RBC Bearings Q3 2026 RBC Bearings Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q3 2026 RBC Bearings Inc Earnings Call
Speaker #1: Good morning,
Joshua Carroll: Good morning, and thank you for joining us for RBC Bearings fiscal third quarter 2026 earnings call. I'm Josh Carroll with the investor relations team. With me on today's call are Dr. Hartnett, Chairman, President, and Chief Executive Officer, Daniel Bergeron, Director, Vice President, and Chief Operating Officer, and Rob Sullivan, Vice President and Chief Financial Officer. As a reminder, some of the statements made today may be forward-looking and are under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also listed in the press release, along with the reconciliation between GAAP and non-GAAP financial information.
Joshua Carroll: Good morning, and thank you for joining us for RBC Bearings fiscal third quarter 2026 earnings call. I'm Josh Carroll with the investor relations team. With me on today's call are Dr. Hartnett, Chairman, President, and Chief Executive Officer, Daniel Bergeron, Director, Vice President, and Chief Operating Officer, and Rob Sullivan, Vice President and Chief Financial Officer. As a reminder, some of the statements made today may be forward-looking and are under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also listed in the press release, along with the reconciliation between GAAP and non-GAAP financial information.
Speaker #1: and thank you for joining us for RBC Bearings Fiscal Third Quarter 2026 earnings calls. I'm Josh Carroll with the investor relations team. With me on today's call are Dr. Hartnett, Chairman, President, and Chief Executive Officer; Daniel Bergeron, Director, Vice President, and Chief Operating Officer; and Rob Sullivan, Vice President and Chief Financial Officer.
Speaker #1: As a reminder, some of the statements made today may be forward-looking and are under the private securities litigation reform act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors.
Speaker #1: We refer you to RBC Bearings' recent findings with the SEC for a more detailed discussion of the risks that could impact the company's future operating results, and financial condition.
These factors are also listed in the press release, along with the reconciliation between GAAP and non-GAAP financial information. With that, I'll now turn the call over to Dr. Hartnett.
Joshua Carroll: With that, I'll now turn the call over to Dr. Hartnett.
Joshua Carroll: With that, I'll now turn the call over to Dr. Hartnett.
Speaker #2: Okay, thank you. And good morning, everyone. Thank you for joining us. As usual, I'm going to start today's call with a short review of our financial results.
Michael Hartnett: Okay, thank you, and good morning, everyone, and thank you for joining us. As usual, I'm going to start today's call with a short review of our financial results and the outlook for the industry with our sectors. Rob Sullivan will follow me with some detailed details on the results. Q3 net sales were $461 million, or a 17% increase over last year. We experienced continued strong performance in our A&D segment and growth from our industrial businesses. Consolidated gross margin for the quarter was 44.3% and 45.1% on an adjusted basis. Adjusted diluted EPS was 3.04 versus 2.34 a year ago, a 30% improvement. EBITDA came in at $149.6 million versus last year, $122.6 million, up 22%.
Michael Hartnett: Okay, thank you, and good morning, everyone, and thank you for joining us. As usual, I'm going to start today's call with a short review of our financial results and the outlook for the industry with our sectors. Rob Sullivan will follow me with some detailed details on the results. Q3 net sales were $461 million, or a 17% increase over last year. We experienced continued strong performance in our A&D segment and growth from our industrial businesses. Consolidated gross margin for the quarter was 44.3% and 45.1% on an adjusted basis. Adjusted diluted EPS was 3.04 versus 2.34 a year ago, a 30% improvement. EBITDA came in at $149.6 million versus last year, $122.6 million, up 22%.
Speaker #2: And the outlook for the industry with our sectors: Rob Sullivan, I'll follow me with some detailed details on the results. Third-quarter net sales were $461 million, or a 17% increase over last year.
Speaker #2: We experienced continued strong performance in our A&D segment and growth from our industrial businesses. Consolidated gross margin for the quarter was 44.3% and 45.1% basis.
Speaker #2: Adjusted diluted EPS was 3.04 versus 2.34 a year ago, a 30% improvement. EBITDA came in at $149.6 million versus last year, $122.6 million, up 22%.
Speaker #2: Pre-cash flow for the period is a strong 99.1 million dollars, and we paid down an additional $81 million of debt in the third quarter.
Michael Hartnett: Free cash flow for the period is a strong $99.1 million, and we paid down an additional $81 million of debt in Q3. 56% of our revenues were industrial, 44% from the A&D sector. Total A&D sales were up 41.5% year-over-year. Commercial aerospace expanded 21.5%. Defense expansion was 86.2%. Rob Sullivan will talk more about these details later in the call. Demand across the A&D sectors continues to be robust. As evidenced, we have modestly exceeded our $2 billion backlog mark that we spoke about last call. Remember, most of our A&D business is contracted and managed through daily or weekly orders or pulls communicated to us electronically, and as a result, represent only a modest footprint in today's backlog statement.
Michael Hartnett: Free cash flow for the period is a strong $99.1 million, and we paid down an additional $81 million of debt in Q3. 56% of our revenues were industrial, 44% from the A&D sector. Total A&D sales were up 41.5% year-over-year. Commercial aerospace expanded 21.5%. Defense expansion was 86.2%. Rob Sullivan will talk more about these details later in the call. Demand across the A&D sectors continues to be robust. As evidenced, we have modestly exceeded our $2 billion backlog mark that we spoke about last call. Remember, most of our A&D business is contracted and managed through daily or weekly orders or pulls communicated to us electronically, and as a result, represent only a modest footprint in today's backlog statement.
Speaker #2: 56% of our revenues were industrial, 44% from the A&D sector. Total A&D sales were up 41.5% year-on-year. Commercial aerospace expanded 21.5%. Defense expansion was 86.2%.
Speaker #2: Rob Sullivan will talk more about these details later in the The band across the A&D sectors call. continues to be robust. As evidenced, we have modestly exceeded our $2 billion backlog mark that we spoke about last call.
Speaker #2: Remember, most of our R&D business is contracted and managed through daily or weekly orders or pulls, communicated to us electronically, and, as a result, represents only a modest footprint in today's backlog statement.
Speaker #2: If these joint contract obligations were extended based upon the statement of work content awarded, and projected build rates, they would likely exceed another half to a full billion dollars of backlog.
Michael Hartnett: If these joint contract obligations were extended based upon the statement of work content awarded and projected bill rates, they would likely exceed another $ half to a full billion in backlog. Today, the strength and outlook on the A&D sector can only be described as extremely robust. Clearly, we are at a national inflection point in the commercial aircraft and defense industries. Let me explain with an overview of some of our key markets. So we'll start with submarines. Submarines are facing an accelerated fleet build-out. The number one defense priority today is submarines. This drives an unprecedented demand for our proprietary quiet-running valves, both for new construction and replacement. To support the current fleet, 66 Virginia-class ships are planned, 25 have been commissioned to date, and 12 Columbia-class ships are planned. Number two, missiles and guided arms.
Michael Hartnett: If these joint contract obligations were extended based upon the statement of work content awarded and projected bill rates, they would likely exceed another $ half to a full billion in backlog. Today, the strength and outlook on the A&D sector can only be described as extremely robust. Clearly, we are at a national inflection point in the commercial aircraft and defense industries. Let me explain with an overview of some of our key markets. So we'll start with submarines. Submarines are facing an accelerated fleet build-out. The number one defense priority today is submarines. This drives an unprecedented demand for our proprietary quiet-running valves, both for new construction and replacement. To support the current fleet, 66 Virginia-class ships are planned, 25 have been commissioned to date, and 12 Columbia-class ships are planned. Number two, missiles and guided arms.
Speaker #2: Today, the strength and outlook on the A&D sector can only be described as extremely robust. Clearly, we are a national inflection point in the commercial aircraft and defense industries.
Speaker #2: Let me explain with an overview of some of our key markets. So we'll start with submarines. Submarines are facing an accelerated fleet build-out. Number one defense priority today is submarines.
Speaker #2: This drives an unprecedented demand for our proprietary quiet-running valves, both for new construction and replacement, to support the current fleet. 66 Virginia ships are planned; 25 have been commissioned to date.
Speaker #2: And 12 Columbia-class ships are planned. Number two, missiles and guided arms support for broad multi-year refurbishment initiatives for offensive and defensive missiles, and vision targeting systems.
Michael Hartnett: Support for broad, multi-year refurbishment initiatives for offensive and defensive missiles and vision targeting systems, both here and overseas, create a strong environment for our precision assemblies and fuel management products. In Europe, NATO's 5% GDP initiative is growing demand for our products from the ground warfare system builders in Europe. This creates a strong, new requirements for RBC products that would have been developed over the past decade. In the USA, the refurbishment of new, and refurbishment and new construction of aircraft systems, as well as the maintenance of untold number of helicopters and airframe platforms, including engines, creates strong and continuous needs for our proprietary components. We expect an expanded defense spending bill will likely accelerate the repair activities further.
Michael Hartnett: Support for broad, multi-year refurbishment initiatives for offensive and defensive missiles and vision targeting systems, both here and overseas, create a strong environment for our precision assemblies and fuel management products. In Europe, NATO's 5% GDP initiative is growing demand for our products from the ground warfare system builders in Europe. This creates a strong, new requirements for RBC products that would have been developed over the past decade. In the USA, the refurbishment of new, and refurbishment and new construction of aircraft systems, as well as the maintenance of untold number of helicopters and airframe platforms, including engines, creates strong and continuous needs for our proprietary components. We expect an expanded defense spending bill will likely accelerate the repair activities further.
Speaker #2: Both here and overseas, create a strong environment for our precision assemblies and fuel management products. In Europe, NATO's 5% GDP initiative is growing demand for our products from the ground warfare system builders in Europe.
