ESAB Corp Q4 FY2024 earnings call

• Recognized the tremendous effort of associates, with EBX driving continuous improvement at manufacturing sites. Fourth quarter capped off a strong year with record profits, over 100% free cash flow conversion. - 2024 highlights: Adjusted EBITDA at top of range, margin set a new record, adjusted EPS and free cash flow above guidance. - Community investment: Europe team expanded technical university network, organized seminars and donated equipment; Blue Collar Tour traveled to highlight products; GCE team collaborated on fuel cell system; U.K. team involved in Project OR. - Growth initiatives: Over $100M invested in growth initiatives, added three acquisitions in 2024 and signed first 2025 acquisition (Bavaria), which expands global consumables portfolio.

Americas: Organic sales declined 200 basis points, offset by 400 basis points price performance and 300 basis points from acquisitions. Adjusted EBITDA improved 210 basis points year-over-year to a fourth quarter record of 21.6%. Europe, Middle East, Asia: Total sales increased 300 basis points, EBITDA margins were at 19.3%. Volume increased by 400 basis points, and the Linde Bangladesh acquisition added 200 basis points of growth.

• Anticipate organic growth of 0% to 2% with positive price and volume, offset by ~3.5 points FX headwind. - Expect adjusted EBITDA of between $515 million and $530 million, margin increase of about 70 basis points at midpoint. - Free cash flow conversion expected to be approximately 100%, net leverage under 1.6x. - Organic growth flat in first half of 2025, improving in second half; strong growth in high-growth markets like India, Middle East, and parts of Asia.

• Uncertainty in the business environment which can impact results. - FX fluctuations, particularly the strong U.S. dollar causing headwinds. - Impact of steel pricing on consumables pricing, which could affect pricing strategies.

Q: Can you provide color on order patterns in early 2025, divergence in underlying trends?

A: Orders continue to be stable to slightly improving in both Americas and rest of the world, with a solid start to 2025 but environment still choppy.

Q: Color on accretion from 2024 deals in 2025 and deal environment?

A: 2024 deals are EPS accretive in year one, integrating well, and there's a robust deal funnel with the first 2025 deal signed, optimistic about executing on the funnel.

Q: Color on improving optimism in Americas in 2025, margin expansion drivers?

A: Equipment line accepted well, gas control business performing well, FABTECH business stabilizing; margin expansion from value-based pricing, EBX continuous improvement, and back office OpEx reduction using new technologies like AI.

Q: Breakdown of organic growth outlook by gas business, equipment vs consumables?

A: Consumables flattish to slight growth, automation and gas control equipment up low single-digit, equipment mid-single-digit; environment choppy but expects stabilization and second half traction.

Q: Split growth by region in 2025, color on Europe organic growth?

A: Developed vs high-growth markets; Europe organically expected low to mid-single digits, muted in first half, slight growth in second half; Americas volumes expected to improve sequentially with better year-over-year comparisons and market improvement.

Q: FX headwind impact on EBITDA, geopolitical opportunity in Russia/Ukraine?

A: FX headwind run about 20% decrement on movements; rooting for peace in Russia/Ukraine, but no near-term numbers in forecast related to reconstruction.

Q: Key investment buckets in 2025, details on EBX manufacturing footprint reduction?

A: Investment in AI, commercial excellence, university research; reducing manufacturing footprint involves tucking acquired businesses into ESAB sites for efficiency, with plenty of opportunity for further optimization.