Earnings call transcript Q2 2023

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Operator

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

Mark Barbalato, Vice President of Investor Relations, you may begin your conference.

Mark Barbalato

operator. Thanks, Second 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 forward-looking to in are filings and forth keep that release. the SEC of Please earnings statements in making our are including and risks subject today's are those set some we

measures and call do respect assume forward-looking required release the law. With any except results presentation. information those statements or intend Actual related as the we today's and found measures may obligation any mentioned non-GAAP accompanying reconciliation can financial to slide differ press today, in these not during to update to earnings our by be

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

Shyam Kambeyanda

all ESAB I'm proud for joining Thank Good team. you, Mark. us of very you morning, the thank everyone, today. and

half first strategic our Our our of are testament on results team's executing focus vision. a

is creating growth, cash strategy. have diversified premier efforts in conviction flow. These our that cyclical, expected our yielded a delivering impressive narrowly strengthened margins and and less focused We're results industrial expanding on

One of of has transformative the efficiency harnessing new which our effectiveness. ESAB of drivers EBX and of been power has heights success propelled the key to

our also Our product not to growth, has but streamlining commitment fueled boosted only profitability. line

significant priority a at excellent yielded on In consolidate is and making team's create all, our improve our not safety addition, opportunities ESG our Workplace top footprint. our to progress activities continue efforts manufacturing are results. we to Kaizen journey. sites our productivity and But have that's

positive in communities. to a making are dedicated impact equally We our

and are exciting. the to partnerships accelerate ahead into commitment truly our green entered we've energy to Lastly, possibilities

second to three the quarter particular. in talk Moving slide to about

grew our Total XXX solid basis reflecting sales both sales and execution and the record second hard by points quarter sales work and impressive global of and dedication by driven demand an the in ESAB robust regions. organic rose margins, teams. X% achieved

margins of was Adjusted our business happy points to XX.X%. indication an above grow EBITDA innovative expanded automation I XXX our solutions. XX%, to basis see

have cash operational EBX efficiency improved Our and initiatives our flow generation.

momentum we guidance. and year a of As strong positive raising our full are our performance, result XXXX

four. slide to Turning

me Let into shaping bit premier a on are we how industrial share ESAB company. narrowly a diversified more

We have gas FABTECH a our business. leader into built global complementing our business control strategically

acquisitions business Ohio now around the and Therapy with XX%. gas revenue Equipment, With million margins our in of greater recent is control $XXX gross than

of We are grow this plenty in over and see coming early expand business potential our years. we innings, the margins to

business and product into Second, process automation cyclical, focused margin a faster we've higher been shaping growing, our less line.

in the approximately XX% quarter, As I've we second today In saw revenue. of XX% business. automation mentioned is ESAB's before, growth our automation

Automation along at our customers. great been with enthusiasm Cobot with our our Digital and met have Solutions Solutions

As shortage double-digit and welders. next growth control sales. percentage a the skilled will This and continue result, contribute years, automation address anticipate reassure of over our customers gas automation increase as years the few ahead. in ongoing in of the , Today XX% we business total to ESAB's

sharing Moving a more five our and automation strategy. to slide on bit

creating on are We differentiated focused business. a automation

an us been process years, acquiring ESAB give management, solution. a allowing few and as on we've our result with a provide collaborating companies in with edge last integrators, the journey that workflow complete customers programming a Over data to

love about smartphone can strong use, program smart initiatives in that is reduces time experienced yield our reflected solution and specifically our use or with in easy solution fact quarter. have their one fact growth started second dividends, acquisitions Talking Solution, the these the robotic the to to Cobot pleased I'm our to our in arm. tablet customers that Today, we programing our

a value unique to providing Additionally, real-time ESAB has the analytics capability with provide proposition. customers

looking and productivity. to changer been a boost their game for has floor Our customers shop programming simplify offering

ahead. more is triple-digit lines saw the the in product to percentage second There growth years quarter. Cobot come sales Our in

the up In and teams had notch. have to improvement Czech in six. lean a chance investment and and Vamberk The job manufacturing activities clear is productivity. slide in Chotebor second our taken function visit a activities a to deliver a lean to step sites. quarter, capital connecting I teams It our Turning done of fantastic have efficiency

