Greetings and thank you for joining us on our first quarter 2026 earnings call. I'll briefly cover our non-GAAP and forward-looking language before passing the call over to our CEO, Ivo Jurek, to be followed by Brooks Mallard, our CFO.

Before the market opened today, we published our first quarter results. Copy of the release is available on our website at investors.gates.com.

Our call this morning is being webcasted and is accompanied by a slide presentation. On this call, we will refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance.

Reconciliations of historical non-GAAP financial measures are included in our earnings release and the slide presentation, each of which is available in the Investor Relations section of our website. Please refer now to slide two of the presentation, which provides a reminder that our remarks will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward-looking statements. These risks include, among others, matters that we've described in our most recent annual report on Form 10-K and in other filings we make with the SEC, including our annual report on Form 10-K that was filed in February 2026.

We disclaim any obligation to update these forward-looking statements. We'll be attending several conferences over the coming weeks and look forward to meeting with many of you.

Before we start, please note all comparisons are against the prior-year period unless stated otherwise. Now, I'll turn the call over to Ivo.

Thank you, Rich, and good morning, everyone. We appreciate your participation on our call today.

I will start on slide three with a brief recap of the first quarter. Our team executed well on our business priorities during the first quarter, navigating successfully through a fair level of business transition.

In particular, our Europe team successfully implemented a new ERP system and achieved higher efficiency rates as the quarter progressed. Exiting the quarter, our Europe business has stabilized and was delivering revenues on par with prior pre-ERP implementation periods, although with still somewhat above normal operating costs.

We anticipate our operation efficiency in Europe to stabilize further during the second quarter. On a global basis, our sales dollars and margin rate were broadly consistent with expectations we have outlined in February.

Excluding the impact of the anticipated headwinds from the ERP transition and the two fewer working days that affected the first two months of the quarter, overall demand trends improved during the quarter. Core sales growth approximated mid-single digits year-over-year in March.

We finished the quarter with a book-to-bill solidly above one. As we sit here today and based on our present run rates, we feel good about our core sales growth prospects for the year, absent of any additional potential escalation of the conflict in the Middle East.

In addition, we do not anticipate any material financial impact from the recent revisions in Section 232 tariffs. As such, we are reiterating our 2026 financial guidance.

Please turn to slide four. Our first quarter sales were $851 million, representing a core sales decrease of 2.9%.

Relative to our core sales guidance provided in February, we experienced some small, incremental distribution inefficiencies associated with the ERP transition, which led to a build of past-due backlog as we exited the quarter. We expect to recover these sales in the second quarter, and Brooks will go into more detail later on the call.

The European ERP transition and fewer working days relative to a prior-year period combined represented approximately a 600 basis points headwind to our core sales. Entering 2026, we experienced a positive inflection in industrial OEM orders, and that trend has continued.

Adjusted EBITDA was $177 million, in line with expectations, resulting in an adjusted EBITDA margin of 20.8%, down 130 basis points year-over-year. The decrease was primarily driven by inefficiencies related to the ERP transition and the impact of having two fewer working days compared to prior-year period.

Our adjusted gross margin was 40.5%, down approximately 20 basis points. Our adjusted earnings per share was 35 cents and down slightly.

The fewer working days in the quarter and ERP transition combined to represent a 7-cent headwind to adjusted EPS. Operational performance and a lower adjusted tax rate were modest benefits.

On slide five, I will cover segment highlights. All year-over-year comparisons were substantially impacted by the ERP conversion as well as the fewer working days.

Looking past these items, we saw a very solid trend across both of our segments, with noted underperformance in commercial on-highway production common to both. In the Power Transmission segment, we generated revenues of $533 million in the quarter, a decrease of approximately 2.5% on a core basis, primarily driven by the fewer working days and ERP transition in Europe.

The Power Transmission segment realized accelerating order trends during March. Personal mobility expanded 6%, and our growth rate was affected by project timing as well as the ERP transition in Europe, the region with the largest exposure to personal mobility.

