ESAB Corp Q2 FY2025 Earnings Call

Thank you for standing by, and welcome to the ESAB Second Quarter 2025 Earnings Release and Conference call. Thank you. I would now like to turn the call over to 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. 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, and good morning, everyone. Thank you for joining us today. Before we begin, I want to express my appreciation to our teams around the world for their unwavering commitment to our customers to EBX and the disciplined execution of our long-term strategy. Despite operating in a challenging market environment, we delivered another quarter of strong results with record margins, a clear reflection of the resilience of our model and the dedication of our teams. During the quarter, I had the opportunity to go to Gemba and visit several of our recent acquisitions. I'm excited about the capabilities and competencies that these businesses bring to ESAB. I also visited teams in Gothenburg and Shanghai. It's always energizing to meet with our teams in the field to listen, learn, and witness firsthand the passion and execution that drive our success. Amidst this dynamic environment, our teams remain laser-focused on the fundamentals, disciplined cost control, elevating the customer experience and sharpening our go-to-market differentiation. These priorities are paying off, and it's clear that ESAB continues to stand out as a world-class franchise positioned to benefit from long-term structural tailwinds, particularly across Asia and Europe. In EMEA and APAC, the performance this quarter was strong. This momentum is a direct result of our team's ability to execute the EBX growth playbook with precision, driving organic growth and capturing broad-based share gains across our markets. Turning to the Americas. A few dynamics are worth calling out. Tariff-related uncertainty introduced unexpected volume headwinds, particularly impacting our local customers in Mexico. And we saw some automation orders delayed, with demand now expected to shift into the second half of the year. That said, the underlying health of the business remains strong. Our pipeline of opportunities is robust, and our teams are focused on delivering. Encouragingly, we began to see signs of improved market conditions in North America in July, early but positive indicators as we move deeper into the second half. Despite the short-term headwinds, our teams delivered total sales growth of 2% and achieved record adjusted EBITDA margins of 20.4%. This performance speaks to the resiliency and strength of our operating model and the consistent focused execution by our teams, even under pressure. In parallel, we continue to make meaningful strides on our Compounder journey. Since our last update, we have successfully completed 2 gas control acquisitions, DeltaP & Aktiv and signed EWM, which accelerates our heavy industrial product roadmap and expands our equipment capabilities. Given our confidence in the strength of our equipment portfolio, the momentum in our gas control business, improving market conditions in North America, and the continued resilience in our high-growth markets, all underpinned by EBX, we have raised our full-year guidance. Moving to Slide 4. Before we go into detail about our performance and recent acquisitions, let me share another initiative that highlights our passion for our industry. At ESAB, we believe that investing in talent is a strategic priority to ensure the long-term success of our business and the future of the fabrication technology industry. The Flame Internship Program, originally launched in Brazil, represents a global initiative designed to give college students immersive hands-on experience working within industrial companies like ours. This initiative spans across every functional area from engineering, operations, to marketing, finance, supply chain, and now digital innovation. The program is energizing not only for our interns who gained vital exposure to real-world challenges and sharpen their skills, but also for our local teams who benefit from fresh perspectives and enthusiasm that these young professionals bring. It has become a catalyst for learning, collaboration, and mentorship across our organization. Beyond its near-term impact, the Flame Internship Program is an intentional investment in building a robust talent pipeline for the fabrication technology sector. By accelerating professional growth and fostering leadership potential, we're shaping the next generation of leaders for our industry. Turning to Slide 5 to talk about the quarter and give you more color around our performance by geography. As this slide illustrates, ESAB continues to benefit significantly from our unmatched global footprint. Our balanced presence across Americas, EMEA, and APAC, not only provides resilience in the face of regional volatility, but it also positions us to capitalize on growth opportunities wherever they may arise. Our business outside North America continues to build on its strength. Europe remains steady, and we're well positioned to benefit from EU stimulus measures already in motion. The Bavaria acquisition is off to a strong start, further strengthening our regional capabilities. In the Middle East, we delivered double-digit growth, a clear evidence of our diversification strategy and investment. India also remains a standout, growing at high single digits. With our leadership position and strong local presence, we're confident in our capability to capture an outsized share of both public infrastructure investment and private sector growth over the next decade. In China and Southeast Asia, the business grew mid-single digits, supported by increased capital expenditure and ongoing LNG investments in China. Meanwhile, Australia and New Zealand delivered solid performance in the quarter, and we remain optimistic about the outlook for the rest of 2025. This sustained EMEA and APAC performance is no coincidence. It is a product of our well-matched geographic footprint, a world-class team, a differentiated product portfolio, and disciplined and consistent execution. In both EMEA and APAC, our teams continue to exemplify the EBX playbook, driving strong organic growth and robust margin expansion. Shifting our focus to the Americas. As mentioned earlier, we faced near-term headwinds primarily due to tariffs. This particularly impacted our local customers in Mexico, where we saw unexpected softness. Additionally, customer orders and automation were delayed into