ESAB Corporation
10/29/2025 | Press release | Distributed by Public on 10/29/2025 04:33
Quarterly Report for Quarter Ending October 3, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
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. Item 1. "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. Our actual results, outcomes or the timing of results or outcomes could differ materially from those discussed in the forward-looking statements.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements contained in this Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the Securities and Exchange Commission (the "SEC"). Statements that could be deemed to be forward-looking statements, include statements regarding: 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; plans, strategies and objectives of our management for future operations, including statements relating to potential acquisitions, compensation plans or purchase commitments; developments, performance, industry or market rankings relating to products or services; 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; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statement that addresses activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be, but are not always, characterized by terminology such as "believe," "anticipate," "should," "would," "could," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy," "targets," "aims," "seeks," "sees" or similar expressions. These statements are based on assumptions and assessments made by our management as of the filing date of this Form 10-Q in light of their experience and perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. 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 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 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;
•our ability to identify, finance, acquire and successfully integrate attractive acquisition targets;
•our exposure to unanticipated liabilities resulting from acquisitions;
•significant movements in foreign currency exchange rates or inflation rates;
•the impact of natural or man-made disasters, adverse or extreme weather events or conditions, epidemics, pandemics and other global health events;
•our ability and the ability of our customers to access required capital at a reasonable cost;
•our ability to accurately estimate the cost of or realize savings from our restructuring programs;
•the amountof, and our ability to estimate and manage, our asbestos-related liabilities;
•the solvency of our insurers and the likelihood of their payment for asbestos-related costs;
•material disruptions at any of our manufacturing facilities;
•noncompliance with various laws and regulations associated with our international operations, including anti-bribery laws, export control regulations and sanctions and embargoes;
•risks associated with our international operations, including risks from trade protection measures and other changes in trade relations;
•risks associated with the representation of our employees by trade unions and works councils;
•our exposure to product liability claims;
•potential costs and liabilities associated with environmental, health and safety laws and regulations;
•failure to maintain, protect and defend our intellectual property rights;
•our ability to attract and retain our employees, including the loss of key members of our leadership team;
•restrictions in our financing arrangements that may limit our flexibility in operating our business;
•impairment in the value of intangible assets;
•the funding requirements or obligations of our defined benefit pension plans and other postretirement benefit plans;
•new regulations and customer preferences reflecting an increased focus on environmental, social and governance issues, including regulations related to climate change and the use of conflict minerals;
•service interruptions, data corruption, cyber-based attacks or network security breaches affecting our electronic information systems;
•risks arising from changes in technology;
•the competitive environment in our industries;
•changes in our tax rates, realizability of deferred tax assets or exposure to additional income tax liabilities;
•our ability to manage and grow our business and execution of our business and growth strategies;
•the level of capital investment and expenditures by our customers in our strategic markets;
•our financial performance;
•difficulties and delays in integrating or fully realizing projected cost savings and benefits of our acquisitions; and
•other risks and factors set forth under "Risk Factors" in Part I. Item 1A. in our 2024 Form 10-K and in Part II. Item 1A in our Form 10-Q for the quarterly period ended April 4, 2025 (the "2025 Q1 Form 10-Q").
See Part I. Item 1.A. "Risk Factors" in our 2024 Form 10-K and in Part II. 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. 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.
Overview
Please see Part I. Item 1. "Business" in our 2024Form 10-K, for a discussion of ESAB's objectives and methodologies for delivering stockholder value.
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 imagineTM. We conduct our operations through two reportable segments. These segments consist of the "Americas," which includes operations in North America and South America, and "EMEA & APAC," which includes Europe, Middle East, India, Africa and Asia Pacific. We serve a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. Our customer base is highly diversified in the industrial end markets.
Outlook
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 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. Instead, our individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and outlook for the future.
We expect strategic acquisitions to contribute to our growth. 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 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.
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 countries 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, 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
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. Item 1.A. "Risk Factors" in our 2024 Form 10-K and in Part II. 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 and nine months ended October 3, 2025 and September 27, 2024.
Results of Operations
The following discussion of our Results of Operations addresses the comparison of the periods presented. Our management evaluates the operating results of each of its reportable segments based upon Net sales, Adjusted EBITDA and Core adjusted EBITDA as defined in the "Non-GAAP Measures" section.
