Gates Industrial Corporation plc

mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. I would now like to turn the conference over to Rich Quas, Vice President of Investor Relations. Rich, the floor is yours.

Greetings, and thank you for joining us on our third quarter 2025 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 2025 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 Private Security 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've described in our most recent annual report on Form 10-K and in other filings we make with the SEC, including our Q2 quarterly report on Form 10-Q that was filed in July of 2025. We disclaim any obligation to update these forward-looking statements. This quarter, we will be attending the Bayer Global Industrial Conference, the UBS Global Industrials and Transportation Conference, and the Goldman Sachs Industrials and Materials Conference, and look forward to meeting many of you. Before we start, please note all comparisons are against the prior year period unless stated otherwise. And now I'll turn the call over to Ivo.

Thank you, Rich. Good morning, everyone, and thank you for joining our call today. Let's begin on slide three of the presentations. Gates posted solid third-quarter results with positive core revenue growth of almost 2% under macro-industrial demand conditions that remain subdued. Our replacement channel grew low single digits, supported by mid-single-digit growth in automotive replacement. Our OEM sales were relatively flat. At the end market level, industrial was mixed. Globally, off-highway realized positive growth, with stabilizing demand in construction offsetting incremental weakness in North American and European agriculture. Commercial on-highway declined mid-single digits, impacted by decreasing production rates in North America. Personal mobility generated another strong quarter of growth, exceeding 20% year-on-year. Our adjusted EBITDA margin increased nicely year-over-year to 22.9%. We generated record adjusted EBITDA dollars and margin for a third quarter. Our net leverage ratio declined to 2.0 turns a 0.4 turn reduction compared to last year's third quarter. With that, we are on pace to reduce our net leverage to under two times by year end. We have updated our 2025 guidance, raising our adjusted EPS midpoint to $1.50 per share. We have maintained our full year 2025 adjusted EBITDA midpoint of $780 million, while slightly lowering our core sales growth outlook at the midpoint. Brooks will provide more color and comments about our updated guidance assumptions later in the presentation. Our board recently approved a new $300 million share repurchase authorization that will expire at the end of 2026. The new authorization replaces the prior authorization, which had over $100 million remaining. On slide four. We have heard from a number of you on the call that you would like to see an update on what is occurring in the end markets. So we have laid out an updated view of our underlying end markets and how they have progressed during 2025. Coming into the year, we did not anticipate a broad macro recovery, but we have continued to see uneven end market performance since we set our initial expectations for the year in February. We did, however, enter the year with some expectations that the PMIs could begin to recover in the second half of 2025. That has not emerged to date. Industrial or high rate demand trends have continued to languish, and softened a bit relative to our expectation during the third quarter in certain geographies on reduced build rates and dealer inventory destock. Additionally, in the on-highway end market, the North American commercial truck production levels deteriorated as the third quarter evolved. Despite some of these near-term headwinds, we are still outperforming our underlying markets and believe that many of our challenged end markets are troughing or are close to troughing. Our automotive replacement and personal mobility business continues to grow nicely, while our data center opportunity set continues to expand. As such, we are optimistic that demand in the majority of our end markets will be more stable to improving at some point in 2026. Please turn to slide five. Third quarter total sales were $856 million, which translated to core growth of 1.7%. Total revenues grew 3% and benefited from favorable foreign currency. As I have highlighted earlier, the end market performance was next in a quarter. Personal mobility continued to trend nicely higher, with its year-over-year growth rate accelerating compared to the second quarter. Off-highway grew mid-single digits with growth in construction and agriculture globally. However, ag declined incrementally in both North America and Europe. Diversified industrial and energy were both down slightly, and on-highway demand was soft. Automotive grew low single digits with solid growth in auto replacement, more than offset a slight decline in auto OEM. Our key growth verticals, personal mobility and auto replacement, contributed to the performance. Our revenues from data center also continues to increase, although from a small base. And we see the liquid cooling opportunity in early stages of more broad-based adoption. Adjusted EBITDA was $196 million, with adjusted EBITDA margin coming in at 22.9 percent, an increase of 90 basis points, and represented a record third quarter margin rate for the company. Our adjusted earnings per share was 39 cents, an increase of approximately 18% year over year. Operating performance contributed two cents, while a lower tax rate and consolidated mix of other items each contributed two cents. We believe we are effectively managing the enterprise across all aspects. On slide six, we will review our segment highlights. In the power transmission segment, we generated revenues of $533 million in a quarter and core growth of 2.3%. Most industrial, and markets realized growth. Personal mobility continues to be a strong contributor, with growth exceeding 20% in the quarter. At the channel level, replacement grew with automotive and industrial channel core growth, each growing low single digits. OEM sales also grew low single digits, with industrial sales growth more than offsetting a decrease in automotive. We continue to invest in our strategic sales initiatives and innovation to help drive potential outgrowth in the future. Our mobility opportunity pipeline is staying robust. In the fluid power segment, our sales were $322 million, representing core growth of just under 1%. Many of our key end markets in fluid power continued to experience various levels of demand pressure, but our teams have held its own. Commercial on-highway sales decreased mid-teens as industry inventories are elevated. Off-highway grew with positive construction trends, offsetting a low single-digit decline in ag. The agriculture performance year-over-year was worse, impacted by incremental OEM production cuts to better align our customers' inventory levels heading into the year end. We believe the underlying ag market is dropping and should be better positioned for recovery sometime in 2026. Replacement demand was strong, driven by double-digit growth in automotive replacement globally with broad-based growth across regions. Industrial OEM sales declined mid-single digits on a core basis, driven by soft demand trends in agriculture and commercial truck. Our data center opportunity pipeline exceeds $150 million, and design activities remain robust. With respect to profitability, both segments expanded adjusted EBITDA margins at a similar rate. I will now pass the call over to Brooks for further comments on our results.