Core Viewpoint - The analyst has upgraded the rating for ESAB Corporation, indicating a positive outlook based on the anticipated recovery in Mexico and a rebound in automation [1] Group 1: Investment Philosophy - The investment approach is fundamentally driven, focusing on identifying businesses with potential for scaling and unlocking significant terminal value [1] - Key factors considered include competitive moat, unit economics, reinvestment runway, and management quality, which are essential for long-term free cash flow generation and shareholder value creation [1] - The analyst emphasizes the importance of fundamental research and targets sectors with strong secular tailwinds [1] Group 2: Professional Background - The analyst has 10 years of experience in investment banking and is currently managing personal funds sourced from friends and family [1] - The motivation for writing is to share investment insights and receive feedback from fellow investors, aiming to help readers focus on long-term equity value drivers [1] - The analyst believes that good analysis should be both analytical and accessible, contributing value to readers seeking high-quality, long-term investment opportunities [1]

Financial Data and Key Metrics Changes - Sales rose 8% to $687 million, with organic sales increasing 2% year-over-year, reflecting solid sequential improvement in the Americas and continued strength in EMEA and APAC [3][4] - Adjusted EBITDA increased 7% to $133 million, with a slight reduction in adjusted EBITDA margin by about 20 basis points due to the impact of the EWM acquisition [4][11] - Free cash flow conversion exceeded 100% this quarter, driven by strong team performance [13] Business Line Data and Key Metrics Changes - In the Americas, total sales increased with mid-single-digit growth in the U.S., while equipment and automation also grew mid-single digits [7][11] - EMEA and APAC delivered volume growth of 4%, supported by strong execution in high-growth markets and high single-digit growth in equipment and automation [8][12] - The EWM acquisition contributed approximately 2 points of growth and roughly $1 million in adjusted EBITDA within Q3 results [10] Market Data and Key Metrics Changes - The U.S. market showed mid-single-digit growth, while Mexico remained stable and South America performed in line with expectations [7][11] - EMEA sales grew 14% year-over-year to $395 million, driven by growth in Asia, India, and the Middle East [12] Company Strategy and Development Direction - The company is raising its full-year guidance, expecting total sales of $2.71 billion to $2.73 billion, reflecting around 1% organic growth and contributions from the EWM acquisition [14] - The strategy includes a shift towards equipment and gas control, aiming for EBITDA margins of 22% or more by 2028 [16] - The company is committed to integrating AI into its EBX initiatives to enhance productivity and performance [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its strategy and deliver long-term shareholder value, highlighting a robust pipeline of productivity and transformational projects [4][16] - The management noted that the fourth quarter started positively, with expectations for improved core growth compared to Q3 [53] Other Important Information - The company completed four acquisitions this year, including EWM, which enhances its equipment and automation portfolios [16] - The company is focused on reducing net leverage to one to two times and positioning for accelerated M&A activity in 2026 [13] Q&A Session Summary Question: Sequential improvement in Americas and concerns about deferred automation shipments - Management indicated there was some catch-up but emphasized good execution and stability in Mexico, with positive momentum in the U.S. market [22][23] Question: Strategic fit of EWM and year-one deal model - Management highlighted strong gross margins for EWM and the importance of investing in growth initiatives to drive sales [24][25][26] Question: EBITDA margin decline in the Americas - Management expected the decline and attributed it to investments in sales initiatives and tariff impacts, with confidence in margin expansion for 2026 [30][31] Question: Margin improvement expectations for 2026 - Management outlined three factors for margin improvement: pricing adjustments, tariff-based movements, and ongoing restructuring initiatives [36][37] Question: EMEA and APAC segment performance - Management noted strong orders in high-growth markets and significant share gains in Europe, with expectations for continued momentum [40][41] Question: EWM's legacy distribution and integration - Management described the distribution as complementary, with opportunities to leverage EWM's product lines through ESAB's global network [44][45] Question: Fourth quarter performance expectations - Management indicated a positive start to Q4, expecting core growth to improve from Q3 levels [52][53]

