Gates Industrial Corporation Plc · NYSE:GTES
Gates Industrial — Q1 2024 Earnings Presentation
20 slides from Gates Industrial's earnings presentation, May 1, 2024
Slide 1: Q1 2024 Earnings Presentation
Q1 2024 MAY 1, 2024 EARNINGS PRESENTATION
Slide 2: Legal Disclaimers
LEGAL DISCLAIMERS 2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This presentation contains, and management may make on our call today, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 19
Slide 3: Q1 2024 Key Highlights
Q1 2024 KEY HIGHLIGHTS 3 ▪ Revenue above midpoint of February guidance • Automotive outperformed industrial; seeing stabilizing trends in certain industrial end markets • Global replacement channel revenues up slightly YoY ▪ Strong operating performance resulting in Adjusted EBITDA margin of 22%+ •
Slide 4: Q1 2024 – Financial Performance
Q1 2024 – FINANCIAL PERFORMANCE 4 $863M ▪ Automotive performance fueled replacement channel growth ▪ Ag and construction impacting Industrial First Fit decline (3.6%) Core Decline YoY ▪ Book to bill above 1; order rates improved as the quarter Net Sales progressed $196M 22.7% Adjusted EBITDA margin
Slide 5: Q1 2024 – Segment Results
Q1 2024 – SEGMENT RESULTS 5 PERFORMANCE HIGHLIGHTS POWER TRANSMISSION NET SALES $533M ▪ Replacement up modestly; First Fit down high single digits (1.7%) Core YoY ▪ Mixed end market growth trends; YoY declines in ADJUSTED EBITDA $119M majority of industrial end markets more than offsetting growth in
Slide 6: Q1 2024 – Regional Core Revenue Performance
Q1 2024 – REGIONAL CORE REVENUE PERFORMANCE 6 Total Gates (3.6%) 9% Greater China 10% EA&I North 49% REVENUE America EMEA (3.0%) (8.0%) +2.3% 27% EMEA 5% North Greater America China South America (0.5%) • NA: Automotive continues to South (1.0%) outperform industrial America East Asia & • EMEA: Soft
Slide 7: Adjusted EPS Walk
Q1 2024 ADJUSTED EPS WALK 7 $0.02 $0.10 ($0.03) $0.31 ($0.03) $0.25 Q1 2023 Adj. EPS Operating Performance Net Interest Expense Income Tax Expense Other Q1 2024 Adj. EPS STRONG PROFITABILITY IMPROVEMENT PARTIALLY OFFSET BY HIGHER TAX AND OTHER ITEMS © 2024 Gates Corporation. All rights reserved.
Slide 8: Q1 2024 – Capital Efficiency & Cash Flow
Q1 2024 – CAPITAL EFFICIENCY & CASH FLOW 8 ($39M) Free Cash Flow Consistent with expectations & follows normal seasonality ▪ ▪ Normal seasonal performance Working capital as % of LTM sales declined approximately 50 basis points YoY 2.4x Net Leverage Improving trend continues ▪ ▪ Improved 0.3x YoY Re
Slide 9: Updated 2024 Guidance
UPDATED 2024 GUIDANCE 9 PRIOR 2024 UPDATED 2024 B/W (Midpoint) CORE REVENUE GROWTH (3%) to +1% (3%) to +1% No Change ADJUSTED EBITDA $725M – $785M $745M – $805M +$20M ADJUSTED EPS $1.28 – $1.43 $1.28 – $1.43 No Change CAPITAL EXPENDITURES ~$100M ~$100M No Change FREE CASH FLOW CONVERSION 90%+ 90%+ N
Slide 10: Updated Walk to 2024 Adjusted EPS Midpoint
UPDATED WALK TO 2024 ADJUSTED EPS MIDPOINT 10 $0.06 $1.36 $1.36 ($0.06) Initial 2024 Adj. EPS Incremental Enterprise Higher Tax Rate* Updated 2024 Adj. EPS Initiative Savings *Tax rate expected to be 200 to 300 basis points higher than initial expectation. BUILDING MOMENTUM IN ENTERPRISE INITIATIVES
Slide 11: Summary Thoughts
SUMMARY THOUGHTS 11 ▪ Solid start to 2024 • Executing on enterprise initiatives • Encouraging signs that industrial activity has stabilized • Taking pragmatic view of how the year unfolds ▪ Delivering on commitments to shareholders • Lowered gross debt and repurchased shares in Q1 • Committed to exe
Slide 12: © 2024 Gates Corporation. All rights reserved.
