Hi, I'm Chigusa Katoku. I'm a multi-industry analyst here at JPMorgan. Today, I'm really excited to have with me Brooks Mallard, Executive Vice President, Chief Financial Officer, as well as Rich Kwas, Head of IR of Gates. Thank you so much for being here today. Thank you for having us. Maybe I just wanted to start off with maybe the near-term trends. Just if you can tell us what you're seeing in terms of demand trends. Forvia said yesterday they were seeing some softness around auto OE, aftermarket, and consumers. Just curious to see if you're seeing any caution from customers given tariffs or just general macro uncertainty. Yeah. Look, I think when we went in and gave our guidance for 2024, we took a very pragmatic view of what we thought was going on. I think at the beginning, a lot of people were pushing back and saying, well, do not you see an inflection coming or something like that? We ended up being pretty close to the mark. We came in better on profitability and EBITDA, a little bit lower on sales given the macro backdrop. I think heading into this year, it is not too dissimilar. I think we have certain areas of the business that we are seeing green shoots, and we see potential for growth. There are other areas of the business which we think are going to take a little bit longer. Let me go through those one by one because I think it's important and pertinent to your question. The automotive replacement business is the strength of the business. It was good in 2024. We've won some business in 2025 in North America that's going to grow the business 100-150 basis points from a core growth perspective overall. The global car park, or how many vehicles are in operation, is growing. It's also aging. People are keeping their cars longer. They're repairing them more often with more frequency because they're keeping them longer, which is good for our business. Our business in total is about 36% automotive replacement, and we have about 9% exposure to automotive OEM. Higher interest rates and I think kind of more consumer uncertainty is probably not great for the automotive OEM business, but it's good for our automotive replacement business. We expect that to continue to be, we expect that to continue to have positive core growth. The mobility business, which we've grown from pretty nascent to a pretty significant part of the business, has been going through about a year and a half of inventory correction coming out of COVID, where the retailers, as well as our channel partners and manufacturers, had built up a significant amount of inventory. We believe that inventory correction is largely past. We returned to core growth in Q4 of 2024. We expect there to be continued core growth in the mobility business in 2025. We think that's going to be a strength of the business. Diversified industrial, we went to kind of flattish in Q4 of 2024. That's largely going to be on the back of manufacturing activity, investment in industrial automation, investment in warehousing, food processing, different manufacturing verticals. That one's, I think, tough to call. I mean, I think we've seen some fits and starts, but we haven't really seen a return to volume growth and a return to kind of a cycle inflection, which everyone's waiting for. We did not build that into our guidance as we thought about 2024. We didn't really think, build that into our Q1 guidance either. I think you've got ag, construction, which are still going to continue to try to find the bottom. I think it's going to be less bad than it was in 2024, but there's still some inventory correction, still some, I think, demand generation kind of at the end user level, which we have to wait and see on. We have certain parts of the business that we think are going to pivot or continue to show growth in 2025, other parts of the business that are not. That's why we have our guidance set. I think midpoint was 1.5% of core growth, which is kind of a mix of markets, some exhibiting some good core growth and others still trolling along the bottom. Thanks. That's super helpful. You have broad geographic exposure. Maybe if you could go around the world and talk about what you're seeing outside the U.S. and China and Europe. Yeah. In Q4, we saw some green shoots in China and in East Asia, India. I think some optimism around industrial activity in China, which drove some of the growth. We are hopeful that that continues. That generally can be a leading indicator that you're going to see some pickup in industrial and in manufacturing activity. EMEA continues to be a struggle. We think they're going to continue to struggle through 2025 as they try to find their way, especially with the new environment. I think if there's a silver lining to kind of how the past couple of months have transpired, I think there's certainly some hope out there that you're going to see a renewed kind of industrial renaissance maybe in Europe and some induced industrial activity, which would certainly be helpful overall. North America, I think North America, we're kind of wait and see. I mean, I think on the one hand, it's naive to think that there's not going to be some repercussion to the overall economy relative to the trade policies and the tariff activity that is going to impact the economy somewhat. Kind of back to our business, a large part of our business is non-discretionary in nature. You have to have our parts to run an automobile or a combine harvester or an e-bike or whatever that device may be. I think we remain pretty confident in terms of the guidance that we gave, both for Q1 and for the full year. I do think that we're going to have to take a wait and see in terms of what happens with North America. Thanks. That's a good segue. Just shifting to tariff exposure, if you can maybe help frame your exposure to tariffs as well as raw materials, steel, copper, aluminum, and how will you approach pricing and how comfortable are you to offset this? Yeah. Let me start with the pricing element. When we went through the big material inflation pressures back in 2021, 2022, 2023, we had hundreds of millions of dollars of material inflation. We had several things driving that: supply