the second half of the year. Despite these challenges, our automation funnel continues to be robust and gives us confidence in the second half as South America continued to perform well, and our recent acquisitions, SUMIG and Sager, are performing as expected. In summary, we're executing from a position of global strength. ESAB remains a globally balanced and agile franchise, one that is built to perform, adapt, and grow through all phases of the economic cycle. Moving to Slide 6 to discuss how we're leveraging EBX and AI to accelerate our long-term growth. During the fourth quarter, we laid out a roadmap, leveraging EBX and AI to reduce structural costs and accelerate growth. Today, I'm pleased to share that we're not only delivering on that plan but exceeding it. We're taking this opportunity to go even further, driving more cost out of the system while investing decisively in our future. These initiatives are not just reducing complexity; they're enhancing how we serve our customers. As a result, we have raised our full-year productivity savings target to approximately $13 million, up from our original $10 million estimate. In parallel, our back-office optimization work has gained momentum, and we now expect to deliver $17 million in savings, reflecting stronger-than-anticipated execution. At the same time, we remain firmly committed to investing in the future. In 2025, we're deploying approximately $20 million in strategic growth investments, funding university research partnerships, expanding commercial excellence initiatives, and advancing our AI capabilities. Looking ahead, we plan to bring our EBX office and AI initiatives together, creating a more integrated engine for operational excellence and innovation. These capabilities are increasingly converging, enabling smarter, faster decision-making and more adaptive systems. It's still early, but the progress is real, and we're confident this combined approach will have a lasting impact on both productivity and customer experience. Turning to Slide 7 to discuss how EWM strengthens our Equipment & Robotics portfolio. Earlier this year, we announced that we entered into an agreement to acquire EWM. EWM is a leading provider of premier arc welding and robotic technology solutions with a leadership position in the Germanic region. This business brings advanced technology, a highly respected global brand, and a strong team. Our businesses are highly complementary in terms of customer bases and channel partnerships, making for a unique strategic fit. This EUR 120 million revenue business is expected to be accretive in year 1 and is expected to close in the fourth quarter. We could not be more excited to have the EWM team join ESAB as EWM accelerates our global equipment growth strategy. Moving to Slide 8 to discuss how ESAB and EWM together create a premier workflow solution. Together, the combination of ESAB and EWM accelerates our product roadmap. EWM strengthens our heavy industrial portfolio with advanced welding technologies, while our innovative light industrial lineup builds key product gaps within EWM. It's a natural fit, one that creates a truly differentiated offering. Now what makes this partnership even more exciting is EWM's React technology, a true breakthrough in the welding space. The Holy Grail of welding has always been the ability to deposit metal faster at a lower heat in order to reduce distortion, improve precision, and enhance overall productivity. With React technology, we're achieving exactly that. In some applications, we're seeing up to 100% faster weld speeds, twice the deposition rate, all while operating at 35% less heat input compared to traditional short arc welding processes. This doesn't just improve performance; it delivers real-world customer benefits: less fume, zero splatter, and significantly improved safety and environmental conditions on the shop floor. With EWM in our portfolio, we have expanded our best-in-class workflow solution for advanced applications, including additive manufacturing and thin metal precision welding, especially for materials like aluminum and stainless steel. When paired with our proprietary consumables, torches, and InduSuite digital overlay, we are delivering a fully customizable end-to-end ecosystem. And we see substantial global selling opportunities ahead. This is more than an acquisition. It's a strategic leap forward in how we serve industrial, automation, and advanced manufacturing customers around the world. Moving to Slide 9 to discuss our newly acquired medical and gas control businesses. During the second quarter, we acquired DeltaP and closed on Aktiv in early July, which propelled us further on our Compounder journey. Let me first start with DeltaP, a European-based medical gas system manufacturer. This business further strengthens our medical gas control position in Europe and is highly complementary with our existing business. This business generates annual sales of approximately $10 million and has gross margins greater than 40%. We see significant opportunities to accelerate growth as we insert DeltaP products into our global distribution. I'm also excited about the addition of Aktiv, an India-based business with local manufacturing. This business has annualized sales of approximately $5 million and gross margins north of 40%. We're excited about the opportunities this brings for global product expansion. Together, these acquisitions accelerate our medical gas equipment strategy, providing ESAB with complementary products and an entry into the fast-growing India market. Turning to Slide 10 to discuss how DeltaP & Aktiv extend our medical gas portfolio. As you can see on this slide, these 2 acquisitions significantly expand our portfolio by providing advanced integrated solutions across the full spectrum of hospital gas systems. The product offerings from DeltaP & Aktiv cover critical components found throughout healthcare facilities including in mission-critical environments like the ICU, emergency room, surgical suites, and general wards. As shown on the slide, our solution now spans the entire supply and distribution chain, delivering, controlling, and monitoring medical gases safely and reliably throughout a hospital. Together, these acquisitions expand our total available market by $200 million and position ESAB as a truly world-class provider of medical gas control products. One that is aligned with our Compounder strategy and built for scalable, profitable growth. On that note, let me hand it over to Kevin.

