RBC Bearings Reports Strong Third Quarter Fiscal 2025 Results, Marked by Growth in Aerospace/Defense and Industrial Segments
RBC Bearings Incorporated, a leading global manufacturer of precision bearings and components for the industrial, aerospace, and defense sectors, today released its results for the third quarter of fiscal 2025, showcasing robust performance across its key segments. The company reported significant growth in both net sales and net income, with particular strength in the Aerospace/Defense (A&D) sector, which saw a double-digit increase in sales.
Third Quarter Financial Overview
For the third quarter of fiscal 2025, RBC Bearings recorded net sales of $394.4 million, marking a 5.5% increase from the same period in the previous fiscal year, which had net sales of $373.9 million. The Aerospace/Defense segment saw a notable 10.7% year-over-year increase in sales, while the Industrial segment grew by 2.7%. This performance demonstrates the company’s strong positioning in its core markets, despite challenges in certain sectors.
Gross margin for the quarter stood at 44.3%, reflecting a solid improvement over last year’s 42.3%. This increase was driven by continued operational efficiencies and favorable product mix. Gross margin in dollar terms reached $174.9 million, up from $158.0 million in the third quarter of fiscal 2024.
In terms of profitability, RBC Bearings posted net income attributable to common stockholders of $56.9 million, a 39.6% increase compared to $40.8 million in the prior-year period. Adjusted net income for the third quarter was $73.0 million, up 34.7% from the adjusted $54.2 million reported in the same quarter last year.
Earnings Per Share Performance
RBC Bearings’ earnings per share (EPS) reflected the company’s improved performance. Diluted EPS for the third quarter was $1.82, a 30.9% increase over the $1.39 reported in the third quarter of fiscal 2024. Adjusted diluted EPS was $2.34, up 26.5% from the adjusted EPS of $1.85 last year. These strong results were driven by higher operating income and effective cost management.
Free Cash Flow and Balance Sheet Strength
RBC Bearings demonstrated continued success in converting operating profits into free cash flow, with a free cash flow conversion rate of 127%. Although this was a slight decrease from the 152% conversion rate seen in the same quarter last year, it remains a strong performance. The company utilized its strong cash flow to reduce its leverage, ending the quarter with trailing net leverage of 1.8x.
The company’s total backlog as of December 28, 2024, was $896.5 million, an increase from $864.0 million at the end of September 2024 and $770.7 million at the close of December 2023. This growth in backlog reflects robust demand across RBC Bearings’ product offerings, particularly in the aerospace and defense sectors.
Segment Performance and Outlook
In the Aerospace/Defense segment, net sales increased by 10.7% year-over-year, driven by strong demand despite the challenges posed by a commercial aerospace OEM strike. RBC Bearings continues to see strong demand for its production capacity, with customers preparing for expected volume recoveries in the second half of calendar year 2025. The company’s product offerings in this segment continue to be a key driver of growth.
For the Industrial segment, net sales rose by 2.7%, driven by organic growth initiatives, share gains, and favorable end-market conditions. RBC Bearings successfully delivered on its expectation of returning to growth in the fiscal third quarter, highlighting the strength of its diversified product portfolio and solid market positioning.
Dr. Michael J. Hartnett, Chairman and CEO of RBC Bearings, stated, “We are pleased with our operational performance in the third quarter, with both the A&D and Industrial segments delivering solid results. Our Aerospace/Defense segment saw robust sales trends, and the Industrial segment continued to benefit from favorable market conditions. We are also proud of our strong free cash flow conversion, which enabled us to reduce our leverage and strengthen our balance sheet.”
Operating Expenses and Adjustments
Operating expenses for the third quarter of fiscal 2025 totaled $70.1 million, up from $63.9 million in the same period last year. The increase in SG&A (selling, general, and administrative expenses) was driven by higher expenses related to business growth and investments. As a percentage of net sales, SG&A accounted for 17.8% in the third quarter, compared to 17.1% in the prior year.
Other operating expenses, which include amortization of intangible assets, restructuring costs, and other items, totaled $19.2 million, compared to $18.9 million in the third quarter of fiscal 2024. The breakdown of these expenses included $17.9 million in amortization of intangible assets, $0.1 million in restructuring costs, and $1.2 million in other charges.
Operating income for the quarter increased by 13.7% to $85.6 million, compared to $75.2 million in the prior year. On an adjusted basis, operating income increased by 13.7% to $85.7 million, reflecting improved profitability.
Interest expense for the third quarter was $14.2 million, a decrease from $19.3 million in the same period last year. This decrease was attributed to the company’s debt reduction efforts and lower interest rates, coupled with effective interest rate hedging strategies.
Preferred Stock Conversion and Impact on EPS
During the third quarter of fiscal 2025, RBC Bearings completed the conversion of its 5.0% Series A preferred stock into common stock. This conversion, which occurred on October 15, 2024, eliminated the future dividend obligations on the preferred stock, resulting in annual cash savings of approximately $23.0 million. The conversion led to a reduction in the weighted average shares outstanding, impacting the calculation of diluted and adjusted diluted EPS for the third quarter.
Fourth Quarter Fiscal 2025 Outlook
Looking ahead to the fourth quarter of fiscal 2025, RBC Bearings expects net sales to range from $434.0 million to $444.0 million, representing a growth rate of 4.9% to 7.3% compared to the fourth quarter of fiscal 2024, which had net sales of $413.7 million. The company expects gross margin to be in the range of 44.0% to 44.5% and SG&A as a percentage of net sales to range from 16.0% to 16.5%.
Webcast and Investor Relations
RBC Bearings will host a live webcast to discuss its third-quarter results on Friday, January 31, 2025, at 11:00 a.m. ET. Investors can access the webcast via the investor relations section of the company’s website at www.rbcbearings.com. An audio replay of the call will be available for two weeks following the event.
Non-GAAP Financial Measures
In addition to GAAP results, RBC Bearings provides non-GAAP financial measures, including adjusted net income, adjusted EPS, and adjusted EBITDA, which exclude certain non-cash or non-recurring items. These measures allow investors to evaluate the company’s ongoing business performance and financial strength. Reconciliations between GAAP and non-GAAP financial results are available in the company’s financial tables.
Overall, RBC Bearings’ third-quarter results reflect a solid performance driven by strength in both its Aerospace/Defense and Industrial segments, along with a strong balance sheet and continued cash flow generation. The company’s strategic initiatives and focus on operational excellence position it well for continued growth in the coming quarters.
