ESAB Corporation
05/07/2026 | Press release | Distributed by Public on 05/07/2026 04:33
Quarterly Report for Quarter Ending April 3, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of the financial condition and results of operations of ESAB Corporation ("ESAB," the "Company," "we," "our" and "us") should be read in conjunction with the Consolidated and Condensed Financial Statements and related footnotes included in Part I. Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2026 (this "Form 10-Q") and the Consolidated Financial Statements and related footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Form 10-K"). You should review the discussion titled "Special Note Regarding Forward-Looking Statements" for a discussion of forward-looking statements. Our actual results, outcomes or the timing of results or outcomes could differ materially from those discussed in the forward-looking statements.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements contained in this Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the Securities and Exchange Commission (the "SEC"). Statements that could be deemed to be forward-looking statements, include statements regarding: the pending acquisition of Eddyfi Technologies and its anticipated benefits, the impact of the war in Ukraine and conflicts in the Middle East and the resulting escalating geopolitical tensions on our business; projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, pension and benefit obligations and funding requirements, synergies or other financial items; plans, strategies and objectives of our management for future operations, including statements relating to potential acquisitions, compensation plans or purchase commitments; developments, performance, industry or market rankings relating to products or services; future economic conditions or performance, including the impact of inflationary pressures, tariffs and trade policies, foreign exchange fluctuations and commodity prices; the outcome of outstanding claims or legal proceedings, including asbestos-related liabilities and insurance coverage litigation; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statement that addresses activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be, but are not always, characterized by terminology such as "believe," "anticipate," "should," "would," "could," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy," "targets," "aims," "seeks," "sees" or similar expressions. These statements are based on assumptions and assessments made by our management as of the filing date of this Form 10-Q in light of their experience and perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties and actual results or outcomes, or the timing of results or outcomes, could differ materially due to numerous factors, including but not limited to the following:
•the war in Ukraine and conflicts in the Middle East, escalating geopolitical tensions and the potential for an extended regional war and the related impact on energy supplies and prices;
•changes in the general economy, including disruptions caused by geopolitical conflicts, as well as the cyclical nature of the markets we serve;
•supply chain constraints and backlogs and risks affecting the availability and prices for raw materials, parts and components, including tariffs and trade disputes, labor shortages and inefficiencies, freight and logistical challenges and inflation in raw material, part, component, freight and delivery costs and our ability to increase our prices to account for increased costs;
•volatility in the commodity markets and certain commodity prices, including oil and steel;
•our ability to identify, finance, acquire and successfully integrate attractive acquisition targets;
•our exposure to unanticipated liabilities resulting from acquisitions;
•significant movements in foreign currency exchange rates or inflation rates;
•the impact of natural or man-made disasters, adverse or extreme weather events or conditions, epidemics, pandemics and other global health events;
•our ability and the ability of our customers to access required capital at a reasonable cost;
•our ability to accurately estimate the cost of or realize savings from our restructuring programs;
•the amount of, and our ability to estimate and manage, our asbestos-related liabilities;
•the solvency of our insurers and the likelihood of their payment for asbestos-related costs;
•material disruptions at any of our manufacturing facilities;
•noncompliance with various laws and regulations associated with our international operations, including anti-bribery laws, export control regulations and sanctions and embargoes;
•risks associated with our international operations, including risks from tariffs and other trade protection measures and other changes in trade relations;
•risks associated with the representation of our employees by trade unions and works councils;
•our exposure to product liability claims;
•potential costs and liabilities associated with environmental, health and safety laws and regulations;
•failure to maintain, protect and defend our intellectual property rights;
•our ability to attract and retain our employees, including the loss of key members of our leadership team;
•restrictions in our financing arrangements that may limit our flexibility in operating our business;
•impairment in the value of intangible assets;
•the funding requirements or obligations of our defined benefit pension plans and other postretirement benefit plans;
•new regulations and customer preferences reflecting an increased focus on environmental, social and governance issues, including regulations related to climate change and the use of conflict minerals;
•service interruptions, data corruption, cyber-based attacks or network security breaches affecting our electronic information systems;
•risks arising from changes in technology, including failure to successfully integrate new technologies such as artificial intelligence;
•the competitive environment in our industries;
•changes in our tax rates, realizability of deferred tax assets or exposure to additional income tax liabilities;
•our ability to manage and grow our business and execution of our business and growth strategies;
•the level of capital investment and expenditures by our customers in our strategic markets;
•our financial performance;
•difficulties and delays in integrating or fully realizing projected cost savings and benefits of our acquisitions; and
•other risks and factors set forth under "Risk Factors" in Part II. Item 1A of this Form 10-Q and "Risk Factors" in Part I. Item 1A. in our 2025 Form 10-K.
