Good afternoon. My name is Sarah and I will be your conference operator today. At this time, I would like to welcome everyone to the Gates Industrial Corporation Q1 2018 Earnings Release Call. All lines have been placed on mute to prevent any background noise. After speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Mr. Bill Waelke, Head of Investor Relations. Please go ahead sir.

Thank you for joining us on our Q1 2018 earnings call. With me today are our CEO, Ivo Jurek; and CFO, David Naemura. After the market closed today, we published our first quarter results. A copy of the release is available on our website at investors.gates.com. Today's call is being webcast and is accompanied by a slide presentation which includes a reconciliation of non-GAAP to GAAP financial measures that we will use during this call and is also available on our website. Please refer now to Slide 2 of the presentation, which provides a reminder that, our remarks and answers will include forward-looking statements within the meaning of the Private Securities Litigation and Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our Annual Report on Form 10-K filed with the SEC and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements which may not be updated until our next quarterly earnings call, if at all. With that I will now turn the call over to Ivo.

Thanks, Bill. Good afternoon. Thank you for joining us today to review our first quarter 2018 results. Beginning on Slide 3 of our presentation, we are pleased to report strong results for this first quarter of 2018. We generated revenues of $852 million, which represents a record quarterly revenue number for Gates. Our total revenue growth was 16.7% over the prior year quarter driven by strong core growth of 6.2% and contribution from our prior year acquisitions of 4.7% as well as a foreign currency translation benefit of 5.8%. We continue to execute on our growth initiatives and see a strong demand environment across the many end markets that we serve. Let me also note that we benefited from double-digit core revenue growth in emerging economy where we have a terrific market present. Our Q1 adjusted EBITDA of $183.9 million also stands as a quarterly record for Gates. At 21.6% of sales, our adjusted EBITDA margin reflects 60 basis points of expansion over the prior year Q1. Excluding acquisitions, on a comparable basis, our year-over-year adjusted EBITDA margin expansion was over 100 basis points with an incremental margin of over 30%, reflecting solid performance in this environment. We continue to invest in the business during Q1 to advance our large organic growth initiatives including investments in commercial capabilities, new product development and incremental manufacturing capacity. As we have discussed previously, we are adding additional capacity in our fluid power segment, which will be coming online during the second half of this year. In addition to our organic investments, last week we announced the acquisition of Rapro in Turkey, which will further advance our fluid power business in Europe. Rapro is primarily focused on the replacement market for which it designs and manufactures molded and branched hoses and other products used…

Thanks, Ivo. I will now cover our Q1 financial performance beginning on Slide 6, where as Ivo mentioned earlier, you can see the record quarterly results that we delivered for revenue and adjusted EBITDA. Core revenue growth was 6.2% in the quarter and adding to that increase were an additional 4.7 points of growth from acquisitions and 5.8 points in foreign currency, bringing total revenue growth to 16.7%. The core revenue growth primarily reflects strong demand in our industrial end markets, particularly at first-fit customers. We saw continued strong demand for mobile applications with double-digit revenue growth in the construction, agriculture and industrial transportation end markets. More broadly, we experienced robust demand across a range of categories and saw a significant growth in our hydraulics business in particular. As Ivo mentioned, we exited the quarter with a significant backlog whereas we typically carry very little backlog as a booked ship business. Our current hydraulics factory utilization is running at historically high rates and we are pleased that we will have additional capacity coming online over the remainder of the year to address these increased demand levels. The first increments of capacity will be from the build out of the remaining space in our existing China hydraulics facility and that will begin to deliver products around the end of Q2. Our two new fluid power plants are scheduled to come online in late Q3 and early Q4. Our adjusted EBITDA of almost $184 million was an increase of $31 million or 20% over the prior year quarter. Our adjusted EBITDA margin was 21.6%, an improvement of 60 basis points over the prior year Q1. Excluding the impacts of acquisition, our adjusted EBITDA margin was 22.1%, an increase of 115 basis points over the prior year Q1. We did see some continued…

Thanks, Dave. We are encouraged by our strong start to the year, which gives us confidence as we look forward for the remainder of 2018. Global industrial production continues to drive demand across our diversified end markets and geographies. Our presence in replacement channels is providing stable recurring revenues across our segments while our first-fit business is robust. We remain selective on opportunities where we can introduce differentiated products on new technologies in first-fit applications or advance our organic growth strategies. With believe we are taking the appropriate steps to position our business on the trajectory of long-term growth as a result of our strategic investments in commercial capabilities, new product development and the necessary manufacturing capacity to deliver on resulting growth. We believe we have a compelling strategy and our global teams are focused on executing on our large organic growth opportunities. Q1 was a very good start to 2018 and our team will remain focused on execution as we move further into the year. I will now turn the call back over to the operator to open up the Q&A session. Sarah?

