Thank you very much everyone for joining Gates Industrial Corporation. This is Tomohiko Sano, SMID cap industrial analyst at JP Morgan. With me, we have Brooks Mallard, CFO, Rich Kwas, Senior Vice President, Investor Relations and Strategy. Brooks, Rich, thank you very much for joining. Thanks, Tomo. Absolutely. Before we begin, I wanted to highlight why Gates Industrial is such a compelling story for this conference. Gates is a global leader in power transmissions and fluid power with outsized growth in personal mobility, data centers, and robotics, and over 70% of sales coming from resilient aftermarket channels. Their innovation-driven transformation has delivered record margins and strong free cash flow, positioning them for continued structural growth. To kick things off, Brooks, if you could help us to start with an introduction to Gates, who the company is, what you do, and your story. Thank you. Well, look, you know, I think one thing, you know, Gates has got a long history. It's got a great brand name, but we're still a relatively young company, right? If you think about, you know, the DNA of Gates, you know, going back many, many years, over 100 years, I think, they have a culture of, you know, material science, you know, innovating new products, a very strong customer focus, and really being the brand of preference, you know, for the power transmission and fluid power products we make. You can go anywhere in the world, and you can see the Gates brand, and you can talk to customers who will go, you know, They say, "Gimme a Gates belt, gimme a Gates coupling," and that's just what they walk in and ask for. What have we added, you know, since we've been a public company? You know, Blackstone acquired the company, I think back in 2015. They brought in a management team of, you know, different people from different, you know, companies, primarily with an industrial focus, and what have we added, right? What we think we've added is we've become a very data-driven company. We like to use data to make decisions. You know, we've added a level of accountability, you know, in terms of, "Hey, look, you know, you promise us this, and then we're gonna give you the money to invest, and then we're gonna hold you accountable." We developed that culture of accountability, so everybody knows that, you know, we all have a part to play. We've also got a focus of continuous improvement. You know, we know that we're in a competitive environment. We know that we've gotta go out there and develop better products. We've gotta develop lower cost products. We've gotta service the customer better. We've gotta do all these things to continue to drive, you know, improvement in the company. Organizationally, we've tried to create a lean organization, you know, a culture of transparency, and then also to be process driven, right? We wanna be driven by process, by process capability, use that and data to make all the right decisions, and if you kinda put all that together, to really make our customers happy. I think that's really kind of the, you know, without getting into all the different products and everything. I mean, that's the culture that we've built at Gates. That's what we've been able to go through. You know, if you think about the past, you know, past six years, even going back to the last downturn in 2019, and you look at all the disruption that's happened over the course of the past six years, we went through COVID, then you went through, you know, material disruption and inflation and then Ukraine war and then tariffs, and now we've got the new thing. Well, you know, when you look at where we are, and we kind of feel like we're at the trough from an industrial perspective, you know, we've improved the profitability of the company, you know, over 300 basis points, right? From kind of mid-teens to mid-twenties from an EBITDA perspective. We've improved, you know, since 2020, we've delivered the company from 4.8x to under 2x, right? We're at our midterm target already in terms of leverage. You know, we've deployed capital. We've, you know, paid down a significant amount of debt. In addition, we bought back about 15% of the company's float, you know, since 2020. You know, we feel like, you know, the culture we've built and then the results that those have produced, you know, really kinda show, you know, where we are. It goes back to kinda what you led off with. We feel like we're positioned now for that next phase of growth, you know, particularly if we can get a little bit of help from, you know, from the industrial macro. Thank you. Based on your 70% of aftermarket sales business model, and for the cyclical perspectives, like, how do you see where we are in the cycle, and how actually you try to embrace those and capture the opportunities for the cycle for now? Yeah. I would say, you know, it's interesting. The you know, the automotive aftermarket business, you know, has typically, you know, for many years, you know, before we went public, was really a very stable part of the business. Right? Like, in 2019, when they had the first kind of trade tariff war, we saw some pretty significant disruption. You saw some stocking up and then some destocking and kind of a lot of different things going on in automotive aftermarket, which we really weren't a big part of the trade war, but it was disrupting the market overall. After that, you know, you saw COVID. COVID affected the automotive aftermarket hugely. You know, you saw people stop driving, so guess what? When people stop driving, automotive aftermarket slows down a little bit, and then it jumped back up. We started to see again, like I went through before, you know, some of the disruptions with, you know, materials and, supply chain and things like that. It took us, from the disruption of the trade war, till about 2023 to get through all those disruptions. Now, if you look back over the course of 2024 and 2025. The automotive aftermarket business is actually working the way we always thought it would, right? It's kind of a strong, you know, business with strong margins. You know, we've got great pricing power, so we're able to in inflationary