12 © 2024 Gates Corporation. All rights reserved.
Slide 13: Appendix
APPENDIX © 2024 Gates Corporation. All rights reserved.
Slide 14: Adjusted EPS – Summary Walk
Q1 2024 ADJUSTED EPS – SUMMARY WALK 14 Q1 2023 $0.25 Margin improvement supported by pricing, OPERATING PERFORMANCE 0.10 initiatives and favorable mix Lower interest expense combined with NET INTEREST EXPENSE 0.02 higher interest income on cash and short- term investment INCOME TAX EXPENSE (0.03) Di
Slide 15: Reconciliations – Core Revenue Growth
RECONCILIATIONS – CORE REVENUE GROWTH 15 (USD in millions) Power Transmission Fluid Power Q1 2024 Reconciliation of Core Revenue Growth Net sales for the quarter ended March 30, 2024 (1) $ 532.8 $ 329.8 $ 862.6 Impact on net sales of movements in currency rates 5.9 (3.1) 2.8 Core revenue for the qua
Slide 16: Reconciliations – Adjusted EBITDA & Net Leverage
RECONCILIATIONS – ADJUSTED EBITDA & NET LEVERAGE 16 (USD in millions) Q1 2024 Q1 2023 LTM Q1 2024 LTM Q1 2023 (1) During the three and twelve months ended March 30, 2024, inventory impairments and Reconciliation to Adjusted EBITDA adjustments included $13.9 million and $20.2 Net Income from Continui
Slide 17: Segment Adjusted EBITDA Margin
Q1 2024 SEGMENT ADJUSTED EBITDA MARGIN 17 (USD in millions) QTD Q1 2024 QTD Q1 2023 Change Reconciliation to Adjusted EBITDA Margin and Incremental Margin Power Transmission Net Sales $ 532.8 $ 548.1 $ (15.3) Power Transmission Adjusted EBITDA $ 119.0 $ 107.7 $ 11.3 Adjusted EBITDA Margin 22.3% 19.6
Slide 18: Reconciliations – Adjusted Net Income
RECONCILIATIONS – ADJUSTED NET INCOME 18 (USD in millions, except share numbers and per share amounts) Q1 2024 Q1 2023 LTM Q1 2024 LTM Q1 2023 (1) During the three and twelve months ended March 30, 2024, inventory impairments and Reconciliation to Adjusted Net Income adjustments included $13.9 milli
Slide 19: Reconciliations – Free Cash Flow & Free Cash Flow Conversion
RECONCILIATIONS – FREE CASH FLOW & FREE CASH FLOW 19 CONVERSION (USD in millions) Q1 2024 Q1 2023 LTM Q1 2024 LTM Q1 2023 Reconciliation of Free Cash Flow Net Cash (Used in) Provided By Operating Activities $ (21.0) $ 52.5 $ 407.5 $ 423.7 Capital Expenditures (1) (18.1) (14.6) (74.9) (83.6) Free Cas
Slide 20: Reconciliations – ROIC & Working Capital as % of LTM Sales
RECONCILIATIONS – RETURN ON INVESTED CAPITAL (ROIC) 20 & WORKING CAPITAL AS A % OF LTM SALES (USD in millions) LTM Q1 2024 LTM Q1 2023 Return On Invested Capital (ROIC) LTM Adjusted EBITDA $ 768.1 $ 698.3 LTM Total depreciation and amortization (217.6) (216.6) LTM Amortization of intangible assets a