Joining us. I'm Andrew Obin. I cover Multi-Industrials at Bank of America. With us, we have the Management of Regal Rexnord. Present today will be Louis Pinkham, Company's CEO, and also Rob Rehard, EVP and the Company Chief Financial Officer. Gentlemen, thank you so much for coming to London. I hope you're enjoying it. I think Louis is going to give some slides, and then we can go to some Q&A. Thanks so much. Great.
Great. Thank you, Andrew. Good afternoon, everyone. I'd like to begin by thanking Bank of America's team for hosting this conference, and to Andrew in particular. We look forward to expanding our relationship. To the investors here today, thank you for spending time to learn more about Regal Rexnord. I realize that many of you may be less familiar with Regal, and so I will provide an overview of the company shortly. Before I get into the specifics, I would like to outline the investment opportunity as we see it. I believe that considering an investment in Regal Rexnord today amidst concerns about tariffs and at a time when some of our key end markets are at low levels in the cycle presents a unique and, I think, highly compelling value investment opportunity.
Six years ago, soon after I became CEO, we began a journey to transform Regal into a higher-performing operating company that is better positioned to grow. This is highly apparent in our margins, both gross and EBITDA, where we have made significant progress, but where there is still more upside to come, much of it tied to self-help. This business has a long track record of strong cash flow generation, but over the next few years, our cash flow is on track to accelerate meaningfully to $1 billion annually, equivalent to a mid-teens cash flow margin. Over the next 18 months, we'll be using that cash flow primarily to pay down acquisition-related debt, creating significant potential upside for equity holders as our capital structure shifts from debt to equity. Longer term, our substantial cash flow creates sizable value creation opportunities from bolt-on M&A and stock repurchases.
Organically, we are working on many initiatives to help accelerate sales growth. Many are tied to launching new products that have increasingly wide competitive moats and are highly weighted to the 50% of our markets that have secular growth tailwinds. Investing to grow the 40% of our sales in the aftermarket is another priority. Its higher margin business improves our durability as an enterprise. As you can see, we have many levers to create value, which are largely under our control. Yet Regal Rexnord is trading at a free cash flow yield above 8%. In short, we believe Regal Rexnord is an undervalued asset, but one with catalysts for revaluation. This is the opportunity I'd like to lay out in more detail today. As I mentioned, we have been on a strategic and operational transformation journey since 2019.
This slide summarizes the profound changes that have occurred at Regal Rexnord since that time. In the year preceding these changes, Legacy Regal was a $3.6 billion business with 27% gross margins and 15% EBITDA margins. Our portfolio was weighted 75% to electric motors, with the remaining 25% in power transmission. Today, we are a $6 billion business. Our mix of motors has flipped from 75% of sales to 25%, with the other 75% of our portfolio now in industrial power transmission and automation. We have 38% gross margins, 1,100 basis points higher, the majority of that change organic, and have a path to 40% gross margins exiting this year. EBITDA margins are up 700 basis points to 22%, with a path to 25% exiting this year. Free cash flow has nearly doubled, and we have line of sight to it doubling again over the next few years.
What drove all this improvement? Number one, three highly intentional M&A transactions, two acquisitions, and one divestiture aimed at three objectives. One, doing more in the strategically advantaged power transmission space. Two, expanding into the highly attractive adjacent industrial automation space. Three, divesting our large horsepower industrial motors business to focus our motors portfolio on wider moat, higher margin, premium efficiency products, especially motorized air moving solutions. Operationally, we decentralized to get closer to our customers. We created a product management function and invested to raise product vitality with a shift in focus from selling components to also assembling our components into more value-added solutions, guiding all of our decisions and remains an 80/20 mindset. To us, that means focusing on our highest value opportunities, products, customers, markets, and deprioritizing everything else, which at earlier points in our transformation journey meant pruning less strategic businesses.
A critical KPI in assessing the portfolio quality is gross margin, which reflects the value customers see in our products. Now, let's dig a bit deeper into our product portfolio. Here is a portfolio view of Regal Rexnord today. We are organized into three segments. The link between them is motion. Our business purpose is to create a better tomorrow with sustainable solutions that power, transmit, and control motion. Starting with Power Efficiency Solutions or PES, this is our legacy motors business and represents just under 30% of our sales. Our now more curated portfolio of high efficiency electric motors power motion. Next is Industrial Powertrain Solutions or IPS, which represents nearly 45% of our sales. These highly engineered components transmit motion from a power source to whatever is being powered. Increasingly, we're selling these components plus a motor integrated into a complete system, which is called a powertrain.
