We are very excited to have Gates Corporation with us and Ivo Jurek, who is the CEO. And even Ivo and I were just talking, it's been many years of you coming to this conference. Thank you for that. We appreciate that. And so maybe just to kick things off, just maybe get it out of the way, like talk about sort of what you're seeing in Q1. I know it's only been a couple of weeks since earnings, but, you know, what's interesting about you, Ivo, is you kind of talked a little bit about green shoots in your industrial space. US ISM has inflected a bit. I get the question all the time of whether that's just pre-buy or what's going on. And you've actually done a little bit better in Asia too.
So maybe talk about if you've seen any big changes versus your core business guidance of down 1% in Q1 to start the year?
Yeah, thanks, Andy. So, let me kind of get the maybe the second question that you had, pre-buys. Gosh, you know, looking at our Q4, although it wasn't, you know, it wasn't bad, it wasn't terrific either. So if that was a pre-buy, I don't know, you know, what world we would be living in. So I just don't believe, I don't see any pre-buys anywhere. And I think that people are trying to figure out exactly what the industrial policy is going to be. You know, it isn't like you have one country that is being targeted for some unfair trade practices or what have you. So I think this is much more complex. And I think that the cool heads will prevail. And everybody's sitting on the sidelines to try to figure out exactly what the policy is going to be.
Once you understand the policy, you will go in and deploy your response, and you know, we have multiple model scenarios that we will deploy, so I don't believe that is a pre-buy, certainly not in our portfolio. Look, you know, kind of the overall question, you know, we just came out of the earnings. I think, you know, it's quite good, I guess, overall. We've done a good job. Our team has done a terrific job delivering solid results, and I don't really see any underlying change to the trend yet, so you know, when I say, you know, we're starting to see some green shoots. Look, Asia was up in Q4, and you know, from my historical perspective operating number of industrial assets, you know, I always want to see Asia recover.
You know, it wasn't China. It was China and East Asia and India. All of Asia was up about three and a half. You know, low to mid single digits. It was broad. It wasn't one market or one application. Everything was up slightly. That to me is quite positive. If you start listening to some of the reporting companies from our industrial universe, and I won't name any, but, you know, some that have an exposure to electronics, all of those reports were much more constructive. In general, you want to see electronics recovering, Asia recovering. You went into January, you start seeing that. PMI was more constructive. It was slightly under 50. February PMI was north of 50. You know, there's starting to be a formation of trends that I certainly would consider green shoots.
While we haven't forecasted in our overall Q1 nor full year guidance and inversion in markets, you know, I would not be surprised at some point in time this year if things trended to be more positively than what all of us are forecasting.
That's helpful, Ivo. So I want to step back for a minute on Gates. You do have strong global market positioning. You've often highlighted product innovation as a key differentiator. So maybe start with what goes into maintaining, you know, competitive edge. I think you've talked about gaining share despite going through the pandemic and you've had supply chain perturbations, now some macro headwinds. So maybe talk about the business model and what you've been able to, why you've been able to maintain or gain share across key categories.
Yeah, I think it's a great question. Look, first of all, let me start with the fact that everything that we do is mission critical. We don't really have a portfolio of products that are kind of nice to have. And then, you know, if something breaks, that you have the optionality or not to replace it. I mean, if your belt breaks in your automobile, you will be towed to a dealer and they'll have to fix it for you. If you're operating a combine harvester or a heavy-duty earth mover and you burst the hydraulic hose, you stop and you have to replace it. So it is mission critical. It's important for the operation of that apparatus. So, you know, we're fortunate that we have products that need replacement throughout the history, the company has been built on innovation.
I would say that over the last 10 years, we have dramatically sped up the introduction of new products. We have done that through cultivating, developing, and improving on our material science capability. I view Gates today as a material science industrial technology company, not just a company that's producing industrial products. We have taken our new product introduction vitality index, you know, probably from kind of around the 5% in 2015, 16 to nearly 20% today. We have a midterm target of having about 25% NPI vitality. We're well on the way to deliver that over the next couple of years. That's just demonstrating the vitality and the power of innovation. When you do that, you tend to develop better products.