What automated washer list ideas globally. Kaizens the our specifically using was We of at Cobot. the line healthcare is our Chotebor. sites. additional right more valve a example improvements our impressive Talking production slide saw the was line on the our XX about quarter. click in in of Kaizens We completed of second The

us, reliable important XX% This our an most enhancing delivered process throughput, lubricant while associates. a initiative customers, importantly, showing in for and created our improvement to also and XX% safety ESG repeatable a usage, also Kaizen of reduction in quality

updating on you of Moving particularly to health efforts. and ESG briefly seven, our efforts. proud I'm our and slide safety

quarter's remarkable total second recordable rate was surpassing The X.XX, benchmarks. incident a industry

commitment back Our giving our to is to steadfast. communities

our And on little pride local to Northern with are for next school, baseball contributions, I collaborated ESAB. Tools, to to the and of generation plant, the teams by welders. customer, Pennsylvania Hanover, in. our creating and are they we to visit was sponsored belonging now small These great we live my equipment Recently, our training is a the communities by where fields the league a donate able but scoreboard sense drive ESAB trade of

together. with focus commitment partnership shaping projects and deepens on GRI to This our Renewable world better a our our green highlights Industries. Lastly, energy

Turning eight on performance. financial to slide our

up $XXX points. grew basis for Sales million, the sales XXX X% quarter total, in organic was

points continue and are basis better and resilient. Our remain end XXX perform expected to added than expected. markets Acquisitions performing of growth as

pushed that a fantastic which we to XX.X%. I of Adjusted third EBITDA like expanded growth point investment in basis sales quarter. All-in-all, profit. record XXX margins into quarter for $X and a points benefited reached the being million ESAB and out delivered from we modestly record would

Moving to slide nine.

in region. region Acquisitions activities, our single-digits. our drive continues was expectations. for XXX line quarter basis up continue grew perform volume our PLS XXX sales points with product growth. strategy, related The of low organic added simplification solid Another and X% to basis excluding our Total to Americas grew They sales points. another line

We The and have innovation. opportunities. growth team's our continue for our industrial our business solutions progress heavy new product efforts VOLT like additional automation the product core mix on success of and battery-powered the commitment creating robotics at and relentless our Edge to changing of the Warrior the is brought

XX. Turning to slide

impressive basis quarter APAC EMEA and our Another points for sales sales regions, of total acquisitions organic basis XXX with growth. XXX up X%, adding growing and points

oil end gas by to continue liquefied see energy, in a natural investment buoyed We and in gas, infrastructure, particular. resilient agriculture, renewable and market

I'm our initiatives expand simplification product very our East, EBX Middle and of are to Europe, using in proud line growth team and margins. They and Asia. Africa drive

our line simplification and XX.X. target stratify the expanded have enhanced customers. in has to Europe unique way record identified process region growth a basis in a product team points, Our EBITDA to Adjusted XXX

high let it note, On slide over me Kevin talk to about to XX. that hand

Kevin Johnson

pay up Thanks, which and leverage to Shyam. We delivered versus allowed cash free strong us was XX% debt further another XXXX net reduce flow, quarter our and down of turns. X.X

closer with flow, Excluding leverage our times. which is cash free three to recent acquisitions, funded our were

by with We we capital X.X $X.XX. work to strong business to working work is system turns. are our working improving also EBX leverage This partners to continuing third In results by delivering payment and XX% identify quarter, improvement. for with the our our capital dividend turns increased opportunities AI

expect to future us to continue can increase in this years. You

We the this year. in higher second half are of on track flow to drive cash even

to slide XX. Turning

half we first strong a second with earlier, XXXX mentioned performance, year in our significantly full raised half and Shyam confidence guidance. increased have As our

Our end from performing and business FX resilient acquisitions improved benefit and continues ahead to plan. markets recent outlook of

growth to $X.XX increasing result, X% our billion $X.XX to billion X% year of As guidance full and X.X%. we total growth organic of X.X% sales to a for a are to

guidance price the and continues tailwind. to Our the volume FX, single-digit remainder growth to low turning for a year of assume and

which $X factories continued million progress line and million in from increased to margins $XXX and back initiatives Adjusted to improved further on and includes manufacturing office. automation EBITDA simplification our consolidation, million, guidance $XXX from product FX

our to has million on initiatives continuing from of deferred Interest our additional second growth, million $X fed guidance $X the guidance We half second $XX are to million expense accounts assumes of this been which on investment one increased $XX business to in long-term fuel million, hike. quarter. added rate for to invest

adjusted rate has is guidance by and $X.XX. EPS unchanged guidance raised Tax been

on we let City Xth and December Investor scheduling will conversion are York our New shortly. be issuing Day the cash to Our of that remains pleased I'm know flow in you for track. details

and continue momentum We to of strong our half first expect the second half have this had a into year.

