Good day, and welcome to the Regal Rexnord second quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please contact our 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 your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Robert Barry, Vice President of Investor Relations. Please go ahead. Great. Thank you, Operator. Good morning and welcome to Regal Rexnord second quarter 2024 earnings conference call. Joining me today are Louis Pinkham, our Chief Executive Officer, and Rob Rehard, our Chief Financial Officer. Before we begin, a note regarding the slide presentation. Due to a minor technical issue at our webcasting firm, those who are viewing our second quarter presentation slides on the webcast will need to manually advance the slides during the presentation versus our typical practice of auto-advancing them on our end. Moving to slide 2, I would like to remind you that during today's call, you may hear forward-looking statements related to our future financial results, plans, and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the SEC, which are available on the regalrexnord.com website. Also, on this slide, we state that we are presenting certain non-GAAP financial measures that we believe are useful to our investors. We have included reconciliations between the non-GAAP financial information and the GAAP equivalent in the press release and in these presentation materials. Turning to slide three, let me briefly review the agenda for today's call. Louis will lead off with his opening comments, an overview of our Q2 performance, and an introduction to our power systems business. Rob Rehard will then present our second quarter financial results in more detail and review our latest 2024 guidance. We will then move to Q&A, after which Louis will have some closing remarks. With that, I'll turn the call over to Louis. Thanks, Rob. Good morning, everyone. Thanks for joining us to discuss our second quarter results, to get an update on our business, and for your continued interest in Regal Rexnord. Our team delivered a strong second quarter with outperformance on nearly every metric, and especially strong margin outperformance at IPS. So before I go any further, I want to thank our 30,000 Regal Rexnord associates for their hard work and disciplined execution, delivering strong second quarter performance while continuing to execute our many longer-term value creation drivers. Turning to our results in more detail, sales in the second quarter were down 7% on an organic basis, excluding industrial systems. As a reminder, we closed on the sale of industrial systems at the end of April, and so it is in our reported financials only for the first month of the quarter. Also recall that due to the timing of the Altra acquisition closing very late in the first quarter of 2023, we pushed 5 days of sales into last year's second quarter, and while immaterial to our annual performance, was a roughly 2-point headwind to growth this quarter. Performance in the quarter continued to be impacted by weak end market demand and destocking in North America residential HVAC, weakness in commercial HVAC outside North America, and pressure in discrete factory automation. Orders in the quarter on a daily basis were down 1.5%, excluding industrial, but up approximately 2%, excluding a large atypical blanket order received in the pool business in the prior year period, which we see as a more relevant performance indicator for Regal. This positive inflection was led by AMC, which saw orders rise 12% versus prior year, followed by IPS orders, which were flat following eight quarters of declines. In July, daily organic orders were up roughly 5%, continuing to build on the momentum we saw in the second quarter. We read this order performance as encouraging signs that all our segments can deliver positive top-line growth in the second half. However, as Rob will elaborate, we now expect this second half ramp to occur at a slightly more gradual pace in the AMC segment versus what was factored into our prior forecast. Despite second quarter top-line pressures, margins in the quarter were strong. Our adjusted gross margin came in at a record 38.1%, excluding industrial. Adjusted EBITDA margin, excluding industrial, was 22.2% and reflects achieving $25 million of synergies in second quarter. We remain on track to achieve $90 million of synergies this year. Lastly, we delivered approximately $136 million of adjusted free cash flow in the quarter. That cash flow, along with proceeds from the industrial systems sale, enabled us to pay down approximately $481 million of gross debt in the quarter, which, combined with our first quarter results, equates to $618 million of debt repayments in the first half. We ended the quarter with net debt to EBITDA leverage at 3.6 times. Nice progress on delivering. We expect that our annual adjusted cash flow this year, plus net proceeds from the industrial systems sale, should enable approximately $900 million of debt pay down in 2024. In summary, a solid quarter of controllable execution by our team. Shifting to the next slide, each quarter I've been introducing one of our principal AMC businesses to help investors better appreciate how we are well-positioned to accelerate profitable growth. This quarter, I will cover power systems. As you can see on the left-hand side of this slide, this is about a $125 million business and has been experiencing very strong growth, posting a 25% compounded annual growth rate over the last three years, in large part due to its primary focus on the data center market, where the rapid adoption of AI, plus ongoing growth in e-commerce, are fueling significant data center expansion. This is a U.S.