Gates Industrial (GTES) Q1 2026 earnings summary

Executive summary

• Q1 2026 net sales were $851.1 million, up 0.4% year-over-year, with core sales down 2.9% and strong order rates; performance was resilient despite ERP transition and fewer working days, with Europe stabilizing post-ERP and operational efficiency expected to normalize in Q2.

• Adjusted EBITDA was $177.4 million (20.8% margin), down year-over-year due to ERP transition and lower volumes; adjusted EPS was $0.35, with a $0.07 headwind from ERP and fewer working days.

• Net income attributable to shareholders was $59.7 million, or $0.23 per diluted share.

• Announced acquisition of Timken's industrial belt business, expected to close in Q3 2026, to strengthen Power Transmission in North America.

• Positioned for improvement in growth trends and adjusted EBITDA margin in the second half of the year, supported by robust order intake and ongoing operational initiatives.

Financial highlights

• Q1 net sales were $851.1 million, with core sales down 2.9% year-over-year.

• Adjusted EBITDA was $177.4 million (20.8% margin), down 130 basis points year-over-year.

• Adjusted gross margin was 40.5%; gross profit was $338.0 million.

• Adjusted EPS was $0.35; diluted EPS was $0.23.

• Free cash flow conversion exceeded 90% over the last 12 months; cash from operating activities increased year-over-year.

Outlook and guidance

• Full-year 2026 guidance reiterated: core sales growth of 1% to 4%, adjusted EBITDA of $775–$835 million, adjusted EPS of $1.52–$1.68, and free cash flow conversion above 90%.

• Q2 2026 revenue guidance is $905–$945 million, with core growth at 3.5% year-over-year at the midpoint.

• Adjusted EBITDA margin for Q2 expected to decline 30 basis points year-over-year due to ERP and footprint optimization, with margin approaching 23.5% in the second half.

• Continued investments in footprint optimization, restructuring, and system implementation are planned for the first half of 2026.