Q4 2023 ESAB Corp Earnings Call
Operator: Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the ESAB Corporation fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.
Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone does it use shop Corporation fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, again, press star one. Thank you. I will now turn the conference over to Mark Barbalato, Vice President of Investor Relations. Mark, you may begin your presentation. Thanks, operator.
If you'd like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw your question again press Star one. Thank you I will now turn the conference over to Mark Barbara <unk>, Vice President of Investor Relations Mark You May begin your conference. Thanks, operator.
Mark Barbalato: Welcome to ESAB's fourth quarter 2023 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 may differ, and we do not assume any obligation or intend to update these forward-looking statements, except as required by law.
Welcome to <unk> fourth quarter 2023 earnings call. This morning, I'm joined by our President and CEO, Sean Combi Yonder and CFO, Kevin Johnson. 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 or intend to update. These forward looking statements, except as required by law with respect to any non-GAAP financial measures mentioned during the call today. The accompanying reconciliation information related to those measures can be found in our earnings press release and today's slide presentation.
Mark Barbalato: With respect to any non-GAAP financial measures mentioned during the call today, the accompanying reconciliation information related 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, Shyam Kambeyanda. Thank you, Mark. Good morning, everyone.
With that I'd like to turn the call over to our President and CEO Sean <unk>.
Thank you Mark good.
Morning, everyone and thank you all for joining us this morning.
Shyam Kambeyanda: And thank you all for joining us this morning. ESAB has made excellent progress in 2023, and we finished the year and the fourth quarter on a high note. As always, let me take a moment to thank our dedicated associates for their hard work and commitment to our goal. Our 2023 performance demonstrates the power of EBX to drive growth, improve margins, and generate strong free cash. During Investor Day this past December, we announced our strategic vision to become a focused premier industrial compound and set our 2028 targets to become a $4 billion in sales, 22% EBITDA margin enterprise that generates 100% free cash flow conversion. The event also showcased our innovative products and solutions within our Fabtech and gas equipment business, allowing us to highlight the power of our portfolio and workflow solutions that are helping our customers solve their most challenging needs. Some of the other highlights from 2023 were the extraordinary progress we have made to enhance our equipment portfolio, both in Fabtech and gas control. We completed our light industrial lineup and introduced the game-changing Renegade Bolt, a battery-powered welder, the first of its kind, which was a hit in the marketplace.
Aesop has made excellent progress in 2023, and we finished the year and the fourth quarter on a high note.
As always let me take a moment to thank our dedicated associates for their hard work and commitment to our goals.
Our 2023 performance demonstrates the power of AVX the dry.
<unk> growth improve margins and generate strong free cash flow.
During Investor Day. This past December we announced our strategic vision to become a focused premier industrial compound and setting our 2028 targets to become a 4 billion in sales, 22% and EBITDA margin enterprise that generates 100% free cash flow conversion.
The event also showcased our innovative products and solutions within our fab tech and gas equipment businesses.
Allowing us to highlight the power of our portfolio and workflow solutions that are helping our customers solve their most challenging needs.
So the other highlights from 2023 was the extraordinary progress we've made to enhance our equipment portfolio, both in fab Tech and gas control.
We completed our light industrial lineup and introduce the game changing renegade volt.
Battery powered well the first of its kind.
Was a hit in the marketplace.
Shyam Kambeyanda: An interesting news item for you on this product; it is now featured in the March edition of Popular Mechanics as the best tool for the trade. We have also made significant progress on our heavy industrial line of products with the launch of our new Warrior Edge. This product specifically addresses robotics and automation. The Warrior Edge, combined with our digital solutions, has created a competitive edge for ESAB as we focus on growing our equipment sales. In addition, we developed and introduced the first AI algorithm-enabled fully autonomous adaptive welding solution for the renewable industry.
And interesting news item for you on this product. It is now featured in the March edition of popular mechanics, as the best tool for the trade.
We also made significant progress on our heavy industrial line of products with the launch of our new warrior edge.
This product specifically addresses the robotics and automation market.
What are your edge combined with our digital solutions has created a competitive edge for Aesop as we focus on growing our equipment sales.
In addition, we developed and introduced the first AI algorithm enabled fully autonomous adaptive learning solution, but the renewable industry.
Shyam Kambeyanda: And within our gas control business, the innovation machine continues to deliver. The Vitality Index in our gas control business is a strong 33%. The team has introduced new valves for industrial specialty and medical gases focused on the North American and Middle Eastern markets.
And within our gas control business the innovation machine continues to deliver.
Vitality index and our gas control business has a strong 33%.
The team has introduced new valves for industrial specialty and medical gas focused on the North American and middle Eastern markets.
Shyam Kambeyanda: Additionally, our gas control team successfully integrated two bolt-on acquisitions, positioning us for continued growth in the coming years. ESAB is also benefiting from micro tailwinds related to onshoring, infrastructure upgrades, the energy transition, agricultural investments, and medical and lab infrastructure improvement. And that's not all. We have added to our EBX toolkit.
Additionally, our gas control teams successfully integrated two bolt on acquisitions.
<unk> also continued growth in the coming years.
<unk> is also benefiting from macro tailwind related to onshoring infrastructure upgrades energy transition agricultural investments and medical and lab infrastructure improvements.
That's not all we have added to our <unk> toolkit, we initiated a few targeted AI driven activities focused on improving our operations and are encouraged by the initial results.
Shyam Kambeyanda: We initiated a few targeted AI-driven activities focused on improving our operations and are encouraged by the initial results. As we enter 2024, we just wrapped up our leadership meeting and rallied our team around growth, bolt-on acquisitions, and taking EBX up another notch. We have a proven and simple formula at ESAB, using EBX to drive growth, expand margins, and improve our cash flow within our base business, add accretive bolt-on acquisitions, and then use EBX to make them stronger. As a result, we're shaping ESAB into a less cyclical, faster growing, and higher margin enterprise. To talk specifically about the fourth quarter, let's turn to slide three.
As we enter 2024, we just wrapped up our leadership meeting and rallied our team around growth bolt on acquisitions and taking EPS up another notch.
We have a proven and simple formula at Aesop use evs to drive growth expand margins and improve our cash flow within our base business.
Accretive bolt on acquisitions, and then use AVX to make them stronger as a result, we're shaping aesop into a less cyclical faster growing and higher margin enterprise.
To talk specifically about the fourth quarter, let's turn to slide three.
Shyam Kambeyanda: Another strong quarter and another step forward in the direction of our 2028 goals. As mentioned earlier, we delivered record fourth-quarter results. Total sales grew by 600 basis points, and adjusted EBITDA margins expanded to a record 19.4%.
Another strong quarter and another step forward in the direction of our 2028 goals.
As mentioned earlier, we delivered record fourth quarter results.
Total sales grew by 600 basis points adjusted EBITDA margins expanded to a record 19, 4%.
