Gates Industrial (GTES) Q2 2026 earnings summary

Executive summary

• Achieved record quarterly sales of $942 million (up 6.6% year-over-year), with core revenue growth of 4.9% and record adjusted EPS, driven by strong industrial OEM and aftermarket channels.

• Adjusted EBITDA reached $211 million (22.5% margin), exceeding expectations, with adjusted EPS up 13% to $0.44 and net income rising to $178 million.

• Raised full-year 2026 guidance for core sales growth, adjusted EBITDA, and adjusted EPS, reflecting improved demand trends and double-digit adjusted EPS growth expectations.

• Completed redomiciliation to Bermuda in July 2026, resulting in a significant discrete tax benefit and a lower effective tax rate for the quarter.

• Positioned to capitalize on early industrial recovery, with strategic initiatives in personal mobility, data centers, and industrial chain-to-belt conversions.

Financial highlights

• Net sales reached $942 million in Q2 2026 (+6.6% YoY), with core growth of 4.9%.

• Adjusted EBITDA was $211 million (22.5% margin); adjusted gross margin improved by 50 bps to 41.8%.

• Free cash flow for the quarter was $60 million; trailing 12-month free cash flow conversion at 94%.

• Net leverage ratio declined to 1.8x, a 0.4x improvement year-over-year.

• ROIC reached 21.6%, up 30 basis points year-over-year.

Outlook and guidance

• Full-year 2026 guidance raised: core sales growth 2.5%-4.5%, adjusted EBITDA $800M-$830M, adjusted EPS $1.62-$1.70.

• Q3 2026 sales expected at $880M-$920M, with core growth at ~5.5% at midpoint.

• Adjusted EBITDA margin target for H2 2026 set at 23.5%.

• Second half 2026 core sales growth expected at 6% year-over-year, up from 1% in first half.

• Capital expenditures for 2026 expected at ~$120 million; free cash flow conversion to remain above 90%.