NYSE:ESAB ESAB Q3 2023 Earnings Report $123.54 +0.91 (+0.74%) As of 09:31 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast ESAB EPS ResultsActual EPS$1.08Consensus EPS $0.92Beat/MissBeat by +$0.16One Year Ago EPS$0.92ESAB Revenue ResultsActual Revenue$681.10 millionExpected Revenue$628.17 millionBeat/MissBeat by +$52.93 millionYoY Revenue Growth+9.80%ESAB Announcement DetailsQuarterQ3 2023Date11/1/2023TimeBefore Market OpensConference Call DateWednesday, November 1, 2023Conference Call Time8:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by ESAB Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 1, 2023 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good morning, and welcome to the ESAB Third 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. Thank you. Mark Barbolotto, Vice President of Investor Relations, you may begin your conference. Speaker 100:00:30Thanks, operator. Welcome to ESAB's Q3 2023 earnings call. This morning, I'm joined by our President and CEO, Shyam Kamayanda and CFO, Kevin Johnson. Please keep in mind that some of the statements we are making are forward looking and are subject to risks, including those set forth in our SEC filings and today's earnings release. Actual results may differ, We do not assume any obligation or intend to update these forward looking statements except as required by law. Speaker 100:00:59With respect to any non GAAP financial measures Mentioned during the call today, the accompanying reconciliation information related to those measures can be found in our earnings press release and today's slide presentation. With that, I'd like to turn the call over to our President and CEO, Shyam Kamayanda. Speaker 200:01:18Thank you, Mark. Good morning, everyone. Thank you all for joining us today. ESAB achieved record results for the Q3. Our team delivered strong year over year organic growth, margin expansion and free cash flow. Speaker 200:01:34Before getting into the slides, let me make a few comments. First, let me appreciate and thank our dedicated associates for their commitment and hard work. Their efforts are driving us closer to our long term goals. 2nd, our markets continue to be resilient, benefiting from favorable macro trends. The Q3 also underscored the strength of our global franchise. Speaker 200:02:00Our European team in particular excelled In the quarter, identifying opportunities to sell our new products and gain market share. During this period, I also had the privilege to travel and meet with our teams in the Asia Pacific and Middle East regions. It's always inspiring to be with our regional teams and I was reassured by the remarkable progress we've made in both regions. Our teams continue to execute our EBX playbook, which has resulted in organic growth, margin expansion and cash flow improvements. Both regions added new customers to our equipment and automation portfolio. Speaker 200:02:40It is a testament to our exceptional ground game that is difficult to replicate and their hard work and excellence are evident in our results. 3rd, In September, we had 2 of our biggest industry events, Essen and Fabtech, where we unveiled ESAB's innovative equipment and automation solutions, generating tremendous interest amongst our end users and sparking excitement among our valued customers. Since 2016, in Fabtech, we have systematically revitalized our equipment portfolio by bridging product gaps And fortifying our distribution networks, while simultaneously creating a global presence in global gas control products and solutions. 4th, we continue to ramp up the use of EBX Business System. During the Q3, we completed several Kaizens, including our presence Kaizen at our Denton facility as part of our product line simplification initiative. Speaker 200:03:40For this Kaizen, our teams mapped out product families, Created plans to eliminate low volume SKUs and aligned customers with similar SKUs to enhance customer value while reducing complexity. We are already seeing the positive impact of this Kaizen that has allowed us to increase on time shipments, improve customer satisfaction and expand margins. Last, as a result of our record 3rd quarter performance and a good start to Q4, We're raising our guidance for the year. Turning to Slide 3. We delivered outstanding third quarter results. Speaker 200:04:19Total sales grew 12% with our organic sales growing an impressive 700 basis points. We continue to experience resilient end markets And we're on track to achieve our goal of increasing our equipment mix to 35% of sales. Profits also reflect a strong quarter with adjusted EBITDA margins expanding by 170 basis points. Our EBX initiative, including product line simplification, continue to enhance our operational efficiency and cash flow generation. Moving to Slide 4. Speaker 200:05:04In the past, I've discussed how we're positioning ESAB for the future. ESAB has always had a leading consumables franchise. When I started in 2016, equipment represented only 26% of our sales. Our strategy was to refresh our equipment portfolio, fill product gaps and extend our leadership in gas control equipment, while protecting our consumables franchise. I'm proud to say we have made great progress on our equipment offering and have successfully filled our product gaps. Speaker 200:05:38Last month, we showcased products like the Volt, the digitally enabled Warrior Edge And our newly digitally connected cobot at Fabtech and Essent trade shows, generating significant interest and excitement. We are making substantial investments in marketing, advertising and sales training to leverage our new product offering. These innovations are beginning to bear fruit with equipment and automation sales seeing high single digit growth, Cobalt sales increasing by triple digits compared to last year. And additionally, our Ohio acquisition has been successful in selling Our GCE gas control products like Medivitile Valves further enhancing our position in the North American gas control market. All in all, strong progress as we continue to shape ESAB into a premier, narrowly diversified industrial company. Speaker 200:06:31Moving to Slide 5, our financial performance. Sales for the quarter reached a record $644,000,000 representing 12% total growth. Our end markets continue to perform better than expected displaying resilience. Our acquisitions continue to outperform. EBITDA margins expanded by 170 basis points reaching a record 18.3. Speaker 200:06:57Turning to Slide 6. The Americas regions performed as expected during the quarter. Total sales increased by 9%, Organic sales increased by 400 basis points year over year and acquisitions added an additional 500 basis points of growth. Excluding our product line simplification initiative, volumes grew low single digits. Our new products and solutions for the distribution channel, Automation and robotics are expanding our growth opportunities. Speaker 200:07:29Our Gas Control business also continued to perform well. EBX and our new product launches played a significant role in driving a 2 20 basis points margin expansion in the quarter. Turning to Slide 7. Our EMEA and APAC segment posted an outstanding quarter with total sales growing by 14%. Organic sales increased by 900 basis points year over year and acquisitions added 200 basis points of growth. Speaker 200:08:00Europe continues to demonstrate resilience and the Middle East and India markets are showing notable strength. Our strong showing at Essent drove sales volumes higher by $4,000,000 in September. EBITDA margins in the region By 130 basis points, the team is effectively utilizing EBX and our pipeline simplification initiative