See Part I. Item 1.A. "Risk Factors" in our 2025 Form 10-K for a further discussion regarding reasons that actual results and outcomes, and the timing of results and outcomes, may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Forward-looking statements speak only as of the date of this Form 10-Q. We do not assume any obligation to update or revise any forward-looking statement, whether because of new information, future events and developments or otherwise.
Overview
Please see Part I. Item 1. "Business" in our 2025 Form 10-K, for a discussion of ESAB's objectives and methodologies for delivering stockholder value.
We are a focused premier industrial compounder. Our rich history of innovative products, workflow solutions and our business system, ESAB Business Excellence ("EBXai"), enables our purpose of Shaping the world we imagineTM. We conduct our operations through two reportable segments. These segments consist of the "Americas," which includes operations in North America and South America, and "EMEA & APAC," which includes Europe, the Middle East, India, Africa and Asia Pacific. We serve a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. Our customer base is highly diversified in the industrial end markets.
Outlook
We believe that we are well positioned to grow our businesses organically over the long term by enhancing our product offerings and expanding our customer base. We believe our business mix is well balanced between sales in high growth and developed markets, and equipment and consumables. We believe that our geographic and end market diversity helps mitigate the effects from cyclical industrial market exposures. Given this balance, management does not use indices other than general economic trends and business initiatives to predict the overall outlook for the Company. Instead, our individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and outlook for the future.
We expect strategic acquisitions to contribute to our growth. We believe that our extensive experience of acquiring and effectively integrating acquisition targets should enable us to capitalize on future opportunities. We believe our recent acquisitions are aligned with this strategic direction. On January 31, 2026, the Company entered into an agreement to acquire Eddyfi Technologies ("Eddyfi"), a global leader in advanced inspection and monitoring technologies headquartered in Quebec, Canada, for a purchase price of approximately $1.45 billion. For the year ended December 31, 2025, Eddyfi's Revenues totaled approximately $240 million. Refer to Note 3, "Acquisitions" in the accompanying Notes contained elsewhere in this Form 10-Q for additional information.
Because our products and services are available worldwide, we rely on a global supply chain to source raw materials, parts and components. The majority of our sales are derived from international operations and, as such, we are subject to specific risks associated with changes in the United States policy regarding international trade and other retaliatory trade measures that the United States and foreign governments may take, including the imposition of tariffs, sanctions, export or import controls and other measures that restrict international trade. The United States has announced significant new tariffs on imports from a wide range of countries, including China, which was followed by retaliatory tariffs by China and a number of countries and a cycle of further retaliatory announcements and trade actions. While certain of the tariffs have been and may be delayed, others have taken or may take effect. Further, tariffs announced or imposed by the United States could be altered or delayed through presidential action, bilateral negotiations, judicial orders or congressional actions, and tariffs announced by other countries can be affected by similar developments. These and future changes in tariffs and trade policies have resulted and could result in additional costs and pricing pressures, supply chain disruptions, volatile or unpredictable customer spending patterns and increased economic or geopolitical risks, any or all of which could adversely affect our business, financial condition and results of operations, perhaps materially or in ways that we cannot predict.
ESAB operates a diversified global supply chain and sources parts and materials globally. In February 2026, the United States Supreme Court (the "Court") ruled that the International Emergency Economic Powers Act ("IEEPA"), which the United States administration (the "administration") relied on to impose certain tariffs, does not authorize the administration to impose
tariffs. On March 4, 2026, the United States Court of International Trade ordered the United States Customs and Border Protection ("CBP") to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process. The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties. In response to the Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority. The full impact of the Court's ruling and the administration's response remains uncertain. In addition, the process for addressing requests for refunds of the IEEPA tariffs has recently begun, and the actual timing and extent of any such refunds remain uncertain at this time. Accordingly, we have not recorded any anticipated recovery of IEEPA tariffs paid as of April 3, 2026. We continue to actively monitor and evaluate these developments and the potential impacts of trade policy and tariffs on our business, supply chain and results of operations. We maintain operations worldwide, including in the jurisdictions impacted by the announced and contemplated tariffs. Refer to Part I. Item 1.A. "Risk Factors" in our 2025 Form 10-K for additional information. The full impact of the matters noted above on the Company, our customers and suppliers, the overall economy and capital markets remains uncertain.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the three months ended April 3, 2026 and April 4, 2025.
