Earnings call transcript: RBC Bearings Q1 2025 beats EPS expectations

RBC Bearings Incorporated (market cap: $12.18 billion) reported its Q1 2025 earnings, surpassing analyst expectations with an adjusted diluted EPS of $2.84, compared to the forecasted $2.74. The company’s revenue reached $436 million, slightly above the anticipated $431.64 million. Following the announcement, RBC Bearings’ stock price rose by 0.79% in pre-market trading, reflecting investor optimism. According to InvestingPro analysis, the stock is currently trading above its Fair Value, with multiple valuation metrics suggesting premium pricing.

Key Takeaways

• RBC Bearings exceeded EPS expectations with an 11.8% year-over-year increase.
• Revenue grew by 7.3% compared to the same quarter last year, driven by strong performance in aerospace and defense.
• The company reported a record free cash flow of $104.3 million.
• Stock price increased by 0.79% following the earnings release.

Company Performance

RBC Bearings demonstrated robust growth in Q1 2025, continuing its strong trajectory in the aerospace and defense sectors. The company’s strategic acquisition of VACCO has expanded its capabilities in marine and space, contributing to its competitive edge. Despite a slight decrease in gross margin from 45.3% to 44.8%, the overall financial performance remains strong, with significant gains in the commercial aerospace and defense segments. InvestingPro data shows the company maintains a healthy financial position with a current ratio of 3.26, indicating strong liquidity, and operates with a moderate debt-to-equity ratio of 0.34.

Financial Highlights

• Revenue: $436 million, up 7.3% year-over-year.
• Earnings per share: $2.84, an increase from $2.54 in the previous year.
• Gross margin: 44.8%, compared to 45.3% last year.
• Free cash flow: $104.3 million, marking a 152% conversion rate.

Earnings vs. Forecast

RBC Bearings reported an EPS of $2.84, surpassing the forecast of $2.74, resulting in a 3.65% earnings surprise. Revenue also exceeded expectations, coming in at $436 million against the forecasted $431.64 million. This performance highlights the company’s effective strategy and operational efficiency.

Market Reaction

The company’s stock price rose by 0.79% in pre-market trading, reaching $387.34. This movement reflects a positive investor sentiment, aligning with the company’s strong earnings performance and strategic growth initiatives. The stock remains within its 52-week range, with a high of $402.22 and a low of $260.53.

Outlook & Guidance

RBC Bearings provided optimistic guidance for Q2, projecting revenue between $445 million and $455 million, indicating an 11.8% to 14.4% year-over-year growth. The company expects VACCO to contribute $15-20 million in Q2 revenue, with gross margins projected to remain stable between 44% and 44.25%. For deeper insights into RBC Bearings’ valuation metrics and growth potential, InvestingPro subscribers can access 15+ additional ProTips and a comprehensive Pro Research Report, offering detailed analysis of the company’s financial health and future prospects.

Executive Commentary

CEO Doctor Hartnett emphasized the company’s strategic focus, stating, "We have a well-defined business plan in most of our core businesses with a strong five-year outlook that’s executable." He also highlighted the integration of VACCO and its potential to improve margins over the next 18 to 24 months.

Risks and Challenges

• Supply chain disruptions remain a potential risk, affecting material procurement.
• The oil and gas and semiconductor segments showed weakness, which could impact future performance.
• The integration of VACCO presents challenges, particularly in achieving projected margin improvements.

Q&A

During the earnings call, analysts inquired about the integration of VACCO and its impact on margins. The company addressed concerns regarding the industrial sector recovery and supply chain challenges, confirming increased content in the GTF Advantage engine and highlighting the strategic focus on defense build-outs through 2030-2032.

Full transcript - RBC Bearings Incorporated (RBC) Q1 2026:

Josh Carroll, Investor Relations, RBC Bearings: Good morning, and thank you for joining us for RBC Bearings Fiscal First Quarter twenty twenty six Earnings Call. I’m Josh Carroll with the Investor Relations team. And with me on today’s call are Doctor. Hartnett, Chairman, President and Chief Executive Officer Daniel Bergeron, Director, Vice President and Chief Operating Officer and Rob Sullivan, Vice President and Chief Financial Officer. As a reminder, some of the statements made today may be forward looking and are 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 Bearings’ 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 listed in the press release along with reconciliation between GAAP and non GAAP financial information. With that, I’ll now turn the call over to Doctor. Hartnett.