-weighted business going to market under the Thomson brand. As we lay out on the right side of this slide, our principal products include paralleling switchgear and automatic transfer switches, along with a field services business. Our highly engineered products are used to provide standby and backup power in mission-critical applications, where even the briefest interruption of power supply can be disruptive to end users. Our services business helps our customers ensure 24/7 uptime, creates stickier customer relationships, and benefits Regal by creating a recurring revenue stream. The primary applications presented on the lower right are data centers, which comprise the majority of power system sales, along with smart manufacturing, medical, and critical public infrastructure, in particular, water and wastewater management. Our power systems team is winning in these high-growth markets for reasons we list on the lower left. At the top of the list is deep application expertise. We focus on some of the most complex power management challenges, such as in colocation data centers, where multiple customers each have unique power management needs. Our business is also differentiated by its best-in-class lead times, exceptional quality, and proprietary technology, most notably in our switchgear controllers that enable smooth load transitions and minimal transients required in sensitive applications. We are also investing for growth and see future share gains tied to new products, expanding our services footprint, augmenting our sales organization, and notably building on recent successes with our lean initiatives to scale up our manufacturing capacity, largely in best-value regions. We believe that all of these attributes, along with our growth investments, should translate into at least low double-digit sales growth at enterprise accretive margins over our three-year planning period. In addition, our strong Thompson market position enables pull-through opportunities from our other businesses, including fan filter units, air moving solutions, and other products within the portfolio. This makes power systems a critical component of Regal Rexnord's data center growth strategy. With that, I'll turn the call over to Rob. Thanks, Louis, and good morning, everyone. I'd also like to thank our global team for their hard work and disciplined execution, which delivered results that exceeded our targets for the quarter. As a reminder, we closed the Altra acquisition at the end of first quarter last year. And so, having lapped that one-year anniversary, we no longer need to consider current period operating performance on a pro forma basis when discussing our AMC and IPS segments. Now, let's review our operating performance by segment. Starting with automation and motion control, or AMC, net sales in the second quarter were down 10% to the prior year on an organic basis, which is slightly better performance than we had expected. The results reflect strength in the aerospace, data center, and medical end markets, which was more than offset by lingering weakness at global discrete factory automation OEMs. Notably, our second quarter performance reflects an approximately 6% sequential improvement and growth in all of our divisions outside of factory automation. From a first half perspective, which smooths out some of the lumpiness we see in this segment, pro forma organic sales were down 7.4%. Adjusted EBITDA margin in the quarter was 22.5% and slightly below our expectations on weaker mix. Given the lower volume in discrete factory automation, which generally runs with margins above fleet average for this segment, we see an unfavorable mix impact when these volumes drop. Orders in AMC in the second quarter were up 12% versus prior year on a daily basis, a notable inflection after six quarters of declines. Book-to-bill in second quarter was 1.05. In the quarter, we continued to experience healthy booking rates for longer cycle projects at aerospace, medical, and data center customers, but with the majority of requested delivery dates landing in late 2024 or early 2025. This timing, combined with continued caution and slower capital investment ramp-ups at certain customers in our shorter cycle factory automation and industrial OEM end markets, means that we are now forecasting a more measured pace of recovery for these end markets and, in turn, for AMC overall in 2024. July orders for AMC were up roughly 10% on a daily organic basis, providing further evidence that we are gaining momentum