We anticipate a return to our normalized levels in personal mobility starting in Q2. Additionally, the construction end market continued to improve, and the ag market is recovering.

In the Fluid Power segment, our sales were $318 million, with a decrease in core sales of approximately 3.5%. Fewer working days and the Europe ERP implementation again contributed to the decline.

We realized strong, double-digit growth in APAC during the quarter. Broadly, order intake was strong exiting the quarter.

I would note that the commercial on-highway was relatively weak in the quarter. That said, North American orders have inflected positively to start 2026.

Our data center business continues to perform in line with our expectations, and revenue grew approximately 700% from a low base in the prior-year period. I'll now pass the call over to Brooks for further comments on our results.

Thank you, Ivo. I'll begin on slide six and discuss our core sales performance by region.

In the Americas, core sales declined approximately 2.6% in the first quarter. Two fewer working days in our first quarter relative to the prior-year period had an unfavorable impact on growth.

North America core sales were down a little less than 2%. Excluding the working-days impact, North America core sales would have increased compared to the prior year.

In EMEA, core sales declined approximately 8.5% year-over-year, most of which was incurred in February. While production outpaced targets, finished good shipping lagged production output in February and through the first part of March.

This led to slightly lower than expected revenues of around $4 million and higher past-due backlog than normal as we exited Q1. Overall, we were pleased with our improvement through the quarter.

We delivered positive core growth in EMEA in March, and that trend has continued through the early stages of Q2. We expect to further improve our distribution efficiencies through the second quarter and exit at normalized levels of shipping output and past-due backlog.

Our APAC region grew almost 4%. Industrial OEM and auto aftermarket both grew nicely and fueled the performance.

Slide seven shows the components of our year-over-year change to adjusted earnings per share. On a combined basis, the temporary headwinds of the ERP transition and fewer working days represented a 7-cent headwind to adjusted earnings per share.

Underlying operating performance contributed 2 cents per share. Other items, including a lower tax rate and share count, represented a 2-cent benefit.

Slide eight provides an overview of our free cash flow and balance sheet position. Over the last 12 months, we delivered free cash flow conversion of approximately 101%.

Stronger operating cash flow drove positive free cash flow for the quarter. We continue to strengthen the balance sheet, exiting the quarter with net leverage at 1.9 times, representing an improvement of approximately 0.4 turns compared to the first quarter of 2025.

Our capital allocation approach remains balanced, and we repurchased additional shares in the first quarter. In late February, we received a credit rating upgrade from Moody's to Ba2 from Ba3.

Our return on invested capital remained strong while incurring margin headwinds associated with the ERP transition and continuing to make investments in our key process and growth initiatives. Turning to slide nine, we have reiterated our full year 2026 financial guidance.

We anticipate core growth to improve over the course of the year. For the second quarter, we are guiding revenues to a range of $905 million to $945 million.

At the midpoint, core growth is estimated to be approximately 3.5% year-over-year. We project adjusted EBITDA margin to decline 30 basis points compared to the prior-year period, influenced by temporary impacts from the ERP transition and our footprint optimization projects, which we expect to benefit adjusted EBITDA margin performance in the second half of this year.

I'll now turn it back to Ivo for closing thoughts.

Thanks, Brooks. On slide 10, let me summarize our key messages.

First, our team executed well and showed a great degree of resiliency during a period of significant business transition. We delivered slightly better adjusted EBITDA margin than expected and solid free cash flow on a seasonal basis.

Our European business is operating as expected post the ERP transition, and our team is highly focused on driving incremental efficiencies with the new system in place. We have shifted our operational focus to optimizing customer service fill rates to pre-ERP implementation levels, which were at world-class.

Second, we continue to see improving demand trends across most of our end markets. Industrial OEM orders are gaining momentum, and we experienced good demand trends in April.

In EMEA, our revenue is trending nicely above expectations to start the quarter. As such, we have good confidence in achieving our core revenue growth guidance with where we sit today.

Third, we believe our business is in a strong position. We are executing on our footprint optimization projects and anticipate achieving an adjusted EBITDA margin approaching 23.5% in the second half of the year.

