Hi, everyone. My name is Mike Halloran. For the last bunch of times, I'm an industrial analyst who worked here at Robert W. Baird. We are pleased to have Gates with us today. Ivo's going to give some prepared remarks. He's the CEO. We are going to dive into Q&A. Anything you guys want to talk about, happy to do so. Floor is yours. Thank you. Good afternoon. I'm Ivo Jurek, Chief Executive Officer of Gates Corporation. I'm really pleased to be here with you. As Mike said, I'm happy to answer any questions that you may have. Before I start, I guess I'm supposed to do legal disclaimers. Could not do without that. On slide two, reminder, remarks will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act that are covered by Safe Harbor Disclaimer. With that, let me dive straight into the overview. Look, a couple of facts and figures in here. Very strong financial profile of the corporation, supported by over 14,000 associates, including over 750 engineers that we have in the company that are the foundation of our innovation processes. Our business is diversified across geographies and markets, products, as well as channels. We believe we have the broadest distribution network and footprint globally. Our product categories serve from over 100,000 ship-to locations. Roughly two-thirds of our business goes through replacement channels, and one-third goes through an OEM channel, which we believe is a very nice mix that provides us with a very strong resilience to our business. Moving now to product segments here on slide four. A very brief overview. Power transmission is the company's heritage that the company was established on. We are a clear global leader in this core market. We engineer and manufacture belts and related components that power drives in demanding applications across a broad range of end markets. Importantly, they wear out, and they need a replacement on regular intervals, and thus such a large presence in replacement channels. In our fluid power, we are one of the top three premier global suppliers and players supplying hydraulics and fluid conveyance across a wide range of applications and markets. Similar to power transmission, these products are highly engineered, but they also operate in harsh and hazardous end markets, applications, and also need to be replaced on a regular basis. Real briefly on our core operating system. Frankly, at the core of everything that we do is our Gates operating system, which we implemented to establish a culture of continuous improvement and data-driven decision-making. We started with GPS, that is the Gates Production System, which is focused on optimization of our factory performance and supports our overall innovation systems. We have also termed the system an eco-innovation system that represents several sustainability benefits to our new products that are created by a focused interface between material science and product engineering, as well as process development. Our customers, this innovation support for our customers, these innovation systems support their goals of greater efficiency, safety, as well as environmental improvements for their products and their operations. For Gates, these innovations help drive environmental improvements, reduce consumption in our factories, and frankly, help us to advance our overall objectives that are associated with sustainability. More recently, we have added a complexity reduction process across our business, where we believe we have a very significant opportunity to drive improvements and profitability improvements across our franchise. Think about it more as a traditional 80/20 type process that gives us the opportunity to optimize the SKU rationalization across a very broad-based presence that we have in the markets. Last but not least, keeping it brief, I will cover very briefly some of the key themes of our strategy that is delineated here on slide six. Again, we have established very well our operating philosophy that values all of our stakeholders with the advancements of our ESG initiatives as a key priority. We have carved out a leading position in attractive end markets, providing highly engineered, mission-critical replacement components in demanding applications. We have numerous tailwinds and enablers in place that support sustainable above-market growth and margin expansion and the opportunity to deploy a significant amount of capital over the next several years. Finally, our track record of performance put us in the same range as premium industrial companies, while our valuation today is still at a significant discount. This is a very exciting time for Gates. We have experienced and committed teams executing on the similar significant opportunities that we have ahead of us. We truly believe that the best days are yet up front. With that, I'll turn it over to Mike. Great, Ivo. Thanks. Let's start high level here with some of the challenges you've seen short term, and then we'll dovetail that into the opportunity set you see going forward and some of the secular pieces. I think one thing that's misunderstood is just how specialized your inputs are and that there's a lot of challenges associated with things when there's poor suppliers towards some of your main products. Maybe talk some of the challenges about the supply chain and what's unique about your exposure points that make it just much harder to address. Yeah. Look, as I have tried to highlight, we are an innovation-focused company. We are a material science-based company. There are very many good things that come with that. During a period of dislocation like what we are facing today, there are some impediments that you face because a significant amount of our inputs is associated with the supply of highly engineered resins, resins that are capable of withstanding high temperatures and are impregnable to oils. In essence, products that we manufacture, again, going to harsh and hazardous applications, they require these highly engineered resins. Over the last 12 to 18 months, we have seen a very significant set of shortages that set in. We have been able to operate reasonably well over the last 12 months, managing and supplementing our operational cadence with a level of inventory. Thus, we have had some somewhat elevated working capital over the last 12 months. Over the last three months in particular, we