Gates Industrial Reports Second-Quarter 2025 Results

Three months ended

(USD in millions)

June 28, 2025

June 29, 2024

% Change

% Core Change

Net sales

$550.1

$541.9

1.5 %

0.6 %

Adjusted EBITDA

$122.8

$123.8

(0.8 %)

Adjusted EBITDA margin

22.3 %

22.8 %

(50 bps)

For the six months ended

(USD in millions)

June 28, 2025

June 29, 2024

% Change

% Core Change

Net sales

$1,077.3

$1,074.7

0.2 %

1.3 %

Adjusted EBITDA

$239.5

$242.8

(1.4 %)

Adjusted EBITDA margin

22.2 %

22.6 %

(40 bps)

Three months ended

(USD in millions)

June 28, 2025

June 29, 2024

% Change

% Core Change

Net sales

$333.6

$343.6

(2.9 %)

(2.5 %)

Adjusted EBITDA

$76.4

$78.4

(2.6 %)

Adjusted EBITDA margin

22.9 %

22.8 %

10 bps

For the six months ended

(USD in millions)

June 28, 2025

June 29, 2024

% Change

% Core Change

Net sales

$654.0

$673.4

(2.9 %)

(1.2 %)

Adjusted EBITDA

$147.0

$155.0

(5.2 %)

Adjusted EBITDA margin

22.5 %

23.0 %

(50 bps)

Gates Industrial Corporation plc

Condensed Consolidated Statements of Operations

(Unaudited)

Three months ended

Six months ended

(USD in millions, except per share amounts)

June 28, 2025

June 29, 2024

June 28,

2025

June 29,

2024

Net sales

$                883.7

$           885.5

$            1,731.3

$            1,748.1

Cost of sales

523.5

528.1

1,026.5

1,060.7

Gross profit

360.2

357.4

704.8

687.4

Selling, general and administrative expenses

231.2

221.2

447.4

436.3

Transaction-related expenses

—

1.2

0.4

1.6

Asset impairments

0.2

—

0.8

—

Restructuring expenses

13.0

1.6

14.6

2.8

Other operating expenses

—

0.1

—

0.1

Operating income from continuing operations

115.8

133.3

241.6

246.6

Interest expense

28.8

49.1

58.4

86.6

Other expenses (income)

6.8

(6.0)

9.2

(10.9)

Income from continuing operations before taxes

80.2

90.2

174.0

170.9

Income tax expense

16.8

12.3

42.0

46.8

Net income from continuing operations

63.4

77.9

132.0

124.1

Loss on disposal of discontinued operations

0.3

0.3

0.6

0.4

Net income

63.1

77.6

131.4

123.7

Less: non-controlling interests

6.6

6.9

12.9

13.0

Net income attributable to shareholders

$                  56.5

$              70.7

$               118.5

$               110.7

Earnings per share

Basic

Earnings per share from continuing operations

$                  0.22

$              0.27

$                 0.46

$                 0.42

Earnings per share from discontinued operations

—

—

—

—

Earnings per share

$                  0.22

$              0.27

$                 0.46

$                 0.42

Diluted

Earnings per share from continuing operations

$                  0.22

$              0.26

$                 0.45

$                 0.41

Earnings per share from discontinued operations

—

—

—

—

Earnings per share

$                  0.22

$              0.26

$                 0.45

$                 0.41

Gates Industrial Corporation plc

Condensed Consolidated Balance Sheets

(Unaudited)

(USD in millions, except share numbers and per share amounts)

