What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-10-29 · 116 added, 170 removed, 244 unchanged (54% of the section changed)

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The following discussion of the financial condition and results of operations of ESAB Corporation (“ESAB,” the “Company,” “we,” “our” and “us”) should be read in conjunction with the Consolidated and Condensed Financial Statements and related footnotes included in Part I.

“Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2024 (this “Form 10-Q”) and the Consolidated Financial Statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “ 2023 Form 10-K ”).

“Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended April 4, 2025 (this “Form 10-Q”) and the Consolidated Financial Statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “ 2024 Form 10-K ”).

You should review the discussion titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements.

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Statements that could be deemed to be forward-looking statements, include statements regarding:

the impact of the wars in Ukraine and the Middle East and the resulting escalating geopolitical tensions on our business;

the impact of the war in Ukraine and the conflict in the Middle East and the resulting escalating geopolitical tensions on our business;

projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, pension and benefit obligations and funding requirements, synergies or other financial items;

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developments, performance, industry or market rankings relating to products or services;

future economic conditions or performance, including the impact of inflationary pressures, foreign exchange fluctuations and commodity prices;

future economic conditions or performance, including the impact of inflationary pressures, tariffs and trade policies, foreign exchange fluctuations and commodity prices;

the outcome of outstanding claims or legal proceedings, including asbestos-related liabilities and insurance coverage litigation;

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These forward-looking statements are subject to a number of risks and uncertainties and actual results or outcomes, or the timing of results or outcomes, could differ materially due to numerous factors, including but not limited to the following:

• the wars in Ukraine and the Middle East, escalating geopolitical tensions and the related impact on energy supplies and prices;

• the war in Ukraine and conflict in the Middle East, escalating geopolitical tensions and the related impact on energy supplies and prices;

• changes in the general economy, including disruptions caused by geopolitical conflicts, as well as the cyclical nature of the markets we serve;

• supply chain constraints and backlogs, including risks affecting raw material, part and component availability, labor shortages and inefficiencies, freight and logistical challenges and inflation in raw material, part, component, freight and delivery costs and our ability to increase our prices to account for increased costs;

• supply chain constraints and backlogs and risks affecting the availability and prices for raw materials, parts and components, including tariffs and trade disputes, labor shortages and inefficiencies, freight and logistical challenges and inflation in raw material, part, component, freight and delivery costs and our ability to increase our prices to account for increased costs;

• volatility in the commodity markets and certain commodity prices, including oil and steel;

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• other risks and factors set forth under “Risk Factors” in Part I.

in our 2023 Form 10-K.

“Risk Factors” in our 2023 Form 10-K for a further discussion regarding reasons that actual results and outcomes, and the timing of results and outcomes, may differ materially from the results, developments and business

decisions contemplated by our forward-looking statements.

Forward-looking statements speak only as of the date this Form 10-Q.

in our 2024 Form 10-K and in Part II.

Item 1A in this Form 10-Q.

“Risk Factors” in our 2024 Form 10-K and in Part II.

Item 1A in this Form 10-Q for a further discussion regarding reasons that actual results and outcomes, and the timing of results and outcomes, may differ materially from the results, developments and business decisions contemplated by our forward-looking statements.

Forward-looking statements speak only as of the date of this Form 10-Q.

We do not assume any obligation to update or revise any forward-looking statement, whether because of new information, future events and developments or otherwise.

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“Business” in our 2024 Form 10-K, for a discussion of ESAB’s objectives and methodologies for deliver ing stockholder va lue.

We are a focused premier industrial compounder.

We are a focused industrial compounder.

Our rich history of innovative products, workflow solutions and our business system, ESAB Business Excellence (“EBX”), enables our purpose of Shaping the world we imagine TM .

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Our customer base is highly diversified in the industrial end markets.

Integral to our operations is EBX.

EBX is our culture and includes our values, a comprehensive set of tools and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, stockholders and associates.

We believe that our management team’s access to, and experience in, the application of the EBX methodology is one of our primary competitive strengths.

We believe that we are well positioned to grow our businesses organically over the long term by enhancing our product offerings and expanding our customer base.

We believe our business mix is well balanced between sales in high growth and developed markets, and equipment and consumables.

We believe our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures.

We believe that our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures.

Given this balance, management does not use indices other than general economic trends and business initiatives to predict the overall outlook for the Company.

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We believe that our extensive experience of acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities.