Items Affecting Comparability of Reported Results
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
The invasion of Ukraine by Russia and the sanctions and other actions taken by governments in response to this crisis have increased the level of economic and political uncertainty. 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. Item 1.A. "Risk Factors" section of the 2024 Form 10-K, as updated by our 2025 Q1 Form 10-Q, for additional information.
Tariffs
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. Item 1A. Risk Factors" section in our 2025 Q1 Form 10-Q.
Acquisitions
We complement our organic growth with acquisitions and other investments. Acquisitions can affect our reported results, and we report the change in our Net sales between periods both from existing and acquired businesses. 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, 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. Dollar. 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. Dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant.
For the three months ended October 3, 2025compared to the three months ended September 27, 2024, fluctuations in foreign currencies increased Net sales by 1.5%, Gross profit by 1.6% and Selling, general and administrative expenses by 2.1%.
For the nine months ended October 3, 2025compared to the nine months ended September 27, 2024, fluctuations in foreign currencies reduced Net sales by 0.6% and Gross profit by 0.2% and increased Selling, general and administrative expenses by 0.2%.
Seasonality
Our European operations typically experience a slowdown during the July and August vacation seasons.
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP performance measure that we include in this Form 10-Q because it is a key metric used by our management to assess our operating performance. 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 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 nine months ended October 3, 2025 and September 27, 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. Management also believes that presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with the accounting principles generally accepted in the United States ("U.S. GAAP"). Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable U.S. 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 October 3, 2025 and September 27, 2024.
| Three Months Ended October 3, 2025 | Nine Months Ended October 3, 2025 | ||||||||||||||||||||||||||||||||||
| Americas | EMEA & APAC | Total | Americas | EMEA & APAC | Total | ||||||||||||||||||||||||||||||
|
(Dollars in millions)(1)
|
|||||||||||||||||||||||||||||||||||
| Net income from continuing operations (GAAP) | $ | 65.3 | $ | 207.7 | |||||||||||||||||||||||||||||||
| Income tax expense | 17.7 | 56.5 | |||||||||||||||||||||||||||||||||
| Interest expense and other, net | 23.6 | 61.4 | |||||||||||||||||||||||||||||||||
|
Operating income (GAAP)(1)
|
$ | 45.3 | $ | 61.3 | $ | 106.6 | $ | 131.0 | $ | 194.6 | $ | 325.6 | |||||||||||||||||||||||
| Adjusted to add: | |||||||||||||||||||||||||||||||||||
|
Restructuring and other related charges(2)
|
2.2 | 2.1 | 4.3 | 4.4 | 5.8 | 10.2 | |||||||||||||||||||||||||||||
|
Acquisition-amortization and other related charges(3)
|
5.8 | 10.7 | 16.5 | 21.5 | 26.2 | 47.7 | |||||||||||||||||||||||||||||
| Depreciation and other amortization | 3.9 | 8.1 | 12.0 | 11.7 | 21.8 | 33.4 | |||||||||||||||||||||||||||||
|
Adjusted EBITDA (non-GAAP)(1)
|
57.3 | 82.2 | 139.5 | 168.5 | 248.4 | 416.9 | |||||||||||||||||||||||||||||
|
Adjusted EBITDA attributable to Russia (non-GAAP)(4)
|
- | 6.1 | 6.1 | - | 17.1 | 17.1 | |||||||||||||||||||||||||||||
|
Core adjusted EBITDA (non-GAAP)(1)
|
$ | 57.3 | $ | 76.1 | $ | 133.4 | $ | 168.5 | $ | 231.2 | $ | 399.8 | |||||||||||||||||||||||
| Adjusted EBITDA margin (non-GAAP) | 19.6 | % | 18.9 | % | 19.2 | % | 19.7 | % | 19.6 | % | 19.7 | % | |||||||||||||||||||||||
