Core Insights - The company reported Q4 earnings, highlighting a stronger-than-expected recovery in demand, particularly from industrial OEMs [1] - The book-to-bill ratio was reported at 1.06, indicating a robust performance and a positive outlook for future demand [2] Industry Performance - There is notable strength in commercial construction and equipment manufacturing, contributing to the overall recovery in demand [2] - The agricultural sector is showing signs of improvement, with certain components recovering nicely, although the overall situation is described as "less bad" [2] - The On-Highway segment has also been performing better, adding to the positive indicators for the industry [2]

Gates Industrial (NYSE:GTES) FY Conference Summary Company Overview - **Company**: Gates Industrial Corporation - **Industry**: Motion Control Industry Key Points Industry and Economic Outlook - The U.S. industrial economy shows signs of recovery, particularly in the industrial OEM sector, which has exceeded expectations [2][10] - The book-to-bill ratio for Gates was reported at 1.06, indicating strong demand [4] - Recovery is noted in commercial construction equipment and agricultural machinery, with cautious optimism for 2026 [10][12] Demand Drivers - The industrial economy has faced over three years of negative performance, with PMIs being negative for approximately 38 months [12][14] - The recent uptick in demand is attributed to a post-COVID restock and a general recovery in specific end markets [16][20] - The recovery is not characterized as a V-shaped recovery but rather a gradual firming of demand [21] Distributor Insights - Strength from large equipment manufacturers typically translates to smaller OEMs, which are serviced by industrial channel partners [22][24] - A lag is expected in distributor confidence, which usually follows OEM performance by one to two quarters [26][30] Personal Mobility and Data Center Markets - Gates has seen significant growth in personal mobility, with expectations of a 30% compound annual growth rate from 2025 to 2028, targeting $300 million in revenue by 2028 [42][44] - The data center market is projected to be a $2 billion opportunity by 2028, with a focus on liquid cooling applications [44][48] Automotive Sector - Automotive OE exposure has decreased to about 8% of revenue from 15% in 2018, with a strategy of selective participation in profitable segments [50][56] - The automotive aftermarket is expected to grow at GDP plus rates, supported by an aging car fleet [62][70] Operational Efficiency and Cost Management - The European ERP rollout is progressing well, with orders being processed and manufacturing operations stabilizing [75][78] - There will be some efficiency headwinds for about one to one and a half quarters due to the ERP implementation [81][83] - The company is focused on optimizing its manufacturing footprint, with completion expected in the second to third quarter of 2026 [91][92] Financial Performance and Guidance - The company anticipates a level-loaded year in 2026, with organic growth projected at 2.5% [109][118] - EBITDA margins are expected to be around 23.5% by the end of the year, with improvements from footprint realignment [113][115] - Incremental margins are projected to be 45%-50% in the first 12 months post-implementation of operational changes [120][123] Capital Deployment and M&A Strategy - Gates has reduced leverage to 1.8 times and has over $800 million in cash on the balance sheet [130][132] - The company plans to focus on share buybacks due to the stock being undervalued, while remaining disciplined in M&A activities [133][134] Market Sentiment - Current ownership is around 65%, with a positive bias towards the company despite low ownership levels [136] This summary encapsulates the key insights and projections discussed during the Gates Industrial FY Conference, highlighting the company's strategic focus on recovery, operational efficiency, and market opportunities.

Core Viewpoint - The company is experiencing growth in several major markets, indicating potential for stronger performance in 2026, despite a conservative forecast of 1% to 4% organic growth [1][2]. Group 1: Market Performance - Four out of seven major markets are showing growth, with personal mobility and data centers being significant drivers [1]. - Only one market is experiencing a modest decline, suggesting overall positive market sentiment [1]. Group 2: Historical Context - The last couple of years (2024 and 2025) saw initial positive trends in PMI and shifting sentiment, but these were followed by challenges that hindered sustained growth [2].

