ESAB - Earnings call 3 2023 | ESAB Corporation

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Operator

Good morning, and welcome to the ESAB Third Quarter 2023 Earnings Release and Conference Call. [Operator Instructions] Mark Barbalato, Vice President of Investor Relations, you may begin your conference.

Mark Barbalato

Thanks, operator. Welcome to ESAB's Third Quarter 2023 Earnings Call. This morning, I'm joined by our President and CEO; Shyam Kambeyanda; and CFO, Kevin Johnson. and that are the those subject in SEC mind are we're set in our and release. forward-looking to filings keep some statements of making forth Please earnings today's risks including results intend update by or law. differ, any as statements, to we not these do Actual assume may obligation except forward-looking required and press slide can With any measures financial the that, non-GAAP respect in be to call today, to found information turn today's Shyam reconciliation over President related mentioned accompanying release our I'd like to earnings to presentation. With and those during measures and Kambeyanda. the the call CEO, our

Shyam Kambeyanda

Good Thank for Mark. us third today. you achieved morning, you, all the for joining everyone. Thank quarter. results record ESAB

flow. Our team delivered year-over-year growth, strong cash organic margin free and expansion

me Before few slides, a into comments. the let make getting

and commitment First, driving are closer associates our thank work. hard let Their dedicated me goals. and long-term efforts for appreciate to our us their

be from markets benefiting favorable continue our trends. to macro Second, resilient

our also quarter third The franchise. underscored strength of global the

particular, in quarter, gain team, new identifying market share. European and our sell excelled products Our to opportunities the in

I with the During regional also in It's the travel had always privilege East the with to regions. and teams meet remarkable in inspiring progress be and we've I our Asia and regions. by this teams, Pacific to was both period, reassured Middle our made

evident our replicate and are and to our is difficult automation our and to expansion Both hard game continue and in flow that cash resulted a our customers equipment their work margin EBX is execute growth, improvements. to teams added in ground Our playbook, which to results. portfolio, excellence organic has exceptional testament regions it new

biggest we system. interest ESAB's among our control had by and solutions, a innovative unveiled FABTECH, Essen equipment products and in tremendous presence in valued bridging systematically users we and product simultaneously gas FABTECH, creating fortifying global events, the have we ramp September, excitement industry use in generating continue XXXX, sparking Since global networks to distribution portfolio EBX customers. X end while equipment revitalized automation up of gaps and our and business our amongst solutions. Fourth, we our Third, where our of

During Kaizens, our simplification Kaizen as line several initiative. facility completed present quarter, the including Denton our of product at part third we our

on-time For product reducing team low-volume seeing with SKUs to to has already and and for mapped Kaizen that our a value impact result our this created QX, has complexity. customer similar plans start quarter We're to margins. Last, while Kaizen, third satisfaction of raising align the families, to expand out increase and good enhance our we're performance shipments, the eliminate SKUs allowed as this customer us year. guidance of positive improve record customers the

quarter to XXX an Slide X. points. Total sales sales grew outstanding results. basis We Turning organic impressive our growing delivered with XX%, third

EMEA experience markets to continue We with geographies in APAC resilient both leading and the way. end

robust Our innovative EBITDA quarter we're increasing and goal of to sales. XX% also strong new products continue XXX track margins our to basis with points. equipment by on demand, to our experience a expanding adjusted Profits mix reflect of achieve

continue simplification, efficiency flow our line generation. to and including Our EBX enhance product initiative, operational cash

past, franchise. consumables only I've a had XXXX, of equipment When positioning I X. in has ESAB Slide represented discussed sales. to future. Moving always we're our the the for leading In started ESAB how XX%

significant trade the gas fill progress showcased franchise. great made we and Cobot product products Our and say we digitally have gaps I'm our control consumables at interest our Warrior and while successfully month, gaps. to Essen shows, FABTECH product Last like and Edge, the enabled portfolio, connected excitement. our equipment filled proud our newly Volt, equipment our generating strategy digitally and our extend to in protecting was offering equipment refresh on leadership have

These offering. and by triple sales advertising new increasing last single-digit equipment product We're to sales fruit and Cobot marketing, our And digits bear substantial investments to high sales beginning making growth, automation to Ohio our seeing innovations all, compared premier control in control are training MediVital progress like with year. leverage in into position acquisition we North further market. company. enhancing the American diversified our has gas our selling products All in to ESAB strong valves our GCE been gas continue shape industrial successful in as narrowly a additionally,