to stimulate growth and expand margins. On that positive note, let me hand it over to Kevin for Slide 8. Speaker 300:08:32Thanks Shyam. We delivered another Strong quarter of free cash flow, up 30% versus last year to a record $100,000,000 And we ended the Q3 with net leverage of less than 2.2 turns as we continued to repay debt. Key to our performance was a 0.5 turn improvement in working capital as we ramp up the deployment of our EBX business system. We have a deep funnel of opportunities for the future and we continue to embrace the latest developments in AI to accelerate improvement. Our cash flow momentum has continued into the Q4 and we are on track to deliver a year of record free cash flow I expect the net leverage of below 2 turns as we exit the year. Speaker 300:09:24Turning to Slide 9. As Sean mentioned earlier, we have again raised our full year 2023 guidance. Sales guidance has been increased to $2,590,000,000 to $2,610,000,000 and organic growth of 5% to 6%. This reflects continued resilience in our end markets, a strong performance from acquisitions Offset by negative FX that is expected to impact our Q4 top line by approximately $12,000,000 Adjusted EBITDA guidance increased to $465,000,000 to $475,000,000 Which includes continued progress on margins from manufacturing consolidation, product line simplification And automation in our back office offset by around $2,000,000 of FX impact. Adjusted EPS Guidance has been raised by $0.15 at the midpoint, reflecting a stronger adjusted EBITDA performance, improved outlook for tax And an update to our interest expense guidance. Speaker 300:10:34Cash flow conversion remains on track for a strong year for ESAB. With that, let me hop back to Shyam on Slide 10 to wrap up. Speaker 200:10:44Thank you, Kevin. To wrap up, our teams continue to execute our strategy, And we're well on our way to becoming a premier narrowly diversified industrial. Our markets continue to show strength and resilience on the back of favorable macro trends. In addition, our focus on introducing new innovative product solutions to our customers is allowing us to grow and gain share. We're taking EBX up a notch and I'm proud of our team's energy and commitment towards continuous improvement. Speaker 200:11:15As a team, we remain focused on creating value for our customers, associates and shareholders. We're poised for a strong finish to 2023 And we're building momentum going into 2024. Thank you again for joining us. Operator, please open the line for questions. Operator00:11:46And your first question today comes from the line of Tami Zakaria From JPMorgan, your line is open. Speaker 400:11:54Hi, good morning. Thank you so much for taking my questions. So I think I just saw pricing turned negative in Europe. Can you help us understand what drove that and what The outlook going forward. Speaker 200:12:11Hi, good morning, Tammy. Yes, thanks for the question. A couple of things. We still anticipate pricing to be sort of in the low single digits as we finish out the year. We just saw some items especially steel sort of abate in the region. Speaker 200:12:28But the real story for us In the EMEA and APAC region was the markets continue to stay resilient. Our teams actually got significant volume And our EBX initiatives drove a significant beat in margin versus where we expected. So all in all, really strong execution by the team. Pricing was just one part of the story based on some inflation that sort of began to abate. But the real story for us was really strong markets, great execution and margin expansion year over year. Speaker 400:13:03Got it. Thank you so much. And just a follow-up, As you think about raw materials prices coming down, how should we think about pricing in the Americas as we look to the next few quarters? Speaker 200:13:17Yes. Tammy, we've talked about this before. We really have 3 strategies on pricing. The first one being inflation based and We play in varied markets and not every market is seeing steel prices abate. So there's sort of a mixed bag out there. Speaker 200:13:35But there's 2 other pieces that we're working hard on. 1 is value pricing and the second one is our product line simplification based pricing. So from that perspective, we're evaluating all of our options and looking at next year in that context. We're confident on holding price regardless of where the markets grow. So our intent as we go forward is to sort of talk more about it during our Investor Day call, but as of right now nothing changes in our strategy. Speaker 400:14:06Got it. Thank you. Great quarter. Speaker 200:14:09Thanks, Tim. Operator00:14:11Your next question comes from the line of Nathan Jones from Stifel. Speaker 500:14:22I was hoping to dig in a little bit more On PLS and its impact on the business, it's been going on for a few quarters. It obviously has some headwind on the revenue line, some Tailwind on the margin line. I think you talked about it having some positive impact on the pricing line there. Maybe you could unpack some of the impacts Of PLS, Forrest, just in terms of the revenue drag, margin benefits, and anything else you can give us some color on? Speaker 200:14:51Yes. The best way to think about PLS is that, one, we've been very happy with the engagement and the execution of our teams on this particular initiative. And what you could see is we talk about PLS a certain way in the Americas market and then we're also doing PLS in Europe and the Middle East and to some extent also in India. And where you can actually see the power of The PLS initiative as it focuses also on growth, fortifying and understanding how you sell to your customers. So what I'd say is that the PLS story is not just about Refinement and elimination of SKUs, but it's also about growth. Speaker 200:15:31And so the best way to think about PLS is look at ESAB's performance. We've talked about the North America business being more complex than some of our other regions, Selling a significant larger amount of SKUs and a lot of third party sales where we were not adding much value in terms of sales Content. And so one of the things that we had talked about is that it would take us this year to get through that aspect of PLS and begin to focus on growth. I was very happy with the progress that the North American team made as the quarter rolled on. We saw improvement starting In July all the way to September in terms of volume. Speaker 200:16:10And to answer your question as to the volume impact, we've said this, if you exclude The PLS volume impact, we had low single digit growth in the region. And all in all, in our view, Really strong initiative, something that we believe is going to be a core toolkit of ours with a big focus on growth as well and Speaker 500:16:39Is it your opinion then that the impact of PLS, I know PLS will be an ongoing initiative, but the major impacts that we're seeing at least To the top line in Americas, I mean, you're talking about probably 5 points of volume or something like that, that you're dragging on revenue in We can more easily identify the impacts to growth of these tools in 2024? Speaker 200:17:11That's right. Our intent is to sort of Exit this year and be in a spot where the comparables are sort of more equal and excluding sort of the big PLS impacts that we've made this year In the North American and Americas market. That's correct. Speaker 500:17:28Awesome. Thanks very much for taking my questions. Speaker 200:17:31Thanks, Nathan. Operator00:17:33Your next question comes from the line of Mig Dobre from Baird. Your line is open. Speaker 600:17:39Hey, good morning guys. Thank you. Thank you for the question. If I