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Thank you, Josh, and good morning. And we have some really we had a great quarter and we have some really good news to go through with you today. So I think thank you all for joining us. So, I’m going to start today’s call as usual with a short review of our financial results and I’ll finish our outlook on the industry in fiscal twenty six. Rob Sullivan will follow me with more details on the numbers.

So our first quarter sales were $436,000,000 a 7.3% increase over last year, driven by continued strong performance in our Aerospace and Defense segment and solid performance from our Industrial businesses. Consolidated gross margin for the quarter was 44.8% versus 45.3% for the same period last year and adjusted diluted EPS was $2.84 versus $2.54 per share. Clearly, we’re very pleased to see these strong margins and kick off our first quarter in fiscal twenty twenty six. Free cash flow was another highlight of the period of $104,300,000 setting a new record for RBC. And adjusted EPS was $2.84 per share.

Total A and D sales were up 10.4% year over year with 9.6% growth on the commercial aerospace side and 11.9% in defense. On the industrial side, this segment grew 5.5% year over year with the distribution and aftermarket up 10%. In A and D, we continue to see broad strength across the portfolio. The aircraft aftermarket expanded 22.6 and the defense aftermarket contributed well also, yielding a total of 10.4% for the segment in the quarter. We hear the progress Boeing is making on aircraft production and continue to pray for their continued success.

Moving to industrial, we achieved a 5.5% growth this quarter. Most of our industrial markets contributed to this performance aggregate, metals and mining, food and beverage, forest products, warehousing, grain grain to name a few. Oil and gas as well as semiconductor remained weak. For RBC, the industrial economy felt strong and the recent print of three percent U. S.

GDP expansion confirmed our impression during the period. Certainly, the tax treatment for capacity investment in the big beautiful bill recently signed pretends well for these sectors in the future quarters. And we expect this to be a very positive influence on demand for our products for the balance of this year and into next. Overall, our backlog for the first time exceeded $1,000,000,000 during the period with $100,000,000 of that being industrial products. Our relentless drive for organic growth through product innovation and market development creates new opportunities that are identified and sorted monthly at our ops meetings.

This is often where high potential productive short and long term options are identified and prioritized. These can be for markets as diverse as aero engine, space, guided weapons, marine, warehousing, airframe, bridge building to name a few examples. This has become an increasingly important feature of our business plan adding to meaningful revenues year in and year out. A little on defense, demand for our products remains at unprecedented levels. We expect to see this sector of our business expand in the high single to low double digits for many quarters into the future.

We are adding to our capacities where needed to satisfy the expanding requirements of our customers. Our marine business is a primary driver in this regard, but there are many other subordinate drivers in this expansion such as airframe, aero engine and aero aftermarket. Clearly, recent the recent acquisition of VAACO adds fuel to this fire. A little on VAACO. VAACO’s marine business, which has historically represented half of their revenues, demand for their products like ours is very high, again driven by the build out of The U.

S. Submarine fleet. Their business like ours must expand to meet the needs of the Navy. The synergy between RBC and VACCO is strong, adding critical mass in the areas of engineering, manufacturing, contract management and supply chain. We are only weeks into our ownership of this new business and I will wait until our next conference call to further elaborate on our plans and potential.

I am highly optimistic about our future together with this unusually synergistic business. As we begin Q2 and fiscal twenty twenty six, the year is shaping up to be a very strong one for RBC. We are well positioned in our markets. We see unprecedented demand in several important areas of the market for our products. We hold a strong balance sheet and have created a well defined business plan in most of our core businesses with a strong button down five year outlook that’s executable.

I will now turn the call over to Rob Sullivan.

Rob Sullivan, Vice President and Chief Financial Officer, RBC Bearings: Thank you, Mike. As Doctor. Hardin indicated, this is another strong quarter for RBC. Net sales growth of 7.3% drove gross profit growth of 6.1%, with gross margins of 44.8% for the quarter and 45.4 on an adjusted basis versus 45.3% for the same period last year. Our performance during the quarter was driven by a strong performance across our business segments with Industrial gross margins leading the way.