X. Moving to Slide

quarter $XXX performance. record growth. reached XX% financial Our Sales for total representing a million, the

to Our resilience. than better perform continue end displaying markets expected,

a by XXX Our XX.X%. acquisitions to outperform. EBITDA continue reaching record basis expanded margins points,

Turning The the and points by expected additional basis quarter. year-over-year Americas increased X%. acquisitions basis Total sales increased points added as an growth. X. to during regions XXX XXX Organic Slide sales performed by of

line product volumes low simplification our single grew digits. initiative, Excluding

are new distribution robotics expanding the our channel, for Our products growth opportunities. and and automation solutions

business gas product control to basis perform in new continued role a EBX well. and the also a played significant in Our points expansion quarter. launches our XXX margin driving

Slide to Turning X.

increased Our markets EMEA added resilience and acquisitions by points of with XXX East Europe notable showing to and points APAC continues are basis Organic outstanding XX%. sales by growing demonstrate XXX the Middle India posted and growth. segment an strength. total quarter, year-over-year, and basis sales

volumes positive our hand Our $X X. The to for showing over stimulate the me is EBX utilizing note, basis EBITDA higher margins. On simplification Kevin in XXX strong it let effectively and Slide expanded region at in client team September. margins that points. growth to and expand Essen by million by drove sales initiative

Kevin Johnson

We X.Xx was flow, record less leverage we our third than working net delivered the deployment capital, repay strong we Shyam. a year with our the as in and Thanks, up business ended system. X.Xx last $XXX Key up of we ramp to as of to million a improvement of EBX to quarter quarter performance XX% another cash continued versus debt. free

future, we to We funnel of deep to latest embrace developments opportunities the for the and a accelerate have continue AI improvement. in

the into of the to the exit track flow year free year. we below quarter, fourth a Our of Xx as cash flow net cash we're and has and momentum deliver continued record on expect leverage

X. Slide to Turning

has offset expected from office, remains guidance margins midpoint, billion top to adjusted at line consolidation, organic a FX Sales by EPS to continued FX EBITDA This Cash million. $X.XX that, X%. a $X.XX in simplification wrap negative resilience line Slide back to tax been our to product an to and been for which billion, of reflecting we full raised hand X% $X.XX As performance Shyam to acquisitions again our mentioned earlier, growth our our markets, to XXXX continued a conversion increased update on flow end have of by approximately improved strong automation Shyam EBITDA me $XXX from manufacturing year reflects on progress guidance. to for and the by our in million on stronger $XX $X impact. Adjusted $XXX by raised is interest million, back expense for guidance. ESAB. With that to Adjusted up. impact XX includes QX increased guidance guidance million track performance, around an has let update year offset strong

Shyam Kambeyanda

our our Kevin. execute way industrial. becoming To wrap our to to you, narrowly Thank teams a we're diversified well up, continue on premier strategy, and

markets to trends. and on the of strength Our show resilience back continue favorable macro

our energy us and grow addition, EBX improvement. product share. on to I'm solutions We're a and allowing our customers is our proud to In notch, innovative gain team's taking and of towards up focus commitment new continuous introducing

you XXXX, for creating the us. finish going customers, remain and we into associates building XXXX. Thank for for We're open focused Operator, for again momentum a shareholders. and our we're poised please value on line team, joining a to As strong questions.

Operator

your And of Zakaria JPMorgan. today comes first Tami from Instructions] line question [Operator from the

Tami Zakaria

the going think, what I in turned outlook drove Europe. and that So pricing help forward? us I what's saw understand just negative Can you

Shyam Kambeyanda

Tami. resilient. in abate the Yes, thanks region for as of the the couple sort in items, us and things. But we low markets of continue the the single digits of APAC saw question. some anticipate the the finish region. was We story still out We EMEA to in sort be real steel A year. to especially pricing stay for just

EBX a margin teams got significant significant initiatives in our Our volume. we beat expected. drove And where versus actually

us in strong all sort one team. execution the really began of strong expansion by based margin great really real on story for the part But story was So inflation all, abate. some was markets, Pricing to year-over-year. that the of execution and just

Tami Zakaria

And it. a Got just follow-up.

coming look Americas in about you down, few quarters? about how pricing materials should we next the raw As the prices think as to we think

Shyam Kambeyanda

we've We Tami, on X pricing. have about talked strategies really this Yes. before.

based, abate. we prices first seeing play being varied and in inflation The markets market steel is one and every not

pricing. of One sort a pieces other there. mixed there's bag value is second based But one So on. the there's X product hard simplification out we're line and working is our pricing that

our that So on confident all in grow. evaluating at markets year the of holding next perspective, price of options and regardless where that from We're context. we're looking

changes nothing our as go forward in about call. intent to as But more strategy. we during right talk our sort of now, So of Investor Day our it is

Tami Zakaria

it. Great quarter. Got

Shyam Kambeyanda

Thanks Tami.

