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Jun 30
Regal Rexnord Q2 2025 Earnings Report
Regal Rexnord reported strong second quarter 2025 financial results, with diluted EPS of $1.19 and adjusted diluted EPS of $2.48, up 8.3% year-over-year. Sales were $1,496.1 million, down 3.3% but down only 1.2% on an organic basis. The company achieved a gross margin of 37.7% and an adjusted gross margin of 38.2%, an increase of 10.0 basis points. GAAP net income rose to $79.6 million from $63.0 million in the prior year. Adjusted EBITDA was $329.7 million, with an adjusted EBITDA margin of 22.0%. Cash from operating activities was $523.2 million, and adjusted free cash flow was $493 million, including proceeds from a new accounts receivable securitization program which contributed $368.5 million and was used to repay debt. Net debt to adjusted EBITDA (including synergies) stood at approximately 3.3x. The company also narrowed its full-year 2025 guidance for adjusted diluted EPS to $9.70 - $10.30 and expects adjusted free cash flow of over $1.0 billion inclusive of securitization proceeds.
Key Takeaways
Regal Rexnord delivered a strong second quarter in 2025, exceeding expectations in sales and earnings. The Power Efficiency Solutions (PES) segment showed robust organic growth and margin expansion, driven by strong HVAC markets. The Industrial Powertrain Solutions (IPS) segment also improved its adjusted EBITDA margin despite market headwinds, while the Automation & Motion Control (AMC) segment met its sales target despite temporary margin pressure from rare earth magnet availability, which is expected to improve. The company's strategic focus on cross-sell synergies and new product vitality is gaining momentum, with significant cross-sell opportunities identified and progress toward realizing synergy targets.
Diluted EPS was $1.19, with Adjusted Diluted EPS at $2.48, marking an 8.3% increase compared to the prior year.
Total sales reached $1,496.1 million, a 3.3% decrease year-over-year, but only a 1.2% decline on an organic basis.
Adjusted Gross Margin improved to 38.2%, up 10.0 basis points from the prior year, and Adjusted EBITDA was $329.7 million with a 22.0% margin.
Cash from operating activities was strong at $523.2 million, and adjusted free cash flow was $493 million, aided by a new accounts receivable securitization program.
Regal Rexnord
Regal Rexnord
Regal Rexnord Revenue by Segment
Revenue by Segment
Automation & Motion Control Revenue
CapyFin.comIndustrial Powertrain Solutions Revenue
CapyFin.comPower Efficiency Solutions Revenue
CapyFin.com Forward Guidance
Regal Rexnord has narrowed its full-year 2025 guidance for Adjusted Diluted Earnings Per Share to a range of $9.70 - $10.30. The company anticipates that mitigation actions will successfully neutralize the impact of current tariffs on 2025 Adjusted EBITDA and Adjusted EPS. Furthermore, Regal Rexnord continues to expect Adjusted Free Cash Flow of $700 million, excluding proceeds from the receivables securitization facility, or over $1.0 billion when inclusive of these proceeds.
Positive Outlook
- Narrowed guidance range for Adjusted Diluted Earnings Per Share to $9.70 - $10.30, indicating increased confidence in earnings.
- Mitigation actions are on track to neutralize the impact of current tariffs on 2025 Adjusted EBITDA and Adjusted EPS.
- Continued expectation of strong Adjusted Free Cash Flow of $700 million (excluding securitization proceeds) or over $1.0 billion (inclusive).
- Strong orders in IPS and AMC segments demonstrate continued momentum in end market recovery and outgrowth initiatives.
- PES segment continues to perform above expectations, contributing positively to overall results.
Challenges Ahead
- Persistent macro-economic and geopolitical uncertainties could impact future performance.
- Temporary, mix-related margin pressure in the AMC segment due to rare earth magnet availability, though expected to improve.
- Decline in net sales for AMC and IPS segments, albeit with organic basis showing less severe impact.
- Project timing in the data center market and metals & mining market created headwinds for AMC and IPS respectively.
- The reliance on a new accounts receivable securitization facility for a significant portion of cash flow from operations, which may not be a recurring source of cash.
Revenue & Expenses
Visualization of income flow from segment revenue to net income