Industrial gross margins during the quarter were 46% and Aerospace and Defense margins were 42.3%. On an adjusted basis, Industrial gross margins were 47.1% for the quarter. On the SG and A line, we had total costs of $73,900,000 or 16.9% of sales for the quarter. Included in that number were additional personnel and fringe costs as well as continued investment in IT related costs during the quarter. This ultimately resulted in adjusted EBITDA of $141,500,000 or 32.5% for the quarter.

That reflects a 5.6% increase in EBITDA dollars year over year. Interest expense in the quarter was $12,200,000 This was down 29.1% year over year reflecting the impact of the debt payments made in fiscal twenty twenty five further enhanced by reduced interest rates this quarter as compared to this time last year. During the quarter, we only paid off approximately $6,000,000 of debt as we held cash in anticipation of the backward deal closing. The tax rate in our adjusted EPS calculation was 22.5 consistent with last year’s 22.4%. Altogether, this led to adjusted diluted EPS of $2.84 representing growth of 11.8% year over year, an impressive result given the choppiness in commercial aerospace production schedules and the macroeconomic softness in the industrial economy.

Free cash flow in the quarter came in at $104,300,000 with conversion of 152% and compares to $88,400,000 and 144% last year. The higher conversion rate was due to the increased earnings and working capital management during the quarter. In July, we drew down $200,000,000 of our revolver to help finance the VACCO acquisition with the remaining $75,000,000 payment coming from cash on hand. Looking ahead, our capital allocation strategy will remain focused on delevering by using the cash that we are generating to pay off that $200,000,000 we drew by the end of the fiscal year. Looking into the second quarter, we’re guiding revenues of $445,000,000 to $455,000,000 representing year over year growth of 11.8% to 14.4%.

That guidance embeds an operating environment that’s been fairly similar to what we have been seeing over the last few quarters with an additional benefit of owning back out for a little more than two months. On the margin side, we are projecting gross margins of 44% to 44.25% for the quarter and SG and A as a percentage of sales to be between 1717.25% for the quarter. Embedded in all this is an assumption that Vaca will add approximately 15,000,000 to $20,000,000 of revenue to our quarterly results in Q2 with gross margins between 2530%, very similar to Sargent when we closed on that acquisition. Keep in mind, this deal closed in the July and therefore this does not reflect the full quarter’s worth of sales activity.

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: To wrap it up, this

Rob Sullivan, Vice President and Chief Financial Officer, RBC Bearings: is another strong quarter for RBC, which underscores the momentum we have built and the strength of our strategic execution. As Doctor. Hartnett notes, we’re well positioned to achieve our objectives and drive growth driven by our core capabilities in engineering and operational excellence and innovative product development. Our focus will continue to remain on executing on our organic growth, integrating VACCO, enhancing operational efficiencies and delivering robust free cash flow conversion to create long term value for all of our stakeholders. With that operator, please open the call for Q and A.

Conference Operator: Certainly. We’ll now be conducting a question and answer session. Our first question today is coming from Christine Lewand from Morgan Stanley. Your line is now live.

Christine Lewand, Analyst, Morgan Stanley: Hey, good morning everyone.

Conference Operator: Good morning,

Christine Lewand, Analyst, Morgan Stanley: So Mike, in your prepared remarks, you kind of talked about a five year outlook there. So, I was wondering, what parts of that could you share with us? How are you thinking about the next five years? And what are the key components that you’re measuring?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Well, we’re going from major business to major business and we’re lining up our historical sales by account and what the outlook for those accounts are. As as you know, if it’s Boeing or Airbus or Embraer or, you know, Pratt or GE or one of the other big drivers of the aerospace industry, they’re all customers of ours. And their business outlook is pretty well defined and within limits. And so we use that in knowing our content and knowing what the expansion of our content would be over that term based upon some of the things that we’re working on now and expect to convert. We boil that all into revenues by account and margins by account and expand it over a course of five years.