As of

June 28, 2025

As of

December 28, 2024

Assets

Current assets

Cash and cash equivalents

$                719.7

$                682.0

Trade accounts receivable, net

826.3

722.7

Inventories

729.0

676.0

Taxes receivable

39.5

28.6

Prepaid expenses and other assets

207.0

196.7

Total current assets

2,521.5

2,306.0

Non-current assets

Property, plant and equipment, net

609.2

579.5

Goodwill

2,022.3

1,908.9

Pension surplus

5.7

5.7

Intangible assets, net

1,232.7

1,248.6

Right-of-use assets

142.4

139.4

Taxes receivable

20.2

20.7

Deferred income taxes

628.6

553.5

Other non-current assets

35.2

24.0

Total assets

$            7,217.8

$            6,786.3

Liabilities and equity

Current liabilities

Debt, current portion

$                  39.8

$                  39.1

Trade accounts payable

411.3

408.2

Taxes payable

27.3

22.9

Accrued expenses and other current liabilities

250.9

251.3

Total current liabilities

729.3

721.5

Non-current liabilities

Debt, less current portion

2,304.9

2,311.5

Post-retirement benefit obligations

76.7

78.0

Lease liabilities

128.5

127.3

Taxes payable

84.7

82.2

Deferred income taxes

52.1

56.8

Other non-current liabilities

229.9

68.7

Total liabilities

3,606.1

3,446.0

Shareholders' equity

—Shares, par value of $0.01 each - authorized shares: 3,000,000,000; outstanding shares:

    257,448,083 (December 28, 2024: authorized shares: 3,000,000,000; outstanding

    shares: 255,203,987)

2.6

2.6

—Additional paid-in capital

2,621.0

2,618.6

—Accumulated other comprehensive loss

(940.0)

(1,077.2)

—Retained earnings

1,585.4

1,479.6

Total shareholders' equity

3,269.0

3,023.6

Non-controlling interests

342.7

316.7

Total equity

3,611.7

3,340.3

Total liabilities and equity

$            7,217.8

$            6,786.3

Gates Industrial Corporation plc

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six months ended

(USD in millions)

June 28,

2025

June 29,

2024

Net income

131.4

123.7

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

105.5

109.1

Foreign exchange and other non-cash financing income

(12.6)

(11.9)

Share-based compensation expense

15.7

13.8

Decrease in post-employment benefit obligations, net

(4.4)

(4.2)

Deferred income taxes

(11.0)

(13.2)

Asset impairments

0.8

—

Gain on disposal of property, plant and equipment

—

(7.2)

Other operating activities

5.8

(1.2)

Changes in operating assets and liabilities:

—Accounts receivable

(63.5)

(56.9)

—Inventories

(16.4)

(66.0)

—Accounts payable

(16.7)

(3.2)

—Prepaid expenses and other assets

(13.0)

13.6

—Taxes payable

(1.6)

(1.4)

—Other liabilities

(9.7)

(22.2)

Net cash provided by operating activities

110.3

72.8

Cash flows from investing activities

Purchases of property, plant and equipment

(36.9)

(37.9)

Purchases of intangible assets

(18.7)

(7.4)

Purchases of investments

—

(11.2)

Cash paid under company-owned life insurance policies

(10.4)

(4.1)

Cash received under company-owned life insurance policies

2.4

10.0

Proceeds from the sale of property, plant and equipment

2.1

10.5

Other investing activities

(0.5)

—

Net cash used in investing activities

(62.0)

(40.1)

Cash flows from financing activities

Issuance of shares

4.7

7.1

Repurchase of shares

(13.0)

(50.3)

Proceeds from long-term debt

—

1,800.0

Payments of long-term debt

(9.4)

(1,907.0)

Debt issuance costs paid

—

(17.7)

Employee taxes paid from shares withheld

(16.9)

(2.4)

Dividends paid to non-controlling interests

(3.5)

—

Other financing activities

4.7

12.7

Net cash used in financing activities

(33.4)

(157.6)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

23.1

(16.2)

Net increase (decrease) in cash and cash equivalents and restricted cash

38.0

(141.1)

Cash and cash equivalents and restricted cash at the beginning of the period

684.8

724.0

Cash and cash equivalents and restricted cash at the end of the period

$                722.8

$                582.9

Supplemental schedule of cash flow information

Interest paid

$                  56.8

$                  86.0

Income taxes paid

$                  54.7

$                  61.4

Accrued capital expenditures

$                    0.9

$                    1.4

Gates Industrial Corporation plc

Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA

(Unaudited)

