Good morning, and thank you for joining us for RBC Bearings Fiscal Fourth Quarter 2025 Earnings Call. I'm Rob Moffatt, Director of Corporate Development and Investor Relations. And with me on today's call are Dr. Michael 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 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 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 a reconciliation between GAAP and non-GAAP financial information. With that, I'll now turn the call over to Dr. Hartnett.

Thank you, Rob, and good morning and thank you for joining us. I'm going to start today's call with a quick review of our financial results, and I'll finish with some high-level thoughts on the industry, our outlook for fiscal 2026 and then hand it over to Rob Sullivan for more detailed color on the numbers. Fourth quarter sales came in at $438 million, a 5.8% increase over last year, driven by continued strong performance in our A&D segment and other very strong performance in the industrial businesses, particularly when viewed against the broader industrial trends. Consolidated gross margin for the quarter was 44.2% versus 43.1% for the same period last year and adjusted diluted EPS was $2.83 a share versus $2.47 a share, up 14.6%. Clearly, we're thrilled to see the results, and this reflects the energy and commitment everyone invested to make this year successful. So, a big thank you to Team RBC. Total A&D sales were up 10.6% year-over-year with 11.6% growth on commercial aerospace and 8.2% on defense. On the industrial side, the segment grew 3.3% year-over-year with distribution and aftermarket up 2.5% and OEM up an impressive 5.1%. In A&D, we saw broad strength across the portfolio. Our leading sources of growth came from engine OEMs, commercial spare parts, commercial fixed-wing aircraft, missiles and guided munitions, and of course, space. For the full year, A&D sales grew at 14% with commercial aero up 13.3% and defense up 15.9%. Although the FAA constrained production and a prolonged strike at our largest customer coupled with other challenges that the industry faced this past year, we still grew the business at 14% and expanded margins as planned. We clearly benefited from the breadth and diversity of RBC's portfolio, giving us exposure to many different customers and many different parts of the supply chain. This includes a healthy balance between aftermarket and OEM, fixed-wing and rotary craft and commercial and defense. We also benefited from highly targeted organic growth initiatives focused on specific customers and programs that not only contributed to fiscal 2025 but should continue to benefit us in 2026 and well beyond. Moving over to the industrial segment, we delivered a 3.3% growth this quarter. We were able to grow the business on a full-year basis, even in an environment where the industrial economy has seen two consecutive years of contraction as measured by the manufacturing PMI. High service levels, lots of internal can-do and incremental progress on new product introductions were the reasons. Our outgrowth relative to peers and the broader industrial economy has been notable, and I want to commend our teams for measuring up to the high bar they reached. Results like this don't happen by chance. They are the result of our relentless focus on our organic growth during our ops meetings and the ambitious goals of our managers that are willing and those goals that they're willing to take on. Coming into the year, we talked about how our focus at Dodge is in the early innings of evolving from delivering cost synergies to driving revenue synergies and that accelerating growth was the major priority for fiscal 2025. I'm proud to say that these early efforts appear to be paying off. Year-over-year OEM sales growth in the Dodge business has been in the double digits for the past three quarters and a very strong finish in the fourth quarter has enabled them to finish with a double-digit OEM sales growth for the full year. Keep in mind, OEM wins today pay off in the aftermarket and MRO dividends for years to come. With fiscal 2025 behind us, let's spend a little time talking about 2026. In terms of end markets, we believe commercial aero is poised for growth of at least 15%, driven primarily by the expected year-over-year production growth at Boeing and Airbus. Last year had its challenges for Boeing, but the company appears to be making substantial progress under its new CEO and recent trends are very encouraging to the industry. On the defense side, we are comping against substantial growth of nearly 22% in fiscal 2024 and 16% in 2025. Even against this high bar, we believe we can grow the business at least in the mid-to-high single-digits and likely more. We are adding additional capacity at several plants to accommodate very strong demand from a wide array of defense OEMs. Certainly, this is led by growth in submarines coupled with broader strength across RBC's portfolio in support of the government's proposed trillion-dollar defense budget. For the industrial businesses, end markets are a little tougher to predict due to the short-term impact of interest rates, tariffs, consumer spending, and general GDP expansion. In any event, we feel the MRO side of the world that supports the staples of human life such as food and beverage, grain, aggregate, mining, forest products, sewage treatment, provides a steady demand for our North American product offering and is essential to keep the wheels of American industry turning and America's population fed. The last topic I want to touch on before handing the call over to Rob is the balance sheet. Last quarter, we crossed the two-turn mark from a net leverage perspective. And this quarter, we pushed it even lower. In total, we allocated $275 million to debt repayment in fiscal 2025, taking our trailing net leverage to 1.7 turns exiting the year. We remain well positioned to pursue additional accretive M&A, and the team has been very active in keeping the pipeline full of ideas. Looking ahead, fiscal 2026 is poised to be another strong year for RBC. The backdrop for growth across all of our channels is substantial, and our team is laser-focused on executing at the highest level. With that, I'd like to turn over the call to Rob Sullivan for more details.

