Gates Industrial (GTES) 1 May 242024 Q1 Earnings call transcript

Thank you for standing by, and welcome to the Gates Industrial Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Rich Kwas. Please go ahead.

Sorry, it seems that we're having technical difficulty at this time. line address the situation. on remain while the we Please

hold placed call Our be music until line will Difficulty] on the you. [Technical resumes. Thank

you Kwas. Earnings and Corporation Thank to turn I by, the over like ahead. standing Industrial to call Gates Rich would welcome now First go Call. Conference to XXXX the [Operator Please Instructions]. Quarter for

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

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

Our morning call webcast, is this being presentation. is slide accompanied a by

will that slide refer of financial financial evaluating Relations website. we available useful in measures non-GAAP certain earnings of in we our the the presentation, our performance. in are release call, Reconciliations historical measures our to and are each this of non-GAAP is section believe On which Investor included

forward-looking the risks Conference. will ] and any look on to X to actual be recent we different Private Industrials Global that most These the statements are report to our Basic of reminder Form many which forward-looking and a meeting include, statements. Later disclaim include provides will of in annual those Act. We remarks make with [ Materials Conference from to & described Industrials Wolfe forward-looking cause the in be our this statements. you. forward the update risks Slide refer Reform These Litigation filings obligation have by with to and expressed Transportation others, in XX-K meaning we subject KeyBanc such SEC. of attending We those month, within now other we Securities that the that the implied could presentation, Please materially statements matters results forward-looking or among

year to prior now otherwise. that against note over comparisons With way, please all start, period we out Ivo. unless of are the call Before I'll the the stated turn

morning, Good joining Rich. today. for you, and everyone, you thank call Thank our

kick at We midpoint above March Automotive on Markets end provided revenue of the we our X. industrial generated continued revenues will to We in guidance Capital off and our range globally. markets. Day outperform the today within February Slide

revenues the Our global with mid-single-digit by replacement replacement slightly increased automotive leading growth. way delivering

for as activity ratio speaking, Broadly March March at and quarter. in improved level book-to-bill book-to-bill order a the our progressed as compared higher full to

rates service as true-cycle customers to operational and order up execution our Our associated nicely on sharpen we continue levels more to the our fill to efficient trend continue performance.

Our in operating quarter expansion. strong margin resulted was performance the in and significant

Our margin year-over-year XXX adjusted to points XX.X%. increased basis EBITDA

of Our gross decline points margin despite encountering the quarter. volume first XXXX, basis the compared to grew XXX quarter in a

material particularly enterprise and XX/XX. headway in cost with We initiatives, our are making with reduction

mix replacement last higher also to our sales expansion. The contributed year to relative gross margin

In more the decreased spending SG&A We higher-than-expected our which year-over-year, quarter. included proceeds. addition, sheet during progress our with balance insurance made

earnings net executed made from call our year term loan to prior $XXX the balance on leverage to X.Xx the XXXX declined debt, commitment in outstanding we've We end year Our our on repay million. reducing X.Xx by quarter.

later later We demand strong in as Brooks full our position addition, year we markets solid end presentation. and in and shares we the updated start our Blackstone will are provide industrial in February. the to EBITDA color start of experienced with repurchase secondary to XXXX In anticipated leverage cash strong recovery experience used a to further good year. the QX, year operating on conjunction believe progressively on Based generate increasing our guidance our offering $XX excess a are we in to our in results million adjusted profitability guidance. in

turn X. please Slide to Now

basis. core which revenue declines million, $XXX on experienced channel, basis, our mid-single-digit a double market grew market digits. automotive industrial growth end The in which by first-fit on First quarter was core of The driven revenue industrial replacement. total was down a bulk end a represented by modestly decrease driven X.X% the

Core revenues modestly. industrial decreased replacement

above led cadence. by stabilizing with signals March, order weakness, prior the what offsetting us Our intake performance specific in improving of quarter which QX also in solid and seen X will market that expanded remained more elsewhere. I greater have experienced pockets book-to-bill we've in order year, we to than note an a of

activity. We are encouraged by the

and compared million was sales year supported the margin Adjusted EBITDA $XXX XXX was mix prior XX.X%. EBITDA period. $X.XX. of the of key earnings increased expanded by basis margin well to initiatives as yielded the points, share Adjusted enterprise replacement a as per

operating offset by XX% partially of as EPS, quarter in adjusted rate grew was items. over as contributed well and higher of well which mix year's income Our tax other this effective $X.XX

