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    ESAB
    Earnings call· Mar 2026(Q1 FY26)

    ESAB Q1 FY26 earnings call ESAB

    May 7, 2026 Source

    Executive summary

    ESAB Corporation Q1 FY26 — Record Sales and Strategic Acquisitions Drive Margin Expansion

    ESAB delivered a strong Q1 FY26 with record sales, driven by its compounder strategy and successful integration of recent acquisitions. The company is actively reshaping its portfolio towards higher-margin equipment and services, with the Eddyfi acquisition set to further accelerate this shift and expand gross margins. Despite geopolitical headwinds and associated cost pressures, ESAB reiterated its full-year guidance, confident in its strategic trajectory and operational agility.

    Highlights

    5

    • Total core sales grew 10% year-over-year, reaching a record $715 million.

    • Adjusted EBITDA increased 6% year-over-year to $136 million.

    • Acquisitions EWM and Aktiv both grew double digits year-over-year.

    • Adjusted free cash flow was $40 million, with cash conversion improving to 49% from 40% in the prior year.

    • Net leverage improved to 1.9x at the end of the first quarter.

    Concerns

    3

    • The conflict in Iran resulted in an expected 30 basis points headwind to adjusted EBITDA margin company-wide.

    • Q1 organic sales volume was negative 3% year-over-year.

    • EWM acquisition was EBITDA dilutive by 40 basis points company-wide, as expected for the first three quarters of FY26.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year total sales growth
    6% to 9%
    high materiality
    High
    Full-year organic sales growth
    2% to 4%
    high materiality
    High
    Full-year adjusted EBITDA
    $575 million to $595 million
    high materiality
    High
    Full-year adjusted EPS
    $5.70 to $5.90
    high materiality
    High
    Eddyfi acquisition close
    Midyear
    high materiality
    High
    Net leverage
    Below 3x
    medium materiality
    High
    Consolidated gross margins
    Greater than 40%
    high materiality
    High
    EWM EBITDA accretion
    EBITDA accretive
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Americas
    The Americas segment delivered a steady performance with revenue growth and stable margins. North America, excluding Mexico, showed mid-single-digit growth, while Mexico remained stable. South America experienced a volume drag due to prior-year tariff comparables.
    Adjusted EBITDA: $56 million (up 3% YoY)North America (excluding Mexico) growth: mid-single digitsMexico performance: stable
    		$288 million3%—19.4%
    EMEA and APAC
    EMEA and APAC demonstrated strong sales growth, gaining share from competition. Margins declined primarily due to the Iran conflict and the dilutive impact of EWM. Europe and India performed as expected, and the Middle East saw limited disruption due to agile operational responses.
    Adjusted EBITDA: $80 million (up 9% YoY)Margin impact from Iran conflict: 50 bpsMargin impact from EWM: 70 bpsEWM and Aktiv growth: double digits
    		$426 million16%—Declined 130 bps

    Operational metrics

    18
    Adjusted EBITDA
    $136 millionUp 6% YoY
    Q1 FY26

    Company-wide adjusted EBITDA.

    Cash Conversion
    49%Up from 40% prior year
    Q1 FY26

    Improved due to strong working capital management and EBXai-driven process gains.

    Net Leverage
    1.9x
    Q1 FY26

    Net leverage at the end of the first quarter.

    EWM EBITDA Dilution
    40 bps
    Q1 FY26

    Expected EBITDA dilution from EWM acquisition for the first three quarters of 2026.

    Iran Conflict EBITDA Headwind
    30 bps
    Q1 FY26

    Impact of the conflict in Iran on adjusted EBITDA margin.

    Equipment as % of Revenue
    44%
    Current

    Equipment mix has increased from 38% in 2016.

    Equipment as % of Revenue (Post-Eddyfi)
    ~52%
    Post-Eddyfi close

    Projected equipment mix after the Eddyfi acquisition closes.

    Gross Margin
    ~38%
    Current

    Gross margin has increased from approximately 35% in 2016.

    EWM Gross Margin
    ~45%
    Current

    Gross margin for the EWM equipment product.

    Eddyfi Gross Margin
    ~65%
    Current

    Gross margin for the Eddyfi business.

    Eddyfi EBITDA Margin
    ~30%
    Current

    EBITDA margin for the Eddyfi business.

    Ruffian 270 and Aristo Edge Servable Market
    $250 million
    Future

    Combined additional servable market from the launch of these two product families.

    EWM React and Tetrix 350 Servable Market
    $900 million
    Future

    Combined additional servable market from EWM's additive manufacturing technology and the Tetrix 350 for TIG welding.

    Middle East Sales as % of Total
    7%
    Q1 FY26

    Proportion of total sales from the Middle East region.

    Total Core Sales Growth
    10%YoY
    Q1 FY26

    Company-wide total core sales growth.

    Organic Sales Growth
    -3%YoY
    Q1 FY26

    Company-wide organic sales growth, impacted by tough prior-year comparables.

    Price Contribution to Sales Growth
    +2%
    Q1 FY26

    Analyst-stated price contribution to sales growth in Q1.

    AI Projects Underway
    40+
    Current

    Number of AI projects contributing to productivity and long-term growth.

    Industry KPIs

    1
    MetricValueDetails
    Incremental margin operating leverage12%%

    Product announcements

    4
    ProductTypeDetails
    Ruffian 270 engine-powered welderlaunch
    Aristo Edgelaunch
    EWM React technologyupdate
    Tetrix 350launch

    Deals & partnerships

    5
    EddyfiExtends ESAB's workflow solutions into the inspection and monitoring space, a market leader in electromagnetic testing, ultrasonic testing, and automated inspection. Serves mission-critical end markets like aerospace, defense, nuclear, and energy infrastructure. Brings meaningful North American exposure.

    Previously announced acquisition, expected to close midyear. Integration team is already in place, sharpening combined workflow solutions value proposition and sharing Eddyfi's capabilities with ESAB customers.

    EWMStrengthens equipment portfolio, filling gaps in product lineup. Leader in additive manufacturing technology.

    One of 18 successful acquisitions that reshaped the equipment portfolio. Integration is progressing ahead of schedule, with early benefits from the combination.

    AktivStrengthens position in gas control.

    One of the acquisitions that strengthened the gas control portfolio.

    DeltaPStrengthens position in gas control.

    One of the acquisitions that strengthened the gas control portfolio.

    BavariaAdded to leadership position in proprietary filler metal.

    One of the acquisitions that strengthened the proprietary filler metal portfolio.

    Risks & headwinds

    2
    Conflict in IranQ1 FY26, ongoing

    30 bps headwind to adjusted EBITDA margin (company-wide); 50 bps headwind to EMEA and APAC segment margin. Increased costs for tungsten, nickel, steel, and freight.

    Mitigation: Rerouting inventory through ports of Jeddah and Salalah in Oman. Implementing surcharges to offset higher costs. Moving price to the market to achieve price/cost neutrality in Q2 and slightly positive in H2.

    Challenging environmentQ1 FY26

    Q1 organic sales volume was -3% YoY.

    Mitigation: Strategic acquisitions, product innovation, and operational agility are expected to drive volume inflection in the latter half of the year. Additional price actions and automation orders are also expected to contribute.

    What to watch in Q2 FY26

    5

    EWM EBITDA accretion

    Exit of FY26
    CurrentEBITDA dilutive (Q1 FY26)
    TargetEBITDA accretive

    Why it matters

    EWM's profitability trajectory is key to overall margin expansion and the success of the acquisition strategy.

    Our cost out and sales synergy efforts are running ahead of schedule, and we expect EWM to be EBITDA accretive as we exit the year.

    Q&A highlights

    6

    Given Q1 volume was -3% and price was +2%, how will ESAB achieve 2-4% organic growth for the full year, implying a significant volume inflection?

    Management explained Q1 faced tough comparables due to prior-year tariff pull-ahead. They anticipate additional price in Q2, and acquisitions becoming organic in the second half of the year will drive positive volume inflection in Q3 and Q4. Automation orders booked for H2 also contribute.

    “The thoughtful way to look at it is down slightly neutral, a little bit more positive in Q3. And then when the acquisitions become part of the base, you really see that organic driver kick in.”

    asked by Nathan Jones · answered by Shyam Kambeyanda

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Transformation and Portfolio Reshaping

    ESAB is undergoing a significant transformation, reshaping its portfolio and building new capabilities to become a premier industrial compounder. This involves strategic acquisitions like DeltaP, Aktiv, EWM, Bavaria, and the pending Eddyfi, which collectively strengthen positions in gas control, equipment, and filler metal. These moves, coupled with over 40 active AI projects, are designed to drive growth, reduce cyclicality, and expand gross margins, making the company more durable through economic cycles.

    02

    Gross Margin Expansion Driven by Mix Shift

    The company's gross margin has expanded from approximately 35% in 2016 to nearly 38% today. This improvement is largely attributed to a strategic shift towards higher-margin equipment, which now accounts for 44% of revenue, up from 38% in 2016. With the Eddyfi acquisition, this mix is projected to rise to approximately 52%. Acquisitions like EWM (gross margins ~45%) and Eddyfi (gross margins ~65%) are key drivers, expected to push consolidated gross margins to over 40% by 2027.

    03

    Product Innovation and Market Expansion

    ESAB launched two key products, the Ruffian 270 engine-powered welder and the Aristo Edge, adding approximately $250 million to its servable market. The Ruffian fills a critical gap with its simultaneous full power delivery, while the Aristo Edge sets new performance benchmarks with ultrafast arc control and spatter reduction. Additionally, EWM's React technology in additive manufacturing and the Tetrix 350 for TIG applications are opening access to an additional $900 million market, including semiconductor wafer manufacturing.

    04

    Eddyfi Acquisition and Strategic Rationale

    The pending acquisition of Eddyfi, expected to close midyear, is a significant step in extending ESAB's workflow solutions into the faster-growing, higher-margin inspection and monitoring space. Eddyfi is a market leader in electromagnetic and ultrasonic testing, serving mission-critical end markets like aerospace, defense, nuclear, and energy infrastructure. Financially, Eddyfi boasts high single-digit growth, 65% gross margins, and 30% EBITDA margins, aligning with ESAB's strategy to expand margins and reduce cyclicality.

    05

    Operational Resilience in the Middle East

    Despite the conflict in Iran, which caused a 30 basis points EBITDA margin headwind company-wide, ESAB demonstrated strong operational resilience. The Middle East, representing approximately 7% of sales, experienced limited disruption due to the company's local footprint and agile response. Teams rerouted inventory through ports in Jeddah and Salalah and implemented surcharges to offset higher costs, positioning ESAB to benefit from future rebuild efforts.

    06

    Strong Balance Sheet and Cash Flow Generation

    ESAB maintained a strong financial position, reporting adjusted free cash flow of $40 million and an improved cash conversion rate of 49%, up from 40% in the prior year. The company ended the quarter with a net leverage of 1.9x. While leverage is expected to temporarily increase with the Eddyfi acquisition, management anticipates deleveraging back below 3x by year-end, underscoring a disciplined capital allocation strategy.

    AI-generated summary of the company’s earnings call. Not investment advice.