Gates Industrial (GTES) 31 Jul 242024 Q2 Earnings call transcript

Thank you for standing by, and welcome to the Gates Industrial Corporation Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Rick Kwas, Vice President, Investor Relations.

You may begin.

Good morning, and thank you for joining us on our second quarter 2024 earnings call. I'll brief [indiscernible] on our non-GAAP and forward-looking language before passing the call over to our CEO, Ivo Jurek, who will be followed by Brooks Mallard, our CFO.

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

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

be Relations statements subject website. of expressed non-GAAP meaning could and These financial Securities those is earnings refer our risks slide other the and of filings Slide we such Act. in historical on or the forward-looking measures make Reform which our annual implied the X in our described our within XX-K Litigation that statements. Private most others, Reconciliations are matters different presentation, a presentation, in recent on available section SEC. now among to Investor materially report which the with the Risks release by statements have the forward-looking include, Please reminder from results are to to included forward-looking of that remarks each cause of of in we actual that provides Form

update will statements. Annual Industrial you. these obligation this quarter, We Later look we Conference. Laguna any disclaim and Morgan We with meeting be of many to Jefferies the XXth attending forward-looking Conference Stanley's forward to

Also, that comparisons using tax all note for note unless the otherwise. XXXX and figures prior stated against adjusted year-to-date adjusted please a are start, we Before effective have please 'XX recast EPS rate. period otherwise normalized we our year

we more and minimize from our quarterly for We investors believe have and remove influenced items reflect tax see information. the comparison. will effective beneficial have to approach apples-to-apples volatility operations, analysts, rate an our tax recast adjusted chosen be better and items appendix and historical to provide nonrecurring To this rate. our discrete core to many individual earnings please Historically, our

way, the of all Ivo. that I'll So with to turn over out it

Thank solid the Good the morning, We'll start team [indiscernible]. moderate execution everyone. year we [ saw second reported results prior on In QX through case entire we you, from quarter, focused Slide revenue Today, our associates. global our X% Rich. on delivered of X ]. by

decreased business First-fit more anticipated, present reflecting the sales than conditions. underlying

anticipated, we our remained demand somewhat markets in soft. As end industrial

agriculture we weakness However, experienced collection incremental demand end in applications. and

industrial. softer revenues environment. outpacing a Book-to-bill below while and margin solid slightly through We in Placement delivered X. X% with our volume adjusted grew is increase a EBITDA automotive managing

expansion margin EBITDA initiatives. by enterprise adjusted year margin benefited Our improvement. the progress continued points. mix to compared gross grew well from Gross margin favorable period our Strong underpinned channel with prior XXX basis as as the

X.Xx, last net to Our year's half declined X leverage a ratio second turn relative quarter. to reduction

our attractive extended During earliest we bonds loans to term the refinanced end the quarter, at decade. and rates, of unsecured maturity the our

We in markets, industrial trimming particularly to guidance On-Highway. estate are our our due the extended softness

that Our note, updated authorization opportunistically. the expires the with XXXX. revenue tool authorization capital us comments a The our updated at last provides return constant and historical color $XXX repurchase shareholders in efficient will week, our new Board more of authorized to provide our later issues share to end Directors million calendar an seasonality. is our presentation. Brooks guidance about of Of with

performance. and initiatives fueled revenues. revenues agriculture in XXX Please primarily decline points. the gross markets outperformed continue most turn of on decrease to increase increase Slide of level, industrial a our core The operating construction [indiscernible] impactful quarter, $XXX a $X.XXX, X. and revenue The margin. At to The the EBITDA Adjusted X% first-fit grew basis was of a In by million, execution performance. end in in end slightly the were margin increase XXX industrial the was $XXX we million and enterprise Replacement revenue posted rate second a market of first-fit. represented basis basis. to an drove deliver point

higher margin. which the above-average revenues, supported the of corporate its In addition, generally mix replacement carries margin in to increase relative average,

from gradually higher related half Adjusted to improving expansion to benefited in and anticipation to existing the a capital and product second represented build trends inventory also income lower X% which a demand as growth. support was share with new our as We per earnings share line customer. well increase, $X.XX, operating