have run into a reasonably severe shortfall of these highly engineered resins that ultimately we are now starting to engineer around. We are deploying our material science capability across the company that we've built over the last five years and dramatically scaled up. We believe that as we enter 2023, we're going to be in a lot better position. Presently, these resins are highly sought after, and they are still at a reasonable shortfall versus the demand that's out there. Does the re-engineering then essentially diversify what the resin inputs look like, make it easier for you to source content on a forward basis, maybe give you a little more leverage? Yeah. Look, we have been working quite diligently on getting ourselves to a point where the most critical components in these resins we can engineer out. It is not a very simple equation, obviously. We have struggled with it for probably the last nine months. We are making good progress. We have been able to find solutions that give us the opportunity to reasonably dilute the most critical resins that are out there. We are looking for a full solution. We are looking at full replacement. Replacement where we will give ourselves an opportunity to buy less specialized resins that are much more widely available on the merchant market, that have many more suppliers that can build and supply those base components that we then, in turn, take into our facilities and we compound our very specific recipes. We deploy those recipes into our factories. The overall objective is to give yourself an opportunity to be more effectively and efficiently positioned. By the way, also give yourself an opportunity to dramatically lower the cost of the inputs. Maybe talk about what the consequence of this is, right? I know you've been very frustrated here because the demand picture has been pretty good, very good, but your ability to service has been lower. Maybe talk about and give some concrete examples of how that lack of supplies is creating inefficiencies in the factory that, frankly, I'm just not sure how you plan around. Right. I think that is really kind of a well-put frustration that we have lived through, particularly over the last three months in the period of time that we just ended. The issue is that when you do not receive the resin in the composition that you need and you do not have the ability to operate your assets, you have your full cost in place. You have your full production crew in place. Frankly, you do not have an ability to extinguish that cost because the resin may show up next week. If it shows up next week, because you are so far behind in keeping up with demand, you need to be in a position to go in and execute on the production output when that resin becomes available. Meanwhile, that generates a tremendous amount of inefficiencies. You do not have an ability to absorb your fixed cost. You actually lose volume and the associated margin with it. That ultimately filters in reduced level of profitability. In the most recent quarter, we have actually quantified it as on the order of kind of 250 basis points in earnings dilution based upon these temporary disruptions that we have seen. We feel better about leaving 2022, entering 2023, both from a perspective of having an ability to use more diluted materials and then looking at fully substituting the resins that are the biggest headache. However, we also are now starting to see finally breaking through some production output at our supply base as they are starting to stabilize. We believe that as we exit 2022, again, we will be in a better position to have these inputs available when we need them and, frankly, eliminate these transitory issues that we have seen in our factories. The transitory piece should start alleviating here. Let's talk about a couple of these other levers. In this quarter, you initiated essentially the next phase of the footprint optimization plan. Maybe just talk to what the goal is and why now. Yeah. I think that part of that messaging was that we felt that we are getting to a situation where we now can more effectively keep up with our customer order flow. While we still have a very substantial backlog, whilst our book-to-bill ratio is still above one, we have been able to deliver more output from our factories, absent the couple of the selected examples that we have made on the very specific resins and parts transmission side of our business. We feel that we are in a position to be able to continue the journey of driving further productivity improvements as we move into 2023, continue to rationalize our operational footprint, and give ourselves, frankly, an opportunity to have some leverage that gives us the opportunity to expand earnings in a normalized environment or hopefully give you an opportunity to offset some of the incremental headwinds that may come in 2023 that none of us really have a good visibility on yet presently. How about the price-cost equation? How are you thinking about the price-cost side of things? Maybe also discuss how you think about the stickiness of the pricing that you've put in the market. Yeah. We have done a terrific job on pricing. While we have made a very specific set of decisions at the end of 2021, and we got slightly behind on the price material economics equation in Q4 of 2021, we have committed to the shareholders and to the analyst community that we will be in a situation where we exit 2022 in a price material margin neutral position. On our call last week, we announced that we actually exited Q3 in a position where price material economics are margin neutral, or maybe we are slightly positive on pricing exiting Q3. Incrementally, we have actually put in that equation incremental logistics costs as well as incremental energy costs. Maybe that makes us a little bit unique, that state that, look, looking just at a traditional inflation in materials, that may not be all the headwind that you are dealing with. Since the inflation in energy costs and logistics has been rather severe over the last two years, we felt we need to be focused on that side as well. We are in a very good situation from a pricing perspective. We've also announced incremental pricing actions into 2022 or 2023 because we don't believe that the inflation is abating enough. Yes, there are segments of the inputs that are