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Gates Industrial (NYSE: GTES) raises 2026 outlook after $941.6M Q2

Filing Impact
(High)
Filing Sentiment
(Neutral)
Form Type
8-K

Rhea-AI Filing Summary

Gates Industrial Corporation Ltd. reported second-quarter 2026 net sales of $941.6 million, an increase of 6.6% with core sales up 4.9%. Net income attributable to shareholders was $170.9 million, and diluted earnings per share were $0.67, with Adjusted Net Income per diluted share of $0.44. Net income from continuing operations was $178.2 million, a margin of 18.9%, and Adjusted EBITDA was $211.4 million, representing a 22.5% margin.

The Power Transmission segment generated net sales of $588.5 million, up 7.0% with core sales growth of 5.3% and Adjusted EBITDA of $134.8 million (22.9% margin). The Fluid Power segment delivered net sales of $353.1 million, up 5.8% with core sales growth of 4.2% and Adjusted EBITDA of $76.6 million (21.7% margin).

For full year 2026, the company raised guidance, now expecting core sales growth of 2.5%–4.5%, Adjusted EBITDA of $800–$830 million, and Adjusted EPS of $1.62–$1.70, while maintaining capital expenditures around $120 million and Free Cash Flow Conversion of 90%+.

Positive

  • Q2 2026 net sales momentum: Net sales reached $941.6 million, up 6.6% versus the prior-year period, with core sales increasing 4.9%.
  • Raised full-year 2026 outlook: Guidance now calls for core sales growth of 2.5%–4.5%, Adjusted EBITDA of $800–$830 million and Adjusted EPS of $1.62–$1.70.
  • Strong profitability metrics: Q2 2026 net income attributable to shareholders was $170.9 million with an 18.9% net income margin from continuing operations and Adjusted EBITDA of $211.4 million at a 22.5% margin.

Negative

  • None.

Filing Explained

Common holders’ reported share count fell after six months of repurchases.

The filing is complete for the quarter ended June 27, 2026 and adds a share-count update: outstanding shares were 253,151,170 at quarter-end versus 253,543,540 at December 31, 2025.

For common holders, the lower reported outstanding count is the filing's material structural change, although the same six-month cash-flow statement also shows $2.5 million of share issuance.

A Form 8-K reports specified material events, and Item 2.02 identifies results of operations and financial condition; this filing records results already generated for the completed quarter.

The release said the Form 10-Q for the quarter ended June 27, 2026 was expected on or about July 31, 2026, providing the next filing point for the quarter's detailed disclosures.

Item 2.02 Results of Operations and Financial Condition Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01 Financial Statements and Exhibits Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Q2 2026 Net Sales $941.6 million Three months ended June 27, 2026 net sales, up 6.6% year over year
Q2 2026 Net Income Attributable to Shareholders $170.9 million Three months ended June 27, 2026
Q2 2026 Diluted EPS $0.67 Diluted earnings per share from continuing operations and total for the quarter
Q2 2026 Adjusted EPS $0.44 Adjusted Net Income per diluted share for the three months ended June 27, 2026
Q2 2026 Adjusted EBITDA $211.4 million Three months ended June 27, 2026; Adjusted EBITDA margin 22.5%
2026 Adjusted EBITDA Guidance $800–$830 million Updated full year 2026 guidance range
Cash and Cash Equivalents $823.5 million Balance as of June 27, 2026
Net Cash from Operating Activities $108.8 million Six months ended June 27, 2026
Adjusted EBITDA financial
"Management uses Adjusted EBITDA as its key profitability measure."
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
core sales financial
"Core sales is a non-GAAP measure that represents net sales for the period excluding the impacts of movements"
Core sales are the revenue generated by a company's main, ongoing business activities after removing one-time or unusual items such as proceeds from asset sales, discontinued operations, or temporary boosts. Investors care because core sales show the steady, repeatable demand for a company’s products or services—like judging a store by its regular weekly receipts rather than a single big clearance sale—to better assess growth trends and future earnings potential.
Free Cash Flow Conversion financial
"Free Cash Flow Conversion is a measure of Free Cash Flow expressed as a percentage of Adjusted Net Income."
Free cash flow conversion measures how effectively a company turns its reported profits into actual cash that can be used for growth, debt repayment, or dividends. It compares the cash generated after expenses to the company's net income, similar to how a person might compare their savings to their paycheck. High conversion indicates the company is efficient at translating profits into cash, which is important for investors assessing its financial health and flexibility.
Last-in-First-out financial
"inventory adjustments, specific to the remeasurement of certain inventories on a Last-in-First-out (“LIFO”) basis."
discrete tax items financial
"we revised our definition of Adjusted Net Income to adjust for discrete tax items, which are significant"
Net sales $941.6 million 6.6% increase year over year, with core sales growth of 4.9%
Net income attributable to shareholders $170.9 million versus $56.5 million in the prior-year quarter
Adjusted EBITDA $211.4 million Adjusted EBITDA margin of 22.5% versus 22.5% a year earlier
Adjusted EPS $0.44 versus $0.39 in the prior-year quarter
Guidance

