat Pumps ~1M Units Electric Gas Electric w/HP Gas Today Future Heat Pump Water Heater Servable Market Exp
Slide 69: Emerging European Residential Heat Pump Market
EMERGING EUROPEAN RESIDENTIAL HEAT PUMP MARKET Incentives, Regulation, And Energy Security Concerns Accelerating Heat Pump Adoption Whole Home Solutions • Addressing This New, Adjacent Market From To Gas Boiler Heating System Heat Pump Heating/Cooling System With ECM Motor, Air Moving & Intelligent
Slide 70: Investment Thesis
INVESTMENT THESIS • Premier Business With Differentiated Technology, Deep Application Expertise & Leading Market Positions • Global Regulatory Growth Drivers • Many Opportunities For Above-Market Growth, Tied To Decarbonization & Energy Efficiency Improvements • Sub-System Strategy Is Driving Robust
Slide 71: Commercial Systems
COMMERCIAL SYSTEMS Scott Brown President 71
Slide 72: Commercial Systems Segment Overview
COMMERCIAL SYSTEMS SEGMENT OVERVIEW Components – 88% Leading Global Provider Of Special Purpose Motors And Air Moving Sub-Systems Super Premium Pool Motors Water System Motors Efficiency General & Premium General & Premium • Technology Leadership, Deep Domain Variable Speed Motors Efficiency Efficie
Slide 73: Commercial Systems Sales Segmentation Detail
COMMERCIAL SYSTEMS SALES SEGMENTATION DETAIL * 40 18 % Sales By % Sales 75 % Sales End Market 70 By Region By Channel 25 50 10 12 Commercial NA OEM Non-Residential Construction APAC Distribution Consumer EMEA Growing In Core And New Markets With Innovative Sub-System Designs And Improved Go-To-Marke
Slide 74: Financial Performance Highlights Transformation
FINANCIAL PERFORMANCE HIGHLIGHTS TRANSFORMATION Net Sales ($M) 1,2 Dramatic Improvement To Growth $1,032 +HSD% & Margin Performance $880 $820 • Solid Margin Expansion Driven by 80/20, RBS, And Mix-Positive New Products • Share Gains From Service Levels, Product Management Investments, 2019 2020 2021
Slide 75: Attractive End Markets with Good Secular Mix
ATTRACTIVE END MARKETS WITH GOOD SECULAR MIX Balanced Set Of Early/Mid/Late Cycle End Markets • Healthy Secular Exposure, Tied To Rising Energy Efficiency Requirements In Our Core Pool And Commercial Building Markets End Market 2022 - 2025 Growth • Investments Focused On Higher-Growth Data Center, C
Slide 76: Accelerating Mix-Positive Growth
ACCELERATING MIX-POSITIVE GROWTH Digital Robust Energy Efficiency Proprietary Accelerating Growth New Product Engine Leadership Sub-Systems Focused On VOC-Driven Broadest, Most Optimizing Under-Served, Reliable Offering Sub-Systems With High-Margin Vitality Doubling In The Market Leading Component C
Slide 77: Digital Accelerating Growth
DIGITAL ACCELERATING GROWTH “Perfect Prospect” Used 80/20 To ID Targets And Align Share Gains ($M) Differentiated Offering To Customer ~$150 Setting The Needs – “Perfect Prospects” Strategy Focus On Small/Medium Customers (<$1M) In GDP+ Growth Markets Digital, eCommerce & Customer Lead-To-Cash ~$80
Slide 78: Robust New Product Development Engine
ROBUST NEW PRODUCT DEVELOPMENT ENGINE Investing Heavily In Proprietary Technologies To Create Global Platforms And Optimized Sub-Systems OEM Vitality • Global Platforms Of Scale With Clear Product Road Maps >25% • Using 80/20 To Increase Focus On Secular End Markets • Solution Teams Focused On Sub-S
Slide 79: Broadest Range in Super Premium Efficiency
