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Item 2. Management’s Discussion and Analysis

2025-10-29 compared with 2025-08-06 · 110 added, 108 removed, 309 unchanged (41% 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 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 ”).

“Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended October 3, 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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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 and six months ended July 4, 2025 and June 28, 2024.

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the three and nine months ended October 3, 2025 and September 27, 2024.

Results of Operations

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Items Affecting Comparability of Reported Results

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:

The comparability of our operating results for the three and nine months ended October 3, 2025 and September 27, 2024 is affected by the following significant factors:

Russia and Ukraine Conflict

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Foreign Currency Fluctuations

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.

A significant portion of our Net sales, 79% for the three and nine months ended October 3, 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 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%.

For the three months ended October 3, 2025 compared to the three months ended September 27, 2024, fluctuations in foreign currencies increased Net sal es by 1.5%, Gross profit by 1.6% and Selling, general and administrative expenses by 2.1%.

For the nine months ended October 3, 2025 compared to the nine months ended September 27, 2024 , fluctuations in foreign currencies r educed Net sal es by 0.6% and Gross profit by 0.2% and increased Selling, general and administrative expenses by 0.2%.

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 due diligence and transaction expenses, amortization of intangibles and fair value charges on acquired inventories and depreciation and other amortization.

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 transaction, due diligence and integration 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.

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 six months ended July 4, 2025 and June 28, 2024.

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 six months ended July 4, 2025 and June 28, 2024.

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

Three Months Ended October 3, 2025 Nine Months Ended October 3, 2025

Americas EMEA & APAC Total Americas EMEA & APAC Total

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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, 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.

(3) Includes transaction, diligence and integration expenses totaling $6.1 million and $20.4 million for the three and nine months ended October 3, 2025, respectively, and amortization of intangibles and fair value charges on acquired inventories totaling $10.3 million and $27.3 million for the three and nine months ended October 3, 2025, respectively.

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

(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

(5) Net sales wer e $40.4 million and $108.8 million relating to Russia for the three and nine months ended October 3, 2025, respectively .

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

Americas EMEA & APAC Total Americas EMEA & APAC Total

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(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.

(3) Includes transaction, diligence and integration expenses totaling $2.5 million and $3.1 million for the three and nine months ended September 27, 2024, respectively, and amortization of intangibles and fair value charges on acquired inventories totaling $7.6 million and $22.4 million for the three and nine months ended September 27, 2024, respectively.

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

(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.

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

Total Company

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

The following table presents the components of changes in our Net sales for th e three and nine months ended October 3, 2025 compared to the prior year period.

Three Months Ended Nine Months Ended

Net Sales Change % Net Sales Change %

(Dollars in millions) (1)

For the three and six months ended June 28, 2024

For the three and nine months ended September 27, 2024

$ 673.3 $ 2,070.0

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9.8 1.5 % (12.3) (0.6) %

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

For the three and six months ended July 4, 2025

Total Net sales growth 54.6 8.1 % 51.5 2.5 %

For the three and nine months ended October 3, 2025

$ 727.8 $ 2,121.6

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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.

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.

Net sales from existing businesses increased by $11.0 million during the three months ended October 3, 2025, compared to the prior year period, driven by increases in both price and volume.

Additionally, there was an increase in net sales from acquisitions attributable to SUMIG Soluções para Solda e Corte Ltda.

(“SUMIG”), Bavaria Schweisstechnik (“Bavaria”), DeltaP s.r.l.

(“DeltaP”), Aktiv Technologies Private Limited (“Aktiv”) and EWM GmbH (“EWM”).

The changes in foreign exchange rates resulted in a $9.8 million favorable currency translation impact.

Net sales from existing businesses decreased by $5.8 million during the nine months ended October 3, 2025, compared to the prior year period, due to a $28.1 million decrease in sales volume due to drivers such as tariffs in the Americas and lower volumes in Russia partially offset by customer pricing increases of $22.3 million.

