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What does Regal Rexnord do and what are its main business segments?

- **Revenue Growth**: Q3 organic sales up 0.7%, driven by energy, automation, and aerospace. Orders rose 9.8% YoY.
- **Data Center Expansion**: Secured $151 million in data center orders in Q3/October, with 2026 growth contribution of 1-1.5%.
- **Margin Challenges**: Adjusted EBITDA margin flat at 22.7%, pressured by rare earth magnets and tariffs.
- **Free Cash Flow**: 2026 guidance of $900 million, enabling net debt leverage reduction to 2.5x.
- **CEO Transition**: Succession process underway, with a new leader expected within 4-6 months.

**【CEO Summary Section】**
- **Third Quarter Performance**: Revenue grew 0.7% organically, driven by strength in energy, automation, and aerospace. Orders rose 9.8% year-over-year, with a book-to-bill ratio of 1.05 and a 6% increase in backlog.
- **Data Center Growth**: Secured $135 million in data center orders in Q3, plus an additional $16 million in October. The data center business is expected to contribute 1-1.5% growth to enterprise sales in 2026.
- **Challenges**: Margins impacted by 80 basis points due to rare earth magnet shortages and tariffs. Adjusted EBITDA margin remained flat at 22.7%.
- **Succession Plan**: CEO Louis Pinkham announced a transition plan, with a new leader expected to be appointed within 4-6 months.

**【CFO Financial Commentary】**
- **Financial Results**: Adjusted EPS of $2.51, up year-over-year. Free cash flow of $174 million used to reduce debt.
- **Guidance Update**: Narrowed 2025 adjusted EPS to $9.50-$9.80 (midpoint $9.65), reflecting tariff impacts and rare earth magnet delays. Free cash flow revised to $625 million due to tariff costs and working capital investments.
- **Tariff Mitigation**: Gross annual unmitigated tariff cost rose to $175 million. Expect to be dollar-cost neutral by mid-2026 and margin-neutral by year-end 2026.
- **2026 Outlook**: Sales growth of low to mid-single digits, with $40 million in cost synergies and potential margin expansion.

**【Q&A Highlights】**
- **Data Center Pipeline**: $1.1 billion bid pipeline across segments, with $400 million tied to e-Pods. New Dallas facility to begin shipments in mid-2026.
- **Free Cash Flow**: 2026 free cash flow expected at $900 million, enabling net debt leverage reduction to 2.5x.
- **CEO Transition**: Board prioritizing continuity, with a focus on commercial and growth leadership in the successor.
- **Tariff Impact**: PES segment most affected by India tariffs, but long-term strategy to move production if needed.

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