times, you know, make sure we're able to maintain margins. We've got opportunities to grow the business, particularly in some of the emerging markets. It's, you know, that business is gonna grow, you know, 2, 3, 4%. It's acting like it, you know, we always hoped it would. On the industrial side, I think that's where you've seen more of the headwinds over the past three years, especially. You know, we've been kind of in a prolonged trough. I think if you go back and look at ISM and all these different metrics, we've been in a prolonged trough. Really, you know, I think that's typically the last piece to come out of it. What you'll typically see is the industrial OEM business start to perk up a bit. You know, we did start to see a little bit better orders in that. In our last earnings call, you know, we saw, you know, we were a little bit cautiously optimistic. You know that what we were seeing on the industrial side with some of the OEM orders, you know, that maybe we were seeing a bit of a turnaround. But then typically after those come through and you start to see factory activity pick up, that's when you'll see the industrial aftermarket business start to pick up some. You know, I would say that's kinda where we are right now. We're still kind of in a, you know, wait and see kinda how things turn out as we get through kinda the busy part of the season. But that's kinda how I see the aftermarket business as part of the overall, so. Thank you. Let's talk about your growth engines, which are personal mobilities and data centers, robotics and automations. Personal mobilities and data center applications are driving outsized growth. What are the key competitive advantage that you have, and also allow Gates to sustain high growth, and defend the share in these markets? Yeah. On personal mobility, think of that as a market where electrification is penetrating the industry. You've probably all, particularly if you're in city centers, you see a fair amount of electric bikes, and that continues to permeate. The belt-driven applications that we provide are really attractive to the bike manufacturers and the overall electrification. They're more efficient, there's less maintenance required, and they're more durable, and they've just worked better with the overall electric powertrain. We've been able to get design wins over the last several years, and you saw our growth, it came close to 30% last year on a year-over-year basis. On an overall for the global personal mobility market. You know, we have a 30% CAGR targeted out through 2028, so we expect to achieve that over the next couple years. You know, it's really just think about penetrating new applications within the electrification. As you think about electric e-bikes, those in the developed markets are growing double digits through the balance of the decade. That's creating a nice base, but then on top of that, we're penetrating applications within that. One example of that would be electric mountain bikes. That was an area that we've run some programs recently. That was an area we had not penetrated previously. We're bringing the cost down of our belt drive, and that's allowing us to penetrate higher volume applications, and we continue to focus on that here going forward. That'll allow us to, if you think about lower cost systems, that'll allow us to penetrate higher volume applications. That continues to be an opportunity. We see that a good growth trajectory through the balance of the decade and even longer. On data center, that was under about $10 million last year, in terms of a base. We're really focused on liquid-cooled applications. If you think about how data centers are now being built, there's a lot of focus on liquid-cooled applications, and so that creates an opportunity for us. We're more of a consumable though, so we come in on the back end, so with our hose and hose assembly and couplings that, you know, that ends up being more on the back end of things. We have a project pipeline that continues to build. We expect off the base in 2025 to grow multiples of that in 2026. We have a target of $100-$200 million of revenue by year-end 2028. We think with the liquid-cooled applications permeating the market over the next few years, that creates a nice opportunity for us. You know, we're working across the board, whether you look through the hyperscalers all the way down to the ODMs, working with the server manufacturers, the cooling distribution unit manufacturers across the board. There's significant opportunity. We think it'll be a nice growth algorithm for us over the next few years. You know, we also have a focus on trying to develop new relationships and gain share of shelf with our replacement customers. That's an ongoing focus for us. Couple, you know, within the last couple years, we won a big North American auto distribution partner, and we've been serving them for the better part of the last year or so. There's opportunities that come across here and there. You know, we're not gonna get those wins every year that are that chunky, but there's always opportunities to gain new customers and also gain share of shelf with existing customers. Thank you. Double-click on data center Rich. If you could talk about the pipelines cadence, like from $10 million to over $100 million to $100 million, are you ready for in terms of capacities and how it's actually come to a margin profiles for data center business? We've added selectively on capacity, and we continue to do so. We feel good about our capacity position here as we look out the next couple years. From a margin standpoint, think of it as fleet average. It's gonna be, you know, a solid contributor to our profitability. You know, as you think about, there's some incremental costs we've been incurring here over the last year as we deploy commercial resources, et cetera, and build the team behind it. We continue to hire people from the industry. As the volume increases, you know, we expect to leverage that pretty nicely. Thank you. If we could talk about the robotics. Recently, JP Morgan, we published a note about the robotics automation opportunities in the U.S., and Gates advanced