Gates Industrial (GTES) Q2 2026 earnings summary

Executive summary

• Achieved record quarterly sales of $942 million (up 6.6% year-over-year) and core revenue growth of 4.9%, with adjusted EPS up 13% to $0.44 and adjusted EBITDA margin at 22.5%.

• Net income for Q2 2026 rose to $178.0 million, supported by volume, pricing, and a significant discrete tax benefit from redomiciliation to Bermuda.

• Raised full-year 2026 guidance for core sales growth, adjusted EBITDA, and adjusted EPS, reflecting strong demand trends and operational execution.

• Book-to-bill ratio remained above one, indicating sustained demand momentum across most end markets.

• Positioned to capitalize on early industrial recovery, with strategic initiatives accelerating and a strong balance sheet.

Financial highlights

• Net sales reached $942 million in Q2 2026 (+6.6% YoY), with adjusted EBITDA of $211 million (22.5% margin) and adjusted EPS of $0.44.

• Adjusted gross margin improved by 50 basis points year-over-year to 41.8%.

• Free cash flow for the quarter was $60 million; trailing 12-month free cash flow conversion was 94%.

• Net leverage ratio declined to 1.8x, a 0.4x improvement from the prior year.

• Return on invested capital increased to 21.6%.

Outlook and guidance

• Full-year 2026 guidance raised: core sales growth now 2.5%-4.5%, adjusted EBITDA $800-$830 million, adjusted EPS $1.62-$1.70.

• Q3 2026 revenue expected between $880-$920 million, with core revenue up ~5.5% at midpoint.

• Adjusted EBITDA margin for the second half targeted at 23.5% or higher.

• Capital expenditures expected at ~$120 million; free cash flow conversion to remain above 90%.

• Anticipates higher sales growth in the second half of 2026.