Speaker #2: This creates a strong new requirement for RBC products developed that would have been developed over the past decade. In the USA, the refurbishment of new and refurbishment and new construction of aircraft systems, as well as the maintenance of untold numbers of helicopters and airframe platforms, including engines, creates strong and continuous needs for our proprietary components.
Speaker #2: We expect an expanded defense spending bill will likely accelerate the repair activities further. We also support the expanding need for both engineering support and staple components for the systems that the big three space explorers are building.
Michael Hartnett: We also support the expanding need for both engineering support and staple components for the systems that the big three space explorers are building, as well as others. They're racing to the moon and/or creating low Earth satellite systems, requiring sophisticated precision assemblies for targeting, thrust vectoring, fuel management, structural members, et cetera. I think you can see this, the picture that we're faced with right now in the A&D sector. Of course, all of these macro extremes in space and defense are simultaneous with the unprecedented build rates for commercial aircraft, including engines. RBC is deeply embedded in all of these areas, which create a tremendous and continuous market for our products, both at the OEM and the replacement levels.
Michael Hartnett: We also support the expanding need for both engineering support and staple components for the systems that the big three space explorers are building, as well as others. They're racing to the moon and/or creating low Earth satellite systems, requiring sophisticated precision assemblies for targeting, thrust vectoring, fuel management, structural members, et cetera. I think you can see this, the picture that we're faced with right now in the A&D sector. Of course, all of these macro extremes in space and defense are simultaneous with the unprecedented build rates for commercial aircraft, including engines. RBC is deeply embedded in all of these areas, which create a tremendous and continuous market for our products, both at the OEM and the replacement levels.
Speaker #2: As well as others. The racing to the moon and/or creating low Earth satellite systems requiring sophisticated precision assemblies for targeting thrust vectoring fuel management, structural members, etc.
Speaker #2: I think you can see the picture that we're faced with right now in the A&D sector. Of course, all of these macro extremes in space and defense are simultaneous with the unprecedented build rates for commercial aircraft including engines.
Speaker #2: RBC is deeply embedded in all of these areas, which create a tremendous and continuous market for our products, both at the OEM and the replacement levels.
Speaker #2: We are working diligently to add machinery and staff to several of our existing sites, guided by our five-year per-site plan, to support these growing A&D revenues.
Michael Hartnett: We are working diligently to add machinery and staff to several of our existing sites, guided by our five-year per site plan to support these growing A&D revenues. Well, I hope this brief abstract gives you a 40,000-foot view of what our world is today in, in the R&D sector, A&D sector. We can certainly go into specific programs, outlook, products, and proprietary positioning, as well as the moats to any depth needed at another time. We've been working well over a generation to achieve industrialized catalog and fortify the portfolio that you see today. So let's turn to the industrial businesses now. Overall, our industrial business was up 3.1%. Industrial distribution was up 1.5%, while OEM sector was up 7%. We saw strength in aggregate and cement, food and beverage, and the warehousing markets during the period.
Michael Hartnett: We are working diligently to add machinery and staff to several of our existing sites, guided by our five-year per site plan to support these growing A&D revenues. Well, I hope this brief abstract gives you a 40,000-foot view of what our world is today in, in the R&D sector, A&D sector. We can certainly go into specific programs, outlook, products, and proprietary positioning, as well as the moats to any depth needed at another time. We've been working well over a generation to achieve industrialized catalog and fortify the portfolio that you see today. So let's turn to the industrial businesses now. Overall, our industrial business was up 3.1%. Industrial distribution was up 1.5%, while OEM sector was up 7%. We saw strength in aggregate and cement, food and beverage, and the warehousing markets during the period.
Speaker #2: Well, I hope this brief abstract gives you a 40,000-foot view of what our world is today in the R&D sector. A&D sector. We can certainly go into products, and proprietary positioning, as well as the moats to any depth needed in another time.
Speaker #2: We've been working well over a generation to achieve industrialized catalog and fortified the portfolio that you see today. So, let's turn to the industrial businesses now.
Speaker #2: Overall, our industrial business was up 3.1%. Industrial distribution was up 1.5%, while OEM sector was up 7%. We saw strength in aggregate and cement, food and beverage, and the warehousing markets during the period.
Michael Hartnett: Recently, we've been seeing positive trends in some of these markets in terms of order demand, which will show as revenue as they work their way through lead time. The semiconductor industry is the biggest standout in this regard. Broad industrial demand strengthened measurably in late December and continued throughout January. In addition, we are introducing several new products to the industrial lineup for FY 2027, many of which have been in testing and development since the Dodge acquisition. Combined, they promise to bend our curve on industrial growth. Also, we are opening a service center in the Midwest to better attend the needs of our -- and tailor our product response to more customers in that region.
Speaker #2: Recently, we've been seeing positive trends in some of these markets, in terms of order demand, which will show as revenue as a work their way through lead time.
Michael Hartnett: Recently, we've been seeing positive trends in some of these markets in terms of order demand, which will show as revenue as they work their way through lead time. The semiconductor industry is the biggest standout in this regard. Broad industrial demand strengthened measurably in late December and continued throughout January. In addition, we are introducing several new products to the industrial lineup for FY 2027, many of which have been in testing and development since the Dodge acquisition. Combined, they promise to bend our curve on industrial growth. Also, we are opening a service center in the Midwest to better attend the needs of our -- and tailor our product response to more customers in that region.
Speaker #2: The semiconductor industry is the biggest standout in this regard. Broad industrial demand strengthened measurably in late December and continued throughout January. In addition, we are introducing several new products to the industrial lineup for FY27, many of which have been in testing and development since the Dodge acquisition.
Speaker #2: Combined, they promise to bend our curve on industrial growth. Also, we are opening a service center in the Midwest to better attend the needs of our and tailor our product response to more customers in that region.
Speaker #2: So I hope I gave you a feel for our environment and the momentum that exists at RBC today. And I'll turn the call over to Rob Sullivan for more discussion on the third quarter and the fourth quarter outlook.
Michael Hartnett: So I hope I gave you a feel for our environment and the momentum that exists at RBC today, and I'll turn the call over to Rob Sullivan for more discussion on Q3 and the Q4 outlook.
Michael Hartnett: So I hope I gave you a feel for our environment and the momentum that exists at RBC today, and I'll turn the call over to Rob Sullivan for more discussion on Q3 and the Q4 outlook.
Speaker #2: Thank you, Mike. As Dr. Hartnett mentioned, we had another strong quarter. Net sales grew 17%, which led to a 16.9% increase in reported gross margin.
Robert Sullivan: Thank you, Mike. As Dr. Hartnett mentioned, we had another strong quarter. Net sales grew 17%, which led to a 16.9% increase in the reported gross margin. Gross margins were 44.3% for the quarter, or 45.1% on an adjusted basis, compared to 44.3% in the same period last year. During the quarter, we delivered strong performance across our business segments, specifically within aerospace and defense, which has demonstrated strong growth, as Dr. Hartnett stated. Q3 A&D sales increased 41.5% year-over-year, and importantly, the increase was 21.7%, excluding sales from VACCO, demonstrating significant expansion from both our legacy, commercial, and defense markets.
Robert Sullivan: Thank you, Mike. As Dr. Hartnett mentioned, we had another strong quarter. Net sales grew 17%, which led to a 16.9% increase in the reported gross margin. Gross margins were 44.3% for the quarter, or 45.1% on an adjusted basis, compared to 44.3% in the same period last year. During the quarter, we delivered strong performance across our business segments, specifically within aerospace and defense, which has demonstrated strong growth, as Dr. Hartnett stated. Q3 A&D sales increased 41.5% year-over-year, and importantly, the increase was 21.7%, excluding sales from VACCO, demonstrating significant expansion from both our legacy, commercial, and defense markets.
Speaker #2: Gross margins were 44.3% for the quarter, or 45.1% on an adjusted basis compared to 44.3% in the same period last year. During the quarter, we delivered strong performance across our business segments, specifically within aerospace and defense.
Speaker #2: Which has demonstrated strong growth, as Dr. Hartnett stated. Third quarter A&D sales increased 41.5% year over year. And 21.7%, excluding sales from backhoe. Demonstrating significant expansion from both our legacy commercial and defense markets.
Speaker #2: A&D gross margins during the quarter were 40.1%, or 42.2% on an adjusted basis. And industrial margins were 47.5%, or 47.4% on an adjusted basis.
Robert Sullivan: A&D gross margins during the quarter were 40.1% or 42%, 42.2% on an adjusted basis, and industrial margins were 47.5% or 47.4% on an adjusted basis. Excluding VACCO, our aerospace and defense gross margins were 43.4% during the period. We are encouraged by the margin progress we've achieved within A&D, driven by increased efficiencies achieved in our plants, coupled with improving pricing on customer contracts. Looking ahead, we expect these benefits to continue to further support margin improvement while recognizing the impact will be gradual as these benefits flow through. On the SG&A line, we had total costs of $77.9 million, or 16.9% of net sales for the quarter.
Robert Sullivan: A&D gross margins during the quarter were 40.1% or 42%, 42.2% on an adjusted basis, and industrial margins were 47.5% or 47.4% on an adjusted basis. Excluding VACCO, our aerospace and defense gross margins were 43.4% during the period. We are encouraged by the margin progress we've achieved within A&D, driven by increased efficiencies achieved in our plants, coupled with improving pricing on customer contracts. Looking ahead, we expect these benefits to continue to further support margin improvement while recognizing the impact will be gradual as these benefits flow through. On the SG&A line, we had total costs of $77.9 million, or 16.9% of net sales for the quarter.
Speaker #2: Excluding backhoe, our aerospace and defense gross margins were 43.4% during the period. We are encouraged by the margin progress we've achieved within A&D, driven by increased efficiencies achieved in our plants, coupled with improving pricing on customer contracts.