Customers can drop the powertrain system into the application they're powering, simplifying their assembly process while improving quality, reliability, and efficiency. Our third segment is Automation and Motion Control, or AMC, which is nearly 30% of our sales. One of our primary products here is servo motors, small, high-precision motors that control motion with incredibly high precision and can do so with great consistency over a long period of time. We also sell the drives and controls used to operate these motors. Our linear actuators control high-precision lateral motion. These products are most commonly used in automation applications such as a robot, which could be a factory robot, a surgical robot, or a humanoid robot. Really, anywhere that high-precision motion matters. Our transformation journey to date would not have been as successful if its execution wasn't guided by our Regal Rexnord values.
Our values serve as unwavering guideposts for how we run the business. Given all the changes in our portfolio, our values and culture have been critical to us executing two extremely successful M&A transactions, to achieving our synergies, which have been substantial, and to harnessing the power of the combined organization. I'd like to spend most of the remaining time talking about our plans to accelerate growth, given our track record on margin expansion and cash flow generation is quite clear. This slide summarizes our growth improvement plans by segment. Moving from left to right, we list our three segments in the first column. The second column shows the organic growth achieved by each segment in the 2019- 2023 period pro forma for all M&A. Next, we provide our through-the-cycle growth targets, and then in the last column, some key drivers of the growth improvement we expect.
In summary, I would outline the three primary drivers of the improved growth outlook. First being, we are making growth investments, particularly in markets with secular tailwinds or that benefit from large-scale trends or mega trends. These investments are largely related to new product development and technology, both customer-facing and behind-the-scenes technology, which make it easier for customers to interact with Regal Rexnord along the entire buying journey. Robust online search, product configurators, being able to receive a single PO when buying products from across our portfolio are some of our examples. Our new product vitality was 10% in 2024, and we see it doubling to 20% in 2027. Second, solution selling. Our current portfolio and our new product investment is disproportionately focused on solutions and subsystems. Our solutions help differentiate us from our competitors and make our customer relationships stickier.
They also make it easier for our customers who can increasingly buy complete systems rather than the individual components that comprise them. Third, leveraging the unrivaled scale and scope of our transformed portfolio to create unique value propositions for our customers. For example, our scale and scope allows us to make powertrains while most others cannot. It also allows Regal to be the natural destination for spend consolidation because we are now a viable and reliable one-stop shop. Our go-to-market scale and scope allows us to serve global customers locally around the world. It also allows us to monetize our new products on a scale many competitors cannot. Bottom line, where historically our portfolio grew just over 2%, we think we can raise that to 4% due to all of the factors I just discussed. Let's dig into a few of these in the next slides.
Our portfolio today has nearly 50% of its sales in markets that benefit from secular tailwinds, which are summarized on this slide. We plan to continue to raise our secular exposures by directing an outsized percentage of our growth investments to serving these markets. Our inorganic growth in time will also continue to drive these exposures higher because one of our key M&A criteria is investing in businesses with secular market tailwinds. While our portfolio today is characterized by highly engineered components with attributes our customers value, the scope of our product portfolio, coupled with our technology leadership and deep domain expertise in our focus markets, means we have an opportunity to move up the value chain and deliver more value-added solutions to our customers. As part of this strategy, our new product development is disproportionately focused on solutions and systems.
Solutions currently represent a high single-digit percent of our sales. We see this growing by 10 points over the next three years. Some examples of our new system products are pictured on the right side of this slide. I'd like to highlight an electromechanical actuator solution that we designed for Honeywell as part of a recently announced partnership in the advanced air mobility market, which is sometimes referred to as the Electric Vertical Takeoff and Landing or eVTOL aircraft market. This slide provides a little more detail on the Honeywell partnership, which helps illustrate why we are getting traction with our solutions and applies to many of our solutions across Regal Rexnord. Some of the more notable drivers are listed on the left-hand side of this slide. First is our long-standing heritage in the aerospace business and the deep domain expertise it brings.