Generally speaking, you get products that, you know, you have a little bit of a more competitive advantage in addition to maybe functional advantage. And, you know, I think that that's a foundation to not only staying relevant and contemporary, but also to be in a position to take more market share from your competitors. And then lastly, I would say, you know, post-pandemic, it was a very interesting time. Our company has been stressed, primarily as Russia invaded Ukraine and lots of industrial assets and highly engineered polymer or, you know, process petrochemical, baseline polymer manufacturing technology were destroyed or came offline. We had to go back and relearn how do we actively engineer compounds that give us an elimination of need for reliance on those assets. And we have done that.
And we, as we have done that, we've also learned that if we operate our assets better, we are more efficient. We focus on building the right levels of inventory, and we deliver incredible fill rates for our customers. And we really put our customer front and center and take their needs into you know foundational value building proposition of our company. You can start thinking about taking market share. And we have demonstrated that most recently, we've spoken you know sometime middle of the year about our major new share gain in North America in one of the most important markets that we serve, Automotive Replacement. We've taken you know a second largest Automotive Replacement channel partner in the country that we've just are ramping up. So, and we feel that there's more of these type of wins out there across our portfolio.
Yeah, no, that's very helpful, Ivo. And then I think the other thing that you've evolved and gotten better at is just execution flat out. Like you've gotten very good at execution. You've been talking about these enterprise initiatives now for a little while. So, you know, maybe talk about, I know you reiterated your 42% gross margin, 24.5% at the midpoint, adjusted EBITDA margin targets for 2026, despite much slower than expected growth. So can you elaborate on what's been better than expected so far with enterprise initiatives and talk about your confidence level as you ramp up on operational excellence and footprint rationalization that you can in fact offset a weaker macro if growth is still slower to hit your targets?
Yeah. Well, thank you for your kind words, Andy, but I think that our team has executed really well. Look, we've set our 42% gross margins and 24.5% midpoint EBITDA margin targets last year at the CMD. And, you know, when we were setting those targets, we said about 150 basis points of improvements will come through incremental volume fall through. Now, the macro wasn't great last year. Obviously, our volume was slightly down, but we have delivered over 200 basis points of gross margin improvement in a volume down environment. And that fell through kind of at that 140 basis points of improvement to EBITDA. So we exited at 22.3% EBITDA margin and 40% gross margins. So we still have a ways to go. But we also now feeling really positively about, you know, where we sit.
And for the next two years, we have opportunities to continue to drive 80/20. We have opportunities to continue to drive material cost savings. We have opportunities to drive standard productivity even in muted volume environment. And we believe that that's going to give us kind of 120 to 150 basis points of improvement. And then when we are done with restructuring, and we anticipate to be done by Q4 of next year, 2026, we will get the incremental 100 basis points of improvement. So even if volume does not improve, we will be right on the money at the midpoint of the 24.5% and the 42% gross margins. And we believe we can do that without that volume increase.
You know, Ivo, I feel like your attitude toward that changed a little bit over the last quarter or two. Just if I'm picking up something, you sound more confident rather than did something happen over the last couple of quarters that allowed you to gain more confidence that even if you don't grow that fast, you can still hit your target? Like, has it just been good execution over the last couple of weeks or something else happened?
I think that our team is becoming much more comfortable in executing in difficult situations. I think we have gotten to realize that we really can't rely on improvements in macro. We don't control that. We do control what happens within the four walls of Gates Corporation. And the team is buying into the strategy. And, you know, when you execute, good things happen. And I think shareholders are happier. All of our stakeholders are happier. You know, it's a lot nicer for our employee base as well to like, to look at, you know, kind of all time high in our stock price, versus looking at, you know, kind of the mid teens that, you know, you kind of churn and turn at, you know, at the level of, you know, a real just unrewarded type, you know, expectation.
