• Adjusted EBITDA Margin: Record fourth-quarter margin of 20.3%, with a 90 basis points expansion year over year.
• Free Cash Flow: Achieved over 100% free cash flow conversion, totaling $321 million for the year.
• Net Leverage: Ended the year with net leverage under 1.6 turns.
• Organic Sales Growth: Flat organic growth for the quarter, with 200 basis points growth from M&A and a 500 basis points FX headwind.
• Americas Performance: Organic sales declined by 200 basis points, offset by 400 basis points of strong price performance and 300 basis points from acquisitions.
• EMEA and APAC Performance: Total sales increased by 300 basis points, with EBITDA margins at 19.3% and volume growth of 400 basis points.
• 2025 Guidance: Projected organic growth of 0% to 2%, with adjusted EBITDA between $515 million and $530 million, reflecting a margin increase of about 70 basis points at the midpoint.
• Interest Expense: Expected to be within the range of $62 million to $65 million for 2025.
• Adjusted Tax Rate: Forecasted improvement at the midpoint of around 50 basis points.

• Warning! GuruFocus has detected 6 Warning Signs with HRNNF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ESAB Corp (NYSE:ESAB) achieved record fourth-quarter profits and adjusted EBITDA margin of 20.3%, demonstrating strong financial performance.
• The company delivered over 100% in free cash flow conversion, indicating robust cash management.
• ESAB Corp (NYSE:ESAB) has a strong global footprint, which provides a competitive advantage, particularly in high-growth markets.
• The company successfully executed three bolt-on acquisitions in 2024, which are expected to be EPS-accretive in the first year.
• ESAB Corp (NYSE:ESAB) is investing in innovation and growth, including AI and commercial excellence initiatives, to drive future profitability and market share gains.

Negative Points

• Organic sales growth was flat, with a 500 basis points FX headwind due to a strong US dollar impacting results.
• The Americas region experienced a 200 basis points decline in organic sales, highlighting challenges in developed markets.
• The company anticipates a 3.5 points FX headwind in 2025, which could impact financial performance.
• ESAB Corp (NYSE:ESAB) faces a choppy and uncertain macroeconomic environment, which could affect future growth.
• The guidance for 2025 includes limited top-line growth, with organic growth expected to be between 0% to 2%.

Q & A Highlights

Q: Can you provide more color on order patterns in early 2025, especially regarding emerging and developed markets? A: Shyam Kambeyanda, President and CEO, stated that 2025 is off to a solid start with stable to slightly improving orders in both the Americas and the rest of the world. However, it's early in the year, and they are cautiously optimistic about the trends.

Q: What kind of accretion does ESAB expect in 2025 from the 2024 acquisitions? A: Kevin Johnson, CFO, mentioned that the 2024 acquisitions are expected to be at or above fleet average in terms of EBITDA percentage. The integration is ahead of expectations, and they are optimistic about the deal environment for 2025.

Q: Your guidance includes a ramp in America's volume. What are the drivers of this optimism? A: Shyam Kambeyanda explained that the acceptance of their equipment line, the performance of their gas control business, and stabilization in their fabtech business are key drivers for the expected improvement in America's volume.

Q: Can you break down the assumptions for organic growth in the gas business and equipment versus consumables? A: Shyam Kambeyanda indicated that consumables are expected to be flat to slightly growing, automation and gas control equipment are expected to grow in the low single digits, and equipment is expected to grow in the mid-single digits.

Q: What are the expectations for regional growth in 2025, particularly in EMEA and APAC? A: Kevin Johnson noted strong growth expectations in high-growth markets like India, the Middle East, and Southeast Asia. Developed markets like Europe and North America are expected to remain stable with improvements anticipated in the second half of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.