What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-01 · 154 added, 97 removed, 263 unchanged (49% of the section changed)

1 unchanged sentence

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 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 ”).

“Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended July 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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in our 2024 Form 10-K and in Part II.

Item 1A in this Form 10-Q.

Item 1A in our Form 10-Q for the quarterly period ended April 4, 2025 (the “2025 Q1 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.

Item 1A in our 2025 Q1 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.

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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 industrial compounder.

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

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.

We believe our recent acquisitions 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.

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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.

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

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.

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, then in addition to the efforts reflected in the discussion that follows, 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

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.

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

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

Item 1A in our 2025 Q1 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.

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the three and six months ended July 4, 2025 and June 28, 2024.

Results of Operations

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Items Affecting Comparability of Reported Results

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:

The comparability of our operating results for the three and six months ended July 4, 2025 and June 28, 2024 is affected by the following significant factors:

Russia and Ukraine Conflict

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Refer to Note 1, “Organization and Basis of Presentation” in the accompanying Notes contained elsewhere in this Form 10-Q as well as Part I.

“Risk Factors” section of the 2024 Form 10-K for additional information.

“Risk Factors” section of the 2024 Form 10-K, as updated by our 2025 Q1 Form 10-Q, for additional information.

The Company continues to actively monitor the changes in United States policy regarding international trade, including the recent progress in reaching or progressing international trade agreements with major counterparties.

As reflected in the discussions that follow, the United States policy regarding international trade and actions taken in response to it have had a variety of impacts on our results of operations during 2025, including decreased sales levels and increased raw material costs.

For additional information on the risks of United States policy regarding international trade to the Company’s operations, refer to the “Part II.

Risk Factors” section in our 2025 Q1 Form 10-Q.

We complement our organic growth with acquisitions and other investments.

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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.

For additional information on our 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, 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.

A significant portion of our Net sales, 80% and 79% for the three and six months ended July 4, 2025, respectively, 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 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%.

For the three months ended July 4, 2025 compared to the three months ended June 28, 2024, fluctuations in foreign currencies increased Net sal es by 0.5% and Gross profit by 0.6% and Selling, general and administrative expenses by 1.1%.

For the six months ended July 4, 2025 compared to the six months ended June 28, 2024 , fluctuations in foreign currencies r educed Net sal es by 1.6% and Gross profit by 1.1% and Selling, general and administrative expenses by 0.9%.

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.

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 months ended April 4, 2025 and March 29, 2024.

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 due diligence and transaction expenses, amortization of intangibles and fair value charges on acquired inventories 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 subject to the same adjustments described above.

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 months ended April 4, 2025 and March 29, 2024.

Three Months Ended April 4, 2025

Americas EMEA & APAC Total

Three Months Ended July 4, 2025 Six Months Ended July 4, 2025

Americas EMEA & APAC Total Americas EMEA & APAC Total

(Dollars in millions) (1)

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Restructuring and other related charges (2)

0.5 0.9 1.4 2.2 3.7 5.9

Acquisition-amortization and other related charges (3)

10.0 11.5 21.6 15.7 15.5 31.2

Depreciation and other amortization 3.8 7.6 11.4 7.7 13.6 21.4

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

— 5.0 5.0 — 11.0 11.0

Core adjusted EBITDA (non-GAAP) (1)

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(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.

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

(3) Includes transaction, diligence and integration expenses totaling $12.8 million and $14.2 million for the three and six months ended July 4, 2025, respectively, and amortization of intangibles and fair value charges on acquired inventories totaling $8.8 million and $17.0 million three and six months ended July 4, 2025, respectively.

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

(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

(5) Net sales wer e $37.1 million and $68.4 million relating to Russia for the three and six months ended July 4, 2025, respectively .

Three Months Ended June 28, 2024 Six Months Ended June 28, 2024

Americas EMEA & APAC Total Americas EMEA & APAC Total

(Dollars in millions) (1)

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Restructuring and other related charges (2)

0.8 4.0 4.8 1.1 5.6 6.7

Acquisition-amortization and other related charges (3)

4.3 3.3 7.7 8.7 6.8 15.5

Depreciation and other amortization 3.7 5.5 9.1 7.2 10.7 17.9

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

— 6.9 6.9 — 12.9 12.9

Core adjusted EBITDA (non-GAAP) $ 64.7 $ 69.3 $ 134.0 $ 118.8 $ 138.5 $ 257.3

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(1) Numbers may not sum due to rounding.