Shyam Kambeyanda: And our end markets continue to be resilient, with particular strength in India and the Middle East. We continue to be encouraged by the growth performance of our co-bots and gas control business. Our co-bot business experienced close to triple-digit growth in the quarter, and our gas control business grew at a low double-digit rate. All our regions continue to benefit from infrastructure investment and energy transition projects. General fabrication activity remained solid.
And our end markets continued to be resilient with particular strength in India and the middle East.
We continue to be encouraged by the growth performance of our cobalt and gas control business, a cobalt business experienced close to triple digit growth in the quarter and our gas control business grew low double digits.
All our regions continued to benefit from infrastructure investment and energy transition projects.
Fabrication activity remained solid this was partially offset by softness in retail.
Shyam Kambeyanda: This was partially offset by softness in retail. Our teams are making positive strides towards a more profitable product make. The impact of our EBX growth tools and product line simplification is reflected in the adjusted EBITDA margins improving 200 basis points and free cash flow improving by 39% year over year. Moving to slide four and reflecting on the full year, and sharing a bit more on our financial metrics. Sales reached a record $2.62 billion, and our core revenue rose by 800 basis points, with standout performances in India and the Middle East region. Adjusted EBITDA improved by 160 basis points to a record $483 million for the full year. And most importantly, we exceeded sales, adjusted EBITDA, and EPS guidance, demonstrating our ability to consistently deliver on our commitment. Our full-year free cash flow reached $305 million, with a record free cash flow performance in the fourth quarter.
Our teams are making positive strides towards a more profitable product mix.
The impact of our AVX growth tools and product line simplification as reflected in the adjusted EBITDA margins, improving 200 basis points and free cash flow improving by 39% year over year.
Moving to slide four and reflecting on the full year and sharing a bit more on our financial metrics say.
Sales reached a record $2 61 billion and our core revenue rose by 800 basis points.
With standout performances in India, and the Middle East regions.
Adjusted EBITDA improved by 160 basis points to a record $483 million for the full year.
And most importantly, we exceeded sales adjusted EBITDA and EPS guidance, demonstrating our ability to consistently deliver on our commitments.
Our full year free cash flow reached $305 million with a record free cash flow performance in the fourth quarter.
Shyam Kambeyanda: This again underscores ESAB's commitment to financial discipline and continuous improvement. Moving to slide five, to discuss our fourth quarter performance in more detail, quarterly sales hit a record $650 million.
This again underscores <unk> commitment to financial discipline and continuous improvement.
Moving to slide five to discuss our fourth quarter performance in more detail.
Quarterly sales hit a record $650 million adjusted EBITDA was a record $126 million expanding 200 basis points year over year to reach an all time high of 19, 4%.
Shyam Kambeyanda: Adjusted EBITDA was a record $126 million, expanding 200 basis points year-over-year to reach an all-time high of 19.4%. As expected, we saw America's business return to positive volume, and our EMEA and Asia-Pacific business continue its positive momentum. In the quarter, we did benefit from FX favorability of about 2 million and about a million in promotional activities that shifted out to the first quarter of 2024. Turning to slide six.
As expected we saw our Americas business returned to positive volume in our EMEA and Asia Pac business continue its positive momentum.
In the quarter, we did benefit from FX favorability of about $2 million and about $1 million in promotional activities that shifted out to the first quarter in 2024.
Turning to slide six.
Shyam Kambeyanda: In the Americas, organic sales grew by 900 basis points, with strong price performance of 800 basis points, volume adding 100 basis points of growth, and acquisitions adding another 100 basis points. We did have a small FX headwind in the quarter. Our investments in new products and solutions, especially our light industrial line focused on distribution, along with our co-bots focused on automation and robotics, are fueling significant growth opportunities. I had a chance to interact with a few of our distributors in December, and their reaction to our product line was remarkable. Several compliments on our Renegade Bolt and our new Ruffian engine-driven welder. The distributors are thrilled with the new ESAB products.
In the Americas organic sales grew by 900 basis points strong price performance of 800 basis points volume, adding a 100 basis points of growth and acquisitions, adding another 100 basis points. We did have a small FX headwind in the quarter.
Our investments in new products and solutions, especially our light industrial line focused on distribution along with our co bots focused on automation and robotics are fueling significant growth opportunities.
I had a chance to interact with a few of our distributors in December and the reaction to our product line was remarkable.
<unk> complements on our renegade bolt and now new Ruffian engine driven well the.
The distributors are thrilled with the new Aesop products. Additionally, our gas control business continues to perform well in the region.
Shyam Kambeyanda: Additionally, our gas control business continues to perform well in the region. Both FAPTEC and gas control contributed to an overall 200 basis points improvement in adjusted EBITDA margin. Turning to slide seven, our EMEA and APAC regions continue to perform as expected, with total sales growing by 400 basis points, while volume grew by 200 basis points.
Both fab Tech and gas control contributed to an overall 200 basis points improvement in adjusted EBITDA margin.
Turning to slide seven our EMEA and APAC regions continue to perform as expected with total sales growing by 400 basis points.
Volume grew 200 basis points acquisitions contributed 100 basis points of growth our team in Europe, India, and the Middle East continued to execute well in the market.
Shyam Kambeyanda: Acquisitions contributed 100 basis points of growth. Our team in Europe, India, and the Middle East continue to execute well in the market. Our gas control team continues to win key projects in lab and hospital expansion projects.
Our gas control team continues to win key projects in lab and hospital expansion projects.
Shyam Kambeyanda: The region has made great strides in selling our equipment line and our fully autonomous adaptive welding solution. To add, the effective utilization of product line simplification and EBX is driving the region's adjusted EBITDA margins up 200 basis points to a record 19.3, underscoring our ability to drive growth and expand margins. On that positive note, let me hand it over to Kevin for slide eight.
The region has made great strides in selling our equipment line and are fully autonomous adaptive welding solutions.
So at the effective utilization of product line simplification and <unk> are driving the region's adjusted EBITDA margins up 200 basis points to a record $19 three underscoring our ability to drive growth and expand margins.
On that positive note, let me hand, it over to Kevin for slide eight.
Kevin J. Johnson: Thanks, Shyam. We delivered another strong quarter of free cash flow of 39% versus 2023, to a record $305 million. Key to our improved performance was a 0.3 turn improvement in working capital as we continued to successfully deploy our EBX business. This strong performance enabled us to de-lever better than expected, and we ended the year with net leverage of less than 1.9 turns.
Thanks, Sean.
We delivered another strong quarter of free cash flow up 39% versus 2023 to a record $305 million key.
Key to our improved performance was up <unk> three turn improvement in working capital as we continue to successfully deploy our <unk> business system.
This strong performance enabled us to deliver better than expected and we ended the year with net leverage of less than one nine turns.