into the second half, but again, with the anticipated pace of recovery tempered versus our prior expectations as delivery dates on these orders are weighted to fourth quarter 2024 or early 2025. I will share more color on how this performance impacts our outlook for AMC later in the call. Turning to industrial powertrain solutions, or IPS, net sales in the second quarter were down 2.8% to the prior year on an organic basis, which was slightly better than our expectation. From a first-half perspective, pro forma organic sales were down 1.9%, but we are gaining momentum here as we move into the third quarter and second half. The results reflect strength in metals and mining and power generation that we believe is driven by stimulus investments and mega projects, net of weakness in agriculture, construction equipment, and general industrial markets. Sales synergies were a tailwind worth a couple points to growth rates in the quarter. Adjusted EBITDA margin in the quarter was 25.8%, above our expectations and up 220 basis points versus prior year. This strong performance reflects better than anticipated mix, as well as continued strong synergy realization, partially offset by headwinds from lower volumes. Orders in IPS on a daily basis were flat in the second quarter, which was great to see after eight quarters of declines. As I mentioned previously, appears to signal momentum going into the second half. Performance reflects particular strength in power gen and marine, net of weakness in agriculture and construction equipment, and broad-based sluggishness across much of general industrial. Book-to-bill in second quarter was 0.97. In July, orders on our daily organic basis were up 3.5%. We are pleased to see an inflection to positive orders growth. This performance not only gives us further confidence in our second half outlook for our IPS, but also provides more evidence that IPS is outperforming its end markets, considering macro indicators such as ISM and certain cautious intra-quarter peer reports that suggest a number of IPS's short-cycle industrial end markets are sluggish. Now, turning to power efficiency solutions, or PES, organic sales in the second quarter were down 10.1% to the prior year on an organic basis, which is ahead of our expectations. In the second quarter, the business continued to be impacted by channel destocking and weaker underlying demand in the North America residential HVAC market, and headwinds in the European and Asia-Pacific commercial HVAC businesses. Commercial HVAC in North America continued to be a bright spot. As we commented when we entered the second quarter, we were cautious in our estimated pace of recovery in residential HVAC, given the persistent headwinds we faced. As we progressed through the second quarter, the timing of demand was slightly better than we anticipated, and we ended the quarter ahead of our expectations. Overall, we are cautiously optimistic that we have now moved past most of the pervasive inventory destocking headwinds we've seen over the past year and a half. The Adjusted EBITDA margin in the quarter for PES was 16.1%, consistent with our expectation, but down from the prior year on lower volumes and weaker mix. We continue to expect the PES margins will be stronger in the back half as volumes improve. Shifting to orders, orders in PES for the second quarter were down 14% on an organic daily basis, but only down 3%, excluding a large blanket order in the pool business booked in the prior year period. The adjusted order decline primarily reflects weakness in commercial HVAC outside North America. Notably, daily orders in the quarter for our legacy North America climate business were up low single digits, and a positive sign of momentum in residential HVAC. While this is encouraging, we believe a portion of the residential HVAC channel continues to have elevated inventories, particularly at certain HVAC distributors, and that underlying volumes in residential HVAC are down slightly. Book-to-bill in the quarter for PES was 1.02. Daily orders in July were up 3% versus prior year, keeping us confident that we are seeing residential HVAC markets improving, but also continuing to reflect some weakness in commercial HVAC outside North America. On the following slide, we highlight some additional financial updates for your reference. Notably, on the right side of this page, you'll see we ended the quarter with total debt of approximately $5.8 billion and net debt of $5.25 billion. We repaid approximately $481 million of gross debt in the quarter, which includes net proceeds from the industrial systems sale. Net debt declined by approximately $465 million. Adjusted free cash flow in the quarter was $136.4 million, and we are on track to deliver $700 million of adjusted free cash flow this year. Consistent with our prior plans, we expect to deploy the majority of this free cash flow to debt reduction. As a result, we are on track to pay down approximately $900 million of our debt in 2024. Now, moving to the outlook, we are making several adjustments to our guidance for 2024, which are detailed in