$XXX growing review to basis. The X, modestly decrease translated segment on Power X.X% we flat. a channel our being segment, performance. replacement automotive were will replacement and grew with In about industrial Slide On the replacement million, Transmission revenues core which X%

Automotive digits, The decrease trends markets. majority Transmission a double decreased due of Power down also revenues in impacted first-fit mid-teens to by markets low end in to our digits. international first-fit. First-fit was production in mid-single industrial decreased softer

regards Energy to revenues Personal to decline, top of rate change moderate. opportunities. On-Highway and by Mobility with posted geographies, solid line starting developed continued although revenues the expansion is in our led to growth

sale EBITDA points. The for improvement our by expanded The led to secured mission-critical broadens market extend XXX business products. margin national reach was basis lower our replacement from will with Power we favorable partner market ramp agreement meaningfully quarter, volumes. channel next margin initiatives Transmission the as an by our our well offset early During we year. new adjusted to channel presence anticipate as mix enterprise that contributions a begin

partnership first-fit gauge same mission-critical U.S. segment. to of revenues a low Industrial drive agriculture about geography. we with extend digits. an decreased product the one components in rate X%. generated $XXX conversions Industrial by our in declined at segment increasing construction. sales Transmission, replacement million. of was partners Power partial offset, overall Power replacement the Core mid-teens, driven replacement to Similar to double declined to channel have activity revenues and largest Automotive Fluid as an Our important our reached agreement weaker

opportunity exciting is serve efficiently that to broadens This our customers. our ability more an

support their data comments additional turn over quarter. are on application to Brooks center manufacturers in in needs. specified now now call with to Brooks? discussions customers I and Additionally, are the servers will multiple several for we chip the with space, the and

Thank you, Ivo.

fell X%. turn our Slide due core decrease revenue X, Industrial channel a by Let's which approximately first-fit. performance revenues primarily North to core revenues high to America, In single double-digit in region. digits declined shows core

the stronger in performance, top than growth trends EMEA, replacement North down about American mobility construction Within personal slightly increased industrial both core weighed fell digits. end single and Energy and digits. fell line industrial grew region's X%. core demand first-fit revenue softest double digits first-fit. industrial was Industrial, the core markets, On-Highway agriculture news In modestly. the on while were markets double slightly. low with replacement markets revenues and replacement Slower revenues Automotive our commercial increased

increased automotive automotive experienced low offsetting decreased digits. applications, growth in a decline with first-fit. about by China core single revenues were driven a flat automotive first-fit revenues decrease in our Core modestly. Automotive replacement

Our industrial our declines first-fit in in neutralized the be revenues by will meaningful supported industrial In solid modestly replacement channel. America, South and by with slightly replacement increased markets core channels. growth decreased growth revenues

East an growth. sheet. lower Asia per lower and in interest automotive of offsetting key another expense. X update On decline the cash out drivers performance with balance markets. has share X, share. slightly on grew lay in of growth we the of and $X.XX an Operating contributed the represented approximately performance taxes also our industrial flow Higher count more a Slide were growth Slide adjusted $X.XX earnings than change overall year-over-year

$XX of the Our million, represented for free second XX%. flow was free quarter cash cash conversion flow

for in levels trade to protect inventory slightly new to Our second build and partners, relative our and capital customer working primarily to quarter, earlier, the dollars service our the due base. year's increased highlighted channel last support to business Ivo key

in year, intend inventories of with seasonality. We normal in reduce to second the our line half our the

