YEARS STRONG Fourth Quarter 2024 February 20, 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 stat ...

Financial Performance - The company achieved a record fourth quarter adjusted EBITDA margin of 20.3%, reflecting a 90 basis points margin expansion on flat organic growth [9][24] - Adjusted EBITDA for 2024 reached the top of the range with a margin of 19.7%, exceeding guidance for adjusted EPS and free cash flow conversion [12][29] - Free cash flow for the year was a record $321 million, with free cash flow conversion exceeding 100% [28][29] Business Line Performance - The welding equipment product line experienced high single-digit growth during the quarter, indicating strong demand and acceptance in the market [11] - The Americas saw organic sales decline by 200 basis points, but strong price performance of 400 basis points and acquisitions contributed positively [25] - In Europe, Middle East, and Asia, total sales increased by 300 basis points, with a 400 basis points volume increase driven by high-growth markets [26] Market Performance - High growth markets continue to offset softness in developed markets, with strength noted particularly in the Middle East, India, and Southeast Asia [10][72] - The company anticipates low to mid-single-digit positive volume growth in EMEA and APAC segments throughout the year [32] Company Strategy and Industry Competition - The company is focused on innovation, shifting its product mix, and pursuing bolt-on acquisitions to enhance financial results [8][20] - The company has invested over $100 million in growth initiatives, including enhancing customer experience through AI and expanding its product portfolio [18][122] - The company aims to reduce its manufacturing footprint by 15% over the next three years to improve efficiency and cost structure [130][135] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the start of 2025, noting stable to slightly improving order patterns in both the Americas and globally [42][44] - The company expects organic growth of 0% to 2% in 2025, with a positive impact from M&A offset by FX headwinds [30][31] - Management acknowledged the choppy environment but remains confident in executing their plans to drive margin growth and cash flow [66][67] Other Important Information - The company launched over 100 new products in 2024 and closed three acquisitions, with plans for continued acquisition activity in 2025 [36][20] - The company is leveraging AI for productivity improvements and customer service enhancements [122][126] Q&A Session Summary Question: Order patterns in early 2025 - Management noted stable to slightly improving orders in both the Americas and globally, indicating a solid start to 2025 [42][43] Question: Accretion from 2024 acquisitions - The company expects the three closed deals to perform at or above fleet average in terms of EBITDA percentage, with integration ahead of expectations [45][46] Question: Improving optimism in the Americas - Management highlighted strong acceptance of their equipment line and stabilization in their FABTECH business as factors contributing to optimism [50][51] Question: Drivers of margin expansion - Margin expansion is driven by value-based pricing, continuous improvement initiatives, and back-office cost reductions using new technologies [55][56] Question: Organic growth outlook for gas business - The gas business is expected to grow slightly, while equipment is anticipated to see mid-single-digit growth [61] Question: Regional growth expectations - Management expects strong growth in high-growth markets like India and the Middle East, while developed markets are expected to remain stable [72][73] Question: FX headwinds impact on EBITDA - The company expects approximately $90 million of FX headwinds, with a typical 20% decrement on EBITDA from FX movements [108][109] Question: Potential opportunities in the Russia-Ukraine conflict - Management expressed hope for peace and potential reconstruction opportunities, but noted that such scenarios are not included in their forecasts [111] Question: Mix benefits in margin guidance - The shift towards equipment, which has higher margins, is expected to positively impact overall margins [114][118]

Group 1 - Esab reported quarterly earnings of $1.28 per share, exceeding the Zacks Consensus Estimate of $1.15 per share, and up from $1.13 per share a year ago, representing an earnings surprise of 11.30% [1] - The company posted revenues of $633.2 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.46%, and down from $689.35 million year-over-year [2] - Esab has surpassed consensus EPS estimates four times over the last four quarters and topped consensus revenue estimates three times during the same period [2] Group 2 - The stock's immediate price movement will depend on management's commentary during the earnings call and the sustainability of earnings expectations [3][4] - Esab shares have increased by approximately 4.3% since the beginning of the year, compared to a 4.5% gain in the S&P 500 [3] Group 3 - The current consensus EPS estimate for the upcoming quarter is $1.24 on revenues of $658.78 million, and for the current fiscal year, it is $5.35 on revenues of $2.65 billion [7] - The estimate revisions trend for Esab is currently unfavorable, resulting in a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Group 4 - The Metal Products - Procurement and Fabrication industry, to which Esab belongs, is currently ranked in the bottom 21% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Market Overview - ESAB Corporation's addressable market is estimated to be approximately $40 billion by the end of 2028, with 48% of 2024 revenues derived from high growth markets[18]. - The company's gas control business is well-positioned in attractive markets such