Regal Rexnord (NYSE:RRX) executives highlighted surging order activity and expanding backlog in the company’s fiscal fourth quarter 2025 earnings call, led by large wins tied to data center power solutions. Management said fourth-quarter results landed in line with expectations on adjusted earnings per share and exited the year with “tremendous order strength,” including a backlog up 50% versus the prior year.
Fourth-quarter results driven by orders and backlog growth
CEO Louis Pinkham said the company’s fourth quarter was characterized by “solid adjusted EPS growth, exceptionally strong orders, and a rising backlog.” On a daily basis, fourth-quarter orders increased 53.8% year over year, and book-to-bill was 1.48.
On sales, Pinkham said fourth-quarter organic revenue rose 2.9% versus the prior year, with particular strength in the Automation and Motion Control (AMC) segment, which grew more than 15% organically. He also cited weakness in Power Efficiency Solutions (PES) that was “more severe than expected,” driven by headwinds in residential HVAC.
Margins improved at the gross profit level, with adjusted gross margin of 37.6%, up 50 basis points year over year, as teams “overcame tariff and mixed headwinds” through synergies, price realization, and volume leverage. Adjusted EBITDA margin was 21.6%, roughly flat year over year. Adjusted EPS for the quarter was $2.51, up 7.3%.
Regal Rexnord generated $141 million of free cash flow in the quarter and ended with net leverage of 3.1x.
Data center E-Pod orders: $735 million and a path to scale
A key highlight was approximately $735 million of fourth-quarter orders for Regal Rexnord’s E-Pod solution, a turnkey power management offering designed to make data center power installation more “plug and play.” Pinkham said the solution draws from the company’s power management portfolio—such as switchgear, automatic transfer switches, and power distribution units—and also incorporates thermal management content including hermetic motors and air-moving solutions. Regal Rexnord also project-manages pod assembly, including third-party content, enabling customers to procure a suite of equipment under a single SKU.
Management attributed the wins to a combination of factors, including Regal Rexnord’s long operating history in power management, customization capabilities, supply chain relationships supporting service levels, and the scale of its roughly $6 billion enterprise.
In Q&A, Pinkham said the company expects E-Pod projects to carry adjusted EBITDA margins “in the 20%+ range,” with program margins improving over time through productivity and supply chain actions. He added that Regal Rexnord’s content represents roughly 40%-50% of the bill of materials, with the remainder including items such as the container and UPS equipment.
On customer and channel mix, Pinkham said the E-Pod activity spans “multiple customers and multiple data center projects in North America,” selling into co-location and hyperscaler customers, but he declined to provide customer-specific detail due to confidentiality agreements.
Regarding timing, Pinkham said there is not yet a firm shipment schedule. The expectation is to start shipping in early 2027 with deliveries extending over a roughly 15- to 18-month period, likely stretching into 2028, with a possibility that some revenue could pull into late 2026 depending on finalized delivery schedules.
Asked about the pipeline after the large Q4 order, Pinkham said the current pipeline is about $600 million for the company’s broader data center business. He indicated he does not expect another quarter with an order of similar magnitude in the near term because capacity is “pretty filled up through 2027,” but emphasized data centers remain a strategic focus.
Segment performance: AMC strength, IPS steady growth, PES HVAC headwinds
CFO Rob Rehard detailed segment results for the quarter:
- Automation & Motion Control (AMC): Organic sales grew 15.2% year over year, ahead of expectations, reflecting strength in data center, aerospace and defense, and discrete automation. AMC adjusted EBITDA margin was 20.5%, down about one point versus prior year and below expectations, which management attributed largely to mix (including a shift toward OEM volume) and continued rare earth magnet availability headwinds. AMC orders were up 190% due to E-Pods; excluding those, AMC orders rose 19.2% daily. January AMC orders were up 3.9% daily.
