Regal Rexnord (RRX) investor relations material

Strategic growth focus and market opportunities

• Targeted investments in automation, aerospace, data centers, and medical sectors represent about a third of the business and are driving growth.

• Humanoid robotics market shows strong momentum, with $30 million in orders and a $100 million bid pipeline.

• Data center business has grown from $30 million to $130 million in five years, with a $1 billion pipeline and new modular EPODs product line targeting a $10 billion market.

• Aerospace partnership with Honeywell targets EVTOL and electric aircraft, leveraging integrated solutions and global production, with a projected 2,000 AAM aircraft per year by 2030.

• Medical and lab automation leverage high-precision motion products to address demand in digital imaging and diagnostics, creating significant cross-sell opportunities.

Financial performance and outlook

• Orders grew 10% in the last quarter, with backlogs up 6% in IPS and 15% in AMC.

• 2024 revenue is approximately $5.9B, with an adjusted gross margin of 38% and adjusted EBITDA margin of 22%.

• Free cash flow projected to rise from $625 million to $900 million, with a 7% free cash flow yield and robust generation supporting debt reduction and M&A.

• Gross margins improved from 26% to 38%, with a target of 40% by 2026 and 25% EBITDA margin by 2027.

• Organic growth is expected to accelerate, driven by price, data center, and automation momentum, with near-term equity value from debt reduction and longer-term upside from M&A and stock repurchases.

Operational initiatives and challenges

• Increased R&D investment from 2% to 3% of sales to drive technology differentiation and new product development.

• Cross-sell initiatives from acquisitions expected to reach $250 million by end of next year.

• Actively managing tariff and rare earth supply chain risks, aiming for tariff and margin neutrality by end of next year and 80% rare earth sourcing outside China.

• Capacity constraints in switchgear for 2026, with EPODs offering potential step-change in growth.

• Business segments include Power Efficiency Solutions, Industrial Powertrain Solutions, and Automation & Motion Control, each with distinct market focuses and margin profiles.