Regal Rexnord (RRX) 47th Annual Raymond James Institutional Investor Conference summary

Business transformation and strategy

• Gross margin improved from 26% to 38% over seven years, driven by decentralization and strategic acquisitions, including Rexnord and Altra for automation capabilities.

• Focus shifted to high-value customers and products using an 80/20 approach, with free cash flow margin targeted to grow from 9% to low teens in the next one to two years.

• About 50% of revenue now comes from secular markets, especially automation, with strong exposure to power transmission and distribution aftermarket.

• Most markets are at or near trough, but early signs of recovery are visible, particularly in data centers, with optimism for 2026.

Market outlook and segment performance

• Guidance for 2024 is cautious, assuming flat volumes and no major ISM inflection, but upside exists if ISM remains above 50.

• AMC segment shows highest growth, with discrete automation orders up 9% in Q4 and a strong pipeline in data centers.

• IPS segment expected to grow low single digits, while PES is forecasted flat due to residential HVAC weakness, which should improve in the second half.

• CapEx appetite remains muted, with no significant volume impact expected from tax or rate changes; ISM remains the key indicator.

Data center and automation opportunities

• Data center business has expanded rapidly, with switchgear revenue growing from $30M to $190M in five years and projected to reach $250M next year.

• Modular ePOD orders totaled $735M last year, with a $600M pipeline for both switchgear and ePODs, and shipping expected through 2027.

• Capacity has doubled in Canada and expanded in Texas, supporting scalable, low CapEx assembly for modular solutions.