Thank you for joining us for the ESAB Third Quarter 2025 Earnings Conference Call. I will now hand the call over to Mark Barbalato, Vice President of Investor Relations. Please proceed.

Thanks, operator. Welcome to ESAB's Third Quarter 2025 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 today's 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. ESAB delivered another solid quarter and returned to positive organic growth. We executed EBX with discipline in a dynamic environment, closed the acquisition of EWM earlier than anticipated, advancing our shift into equipment and furthering our compounder journey. As a result, we're raising our full year guidance. Let me take a moment to thank all of our associates as all of this would not have been accomplished without their passion and commitment to achieving our shared vision for ESAB. During the third quarter, sales rose 8% to $687 million; more importantly, organic sales increased 2% year-over-year, reflecting solid sequential improvement in the Americas and continued strength in EMEA and APAC, driven by our high-growth markets. Adjusted EBITDA increased 7% to $133 million, reflecting strong execution on margin, some additional tariff impact in the Americas as well as continued investment in sales and AI initiatives. All accelerating our mix into equipment and gas control. The recently closed EWM acquisition brings high-level talent, unmatched technology, and highly accretive gross margins to ESAB. Our transition team is using our proven EBX integration process, and we're collaborating on growth, cross-selling opportunities as well as margin expansion initiatives. That said, there's more work to be done on our compounded journey, but I'm pleased to say that our pipeline is rich, and I'm confident in our ability to execute on our strategy and deliver long-term shareholder value. Turning to Slide 4. Let me give you a few examples of our team living our purpose and values of shaping the world we imagine. First, let me talk about our Remake This Town initiative that just launched in Chicago with Doorways 2 Destiny, a citywide installation of 16 steel doors, each standing over 10 feet tall and weighing roughly 3,000 pounds, and doubling as a job connector through the My Chicago and My Future apps, linking youth to apprenticeships, internships, and jobs in real time. In partnership with BUILD Chicago and the Chicago YMCA, the doors appeared at YMCAs, schools, galleries, and community centers. Welder underground led the installations, and local artists transformed the doors into public art. Youth engaged through welding demos, hands-on stations, collaborative art-making, and resource pop-ups. The mobile welding studio bus turned the streets into open-air classrooms, and local welders joined following an online call to action. This tour directly addresses the shortage, as we convert curiosity into careers through paid internship pathways, industry certifications, and mentorship from experienced craftsmen and craftswomen. Young people meet employers, start with summer opportunities, and progress into long, well-paid careers in skilled trades. We're expanding the pipeline globally with partners such as Vilnius Tech, Riga Tech, and Burnley College, where students learn on ESAB equipment and gain credentials that travel. ESAB is committed to building strong skills, strong wages, and strong communities. This is a fantastic initiative. I'm really proud of our teams, their creativity, and engagement. Transitioning back to our numbers and turning to Slide 5. In the Americas, total sales increased, and organic growth was positive year-over-year, with clear sequential improvement from Q2 as expected. The U.S. delivered mid-single-digit growth and equipment, and automation grew mid-single digits across the region. This momentum is notable given that Q3 is typically our seasonal trough due to summer shutdowns. Mexico remained stable, and South America performed in line with expectations. Moving to Slide 6 to discuss EMEA and APAC. Our unparalleled global footprint continues to show its strength. EMEA and APAC delivered volume growth of 4%, supported by strong execution in high-growth markets and high single-digit growth in equipment and automation. We're seeing renewed investment and activity in Europe, and we expect developing market GDP over the next 5 years to outpace developed markets by roughly 2 times. ESAB is well positioned to capture that differential. Turning to Slide 7. As mentioned before, we completed the acquisition of EWM, a premier provider of advanced arc welding and robotic solutions. EWM adds React technology that I've mentioned before, an innovation that can deliver 100% faster weld speeds and double the deposition rates with roughly 35% lower heat input versus traditional short-arc processes. Customers see higher productivity, lower fume, and improved quality. The impact is visible on the shop floor. EWM React is changing workflows. Combined with ESAB consumables, torches, and our InduSuite digital overlay, we deliver an end-to-end ecosystem that is hard to match. The teams are executing our EBX playbook for integration and advancing EBX-driven margin initiatives that we expect to see a positive impact from in 2026. On that positive note, let me hand it to Kevin, who will take you through the financial details.