For full year 2026, core sales growth outlook was raised to 2.5%–4.5%, Adjusted EBITDA to $800–$830 million, and Adjusted EPS to $1.62–$1.70, with capital expenditures around $120 million and Free Cash Flow Conversion of 90%+.

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FAQ

What were Gates Industrial (GTES) net sales in Q2 2026?
Gates Industrial reported Q2 2026 net sales of $941.6 million, an increase of 6.6% over the prior-year period, with core sales up 4.9%. Both Power Transmission and Fluid Power segments contributed to this growth.

What was Gates Industrial (GTES) profitability and EPS in Q2 2026?
Net income attributable to shareholders was $170.9 million, with diluted EPS of $0.67. Adjusted Net Income was $112.5 million, resulting in Adjusted EPS of $0.44 for the quarter.

How did Gates Industrial (GTES) business segments perform in Q2 2026?
Power Transmission net sales were $588.5 million, up 7.0% with core sales growth of 5.3% and Adjusted EBITDA of $134.8 million. Fluid Power net sales were $353.1 million, up 5.8% with core sales growth of 4.2% and Adjusted EBITDA of $76.6 million.

How did Gates Industrial (GTES) update its 2026 financial guidance?
For 2026, Gates now expects core sales growth of 2.5%–4.5%, Adjusted EBITDA of $800–$830 million, and Adjusted EPS of $1.62–$1.70. Capital expenditures are projected around $120 million with Free Cash Flow Conversion of 90%+.

What were Gates Industrial (GTES) cash flows in the first half of 2026?
For the six months ended June 27, 2026, net cash provided by operating activities was $108.8 million. Net cash used in investing activities totaled $41.8 million, and net cash used in financing activities was $50.8 million.

What is Gates Industrial (GTES) balance sheet position as of June 27, 2026?
As of June 27, 2026, Gates had cash and cash equivalents of $823.5 million and total assets of $7,392.8 million. Shareholders’ equity stood at $3,521.9 million, with total equity including non-controlling interests of $3,894.2 million.

Which non-GAAP metrics does Gates Industrial (GTES) emphasize?
Gates highlights Adjusted EBITDA, Adjusted Net Income, Adjusted Gross Profit, core sales and Free Cash Flow. Management uses these to assess profitability, underlying operational performance, sales growth excluding currency and acquisitions, and cash generation relative to Adjusted Net Income.
0001718512FALSE00017185122026-07-312026-07-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 31, 2026
Gates Industrial Corporation Ltd.
(Exact Name of Registrant as Specified in its Charter)
Bermuda 001-38366 98-1950337
     
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation)   Identification No.)
1144 Fifteenth Street, Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)
(303) 744-1911
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, $0.01 par value per shareGTESNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨



Item 2.02    Results of Operations and Financial Condition
On July 31, 2026, Gates Industrial Corporation Ltd. announced its financial results for the second quarter of 2026 ended June 27, 2026. A copy of the press release is furnished as Exhibit 99.1 to this report.
The information furnished under this Item 2.02, including Exhibit 99.1, will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and will not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be set forth by specific reference in that filing.

