Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the ESAB First Quarter 2023 Earnings Conference. All line have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

Mr. of at President Vice Barbalato, Investor ESAB. Relations Mark

may begin conference. your You

Mark Barbalato

Kambeyanda; quarter to our call. Shyam Johnson. Welcome operator. XXXX President CFO, ESAB's CEO, by Thanks, joined first earnings Kevin I'm This and and morning,

intend and keep any today's making forward-looking update those required earnings results are to set release. Please statements in obligation our risks, differ subject are mind Actual of and that statements, the we in forward-looking SEC assume we except to law. forth by are or do including not some filings these may and as

mentioned With information the respect to can earnings any non-GAAP those slide to and today, financial be reconciliation measures presentation. accompanying release in our during press the measures found call related today's

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

Shyam Kambeyanda

Good you busy. joining you, all has ESAB morning, The Thank Thank for team everyone. today. us been Mark.

and have our our very goals. we I'm been importantly, focus. More made and impactful accomplishing towards meaningful strategic effort of progress proud have team's

system Chennai, Our had a margin out Sweden our recently and continues I've expansion India sites visiting to several was EBX global to visit the been I process engineering flow. cash to to and our truly in and expect our new quarters. meet at work we to teams. chance innovation Gothenburg, actually products business see higher of and launch delighted innovation, drive coming with the

our to report about we and with I'm our ESG community highlighted sustainable sharing forward where sustainability of positive activities practices. first products our Day. during efforts design our associates our pleased involvement published to I continued more globally. initiatives governance we am QX, make looking Investor In with our more and our

that another strong by and robust the specifically sales and to first Europe East about X first performance quarter. regions demand quarter performance We Slide driven quarter had expectations. the our Americas. in Middle X%, the in to APAC, solid Organic rose talk of exceeded from Moving

as our to EBX expanded working XX% up EBITDA and improved XX initiatives and capital. up basis margins margins was push XX.X% points Adjusted

teams continued and for are performance We with great integrating the growth pleased make synergies expansion. to new acquisitions. and margin strides The in of our finding

our deep In and the meeting, a into resolve their newest review business acquisitions, a and this XXX-day I'll on we to weeks, review. roadblocks. EBX for dive do At any synergies few Swift-Cut visit Therapy progress

We're end off to markets good and into in I'm the the momentum a second our start continued that year, has this quarter. positive pleased

As share a raised will this have more result, later. full we year our Kevin guidance. on

X. a better higher accelerates ESAB equipment to shows Turning We've cyclical, our slide to on faster-growing, progress this margin enterprise. journey towards And this been objective. sales reshape Slide a a achieving that less into of mix

this have Let share advanced strategy. how me we

First, through open innovation.

products Rebel, complete RobustFeed. Rogue, our We and protected R&D the of light spend. our have to as of And developed line like Renegade heavy-duty industrial a Fabricator line like and have introduce new know, Edge, Warrior you begun equipment always we've

established leadership acquisitions the into welding and [ph] our products of in North and and portfolio ESAB America gas XXXX strengthened Second, InduSuite. for which equine last, acquisition GCE. portfolio, Europe. GCE equipment gas we've solutions call cutting we our digital robotic with And Victor automated and positions torches,

expand this mix In allowing markets into than to end of equipment. to greater expanded profitable our additions XX%. into Ohio the XX ESAB margins the confident and We're higher profit business last a EBITDA we've this with more that Therapy is months, us strategy sustainably shifting

Moving to X. Slide

voice EBS unmet have understand of to a a reduce the At robust safety customers facing welder gathering shortage, stage ESAB, we cost for our to requirements total time is product development industry spent process includes their gate of Our that needs. ownership. and significant increased need the

three, trained is quarters. by workflow encouraged the and solution generated. the the broader the our with our ease funnel important architecture, I hours. InduSuite and start, be three teams This cobot solution have ESAB in I'm characteristics, where sharing of two, just coming we more these one, To open in matter look use on a forward industry to our cobot of one digital can solve call issues, designed that

to Slide Turning X.

and continue our We up any we continuous initiatives lean throughout floor reductions free to which and our face drive with manufacturing EBX future rooftop initiatives, improvement our facilities, space, helps issues within solve business.

