Q1 2024 Regal Rexnord Corp Earnings Call

Operator: Good day, and welcome to the Regal Rexnord First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Rob Barry, Vice President, Investor Relations. Please go ahead.

Good day and welcome to the Regal Rexnord first quarter 'twenty 'twenty four earnings conference call.

Operator: All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Robert Douglas Barry: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Rob.

Robert Douglas Barry: Barry Vice President Investor Relations. Please go ahead.

Robert Douglas Barry: Great. Thank you, operator. Good morning, and welcome to Regal Rexnord's first quarter 2024 earnings conference call. Joining me today are Louis Pinkham, our Chief Executive Officer, and Rob Rehard, our Chief Financial Officer. I'd like to remind you that during today's call, you may hear forward-looking statements related to our future financial results, plans, and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the SEC, which are available on the RegalRexnord.com website.

Robert Douglas Barry: Great. Thank you operator, good morning, and welcome to Regal <unk> first quarter 2024 earnings Conference call. Joining me today are Louis Pinkham, our Chief Executive Officer, and Rob <unk>, Our Chief Financial Officer.

Robert Douglas Barry: On slide three, we state that we are presenting certain non-GAAP financial measures that we believe are useful to our investors, and we have included reconciliations between the non-GAAP financial information and the GAAP equivalent in the press release and in these presentation materials.

Robert Douglas Barry: I would like to remind you that during today's call you may hear forward looking statements related to our future financial results plans and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the SEC which are available.

Robert Douglas Barry: On the <unk> Dot com website.

Robert Douglas Barry: On slide three we state that we are presenting certain non-GAAP financial measures that we believe are useful to our investors and we've included reconciliations between the non-GAAP financial information in the GAAP equivalent in the press release and in the presentation material.

Robert Douglas Barry: Turning to slide four, let me briefly review the agenda for today's call. Louis will lead off with his opening comments and an overview of our 1Q performance. Robert Rehard will then provide our first quarter financial results in more detail and review our latest 2024 guidance. We'll then move to Q&A, after which Louis will have some closing remarks. And with that, I'd now like to turn the call over to Louis.

Robert Douglas Barry: Turning to slide four let me briefly review the agenda for today's call Lewis will lead off with his opening comments and an overview of our <unk> performance. Rob <unk> will then provide our first quarter financial results in more detail and review our latest 2024 guidance. We'll then move to Q&A after which Louis will have some closing remarks.

Louis: And with that I'd now like to turn the call over to Lewis.

Louis Vernon Pinkham: Great. Thanks, Rob. And good morning, everyone. Thanks for joining us to discuss our first quarter results, to get an update on our business, and for your continued interest in Regal Rexnord. Before discussing our first quarter performance, I'd like to acknowledge an important milestone on our Regal Rexnord transformation journey, which is the April 30th close on selling our industrial systems business. Completing that transaction is notable for a number of reasons.

Louis: Great. Thanks, Rob and good morning, everyone. Thanks for joining us to discuss our first quarter results to get an update on our business and for your continued interest in <unk>.

Louis Vernon Pinkham: Before discussing our first quarter performance I'd like to knowledge, an important milestone on our Regal rexnord transformation journey.

Louis Vernon Pinkham: The April 30th close on selling our industrial systems business completing.

Louis Vernon Pinkham: Completing that transaction is notable for a number of reasons.

Louis Vernon Pinkham: It allows us to focus on more durable, higher growth, and higher margin opportunities in our remaining segments, and it is generating attractive sale proceeds that allow us to accelerate paying down our debt. It also marks the conclusion of our inorganic portfolio transformation. The evolution of the company's portfolio through merger, acquisition, and divestment transactions has been highly intentional and a critical driver of our strategy to become a faster growing, higher margin, and more cash generative enterprise.

Louis Vernon Pinkham: It allows us to focus on more durable higher growth and higher margin opportunities in our remaining segments.

Louis Vernon Pinkham: And it is generating attractive sale proceeds that allow us to accelerate paying down our debt.

Louis Vernon Pinkham: But it also marks the conclusion of our inorganic portfolio transformation.

Louis Vernon Pinkham: The evolution of the company's portfolio through merger acquisition and divestment transactions has been highly intentional and a critical driver of our strategy to become a faster growing higher margin and more cash generative enterprise.

Louis Vernon Pinkham: It began with the 2021 merger with Rexnord's approximately $1.2 billion process and motion control business and was followed by the 2023 acquisition of Altra, with its approximately $1.9 billion in sales split between industrial power transmission and automation and motion control.

Louis Vernon Pinkham: It began with the 2021 merger with rexnord approximately $1 $2 billion process <unk> motion control business and was followed by the 2023 acquisition I'm ultra with its approximately $1 $9 billion in sales split between industrial and powertrain.

Louis Vernon Pinkham: <unk> mission and automation and motion control.

Louis Vernon Pinkham: Having closed on the industrial systems business, we now have our go forward portfolio. It is a portfolio characterized by 50% of sales into markets with secular demand tailwinds, a product offering with mid-teens vitality, higher than at any point in our history, and targeted to reach 25% in the next two years. Our offering today has more differentiated products with wider competitive moats and is nearly 75% weighted to automation and motion control and industrial power transmission, while our legacy Regal Motors business, which five years ago was roughly three-quarters of our portfolio, is now more focused, more profitable, and steadily evolving into a motorized air-moving subsystems business.

Louis Vernon Pinkham: Having closed on the industrial systems business, we now have our go forward portfolio.

Louis Vernon Pinkham: It is a portfolio characterized by 50% of sales into markets with secular demand tailwind our product offering with mid teens vitality higher than at any other point in our history and target needed to reach 25% in the next two years.

Louis Vernon Pinkham: Our offering today has more differentiated product with wider competitive moats and as nearly 75% weighted to automation and motion control and industrial power transmission, while our legacy Regal Motors business.

Louis Vernon Pinkham: Five years ago was roughly three quarters of our portfolio is now more focused more profitable and steadily evolving into a motorized air moving sub systems business.

Louis Vernon Pinkham: All these characteristics are evident in our gross margin, which reached 37.4% in the first quarter on an adjusted basis, excluding industrial. This is more than 1,000 basis points of improvement versus 2019 levels, and while a few hundred basis points can be attributed to M&A mix, about seven points of that expansion is organic, a testament to the power of 80-20, to our sizable M&A synergies, to the Regal Rexnord More important, however, is what we can achieve with this new portfolio going forward, a clear path to 4%, and 40% adjusted gross margins and to $1 billion of adjusted free cash flow on an annual run rate basis exiting 2025 or at least $1 billion in 2026, plus steadily improving revenue outgrowth versus what is now a richer mix of... secular Marx.

Louis Vernon Pinkham: All of these characteristics are evident in our gross margins.

Louis Vernon Pinkham: Which reached 37, 4% in the first quarter on an adjusted basis, excluding industrial systems.

Louis Vernon Pinkham: This is more than 1000 basis points of improvement versus 2019 levels and while a few hundred basis points can be attributed to M&A mix about seven points.

Louis Vernon Pinkham: Janssen is organic.

Louis Vernon Pinkham: Testament to the power of 80, 22 hour sizable M&A synergies to the Regal rexnord business system and to our heightened pricing discipline among other factors.

Louis Vernon Pinkham: More important however is what we can achieve with this new portfolio going forward.

Louis Vernon Pinkham: Clear path to 4%, 40% adjusted gross margins and two 1 billion of adjusted free cash flow on an annual run rate basis, exiting 2025 or at least $1 billion in 2026.

Louis Vernon Pinkham: Plus steadily improving revenue outgrowth versus what is now a richer mix.

Louis Vernon Pinkham: Secular market.

Louis Vernon Pinkham: In short, tremendous value creation opportunities for our shareholders, our customers, and our associates. However, executing all of this portfolio change, while continuing to improve our core operations, has not been easy. So I want to pause and thank our 30,000 Regal Rexnord Associates for their hard work and disciplined execution, delivering step-change improvements in our operations over a multi-year period. We really do have an excellent team.

Louis Vernon Pinkham: In short tremendous value creation opportunities for our shareholders, our customers and our associates.

Louis Vernon Pinkham: Executing all of this portfolio change, while continuing to improve our core operations has not been easy so I want to pause and thank our 30000 Regal Rexnord associates for their hard work and disciplined execution delivering step change.

Louis Vernon Pinkham: Movements in our operations over a multiyear period.

Louis Vernon Pinkham: We really do have an excellent team.

Louis Vernon Pinkham: Now consistent with our evolving portfolio, we recently decided to update our business purpose. Our purpose is our North Star, the reason why our 30,000 associates around the world find meaning coming to work every day. It now reads, we create a better tomorrow with sustainable solutions that power, transmit, and control motion, helping our customers, our communities, and our planet with the most sustainable solutions. It remains core to how and why we operate. It is integrated into our strategy and embedded in our purpose.

Louis Vernon Pinkham: Now consistent with our adult portfolio, we recently decided to update our business purpose. Our purpose is our north star the why our 30000 associates around the world by meaning coming to work every day.

Louis Vernon Pinkham: It now reads, we create a better tomorrow with sustainable solutions that power transmit and control motion.

Louis Vernon Pinkham: Helping our customers our communities and our planet with the most sustainable solution remains core to how and why we operate.

Louis Vernon Pinkham: It is integrated into our strategy and embedded in our purpose.

Louis Vernon Pinkham: In some recent news on this front, we were very pleased to see our progress and contributions around sustainability recognized by Barron's, achieving a rank of 14 on its list of the 100 most sustainable U.S. companies. But the unifying characteristic of our Go Forward portfolio is now all about motion. Our high-efficiency electric motors provide the power to create motion; a portfolio of highly engineered power transmission components and subsystems efficiently transmits motion to power industrial applications, while our automation offering controls motion in a wide variety of applications that range from factory automation to precision control in surgical tools.

Louis Vernon Pinkham: And some recent news on this front, we were very pleased to see our progress in contributions around sustainability recognized by barron's achieving a rank of 14 on its list of the 100, most sustainable U S companies.

Louis Vernon Pinkham: But the unifying characteristic.

Louis Vernon Pinkham: Of our go forward portfolio is now all about motion.

Louis Vernon Pinkham: Our high efficiency electric motors provide the power to create motion.

Louis Vernon Pinkham: Our portfolio of highly engineered power transmission components, and subsystems efficiently transmit motion to power and industrial applications.

Louis Vernon Pinkham: While our automation offering controls motion in a wide variety of applications that range from factory automation to precision control in surgical tools.

Louis Vernon Pinkham: We expect to share a lot more about how we plan to harness the power of our evolved Regal Rexnord portfolio to accelerate profitable growth at an Investor Day we are hosting on September 17th in New York City. Now, turning to our first quarter results. Our team delivered a strong first quarter, despite some persistent end market headwinds. I would summarize the first quarter as demonstrating strength and outperformance in IPS, on the top line and with Margot, net of continued market headwinds in PEF, with AMC tracking largely in line, allowing us to hold our full year adjusted EPS guidance aside from impacts related to selling industrial.

Louis Vernon Pinkham: We expect to share a lot more about how we plan to harness the power of our evolved Regal rexnord portfolio to accept to accelerate profitable growth and in Investor Day, We are hosting on September 17th in New York City.

Louis Vernon Pinkham: Yeah.