Operator

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

Nathan Jones

business. in dig been going little line, I tailwind has to PLS margin some was on and bit revenue obviously the for on its some the the a It's more It a quarters. on hoping line. on few headwind on impact

on you margin some terms the line there. having impact some revenue anything on? in you I could benefits the it some of else the as, as and of positive color PLS you give pricing think of drag, unpack about Maybe talked impacts far can us just

Shyam Kambeyanda

the then also and how Middle about you power actually some of growth, where and on PLS with is And our been in extent, you way this as customers. could it PLS execution Americas The teams on see to and happy PLS engagement market best to fortifying we've Yes. your in to focuses certain also we're a is initiative. East PLS the and way sell also the initiative we the and one, can see understanding very doing And you the about what talk think Europe that, of the in particular India.

say So of what just but refinement not elimination SKUs, also the about PLS growth. story I'd is and is about it's that

regions, of at we a about And the look in some of and of being more so amount other way than third-party North where value larger America significant about sales We've to content. think not were PLS of is our complex best sales selling business a lot adding SKUs terms performance. the talked ESAB's much

to all And North all one growth. I progress of happy as the had way take is you the team we And begin all, question through September very saw the impact, if And year really believe get and was we're well, in and American We with ours starting of in core that PLS and your demonstrating in be improvement we going Middle this, of in would on. about July the focus that a as the to we've we on impact, volume volume single-digit to a this as region. terms quarter demonstrating is talked with volume. toolkit growth that PLS to initiative, made in in answer growth strong to low East said focus that so on the of in Europe. rolled that exclude view, us something that our it to things that the big aspect the the had

Nathan Jones

Is we these it something that least at see But to that for and XXXX top of normal impact like cadence into your a that then to talking PLS. that, major that impacts that you're the identify impacts of I end points will opinion can the know I be seeing growth PLS you're we in Americas, be dragging where more the of easily XXXX. about revenue volume the more an mean, X in in major on tools or impacts ongoing we're initiative. the line of probably the should

Shyam Kambeyanda

right. That's

sort a in of market. That's more made Americas to that excluding the and year exit are big the North of is sort sort comparables correct. intent the we've and this this Our and America impacts where equal in of be spot PLS year

Operator

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

Mircea Dobre

like little I If you I'd growth may, your to can unpack bit more. if see a

volumes on double here, X, X low digits. automation So you Slide equipment Slide that mentioned up and rather were

running basic your consumables of driven like were by looks it kind flat was your growth math, equipment and all volume really automation. in Just and

the into me maybe sort that, is to you with sides I'd equipment you consumable sustainable of comment of quarter these business if from is you and if like understand think is beyond how on I'm see in even correct What volumes happening just wrong fourth your there. to or side? the you're this automation? What willing growth how So progressing X do

Shyam Kambeyanda

Yes.

from always good hear So thanks, you. Mig, to

of couple aspects. So a

was The equipment comments something spoke XXXX, really in that not in that first have we is did prepared piece I an my about line.

made equipment that came that stories a sales with full and was of the new Essen on best with excitement in we progress our creating One the now line. and Edge to fact of our the saw FABTECH lineup team have sell out that toolkit product we've the go solutions a and Warrior automation

back think franchise. was So ESAB consumables as as primarily a playing it of in XXXX, fundamentally,

a full and go out to we've on today, behind. FABTECH behind our the and now sales teams line and So to got side product customers get rally our

So the believe consumables. That that excitement particular that we're of of being a seeing over fundamentally next so lot a front. will we more couple of said, years, to we equipment engagement underlying, consumables be vis-a-vis assumption on able lot seeing automation equipment We're that which and the sell the that has But growth just much. is not growing probably see primarily of did we faster assumption, well, right the as is part incorrect making you're as is it than and the consumables.

this that for feel we so And continues journey us.

we about that is Our the significant. position strength of spoke in geographies

teams our EBX ground are executing is We none playbook ESAB unparalleled. now and quite playbook our that feel bar Our game well. growth and genuinely

to So over years. to the we we continue an to and gain be that positive coming share opportunity volumes have believe drive

able Mig, that by in you, The I projects positively never seen markets in been all U.S., here development and region. India, resilient and and to that's or with kind or to Middle detail is the the reshoring, Mexico December. times have infrastructure reindustrialization I've know can whether you our East, of in the growth. We're during other drive reality, in seen topics looking a particular underway. like the was I be -- never say I very that going the significant you Day have Canada and opportunity all to opportunity and and before us I going find you over the been in have more for on from in truly happening lot an can college to aspect, I'd in companies been I decade we that happen we've it also kind volume back, call are I what to next was industrial tell how that's And to renaissance about sharing ESAB we of tell and have investment forward particular, of Investor these came there the the a surprised