Speaker #2: Looking ahead, we expect these benefits to continue to further support margin improvement, while recognizing the impact will be gradual as these benefits flow through.
Speaker #2: On the SG&A line, we had total cost of $77.9 million, or 16.9% of net sales for the quarter. This ultimately resulted in an adjusted EBITDA of $149.6 million, or 32.4% of sales for the quarter.
Robert Sullivan: This ultimately resulted in an adjusted EBITDA of $149.6 million, or 32.4% of sales for the quarter. That represents an approximate 22% increase in adjusted EBITDA dollars during the quarter compared to the same period last year. Interest expense for the quarter was $13 million. This was down 8.5% year-over-year, reflecting the improved leverage position achieved over the last 12 months, coupled with lower interest rates compared to this time last year. We paid off $81 million of debt during the quarter and another $67 million since the end of this, the third quarter. The tax rate in our adjusted EPS calculation was 22.1% compared to last year's 22.2%.
Robert Sullivan: This ultimately resulted in an adjusted EBITDA of $149.6 million, or 32.4% of sales for the quarter. That represents an approximate 22% increase in adjusted EBITDA dollars during the quarter compared to the same period last year. Interest expense for the quarter was $13 million. This was down 8.5% year-over-year, reflecting the improved leverage position achieved over the last 12 months, coupled with lower interest rates compared to this time last year. We paid off $81 million of debt during the quarter and another $67 million since the end of this, the third quarter. The tax rate in our adjusted EPS calculation was 22.1% compared to last year's 22.2%.
Speaker #2: That represents an approximate 22% increase in adjusted EBITDA dollars during the quarter, compared to the same period last year. Interest expense for the quarter was $13 million.
Speaker #2: This was down 8.5% year over year, reflecting the improved leverage position achieved over the last 12 months, coupled with lower interest rates compared to this time last year.
Speaker #2: We paid off $81 million of debt during the quarter, and another $67 million since the end of the third quarter. The tax rate in our adjusted EPS calculation was 22.1%, compared to last year's 22.2%.
Speaker #2: This led to adjusted diluted earnings per share of $3.04, representing growth of 29.9% year over year. Free cash flow in the quarter came in at $99.1 million, with conversion of $147%, and compared to the 73.6 million and $127% last year.
Robert Sullivan: This led to adjusted diluted earnings per share of $3.04, representing growth of 29.9% year-over-year. Free cash flow in the quarter came in at $99.1 million, with conversion of a hundred and 147% and compared to $73.6 million and 127% last year. The higher conversion rate was due to the increased earnings and working capital management during the quarter. As we've noted previously, our capital allocation strategy going forward will remain focused on deleveraging by using the cash that we generate to pay off outstanding debt. Our expectation is to pay off the remainder of the term loan by November of 2026.
Robert Sullivan: This led to adjusted diluted earnings per share of $3.04, representing growth of 29.9% year-over-year. Free cash flow in the quarter came in at $99.1 million, with conversion of a hundred and 147% and compared to $73.6 million and 127% last year. The higher conversion rate was due to the increased earnings and working capital management during the quarter. As we've noted previously, our capital allocation strategy going forward will remain focused on deleveraging by using the cash that we generate to pay off outstanding debt. Our expectation is to pay off the remainder of the term loan by November of 2026.
Speaker #2: The higher conversion rate was due to the increased earnings and working capital management during the quarter. As we've noted previously, our capital allocation strategy going forward will remain focused on deleveraging by using the cash that we generate to pay off outstanding debt.
Speaker #2: Our expectation is to pay off the remainder of the term loan by November of 2026. Looking into the fourth quarter, we are guiding revenues at $495 to $505 million, representing year-over-year growth of 13.1% to 15.4%.
Robert Sullivan: Looking into Q4, we are guiding revenues of $495 to 505 million, representing year-over-year growth of 13.1% to 15.4%. On the gross margin side, we are projecting adjusted gross margins of 45% to 45.25% for the quarter, and SG&A, as a percentage of sales, to be between 16% and 16.25% for the period. With that, operator, please open the call for Q&A.
Robert Sullivan: Looking into Q4, we are guiding revenues of $495 to 505 million, representing year-over-year growth of 13.1% to 15.4%. On the gross margin side, we are projecting adjusted gross margins of 45% to 45.25% for the quarter, and SG&A, as a percentage of sales, to be between 16% and 16.25% for the period. With that, operator, please open the call for Q&A.
Speaker #2: On the gross margin side, we are projecting adjusted gross margins of 45% to 45.25% for the quarter, and SG&A as a percentage of sales to be between 16% and 16.25% for the period.
Speaker #2: Without an operator, please open the call for Q&A.
Speaker #3: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Michael Hartnett: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Kristine Liwag with Morgan Stanley. Please proceed.
Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Kristine Liwag with Morgan Stanley. Please proceed.
Speaker #3: You may press star two if you would like to remove your question from the queue, and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker #3: Our first question is from Christine Luag with Morgan Stanley. Please.
Speaker #3: proceed. Hey,
Speaker #4: Good morning, everyone. Rob and Dr. Hartnett, I just wanted to follow up regarding your commentary on the industrial business. So you mentioned that you're seeing strength in aggregate and cement, food and beverage, and warehousing.
Kristine Liwag: Hey, good morning, everyone, Rob and Dr. Hartnett. I just wanted to follow up regarding your commentary on the industrial business. So you mentioned that, you know, you're seeing strength in aggregate and cement, food and beverage, and warehousing. You've got the new products that you're introducing for Fiscal Year 2027, and, you know, it sounds like semiconductor has been doing really well. I was wondering, for these verticals, can you provide what is embedded in your Q4 revenue outlook? And also, when we go into 2027, how do you think about growth for these end markets?
Kristine Liwag: Hey, good morning, everyone, Rob and Dr. Hartnett. I just wanted to follow up regarding your commentary on the industrial business. So you mentioned that, you know, you're seeing strength in aggregate and cement, food and beverage, and warehousing. You've got the new products that you're introducing for Fiscal Year 2027, and, you know, it sounds like semiconductor has been doing really well. I was wondering, for these verticals, can you provide what is embedded in your Q4 revenue outlook? And also, when we go into 2027, how do you think about growth for these end markets?
Speaker #4: You've got the new products that you're introducing for fiscal year '27, and it sounds like semiconductor has been doing really well. I was wondering, for these verticals, can you provide what is embedded in your Q4 revenue outlook?
Speaker #4: And also, when we go into 2027, how do you think about growth for these end
Speaker #2: Yeah, Christine, the way we have our fourth quarter built out right now, it looks a lot like the third quarter in terms of what we're forecasting for year over year growth.
Robert Sullivan: Yeah, Kristine, you know, the way we have our fourth quarter built out right now, it looks a lot like the third quarter in terms of what we're forecasting for year-over-year growth. Maybe slightly conservative on the industrial side. So, you know, we're just expecting more of the same. Obviously, we saw that the PMI this week was positive. So if that trend were to continue, that would be certainly a bullish sign for our business.
Robert Sullivan: Yeah, Kristine, you know, the way we have our fourth quarter built out right now, it looks a lot like the third quarter in terms of what we're forecasting for year-over-year growth. Maybe slightly conservative on the industrial side. So, you know, we're just expecting more of the same. Obviously, we saw that the PMI this week was positive. So if that trend were to continue, that would be certainly a bullish sign for our business.
Speaker #2: Maybe slightly conservative on the industrial side. So we're just expecting more of the same. Obviously, we saw the PMI this week was positive. So that trend were to continue, that would be certainly a bullish sign for our business.
Speaker #4: Okay, great. And then if I could follow up with backhoe, the quiet running valves is a really differentiated technology. I was wondering, outside of submarines, are there other use cases for this product?
Kristine Liwag: Okay, great. And then if I could follow up, you know, with VACCO, the quiet-running valve is a really differentiated technology. I was wondering, outside submarines, are there other use cases for this product?
Kristine Liwag: Okay, great. And then if I could follow up, you know, with VACCO, the quiet-running valve is a really differentiated technology. I was wondering, outside submarines, are there other use cases for this product?
Michael Hartnett: Mike, you on? So, Kristine, hi, it's Dan Bergeron. Yeah, for Sargent Aerospace, their products are specifically for submarine, and on the VACCO side, there are some applications for them in space on satellites.
Daniel Bergeron: Mike, you on? So, Kristine, hi, it's Dan Bergeron. Yeah, for Sargent Aerospace, their products are specifically for submarine, and on the VACCO side, there are some applications for them in space on satellites.
Speaker #2: Mike, you on? So Christine, hi, it's Dan Bergeron. Yeah, for Sargent Aerospace, their products are specifically for submarines. And on the backhoe side, there are some applications for them in space on satellites.
Speaker #4: Gotcha. Super helpful. And then does it, I mean, just following up on my industrial question, with the improving outlook and also when we think about the order activity that you face, is it fair to say that fiscal year '27 would be a higher growth year for an industrial than fiscal year
Kristine Liwag: Gotcha. Super helpful. And then is it, you know, I mean, just following up on my industrial question, you know, with the improving outlook, and also when we think about the order activity that you've faced, is it fair to say that Fiscal Year 2027 would be a higher growth year for an industrial than Fiscal Year 2026?
Kristine Liwag: Gotcha. Super helpful. And then is it, you know, I mean, just following up on my industrial question, you know, with the improving outlook, and also when we think about the order activity that you've faced, is it fair to say that Fiscal Year 2027 would be a higher growth year for an industrial than Fiscal Year 2026?
Speaker #4: '26? We're expecting that,
Michael Hartnett: We're expecting that, Kristine. Yes. Yes.
