Q1 2022 ESAB Corp Earnings Call

May 10, 2022

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Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on music hold, and we thank you for your patience. Good morning, ladies and gentlemen. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the ESAB Corporation Q1 2022 Earnings Conference Call. Today's conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again. Thank you.

Ladies and gentlemen, thank you for standing by today's conference call will begin momentarily until that time your lines will again be placed on music hold and we thank you for your patience.

Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on music hold, and we thank you for your patience.

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Good morning, ladies and gentlemen. My name is Abby and I will be your conference operator today.

Good morning, Ladies and gentlemen, my name is Abby and I will be your conference operator today.

At this time, I would like to welcome everyone to the ESOP Corporation first quarter 2022 earnings conference call.

At this time I would like to welcome everyone to the <unk> Corporation first quarter 2022 earnings conference call.

Today's conference is being recorded, and all lines have been placed on mute to prevent any background noise.

Today's conference is being recorded and all lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Sarky followed by the number one on your telephone keypad.

Operator: At this time, I would like to turn the conference over to Mark Barbalato, Vice President of Investor Relations. Mr. Barbalato, you may begin your conference.

If you would like to withdraw your question Press Star one once again.

Thank you. And at this time, I would like to turn the conference over to Mark Barbaralato, Vice President of Investor Relations. Mr. Barbaralato, you may begin your conference.

Thank you and at this time I would like to turn the conference over to Mark Barbara Lotto, Vice President of Investor Relations. Mr. Barbara Lotto, you May begin your conference.

Mark Barbalato: Thanks, operator. Welcome to ESAB's Q1 2022 Earnings Call. This morning, I'm joined by our President and CEO, Shyam Kambeyanda, and CFO, Kevin Johnson. Please keep in mind that some of the statements we are making are forward-looking and are subject to risks, including those set forth in our SEC filings and today's earnings release. Actual results might differ, and we do not assume any obligation or intend to update these forward-looking statements, except as required by law. With respect to any non-GAAP financial measures made during the call today, the company reconciliation information relating to those measures can be found in our earnings press release in today's slide presentation. With that, I'd like to turn the call over to our President and CEO, Shyam Kambeyanda.

Yeah.

Thanks, Operator, welcome to <unk> first quarter 2022 earnings call.

Thanks, operator. Welcome to ESOP's first quarter 2022 earnings call. This morning, I'm joined by our President and CEO , Shyam Kamayanda, and CFO , Kevin Johnson.

Morning, I'm joined by our President and CEO and.

CFO Kevin Johnson.

Please keep in mind that some of the statements we are making are forward-looking and are subject to risks, including those set forth in our SEC filing and today's earnings release. Actual results might differ, and we do not assume any obligation or intend to update these forward-looking statements, except as required by law.

Please keep in mind that some of the statements. We're making are forward looking and are subject to risks, including those set forth in our SEC filings and today's earnings release actual results may differ and we do not assume any obligation.

Legations or intend to update these forward looking statements.

As required by law.

With respect to any non-GAAP financial measures made during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and today's slide presentation.

With respect to any non-GAAP financial measures made during the call today. The company reconciliation information relating to those measures can be found in our earnings press release and today's slide presentation.

With that, I'd like to turn the call over to our president and CEO , Sean Ambriante.

Shyam P. Kambeyanda: Thank you, Mark, and good morning, everyone. Thank you for joining us today. Let me start by reminiscing a bit. 5 April 2022 was a fantastic day for ESAB. Being listed on the New York Stock Exchange was a source of profound pride for all of our global associates. Over the last 5 years, we've made solid progress and have confidence in our strategic direction moving forward. As a team, we're focused on taking our ESAB business system, that we call EBX, up a notch to continue to drive innovation, growth, margin expansion, better cash flow, and breakthrough strategies to deliver long-term shareholder value. Turning to slide 3. I'm pleased to report another quarter of strong results. We extended our outperformance on volume growth and improved our margins year over year.

Shyam Kambeyanda: Thank you, Mark, and good morning, everyone. Thank you for joining us today. Let me start by reminiscing a bit. 5 April 2022 was a fantastic day for ESAB. Being listed on the New York Stock Exchange was a source of profound pride for all of our global associates. Over the last 5 years, we've made solid progress and have confidence in our strategic direction moving forward. As a team, we're focused on taking our ESAB business system, that we call EBX, up a notch to continue to drive innovation, growth, margin expansion, better cash flow, and breakthrough strategies to deliver long-term shareholder value. Turning to slide 3. I'm pleased to report another quarter of strong results. We extended our outperformance on volume growth and improved our margins year over year.

With that I'd like to turn the call over to our President and CEO Sean.

Yeah.

Thank you, Mark. And good morning, everyone. Thank you for joining us today. Let me start by reminiscing a bit. April 5th was a fantastic day for ETHOP. Being listed on the New York Stock Exchange was a source of profound pride for all of our global associates. Over the last five years, we've made solid progress and have confidence in our strategic direction moving forward.

Thank you Mark and good morning, everyone. Thank you for joining US today, let me start by Reminiscing of Bad April 5th was a fantastic day for Aesop being listed on the New York Stock Exchange was a source of profound price for all of our global associates over the last five years, we have made solid progress.

Confidence in our strategic direction moving forward.

As a team, we're focused on taking our ESOP business system that we call EBX up a notch to continue to drive innovation, growth, margin expansion, better cash flow, and breakthrough strategies to deliver long-term shareholder value.

As a team we're focused on taking on Aesop business system that we call <unk>.

We're continuing to drive innovation growth margin expansion, better cash flow and breakthrough strategies to deliver long term shareholder value.

Turning to slide three, I'm pleased to report another quarter of strong results. We extended our outperformance on volume growth and improved our margins year over year. I'm very proud of our team's focus and determination as we successfully navigated headwinds due to COVID restrictions in China and the war in Ukraine.

Turning to slide three.

I am pleased to report another quarter of strong results, we extended our outperformance on volume growth and improved our margins year over year.

Shyam P. Kambeyanda: I'm very proud of our team's focus and determination as we successfully navigated headwinds due to COVID restrictions in China and the war in Ukraine. In terms of financials, in the first quarter, we delivered a record of $648 million in sales, 18% year-over-year organic growth, which reflected strong price realization and a broad-based demand for our innovative solutions. EBITDA climbed to $109 million, a 16% increase year over year. Our margins expanded 30 basis points to 16.9%. We continue to introduce exciting new products, and as I mentioned before, we've taken our EBS efforts up a notch, and I will share more on both these topics in the next 2 slides. Now, moving to slide 4. We launched 28 new products in Q1 and continued to prioritize investment in R&D.

Shyam Kambeyanda: I'm very proud of our team's focus and determination as we successfully navigated headwinds due to COVID restrictions in China and the war in Ukraine. In terms of financials, in the first quarter, we delivered a record of $648 million in sales, 18% year-over-year organic growth, which reflected strong price realization and a broad-based demand for our innovative solutions. EBITDA climbed to $109 million, a 16% increase year over year. Our margins expanded 30 basis points to 16.9%. We continue to introduce exciting new products, and as I mentioned before, we've taken our EBS efforts up a notch, and I will share more on both these topics in the next 2 slides. Now, moving to slide 4. We launched 28 new products in Q1 and continued to prioritize investment in R&D.

I'm very proud of our team's focus and determination as we successfully navigated headwinds due to COVID-19 restrictions in China and the war in Ukraine.

In terms of financials, in the first quarter, we delivered a record of $648 million in sales, 18% year-over-year organic growth, which reflected strong price realization and a broad-based demand for innovative solutions.

In terms of financials in the first quarter, we delivered a record of $648 million in sales, 18% year over year organic growth, which reflected strong price realization and a broad based demand for innovative solutions.

EBITDA climbed to $109 million, a 16% increase year-over-year. Our margins expanded 30 basis points to 16.9%.

EBITDA climbed to $109 million, a 16% increase year over year, our margins expanded 30 basis points to 16, 9%.

We continue to introduce exciting new products. And as I mentioned before, we've taken our EBS efforts up a notch. And I will share more on both these topics in the next two slides.

We continue to introduce exciting new products and as I've mentioned before we've taken our EPS FX.

<unk> and I will share more on both these topics in the next two slides.

Now, moving to slide four, we launched 28 new products in Q1 and continue to prioritize investment in R&D. Our open innovation process has allowed ESOP to accelerate the pace of innovation. For the full year, we're on target to launch approximately 110 new products.

Now moving to slide four.

Shyam P. Kambeyanda: Our open innovation process has allowed ESAB to accelerate the pace of innovation. For the full year, we're on target to launch approximately 110 new products. Let me take a bit of time to highlight some of them. RobustFeed. This is an award-winning feeder that is used in heavy industrial applications. During the quarter, we redesigned the unit so that it can connect to any power source, helping us expand the market for this product. The Fabricator has new and upgraded technology that simplifies our product line and provides a competitive offering to our customers. I've mentioned product line rationalization in the past. This accelerates our efforts to rationalize our SKUs and improve margins going forward. Our gas control business also launched some exciting new products in the first quarter: the Druwa Pure High Purity and Medivital.

