Good day, and welcome to the Regal Rexnord first quarter 2022 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference call over to Mr. Robert Barry, Vice President, Investor Relations. Mr. Barry, the floor is yours, sir. Great, thank you, operator. Good morning, and welcome to Regal Rexnord's first quarter 2022 earnings conference call. Joining me today are Louis Pinkham, our Chief Executive Officer, and Rob Rehard, our Vice President and Chief Financial Officer. Before turning the call over to Louis, I'd like to remind you that the statements made in this conference call that are not historical in nature are forward-looking statements. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in forward-looking statements. For a list of factors that could cause actual results to differ materially from projected results, please refer to today's earnings release and our SEC filings. On Slide 3, we state that we're presenting certain non-GAAP financial measures in the presentation. We believe these are useful financial measures to provide you with additional insight into our operating performance and for helping investors understand and compare our operating results across accounting periods and in the same manner as management. Please read this slide for information regarding these non-GAAP financial measures, and please see the appendix for reconciliations of these measures to the most comparable measures in accordance with GAAP. Turning to slide four, let me briefly review the agenda for today's call. Louis will lead off with his opening comments. Rob Rehard will then provide our first quarter financial results in detail and discuss updates to our 2022 guidance. We'll then move to Q&A, after which Louis will have some closing remarks. With that, I'll turn the call over to Louis. Great. Thanks, Rob, and good morning, everyone. Thanks for joining us to discuss our first quarter earnings and to get an update on our business. Thank you for your interest in Regal Rexnord. I am really pleased to report that 2022 got off to a very strong start for Regal Rexnord with solid first quarter operating performance, plus significant progress on our M&A integration and longer-term growth in margin initiatives. In the quarter, the company achieved 15% organic top-line growth, posted 280 basis points of adjusted gross margin expansion, and realized 250 basis points of adjusted EBITDA margin expansion. Our top-line performance was boosted by clearly identifiable share gains in many parts of our business, while our margin expansion was underpinned by, among other factors, achieving positive price cost and realizing strong merger synergies in MCS. With first quarter orders up 10% and a record backlog, our revenue prospects are solid. Our PMC and Arrowhead integration activities are progressing nicely, and I'd like to congratulate the PMC integration team that, through strong execution, was able to accelerate a number of our synergy actions, allowing us to start realizing savings a bit sooner than we had previously planned. While our results in the first quarter were strong, the global supply chain continues to be challenged, and new supply chain headwinds arose during the quarter related to COVID containment efforts in China. The good news is that our Regal Rexnord team has been successful confronting all challenges head on, and I believe that is inherent in our results and updated outlook. Before going any further, I'd like to say a sincere thank you to our 30,000 associates around the world. It is your disciplined execution, embrace of our 80/20 principles, and continued adherence to our Regal Rexnord values, even as we face persistent personal and professional challenges, that is allowing us to serve our customers at a high level, gain share, and meet our financial commitments while continuing to invest in our business. One of the things I am most proud of and most excited about as I look ahead are the share gains our teams have been achieving in recent quarters. I attribute these gains to a number of factors, including execution that's a little better than some of our competitors, our 80/20 mindset, and our digital investments that are making it easier for our customers to transact with us. New product development has also been gaining momentum as our team strengthen the muscle around driving customer intimacy and leveraging voice of the customer to make products that are purposeful for our customers and deliver value they are willing to pay for. Value we measure with the gross margins we earn on selling them. The common denominator of all new product development at Regal Rexnord is being mindful of our business purpose: creating a better tomorrow by energy efficiently converting power into motion. While driving energy efficiency is central to our purpose, our teams are also thinking more broadly about the environmental impact of our products. A great example is pictured on this slide. A Rexnord branded gear drive sold through our MCS segment, which is commonly used in metals and mining, pulp and paper, and aggregates end markets. In the example pictured, a customer in the aggregates market was having to perform excessive oil changes because it did not have a good way of measuring oil quality in its prior gear drives. While runtime is typically used to time oil changes, this is a rudimentary approach and often results in excessive cost and oil waste. In response, our Regal Rexnord engineers developed a continuous oil monitoring solution with an IoT sensor and control board that uses proprietary algorithms to identify when oil degradation has occurred. The result is increased runtime, reduced frequency of