Louis Vernon Pinkham: Sales in the quarter were up 26.4% overall, but down 7.5% on a per-forma organic basis, or down 7.1% excluding industrial, as we continued to see weak end-market demand in residential HVAC and factory automation. Proforma orders in the quarter were down 4.3% on a daily basis, excluding industrial, and up 6% sequentially. While the first quarter began with roughly flat orders in January, trends weakened during the quarter, entirely attribu Notably, the book bill was approximately 1.1 in the quarter, the first time in four quarters that we had a bill rate above one.

Louis Vernon Pinkham: Now turning to our first quarter results.

Louis Vernon Pinkham: Our team delivered a strong first quarter, despite some persistent end market headwinds.

Louis Vernon Pinkham: We summarize first quarter is demonstrating strength and outperformance in Ips on.

Louis Vernon Pinkham: On the topline and with margins net of continued end market headwinds in PFS with AMC tracking largely in line, allowing us to hold our full year adjusted EPS guidance aside from impacts related to selling industrial systems.

Louis Vernon Pinkham: Yeah.

Louis Vernon Pinkham: Sales in the quarter were up 26, 4% overall, but down seven 5% on a pro forma organic basis or down seven 1%, excluding industrial as we continued to see weak end market demand in residential HVAC and factory automation.

Louis Vernon Pinkham: Pro forma orders in the quarter were down four 3% on a daily basis, excluding industrial and up 6% sequentially.

Louis Vernon Pinkham: While first quarter began with roughly flat orders in January.

Louis Vernon Pinkham: Trends weakened during the quarter entirely attributable to PFS.

Louis Vernon Pinkham: Notably book Bill was approximately $1 one in the quarter. The first time in four quarters that we had a book to bill rate above one.

Louis Vernon Pinkham: In April, our pro forma orders were down approximately 2 percent, trending better than the first quarter exit rate. Order growth rates in IPS and PES actually improved sequentially in April, but AMC saw some incremental pressure that we would attribute to order timing. Rob will share more detail in this session. Despite first quarter top line pressures, margins in the quarter were strong.

Louis Vernon Pinkham: In April our pro forma orders were down approximately 2% trending better than the first quarter exit rate.

Louis Vernon Pinkham: Order growth rates in Ips and PFS actually.

Louis Vernon Pinkham: Improved sequentially in April, but AMC saw some incremental pressure that we would attribute to order timing.

Louis Vernon Pinkham: Rob will share more detail on this session.

Louis Vernon Pinkham: Despite first quarter topline pressures margins in the quarter were strong.

Louis Vernon Pinkham: Our adjusted gross margin came in at 37.4% excluding industrial, mainly reflecting our synergies, 80-20, and lean action. Adjusted EBITDA margin of 20.5% was up 100 basis points versus the prior year on a pro forma basis, aided by delivering $26 million in synergies, which keeps us on track to achieve $90 million this year. Excluding industrial systems, our first quarter adjusted EBITDA margin was 21.5 percent, up 80 basis points versus the prior year pro forma level.

Louis Vernon Pinkham: Our adjusted gross margin came in at 37, 4% excluding industrial.

Louis Vernon Pinkham: Mainly reflecting our synergies 80, 20 and lean actions.

Louis Vernon Pinkham: Adjusted EBITDA margin up 25% was up 100 basis points versus the prior year on a pro forma basis aided by delivering $26 million in synergies, which keeps us on track to achieve $90 million this year.

Louis Vernon Pinkham: Excluding industrial systems, our first quarter adjusted EBITDA margin was 21, 5% up 80 basis points versus the prior year pro forma level.

Louis Vernon Pinkham: Lastly, we delivered $65 million of adjusted free cash flow, a strong result in the seasonally softer first quarter, and we are on track to deliver $700 million of adjusted free cash flow this year. We paid down $135 million of debt in the quarter. Our anticipated annual adjusted cash flow this year, plus net proceeds from the industrial systems sale, should enable over $900 million of debt paydown in 2024. All things considered, a solid start to 2020.

Louis Vernon Pinkham: Lastly, we delivered $65 million of adjusted free cash flow a strong result in the seasonally softer first quarter.

Louis Vernon Pinkham: And are on track to deliver $700 million of adjusted free cash flow this year.

Louis Vernon Pinkham: We paid down $135 million of debt in the quarter.

Louis Vernon Pinkham: Our anticipated annual adjusted cash flow this year plus net proceeds from the industrial system sale should enable over $900 million of debt Paydown in 2024.

Louis Vernon Pinkham: All things considered a solid start to 2024.

Louis Vernon Pinkham: Moving on, you may recall that each quarter I spend a few minutes introducing one of our principal AMC businesses to help investors better appreciate how we are well positioned to accelerate profitable growth. This quarter, I'd like to spend a couple of minutes discussing our conveying business. As you can see on the left-hand side of this slide, this is about a $400 million business for us, and we expect it to grow at a high single-digit rate this year.

Speaker Change: Shifting focus you may recall that each quarter I have been spending a few minutes introducing one of our principal AMC businesses to help investors better appreciate how we are well positioned to accelerate profitable growth.

Louis Vernon Pinkham: Key brands are also listed, which are a valuable core asset because they signify quality and reliability plus differentiated competencies in areas such as line speed and sustainability, focused on reducing water consumption and energy efficiency. Conveyance-focused markets, warehouse, beverage, and food all benefit from secular tailwinds. We serve these markets by designing and manufacturing conveying modules and subsystems, including palletizers and depalletizers, along with a range of highly engineered components and subsystems, as well as project management and engineering services.

Louis Vernon Pinkham: This quarter I'd like to spend a couple of minutes discussing our conveying business.

Louis Vernon Pinkham: As you can see on the left hand side of this slide this is about a $400 million business for us and we expect it to grow in the high single digit rate this year.

Louis Vernon Pinkham: Key brands are also listed which are a valuable core asset because of the signify quality and reliability plus differentiated competencies in areas such as line speed and sustainability.

Louis Vernon Pinkham: <unk> focused on reducing water consumption.

Louis Vernon Pinkham: Energy efficiency.

Louis Vernon Pinkham: Conveyance focused markets warehouse beverage and food all benefit from secular tailwind.

Louis Vernon Pinkham: We serve these markets by designing and manufacturing campaign modules and subsystems, including <unk> and <unk>, along with a range of highly engineered components and sub systems as well as project management and engineering services.

Louis Vernon Pinkham: While growth in Kamei has been constrained in recent years due to weakness in the beverage and warehouse and market, our teams have been focused on outgrowth initiatives, and they are making great progress. How we are winning share is summarized on the lower left-hand side of the slide. Increasingly, growth and conveying will be driven by selling powertrains. As a reminder, a powertrain is a solution that comprises the critical power transmission components that link a motor to the application it is powering, sold as one integrated subsystem.

Louis Vernon Pinkham: While growth in campaign has been constrained in recent years on weakness in the beverage and warehouse end market.

Louis Vernon Pinkham: Our teams have been focused on outgrowth initiatives and Theyre, making great progress.

Louis Vernon Pinkham: How we are winning share as summarized on the lower left hand side of this slide increasingly growth and campaign will be driven by selling powertrain. As a reminder, our powertrain is a solution that comprises the critical power transmission components that link a motor to the application it is powering.

Louis Vernon Pinkham: As one integrated subsystem.

Louis Vernon Pinkham: In the case of conveying, what is being powered are belts, conveyors, palletizers, and depalletizers. These are designed through cross-functional collaboration between our conveying business and the applicable teams across the business. The customer value proposition is ease of doing business, an ability to outsource certain engineering functions, plus the greater reliability and performance that comes when we engineer the various pieces together into a unified system. At the bottom of this slide are some great examples of differentiated product solutions.

Louis Vernon Pinkham: In the case of conveying what is being powered our belt conveyors Palletize and deep Palatitis. These.

Louis Vernon Pinkham: These are designed through cross functional collaboration between our conveying business and the applicable teams across the business.

Louis Vernon Pinkham: The customer value prop is ease of doing business and ability to outsource certain engineering functions plus the greater reliability and performance that comes when we engineered the various pieces together into a unified system.

Louis Vernon Pinkham: On the bottom of this slide are some great examples of differentiated product solutions.

Louis Vernon Pinkham: The first is our ModSort branded mobile flat sorter, which sorts products or packages in a warehouse or distribution center. This particular example leverages our core competency in high-speed conveying. It can sort 3,000 parcels per hour versus a more typical offering that has 30 to 40% lower sortation rates, thereby reducing the needs for manual labor and improving package handling efficiency. In addition to the ModSort module, this subsystem uses additional conveying components, plus a Regal Rexnord motor, gear, and bearing.

Louis Vernon Pinkham: First is our mod sort branded mobile flat sorter, which sorts of products or packages in a warehouse or distribution center.

Louis Vernon Pinkham: This particular example, leverages our core competency in high speed campaign.

Louis Vernon Pinkham: It can sort 3000 parcels per hour versus a more typical offering that has 30% to 40% lower sortation rates, thereby reducing the need for manual labor and improving package handling efficiency.

Louis Vernon Pinkham: In addition to the Mod sort module. This sub system uses additional conveyed component plus a regal rexnord and motor or gear and bearings.

Louis Vernon Pinkham: Next is Run-Dry Belting, designed for beverage applications. The Average Beverage Company uses four to seven gallons of water to produce a single gallon of its product, often in combination with soap, to create a lubricant that reduces friction, flushes away spills, dissipates heat, and reduces chain wear. The proprietary design of our run-dry belting requires almost no lubrication. We eliminate the water needed for conveyor lubrication by up to 80-90% and enable 10% better energy efficiency by reducing the load on the drive system.

Louis Vernon Pinkham: Next is run dry bell team designed for beverage applications. The average beverage company users 47 gallons of water to produce a single gallon of its products often in combination with <unk> to create a lubricant that reduces friction flushes away spills dissipate.

Louis Vernon Pinkham: Heat and reduces chain where.

Louis Vernon Pinkham: The proprietary design of the hour run dry belting requires almost no lubrication.

Louis Vernon Pinkham: We eliminate the water needed for conveyor lubrication by up to 80% to 90% and enabled 10% better energy efficiency by reducing the load on the drive system.

Louis Vernon Pinkham: The third product pictured is our Clean Top Metal Conveyor Belt for the food industry. Here, our differentiated value proposition is reliability and durability, which is enabled by our design and engineering approach. This product, used in a food production facility, has been proven to last six times longer than most competitors. I hope this gives you a better sense for why we see a robust growth outlook for our conveying business. While we think end markets will increasingly be a tailwind for us in the back half of 2024 and into 2025, the business is also doing so much more to accelerate its revenue growth. And with that, I'll turn the call over to Rob.

Louis Vernon Pinkham: The third product pictured is our clean top metal conveyor belt for the food industry.

Rob: Here, our differentiated value prop is reliability and durability, which is enabled by our design and engineering approach.

Rob: This product used in a food production facility has been proven in the last six times longer than most competitors.

Rob: I Hope this gives you a better sense for why we see a robust growth outlook for our Canadian business.

Rob: While we think end markets increasingly will be a tailwind for us in the back half of 2024 and into 2025. The business is also doing so much more to accelerate its revenue outgrowth.

Louis Vernon Pinkham: And with that I'll turn the call over to Rob.

Robert J. Rehard: Thanks Louis, and good morning everyone. I'd also like to thank our global team for their hard work in the quarter and over the last few years as we have been working diligently to transform our business organically and inorganically into a more durable and higher performing enterprise. Now, let's review our operating performance by segment. Starting with Automation and Motion Control, or AMC, net sales in the first quarter were up 96.9% from the prior year, reflecting the ultra-acquisition.

