REGAL REXNORD CORP

Regal Rexnord Corporation operates in the industrial motion control industry, providing electric motors, air moving subsystems, power transmission components, and automation offerings that power, transmit, and control motion. The Company is comprised of three operating segments: Automation & Motion Control (AMC), Industrial Powertrain Solutions (IPS), and Power Efficiency Solutions (PES). The AMC segment sells into markets that include discrete factory automation, food and beverage, aerospace, general industrial, medical and data center. The IPS segment serves a broad range of markets that include general industrial, metals and mining, energy, discrete automation and commercial HVAC. The PES segment's products are used in residential and commercial HVAC, and in a wide range of general commercial applications. The Company derives nearly 40% of its sales through the distributor channel, which largely reflects less cyclical aftermarket transactions.

The principal markets for IPS and AMC are highly fragmented, with a small number of larger competitors offering broader product lines that serve multiple markets, applications, and geographies. Competition in these segments is based on factors that include product quality, lead times, availability, custom engineering capabilities, price, reliability, and engineering support. Electric motor and electronic drive manufacturing is a highly competitive global industry. The Company believes that the broad scope of its product portfolio, plus the scale of its go-to-market capabilities, positions it to offer customers a unique and compelling value proposition. With over two thousand associates engaged in sales or sales support roles, the Company has broad go-to-market scale and scope. In 2025, 2024, and 2023, the Company had no customer that accounted for more than 10% of consolidated net sales.

The Company generates revenue by selling products directly to OEMs, distributors and end-users. The Company's product sales are made via purchase order, long-term contract, and, in some instances, one-time purchases. The Company derives a significant portion of revenue from its OEM customers. The Company's primary performance obligations consist of product sales and customized systems/solutions. For performance obligations related to substantially all of the Company's product sales, the Company determines that the customer obtains control upon shipment and recognizes revenue accordingly. For certain contracts, the Company recognizes revenue over time in proportion to costs incurred.

The AMC segment designs, produces and services conveyor products, conveying automation subsystems, aerospace components, precision motion control solutions, high-efficiency miniature servo motors, controls, drives and linear actuators, as well as power management products that include automatic transfer switches, paralleling switchgear, and customized modular electric pod solutions (E-Pods) that comprise relevant power and thermal management content. AMC net sales for 2025 were $1,689.8 million ¹, an increase of $56.0 million, or 3.4%, as compared to 2024. The increase consisted of an organic sales increase of 2.8% and a positive foreign currency translation impact of 0.6%. The $45.8 million increase in organic sales was primarily driven by growth in the aerospace and discrete automation markets, partially offset by headwinds in the general industrial and medical end markets, and persistent challenges sourcing rare earth magnets, particularly for products serving the medical and defense markets.

The IPS segment designs, produces and services a broad portfolio of highly-engineered transmission products, including mounted and unmounted bearings, couplings, mechanical power transmission drives and components, gearboxes and gear motors, clutches, brakes, and industrial powertrain components and solutions. IPS net sales for 2025 were $2,594.1 million ², a decrease of $4.0 million, or 0.2%, as compared to 2024. The decrease consisted of an organic sales decline of 0.7%, partially offset by a positive foreign currency translation impact of 0.5%. The $17.6 million decrease in organic sales was primarily driven by weakness in general industrial markets, partially offset by strength in energy markets. Gross profit increased $41.9 million, or 4.0%, as compared to 2024, primarily driven by synergies, partially offset by lower volume and sales mix headwinds. The PES segment designs and produces fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, electronic drives, fans and blowers, as well as integrated air moving subsystems. PES net sales for 2025 were $1,650.6 million ³, an increase of $6.5 million, or 0.4%, as compared to 2024. The increase consisted of an organic sales increase of 1.0% and a positive foreign currency translation impact of 0.2%, partially offset by a negative impact from divestitures of 0.8%. The $16.7 million increase in organic sales primarily reflects growth in the residential and commercial HVAC markets. Gross profit increased $26.8 million, or 5.8%, as compared to 2024, primarily driven by higher volume and lower restructuring and related expenses of $28.4 million.

