RBC Bearings Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
November 1, 2024

There are 12 speakers on the call.

Operator

Good morning, and thank you

Speaker 1

for joining us for RBC Bearings' fiscal 2nd quarter 2025 earnings call. I'm Ron Moffat, Director of Corporate Development and Investor Relations. And with me on today's call are Doctor. Michael Hartnett, Chairman, President and Chief Executive Officer Daniel Bergeron, Director, Vice President and Chief Operating Officer and Rob Sullivan, Vice President and Chief Financial Officer. As a reminder, some of the statements made today may be forward looking and are made under the Private Securities Litigation Reform Act of 1995.

Speaker 1

Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also listed in the press release along with the reconciliation between GAAP and non GAAP financial information. With that, I'll now turn the call over to Doctor. Hartnett.

Speaker 2

Good morning, everyone, and thank you for joining us. I'm going to start today's call with a quick review of our financial results, and I'll finish with some high level thoughts on the industry and our outlook

Speaker 3

for the remainder of 2025.

Speaker 2

I'll then hand it over to Ross Sullivan for more detailed color on our numbers.

Speaker 3

2nd quarter net sales came in at $398,000,000

Speaker 2

a 3.2% increase over last year, driven by continued strong performance in our A and D segment and what we believe was continued outperformance versus peers on the industrial side. Total A and D sales were up 12.5% year over year with 17.3% growth on the defense side and 10.3% growth on commercial aerospace. On the industrial side, the segment came down 1.4% year over year with OEM down 2.5% and aftermarket sales down 0.9%. Before I go too deep into the quarter, the results I wanted to spend a minute or 2 on the strength we are seeing currently staying on the defense side of the business. Year to date sales stand at an impressive 26.7 percent organic growth versus last year.

Speaker 2

We are seeing exceptionally strong demand in our range of business where there is multiyear backlog that can drive additional growth. We are also seeing continued strong and urgent demand for our fixed wing and missile guided munitions category. With the current geopolitical backdrop, we are planning for the continuation of this demand through the remainder of this year into next well beyond. During the period, we saw unexpected headwinds from Boeing site, the impact of Hurricane Helene. The later resulted in a plant shutdown in Asheville, North Carolina for over a week.

Speaker 2

These events impacted revenues by $4,000,000 to $5,000,000 in the period. Well, now summer is over and we're moving to the performance during the period. Gross margin

Speaker 4

in the quarter came in at $173,800,000

Speaker 2

or 43.7 percent of sales, a 55 point increase year over year. The biggest drivers of our margin expansion continue to be increased absorption of our aerospace and defense capacity, ongoing synergies at Dodge, a wide range of smaller projects

Speaker 3

on

Speaker 2

a plant by plant basis that we continue to identify through the RBC ops management process. Would like to acknowledge and thank our teams for this performance. They are the driving force behind the projects that deliver these results. They are the foundation of our culture of continuous improvement at RBC. Net income of $67,000,000 was up 6% year over year and that translated into an adjusted EPS of $2.29 per share compared to last year's $2.17 share.

Speaker 2

Cash from operations came in at $43,000,000

Speaker 4

and

Speaker 2

compares to $53,000,000 last year, but the timing and scope of cash tax payments is the biggest factor in year over year comparison. We use our cash to continue to deleverage the balance sheet with over $35,000,000 of debt reduction in the quarter, taking our trailing net leverage to right approximately 2 times returns. As a reminder, we are targeting a $275,000,000 to $300,000,000 debt reduction for the year, which will allow us to exit the year nicely below the 2x turn mark, leaving our balance sheet well positioned for further acquisition interest. Moving to our outlook. On the A and D side, demand remains very strong.

Speaker 2

As a result of recent events, Boeing is playing an increasingly smaller role in our revenues, and we expect this to continue over the balance of this quarter and into next. And consequently, we are planning our business accordingly. When their strike will end and how to plan to step up production of the 737 airplane is not at all clear to us at this time. Of course, the production of the 787 ship remains unaffected. We do know that their backlog for 737 is substantial.