Mircea Dobre

in a you it instance, just for conditions products sustainable what is for what activity. deceleration looking why your there, the of in today, as -- That's which the maybe But the your all broader to leading a the outgrowth have kind of we're asking shift peers better deem that point that really when your finer to at new is initiatives just lack I'm Sure. put even Is question. we term, reported, penetration what in reported and going here, forward? seen apparent demand you of potentially are market be to not maybe

Shyam Kambeyanda

Yes.

twofold. So

from seeing strength. to We particular seeing that doing playing. continue do some We're and us and and is on the of really, other simple is are also strength, where we the play East see investment doing that infrastructure we've we've seeing gas that about it as to we're exposure one see impact it ESAB's this markets that and show before. actually processes We're say believe got oil always in Xx good to ag the get resilience reasonable talked we We and to continue continue gain show energy And a we're would have, showing well. some The place we first that I sort just in piece Yes, markets a the having answer. that downstream allow in growth, emerging customers But what we we're Middle place. talked out. better and and that there. renewable about

Operator

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

Christopher Dankert

I December shot here, a on I but Kevin, be and a quarter it what give manufacturing touched kind question might -- in you think anyhow. actions just any more kind happen were yet to the needs Maybe what on that consolidation. of of on for the I update front?

Kevin Johnson

Yes.

this as of fourth couple large of we're in work working been future. actions about opportunities our terms in we've few business result is We year year margins. manufacturing consolidation. a the focus There of of had doing. got this a impact that's we're a hard excited dollars that those a on an we've probably that with And million funnel our projects a quarter, some So on European the the benefiting for

Shyam Kambeyanda

think Chris, heavy past. the Yes, lifting the our before, we've we in innings can of think of this we've I where terms in think lot But we done we're talked a about middle footprint efficiency in where go.

sort data our still and about spoke position. different to point to plenty of but drives is terms of So that related things do in to the rationalization, that mining AI -- also the of a footprint in Kevin that OpEx terms fundamentally

we're we're or cycle, initiatives I for Kevin we end those go and looking and looked for as actually in at them forward accelerate on So us us, play run the into to plans course. those the putting depending executing through do the either to of several budget what markets

Christopher Dankert

of up what cost, Perfect. here? year the of and give was the just in cost kind the EBITDA color kind to out you of to price on And here on price any finish of following quarter we're can what kind us then expecting impact

Kevin Johnson

Yes.

over Shyam inflation So ahead watched as I fourth of earlier, continue we're monitor this inflation, bit step that reacted we're quarter. point, to we closely with and constantly where that as price. we would a think and look little to we've the at say inflation And and to with keep mentioned through we'll price

Shyam Kambeyanda

We have a system. strong really

work that standard price particular look few really call our kind how did the is a Chris, of back about, monitor at of I'd us creating As we metric. to business. we've doing our Kevin what for against a a past, business years job where in nice talked net within impact

out things right enough based PLS we're pricing the and to about spoke value then marketplace. in feel going ones pricing ensure space on, doing that And which And that we're associated X I confident so the we've our we with price. sensors other the got is hard in

Christopher Dankert

we I topic think I the just A XX-XX put could -- with kind into think of how as Or that last that lines an beyond should price reset of approach dynamic, we we after a about pricing year? price component kind move the guess about fine there. 'XX? PLS are if like of on of point is that that kind do this as

Shyam Kambeyanda

ongoing an it's We believe that initiative.

value, customer that you You then continually you short of and fruit early But you process. would work it some to it becomes at of and SKUs. think add sort of business, process your yes, piece. stable low-hanging your But product the how think significant look answer think customers value where you amount delivering and you where at are that be, line about come a and how about your a about you is how powerful your there's

us for we're So thing about, that on. we're we've an exercise talked The and it. excited PLS not exercise cutting, in is in and growth focused about it's always an what efficiency, one that's

Operator

of Your from next America. of Bank Sherif question comes the El-Sabbahy line from

Sherif El-Sabbahy

follow a seen. bit Just the strong of some equipment you've up sales on

customer? in are market uptick FABTECH product sales, Or seeing are mostly side, the among the the you ESAB growing equipment lines? On buying customers sort also the new it of from sort refresh existing share nontraditional is that of