We believe that the recent acquisitions of Linde Industries Private Limited (“Linde Industries”) on July 2, 2024, Sager S.A.

on February 26, 2024 and Therapy Equipment Limited (“Therapy Equipment”) on January 11, 2023 as well as the April 30, 2024 agreement to acquire SUMIG Soluções para Solda e Corte Ltda are aligned with this strategic direction.

We believe our recent acquisitions of Sager S.A.

(“Sager”), ESAB Bangladesh Private Limited (“ESAB Bangladesh”) (formerly known as Linde Industries Private Limited) and SUMIG Soluções para Solda e Corte Ltda.

(“SUMIG”) in 2024 as well as the acquisition of Bavaria Schweisstechnik completed April 30, 2025 are aligned with this strategic direction.

Refer to Note 3, “Acquisitions” in the accompanying Notes contained elsewhere in this Form 10-Q for additional information.

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the three and nine months ended September 27, 2024 and September 29, 2023.

Because our products and services are available worldwide, we rely on a global supply chain to source raw materials, parts and components.

The majority of our sales are derived from international operations and, as such, we are subject to specific risks associated with changes in the United States policy regarding international trade and other retaliatory trade measures that the United States and foreign governments may take, including the imposition of tariffs, sanctions, export or import controls and other measures that restrict international trade.

The United States has announced significant new tariffs on imports from a wide range of countries, including China, which was followed by retaliatory tariffs by China and a number of countries and a cycle of further retaliatory announcements and trade actions.

While certain of the tariffs have been and may be delayed, others have taken or may take effect.

Further, tariffs announced or imposed by the United States could be altered or delayed through presidential action, bilateral negotiations, judicial orders or congressional actions, and tariffs announced by other counties can be affected by similar developments.

These and future changes in tariffs and trade policies have resulted and could result in additional costs and pricing pressures, supply chain disruptions, volatile or unpredictable customer spending patterns and increased economic or geopolitical risks, any or all of which could adversely affect our business, financial condition and results of operations, perhaps materially or in ways that we cannot predict.

We are actively monitoring and evaluating these developments and the potential impacts of trade policy and tariffs on our business, supply chain and results of operations.

We maintain operations worldwide, including in the jurisdictions impacted by the recently announced and contemplated tariffs.

If tariffs continue to be maintained at current levels, and/or the United States government or foreign governments impose further retaliatory tariffs or other trade restrictive measures in response, we expect

that such actions could negatively impact our revenue growth and margins in future periods through increased supply chain costs, decreased demand and other adverse economic impacts.

The net effect of these actions on our company will depend on our ability to successfully mitigate and offset their impact, which efforts may not be effective.

If we are unable to mitigate these risks through supply chain adjustments, pricing strategies or other measures, our business could be negatively affected and produce additional impacts.

Please refer to Part I.

“Risk Factors” in our 2024 Form 10-K and in Part II.

Item 1A in this Form 10-Q for additional information.

The full impact of the matters noted above on the Company, our customers and suppliers, the overall economy and capital markets remains uncertain.

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the three months ended April 4, 2025 and March 29, 2024.

Results of Operations

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Items Affecting Comparability of Reported Results

The comparability of our operating results for the three and nine months ended September 27, 2024 and September 29, 2023 is affected by the following significant factors:

The comparability of our operating results for the three months ended April 4, 2025 and March 29, 2024 is affected by the following significant factors:

Russia and Ukraine Conflict

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The change in Net sales due to acquisitions for the periods presented in this filing represents the incremental sales as a result of acquisitions.

On July 2, 2024, the Company completed the acquisition of Linde Industries, a leading welding company in Bangladesh.

On February 26, 2024, the Company completed the acquisition of Sager S.A., a welding repair and maintenance product and service leader in South America.

During the first quarter of 2023, the Company completed the acquisition of Therapy Equipment, a regional leader in oxygen regulators.

For additional information on these acquisitions, refer to Note 3, “Acquisitions” in the accompanying Notes contained elsewhere in this Form 10-Q.

Foreign Currency Fluctuations

A significant portion of our Net sales, 79% and 78% , for the three and nine months ended September 27, 2024, respectively, are outside the United States, with the majority of those sales denominated in currencies other than the U.S.

A significant portion of our Net sales, 78% for the three months ended April 4, 2025 are outside the United States, with the majority of those sales denominated in currencies other than the U.S.

Because much of our manufacturing and employee costs are outside the United States, a significant portion of our costs are also denominated in currencies other than the U.S.

Changes in foreign exchange rates can impact our results of operations and are quantified when significant.

