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EC

ESAB Corp (ESAB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $0.671B, down 2.7% reported but flat core organic year-over-year; diluted EPS from continuing operations was $1.18 and core adjusted EPS was $1.28 .
  • Core adjusted EBITDA rose to $128.6M with a record 20.3% margin (+90 bps y/y), driven by EBX productivity and mix shift; welding equipment grew high-single digits .
  • 2025 guidance initiated: core organic growth 0.0–2.0%, total core sales growth -(2.0)–0.0% (FX headwind ~3.5% offset by ~1.5% M&A), core adjusted EBITDA $515–$530M, core adjusted EPS $5.10–$5.25; interest expense $62–$65M and ~100% cash conversion targeted .
  • Strategic catalysts: completed SUMIG acquisition and signed agreement to acquire Bavaria to strengthen light automation and consumables portfolio; management emphasized continued margin expansion and active M&A funnel .

What Went Well and What Went Wrong

What Went Well

  • Record profitability: “We delivered 90 basis points of margin expansion… and achieved a record fourth quarter adjusted EBITDA margin of 20.3%” .
  • Product momentum: “One of the highlights of the quarter was our welding equipment product line, which rose high single digits” .
  • Strong cash generation and balance sheet: “Another record free cash flow of $321 million… ending the year with net leverage under 1.6x” .

What Went Wrong

  • FX headwinds weighed on reported sales: total sales faced ~500 bps FX drag due to a strong USD in Q4; Americas saw FX pressure as well .
  • Americas volume softness: Americas organic sales declined ~200 bps; volume expected to be flat-to-negative near term, with price positive .
  • Discontinued operations reduced net income: Q4 loss from discontinued operations was $(18.6)M, impacting GAAP net income .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$689.3 $673.3 $670.8
Diluted EPS - Continuing Ops ($USD)$0.96 $1.13 $1.18
Core Adjusted EPS ($USD)$1.13 $1.25 $1.28
Core Adjusted EBITDA ($USD Millions)$125.8 $124.8 $128.6
Core Adjusted EBITDA Margin (%)19.4% 19.6% 20.3%
Operating Income ($USD Millions)$103.7 $106.0 $111.4

Segment breakdown:

Segment MetricQ4 2023Q3 2024Q4 2024
Americas Net Sales ($USD Millions)$307.3 $288.8 $282.1
EMEA & APAC Net Sales ($USD Millions)$382.0 $384.4 $388.6
Americas Core Adj. EBITDA Margin (%)19.5% 20.6% 21.6%
EMEA & APAC Core Adj. EBITDA Margin (%)19.3% 18.9% 19.3%

KPIs:

KPIQ4 2023Q3 2024Q4 2024
Adjusted Free Cash Flow ($USD Millions)$105.9 $95.8 $105.1
Cash and Equivalents ($USD Millions)$102.0 $253.7 $249.4
Core Adjusted Net Income ($USD Millions)$68.7 $76.7 $78.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core Organic Sales Growth (%)FY2025N/A0.0%–2.0% Initiated
Total Core Sales Growth (%)FY2025N/A-(2.0)%–0.0% (FX ~(3.5)%, M&A ~1.5%) Initiated
Core Adjusted EBITDA ($USD Millions)FY2025N/A$515–$530 Initiated
Core Adjusted EPS ($USD)FY2025N/A$5.10–$5.25 Initiated
Interest Expense ($USD Millions)FY2025N/A$62–$65 Initiated
Adjusted Tax Rate (bps improvement)FY2025N/A~50 bps improvement Initiated
Cash Flow Conversion (%)FY2025N/A~100% Initiated
FY2024 Core Adj. EBITDA ($USD Millions)FY2024$495–$515 (Q2 update) $500–$515 (Q3 update) Raised midpoint