Results of Operations
The following discussion of our Results of Operations addresses the comparison of the periods presented. Our management evaluates the operating results of each of its reportable segments based upon Net sales, Adjusted EBITDA and Core adjusted EBITDA as defined in the "Non-GAAP Measures" section.
Items Affecting Comparability of Reported Results
The comparability of our operating results for the three months ended April 3, 2026 and April 4, 2025 is affected by the following significant factors:
Russia and Ukraine Conflict
The invasion of Ukraine by Russia and the sanctions and other actions taken by governments in response to this crisis have increased the level of economic and political uncertainty. Refer to Note 1, "Organization and Basis of Presentation" in the accompanying Notes contained elsewhere in this Form 10-Q as well as Part I. Item 1.A. "Risk Factors" section of the 2025 Form 10-K for additional information.
The Middle East Conflict
The conflict in the Middle East and the related impacts, such as logistics challenges from the closing of the Strait of Hormuz, have increased the level of economic and political uncertainty. As reflected in the discussions that follow, these logistics challenges have had a variety of impacts on our results of operations during the three months ended April 3, 2026, including decreased sales levels and increased inventory costs. Refer to Part I. Item 1.A. "Risk Factors" section of the 2025 Form 10-K for additional information.
Tariffs
The Company continues to actively monitor the changes in United States policy regarding international trade, including the recent progress in reaching or progressing international trade agreements with major counterparties. As reflected in the discussions that follow, the United States policy regarding international trade and actions taken in response to it have had a variety of impacts on our results of operations during 2025 and the first quarter of 2026, including decreased sales levels and increased raw material costs. For additional information on the risks of United States policy regarding international trade to the Company's operations, refer to Part I. Item 1.A. "Risk Factors" section of the 2025 Form 10-K for additional information.
Acquisitions
We complement our organic growth with acquisitions and other investments. Acquisitions can affect our reported results, and we report the change in our Net sales between periods both from existing and acquired businesses. The change in Net sales due to acquisitions for the periods presented in this filing represents the incremental sales as a result of acquisitions. For
additional information on our acquisitions, refer to Note 3, "Acquisitions" in the accompanying Notes contained elsewhere in this Form 10-Q and Note 5, "Acquisitions" in the Company's 2025 Form 10-K.
Foreign Currency Fluctuations
A significant portion of our Net sales, 79% for the three months ended April 3, 2026 are outside the United States, with the majority of those sales denominated in currencies other than the U.S. Dollar. Because much of our manufacturing and employee costs are outside the United States, a significant portion of our costs are also denominated in currencies other than the U.S. Dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant.
For the three months ended April 3, 2026 compared to the three months ended April 4, 2025, fluctuations in foreign currencies increased Net sales by 5.5% and Gross profit by 5.5% and increased Selling, general and administrative expenses by 6.1%.
Non-GAAP Measures
Adjusted EBITDA is a non-GAAP performance measure that we include in this Form 10-Q because it is a key metric used by our management to assess our operating performance. ESAB presents this non-GAAP financial measure including and excluding Russia due to economic and political volatility caused by the Russia and Ukraine conflict, which we believe results in enhanced investor interest in these alternative presentations. Adjusted EBITDA excludes from Net income from continuing operations the effect of Income tax expense, Interest expense and other, net, Restructuring and other related charges, acquisition transaction, due diligence and integration expenses, amortization of intangibles and fair value step up on acquired inventories and depreciation and other amortization. We also present Adjusted EBITDA margin, which is subject to the same adjustments as Adjusted EBITDA. Further, we present these non-GAAP performance measures on a segment basis subject to the same adjustments described above. We also present Core adjusted EBITDA and Core adjusted EBITDA margin, which are subject to the same adjustments as Adjusted EBITDA and Adjusted EBITDA margin, respectively, and which removes the impact of Russia for the three months ended April 3, 2026 and April 4, 2025. Adjusted EBITDA and Core adjusted EBITDA assist management in comparing our operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to unusual events or discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity and core business. Management also believes that presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with the accounting principles generally accepted in the United States ("U.S. GAAP"). Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable U.S. GAAP financial measures.