Item 9.01    Financial Statements and Exhibits

Exhibits
Exhibit No.Description
99.1
Press release dated July 31, 2026
104Cover Page Interactive Data File (embedded within the Inline XBRL document)



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GATES INDUSTRIAL CORPORATION LTD.
By:/s/ L. Brooks Mallard
Name:L. Brooks Mallard
Title:Chief Financial Officer
Date: July 31, 2026



Gates Industrial Reports Second-Quarter 2026 Results
gatescorpimagea05.jpg
Denver, CO, July 31, 2026
Second-Quarter 2026 Financial Summary
◦Second-quarter net sales of $941.6 million, up 6.6% compared to the prior-year period, including a core sales increase of 4.9%.
◦Net income attributable to shareholders of $170.9 million, or $0.67 per diluted share.
◦Adjusted Net Income per diluted share of $0.44.
◦Net income from continuing operations of $178.2 million, or a margin of 18.9%.
◦Adjusted EBITDA of $211.4 million, or a margin of 22.5%.
◦Increasing 2026 guidance.
Gates Industrial Corporation Ltd. (NYSE:GTES), a leading global provider of application-specific fluid power and power transmission solutions, today reported results for the second quarter ended June 27, 2026.
Ivo Jurek, Gates Industrial’s Chief Executive Officer, commented, “We delivered a strong second quarter, exceeding expectations. We generated record sales and EPS and experienced improving order momentum globally. We believe we are in solid position to capitalize on strengthening industrial demand.”
Jurek continued, “We have raised our 2026 guidance for sales, profitability and adjusted earnings per share. We anticipate higher sales growth in the second half of 2026 relative to our initial guidance. Our balance sheet is strong and our capital allocation optionality is significant. I am grateful to our global Gates teams for their dedication and commitment to delivering on our strategic priorities.”
Power Transmission Segment Results
Three months ended
(USD in millions)June 27, 2026June 28, 2025% Change% Core Change
Net sales$588.5$550.17.0%5.3%
Adjusted EBITDA$134.8$122.89.8%
Adjusted EBITDA margin22.9%22.3%60 bps
Six months ended
(USD in millions)June 27, 2026June 28, 2025% Change% Core Change
Net sales$1,121.7$1,077.34.1%1.5%
Adjusted EBITDA$246.8$239.53.0%
Adjusted EBITDA margin22.0%22.2%(20 bps)
1

Fluid Power Segment Results
Three months ended
(USD in millions)June 27, 2026June 28, 2025% Change% Core Change
Net sales$353.1$333.65.8%4.2%
Adjusted EBITDA$76.6$76.40.3%
Adjusted EBITDA margin21.7%22.9%(120 bps)
Six months ended
(USD in millions)June 27, 2026June 28, 2025% Change% Core Change
Net sales$671.0$654.02.6%0.4%
Adjusted EBITDA$142.0$147.0(3.4%)
Adjusted EBITDA margin21.2%22.5%(130 bps)
2026 Guidance
The Company is raising its full year 2026 financial guidance. The table below reflects our updated full year 2026 financial guidance.
Prior 2026Updated 2026Change (At Midpoint)
Core Sales Growth
1% to 4%2.5% to 4.5%+ 100 bps
Adjusted EBITDA
$775 to $835 Million$800 to $830 Million+ $10 Million
Adjusted EPS
$1.52 to $1.68$1.62 to $1.70+ $0.06
Capital Expenditures
~$120 Million~$120 MillionNo Change
Free Cash Flow Conversion
90%+90%+No Change
Share-based metrics in the Company’s guidance do not include the effect of any potential share repurchases.
Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures, including expected Core Sales Growth, Adjusted EBITDA, Adjusted Earnings per Share and Free Cash Flow conversion for 2026. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.
Conference Call and Webcast
Gates Industrial Corporation Ltd. will host a conference call today at 10:00 a.m. Eastern Time to discuss the Company’s financial results. The live webcast of the conference call and accompanying presentation materials can be accessed through Gates Industrial’s website at investors.gates.com. For those unable to access the webcast, the conference call can be accessed by dialing (888) 414-4601 (domestic) or +1 (646) 960-0313 (international) and requesting the Gates Industrial Corporation Second-Quarter 2026 Earnings Conference Call or providing the Conference ID of 5772067. An audio replay of the conference call can be accessed by dialing (800) 770-2030 (domestic) or +1 (647) 362-9199 (international), and providing the passcode 5772067, or by accessing Gates Industrial’s website at investors.gates.com.
2