Yeah. Wow. Citigroup has gone up finally a little bit too. Okay.
You know, by the way, my stock goes hand in hand with yours. So I don't know. There's some correlation there.
Anyway, back to this. So, taking a step back, you've highlighted secular tailwinds across your business, you know, industrial automation, electrification, mobility, infrastructure build out. Thinking of these trends from your perspective, what has played out as you expected? Where did investment slow? And which secular trend would you say you're most excited about as we look at 2025 and beyond?
Yeah. So, look, I'm super excited about personal mobility. You know, I've been on the tech for three or four years. We've had a really good run. And then in 2022, we've started to see a massive destocking post-COVID. That's played itself out. We're now seeing reacceleration of growth. We have exited 2024 with over $300 million of pipeline of opportunities that our teams are working very diligently on securing. We certainly believe that, you know, we kind of sized it as personal mobility should be kind of $300 million business for us by 2027. I believe that we will deliver that. And that, you know, that represents a very nice growth and very nice algorithm to add to our growth trajectory. Look, I'm actually really quite excited about what's happening with data centers.
You know, many questions that I get about data centers is, hey, so when will you get a meaningful revenue? You know, I do think that we will start seeing some nice flow through sometime in 2025, latter part of 2025 into 2026. You know, we are working with the best companies in the world from the hyperscalers to folks that build black and white boxes for servers. And that's really exciting. We've developed true innovation, specifically tailored products. And I would say probably the only products that are tailored for data center use in fluid conveyance. We've launched that in November of last year. We have probably the smallest, highest density, highest power density, cooling pumps that are available on the marketplace today. We got great couplings. So, you know, these opportunities are pretty meaningful out there.
And I'm pretty sure that while we won't win all of them, I do believe that we're going to win a fair share of those opportunities as we move through 2025. So to me, that's very exciting. Look, we used to, you know, speak quite frequently about chain to belt in industrial applications. You know, the discrete and industrial automation slowed down over the last couple of years. And it was, you know, another very challenging environment. But we are seeing some real resurgence in interest in the technology and in, you know, lower power consumption, improved productivity and uptime of equipment in use. So I believe that over the next, you know, 10, 15, 20 years, that's going to be a great opportunity. That's a $7 billion market size opportunity for us.
You know, we won't, you know, we won't take giant chunks in 12 months, but over the next 20 years, how much of that $7 billion is attainable and reachable by us? I think a pretty good chunk of revenue will come out of that opportunity. So I'm pretty excited. You know, I feel that we have positioned the company to execute well on organic initiatives that are the lowest cost of acquisition and the highest IRR opportunities that we can execute on.
It's helpful. If 2027 personal mobility looks like $300 million, what does data center exposure for Gates look like in 2027?
Look, I don't, you know, I don't see any reason why that couldn't be $100 to 200 million in incremental revenue. I mean, you know, this, it's real, it's tangible. You know, I think that people are, you know, making major investments in that infrastructure and we will be there and we will have our fair share. I mean, to us, it's about a $1.6 to 1.8 billion TAM. The players in that space need to be respected companies in their field. You know, we have a right to play and we are probably one of the top three players that will participate.
Right now that business is very small.
Very small. Yeah. I mean, we've invoiced a good amount of revenue last year, but I would say that this was almost done through haphazard sales where, you know, the operators would go into our industrial distributors and buy it from there. They buy, you know, kind of a general industrial products rather than, specifically tailored for application product.
Okay. And so we talked about this a little bit, Ivo, at the beginning, like, but if we go around Gates by region, right? You know, China has been better for you than most. So maybe we could just talk about that. But could you highlight one or two areas where Gates strategy has allowed you to perform well or best maybe versus the geographic environment? You know, China comes to mind, but you maybe were just worse in China early. I don't know. Like, what do you think about that question?