The increase in net sales from acquisitions was attributable to Sager S.A., ESAB Bangladesh Private Limited (“ESAB Bangladesh”), SUMIG, Bavaria, DeltaP, Aktiv and EWM.

The changes in foreign exchange rates resulted in a $12.3 million unfavorable currency translation impact.

Sales excluding Russia

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

The following table presents the components of changes in our Net sales excluding Russia (“Core sales”) for the three and nine months ended October 3, 2025 compared to the prior year period.

Three Months Ended Nine Months Ended

Core Sales (5)

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(Dollars in millions) (1)

For the three and six months ended June 28, 2024

For the three and nine months ended September 27, 2024

$ 635.6 $ 1,958.0

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Total Core sales growth 51.8 8.1 % 54.7 2.8 %

For the three and six months ended July 4, 2025

For the three and nine months ended October 3, 2025

$ 687.4 $ 2,012.7

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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 $37.1 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.

(5) Net sales relating to Russia were $40.4 million and $37.7 million for the three months ended October 3, 2025 and September 27, 2024, respectively, and $108.8 million and $112.0 million for the nine months ended October 3, 2025 and September 27, 2024, respectively.

Core sales from existing businesses increased by $12.1 million during the three months ended October 3, 2025, compared to the prior year period, driven by increases in both price and volume.

The increase in net sales from acquisitions was attributable to SUMIG, Bavaria, DeltaP, Aktiv and EWM.

The changes in foreign exchange rates resulted in a $5.9 million favorable currency translation impact.

Core Sales from existing businesses increased by $6.6 million during the nine months ended October 3, 2025, compared to the prior year period, primarily due to customer pricing increases of $20.9 million partially offset by a $14.3 million decrease in sales volume due to drivers such as tariffs in the Americas.

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

The changes in foreign exchange rates resulted in a $21.4 million unfavorable currency translation impact.

Operating Results

The following table summarizes our results for the comparable periods.

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 3, 2025 September 27, 2024 October 3, 2025 September 27, 2024

(Dollars in millions)

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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, 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.

(2) Includes transaction, diligence and integration expenses totaling $6.1 million and $20.4 million for the three and nine months ended October 3, 2025, respectively, and $2.5 million and $3.1 million for the three and nine months ended September 27, 2024, respectively.

Additionally, it includes amortization of intangibles and fair value charges on acquired inventories totaling $10.3 million and $27.3 million for the three and nine months ended October 3, 2025, respectively, and $7.6 million and $22.4 million for the three and nine months ended September 27, 2024, respectively.

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

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.

Third Quarter of 2025 Compared to Third Quarter of 2024

Gross profit increased by $15.5 million in the third quarter of 2025 compared to the prior year period primarily attributable to acquisitions, favorable foreign exchange and price increases partially offset by higher material costs.

The decline of gross profit margin was primarily due to the dilutive effect in the Americas segment, which was caused by customer pricing in response to tariff-related cost increases, leading to margin compression.

Selling, general and administrative expense increased by $12.4 million in the third quarter of 2025 compared to the prior year period primarily due to acquisitions and related transaction costs partially offset by benefits from EBX driven savings.

The effective tax rate of 21.3 % for the quarter ended

October 3, 2025 differed from the effective tax rate of 20.3 % for the same period ended September 27, 2024 due to an agreement with a taxing authority on the treatment of subsidy income in a foreign jurisdiction in 2024.

Net income from continuing operations decreased $5.7 million primarily due to higher Interest expense and other, net mainly driven by a higher Debt balance related to acquisitions.

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.

Adjusted EBITDA increased $12.1 million and related margin expanded 30 basis points compared to the same period in the prior year.

Core adjusted EBITDA increased $8.6 million compared to the same period in the prior year.

Nine Months Ended October 3, 2025 Compared to Nine Months Ended September 27, 2024

Gross profit increased $11.4 million in the nine months ended October 3, 2025 compared to the prior year period primarily attributable to acquisitions, favorable foreign exchange and price increases partially offset by higher material costs, including tariffs, product mix and a decrease in sales volume.

