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Oct 02, 2021
Gates Industrial Q3 2021 Earnings Report
Gates Industrial's Q3 2021 results were reported, demonstrating significant growth and profitability.
Key Takeaways
Gates Industrial reported excellent Q3 2021 results, with net sales up 21.1% and core revenue growth of 19.0%. The company achieved record third-quarter revenue and earnings, driven by strong demand in industrial end markets. Adjusted EBITDA increased by 31.4%, and net leverage was reduced to 2.7x.
Net sales increased by 21.1%, with core revenue growth of 19.0% compared to the prior-year period.
Net income attributable to shareholders was $70.2 million, or $0.23 per diluted share.
Adjusted Net Income reached $92.0 million, or $0.31 per diluted share.
Adjusted EBITDA grew by 31.4% year-over-year, with a margin of 21.3%, representing a 160 basis points expansion.
Gates Industrial
Gates Industrial
Forward Guidance
The company maintains its full-year 2021 outlook for core revenue growth in the range of 20.0% to 22.0%. Adjusted EBITDA margin is expected to be in the range of 21.0% to 21.5%. Total capital expenditures are expected to be approximately $100 million, and Free Cash Flow Conversion continues to be expected at greater than 80% of Adjusted Net Income.
Positive Outlook
- Maintaining full-year core revenue growth outlook of 20.0% to 22.0%
- Free Cash Flow Conversion expected at greater than 80% of Adjusted Net Income.
- Continued experience of a robust growth environment.
- Focus on mitigating actions to navigate external operating challenges.
- Constructive view of the setup for 2022, and opportunity to build on the momentum seen in the business this year.
Challenges Ahead
- Additional inflation, particularly related to freight and logistics, is leading to margin pressure.
- Costs incurred to support the exceptional demand from customers are leading to margin pressure.
- Updating expectation for full-year Adjusted EBITDA margin to be in the range of 21.0% to 21.5%, compared to the previous range of 22.2% to 22.8%.
- External operating challenges are likely to persist for some time.
- Supply chain disruptions, inflation, and inefficiencies from constrained labor availability.