(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.

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

(3) Includes transaction, diligence and integration expenses totaling $0.5 million and $0.6 million for the three and six months ended June 28, 2024, respectively, and amortization of intangibles and fair value charges on acquired inventories totaling $7.3 million and $14.9 million for the three and six months ended June 28, 2024, respectively.

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

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

(5) Net sales were $40.7 million and $74.4 million relating to Russia for the three and six months ended June 28, 2024, respectively.

Total Company

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

Net Sales Change %

The following table presents the components of changes in our Net sales for th e three and six months ended July 4, 2025 compared to the prior year period.

Three Months Ended Six Months Ended

Net Sales Change % Net Sales Change %

(Dollars in millions) (1)

For the three months ended March 29, 2024

For the three and six months ended June 28, 2024

$ 707.1 $ 1,396.8

Components of Change:

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Acquisitions (3)

20.9 3.0 % 35.7 2.6 %

Foreign currency translation (4)

3.2 0.5 % (22.1) (1.6) %

Total Net sales decline (11.6) (1.7) %

For the three months ended April 4, 2025

Total Net sales growth (decline) 8.5 1.2 % (3.1) (0.2) %

For the three and six months ended July 4, 2025

$ 715.6 $ 1,393.7

(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.

(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.

(3) Represents the incremental sales 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 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.

Net sales from existing businesses decreased by $15.6 million during the three months ended July 4, 2025, compared to the prior year period.

Volume declined by $23.2 million, primarily due to reduced customer demand in the Americas due to tariff uncertainty impacting our Mexico business and delayed automation purchases across North America and lower volumes in Russia.

This was partially offset by strong growth in the EMEA and APAC markets and $7.6 million in price increases.

The increase in net sales from acquisitions was attributable to ESAB Bangladesh Private Limited (“ESAB Bangladesh”), SUMIG Soluções para Solda e Corte Ltda.

(“SUMIG”), Bavaria Schweisstechnik (“Bavaria”) and DeltaP.

The changes in foreign exchange rates caused a $3.2 million favorable currency translation impact.

Net sales from existing businesses decreased by $16.7 million during the six months ended July 4, 2025, compared to the prior year period, due to a $30.3 million decrease in sales volume due to drivers such as tariffs in the Americas partially offset by customer pricing increases of $13.6 million.

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

The changes in foreign exchange rates caused a $22.1 million unfavorable currency translation impact.

Sales excluding Russia

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

The following table presents the components of changes in our Net sales excluding Russia (“Core sales”) for the three and six months ended July 4, 2025 compared to the prior year period.

Three Months Ended Six Months Ended

Core Sales (5)

Change % Core Sales (1)(5)

(Dollars in millions) (1)

For the three months ended March 29, 2024

For the three and six months ended June 28, 2024

$ 666.3 $ 1,322.4

Components of Change:

Existing businesses (core organic sales) (2)

(6.9) (1.0) % (5.5) (0.4) %

Acquisitions (3)

20.9 3.1 % 35.7 2.7 %

Foreign currency translation (4)

(1.9) (0.3) % (27.3) (2.1) %

Total Core sales decline (9.2) (1.4) %

For the three months ended April 4, 2025

Total Core sales growth 12.1 1.8 % 2.9 0.2 %

For the three and six months ended July 4, 2025

$ 678.5 $ 1,325.3

(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 $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.

(5) Net sales relating to Russia were $37.1 million and $40.7 million for the three months ended July 4, 2025 and June 28, 2024, respectively, and $68.4 million and $74.4 million for the six months ended July 4, 2025 and June 28, 2024, respectively.

Core sales from existing businesses decreased by $6.9 million during the three months ended July 4, 2025 compared to the prior year period primarily due to a $14.2 million decrease in sales volume as described above partially offset by customer pricing increases of $7.4 million.