Rob: Thanks, Liz and good morning, everyone.

Robert J. Rehard: I'd also like to thank our global team for their hard work in the quarter and over the last few years as we have been working diligently to transform our business organically and inorganically into a more durable and higher performing enterprise.

Robert J. Rehard: Now, let's review our operating performance by segment.

Robert J. Rehard: Starting with automation and motion control, our AMC net sales in the first quarter were up 96, 9% to the prior year, reflecting the ultra acquisition pro forma for the ultra acquisition organic sales were down four 5% and aligned with expectations, reflecting strength in the data center medical and aerospace.

Robert J. Rehard: Pro forma for the ultra-acquisition, organic sales were down 4.5% and aligned with expectations, reflecting strength in the data center, medical, and aerospace end markets, which was more than offset by weakness in the global discrete automation markets. Adjusted EBITDA margin in the quarter was 22.5%, in line with our expectations. This margin is down 50 basis points versus the prior year on a reported basis, which, as a reminder, is comparing to a period when we did not have all trade and hour results.

Robert J. Rehard: End markets, which was more than offset by weakness in global discrete automation market.

Robert J. Rehard: Adjusted EBITDA margin in the quarter was 22, 5% in line with our expectation is.

Robert J. Rehard: This margin is down 50 basis points versus prior year on a reported basis, which as a reminder is comparing to a period. When we did not have oil trading our results on a comparable pro forma basis.

Robert J. Rehard: On a comparable pro forma basis, AMC's first quarter adjusted earnings were up 10 basis points versus the prior year period. The pro forma margin performance reflects pockets of strength in mixed positive markets, including medical, aerospace, and data center, synergy realization, and good discretionary cost management, partially offset by lower volume, on a pro forma, daily, organic basis were down 2.7% in the first quarter; orders continue to reflect weakness in our short cycle discrete factory automation.

Robert J. Rehard: First quarter adjusted EBITDA margin was up 10 basis points versus the prior year period.

Robert J. Rehard: The pro forma margin performance reflects pockets of strength and mix positive markets, including medical Aerospace and data center synergy realization and good discretionary cost management, partially offset by lower volume.

Robert J. Rehard: Orders in AMC on a pro forma daily organic basis or down two 7% in the first quarter.

Robert J. Rehard: Orders continued to reflect weakness in our short cycle discrete factory automation business. However, sequential orders were up approximately 6% with orders for longer cycle automation and for our aerospace business remains, particularly healthy and contributing some backlog growth.

Robert J. Rehard: However, sequential orders were up approximately 6%, with orders for longer cycle automation and for our aerospace remaining particularly healthy and contributing to some backlog growth. Notably, book-to-bill in the quarter was 1.08, marking the first time in the last four quarters that we saw a book-to-bill above 1.

Robert J. Rehard: Notably book to Bill in the quarter was $1 eight marking the first time in the last four quarters that we saw a book to bill above one.

Robert J. Rehard: However, April orders for AMC were down nearly 5% on a daily organic basis, due mostly to lumpy, large project orders. Before moving on, I want to spend a few extra minutes providing a bit more color on what we are seeing in order rates and discrete automation, which is primarily in the Motion Control Solutions, or MCF, business, where we have seen the most pressure within AMC over the last couple quarters and why we remain confident in a stronger second half.

Robert J. Rehard: However April orders for AMC were down nearly 5% on a daily organic basis due mostly to the lumpy large project orders.

Robert J. Rehard: Before moving on I want to spend a few extra minutes, providing a bit more color on what we're seeing in order rates in discrete automation, which was primarily in the motion control solutions, our NCS business.

Robert J. Rehard: While we have seen the most pressure within AMC over the last couple of quarters and why we remain confident in a stronger second half.

Robert J. Rehard: Year-over-year, first quarter orders were up approximately 3%, however, sequentially, they saw a 7% decline due to two large orders in our government and market that landed in the fourth quarter. As we stated previously, order patterns in this business do tend to be lumpy.

Robert J. Rehard: Year over year first quarter orders were up approximately 3%. However sequentially saw a 7% decline due to two large orders in our government and market Atlanta in the fourth quarter.

Robert J. Rehard: As we stated previously order patterns in this business do tend to be lumpy outside of the sequential impact we experienced a healthy 38% sequential orders improvement in all of our other key end markets combined including medical Robotics factory automation and autonomous solutions.

Robert J. Rehard: Outside of this sequential impact, we experienced a healthy 38% sequential orders improvement in all of our other key end markets combined, including medical, robotics, factory automation, and autonomous solutions. This is the second consecutive quarter of Bookings Improvement. I'll provide a bit more color on this as it relates to our guidance assumptions later in this presentation. Turning to Industrial Powertrain Solutions, or IPS, net sales in the first quarter were up 55.3% from the prior year, reflecting the acquisition.

Robert J. Rehard: This is the second consecutive quarter of bookings improvement.

Robert J. Rehard: I'll provide a bit more color on this as it relates to our guidance assumptions later in this presentation.

Robert J. Rehard: Turning to industrial powertrain solutions or Ips net sales in the first quarter were up 55, 3% to the prior year, reflecting the ultra acquisition pro forma for the acquisition organic sales were down 1%, which was several points above our expectation.

Robert J. Rehard: Pro forma for the acquisition, organic sales were down 1%, which was several points above our expectations. Growth in the quarter mainly reflected strength in the general industrial and energy sectors, offset by weakness in the alternative energy, agriculture, and construction markets. Adjusted EBITDA margin in the quarter was 25.8%, firmly above our expectations.

Robert J. Rehard: Growth in the quarter, mainly reflects strength in the general industrial and energy markets offset by weakness in the alternative energy agriculture and construction markets.

Robert J. Rehard: Adjusted EBITDA margin in the quarter was 25, 8% firmly above our expectations, while that margin is down 350 basis points versus the prior year on a reported basis similar to what I said when discussing AMC that varian is comparing to a period. When we did not have altering our results, but margins are up 110.

Robert J. Rehard: While that margin is down 350 basis points versus the prior year on a reported basis, similar to what I said when discussing AMC, that variance is compared to a period when we did not have an alteration in our results. But margins are up 120 basis points versus the prior year on a comparable pro forma. It is worth noting that the margin decline you see on a reported basis, to a larger extent, reflects adding Altra's business, which ran at lower margins, to our legacy Regal Rex.

Robert J. Rehard: One basis points versus the prior year comparable pro forma basis.

Robert J. Rehard: It is worth noting that the margin decline.

Robert J. Rehard: Our reported basis to our largest debt reflects adding altra business, which ran at lower margins for our legacy <unk> business a significant part of our synergy plan is rendered is leveraging our 80 20 and restructuring playbook legacy altra operations and strengthening those margins to the lever level.

Robert J. Rehard: A significant part of our Synergy Plan is leveraging our 80-20 and restructuring playbook in the Legacy Ultra operations and strengthening those margins to the level of our Legacy Regal Bill. On a pro forma basis, the margin improvement at IPS reflects tailwinds from synergies and slightly favorable mix, along with strong discretionary cost management partially offset by headwinds from lower volumes. Orders in IPS on a pro forma, daily, organic basis were down 3.1% in the first quarter.

Robert J. Rehard: Our legacy Rebuilders.

Robert J. Rehard: On a pro forma basis, the margin improvement at Ips reflects tailwind from synergies and slightly favorable mix along with strong distress discretionary cost management, partially offset by headwinds from lower volumes.

Robert J. Rehard: Orders in Ics on a pro forma daily organic basis or down three 1% in the first quarter.

Robert J. Rehard: Book to Bill in the quarter was 1.06, and similar to what we saw at AMC, this was the first time in the last four quarters that we saw a Book to Bill above 1, giving us continued confidence in our guidance assumptions and vetted drive. In April, orders on a daily organic basis were down just below 1%, an improvement versus the first quarter, although orders were down once again. 1% if you want.

Robert J. Rehard: Book to Bill in the quarter was one point Asics and similar to what I saw what we saw in E&C. This was the first time in the last four quarters that we saw in book to Bill above one, giving us continued confidence in our guidance assumptions embedded for Ips.

Robert J. Rehard: In April.

Robert J. Rehard: Orders on a daily organic basis or down just below 1% an improvement versus the first quarter.

Robert J. Rehard: Although orders were down one down.

Robert J. Rehard: 1% in Q1 they.

Robert J. Rehard: They were up more than 8% on a sequential basis, which is stronger than the typical seasonal improvement we saw from fourth quarter to first quarter. We continue to expect stronger orders performance in IPS in the second half, as shipments become much. Turning to Power Efficiency Solutions, or PES, organic sales in the first quarter were down 17.8% from the prior year, below our expectations. The short bowling performance was driven by continued channel de-stocking activity in the North America Furnace business, weaker demand in the North America residential HVAC market, and headwinds in Europe and Asia-Pacific commercially.

Robert J. Rehard: They were up more than 8% on a sequential basis, which is stronger than the typical seasonal improvement we saw from fourth quarter to first quarter. We continue to expect stronger orders performance in Ips in the second half as.

Robert J. Rehard: Compares become much easier.

Robert J. Rehard: Turning to power efficiency solutions, our Pts organic sales in the first quarter were down 17, 8% from the prior year below our expectations.

Robert J. Rehard: The shortfall in performance was driven by continued channel Destocking activity in the North America furnace market.

Robert J. Rehard: Weaker demand in the North America residential HVAC market and headwinds in the Europe, and Asia Pacific commercial HVAC markets.

Robert J. Rehard: While headwinds in these markets were quite severe, we did see pockets of strength, including in our North America commercial HVAC business and in pool markets. We believe a warmer winter was a factor weighing on furnace sales, which left the channel elevated in the. We also believe air conditioning inventory levels remain elevated in parts of the HVAC distribution channel.

Robert J. Rehard: Headwinds in these markets were quite severe we did see pockets of strength, including our North America commercial HVAC business and in pool markets.

Robert J. Rehard: We believe a warmer winter was a factor weighing on furnace sales, which led to the channel was still elevated inventories.

Robert J. Rehard: We also believe air conditioning inventory levels remain elevated in parts of the HVAC distribution channel.

Robert J. Rehard: The adjusted EBITDA margin in the quarter for PES was 13.2%, down 50 basis points versus the prior year period, and below our expectations, key contributors to the PES margin performance, or lower volumes and weaker mix. We expect PES margins to improve to a mid-teens rate in the second quarter and track back to a high teens rate in the second half as volumes improve, mix normalizes, and we realize benefits from the restructuring actions that we are taking, such as shifting orders. Orders in PES for the first quarter were down 7.6% on a daily basis. This weakness reflects continued pressure on residential HVAC and incremental weakness in commercial HVAC, specifically in Europe and Asia.

Robert J. Rehard: The adjusted EBITDA margin in the quarter for Pts was 13, 2% down 50 basis points versus the prior year period and below our expectations.

Robert J. Rehard: Key contributors to the margin performance or lower volumes and weaker mix.

Robert J. Rehard: We expect margins to improve to a mid teens rate in second quarter and track back to a high teens rate in second half as volumes improved mix normalizes and we realized benefits from restructuring actions that we're taking in this business.

Robert J. Rehard: Shifting to orders.

Robert J. Rehard: Orders in Pts for the first quarter were down seven 6% on a daily basis.

Robert J. Rehard: Fitness reflects continued pressure in residential HVAC and incremental weakness in commercial HVAC, specifically in Europe and Asia. We are also experiencing pockets of pressure in our general purpose motors business, both in distribution likely tied to lingering destocking and with certain Oems.

