Earnings call transcript Q3 2022

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Operator

Good day and welcome to the ESAB Corporation Third Quarter 2022 Earnings Call. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you.

I’d now like to welcome Mark Barbalato to begin the conference. Mark, over to you.

Mark Barbalato

operator. Thanks, Third Call. ESAB’s XXXX Quarter to Earnings Welcome This Shyam Kambeyanda; joined by and CEO, our President and morning, I’m CFO, Kevin Johnson.

mind except forward not obligation subject mentioned Actual results intend any in are assume as SEC the these filings set any to statements, keep that required differ. earnings the our of Please release. to accompanying today’s measures statements forward-looking With be found the to non-GAAP law. forth making today, press in in financial are related our presentation. slide risks, And those during looking; or to today’s are can may and and by call including those some respect we information earnings we update reconciliation do and release measures

like turn President over to I’d Shyam that, call to our Kambeyanda. the CEO, and With

Shyam Kambeyanda

and you, you thank all morning, for Good Thank us Mark. everyone, today. joining

quarter and I’m another X. growth, solid delivered revenue expansion on ESAB flow. of margin Slide cash

made to shaping increased XX%. progress we continued sales margin XX expanded This towards EBITDA as Organic a points EBX traction. basis ESAB faster-growing, and to initiatives business. Adjusted quarter, great XX.X% higher-margin less-cyclical gain into

shape our goals introducing accretive proud X of long-term new and against enterprise continue effort by execution margins bolt-on, our EBX these acquisitions; goals. products; cash strategic making to using flow. I’m We exciting, and expand to improve towards and our team’s

X Slide to and Moving growth. focusing organic on

XX%. Our vitality index continues at robust be to

slide, I’ve of some the new the On our left highlighted of exciting, products.

equipment control will slide and faster and connected. industry-leading that higher towards efficient products margins. note gas organic digitally on developing products the welding new gross are You we’re that ESAB growth on focused will shape These eco-friendly, and

the new gas enhanced start control product and is products Let has our digitally with slide. enabled. The on safety features MediVital me

on products waste, in our safety; best GCE rates and system, reduce control. gas These most savings importantly the market central innovative most significant medical customers, upgraded is increase reduce gas customers. precision launched flow resulting and and cost also which the leakage the for the our an system with We medical highest maintenance; gas for

Moving This new pulse robotics offers provides power enhanced source to Warrior with digital wave FABTECH, about market the the best-in-class and and connectivity me for talk let Edge. leading first product automation. technology

our a further light ES, growth interface. is Renegade offering, Next lower consumption globally. a the out and our which scalable a our product our for new customers Both industrial and platform equipment builds provide the energy ESAB user Renegade best-in-class Warrior providing with

evolving Slide Moving now our the portfolio. about to X conversation equipment and continuing

product, which result products. our equipment Renegade, will to product a VOLT FLEXVOLT expand DEWALT’s was Black open business The allows brand technology addition alongside is machine Renegade Renegade introduce this channels. fantastic Warrior to opportunities welder opens and the in battery-powered The free, at areas. to mix to and bring battery-powered DEWALT our me our whole as higher a a equipment and product partnership allowing a also making EBX welding new continue This the new the battery to welding the remote VOLT friends new reach our leverages VOLT. battery welder, product transportability, create interchangeable to margins. and, & Decker. new Stanley and segment. friendly other improves environmentally is of category-defining recyclable industry-leading Let rechargeable, our exciting our users market. and a hard-to-access ESAB developed the to VOLT with The with Renegade shape category The us customers welder a in for The using innovation process in is noise most This and

our many of X. spoken gas Moving I’ve control to to you Slide about business.

medical to ESAB critical and and in less-cyclical Europe. acquired calibrate an a about with industrial than we to cutting. part control acquired These industrial is welding control with making faster-growing, We GCE, a also to an in of business. The gross today acquisitions platform higher-margin $XXX rate us. leading above Let well, gas Gas included provided with integral to gas gross and XXXX, access a end platform natural margins. growth control This XXXX, business which in gas all base Then Victor million, of take in a XX%. moment annual margins a And mission-critical accretive greater successful leader is core markets. our generated our adjacency is me it gas business.