Shyam Kambeyanda: Our open innovation process has allowed ESAB to accelerate the pace of innovation. For the full year, we're on target to launch approximately 110 new products. Let me take a bit of time to highlight some of them. RobustFeed. This is an award-winning feeder that is used in heavy industrial applications. During the quarter, we redesigned the unit so that it can connect to any power source, helping us expand the market for this product. The Fabricator has new and upgraded technology that simplifies our product line and provides a competitive offering to our customers. I've mentioned product line rationalization in the past. This accelerates our efforts to rationalize our SKUs and improve margins going forward. Our gas control business also launched some exciting new products in the first quarter: the Druwa Pure High Purity and Medivital.

We launched 28, new products in Q1 and continue to prioritize investment in R&D. Our open innovation process has allowed <unk> to accelerate the pace of innovation for the full year, we're on target to launch approximately 110 new products.

Let me take a bit of time to highlight some of them. Robots feed. This is an award-winning feeder that is used in heavy industrial applications. During the quarter, we redesigned the unit so that it can connect to any power source, helping us expand the market for this product.

If you take a bit of time to highlight some of them robustly. This isn't an award winning feature that is used in heavy industrial applications.

During the quarter, we redesigned the units so that it can connect to any power source, helping us expand the market for this product.

The fabricator as new and upgraded technology that simplifies our product line and provides a competitive offering to our customers I've mentioned product line rationalization in the past this accelerates our efforts to rationalize our skus and improve margins going forward.

The fabricator has new and upgraded technology that simplifies our product line and provides a competitive offering to our customers. I've mentioned product line rationalization in the past. This accelerates our efforts to rationalize our SKUs and improve margins going forward.

Our gas control business also launched some exciting new products in the first quarter. The Druva Pure High Purity and Medivital. These are great examples of designing the best-in-class technology and expanding into new geographies.

Our gas control business also lots of exciting new products in the first quarter that drove a pure high priority and many vital.

Shyam P. Kambeyanda: These are great examples of us designing the best-in-class technology and expanding into new geographies. Moving to slide 5. I'm really excited about the next phase of EBX, and I want to share with you some examples of Kaizens we completed in the first quarter. We continue our EBX journey to improve safety and productivity while reducing our footprint. In the first quarter, we completed 10 major Kaizens in North America, which resulted in $3 million in productivity savings. These Kaizens also freed up over 5,000 sq ft of manufacturing and assembly space. The main tenet of our Kaizens is to improve quality, productivity, and safety with minimal capital investment, and that's exactly what we did in the example I'm sharing with you.

Shyam Kambeyanda: These are great examples of us designing the best-in-class technology and expanding into new geographies. Moving to slide 5. I'm really excited about the next phase of EBX, and I want to share with you some examples of Kaizens we completed in the first quarter. We continue our EBX journey to improve safety and productivity while reducing our footprint. In the first quarter, we completed 10 major Kaizens in North America, which resulted in $3 million in productivity savings. These Kaizens also freed up over 5,000 sq ft of manufacturing and assembly space. The main tenet of our Kaizens is to improve quality, productivity, and safety with minimal capital investment, and that's exactly what we did in the example I'm sharing with you.

These are great examples of us designing the best in class technology, and expanding into new geographies.

Moving to slide five, I'm really excited about the next phase of EBX.

Moving to slide five I'm really excited about the next phase of <unk>.

And I want to share with you some examples of Kais as we completed in the first quarter. We continue our EBX journey to improve safety and productivity while reducing our footprint.

And I wanted to share with you. Some examples of guidance we completed in the first quarter, we continue our ebix journey to improve safety and productivity, while reducing our footprint.

In the first quarter, we completed 10 major Kaisers in North America, which resulted in three million in productivity savings. These Kaisers also freed up over 5,000 square feet of manufacturing and assembly space.

In the first quarter, we completed 10 major guys in North America, which resulted in $3 million in productivity savings. These guys has also freed up over 5000 square feet of manufacturing and assembly space.

The main tenet of our Kaisers is to improve quality, productivity, and safety with minimal capital investments, and that's exactly what we did in the example I'm sharing with you. At our Denton facility, one of our key product lines, we increase sales per month by over 40% and improve productivity by 42%, gain manufacturing space, and improve safety. I'll be visiting the Denton facility later this month to celebrate with our team.

The main tenant of our guidance is to improve quality productivity and safety with minimal capital investment and Thats exactly what we did in the example, I'm sharing with you.

Shyam P. Kambeyanda: At our Denton facility, one of our key product lines, we increased sales per month by over 40% and improved productivity by 42%, gained manufacturing space, and improved safety. I'll be visiting the Denton facility later this month to celebrate with our team. Moving to slide 6. Q1 2022 sales rose to a record $648 million, a 14% increase year-over-year, 18% organically. This reflected a volume increase of 4%, a price increase of 14%, and 400 basis points of currency impact. We continue to experience healthy demand across most geographies. A real highlight of this quarter was record equipment sales at ESAB. The regions where we experienced lower sales were Russia, as expected, and China due to COVID lockdowns. Our teams continue to do a fantastic job managing price to offset the impact of inflation.

Shyam Kambeyanda: At our Denton facility, one of our key product lines, we increased sales per month by over 40% and improved productivity by 42%, gained manufacturing space, and improved safety. I'll be visiting the Denton facility later this month to celebrate with our team. Moving to slide 6. Q1 2022 sales rose to a record $648 million, a 14% increase year-over-year, 18% organically. This reflected a volume increase of 4%, a price increase of 14%, and 400 basis points of currency impact. We continue to experience healthy demand across most geographies. A real highlight of this quarter was record equipment sales at ESAB. The regions where we experienced lower sales were Russia, as expected, and China due to COVID lockdowns. Our teams continue to do a fantastic job managing price to offset the impact of inflation.

At our Denton facility, one of our key product lines, we increased sales per month by over 40% and improved productivity by 42% gain.

<unk> manufacturing space and improve safety I'll be visiting the Denton facility later this month to celebrate with our team.

Moving to slide six.

First quarter 2022 sales rose to a record $648 million, a 14% increase year-over-year, 18% organically. This reflected a volume increase of 4%, a price increase of 14, and a 400 basis points of currency impact.

First quarter 2022 sales rose to a record $648 million, a 14% increase year over year, 18% organically. This reflected a volume increase of 4% price increase of 14, and a 400 basis points of currency impact.

We continue to experience healthy demand across most geographies. A real highlight of this quarter was record equipment sales at ESOP.

We continue to experience healthy demand across most geographies a real highlight of this quarter was record equipment sales at Aesop.

The regions where we experienced lower sales were Russia, as expected, and China, due to COVID lockdowns. Our teams continue to do a fantastic job managing price to offset the impact of inflation. With our focus on margin expansion, EBITDA increased to $109 million, up 16 percent, and expanded margins 30 basis points to 16.9, with a strong year-over-year performance from our Americas unit.

The regions, where we experienced lower sales, where Russia as expected in China due to Covid Lockdowns. Our teams continue to do a fantastic job managing price to offset the impact of inflation with our focus on margin expansion EBITDA increased to $109 million up 16% and expanded margins 30 basis points to <unk>.

Shyam P. Kambeyanda: With our focus on margin expansion, EBITDA increased to $109 million, up 16%, and expanded margins 30 basis points to 16.9%, with a strong year-over-year performance from our Americas unit. Moving to slide 7, and talking specifically about our Americas segments. The Americas segments performed well, as sales climbed to $272 million, a 21% growth organically. This reflected increases in volume of 3% and a price of 18%, with a slight currency headwind. We're continuing to make good progress. Our new and improved product offering are driving growth in the channel. EBITDA increased by 32%, margins expanded by 150 basis points, reflecting strong execution as our team successfully managed through inflation and supply chain constraints. Earlier, I shared our lean activities, and I'm very proud of our team and what we are building together.

Shyam Kambeyanda: With our focus on margin expansion, EBITDA increased to $109 million, up 16%, and expanded margins 30 basis points to 16.9%, with a strong year-over-year performance from our Americas unit. Moving to slide 7, and talking specifically about our Americas segments. The Americas segments performed well, as sales climbed to $272 million, a 21% growth organically. This reflected increases in volume of 3% and a price of 18%, with a slight currency headwind. We're continuing to make good progress. Our new and improved product offering are driving growth in the channel. EBITDA increased by 32%, margins expanded by 150 basis points, reflecting strong execution as our team successfully managed through inflation and supply chain constraints. Earlier, I shared our lean activities, and I'm very proud of our team and what we are building together.

$16 nine with a strong year over year performance from our Americas unit.