|
Core adjusted EBITDA margin (non-GAAP)(5)
|
19.6 | % | 19.3 | % | 19.4 | % | 19.7 | % | 20.0 | % | 19.9 | % | |||||||||||||||||||||||
(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, 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 $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 were $40.4 millionand $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 | ||||||||||||||||||||||||||||||
|
(Dollars in millions)(1)
|
|||||||||||||||||||||||||||||||||||
| Net income from continuing operations (GAAP) | $ | 71.0 | $ | 219.5 | |||||||||||||||||||||||||||||||
| Income tax expense | 18.1 | 54.5 | |||||||||||||||||||||||||||||||||
| Interest expense and other, net | 16.9 | 49.9 | |||||||||||||||||||||||||||||||||
| Pension settlement loss | - | 12.2 | |||||||||||||||||||||||||||||||||
| Operating income (GAAP) | $ | 49.9 | $ | 56.1 | $ | 106.0 | $ | 151.8 | $ | 184.3 | $ | 336.0 | |||||||||||||||||||||||
| Adjusted to add: | |||||||||||||||||||||||||||||||||||
|
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 | 10.1 | 13.5 | 12.1 | 25.6 | |||||||||||||||||||||||||||||
| Depreciation and other amortization | 3.7 | 5.7 | 9.5 | 10.9 | 16.5 | 27.4 | |||||||||||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | 59.4 | 68.1 | 127.4 | 178.2 | 219.4 | 397.5 | |||||||||||||||||||||||||||||
|
Adjusted EBITDA attributable to Russia (non-GAAP)(4)
|
- | 2.6 | 2.6 | - | 15.5 | 15.5 | |||||||||||||||||||||||||||||
| Core adjusted EBITDA (non-GAAP) | $ | 59.4 | $ | 65.5 | $ | 124.8 | $ | 178.2 | $ | 203.9 | $ | 382.1 | |||||||||||||||||||||||
| Adjusted EBITDA margin (non-GAAP) | 20.6 | % | 17.7 | % | 18.9 | % | 19.9 | % | 18.7 | % | 19.2 | % | |||||||||||||||||||||||
|
Core adjusted EBITDA margin (non-GAAP)(5)
|
20.6 | % | 18.9 | % | 19.6 | % | 19.9 | % | 19.2 | % | 19.5 | % | |||||||||||||||||||||||
(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, 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 $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 $37.7 million and $112.0 million relating to Russia for the three and nine months ended September 27, 2024, respectively.
Total Company
Sales
The following table presents the components of changes in our Net sales for the 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 nine months ended September 27, 2024
|
$ | 673.3 | $ | 2,070.0 | |||||||||||||||||||
| Components of Change: | |||||||||||||||||||||||
|
Existing businesses (organic sales)(2)
|
11.0 | 1.6 | % | (5.8) | (0.3) | % | |||||||||||||||||
|
Acquisitions(3)
|
33.8 | 5.0 | % | 69.5 | 3.4 | % | |||||||||||||||||
|
Foreign currency translation(4)
|
9.8 | 1.5 | % | (12.3) | (0.6) | % | |||||||||||||||||
| 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 | |||||||||||||||||||
(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 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 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 nine months ended October 3, 2025 compared to the prior year period.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
Core Sales(5)
|
Change % |
Core Sales(5)
|
Change % | ||||||||||||||||||||
|
(Dollars in millions)(1)
|
|||||||||||||||||||||||
|
For the three and nine months ended September 27, 2024
|
$ | 635.6 | $ | 1,958.0 | |||||||||||||||||||
| Components of Change: | |||||||||||||||||||||||
|
Existing businesses (core organic sales)(2)
|
12.1 | 1.9 | % | 6.6 | 0.3 | % | |||||||||||||||||
|
Acquisitions(3)
|
33.8 | 5.3 | % | 69.5 | 3.6 | % | |||||||||||||||||
|
Foreign currency translation(4)
|
5.9 | 0.9 | % | (21.4) | (1.1) | % | |||||||||||||||||
| Total Core sales growth | 51.8 | 8.1 | % | 54.7 | 2.8 | % | |||||||||||||||||
|
For the three and nine months ended October 3, 2025
|
$ | 687.4 | $ | 2,012.7 | |||||||||||||||||||
(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 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.
