Executive Summary

ESAB delivered solid Q2 marked by record core adjusted EBITDA margin and a clean revenue/EPS beat versus Street, supported by strong EMEA/APAC momentum amid tariff headwinds in the Americas .
Management raised FY25 guidance for sales growth, EBITDA, and EPS, citing accretive M&A (DeltaP, Aktiv; EWM signed), improving Americas cadence, and continued execution of EBX productivity programs .
Tariffs delayed Americas automation shipments and softened Mexico volumes, but pricing actions fully offset tariff costs and H2 catch‑up is expected as conditions normalize .
Stock-reaction catalysts: raised guidance, record margins, and strategic portfolio expansion (EWM’s REACT technology) that enhances medium‑term growth/mix and returns .

What Went Well and What Went Wrong

What Went Well
- Record core adjusted EBITDA margin, driven by EBX execution, mix, and pricing discipline; EMEA/APAC delivered record 20.6% core adjusted EBITDA margin with double-digit sales growth .
- Strategic M&A flywheel: closed DeltaP and Aktiv (high‑margin medical gas equipment) and signed EWM (heavy industrial/robotic welding; REACT technology) enhancing equipment portfolio and TAM .
- Management raised FY25 guidance, underpinned by high-growth market strength and incremental productivity/back‑office savings: “we have raised our full year productivity savings target to approximately $13 million… back office optimization… $17 million” .
What Went Wrong
- Tariff uncertainty pressured Americas volumes, particularly Mexico; automation orders slipped into H2, creating short‑term revenue timing headwinds .
- YoY profit press: operating income declined YoY ($109.1M vs $119.4M), interest expense rose ($21.0M vs $15.9M), and adjusted free cash flow was lower YoY ($46.4M vs $78.8M) .
- Higher acquisition‑related charges impacted adjusted bridges (Q2 pretax acquisition‑amortization/other $21.6M vs $7.7M prior year) as integration and portfolio build accelerate .

Financial Results

Recent quarters performance (oldest → newest):

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($M)	$670.8	$678.1	$715.6
Diluted EPS – Continuing Ops (GAAP)	$1.18	$1.14	$1.12
Core Adjusted EPS (Non‑GAAP)	$1.28	$1.25	$1.36
Core Adjusted EBITDA ($M)	$128.6	$127.9	$138.5
Core Adjusted EBITDA Margin (%)	20.3%	19.8%	20.4%
Adjusted Free Cash Flow ($M)	$105.1	$30.4	$46.4

Q2 2025 vs estimates and YoY:

Metric	Q2 2024	Q2 2025 Consensus	Q2 2025 Actual	vs Consensus	YoY
Revenue ($M)	$707.1	$675.2*	$715.6	Bold beat	+1.2%
Primary EPS (Non‑GAAP)	$1.32	$1.346*	$1.36	Bold beat	+3.0%

Segment/Geography – Q2 2025:

Metric	Americas	EMEA & APAC	Total
Sales ($M, reported)	$282.7	$432.9	$715.6
Core Sales ($M, ex‑Russia)	$282.7	$395.7	$678.5
Core Organic Growth YoY (%)	(7.2%)	+4.4%	(1.0%)
Core Adjusted EBITDA ($M)	$56.8	$81.7	$138.5
Core Adjusted EBITDA Margin (%)	20.1%	20.6%	20.4%

Operational KPIs – Q2 2025:

KPI	Q2 2025
Adjusted Interest Expense and Other, net ($M)	$21.0
Cash & Cash Equivalents ($M, quarter‑end)	$258.2
Adjusted Free Cash Flow ($M)	$46.4
Core Organic Sales Growth YoY (%)	(1.0%)

Notes: “Bold beat” indicates better than consensus; “Primary EPS” aligns with non‑GAAP EPS used in Street consensus.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core Net Sales Growth	FY 2025	(1.0)%–1.5%	1.5%–3.5%	Raised
Core Organic Sales Growth	FY 2025	0.0%–2.0%	0.0%–2.0%	Maintained
M&A Contribution	FY 2025	2.0%–2.5%	~2.5%	Slightly raised
FX Impact	FY 2025	~(3.0)%	~(1.0)%	Less negative
Core Adjusted EBITDA ($M)	FY 2025	$520–$530	$525–$535	Raised
Core Adjusted EPS	FY 2025	$5.10–$5.25	$5.15–$5.30	Raised