Robert J. Rehard: We are also experiencing pockets of pressure in our general purpose motors business, both in distribution, likely tied to lingering destocking, and with certain OEMs. Additionally, we see some of our HVAC customers being more cautious about placing orders as they evaluate the underlying strength of global HVAC. Daily orders in April improved somewhat to down approximately 2% versus the prior year, which is directionally encouraging, but we believe it would be premature to conclude this trend would be sustainable at best.

Robert J. Rehard: We see some of our HVAC customers being more cautious about placing orders as they evaluate the underlying strength of global HVAC markets.

Robert J. Rehard: Daily orders in April improved sunlight to down approximately 2% versus prior year, which is directional encouraging but we believe would be premature to conclude this trend will be sustainable at this point.

Robert J. Rehard: While recent commentary from some of our OEM customers sounds a bit more encouraging, we have also experienced repeated false positives from some of them in recent quarters regarding inflection in residential HR. As a result, we are remaining cautious about the near-term outlook for PES and due to the results we are reporting for Q1, along with the expectations for Q2, are lowering our growth expectation for this business in 2024, a dynamic that I will discuss in more detail in the Outlook portion of this call.

Robert J. Rehard: While recent commentary from some of our OEM customers sounds a bit more encouraging we have also experienced repeated false positives from some of them in recent quarters regarding inflection in residential HVAC.

Robert J. Rehard: As a result, we are remaining cautious about the near term outlook for PFS and due to the results we are reporting for Q1.

Robert J. Rehard: Along with the expectations for Q2 are lowering our growth expectation for this business in 2024.

Robert J. Rehard: The dynamic that I will discuss in more detail in the outlook portion of this call.

Robert J. Rehard: That said, we remain cautiously optimistic about a stronger second half for PES, as comparisons become easier in the absence of prior-year destock administrations. We also built some backlog in the quarter, with a book-to-bill of 1.1 in the quarter, which should help us in the near future. We highlight some additional financial updates for your reference. Notably, on the right side of this page, you'll see we ended the quarter with total debt of $6.25 billion and net debt of $5.7 billion. We repaid $135 million of gross debt in a quarter.

Robert J. Rehard: That said, we remain cautiously optimistic about a stronger second half for ves as compared to become easier in the absence of prior year Destock headwinds. We also built some backlog in the quarter with a book to Bill of one one in the quarter, which should help us in the near future.

Robert J. Rehard: On the following slide.

Robert J. Rehard: We highlight some additional financial updates for you referenced notably on the right side of this page you will see we ended the quarter with total debt of $6 5 billion.

Robert J. Rehard: And net debt of $5 7 million.

Robert J. Rehard: We repaid $135 million of gross debt in the quarter, we plan to deploy the net proceeds from the industrial system sale had debt reduction, which would further reduce our debt by approximately $355 million.

Robert J. Rehard: We plan to deploy the net proceeds from the industrial system sale to debt reduction, which should further reduce our debt by approximately $355 million. Adjusted free cash flow in the quarter was $64.6 million, a strong performance considering normal seasonality, and we are on track to deliver $700 million of adjusted free cash flow this year. Consistent with our prior plans, we expect to deploy this free cash flow after dividend payments to pay down debt.

Robert J. Rehard: Adjusted free cash flow in the quarter was $64 6 million strong performance considering normal seasonality and we are on track to deliver $700 million of adjusted free cash flow. This year consistent with our prior plans, we expect to deploy this free cash flow after dividend payments to debt reduction as a result of the combination of the industrial sales net proceeds.

Robert J. Rehard: As a result, the combination of the industrial sales net process plus post-dividend free cash flow should enable us to pay down approximately $900 million of our debt in 2024 and benefit from the associated lower income. Moving on to the, we are making several adjustments to our guidance for 2024, which are detailed in the table on the right-hand side of this slide. Also included in the table is our standard disclosure on below-the-line items, with specific indications for what has.

Robert J. Rehard: <unk> plus post dividend free cash flow should enable us to pay down approximately $900 million of our debt in 2024.

Robert J. Rehard: And benefit from the associated lower interest costs.

Robert J. Rehard: Moving on to the outlook, we are making several adjustments to our guidance for 2024, which are detailed in the table on the right hand side of this slide.

Robert J. Rehard: Also included in the table is our standard disclosure on below the line items with specific indications for what has changed.

Robert J. Rehard: First, having closed on the sale of industrial systems on April 30th, we are removing it from the Outlook from May onwards, as outlined in the second column from the left. Removing Industrial is a headwind to sales of approximately $345 million but a benefit to our adjusted EBITDA margin worth roughly 70 basis points for the year. The sail also has some below-the-line input, and most notably, lower interest rates; we are deploying sale proceeds to pay down our debt. There is also a small impact on the minority interest line in the P&L, as detailed in the tables. The net impact on adjusted earnings per share from these factors is negative 15%.

Robert J. Rehard: First having closed on the sale of industrial systems on April 30, we are removing it from the outlook from May onwards, as outlined in the second column from the left.

Robert J. Rehard: Removing industrial as a headwind to sales of approximately $345 million, but a benefit to our adjusted EBITDA margin worth roughly 70 basis points for the year.

Robert J. Rehard: The sale also had some below the line impact most notably lower interest expense as we are deploying sales proceeds to pay down our debt.

Robert J. Rehard: There is also a small impact of the minority interest line in the P&L as detailed in the table the net impact to adjusted earnings per share from these factors as negative 15.

Robert J. Rehard: Note that Industrial Systems will remain in our second quarter results for the month of April, and its performance will remain in our annual disclosure for the January through April 30th period of ownership. We are updating the outlook for our remaining business, outlined in the third column from the left. These updates include reducing our sales outlook by $60 million, mainly in PES, but raising our expectation for adjusted EBITDA margins by 10 basis points, factory mix impacts, as well as making several below-the-line adjustments as outlined in the table. The net impact of these adjustments is neutral to adjusted earnings per share.

Robert J. Rehard: Note that industrial systems will remain in our second quarter results for the month of April and its performance will remain in our annual disclosures for the January through April 30 year period of ownership.

Robert J. Rehard: Second.

Robert J. Rehard: We are updating the outlook for our remaining business outlined in the third column from the left.

Robert J. Rehard: These updates include reducing our sales outlook by $60 million, mainly NPS, but raising our expectation for adjusted EBITDA margins by 10 basis points factory mix impact as well as maintenance several below the line adjusted adjustments as outlined in the table.

Robert J. Rehard: The net impact of these adjustments is neutral to adjusted earnings per share.

Robert J. Rehard: The combined impacts of the industrial system sale and the adjustments to our remaining business are presented in the last column on the right and reduces the midpoint of our adjusted EPS guidance by $10, for a new EPS guidance range for full year 2024 of $9.60 to $10.40. Finally, as mentioned previously, adjusted free cash flow is expected to be $700 million this year.

Robert J. Rehard: The combined impacts of the industrial system sale and the adjustments to our remaining business are presented in the last column on the right and reduces the midpoint of our adjusted EPS guidance range.

Robert J. Rehard: To $10 for a new EPS guidance range for full year 2024 of $9 60 to $10 40.

Robert J. Rehard: Finally, as mentioned previously adjusted free cash flow is expected to be $700 million this year.

Robert J. Rehard: On this slide.

Robert J. Rehard: We provide more specific expectations for our second quarter and full year performance by segment, on revenue and adjusted EBIT to market. Note that the full year 2024 Guided Growth Rates for AMC and IPS are off of 2023, the Proforma Region. Starting with AMC, for the second quarter, we anticipate sales of approximately $410 million, with EBITDA margins of approximately 23%, a modest improvement versus first quarter performance on both metrics for the year. We now expect A and Z sales to be flat, a slight reduction versus our prior expectation based on updated order rates discussed earlier specific to discrete factory automation.

Robert J. Rehard: We provide more specific expectations for our second quarter and full year performance by segment.

Robert J. Rehard: On revenue and adjusted EBITDA margin note.

Robert J. Rehard: Note that the full year 2024 guided growth rates for AMC and Ips are off a 2023 pro forma results.

Robert J. Rehard: Starting with AMC for the second quarter, we anticipate sales of approximately $410 million with EBITDA margins of approximately 23% a modest improvement versus first quarter performance on both metrics for the year.

Robert J. Rehard: We now expect AMC sales to be flat, a slight reduction versus our prior expectation based on updated order rate discussed earlier specific to discrete factory automation.

Robert J. Rehard: We expect 2024 adjusted EBITDA margins to be in a range of 24 to 25 percent, consistent with our previous expectation. Overall, we continue to see strength in the data center, aerospace, and medical markets within AMC, net of headwinds in discrete factory automation. Now, I circle back to the MCS business I discussed earlier. Our AMC outlook implies only a slight Q2 revenue improvement due to the lingering discrete factory automation market dynamics, but we are more bullish about the future growth potential due to a couple key factors. First, we saw a 49% larger project funnel in the first quarter versus the same period last year. This includes roughly 37% growth in new product design and prototype width.

Robert J. Rehard: We expect 2024, adjusted EBITDA margins to be in a range of 24%, 25% consistent with our previous expectation overall, we continue to see strength in the data center aerospace and medical markets within AMC net of headwinds in discrete factory automation.

Robert J. Rehard: Circling back to the NCS business I discussed earlier, our AMC outlook implies only a slight Q2 revenue improvement due to the lingering discrete factory automation market dynamics, but we are more bullish about the future growth potential due to a couple of key factors first we saw a 49%.

Robert J. Rehard: Project funnel in first quarter versus the same period last year.

Robert J. Rehard: This includes roughly 37% growth and new product design and prototype wins.

Robert J. Rehard: Second, we are gaining traction in our strategic, secular in-market outside of factory automation, such as aerospace, medical automation, and robotics, where new programs and new products are ramping up. The orders in these strategic end markets typically come with a longer time to fill than factory automation orders, but our order growth over the last two quarters is building a healthier scheduled backlog mix in Q3 and Q4 of this year. This growing strategic in-market success provides us with a cautiously optimistic outlook for the second half of this year. Now, shifting to IPS.

Robert J. Rehard: Second we are gaining traction in our strategic secular end markets outside of factory automation, such as aerospace medical automation, and robotics, where new programs and new products are ramping up.

Robert J. Rehard: The orders and the strategic end market typically come with a longer time to fill and factory automation orders, but our orders growth over the last two quarters is building a healthier scheduled backlog mix in Q3 and Q4 of this year.

Robert J. Rehard: This growing strategic and market success provides us with a cautiously optimistic outlook the second half of this year.

Robert J. Rehard: Now shifting to Ibs.

Robert J. Rehard: We anticipate sales of approximately $670 million in the second quarter, with margins of approximately 25%. [inaudible] For the year, we now expect IPS sales to be flat, a slight improvement versus our prior expectations. We are feeling a little bit better about the outlook for IPS after a stronger start to the year, but we are mindful of pockets of weakness, particularly in the ag and construction markets and in parts of general industry. We expect IPS adjusted EBITDA margins to be in a range of 25.5 to 26.5%, which at the midpoint would be 50 basis points above our previous expectations.

Robert J. Rehard: We anticipate sales of approximately $670 million in the second quarter with margins of approximately 25%.

Robert J. Rehard: An improvement versus first quarter performance on sale, but a modest sequential decline on margin factoring the stronger top line momentum we saw in first quarter, but some normalizing that mix as we do not expect the same level of benefit in second quarter that we saw in the first quarter.

