Executive Summary

ESAB delivered a solid Q3: sales $727.8M (+8% YoY), returned to positive core organic growth (+2%), and core adjusted EPS of $1.32; core adjusted EBITDA was $133.4M with margin of 19.4% (down ~20 bps YoY) as EWM mix and late-quarter tariff effects modestly compressed margin .
Results beat Wall Street on revenue, EPS, and EBITDA; Q3 revenue $727.8M vs consensus $665.1M*, EPS $1.32 vs $1.273*, and EBITDA $133.9M vs $129.9M*; beats were driven by EMEA/APAC strength, U.S. mid-single-digit growth, and EWM contribution (~2 pts of growth) . Consensus values marked * are from S&P Global.
Guidance raised: 2025 core net sales growth to 4.5%-5.5% (prior 1.5%-3.5%), core adjusted EBITDA to $535-$540M (prior $525-$535M), and core adjusted EPS narrowed to $5.20-$5.30 (prior $5.15-$5.30) .
Key catalysts: completion/integration of EWM with >45% gross margins and React technology; Americas tariff mitigation via “in region, for region” footprint (~80%) and manufacturing shifts; strong start to Q4 with improving core growth run-rate .

What Went Well and What Went Wrong

What Went Well

Returned to core organic growth (+2%) with U.S. mid-single-digit growth and EMEA/APAC volume +4%; equipment and automation grew mid-single digits in multiple regions .
EWM acquisition closed early; accretive gross margins (>45%) and ~2 points of Q3 growth, with cross-selling and margin initiatives underway; management expects ~10% ROIC by year three .
Free cash flow conversion exceeded 100% in Q3 and adjusted FCF reached $86.4M, supported by strong execution and disciplined EBX pricing/productivity .

Management quotes:

“About 80% of our manufacturing is in region for region, which reduces tariff impact, shortens lead times, and supports share gains.”
“EWM adds React technology… 100% faster weld speeds and 2x the deposition rates and roughly 35% lower heat input versus traditional short arc processes.”
“Adjusted EBITDA is now $535 to $540 million… Adjusted EPS… $5.20 to $5.30.”

What Went Wrong

Americas margins were pressured (~100 bps) by investment in sales initiatives and late-quarter tariff impacts (e.g., copper), creating slight price-cost drag; mitigation actions include moving manufacturing to local regions and restructuring into early Q1 .
Core adjusted EBITDA margin compressed ~20 bps in Q3, primarily from EWM mix and tariff dynamics despite strong execution .
Automation and Mexico softness persisted from Q2 with only partial catch-up in Q3; some deferred revenue pushes into Q4/Q1 .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$678.1	$715.6	$727.8
Diluted EPS - Continuing Operations ($)	$1.14	$1.12	$1.04
Core Adjusted EPS ($)	$1.25	$1.36	$1.32
Core Adjusted EBITDA ($USD Millions)	$127.9	$138.5	$133.4
Core Adjusted EBITDA Margin (%)	19.8%	20.4%	19.4%
Net Income attributable to ESAB ($USD Millions)	$67.4	$66.9	$54.8

Segment breakdown (Net Sales and Core Adj. EBITDA):

Segment Metric	Q1 2025	Q2 2025	Q3 2025
Net Sales - Americas ($M)	$280.7	$282.7	$292.7
Net Sales - EMEA & APAC ($M)	$397.5	$432.9	$435.1
Core Adj. EBITDA - Americas ($M)	$54.5	$56.8	$57.3
Core Adj. EBITDA - EMEA & APAC ($M)	$73.4	$81.7	$76.1
Core Adj. EBITDA Margin - Americas (%)	19.4%	20.1%	19.6%
Core Adj. EBITDA Margin - EMEA & APAC (%)	20.0%	20.6%	19.3%

KPIs:

KPI	Q1 2025	Q2 2025	Q3 2025
Net Cash from Operating Activities ($M, GAAP)	$35.4	$46.6	$81.5
Purchases of PP&E ($M, GAAP)	$7.3	$9.2	$11.3
Adjusted Free Cash Flow ($M)	$30.4	$46.4	$86.4

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core net sales growth	FY 2025	1.5%–3.5%	4.5%–5.5%	Raised
Organic growth (component of core)	FY 2025	0.0%–2.0%	~1.0%	Tightened
M&A contribution	FY 2025	~2.5%	~4.5%	Raised
Currency (FX)	FY 2025	~(1.0)%	(1.0)%–0.0%	Improved range
Core adjusted EBITDA ($M)	FY 2025	$525–$535	$535–$540	Raised
Core adjusted EPS ($)	FY 2025	$5.15–$5.30	$5.20–$5.30	Narrowed
Total sales ($B)	FY 2025	N/A	$2.71–$2.73 (call)	Introduced on call