belts, power transmission solutions play a key role, I think, in the robotics system running smoothly. How do you see Gates' role evolving in robotics automation adoption for acceleration across the industrial space? Yeah. You know, look, you know, we've had a focus on, you know, applications within the four walls of a factory, you know, going back here, you know, really, you know, I think since we've been public, right? That's really our chain to belt conversion initiative, right? We had great success with it on the mobility side, which is kind of more of a mobile application. We've always been very strong in mobile applications, whether it's two wheels or four wheels, heavy duty truck, construction, agriculture, all these different things. What we really focus now on, and this aligns directly with the, you know, robotics and the automation, the stuff within the four walls of a factory is, you know, making sure that we get in and we have a strong selling solution along with a strong product portfolio to sell to the machine OEMs, right? You know, we've had good success on retrofitting applications within the four walls of a factory using Gates belt drive systems. We're trying to take that focus and apply it now to the machine OEMs, so we get in on the ground floor of all these applications. The big driver there has been, as we've continued to work on cost productivity and material efficiency, and new products, is we're getting closer and closer to cost proximity with chain-driven systems. The closer we get to cost proximity to where the actual decision on the cost between one and then the other is very, very close, when you look at the energy efficiency, when you look at, you know, the downtime, when you look at the cleanliness of the Gates belt drive systems, when you look at all those and you've got cost proximity, then you've really got the equation that you need to go in there and really get some market share gains on the machine OEM side, and that's really what we're focused on right now. Put them aside for a minute? I think that's, you know, just think about getting in terms of that initial install cost, and if we can penetrate that market. You know, we've had more success historically on the end user in terms of conversion, and that is still ongoing, but there's a distinct opportunity with the machine builders to get installed first, and that creates obviously a replacement opportunity longer term. The key there was the cost proximity piece, right? Because like I said, you know, chain-driven systems, they've been working on those since there's been chain, right? This initiative has only been ongoing for 10 years, and we're already getting pretty close. Then, like I said, the closer we get on cost proximity, you know, the more opportunity we're gonna have. If you could talk about the humanoid, any exposures and anything that we can be excited about the humanoid's exposure. I'd say it's, you know, it's a possible opportunity. I would say though that, you know, nothing to talk about materially today as it relates to that, but always an opportunity, so. Looking forward to it. All right. Thank you. If you could talk about the most important areas of innovations, whether it's actually material science, digital monitoring, predictive maintenance that will drive Gates' differentiations, value creation in the next, the phase of factory automations and robotics? Yeah, look, I mean, I think, you know, from a, you know, Gates is really a material science company, right? That's what we are, you know, we're very focused on, right? You know, we're gonna continue to develop new, you know, material combinations. We're gonna continue to look at, continue to be flexible, in terms of, you know, some of the different combinations of resins and compounds and things like that that we do that produce, you know, products with specific, with specifications that our customers want. You know, I do, you know, I think we have a lot of opportunity to use new, you know, digital tools and AI and things like that to expand our capability on material science, right? You know, can you run iterations on compounding to see what the outcome's gonna be? Can you get a lot faster in determining, you know, what's gonna be success and what you might not wanna do, right? When it comes to a material science perspective, right? You know, we're looking at all these different tools, you know, to improve our material science capability. I think also, you know, when you think about, you know, product applications, you know, whether you're, you know, looking at tools to make yourselves better, or you're looking at tools that other people are using to make themselves better, you know, our products are used in so many different applications that it opens up a wide aperture for us. I think like the data centers is a great example, right? I mean, you know, when you think about, you know, hoses and couplings, you know, these are things that we've been doing for 100 years. You know, as liquid cooling became a big opportunity, we already had the products, right? We already had the capability. It was just a matter of matching up specific, you know, specifications with capability and products with, you know, the right, you know, set of end users and customers and specifiers and things like that. We created this, you know, this great new opportunity. You know, look, you know, we're. You know, we're always gonna look at all, you know, all the different, you know, applications that are out there, we're gonna look at the different tools that are out there, and we're gonna use those to drive, you know, not only our material science focus, but our new product development and product application focus, and that's where you kinda marry those two up, and that's why, you know, I think customers love to do business with Gates 'cause we can marry those two up and really kinda, you know, scratch any itch they have, right? And really take care of the customer in a great way. Thank you. Let's talk about executions, operational excellence, the margin expansions. Despite the macro headwinds, Gates has delivered record margins and strong free cash