Michael Hartnett: We're expecting that, Kristine. Yes. Yes.
Speaker #2: Christine.
Speaker #2: Yes. Great.
Speaker #4: Thank you.
Kristine Liwag: Great. Thank you.
Kristine Liwag: Great. Thank you.
Michael Hartnett: Yeah. Yep.
Michael Hartnett: Yeah. Yep.
Speaker #2: Yep. Our next
Operator: Our next question is from Michael Ciarmoli with Truist Securities. Please proceed.
Operator: Our next question is from Michael Ciarmoli with Truist Securities. Please proceed.
Speaker #3: The question is from Michael Carmelly with Truist Securities. Please proceed.
Speaker #5: This is Alexandra Mandry on for Michael Carmelly with Truist Securities, and thanks for taking my question. Strong and at all-time highs with that. We've seen that backlog growth has been 230% year-over-year growth.
[Analyst] (Truist Securities): This is Alexandra Mandry on for Michael Ciarmoli with Truist Securities, and thanks for taking my question. We've seen that backlog growth has been strong and at all-time highs with that 230% year-over-year growth. So could you add some more color in terms of order composition and sub-market breakdown? And also, what is the relationship with backlog and revenue going forward?
Alexandra Mandry: This is Alexandra Mandry on for Michael Ciarmoli with Truist Securities, and thanks for taking my question. We've seen that backlog growth has been strong and at all-time highs with that 230% year-over-year growth. So could you add some more color in terms of order composition and sub-market breakdown? And also, what is the relationship with backlog and revenue going forward?
Speaker #5: So could you add some more color in terms of order composition and submarket breakdown? And also, what is the relationship with backlog and revenue going
Speaker #5: forward? Okay.
Michael Hartnett: Okay, there was a number of questions there. The first question was the composition of the backlog, and I think Rob has that.
Speaker #2: There was a number of questions there. The first question was the composition of the backlog, and I think Rob has that. Yeah. What I can tell you is that over 90% of our backlog is really our A&D market.
Michael Hartnett: Okay, there was a number of questions there. The first question was the composition of the backlog, and I think Rob has that.
Robert Sullivan: Yeah. What I can tell you is that over 90% of our backlog is, is really our A&D market. Most of our industrial business tends to move in and out, and doesn't really get stuck in the backlog. And in terms of the duration, which I think was another part of your question, you know, some of these contracts, specifically with Sargent or VACCO, can be, you know, multiyear, going well beyond the next, you know, 12 to 24 months.
Robert Sullivan: Yeah. What I can tell you is that over 90% of our backlog is, is really our A&D market. Most of our industrial business tends to move in and out, and doesn't really get stuck in the backlog. And in terms of the duration, which I think was another part of your question, you know, some of these contracts, specifically with Sargent or VACCO, can be, you know, multiyear, going well beyond the next, you know, 12 to 24 months.
Speaker #2: Most of our industrial business tends to move in and out and doesn't really get stuck in the backlog. And in terms of the duration, which I think was another part of your question, some of these contracts specifically with Sargent or backhoe can be multi-year, going well beyond the next 12 to 24 months.
Speaker #3: Great. And then, I guess, can you break down the backlog further between submarkets within A&D?
[Analyst] (Truist Securities): Great. And then I guess, like, can you break down the backlog further between the submarkets within A&D?
Alexandra Mandry: Great. And then I guess, like, can you break down the backlog further between the submarkets within A&D?
Robert Sullivan: You know, I don't have all that detail right in front of me to share with you at this time. You know, we just kind of look at it at the segment level. But obviously, with Sargent and VACCO, there's a significant portion of our backlog with the marine products.
Speaker #2: I don't have all that detail right in front of me to share with you at this time. We just kind of look at it at the segment level.
Robert Sullivan: You know, I don't have all that detail right in front of me to share with you at this time. You know, we just kind of look at it at the segment level. But obviously, with Sargent and VACCO, there's a significant portion of our backlog with the marine products.
Speaker #2: But obviously, with Sargent and backhoe, there's a significant portion of our backlog with the
Speaker #2: But obviously, with Sargent and backhoe, there's a significant portion of our backlog with the marine. That makes sense.
[Analyst] (Truist Securities): That makes sense. Then I guess just one other one. So on the fiscal Q1 2026 call, you mentioned using roughly a $30 million run rate for VACCO quarterly revenue. So given that, did you divest maybe from any contracts or make any other changes that would reflect that slight performance discrepancy?
Alexandra Mandry: That makes sense. Then I guess just one other one. So on the fiscal Q1 2026 call, you mentioned using roughly a $30 million run rate for VACCO quarterly revenue. So given that, did you divest maybe from any contracts or make any other changes that would reflect that slight performance discrepancy?
Speaker #3: And then, I guess just one other one. So, on the fiscal Q2 '26 call, you mentioned using roughly a $30 million run rate for backhoe.
Speaker #3: Quarterly revenue. So given that, did you divest maybe from any contracts or make any other changes that would reflect that slight performance?
Speaker #3: discrepancy? I mean, they were
Robert Sullivan: I mean, they were at $29 million this quarter, so they were—they're pretty close to that $30 million run rate. It's just timing. You know, we're in the middle of integration, and these contracts can be, you know, a little bit lumpy quarter to quarter. But I would say we feel pretty good with where that business is operating and are optimistic for the next year.
Robert Sullivan: I mean, they were at $29 million this quarter, so they were—they're pretty close to that $30 million run rate. It's just timing. You know, we're in the middle of integration, and these contracts can be, you know, a little bit lumpy quarter to quarter. But I would say we feel pretty good with where that business is operating and are optimistic for the next year.
Speaker #2: at 29 this quarter. They were pretty close to that $30 million run rate. There's just timing. We're in the middle of integration, and these contracts can be a little bit lumpy quarter to quarter, but I would say we feel pretty good with where that business is operating and are optimistic for the next
Speaker #2: year.
Speaker #3: Great. Thank
[Analyst] (Truist Securities): Great. Thank you.
Alexandra Mandry: Great. Thank you.
Speaker #3: you. Our next question is from Steve Barger with KeyBank Capital Markets. Please
Operator: Our next question is from Steve Barger with KeyBanc Capital Markets. Please proceed.
Operator: Our next question is from Steve Barger with KeyBanc Capital Markets. Please proceed.
Speaker #3: proceed. Good
Speaker #6: morning, Dr. Hartnett and Rob. This is Christian Zylon for Steve Barger. Thanks for taking the question. Good morning. Just following up on your industrial comments, it does seem like you guys started growing before we actually saw an industrial inflection, or at least have been less impacted by recent weakness.
[Analyst] (KeyBanc Capital Markets): Morning, Dr. Hartnett and Rob. This is Christian Zylstra-
Steve Barger: Morning, Dr. Hartnett and Rob. This is Christian Zylstra-
Michael Hartnett: Morning
Michael Hartnett: Morning
[Analyst] (KeyBanc Capital Markets): ... Steve Barger. Thanks for taking the question. Morning. Just following up on your industrial comments, it does seem like you guys started growing before we actually saw an industrial inflection, or at least have been less impacted by recent weakness. But January PMI was strong a few days ago. US industrial production has inflected positively. Sentiment and short cycle manufacturing seems to be improving. So looking back, what do you think drove your outperformance? And then based on your business and your mix, do you think you can outgrow peers or continue your strain of growth?
Steve Barger: Steve Barger. Thanks for taking the question. Morning. Just following up on your industrial comments, it does seem like you guys started growing before we actually saw an industrial inflection, or at least have been less impacted by recent weakness. But January PMI was strong a few days ago. US industrial production has inflected positively. Sentiment and short cycle manufacturing seems to be improving. So looking back, what do you think drove your outperformance? And then based on your business and your mix, do you think you can outgrow peers or continue your strain of growth?
Speaker #6: But January PMI was strong a few days ago. US industrial production has inflected positively. Sentiment in short-cycle manufacturing seems to be improving. So looking back, what do you think drove your outperformance?
Speaker #6: And then based on your business and your mix, do you think you can outgrow peers or continue your string of
Speaker #6: growth? Well, I think one of
Michael Hartnett: Well, I think one of the, you know, the outperformance, number one, the Dodge brand is a very strong brand in the industrial marketplace, particularly the industrial MRO marketplace. And that marketplace is pretty short cycle, and as a result of being such short cycle, your product availability needs to be high in order to capture the sale. And so, Dodge does an outstanding job at managing their product availability, their hit rates, and stocking of their core products. So, I think we're probably industry best in that regard. And so that helps performance when times are tough. There was a second part of your question, Steve.
Michael Hartnett: Well, I think one of the, you know, the outperformance, number one, the Dodge brand is a very strong brand in the industrial marketplace, particularly the industrial MRO marketplace. And that marketplace is pretty short cycle, and as a result of being such short cycle, your product availability needs to be high in order to capture the sale. And so, Dodge does an outstanding job at managing their product availability, their hit rates, and stocking of their core products. So, I think we're probably industry best in that regard. And so that helps performance when times are tough. There was a second part of your question, Steve.
Speaker #2: outperformance, number one, the Dodge brand is very strong brand in the the the industrial marketplace, particularly the industrial MRO marketplace. And that marketplace is pretty short cycle.
Speaker #2: And as a result of having being cycle, your product availability needs to be high in order to capture the sale. And so Dodge does an outstanding job at managing their product availability and their hit rates.
Speaker #2: And stocking of their core products. So I think we're probably industry best in that regard, and so that helps performance when times are tough.
Speaker #2: There was a second part of your question, Steve, and I forget what it—
Michael Hartnett: I forget what it was.
Michael Hartnett: I forget what it was.