For the three months ended September 27, 2024 compared to the three months ended September 29, 2023, fluctuations in foreign currencies reduced Net sal es by 3.1% and Gross profit by 3.6% and Selling, general and administrative expenses by 1.6%.

For the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023 , fluctuations in foreign currencies reduced Net sal es by 2.7% and Gross profit by 3.0% and Selling, general and administrative expenses by 1.0%.

For the three months ended April 4, 2025 compared to the three months ended March 29, 2024, fluctuations in foreign currencies reduced Net sal es by 3.7% and Gross profit by 3.0% and Selling, general and administrative expenses by 2.9%.

Our European operations typically experience a slowdown during the July and August vacation seasons.

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ESAB presents this non-GAAP financial measure including and excluding Russia due to economic and political volatility caused by the Russia and Ukraine conflict, which we believe results in enhanced investor interest in these alternative presentations.

Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense and other, net, Pension settlement loss, Restructuring and other

related charges, acquisition-amortization and other related charges and depreciation and other amortization.

We also present Adjusted EBITDA margin, which is subject to the same adjustments as Adjusted EBITDA.

Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense and other, net, Pension settlement loss, Restructuring and other related charges, acquisition-amortization and other related charges and depreciation and other amortization.

We also present

Adjusted EBITDA margin, which is subject to the same adjustments as Adjusted EBITDA.

Further, we present these non-GAAP performance measures on a segment basis, where we exclude the impact of Restructuring and other related charges, acquisition-amortization and other related charges and depreciation and other amortization from operating income.

We also present Core adjusted EBITDA and Core adjusted EBITDA margin, which are subject to the same adjustments as Adjusted EBITDA and Adjusted EBITDA margin, respectively, and which removes the impact of Russia for the three and nine months ended September 27, 2024 and September 29, 2023.

Adjusted EBITDA and Core adjusted EBITDA assist management in comparing our operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to unusual events or discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity and core business.

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GAAP financial measures.

The following tables set forth a reconciliation of Net income from continuing operations, the most directly comparable GAAP financial measure, to Adjusted EBITDA, Adjusted EBITDA margin, Core adjusted EBITDA and Core adjusted EBITDA margin by segment for the three and nine months ended September 27, 2024 and September 29, 2023.

Three Months Ended September 27, 2024 Nine Months Ended September 27, 2024

Americas EMEA & APAC Total Americas EMEA & APAC Total

Three Months Ended April 4, 2025

Americas EMEA & APAC Total

(Dollars in millions) (1)

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Interest expense and other, net 16.8

Pension settlement loss — 12.2

Operating income (GAAP) (1)

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Restructuring and other related charges (2)

0.9 1.0 1.9 2.0 6.6 8.6

Acquisition-amortization and other related charges (3)

4.8 5.2 10.0 13.5 12.1 25.6

Depreciation and other amortization 3.9 6.0 10.0

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Adjusted EBITDA attributable to Russia (non-GAAP) (4)

— 2.6 2.6 — 15.5 15.5

Core adjusted EBITDA (non-GAAP) (1)

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(4) Numbers calculated following the same definition as Adjusted EBITDA for total Company.

(5) Net sales wer e $37.7 million and $112.0 million relating to Russia for the three and nine months ended September 27, 2024, respectively .

Three Months Ended September 29, 2023 Nine Months Ended September 29, 2023

Americas EMEA & APAC Total Americas EMEA & APAC Total

(5) Net sales wer e $31.3 million relating to Russia for the three months ended April 4, 2025 .

Three Months Ended March 29, 2024

Americas EMEA & APAC Total

(Dollars in millions) (1)

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Interest expense and other, net 17.1

Pension settlement loss 12.2

Operating income (GAAP) $ 46.0 $ 64.7 $ 110.7

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Restructuring and other related charges (2)

1.6 1.6 3.1 5.4 12.3 17.7

Acquisition-amortization and other related charges (3)

5.2 4.0 9.3 16.0 11.9 27.8

Depreciation and other amortization 3.5 5.3 8.8

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Adjusted EBITDA attributable to Russia (non-GAAP) (4)

— 4.7 4.7 — 15.7 15.7

Core adjusted EBITDA (non-GAAP) $ 54.1 $ 69.1 $ 123.2

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(4) Numbers calculated following the same definition as Adjusted EBITDA for total Company.

(5) Net sales were $36.9 million and $114.4 million relating to Russia for the three and nine months ended September 29, 2023, respectively.

