ESAB Corporation

Thank you for standing by and welcome to the ESOB 4th Quarter 2024 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you. I'd now like to turn the call over to Mark Barbalado, Vice President of Investor Relations. You may begin.

Thanks, Operator. Welcome to ESOB's 4th Quarter 2024 earnings call. This morning I'm joined by our President and CEO, Sham Kambyanda, 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, but 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. With that, I'd like to turn the call over to our President and CEO, Sham Kambyanda.

Thank you, Mark, and good morning, everyone. Thank you all for joining us today. Let me begin by recognizing the tremendous effort of all of our associates. Their commitment to our purpose and values and their unyielding dedication to serving our customers enabled us to excel in a challenging environment. Our teams globally continued to raise the bar with EBX, driving continuous improvement kaizens at our manufacturing sites, enhancing sales processes to simplify doing business, and accelerating the pace of innovation to gain market share. The fourth quarter capped off another strong year, delivering record fourth quarter profits, reducing the cyclicality of our business, and delivering over 100% in free cash flow conversion. These achievements bring us closer to our 2028 goals. 2025 is off to a solid start, and we are determined to build on our momentum from 2024. We will stay focused on innovation, shifting our mix, adding bolt-on acquisitions, and raising the bar on EBX to deliver differentiated financial results. Turning to slide three to discuss our financial performance for the fourth quarter, we delivered 90 basis points of margin expansion on flat organic growth and achieved a record fourth quarter adjusted EBITDA margin of 20.3%. This underscores our unwavering commitment to EBX and continuous improvement, enabling us to navigate and execute in a challenging market. Let me reiterate, ESAB has an unmatched global footprint. This is a significant competitive advantage, and in today's context, our high growth markets continue to offset softness in developed markets. In addition, our commercial EBX playbook and the introduction of exciting new products are capturing the attention of end users and customers alike. One of the highlights of the quarter was our welding equipment product line, which rose high single digits in the quarter. We have a track record of consistent strong cash flow generation, which we are deploying to execute our compound strategy. As a result of our efforts over the last eight years, ESAB is a less cyclical, higher margin and stronger cash flow business. Moving to slide four to discuss our 2024 highlights. The team continued to execute and deliver on our commitments. Adjusted EBITDA came in at the top of the range and margin set a new record at 19.7%. Adjusted EPS and free cash flow conversion were well above our guidance. Most importantly, our teams are passionate about our purpose of shaping the world we imagine and our shared vision of reaching our 2028 goals. Turning to slide five and bringing our team's passion to life for you, I've been sharing stories that reflect the enthusiasm of our teams and the power of our enterprise to shape the world we imagine. This time I would like to share how our teams are investing in our local communities. Our team in Europe has expanded our network of technical universities to further the education of young students who are passionate about the field of fabrication technology. We are organizing seminars and donating ESAB equipment as our associates volunteer their time to teach students welding techniques and the best safety practices. We kicked off the ultimate Euro tour and our blue collar tour, traveling to different cities to highlight our products and solutions to customers, distributors and future end users. The blue collar tour is particularly inspiring, making 30 in over 60 days visiting trade schools