[Operator Instructions] Your first question comes from the line of Andrew Kaplowitz from Citi Group. Please go ahead.

Good afternoon guys.

Hello, Andrew.

Hi, Andy.

Ivo or Dave, you have mentioned that your hydraulics capacity limited fluid power growth in the quarter. Hydraulics were able to grow high-teens, as you said, how much higher would be 10.2% in the segment have been the organic growth? And as you know there has been some increased concern regarding markets, really, such as hydraulics peaking, have you seen any evidence of slowing in any of your fluid power markets and how – can you tell about your visibility given that you’ve actually built backlog in the segment?

Yeah, and this is a great question right and I – look I will stay away from whether and how the markets are behaving [indiscernible]. Look we are very encouraged with the start to 2018. The markets are behaving very similarly that we have exited 2017 with. So we are very encouraged by the behavior. Our customers are doing really well as we said we are increasing our backlog if we were able to manufacture all of the orders that we have received in the quarter, Andy. We would have probably put it another 5% of core growth or so in the fluid power segment, so you were looking at somewhere north of 12% core. We have told you on our last quarterly call that we have been running at pretty elevated levels and we have just reached the levels where we just were not able to frankly to fulfill all of those incoming orders as we don’t see any reduction in forecast as we are looking into the future period.

Okay, Ivo, that’s really helpful. And then last quarter you had mentioned that you’ve thought your North American auto replacement business could pick up a bit in 2018, but you know depending on which industrial company we talk to auto aftermarket was relatively lethargic in the first quarter. So did you see a pick up and what about your outlook in that part of your business, auto replacement, maybe as a whole for the company?

Yeah, sure. I think that that’s a really good question. Our total replacement business in Q1 was approximately – it was slightly under 5%, was about 4.9% and the North America business grew slightly under 3%, so about 2.7. So as I said on the last update, we saw that the business is doing a little bit better. It’s true. Again as we have explained I think on the last call, we see that the headwinds from 2008, 2009 are starting to dissipate. We are primarily focused on the seven year plus old fleet. And so we expect that – you know that’s a market that’s going to replace, that’s going to provide stability for us as we move forward into 2019 and beyond. And frankly the emerging economies are behaving really well. I mean there is a very robust growth in car fleet and maybe just give you a number on China as an example our AR business in China grew about 13% or so.

Got it. So it sounds like steady as you go in the business and good growth in first-fit as well.

In our first-fit auto business, we grew about 4% globally. So we – again it’s not a big part of our business overall, but continue to see growth with differentiated products and the growth in hydraulics is doing really well.

Thanks, Ivo.

Thank you.

Your next question comes from Julian Mitchell from Barclays. Please go ahead.

Hi, good afternoon. Maybe just give a little bit of color on the overall sort of developed market growth rate in the quarter. I mean I think one trend you've seen in general is emerging market growth, very buoyant developed markets weaker. So I think you’ve said emerging market growth was double-digits. So, how was developed market growth in Q1 and what was it in prior quarter? Thank you.

Good afternoon, Julian. Thank you. Yes, as we said, the emerging markets continue to perform really well for us. Again we have a terrific presence there. We’re spending quite a bit of resources to continue to grow – grow those – grow our presence in those markets. I’d say that the developed markets have grown kind of the low single-digits. They are doing reasonably well. We're not displeased they are behaving the way that this plant than we anticipate it for 2018.

And…

And probably I would maybe add, Julian, if I can that if we had the capacity available in fluid power, we would have probably seen maybe another three points of quarter growth in the developed economies. So we’d probably be growing kind of mid single digits. The demand is not an issue. Its available capacity to support all the orders that we see coming in.

Understood. Thank you. And then my follow up would just be around the circling back maybe to that price versus cost equation as you have pointed out you had good adjusted gross margin increase in the first quarter. When you’re thinking about that price cost delta, is that becoming even more of tailwinds when you look at the back half of the year in terms of the remaining nine months in terms of the gross margin impact? Or you think it will be fairly steady with what you saw in Q1?