flow. From your perspectives, so what are the key drivers behind this on-the-ground culture? How do you maintain it across the organizations, especially during the recent large scale ERP and footprint optimization projects? Look, I think, you know, when I talked earlier about, you know, the culture of the company, I mean, I think really this is the key element of, you know, how do you drive, you know, continued improvement on your financial metrics, you know, through the cycle, right? You know, from a material science perspective, right, you know, we always had a strong, you know, capability in material science. I will tell you that when we went through the big issues with material availability, with what went on with the Ukraine, Russia war and some of the displacement that was going on there and things like that, you know, we shifted our focus somewhat on our material science efforts, and we started looking at, "Hey, look, you know, we've got some issues in terms of material availability, with cost, with things like that. How do we look at that and say, 'Look, let's focus on cost.' How do we start, you know, getting our costs realigned, and looking at what we can do to kind of have the same specifications, but do it at a lower cost, or do it with materials that are much easier to get?" Right? We refocused our efforts and said, "Okay, let's do this." We've seen great success over the past, you know, two years, and we think we'll have great success this year in terms of being able to kinda realign our material costs, right? Get better there. You know, from a cost perspective, right, you know, we've done a lot of work on, you know, taking cost out kind of in line with, you know, what we've seen from some of the volume headwinds, to try to maintain our cost productivity in the factories. You know, to kind of cover a point that you were talking about. We know we've also looked at, let's take a look at our overall footprint and see what we need to do from a cost productivity perspective as well as a labor availability perspective and kind of where are you seeing inflation in your labor force and realign our footprint so that, you know, we're gonna be able to do better from a conversion cost perspective, you know, with labor and overhead costs and things like that. I mean, that's really gonna focus on being focused on data, you know, being focused on making sure that you take cost out every year, kind of that, and then focus on that continuous improvement effort, right? To kind of switch gears to the ERP. Look, you know, I've been through, you know, ERP implementations before, and they're never easy. They're necessary sometimes. The one that we did in the EMEIA region was necessary, you know, given kind of some of the infrastructure things that were going on there. I will tell you that the team, you know, came together and has done a good job. You know, so far, you know, we're where we thought we would be, you know, from an ERP perspective. Look, you know, I think as they get through the heavy lifting on that, then they're gonna come out with, you know, a much better baseline in terms of understanding where they are and then a system to run it, to then start to put in more improvements and start to get better as they move forward. You know, I will tell you that as we sit here and look today at it, you know, I'm very encouraged as we get through this quarter and then get through next quarter about the future for EMEIA in terms of improving a lot of things. You know, not just the cost side, but really the working capital side. I'm gonna have better visibility to inventory management. We're gonna have better visibility to customer demand and forecasting and things like that. I'm very encouraged about what they can do in the future. Thank you. Shifting gear to regional performance. You're a global player, and Gates has outperformed in Europe and China versus peers. What are the key factors behind this success, and how replicable is it in other regions as well? I think if you go back to the Q4, we had solid growth in the EMEIA region. We were up almost 6% year-over-year on a core basis. I think over the course of the second half of 2025, you saw some improved demand trends in general in the market over there, and so we were able to capitalize on that. You know, things turned the corner a little bit, if you will. You know, as you all know, some of the PMIs have kinda crept back towards 50 and maybe have exceeded 50 at this point in certain of those jurisdictions. We saw good receptivity in the back half of the year in terms of particularly on the industrial OE side, and that kind of fed our comments somewhat around improved demand trends on industrial OE orders as we exited the year. In China and generally in Asia, we've seen solid, steady demand trends really for most of the last couple years. We have a very strong franchise in China. I think our team is really well-versed over there and well-positioned, done a great job. You know, we've transformed some of the mix of that business, which was maybe a little more auto-centric if you go back a decade ago. While we still have you know a strong position in auto, it's really transitioned to more of a replacement mix rather than an OE mix in China, and we've grown the industrial side of things there. In North America, I think, you know, we started the year towards the end of last year and really in the Q4, we saw improved OE order trends in North America as well, and that kinda also you know helped us as we exited the year and then as we started this year, we saw improved order trends on the OE side in North America. That kinda fed some of our cautious optimism here as we entered this year. We typically see one thing that's different now versus maybe the last couple years when we saw a little bit of a head fake with the PMIs in 2024 and 2025 is that the industrial OE orders have started to improve, and our book-to-bill was solidly above one. What typically happens is when you see industrial OE orders turn, you'll ultimately see the replacement aftermarket start to turn. It takes them a little longer. That gives us some greater optimism overall that the