About Gates Industrial Corporation Ltd.
Gates is a global manufacturer of innovative, highly engineered power transmission and fluid power solutions. Gates offers a broad portfolio of products to diverse aftermarket channel customers, and to original equipment manufacturers as specified components. Gates participates in many sectors of the industrial and consumer markets. Our products play essential roles in a diverse range of applications across a wide variety of end markets ranging from harsh and hazardous industries such as agriculture, construction, manufacturing and energy, to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners and virtually every form of transportation. Our products are sold in more than 130 countries across our three commercial regions: the Americas; Europe, Middle East & Africa; and Asia Pacific.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “trends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. These statements include, but are not limited to, statements related to expectations regarding the performance of the Company’s business and financial results, our ability to capitalize on demand, anticipated sales growth, our capital allocation optionality and statements regarding our outlook for 2026. Such forward-looking statements are subject to various risks and uncertainties, including, among others, U.S. policies, actions or legislation (including the imposition of tariffs), economic, political and other risks associated with international operations (including as a result of the ongoing conflicts in the Middle East and their impact on supply chains, such as reduced availability of certain of our production materials and increased supply costs, and economic conditions), availability of raw materials or other manufacturing inputs at favorable prices in sufficient quantities, or at a given time, changes in our relationships with, or the financial condition, performance, purchasing power or inventory levels of, of key channel partners, dependence on the continued operation of our manufacturing facilities, supply chains, distribution systems and information technology systems, our ability to forecast demand or meet significant increases in demand and market acceptance of new product introductions and innovations. Additional factors that could cause the Company’s results to differ materially from those described in the forward-looking statements can be found under the section entitled “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”), and Quarterly Report on Form 10-Q for the quarter ended June 27, 2026, which is expected to be filed with the SEC on or about the date of this press release, as such factors may be updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in the Company’s filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

3

Gates Industrial Corporation Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months endedSix months ended
(USD in millions, except per share amounts)
June 27, 2026June 28, 2025June 27, 2026June 28, 2025
Net sales$941.6 $883.7 $1,792.7 $1,731.3 
Cost of sales555.5 523.5 1,068.6 1,026.5 
Gross profit386.1 360.2 724.1 704.8 
Selling, general and administrative expenses250.7 231.2 477.6 447.4 
Transaction-related expenses3.1 — 3.6 0.4 
Asset impairments— 0.2 — 0.8 
Restructuring expenses0.7 13.0 1.4 14.6 
Operating income from continuing operations131.6 115.8 241.5 241.6 
Interest expense30.0 28.8 59.9 58.4 
Other expense1.4 6.8 3.5 9.2 
Income from continuing operations before taxes100.2 80.2 178.1 174.0 
Income tax expense(78.0)16.8 (66.5)42.0 
Net income from continuing operations178.2 63.4 244.6 132.0 
Loss on disposal of discontinued operations0.2 0.3 0.4 0.6 
Net income178.0 63.1 244.2 131.4 
Less: non-controlling interests7.1 6.6 13.6 12.9 
Net income attributable to shareholders$170.9 $56.5 $230.6 $118.5 
Earnings per share
Basic
Earnings per share from continuing operations$0.67 $0.22 $0.91 $0.46 
Earnings per share from discontinued operations— — — — 
Earnings per share$0.67 $0.22 $0.91 $0.46 
Diluted
Earnings per share from continuing operations$0.67 $0.22 $0.90 $0.45 
Earnings per share from discontinued operations— — — — 
Earnings per share$0.67 $0.22 $0.90 $0.45 