BROADEST RANGE IN SUPER PREMIUM EFFICIENCY Commercial Motor Efficiency Grades International Electromechanical Commission Standard • Broadest Range Of IE4+ Commercial Motors IE5 Ultra Premium (Proposed) IE4 Super Premium Applications Leveraging RRX Domain Expertise IE3 Premium In Key Markets IE2 High
Slide 80: The Power of Our Technological Breadth
THE POWER OF OUR TECHNOLOGICAL BREADTH Leveraging Our Unique Technology Leadership Disruption In Air Moving Sub-Systems In Air Moving Sub-Systems • 10% Less Blowers Needed To Meet Flow Requirements Compared To Competition • 10% Less Energy Consumption • Less Peripheral Material Needed High Efficienc
Slide 81: Bringing Our Leading High-Speed Technology to New Secular Markets
BRINGING OUR LEADING HIGH-SPEED TECHNOLOGY TO NEW SECULAR MARKETS A New, High-Efficiency Technology With High-Speed Motorized Vacuum Applicability In Many Adjacent Markets Pump Sub-Systems Competitor Offering • Example Of 80/20 Mindset & Global Platform Approach • 35% More Energy Efficient Than Curr
Slide 82: Investment Thesis
INVESTMENT THESIS • Transformation Accelerating – Our 80/20 RBS And Growth Initiatives Are Working…. Flywheel Momentum Building • Accelerating Investments In Digital To Take Our Rightful Share With Underserved, High Margin Small/Medium Customers • New Product Engine Powering Up…Vitality Doubling Ove
Slide 83: M&A Strategy
M&A STRATEGY Justin Baier VP Strategy & Business Development 83
Slide 84: Overhauled M&A Process and Tools
OVERHAULED M&A PROCESS AND TOOLS M&A Market & Target Funnel Valuation & Deal Integration Strategy Assessment Management Assessment Strategy • Long-Term Vision • Templates Defining • Segment And Corporate • ROIC Model As • Integration Standard Work Funnel Tools Key Tool Management Office • Measurable
Slide 85: M&A Focus Areas
M&A FOCUS AREAS Bolt-Ons Adjacent Moves Transformative To Strengthen To Add Growth Moves To Reshape The Core And Margin Portfolio Recent Transactions Close Gaps In Portfolio; Secular Growth Exposure And Strengthen Core Or Product, Geography, End-Market Clear Differentiation Create New Segment Deal R
Slide 86: Deal Screening Criteria
DEAL SCREENING CRITERIA M&A Targets Pre-Screen Vision State ‒ Must Clear Specific Margin & Growth Hurdles ‒ Secular/GDP+ Growth ‒ Limited Tech Disruption Market ‒ Deal Runway ‒ Path To Gross Margins >35% ‒ Leading Position/Brand ‒ Differentiated Product Target ‒ Fit With RRX Culture Fit ‒ Leverages
Slide 87: Incremental Earnings Potential from M&A
INCREMENTAL EARNINGS POTENTIAL 2025E EPS FROM M&A 3.5x Leverage 2.5x Leverage 50% Of Free Cash Flow For M&A 2022E ~$15 Adj. Adj. EPS1 $10.20 Organic EPS - $10.80 $7.01 to $7.61 GAAP EPS Strong Free Cash Flow, Ample Balance Sheet Capacity, And Proven Integration Capabilities Enable Significant EPS Up
Slide 88: Financial Discussion
FINANCIAL DISCUSSION Rob Rehard CFO
Slide 89: Finance Key Messages
FINANCE KEY MESSAGES Expect Strategic Significant $1 Billion Accelerating Exceptional Capital Gross Margin Annual Free Growth Across Balance Sheet Deployment Expansion Cash Flow The Portfolio Flexibility As A Catalyst Opportunity By 2025 For Growth 89
Slide 90: PMC Merger Scorecard – Broadly Outperforming
PMC MERGER SCORECARD – BROADLY OUTPERFORMING EXPECTATION AT EXPECTATION CURRENT ANNOUNCEMENT (2/2021) AT CLOSE (10/2021) EXPECTATION TRACKING Net Sales (2022) ~$4.5B $5.0B $5.2B Adj. Gross Margin ~33% Unchanged ~33% Adj. EBITDA (2022) ~$0.94B >$1.0B >$1.1B Adj. EBITDA Margin (2022) ~21% Unchanged >2