XS, free and with to of facility pleased specific past by were production to up mapping, engagement we space example, this the manufacturing past up and at space lean within we freed ESAB. solved manufacturing X,XXX square consolidate feet sales grow with to In teams able their due merge our Through dues and Really XX%. problem manufacturing and principles. reduced value rooftops help this stream

we now fact, of is business. underway, recognizing our to delivering work competition have and teams hard which a In results the lean

X to Turning Slide and financials. our

X% First quarter sales grew organically.

in basis XXX APAC, line the added and currency Our cost Acquisitions Americas basis with EBITDA resilient. expectations. expanded to strength, price XX to and continue remain markets show another continue year-over-year East helped growth. points Strong as coupled Middle with in while the headwinds perform expected quarter. savings and performed inflation to XX.X%. have of offset Europe points

team initiative X. a solid acquisitions added quarter points and expectations. executes basis on of margins accelerated our Americas drive had and our to operational with Slide We've continues rose rationalization organically Sales line in X% line to XXX efficiency. price product as to Moving perform growth. the and

a expanded As increased adjusted result, to XX XX% basis XX%. EBITDA margins points and

Turning X. to Slide

for quarter APAC segments. our and EMEA strong Another

two strong with X X% X XXX organically, and reflecting demand benefit from APAC renewable energy regions continuing gas. we both First investment points and points sales basis and volume. quarter and points and oil to of in Middle strong to of growth, infrastructure, added in Acquisitions East, price regions, of increased the continue experience

Adjusted basis and points mentioned As European the before, market execution to by XX XX% by reflecting team. be to resilient. the continues margins expanded year-over-year XX.X%, EBITDA strong improved

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

Kevin Johnson

improve QX continue free a flow our ESAB cash Shyam. Thanks, year, we as record to a Good use strong We the start performance. EBX morning. had for to to

flow quarter. free our reduce us well Our in acquisition as net allowed fund cash as Therapy further the to the strong that closed leverage, first

improvement. partners AI for opportunities identify working capital ESAB work to continues with to

have projects in conversion. long-term cash confidence We guidance, goal our XXX% delivering up of that a XXXX give greater us than lined

Turning XX. to Slide

earlier, Total growth Shyam our As we guidance. to has X are to mentioned sales now increased guided points XXXX year raising full X% X%. between

organic We to have guidance X.X% X.X raised our on to point based our performance. growth strong quarter X.X% first on

resilient the volume, and dollar. U.S. rest on and continue X.X remain coming improved of assumptions Our for a rest from single-digit end weaker the volume with markets points to FX at year unchanged low has price. be price the

in and to tailwinds half half in EBITDA to in turn the by first half and the improved quarter million, organic of year. improved other $XX for it the year. We expect second a from the from low quarter single-digit Adjusted FX headwind FX increased the growth throughout coming second guidance the

$XX expect around Interest to increased we Tax $XX million guidance increase to Fed guidance second the X.XX% rate a end adjusted million now as of by and up remains $X million the by $X.XX. to bps has been the guidance raised freed XX the to quarter. cash been has further EPS unchanged

greater remains cash conversion our guidance Finally, on than track at XX%. flow

appendix. included in quarters, detailed in As guidance a have more the we slide prior

Exchange. XXXX been to back our Shyam, Investor hand at for has to October that Day confirmed you I I'm let know York Xth the Before the pleased Stock New

on provide more closer details the to time. will this We

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

Shyam Kambeyanda

In making our Kevin. strides towards Thank we're you, summary, goals. great long-term

have positive to our momentum the accelerate with in opportunities We business journey. more

funnel recent acquisitions. acquisition we're bolt-on performance Our of is healthy, with pleased the and our three

up lean growth focused on taking profitable teams activities based and Our a EBX are notch.

and As a result, to is strong flow. margin well expansion another deliver of ESAB cash growth, positioned year

We have guidance for the raised for on year and delivering shareholders. are our our laser-focused

you us. Thank again please open Operator, joining line for for the questions.

Operator

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

open. Your is line

Tami Zakaria

morning. much for questions. good so Hi, Thanks my taking

question [ph] the it it down first my on on simplification market So Any Americas because of It was was region? weakness why line any the product volume Is seems you're volume. down? Or in doing the color the X% the is there? end about in was there like quarter.