In addition, our balance sheet is in a strong shape. We announced a small acquisition today, acquiring Timken's industrial belt business, which we expect to close in the third quarter.

The acquisition augments our power transmission position in North America and should supplement growth moving forward. We intend to remain opportunistic deploying capital to enhance shareholder returns.

Before taking your questions, I want to thank all of our global Gates associates for their diligence and effort supporting our customers' needs and executing on our strategic goals. With that, I will now turn the call back to the operator for Q&A.

Hey, morning, everyone.

Morning, Mike.

Morning.

Maybe we just start where you were leaving off there a little bit, Ivo. It sounds like core growth would have been positive in the quarter, excluding the ERP and some of the days issues.

Feels like the trajectory is what you're wanting to see exiting 1Q into 2Q holistically. Maybe just confidence in the sustainability as we sit here today, any areas of concern, what are your customers saying?

Just kind of generically help us understand how you think this tracks through the year.

Mike, good morning and thank you for the question. Look, we actually had a terrific quarter.

Taking into account the quantified issues that we have highlighted on our Q3 earning call last year outlining that we have a major ERP upgrade that we're going to do on basically 24% of the global company's revenues in a big bang type event, and we have executed in an amazing way. I'm super proud of our Europe team.

They have done a fantastic job, and the business performed as we have anticipated. The business continues to behave in a very strong fashion.

Net of the two less selling days and the ERP, we would have been basically up 300 basis points on core, which is right in line with what we have expected for the year and is basically trending towards the midpoint of our annual guidance. April, we have exited in a very strong position as well.

The order flow is very solid. We have highlighted on last couple of calls that we have seen a very nice inflection in the industrial OEM order flow that remained throughout Q1 and into April.

As I see it today, I feel quite confidently that we are in a very good position to be able to achieve our annual guidance. We've actually put the business in a position to be able to do really well as the revenue generation capabilities and the end market stabilized.

We are in a very good shape.

That makes a lot of sense. Maybe just the Timken belts purchase, why does it make sense now, what capabilities does it add that you lacked before, and then any sense of size, revenue, profitability, any of that?

Look, it was very opportunistic. We were approached some time ago about the opportunity to acquire an asset that, frankly, when you talk around the edges of what you do, this is right front and center of what we do, right?

This is highly complementary in nature for us. The business has evolved.

I think that there have been some highlights about what the business was about 10 years ago. I think the business has gone through some transitions.

We are buying assets in a facility in Mexico that is going to be highly complementary for us. We think that that business can kind of add maybe $5 million a month in annualized revenue.

It's highly complementary, and I believe that it will be very accretive to us as we embed it into our operations and it has the opportunity to continue to accelerate our growth rate.

Makes a lot of sense. Appreciate it.

Thank you.

Thanks, Mike.

Hey, morning. This is David Tarantino on for Jeff.

Hey, David.

Maybe could you give us a little color on kind of the margin trends if you kind of back out the ERP transition and maybe give us some color on price cost relative to the increase in inputs, particularly around any oil derivative impacts and or any tariff impacts you expect moving forward. It looks like the year is kind of playing out in line with expectations overall.

Okay.

All right, David, that's a lot to unpack, get ready. First, let's start with the margin headwinds.

As I look at Q1, conservatively, I would say we had at least 200 basis points of EBITDA margin headwinds. At least half of that was associated with the ERP transition in Europe.

That's a combination of lower sales as we talked about and then the impact of higher, temporary SG&A costs as we move through the hypercare phase of that go-live. Those costs are temporary.

They'll come out as we exit Q2. Then the other half is a combination of the footprint optimization kind of cost out that we talked about in the first half of the year as well as the impact of less days, right?

Just kind of a leverage part of the less days. You kind of take that into account, we're kind of pushing up towards 23% EBITDA from a one-off perspective.

Then I look at Q2, the midpoint we're at 22.2%, I think, 22.3%, 22.2%, and I see we still have about 100 basis points of headwind, again about half of that coming from ERP, almost entirely coming from hypercare and increased SG&A, and then the rest really coming around the footprint and cost actions that should be complete by the end of Q2. Again, before we start to get any of the savings or anything, we're approaching 23%.