Moving to slide 7 and talking specifically about our America segment, the America segment performed well as sales climbed to $272 million, a 21% growth organically. This reflected increases in volume of 3% and a price of 18% with a slight currency headwind.

Moving to slide seven and talking specifically about our Americas segments. The Americas segments performed well as say, a 5% to $272 million or 21% growth organically. This reflected increases in volume of 3% and a price of 18% with a slight currency headwind.

We're continuing to make good progress. Our new and improved product offering are driving growth in the channel.

We're continuing to make good progress on new and improved product offering of driving growth in the channel.

EBITDA increased by 32 percent, margins expanded by 150 basis points reflecting strong execution as our team successfully managed through inflation and supply chain constraints.

EBITDA increased by 32% margins expanded by 150 basis points, reflecting strong execution as our team successfully managed through inflation and supply chain constraints.

Shyam P. Kambeyanda: We have lots of exciting new products under development, which will drive future growth and margin expansion, and I'll share more in due time. On to slide eight now, talking about our EMEA and APAC segments. Our EMEA and APAC segments performed well, despite headwinds in the quarter from COVID in China and the war in Ukraine. First quarter sales increased 10% and climbed 16% organically. This reflected a volume increase of 4%, a price of 12%, and 600 basis points of currency headwind. This region also saw record equipment sales. Another highlight in the quarter was the momentum we're building in robotics and WeldCloud solutions, driving growth in both our funnel and order backlog. EBITDA increased 7% in the quarter. EBITDA was 17.4%.

Shyam Kambeyanda: We have lots of exciting new products under development, which will drive future growth and margin expansion, and I'll share more in due time. On to slide eight now, talking about our EMEA and APAC segments. Our EMEA and APAC segments performed well, despite headwinds in the quarter from COVID in China and the war in Ukraine. First quarter sales increased 10% and climbed 16% organically. This reflected a volume increase of 4%, a price of 12%, and 600 basis points of currency headwind. This region also saw record equipment sales. Another highlight in the quarter was the momentum we're building in robotics and WeldCloud solutions, driving growth in both our funnel and order backlog. EBITDA increased 7% in the quarter. EBITDA was 17.4%.

Earlier I shared our lean activities and I'm very proud of our team and what we're building together. We have lots of exciting new products under development, which will drive future growth and margin expansion. And I'll share more in due time.

Earlier, I shared our lean activities and I'm very proud of our team and what we're building together, we have lots of exciting new products under development, which will drive future growth and margin expansion and I'll share more in due time.

On to slide eight now, talking about our EMEA and APAC segment.

Onto slide eight now talking about our EMEA and APAC segments.

Our EMEA and APAC segment performed well, despite headwinds in the quarter from COVID in China and the war in Ukraine. First quarter sales increased 10 percent and climbed 16 percent organically. This reflected a volume increase of 4 percent, a price of 12 and a 600 basis points of currency headwinds.

And APAC segment performed well despite headwinds in the quarter from Covid in China, and the war in Ukraine first quarter sales increased 10% and climbed 16% organically. This reflected a volume increase of 4% a price of 12, and a 600 basis points of currency headwind.

This region also saw record equipment sales. Another highlight in the quarter was the momentum we're building in robotics and well cloud solutions, driving growth in both our funnel and order backlog. EBITDA increased 7% in the quarter. EBITDA was 17.4%. This included approximately 4 million provisions related to Russia, without which margins would have increased 50 basis points year over year.

This region also saw record equipment sales.

As a highlight in the quarter was the momentum we're building in robotics and World class solutions driving growth in both our funnel and order backlog.

Shyam P. Kambeyanda: This included approximately $4 million provision related to Russia, without which margins would have increased 50 basis points year-over-year. I'm very proud of our teams in Europe, Middle East, and Asia during these challenging times. They have performed extraordinarily well and have built great momentum. Moving to slide 9, let me turn it over to Kevin.

Shyam Kambeyanda: This included approximately $4 million provision related to Russia, without which margins would have increased 50 basis points year-over-year. I'm very proud of our teams in Europe, Middle East, and Asia during these challenging times. They have performed extraordinarily well and have built great momentum. Moving to slide 9, let me turn it over to Kevin.

EBITDA increased 7% in the quarter EBITDA was 17, 4%. This included approximately $4 million provision related to Russia, without which margins would have increased 50 basis points year over year.

I'm very proud of our teams in Europe , Middle East and Asia during these challenging times. They have performed extraordinarily well and have built great momentum. Moving to slide nine.

I'm very proud of our teams in Europe Middle East and Asia. During these challenging times, they've performed extraordinarily well and have built great momentum.

Kevin J. Johnson: Thanks, Shyam. On today's call, we are confirming our 2022 guidance. As we discussed at our Investor Day, this guidance has been updated to reflect the impact on our Russian business. In the first quarter, Russia contributed around 6% of sales, as we had expected. In our guidance for the rest of the year, we have removed any further sales and profit from Russia. Our business, excluding Russia, is performing really well, and we continue to expect organic growth of 9% to 12%. We did have some pressure in China in the first quarter, as Shyam mentioned. Sales down approximately 100 basis points due to the recent waves of COVID lockdowns. But our main manufacturing facility in China is now open, and we expect things there to improve in the second quarter. We're still operating in a highly inflationary environment and are closely monitoring this.

Kevin Johnson: Thanks, Shyam. On today's call, we are confirming our 2022 guidance. As we discussed at our Investor Day, this guidance has been updated to reflect the impact on our Russian business. In the first quarter, Russia contributed around 6% of sales, as we had expected. In our guidance for the rest of the year, we have removed any further sales and profit from Russia. Our business, excluding Russia, is performing really well, and we continue to expect organic growth of 9% to 12%. We did have some pressure in China in the first quarter, as Shyam mentioned. Sales down approximately 100 basis points due to the recent waves of COVID lockdowns. But our main manufacturing facility in China is now open, and we expect things there to improve in the second quarter. We're still operating in a highly inflationary environment and are closely monitoring this.

Moving to slide nine let me turn it over to Kevin.

Thanks, Sean. On today's call, we are confirming our 2022 guidance.

On today's call, we are confirming our 2022 guidance.

As we discussed at our investor day, this guidance has been updated to reflect the impact on our Russian business.

As we discussed at our Investor Day. This guidance has been updated to reflect the impact on our Russian business.

In the first quarter, Russia contributed around 6% of sales, as we'd expected. In our guidance for the rest of the year, we've removed any further sales and profit from Russia.

In the first quarter, Russia contributed around 6% of sales as we had expected.

Our guidance for the rest of the year, we have removed any further sales and profit from Russia.

Our business, excluding Russia, is performing really well and we continue to expect organic growth of 9 to 12 percent.

Our business, excluding Russia is performing really well and we continue to expect organic growth of 9% to 12%.

We did have some pressure in China in the first quarter, as Sian mentioned. Seals down approximately 100 basis points due to the recent wave of COVID lockdowns. But our main manufacturing facility in China is now open. And we expect things there to improve in the second quarter.

We did have some pressure in China in the first quarter as Sean mentioned sales down approximately 100 basis points due to the recent wave of Covid lockdowns, but our main manufacturing facility in China.

I opened.

We expect things to improve in the second quarter.

Kevin J. Johnson: If we experience any further inflation, we will respond quickly with price increases. Our team has made good progress on our manufacturing, consolidation, and transformation project in Q1. We remain on target to deliver around $20 million of savings this year. EBITDA is guided to $400 to $420 million, which includes approximately $35 million of additional public company expenses, around $6 million of which we incurred during Q1. Our adjusted EPS remains in line with our previous guidance at $3.85 to $4.05. We continue to be on target to deliver free cash flow of greater than $210 million.

Kevin Johnson: If we experience any further inflation, we will respond quickly with price increases. Our team has made good progress on our manufacturing, consolidation, and transformation project in Q1. We remain on target to deliver around $20 million of savings this year. EBITDA is guided to $400 to $420 million, which includes approximately $35 million of additional public company expenses, around $6 million of which we incurred during Q1. Our adjusted EPS remains in line with our previous guidance at $3.85 to $4.05. We continue to be on target to deliver free cash flow of greater than $210 million.

We're still operating in a highly inflationary environment and are closely monitoring this.

If we experience any further inflation, we will respond quickly with price increases.

Our team has made good progress on our manufacturing consolidation and transformation project in the first quarter, we remain on target to deliver around $20 million of savings this year.

Our team has made good progress on our manufacturing, consolidation and transformation project in the first quarter. We remain on target to deliver around $20 million of savings this year.

EBITDA is guided to $400 to $420 million, which includes approximately $35 million of additional public company expenses.

EBITDA is guided to $400 million to $420 million, which includes approximately $35 million of additional public company expenses.

around six million of which we incurred during the first quarter.

Around $6 million of which we incurred during the first quarter.

Our adjusted EPS remains in line with our previous guidance at $3.85 to $4.05.

Our adjusted EPS remains in line with our previous guidance at $3 85.

