RBC Bearings Incorporated (NYSE:RBC) Q1 2024 Earnings Call Transcript

When you look at Dodge, Dodge is a little different. Dodge is very dependent upon being able to do a great job forecasting the demand in their market sectors. And so over the years they have independently developed a process of being able to forecast the economics of a given market sector, which then translates down to build rates for items that are sold to that sector. And when I was first introduced to their methods, I was really kind of skeptical about it could be done that way, but it can be done that way and they do an amazing job with satisfying their customer base and making sure that the right product is available to the right customer at the right time. And I think when you tour one of our plants will show you how a plant with an offering of 10,000 line items, makes every line item available every day for shipment to a customer with sort of a minimal backup in inventory.

It is really an experience to see how they do that.

Kristine Liwag: So in terms of your different end markets, can you provide the trends that you are seeing and where you see risks and opportunities regarding your full-year outlook?

Michael Hartnett: Yes. Well, I mean, we are, are we talking industrial or aircraft defense or all three?

Kristine Liwag: All, all of the above, please.

Michael Hartnett: All of the above. Well aircraft is, unless something different happens, we are pretty much dialed in on rate and materials and plant loading and plant staffing. We know what the program is and at the end of this year, we are going to be running hard to keep up. And that is the way that looks. But we will keep up, but it is going to be demanding for us in several of our plants. So that is the aircraft story. On the defense side, the Marine business is sort of one of the leaders in our defense program and we are busy building submarine components to service the Navy. And that is the number one defense priority is to build submarines and we are a big, big supplier in that category. So, our contracts are multi-year, multi-products, multi-million dollars, and they are in place.

And our supply chain is working effectively. And things are starting to move through the plant just the way we like to see. So I think that volume will continue to increase as we start building, more assemblies, and shipping more assemblies. So we expect to see good growth in that sector going forward for the rest of the year. And then on the industrial side you know there is several important markets for us in the industrial business. And we have been doing a lot of study on this to understand, because there is so many industrial markets that we service which are the markets that are really material to us and which are the markets that have a substantial growth potential. And we see markets substantial growth potentials based upon, demonstrated consumption of our products, in food and beverage, forest products, oil and gas, mining and materials, and aggregate.

And those are material markets for us that have we feel a double-digit, either they have demonstrated double-digit growth potential or there is something coming down the pike like the Infrastructure Bill that is going to encourage that potential. So those are the markets.

Operator: Our next questions come from the line of Peter Skibitski with Alembic Global. Please proceed with your questions.

Peter Skibitski: Good morning guys. Nice quarter. Just one follow-up on gross margin. It sounds like performance is a big part of the great result there. Just curious, Mike, because I know you have talked about pricing power being a tailwind for you due to inflation. On kind of a relative basis, relative to other factors, how much was pricing helpful to the gross margin result?