Speaker 2

Their customers need the aircraft, some desperately. We stand in a perfect position to support any production rate set by management. We expect clarification in the next few weeks on these matters regarding production rates and are currently busy negotiating and inking contracts now that will support production for Boeing through 2,030. Using these assumptions and with the strong results already delivered in the first half of

Speaker 3

the year, I believe our

Speaker 2

A and D business should be able to deliver low to midterms growth for the full year. On the industrial side, I was pleased with the results we saw in the Q2, including the continued strength

Speaker 3

in

Speaker 2

grain, food and beverage and power generation. All of our weakness is concentrated into a few end markets, primarily oil and gas as a result of inventory corrections during the period at 2 customers. I believe our industrial business can return to growth in the back half of the year as a drag for some of these end markets to hold off and our relentless focus driving organic growth continues. Looking forward to next year, as we develop our operating budgets today, we see number 1, continued defense demand led by new products and weapons. Boeing 737 old rates at the 38 rate pushing towards 50 rate in 27.

Speaker 2

Strong and increasing demand for jet engine components and repairs. Strengthening industrial demand, space products playing an increasingly significant role in our lineup of revenues, impactful synergies from Dodge Acquisitions as we end the cooling and testing cycle and begin the resturing some products with RBC plants, an important and incremental expansion of our statements and work for European Aerospace Community. With that, I'll now turn the call over to Rob to give more details on our guidance.

Speaker 3

Thank you, Mike. As Doctor. Hartnett indicated, this

Speaker 2

was another strong quarter for

Speaker 3

RBC despite the short term and one time challenges in the period. Net sales growth of 3.2% drove gross margin growth of 4.5% year over year with 55 basis points of gross margin percentage expansion. This year over year margin expansion was primarily reflected in our Industrial segment, We continue to see strong execution and the benefits of Dodge Synergies achieved. On the SG and A line, we continued our investments in our future growth. This includes investment in personnel costs for existing talent as well as new resources such as sales force additions to support the international expansion that we previously highlighted.

Speaker 3

In addition, we continued our investment in back office support including IT and had incremental professional and travel fees during the period. This led to adjusted EBITDA of $123,400,000 up 1.1 percent year over year and an adjusted EBITDA margin of 31%, which was down 66 basis points year over year against a tough comp and still above 2024's full year 30.9 percent margin. Interest expense in the quarter was $15,600,000 This was down 22% year over year reflecting the ongoing repayment of our term loan and revolver, lower rates on our variable rate debt and the benefits from our interest rate and cross currency swaps. The tax rate in our adjusted EPS calculation was 22.1%, reasonably consistent with last year's rate of 22. Altogether, this led to adjusted diluted EPS of $2.29 representing year over year growth of 5.5%, an impressive result given some of the short term headwinds in the quarter.

Speaker 3

In terms of cash flow, through the 1st 6 months of fiscal 2025, we have generated $140,400,000 in cash from operations, with free cash flow conversion of approximately 100% of net income. Our 2nd quarter free cash flow was impacted by the timing of certain tax payments and the purchase of a building in Switzerland for approximately $8,000,000 during the quarter, which was previously leased. A portion of this was financed with a 10 year mortgage at 2.2%. Our 6 month free cash flow has increased 14.5 percent year over year, primarily driven by net income growth results during the period. As usual, we used a meaningful portion of the cash generated to continue to deleverage the balance sheet.

Speaker 3

We repaid over $35,000,000 of debt during the quarter with another large $32,000,000 payment crossing the wire 2 days after the quarter's close. If you include that payment, it takes our total year to date debt reduction to 128,700,000 dollars And in terms of our

Speaker 2

free cash flow generation going forward,

Speaker 3

the October 15 automatic conversion of our Series A mandatory convertible preferred stock is not only slightly accretive to EPS, but it also removes the cash dividend payment, reducing our future total cash outlays by approximately $23,000,000 on an annualized basis. This is roughly 9.5% of

Speaker 2

fiscal 20 24's total free cash flow.