Shyam Kambeyanda

you Yes. Good morning, question. Tami. Thank that for

enterprise, that and our in Americas things. on has talked product accelerated. into I we're absolutely across simplification a couple less progress globe always reshaping region. front And higher-margin business a specifically spot cyclical our think driving our great that making we've you're of And on portfolio. the So about One,

continue lines to believe have focus secular through. that that driving product we on we're We longer tailwind and

we end to where we great of in segment, terms Renewable segments continue markets, down. especially Ag with see along In being retail slightly our see strength, Automotive Energy, the

expected. believe our North is America as business we So performing that

go see to continue as and into to expect improve into year. the we next margins We year

terms line So I simplification except the in really specific which piece. to of about for product was what nothing mentioned, actions, talk

Tami Zakaria

done headwind product it. line Got would the largely thoughts and when simplification largely abate? Any when be on would

Shyam Kambeyanda

Yes.

year this with of go to particular expect through We most that exercise.

we so quarter, think and get I'll the into be into more the XXXX. probably expect late share initiative on the But particular that in we we're innings innings middle next And to as on that Tami.

Operator

And Stifel. your the line of Nathan comes from next Jones from question

Your line open. is

Nathan Jones

Good competitors volume was the one There a ESAB's pretty follow in between volume. morning, to and wide everyone. it main I'm sure up Americas your is. going PLS on Americas disparity volume. of I'm

impact little of going a be there? the you deliberate I share on share hoping is or market think give quantifiable losses. there's know any could to I'm you PLS, color obviously, more whether some PLS So market us losses not

what the disparity more you hoping versus impact of actual here? some PLS color Just the of can give that And around is competitor? your us

Shyam Kambeyanda

that Yes. question, Thanks Nathan. for

with lines that So lines. deep out want product you we're look very our that's that shaped product to all what the when have we performance we front with with segments, anybody to and data, the view there. And particular along particular strong at at actually of grow want I of do product is, looked was the dive a grow lines. can that we customers end we tell sort comparable We presented on across on on the is particular that our how we

number one. So that's phase

our the which around in over long towards that And is process-driven you The better about is work in approached case process the always we've how margins on today even second and talked solutions, focused really we capital will [ph] automation, around I are cyclical in goods flow this we're find, made fact, businesses presentation value-add. particle cobots, and is what that solution lesser where piece focus term.

for and term, setting So steady up in some the noise. believe But cyclicality. we growth, long margin there we're ESAB higher less term, over profile short be the may

think And margins on we what important EPS and think based. is in addition way that, We the you're to is in where we're clearly improve to to region. continue product creating that's focus line this really I dollars go things simplification, the as our space. in front. state, our on at it's seeing innings to we're through you an on, middle the strong we're comparatives, our pleasing in Nathan, we're say especially I And enterprise all look the very that Tami, to fab tech if to least. that as incredibly particular mentioned But focused numbers, our And the

Nathan Jones

along. nose market Yes, with that's important cover go going price obviously prices or the your because need back positioned to need some further increases are as PLS to where be on you you cost, order after on that? just Maybe just where price think in Do creates any to they inflation. it's you're

Shyam Kambeyanda

Yes.

we we've so talked around about couple that processes have three Nathan, price. a And this of times,

and obviously The or to for immediately seen price. pricing. commodities, nickel those whether we've being of it gone move first sort and copper inflation-related some we've be And reacted out

third piece continued for think second I ESAB. the where opportunity and there's then And is

pricing, being activity. associated value-based one and third with the second simplification product our The line

right inflation at activity and new of side sort a then products, we as we continued introduce this one But some second ESAB, driving portfolio our that the on additional bringing that piece, we've the value increases. think it with couple of gone to on continue evaluate I price proposition the out PLS obviously at So price.

being some areas within said, that in we've focused volume on. especially that seen also our business, growth we're But the

playing how started are with as out we both really year. the pleased So of those

Operator

Instructions] question the from Your Mig [Operator from line Dobre next comes Baird. of

open. line Your is

Mig Dobre

morning. thank Yes, you. Good

of adding you're about in what to the that back the talk sourcing proprietary selling this terms solution, of a little versus more how parties? third you're what bit maybe from you're ESAB Going is this cobot, can kind you

to to versus the they're in the guess has discussion you have between some it volume with in if curious that you doing. do variance the I might pertains competitor automation exposures I'm and maybe of what various as the And Americas, your

maybe with So that. can start we

Shyam Kambeyanda

from Yes. that, hear good you. to and always Thanks for Mig,

So a things. couple of

had we've think the questions Americas. on couple a I of

and the EMEA And also I phenomenal had that important talked really we've think it's to a always our brings state about value global franchise to our APAC enterprise business our table. the quarter. and

our you is when and can franchise possible state it's that what across what the so with can see to enterprise. And is important we what it also gets focused drive

some the proprietary so can't from your stuff. share disclosures the we our where of spoke do are cobots, showcase you of of to to line, you waiting, think that a stuff some of it. question other have that to do We happy happy lot Specifically of sort I some that things about, if But that's Day to bottom office, Investor around have to I some I three at technology. or of ourselves want share with out please differentiated one that there, all I'm some visit particular of you we've

