Gates Industrial Corporation plc

Good morning and welcome to the Gates Industrial Corporation Q3 2022 earnings call. All callers are in a listen-only mode. Following the presentation, there will be a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. As a reminder, today's conference is being recorded. It is now my pleasure to turn the call over to Bill Welke, Head of Investor Relations. Please go ahead, Mr. Welke.

Thank you for joining us this morning on our third quarter 2022 earnings call. I'll briefly cover our non-GAAP and forward-looking language before passing the call over to our CEO, Ivo Jurek, who will be followed by Brooks Mallard, our CFO. Before the market opened today, we published our third quarter results. A copy of the release is available on our website at investors.gates.com. Our call this morning is being webcast. and is accompanied by a slide presentation. On this call, we will refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliations of historical non-GAAP financial measures are included in our earnings release and the slide presentation, each of which is available in the investor relations section of our website. Please refer now to slide two of the presentation which provides a reminder that our remarks will include forward-looking statements within the meaning of the private securities litigation reform act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward-looking statements. These risks include, among others, matters that we have described in our most recent annual report on Form 10-K and in other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements. With that, I'll turn things over to Ivo.

Thank you, Bill. Good morning, everyone, and thank you for joining our call today. Before we begin, I would like to take this opportunity and thank Bill for his support over the last four years in helping Gates to stand up and operationalize our investment relations structure as a public company. Bill is moving on to a new role at a different company upon completion of this quarter's earning cycle, and we will be making further announcements about the IR leadership role transition over the next month or so. With that, I'll begin on slide three of the presentation. Our global teams executed well and delivered high single-digit core growth while facing an operating environment that was incrementally more challenging. The underlying demand for our products remained positive with largely stable order rates across most of our markets and a book-to-bill ratio that remained well above one. Our backlog stayed elevated primarily as a result of incremental raw material availability challenges and labor disruptions, as well as stable order rates. Our profitability improved sequentially in a quarter. While inflation moderated in certain areas, it remained elevated overall, and we saw notable acceleration of energy and specific petrochemical input costs. The inflation in a quarter was higher than our expectations. However, the pricing actions we have implemented allowed us to exit the quarter in a margin neutral price cost position. While the availability of some supply chain inputs improved, we continue to face supply disruptions associated with highly engineered polymers in particular, and we anticipate the situation continuing in the fourth quarter. While we expect these disruptions to moderate next year, we are updating our outlook for 2022 to reflect their impact as well as that of the incremental inflation and additional effects. Although end market demand remains largely supportive in light of the current macro uncertainty, we are initiating the next phase of our footprint optimization plan, the details of which Brooks will cover later in a presentation.