As I look at those two, kind of two data points, and I look at the 23.5% that Ivo talked about in the back half of the year, boy, we feel pretty good. We feel pretty good getting through the ERP transition, exiting the way we did, eking out a little core growth in EMEA, and then kind of looking at the rest of the business and starting to get a little bit of growth there.

We feel pretty good about things. From a tariff perspective, we don't really expect any impact from the 232 stuff.

Most of ours was classified as automotive, and so that really doesn't impact us at all. We have a little bit of headwinds, maybe 20 bps of kind of dilution as we priced for tariffs.

We're not even counting that, though, in any of our numbers. We're going to get to where we need to get irrespective of that.

When you think about what's going on in the Middle East and the cost of oil and how that kind of impacts through the enterprise, obviously that's going to impact things like resins and polymers and compounds. It's going to impact things that have high energy use, like aluminum and steel, you're seeing those go up.

Then there's ripple effects through the rest of the P&L. When it comes to pricing for inflation, we're very confident on that, right?

We've always been able to price for inflation. We're getting out ahead of that.

We learned some lessons as we think back, post-COVID and the Russia-Ukraine conflict, and we're really focused on surety of supply for our customer. In addition, we've done a lot of work around our supply base, supplier development, alternative materials, different things like that.

We feel like we're in a very solid position in terms of making sure we can take care of our customers, get surety of supply, not have any kind of interruptions in the business. Then also, as I said, we know we can price for inflation, and we will make sure we take care of that.

In addition, we're sticking by our guidance in the second half, and we feel pretty good about it, okay?

Great. That's really helpful.

Then maybe following up on the demand trends, could you just give us a little bit more color on the underlying demand trends relative to the strong order take you highlighted? How do the current customer conversations track with that initial end market framework you guys provided last quarter?

Look.

I don't think that anything really has fundamentally changed. If there was a change, I would say maybe the, particularly North America on-highway, order flow has gotten better than where it was kind of exiting 2025.

Outside of that, we see pretty solid demand trends across the portfolio. We see good behavior in automotive aftermarket.

We feel well about industrial off-highway. Obviously, commercial construction has been quite strong.

Ag's been recovering very, very nicely. Energy and resources have stabilized, so that's kind of more still neutral around the edges, but we anticipated there may be an inflection taking into account what's happening in the Middle East.

Diversified industrial is in a good place. Auto is soft, auto OEM is soft, but it's such a small part of our business and it is right where we anticipated.

When I take a look at where we sit, we feel very confidently that the midpoint of our guide for the year is super achievable.

Thanks, good morning. By the way, congratulations on the deal.

I think this is your first deal as a public company, right, Ivo?

It is. Thank you, Nigel, and it's a really nice tuck-in transaction that it's not even middle of the fairway, in the middle of your household.

It does seem like hand and glove. Maybe just a bit more details on what you're seeing, sort of through April.

Number one, given the short-cycle nature of your products, I'm just trying to understand why the push from the ERP transition. Just want to understand how you're recovering those sales, because I think we tend to think of short cycle sort of one and done, it's lost, it doesn't recover.

Just want to understand that. Then it sounds like you're seeing recovery in industrial OEM.

You mentioned on-highway as an area of recovery, as well. I'm just wondering if some of the strengths you're seeing is really being driven by some of this heavy industry recovery.

Thank you, a lot to unpack. Look, why do we feel that we're going to recover the sales in in Europe?

Because we really The way to think about it, Nigel, is that we went we went live basically in the first week of February. You have to backflush the system, no matter what you do, you kind of lose one week of, one week of activity, and then you fire back your assets and you restart them.

Everything was going the way that we've anticipated. We've just it just took us pretty Think about it as one more day to un-gum our distribution centers, and we've just simply ran out of calendar in March.

Europe revenue in March was on par with prior-year pre-ERP implementation, they were fully recovered. Frankly, in the month of April, at the beginning of April, they've recovered the revenue from Q1.