The following tables set forth a reconciliation of Net income from continuing operations, the most directly comparable GAAP financial measure, to Adjusted EBITDA, Adjusted EBITDA margin, Core adjusted EBITDA and Core adjusted EBITDA margin by segment for the three months ended April 3, 2026 and April 4, 2025.
| Three Months Ended April 3, 2026 | |||||||||||||||||
| Americas | EMEA & APAC | Total | |||||||||||||||
|
(Dollars in millions)(1)
|
|||||||||||||||||
| Net income from continuing operations (GAAP) | $ | 51.8 | |||||||||||||||
| Income tax expense | 13.1 | ||||||||||||||||
| Interest expense and other, net | 25.6 | ||||||||||||||||
| Operating income (GAAP) | $ | 35.2 | $ | 55.3 | $ | 90.5 | |||||||||||
| Adjusted to add: | |||||||||||||||||
|
Restructuring and other related charges(2)
|
9.0 | 1.2 | 10.2 | ||||||||||||||
|
Acquisition-amortization and other related charges(3)
|
7.7 | 15.1 | 22.8 | ||||||||||||||
| Depreciation and other amortization | 4.2 | 8.9 | 13.1 | ||||||||||||||
| Adjusted EBITDA (non-GAAP) | 56.0 | 80.6 | 136.6 | ||||||||||||||
|
Adjusted EBITDA attributable to Russia (non-GAAP)(4)
|
- | 0.7 | 0.7 | ||||||||||||||
| Core adjusted EBITDA (non-GAAP) | $ | 56.0 | $ | 79.9 | $ | 135.9 | |||||||||||
| Adjusted EBITDA margin (non-GAAP) | 19.4 | % | 17.6 | % | 18.3 | % | |||||||||||
|
Core adjusted EBITDA margin (non-GAAP)(5)
|
19.4 | % | 18.7 | % | 19.0 | % | |||||||||||
(1) Numbers may not sum due to rounding.
(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.
(3) Includes transaction, diligence and integration expenses totaling $10.3 million for the three months ended April 3, 2026 and amortization of intangibles and fair value step up on acquired inventories totaling $12.5 million for the three months ended April 3, 2026.
(4) Numbers calculated following the same definition as Adjusted EBITDA for total Company.
(5) Net sales were $31.1 million relating to Russia for the three months ended April 3, 2026.
| Three Months Ended April 4, 2025 | |||||||||||||||||
| Americas | EMEA & APAC | Total | |||||||||||||||
|
(Dollars in millions)(1)
|
|||||||||||||||||
| Net income from continuing operations (GAAP) | $ | 72.6 | |||||||||||||||
| Income tax expense | 20.5 | ||||||||||||||||
| Interest expense and other, net | 16.8 | ||||||||||||||||
| Operating income (GAAP) | $ | 43.2 | $ | 66.6 | $ | 109.8 | |||||||||||
| Adjusted to add: | |||||||||||||||||
|
Restructuring and other related charges(2)
|
1.7 | 2.8 | 4.5 | ||||||||||||||
|
Acquisition-amortization and other related charges(3)
|
5.6 | 4.0 | 9.6 | ||||||||||||||
| Depreciation and other amortization | 3.9 | 6.0 | 10.0 | ||||||||||||||
| Adjusted EBITDA (non-GAAP) | 54.5 | 79.4 | 133.9 | ||||||||||||||
|
Adjusted EBITDA attributable to Russia (non-GAAP)(4)
|
- | 6.0 | 6.0 | ||||||||||||||
| Core adjusted EBITDA (non-GAAP) | $ | 54.5 | $ | 73.4 | $ | 127.9 | |||||||||||
| Adjusted EBITDA margin (non-GAAP) | 19.4 | % | 20.0 | % | 19.7 | % | |||||||||||
|
Core adjusted EBITDA margin (non-GAAP)(5)
|
19.4 | % | 20.0 | % | 19.8 | % | |||||||||||
(1) Numbers may not sum due to rounding.
(2) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.
(3) Includes transaction, diligence and integration expenses totaling $1.4 million for the three months ended April 4, 2025 and amortization of intangibles and fair value step up on acquired inventories totaling $8.2 million for the three months ended April 4, 2025.
(4) Numbers calculated following the same definition as Adjusted EBITDA for total Company.
(5) Net sales were $31.3 million relating to Russia for the three months ended April 4, 2025.