Thank you, Mike. As Dr. Hartnett indicated, this was another strong quarter for RBC. Net sales growth of 5.8% drove gross profit growth of 8.5% with more than 110 basis points of expansion. The quarter benefited from strong manufacturing performance coupled with the structural drivers of our gross margin performance, including Dodge synergies, increased utilization of our aerospace and defense manufacturing assets, and the continuous improvement focus on the RBC ops management process. Industrial gross margins during the quarter were 45.7%, and aerospace and defense margins were 41.5%. On the SG&A line, we continued our investments in future growth. This included a combination of investments in personnel costs and back-office support, including IT. This resulted in adjusted EBITDA of $139.8 million, up 7.4% year-over-year and adjusted EBITDA margin of 31.9%, which was up 50 basis points year-over-year. Interest expense in the quarter was $12.8 million. This was down 31.8% year-over-year, reflecting the ongoing repayment of our term loan, as well as a lower rate on the loan as the SOFR base rate has moved lower. The tax rate in our adjusted EPS calculation was 21.7%, reasonably consistent versus last year's 21.2%. Altogether, this led to adjusted diluted EPS of $2.83, representing growth of 14.6% year-over-year, an impressive result given the choppiness in commercial aerospace customer production schedules and the macroeconomic softness in the industrial economy. Free cash flow in the quarter came in at $55 million with conversion of 76% and compares to $70 million and 113% last year. The lower conversion rate this quarter was primarily the result of timing around accounts receivable, driven by year-over-year increased sales. As usual, we use the cash generated to continue to deleverage the balance sheet. We repaid $82 million of the debt during the quarter, taking our total year-to-date debt reduction to $275 million. All in, this is another strong year for free cash flow generation, and all of that cash flow is applied to debt reduction. This takes our trailing net leverage to 1.7 turns, leaving our balance sheet in an increasingly attractive position to pursue additional accretive M&A. Looking into the first quarter, we are guiding to revenues of $424 million to $434 million, representing year-over-year growth of 4.4% to 6.8%. That guidance embeds an operating environment that's fairly similar to the fiscal fourth quarter. On the margin side, we are projecting gross margins of 44.25% to 44.75% for the quarter, which at the midpoint would be up against the full year fiscal 2025 performance. Our focus on continuous improvement on the margin line marches on and can be seen in our outlook for full-year gross margin expansion of 50 basis points to 100 basis points, which will likely be back-half weighted. This is inclusive of all tariffs at the current levels. We currently expect tariff pressure to be minimal and believe we can mitigate the expected headwinds and still deliver margin expansion on a full-year basis. Similar to prior years, we expect to reinvest some of this margin expansion into fueling future growth through investments in the SG&A line. We expect other factors to be normal as well, including free cash flow conversion of 100%, adjusted taxes in the 22% to 23% range, and CapEx in the range of 3% to 3.5% of sales. In closing, this was another strong quarter for RBC, and we are poised for another strong year. We remain focused on leveraging our core strengths in engineering, manufacturing, and product development to drive both organic and inorganic growth, continuous improvement in operating efficiency, and high levels of free cash flow conversion. With that operator, please open the call for Q&A.