Second is the depth and breadth of our portfolio. As you can see in the picture, these actuators comprise many of our components, which we are able to engineer into a value-added system. The value prop for the customer is about improving quality and reliability through an integrated system optimized for performance, along with making it easier to do business with Regal by being able to procure one system versus multiple components. Our significant global manufacturing capabilities were also a factor here, which means that we can produce at scale with consistency and reliability. Regarding advanced air mobility in particular, we are excited about the significant growth potential we see in this market, as outlined on the lower part of this slide. AAM has the potential to be truly needle-moving growth opportunity for Regal in the future.
A category of solutions we believe is a sizable strategic opportunity for us is providing competitive powertrains. As I mentioned earlier, and as described on this slide, a powertrain combines a motor or power source with the power transmission components that connect the power source to whatever it is providing. The power source can be one of our high-efficiency electric motors from PES or a high-precision servo motor from AMC. Given our scope in motors and in power transmission components, we are able to provide powertrains for a wide range of applications. Traditionally, customers procure all these individual pieces and assemble the powertrain themselves. Increasingly, our customers are buying the complete solution from us, which allows them to focus on the larger products these subsystems go into. It also raises the quality, reliability, and efficiency from the powertrain. This slide illustrates the scale and scope advantage we have in powertrains.
Down the middle of this slide, we list all the key product categories in our powertrain portfolio. Across the top, we designate the leading global competitors and their capabilities in each principal product category. A few things become clear. One, Regal Rexnord is a leader in all categories with top three positions across the board. Two, we have the broadest portfolio in terms of products and capability. Three, we are the only player able to offer complete industrial powertrain across a wide range of applications. This slide shows how we envision the company over the three-year planning horizon, factoring our growth, margin, and capital deployment plans.
In short, powerful further transformation is summarized in these metrics: organic sales growth of 2%-5%, 40% gross margins, 25% EBITDA margins, low double-digit annual earnings per share growth, a free cash flow margin comfortably in the low to mid-teens, which implies a billion dollars plus in annual free cash flow, and net leverage in the 1.5x-2x range. We believe all these metrics help support a top quartile valuation multiple and that achieving these targets will be important catalysts for revaluation. A powerful component of our investment case, less easily captured by the operating metrics I just shared, is the potential benefit to our equity holders from paying down our debt.
The bars in the chart on the left represent our enterprise value and indicate the percentage mix of debt versus equity and how we expect the mix to evolve over the next three years based on our generation of cash under the assumptions outlined on the right-hand side of the slide. Notably, we assume that our EV to EBITDA multiple remains constant over this period. Of course, if our multiple expands and should, that would suggest even more meaningful upside for our equity holders. The rising percentage of equity in our capital structure is, as we pay down debt, implies significant upside potential to our share price and is expected to be a significant component of the Regal Rexnord investment case over the next couple of years. I hope I have given you a better sense of why we think Regal Rexnord shares represent a highly compelling investment opportunity.
Fundamentally, it starts with having a high-quality enterprise, as outlined on the left, strong secular exposures, technology-differentiated solutions, strong brands and channel positions, robust aftermarket sales, unrivaled global scale and scope, a strong cash generation. Most of these attributes are reflected in our top quartile margins. From a financial perspective, we have ample remaining margin self-help ahead of us, plus strong and accelerating cash flow and ability to create value for our equity holders by deploying cash flow to debt and over time by deploying capital to inorganic growth and stock repurchases. I have also shared a variety of initiatives underway to improve organic growth, where we are making good progress.
Much of this progress has been masked recently by end market pressures, but with our orders now inflecting positive over the last three quarters, we are optimistic that our self-help growth initiatives will increasingly be apparent in this year's unfold and in the future. In that context, we believe our shares trading at a free cash flow yield of above 8% suggests RRX is an undervalued asset with compelling risk-reward. With that, I want to thank you all for being here today and look forward to questions from Andrew.
Yeah, no, thanks so much, Louis. Just a question. I know that you have put out a press release today highlighting the tariff impact.
Yes.
Could you just clearly, a very hot topic at this conference, can you just provide details for us what exactly the impact is and what does it mean for companies' earnings and yeah, the considerations they wanted to putting out a press release like this?
Yeah, I think the main takeaway is that we believe the tariffs will be cost-neutral for us, if not margin-neutral over time. The tariffs that are in place today, you've got steel and aluminum, and then you've got the tariffs coming from China, Mexico, and Canada. That's about an unmitigated $60 million impact annually to Regal.
