Regal Rexnord Q2 Earnings Call Highlights

Second-quarter performance improved: Orders rose 8.8% year over year, while enterprise sales increased 4.2%, including 3.3% organic growth. Data centers, automation, commercial HVAC and energy markets were strong, but residential HVAC and pool demand remained weak. Automation & Motion Control led growth with 15.6% organic sales growth and 17.1% higher orders, supported by data-center, aerospace and automation demand. Longer-cycle projects are building backlog, although some project timing will cause modestly lower third-quarter sales. Full-year sales and EPS guidance was maintained, but profitability expectations weakened: Regal Rexnord lowered its adjusted EBITDA margin outlook and free-cash-flow guidance due to inflation-related pricing lags, slower productivity savings and higher working-capital needs tied to AMC growth.

Regal Rexnord NYSE: RRX reported second-quarter results marked by higher orders, organic sales growth and continued momentum in data center, automation and energy-related markets, while lowering certain segment outlooks amid inflation, pricing lags and weakness in residential HVAC and pool markets. The company also introduced Aamir Paul on his first earnings call as chief executive officer. Paul, who joined Regal Rexnord on July 1, said his initial focus has been listening to employees, customers, channel partners, suppliers and investors. He previously held leadership roles at Dell Technologies and Schneider Electric.

“I came to Regal Rexnord because I see tremendous opportunities across the company’s portfolio, strong channel positions, manufacturing scale, and healthy balance sheet,” Paul said. He cited factory automation, aerospace and defense, air moving, robotics, eVTOL and data centers as attractive areas for the company.

Daily orders increased 8.8% from the prior-year period during the second quarter, or 8.1% excluding data center activity, according to Chief Financial Officer Rob Rehard. Orders excluding the company’s consumer-oriented residential HVAC and pool businesses rose at a low-double-digit rate.

Enterprise sales increased 4.2% year over year, including 3.3% organic growth. Excluding residential HVAC and pool, sales rose 6.1%. Rehard said growth was broad-based, with notable strength in data centers, commercial HVAC, discrete automation and energy markets. Adjusted gross margin was 39.8%, or 37.8% excluding $32 million in IEEPA tariff refunds recorded during the quarter. Adjusted EBITDA margin was 23.5%, or 21.5% excluding the refunds. Adjusted earnings per share totaled $2.99, or $2.60 excluding the refund benefit. The latter figure represented 5% adjusted earnings growth from the prior year, Rehard said. Adjusted free cash flow was $154 million, improving sequentially on higher EBITDA, lower interest costs and normal seasonality. Rehard noted that second-quarter 2025 cash flow had benefited from $369 million of proceeds from the company’s accounts-receivable securitization program.

Automation & Motion Control, or AMC, posted 15.6% organic sales growth in the second quarter. The segment benefited from data center, discrete automation, aerospace and defense demand. Orders rose 17.1%, or 15% excluding data center, while book-to-bill was 1.02. AMC adjusted EBITDA margin was 21.1%, or 19.9% excluding tariff refunds. Rehard said volume gains were partly offset by growth investments. He added that nearly half of AMC’s first-half order growth was tied to longer-cycle pro...