Actually our Europe business was up almost double digits in the month of April. They've had, full recovery, they are performing well.

We are, we are doing a really good job. That team is just executing in a world-class level.

I feel quite well that, that we, we have recovered completely and not really lost any revenue. Again, one day, and that was nicely recovered.

When it comes to this demand trends, I I believe that what you see on the heavier industry is more in line with that underlying economy around, the large projects that are coming out of ground around the data centers and, power gen and power infrastructure, and, you need lots of construction equipment, mo- earthmoving equipment, and so on and so forth. We've, we've anticipated that those businesses were quite weak for an extended period of time, and I think that, you and I discussed that on our Q3 earnings that, the the the outlook has been stabilizing, and, we're now starting to actually see the outlook turn, nicely positive.

PMI is above 50, and, that's good for kind of the overall underlying trend, and look, I'm not, I'm not prepared to declare victory in here, but I feel pretty, I I feel pretty positively about the demand trends.

Oh, ISM 52.6, I think, this morning, fourth month above 50, it's a bit of a trend now. Thanks for that, Ivo.

Then just going back to the previous question about the inflation recovery, is there more price coming into 2Q versus 1Q? Then, Brooks, this selling-day headwind in 1Q, does that come back in 4Q, do we have some tailwind in the back half of the year?

We have an extra day in Q4, so that's, as we kind of move through the year, whenever we actually talk about Q4, you'll see it a little bit higher and it'll be because of that extra day. From a pricing perspective, you might see a little leak into the end of Q2, but that's mostly going to be a second-half event.

That'll evolve over Q2, and we'll give more guidance as we see how things evolve and we start to roll out our Q3 guidance after this quarter.

That's great. Thanks, guys.

Thanks, Nigel.

Hi, good morning. Just trying to understand the sort of ERP catch-up.

I think you had 3% sort of underlying growth ex-ERP in the first quarter, and then you're guiding for around that rate for Q2, and I think for the second half as well. Just wondered if you might have some ERP catch-up that would push up that underlying growth in the balance of the year from the 3% you did in Q1, particularly as your order trends seem pretty good and you had a good book-to-bill.

I'm just trying to square those things. I guess I'd say if you're running at 3% every quarter underlying, but then you should get a catch-up from ERP and the orders seem better, why is it 3% every quarter through the year?

Look. Julian, a good question, right?

The ERP catch-up, we basically were about a day worse than what we've anticipated. We've lost seven seven working days.

Excuse me. The order trends are very, very solid.

We are early in the year. I don't think that it is prudent to be making any adjustments to guidance this early in a year.

Of course, when you take a look at the order trends, and I think that you probably hear it from our responses, we feel a lot more positively around where we sit for the year, but it's quite early in a year. We will execute on what's within our control and manage our revenue generation to deliver on the guidance that we have put forward at this point in time.

Got it. Then just my follow-up around price versus volumes in the revenue line.

Maybe I missed it, but did you mention what price was in the first quarter? Then I think for the year as a whole, you'd guided 1, 1.5 points of price.

Is that still the case or there's a bit extra now because of the higher cost inflation?

As I said before, Julian, we're kind of seeing how things evolve. We've begun to roll out some price increases, and then we're looking at the impact of some other things, and so, there will definitely be an evolution of price versus volume as we work our way through the second quarter.

This is all relatively kind of late breaking, and we're still kind of working through some of the numbers. I would say stay tuned for the second half of the year.

We reiterated our guide. We feel comfortable with our numbers both from a top-line and a profitability perspective, and we'll update you on the components of it as we work through how all this oil increase in cost impacts our numbers, okay?

Got it. In the first quarter sort of reported, price was what, a point and a half or something?

A little bit higher. A little bit higher.

We have a little bit more tariff pricing in the first half of this year cuz we kicked that off in the third quarter of last year. All right, a little bit more in the original numbers, a little bit more price-heavy in the first half related to tariffs.

Great. Thank you.

Mhm.

Good morning, everyone.

Morning, Andy.