Three months ended

Six months ended

(USD in millions)

June 28,

2025

June 29,

2024

June 28,

2025

June 29,

2024

Net income from continuing operations

$               63.4

$               77.9

$            132.0

$            124.1

Adjusted for:

Income tax expense

16.8

12.3

42.0

46.8

Interest expense

28.8

49.1

58.4

86.6

Depreciation and amortization

53.3

54.5

105.5

109.1

Transaction-related expenses ⁽¹⁾

—

1.2

0.4

1.6

Asset impairments

0.2

—

0.8

—

Restructuring expenses ⁽²⁾

13.0

1.6

14.6

2.8

Share-based compensation expense

9.6

5.2

15.7

13.8

Inventory write-offs and adjustments ⁽³⁾ (included in cost of sales)

4.0

3.4

3.0

17.3

Restructuring-related expenses (included in cost of sales)

1.2

—

2.4

—

Restructuring-related expenses (included in SG&A)

3.1

—

4.6

0.1

Credit loss related to customer bankruptcy (Included in SG&A)

—

—

—

0.1

Other expenses (income), excluding foreign currency transaction gain or loss ⁽⁴⁾

5.8

(3.1)

7.1

(4.6)

Other items not directly related to current operations

—

0.1

—

0.1

Adjusted EBITDA

$            199.2

$            202.2

$            386.5

$            397.8

Net Sales

$            883.7

$            885.5

$         1,731.3

$         1,748.1

Net income from continuing operations margin

7.2 %

8.8 %

7.6 %

7.1 %

Adjusted EBITDA Margin

22.5 %

22.8 %

22.3 %

22.8 %

(1)

Transaction-related expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions.

(2)

Restructuring expenses represent items qualifying for recognition as such under U.S. GAAP and include costs related to the closure of lines of business, facility closures and consolidations, fundamental organizational rationalizations and non-recurring employee severance related to such actions.

(3)

Inventory write-offs and adjustments include the reversal of the adjustment to remeasure certain inventories on a Last-in-First-out ("LIFO") basis.

(4)

Other expenses (income) excludes foreign currency transaction losses of $1.0 million and $2.1 million during the three and six months ended June 28, 2025, respectively, and foreign currency translation gains of $2.9 million and $6.3 million during the three and six months ended June 29, 2024, respectively.

Gates Industrial Corporation plc

Reconciliation of Net Income Attributable to Shareholders to Adjusted Net Income

(Unaudited)

Three months ended

Six months ended

(USD in millions, except share numbers and per share amounts)

June 28,

2025

June 29,

2024

June 28,

2025

June 29,

2024

Net income attributable to shareholders

$                  56.5

$                  70.7

$                118.5

$                110.7

Adjusted for:

Loss on disposal of discontinued operations

0.3

0.3

0.6

0.4

Amortization of intangible assets arising from the 2014 acquisition of Gates

29.0

28.9

57.3

58.0

Transaction-related expenses ⁽¹⁾

—

1.2

0.4

1.6

Asset impairments

0.2

—

0.8

—

Restructuring expenses ⁽²⁾

13.0

1.6

14.6

2.8

Restructuring-related expenses (included in cost of sales)

1.2

—

2.4

—

Restructuring-related expenses (included in SG&A)

3.1

—

4.6

0.1

Share-based compensation expense

9.6

5.2

15.7

13.8

Inventory write-offs and adjustments ⁽³⁾ (included in cost of sales)

4.0

3.4

3.0

17.3

Adjustments relating to post-retirement benefits

0.5

(0.6)

0.9

(1.3)

Financing and other FX related losses

7.8

(3.0)

11.0

(1.5)

Loss on extinguishment of debt ⁽⁴⁾

—

14.8

—

14.8

Credit loss related to customer bankruptcy (included in SG&A)

—

—

—

0.1

Discrete tax items ⁽⁵⁾

(7.2)

(12.2)

