Gates Industrial Corporation Plc · NYSE:GTES
Gates Industrial — Q4 2024 Earnings Presentation
31 slides from Gates Industrial's earnings presentation, Feb 6, 2025
Slide 1: Q4 2024 Earnings Presentation
Q4 2024 FEBRUARY 6, 2025 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: Full Year 2024 Review
FULL YEAR 2024 REVIEW 3 STRONG EXECUTION 2024A YoY Change Revenue $3.41B (4.5%) ▪ Generated record adjusted EBITDA dollars; sizable Adjusted EBITDA $761M 2% adjusted EBITDA margin improvement YoY while encountering mid-single digit volume decline Gross Margin 39.9% 180 bps Adjusted EBITDA Margin 22.
Slide 4: 2024 Adjusted EPS Walk
2024 ADJUSTED EPS WALK 4 $0.06 ($0.10) $0.06 ($0.05) $1.39 $0.08 $1.34 2023 Adjusted EPS Operating Income Interest Expense Lower Share Count Tax Other Items 2024 Adjusted EPS OPERATING PERFORMANCE AND CAPITAL DEPLOYMENT SUPPORTED 2024 EARNINGS GROWTH © 2025 Gates Corporation. All rights reserved.
Slide 5: Q4 2024 Key Highlights
Q4 2024 KEY HIGHLIGHTS 5 ▪ Core revenue performance in line with expectations • Replacement increased; Auto Replacement grew mid-single digits • OEM channel declined impacted by weak Agriculture and Construction; Personal Mobility grew 20% ▪ Adjusted EBITDA margin increased modestly • Adjusted EBITD
Slide 6: Q4 2024 – Financial Performance
Q4 2024 – FINANCIAL PERFORMANCE 6 $829M Core Revenue Performance Consistent with Expectations ▪ ▪ Automotive growth; Industrial decreased Modest growth in Replacement channels Net Sales $181M 21.8% Adjusted EBITDA margin ▪ ▪ Gross margin leading profitability improvement Enterprise initiatives more
Slide 7: Segment Highlights
SEGMENT HIGHLIGHTS 7 ADJ. EBITDA NET SALES QUARTER HIGHLIGHTS MARGIN Q4 2024 POWER TRANSMISSION ▪ Personal Mobility recovery underway (up $520.0M 21.7% ~20% YoY); soft agriculture and commercial (0.9%) (30) bps on-road demand Core Growth ∆ EBITDA Margin ▪ Auto replacement increased low single 2024 d
Slide 8: Regional Core Revenue Performance
REGIONAL CORE REVENUE PERFORMANCE 8 Total Gates Greater China Q4 (2.6%) 10% 2024 (3.5%) North 11% EA&I America 48% Q4 North America Greater China REVENUE Q4 (2.8%) Q4 +3.7% 26% 2024 (3.8%) 2024 +1.3% 5% EMEA EMEA South America Q4 (6.2%) ▪ NA: Industrial OEM demand challenges 2024 (6.9%) more than of
Slide 9: Q4 2024 Adjusted EPS Walk
Q4 2024 ADJUSTED EPS WALK 9 $0.37 $0.36 $0.01 ($0.06) $0.04 Q4 2023 Adj. EPS Volume Enterprise Initiatives Lower Share Count & Other Items Q4 2024 Adj. EPS OPERATIONAL FOCUS LESSENED PROFIT IMPACT FROM CORE SALES DECLINE; CAPITAL ALLOCATION SUPPORTED EARNINGS © 2025 Gates Corporation. All rights res
Slide 10: Q4 2024 – Capital Efficiency & Cash Flow
Q4 2024 – CAPITAL EFFICIENCY & CASH FLOW 10 $158M Free Cash Flow 168% conversion ▪ ▪ Optimizing inventory for return to growth Incremental capex deployed to footprint optimization projects and systems enhancements 2.2x Net Leverage Ratio Improved YoY and sequentially ▪ ▪ Gross debt decreased YoY Ach
