ESAB Q2 2026 Earnings Call: Complete Transcript

ESAB (NYSE: ESAB ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

View the webcast at Summary ESAB Corporation reported a strong second quarter 2026, with record total sales of $766 million, a 13% year-over-year increase, and a return to organic growth in both segments. The acquisition of Edify was completed ahead of schedule, contributing to faster organic growth, higher margins, and a more resilient earnings profile. 5% adjusted EBITDA margin, despite a 90 basis point decline due to transitory price-cost neutrality. Strategic initiatives include strengthening the equipment mix to over 50% of revenue, enhancing workflow solutions, and leveraging the Edify acquisition for geographic expansion.

1 billion, with an expected adjusted EBITDA of $615 to $625 million, reflecting contributions from Edify and strategic investments. Management expressed confidence in organic growth for the second half of the year, particularly in equipment and automation, and highlighted efforts to mitigate geopolitical headwinds, especially in the Middle East. Full Transcript OPERATOR Hello everyone. Thank you for joining us and welcome to the ESAB Corporation second quarter 2026 earnings release and conference call.

After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Mark Barbalato, Vice President of Investor Relations.

Mark, please go ahead. Mark Barbalato, Vice President of Investor Relations Thanks, operator, and welcome to ESAB's second quarter 2026 earnings call. This morning I'm joined by our President and CEO, Shyam P. Kambeyanda, and CFO, Brent Jones.

Please keep in mind that some of the statements we are making today are forward-looking and are subject to risks, including those set forth in today's SEC filings and 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 can be found in our earnings press release and today's slide presentation, which is available on our website. With that, I'd like to turn the call over to our President and CEO, Shyam P.

Kambeyanda. Shyam P. Kambeyanda — President and CEO Thank you, Mark, and good morning, everyone. Thank you for joining us today.

Let me start by welcoming our Edify teammates to ESAB. I was in Quebec for day one, and the positive energy was palpable. The teams are working extremely well together, building plans for growth and innovation. Edify adds talented leaders to our organization.

To add, Brent has been with us now for 90 days, and he's done a great job jumping right in and raising the bar for ESAB. In addition, we've scored a real win bringing RJ to ESAB as an Executive Vice President. RJ brings over 30 years of experience with Danaher, Veralto, and GE HealthCare. At each of those companies, she built process-driven organizations at scale and delivered outstanding results.

She's also an expert practitioner of our business system. I believe the combination of Brent, RJ, EBX, AI, and our current leadership team is exactly what ESAB needs to drive organic growth, margin expansion, and strong cash flow generation. We've been busy in the first half. Our teams have kept their heads down, focused on executing their plans and controlling the controllable.

And it shows. Turning to Slide 3 to discuss our second quarter highlights. In particular, ESAB delivered a strong second quarter, headlined by record total core sales and adjusted EBITDA and a return to organic growth in both segments. Demand in North America and Asia remained robust, Europe continues to be resilient, and the Middle East performed in line with expectations in a tough environment.

These results reflect the strength of our team and the power of our global enterprise, showcasing the value of our unrivaled workflow solution that addresses our customers' most complex issues. 5% driven by double-digit growth in automation and equipment. Adjusted EBITDA grew 8% to $150 million. Margins reflected transitory price-cost neutrality driven by increased logistics costs and commodity costs, which we expect to correct over the next few quarters with price and cost-out activities.

Our teams did a fantastic job thoughtfully navigating this transitionary inflation, all while protecting our investments in equipment growth initiatives. We closed the acquisition of Edify ahead of schedule, a defining step that positions ESAB for faster organic growth and higher margins. Brent will walk you through the financial details and our updated outlook, which now incorporates Edify. The ESAB you see today is a transformed enterprise, with equipment now representing over 50% of our revenue and powering our ability to accelerate organic growth.

Before we move on, I want to thank our teammates around the world for their passion and commitment to our shared vision. Together we're raising the bar of performance at ESAB. Moving to Slide 4, showcasing Edify, I want to take a moment to remind everyone why this asset is so important. Edify powers the next phase of ESAB's workflow and is a global leader in inspection and monitoring technologies for mission-critical applications.

With clear leadership in electromagnetic testing, ultrasonic testing, and automated inspection, it serves attractive end markets with strong secular tailwinds across aerospace and defense, nuclear infrastructure, and oil and gas. These tailwinds are driven by aging infrastructure, rising inspection requirements, growing power generation demand, and an industry-wide skilled labor shortage. Let me bring this to life for all of you. In early July we hosted several customers at Edify, where we showcased the power of our combined workflow solution across various end markets.