The $4 five.

We continue to be on target to deliver free cash flow of greater than $210 million.

We continue to be on target to deliver free cash flow greater than $210 million.

Kevin J. Johnson: In Q1, free cash flow at $22 million was in line with expectations, lower than the prior year due to additional investments we have made in working capital to support growth and mitigate supply chain risk. We expect to see free cash flow improve as we progress through the rest of this year. In the near term, our priorities are focused on paying down debt, and we are considering initiating a modest quarterly dividend. To assist with modeling, we've included some additional slides in the appendix, a more detailed guidance slide, and additional quarterly historical financials by segment. Let me now hand back to Shyam on slide 10 to wrap up.

Kevin Johnson: In Q1, free cash flow at $22 million was in line with expectations, lower than the prior year due to additional investments we have made in working capital to support growth and mitigate supply chain risk. We expect to see free cash flow improve as we progress through the rest of this year. In the near term, our priorities are focused on paying down debt, and we are considering initiating a modest quarterly dividend. To assist with modeling, we've included some additional slides in the appendix, a more detailed guidance slide, and additional quarterly historical financials by segment. Let me now hand back to Shyam on slide 10 to wrap up.

In the first quarter, free cash flow at $22 million was in line with expectations lower than the prior year due to additional investments we have made in working capital to support growth and mitigate supply chain risk.

In the first quarter free cash flow of $22 million was in line with expectations.

Sure than the prior year due to additional investments we have made in working capital to support growth and mitigate supply chain risks.

We expect to see free cash flow improve as we progress through the rest of this year.

We expect to see free cash flow improves as we progress through the rest of this year.

In the near term, our priorities are focused on paying down debt, and we are considering initiating a modest quarterly dividend.

In the near term our priorities are focused on paying down debt and we are considering initiating a modest quarterly dividend.

To assist with modeling, we've included some additional slides in the appendix, a more detailed guidance slide, and additional quarterly historical financials by segment.

To assist with modeling we've included some additional slides in the appendix and more detailed guidance slide and additional quarterly historical financials by segment.

Shyam P. Kambeyanda: Thank you, Kevin. We're off to a great start as a public company. Our team continues to manage price to offset inflation and successfully mitigate supply chain risk. EBX is in our DNA. The planned activities in lean manufacturing, coupled with our business process improvements, provide a clear path to growth, margin expansion, and improved cash flow. The team is in place. We're on target to deliver our long-term strategic goals. With that, I want to thank you again for joining us. Operator, can we please open the line for questions?

Shyam Kambeyanda: Thank you, Kevin. We're off to a great start as a public company. Our team continues to manage price to offset inflation and successfully mitigate supply chain risk. EBX is in our DNA. The planned activities in lean manufacturing, coupled with our business process improvements, provide a clear path to growth, margin expansion, and improved cash flow. The team is in place. We're on target to deliver our long-term strategic goals. With that, I want to thank you again for joining us. Operator, can we please open the line for questions?

Let me now hand back to Sean on slide 10 to wrap up.

Let me now hand back to Sean on Slide 10 to wrap up.

Thank you, Kevin. We're off to a great start as a public company. Our team continues to manage price to offset inflation and successfully mitigate supply chain risk.

Thank you Kevin.

After a great start as a public company.

<unk> continues to manage price to offset inflation and successfully mitigate supply chain risks.

EBX is in our DNA, the planned activities in lean manufacturing coupled with our business process improvements provide a clear path to growth, margin expansion, and improved cash flow.

<unk> is in our DNA.

The planned activities in lean manufacturing, coupled with our business process improvements provide a clear path to growth margin expansion and improved cash flow.

The team is in place. We're on target to deliver our long-term strategic goals. With that, I want to thank you again for joining us. Operator, can we please open the line for questions?

The team is in place we're on target to deliver our long term strategic goals with that I want to thank you again for joining US operator can we please open the line for questions.

Operator: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. We will take our first question... from Chris Dankert with Loop Capital. Your line is open.

Thank you.

And at this time, I would like to remind everyone in order to ask a question, press star than the number one on your telephone keypad.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Well pause for just a moment to compile the Q&A roster.

Yeah.

And we will take our first question.

Yeah.

From Chris.

Chris Dankert.

Christopher M. Dankert: Hey, good morning. I guess first off, congrats on all the hard work that got you guys here. So I guess first question here, kind of looking at everything, speaking to Europe specifically, maybe you can kind of just tell us the lay of the land, what you're seeing in terms of order rates, demand, just kind of give us an update on what you're seeing there, kind of in the context of the conflict and kind of economic concerns there.

Chris Dankert: Hey, good morning. I guess first off, congrats on all the hard work that got you guys here. So I guess first question here, kind of looking at everything, speaking to Europe specifically, maybe you can kind of just tell us the lay of the land, what you're seeing in terms of order rates, demand, just kind of give us an update on what you're seeing there, kind of in the context of the conflict and kind of economic concerns there.

With cash.

Capital Your line is open.

Hey, good morning. I guess, first off, congrats on all the hard work that got you guys here. So, I guess, first question here, kind of looking at everything, speaking to Europe specifically, maybe you can kind of just tell us the lay of the land, what you're seeing in terms of order rates, demand, just kind of give us an update on what you're seeing there, kind of in the context of the conflict and kind of economic concerns there.

Hey, good morning, I guess first off congrats on the on all the hard work that got you guys here.

So I guess first question here kind of looking at everything speaking to Europe , specifically, maybe you can kind of just tell us the lay of the land what you're seeing in terms of order rates demand just kind of give us an update on what youre seeing there kind of in the context of the conflict and kind of economic concerns there.

Shyam P. Kambeyanda: Yeah, good morning, Chris. Thank you for the question. So what I'd say to you is that the momentum that we had in Q1 continues into Q2. That being said, we're closely monitoring our daily sales rates, our order rates, and as of now, we're not seeing anything that changes our view or anything to our forecast that we've already issued, in the press release and in the presentation.

Shyam Kambeyanda: Yeah, good morning, Chris. Thank you for the question. So what I'd say to you is that the momentum that we had in Q1 continues into Q2. That being said, we're closely monitoring our daily sales rates, our order rates, and as of now, we're not seeing anything that changes our view or anything to our forecast that we've already issued, in the press release and in the presentation.

Yes, good morning, Chris Thank you for the question.

Yeah, good morning, Chris. Thank you for the question. So what I'd say to you is that the momentum that we had in the first quarter continues into the second quarter. That being said, we're closely monitoring our daily sales rates, our order rates, and as of now we're not seeing anything that changes our view or anything to our forecast that we've already issued in the press release and in the presentation.

So what I'd say to you is that the momentum that we had in the first quarter continues into the second quarter.

That being said, we're closely monitoring our daily sales rates, our order rates and as of now we're not seeing anything that changes our view or anything to a forecast that we have already issued.

Christopher M. Dankert: Got it. Okay, glad, glad to hear you're kind of comfortable on, on that market. Then maybe kind of a bigger picture question. I mean, roughly half the markets historically have been, you know, lower labor cost regions. I guess thinking with that backdrop, how do we think about automation solutions kind of within the ESAB portfolio? I mean, kind of what's the mix of automation sales today and kind of where that's headed?

Chris Dankert: Got it. Okay, glad, glad to hear you're kind of comfortable on, on that market. Then maybe kind of a bigger picture question. I mean, roughly half the markets historically have been, you know, lower labor cost regions. I guess thinking with that backdrop, how do we think about automation solutions kind of within the ESAB portfolio? I mean, kind of what's the mix of automation sales today and kind of where that's headed?

In the press release and in the presentation.

Got it okay glad to hear you're kind of comfortable on on that market and then maybe kind of a bigger picture question.

Got it. Okay, glad to hear you're kind of comfortable on that market. Then maybe kind of a bigger picture question, I mean, roughly half the markets historically have been, you know, lower labor cost regions. I guess thinking with that backdrop, how do we think about automation solutions kind of within the ESAB portfolio? And maybe kind of what's the mix of automation sales today and kind of where that's headed?

Roughly half the markets historically have been lower labor cost regions, I guess thinking with that backdrop, how do we think about automation solutions kind of within the <unk> portfolio and maybe kind of what's the mix of automation sales today and kind of where that's headed.

Shyam P. Kambeyanda: Yeah, I don't think we've given out specific numbers related to automation or as a percent of our sales, Chris. But what I would say to you is that what we are seeing, even in emerging markets, an adaptation of sorts, as you see, you know, the labor market in terms of welders minimized. We do see adaptation for automation, and especially the solution that we're looking at. You know, I've talked about this many times before with the OCTOPUZ acquisition. What we have today within our portfolio is the ability to program robots within hours on an offline basis. And so what I'd say to you on that particular front, we see a strong trajectory for growth within our business in both the emerging markets and the developed markets for this.