Thanks, Shyam, and good morning. Let's turn to Slide 11. During the quarter, ESAB benefited from strong market demand in our high-growth markets, offsetting tariff impacts in North America and supporting balanced organic growth. Total sales rose 200 basis points year-over-year, driven by acquisitions and more favorable currency trends. The team's execution this quarter reflects their adaptability and commitment to excellence, which has been instrumental in achieving the highest adjusted EBITDA margin in the company's history. Turning to Slide 12. Organic sales in the Americas declined due to delays in automation orders caused by tariff uncertainty and a weaker Mexican market as new customers from last year delayed investments. However, strong pricing helped balance this. The SUMIG acquisition added 300 basis points of growth, partially countering the negative effects of a stronger U.S. dollar. ESAB remains focused on long-term growth using the EBX business system to enhance pricing, productivity, and efficiency. A strong operational performance eased the impact of tariffs in the quarter, and adjusted EBITDA reached 20.1%, highlighting our teams' resilience. Moving now to Slide 13. EMEA and APAC maintained strong growth, especially in the Middle East, India, and Asia with robust sales funnels and increased optimism heading into the second half of 2025. Total sales rose 11%, while EBITDA margins hit a record 20.6%. Volume grew by 600 basis points, led by high-growth markets, and Europe showed positive momentum, benefiting from new stimulus measures. The Bavaria and Bangladesh acquisitions contributed an additional 400 basis points of growth and are performing well. Favorable FX, particularly a stronger euro versus the U.S. dollar, supported results. Our teams in EMEA and APAC delivered an outstanding quarter, surpassing expectations and establishing a strong momentum for continued success throughout the remainder of the year. Moving on to Slide 14 to discuss our cash flow. In the quarter, we generated $46 million in free cash flow. This cash flow reflects some increased pre-buys related to tariffs and increased working capital in the EMEA and APAC to meet higher growth. Looking ahead, we expect an improvement in cash flow during the second half of 2025, primarily due to a reduction in tariff-related inventory as well as normal seasonal trends, which historically drives stronger cash flow in the second half of the year. Maintaining net leverage within our 2x target range has been a key focus, and this disciplined approach enhances our ability to invest flexibly in growth opportunities aligned with our Compounder strategy. This strong financial position ensures that we can adapt to changing market conditions, pursue strategic acquisitions, and continue generating shareholder value over time. Moving now to Slide 15 and our 2025 outlook. Revenue assumptions have been increased around 25 basis points due to the DeltaP & Aktiv acquisitions, which together provide approximately $7 million. The remainder is attributed to changes in FX rates. The current guidance does not include the EWM acquisition expected to close in Q4, which presents some additional upside. Guidance for organic growth remains unchanged. In the second half of 2025, we expect low single-digit organic growth for ESAB. EMEA and APAC is expected to achieve mid-single-digit growth offset by a low single-digit decline in the Americas. Adjusted EBITDA guidance has been increased to a range of $525 million to $535 million. Cash flow conversion guidance is unchanged. The company continues to prioritize cash flow performance and maintains a strong balance sheet to support our growth plans.