oil changes, lower operating costs, and lower hazardous waste disposal. The gear drive is also equipped with remote monitoring capabilities, which connects to an online dashboard and enables robust diagnostics and prognostics, resulting in further operating efficiency gains for the customer. A real win. Before turning the call over to Rob, I'd like to share some perspective on the operating environment expected in second quarter. As you may remember, when we set our guidance for this year, we decided to take a more conservative approach, capturing our strong orders and record backlog, but retaining some caution around supply chain constraints and inflation. In short, I'm glad we did, because unfortunately, the operating environment became riskier during the first quarter, related mainly to the situation in Ukraine and to a lesser extent, China's government's COVID containment efforts. The situation we are experiencing in China included a whole city lockdown in Shanghai starting on April first. The local port is open, but logistics around it have been restricted. For Regal, a couple of our facilities were impacted, but were able to resume partial production earlier this week and should be fully operational in May. However, we continue to confront challenges related to a number of our suppliers not being fully operational. Fortunately, all of our associates in the region are safe, and notably, vaccination rates among our team in China are nearly 100%. As a result of the lockdowns, our sales have seen a modest negative impact to start second quarter. However, net of expected catch-up activity and assuming current plans for relaxing recent government COVID containment protocols, we believe the ultimate net impact will be minimal for Regal Rexnord. Turning to Ukraine, I think it goes without saying that this situation is both horrifying and saddening, and our thoughts and prayers are with the people of Ukraine. From a business perspective, Regal Rexnord has very little exposure to either Russia or Ukraine. That said, the macroeconomic ripple effects of the crisis are just starting to be felt, but likely raise risk to the macro outlook in Europe and perhaps more broadly. I'm not going to speculate, but rest assured that we are monitoring the situation closely and will remain focused on what's under our control. Keeping our associates safe, executing our M&A synergy plans, continuing to pursue our numerous growth and margin expansion initiatives, and remaining balanced when it comes to capital deployment. With that, I'll turn the call over to Rob to take you through our first quarter performance in more detail. Thanks, Louis, and good morning, everyone. As you heard, Regal Rexnord had very strong results in Q1, despite having to navigate a number of persistent headwinds. I'd also like to send my thanks to our global team for executing with discipline in this challenging environment. Now let's turn to our first quarter segment financial performance. Starting with our Motion Control Solutions segment or MCS, organic sales in the first quarter were up 9.9% from the prior year. The result reflects broad-based growth, but with particular strength in the general industrial, forestry, and agriculture end markets, partially offset by lapping prior year large project activity in the wind and helicopter aerospace markets. As in recent quarters, supply chain disruptions continued to impact our ability to deliver, resulting in increased backlog and posing a headwind to the top line. This theme of supply chain related backlog build can be said of all of our segments. Adjusted EBITDA margin for the quarter for MCS was 24.8%. Down 140 basis points compared to the prior year, factoring in commodity inflation, higher freight costs, updated corporate cost allocations and FX headwinds, largely offset by tailwinds related to favorable price realization, merger synergies, restructuring actions, higher volumes, and mix. These results were in line with our expectations, and we remain on track to deliver the targets we set when we announced this transformative merger. Orders in MCS for the quarter were up approximately 7% and are tracking slightly down in April, due primarily to some of the lumpiness resulting from a few large project orders in the prior year month, both on a daily basis. Turning to Climate Solutions. Organic sales in the first quarter were up 14.9% from the prior year. The increase was driven by broad-based strength, but particularly in North America residential HVAC, in EMEA, and in North America General Industrial. The business also continued to achieve nice market share gains in the quarter. The adjusted EBITDA margin in the quarter for climate was 21.1%, down 20 basis points versus the prior year period. Factors impacting this margin include commodity inflation, higher freight costs, and supply chain-related frictions, largely offset by price realization, restructuring savings, and positive mix. Orders in climate for the quarter were up approximately 11% and are down modestly in April, which we see as timing related, and we fully expect to move back to at least neutral within the next few weeks, despite tough order comps based on our customers' forecasts. Turning to Commercial Systems. Organic sales in the first quarter were up 24.8% from the prior year. Growth in the quarter reflects strong performance in North America General Industrial, pool pump, and large commercial HVAC. Our commercial business also continues to achieve meaningful share gains in the North America general industrial market, tied to some of our digital investments. The adjusted EBITDA margin in the first quarter for Commercial