(5) Net sales were $33.6 million relating to Russia for the three months ended March 29, 2024.

Total Company

Net sales decreased for th e three and nine months ended September 27, 2024, compared to the prior year period .

Net sales decreased for th e three months ended April 4, 2025, compared to the prior year period .

The following table presents the components of changes in our Net sales.

Three Months Ended Nine Months Ended

Net Sales Change % Net Sales Change %

Three Months Ended

Net Sales Change %

(Dollars in millions) (1)

For the three and nine months ended September 29, 2023

$ 681.0 $ 2,085.4

For the three months ended March 29, 2024

Components of Change:

Existing businesses (organic sales growth) (1)

Existing businesses (organic sales) (2)

(1.1) (0.2) %

Acquisitions (3)

6.6 1.0 % 10.3 0.5 %

Foreign currency translation (4)

(25.3) (3.7) %

Total sales growth (7.7) (1.1) % (15.4) (0.7) %

For the three and nine months ended September 27, 2024

$ 673.3 $ 2,070.0

Total Net sales decline (11.6) (1.7) %

For the three months ended April 4, 2025

(1) Numbers may not sum due to rounding.

(2) Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.

(2) Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business.

(3) Represents the incremental sales attributable to acquired businesses in comparison to the portion of the prior period during which we did not own the business.

(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

Net sales from existing businesses increased $6.6 million during the three months ended September 27, 2024, compared to the prior year period, due to customer pricing increases of $8.7 million that was partially offset by a $2.1 million decrease in sales volumes.

The increase in net sales from acquisitions was attributable to Sager S.A.

and Linde Industries.

The changes in foreign exchange rates caused a $20.9 million unfavorable currency translation impact.

Net sales from existing businesses increased $31.6 million during the nine months ended September 27, 2024, compared to the prior year period, due to an increase in sales volumes of $14.6 million and customer pricing increases of $17.0 million.

The increase in net sales from acquisitions was attributable to Therapy Equipment, Sager S.A.

and Linde Industries.

Net sales from existing businesses decreased $1.1 million during the three months ended April 4, 2025, compared to the prior year period, due to a $7.1 million decrease in sales volumes partially offset by customer pricing increases of $6.0 million.

The increase in net sales from acquisitions was attributable to Sager S.A., ESAB Bangladesh and SUMIG.

The changes in foreign exchange rates caused a $25.3 million unfavorable currency translation impact.

Sales excluding Russia

Sales excluding Russia (“Core Sales”) decreased for the three and nine months ended September 27, 2024, compared to the prior year period.

Net sales excluding Russia (“Core sales”) decreased for the three months ended April 4, 2025, compared to the prior year period.

The following table presents the components of changes in our Core sales.

Three Months Ended Nine Months Ended

Core Sales (5)

Three Months Ended

Core Sales (5)

(Dollars in millions) (1)

For the three and nine months ended September 29, 2023

$ 644.1 $ 1,971.0

For the three months ended March 29, 2024

Components of Change:

Existing businesses (core organic sales growth) (2)

8.0 1.2 % 24.9 1.3 %

Existing businesses (core organic sales) (2)

Acquisitions (3)

6.6 1.0 % 10.3 0.5 %

Foreign currency translation (4)

(25.4) (3.9) %

Total core sales growth (8.5) (1.3) % (13.1) (0.7) %

For the three and nine months ended September 27, 2024

$ 635.6 $ 1,958.0

Total Core sales decline (9.2) (1.4) %

For the three months ended April 4, 2025

(1) Numbers may not sum due to rounding.

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(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

(5) Net sales relating to Russia were $37.7 million and $112.0 million for the three and nine months ended September 27, 2024, respectively, and $36.9 million and $114.4 million for the three and nine months ended September 29, 2023, respectively.

Core Sales from existing businesses increased $8.0 million during the three months ended September 27, 2024 compared to the prior year period primarily due to customer pricing increases of $8.3 million partially offset by a $0.3 million decrease in sales volume.

The $6.6 million increase in net sales from acquisitions was attributable to Sager S.A.

and Linde Industries.

The changes in foreign exchange rates caused a $23.1 million unfavorable currency translation impact.

Core Sales from existing businesses increased $24.9 million during the nine months ended September 27, 2024 compared to the prior year period primarily due to an increase in sales volume of $12.4 million and customer pricing increases of $12.5 million.

The increase in net sales from acquisitions was attributable to Therapy Equipment, Sager S.A.

and Linde Industries.