Financial Data and Key Metrics Changes - Sales rose 8% to $687 million, with organic sales increasing 2% year-over-year, indicating solid sequential improvement in the Americas and continued strength in EMEA and APAC [3][10] - Adjusted EBITDA increased 7% to $133 million, reflecting strong execution on margin and additional tariff impacts in the Americas [4][10] - Adjusted EBITDA margin was reduced by about 20 basis points due to the impact of EWM acquisition, while the overall adjusted EBITDA margin was 19.6% in the Americas [11][12] Business Line Data and Key Metrics Changes - In the Americas, total sales increased with mid-single-digit growth in the U.S., driven by equipment and automation [7][11] - EMEA and APAC delivered volume growth of 4%, with organic sales up 3% and adjusted EBITDA margin expanding to 19.3% [8][12] Market Data and Key Metrics Changes - The U.S. market showed mid-single-digit growth, while Mexico remained stable and South America performed as expected [7][10] - EMEA and APAC experienced strong execution in high-growth markets, with high single-digit growth in equipment and automation [8][12] Company Strategy and Development Direction - The company is focusing on shifting its mix towards equipment and gas control, aiming for EBITDA margins of 22% or more by 2028 [15] - The acquisition of EWM is expected to enhance the company's technology and gross margins, with a strong emphasis on integration and cross-selling opportunities [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its strategy and deliver long-term shareholder value, despite challenges in the operating environment [4][15] - The company raised its full-year guidance, expecting total sales of $2.71 to $2.73 billion and adjusted EBITDA of $535 to $540 million [13][14] Other Important Information - Free cash flow conversion exceeded 100% this quarter, and the company aims to reduce net leverage to one to two times by utilizing strong Q4 cash flow [12] - The company is committed to investing in growth initiatives and M&A to drive long-term value [14][15] Q&A Session Summary Question: Catch-up on deferred automation shipments and selling to Mexico - Management indicated there was some catch-up but emphasized good execution and focus on commercial excellence, with expectations for continued momentum into Q4 [21] Question: Year-one deal model for EWM acquisition - Management highlighted strong gross margins for EWM and the importance of investing in growth initiatives to drive sales [23][25] Question: EBITDA margin decline in the Americas - Management expected the decline and attributed it to investments in sales initiatives and tariff impacts, with confidence in margin expansion for 2026 [28][34] Question: M&A strategy and geographic expansion - Management stated they are agnostic regarding geographic expansion, focusing on acquiring the best assets regardless of location [29] Question: Margin improvement expectations for 2026 - Management outlined three factors for expected margin improvement: pricing adjustments, tariff-based movements, and ongoing restructuring initiatives [35] Question: EMEA and APAC market performance - Management noted strong orders in high-growth markets and significant share gains in Europe, with expectations for continued momentum [38][39] Question: EWM distribution and integration - Management expressed excitement about the complementary nature of EWM's distribution and the potential for integrating their product lines into ESAB's global network [41]

Core Viewpoint - Esab reported quarterly earnings of $1.32 per share, exceeding the Zacks Consensus Estimate of $1.27 per share, and showing an increase from $1.25 per share a year ago, indicating a positive earnings surprise of +3.94% [1][2] Financial Performance - The company achieved revenues of $687.4 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 4.06%, and up from $635.6 million in the same quarter last year [2] - Over the last four quarters, Esab has consistently surpassed consensus EPS estimates four times and topped revenue estimates three times [2] Stock Performance and Outlook - Esab shares have increased by approximately 1% since the beginning of the year, while the S&P 500 has gained 17.2%, indicating underperformance relative to the broader market [3] - The future performance of Esab's stock will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $1.36 on revenues of $674.58 million, and for the current fiscal year, it is $5.26 on revenues of $2.66 billion [7] - The estimate revisions trend for Esab was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market [6] Industry Context - The Metal Products - Procurement and Fabrication industry, to which Esab belongs, is currently ranked in the top 8% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1, suggesting potential for growth within the industry [8]

Third Quarter 2025 October 29, 2025 EARNINGS CONFERENCE CALL © 2024 Forward-Looking Statements & Non-GAAP Disclaimer Forward-Looking Statements This presentation includes forward-looking statements, including forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning the Company's plans, goals, objectives, outlook, expectations, and intentions, including statements that are ...