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

Shyam Kambeyanda

root, driving both delivering Thank strategy margin you, expansion. taking summary, growth we're line Kevin. simplification focused and In is Product forward. on our

Our acquisitions strategy. automation great seeing are we're and progress on above our expectations performing

and to team's within continue commitment We EBX our with and enterprise towards I'm pleased our energy continuous improvement. drive

year full our in execute, first raised performance to As a guidance. our significantly confidence result our we half of team's have ability and

to We're of on strategic significant year towards track our another progress deliver goals.

Operator, for on for focused we're associates open Thank again our and joining value team, shareholders. a us. the you questions. please As line significant creating for

Operator

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

is line Your open.

Tami Zakaria

Good you so Hi. my questions. taking for much Thank morning.

volume my just low single-digit price be So clarify, and back expect to is you the both first half. up question in to

pricing up? volume both and So

Shyam Kambeyanda

we've well morning, Good accurate. half. Obviously, well. third Hi. as that's We Tami. a Yes, had off quarter the started strong first

that are current will our single-digit and price second have the low so the And of half estimates year volume.

Tami Zakaria

back So expect to will the markets, I in that flat you half? and in the APAC reaccelerate mean saw, that pricing both pricing EMEA think, Does I because be quarter? in was positive second do

Shyam Kambeyanda

-- that's half. then the lap stay we or see into to I of start think estimate America is we rest sort the to kind have the I it's think that of at pricing where the of North in assumption we No, the that have to pricing view second the then world that and the and

Tami Zakaria

Americas, ask of us volume that X% to give when could PLS is how volume, much Got attributable you that to more in the it. expect dissipate? The I If the can negative you question. initiative? a sense And one

Shyam Kambeyanda

global strong sort it's that we you first, a our volumes quarter and strong. at think, I overall very Yeah, ESAB had of saw important really of be to sort reiterate

in good also times to volumes mentioned the a strategy. our took think We positive that work our on single-digits continue we we complex business you that before PLS being have and our be PLS several out low activities. said, North execute that I when saw America American I've and in But

the it year view get this that rest that. of Our is to takes through

margins a that results, to to our Making you growth very good you the Now saw when it committed happy PLS have a we're spot. the we're in happen sustainable that's America. and sure but, may but we volume a with committed exclude earlier slight business to we're driving process, the

Tami Zakaria

it. you Thank so Got much.

Operator

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

Your line is open.

Nathan Jones

Good morning, everyone.

Shyam Kambeyanda

Nathan. Hi,

Nathan Jones

up an also of impact that is PLS there. from volume but numbers, business. an there on follow the Tami's obviously margin assume just the It's I'll PLS impact profile on from question on the I

the of actions? the that kind any on directly from you're seeing profile improvement these in So can PLS you commentary give us margin

Shyam Kambeyanda

first things grow. is second in obviously I the wanted right and piece in well very EBX. team price. think was We perspective. we quarter. and PLS on that business. to accounts mix delivered team's The the that went the from We Multiple We our the And the I way improved the grew executed we of then proud

could the and and it And and it so, say a execution EBX of from one this PLS sort at the along look with coming take rest growth accounts price. of of on delivering half

Nathan Jones

result a quarter. kinds strong mean a whether in of don't commentary quarter think half? be to quarter, things good right maintain the volume back of was the the can going you the to comment should lot those the guys good margins second margins, in some probably any follow-up on I repeat so, maybe that, mean, second which that in in is there's in just XQ a guess half? I you there back I Do went

Shyam Kambeyanda

of There's of think it. hit go the investment pushed and I of had intention team about the particular entire obviously things year of add we of point. sort for is that sort a the enterprise watermark couple then is continue from want that this growth Yeah, rest expense to for to $X of into and That XXXX. and leadership us into to operating a in the got a We the that million quarter. third

XXXX. are the what but see also quarter, So kind today. teams a in We that is guy seasonality can are that focused we say driving similar second our on growth, the where good was seasonality I on maintaining of in we expect and seasonality that has out given I some into gaining you Kevin we kind numbers of momentum to us business with the and playing perform as go our know

