Gates Industrial Corporation Plc · NYSE:GTES
Gates Industrial — Q3 2023 Earnings Presentation
19 slides from Gates Industrial's earnings presentation, Nov 3, 2023
Slide 1: Q3 2023 Earnings Presentation
Q3 2023 NOVEMBER 3, 2023 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: Q3 2023 Key Highlights
Q3 2023 KEY HIGHLIGHTS 3 ▪ Generated record revenue and adjusted EPS for a third quarter • Core growth performance consistent with guidance midpoint • Automotive outperformed industrial markets ▪ Adjusted EBITDA margin of 21.7% • YoY expansion of 110 bps • Gross margin +330 bps fueled by enterprise
Slide 4: Q3 2023 Financial Performance
Q3 2023 – FINANCIAL PERFORMANCE 4 $873M Core Growth In Line with Expectations ▪ ▪ Broad automotive growth Industrial down, with China softer than anticipated Net Sales ▪ Replacement markets resilient $189M 21.7% Adjusted EBITDA margin ▪ ▪ Gross margin up 330 bps vs. Q3 2022 EBITDA margin expansion o
Slide 5: Q3 2023 Segment Results
Q3 2023 – SEGMENT RESULTS 5 PERFORMANCE HIGHLIGHTS POWER TRANSMISSION NET SALES $536M +1% Core YoY ▪ Solid automotive growth; China weaker than expected and Mobility de-stocking ▪ Personal Mobility business pipeline robust ADJUSTED EBITDA $116M ▪ Margin expansion driven by operational improvements a
Slide 6: Q3 2023 Regional Core Revenue Performance
Q3 2023 – REGIONAL CORE REVENUE PERFORMANCE 6 Total Gates Greater China (0.5%) 9% EA&I 10% North REVENUE 50% America +3.9% 25% (2.0%) EMEA (8.6%) 5% EMEA North Greater America China South America Note: Figures don’t add due to rounding. +2.7% +3.7% • NA: Weaker industrial offset solid South auto per
Slide 7: Adjusted EPS Walk
Q3 2023 ADJUSTED EPS WALK 7 $0.04 ($0.02) $0.02 $0.35 $0.31 Q3 2022 Adj. EPS Operating Performance Net Interest Expense Other Q3 2023 Adj. EPS STRONGER PROFITABILITY WAS PRIMARY DRIVER OF YEAR-OVER-YEAR GROWTH © 2023 Gates Corporation. All rights reserved.
Slide 8: Q3 2023 Capital Efficiency & Cash Flow
Q3 2023 – CAPITAL EFFICIENCY & CASH FLOW 8 ▪ Higher adjusted EBITDA margin rate coupled $90M Free Cash Flow 95.6% conversion ▪ with moderating trade working capital Includes $11M YoY increase in cash interest ▪ LTM FCF conversion = 138.2% 2.6x Net Leverage Net leverage ratio down 0.6x YoY ▪ ▪ Paid d
Slide 9: Updated 2023 Guidance
UPDATED 2023 GUIDANCE 9 PRIOR 2023 UPDATED 2023 B/W (Midpoint) CORE REVENUE GROWTH 0 to +2% 0 to +2% No Change ADJUSTED EBITDA $710M – $740M $725M – $735M +$5M ADJUSTED EPS $1.18 – $1.24 $1.22 – $1.28 +$0.04 CAPITAL EXPENDITURES <$100M <$85M Lower FREE CASH FLOW CONVERSION 100%+ 100%+ No Change Q4 C
Slide 10: Summary Thoughts
SUMMARY THOUGHTS 10 ▪ Focused execution driving improved performance in more challenging growth environment • Strong operational performance fueling gross margin expansion • Advancing supply chain initiatives to improve service, productivity and working capital management • Continue to assess restru
Slide 11: © 2023 Gates Corporation. All rights reserved.
11 © 2023 Gates Corporation. All rights reserved.
Slide 12: Appendix
APPENDIX © 2023 Gates Corporation. All rights reserved.
Slide 13: Adjusted EPS – Summary Walk
Q3 2023 ADJUSTED EPS – SUMMARY WALK 13 Q3 2022 $0.31 Improved operating performance from OPERATING PERFORMANCE 0.04 pricing and margin improvement NET INTEREST EXPENSE (0.02) Higher interest rates OTHER 0.02 Primarily share count impact Q3 2023 $0.35 © 2023 Gates Corporation. All rights reserved.
Slide 14: Reconciliations – Core Revenue Growth
RECONCILIATIONS – CORE REVENUE GROWTH 14 © 2023 Gates Corporation. All rights reserved. (1) Throughout this document the terms "net sales" and "revenue" are used interchangeably in reference to the GAAP measure "net sales."
Slide 15: Reconciliations – Adjusted EBITDA and Net Leverage
RECONCILIATIONS – ADJUSTED EBITDA AND NET LEVERAGE 15 (1) During the three and twelve months ended September 30, 2023, inventory impairments and adjustments included $2.1 million and $7.2 million, respectively, for the reversal of the adjustment to remeasure certain inventories on a Last-in- First-o
Slide 16: Segment Adjusted EBITDA & Margin
Q3 2023 SEGMENT ADJUSTED EBITDA & MARGIN 16 (USD in millions) Q3 2023 Q3 2022 Change Reconciliation to Adjusted EBITDA Margin and Incremental Margin Power Transmission Net Sales $ 536.4 $ 522.5 $ 13.9 Power Transmission Adjusted EBITDA $ 116.5 $ 101.9 $ 14.6 Adjusted EBITDA Margin 21.7% 19.5% 220 bp
Slide 17: Reconciliations – Adjusted Net Income
RECONCILIATIONS – ADJUSTED NET INCOME 17 (USD in millions, except share numbers and per share amounts) (1) During the three and twelve months ended Q3 2023 Q3 2022 LTM Q3 2023 LTM Q3 2022 September 30, 2023, inventory impairments and Reconciliation to Adjusted Net Income adjustments included $2.1 mi
Slide 18: Reconciliations – Free Cash Flow & Free Cash Flow Conversion
RECONCILIATIONS – FREE CASH FLOW & FREE CASH FLOW 18 CONVERSION (USD in millions) Q3 2023 Q3 2022 LTM Q3 2023 LTM Q3 2022 Reconciliation of Free Cash Flow Net Cash Provided By Operating Activities $ 107.8 $ 100.6 $ 538.7 $ 187.7 Capital Expenditures (1) (17.4) (27.6) (68.5) (88.7) Free Cash Flow $ 9
Slide 19: Reconciliations – Return on Invested Capital (ROIC)
RECONCILIATIONS – RETURN ON INVESTED CAPITAL (ROIC) 19 (USD in millions) Q3 2023 Q3 2022 Return On Invested Capital (ROIC) LTM Adjusted EBITDA $ 727.2 $ 654.2 LTM Total depreciation and amortization (215.6) (219.3) LTM Amortization of intangible assets arising from the 2014 acquisition of Gates 115.