Kevin J. Johnson: In 2024, we continue to see opportunities to use VBX and leverage AI to drive even stronger cash flow to support our compounding journey. Turning to slide nine, we provide our 2024 guide. Total sales growth of 1.5% to 3.5%, which includes a point of FX headwind, and organic growth of 2.5% to 4.5%. We have also provided our 2024 seasonality by quarter on the slide. We expect year-on-year incrementals to be in the low 30s with an adjusted EBITDA guidance of $495 to $515 million. This guidance includes $10 million of restructuring benefits and $15 million of additional investment in our business to support the commercialization of our innovative new equipment portfolio. Interest expense is guided to $74 million to $77 million, the adjusted tax rate between 23% to 24%, and the short count around $62 million.
In 2024, we continue to see opportunities to use the bx and leverage AI to drive even stronger cash flow to support our compounding journey.
Turning to slide nine we provide our 2020 for guidance.
Total sales growth of one and a half to three 5%, which includes a point of FX headwind on organic growth of two and a half to four 5%.
We have also provided our 2024 seasonality by quarter on this slide.
We expect year on year incrementals to be in the low thirties with an adjusted EBITDA guidance of $495 million to $515 million.
This guidance includes $10 million of restructuring benefits of $15 million of additional investment in our business to support the commercialization of our innovative new equipment portfolio.
Interest expense is guided to $74 million to $77 million adjusted tax rate between 23% to 24% sure kind of around $62 million.
Kevin J. Johnson: Overall, unadjusted EPS guidance of $4.65 to $4.85. Finally, our cash flow conversion guide is greater than 95%, which includes two one-time capital investments of around $10 million we're making to support future growth. To assist with modeling, we have included a more detailed guidance slide in the appendix. With that, let me hop back to Shyam on slide 10 to wrap up.
<unk> on adjusted EPS guidance of $4 65 to $4 85.
Finally, our cash flow conversion guide is greater than 95%, which includes two one time capital investments of around $10 million, we're making to support future growth.
To assist with modeling we have included a more detailed guidance slide in the appendix with that let me hand back to <unk> on slide 10 to wrap up.
Shyam Kambeyanda: Thank you, Kevin. In conclusion, our teams are focused on executing our strategy, propelling us closer to our goal of becoming a premier industrial compound. We exit 2023 with momentum as our innovative new products ignite enthusiasm within our customers and our sales. We're putting a robust cash flow to good use, reducing debt, and adding strategic bolt-on acquisitions. Our M&A pipeline is the strongest it's ever been, positioning us favorably to augment organic growth. We're taking EBX up a notch with the President's Kaizen event occurring every quarter.
Thank you Kevin in conclusion, our teams are focused on executing our strategy propelling us closer to our goal of becoming a premier industrial compound we.
We exit 2023 with momentum as our innovative new products ignite enthusiasm within our customers and our sales team.
We're putting a robust cash flow to good use reducing debt and adding strategic bolt on acquisitions.
Our M&A pipeline is the strongest it's ever been positioning us favorably to augment organic growth.
We're taking ebs up a notch with the President's kaizen event occurring every quarter.
Operator: We're off to a good start in 2024, and our focus is on delivering the year as we have guided and positioning ESAB to realize our 2028 objective. We're just getting started. And, as I said at Investor Day, it's a great time to be an investor in ESAB. This team is poised to continue to deliver significant value for our customers, associates, and shareholders. With that, operator, let's open the lines for questions. If you would like to ask a question, please press star followed by the number one on your telephone keypad, and if you would like to withdraw that question, again, press star one.
We're off to a good start in 2024, and our focus is on delivering the year as we have guided and positioning aesop to realize our 2028 objectives. We're just getting started and as I said at Investor day, It's a great time to be an investor in Aesop. This team is poised to continue to deliver significant value for our.
Customers associates and shareholders.
With that operator, let's open the lines for questions.
I ask a question. Please press star followed by the number one on your telephone keypad and if you would like to withdraw that question again press star one.
Tami Zakaria: We ask that you limit yourself to one question and one follow-up. Your first question comes from the line of Tami Zakaria from JP Morgan. Please go ahead. Hi, good morning. Thank you so much.
Ask that you limit yourself to one question and one follow up your first question comes from the line of Tami Zakaria from Jpmorgan. Please go ahead.
Hi, good morning, Thank you so much and excellent margin performance in the quarter.
Shyam Kambeyanda: You had an excellent margin performance in the quarter. So my first question is on that topic. The implied incremental EBITDA margin in your 2024 guide seems to be in the mid 30%. And your 2028 target to get to the 22% EBITDA margin would require you to have an implied incremental of about, call it the high 20%, meaning it seems like you're running ahead of that target. So should we think about the target as pretty conservative and easy to get to, or was it originally adopted, assuming that incremental margin, over time, later toward the 2028 timeline slows down, and it was always going to be front-end loaded? Well, first, good morning.
So my first question is along that topic, the implied incremental EBITDA margin and your 2024 guide seems to be in the mid 30%.
And your 2020 target.
To get to the 22% EBITDA margin would imply you would require you to have an implied an incremental of about call. It high 20%, meaning it seems like you're running ahead of that.
Target so should we.
Let's think about the target as pretty consistent conservative and easy to get to or was it originally adopted assuming that incremental margin.
Over time later towards the 2028 timeline slows down.
And it was always going to be front end loaded so any thoughts on the incremental piece.
Shyam Kambeyanda: It's always good to hear from you, Tami. Well, first, thank you. I think we did have a great quarter, both on the growth side and on the margin side of the business. I'm really proud of how the team performed. I am thrilled that, you know, we finally saw us peak out to positive volume in North America and continue our momentum in the rest of the world. To answer your question, we did really like our margin performance in the fourth quarter and how we finished out the year. As you know, as you look out your window, there are many things that can come at you, headwinds or tailwinds, as you look at 2028.
Well first good morning always good to hear from the Italian.
Well first thank you I think we did have a great quarter, both on the growth side.
And on the margin side of the business really proud of how the team has performed.
Thrilled that we finally saw as peak out to positive volume in North America and continue our momentum in the rest of the world to answer your question.
We we did really like our margin performance in the fourth quarter and how we finished out the year.
No.
Look out your window, there's many things that could come at you headwinds a tailwind as we look at 2028.
Shyam Kambeyanda: What we've always said is that our team is very confident in delivering the margin growth targets that we've set within the business and then focusing on augmenting our organic growth through organic opportunities and acquisitions. As I mentioned earlier, we've got a really strong funnel. So we feel that both in 2024 and the rest of the time, we really have a chance to accelerate the growth line within organic opportunities but continue to keep the pace of how we see our margin expansion continue. So, bottom line, I think we're right where we need to be. And I think we're driving the ship forward with some momentum. Got it. Great to hear.
Well, we've always said is that our team is very confident in delivering the margin growth targets that we've said within the business and then focusing on.