the table on the right-hand side of this slide. Also included in the table is our standard disclosure on below-the-line items with specific indications for what has changed. As a reminder, our enterprise results include the recently sold industrial systems business for the first four months of the year, which equates to approximately $160 million in sales and $13 million in Adjusted EBITDA. We are reducing our sales outlook by approximately $45 million. As we entered the year, we commented that our full-year outlook called for a rebound in both residential HVAC and factory automation. As I've commented today, we are finally seeing the early stages of a rebound in residential HVAC and even saw a bit of demand pull forward in the quarter. However, we now expect a softer second half ramp in our automation and motion control segment. More specifically, as we commented when we reported first quarter, we were seeing a strong surge in funnel activity within certain of our AMC businesses and started to see the longer cycle backlog building into the third and fourth quarters. However, as we move through the second quarter and now early into the third quarter, we are seeing delivery dates on new orders shifting later into 2024 or early 2025. Given that we continue to see strong orders, book-to-bill above one, and growing funnel activity in AMC, we see this as purely timing, but it is having an impact on our current year outlook. Our outlook for Adjusted EBITDA margin is 22.4%, which is roughly a half point below our prior outlook due to the lower sales volumes and slightly weaker mix. Below the line, our latest forecast for interest expense is now $6 million higher, or $376 million, reflecting the impact of upward SOFR rate revisions versus our prior estimate, along with the expected cadence of free cash flow in the year and the associated impact on interest expense. We are also providing our latest expectations for depreciation, amortization, and effective tax rate. The net impacts of these changes reduce the midpoint of our adjusted diluted EPS guidance range by $0.40- $9.60, which was the low end of our prior range. Our new adjusted diluted EPS guidance range for full year 2024 is now $9.40-$9.80, which compares to our prior range of $9.60-$10.40. The changes we are making today are roughly a 4% reduction in EPS and a 2.5% reduction in EBITDA versus the full-year guidance midpoint we provided last quarter. Finally, we continue to expect adjusted free cash flow to be approximately $700 million this year. Once again, we plan to use the majority of this cash to pay down roughly $900 million of our debt by the end of this year. Our ability to maintain our expectation for $700 million of free cash flow this year, despite lower expected EBITDA, is due to updated working capital improvement opportunities our teams are projected to execute in late Q3 and throughout Q4, especially in the area of inventory reductions. On this next slide, we provide more specific expectations for our performance by segment on revenue and Adjusted EBITDA margin for the third quarter and for the full year. Note that the 2024 guided growth rates for AMC and IPS sales are calculated versus 2023 pro forma sales results. Starting with AMC, for third quarter, we expect sales to be approximately $420 million and Adjusted EBITDA margin to be approximately 24%. For the full year, we now expect AMC sales to be down low single digits, a reduction versus our prior expectations of flat, reflecting a softer second half ramp. With that said, we feel good about the longer cycle part of the business, with AMC orders, as stated earlier, of 12% year-over-year in the quarter. We now expect AMC's 2024 Adjusted EBITDA margin to be approximately 24%, the low end of the prior target range, reflecting our weaker volume outlook. Shifting to IPS, for third quarter, we expect sales to be approximately $655 million and Adjusted EBITDA margin to be approximately 26%. For the full year, we continue to expect IPS sales to be roughly flat, showing the momentum that is building in this business tied to healthy sales synergies. We continue to expect IPS's 2024 Adjusted EBITDA margin to be approximately 26%, reflecting nice tailwinds from synergies and overall business performance. Finally, PES. For third quarter, we expect sales to be approximately $455 million and Adjusted EBITDA margin to be approximately 18%. For the full year, we continue to expect sales to decline at a mid-single-digit rate, but we now expect margins to be approximately 16.5%, near the lower end of our prior target range, reflecting weaker mix in the motors businesses. While it is disappointing that we are seeing a slower second half ramp for AMC, I think it's important to consider our results in the broader context of where we're taking Regal Rexnord. A clear path to top quartile 40% gross margins, which our 38% Q2 gross margin reinforces, along with a path to 25% Adjusted EBITDA margins and $1 billion in annual free cash flow. Cash that we expect to enable a dramatic shift in our capital structure from debt to equity over the next couple of years