Gates Industrial (GTES) 19th Annual Global Transportation & Industrials Conference summary

Market environment and demand trends

• Global business conditions are constructive despite geopolitical turmoil, with coordinated expansion in global PMIs and four months of ISM above 50, indicating underlying demand strength.

• Inventory levels are stable, with no significant build-up, and order intake remains strong, supporting guidance midpoint.

• 80% of the portfolio is in expansionary markets, while auto OE (7% of revenue), energy, and on-highway segments are currently flat or down but expected to improve in the second half and into 2026.

• April and May performance tracked positively, with expectations for continued improvement as pent-up demand is released.

Financial performance and outlook

• Organic revenue was down 2.7% in Q1, but adjusting for sell-in pressure and ERP transition, underlying growth was about 3%.

• Q2 organic growth guidance of 3.5% is considered attainable, with further upside possible as inflationary pricing impacts are expected to be more significant in Q3.

• Second half revenue growth of 4.5% is targeted, aided by recovery in on-highway and energy, and a regained business day in Q4.

• EBITDA margin of 23.5% for the second half is seen as very achievable, with a path to 24% by 2027 supported by restructuring benefits and anticipated volume growth.

Strategic initiatives and growth drivers

• Automotive OEM exposure has been halved over recent years, with growth maintained through organic initiatives such as personal mobility and chain-to-belt conversions.

• Personal mobility business is expected to grow 20–30% annually through 2028, reaching or exceeding its previous peak.

• Liquid cooling for data centers is scaling up, with $100–200 million revenue opportunity projected by 2028; majority of data centers expected to adopt this technology by 2027–2028.

• Industrial chain-to-belt conversion and new technologies are expected to become more impactful from 2027–2028, targeting cost competitiveness and new OEM opportunities.

• Combined cyclical and secular growth drivers are expected to deliver organic growth above 3.5% through the cycle.