<unk>, our organic growth with an organic opportunities and acquisitions I mentioned earlier, we've got a really strong funnel.
So we feel that both in 2024 and the rest of the time, we really have a chance to accelerate the growth line width with inorganic opportunities, but continue to keep the pace on how we see our margin expansion continues so bottom line I think we're right where we need to be.
And I think were driving the ship forward with some momentum.
Got it great to hear so my second question is just.
Shyam Kambeyanda: So my second question is, just trying to understand the full year outlook in terms of sales. It seems like the first half is expected to be modestly lower than the second half. And then the growth acceleration in the fourth quarter is much heavier than what's implied in for the first quarter. So what's really driving this expectation of a slower start?
Just trying to understand the full year outlook in terms of sales. It seems like the first half is expected to be modestly lower than the second half.
And then the growth acceleration in the fourth quarter is much heavier than than what's implied for the first quarter. So.
What's really driving this expectation of like us.
Shyam Kambeyanda: And then what gives you visibility that, you know, growth is going to accelerate in the back half? Yeah, I think I mentioned we're off to a good start to the first quarter. But I think we did have weather in the Scandinavian region of Europe and also North America that was a bit severe.
<unk> start and then what gives you visibility of that growth is going to accelerate in the back half.
Yes, I think.
I mentioned, we're off to a good start.
For the first quarter, but I think we did have weather in the Scandinavian.
<unk> region of Europe, and also North America, there was a bit severe we've also had the Chinese new year falls squarely in February and then we expect Easter to land completely in the first quarter. This year as well so theres a bit of a what I'd call a headwind that is just.
Shyam Kambeyanda: We've also had the Chinese New Year fall squarely in February, and then we expect Easter to land completely in the first quarter this year as well. So there's a bit of what I'd call a headwind that is just related things outside the control of the business this year versus last year. And so you're seeing some days adjusted plus holidays kind of kick into that first quarter number. And then, you know, the rest of the year kind of shapes out the way we see it today. Now, what it doesn't include is any acquisitions that we make in that period.
Related things outside the control of the business this year versus last year, and so youre seeing some days adjusted plus holidays kind of kick into that first quarter number.
And then the rest of the kind of shapes out the way we see it today.
Now what it doesn't include is any acquisitions that we make.
Shyam Kambeyanda: And that would obviously be positive upside to both growth and earnings, and our intent, obviously, is to acquire businesses that are accretive to margin. So in both ways, we expect to sort of continue that positive momentum. Wonderful, see you in a couple of weeks.
That period and that would obviously be positive upside to both growth and our intent obviously is to acquire businesses that are accretive to margin. So on both ways, we expect to sort of continue that positive momentum.
Wonderful see you in a couple of weeks.
Tami Zakaria: Thanks. Thanks, Tim. Your next question comes from the line of Meg Dobre from Baird. Please go ahead.
Thanks, Thanks Tammy.
Your next question comes from the line of Mike Del O'brien from Baird. Please go ahead.
Mircea Dobre: Yes, good morning. I also want to ask about margin, and I can appreciate the discussion on incrementals that are baked into the guide for 24. But performance in Q4 was quite strong, right? North of 19%, and that's, frankly, above the high end of where you're guiding margins for 2024. So I'm sort of wondering kind of how we should think about seasonality here. Why, for instance, should we see a step down in margin relative to Q4? Anything to know about that? Yeah, first of all, we were very happy with how both of our regions performed and really all across Fabtech, gas control, and across almost all regions, which sort of gives us great confidence about how people are inculcating EBX into their daily standard work and how our teams are sort of working towards what is our ultimate goal that we've set up for 2028. I did mention we had a few good guys come at us in the fourth quarter.
Yes, good morning.
I also want to ask.
About margin I can appreciate the discussion on Incrementals that are baked into the guide for 2024.
But performance in Q4 was quite strong right north of 19%, that's frankly above the high end of where you are guiding margins for 2024, so I'm sort of wondering.
Kind of how we should think about seasonality here.
Why for instance, should we see a step down in margin relative to Q4 anything to know about that.
Yes.
First we were also very happy with how both of our regions performed and really all across that that gas control and across almost all regions, which sort of gives us great confidence as how people are inculcating PBX into their daily standard work and how our teams are sort of working towards what is our ultimate goal that we had set out for 2020.
Eight.
I did mentioned we had a few good guys come at us in the fourth quarter I mentioned, a little bit of favorability of a couple million dollars with FX and about $1 million in sort of marketing and some other activities that pushed out to the quarter and then Kevin briefly mentioned, we're going to continue to invest as.
Shyam Kambeyanda: I mentioned a little bit of favorability of a couple million with FX and about a million in sort of marketing and some other activities that pushed out to the quarter. And then Kevin briefly mentioned that we're going to continue to invest as we can as we drive equipment sales across all geographies, with about 15 million of additional investment. And so those are the factors that you should probably look at. And then take a look at the guide as we go into next year.
As we can as we drive equipment sales across all geographies of about $15 million of additional investment and so those are the factors that you should probably look at and then take a look at the guide as we go into next year.
Shyam Kambeyanda: We absolutely believe that now that the flywheel is turning at ESAB, we can take some of those dollars and invest them back in the business for some of the activities that will fundamentally reshape us over the next three years. Appreciate the caller there and, I apologize, I don't know if I missed this, but when we're looking at your organic guidance, the 2.5 to 4.5, can you maybe put a finer point here on how you're thinking about pricing versus volume, and do you foresee any differences between your two reported segments? Yeah, we're expecting positive volume through each quarter and a low single-digit price. The price is pretty consistent year over year by each of the quarters, with volume positive in Q1, but improving as we progress through the year. And obviously, as you've seen from us in the past, we're going to continue to be pretty vigilant on price. We are going to have gone for price already in the first quarter.
We absolutely believe that now is the flywheel is turning at Aesop.
We can take some of that dollars and invested back in the business with some of the activities that will fundamentally reshape us over the next three years.
I appreciate the color there.
I apologize I don't know if I missed this but.
When when we're looking at your organic guidance, the $2 five to four and a half.
Can you maybe put a finer point.
Here on how we should how you are thinking about pricing versus versus volume and do you foresee any differences between your two reported segments.
Yes.
Yeah, So mig.
We're expecting positive volume.
Three each quarter.
And low single digit price.
The price is pretty consistent year over year by each of the quarters.
With volume positive in Q1, but improving as we progress through the year.
Obviously, you've made as you've seen from us in the past, we're going to continue to be pretty vigilant on price. We are our garner hot-comb for price for that in the first quarter, we'll continue to watch inflation and move as required in terms of the segments. Our expectation is that both.
Shyam Kambeyanda: We'll continue to watch inflation and move as required. In terms of the segments, our expectation is that both we expect both segments to be positive on volumes with a stronger price in the America segment versus EMEA and APOC. Can I ask why the America segment has a higher price, what's the factor driving that?