Shyam Kambeyanda

Yes, really both.

customers sort about consumable this already able buying the sell The of to that franchise a not and portfolio. us first to piece a that being were strong full context in the is from us of having talked really I

for portfolio, are have piece Volt, of the us with then are And that changed. has along opportunity solution and with Warrior the that transformation full workflow that fundamental products and the not now it to engaging engaging the like ESAB today, the Edge our a with did new customers comes new these customers so us. exciting like with second allow And

sides so that is not and $X $X I've a sales actually $X And on we're a winning us gain. share something sales talked growth, about, for but both equipment in only in in

a of innovation to we've that dynamic the us. open there. our team engineering And terms and so of efforts nice get proud it's for put Very in in, us really

forefront, to is this intent it build keep in on it the keep category on Our best-in-class the continue and this. to continue now to line, refresh

Sherif El-Sabbahy

just in of seeing side. the sort And areas some of mentioned Understood. on wind Can you end you're and remind seen you renewables are markets some us of projects, energy then your particularly just -- the renewables. on your kind exposure We've strength? clean upheaval in of of strength where in

Shyam Kambeyanda

Yes.

So -- Mark? do have number, the you

Mark Barbalato

digits. single low It's

Shyam Kambeyanda

on But significant not may I'm in a investment going what do of see result amount -- of with decade. We're amount significant Middle we we're engage particular going is next probably of offshore renewable opportunity East. its also seeing mean, aspect seeing there as the speaking the I America. in of, a that's the and a is I you're U.S. it. also seeing, hard of in Europe that continue along is peak investment an energy going upheaval what of that's yes, to We're South sort sure that for activity on obviously, mean, that be the

a So talked our shows gaining We're ton is our about at we're seeing particular incumbents. something few traction. welding that around opportunity for field excitement actually that we've of called industrial that where a displacing some and adaptive category list

we terms And space, efforts we has of have. like like the in that our team we technology put so the in, the

a ESAB. it's so driver for And growth

Operator

Evercore we'll question. our next Rob ISI. Yes, from line the of UBS. on Raso the from Your of Jamieson David It to question from move line next comes from is

Robert Jamieson

Yes, quarter. on quick good a real the end markets. on Congrats just

I probably digits pretty like think the auto single exposure your low is small, to U.S. here in

Gap] UAW as business it's strikes baked anything Americas? your [Audio to there full the year in related is consumables to Just in

Shyam Kambeyanda

have No. We auto Americas. little the in very actually exposure

continue and a that do aspect have so the impact work there. said, being opportunities strike. And saw we result, channel expect sort no as of we to that to growth But really the to of continue of

Robert Jamieson

Got you.

on and use And working know Kevin, then here. you for doing AI I strong of cash mean, couple flow. And a that's Perfect. another the mentioned just I look, capital. free what Okay. quarter

leverage efficient I grow year. business? And the as the across guess, or Just become curious like another to you're net equipment similar use on more trying your of of leads if to question then, there's Xx opportunities rest on the maybe initiatives technology end being the by a sales sub organization to

to on Just you there. looking you're expand acquisition an of portfolio the Any gas business? looking Are fill? the control the update to still other pipeline areas prioritization and that

Kevin Johnson

Day piloting of But think I few side probably times that we've at we're a opportunity and business business. a of in December. AI in that bit some some the the the at is in in we're But benefits more spoken this you Investor across areas cash focused the in about projects the more that our we'll get Rob, that AI supporting the talk we're evolving entire in something Yes. world are little significant looking activities where to mentioned are definitely doing we're even AI future. areas detail see

definitely across business. on the of working wider and that forefront the something at mind our definitely So we're

of terms over to In Shyam. hand and maybe the M&A the I funnel,

Shyam Kambeyanda

strength some Yes. strong opportunities funnel, create our well the have on to very as very FABTECH gas We more got side M&A actually business. a control balanced. of a opportunities as within We've lot

funnel it. never them. down working been And executing on on to stronger. based of few so actively a yes, we're comes timing The has us just It

expect But see a we'll happen. be in so when And our compounder category. continue those we to to

better to diversified create Our a cash ESAB flow intent a premier cyclical, less begin to higher industrial. and business is to shift margin, narrowly

And on acquisition direction. particular that you'll on well our that front. see fuel strategy we're our will way think that I

Operator

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

Mark Barbalato

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

Operator

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

now may disconnect. You

ESAB (ESAB) 1 Nov 232023 Q3 Earnings call transcript