GuruFocus -
- Net Sales: $398 million, a 3.2% increase year-over-year.
- A&D Sales Growth: 12.5% year-over-year, with defense up 17.3% and commercial aerospace up 10.3%.
- Industrial Segment Sales: Down 1.4% year-over-year; OEM down 2.5%, aftermarket down 0.9%.
- Gross Margin: $173.8 million or 43.7% of sales, a 55 basis point increase year-over-year.
- Net Income: $67 million, up 6% year-over-year.
- Adjusted EPS: $2.29 per share, compared to $2.17 per share last year.
- Cash from Operations: $43 million, compared to $53 million last year.
- Debt Reduction: Over $35 million in the quarter, with a year-to-date total of $128.7 million.
- Adjusted EBITDA: $123.4 million, up 1.1% year-over-year; margin of 31%.
- Interest Expense: $15.6 million, down 22% year-over-year.
- Tax Rate: 22.1%, consistent with last year's rate.
- Free Cash Flow Conversion: Approximately 100% of net income for the first six months of fiscal 2025.
- Third Quarter Revenue Guidance: $390 million to $400 million, representing 4.3% to 7% year-over-year growth.
- Third Quarter Gross Margin Guidance: 42.5% to 43.5%, an increase of roughly 70 basis points year-over-year at the midpoint.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RBC (TSX:RY) Bearings Inc (NYSE:RBC) reported a 3.2% increase in net sales for the second quarter, driven by strong performance in the Aerospace and Defense (A&D) segment.
- The A&D segment saw a 12.5% year-over-year growth, with defense sales up 17.3% and commercial aerospace sales up 10.3%.
- Gross margin improved to 43.7% of sales, a 55 basis point increase year-over-year, attributed to increased absorption in A&D capacity and ongoing synergies from the Dodge acquisition.
- Net income rose by 6% year-over-year, translating into an adjusted EPS of $2.29 per share, up from $2.17 per share last year.
- RBC Bearings Inc (NYSE:RBC) reduced its debt by over $35 million in the quarter, with a year-to-date debt reduction of $128.7 million, positioning the balance sheet well for future acquisitions.
- The industrial segment experienced a 1.4% decline year-over-year, with OEM sales down 2.5% and aftermarket sales down 0.9%.
- Unexpected headwinds, including a Boeing (NYSE:BA) strike and the impact of Hurricane Beryl, resulted in a revenue impact of $4 million to $5 million during the period.
- Cash from operations decreased to $43 million compared to $53 million last year, primarily due to the timing and scope of cash tax payments.
- Adjusted EBITDA margin decreased by 66 basis points year-over-year to 31%, despite being above the full-year 2024 margin.
- The company faces uncertainty regarding Boeing's production rates, particularly for the 737, which could impact future revenue projections.
A: Michael Hartnett, CEO: While it's possible to quantify, I can't do it here. The consolidated gross margin reflects those impacts, and using it for EPS contribution is fair.
Q: Has the exposure to Boeing decreased further, and is there a risk of destocking once production ramps up?
A: Michael Hartnett, CEO: Our exposure is at a low point. Once Boeing resumes production, they will likely create a strong demand, so I don't foresee a destocking issue.
Q: Are you seeing any slowdown in defense bookings due to the continuing resolution for the Department of Defense?
A: Michael Hartnett, CEO: No, our defense bookings are primarily with OEMs, not directly with the Department of Defense, and they are firm contracts extended over many years.
Q: What is driving the confidence in industrial sales growth for the next quarter, and do you expect both OEM and aftermarket to return to positive growth?
A: Daniel Bergeron, COO: Growth is driven by mining, multi-industrial, food and beverage, and warehousing sectors. We expect oil and gas and semiconductor sectors to recover in the fourth quarter or first quarter.
Q: How is the M&A landscape, and are there opportunities due to stress in the Boeing supply chain?
A: Michael Hartnett, CEO: We see opportunities, especially in A&D, but competition from private equity is strong. Many businesses have significant challenges that require a comprehensive approach to resolve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.