Speaker 3

In the Q3, when calculating EPS, we anticipate net income to be reduced by approximately $1,000,000 of dividend costs and the diluted EPS to include approximately $1,800,000 additional shares from the conversion. The full impact of the shares will be reflected in the Q4 when they are all outstanding for the full period. Looking into the Q3, we expect revenues of $390,000,000 to $400,000,000 representing year over year growth of 4.3% to 7%. As a reminder, many of our plants, our fiscal 3rd quarter includes fewer selling days due to holidays and is typically our latest quarter of the year. Our guidance is calling for flattish revenue trends as compared to Q2 fiscal 2025 despite the selling day headwind and despite the aerospace OEM headwinds that Doctor.

Speaker 3

Hartman pointed out earlier. This is driven primarily by ongoing strength in the broader market and industrial sales that should be comparable to that of Q2. On the gross margin side, we are projecting gross margins of 42.5% to 43.5%, which would be an increase of roughly 70 basis points year over year at the midpoint.

Speaker 2

On the SG and A side, we expect SG and A as a

Speaker 3

percentage of sales to be in the 17% to 17.5% range during the Q3. In closing, this is another strong quarter for RBC. We remain focused on leveraging our core strength in engineering, manufacturing and product development to drive both organic and inorganic growth, continued margin excellence and high levels of free cash flow conversion. With that, operator, please open

Speaker 5

the call for Q and A.

Speaker 6

Thank you. Our first question comes from Michael Ciarmoli with Truist Securities. Please state your question.

Speaker 5

Hey, good morning guys. Thanks for taking the questions. Hey, just I guess the strike combination of the strike implications, the hurricane, I think you called out some revenue impact, any way to quantify the impact that may have had on gross margins?

Speaker 2

Yes, I mean, obviously, there's a way to do that, but I can't do it here and now. If you just look at the consolidated gross margin, it's kind of reflective of those parts of those products. So I've been just using the consolidated gross margin as the yardstick for contributions. But it would what that would have contributed to EPS, I think that's fair. Okay.

Speaker 2

Okay. Okay.

Speaker 3

Fair

Speaker 5

enough. And then, Mike, I think you said the exposure to Boeing was down even further now. I mean, does that incorporate Spirit as well? And are you at a position now? I know you guys always like to build strategic inventory

Speaker 3

and ship out

Speaker 5

of that strategic inventory. Are you have you built too much? Is there going to be a destock period? I know the lead times are definitely still elongated for some of your products, but any color in terms of once maybe, I mean, I guess, Boeing first has to get this sort of rate cap lifted. But any thoughts on if there's a destock headwind once they start ramping again?

Speaker 3

I don't see it. I mean,

Speaker 2

we're sort of down at the nadir of what we've been supplying that whole food chain in terms of products. So I

Speaker 6

think once

Speaker 2

they get back into production and start heading towards that 38 number, I think they're going to pull a big vacuum on the system.

Speaker 5

Okay, okay. Got it. That's helpful. And then, just the last one, I mean, urgent demand for fixed wing munitions. Any I mean, I guess just any more detail you can provide there if you're seeing more from Europe and NATO recapitalizing?

Speaker 5

Is it just all flowing through kind of the domestic prime contractors? And maybe even what the pipeline looks like for some of these newer programs? I mean, we keep seeing a lot of new development platforms across a lot of different domains. Any detail there?

Speaker 2

Well, I think the

Speaker 3

detail there is that there's just

Speaker 2

a lot of these guided weapons and shoulder mounted weapons use bearings, precision bearings and many of them are miniature bearings. And there is no in those because they're U. S.-made defense products, those miniature bearings have to be U. S.-made defense bearings, U. S.-made bearings, and

Speaker 3

there's that particular

Speaker 2

supply chain has atrophied over the last generation and now there's not sufficient production capacity for miniature bearings to service the demand. And

Speaker 3

I mean, I'm

Speaker 2

not telling any secrets out of school here, but I mean, Defense Department's offering special incentives to increase miniature bearing production. And we know about it. We're not participating in it for other reasons, but we're not but we are aware of

Speaker 6

it. Thank you. And our next question comes from Pete Skibitski with Alembic Global. Please state your question.

