ESAB Aktie

Thank you for standing by, and welcome to the ESAB Corporation First Quarter 2026 Earnings Release and Conference Call. [Operator Instructions]

Thank you. I'd now like to turn the call over to Mark Barbalato, Vice President of Investor Relations. Mark, you may begin.

Thanks, operator. Welcome to ESAB's first quarter 2026 earnings call. This morning, I'm joined by our President and CEO, Shyam Kambeyanda; and CFO, Brent Jones. Please keep in mind that some of the statements we are making are forward-looking and are subject to risks, including those set forth in our SEC filings and today's earnings release. Actual results may differ, and we do not assume any obligation or intend to update these forward-looking statements, except as required by law. With respect to any non-GAAP financial measures mentioned during the call today, the accompanying reconciliation information related to those measures can be found in our earnings press release and today's slide presentation. With that, I'd like to turn the call over to our President and CEO, Shyam Kambeyanda.

Thank you, Mark, and good morning, everyone. Thank you for joining us today. Turning to Slide 3 to discuss our first quarter highlights. We're pleased to report a strong start to the year headlined by record first quarter sales. Total core sales grew 10% year-over-year, a result that reflects both the effectiveness of our compounder strategy and the resilience of our diversified global footprint. Despite a more challenging environment, which included higher costs as a result of the conflict in Iran, we generated sales of $715 million and adjusted EBITDA of $136 million, an increase of 6% year-over-year. We delivered this performance while continuing to invest in the long-term drivers for the business. I am especially encouraged with the performance of our acquisitions. EWM and Aktiv both grew double digits year-over-year, and our sales synergy funnel across the portfolio improved meaningfully, reinforcing our confidence in the strategic value these businesses bring to ESAB and their potential to drive organic growth in the years to come.

Looking ahead, we are accelerating our compounder journey through the previously announced acquisition of Eddyfi, which we expect to close midyear. This transaction strengthens our portfolio and extends our runway into profitable growth. Given our first quarter performance and our visibility to the remainder of the year in booked orders and additional price, we are reiterating our previously announced guidance, we are confident in the trajectory of the business while remaining mindful of the dynamic environment in which we operate. Moving to Slide 4. Before we turn to the quarter, I want to put the past 1.5 years into context. Throughout 2025 and into the start of '26, we have deliberately been reshaping ESAB, sharpening the portfolio and building new capabilities across the company.

The ESAB you see today is meaningfully stronger. Our capital allocation strategy is the clearest place to see it. We have continued to build a premier industrial compounder by adding strength across every layer of the value chain. We have strengthened our position in gas control with DeltaP and Aktiv. We've created a best-in-class equipment portfolio with EWM and filled out every gap in our equipment product lineup. We added to our leadership position in proprietary filler metal with Bavaria and Eddyfi, which is expected to close midyear, extends our workflow solution into inspection and monitoring. Complementing these acquisitions, we now have more than 40 AI projects actively underway contributing both to near-term productivity and long-term growth.

The new acquisitions coupled with AI initiatives will drive growth, reduce cyclicality, expand our gross margin profile making ESAB more durable through the cycle than it has ever been. Turning to Slide 5. This slide brings the story to life. Over the past decade, we have reshaped ESAB into a faster-growing, higher-margin enterprise and the shift is now plainly evident in both our mix and our margins. Three levers have driven the work. First, sustained R&D investment to refresh our product portfolio and fuel growth; second, EBXai, our operating system for productivity and operational excellence, third, a disciplined M&A program that has added growth and margin. Let's start with our mix. In 2016, equipment represented roughly 38% of our sales, a fully refreshed product portfolio and an optimized manufacturing footprint and 18 successful acquisitions have changed that picture.

With the recent additions of EWM and Bavaria in Fabrication Technology and DeltaP and Aktiv in gas control equipment now accounts for roughly 44% of revenue. Upon closing Eddyfi midyear, that mix will rise to approximately 52%. The margin trajectory tells the same story. Our gross margin has moved from approximately 35% in 2016 to nearly 38% today. Eddyfi accelerates the next step. As I've shared with you before, our equipment product carries gross margins closer to 45%. And Eddyfi, as we shared before, is close to 65%. Together, these dynamics will push our consolidated gross margins to greater than 40% for 2027 and beyond.

Moving to Slide 6. Momentum is building globally across our welding equipment portfolio, and 2 launches are leading the way, the Ruffian 270 engine-powered welder and the Aristo Edge. The Ruffian fills a critical gap in our offering and stands out as the most productive operator-friendly unit in its class. It is the only welder in its category to deliver full power simultaneously. 270 amps of welding output and 11,000 watts of generator power at the same time at a 100% duty cycle, an independent generator arc ensures that running power tools never causes a spike or drop in the welding arc. The Aristo Edge sets a new performance benchmark on both the advanced manual and robotic sides. Its ultrafast arc control manages the arc 10 to 20x faster than traditional equipment, clearing short circuits instantly and preventing defects and the advanced waveforms reduce spatter by up to 85%, producing a stable puddle that virtually eliminates post-weld cleanup.

With 500 amps at a 60% duty cycle, the plug-and-play compatibility with all major robot and cobot brands, it is built for continuous industrial scale production. Customer response has been strong. We have secured preferred status with the yellow goods OEM on the Aristo Edge, and we're gaining channel share with the Ruffian. Together, these 2 product families add roughly $250 million to our servable market. Turning to Slide 7. When we acquired EWM, additive manufacturing was one of the capabilities we were most excited about. It is an advanced 3D metal printing process that uses electric arc as the heat source and metal wire as the feedstock to build large high-strength components layer by layer. And EWM is a clear leader in this space. EWM's React technology is now opening doors for the broader ESAB portfolio. We are gaining real traction with a major U.S. distributor and with defense OEMs.

We have secured orders with integrators, engineering and construction firms and 2 German OEMs manufacturing in the U.S. today. In parallel, our teams are building a healthy cross-sell funnel, bringing ESAB filler metal to EWM customers and EWM equipment to ESAB customers. There is still work ahead, but Q1 was an encouraging start. The next product, Tetrix 350, adds a second growth lane, it is the best-in-class power source for TIG applications, including precision welding requirements needed for semiconductor wafer manufacturing and it pairs naturally with our AMI product where order activity continues to rise. Together, these 2 products give ESAB access to an additional $900 million of servable market across additive manufacturing and TIG and orbital TIG welding.

They have our sales teams energized by the new workflow solutions we can now deliver to our most discerning customers. Moving to Slide 8. Let me reiterate what I shared when we announced the Eddyfi acquisition. This transaction extends ESAB workflow solutions into faster-growing, higher-margin inspection and monitoring space, a bit more detail on the asset itself, Eddyfi is a clear market leader in electromagnetic testing, ultrasonic testing and automated inspection. It serves mission-critical end markets with attractive secular tailwinds across aerospace, defense, nuclear and energy infrastructure. The business also brings meaningful North American exposure that pairs naturally with ESAB's global footprint, opening immediate geographic expansion opportunities for both companies.

Financially, Eddyfi is a premier asset, high single-digit growth, gross margin is about 65%, and EBITDA margins around 30%. Strategically, the deal accelerates our shift towards equipment, strengthens our ability to deliver differentiated workflow solutions, expand margins, reduce cyclicality and ultimately improves the predictability and resilience of our earnings profile. Although the transaction is expected to close midyear, we're already in motion. Our integration team is in place sharpening the combined workflow solutions value proposition and beginning to share Eddyfi's capability with ESAB customers. Turning to Slide 9. What I love about this industry is that we enable extraordinary engineering every day. A few moments capture that better than what is happening right now with NASA's Artemis program. For the first time in more than 50 years, humanity returned to the moon and ESAB technology helped make that possible.

A decade ago, we would not have been at the table. Today, we are a key contributor and that is a source of enormous pride across our company. You can see one example on this slide. Our friction-stir welding technology delivers the exact combination of strength, precision, reliability and weight optimization that the most demanding aerospace environments require. ESAB's technology enables aluminum alloy structures to be extraordinarily strong and remarkably light. Boeing's selection of our technology for the Space Launch System, fuel tank reinforces the thesis behind our portfolio, differentiated innovation applied to mission-critical manufacturing in the world's most demanding end markets. This is what we mean when we talk about being the fabrication technology provider of choice, and it is what gets our teams out of bed every morning.

Before I go into more detail about the quarter, I'd like to take this opportunity to thank Kevin Johnson for his contributions to ESAB and wish him well in his new role. At the same time, I'm very excited to welcome Brent Jones to the ESAB family. Brent brings diverse and highly valuable expertise as we move into the next phase of our compounder journey. With that, let me hand it over to Brent to say a few words.

Thank you, Shyam, and good morning, everyone. I want to start by thanking Shyam and the entire ESAB team for the warm welcome. I'm thrilled to be joining ESAB and look forward to working closely with the team as we continue to advance ESAB's compounder journey. ESAB has a strong foundation a compelling strategy and a tremendous opportunity ahead, and I'm excited to be part of it. Let me hand it back to Shyam to go through the financials.

Thanks, Brent. Moving to Slide 10. Turning to the quarter. We're pleased with how the business has performed overall. Strong execution by our global teams drove record first quarter total sales growth of 10% year-over-year, a clear demonstration of the power of our compounder strategy. Adjusted EBITDA was $136 million, up 6% year-over-year with an adjusted EBITDA margin of 19%. Margins in the quarter reflected an expected 40 basis points impact from EWM and an additional 30 basis points of headwind from the conflict in Iran. Important to note, EWM is already contributing strong growth this quarter. As I've shared before, EWM is accretive to gross margins but dilutive to EBITDA margins for the first 3 quarters in 2026.

