All right, there we go. The clock has started. All right. Hi, everybody. I'm Steve Volkmann with Jefferies. I cover Gates amongst a number of other industrial companies, so very pleased to welcome Gates to this session. We have Ivo Jurek, who is the CEO. We have Head of Investor Relations, Rich Kwas, with us as well. So we're gonna do this as a sort of fireside chat. We'd love to have whatever input or questions that you guys might have. So I'll start off and do a little conversation here, and then we'll see if anyone wants to participate. That'd be great. So, Ivo, welcome. Thanks for coming. Thank you. Maybe the best way to start is, just in case people aren't familiar with Gates, sort of, you know, who are you? What do you do? And then we'll dive into some of the trends. Sure. Great. Thank you very much, Steve. Appreciate being able to be here with you. Gates Corporation, we are a material science company. We produce products that go into harsh and hazardous, mission-critical type applications for a pretty wide array of applications across the industrial spectrum. We are pretty diversified, both from the end markets as well as geographies. In general, we generate a very attractive mix of margins, and we convert those margins into pretty durable and robust free cash flow. Our EBITDA margin is tracking in the 22%-23%, and we anticipate over the next 12-24 months to deliver 24% adjusted EBITDA margins on the business that we support. Predominantly, our margin expansion, which has been reasonably robust, particularly over the last three years that have been pretty challenging from the end market demand, volume-based demand. And it was driven primarily by a mix of footprint optimization initiatives, as well as 80/20, and reasonably good amount of material cost reductions that we have been able to deliver. Those initiatives are longer term. We do not anticipate that, when we get to 24% EBITDA, adjusted EBITDA margins, that those will cease. We have a plenty of opportunity in our company to continue to evolve and expand margins through these three initiatives well into the future. We have a very strong competitive position. We have two segments in our business: Power Transmission and Fluid Power. Both of these segments are of scale, and in both of these segments in general, we are top three market participants in all geographies where we participate. We have a number of attractive growth initiatives that we will be discussing here today with Steve, that are primarily driven by industrial chain to belt conversion. We have a very strong presence in automotive replacement market that continues to do well, and we continue to see a number of opportunities to expand that. We have a nascent and an early stage opportunity in the emerging liquid cooling of AI-based data centers, that we are starting to participate in, as well as very attractive opportunity set in personal mobility, where we are converting chain drives into Gates Carbon Drive solutions. Our company's well-positioned to not only deliver strong growth over the midterm, but also to generate very nice returns for shareholders. Our balance sheet is in a good shape, and we anticipate that we will have a strong optionality to deploy our surplus cash either into buybacks and further debt reductions or into an emerging M&A opportunities that we are starting to evaluate. Great. So why don't we dive in sort of to more recency? I guess this is webcast, so first I'll give you an opportunity to see whether you want to give us any updates relative to what you've seen in the last few weeks. I don't know if tariffs might be a topic or end market or anything like that, and if you don't, we'll move on. Yeah, sure. Look, I mean, I think that we have pretty well framed our Q3 and Q4 on our most recent earnings call. We haven't really seen anything substantially different from what we have indicated on our call. Obviously, there are puts and takes as the administration is deploying you know, additional adjustments to their policy. They can result in, you know, some things being a little bit better, some things being a little bit worse. The incremental tariffs really don't have a meaningful impact on what we have represented, so we believe that, you know, we are reasonably well positioned to deliver on our guidance that we have offered on our call. Okay, so second quarter, you know, I think things were flattish and maybe down slightly organically. You know, what end market trends are you sort of seeing in your businesses? Yeah. So the end markets have been pretty challenged, I think, over the last three and a half years or so. The industrial PMIs have not been very supportive. They're a pretty good indicator of the underlying industrial activity, but, you know, we did see some, you know, some incremental behavior in our end markets. I think we've spoken at the beginning of the year that we anticipated the ag business to be reasonably challenged. I think that's playing itself out. As we have highlighted, I don't think that's a surprise to anyone. We have anticipated that the heavy-duty truck market in North America is gonna be a little more constructive than I think it has developed. I think that some of the new policies that were deployed by the administration, like revocation of the most recent emission standards, has put a little bit incremental pressure on the truck makers, and I, you know, certainly feel that that business has been a little bit more challenged than what we've anticipated. The rest of the world is doing actually reasonably well. Our automotive replacement market is doing quite well, not only because we have had the opportunity to gain market share, but also because the underlying