me exciting business, we As Slide control continue of we’ll our that X Medical. strengthening brings to gas our Ohio and acquisition move forward, and on to focus

gas I’m into shape team providing thrilled higher-margin mission-critical with to $XXX This of regulators a position family. a ESAB strengthens leader to With presence welcome control our as a ESAB in strong business technology; have control Ohio leader less-cyclical, global Medical now attractive continues American Medical and XX%. a north North margins we gross higher-growth, the into in million the flowmeters, and market. in oxygen businesses. control acquisition gas gas Medical, our the platform is with and Ohio Ohio

combined with opportunities are footprints. our existing geographic significant our cross-sell When given complementary there gas to control platform,

continue to addition, on and and I we with updates forward In look journey. accelerate on to will we efficiency innovation, be more use this to drive this productivity There EBX more will savings. come exciting as will you improve sharing front,

X. Moving Slide to

and expansion driving we innovative solutions, our and InduSuite mix cash workflow enterprise, flow. acquisitions Edge, supported focused new like our robotics margins improving on VOLT Renegade an by and equipment growing Ohio organically going bolt-on through improving margin and and Medical; are the EBX, of the Warrior forward; As like introduction

cash of revenue, XX%-plus than ability goals achieve margins conversion. EBITDA and We strategic our in $X our are XXX%-plus greater billion long-term to of confident

Europe our on financials Middle America organically expected, and to to in grew Turning India Sales X. quarter on the East performed the outperformed. resiliency. show as North and Slide businesses at continues XX%.

New our excitement with products continue to generate customers.

teams XX are well, executing EBITDA process. We EBX by margins The continue cover points with inflation our year-over-year. price to expanding using basis

lines. rose had to Sales continue quarter. our and Americas aimed to XX% solid at Moving cyclicality we And our our organically. XX. product lowering run which is playbook, rationalizing Slide a

in earlier, America mentioned line expectations. business performed North I our As with

strengthen South as America of XX X% was result comp buying expanded points, a a line and EBITDA with continues with and faced post-COVID margins but in performing is we basis increased sequentially well patterns. difficult to expected. what year-over-year

Moving to Slide XX.

APAC and quarter. EMEA business a strong Our had

third X% productivity. efficiency FX strong year-over-year, basis Our to segment This negatively process XX execution by was the And reflecting quarter of improved despite strong our U.S. sales points and and EBITDA rose dollar. margins organically. improve a headwind, EBX costs reduce impacted

over for me let that, Kevin to turn With it XX. Slide

Kevin Johnson

everyone. Thanks, Shyam. Good morning,

cash to Free and was flow versus XX% greater flow. chains flow. cash conversion the than was improve improved a and Supply the year up to inventory prior drive quarter, had for continued flex us cash ESAB quarter allowing in cash strong XXX%.

As fund able leverage expect Shyam discussed, less, quarter, this and targeted Xx our In flow. Ohio acquisition, cash year already net announced another with end quarter Xx to we we the generation; to leverage our range. cash year-to-date the with we a have within strong well the expect Medical to acquisition been and fourth or of flow of X.Xx

flow. in significant opportunities our earlier spoke have Investor further cash we still I higher to drive at the Day, year, As

than embracing processes goal EBX new on annual are improving our using long-term delivering team and of XXX%. to our consistent technology. cash We continues And greater of focus our conversion

million free of we greater than cash deliver remain $XXX track on XXXX, For flow. to

updated of an XX. Turning to provide Slide overview guidance. We our XXXX

we conditions numbers remains which in guidance guidance and spoke. was Russia time line quarter remaining unchanged, Organic exclude reduced, of second market last Our from sales XXXX XXXX. approximately $XX with has of growth million the Total what been -- FX. with we reflects additional expected