(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 | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2025 | September 27, 2024 | October 3, 2025 | September 27, 2024 | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Gross profit | $ | 269.3 | $ | 253.8 | $ | 790.5 | $ | 779.1 | |||||||||||||||
| Gross profit margin | 37.0 | % | 37.7 | % | 37.3 | % | 37.6 | % | |||||||||||||||
| Selling, general and administrative expense | $ | 158.3 | $ | 145.9 | $ | 454.8 | $ | 434.5 | |||||||||||||||
| Net income from continuing operations | $ | 65.3 | $ | 71.0 | $ | 207.7 | $ | 219.5 | |||||||||||||||
| Net income margin from continuing operations | 9.0 | % | 10.6 | % | 9.8 | % | 10.6 | % | |||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 139.5 | $ | 127.4 | $ | 416.9 | $ | 397.5 | |||||||||||||||
| Adjusted EBITDA margin (non-GAAP) | 19.2 | % | 18.9 | % | 19.7 | % | 19.2 | % | |||||||||||||||
| Core adjusted EBITDA (non-GAAP) | $ | 133.4 | $ | 124.8 | $ | 399.8 | $ | 382.1 | |||||||||||||||
| Core adjusted EBITDA margin (non-GAAP) | 19.4 | % | 19.6 | % | 19.9 | % | 19.5 | % | |||||||||||||||
| Items excluded from Adjusted EBITDA: | |||||||||||||||||||||||
|
Restructuring and other related charges(1)
|
$ | 4.3 | $ | 1.9 | $ | 10.2 | $ | 8.6 | |||||||||||||||
|
Acquisition-amortization and other related charges(2)
|
16.5 | 10.1 | 47.7 | 25.6 | |||||||||||||||||||
| Interest expense and other, net | 23.6 | 16.9 | 61.4 | 49.9 | |||||||||||||||||||
| Income tax expense | 17.7 | 18.1 | 56.5 | 54.5 | |||||||||||||||||||
| Pension settlement loss | - | - | - | 12.2 | |||||||||||||||||||
| Depreciation and other amortization | 12.0 | 9.5 | 33.4 | 27.4 | |||||||||||||||||||
| Items excluded from Core adjusted EBITDA: | |||||||||||||||||||||||
|
Adjusted EBITDA attributable to Russia (non-GAAP)(3)
|
$ | 6.1 | $ | 2.6 | $ | 17.1 | $ | 15.5 | |||||||||||||||
(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, 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.
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 $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. 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 $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 $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
We report results in two reportable segments: Americas and EMEA & APAC.
Americas
The following table summarizes selected financial data for our Americas segment:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2025 | September 27, 2024 | October 3, 2025 | September 27, 2024 | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Net sales | $ | 292.7 | $ | 288.8 | $ | 856.1 | $ | 894.6 | |||||||||||||||
| Gross profit | $ | 112.2 | $ | 114.4 | $ | 333.4 | $ | 348.3 | |||||||||||||||
| Gross profit margin | 38.3 | % | 39.6 | % | 38.9 | % | 38.9 | % | |||||||||||||||
| Selling, general and administrative expense | $ | 64.6 | $ | 63.2 | $ | 198.0 | $ | 194.6 | |||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 57.3 | $ | 59.4 | $ | 168.5 | $ | 178.2 | |||||||||||||||
| Adjusted EBITDA margin (non-GAAP) | 19.6 | % | 20.6 | % | 19.7 | % | 19.9 | % | |||||||||||||||
| Items excluded from Adjusted EBITDA: | |||||||||||||||||||||||
| Restructuring and other related charges | $ | 2.2 | $ | 0.9 | $ | 4.4 | $ | 2.0 | |||||||||||||||
| Acquisition - amortization and other related charges | 5.8 | 4.8 | 21.5 | 13.5 | |||||||||||||||||||
| Depreciation and other amortization | $ | 3.9 | $ | 3.7 | $ | 11.7 | $ | 10.9 | |||||||||||||||
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. 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. 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 remained relatively consistent compared with the prior year. Adjusted EBITDA decreased $2.1 million primarily due to the aforementioned factors.
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. The Sager S.A. and SUMIG acquisitions contributed a $25.2 million increase to Net sales from acquisitions. 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.