I'll is our of our reason, cobot an being as primary the you ease digital our the valuable being What comes we're give with along use seeing that with example. to extraordinarily customers. essentially package

recently That trained on it and by sent. that back were member other we one had customer with past to dues By of having more sample Monday us they were We've to running them. We've they and went of a were They asked been out they to couple to sample were had technician. afternoon, significant along a sample, of send about a influencers on send requirement order. couple actually a They got afternoon [ph] Tuesday, doing a talk large retailer a as of on the that off we they called . they hold the until it, to where actually they send said a had their out we us, call some social media. ours the going to advertisements and they us refused team

wells They X,XXX went ran week week, to a from due, wells a their past a of about about thrilled about wealth XX,XXX through it.

more with out. them I working think get press to we're some going be to releases

front, bottom relationships phase. got specific on particular Yes, pendant funnel with some line But we when manufacturers that of the software marketplace. is the use I particular the a think some differentiated on it the do talk we've ease along have that this use that really control about people with strong have a of in we we in the where have we solution to terms solution, robot best that

our piece products shift mix, the about for chunky year want significant, high really that is less welding to where less set, of our some fore process excited allows automation really industry to call, digital also to that automation space side, exactly combat be, and it's creating along on the into a because we brings solution what I'd side So particular creating cyclical it solution which focused the this tailwind customers with X the of low volume XX for ESAB. expertise,

Mig Dobre

Understood. Maybe mix shifting about number time over my talking follow-up equipment. the is your on X, towards Slide

curious the really side? So at trying it here? XXXX, capitalizing to share Is and the there? product a as how equipment get of as on sort XXXX looking you goal, automation, to introducing of, on new I'm we're this way again, it is take function you Or described primarily

goal by margin much mix that well. you margin EBITDA this can of that target driven think on percent Maybe comment XX-plus towards is you the have And you equipment? as you. as about Thank really then that how shift also, outlined,

Shyam Kambeyanda

Yes.

several the we've So that Chris, particular as tools of that are and regardless whether great the of we enterprise. the line up, one the necessary of an been with of confident times where have things that bottom we north community our on the of has top range is heads top end the at this get confidence have we range that or to XX% mentioned

on transformation with price, cost team. that our a taking along with rooftop a OpEx there's associated we're our focusing that activity comes doing of amount with confidence our where EPX, sales productions, and of out, amount So work significant and tremendous activities associated we're

of confidence that we XX%. particular talking top this significant and a that of amount that to regardless of there's things do So line percentage. get sight has on of the get beyond that what What us north here journey are about line, team accelerate help we're us

the on, is on so a of And we've that there done. things you're couple mix, spot

of teams done this being light a the with drive on Edge. And pre-work lot line-up I'll that to excitement Renegade equipment the We another Later to be have by the a you of and year, this this the I and VOLT give example. we'll lot full you launching of QX industrial in a mentioned front. year, particular activity think in the Warrior I launching past,

combination technology. of look in, actually we More East recently, recently the particular about. that of Warrior never large that industry our does to in have customer you electrode use we to Edge Warrior with terms that things with given that game our re-upped Middle the a Wind, we changed shop with competitor AI technology example significant been we coal a Europe sort what along do allows out some and had control amount a for before. them talked a where within of the customer come at the which that with that in We've ease floor activity is Similarly, ICE, along on Edge our very integrated able of do they

the And so like of never out sub kind the before seen amount a lot equipment of globally. line deserves pull-through of of a driving finally about our and that and there equipment we're entitlement ESAB excitement these seeing significant we've excitement

portfolio. a a work early but of And filling done We've clearly, lot excitement. stages, our lot so it's of equipment out

it's sales, building been equipment combination, don't a So and equipment forget upon. automation we've gas that

kit there them to set three you for I things XX those our so three We've in to But own. at And confident get [ph] the us up on plenty want margins just what of platforms. kind spot. is targets on margin And better drive we're are those those don't got the three a drives all of look to