The $20.9 million increase in net sales from acquisitions was attributable to ESAB Bangladesh, SUMIG, Bavaria and DeltaP.

The changes in foreign exchange rates caused a $1.9 million unfavorable currency translation impact.

Core Sales from existing businesses decreased by $5.5 million during the six months ended July 4, 2025 compared to the prior year period primarily due to a $17.8 million decrease in sales volume as described above partially offset by customer pricing increases of $12.3 million.

The $35.7 million increase in net sales from acquisitions was attributable to Sager S.A., ESAB Bangladesh, SUMIG, Bavaria and DeltaP.

The changes in foreign exchange rates caused a $27.3 million unfavorable currency translation impact.

Operating Results

The following table summarizes our results for the comparable periods.

Three Months Ended

April 4, 2025 March 29, 2024

Three Months Ended Six Months Ended

July 4, 2025 June 28, 2024 July 4, 2025 June 28, 2024

(Dollars in millions)

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Restructuring and other related charges (1)

$ 1.4 $ 4.8 $ 5.9 $ 6.7

Acquisition-amortization and other related charges (2)

21.6 7.7 31.2 15.5

Interest expense and other, net 21.0 15.9 37.8 33.0

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

$ 5.0 $ 6.9 $ 11.0 $ 12.9

(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 acquired intangibles, fair value charges on acquired inventories and integration expenses.

(2) Includes transaction, diligence and integration expenses totaling $12.8 million and $14.2 million for the three and six months ended July 4, 2025, respectively, and $0.5 million and $0.6 million for the three and six months ended June 28, 2024, respectively.

Additionally, it includes amortization of intangibles and fair value charges on acquired inventories totaling $8.8 million and $17.0 million three and six months ended July 4, 2025, respectively, and $7.3 million and $14.9 million for the three and six months ended June 28, 2024, respectively.

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

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.

Second Quarter of 2025 Compared to Second Quarter of 2024

Gross profit decreased by $4.3 million and related margin decreased 100 basis points in the second quarter of 2025 compared to the prior year period primarily attributable to decreases in sales volume in the Americas segment and higher tariff-related material costs partially offset by accretion from acquisitions, favorable foreign currency impact and price increases.

Selling, general and administrative expense increased by $9.4 million in the second quarter of 2025 compared to the prior year period primarily due to increases from acquisitions and related transaction costs and unfavorable foreign currency impact partially offset by benefits from EBX driven savings.

The effective tax rate of 20.8 % for the quarter ended July 4, 2025 differed from the effective tax rate of 17.3 % for the same period ended June 28, 2024 due to a favorable final ruling in a tax case in a foreign jurisdiction in 2024.

On July 4, 2025, the reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), was signed into law.

The OBBBA provisions include immediate deduction of domestic Research and Development (R&D) expenditures, reinstatement of 100% first-year bonus depreciation, permanent extension of most expiring Tax Cuts and Jobs Act provisions, and international tax changes.

The Company does not currently expect the impact of the OBBBA to be material to 2025.

Net income from continuing operations decreased $15.7 million primarily due to the aforementioned factors as well as higher Interest expense and other, net mainly driven by the interest rate on our borrowings being higher than the prior year period.

For additional information on the Interest expense and other, net impact, refer to Note 10, “Debt” and Note 11, “Derivatives” in the accompanying Notes contained elsewhere in this Form 10-Q.

Adjusted EBITDA increased $2.5 million

and related margin expanded 20 basis points compared to the same period in the prior year.

Core adjusted EBITDA increased $4.5 million and related margin expanded by 30 basis points compared to the same period in the prior year.

Six Months Ended July 4, 2025 Compared to Six Months Ended June 28, 2024

Gross profit decreased $4.1 million and related margin decreased by 20 basis points in the six months ended July 4, 2025 compared to the prior year period primarily attributable to higher material costs and decrease in sales volume partially offset by accretion from acquisitions and price increases.

Selling, general and administrative expense increased $7.8 million in the six months ended July 4, 2025 compared to the prior year period primarily due to increases from acquisitions and related transaction costs partially offset by benefits from EBX driven savings and gains on the disposition of properties.