and longer term fund robust inorganic growth, not to mention the many things we are doing to accelerate organic growth. Moving to slide 13, a reminder that telling that growth story will be the primary focus of our upcoming investor day on September 17th in New York City, and we look forward to seeing many of you there. And with that, operator, we are ready to take questions. Yes, thank you. We will now begin the question- and- answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If any time your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble the roster. Today's first question comes from Mike Halloran with Baird. Morning, Mike. So just making sure you could hear me. So I think the first question here is around kind of order dynamics and expectations in the back half of the year. If I hear the order commentary across the segments, it feels at least kind of in line with your thought process exiting the first quarter report, if not better. When you look at the back half of the year from a cadencing perspective, it seems more messaging around deliveries and outlay timing as opposed to a change in the underlying demand thought process. So maybe you could confirm that one way or another and then also talk to the underlying demand process and where you're seeing the bigger puts and takes, if at all, versus what you were seeing, say, a quarter ago? Yeah. So, Mike, good morning and thanks for the question. I think you've summarized it quite well, actually. The orders really met our expectation in Q2. We feel really good about the fact that AMC has turned to positive order growth at about 12%. That IPS feels really solid at relatively flat, but that's after eight quarters of decline. And then PES is starting to gain some momentum, especially seeing now July orders of PES at roughly 3. And then again for AMC, roughly 10 and 3.5 for IPS. So roughly 5 for Regal. So yeah, July feels good as well. But to your question around timing, it really is simply timing. It's not underlying market demand. We are just seeing the orders being placed in our backlog in the latter quarter and then into the first half of next year. When we look at it from a market perspective, it's pretty much playing out as we expected in that residential HVAC is starting to see a rebound. We are also seeing some stabilization of factory automation. Actually, our factory automation business, our orders in Q2 were up 9% year-over-year, and so giving us some confidence in that recovery. And we're seeing some early green shoots, early green shoots in alternative energy, solar, in food and beverage, and so giving us confidence that the second half will show positive growth and that we will move into 2025 with growth as well. Helpful. And then kind of a subset question of that, when you look at the IPS segment, the down mid-single-digit thought process for the year, as I think Rob alluded to in some of the prepared remarks, some of the data points that were coming out from some of the subsegments were a little more challenging. You seem to be outperforming. So maybe talk to the levels of our performance and also, as you think about kind of the growth rates, plus and minuses within certainly some of the more machinery-oriented components of that IPS segment, maybe just talk to the trend trajectory and how you're playing against that kind of trend. Yeah. So great question, Mike, and thanks for the question because we actually think our IPS segment is outperforming market. The business is certainly being impacted by some weak end markets, ag and construction, but strength in marine, power gen, and metals and mining. We also feel really good, though, about our cross-sell synergies and our power train growth initiatives, which is allowing us to outperform the market. Through July of this year, we basically lapped our 2023 cross-selling that we achieved on a full-year basis. Our funnel of potential cross-selling opportunities is up roughly 190% year-over-year, and we feel really good about that progress. And when we run the math, only about 10% of our customers are buying two or more of our product. And just think if they were able to buy more of our product, and certainly if they're buying one in the industrial powertrain, they're likely buying all. And so we feel good about the cross-sell is allowing us to outperform. Rob said in his prepared remarks, roughly a couple of percent, and we believe that's what's strengthening our position. We'll provide quite a bit more detail on this at the investor day, but that's a major driver of the success we're seeing in IPS. Great. Thanks, Louis. Appreciate it. . Yeah. Thanks, Mike. Thank you. And the next question comes from Jeff Hammond with KeyBanc Capital Markets. Hey, good morning, guys. Morning. Morning, Jeff. So just want to focus on PES. I mean, I think what we're hearing from the residential HVAC OEMs is they're seeing volume growth again, destocking's done, and then they're taking last call for 410A And we saw some pretty sporty order rates, I think 30% from one, 100% from another, and probably some noise in there. But it just still seems like