market will start to turn as we get through 2026. Thank you. Before I open up the Q&A, I wanted to ask about the capital allocations in M&A. With leverage at record lows and strong cash flow generation, how do you prioritize between buybacks, organic investment, and M&A at this moment? Yeah. Look, I mean, organic investments are always, you know, gonna be our first use of capital because they typically have the highest IRRs. They typically will have a 25%+ IRR. Now, there's only so much money. I mean, typically, you know, from a capital perspective, you know, your sweet spot for our company at the current size right now, maybe $100 million-$120 million, and that's so you can, you know, get the right people focused on the right projects, make sure you get them to the end, declare victory, and then move on to the next one. You know, we typically have significantly more of a pipeline of good projects, you know, than you can really execute on in the short run, right? It's a matter of, you know, people and time and effort and things like that. You wanna be balanced in your approach. On working on projects versus, you know, daily productivity and delivery to the customers and all these other things, right? That's always a good first use of capital. You know, we still think our stock is undervalued. In terms of where we rank compared to our peer group. We've still got a significant amount of ability left in our current stock repurchase program that we plan to use. We'll continue to use that. You know, we'll continue to look at debt paydown as an opportunity, you know, especially as interest rates do start to pull back and we start to see some opportunity there to kinda reconfigure our debt and maybe, you know, shave some basis points off of that. We'll certainly look at that as an opportunity. M&A, as I think, is something that we're opening up the aperture on, right? Look, you know, M&A is tricky, right? You know, there has to be something that's actionable. Right? It's gotta make sense for your business. It's, you know, it's gotta have the right, you know, payback. You know, we certainly would like to, I think, add some inorganic growth to our profile. That's something that's been missing from the company. I think that's something we wanna add in. You know, given all that, from an M&A perspective, we're gonna stay close to the core, right? It's gonna be something that aligns with our current product portfolio. It's gonna be something that looks very much like what Gates does today. You know, it's gonna have something that's, you know, critical application in nature. You have to have our products to run whatever it is you're running, whether it's a combine harvester, whether it's a, you know, automated, you know, machine in any different vertical or whether it's a electric bike or whatever it is. You know, typically we like it to have a large replacement business, a large aftermarket business that we can tap into and tap into kind of our total distribution system, and we like it to have good financial metrics, right? A large synergy play that we can fold into our business. Thank you, Brooks. Yep. I would pause here to see if anyone has any questions. All right, moving a little bit more. You talk about underappreciations about the valuations, Brooks. Are there aspects of Gates business, aftermarket, material, innovations, digitalizations, your role in the robotics automation value chains that you believe are underappreciated? Any thoughts? Yeah. I'll tell you, I'll give one thought, then I'll let Rich go, and then we'll see how much time we have left. I think one thing that people have, you know, underestimated about the business is, you know, the cash generation part of our business. You know, we're able to generate cash at a high level year in and year out, you know, good cycle, bad cycle. You know, when you go back to 2020, you know, we delevered the business almost three times in addition to, as I said, buying back about 15% of the outstanding float as Blackstone exited the business and they're no longer owning any shares of the business at all You know, when you can generate cash like that, you know, during, you know, even when the cycle's down and things aren't great, it puts you in opportunity of strength. Whether you wanna, you know, use that as an opportunity to buy back stock when you, when you think it's really undervalued, or you wanna step up your M&A, you know, capability and things like that. It's something that, you know, I hope that investors will take to heart and go, you know, if we do a little bit more M&A or if we don't, you know, this business is gonna delever over time, half a turn every year. It's just what's gonna happen. Whether we use to take that cash and buy back stock or do M&A or pay down debt, it's gonna generate cash year in and year out, right? That's gonna give us great flexibility and opportunity from a capital allocation perspective, which we think is one of the, you know, absolute key things that's gonna drive shareholder value in the future. Yeah. I was just gonna say, you know, the, I think the sturdiness of the franchise is underestimated. This brand's known across the world. You, you'll walk into any part of Asia, any part of Europe, people recognize the Gates brand. You know, it's unlike other companies maybe that have added acquisitions over the years, and maybe their core brand is relevant in one part of the geography, half the world, but the other half, you know, they use other brands to drive their value proposition. This is a one core brand, and I think that's pretty unique among many companies. I'd say, you know, the other thing is just in general, the company's been around 115 years. Our management team, our board's focused on keeping this business running for the next 115 years. I think, you know, we're starting. You've seen that with personal mobility, where we've created a new market, essentially. There's opportunities to do that in the future, and we intend to do it. All right. Thank you. I think it's time's up. I'd like to wrap it up with a thank you, Brooks and Rich, and thank you everyone for joining. Thank you, everyone. Thank you.