Slide 11: 2025 Outlook
2025 OUTLOOK 11 FULL YEAR 2025 CORE FREE CASH REVENUE ADJUSTED CAPITAL FLOW GROWTH EBITDA ADJUSTED EPS EXPENDITURES CONVERSION (0.5%) to 3.5% $735M – $795M $1.36 – $1.52 ~$120M 90%+ KEY ASSUMPTIONS/CONSIDERATIONS Q1 ESTIMATES ▪ Core growth improves as year progresses, but no industrial demand ▪ Reve
Slide 12: Q1 2025 Adjusted EBITDA Margin Walk
Q1 2025 ADJUSTED EBITDA MARGIN WALK 12 22.7% 22.6% (70 bps) (50 bps) 22.1% 22.0% 100 bps (40 bps) Q1 2024 Adj One-Time Insurance Q1 2024 Adj Q1 2025E Q1 2025E Q1 2025E Adj EBITDA Q1 2025E F/X Impact Q1 2025E Adj. EBITDA Margin Proceeds in Q1 2024 EBITDA Margin (Ex- Volume/Mix Impact Enterprise Initi
Slide 13: 2025 Adjusted EBITDA Walk
2025 ADJUSTED EBITDA WALK 13 $ in MM ($34) $51 ($13) $765 $761 Non-Repeat of Favorable Core Growth (Incl. Price & Mix) Items Realized in 2024 Enterprise Initiatives Footprint Optimization Inflation & Investments 2024 Adjusted EBITDA Operational Items F/X Non-Recurring Items 2025E Adjusted EBITDA (Mi
Slide 14: 2025 Adjusted EPS Walk
2025 ADJUSTED EPS WALK 14 ($0.10) $0.12 $1.44 $0.03 $1.39 Core Growth (Incl. Price & Mix) Lower Interest Expense Enterprise Initiatives Lower Share Count Footprint Optimization Non-Repeat of Favorable Items Realized in 2024 Inflation & Investments 2024 Adjusted EPS Operational Items F/X Non-Recurrin
Slide 15: Investing for the Future
INVESTING FOR THE FUTURE 15 CAPITAL EXPENDITURES ADJ. EBITDA MARGIN INVESTING IN OPERATIONAL CAPABILITIES $120.0 ▪ Footprint optimization 24.5% ▪ IT systems infrastructure and $110.0 ~40 bps headwind from FX systems upgrades and Systems Investments $100.0 ▪ New product innovation Depreciation Expens
Slide 16: Expanding Margins: 2024 – Solid Progress
EXPANDING MARGINS: 2024 – SOLID PROGRESS 16 OPERATIONAL EXECUTION DRIVING MARGIN EXPANSION 2023 2024 2026E GM 38% GM ~40% GM ~42% Margin Expansion Margin Expansion Material Costs Material Material Cost Reduction Costs Material ▪ Favorable impact in 2024 Costs ▪ More savings opportunities in expected
Slide 17: Secular Growth Opportunities
SECULAR GROWTH OPPORTUNITIES 17 MOBILITY DATA CENTERS AUTO REPLACEMENT ▪ Strong design win activity in 2024 ▪ Engaged in specification process ▪ Major new channel partner added in with variety of customers North America; share gains in EMEA ▪ New Product Introductions (NPI) as well increased; new ap
Slide 18: Summary Thoughts
SUMMARY THOUGHTS 18 ▪ Executed well in a soft demand environment • Solid operational execution drove significant profit margin improvement in 2024 • Unwavering focus on customer needs o Service levels increased o Design wins grew o Expanding end market exposure to capitalize on secular trends ▪ Well
Slide 19: © 2025 Gates Corporation. All rights reserved.
19 © 2025 Gates Corporation. All rights reserved.
Slide 20: Appendix
APPENDIX © 2025 Gates Corporation. All rights reserved.