Thanks, Shyam, and good morning. Let's turn to Slide #8 to discuss our financial performance. We are pleased to have completed the EWM acquisition ahead of schedule, which contributed approximately 2 points of growth and roughly $1 million in adjusted EBITDA within our Q3 results. Our ESAB and EWM teams have begun the integration process as part of our commitment to strengthening our collective equipment and automation portfolios, enabling us to provide our customers with an unparalleled solution. Turning to our results. We experienced a return to organic growth as expected, with a 2% increase in organic sales. We continue to benefit from robust market demand in our high-growth markets within EMEA and APAC and delivered mid-single-digit growth in our U.S. business, while our other regions performed as expected. Total sales increased by 800 basis points year-over-year, supported by organic growth, contributions from acquisitions including EWM and favorable currency movements. The adjusted EBITDA margin was reduced by about 20 basis points due to the impact of EWM, while our base business delivered expected profitability supported by EBX and our strong global execution. Turning to Slide #9 to discuss our Americas segment. Organic sales in the Americas rose mainly from strong U.S. equipment and automation growth as well as price discipline. Acquisitions added 300 basis points, offsetting foreign exchange. Adjusted EBITDA margin was 19.6%, which included ongoing investment for long-term growth and a drag driven by price/cost dynamics related to tariffs. We have launched several EBX cost and restructuring initiatives in Q4 and expect strong margin improvement in 2026 as volumes improve. Moving to Slide #10 to discuss our performance in EMEA and APAC. Sales grew 14% year-over-year to $395 million, driven by growth in Asia, India, and the Middle East as well as our recent acquisitions, including EWM. Organic sales were up 3%, with volume increasing 4%. Adjusted EBITDA margin expanded to 19.3%, rising 40 basis points year-over-year. Excluding EWM, it would have been 19.7%, an 80-basis point gain. Our global teams continued to execute strongly with optimism for further strong growth in 2026. Moving to Slide #11 to discuss our cash flow. Free cash flow conversion exceeded 100% this quarter, driven by a strong team performance. We successfully expanded and extended our credit facilities early in Q4, increasing ESAB's long-term financial flexibility. We aim to use our seasonally strong Q4 cash flow to reduce net leverage to 1 to 2 times and position ESAB for accelerated M&A activity in 2026. Turning to Slide #12 to discuss our 2025 guidance. Based on our year-to-date performance and the successful completion of the EWM acquisition, we have raised our full-year guidance. We expect total sales of $2.71 billion to $2.73 billion, reflecting around 1 point of organic growth, and a modest foreign exchange improvement on the EWM acquisition. Adjusted EBITDA is now $535 million to $540 million, including approximately $3 million from EWM. We will be investing in EWM over the next year to drive synergies for our white paper, and we expect a better than 10% return on invested capital within 3 years. Adjusted EPS has been tightened to between $5.20 and $5.30 reflecting improved profit offset by increased interest expense due to EWM. Additionally, free cash flow has been changed to around 95% because of EWM. ESAB continues to accelerate investments to drive both organic growth and M&A as we focus on delivering long-term shareholder value. With that, let me hand back to Shyam on Slide 13 to wrap up.

Thank you, Kevin. Our path is consistent and proven. Our global footprint is an advantage; about 80% of our manufacturing is in-region for region, which reduces tariff impact, shortens lead times, and supports share gains. EBX discipline continues to drive pricing, supply chain performance, and productivity. We continue to have a robust list of productivity and transformational projects. And this year, we're integrating AI into EBX to raise the bar. We're shifting our mix towards equipment and gas control, building a higher margin, less cyclical enterprise aimed at 22-plus EBITDA margins by 2028 or sooner. We've closed 4 acquisitions this year: Bavaria, Delta P, Aktiv, and EWM, expanding proprietary consumables, medical gas, and welding equipment. The funnel remains healthy and disciplined. Our third-quarter performance shows resilience and strength of our enterprise. We returned to organic growth, closed EWM early, raised our guidance, and have had a solid start to Q4. We're accelerating EBX, integrating EWM, and using strong cash flow and a flexible balance sheet to advance our compounder journey. ESAB is built to perform, adapt, and win. With that, operator, please open the line for questions.