Total Company
Sales
The following table presents the components of changes in our Net sales for the three months ended April 3, 2026 compared to the prior year period.
| Three Months Ended | |||||||||||
| Net Sales | Change % | ||||||||||
| (Dollars in millions) | |||||||||||
|
For the three months ended April 4, 2025
|
$ | 678.1 | |||||||||
| Components of Change: | |||||||||||
|
Existing businesses (organic sales)(1)
|
(12.6) | (1.9) | % | ||||||||
|
Acquisitions(2)
|
42.8 | 6.3 | % | ||||||||
|
Foreign currency translation(3)
|
37.3 | 5.5 | % | ||||||||
| Total Net sales growth | 67.5 | 9.9 | % | ||||||||
|
For the three months ended April 3, 2026
|
$ | 745.6 | |||||||||
(1) Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.
(2) Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business.
(3) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.
Net sales from existing businesses decreased by $12.6 million during the three months ended April 3, 2026, compared to the prior year period, due to a $21.7 million decrease in sales volume due to drivers such as tariffs in the Americas, logistics challenges in Middle East related to the war in Iran and lower volumes in Russia partially offset by customer pricing increases of $9.0 million. The increase in net sales from acquisitions was attributable to Bavaria Schweisstechnik ("Bavaria"), DeltaP s.r.l. ("DeltaP"), Aktiv Technologies Private Limited ("Aktiv") and EWM GmbH ("EWM"). The changes in foreign exchange rates resulted in a $37.3 million favorable currency translation impact.
Sales excluding Russia
The following table presents the components of changes in our Net sales excluding Russia ("Core sales") for the three months ended April 3, 2026 compared to the prior year period.
| Three Months Ended | |||||||||||
|
Core Sales(4)
|
Change % | ||||||||||
| (Dollars in millions) | |||||||||||
|
For the three months ended April 4, 2025
|
$ | 646.9 | |||||||||
| Components of Change: | |||||||||||
|
Existing businesses (organic sales)(1)
|
(7.4) | (1.1) | % | ||||||||
|
Acquisitions(2)
|
42.8 | 6.6 | % | ||||||||
|
Foreign currency translation(3)
|
32.2 | 5.0 | % | ||||||||
| Total Core sales growth | 67.6 | 10.5 | % | ||||||||
|
For the three months ended April 3, 2026
|
$ | 714.5 | |||||||||
(2) Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.
(3) Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business.
(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.
(5) Net sales relating to Russia were $31.1 million and $31.3 million for the three months ended April 3, 2026 and April 4, 2025, respectively.
Core Sales from existing businesses decreased by $7.4 million during the three months ended April 3, 2026, compared to the prior year period, primarily due to a $17.0 million decrease in sales volume due to drivers such as tariffs in the Americas and logistics delays in Middle East related to the war in Iran partially offset by $9.5 million of customer pricing increases. The increase in net sales from acquisitions was attributable to Bavaria, DeltaP, Aktiv and EWM. The changes in foreign exchange rates resulted in a $32.2 million favorable currency translation impact.
Operating Results
The following table summarizes our results for the comparable periods.
| Three Months Ended | |||||||||||
| April 3, 2026 | April 4, 2025 | ||||||||||
| (Dollars in millions) | |||||||||||
| Gross profit | $ | 275.1 | $ | 255.2 | |||||||
| Gross profit margin | 36.9 | % | 37.6 | % | |||||||
| Selling, general and administrative expense | $ | 174.5 | $ | 140.9 | |||||||
| Net income from continuing operations | $ | 51.8 | $ | 72.6 | |||||||
| Net income margin from continuing operations | 6.9 | % | 10.7 | % | |||||||
| Adjusted EBITDA (non-GAAP) | $ | 136.6 | $ | 133.9 | |||||||
| Adjusted EBITDA margin (non-GAAP) | 18.3 | % | 19.7 | % | |||||||
| Core adjusted EBITDA (non-GAAP) | $ | 135.9 | $ | 127.9 | |||||||
| Core adjusted EBITDA margin (non-GAAP) | 19.0 | % | 19.8 | % | |||||||
| Items excluded from Adjusted EBITDA: | |||||||||||
|
Restructuring and other related charges(1)
|
$ | 10.2 | $ | 4.5 | |||||||
|
Acquisition-amortization and other related charges(2)
|
22.8 | 9.6 | |||||||||
| Interest expense and other, net | 25.6 | 16.8 | |||||||||
| Income tax expense | 13.1 | 20.5 | |||||||||
| Depreciation and other amortization | 13.1 | 10.0 | |||||||||
| Items excluded from Core adjusted EBITDA: | |||||||||||
|
Adjusted EBITDA attributable to Russia (non-GAAP)(3)
|
$ | 0.7 | $ | 6.0 | |||||||
(1) Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, impairment of long-lived assets and other costs in connection with the closure and optimization of facilities and product lines.