Robert J. Rehard: For the year, we now expect sales to be flat, a slight improvement versus our prior expectations.

Robert J. Rehard: We are feeling a little bit better about the outlook for Ips after a stronger start to the year, but are mindful of pockets of weakness, particularly in the AG and construction markets and in parts of general industrial.

Robert J. Rehard: We expect adjusted EBITDA margins to be in a range of $25 five to 26, 5%, which at the midpoint would be 50 50 basis points above our previous expectations.

Robert J. Rehard: Our margin outlook for IPS continues to reflect nice tailwinds from Synergy's net of full-year mixed pressure and select growth investors. For PES, we anticipate sales of approximately $395 million in the second quarter, with margins of approximately 16%, a modest improvement on sales versus the first quarter and a somewhat stronger improvement versus the first quarter of March. For the year, we now expect sales to decline at a mid-single-digit rate, weaker than our prior expectation for sales to be flat.

Robert J. Rehard: Our margin outlook for Ips continues to reflect nice tailwind from synergies net of full year mix pressure.

Robert J. Rehard: And select growth investments.

Robert J. Rehard: For PFS, we anticipate sales of approximately $395 million in the second quarter with margins of approximately 16%.

Robert J. Rehard: Improvement on sales versus first quarter, and a somewhat stronger improvement versus first quarter on margin.

Robert J. Rehard: For the year, we now expect sales to decline at a mid single digit rate weaker than our prior expectation for sales to be flat versus the prior year.

Robert J. Rehard: We expect adjusted EBITDA margins to be in a range of 16 to 18 percent, which is also down versus our prior. As I mentioned earlier, PES got off to a slower start than expected in our residential HVAC business, and we remain cautious about the near-term outcome. We continue to be more optimistic about the second half as compares ease significance, and our new products gain momentum and on margin as we see benefits from restructured actions we are taking. We also acknowledge more optimistic commentary from certain HVAC OEM customers on Reggie HVAC, though we have not factored in your outlook. To the contrary, we're building in some incremental. The improvement in orders in April versus the first quarter is also encouraged, but we think it is premature to assume that there will be a containment.

Robert J. Rehard: We expect adjusted EBITDA margins to be in a range of 16% to 18%, which is also down versus our prior expectation.

Robert J. Rehard: As I mentioned earlier.

Robert J. Rehard: After a slower start than expected in our residential HVAC business and we remain cautious about the near term outlook.

Robert J. Rehard: We continue to be more optimistic about the second half as comparisons ease significantly and our new products gain momentum and on margin as we see benefits from restructuring actions we are taking.

Robert J. Rehard: We also acknowledge more optimistic commentary from certain HVAC OEM customers on <unk>, though we have not factored into our outlook to the contrary we are building in some incremental conservatism.

Robert J. Rehard: The improvement in orders in April versus first quarter is also encouraging.

Robert J. Rehard: But we think premature to assume that continues.

Robert J. Rehard: All that said, if we take a step back for a moment, we believe the Resi HVAC markets will inflect at some point in the near future, and we believe we're closer to that happening than we've ever been in over a year. Before turning the call over to the operator for questions, I wanted to underline a couple points Louis shared in his remarks. Over 1,000 basis points of adjusted gross margin improvement in the last four years, and a path of 40% exiting next year, a similar path to over a billion dollars in annual adjusted free cash flow on a transformed portfolio that has dramatically shifted to more durable products and market services.

Robert J. Rehard: All that said if we take a step back for a moment, we believe the <unk> market will inflect at some point in the near future and we believe we are closer to that happening than we've ever been in over a year.

Robert J. Rehard: Before turning the call over to the operator for questions I wanted to underlying a couple of points Louis shared in his remarks.

Robert J. Rehard: Over 1000 basis points of adjusted gross margin improvement in the last four years and a path of 40% exiting next year.

Robert J. Rehard: A similar path to over $1 billion in annual adjusted free cash flow.

Robert J. Rehard: And a transformed portfolio that has dramatically shifted to more durable products and markets served.

Robert J. Rehard: In 2019, power transmission was about 25% of our business, with the remainder of motors. Today, automation and power transmission is 75% of our portfolio, and we have a motors and air moving business that is much more focused and profitable. We are excited about our future, and we believe we have a tremendous amount of additional value to create for our stakeholders as we continue to expand margin, raise annual free cash flow, pay down our debt, and accelerate organic growth. And with that, operator, we are ready to take questions.

Robert J. Rehard: In 2019 power transmission was about 25% of our business with the remainder of others today automation and power transmission is 75% of our portfolio and we had our motors and are moving business that is much more focused and profitable.

Robert J. Rehard: We are excited about our future and we believe we have a tremendous amount of additional value to create for our stakeholders. As we continue to expand margin rate annual free cash flow pay down our debt and accelerate organic growth.

Robert J. Rehard: And with that operator, we are ready to take questions.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Mike Halloran with Baird. Please go ahead.

Speaker Change: We will now begin the question and answer session.

Operator: To ask a question you May press Star then one on your telephone keypad. If you are using a speaker phone. Please pick up your handset before pressing the keys.

Michael Patrick Halloran: Any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Operator: The first question comes from Mike Halloran with Baird. Please go ahead.

Michael Patrick Halloran: Hey, good morning, everyone.

Michael Patrick Halloran: Hey, good morning, Mike.

Michael Patrick Halloran: So, certainly heard all Rob's remarks about seasonality 1H, 2H, but maybe Louis, you could just talk to your confidence level in seeing that ramp into the back half of the year, maybe frame it as what needs to happen to hit the high end of the guidance and what the market looks like. And then, similarly, at the low end of the guidance, what kind of market are we seeing here? What kind of sequentials, however you want to frame it, are we seeing if we're at the low end of the revenue guidance?

Michael Patrick Halloran: So certainly heard all robs remarks about seasonality one H two H, but maybe Louis you could just talk to your confidence level in seeing that ramp into the back half of the year and.

Michael Patrick Halloran: Maybe frame it is what needs to happen to hit the high end of the guidance and what does the market look like and then similarly at the low end of guidance, what kind of market that we've seen here what kind of sequential is however, you want to frame it.

Michael Patrick Halloran: Are we seeing if we're at the low end of the revenue guidance.

Louis Vernon Pinkham: Yeah, so I appreciate the question, Mike. You know, there are a couple of things here.

Louis: Yes so.

Louis: I appreciate the question Mike.

Louis Vernon Pinkham: First of all, if you look at the first half and the second half, it's about a 48-52 split now. There are really two things that have to be true for us. And we based our forecasting on, you know, the best information we had at the time. For that 52% to be true, we need our PES sales to rebound, and it's really the Resi HVAC piece that must improve. Now, you know, our book bill coming out of Q1 was 1.1, which gives us a little bit of confidence in that. However, our orders progressing through April are down two in the PES segment.

Louis: All of things here first of all.

Louis: You look at first half second half, it's about $48 52 split now.

Louis Vernon Pinkham: There's really two things that have to be true for us.

Louis Vernon Pinkham: And we based our forecasting on the best information, we had at the time.

Louis Vernon Pinkham: That 52% to be true, we need rps sales to rebound and it's really the <unk> piece that that.

Louis Vernon Pinkham: Must improve now.

Louis Vernon Pinkham: Our book to Bill coming out of Q1 was $1, one which gives us a little bit of confidence on that our orders.

Louis Vernon Pinkham: Progressing through April at down to in the Pts segment, and then just what we're hearing from the market from our channels and OEM give us some confidence, but we're going to be cautious right now because although we feel more confident today than we've ever felt.

Louis Vernon Pinkham: And then just what we're hearing from the market, from our channels and OEMs gives us some confidence. But we're going to be cautious right now, because although we feel more confident today than we've ever felt, January was pretty strong as well, and then it weakened through the quarter. So we feel that we've rightly positioned Q2, are still getting through the destock market headwinds, and then, with easier comps, recovery in the second half. The same holds true for factory automation, but less so it has a lesser impact on our overall business.

Louis Vernon Pinkham: January was.

Louis Vernon Pinkham: Pretty strong as well and then it weakened through the quarter. So.

Louis Vernon Pinkham: We feel.

Louis Vernon Pinkham: That we rightly positioned Q2.

Louis Vernon Pinkham: Still.

Louis Vernon Pinkham: Getting through the destock market headwinds and then with easier comps recover.

Louis Vernon Pinkham: A recovery in the second half.

Louis Vernon Pinkham: The same holds true for factory automation, but lesser so it has a lesser impact on our overall business. We feel really good about the order rates that we're seeing for the longer cycle piece of that business, Rob talked about our funnel being up 50% our win rates.

Louis Vernon Pinkham: We feel really good about the order rates that we're seeing for the longer cycle piece of that business. Rob talked about our funnel being up 50% or win rates being up significantly, which gives us confidence for the second half and into 25 in particular. But we do need to see the book bill continue to progress at about the same pace we saw in April. So as long as that holds true, we feel good.

Louis Vernon Pinkham: <unk> up significantly, which gives us confidence of the second half and into 'twenty five in particular, but we do need to see book Bill continued.

Louis Vernon Pinkham: <unk> continued to progress at about the same pace, we saw in April so as long as that holds true.

Louis Vernon Pinkham: We feel Phil good now the upside piece to your question.

Louis Vernon Pinkham: Now the upside piece to your question is if the rebound in the Resi HVAC business is stronger than what we're anticipating. And honestly, I'll tell you, we're being cautious. And so we think that's the best way to position ourselves for right now.

Louis Vernon Pinkham: Is this a rebound in the <unk> business is stronger than what we're anticipating.

Louis Vernon Pinkham: And honestly I'll tell you we are being cautious.

Louis Vernon Pinkham: And so we think thats, the best way to position ourselves for right now.

Louis Vernon Pinkham: Thanks for that. And then, as part of the mission statement update, you reiterated the exit rate margin commentary. So, if you could just talk about how that should play out over the next couple of years here from a linearity perspective, and then how tied to revenue that is versus how in control that is with just your internal actions.

Speaker Change: Thanks for that and then and then.

Louis Vernon Pinkham: As part of the mission statement update you reiterated the exit rate margin commentary so.

Louis Vernon Pinkham: If you could just talk about how that should play out over the next couple of years here from a linearity perspective, and then how tied to revenue that is versus how we can control that is with just your internal actions.

Louis Vernon Pinkham: Yeah, so a lot of it is just our internal actions. And so I think it's probably better to base it on 23 to give you an understanding of how we got there. So if you take 23 at 35% gross margins and 21% EBITDA, Industrial lists us by about 100 basis points on both GM and EBITDA. Synergies are about 250 basis points, and as you know, we've got $90 million of synergies this year and $65 million next year, and then about a point, a point and a half from NPV 80-20 and mix, and I tell you that that's a pretty straight line.

Louis Vernon Pinkham: Yes, so a lot of it is just our internal actions and so I think it's probably better to basic to build it off of 23 to.

Louis Vernon Pinkham: To give you an understanding of how we get there so if.

Louis Vernon Pinkham: If you take 23 at 35% gross margins and 21% EBITDA.

Louis Vernon Pinkham: Industrial lifts us by about 100 basis points on both GM and EBITDA.

Louis Vernon Pinkham: Synergies are about 250 basis points and as you know, we've got $90 million of synergies this year and $65 million next year, and then about a point or point and a half from NPV 80, 20 and mix and I would tell you that that's pretty straight line.