and high

schools. Adding to our sustainability initiative, our GCE team collaborated with a key customer to build a fuel cell system used for backup emergency power. We believe in inclusivity at ESAB and I want to especially recognize our UK team who are engaging with Project OAR, which is an initiative that aims to bring new talent and diversity into our industry as it nurtures young talent regardless of background. As always, I'm humbled and proud of the time our associates have volunteered to share their passion for our industry and I know it positively shapes the education and lives of future generations. Moving to slide 6, over the next two slides I would like to share what differentiates ESAB. We believe in the power of and. We expect to find ways to take costs out of our business and invest a portion of these savings in innovation and growth. This slide provides you with an idea of what we're focused on over the next three years to improve margins, deliver stronger free cash flow and achieve better than market growth. I've mentioned before we're in the middle innings of our EBX journey. At our leadership conference next week, we will be sharing our goals to accelerate our Kaizen activities and strengthen our continuous improvement process. We're also training our leadership team with new tools for productivity like AI to drive back office savings. We expect to generate 60 million in savings by 2028 through these activities. Moving to slide 7, we've invested over a hundred million dollars in growth initiatives. These initiatives include driving commercial excellence to expand our light automation and equipment portfolio, leveraging AI to enhance customer experience, supporting our with targeted marketing programs to improve brand recognition and funding university research to drive technological breakthroughs for future innovative products. The results are exciting with our new products improving our equipment mix and profitability. The flywheel is turning and we're just getting started. Moving to slide 8 to discuss the continuation of our compounder journey. During 2024, we added three fantastic acquisitions and let me announce that we signed our first deal of 2025, Bavaria on Tuesday. Bavaria expands our global consumables portfolio and we will share more with all of you at a later date. It is important to note that these deals were proprietary, allowing us to pay a competitive multiple and these acquisitions are EPS accretive in year one. In Q4, I had the opportunity to visit Sumig in Caxias do Sul in Brazil, a gem of a business nestled in the mountains of Rio Grande do Sul state. This 35 million revenue asset extends our product line into higher growth light automation and shifts our mix to higher margin equipment in the Americas. We've spoken before about Lindy Bangladesh and Sager, both businesses are integrating ahead of plan. These acquisitions demonstrate our ability to find accretive acquisitions around the world. Coming back to the point I've made, we have top tier talent in Colombia, the Indian subcontinent and Brazil, allowing us to identify, pursue, acquire and integrate these great businesses. And lastly, the slide highlights our commitment to our discipline to ensure acquisitions meet both our strategic and financial goals. Turning to slide nine and talking specifically about our financial metrics for the quarter. Total sales reflected flat organic growth, 200 basis points of growth from M&A and a 500 basis points of FX headwind due to a strong US dollar. We were pleased with our standard automation and welding equipment performance during the fourth quarter. This reflects the channel's acceptance of our updated product portfolio and the commercial excellence initiative, which continues to gain momentum. Adjusted EBITDA improved by 90 basis points year over year, reaching a fourth quarter record of 20.3%, driven by the successful implementation of EBX initiatives. Turning to slide 10, focusing on our performance in the Americas. Organic sales declined by 200 basis points, offset by strong price performance during the quarter of 400 basis points. Acquisitions added 300 basis points, helping offset FX headwinds. During the quarter, we closed on Sumig and the business is off to a great start with ESAB. Adjusted EBITDA improved 210 basis points year over year, reaching a fourth quarter record of 21.6%. Moving to slide 11, another strong performance from our teams in Europe, Middle East and Asia. Total sales increased 300 basis points and EBITDA margins were at 19.3%. During the quarter, volume increased by 400 basis points as we experienced strength in high growth markets and our teams continue to drive share gains in equipment and improve our mix. The Lindy Bangladesh acquisition performed well and added 200 basis points of growth. On that positive note, let me hand it over to Kevin for slide 12.

Thanks, Sian. Good morning. This year we achieved another record free cash flow of $321 million. We also attained a free cash flow conversion, exceeding 100% supported by our continued deployment of our EBX business system and the advantages gained from the AI projects initiated in 2023. Our great cash performance meant we could pay down debt better than expected, ending the year with net leverage under 1.6 tons. This included spending $154 million and three terrific full-gone acquisitions that Sian discussed earlier. With our strong balance sheet and cash flow, we are positioned well to execute on our compounder journey. Moving now to slide number 13, we provide our 2025 guidance. We anticipate organic growth of 0 to 2% with both positive price and volume. We expect a benefit of approximately 1.5 points from M&A, which will be offset by around 3.5 points of FX headwind due to a stronger US dollar, particularly in the first half of the year. The guidance does not reflect the Bavaria acquisition, which will be updated upon its close. Regarding seasonality, the quarterly breakdown is detailed on the slide. We anticipate that organic growth will be flat in the first half of the year, with an improvement expected in the second half. This includes positive pricing throughout the year in both our segments. We foresee volumes in the Americas improving sequentially as we progress through the year due to more favorable -over-year comparisons and some market improvement. Additionally, we expect continued strength in high-growth markets, particularly in the Middle East, India and rest of Asia, resulting in low to -single-digit positive volume growth in RMA and APAC segments throughout the year. We project adjusted EBITDA of between $515 and $530 million, reflecting a margin increase of about 70 basis points at the midpoint. We aim to generate approximately $25 million in savings during the year from EBX initiatives focused on productivity, back office, cost reduction and restructuring, offset by $15 million in investment growth initiatives, mainly for new welding equipment, gas-controlled products and AI. Interest expense is expected to be within the range of $62 to $65 million. Additionally, we forecast an improvement in our adjusted tax rate at the midpoint of around 50 basis points. Finally, our Castro conversion guidance is approximately 100% as we continue to focus on maintaining a strong Castro performance and an increasingly robust balance sheet to support our compounding strategy. Let me hand back to Siam now on slide 14 to wrap up.