At On X, Power at a In X.X% which the about replacement in automotive level, came revenues which our $XXX a by X%, Slide segment, our let's digits. segment basis. decrease on performance. review channel the replacement, grew fueled mid-single Transmission grew represented core million,

and First construction single performance declines realizing Fit slightly. decline personal decreased mid-single-digit core to offset low was and automotive market which high automotive revenues growing in and end was with mixed growth, double-digit industrial a diversified experiencing agriculture. by End mobility, digits energy, industrial on-highway

signs market magnitude to quarters is note, in these began and end relative Of stability. America the end the previous diversified industrial ease markets in showing of North declines to of the

Our higher adjusted contributions increased sales. EBITDA from replacement enterprise from margin mix initiatives a of our nicely, and various benefiting

of performance bright the enterprise activity Fluid mid- construction. Power XXX foreign spot, single Fit [ segment growing adjusted operating Power margins posting fell basis was partially high currency weaker by double XXX digits, Our declined of just in decrease X% Revenues a with stronger revenues $XXX driven ] effects by points of that digits. Industrial supported by under Automotive X% initiatives. revenues improved execution core to was and agriculture by First million. almost replacement posted ongoing Fluid points. offset a segment, our fueled EBITDA favorable basis

on Brooks? our additional call I turn over will Brooks the now results. to for details

Ivo. you, Thank

Slide revenue America, North and overview to industrial an by core of the Industrial X%, geographic sales performance core decreased Most our weaker channel In now primarily our the region. in high impactful digits. of results. trends. X Moving expectations. driven enterprise by regions our outperformed revenue core Fit. replacement declined was by First low single double-digit Agriculture Industrial weakness consistent digits, a our single performance, decrease with due to fell most mobility, revenues to personal followed core

in destocking second as anticipate now onwards. from the and exit personal the we abate We recovery half generation steady of mobility anticipate XXXX QX revenue to

South in Fit. EMEA company revenues core with First the Automotive are region with Fit our America in was largely automotive benefited both overall Asia fell stability In in was solid decreases. and with to most core mid-single core down our trend. increased modestly mix. X% and replacement EMEA, we Additionally, near digits, in weaker realized relative East in strong revenues we overall last in Fit the modestly Diversified expanded growth revenue grew where replacement In impactful measured general, In Automotive the more in regions. saw China, core our year. Automotive and which the market revenues the both expectations. First digits, outperforming replacement with expectations with consistent and Industrial industrial decline. flat and revenues First teens. were from observed in channel, about Industrial, general, automotive double stability of the demand a China was end posted industrial end Industrial showing core performance markets partial high was growth to demand grew industrial while most offset and although grew slightly slight declines term. in down, was

year prior and due On by strength booking allowances tax quarter and adjusted the from items. Slide approximately the mix to Operating fuel discrete the rate The earnings mostly offset estimates tax per that contributed The we by to X, activity discrete show around we share largely the be changes certain of $X.XX quarter. items expect of growth. items operating a an performance a other walk year valuation progresses. performance the partially offset other as involve in higher-than-expected per was tax in share

our and Slide provides cash performance flow an update balance X on sheet.

quarter an of in with first was result million. This the for outflow normal flow our cash $XX free line performance. seasonal Our is

year X.Xx, million the $XXX which Our term loan. ratio was prior a reflected X.Xx our and declined net in to period leverage reduction lower than

first ratings the S&P. from we quarter, upgrade received During a

X week, Additionally, our to higher bumped last late rating BaX. credit notch Moody's

Our the had we existing with trailing XX.X%, At profitability. XX-month mostly return increase to remaining points QX, on increased by under repurchase approximately share invested XXX basis driven authorization. strengthening end of our capital $XX the our million

