Financial Data and Key Metrics Changes - In Q2 2025, total sales were $884 million, representing a 0.6% decline on a core basis, with foreign currency slightly positive compared to the prior year [10][12] - Adjusted EBITDA was $199 million, with an adjusted EBITDA margin of 22.5%, a decrease of 30 basis points year over year [12][8] - Adjusted earnings per share increased by approximately 8% to $0.39 [12] Business Line Data and Key Metrics Changes - In the Power Transmission segment, revenues were $550 million, showing slight core growth, with personal mobility growing 18% [13] - The Fluid Power segment reported sales of $334 million, translating to a 2.5% decrease on a core basis, with mixed end market dynamics [14] - Industrial OEM sales in Fluid Power declined low double digits, while agricultural demand showed low single-digit growth for the first time since Q4 2022 [15] Market Data and Key Metrics Changes - North American core sales declined 1.3%, primarily affected by lower OEM demand, while replacement channel sales expanded low single digits [18] - EMEA core sales fell just over 1%, with mixed results in OEM and replacement sales [19] - East Asia and India posted approximately 4% core growth, with growth across all industrial end markets [20] Company Strategy and Development Direction - The company is focused on improving gross margins through material cost savings, footprint optimization, and productivity [32] - Investments in personal mobility and data center markets are expected to drive future growth, with a pipeline exceeding $300 million [30][31] - The company aims to reduce net leverage below two times by year-end 2025 through a balanced capital deployment strategy [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a gradual recovery in personal mobility and industrial replacement markets, with expectations for growth to inflect higher in the second half of the year [31][39] - The company is optimistic about the data center market, anticipating significant growth driven by the adoption of liquid cooling technologies [41][42] - Management acknowledged challenges in the automotive OEM sector but emphasized selective participation in that market [50] Other Important Information - The company updated its 2025 guidance, raising the adjusted EBITDA midpoint to $780 million and adjusted EPS midpoint to $1.48 [9][24] - Tariff impacts are expected to be approximately $50 million annually, with plans to cover 85% to 90% of the projected impact through pricing and operational actions [26] Q&A Session Summary Question: Confidence in growth pivot for Q3 - Management indicated that order rates have been as anticipated, with improvements in industrial replacement and stable automotive replacement contributing positively [38] Question: Data center market opportunity - Management expressed increased optimism about the data center market, with expectations for significant revenue growth driven by liquid cooling adoption [41][42] Question: Auto OE softness and selective participation - Management confirmed that the softness is primarily due to lower production, particularly in Europe, and reiterated their strategy of selective participation in the auto OE market [50] Question: Chain to belt conversion cost parity - Management noted that they are making progress towards cost parity between belt and chain drives, which is expected to accelerate conversions in the industrial sector [54] Question: Industrial recovery signs - Management highlighted stability in agricultural markets and improvements in industrial replacement order rates, while acknowledging ongoing challenges in construction and on-highway markets [62] Question: Free cash flow and buyback strategy - Management confirmed a balanced approach to capital deployment, focusing on debt reduction while considering stock buybacks due to undervaluation [65] Question: EBITDA margin outlook - Management confirmed expectations for high operating leverage in the second half of the year, with continued focus on core growth and enterprise initiatives [71]