Speaker #2: was. Yeah, it was
[Analyst] (KeyBanc Capital Markets): Yeah, it was just based on, like, your current business and mix. Do you think that can continue into calendar 2026?
Steve Barger: Yeah, it was just based on, like, your current business and mix. Do you think that can continue into calendar 2026?
Speaker #6: just based on your current business and mix. Do you think that can continue into calendar
Speaker #6: 2026? Yeah, it
Michael Hartnett: Yeah, it should. I absolutely think it should. You know, we're expecting a stronger industrial economy in 2026. Certainly, it started in January, started off well. Semicon has come back in a significant way, which was dormant for a long period of time, and that's an important sector for us. So, yeah, I think we're gonna do better on the industrial side in calendar 2026.
Michael Hartnett: Yeah, it should. I absolutely think it should. You know, we're expecting a stronger industrial economy in 2026. Certainly, it started in January, started off well. Semicon has come back in a significant way, which was dormant for a long period of time, and that's an important sector for us. So, yeah, I think we're gonna do better on the industrial side in calendar 2026.
Speaker #2: should. I absolutely think it should. We're expecting a stronger industrial economy in '26. Certainly, it started in January started off well. Semicon has come back in a significant way, which was dormant for a long period of time.
Speaker #2: And that's a nice, important sector for us. So, yeah, I think we're going to do better on the industrial side in calendar.
Speaker #2: '26. That's great.
[Analyst] (KeyBanc Capital Markets): That's great. And then just switching gears to aero and defense. A couple quarters ago, you mentioned some synergies on the space side with VACCO and Legacy RBC. Just any quick update there, and maybe more broadly, any updates on how you're thinking about the broader space industry, and what specific markets or applications that you currently are not exposed to or not involved in, that could be interesting? Does that require more engineering expertise or capacity? Just any kind of thoughts there. Thank you.
Steve Barger: That's great. And then just switching gears to aero and defense. A couple quarters ago, you mentioned some synergies on the space side with VACCO and Legacy RBC. Just any quick update there, and maybe more broadly, any updates on how you're thinking about the broader space industry, and what specific markets or applications that you currently are not exposed to or not involved in, that could be interesting? Does that require more engineering expertise or capacity? Just any kind of thoughts there. Thank you.
Speaker #6: And then, just switching gears to Air and Defense, a couple of quarters ago, you mentioned some synergies on the space side with Barden and legacy RBC.
Speaker #6: Just any quick update there, maybe more broadly, any updates on how you're thinking about the broader space industry and what specific markets or exposed to or not involved in that could be interesting?
Speaker #6: Does that require more engineering expertise, or capacity? Just any kind of thoughts there? Thank you.
Michael Hartnett: Yeah. Well, VACCO is a, you know, it's a company we learn more about, you know, every month. And one of the things that we're learning about VACCO is they have a very good product program that services the space market with staples that the space market requires in order to build out satellites. And they have a tremendous brand and following in these staples. And so it's a little bit like the bearing business. If you have a stocking position on these staples, you're liable to get the order, and you're liable to significantly improve your sales. And so we're looking at their product offering and deciding exactly which products we should be stocking.
Michael Hartnett: Yeah. Well, VACCO is a, you know, it's a company we learn more about, you know, every month. And one of the things that we're learning about VACCO is they have a very good product program that services the space market with staples that the space market requires in order to build out satellites. And they have a tremendous brand and following in these staples. And so it's a little bit like the bearing business. If you have a stocking position on these staples, you're liable to get the order, and you're liable to significantly improve your sales. And so we're looking at their product offering and deciding exactly which products we should be stocking.
Speaker #2: Well, Backhoe is a company we learn more about every month. And one of the things that we're learning about Backhoe is they have a very good product program that services the space market with staples that the space market requires in order to build out satellites.
Speaker #2: And they have a tremendous brand and following in these staples. And so it's a little bit like the bearing business. If you have a stocking position on these staples, you're liable to get the order and you're liable to significantly improve your sales.
Michael Hartnett: And, to some extent, we think, we think if we had those products in stock, people would actually, actually develop or design satellite systems around those products, because when it's undefined, it's undefined, and, and people kind of, you know, grow their own spoke. So, we can, we, we can help guide the industry by making these products more available, and at the same time, improve our sales to the satellite OEMs. And there's, there's, there's quite a few of these people.
Michael Hartnett: And, to some extent, we think, we think if we had those products in stock, people would actually, actually develop or design satellite systems around those products, because when it's undefined, it's undefined, and, and people kind of, you know, grow their own spoke. So, we can, we, we can help guide the industry by making these products more available, and at the same time, improve our sales to the satellite OEMs. And there's, there's, there's quite a few of these people.
Speaker #2: If they grow their own spoke, we can help guide the industry by making these products more available. And at the same time, improve our sales to the satellite OEMs.
Speaker #2: And there's quite a few of these people.
Speaker #6: That's great. Appreciate the color. Thank you, guys.
[Analyst] (KeyBanc Capital Markets): That's great. Appreciate the call. Thank you, guys.
Steve Barger: That's great. Appreciate the call. Thank you, guys.
Michael Hartnett: Yep.
Michael Hartnett: Yep.
Speaker #1: Our next question is Yep. from Scott Dulese with Deutsche Bank. Please proceed.
Operator: Our next question is from Scott Deuschle with Deutsche Bank. Please proceed.
Operator: Our next question is from Scott Deuschle with Deutsche Bank. Please proceed.
Speaker #7: Hey, good morning. Dr. Hartnett, can you clarify whether the new Airbus contract included a meaningful ship set content increase on any of your programs?
[Analyst] (Deutsche Bank): Hey, good morning. Dr. Hartnett, can you clarify whether the new Airbus contract included a meaningful ship-set content increase on any of your programs?
Scott Deuschle: Hey, good morning. Dr. Hartnett, can you clarify whether the new Airbus contract included a meaningful ship-set content increase on any of your programs?
Michael Hartnett: Yeah. Yes, it did. I guess it's – you know, what do you define as meaningful? I mean, I'm just running through some of the programs, the new programs that we captured, in my own mind here on the Airbus contract. So, yeah, I would say it's probably increased Airbus content 20%, that sort of thing.
Michael Hartnett: Yeah. Yes, it did. I guess it's – you know, what do you define as meaningful? I mean, I'm just running through some of the programs, the new programs that we captured, in my own mind here on the Airbus contract. So, yeah, I would say it's probably increased Airbus content 20%, that sort of thing.
Speaker #2: Yes, it did. I guess it's definitely what do you define as meaningful? I mean, we just running through some of the programs, the new programs that we captured in my own mind here on the Airbus contract.
Speaker #2: So yeah, I would say it's probably increased Airbus content 20%. That sort of thing.
Speaker #7: Okay. Can you say when that might layer into your revenue? Is there maybe a one- to two-year lag as you tool up for that higher content?
[Analyst] (Deutsche Bank): Okay. Can you say when that might layer into your revenue? Is there maybe a 1- to 2-year lag as you tool up for that higher content, or could you see it sooner?
Scott Deuschle: Okay. Can you say when that might layer into your revenue? Is there maybe a 1- to 2-year lag as you tool up for that higher content, or could you see it sooner?
Speaker #7: Or could you see it
Speaker #7: sooner? We expect to see it in
Michael Hartnett: We expect to see it in this particular quarter.
Michael Hartnett: We expect to see it in this particular quarter.
Speaker #2: this particular quarter.
Speaker #7: Okay, that's great. And then, can you also give us a sense for how large the missile business is today relative to defense overall? And would you expect missile revenue growth to outpace commercial aerospace, given some of these big contracts Lockheed and Raytheon have?
[Analyst] (Deutsche Bank): Okay, that's great. And then can you also give us a sense for how large the missile business is today relative to defense overall? And would you expect missile revenue growth to outpace commercial aerospace, given some of these big contracts Lockheed and Raytheon have gotten?
Scott Deuschle: Okay, that's great. And then can you also give us a sense for how large the missile business is today relative to defense overall? And would you expect missile revenue growth to outpace commercial aerospace, given some of these big contracts Lockheed and Raytheon have gotten?
Speaker #7: gotten? Yeah.
Michael Hartnett: Yeah. I mean, missiles are... They're a funny breed. I mean, they're used for all sorts of things. You know, there's the HIMARS, and there's the JDAMs, and those are bombs. And there's the hypersonics, and then there's the standard missiles that go into just are part of the F-16 package. And so we're pretty much, you know, across the board on all of these programs. I can't... You know, it's hard to see exactly how big this missile business can be, particularly when they start building out hypersonics.
Michael Hartnett: Yeah. I mean, missiles are... They're a funny breed. I mean, they're used for all sorts of things. You know, there's the HIMARS, and there's the JDAMs, and those are bombs. And there's the hypersonics, and then there's the standard missiles that go into just are part of the F-16 package. And so we're pretty much, you know, across the board on all of these programs. I can't... You know, it's hard to see exactly how big this missile business can be, particularly when they start building out hypersonics.
Speaker #2: I mean, missiles are a funny breed. I mean, they're used for all sorts of things. There's the HIMARS, and there's the JDAMs, and those are bombs.
Speaker #2: And there's the hypersonics. And then there's the standard missiles that go into just are part of the F-16 package. And so we're pretty much across the board on all of these programs.
Speaker #2: I can't it's hard to see exactly how big this missile business can be, particularly when they start building those a lot of those hypersonics are going to go on the Columbia's and the Virginia's.
Michael Hartnett: But, you know, a lot of those hypersonics are gonna go on the Columbias and the Virginias. So, we're definitely gonna be part of that program in a meaningful way. But I don't have an answer for you with regard to how big the overall missile business can be at RBC versus commercial aircraft. I don't think it's gonna be as large, anywhere near as large as our commercial aircraft business.