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. Turning to Slide 11 and talking about the Americas. The Americas delivered a steady first quarter. Total sales were $288 million, up 3% year-over-year and adjusted EBITDA was $56 million, also up 3% year-over-year, with margins flat at 19.4%. Within the segment, North America, excluding Mexico, grew mid-single digits and Mexico held stable. We're also seeing meaningful interest in EWM across the U.S., which is encouraging as we broaden the commercial reach of that business. At the same time, we're reshaping our manufacturing footprint and accelerating our EBXai initiatives, which are designed to strengthen competitiveness and expand margins. Moving to Slide 12 to talk about EMEA and APAC. We continue to gain share from competition across EMEA and APAC, a clear demonstration of our global footprint.

Sales increased 16% to $426 million and adjusted EBITDA rose 9% to $80 million. Margins declined 130 basis points with 50 basis points of that reflecting the conflict in Iran and the additional 70 basis points coming from EWM. Europe and India performed in line with expectations, and the Middle East saw limited disruption. EWM and Aktiv both grew double digits with strong sales funnel momentum building across all 4 acquisitions. EWM integration is progressing ahead of schedule, and we're already seeing early benefits from the combination with ESAB. Moving to Slide 13. We continue to gain share in the Middle East, and that success starts with our local presence in the region.

The resilience we have shown this quarter reflects both the local footprint and the way our teams have responded to changing conditions. The Middle East represents roughly 7% of our sales. And despite the conflict, the region saw limited disruption. Our teams reacted quickly to the disruption by rerouting inventory through ports of Jeddah and Salalah in Oman and implementing surcharges to offset higher costs. It is a clear example of the agility and discipline that define our operating model. Long-term fundamentals remain attractive. We've made investments on the ground, most notably in Saudi Arabia and that footprint positions us better than any of our peers to win with customers and support the rebuild once conditions stabilize.

Turning to Slide 14. Our balance sheet and cash flow remain important enablers of our compounder journey, and we've made meaningful progress on both fronts. Adjusted free cash flow was $40 million and cash conversion improved to 49% up from 40% in the prior year quarter. The improvements reflect strong working capital management and continued EBXai-driven process gains in order-to-cash. We expect strong full year cash generation. We're also focused on deleveraging. We ended the first quarter at net leverage of 1.9. That figure will step up temporarily once the Eddyfi acquisition closes where we expect to be back below 3 by year-end.

Moving to Slide 15. Given our first quarter performance and our visibility to the remainder of the year in booked orders and additional price, we are reiterating our previously announced guidance. We are confident in the trajectory of the business while remaining mindful of the dynamic environment in which we operate. On a core basis, our outlook assumes total sales growth of 6% to 9%, which consists of organic growth of 2% to 4%, 400 basis points from M&A and FX contributing approximately 1%. Our adjusted EBITDA range remains $575 million to $595 million, and our adjusted EPS range remains $5.70 to $5.90. Turning to Slide 16. In summary, our recent initiatives have fundamentally reshaped ESAB, accelerating our transformation into a premier industrial compounder. The 4 acquisitions we made last year, EWM, Bavaria, DeltaP and Aktiv and Eddyfi now to start 2026, have moved the company decisively towards higher growth, higher-margin, lower-cyclicality and a more predictable earnings profile.

We have meaningfully increased our exposure to defense, nuclear and the fast-growing additive manufacturing space while positioning ourselves opportunistically to benefit from rising semiconductor capital spending. We are thrilled with these acquisitions and the way they have shaped our portfolio, strengthening our ability to compound value and generate stronger cash flow over the long term. Operationally, we're winning in the market, our acquisitions are performing. EBXai continues to power productivity across the company. The second quarter is tracking to plan with stable sales and orders, supporting our decision to reiterate full year guidance. Taken together, these actions position ESAB to compound long-term shareholder value at an accelerating pace.

Our teams are energized, our strategy is working. The path ahead for ESAB is full of opportunity and our finest moments are still in front of us. With that, operator, let's open the line for questions.

[Operator Instructions] Your first question comes from the line of Nathan Jones with Stifel.

Again, at a fairly high level, volume in the first quarter was minus 3 and I would have thought that price should be fading from the plus 2 that we had in the first quarter, maybe not with all the renewed inflation. It does imply an inflection on volume to get to the 2% to 4% organic growth for the full year. So can you maybe talk about where you see the inflection in volumes as we go through the year from that negative 3 to something that's positive.

Yes. I think, Nathan, we obviously were going against the comparable last year, if you remember, with the pull ahead with tariffs. So comparably, we knew Q1 would be just a bit softer as a result of the pull ahead that happened last year when the tariffs went into play. So we sort of landed in Q1 even a little stronger than what we thought based on when the conflict started. So very pleased with the top line number and how the teams performed. And as you go through the year, a couple of things happen. One, obviously, we go in with some additional price into Q2. Second, in the back half of the year, as you know, some of the acquisitions that today show up, the acquisitions that show up today on a different line become organic as we go into the third and the fourth quarter driving up organic sales as we finish out the year. So 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. Clearly, for us, the teams have done, in my view, a phenomenal job navigating through the first quarter even though the war came upon us as we finished out February, the team sort of really rallied, figured things out quickly in terms of supply chain, handled the quarter strong and we finished well, and we set us up nicely for Q2 and beyond.

I guess I'll ask my follow-up about the Middle East. We have heard from companies about lack of side access and things like that, that are impeding, I guess, work being done in the Middle East, can you talk about the impact that's having on your business? We were only at it for 1 month out of the quarter in the first quarter. Should we expect a little bit more impact than I think you called out 50 basis points of margin in EMEA and APAC. Does that get a little bit worse in the second quarter? Or maybe talk about the mitigation activities that you've deployed to help offset that?

Yes. So the way to think about it, at least in the first quarter was when it came upon us, I think we drove to get supplies into the Middle East so that we had the right inventory in place for the business. And so think of it as some additional costs that came at us in Q1 that we thoughtfully engaged with to make sure that the business was in a good spot. We've gone out for price as the month went on. And so think about that margin gap actually reducing. That being said, we are going out for price to match costs so we don't have any additional price there. So we expect to be price cost neutral. So it's an improving scenario. And as the year goes along, we'll continue to work the price piece to continue our journey forward like we've done in the past. So that's the way to think about it. So a little additional hit in Q1, getting better as we get into Q2 with the additional price that we've gone out with and then getting slightly positive as we finish out the year in the third and fourth quarter.

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

Good morning. Thank you so much. I heard you talk about acquisitions growing double-digit percent. Did those acquisitions have unusually easy compares? Or that's a good gauge for the rest of the year. And within that double-digit percent, how much was price versus volume?

All right. So let me start with the first piece. The 2 businesses that I highlighted were EWM and Aktiv. The short answer is, year-over-year, it wasn't about easy comparables. It was the actions that the team were taking, engaging with new customers, getting new orders especially in Europe, the Middle East and some extent also in North America for the EWM business. And so we feel really good one about the acquisition, two, about the funnel that we've created that's now creating momentum in the equipment business. There was some price in it, but most of it was volume, which is what's exciting for us as we go through the year.

So I hope that sort of answers that question. The other piece that I think I want to reiterate as we look at the second half of the year as well, we have some automation orders that we booked several of them that stack up quite nicely adding to that organic growth number that we expect to see in the second half of the year in Q3 and Q4. So additional price, additional orders in automation, these businesses that we've acquired that are really matching the strategic fit that we saw are today outperforming our plan, creating additional tailwind for volume as we finish out the year.

That is excellent color. And regarding the 30 basis points headwind you saw in the quarter to EBITDA from the Iran conflict. Do you expect a similar 30 bps headwind in 2Q or that steps down?

I think the way to think about it is, we'll obviously see, but let's start with the positive. The war could settle in a week and maybe we're talking about something different. But on the side, if the war were to continue, we would see 2 additional months of volume that would then get offset by some additional price that we've gone in. So the way to think about it is that it's not going to get worse, could get slightly better as the quarter goes on.

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

Thank you, and good morning, everyone. I want to talk a little bit about the Americas segment. And I guess the moving pieces here, I'm trying to think through them. You had the negative one organic in the quarter, but you kind of call out here that excluding Mexico, North America is up mid-single digits. Mexico, it's stable. Obviously, something else acted as a drag here. Can you comment at all on that?

Yes. We were actually very pleased with our U.S. and Canadian businesses for the quarter, Mig. We felt that both on price and on what I would call created volume, we were very happy with how the business performed. And I would also say that in April, we did better than how we finished out in Q1. So really happy about how that business is performing. The traction that we're getting with customers and the channel. I was actually out with some of the distributors. Our team had an EDAC, our distributor meeting out in Albuquerque. That went really well. I've done some gemba with the North American team down in Texas and also down in Mexico. And we feel really good about the traction, the funnel, the growth bridges that the teams have that are now driving results in U.S. and Canada. When it comes to Mexico, as you remember, this was the last quarter in those comparables that we spoke about and so what I meant by stable is that the business continues to be at the levels that it was in Q4.

As I visited with the team last week, there are shoots of improvement as we go through the year. So optimistic about how the year sort of shapes up, also with Mexico kind of lapping itself in Q2. To give you some additional color on the volume, obviously, the rest is South America where they also had some tariff-related volume bump last year that sort of goes away and neutralizes now and puts us in a better spot for Q2.

I see. And given the way the comparisons are looking here from a volume standpoint for the rest of the year, I mean, we started with negative 4, but then your comps are getting easier. At what point in time do you -- so I guess 2 questions. At what point in time do you see volume inflection here? When can we expect some growth? And how do you think about the full year from a volume perspective? So what's embedded in the 2026 guide for America's volume specifically?

Well, America's volume, we expect to be -- so let me just sort of thoughtfully walk you through that. When you look at U.S. and Canada, we feel that we're going to be volume positive. And when it comes to Mexico as well, we think as the year goes on, we're going to be volume positive, slightly positive on volume also in Mexico. South America, in my view, will stay slightly volume positive. They were a bit volume negative in the first quarter just on the back of year-over-year comparables with the tariff year. They also go positive.

So the way to think about the year as it plays out is you saw Q1 be slightly negative. You'll see Q2 be neutral, Q3 getting positive. And then Q4, in my view, will be nicely positive because some of the acquisitions that today are not considered part of our base, become part of our base. In addition to that, obviously, we're really excited about the Eddyfi acquisition that will close here in midyear. That then allows us additional opportunities for growth for our base business and to be able to pull to Eddyfi with our customers.