as medical and specialty gas control[18]. - ESAB's international operations provide exposure to high growth economies, which are expected to offer additional growth opportunities[26]. - In the year ended December 31, 2024, 78% of the company's sales were derived from international operations, with 43% from the Americas and 57% from EMEA & APAC[54]. - The company believes its business mix is well balanced between high growth and developed markets, which helps mitigate cyclical industrial market exposures[185]. Financial Performance - Net sales for the year ended December 31, 2024, decreased to $2,740.8 million, down from $2,774.8 million in 2023, reflecting a decline of $34.0 million or 1.2%[206]. - Adjusted EBITDA for 2024 was $528.8 million, an increase from $501.1 million in 2023, resulting in an Adjusted EBITDA margin of 19.3%, up from 18.1%[212]. - Gross profit for 2024 increased to $1,037.5 million, with a gross profit margin of 37.9%, compared to $1,015.8 million and 36.6% in 2023[212]. - Core sales for 2024 were $2,591.2 million, a decrease of $29.8 million or 1.1% from $2,620.9 million in 2023[209]. - Net income from continuing operations for 2024 was $293.1 million, compared to $223.4 million in 2023, reflecting a net income margin increase to 10.7% from 8.0%[212]. Acquisitions and Growth Strategy - The company completed three acquisitions during the year ended December 31, 2024, and expects to pursue more acquisitions in the future[19]. - The company expects strategic acquisitions to contribute to growth, having recently acquired Therapy Equipment Limited in 2023 and Sager S.A., ESAB Bangladesh, and SUMIG in 2024[186]. - The company seeks acquisition opportunities to expand into new markets and enhance its position in existing markets, but faces risks related to integration and realization of anticipated benefits[67][69]. Workforce and Employment - Approximately 9,300 associates are employed by ESAB, with around 1,300 in the United States and 8,000 outside the United States[40]. - Approximately 18% of U.S. associates are covered by collective bargaining agreements, while 39% of non-U.S. associates are represented by foreign trade unions[45]. - The company is committed to a "Talent First" strategy, focusing on attracting and retaining talent while ensuring associate health and safety[41]. - Approximately 36% of the company's associates were represented by trade unions and works councils as of December 31, 2024[103]. - The company has approximately 8,000 associates in foreign locations, representing about 86% of its worldwide associate base[103]. Risks and Challenges - The company faces risks from cybersecurity incidents that could materially affect its business, financial condition, and results of operations[77]. - The company is exposed to fluctuations in currency exchange rates, with approximately 78% of sales derived from operations outside the United States[65]. - The cyclical nature of the welding and cutting industry may adversely affect the company's performance, particularly during periods of economic downturn[52]. - A significant decline in capital investment and maintenance expenditures by customers could reduce demand for the company's products and services, impacting financial performance[53]. - The occurrence of legal claims, regulatory actions, or environmental liabilities could have a material adverse effect on the company's business and financial results[126]. Debt and Capital Structure - As of December 31, 2024, the company has $1.1 billion of outstanding indebtedness and the ability to incur an additional $50 million of indebtedness through uncommitted credit lines[78]. - The company issued $700 million in aggregate principal amount of 6.25% senior notes due 2029 on April 9, 2024[81]. - The company may require additional capital to finance its growth strategy, which may not be available or may not be on acceptable terms[72]. Regulatory and Compliance - The company is subject to ongoing audits by tax authorities, which could result in unfavorable tax adjustments impacting future financial results[100]. - Changes in tax rates and regulations could adversely affect the company's financial results, particularly with the potential implementation of a global minimum corporate tax[99]. - The company is subject to various United States sanctions and export control regulations, which could result in substantial fines or other sanctions if not complied with[115][117]. - The company must comply with stringent environmental and health and safety laws, which could result in costly liabilities if not adhered to[120][121]. Dividend and Shareholder Returns - The company declared a quarterly cash dividend of $0.06 per share for Q1 2024 and $0.08 per share for Q2, Q3, and Q4 2024, but future dividends are not guaranteed[138]. - The company’s ability to pay dividends will depend on its financial condition, earnings, and capital requirements[139]. - The company authorized a stock repurchase program to buy back up to 5 million shares of common stock, with no repurchases made during the year ended December 31, 2024[178]. Operational Insights - The company operates through two reportable segments: "Americas" and "EMEA & APAC," serving a diversified global customer base[184]. - The company operates defined benefit pension plans and post-retirement medical and death benefit plans, which may be subject to funding requirements that could adversely affect its financial condition[106]. - A significant portion of the pension plans' assets are invested in publicly traded debt and equity securities, making them vulnerable to market risks[107]. - The company relies on third-party suppliers for a substantial amount of raw materials, parts, and components, which may be subject to price changes and availability issues[91].