Slide 91: Recent Financial Performance
RECENT FINANCIAL PERFORMANCE Adj. Net Sales 1 Adj. Gross Margin 1,2 Adj. EBITDA Margin 1,2 ~$5.2 ~21% ~33% 30.3% $3.8 28.7% 19.0% 27.5% 16.5% $3.2 15.3% $2.9 2019 2020 2021 2022E 2019 2020 2021 2022E 2019 2020 2021 2022E Organic Growth 1 (6%) (8%) 17% +HSD% Transformation Evident In Our Financial Pe
Slide 92: Free Cash Flow and Debt
FREE CASH FLOW AND DEBT Consistent Track Record Of Strong FCF Generation Net Debt1/Adjusted Bank EBITDA 1,2 1.7x Free Cash Flow ($M) 1 1.4x* Free Cash Flow Conversion (%) **,1,2 1.3x* $600 200% 1.0x 192% $500 153% $400 $388 110% 2019 2020 2021 2Q22 $316 $303 ~100% 100% $1,600 Maturity Schedule $1,47
Slide 93: 2022 Financial Outlook
2022 FINANCIAL OUTLOOK Guidance As Of 2Q Earnings Current Update ~$5.2B ~21% • Reaffirming 2022 Guidance Revenue Adj. EBITDA HSD Organic Margin • Book-To-Bill At ~1.0x Growth • Supply Chain Challenges Continue As Expected • Backlog Remains At Elevated Levels As Expected $10.20 - • Synergies On Track
Slide 94: Three Year Sales Outlook
THREE YEAR SALES OUTLOOK Expect To Outgrow End Markets By ~50% Sales Bridge • Forecast Assumes ~3-4% Organic Growth In ~2% ~$6B 2023, ~5-6% Thereafter ~3% • Assume ~Flat Price (Modest Givebacks On $5.2B Material Price Formulas Mostly Offset By Pricing Management On Non-Contracted) • Forecast Assumes
Slide 95: Three-Year Adjusted EBITDA Margin Outlook
THREE-YEAR ADJUSTED EBITDA MARGIN OUTLOOK • Mix Expected To Be A Key Driver Of Further Adj. EBITDA Margin Bridge Margin Gains ~25% • Merger Synergies And Ongoing Restructuring Are Meaningful Tailwinds • Investments Focused On High-ROIC Growth ~21% Opportunities Segment Adj. EBITDA Margin Targets Seg
Slide 96: Free Cash Flow
FREE CASH FLOW Free Cash Flow ($M) 1 Free Cash Flow Conversion (%) *,1,2 200% $1,000 192% $800 153% 2025E Free $600 Cash Flow $400 $316 $388 110% $303 ~100% >100% 100% ~$1 Billion $200 $0 2019 2020 2021 2022E 2025E We See A Path To ~$1 Billion Annual FCF By 2025 1Non-GAAP Financial Measurement, See
Slide 97: Capital Deployment Strategy
CAPITAL DEPLOYMENT STRATEGY Organic Growth Inorganic Growth Return Capital Total Deployed* • 80/20: Prioritize High- • Bolt-On Acquisitions • Dividends Return Investments And Larger Deals If • Share Repurchases High Fit • Innovation And New Products • Strict Strategic Fit And Financial • Synergy Rea
Slide 98: Sources and Uses
SOURCES AND USES (2023 – 2025E) Sources Uses B/S Capital Capacity* Deployment Capacity ~$6 Billion M&A Plus Repo’s N3Y FCF Cash EOY ‘22 Dividends Capital Allocation Biased To Growth *Assumes Adding 2.5x Of Leverage On A Net Debt/Adj. EBITDA Basis 98
Slide 99: Dividends Paid
DIVIDENDS PAID $1.36 $1.26 $1.20 $1.16 $1.08 $1.00 $0.94 $0.90 $0.84 $0.78 $0.74 $0.70 $0.66 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2022E Consistent Track Record Of Raising The Dividend * Excludes Special Dividend Associated With Rexnord PMC Merger. 99
Slide 100: Outperforming on Total Shareholder Return
OUTPERFORMING ON TOTAL SHAREHOLDER RETURN Transformation Momentum Contributing To Outperformance • Rising Evidence Of Outgrowth • Credible Path To Continued Margin Gains • Transformational Merger With Rexnord PMC, Compelling Arrowhead Acquisition • Sizable Free Cash Flow • Tremendous Upside From Cap
Slide 101: Expected Regal Rexnord in 2025