Speaker 7

Sorry if I missed it, but I know you quantified the Asheville impact and I guess industrial. Can you quantify how much the Boeing IAM strike negatively impacted the 2nd quarter? And maybe give us a sense of how we should think about the back half of the year, the kind of lingering impact?

Speaker 2

Well, yes, I think for the back half of our year, our assumption is based on the Boeing being in production and the supply chain having the requirements for 1 month out of 3. And is that the right number? I don't know. It seemed to be conservative when we made it. But this is now November and the strike looms, although it's maybe it will make progress today as I read the journal.

Speaker 2

So, what boils into our numbers is operating 1 month out of 4.

Speaker 7

Okay. So you're assuming sequentially your commercial aero revenue should be down in the 3rd quarter?

Speaker 2

Yes.

Speaker 7

Okay. And then just I mean you had some nice backlog increase sequentially, I think it was about 4.6%. Was a lot of that commercial aerospace and maybe it was wide body orders?

Speaker 3

A lot of that would have been on the defense side. Certainly, aerospace defense segment heavy, but it would have been a lot of the defense side of our business.

Speaker 7

Okay, got it. That was well, heading into my last question then, we've got this continuing resolution ongoing, right, for DoD, which is your Q3. Have you seen sort of quarter to date as we sit here in November, any slowdown in defense bookings that we can maybe surmise results from the CR?

Speaker 2

Yes, I'm trying to think if we are seeing that. Our defense bookings are for the most part, the significant part of those are with OEMs. So, they're not with the Department of Defense. So the bookings are firm contracts or purchase orders that are extended over often many years. And I think what's reflected in our backlog is it still 12 months?

Speaker 2

No. It's the full. Okay. So, yes, no, we're not seeing it. We're not feeling it.

Speaker 7

Okay. Got it. It's helpful. Thanks so much, guys.

Speaker 6

Our next question comes from Tim Thein with Raymond James. Please state your question.

Operator

Thank you. Good morning. Just the first one was on Rob's commentary there at the end, in terms of the outlook for the Q3, I thought I heard Rob, you say that you expected industrial to be flat with the 2nd quarter. Was that did I hear that correct or?

Speaker 3

I see, yes, sequentially, it should look a lot like Q2 plus or minus. That's what we're looking at right now.

Operator

Okay. So, all right. So that's then you're seeing if that were the case and not to hold you to the penny, but that's calling for year over year growth? Correct. Yes, okay, got it.

Operator

And I guess, I'm interested in maybe this ties back into the outperformance that you that I believe you saw in terms of we haven't seen or heard from every one of your industrial peers, but I suspect down

Speaker 2

less than

Operator

a point is probably better than what you'll see from others. And I'm just curious, as you look to the 3rd your fiscal Q3, the commentary from the at least from the public bearing distributors, it doesn't they're not calling for much by way of improvement. So I'm just curious in terms of what you guys are seeing. Is this some of the benefits from Dodge paying off? Is it maybe you're gaining a higher share of wallet with the distributors?

Operator

Maybe you can just give some color in terms of what's driving this outperformance on the industrial side?

Speaker 2

Outperformance relative to our peers?

Operator

Yes. I mean, if you did, yes, exactly. Okay.

Speaker 2

Because I don't think it's outperformance relative to our plan.

Operator

Got it.

Speaker 2

It's, I mean, I'd have to know more about why our peers are falling behind then we're a little behind our plan. So I didn't think it was outperformance to give a description of where we are, but do you think that fits us. I don't know what their problem

Operator

is. It wasn't it was a flattening. It was I mean, I just I don't think others are talking about industrial revenues down a point or less, but that was all. So and I'm not asking you to speak for your peers. I'm just maybe just in terms of just to the extent you are seeing improvement, it may again maybe it's lagging your expectations, but I suspect it's better than what you'll see from others.

Operator

So it was just if you had any commentary around what you've seen internally and where your some of the initiatives you put forth and how those are progressing?