Our quarter net XXXX. lower at is ratio the than which of leverage X.X finished X.Xx, turn second

our the we annualized During rate bonds interest that attractive lowers of and second an blended unsecured loans at quarter expense. refinanced XXXX, term our

addition, XXXX. is nearest maturity In now our debt [indiscernible]

was Our to trailing XXX invested fueled higher on points return margin. and approximately expanded primarily by basis capital XX-month XX.X%

believe is we opportunistic solid we Slide where XXXX our now XXXX in guidance to have returning intend capital trimmed We on guidance. balance updated X, Shifting sheet to to remain shape, our shareholders. our and

revenues to expect X% revenue range our plus At core have lowered range we a minus our to minus from prior of to X% X%. minus midpoint, anticipated the of to our core now the into X% about X% had We year. as of heading half markets have performed to expectations of we majority midpoint The previously. X% second a of the down compared be down

have trends demand first-fit areas most agriculture and softer industrial in in notably gotten However, certain construction.

end recently. In have for addition, relatively us, a market automotive while it's trends small production OEM softened

automotive We summer from OEMs. extended levels shutdowns the seeing are now more of

the to foreign are offset is midpoint million million $XXX initiatives. guidance reducing exchange guidance on $XXX lower our prior by volume million. partially The our headwind, to execution than million adjusted enterprise our lower a range EBITDA We $XXX $XX and being with of

is and per range our per incorporates per now tax new earnings Our adjusted $X.XX to methodology. share share $X.XX

free and unchanged. cash expenditures conversion capital for flow remains guidance Our

income the we range points expect the the midpoint, year-over-year XX decrease $XXX our to XX, impact about sales lower per to partially updated by a with project right, initiatives. earnings to of adjusted about estimate million basis approximately For revenues Slide we $X.XX EBITDA we X% decrease quarter, On operating from we lower unfavorable to core third volumes, $XXX prior guidance of at our the to from guidance. We in offset year-over-year. walk revenues to adjusted million. left be share margin the impact midpoint. enterprise From anticipate At

is approximately $X.XX new share. accelerated with associated costs conversions per The business

investment share to about QX earnings other $X.XX We per interest begin higher expect approximates profitability FX and $X.XX of tax incremental net this of expense, in share a growth from Unfavorable per to headwind. about Lower and adjusted benefit. XXXX. items

for With that, to Ivo it turn comments. I some summary will over

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

by the adjusted basis XXXX. our a [ ] am I while increased core operating with EBITDA margin of encountering pleased year-over-year, X% in growth. Year-to-date, decrease half we in have first XXX points performance our First,

area are We initiatives, reduction. cost progress of enterprise good our the material in making particularly with

fortified science Our polymers. of dividends the reduce on highly our nice our capabilities engineered to resident has material for years heightened We paid chain focus exposure single-sourced, last and us. capabilities over supply couple

savings material critical ability expect Also, through savings we and accelerated come. reengineering of to materials and components our drive more to

to our benefiting of cooling hyperscale devices Now built us personal product markets the focus are solutions growth exciting a in change in efficient centers. conveyance enable way designed offer to data and new new secular mobility from enter that are developing from fluid terms developing lines technologies that to we more engineering driving

to through Our focus our macro are growth, managing while the organic accelerate environment. present opportunities on we is

the savings savings the of with achieved associated the realized about during $XX million unfolded we footprint to decided projects Given outlined in have We number Day, optimization plans our these XXXX. pull of and anticipate by with year end the how industrial of by rate forward run annualized has XXXX. demand balance and approximate actions of year, XX% our a Capital the Markets this will XXXX, initiate end

to long demand intend more our enhance should changes. levels on our solid our flex profitability believe We program's business will and and In to ability improve takes our impact our when on from plan term to position generate a next next upturn enterprise view, on and made already logistics share actions operations call. to specifics manufacturing quarter's We execution these efficiencies the hold. company the being industrial initiatives the an stronger investments and underway

continues enhance build. Second, value our shareholder to optionality to

Our in net year-end. low to by the the ratio Xx and Xs is tracking level leverage

replaces new deploying Directors capital. and our on us we $XXX We At over a $XXX shares inorganic improvements, under current valuation, capital Last pursue of million balance lowered the should is We midterm. recently our week, annualized opportunistically our ] highly actively our excess maturities our of initiatives costs. focused enable more authorization, which debt believe which an extended towards use approved attractive remain authorization. repurchase financing million share growth our our prior [ to left Board sheet