Julian, it’s Dave. I think the way we’re thinking about it is that we will maintain will be probably price material neutral or materially so for the year. I think they compared it a little tougher we added along price last year. I think we were well served to be proactive early in the year we had some things that made we’re unique to our industry like the impacts of inflation [indiscernible] which didn’t impact everyone, but it costs us to provide a little bit earlier on price. Accordingly, I think we carry good price into the year and we will begin to compare against that. So I think the compare does gets a little harder as the year goes on, I think we’re looking very favorable right now and we anticipate the price materially economics neutral, it’s not a little bit better than neutral for the full year.

Great, thank you.

You bet.

Your next question comes from the line of Jerry Revich from Goldman Sachs. Please go ahead.

Hi. This is Corinne Jenkins on for Jerry Revich. So I understand the utilizations are for fluid power. I was hoping you could talk about what you’re seeing in your power transmission business and where you’re seeing that utilization for that across your global footprint?

Yeah, you know, good afternoon. We – I think we have updated that on the last quarter as well. Look the demand remains quite solid for us. Again, emerging economies are growing very, very nicely. It’s a very constructive market environment, particularly in the emerging economies. We are running higher capacity utilization rates in those emerging economies. We are not dramatically capacity constraint in power transmission with the exception of a couple of product lines that we are rectifying, but they are not really giving us any headaches so to speak. So it’s a very constructive environment and I think we are well balanced with our capacity available to support for the growth.

Okay. And then it sounds like you expect the hydraulic power demand remain pretty elevated. Can you talk about how long you expect to take to work on the backlog that you have exiting this quarter and then if we should think about any sort of catch up in sales?

Look, I mean, my expectation is that – let me give you a company specific answer rather than you know try to opine on what I think you know the cycle of the business is going to be. Look we see a very strong demand. We expect that demand to carry forward after frankly several years a very weak construction equipment, ag equipment and mining equipment sales. So my expectation is that the end market is going to be very supportive of further growth. The way that we are thinking about how we are positioning ourselves is that we have tremendous investments in new technology in fluid conveyance. We are already starting to demonstrate that technology without third party OE customers. They are quite excited by that technology. We believe that we have a significant opportunity to take incremental market share way. We are putting capacity in support of this new technology and the opportunities that we have across the globe. We are reasonably small player outside of North America. And so we believe with that capacity in Poland, the incremental capacity in – the incremental capacity in China and in North America, we should continue to see pretty reasonable growth rate well into the future. And maybe the last piece of your question about that backlog. Look, our expectation is that, that backlog is going to be extinguished by the end of the calendar year 2018 where we expect to go back into our kind of normal operating mode of book and ship. We are not a big backlog business, we are more of a book and ship company, and we expect that end of the year, we will be there.

Great thank you.

Thanks Corinne.

Your next question comes from Jamie Cook from Credit Suisse. Please go ahead.

Hi good evening. Two questions. First, you talked about demand being constrained by your own capacity issues, but were there any external factors impacting demand, whether it’s labor and ability to ship product, or supply chain issues? And then my second question just with regards to where the strength is coming from, in particular, first-fit, in the mobile equipment markets, does not have an impact on mix or profitability?

Jamie good afternoon. So the first question, sorry let me start with the second question first. We don't expect a significant impact to our results. I mean, the mix is slightly shifted towards OE, maybe two to three points, overall, and we have a really not seen external factors to be impacting our ability to supply Fluid Power products. It’s been all company specific, we’re just running extremely high rates of asset utilization, and that's why we’ve frankly, see an opportunity to make investments about a year and half ago, that's when we started to stand up the capacity. It's coming in what we believe is a good timing for those new assets will help us offset the capacity shortfalls that we are experiencing presently.

Okay.

Jamie…

Sorry, go ahead.

The negative impact of mix was under 30 basis points as we see some of that mixed shift in the quarter under 30 basis points of the gross margin level, of course.

Okay and for the year, what’s your expectation?

I wouldn’t give guidance for the year on that. We'll see how the revenues come out for the year. But in the first quarter, we saw, as Ivo said, the two or maybe three point shift in mix and it had a 25, 27 basis point impact at gross margin level which obviously is more offset by a number of positive things.

Okay, great. Thanks.

Thanks Jamie.

Your next question comes from the line of Jeff Hammond from KeyBanc Capital Markets. Please go ahead.

Hey good afternoon guys.

Hi Jeff.