Speaker 2

Well, I mean, there's I would say that the Agen's performance is showing an improvement year over year, because last year in these quarters, our first and second quarter, we were still fighting with the tail of supply chain problems And that second quarter was the end of that tail. So which effectively made those quarters last year a little bit stronger than they should have been because of products that needed to be shipped, but couldn't be shipped because we didn't have all the parts we needed to finish various assemblies. So now we're not we don't have that difficult quarter to quarter comp. And so now it's more a pure operating performance relative to market demand.

Operator

Got it. Okay. And then just on the I think last quarter you'd commented that the full year margin improvement may be closer to 100 basis points on the gross margin side? Is that still the forecast today?

Speaker 3

Yes.

Operator

Yes. Okay. Got it. Got it. Okay.

Operator

And last one and I'll move on. Just you highlighted within A and B, the Marine segment. I think you've been calling on that for some time. Any I don't know if it's something for competitive reasons, maybe you're precluded from divulging it. But any context in terms of within that total company backlog, the size of the even if it's just qualitatively the size of that marine backlog as you sit here today?

Speaker 3

Yes, I mean, it's a meaningful part of that backlog to the tune of a couple of 100,000,000

Operator

dollars Got it. Okay. Thanks a lot.

Speaker 6

Thank you. Our next question comes from Ross Sperinblak with William Blair. Please state your question.

Speaker 3

Hey, good morning guys.

Speaker 2

Good morning, Ross.

Speaker 8

Maybe just starting with Dodge, thinking through kind of the longer term growth outlook, the business has been stable. It would be great to hear where you stand on the R and D strategy and how we should be thinking about the timing of getting that new product muscle working?

Speaker 2

Yes. Well, we have several new product initiatives moving through from R and D into production. And so, I think this year, some of the first will probably generate a few $1,000,000 over the full year period. I mean, it's a normal start for a new product. So I would say that new products out of Dodge on an annualized basis next year, dollars 5,000,000 to 10,000,000.

Speaker 8

Okay. So you feel like you're getting buy in from the workforce and this is really starting to potentially snowball in the next couple of years?

Speaker 2

Yes. Well, I think it's if we have identified the market demand well enough, I think we have some pretty sharp people working that end of the equation. Yes, I think those should be meaningful contributors.

Speaker 8

That's great to hear. And maybe just thinking about Dodge's warehousing business. It's been a tougher couple of years, but it's seeing signs that greenfield activity is picking up. So anything just to call on that performance and then maybe anything around project activity that you might be hearing from your customers?

Speaker 2

I think that side of the business showed some positive effects here in this last quarter. So it's coming back slowly. We're looking seriously at that market and we're probably going to develop a new product line to address it, which will probably take a few years in the development, but should allow us to be a more significant player. Okay. I

Speaker 8

don't want you to give away any of your strategy there, but is it still conveyor oriented, if I can ask?

Speaker 2

Yes. Perfect. All right. And then just one last one here. What else do you want me to give away, Ross?

Speaker 8

The key to your caller. On the 787 and 777X ramp, phone was kind of breaking up. But thinking about the second half margin progressions for aerospace, that was previously in the cards, conversations may still be in the works with Boeing on that. Just any expectations there, maybe second half or even fiscal next year?

Speaker 2

Well, I think next year, we should be beyond these troubles and into production and moving into that 38 per month ship build rate. That's our expectation in terms of what we're rolling together for operating budgets that will sort of be the basis of our operating budget next year. Clearly Boeing had published a objective of moving into the 50s before they had the problems that they had last year. They certainly need to do that. At one point, they had an objective of 60 ships per month.

Speaker 2

They really need to reboot that objective given their backlog and the need of their customers and the needs of their supply chain. I mean, there's the supply chains are in pretty tough shape. A lot of them are if you survey exactly the financial health of a lot of Boeing and Airbus' suppliers, it's not good. And we know that because we sell them products and we try to collect our receivables based upon what we sold them. And so we know who's having a tough time.

Speaker 8

Got it. Anything to call out there, I guess, on maybe your willingness to look for incremental market share gains with Boeing? Feels like diversification might be the better angle at this juncture.

Speaker 2

Can you say that again, Ross?