X. Slide updated our XXXX guidance to Shifting on

EBITDA increased our outperformance QX's XXXX million full range $XXX the represents of have most adjusted guidance to of increase. to year million. $XXX We a

be The for offset free higher adjusted rate are reiterating earnings per for the share, is expected a year guidance to flow revenue core effective capital cash higher growth EBITDA XXXX. adjusted conversion. tax for by expenditures and We

to million revenues of the in For to expect second be the we range $XXX quarter, million. $XXX

core low EBITDA will year. in to to headwinds our We as single-digit the estimate second expand continue adjusted we quarter. the We XX points decline compared prior growth approximately act XXX expect margin a year-over-year basis to through industrial

are repurchase relative does the our activity. from initial midpoint to enterprise share of On Page savings provided note effective higher being XX, we adjusted to not per XXX February. rate, initial the that earnings adjusted outlined contribution an Greater initiatives show the higher we we offset which points share we updated tax expect our February. walk any per in expectation in incremental the fully basis incorporate versus by be guidance share to XXX Please earnings guidance

over will I to Ivo. it back that, With turn

I'll questions. Thank our before you. we take On Slide XX, key messages your summarize

our solid First, pleased with performance I'm to XXXX. start operating

and XX/XX. we initiatives, the particularly Our with are cost our various margin traction material in gaining reduction healthy, was areas performance in of enterprise

to Our and signs process like activity that savings to the see material and stay stabilize, construction efficiencies soft markets industrial We science although driving ag for benefits. we time is are material being. beginning competencies expect

we our period stability more more encouraging, the inflection March flat quarters improvement for the order trend end industrial has growth, activity a volume of softness Core a The would QX in we out to -- constructive flattened markets the on become of is couple before and certain intake business. see continued was suggest saw after last in in industrial near-term diversified need in PMI our but markets. over we

growth we As such, our expectation for top the maintained pragmatic of line year. have a view

strengthen our our with are upgrades. HSC effectively our We on have and made quarter gross first balance We evidenced X sheet in continue by capital in shareholders. we parallel to executing we rating we debt recent believe repurchasing as shares. are reduced Second, the our deploying to commitments

focused highly We at improvements. XXXX our are flow targets cash achieving on Day and Markets margin outlined Capital we drive as our March

strategic Our intend opportunistic. expand, be to optionality we should and

expressing on execution focus as their for key global expectations. commitment almost appreciation I'll as meet finish XX,XXX with diligence particular of by Gates a well dedication associates our my our to to and customers' priorities

over back begin the the call the turn now will to operator I that, With Q&A. to

Thank you.

We will begin the session. question-and-answer [Operator Instructions]. now

question with comes Nigel the of from first The line Coe Wolfe Research.

Good everyone. Thanks. morning,

growth, the right just in for X.X% of down at looking What was What the you the year. to recognize ] just high the here half? wondering, So [ to talk pathway what the the I within macro context in in sort plus maybe QX, back end needs of have obviously, year? QX that, through ] contribution And comp X coming about full of year-over-year. obviously, is go [ we back the and half price

Nigel. Hi,

second pretty half still we're the for of year, pragmatic. So the being

mobility start the see as then we bit. the to personal started last prepared our do just market And said rest we in starting to industrial industrial come all, then right, a we of and things back. get year. to And remarks, back just the it's comps little come of because expect to easier, trough stabilize First the

has through really replacement good business been the first automotive Our quarter.

stabilizing better, we're see. then some then mobility And starting is that things market really industrial of haven't seeing pockets wait getting it's of So We've just personal seen stabilization, and the pockets we've back. yet. some things we and to some the turned to come really have seen but

aftermarket there's reason to the levels believe through And auto year? of kind these wouldn't no the maintain at

very is we demand trends anticipated order this strong. I is underlying very very The the strong. are The mean flows strong. are book-to-bill -- No.

automotive will outperform. aftermarket we that anticipate continue So the to

lower from follow-on And QX. guide. QX. a doing XQ Okay. usually, have QX think follow-on margins quick bit to wrong, QX math a think I'm we're And looking margins little we the a I the I for slight And in is my than if downtick

still a be, So attention just from and as healthy should to level we dynamics kind we what of QX of Obviously, very wondering margin. kind go paying QX? specific very, of

that Just to QX wondering dynamic. QX about

we the and kind in had, insurance the Yes. that tailwinds relative bit things things SG&A, of had in come big we is uptick to happen some The have normal terms thing labor of like through some little to good expect of increases then a SG&A an the when that. on we QX balance to related year. of of transactional And some and spending we FX that news out don't also in merit

kind So you'd one-off uptick normal almost an the say, but had related we as some in is expect and all benefits of I from headwind, QX. EBITDA SG&A margin of the, that perspective of you say wouldn't really kind would to

Thank great. That's Okay. you.

line Your question next KeyBanc of Capital from comes Hammond the Jeff Markets. of

opportunities incremental is Is what that pull the more forward? Tarantino on line around this it, give Or initially $X.XX self-help. on Jeff. where here on specifically outlook seems you color just us This coming is identified? self-help more relative start from? some is you for of raised versus finding all David incremental the margin to just to the Could Maybe incremental the you

Yes.