Michael Hartnett: But, you know, a lot of those hypersonics are gonna go on the Columbias and the Virginias. So, we're definitely gonna be part of that program in a meaningful way. But I don't have an answer for you with regard to how big the overall missile business can be at RBC versus commercial aircraft. I don't think it's gonna be as large, anywhere near as large as our commercial aircraft business.
Speaker #2: So, we're definitely going to be part of that program in a meaningful way. But I don't have an answer for you with regard to how big the overall missile business can be at RBC versus commercial aircraft.
Speaker #2: I don't think it's going to be anywhere near as large as our commercial aircraft business.
Speaker #7: Okay. And then, Rob, I was wondering if you could pull apart the gross margin guidance by segment for the fourth quarter and rate of sequential gross margin improvement in A&D.
[Analyst] (Deutsche Bank): Okay. Then, Rob, I was wondering if you could pull apart the gross margin guidance by segment for Q4, and in particular, help us understand the, the rate of sequential gross margin improvement in A&D, given that pricing step up you have coming through.
Scott Deuschle: Okay. Then, Rob, I was wondering if you could pull apart the gross margin guidance by segment for Q4, and in particular, help us understand the, the rate of sequential gross margin improvement in A&D, given that pricing step up you have coming through.
Speaker #7: Given that pricing step up you have coming
Speaker #7: Given that pricing step-up you have coming through. Yeah.
Robert Sullivan: Yeah, I mean, I think the, one of the best ways to look at it is, you know, we're, we're guiding you to a gross margin that's in, you know, at the high end incrementals where we were in Q3. And, you know, we would expect aerospace and defense to be growing at a rate faster than industrial. So that, that should imply that there should be some, you know, increment to what we've seen in aerospace and defense. So as I, I said, it was about 42.2 this quarter. You know, we should see some gradual improvement in this quarter that's getting us to that, to that guidance. So that's, that's how I break it down. I think industrials should, should more or less, look where they, you know, they have been.
Robert Sullivan: Yeah, I mean, I think the, one of the best ways to look at it is, you know, we're, we're guiding you to a gross margin that's in, you know, at the high end incrementals where we were in Q3. And, you know, we would expect aerospace and defense to be growing at a rate faster than industrial. So that, that should imply that there should be some, you know, increment to what we've seen in aerospace and defense. So as I, I said, it was about 42.2 this quarter. You know, we should see some gradual improvement in this quarter that's getting us to that, to that guidance. So that's, that's how I break it down. I think industrials should, should more or less, look where they, you know, they have been.
Speaker #2: I mean, I think one of the best ways to look at it is we're guiding you to a gross margin that's at the high end incrementals where we were in Q3.
Speaker #2: And we would expect aerospace and defense to be growing at a rate faster than industrial. So that should imply that there should be some increment to what we've seen in aerospace and defense.
Speaker #2: So, as I said, it was about 42.2 this quarter. We should see some gradual improvement in this quarter that's getting us to that guidance.
Speaker #2: So that's how I'd break it down. I think industrials, should more or less look where they have been I think we have some opportunities, but we have a little bit of headwind just from some absorption challenges that we always have in the third fiscal quarter with the holidays and just fewer earned hours.
Robert Sullivan: You know, I think we have some opportunities, but we have a little bit of headwind just from some absorption challenges that we always have in the third fiscal quarter with the holidays and just fewer earned hours. But generally speaking, industrial should look like what it did in the third quarter, I would expect.
Robert Sullivan: You know, I think we have some opportunities, but we have a little bit of headwind just from some absorption challenges that we always have in the third fiscal quarter with the holidays and just fewer earned hours. But generally speaking, industrial should look like what it did in the third quarter, I would expect.
Speaker #2: But generally speaking, industrials should look like what it did in the third quarter, I would expect.
Speaker #7: Okay. Thank you.
[Analyst] (Deutsche Bank): Okay, thank you.
Scott Deuschle: Okay, thank you.
Speaker #1: Our next question is from Pete Skubisky with Alembic Global. Please proceed.
Operator: Our next question is from Pete Skibitski with Alembic Global. Please proceed.
Operator: Our next question is from Pete Skibitski with Alembic Global. Please proceed.
Speaker #8: Hey, good morning, guys.
Pete Skibitski: Hey, good morning, guys.
Pete Skibitski: Hey, good morning, guys.
Speaker #2: Good morning.
Robert Sullivan: Good morning.
Robert Sullivan: Good morning.
Pete Skibitski: Just a couple for me. Mike, can you update us or remind us kind of where you guys are at on the production rates right now for the core Boeing and Airbus programs?
Speaker #8: Just a couple for me. Mike, can you update us or remind us kind of where you guys are at on the production rates right now for the core Boeing and Airbus?
Pete Skibitski: Just a couple for me. Mike, can you update us or remind us kind of where you guys are at on the production rates right now for the core Boeing and Airbus programs?
Speaker #8: programs? Oh,
Michael Hartnett: Oh, yeah. Well, I think Boeing is, you know, I think they're pushing towards, they're at 38 737s a month, looking to go to 42, looking to go to 50, with an overall objective of getting to 60. The exact dates that those occur, I don't have in front of me, but I do have, you know, in one of my files. But the 60 is not that far off. And then the 787 is, you know, 6, as I remember, 6 going to 8 per month, and that's a significant step up for us. We have one plant that's, you know, very dependent upon the 787 ship-set, and so that's very helpful.
Michael Hartnett: Oh, yeah. Well, I think Boeing is, you know, I think they're pushing towards, they're at 38 737s a month, looking to go to 42, looking to go to 50, with an overall objective of getting to 60. The exact dates that those occur, I don't have in front of me, but I do have, you know, in one of my files. But the 60 is not that far off. And then the 787 is, you know, 6, as I remember, 6 going to 8 per month, and that's a significant step up for us. We have one plant that's, you know, very dependent upon the 787 ship-set, and so that's very helpful.
Speaker #2: yeah. Well, I think Boeing is I think they're pushing towards they're at 38, 737s a month, looking to go to 42, looking to go to 50.
Speaker #2: With an overall objective of getting to 60. The exact dates that those that occurs, I don't have in front of me, but I do have in one of my files.
Speaker #2: But the 60 is not that far off. And then the 787 is, as I remember, 6 going to 8 per month. And that's a significant step up for us.
Speaker #2: We have one plant that's very dependent upon the 787 ship. And so that's very helpful. And then the 777, 777X seems to be coming in to its own and but I think that's only a few ships a month in the distant future.
Michael Hartnett: And then, you know, the 777, 777X seems to be coming into its own. But I think that's only a few ship-sets a month, in the distant future. I don't have that number in front of me.
Michael Hartnett: And then, you know, the 777, 777X seems to be coming into its own. But I think that's only a few ship-sets a month, in the distant future. I don't have that number in front of me.
Speaker #2: I don't have that number in front of me.
Speaker #8: Okay. And just are you guys producing kind of in line with where Boeing is, or are you I think typically you're, I don't know, six to nine months ahead of their production rates.
Pete Skibitski: Okay. And just, are you guys producing kind of in line with where Boeing is? Or are you... I think typically you're, I don't know, six to nine months ahead of their production rates. Is that where you're at right now? Or do you feel like you're there may be reworking off some inventory?
Pete Skibitski: Okay. And just, are you guys producing kind of in line with where Boeing is? Or are you... I think typically you're, I don't know, six to nine months ahead of their production rates. Is that where you're at right now? Or do you feel like you're there may be reworking off some inventory?
Speaker #8: Is that where you're at right now, or do you feel like you're maybe working off some
Speaker #8: inventory? I
Michael Hartnett: I think, you know, in one of our smaller plants, Boeing is working off some in-inventory, and that sort of turns around in July. In all of the other plants, we're pretty much lockstep with their production rates.
Speaker #2: think in one of our smaller plants, Boeing is working off of some inventory, and that sort of turns around in July. And all of the other plants, we're pretty much lockstep with their production
Michael Hartnett: I think, you know, in one of our smaller plants, Boeing is working off some in-inventory, and that sort of turns around in July. In all of the other plants, we're pretty much lockstep with their production rates.
Speaker #2: rates. Okay.
Pete Skibitski: Okay. Okay, got it. One last one for me, maybe for Rob. Hey, Rob, you guys were kind of hot this quarter on the CapEx spend, inflated up a bit.
Pete Skibitski: Okay. Okay, got it. One last one for me, maybe for Rob. Hey, Rob, you guys were kind of hot this quarter on the CapEx spend, inflated up a bit.
Speaker #8: Okay. Got it. One last one for me, maybe for Rob. Hey, Rob, you guys were kind of hot this quarter on the capex spend.
Speaker #8: It inflected up a bit. Are you still on is that just timing? Are you still on tap to be about 3.5% spend for the full year, and maybe continuing that level into fiscal 27?
Robert Sullivan: Yep.
Robert Sullivan: Yep.
Pete Skibitski: Are you still on -- is that just timing? Are you still on tap to be about 3.5% spend for the full year and maybe continuing that level into fiscal 2027?
Pete Skibitski: Are you still on -- is that just timing? Are you still on tap to be about 3.5% spend for the full year and maybe continuing that level into fiscal 2027?
Speaker #2: Yeah. And we made some strategic investments in some capacity build-outs, but I think we'll still end up 3.5%, less than 4% for the full—
Robert Sullivan: Yeah, we've and we made some strategic investments and some capacity buildouts, but I think we'll still end up 3.5, less than 4% for the full year.
Robert Sullivan: Yeah, we've and we made some strategic investments and some capacity buildouts, but I think we'll still end up 3.5, less than 4% for the full year.
Speaker #2: year. Okay.
Pete Skibitski: Okay. Got it. Thanks, guys.
