RBC Bearings Incorporated

Greetings and welcome to RBC Barings' third 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Josh Carroll, with Investor Relations. Please go ahead.

Good morning, and thank you for joining us for RBC Barron's fiscal 2023 third 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 with 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 website. 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. Hart.

Okay, thank you, Josh, and good morning, everyone, and welcome to the RBC's third quarter conference call. So net sales for our third quarter for fiscal 2023 were $351.6 million versus $267 million for the same period last year, a 31.7% increase. For the third quarter of 2023, sales of industrial products represented 70% of net sales, with aerospace products at 30%. Gross margin for the quarter was 146 million, or 41.5% of net sales. This compares to 93.3 million, or 35% for the same period last year. Adjusted operating income was 71.6 million, 20.4% of net sales compared to last year of 46.3 million and 17.3% respectively. Adjusted EPS diluted came in at $1.64 a share. Adjusted EBITDA was 103.3 million, 29.4% of net sales compared to 71.4 million, 26.7% of net sales for the same period last year. During the period, we paid down debt by another $60 million on the term loan, and free cash flow was $54.4 million. Turning now to some of our sectors, on the industrial business, we saw and are seeing continued strength from the OM sector with RBC Classic Industrial up by 14.1%, driven by semiconductor machinery, energy, and mining. Both RBC and Dodge showed a 12-plus percent growth in the industrial distribution revenues. Overall, industrials were up 11.8%, with sector growth mitigated somewhat by Europe and some select OEM weakness. On the aerospace and defense side, overall we saw an expansion of 13.2% with aero OEM up 26 plus percent. Demand drivers here are the obvious candidates. Large plane builders and their supply chain coming to life as the production of Boeing's 737 and 787 ships rebound. We are at the beginning of this recovery now in pandemic inventories showing less of an impact and production rate increases are well publicized. We expect to see increased demand creating double-digit growth from the plane builders for many quarters to come, and we continue to add resources and planning to support increased build rates, build rate-driven demand, as well as expanded work statements. In total, RBC saw an organic growth in revenue of 12.7% during the period. There's been some questions about backlog and much of our commercial aircraft business is done where the backlog isn't represented by the contract and the orders are published on a portal and we ship to those orders. So probably 60% of our business there doesn't ever get into our backlog. Regarding the fourth quarter, we're expecting sales to be $375 to $385 million. This is becoming an increasingly difficult projection to make now post-Dodge acquisition, which means half our sales, our stock items, where daily shipments are subject to daily orders, as opposed to being defined by long-term contracts where quarterly revenues can be well-planned. So that kind of puts us into the business of economic forecasting, and we do the best we can. I'll now turn the call over to Rob for more detail on financial performance.