Note: Management also indicated FCF conversion “around 95%” given EWM investment (call commentary) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
Tariffs & price-cost	Prepared inventory; general price increases; ~$15–$20M NA tariff impact planned to be covered with price	Price-cost neutral in Q2; Americas lull; automation push-outs; Mexico softness	Late copper tariffs caused slight price-cost drag; manufacturing to shift to regions; restructuring underway	Improving mitigation actions
Americas margin trajectory	Strong margin expansion via EBX, pricing, mix; atypical cadence in 2025	Record core EBITDA margin; Americas headwinds offset by pricing; plan for H2 volume improvement	Expect stronger margins in 2026 via pricing, supply chain shifts, restructuring	Margin expansion deferred to 2026
EMEA/APAC growth	Positive momentum; high-growth markets strength	11% sales growth; record 20.6% margin; strong Middle East/India/Asia	Volume +4%; equipment/automation high single-digit; renewed Europe investment	Sustained strength
EWM acquisition & integration	Announced intent and strategic fit (heavy equipment/robotics)	Signed; accretive margins; tech differentiation (React)	Closed early; ~2 pts growth; ~$3M profit in year one; >45% gross margins	Integration progressing
AI/EBX initiatives	Raised productivity/back-office savings; investing ~$20M in growth/AI	Savings ramp and reinvestment; EBX/AI acceleration	Integrating AI into EBX; long-term margin target 22%+ by 2028	Scaling
Mexico & automation	Channel pause due to tariff uncertainty	Automation down; partial thaw in Mexico; orders slated for H2	Partial catch-up; remainder into Q4/Q1	Recovery into Q4/Q1

Management Commentary

Strategic mix shift: “We’re shifting our mix towards equipment and gas control, building a higher margin, less cyclical enterprise aimed at 22% plus EBITDA margins by 2028 or sooner.”
Integration value: “Our transition team is using our proven EBX integration process… collaborating on growth, cross-selling… margin expansion initiatives.”
Footprint advantage: “About 80% of our manufacturing is in region for region, which reduces tariff impact, shortens lead times, and supports share gains.”
EWM economics: “Our expectation this year for EWM is around $3 million of profit… drive the business to its 10% ROIC target by year three.”

Q&A Highlights

Americas margins: Management expected ~100 bps headwind from growth investments and late-quarter tariff impacts; mitigation via manufacturing relocation and restructuring into early Q1 .
Tariff price-cost: Slight drag in Q3 due to copper tariffs; plan to localize manufacturing to remove drag; pricing actions continue .
EWM synergies: >45% gross margins, accretive tech; ~$3M profit in year one with SG&A and gross profit synergies to be detailed in Q1 next year .
Outlook cadence: Strong start to Q4, better core growth vs Q3; Americas comps ease in 2026, supporting volume tailwinds .
Consumables vs equipment: Equipment strength and workflow solutions; consumables steady and “better than market,” with global certifications enabling cross-sell .

Estimates Context

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue – Actual ($M)	$678.1	$715.6	$727.8
Revenue – Consensus ($M)*	$633.8*	$675.2*	$665.1*
Primary EPS – Actual ($)	$1.25	$1.36	$1.32
Primary EPS – Consensus ($)*	$1.206*	$1.346*	$1.273*
EBITDA – Actual ($M)	$133.9*	$129.8*	$133.9*
EBITDA – Consensus ($M)*	$120.9*	$136.0*	$129.9*

Notes: Consensus values marked * retrieved from S&P Global. EBITDA actuals shown in this table are also retrieved from S&P Global*.

Implications:

Q3 beat on revenue, EPS, and EBITDA vs consensus, led by EWM contribution (~2 pts), EMEA/APAC strength, and U.S. sequential improvement .
Street estimates likely to move up for FY revenue and EBITDA following guidance raise and improved FX/M&A contribution; EPS range narrowed due to higher interest from EWM .

Key Takeaways for Investors

Narrative turning positive: organic growth resumed, guidance raised, and strong Q4 start; expect sentiment support from EWM integration updates and margin trajectory commentary .
Near-term focus: Monitor Americas tariff mitigation (manufacturing shifts) and restructuring completion by early Q1 as catalysts for 2026 margin expansion .
M&A compounding intact: EWM closed with >45% gross margins; funnel remains healthy across gas control and equipment; cross-selling and React tech should support top-line and mix .
Cash generation: Q3 adjusted FCF $86.4M and >100% conversion underpin deleveraging toward 1–2x and capacity for further M&A in 2026 .
Regional strength: EMEA/APAC continue to outperform on volume and equipment; watch European stimulus/defense/energy demand as incremental tailwinds .
Margin path: Expect modest compression near term from mix/investments, but pricing/EBX/productivity and mix shift to equipment/gas control support medium-term EBITDA toward 22%+ by 2028 .
Trading setup: Be ready for upside revisions post-raise; potential catalysts include detailed EWM synergy targets in Q1, evidence of tariff cost neutralization, and confirmation of Q4 run-rate improvement .

Additional documents reviewed:

Q3 2025 press release and 8-K (full financial tables and guidance) .
Q3 2025 earnings call transcript (full) – –.
Prior quarter Q2 and Q1 press releases, 8-Ks, and transcripts for trend analysis – – – – –.

ESAB Corp (ESAB)·Q3 2025 Earnings Summary