Yes. And Mig, the other thing I'd say to you is that in the second half of the year, I made the comment earlier, we've got additional price going in, in Q2. We've also got additional automation orders that we have booked for the third and the fourth quarter. So as you look at it, one, obviously, you're lapping a tariff quarter in Q1, you're getting to a spot where Mexico becomes -- laps itself in Q2. You've got additional price Q3, you've got these automation orders plus additional price. In Q4, you've got these businesses that today drove double-digit growth in Q1, becoming part of the base in Q4. And so as you sort of look at it, my thoughts here are very realistic and maybe slightly conservative is how you think about the volume numbers as you finish out the year.

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

I just wanted to go back to the Middle East question. Just to clarify, this 50 basis point drag that was on segment EBITDA margin. Was there any impact on volumes and is there any sense that more broadly, higher commodity prices are in any sense, weighing on overall demand?

Yes. The short answer is we did not see it, and we have not seen it yet. But we have seen cost impact, specifically some like tungsten, we've seen nickel move a little bit. We've seen steel move a little bit. So yes, the war has created a little bit more cost in some of the steel and components that we buy. The other piece that we've really seen is around freight. Freight costs have gone up and partially, that's likely because of fuel costs. And so those are the 2 aspects. We're moving price to the market to sort of overcome and offset all of it. We expect price/cost to be neutral for at least the second quarter, and then we'll continue to sort of work to be price/cost positive as the year plays on.

Okay. And then just another question on margins. I think incremental margin in the quarter was about 12% for the total company and the guide seems to embed something around 20%. So can you just kind of walk through the progression through the rest of the year of how incremental margins should improve?

Yes. I think the first one, obviously, is we expect better price from Q1 to Q2. So that's assumption number one. Things came at us a bit fast in March. We went out with some price. We didn't get all of it in Q1. We get price in Q2. The second piece is that we are seeing good momentum in the North American market. And those margins for us are also accretive. We see really nice activity in Europe. One of the things that we have not talked about is how well Europe performed for us to offset some of the issues that we had in the Middle East. So those are basically the 2 aspects of it.

And then we continue to make improvements in the acquisitions. We talked about EWM being ahead of schedule. In terms of its integration plan and the plans that we had to continue to improve EBITDA percentage in that business. So Q1 will be sort of the -- in terms of EBITDA, the lowest quarter for EWM. And every quarter, sequentially, the EBITDA percentage for EWM improves becoming accretive in Q4.

[Operator Instructions] Your next question comes from Steve Volkmann with Jefferies.

Shyam, you mentioned Europe's strength a couple of times. Can you just delve into that a little bit and sort of share versus kind of what you're seeing from an end market perspective? I think you might have mentioned some stimulus benefits over there in past calls or something? Just an update on what's happening there?

Yes. There's a couple of pieces playing in our favor. One, obviously, we have a phenomenal footprint and now with the 2 acquisitions that we've made in the Germanic region, we really have a position of strength in Europe. We are local. We are able to supply and serve our customers locally, giving us a significant advantage in the region. In the moments of conflict and the moments of uncertainty, what we find is customers begin to realize that they can rely on ESAB. The second thing that's driving it to some extent is the defense spending that's happening in Europe, we're seeing quite a bit of orders associated with that come to us. We're also seeing a lot of momentum on the equipment side, especially with EWM that's benefiting our business.

And there's a couple of actions underway in Europe that could also benefit us. One is this carbon tax piece that is expected to land in 2027. That's giving us a little bit of an advantage and then there are some additional tariffs and quotas that the European Union is expected to put in midyear that would advantage local companies in Europe. So those are the aspects that are giving us a benefit, really pleased with how our European business did. Obviously, if the Middle East conflict resolves, there's some additional significant tailwind for us in Europe and Asia Pac.

Okay. Great. And I think you may have almost segued to my follow-up, which is I know it's early days, but has your team been able to think about what type of sort of rebuilding and upgrades might be required in the Middle East and how that -- you might participate in that?

Yes. We actually have -- we met with our leader in the Middle East this week to look through what the opportunities will be once peace finds its way into that conflict. We feel that with the damage that has occurred in the conflict and the repair that would be needed, ESAB could have a position to take advantage of that rebuild because most of our filler metal is specced into most of the damaged sites. As a result, we find ourselves in a position of advantage.

And that concludes our question-and-answer session. I would now like to turn the conference back over to Mark Barbalato for closing comments.

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

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Thank you for standing by, and welcome to the ESAB Corporation to acquire Eddyfi Technologies, Creating an Unrivaled Provider of Complete Workflow Solutions Conference Call. [Operator Instructions]

I'd now like to turn the call over to Mark Barbalato, Vice President of Investor Relations. You may begin.

Please keep in mind that some of the statements we are making are forward-looking and are subject to risks, including those set forth in our SEC filings and today's earnings release. Actual results may differ, and we do not assume any obligation or intend to update these forward-looking statements, except as required by law. With respect to any non-GAAP financial measures mentioned during the call today, the accompanying reconciliation information related to those measures can be found in our earnings press release and today's slide presentation.

With that, I'd like to turn the call over to our President and CEO, Shyam Kambeyanda.

Thank you, Mark, and good morning, everyone. Thank you for joining us today. Today marks a significant moment for ESAB. I want to begin with our purpose of shaping the world we imagine. This acquisition reinforces the purpose and reflects our commitment to our values as we continue to shape ESAB for the future, driving faster growth, higher margins and stronger, more durable value creation for all our stakeholders.

Before turning to the slides, let me provide some context on how we arrived here. For the past 2.5 years, we have been working deliberately in this space. Through our EBX process, we value map the entire end-to-end workflow of our customers, looking at where customers create value, where complexity resides and where returns on capital are structurally more attractive. What became very clear through that work is that inspection and monitoring represents one of the most compelling extensions of our current workflow. It is technology-led, mission-critical, supported by strong secular tailwinds and characterized by high single-digit growth, attractive margins and lower cyclicality. We also concluded that if we execute the right acquisition, this space would provide ESAB with a long runway to deploy capital at very attractive returns.

But to do that, we first needed to establish a credible entry point, a true beachhead into inspection and monitoring. That brings us today and to Eddyfi. We are excited to announce that we have signed a definitive agreement to acquire Eddyfi, an exceptional company defined by technology leadership, a growth mindset, deep customer intimacy and a strong entrepreneurial culture. These attributes align closely with ESAB's own culture. At ESAB, we believe long-term success is built by investing in people, empowering teams and fostering a winning culture. We are confident this shared philosophy will enable the Eddyfi team to thrive and accelerate their growth within ESAB. Together, we are uniquely positioned to reshape workflow solutions for our customers while positioning ESAB for a faster growth, higher margins and lower cyclicality.

Moving to Slide 4. There are several compelling reasons why we are excited to welcome Eddyfi to the ESAB family. First, with Eddyfi, ESAB becomes a clear unrivaled provider of a fully integrated workflow solution spanning fabrication, inspection and monitoring. Second, this acquisition positions ESAB as the partner of choice for our most important global customers, customers for whom quality, productivity and asset integrity are mission-critical. Third, Eddyfi expands ESAB's total addressable market by approximately $5 billion and strengthens our M&A pipeline, supporting sustained higher growth and higher margins over time.

Turning to Slide 5. Let me briefly highlight Eddyfi's profile and financial characteristics. Eddyfi is a market leader in electromagnetic testing, ultrasonic testing and automated inspection with clear leadership across these categories. The company serves mission-critical end markets with attractive secular tailwinds, including aerospace, defense, nuclear and energy infrastructure. Eddyfi also brings increased North American exposure while benefiting from ESAB's global footprint, creating immediate geographic expansion opportunities. Their solutions address powerful structural trends, aging infrastructure, rising inspection requirements, growing power generation demand and skilled labor shortages through automation and advanced inspection technologies. Financially, Eddyfi is a premier asset. The business delivers high single-digit growth, gross margins above 65% and EBITDA margins of approximately 30%.

For ESAB, this acquisition accelerates our shift towards equipment, enhances our ability to deliver differentiated workflow solutions, expands margins, reduces cyclicality and ultimately improves the predictability and resilience of our earnings profile.

Turning to Slide 6. Since becoming a publicly traded company, our ambition has been clear: to build a premier industrial compounder capable of consistently outpacing the markets across cycles. Eddyfi directly advances this objective. As you know, ESAB is a global leader in filler metals, welding equipment, gas control and in-process monitoring through InduSuite. Eddyfi, including its magnified digital platform, adds post-weld inspection, structural integrity and life cycle monitoring capabilities across both metal and composite structures.

Together, we're uniquely positioned to serve critical markets while accelerating the industry shift towards connected digital workflow solutions that integrate inspection, traceability and life cycle monitoring into a seamless process.

Moving to Slide 7. Since 2016, we have consistently expanded ESAB's total addressable market. Eddyfi is a meaningful step forward in that journey. By combining Eddyfi's inspection and monitoring capabilities with ESAB's global scale, we extend these solutions into new regions and customer segments. As shown on the slide, Eddyfi increases our total addressable market by approximately $5 billion, bringing ESAB's TAM to roughly $45 billion. Importantly, it establishes a foundation in inspection and monitoring, creating additional long-term compounding opportunities.

Turning to Slide 8. Through our diligence process, we've identified $20 million in run rate synergies. Leveraging EBXai, we see opportunities across sourcing, shared services, digital workflow integration, geographic expansion and operational efficiencies. As with prior acquisitions, synergies will build over time.

Turning to Slide 9. Over the past several years, we have deliberately shifted our portfolio to higher-margin product lines, particularly equipment and gas control. Eddyfi meaningfully accelerates that journey. We have previously outlined our goal of achieving a 60-40 ratio of consumables to equipment, and this acquisition moves us decisively towards that target. On a pro forma basis, we expect 2025 ESAB revenue of approximately $3 billion with EBITDA margins of around 21%, just 100 basis points below our 2028 target of 22%. In fact, we now expect to reach approximately 22% EBITDA margins by 2027.