Thank you, Kevin. We delivered another strong quarter, driven by outperformance in our EMEA and APAC segments, and we expect this momentum to continue. Our high-growth markets are thriving, and we remain confident that our automation business in North America and the activity in Mexico will rebound in the second half of the year as customers adapt to evolving market dynamics and trade conditions stabilize. This year, we're on track to complete 4 acquisitions: Bavaria, DeltaP, Aktiv, and EWM. These moves further accelerate our Compounder journey, strengthening our portfolio, expanding our reach, and enhancing our technology offering. Our balance sheet remains strong, and we continue to drive EBX to deliver strong margin performance. We have started Q3 with good momentum and are confident in our execution. As a result, we have raised our 2025 guidance. Looking ahead, we are executing with discipline, backed by the power of EBX, the potential of AI, and the passionate global team. ESAB is built to lead, built to grow, and built to win across cycles and around the world. With that, operator, let's open the line for questions.

Your first question comes from the line of Tami Zakaria with JPMorgan.

My first question is on tariffs. By the way, great results outside the Americas. But I think you mentioned tariffs were a 500 basis points volume headwind. I just wanted a little more color. Is that headwind tied to a few customers? Or was it broad-based? Is it more of a timing shift, and do you expect to recover in the back half? I heard you mention Mexico. But any more color you can give regarding what gives you confidence that things can get better in the back half?

Tami, always good to hear from you. So thank you for that question. First, I want to reiterate that we are very proud of our performance in the rest of the world, especially EMEA and APAC, with really strong volume performance. As you know, the business continues to build on the momentum that we had started a few years back. So incredibly strong performance and proud of the team in EMEA and APAC. On the North America side, you are spot on. What we did see is once the tariffs hit in April, our local customers in Mexico, which is a combination of both the channel and some transportation customers that we had won a year earlier, sort of delayed ordering and went into a wait-and-see mode, which was unexpected on our part as we went into the quarter. We expect that to sort of abate as we get into the third quarter and the fourth quarter, but it's still a wait-and-see piece. On the automation side, we are actually very confident. We do have the orders on hand. We do have a schedule that now shapes to a better position in the second half, and we are quite confident about that recovery, not only in the robustness of our funnel but also from the orders that we have to ship in the second half.

Got it. That's super helpful. And then a very quick one. I think I saw in one of the slides, you quantified $30 million in savings. Can you just remind us what those savings were in 2024 or 2023? Just trying to understand if the savings are accelerating or remaining stable.

Yes, over the last few years, we have been increasing the savings we've generated. We've been focusing on footprint rationalization recently. As Shyam mentioned today on the call, we've begun implementing back-office automation. We are also engaged in more EBX initiatives in our facilities to boost productivity, and we have definitely seen a significant increase in the savings we've achieved over the past three years.

Your next question comes from the line of Bryan Blair with Oppenheimer.

I guess somewhat a follow-up to Tami's question. It looks like Americas Q2 core growth would have been essentially flat, excluding the tariff impact that you outlined. Maybe offer a little more color on the underlying order trends through the quarter. You mentioned some improvement in July. If there are any finer points you can offer there, that would be helpful. And then touch on or quantify how we should think about the catch-up in automation demand and Mexico orders, the impact on Q3 and Q4 revenue.

Yes. If you remember, Bryan, we had talked about the Americas, even as we went into the quarter, volume sort of being down mid-single digits. When you see the print today, it's a bit worse than that. We sort of talked specifically about the 2 items that you mentioned, which were Mexico and automation creating that additional down drag. We see automation coming back nicely. So that is no longer an issue in the second half. Mexico, on the other hand, has shown some life, but I think it takes a bit longer. We still don't have a complete trade agreement with both Canada and Mexico at this point. We think whenever that gets figured out and settles, we'll see Mexico come back to normal. The second aspect we've always felt, as we guided our numbers for the year, is that the second half comparables also for ESAB get better. Remember, we did have a really solid post last year in the second quarter in the Americas. All these factors play into how we guide the second half of the year. On the comment you had on orders, we did see stability in the orders and a slight improvement in the Americas. So that is the other encouraging piece for us. As we sort of exit July, we feel a lot better about guiding the rest of the year.

That's helpful color and encouraging. It would be great to hear a bit more about EWM. Your commentary was, I would say, uniquely enthusiastic about the deal. To quickly cover just the basic financials, how should we think about growth rates and margin at the outset and where your team believes profitability can climb over time? And then more importantly, with the deal being somewhat of a proxy for R&D, any other detail you can offer on how it influences the refresh of your heavy industrial portfolio and related opportunities?