We expect both segments to be positive for volumes with stronger price in the Americas segment versus EMEA and APAC.
Can I can I ask why stronger price in Americas.
What's the factor driving that.
Shyam Kambeyanda: And so we do have a portion of the business that's in South America. So there is an element of some additional price there. And our team continues coming out of the TLS activities that we did last year in North America to maximize value, particularly on the new innovative products that we're bringing to the market. We see an opportunity to continue to drive price to a better place. Thanks a lot.
So we do have a portion of the business. That's in South America. So theres an element of some additional price there on our team continues cumin pls activities that we did last year continues in North America to maximize value, particularly on the new innovative products that we're bringing into the market we see.
An opportunity to continue to drive price to a better place.
Mircea Dobre: Thank you. Your next question comes from the line of David Rosso from Evercore ISI; please go ahead. Hi, thank you.
Excellent. Thank you.
Your next question comes from the line of David Raso from Evercore ISI. Please go ahead.
Hi, Thank you picking up on the price commentary.
David Rosso: Picking up on the price commentary, I thought the price in the fourth quarter was a pleasant surprise in the Americas. So can you give us a sense of, is there any incremental price you took in January, or is the price you expect in America in 24 simply whatever you have as carryover? And then, if you can also on the negative pricing and international, just so we kind of square up, where's that coming from? Is that largely a downturn in Europe?
Price in the fourth quarter was a pleasant surprise in the Americas.
Can you give us a sense of is there any incremental pressure you took in January.
Or is.
The price you expect in Americas, and 24 simply whatever you have is carryover.
And then if you could now but also on the negative pricing in international just so kind of square up Where's that coming from is that largely done.
Down Europe.
Shyam Kambeyanda: but maybe some positive price in the Middle East and in India. Yeah, so thanks, David. Great. Good to hear your voice, as always.
But maybe some positive price in middle East and.
In India.
Yeah. So thanks David.
Good to hear your voice as always so couple of things.
Shyam Kambeyanda: So a couple of things. We did lap up in Q4 some America pricing. But that being said, as Kevin mentioned, we've gone out with some additional pricing in the first quarter in both of our regions. When we looked at Europe, we did see some, you know, we've talked about this before; we see steel prices moving very differently in different regions. And we did see some deflationary steel prices, especially in Europe, that sort of allowed us to do something different in our pricing strategies in Europe for the fourth quarter. But we have done some additional pricing activities, you know, in the first quarter. But that being said, what we were really happy about in Europe was the expansion in margins by about 200 basis points.
We did lap in Q4, some tobacco pricing.
But that being said as Kevin mentioned, we've gone out with some additional pricing in the first quarter.
In both of our regions.
When we looked at Europe, we did see some we've talked about this before we see steel prices moving very differently in different regions and we did see some deflationary steel prices, especially in Europe.
That's sort of allowed us to do something different.
And our pricing strategies in Europe for for the fourth quarter, but.
But we have done some additional pricing activities.
In the first quarter, but that being said, what we were really happy about in Europe was the expansion in margins about 200 basis points and if you remember one thing that we have said is that <unk> focused on a net price number so when we see deflation.
Shyam Kambeyanda: And if you remember, one thing that we have said is that ESAB is focused on a net price number. So when we see deflation and what we do with the marketplace, we want to be net positive on the price line as we move forward. And that was very evident in how we performed in the fourth quarter. I hope that answers the question.
And what we do with the marketplace, we want to be net positive on the price line as we move forward and that was very evident in how we performed in the fourth quarter I hope that answers the question.
Shyam Kambeyanda: That's fair and not to drill down to the first quarter, but I heard positive price, positive volume. And just making sure, I mean, obviously, the currency is a negative one for the year, so it must be more front-end loaded. But just trying to square that up, basically, you're looking for a positive price, positive volume, offset by volume for a flattish first quarter. Is that it?
No Thats fair and Thats, a drill down to the first quarter, but I heard positive price positive volume.
I'm, just making sure I mean, obviously the currency is negative one for the year it must be more front end loaded.
But just trying to square that up based so youre looking for positive price positive volume offset by volume for a flattish first quarter.
David Rosso: Yeah, that's right. That's all right. And I think the other piece that we, the other piece we mentioned is that there's a bit of noise in the first quarter with weather and where the holidays are landing. So you've got a day's impact as well that comes at you for the first quarter. And lastly, you referenced an M&A pipeline. I'm not sure the word you used, robust or full, or whatever it may be, but can you explain what you meant by that and maybe give us some framework of how you're thinking about M&A this year? Yeah, you know, very similar to our strategy in the past, bolt-on acquisitions, keeping our debt level, you know, in that two range, and driving businesses and acquiring businesses that are accretive, improve our geographic strategic positioning, and filling out product line gaps. We've got a few that have a chance to get over the goal line.
Yes.
Right.
That's right and I think the other piece that we did.
The other piece, we mentioned is that there is a bit of noise in the first quarter with weather, but where the holidays are landing so you've got a day's impact as well that comes at you for the first quarter date.
Okay, and lastly, you referenced some M&A pipeline.
Sure the world views robust or full or whatever it may be but but can you explain what you meant by that and maybe give us. Some some framework of how youre thinking about M&A this year.
Yeah, very similar to our strategy in the past bolt on acquisitions, keeping our debt level.
In that two range.
And driving businesses and acquiring businesses that are accretive improve our geographic strategic positioning and filling out our product line gaps. We've got a few that are that have a chance to get over the goal line.
Shyam Kambeyanda: And so as a result, we're feeling quite good that none of our guidance does not include any acquisitions that could happen. And that would be a pleasant upside to anything that we've guided to today. And I guess I was also hinting at size a little bit. I mean, is this Ohio medical size, or is this more therapy size?
And so as a result, we're feeling quite good that none of our guidance does not include any.
Any acquisitions that could happen and that would be a pleasant upside to anything that we've guided to today.
And I guess amount was also hinting at size a little bit I mean is this ohio medical size or is this more therapy size I'm, just trying to get a sense of magnitude.
David Rosso: I'm just trying to get a sense of magnitude. Yeah, they're, you know, what I'd say in one in one kind of scenario, you know, that there's probably a couple in there the size of therapy and a couple in there the size of Ohio. Helpful. All right. Thank you so much.
Yes.
What I would say, one and one kind of a scenario that there's probably a couple and then size of therapy and a couple in there the size of Ohio.
Helpful. All right. Thank you so much.
Nathan Hardie Jones: Your next question comes from the line of Nathan Jones from Stiefel. Please go ahead. Good morning, everyone. Bye.
Your next question comes from the line of Nathan Jones from Stifel. Please go ahead.
Good morning, everyone.
Hi, Nathan.
