ESAB Corporation

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 star one. Thank you. I'd now like to turn the call over to Mark Barbalotto, Vice President of Investor Relations. You may begin.

Thanks, Operator. Welcome to ESOP's first quarter 2025 earnings call. This morning, I'm joined by our President and CEO, Shyam Kambianda, 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 intent 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, Shyam Kambianda.

Thank you, Mark, and good morning, everyone. Thank you all for joining us today. We had a strong start to the year. These results reflect our ability to perform in a challenging market and underscores the performance-driven, accountable culture we have built at ESOP. Let me step back and share how we're creating a comparative advantage and why we're confident about our future. We deliberately shaped ESA to be locally responsive while leveraging our unmatched global scale. This dual advantage allows us to serve customers more effectively and maintain secure, resilient supply chains in a dynamic market. Additionally, we have deployed our capital well, invested in innovation, resulting in a fully refreshed equipment product line, and acquired 15 outstanding businesses. enabling us to expand our serviceable market and strengthen our global presence. Our focus is on building a long-term winner, one that thrives regardless of economic backdrop. Today, we're driving sales excellence, shifting our portfolio towards equipment and gas control. Looking ahead, we're intensifying our investment in innovation, deepening partnerships with universities, and harnessing the power of AI and continuing a steady cadence of high-impact acquisitions. Over the past four weeks, I've had the opportunity to make three trips to Europe and one to India. There's a noticeable sense of optimism and excitement about the future in both regions. The stimulus and investment plans announced by the EU, Germany in particular, are especially encouraging and signal significant upside potential once stimulus and investment spending begins. I was also encouraged by our team's ability to execute effectively. We're seeing strong traction with our new equipment offering and our gas control business is gaining momentum, both organically and through promising acquisition opportunities. I want to take this moment to recognize the extraordinary efforts of our associates, their tireless work, dedication to our customers, and commitment to EBX gives me confidence that we're well positioned to navigate the current environment and continue winning. At ESAB, we're shaping the world we imagine without limits. Let me turn to slide three to review our first quarter financial performance. We delivered 100 basis points of margin expansion on slightly positive organic growth, resulting in a record first quarter adjusted EBITDA margin of 19.8%. This strong performance underscores our discipline execution of the EBX framework complemented by accelerated strategic growth investments that are expected to generate returns in the long term. As I mentioned last quarter, ESAB's unmatched global footprint is a key competitive advantage. With 80% of our manufacturing located in region for region, we're uniquely positioned to manage today's global dynamics with agility and scale. Our commercial excellence initiative, coupled with a steady stream of innovative product launches, continues to drive momentum. In Q1, both our global welding equipment and gas control equipment businesses grew by mid single digits, reflecting strong channel acceptance of our new offerings. We're also leveraging EBX to enhance supply chain performance, drive process improvements, and expand margins. On the acquisition front, I'm thrilled to share that we have received all regulatory approvals and officially completed the Bavaria acquisition yesterday. This strengthens our proprietary consumables portfolio and positions us to gain share in faster growing end segments. As a result of our strong execution driven by EBX initiatives, new product launches, and recent acquisitions, I'm confident in our outlook for 2025. It is important to note that our full year guidance also reflects the expected impact of tariffs, which Kevin will detail shortly. Turning to slide four, over the past few quarters, I've highlighted the passion our associates have for both our business and their communities. This quarter, I want to spotlight another initiative on how we're making a difference by investing in the next generation of fabricators. Three weeks ago, I visited Denton, Texas, where we hosted students from the agricultural welding class at MacArthur High School in Irving, Texas. The students toured our facility, engaged in hands-on training at our customer innovation center, and received ESAB equipment, PPE, and consumables for their lab. We also awarded a scholarship to the students in memory of our beloved ESAB associate, Charlie. It was an inspiring day for both our team and the students. Similarly, in India, we've partnered with two organizations, to establish a state-of-the-art welding training institute in rural Tamil Nadu. This initiative supports grassroots development of talent and provides local youth with a sustainable career path in welding and automation. These are just a few examples of how our associates are shaping a better world, one community at a time. Moving to slide five. Over the last eight years, our strategy has been clear to improve operational performance with EBX, invest in innovation, delight our customers to local agility, and deploy our capital effectively. By optimizing our footprint, executing our product line simplification strategy, and streamlining our supply chains, we have built the capability to manufacture all our major products within each of our three regions, the Americas, EMEA, and APAC. a key factor in mitigating tariffs. Our footprint combined with our EBX net pricing tool positions ESOP to outperform even in volatile markets. Long term, we're building a higher margin, less cyclical, and higher cash flow enterprise. Moving to slide six to talk about our journey to premiere. Through open innovation and our EBX stage gate process, we've revitalized our equipment line. At the same time, we've exited unattractive capital-intensive automation projects and focused on high-growth swim lanes, most notably gas control. Our gas control business has grown from 10% to 18% of total revenue and is on track to reach 25% of revenue by 2028. With gross margins in the mid-40s, this segment has opened new adjacencies in medical and specialty gas markets. This shift in mix towards gas control and welding equipment supports our 2028 target of 22% EBITDA. At the bottom of the slide, you can see the progress we've made in adjusted EBITDA since 2016. We've steadily moved towards a more profitable mix and achieved approximately 700 basis points of margin expansion, all while generating strong cash flow to fund our compound strategy. Turning to slide seven and sharing more on our compounder journey. Our disciplined capital allocation has been the cornerstone of our success. One of our primary objectives has been to grow our gas control portfolio, strengthen digital and standard automation capabilities, fortify our core fabtech business, and expand our addressable market. We've executed this plan with discipline, adding 15 high-quality businesses, including Bavaria, as of yesterday. Last week, I visited our Bavaria team in Munich and was deeply impressed by their manufacturing capabilities, the proprietary flux they've developed, and the innovative culture they have fostered. This acquisition significantly strengthens our portfolio of proprietary consumables and strategically positions us to benefit from the EU and German stimulus programs targeting key sectors. For context, flux is the secret sauce in submersion welding. By combining Bavaria's flux and our sub-arc wire, we're unlocking growth opportunities across key sectors like oil and gas, wind, nuclear, transportation, infrastructure, and defense, where Bavaria products are already specified. While the acquisition is expected to be EPS neutral in year one, we see significant margin expansion upside to ESAB's global distribution and scale efficiencies. Our balance sheet is the strongest it's ever been, and our acquisition pipeline is robust. In fact, we may close two more tuck-in gas control deals before the end of Q2. We continue to prove ourselves as a premier industrial compounder. On that note, let me hand it over to Kevin for slide eight to discuss our financial performance.