Selling, general and administrative expense increased $20.3 million in the nine months ended October 3, 2025 compared to the prior year period primarily due to acquisitions and related transaction costs partially offset by benefits from EBX driven savings and restructuring initiatives.

The effective tax rate of 21.4% for the nine months ended October 3, 2025 differed from the effective tax rate of 19.9% for the same period ending September 27, 2024 due to 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.

Net income from continuing operations decreased $11.8 million in the nine months ended October 3, 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 a higher Debt balance related to acquisitions 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.

Adjusted EBITDA increased $19.4 million and Adjusted EBITDA margin expanded by 50 basis points in the nine months ended October 3, 2025 compared to the prior year period.

Core adjusted EBITDA increased by $17.7 million compared to the same period in the prior year.

Reportable Segments

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 3, 2025 September 27, 2024 October 3, 2025 September 27, 2024

(Dollars in millions)

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Depreciation and other amortization $ 3.9 $ 3.7 $ 11.7 $ 10.9

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.

Third Quarter of 2025 Compared to Third Quarter of 2024

Net sales in our Americas segment increased $3.9 million in the third quarter of 2025 compared with the prior year period.

Net sales from existing business increased $0.4 million primarily due to pricing increases and new product initiatives partially offset by slightly lower sales volumes.

The acquisition of SUMIG contributed a $7.4 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.

In addition, there was $3.9 million of unfavorable currency translation.

Gross profit decreased by $2.2 million attributable to higher material costs, including tariffs, and product mix partially offset by price increases and accretion from acquisitions.

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

Adjusted EBITDA decreased $2.1 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.

Nine Months Ended October 3, 2025 Compared to Nine Months Ended September 27, 2024

Net sales in our Americas segment decreased $38.5 million in the nine months ended October 3, 2025 compared with the prior year period.

Net sales from existing business decreased $29.1 million due to reduced sales volumes primarily driven by tariffs and related impacts partially offset by pricing increases.

In addition, there was $34.6 million in unfavorable currency translation.

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and SUMIG acquisitions contributed a $25.2 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.

Gross profit decreased $14.9 million attributable to higher material costs, including tariffs, and decreases in sales volume partially offset by acquisitions and price increases.

Selling, general and administrative expense increased $3.4 million compared with the prior year period primarily due to acquisitions partially offset by benefits from EBX driven savings.

Adjusted EBITDA decreased $9.7 million compared to 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 Six Months Ended

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

Three Months Ended Nine Months Ended

October 3, 2025 September 27, 2024 October 3, 2025 September 27, 2024

(Dollars in millions)

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Adjusted EBITDA attributable to Russia (non-GAAP) $ 6.1 $ 2.6 $ 17.1 $ 15.5

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.

Third Quarter of 2025 Compared to Third Quarter of 2024

Net sales in our EMEA & APAC segment increased $50.7 million in the third quarter of 2025 compared with the prior year period.

Net sales from existing business increased $10.6 million primarily resulting from increases in sales volume.

Furthermore, the Bavaria, DeltaP, Aktiv and EWM acquisitions contributed $26.4 million to Net sales from acquisitions and there was a $13.7 million favorable foreign currency impact.

Gross profit increased by $17.7 million in the third quarter of 2025 compared with the prior year period primarily due to acquisitions, increased sales volumes and foreign currency translation impacts partially offset by pricing decreases.

Selling, general and administrative expense increased $11.2 million in the third quarter of 2025 compared with the prior year period largely due to acquisitions and related transaction costs.

Adjusted EBITDA

increased $14.1 million and related margin expanded by 120 basis points and Core adjusted EBITDA increased to $76.1 million and the related margin expanded by 40 basis points in the third quarter of 2025 compared with the prior year period primarily because of the aforementioned factors.

Nine Months Ended October 3, 2025 Compared to Nine Months Ended September 27, 2024

Net sales in our EMEA & APAC segment increased $90.0 million in the nine months ended October 3, 2025 compared with the prior year period.

