Slide 1: Q1 2023 Earnings Presentation
Q1 2023 MAY 4, 2023 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: Q1 2023 Key Highlights
Q1 2023 KEY HIGHLIGHTS 3 ▪ Revenue above mid-point of Q1 guidance • Posted mid-single digit core growth; estimate cybersecurity event impacted core growth by ~150 bps • EMEA growth of 10%; all regions outside of China posted positive core growth ▪ Strong margin expansion of 180 bps • Continued solid
Slide 4: Q1 2023 Financial Performance
Q1 2023 – FINANCIAL PERFORMANCE 4 $898M 4% Core Growth YoY ▪ ▪ Solid growth in most end markets F/X was a 3.5% headwind Net Sales $175M 19.4% Adjusted EBITDA margin ▪ ▪ YoY margin expansion of 180 bps Price/cost position in balance Adjusted EBITDA ▪ Gross margin expanded on supply chain stabilizatio
Slide 5: Q1 2023 Segment Results
Q1 2023 – SEGMENT RESULTS 5 PERFORMANCE HIGHLIGHTS POWER TRANSMISSION NET SALES $548M ▪ Healthy growth in Energy, Construction and Personal Mobility offset China COVID pressure ▪ Polymer supply normalizing ADJUSTED EBITDA $108M ▪ Booked significant wins in Personal Mobility ▪ Margin expansion driven
Slide 6: Q1 2023 Regional Core Revenue Performance
Q1 2023 – REGIONAL CORE REVENUE PERFORMANCE 6 Total Gates +4% 9% Greater China 10% EA&I North 48% REVENUE +10% America 28% EMEA EMEA +2% (6%) 5% North Greater America China South America +8% +8% South East Asia & EMEA sales remained robust; America India China sales gained momentum as quarter progre
Slide 7: Q1 2023 Adjusted EPS Walk
Q1 2023 ADJUSTED EPS WALK 7 $0.06 ($0.03) ($0.06) $0.26 $0.02 $0.25 Costs from Cyber Event* Q1 2022 Adj. EPS Operating Performance Interest Tax Other Q1 2023 Adj. EPS * Non-recurring costs related to the cybersecurity incident added back to adjusted EPS. STRONG OPERATIONAL IMPROVEMENT MITIGATED BY H
Slide 8: Q1 2023 Capital Efficiency & Cash Flow
Q1 2023 – CAPITAL EFFICIENCY & CASH FLOW 8 ▪ Significant favorable swing in working $38M Free Cash Flow Seasonally strong cash conversion ▪ capital use vs. Q1 2022 LTM Free Cash Flow Conversion approximated 105% 2.7x Net Leverage Net leverage ratio fell 0.5x YoY ▪ ▪ First time under 3x for Q1 as a p
Slide 9: 2023 Outlook – Reiterating Full Year Guidance
2023 OUTLOOK – REITERATING FULL YEAR GUIDANCE 9 FULL YEAR 2023 CORE FREE CASH REVENUE ADJUSTED CAPITAL FLOW GROWTH EBITDA ADJUSTED EPS EXPENDITURES CONVERSION 1% – 5% $700M – $750M $1.13 – $1.23 ~$100M 100% Q2 ESTIMATES ▪ Revenues: $915M - $945M ▪ Low single digit core growth vs. Q2 2022 ▪ Slight F/
Slide 10: Summary Thoughts
SUMMARY THOUGHTS 10 ▪ Solid execution to start 2023 • Resilient performance including unanticipated challenges from cybersecurity incident • More stability in global supply chain resulted in better operational performance • Focused on driving improved service levels ▪ Balance sheet/capital returns •
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
Q1 2023 ADJUSTED EPS – SUMMARY WALK 13 Q1 2022 $0.26 Improved operating performance from OPERATING PERFORMANCE 0.06 pricing and margin improvement Higher income tax expense from higher INCOME TAX EXPENSE (0.06) pre-tax income combined with decrease in one-time tax benefit Other (0.01) Q1 2023 $0.25
Slide 14: Reconciliations – Core Revenue Growth
RECONCILIATIONS – CORE REVENUE GROWTH 14 (USD in millions) Power Transmission Fluid Power Q1 2023 Reconciliation of Core Revenue Growth Net sales for the quarter ended April 1, 2023 (1) $ 548.1 $ 349.6 $ 897.7 Impact on net sales of movements in currency rates 25.4 5.7 31.1 Core revenue for the quar
Slide 15: Reconciliations – Adjusted EBITDA and Net Leverage
RECONCILIATIONS – ADJUSTED EBITDA AND NET LEVERAGE 15 (USD in millions) Q1 2023 Q1 2022 LTM Q1 2023 LTM Q1 2022 Reconciliation to Adjusted EBITDA Net Income from Continuing Operations $ 30.9 $ 37.4 $ 236.4 $ 292.2 Adjusted for: Income tax expense (benefit) 15.3 (2.2) 32.4 (2.7) Net interest and othe
Slide 16: Reconciliations – Adjusted Net Income
RECONCILIATIONS – ADJUSTED NET INCOME 16 (USD in millions, except share numbers and per share amounts) Q1 2023 Q1 2022 LTM Q1 2023 LTM Q1 2022 Reconciliation to Adjusted Net Income Net Income Attributable to Shareholders $ 26.4 $ 30.9 $ 216.3 $ 260.7 Adjusted for: Loss on the disposal of discontinue
Slide 17: Reconciliations – Free Cash Flow & Free Cash Flow Conversion
RECONCILIATIONS – FREE CASH FLOW & FREE CASH FLOW 17 CONVERSION (USD in millions) Q1 2023 Q1 2022 LTM Q1 2023 LTM Q1 2022 Reconciliation of Free Cash Flow Net Cash Provided By (Used In) Operating Activities $ 52.5 $ (105.4) $ 423.7 $ 301.0 Capital Expenditures (1) (14.6) (18.0) (83.6) (84.8) Free Ca
Slide 18: Reconciliations – Return on Invested Capital (ROIC)
RECONCILIATIONS – RETURN ON INVESTED CAPITAL (ROIC) 18 (USD in millions) Q1 2023 Q1 2022 Return On Invested Capital (ROIC) LTM Adjusted EBITDA $ 698.3 $ 696.3 LTM Total depreciation and amortization (216.6) (221.9) LTM Amortization of intangible assets arising from the 2014 acquisition of Gates 115.