Ivo, I think you said personal mobility up 6% in Q1. I know affected by ERP.

I know you've talked about personal mobility growing sort of that high 20s to 30% over the next few years. I think you said Q2 return to more normalized growth run rates in personal mobility.

Maybe just update us, is that the case? Can you get back to those rates and do you still expect '26 to grow at that sort of normalized high growth rate in personal mobility?

Thank you, Andy. Absolutely.

We've had some delays with a couple of projects that were supposed to ramp up in Q1. They are ramping up in Q2, and the ERP was an outsized impact because a very significant amount of our revenue base is Europe-based.

That drove a pretty meaningful impact to the Q1 growth rates. As I indicated in the prepared remarks, we certainly believe that business is going to go and deliver that mid-20s growth rate as we have committed our original guidance.

I think I have to ask you about that other big growth driver, data centers. I think you said up 700% off a low base.

I don't know, that probably puts you at what, 10 million for the quarter, maybe a little bit more, you tell me. Is there a way to more directly refine what '26 could look like?

Then, obviously we're all wondering how you fare versus that 100 million to 200 million rate by '28? How's the progress versus that?

Look. We feel very good about where we sit today.

Our order intake and billings are strong in data centers, indicating a really nice acceleration of penetration. Obviously, it is from a small base last year, but we've started to accelerate our revenue gen and order intake in Q4.

We continue to develop a much more wholesome understanding of the infrastructure partners and the semiconductor partners, cooling technology and their needs. Look, we continue to drive and tailor our technology for those needs.

We are launching new products. Those products, we believe, put us at the forefront of the incremental improvements that are needed to facilitate much much better liquid cooling flow rates to improve the efficiency from the existing infrastructure and be, kind of a leading-edge supplier kind of for the next generation of the chips that are now being developed.

We are kind of building, Andy, kind of the traditional approach that I have probably demonstrated over the last 10 years. We go after an application that is exciting and emerging.

We develop a highly specialized knowledge, and we tailor our products that will offer differentiated performance, and we build a sustainable, durable revenue stream on forward-going basis. I think that our data continues to demonstrate that we are on that trajectory.

I've committed to you all and to our shareholders kind of $100 to $200 million of revenue by '28, and I believe that we are on that trajectory.

Bottom line, on track toward that goal in Q1 is how you characterize it?

Correct.

Okay.

That is correct.

Thank you.

Thanks, Andy.

Thank you. Good morning, everyone.

Morning, Deane.

Morning, Deane.

Hey, love to circle back on the Timken deal and congrats. Ivo, can you just give us some color strategically what this brings to Gates?

Is this a product line extension, because if I look at the SKUs, they're awfully similar. Maybe it's some on the sports equipment side.

Does it bring any new distribution partners maybe to the table? I like seeing the manufacturing facility coming in, but maybe if we could start there.

Thanks.

Good morning, Deane. Those are all really good questions.

I would think about it more as kind of a industry consolidation more than anything else. As Gates is the global leading supplier of all types of belts in all sorts of different applications.

This was just another competitor for us that was small, and I think that Timken felt that that was not at the front and center of what they wanted to focus on forward-going basis, and it is something that is additive to us more across the customer base. I think that the technologies and the type of applications that that business participates in is complementary, and it's not something that is super new.

We will be switching a whole bunch of that portfolio into Gates constructions, and the factory is nice to have. I think that you should just think about it more as a kind of industry consolidation than anything else, and they have some good folks there that that's always nice to bring into our family, and we will welcome the employees to Gates organization with open arms.

We just think that it's a good transaction, it's right at the core of what we do, and we feel that we are the right owner and a good steward of that business on forward-going basis.

That's really good to hear, and I know we don't have the terms, but based upon the seller's previous comments about margins, it looks like this is coming in well below the Power Transmission margins for Gates. That would suggest there's some nice accretion opportunity.

Can you give any color or context there?

Look, I think that the business is certainly coming in kind of below what our North America Power Transmission fleet averages. Lots of that business is, frankly, OEM business, in just a natural way, that's got a little bit lower margins.

