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EC

ESAB Corp (ESAB)·Q1 2025 Earnings Summary

Executive Summary

  • ESAB delivered Q1 2025 revenue of $678.1M and GAAP diluted EPS of $1.14; core adjusted diluted EPS was $1.25, with core adjusted EBITDA of $128M and a record Q1 margin of 19.8% .
  • Results were ahead of Wall Street: revenue beat consensus by ~$44M and EPS by ~$0.04, and Q4/Q3 had similar beats; ESAB raised its 2025 core adjusted EBITDA guidance to $520–$530M while keeping EPS at $5.10–$5.25 . Revenue Consensus Mean Q1 2025: $633.8M*; Primary EPS Consensus Mean Q1 2025: $1.2060* (Values retrieved from S&P Global).
  • Management highlighted manageable tariff exposure (~$15–$20M in North America), offset with pricing and supply-chain actions; Americas volumes remain soft near-term, while EMEA/APAC are stronger and Europe stimulus is a potential tailwind later in 2025 .
  • Catalysts: guidance raise, closing Bavaria (consumables) and potential additional tuck-ins, and a 25% dividend increase to $0.10/share payable July 18, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Record Q1 margin performance: core adjusted EBITDA margin expanded 100 bps to 19.8% on mid-single-digit growth in welding and gas equipment; “strong first-quarter results… record margin performance” .
  • Strategic M&A execution: Bavaria acquisition closed on Apr 30, strengthening proprietary consumables; management sees synergy upside and may close two more gas control tuck-ins by end of Q2 .
  • Pricing and mix discipline via EBX: both regions expanded margins despite a tough environment; equipment and gas control continued to gain share and support higher margins .

What Went Wrong

  • Americas softness and tariff overhang: organic volume expected negative mid-single digits for 2025; channel “wait-and-see” behavior in Q1 and early Q2 amid tariff uncertainty .
  • FX headwinds: stronger USD and euro-driven headwinds remain a drag, with currency adverse in North America and EMEA/APAC; price actions are targeted primarily in North America .
  • Free cash flow dipped in Q1 due to proactive inventory pre-purchases ahead of tariffs (~$10M), with stronger H2 cash flow expected .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$673.3 $670.8 $678.1
GAAP Diluted EPS - Continuing Ops ($)$1.13 $1.18 $1.14
Core Adjusted Diluted EPS ($)$1.25 $1.28 $1.25
Core Adjusted EBITDA ($USD Millions)$125 $129 $128
Core Adjusted EBITDA Margin (%)19.6% 20.3% 19.8%
Revenue Consensus Mean ($USD Millions)*$618.1*$636.4*$633.8*
Primary EPS Consensus Mean ($)*$1.1224*$1.1647*$1.2060*

Values retrieved from S&P Global.

Segment breakdown

MetricQ3 2024Q4 2024Q1 2025
Americas Revenue ($USD Millions)$288.8 $282.1 $280.7
EMEA & APAC Revenue ($USD Millions)$384.4 $388.6 $397.5
Americas Adjusted EBITDA Margin (%)20.6% 21.6% 19.4%
EMEA & APAC Adjusted EBITDA Margin (%)18.9% 19.3% 20.0%

KPIs

KPIQ3 2024Q4 2024Q1 2025
Adjusted Free Cash Flow ($USD Millions)$95.8 $105.1 $30.4
Net Cash Provided by Operating Activities ($USD Millions)$101.0 $126.9 $35.4
Net Sales relating to Russia ($USD Millions)$37.7 $37.6 $31.3
Net Leverage (Net Debt/EBITDA) (x)—<1.6x ~1.5x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Core Net Sales Growth Range (%)FY 2025(2.0%)–0.0% (1.0%)–1.5% Raised
Organic Growth (%)FY 20250.0%–2.0% 0.0%–2.0% Maintained
M&A Contribution (%)FY 2025~1.5% 2.0%–2.5% Raised
Currency Impact (%)FY 2025~(3.5)% ~(3.0)% Improved
Core Adjusted EBITDA ($M)FY 2025$515–$530 $520–$530 Raised
Core Adjusted EPS ($)FY 2025$5.10–$5.25 $5.10–$5.25 Maintained
Interest Expense ($M)FY 2025$62–$65 Increased (not quantified) Increased
Dividend per Share ($)Quarterly—$0.10 (payable 7/18/25) Increased 25%