Pete Skibitski: Okay. Got it. Thanks, guys.
Speaker #8: Got it. Thanks,
Speaker #8: guys. Our
Speaker #1: Next question is from Tim Thien with Raymond James. Please proceed.
Operator: Our next question is from Tim Thein with Raymond James. Please proceed.
Operator: Our next question is from Tim Thein with Raymond James. Please proceed.
Speaker #4: Great, thank you. I've said two on the industrial business. I think, Rob, you said earlier that what's embedded in the fourth quarter guide is a growth rate for that business comparable to what you did of, call it, 3% in the third, if I heard that correct.
[Analyst] (Raymond James): Great. Thank you. I've said, too, on the industrial business, on the... I think, Rob, you said earlier that what's embedded in the Q4 guide is a growth rate for that business comparable to what you did, call it 3%, in the Q3, if I heard that correct. I'm just curious, is that in terms of your obviously this is a business that's a lot harder to predict than A&D in the short term, but I'm curious what you've seen kind of, you know, in recent months, trends in just in terms of order activity.
Tim Thein: Great. Thank you. I've said, too, on the industrial business, on the... I think, Rob, you said earlier that what's embedded in the Q4 guide is a growth rate for that business comparable to what you did, call it 3%, in the Q3, if I heard that correct. I'm just curious, is that in terms of your obviously this is a business that's a lot harder to predict than A&D in the short term, but I'm curious what you've seen kind of, you know, in recent months, trends in just in terms of order activity.
Speaker #4: I'm just curious, is that in terms of your obviously, this is a business that's a lot harder to predict than A&D in the short term, but I'm curious what you've seen kind of in recent months trends just in terms of order activity?
Speaker #4: Does that get you to a similar kind of outcome, or is that, I don't know, just maybe just help us in terms of what you've actually seen in terms of incoming order trends relative to that number?
[Analyst] (Raymond James): Does that get you to a similar kind of outcome, or is that, I don't know, do you just -- maybe just help us in terms of what you've actually seen in terms of incoming order trends relative to the, to that number?
Tim Thein: Does that get you to a similar kind of outcome, or is that, I don't know, do you just -- maybe just help us in terms of what you've actually seen in terms of incoming order trends relative to the, to that number?
Speaker #2: Yeah. What's built in for the fourth quarter is probably even a little bit below that 3%, but to be honest, the orders have been pretty good.
Robert Sullivan: Yeah, we, you know, what's built in for Q4 is probably even a little bit below that 3%. But to be honest, the orders have been pretty good in the recent months, so we feel really comfortable with what we're forecasting.
Robert Sullivan: Yeah, we, you know, what's built in for Q4 is probably even a little bit below that 3%. But to be honest, the orders have been pretty good in the recent months, so we feel really comfortable with what we're forecasting.
Speaker #2: And the recent months, so we feel really comfortable with where we're forecasting.
[Analyst] (Raymond James): Okay. And then, just as part of it as you integrate Dodge, there is a lot of investment that the company has made over the years in terms of making that more of a global business. Where are you in terms of realizing some of those growth initiatives? You highlighted the service center piece earlier. I don't know if that's, obviously, I'm not international, but maybe just if there's a way to kind of help us in terms of the underlying growth prospects of Dodge. Yeah, that's all. Thank you.
Tim Thein: Okay. And then, just as part of it as you integrate Dodge, there is a lot of investment that the company has made over the years in terms of making that more of a global business. Where are you in terms of realizing some of those growth initiatives? You highlighted the service center piece earlier. I don't know if that's, obviously, I'm not international, but maybe just if there's a way to kind of help us in terms of the underlying growth prospects of Dodge. Yeah, that's all. Thank you.
Speaker #4: As you integrate Dodge, there's a lot of investment that the company has made over the years in terms of making that more of a global business.
Speaker #4: Where are you in terms of realizing some of those growth initiatives? You highlighted the service center piece earlier. I don't know if that's obviously not international, but maybe just if there's a way to kind of help us in terms of the underlying growth prospects of Dodge, yeah, that's all.
Speaker #4: Thank
Speaker #4: you. Yeah.
Speaker #1: Our. I
Operator: Our-
Operator: Our.
Michael Hartnett: Yeah, you know, I think-
Michael Hartnett: Yeah, you know, I think.
Speaker #2: think. Sorry. I think we're still in the middle innings on that process, and we realized a tremendous amount of synergy on the cost side with Dodge as we've all talked about in the past.
Operator: Sorry, go ahead.
Operator: Sorry, go ahead.
Michael Hartnett: Sorry. I think we're still in the middle innings on that process, and we realize the tremendous amount of synergy on the cost side with Dodge, as we've all talked about in the past. I think we're in the middle innings, and then some of those new initiatives are being put in place. We've had a lot of great meetings and discussions around that new service center, some new product initiatives that you know we're in the process of deploying. So I think there's some bright things ahead on that business.
Michael Hartnett: Sorry. I think we're still in the middle innings on that process, and we realize the tremendous amount of synergy on the cost side with Dodge, as we've all talked about in the past. I think we're in the middle innings, and then some of those new initiatives are being put in place. We've had a lot of great meetings and discussions around that new service center, some new product initiatives that you know we're in the process of deploying. So I think there's some bright things ahead on that business.
Speaker #2: I think we're in the middle innings on some of those new initiatives that are being put in place. We've had a lot of great meetings and discussions around that new service center.
Speaker #2: Some new product initiatives that we're in the process of deploying. So I think there's some bright things ahead on that business.
Speaker #4: Thank you.
[Analyst] (Raymond James): Thank you.
Tim Thein: Thank you.
Speaker #1: Our next question is from Jordan Lioness with Bank of America. Please proceed.
Operator: Our next question is from Jordan Lyonnais with Bank of America. Please proceed.
Operator: Our next question is from Jordan Lyonnais with Bank of America. Please proceed.
Speaker #6: Hey, good morning. Thank you for taking the question. I wanted to touch on missiles again. If we look at the frameworks that Lockheed and Raytheon now have, when we start to see those turn into real contracts in production, how are you guys thinking about CAPEX, or do you need additional investment to hit these quadruple production rates?
Jordan Lyonnais: Hey, good morning. Thank you for taking the question. I wanted to touch on missiles again. If the frameworks that Lockheed and Raytheon now have, when we start to see those turn into real contracts in production, how are you guys thinking about CapEx, or do you need additional investments to hit these quadruple production rates? Thank you.
Jordan Lyonnais: Hey, good morning. Thank you for taking the question. I wanted to touch on missiles again. If the frameworks that Lockheed and Raytheon now have, when we start to see those turn into real contracts in production, how are you guys thinking about CapEx, or do you need additional investments to hit these quadruple production rates? Thank you.
Speaker #6: Thank you.
Michael Hartnett: Well, you know, it's the question you ask is the same question the missile builders ask us: Do you guys have the capacity to take on, you know, this much demand? And we do. And so we do have to add some equipment. The equipment that we add is certainly within that 3.5% that Rob's been talking about. So it's modest, and it's usually just gonna use our capital base that we have in place today, for the most part, to a more effective level. So yeah, you shouldn't see any surprises on the capital side in order to tool up this business.
Speaker #2: Well, it's the question you ask is the same question the missile builders ask us. And do you guys have the capacity to take on this much demand?
Michael Hartnett: Well, you know, it's the question you ask is the same question the missile builders ask us: Do you guys have the capacity to take on, you know, this much demand? And we do. And so we do have to add some equipment. The equipment that we add is certainly within that 3.5% that Rob's been talking about. So it's modest, and it's usually just gonna use our capital base that we have in place today, for the most part, to a more effective level. So yeah, you shouldn't see any surprises on the capital side in order to tool up this business.
Speaker #2: And we do. And so, we do have to add some equipment. The equipment that we add is certainly within that 3.5% that Rob's been talking about.
Speaker #2: So it's modest. And it usually it's just going to use our capital base that we have in place today for the most part to a more effective level.
Speaker #2: So yeah, you shouldn't see any surprises on the capital side in order to tool up this business.
Speaker #6: Great. Thank you so much.
Jordan Lyonnais: Great. Thank you so much.
Jordan Lyonnais: Great. Thank you so much.
Michael Hartnett: Yeah.
Michael Hartnett: Yeah.
Speaker #1: Our next question is from Russ Spellenbeck with William Blair. Please.
Operator: Our next question is from Ross Sparenblek with William Blair. Please proceed.
Operator: Our next question is from Ross Sparenblek with William Blair. Please proceed.
Speaker #1: proceed. Hey,
Ross Sparenblek: Hey, good morning, gentlemen. Thanks for taking the questions.
Ross Sparenblek: Hey, good morning, gentlemen. Thanks for taking the questions.
Speaker #6: question. Morning,
Michael Hartnett: Morning.
Michael Hartnett: Morning.
Operator: Morning.
Robert Sullivan: Morning.
Ross Sparenblek: Just starting with VACCO, I mean, it looks like some really strong performance on the margin side in the quarter. Can you maybe just help us parse out, you know, the success there? If this is, you know, one time, and if we should expect that to be the largest kind of margin contributor to Aerospace and Defense gross margins in the fourth quarter.
Ross Sparenblek: Just starting with VACCO, I mean, it looks like some really strong performance on the margin side in the quarter. Can you maybe just help us parse out, you know, the success there? If this is, you know, one time, and if we should expect that to be the largest kind of margin contributor to Aerospace and Defense gross margins in the fourth quarter.
