ESAB (ESAB) - 2024 Q4 - Annual Report

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].