Regal Rexnord Corporation · NYSE:RRX
Regal Rexnord — Q3 2021 Earnings Presentation
35 slides from Regal Rexnord's earnings presentation, Nov 2, 2021
Slide 1: Third Quarter 2021 Earnings
Creating a better tomorrow™… Third Quarter 2021 Earnings November 2, 2021 Louis Pinkham, Chief Executive Officer Rob Rehard, Vice President, Chief Financial Officer
Slide 2: Forward Looking Statements
3Q 2021 FORWARD LOOKING STATEMENTS This document 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,
Slide 3: Non-GAAP Financial Measures
3Q 2021 NON-GAAP FINANCIAL MEASURES We prepare financial statements in accordance with accounting principles generally accepted Corporation, free cash flow, free cash flow as a percentage of adjusted net income attributable in the United States of America (“GAAP”). We also periodically disclose cert
Slide 4: Opening Comments & Overview
3Q 2021 Creating a better tomorrow™… Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2021 Results, 2021 & 2022 Outlooks ROB REHARD, CFO Arrowhead Systems LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO
Slide 5: Opening Comments & Overview of Results
3Q 2021 OPENING COMMENTS & OVERVIEW OF RESULTS Opening Comments ($ in millions, except per share data) 3Q 2020 3Q 2021 • Margin & Adjusted EPS Records Despite Inflation & Supply Chain Headwinds, Aided by 80/20, Price Discipline, Ongoing Restructuring Adjusted Net Sales* $758.2 $892.7 • Continue to R
Slide 6: Opening Comments & Overview
3Q 2021 Creating a better tomorrow™… Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2021 Results, 2021 & 2022 Outlooks ROB REHARD, CFO Arrowhead Systems LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO
Slide 7: Power Transmission Solutions
3Q 2021 LEGACY POWER TRANSMISSION SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 23.7% ($ Millions) from Operations* • Key Drivers ($ Millions) • Alternative Energy • N.A. General Industrial • Conveying $39.0 $207.6 Adjusted Operating Margin* • 18.8% of Adj. Net Sales $166.9
Slide 8: Climate Solutions
3Q 2021 CLIMATE SOLUTIONS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 14.2% ($ Millions) from Operations* ($ Millions) • Key Drivers • N.A. HVAC • EMEA Recovery $52.2 $268.4 $166.9 • N.A. General Industrial $52.2 $166.9 $268.4 $166.9 Adjusted Operating Margin* $234.0 • 19.4% of Adj
Slide 9: Commercial Systems
3Q 2021 COMMERCIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 20.9% ($ Millions) from Operations* • Key Drivers ($ Millions) • N.A. General Industrial • C-HVAC $268.7 Adjusted Operating Margin* $268.7 • 11.5% of Adj. Net Sales $30.9 $218.5 $25.6 3Q20 3Q21 3Q20 3Q21 * Non-G
Slide 10: Industrial Systems
3Q 2021 INDUSTRIAL SYSTEMS Sales Adjusted Net Sales* Adjusted Income • Organic Sales* Up 3.6% ($ Millions) from Operations* ($ Millions) Adjusted Operating Margin* • 3.4% of Adj. Net Sales $148.0 $138.8 $10.0 $5.1 3Q20 3Q21 3Q20 3Q21 * Non-GAAP Financial Measurement, See Appendix for Reconciliation.