Financial Performance - ESAB reported third quarter sales of $728 million, an increase of 8% year-over-year, with core organic growth of 2%[3] - Net income from continuing operations attributable to ESAB was $64 million, or $1.04 diluted earnings per share[3] - Core adjusted EBITDA rose 7% to $133 million, with a margin decrease of 20 basis points to 19.4% compared to the prior year[3] - ESAB's total net income for the third quarter was $56.5 million, down from $69.8 million in the prior year[22] - Adjusted net income from continuing operations for the three months ended October 3, 2025, was $83.2 million, compared to $78.6 million for the same period in 2024, representing a growth of 8.5%[24] - Adjusted net income margin from continuing operations was 11.4% for the three months ended October 3, 2025, slightly down from 11.7% in the same period of 2024[24] - Net income from continuing operations attributable to ESAB Corporation (GAAP) for the three months ended October 3, 2025, was $63.7 million, down from $69.4 million in the same period of 2024, a decrease of 10.1%[24] - Net income for the nine months ended October 3, 2025, was $194,457, down from $215,796 for the same period in 2024, representing a decrease of approximately 9.5%[43] Sales and Growth - The U.S. business returned to mid-single-digit growth, while EMEA and APAC regions experienced strong demand from high-growth markets[4] - The company raised its full-year 2025 outlook for total core sales growth to 4.5% to 5.5% and core adjusted EBITDA guidance to $535 to $540 million[6] - Core adjusted EPS guidance was narrowed to $5.20 to $5.30, up from the previous range of $5.15 to $5.30[6] - For the three months ended September 27, 2024, total sales reached $673.3 million, reflecting an 8.1% increase compared to the previous year[32] - Organic sales growth for existing businesses was 1.6%, with a total increase of $54.6 million in sales attributed to this segment[32] - Acquisitions contributed $33.8 million to total sales, representing a 5.0% increase[32] - For the nine months ended September 27, 2024, total sales were $2,070.0 million, with a decline of 4.3% attributed to existing businesses[34] - The company expects 2025 core net sales growth in the range of 4.5% to 5.5%[39] Adjusted Financial Metrics - Adjusted EBITDA for the three months ended October 3, 2025, was $139.5 million, an increase from $127.4 million in the same period of 2024, reflecting a growth of 9.3%[27] - Core adjusted EBITDA margin for the three months ended October 3, 2025, was 19.4%, compared to 19.6% for the same period in 2024[27] - Adjusted net income per share – diluted from continuing operations (non-GAAP) for the three months ended October 3, 2025, was $1.36, compared to $1.28 for the same period in 2024, an increase of 6.3%[24] Acquisitions and Investments - ESAB completed the EWM acquisition, enhancing its heavy equipment and automation portfolio and providing access to leading React technology[5] - The company is focusing on cross-selling initiatives and margin-expansion opportunities post-acquisition[5] - Restructuring and other related charges for the three months ended October 3, 2025, amounted to $4.3 million, compared to $1.9 million in the same period of 2024[27] - Acquisition-amortization and other related charges for the three months ended October 3, 2025, were $16.5 million, up from $10.1 million in the same period of 2024[27] - The company made acquisitions totaling $439,669, a substantial increase from $86,537 in the prior year, reflecting a growth of about 408.5%[43] Cash Flow and Assets - Adjusted free cash flow for the three months ended October 3, 2025, was $86.4 million, compared to $95.8 million for the same period in 2024[36] - Total assets as of October 3, 2025, were $4,869.4 million, an increase from $4,033.9 million at the end of 2024[41] - Current liabilities totaled $669.1 million as of October 3, 2025, compared to $632.1 million at the end of 2024[41] - Net cash provided by operating activities decreased to $163,514 from $228,523, a decline of about 28.5% year-over-year[43] - Cash used in investing activities significantly increased to $462,053 compared to $114,214 in the previous year, indicating a rise of approximately 304.5%[43] - Net cash provided by financing activities rose to $227,263 from $40,576, marking an increase of approximately 460.5%[43] - Cash and cash equivalents at the end of the period were $218,219, down from $253,670, a decrease of about 14%[43] Other Financial Information - The company reported a loss from discontinued operations of $8.8 million in the third quarter[22] - The company reported a pension settlement loss of $12.2 million for the nine months ended September 27, 2024[24] - The company experienced a net loss on the sale of property, plant, and equipment amounting to $5,697, compared to a loss of $1,060 in the previous year[43] - Depreciation, amortization, and other impairment charges increased to $58,731 from $50,028, reflecting a rise of approximately 17.4%[43] - Trade receivables net decreased by $50,381, compared to a decrease of $39,075 in the previous year, indicating a worsening in collection efficiency[43] - The effect of foreign exchange rates on cash and cash equivalents resulted in an increase of $40,137, contrasting with a decrease of $3,218 in the prior year[43]