We will now start the question-and-answer session. Our first question comes from Kristine Liwag at Morgan Stanley. Your line is now live.

Hey, good morning, everyone.

Good morning.

Hi, Kristine.

So maybe first question on commercial aerospace. I mean, we're starting to finally see Boeing production rate move in that positive trajectory. So, I guess I wanted to level set. Can you remind us when we actually get to, let's say, $50 per month for the 737 MAX and 10 per month for the 787? I mean, how much bigger is your commercial aerospace OE business at that point? And then also, when we think about margins, you guys have done an incredible job holding onto margins even though production rates have been uncertain. When we get to that full run rate, how should we think about the margin opportunity?

Well Kristine, you asked some difficult questions as usual.

And I'm hoping you're going to have some great answers.

Yeah, you would be the right person to ask about when Boeing will reach the 50 a month target. For now, we're optimistic that they'll achieve the 38 number very soon, potentially within a month or two. They're reportedly making good progress with the FAA on approving the key metrics, which will enable them to produce the next 10 planes. We're expecting that it won't be too late into calendar '26 before we start seeing plane builds in the upper 40s.

Is that revenue?

Is that how you see it?

Yeah, I mean, I just looked at the May deliveries, and we're only in the halfway part of May, and they got to some pretty good production numbers. So, I think I would agree with your assessment of the 38 is going to be very soon. But what I wanted to ask you is like, so when you do get to that 40s per month or even eventually 50, I mean, how much bigger could your revenue be? Because you want a lot of shipset content for the MAX versus the NG that we didn't really see the full benefit of because of the disruption in production. So, I just wanted to understand, could your Boeing commercial OE revenue be at this point 2x versus 2019? Just some sort of level-setting numbers around that, Mike.

Okay. Well, let me do a little math here and maybe come back at the other end of the Q&A, and I'll have my math done.

Sounds good. In the industrial sector, I was curious about the growth you're experiencing. It seems clear that this growth is attributed to your team's strategy rather than the overall market conditions. Could you provide more details about the specific initiatives you've implemented and the extent to which they contributed to your incremental growth compared to the market? Additionally, do you believe you can maintain your growth leadership in this cycle compared to your competitors?

On the industrial side, there were some product lines at Dodge that faced service level challenges after we acquired the company. We prioritized working with the Dodge team to enhance service levels and production capacity for these products, which led to a positive market response. This was relatively straightforward to address since it didn’t involve lengthy product development or testing. We focused on resolving service level issues first. Additionally, Dodge had several products nearing completion of their testing phase when we took over, but they hadn’t been capitalized due to a shift in priorities while the business was for sale. We benefited from that situation and managed to launch some of those new products quite rapidly, contributing to overall growth. Furthermore, there are longer-term opportunities for Dodge currently in development that will take more time to materialize but have the potential for significant market impact once they do. Overall, the outlook for them is quite positive.

Great. Thank you.

Yeah.

Thank you. Next question today is coming from Michael Ciarmoli from Truist Securities. Your line is now live.

Good morning, everyone. Great results. I appreciate you taking my questions. Rob, do you have the gross margins by segment for the quarter?

I did read them out in my script, but I will repeat them. The industrial gross margins were 45.7% this quarter and A&D was 41.5%.

Got it. Do we have any thoughts on 2026? The gross margin expansion might seem a bit conservative, assuming we achieve the volumes. Given that everything from Boeing is sounding better, if we do see an increase in margin expansion, I would expect it to come from the aerospace and defense side. Is it reasonable to suggest that there is more potential for growth in that area?