Systems was 21.1%, up 510 basis points compared to the prior year, reflecting favorable price realization, positive mix, and volume growth, partially offset by commodity, freight, and other non-material inflation, in addition to costs associated with supply chain disruptions. While performance was strong in the Commercial Systems segment during the quarter and the team is executing extremely well, a portion of the strong EBITDA margin performance was related to the annual inventory revaluation at the beginning of this year and the timing of the associated inventory movements. We expect the segment's EBITDA margins to return to more normal levels in a range of roughly 15%-17% through the remainder of the year as the inventory included in the annual revaluation is sold. Shifting to orders. Segment orders for the first quarter were up 11%, and April is tracking roughly flat, which is also consistent with our Q2 expectation. In Industrial Systems, organic sales in the first quarter were up 7.1% versus the prior year. Principal drivers include strength in America's general industrial markets, partially offset by weakness in Asia. The adjusted EBITDA margin in the quarter for industrial was 8.4% as we continue to improve the operational performance of this segment. Orders in industrial for the quarter were up approximately 16% and are tracking at a similar rate in April, both on a daily basis. On the following slide, we highlight some key financial metrics for your review. A couple notable highlights. First, on the right side of this page, you'll see that we ended the quarter with a net debt to EBITDA ratio of 1.7x or 1.5x on a pro forma basis. Second, our free cash flow in the quarter was negative $19.3 million. While we historically see a slow start to free cash flow at the beginning of the year, these results were slightly below our expectations. The supply chain headwinds impacted our inventory balances at quarter end a bit more than initially expected. We see this as timing related and fully expect to achieve at least a 100% free cash flow conversion rate for the year. Finally, we spent $114 million on purchasing our shares in the first quarter and now have $320 million remaining on our share purchase authorization. Moving to the outlook. We are raising our expectation for adjusted earnings per share to a range of $10.10-$10.70 from our prior range of $10-$10.60. The range continues to assume a mid- to high single-digit revenue growth rate. Now before we go to questions, I'd like to touch briefly on our decision to align our inventory accounting approach from LIFO or last in, first out to the FIFO or first in, first out method. As of January 1, 2022, the company had just under 50% of its inventory, all in the U.S., accounted for under the LIFO method and the remaining 50% under FIFO. Aligning the enterprise on one methodology provides for better consistency, resulting in improved comparability across segments, regions, and business units. Making this adjustment now at the start of the first full year following the recent merger with Rexnord PMC and the acquisition of Arrowhead Systems also makes sense. In addition to the consistency and improved comparability benefits, FIFO allows for better matching of cost of goods sold to revenues in a given period, and it reduces the administrative burden of determining LIFO equivalent valuations. From a guidance perspective, this accounting change has only a negligible impact because we had not anticipated any additional LIFO related expense in our 2022 outlook to begin with. The cash tax implications resulting from this change should not impact our ability to achieve our targeted 100% annual free cash flow conversion. We've included a table in the appendix of this presentation to reconcile the moderate impact of this change on our P&L. I will wrap up this call by saying that we are very pleased with the Q1 results and our team's ability to execute in an extremely challenging environment. We are meeting all of our expectations with the merger as well as the newly acquired Arrowhead business, and our outlook remains very positive considering we are still in the early stages of our continued transformation. With that, operator, we are now ready to take questions. Hey, thank you, sir. We will now begin the question and answer session. To ask a question, you may press star then one on a touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. Again, it is star then one to ask a question. At this time, we will just pause momentarily to assemble our roster. The first question we have will come from Mike Halloran of Baird. Please go ahead. Hey, good morning, everyone. Morning. Morning. You know, industrial orders up. Sounds like the rest of them were closer to flattish cumulatively, but you also have a pretty robust backlog. You know, maybe talk about the relationship you see between the orders and the backlog as you work through the year here. Obviously, some level of slowing in orders was inevitable given how the backlog has materialized. You know, maybe put that in context of how you're thinking about the revenue growth, the underlying demand, and how this matching or mismatching materializes as you move forward, if that question makes sense. Yeah, completely, Mike. I will clarify a couple of things, though. Orders were up 10% in Q1. It was actually. Sorry. Yeah. Sorry, Louis, I apologize. I meant in April. I apologize what that was. Okay. Yeah. Yeah. I apologize. No, that's okay. I will make a point, though, you know, when you think about some of the businesses and you look at the compares year-over-year, for example, April last year, orders were up 100% for