ESAB Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: ESAB’s sales rose 13% year over year to $766 million, while adjusted EBITDA increased 8% to $150 million, supported by organic growth, acquisitions and strong demand for equipment and automation.
• Eddyfi acquisition expands growth opportunities: The deal closed ahead of schedule and adds inspection, monitoring and data-traceability capabilities, with a nearly $450 million commercial funnel and expected synergies of approximately $20 million.
• 2026 outlook raised: ESAB now expects $3.0 billion–$3.1 billion in core sales, $615 million–$625 million in adjusted EBITDA, adjusted EPS of $5.40–$5.50 and free-cash-flow conversion of about 90%, despite temporary logistics, commodity and price-cost pressures.

ESAB NYSE: ESAB reported record total core sales and adjusted EBITDA for the second quarter of 2026, supported by organic growth in both operating segments, double-digit growth in automation and equipment, and contributions from acquisitions.

Total sales rose 13% from a year earlier to $766 million, including 2.5% organic growth and an 8% contribution from acquisitions. Adjusted EBITDA increased 8% to $150 million, while adjusted EBITDA margin was 19.5%, down 90 basis points year over year.

President and CEO Shyam Kambeyanda said the quarter reflected robust demand in North America and Asia, resilient conditions in Europe, and performance in the Middle East that was in line with the company’s expectations amid a difficult operating environment.

Acquisition of Eddyfi Closes Ahead of Schedule

ESAB said it completed its acquisition of Eddyfi ahead of schedule. Eddyfi provides inspection and monitoring technologies used in mission-critical applications, including electromagnetic testing, ultrasonic testing and automated inspection.

Kambeyanda said the acquisition expands ESAB’s end-to-end workflow capabilities, combining welding, joining, gas-control and automation offerings with inspection, monitoring and data-traceability technologies. He said the combined businesses are pursuing commercial opportunities across aerospace and defense, nuclear, infrastructure, oil and gas, pipelines, rail and wind-energy applications.

“The ESAB you see today is a transformed enterprise with equipment now representing over 50% of our revenue and powering our ability to accelerate organic growth,” Kambeyanda said.

The company said Eddyfi serves markets supported by aging infrastructure, higher inspection requirements, power-generation demand and shortages of skilled labor. Kambeyanda said Eddyfi has high-single-digit growth, gross margins of approximately 65% and EBITDA margins of roughly 30%.

During the question-and-answer session, Kambeyanda said Eddyfi’s commercial funnel is close to $450 million, though he cautioned that converting opportunities will take time. He said the company expects to secure some initial orders that could support further growth in 2027 and beyond.

ESAB also reiterated that it expects approximately $20 million in synergies from the transaction, with potential for more over time. The company said its initial priority is capturing commercial growth opportunities while also pursuing operational benefits through areas such as supply chain and shared services.

Segment Performance and Market Conditions

Sales in the Americas segment increased 12% to $316 million, including 5% organic growth. ESAB said North America posted double-digit organic growth, led by equipment, while gas equipment and automation also rose by double digits. Mexico continued to stabilize, while the company said it is working to mitigate expected headwinds in South America.

EMEA and APAC sales rose 14% to $450 million, including 1% organic growth. The company said geopolitical disruptions in the Middle East affected volumes and pressured segment margins, though better-than-expected European performance partly offset those effects.

Kambeyanda said the Middle East represents roughly 7% to 8% of ESAB’s business and was down by about 10% to 11% during the quarter. Logistics costs in the region tripled because of the conflict, according to the company. He said ESAB expects those costs to be temporary and noted that many assets expected to require rebuilding work are specified with ESAB products.

Before the conflict, the Middle East had been growing close to 20% for the company, Kambeyanda said. He added that reconstruction activity could eventually support growth at similar or potentially higher levels, though ESAB did not provide specific guidance for the region.

In Europe, Kambeyanda cited improving activity in Eastern Europe, Scandinavia and Germany, particularly in defense-related markets. He also pointed to investment in energy markets and said ESAB continues to gain share in consumables and equipment.

Equipment and automation demand was broadest in general fabrication, defense and distribution channels, management said. Consumables continued to grow in the low-single digits globally, though at a slower pace than equipment, gas control and automation.

Margins, Cash Flow and Updated Outlook

CFO Brent Jones said quarterly margins were affected by temporary price-cost neutrality tied to higher logistics and commodity costs, as well as targeted commercial investments intended to accelerate equipment growth. ESAB expects to address the cost pressure through pricing and cost-reduction actions over the next several quarters.

The company said pricing was approximately 2% in the second quarter and is expected to improve modestly during the second half, moving toward 3% and exiting the fourth quarter at a better rate. Management said it expects volumes to be flat to slightly improved sequentially in the second half.

Core adjusted earnings per share, excluding one month of Eddyfi and related financing transactions, was $1.41. Jones said debt financing affected quarterly EPS by $0.13, including $0.03 related to pre-funding. Equity financing, including common shares and mandatorily convertible preferred stock, created an additional $0.03 headwind.

First-half adjusted free cash flow was in line with the prior-year period despite higher interest expense. Cash flow was affected by restructuring and acquisition-integration costs, along with higher equipment inventory intended to support customer demand. ESAB expects strong cash generation in the second half.

The company raised its full-year 2026 outlook following the Eddyfi closing. ESAB now expects:

• Total core sales of approximately $3 billion to $3.1 billion;
• Organic growth of 2% to 4%;
• Approximately nine percentage points of growth from acquisitions;
• Adjusted EBITDA of $615 million to $625 million, including seven months of Eddyfi;
• Adjusted EPS of $5.40 to $5.50; and
• Free-cash-flow conversion of about 90%.

Jones said the updated EBITDA outlook includes roughly $15 million of pressure from temporary price-cost neutrality, logistics and commodity inflation, while preserving investments in equipment-growth initiatives. He said Eddyfi’s contribution to the higher EBITDA outlook is approaching $50 million, offset by those investments and cost pressures.

Management said its priorities remain organic growth, margin expansion and balance-sheet deleveraging, alongside continued investment in tuck-in and bolt-on acquisitions.

About ESAB (NYSE:ESAB)

ESAB Corporation is a global leader in welding, cutting and gas control technologies, offering a comprehensive portfolio of equipment, consumables and automation solutions. The company's products include welding power sources, cutting machines, torches, electrodes, filler metals and gas regulating equipment designed to meet the needs of diverse industries. ESAB serves sectors such as construction, shipbuilding, automotive, energy, infrastructure and manufacturing, providing both standard and customized solutions to enhance productivity and quality in metal fabrication and processing.

Founded in 1904 by Swedish inventor Oscar Kjellberg, ESAB pioneered the development of coated welding electrodes, laying the groundwork for modern welding practices.

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