EMEA & APAC
The following table summarizes the selected financial data for our EMEA & APAC segment:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2025 | September 27, 2024 | October 3, 2025 | September 27, 2024 | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Net sales | $ | 435.1 | $ | 384.4 | $ | 1,265.4 | $ | 1,175.4 | |||||||||||||||
| Gross profit | $ | 157.1 | $ | 139.4 | $ | 457.2 | $ | 430.8 | |||||||||||||||
| Gross profit margin | 36.1 | % | 36.3 | % | 36.1 | % | 36.7 | % | |||||||||||||||
| Selling, general and administrative expense | $ | 93.8 | $ | 82.6 | $ | 256.8 | $ | 239.9 | |||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 82.2 | $ | 68.1 | $ | 248.4 | $ | 219.4 | |||||||||||||||
| Adjusted EBITDA margin (non-GAAP) | 18.9 | % | 17.7 | % | 19.6 | % | 18.7 | % | |||||||||||||||
| Core adjusted EBITDA (non-GAAP) | $ | 76.1 | $ | 65.5 | $ | 231.2 | $ | 203.9 | |||||||||||||||
| Core adjusted EBITDA margin (non-GAAP) | 19.3 | % | 18.9 | % | 20.0 | % | 19.2 | % | |||||||||||||||
| Items excluded from Adjusted EBITDA: | |||||||||||||||||||||||
| Restructuring and other related charges | $ | 2.1 | $ | 1.0 | $ | 5.8 | $ | 6.6 | |||||||||||||||
| Acquisition - amortization and other related charges | 10.7 | 5.2 | 26.2 | 12.1 | |||||||||||||||||||
| Pension settlement loss | - | - | - | 12.2 | |||||||||||||||||||
| Depreciation and other amortization | 8.1 | 5.7 | 21.8 | 16.5 | |||||||||||||||||||
| Items excluded from Core adjusted EBITDA: | |||||||||||||||||||||||
| Adjusted EBITDA attributable to Russia (non-GAAP) | $ | 6.1 | $ | 2.6 | $ | 17.1 | $ | 15.5 | |||||||||||||||
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
Overview
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, 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 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. 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. We believe that our sources of liquidity between debt and cash flows from operating activities are adequate to fund our operations for the next twelve months and thereafter.
Stock Repurchase Program
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 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.
Cash Flows
As of October 3, 2025, we had $218.2 million of Cash and cash equivalents, a decreaseof $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:
| Nine Months Ended | |||||||||||
| October 3, 2025 | September 27, 2024 | ||||||||||
|
(Dollars in millions)(1)
|
|||||||||||
| Net cash provided by operating activities | $ | 163.5 | $ | 228.5 | |||||||
| Purchases of property, plant and equipment | (27.7) | (27.1) | |||||||||
| Proceeds from sale of property, plant and equipment | 4.7 | 3.5 | |||||||||
| Acquisitions, net of cash received | (439.7) | (86.5) | |||||||||
| Other investing | 0.5 | (4.1) | |||||||||
| Net cash used in investing activities | (462.1) | (114.2) | |||||||||
| Proceeds from borrowings on Senior Notes | - | 700.0 | |||||||||
| Proceeds from borrowings on revolving credit facilities and other | 359.6 | 205.0 | |||||||||
| Repayments of borrowings on Term Loans | (10.0) | (597.5) | |||||||||
| Repayments of borrowings on revolving credit facilities and other | (90.4) | (236.6) | |||||||||
| Payment of debt issuance costs | - | (10.4) | |||||||||
| Payment of dividends | (15.8) | (12.1) | |||||||||
| Distributions to noncontrolling interest holders | (3.1) | (2.6) | |||||||||
| Other financing | (13.0) | (5.1) | |||||||||
| Net cash provided by financing activities | 227.3 | 40.6 | |||||||||
| Effect of foreign exchange rates on Cash and cash equivalents | 40.1 | (3.2) | |||||||||
| (Decrease) increase in Cash and cash equivalents | $ | (31.1) | $ | 151.7 | |||||||
(1) Numbers may not sum due to rounding.
Cash flows from operating activities can fluctuate significantly from period to period due to changes in working capital and the timing of payments for items such as pension funding, asbestos-related costs and restructuring program funding. Changes in significant operating cash flow items are discussed below.
•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 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.
Critical Accounting Policies and Estimates
The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. 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.
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.
ESAB Corporation published this content on October 29, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 29, 2025 at 10:33 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]