Yeah. I think, we certainly see a lot of runway. You can see the gap between A&D and industrial, and where A&D is today versus where it's demonstrated its ability in the past leaves us opportunity to expand with more throughput in the plants. We've spoken about some of the contract renewals that will come up late in the year and the increased volumes, all kind of contributing. So we think that the gross margins in A&D certainly have some runway there. And as I mentioned, that expansion looks like it could be back-half weighted 50 bps to 100 bps.

Got it. And then you guys gave some pretty good detail on '26, with I'd say more of that contained to aero, and I get the industrial environments probably a little bit more fluid and harder to predict. But I mean, if we kind of mash it together, it sounds like the aero side of the house can grow low teens. I mean, if you kind of imply low-single, maybe mid-single for industrial, are you guys comfortable with a $1.7 billion to $1.8 billion revenue kind of bogey for next year?

I think we're really sticking to the direct guidance for the next quarter as we always do. Yeah, we've offered some color on the A&D for the full year, and we'll go from there.

Okay. Last one, and I'll jump back in the queue. You talked about minimal tariff impact. I mean, is there any change in your thought process around kind of your sentiment or views on tariffs? I mean, the commentary last quarter, I think it was talking about adding space and fuel that would be strongly net good for the business. So, has anything kind of changed around tariffs, the ability to offset with pricing, are you seeing any share gains as customers potentially rethink their supply chains, looking for domestic sources?

I think there is a distinction between short-term and long-term effects. In the short term, we are maintaining a stable supply chain and overall believe that the impact of tariffs is neutral. In the long term, the effects will vary based on the size of the tariffs; larger tariffs could work to our advantage due to resulting shortages, allowing us to easily secure the right mix without extensive searching.

Got it. Understood. All right. Thanks guys. I'll jump back in the queue.

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

Thanks. Good morning.

Good morning.

Mike, you talked about organic growth initiatives targeted at specific customers and programs, but I know the team is always in front of people. So is this an acceleration of existing programs, or are you trying something new, and what does that look like?

Well, it depends upon whether you're talking A&D or industrial. I mean, obviously, the way the A&D works, you're always in front of people with new programs. I mean, it's just the way the business is working, seems like it's always worked that way. Industrial, it's a little different. I think, Dodge has had pretty much over the years, a pretty fixed mix and a well-honed process. And so, Dodge, we're taking a few additional steps to invigorate their OEM business, and that's having modest gains.

Is that targeting more wallet share with existing customers, or are you casting a broader net for new customers?

Both. Absolutely both. And we're doing some things to make it easier for new customers to do business with us. And we're opening up some geographic regions that have been where we really didn't have significant representation or customer reach in the past.

Got it. You may have talked about this in the past, but what are the new regions that you're really targeting?

Well, I think there's the most productive regions are in North America. The more exotic and higher risk regions are elsewhere in the world. South America, India, Mexico, places like that.

Got it. And then last question. I know capacity utilization is always a tricky question because of productivity initiatives and your ability to run overtime or add a shift. But if you're going to post double-digit growth in A&D and we also get a firmer industrial production cycle, how much flexibility do you have in the plants to support that higher growth right now?

I'm glad you asked that question because we have a variety of plants and the demand on them varies. Some plants are facing overwhelming demand, while others are more balanced. For the A&D side, about 70% of our revenue comes from plants that are exceeding their capacity, with demand far outstripping supply. We've experienced double-digit growth in those segments over the last couple of years, but we've reached a capacity limit in some areas, and we're addressing that now. We're investing in labor, increasing hours, and adding machinery. We're also reallocating machinery from balanced plants to those with constrained capacity. This is happening as we speak, and we're committed to growing our throughput in those A&D plants this year and into next year. We anticipate using the same approach for at least the next two years. While this may sound like a challenge, it's a positive situation to manage. Of all the issues we face, if this is one of them, I consider it a good problem to have.