I our global making Before priorities I taking and dedication operator my customers' With turn business your to almost for for questions, the want achieving back to gratitude their that, expectations. to over Gates associates will convey now our to commitment the XX,XXX call the and Q&A.

from Mike [Operator Instructions] Your from Halloran line of the Baird. comes question first

end on if levels quarter, maybe where markets on lower pressure. talk here some So Maybe seeing you thoughts end stabilization levels you're normalizing some you and just outlook those -- at start when any what from saw through on through you're the the the of your markets? just perspective seeing

I we weak less for more been crept were May envisaged would commercial Thank Look, it's we question, in that remained applications mean, is our play through Yes. of construction seen how the that recall, have part out. going or any have latter business, kind our first-fit I Off-Highway with for deceleration remains to quarter, went your as that you the line the And markets by type about as that it expressed I some Mike. what expectations we July ag note But say, in seen you in industrial recovery. towards muted developing we as end of we in of think particularly reasonably June, in have and the in have that, a applications, again, industry well. and predominantly may

half, probably OEMs some their car be that would bit in if have maybe the this a that notable I say that notable second be believe have is I'd longer going be And July, particularly that they little the and we other years. would those that have the the that's on we X over And changes again, seen. in And taken have we've have we reverse change or X last say to proactive comment going so the reductions step I'd I the environment, underlying some to to probably in and be reflect builds. the anticipate seen of most layering than seen. frankly, in we And industrial been extended why -- is most summer not shutdowns that first-fit. what would

assumptions. we think from anticipated, as Again, has bottomed out that maybe changed what's QX. pretty prior say much Now in mobility, I'd we

to While seeing that should We played we we're out, see market underlying growth into core of think still the we start itself has It's going and XXXX. anticipate the destocking into are conditions growth second improving. reacceleration half. that negative

is again, out that, the anticipated. So way playing we

we've bit anticipated, not that's think was to of the China opportunity maybe revenue that a edges, what but better little around And than offset about performance amount replacement really had the massive how the a we markets. industrial

the internal that still efforts. demand really you're to quarter, changes the the third with in in down margin That you're for very Great. seeing and at have normalization helpful. the on was guessing And has little I'm look the then the commentary margins if bit line, a the you environment do confident year-over-year. on

trend third the So if in back internal any thinking you of about if that part little look those a what seeing maybe you're and the the bit can about And short things there's the you're year, you some to of how quarter term? internally. in in and change talk confidence

margin outlook think improvement volume. Yes. Thanks margins take they're bit kind we think line. kind enterprise the we for mean, on conversion the I just we your for costs of have wins. the look, I of some question, flattish some we to Mike. expect headwind that lower lower at even I SG&A -- of we're our on initiatives it's But as No, and to good we feel driving able -- about of from really how EBITDA be and some with and maintain a gross because expect little of talked our we business about out inventory gross new margin look volumes on

through We offset expect that able QX to and the enterprise to initiatives be QX.

well. especially material we're doing initiatives the the So line, enterprise material working on line are on savings

feel the a margin from of year. about we where so gross the in second perspective good half And stand we

in initiatives you're confidence and this demand no currently, change that internal change correct? the related, the just driving is So

with correct. really I'll we're is initiatives. margin That see and gross as enterprise performance actually that And the first doing in our you the Mike, half. state, could margin And in well EBITDA

from Q feel a in confidence into starting So better start ]. that a I the market we trends there's we backdrop on over like I account the again, recover, and negative than feel market an we're we've we have historically market an been taking mean, position really as working strong ever to XX% starts -- underlying have incredibly degree of been high [

Well quite at to recently. we've CMD deliver committed are positioned that feel well incredibly I the we So that. on well

