Tomo Samuel

Tomo Samuel inquired about the specific revenue contribution from data center sales within the fluid power segment's $322 million revenue for the quarter, the expectation for 2025 data center revenue, and the conversion outlook for the $150+ million pipeline in 2026. He also asked about the effectiveness of passing through cost inflation in Q3 and the company's pricing strategy for 2026.

Answer

CEO Ivo Jurek stated that data center revenue is still a very small but nicely growing base, not yet in the tens of millions, and that more tangible forecasts for 2026/2027 will be provided in future calls, reiterating the $100 million-$200 million target by 2028. He highlighted robust design-in activities and new customer engagements. CFO Brooks Mallard explained that Gates Industrial has historically been effective in passing through cost inflation, including tariffs, with pricing strategies that cover material and utility inflation annually. He added that the 80/20 playbook is used to optimize value pricing across hundreds of thousands of SKUs, ensuring coverage of costs.

Tomo Samuel inquired about the specific revenue contribution from data center sales within the fluid power segment's $322 million revenue for the quarter, and sought expectations for 2025 data center revenue and the conversion rate of the $150 million+ pipeline into 2026. He also asked about the effectiveness of passing through cost inflation in Q3 and the company's pricing strategy for 2026.

Answer

CEO Ivo Jurek stated that data center revenue is still a very small, albeit nicely growing, portion of total revenue, not yet in the tens of millions, and therefore not being specifically disclosed. He reiterated optimism for data center growth, maintaining the $100-$200 million target by 2028, and mentioned robust design-in activities and new customer engagement. CFO Brooks Mallard explained that the company has historically been effective in passing through cost inflation, including new tariffs, primarily through pricing, though some regions like Asia rely more on operational offsets. He highlighted the use of the 80/20 playbook to optimize pricing, including value-based pricing for unique SKUs, ensuring coverage of material and utility inflation annually.