may, I'd like to see if you can unpack your growth a little bit more. So on Slide 3 here, Rather Slide 4, you mentioned that equipment and automation volumes were up low double digits. Speaker 600:17:57Just running basic math, It looks like your consumables were flat and your growth in volume was really kind of all driven by equipment and automation. So correct me if I'm wrong there. What I'd like to understand from you is sort of how you see these two sides of your business progressing into the Q4 or maybe if you're Willing to comment even beyond that, how sustainable is this growth in equipment and automation? What do you think is happening with volumes just on a consumable side? Thank you. Speaker 200:18:28Yes. So thanks, Mig, always good to hear from you. So a couple of aspects. The first piece is something that I spoke about In my prepared comments was that in 2016, we really did not have an equipment line. One of the best stories that came out of Fabtech and Essen was the excitement our sales team saw with the fact that we now have a full toolkit and a lineup to go sell on equipment And the progress that we've made in creating automation solutions with our new Voyage Edge product line. Speaker 200:18:59So fundamentally think of it as ESAB was playing back in 2016 Primarily as a consumables franchise, to today we've now got a full product line on the fab tech sites to go out and get behind and our sales teams and our So we're seeing a lot of excitement on that particular front. We're seeing a lot of engagement. And so we fundamentally believe that over the next couple of years, We will be able to sell more equipment visavis consumables. That being said, the assumption that you're making primarily Has the right assumption, which is equipment and automation is growing faster than consumables. But probably the incorrect part of it is that the underlying we did see growth as well, just not as much. Speaker 200:19:45And so we feel that this journey continues for us. Our position of strength in the geographies that we spoke about is significant. Our ground game is bar none and unparalleled. We genuinely feel that our teams are now executing our ESAB growth playbook and EBX playbook quite well. So we believe that we continue to have an opportunity to gain share and drive volumes to be positive over the coming years. Speaker 200:20:14The other aspect, Mig, that I'd say to you is, we've been very positively Surprised by how resilient the markets have been. And in reality, what we Fine. I was in the Middle East and I can tell you never before have I seen the kind of infrastructure and investment projects underway. I was in India and I can tell you from the times that I have came to college here and I've been going back, I've never seen the kind of development that's happening in that particular region. And we all know about the opportunity that's going to happen in the U. Speaker 200:20:49S, Canada and Mexico over the next decade Whether you call it reindustrialization or an industrial renaissance or reshoring, There truly is significant opportunity for companies like us and ESAB in particular to be able to drive volume growth. We're also looking forward to sharing a lot more detail on all of these topics during our Investor Day in December. Speaker 600:21:15Sure. And thank you for that color. But maybe just to put a finer point here, when we're looking at what your peers reported, for What we have seen there, for lack of a better term, it's just deceleration in activity. That's not really apparent in your in what you reported today, which is why I'm asking the question. Is it that the penetration of new products and all your initiatives are leading to the kind of outgrowth in the market that you deem to be sustainable Even as maybe broader demand conditions potentially shift going forward? Speaker 600:21:54Thank you. Speaker 200:21:56Yes. So twofold. The first one is just Simple answer, yes, we believe that we've got good processes in play that allow us to continue to do what we're doing and get better from there. But the other piece that I would also say is that the markets actually are showing reasonable resilience as we see it And where we are playing, we talked about this before, we're seeing ag continue to show some strength, we're seeing renewable energy show some strength and we continue to Gain customers in that particular place, we see downstream oil and gas and investment in the Middle East and infrastructure doing well. And the emerging markets exposure that we have, really we've always talked about it having sort of a 2x impact On ESOP's growth, and we're seeing that play out. Speaker 600:22:46Okay. Thank you. Operator00:22:50And your next question comes from the line of Chris Dankert from Loop Capital. Your line is open. Speaker 700:22:57Hey, good morning everyone. Might be a question more for December here, but I'll give it a shot anyhow. Kevin, I think you touched on manufacturing consolidation, maybe just any kind of update on what the actions were in the quarter and kind of what needs to happen yet on that front? Speaker 300:23:13Yes. So we've been working hard on the manufacturing consolidation. We had a couple of large projects this year With a focus on our European business this year in terms of some work that we're doing, there There is an impact in the Q4, probably a few $1,000,000 as a result of those actions that's benefiting our margins. Speaker 200:23:36And we've got a Funnel of opportunities that we're excited about for the future. Yes, Chris, I think we've talked about this before where We think we're in the middle innings in terms of where we think our footprint efficiency can go, but we've done a lot of heavy lifting in the past. So But the point still is that plenty to do in terms of footprint rationalization, in terms of the things that Kevin spoke about also related to AI And data mining that sort of fundamentally drives our OpEx to a different position. So we're looking forward to executing those As we go into the budget cycle, Kevin and I actually looked at several of those initiatives for us and we're putting plans in play depending on what The end markets do for us to either accelerate or run them through the course. Speaker 700:24:27Perfect. Thanks for the call there, both of you. And then just kind of following up here on price cost, any kind of color you can give us on what the impact of price cost was To EBITDA in the quarter and kind of what we're expecting to finish out the year here? Speaker 300:24:43Yes. So I think as Sean mentioned earlier, we We're constantly watching inflation reacting to inflation with price. And we would say at this point, we're a little bit ahead where we are with price over inflation and we'll look to continue to monitor that closely And keep that as we step through the Q4. Speaker 200:25:06We have a really strong system as we've talked about Chris in the past where we look at Net impact of price within our business, Kevin did a really nice job few years back kind of creating what I'd Call a standard work for us to monitor how our business is doing against that particular metrics. And so we feel confident that we've got enough Sensors out in our space to ensure we're doing the right things associated with price. And then I spoke about the 2 other ones that we're Going hard on which is value pricing and PLS based pricing in the marketplace. Speaker 700:25:40I guess if I could just put a fine point on that last Topic there, PLS with the price dynamic, is that should we think about that as like an eightytwenty price approach as we move kind of beyond this year or how do we think about That component