RBC Bearings Incorporated Q3 FY2026 earnings call

Key Points

• Net sales for the third quarter were $161 million, a 17% increase year over year. Consolidated gross margin was 44.3%, or 45.1% on an adjusted basis. Adjusted diluted EPS was $3.04, a 30% improvement from the prior year. EBITDA was $149.6 million, up 22% year over year, and free cash flow was $99.1 million with $81 million of debt paid down.
• Demand in the A&D sectors remains robust, with backlog exceeding $2 billion. The A&D business benefits from strong demand in submarines, missiles, defense spending, and commercial aircraft. For example, submarines face accelerated fleet build-out, and missiles have strong refurbishment and new construction needs.
• Industrial business saw growth of 3.1%, with strength in aggregate, cement, food and beverage, and warehousing markets. The semiconductor industry showed strong demand, and the company is introducing new products for FY '27 and opening a service center in the Midwest.

Third quarter net sales were $161 million, a 17% increase over the prior year. The A&D segment saw total sales up 41.5% year on year, with commercial aerospace expanding 21.5% and defense up 86.2%. The industrial business was up 3.1%, with industrial distribution up 1.5% and the OEM sector up 7%. Revenue contribution was 56% from industrial and 44% from the A&D sector.

Fourth Quarter Guidance

• Revenue is guided to be between $495 million and $550 million, representing year-over-year growth of 13.1% to 15.4%.
• Adjusted gross margins are projected to be in the range of 45% to 45.25% for the quarter.
• SG&A as a percentage of sales is expected to be between 16% and 16.25%.

Actual results may differ materially from forward-looking statements due to various factors. Refer to RBC Bearings' recent filings with the SEC for a detailed discussion of risks impacting future operating results and financial condition.

Q: Kristine Liwag from Morgan Stanley asked about industrial business embedded in 4Q revenue outlook and growth in 2027.

A: Michael Hartnett and Rob Sullivan responded that industrial growth is expected to be higher in 2027, with current positive trends.

Q: Michael Ciarmoli from Truist Securities asked about backlog composition and relationship with revenue.

A: Michael Hartnett and Rob Sullivan discussed that over 90% of backlog is in the A&D segment, and contracts can be multiyear.

Q: Steve Barger from KeyBanc Capital Markets asked about industrial outperformance and Aero & Defense synergies.

A: Michael Hartnett discussed Dodge's strong brand and VACCO's space applications.

Q: Scott Deuschle from Deutsche Bank asked about Airbus contract content and missile business.

A: Michael Hartnett mentioned increased Airbus content and the company's involvement in missile business.

Q: Pete Skibitski from Alembic Global asked about Boeing and Airbus production rates.

A: Michael Hartnett provided details on Boeing's production targets.

Q: Tim Thein from Raymond James asked about Industrial business growth initiatives.

A: Rob Sullivan discussed ongoing integration and new initiatives.

Q: Jordan Lyonnais from Bank of America asked about missiles and CapEx.

A: Michael Hartnett responded on CapEx needs for missile production.

Q: Ross Sparenblek from William Blair asked about VACCO margins and industrial guidance.

A: Michael Hartnett discussed VACCO margins and an optimistic industrial outlook