Regal Rexnord Corp (RRX, Financial) released its Q3 2023 earnings on November 2, 2023. The company reported a strong free cash flow of $161.5 million and a significant reduction in gross debt. However, the company also reported a decrease in GAAP net income.
Financial Performance and Challenges
Regal Rexnord Corp (RRX, Financial) reported a 24.5% increase in sales compared to the previous year. However, on a pro forma organic basis, sales were down by 8.5%. The GAAP net income decreased by $260.5 million to $(138.6) million, including non-cash impairment charges of $173.7 million.
Financial Achievements
The company achieved a strong free cash flow of $161.5 million and paid down $185 million of gross debt in the quarter. This brought the net debt to normalized adjusted EBITDA to 3.86. The company also reached an agreement to sell its Industrial Motors & Generators businesses for $400 million.
Income Statement, Balance Sheet, Cash Flow Statement
Regal Rexnord Corp (RRX, Financial) reported a GAAP diluted EPS of $(2.10) and adjusted diluted EPS of $2.10. The company now expects full year GAAP diluted EPS in a range of $(1.07) to $(0.87) and adjusted diluted EPS in a range of $9.05 to $9.25 versus $10.20 to $10.60 previously.
CEO Commentary
CEO Louis Pinkham commented, “Our performance in the third quarter may best be summarized on two fronts. The first was another quarter of strong free cash flow and successfully reaching an agreement to sell our Industrial Motors and Generators businesses. The second was facing more challenging end market headwinds and higher-than-targeted manufacturing costs, which caused us to fall short of our guidance expectations."
Future Outlook
Despite the challenges, the company reiterated its expectation for free cash flow to exceed $650 million in 2023. The company is also optimistic about its future, citing a clear path to ~40% gross margins and 25% adjusted EBITDA margins, which is largely volume independent.
Explore the complete 8-K earnings release (here) from Regal Rexnord Corp for further details.