Just back on the Fluid Power ramp and supply chain. Clearly, a lot of people are kind of feeling pressure and didn't seem to show up in your incrementals. As you look forward and you try to catch-up some of the backlog and you ramp these new plans, are you anticipating any redundant cost or need for working capital build and any kind of negative impact on the incrementals as we go forward?

Good question. First, on incrementals, on the face of the income statement, Q1 reads at 25%, but that's negatively impacted by the acquisition if we adjust for outlets an apples-to-apples basis, we would see about 32.5% incrementals, that's also negatively impacted by FX. And so if thought about on a core basis, you'd be quite a bit closer to 40, if not at 40 which would be a pretty good quarter for us. I think there are some start-up costs. We don't see a huge working capital bill. We are going to have to bring in some raw materials but from a cost standpoint, we think there's a few million dollars and we've contemplated that in kind of how we've gotten people to the year. And there'll be some inventory impact but not meaningfully. So we think we've got it contemplated, and I don't think there would be a large impact to incrementals.

Okay, great. And then just as you look at some of your competition in Fluid Power, what are you – how are you thinking about your lead times versus theirs? Is an opportunity where you can capture some share even though you're building some backlog? Maybe just let me know what you’re seeing from the comps. Thanks.

Yes Jeff I think that you’re spot on. I mean, we believe that incremental capacity that we are spending up is going to give us a tremendous opportunity to capture for the market share. And frankly, the investment that we are making in NPI is also going to further accelerate our competitive position. So we feel really well about the where we stand presently in terms of our Fluid Power business.

Thanks guys.

Thank you.

Your next question comes from Deane Dray from RBC Capital Markets.

Thank you. Good afternoon everyone.

Hi Deane.

Just want to stay on that very last point on Jeff's question regarding that build in backlog and maybe this is the glass-half empty view, but is there any negative fallout in not being able to do the book and ship that your customers are usually expecting? And might any of this backlog go away, if any competitor is picking up share because of your capacity constraint?

So Deane I think that’s a very thoughtful question that you raised. But what we are dealing with is we're frankly dealing with global capacity constraint. There are really no competitors that have the ability to just walk in and offer incremental supply because they are just simply not available. And in terms of lots of the OE business, that frankly, we're doing everything that we can to support, you also need to grow through a significant amount of qualifications, which is not something that you can just simply do overnight. So we're working very diligently, we feel good about our backlog. We do not believe that a backlog is cancelable. And, frankly, there are no inventories in the channel so it's kind of an interesting situation, and we feel very constructive about bringing that capacity online right now, taking advantage of the economics.

That’s good to hear. And thanks for that clarification. And then how about some color on the acquisition, the Rapro deal? Some questions that merely come to mind is what kind of manufacturing capacity are they operating at? And are there any kind of back practices that either they'll share with you or you'll share with them? And then lastly, where are they in this, the branding side, it's all aftermarket, but you guys are the good, better, best, Jo Gates is all up there on the best and maybe a little bit of better. But where are they in that continuum of sort of premium brand?

Yes, okay Deane, great question. The product that Rapro manufacturer is something that we do very well here in North America, it's actually, a very high-margin products for us as we were looking at this opportunity. One of the big opportunities in this is a bringing our know-how and expertise to them. So we think we're going to have an ability to drive volumes as we drop this business into our aftermarket channels, we set it seamlessly and as we’re able to ramp volumes through our distribution base. We think we could quite come close to doubling these distinct capacity on their current manufacturing footprint. So we're pretty bullish on that basically bringing the Gates Operating System what is already a very good company. And from a brand perspective, they are a rare recognized brand in Europe, we actually source a little bit of their product for European models ourselves and we – they're well-recognized, and I think they fit well into the kind of the Gates tier of brand recognition here.

That's good to hear. Just last one, are there more Rapro deals in your pipeline?

Yes, it’s highly pragmatic global markets that we play in, and it we like to believe that there will continue to be a good runway of accretive bolt-on acquisitions. We're always working on them and I think we just got to find the right ones, and we'll kind of continue as it is part of our strategy.

Great, thank you.

Thanks Deane.

Your next question comes from the line of Charlie Brady from SunTrust Robinson. Please go ahead.

Hey thanks. Just following on Dean’s question on Rapro. I was wondering, does Rapro bring to you any new customers or distribution that you don't have now that may be you get and you can leverage that up.

So Charlie good afternoon. Yes, they do. Obviously, they have a reasonable good presence, I mean, it's not a big business but that they have good customer base in Eastern Europe and in Middle East, and some in Western Europe. So they do bring customers to us where we believe we're going to be able to cross-sell our products that are core to us. And frankly, as Steve indicated, we feel really positive about our ability to take those products, and then funnel their products through our channels, particularly in the EMEA market space.