For us, again, this is kind of core of what we do, we believe that we have a significant opportunity to drive margins to be at a company fleet average, and that would just indicate that there's a very nice opportunity to improve profitability on that asset, and it should be a very good transaction for us once we have the opportunity to integrate it in and start running it under the Gates operating system and frankly, drive the margins to where they should be.

All good to hear. Thank you.

Thanks, Deane.

Thank you. I wanted to follow up on some of the commentary on the ERP disruption and potential catch-up.

I guess if we assume the ERP was a 3-point headwind in the quarter, I guess would imply about $25-$30 million impact. Then I think, Ivo, you said that Europe has fully caught up on the lost revenue in April.

I just want to make sure I'm understanding that right. Was Europe a sub-segment of that 25 to 30 million?

Just trying to understand how much catch-up there really was there in April. Thank you.

Chris, thanks for the question. Let me just clarify.

We came about $5 million light to the midpoint that we have guided on Q1. My comment has been more around that $5 million that we came a little bit light on in Q1 that we have fully recovered, not the incremental $25 million that you are stipulating.

That is something that we anticipate we will recover as the year progresses.

Right, and that was built into our original guidance, right? Ivo was bridging the gap on Q1 versus the balance of the year.

Got it. Thank you.

If it felt like the 25 to 30 was a lot, I appreciate that clarification. Thank you.

Then if I could just follow up on data center, it's very nascent for you guys now. I guess my question is, is this just a nascent market since it's tied to liquid cooling, which is still in the very early stages, or is there already an established player that's out there in the market that you guys have to go and take share from?

Cuz I think it's understandable why you guys have a right to win there, but then also just the question is, if this market's already developing, why aren't you guys meaningful share already? Correct me if you already are meaningful share.

Thank you.

Look, I think it is a nascent market, right? I think that we all started to talk about liquid cooling much more profoundly in about 12 months ago.

We have started to quantify our growth rates in that market pretty meaningfully in the second half of the year. I think that our order intake does indicate that we are taking a fair share of that revenue.

They are well-established players, just like Gates is an established player that will be competing for the available infrastructure buildout, but there's so many projects that, in our view, there will be room for more players to come in and for everybody to have plenty of opportunity to build strong, solid revenue stream as this business becomes mainstream. My sense is we didn't just kind of come up with '28 as some random date.

We feel that by '28, this should transition from emerging applications to mainstream where all data centers will be liquid cooled.

Thank you, Ivo. Appreciate that.

Thanks, Chris.

Hi, thank you for the time. With the second half of the year implying organics around 4.5, I'm curious, the order strength that you've mentioned multiple times for March and April, can you give us a sense of what the order growth is trending right now year-over-year?

Look, I would say order growth is outpacing core growth certainly in Q1 as we saw backlog build kind of across the business. I think it's an indication of the industrial OEM strength that Ivo talked about.

That's really, as we've been going through a little bit of the trough that we've seen on the industrial side, the strength in the industrial OEM business is giving us pretty good confidence. We had backlog build in Q1.

We saw strength in April, which is why we highlighted that. Orders are on pace to support our core growth number right now.

I'd say also remember that the second half of the year there is that extra day that we have in the second half of the year that kind of offsets the two days in the first quarter, and so that gives you a little bit higher growth rate in the second half. Then also there's some catch-up throughout the year on the EMEA side.

When we look at it kind of from an overall perspective, we feel like it's pretty evenly paced throughout the year from a core growth perspective.

David, what I would remind also everybody is that prior-year comparisons are a little more difficult, too, right? Because we had that big step-up in AR business of the channel wind that we had.

In

the first half.

Right. In the first half.

Actually, the underlying performance in Q1 was quite good. Yeah.

That's what I was just wondering, are we really seeing orders running above that second half organic growth rate? It's just the tone you have is pretty bullish, just trying to set that up.

I think when you look at the one-offs that I talked about in terms of the extra day, you look at the order rate right now, and you look at the trend and kind of what we've guided to for Q2, again, we feel pretty confident in our guide and we feel good about where we stand on an orders perspective and a sales perspective.

