Financial Data and Key Metrics Changes - The company achieved net sales of $656 million and Adjusted EBITDA of $69 million in Q1, both exceeding the outlook range [4][9] - Adjusted EPS was $0.83, above the top end of the outlook range, while the prior year's EPS was $1.63 [9] - Organic volume increased by 2% year-over-year, driven by strong performance in the electrical segment [4][11] - The tax rate in Q1 was 3%, a significant decrease from 21% in the prior year, reflecting a one-time discrete benefit [9] Business Line Data and Key Metrics Changes - The electrical segment saw net sales increase year-over-year, driven by higher volume growth, although adjusted EBITDA margins compressed due to higher material costs and lower average selling prices [12] - The S&I segment experienced lower net sales compared to the previous year, primarily due to lower volume, but adjusted EBITDA and margins increased due to improved productivity [12] Market Data and Key Metrics Changes - The company expects mid-single-digit volume growth for the full year, supported by core construction growth and contributions from solar and global construction services [13][15] - The Dodge Momentum Index indicates favorable growth in core non-residential end markets, with significant investments expected in the data center market [18] Company Strategy and Development Direction - The company is focused on its core electrical infrastructure portfolio, supported by broader mega trends, and is advancing its 80/20 Initiative to streamline manufacturing capacity [5][7] - The divestiture of the TekTube mechanical tube product line aligns with the company's strategy to enhance focus on electrical end markets [5] - The company plans to exit three manufacturing facilities in the second fiscal quarter to further streamline operations [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the FY 2026 outlook, expecting net sales between $2.95 billion and $3.05 billion, with adjusted EBITDA remaining unchanged at $340 million to $360 million [6][15] - The management highlighted ongoing productivity improvements and a favorable cash position despite a year-over-year decline in operating cash flow [12][13] Other Important Information - The company recognized approximately $18 million in cash proceeds from the TekTube divestiture and anticipates an additional $7 million from real estate sales in Q2 [13] - The company is on track to deliver its fiscal year 2025 sustainability report, detailing ongoing initiatives and accomplishments [6] Q&A Session Summary Question: Can you provide more color on the core markets? - Management noted good growth in PVC and steel conduit markets, with strong backlogs and commitments for data center projects [24][26] Question: Why was there no increase in EBITDA and EPS guidance despite good Q1 results? - Management indicated it is early in the year and preferred to maintain current guidance while monitoring progress [28][32] Question: What is the update on the competitive environment and pricing? - Management acknowledged ongoing import competition in PVC conduit but noted improved pricing and margins in steel conduit [34][35] Question: Can you provide an update on the strategic review and cost-saving efforts? - Management confirmed ongoing strategic alternatives and highlighted expectations for productivity gains from facility closures [41][42] Question: How is the solar market performing? - Management indicated that solar activity was down year-over-year but noted a good backlog and expected demand growth in the second half of the year [85][86]

Financial Data and Key Metrics Changes - Gates reported third-quarter total sales of $856 million, translating to core growth of 1.7% year-over-year, with total revenues growing by 3% due to favorable foreign currency effects [8][9] - Adjusted EBITDA was $196 million, with an adjusted EBITDA margin of 22.9%, representing a record third-quarter margin rate for the company, an increase of 90 basis points year-over-year [9][10] - The net leverage ratio improved to 2.0 turns, a reduction of 0.4 turns compared to the previous year's third quarter [6] Business Line Data and Key Metrics Changes - In the power transmission segment, revenues were $533 million with core growth of 2.3%, driven by personal mobility growth exceeding 20% [10][11] - The fluid power segment generated $322 million in sales, with core growth just under 1%, impacted by mid-teens decline in commercial on-highway sales [11] - Automotive replacement sales increased by high single digits, while automotive OEM sales grew low single digits [14] Market Data and Key Metrics Changes - North America experienced flat core sales, with a low double-digit decline in industrial OEM sales due to demand weakness in agriculture and commercial on-highway [13][14] - EMEA saw core sales grow by 2.6%, with personal mobility growing almost 75% [14] - East Asia and India posted approximately 5% core growth, while South America experienced low to mid-single-digit declines [14] Company Strategy and Development Direction - The company is focused on restructuring plans, including closing multiple factories and implementing an ERP system conversion expected to be completed by mid-2026 [18][19] - The board approved a new $300 million share repurchase authorization, indicating a commitment to returning value to shareholders while maintaining flexibility for potential M&A opportunities [6][24] - The company anticipates achieving an adjusted EBITDA margin of approximately 24% by the end of 2026, driven by ongoing cost-saving initiatives and operational improvements [22][24] Management's Comments on Operating Environment and Future Outlook - Management noted that many end markets are at or near trough levels, with expectations for stabilization and improvement in 2026 [8][39] - The company remains optimistic about growth in personal mobility and data center opportunities, projecting a compound annual growth rate of around 30% for personal mobility from 2025 to 2028 [33][34] - Management acknowledged challenges in the agricultural sector but expressed confidence in a gradual recovery starting in 2026 [39] Other Important Information - The company updated its 2025 guidance, raising the adjusted EPS midpoint to $1.50 per share while slightly lowering the core sales growth outlook [6][17] - Free cash flow was reported at $73 million, representing a 73% conversion to adjusted net income, impacted by increased restructuring cash outflows [16] Q&A Session Summary Question: Clarification on margin targets and restructuring costs - Management confirmed that the 24% margin target for 2027 serves as a foundational floor, with expectations for growth in 2026 and beyond [27][29] - Additional costs related to restructuring and ERP implementation were discussed, with expectations for improved efficiencies post-implementation [30][31] Question: Growth visibility in structural growth vectors - Management expressed optimism about growth in personal mobility and liquid cooling in data centers, with expectations for significant design activity and adoption [33][34] Question: Details on restructuring dimensions - Management provided insights into the restructuring plan, indicating multiple factory closures and hundreds of affected employees, with a payback period of one to two years [44][46] Question: Tariff impact and volume outlook - Management noted a 30 to 40 basis points EBITDA dilution due to tariffs, with expectations for stabilization in agricultural markets and improved production output in automotive [49][50] Question: Exit rate from 2025 and Q4 expectations - Management indicated that Q4 revenue guidance reflects a cautious outlook, with no significant changes anticipated in demand conditions [54][56]