(2) Includes transaction, diligence and integration expenses totaling $10.3 million for the three months ended April 3, 2026 and $1.4 million for the three months ended April 4, 2025. Additionally, it includes amortization of intangibles and fair value step up on acquired inventories totaling $12.5 million for the three months ended April 3, 2026 and $8.2 million for the three months ended April 4, 2025.
(3) Numbers calculated following the same definition as Adjusted EBITDA for total Company.
Three Months Ended April 3, 2026 Compared to Three Months Ended April 4, 2025
Gross profit increased $19.9 million in the three months ended April 3, 2026 compared to the prior year period primarily attributable to acquisitions and foreign exchange partially offset by tariff-related cost increases, net of customer pricing, product mix and a decrease in sales volume. The decline of gross profit margin was primarily due to the dilutive effect in the Americas segment caused by tariff-related price pass-through to customers as well as higher freight and material costs due to oil price increases from the war in Iran. Selling, general and administrative expense increased $33.6 million in the three months ended April 3, 2026 compared to the prior year period primarily due to acquisitions and related transaction costs and foreign exchange impact. Interest expense and other, net increased by $8.8 million due to $4.8 million of costs associated with the Bridge Loan that the Company entered into to fund the Eddyfi acquisition as well as a higher average outstanding debt balance. The effective tax rate of 20.2% for the three months ended April 3, 2026 differed from the effective tax rate of 22.0% for the same period ended April 4, 2025 due to favorable provisions related to FDDEI under the One Big Beautiful Bill Act that were effective beginning with the 2026 tax year.
Net income from continuing operations decreased $20.8 million in the three months ended April 3, 2026 compared to the prior year period primarily due to the aforementioned factors as well as higher Restructuring and other related charges primarily driven by strategic initiatives to improve margins in the Americas and the integration of the recent EWM acquisition and higher Acquisition-amortization and other related charges related to the recent acquisition and integration activity. Adjusted EBITDA
increased $2.7 million in the three months ended April 3, 2026 compared to the prior year period primarily due to the aforementioned. Core adjusted EBITDA increased by $8.0 million compared to the same period in the prior year primarily due to the aforementioned factors. Adjusted EBITDA attributable to Russia decreased by $5.3 million largely due to relocating the Russia manufacturing plant from an owned property to a leased property and expenses associated with this relocation project as well as shifting of product mix from higher to lower margin products in response to shifts in demand and decreases in customer pricing while material costs continue to increase. The decline of Core adjusted EBITDA margin was primarily due to dilution from the EWM acquisition as well as higher freight and material costs due to oil price increases from the war in Iran.
Reportable Segments
We report results in two reportable segments: Americas and EMEA & APAC.
Americas
The following table summarizes selected financial data for our Americas segment:
| Three Months Ended | |||||||||||
| April 3, 2026 | April 4, 2025 | ||||||||||
| (Dollars in millions) | |||||||||||
| Net sales | $ | 288.4 | $ | 280.7 | |||||||
| Gross profit | $ | 111.5 | $ | 110.1 | |||||||
| Gross profit margin | 38.7 | % | 39.2 | % | |||||||
| Selling, general and administrative expense | $ | 67.4 | $ | 65.1 | |||||||
| Adjusted EBITDA (non-GAAP) | $ | 56.0 | $ | 54.5 | |||||||
| Adjusted EBITDA margin (non-GAAP) | 19.4 | % | 19.4 | % | |||||||
| Items excluded from Adjusted EBITDA: | |||||||||||
| Restructuring and other related charges | $ | 9.0 | $ | 1.7 | |||||||
| Acquisition - amortization and other related charges | 7.7 | 5.6 | |||||||||
| Depreciation and other amortization | $ | 4.2 | $ | 3.9 | |||||||
Three Months Ended April 3, 2026 Compared to Three Months Ended April 4, 2025
Net sales in our Americas segment increased $7.7 million in the three months ended April 3, 2026 compared with the prior year period. Net sales from existing business decreased $2.1 million due to reduced sales volumes primarily driven by tariffs and related impacts partially offset by pricing increases. In addition, there was a $9.8 million favorable increase in currency translation. Gross profit increased $1.4 million attributable to favorable foreign exchange impact and price increases partially offset by higher material costs and volume. The decline of gross profit margin was primarily due to the dilutive effect in the Americas segment, which was caused by tariff-related price pass-through to customers. Selling, general and administrative expense increased $2.3 million compared with the prior year period primarily due to foreign exchange impact. Restructuring and other related charges increased $7.3 million in the three months ended April 3, 2026 compared with the prior year period primarily driven by strategic initiatives to improve margins in the Americas. Adjusted EBITDA increased $1.5 million compared to the prior year period primarily due to the aforementioned factors.