our climate business, and the compares are a little bit tough. Nevertheless, you're right. We've built a pretty strong backlog. Our backlog is roughly up 30% year-over-year in Q1. If you looked at it, at ending backlog, end of the year was actually up 60% year-over-year. You know, the backlog is quite healthy and strong. We are not anticipating a significant reduction in backlog through this year in our current guidance. That's a conservative approach, bluntly. It's all around the supply chain and the murkiness and volatility that we see. We still believe that there's strong demand in most of our markets served. From that perspective, you know, we're feeling pretty good about the opportunity for this year and the progression through the year, and the backlog will certainly support it. Does that help, Mike? Yeah. No, no, that does. The follow-up, I suppose, is when you think about the order patterns from a customer perspective, do you get a sense that there was a pull forward of some of these orders, and so inevitably you get maybe an order air pocket, but that's already assumed in backlog? Maybe just a discussion on inventory levels and purchasing patterns at your customer level. Great question. You know, as lead times have extended, the ERP systems of our customers ramp up their minimum order quantities and demand requirements. Really no different than what we're dealing with our supply chain as well. As our supply chain lead times have increased, we've certainly ramped up our needs as well. I think there's some of that. When we think about Q2 as an example, we're forecasting orders in Q2 to be relatively flat compared to last year. Now, from a full year perspective, we do expect orders to be up year-over-year, but Q2 we expect them to be relatively flat. Yes, I absolutely believe, because of the supply chain challenges that our customers have, and the longer lead times, our customers have placed a bit stronger demand on us to satisfy those requirements. That makes a lot of sense. Appreciate it. Sure. Next, we have Jeff Hammond of KeyBanc. Hey, good morning, guys. Morning. Morning, Jeff. Maybe just back on the kind of order movement. I think you mentioned, Louis, you know, some markets still feel very good, and maybe there's just some timing and some, you know, maybe some pockets where you're seeing real slowing. Just maybe talk about where you think there's real demand risk versus just some, you know, comp noise or supply chain noise. I would tell you, Jeff, it's already embedded in our guidance, but wind is a market that we've seen soften, mostly because of larger projects last year and the compares. We are seeing some softening in China, moderating certainly concerns around COVID lockdowns. Then we have concerns around EMEA as well. We haven't really seen that in a demand or order slowdown bluntly. We did initially, but that rebounded through the quarter at our European operations and businesses. That's a concern for us. Otherwise, everything is quite strong and positive. We feel good, part of the reason why we raised our guidance slightly, because we feel good that the demand is still there, and there's still strength in that demand. Really, from a market perspective, other than wind and a little bit in China, we think the overall demand is still healthy. Okay, very helpful. Just in MCS, you know, Rob, I think you mentioned some corporate allocation. I'm just wondering what the core incremental margins were in MCS, and if there was a synergy number, you know, that you were able to give us in 1Q and kind of how that builds through the year. Sure. The incrementals in MCS were a little below what we might normally see in that business due to some of the, as I said, the inflation that we're seeing that hit that business, the freight inflation and other inflation. It's a little bit lower than what we might expect, you know, you know, we expect that business to perform above 30%. Then the second half of the question was around the. The synergy. Synergy that we saw in the first quarter. We saw about $8 million-$10 million of synergies that came through in the quarter, which is really absolutely in line with what we thought, even tracking slightly ahead, if you will, in terms of the synergy realization. Okay, how do you see that building? I mean, I guess. On the point of kinda, you know, the temporary price cost dynamics, freight, you know, and then the build in synergies, like just trying to get a better sense of kind of how the margins, you know, kind of trend through the years, is this the low point, you know, et cetera. Let me give you some color on that. The margins in MCS, the expectations there are that the margins will continue to improve every quarter as we go through the year. That is absolutely tied to the performance that we're talking about on the synergies and realizing those synergies. As we said, we have good visibility and are very confident in our ability to achieve the $70 million exit rate as we come out of this first year. Okay. Appreciate it, guys. Great. Thanks, Jeff. Next, we have Nigel Coe of Wolfe Research. Thanks. Good morning, everyone. Morning, Nigel. Morning, guys. Going back to the orders, I mean, you've got really impossible comps coming up. I wanna just focus more on the book-to-bill. I mean, you talked about the backlog build during one Q, very healthy. What about April? Even though you had down orders, are you still building backlog in April? Yeah, we're not anticipating to build further backlog in April. Our book-to-bill was, I don't have the numbers exactly right in front of me, Nigel, but it was about 1.1 in first quarter, and it should be relatively