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

you and impacting Maybe could talked said? it unpack just do each how Is see the partnership that material, just and the you the you you wins think how impact of segment. with partner in is broadened it out getting I about an it's major much 'XX, if same

for Yes, question, you your Jeff. absolutely. Thank

our Fluid say is that would customers. side, with on I that the largest one So Power existing of

do we and just to them. this in that serve supplier it's to revenue not We the Corporation. months, them. port And we that transmission, did we're to to XX prime geographies next of will where that's And up ramps of going one kind it how with. business anticipate be actually historically points over new a as XXX material become reasonably we large it's -- critical going broadening basis Gates XXX of the a we acquisition customer and serve to will that are on that out add

to some felt start -- it that them meaningful 'XX wins, worthwhile seeing get go we a activities into it's from X that benefits meaningful and forward design and onwards. so we and the the was pull QX of So can

you're to And on and you some a maybe there's if said Okay. forward That's great people the then any Maybe think purchases? trend new auto. first-fit I defer weakness in as news. offsets speak seeing just you think replacement

Look, mean, Yes. see more shutdowns. just we extended I

not for output on going other that is playing in going way we've basis, to be side the has going forward see OEM I'm anticipated. just be shutdown July. a the not that extended been that more the they're calling or did So take an to production what We on to less

fluid the is the side business, employment. [indiscernible] single-digit have rate, of low positive that The very kind the older replacement of growing market at to still is around our of car globe. As dynamic are getting there. It's

driving they miles. large a So of are amount

new X, future. driver continue we of associated are going we great is anticipate our to it's to in X positive. as even we in the well And market continue the a growth last positioned And that well AR. underlying quarters. saw X, you with of over to just attributes very, dynamics, very execute And without well that the So believe the lower vehicles purchasing

line Your Wolfe Nigel question comes from next Research. from the Coe of

first-fit range So but at what end were when production is biggest much you say or is within is in biggest about say you thinking? oil -- -- still so that? where the in -- it the than you think was. we more order is here? where delta than Or now, move it Off-Highway [indiscernible] when about are you less Obviously, your the low we would would obviously, Off-Highway, you're April albeit weaker broader versus your But clearly think

I of guest I Nigel. ag Ag. in the constructive think the Look, weakened but thank that ag was already we that we are say seeing materially of we we a -- just forward Off-Highway, equipment on to were And on mean, I with seen we what very Yes. the what the I shutdowns in needed our particularly not that's that more an question, build plants, guidance for you anticipated, extended ag would has we've is good original have than come in guidance, our are issue reflect amount in reduction we OEs. of significant guidance production mean, new seeing but out. by reasonably it's because felt

we going anticipating were which I around look, general choppy. mean, in think is anticipate is there be is really flattening we v-shaped didn't industrial, that, more what to the that and of that's I a there. happening of kind recovery of kind it's of edges, Outside demand out

I July broader be would seen. that not in what in OEMs it's in guide. incrementally the There's But original a going we than some have puts and really extended overall, or We deeper that we anticipate shutdown just of did have say, the to our the Off-Highway other of worse some embedded way takes. it's that

of points. grow by still low midpoint drop we down, kind still volume EBITDA of our we overall, for full our anticipating at midpoint taking reasonably a year-on-year are the that the basis year, to So adjusted with XXX revenue even anticipating earnings, while the we're mid-single-digit in at kind are

that of And the on that that that that's initiatives demonstrate row managing strong of has. in the to the second enterprise back we a this drive very business of kind earnings are our year do to power execution and

holding then cetera, great And it's we well. auto, really color. up Gap] are seeing That's Great. [Audio et

And any So sure you're maybe pockets with some that no incrementally I pricing of as price just are outlook. then developing that in well, to seeing this we there's weakness of seeing make there? weaker want changes conditions

half what the remind is anticipate business Look, anticipated much of again. very a everybody, really the it will in or line rest more be performing second anticipate we not recovery just not I did we did with decelerating. less

industrial original OE the it of out applications, less let guidance. our more answer how or have we anticipated absent playing so is pricing the itself And Brooks And in I'll question.