Financial Data and Key Metrics Changes - Total sales for the second quarter were $884 million, representing a 0.6% decline on a core basis [8] - Adjusted EBITDA was $199 million with an adjusted EBITDA margin of 22.5%, a decrease of 30 basis points [10] - Adjusted earnings per share increased by approximately 8% to $0.39 [10] - Free cash flow grew year over year to $74 million, representing 73% conversion to adjusted net income [20] - Net leverage ratio declined to 2.2 times, improving by 0.1 times compared to the prior year [21] Business Line Data and Key Metrics Changes - In the Power Transmission segment, revenues were $550 million, with high single-digit growth in industrial OEM sales offset by a decline in automotive OEM sales [11] - The Fluid Power segment reported sales of $334 million, translating to a 2.5% decrease on a core basis, with mixed end market dynamics [12] - Personal mobility grew 18% in the quarter, while the industrial replacement channel realized positive core growth for the first time since Q1 2023 [9][11] Market Data and Key Metrics Changes - North America core sales declined 1.3%, primarily affected by lower OEM demand [15] - EMEA core sales fell just over 1%, with OEM sales down mid single digits [16] - East Asia and India posted approximately 4% core growth, with growth across all industrial end markets [17] Company Strategy and Development Direction - The company is focused on executing well in an uncertain macro environment and is preparing for an anticipated acceleration in core growth over the mid-term [29] - Investments in commercial front-end and innovation are aimed at capitalizing on strategic growth opportunities [11][28] - The company anticipates that investments in new belts and sprockets will bring belt drives closer to cost parity with chains, unlocking potential market growth [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of personal mobility and anticipates growth to inflect higher in the second half of the year [29] - The company is seeing stability in agricultural markets and expects further opportunities in the industrial off-road market [29] - Management highlighted the importance of improving gross margins through material cost savings and productivity [30] Other Important Information - The company updated its 2025 guidance, raising the adjusted EBITDA midpoint to $780 million and adjusted EPS midpoint to $1.48 [7][22] - The anticipated annualized impact of tariffs is approximately $50 million, with plans to cover 85% to 90% of the projected impact through pricing and operational actions [24] Q&A Session Summary Question: Confidence in growth pivot in Q3 - Management indicated that order rates have been as anticipated, with improvements in industrial replacement and personal mobility driving confidence in growth rates [36][38] Question: Data center market opportunity - Management expressed a more bullish view on the data center market, anticipating significant revenue growth driven by liquid cooling adoption [40] Question: Auto OE softness and selective participation - Management confirmed that the softness is primarily due to lower production, particularly in Europe, and emphasized their strategy of selective participation in the auto OE market [46][47] Question: Chain to belt conversion cost parity - Management noted that they are making meaningful progress towards cost parity between belt drives and chain drives, which is expected to accelerate market adoption [50][51] Question: Industrial recovery signs - Management highlighted stability in agricultural markets and improvements in industrial replacement order rates, while noting ongoing challenges in construction and on-highway markets [58][59] Question: Buyback and free cash flow confidence - Management confirmed a balanced approach to capital deployment, focusing on debt reduction while also considering stock buybacks due to undervaluation [62][63] Question: EBITDA margin outlook - Management confirmed expectations of high operating leverage in the second half of the year, with continued focus on core growth and enterprise initiatives [70][71]

Financial Performance - Net sales reached $884 million[14], with a core sales decline of 0.6% year-over-year[15] - Adjusted EBITDA was $199 million[16], representing a 22.5% adjusted EBITDA margin[17] - Adjusted earnings per share (EPS) grew by 8.3% year-over-year to $0.39[18] - Gross margin stood at 40.8%, marking the fifth consecutive quarter above 40%[20] Segment Performance - Power Transmission net sales were $550 million[27], with core sales growth of 0.6% year-over-year and an adjusted EBITDA margin of 22.3%[23], a decrease of 50 bps year-over-year[23] - Fluid Power net sales were $334 million[25], with a core sales decline of 2.5% year-over-year and an adjusted EBITDA margin of 22.9%[25], an increase of 10 bps year-over-year[28] Regional Performance - Greater China experienced core revenue growth of 0.6%[30], while East Asia & India grew by 4.4%[30] - North America and EMEA both saw core revenue declines of 1.3%[30], and South America declined by 2.9%[30] Capital Efficiency and Cash Flow - Free cash flow was $74 million[39], showing an 11% year-over-year improvement[42] - Net leverage improved to 2.2x[41] - LTM free cash flow conversion increased to 79.9%[92] Guidance - The company raised its adjusted EBITDA midpoint by $15 million and adjusted EPS by $0.04[12] - Core revenue growth outlook is maintained at 0.5% to 2.5%[43] - Adjusted EBITDA is projected between $765 million and $795 million[43] - Adjusted EPS is expected to be in the range of $1.44 to $1.52[43]