With that, I'll hand it over to Kevin to walk you through the financial details of this acquisition.

Thanks, Shyam, and good morning. Turning to Slide 10 for the transaction summary for Eddyfi. The acquisition is projected to bring in about $270 million in 2026 revenue with an EBITDA margin over 30%. The purchase price is $1.45 billion, cash-free and debt-free. The deal values Eddyfi at 14.5x 2026 earnings, factoring in $20 million of annual run rate savings. Funding will come from a combination of cash on hand, debt and $318 million in privately placed securities made up of $175 million of a mandatory convertible preferred and $143 million of common equity. This acquisition will greatly enhance ESAB's growth and profitability while creating new opportunities for additional acquisitions that can further improve the ESAB business and accelerate our journey to a premier industrial compounder. At closing, net leverage is expected to be in the low 3x dropping below 3x by year-end, well within our targeted range of 2 to 3x net leverage.

Turning now to Slide #11. We provide our preliminary results for the fourth quarter of 2025. The ESAB team sustained a robust performance during the fourth quarter, achieving total core growth of approximately 8.5%. Organic growth experienced a decline of 1.8% attributable to a softer December as we experienced unexpected softness in Europe and South America as customers ceased operations for the holidays a week earlier than anticipated. High-growth markets, particularly the Middle East and India, continued to demonstrate strength. I'm proud of the performance of the ESAB team, which used EBX to boost EBITDA and widen margins, achieving around 9% growth at the midpoint and approximately 50 basis point margin increase, excluding EWM. The EWM integration is progressing well with promising opportunities for long-term equipment growth and market share gains.

Moving to Slide #12 and our full year 2025 highlights. We are proud of our strong reputation for following through on our commitments. Since our spin-off, we have aimed to set realistic goals and surpass them. Although 2025 brought challenges, our team managed to increase both revenue and EBITDA throughout the year. I'm happy to report that we ended the year, again, well above our original guidance.

Moving to Slide #13 and ESAB's 2026 outlook. Please note, our guidance excludes the impact from the Eddyfi acquisition, which will be incorporated following its expected closure in the middle of the year. We anticipate organic growth in the range of 2% to 4%, driven by positive pricing and volume. Additionally, we expect approximately a 4-point benefit from M&A and an FX tailwind of 0% to 1%. To address seasonality, the quarterly breakdown is outlined on the slide.

Organic growth is projected to be flat in the first quarter with improvement forecasted sequentially quarters 2 through 4, attributable to more favorable comparisons and progress in growth initiatives. Our adjusted EBITDA is projected to range between $575 million and $595 million, representing a margin expansion of approximately 40 basis points at the midpoint, excluding EWM. We aim to deliver savings of roughly $25 million during the year through productivity enhancements, back-office efficiencies and restructuring initiatives, which will be partially offset by $15 million allocated to growth investments. Interest expense is expected to fall within the $80 million to $85 million range with an anticipated adjusted tax rate of 20% to 21%. Cash flow conversion is projected at approximately 90% as we maintain a disciplined focus on robust cash generation while investing in EBXai initiatives, including some large onetime restructuring activities to enhance our manufacturing competitiveness.

We are confident in our operating plan and optimistic about delivering another successful year in 2026. The momentum will be further enhanced upon closing the Eddyfi acquisition.

With that, I will return the discussion to Shyam.

Thank you, Kevin. Turning to Slide 14 to summarize. Today is a defining day for ESAB. Eddyfi strengthens our technology leadership and positions us as the unrivaled provider of end-to-end workflow solutions. Eddyfi expands our presence in higher growth, higher-margin markets and enhances the quality and durability of our portfolio. In addition, inspection and monitoring is an attractive space to deploy additional capital at attractive returns. Equally important, the strong cultural alignment between our organizations gives us confidence in our ability to integrate effectively and move with speed. We expect this acquisition to be EPS accretive in 2027.

Let me end by thanking our teams and our partners who worked on this acquisition and welcome the Eddyfi team to ESAB. Together, we're well positioned to unlock extraordinary long-term value. With that, operator, we're now ready to take questions.

[Operator Instructions] Your first question today comes from the line of Bryan Blair from Oppenheimer.

Deal checks a lot of boxes. It's certainly a little more transformational in nature than what we had anticipated, but certainly like the profile, the fit seems pretty clean. You mentioned a few times that Eddyfi will serve as a true beachhead to pursue growth and scale in inspection and monitoring. I guess to level set on that and think about competitive landscape, how should we think about the major competitors in the market, who you're likely to bump up against more frequently? And then how much fragmentation is there beyond the "big guys?"

Yes. First, what I'd tell you is that this is something that we've been working on for over 2.5 years, Bryan. And one of the things that we pride ourselves in is our process and how we identify opportunities and how we connect the dots -- what became very clear to us as we were going through this process was that the connection between our traditional fabrication technology business and inspection and monitoring was very clear. The customer base, the people that are involved in the purchasing of it and the interactions that we have with the general marketplace. And the additional cherry on the top was the fact that this was a very attractive space in terms of margin, in terms of growth and the aspect that it was lower cyclicality.

To answer the second part of your question around what are the opportunities to compound, as I mentioned to you, it's about a $5 billion market. Apart from a few larger competitors, the space is actually quite fragmented. Think of this as an acquisition that creates a platform within ESAB upon which we can bring, acquire and integrate any other acquisition in the space with much more velocity and much higher and much more attractive return on investment metrics for ESAB.

In terms of the competitive landscape, yes, there are a couple of people, but it depends on the space that you're working on and the characteristics within that space. So let me just mention a few. You look at on one side, probably liquid penetrants and visual inspection and on the other side, the electromagnetic testing and ultrasonic testing. And in each of those categories, there are actually different competitors that provide you either a product that you may need or a geographic expansion opportunity or possible access to customers. We've got a very robust list of targets off of this. We think we continue to build out and strengthen our workflow. What we're most excited about are the growth and the margin characteristics in this business and thrilled about what we can do as we begin to deploy capital in this space.

And as you know, Bryan, we now have 3 places to deploy capital. And what I'd like to also add is that this is an extension, not an adjacency, right? This is a space that we now know well. It's a customer base that we know well. It's a customer base that we interact with. So this acquisition, in many ways, is us walking along the path of creating additional value for our customers as well our shareholders.

Understood. That all makes sense. Helpful color. And to quickly touch on the preliminary 2026 core outlook you provided, are you anticipating a meaningful difference in the organic growth path of Americas versus EMEA and APAC within the 2% to 4% consolidated?

No, Bryan, we're expecting similar growth, similar price, similar volume in both the segments.

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

So the 55% recurring sales. Can we talk about that a little bit? From what I can tell from the website and so on, this company seems to be selling products rather than services. But correct me if I'm wrong about that. Is there a service component to all of this? Is that what's in recurring sales? And what -- how does demand play out in the space? Is there a replacement component to it where some of these products need to be replaced every so many years? Or how -- what exactly is kind of like the fundamental demand driver?

Yes. So first, obviously, a general trend when you look at the energy infrastructure that's going up, the demand in aerospace and defense. So there's an underlying demand that's sort of driving growth within this business. When we look at the characteristics, so let me sort of break that down for you. There is positive pricing in this business of about 200 basis points. We think that the underlying markets are about 200 to 300 basis points. And the technology leadership allowing this business to actually gain share in the market is the rest of the number to getting us to the high single digits number that we talk about in terms of growth.

The second point that you made to me, there is a service component, yes. But think of all of these equipment that go out there for inspection and monitoring having probes and sensors out in the marketplace. And most of these probes and sensors in many applications are single use and as a result, create a really strong recurring revenue stream for the business. And as a result, you have about a 55% reoccurring. And then you've got the general marketplace doing very well, especially in aerospace, defense, in the nuclear segment, in the energy segment and general infrastructure build as things happen both in North America and in Europe.

Okay. As far as the matter in which you're financing the transaction, can you give us maybe a little more detail on the convert and also on the common equity as well, maybe like the -- how do you think about the number of shares issued and so on?

Yes. So Mig, let me take that question. So on the mandatory, it's $175 million. It's a 6.5% dividend with a 15% premium on it. So in terms of shares, you'd be looking at a maximum of around about 1.45 million shares, a minimum about 1.26 million shares on conversion, which would be in 3 years. On the common equity, it's $143 million, and you'd be looking at the shares of around about 1.25 million shares associated with that.

And we love the combination, Mig, obviously, because it sort of gets us out into the low 3s in terms of leverage. And we believe, as Kevin mentioned in his script, very quickly by the end of the year, we're down below 3 in terms of leverage. So we think that the ability for us to go out and do this was extraordinary, obviously, and a vote of confidence in what we're doing and how we're changing the profile of ESAB and puts us in a great position from a balance sheet perspective by the end of the year.

All right. If you'll allow one final one. If I heard you correctly, in your guidance, you're anticipating flat organic growth in Q1. Can you talk about that a little bit more? My -- looking at my model, the comp in Q1 was relatively easy, maybe not as easy as Q2. How do you think about Americas versus EMEA and APAC organic? And what gives you confidence that we have enough acceleration for the rest of the year to get to your guidance?

Yes. I'll start it off and then Kevin can take the rest of it. The first piece for us is that last year, if you remember, Q1, we had an anticipation pull ahead based on what was going to go on in the U.S. with tariffs. And so as a result, in general, we feel that Q1 from a comparative perspective is probably the toughest on a year-over-year basis. And then from the second quarter on, the comparables become quite favorable to ESAB. And Mig, you know this, our view at the start of the year is to go in with what we believe gives us the best chance to execute and deliver. You saw our numbers from this year as well from our original guide to where we ended. It's no different for 2026. We're going in with several activities, both around growth and margin expansion. And we believe that we're well positioned to have a strong year in 2026. And I'll let Kevin talk about the quarters.

