Gates(US:GTES)2025-04-30 11:31markdown [First-Quarter 2025 Financial and Operational Highlights](index=1&type=section&id=First-Quarter%202025%20Financial%20Summary) Gates reported a slight decrease in Q1 2025 net sales to $847.6 million, yet achieved core revenue growth and increased net income, while reiterating full-year guidance Q1 2025 Financial Highlights | Metric | Q1 2025 | Change vs. Q1 2024 | | :--- | :--- | :--- | | Net Sales | $847.6 million | -1.7% | | Core Revenue Growth | +1.4% | N/A | | Net Income (attributable to shareholders) | $62.0 million | +55.0% | | Diluted EPS | $0.24 | +60.0% | | Adjusted Net Income per Diluted Share | $0.36 | +5.9% | | Adjusted EBITDA | $187.3 million | -4.2% | | Adjusted EBITDA Margin | 22.1% | -60 bps | - The CEO highlighted company-wide volume growth supported by **strong performance** in the Auto Replacement and Personal Mobility end markets, along with an **increase in year-over-year gross margin**[3](index=3&type=chunk) - Despite a more uncertain business environment, the company **reiterated its full-year guidance**, citing confidence in its competitive position and 'in-region, for-region' manufacturing strategy[3](index=3&type=chunk) [Segment Performance](index=1&type=section&id=Segment%20Results) In Q1 2025, the Power Transmission segment saw a slight sales decline but achieved positive core growth, while the Fluid Power segment experienced a larger sales decrease and flat core growth. Both segments saw a contraction in their Adjusted EBITDA margins compared to the prior year [Power Transmission Segment](index=1&type=section&id=Power%20Transmission%20Segment%20Results) The Power Transmission segment reported Q1 2025 net sales of $527.2 million, a 1.1% decrease from the prior year, but showed 2.1% core sales growth. Adjusted EBITDA was $116.7 million, with the margin slightly contracting by 20 basis points to 22.1% Power Transmission Q1 2025 Results (USD in millions) | Metric | Q1 2025 | Q1 2024 | % Change | % Core Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $527.2 | $532.8 | (1.1%) | 2.1% | | Adjusted EBITDA | $116.7 | $119.0 | (1.9%) | N/A | | Adjusted EBITDA Margin | 22.1% | 22.3% | (20 bps) | N/A | [Fluid Power Segment](index=1&type=section&id=Fluid%20Power%20Segment%20Results) The Fluid Power segment's Q1 2025 net sales were $320.4 million, down 2.9% YoY, with core sales remaining nearly flat at 0.1% growth. Adjusted EBITDA decreased by 7.8% to $70.6 million, and the margin compressed by 120 basis points to 22.0% Fluid Power Q1 2025 Results (USD in millions) | Metric | Q1 2025 | Q1 2024 | % Change | % Core Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $320.4 | $329.8 | (2.9%) | 0.1% | | Adjusted EBITDA | $70.6 | $76.6 | (7.8%) | N/A | | Adjusted EBITDA Margin | 22.0% | 23.2% | (120 bps) | N/A | [2025 Full-Year Guidance](index=2&type=section&id=2025%20Guidance) The company reiterated its full-year 2025 guidance, projecting core sales growth between -0.5% and +3.5%, Adjusted EBITDA of $735 million to $795 million, and Adjusted EPS of $1.36 to $1.52 - The company is **maintaining its full-year financial guidance** for 2025[7](index=7&type=chunk) Full-Year 2025 Guidance | Metric | Guidance Range/Value | | :--- | :--- | | Core Sales Growth (YoY) | (0.5%) to +3.5% | | Adjusted EBITDA | $735 million to $795 million | | Adjusted Earnings Per Share | $1.36 to $1.52 | | Capital Expenditures | Approx. $120 million | | Free Cash Flow Conversion | > 90% | [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The consolidated financial statements for Q1 2025 show a year-over-year decrease in net sales but an increase in gross profit and a significant rise in net income. The balance sheet indicates stable total liabilities and growth in total equity. Cash flow from operations turned positive compared to the prior year, though the overall cash position decreased due to investing and financing activities [Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, net sales decreased to $847.6 million from $862.6 million YoY. Despite this, gross profit increased to $344.6 million from $330.0 million, and net income attributable to shareholders grew significantly to $62.0 million from $40.0 million in the prior-year