Louis Vernon Pinkham: Now all of that gets us to the 40% gross margin, but we are reinvesting about 100 basis points back in R&D over that same period, and so that's how you get to the 25% EBITDA margin. Hopefully, that's helpful. No, that's very helpful.

Louis Vernon Pinkham: All of that gets us to the 40% gross margins, but we are reinvesting about 100 basis points Baskin R&D through that same period and so that's how you get to the 25% EBITDA margins.

Speaker Change: Hopefully that's helpful.

Louis Vernon Pinkham: That was very helpful; I really appreciate it; thanks, Louis.

Speaker Change: No that's very helpful really appreciate it thanks Louis.

Speaker Change: Thanks, Mike.

Julian C.H. Mitchell: The next question is from Julian Mitchell with Barclays; please go ahead.

Louis Vernon Pinkham: The next question is from Julian Mitchell with Barclays. Please go ahead.

Louis Vernon Pinkham: Hi, good morning. Maybe I just wanted to sort of try and dial into the second half revenue guides for the industrial businesses, AMC and IPS. So it looks like you've got a sort of a bigger, you know, back half increase, half on half for sales in AMC, perhaps versus, you know, what you have in IPS, so maybe just trying to understand.

Julian C.H. Mitchell: Hi, good morning, maybe.

Marty: Maybe Marty.

Speaker Change: Morning, maybe just wanted to sort of try and.

Louis Vernon Pinkham: The dial in to the.

Louis Vernon Pinkham: The sort of second half revenue guide for the industrial businesses AMC and Ips.

Louis Vernon Pinkham: So it looks like you've got a sort of a big back half.

Louis Vernon Pinkham: Increase half on half of sales and AMC, perhaps versus what you have in <unk>.

Louis Vernon Pinkham: So maybe just trying to understand.

Louis Vernon Pinkham: Whats sort of driving that big AMC step up I think another factory automation payer. This morning is talking a lot about.

Louis Vernon Pinkham: End of Destocking for example is driving a big improvement in that half on half numbers.

Louis Vernon Pinkham: So just wanted to kind of how you see that dynamic playing out in <unk>.

Louis Vernon Pinkham: Discrete automation.

Louis Vernon Pinkham: And maybe why Ips has less of that second half.

Louis Vernon Pinkham: <unk> and IMC that would be helpful.

Louis Vernon Pinkham: Yeah, Julian, I think you're spot-on, and so I'm going to answer IPS. We feel really good about the successes we've been seeing in our cross-sale and our synergy growth. You know, the reality of IPS, we feel like we got through the de-stocking in the second half of last year, maybe a little bit in the first quarter. And so we're not seeing nearly as much as we used to, certainly not in residential HVAC or discrete automation. And so that's why IPS feels really good about the position.

Speaker Change: Yeah, So julien.

Julian: I think youre spot on and so I'm going to answer Ips.

Louis Vernon Pinkham: We feel really good about the successes, we've been seeing in our cross sale and our synergy growth.

Louis Vernon Pinkham: The reality of Ips is we feel like we got through the Destocking in the second half of last year, maybe a little bit in the first quarter and so we're not seeing nearly what we've seen.

Louis Vernon Pinkham: Certainly not in residential HVAC or discrete automation and so that's why Ips.

Louis Vernon Pinkham: We're really good about the position we think our hypothesis that bringing these strong businesses together is playing out now automation and motion control.

Louis Vernon Pinkham: We think our hypothesis of bringing these, you know, strong businesses together is playing out. Now, automation and motion control, again, I think you're spot on. Now, I tell you, factory automation only makes up about 15%-ish of that segment. What's also rising here is the strength in the other markets. Aerospace, we expect to be up in the second half year sequentially, as well as year over year. Medical, definitely sequentially in year over year, as well as data center sequentially in year over year, which gives us a little bit more confidence in that second half for AMC. But those are really the main drivers. But I'd agree with you that de-stocking and discrete automation will help us a bit. And IPS is really just, you know, good execution and good performance of our commercial.

Louis Vernon Pinkham: Again, I think youre spot on no I'd tell you it's factory automation.

Louis Vernon Pinkham: It only makes up about 15% ish of that segment. What's also lifting here is the strength in.

Louis Vernon Pinkham: The other markets aerospace, we expect to be up in the second half year.

Louis Vernon Pinkham: Sequentially as well as year over year medical definitely sequentially and year over year, as well as datacenter sequentially and year over year, which gives us a little bit more confidence in that second half for AMC.

Louis Vernon Pinkham: But those are really the main drivers, but I would agree with you that destocking discrete automation will help us a bit.

Louis Vernon Pinkham: Ips is really just.

Louis Vernon Pinkham: Good good execution, good performance of our commercial teams.

Speaker Change: That's helpful. Thank you and then just.

Louis Vernon Pinkham: And then just, I don't know how much color you could provide, but we've obviously got your second half implied guidance now and what you have for Q2. Just wondered if there was any color you could provide as to how we should think about earnings, sequentially sort of through that second half, you know, are we thinking sort of sales and EBITDA margins up sequentially in both Q3 and Q4. You know, any thoughts to try and understand kind of that waiting in the second half for Regal as a whole?

Speaker Change: I don't know how much color you could provide but yeah. We've obviously got your second half implied guidance now.

Louis Vernon Pinkham: And what you have for Q2, just wondered if there was any color you could provide as to how we should think about earnings.

Louis Vernon Pinkham: Sequentially sort of through that second half.

Louis Vernon Pinkham: We're thinking sort of sales and <unk>.

Louis Vernon Pinkham: EBITDA margins up sequentially.

Louis Vernon Pinkham: In both Q3 and Q4.

Louis Vernon Pinkham: Any thoughts to try and understand kind of that waiting in the second half.

Louis Vernon Pinkham: Regal as a whole.

Robert J. Rehard: Yeah, Julian, this is Rob. I'll take that. We do expect that, you know, sequentially, third quarter, obviously sequentially stronger than second quarter, but fourth quarter then builds again off of third, so we do see that sequential improvement as we move forward. And the same for margins as we move through third quarter and fourth quarter, and associated, then of course, EPS building as we move into the fourth quarter. So, you know, you might expect, seasonality wise, we might see a little bit of a drop off in the fourth quarter. But we're actually not forecasting that at this time. We're seeing it actually continue to build through the fourth quarter based on what we've talked about today.

Louis Vernon Pinkham: Yeah. Julian this is Rob I'll take that we do expect that.

Robert J. Rehard: Sequentially third quarter obviously.

Robert J. Rehard: Sequentially stronger than second quarter, but the fourth quarter, then builds again off a third so we do see that sequential improvement as we move forward and the same for margins as we move through third quarter and fourth quarter and associated then of course EPS.

Robert J. Rehard: Building as we move into the fourth quarter. So.

Robert J. Rehard: You might expect seasonality wise, we might see a little bit of a drop off in the fourth quarter were actually not forecasting that at this time, we're seeing it actually continue to build through the fourth quarter based on what we've talked about today.

Robert J. Rehard: Yes.

Robert J. Rehard: Thanks, Rob. And does that mean it's sort of an even weighting in that step up, or Q3 will always have a bigger one in terms of that step up sequentially than Q4 is having?

Speaker Change: Thanks, Robyn and does that mean.

Robert J. Rehard: It's sort of an even waiting in that step up in Q3 will always have a bigger one in terms of that step up sequentially in Q4 is having.

Robert J. Rehard: Yeah, Q3 would be a bigger step up from Q2 than Q4 over Q3.

Speaker Change: Yes, Q3 would be a bigger step up off of Q2, then Q4 over Q3.

Robert J. Rehard: That's great. Thank you.

Speaker Change: That's great. Thank you.

Speaker Change: Got it.

Jeffrey David Hammond: The next question is from Jeff Hammond with KeyBank Capital Markets. Please go ahead.

Robert J. Rehard: The next question is from Jeff Hammond with Keybanc capital markets. Please go ahead.

Louis Vernon Pinkham: Hey, good morning, guys. Good morning, Jeff.

Jeffrey David Hammond: Hey, good morning, guys, Hey, good morning, Jeff So just on P. S.

Jeffrey David Hammond: So just on PES, you know, I'm, I'm just trying to understand your commentary and I guess how starkly weak it's been is, is, maybe disconnected a little bit from, from the OEM. So I'm just trying to understand. You know, how have you seen share shift? I know you picked up some shares during, you know, COVID, maybe because you had a closer supply chain. There's been some, you know, seal changes and refrigerant changes.

Jeffrey David Hammond: Just trying to I mean, your commentary and I guess I'll start we could span as well maybe disconnected a little bit from from the OEM. So I'm just trying to understand.

Jeffrey David Hammond: Are you seeing share shifts? You know, as these new models are coming out, or, you know, we are underappreciating, you know, 8020, just the level set us on, you know, share and, and just some of these, you know, regulatory changes.

Jeffrey David Hammond: How have you seen share shift I know you've picked up some share during COVID-19, maybe because you had a closer supply chain. There's been some changes in refrigerant changes are you seeing share shifts.

Jeffrey David Hammond: As these new models are coming out or we under under appreciating.

Jeffrey David Hammond: 2020.

Jeffrey David Hammond: You know level set us on share and.

Jeffrey David Hammond: And just some of these kind of regulatory changes.

Louis Vernon Pinkham: Yeah, so, Jeff, I appreciate the question. You know, we feel good about our share position. We do not feel like, and to your point, we definitely gained some share during COVID. But we think we've held on to much of it.

Speaker Change: Yeah, So Jeff I appreciate the question.

Louis Vernon Pinkham: We feel good about our share position, we do not fewer.

Louis Vernon Pinkham: Fuel like and to your point, we definitely gained some share during COVID-19. We think we've held onto much of it now with 80 20. This is the piece of the business, where we haven't managed 80 20.

Louis Vernon Pinkham: Now, with 8020, this is the piece of the business where we have managed to grow 8020. We're no longer going to sell products at low margins. That's just not who we are.

Louis Vernon Pinkham: We're no longer going to sell product at low margins that just not who we are we sell value in our product and technology and so we have seen some $80 20 pruning in this space, but thats really not not a driver here from a regulatory perspective.

Louis Vernon Pinkham: We sell value in our product and technology, and so we have seen some 8020 pruning in this space, but that's really not a driver here. From a regulatory perspective, you know, for sure, with the 2025 GWP regulations, we're working with all of our REM customers. In some aspects, in some respects, they have to redesign their products to meet the requirements, and this tends to help us because they typically choose a more energy efficient motor, and that should be a positive for us in the end. But I want to circle back a little bit to the initial part of your question, which was a disconnect with the views that are being stated right now.

Louis Vernon Pinkham: <unk>.

Louis Vernon Pinkham: You know for sure with the 2025 DWP.

Louis Vernon Pinkham: Regulations, we are working with all of our OEM customers.

Louis Vernon Pinkham: In some aspects and some perspective, they have to redesign their products to meet the requirements in this tends to help us because they typically choose a more energy efficient motor.

Louis Vernon Pinkham: And.

Louis Vernon Pinkham: That should be a positive for us in the end, but I wanted to circle back a little bit to your initial part of your question, which was a disconnect with the.

Louis Vernon Pinkham: A couple of things I'd clarify. There's definitely some lack of clarity in the market, and I think we've had a few false starts. And I remind you that our HBAC OEMs, when they're talking about the current situation, they're talking about consumer demand, and that's a bit of a lag from what we would see with demand. And in addition, some of that demand is going to be satisfied through stock levels. And in addition, I'd say to that, there's an embedded price in their demand, and unit volumes are still under pressure. And as you know, we don't link prices to their price levels.

