Slide 1: Q2 2020 Earnings Presentation
Q2 2020 AUGUST 4, 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: Q2 2020 Overview
Q2 2020 OVERVIEW 3 Employee safety is our top priority Preserved operational continuity Improved decremental margins Maintained flexibility to respond to changes in demand Restructuring program on plan Continued momentum with product portfolio revitalization Key regions and end markets
Slide 4: Q2 2020 Financial Performance
Q2 2020 FINANCIAL PERFORMANCE 4 USD in millions NET SALES ADJUSTED EBITDA ADJUSTED EPS (1) $810 $165 $0.26 $577 (26.4%) $83 Core 20.4% 14.4% (2.4%) Margin Margin FX $0.03 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 China returned to growth, 35% decremental margin(2) Adjusted EPS decline driven b
Slide 5: Regional Performance
REGIONAL PERFORMANCE 5 China returned to North America EMEA Greater China growth in May and Core Growth Core Growth Core Growth Q2 REVENUE June (28%) (30%) 2% China Americas & EMEA 15% showing sequential 10% EA&I improvement from N. America 49% April lows; 23% replacement markets South America E
Slide 6: Power Transmission
POWER TRANSMISSION 6 Q2 Summary: Carbon Drive – Personal Mobility Solutions Sequential improvement throughout the quarter Gates recently launched a number of • China returned to growth, driven by solid performance in industrial end new Carbon Drive belts, sprockets markets and cranksets, expanding
Slide 7: Fluid Power
FLUID POWER 7 Q2 Summary: China – Positioned for Long-Term Growth Sequential improvement throughout the quarter in all regions • China returned to growth, aided by the Construction end market Gates is realizing benefits from the • North America least impacted, result of larger presence in the auto
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 $288 150% Conversion $943 20.7% $836 62% $219 Conversion New Capacity Capex 14.6% 49% Conversion $173 29.2% 30.3% Q2 2019 LTM Q2 2020 LTM Q2 2019 LTM Q2 2020 LTM Q2 2019 LTM Q2 2020 LTM Sign
Slide 9: Liquidity
LIQUIDITY 9 USD in millions $1,055 FINANCIAL COVENANTS RCF $185 Revolving credit facility (RCF) • Can be drawn up to 30% with no financial covenants • >30% draw requires senior secured net leverage <7.15x credit facility EBITDA (3.5x as of Q2 2020) ABL $230 1 Asset-backed loan (ABL) • Can be dra
Slide 10: 2020 Framework
2020 FRAMEWORK 10 Q3 and Q4 expected to reflect sequential Cost actions improvement • Previously initiated $40M restructuring program • Absent broad re-implementation of movement progressing as planned restrictions, Q3 core revenue anticipated to • Compressible/discretionary spend reductions of
Slide 11: Summary
SUMMARY 11 Solid execution in unprecedented economic environment Posture shifting to respond to expectations of continued recovery • Trends suggest end of extended downturn within sight • Improved, more flexible operational footprint Winning business with new products Resilient business that
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) Q2 2020 Q2 2019 LTM Q2 2020 LTM Q2 2019 Reconciliation to Adjusted EBITDA Net (Loss) Income from Continuing Operations $ (27.8) $ 26.7 $ 75.0 $ 781.2 Adjusted for: Income tax expense (benefit) 0.6 37.5 (9.2) (493.6) Net interest and other expens
Slide 15: Reconciliations – Adjusted Net Income
RECONCILIATIONS – ADJUSTED NET INCOME 15 (USD in millions, except share numbers and per share amounts) Q2 2020 Q2 2019 LTM Q2 2020 LTM Q2 2019 Reconciliation to Adjusted Net Income Net (Loss) Income Attributable to Shareholders $ (22.4) $ 21.5 $ 68.1 $ 770.7 Adjusted for: Loss on disposal of discont
Slide 16: Reconciliations – Free Cash Flow and Free Cash Flow Conversion
RECONCILIATIONS – FREE CASH FLOW AND FREE CASH 16 FLOW CONVERSION (USD in millions) Q2 2020 Q2 2019 LTM Q2 2020 LTM Q2 2019 Reconciliation of Free Cash Flow Net Cash Provided by Operations $ 40.5 $ 111.5 $ 356.7 $ 283.4 Capital Expenditures (1) (12.7) (19.2) (68.6) (110.6) Free Cash Flow $ 27.8 $ 92
Slide 17: Reconciliations – Return on Invested Capital (ROIC)
RECONCILIATIONS – RETURN ON INVESTED CAPITAL (ROIC) 17 (USD in millions) Q2 2020 Q2 2019 Return On Invested Capital (ROIC) LTM Adjusted EBITDA $ 484.1 $ 697.9 LTM Total depreciation and amortization (219.5) (221.2) LTM Amortization of intangible assets arising from the 2014 acquisition of Gates 117.