Look, I think that, you know, China has been a very good place for us historically, and I believe that China is going to be just fine for the not so distant and distant future for the company. Since I came to the company in 2015, we have had and we've deployed a strategy of in region for region participation. So China for us is, China is for China. We don't really export anything from China to the United States, and we haven't since, I want to say maybe 2017, so, you know, we have a China team that is very industrious that is building out capabilities in industrial applications. We have built a wonderful Automotive Replacement business in China. We are number one market share holder in the products that we manufacture in China. Not many companies can say that about anything that they do.
I think that bodes well for us, and you know, even last year when, you know, people are, you know, kind of down on China, that business grew for us, high single digits, right, so I feel that we have a good franchise that is nicely profitable, highly accretive to the company and a team that can execute. I'll say that the other area that we have done really well is Latin America. We've done really well in Latin America. We have great assets positioned in the region. Again, we support the region from Brazil. We do some fulfillment from Mexico, and that business has grown very, very significantly over the last three to four years. Where I believe we have the next set of opportunities is actually in the United States. We have positioned the business well. We have the right innovation.
We are starting to take market share from markets where we have not only a birthright to participate in, but we are actually the leader in those markets. And so I, you know, think that North America is positioned well to deliver a nice amount of growth over the next, you know, two, three, four, five years.
So Ivo, let's dig into that. So like, you know, maybe I'll kind of intertwine it with another question I wanted to ask, which is, you know, about auto replacement in general. I think it's underappreciated a bit for you guys, wherever you do auto replacement. But like, let's just start with the US because you said to me in the beginning, right, you're adding more channel partners. So like, maybe talk about US auto replacement. Can you add more channel partners? Like how do you, I mean, that's a big add in itself. So like, so maybe talk about how that's going, share gains in auto replacement in the US, because you already have high share, if I'm not mistaken.
We do. But you know, I think that, you know, I spoke a little bit earlier around, you know, how I think we have really relearned the importance of fill rates and servicing our customers. If you do that, you know, everybody wants to do business with Gates. It isn't that we don't really need to convince customers to do business with Gates. Customers want to do business with Gates, but it's been always up to Gates whether or not we will have the capability to support those customers. So when we've added that large channel partner in the US in AR, I spoke with the CEOs of both of our present customers. They're both very, very important, super important partners that we have done business over 75 years with, right? So longevity was key.
And you know, the one thing that they told me is, hey, don't screw it up. Okay. And what they meant by that is to ensure that you can execute because adding something only to have breakage somewhere else does not really work. And so our fill rates today, while we have added that very substantial account to our customer registry, has been executed in a flawless fashion. All three of these super large accounts, we service them in total service levels within 72 hours of order drop. We service those accounts in 97% to 98% fill rates. That's really hard to do when you are doing that with no forecasts, no visibility to what their demand is going to be and having that large rapid turnover of volume. So I think that's been critical for us to do that.
So do I think that, you know, there is more of these share gains? Actually, I do. But you know, before we embrace on that, let's make sure that we maximize the opportunity with the three accounts that we, you know, we have these three large out of four in the US and we deliver further growth through innovation, portfolio coverage, and the fill rates.
It's very helpful. I turn over to the audience in a second in case the audience has any questions, but let me ask you about sort of the opposite side of that, which is auto OEM. You know, I guess the business is sort of stabilized for you guys, but in quotes, still de-emphasizing it a bit, you tell me. But how do you sort of grow from here when builds still look pretty lethargic, if not down? Can you use PMI to outperform builds? Like, how do you think about penetration too? Like, you know, you and I talked about EV penetration being higher than ICE, but now maybe it's better to be the opposite way around. You tell me.