Core Insights - ESAB Corporation reported third quarter sales of $728 million, reflecting an 8% increase on a reported basis and a 2% increase on a core organic growth basis compared to the prior year [2][5] - The company achieved a net income from continuing operations of $64 million, translating to $1.04 diluted earnings per share, while core adjusted net income was $81 million or $1.32 diluted earnings per share [2][5] - Core adjusted EBITDA reached $133 million, a 7% increase, with a margin decrease of 20 basis points to 19.4% compared to the same quarter last year [2][5] Business Performance - The U.S. business returned to mid-single-digit growth as tariff uncertainties diminished, while EMEA and APAC regions experienced strong demand from high-growth markets [3][4] - The completion of the EWM acquisition enhanced ESAB's heavy equipment and automation portfolio, providing access to leading React technology [4][8] Financial Guidance - ESAB raised its full-year 2025 outlook for total core sales growth to 4.5% to 5.5%, with core organic sales growth projected at 1.0% and M&A contributing approximately 4.5% [5] - The core adjusted EBITDA outlook was increased to $535 to $540 million, compared to the previous guidance of $525 to $535 million [5] Historical Context - ESAB Corporation, founded in 1904, is a focused industrial compounder with a history of innovative products and solutions, employing approximately 10,300 associates and serving customers in around 150 countries [6]

Core Viewpoint - ESAB Corporation's Board has declared a dividend, indicating a commitment to returning value to shareholders and reflecting the company's financial health [1] Group 1 - The dividend declaration is a positive signal for investors, suggesting confidence in the company's ongoing performance and profitability [1] - This action may attract more investors looking for income-generating stocks, potentially increasing the stock's market value [1]

Core Insights - The investment approach focuses on identifying businesses with potential for long-term growth and significant terminal value generation [1] - Emphasis is placed on understanding core business economics, including competitive advantages, unit economics, reinvestment opportunities, and management quality [1] - The analyst aims to provide accessible and analytical insights to help readers identify high-quality, long-term investment opportunities [1] Investment Strategy - The investment strategy is fundamentally driven, concentrating on sectors with strong secular growth trends [1] - The approach involves a deep dive into the factors that contribute to long-term free cash flow generation and shareholder value [1] - The analyst has a decade of self-education in investment, currently managing personal funds sourced from friends and family [1]

Financial Data and Key Metrics Changes - Total sales growth of 2% was achieved, with record adjusted EBITDA margins of 20.4% [8][27] - Adjusted EBITDA reached 20.1%, highlighting the company's resilience despite challenges [29] - Free cash flow generated in the quarter was $46 million, with expectations for improvement in cash flow during the second half of 2025 [31][32] Business Line Data and Key Metrics Changes - EMEA and APAC segments showed strong performance, with total sales rising 11% and EBITDA margins hitting a record 20.6% [30] - Organic sales in The Americas declined due to delays in automation orders and tariff impacts, but strong pricing helped balance this [28][29] - Automation orders were delayed, but the company expects recovery in the second half of the year [41][50] Market Data and Key Metrics Changes - The Middle East delivered double-digit growth, while India grew at high single digits [12] - China and Southeast Asia experienced mid-single-digit growth, supported by increased capital expenditure and ongoing LNG investments [13] - The Americas faced near-term headwinds primarily due to tariffs, particularly impacting local customers in Mexico [14][40] Company Strategy and Development Direction - The company is focused on disciplined cost control, elevating customer experience, and sharpening market differentiation [6] - Recent acquisitions, including Delta P and Active, are expected to accelerate growth and expand the product portfolio [9][22] - The company raised its full-year guidance based on confidence in its equipment portfolio and improving market conditions [9][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the automation business in North America and the overall health of the business [41][36] - The company anticipates continued strong performance in high-growth markets and expects to complete four acquisitions this year [36][37] - Management remains optimistic about the impact of EU stimulus measures and the stability of the European market [92][96] Other Important Information - The company is investing approximately $20 million in strategic growth initiatives, including university research partnerships and AI capabilities [17][81] - The Flame internship program aims to build a robust talent pipeline for the fabrication technology sector [10] Q&A Session Summary Question: Can you provide more color on the tariff impacts? - Management noted that tariffs introduced unexpected volume headwinds, particularly in Mexico, but expects recovery in the second half of the year [40][41] Question: What are the savings targets for 2024? - The company has been increasing savings over the last three years, with a focus on back office automation and productivity improvements [43][44] Question: Can you elaborate on the automation demand in Mexico? - Management indicated that automation orders were delayed but are expected to recover in Q3 and Q4, with a slow recovery in Mexico overall [50][88] Question: What is the outlook for Europe and the impact of stimulus measures? - Management expects stable growth in Europe, with stimulus measures beginning to show positive effects, although not at the anticipated rate [92][96] Question: How significant is the automation component's decline? - The decline in automation sales was noted to be in the high twenties percentage-wise, with expectations for recovery [105] Question: What is the expected growth and margin for the EWM acquisition? - The EWM acquisition is expected to have mid-single-digit growth potential and gross margins above 40% [56][57]