Gates' record-setting financials
- Gates Corporation delivered a record-setting adjusted EBITDA of $770 million in 2025, even as end-market demand slipped and trade uncertainty abounded.
- Even though automotive (including commercial vehicle) OEM sales dropped, it still saw net sales of $856 million in the fourth quarter.
- It notched a record low leverage ratio for the company of 1.85 times, ending the year with more than $800 million in cash on the balance sheet. The S&P upgraded its credit rating to BB.
There's a little more optimism for 2026 as Gates Corporation released its fourth quarter earnings, full-year 2025 reports and guidance for the coming year.
"In 2025, we delivered double-digit growth in earnings per share and reduced our net leverage ratio while managing through an uncertain demand environment," says Ivo Jurek, CEO. "We are optimistic about our growth prospects in 2026 and our ability to deploy capital prudently to increase long-term value creation for our shareholders."
A look at Q4
For the fourth quarter, Gates reported net sales of $856.2 million, up 3.2% year over year, and an adjusted EBITDA of $187.8 million with a margin of 21.9%.
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Gates announced layoffs at two North American facilities, one in Kansas and one in Iowa. On Dec. 1, Gates began reducing its workforce at the Iola, Kansas, facility as it stopped production of hydraulics flexible mandrel (HFM) products at the site. HFM is used to produce high-performance hoses. It also announced layoffs at its Newton, Iowa, plant, which ceased operations in November.
Full-year 2025 financials
In 2025, Gates' sales grew 1% to $3,443.2 million with an adjusted EBITDA of $770.1 million and a margin of 22.4%.
"Our strategic growth initiatives continued to gain momentum and we improved the cost position of our business," Jurek says. "We generated a substantial increase in cash from operating activities and our balance sheet is strong."
In a presentation on the earnings for the year, Gates says it outperformed its end markets amidst uncertainty from trade policies. It was a "record year" for Gates, and the company achieved a net leverage ratio of under two times for the first time.
Looking ahead to 2026
"We are optimistic about our growth prospects in 2026 and our ability to deploy capital prudently to increase long-term value creation for our shareholders," Jurek says.
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Gates expects more of its end markets' outlooks to improve but is not yet assuming a full market recovery. It projects growth of 1-4% with capital expenditures of $120 million and a free cash flow conversion rate of better than 90%.
The company is coming out of the downturn with a "structurally improved business," it says, and is coming into the year cautiously optimistic about industrial recovery.