The effective tax rate of 21.4% for the six months ended July 4, 2025 differed from the effective tax rate of 19.7% for the same period ending June 28, 2024 due to discrete tax adjustments in 2024 for a favorable final ruling in a tax case in a foreign jurisdiction.

Refer to above for further information on the anticipated OBBBA impact on the tax rate and related expense.

Net income from continuing operations decreased $6.0 million in the six months ended July 4, 2025 compared to the prior year period primarily due to the aforementioned factors as well as higher Interest expense and other, net largely driven by the interest rate on our borrowings being higher than the prior year period partially offset by the $12.2 million non-cash pension settlement loss in 2024.

For additional information on the Interest expense and other, net impact, refer to Note 10, “Debt” and Note 11, “Derivatives” in the accompanying Notes contained elsewhere in this Form 10-Q.

Adjusted EBITDA increased $7.3 million and Adjusted EBITDA margin expanded by 60 basis points in the six months ended July 4, 2025 compared to the prior year period due to the aforementioned factors.

Core adjusted EBITDA increased by $9.1 million and Core adjusted EBITDA margin expanded by 60 basis points.

Reportable Segments

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

Three Months Ended

April 4, 2025 March 29, 2024

Three Months Ended Six Months Ended

July 4, 2025 June 28, 2024 July 4, 2025 June 28, 2024

(Dollars in millions)

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Depreciation and other amortization $ 3.8 $ 3.7 $ 7.7 $ 7.2

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.

Second Quarter of 2025 Compared to Second Quarter of 2024

Net sales in our Americas segment decreased $27.1 million in the second quarter of 2025 compared with the prior year period.

Net sales from existing business decreased $22.4 million primarily due to reduced sales volumes primarily driven by tariff uncertainty impacting our Mexico business and delayed automation purchases across North America partially offset by pricing increases.

In addition, there was $12.9 million of unfavorable currency translation.

The acquisition of Sager S.A.

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 acquisition of SUMIG contributed a $8.2 million increase to Net sales from acquisitions.

Gross profit decreased by $11.7 million attributable to decreases in sales volumes partially offset by accretion from acquisitions and price increases.

Selling, general and administrative expense remained relatively consistent compared with the prior year primarily due to acquisition-related transaction costs partially offset by benefits from EBX driven savings.

Adjusted EBITDA decreased $7.9 million primarily due to the aforementioned factors.

Six Months Ended July 4, 2025 Compared to Six Months Ended June 28, 2024

Net sales in our Americas segment decreased $42.4 million in the six months ended July 4, 2025 compared with the prior year period.

Net sales from existing business decreased $29.4 million primarily due to reduced sales volumes primarily driven by tariff costs and related impacts partially offset by pricing increases.

In addition, there was $30.8 million in unfavorable currency translation.

The Sager S.A.

and SUMIG acquisitions contributed a $17.8 million increase to Net sales from acquisitions.

Gross profit decreased $12.7 million attributable to higher material costs and decreases in sales volume partially offset by accretion from acquisitions and price increases.

Selling, general and administrative expense remained relatively consistent compared with the prior year period primarily due to acquisition-related transaction costs partially offset by benefits from EBX driven savings.

Adjusted EBITDA decreased $7.5 million and Adjusted EBITDA margin remained relatively consistent with the prior year period primarily because of the aforementioned factors.

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

Three Months Ended

April 4, 2025 March 29, 2024

Three Months Ended Six Months Ended

July 4, 2025 June 28, 2024 July 4, 2025 June 28, 2024

(Dollars in millions)

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Adjusted EBITDA attributable to Russia (non-GAAP) $ 5.0 $ 6.9 $ 11.0 $ 12.9

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.

Second Quarter of 2025 Compared to Second Quarter of 2024

Net sales in our EMEA & APAC segment increased $35.6 million in the second quarter of 2025 compared with the prior year period.

This was primarily due to an increase in Net sales from existing business in Core markets of $15.5 million primarily resulting from increases in sales volume in high-growth markets, a $12.7 million increase related to the acquisition of ESAB Bangladesh, Bavaria and DeltaP and a $16.1 million favorable foreign currency impact;

these were partially offset by $8.7 million of lower sales in Russia.