shortages coming out of COVID, Ukraine-Russia war, which had some dislocation on suppliers, and then just overall, I think, supply chain uncertainty. We were able to pass those price increases along at EBITDA margin neutral levels. We were able to keep ourselves whole. Two-thirds of our business is through distribution. We are efficient and effective at passing those price increases through. We do a good job of communicating with the customer and letting them understand what the underlying drivers are. In general, distribution will pick up those price increases and they'll pass them along. While we're a global business, we're very much an in-region, for-region business. North America is mostly made in North America for North America, EMEA the same way, China the same way, East Asia and India the same way. The big question for us is the imports from Mexico to the U.S. We're kind of de minimis in our exposure to Canada, kind of de minimis in our exposure to China and those imports coming in. We're currently kind of going through an analysis in terms of what's covered under the USMCA, kind of how clawbacks are going to be handled in terms of, do you make something in the U.S., send it to Mexico for some value-added activity or assembly activity, and then it comes back to the U.S. We're currently kind of formulating all that information and building that into our pricing strategy, kind of coming up here at the end of March. I think April 2nd is kind of D-Day for that, for getting all those price increases through. A couple of things. First of all, we do have still a pretty significant manufacturing footprint in the U.S. So we are able to flex our manufacturing capacity and capability to kind of find the most efficient kind of, I guess, tariff methodology in terms of how we're going to deal with these tariffs. We are working through that at the current time. I think, again, back to my original point, most of our exposure here is through the distribution side of the business. A lot of our OEMs will tend to pick up at the factory. So they're the importer of record. The tariff really kind of becomes more their issue than our issue. Most of our exposure is going to be through the distribution business, which, again, is a little bit easier to pass those price increases on. Not only from a, they'll take the price and pass it on to their customer, but also just from a mechanics perspective, we're very good at taking those prices, allocating them across all of our SKUs, and then passing that price through to their system so they can update their prices on the shelf. Thanks. That's helpful. You mentioned too, just remembering back in the post-COVID inflationary period, you were pretty nimble with pricing, pricing on a quarterly basis. You maintained price cost margin neutrality. Any thoughts on what your approach is this time around? Yeah. Look, I think there's a lot more moving parts here in terms of what's in and what's out and how quickly things can change. I think previously in the material inflation era, it was more, I think we were more certain that we were going to see price increases over the near to medium, I'm sorry, cost increases over the near to medium term, and they were going to be sticky. I think it's anybody's guess how sticky this is going to be. Our current approach is we're really taking the administration kind of at their word, which is you should see this as a one-time kind of economic reset and adjust your business accordingly, and after that, it's done. That's kind of how we're looking at it. I think it's going to be a little bit tougher on this one, maybe to maintain EBITDA margin neutrality. We're certain we're going to get EBITDA dollars neutrality, but the EBITDA margin neutrality is probably going to be a little bit tougher put. We will have to work through all the specifics of it and see. The other thing is from an implementation perspective, it takes about a quarter for cost to work their way through our system in North America. From the time that the tariffs are enacted to the time that we actually see them roll through our P&L, it'll be about 90 days. We can get a price increase usually through our system and through our customers, distributor partners' systems in about 60 days. We feel pretty confident that in terms of being able to match price versus cost as these tariffs roll through, that we can match them up real time and make sure that we stay whole from an EBITDA dollars perspective. Okay. That's super helpful. Just one last thing on this topic. Did you see any impact of tariff prebuy from customers in the fourth quarter? Conversely, have you prebought inventory to get ahead of tariffs? No. We haven't seen any impact. As part of, and I'm sure we'll get into this later, as part of our material cost reduction initiative that came about as a result of all the cost increases and the supply chain dislocation that was related to COVID and then the aftermath of that, we've really expanded our supplier base. We've got good optionality in terms of in-region sourcing and also out-of-region sourcing. We've really, I think, made our supply chain much more stable and much more capable of absorbing these kinds of exogenous events that can come about from time to time. While we know that there's going to be some increases related to incoming raw material costs, whether it's resins that may be coming from Mexico or wherever they may be coming from, or aluminum and steel, we've got those into our calculations around pricing and what we need to roll out to our customers and to our distributor partners to ensure that we're whole, again, from an EBITDA dollars perspective. Just curious to hear, overall, what's your take on what's going on out there under the current administration? There's a lot of near-term noise, but are you kind of getting ready to dust off your playbook and cut costs and CapEx? Are you more inclined to still keep your foot on the gas because you have faith that this will ultimately be a business-friendly administration? Yeah. Look, I think things are dynamic. I do not think you want to flip one way or the other too quickly. The initiatives that we have put in place that have driven our gross margin and EBITDA margin expansion over the past six quarters are the same ones that are going to drive us to our medium-term goal of 24.5% EBITDA. Those plans have been in place for a while. The economics of those do not really change given the broader backdrop. We have great internal investment opportunities. Our capital spending is actually going to be up in 2025 and 2026 to support these initiatives to drive gross margin and EBITDA margin expansion. We have just a number of really great internal projects we are working on. They are going to drive material cost out, footprint optimization projects, system enhancement projects. We are going to continue to invest in the business. We believe that we have got a base of business in our replacement business that will remain strong, that will underpin the business. Look, we have been able to expand margins in a down volume environment, again, over the past six quarters. We feel confident in our internal initiatives, our manufacturing initiatives that we are working on. We will be able to continue to drive margin expansion and hit our medium-term goal. Now, the timing may take a little bit longer if the cycle inflection does not come and you do not see increased industrial activity, increased manufacturing activity, particularly in the U.S. We still feel confident in our medium-term goals of 24.5% EBITDA just with the internal initiatives we have going. Just continuing on that point on margins. You've always had a 24% plus target, but if you could elaborate more on what gives you confidence to achieve this 24.5% by 2026 this time around, just your progress on the material cost reduction, footprint optimization, productivity, 80/20, maybe if you can touch on which areas are more low-hanging fruit versus it's more back-end weighted. Right. I'll start with the material cost reduction project. We kicked that off in 2023, and that was a combination of things. Kind of there was supplier development, negotiation, cost reduction element, which was the first part of the savings that we got mostly in 2024. That's what drove a lot of our margin expansion in 2024. At the same time, our material science team was looking at the new cost paradigm that we were looking at coming out of the inflationary period. We were doing a lot of work on reformulating compounds and mixes and things that went into our product so that we could drive a lower cost base, but as good as or even sometimes better than previous performance. Lower cost, same specification, same capability from a product perspective. I would say that's kind of the next tranche of savings that we expect to get in 2025. There was a third one where we were working on our technology and our investment in mixing and compounding and kind of how we do our internal kind of special sauce in terms of how we make things. There is some capital equipment that we had to invest in, some different things with a little bit longer lead time. That is really more of a 2026 savings. When you look at what we targeted to save, it's actually pretty evenly distributed over three years with different lead times in terms of driving the savings. We feel comfortable and confident in what, obviously, 2024, we delivered what we think is kind of outstanding performance in terms of gross margin expansion in a down volume environment. We feel comfortable where we are in 2025 with driving those savings. As we get the new equipment and new technology in place, we think that's going to drive the 2026 savings as well. From a footprint optimization perspective, that's really a combination of being more efficient with our cost footprint, primarily in North America, but there's some global element to it as well. There is certainly a labor savings part of it. There is a fixed cost savings part of it. That is what really goes into the $40 million number that we said we would be at as we exited 2026, $40 million of annualized savings as we exit 2026. There is also a part of it that's really around labor availability. We found that through the cycle, we've struggled in some areas to be able to flex our labor up and down through the cycle. In some of those areas, we've had to move so that we could access labor and be able to keep our customers happy in the upcycle when orders are really trending up, but then be able to flex our costs down through the downcycle and maintain profitability in the downcycle and then kind of reset our profitability and re-index it to a higher level. That's really the footprint optimization piece. That's over 100 basis points of EBITDA margin improvement, again, as we exit 2026. The third piece of it is kind of the ongoing work we're doing around 80/20 and plant productivity, pricing, back-end supply chain optimization, plant scheduling optimization. That's really using the 80/20 tools to really make the business simpler and easier to run. That's probably the smallest piece of it and probably the most volume-dependent piece of it, right. Because, I mean, you get to a certain point where you've got three years of negative PMI, and you need that cycle inflection to get the plant productivity piece of it because you need some volume to flow through it. Those are the three big pieces. I would say the vast majority, 80% plus of that savings, is all really internal, cycle agnostic, and really about the execution of our team in terms of delivering that savings. That's why we feel confident about it. Yeah. On that point, you've been clear that to achieve your margin targets, you don't need a meaningful cyclical recovery. I think your margin bridge assumes some volume growth. What are the visible areas of volume growth that you see even if the macro remains muted? Yeah. Look, I think one of the exciting things and one of the things that people, or I should say investors that we meet with often say, "Well, why hasn't your stock completely re-rated yet?" Right. We went through the Blackstone exit. We went through getting our leverage down. We really kind of achieved all those goals in terms of positioning the company the way we want to. I think we're still, I think, undervalued, right. Undervalued as a company. Right. Remind me again the second part of the question. What are some visible areas of growth that you see even at the macro? I was getting to the growth area. One of the reasons, one of the things that people often say to us is, "Well, the business hasn't necessarily grown." Right. If you look here at our growth and profitability versus our peer group, we're kind of in the middle of our peer group from a growth perspective. If you look on the left-hand side at 3%, and we actually have a 50 basis points headwind as we have de-emphasized the automotive OEM business. When we went public in 2018, our automotive OEM was 14% of the overall business. Today it's 9%. Right. We've decreased that business 5%, yet we've still grown 3% over this period. Right. If you look at our gross margins, we're right in the middle of the pack, but we exited 2024 at about a 40% gross margin. Right. If you look at our EBITDA margin, again, kind of in the middle of the pack, but we exited 2024 at over 22%. We are 22.3% EBITDA margins for 2024. We are moving everything in the right direction, yet we still feel like if you go to the next slide, we still feel like we are not getting a fair valuation. Right. We are trading at a significant discount from the peer group we are at, the peer group we compare ourselves to, even given our growth, our growth numbers and our gross margin numbers and our EBITDA margin numbers. I think what is exciting when you talk about growth going forward is we have several things that we think are going to help us outgrow the market in the future. I think number one is our base business of the automotive replacement business. It has got a growing market, and we think we can continue to take share around the globe. Okay. The car park, which is about 2 billion vehicles globally, is getting bigger, and it's getting older. Right. That is a good outcome for our automotive replacement business. I think the second big growth, and so that's kind of a major growth underlying on 36% of the business, a major growth vector that's going to push 36% of the business. The next part of the business we think is going to grow nicely over the short to medium term is the mobility business. The mobility business was growing kind of at really big numbers going through COVID. We went through this inventory correction over the past year and a half, and now we've inflected back to core growth in Q4 of 2024. When you look at the channel inventory, which is back to normalized levels, and you look at the underlying demand, and then you look at the programs that we've won that we know we're spec'd in on over the course of the next couple of years, we feel very confident that we're going to grow the mobility business significantly faster than the market. There are really kind of two things going on that's helping us grow. Right. One is kind of the continued electrification of the mobility market. Things are continuing to move to electrical drive versus internal combustion drive, which lends itself to a Gates belt drive system. It's a better application for that particular, or it's a better product for that particular application. I would say the second thing is, as we continue to work on the material science part of it, we continue to get closer to parity with chain. Belt becomes the natural option. It's quieter, it's smoother, it's more power efficient. As we've grown this mobility business, it started out at the high end, and now we're making good penetration on the medium end. This is a big global market that we think we've got over the course of the next five plus years a lot of market share to gain. A growing market, and we're going to take market share because belts are going to replace chain. Along those same lines, we have the industrial chain to belt initiative that we're working on. Again, the industrial chain market is a $7 billion market, and we're a very low single-digit player in that market today. We think over the course, I mean, this is one that's going to last many, many years. We're going to continue to displace chain with belt drives. Belt drives are more energy efficient. They don't require lubrication. They have better uptime characteristics. As we've continued to develop products, we've continued to close the gap on the initial cost base of belt versus chain. The more that we close that gap, the more that we get the machine OEMs, machinery OEMs to specify us in the original equipment specification, the more we're going to grow that business. I think the last one is, and this is one that I know it's a buzzword on everybody's lips right now, is around data centers. We've made hydraulic hose, and we've got applications in supercomputers today, right, that we've had for several years. As data centers are moving toward liquid cooling, we have the hose capability in a lot of different material formats, in halogen-free, in other metallic-free hoses, kind of more basic hoses. We have a lot of different specifications on the hose that cools data centers. In addition, we have a partnership with a company called CoolIT, where one of the applications we developed for the electric vehicle market, which is an electronic water pump in a very small confined space with very large pumping capacity, we've now taken that and we're developing that application for data centers so that you can place the pumping apparatus along with the hose and the couplings that you need. We kind of have that whole system that we can supply data centers, and we can scale it based on what their need is. Right. Is it one-inch diameter. Is it 2-inch diameter? We can scale the electronic water pump to go with the hose to provide the cooling for the data center. Look, this is one that's very nascent in kind of the order generation and the specification and different things like that. We are more at the back end of the build out there. We do not expect anything in that in 2025, but we do expect some growth from data centers in 2026. That is about a $1.5 billion market, right? We feel like we should have a pretty fair share of that as well. Great. Maybe shifting to the portfolio, do you like your current channel, geographic, and end market mix? You have lowered your auto exposure and grew personal mobility over time, but are there any areas that you can add or reduce exposure to to shift more towards high margin, high growth, low cyclicality? No, I mean, I think we really like, I think we really like our portfolio as it stands, right. I mean, I think we continue to be able to develop new products and new applications for our products internally. The automotive replacement business is acting now, and it has acted over the past couple of years, really with the characteristics it's exhibited for many years before that, before kind of the original trade war in 2019, and then COVID, and then material inflation, and then Russia-Ukraine war and displacement for location and different things like that, or displacement of supply chain and things like that. It has really been the stable business, the ability to grow market share, expanding car park. Look, we have replacement products for internal combustion engines, for hybrid vehicles, for electric vehicles. We supply all of those replacement parts, right. As the electric vehicle becomes a larger part of the car park, we're well positioned. We actually have more content on an electric vehicle than we do on an internal combustion vehicle. We're well positioned to supply those replacement parts as well. We've spent a lot of time and effort kind of recapitalizing the fluid power business. We built three new facilities. We came out with a lot of new products. We drove costs out of that product line. Now it's really kind of on a par level with the power transmission business, whereas it used to be lagged behind from a profitability perspective. Now we have really two what we think are strong, synergistic product lines in fluid power and power transmission. A lot of them go through the same channel. They have a lot of the same material characteristics. We think we can build on that with different applications and ways to grow this business organically over the long term. On capital deployment, I think your near-term priorities are paying down debt and buying back stock, but how will you balance those two? You are close to your targeted leverage, but when can we expect you to be more active on the M&A front? Yeah. Look, a couple of things on that, right. We still think the stock is undervalued, and we've kind of shown the data that we think proves that out. For us, we want to continue to buy back stock. We think that's a good use of our shareholder money and a good use from a capital allocation perspective. We still want to get our gross debt down below $2 billion, which I think is approximately another $300 million of debt paydown. We're still going to continue to pay down some debt. We have some tranches of debt that are a little bit more high cost than others. That's still a good way for us to achieve the goals that we've committed to, in addition to saving some dry gunpowder for when M&A does become more relevant, right. I think, look, just from a pure math perspective, right, it's a tough putt to be trading at 9x and go acquire a company that's trading at 12x or 13 x. That math just doesn't work. That's a long way to go to make sure you're not getting diluted by that acquisition. I think if you look at our recent history over the past three years, we've deployed about $1.1 billion of capital externally. About 45% of that was for debt paydown, and about 55% of that was for stock buyback, where we participated side by side when Blackstone was exiting the business. I think that came to a pretty nice conclusion as we exited 2024. I think as we look forward, we may lean a little bit more in on stock buyback in the short term, but we're going to be pretty balanced in terms of our capital allocation. We continue to look at M&A targets. There's a lot of things that fit our profile, critical to performance through distribution, higher margin business, non-discretionary and spend. There'll come a time when M&A will come more to the forefront from a capital allocation perspective. I think here over the next year or two, we're going to be much more focused on capital allocation, I mean, stock buyback and debt paydown. Maybe I'll open up to the audience to see if there are any questions. Sort of a small one, but you mentioned that one approach to the tariffs would be you have some facilities in the U.S. that you could flex back to. Later on, you talked about facilities where you've moved away from because labor shortages. You moved to where labor was more available. I'm assuming that those available facilities would be the ones that were more challenging from a labor standpoint. I guess how realistic would it be to actually flex back? Yeah, I'm not sure that's 100% accurate. I mean, I think those are kind of two. I mean, what we're doing from a footprint optimization perspective and where we can flex, where we can flex our capacity, there's not a lot of overlap there. I think we can do both. Yep. Do you think that's how realistic is that? Everyone sort of seems to say, "I'm going to price. I'm going to hope that it settles down. Our products stay in existing trade agreements. If not, I'm going to price. And then maybe there's something I can do to move manufacturing." That third seems pretty distant. You're. Yeah. Look, what I would say is, look, our footprint optimization project is in place. That is for the long term. At this point, I would say we are focused on where we can flex our current manufacturing capability and where we are going to be in the U.S. long term, where can we flex that? Other than that, we are looking at it like inflation. It is pricing. Like I said, when we were going through the material inflation of 2021, 2022, 2023, we were rolling out quarterly price increases. Some of our stuff will be covered under USMCA. Some of it will be we will get a clawback depending on where the value is added. Let me be very clear. We are going to use price to offset tariffs. We are not going to eat it. We are going to use price to offset tariffs. Okay. Thanks. With that, I think we're out of time. Thank you so much for being with us today. Thanks, Chigusa. Appreciate it. Thank you. Thanks, everyone.