Look, my view have, and you and I have known each other now for a while. Yeah. You know, my view has always been, look, you've got to remain pragmatic because, you know, when people are talking that, you know, everybody's going to be driving an EV tomorrow, you know, we understood that's impossible, simply impossible because of the infrastructure. You know, there were no assets in place to support it and so on and so forth. But look, there will be a need for all of these technologies. You know, is electric vehicle the ultimate technology? I don't think so. I mean, I think that there's going to be a next generation, you know, whether it's hydrogen or whether it's, you know, a technology that is similar to that.
My view is that EV is just kind of an intermediate stopgap that's less than optimum, to be honest with you, because the carbon footprint that you generate in an electric vehicle over its life ain't great. It just isn't. So, you know, there will be different solutions and we're going to be technology agnostic. We will participate, as long as we can make the returns that we have, you know, we have committed to our shareholders and we expect for the products, the innovation and the services that we generate. So if we can make those returns doing business with the car companies, we will, but if we can't, you know, we got plenty of opportunities elsewhere. You know, look, our focus is not just to stop at 24.5% EBITDA margin. To me, that's an intermediate stop.
I got to get there before I set the next target, so let's just get there and let's continue to evolve the portfolio and the mix so that we give ourselves the opportunity to continue the journey towards better returns.
Do you think auto always stays at the kind of 10% portion of the business or does it keep going down over time?
You know, I don't know that it's going to stay at nine or it's going to be seven. Yeah. What I know is it's immaterial to me. Yeah, and I don't really lose sleep or I don't lose focus from some of the other more secular opportunities where we are placing lots of investment. We are building organizational capability on the front end and the back end to be able to capitalize on those opportunities because, hey, they are more interesting, they are more durable, and they're going to be with us for the next hundred years.
Yeah, that makes sense. Any questions from the audience? Anybody want to ask a question? Okay. So, let me ask you about, you mentioned discrete automation and markets like that. It's part of your diversified industrial business. So I think you have diversified industrial up below single digits in 25. Maybe elaborate on what the customers are telling you now, because that business has been tough for the last couple of years, but like maybe a little bit better this year. And separately, you talked at your investor day about mid-single-digit, mid-term growth of the market. Do you think this market can be one of your higher growth markets moving forward?
I think it can. Look, you know, Gates is not a unique company in dealing with some dislocation of the markets. Again, let's remind ourselves, 28 months of negative PMI, unprecedented since what, the forties, early fifties, 1952. So the economy doesn't feel that way, but the manufacturing economy was pretty dislocated, right? So, you know, whether or not it's Honeywell, Intelligrated, Cognex, Rockwell Automation, all very fine companies, right? All dealing with a significant dislocation. My sense is that's bottoming out. You know, when the business stabilizes, those are very good business opportunities that, you know, we participate in, along the side with the Rockwells and the Intelligrated. So I'm pretty excited about seeing some of the bottoming out.
And again, I don't know that it will reaccelerate in Q2 or Q3, but, you know, I'm certainly feeling much more optimistic that we are bottoming out, or maybe we have already reached the bottom than that we are still going down. So I think, you know, more positive than negative in my mind. And, you know, as the Green Shoots turn, you know, better signs of green, I think that we'll, you know, be pretty well positioned to capitalize on what comes our way.
It's helpful. And so I want to double click on personal mobility again, because you do seem pretty excited about it. I think it turned positive again for the first time after seven quarters, but it was up 20%. That's a pretty big sort of inflection, of course, off a lower base. You talked about inventory levels having normalized. You gave, you know, sort of that potential for $300 million in 2027. So it seems like you're pretty confident this can go back to a 20% growth business over time, but sort of what is Gates doing to make sure you get there? Like, is it NPI that's going? And what are the trends that you see? Because 20% is a big number, you know? Yeah. So like, how can you get there?