Your first question comes from Bryan Blair from Oppenheimer.

Sequential improvement in Americas, this is obviously good to see. There was obviously some consternation last quarter regarding deferred automation shipments and then selling into Mexico. To what extent did your team catch up on that $15 million or so in combined revenue during Q3? And are there any lingering risks or concerns on either front?

Bryan, the way to think about it is there was a bit of catch-up, but not much. Really, it was good execution from our teams, a lot more focus on some commercial excellence within the teams. Mexico stabilized. We continue to drive some of our sales initiatives, and we talked about equipment and automation doing well. We did catch up to a little bit of that automation pushout, but not all of it. We think that sort of kind of feeds into Q4 and a little bit into Q1. So all in all, we felt really good about the print that we had in the Americas. Overall, as you know, South America performed as expected. Mexico performed as expected. We obviously had some momentum in the U.S. market. And so feeling really good about the team, our execution plans, and our start to Q4.

I appreciate the color. The strategic fit of EWM seems quite powerful. It's nice that your team can begin integration a little earlier than anticipated. That in mind, how should we think about the year 1 deal model? I suspect cross-selling will be a solid lever at least over time. We know gross profit is very strong. It does seem like there's some relatively heavy-handed work to be done on SG&A structure. Just curious how we should think about those moving parts through the first year and perhaps the first couple of years?

Yes. I'll let Kevin talk about the modeling piece. But let me just talk about EWM as a business. Really strong gross margins, better than 45%. So really thrilled about the gross margin percentage within the business. Really excited about the reception we received at Essen plus some customers globally. In almost every geographic region, our sales teams are now pulling on the product line, which is excellent to see. The third thing that I would say to you is, and a lesson that we have learned over time, is that we have to invest in the front end early to drive some of the growth pieces, and that's what we're doing. And you heard in our commentary, we're talking about growth initiatives and growth incentives that we're going to put in place to drive equipment sales and accelerate that mix. I'll let Kevin talk about the modeling piece.

Yes, Bryan, as I mentioned on the call, our expectation this year for EWM is around $3 million of profit. And obviously, again, as I mentioned, we are making some investments in that business, and we'll continue to make those investments over the next 12 months as we drive the business to its 10% ROIC target by year 3. But what I can say, we've been under the technical difficulty for about a month, and we're actually seeing some tremendous opportunities, both on the top line and also synergies right across the business, both not only in SG&A but also within gross profit. So I think when we come to give our guidance in the first quarter, I think we'll be in a better position to build all of those into our model and provide those to you in Q1 next year.

But a really exciting addition to us, Bryan. I think an appropriate time as well. I think a good inflection point in Europe. So really excited about what that business brings to us, not just in Europe but globally.

Your next question comes from the line of Tami Zakaria from JPMorgan.

Great results. Question on the Americas segment. EBITDA margin moved down about 100 basis points. Was this according to your expectation? If so, what's driving it? And is there any tariff headwind to call out there?

Yes. The short answer is we did expect some of it. The couple of contributors were the first thing that we mentioned in the earlier piece is that we are investing in some sales and growth initiatives in the region that we believe will benefit us as we go into 2026. And then the second part of it is that we did see some tariff-based impact come at us late in the quarter that we will offset by making sure that we appropriately move the manufacturing to the regions, which happens in late Q1 or possibly early Q1 for us. So very confident about setting up the business in the Americas for margin expansion into 2026. And feeling good about the restructuring initiatives also that we have started that will accelerate that margin journey for us in the Americas.

Understood. That's very helpful. And one question on M&A. I think you did Bavaria and then EWM, both seem to be Europe-based. Are you consciously expanding footprint, particularly in Europe because you see more growth in the region? Or do you remain agnostic, and you don't mind spending in the Americas or Asia?

Yes, we're agnostic. I think what we're looking for are the best assets at the best financial principles that we have for the business. Both these businesses actually give us extensions into other geographic regions. Bavaria has the ability to supply into the North American market, the Middle East, and Asia. EWM has also made some nice inroads into North America. We're finding some additional opportunities in the Middle East and Asia for the EWM product line. And so these 2 businesses obviously strengthen our footprint in Europe but create opportunities and avenues for growth in North America, in particular, and also in other geographic regions.