I a we're business a a little ], QX. using the better. stuff little we better of mix and if about -- the better now, And then replacement better there's was in on of price that bit that a bit [ So -- lot with on did in little a think as bit. initiatives. kind helped productivity the a on we underpinning We QX, little did XX/XX do think In infrastructure price the bit came little bit enterprise because you underlying

better get in through we we as little not to move is bit we a lot as by but then driven year. price it as helpful to through productivity. And expect the be as the And a productivity material of that you year, cost move expect was QX,

year. his the on in that of through to continue mentioned doing Ivo the his balance material the end material out is As -- and the we're at we comments, coming of work science cost to fruition, that expect

able expand So even our with we're volumes down, to being margins.

around the lot we've a hard And really so work productivity that's material of out. and done material cost

comments this? of the And maybe in guidance were sales Could just around [ March. quarter. up on follow relative to provided in kind end the order some the I at on ] just And Okay. lower color seeing just context. mean of some the give Great. rates you're the improvement you maybe where give in

just maybe on where seeing when set expect So you'd us you're show trends positive near-term more and the level to through? this

Yes.

seeing more on that replacement. the We're order order order stronger say little rates rates, particularly we in would replacement I rates, are automotive backdrop North industrial America. bit look, in market So a constructive in seeing

As year a reference sequentially. maybe to prior and

blanket So I'd through anticipate say being project longer well. that that those were ship we businesses bigger year. drivers. We placed did to type see orders some for as the

us. When mean, the a indicator selling seeing of are is in important distributors are inventory stability pretty very at I good look which to a what the for I take channel. kind we

a being commercial more we are ship with what by now offset rates negative order the slightly to in So ag maybe And would out. that line anticipate and in construction. little it's said, backdrop more

of both into answer, answer your X segments question. hopefully, that to of of kind try package So your question I your

the comes Volkmann Steve The line next Jefferies. Yes. of question of from Great.

curious if that because down sort like on break the of possible of the initiatives the margin it's of automotive relative enterprise got you I'm aftermarket? benefits benefits sounded mix on to the to

Yes.

the expansion. impact in mix XX of was So points QX margin gross basis about

was it then some mean, balance so so favorable I headwinds. and XX of and volume FX we enterprise of then the bps by And offset deflation had about inflation, initiatives,

Got it.

improving optimistic bit then we of the come sort as rest you year? as raise back directionally, of how mix should are rest year? the rest you the guess the the I'm Okay. but these like struck a That's things I helpful. Is little didn't really the sound and that And fact of rest about the by think year. a of fairly headwind businesses sound the there of

about Steve, I We're year what for a It's improvements. in forecasting that pragmatic the there's are mix. on X seeing wouldn't next the we headwind while say quarters. are we just being early the

of X will puts a we a feel real macros. the I not a There And construction. like takes. are said, see are fake, PMI infection market I validation, month, that There ag it's add positive some head less the end just environment. underlying markets need that's a while to are in and more really As commercial it's and stabilizing some but constructive

we we the as progresses, a feel just assess that's rest so would of But if year. and would warranted. year at in certainly take this And time, the we're that to forecast pragmatic view point of trying the

line Sachs. from the Your Goldman next Revich of comes question Jerry of

freight you tailwind won't first deliveries versus expanding from quarter. lower just cost? on-time on for the of that out supply You was and the the on you point folks? How kind mentioned basis if is XQ there so start based in that deflation as I the improved XX what wonder on might chain flesh momentum like you much the comment just in what mind look far. And efficiencies normalizes of can that

Yes.