Earnings Call Themes & Trends

Topic	Q4 2024 (Q‑2)	Q1 2025 (Q‑1)	Q2 2025 (Current)	Trend
AI/back‑office productivity	Announced multi‑year EBX/AI savings goals; target $60M by 2028	Investing in AI and commercial excellence; ~$25M 2025 savings, $15M growth investments	Raised 2025 productivity savings to ~$13M and back‑office savings to ~$17M; integrating EBX+AI	Increasing scope and savings
Tariffs/macro (Americas)	Modeling FX/tariff headwinds; Americas pricing resilient	Americas lull as channel waited on tariff clarity; price actions taken; inventory pre‑buy	Tariff‑driven volume headwind; pricing fully covers tariffs; automation orders shifted to H2	Headwind peaking; H2 recovery expected
Regional trends	High‑growth markets (ME, India, Asia) strong; Europe stabilizing	EMEA/APAC strength maintained; green shoots in China	EMEA/APAC strong; EMEA/APAC core EBITDA margin 20.6%; Europe steady with stimulus optimism	Ex‑Americas momentum sustained
Product performance	Equipment high single‑digit growth; mix tailwind	Welding/gas equipment mid‑single‑digit growth; vitality continues	Equipment impacted by automation delays in Americas; outlook positive with EWM tech	Portfolio strengthening; H2 catch‑up
M&A/compounder	3 bolt‑ons in 2024; signed Bavaria	Completed Bavaria; targeted tuck‑ins in gas control	Closed DeltaP, Aktiv; signed EWM; pipeline healthy	Accretive M&A cadence continues
Pricing & cost	Value‑based pricing supporting margins	General price increases (no surcharges); tariffs covered with price	“Price‑cost neutral against tariffs” in Q2	Pricing discipline intact

Management Commentary

“ESAB delivered another quarter of record core adjusted EBITDA margins… Robust demand in EMEA and APAC enabled us to sustain momentum, while our Americas team navigated tariff‑related pressures successfully using EBX.” – Shyam Kambeyanda, CEO .
“We now expect to deliver $17 million in [back‑office] savings… we’re deploying approximately $20 million in strategic growth investments… advancing our AI capabilities.” – Shyam Kambeyanda, CEO .
On EWM: “This €120 million revenue business is expected to be accretive in year one… REACT technology… up to 100% faster weld speeds, twice the deposition rates… at 35% less heat input.” – CEO .
“In the quarter, we generated $46 million in free cash flow… expect an improvement in cash flow during 2025… Maintaining net leverage within our 2x target range has been a key focus.” – Kevin Johnson, CFO .

Q&A Highlights

Tariffs and Americas cadence: Management cited tariff‑driven softness in Mexico and timing shift of automation to H2; channels showed “wait‑and‑see” behavior, but July order trends improved; pricing covered tariff costs .
Automation sizing: Global automation down “high twenties” percent YoY; recovery expected as H2 shipments proceed .
EWM financial/strategic logic: ~€120M revenue; gross margins >40%; 10% ROIC in 3–4 years; proprietary REACT process broadens access to advanced applications and lowers R&D burden at ESAB .
Europe outlook: Stable with early stimulus activity in energy/defense; margins “very strong,” comparable or better than Americas; flattish growth modeled near‑term .
Investments vs savings: 2025 guidance raise reflects FX tailwind and savings, partially reinvested in growth (commercial excellence, AI, university partnerships) .

Estimates Context

Q2 2025 results vs S&P Global consensus: Revenue $715.6M beat $675.2M*; Primary EPS (non‑GAAP) $1.36 beat $1.346*; both modest positive surprises .
Forward context: Management raised FY25 guidance; Street may lift H2 Americas assumptions given automation timing and observed July stabilization, while keeping EMEA/APAC momentum embedded .

Estimates marked with an asterisk (*) are Values retrieved from S&P Global.

Key Takeaways for Investors

Mix/EBX continue to drive structural margin expansion; record 20.4% core adjusted EBITDA margin in Q2 confirms execution resilience .
EMEA/APAC strength offsets Americas volatility; near‑term setup favors continued outperformance ex‑Americas with H2 Americas catch‑up (automation) .
Pricing discipline neutralized tariff cost impacts; limited risk to gross margin from tariffs if pricing power holds .
Accretive M&A expanding TAM and technology (EWM REACT) should support medium‑term growth/mix and returns; near‑term integration charges are a known/managed headwind .
FY25 guidance raised across sales, EBITDA, and EPS; upside levers include additional savings, EWM close in Q4, and any incremental European stimulus .
Cash generation set to improve H2 as tariff pre‑buys unwind; balance sheet remains supportive of continued “compounder” cadence .
Watch: Americas order cadence (Mexico recovery), automation shipment conversion, EWM close/timing, and FX trajectory (euro) into Q4 .

Additional supporting details

Other Q2‑period press releases:

Q2 2025 results press release mirrored 8‑K disclosures and guidance raise .
Scheduling release (7/10/25) announced the Q2 earnings call timing .

Prior quarters trend analysis sources:

Q1 2025 8‑K and call: flat core organic growth; equipment/gas control growth; inventory pre‑buy for tariffs; raised revenue guidance (M&A/FX) .
Q4 2024 8‑K and call: record Q4 margin; equipment growth; 2025 initial guide; M&A (SUMIG), signed Bavaria .

ESAB Corp (ESAB)·Q2 2025 Earnings Summary