Your next question comes from the line of Mig Dobre from Baird.

If we can revisit the margin discussion in the Americas, I think I heard Kevin or possibly you, Shyam, mention that in 2026, we should be expecting significantly stronger margins in this segment. I understand you're not providing specific guidance for 2026, but could you explain why margins are anticipated to improve in that year? What factors are under your control, and what role does the restructuring play versus a general expectation of market recovery?

Yes. There are a few key reasons. We are not disclosing the specific restructuring activities, but some projects are already progressing, and we expect them to be completed by early in the first quarter. Additionally, we will have better comparables as we move into 2026. Another factor is that as we adjust our supply chains appropriately, we anticipate gaining further advantages. In summary, we have three main components at play: pricing changes expected at the start of the year, tariff-related adjustments to ensure our manufacturing is optimally positioned, and the restructuring efforts we are implementing. All of this should come together by early first quarter, providing significant momentum for margin expansion in 2026. We have consistently stated that we are confident in reaching a 22% plus EBITDA target by 2028. Historically, we see a pattern of settling in and building momentum over a couple of years, followed by acceleration in the subsequent year, which will apply in this case as well.

Okay. Understood. Maybe in your EMEA and APAC segment, others pointed out, you are increasing your exposure to Europe, maybe with some of the deals that you have done. But as we're looking at 2025, right, it does seem that there's quite a bit of bifurcation between what you've experienced in the Middle East and India versus what's been going on in Europe. So I guess, it would be helpful maybe delineating the European region versus some of the other ones in this segment. And as a general framework for 2026, how do you think about Europe relative to these other regions? I mean can we count on actual volume acceleration in '26 if Europe picks up? Or are there some other factors that we need to keep in mind here?

Yes, really detailed question, Mig. So let me sort of address all of it. So the first piece is we continue to see strong orders and strength in our high-growth markets. In fact, the entire team was here last week, and we got to interact with 2 of the regional presidents, especially from the Middle East and Asia and really strong momentum, and we expect that momentum to stay. The second piece of your question around Europe; we've actually done really well in Europe. We get some data based off the European Welding Association, and I can tell you, our numbers are significantly better than what we think is happening in that industry, which sort of points towards significant share gain in the European market by our teams. And it's on the back of equipment and automation, we talked about high single-digit growth in equipment. And that's really where something that I've spoken to you about in the past, where we're winning over customers in Europe and the rest of the world with our equipment product line, which we believe eventually makes its way to the markets that we're most focused on, which is in the Americas. So we continue to have that particular momentum. The third part of your question is that we are seeing orders and momentum increase in Europe based on defense, infrastructure movements, and energy investments in Europe. We expect that to accelerate as we go into 2026. So the overall picture for us in 2026 is we still feel very good about this flywheel where Asia and the Middle East continue its momentum forward and Europe gives an additional boost to that already strong marketplace that we have, giving us possibly some really good tailwind. Now we'll finish out the quarter and give you guidance as we get into 2026. But as we sit here, we feel that we're very well positioned to capitalize and win on that acceleration.

No, that's super helpful. And if I may squeeze one last one. When we're talking about EWM, can you talk a little bit about their legacy distribution and how that compares to your footprint? And how easy or maybe not easy is it to take that product and be able to just kind of put it through your global distribution network?

Yes. So I'll start with the conversation in Europe. Very rarely do I get applause when I'm in a town hall very early in my commentary. And when we announced the EWM acquisition with our team in Europe, I can't tell you the excitement that existed in the team. The second part of it on distribution; it actually is very complementary. And as a result, we are actually seeing opportunities for us to move our products, especially consumables and torches into their distribution channel and sort of pick up sales for ESAB on that particular front. And in terms of reception of their product lines, when we looked at the acquisition, the product lines were very complementary as well. We had a really strong light industrial line. They complemented the gaps that we had on the heavy industrial line. And as a result, when you look at our lineup today, Mig, it's incredible. And I'll also tell you, there is a U.S. customer that's been after us since FABTECH to kind of figure out how we can get that line into North America. And so really excited about the avenues that's opened up and the opportunities that we have in front of us. It's going to come down to execution like anything else, Mig, but that challenge we will take on as a team.