Gross profit increased by $7.5 million in the second quarter of 2025 compared with the prior year period primarily due to accretion from acquisitions, increased sales volumes and foreign currency translation impacts partially offset by pricing decreases.

Selling, general and administrative expense increased $7.1 million in the second quarter of 2025 compared with the prior year period largely due to acquisitions and an unfavorable currency translation impact partially offset by a gain on disposition of property.

Adjusted EBITDA increased $10.4 million and related margin expanded by 80 basis points and Core adjusted EBITDA increased to $81.7 million and the related margin expanded by 110 basis points in the second quarter of 2025 compared with the prior year period primarily because of the aforementioned factors.

Six Months Ended July 4, 2025 Compared to Six Months Ended June 28, 2024

Net sales in our EMEA & APAC segment increased $39.3 million in the six months ended July 4, 2025 compared with the prior year period.

This was primarily due to an increase in Net sales from existing business in Core markets of $23.9 million driven by increases in sales volume in high-growth markets partially offset by lower pricing, a $17.9 million increase related to the acquisition of ESAB Bangladesh, Bavaria and DeltaP and a $8.7 million in favorable foreign currency impact;

partially offset by $11.2 million of lower sales in Russia.

Gross profit increased $8.6 million in the six months ended July 4, 2025 compared with the prior year period due to accretion from acquisitions and increased sales volumes partially offset by lower pricing.

Selling, general and administrative expense increased $5.4 million in the six months ended July 4, 2025 compared with the prior year period primarily due to acquisitions and related costs partially offset by a gain on disposition of property.

Adjusted EBITDA increased $14.8 million and Adjusted EBITDA margin expanded 90 basis points and Core adjusted EBITDA increased to $155.1 million and Core adjusted EBITDA margin expanded 110 basis points in the six months ended July 4, 2025 compared with the prior year period 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 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.

As of July 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 5.52%, excluding accretion of deferred financing fees.

As of the end of the second 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 three months ended April 4, 2025.

No repurchases of the Company’s Common stock have been made through the six months ended July 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 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.

As of July 4, 2025, we had $258.2 million of Cash and cash equivalents, an increase of $8.9 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

Six Months Ended

July 4, 2025 June 28, 2024

(Dollars in millions) (1)

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Proceeds from sale of property, plant and equipment 4.7 0.6

Acquisition, net of cash received — (18.1)

Acquisitions, net of cash received (86.3) (18.1)

Other investing (0.5) (3.1)

Net cash used in investing activities (98.5) (36.9)

Proceeds from borrowings on revolving credit facility and other — 115.0

Proceeds from borrowings on Senior Notes — 700.0

Proceeds from borrowings on revolving credit facilities and other 8.7 205.0

Repayments of borrowings on Term Loans (5.0) (597.5)

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

Repayments of borrowings on revolving credit facilities and other — (237.0)

Payment of debt issuance costs — (10.4)

Payment of dividends (9.7) (7.3)

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Other financing (12.4) (5.3)

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

Net cash (used in) provided by financing activities (19.6) 46.3

Effect of foreign exchange rates on Cash and cash equivalents 45.0 (10.4)

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

Increase in Cash and cash equivalents $ 8.9 $ 126.5

(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 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.

• Operating cash flow for the six months ended July 4, 2025 decreased due to lower operating income and higher working capital requirements, including additional investment in inventory in North America due to uncertainties related to tariffs.

• Discontinued operations for the six months ended July 4, 2025 and June 28, 2024 included outflows of $7.2 million and $8.5 million, respectively, which were primarily asbestos-related.

• Restructuring initiative payments were $5.9 million and $5.4 million for the six months ended July 4, 2025 and June 28, 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 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 flows used in investing activities during the six months ended July 4, 2025 primarily comprise approximately $86 million of cash used for the acquisitions of Bavaria and DeltaP and during the six months ended June 28, 2024 included approximately $18 million of cash used for the acquisition of Sager S.A.

Our Cash and cash equivalents as of July 4, 2025 included $241.7 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