Gates Industrial's Q4 2024: Dissecting Contradictions in Mobility Trends, Market Recovery, and Margins

These are the key contradictions discussed in Gates Industrial's latest 2024Q4 earnings call, specifically including: Personal Mobility trends, Industrial Market Recovery Expectations, Data Center Engagements, and Margin Improvement Expectations:



Revenue and Profitability:
- Gates Industrial Corporation reported total revenue of $829 million in Q4, which represented a 2.6% decrease on a core basis and was down 4% inclusive of unfavorable foreign currency effects.
- The adjusted EBITDA margin expanded by 30 basis points to 21.8%.
- The profitability performance was driven by a 130 basis point increase in gross margin to 40.4%, benefiting from various enterprise initiatives and favorable channel mix.

Regional Performance:
- In North America, core sales declined approximately 3%, primarily affected by lower OEM demand, with Industrial OEM channel sales decreasing double digits.
- East Asia and India posted 3.5% growth in core sales, driven by Automotive replacement channel growth and Industrial end markets.
- The company's performance in China was modestly up, supported by strength in the replacement channel and Automotive replacement.

Segment Performance:
- The Power Transmission segment reported revenue of $520 million, with a 1% decrease on a core basis, supported by modest growth in Automotive replacement.
- The Fluid Power segment saw sales of $309 million, peaking approximately 5% core, benefited by Automotive replacement growth and a higher replacement sales mix.

Guidance and Outlook:
- For 2025, the company initiated guidance for core revenues to be in the range of down 0.5% to up 3.5% relative to 2024, assuming end market contribution as a slight headwind on a weighted average basis.
- The adjusted EBITDA guidance is in the range of $735 million to $795 million, with a 50 basis point increase in adjusted EBITDA margin year-over-year.
- The guidance incorporates a 3% headwind from foreign exchange, with greater impact expected in the first half of the year.