Gates Industrial Corporation plc Q4 2025 Earnings Call Summary

Gates Industrial Corporation plc Q4 2025 Earnings Call Summary Moby Intelligence Fri, February 13, 2026 at 5:32 AM GMT+8 3 min read In this article:

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Gates Industrial Corporation plc Q4 2025 Earnings Call Summary - Moby

Strategic Performance and Market Dynamics

• Achieved record adjusted EBITDA and EPS in 2025 despite a troughing demand environment and contraction in several key end markets.

• Realized significant outperformance in secular growth verticals, with personal mobility growing over 25% and data center business expanding 4x year-over-year.

• Successfully reduced net leverage to 1.85x, marking the first time the company has finished a year below the 2.0x threshold.

• Attributed margin resilience to disciplined SG&A management and production output adjustments, which offset unfavorable mix and lower volumes.

• Exited the down cycle with a structurally improved business, delivering over 300 basis points of improved profitability compared to the previous cycle trough.

• Observed a notable shift in order trends exiting 2025, with a book-to-bill ratio solidly above 1x driven by industrial OEM recovery.

• Maintained a 'region-for-region' strategy, consolidating geographic reporting to better align with localized management and supply chain operations.

2026 Strategic Outlook and Guidance Framework

• Anticipates 2026 core sales growth of 1% to 4%, assuming approximately 80% of end markets will be flat to up during the year.

• Guidance incorporates a 100 basis point margin drag in the first half of 2026 due to ERP implementation costs and footprint optimization initiatives.

• Assumes a 500 basis point core growth headwind in Q1 2026 specifically related to two fewer business days and temporary ERP transition inefficiencies.

• Expects footprint optimization benefits to contribute approximately $10 million in adjusted EBITDA during the second half of 2026.

• Projects personal mobility and data center verticals will continue to grow at significantly higher rates than the company fleet average through the end of the decade.

Operational Risks and Capital Allocation

• Allocated $120 million for 2026 capital expenditures to support long-term efficiency projects and enterprise initiatives.

• Repurchased over $100 million in shares during Q4 2025, signaling management's view of the stock as undervalued relative to business strength.

• Identified potential for inorganic growth, shifting focus toward logical, non-transformational M&A opportunities enabled by the strengthened balance sheet.

• Flagged ongoing labor inflation and potential automotive OEM volatility as persistent macro variables requiring pragmatic management.

Q&A Session Highlights

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Story Continues Sustainability of order acceleration and industrial distributor destocking trends

• Management noted the most positive order trend in three years, specifically led by industrial OEM recovery which typically precedes other end markets.

• Distributor destocking in Q4 was characterized as typical year-end inventory management rather than a disconcerting structural shift.

• Expressed cautious optimism while waiting for sustained PMI readings above 50 to confirm a full industrial recovery.

Data center market exposure and long-term revenue targets

• Confirmed a target of $100 million to $200 million in data center revenue by 2028, driven by liquid cooling adoption.

• Reported that Q4 data center orders grew 350% sequentially and nearly 700% year-over-year, albeit from a small base.

• Product penetration is expanding across hoses, couplings, fittings, and water pumps.

Incremental margins and long-term profitability targets

• Expects enhanced incremental margins of 45% plus in the near term as footprint optimization and restructuring savings flow through.

• Long-term through-the-cycle incremental margins are targeted at 35% to 40%, accounting for a mix shift toward OEM business.

• Management believes the business can exceed previous midterm profitability commitments due to structural improvements made during the downturn.

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