of pricing after kind of the lines are kind of reset into 24? Speaker 200:26:01We believe that it's an ongoing initiative. You continually look at where you add value, where you are delivering significant amount of value to your customer and work that piece. But the short answer would be, yes, there's some sort of low hanging fruit that Come at you early and then it becomes a stable process, but it is a powerful process of how you think about your business, how you think about your customers and how you think about your product line and SKUs. So we're excited about it. The one thing that we've always talked about PLS for us is not an exercise in cutting, it's an exercise in growth and efficiency, And that's what we're focused on. Speaker 700:26:39Got it. Thanks so much. Operator00:26:43Your next question comes from the line of Sherif El Sabai from Bank of America. Your line is open. Speaker 700:26:50Hi, good morning. Hi, Charisse. I just Speaker 800:26:53wanted to follow-up a bit on some of the strong equipment sales you've seen. On the Fabtech side, are you seeing The uptick in equipment sales mostly from existing customers that are buying sort of the new refreshed product lines Or is it also growing market share among sort of the non traditional ESAB customer? Speaker 200:27:15Yes, really both. The first piece is that I'd sort of talked about this in the context of us having a really strong consumable franchise and not being able to sell to the customers that were already buying from us A full portfolio and so today that has changed. And then the second piece that comes along with it with these exciting new products like the Volt, Like the Warrior Edge and the fundamental transformation of our portfolio, new customers are engaging with us and customers that did not have The opportunity to allow for a full ESAB workflow solution are now engaging with us. And so we're actually winning on both And something that I've talked about, dollars 1 sales for us in equipment is not only a dollar sales in growth, but $1 in share gain. And so it's a really nice dynamic for us, very proud of our engineering team and the efforts that we put in, in terms of open innovation to get us there. Speaker 200:28:06Our intent now is to continue to refresh this line, keep it On the forefront, keep it in the best in class category and continue to build on this. Speaker 800:28:18Understood. And then you mentioned just on some of the end markets you're seeing strength in renewables. We've seen some upheaval in clean energy projects, particularly on the wind side. Can you remind us just of your exposure in renewables and kind of sort of Speaker 700:28:33where are your areas of Speaker 200:28:37Yes. So do you have the number, Mark? It's low single digits. But what we are seeing is a significant amount of investment that is going in and an activity as a result of it. Mean, yes, there may be I mean, I'm not sure of the upheaval that you're speaking of. Speaker 200:28:55What we do see is a significant amount of offshore investment That's going on in Europe that's going to continue probably for the next decade. We're seeing sort of renewable energy peak its Opportunity also in the Middle East, where we're seeing obviously the U. S. Also engage hard on that particular aspect along with South America. So our opportunity list and something that we've talked about at our industrial shows called adaptive welding for that particular category is We're gaining a ton of traction. Speaker 200:29:28We're seeing some excitement around that field where we're displacing a few incumbents. And so We like the space. We like the efforts our team has put in, in terms of the technology that we have. And so it's a growth driver for ESA. Operator00:29:48Your next question comes from the line of David Raso from Evercore ISI. Yes. We'll move on to our next question. It is from the line of Rob Jamieson from UBS. Your line is open. Speaker 900:30:16Good morning, guys. Congrats on the good quarter. Yes, just real quick on the end markets. I think your exposure to auto is pretty small, like probably low single digits here in the U. S. Speaker 900:30:29Just is there anything baked in to full year W strikes as it's related to your consumables business in the Americas? Speaker 200:30:38No, we actually have very little auto exposure in the Americas. And so as a result, we really saw no impact Of the strike, but that being said, we do expect to continue to sort of work That aspect of the channel and continue to have growth opportunities there. Speaker 900:31:04Got you. Okay, perfect. Thanks. Then just a couple on free cash flow. I mean, look, another strong quarter here. Speaker 900:31:10And Kevin, I know you mentioned the use of AI, and what that's for working capital. Just curious if there is opportunities to use similar technology across the rest of the organization to maybe become more efficient Sales initiatives or leads as you're trying to grow your equipment business. And then I guess another question on like net leverage being sub Two turns by the end of the year. Just an update on the acquisition pipeline and prioritization there. Are you still looking to expand the gas Speaker 300:31:44Yes. Raul, I think we've spoken a few times That we are piloting some projects in AI that are supporting the cash side of the business, but We'll probably talk a little bit more in detail about some of the activities we're doing at our Investor Day in December, but AI is something that we're looking at Across the entire business and the areas that you mentioned are areas where we are definitely focused and see Significant opportunity in this evolving AI world to get even more benefits in the future. So definitely at the forefront of our mind and definitely We're working on across the wider business. In terms of the M and A and the funnel, I'll maybe hand over to Sean. Speaker 200:32:26Yes, we actually have a very strong M and A Funnel, very balanced. We've got a lot of opportunities on the gas control side as well as some opportunities to create more strength within our Fabtech business. And so yes, we're actively working it. The funnel has never been stronger. It just comes down to us Excuse me, based on timing on a few of them. Speaker 200:32:50And so we'll see when those happen. But we continue to And begin to shift ESAB to a narrowly diversified premier industrial. I think we're well on our way Thank you. Operator00:33:22And there are no further questions at this time. Mr. Mark Barbolato, I turn the call back over to you for some final closing remarks. Speaker 100:33:30Thank you for joining us today and we look forward to speaking to you on our next call. Operator00:33:34This concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallESAB Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) ESAB Earnings HeadlinesESAB (NYSE:ESAB) Price Target Raised to $126.00May 5 at 3:39 AM | americanbankingnews.comEarnings call transcript: ESAB Corp beats Q1 2025 earnings expectationsMay 3, 2025 | uk.investing.comThe Trump Dump is starting; Get out of stocks now?The first 365 days of the Trump presidency… Will be the best time to get rich in American history.May 7, 2025 | Paradigm Press (Ad)ESAB First Quarter 2025 Earnings: Revenues Beat Expectations, EPS LagsMay 3, 2025 | finance.yahoo.comESAB Corporation (ESAB) Q1 2025 Earnings Call TranscriptMay 2, 2025 | seekingalpha.comESAB Corp (ESAB) Q1 2025 Earnings Call Highlights: Record EBITDA Margin and Strategic Growth ...May 2, 2025 | uk.finance.yahoo.comSee More ESAB Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like ESAB? Sign up for Earnings360's daily newsletter to receive timely earnings