Regal Rexnord Corporation · NYSE:RRX
Regal Rexnord — Regal Beloit — Q2 2021 Earnings Presentation
30 slides from Regal Rexnord's earnings presentation, Jul 29, 2021
Slide 1: Second Quarter 2021 Earnings Conference Call
2Q July 29, 2021 Second Quarter 2021 Earnings CONFERENCE CALL Louis Pinkham Rob Rehard Chief Executive Officer Vice President Chief Financial Officer
Slide 2: Forward Looking Statements
2Q 2021 FORWARD LOOKING STATEMENTS Certain statements made in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. This report contains forward-looking statements, within the meaning o
Slide 3: Non-GAAP Financial Measures
2Q 2021 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted percentage of adjusted net income attributable to Regal Beloit Corporation, adjusted income in the United States of America (“GAAP”). We also periodically disclose certain
Slide 4: Further Information
2Q 2021 FURTHER INFORMATION Additional Information This communication does not constitute an offer to buy, or a solicitation of an offer to sell, any securities of the Company, Rexnord or Land Newco, Inc. (“Land”). In connection with the Rexnord Transaction, the Company and Land filed registration s
Slide 5: Agenda
2Q 2021 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2021 Results & 2021 Outlook ROB REHARD, CFO Merger Update LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2021 Regal Beloit Corporation 5
Slide 6: Opening Comments & Overview of Results
2Q 2021 OPENING COMMENTS & OVERVIEW OF RESULTS Opening Comments • Very Strong 2Q Performance; Margin & Adjusted EPS Records • Achieving “300-in-3” Margin Target Well Ahead of Schedule ($ in millions, except per share data) 2Q 2020 2Q 2021 • Realizing Share Gains Across the Business Adjusted Net Sale
Slide 7: Case Study – Custom Industrial Powertrain Solution
2Q 2021 CASE STUDY – CUSTOM INDUSTRIAL POWERTRAIN SOLUTION Regal expertise across the Industrial Powertrain provides a strong value proposition in attractive end markets Customer Problem Perceptiv® A resource recovery OEM designing “Zero Landfill” waste- Sensor to-energy solutions was developing a n
Slide 8: Agenda
2Q 2021 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2021 Results & 2021 Outlook ROB REHARD, CFO Merger Update LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2021 Regal Beloit Corporation 8
Slide 9: Power Transmission Solutions
2Q 2021 POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 33.1% ($ Millions) from Operations* ($ Millions) • Key Drivers • Alt-E (Solar) • US General Industrial $215.1 • Unit Material Handling $41.8 • 80/20 Pruning (~2.8%) $159.4 Adjusted Operating Margin* •
Slide 10: Climate Solutions
2Q 2021 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 43.4% ($ Millions) from Operations* ($ Millions) • Key Drivers • NA HVAC $257.3 • EMEA $47.3 • NA General Industrial • Commercial Refrigeration $178.2 • 80/20 Pruning (~3.5%) Adjusted Operating Margin* • 18.4% of
Slide 11: Commercial Systems
2Q 2021 COMMERCIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 49.6% ($ Millions) from Operations* ($ Millions) • Key Drivers • NA General Industrial • Pool Pump $269.3 • China • 80/20 Pruning (~1.4%) $175.9 Adjusted Operating Margin* $31.3 • 11.6% of Adj. Net Sales • Up 56
Slide 12: Industrial Systems
2Q 2021 INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 15.2% ($ Millions) from Operations* ($ Millions) • Key Drivers • Data Centers • NA General Industrial • 80/20 Pruning (~1.9%) Adjusted Operating Margin* $145.2 • 2.3% of Adj. Net Sales $120.6 • Mexico Supply Cha
Slide 13: Key Financial Metrics
2Q 2021 KEY FINANCIAL METRICS Capital Expenditures Balance Sheet as July 3, 2021 • $13.6 Million in 2Q 2021 • Total Debt of $1,019.9 Million • $60.0 Million Expected in FY 2021** • Net Debt of $401.4 Million • Net Debt/Adj. EBITDA* of 0.7 Effective Tax Rate (ETR) • 19.2% Adj. ETR* in 2Q 2021 • 21.0%
Slide 14: 2021 Outlook
2Q 2021 2021 OUTLOOK Introducing 2021 Guidance* • Sales growth in the high teens • Adjusted Diluted Earnings per Share** in a Range of $8.70 to $9.00 for 2021, Up 53% YOY at the Mid-Point Other FY 2021 Modeling Assumptions • Net Interest Expense of ~$28 Million*** • Capital Expenditures of ~$60 Mill
Slide 15: Margin Target Update (300 in 3)
2Q 2021 300 IN 3 UPDATE • We now expect to achieve an adjusted operating margin at least 300 bps above 2019 levels for 2021, delivering on our “300 in 3” goal well ahead of schedule. Original Targets Actual Performance 13.2 - 13.7% 14.0% 10.7% 10.7% 2019 2022E 2019 2Q21 Hitting Margin Expansion Goal