market dynamics are rather positive, so that's been behaving quite well. In the first half, we have seen, for the first time in probably two years, a very positive core growth in personal mobility. We have grown, roughly about 20% in the first half, and that business continues to do, well, and we anticipate the second half is gonna be more constructive than the first half. And we have highlighted that we anticipate that business to grow around 30% compound annually for the next couple of years. So we feel pretty well, about that. And, diversified industrials, I would say it's pretty neutral at this point in time. That's after a couple of years of really challenging end market conditions, so we believe that market has troughed and, we anticipate that there may be, some improvements as we go into 2026. That is kind of about what, you know, what we- We got an update on August truck orders about an hour ago, and they were down 20%, so— Oh. We're not there yet. There you go. Anyway, let's talk about some more uplifting things. Maybe you started with it. Let's talk about personal mobility. I think you're up 18% in the quarter. Just talk about what's driving that business, maybe size it for us, and then you talked about the opportunity on growth for the next couple of years. Sure. That business has been an interesting business because Gates has developed an alternative solution to what we have all grown up with, which is a chain drive on a bicycle. And we have developed a really elegant solution to replace the chain with a carbon drive that gives us the opportunity to offer a better solution than what chain represents on that device. There are a couple of things that are driving value creation and a business growth opportunity for our company. Number one, as electrification takes hold and more significant portion of that end market is getting electrified, that represents a good opportunity for us to drive penetration. So we don't necessarily see that we need to, you know, we need to visualize end units growth in, e-bikes or bikes. We need to see just the penetration of e-bikes, and that gives us, a very strong, opportunity to deliver a decent, amount of growth rate for that business over the midterm. The business, at the end of 2024, represented about, circa $100 million of revenue. We've committed to our shareholders that by 2028, we will scale the business up to about $300 million. We have a line of sight to deliver that volume growth over the next three years, predominantly driven by the design wins that we have won, with, bike and e-bike manufacturers and e-scooters and scooter manufacturers globally. And so we anticipate in the second half, we will deliver better growth than we did in the first half of 2025, and then from there on, we are committing to about 30% compound annual growth rate for the next couple of years to get to the $300 million target. Is that margin accretive? It is actually very margin accretive, yes. Okay. And when we're done in 2028 with $300 million of revenue, not that we'll be done, but when we reach that waypoint, how much of that business will be sort of U.S., non-U.S.? Just give us a sense of the global. Yeah, so that business has developed very strongly in Europe and was predominantly driven by the adoption of higher price point e-bikes. Our sweet spot at that point in time was about EUR 3,000-EUR 5,000. That, you know, that gave us the opportunity to develop the technology, demonstrate the technology on a premium product, and continue to evolve and innovate our product portfolio. So now we can start penetrating a broader range of applications. I would say that, you know, we're now starting to get to applications that have a price point of about $1,000. So there is a very significant opportunity to not only, you know, reach the $300 million for us, but, you know, continue to expand well beyond that, as we penetrate those, more mainstream applications here, as well as in Europe. But we also see a very significant emerging opportunity that we participate with in Asia, where personal mobility is still, you know, in a large way, done on two-wheelers. And as they try to evolve into more efficient two-wheelers, and they are starting to adapt e-scooters and e-motorcycles, that's where, you know, we have an opportunity to drive growth and deliver pretty substantial amount of revenue from Asia, whereas today it's predominantly Europe and North America. Why do I want a belt on my bike or e-bike when my chain seems to work fine? It does work fine as long as you don't mind oiling your chain and tensioning and replacing your chain every few thousand miles, and getting that black stuff all over your pants as you're driving, so if that's what you don't mind, then— Other than that. it's a fine solution. Our solution is much more elegant. You will never have to replace that chain. You never have to oil it. It doesn't rust. It is more smooth. I think that you will be quite pleased with an opportunity to drive or ride a two-wheeler mobility device with a Gates Carbon Drive. Mine also seems to come off a lot as well— Yeah. But I was just teeing up the question. So, let's sort of stay with that topic, but let's talk about belt and chain opportunities outside of personal mobility and kind of more of the industrial space. Right. I think that, you know, to me, while the personal mobility opportunities are super exciting, and they are very elegant, and I think that they are You know, they're frankly quite terrific. I do believe that we have a very large market opportunity over that longer-term horizon in industrial applications. Industrial chain market is about $8 billion a year market TAM for our company. Again, it is a