perspective, done it's on kind perspective, inflation pretty of in worse remaining constructive our optimized we little better XX/XX environment freight, a pricing of from a additional in bit is work that from bag So utilities, bit then flattish normal see to of strategic pricing bit move pricing little we've terms labor and as a a inflation we an the -- stable actions sticky. -- don't little we forward. between see But and an mixed pricing, the slightly

So we don't see that. from any headwinds

Your from of Barclays. comes the Julian next question Mitchell from line

so is as general asking Yes, -- $XX that guidance first-fit of the AGCO auto cyclical you wondered savings million into recovery of don't weaker year. for your pulled a or program the million chunk more or I on forth. sort year? expect you million-odd first-fit perspective either XXXX. you've is that business of so coming some 'XX or reason I'm look next see likely industrial. fact and to the the one these in that a this reflecting $XX I I across What's forward adjustments, likes areas those should like slope And realize sharp from that But the Is recovery of clearly Off-Highway savings next $XX guess can we we of assume the

extended I past months we're have Julian, the we And the way PMI of you happening. manufacturing a which clarity are on quite the you that are trends we that REITs XX, is if 'XX. REIT, is about have not clearly, XX having shorter of of all think lack extended near PMI Look, been mean kind reasonably over it's bottom range, get the that think unusual. been the when cycle. it, activity couple specific some And pretty and the even of I to going that, Yes. some I'm the would seen of in at to on deceleration But look you of about the highly anticipate years. prolonged add manufacturing

is happen predict And the will we of to industrial somewhere activity, see going more to side prolonged do that are that you executed, My first-fit, we the to do a what's some while weakness. anticipation I'm near believe now. that particularly not ag industrial vis-a-vis be clearly here had to out. frankly, we probably on on of number opportunity And have and degree taking restructuring programs the ready [indiscernible] are right we bottoming

occasions we I go we update. are represented, our structural outline customers, to and forward, really And will have labor, service projects had we're and playbook we of vis-a-vis at access the to footprint doing what deliver optimizing We're to believe out. Market the of clearly exist improvement a that optimize And that's Day direct have good profitability executed. think, a pull try just optimization We efficiency presently. get meaningful that opportunities are Capital rather to and us for taking ready how pretty not operating these we our that to when our distribution capacity better

in doesn't that year-on-year and trajectory back the XXX-plus That's bit just revenue guided after look a are follow-up. my that a drill in half just trying again. Wanted into the EBITDA the down think, margins, helpful. maybe And points I element year-on-year little then different. first down increase to XXX about margin basis to

terms maybe think the sort of the anything there's So just investments, to in to teens think, confidence mentioned something ] get half, price mix XX% in cash the the is in that, year. I free in there something but I tied for the wondered -- [ first the of conversion cost around else what's moving to SG&A if dynamics and or step-up

Yes.

that going bigger in of move So unpack as elements headwind And bigger a first. me than FX. it's is, One a now and the are I we well, X talked back other first XXXX in FX think been we already going QX, we second one these down care sure we draw of to inventory business to in and weigh our we make inventories wins we're up on year, also now of in cost That's like some sure to we the to things align some our obviously we of had could There's had take half the absorption going the think, -- half built our as anticipation headwind is X then of some exit that. the That's year. on and let we about and the has through had production. margins. a pieces the of the one, customers, I of fixed anticipated. make kind