flat one for second quarter. Okay. Thanks. That's helpful. Then just going back to FIFO, the commercial margins. It sounds like this was maybe a consequence of this change from LIFO to FIFO, the flush through on the commercial margins. Number one, is that correct? Then secondly, any way to think about what the benefit would have been intra-quarter for One Q from that change? Thank you for the question. Let me be very clear. The first quarter commercial margin was more around the benefit of the annual inventory revaluation relative to the timing of the inventory movements that were included in the reval. When you do your cost roll, the assumption is that there's you know, the theory is that there's perfect timing with the with the turns of your inventory. When there's a bit of a timing difference, which is what happened in commercial, you will see that that flows through at a higher rate. In other words, not as much inventory flowed through in the quarter that was assumed when we did the revaluation. It isn't related to the change from LIFO to FIFO. Now, the When you said your second part of that question was, well, what about the impact of that change to the business? An immaterial amount. The impact to Q1 would have been very immaterial, but it is not the reason for the commercial margin improvement. We estimate that impact in commercial was approximately $10 million. If you were to look at it that way, and you were to back out that $10 million from that number, you'd see the margins in commercial are closer to about 17%, relative to the 21% that was posted. Yeah, Nigel, I'm gonna follow on here because when you look at Commercial Systems, you probably recall that I've said a number of times, our Commercial Systems business is a diamond in the rough, and we are starting to see some of those benefits. The fact that even when you think about the business when you pull out the cost roll-off, and it's about 17%-18% EBITDA margins in the quarter, that's solid. They were hitting on all cylinders. They've got good strength in new products. Our digital customer capabilities to grow share have improved, and our service levels are allowing us to slightly beat our competitors and win more. Commercial had a very strong quarter. Now, you know, as Rob said, we think that will moderate slightly, and our belief is that the EBITDA margins will return to about a 15%-17% range for the remainder of the year. Q1 was a strong quarter for our Commercial Systems business. I couldn't be more proud of that team. Yeah. 15%- 17% is still very healthy. Okay, Louis. Thank you. Thank you very much. Sure. Next, we have Christopher Glynn of Oppenheimer. Thank you. Good morning. Morning. Curious in MCS, if you think about the Rexnord piece here, they've got a nice aerospace business. I think it's OE-centric, so you know, little bit of a delay versus the aftermarket cycle. But how's that looking for you know, ramp intensity as you move through the quarters this year? And what effect might that have on MCS EBITDA margins relative to the first quarter? You know, maybe a bit similar to how you talked about commercial subsequent to 1Q. Yeah. We do have a solid, strong aerospace business. You know, pre-COVID, it's about $250 million in revenue. That's about $50 million from the legacy Regal and $200 million from Rexnord. That business has been rebounding, strong orders growth. We expect revenue to continue to grow through the year. I would tell you the margins in that business are not quite at our fleet average, and so we're working those, and we see a clear path to get those to our fleet average. More of the benefit of the MCS EBITDA improvement is gonna come from the synergy, and we see a step function every quarter as the quarters progress this year. Again, more from synergy benefit than from aerospace. Great. Thanks. Overall, just going back to the FIFO change. As product expenses and inflation push a little higher, how should we think of that impact? Do you expect to maintain price cost positive every quarter this year, like for the last five plus? Yeah. Short answer on that one is absolutely. We have great confidence in our team's ability to implement price increases on our non-contracted business, effectively to cover off on inflation. Our two way material price formula as well, there is often a bit of a lag. We're very confident that those will catch up, but we think we will be price cost positive every quarter this year. Chris, it's actually been 18 quarters that we've been price cost positive, and I couldn't agree with Rob more. The way we manage our business, our cadence, our 80/20 approach, we will manage through the inflationary period, which we do expect, but we will be price cost positive. Great. Appreciate the color. Thanks. Sure. The next question we have will come from Julian Mitchell of Barclays. Hi. Good morning. Good morning. Morning. Maybe just the first question around you know what you're seeing and sort of expecting in the U.S. consumer or resi-facing businesses. You did not call those out as an area of concern. It's clearly something investors though are extremely concerned about right now. Maybe help us understand kind of how you see those resi orders in Climate playing out this quarter, and also sort of expectations around the pool segment within Commercial. Just sort of you know how you're assessing kind of sell-through, sell-in dynamics in that U.S. resi market. Yeah. Great, Julian. I'll take that here. First of all, we think the underlying end market demand remains incredibly healthy. We had anticipated a slower order growth rate in climate, mostly due to very tough comps. In my earlier comments, I