QX, was really, on than and bit seeing a I as probably seeing deflation inflation of So a freight FX FX, an bit relative freight we're are in inflation more to it little on going seeing We're of utilities. And up. was little what a said, bit deflation. because favorability uptick little is we're and costs it

little bit So bit and utilities better. are little up then are down. a And materials a

day, and at things really XX better worse. it's the are maybe it's But are things of some Some -- bps. the end

of so of We're it's stabilization deal. just across really board. a that things And the a seeing not big kind of

seen we've initial you you on 'XX? of get That's the expectations with are as of how said XXXX. years, conceptually in over inflation going normalized couple distributors the about set for your what your Can you as outsized just expectations talk forward, you ready helpful. about should expect in the terms next thinking to And conversations inflation distributors in considering then pricing

Jerry. a way long away, Well, XXXX is

inflationary be predict we that to, try I tell One can going to things. always a to couple is you I'm believe, going So to what's to far not we're of happen going out. with able to X seen, our pricing. extraordinary inflation that we to offset we've neutrality saw over we margin get with able were the price pressures past years, the the get right? Even EBITDA

addition, We're to around in that to to relative can strategic the do things to we tools using the look XX/XX we'll going do some In continue on We'll going of we of at pricing. be And materials. with XX/XX. pricing as we we the what's work terms best through XXXX. when with that judgment make utilities. We'll then then on get we'll at to And on look freight. what's more going with going what's look at

And what time of need do you lead provide. to kind

X X to Typically months.

Your next of question UBS. line comes of Karas from the Damian

thoughts you've seeing of now. wondering such mentioned Good got could I your kind a to year and numbers the opportunity And maybe, obviously topical have any just show and Thanks presuming bit step is progresses. morning, share was any right back, up been the everyone. if or on pragmatic take space. guys Fit ask see you drivers. I of your that in little activity very First all there's as know potential we'd activity the a you kind around more you've centers I, industrial about the for capabilities guidance approach I'm margins just this Data category? generally. growth you thoughts in

Sure, Yes. Damian.

to as incremental emerging rather CMD X the an the to the we years. as opportunity next stated data growth ago, center X during about view drive month a ago, X significant I weeks we think to

for refreshed hyperscale applications to That be electric the also portfolio of decent process to We is particularly center our specifically are fluid that's conveyance needed those products. participate fluid going launching data have more water centers. conveyance that in said, with our we what's and to in a product with fully data being pumps target able tailored reasonably

ramp-up that going expectation and anticipate So that to see in go we should XXXX. we more about be there meaningful start that But I talking say wouldn't 'XX a 'XX. into I would in we're it as an

takes early out. time as these As the in some revenue and ramp-up projects specked get data you know, centers these are built

I of how about would you kind say that's think it. should So

start feel in particularly stabilizing [ the particularly And think ] constructive this any recovery the now XXXX, be as Brooks itself And would we about in expect stick space, nice that. year. a mobility, end very don't personal uptick in said our should personal side, ] constructive. second we we initiative design I involved significant mobility our are seeing extremely across anticipate personal hockey to in as then say do to we're mobility chain-to-belt still first in half in remarks, again And of in the my on while the and markets prepared projects market quite mobility should have so rates the so number destock out lots believe wins, on certainly of that half, that, going as I that may I other we [ that of is drivers the growth are more constructive we the we said really play

we business, of have constructive the as rather us. still our drivers been positive be side of and then And midterm in demonstrating, replacement that doing we good there for should some a are are that believe the and automotive job we

have So the to stability year. we in, to we which the would seeing growth But this of in the to we start lots second do market believe being into said, we future. underlying continue some need start everybody environment, in of that should seeing ground half drive I factors

to maybe but And of you see inflection. China. Okay. I That expectations know choppy on Great. growth said could bit elaborate kind it you a sense. was your little the then nice makes positive trends, for just still

a So of continue what maybe you just hesitation about here giving the just choppiness. expected and and talk can't you from little makes you think grow kind what's to

that again, fundamentally, of that pragmatic what happening. I are headwinds say, I Look, there economy. say in more would lots view still of is a would

growing We really nicely. are

in seeing the bad. those In start Our in business China industrial it's that replacement despite becoming side, replacement automotive China. headwinds. less We particularly

is inflection stabilizing. could into one of there. half degree Commercial anticipate of some So second construction the year

particular, I China, better, the comp going conclusions year. our I was there QX to choppy. could And say mean you So getting also China is last would challenging things in best because in that we in are they're that quarter to be that had but count

try underlying the again, is to while getting skis here. our stabilizing, pragmatic than just be rather So market we way maybe over or stabilizing

