Gates Industrial Corporation plc Q1 FY2026 earnings call

• Team executed well during business transition, Europe team implemented new ERP system and achieved higher efficiency rates. • Global sales dollars and margin rate broadly consistent with expectations; core sales growth approximated mid-single digits year-over-year in March; book-to-bill solidly above 1. • Adjusted EBITDA was $177 million, adjusted EBITDA margin 20.8%, down 130 basis points year-over-year, primarily due to ERP transition and fewer working days. • European business operating as expected post-ERP transition, focusing on driving incremental efficiencies. • Improving demand trends across most end markets, industrial OEM orders gaining momentum, EMEA revenue trending above expectations. • Announced acquisition of Timken's industrial belt business, expected to close in third quarter, augmenting parts transmission position in North America.

Power Transmission Segment: Generated revenues of $533 million in the quarter, a core sales decrease of approximately 2.5%, primarily driven by fewer working days and ERP transition in Europe; personal mobility expanded 6%, growth affected by project timing and ERP transition in Europe. Fluid Power Segment: Sales were $318 million, core sales decrease of approximately 3.5%, fewer working days and ERP implementation contributed to decline; strong double-digit growth in APAC; commercial on-highway relatively weak in the quarter. Data center business: Revenue grew approximately 700% from a low base in prior year period.

• Reiterated full year 2026 financial guidance. • Anticipate core growth to improve over the year. • Second quarter guidance: revenues range $905 million to $945 million, midpoint core growth estimated ~3.5% year-over-year; adjusted EBITDA margin projected to decline 30 basis points compared to prior year period, influenced by temporary impacts from ERP transition and footprint optimization projects, expected to benefit adjusted EBITDA margin performance in second half of year.

• Forward-looking statements subject to risks that could cause actual results to differ materially, including matters described in most recent annual report on Form 10-K and other SEC filings. • Impact of ERP transition and fewer working days on sales and margins. • Potential impact of Middle East conflict on demand trends. • Impact of cost inflation, including oil derivative impacts, on pricing and profitability. • Competition and changing market conditions in various segments.

Q: Michael Halloran at Baird asked about core growth trajectory, areas of concern, and customers' feedback.

A: Ivo Jurek responded that the business performed well, with core growth would have been positive excluding ERP and day issues, and April order flow was solid.

Q: Jeff Hammond at KeyBank asked about margin trends, price costs, and tariff impacts.

A: Brooks Mallard discussed margin headwinds from ERP transition and footprint optimization, no material tariff impact expected, and confident in pricing for inflation.

Q: Nigel Koh at Wolf Research asked about ERP catch-up and demand trends.

A: Ivo Jurek explained recovery of sales in Europe due to ERP system backflash and order trends in heavy industry.

Q: Andy Kaplowitz at Citigroup asked about personal mobility growth and data center business.

A: Ivo Jurek updated on personal mobility recovery and data center business strong order intake.

Q: Dean Dre at RBC Capital Markets asked about Temkin deal and accretion.

A: Ivo Jurek discussed industry consolidation and potential margin improvement.

Q: Chris Snyder at Morgan Stanley asked about ERP disruption and data center market.

A: Ivo Jurek clarified ERP revenue recovery and data center market nascent nature.

Q: David Rasso at Evercore ISI asked about order growth and margin guidance.

A: Brooks Mallard talked about order growth outpacing core growth and margin headwinds in Q2.

Q: Jerry Ravitch at Wells Fargo asked about replacement market demand and M&A pipeline.

A: Ivo Jurek said replacement market was healthy and there are robust M&A opportunities.

Q: Tomo Sano at JPMorgan asked about robotics opportunities and Timken acquisition impact.

A: Ivo Jurek discussed robotics opportunities and immaterial impact of Timken acquisition on net leverage