4

Gates Industrial Corporation Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(USD in millions, except share numbers and per share amounts)
As of
June 27, 2026		As of
December 31, 2025
Assets
Current assets
Cash and cash equivalents$823.5 $812.1 
Trade accounts receivable, net 900.3 744.2 
Inventories740.6 700.0 
Taxes receivable40.5 43.4 
Prepaid expenses and other assets204.4 181.8 
Total current assets2,709.3 2,481.5 
Non-current assets
Property, plant and equipment, net599.4 609.0 
Goodwill2,022.4 2,035.2 
Pension surplus6.7 7.6 
Intangible assets, net1,122.9 1,192.4 
Right-of-use assets146.2 137.1 
Taxes receivable2.6 5.4 
Deferred income taxes729.4 640.0 
Other non-current assets53.9 43.2 
Total assets$7,392.8 $7,151.4 
Liabilities and equity
Current liabilities
Debt, current portion$39.2 $36.2 
Trade accounts payable482.4 433.7 
Taxes payable31.2 27.0 
Accrued expenses and other current liabilities282.3 238.5 
Total current liabilities835.1 735.4 
Non-current liabilities
Debt, less current portion2,194.3 2,196.3 
Post-retirement benefit obligations60.9 68.8 
Lease liabilities129.3 124.5 
Taxes payable56.3 62.1 
Deferred income taxes40.5 49.3 
Other non-current liabilities182.2 225.8 
Total liabilities3,498.6 3,462.2 
Shareholders’ equity
—Shares, par value of $0.01 each - authorized shares: 3,000,000,000; outstanding shares: 253,151,170 (December 31, 2025: authorized shares: 3,000,000,000; outstanding shares: 253,543,540)
2.5 2.6 
—Additional paid-in capital2,641.3 2,633.3 
—Accumulated other comprehensive loss(929.2)(917.1)
—Treasury shares— (37.5)
—Retained earnings1,807.3 1,652.7 
Total shareholders’ equity3,521.9 3,334.0 
Non-controlling interests372.3 355.2 
Total equity3,894.2 3,689.2 
Total liabilities and equity$7,392.8 $7,151.4 
5

Gates Industrial Corporation Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
(dollars in millions)
June 27,
2026		June 28,
2025
Cash flows from operating activities
Net income$244.2 $131.4 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization112.8 105.5 
Foreign exchange and other non-cash financing income(13.0)(12.6)
Share-based compensation expense15.7 15.7 
Decrease in post-employment benefit obligations, net(1.7)(4.4)
Deferred income taxes(113.8)(11.0)
Asset impairments— 0.8 
Other operating activities2.8 5.8 
Changes in operating assets and liabilities:
—Accounts receivable(161.6)(63.5)
—Inventories(46.3)(16.4)
—Accounts payable50.9 (16.7)
—Prepaid expenses and other assets(11.4)(13.0)
—Taxes payable4.5 (1.6)
—Other liabilities25.7 (9.7)
Net cash provided by operating activities108.8 110.3 
Cash flows from investing activities
Purchases of property, plant and equipment(35.0)(36.9)
Purchases of intangible assets(5.2)(18.7)
Cash paid under company-owned life insurance policies(10.8)(10.4)
Cash received under company-owned life insurance policies8.1 2.4 
Proceeds from the sale of property, plant and equipment1.5 2.1 
Other investing activities(0.4)(0.5)
Net cash used in investing activities(41.8)(62.0)
Cash flows from financing activities
Issuance of shares 2.5 4.7 
Repurchase of shares(38.7)(13.0)
Payments of long-term debt(4.7)(9.4)
Employee taxes paid from shares withheld(8.7)(16.9)
Dividends paid to non-controlling interests— (3.5)
Other financing activities(1.2)4.7 
Net cash used in financing activities(50.8)(33.4)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(4.7)23.1 
Net increase in cash and cash equivalents and restricted cash11.5 38.0 
Cash and cash equivalents and restricted cash at the beginning of the period815.0 684.8 
Cash and cash equivalents and restricted cash at the end of the period$826.5 $722.8 
Supplemental schedule of cash flow information
Interest paid$52.0 $56.8 
Income taxes paid$39.3 $54.7 
Accrued capital expenditures$1.8 $0.9 
6

Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, which management believes are useful to investors, securities analysts and other interested parties. Management uses Adjusted EBITDA as its key profitability measure. This is a non-GAAP measure that represents EBITDA before certain items that impact comparison of the performance of our business either period-over-period or with other businesses. We use Adjusted EBITDA as our measure of segment profitability to assess the performance of our businesses, and it is used for consolidated Gates as well because we believe it is important to consider our total profitability on a basis that is consistent with that of our operating segments. Adjusted EBITDA margin is Adjusted EBITDA for a particular period expressed as a percentage of net sales for that period.
Management uses Adjusted Net Income as an additional measure of profitability. Adjusted Net Income is a non-GAAP measure that represents net income attributable to shareholders before certain items that impact comparison of the performance of our business, either period-over-period or with other businesses. Beginning with the three months ended June 29, 2024, we revised our definition of Adjusted Net Income to adjust for discrete tax items, which are significant, unusual or infrequently occurring tax items. We have revised the prior period amounts to conform to our current period presentation.
Management uses Adjusted Gross Profit as an additional measure of operating performance. Adjusted Gross Profit is a non-GAAP measure that represents gross profit before certain items that impact the comparability of our results, such as restructuring costs and inventory adjustments, specific to the remeasurement of certain inventories on a Last-in-First-out (“LIFO”) basis. Adjusted Gross Profit margin is Adjusted Gross Profit expressed as a percentage of sales. We use Adjusted Gross Profit and Adjusted Gross Profit margin because it provides insight into the underlying profitability of our core operations by excluding items that are not indicative of ongoing business performance.
Core sales is a non-GAAP measure that represents net sales for the period excluding the impacts of movements in average currency exchange rates and the first-year impacts of acquisitions and disposals, when applicable. Core sales growth is the change in core sales expressed as a percentage of prior period net sales. We present core sales growth because it allows for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency gains or losses, or the incomparability that would be caused by the impact of an acquisition or disposal.
Management uses Free Cash Flow to measure cash generation. Free Cash Flow is a non-GAAP measure that represents net cash provided by operations less capital expenditures. Free Cash Flow Conversion is a measure of Free Cash Flow expressed as a percentage of Adjusted Net Income. We use this metric as a measure of the success of our business in converting Adjusted Net Income into cash.
These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP. Please see below for a reconciliation of historical non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.
7

Gates Industrial Corporation Ltd.
Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA
(Unaudited)
Three months endedSix months ended
(USD in millions)
June 27, 2026June 28, 2025June 27, 2026June 28, 2025
Net income from continuing operations before taxes$178.2 $63.4 $244.6 $132.0 
Adjusted for:
Income tax (benefit) expense(78.0)16.8 (66.5)42.0 
Interest expense30.0 28.8 59.9 58.4 
Depreciation and amortization57.1 53.3 112.8 105.5 
Transaction-related expenses (1)
3.1 — 3.6 0.4 
Asset impairments— 0.2 — 0.8 
Restructuring expenses 0.7 13.0 1.4 14.6 
Share-based compensation expense9.4 9.6 15.7 15.7 
Inventory adjustments (2) (included in cost of sales)
3.6 4.0 7.6 3.0 
Restructuring related expenses (included in cost of sales)4.0 1.2 6.5 2.4 
Restructuring related expenses (included in SG&A)5.3 3.1 6.6 4.6 
Other (income) expenses, excluding foreign currency transaction gain or loss and insurance recoveries(3)
(2.0)5.8 (3.4)7.1 
Adjusted EBITDA$211.4 $199.2 $388.8 $386.5 
Net Sales$941.6 $883.7 $1,792.7 $1,731.3 
Net income from continuing operations margin18.9 %7.2 %13.6 %7.6 %
Adjusted EBITDA margin22.5 %22.5 %21.7 %22.3 %
(1)Transaction-related expenses relate primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions.
(2)Inventory adjustments include the reversal of the adjustment to remeasure certain inventories on a Last-in-First-out (“LIFO”) basis.
(3)
Other(income) expenses excludes foreign currency transaction losses of $1.5 million and $4.3 million and insurance losses of $1.8 million and $2.5 million during the three and six months ended June 27, 2026, respectively, and foreign currency transaction losses of $1.0 million and $2.1 million during the three and six months ended June 28, 2025, respectively.