Shyam Kambeyanda: Yeah, I don't think we've given out specific numbers related to automation or as a percent of our sales, Chris. But what I would say to you is that what we are seeing, even in emerging markets, an adaptation of sorts, as you see, you know, the labor market in terms of welders minimized. We do see adaptation for automation, and especially the solution that we're looking at. You know, I've talked about this many times before with the OCTOPUZ acquisition. What we have today within our portfolio is the ability to program robots within hours on an offline basis. And so what I'd say to you on that particular front, we see a strong trajectory for growth within our business in both the emerging markets and the developed markets for this.

Yeah, I don't think we've given out specific numbers related to automation or as a percent of our sales, Chris, but what I would say to you is that what we are seeing, even in emerging markets, an adaptation of sorts as you see

Yeah, I don't think we've given out specific numbers related to automation or as a percent of our sales, Chris but what I would say to you is that what we are seeing even in emerging markets.

The operation of sorts as you see.

you know, the labor market in terms of welders minimized, we do see adaptation for automation and especially the solution that we're looking at, you know, I've talked about this many times before with the Octopus acquisition, what we have today within our portfolio is the ability to program robots within hours on an offline basis.

The labor market in terms of welders.

Minimized, we do see adaptation for automation and especially the solution that we're looking at.

Talked about this many times before with the Octopus acquisition, what we have today within our portfolio is the ability to program robots within hours on an offline basis, and so what I'd say to you on that particular front, we see a strong trajectory for growth within our business in both the emerging markets and the developed markets for this.

And so what I'd say to you on that particular front, we see a strong trajectory for growth within our business in both the emerging markets and the developed markets for this. Now remember, countries like Brazil and India have already made a significant foray into automation.

Shyam P. Kambeyanda: Now, remember, countries like Brazil and India have already made a significant foray into automation, and I think this just allows for an accelerated adaptation of that particular technology.

Shyam Kambeyanda: Now, remember, countries like Brazil and India have already made a significant foray into automation, and I think this just allows for an accelerated adaptation of that particular technology.

Countries, like Brazil, and India have already made a significant foray into automation.

And I think this just allows for an accelerated adaptation of that particular technology.

And I think this just allows for an accelerated adopt patient of that particular technology.

Christopher M. Dankert: Got it. That's really helpful. Thanks for the color there, and congrats again. I'll hop back in the queue here.

Chris Dankert: Got it. That's really helpful. Thanks for the color there, and congrats again. I'll hop back in the queue here.

Shyam P. Kambeyanda: Thanks, Chris.

Shyam Kambeyanda: Thanks, Chris.

Yeah, that's really helpful. Thanks for the color there, and congrats again. I'll hop back in the queue here.

Got it that's really helpful. Thanks for the color there and congrats again I'll hop back in the queue here.

Operator: As a reminder, it is star one if you would like to ask a question. Our next question comes from Walt Liptak with Seaport. Your line is open.

Thanks, Chris.

And as a reminder, it is star one if you would like to ask a question and our next question comes from Walter Liptak with Seaport. Your line is open.

And as a reminder, it is star one if you would like to ask a question and our next question comes from Walt Liptack with Seaport. Your line is open.

Walt Liptak: Hey, thanks. And, Mike, congratulations, too, on all the hard work to get here.

Okay, thanks and my congratulations to and all the hard work to get here.

Okay.

Shyam P. Kambeyanda: Hi, Walt.

Shyam Kambeyanda: Hi, Walt.

Hey, Thanks, and congratulations to all the hard work to get here.

Walt Liptak: Yeah, wanted to ask about, you know, the gross margins and how you're feeling about the inflation rates that you're seeing right now and selling price increases. And, you know, what do you think about, you know, the later half of this year and where your margins might be?

Wow.

I wanted to ask about, you know, the gross margins and how you're feeling about the, you know, the inflation rates that you're seeing right now and selling price increases.

Wanted to ask about.

The gross margins.

How youre feeling about the.

This.

The inflation rates that youre seeing right now and selling price increases.

And, you know, when, you know, what do you think about, you know, the later half of this year and where where your margins might be?

Yes.

What do you think about.

The later half of this year.

Where your margins might be.

Okay.

Operator: Ladies and gentlemen, just one moment, please, while we reconnect our speakers.

Okay.

And ladies and gentlemen, just 1 moment, please, while we reconnect our speakers.

Ladies and gentlemen, just one moment, please while we reconnect our speakers.

Okay.

Walt Liptak: Hello? Hello, guys, can you hear me?

Shyam P. Kambeyanda: Yeah. Hey, we're back on.

Shyam Kambeyanda: Yeah. Hey, we're back on.

Luke.

Operator: We can hear you.

Walt Liptak: Okay. Yeah, I don't know if you heard my question, but, yeah, basically the-

Hello, guys. Can you hear me? Hey, we're back on. We can hear you. Yeah, I don't know if you heard my question, but yeah, basically the, you know, the gross margin looks like they were down a little bit and, you know, understand that you're raising prices to offset the inflation. But, you know, is there a point at which you think the gross margin can be up on a year basis?

Hello, guys can you hear me.

Shyam P. Kambeyanda: Yeah.

Shyam Kambeyanda: Yeah.

Walt Liptak: You know, the gross margin looked like they were down a little bit, and you know, I understand that you're raising prices to offset the inflation, but you know, is there a point at which you think the gross margin can be up on a year-over-year basis?

Okay.

Yes, I don't know if you heard my question.

Basically the gross.

Gross margin beat and it looks like they were down a little bit.

<unk>.

Understand that you are raising prices to offset the inflation, but.

Shyam P. Kambeyanda: Yeah. So to answer that question in full, so I think one of the things that we're very confident about is our pricing process. What I'd say to you is that we've mentioned before that we have three very strong processes, one, to deal with inflation, two, to deal with the innovative new products in terms of value pricing, and the third one being product line life cycle management. And so we're sort of executing across all those three processes, and we feel confident that going forward, we can continue to move prices based on inflation and then kind of do more on the second two processes that I talked about.

Shyam Kambeyanda: Yeah. So to answer that question in full, so I think one of the things that we're very confident about is our pricing process. What I'd say to you is that we've mentioned before that we have three very strong processes, one, to deal with inflation, two, to deal with the innovative new products in terms of value pricing, and the third one being product line life cycle management. And so we're sort of executing across all those three processes, and we feel confident that going forward, we can continue to move prices based on inflation and then kind of do more on the second two processes that I talked about.

Is there a point at which you think that gross margin could be up.

On a year over year basis.

Yeah, so to answer that question in full, so I think one of the things that we're very confident about is our pricing process.

Yeah. So.

Ask that question and Paul So I think one of the things that we're very confident about is our pricing process.

What I'd say to you is that we've mentioned before that we have three very strong processes want to deal with inflation to to deal with the innovative new products in terms of value pricing and the third one being product line lifecycle management. And so we're sort of executing across all those three.

What I'd say to you is that we've mentioned before that we have three very strong processes want to deal with inflation to deal with the innovative new products in terms of value pricing and the third one being product line lifecycle management and so we're sort of executing across all of those three.

processes and we feel confident that going forward, we can continue to move prices based on inflation and then kind of do more on the second two processes that I talked about. In terms of gross margins, we feel that we've got about a 200 basis points compression based off of what we call this

Processes, and we feel confident that going forward.

Continuing to move.

Shyam P. Kambeyanda: In terms of gross margins, we feel that we've got about 200 basis points compression based off of what we call this price cost piece, and compression happening because of inflation as well as price. Going forward, what I'd say to you is that we continue to see some inflationary and, you know, headwinds as we go into Q2 and Q3. We may see that ease into next year a little bit. But that being said, we're doing a lot of work with EBX, leaning out our factories, looking at additional footprint opportunities going forward. And so we remain confident about our journey upwards, when it comes to gross margins.

Shyam Kambeyanda: In terms of gross margins, we feel that we've got about 200 basis points compression based off of what we call this price cost piece, and compression happening because of inflation as well as price. Going forward, what I'd say to you is that we continue to see some inflationary and, you know, headwinds as we go into Q2 and Q3. We may see that ease into next year a little bit. But that being said, we're doing a lot of work with EBX, leaning out our factories, looking at additional footprint opportunities going forward. And so we remain confident about our journey upwards, when it comes to gross margins.

<unk> based on inflation, and then kind of do more on the second two processes that I talked about in terms of gross margins. We feel that we've got about 200 basis points compression based off of what we call. This.

Price cost piece and compression happening because of inflation as well as price.

Going forward, what I'd say to you is that we continue to see some inflationary headwinds as we go into the second and third quarter. We may see that ease into next year a little bit. But that being said, we're doing a lot of work with EBX, leaning out our factories, looking at additional footprint opportunities going forward. And so we remain confident about our journey upwards when it comes to gross margin.

Going forward, what I'd say to you is that we continue to see some inflationary.

