ESAB Corporation

for standing by. At this time, I would like to welcome everyone to today's ESAB Corporation third quarter 2024 earnings call. 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 star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Mark Barbalotto, Vice President of Investor Relations.

Mark, please go ahead. Thanks, Operator. Welcome to ESOP's third quarter 2024 earnings call. This morning, I'm joined by our President and CEO, Sean Combionda, 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. With respect to any non-GAAP financial measures mentioned during the call today, the company 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 Kambayanda.

Thank you, Mark, and good morning, everyone. Thank you all for joining us today. We're pleased to report another strong quarter marked by positive volume growth, record third quarter margins, and robust cash flow in a challenging market. Our differentiated geographic footprint, award-winning products, commercial excellence initiatives, and strategic acquisitions continue to drive our organic growth. Let's move to slide three to discuss specific highlights for the quarter. First, I want to recognize our teams globally for their relentless commitment to our strategy and EBX. Strong demand in high growth markets such as India, other parts of Asia and the Middle East have helped counterbalance slower markets. Our portfolio of light and heavy industrial equipment has continued to deliver with equipment sales increasing in the low double digits this quarter. These new products continue to gain momentum across our channels. Additionally, we're seeing steady growth in our gas control equipment business with positive volume and price. Adjusted EBITDA margins expanded 130 basis points to reach a record 19.6% for the third quarter. And year to date, we've generated a record $215 million in adjusted free cash flow, enabling us to execute our compounded strategy. Turning to slide four, I've been sharing stories that reflect the passion of our teams and the power of our enterprise to shape the world we imagine. This time I want to share my reflections from my recent trip to visit our teams and customers in the Middle East and India. As you know, we pride ourselves as an executive team in going to Gemba. This trip was reassuring. I know I've mentioned this to you all before. I grew up in India and have been visiting the Middle East since the early 2000s. I have to reiterate, the energy is different, and on every trip you see meaningful change in infrastructure in both these regions. and you get additional insights to new projects and plans. For those of you familiar with the Emirates, you now see development beyond Abu Dhabi and Dubai. There are ambitious plans in Ras Al Khaimah. Similarly, Saudi continues its progress, creating growth for ESAB and generating significant excitement. Our largest customers in the Middle East now have a backlog of orders extending five years. And if anticipated government investments in Saudi Arabia materialize, this could further increase the backlog at our customers. We're also focused on addressing the skilled welder shortage by training the next generation of welders. We've established several training schools in the Middle East. This quarter, I'd like to highlight our team's activities in India. Clearly, it's no longer the country I grew up in. The changes are noticeable now. With every visit, you see cranes and construction in Tier 3 cities, and our team in India is doing some exceptional work. We're proud of our business there, and we are the market leaders in this dynamic, rapidly expanding geography. We've made consistent investments in expanding our R&D capabilities in Chennai, as well as adding manufacturing capacity to meet both current and future demand. On the specific project called Project Bandhan, which means bond or binding in English, our team is very proud of this initiative, where we are actively training the new generation of welders on ETHOP's equipment to meet the unprecedented growth we're expecting. We are training 5,000 plus welders annually in India. And more importantly, we're providing the new generation of welders special training around workplace safety. As you may know, at ESAB, we believe zero incidents is possible. As we shape our future in India, our teams have volunteered over 45,000 hours to this initiative in 2024. Let me leave you with another statistic on India. We know India's infrastructure needs are significant, and the government has announced investments of around 1.7 trillion over the next seven years. I'm proud to say that ESAB is playing a crucial role in training the skilled workforce necessary to support India's growth plan. Moving to slide five, let's explore how we're building the capabilities to accelerate sustainable long-term growth. As I mentioned during Invest Today and earlier in my comments today, we're seeing good progress in equipment sales globally. Let me share what our teams have been working on to enable this growth. Our commercial excellence initiative, highlighted at our Invest Today, is gaining traction. By refining our approach to better serve customers and aligning our organization around ESOP's key customer segments through our product line simplification process, we're accelerating growth while enhancing customer experiences. As a result, we are growing faster in equipment. We're also amplifying our innovation pipeline. supported by our EBX open innovation model, which continues to shorten the time needed to bring new products to market. Alongside these efforts, we're enhancing our presence in the channel with targeted marketing initiatives, including creating social media studios across each geographic region to showcase new products and build brand equity. These digital marketing efforts supported by content creators are already generating significant positive impact, resulting in approximately 900 million social media impressions for ESAB. All this hard work was validated by a brand market study we did that showed ESAB's brand recognition in North America has improved by 200%. Moving to slide six, let's review our quarterly performance. Organic sales increased by 100 basis points, reflecting continued strength in high-growth markets. These results reflect double-digit growth in equipment sales and positive growth from our gas control business. Adjusted EBITDA expanded 130 basis points year-over-year, setting a third-quarter record of 19.6%. All this was driven by EBX initiatives across the company. Turning to slide seven. and focusing on the performance in the Americas. Organic sales rose by 200 basis points, driven by strong pricing performance, which offset softer end markets than we expected. Our equipment and workflow solutions continue to drive excitement in the channel, and the team did an excellent job using EBX sales tools and lean initiatives to deliver 190 basis point increase in adjusted EBITDA margin reaching a third quarter record of 20.6%. Moving to slide eight to discuss the performance in EMEA and APAC regions. Our teams in Europe, Asia, and the Middle East achieved another quarter of solid performance. Volume increased by 200 basis points, with high growth markets offsetting the volume softness in Europe as expected. Effective use of EBX, net pricing tool, and strong operational execution led to 100 basis points margin expansion year-over-year, reaching 18.9%. On that positive note, let me hand it over to Kevin for slide nine.