updates on ESAB and other key companies, straight to your email. Email Address About ESABESAB (NYSE:ESAB) engages in the formulation, development, manufacture, and supply of consumable products and equipment for use in cutting, joining, automated welding, and gas control equipment. Its comprehensive range of welding consumables includes electrodes, cored and solid wires, and fluxes using a range of specialty and other materials; and cutting consumables comprising electrodes, nozzles, shields, and tips. The company's equipment ranges from portable welding machines to large customized automated cutting and welding systems. It also offers a range of software and digital solutions to help its customers increase their productivity, remotely monitor their welding operations, and digitize their documentation. The company sells its products under the ESAB brand to various end markets, such as general industry, infrastructure, renewable energy, medical and life sciences, transportation, construction, and energy. It offers its products through independent distributors and direct salespeople. The company operates in North America, South America, Europe, the Middle East, India, Africa, and the Asia Pacific. ESAB Corporation was founded in 1904 and is headquartered in North Bethesda, Maryland.View ESAB ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's Earnings Upcoming Earnings Monster Beverage (5/8/2025)Coinbase Global (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Shopify (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 10 speakers on the call. Operator00:00:00Good morning, and welcome to the ESAB Third 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. Thank you. Mark Barbolotto, Vice President of Investor Relations, you may begin your conference. Speaker 100:00:30Thanks, operator. Welcome to ESAB's Q3 2023 earnings call. This morning, I'm joined by our President and CEO, Shyam Kamayanda and CFO, Kevin Johnson. Please keep in mind that some of the statements we are making are forward looking and are subject to risks, including those set forth in our SEC filings and today's earnings release. Actual results may differ, We do not assume any obligation or intend to update these forward looking statements except as required by law. Speaker 100:00:59With respect to any non GAAP financial measures Mentioned during the call today, the accompanying reconciliation information related to those measures can be found in our earnings press release and today's slide presentation. With that, I'd like to turn the call over to our President and CEO, Shyam Kamayanda. Speaker 200:01:18Thank you, Mark. Good morning, everyone. Thank you all for joining us today. ESAB achieved record results for the Q3. Our team delivered strong year over year organic growth, margin expansion and free cash flow. Speaker 200:01:34Before getting into the slides, let me make a few comments. First, let me appreciate and thank our dedicated associates for their commitment and hard work. Their efforts are driving us closer to our long term goals. 2nd, our markets continue to be resilient, benefiting from favorable macro trends. The Q3 also underscored the strength of our global franchise. Speaker 200:02:00Our European team in particular excelled In the quarter, identifying opportunities to sell our new products and gain market share. During this period, I also had the privilege to travel and meet with our teams in the Asia Pacific and Middle East regions. It's always inspiring to be with our regional teams and I was reassured by the remarkable progress we've made in both regions. Our teams continue to execute our EBX playbook, which has resulted in organic growth, margin expansion and cash flow improvements. Both regions added new customers to our equipment and automation portfolio. Speaker 200:02:40It is a testament to our exceptional ground game that is difficult to replicate and their hard work and excellence are evident in our results. 3rd, In September, we had 2 of our biggest industry events, Essen and Fabtech, where we unveiled ESAB's innovative equipment and automation solutions, generating tremendous interest amongst our end users and sparking excitement among our valued customers. Since 2016, in Fabtech, we have systematically revitalized our equipment portfolio by bridging product gaps And fortifying our distribution networks, while simultaneously creating a global presence in global gas control products and solutions. 4th, we continue to ramp up the use of EBX Business System. During the Q3, we completed several Kaizens, including our presence Kaizen at our Denton facility as part of our product line simplification initiative. Speaker 200:03:40For this Kaizen, our teams mapped out product families, Created plans to eliminate low volume SKUs and aligned customers with similar SKUs to enhance customer value while reducing complexity. We are already seeing the positive impact of this Kaizen that has allowed us to increase on time shipments, improve customer satisfaction and expand margins. Last, as a result of our record 3rd quarter performance and a good start to Q4, We're raising our guidance for the year. Turning to Slide 3. We delivered outstanding third quarter results. Speaker 200:04:19Total sales grew 12% with our organic sales growing an impressive 700 basis points. We continue to experience resilient end markets And we're on track to achieve our goal of increasing our equipment mix to 35% of sales. Profits also reflect a strong quarter with adjusted EBITDA margins expanding by 170 basis points. Our EBX initiative, including product line simplification, continue to enhance our operational efficiency and cash flow generation. Moving to Slide 4. Speaker 200:05:04In the past, I've discussed how we're positioning ESAB for the future. ESAB has always had a leading consumables franchise. When I started in 2016, equipment represented only 26% of our sales. Our strategy was to refresh our equipment portfolio, fill product gaps and extend our leadership in gas control equipment, while protecting our consumables franchise. I'm proud to say we have made great progress on our equipment offering and have successfully filled our product gaps. Speaker 200:05:38Last month, we showcased products like the Volt, the digitally enabled Warrior Edge And our newly digitally connected cobot at Fabtech and Essent trade shows, generating significant interest and excitement. We are making substantial investments in marketing, advertising and sales training to leverage our new product offering. These innovations are beginning to bear fruit with equipment and automation sales seeing high single digit growth, Cobalt sales increasing by triple digits compared to last year. And additionally, our Ohio acquisition has been successful in selling Our GCE gas control products like Medivitile Valves further enhancing our position in the North American gas control market. All in all, strong progress as we continue to shape ESAB into a premier, narrowly diversified industrial company. Speaker 200:06:31Moving to Slide 5, our financial performance. Sales for the quarter reached a record $644,000,000 representing 12% total growth. Our end markets continue to perform better than expected displaying resilience. Our acquisitions continue to outperform. EBITDA margins expanded by 170 basis points reaching a record 18.3. Speaker 200:06:57Turning to Slide 6. The Americas regions performed as expected during the quarter. Total sales increased by 9%, Organic sales increased by 400 basis points year over year and acquisitions added an additional 500 basis points of growth. Excluding our product line simplification initiative, volumes