Operator

of Loop Dankert from comes Chris Capital. question next Your the line from

open. is line Your

Chris Dankert

I Middle update we the you guess between in a some detail question, you cited strength Maybe give the bit dynamics just APAC can little any morning. Thanks in East. just here. Europe China, if India, for some Hey, could dig in you taking provide? the on us could and here,

Shyam Kambeyanda

being Yes. have tell There's around There's a in entirety But you is details investment I this share of the we what's region. lot of a moving that APAC specific by don't extraordinarily the with in. region manufacturing read spoke Obviously, can briefly. lot outlier. government clearly in what happening. well did I the its us the India. happening clear India about And in press

And talk agriculture, doing infrastructure, the into India. the and into all renewable right, so in investment energy it's about, refining investment are that oil investment things around the often we gas, extraordinarily capability, well

Australia. you at driving government renewable coming along energy, for look creates then our of invest in as Then We've tanks that's out it's LNG with tailwind of what that COVID got seen in And Asia forward. infrastructure, China, can and sort the all of you actually, storage call invest business I Southeast a piece. the imagine,

And else a a some whole, is that so significant isolated from think tailwind region that as that seeing I see amount you globally. bit actually of anything

my of The kind never this energy. it's Middle in sustained seen opinion, East,

infrastructure. You're in seeing investments

You're oil and within LNG piece in. a being come investment steady that obviously particular seeing big the gas front.

infrastructure And so ESAB, are we're that amount phenomenally seeing that shift, of locations a region, both the sustained an as in there's know, with particular activity well interacted placed. in but of a least investment, this sustained you And amount perspective. fundamental diversification time from at economic a I've

of for this mentioned India. anybody I've we're think you I emphasize before, And to in

region in great in Middle continues And and ground perform of new East, a have team, region, extraordinarily growing Asia India. again, find ways both in the our Southeast game, Australia business. to the We well, the

to been to some sales regions. adapt than actually digital about it's talked examples the you of some quicker equipment our that of on of leader. driving automation, that other see and the And the region interesting Some they've sales, I

good the that based. has customers part most are Now about been the that European fact of the either adaptation U.S. and

got stories are the a is obviously sales back. So This filtering through. that we've go cycle of to

significant hill transform and saying yet, not and climbed we sort sitting I'm but we've journey are as we're So reshape progress making here of excited our the about ESAB. that

Chris Dankert

just X, bit color. that. you. mean, put up here, then in Thank we but talked the the kind it of I you on you about Slide really contemplated targets today a equipment some we of little great beyond That's terms Thank And for what's here. as us of to automation Can what's kind kind of of sales 'XX in that want where XXXX go a and and X-year you more remind from percent outlook? to

of a look And it from break outlook, as years of – Can into and X from just now? think we organic you the down we should maybe automation about is at M&A. kind how to days combination growth

Shyam Kambeyanda

around there. Well, remember, in And But drive being the that about it's probably out we've more a cyclical, wouldn't – process out XX% just space, but customers our today set our getting a more out business number, creating business that reliable higher a reasonable to out on working space. give partners integrators, focus now also expect is forward, margin particular now targets Yes. and refined I specific automation, to our automation using we is laser few profile. assume of on less our there. using for partners

And a so to it's quality of we particular be we margins that where right on the the this have is way will our that portion that, And accretive. it. space, in focus feel business, high view

that's sharing you're have you Investor a on significant. spot And does We'll sort does of short yes, to within during growth on it. it look automation answer But it that growth number yes, a for that, that, yes, Day. bit have more at the is our little

we do nothing have see ourselves gaps numbers today. we continue The Now imminent answer does or out may the build to is but it short M&A that's But no. to have in any it? in that M&A,

Operator

the have we Loop follow-up a question And from Instructions] of from line Capital. Chris Dankert [Operator

is line Your open.

Chris Dankert

one sorry, item. little Hey, just housekeeping

the on write about the disposal there? curious, been Russia business, there to home of anything Just update has any

Shyam Kambeyanda

to on than we've that more spoken particular nothing what front add No, of.

update more So that front. n to nothing

Chris Dankert

much, so guys. Thanks enough. Fair

Operator

to I no are call time. back Mr. closing at further some for this remarks. Barbalato, the over there And Mark questions turn you final

Mark Barbalato

on our today, look us to speaking joining call. we Thank to you next you and for forward

Operator

your for Thank you call. conference participation. today's concludes This

now may You disconnect.

ESAB (ESAB) 2 May 232023 Q1 Earnings call transcript