Look, you know, I think we've guided for the year up 20% as well. So, you know, we feel that, you know, that should, that recovery should continue. What are we doing? Well, look, we are adding front end capability. We are broadening our customer base. We have doubled down on innovation and we have broadened our participation, not just across the super premium products, but we are now offering solutions for mid-level applications. So kind of mid-level bikes and scooters, and you know, that's got a ton of new opportunity. One of the biggest categories in bike actually is a mountain bike. You know, I think that, that's probably not too surprising, and you know, we've never really had a solution for that. We have a solution. We have a number of customers that we have signed up that will start production of their bikes in 2026.
I think that we have a degree of visibility that this thing can get back a full level of juice that it had before 2022. Our portfolio is broadening. Our customer base is broadening. You know, our team is executing well. They are quite excited about the opportunities they have ahead of themselves. I think that we'll get very close.
I want to talk. I want to pivot and talk about margin. We already talked about, you know, some of your improvements. You mentioned that materials really have been a big reason why you've been able to get gross margin up. Has there been anything specific that went into that? You know, you've been focused on strategic sourcing or value add, value manufacturing innovation, but like, what has been so successful in that?
Look, again, I think that, you know, I don't want to overuse the term taking lemons and making lemonade, but, you know, when that 2022, when we got hit with the polymer shortages, we had to very quickly pivot into re-engineering our polymers and do it fast. We had to re-engineer our processes so that, you know, most of our stuff is certified and, you know, by customers or by third-party agencies because we make mission-critical products. So we had to develop processes that streamlined innovation, that leveraged our material science capabilities, started redesigning polymers to, maybe lower common denominator commodities that we could then mix in our mixing capabilities into new polymers and then qualify those products with customers and with third-party supply, with third-party agencies. I think we have done a terrific job.
And when we have done that, we've actually realized that what we have accomplished, you know, was not only to support our customer base with the products that they were already buying, but we've actually designed cost out in that process simplification. And so then we looked at each other and said, hey, look, why can't we do it across all of our raw materials? So we've developed a three-year plan. We're executing on that plan. And, you know, we feel that what we have done in 2024 was terrific. And we feel that we still have a couple more years of being able to execute as much as what we have done in 2024.
Got it. And then I also want to look at 80/20 again, maybe an update on where you are in terms of the rollout. How many regions have you started implementing 80/20 in? How are you thinking about the progress you can deliver in 2025?
Yeah, so I would say that the best progress that we have attained today, this is North America. I mean, North America is fully on board with front end 80/ 20. So across all the businesses that we do and our teams are optimizing, they're streamlining our portfolio, we're optimizing our pricing structure. It's becoming a way of life, a life for our folks. We have done a number of work streams on the back end, so in the factories. And what we are starting to realize is that the benefit in the back end may be actually bigger than on the front end, but that takes a lot of effort and it takes kind of retraining how you run your factories and the fulfillment model that you have. So we have about four work streams in North America.
As we complete those work streams, we will start putting it across specific facilities where we can, you know, we can get rather significant, I think, rather significant benefits. In Europe, we are well on the way in the front end process. We have done the Industrial Replacement as well as the Automotive Replacement side of that business. We still have a ways to go on the OE side, and we have yet to deploy it in the factories. The factories will start a couple of specific work streams, I would say maybe mid-year in Europe. We're making, you know, a good measured progress. I would say, Andy, that that's going to be a 10-year journey. This is not a journey that ends, you know, in 2026 or 2027. This is a way of life.
You know, I tried to 80/20 my personal life. It works. It's great. It's really, you get a huge benefit when you focused on a much fewer number of things that, that are impactful, and that's really what 80/20 is.
Sure. And then maybe let's take that over to cash flow, right? Like, so, you know, I think you exited 2024 still higher than your working capital % of revenue target. So like, you know, where can you tackle working capital % of sales? What's the opportunity?