Thank you, Kevin. To summarize, 2024 was another strong year of execution. We launched over 100 new products and closed on three fantastic bolt-on acquisitions. We leveraged the power of EBX to achieve record EBITDA margins and generated better than 100% free Castro conversion. We're off to a solid start to 2025, and as we continue to focus on improving our mix, we intend to take EBX up another notch to drive higher margins and strong cash flow. Our acquisition funnel is full of high-quality assets that will help propel us towards our 2028 goals. We're laser-focused on what we control. We have demonstrated agility and the ability to execute no matter what the business environment. The team is focused on creating long-term shareholder value. Thank you all for joining us this morning. With that, operator, let's open the line for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We ask that you please limit yourself to one question and one follow-up. Your first question comes from the line of Brian Blair from Oppenheimer. Your line is open.

Thank you. Good morning,

guys. Good morning.

It would be great to hear a little more color on order patterns in early 2025. Obviously, emerging markets outgrowth has been notable through 2024, and that's expected through the cycle. In terms of developed market activity, offsetting that sluggishness is certainly a positive as well. I'm just curious if there's been any shift or you would call it any divergence in underlying trends to start the new year.

Yeah, I think first, obviously, very proud of our team and our performance in 2024. I think our progress towards becoming a premier industrial compounder continues. As I mentioned in my script, we're off to a good start in 2025. We sort of have gotten past January and the month was, in our view, a solid start. Orders continue to be stable to slightly improving. That's actually both in the Americas and the rest of the world. That's been a good indication, but it's early. Brian, I think it's important to watch where things end up. But I must say that we're happy with the start to 2025.

I appreciate the color. And sort of a level setting question, the 2024 deals that were executed, what kind of accretion does your team expect in 2025 from those assets? And then any additional color you can offer on the deal environment would be great.

Yeah, I'll let Sham answer the question around the deal environment. But Brian, I think as we've pointed out before in the three deals that have closed, our expectation is that they're at fleet or above fleet average in terms of EBITDA percentage. And as Sham mentioned during his part of the script, they're integrating very well. In fact, we're seeing them a little bit ahead of where we'd expected when we had prepared their white papers.

And in terms of what we have, I think I mentioned as I ended that the robust, we have a robust funnel. The fact that we signed our first deal on Tuesday was very encouraging, sets up well for the full year. You know, we did three deals last year. You know, I think our goal would be to sort of continue that kind of pace. But as you all know, it takes two to tango. But we are optimistic about the funnel that we have and our ability to execute against it.

Understood. That's encouraging. Thanks.

Your next question comes from a line of Suri Boroditsky from Jefferies. Your line is open.

Hi, good morning. So your guidance includes a ramp in America's volume. You mentioned easy comps, but also improving market conditions. Can you talk about the drivers of this improving optimism as we go through the year?

Yeah, good morning, Suri. So a couple of things for us, and I spoke about it in prior calls as well. Our equipment line is being accepted quite well, both in the distributor channel and with end users. So we see our commercial excellence program that's focused on shifting our mix of our business towards equipment continue to gain traction. We see our gas control business. As some of you are now aware that we have a gem of a gas control business within ESAB. That business continues to perform well in the Americas and has green shoots for growth. And then we see a stabilization off of Q4 within our Fabtech business to slightly improving conditions as the year goes on in the Americas. And so those three factors is what we've sort of put into our guidance for 2025.

I appreciate that color and maybe sticking with the guidance. Maybe you're looking for limited top line growth this year, but you're looking for 70 basis points of margin expansion as well. So maybe just talk about the different drivers of the margin expansion expected for the year.

Yeah, you know, we've we've talked about margin expansion in the spirit of continuous improvement and what's in our DNA and in our culture at ESAB. You know, I think that the important piece that I'd like to state there that we look at cost out opportunities. And we look at opportunities to take some of that cost out and reinvest in our business. And so when you look at the margin expansion levers that we have, the first one obviously is price. And in this year, we're looking at value based pricing, new product introductions to help us move our margins forward. The second aspect of it is EBX, continuous improvement and productivity gains that we expect to drive within within our shop floor. And the third piece is back office and OpEx reduction using sort of the new technologies that are there like AI, like data analytics to drive margins forward. And so the expansion story for us as we talk about the midpoint of 70 has all those three factors in it.