It's early in the year as well, right, David? It's very early in the year.

Yeah. Yeah.

All right, I appreciate that. If I heard you correctly about the second quarter, while the guide for the margins around, I think, 22.2, you feel there's still about 100 bps in there of, I guess, ERP drag if I heard correctly.

Is that the right way to think of it? Please go ahead.

It's about half ERP and half footprint optimization cost out. It's kind of similar to what it was in Q1, but it's half, and so you've progressed from 20.8 to 22.2.

You still have 100 bps of headwind, and so you're kind of knocking on 23% from an EBITDA perspective when you adjust for the one-offs. When, again, we talk about the 23.5% target in the second half of the year, we feel pretty good about that.

All right, I appreciate the time. Thank you.

Thank you. Yeah.

Yes, hi. Good morning, everyone.

Hey, Jerry.

Ivo, Brooks, I'm wondering if you could just talk about the difference in demand cadence you're seeing on the replacement market by end market if you have that type of visibility. We were surprised to hear from somebody else in the supply chain that parts demand in truck applications was really soft in the first quarter.

I'm wondering if you're seeing that or if you have that level of granularity and visibility in any other replacement demand trends that you can talk about and in terms of cadence, what would be helpful?

Yeah. We don't really break out replacement channels by end market.

What I will tell you is that the aftermarket in Q1 was quite healthy. Absent of the two things that we have listed, it was running at a trend line, I would not be able to tell you that there was something out of ordinary that was not behaving well.

Our aftermarket is actually quite okay. When I take a look at POS, the POS data was very healthy, there wasn't any indication of somebody trying to pull demand forward.

We didn't see that. The sales out kind of outpaced our sales in slightly.

Everything is what I see a normal operating conditions. I wouldn't call that that it's extraordinarily out of line on a positive or that it is negative at all.

I think it's behaving the way that we anticipated.

Super. Separately, nice to see the transaction announced this morning.

Can you talk about as you look at the M&A pipeline, are there additional opportunities that we should be thinking about over the next 12 to 18 months, if you do have an active pipeline, what's the range of capital that you think you could deploy beyond the announcement today?

Look. We have a very healthy balance sheet.

I spent years on trying to get this balance sheet to be durable. We are right in line with what we have committed in our last CMD.

We feel that we have a ton of capacity. I think that we are operating the business quite well with driving profitability forward, and we believe that there are many opportunities presently.

Our pipeline is very robust. We are doing presently a ton of work on number of assets that would be highly accretive to what we do, again, front and center to our portfolio.

We are really not looking anything that would be an extension or a third leg. We don't believe that that is the most meaningful way to add to our scale.

We will talk to you as these things develop further, but I would say yeah, there's a very good likelihood of more announcements coming certainly within this calendar year.

Thank you.

Hello, everyone.

Hi, Tomo.

Good morning.

Thank you. Could you share your perspective on business opportunities for Gates in robotics, especially humanoid applications based on your discussion with the customers and your technology services?

What is Gates potential in this space, and there are any specific technology services you see as a key differentiators?

Good morning. Look, yes, we do see opportunities.

There are some nice opportunities that we already participate on today. We have a very nice small-scale business in China in particular and in Japan in robotics.

I would not be in a position, frankly, to tell you today whether or not there's some humanoid opportunities very specifically, but we do have a very nice robotics power transmission business with small belts that they're perhaps more cost-efficient than the alternative technologies. We believe that that's going to be a small, accretive end market as it develops on forward-going basis.

Thank you, and just follow up on the Timken's acquisitions. Could you talk about expected impact on the net leverage following this acquisitions and how should we think about the capital allocations strategies, including the balance sheet, please?

It's it's immaterial. It was a, super, positive purchase price, opportunistic purchase price that we've, that we've acquired this business.

It will be not meaningful on our net leverage.

Thank you.

Thanks, Tomo.

Hey, thanks, everybody, for participating. If you have any further questions, feel free to reach out to me.

Otherwise, have a great weekend. Take care.