We believe that we'll be able to manage that to cost-neutral initially to margin-neutral by the end of the year by leveraging the strength of our supply chain, leveraging the strength of our manufacturing footprint with over 100 manufacturing facilities around the world, along with driving productivity and price in the marketplace. That's the main takeaway from that announcement.
Just sort of to dig in a little bit more, are those going to be surcharges? What happens to your backlog? Can you go and reprice the backlog?
They are not surcharges. They would be partially driven by price. It's not a surcharge. We would not go renegotiate our backlog. Remember, when you think about our backlog, which is three to four months, some of it's already in inventory. We don't see a big impact.
On April 2nd, tariffs go, 1201, your prices go up, and that's it.
Prices have already gone up to address the tariffs that have already been put in place. If the April tariffs come in, that's a different story. We still believe we'll be price-cost neutral, but price will have to be part of that storyline.
What happens if they're rescinded?
That will have to be managed as well through a commercial negotiation with our customers.
Okay, fine. Generally, this is just the pricing. We're going to go up, there's more uncertainty, tariffs up, we're raising prices.
The other thing just to emphasize, though, is the leverage of our scale as a business. If you refer back to during the COVID period, we were able to move production pretty well to garner share growth.
We're going to need to do some of that as well here to minimize the tariff impact.
What percent of your Mexico revenue falls under USMCA?
It's roughly 90%.
Oh, wow. Okay. Let me ask you sort of another question. There's a lot of interest. We've been hosting a lot of events in humanoid robots. I think I know where this is, but does it move the needle anytime soon? Just you brought it up. I know on the robotics side, I'm familiar with your exposure, but humanoid robot, can you just talk a little bit more about that? Because clearly, that's something investors care.
Yeah. You know, honestly, we've been playing in this space for quite some time, in particular in China. Most of it's been project-related. We know what it takes, and we have products and components and solutions to be able to support humanoid.
We also believe in onshoring and the fact that there's likely going to be more manufacturing brought back to the United States. With 4% unemployment rates, the only way you're going to do that is through automation. This was a big part of the thesis of the acquisition of Altra and why we wanted to move in the automation space. We do feel there could be strength in humanoid robots. Actually, in our next earnings call, we'll talk about a partnership that we've just signed in the U.S. to accelerate that for Regal. We also think there's going to be other automation opportunities where we're perfectly positioned as well.
Yeah. Excellent. And, you know, just maybe you can expand your view on industrial manufacturing pickup in the U.S. in terms of reshoring. How are you poised to benefit?
Yeah.
You know, ISM has been below 50 for nearly 24 months now. Arguably, it's even in the high 40s because of the strength of the electrical utility and data center industry. We arguably have been in a recessionary state and a low point of our markets. There has to be a reinvestment in capital. We thought for sure that was going to come in 2025. Actually, we started to see it first in January. ISM was getting stronger. A little bit of a pullback in February because of the tariffs and market uncertainties. We still believe that we'll see ISM go above 50 this year.
Oh, okay. This year. Okay. I thought you were going to say March.
Given that, no, I'm not ready to bet on that one yet. Given that, we're well positioned.
We're well positioned because of our position in industrial powertrain and our channel position, our strong brands. We are well positioned with the automation solution suite out of AMC.
Maybe just provide a little bit more color. What are you hearing from your customers at this stage of the cycle? Any changes since you reported fourth quarter earnings? Are there any pockets where you're seeing macro improvements? Any pockets where there seems to be some sort of slowdown? Like people talk about slowdown, like actual slowdown.
Yeah. We won't share a lot more than we shared at our earnings release. You know, we did talk about the fact that we were expecting a bit of a gap in the first half because of residential HVAC and the A2L transition of the last quarter of last year.
However, we saw 3% orders growth in January where we were expecting orders to be down. Perhaps there's some optimism there. There's definitely discussion with our distribution channel partners. I believe one of them was here meeting with at the conference who feels that this year could be a low single-digit growth year. That would absolutely benefit us since today we go through distribution on 50% of our IPS business and 25% goes through three large distributors, one of which was with you. We're still dealing, talking with our customers that there's optimism in the year. The longer the uncertainty around markets and tariffs go on, I think the less likely that could be.
Gotcha. What are you hearing from your customer at this stage in the cycle? Specifically, any changes since you reported fourth quarter earnings?
No.
Okay.
