ESAB (US:ESAB)2025-10-29 13:00Financial 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]