Yes. So Mig, as you picked up, it's flat organic growth in the first quarter for the business. In terms of the 2 segments, we're expecting relatively similar year-over-year numbers in both the segments in the first quarter. And in both segments, we will see improvement as we step through from Q2 to Q4, partly due to the fact that we do have easier comps, particularly in the Americas segment related to what happened last year.

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

I wanted to clarify, I think I heard you say the deal is accretive in 2027. Should we expect dilution in the sub year 2026 versus the EPS guide of $5.70 to $5.90, should it close midyear?

Yes, Tami, obviously, the closing, we're a bit at the mercy of some of the regulatory bodies. But our expectation at this point would be we would close at the midyear. And you're correct, we would expect some dilution in 2026, but we're modestly accretive as we move into 2027.

I think what we see here, Tami, would be, obviously, margin would be very accretive, both on the gross margin side and the EBITDA percentage side, but then dilutive on the EPS line.

Understood. That's helpful color. And thanks for all the comments on the recurring revenues. Just to build on that, I think I saw the Eddyfi has robotics and software revenues. Could you comment on the mix of that? And could you comment on the growth profile if the robotics or software piece is sizable enough at this point?

Yes. I don't think we've -- we'll sort of come out and give more detail as we go forward. The software business, obviously, is a fast-growing piece within Eddyfi. But from a scale perspective, it's embedded within the technology and not called out separately as we go about it. But I'll take a look at it, Tami, and get back to you. On the robotics side, there is clear activity. In fact, at several of our visits to the site, we did see some significant activity around robotics. They also play very similar to us in tight spaces, especially around defense. And as a result, need robotics to allow for these probes to enter tight areas. And then obviously, automation and the ability to capture data is a significant piece. But we don't break out automation per se on that particular front, but they are integrated into the development of the new products and the new innovation pipeline that exists within Eddyfi for the next couple of years.

Understood. That's very helpful. If I can add one more. Could you comment on the mix of the key end markets? I saw you mentioned nuclear, aerospace, defense. Is there a way to quantify what mix is some of the larger end markets for Eddyfi right now?

Yes. I think the -- let me sort of walk you through a couple, right? I think we did give you, I think, on Slide 5, a piece that talks about the nuclear space -- so let me just pull that up and make sure that I have the piece in front of me. So if you look at Slide 5, Tami, it sort of talks about nuclear being at 30%. Infrastructure, this is civil infrastructure, whether it be bridges, roads, dams being about 24% energy infrastructure, this would be oil and gas, liquid natural gas as well -- liquefied natural gas as well and then 12% with aerospace and defense, which is the fastest-growing aspect of this business, and then the rest fall into the other categories across the industrial landscape.

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

Just maybe on some of the potential to expand the Eddyfi business here. You talked about being able to leverage ESAB's global footprint with them being a bit more overweight in North America. This would seem like completely different products, completely different manufacturing. Can you maybe just talk a bit about how that works and how you would go about generating some of those revenue synergies using ESAB's footprint, ESAB's customer list, et cetera?

Yes. So we did a tremendous amount of VOC on this front, Nathan. And what we determined was that every customer that buys fabrication technology products also spends money on inspection and monitoring. The more critical the application, the larger the spend on inspection and monitoring along with the fabrication technology spend. And in some cases, the percentage was 30% to 40% of the fabrication technology spend. So think of this as if they were to buy $1 million worth of fabrication technology equipment, they were then spending about 30% of that on inspection and lifetime monitoring of that particular asset.

And so the view for us is that there is an entitlement piece associated with the fact that all of our customers are doing some of this and the most critical customers are using technologies that Eddyfi has a significant amount of strength. We've -- as we did some of the work at some of our customers, Eddyfi is not the primary provider of product. But we strongly believe that with the position that we have with these customers, we can begin to make that shift to Eddyfi.

The one thing that is in Eddyfi's favor is that they are by far the best technology in the marketplace. In terms of ease of use, they are the best. In terms of speed and accuracy, they are the best in the categories that they play in. And so as a result, as we've done some of the initial work and got feedback from some of our big customers, there is an interest to be able to get everything from one provider, but more importantly, a need to kind of work through the entire workflow to provide integrity for the entire value chain.

So I guess that's less about like leveraging your actual physical footprint. It's leveraging customer relationships to grow the business.

That's right, Nathan.

Okay. And then I guess as a follow-up question -- go ahead.

No, I'm going after you.

I was going to say a follow-up question, talking about 3-ish turns of leverage at the end of the year, which means you're going to really have to prioritize the areas that you use capital for M&A. You had laid out the 2 buckets before, and now you obviously have the third bucket here for M&A. Can you talk about the priority and how you'll think about allocating capital to M&A going forward here given the increased leverage and the less optionality that you have on the balance sheet?

Yes. I'd actually state it slightly differently. We don't see this as an additional leg in our business. We see this as an extension of the fabrication technology business into more attractive returns and sort of really creating a workflow that continues to move ESAB up on the value chain. And so when it comes to capital allocation, we see ourselves, obviously, with this particular space, we think there are some opportunities to create some really attractive returns. And we'll focus obviously on gas control and fab tech as well. But as we get into 2026 and a part of 2027, obviously, our focus is going to be to deleverage. And we've talked about it. We come out in the low 3s and quickly get down into the 2s. So we'll have plenty of balance sheet capacity for the kind of stuff that we want to get done.

Yes, Nathan, I think the important piece here for us is that it's an incredible opportunity. We felt that as we went through this particular process that we found an opportunity and a way to connect the dots that we felt no one in our space was looking at. It was sort of sitting out there in the open a really attractive space within the fabrication technology realm, but a very different characteristic in terms of margin and growth. And so we are thrilled that we were able to connect the dots first, but more importantly, able to execute on this particular transaction. We believe Eddyfi is the best asset in this particular space, and it now allows us to continue to compound in this space with really attractive returns for our shareholders.

And your next question comes from the line of Tom Hayes from ROTH Capital Partners.

Congrats on the deal. Shyam, maybe just one question on the inspection and monitoring market itself. I was just wondering, maybe you could provide a little bit of details on -- is it -- is the industry kind of a regional function? I know that Eddyfi has a fairly broad sales by region. But I was just wondering, in general, is it a fairly regional business? And then just kind of on the competitive nature of it, is it a regulatory -- a fragmented market? Or there are some other large players besides Eddyfi?

Yes. There are some larger players, but none of them sort of drive above the threshold of taking any particular -- as we did the [indiscernible], whether you look at by geography or by product category that sort of rise collectively to a number that's larger than 25%. So that, I think, is the incredible part about this business. So plenty of fragmentation, plenty of opportunity for us to go after other assets in the space as we see fit.

When you talk about the geography, what we loved about this business was its largest exposure was to the North American market. We wanted to increase our exposure in the North American market. And then obviously, they do have exposure in Europe where they can build on our strength. They have smaller exposures to South America, the Middle East and India, where we have great positions of strength and expect to take them along. And this business also has some great strength in Japan and Korea that we expect to leverage.

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, and we look forward to talking to you soon.

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

Thank you for standing by, and welcome to the ESAB Third Quarter 2025 Earnings Conference Call. [Operator Instructions].

I'd now like to turn the call over to Mark Barbalato, Vice President of Investor Relations. You may begin.

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 for discipline in a dynamic environment, closed the acquisition of EWM earlier than anticipated, advancing our shift into equipment and furthering our compounded 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 are 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 stands over 10 feet tall and weighs roughly 3,000 pounds, and doubles as a job connector through the my Chicago and my future apps, linking youth to apprenticeships to internships and jobs in real time. In partnership with Bill Chicago and Chicago YMCA, the doors appeared at YMCAs, schools, galleries and community centers [indiscernible] underground led installations and local artists transform 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 door directly addresses well the shortage, we convert curiosity into careers through paid internship pathways, industry certifications, mentorship from experienced craftsman 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 on 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 a 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 in activity in Europe and we expect developing market GDP over the next 5 years to outpace developed markets by roughly 2x. 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, and innovation that can deliver 100% faster well speeds and 2x the deposition rates and roughly 35% lower heat input versus traditional short or 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 Endosuitedigital 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 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 20 basis points due to the impact of EWM, while our [ ES ] 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 FX. 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 2x 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, a modest FX improvement on the EWM acquisition. Adjusted EBITDA is $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% ROIC 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, shortened lead times and support share gains. EBX discipline [indiscernible] 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 have closed 4 acquisitions this year [indiscernible] healthy and discipline. 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 compounded journey. ESAB is built to perform, adapt and win.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of 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 sell in 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 sort of 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 in 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's 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. I'm 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 Essent 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 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 [indiscernible] 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 in to 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 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 actually had 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 the other geographic regions.

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

If we can go back to the margin discussion in Americas, I think I heard Kevin or maybe it was you, Shyam, saying that 2026, we should be seeing much, much stronger margins in this segment. I realize you're not providing detailed '26 guidance, but it would be helpful for us to understand why margins get better in '26? What's sort of within your control and maybe some of the restructuring that you're doing as opposed to just kind of a broader call on end market reacceleration?

Yes. I think they were sort of twofold. We are not calling out the specific restructuring activities, Mig, as you can imagine. But we are -- some of the projects are already underway, and we expect that to complete sometime in early first quarter. The second aspect, obviously, is that we get to better comparables as we move into 2026. And the third aspect for us is as we sort of shift some of the supply chains to where they need to be appropriately, we feel we get another boost. So sort of 3 things happening. Pricing that will occur as we start the year, the tariff-based movements that we're making to sort of ensure our manufacturing is in the right spot, and then the restructuring that we're doing that all of it, which we feel will sort of come to fruition somewhere in that early first quarter, giving us really solid momentum for margin expansion in 2026.

And we've always said this, Mig. We're very comfortable getting to that 22% plus EBITDA number by 2028. And you've seen in our historical pieces, we sort of have a couple of years where we're settling in and sort of creating momentum and then the following year, we sort of accelerate and build out, this would be no different than that.