Thanks. And then just back on the hydraulic, the backlog and that capacity utilization issue you're facing right now. I'm just wondering when you're running up a plant flat out, you obviously you are some inefficiencies because you’re making those fast as you make. And I’m wondering from a market perspective can you put some color on may be kind of the negative impact to margin that just been going flat-out is having and how that pressure when that pressure gets relieved, aside from start of cost, on the new plants, how that might benefit margins in that part of the business?

Yes look, I think we mentioned a little of this in the last quarter but for sure, we saw that in the fourth as we are ramping up the fast, we’ll continue to see some of that in the first. It's there, it's not a massive, right, I think it's a total level, sure, there's kind of $1 million or $2 million here and there, as we've had to outsource certain products that we otherwise might make and into your point just running a factory flat-out is not a sufficient at running at an optimal level. We'll get more efficient, to your point, we have some inefficiencies being these other plans are, but I think once we hit kind of a more of a steady-state next year, but it’s not going to be a big number of the total lever here, I don't think.

Thanks. And just final one from me, can you give us the share count you guys are using in the earnings this quarter, I just didn't see that in release?

We're using 289,000,750 – I mean 289,756,379.

Thank you.

Thank you.

[Operator Instructions] Your next question comes from the line of Steven Winoker from UBS. Please go ahead.

Thanks good afternoon guys.

Hi, Steve.

Just maybe backing up for a second on not Rapro but just the whole point of the impact and how you're think about deleveraging, you mentioned the 3.9x post-IPO, you're still fitting in some of these smaller, very small bolt-ons occasionally, but any thoughts given also the performance in the business of accelerating the deleveraging, or how you're thinking about that now, Ivo?

Steve, this is Dave. I think we've always said is a balance, right, and deleveraging remains a focus area for us. We continue to think of the midterm here, we should build to get the 3x or better, and we're focused on that. At the same time, we're trying to balance that with the investments for long-term growth. So the increase in capital spend and doing a few bolt-ons that we think accelerate our strategy have been in our approach. So it remains top of mind, but we remain with kind of a balanced approach where we're going to keep investing in the business. And frankly, as you point out, that growth in EBITDA and our ability to continue to grow the business well and grow adjusted EBITDA will help us delever as well, quite a bit.

Are you not going to step up over these sort of smaller bolt-ons most likely?

I think what you saw most from last year was pretty reflective of where we're at. I think we deployed a little over $100 million of capital last year, and that was with doing a pretty good sized deal with Atlas. Look, Rapro was not a big deal. We paid about 8-ish, a little over eight time EBITDA for it. We think post synergies, we'll be in the five range, and those are kind of the deals, when they're in our core business, make a lot of sense for us. But again, small deal, and I think what we've seen out of us last year and continue to beginning this year with Rapro is kind of how we are think about bolt-ons. Never say never, there's a lot of opportunities out there to help us accelerate our strategy. But I think kind of indicates kind of how we're going about it.

Right. You guys, since the IPO, it seems like I know I get a lot of calls where you're getting settled with the auto first-fit label, but you're point on this call in addition to the growth that blew that away. What about 2017, 2018 [indiscernible] that first fit now in auto and you’re still growing that kind of as you said mid-single digits, and any kind of color about how it changes there? And why that's kind of a smaller become a smarter part of that business?

It’s a great question. And you’re right. I think we've been sorted with a bit of a missed number, and we're in the team’s number and over half of that, half of that – over half of that number is emerging market based where, if you think of first-fit emerging markets, we're growing at a good rate there and it's an important vehicle to establishing that aftermarket business that we want that the after aftermarket guys. So relative to developed markets, we're very low, sub-2% of sales in North America, where I think people have concerns about the registration rates. And frankly,, we turn away as much business as we take. So from that dynamic, we put in a very strategic filter that one, we got to get paid for coming to, we want to be able to introduce innovative products, and so we're very, very highly selective. So I appreciate the question because I think it's an important point.

Okay, and just a couple of cleanup questions. On as we sort of steering at second quarter, you got a lot of these investment dynamics that everyone's been focused on at the call. But normally, I guess, last year, you ran just under half of your sales in the first half, half in the not just over in the second half and EBITDA was pretty close. Other than, I guess, given the dynamics that you've talked about on the investment capacity front, should we expect a very different second half, first half dynamic this year?