your business is lagging, and I'm trying to understand that. And then just maybe speak in general to any share or content shift that you've seen around this refrigerant change. Yeah. So good morning, Jeff. A couple of points I'd comment on. First of all, we actually are very pleased with our position in PES and how they performed in Q2 and slightly above our expectations. But I want to remind you that PES is a business that's only about 25% residential HVAC. And we saw orders in the quarter up low single digit, and we're forecasting sales in third quarter up low single digits. Now, your comments around some of the OEMs calling out much larger orders, it really is going to be dependent upon the transition, or at least that's our expectation, the A2L refrigerant transition. And we are seeing some OEMs deciding to build inventory of old 410A systems ahead of the transition, while others are already opting not to. And so we're going to monitor this closely, but for now, our forecast does not factor any significant pre-build of old systems. Now, with regards to the new systems and our position on those new systems, we're a leader in the variable speed motor market in climate in residential HVAC, and our position is pretty strong across the board there. So no change from that perspective. Now, as you know, over the last five years, we have been moving away from lower-end, lower technology, lower margin motor business, but this just aligns with the strategy we've been taking of providing value-added, margin-positive business for Regal Rexnord. Okay. So it sounds like the lingering weakness is maybe more in that general commercial and rest of world than resi HVAC. Shifting gears, though, to AMC, I'm trying to bridge first half to second half margins to get to your 2024 because it seems like sales are second half to first half maybe flat to slightly down, and yet to hit your margin target, you got to be significantly higher on margins. And it seems like, I guess, discrete is maybe margin mix rich, which is where kind of the lingering weakness is. Yeah. So, Jeff, you're pretty much hit it right on the head. The shift in mix to factory automation and continued ramp-up in especially those very margin-rich businesses within AMC, like the medical business, is really playing into that uptick in margins as you move into the back half, which is contributing to the higher rate as we finish the year. Okay. So discrete automation still gets better in the second half. It's just a slower ramp than you previously thought? Absolutely. It gets better in the second half. I'll just remind a comment I made a second ago, Jeff, that orders were actually up in discrete automation in Q2 about 9%. So we are expecting a stronger second half in factory automation for sure. Okay. Thank you. Sure. You got it. Thanks, Jeff. Thank you. And the next question comes from Julian Mitchell with Barclays. Hi, good morning. Maybe my first question, and thanks for the various guidance points. If we look at sort of the third versus fourth quarter, just trying to understand the sort of degree of ramp there, I think is it fair to say that the sort of third quarter earnings or EPS, based on what you've said, is looking at sort of $250-$260 or so, and then you have that steeper ramp into Q4 based on things like the AMC margin mix tailwind from factory automation. Is that roughly sort of the right seasonality, or maybe just clarify that and if there's anything moving around below the line between Q3 and Q4? Yeah. There really isn't a lot moving below the line between Q3 and Q4 aside from interest expense, which will obviously get a little bit better as you go into the back half of the year or the final quarter of the year in particular. The margin should improve as a result of mix as you go from third to fourth. If you go and you do the math off of the third quarter that we put out along with the full-year guide, you'll see there's maybe 100 basis points of margin improvement as you move from third to fourth. So that's also a contributor there off of higher sales as well. So that's how you get there. That supports the margins that we put in there and the ramp-up in earnings. But aside from interest expense, there is no other below-the-line improvement that we see from third to fourth. I see. And so that sort of 250, 260 number doesn't sound outlandish for Q3. No. I mean, if you go back and work the math, it's about 250 off of what we put out. So you're right on line. That makes sense. Then just a very quick follow-up. Excited to hear more at the investor day in sort of 7 weeks or so. But I suppose as we're thinking about the way the sort of the macros ending up and at the same time the progress on synergies and maybe some green shoots on the top line, just sort of kind of circle it together. Lewis, if we're thinking about the EBITDA margin sort of aspirations medium term, I think you've talked about that 25% or mid-20s EBITDA margin exit rate from next year. Just wondered sort of is that a sort of a moving feast because the top line is proving very choppy. Any thoughts around that, please? Julian, I