On April 30, 2024, the Company sold its industrial motors and generators businesses, which represented the substantial majority of the Industrial Systems operating segment, for $444.0 million ⁴. On March 27, 2023, the Company completed the acquisition of Altra Industrial Motion Corp. for a total purchase price of $5.1 billion ⁵. During 2025, the Company did not repurchase any shares. During 2024, the Company purchased 332,439 shares ⁶ or $50.0 million ⁷ in aggregate purchase amount, pursuant to the repurchase authorization. The maximum value of shares of the Company's common stock available to be purchased as of December 31, 2025 is $145.0 million ⁸. The Company paid $93.0 million ⁹ in dividends to shareholders in both 2025 and 2024. On January 26, 2026, the Board of Directors declared a quarterly dividend of $0.35 ¹⁰ per share. As of December 31, 2025, the Company had $1,500.0 million ¹¹ of available borrowing capacity under the 2025 Revolving Facility. The Company borrowed $850.0 million ¹² under the 2025 Term Facility on February 12, 2026 and used the proceeds to refinance the 2026 Senior Notes.

Net sales for 2025 were $5,934.5 million ¹³, a decrease of $99.3 million, or 1.6%, as compared to 2024. The decrease primarily consisted of a negative impact from divestitures of 2.8%, partially offset by an organic sales increase of 0.8% and a positive foreign currency translation impact of 0.4%. Gross profit increased $26.8 million or 1.2% as compared to 2024. Income from operations was $680.8 million ¹⁴ compared to $630.0 million ¹⁵ in 2024. Net income attributable to Regal Rexnord Corporation was $279.5 million ¹⁶ compared to $196.2 million ¹⁷ in 2024. Diluted earnings per share was $4.20 ¹⁸ compared to $2.94 ¹⁹ in the prior year. Cash flow provided by operating activities was $990.8 million ²⁰ in 2025, a $381.4 million increase from 2024.

The Company is focused on growing its position in prioritized secular growth markets, including some with strong regulatory tailwinds tied to rising energy efficiency requirements. These markets include discrete automation (including robotics), aerospace, data center and medical. A significant portion of growth investments are directed to end markets with secular growth characteristics. The Company plans to double its new product vitality in the medium term with the majority of new product introductions focused on serving secular growth markets, expanding the industrial powertrain offering, supporting rising demand for greater energy efficiency, and/or leveraging digital capabilities to enhance products' performance and ease-of-use. One of the Company's key product-related growth initiatives is integrating multiple products or components into value-added solutions, particularly selling industrial powertrains which combine high-efficiency electric motors with critical power transmission components. A dedicated powertrain solutions team leverages relevant product, technology and application expertise from across segments to provide a single point of contact for customers to design and procure these sub-systems.

The Company is pursuing a number of initiatives aimed at raising business durability further, including pursuing OEM sales that have higher aftermarket potential, and directing more of its growth investment to serving markets and applications with secular tailwinds. The IPS segment is targeting first fit sales that have higher aftermarket potential, and the PES business is launching new products specifically for the aftermarket. The Company's acquisition of Altra and merger with the Rexnord PMC business are continuing to generate significant revenue and cost synergies, which the Company expects will contribute increasingly to its organic top line growth and have, and should continue to, meaningfully benefit its adjusted EBITDA margins, net income, and free cash flow.

The Company's 80/20 initiatives are particularly leveraged to align product and service offerings to what customers need and value, measured on several metrics, in particular organic growth and gross margin. The disciplined use of the Regal Rexnord Business System (RBS), in combination with 80/20 initiatives, is critical to driving profitable growth. The Company expects to continue to maintain its long track record of strong free cash flow generation, which supports expeditious de-leveraging post acquisitions, funding inorganic growth initiatives through M&A activity, and returning capital to shareholders through dividends and stock repurchases.

The Company's global manufacturing base consists of manufacturing locations across North America, Europe, Asia Pacific and the rest of the world. The Company's ability to shift production between locations has helped it navigate geopolitical, supply chain and other disruptions, including shifts in global tariff and trade policies, and provide better service levels to customers. The Company expects its flexible global manufacturing footprint will provide similar benefits in the future. In 2026, the Company anticipates capital spending for property, plant and equipment to be approximately $120.0 million ²¹. The Company believes that its present manufacturing facilities will be sufficient to provide adequate capacity for its operations in 2026 and anticipates funding 2026 capital spending primarily with operating cash flows.