I’m going to stay away from quarterly guidance, and I appreciate that's not exactly what you're asking, Steve, but is unique environment here with the capacity constrained on the Fluid Power side. Having a little higher backlog, and we otherwise would have been bringing that capacity in the second half. So I don't want to frankly kind of guide beyond the year here but I acknowledge that, that dynamic probably introduces a little nuances and consistent with prior year. I mean, but I'll let you kind of quantify that.

Okay. Can you answer my last question is on the free cash flow in the quarter, not the trailing 12 months at $87 million, of which, $60 million was CapEx, $26.5 million, CFO. Is that $26.5 million, is that – was that – could you maybe talk about the dynamics there? Was that anything unusual other than build on the growth?

Yes it’s build on the growth. I think we got a little more efficient as a percent of sales. But we always, one, we always build a during this period as well coming off a low point from year end towards seasonally higher at the end of the second quarter. And we grew at a fast rate, and we had to provide with that, right?

Alright guys, thanks a lot.

Thank you.

Your next question comes from the line of Sawyer Rice from Morgan Stanley. Please go ahead.

Yeah. Thanks. Good afternoon guys.

Good afternoon.

Maybe, say a bit here on the Fluid Power side. Can you maybe give us a little – of view of the level of capacity utilization post all this capacity coming online? And then maybe asking Dean's question about a different way or any region, I guess, globally, that you'll see more of a need for capacity introduction to either organically or inorganically in the future?

Sure. It’s Dave. I guess, we’ll see that, so capacity is going to ramp whereas very high levels right now. I think we’ll come down to a very healthy level, which will probably be in the 60-ish percent range, and then will ramp from there. As we noted, we're going to enter this new capacity with some backlog, and it's going to take time to come up. The new plants are going to be one third capacitated as it is. So these are big plans we're building, we're going to lay out a third of the floor. And then as we get into future years and frankly, the capacity we're putting in here are left as well. And as we get into future years, we'll have opportunity to grow into it more eloquently, your point around where we have opportunities. We're very well penetrated. Although we still have a ton of opportunity, there's a $12-plus billion market of which we have $1 billion of share, but relatively more penetrated in North America currently. So I would say internationally in both EMEA and Asia-PAC, we still have significant opportunities to take share, and I think that's consistent with where we see is bringing up the capacity.

Great. And then maybe, if I could just one follow-up on PT side of the business, maybe just any incremental data points on the chain-to-belt, if there's any positive reception as a go-to-market with that through the quarter? Thanks.

Hey, Sawyer. This is Ivo. Look as we characterize, we are in the very early stages of this initiative, but frankly, we are also very encouraged by what we see, we are validating the market is very big and we are continuing to unearth really existing opportunities, and anecdotally, we started to focus on this opportunity in North America last year, and we've identified a bunch of interesting opportunities, everything from mobility to grain silos, asphalt manufacturing facilities, lumbar mills, where we have helped a couple of lumber processing facilities to significantly improve safety and reliability of operating those assets. And I guess, my regional guide across the globe, let's say, hey, look, you guys go out there and start talking to your customers and let me – let's validate that this opportunity exists across the globe. And lo and behold, we're finding different type of applications in Asia Pacific, it may be associated more with personal mobility. We are finding opportunities in oil and gas, if you can't believe it with opportunities there as an example, mud pump drives in oil extractions. We're finding opportunities in EMEA in light manufacturing industrial complex. And we are finding opportunities in offshore marine where people are struggling with keeping chain from being rusted and maintaining – maintain servicing their equipment, that is quite important in loading and offloading various payloads. So we are validating actually directly with customers that the opportunity exists, and we are winning a number of applications. We are converting them, and we are realizing that once we convert one, we have an opportunity to convert 40, 50, 60 plants that those customers may be operating once they have gotten to proof-of-concept. So I know it's a long-width answer, but I think as you can sense, there's a general degree of enthusiasm about what this represents for Gates for the long term. And although we are early, we are quite bullish on the construct of that strategy.

Great, thanks.

And I'm showing no other questions at this time. I will now turn the call back over to Mr. Bill Waelke for closing comments.

Thanks to all for joining us on our call today and for your interest in Gates. We look forward to speaking with you to report our Q2 results. And the interim, if you have further questions, please don’t hesitate to contact me. Have a good evening everyone.

This concludes today's conference call. Thank you for your participation. You may now disconnect.