And we do that for basically all of our businesses, but obviously the big ones get the most attention. And so that leads us to the point of planning on do we have the right capacity to satisfy the business demands for these customers. And so with that, we kind of look at what our capitalization is in each one of those business units and what’s where it needs expansion improvement, and where likely the mix is going to be the strongest and maybe our production ability to support that mix is weak. So it gives us sort of a timeline to build out our thoughts on how to expand those businesses. And we have several businesses that have very, very positive outlooks over the next five years given where they’re positioned in their markets.

And I don’t know if I answered all your questions, but that’s our process.

Christine Lewand, Analyst, Morgan Stanley: I mean, it sounds like a pretty positive one. So with the capacity that you have in place and you had built out a lot of capacity kind of going into COVID in preparation for these new programs, Does this mean that you have to spend more money on CapEx? And how should we think about the margin? If the build rates play out as the OEMs have described or are planning for, what does that ultimately mean for potential margin expansion and revenue growth for your aerospace business?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Well, certainly for the aerospace business, it’s very positive. And actually right now we’re actually airfreighting manufacturing equipment from Europe into some of the plants to expand the capacity on an accelerated business because business is a little bit stronger in certain areas than we had anticipated. So I think in terms of how much CapEx we’ll employ over that period of time, I think we’re like between our depreciation is like 3% to 4% And I think we’re going to kind of stay in that range. We have some real estate that we’ll probably end up liquidating and consolidating a couple of businesses over time, which sort of will net us back to that 3% to 4% kind of range.

Christine Lewand, Analyst, Morgan Stanley: Great. Thank you. And if I could follow-up on the big beautiful bill comment that you mentioned. I mean, you guys are core to U. S.

Infrastructure build. When you think about the opportunity set that’s outlined in that bill, can you just with the portfolio today, can you give us a reminder of where you are in the cycle? Are you going to be earlier cycle on those builds, mid? And how quickly ultimately for your business could you see how orders materialize? And is that what kind of drove that $100,000,000 backlog for industrial that you called out earlier?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Yes. Well, I think a lot of our industrial customers are small, not all of them are small, but a lot of them are small. And so I think the tax treatment in that bill allowing them to expense their industrial equipment and minimize their tax bill in any given year is catnip. And so we would expect to see a lot of expansion on those of demand from those smaller customers. And so that’s probably how it’s going to affect our industrial

I’m not sure on the aircraft in aerospace and defense side, everybody’s a pretty large customer and they probably don’t pay taxes now anyway. So I’m not sure how impactful that bill will be, but we’re expecting it to be more favorable on the industrial side than the aerospace side.

Christine Lewand, Analyst, Morgan Stanley: Great. Thank you very much.

Conference Operator: Thank you. Our next question today is coming from Michael Ciarmoli from Truist Securities. Your line is now live.

Michael Ciarmoli, Analyst, Truist Securities: Thanks for taking the question. Nice results as always. Rob, can you maybe help us with just more of the modeling details for VACCO? I mean, should we be I think we had the full year run rate revenue for March. Should we be thinking they’re getting similar growth tailwinds from other naval exposed companies?

So maybe 10,000,000 to $11,000,000 monthly revenue contribution to work with our models? And does all of this revenue go into the A and D segment, specifically in defense? And I guess just thinking about margins, it seems like if we use that midpoint of what you gave, maybe it’s the 150 basis points of dilution this year, but anything else you can share with us?

Rob Sullivan, Vice President and Chief Financial Officer, RBC Bearings: It’s early days, right? We’ve really had them under our tent for about two weeks now. So I think we’ll have a lot more to share on where it’s all going to go for the broader year by next quarter. I kind of laid out what I thought the impact is going to be for this coming quarter. But I think generally speaking where our margins are running, if you look at our despite any dilutive impact, if you look at our gross margins for Q2 in the range that we provided, it’s still exhibiting year over year expansion from where we were at this time last year.

So it’s not overall as meaningfully impactful as a result. And just about any acquisitions we were going to put under our tent would have some measure of impact in the short term but that’s our playbook, right? And that’s what we’ve done with Sargent. That’s what we’ve done with Dodge. That’s kind of how we’re looking at this thing.