You know, just once again, I'm familiar with the business, but how would you describe your moat across your businesses? You know, what differentiates Regal Rexnord from the competition?
You know, I'm going to break it down by segment and give you the enterprise view. For AMC, it's absolutely technology and product. If you have a challenge, you go to Kollmorgen, you go to Thomson. Those are differentiators. In IPS, it's about the strength of our brands, the engineered solutions, and it's our position in the channel to best service our customers in the aftermarket. If you talk about PES, it's technology around premium efficiency, motors, and air moving solutions. Technology is our moat in PES.
Is it also customization or?
From an enterprise level, it is that integration capability, our scale and scope around our portfolio to be able to bring products together as one integrated system. It is our scale and scope of go-to-market, our ability to access more of our OEM and end-user customers with nearly 2,000 sales professionals in the marketplace worldwide.
Okay. That makes sense. Just remind us, what's your split between distribution and direct?
It's roughly 40-60 distribution by business. It's roughly 50-50 in IPS, 30-70 in AMC, and 25-75 in PES.
Okay. I guess you have target, if I get it right, to 5% sales CAGR from 2024-2027.
Right.
This incorporates sort of micro market CAGR of 1.5%-3.5% plus outgrowth. What does this assume? Like what exactly are you assuming about general market environment?
When does your target embed inflection in the market environment to hit those numbers?
Our target embeds an inflection starting in the second half of this year, although we've guided this year as flat from a sales perspective. Our expectation is that we start rebounding from a market perspective in the second half. Every one of our divisions, we have 20 divisions. We run our businesses decentralized. Everyone has a product and technology roadmap and a market strategy. They all have a growth plan to outgrow their markets by 50%. That will come from new product, our growth and vitality, our improvements in our go-to-market, as well as moving from a component supplier to a system supplier. Lastly, it's about our cross-sell initiatives. In 2024, we had about $100 million plus of cross-sales.
Today, only 15% of our customers buy two or more of our products. If they're buying one, they're buying likely all. Just moving that to 5% would be roughly $160 million of incremental revenue or $1 billion over the next 10- 20 years from the aftermarket. These are all the initiatives we're trying to drive to outgrow what we believe market will be.
Just generally, is there sort of some embedded that, you know, because another question you ask, it's been just so weak for so long. Is there a view that, you know, once we inflect, we could be sustainably above the trend for a while or how do you?
We want to be cautious about our approach, but that would be our expectation and our hope is that we would start to see a rebound 2026 and 2027.
You know, as you said, we're guiding this period of 2024- 2027 at 2%-5%, the midpoint 3.5%. If we're flat this year, that makes 2026, 2027 above 4%.
Right. That's exactly right. Okay. There was a material rise to your M&A cross-sell synergy targets, which I think were previously $125 million and then raised an incremental $125 million to 2027, largely affecting Altra cross-sell. What changed relative to previous expectations and how do you plan to drive these synergy targets?
It's exactly what you said. It really was that we embedded the Altra cross-sell in. I'd say what gives, so historically we had not, it was only the Rexnord cross-sell. So $125 million more with the Altra cross-sell.
It's applying the same toolset to Altra.
That's correct. That's the major driver.
What's really driving it is all of the initiatives we talked about, in particular, the simple fact that we want more of our customers buying more than one of our products. We've also been investing significantly in digital to help with that. Today, most of our competitors take a PEO by brand or by product. We'll take one PEO for any product in our portfolio. We've invested heavily in product configurators and digital online activities to help our customers do business with us more easily. All these things should allow us to achieve our $250 million goal by 2027.
This extra $125 million is dead and better than the plan?
It is.
Okay. Thank you. What work on the M&A cost synergy targets is already completed and what work is left to be done through 2027?
Yeah, what drove the incremental $15 million raised to the targets? The cost synergy.
Yeah. The $54 million is on track for this year. Those are the cost synergies we see coming this year with another $40 million next year and $15 million in 2027. The extra $15 million was just driven by additional opportunities that we identified during the process. A lot of that came through, you know, direct material savings as well as additional footprint consolidation opportunities. The way that we're getting there is obviously, you know, through footprint rationalization and direct and indirect material savings. Most of the, and that's on the remaining portion. The portion that's already behind us is the, like a lot of the OpEx expense that we were able to pull out, like corporate costs, those sorts of things.