Gates Industrial (NYSE:GTES) 2026 Conference Summary Company Overview - **Company**: Gates Industrial Corporation - **Ticker**: NYSE:GTES - **Conference Date**: February 18, 2026 Key Industry Insights - **Market Performance**: Four out of seven major markets are experiencing growth, with personal mobility and data centers being significant drivers [1][4] - **Growth Forecast**: The company anticipates organic growth of 1%-4% for 2026, despite a more positive outlook compared to previous years [2][4] - **Industrial OEM Trends**: There is a noted improvement in order trends from industrial OEMs, particularly in commercial construction and agricultural equipment [4][11] Financial Performance - **EBITDA Margin Guidance**: The company expects to exit 2026 with an adjusted EBITDA margin of approximately 24%, with a target of 24.5% for 2027 [27][28] - **Cash Flow**: Forecasting over 90% free cash flow conversion in 2026, supported by significant investments in CapEx and restructuring [136][139] - **Leverage**: Ended 2025 with a net leverage ratio of 1.85, the lowest since going public, providing flexibility for capital allocation [139] Growth Drivers - **Personal Mobility**: This segment is projected to grow from approximately $140 million to $300 million by 2028, with a compound annual growth rate of 20%-30% [22][69] - **Data Centers**: Anticipated revenue growth in the data center segment, with a target of $100 million-$200 million by 2028, driven by liquid cooling adoption [97][98] - **Automotive Aftermarket**: The aging car fleet is expected to support continued growth in this segment, with the company aiming to outperform GDP growth [108][111] Regional Performance - **Europe**: Strong growth in personal mobility (75% growth rate) and recovery in industrial businesses, particularly in agriculture and commercial construction [56][60] - **China**: The company has gained significant market share in the automotive aftermarket, with a diversified portfolio contributing to strong performance [62] Strategic Initiatives - **ERP Implementation**: The transition to a new ERP system in Europe is expected to improve operational efficiency, despite initial drag on margins [63][65] - **Cost Optimization Programs**: Initiatives aimed at material cost savings and footprint optimization are expected to contribute positively to margins in the coming years [35][36] Market Outlook - **Industrial Production**: The company is closely monitoring PMI indicators, with expectations of improvement in diversified industrial markets [118][121] - **Auto OEM Participation**: The company plans to maintain selective participation in the auto OEM segment while focusing on industrial growth [126][132] Conclusion - **Long-term Vision**: The company expresses optimism about future growth opportunities, driven by innovation and adaptation of core technologies across various applications [144][155]

Mallard added that Gates ended the year with “over $800 million of cash” and said S&P upgraded the company’s credit rating in December to BB from BB- with a stable outlook. He also cited return on invested capital of 23.4% at year-end.Management also pointed to balance sheet progress and shareholder returns. Jurek said net leverage ended 2025 at 1.85x, down from the prior year, and noted the company was “aggressive” with share repurchases in the fourth quarter, buying back more than $100 million at what he ...