The Company expects to continue to maintain its long track record of strong free cash flow generation, which supports expeditious de-leveraging post acquisitions, funding inorganic growth initiatives through M&A activity, and returning capital to shareholders through dividends and stock repurchases. The Company plans to use cash generated from operations to fund its interest obligations and reduce the principal balance of its debt over time. The Company is continuing to evaluate opportunities to repatriate additional foreign cash in 2026. The Company will, from time to time, maintain excess cash balances which may be used to fund operations, repay outstanding debt, fund acquisitions, pay dividends, make investments in new product development programs, repurchase its common stock, or fund other corporate objectives.

The Company faces headwinds from changes to and uncertainty in US trade policy, tariff and import/export regulations. The US government imposed tariffs on imports from China, Canada, Mexico, India and other countries, and such countries have taken or have threatened to take retaliatory actions, including China's imposition of stricter export controls on certain types of rare earth magnets. The US imposition of reciprocal and penalty tariffs on imports from India in August 2025 has impacted the cost of materials and goods originating from India and the Company believes without a reduction in the US effective tariff rate on India, its business may be impacted. The Company's internal estimates reflect that the vast majority of goods the Company imports from Canada and Mexico are compliant with the United States-Mexico-Canada Agreement (USMCA) and are therefore exempt from tariffs, but if this exemption is altered or removed, there could be a material adverse effect on the Company's business, operations and financial results.

The Company faces structural headwinds from its substantial indebtedness. As of December 31, 2025, the Company had approximately $4.8 billion ²² in aggregate debt outstanding under its various financing arrangements, including a substantial amount of debt incurred in connection with the Altra Transaction. The Company's ability to make required payments of principal and interest on its debt levels will depend on its future performance, which is subject to general economic, financial, competitive and other factors beyond its control. The Company also faces risks related to global climate change and related legal and regulatory developments, including the European Union's Corporate Sustainability Reporting Directive (CSRD) and California's climate disclosure rules, which have increased and are expected to continue to increase compliance costs.

The Company faces material risk from its substantial indebtedness, with approximately $4.8 billion ²³ in aggregate debt outstanding as of December 31, 2025, which could make it more challenging to obtain additional financing, increase vulnerability to interest rate changes, and require a substantial portion of cash flow from operations to service debt. The Company is dependent on a single or limited number of suppliers for some materials or components, and any loss of those suppliers or their failure to meet commitments may adversely affect business and results of operations. The Company faces significant risk from changes to and uncertainty in US trade policy, including the imposition of higher tariffs on imports from China, Canada, Mexico, India and other countries, and retaliatory actions such as China's export controls on certain rare earth magnets, which create risk in the supply chain and may increase costs or limit the ability to produce certain products. The Company's operations are highly dependent on information technology infrastructure, and failures, attacks or breaches could significantly affect the business, with cybersecurity threats increasing in both frequency and sophistication. The Company has a material amount of goodwill and other long-lived assets, and an impairment would require reducing the carrying value to fair value through a non-cash charge, which could be material.

Management's message emphasizes creating value for key stakeholders by accelerating profitable growth, raising margins, generating more cash, and increasing return on invested capital. The primary aspects of the strategy include leveraging 80/20 initiatives to accelerate profitable growth, deploying the Regal Rexnord Business System (RBS) for continuous improvement, raising exposure to markets with secular growth tailwinds, maintaining a strong portfolio of highly-engineered products and trusted brands, leveraging the Company's unrivaled scale and scope to enable unique customer value-propositions, providing a broader offering of increasingly robust solutions, utilizing the Company's flexible global manufacturing presence, improving business durability, leveraging the Company's strong free cash flows to enhance its growth profile and raise shareholder returns, and realizing synergies from M&A transactions. The Company plans to double its new product vitality in the medium term with the majority of new product introductions focused on serving secular growth markets, expanding the industrial powertrain offering, supporting rising demand for greater energy efficiency, and/or leveraging digital capabilities. The Company also plans to create significant value for stakeholders by deploying excess capital towards maintaining a strong balance sheet and returning capital to shareholders through dividends, periodic stock repurchases and, over time, funding highly synergistic M&A transactions.