RBC Bearings Incorporated

Greetings. Welcome to RBC Bearing's second quarter fiscal year 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Josh Carroll, Investor Relations. Thank you. You may begin.

Good morning, and thank you for joining us for RBC Barron's fiscal 2023 second quarter earnings conference call. With me on the call today are Dr. Michael J. Hartnett, Chairman, President, and Chief Executive Officer, Daniel A. Bergeron, Director, Vice President, and Chief Operating Officer, and Robert Sullivan, Vice President and Chief Financial Officer. Before beginning today's call, let me remind you that some of the Statements made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Barron's recent filings at the SEC for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. These factors are also described in greater detail in the press release and on the company's websites. In addition, reconciliation between GAAP and non-GAAP financial information is included as part of the release and is available on the company's website. With that, I'll now turn the call over to Dr. Hartman.

Okay, thank you, Josh, and good morning, everyone, and welcome. I'll go through the introduction here and then turn it over to Rob. Net sales for the second quarter of 2023 were $369.2 million. versus 160.9 million for the same period last year, an increase of 129.4%. The second quarter of 2023, sales of our industrial products represented 72% of net sales and aerospace products, 28%. Gross margin for the quarter was 151.1 million, or 40.9% of net sales. This compares with 62.5 million or 38.8% for the same period last year. Adjusted operating income was 76 million, 20.6% of net sales compared to last year of 20 million and 12.4% respectively. Gap EPS was $1.31. Adjusted EPS came in at $1.93 per share. Adjusted EBITDA was 108.8 million, 29.5% of net sales, compared to 45.4 million and 28.2% of net sales for the same period last year. During the period, we paid down debt of another 45 million on the term loan and had pre-cash flow of 14.1 million. We entered the second quarter with continued strength in the industrial sector, and a good outlook for the balance of our fiscal year. Sales of industrial products were up 290.7% from last year. RBC's organic growth for the industrial products was 7.9%. Dodge expanded at a 16.2% rate. So that average rate for industrial growth was somewhere around 14%. Weakness from Europe reduced the classic growth rate from double-digit expansion on the RBC side of the coin. Major markets of mining, aggregate, oil and gas, food and beverage, grain, semiconductor, machinery, and general industrial distribution continue to perform well. Turning now to aerospace and defense. Overall, the second quarter of 2023 net sales were up 11.4%. Commercial aerospace expanded at a rate of 31.3%. Expansion of production levels at Boeing and Airbus were the obvious prime drivers here. As you know, we are in a very early innings of a multiyear expansion with these majors. We remain busy adding capacity in the forms of capital and staff to our manufacturing sites in order to support future quarter-to-quarter demand requirements. putting this all back together again after the pandemic and Boeing's problems. A word on our defense business. This business contracted 15.3%. The delay in shipping products within the quarter as a result of normal production delays and a shortfall in order rate from historical norms for government spares on military aircraft platforms explains most of that variance. It's disturbing to see that the deferred maintenance of our important defense aircraft continues with low grades of fleet readiness are reported by the Air Force Times. The sophisticated materials needed to produce replacement parts have at least a 52-week lead time, so this problem will be with us for some time. Obviously, fleet readiness should be a national defense priority, so write your congressman. Recently, we have had an unusual amount of inquiries for products associated with munitions used in Ukraine, as well as other sophisticated weaponry, some of which have recently converted to orders. Regarding the third quarter, we are expecting sales to be between $348 and $360 million, and I'll now turn the call over to Rob for more detail on the financial performance.