EMEA & APAC
The following table summarizes the selected financial data for our EMEA & APAC segment:
| Three Months Ended | |||||||||||
| April 3, 2026 | April 4, 2025 | ||||||||||
| (Dollars in millions) | |||||||||||
| Net sales | $ | 457.2 | $ | 397.5 | |||||||
| Gross profit | $ | 163.6 | $ | 145.1 | |||||||
| Gross profit margin | 35.8 | % | 36.5 | % | |||||||
| Selling, general and administrative expense | $ | 107.1 | $ | 75.8 | |||||||
| Adjusted EBITDA (non-GAAP) | $ | 80.6 | $ | 79.4 | |||||||
| Adjusted EBITDA margin (non-GAAP) | 17.6 | % | 20.0 | % | |||||||
| Core adjusted EBITDA (non-GAAP) | $ | 79.9 | $ | 73.4 | |||||||
| Core adjusted EBITDA margin (non-GAAP) | 18.7 | % | 20.0 | % | |||||||
| Items excluded from Adjusted EBITDA: | |||||||||||
| Restructuring and other related charges | $ | 1.2 | $ | 2.8 | |||||||
| Acquisition - amortization and other related charges | 15.1 | 4.0 | |||||||||
| Depreciation and other amortization | 8.9 | 6.0 | |||||||||
| Items excluded from Core adjusted EBITDA: | |||||||||||
| Adjusted EBITDA attributable to Russia (non-GAAP) | $ | 0.7 | $ | 6.0 | |||||||
Three Months Ended April 3, 2026 Compared to Three Months Ended April 4, 2025
Net sales in our EMEA & APAC segment increased $59.8 million in the three months ended April 3, 2026 compared with the prior year period. Net sales from existing business decreased $10.5 million primarily resulting from volume decreases from logistics challenges in the Middle East related to the war in Iran and lower volumes in Russia. This decrease was more than offset by $42.8 million of Net sales from the Bavaria, DeltaP, Aktiv and EWM acquisitions and $27.5 million in favorable foreign currency impact. Gross profit increased $18.5 million in the three months ended April 3, 2026 compared with the prior year period due to acquisitions and favorable foreign exchange impact partially offset by lower volumes and higher material costs. The decline of gross profit margin was primarily attributable to higher freight and material costs due to oil price increases from the war in Iran as well as plant relocation costs and an unfavorable product mix in Russia in 2026. Selling, general and administrative expense increased $31.3 million in the three months ended April 3, 2026 compared with the prior year period primarily due to acquisitions and related costs and foreign exchange impact. Acquisition - amortization and other related charges increased $11.1 million in the three months ended April 3, 2026 compared with the prior year period primarily driven by the EWM acquisition. Adjusted EBITDA increased $1.2 million and Core adjusted EBITDA increased $6.5 million in the three months ended April 3, 2026 compared with the prior year period primarily due to the aforementioned factors. The decline of Core adjusted EBITDA margin was primarily due to dilution from the EWM acquisition as well as higher freight and material costs due to oil price increases from the war in Iran.
Liquidity and Capital Resources
Overview
We expect to finance our working capital requirements through cash flows from operating activities. We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures, restructuring and asbestos-related cash outflows, debt service and required principal payments, stock repurchase and, subject to approval from the Board of Directors, payment of cash dividends.
As of April 3, 2026, we were in compliance with the covenants under the A&R Credit Agreement and the Indentures. The Company's weighted average interest rate of borrowings under the Credit Agreement and the Indentures was 5.45%, excluding accretion of deferred financing fees. As of the end of the first quarter, we had the capacity for additional indebtedness of up to $1,050 million available on the Revolving Facility. Additionally, we have the ability to incur $73.1 million of indebtedness pursuant to certain uncommitted credit lines, consisting primarily of an uncommitted credit line that we currently have in place, which we have used from time to time in the past for short-term working capital needs. Refer to Note 9, "Debt" and Note 10, "Derivatives" in the accompanying Notes contained elsewhere in this Form 10-Q for more information related to the Company's debt and derivative instruments. We believe that we could raise additional funds in the form of debt or equity if it were determined to be appropriate for strategic acquisitions or other corporate purposes. We believe that our sources of liquidity between debt and cash flows from operating activities are adequate to fund our operations for the next twelve months and thereafter.