abating. If you are consuming aluminum and steel, those inputs are starting to maybe turn right side up. However, resins, petrochemical refined products, energy costs, frankly, labor inputs, all of those continue to be reasonably inflationary. We need to be cognizant of that and not get behind. We have made another round of pricing announcements that are going to be effective in Q1. We are very committed to stay price material economics positive as we move forward. Any other levers we should be thinking about on the margin line as we go into next year? Otherwise, I'll switch to the demand side. I would say that probably the demand is going to be the critical driver. We actually feel quite good where we sit. Yes, we are not happy. Why we are not happy about operating leverage in Q3 in particular is because of the external issues that we've dealt with supply. We actually are delivering from our vantage point, the terrific level of profitability. If I layer in the 250 basis points of dilution that we've gotten from the disruptions operationally, we have been doing quite well in terms of generating operational leverage on incremental volume. Let's switch to the demand side. Let's talk about this in two ways. First, we'll do the secular. Second, we'll do kind of just what you're seeing today. I think back to the analyst day and the big focus was the market outgrowth opportunity set because of a lot of the things that you guys are innovating on and controlling. Let's take those in two buckets. On the fluid power side, what is the opportunity set for you guys to see outgrowth potential there? I'll leave it there, and I can have some follow-ups. Yeah. Look, we have done an incredible job in rebuilding our product portfolio and repositioning our fluid power business. We have been delivering a tremendous amount of growth throughout this upcycle and throughout the dislocation. I would say I would point to the fluid power as being a perfect example of the power of material science capabilities as a company. We have redesigned some of the most critical resin inputs that we anticipated will be problematic. Surely enough, we have delivered both expansion in terms of revenue and expansion in terms of profitability in fluid power. The new products that we have redesigned also drive an outside growth. They are much more competitive. They are lower cost. They are lighter. They are more ergonomically user-friendly. They are solving all of the problems that our customers are looking at today in fluid power. Predominantly, our customers in hydraulics are looking at weight reduction. We are kind of hitting the sweet spot with our redesigned products, and we are taking market share away from our traditional competitors on fluid power. The EV piece, maybe just talk a little bit about the metrics behind why that's so positive for that business over time. Yeah. Really good point. Also, something that we add in our fluid power segment, in this case, it's not hydraulic, but it's fluid conveyance. In engine cooling today, we have a very nice present in the automotive aftermarket. We have kind of a quarter billion dollar size of the business that we generate from that opportunity. The same products that we manufacture today for ICE are products that ultimately are deployed in cooling batteries and inverters in electric platforms, with the exception of being somewhat more complex and larger in scale and, frankly, much more significant in content. Whereas today, we may have $25-$50 of content in an ICE application. We have nearly $300 of content opportunity in battery cooling and inverter cooling with electric pumps as well as with the fluid conveyance infrastructure that we put in place. This is a very terrific opportunity for us. I just note that we are a company that participates predominantly in the aftermarkets. That is the business that we have created. For us to realize that opportunity as a large opportunity, firstly, we need electric propulsion to get into the market. We need those conversions to happen from ICE to electric. We need those vehicles to age because our sweet spot of service is 7 to 12 years old vehicles. It will be probably more by 2035 to 2040 before this becomes a large secular opportunity for our products. Absolutely. Maybe the power transmission side of things, maybe talk to a little bit the chain to belt opportunity, how that's tracking through this dislocation period. What's the impediment to the conversion? Is there one, or is it just a matter of time and blocking and tackling in the marketplace? Yeah. First of all, this is an incredible opportunity for a company. It's an opportunity where the overall size of the market is kind of $8 billion in industrial and about $4 billion incrementally in personal mobility. I think two-wheel applications. We have, in 2019, generated about $20 million of revenue in chain to belt. That was the first year that we started to talk publicly about what the opportunity means. We've committed to the market that by 2023, we believe we can generate kind of $200 million of revenue incrementally from that opportunity. We will be exiting 2022 north of $250 million of revenue. Frankly, our revenue today is limited by our ability to supply. Coming back to that question about what it will take to scale up further, I think it is staying true to blocking and tackling, driving those conversions. We have converted opportunities from working with OEMs that manufacture industrial robotics to people that generate equipment into semiconductor-type applications in wafer polishing. We have converted drives that are deployed in the pharmaceutical industry. We have converted drives, belt drive that supports baggage handling in the largest Southern United States airport. We have a vast set of opportunities that we have demonstrated we can convert. We need to stay true to those conversions, continue to invest in front-end, and balance our approach to existing installations and convert those while working with the OEMs in designing in belt-driven drive versus a chain-driven drive. We have developed a whole set of new front-end tools because industrial chain has been in use for over 150 years. People know how to do that. There are tools. There are design tools that the designers of equipment can use. We spent quite a bit of time over the last couple of years