non, non-traditional competitor for us. We don't manufacture chain drives at Gates Corporation. We believe that we can offer a much more elegant solution for industrial applications, whereas our belt solution offers significant upside, operational upside to our customers: lower energy consumption, significant reduction in maintenance cost, a noise pollution reduction, and, you know, most importantly, energy reduction in consumption of energy as you operate that end unit. So it is a better solution. Today, it is a much more expensive solution than chain. We have had a significant engineering set of activities where we believe that we are now coming towards a technology breakthrough. We have discussed it a number of occasions. We've demonstrated the technology that gives us an opportunity to get to a chain cost proximity on these applications, and we believe that we needed to make that breakthrough to be able to drive penetration of stationary machine OEM applications. And so we now anticipate that over the next 12-24 months, we will be not only shipping these units out, we will have a capability to vertically integrate the manufacturing of these sprockets and have a differentiated opportunity to offer to the machinery OEMs. As a plug-in, you know, there is not just a benefit in operating assets that are transmitting mechanical power through belts rather than chains. We are also offering in our solution nearly 90% reduction of carbon footprint over the use of the life of that asset, which is rather significant. And while, you know, maybe the environmental factors have fallen a little bit away on the radar of companies, I think that there are companies that continue to care about being good stewards of the environment. And, you know, this is a pretty substantial incremental benefit that you can receive by adapting this new technology. So have you sized what you think that business could look like, like we did for the personal mobility side? Yeah. Well, we certainly believe that that business could be, you know, kind of $250 million by the end of the decade, which I don't think is unreasonable, taking into account that there's a pretty significant value proposition in here. And as we get again closer to the proximity of the cost of the chain drive, this opportunity is becoming much more meaningful and tangible for us to be able to deliver on. Okay, great. So let's shift to the bright, shiny object in data centers and maybe start by just telling us what you're working on there. Yeah, sure. So, data centers is a unique opportunity for our company. We have been developing specifically designed products for adoption in liquid-cooled data centers. All the products that we manufacture for applications in data centers are core products that we have a long history in manufacturing. We've just custom-tailored design the products that we have historically manufactured for a use in these applications. The application is reasonably unique. It's an application that is sitting right at the center of what we do. It's a mission-critical application, where people care very much about having an ability to have a system that is leak-proof in this case. It is essential. You don't really want to have a water contamination in a data center. So, we have developed a fluid conveyance hoses that are specifically tailored for these applications. We have couplings and fittings applications that connect the hoses to the manifold and the racks. We have developed an electric pump that goes in this application that happens to be smallest in size, highest in cooling capacity pump available on the marketplace today. And, we also offer a belted solution into high output industrial HVAC blower systems. So we pretty much are capable of are able to provide all key products from both of our product segments to the use in these data centers. Most recently, we've spoken about. And since our Q2 earnings call update, we have secured a supply agreement with a hyperscaler data center operator to support their data center applications. We will be supplying hose and coupling assembly for their use. We will be doing that through an Asian-based ODM starting in 2026. We are presently in early pre-production of our e-water pump for an application in server racks with a U.S.-based server manufacturer that we anticipate will be in full pre-production by Q4, and then in production in 2026, and that is being done through another Asian-based ODM for this application. We have a number of, a significant number of designing activities that are occurring with other server manufacturers, other ODMs, critical infrastructure providers, as well as EPCs that build the gray spaces. So we're pretty well-positioned. We're very excited about some of the opportunities that lie in front of us, and we are being laser-focused in being able to scale up our production capability and capacity in support of the demand. And I think you've sized that addressable market potentially around $1.8 billion-$2 billion. Just talk about that a little bit, and what might change that or make it bigger. Yeah, so, when we sized this market for the products that we manufacture, we have taken into account an industry estimate of about 30% of data centers that will be built between now and end of the decade being liquid-cooled. I believe that assumption may prove to be conservative, taking into account that basically vast majority of everything that we see is AI-based data centers that are coming out of the ground, so that could reasonably well upsize the market opportunity for us. You know, we are certainly not forecasting any more than that at this point in time, and we'll, you know, we'll be very pleased if we can upsize that market