Financial Performance - Gates Industrial reported quarterly earnings of $0.39 per share, matching the Zacks Consensus Estimate, and an increase from $0.36 per share a year ago [1] - The company posted revenues of $883.7 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.01%, although this represents a slight decline from year-ago revenues of $885.5 million [2] - Over the last four quarters, Gates Industrial has exceeded consensus EPS estimates three times and topped revenue estimates four times [2] Stock Performance - Gates Industrial shares have increased approximately 20.4% since the beginning of the year, outperforming the S&P 500's gain of 8.3% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations for it to outperform the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.35 on revenues of $836.93 million, and for the current fiscal year, it is $1.43 on revenues of $3.4 billion [7] - The trend of estimate revisions for Gates Industrial has been favorable leading up to the earnings release, which may influence future stock movements [5][6] Industry Context - Gates Industrial operates within the Manufacturing - General Industrial industry, which is currently ranked in the top 10% of over 250 Zacks industries, suggesting a positive outlook for the sector [8] - The performance of Gates Industrial's stock may also be influenced by the overall industry outlook, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Financial Performance - Second-quarter net sales were $883.7 million, a decrease of 0.2% year-over-year, with a core sales decline of 0.6%[5] - Net income attributable to shareholders was $56.5 million, or $0.22 per diluted share, compared to $70.7 million, or $0.27 per diluted share in the prior year[5][15] - Adjusted EBITDA for the second quarter was $199.2 million, representing a margin of 22.5%[5] - Net income for the six months ended June 28, 2025, was $131.4 million, compared to $123.7 million for the same period in 2024, reflecting a year-over-year increase of 5.6%[19] - Adjusted EBITDA for the six months ended June 28, 2025, was $386.5 million, down from $397.8 million for the same period in 2024, indicating a decrease of 3.3%[27] - For the three months ended June 28, 2025, net income attributable to shareholders was $56.5 million, a decrease from $70.7 million for the same period in 2024[32] - Adjusted net income for the six months ended June 28, 2025, was $195.0 million, compared to $187.3 million for the same period in 2024, reflecting a year-over-year increase of 9.1%[32] Sales and Segment Performance - The Power Transmission segment reported net sales of $550.1 million, a 1.5% increase year-over-year, while the Fluid Power segment saw net sales decline by 2.9% to $333.6 million[4][6] - Total net sales for the three months ended June 28, 2025, were $883.7 million, a slight decline of 0.2% compared to $885.5 million for the same period in 2024[36] - For the six months ended June 28, 2025, the company experienced a net sales growth of 0.2% in Power Transmission, while Fluid Power saw a decline of 2.9%[36] - Core sales for the six months ended June 28, 2025, increased to $1,754.2 million, up from $1,748.1 million in the same period in 2024, representing a growth of 0.3%[36] Guidance and Projections - The company raised its full-year 2025 guidance, expecting core sales growth between +0.5% to +2.5% year-over-year[9] - Adjusted EBITDA guidance for 2025 is projected to be between $765 million and $795 million[9] - Adjusted Earnings Per Share for 2025 is anticipated to be in the range of $1.44 to $1.52[9] - Capital expenditures for 2025 are estimated at approximately $120 million[9] - Free Cash Flow conversion is expected to exceed 90% for 2025[9] Assets and Liabilities - Total assets increased to $7,217.8 million as of June 28, 2025, up from $6,786.3 million as of December 28, 2024, representing a growth of 6.4%[17] - Total current liabilities slightly increased to $729.3 million as of June 28, 2025, from $721.5 million as of December 28, 2024[17] - Total shareholders' equity rose