8

Gates Industrial Corporation Ltd.
Reconciliation of Net Income Attributable to Shareholders to Adjusted Net Income
(Unaudited)
Three months endedSix months ended
(USD in millions, except share numbers and per share amounts)
June 27, 2026June 28, 2025June 27, 2026June 28, 2025
Net income attributable to shareholders$170.9 $56.5 $230.6 $118.5 
Adjusted for:
Loss on disposal of discontinued operations0.2 0.3 0.4 0.6 
Amortization of intangible assets arising from the 2014 acquisition of Gates29.6 29.0 58.9 57.3 
Transaction-related expenses (1)
3.1 — 3.6 0.4 
Asset impairments— 0.2 — 0.8 
Restructuring expenses0.7 13.0 1.4 14.6 
Restructuring related expenses (included in cost of sales)4.0 1.2 6.5 2.4 
Restructuring related expenses (included in SG&A)5.3 3.1 6.6 4.6 
Share-based compensation expense9.4 9.6 15.7 15.7 
Inventory adjustments (2) (included in cost of sales)
3.6 4.0 7.6 3.0 
Adjustments relating to post-retirement benefits0.1 0.5 5.5 0.9 
Financing and other FX related losses1.3 7.8 (3.3)11.0 
Discrete tax items (3)
(100.7)(7.2)(107.0)(7.1)
Other adjustments(1.7)(1.5)(3.1)(2.8)
Estimated tax effect of the above adjustments(13.3)(15.4)(22.2)(24.9)
Adjusted Net Income$112.5 $101.1 $201.2 $195.0 
Diluted weighted-average number of shares outstanding256,135,551260,469,532256,417,931261,005,482
Adjusted Net Income per diluted share$0.44 $0.39 $0.78 $0.75 
(1)Transaction-related expenses related primarily to advisory fees and other costs recognized in respect of major corporate transactions, including the acquisition of businesses, and equity and debt transactions.
(2)Inventory adjustments include the reversal of the adjustment to remeasure certain inventories on a Last-in-First-out (“LIFO”) basis.
(3)Discrete tax items include changes in uncertain tax positions relating to prior years, changes in tax laws or rates, changes in valuation allowances, excess tax benefits on stock option exercises, and prior year adjustments in various foreign jurisdictions in which returns were filed.

9

Gates Industrial Corporation Ltd.
Reconciliation of Gross Profit to Adjusted Gross Profit
(Unaudited)

Three months endedSix months ended
(USD in millions)
June 27, 2026June 28, 2025June 27, 2026June 28, 2025
Net sales$941.6 $883.7 $1,792.7 $1,731.3 
Cost of sales555.5 523.5 1,068.6 1,026.5 
Gross Profit386.1 360.2 724.1 704.8 
Inventory adjustments (1) (included in cost of sales)
Restructuring related expenses (included in cost of sales)3.6 4.0 7.6 3.0 
Adjusted Gross Profit4.0 1.2 6.5 2.4 
$393.7 $365.4 $738.2 $710.2 
Gross Profit margin
Adjusted Gross Profit margin 41.0%40.8%40.4%40.7%
41.8%41.3%41.2%41.0%

(1)Inventory adjustments include the reversal of the adjustment to remeasure certain inventories on a Last-in-First-out (“LIFO”) basis.
10

Gates Industrial Corporation Ltd.
Reconciliation of Net Sales to Core Sales Growth
(Unaudited)

Three months ended June 27, 2026
(dollars in millions)
Power TransmissionFluid PowerTotal
Net sales for the three months ended June 27, 2026$588.5 $353.1 $941.6 
Impact on net sales of movements in currency rates(9.5)(5.5)(15.0)
Core sales for the three months ended June 27, 2026$579.0 $347.6 $926.6 
Net sales for the three months ended June 28, 2025550.1 333.6 883.7 
Increase in net sales$38.4 $19.5 $57.9 
Increase in net sales on a core basis (core sales)$28.9 $14.0 $42.9 
Net sales increase7.0%5.8%6.6%
Core sales increase5.3%4.2%4.9%

Six months ended June 27, 2026
(dollars in millions)
Power TransmissionFluid PowerTotal
Net sales for the six months ended June 27, 2026$1,121.7 $671.0 $1,792.7 
Impact on net sales of movements in currency rates(28.7)(14.2)(42.9)
Core sales for the six months ended June 27, 2026$1,093.0 $656.8 $1,749.8 
Net sales for the nine months ended
Net sales for the six months ended June 28, 20251,077.3 654.0 1,731.3 
Increase in net sales$44.4 $17.0 $61.4 
Increase in net sales on a core basis (core sales)$15.7 $2.8 $18.5 
Net sales increase 4.1%2.6%3.5%
Core sales increase1.5%0.4%1.1%









Contact
Gates Investor Relations
Rich Kwas
(303) 744-4887
investorrelations@gates.com
11

Source: View Original Filing on SEC EDGAR

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