Yeah. Look, I mean, we recognize that we have higher ratios working capital, but what we have done is we have reconfigured what we've put into our inventories, right? Look, while we have not, and again, we have not accounted for potential upturn in 2025, we believe that we are a lot closer to it, and you know, we have learned from the last couple of upcycles and what we see early in the recovery, and so we wanted to make sure that we have the right mix of products in our warehouse so that not only we can maintain the high levels of service when the initial upturn occurs, but that's also your opportunity to purely organically take more market share away because your competitors in general are not as well positioned as you could be.
We feel that, you know, we have at an expense of carrying a little higher level of inventories. We believe that we've positioned the business to take advantage of the, of the, you know, upcycle. Whether or not it happens this year or, you know, in, you know, Q2 or Q3, whatever, we will be ready for that uptick to occur. But that being said, you know, look, we believe that we probably have, you know, a couple hundred, maybe 300 basis points of opportunity to take working capital to a more meaningful level that will translate into meaningful improvement in our cash flows as well, obviously.
So you have a mid-term net leverage target of one to two times. You're currently just above that at 2022, right? You mentioned your earnings call, you have the ability to reduce leverage 0.5 a year, based on cash generation. But, you know, stepping back, your balance sheet's in good shape, right? So the question is, what do you do with it? I obviously you've remained committed to organic investments. We've talked a lot about that. Share repurchases, dividends. You've gotten, you do have a strong ROIC now. So curious how M&A could help, if at all, accelerate the growth over time. You know, how do you think about it right now?
Look, M&A is going to play an important role at some point in time for Gates Corporation. I think that we have earned the right. We have cleaned up the balance sheet. We've made the business more profitable, more stable, I think more desirable for shareholders and for customers to do business with and so on and so forth. But one of the things that we are only starting to see now is that the stock is starting to re-rate slightly, right? We are still trading at about nine times EV to EBITDA multiple, while we are delivering premium financial metrics.
If you take a look at kind of the average, EV to EBITDA multiple of the companies in the universe that we compare ourselves to, you know, those companies having the same level of average financial performance as we do, they're trading at five or six terms higher than we are, right? I don't think that there's any reason, you know, for that, dislocation. I believe that before we start doing any meaningful M&A, we need to see the stock re-rate. You know, when it starts rating, and again, I'm not talking that we need to be trading at 16 times, right? The stock should, you know, start re-rating at 11, 12 times, and then you can start having more meaningful conversation about M&A. Meanwhile, we'll continue to buy back stock.
We'll continue to pay down debt and continue to make organic investments in the highest IRR projects that probably you can do. And that will also kind of ensure that I'm going to be here with you next year, yeah, rather than do an ill-fated M&A and then, you know, not potentially not.
You've been a mainstay, but we don't want to lose you. So, just be careful, right? So last question, and I've asked this question to you before and of every company here this year. What are the top two or three innovations and structural changes affecting your company over the next five years? And are there any emerging industry trends that are perhaps being overlooked in the current discourse?
Yeah. Look, I mean, I think AI is going to play a good role well into the future. I'm sure that that's not a surprising answer. Then, look, I think that, you know, there's going to be innovation that is driven by a substantial amount of technological change in an industrial complex. The industrial complex is going to continue to automate. It will continue to drive productivity. With all of those movements come opportunities for industrial technology companies to be part of the solution. You know, sometimes we don't really see clearly around the corner, but as you approach the corner, you start realizing how these opportunities can come and become large and meaningful. I would put for Gates Corporation, I'll put data center opportunities there. Like, I mean, we've developed the industrial electric pump from our work on electric vehicles.
We've developed a really cool pump and, you know, a cool IT and a nice data center infrastructure participant looked at it and says, hey, this is really cool. We, you know, we could use this and we have adapted the technology and that's morphed into a very unique opportunity for Gates Corporation to participate in a tremendous secular growth opportunity into the future. So I think that, you know, those are things that we need to stay front and center, grounded, stay focused and execute, execute, execute.
On that note, Ivo, thank you very much. Appreciate your time.
Thank you.