Financial Performance - Net sales for Fiscal 2025 were $3,443.2 million, an increase of 1.0% or $35.0 million compared to $3,408.2 million in Fiscal 2024[195] - Gross profit for Fiscal 2025 was $1,371.7 million, compared to $1,358.5 million in Fiscal 2024, indicating a slight improvement[195] - Net income from continuing operations increased to $277.1 million in Fiscal 2025, up from $220.5 million in Fiscal 2024[195] - Adjusted EBITDA for the year ended December 31, 2025, was reported at $770.1 million, compared to $761.1 million in 2024 and $747 million in 2023[250] - Core sales for the same period were $3,433.0 million, reflecting a core sales increase of 0.7%[252] Cost and Expenses - Cost of sales increased by 1.1% to $2,071.5 million in Fiscal 2025 from $2,049.7 million in the prior year, reflecting a rise of $21.8 million[197] - Selling, general and administrative expenses decreased slightly to $876.1 million in Fiscal 2025 from $876.5 million in the prior year[198] - Restructuring expenses in Fiscal 2025 totaled $26.3 million, significantly higher than $6.5 million in Fiscal 2024, reflecting a global cost reduction effort[200] Segment Performance - In Fiscal 2025, net sales in the Power Transmission segment increased by 1.9% to $2,147.1 million, driven by a $36.7 million benefit from pricing and favorable currency exchange rates[215] - Fluid Power segment net sales decreased by 0.3% to $1,296.1 million, primarily due to lower volumes of $30.7 million, despite a $28.6 million benefit from pricing[218] - Adjusted EBITDA for the Power Transmission segment rose by 2.3% to $479.6 million, resulting in an Adjusted EBITDA margin of 22.3%[217] - Adjusted EBITDA for the Fluid Power segment decreased by 0.6% to $290.5 million, with an Adjusted EBITDA margin of 22.4%[220] Cash Flow and Investments - Cash provided by operating activities increased to $478.1 million in Fiscal 2025, up from $379.6 million in the prior year, driven by a $56.4 million increase in net income[225] - Net cash used in investing activities rose to $119.0 million, primarily due to increased capital expenditures of $7.2 million[226] - Net cash used in financing activities decreased to $251.1 million, driven by a reduction in share repurchases by $56.8 million[227] Debt and Liquidity - Long-term debt as of December 31, 2025, was $2,232.5 million, a decrease from $2,350.6 million as of December 28, 2024[229] - The company anticipates no material long-term deterioration in its liquidity position and believes it has adequate resources for the next twelve months[224] - The company increased its borrowing capacity under the revolving credit facility from $250 million to $500 million, with a maturity extension to June 4, 2029[236] - Total committed borrowing headroom as of December 31, 2025, was $471 million, alongside cash balances of $812.1 million[239] Tax and Interest - The effective tax rate for Fiscal 2025 was 18.5%, significantly lower than 32.8% in Fiscal 2024, driven by a $21.9 million benefit on net book-tax differences[206][207] - Interest expense decreased by $18.5 million to $125.9 million in Fiscal 2025, primarily due to lower interest rates on floating rate Dollar Term Loans[203] Credit Risk and Ratings - Two customers accounted for 13.7% and 8.4% of total trade accounts receivable as of December 31, 2025, indicating a concentration of credit risk[297] - The company has established long-term credit ratings of Ba3 Stable with Moody's and BB Stable with Standard & Poor's[291] Currency and Hedges - The impact of currency rate movements on net sales was a negative $10.2 million for the year ended December 31, 2025[252] - The company expanded its net investment hedge capacity by entering into cross currency swaps and foreign exchange forward contracts with a gross notional value of $820.0 million[286] Compliance and Impairments - The company maintained compliance with its financial covenants and had no borrowings on the revolving credit facility during the reporting periods[254] - The fair value of the Power Transmission and Fluid Power reporting units exceeded their carrying values, resulting in no goodwill impairments recognized during Fiscal 2025[268]