So I think they’re running at a $30,000,000 a quarter run rate on sales over the last twelve months. And that’s kind of the barometer that we were using. And so more to come certainly in the future.

Michael Ciarmoli, Analyst, Truist Securities: Okay. That’s helpful. Yes, would say 150 basis points dilution. I was actually looking at my 26 exit rate. Yes, you should still get year over year expansion.

Are we putting all these revenues in the A and D sector? Or is anything going into industrial just so we could have Yes, models

Rob Sullivan, Vice President and Chief Financial Officer, RBC Bearings: it’s A and D.

Michael Ciarmoli, Analyst, Truist Securities: Okay, okay. Helpful. And then maybe separately, Mike, what are you seeing in commercial aerospace? We’ve seen some different trends, maybe some destocking on the airframe side, engine continues to be strong. I think your year over year growth, I think if I’ve got it right in the OE side, maybe showed some deceleration with a big pickup in aftermarket.

But anything else you can talk to build rates, color, order trends?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Well, I mean, I think the build rates are pretty public news, right? And so our content per build rate is pretty well defined. The we do expect to in a measured way expand our content on some of these ships over the next six to twelve months. And I think that’s probably the biggest positive we’re seeing right now. And currently we’re negotiating contracts with all of these OEMs on expanding and our statement of work and the term of the statement of work over the next five years.

So and the discussions are very positive. So I think it’s looking good for us.

Michael Ciarmoli, Analyst, Truist Securities: Okay. Okay. Thanks. I’ll jump back in the queue. Thanks guys.

Thanks.

Conference Operator: Thank you. Next question is coming from Steve Barger from KeyBanc Capital Markets. Your line is now live.

Steve Barger, Analyst, KeyBanc Capital Markets: Hey, thanks. Good morning.

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Good morning, Steve.

Steve Barger, Analyst, KeyBanc Capital Markets: Mike, you talked about some of the impacts from the one big beautiful bill on smaller customers, but we’ve been hearing a few industrial companies talk a little more positively about the back half and even 2026 before seeing that benefit. So to the extent you can pull stimulus apart from general demand, does it feel like we’ve turned the corner into a sustainable industrial expansion?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: It certainly felt that way in the first quarter. I mean, our industrial distribution business in the first quarter was up 10%. That’s pretty good for an industrial distribution business to be up 10% in the quarter. So it metrics are telling us that yes, things have things are getting stronger. My own metric is the number of tractor trailers on the highways that are between me and my exit seem to be exponentially larger this year than they were last year.

And everybody that comes to work complains about the traffic now. So to me that’s a very good sign that the economy is really being stimulated.

Steve Barger, Analyst, KeyBanc Capital Markets: Yes, makes sense. Great to see you hit the $1,000,000,000 backlog milestone. You said most of that is aero and dispense. What’s the duration of that backlog? Is that multiple years?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: It multiple years. And we think we have an honest to goodness chance of doubling that over the next twelve months.

Steve Barger, Analyst, KeyBanc Capital Markets: Wow. Just from all the defense programs primarily or does that include commercial? What would drive that?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Mainly defense.

Steve Barger, Analyst, KeyBanc Capital Markets: Got it. Okay. And when you talk about doubling that over the next twelve months, would that push the backlog to end of decade or would we think about the monetization schedule of that?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Well, a lot of the center of mass on that is our build outs that of equipment between now and 02/1930, 02/1931, 02/1932. So that’s sort of how these contracts are coming together.

Steve Barger, Analyst, KeyBanc Capital Markets: Got it. And last one for me. We know you and your team make detailed plans just like how you talked about the five year process. I know it’s really early in owning VACCO, but just can you talk about first steps of integration? Can you take a shot at margin progression in coming quarters and years?

And how you see that playing out just based on your experience from other deals?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Yes. Well, Sargent, VAACO is kind of Sargent’s little brother for half of their revenues particularly the Marine half. And it’s RBC’s aerospace little brother for the other half, for the space half. So, we have it well covered. When we did Sargent, we expanded over time, their margins by about a thousand basis points.