In connection with the pending Eddyfi acquisition, the Company has committed equity financing of approximately $318 million, consisting of the issuance of the Mandatory Convertible Preferred Stock for an aggregate liquidation preference of approximately $175 million and the concurrent issuance of common stock to institutional investors at a purchase price of approximately $143 million, both of which are expected to close concurrently with the Acquisition. Refer to Note 3, "Acquisitions" for additional information.
Stock Repurchase Program
On August 13, 2024, the Board of Directors authorized and approved a stock repurchase program to repurchase up to five million shares of the Company's Common stock, par value $0.001 per share, from time-to-time on the open market, in privately negotiated transactions or as may otherwise be determined by the Company's management in its discretion. No repurchases of the Company's Common stock have been made through the share repurchase program since inception. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions, applicable legal requirements and other factors. There is no term associated with the remaining repurchase authorization.
Cash Flows
As of April 3, 2026, the Company had $1.0 billion of Cash and cash equivalents, an increase of $818.9 million from the balance of $185.9 million as of December 31, 2025.
The following table summarizes the change in Cash and cash equivalents during the periods indicated:
| Three Months Ended | |||||||||||
| April 3, 2026 | April 4, 2025 | ||||||||||
|
(In millions)(1)
|
|||||||||||
| Net cash provided by operating activities | $ | 46.9 | $ | 35.4 | |||||||
| Purchases of property, plant and equipment | (13.7) | (7.3) | |||||||||
| Proceeds from sale of property, plant and equipment | 0.3 | 4.6 | |||||||||
| Net cash used in investing activities | (13.4) | (2.7) | |||||||||
| Proceeds from borrowings on Senior Notes | 1,000.0 | - | |||||||||
| Repayments of borrowings on Term Loans | - | (2.5) | |||||||||
| Proceeds from borrowings on revolving credit facilities and other | 131.2 | - | |||||||||
| Repayments of borrowings on revolving credit facilities and other | (317.4) | - | |||||||||
| Payment of debt issuance costs | (17.0) | - | |||||||||
| Payment of dividends | (6.1) | (4.9) | |||||||||
| Distributions to noncontrolling interest holders | (1.1) | (1.2) | |||||||||
| Other financing | (3.4) | (4.6) | |||||||||
| Net cash provided by (used in) financing activities | 786.2 | (13.1) | |||||||||
| Effect of foreign exchange rates on Cash and cash equivalents | (0.7) | 22.4 | |||||||||
| Increase in Cash and cash equivalents | $ | 818.9 | $ | 42.0 | |||||||
(1) Numbers may not sum due to rounding.
Cash flows from operating activities can fluctuate significantly from period to period due to changes in working capital and the timing of payments for items such as pension funding, asbestos-related costs and restructuring program funding. Changes in significant operating cash flow items are discussed below.
•Operating cash flow for the three months ended April 3, 2026 increased compared to the same period in the prior year primarily due to favorable working capital movements and higher non-cash expenses related to depreciation and amortization partially offset by the decline in net income.
•Discontinued operations for the three months ended April 3, 2026 and April 4, 2025 included outflows of $4.3 million and $2.3 million, respectively, which were primarily asbestos-related.
•Restructuring initiative payments were $9.1 million and $3.3 million for the three months ended April 3, 2026 and April 4, 2025, respectively. Refer to Note 8, "Accrued and Other liabilities" in the accompanying Notes contained elsewhere in this Form 10-Q for additional information.
Cash flows used in investing activities during the three months ended April 3, 2026 and April 4, 2025 are primarily comprised of purchases of property, plant and equipment.
Cash flows provided by financing activities during the three months ended April 3, 2026 are primarily comprised of the proceeds from borrowings on the 2031 Senior Notes partially offset by net repayments of borrowings on the revolving facilities and debt issuance costs.
Our Cash and cash equivalents as of April 3, 2026 included $193.8 million held in jurisdictions outside the United States. Cash repatriation of non-United States cash into the United States may be subject to withholding taxes, other local statutory restrictions and minority owner distributions.
Critical Accounting Policies and Estimates
The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.
There have been no other significant additions or changes to the methods, estimates and judgments included in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" in the 2025 Form 10-K.
ESAB Corporation published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 10:36 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]