Your Citigroup. next of line the question comes of Andy from Kaplowitz

want with free start just I flow. to out Brooks, cash

out which think year, start year last But you flow. I positive of You the is had free kind normal. seasonally negative, is -- not cash

So can in the what know you maybe discuss happened I change for outlook year. didn't you the the quarter?

nice So should QX? you to turn in a cash

Yes. was outlier Well, I mean, last I year more of the this normal. more is think and year of a to return

so typically variable And payout build little and inventory then QX And we had through we busier. a because bit in this QX that's year. of also comp more QX

would So QX year-over-year of of year. impacted QX that that year also last change, more was was year. a I pretty QX much this and But normalized this of significant say than

Because and Ivo, think then think run question, in of just diversified better to What half. the of follow it mentioned have you double-digit get you driving previous up industrial about Investor I rate then talked kind the growth the is I personal potentially mobility. in 'XX. in to? diversified And does industrial you gets mobility Okay. want What at to second on stabilization? And kind personal Day,

sort So visibility what's of personal inflection in toward mobility? the that

order see market bills of mobility think, and inflection, X I time. Look, are personal by last X we some the the destock kind COVID we was see during era. haven't seen so or What starting demand. expedites is now to in starting real impacted kind the long quarters, to very a the in the over you're over Look, particularly of the

you trap are inventory will You're of and approaching of the this you destock. an starting that please customers for to could indication see we give of now you calling expedite please, kind And saying, order [ that the "Oh, ] kind me?"

if end take look build, a And they the so the underlying stabilized. market you at builds, unit

start QX is So it. basis, see to and believe perhaps a as the end believe we an and because we as that the normalization forward-going is there coming we space, destock we'll we that a then get being the steady channel end, And kind of personal we slow demand with more market of are bottom looking on should recovery XXXX. into mobility in more stabilizing

that a the a and the of to what take is time grab up we share the CMD. to sale at of conversions. built new offered some rates that we confidence this bit seeing usual. growth Now us continue for Look, equipment that being in season the start ramp in degree is of gives were quite will They as we being do discussing

So actually we bottom that of quite mobility half year. positively have we feel in the personal in reached the first the this

we improvement pointing X of stabilizing towards more negative replacement. of for Reasonably, broad demand. side. Now seen words a off my on are indicators [ that reasonably indication, of But the replacement wouldn't I bad as the reduction rates I think industrial positive it's order let read have ]. all or last to the in you industrial things just kind X or quarters races. there Look, all the

is kind bad, the line is less mirror a steady in getting very of industrial that PMI the is so So will much we a with indices. just this of recovery frankly, on of telling believe trajectory it performance the you what,

of from comes question Barclays. Mitchell next Your Julian

today. at point your bit a uneven I industrial. kind ago again, on maybe again sort environment also you guess it's just We last totally month see that sort tone, seems the more things new a were the on measured or less the notable going Because a with X. I in of Investor little then Is XX broad going than or understand an trend orders. it below of just very hour to characterization? any of the sort slowdown the and more back quickly fair like felt environment. see in balanced or back And of that in Maybe change getting PMI and it better, Day, maybe Did the

tepid that nature there market the versus more little wondered So just feel CMD. any the on but that's or now just the environment, you particular region of was a

Look, things a of point March, it little was Easter that the earlier coming prior out, anticipated bit X the that than into was holiday was Yes. in which would I while we years.

at reasonably I choppiness of less more month. that it And was was the weaker half seen -- half a second have would it sales. the I performance mean was little a day muted. say of that We than

want you of it, was the in If scope And Easter with what impact. to coming kind would the more earlier. kind of associate I that

space hand, off-highway anticipate but I some to weaker. And well. of recovery continue in of year. recovering constructive the builds ag half. other by is second kind that more to of to the is headwind probably that But be getting my on to don't commercial the going rest anticipate then in be would would construction that that's going the some offset be a -- somewhat And I I be is to going mobility sense that challenged say personal that are in into AR going equipment the the as is

impacting anticipated. again, more more prior So March to has rate that I bit than below that of I on probably year kind changed. a would coming came I of really would Julian, just well anticipated than little see. say, maybe And anything that going what in probably and Easter say what us in it's a the we we've we've wouldn't holiday say that are earlier half back

year. tax sort rate. And this EBITDA of has increase helpful. the margin for offset higher a question then maybe Brooks for more Clearly, That's guide on that project