(7.1)

(0.5)

Other adjustments

(1.5)

(1.7)

(2.8)

(3.5)

Estimated tax effect of the above adjustments

(15.4)

(13.1)

(24.9)

(25.5)

Adjusted Net Income

$                101.1

$                  95.5

$                195.0

$                187.3

Diluted weighted-average number of shares outstanding

260,469,532

266,812,510

261,005,482

266,951,237

GAAP Net Income per diluted share

$                  0.22

$                  0.26

$                  0.45

$                  0.41

Adjusted Net Income per diluted share

$                  0.39

$                  0.36

$                  0.75

$                  0.70

(1)

Transaction-related expenses related primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions.

(2)

Restructuring expenses represent items qualifying for recognition as such under U.S. GAAP and included costs related to the closure of lines of business, facility closures and consolidations, fundamental organizational rationalizations and non-recurring employee severance related to such actions.

(3)

Inventory write-offs and adjustments include the reversal of the adjustment to remeasure certain inventories on a Last-in-First-out ("LIFO") basis.

(4)

On June 4, 2024, Gates extinguished the 2021 Dollar Term Loans and the asset-backed credit facility in connection with our debt refinancing. As a result, we accelerated $14.8 million in deferred issuance costs during the three months ended June 29, 2024.

(5)

For the three months ended June 28, 2025, the effective tax rate was driven primarily by net discrete tax benefits of $7.2 million, of which $3.2 million related to prior year adjustments primarily from various foreign jurisdictions in which returns were filed, $2.6 million related to excess tax benefits on stock option exercises, and $2.0 million related to changes in the realizability of certain deferred tax assets, offset by $0.6 million of other net discrete tax expenses.

For the six months ended June 28, 2025, the effective tax rate was driven primarily by net discrete tax benefits of  $7.1 million, of which $8.6 million related to excess tax benefits on stock option exercises,  $3.2 million related to prior year adjustments primarily from various foreign jurisdictions in which returns were filed and $0.6 million other discrete tax benefits, offset by $3.2 million related to changes in the realizability of certain deferred tax assets and $2.1 million related to net unrecognized tax benefits.

Gates Industrial Corporation plc

Reconciliation of Net Sales to Core Sales Growth

(Unaudited)

Three months ended June 28, 2025

(USD in millions)

Power

Transmission

Fluid Power

Total

Net sales for the three months ended June 28, 2025 ⁽¹⁾

$             550.1

$             333.6

$            883.7

Impact on net sales of movements in currency rates

(5.2)

1.5

(3.7)

Core sales for the three months ended June 28, 2025

$            544.9

$            335.1

$            880.0

Net sales for the three months ended June 29, 2024

541.9

343.6

885.5

Increase (decrease) in net sales

8.2

(10.0)

(1.8)

Increase (decrease)  in net sales on a core basis (core sales)

$                 3.0

$               (8.5)

$               (5.5)

Net sales growth (decline)

1.5 %

(2.9 %)

(0.2 %)

Core sales growth (decline)

0.6 %

(2.5 %)

(0.6 %)

Six months ended June 28, 2025

(USD in millions)

Power

Transmission

Fluid Power

Total

Net sales for the six months ended June 28, 2025

$         1,077.3

$             654.0

$         1,731.3

Impact on net sales of movements in currency rates

11.7

11.2

22.9

Core sales for the six months ended June 28, 2025

$         1,089.0

$            665.2

$         1,754.2

Net sales for the six months ended June 29, 2024

1,074.7

673.4

1,748.1

Increase (decrease) in net sales

2.6

(19.4)

(16.8)

Increase (decrease) in net sales on a core basis (core sales)

$               14.3

$               (8.2)

$                 6.1

Net sales growth (decline)

0.2 %

(2.9 %)

(1.0 %)

Core sales growth (decline)

1.3 %

(1.2 %)

0.3 %

(1)

Throughout this document the terms "net sales" and "revenue" are used interchangeably in reference to the GAAP measure "net sales."