Slide 11: Key Financial Metrics & Other Updates
3Q 2021 KEY FINANCIAL METRICS & OTHER UPDATES Capital Expenditures Balance Sheet at October 2, 2021 • $13.2 Million in 3Q 2021 • Total Debt of $648.3 Million • $57.0 Million Expected in FY 2021** • Net Debt of $319.7 Million • Net Debt/Adj. EBITDA* of 0.5 Effective Tax Rate (ETR) • 20.2% Adj. ETR* i
Slide 12: Updating 2021 & 2022 Outlooks
3Q 2021 UPDATING 2021 & 2022 OUTLOOKS • Incorporating Rexnord PMC and related merger impacts Outlook Summary (higher shares, D&A, interest, tax) as of 4Q 2021, and Arrowhead as of January 1, 2022. • Updating calculation of Adjusted EBITDA to add back stock- based compensation and calculation of Adju
Slide 13: Opening Comments & Overview
3Q 2021 Creating a better tomorrow™… Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2021 Results, 2021 & 2022 Outlooks ROB REHARD, CFO Arrowhead Systems LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO
Slide 14: Arrowhead Systems Company Snapshot
3Q 2021 ARROWHEAD SYSTEMS COMPANY SNAPSHOT 2021F Key Metrics1 Representative Products $99M Sales 33% GM % 18% Adj. EBITDA % 18% ‘18-’21 sales CAGR Mat top conveyors Bulk palletizers Sanitary/ washdown Sales by Segment2 Sales by End-Market2 Aluminum beverage can 22% Palletizing/ de-palletizing 13% Fo
Slide 15: Arrowhead Systems Strategic Rationale
3Q 2021 ARROWHEAD SYSTEMS STRATEGIC RATIONALE Strong growth outlook – Compelling historic growth (18% CAGR 2018-2021) with long-term forward-looking forecast 1 of mid-single digits plus, driven by high-growth end markets (e.g. aluminum beverage can manufacturing and filling) Attractive product portf
Slide 16: A Great Fit: Arrowhead's Systems and Regal Rexnord's Components
3Q 2021 A GREAT FIT: ARROWHEAD’S SYSTEMS AND SERVICES & REGAL REXNORD’S COMPONENTS & MODULES Component Offerings Palletizing / Depalletizing Systems Gearing Motors Bearings Combining complementary Bulk palletizers Case palletizers portfolios will enable Regal Conveyance Sub-Systems Rexnord to better
Slide 17: Synergy in Action: Accelerating Growth of the ModSort Offering
3Q 2021 SYNERGY IN ACTION: ACCELERATING GROWTH OF THE MODSORT OFFERING Combining the ModSort offering, …with Arrowhead’s proven system Regal Rexnord’s high-growth capabilities, we expect to further transfer & divert module… accelerate the platform’s growth ModSort Product Line Overview Synergy betwe
Slide 18: Opening Comments & Overview
3Q 2021 Creating a better tomorrow™… Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2021 Results, 2021 & 2022 Outlooks ROB REHARD, CFO Arrowhead Systems LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO
Slide 19: Opening Comments & Overview
3Q 2021 Creating a better tomorrow™… Opening Comments & Overview LOUIS PINKHAM, CEO 3Q 2021 Results, 2021 & 2022 Outlooks ROB REHARD, CFO Arrowhead Systems LOUIS PINKHAM, CEO Questions & Answers Closing Remarks LOUIS PINKHAM, CEO
Slide 20: Adjusted Diluted Earnings Per Share
3Q 2021 APPENDIX ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Nine Months Ended Oct 2, Sep 26, Oct 2, Sep 26, 2021 2020 2021 2020 GAAP Diluted Earnings Per Share $ 1.70 $ 1.60 $ 5.24 $ 3.41 Restructuring and Related Costs 0.05 0.12 0.19 0.43 Transaction and Related Costs 0.59 — 1.14 — Loss
Slide 21: 2021 Adjusted Q4 Guidance and 2022 Guidance
3Q 2021 APPENDIX 2021 ADJUSTED Q4 GUIDANCE Minimum Maximum 2021 Diluted EPS Q4 Guidance $ 0.29 $ 0.59 Restructuring and Related Costs 0.14 0.14 Transaction and Related Costs 0.36 0.36 Inventory Step Up Purchase Accounting 0.66 0.66 Intangible Amortization 0.44 0.44 Share-Based Compensation 0.08 0.08
Slide 22: Adjusted Income from Operations