grew low single digits. Our new products and solutions for the distribution channel, Automation and robotics are expanding our growth opportunities. Speaker 200:07:29Our Gas Control business also continued to perform well. EBX and our new product launches played a significant role in driving a 2 20 basis points margin expansion in the quarter. Turning to Slide 7. Our EMEA and APAC segment posted an outstanding quarter with total sales growing by 14%. Organic sales increased by 900 basis points year over year and acquisitions added 200 basis points of growth. Speaker 200:08:00Europe continues to demonstrate resilience and the Middle East and India markets are showing notable strength. Our strong showing at Essent drove sales volumes higher by $4,000,000 in September. EBITDA margins in the region By 130 basis points, the team is effectively utilizing EBX and our pipeline simplification initiative to stimulate growth and expand margins. On that positive note, let me hand it over to Kevin for Slide 8. Speaker 300:08:32Thanks Shyam. We delivered another Strong quarter of free cash flow, up 30% versus last year to a record $100,000,000 And we ended the Q3 with net leverage of less than 2.2 turns as we continued to repay debt. Key to our performance was a 0.5 turn improvement in working capital as we ramp up the deployment of our EBX business system. We have a deep funnel of opportunities for the future and we continue to embrace the latest developments in AI to accelerate improvement. Our cash flow momentum has continued into the Q4 and we are on track to deliver a year of record free cash flow I expect the net leverage of below 2 turns as we exit the year. Speaker 300:09:24Turning to Slide 9. As Sean mentioned earlier, we have again raised our full year 2023 guidance. Sales guidance has been increased to $2,590,000,000 to $2,610,000,000 and organic growth of 5% to 6%. This reflects continued resilience in our end markets, a strong performance from acquisitions Offset by negative FX that is expected to impact our Q4 top line by approximately $12,000,000 Adjusted EBITDA guidance increased to $465,000,000 to $475,000,000 Which includes continued progress on margins from manufacturing consolidation, product line simplification And automation in our back office offset by around $2,000,000 of FX impact. Adjusted EPS Guidance has been raised by $0.15 at the midpoint, reflecting a stronger adjusted EBITDA performance, improved outlook for tax And an update to our interest expense guidance. Speaker 300:10:34Cash flow conversion remains on track for a strong year for ESAB. With that, let me hop back to Shyam on Slide 10 to wrap up. Speaker 200:10:44Thank you, Kevin. To wrap up, our teams continue to execute our strategy, And we're well on our way to becoming a premier narrowly diversified industrial. Our markets continue to show strength and resilience on the back of favorable macro trends. In addition, our focus on introducing new innovative product solutions to our customers is allowing us to grow and gain share. We're taking EBX up a notch and I'm proud of our team's energy and commitment towards continuous improvement. Speaker 200:11:15As a team, we remain focused on creating value for our customers, associates and shareholders. We're poised for a strong finish to 2023 And we're building momentum going into 2024. Thank you again for joining us. Operator, please open the line for questions. Operator00:11:46And your first question today comes from the line of Tami Zakaria From JPMorgan, your line is open. Speaker 400:11:54Hi, good morning. Thank you so much for taking my questions. So I think I just saw pricing turned negative in Europe. Can you help us understand what drove that and what The outlook going forward. Speaker 200:12:11Hi, good morning, Tammy. Yes, thanks for the question. A couple of things. We still anticipate pricing to be sort of in the low single digits as we finish out the year. We just saw some items especially steel sort of abate in the region. Speaker 200:12:28But the real story for us In the EMEA and APAC region was the markets continue to stay resilient. Our teams actually got significant volume And our EBX initiatives drove a significant beat in margin versus where we expected. So all in all, really strong execution by the team. Pricing was just one part of the story based on some inflation that sort of began to abate. But the real story for us was really strong markets, great execution and margin expansion year over year. Speaker 400:13:03Got it. Thank you so much. And just a follow-up, As you think about raw materials prices coming down, how should we think about pricing in the Americas as we look to the next few quarters? Speaker 200:13:17Yes. Tammy, we've talked about this before. We really have 3 strategies on pricing. The first one being inflation based and We play in varied markets and not every market is seeing steel prices abate. So there's sort of a mixed bag out there. Speaker 200:13:35But there's 2 other pieces that we're working hard on. 1 is value pricing and the second one is our product line simplification based pricing. So from that perspective, we're evaluating all of our options and looking at next year in that context. We're confident on holding price regardless of where the markets grow. So our intent as we go forward is to sort of talk more about it during our Investor Day call, but as of right now nothing changes in our strategy. Speaker 400:14:06Got it. Thank you. Great quarter. Speaker 200:14:09Thanks, Tim. Operator00:14:11Your next question comes from the line of Nathan Jones from Stifel. Speaker 500:14:22I was hoping to dig in a little bit more On PLS and its impact on the business, it's been going on for a few quarters. It obviously has some headwind on the revenue line, some Tailwind on the margin line. I think you talked about it having some positive impact on the pricing line there. Maybe you could unpack some of the impacts Of PLS, Forrest, just in terms of the revenue drag, margin benefits, and anything else you can give us some color on? Speaker 200:14:51Yes. The best way to think about PLS is that, one, we've been very happy with the engagement and the execution of our teams on this particular initiative. And what you could see is we talk about PLS a certain way in the Americas market and then we're also doing PLS in Europe and the Middle East and to some extent also in India. And where you can actually see the power of The PLS initiative as it focuses also on growth, fortifying and understanding how you sell to your customers. So what I'd say is that the PLS story is not just about Refinement and elimination of SKUs, but it's also about growth. Speaker 200:15:31And so the best way to think about PLS is look at ESAB's performance. We've talked about the North America business being more complex than some of our other regions, Selling a significant larger amount of SKUs and a lot of third party sales where we were not adding much value in terms of sales Content. And so one of the things that we had talked about is that it would take us this year to get through that aspect of PLS and begin to focus on growth. I was very happy with the progress that the North American team made as the quarter rolled on. We saw improvement starting In July all the way to September in terms of volume. Speaker 200:16:10And to answer your question as to the volume impact, we've said this, if you exclude The PLS volume impact, we had low single digit growth in the region. And all in all, in our view, Really strong initiative, something that we believe is going to be a core toolkit of ours with a big focus on growth as well and Speaker 