(5) Net sales relating to Russia were $31.3 million and $33.6 million for the three months ended April 4, 2025 and March 29, 2024, respectively.

Core sales from existing businesses increased $1.3 million during the three months ended April 4, 2025 compared to the prior year period primarily due to customer pricing increases of $4.9 million partially offset by a $3.6 million decrease in sales volume.

The $14.8 million increase in net sales from acquisitions was attributable to Sager S.A., ESAB Bangladesh and SUMIG.

The changes in foreign exchange rates caused a $25.4 million unfavorable currency translation impact.

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The following table summarizes our results for the comparable periods.

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Three Months Ended

April 4, 2025 March 29, 2024

(Dollars in millions)

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Restructuring and other related charges (1)

$ 1.9 $ 3.1 $ 8.6 $ 17.7

Acquisition-amortization and other related charges (2)

10.0 9.3 25.6 27.8

Interest expense and other, net 16.8 17.1

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Adjusted EBITDA attributable to Russia (non-GAAP) (3)

$ 2.6 $ 4.7 $ 15.5 $ 15.7

(1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating

equipment, lease termination, impairment of long-lived assets and other costs in connection with the closure of and optimization of facilities and product lines.

(2) Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.

(2) Includes transaction expenses, amortization of acquired intangibles, fair value charges on acquired inventories and integration expenses.

(3) Numbers calculated following the same definition as Adjusted EBITDA for total Company.

Third Quarter of 2024 Compared to Third Quarter of 2023

Gross profit increased $4.1 million in the third quarter of 2024, with gross profit margin expanding 100 basis points compared with the prior year period.

This increase was primarily attributable to customer pricing, lower material costs and favorable product mix partially offset by unfavorable currency translation.

Selling, general and administrative expense remained relatively consistent in the third quarter of 2024 compared to the prior year period.

The effective tax rate of 20.3 % for the quarter ended September 27, 2024 differed from the effective tax rate of 24.6 % for the same period ended September 29, 2023 due to an agreement with a tax authority on the treatment of subsidy income in a foreign jurisdiction in 2024.

Net income from continuing operations increased $10.2 million in the third quarter of 2024 compared with the prior year period primarily due to the aforementioned factors as well as lower interest expense.

Net income margin from continuing operations increased by 170 basis points due to the aforementioned factors.

In the third quarter of 2024, Adjusted EBITDA increased $4.9 million and Adjusted EBITDA margin increased by 90 basis points compared to the same period in 2023 benefiting from higher Gross profit.

Core adjusted EBITDA increased $7.0 million, and Core adjusted EBITDA margin expanded by 130 basis points compared to the same period in 2023.

Nine Months Ended September 27, 2024 Compared to Nine Months Ended September 29, 2023

Gross profit increased $18.1 million in the nine months ended September 27, 2024, with gross profit margin expanding 110 basis points compared with the prior year period.

This increase was primarily attributable to benefits from customer pricing and lower material costs partially offset by unfavorable currency translation.

Selling, general and administrative expense decreased $8.3 million in the nine months ended September 27, 2024, compared to the prior year period.

This decrease was primarily driven by savings from restructuring initiatives and currency translation.

The effective tax rate of 19.9 % for the nine months ended September 27, 2024 differed from the effective tax rate of 32.2% for the same period ending September 29, 2023 due to discrete tax adjustments in 2023 for dividend withholding taxes and an increase in unrecognized tax benefits due to an adverse court ruling in a tax case in a foreign jurisdiction and discrete tax adjustments in 2024 for a favorable final ruling in a tax case in a foreign jurisdiction and an agreement with a taxing authority on the treatment of subsidy income in a foreign jurisdiction in 2024.

Net income from continuing operations increased $55.7 million in the nine months ended September 27, 2024 compared with the prior year period primarily due to the aforementioned factors as well as lower interest and income tax expenses.

Net income margin from continuing operations increased by 270 basis points due to the aforementioned factors.

In the nine months ended September 27, 2024, Adjusted EBITDA increased $24.9 million and Adjusted EBITDA margin increased by 130 basis points compared to the same period in 2023 benefiting from higher Gross profit and lower Selling, general and administrative expense.

In the nine months ended September 27, 2024, Core adjusted EBITDA increased by $25.2 million and Core adjusted EBITDA margin expanded by 140 basis points.

Business Segments

We formulate, develop, manufacture and supply consumable products and equipment, including cutting, joining and welding robotics, as well as gas control equipment.

Our products are marketed under several brand names, most notably ESAB, providing a wide range of products with innovative technologies to solve challenges in virtually any industry.