This was the first time our teams from Edify, EWM, GCE, and ESAB worked together to demonstrate the full power of our enterprise. The event showcased our unrivaled workflow solutions, and our customers walked away with a clear understanding of the connection between ESAB and Edify and the value it creates for their operations. That excitement is already converting into an active funnel of commercial opportunities, and our teams are energized to capture them.

Just this week I visited Edify's site in State College, Pennsylvania, and got a firsthand view of this talented team, their ability to partner with large aerospace customers to quickly build prototypes to solve the toughest problems. It reinforced what I've believed all along. We've picked up a team that is maniacally focused on the customer, capable of innovating at the speed of our customers' problems, and carries an entrepreneurial spirit that will serve ESAB well over the long term.

For our shareholders, this translates directly into a stronger ESAB, faster organic growth, higher margins, reduced cyclicality, and a more predictable and resilient earnings profile that compounds value over time. Financially, Edify is a premier asset. The business delivers high single-digit growth, gross margins of approximately 65%, and EBITDA margins of roughly 30%. Edify also brings meaningful North American exposure that pairs naturally with ESAB's global footprint, creating immediate geographic expansion opportunities for both companies.

Turning to Slide 5, by combining ESAB and Edify, we have created an unrivaled end-to-end workflow solution that supports our customers from initial preparation and joining all the way through real-time asset management, data-driven insights, and full traceability. Our teams are focused, and our growth funnels have never been stronger, and we're very optimistic about the opportunities that lie ahead. Together, we're uniquely positioned to accelerate the industry shift towards connected and digital workflow solutions. Moving to Slide 6, this is ESAB's transformation in one picture.

Over the past decade we have deliberately shifted our mix towards a faster-growing, higher-margin portfolio of equipment and gas control products, which has become the foundation of our complete end-to-end workflow solution. From our leadership in gas control to our advanced equipment portfolio, every step we have taken, including our recent acquisitions, has been accretive to our growth and gross margin profile and has significantly strengthened our offering and geographic reach. The execution of our strategy has moved our equipment mix from 38% to 50% plus on a 2026 pro forma basis.

At that same period we have improved our gross margins by approximately 500 basis points. Turning to Slide 7, this slide is the proof point of our capital allocation strategy. Over the last 18 months we've deliberately deployed capital into high-quality assets that have fundamentally reshaped ESAB. Every one of these acquisitions is delivering.

We have already discussed the merits of Edify, and Aktiv and Delta P strengthen our gas control leadership with unique products in fast-growing geographies. EWM establishes ESAB as the technology leader in equipment, bringing cold metal transfer technology, which we call REACT, along with additive manufacturing capabilities, and Bavaria extends our proprietary filler metal product line while deepening our presence in Germany. Each asset improves our growth profile, enhances our margin, and extends our workflow solution—exactly what we set out to do. The results validate our playbook, and the runway ahead is long.

We have reinvigorated EBX AI, sharpening our focus and driving out cost. ESAB is on a new trajectory. On that positive note, let me hand it over to Brent to walk you through the financial details. Brent Jones, CFO Thank you, Shyam, and good morning everyone.

It is a pleasure to be on the call today. I have been spending my first few months diving into the business and getting to know the team. Based upon everything I've seen, I believe we have a strong foundation in place to drive long-term shareholder value. Let's turn to Slide 8 to review our financial summary.

As Shyam noted, we delivered $766 million in total sales, a 13% increase over the second quarter of 2025. 5% organic sales growth reflecting double-digit growth in automation and equipment as well as an 8% contribution from acquisitions. 5% adjusted EBITDA margin. We experienced a 90 basis point year-over-year margin decline because of transitory price-cost neutrality and deliberate targeted commercial investments to accelerate growth in our equipment product line.

We view these investments as essential to driving future growth and margin expansion as equipment becomes a larger slice of the pie. 41. Given the number of moving pieces related to this transaction, we have provided a simple walk. As you may recall, we pre-funded a large portion of the debt financing with an exceptionally well-timed bond offering in March where we raised $1 billion at a very attractive cost of capital.

This financing is even more attractive in retrospect given current market volatility and interest rate trends. 03 was attributable to the pre-funding. Our committed equity financing consisting of common shares and mandatorily convertible preferred stock, which helped fortify our balance sheet, led to a 3 cent headwind. We are extremely excited to have Edify as part of the ESAB team.