500:16:39Is it your opinion then that the impact of PLS, I know PLS will be an ongoing initiative, but the major impacts that we're seeing at least To the top line in Americas, I mean, you're talking about probably 5 points of volume or something like that, that you're dragging on revenue in We can more easily identify the impacts to growth of these tools in 2024? Speaker 200:17:11That's right. Our intent is to sort of Exit this year and be in a spot where the comparables are sort of more equal and excluding sort of the big PLS impacts that we've made this year In the North American and Americas market. That's correct. Speaker 500:17:28Awesome. Thanks very much for taking my questions. Speaker 200:17:31Thanks, Nathan. Operator00:17:33Your next question comes from the line of Mig Dobre from Baird. Your line is open. Speaker 600:17:39Hey, good morning guys. Thank you. Thank you for the question. If I may, I'd like to see if you can unpack your growth a little bit more. So on Slide 3 here, Rather Slide 4, you mentioned that equipment and automation volumes were up low double digits. Speaker 600:17:57Just running basic math, It looks like your consumables were flat and your growth in volume was really kind of all driven by equipment and automation. So correct me if I'm wrong there. What I'd like to understand from you is sort of how you see these two sides of your business progressing into the Q4 or maybe if you're Willing to comment even beyond that, how sustainable is this growth in equipment and automation? What do you think is happening with volumes just on a consumable side? Thank you. Speaker 200:18:28Yes. So thanks, Mig, always good to hear from you. So a couple of aspects. The first piece is something that I spoke about In my prepared comments was that in 2016, we really did not have an equipment line. One of the best stories that came out of Fabtech and Essen was the excitement our sales team saw with the fact that we now have a full toolkit and a lineup to go sell on equipment And the progress that we've made in creating automation solutions with our new Voyage Edge product line. Speaker 200:18:59So fundamentally think of it as ESAB was playing back in 2016 Primarily as a consumables franchise, to today we've now got a full product line on the fab tech sites to go out and get behind and our sales teams and our So we're seeing a lot of excitement on that particular front. We're seeing a lot of engagement. And so we fundamentally believe that over the next couple of years, We will be able to sell more equipment visavis consumables. That being said, the assumption that you're making primarily Has the right assumption, which is equipment and automation is growing faster than consumables. But probably the incorrect part of it is that the underlying we did see growth as well, just not as much. Speaker 200:19:45And so we feel that this journey continues for us. Our position of strength in the geographies that we spoke about is significant. Our ground game is bar none and unparalleled. We genuinely feel that our teams are now executing our ESAB growth playbook and EBX playbook quite well. So we believe that we continue to have an opportunity to gain share and drive volumes to be positive over the coming years. Speaker 200:20:14The other aspect, Mig, that I'd say to you is, we've been very positively Surprised by how resilient the markets have been. And in reality, what we Fine. I was in the Middle East and I can tell you never before have I seen the kind of infrastructure and investment projects underway. I was in India and I can tell you from the times that I have came to college here and I've been going back, I've never seen the kind of development that's happening in that particular region. And we all know about the opportunity that's going to happen in the U. Speaker 200:20:49S, Canada and Mexico over the next decade Whether you call it reindustrialization or an industrial renaissance or reshoring, There truly is significant opportunity for companies like us and ESAB in particular to be able to drive volume growth. We're also looking forward to sharing a lot more detail on all of these topics during our Investor Day in December. Speaker 600:21:15Sure. And thank you for that color. But maybe just to put a finer point here, when we're looking at what your peers reported, for What we have seen there, for lack of a better term, it's just deceleration in activity. That's not really apparent in your in what you reported today, which is why I'm asking the question. Is it that the penetration of new products and all your initiatives are leading to the kind of outgrowth in the market that you deem to be sustainable Even as maybe broader demand conditions potentially shift going forward? Speaker 600:21:54Thank you. Speaker 200:21:56Yes. So twofold. The first one is just Simple answer, yes, we believe that we've got good processes in play that allow us to continue to do what we're doing and get better from there. But the other piece that I would also say is that the markets actually are showing reasonable resilience as we see it And where we are playing, we talked about this before, we're seeing ag continue to show some strength, we're seeing renewable energy show some strength and we continue to Gain customers in that particular place, we see downstream oil and gas and investment in the Middle East and infrastructure doing well. And the emerging markets exposure that we have, really we've always talked about it having sort of a 2x impact On ESOP's growth, and we're seeing that play out. Speaker 600:22:46Okay. Thank you. Operator00:22:50And your next question comes from the line of Chris Dankert from Loop Capital. Your line is open. Speaker 700:22:57Hey, good morning everyone. Might be a question more for December here, but I'll give it a shot anyhow. Kevin, I think you touched on manufacturing consolidation, maybe just any kind of update on what the actions were in the quarter and kind of what needs to happen yet on that front? Speaker 300:23:13Yes. So we've been working hard on the manufacturing consolidation. We had a couple of large projects this year With a focus on our European business this year in terms of some work that we're doing, there There is an impact in the Q4, probably a few $1,000,000 as a result of those actions that's benefiting our margins. Speaker 200:23:36And we've got a Funnel of opportunities that we're excited about for the future. Yes, Chris, I think we've talked about this before where We think we're in the middle innings in terms of where we think our footprint efficiency can go, but we've done a lot of heavy lifting in the past. So But the point still is that plenty to do in terms of footprint rationalization, in terms of the things that Kevin spoke about also related to AI And data mining that sort of fundamentally drives our OpEx to a different position. So we're looking forward to executing those As we go into the budget cycle, Kevin and I actually looked at several of those initiatives for us and we're putting plans in play depending on what The end markets do for us to either accelerate or run them through the course. Speaker 700:24:27Perfect. Thanks for the call there, both of you. And then just kind of following up here on price cost, any kind of color you can give us on what the impact of price cost was To EBITDA in the quarter and kind of what we're expecting to finish out the year here? Speaker 300:24:43Yes. So I think as Sean mentioned earlier, we We're constantly watching inflation reacting to inflation with price. And we would say at this point, we're a little bit ahead where we are with price over inflation and we'll look