Right? I’m not sure exactly what the historical timeframe was that we did that, but it was probably between we acquired Sargent in 2015 and, you know, the wheels came off of the with the pandemic early twenty twenty. So it was probably in that period of time that we expanded it. I don’t think VACCO is going to take that long. And I think they’re going to see a similar ramp.

And we’re thinking eighteen to twenty four months just, would be a good bogey. Nothing is hard. Nothing is unknown. As Rumsfeld says, it’s all known knowns to us. And, it’s a matter of sort of execution and we have we literally have teams of people on the West Coast there, every day sort of sorting through and creating a roadmap.

That goes in an area, geographic area, where you know, we have over an employment base of over a thousand people in seven or eight plants and very highly synergistic to what they do and how they do it and what skill sets they have what they have for supply chain and what we have for supply chain. They’re very, very similar businesses. So, I think it’s going to be much easier to get accelerate our the improvement of that business than it was for Sargent and maybe not as easy as Dodge.

Steve Barger, Analyst, KeyBanc Capital Markets: That’s great detail. I’m looking forward to seeing how that progresses. Drive safe out there.

Conference Operator: Yes. Thanks. Thank you. Next question is coming from Scott Deuschel from Deutsche Bank. Your line is now live.

Scott Deuschel, Analyst, Deutsche Bank: Hey, good morning. Doctor. Hartnett, did the upgrade of the GTF engine to the GTF advantage create an opportunity for RBC to potentially increase its share position on the program? Meaning just did the changes in the engineering of the engine and the upgrades for certain parts create some openings for you all to come in and increase your content?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Yes. Yes, yes, and yes. We’re gonna increase our content.

Scott Deuschel, Analyst, Deutsche Bank: Any more specifics? Or

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: hesitate to talk more about it, but it’s we’re going to increase our content substantially on that engine.

Scott Deuschel, Analyst, Deutsche Bank: Okay. And do you have a sense for when that begins to ramp up for you all? Do you see it a little bit in the second half of this year and more 2026 in terms of when we see those gains?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: I think it’s going to start slowly in calendar twenty six and ramp through 02/1930.

Scott Deuschel, Analyst, Deutsche Bank: Okay. And Hartnett, it sounds like we’ll hear more on VACCO in the future, but can you maybe just spend a few moments with respect to the revenue synergy strategy with VACCO, particularly as it relates to space?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Yeah. I mean, well, sure. I think the space business is probably the hardest part for us to sort through. RBC has a pretty good business in space with a completely different customer base than BACCO has with completely different products than BACCO has. BACCO has a really nice core space business and then some business in space that needs to be rethought.

And so we’re sort of working our way through that. Net net, some of the VACCO customers are have always been target customers for RBC on the space side. So we’re going to have good introductions there. We’ll be able to ride VACCO’s coattails into those customers. On the other hand, VACCO can ride RBC’s coattails into customers in the space business that they don’t have.

So I think that’s what we see as the benefit right now. And I think VACCO’s engineering strength in what they do and what they produce for products is, if not unique, very, very limited, design engineering test skills available at that level in the country. And, so they really have some unique very unique talents and tools, which we hope to be able to employ with going forward for in RBC’s space business benefit.

Scott Deuschel, Analyst, Deutsche Bank: That’s great. And last question if I can. Just on the aerospace and defense ramp, do you foresee any supply chain constraints on your end over the next few years, particularly as it relates to your ability to obtain sufficient volumes of specialty alloys? Or do you already have firm delivery to end that growth lined up with suppliers of those alloys?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Well, you know, that’s kind of a think on the supply chain side, non alloy, I think we’re fine. Where VACCO is on the supply chain side is something that we’re trying to sort through, but we have so much production capacity ourselves in LA that I think it’s going to be a big issue. So we’re very vertically integrated from the once we receive the material. Now receiving the material, that’s another issue. There are some materials that are not a problem and that are semi exotic.

They’re stainless steels and we use them in pretty good quantities and they’re a little bit on the commodity side in terms of the ability to procure these. So that’s all fine. On some of the more exotics, we’ve been tested for years on how to secure and procure some of these exotic materials and have actually bought extensive inventories of the exotics to protect our production base. Those at one point in time were impossible to get and that seems to have improved that and it’s more normalized, but nevertheless, it’s still you can’t get some of this stuff for sixty weeks. So your planning cycle needs to be way out there in order to make sure that your customer deliveries don’t get affected by somebody that can’t get your material.