Nathan Hardie Jones: A couple of questions on some of the investments you're making in 2024. You mentioned $15 million of additional incremental investment to support growth, and Kevin mentioned a couple of CapEx expenditures to support growth. Maybe you could just give us some more color on what those are and how they will drive growth over the next few years. Yeah, so let me take the question on marketing. I'll hand it over to Kevin for the capital.
Couple of questions on some of the investments Youre, making in 2024, and you mentioned the $8 million.
Of additional incremental investment to support growth and Kevin mentioned, a couple of Capex expenditures.
Support growth, maybe you could just give us some more color on on what those are.
They will drive growth over the next few years.
Yes, So let me take the question on marketing I'll hand, it over to Kevin for the capital.
Shyam Kambeyanda: So, on the marketing side, as you know, we've launched several new products, and our intent is to continue to create marketing structures and advertising for these particular products around the globe as we begin to seed these products into the marketplace. The other aspect of it is incentive plans for our sales teams as they begin to sell a different mix and encouraging them to learn and be able to sort of competently sell the product line that we have. And last but not least, we are looking at enhancing our marketing strategy a bit differently, and I don't have anything much to share now, but I hope by the third quarter, we can share with you how we'll begin to separate ourselves on that particular piece and really create something special for the long term at ESAB. And so those are the dollars that we're talking about here.
So on the marketing side as you know we've launched several new products.
Our intent is to continue to create.
Marketing structures and advertising for these particular products around the globe as we begin to see these products into the marketplace.
Other aspect of it is incentive plans for our sales teams as they begin to sell a different mix and encouraging them to learn and be able to sort of competently sell of the product line that we have.
And last but not least we are looking at augmenting our marketing strategy a bit differently nothing much to share now, but I hope by the third quarter. We can share with you how will begin to separate ourselves on that particular piece and really create something special for the long term at Aesop and so thats the dollars that we're talking about that Kevin.
Kevin J. Johnson: Kevin, do you want to give a bit of color on capital? Yeah, on the two capital investments. Two main areas that we're focused on. The first is we're putting some investment into emerging markets. Obviously, you know, what you're seeing is continued great growth from some of our markets. And what we're doing is we're building out some additional infrastructure just to allow us to support the growth that we're seeing. And the second investment, you probably heard us talk about in the script around AI, both Shyam and me. So we are putting some additional investment into AI and also into some other IT investments just to support the growth that we're expecting in ESAB over the next number of years. I guess the second one I might ask about the PLS that you guys undertook in 2023. I know that was somewhat of a headwind for volume in the Americas.
To give a better color on capital.
Two capital investments.
Sure.
Two main areas.
<unk> focused on the first is we're putting some investment into the emerging markets obviously.
What youre seeing is continued great growth from some of our markets and what.
What we're doing is we're building out some additional infrastructure just to allow us to support the growth that we're seeing.
The second advancement.
Probably heard us talk on the script that Ryan AI Xiaomi. So we are putting some additional investment into AI and also into some other investments just to support the growth that we're expecting in the Sop over the next next number of years.
Great I guess, the second one I might ask about pls.
Undertook in 2023, I know that was somewhat of a headwind to volume in the Americas.
Nathan Hardie Jones: Please give us an update on where you stand with, you know, at least the first run through PLS. Whether or not that is any kind of headwind remaining in 2024, or whether that's behind us, and how you think that's focusing the company on growth. Yeah, you know, first, we're really happy with how PLS is being executed by our teams. We continue to see opportunities to refine our product line, our SKUs, to serve our customers well. So that being said, a big chunk of the PLS, yes, is behind us, but we continue to expect to do PLS in some of our other regions, a little more focus in Europe and a bit more focus in the Asia region as well around PLS for us.
Can you just give us an update on where you stand with at least the first run through Pls.
Whether or not that has any kind of headwind.
Remaining in 2024, whether that's behind Us and how you think thats focusing the company on on growth.
Yeah.
First.
We're really happy with how pls is being executed by our teams.
Continue to see opportunity.
To refine.
Product line, our skus to serve our customers well, so that being said a big chunk of the Pls, yes is behind us, but we continue to expect to do pls in some of our other regions a little more focus in Europe.
And a bit more focus.
In the Asia region, as well around Pls for us, but that being said I think we are at a point now that we can look at a net positive growth number coming out of Pls, where we've done some of the heavy lifts and now we're focused on growing.
Nathan Hardie Jones: But that being said, I think we are at a point now that we can look at a net positive growth number coming out of PLS, where we've done some of the heavy lifting, and now we're focused on growing as well as sort of refining our product line. But I can tell you that PLS, for us now, is standard work. We're looking at it with a growth lens as well. And so, as a result, our teams are focused on driving growth with some great customers, as well as making sure our product line continues to get refined. Great
As well as sort of refining our product line, but I can tell you that pls for US now is standard work.
Looking at it with the growth.
Lens as well and so as a result, our teams are focused on driving growth with some set of customers as well as making sure our product line continues to get refined.
Christopher M. Dankert: Thanks very much for taking my question. Your next question comes from the line of Chris Dankert from Loop Capital. Please go ahead. Hey, good morning.
Great. Thanks, very much for taking my questions.
Our next question comes from the line of Chris Dankert from Loop capital. Please go ahead.
Hey, good morning, Thanks for taking the question.
Christopher M. Dankert: Thanks for taking the question. I guess first off, thinking about international kind of what's baked into the guidance there. How are you thinking about just kind of the trends in Europe and probably China specifically? Are we kind of expecting it to stabilize at this level? Are we expecting kind of a continued, you know, slide in the first half and then stabilization, or rebound? Maybe some comments on those regions in particular would be helpful. Yeah, yeah, Chris, I think so.
I guess first off thinking about international kind of what's baked into the guidance there.
How are you thinking about just kind of the trends in Europe, and probably China, specifically are we kind of expected to stabilize at this level or are we expecting kind of a continued.
Shyam Kambeyanda: I may not have mentioned this, but we sort of view our businesses by daily sales rate. And, you know, we also look at how things are performing across all of our regions. And what we've seen is that there is stability in those rates. So nothing is sort of shifting downwards.
Shyam Kambeyanda: That being said, sort of year-over-year comparables are getting a little tighter. And so the way to think about it is that, for a fact, the Germanic region in Europe is seeing a lot of stress and has been seeing a lot of stress for a few quarters now, while the rest of Europe seems to be holding OK. And that's what we see.
Shyam Kambeyanda: And with a significant amount of, obviously, positive momentum in the Middle East and in India, in particular. And, you know, the UK has also sort of seen a bit of stress. But our position in the UK is quite strong, and we continue to gain grain share in China.
So sort of seen a bit of stress, but opposition of the uk's quite strong and and we continued to grin <expletive>.
On on China.
<unk>.
We sort of seen some investment come in from the government and you know there's a comment that I made earlier around energy transition.