Headwinds as we go into the second and third quarter, we may see that ease into next year, a little bit but that being said, we're doing a lot of work with UBS leaning out our factories looking at additional footprint opportunities going forward.

Walt Liptak: Okay, great. And that kind of, you know, leads into, you know, maybe, you know, on the cost side, more of the overhead SG&A costs. You know, how are you feeling about your, your corporate expense and your SG&A this quarter? And as a public company, are there more ads that you have to do to, you know, to have the right people to run the company? And I guess we're-

We remain confident about our journey upwards when it comes to gross margins.

Okay, great. And that kind of, you know, leads into, you know, maybe, you know, on the cost side, more of the overhead SG&A costs. You know, how are you feeling about your corporate expense and your SG&A this quarter? And as a public company, are there more ads that you have to do to, you know, to have the right people to run the company? And I guess we're, yeah.

Okay, Great and then kind of leads into.

Maybe on the <unk>.

Cost side.

More of the overhead SG&A costs.

How are you feeling about your corporate expense and your SG&A.

SG&A this quarter.

As a public company or Theyre more ads that you have to do too.

Shyam P. Kambeyanda: No, and-

Shyam Kambeyanda: No, and-

Walt Liptak: Yeah, okay. Go ahead.

We have the right people to run the company.

Shyam P. Kambeyanda: No, so I think the short answer to that is that we have our full team in place. We do not need any more resources to run a public company. Kevin mentioned earlier that the assumption that we've made and given to all of you is $35 million on a full year basis, out of which $6 million was already part of our Q1 results. So you could expect the remaining portion of it to come through in the remaining quarters. That being said, we continue to look at business process improvements that I talked to you about in terms of EBX and looking at our entire operating expense structure to kind of figure out how to digitize, improve processes going forward. So from a start perspective, we're set, we're ready.

Shyam Kambeyanda: No, so I think the short answer to that is that we have our full team in place. We do not need any more resources to run a public company. Kevin mentioned earlier that the assumption that we've made and given to all of you is $35 million on a full year basis, out of which $6 million was already part of our Q1 results. So you could expect the remaining portion of it to come through in the remaining quarters. That being said, we continue to look at business process improvements that I talked to you about in terms of EBX and looking at our entire operating expense structure to kind of figure out how to digitize, improve processes going forward. So from a start perspective, we're set, we're ready.

And I guess.

Yes, okay.

No, so so I think I think the short answer to that is that we have our full team in place. We do not need any more resources to run a public company. Kevin mentioned earlier that the assumption that we've made and given to all of you is 35Million full year basis out of which 6Million was already part of our Q1 results. So you could expect the remaining portion of it to come through in the remaining quarters.

So I think I think the short answer to that is that we have our full team in place, we do not need any more resources to run a public company.

Kevin mentioned earlier that the assumption that we've made and given to all of you at $35 million full year basis out of which $6 million was already part of our Q1 results. So you could expect the remaining portion of it to come through in the remaining quarters.

That being said, we continue to look at business process improvements that I talked to you about in terms of EBX and looking at our entire operating expense structure to kind of figure out how to digitize improved processes going forward. So, from a start perspective, we're set, we're ready, 35 million is the number that we have out there, but that being said, we continue to work on it to find improvement opportunities.

That being said, we continue to look at business process improvements that I talked to you about in terms of <unk> and looking at our entire.

Operating expense structure to kind of figure out how to digitize improve processes going forward.

Shyam P. Kambeyanda: $35 million is the number that we have out there, but that being said, we continue to work on it to find improvement opportunities, and continue to get the OpEx to the most optimal place possible for the business.

Shyam Kambeyanda: $35 million is the number that we have out there, but that being said, we continue to work on it to find improvement opportunities, and continue to get the OpEx to the most optimal place possible for the business.

So from a stock perspective.

<unk>, we're ready to $35 million is the number that we have out there, but that being said we continue to work on it to find improvement opportunities.

and continue to get OPEX to the most optimal place possible for the business. Okay, great.

Walt Liptak: Okay, great. Okay, thanks. I'll get back in queue.

And continuing to get Opex to the most optimal place possible for the business.

Operator: As a reminder, it is star one if you would like to ask a question, and we will take our next question from Vlad Bystricky with Citigroup. Your line is open.

Okay, great. Okay. Thanks, I'll get back in queue.

Yeah.

And as a reminder, it is star one. If you would like to ask a question, and we will take our next question from Vlad with Citigroup. Your line is open. Good morning everyone.

And as a reminder, it is star one if you would like to ask a question and we will take our next question from Vlad by sticky with Citigroup. Your line is open.

Christopher M. Dankert: Good morning, everyone. Thanks for taking my call.

Vlad Bystricky: Good morning, everyone. Thanks for taking my call.

Shyam P. Kambeyanda: Morning, morning, Vlad. Hi, Vlad.

Shyam Kambeyanda: Morning, morning, Vlad.

Kevin Johnson: Hi, Vlad.

Good morning, everyone. Thanks for taking my call.

Christopher M. Dankert: So, Kevin, I think you mentioned about $100 million of headwind in China in the quarter, related to the lockdowns, but that your facility is back up online now?

Vlad Bystricky: So, Kevin, I think you mentioned about $100 million of headwind in China in the quarter, related to the lockdowns, but that your facility is back up online now?

Good morning, Good morning, Hi, Brian .

Okay.

Um, so, Kevin, I think you mentioned about 100Million dollars headwind in China in the quarter related to the lockdowns, but that your facilities back up online. Now, I guess 1, you know, did I hear that? Right? And 2, can you give us a little more?

So.

Kevin I think you mentioned.

About $100 million headwind in China in the quarter related to the Lockdowns.

Vlad Bystricky: ... I guess one, you know, did I hear that right? And two, can you just - yeah, I thought - give us a little more? It was, thought it was 100 basis points. It wasn't... Yeah, so just to correct. 100 basis points. 100 basis points.

Kevin Johnson: ... I guess one, you know, did I hear that right? And two, can you just - yeah, I thought - give us a little more? It was, thought it was 100 basis points. It wasn't... Yeah, so just to correct. 100 basis points. 100 basis points.

These back up online now.

I guess, one did I hear that right and two slides a little more.

But it was 100 basis points that wasn't, yeah, so just to. 100 basis points. 100 basis points, yeah. Not 100 million. Great, that makes more sense. 100 basis points, so can you just give us more, can you give us more color on what you're actually seeing on the ground in China? I know you said your facility is back up, but just sort of broader supply chain impact and how you expect.

Shyam P. Kambeyanda: Yeah. Yeah.

But it was a 100 basis points. It wasn't yeah, so just to grow.

Vlad Bystricky: Yeah. Yeah, not 100 million. Okay. Great. That, that, that makes more sense. 100 basis points. Thank you. So can you just give us more, can you give us more color on what you're actually seeing on the ground in China? I know you said your facility is back up, but just sort of broader supply chain impacts, and how do you expect recovery to sort of unfold here over the quarter?

100 basis points.

100 <unk>.

Not a $100 million okay.

Great.

That makes more sense for 100 basis points. So can you just give us some more.

Can you give us more color on what you're actually seeing on the ground in China. I know you said your facility is back up but just sort of broader supply chain impacts.

How do you expect.

recovery to sort of unfold here over the quarter.

Shyam P. Kambeyanda: Yeah, let me take that, Vlad. So I think what we saw was, you know, to the back end of the quarter, you saw Shanghai sort of shut down and several other cities, you know, along with it. April has kind of stayed in that particular realm, but we're now seeing into May, things opening up, business coming back, factories opening up, ports, you know, kind of continuing to function. So what we see is that throughout the quarter, there will be sort of a move back to some amount of normalcy within China. And as you can... As you probably have heard, they expect to kind of get back to normal sometime in the middle or the latter part of May.

Shyam Kambeyanda: Yeah, let me take that, Vlad. So I think what we saw was, you know, to the back end of the quarter, you saw Shanghai sort of shut down and several other cities, you know, along with it. April has kind of stayed in that particular realm, but we're now seeing into May, things opening up, business coming back, factories opening up, ports, you know, kind of continuing to function. So what we see is that throughout the quarter, there will be sort of a move back to some amount of normalcy within China. And as you can... As you probably have heard, they expect to kind of get back to normal sometime in the middle or the latter part of May.

Recovery to sort of unfold here over the quarter.

Yeah, let me take that lad. So I think what we saw was, you know, to the back end of the of the quarter, you saw Shanghai sort of shut down and several other cities, you know, along with it.

Yes, let me take that so I think what we saw was the <unk>.

Back end of the quarter, you saw Shanghai sort of shutdown and several other cities.

Along with that.

April has kind of stayed in that particular realm, but we're now seeing into May things opening up, business coming back, factories opening up, ports, you know, kind of continuing to function. So, what we see is that throughout the quarter, there will be.