Yes. Let me start with your feedback about enthusiasm. I appreciate that. Obviously, it's a sizable deal for us and took significant effort from our team. The other piece that we loved about the process was that it was proprietary; we could execute the deal with the team at EWM. Kudos to our entire team in Europe and our corporate team here on executing the transaction. The enthusiasm stems, in part, because of what I mentioned on the call, which is this React technology that they have. As you know, we've been working to enter industries where we currently do not participate. This technology and process give us access to that. When it comes to additive manufacturing, thin metal, and larger OEMs needing this technology today, there is really only one other player that has something similar. We feel good about the acquisition, the technology that it brings, and how it fills out our portfolio. In terms of sales, as we mentioned, it's a EUR 120 million business. We expect it to benefit from the stimulus coming up in Europe. It has a strong position in the Germanic region where we had little exposure. We think the Germanic region is at the bottom and will move up from here. The question really is timing for when the German market improves, whether it's in the third or fourth quarter. We expect to close the deal in the fourth quarter, so we're hoping the timing fits perfectly. This business has mid-single-digit growth potential, and the gross margins are north of 40%. There are opportunities to save on the R&D spend side, where we no longer have to invest in building out that technology at ESAB. We can now focus our business along with EWM toward growth. Kevin, did I miss anything on EPS?

The deal is highly synergistic, as Shyam mentioned. There are significant overlaps with ESAB globally, and we're looking forward to partnering together. The ROIC on this deal looks a bit more like a bolt-on than a strategic asset, which is what it is. Our expectation would be carrying a 10% ROIC threshold within a sort of 3- to 4-year time period. So there's a real excellent return on this investment.

Your next question comes from the line of Nathan Jones with Stifel.

This is Adam Farley on behalf of Nathan. Maybe first on China and Southeast Asia. You noted a positive outlook for the year. What industries are driving the improvement? What industries are still struggling? And what gives you confidence for a continued positive outlook?

On that front, we've been quite positive on China, partially because of where we play in the top tier of the market. We never really saw a down drag in China. If you remember, even on past calls where others were seeing significant headwinds in China, we've held our business stable. In my recent visit to our team in Shanghai, we sort of went through an operating plan set as goals 5 years ago, and where the team has come. Our business has doubled, and our EBITDA margins have expanded over 700 basis points during that time. An extraordinary effort by our team in China. We see strength in the energy sector. We participate in the rail, high-speed rail, and a little bit on high-end infrastructure build-outs. China continues to invest in its energy independence and maintain their high-speed lines and rail lines. Thus, ESAB continues to benefit from that tailwind in China. The Southeast Asian market was a bit down but is showing signs of recovery due to manufacturing and infrastructure improvements moving into the region. This is benefiting ESAB. We also saw positivity from Australia and New Zealand. Overall, the geography of China, Southeast Asia, and Australia shows signs of recovery. We are exceptionally proud of the business and our performance.

That's great. And maybe on price cost, what was the impact of price cost in the quarter on margins? And is ESAB covering tariffs with price?

Yes. As we've done in the past, Adam, the business has done a great job of getting price to cover tariffs. We were price cost neutral against tariffs in the quarter. It did create a little compression on the gross profit margin, but we are covering all of our tariff costs with price.

Your next question comes from the line of Neal Burk with UBS.

Incrementals were pretty solid in the quarter, up 37% for the company. However, the guidance for the back half implies a step-down in incrementals. Is that right? What leads to that step-down in incrementals given the volume declines were worse in Q2?

Yes. I think there are a couple of pieces to it. The first is that you saw we guided to a better FX range, and FX doesn't drop at the same incrementals. I'll let Kevin talk through the rest of it.

On the FX side, which was really the majority of the arrears we put through, we have a lot of our costs in the geographies where we operate. So when FX affects us, we typically see increments or decrementals in the sort of 10% range. That does create a bit of compression in year-over-year incrementals or decrementals for us as FX moves. Beyond that, we're working hard on all of the initiatives Shyam discussed and looking for opportunities to continue improving that number. That's the main reason for the trend you're seeing.

To add to Kevin's comment, we expect better organic volume in the second half than in the first half, along with some better FX tailwinds in the second half.

Your next question comes from the line of Mircea Dobre with Baird.

A question on Slide 6, if I may. Can you talk a little bit more about this productivity improvement and the back office optimization? I'm looking at this chart, and I'm trying to make sure that I'm clear in terms of what it is telling us. Are these savings that you're generating relative to 2024? Does this contribute directly to EBITDA? Is that the way to interpret this chart?

That's right, Mig. These are additional savings generated in the year. As we entered this year, we were targeting around $25 million of savings. As we've progressed through the first few quarters, we have increased the target we're aiming for.