Financial Data and Key Metrics Changes - Gates Corporation achieved nearly 1% core growth in 2025, with record adjusted EBITDA dollars and adjusted EPS growing 9% to a record $1.52 [6][8] - The net leverage ratio improved to 1.85x at year-end 2025, a decrease of almost 0.4 turns compared to the previous year [6][16] - Free cash flow conversion was 238% of adjusted net income for Q4, bringing the full-year 2025 conversion to 92% [15][16] Business Line Data and Key Metrics Changes - In the Power Transmission segment, revenues were $537 million with flat core growth; Personal Mobility business grew 28% year-over-year [11] - Fluid Power segment sales were $320 million with approximately 1% core growth, driven by low double-digit growth in Off-Highway markets [11] - OEM sales expanded approximately 4%, while aftermarket sales declined about 1% [10] Market Data and Key Metrics Changes - North America core sales decreased about 2.5% in Q4, influenced by distributor inventory management [12] - EMEA core sales grew 5.8% in Q4, with double-digit growth in industrial markets [14] - South America core sales grew slightly, driven by commercial on-highway and agriculture [15] Company Strategy and Development Direction - The company is focused on strategic revenue initiatives to generate market outgrowth and is optimistic about 2026 top-line potential [23][24] - Investments are being made in personal mobility and data center markets, with expectations for significant growth in these areas [24] - The company plans to pursue logical and non-transformational M&A opportunities to enhance its portfolio [56] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about an industrial demand recovery entering 2026, with improving order trends [7][22] - The company anticipates core sales growth of 1%-4% in 2026, with adjusted EBITDA guidance of $775 million-$835 million [17] - Management noted that the first quarter will face headwinds due to fewer business days and ERP transition costs, but expects recovery in subsequent quarters [20][40] Other Important Information - The company repurchased over $100 million of its shares in Q4 at an attractive valuation [7] - S&P upgraded the company's credit rating to double B from double B minus with a stable outlook [16] Q&A Session Summary Question: Can you provide more detail on the book-to-bill ratio and order acceleration? - Management noted positive order trends exiting 2025, particularly in the industrial OEM segment, indicating a strong recovery [30] Question: What impacted the Adjusted EBITDA margin in Q4? - Management indicated that production output was managed to optimize working capital, which affected margins [34] Question: What are the expectations for organic growth in Q2? - Management expects organic core growth in Q2, with a balanced seasonalization throughout the year [40] Question: Can you elaborate on the data center exposure and growth expectations? - Management anticipates significant growth in the data center business, particularly in liquid cooling products, with a target of $100-$200 million by 2028 [46] Question: How sustainable is the growth in the personal mobility segment? - Management expressed high confidence in continued growth in the personal mobility business, projecting high 20s to 30% compound annual growth through 2028 [53] Question: What does the S&P upgrade mean for the company? - Management indicated that while the upgrade may not significantly impact interest rates, it reflects the company's strong cash generation and profitability [66]

Financial Data and Key Metrics Changes - The company achieved nearly 1% core growth in 2025, with record adjusted EBITDA dollars and adjusted EPS growing 9% to a record $1.52 [6][8][9] - The net leverage ratio improved to 1.85x at year-end 2025, a decrease of almost 0.4 turns compared to the previous year [6][16] - Free cash flow conversion was 238% of adjusted net income for Q4, bringing the full-year conversion to 92% [15][16] Business Line Data and Key Metrics Changes - In the Power Transmission segment, revenues were $537 million with flat core growth; Personal Mobility business grew 28% year-over-year [11] - The Fluid Power segment reported sales of $320 million with approximately 1% core growth, driven by low double-digit growth in Off-Highway markets [11] - OEM sales expanded approximately 4%, while aftermarket sales declined about 1% [10] Market Data and Key Metrics Changes - North America saw core sales decrease about 2.5% in Q4, influenced by distributor inventory management [12] - EMEA experienced core sales growth of 5.8%, with double-digit growth in industrial markets [14] - South America reported slight core sales growth, driven by commercial on-highway and agriculture [15] Company Strategy and Development Direction - The company is focused on strategic revenue initiatives to generate market outgrowth and is optimistic about 2026 top-line potential [23][24] - Investments are being made in personal mobility and data center markets, with expectations for these sectors to grow significantly [24] - The company plans to pursue logical and non-transformational M&A opportunities to enhance its portfolio [56] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about an industrial demand recovery entering 2026, with improving order trends [7][22] - The company anticipates core sales growth of 1%-4% in 2026, with adjusted EBITDA guidance of $775 million-$835 million [17][18] - Management noted that the first quarter will face headwinds due to fewer business days and ERP transition costs, but expects recovery in subsequent quarters [20][21] Other Important Information - The company returned over $100 million to shareholders through share repurchases in Q4 [7] - S&P upgraded the company's credit rating to double B from double B minus with a stable outlook [16] Q&A Session Summary Question: Can you provide more detail on the book-to-bill ratio and order acceleration? - Management noted positive order trends exiting 2025, particularly in the industrial OEM segment, indicating a strong recovery [30] Question: What impacted the Adjusted EBITDA margin in Q4? - Management indicated that production output was managed to optimize working capital, which affected margins [34] Question: How do you see the phasing of EBITDA for the year? - Management expects organic core growth in the second quarter, with a balanced seasonalization throughout the year [40] Question: What is the outlook for the data center business? - The company anticipates significant growth in the data center sector, particularly in liquid cooling products, with a target of $100-$200 million by 2028 [45] Question: How sustainable is the growth in the personal mobility segment? - Management expressed high confidence in continued growth in the personal mobility business, projecting high 20s to 30% annual growth through 2028 [53] Question: What does the S&P upgrade mean for the company? - Management indicated potential upside in interest rates due to the upgrade, but noted that the impact may be limited given current favorable debt trading conditions [64]