X financing due reflecting from quarter we improvements Adjusted to continue With has we our in use as narrowed secured go, million includes adjusted to the raised guidance to been to $X interest from our FX. operating $X.XX, lower favorable to margins last EBX an EBITDA guidance, quarter. expand we to which and approximately $X impact expense performance EPS

We expect in positive another forward exiting QX strong with and momentum. XXXX to look quarter

to let XX up. Slide wrap Shyam to hand back that, With on me

Shyam Kambeyanda

Kevin. you, Thank

growth, quarter and summarize. business shape delivered solid higher We we To towards cyclicality another higher less as margins. our

products the increase and to new products towards will innovative market; mix equipment. game-changing, introducing these are We our

We are portfolio accretive Ohio shaping our acquisitions Medical. like positively with

across flow. strong EBX deliver drive the to business and our cash costs to operating continue free We reduce

We’re value. off well business on we’re to QX shareholder start good shaping our our deliver to long-term and way in to a

Thank us. for joining again you

please Operator, line open the for questions.

Operator

from [Operator Instructions] Zakaria Your Tami from JP first line the Morgan. of question comes

Tami Zakaria

are first question almost America lapping seems in my North XX%-plus pricing about pricing in how so XXXX? realization thinking as So it price year, you And is X%. tougher like pricing, was on it’s last compares get maybe from up

Shyam Kambeyanda

for Thanks question, that Tami. Yes.

of a I So for before. couple this things there mentioned of sort us. are

process. within processes as ESAB part We different have X pricing of our EBX for

you’ve and really was that. The a seen on us first inflation, strong do one job associated with

see to expect, on I next see would to over in I larger XXXX. But go but inflation what XX as pricing processes does, will disciplined. as role be months, very into And XX think other we price-based So markets place continue will play develop that have inflation. that X we we’ll there’s the a the we that

these the think we where work to you this marketplace, next again gate that some the to detail for around is to have that to our go Kevin and I products last I year the our to better to then positive. finish we process there’s one continuing develop on forward, some coming pricing continue is be feel we more we expect value-based in probably And first on with the The the We’ve us stage guidance strong spot. rationalization, a piece out out so going We’ll targeted and give margins products. as year. and out done opportunity around simplification sometime line XXXX. pricing in based And [value are priced] to going as drive a QX market piece pricing teams we’re products new with. product to with really work continue be

Tami Zakaria

in you’re on to I color. a your region? if been helpful And very lot noise different actually then seeing a regard EMEA of follow-up: Europe, with in hearing moderation trends comments order we’ve markets. From That’s So perspective, about ask what in demand any end can the

Shyam Kambeyanda

We to in investment be strong. our opportunity energy, which and favor a be we agriculture through to few that Europe. possibly in renewable factors, view, tower the sort very question. we is opportunity about continue to a have strong continue Yes. a press, are We’ve in to XX think includes QX will think in to and strength in well there our our be nuclear, go Europe understand the of -- the my Tami, Thanks what’s the game for ground in Europe. I team, We’ve but continues We our call, started as news. in that resilient. the business. There continent. in -- talked business, Europe European And read obviously strong we European in mentioned be I could my are going We wind next earlier XX months. as growth spending

advantage We LNG fronts, we that space. with continue forward gas, our wind and positioned look those bit some investments, on of the also and in products its their some that certified ESAB to And then spend as of gas more economy of the European when is will their maybe take as will sort little think space, needs. to on we particular technology well X equipped a there. at nuclear defense for that line, welding is that have believe well oil And port products products continue et also, phenomenal way ESAB I possibly drive to that. cetera Europe and about, oil for of investments GDP make last defense. piece you the We talk ICE of sort The make is have way all will the that sort

are of moderate could that also So some are we ESAB positives on into years. we but as the that think next couple go there some there the impact negatives,

Operator

question Your Baird. the Mig Dobre of next line from from comes

Mig Dobre

expect a to we’re from going Tami of to business is in function want the we clearly your growth like -- market of business on Or within kind think Is of the relative in of demand? terms about the how America? dynamics sort is what year, context? more since momentum slowed here especially up and think in this you the you business? just do and Should volumes, sort XXXX? with talking the of I were in perspective, so tone as the your where at Latin I of that end follow this investors outlook. we’re channel or maybe comparisons about Volumes managing this discussion like highlighted on contemplating decline in and about earlier point