Nathan Jones

quick one innovation. a on Just

kind the You of of, products you the what back new guys and about and into last and year, VOLT coming year kind those the what we more 'XX? half half. on products, revenue at seeing relate Can reaction as EDGE to the you're new that's of have of looking EDGE growth to traction from a customer of out and you or kind if get contribution bunch talk second in you're VOLT

Shyam Kambeyanda

for you that thank Yeah, question.

going and and at really big a the in The significant then I industrial that think our call We FABTECH very customer was line product We're clearly, actually been Volt in the that at launch we The the also positive. a way quarter. ultimate excited sort equipment now to We're Edge third have seeing same been of our line. Essen amount in about talk line. about product has lineup. actually at from line. also the time of Warrior initial Renegade growth reaction light launch it

we've a impressed customers now, to and chance and truly be lines. Similarly And the very I interact we America, at a In of back. the few a of of play category industrial come performance particular distributors Edge. in had in large that and customers with in couple a weeks the were fact, Europe was with product had product of North they heavy Warrior our line feel in few will I line. that I look on

forward very that story. automation our analytics in, received. of from business hasn't really solution great sort in of data brings solution in was our that a creating of what we're that looking terms a bringing us workflow programing, was gaining and terms The half The set part well second said, -- momentum. from But category. we And the to so of that prevented being

and sector In of fact, impressed the in result met unit, that thoroughly the data extent of showcased large combination were in them a of got with we we've them our piece of also and our customers the wind I innovation. welding. that our order when our from They to a power the one technology analytics a pretty as adaptive

the automation. on really progress. So our teams realigned thrilled also about We've focused be to

dividends. that of all paying is So now

to traction talking Investor forward and this about looking especially during So us more gaining Day. more

Nathan Jones

Thanks questions. very much taking for my

Operator

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

Your line is open.

Mircea Dobre

Thanks everyone. for morning, Good question. taking the

So discussion. versus regions? Can for wondering about maybe -- sticking little talking when the delineate -- as versus XX% is and to what how in a if remind Americas, automation this you're you're growth. you you bit with big me I'm you're you business can other Europe seeing this the year-over-year

Shyam Kambeyanda

Mig. Yeah, good morning,

of XX% focused a the remember, about so business material saw of So was and We volumes North we've capability, focused America similar we math in and our couple and really do we on the capability, I've we handling, XX%. That's to talking about that automation that automation and differentiated analytics programing to the process-based large that traction. on of adding gained Rest solution been of the within set in solution talked years growth were you automation our less where integrators World. Mig, end solution a some about that being total but building What along business last was really a digital adding the create working actually workflow on users. revenue business more can with around had out spent are you if both to

with until and but our tripled which of seen as customer a about on we really in in onto product obviously our Cobot line, Last that and had got actually that them as front. extraordinarily that a I comes brief excitement their Canadian our throughput a that our result tremendous had so So base, our shared category held new improved equipment off we also products. almost excited we've of the And automated applications well small space a amount throughput, time, that well. and Cobot cutting really also shared you then did business comes really

So, for really and actually in in Rest thrilled the both about marketplace the us balanced growth doing what and Americas see the all three the quite are we of World.

Mircea Dobre

where presuming Europe that seeing -- talked that. about -- you maybe world, wrong for most Demand of well? the demand markets Are but emerging I'm as this in you I'm is it of occurring is you And say or rest

Shyam Kambeyanda

are. Yeah, actually we

of adapt well. then seeing in We're India lot automation. obviously, seeing and a big East of of a that places a the are Europe Middle as automation lot is adopt piece We

Mircea Dobre

Understood.

You going as I'm margins When question the times, the couple outlined you've kind from curious far got goal how quarter, they anything not forward? margin but try not, you we're at and I already asked if potentially, then margin in than there's forward? what unique before I'll of might it I'm path that that a XX% expecting look not considerably better how -- see you the incremental to if well. QX curious opportunity that I were of have that I was do what sort that's And frame of you because going about as and the

Shyam Kambeyanda

you in we very that sort seasonality the spoke we were rest out the quarter, the to million, that through forecast and I in thrilled the that We forward. from was very the there didn't Apart execution of our want way something? pushed to we I Yeah, think drive that. third that the the felt obviously, year, the regions well the of that business executed business plays being had opportunities with teams which the and see got but our one-time to that quarter, from we $X both quarter. to the performed about amount the any a to is second said, add Kevin, benefits do

Kevin Johnson

sequential rest is year. range decrementals incrementals, that in XX% the of expectation through this our progress Mig, think, I as we