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 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. And we get some data that's 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, we are seeing orders and momentum increase in Europe based on defense, based on some 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, Middle East continues its momentum forward and Europe gives an additional [ boy ] 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 sort of take capitalize and win on that acceleration.

No, that's super helpful. And if I may squeeze 1 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 an 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 it'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 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. I think, Nathan, the way we look at our fourth quarter is we finished at about a 2% core growth rate in the third quarter. We're expecting that to be a little better in Q4 and October started off on that run rate. And that's really what I'm talking about is that our core growth improves from where we were in Q3, and we feel good about that as we sit here today.

All in all, I think as you look at ESAB and you sort of project out, comparables get better. Our teams are focused on execution. I talked about the investments that we're making. One of the things that I do want to stress with the entire community that's on the call, we've always said to all of you that we are an [ AND ] business. We want to go out and do the productivity things for ESAB, but we also want to go ahead and invest in our business in terms of growth in our initiatives, and we're doing both of that. And we feel that, that returns the best -- that's the best return for our shareholders over the long term, and we're committed to that. And we're taking the opportunity here as we finish out 2025 to invest in the business, and take some productivity and cost out, we feel that, that sets us up well for '26.

I guess a follow-up on price/cost in Americas, obviously, is that 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 bid 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 Neil Burke from UBS.

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

Yes. The way to think about our consumables business, we continue to do well. It's just that we sort of saw our new products, our new product introductions. We've introduced actually an engine-driven welder. Our edge product line continues to do really well. We've introduced a fabricator line and some new LIPs in other geographies that have sort of really caught the attention in the marketplace. And we've been focused for a while to get our channel to pick up and customers to pick up our equipment, and we're seeing success. In fact, I would submit that in some of the regions, we're really out there taking some significant share from the competition.

On the consumables side, we're steady. And we feel that we're still doing better than market on the consumables side, but slightly lower sort of growth performance in that particular front. But we're excited about what's coming at us for 2026 and how Q4 has started. So nothing there that causes us any sense of alarm or concern, but really excited about the entire portfolio now coming to work. And I mentioned that briefly, we're really working on workflow solutions, and I won't mention this, I won't mention the customer, in particular, but we actually went into a large U.S. customer and provided a full workflow solution that had our equipment porches, filler metal and our digital solution set. And for the first time, we're certified for that customer globally. And so we're picking up a few orders on that particular front.

And so really driving the full workflow solution set, which I think is going to benefit both our consumable business and our Equipment business going forward.

And just a follow-up. 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 -- it's more like maybe a mid-single-digit decline. I guess, is that math like roughly correct? And I guess, like 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 like major puts and takes on the growth rate exiting the year and entering 2026?

I mean, Mexico, as Shyam mentioned, been pretty stable on what we saw in the second quarter. But yes, we are [indiscernible] 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 fine spike to what we saw in the second quarter.

I think what you'll see as we said in the 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.

We can sort of talk offline, Neil, 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.

Thank you for standing by, and welcome to the ESAB Second Quarter 2025 Earnings Release and Conference call. [Operator Instructions] Thank you. I would now like to turn the call over to Mark Barbalato, Vice President of Investor Relations. You may begin.

Thanks, operator. Welcome to ESAB's Second 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 for in our SEC filings and today's earnings release. Actual results may differ, and we do not assume any obligation or intend to update these forward-looking statements, except as required by law. With respect to any non-GAAP financial measures mentioned during the call today, the accompanying reconciliation information related to those measures can be found in our earnings press release and today's slide presentation.

With that, I'd like to turn the call over to our President and CEO, Shyam Kambeyanda.

Thank you, Mark, and good morning, everyone. Thank you for joining us today. Before we begin, I want to express my appreciation to our teams around the world for their unwavering commitment to our customers to EBX to the disciplined execution of our long-term strategy. Despite operating in a challenging market environment, we delivered another quarter of strong results with record margins, a clear reflection of the resilience of our model and the dedication of our teams.

During the quarter, I had the opportunity to go to Gemba and visit several of our recent acquisitions. I'm excited about the capabilities and competencies that these businesses bring to ESAB. I also visited teams in Gothenburg and Shanghai. It's always energizing to meet with our teams in the field to listen, learn and witness firsthand the passion and execution that drive our success. Amidst this dynamic environment, our teams remain laser-focused on the fundamentals, disciplined cost control, elevating the customer experience and sharpening our go-to-market differentiation.

These priorities are paying off, and it's clear that ESAB continues to stand out as a world-class franchise positioned to benefit from long-term structural tailwinds, particularly across Asia and Europe. In EMEA and APAC, the performance this quarter was strong. This momentum is a direct result of our team's ability to execute the EBX growth playbook with Precision, driving organic growth and capturing broad-based share gains across our markets.

Turning to the Americas. A few dynamics are worth calling out. Tariff-related uncertainty introduced unexpected volume headwinds, particularly impacting our local customers in Mexico. And we saw some automation orders delayed with demand now expected to shift into the second half of the year. That said, the underlying health of the business remains strong. Our pipeline of opportunities is robust, and our teams are focused on delivering. Encouragingly, we began to see signs of improved market conditions in North America in July and early but positive indicator as we move deeper into the second half.

Despite the short-term headwinds, our teams delivered total sales growth of 2% and achieved record adjusted EBITDA margins of 20.4%. This performance speaks to the resiliency and strength of our operating model and the consistent focused execution by our teams, even under pressure. In parallel, we continue to make meaningful strides on our compounded journey. Since our last update, we have successfully completed 2 gas control acquisitions, Delta P and Active and signed EWM, which accelerates our heavy industrial product road map and expand our equipment capabilities.

Given our confidence in the strength of our equipment portfolio, the momentum in our gas control business, improving market conditions in North America and the continued resilience in our high-growth markets all underpinned by EBX, we have raised our full year guidance.

Moving to Slide 4. Before we go into detail about our performance and recent acquisitions, let me share another initiative that highlights our passion for our industry. At ESAB, we believe that investing in talent is a strategic priority to ensure the long-term success of our business and the future of the fabrication technology industry. The flame internship program originally launched in Brazil, represents a global initiative designed to give college students immersive hands-on experience working within industrial companies like ours. This initiative spans across every functional area from engineering, operations, to marketing, finance, supply chain and now digital innovation.

The program is energizing not only for our interns who gained vital exposure to real-world challenges and sharpen their skills but also for our local teams who benefit from fresh perspectives and enthusiasm that these young professionals bring. It has become a catalyst for learning, collaboration, mentorship across our organization. Beyond its near-term impact, the flame internship program is an intentional investment in building robust talent pipeline for the fabrication technology sector. By accelerating professional growth and fostering leadership potential, we're shaping the next generation of leaders for our industry.

Turning to Slide 5 to talk about the quarter and give you more color around our performance by geography. As this slide illustrates, ESAB continues to benefit significantly from our unmatched global footprint. Our balanced presence across Americas, EMEA and APAC, not only provides resilience in the face of reasonable volatility but it also positions us to capitalize on growth opportunities wherever they may arise. Our business outside North America continues to build on its strength. Europe remains steady, and we're well positioned to benefit from EU stimulus measures already in motion. The Bavaria acquisition is off to a strong start, further strengthening our regional capabilities. In the Middle East, we delivered double-digit growth, a clear evidence of their diversification strategy and investment.

India also remains a standout growing at high single digits with our leadership position and strong local presence, we're confident in our capability to capture an outsized share of both public infrastructure investment and private sector growth over the next decade. In China and Southeast Asia, the business single digits, supported by increased capital expenditure and ongoing LNG investments in China. Meanwhile, Australia and New Zealand delivered solid performance in the quarter and we remain optimistic about the outlook for the rest of 2025. This sustained EMEA APAC performance is no coincidence. It is a product of our well-matched geographic footprint, a world-class team, a differentiated product portfolio and disciplined and consistent execution. In both EMEA and APAC, our teams continue to exemplify the EBX playbook, driving strong organic growth and robust margin expansion.

Shifting our focus to the Americas. As mentioned earlier, we face near-term headwinds, primarily due to tariffs. This particularly impacted our local customers in Mexico, where we saw an expected softness. Additionally, customer orders and automation were delayed into the second half of the year. Despite these challenges, our automation funnel continues to be robust and gives us confidence in the second half as South America continued to perform well, and our recent acquisitions, Sumic and Sager are performing as expected.

In summary, we're executing from a position of global strength. ESAB remains a globally balanced and agile franchise 1 that is built to perform, adapt and grow through all phases of the economic cycle. Moving to Slide 6 to discuss how we're leveraging EBX and AI to accelerate our long-term growth. During the fourth quarter, we laid out a road map, leveraging EBX and AI to reduce structural costs and accelerate growth. Today, I'm pleased to share that we're not only delivering on that plan, but exceeding it. We're taking this opportunity to go even further there, driving more cost out of the system while investing decisively in our future.

These initiatives are not just reducing complexity, they're enhancing how we serve our customers. As a result, we have raised our full year productivity saving revenue target to approximately $13 million, up from our original $10 million estimate. In parallel, our back office optimization work has gained momentum, and we now expect to deliver $17 million in savings, reflecting stronger-than-anticipated execution. At the same time, we remain firmly committed to investing in the future. In 2025, we're deploying approximately $20 million in strategic growth investments, funding university research partnerships, expanding commercial excellence initiatives and advanced AI capabilities.

Looking ahead, we plan to bring our EBX office and AI initiatives together, creating a more integrated engine for operational excellence and innovation. These capabilities are increasingly converging, enabling smarter, faster decision-making and more adaptive systems. It's still early, but the progress is real and we're confident this combined approach will have a lasting impact on both productivity and customer experience.

Turning to Slide 7 to discuss how EWM strengthens our equipment and robotics portfolio. Earlier this year, we announced that we entered into an agreement to acquire EWM. EWM is a leading provider of premier arc welding and robotic technology solutions with a leadership position in the Germanic region. This business brings advanced technology, a highly respected global brand and a strong team. Our businesses are highly complementary in terms of customer bases and channel partnership, making for a unique strategic fit. This EUR 120 million revenue business is expected to be accretive in year 1 and expected to close in the fourth quarter. We could not be more excited to have EWM team join ESAB as EWM accelerates our global equipment growth strategy.