Shyam Kambeyanda

started Orders of of QX to started well. that all XXXX, we’ll but just process you We’ve anything sometime of that downward strong our make say can in see be you in has that would any volume that for so of what I rate. sort talk is me, sort trend to I today we QX, about we’re don’t to us seeing concerned. sort that want to makes a me say at continue

to bridges. continue We our growth work

we America North volume -- customers, new drive be there drives of us us the We the better new think cross-sell out is continue high of team made that exciting real products and driving GCE in for think some drive Mig, the we of in the gain. that excited and opportunities new Ohio thrilled share products our for all Medical. the and doing. And portfolio flow Ohio to that to the geographies; whether we’re cyclicality really it be our and and think Our The piece that globally for that, what going opportunities in thing, that’s is that part to marketplace. acquisition launching a the products, about there’s that margins, the We products again, or channels geographic growth, about that better strengthen for we’re business. possibility build other also control that’s growth; we’re opportunity cash the one lower about I gas think

in else there’s yes, we all and leaders. sufficient -- but the So at here, out QX, finish all, we’re into optimism, just ESAB and seasoned QX of anything as like amount go sits team strong and

expected. right go There’s that We’re products. for the resilient. way, we’re opportunity now, making the we is sort on everything as newsprint as are growth very for at Markets there could much other as performing come plans us, as things of in are that excited markets could sit about but but the

we’ve the really about positioned that and good excited made for where feeling term. is very long We’re the the about acquisitions business

Mig Dobre

from of the to pricing, a though. in so discussion sort to way ago like I pricing -- to -- I interpreting on things the pertaining commentary and of so your side fair more your Okay, business, the enough. it really your And was is really moment wondering, was consumables, than on. equipment am value

As raw we’re Or for it’s do think at XXXX? flat potential kind consumable as start material better to remain pricing going you that looking back, manifesting is reasonable to you -- costs headwind? or as of a going in

Shyam Kambeyanda

what the And this seen commodity price Yes. way Mig, the way the is in that has of we to some happened at I is, would on onto that ask you held have down. past, the drop. we’ve look prices

of We’re so an the down, going very forward. business within continue pricing quick as deliberate have are the we way we go out expectation with very the to think that’s marketplace and I that we sort to on

second or of out you go [there’s justify where that piece to inflation The to pricing as another] north say sort move there at would I it’s that is continues possibly to XXXX. be that into we

understanding all you So know, process the of disciplined as a team, inflation. we have very

at and know sales with teams, so As every region a business price we sees our position the time matter inflation in a if inflation in no exactly where of cost monthly the team, moment quarter. month all any where that result, within other we at, within of the as or review vis-à-vis basis commodities-based is on net and it’s business a the we’re our

focused business, comfortable and driving geared have. team. price the and sort on And that So is margins focus we’re to of I’m the we as impact with where leadership the that’s very the on really net process process forward, a

Operator

of [Operator Dankert comes the next from from Loop Instructions] Capital. your And question line Chris

Chris Dankert

in update the and on, on what’s thinking line I if it, kind just the me that going about guess but any rationalization, front? product missed quarter, on -- EBX forgive I of

Shyam Kambeyanda

Thanks Chris. for that,

that front. that The is early view just make progress have we piece. that on to continue on innings we’re that particular particular We

We move continue it drive result, OpEx and expect kind rationalization that’s of then sort to There’s through that a say ours forward that initiative we you I’d of as to footprint to to within XXXX, EBX reduction is we’ll right behind of go to business. and piece on continues piece. different as that the geographies drive another what so

continued And improvement product our then at looking of within different OpEx the so transformation business. X footprint rationalization, we’re in sort line sort of pieces of and

And progress piece, actually in early rationalization us on working seeing innings ahead XXXX. encouraged the all X, of good so and by what’s sort we’re product of some