Slide 16: Outlook – End Market Update
2Q 2021 OUTLOOK – END MARKET UPDATE 1 We estimate ~30% of Regal’s end markets will further accelerate in 2022 vs. in 2021. • Markets include non-res, hospitality, food & beverage, data center, alt-E, parts of industrial • Expect positive growth in remaining markets in 2022 Sales By End Market Alt. E
Slide 17: Agenda
2Q 2021 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2021 Results & 2021 Outlook ROB REHARD, CFO Merger Update LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2021 Regal Beloit Corporation 17
Slide 18: Rexnord PMC Merger Update
2Q 2021 REXNORD PMC MERGER UPDATE • Closing is on track for the second half of 2021, subject to approval by Regal and Rexnord shareholders and satisfaction of other customary closing conditions. All required regulatory approvals now obtained. • Special shareholder meetings scheduled for September 1,
Slide 19: Agenda
2Q 2021 AGENDA Opening Comments & Overview LOUIS PINKHAM, CEO 2Q 2021 Results & 2021 Outlook ROB REHARD, CFO Merger Update LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO ©2021 Regal Beloit Corporation 19
Slide 20: Appendix
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Slide 21: Adjusted Diluted Earnings Per Share
2Q 2021 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Six Months Ended Jul 3, Jun 27, Jul 3, Jun 27, 2021 2020 2021 2020 GAAP Diluted Earnings Per Share $ 1.94 $ 0.69 $ 3.54 $ 1.81 Restructuring and Related Costs 0.11 0.21 0.14 0.31 Transaction Costs 0.19 — 0.55 — Loss on Businesse
Slide 22: 2021 Adjusted Annual Guidance
2Q 2021 APPENDIX 2021 ADJUSTED ANNUAL GUIDANCE Minimum Maximum 2021 Diluted EPS Annual Guidance $ 7.29 $ 7.59 Restructuring and Related Costs 0.30 0.30 Transaction Costs 1.14 1.14 Loss on Businesses Divested and Assets to be Exited 0.04 0.04 Gain on Sales of Assets (0.07) (0.07) 2021 Adjusted Dilute
Slide 23: Adjusted Income from Operations
2Q 2021 APPENDIX Three Months Ended Power Commercial Transmission ADJUSTED INCOME FROM OPERATIONS Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Jul 3, Jun 27, Jul 3, Jun 27, Jul 3, Jun 27, Jul 3, Jun 27, Jul 3, Jun 27, 2021 2020 2021 2020 2021 2020 2021 202
Slide 24: Adjusted Net Sales
2Q 2021 APPENDIX Three Months Ended Commercial Power Transmission ADJUSTED NET SALES Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Jul 3, Jun 27, Jul 3, Jun 27, Jul 3, Jun 27, Jul 3, Jun 27, Jul 3, Jun 27, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 N
Slide 25: Adjusted Effective Tax Rate
2Q 2021 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended Six Months Ended (Dollars in Millions) Jul 3, Jun 27, Jul 3, Jun 27, 2021 2020 2021 2020 Income before Taxes $ 100.4 $ 37.8 $ 187.6 $ 98.4 Provision for Income Taxes 19.2 8.5 39.4 22.4 Effective Tax Rate 19.1% 22.5% 21.0% 22.8% Income b
Slide 26: Free Cash Flow
2Q 2021 APPENDIX Three Months Six Months FREE CASH FLOW Ended Ended (Dollars in Millions) Jul 3, Jun 27, Jul 3, Jun 27, 2021 2020 2021 2020 Net Cash Provided by Operating Activities $ 87.1 $ 86.9 $ 136.6 $ 189.6 Additions to Property Plant and Equipment (13.6) (9.5) (24.3) (20.4) Free Cash Flow $ 73
Slide 27: Organic Sales Growth
2Q 2021 APPENDIX ORGANIC SALES GROWTH Three Months Ended (Dollars in Millions) Power Commercial Industrial Climate Transmission Systems Systems Solutions Solutions Total Regal Net Sales Three Months Ended Jul 3, 2021 $ 269.3 $ 145.2 $ 257.3 $ 215.1 $ 886.9 Impact from Foreign Currency Exchange Rates
Slide 28: Total Gross Debt/EBITDA
2Q 2021 APPENDIX TOTAL GROSS DEBT/EBITDA TOTAL GROSS DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Jul 3, LTM Jul 3, 2021 2021 Net Income Net Income $ 266.0 $ 266.0 Plus: Income Taxes 73.8 Plus: Income Taxes 73.8 Plus: Interest Expense 41.7 Plus: Interest Expense 41.7 Less: In
Slide 29: Total Net Debt/EBITDA
2Q 2021 APPENDIX TOTAL NET DEBT/EBITDA TOTAL NET DEBT/ADJUSTED EBITDA (Dollars in Millions) (Dollars in Millions) LTM Jul 3, LTM Jul 3, 2021 2021 Net Income $ 266.0 Net Income $ 266.0 Plus: Income Taxes 73.8 Plus: Income Taxes 73.8 Plus: Interest Expense 41.7 Plus: Interest Expense 41.7 Less: Intere
Slide 30: Shipping Days
2Q 2021 APPENDIX Shipping 1Q 2Q 3Q 4Q FY Days 2015 64 63 64 59 250 2016 64 64 63 60 251 2017 64 63 63 60 250 2018 63 64 63 61 251 2019 63 63 63 61 250 2020 63 63 63 64 253 2021 64 64 63 60 251 Regal operates on a 52/53 week fiscal year ending on the Saturday closest to December 31 Fiscal Years 2