Speaker 8

I mean, I know that

Operator

you guys want to maybe diversify away from Boeing a bit, but if

Speaker 8

you saw low hanging fruit on potential market share opportunities,

Speaker 2

I mean, would

Speaker 8

you move in that direction?

Speaker 2

Yes, there's a lot of low hanging fruit. I mean, Boeing is going to be a survivor. There's only 2 of these guys in the whole world right now that are practical producers. And we like both of them. And we have projects, big projects in the breach with both companies.

Speaker 2

And some are reaching harvest. Let's put it that way.

Speaker 6

Our next question comes from Ron Epstein with Bank of America. Please state your question.

Speaker 3

What are you

Speaker 9

seeing out there in sort of the M and A world? How are properties priced? Is there anything on the market? Does the stress that the Boeing strike has maybe caused some suppliers, has that opened up some opportunities?

Speaker 2

Yes, we see things coming to market on the M and A world all the time and we particularly in the A and D side of the business. And we try to understand whether or not we should participate in the auction and sometimes we do and sometimes we don't. What we're seeing is a hungry and competitive private equity interest in aerospace companies, if you can believe that. So the competitive nature of these businesses that are attractive to us has been difficult and some of these businesses come with big problems to solve. So whoever gets involved with any one of these acquisitions in many cases needs to have a big toolbox because a lot of tools need to be employed to fix them.

Speaker 9

Yes, that makes sense. And then maybe another question, maybe along sort of similar lines but different. I think it became very evident yesterday when Huntington Ingalls reported that they're having all kinds of issues. Are there opportunities specifically for you guys in your kind of the naval supply chain to help? I mean it seems like that end market in particular is really struggling to execute.

Speaker 9

And I don't know for a company that's a good executor, is there an opportunity there for you guys to do something pick up share either organically or inorganically because of all the troubles that are happening in that natal supply chain?

Speaker 2

Well, we certainly looked at it Ron and I'd say right now our focus is on executing our current order book and trying to bring up our production rate. Actually we have to double our production rate as quickly as possible to meet the objectives that the Navy has and the rest of the industry has for our products. So we've been really busy doing that. We have talked to some of the people that have complained that the industrial base isn't big enough or strong enough to support the build out and we've offered to build a plant on the waterfront in Connecticut and barge things over to Groton and equip it with the appropriate machinery and so on and so forth. And we could do it, but there wasn't a lot of interest expressed.

Speaker 6

Thank you. And our next question comes from Joe Ritchie with Goldman Sachs. Please state your question.

Speaker 4

Hi. This is Vivek Srivastava on for Joe. Thank you for the question. My first question is on the industrial end market. You talked about industrial sales next quarter confidence?

Speaker 4

And do you expect both original equipment and aftermarket to return to positive growth next quarter?

Speaker 10

So on the just to understand your question, kind of the end markets that we're seeing good activity on is mining, multi industrial, food and beverage, warehousing both on the for all of them on the OEM side and the MRO side. And we're still seeing softness on some of the mining side of the business and on aggregate and those end markets. So it's a mixed bag now. Oil and gas, we're expecting we should see that starting to come back maybe in our Q4 or Q1. Same with semiconductor, which is starting to show signs that we could see some positive movement in Q4, Q1.

Speaker 10

But it's just our average our different markets on the MRO side that are actually driving some of our growth.

Speaker 4

Very helpful. Moving on to pricing, just trying to understand how much of your list pricing you put on in January and how you think about that? And then you've talked about contracts in aerospace and defense. Any color on contracts coming up for renewal and what's the view on pricing there?

Speaker 2

Well, I would say this is as it relates to aircraft and defense. A lot of the contracts that we have with various people were signed in 2019, 2020. And between 2020 and today, the producer price index is up 32%.

Speaker 3

And

Speaker 2

so these new contracts that we're negotiating reflect that change. The old contracts that we have where the prices were set years ago don't have many of them don't have the adjustment needed in order to reflect the change in the PPI, but the new ones do and new prices have been readjusted.

Speaker 4

That's very helpful. Just last question quickly on your backlog within industrial. Any color on how your industrial backlog is trending maybe compared to 2019 levels? And do you see like some risk of that backlog still normalizing or you think backlog in industrial is normalized?