So like is the does that Is tax type the we it we And when XXs range? about think rate sort the should P&L of of adjusted tax sort the XX% beyond more low XXXX in a year? type use? rate for

Yes.

statutory are rate said discrete we a I coming based we've my income in up offset. in a these is little year, yes, mix seeing, that of going be had What -- our tick the items. remarks, And jurisdictions of seen for the they're I to on as tax the largely, in in are bit think too, we So from.

little an a that's so year. And for uptick bit the of

I obviously, kind the then of to forward, and for think XX% again, in think And range. impacted, going different tax But going it there's and this 'XX like coming to midterm. ought it's XX% pillar it's may the that with income ] said, where be on I we going like things going be is mix here little a the be affect to is bit in. where we of things and And to by 'XX there. that, [ other

comes question Your of next of Baird. the line Halloran Mike from

lot So I together these all put here. lines. to just Because markets, a lot different a kind pieces of of trend want of

in guidance less is for sequentials the your relatively for remainder the assuming of it more net overall you business stability or normal If together, the year?

think the that that's think I Mike. Yes, way right about it, to

demand I bit of So be AR maybe other puts is think of right? the right probably takes, a to may some little stabilizing about that and highway, weaker the better, stabilizing some think -- performing recovering. with some and that segments way

that's think So puts stability. to and good a it, takes and about way more

seeing you could and towards start can improvement provide ago. not then organization long the update are we that a internally, an And and teams had bit accepting little you think the how on you it more I just benefits. geared some operational initiatives significant Analyst how the probably quickly Day know

So internal about how momentum the is going. more curious curve and adoption the

Yes.

doing we're for that, you think better. Mike. asking a Look, question. great I it's Thank

year. for we guidance will EBITDA and forecasting guidance its and the I have But think which a see revenue we thinking rather not at in targets much internal margin you're to will in the right, is that to nicely, our set the would we've drive if that, the more expectation. the comfortable continue have really organization on taken updated that improvements, the our gross EBITDA more upgraded vision volume the on I execute environment. confident margin up say we in margin improvement lower that are ability much midpoint, and or about that

And quite we executing are so well.

We the year. we've slightly of better are at what the beginning than anticipated probably doing

as delivering margin XXXX of drop. both level, volume EBITDA things be margin and think to high on the performance, it, in end are right gross we've about during kind you going happening gross of an level we're at And if market of anticipated. Some kind historical

constructive and in So a we us enter volume that's a 'XX of positive with environment very as setup kind 'XX. providing more the

progress. that are feel upon CMD. I to And today capable that the confident deliver sit we're on that we So where I much 'XX laser-focused based at made see our I execution, good to we organizational commitments executing out objective We the to set would more our be from and going what on on highly shareholders.

Dray comes RBC of question Markets. Capital next from Your Deane

just versus and Industrial of Fit. about morning, distinction also America a Fit in make And lots you've and Good Thank can you segments just discussion North tone forth. on Fit demand a aftermarket if maybe, industrials, and EMEA. There's of Maybe down been between look demand And at both of there. good First the want the when down like you given the to idea, slides, First First circle everyone. so lot you're you. And back. stabilizing and color the just business

the specific commercial maybe how you just verticals, a reflect so not stage all and deeper being in do environment? So Fit construction you First the at ag, But on And saying have is this just forth. First stabilizing Fit down dig into individual to enough. just

that very, digits is First low would are say, AI impacted personal of performance, driven X automotive mobility. say globally. driving, AR by would verticals Fit I is business construction would First replacement solid I that, up say a by while side. XX% very ag, the predominantly the in performance the and the replacement I in Fit single commercial Those that's And

mid-single up performance low the industrial single I would in digits digits. So say, which is and replacement, down, stabilizing

that replacement trends business. if maintain So year. to industrial what seeing we But the as you and going be we in a look improving takes. that take recall a I you're will throughout believe to is automotive the off-highway right, also stated, through need replacement we continue puts the believe I in of side year start at strong that the headwind you work performance I to and our can the And

you any did about then missed how the off? And in I Easter April? And but have -- noticeably impact. it, start holiday that when did Was you cadence recouped helpful. quarter, might that of early talked That's April Great. in