Moving to Slide 8 to discuss how ESAB and EWM together create a premier workflow solution. Together, the combination of ESAB and EWM accelerates our product road map, EWM strengthens our heavy industrial portfolio with advanced welding technologies while our innovative light industrial lineup builds key product gaps within EWM. It's a natural fit, 1 that creates a truly differentiated offering. Now what makes this partnership even more exciting, EWM's react technology, a true breakthrough in the welding space. The Holy Grail of welding has always been the ability to deposit metal faster at a lower heat in order to reduce distortion, improve precision and enhance overall productivity.

With ReACT technology, we're achieving exactly that. In some applications, we're seeing up to 100% faster well speeds, twice the deposition rate, all while operating at 35% less heat input compared to traditional short arc welding processes. This doesn't just improve performance. It delivers real-world customer benefits, less fume, 0 splatter, and significantly improved safety and environmental conditions on the shop floor. With EWM in our portfolio, we have expanded our best-in-class workflow solution for advanced applications, including additive manufacturing and thin metal precision welding, especially for materials like aluminum and stainless steel.

When paired with our proprietary consumables, porches and IndoSuite digital overlay, we are delivering a fully customizable end-to-end ecosystem. And we see substantial global selling opportunities ahead. This is more than an acquisition. It's a strategic leap forward in how we serve industrial, automation and advanced manufacturing customers around the world.

Moving to Slide 9 to discuss our newly acquired medical and gas control businesses. During the second quarter, we acquired Delta P and closed on Active in early July, which propelled us further on our compounded journey. Let me first start with Delta P, a European-based medical gas system manufacturer. This business further strengthens our medical gas control position in Europe and is highly complementary with our existing business. This business generates annual sales of approximately $10 million and has gross margins greater than 40%. We see significant opportunities to accelerate growth as we ensure Delta P products into our global distribution.

I'm also excited about the addition of Active, an India-based business with local manufacturing. This business has annualized sales of approximately $5 million and gross margins north of 40%. We're excited with the opportunities this brings for global product expansion. Together, these acquisitions accelerate our medical gas equipment strategy, providing ESAB with complementary products and an entry into the fast-growing India market.

Turning to Slide 10 to discuss how Delta P and Active extend our medical gas portfolio. As you can see on this slide, these 2 acquisitions significantly expand our portfolio by providing advanced integrated solutions across the full spectrum of hospital gas systems. The product offerings from Delta P and active cover critical components found throughout the health care facilities including in mission-critical environments like the ICU, emergency room, surgical suites and General Ward. As shown on the slide, our solution now spans the entire supply and distribution chain, delivering controlling and monitoring medical gases safely and reliably throughout a hospital.

Together, these acquisitions expand our total available market by $200 million and positions ESAB as a truly world-class provider of medical gas control products. One that is aligned with our compounder strategy and build for scalable, profitable growth. On that note, let me hand it over to Kevin.

Thanks, Shyam, and good morning. Let's turn to Slide #11. During the quarter, ESAB benefited from strong market demand in our high-growth markets, offsetting tariff impacts in North America and supporting balanced organic growth. Total sales rose 200 basis points year-over-year, driven by acquisitions on more favorable currency trends. The team's execution this quarter reflects their adaptability and commitment to excellence, which has been instrumental in achieving the highest adjusted EBITDA margin in the company's history.

Turning to Slide #12. Organic sales in the Americas declined due to delays in automation orders caused by tariff on certainty and a weaker Mexican market as new customers from March year delayed investments. However, strong pricing helped balance this. The Sumic acquisition added 300 basis points of growth, partially countering the negative effects of a stronger U.S. dollar. ESAB remains focused on long-term growth using the EBX business system to enhance pricing, productivity and efficiency, a strong operational performance ease the impact of tariffs in the quarter and adjusted EBITDA reached 20.1% and highlighting our team's resilience.

Moving now to Slide #13. EMEA and APAC maintained strong growth, especially in the Middle East, India and Asia with robust sales funnels and increased optimism heading into the second half of 2025. Total sales rose 11%, while EBITDA margins hit a record 20.6%. Volume grew by 600 basis points, led by high-growth markets and Europe showed positive momentum benefiting from new stimulus measures. The Bavaria and Bangladesh acquisitions contributed an additional 400 basis points of growth and are performing well, favorable FX, particularly a stronger euro versus the U.S. dollar supported results. Our teams in EMEA and APAC delivered an outstanding quarter, surpassing expectations and establishing a strong momentum for continued success throughout the remainder of the year.

Moving on to Slide #14 to discuss our cash flow. In the quarter, we generated $46 million in free cash flow. This cash flow reflects some increased prebuys related to tariffs and increased working capital in the EMEA and APAC to meet higher growth. Looking ahead, we expect an improvement in cash flow during the second half of 2025, primarily due to a reduction in tariff-related inventory as well as normal seasonal trends which historically drives stronger cash flow in the second half of the year. Maintaining net leverage within our 2x target range has been a key focus and this disciplined approach enhances our ability to invest flexibly in growth opportunities aligned with our compounder strategy. This strong financial position ensures that we can adapt to changing market conditions, pursue strategic acquisitions and continue generating shareholder value over time.

Moving now to Slide #15 on our 2025 outlook. Revenue assumptions have been increased around 25 basis points due to the Delta P and Active acquisitions, which together provide approximately $7 million. The remainder is attributed to changes in FX rates. The current guidance does not include the EWM acquisition expected to close in Q4, which presents some additional upside guidance for organic growth from an unchanged in the second half of 2025, we expect low single-digit organic growth for ESAB. EMEA and APAC is expected to achieve mid-single-digit growth offset by a low single-digit decline in the Americas. Adjusted EBITDA guidance has been increased to a range of $525 million to $535 million. Cash flow conversion guidance is on genes. The company continues to prioritize cash flow performance, and maintain a strong balance sheet to support our growth plans.

With that, let me hand back to Shyam on Slide 16 to wrap up.

Thank you, Kevin. We delivered another strong quarter, driven by outperformance in our EMEA and APAC segments, and we expect this momentum to continue. Our high-growth markets are thriving, and we remain confident that our automation business in North America and the activity in Mexico will rebound in the second half of the year as customers adapt to evolving market dynamics and trade conditions stabilize. This year, we're on track to complete 4 acquisitions Bavaria, Delta P, Active and EWM. These moves further accelerate our compounded journey, strengthening our portfolio, expanding our reach and enhancing our technology offering.

Our balance sheet remains strong, and we continue to drive EBX to deliver strong margin performance. We have started Q3 with good momentum and are confident in our execution as a result, we have raised our 2025 guidance. Looking ahead, we are executing with discipline backed by the power of EBX, the potential of AI and the passionate global team, ESAB is built to lead, build to grow and build to win across cycles and around the world.

With that, operator, let's open the line for questions.

[Operator Instructions] Your first question comes from the line of Tami Zakaria with JPMorgan.

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

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

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

Tami, yes, we've -- the last -- over the last few years, we've been increasing the number of savings that we've been able to generate. So we've been doing a lot of through print rationalization over the last few years. And as you can see with what Shyam discussed today in the call, we started to move a lot more into back office automation. We're doing a lot more EBX initiatives around our facilities to actually improve the productivity, but there's been a -- certainly a ramp-up in terms of the savings we've generated over the last 3 years.

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

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

Yes. If you remember, Bryan, the way that we had talked about the Americas even as we went into the quarter, we talked about volumes sort of being down mid-single digits. And obviously, when you see the print to date, it's a bit worse than that. And then we sort of talk specifically about the 2 items that you mentioned, which was Mexico and automation sort of creating that additional down drag. We see automation coming back nicely. And so that no longer, in our view, is an issue in the second half. Mexico, on the other hand, has shown some life. But I think it takes a bit longer. As you know, we still don't have a complete trade agreement with both Canada and Mexico at this current time. We think whenever that sort of gets figured out and settles, we'll see sort of Mexico come back to normal.

And the second aspect of it is something that we've always felt as we guided our numbers for the year is that the second half comparables also for ESAB get better. If you remember, we did have a really solid post last year in the second quarter in the Americas. And so all of that sort of play into how we're guiding the second half of the year. To the comment that you had on orders, we did see stability in the orders and a slight improvement in the Americas. So that is the other encouraging piece for us. I think as we sort of exit July, surely feel a lot better about how we're guiding the rest of the year.

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

Yes. Let me start with the piece about enthusiastic, I appreciate that. Obviously, it's a sizable deal for us and a significant effort from our team. The other piece that we loved about the process was that it was proprietary that we were able to sort of execute on the deal working with the team at EWM. So really kudos to our entire team in Europe and our corporate team here on executing that transaction. There is enthusiasm partially because what I mentioned on my call, which is this React technology that they have. And as you know, Bryan, I think we've been working to -- working our way into industries that we don't currently participate in. And this technology and process gives us access to that.

When it comes to additive manufacturing, when it comes to thin metal, when it comes to larger OEMs that need this technology today, there was really -- there's maybe 1 other player that sort of has something similar. And so we really feel good about the acquisition, the technology that it brings and how it fills out our portfolio. From a sales perspective, as we mentioned, there's a EUR 120 million business. We expect it to benefit from the stimulus that's coming up in Europe. It has a position of strength in the Germanic region, where we had very little exposure. We think the Germanic region is at the bottom, and it moves up from here. The question really is around timing as to when the German market improves, whether it's in the third or the fourth quarter, we expect to close the deal in the fourth quarter. So we're hoping the timing sort of fits perfectly on top of each other.

But no different than our expectations for our equipment business. We think over the long term, it has mid-single-digit growth potential. The gross margins of this business are north of 40%. And yes, there is some opportunity to sort of save on the R&D spend side where we no longer have to invest in building out that technology at ESAB, and we can now focus our business along with EWM towards growth. Anything I missed, Kevin, on EPL.