think it's a little early for us to comment any further than what we've said. We feel really good about our path to 40% gross margins. I think we've proven ourselves as being margin zealots, and so I feel good about that 25% and then continuing to invest in the business. To get to the 40% gross margins, we ended Q2 at 38.1. If you just take the synergies alone over the next year and a half, we get to 40% gross margins, if not a little bit better. And I'll tell you, we'll continue to drive 80/20 and lean until then. So even if there's a little weakness on the top line, so the deleverage and ESNA costs are a little bit higher as a percent, we still feel pretty good about driving to that 25. So we're not ready to say much more than that, but we'll certainly elaborate at investor day. Great. Thank you. Thanks. Thanks, Julian. Thank you. And the next question comes from Nigel Coe with Wolfe Research. Thanks. Good morning, everyone. Morning, Nigel. Thanks for the question. Good morning. So just wanted to ask another boring question on PES. So this step-up from Q2 to Q3, so it's about $30 million-$35 million sales. Obviously, a bit more aggressive than normal seasonality, but we're not in a normal environment. So I'm just wondering the visibility on that and maybe just talk about the dollar orders instead of year-to-year, the dollar orders in the second quarter and maybe in July that supports that lift-up in sales. Yeah. So we're happy to follow up after the call with you specifically on giving you exact dollar orders. Nigel, I don't have it in front of me. But what I can tell you is that, again, second quarter Resi orders were up low single digits, and that's going to drive our third quarter revenue to be up low single digits. As you know, the backlog in this business is only about two months. And so we're very short cycle in PES. And exiting Q2 with a 1.02 book-to-bill also gives us that confidence for a bit of a step-up. Now, from a third quarter perspective, realize that what we're forecasting overall for PES is sales slightly down, and that's driven by the rest of the business still having some pressure, in particular general commercial that I would align heavily to ISM and that we're seeing revenue down mid-single digits. So overall, slightly down in third quarter, but we have confidence with a book-to-bill of 1.02 and with the starting of the rebound in residential HVAC that we have a path to third quarter and fourth quarter for that matter. Okay. That's great. Thanks, Lewis. And then, Rob, you were pretty definitive about the improvement in automation. I think you said absolutely improved. So I'm just wondering, are you talking about kind of the year-to-year deltas against EJCOMPS? Are we talking here about the actual dollar sales relative to the first half of the year? Because the PMI just printed, and it's a very weak ISM. So I'm just wondering if we've got enough kind of hedge for the macro in the back half of the year. Yeah. We feel good about where we've guided relative to what we're seeing. I feel good about the fact that we saw the order rates improving, as Louis mentioned, about 9% in that particular part of the business. And the fact that we've—and so to your question specifically, both sequentially and year-over-year, we're feeling very good about the back half and where we're guiding AMC. Book-to-bill and factory—whoop, Nigel, I'm sorry. Book-to-bill in our factory automation business was over 1.1. It was like 1.13. So we feel we're progressing in the right sequential basis, as Rob said. And then just on the book-to-bill, the July orders, obviously very encouraging year-over-year, but was book-to-bill above 1 in July? Yes. Book-to-bill was slightly over 1. And as I said, there's about 10% on orders. Great. Thanks, guys. Sure. Thanks, Nigel. Thank you. And the next question comes from Ritchie with Goldman Sachs. Hi, guys. This is Joe. How are you doing? Hey, Joe. Good morning. Good morning. So maybe just following up on Nigel's question there. So we're all just trying to kind of double-click into the orders in July in AMC. I think you had—I think you referenced that you expected those to convert to revenues or a portion, at least in the fourth quarter. How much of it is going to convert this year versus what your expectation is for something maybe longer cycle into 2025? You know, Joe, we don't have it cut that way. Our backlog's filling nicely for what we've guided to. We're not expecting any significant lift in orders to be able to achieve the fourth quarter guide. So we're happy to provide more detail going forward, but I think maybe the way to think about it is about a third of those orders will lay into the second half and about 2/3 into 2025. But we're happy to give you more detail in the future. Okay. Yeah. No, that's helpful, Louis. So then I guess the baseline then is we've kind of hit a bottom on revenue for AMC, $420 in the third quarter. We start to improve from there. So I want to make sure that I have that right. And then secondly, I think Jeff touched on the margins earlier. It seems like a pretty material uptick in margins