The teams are already working together exceptionally well and we are making targeted commercial investments to accelerate our long-term growth and margin expansion. Turning to our Americas segment on Slide 10, the Americas delivered a strong Q2. Total sales grew 12% to $316 million with 5% organic growth. North America had double-digit organic growth on the back of particularly strong performance in equipment.

One of our key growth priorities, gas equipment and automation, rose double digits. Finally, Mexico continues to stabilize and we are working to mitigate expected headwinds in South America. Moving to Slide 11, our EMEA and APAC segment sales grew 14% to $450 million, representing 1% organic growth. We were able to drive organic growth despite the meaningful geopolitical headwinds in the Middle East which impacted volumes.

Margins in the segment were pressured by these disruptions as well as continued equipment growth investments. However, better-than-expected performance in Europe helped partially offset these headwinds. We continue to be excited about what EWM is doing for our business both in Europe and globally, and the EWM integration and associated margin expansion plans remain solidly on track. Turning to Slide 12 regarding cash generation, our first half adjusted free cash flow was in line with the first half of 2025 despite the meaningful increase in interest expense.

Our cash flow was impacted by costs associated with restructuring and acquisition integration activities that are enabling future growth and margin expansion, and a strategic decision to carry higher equipment inventory levels to serve our customers. We are focused on leveraging EBX AI structurally to improve our working capital turns and we expect strong second-half cash generation. In terms of capital allocation, we continue to focus on investing in organic growth, debt reduction, and accretive tuck-in and bolt-on acquisitions. Moving to Slide 13 to update our full year 2026 outlook.

With Edify now closed, we are raising our full year 2026 outlook. 1 billion. This assumes organic growth of 2% to 4%. Acquisitions are now expected to contribute approximately 9 points of growth and foreign currency remains unchanged.

We have increased adjusted EBITDA to $615 to $625 million, which includes seven months of Edify. We have assumed about $15 million of drag from transitory price-cost neutrality driven by logistics costs and commodity inflation while protecting investment in equipment growth initiatives. 50 reflects these changes as well as the contribution and funding of the Edify acquisition. Our free cash flow conversion should be approximately 90%.

We have the right strategy and are executing it with discipline and focus and are on track to deliver another year of strong results. Thank you for your time and I will now turn it back to Shyam. Shyam P. Kambeyanda — President and CEO Thank you, Brent.

To summarize, we delivered a record second quarter with positive organic growth in both segments and we closed Edify ahead of schedule. We're building momentum in our business. We transformed ESAB. We're continuing to reduce rooftop and optimize our manufacturing footprint.

We are simplifying EBX AI so that every team member is fully engaged with our tools. Our teams are driving four powerful funnels: a funnel for new customers, a funnel for synergy sales, a funnel for cost-out and a funnel for Kaizen. We have renewed focus on Gemba. Starting with me, our priorities are clear: driving organic growth, margin expansion and deleveraging the balance sheet.

We have reshaped ESAB into a faster-growing, higher-margin enterprise. True to our values, we will keep helping each other win, valuing every voice as we deliver long-term shareholder value. With that, operator, please open the line for questions. OPERATOR We will now begin the question and answer session.

Please limit yourself to one question and one follow-up. If you would like to ask a question, please press Star one to raise your hand. To withdraw your question, press Star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Brian Blair with Oppenheimer. Brian, please go ahead.

Brian Blair, Analyst at Oppenheimer Thank you. Morning everyone. Shyam P. Kambeyanda — President and CEO Morning.

Morning. Brian Blair, Analyst at Oppenheimer Shyam, something you could offer a little more color on how orders progressed through Q2 and into Q3, and how your team's thinking about organic growth in the back half, both in terms of Q3/Q4 cadence and segment contribution. Shyam P. Kambeyanda — President and CEO Yeah, thanks.

Thanks for that question, Brian. Obviously we were very happy with how things progressed for us from Q1 to Q2. We've seen that trend continue into Q3. As you've always known, we felt at the back half of the year we had a lot of initiatives in play.

We felt that sequentially our growth profile and our performance improves. And you've seen that from Q1 to Q2, our performance improved both from a margin perspective and a performance perspective on sales. We expect to continue that core growth trend into Q3 and Q4. The other piece that I would add there, Brian, is that we have, as I'd mentioned before, there were a couple of things that we were very comfortable with.

One was EWM and the initiatives that we're working on for equipment in the second half of the year.