to $3,269.0 million as of June 28, 2025, up from $3,023.6 million as of December 28, 2024, reflecting an increase of 8.1%[17] Cash Flow and Working Capital - Cash and cash equivalents at the end of the period were $722.8 million, an increase from $582.9 million at the end of the previous period, marking a rise of 24%[19] - The company reported a net cash provided by operating activities of $110.3 million for the six months ended June 28, 2025, compared to $72.8 million for the same period in 2024, a significant increase of 51.5%[19] - The company experienced a decrease in inventories, with a reduction of $16.4 million during the six months ended June 28, 2025[19] - Free Cash Flow for the period was not explicitly stated but is a key measure for assessing cash generation[24] Other Financial Metrics - The Adjusted EBITDA margin for the six months ended June 28, 2025, was 22.3%, compared to 22.8% for the same period in 2024[27] - The effective tax rate for the six months ended June 28, 2025, was influenced by net discrete tax benefits of $7.1 million, primarily from excess tax benefits on stock option exercises[33] - Restructuring expenses for the three months ended June 28, 2025, amounted to $13.0 million, compared to $1.6 million for the same period in 2024[32] - The company reported a loss on extinguishment of debt of $14.8 million during the three months ended June 29, 2024, due to debt refinancing[34] - The impact of currency rate movements on net sales for the three months ended June 28, 2025, was a negative $3.7 million[36] - The diluted weighted-average number of shares outstanding for the three months ended June 28, 2025, was 260,469,532[32]

Core Viewpoint - Gates Industrial Corporation reported solid second-quarter results with positive core sales growth in Replacement channels and double-digit growth in Mobility business, alongside a return to growth in Agriculture for the first time since Q4 2022 [2][9] Financial Summary - Second-quarter net sales were $883.7 million, a decrease of 0.2% year-over-year, with core sales declining by 0.6% [9] - Net income attributable to shareholders was $56.5 million, or $0.22 per diluted share, while adjusted net income per diluted share was $0.39 [9][13] - Adjusted EBITDA for the quarter was $199.2 million, representing a margin of 22.5% [9][13] Segment Performance Power Transmission Segment - Net sales for the three months ended June 28, 2025, were $550.1 million, up 1.5% from $541.9 million in the prior year, with a core sales increase of 0.6% [3] - Adjusted EBITDA was $122.8 million, with an adjusted EBITDA margin of 22.3% [3] Fluid Power Segment - Net sales for the three months ended June 28, 2025, were $333.6 million, down 2.9% from $343.6 million in the prior year, with a core sales decline of 2.5% [4] - Adjusted EBITDA was $76.4 million, with an adjusted EBITDA margin of 22.9% [4] Guidance for 2025 - The company raised its full-year guidance for 2025, expecting core sales growth between 0.5% to 2.5% year-over-year, adjusted EBITDA of $765 million to $795 million, and adjusted earnings per share of $1.44 to $1.52 [5][10]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Gates Industrial (GTES) - Gates Industrial currently holds a Momentum Style Score of B, indicating a positive momentum outlook [2] - The company has a Zacks Rank of 2 (Buy), suggesting strong potential for outperformance in the market [3] Performance Metrics - GTES shares have increased by 1.79% over the past week, while the Zacks Manufacturing - General Industrial industry has seen a slight decline of 0.01% [5] - Over the past month, GTES has shown a price change of 11.34%, outperforming the industry's 5.09% [5] - In the last quarter, GTES shares have risen by 40.62%, and over the past year, they have gained 39.82%, significantly outperforming the S&P 500's increases of 19.12% and 11.85% respectively [6] Trading Volume - The average 20-day trading volume for GTES is 1,566,129 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the past two months, one earnings estimate for GTES has increased, while none have decreased, raising the consensus estimate from $1.42 to $1.43 [9] - For the next fiscal year, one estimate has also moved upwards with no downward revisions noted [9] Conclusion - Given the positive performance metrics and earnings outlook, GTES is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [11]