Yeah, for sure. It's a great problem to have. Did you maybe mention a CapEx number for the year?

It is expected to be in the range of 3% to 3.5%.

Got it. Okay. Thanks. Thank you.

Thank you. Our first question is coming from Pete Skibitski from Alembic Global. Your line is now live.

Hey, good morning, guys.

Good morning, Pete.

Maybe one for Rob. Hey, Rob, I think you said the free cash conversion target for '26 as one times. You had this big receivables build here in the fourth quarter. I don't know how fast you expect to collect on that, but it seems to the extent you can collect on that it's pretty large that maybe 1 times conversion is kind of conservative unless you think as you grow here that fourth quarter will be kind of ongoing receivables delays. But I was wondering if you could give some color on that.

Yeah. I mean the 1 times always our target. Hopefully, hopefully, we'll beat it. We are continuing to grow sales. So, there'll always be some of that pressure, but we're going to do what we can to exceed that.

Okay. fair enough. And then just on the CapEx profile, I guess maybe, Mike, if this reconciliation bill goes through and defense budgets grow well into the double digits, is that going to kind of set off another CapEx cycle for you guys just given that's a pretty, pretty big step-up in potential demand there? I don't know what this current cycle kind of enables you for capacity wise.

Yes, it will. We are actually planning a five-year outlook for several of our plants to determine our capital needs and how we should adjust. When we consider the projected growth at those plants over the next five years, given the A&D profile we are examining, we need to take action now to stay ahead.

Okay. Makes sense. Last one for me, just on I think Steve kind of asked about the SG&A investments. I think I might have missed some of it. Could you just update us on the timeline in terms of have you reached kind of peak incremental spend on some of the incremental IT investments and the India investments that you guys wanted to do. And so, I don't know if we should expect some operating leverage at this point going forward or are you still kind of growing that investment and maybe what's the return timeline on that?

Yeah. So we're continuing to invest in the growth. Obviously, we're trying to grow the company at a healthy rate, but the key takeaway would be of that margin expansion that we're seeking, we're always aiming to see a good amount of that fall down to the EBITDA line. That's the best way I'd frame it.

Okay. Fair enough. Thanks guys.

Thank you. Next question is coming from Ross Sparenblek from William Blair. Your line is now live.

Good afternoon, guys.

Hi, Ross.

Hey, on the defense guidance, I believe you guys said mid to high single digit plus for 2026. It seems like a generally broad range there. So, it'd be great to just gauge the sensitivity and what's informing the lower end versus high end? Is it more just ramping capacity or is it kind of just customer timing.

It's likely related to ramping capacity. We are navigating through some significant contracts with major clients, including aircraft manufacturers and defense agencies. Many of these contracts are already booked or in progress, while others are facing delays due to administrative issues on their end. Nevertheless, we anticipate this will pose a challenge for our capacity.

Okay, understood. And then maybe just on industrial, can you just elaborate on some of the end-market dynamics there on the strength on the OEM side? You noted Dodge being strong, maybe just on the RBC classic.

Hey, Ross, it's Rob Moffatt. Just looking at the end markets, mining metals was our strongest. We've had a couple of decent quarters there. Aggregate and cement was number two and warehousing and logistics is an end market that has turned very nicely positive for us. Those are our top three contributors to growth.

Okay. It seems that the worst may be behind us, and we still anticipate oil and gas performing well in the second half of 2025. So perhaps it’s more about the mix when we consider the gross margin decline in the first quarter or the strength in the OEM for RBC Classic.

Yeah. You're talking about the Q1 versus Q1 last year.

I think I would just point to the fact that Q1 last year was an exceptionally strong margin quarter. We had a nice product mix there coupled with some expedites that were flowing through, if you recall. So, I'd just kind of remind you that the overall implication for the Q1 margin is above the full year FY '25 performance.