Shyam Kambeyanda: We've sort of seen some investment come in from the government. And, you know, as the comment that I made earlier around the energy transition that's happening and things, especially as people are sort of creating storage spaces for LNG and other aspects that have sort of seen us sort of perform better than what we've sort of heard commentary out in the marketplace around China. I'd also tell you, if you're, you know, from if I'm repeating myself, I apologize, but we play in the top tier And as a result, don't really feel the, you know, the peaks and troughs that maybe the others are feeling in China. The space that we're in continues to be a space that China continues to invest in, and we're benefiting. That's a really great color.
That's happening and <unk> and things, especially as people are sort of creating storage spaces for LNG in other aspects that is sort of <unk>.
Better than what we've sort of heard the commentary out in the marketplace around China. I'd also tell you if you're from if I, if I'm repeating myself I apologize, but we play in the top tier of the of the Chinese market and as a result don't really feel the you know the peaks and troughs that maybe the others feeling in China.
The space that were in continues to be a space that the.
China continues to invest in and we're benefiting from it.
That's really great. Thank you and then I got to kind of follow up here any commentary update from the manufacturing consolidation in any kind of plans on that front for the year.
Christopher M. Dankert: And then, I guess, to kind of follow up here, any comment or update on some of the manufacturing consolidation and any kind of plans on that front for the year? Yeah, you know, Kevin and I start the year with a set of projects that we have in our pocket. And depending on where the market goes, we accelerate or move along on schedule. There are a few projects that we have planned. You know, so absolutely, we have about 10 million in our guidance for some of that, and we may accelerate that if we see any issues in the market, but otherwise, that's our intention. Got it. Yeah, it's more refining around the edges than anything particularly dramatic.
Yeah, you know, Kevin and I started out with.
Set of projects that we have in our pocket and depending on where the market goes we accelerate or move along on schedule. There are a few projects that we have planned.
So so absolutely we we have about 10 million in our guidance for some of that and we may accelerate that if we see any any issues in the market, but otherwise that's our intent.
Got it got some more and more refining around the edges than anything, particularly dramatic so please apply.
Yeah, Yeah, a lot of it depends also on on acquisitions bolt on acquisitions that we make that will then allow us to do some additional consolidation.
Think about it.
Makes sense, well well, thanks, so much and and best of luck on the ear.
Thank you.
Your next question comes from the <unk> from U P. S. Please go ahead.
Shyam Kambeyanda: So, um, yeah, yeah. A lot of it depends also on, uh, acquisitions, both acquisitions that we make that will then allow us to do some additional consolidation. Makes sense.
Hey, good morning, <unk> today.
Thanks, Thanks, Rob.
Yeah, just wanted to talk a little bit about the gas control business I mean, it was uploaded double digits I mean solid performance. Just wondering if you could talk a little bit more about what you saw on the end markets there.
Christopher M. Dankert: Well, thanks so much and best of luck for the year. Thank you. Your next question comes from the line of Rob Jamison from UBS. Please go ahead. Hey, good morning.
Robert Gregor Jamieson: Congratulations on the results today. Thanks. Thanks, Rob. Yeah, I just wanted to talk a little bit about the gas control business. I mean, it was up low, double digits. I mean, solid performance.
What was maybe a little bit better maybe even worse than you expected. But then also like a reminder, on what the split might be between equipment and consumables and then have a follow up on a doctor. Thank you.
Yeah, so on on the gas control business we.
You're absolutely right, we did see low double digit growth, where we saw a significant amount of growth was on the energy transition piece of the business, So energy markets, whether it be oil and gas or anything associated with energy. We saw we saw a nice uptake in our gas control business on that particular front and then continued momentum on special.
Shyam Kambeyanda: Just wondering if you could talk a little bit more about what you saw in the end markets there, what was maybe a little bit better, maybe a little worse than you expected, but then also, like a reminder of what the split might be between equipment and consumables and then follow-up on that. Yeah, so on the gas control business, you're absolutely right. We did see low double-digit growth. Where we saw a significant amount of growth was in the energy transition piece of the business. So energy markets, whether it be oil and gas or anything associated with energy, we saw a nice uptick in our gas control business on that particular front, and then continued momentum on specialty and medical gases with sort of investments happening across in terms of upgrades. So those were really the highlights there.
<unk> gas is with that sort of investments happening across in terms of upgrades. So those are really the highlights there where we did see a bit of headwind was again in the in the market in Germany.
Our our gas control business in Europe actually has a significant amount of German exposure and so that was a drag on that on that particular business, but the industrial specht and medical side everywhere else saw some nice growth and obviously, we have some some nice clothes opportunities also set up for.
Shyam Kambeyanda: Where we did see a bit of a headwind was again in the market in Germany. Our gas control business in Europe actually has a significant amount of German exposure, and so that was a drag on that particular business. But the industrial spec and medical side everywhere else saw some nice growth. And obviously, we had some nice growth opportunities also set up for 2024. You know, that's helpful.
For 2024.
No. That's that's helpful. And then how do you think about you know.
You know what's embedded in your guidance between maybe gas controlling the core welding business.
Yeah, we've we've not sort of split out to to talk about them separately and our guide, but what I'd say is that we are obviously coming off some really hot.
Robert Gregor Jamieson: And then how do you think about, you know, Uh, you know, what's embedded in your guidance between maybe gas control and core welding? Yeah, we've not sort of split out the two to talk about them separately in our guide. But what I'd say is that we're obviously coming off some really high numbers on the gas control side, so I expect that to be a bit more muted in 2024. And then you know, you can do the math on the averages as you look at our Fabtech business as well. Sure, perfect. Can I sneak one more in?
Hot numbers on the gas controls side, so I expect that to be a bit more muted in 2024, and then you know you can you can do the math the averages as you look at our Fabtech business as well.
Perfect and can I see one more in obviously, there's always my my my favorite subject with you all the talk about the AI initiatives and what you're doing with you be extra free cash flow and I know, that's something where Kevin you started was implementing this I'm working capital and some initiatives. There just curious kind of would you be able to share any more of those sun on what specifically.
Robert Gregor Jamieson: Obviously, this is always my... topic with you all to talk about the AI. What you're doing with EBX, your free cash flow. And I know that's something where Kevin you started implementing this on working capital and some initiatives there. Just curious, would you be able to share any more with us on what specifically you might be targeting from the EBX side to help support growth but also improve margins? Yeah, you know, there are a couple of aspects.
You might be targeting from the B X side to help kind of support broke but also improve Martin.
Yeah, you know.
Couple of aspects and I think I've mentioned it before as well, we we think that are.
Material planning and production planning side of the business has some opportunity where AI it could be a significant asset.
And that's why we've been focused both with our data mining tools that we've used them to pass along with the now a I we are sort of looking at some other projects, but nothing that's sort of baked enough to talk about but we do expect to continue to <unk> to these emerging technology.