- Industrial Powertrain Solutions (IPS): Organic sales rose 3.7% year over year, with strength in metals and mining and energy. IPS adjusted EBITDA margin was 25.7%, just below the prior year, impacted by weaker mix, tariffs, and higher growth investments, partially offset by synergy gains. IPS orders increased 3.3% daily (the sixth consecutive quarter of positive order growth), book-to-bill was 0.96, and backlog ended 2025 up 6% year over year. January IPS orders were down 0.5% daily.
- Power Efficiency Solutions (PES): Organic sales declined 10.7% year over year, below expectations, driven by weaker residential HVAC performance tied primarily to “more severe channel destocking” following the A2L regulatory transition, partly offset by strength in commercial HVAC. PES adjusted EBITDA margin was 15.6%, above expectations and up 30 basis points year over year, reflecting cost management and mix benefits. PES orders fell 15.9% daily, book-to-bill was 0.91, and January PES orders were up 3.8% daily.
2025 wrap-up and 2026 guidance framework
For full-year 2025, management said orders grew 15.5% on a daily basis, led by AMC (up 53%), with IPS up 4% and PES down 5%. Organic sales increased 80 basis points for the year, with acceleration as the year progressed. Adjusted EBITDA margin was 22%, roughly flat on a comparable basis, while adjusted EPS rose to $9.65, up nearly 6%. Adjusted free cash flow was $893 million, and the company paid down more than $700 million of debt during 2025.
Looking to 2026, Rehard guided to roughly 3% sales growth, including 1–1.5 points from large data center projects and about 1.5 points from price actions “largely tariff related.” Outside of data centers, management assumes net volume growth across other end markets is roughly flat. The company said it is taking a “measured” approach and does not embed improvement in the ISM index from 2025 levels, even after noting the January ISM reading moved above 50.
Regal Rexnord forecast adjusted EBITDA margin to rise 50 basis points to 22.5%, reflecting expected incremental margins in the “mid-30s” on the growth forecast. Rehard said the company expects to realize $40 million of cost synergies in 2026 but is treating that as a contingency against potential P&L pressures rather than embedding it in guidance.
The company provided adjusted EPS guidance of $10.20 to $11.00 (midpoint $10.60), which management said implies about 10% growth at the midpoint. Free cash flow guidance for 2026 is approximately $650 million, reflecting working capital investment to support data center growth. Rehard also cited $120 million of expected capital expenditures for the year.
On tariffs, management said guidance reflects current tariffs as well as an update to India tariffs, with an annualized unmitigated impact of about $155 million. The company expects to become “dollar cost neutral” on tariffs by mid-2026 and “margin neutral” by the end of 2026.
Other themes: rare earth magnets, CEO search, and leverage targets
Executives discussed ongoing headwinds from rare earth magnet availability, particularly affecting parts of AMC tied to medical, defense, and discrete automation. Management said mitigation plans—including alternate sourcing outside China, HRE-free alternatives, permissible exports, and subassemblies—remain on track, with progress dependent in some cases on customer validation timelines. Pinkham said the company expects most of the impact to recover by the end of 2026, with improvement through the year.
On capital structure, management said it expects net leverage to be about 2.7x by the end of 2026 (around 3.0x mid-year), and that debt paydown remains the primary capital allocation priority until reaching a target of below 2.5x.
Pinkham also addressed the CEO search, saying the board’s process is progressing as expected and that the company is down to a “select few,” with an announcement expected in the “near future.”
About Regal Rexnord (NYSE:RRX)
Regal Rexnord Corporation (NYSE: RRX) is a global industrial manufacturer specializing in electric motors, power generation equipment and automated motion control systems. The company designs, engineers and produces a broad portfolio of products that includes energy-efficient electric motors, variable frequency drives, gearboxes, couplings, bearings and power transmission components. These offerings support critical applications in industries such as heating, ventilation and air conditioning (HVAC), refrigeration, data centers, water treatment, food and beverage processing, mining, oil and gas, and material handling.
The company’s operations are organized into multiple business segments that address distinct customer needs.