Ross, if you're thinking in terms of growth, I mean, we do still have headwinds in the oil and gas segment and the semiconductor end markets. I still think that those are going to turn. If you look at the strong performance that we had in industrial, it's a lot of the things that Dr. Hartnett talked about earlier, organic growth initiatives, really strong performance at Dodge and picking up pockets of market share in different places. It's the things that we focus on during ops that are driving that. More so than end markets.

Awesome. Thanks guys.

Thank you. Next question is coming from Jordan Lyonnais from Bank of America. Your line is now live.

Hey, good morning. Thanks for taking the question. I appreciate the comments on the debt repayment. But could you guys give a sense of what you're seeing for M&A pipeline, has anything changed in the market for you or what's coming up that you'd be interested in?

We've been actively exploring a range of alternatives when it comes to M&A, and we've been quite busy with this effort. Synergy plays a crucial role in our selection process, and we are very selective, which requires a significant amount of time and effort from our team. While it does create some pressure for the staff, we believe we're making progress. Our balance sheet is in a strong position, allowing us to act if the right opportunity arises, and we will respond swiftly if we find something appealing.

Great. Thank you so much.

Thank you. Next question today is coming from Kristine Liwag from Morgan Stanley. Please proceed with your follow-up.

I wanted to get back in queue, Mike, to check on your math, I know you're really good at it, so I just want to make sure you didn't forget but...

Kristine, I always hoped you would forget. This is how my calculations turned out. I figured it as a 10-plane annual rate for the 737, which would add about $24 million. For the 777, a five-plane annual rate would also add $24 million. Lastly, for the 320, a 10-plane annual rate would contribute $12 million.

Great. These are impressive numbers. Thank you. I will do some analysis and get back to you later. However, since I'm in the queue, I wanted to follow up on the earlier M&A question. Talking with some industry contacts, I've found that many are quite surprised by what you've achieved with the Dodge asset. It’s remarkable that your industrial business has shown a significantly higher gross margin compared to your aerospace defense business. Given your trust in your team and the structured training you've provided, this level of performance from Dodge has indeed taken the industry by surprise. Now that you've seen the growth, doubling your revenue and achieving over 1,000 basis points in margin within just 18 months of acquisition is a significant operational achievement. Does this enhance your confidence? Does it expand your view on potential acquisitions, specifically targeting assets you believe you can improve or extract more value from? Additionally, with your balance sheet showing 1.7 times net debt to EBITDA and substantial growth potential in your organic business, you may not need to pursue acquisitions. Can you provide some guidance on the types of assets that would interest you? Are you leaning more towards industrial or aerospace defense? Are there specific milestones or characteristics, like size or unique content, that we should be aware of? Thank you.

Certainly. On the aerospace defense side, we prefer companies that serve our customers because those customers are highly sophisticated. Negotiating terms and conditions can be challenging and time-consuming. If you've established your terms with a customer, understand their decision-making process, and have a solid relationship with the account—along with marketing personnel who have supported that account for many years—you gain confidence in the companies that service that account as well. You can easily assess the company's standing, its reputation, marketing strategies, pricing, and more. This is a key aspect we look for, as it also adds scale to that account, benefiting your overall operations. We appreciate having that aspect checked off. In terms of production, we have over 1,000 engineers skilled in manufacturing processes, giving us a strong capability to integrate into the manufacturing landscape of potential targets. If there are areas for improvement, we can quickly identify them and bring in the right specialists to address those specific manufacturing needs. It's a straightforward process for us; we find it manageable and it mitigates a lot of risks. We understand the account thoroughly, know the manufacturing capabilities, and recognize opportunities to enhance plant efficiencies. Additionally, we can assess whether the pricing approaches align with our expectations, making it easier to identify suitable candidates that fit this profile.

Great. Thank you.

Yeah.

Thank you. We've reached end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Okay. Well, I have no more comments. I think I'm pretty much commented out. But I appreciate everybody participating today and there were a lot of good questions. I hope we gave you good answers and we look forward to talking to you later in the summer. Thank you, David.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.