Net sales from existing business increased $23.3 million primarily resulting from increases in sales volume.

Furthermore, the ESAB Bangladesh, Bavaria, DeltaP, Aktiv and EWM acquisitions contributed $44.3 million to Net sales from acquisitions and there was a $22.4 million in favorable foreign currency impact.

Gross profit increased $26.4 million in the nine months ended October 3, 2025 compared with the prior year period due to acquisitions, favorable foreign exchange impact and increased sales volumes partially offset by lower pricing.

Selling, general and administrative expense increased $16.9 million in the nine months ended October 3, 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 $29.0 million and Adjusted EBITDA margin expanded 90 basis points and Core adjusted EBITDA increased to $231.2 million and Core adjusted EBITDA margin expanded 80 basis points in the nine months ended October 3, 2025 compared with the prior year period primarily because of the aforementioned factors.

Liquidity and Capital Resources

We expect to finance our working capital requirements through cash flows from operating activities.

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

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

As of October 3, 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 5.55%, 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.

As of the end of the third quarter, we had the capacity for additional indebtedness of up to $490 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.

Refer to Note 10, “Debt” and Note 11, “Derivatives” in the accompanying Notes contained elsewhere in this Form 10-Q for more information related to the Facilities and derivative instruments.

After the quarter ended October 3, 2025, on October 16, 2025, the Company entered into an Amended and Restated Credit Agreement that, among other things, provides for (i) a senior term loan A facility in an aggregate principal amount of $350 million, and (ii) a senior revolving credit facility in the amount of $1.05 billion to replace the Company’s existing $400 million Term Loan A-1 Facility and $750 million Revolving Facility and pay off the outstanding principal and interest thereunder.

Both facilities mature on October 16, 2030, subject to a springing maturity date under certain circumstances.

Refer to Note 10, “Debt,” “Note 16, Subsequent Events” and “Note 11, “Derivatives” in the accompanying Notes contained elsewhere in this Form 10-Q for more information related to the Facilities and derivative instruments.

We believe that we could raise additional funds in the form of debt or equity if it were determined to be appropriate for strategic acquisitions or other corporate purposes.

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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 six months ended July 4, 2025.

No repurchases of the Company’s Common stock have been made through the nine months ended October 3, 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 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.

As of October 3, 2025, we had $218.2 million of Cash and cash equivalents, a decrease of $31.1 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:

Six Months Ended

July 4, 2025 June 28, 2024

Nine Months Ended

October 3, 2025 September 27, 2024

(Dollars in millions) (1)

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Other financing (13.0) (5.1)

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

Net cash provided by financing activities 227.3 40.6

Effect of foreign exchange rates on Cash and cash equivalents 40.1 (3.2)

Increase in Cash and cash equivalents $ 8.9 $ 126.5

(Decrease) increase in Cash and cash equivalents $ (31.1) $ 151.7

(1) Numbers may not sum due to rounding.

1 unchanged sentence

Changes in significant operating cash flow items are discussed below.

• 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.

• Operating cash flow for the nine months ended October 3, 2025 decreased compared to the prior year period due to higher purchases of inventory in advance of tariff, higher interest expenses and transaction costs associated with acquisition activity.

• Discontinued operations for the nine months ended October 3, 2025 and September 27, 2024 included outflows of $10.8 million and $12.1 million, respectively, which were primarily asbestos-related.

• Restructuring initiative payments were $8.8 million and $8.3 million for the nine months ended October 3, 2025 and September 27, 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 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 flows used in investing activities during the nine months ended October 3, 2025 primarily comprise approximately $440 million of cash used for the acquisitions of Bavaria, DeltaP, Aktiv and EWM and during the nine months ended September 27, 2024 included approximately $87 million of cash used for the acquisition of Sager S.A.

and ESAB Bangladesh.

Our Cash and cash equivalents as of October 3, 2025 included $211.5 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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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