April has kind of stayed in that particular round, but we are now seeing in domain things opening up business coming back factories opening up ports kind of continuing to function. So what we see is that throughout the quarter there will be.

sort of move back to some amount of normalcy within China. And as you probably have heard, they expect to kind of get back to normal sometime in the middle or the latter part of May with their sort of zero COVID policy going forward. So that's the assumption that we're making. The second thing that I would say to you on that particular front is

Sort of a move back to some amount of normalcy, but then within China and as you can as you probably have heard do you expect to kind of get back to normal sometime in the middle or the latter part of May.

Shyam P. Kambeyanda: You know, with their sort of zero COVID policy going forward. So that's the assumption that we're making. The second thing that I would say to you on that particular front is, China's already announced that they are going to continue to sort of figure out ways to stimulate the economy as they come out of this, mini crisis that they've had with COVID. So what I would expect out of them is that we would probably come out really strong towards the end of Q2, continue that strength into Q3, and then go back to normal levels sometime in Q4 and Q1 of next year.

Shyam Kambeyanda: You know, with their sort of zero COVID policy going forward. So that's the assumption that we're making. The second thing that I would say to you on that particular front is, China's already announced that they are going to continue to sort of figure out ways to stimulate the economy as they come out of this, mini crisis that they've had with COVID. So what I would expect out of them is that we would probably come out really strong towards the end of Q2, continue that strength into Q3, and then go back to normal levels sometime in Q4 and Q1 of next year.

With their sort of zero carbon policy going forward. So that's the assumption that we're making the second thing that I would say to you on that particular front as China has already announced that they are going to continue to sort of figure out ways to stimulate the economy as they come out of this mini crisis that they've had with COVID-19. So.

China's already announced that they are going to continue to sort of figure out ways to stimulate the economy as they come out of this many crisis that they've had with COVID. So what I would expect out of them is that we would probably come out really strong towards the end of Q2, continue that strength into Q3 and then go back to normal levels sometime in Q4 and Q1 of next year.

What I would expect out of them is that we would probably come out really strong towards the end of Q2 continue that strength into Q3, and then go back to normal levels sometime in Q4 and Q1 of next year.

Vlad Bystricky: Okay, that's, that's really helpful color. Appreciate it. And then, just a follow-up. You know, now that you've separated, I guess any update or color in terms of how you're thinking about balance sheet leverage in the current environment, going forward?

OK, that's that's really helpful color. Appreciate it and then.

Okay, that's great.

Really helpful color I appreciate it and then.

Okay.

A follow up.

You know, now that you've now that you've separated, I guess, any update or color in terms of. How you're thinking about balance sheet leverage in the current environment.

Now that you've now that you've <unk>.

Separated I guess any update or color in terms of how youre thinking about.

Balance sheet leverage in the current environment.

Shyam P. Kambeyanda: Yeah. So what I'd say to you is that we've said publicly that we want to stay within the- we're gonna start off at about 2.75, as you know, and our goal is to always stay between 2 to 3. One of the things I said in my summary statement is that our focus is on reduction of that debt as we go out. And if any opportunities come up with acquisitions or something like that, we would consider it, but right now, our focus really is set on strong cash generation, reducing our debt, and setting up strongly as we move into 2023.

Shyam Kambeyanda: Yeah. So what I'd say to you is that we've said publicly that we want to stay within the- we're gonna start off at about 2.75, as you know, and our goal is to always stay between 2 to 3. One of the things I said in my summary statement is that our focus is on reduction of that debt as we go out. And if any opportunities come up with acquisitions or something like that, we would consider it, but right now, our focus really is set on strong cash generation, reducing our debt, and setting up strongly as we move into 2023.

Going forward.

Yeah, so what I'd say to you is that we've said publicly that we want to stay within the, we're going to start off at about two point seven five, as you know, and our goal is to always stay between two to three. One of the things I said in my summary statement is that our focus is on reduction of that debt as we go out.

Yes, so what I'd say to you is that we've said publicly that we want to stay within that where we're going to start off at about $2 75, as you know and our goal is to always stay between two to three one of the things I said in my summary statement is that our focus is on reduction of that debt as we go out.

And if any opportunities come up with acquisitions or something like that, we would consider it. But right now, our focus really is set on strong cash generation, reducing our debt and setting up strongly as we move into 2023.

And if any opportunities come up with.

The acquisitions are something that that we would consider it but right now our focus really is set on strong cash generation, reducing our debt.

In setting up strongly as we as we move into 2023.

Vlad Bystricky: Great. Thanks, guys. Thanks, Vlad.

Operator: We will take a follow-up question from Chris Dankert with Loop Capital Markets. Your line is open.

Great. Thanks, guys.

Thanks, Bob.

Christopher M. Dankert: Hey, thanks again for taking the question. I guess, did want to kind of circle back on Russia here. So again, out of the guidance, but just any comments you can give us on how we're looking at that on a go-forward basis here. Are we exploring strategic options? Is it more a matter of, "Hey, we're gonna ride this out," and just kind of keep running the business and operating things, and hopefully at some point, they can kind of get brought back into the guide? Just how we're thinking about Russia, maybe beyond just this year.

Chris Dankert: Hey, thanks again for taking the question. I guess, did want to kind of circle back on Russia here. So again, out of the guidance, but just any comments you can give us on how we're looking at that on a go-forward basis here. Are we exploring strategic options? Is it more a matter of, "Hey, we're gonna ride this out," and just kind of keep running the business and operating things, and hopefully at some point, they can kind of get brought back into the guide? Just how we're thinking about Russia, maybe beyond just this year.

We will take a follow up question from Chris Dankert with loop capital markets. Your line is open.

We will take a follow-up question from Chris Denkert with Loop Capital Markets. Your line is open.

Hey, thanks again for taking the question. I guess did want to kind of.

Hey, Thanks again for taking the question.

I guess did want to kind of circle back on Russia here. So again out of the guidance, but just any comments you can give us on how we're looking at that on a go forward basis here are we exploring strategic options is it more a matter of hey, we're going to ride this out and just kind of keep running the business and operating things in hone.

Let's circle back on Russia here, so again, out of the guidance, but just any comments you can give us on how we're looking at that on a go-forward basis here. Are we exploring strategic options? Is it more a matter of, hey, we're going to ride this out and just kind of keep running the business and operating things, and hopefully at some point they can kind of get brought back into the guide? Just how we're thinking about Russia, maybe beyond just this year.

At some point they can kind of get brought back into the Guy that's how we're thinking about Russia, maybe beyond just this year.

Shyam P. Kambeyanda: Yeah, I think the best way to think about that, Chris, is what we put out on our website a few weeks back. You know, our thoughts about, you know, figuring out how to transition out of Russia is the best way to look at it. What I'd say to you is that we've already announced that we have not made no more capital investments. We've stopped support. And so our primary focus right now is the safety and security of our associates, and then figuring out the right way to exit the region in an appropriate way. So that's the best way to think about it. And in our guidance, that's what's reflected, where we're saying that we do not expect any more profits from that region going forward.

Shyam Kambeyanda: Yeah, I think the best way to think about that, Chris, is what we put out on our website a few weeks back. You know, our thoughts about, you know, figuring out how to transition out of Russia is the best way to look at it. What I'd say to you is that we've already announced that we have not made no more capital investments. We've stopped support. And so our primary focus right now is the safety and security of our associates, and then figuring out the right way to exit the region in an appropriate way. So that's the best way to think about it. And in our guidance, that's what's reflected, where we're saying that we do not expect any more profits from that region going forward.

Yeah, I think the best way to think about that, Chris, is what we put out on our website a few weeks back, you know, thoughts about.

Yes, I think the best way to think about that Chris is what we put out on our website a few weeks back thoughts about.

you know, figuring out how to transition out of Russia is the best way to look at it. What I'd say to you is that we've already announced that we have not made no more capital investments. We've stopped support. And so our primary focus right now is the safety and security of our associates and then figuring out the right way to exit the region in an appropriate way. So that's the best way to think about it. And in our guidance, that's what's reflected where we're saying.

Figuring out how to transition out of Russia is the best way to look at it what.

What I'd say to you is that we've already announced.

<unk> announced that we have not made no more capital investments we've stopped support and so our primary focus right now is the safety and security of our associates and then figuring out the right way.

To exit the region.

In an appropriate way so that's the best way to think about it and then our guidance, that's what's reflected where we're saying.

Shyam P. Kambeyanda: If anything changes, we'll let you know, but that's really where we're set today.

Shyam Kambeyanda: If anything changes, we'll let you know, but that's really where we're set today.

that we do not expect any more profits from that region going forward. If anything changes, we'll let you know, but that's really where we're set.

But we do not expect any more profit from that region going forward. If anything changes, we'll let you know, but thats really where were set today.

Christopher M. Dankert: Okay, I appreciate that. And then just the last one from me. I guess, as we think about data capabilities, whether it's the ability to kind of change to understand customer purchasing habits or data on sourcing and the ability to control inventories, just any comments on how you feel about the state of data and analytics in the company today, and kind of what the opportunity is there?