Louis Vernon Pinkham: The views that are being stated right now a couple of things I'd clarify.

Louis Vernon Pinkham: <unk>.

Louis Vernon Pinkham: There are definitely some lack of clarity in the market and I think we've had a few false starts.

Louis Vernon Pinkham: And.

Louis Vernon Pinkham: I remind you that our HVAC Oems when theyre talking about current situations theyre talking about consumer demand.

Louis Vernon Pinkham: And that's a bit of a lag from what we would see with demand and in addition, some of that demand is going to be satisfied through stock levels.

Louis Vernon Pinkham: And in addition, I would say to that there's embedded pricing their demand and unit volumes are still under pressure and as a as you know we don't linked to their price levels and so I'm.

Louis Vernon Pinkham: And so all in all, we're perhaps a bit more cautious. Just because, again, January we thought was going to see a bit of a recovery, and honestly, fourth quarter, we were hearing from OEMs that we were going to see recovery. And so we're being cautious. April gives us a little bit of confidence, but again, one month does not make a trend. So a lot there, Jeff, but hopefully that was helpful in explaining how we're thinking about it.

Louis Vernon Pinkham: All in.

Louis Vernon Pinkham: Sure.

Louis Vernon Pinkham: Perhaps a bit more cautious.

Louis Vernon Pinkham: Just because again.

Louis Vernon Pinkham: January we thought was going to see a bit of a recovery honestly fourth quarter. We were hearing from Oems that we are going to see recovery and so we're being cautious.

Louis Vernon Pinkham: April gives us a little bit of confidence, but again, one month does not make a trend. So a lot there Jeff, but hopefully that was helpful of how we're thinking about it.

Robert J. Rehard: Okay, great. And then just IPS, I think you said the mix was positive, and you thought that would step back. What in particular was driving the positive mix? And why don't you think it would continue? And then just within the kind of guide change on IPS margins, you know, is that better synergies, or is there some mix in there as well? Yeah, so they, the, uh, the mix was...

Jeff: Okay, Great and then just I P. S. I think you said mix was a positive and you thought that would step back.

Robert J. Rehard:

Robert J. Rehard: But what in particular was what's driving the positive mix in.

Robert J. Rehard: And why don't you think it would continue and then just within the kind of guide change on Ips margins.

Robert J. Rehard: That better synergies or is there some mix in there as well.

Robert J. Rehard: Yeah, so the mix was largely around we had fairly strong distribution versus OEM as we moved through the first quarter. We don't see that same strength as we move into the second quarter. Synergies absolutely continue to build as we move through the year. We saw synergies of roughly $26 million in the first quarter, and we are on track to that $90 million. So, continue to build as we move through the year, but the mixed impact is really just not the continuation that we saw in the first quarter on that strong distribution.

Robert J. Rehard: Yes.

Robert J. Rehard: The mix was largely around hey, we had fairly strong.

Robert J. Rehard: Distribution versus OEM as we move through the first quarter.

Robert J. Rehard: We don't see that same strength as we move into the second quarter.

Robert J. Rehard: Synergies absolutely continue to build as we move through the year, we saw synergies of roughly.

Robert J. Rehard: $26 million in the first quarter and are on track to that $90 million. So continuing to build as we move through the year. So that's that.

Robert J. Rehard: Mix impact is really just not the continuation that we saw in the first quarter on that strong distribution versus OEM.

Speaker Change: Okay. Thanks.

Speaker Change: Thanks, Jeff.

Nigel Edward Coe: The next question is from Nigel Coe with Wolf Research. Please go ahead.

Robert J. Rehard: The next question is from Nigel Coe with Wolfe Research. Please go ahead.

Louis Vernon Pinkham: Oh, thanks. Good morning. Thanks for the question. Good morning, Nigel. Good morning, just another question on PEF, I'm sorry about that, but your secret guide would embed... And I think 2Q is normally your seasonally strongest quarter, so I understand, you know, Louis, you want to be very cautious, big signals from customers, but is there anything you're seeing to maybe, you know, kind of inform that sort of view on 2Q, other than want to be very cautious? And then my sort of follow-on question with that would be maybe some more details around the restructuring you called out for that.

Nigel Edward Coe: Oh, Thanks, good morning, Thanks for the question.

Louis Vernon Pinkham: Morning.

Speaker Change: Good morning, just another question on top of that but yes.

Louis Vernon Pinkham: Yes, you could guide embed.

Louis Vernon Pinkham: But it will pick up Q over Q from from <unk>, and I think to Keith's normally your seasonally strongest.

Louis Vernon Pinkham: A quarter, so I understand.

Louis Vernon Pinkham: No it wouldn't be very cautious.

Louis Vernon Pinkham: Mixed signal some customers.

Louis Vernon Pinkham: But is there anything you're seeing maybe kind of inform that that's sort of <unk> of the month would be by quarter.

Louis Vernon Pinkham: And then my follow on question, but that would be maybe some more details around the restructuring you called out.

Louis Vernon Pinkham:

Louis Vernon Pinkham: Yeah, you know, really no. I... I feel like when we were here in October and then we were here in January, we were in similar situations, and so we're going to be cautious about our guidance for this quarter. Now again, a 1.1 book bill rate coming out of Q1, and orders down 2% in April give us some confidence. I wish we could have this conversation after MET because then I'll have more confidence because, again, I felt like I was in a similar situation in January.

Louis Vernon Pinkham: Yeah.

Speaker Change: Really no.

Louis Vernon Pinkham: Right.

Louis Vernon Pinkham: I feel like when we were here in October and then we were here in January we're in similar situations and so word and be cautious about our guide for this quarter now again, one one book Bill rate coming out of Q1.

Louis Vernon Pinkham: Orders down 2% in April gives us some confidence.

Louis Vernon Pinkham: I wish we could have this conversation after met because then I'll have more confident because again I felt like I was in a similar situation in January so we're going to be cautious here make sure that we are executing.

Louis Vernon Pinkham: So we're going to be cautious here, make sure that we execute beyond that. That's really the view. And then on the second part of your question there, you know we do have some restructuring savings that are embedded in the guide, and we don't typically comment on segment-level restructuring actions, but it's certainly a component, but a lesser component, of the second quarter step up in margin versus what we expect in terms of a little bit of volume. A little bit of volume goes a long way.

Louis Vernon Pinkham: Cute.

Louis Vernon Pinkham: Beyond that that's really the view and then on the <unk>.

Louis Vernon Pinkham: Okay, that's helpful. Thanks.

Louis Vernon Pinkham: Second part of your question there.

Louis Vernon Pinkham: We do have some restructuring savings are embedded in the guide and we don't typically comment on segment level restructuring actions, but is certainly a component, but a lesser component to the second quarter step up in margins versus what we expect in terms of like you said, a little bit of volume little bit of volume does.

Louis Vernon Pinkham: A long way in terms of absorption, but also.

Louis Vernon Pinkham: The site to some better mix coming through in the second quarter versus the first so yes restructuring actions will help but it's not a big driver of the improvement going forward.

Nigel Edward Coe: And then, you know, we've seen copper prices, you know, running pretty hard here, so I'm wondering if, you know, the MPF, which I think is mainly within PES, whether that's having some impact on your second quarter margin. I think there's a bit of a lag on the recovery there. So anything to say on the MPF? And then, you know, as we unplug industry from data.

Louis Vernon Pinkham: Okay. That's helpful. Thanks, and then.

Nigel Edward Coe: We think copper pricing running pretty hot.

Nigel Edward Coe: I'm wondering if the.

Nigel Edward Coe: Which I think mainly with NPS, whether that's having some impact.

Nigel Edward Coe: To your second quarter market I think there's been a lag on the recovery there.

Nigel Edward Coe: The thing to say on the NPS and then as we unplug industrial from the Guy that's what I'm trying to call.

Nigel Edward Coe: Coming from industrial and some of the other segments.

Robert J. Rehard: Yeah, so let me take those two pieces here. So first of all, from the copper coming through on the two-way material price formulas, hey, these are two-way. We aren't seeing a lot of that yet.

Speaker Change: Yeah. So let me let me take those two.

Robert J. Rehard: Pieces here, so first of all from a copper.

Robert J. Rehard: Copper coming through on the two way material price formulas and these are two way, we arent seeing a lot of that yet that there is still a lag there on the non contracted business, which I know is not part of your question, but we do hedge both copper and aluminum and so on that on the non contracted side. So no we aren't seeing a big impact from that as we move through the year.

Robert J. Rehard: There is still a lag there on the non-contracted business, which I know is not part of your question, but we do hedge both copper and aluminum, so that's on the non-contracted side. So, no, we aren't seeing a big impact from that as we move through the year, but we are continuing to evaluate. On your second question on stranded costs, potentially, so the 15 cents that you see in the model that we provided in the presentation, it is simply dilution. There is certainly a bit of stranded costs that we would estimate to be a little less than $5 million, which are partly covered by TSAs, and which we believe we can take.

Robert J. Rehard: There.

Robert J. Rehard: Our.

Robert J. Rehard: Continuing to evaluate on the your.

Robert J. Rehard: Your second question on stranded costs.

Robert J. Rehard: Potentially so that 15% that you see.

Robert J. Rehard: In the in the model that we provided in the presentation.

Robert J. Rehard: It is simply dilution there is a certainly a a bit of stranded cost that we would estimate to be a little less than $5 million, which are partly covered by <unk> and which we believe we can take out in the next 12 months through our normal productivity actions.

Speaker Change: Great. Thank you.

Speaker Change: Thanks, Brian.

Walter Scott Liptak: The next question is from Walter Liptak with Seaport. Please go ahead.

Robert J. Rehard: The next question is from Walter Liptak with Seaport. Please go ahead.

Robert J. Rehard: All right, thanks.

Walter Scott Liptak: Alright. Thanks.

Walter Scott Liptak: But wanted to ask about.

Walter Scott Liptak: The free cash flow for the year.

Robert J. Rehard: And.

Walter Scott Liptak: How will you know.

Walter Scott Liptak: We're going into a seasonally stronger period, how the cash flow might look for the second quarter and then.

Walter Scott Liptak: What are the puts and takes.

Walter Scott Liptak: To getting to that.

Walter Scott Liptak: Free cash flow number.

Robert J. Rehard: Sure. Yes, so $700 million for the year, and you're specifically asking about maybe puts and takes on maybe working capital, how that progresses, and the seasonality associated with inventory bills. I would expect that – you know, the cadence of our cash flow is customarily going to be, hey, you're going to start a little bit slower in the first quarter and build as you move through the year, with most of your cash coming in the late third and fourth quarters.

Walter Scott Liptak: Sure Yes.

Walter Scott Liptak: So 700 million for the year and you're specifically asking about.

Robert J. Rehard: Maybe puts and takes on maybe working capital how that progresses, the seasonality associated with inventory builds.

Robert J. Rehard: We'd expect that.

Robert J. Rehard: The cadence of our cash flow is customarily going to be hey, youre going to start a little bit slower in the first quarter and build as you move through the year with most of your cash coming in.

Robert J. Rehard: In the late third and fourth quarters.

Robert J. Rehard: We do see that there is a headwind in working capital this year relative to last year. We saw almost $250 million of working capital benefit last year, and we might see about $50 million of that this year. That being said,

Robert J. Rehard: We do see that.

Robert J. Rehard: There is a headwind in working capital this year relative to last year.