Mircea Dobre

a on clarify to about I'm think mean, the guess sorry, -- I when about sequential I just year-over-year I incrementals, basis talk is you here, to it way

Kevin Johnson

year-over-year. Yeah,

Mircea Dobre

seasonality. Typical

Kevin Johnson

the mid the as we be high 'XXs year. will rest year-over-year of in through the to go Yeah,

Shyam Kambeyanda

the bit with some earlier Mig, that products business. remember, quarter us believe the invest the We've We our got will the launch up are set activities have and we really our that quarter second about that we talked half. I the for new in a to some that are planned third we for way of additional investments XXXX. in the Yeah, into planning fourth well of coming coming

Kevin Johnson

million Yeah. Mig. we There's around in, of out investment put $X

as $XX of million. the well half As the

going that for additional have -- we to were year. for communicated already we this So spend

Mircea Dobre

the on -- in next know. want Last that's question later Investor Day to comment I XX of M&A a you at question maybe over to me, sort a the how pipeline you year, call and the be for from months, XX how aggressive maybe your think don't

Shyam Kambeyanda

Yeah. We're obviously One, front. I our very take that to funnel is happy say on questions would strong. that

in I team to called continue done about made has bolt-on the all of meaningfully. and we're and nice far what they've different that think our move added And a forward tuck-in growth geographies. acquisitions that job the expectations. really that performing strategy business for our that about thus are acquisitions thrilled above our providing we've value identifying we Thrilled to they the them and three opportunities are

very We now of none leverage we that expect X.X. to our slide had to presented our acquisition acquisitions, saw the you strategy if would is and the Kevin done, to similar X.X, that, down on been have X.X close down to stay we

trend. mentioned great stay two in do generator we that cash, of you to our the continue obviously We expect we as had we're acquisitions. We're to past as to a the within half that second generating of expect we all range

two rates range. keeping we acquired And companies where or in cash that generate to our in so are they to debt today expect

Mircea Dobre

you. Thank right. All

Operator

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

Your line is open.

Christopher Dankert

my Thanks morning. questions. color. the taking for appreciate Really all good Hey,

particularly I -- price if I'm here simplification just and the it, moving the us line me on around curious, given but You've missed product here, parts around just cost around benefit from side, there, sense was kind a price and and margin of can for of just a give cost how kind a you can half in us perspective? quarter the the what we in expect of that big back forgive

Shyam Kambeyanda

Yeah.

So a we to cost price we've be on always said expect side, that neutral.

is on strategy. so our cost, view -- price our so that And

pricing it add other will we pricing, is with sales, got related to activities whether price simplification whether be to intention our expect three-fold. And we've inflation, would market. we've to talked this tailwind we we Now, product line it about One -- to the our is to continue we'll inflation always go said, be being would think underway, see related that before. do but and if value that

our pricing The one second the value and simplification. third now line product related was to around one is

inflation we three. now see we in And number second don't year half pricing pricing, and you inflation the third a as of America, towards would result, play see the that year. second we to XXXX. to PLS and do all we into be otherwise second Inflation-based as the move to did bit play the expect into We but pricing so expect half some obviously, continue those around of and the higher, a North much see value as

Christopher Dankert

of gas And Understood. the can guess at like zoom growth opportunities the is maybe but diverse more control excited, That's when you talking bit more look whether a and about gets it out in really type the of here, -- or of is of obviously that in little applications talk helpful. -- you market some quarter, terms it I the specifically, nice control medical industrial thing? to what the gas Obviously, we're core most there. you

Shyam Kambeyanda

began has back business industrial XXXX part that that better in industrial about that business has. sort the it characteristics broader we as saw actually business to of the and ESAB Yeah, that and on the side focus great of we XXXX,

when you So it over map we of like business. the characteristics obviously and side then greater the the higher Specialty, stack to to and we possibility then cyclicality, acquire margin see And the lesser is of that industrial in and then category. growth, businesses Med of

continues like the talked ESAB We journey we've business industrial of accretive the for side spec medical of on we're pick product north of and So performance then happy that us. gross and margins and actually it you about the side that breadth of that the of being the further that about that entire the business line. gas to

Christopher Dankert

there. so Thanks the much Perfect. for color

Operator

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

Mark Barbalato

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

Operator

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

You may now disconnect.

ESAB (ESAB) 1 Aug 232023 Q2 Earnings call transcript