EXPECTED REGAL REXNORD IN 2025 Capex <2% ~$1B Of Sales Annual FCF Revenue Adj. Gross Margin Adj. EPS >$6B, ~37% ~$15 Secular End Market Exposure GDP+ Growth (Low DD CAGR) Adj. EBITDA >35% (4 – 6% Organic) Margin ~25% Of Net Sales Vitality Another ~28% A Compelling Investment Thesis For All Of Our St
Slide 102: Appendix
feregalRexnord APPENDIX INVESTOR DAY 22
Slide 103: Total Regal Rexnord Adjusted Gross Margin
APPENDIX TOTAL REGAL REXNORD ADJUSTED GROSS MARGIN Unaudited (Dollars in Millions) Year Ended Jan 1, Jan 2, Dec 28, 2022 2021 2019 Net Sales $3,810.3 $2,907.0 $3,238.0 Net Sales from Businesses Divested/to be Exited — — (52.8) Adjusted Net Sales $3,810.3 $2,907.0 $3,185.2 Gross Profit as Reported $1
Slide 104: Segment Information
APPENDIX SEGMENT INFORMATION Unaudited (Dollars in Millions) Year Ended Commercial Systems Climate Solutions Motion Control Solutions * Jan 1, Jan 2, Dec 28, Jan 1, Jan 2, Dec 28, Jan 1, Jan 2, Dec 28, 2022 2021 2019 2022 2021 2019 2022 2021 2019 Net Sales $1,032.1 $ 820.2 $ 905.3 $1,030.6 $ 846.8 $
Slide 105: 2022 Adjusted Annual Guidance
APPENDIX 2022 ADJUSTED ANNUAL GUIDANCE Minimum Maximum 2022 Diluted EPS Annual Guidance $ 7.01 $ 7.61 Restructuring and Related Costs 0.68 0.68 Intangible Amortization 2.10 2.10 Stock-Based Compensation 0.29 0.29 Transaction and Related Costs 0.06 0.06 Inventory Step Up 0.10 0.10 Gain on Sales of As
Slide 106: Total Regal Rexnord Adjusted EBITDA
APPENDIX TOTAL REGAL REXNORD ADJUSTED EBITDA Year Ended (Dollars in Millions) Jan 1, Jan 2, Dec 28, 2022 2021 2019 GAAP Income from Operations as Reported $ 332.4 $ 280.1 $ 351.1 LIFO to FIFO Adjustment 25.9 (2.1) (3.5) GAAP Income from Operations Recasted $ 358.3 $ 278.0 $ 347.6 Restructuring and R
Slide 107: Adjusted EBITDA by Segment
APPENDIX Year Ended ADJUSTED EBITDA Commercial Systems Climate Solutions Motion Control Solutions * (Dollars in Millions) Jan 1, Jan 2, Dec 28, Jan 1, Jan 2, Dec 28, Jan 1, Jan 2, Dec 28, 2022 2021 2019 2022 2021 2019 2022 2021 2019 GAAP Income from Operations $ 99.5 $ 65.1 $ 106.8 $ 189.1 $ 130.0 $
Slide 108: Total Regal Rexnord Debt to EBITDA
APPENDIX TOTAL REGAL REXNORD DEBT TO EBITDA Last Twelve Months Jun 30, 2022 * Jan 1, 2022 * Jan 2, 2021 Dec 28, 2019 Net Income as Reported Jan 2, 2021 and Dec 28, 2019 $ 385.2 $ 283.2 $ 193.8 $ 242.6 LIFO to FIFO Adjustment 11.6 19.7 (1.6) (2.8) Net Income Recasted $ 396.8 $ 302.9 $ 192.2 $ 239.8 I
Slide 109: Total Regal Rexnord Free Cash Flow
APPENDIX TOTAL REGAL REXNORD FREE CASH FLOW Year Ended Jan 1, Jan 2, Dec 28, 2022 2021 2019 Net Cash Provided by Operating Activities $ 357.7 $ 435.4 $ 408.5 Additions to Property Plant and Equipment (54.5) (47.5) (92.4) Free Cash Flow $ 303.2 $ 387.9 $ 316.1 GAAP Net Income Attributable to Regal Re
Slide 110: Organic Sales Growth
APPENDIX ORGANIC SALES GROWTH Total Regal Rexnord Net Sales Year Ended Jan 1, 2022 $ 3,810.3 Net Sales from Business Acquired (348.5) Impact from Foreign Currency Exchange Rates (50.2) Organic Sales Year Ended Jan 1, 2022 $ 3,411.6 Net Sales Year Ended Jan 2, 2021 $ 2,907.0 Adjusted Net Sales Year E
Slide 111: Organic Sales Growth
APPENDIX ORGANIC SALES GROWTH Total Regal Rexnord Net Sales Year Ended Dec 28, 2019 $ 3,238.0 Net Sales from Business Acquired (31.7) Net Sales from Businesses Divested/to be Exited (52.8) Impact from Foreign Currency Exchange Rates 37.3 Organic Sales Year Ended Dec 28, 2019 $ 3,190.8 Net Sales Year