Gates Industrial (NYSE:GTES) Q4 2025 Earnings call February 12, 2026 10:00 AM ET Company ParticipantsBrooks Mallard - CFOIvo Jurek - CEORich Kwas - VP of Investor RelationsConference Call ParticipantsAndy Kaplowitz - AnalystDavid Raso - AnalystDeane Dray - AnalystJeff Hammond - AnalystJerry Revich - AnalystJulian Mitchell - AnalystMike Halloran - AnalystNigel Coe - AnalystStephen Volkmann - AnalystTomo Sano - AnalystOperatorLadies and gentlemen, thank you for standing by. Welcome to the Gates Corporation fo ...

Financial Data and Key Metrics Changes - Primerica reported a record year in 2025 with a 10% increase in adjusted net operating income to $751 million and a 16% increase in diluted adjusted operating income per share to $22.92 [5][14] - The company achieved a 16% increase in fourth quarter adjusted net operating income and a 22% increase in diluted adjusted operating income per share [4][14] - The return on adjusted equity (ROAE) increased by 200 basis points to 33.1% [14] Business Line Data and Key Metrics Changes - Term life insurance sales faced challenges with a 10% decline in new policies issued for the full year compared to record levels in 2024, while estimated annualized issued term life premiums declined by 7% [8][10] - Investment and savings product (ISP) sales grew significantly, with fourth quarter sales of $4.1 billion, up 24% year-over-year, and full year sales of $14.9 billion, also up 24% [9][10] - The ISP segment represented 38% of consolidated operating revenues in 2025, up from 32% in 2022 [18] Market Data and Key Metrics Changes - Client asset values reached $129 billion, a 15% increase compared to the previous year, supported by solid annual net inflows of $1.7 billion [11] - The company ended the year with nearly 3,500 licensed representatives in the U.S. who closed over $500 million in mortgage loans, a 26% increase year-over-year [12] Company Strategy and Development Direction - Primerica aims to grow across all major product lines while strengthening recruiting and licensing to expand its distribution footprint [12] - The company is optimistic about the opportunities in 2026, focusing on accelerating momentum and improving productivity through targeted sales training [9][13] - The management emphasizes the importance of building relationships with clients, which is seen as a competitive advantage against emerging technologies like AI [41][43] Management's Comments on Operating Environment and Future Outlook - Management noted that cost of living pressures are beginning to ease, which may improve purchasing power for middle-income families [30][46] - The company maintains a conservative outlook for term life policy growth in 2026, projecting a 2%-3% increase [9][18] - Management expressed confidence in the ISP segment's continued growth, driven by favorable demographic trends and strong demand for retirement solutions [10][11] Other Important Information - Primerica returned approximately 79% of net operating income to shareholders through share repurchases and dividends, indicating a capital-light approach to capital deployment [23] - The company is investing in technology to enhance operational efficiency and support growth in its securities business [82] Q&A Session Summary Question: What is driving the term sales outlook for 2026? - Management anticipates increasing momentum as economic conditions improve, particularly for middle-income families [29][31] Question: Why are term life and ISP showing diverging trends? - Different segments of the middle-income market react differently to economic conditions, with ISP benefiting from money in motion towards retirement accounts [32][33] Question: What is the potential impact of AI on the business model? - Management views AI as an opportunity to improve efficiencies and enhance the sales process, while emphasizing the importance of personal relationships with clients [41][43] Question: What distractions are being seen in the middle market? - Cost of living pressures and economic uncertainties have been distractions, but there are signs of improvement in purchasing power [45][46] Question: What is the outlook for recruiting and sales force growth? - Management believes there is significant market potential and expects to see growth in the sales force, although it may take time to see results [58][59]