Slide 21: Underlying 2025 Market Growth Expectations
UNDERLYING 2025 MARKET GROWTH EXPECTATIONS 21 FY 2024 SALES SPLITS 2025 Underlying Global Market Growth Current Trend Expectations vs PY Personal Automotive Replacement Energy & Mobility Resources 6% 3% Automotive OEM Auto Diversified Replacement Industrial Off-Highway Industrial 19% 36% Industrial
Slide 22: Q4 2024 Adjusted EPS – Summary Walk
Q4 2024 ADJUSTED EPS – SUMMARY WALK 22 Q4 2023 $0.37 OPERATING PERFORMANCE (0.02) Core sales decline vs. prior year period NET INTEREST EXPENSE 0.01 Lower interest rate INCOME TAX EXPENSE (0.01) Higher effective tax rate LOWER SHARE COUNT AND OTHER 0.01 Lower share count and non-controlling interest
Slide 23: 2024 Adjusted Full Year EPS – Summary Walk
2024 ADJUSTED FULL YEAR EPS – SUMMARY WALK 23 2023 $1.34 OPERATING PERFORMANCE 0.08 Enterprise initiative benefits NET INTEREST EXPENSE 0.06 Lower rates and reduced debt balance LOWER SHARE COUNT 0.06 Repurchased $175 million of shares in 2024 TAX (0.10) Higher effective tax rate OTHER ITEMS (0.05)
Slide 24: Reconciliations – Core Revenue Growth
RECONCILIATIONS – CORE REVENUE GROWTH 24 (USD in millions) Power Transmission Fluid Power Q4 2024 Reconciliation of Core Revenue Growth Net sales for the quarter ended December 28, 2024 (1) $ 520.0 $ 309.4 $ 829.4 Impact on net sales of movements in currency rates 8.2 3.5 11.7 Core revenue for the q
Slide 25: Reconciliations – Adjusted EBITDA and Net Leverage
RECONCILIATIONS – ADJUSTED EBITDA AND NET LEVERAGE 25 (USD in millions) Q4 2024 Q4 2023 FY 2024 FY 2023 (1) In July 2022, Gates suspended our operations in Russia. In September, 2024, we deconsolidated the Russian subsidiary Reconciliation to Adjusted EBITDA upon loss of control and recognized a dec
Slide 26: Reconciliations – Incremental/Decremental Margin
RECONCILIATIONS – INCREMENTAL/DECREMENTAL MARGIN 26 (USD in millions) Change Incremental / Change Incremental / Q4 2024 Q4 2023 FY 2024 FY 2023 Decremental Margin Decremental Margin Reconciliation to Adjusted EBITDA Margin and Incremental / Decremental Margin Power Transmission Net Sales $ 520.0 $ 5
Slide 27: Reconciliations – Q1 2024 Adjusted EBITDA
RECONCILIATIONS – Q1 2024 ADJUSTED EBITDA 27 (USD in millions) Q1 2024 (1) During the three and twelve months ended March 30, 2024, inventory impairments and adjustments included $13.9 million and $20.2 million, respectively, for the reversal of the adjustment to remeasure Reconciliation to Adjusted
Slide 28: Reconciliations – Adjusted Net Income
RECONCILIATIONS – ADJUSTED NET INCOME 28 (USD in millions, except share numbers and per share amounts) Q4 2024 Q4 2023 FY 2024 FY 2023 Reconciliation to Adjusted Net Income Net Income Attributable to Shareholders $ 36.6 $ 62.9 $ 194.9 $ 232.9 Adjusted for: Loss on the disposal of discontinued operat
Slide 29: Reconciliations – Adjusted Net Income (Cont.)
RECONCILIATIONS – ADJUSTED NET INCOME (CONT.) 29 (1) In July 2022, Gates suspended our operations in Russia. During the three months ended September 28, 2024, we deconsolidated the Russian subsidiary upon loss of control and recognized a deconsolidation loss. (2) During the three and twelve months e
Slide 30: Reconciliations – Free Cash Flow & Free Cash Flow Conversion
RECONCILIATIONS – FREE CASH FLOW & FREE CASH FLOW 30 CONVERSION (USD in millions) Q4 2024 Q4 2023 FY 2024 FY 2023 Reconciliation of Free Cash Flow Net Cash Provided By Operating Activities $ 190.9 $ 189.3 $ 379.6 $ 481.0 Capital Expenditures (1) (33.4) (24.2) (106.7) (71.4) Free Cash Flow $ 157.5 $
Slide 31: Reconciliations – Return on Invested Capital (ROIC)
RECONCILIATIONS – RETURN ON INVESTED CAPITAL (ROIC) 31 (USD in millions) FY 2024 FY 2023 Return On Invested Capital (ROIC) LTM Adjusted EBITDA $ 761.1 $ 747.0 LTM Total depreciation and amortization (216.9) (217.5) LTM Amortization of intangible assets arising from the 2014 acquisition of Gates 115.