had shared that, remember that orders were up 100% year-over-year in April. Our climate backlog is up 20% year-over-year at the end of first quarter, and was up 60% year-over-year at the end of last year. Our backlog is very healthy. Again, we think the underlying demand is healthy. We also believe that there's a restock opportunity that remains because of the supply chain constraints. We work with our OEMs very closely. We understand their WIP inventories and the simple fact that we haven't been able to supply, especially the variable speed motors to the extent that they would consume them. Given that strong residential new construction, the fact that we believe we are gaining share as well, especially in the variable speed motor space where we can differentiate on technology, but also on our service levels, we're feeling pretty bullish. Longer term work from home, IAQ, the regulatory changes of 2023, there's still tailwinds here that will benefit climate side of our business, certainly in 2022. Specific to pool, you know, I'll remind everyone that pool is only about 3% of our sales. You know, while some inventories are currently high in the channel right now, those are not our inventories. We have validated that. We are close to our distribution channel. We are close to our OEMs. We know that very clearly. You take that and you know, you look at the full DOE regs that went into place the first half of last year, that's a bit of a mix up for us. Just the secular trends that are highly favorable around southern migration, backyard living, millennials entering in the housing market, deurbanization, all of these are benefits. I think you saw in the results of our OEMs and distributors that they're doing well. You add that to our new product development efforts and a new product that we've launched in the last six months that is more compact and more energy efficient than our competitors. We feel there's strong tailwind. Now, again, it's 3% of our business, but we feel a strong tailwind. Thanks. Then just my second question would be sort of any, you know, high level context you could give us around the second quarter expectations. You know, I realize you don't give explicit sort of quarterly financial guidance, but there is a sort of a fast-moving, you know, macro context here. Should we think about second quarter being, you know, sort of sales up slightly sequentially, maybe margins down slightly sequentially? Is that the right kind of framework? Yeah, Julian. Rob here, I'll take that one. You're right. We don't normally give a lot of color on the next quarter, but as you said, considering the volatility in the market, it certainly is a benefit to do that. First of all, we'd say their top line's relatively flat to slightly up, overall, when you're looking at cadence there from first to second. When it comes to margins, you know, overall, EBITDA margins should be relatively flat in the second quarter to the first quarter. Of course, there's a little bit of movement between the segments. We've already commented earlier that we expect Commercial to fall in the range around, you know, 15%-17%, over the next few quarters. That also applies to the second quarter. Industrial, we see that to continue to improve in Q2 and beyond, based on the operational improvements we made in that business. We see Climate relatively flat, relative to the first quarter. As I said earlier, MCS continues to improve at a moderate pace as we go through each quarter throughout the year. When we create our forecast, at this point, we're looking at the supply chain, the issues around supply chain, those challenges in particular. Our assumption is that stays relatively constant with the way it is today. We're also expecting that China actually recovers a little bit in May. You know, it could be a little better than what I just described. It could be a little bit worse than what I just described. I think that's pretty much middle of the fairway and the way we're thinking about it right now. Very helpful. Thank you. Great. The next question we have will come from Chris Dankert of Loop Capital. Hey, thanks for taking the question. Hey, Chris. I guess zooming out a little bit to a higher level here, you know, a couple of years back, we'd highlighted, you know, some of the product rationalization efforts and some targets there. I guess any kind of update, you know, as specific as you wanna get by segment or kind of overall just on how far we are along down that path on product rationalization here? Yeah. Good question, Chris. I'd say, you know, different by different segments. Climate Solutions in really good, solid position, probably not much more to do. Commercial Systems is still working through and really driving 80/20 and thinking, you know, as we've talked previously, Regal is a formation of a number of different motor companies and then rationalizing the SKU levels there. I'd say we're probably halfway. That's slightly above that. You know, Industrial Systems will continue to work pruning and managing our SKU count and to drive to higher margins. That's a big part of our 80/20 initiatives there. Lastly, MCS. You know, the nice part about MCS of bringing these two strong businesses together is product line simplification in a number of spaces. We just reviewed something the other day that we'll be able to take more than 50% of our SKUs out of a product line and see over time $10 million of incremental savings that we haven't even baked into our plans yet. There's opportunity still out there. What you can be assured of Regal Rexnord is that we drive 80/20, and we will constantly evaluate segments, reevaluate to understand