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

I'll start with asking for a bit more color on your comment that you're off to a pretty good start in 4Q. If you could just expand on that and talk about what you're seeing to date in the fourth quarter?

Yes. Nathan, we finished the third quarter with a core growth rate of about 2%, and we expect that to improve slightly in Q4, with October starting off on that positive trend. I'm referring to our core growth improving from what we experienced in Q3, and we're optimistic about this as we move forward. Overall, when you look at ESAB and make projections, the comparables become more favorable. Our teams are dedicated to execution, and I mentioned the investments we are making. It's important to highlight that we operate as an AND business; we focus on productivity for ESAB while also investing in growth initiatives. We believe this approach offers the best returns for our shareholders in the long run, and we're committed to it. As we wrap up 2025, we are taking the opportunity to invest in the business while also improving productivity and reducing costs, which we believe will position us well for 2026.

I guess a follow-up on price/cost in Americas. Obviously, it seems that's where the tariff impact is. You talked about getting some costs later in the quarter. Did you get to price/cost neutral on a dollar basis in the third quarter? Is there any color you can give us on what the drag was to margins in the third quarter and then your expectations for the fourth quarter on price cost? And I'll leave it there.

Yes. It was a slight drag in the quarter on price/cost. Really, it came about towards the end when copper tariffs came in. And there were some products that we sort of build in the U.S. and ship out to other regions where we actually have manufacturing capacity. Nathan, so what we are going to be doing is moving that manufacturing capacity to the region that the products are sold in and take away that drag that we saw in the third quarter. In addition to that, we talked about doing some additional restructuring, which is actually already underway that we expect to finish out in the early part of Q1, creating that really nice tailwind on margin expansion for '26.

And just to clarify, drag on margins or drag on dollars?

It was a bit on dollars. So that's really causing the drag as well. So price cost slightly off of neutral.

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

Good to see solid growth in equipment and automation. Can you just talk about what you're seeing in consumables?

Our consumables business is performing well. We've launched new products, including an engine-driven welder and our successful Edge product line. Additionally, we've introduced the Fabricator line and new LIPs in different regions that have gained attention in the market. We've been working hard to improve our channel performance and encourage customers to adopt our equipment, and we're seeing positive results. In several regions, we're capturing significant market share from competitors. Although our consumables growth has been slightly lower, we still believe we're outpacing the market, and we are optimistic about our prospects for 2026 and the beginning of Q4. There are no concerns at this point, and we're excited about our entire portfolio coming together. We are also focused on providing workflow solutions. Recently, we collaborated with a large U.S. customer, offering a comprehensive workflow solution that included our equipment, torches, filler metal, and digital solutions. For the first time, we received global certification from this customer, which has led to some new orders. This approach to full workflow solutions is expected to enhance both our consumable and equipment businesses going forward.

And just a follow-up. If my math is right on last quarter on this Mexico and automation headwind. I thought the headwind implied about like a 20% decline in revenues in those businesses in the Americas. And this quarter, it seems like it's more like maybe a mid-single-digit decline. I guess, is that math like roughly correct? And I guess, going forward, I mean, it looks like you're going to exit this year growing at around 3% to 4% in aggregate. So I mean absent anything dramatically changing, kind of the absence of the negative in those 2 businesses in Mexico and automation, is that like a good starting point for next year? Like any kind of major puts and takes on the growth rate exiting the year and entering 2026?

I mean, Mexico, as Shyam mentioned, it's been pretty stable on what we saw in the second quarter. But yes, we are down in terms of volumes, and that's really the countermeasure to the fact that the U.S. grew in that mid-single-digit territory, which was a nice bounce back to what we saw in the second quarter. I think what you'll see as we step into 2026 is that our comps against Mexico will get significantly easier if that's what you're getting at. So we would expect that there will be some tailwinds on volumes as we step into 2026, particularly from Q2 onwards when the tariffs impacted us.

But we can sort of talk offline, Neal, on some of the numbers. It does look a little off, but we can discuss those numbers on our separate call.

And that concludes our question-and-answer session. 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 speaking to you next quarter.

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