Company Overview - Gates Industrial Corporation plc is a global manufacturer specializing in innovative, highly engineered power transmission and fluid power solutions [2] - The company offers a broad portfolio of products catering to diverse replacement channel customers and OEMs, participating in various sectors of industrial and consumer markets [2] - Gates' products are essential in a wide range of applications across different end markets, including harsh industries and everyday consumer applications, and are sold in over 130 countries [2] Upcoming Earnings Release - Gates Industrial will issue its second-quarter earnings release before the market opens on July 30, 2025 [1] - Management will host a webcast and conference call on the same day at 11:30 a.m. Eastern time to discuss the financial results [1] - An audio replay of the conference call will be available from approximately 2:30 p.m. Eastern time on July 30, 2025, until 11:59 p.m. Eastern time on August 6, 2025 [1][3]

Company Overview & Strategy - The company aims for a core revenue growth of 3-5% through the cycle, targeting twice the rate of industrial production in the mid-term[11] - The company expects to achieve an Adjusted EBITDA margin of 24.5% by 2026 through various enterprise initiatives[11] - In 2024, the company's revenue was $3.4 billion, with an Adjusted EBITDA of $761 million and Free Cash Flow of $273 million[16] Segment Breakdown - Power Transmission accounted for $2.1 billion (62%) of sales in 2024, while Fluid Power accounted for $1.3 billion (38%) of sales[21, 30] - In Power Transmission, 34% of sales are First Fit and 66% are Replacement[23] - In Fluid Power, 30% of sales are First Fit and 70% are Replacement[32] Financial Targets & Capital Allocation - The company is targeting approximately 100% Free Cash Flow conversion during the 2024-2026 period[89] - Since mid-2020, the company has executed approximately $1.2 billion in share repurchases and debt paydown[91] - The company's Net Leverage Ratio was 2.2x as of the end of 2024[91, 96] - The company targets Net Leverage between 10x to 20x by 2026[94] - The company projects Adjusted EPS to be between $1.90 and $2.30 by 2026[110]

Gates Industrial (GTES) FY Conference Summary Company Overview - **Company**: Gates Industrial Corporation (GTES) - **Conference Date**: May 21, 2025 Key Industry Insights - **Automotive Replacement**: Strong performance noted, particularly in North America and China, driven by new customer acquisitions and high used car sales prices [2][9] - **Mobility Sector**: Experienced double-digit growth, especially in e-bikes, with a positive outlook for continued strength [3][4] - **Industrial Recovery**: Gradual recovery observed, particularly in Asia, but tempered expectations for growth due to global trade uncertainties [6][12] - **Geographical Performance**: - **North America**: Positive trends in automotive replacement; industrial side expected to be challenging [11] - **EMEA**: Slight decline of 1% in Q1, but mobility business expected to provide tailwinds [3][11] - **Asia**: Positive core growth in China and India, with signs of industrial recovery [12][14] Financial Performance and Guidance - **Q1 Performance**: Exceeded expectations with a 1.5% organic growth; Q2 guidance remains flattish [1][5] - **Full Year Guidance**: Targeting approximately 1.5% organic growth for the year, with expectations for acceleration in the second half [17][21] - **Pricing Strategy**: Implemented $40 million in price increases to offset tariffs, anticipating some demand headwinds [20][27] Operational Challenges and Strategies - **Inventory Levels**: Destocking in agriculture and construction sectors is nearing completion, with confidence in distribution inventory levels [22][23] - **Tariff Impact**: Ongoing adjustments to pricing strategies in response to tariffs, with a focus on maintaining margin neutrality [29][34] - **Debt Management**: Aiming to reduce gross debt below $2 billion while balancing stock buybacks and potential M&A opportunities [46][48] M&A and Growth Opportunities - **M&A Strategy**: Open to strategic acquisitions that align with growth objectives, particularly in underrepresented segments or geographies [49][52] - **Data Center Market**: Targeting $100 to $200 million in incremental revenue by 2027, focusing on organic growth through existing product lines [41][42] Conclusion - **Outlook**: Gates Industrial remains optimistic about its growth trajectory, particularly in automotive replacement and mobility sectors, while navigating challenges in industrial recovery and global trade dynamics. The company is committed to strategic pricing, operational efficiencies, and exploring M&A opportunities to enhance its market position [35][54]