Robert J. Rehard: We saw almost $250 million of working capital.

Robert J. Rehard: [noise] benefit last year.

Robert J. Rehard: See about $50 million of that this year that being said.

Robert J. Rehard: The way that we we bridge from last year to this year. If you will if you think that we got almost about $660 million last year going to $700 million this year.

Robert J. Rehard: We will get a little bit out of EBITDA year over year.

Robert J. Rehard: Our cash interest.

Robert J. Rehard: <unk> will come down.

Robert J. Rehard: Cash taxes will also be lower.

Robert J. Rehard: And then last year, and then restructuring should come in a little bit lower so when you kind of raised last year to this year and there is about.

Robert J. Rehard: $40 million or so between the two years those are the kind of puts and takes on the bridge to get you to this year's cash flow.

Louis Vernon Pinkham: Anything else, Chris? I wanted to ask about the conveying products and thanks for pointing out the $400 million in sales. I wonder if you could talk about the margins for that business and if there's a difference between margins for component parts and systems versus design engineering. And are you doing any installation or integrated systems within that $400 million?

Robert J. Rehard: Alright.

Louis Vernon Pinkham: Okay.

Speaker Change: Oh, sorry about that.

Louis Vernon Pinkham: So Lewis I wanted to ask about the the conveying products and thanks for pointing out the $400 million in sales.

Louis Vernon Pinkham: Wonder if you could talk about the margins for that business and if there is a difference between margins for <unk>.

Louis Vernon Pinkham: Component parts and systems versus design engineering.

Louis Vernon Pinkham: And are you doing any.

Louis Vernon Pinkham: Installation or integrated systems within that $400 million.

Louis Vernon Pinkham: Yes, so I'll go a little backwards. So, are we doing installation and project management? We are. It's not a big percentage of that business, but about 5%, and we're actually seeing that piece growing nicely. The margins of the overall business are actually above our average in that segment, and it's part of AMC. It's a solid business. Now, it really depends project by project, but our equipment side and our system side are not that far off our component side for margins. So overall, it's a really solid business for us.

Chris: Yeah, So I'll go a little backwards.

Louis Vernon Pinkham: Are we doing installation and project management, we are its not a big percentage of that business, but about 5% and we're actually seeing that piece growing nicely.

Louis Vernon Pinkham: You know the margins of the overall business are actually above our average in that segment and it's part of AMC.

Louis Vernon Pinkham: All of that business now.

Louis Vernon Pinkham: Really depends on project by project, but our equipment side in our system side are not that far off our component side for margin. So overall, a really solid business for us.

Louis Vernon Pinkham: Okay, great. And why do you think that this part of, you know, say, the conveyors is growing faster than, say, the automation part of your Well, um, you know, it

Speaker Change: Okay, Great and why is it that you do.

Louis Vernon Pinkham: Thanks.

Louis Vernon Pinkham: Part of it.

Louis Vernon Pinkham: The conveyors are growing faster than say.

Louis Vernon Pinkham: The automation part of your business.

Louis Vernon Pinkham: Well, you know, the commanding business is really linked to food and beverage and warehouse. And for sure, food and beverage and warehouse has been under pressure for the last couple of years. In particular, I should say, beverage and warehouse. And so we're seeing that rebound as the year progresses and into next year. And then, you know, I'll emphasize one other point, which is that with the acquisition of Arrowhead as well as our industrial powertrain solutions, synergy strategy of selling the entire industrial powertrain, it really fits into these markets well. And so we're winning more because of the total solution that Regal Rexnord is able to bring to bear.

Louis Vernon Pinkham: Well you know.

Louis Vernon Pinkham: The Canadian business is really linked to food and beverage and warehouse and for sure or food and beverage and warehouse has been under pressure for the last couple of years in particular, I should say beverage and warehouse.

Louis Vernon Pinkham: And so we're seeing that rebounding as the year progresses and into next year and then you know I'll emphasize one other point, which is.

Louis Vernon Pinkham: With the acquisition of Arrowhead as well as our industrial powertrain solutions.

Louis Vernon Pinkham: Synergy strategy of selling the entire industrial powertrain it really fits into these markets well and so we're winning more because of the total solution that Regal rexnord is able to bring to bear.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks Ralph.

Joseph Alfred Ritchie: The next question is from Joe Ritchie with Goldman Sachs. Please go ahead.

Louis Vernon Pinkham: The next question is from Joe Ritchie with Goldman Sachs. Please go ahead.

Louis Vernon Pinkham: Hey guys, good morning. Hey, good morning, Joe.

Joseph Alfred Ritchie: Hey, guys good morning.

Joseph Alfred Ritchie: Alright, good morning, Joe.

Joseph Alfred Ritchie: Hey, so I just want to really focus my questions on AMC. So clearly, there's a big part of the business that is going from inorganic to organic this upcoming quarter. And so I just want to make sure I'm dialing this in right. Like you guys are now looking at potentially like mid-teens down organic for the second quarter. And is that, so please correct me if I'm wrong there. And then also, is that kind of like where the trend is in business right now? And any color you can give us on the discrete automation side of the business would be helpful relative to that number.

Joseph Alfred Ritchie: Hey, So just wanted to really focus my questions on AMC.

Joseph Alfred Ritchie: Clearly like there is a big part of the business that is going from inorganic organic this upcoming quarter and so I just wanted to make sure I'm dialing that right. Like you guys are now looking at potentially like mid teens down organic for the second quarter and is that.

Joseph Alfred Ritchie: So please correct me if I'm wrong. There and then also is that kind of like what where trend is on the business right now.

Joseph Alfred Ritchie: And any color you can give us on the discrete automation side of the business would be helpful relative to that number.

Louis Vernon Pinkham: Yeah, so... Joe, I appreciate the question. I would say you've also got to remember there's a little bit of a stub period compare that puts a bit of a pressure on AMC. Really, though, the main pressure in AMC for us is discrete automation. And although we're seeing the order book feel better, it's really more second half and 25 weighted. And so that's putting pressure on us. But again, the segments or the markets that are accelerating are medical, data center, and arrow, which gives us confidence in them.

Speaker Change: Yeah. So.

Joseph Alfred Ritchie: Yes.

Louis Vernon Pinkham: Okay, got it. That's, that's helpful. And then I guess, just maybe just sticking with that last comment, so forget that those end markets are doing better, like in the end markets that aren't doing well, like, is there anything from like, whether it's negotiations or marketing qualified leads or any type of like kind of leading indicators that are helping you feel better about like the parts that aren't doing well bottoming out.

Speaker Change: John I appreciate the question.

Louis Vernon Pinkham: I would say.

Louis Vernon Pinkham: Also got to remember there is a little bit of a stub period compare.

Louis Vernon Pinkham: It's a bit of a pressure on AMC it really though the main pressure in AMC for us as discrete automation and although we are seeing the order book fuel better it's really more second half in 'twenty five weighted and so that's that's putting pressure, but again the segments.

Louis Vernon Pinkham: Are the markets that are accelerating our medical data center.

Louis Vernon Pinkham: And arrow, which gives us confidence in the second half of next year, sorry second half of this year.

Louis Vernon Pinkham: Yeah.

Louis Vernon Pinkham: Okay.

Louis Vernon Pinkham: Okay got it that's.

Louis Vernon Pinkham: That's helpful and then I guess.

Louis Vernon Pinkham: Maybe just sticking with that last comment so to get to those end markets are doing better.

Louis Vernon Pinkham: In the end markets that arent doing well like.

Louis Vernon Pinkham: Is there anything from my day, whether it's like you know.

Louis Vernon Pinkham: Negotiation, there marketing qualified leads or any type of like kind of leading indicators that are helping you feel better about life.

Louis Vernon Pinkham: But the parts that aren't doing well bottoming.

Louis Vernon Pinkham: Yeah, so I would refer you back to some of the statements that Rob made earlier. And so factory automation makes up about 35% of that segment, and our funnel's up 50%, our win rate's up about 300 basis points, and we're seeing a book bill in that segment coming out of the first quarter of 1.08. So all of this is giving us more confidence in the second half, and so... Yeah, that's really why we're guiding what we're guiding for second half sales.

Speaker Change: Yeah. So.

Louis Vernon Pinkham: You know I would refer you back to some of the statements that Rob made earlier on and so it factory automation makes up about 35% in that segment and our funnel is up 50% our win rates up about 300 basis points and are we're seeing a book Bill in.

Louis Vernon Pinkham: Segment coming out of the first quarter of a one point no way so all of this.

Louis Vernon Pinkham: Is giving us more confidence in the second half.

Louis Vernon Pinkham: And so.

Louis Vernon Pinkham: Yeah, that's that's really why we're guiding what we're guiding for second half sales.

Joseph Alfred Ritchie: Okay, yeah, no, that's helpful. Thanks for the clarification. I'll get back to you.

Louis Vernon Pinkham: Okay.

Speaker Change: Helpful. Thanks for that clarification I'll get back in queue.

Louis Vernon Pinkham: Okay, great. Thank you.

Speaker Change: Okay, great. Thank you.

Louis Vernon Pinkham: Yeah.

Louis Vernon Pinkham: This concludes the question and answer session. I'd like to turn the conference back over to Louis Pinkham for any closing remarks. Thank you, Operator, and thanks to our investors and analysts for joining us today.

Louis Vernon Pinkham: This concludes the question and answer session I would like to turn the conference back over to Louis Pinkham for any closing remarks.

Louis Vernon Pinkham: Thank you operator, and thanks to our investors and analysts for joining us today.

Louis Vernon Pinkham: I would like to conclude where I began with our evolved purpose. Through highly intentional actions, we have made tremendous progress transforming what had been Regal Bloit into the Regal Rexnord we are today, a powerful portfolio comprised of wider mode products serving a stronger mix of more durable secular markets. Our one global Regal Rexnord team is excited about the many opportunities this portfolio presents, and I am confident that we are better positioned than ever before to create a better tomorrow for all of our key stakeholders with sustainable solutions that power, transmit, and control the world.

Louis Vernon Pinkham: I would like to conclude where I began with our evolved purpose.

Louis Vernon Pinkham: And by doing so, we can achieve the win-win objectives of giving back to our communities and our planet while driving profitable growth. In short, tremendous opportunities for our associates, for our customers, and for our shareholders, and an exciting time for Regal Rexnord. Thank you again for joining us today, and thank you for your interest in Regal. Have a good day.

Louis Vernon Pinkham: Through highly intentional actions, we have made tremendous progress transforming what had been regal beloit into the Regal Rexnord, we are today.

Louis Vernon Pinkham: Our powerful portfolio comprised of wider moat products, serving a stronger mix of more durable secular markets out.

Louis Vernon Pinkham: Sure one global Regal Rexnord team is excited about the many opportunities this portfolio presents.

Louis Vernon Pinkham: And I am confident that we are better positioned than ever before to create a better tomorrow for all of our key stakeholders with sustainable solutions that power transmit and control motion.

Louis Vernon Pinkham: And by doing so we can achieve the win win objectives of giving back to our communities and our planet and driving profitable growth.

Louis Vernon Pinkham: In short tremendous opportunities for our associates for our customers and for our shareholders and an exciting time for Regal rexnord.

Louis Vernon Pinkham: You again for joining us today and thank you for your interest in Regal have a good day.

Louis Vernon Pinkham: Yes.

Louis Vernon Pinkham: Yeah.

Louis Vernon Pinkham: Okay.

Operator: Thank you for attending today. You may now disconnect.

Speaker Change: Thank you for attending today you may now disconnect.