Shyam Kambeyanda: And I think we mentioned it before, as well, we think that our Material planning and production planning side of the business has some opportunities where AI could be a significant asset. And that's where we've been focused, both with our data mining tools that we've used in the past, along with AI. We are sort of looking at some other projects, but nothing that's sort of big enough to talk about. But we do expect to continue to lean in to these emerging technologies and trends that could fundamentally help reshape an enterprise. Kevin, did I miss something? No, thank you.
G as in France.
That could fundamentally help reshape an enterprise Kevin did I Miss something I'll think of who you got it I mean, there's there's a lot of.
Momentum happening at the moment Chris.
And we're just making sure that we are poised.
To take advantage of it the area that I'm, probably more focused on is sort of back office support them.
And how we can improve cash flow using.
Oh Aye Aye technology. So we've got several kind of projects that are starting to you don't care about.
Kevin J. Johnson: You got it. I mean, there's a lot of momentum happening at the moment, Chris. And we're just making sure that we're poised to take advantage of it. The area that I'm probably more focused on is sort of back office support and how we can generate improved cash flow using AI technology. So we've got several kinds of projects that are starting to gear up, and it's going to be an exciting year as we go on the learning curve because there is an element of learning curve with AI. But I think the decision that we have made is that we want to be in it at the start, and we want to be a leader in this area. Great, thank you so much for taking my questions, and congratulations again. Your next question comes from the line of Meg Dobre from Baird. Please go ahead.
Yeah, it's going to be an exciting this year as we go on the learning curve because there is an element of learning curve with a I, but I think the decision that will be it is we want to be in it you know at the start and we want to be a leader you know in this area.
Great. Thank you so much for taking my questions are you interested in.
Your next question comes from the line of <unk>. Please go ahead.
Thank you for taking my follow up I I appreciate it I have I have two of them.
I guess.
The first one is is an armchair games I'm I'm wondering when when you look at whatever industry data you might be using internally is there a way to frame any progress that you might've made I mean optically to me it looks like your growth is better than your peers, which would imply some share gain.
Mircea Dobre: Oh, thank you for taking my follow-up. I appreciate it. I have I have two of them.
I'm wondering if my interpretation is indeed, correct and if there is something can be extrapolated here as we think about 2024.
Shyam Kambeyanda: I guess the first one is on share gains. I'm wondering, when you look at whatever industry data you might be using internally, is there a way to measure any progress that you might have made? I mean, optically, to me, it looks like your growth is better than your peers, which would imply some share gain. I'm wondering if my interpretation is indeed correct and if there is something to be extrapolated here as we think about 2024. Yeah, you know, there's no industry data per se out there, Meg, that sort of clearly points to any of that. I think for us, it's been around execution, the makeshift.
Yeah, you know it's.
There's there's no industry data per se out there make that sort of clearly points to any of that I think for us it's been around execution.
The make shift I think we have one thing that we've obviously mentioned in the past is that <unk>.
Primarily been of consumables company and then the last couple of years, we really got our equipment line coming in.
And I don't think even on the gas equipment side I think we've done a really nice job getting our industrial products back in front of our customers and focusing on growth segment. So I think the best way for you to look at how <unk> thinks about it.
Shyam Kambeyanda: I think one thing that we've obviously mentioned in the past is that ESAB has primarily been a consumables company. And then in the last couple of years, we've really got our equipment line coming in. And even on the gas equipment side, I think we've done a really nice job getting our industrial products back in front of our customers and focusing on growth segments. So I think the best way for you to look at how ESAB thinks about it is that we're focused on end markets that are growing faster than others. We're focused on customers that have better growth opportunities than others, and we're focused on products that provide us with a better margin and then also solve some of our customers' biggest challenges. We think if we do all of those right, what you just mentioned about share gain just happens. So I think as a team, we're focused on the process. I think the results will begin to show themselves. Okay, understood.
Is that we're focused on and markets that are growing faster than others would focus on customers that have better growth opportunities and others and we're focused on products that provide us with a better margin and then also solve some of our customers biggest challenges. We think if we do all of those right what.
What you just mentioned about Shagging just happens so I think as a team will focus on the process.
I think the results will begin to show themselves.
Okay understood and my final question on automation, maybe remind us here the size of this business in 2023.
You're talking about Cobots growan growing a lot.
How <unk> you think about this business and 24 and what might be a better.
Thank you.
Yeah, you know, we're obviously quite excited about the the progress that we've made in automation fries as you know the business is about 10% of our business and growing.
Quite nicely, we expect the growth to continue next year. You know, we we think there's sort of a double digit opportunity of growth in in the automation space for Aesop, So it'll be a larger share of our business, but as I mentioned before where we're not looking for big chunks here. We're looking for process. We're looking for.
Mircea Dobre: And my final question on automation, maybe remind us here of the size of this business in 2023. You talked about cobots growing, growing a lot. What do you think about this business in 24?
Shyam Kambeyanda: Yeah, you know, we're obviously quite excited about the progress that we've made in automation. For us, as you know, the business is about 10% of our business and is growing quite nicely. We expect the growth to continue next year. You know, we think there's sort of a double-digit opportunity for growth in the automation space for ESAB, so it'll be a larger share of our business. But as I mentioned before, we're not looking for big chunks here. We're looking for processes, and we're looking for workflow that's a bit focused and less around material handling that sort of drives large volumes through ESAB. But I think the richness and the conversion to profit are what we really like.
<unk>, that's that's a bit focused and less around material handling that sort of drives large volumes two e's, but I think the richness in the conversion on profit.
We we really like the other piece around Cobots, we are seeing momentum we saw another quarter of really strong growth about close to 90 per cent growth in that particular segment.
You know at our leadership meeting we had the automation team talk and present about the opportunities what I can tell you is that there's obviously excitement within our team and also in the customer base, but the volumes are still low but the opportunity exists in our solution said and the way our teams are going about selling it clearly.
Shyam Kambeyanda: The other piece around cobots, we are seeing momentum. We saw another quarter of really strong growth, close to 90% growth in that particular segment. You know, at our leadership meeting, we had the automation team talk and present about the opportunities. What I can tell you is that there's obviously excitement within our team and also in the customer base, but volumes are still low. But the opportunity exists, and our solution set and the way our teams are going about selling it clearly has momentum.
Has momentum.
Great I'll leave it there.
Thanks Mexican ma'am.
We have no further questions center came at this time I will now turn the call back on for <unk> for closing remarks.
Thank you for joining us today, and we look forward to talking to you the next quarter.
This concludes today's conference call. Thank you for your participation and you may now disconnect.
[music].
Mircea Dobre: Great. I'll leave it there. Thanks, Meg.
Mark Barbalato: We have no further questions in our queue at this time. I will now turn the call back over to Mark Barbalato for closing remarks. Thank you for joining us today, and we look forward to talking to you next quarter. This concludes today's conference call. Thank you for your participation, and you may now disconnect.