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
AI/Technology initiativesEBX system and AI projects initiated in 2023; margin and FCF records Digital marketing scale; brand recognition up; continued EBX Training leadership with AI; $25M savings in 2025; $60M by 2028 Increasing investment and savings realization
Product performance (Equipment)Equipment strength; record margins Low double-digit equipment growth High-single-digit equipment growth Sustained outperformance, mix shift to equipment
Regional trendsHigh-growth markets (India, Middle East) offset developed softness Positive volume EMEA/APAC; Americas price up, volume slightly negative Strong high-growth markets; developed markets stable; Americas improvement H2’25 High-growth solid; developed stabilizing, Americas improving late-year
Tariffs/Macro & FXGuidance reduced amid macro/FX Europe subdued but stable; Americas sluggish DIY; price discipline FX ~$90M headwind FY25; 20% EBITDA decrement sensitivity; steel/tariff pass-through ability Macro choppy; FX drag manageable; pricing playbook intact
M&A pipelineLinde Bangladesh acquisition completed Funnel “strongest ever” SUMIG completed; Bavaria signed; EPS-accretive Active pipeline; strategic tuck-ins continuing
R&D/University engagementR&D investment, Chennai expansion Innovation pipeline and channel presence Expanded university partnerships; community/training programs Broadening ecosystem and innovation support

Management Commentary

  • “We delivered 90 basis points of margin expansion on flat organic growth, and achieved a record fourth quarter adjusted EBITDA margin of 20.3%” — Shyam Kambeyanda, CEO .
  • “We achieved another record free cash flow of $321 million… ending the year with net leverage under 1.6x” — Kevin Johnson, CFO .
  • “We anticipate organic growth of 0% to 2%… benefit of ~1.5 points from M&A, offset by ~3.5 points of FX headwind” — Kevin Johnson, CFO .
  • “We signed our first deal of 2025, Bavaria… EPS accretive in year 1” — Shyam Kambeyanda, CEO .

Q&A Highlights

  • Early 2025 orders: “Orders continue to be stable to slightly improving… both in the Americas and the rest of the world” .
  • Margin expansion drivers: value-based pricing, EBX productivity, back-office AI/analytics; creating investment envelope while expanding margins .
  • Regional outlook: high-growth markets (India, Middle East, SE Asia) low-to-mid single-digit volume growth; developed markets stable with Americas improving in H2’25 .
  • Pricing in Americas: ~4% in Q4 driven largely by value-based pricing on new products; pricing expected low-single-digit in 2025 unless steel moves .
  • FX impact: ~$90M FY25 sales headwind; ~20% EBITDA decrement sensitivity due to natural hedges .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates for ESAB, but the request hit a daily limit and could not be completed at this time. As a result, a formal comparison to Wall Street consensus is unavailable. We will update vs. estimates once S&P Global data access is restored [GetEstimates error — SPGI daily limit exceeded].

Key Takeaways for Investors

  • Mix-led margin expansion continues: Core adjusted EBITDA margin reached 20.3% (+90 bps y/y); Americas core margin hit 21.6% as equipment and gas control mix improved and EBX productivity scaled .
  • Strong FCF supports compounding: Adjusted FCF of $105.1M in Q4 and $320.5M for FY, enabling M&A while reducing leverage; FY cash conversion >100% and similar conversion targeted for 2025 .
  • 2025 guide is conservative on top line: FX (~3.5%) offsets M&A (~1.5%); organic 0–2% with H2 acceleration and price positive; margin expansion guided via EBX savings and back-office AI .
  • Product momentum persists: Welding equipment grew high-single digits in Q4; continued commercial excellence and new products (including battery platforms and automation) should support price/mix gains .
  • Active M&A pipeline: SUMIG completed and Bavaria signed (consumables); management reiterates proprietary deal flow and EPS accretion, supporting mix and margin strategy .
  • FX and steel are watch items: FX headwinds are material for FY25; pricing agility (value-based, pass-throughs) and natural hedges mitigate some impact; monitor steel/tariff dynamics for pricing trajectories .
  • Execution narrative likely to drive sentiment: Record margins, disciplined guide, and visible savings/investment envelope provide near-term support; H2 Americas volume inflection is a potential upside catalyst if realized .

Additional Q4 2024 Press Releases (Relevant)

  • Q4 results release with guidance initiation (2/20/2025) .
  • Board declares dividend (2/27/2025) .
  • Earnings release schedule announcement (1/23/2025) .

All figures above are sourced from ESAB’s Q4 2024 Form 8‑K and earnings press release, and Q4/Q3/Q2 earnings call materials and press releases, as cited per entry.