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs & PricingPricing supported margins; FX headwinds noted; guidance contemplated FX and price actions Tariff impact ~$15–$20M in NA; offset with price; proactive inventory; moving assembly to unaffected regions Manageable headwind; pricing actions in NA sustained
Equipment & Gas ControlEquipment gaining traction; high-single-digit equipment growth in Q4 Mid-single-digit growth in welding and gas equipment; gas control margins accretive with runway to 25% of revenue by 2028 Positive mix shift continues
Regional TrendsEMEA/APAC strength; Americas softer; FX drag (euro) Europe optimism tied to stimulus; India/Middle East strong; North America lull amid tariff uncertainty EMEA/APAC improving; Americas cautious near-term
M&A & SynergiesSUMIG (Brazil), Bangladesh integrating ahead of plan; Bavaria signed Bavaria closed; EPS-neutral year 1; synergy ramp; potential two tuck-ins by Q2 end Active pipeline; accretive mix
Cash Flow & LeverageRecord FCF in 2024; net leverage under 1.6x Q1 FCF $30M with ~$10M inventory prebuy; net leverage ~1.5x; stronger H2 cash flow expected Near-term investment for tariffs; leverage improving

Management Commentary

  • “ESAB delivered strong first-quarter results, with our team’s continued focus on EBX driving positive growth and record margin performance amid challenging market conditions” — Shyam P. Kambeyanda, CEO .
  • “We are building ESAB into a premier industrial compounder… pursue strategic bolt-on and tuck-in acquisitions… deploy EBX to enhance margins… positions us well to navigate today’s tariff uncertainties with confidence” — CEO .
  • “We delivered 100 basis points of margin expansion… record first quarter adjusted EBITDA margin of 19.8%… complemented by accelerated strategic growth investments” — CEO prepared remarks .
  • “Our gas control business has grown from 10% to 18% of total revenue and is on track to reach 25%… with gross margins in the mid-40s” — CEO .
  • “We have received all regulatory approvals and officially completed the Bavaria acquisition… strengthens our proprietary consumables portfolio” — CEO .

Q&A Highlights

  • Tariff exposure quantified and actions: ~$15–$20M impact in North America; pricing already implemented; proactive inventory purchases; relocating assembly to mitigate .
  • Americas outlook: core volumes negative mid-single digits for 2025 with price offsets; margin cadence unlike prior years due to organic growth dynamics; Q2 starting similarly amid tariff clarity wait .
  • Gas control momentum: strong start; two medical gas control tuck-ins expected by end of Q2; accretive margins above 2028 targets .
  • Europe stimulus: optimism around EU/German stimulus with potential benefits beginning 2H25; Bavaria expands exposure .
  • Interest expense and guidance: EBITDA guidance raised on Bavaria; interest cost to rise in Q2 then decline through 2025 as cash flow builds .

Estimates Context

  • Q1 2025 beat: Revenue $678.1M vs consensus $633.8M*; Primary EPS $1.25 vs consensus $1.2060* — both beats. Prior quarters also exceeded estimates (Q4 revenue $670.8M vs $636.4M*; EPS $1.28 vs $1.1647*; Q3 revenue $673.3M vs $618.1M*; EPS $1.25 vs $1.1224*) .
    Values retrieved from S&P Global.

  • Implications: Street likely raises EBITDA and segment margin assumptions modestly given persistent mix improvement and pricing resilience, while maintaining caution on Americas volume and FX headwinds .

Key Takeaways for Investors

  • Bold beat-and-raise quarter: revenue and EPS beat consensus, and 2025 core adjusted EBITDA guidance increased to $520–$530M; EPS held at $5.10–$5.25 .
  • Mix shift to equipment and gas control continues to underpin margins; Q1 core adjusted EBITDA margin at 19.8% and strong segment margins in both regions .
  • Tariffs manageable: quantified NA impact (~$15–$20M) with offsetting price actions and supply-chain moves; expect near-term Americas volume softness but limited margin damage .
  • M&A acceleration: Bavaria closed with synergy upside; two tuck-ins likely by end-Q2 in gas control, supporting margin accretion and growth .
  • Cash flow to improve in H2 after Q1 inventory prebuy; leverage ~1.5x provides flexibility for continued compounding .
  • Dividend increased to $0.10/share, signaling confidence in cash generation and capital allocation discipline .
  • Watch Europe: stimulus deployment could be a 2H catalyst; ESAB’s footprint and Bavaria exposure provide optionality .