to continue to monitor that closely And keep that as we step through the Q4. Speaker 200:25:06We have a really strong system as we've talked about Chris in the past where we look at Net impact of price within our business, Kevin did a really nice job few years back kind of creating what I'd Call a standard work for us to monitor how our business is doing against that particular metrics. And so we feel confident that we've got enough Sensors out in our space to ensure we're doing the right things associated with price. And then I spoke about the 2 other ones that we're Going hard on which is value pricing and PLS based pricing in the marketplace. Speaker 700:25:40I guess if I could just put a fine point on that last Topic there, PLS with the price dynamic, is that should we think about that as like an eightytwenty price approach as we move kind of beyond this year or how do we think about That component of pricing after kind of the lines are kind of reset into 24? Speaker 200:26:01We believe that it's an ongoing initiative. You continually look at where you add value, where you are delivering significant amount of value to your customer and work that piece. But the short answer would be, yes, there's some sort of low hanging fruit that Come at you early and then it becomes a stable process, but it is a powerful process of how you think about your business, how you think about your customers and how you think about your product line and SKUs. So we're excited about it. The one thing that we've always talked about PLS for us is not an exercise in cutting, it's an exercise in growth and efficiency, And that's what we're focused on. Speaker 700:26:39Got it. Thanks so much. Operator00:26:43Your next question comes from the line of Sherif El Sabai from Bank of America. Your line is open. Speaker 700:26:50Hi, good morning. Hi, Charisse. I just Speaker 800:26:53wanted to follow-up a bit on some of the strong equipment sales you've seen. On the Fabtech side, are you seeing The uptick in equipment sales mostly from existing customers that are buying sort of the new refreshed product lines Or is it also growing market share among sort of the non traditional ESAB customer? Speaker 200:27:15Yes, really both. The first piece is that I'd sort of talked about this in the context of us having a really strong consumable franchise and not being able to sell to the customers that were already buying from us A full portfolio and so today that has changed. And then the second piece that comes along with it with these exciting new products like the Volt, Like the Warrior Edge and the fundamental transformation of our portfolio, new customers are engaging with us and customers that did not have The opportunity to allow for a full ESAB workflow solution are now engaging with us. And so we're actually winning on both And something that I've talked about, dollars 1 sales for us in equipment is not only a dollar sales in growth, but $1 in share gain. And so it's a really nice dynamic for us, very proud of our engineering team and the efforts that we put in, in terms of open innovation to get us there. Speaker 200:28:06Our intent now is to continue to refresh this line, keep it On the forefront, keep it in the best in class category and continue to build on this. Speaker 800:28:18Understood. And then you mentioned just on some of the end markets you're seeing strength in renewables. We've seen some upheaval in clean energy projects, particularly on the wind side. Can you remind us just of your exposure in renewables and kind of sort of Speaker 700:28:33where are your areas of Speaker 200:28:37Yes. So do you have the number, Mark? It's low single digits. But what we are seeing is a significant amount of investment that is going in and an activity as a result of it. Mean, yes, there may be I mean, I'm not sure of the upheaval that you're speaking of. Speaker 200:28:55What we do see is a significant amount of offshore investment That's going on in Europe that's going to continue probably for the next decade. We're seeing sort of renewable energy peak its Opportunity also in the Middle East, where we're seeing obviously the U. S. Also engage hard on that particular aspect along with South America. So our opportunity list and something that we've talked about at our industrial shows called adaptive welding for that particular category is We're gaining a ton of traction. Speaker 200:29:28We're seeing some excitement around that field where we're displacing a few incumbents. And so We like the space. We like the efforts our team has put in, in terms of the technology that we have. And so it's a growth driver for ESA. Operator00:29:48Your next question comes from the line of David Raso from Evercore ISI. Yes. We'll move on to our next question. It is from the line of Rob Jamieson from UBS. Your line is open. Speaker 900:30:16Good morning, guys. Congrats on the good quarter. Yes, just real quick on the end markets. I think your exposure to auto is pretty small, like probably low single digits here in the U. S. Speaker 900:30:29Just is there anything baked in to full year W strikes as it's related to your consumables business in the Americas? Speaker 200:30:38No, we actually have very little auto exposure in the Americas. And so as a result, we really saw no impact Of the strike, but that being said, we do expect to continue to sort of work That aspect of the channel and continue to have growth opportunities there. Speaker 900:31:04Got you. Okay, perfect. Thanks. Then just a couple on free cash flow. I mean, look, another strong quarter here. Speaker 900:31:10And Kevin, I know you mentioned the use of AI, and what that's for working capital. Just curious if there is opportunities to use similar technology across the rest of the organization to maybe become more efficient Sales initiatives or leads as you're trying to grow your equipment business. And then I guess another question on like net leverage being sub Two turns by the end of the year. Just an update on the acquisition pipeline and prioritization there. Are you still looking to expand the gas Speaker 300:31:44Yes. Raul, I think we've spoken a few times That we are piloting some projects in AI that are supporting the cash side of the business, but We'll probably talk a little bit more in detail about some of the activities we're doing at our Investor Day in December, but AI is something that we're looking at Across the entire business and the areas that you mentioned are areas where we are definitely focused and see Significant opportunity in this evolving AI world to get even more benefits in the future. So definitely at the forefront of our mind and definitely We're working on across the wider business. In terms of the M and A and the funnel, I'll maybe hand over to Sean. Speaker 200:32:26Yes, we actually have a very strong M and A Funnel, very balanced. We've got a lot of opportunities on the gas control side as well as some opportunities to create more strength within our Fabtech business. And so yes, we're actively working it. The funnel has never been stronger. It just comes down to us Excuse me, based on timing on a few of them. Speaker 200:32:50And so we'll see when those happen. But we continue to And begin to shift ESAB to a narrowly diversified premier industrial. I think we're well on our way Thank you. Operator00:33:22And there are no further questions at this time. Mr. Mark Barbolato, I turn the call back over to you for some final closing remarks. Speaker 100:33:30Thank you for joining us today and we look forward to speaking to you on our next call. Operator00:33:34This concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by