So that’s a little bit of a challenge, but it’s on an eightytwenty basis, it’s definitely in the 20 category not the 80 category.

Scott Deuschel, Analyst, Deutsche Bank: Thank you very much and great results.

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Thank you.

Conference Operator: Thank you. Next question is coming from Pete Skibitski from Alembic Global. Your line is now live.

Pete Skibitski, Analyst, Alembic Global: Yes. Thanks guys. Nice quarter. Mike, I want to circle back to industrial one more time. Just PMIs have stayed below 50%, but revenue has really kind of accelerated here in the last couple of quarters.

You mentioned GDP and the tax changes. We’re a month here into the second quarter. Do you have some degree of confidence that industrial is now kind of a mid single digit grower versus maybe more tepid growth, the way we’re thinking about it six months ago?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: I think it’s sector dependent. You look at certain sectors and it’s off. But our major sectors have performed very well up year to year. And so, guess if I’m in Texas, I’m not feeling great about life in the oil patch. On the other hand, if I’m doing grain or aggregate in various parts of the country, I’m doing fine.

Forest products seems to be doing great. Food and beverage seems to be doing great. So the consumable side of the world is okay. The larger OEM side of the world is definitely slow. We haven’t seen the turn into larger OEMs, on the consumable side, it’s definitely turned.

Pete Skibitski, Analyst, Alembic Global: Okay. So maybe we shouldn’t get too carried away with our assumptions there yet?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Well, I think the impact of this bill is yet to be seen. It’s only weeks old, right? And I think that’s going to have a real positive effect. Will farmers buy more combines because they can expense them in a given year? Some might.

It might help people like Deere.

Pete Skibitski, Analyst, Alembic Global: Yes. Yes. Okay. Fair enough. And just last one for me.

In the first quarter and maybe quarter to date in second quarter, have you seen any impacts at all positive or negative from tariffs?

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Tariffs, first of all, we’re very, very USA oriented and USA organized. And so our production in sales is mainly influenced by what happens in the country. But we are impacted by tariffs to the extent that we needed to, we’ve sort of neutralized the impact of our tariff exposure to our P and L with price adjustments or adjustments in our contracts supply agreements. And we have some customers who say, okay, we understand there’s a tariff that’s on us. We’re the importer of record and just pass it through.

So we’re happy to do that. Others are more argumentative about it. And so we try to work with them as cooperatively as possible. And how that’s going to turn out remains to be seen. And others we’ve just adjusted the price.

Pete Skibitski, Analyst, Alembic Global: Yes, yes. Fair enough. Thanks for the color.

Conference Operator: Okay. Thank you. Next question is coming from Jordan Leonez from Bank of America. Your line is now live.

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Hey, good morning. Hi, Jordan. On Aero, just given that it looks like production is stabilizing, how should we think about contract renewals that you guys have coming up in pricing power going forward?

Rob Sullivan, Vice President and Chief Financial Officer, RBC Bearings: I mean, I think we’ve developed a really strong reputation with our customers and it was really done through execution and that starts with quality, starts with our on time delivery. And so we’re thrilled with what the news has demonstrated or illustrated in terms of the production rates and the stabilization in some of the large OEMs. But I think it’s more just the reputation that we’ve earned through our performance over the years that gives us the ability to successfully develop the long term agreements that we’ve been able to do in the past and the ones we’re looking forward to in the future in 2026.

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Got it. Thank you.

Conference Operator: Thank you. We’ve reached the end of our question and answer session. I’d like to turn the floor back over to Doctor. Hartner for any further or closing comments.

Doctor Hartnett, Chairman, President and Chief Executive Officer, RBC Bearings: Okay. Well, I think that concludes our conference call for the day. And I appreciate everybody’s questions and participation. And look forward to talking to you again, I guess, it’s mid fall. So good day.

Conference Operator: Thank you. That does conclude today’s teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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