Financial Performance - ESAB reported fourth quarter sales of $671 million, a decrease of 3% year-over-year, with flat core organic growth[3]. - Net income from continuing operations attributable to ESAB was $72 million, or $1.18 diluted earnings per share, with core adjusted net income of $79 million, or $1.28 diluted earnings per share[3]. - Core adjusted EBITDA for the fourth quarter was $129 million, representing a 2% increase and a margin expansion of 90 basis points to 20.3%[3]. - The company achieved high-single-digit growth in welding equipment during the quarter, contributing to overall performance[9]. - ESAB's operating income for the fourth quarter was $111 million, compared to $103.7 million in the prior year[24]. - The company reported a net income attributable to ESAB Corporation of $53.7 million for the fourth quarter, up from $50.2 million year-over-year[24]. - Net income from continuing operations (GAAP) for Q4 2024 was $73.6 million, up from $59.6 million in Q4 2023, representing a 23.5% increase[26]. - Adjusted net income from continuing operations (non-GAAP) for Q4 2024 was $80.1 million, compared to $70.8 million in Q4 2023, reflecting a 17.5% growth[26]. - Adjusted EBITDA for Q4 2024 reached $131.2 million, an increase from $128.5 million in Q4 2023, indicating a 2.1% rise[28]. - Adjusted EBITDA margin (non-GAAP) for Q4 2024 was 19.6%, compared to 18.6% in Q4 2023, showing an improvement of 1.0 percentage points[28]. - Core adjusted net income per share (non-GAAP) for Q4 2024 was $1.28, up from $1.13 in Q4 2023, marking a 13.3% increase[30]. - Total net income from continuing operations for the year ended December 31, 2024, was $293.1 million, compared to $223.4 million in 2023, a significant increase of 31.2%[26]. - Adjusted net income margin from continuing operations for the year 2024 was 11.8%, up from 10.3% in 2023, reflecting a 1.5 percentage point improvement[26]. - Net income for the year ended December 31, 2024, increased to $270,748, up from $211,024 in 2023, representing a growth of approximately 28%[49]. Future Projections - The company expects core organic growth of 0.0% to 2.0% and total core sales growth of (2.0)% to 0.0% in 2025, impacted by approximately (3.5)% currency headwinds[5]. - ESAB anticipates core adjusted EBITDA of $515 million to $530 million and core adjusted EPS of $5.10 to $5.25 for the full year 2025[5]. - The company expects 2025 core net sales growth to range from -2.0% to 0.0%, with organic growth projected at 0.0% to 2.0% and acquisitions contributing approximately 1.5%[42]. - The company's core adjusted EBITDA for 2024 is projected to be $510.7 million, with a range of $515 million to $530 million for 2025[42]. Acquisitions and Investments - The acquisition of SUMIG, a South American light automation and equipment business, was completed in Q4 2024 to enhance global market opportunities[6]. - ESAB signed an agreement to acquire Bavaria Schweisstechnik GmbH, a European business, expected to close in 2025, which will strengthen its consumables portfolio[7]. - The company reported a significant increase in acquisitions, net of cash received, totaling $153,664, compared to $18,665 in 2023[49]. Cash Flow and Assets - Adjusted free cash flow for the year ended December 31, 2023, was $320.5 million, compared to $304.5 million for the previous year[40]. - Cash and cash equivalents increased to $249.4 million as of December 31, 2024, compared to $102.0 million as of December 31, 2023[45]. - Total assets grew to $4,033.975 million as of December 31, 2024, up from $3,828.629 million as of December 31, 2023[45]. - The company reported a decrease in retained earnings to $597.2 million as of December 31, 2024, compared to $350.6 million as of December 31, 2023[45]. - Net cash provided by operating activities rose to $355,399, compared to $330,494 in the previous year, indicating an increase of about 7.5%[49]. - The company experienced a net cash used in investing activities of $205,696, compared to $62,243 in the prior year, indicating a significant increase in investment outflows[49]. Currency Impact and Sales - The impact of foreign currency translation resulted in a decline of $89.7 million (3.2%) in total sales for the year ended December 31, 2023[37]. - For the three months ended December 31, 2023, total sales declined by $18.6 