Speaker #6: really strong performance on the margin side in the quarter. Can you maybe just help us parse out the success there? If this is one-time and if we should expect that to be the largest kind of margin contributor to aerospace and defense gross margins in the fourth
Speaker #6: quarter? Well,
Michael Hartnett: Well, Aerospace gross margins in Q4 ought to be pretty good, Ross. It's a little bit difficult for us to predict how good, but I suspect they're gonna be better than they were in Q3. You know, given volumes and pricing and sort of the other, you know, factors that go into the calculus to make it all work well. So yeah, those margins will definitely expand.
Michael Hartnett: Well, Aerospace gross margins in Q4 ought to be pretty good, Ross. It's a little bit difficult for us to predict how good, but I suspect they're gonna be better than they were in Q3. You know, given volumes and pricing and sort of the other, you know, factors that go into the calculus to make it all work well. So yeah, those margins will definitely expand.
Speaker #2: Aerospace gross margins in the fourth quarter ought to be pretty good, Russ. And it's a little bit difficult for us to predict how good, but I suspect they're going to be better than they were in the third quarter.
Speaker #2: Giving volumes and pricing and sort of the other factors that go into the calculus to make it all work well. So yeah, those margins will definitely expand.
Speaker #4: Okay.
Ross Sparenblek: Okay, well-
Ross Sparenblek: Okay, well-
Speaker #2: When we put
Michael Hartnett: When we put together the outlook for Q4, you know, it implies a 7.5% organic growth rate and a 14% total growth rate, you know, versus last year's Q4. The 7.5%, you know, sort of, you know, balances aircraft and defense out at 10%, whereas industrial is somewhere less than 5% in order to get to the 7.5%. So we're looking at an aircraft. You know, we use an aircraft, you know, a little bit north of 10% against a Q3, which was 21.3%. So I think, you know, I think the Q4 outlook is very conservative.
Michael Hartnett: When we put together the outlook for Q4, you know, it implies a 7.5% organic growth rate and a 14% total growth rate, you know, versus last year's Q4. The 7.5%, you know, sort of, you know, balances aircraft and defense out at 10%, whereas industrial is somewhere less than 5% in order to get to the 7.5%. So we're looking at an aircraft. You know, we use an aircraft, you know, a little bit north of 10% against a Q3, which was 21.3%. So I think, you know, I think the Q4 outlook is very conservative.
Speaker #2: Together, the outlook for the fourth quarter implies a 7.5% organic growth rate in a 14% total growth rate versus last year's fourth quarter.
Speaker #2: The 7.5% sort of balances aircraft and defense out at 10%, whereas industrial is somewhere less than 5% in order to get to the 7.5%.
Speaker #2: So we're looking at an aircraft a little bit north of 10% against a third quarter, which was 21.3%. So I think the fourth quarter outlook is very conservative.
Michael Hartnett: But we elected to make it conservative because really for no other reason than to be conservative. So notwithstanding that, I think we expect to have a very strong fourth quarter. We have great market positioning, strong teams, good order book. It's only a matter of execution, and there's one thing about RBC: we always execute. So I think in the fourth quarter, I think our investors are gonna be very pleased with the results.
Michael Hartnett: But we elected to make it conservative because really for no other reason than to be conservative. So notwithstanding that, I think we expect to have a very strong fourth quarter. We have great market positioning, strong teams, good order book. It's only a matter of execution, and there's one thing about RBC: we always execute. So I think in the fourth quarter, I think our investors are gonna be very pleased with the results.
Speaker #2: it conservative But we elected to make because really for no other reason than to be aircraft we use an conservative. So notwithstanding that, I think we expect to have a very strong fourth quarter.
Speaker #2: We have great market positioning, strong teams, and a good order book. It's only a matter of execution. And there's one thing about RBC.
Speaker #2: We always execute. So I think in the fourth quarter, I think our investors are going to be very pleased with the
Speaker #2: results. Yeah.
Speaker #4: And that's pretty clear with the gross margins for VECA in the quarter. I don't get the impression that it's a lot of operating cost out and what is kind leverage there.
Ross Sparenblek: Yeah, and that's pretty clear with, you know, the gross margins for Q2 on the quarter. I just, I don't get the impression that it's a lot of operating leverage there. I mean, was it more cost out? And, you know, what is kind of maybe the, the revised outlook on where those margins can go? It feels like we should be converging with, you know, consolidated aerospace, more aerospace and defense gross margins sooner rather than later.
Ross Sparenblek: Yeah, and that's pretty clear with, you know, the gross margins for Q2 on the quarter. I just, I don't get the impression that it's a lot of operating leverage there. I mean, was it more cost out? And, you know, what is kind of maybe the, the revised outlook on where those margins can go? It feels like we should be converging with, you know, consolidated aerospace, more aerospace and defense gross margins sooner rather than later.
Speaker #4: I mean, was it more of maybe the revised outlook on where those margins can go? It feels like we should be converging with consolidated aerospace and defense gross margins sooner rather than later.
Speaker #2: Yeah, I would. Yeah, I would think those margins are going to—the ND margins are going to—chase up towards the industrial margins. I don't know if they'll reach them, but they're going to close the gap.
Michael Hartnett: Yeah, I would think those margins are gonna, you know, the ND margins are gonna chase up towards the industrial margins. I don't know if they'll reach them, but they're gonna close the gap.
Michael Hartnett: Yeah, I would think those margins are gonna, you know, the ND margins are gonna chase up towards the industrial margins. I don't know if they'll reach them, but they're gonna close the gap.
Speaker #4: Okay. That's helpful. And then maybe just another one on the industrial business. It looks like your peers are kind of guiding for most single digits for 2026.
Ross Sparenblek: Okay, that's helpful. And then maybe just another one on the industrial business. It looks like your peers are kind of guiding for low single digits for 2026. Can you maybe just help us think-
Ross Sparenblek: Okay, that's helpful. And then maybe just another one on the industrial business. It looks like your peers are kind of guiding for low single digits for 2026. Can you maybe just help us think-
Speaker #4: Can you maybe just help us think through kind of the more cyclical...
Michael Hartnett: Sorry.
Michael Hartnett: Sorry.
Ross Sparenblek: kind of the more cyclical... Sorry?
Ross Sparenblek: kind of the more cyclical... Sorry?
Speaker #4: sorry.
Speaker #2: The peers are
Michael Hartnett: The peers are guiding to what for 2026?
Michael Hartnett: The peers are guiding to what for 2026?
Speaker #2: guiding to what for
Speaker #2: '26?
Speaker #4: Looking like low single digits. Kind of
Ross Sparenblek: Looking like low single digits, kind of,
Ross Sparenblek: Looking like low single digits, kind of,
Michael Hartnett: Low single.
Michael Hartnett: Low single.
Ross Sparenblek: -consolidated. And I think a lot of that's kind of cyclicality and maybe the heavy machinery, capital goods, and that is the more cyclical piece of your industrial business. Anything to call out the channel there? I mean, is do you think inventory is balanced? And if we do start to, you know, see elevated build rates like the OEMs are expecting, how soon should we expect a catch-up there?
Ross Sparenblek: Consolidated. And I think a lot of that's kind of cyclicality and maybe the heavy machinery, capital goods, and that is the more cyclical piece of your industrial business. Anything to call out the channel there? I mean, is do you think inventory is balanced? And if we do start to, you know, see elevated build rates like the OEMs are expecting, how soon should we expect a catch-up there?
Speaker #4: cyclicality and maybe the heavy machinery, capital goods, and that is the business. Anything to call out in the channel there? I mean, do you think inventory is balanced?
Speaker #4: More cyclical piece of your industrial. And if we do start to see elevated build rates like the OEMs are expecting, how soon should we expect a catch-up there?
Michael Hartnett: Hmm. Yeah, well, I think our industrial business will be sort of better than the single digits. It'll be... You know, we're expecting sort of the high single digits as worst case. So, but we're not, you know, we're not coming out with full year guidance. We never do. And, but we're looking at it. We're pretty optimistic about what the, what, what's involved in the year ahead.
Michael Hartnett: Hmm. Yeah, well, I think our industrial business will be sort of better than the single digits. It'll be... You know, we're expecting sort of the high single digits as worst case. So, but we're not, you know, we're not coming out with full year guidance. We never do. And, but we're looking at it. We're pretty optimistic about what the, what, what's involved in the year ahead.
Speaker #2: Yeah, I think our industrial business will be sort of better than the single digits. We're expecting sort of the high single digits as worst case.
Speaker #2: So but we're not coming out with full-year guidance. We never do. And but we're looking at it. We're pretty optimistic about what's involved in the year
Speaker #2: ahead. All right.
Ross Sparenblek: All right. Well, thank you very much, and congrats on the quarter, guys.
Ross Sparenblek: All right. Well, thank you very much, and congrats on the quarter, guys.
Speaker #4: Well, thank you very much and congrats on the quarter, guys.
Speaker #2: Thank you.
Michael Hartnett: Thank you. Thanks.
Michael Hartnett: Thank you. Thanks.
Speaker #2: Thanks. With no further
Operator: With no further questions, I would like to turn the conference back over to Dr. Hartnett for closing remarks.
Operator: With no further questions, I would like to turn the conference back over to Dr. Hartnett for closing remarks.
Speaker #1: questions, I would like to turn the conference back over to Dr. Hartnett for closing
Speaker #1: remarks. Okay.
Michael Hartnett: Okay, well, this concludes our Q3 conference call, and we thank you all for taking the time today to participate, and look forward to talking again, probably late May. Good day.
Michael Hartnett: Okay, well, this concludes our Q3 conference call, and we thank you all for taking the time today to participate, and look forward to talking again, probably late May. Good day.
Speaker #2: Well, this concludes our third quarter conference call. We thank you all for taking the time today to participate and look forward to talking again, probably in late May.
Speaker #2: Good day.
Operator: Thank you. This will conclude today's conference. You may disconnect at this time.
Operator: Thank you. This will conclude today's conference. You may disconnect at this time.