I appreciate the color. Thank you.

Your next question comes from the line of Meg Dobre from Baird. Your line is open.

Thank you. And good morning, everyone. Maybe going back to your organic growth outlook. I'm curious if you can sort of break down what your assumptions are for the gas business specifically and then maybe give us a little bit of context of how you think about equipment versus versus consumables. The way I can understand your comment, the gas business continues to grow pretty well. Equipment seems to be gaining share. So help us understand the moving pieces here in terms of how we get to the one percent midpoint.

Yeah, you know, the way to think about it is consumables flattish to maybe slight growth. And then you'd look at automation and gas control equipment being up slightly higher on the low single digit piece. And then we see equipment be somewhere in the mid single digit range make for the year.

OK, if I sort of put together those moving pieces, I guess I end up with something that's a little bit higher than where you've guided. And that's kind of the thing that really stood out to me as I was looking at your outlook. It seems like 2024 was a tough year from a macro standpoint, from an end market standpoint. I mean, that's what we kind of talked about throughout the past three to four calls. And I'm wondering, from your perspective, are things actually getting better? Do you have hope for things getting better in 2025? Whereas essentially the outlook just baking in the same sort of choppy and difficult environment that you had in 2024. Thank

you. Yeah, I think it's you know, I mentioned this earlier, we're off to a good start to 2025, but the environment is still choppy. We think it sort of stabilizes as the year goes on and the second half has sort of a lot more traction than the first half. But that being said, I think I mentioned earlier, we don't see things moving, you know, downward from where we finished Q4. We've seen orders kind of stay positive to slightly better than how we ended the fourth quarter. And so all in all, we feel confident about our guide. But there's a lot of uncertainty out there. And I think the way I ended the call was probably the best way that I could put it to you. You know, we surely can't control the environment that will come at us. And if it's positive, you can rest assured that that this team will be driving ahead of that positivity. But if there's some uncertainty, we are also very confident in executing our plan to continue to grow margin, drive cash flow and gain share. Appreciate the

call. Thank

you.

Your next question comes from a line of Nathan Jones from Stiefel. Your line is open.

Good morning, everyone.

Hi, Nathan.

I guess I'll start off with some more detail on the guidance. Maybe you can split it up a little bit more by region. Obviously, I think there's probably a fair difference in some of the regions in EMEA and APAC and maybe North and South America as well. So any color you can provide on your expectations in 2025 for growth in various regions that make up the segments.

Yeah, I think maybe the best way to look at it, Nathan, is the split between developed and high growth markets. As I say during my script, we are still seeing very strong markets in India, the Middle East, and we are seeing particularly in Southeast Asia, quite a number of pockets of good growth expected this year. But the developed markets, Europe and North America, we're not seeing any deterioration in those markets. But based on what we can see at the moment, our expectations are consistent with how we ended last year and then start to improve in the second half of the year, particularly in the Americas.

Fair enough. I guess I did have one question on the fourth quarter results on the Americas price being at 4%. It wouldn't seem like inflation would have warranted that kind of price increase. Was that something that's value-based pricing or was that more related to the strength in the US dollar that drove that price?

No, a lot of it was value-based pricing as we sort of introduced new products into the regions and then some inflation-based pricing that was out there, Nathan. But I think both our teams in North and South America did a really nice job with holding price, moving margins to a good spot. So, very proud of that team. We believe that that 210 basis points -over-year improvement was solid. The team did a really nice job both on the operating side and on the price side.

I guess just to follow up then, you've said positive volume, positive price in all the regions. And if you're at 1%, that probably means very low pricing that you're getting in 2024. Is there the potential with new product introductions that drove some of that good pricing in the fourth quarter to carry over in 2025? Maybe we say a little bit better pricing in the Americas than that kind of very low single-digit you're looking at.

I think, Nathan, we're pointed at the moment a little bit higher on price in the Americas. But you're right, we're around about a point or so of price in that business. I think as we launch new products, certainly the value pricing is something we've been using EBX for. We're learning more. Of course, there's opportunities as we go through 2025 as we bring out these new products to actually price them a bit better and maybe do better than that number. But at the moment, we feel confident with where we've positioned the guidance.

Awesome. Thanks very much for taking my questions.

Your next question comes from a line of David Russo from Evercore ISI. Your line is open.

Hi, thank you for the time. The Americas, can just be clear on the guidance, do we see volumes turning positive during the year on a -over-year basis in Americas?