And third costs. I converts. then business out there's mean cost, win There's going cost. part change the new the merchandising to and is headwind there's to a well. that's be a year-over-year as

really. elements, So the X those are

perspective. going different SG&A to really think the There's of is I volume. less be to be don't a just that versus SG&A SG&A year-over-year. On more it's volume going side,

we're So it's to perspective. actually weigh a percentage bit far going off. to your From be -- from on a conversion, going margins a it's little that not cash

really XX% in cash half. collecting speaking, that flows second and we'll drawdown on seasonality deliver of the the first about, talked the right? strong coming XX% be that in I to confident that had last half. cash year, the far Historically inventory feel sales conversion of we Historically then with that conversion the look that able I mean at cash half QX. in of second off. in not higher and we in, that's kind speaking, some you the the conversion particularly cash Between the

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

plan joined moving thought forward the process of But XX-XX bit to just That's ahead late. a the start -- I in this. the terms of restructuring if through actions. good that go to missed -- little changes can have provide repositioning, what the you insights answer, a might have I of typically and Ivo, talk sign any be pull you'll in and the your of the making? you up implement

question, the for you Yes. Thank Dean.

plan solid we ready pull attributes. Capital that And that go feel represented we've and March during the just Number are X -- look, So activities. we one, optimization we to Market we to ready Day good are a we execute. the have forward

so And ready be doing be them and speak. ready are in are we as are programs we that. place executed put putting to we to place, Those and in

at We quarters. for are by really those about X pulling these

not pulled them like forward couple we by years. have of it's a So

that. like anything So

and programs ordering Some things nature. doing of reasonably we are longer that term, complex of and projects. these equipment are

by So that's this of kind of of the attribute will completion the that XXXX. kind that's project -- necessitating

So from good that vantage point, in we place. a are

you how kind mean, at I us scheduling within the XX-XX giving of and programs output about separate we think plans. question, to set as more opportunity a the if the of manufacturing, are look optimizing optimize XX/XX the On that a

And us doing us, forward. an that's giving I what opportunity to think become we as also move more efficient it's significantly for

kind So not those one leading They processes, just other. of are in the necessarily complementary complementary nature.

are above. And we executing so

piece And new just water on couple hear. on and to developments still business. the then pumps of I the updates. a and any data small front know chain-to-belt. of Good new a center it's Anything the

Thank you. Yes.

On this mean, the centers, is look, I vantage quite our space from really interesting, data an point.

itself And of other deployed actually also broad in this technology to trying the really pretty across lots of specifically presently, targets to applications. is lead very, this of still figure environment. launching set out that some we're very early deliver changes. all, technology. fluid to First deployed that new very, most industrial expensive People application, very be on, apparatus conveyance cooling being conveyance are what efficient is a but of this fluid to in process interesting

free. have very able are we what specifications to metal The do. It's exciting there right? rather to You difficult, are be

things in which the of have to accomplish we participate. halogen-free be that trivial construction, your not a You set to in space is

We've give us that based trials engineering on new a been space. opportunity is that eliminate and develop to new night polymers real able technology deliver the in to differentiation this

So exciting. quite it's

preferred We are significant chip as specified manufacturers and to of their the presently working get with server number partners. makers space in

close Cool We have partner with very in coordination IT. our

volume with towards be the of cooling into abilities year. -- other get part to our up large able offer we this latter anticipate incremental pumps, have and some we extending are We large been in specified probably to will ramping beyond next we a manufacturer and that year the solutions

changing a there. happening. is lot lot's So A

We with are middle in cooling. dealing the right the players major in of

our power, to and played be how a marketplace, folks point also remove we protect these truly the good going of to that's this that extent believe chips be power very several years in efficient these are the that equipment. and solution think game the is over understanding as from the price I is and but how going targeting to answering servers that to that

exciting very, a it's So stuff. very

particular. in a way I'll itself the part impacted that has pretty back Put destock. second Personal aside your mobility personal Coming with for to be out. my that playing I by the mobility of 'XX, we on significant second, as been growth. question, And start reacceleration And plays paid. remarks, kind then our will is start indicated of onset the itself of seeing out of in to believe prepared that we that a

is applications. scooters, with are There to continue get getting these non-electrified no the applications. across various or position it We're position unelectrified. the and X-wheel strong We segment, very very electrified print it's bike application electrified print market both manufacturers of strong with