million, or 2.7%, with Americas sales decreasing by $25.2 million (8.2%) and EMEA & APAC sales increasing by $6.6 million (1.7%)[34]. - For the year ended December 31, 2023, total sales were $2,774.8 million, reflecting a decline of $34.0 million (1.2%), with Americas sales decreasing by $38.3 million (3.1%) and EMEA & APAC sales increasing by $4.3 million (0.3%)[37]. Expenses and Charges - Restructuring and other related charges for Q4 2024 were $1.7 million, down from $6.4 million in Q4 2023, showing a reduction of 73.4%[28]. - The company reported a pension settlement loss of $12.2 million for the year ended December 31, 2024, compared to no loss reported in 2023[26]. - Depreciation, amortization, and other impairment charges were reported at $66,790, down from $75,034 in the previous year, indicating a decrease of about 11%[49]. - Stock-based compensation expense increased to $19,780 from $16,122, representing a rise of approximately 22%[49]. Dividends and Borrowings - The company paid dividends totaling $16,992, an increase from $13,342 in the previous year, reflecting a growth of approximately 27%[49]. - Proceeds from borrowings on Senior Notes amounted to $700,000, with additional borrowings on revolving credit facilities totaling $205,000[49]. - The effect of foreign exchange rates on cash and cash equivalents resulted in a decrease of $34,017, compared to a decrease of $18,555 in 2023[49].

Core Insights - Esab (ESAB) has consistently surpassed earnings estimates and is well-positioned for future earnings reports [1][2] Earnings Performance - In the last two quarters, Esab has exceeded earnings estimates by an average of 7.77% [2] - For the most recent quarter, Esab reported earnings of $1.25 per share against an expectation of $1.12, resulting in a surprise of 11.61% [3] - In the previous quarter, the consensus estimate was $1.27 per share, while the actual earnings were $1.32 per share, leading to a surprise of 3.94% [3] Earnings Estimates and Predictions - Estimates for Esab have been trending higher due to its history of earnings surprises [4] - The stock has a positive Zacks Earnings ESP of +1.75%, indicating bullish sentiment among analysts regarding the company's earnings prospects [7] - The combination of a positive Earnings ESP and a Zacks Rank 3 (Hold) suggests a high likelihood of another earnings beat [7] Statistical Insights - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 or better have a nearly 70% chance of producing a positive surprise [5] - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, reflecting the latest analyst revisions [6] Importance of Earnings ESP - A negative Earnings ESP reduces predictive power but does not necessarily indicate an earnings miss [8] - Companies can still beat consensus EPS estimates despite a negative Earnings ESP, and some stocks may remain stable even if they miss estimates [8] - It is crucial to check a company's Earnings ESP before quarterly releases to enhance the chances of successful investment decisions [9]

Group 1 - ESAB has experienced significant selling pressure, resulting in an 8.2% loss over the past four weeks, but it is now in oversold territory with potential for better earnings than previously predicted [1] - The Relative Strength Index (RSI) is a key technical indicator used to identify oversold stocks, with a reading below 30 typically indicating oversold conditions [2] - The RSI reading for ESAB is currently at 28.06, suggesting that the heavy selling may be exhausting itself and a trend reversal could be imminent [5] Group 2 - Analysts have raised earnings estimates for ESAB, with a 0.5% increase in the consensus EPS estimate over the last 30 days, indicating potential price appreciation [6] - ESAB holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which supports the likelihood of a near-term turnaround [7]

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Esab (ESAB) came out with quarterly earnings of $1.25 per share, beating the Zacks Consensus Estimate of $1.12 per share. This compares to earnings of $1.08 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 11.61%. A quarter ago, it was expected that this maker of welding and cutting equipment would post earnings of $1.27 per share when it actually produced earnings of $1.32, delivering a surprise of 3.94%.Over the last four qua ...