period. Diluted EPS rose to $0.24 from $0.15 Q1 Statement of Operations Highlights (USD in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $847.6 | $862.6 | | Gross Profit | $344.6 | $330.0 | | Operating Income | $124.7 | $116.7 | | Net Income Attributable to Shareholders | $62.0 | $40.0 | | Diluted EPS | $0.24 | $0.15 | [Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 29, 2025, total assets were $6,885.8 million, a slight increase from $6,786.3 million at year-end 2024, with cash and cash equivalents at $640.2 million Balance Sheet Highlights (USD in millions) | Metric | March 29, 2025 | Dec 28, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $640.2 | $682.0 | | Total Current Assets | $2,368.0 | $2,306.0 | | Total Assets | $6,885.8 | $6,786.3 | | Total Liabilities | $3,457.9 | $3,446.0 | | Total Shareholders' Equity | $3,102.3 | $3,023.6 | [Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash provided by operating activities was $7.3 million, a significant improvement from a $21.0 million use of cash in Q1 2024. Net cash used in investing activities was $31.0 million, and cash used in financing activities was $24.6 million, primarily due to share repurchases. The quarter ended with a cash balance of $643.1 million, a decrease of $41.7 million during the period Q1 Cash Flow Highlights (USD in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7.3 | ($21.0) | | Net cash used in investing activities | ($31.0) | ($19.5) | | Net cash used in financing activities | ($24.6) | ($148.9) | | Net decrease in cash | ($41.7) | ($198.3) | | Cash at end of period | $643.1 | $525.7 | [Non-GAAP Financial Measures and Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Measures) The company provides non-GAAP measures like Adjusted EBITDA, Adjusted Net Income, and Core Sales to offer a clearer view of underlying performance, with reconciliations showing core sales growth despite reported net sales decline [Reconciliation to Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20from%20Continuing%20Operations%20to%20Adjusted%20EBITDA) For Q1 2025, Net Income from continuing operations of $68.6 million was reconciled to an Adjusted EBITDA of $187.3 million. Key positive adjustments included depreciation & amortization ($52.2M), net interest and other expenses ($30.9M), and income tax expense ($25.2M). The resulting Adjusted EBITDA margin was 22.1%, down from 22.7% in the prior year Reconciliation to Adjusted EBITDA (USD in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income from continuing operations | $68.6 | $46.2 | | Adjustments (Net) | $118.7 | $149.4 | | **Adjusted EBITDA** | **$187.3** | **$195.6** | | Net Sales | $847.6 | $862.6 | | **Adjusted EBITDA Margin** | **22.1%** | **22.7%** | [Reconciliation to Adjusted Net Income](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20Attributable%20to%20Shareholders%20to%20Adjusted%20Net%20Income) Q1 2025 GAAP Net Income attributable to shareholders of $62.0 million was reconciled to an Adjusted Net Income of $93.9 million. Major positive adjustments included amortization of intangible assets ($28.3M) and share-based compensation ($6.1M). This resulted in an Adjusted Net Income per diluted share of $0.36, an increase from $0.34 in Q1 2024 Reconciliation to Adjusted Net Income (USD in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income attributable to shareholders | $62.0 | $40.0 | | Adjustments (Net) | $31.9 | $51.8 | | **Adjusted Net Income** | **$93.9** | **$91.8** | | **Adjusted Net Income per diluted share** | **$0.36** | **$0.34** | [Reconciliation to Core Sales Growth](index=10&type=section&id=Reconciliation%20of%20Net%20Sales%20to%20Core%20Sales%20Growth) The company reconciled a reported total net sales decline of 1.7% to core sales growth of 1.4% for Q1 2025. The difference was primarily due to a negative impact from currency exchange rates totaling $26.7 million. The Power Transmission segment achieved 2.1% core growth, while the Fluid Power segment had 0.1% core growth Q1 2025 Net Sales vs. Core Sales Growth | Segment | Net Sales Decline | Core Sales Growth | | :--- | :--- | :--- | | Power Transmission | (1.1%) | 2.1% | | Fluid Power | (2.9%) | 0.1% | | **Total** | **(1.7%)** | **1.4%** |