Chris Dankert

on else then Well, about. you it. ask kind to Got wanted that something I touches of

on part. mean, footprint assume I and the for it the So rationalization, most fair is to a evaluation That’s we’re planning stages benefit, the here? in like XXXX probably

Shyam Kambeyanda

expect the within it. there’s ratchet or that expectations in our number benefit, would do within we’ve be our what the hear specific the view up so think be something ratchet a but It’s and from to don’t be as continually sometime we into I us on benefits would restructuring the we team, there. given something in out as go footprint as QX to business up us and that we performance going for to

going about to ready talk QX. not that Kevin in just year, expect to hear so about I We’re and through more budget processing next it. and for our are

Operator

next comes from Stifel. Nathan Your the from question line Jones of

Adam Farley

is This Adam Nathan. on Farley for

the So They color little a pipeline, the gaps to expecting maybe then wondering launching in on that vitality provide I on how had from new supply go detail all index. there equipment? the you in ESAB might on really Have difficulties maybe many maybe interesting. if you sound inorganically? products And launch I more can products new appreciate any chain you any are after XXXX. technology are was product

Shyam Kambeyanda

Yes.

that. you thank for So

excited around years about the appreciate really done we’re ESAB. I what over really the innovation of we’ve So with question because couple last

Warrior. done and about the products. look on see we what innovations, for are we’re with XXX. when is and create for something now made are as platforms. piece is, that bigger XX view we’ve know, scalable off us design scalable, What the platforms you also talked at the you see started I you Renegade, us you The As the that what is at Today, integrity. call is those And so we’ve

design sort that of are see You foundation. of now the part

a a to absolutely we’re And a what production we result, forward as Renegade supply that chain, going which and of not changing. excited have about. really something result so mention is better efficiency as game It’s VOLT was better a it the

about will FABTECH. us it see talk You at

as the other This be device in we’ve time well so next way it to if publicly. that welding. needed week. as to a are the It’s same belongs has it that the battery, any talked first going somebody here a launching for We’re tool can out And has battery applications a they big for there performs run it that was about to product that’s equipment. interchangeable DEWALT, today remote that exact power that use welding

So really piece. excited about that

continue question the some down And keep answer filler bit also to The some number foundation. our specific equipment, innovations to on metal up talked torch only we your on a specific short platform, our side the but business, also we’re of on on business. of pace, will may innovate about sort of I’ve the slow we yes. of the side is because focused

that our exciting pay continue X in So the supply upon consistency rationalizing the is dividends foundation chain, number X be the next simplicity years. view customer a to rationalizing of and terms number over margins can products on creating satisfaction a that doing that stuff and my and will lines, product to all truly what start in of built [both] platform we’re all, then innovative in SKUs, of of really

Adam Farley

of I’m holding question our ask for end between to consumer on and forward want than industrial outlook seeing divergence wondering you’re if retail-oriented in did other that markets, another maybe growth. companies stronger markets. of I some this your heard in industrial helpful. maybe from so markets, coverage We’ve your really more That’s

Shyam Kambeyanda

to couple announcement And we’re on particular days should our next is is of So partially this, market. come because bit that the different that another a see front out you’ll the story move sort our talk about us retail into new but retail. in of

space. that to new we’re so And

in really it’s move America, So for space, that into as North ESAB. especially all we growth

the good as particular both actually that the mentioned in And seeing the front side been then both we’re for -- off is in on some word So the us sort way in the we well. of Middle to we’re of you It’s And has of held of industrial best momentum Americas positive and up. to best activity. And side sort start retail the I the share to and QX outperformers actually been is resilient on use sort East have to look as QX. India Europe. to also a because

Operator

at questions call like [Operator this would the Mark to Instructions] There for are no over I closing turn back statements. further to time.

Mark Barbalato

to joining on a us good you our next day. forward today. we Thank to look And you call. speaking Have for

Operator

This concludes today’s conference call.

You may now disconnect.

ESAB (ESAB) 3 Nov 222022 Q3 Earnings call transcript