how best to service our highly valued customers, but also to move more and more of our products to A products. I'm not giving you exact numbers here, Chris, but that I'd tell you there's still plenty of self-help that we have here. No, that's a really helpful update. Thank you so much for kind of walking through that. I guess the follow-up I'd have here is, you know, thinking about, you know, footprint consolidation specifically for industrial. I think the historical plan was, "Hey, let's cut out about eight locations there." If I look back at the filings you guys have, we haven't made a lot of progress there, or maybe, I mean, actually any technically. Am I misreading something in the filings? Have we been seeing closures there? Is it a matter of supply chain slowing down some of that footprint consolidation? Just any comments on industrial specifically and kind of how the square footage rationalization is progressing here. I'm not sure where the eight number's coming from. Since I've been at Regal Rexnord, and it's been three years now, that has never been a big part of our plans. The big part of our plans was much of our production was coming out of China, and we needed to have a regional capability, and that was the establishment of our MGM facility now in Monterrey. What we did do there is we took two facilities, and we consolidated into one and expanded that facility. There is perhaps one more footprint consolidation in time, but I don't think there's a lot more footprint rationalization in industrial. More of the effort has been placed on starting up that Monterrey facility, and I couldn't be more pleased with the production and the output of that facility today, and improving the supply chain. The supply chain is long in our industrial business, and we've been rationalizing that significantly over the last two years, meaning getting our suppliers closer to our manufacturing facility. Beyond that, hopefully that answers it. Again, like I said, I don't know where that eight site rationalization is coming from. Sorry about that. Yeah. No, no worries. I'll follow up a little bit offline, but thanks so much for the color. Again, congrats on a really nice start to the year here. Yeah. Thank you very much. Again, as a reminder, if you'd like to participate in today's Q&A, please press star then one on your touchtone phone. Again, that's star then one to ask a question. Next, we have Walt Liptak of Seaport Research Partners. Hey, good morning, guys. I'll chime in with a congratulations to a strong start too. Thanks, Walt. Wanted to ask first about the pricing strategy. In the first quarter, you know, of the organic revenue growth, can you give us an idea of how much was unit volume growth versus selling price increases? Sure. The growth in the first quarter was primarily, you know, the market and price. Now price made up the majority of the organic growth that we're seeing and what we communicated during the call. Okay, great. Okay, perfect. The inventory levels you had, the nice build in the quarter, you know, to protect against uncertainty. Are you expecting inventories will come down later in the year or will you continue to build them or keep them at this level? We absolutely expect inventory levels to come down at the end of the year. Actually, in the second half of the year, we do expect that inventory will be a source of cash as we exit this year and it will be a good, strong contributor to our free cash flow conversion and our operating cash flow. Okay, great. Excuse me, of the $70 million in synergies, can you give us an update just on how much are you into that to getting to that $70 million target? You mentioned the $8 million-$10 million so far that you got in the first quarter. You know, where are we in that journey to the $70 million? Yeah, I mean, we have a very clear path. We've been able to get after the general administrative indirect and footprint related synergies a bit faster than expected, so feel really good about that. A little bit of uncertainty around the cadence of sourcing savings, so maybe a little behind on direct material, but overall, ahead of our objectives. Like Rob said, $8 million-$10 million first quarter, and that will improve as the year progresses, which will, of course, help the EBITDA margin improvement in MCS. We have a clear path to be at the $70 million run rate by the end of the year, if not maybe a little bit stronger than that. Okay, great. Okay, thanks for the color on that. Sure. Thanks, Walt. Well, sir, no additional questions at this time. We'll go ahead and conclude our question and answer session. I would now like to turn the conference call back over to Mr. Louis Pinkham, CEO, for any closing remarks. Sir? Great. Thanks, operator, and thanks to our investors and analysts for joining us today. As I look ahead to the remainder of 2022, despite the many challenges we are facing, what keeps me excited is the sizable opportunity for value creation that is under our control. From our new product development pipelines and our outgrowth initiatives to ongoing restructuring actions to sizable merger synergies to a tremendous opportunity tied to capital deployment, I am confident that the best days for Regal Rexnord for our customers, our shareholders, and our associates remain firmly ahead of us. Thank you again for joining us today, and thank you for your interest in Regal Rexnord. Have a good day. We thank you also, sir, to yourself and to the rest of the management team for your time. Again, the conference call has now concluded. At this time, you may disconnect your lines. Thank you. Take care, and have a blessed day, everyone. Thank you.