Gates Industrial Corporation plc (NYSE: GTES) reported Q2 EPS of $0.03, $0.08 better than the analyst estimate of ($0.05). Revenue for the quarter came in at $576.5 million versus the consensus estimate of $557.15 million.

Second-Quarter 2020 Highlights

• Net sales of $576.5 million compared to prior-year period of $809.9 million.
• Net loss attributable to shareholders of $22.4 million, or $0.08 per diluted share, compared to prior-year period net income attributable to shareholders of $21.5 million, or $0.07 per diluted share.
• Adjusted Net Income of $9.4 million, or $0.03 per diluted share.
• Adjusted EBITDA of $83.2 million and Adjusted EBITDA margin of 14.4%.

Ivo Jurek, Gates Industrial's Chief Executive Officer, commented, "The sharp impact of COVID-19 in the second quarter presented a significant challenge for Gates, our employees and our customers; however, it also likely marked a turning point, as we believe the worst of the pandemic's effect on our end markets is now behind us. While challenges and market uncertainty still remain, we continue to focus on the items we can control, including safety initiatives to protect our employees, preserving operational continuity to supply our mission-critical components globally and taking appropriate cost actions to mitigate the impact on margins from the volume decline. I am very proud of the Gates teams around the world and the resolve they have shown in this challenging environment."

Jurek continued, "Throughout the second quarter we observed sequential monthly improvement in our business, as customers brought production back online and most movement restrictions were lifted. Our replacement channels, in particular, demonstrated resilience with their rate of improvement during the quarter, which we believe speaks to the critical nature of our products. Based on the trends we see today, we expect demand to continue to recover in the second half of the year. Although COVID-19 is not yet fully under control, I am pleased with the trajectory of the business and confident the cost actions we've taken while continuing to fund key initiatives position us well to capitalize on the recovery."

2020 Outlook

Due to the continuing level of uncertainty related to the COVID-19 pandemic and the inability to predict the trajectory and sustainability of the demand recovery, the Company is not reinstating full-year 2020 core revenue or Adjusted EBITDA guidance at this time. The Company continues to expect total capital expenditures of approximately $70 million and Free Cash Flow Conversion to be greater than 100% of Adjusted Net Income.

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