In the fourth quarter, David, we see the margins turning positive. Volumes, yeah. Our volumes, sorry. Okay,

terrific. And for Europe organically for 2025, I'm just curious if you can give us some context around how you're looking at that business organically in 2025.

Yeah, our expectation organically is low to mid-single digits. We expect fairly steady growth as we progress through the year.

And the low single digit, that was a decline. I think you're talking

all of the rest of the Americas or just Europe. Was your question just on Europe?

Yeah,

just Europe. Oh, sorry, I was answering the beer. Yeah,

I think Kevin was sort of talking the whole world. So I think slightly muted volumes for Europe. You know, I think the way to position that, David, is we have a really strong European business. Our team continues to gain share. And our performance in Europe, in my view, has been very strong. Volumes are muted, but what I would submit is that it's better than the Americas performance. So think of it as muted in the first half, moving to slight growth in the second half, but better performance than the Americas volume number that you saw in Q4.

Great. And one thing, too, on the currency translation for the international businesses, I appreciate America's is getting hurt, you know, the Brazilian Reais, for example, but that there's no currency drag in the international of AMEA and APAC. Can you explain that? I'm just maybe not modeling it correctly, just given the dollar, euro, and just trying to figure out which currencies are that helpful to keep it flat.

In terms of currency, the euro is a negative headwind, David, for us. So we do expect some effect headwinds within the AMEA and APAC business. In fact, the euro is our biggest drag out of all of the currencies that we have.

Yeah, I was just thinking of the last quarter to the international, as the international AMEA, APAC has been shown as currency neutral. And I'm just making sure for going forward, just trying to figure out how it's been neutral the last couple quarters. Maybe I was missing something on the rupee or something. I just was trying to figure out why it has been. Yeah,

and that division, really the currency that drives things the most is the euro, and there'll be a consequence of movements year over year in the euro. Yeah, okay. But as we look through the full year, as we look through the full year guidance, we are seeing, you know, quite a quite a large headwind year over year on the euro. And also do see the Indian rupee pop up as one of the currencies that is causing a little bit of headwind in terms of the full year guidance.

And lastly, back to the question on pricing in America's, it feels a bit conservative. What's in your order book? Is it already having the muted year over year price gains versus what you're posting? Or you're just assuming some anniversary where there's no further price? I'm just trying to understand why the price, you've been doing a very good job on getting the price in America's, and I'm just making sure I understand why it's guided now sort of largely going away, very little price for 25. Is that already in the backlog or just trying to understand why pricing can't stay a little more positive?

I think the way to think about that, there's moving pieces in there, depending on what steel does, David. So I think our assumptions right now is that at least we have not seen steel pricing jump. And so it's a bit more muted on that particular side, on the consumable side, on the equipment side, obviously, you know, we feel very confident about the pricing. And so to answer your question, I think the assumption that we're taking in is that steel kind of stays where it's at, just slightly down as we go through the year. If things were to move the other way, as you know, we'd be sort of out there with some additional price.

So like a tariff impact, I assume the contracts have an ability to pass it on pretty quickly if steel

moved.

That's

right. That's right. Thank you so much. I appreciate it.

Your next question comes from a line of Tammy Zakaria from JP Morgan. Your line is open.

Hey, good morning. Thank you so much. My first question is on FX. Seems like you're modeling or expecting 90 million dollars of FX headwind this year, year over year. How much of EBIT headwind would that be? I'm trying to understand if you have a rule of thumb for incremental or decremental margin related to FX.

Yeah, as you know, we have a lot of our costs in the regions where we operate. So we do have some element of natural hedge. So typically for us, it's around about a 20 percent decremental. We would expect on FX movement, positive or negative.

Got it. OK, that's helpful. And then my other question is the more geopolitical. Should Russia and Ukraine, the conflict resolve? Do you see any opportunity in the near term if rebuilding in that region begins or is that not a region where you have much exposure left?

Yeah, you know, I think first we are rooting for peace and sustained peace in the region. If things were to get better and there was a reconstruction plan, we would expect to benefit from it. But that is not in our numbers or in our forecast.

Got it. OK, thank you.

Your next question comes from a line of Chris Danker from Loop Capital Markets. Your line is open.

Hey, morning. Thanks for taking the questions, guys. I guess, first off, maybe a point of maybe a point of clarification. And just to kick things off here on the margin walk, you didn't highlight the benefit. It seems like equipment still outgrowing gas control, still outgrowing consumables. I would assume there's kind of a continued mixed tailwind there. So is that included in the margin walk? Is that just part of the pricing? Maybe kind of if you could put a little finer point on mix, that'd be helpful.