Financial Data and Key Metrics Changes - For the fourth quarter, the company reported total revenues of $394.3 million and adjusted operating income of $128 million [9] - The Sphere segment generated revenues of $274.2 million, an increase of over 60% compared to the prior year period, driven by higher revenues from the Sphere Experience [9] - Fourth quarter adjusted operating income for the Sphere segment was $89.4 million, compared to an adjusted operating loss of approximately $800,000 in the prior year quarter [10] Business Line Data and Key Metrics Changes - The Sphere Experience saw significant revenue growth due to The Wizard of Oz, with over 2.2 million tickets sold and approximately $290 million in ticket sales [8] - MSG Networks generated $120.1 million in revenues and $38.6 million in adjusted operating income, reflecting a decrease in subscribers and lower affiliate rates [11][12] Market Data and Key Metrics Changes - The company is expanding its Sphere venues, with a new 6,000-seat Sphere planned for National Harbor, Maryland, expected to open in four years or less [5][6] - The company is in discussions for additional Sphere projects in both domestic and international markets [7] Company Strategy and Development Direction - The company aims to create a global network of Sphere venues powered by proprietary technology and immersive content [5] - Continued investment in immersive technology and experiential content is a priority to maintain leadership in the market [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business model, citing strong ticket sales and positive discussions with IP holders for future projects [8][44] - The company anticipates a strong convention season next year, which will influence show scheduling and revenue growth [28] Other Important Information - The company has refinanced its credit facility related to Sphere in Las Vegas, extending the maturity for a new five-year term [12] - The company is focused on managing SG&A expenses efficiently while supporting growth initiatives [32] Q&A Session Summary Question: How many sphere expansion projects are expected in the next few years? - Management indicated they could handle 5 to 6 projects simultaneously, assuming they are profitable [15][16] Question: Have elevated construction costs impacted conversations with potential partners? - Management stated that the investment model remains viable despite increased costs, and they are exploring new construction methods to lower expenses [17] Question: Can you provide more details on the National Harbor location selection? - The location was chosen due to competitive offers and a favorable site, which expedited the decision-making process [21] Question: How are ticket sales for The Wizard of Oz trending during the winter? - Management noted strong growth despite seasonal headwinds and is confident in future demand [28] Question: What is the outlook for SG&A expenses in 2026? - Management is focused on cost-saving opportunities while ensuring infrastructure supports growth, with fluctuations expected due to non-recurring expenses [32] Question: What is the status of the residency pipeline through 2027? - The company is nearly fully booked for 2026 and has limited availability in 2027, focusing on long weekends to maximize attendance [48] Question: Can you update on the sponsorship strategy and Exosphere progress? - The company is seeing strong growth in sponsorships and has debuted interactive experiences, with plans for more announcements throughout the year [56][57]

Financial Data and Key Metrics Changes - The company reported full-year Adjusted EBITDA of $248 million for 2025, an 8% increase from 2024, exceeding prior guidance [5][6] - Fourth-quarter Adjusted EBITDA was $62 million, down from $95 million in the prior year period [10][6] - Pro forma net income for the full year was $89 million, or $0.57 per share, while fourth-quarter pro forma net income was $32 million, or $0.20 per share [6][9] Business Line Data and Key Metrics Changes - Southern Timber segment generated fourth-quarter Adjusted EBITDA of $32 million, down 8% year-over-year due to lower net stumpage realizations [7][12] - Pacific Northwest Timber segment reported fourth-quarter Adjusted EBITDA of $5 million, a 24% decline from the prior year, primarily due to a 26% decrease in harvest volumes [16][12] - Real estate segment achieved full-year Adjusted EBITDA of $127 million, significantly above guidance, with fourth-quarter Adjusted EBITDA of $33 million [18][19] Market Data and Key Metrics Changes - The company noted that rural HBU markets remained strong, contributing to the real estate segment's performance [6][19] - Pulpwood pricing in the Atlantic region faced downward pressure due to increased supply and mill closures, impacting overall demand [15][52] - The Pacific Northwest is expected to see tightening log markets due to improving demand from sawmills and constraints on Canadian supply [18][17] Company Strategy and Development Direction - The merger with PotlatchDeltic is expected to create a premier land resources company with a diversified timberland portfolio and enhanced operational efficiencies [3][4] - The company plans to focus on disciplined capital allocation and synergies from the merger to create long-term shareholder value [4][29] - The leadership team is implementing best practices from both companies to optimize organizational structure and enhance operational efficiency [4][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term value creation potential from the merger, despite current market challenges in timber and lumber [28][29] - The company anticipates improved demand and pricing in local markets as sawmills ramp up production in response to higher lumber prices [15][18] - Management highlighted the importance of addressing the underbuilt housing stock in the U.S. as a long-term driver for timber demand [52] Other Important Information - The company repurchased approximately 110,000 shares at an average price of $26.31 per share prior to the merger announcement [11] - The company paid a special dividend of $1.40 per share due to taxable gains from the sale of its New Zealand joint venture [11] - The company finished 2025 with $843 million in cash and $1.1 billion in debt, maintaining a conservative leverage profile [12] Q&A Session Summary Question: Can you provide insights on the drivers for real estate sales in 2026? - Management noted that real estate sales are lumpy and significantly impacted by larger transactions, with strong premiums to timberland value driving performance [34][36] Question: What factors influenced the initial harvest guidance for the combined companies? - Management indicated that the guidance reflects a partial year contribution from PotlatchDeltic and aligns with Rayonier's historical sustainable yield [48][49] Question: Are there signs of stabilization in the pulpwood market? - Management acknowledged challenges in the southern timber segment but expressed optimism for long-term demand growth due to housing market dynamics [51][52] Question: What is the company's stance on M&A opportunities in the current market? - Management stated that while the timberland M&A market remains competitive, the focus is on share repurchases as the best use of capital at this time [60][61] Question: How does the company view the integration of wood products within the timberlands portfolio? - Management believes that the integrated model will benefit shareholders over time, with a focus on evaluating investment opportunities based on return potential [76][77]