ESAB’s comprehensive range of welding consumables includes electrodes, cored and solid wires and fluxes using a wide range of specialty and other materials, and cutting consumables including electrodes, nozzles, shields and tips.

ESAB’s equipment ranges from portable welding machines, gas control equipment and customized automated cutting and welding systems.

ESAB also offers a range of software and digital solutions to help its customers increase their productivity, remotely monitor their welding operations and digitize their documentation.

Products are sold into a wide range of end markets, including general industry, infrastructure, renewable energy, medical and life sciences, transportation, construction and energy.

First Quarter of 2025 Compared to First Quarter of 2024

Gross profit and related margin remained relatively consistent in the first quarter of 2025 compared to the prior year period.

Selling, general and administrative expense decreased by $1.6 million in the first quarter of 2025 compared to the prior year period primarily due to a gain on disposition of a property, EBX driven restructuring savings and currency translation benefits partially offset by increases from acquisitions and growth initiatives.

The effective tax rate of 22.0 % for the quarter ended April 4, 2025 differed from the effective tax rate of 22.7 % for the same period ended March 29, 2024 primarily due to withholding taxes.

Net income from continuing operations increased $9.7 million and related margin expanded by 160 basis points in the first quarter of 2025 compared with the prior year period primarily due to the aforementioned factors as well as the $ 12.2 million non-cash pension settlement loss in the prior year period that did not recur in the first quarter of 2025.

In the first quarter of 2025, Adjusted EBITDA increased $4.8 million and related margin expanded by 100 basis points compared to the same period in the prior year primarily due to lower Selling, general and administrative expense.

Core adjusted EBITDA increased $4.7 million and related margin expanded by 100 basis points compared to the same period in the prior year.

Reportable Segments

We report results in two reportable segments:

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The following table summarizes selected financial data for our Americas segment:

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Three Months Ended

April 4, 2025 March 29, 2024

(Dollars in millions)

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Depreciation and other amortization $ 3.9 $ 3.5

Third Quarter of 2024 Compared to Third Quarter of 2023

Net sales in our Americas segment decreased $17.0 million in the third quarter of 2024 compared with the prior year period.

Net sales from existing business increased $6.2 million primarily due to pricing increases, which was more than offset by $26.0 million in unfavorable currency translation.

First Quarter of 2025 Compared to First Quarter of 2024

Net sales in our Americas segment decreased $15.3 million in the first quarter of 2025 compared with the prior year period.

Net sales from existing business decreased $7.0 million primarily due to reduced sales volumes in filler metals partially offset by pricing increases and higher sales volumes of gas control and welding equipment.

In addition, there was $17.9 million of unfavorable currency translation.

The acquisition of Sager S.A.

contributed a $2.8 million increase to Net sales from acquisitions.

Despite lower sales, Gross profit remained relatively consistent with the same period in the prior year due to customer pricing increases, lower material costs and EBX driven business improvements that also expanded Gross profit margin by 170 basis points.

Selling, general and administrative expense decreased by $5.3 million primarily due to savings from restructuring initiatives and currency translation.

Adjusted EBITDA increased $2.2 million and Adjusted EBITDA margin expanded 190 basis points primarily due to the aforementioned factors.

Nine Months Ended September 27, 2024 Compared to Nine Months Ended September 29, 2023

Net sales in our Americas segment decreased $13.0 million in the nine months ended September 27, 2024 compared with the prior year period.

Net sales from existing business increased $27.6 million, which was more than offset by $47.0 million in unfavorable currency translation.

The increase in Net sales from existing business was primarily due to customer pricing increases, partially offset by a decrease in sales volumes.

The Sager S.A.

acquisition contributed to $6.4 million of the overall sales increase.

Gross profit increased $11.4 million and Gross profit margin increased 180 basis points due to price increases, benefits from EBX driven business improvements and the Sager S.A.

acquisition, partially offset by an unfavorable currency impact.

Selling, general and administrative expense decreased by $5.6 million primarily due to savings from restructuring initiatives and currency translation.

Adjusted EBITDA increased $13.3 million and Adjusted EBITDA margin expanded 170 basis points primarily because of the aforementioned factors.

and SUMIG contributed a $9.6 million increase to Net sales from acquisitions.

Gross profit decreased by $1.0 million due to lower sales volumes;

however, gross profit margin expanded by 170 basis points due to EBX initiatives, including value pricing.

Selling, general and administrative expense remained relatively consistent with the same period prior year.