The acquisition of Altra, you know, you completed in March of 2023. What have you learned two years since completing the acquisition? How do you think about these businesses belonging in the same portfolio?
I think it's an excellent fit. We were very intentional with that acquisition. When I became CEO, we outlined a strategy that drove us to improve our gross margin. That was a big driver. Then position ourselves in markets that would allow us to accelerate growth. A big reason for the Altra, especially the A&S side of Altra, the automation side of Altra acquisition. The fit has worked out exactly as we expected. Maybe a little surprised that 2024 had the reset on discrete automation. The long-term play in automation and the macro drivers that support it, we're really excited.
What?
No, sorry. I apologize.
No, no, I'm listening.
What we're very pleased with is the product and technology that we got. Maybe a couple of surprises is we expected a little bit more operational strength on the A&S side of the business. We're working on that. That's the Regal Rexnord Business System. We can bring that to bear and help with that. What we're incredibly excited about is the integrated system capability that we have today with the strength of the portfolio.
Yeah, the product's always good. How do you think, how do you think specifically about sort of cash flows? Right? Because I think Fortive was run in a very specific, the Fortive of the Kollmorgen and Thomson were run in a very specific way, a very Danaher-like way.
Yeah. Yeah.
How do you sort of, you know, and your, you know, clearly cash flow generation is one of the main pitches and, you know, relative to your bid value, targeting very robust cash flow generation. Can you just sort of connect? How do you get more, you know, how do you sort of start with Altra, wring more cash out of Altra and end up with superior cash flow conversion?
You know, Altra's cash flow conversion was pretty solid. So was Rexnord, so was Regal. You bring it all together and you drive it off of EBITDA. We will continue to invest in R&D. R&D is about 3% of Regal. That has gone up 100 basis points. We do not think we need to invest any more there. We do not see our CapEx needing to be above 2%.
Yeah.
Not even with Altra, nor the investment, because I agree with you. Fortive was a little bit restrictive around markets that Altra could grow in. If there's a return on investment, we'll invest to grow. That's what we've been doing.
Interesting. Okay. Thank you. Maybe just shift a little bit to margins. You know, you have 200 basis points of adjusted gross margin expansion, 300 basis points of adjusted EBITDA expansion. Just operationally, how should we think about key levers to drive improvement? Is there more restructuring to be done?
There is more restructuring to be done. Just let me start with, there's about, you're right, about 200 more basis points of improvement in gross margins. Half of that's coming through the synergies that we just talked about, the $54 million.
The other half is 80-20 lean, product line simplification, the things that we have been doing already to kind of get us there. We have a very clear path to get to the 40% gross margins exiting this year. Then the 25% on the EBITDA margins as well. EBITDA margins, we need a little bit of help from the top line, not much to get there. We do still expect to exit at 25%.
You know, just sort of think about 40%, I think your business is aftermarket and services. How do you track your attach rate and what KPIs do you track?
Yeah, you know, our attach rate is, we believe, quite solid, but it is market by market and vertical by vertical that we look to drive it. Now, our aftermarket is about 40% of our sales, like you said.
We still feel, though, that you've got to drive the installed base, and we invest heavily in the installed base. The system solution has allowed us to do that because, as I said before, we track typically four to five replacements over the life cycle of a product solution. The installed base is just as important to us as the aftermarket.
Excellent. Maybe sort of powertrain, I think, highest margin business in your portfolio. Can you just remind us what is it about the business that makes it, you know, better than the other two businesses? You know, frankly, is it structural or is it where we are? Is there room over time to bring automation and motion control to that level?
Scale and scope helps a lot.
Position in the aftermarket with 50% sales helps, and the strength of our brands and the fact that we're really the leader in many of the markets and the products we serve help. Remember, our objective for IPS is between 27-29. AMC is 24-26.
Right.
It's not that far behind. In time, we absolutely believe AMC will get to parity with IPS because of growth.
Gotcha. I guess the final question, should we expect you guys to start doing M&A once net leverage falls below two and a half in 2026?
If we're still trading at our multiple right now, no. We're going to buy back. We are cultivating and we have a funnel of activity and we're looking at it will only be bolt-ons. We do not, the transactions we made with Altra and Rexnord were highly intentional.
We do not see a need to do anything significant with the portfolio. It is about strengthening it. Again, if we are trading where we are today, we are going to buy back shares.
We are right on time. It has been a delight to have you here. Thanks so much.
Thank you.