Financial Data and Key Metrics Changes - For 2025, the company reported adjusted operating earnings per share of $2.77, exceeding expectations and continuing a track record of exceeding the midpoint of guidance each year as a standalone utility [6][17] - The company achieved a 7.4% annual earnings growth rate and 8% rate base growth since 2021, demonstrating its ability to navigate changes and execute consistently [6][13] - The company reported GAAP earnings of $2.73 per share for the full year and $0.58 for the fourth quarter, with non-GAAP earnings of $2.77 and $0.59 respectively, reflecting strong year-over-year growth [17][18] Business Line Data and Key Metrics Changes - The company maintained top quartile reliability metrics across its utilities, ranking first, second, fourth, and seventh among peers based on 2024 benchmarking data [7][8] - The company plans to invest $41.3 billion in capital over the next four years, with over 70% of the increase driven by transmission investments [10][24] - The company expects to achieve annualized earnings growth of 5%-7% through 2029, with a projected rate base growth of approximately 8% [13][34] Market Data and Key Metrics Changes - The company anticipates load growth exceeding 3% through 2029, supported by a large load pipeline and an increasing number of signed Transmission Security Agreements [11][12] - The company reported that its average customer bill as a percentage of median income has remained relatively flat since 2021, growing only 10 basis points while maintaining top quartile reliability [31][32] Company Strategy and Development Direction - The company is focused on executing its capital plan efficiently, maintaining industry-leading operational performance, and driving affordability through disciplined cost management [40][41] - The company is actively partnering with federal, RTO, and state leaders to address high supply prices and emerging reliability risks, advocating for policies that support energy security and affordability [15][33] - The company emphasizes a customer-focused approach and aims to capture meaningful opportunities for sustainable growth while maintaining a strong balance sheet [16][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to lead the energy transformation and meet unprecedented demand, highlighting the importance of continuous improvement and targeted investments [5][6] - The management acknowledged the challenges posed by high supply prices but remains optimistic about the national focus on advancing policies to incentivize new generation and improve affordability [15][16] - The company is committed to maintaining a strong balance sheet while funding its capital needs and achieving a balanced funding strategy [37][38] Other Important Information - The company executed a $60 million customer relief fund to support low and moderate-income customers facing higher supply costs [14] - The company has made significant progress on the regulatory front, achieving key milestones in rate cases and filings [10][21] Q&A Session Questions and Answers Question: Could you comment on the rate-based growth and financing lag? - Management noted that actual rate base growth has been about 8% and earnings growth at 7.4%, indicating a continuation of this track record [46] Question: How is the regulatory strategy for 2026 being approached? - Management is in constant conversations with stakeholders and is considering the best approach for rate cases in Pennsylvania and Maryland, focusing on affordability and reliability [49] Question: What is the company's stance on supply challenges and the RBA process? - Management supports the development of a reliability backstop option and emphasizes the need for utility-generated power to lower customer costs and improve reliability [53][54] Question: How are legislative conversations progressing regarding affordability? - Management is actively engaging with legislators across jurisdictions to find collaborative solutions to the affordability dilemma [68][69]

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