opportunity. But if that market opportunity remains at about $1.8 billion, we have estimated that by 2028, we would anticipate to deliver between $100 million-$200 million of incremental revenue for our company through this opportunity alone. Do you need to add capacity to do that? We have a reasonably well-positioned capacity for the fluid conveyance products that we manufacture. We are scaling up capability and capacity to build the fittings and couplings, and we are ramping up a couple of production lines in support of the water pumps that we anticipate to deliver to our customers. Presumably, this will also be margin accretive, or not necessarily? It will also be margin accretive, yes. Okay, good. And then we were talking, I think, offline, about whether this might have some applicability in other business areas, other end markets over time. Sure. I think that that's a really good point, Steve. Look, we believe that our water pump technology today is amongst the most competitive solutions available in the marketplace if size is a differentiator. Many of the industrial applications do care about output in size, so we anticipate that as we scale this pump into data center applications, we should have opportunities to adopt this device across a broader set of industries. And frankly, we have already demonstrated we have a capability to do that because the original technology was developed for hybrid electric application with an Asia-based OEM. So we've not only scaled it up, but we have also been able to take it across different industrial set of applications now into the data centers, and we are demonstrating that this is a very, very competitive technology. Great. Okay, why don't we take a quick break? Anybody want to ask a question, or—o kay. Why don't we talk a little bit more about your margin expansion? I mean, you, you've delivered 30-35 basis points of margin expansion, I think, over the last few years. You know, how have you done that, and how do you keep that going? Yeah, it's a great, great question. We have deployed a whole bunch of self-help initiatives across the last several years. We've certainly anticipated that there will be, you know, a number of challenges in the industrial complex, and we felt that it was essential for us to continue to deliver strong financial returns, and the only way that we could have done that is by, you know, processing and prosecuting our business a little bit differently than we have done historically. So we have deployed a number of different initiatives. We have taken a look across the landscape, and we certainly saw opportunities to improve the efficiency of our operational footprint. Not necessarily because we wanted to necessarily reduce the number of factories. Now, I mean, there are benefits. There are underlying benefits when you do that, but for us, the biggest issue was that during every upcycle, we have struggled to be able to have access to the availability of labor in support of the order book that we have had. So we wanted to position our factories in closer proximity where labor is more readily available. And you know, so that was kind of the first underlying pretext of what we have done. Well, as we are doing that, we're also finding a significant amount of economic efficiencies that come with that benefit. Secondly, we found that deploying 80/20 around our portfolio would give us the opportunity to drive further margin expansion opportunities, and we've certainly seen, you know, pretty strong early returns from that program. Thirdly, we have had an opportunity to test our supply chain at the onset of the Ukraine-Russia war, where we have been significantly impacted by raw material shortages that were coming out of that region, as both of those countries were very critical in the supply of refined petrochemical byproducts to predominantly polymer industries. And so as their capacity got extinguished, our supply chains got tested. We needed to re-engineer the materials that we were using in our manufacturing, and as a material science-based company, we've deployed our material scientists to go in and do just that, so within a couple of quarters, we have been able to not only re-engineer the materials, but we've also realized that lots of the materials that we have been re-engineering out were rather costly and gave us an opportunity not only to help ourselves with the supply chain, but also gain efficiencies in doing so, so as we came on the other side of that process, we have decided to harness the benefits that we were seeing and put ourselves on a trajectory to continue to drive further reduction in material cost. And that has been a very good journey that has given us strong benefits over the last two years, and we believe that we have two to three more years of that journey available. And so between footprint optimization and supply chain optimization and 80/20, we believe that, you know, we have a further opportunity to continue to drive that margin expansion. And frankly, we have done that during a rather negative end market backdrop with declining volumes, being able to expand margins. So we're quite pleased with what our team has done, and we believe that these opportunities remain. And as the business starts to improve, as the underlying conditions, as PMIs improve, as the underlying market conditions improve and some of these end markets start to recover, that represents a rather meaningful opportunity for us to continue to not only increase our margins, but, you know, get to, you know, super healthy incrementals as well. How should we think about incrementals over the next couple of years? Yeah. So, you know, we've represented that we believe that, our