3Q 2021 APPENDIX Three Months Ended Power Commercial Transmission ADJUSTED INCOME FROM OPERATIONS Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, 2021 2020 2021 2020 2021 2020 2021 202
Slide 23: Adjusted Net Sales
3Q 2021 APPENDIX Three Months Ended Commercial Power Transmission ADJUSTED NET SALES Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 N
Slide 24: Adjusted Effective Tax Rate
3Q 2021 APPENDIX ADJUSTED EFFECTIVE TAX RATE Three Months Ended Nine Months Ended (Dollars in Millions) Oct 2, Sep 26, Oct 2, Sep 26, 2021 2020 2021 2020 Income before Taxes $ 88.9 $ 83.4 $ 276.5 $ 181.8 Provision for Income Taxes 17.8 17.1 57.2 39.5 Effective Tax Rate 20.0% 20.5% 20.7% 21.7% Income
Slide 25: Free Cash Flow
3Q 2021 APPENDIX Three Months Nine Months FREE CASH FLOW Ended Ended (Dollars in Millions) Oct 2, Sep 26, Oct 2, Sep 26, 2021 2020 2021 2020 Net Cash Provided by Operating Activities $ 121.5 $ 120.3 $ 258.1 $ 309.9 Additions to Property Plant and Equipment (13.2) (9.3) (37.5) (29.7) Free Cash Flow $
Slide 26: Organic Sales Growth
3Q 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 Oct 2, 2021 $ 268.7 $ 148.0 $ 268.4 $ 207.6 $ 892.7 Impact from Foreign Currency Exchange Rates
Slide 27: Total Gross Debt/EBITDA
3Q 2021 APPENDIX TOTAL GROSS DEBT/EBITDA TOTAL GROSS DEBT/ADJUSTED BANK EBITDA (Dollars in Millions) (Dollars in Millions) LTM Oct 2, LTM Oct 2, 2021 2021 Net Income $ 270.8 Net Income $ 270.8 Plus: Income Taxes Plus: Income Taxes 74.5 74.5 Plus: Interest Expense Plus: Interest Expense 54.7 54.7 Les
Slide 28: Total Net Debt/EBITDA
3Q 2021 APPENDIX TOTAL NET DEBT/EBITDA TOTAL NET DEBT/ADJUSTED BANK EBITDA (Dollars in Millions) (Dollars in Millions) LTM Oct 2, LTM Oct 2, 2021 2021 Net Income $ 270.8 Net Income $ 270.8 Plus: Income Taxes Plus: Income Taxes 74.5 74.5 Plus: Interest Expense Plus: Interest Expense 54.7 54.7 Less: I
Slide 29: Adjusted Income from Operations
3Q 2021 APPENDIX Three Months Ended Power Transmission ADJUSTED INCOME FROM OPERATIONS Commercial Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Apr 3, Mar 28, Apr 3, Mar 28, Apr 3, Mar 28, Apr 3, Mar 28, Apr 3, Mar 28, 2021 2020 2021 2020 2021 2020 2021 202
Slide 30: Adjusted Income from Operations
3Q 2021 APPENDIX Three Months Ended Power Transmission ADJUSTED INCOME FROM OPERATIONS Commercial 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 31: Adjusted Income from Operations
3Q 2021 APPENDIX Six Months Ended Power Transmission ADJUSTED INCOME FROM OPERATIONS Commercial 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
Slide 32: Adjusted Income from Operations
3Q 2021 APPENDIX Three Months Ended Power Transmission ADJUSTED INCOME FROM OPERATIONS Commercial Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, 2021 2020 2021 2020 2021 2020 2021 202
Slide 33: Adjusted Income from Operations
3Q 2021 APPENDIX Nine Months Ended Power Transmission ADJUSTED INCOME FROM OPERATIONS Commercial Systems Industrial Systems Climate Solutions Solutions Total Regal (Dollars in Millions) Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, Oct 2, Sep 26, 2021 2020 2021 2020 2021 2020 2021 2020
Slide 34: Shipping Days
3Q 2021 APPENDIX Shipping 1Q 2Q 3Q 4Q FY Days 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 2022 63 64 63 60 250 Regal historically operated on a 52/53 week fiscal year ending on the Saturday closest to December 31.
Slide 35: Legacy Regal Rexnord End Market Shifts
3Q 2021 APPENDIX Legacy Regal Regal Rexnord Noteworthy End Market Exposure Shifts Metals/ Mining O&G Consumer General Industrial: 19% to 21%, Hospitality General Industrial 4% 3% Consumer 15% Up 200bps RNC 4% 21% 21% 4% Consumer: 21% to 15%, Down Food & Bev. 5% Non-Res NC1 600bps 10% Non-Res Constru