Gates Industrial (GTES) investor relations material

Margin expansion and cost initiatives

• Targeting 24.5% EBITDA margin by 2026, with 22.5% expected in 2025 and 23.5% in the back half of 2026, driven by material cost-out and restructuring programs.

• $40 million in restructuring to impact margins in late 2026, with an additional $20 million planned but not yet scheduled.

• Footprint optimization in North America and ERP upgrades in Europe are expected to deliver $5 million in quarterly savings from late 2026 through early 2027.

• Tariffs present a 30-40 basis point headwind per quarter until Q3 2026, mostly offset by pricing and productivity gains.

• Incremental margins on volume are expected to be 35%, with outsized incrementals (45%+) as cost savings flow through, especially from Q3 2025 onward.

Growth opportunities and end markets

• Data center liquid cooling TAM increased to over $2 billion, with content opportunity of $100,000 per megawatt; targeting $100–200 million in revenue by 2028.

• Mobility business expected to grow at a 30% CAGR, aiming for $300 million in revenue within 2–3 years, with margins at or above fleet average.

• Automotive replacement and industrial markets in China and India show solid growth, with India’s aftermarket poised for expansion as vehicle age increases.

• Diversified industrial and construction end markets expected to turn positive in 2026, while oil & gas and agriculture remain pressured.

• Channel inventories are stable to slightly lower, with no significant restocking or destocking trends observed.

Capital allocation and M&A

• Leverage reduced from 4.8x in 2020 to near 2x, with $675 million debt repaid and $625 million in share buybacks over five years.

• $300 million additional buyback authorized; focus remains on bolt-on M&A in mission-critical, high-replacement areas.

• Capital priorities include continued debt reduction, opportunistic buybacks, and strategic M&A to enhance shareholder returns.