So a it America, about wasn't the Europe at a impacted holiday the the the It of were under March Easter again, or that holiday month particularly was think Europe, intake the maybe anticipated not day shipments of about of North midpoint came really what It side. Easter more we have half sales. was in the shade at more on and CMD. an impacted -- from significant, side kind the but order we

not remains we April, we AR no commercial myself of construction, solid. to will IR repeat probably I improving ag, as see continue kind In choppiness. Again, came improvement. hockey look, stick anticipated, in steadily

So continuation of seen. we have what

is the So the environment choppy. best That's market way to describe it.

a and are can may have a intakes and several a of that week have You in very order row then you shipments. very good, weak, weeks

much our in for playing anticipating are pretty out as QX. forecast we it's itself So

the Raso of Evercore. from David of comes question next Your line

year. Just currency a don't the quick think a for the head where your cleanups. couple curious of I now is year. heard for I guide currency just I'm on

Dave. We Well, balance we -- the current just take currency, and really the for don't rates we those we of the mean I forecast year. use

I mean, FX, to to try I'm that's for going happen going sure. predict so what's not And with to

we how look that. that's So at

So kind when whatever forecast, are put the for of the roll that's prevailing use up what we we rates of balance the our year.

to for of it's it I the was little bit first a drag. it slightly a year? mean was safe mean, drag the try just I that given a it negative Is in assume to and... quarter,

of about quarters, perspective. line It's from kind end gets overall it's of it but the XX for through year, positive the drag first the top bps the towards year, a X and a drag then the

Okay. are where across stand can should when particularly with a we update the the And that make finish line which those? The optimization, ones quick us footprint you give get difference? a they

those. quantified not have we Well,

a time as the that like the latter CMD, did update China, 'XX. we completion, we benefits substantial you 'XX, So are we of of you about have think I of year. our will part at number But with China ongoing, in project until just not last and would early projects know,

orders I revenue year-over-year, actually said just book-to-bill the right? think lastly, Okay. And not know down. then you is I above up X, but

is I heard can order book-to-bill are correctly, your above you But down. in X as quarter. a actually said the up correct? be year-over-year still that first company you So and orders Is

correct. That's

you for So up into long the lead being it's enough. think the your the XQ on enough organic the orders but is I obviously, I to just X.X% count time choppy week just organic of sort of idea like goes mean the even I flat orders first in moving can't It's week. idea back up sort -- of comment. mean, are of is Maybe XQ quarter? don't down company. a were It in as We orders a... around to that converting in the quarter,

longer versus the right mining, fill some X oil has the think to will been the Look, that year of the you I simply some cycle that to think just and that driven was commercial businesses ag half the 'XX quarters. I that's incrementally QX way about over then Dave, -- of in projects, prior kind next of think Half but in the and weakness Yes, it. cycle construction. to X gas and outperformance of by see driven in through driven a little was of outperformance more shorter

So just out. balance that to we're trying

inflection." above And ability market we believe prepared is growth there's we to point declare are deliver "Hey, this Again, what say, stabilizing, an we and to envisaging restate the but victory our early. I'll meaningfully time. at top that are anticipated we And environment impact that line again, in a not end will it now it's

backdrop are we with we a but off good where more very are pleased sit a we the is that start to We presently. positive, believe and little very

while revolver year down. The the Can about your the one interest quick full did your to us expense, with I lower in 'XX And lot quarter I right expense? so little a expense not give help one. even enable you you're be repeating a have how than in know interest interest thinking that first you some thought. I used But come should

$XXX interest million We're be down it Yes. to I year-over-year. about thinking expense interest mean GAAP is year. for the expense, going

this will for now further turn There closing remarks. at no Kwas are the to conference I questions time. back Rich

you, Thank everyone, for joining. All right.

a otherwise, have further Thank any of great the have feel reach And to rest questions, you out. week. If free you.

Thank for conference all Thank you today. for you. does conclude joining. That our

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