I see. So you've increased your savings by $5 million. It sounds like FX is contributing $5 million to EBITDA. You've only raised your guidance by half of what FX and savings are contributing. Is the implication here that the volume compression you've experienced, especially in Americas, means there's no recapture whatsoever embedded in the back half? Hence, only raising guidance by $5 million rather than $10 million plus?

Yes, so what the slide is projecting is that we have been working hard on driving additional savings, but we are also protecting investments back within the business. As you can see on the slide, we're putting back into the business $20 million incrementally on last year in terms of additional investments we are doing. We are always looking for opportunities to deploy investments back into our commercial excellence program, back into work that we are doing around AI to accelerate long-term growth and improve the overall business.

On that front, I want to emphasize that some of what we have been working on with both universities and AI is extremely exciting and, in many ways, transformational. Our view today is that early investment in these areas will yield significant benefit to ESAB and is the right thing to do. We are saving, protecting our margins in the business, while investing back in ways that we think will benefit ESAB in 2026 and beyond.

And my follow-up, if I may, on Mexico specifically. Can you help understand how large Mexico is as part of this segment? In terms of the disruption to demand, is there a particular industry driving that? I'm trying to determine if there's something different occurring other than the trade headlines.

Yes, that's a fair question. We mentioned before that we were on par with our peers in Mexico. So you can assume that our portion of Mexico is a bit higher than our peer set. We have not provided specific Mexico numbers, but about 20% to 25% of our business sits between Mexico and Automation. We've seen that business take the down drag of the 500 basis points we spoke about, likely split down the middle between the two areas. Regarding the industries we're exposed to, transportation is one and then general industry, particularly in the channel as well. We saw a harder down drag on industry than the channel, but both saw stalling. We expect recovery, although slower than in North America and the U.S. market. We are off to a good start, as I mentioned, but we have seen Mexico slow but have good momentum overall. While U.S. MCA is satisfactory, the uncertainty in trade is affecting Mexico and the automation side was pushed out. We’re quite confident about these areas coming back.

Your next question comes from the line of David Raso with Evercore.

I am most interested in Europe, just given that it's your largest geography. You made a comment about EU stimulus measures already in motion. You mentioned the business is steady, but I was curious about what you expect from Europe in the second half of the year into early '26. Are those stimulus measures already showing up in the order book? Can you remind us of the margins in Europe versus the rest of EMEA and APAC?

I will take a few pieces here. Europe remains stable, and we're not seeing decreases in volumes. The stimulus measures refer to energy independence, and we’re seeing some spending associated with defense kick in, but not as much as reported in the media. The view for us is that Europe continues to stabilize and we have not experienced sequential declines in the business. The margins in Europe are strong, almost equivalent or slightly above our Americas business.

Just on the outlook for growth, Dave, our assumption is that Europe would have flat growth. The growth in EMEA and APAC in the second half comes mainly from our high-growth markets.

There are chunky deals in gas control as well. We prefer to pursue proprietary processes in which we believe the asset holds significant value, rather than entering a regular auction process. We've been working really hard on this. The funnel is strong, and we expect to pursue a few opportunities in 2025 and 2026.

One last thing. In the Q, I noticed equipment revenues were flat, and consumables were up about 2%. Were those organic numbers? Was equipment performance hit more by the Americas issues?

That's right. The automation side of our business created a drag on the equipment side during the quarter, and we believe that will reverse itself in the third and fourth quarters.

Your final question comes from the line of Chris Dankert with Loop Capital Markets.

On automation, can you quantify just how steep the drop in automation was? My back-of-the-envelope calculation suggests a substantial cut here, as we're talking about pretty significant reductions year-over-year. I am curious if you could quantify the global automation sales.

No, not that severe. It would probably be in the high 20s. We do see many small deals stack up rather than significant ones. But that would be the general number.

Has there been any thaw in Mexico since July and August? Or are we still kind of in a holding pattern?

Some progress has been made. As I mentioned, last quarter, we acquired several new customers and had great market share momentum, but then many went into a pause mode. They have since come off pause, but not at the pace we saw in Q2. We foresee a gradual recovery in Mexico due to trade deals coming together. The U.S. MCA is fine, but uncertainty is impacting Mexico. The automation issue has been pushed out. We are quite confident about these areas returning to strength soon.

This concludes our question-and-answer session. I would now like to turn the call over to Mark Barbalato for closing remarks. You may go ahead.

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

This concludes today's conference call. You may disconnect.