Gates Industrial Corporation Plc · NYSE:GTES
Gates Industrial — Q3 2020 Earnings Presentation
17 slides from Gates Industrial's earnings presentation, Nov 3, 2020
Slide 1: Q3 2020 Earnings Presentation
Q3 2020 NOVEMBER 3, 2020 EARNINGS PRESENTATION
Slide 2: Legal Disclaimers
LEGAL DISCLAIMERS 2 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 1934, as amended. In some ca
Slide 3: Q3 2020 Overview
Q3 2020 OVERVIEW 3 Safety of employees and communities remains top priority Business model demonstrating its resilience Automotive replacement channel leading the recovery Operational initiatives driving gross margin expansion Innovation efforts expanding across product portfolio Well po
Slide 4: Q3 2020 Financial Performance
Q3 2020 FINANCIAL PERFORMANCE 4 USD in millions NET SALES ADJUSTED EBITDA ADJUSTED EPS (1) $747 $0.26 $712 $145 $140 $0.22 (3.6%) Core 19.4% 19.7% (1.0%) Margin Margin FX Q3 2019 Q3 2020 Q3 2019 Q3 2020 Q3 2019 Q3 2020 23% sequential Gross margin expansion driving Adjusted EPS growth of 18% accelera
Slide 5: Q3 Regional Performance – Core Revenue
Q3 REGIONAL PERFORMANCE – CORE REVENUE 5 Q3 CORE REVENUE China North America EMEA Greater China 12% YoY (5.9%) YoY +0.1% YoY +9.1% 11% EA&I Seq +21.6% Seq +30.5% Seq +7.3% N. America 47% 26% 4% EMEA S. America South America East Asia & India YoY (2.7%) YoY (13.6%) Seq +34.6% Seq +22.2% Total Gates Y
Slide 6: Power Transmission
POWER TRANSMISSION 6 Q3 SUMMARY CONVERSIONS TO BELTS PROGRESSING Sequential improvement in all regions • Core growth in China and Europe, significant improvement in North America to nearly flat core revenue Resilient business, with sales into replacement channels returning to core growth • Autom
Slide 7: Fluid Power
FLUID POWER 7 Q3 SUMMARY STATIONARY HYDRAULICS IN FOCUS Sequential improvement in all regions • Core growth in China accelerated significantly from Q2 New products enabled Sales into replacement channels outperforming first-fit a recent stationary hydraulics design win • Sales into first-fit cha
Slide 8: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW 8 USD in millions, except multiple data TRADE WORKING CAPITAL FREE CASH FLOW ROIC $256 $913 New Capacity $857 Capex 19.7% 14.2% $230 $261 28.9% 31.5% Q3 2019 LTM Q3 2020 LTM Q3 2019 LTM Q3 2020 LTM Q3 2019 LTM Q3 2020 LTM Reduced investment in 128% Free Cash Flow Q2 ’20 n
Slide 9: Liquidity
LIQUIDITY 9 USD in millions Total $1,105 FINANCIAL COVENANTS RCF $185 Revolving credit facility (RCF) • Undrawn – can be drawn up to 30% with no financial covenants ABL $247 1 • >30% draw requires senior secured net leverage <7.15x credit facility EBITDA (3.6x as of Q3 2020) Asset-backed loan (A
Slide 10: 2020 Framework
2020 FRAMEWORK 10 Q4 expected to reflect continued sequential Solid cash flow generation improvement • Investing in working capital to support increased • Absent broad re-implementation of movement demand restrictions, change in Q4 core revenue anticipated • Capex of ~$70M expected for the full
Slide 11: Summary
SUMMARY 11 Strong execution through historically challenging market conditions Business firmly on trajectory of recovery Better positioned today than when exiting previous downturns • Optimized cost structure, poised for growth • More efficient and flexible manufacturing footprint with greater
Slide 12: ©2018 Gates Inc. All rights reserved.
12 ©2018 Gates Inc. All rights reserved.
Slide 13: Appendix
Gates) APPENDIX CLL
Slide 14: Reconciliations – Adjusted EBITDA
RECONCILIATIONS – ADJUSTED EBITDA 14 (USD in millions) Q3 2020 Q3 2019 LTM Q3 2020 LTM Q3 2019 Reconciliation to Adjusted EBITDA Net Income from Continuing Operations $ 45.7 $ 37.5 $ 83.2 $ 751.7 Adjusted for: Income tax (benefit) expense (16.0) 4.4 (29.6) (496.4) Net interest and other expenses 34.
Slide 15: Reconciliations – Adjusted Net Income
RECONCILIATIONS – ADJUSTED NET INCOME 15 (USD in millions, except share numbers and per share amounts) Q3 2020 Q3 2019 LTM Q3 2020 LTM Q3 2019 Reconciliation to Adjusted Net Income Net Income Attributable to Shareholders $ 41.9 $ 35.5 $ 74.5 $ 746.3 Adjusted for: Loss on disposal of discontinued ope
Slide 16: Reconciliations – Free Cash Flow and Free Cash Flow Conversion
RECONCILIATIONS – FREE CASH FLOW AND FREE CASH 16 FLOW CONVERSION (USD in millions) Q3 2020 Q3 2019 LTM Q3 2020 LTM Q3 2019 Reconciliation of Free Cash Flow Net Cash Provided by Operations $ 55.9 $ 81.4 $ 331.2 $ 316.4 Capital Expenditures (1) (18.0) (16.4) (70.2) (86.3) Free Cash Flow $ 37.9 $ 65.0
Slide 17: Reconciliations – Return on Invested Capital (ROIC)
RECONCILIATIONS – RETURN ON INVESTED CAPITAL (ROIC) 17 (USD in millions) Q3 2020 Q3 2019 Return On Invested Capital (ROIC) LTM Adjusted EBITDA $ 479.1 $ 661.7 LTM Total depreciation and amortization (218.0) (222.6) LTM Amortization of intangible assets arising from the 2014 acquisition of Gates 117.