Financial Data and Key Metrics Changes - Gates Corporation reported nearly 1% core growth in 2025, outperforming many end markets that remain in contraction [5] - Adjusted EBITDA dollars reached an all-time record, with adjusted EPS growing 9% year-over-year to $1.52, the top end of guidance [7][8] - The net leverage ratio improved to 1.85x at year-end 2025, a decrease of almost 0.4 turns compared to the previous year [6][14] Business Line Data and Key Metrics Changes - The Personal Mobility business experienced over 25% core growth in 2025, while the Data Center business grew 4x compared to 2024 [5] - In the Power Transmission segment, revenues were $537 million with flat core growth, while the Fluid Power segment generated $320 million with approximately 1% core growth [10] - Automotive OEM sales decreased, but Industrial OEM sales grew solid double digits year-over-year [10] Market Data and Key Metrics Changes - North America saw a core sales decrease of about 2.5% in Q4, influenced by distributor inventory management [11] - EMEA experienced a core sales growth of 5.8% in Q4, with double-digit growth in industrial markets [12] - Core sales in China grew about 3.5% year-over-year, while East Asia and India saw slight decreases [12] Company Strategy and Development Direction - The company is focused on strategic revenue initiatives to generate market outgrowth and is optimistic about 2026 top-line potential [20] - Investments are being made in personal mobility and data center markets, with expectations for these sectors to grow significantly [21] - The company plans to pursue logical and non-transformational M&A opportunities to enhance its portfolio [55] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about an industrial demand recovery entering 2026, with a book-to-bill ratio above 1x [6][20] - The company anticipates core sales growth in a range of 1%-4% for 2026, with adjusted EBITDA forecasted between $775 million and $835 million [15] - Management noted that while there are positive signs, they do not expect a sharp recovery in 2026 [20] Other Important Information - Free cash flow conversion was 238% of adjusted net income for Q4, bringing the full-year conversion to 92% [14] - The company repurchased over $100 million of its shares in Q4 at an attractive valuation [6] - S&P upgraded the company's credit rating to double B from double B minus with a stable outlook [14] Q&A Session Summary Question: Can you elaborate on the book-to-bill over one in Q4 and January orders? - Management noted the most positive order trend in two to three years, particularly in the industrial OEM segment, indicating a strong recovery [26][28] Question: What impacted the Adjusted EBITDA margin in Q4? - Management indicated that managing output and inventory levels contributed to the margin dynamics, alongside a focus on working capital [31][32] Question: What is the expected EBITDA contribution in the first half of the year? - Management expects about 100 basis points of headwind in the first half due to ERP implementation and footprint optimization [37] Question: How sustainable is the growth in the Personal Mobility business? - Management anticipates continued high growth in the Personal Mobility business, projecting a compound annual growth rate of 30% through 2028 [51] Question: What are the implications of the S&P upgrade? - Management indicated that while there may be some upside from the upgrade, the impact on interest rates is uncertain [63] Question: How does the company view its M&A strategy? - Management is focused on non-transformational M&A opportunities that could enhance the portfolio without significant changes [55]

Q4 2025 EARNINGS PRESENTATION FEBRUARY 12, 2026 1 LEGAL DISCLAIMERS 2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This presentation contains, and management may make on our call today, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "conti ...