sequentially, not just in 3Q, but also in 4Q. I'm baking in close to 300 basis points. Just is there a way to parse that out into the 4Q margin and what really drives that improvement for 4Q? Let me just take very quickly revenue. So the revenue guide is actually relatively flat sequentially into Q3. And then, yes, a step-up into Q4. We feel confidence with the roughly 10% or 12% of orders up in Q2, the 10% of orders up in July, the more than 1.1 book-to-bill coming out of July, that that is definitely the path that this business is on. With regards to margins. Yeah. And I'll take that side of it. So the margin step-up is absolutely related to mix within this business and the greater mix going into that discrete factory automation, which we've been talking about, as well as a little bit of synergy improvement as we move through the back half of the year. Remember, we said we were going to do $90 million, and we're on track to do that. We did about $25 million in the second quarter and expected to do over $20 million in the third and the remainder in the fourth. And roughly 20% of those synergies also goes into the AMC side of the business. So that's also helping to improve margins as we go through the year. Okay. Thanks, guys. You got it. Thank you. And the next question comes from Christopher Glynn with Oppenheimer. Thank you. Good morning, guys. Morning, Chris. So looking at IPS, holding up well, performing well, but very much kind of two stories, various different markets with ag and construction down significantly. Wondering if you could go into a little bit in terms of the magnitudes on a relative basis of some of the plus-minuses because at some point, things like ag and construction are going to turn. And based on the comparisons, helps us think about what you're seeing there and kind of mix of D stock that's into those magnitudes. Yeah. So, Chris, I don't have it cut into that level of detail, but roughly from our operating reviews, I can tell you that we're seeing ag and construction down high single digit. I think there's a bit of D stock there. I don't think it's a ton of D stock. I think there are demand constraints in those markets. We are seeing marine power gen up high single digits. And that's really a big part of that balance. And then with ISM being below 50 and PMIs in Europe and Asia below 50, the fact that IPS we're calling for relatively flattish, we feel good that our cross-sell activity is helping to bolster the overall business to outperform market. But hopefully, that gives you a little sense of how we're thinking about it by market. Yeah. On the kind of MRO and distribution side, what are you seeing there? Is sell-through pretty aligned, do you think? Yeah. No, no. We do not have an inventory issue on distribution. This is part of the reason this business is a good forecastable business for us. Half of the business is aftermarket MRO, goes through distribution. Half of that, we see the sales in, sales out, and inventory levels of our distributors. Nothing is out of whack right now. So, yeah, it's pretty much aligning with the demand. Great. Then just kind of tuning question on the discrete within AMC, where we've had a lot of discussion. It seems like you're starting to maybe anticipating flattish revenue year-over-year in the fourth quarter for discrete and probably down very hefty double digits on a reported revenue basis in the second quarter. Just want to make sure that understanding of the bridge is correct. We don't have it for just discrete. Discrete automation is roughly 35% of that segment. The overall segment for the full year will be down low single digits is what we're guiding to. So we're expecting a pickup in the second half, and the orders are supporting it from a year-over-year perspective. There's not much more I have prepared on factory automation than that. Maybe the only other thing I would add is I think we're thinking around flat to low single digits in the back half. In the back half for that particular business is about what we've been monitoring and seeing. Thank you. You got it. Thank you. And this does conclude the question and answer session. I would like to return the conference to Mr. Louis Pinkham for any closing comments. Great. Thank you, operator. And thanks to our investors and analysts for joining us today. The performance we delivered over the last five years tells a tremendous story of portfolio transformation, margin expansion, free cash flow acceleration, and laying the groundwork for faster organic growth. The next phase of our journey will be more about leveraging the benefits of our reshaped portfolio to accelerate profitable growth, both organic and in time inorganic. We see so many levers under our control to create significant shareholder value, and we look forward to presenting that story at our investor day scheduled for September 17th in New York City. We hope you will join us. Thank you again for joining us today, and thank you for your interest in Regal Rexnord. Thank you. The conference has now concluded. Thank you for attending today's presentation. We now disconnect.