Chris Dankert: Okay, I appreciate that. And then just the last one from me. I guess, as we think about data capabilities, whether it's the ability to kind of change to understand customer purchasing habits or data on sourcing and the ability to control inventories, just any comments on how you feel about the state of data and analytics in the company today, and kind of what the opportunity is there?

Okay, I appreciate that. And just the last one for me, I guess, as we think about data capabilities, whether it's the ability to kind of change to understand customer purchasing habits or data on sourcing and the ability to control inventories, any comments on how you feel about the state of data and analytics in the company today and kind of what the opportunity is there?

Okay I appreciate that.

And then just the last one for me I guess as we think about.

Data capabilities, whether it's the ability to kind of.

Change.

To understand customer purchasing habits or data on sourcing and the ability to control inventories at any comments on how you feel about.

The state of data and analytics in the company today and kind of what the opportunity is there.

Shyam P. Kambeyanda: Yeah, you know, it's something that, personally, I feel, you know, very strongly about. I think we've had great systems, great data, as you know, within Colfax, or Enovis. ESAB ran as a separating opco. So our data capability, data gathering capability was strong, but since then, we've actually engaged with a data mining company to kind of get real-time data to sort of look at exactly where we were, both from a customer perspective, along with, you know, understanding where our data, material flow, material purchasing aspects were within the business. And we see that as a really strong opportunity to continue to gain momentum in our margin expansion story going forward. So more to come on that particular front, but I see that as a large opportunity for ESAB to continue to change the game.

Shyam Kambeyanda: Yeah, you know, it's something that, personally, I feel, you know, very strongly about. I think we've had great systems, great data, as you know, within Colfax, or Enovis. ESAB ran as a separating opco. So our data capability, data gathering capability was strong, but since then, we've actually engaged with a data mining company to kind of get real-time data to sort of look at exactly where we were, both from a customer perspective, along with, you know, understanding where our data, material flow, material purchasing aspects were within the business. And we see that as a really strong opportunity to continue to gain momentum in our margin expansion story going forward. So more to come on that particular front, but I see that as a large opportunity for ESAB to continue to change the game.

Yes.

Yeah, you know, it's something that, uh, personally, I feel.

<unk> that.

Personally I feel.

Yes.

you know, very strongly about. I think we've had great systems, great data, as you know, within Colfax, or in all this, ESOP, REN has a separating opcode. So our data capability, data gathering capability was strong. But since then, we've actually engaged with the data mining company to kind of get real time data to sort of look at exactly where we were, both from a customer perspective,

Very strongly about I think we've had great systems, great data as you know within Colfax.

In August <unk>.

Our brand is the separating opco, so our data capability data gathering capability was strong but since then we've actually engaged with the data mining company to kind of get real time data to sort of look at exactly where we were both from a customer perspective.

along with understanding where our data, material flow, material purchasing aspects were within the business. And we see that as a really strong opportunity to continue to gain momentum in our margin expansion story going forward.

Along with.

Understanding where our data material flow material purchasing.

Aspects of orbit in the business and we see that as a really strong opportunity to continue to gain momentum in our margin expansion story going forward.

Shyam P. Kambeyanda: As we look at margin expansions and generating better cash flow, it's absolutely in our crosshairs.

So, more to come on that particular front, but I see that as a large opportunity for ESOP to continue to change the game. And as we look at margin expansions and generating better cash flow, it's absolutely in our crosshairs.

Shyam Kambeyanda: As we look at margin expansions and generating better cash flow, it's absolutely in our crosshairs.

So more to come on that particular front, but I see that as a large opportunity for <unk> to continue to change the game.

Christopher M. Dankert: Gotcha. Gotcha. Glad to hear it. Thanks again, Shyam.

Chris Dankert: Gotcha. Gotcha. Glad to hear it. Thanks again, Shyam.

As we look at margin expansion and generating better cash flow, it's absolutely in our crosshairs.

Operator: We'll take a follow-up question from Walt Liptak with Seaport. Your line is open.

Got you got you glad to hear thanks again Shaun.

Yes.

We will take a follow-up question from Walt Liptack with Seaport. Your line is open.

And we'll take a follow up question from Walt Liptak with Seaport. Your line is open.

Walt Liptak: Hey, thanks for taking my follow-up. I wanted to ask about the guidance and the organic revenue growth of 4 to 7%. You know, you're at 18 in Q1, you know, so that implies, I guess, some difficult comps in the second half. Are you expecting to stay, you know, volume positive throughout the year, across the regions? You know, what are some of the assumptions going into that organic of 4 to 7%?

Hey, Thanks for taking my follow up.

Hey, thanks for taking my follow up. I want to ask about the guidance and the organic revenue growth of 4 to 7%. You know, you're at 18 in the 1st quarter, you know, so that implies, I guess, some, some difficult comps in the 2nd half are expecting to to stay, you know, volume positive throughout the year across the regions. You know, what are some of the assumptions going into that organic of 4 to 7?

I wanted to ask about the guidance the organic revenue growth of 4% to 7%.

At 18 in the first quarter, so that implies I guess some.

Some difficult comps in the second half are you expecting to.

Tuesday.

<unk>.

Volume positive throughout the year across the regions what are some of the assumptions going into that organic or four to seven.

Shyam P. Kambeyanda: Yeah, you know, I think the best way to think about that one is that we did give the guidance earlier at, you know, our Investor Day, and it's just been a few weeks since we gave that guidance. So it's more important for us to reaffirm our guidance going forward. What I would say to you is that we're cautiously looking at the rest of the year, to see where things end up, but we felt it was more prudent this time around to sort of hold our guidance rather than to sort of put anything else into that particular piece going forward. But that being said, we're off to a good start in Q2. We'll see how the next couple of months play out. We're confident in the guidance that we've given.

Shyam Kambeyanda: Yeah, you know, I think the best way to think about that one is that we did give the guidance earlier at, you know, our Investor Day, and it's just been a few weeks since we gave that guidance. So it's more important for us to reaffirm our guidance going forward. What I would say to you is that we're cautiously looking at the rest of the year, to see where things end up, but we felt it was more prudent this time around to sort of hold our guidance rather than to sort of put anything else into that particular piece going forward. But that being said, we're off to a good start in Q2. We'll see how the next couple of months play out. We're confident in the guidance that we've given.

Yeah, you know, I think the best way to think about that one is that we did give the guidance earlier at our investor day, and it's just been a few weeks since we gave that guidance. So it's more important for us to reaffirm.

Yes, I think the best way to think about that one is that we did give the.

Guidance earlier at.

Our Investor day, and it's just been a few weeks since we gave that guidance. So it was more important for us to reaffirm.

Our guidance going forward, what I would say to you is that we're cautiously looking at the rest of the year to see where things end up, but we felt it was more prudent this time around to sort of hold our guidance rather than to sort of put anything else into that particular piece going forward. But that being said, we're off to a good start in Q2. We'll see how the next couple of months play out. We're confident in the guidance that we've given.

Our guidance going forward, what I would say to you is that we are cautiously looking at the rest of the year.

To see where things end up but we felt it was more prudent at this time around to sort of hold our guidance rather than to sort of put anything else into that particular piece going forward, but that being said we're off to a good start in Q2, we will see how the next couple of months play out well.

Shyam P. Kambeyanda: You know, we sort of read and look at the same things that everybody else is, and we'll see if an update is needed at the appropriate time.

Shyam Kambeyanda: You know, we sort of read and look at the same things that everybody else is, and we'll see if an update is needed at the appropriate time.

We're confident in the guidance that we've given.

You know, we sort of read and look at the same things that everybody else is, and we'll see if an update is needed at the appropriate time.

We sort of read and look at the same things that everybody else is and we'll see if that update as needed at the appropriate time.

Walt Liptak: Okay, great. Thank you.

Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the call back to Mark Barbalato for closing remarks.

Okay.

Okay, great. Thank you.

Yeah.

And ladies and gentlemen, there are no further questions at this time. I will now turn the call back to Mark Barbaralato for closing remarks.

And ladies and gentlemen, there are no further questions at this time I will now turn the call back to Mark Barbara <unk> for closing remarks.

Shyam P. Kambeyanda: Thank you for joining us today, and we look forward to speaking to you on our next call. Have a good day.

Mark Barbalato: Thank you for joining us today, and we look forward to speaking to you on our next call. Have a good day.

Thank you for joining us today and we look forward to speaking to you on our next call. Have a good day.

Thank you for joining us today, and we look forward to speaking to you on our next call.

Operator: Ladies and gentlemen, this concludes today's call. We thank you for your participation, and you may now disconnect.

Good day.

And ladies and gentlemen, this concludes today's call. We thank you for your participation, and you may now disconnect.

And ladies and gentlemen. This concludes today's call. We thank you for your participation and you may now disconnect.

Okay.

[music].

Yes.

Q1 2022 ESAB Corp Earnings Call

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