Are you talking about the 2025 guide, Chris, or are you talking about how we finished Q4 2025? No, I'm the guide. I'm sorry.

Yeah. Yeah. So obviously, as equipment becomes a larger part of our business, that mix is beneficial to the margin. Certainly one of the one of the areas that we've been focused on as well as value pricing, as well as some additional restructuring efforts, as well as some of the efficiency improvements we're making in the back office, Chris. So it's definitely in the mix. I think the key thing that Sean talked today about on the call is the fact that we're also creating an envelope, a window that's allowing us to continue to invest back in the business as well. So all of the savings that we're generating from all of those activities, they're not all flowing straight through to the bottom line because we're continuing to invest in the business for the future.

And I think that's important, Chris, to understand. And that really differentiates ESAB. You know, the fact that we are taking costs out, creating some headroom, but more importantly, investing in the future. And we think that pays dividends over the long term to our shareholders.

Well, that's actually a great segue to my second question here. I guess maybe can you guys break out maybe a couple of the key buckets for investment this year in 2025? I mean, is it additional product R&D? Is it digital? Maybe just if you could give some color there, that'd be great.

Yeah, you know, we obviously we've been talking since 2023 about AI. And that is continuing to be a focus area for Sean, me and our broader team. We're not going to share all of the secret sauce on the call, but I can assure you we've got several projects in flight at different stages at the moment within the business. And we think that's an important area. It's amazing just some of the opportunities that are coming across on back office automation, as well as customer service, which has been a big focus area for us for the back end of 24 and into 25 and how we can use AI to enable us to do that. And then there's the commercial excellence initiatives that we kicked off a year or so ago. We're looking at making sure we maximize our share of welding equipment. And we've got a number of activities associated with that that will continue to invest in this year to make sure that we drive strong growth in welding equipment again in 2025. Yeah,

I think I think just to add to what Kevin said, you know, in in some regions, as you as you can imagine, customers, you know, were ESOP buyers. And and on the equipment side, what we're finding is that if we have targeted commercial strategies to those customers, we're able to go back and gain share. And our European team has done a really nice job with it. So as our South American team, so really happy about the commercial excellence side. And the other aspect of AI is that we're finding that it can also play a large role in design and development. And so we've been investing the other investment that Kevin did mention was with universities as we kind of look to break through technologies that will that will reshape, you know, our portfolio for the future. So really three aspects on that particular front.

That's helpful. Thanks so much for the color guys and best of luck in twenty five here.

Thank you. Thank you. Your next question comes from a line of make Dobre from Baird. Your line is open.

Yeah, thank you. Just a very quick follow up. So on slide six, when you talk about the X, you have this goal outline to reduce manufacturing footprint by 15 percent over the next three years. And I'm curious if you can comment a little bit more on this. And I'm wondering two things. First, what sort of changes are you making here? And is it more about kind of like shifting production into certain geographies, anything else that we should know? And what's the net effect of reducing the manufacturing footprint in terms of efficiency or your cost structure?

Yeah, sort of we, you know, on that left side of the slide, we talked about kind of the improvement and the benefits of what we're doing on the right, you know, both in manufacturing footprint and some back office optimization. The best way to think about it is that we acquire bolt on and tuck in acquisitions. Our premise and thesis on most of it is that, you know, you pick up a business, you've got a grid of margins, you're able to tuck and tuck them into a sub manufacturing sites, become more efficient and as a result drive more to the bottom line. And so the assumption on that particular piece is no different. We brought some other actions underway as well on some legacy facilities, but we usually don't talk about them in much detail in these calls. But rest assured, what I wanted to communicate on that particular slide is that I often get a question about how far along are you? And do you have more to do in terms of EBX and optimization and footprint? And I think the short answer is we do. We have plenty to do, actually. In fact, I would submit that we had a strong year in 2024, but we could have done more. Well, I'm sure we'll feel the same way when we're done with 2025. And so this sort of just gives you a view of how we think about our footprint and what we think the opportunities will be as we acquire companies and we take some of the companies that we've acquired and continue to make them more efficient.

Appreciate it. And that concludes our question and answer session. I will now turn the call back over to Mark Barbolato for closing remarks.

Thank you for joining us today and we look forward to speaking to you next quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.