Gates Industrial — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third-quarter net sales reached $903.6 million, a 5.6% increase year-over-year, including a 5.5% core sales increase.
• Net income attributable to shareholders was $86.5 million ($0.34 per diluted share), compared to $81.6 million ($0.32 per diluted share) in the prior-year period.
• Net income from continuing operations was $91.6 million, representing a 10.1% margin, up from 10.4% in the prior year.
• Adjusted Net Income per diluted share was $0.47, compared to $0.39 in the prior year.
• Adjusted EBITDA was $215.4 million, or a 23.8% margin, compared to $195.8 million (22.9% margin) in the prior year.
• For the nine months ended September 26, 2026, net sales were $2,696.3 million (4.2% increase), with net income from continuing operations at $336.2 million.
• Nine-month Adjusted EBITDA was $604.2 million (22.4% margin), compared to $582.3 million (22.5% margin) in the prior year.
• Gross profit margin was 42.4% for the quarter, compared to 39.9% in the prior year; Adjusted Gross Profit margin was 43.2%.
• Cash and cash equivalents were $830.8 million as of September 26, 2026, compared to $812.1 million as of December 31, 2025.
• Total debt was $2,220.9 million ($30.0 million current portion + $2,190.9 million non-current) as of September 26, 2026.
• Net cash provided by operating activities for the nine months was $170.0 million, down from $208.3 million in the prior year.
• Net cash used in financing activities for the nine months was $105.4 million, primarily driven by share repurchases of $96.1 million.

Guidance and Future Outlook:

• The company raised its full-year 2026 financial guidance for profitability and adjusted earnings per share.
• Updated 2026 Core Sales Growth guidance is 3.2% to 3.8% (prior: 2.5% to 4.5%).
• Updated 2026 Adjusted EBITDA guidance is $809 million to $823 million (prior: $800 million to $830 million).
• Updated 2026 Adjusted EPS guidance is $1.66 to $1.72 (prior: $1.62 to $1.70).
• Capital expenditures guidance remains at approximately $120 million.
• Free Cash Flow Conversion guidance remains at 90%+.
• Management stated the company is on pace to achieve its previously communicated adjusted EBITDA margin target for the second half of 2026.

Business Segments and Product Lines:

• Power Transmission Segment: Net sales were $560.1 million for the quarter (5.0% increase, 5.2% core increase). Adjusted EBITDA was $137.1 million (12.3% increase), with a margin of 24.5% (up 160 bps). For the nine months, sales were $1,681.8 million (4.4% increase) and Adjusted EBITDA was $383.9 million (6.2% increase).
• Fluid Power Segment: Net sales were $343.5 million for the quarter (6.5% increase, 6.1% core increase). Adjusted EBITDA was $78.3 million (6.2% increase), with a margin of 22.8% (down 10 bps). For the nine months, sales were $1,014.5 million (3.9% increase) and Adjusted EBITDA was $220.3 million (down 0.2%).
• Sales in the Industrial OEM channel increased high-teens year-over-year.
• Year-over-year growth in the Industrial Aftermarket channel accelerated relative to the prior quarter.

Market and Competitive Landscape:

• The company operates in diverse sectors including agriculture, construction, manufacturing, energy, and consumer applications (printers, power washers, automatic doors, vacuum cleaners, transportation).
• Products are sold in more than 130 countries across three commercial regions: the Americas; Europe, Middle East & Africa; and Asia Pacific.
• The press release does not provide specific market share data or direct competitor comparisons.

Risks and Challenges:

• Forward-looking statements are subject to risks including U.S. policies, tariffs, and economic, political, and international operational risks.
• Specific risks include ongoing conflicts in the Middle East impacting supply chains, reduced availability of production materials, and increased supply costs.
• Risks include availability of raw materials at favorable prices, changes in relationships with key channel partners, and dependence on manufacturing facilities and distribution systems.
• Risks include the ability to forecast demand, meet significant demand increases, and market acceptance of new product introductions.

Management Commentary and Tone:

• CEO Ivo Jurek stated the team executed well, resulting in mid-single digit sales growth and a significant gross profit margin increase.
• Management expressed appreciation for the effort and commitment of global teams in achieving new records.
• The tone was confident, citing the balance sheet's provision of significant capital deployment optionality.

Other Key Points:

• Share repurchases totaled $96.1 million for the nine months ended September 26, 2026, compared to $13.0 million in the prior year.
• The company received a cybersecurity incident insurance recovery of $5.2 million in the prior year (July 2025) related to a February 2023 incident; no recovery was recorded in the current period.
• Discrete tax items included in Adjusted Net Income adjustments were $(113.5) million for the nine months ended September 26, 2026.
• Transaction-related expenses were $4.0 million for the quarter and $7.6 million for the nine months.
• Restructuring expenses were $0.6 million for the quarter and $2.0 million for the nine months.
• The conference call and webcast were scheduled for October 30, 2026, at 10:00 a.m. Eastern Time.