Speaker 3

The big takeaway I would tell you on the industrial backlog that's worth considering in the Q1 of 2019 was just that during the supply chain crisis, Dodge carried a much heavier backlog than they do today. So Dodge has gone back to a much more normalized lower backlog. It's really not an overly meaningful part of our backlog today, which really reflects their normal book and turn type of business, which you would expect.

Speaker 10

And that's also reflected on the classic RBC, so on the industrial side. The markets behave the same way, flattening out business in the quarter.

Speaker 4

Great. Thank you.

Speaker 6

Thank you. And our next question comes from Steve Barger with KeyBanc Capital Markets. Please state your question.

Speaker 11

Thanks. Good morning.

Speaker 2

Thanks, Pete.

Speaker 11

On the industrial side, the 4 ish percent growth you expect for industrial in 3Q certainly seems positive. The comp in 4Q is similar. So is that a reasonable year over year run rate from here, meaning you think the inflection has happened in industrial for your business and you're back to consistent growth?

Speaker 3

I just want to be clear. So what I said was that sequentially, it could look a lot like Q2 plus or minus. So with a fewer days that could mean down ever so slightly. So we didn't say 4% next quarter. I just want to say that we

Speaker 10

think it will grow though.

Speaker 11

Dollars. You don't mean dollars, it's a growth rate.

Speaker 3

Yes, we do expect sequential growth, but we didn't say 4%.

Speaker 11

Sequential growth in growth rate,

Speaker 5

not dollars?

Speaker 3

In industrial.

Speaker 11

I understand, but you're not saying sequential growth in dollars, you're saying sequential growth rate gets better. Got it. Just want to make

Speaker 3

sure everybody understands. Okay.

Speaker 11

What percentage of the portfolio do you classify as defense now across the two segments? And what percentage of the portfolio, Mike, would you consider as exceptionally strong, maybe running 20% plus?

Speaker 10

Steve, we're looking at that number for you. Just a second. Okay.

Speaker 3

So just within Aerospace and Defense segment, Defense is about a third of the total in that segment.

Speaker 11

A third in aerospace, okay. But you have some defense and industrial as well?

Speaker 3

No. No, we have that we have it all

Speaker 11

in aerospace and development. Okay. Got it. Okay. And Mike, for the second part of that question, you had talked about some of the lines of business being exceptionally strong right now.

Speaker 11

What percentage of the overall portfolio would you consider exceptionally strong? It's

Speaker 2

RBC, traditional RBC plus industrial. The traditional RBC is at A and D, which was used to be 60% of revenues before we acquired that. So it's 30% of total revenues is exceptionally strong.

Speaker 11

30%. Got it. That's great. And just one last one. I heard you say $4,000,000 to $5,000,000 related to the weather impact in the one plant.

Speaker 11

You were able to mitigate the strike impact with strong demand from other customers. What would revenue have been in 3Q ex strike?

Speaker 2

At what build rate? Yes. I think so. At what build rate?

Speaker 11

I guess the build rate that was occurring prior to the strike.

Speaker 10

Steve, this is Ram Moffett. I don't think we're going to get in the hypotheticals on the Q3, especially since it's forward looking.

Speaker 11

Well, I was actually looking for 2Q, what it would have been, because you only lost a couple of weeks of production in 2Q. But

Speaker 4

you

Speaker 10

had 2 impacts on the Boeing side, right? You had the original impact from the January door plug blowout, then you had the strike itself, then you had the hurricane. There's just too many variables to really narrow that down and answer with a high level of confidence.

Speaker 11

Got you. That's okay. Thanks.

Speaker 6

Thank you. And we have now reached the end of the question and answer session. And I will now turn the call over to Doctor. Hartnett for closing remarks.

Speaker 2

Okay. Well, thank you. And this concludes our conference call for the Q2. I appreciate everybody's participation and all the good questions and look forward to talking to you again in early February. Good day.

Speaker 6

Thank you. And all parties may now disconnect. Have a good day.

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Earnings Conference Call
RBC Bearings Q2 2025
00:00 / 00:00
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