to develop the same type of tools, give those tools to designers, make them comfortable with how to size those drives, and give themselves the opportunity to overall reduce cost, improve efficiency, and improve ESG metrics. Probably should have led with it, but maybe just talk through why your belt option is so much more powerful than the chain option. Yeah. Look, we've developed a proprietary technology that is using carbon reinforcement inside of these belts. If you think about that belt, you can take the belt and transmit the same amount of power while you reduce the weight of the drive system itself very dramatically in many occasions to the tune of 80-90%. That is what gives you an opportunity to drive improvement in energy consumption. We all know that energy consumption is very important for everybody today, not just because the energy is escalating pretty dramatically, energy cost, but also because energy consumption is equivalent to generation of carbon footprint. If we can help to drive reduction of carbon footprint, there will be a long secular tailwind just driven from that. The belt drive also gives you an opportunity to reduce maintenance cycle. It improves uptime. It gives people productivity boosts that, frankly, is free. They do not have to do anything for it. They do not have to service those drives like you have to service them when there is an industrial chain. Maybe talk a little bit then on the more current demand outlook picture. How are you seeing the demand transition next year? What are the end markets you're excited about? Think have some sustainability underneath the hood. What are some of the end markets that you're feeling a little more concerned about? Yeah. Presently, in some strange way, the business is actually quite good. It is somewhat dislocated from all the kind of the market psychology, if you would. We all talk about, "Oh my goodness, all the indices are decelerating. Interest rates are going up. Everybody's being worried about what's going to happen tomorrow." That's not translating today to demand destruction presently. Demand is very strong. We do see some choppiness in industrial replacement end market in Europe. We've talked about it on our call. Overall, the business remains quite fundamentally sound. The areas that we are very excited about continue to be associated with our chain to belt conversion. We believe that that's truly secular. Today, unfortunately, we are very capacity constrained. I've talked about the incremental capacity increases that we are putting in place. If you want to order my belt for your industrial drive and convert chain to my belt, you will basically wait 12 months today. We have got to get our capacity up so we are fully sold out for those applications. Personal mobility is very, very hot end market for us. We see a very substantial increase in the design activity of conversion of two-wheelers, particularly in developing countries like India and China and Indonesia and Vietnam, from ICE to electrified propulsion. It is important there because it is a very inexpensive way for them to reduce pollution. And as you know, Mike, in the developing economies, people do not drive vehicles. They do not drive cars. They drive two-wheelers. There are lots of them there being built. Maybe just tell people what that range then looks like of types of vehicles when you talk about two-wheelers. We're talking about everything from e-bikes to e-scooters, right? Scooters, they're kind of on an internal combustion engine, maybe 100 cc in engine displacement. Those are getting displaced by an electric motor that is rechargeable with a lithium-ion battery. That is a very exciting opportunity for us in these developing countries. We're quite excited about that. I believe that there's a very long runway towards converting those opportunities. Today, we have a very large market share. We are number one market shareholder. We have nearly 100% market share in two-wheelers. There will be others that will come in. We are creating this market. We also believe that over the long term, we will continue to maintain our number one market share leadership. Last question here. Maybe just talk a little bit about the cash flow constraints in the short term, given everything that's happened. If we were sitting here last year, we would have talked about maybe a little more intent to go on the M&A side. Guessing that's maybe been pushed out a little bit, but love to understand your thought process around how cash should improve next year, cash conversion, excuse me, and then when you think you might get a little more active. Yeah. I will point out that we have a very healthy cash generation in Q3 and Q4 of this year. We've delivered nearly 85% cash conversion in Q3. We're going to have nearly 300% conversion in Q4. We're going to generate maybe over $200 million slightly, plus or minus, of free cash flow in Q4. Cash flow generation is actually reasonably healthy today. We believe that as we enter 2023, the cash flow should start normalizing, inventory start normalizing, inflation start abating to a degree. You are now in balance from earnings perspective in inflation. That's no longer a headwind in working capital. You should anticipate 100% conversion to adjusted net income in 2023. We have many priorities for capital deployment. We can pay down more debt. We can buy our stock. Our stock is very inexpensive. There are very strong returns that we can generate by buying back our stock. We've bought over $200 million of stock over the last 12 months. We believe that that's a very viable optionality. On M&A, I think there's still some degree of expectation by sellers as to what multiples they deserve for their business. I think that the dynamics have changed. I think that people need to come to grips with the fact that the interest rate environment is getting more substantial, more robust. The interest rates are going higher. That will put some pressure on some of these sellers. As that works itself through, there will be companies that will become more constrained. Companies like Gates that are very profitable and generating very strong cash conversion will be in and we will have opportunities to go out and selectively buy other companies. Great. Please join me in thanking you both for your time. Thank you. We're going to stay here.