Adjusted EBITDA increased $0.4 million and related margin expanded by 110 basis points primarily due to the aforementioned factors.

The following table summarizes the selected financial data for our EMEA & APAC segment:

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Three Months Ended

April 4, 2025 March 29, 2024

(Dollars in millions)

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Adjusted EBITDA attributable to Russia (non-GAAP) $ 6.0 $ 5.9

Third Quarter of 2024 Compared to Third Quarter of 2023

Net sales increased for our EMEA & APAC segment by $9.3 million in the third quarter of 2024 compared with the prior year period.

This increase was primarily due to an increase in Net sales from existing business of $0.4 million, a $3.8 million increase related to the acquisition of Linde Industries and a $5.1 million favorable currency translation.

Gross profit increased $5.7 million in the third quarter of 2024 compared with the prior year period primarily due to improved product mix and lower material costs partially offset by lower pricing.

Gross profit margin expanded 70 basis points compared to the same period in 2023 primarily due to improved product mix, lower material costs and EBX driven business improvements.

Selling, general and administrative expense remained relatively consistent compared to the same period in 2023.

Adjusted EBITDA increased $2.8

million and Adjusted EBITDA margin expanded 30 basis points and Core adjusted EBITDA increased to $65.5 million and the related Core adjusted EBITDA margin expanded 100 basis points primarily because of the aforementioned factors.

Nine Months Ended September 27, 2024 Compared to Nine Months Ended September 29, 2023

Net sales in our EMEA & APAC segment decreased $2.4 million in the nine months ended September 27, 2024 compared with the prior year period.

Net sales from existing business increased $4.0 million, with the Therapy Equipment and Linde Industries acquisitions contributing an additional increase of $3.9 million.

These increases were offset by $10.3 million in unfavorable currency translation.

The increase in Net sales from existing business was primarily due to an increase in sales volumes partially offset by decreases in customer pricing.

Gross profit and Gross profit margin increased $6.7 million and 70 basis points, respectively, due to EBX driven business improvements, lower material costs and improved product mix partially offset by an unfavorable currency impact.

Selling, general and administrative expense decreased $5.8 million primarily due to savings from restructuring initiatives.

Adjusted EBITDA increased $11.7 million and Adjusted EBITDA margin expanded 110 basis points and Core adjusted EBITDA increased to $203.9 million and Core adjusted EBITDA margin expanded 110 basis points primarily because of the aforementioned factors.

First Quarter of 2025 Compared to First Quarter of 2024

Net sales in our EMEA & APAC segment increased $3.8 million in the first quarter of 2025 compared with the prior year period.

This was primarily due to an increase in Net sales from existing business of $5.9 million driven by increases in sales volume partially offset by lower pricing and a $5.2 million increase related to the acquisition of ESAB Bangladesh partially offset by $7.4 million unfavorable currency translation.

Gross profit and related margin remained relatively consistent with the same period prior year.

Selling, general and administrative expense decreased in the first quarter of 2025 compared with the prior year period due to a gain on disposition of a property, EBX driven savings, restructuring initiatives and currency translation benefit partially offset by an increase in growth investments.

Adjusted EBITDA increased $4.4 million and related margin expanded by 90 basis points and Core adjusted EBITDA increased to $73.4 million and the related margin expanded by 80 basis points primarily because of the aforementioned factors.

Liquidity and Capital Resources

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We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures and restructuring related cash outflows, asbestos-related cash outflows, debt service and required amortization of principal, stock repurchase and, pending approval from the Board of Directors, payment of cash dividends.

As of September 27, 2024, we were in compliance with the covenants under the Credit Agreement and the Company’s weighted average interest rate of Debt was 5.01%, excluding accretion of deferred financing fees and net of interest rate hedge impacts.

As of the end of the third quarter, we had the capacity for additional indebtedness of up to $750 million available on the Revolving Facility, subject to meeting financial covenants and other requirements.

As of April 4, 2025, we were in compliance with the covenants under the Credit Agreement and the Indenture.

The Company’s weighted average interest rate of borrowings under the Credit Agreement and the Indenture was 5.16%, excluding accretion of deferred financing fees and net of interest rate hedge impacts.

As of the end of the first quarter, we had the capacity for additional indebtedness of up to $750 million available on the Revolving Facility, subject to meeting financial covenants and other requirements.

Additionally, we have the ability to incur $50.0 million of indebtedness pursuant to certain uncommitted credit lines, consisting of an uncommitted credit line that we have used from time to time in the past for short-term working capital needs.