incrementals for the first 12 to 18 months of volume recovery should be kind of 1,000 basis points better than our normalized incrementals, which are about 35%, on incremental revenue. So kind of, you know, thinking about, you know, 45%, plus or minus incrementals in the first 12 to 18 months, you know, is very robust, very healthy, margin expansion. And, you know, kind of post the 12, 18 months, we believe that we will normalize back at, at 35% or so, incrementals. Okay. Let's talk just briefly about tariffs. I think you've said that it's about a $50 million headwind for you this year. Just talk about sort of how that comes to play. Yeah. Yeah. The $50 million is annualized for us, and we will not see all of the $50 million, obviously, in 2025. Look, we have had a philosophy since, you know, the last 10 years that I have been present in the company of in-region, for-region manufacturing. I mean, in-region, for-region manufacturing is great. What you kind of underestimate sometimes is the supply chain complexities. So while you may be manufacturing in North America, and, you know, for us, we have a very little exposure in importing products from China, as an example, is de minimis around the edges. The bigger issue is that you do supply on raw materials that you put inside of your processing of those materials. And in a way, you know, you have been exposed to importing additives, you know, some steel components, importing things like bolts and nuts that you really don't manufacture in the United States. You don't quite realize how much tariff exposure you may have. But overall, on a scale of the company, I think that we were reasonably well positioned. Again, $50 million annualized. We will be offsetting that $50 million tariff predominantly through pricing. We anticipate that 80% to 90% of the tariff cost is gonna be offset through price on a dollar-to-dollar neutrality, and the final 10% will be offset through incremental operational activities that we have deployed. How do you think your manufacturing and cost footprint compares to your competitors? You know, we are a reasonably well geographically diversified company. We have a strong presence in the United States. We have a very strong presence in North America, as I again, as I indicated. We are in-region, for-region, so we really don't import lots of finished goods products from other regions. So you know, we are very well positioned. I believe that that also gives us an opportunity to potentially leverage that benefit from our presence in the United States, and possibly over the midterm, it should represent an opportunity to drive incremental growth. Okay. Maybe final topic, sort of balance sheet, capital allocation. Your debt levels have come down. Maybe they need to come down slightly more. I don't know how you feel about that, but talk about where you think the balance sheet is and what type of optionality that gives you. Right. Our balance sheet, I think, is in a very good shape. We've exited the quarter with about 2.1x-2.2x leverage. We anticipate that we will be below 2x leverage by the end of the year. That I think is a very reasonable level. Most recently, about a month ago, we have paid down $100 million of gross debt. We anticipate that over the medium term, kind of next couple of years, we would like to get below $2 billion of gross debt. Our strong free cash flow generation capability and margin expansion gives us the opportunity to delever kind of in a natural way, at half a turn or so a year. Our short-term targets, so by 2026, we've committed to get, you know, to 1.5x-2x, so we are a little bit ahead of that, of that target. So, you know, 1.5x leverage is, you know, it's a, it's an area that would be good to traffic in. That gives us ton of optionality, because, again, we kind of delever it half a turn a year, so that gives you a scale of the free cash flow, surplus free cash flow that you are generating. So in short term, we will be deploying that cash flow in further debt paydowns and repurchases. I think that that's the best use of cash for us to return the cash back to shareholders and stay focused on execution of our organic growth initiatives. We are truly fortunate to have a very significant organic opportunity ahead of us, but you know, we are also starting to think about potential incremental M&A that we can do. But you know, I think that while we are building a strong pipeline, we have a strong pipeline of potential M&A opportunities. We do believe that you know, buying back our stock is generating the biggest IRR on that cash deployed, so we'll continue to do that, at least over the short term. Ultimately, when you do start to layer in some M&A, what types of things? Is it geography, product, process? Yeah. Well, I think at first, we start with You know, we are a unique company. We are about 65% aftermarket and 35% OE applications. So whatever we do, we would want to ensure that that mix of revenue stays consistent with what we do. We are interested in companies that have a very similar profile to what we have: mission-critical, highly engineered products that need replacement. And then, you know, I think that, you know, layering more broadly things that would advance your opportunities in different geographies would make sense. Building, you know, lots of factories in different geographies is complex, costly, and it doesn't always generate the returns that you want to. So that would be a reasonable assumption, that it would make more sense to acquire something around your core portfolio. All right. That is perfect. We are out of time. Thank you, everybody. Thank you all for listening. Thank you, guys, for the discussion. Thank you. Thanks, Steve.