• Adjusted EBITDA Margin: Record first quarter adjusted EBITDA margin of 19.8%, with a 100 basis points expansion.
• Organic Growth: Slightly positive organic growth in Q1.
• Global Welding and Gas Control Equipment Growth: Mid-single digits growth in both segments.
• Americas Organic Sales: Declined by 200 basis points, offset by strong price performance.
• EMEA and APAC Sales Growth: Total sales rose by 200 basis points, with volume increasing by 400 basis points.
• Free Cash Flow: Generated $30 million in free cash flow, including $10 million inventory pre-purchase.
• Net Debt: Reduced to 1.5 turns.
• 2025 Revenue Outlook: Raised by approximately $30 million due to acquisitions and FX improvements.
• Adjusted EBITDA Guidance: Increased to $520 million to $530 million, reflecting the Bavaria acquisition.

• Warning! GuruFocus has detected 4 Warning Sign with CMPR.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ESAB Corp (NYSE:ESAB) reported a record first quarter adjusted EBITDA margin of 19.8%, reflecting strong execution and strategic growth investments.
• The company has successfully completed the acquisition of Bavaria, strengthening its proprietary consumables portfolio and positioning it for growth in key sectors.
• ESAB Corp (NYSE:ESAB) is leveraging its global footprint with 80% of manufacturing located in-region, allowing for agile management of global dynamics.
• The gas control business has grown significantly, now accounting for 18% of total revenue, with expectations to reach 25% by 2028.
• Strong performance in high-growth markets such as India, Asia Pacific, and the Middle East offset softness in the Americas, showcasing the company's global resilience.

Negative Points

• Organic sales in the Americas declined by 200 basis points, impacted by lower volumes despite strong price performance.
• The company faces a tariff impact in North America, estimated between $15 million to $20 million, which it plans to offset with pricing strategies.
• There is a noticeable lull in the North American market due to tariff uncertainties, affecting customer and channel engagement.
• Despite strong cash flow, the company had to increase inventory pre-purchases by approximately $10 million ahead of tariffs, impacting short-term cash flow.
• The acquisition of Bavaria is expected to be EPS neutral in the first year, indicating limited immediate financial benefit.

Q & A Highlights

Q: Can you provide more details on the tariff headwinds for 2025 and how you plan to mitigate them? A: Shyam Kambeyanda, President and CEO, explained that ESAB has positioned itself well with 80% of its products built in-region, minimizing tariff exposure. Kevin Johnson, CFO, added that the main impact is in North America, with an estimated $15 million to $20 million tariff impact, which they plan to offset with pricing adjustments.

Q: Could you elaborate on the growth trends and outlook for the gas control equipment business? A: Kevin Johnson, CFO, noted that the gas control business has strong momentum, supported by past acquisitions and upcoming ones expected to close in Q2. These acquisitions will enhance the medical side of the gas control business, contributing to its growth and accretive margins.

Q: How are you approaching pricing versus volume in your organic growth guidance, and have there been any changes since the start of the year? A: Shyam Kambeyanda, President and CEO, stated that they have implemented general price increases rather than surcharges. Kevin Johnson, CFO, mentioned that pricing in EMEA and APAC remains flat, while North America has seen some pricing adjustments to counter tariff impacts.

Q: Can you provide more insight into the organic growth expectations for the Americas and how pricing and volume will impact margins? A: Shyam Kambeyanda, President and CEO, indicated that they expect low to mid-single-digit negative core volume growth in the Americas, with pricing adjustments to cover tariff impacts. Kevin Johnson, CFO, emphasized the importance of the EBX process in maintaining net positive pricing and expanding margins.

Q: With the 2028 target of 22% EBITDA margin, is there potential to update this target given current performance? A: Shyam Kambeyanda, President and CEO, acknowledged the strong start and momentum but emphasized the importance of meeting current targets before setting new ones. He highlighted ongoing investments in growth and innovation as key factors in achieving long-term margin improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.