more in that's for now bikes, to penetrate North broadly exciting America, starting and more We're us. to starting mid-sized enter really

business onwards. kind deliver that degree and a high the is that from we to going So growth start of that confidence we continue have of reaccelerating to very anticipated 'XX

continue with nice side, States. in Asia, with on on in then a And to secular us opportunity are we industrial conversions equipment a as really we that's food the well. the broader for some well robotics in very doing of processing United work and So set Asia,

some making it We the the OEMs, with being U.S. we in both and investment speak. made front in And player believe a be critical are for as is real that Europe us end. and we in is to major investments the

So very positive developments on our end.

area of them, next of will have again, this and XX to confidence a continues kind is that Some we very the 'XX But set XX good of out years. opportunity, of both play onwards. of over themselves opportunities that these an for

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

back give year-over-year a China decline. you by Can what China. region seeing us into you're to more and shifted color specifically little a

first-fit, said you mentioned by industrial the think you led double-digit replacement. I in but improvement

going first-fit behind? can't can you picking sense -- industrial what's tell Does So be us up there? help of that on make you far replacement over

Yes.

said the not really it's I uneven you've rebound it's seen mean you So nice to thank mean and also then I China, been And remarks in Andy. in you just And is. I mean your environment themselves. and trends for the frankly, I prepared it's right? globally, choppy. -- into April March interesting some see reverse in of think to so how I look, remained question, my see have

uneven less very So to what's say, almost that's and happening. type but it's behavior, predictable China, very, a let's specifically

second still QX. AFF single China the was for forecasted is the well digits It's for And down space reasonably in negative the in auto down China us production half. for uneven. reasonably in reasonably high

out to of China, a than edges, positive, are industrial enough of So bit a offset to worse -- than that's construction maybe guess, way reasonably us, of I [indiscernible], that. kind replacement ag little the diversified we side around not rebound industrial you the the those But was side itself see for sorry, be while what going did the could in less it's play anticipate in necessarily kind would and overall anticipate. small we

the and China see don't business are AR replacement well. in AR in quite our still well. a The for we quite business side doing dynamics But really is China. positive, change doing trajectory market the of in of is

footing be start that And at future. going and figuring to you the has matured. is it China they through be So historically, what not they out the growth do going stimulate else seeing. engine has not, that on things of probably like better the is economy, cycles will the some time in everybody to as massive to should they than know economy be And want been

comments and the about follow in of markets? terms we're industrial [indiscernible]. sure and of channel and Ivo, partners industrial. the I could saying. of doesn't channels channel wanted what still inventories compete? ag your along are on of terms look in to say that other industrial inventories bottom would bouncing I'm what construction What in are great you up maybe terms probably But sort greater the about that you seeing in your there Maybe talk you

what the commercial probably construction I inventories reasonably ag pretty reasonable. slowdown that's these We believe, say. see. Andy, you the and an answer and don't continue Look, really that are extended period impacted the But destock mean would in see -- folks we exactly I the gave of that somewhat that we rest been kind inventories, going to me further anticipate for extended your into markets taking time around to have for account be an into the you believe that have any destocking bottom to time. period taking of of bouncing proactive been of account are even

ag the particular, inventories in well that absent think positioned. are So we

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

Clay Jerry. on for

and reductions. quick to of previously the X% apologies one outlined able on moving How much one, far? so benefit realize that but missed Just the material it, I benefits those line realizing to have we if time from What's cost been forward.

believe continue move material to that exactly we that the execute of and of future. to have say anticipate improvement. percent changes as is just any on our we terms in we go I into we don't cost ability and well would savings extent clarified the to what continue I

back Kwas session. I That the concludes Rich question-and-answer turn remarks. now over closing to will for our call

participating. for everybody, Thanks,

If questions, to Have a any you follow-up have day. feel reach great out. free

your conference today's Thank concludes you This participation. call. for

You disconnect. may now