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On August 13, 2024, the Board of Directors authorized and approved a stock repurchase program to repurchase up to five million shares of the Company’s Common stock, par value $0.001 per share, from time-to-time on the open market, in privately negotiated transactions or as may otherwise be determined by the Company’s management in its discretion.

No repurchases of the Company’s Common stock have been made through the nine months ended September 27, 2024.

No repurchases of the Company’s Common stock have been made through the three months ended April 4, 2025.

The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions, applicable legal requirements and other factors.

There is no term associated with the remaining repurchase authorization.

As of September 27, 2024, we had $253.7 million of Cash and cash equivalents, an increase of $151.7 million from the balance of $102.0 million as of December 31, 2023.

The following table summarizes the change in Cash and cash equivalents during periods indicated:

Nine Months Ended

September 27, 2024 September 29, 2023

As of April 4, 2025, we had $291.3 million of Cash and cash equivalents, an increase of $42.0 million from the balance of $249.4 million as of December 31, 2024.

The following table summarizes the change in Cash and cash equivalents during the periods indicated:

Three Months Ended

April 4, 2025 March 29, 2024

(Dollars in millions) (1)

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Proceeds from sale of property, plant and equipment 4.6 0.4

Acquisitions, net of cash received (86.5) (18.7)

Acquisition, net of cash received — (18.1)

Other investing — (1.5)

Net cash used in investing activities (2.7) (26.6)

Proceeds from borrowings on Senior Notes 700.0 —

Proceeds from borrowings on revolving credit facility and other — 115.0

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Repayments of borrowings on revolving credit facility and other — (135.0)

Payment of debt issuance costs and other (15.5) —

Payment of dividends (4.9) (3.6)

Distributions to noncontrolling interest holders (1.2) —

Net cash provided by (used in) financing activities 40.6 (142.2)

Other financing (4.6) (4.0)

Net cash used in financing activities (13.1) (33.9)

Effect of foreign exchange rates on Cash and cash equivalents 22.4 (9.4)

Increase in Cash and cash equivalents $ 151.7 $ 10.8

Increase (decrease) in Cash and cash equivalents $ 42.0 $ (25.5)

(1) Numbers may not sum due to rounding.

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Changes in significant operating cash flow items are discussed below.

• Operating cash flow was positively impacted by increased operating income for the nine months ended September 27, 2024, partially offset by higher working capital to support growth.

• Discontinued operations for the nine months ended September 27, 2024 and September 29, 2023 included outflows of $12.1 million and $12.2 million, respectively, which were mainly asbestos-related.

• Restructuring initiative payments were $8.3 million and $15.4 million for the nine months ended September 27, 2024 and September 29, 2023, respectively.

• Operating cash flow for the three months ended April 4, 2025 is a result of operating income partially offset by higher working capital requirements, including additional investment in inventory due to uncertainties related to tariffs.

• Discontinued operations for the three months ended April 4, 2025 and March 29, 2024 included outflows of $2.3 million and $3.7 million, respectively, which were primarily asbestos-related.

• Restructuring initiative payments were $3.3 million and $2.9 million for the three months ended April 4, 2025 and March 29, 2024, respectively.

These payments included severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment and other costs in connection with the closure and optimization of facilities and product lines.

Cash flows used in investing activities include $86.5 million of cash used for the acquisition of Sager S.A.

and Linde Industries during the nine months ended September 27, 2024.

Cash inflows provided by financing activities of $40.6 million during the nine months ended September 27, 2024 was primarily driven by proceeds from borrowings on long-term debt of $905.0 million partially offset by net repayment of borrowings on long-term debt of $834.1 million, payment of debt issuance costs of 10.4 million and cash dividends of $12.1 million.

The new Senior Notes borrowing in April 2024 provided liquidity beyond the amount needed to refinance extinguished debt.

Our Cash and cash equivalents as of September 27, 2024 included $231.9 million held in jurisdictions outside the United States.

Cash flows used in investing activities during the three months ended March 29, 2024, include $18.1 million of cash used for the acquisition of Sager S.A.

Our Cash and cash equivalents as of April 4, 2025 included $269.8 million held in jurisdictions outside the United States.

Cash repatriation of non-United States cash into the United States may be subject to withholding taxes, other local statutory restrictions and minority owner distributions.

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Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.

Actual results may vary from what our management

anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.

There have been no other significant additions or changes to the methods, estimates and judgments included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” in the 2024 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis