ESAB Corporation ((ESAB)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for ESAB Corporation painted a generally positive picture, highlighting robust financial performance and strategic growth initiatives. The company reported increased sales and EBITDA growth, buoyed by the successful acquisition of EWM. Despite facing some challenges related to tariffs in the Americas and deferred revenues in Mexico and automation, ESAB managed to raise its full-year guidance, showcasing strong cash flow and financial resilience.
Organic Growth and Sales Increase
Sales for ESAB rose by 8% to $687 million, with organic sales seeing a 2% year-over-year increase. This growth reflects significant improvements in the Americas and sustained strength in the EMEA and APAC regions, indicating a healthy demand for ESAB’s offerings across various markets.
EWM Acquisition
The acquisition of EWM was completed earlier than expected, contributing approximately 2 points of growth and around $1 million in adjusted EBITDA. This strategic move brings high-level talent, unmatched technology, and highly accretive gross margins to ESAB, enhancing its competitive edge in the market.
Adjusted EBITDA Growth
ESAB reported a 7% increase in adjusted EBITDA, reaching $133 million. This growth was driven by strong execution on margins, despite the tariff impacts in the Americas, and continued investments in sales and AI initiatives, underscoring the company’s focus on innovation and efficiency.
Free Cash Flow Conversion
The company achieved a free cash flow conversion rate exceeding 100% this quarter, a testament to the strong performance of its team. Additionally, credit facilities were expanded early in Q4, providing ESAB with increased financial flexibility to support future growth initiatives.
Raised Full Year Guidance
ESAB has raised its full-year guidance, projecting total sales between $2.71 billion and $2.73 billion, with adjusted EBITDA expected to be in the range of $535 million to $540 million. This optimistic outlook includes contributions from the EWM acquisition and reflects the company’s confidence in its growth trajectory.
Tariff Impact in the Americas
The adjusted EBITDA margin in the Americas was impacted by ongoing investments, with a drag resulting from price/cost dynamics related to tariffs. This challenge highlights the complexities of operating in a global market and the need for strategic adjustments to mitigate such impacts.
Challenges in Mexico and Automation
ESAB faced deferred revenue issues in automation shipments and sales into Mexico. While there was some revenue catch-up during Q3, it was not fully recovered, indicating ongoing challenges in these areas that the company is working to address.
Forward-Looking Guidance
Looking ahead, ESAB has raised its full-year guidance based on strong financial performance. The company expects total sales to reach between $2.71 billion and $2.73 billion, with adjusted EBITDA forecasted at $535 million to $540 million. Despite some tariff-related headwinds, ESAB anticipates strong margin improvements in 2026, driven by pricing strategies, restructuring initiatives, and manufacturing adjustments. The company remains committed to enhancing shareholder value through both organic growth and strategic M&A activities.
In conclusion, ESAB Corporation’s earnings call highlighted a positive sentiment, with strong financial performance and strategic growth initiatives leading the way. Despite some challenges, the company remains optimistic about its future, as reflected in its raised full-year guidance and commitment to long-term shareholder value.