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

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

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

On that particular front, if you sort of seen as we've been actually quite positive on China, partially because of where we play on the top tier of the market, we never really saw a down drag in China. And if you remember, even on the calls in the past, where people were seeing sort of a significant headwind in China, we've actually held our business stable. In fact, in my recent visit to our team in Shanghai, we sort of go through an operating plan as to what we set as goals 5 years ago and where the team has come. Our business has doubled. And our EBITDA margins have expanded over 700 basis points in that time period.

So an extraordinary effort by our team in China. Where we see the strength is again on the energy sector, we participate also in the rail -- high-speed rail and a little bit on high-end infrastructure build-outs. Where we see China continue to work on its energy independence, we do see them continuing to invest and maintain their high-speed lines, rail lines. And so as a result, ESAB continues to benefit from that tailwind in China. The Southeast Asian market was a bit down and has shown signs of recovery. Part of it is manufacturing and infrastructure improvements that are moving into the region. That's benefiting ESAB. And then we also saw life and positivity out of Australia and New Zealand. So that whole geography for us, at least on the bottom side of of China, Southeast Asia and Australia were a bit down but are showing signs of recovery. And really, I can't say enough. I think the number that we posted in the rest of the world, EMEA and APAC, almost a 6% volume growth based on everything that we're seeing out there in the market and how people are talking about those markets. I think we have an exceptional enterprise and something to be very proud of.

That's great. And maybe on price costs, what was the impact of price cost in the quarter to margins? And as you saw covering tariffs in the price?

Yes. So we're -- as we've done in the past, that the business is doing a great job of getting price to cover tariffs. We were price cost neutral against tariffs in the quarter. So it did create a little bit of compression on the gross profit margin, but we are covering all of our tariff costs with price.

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

So incrementals were pretty solid in the quarter, up 37% for the company. I guess like the guide for the back half, if my math is correct, implies a step down in incrementals. But I guess, number one, is that right? And number two, like what kind of leads to that step down in incrementals given it seems like the volume declines were worse in 2Q. .

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

Yes. So on the FX side, which was really the majority of the areas we put through, as you know, we have a lot of our costs in the geographies where we operate. So when we go up or down on FX, we typically get incrementals or decrementals somewhere in the sort of 10% type range. So therefore, that does create a little bit of compression in terms of the year-over-year incrementals or decrementals for us as FX moves. Underlying that, of course, we're working hard on all the initiatives that Shyam discussed, and we'll continue obviously to work hard on savings and look at to see if we can find opportunities to continue to improve that number. But that's the main reason why you're seeing that year-over-year.

Yes. I think just to sort of add to Kevin's comments, we are expecting to see better volume -- organic volume in the second half than the first half. And then obviously some better FX tailwind as well in the second half. So those will be the 2 aspects.

All right. That's clear. On new products, I know this gets sort of complicated with all the tariff noise in the Americas, in North America in the quarter. But like can you just give us an update on new product introductions and like any contribution to sales?

Yes. We continue to maintain -- we do measure it. It's part of our key KPIs. It's something that's core to ESAB, measuring our vitality and new product introductions. I think we had talked about earlier on that we plan to maintain our momentum in new products. And this year, again, in terms of how we look at our product introductions, we're going to be very close to 100 new products introduced. Our vitality rate on a 5-year basis will still be closer to 23% to 24%, a little lower than where we were last year just based on some of the tariff-related noise that has come in. But all in all, we continue to feel very good about our vitality metric. We feel good about the new products that are being introduced, and now with EWM, Delta P and Active, we get to introduce really a new array of portfolio of products that I think our customers will really like. But more importantly, allows ESAB to sell an entire workflow, both in our gas control side of the business and in our Fab Ex side of the business.

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

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

Right. Yes, Mig. These are additional savings that we're generated in the year. So as we entered into the year, we were targeting around $25 million of savings. And as we've progressed through the first few quarters, we've actually increased the target that we're using for.

I see. So you've increased your savings by $5 million. It sounds like FX is contributing $5 million, you've only raised your guidance by half of what FX and savings are contributing. Is the implication here that volume compression that you've experienced and the headwind that you've experienced in Americas in Mexico and automation, there's essentially no catch-up whatsoever, that's embedded in the back half, hence, you raising by only $5 million rather than $10 million plus.

Yes. So what the slide is trying to project is the fact that we have been working hard on driving additional savings, Mig. But what we're also doing is protect an investment back within the business. So as you can also see in the slide, we're actually putting back into the business, $20 million incremental on last year in terms of additional investments that we're making. So what we're trying to do is look for opportunities, always to see how we can further deploy investments back into our commercial excellence program back into work that we're doing around to accelerate long-term growth and improve the overall business in the future.

And I think on that front, Mig, I can tell you that some of the stuff that we have been working on, both with universities and with AI. It's extremely exciting. In my view, transformational in many ways. And our view today is that early investment in those things will read a far more benefit to ESAB and the right thing to do. So we're saving -- we're sort of protecting our margins in the business, but we're putting money back that we think will benefit ESAB in 2026 and beyond.

And then my final follow-up, if I may, on Mexico specifically. A little bit hard to gauge what's going on from [indiscernible]. Can you maybe help understand how large Mexico as part of the segment. And in terms of the disruption of demand that you're seeing over there, is there a particular industry that is driving that? I don't know if it's auto or heavy manufacturing? Or is there something else going on with your distributors? And really, the reason why I'm asking because I'm trying to figure out exactly what we have to watch for in order to determine if something is different other than, obviously, the trade headlines over there.

Yes. I think that's a fair question, Mig. I think we had mentioned before in one of our calls that we were on par with our peers in Mexico. So you can 1 assume that our portion of Mexico was a little higher than our sort of peer set. And the second piece that we have not given out specific Mexico numbers, but what I can tell you is about 25% of our business sits within -- 20% to 25% sits between Mexico and Automation. And we saw that business sort of take the down drag of that 500 basis points that we spoke about, and you could probably split the 2 kind of down the middle, the way that we see it.

And then to your additional question, we did have a really good strategy and benefited from it. One of the things that we've often talked about is how we intend to kind of go out and play in our space. We did win several distributors and several new customers in Mexico last year. And this year, when the tariffs sort of came at them in April, they slowed down significantly. And so if you were to sort of gauge the Mexican market, you'd see that the volumes are down quite hard on that particular front. In terms of the industries that we have exposure to, transportation being 1 and then sort of general industry and really in the channel as well. And both sort of saw that down drag. The industry saw maybe a little harder down drag versus the channel, but both saw sort of stalling is the best way that I could put it. But we do see a recovery coming at us, probably a little slower than where we see North America and the U.S. market in particular. But we're off to a good start, as I mentioned, Mig. Mexico is still slow, but the U.S. market is doing okay.

And then the last piece, as I mentioned, the automation was really an issue in the quarter. that got pushed out. And we see that sort of coming back at us in Q3 and Q4. And so we're very confident about that piece. And if semiconductor investment kicks in and some of the other stuff kicks in, then we've got additional upside.

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

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

Yes. So I'll take few pieces here. I'll let Kevin jump in as well. So I think we talked about Europe being stable. So we're not seeing Europe sort of drop is the best way to think about it. When you -- when I talk about the stimulus measures in motion, we've seen energy independence. We've seen some spending associated with defense kick in, but not at the rate and the conversations that you've sort of seen in the newspaper. I mean, there's comments around almost $2 trillion going into play in Europe over the next decade. That we have not seen come in.

But we've seen commentary around the 2 things that I just spoke about come into play, activity and optimism exists. So the view for us for Europe is that it continues to be stable and not a business that where we've seen sort of volumes decline or sequential declines in the business. The other piece to answer your question, the margins for us in Europe are very strong, almost equivalent to slightly probably even ahead of our Americas business. So our margins are very strong in Europe.

Just on the outlook for growth, David, our assumption at the moment is that Europe would be flattish growth and a lot of the growth in EMEA and APAC in the second half is coming from our high-growth markets.

That's helpful. And EWM, nice chunky acquisition, the technology, obviously, we're excited about. I'm curious, though, in gas control and the comment, you're still positioned to have a strong pipeline of M&A. Anything chunkier in gas control, Delta P, Active, but something that EWM type size. Is that something we can look for or the gas control deal is going to stay, call that sub-$50 million kind of size?

I think there's a couple of things. The short answer is, yes. There are chunky deals in that space where we like to be is when we have a proprietary process in play and can match what we think the asset is valuable to us rather than get into a sort of a regular auction process. We feel that the ROIC to our investors is better when we can create a proprietary process. So we've been working really hard. The funnel is actually very strong. We have a chance to sort of have a few tie to the apple here. Hopefully, in 2026 or 2025, we'll see some things come into play. But the short answer is there's plenty of assets, plenty of assets that allow us to expand our presence in gas control and sort of achieve our 2028 goals of getting to $4 billion in sales.

One last, I'm sorry. In the Q, I noticed the equipment of revs were flat, consumables up about 2, but those are all in numbers. Could you indulge me with the organic equipment consumables? Was it equipment down? Is that was maybe hurt more by the Americas issues?

That's right. The automation side of the business did sort of create a bit of a down drag on the equipment side of our business in the quarter, which we think reverses itself as we get into the third and fourth quarter.

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

I guess just on the automation piece, can you kind of indulge us to just how steep the drop in automation was? I mean, just my back of the envelope, then we're talking about a pretty substantial cut here. But we're talking 40% lower on a year-over-year basis. But just any kind of sense you can give us around just how like quantifying how big that automation component was?

Are you sort of looking at it in the Americas or globally?

Global automation sales.

Yes. The view that we have, globally, no, not that severe. I mean, maybe in the 20s, 20s probably is where we would look at it. Now we obviously stack up a whole bunch of small ones rather than some big deals. But yes, that would kind of be the number.

Okay. That's helpful. And then, I guess, just as far as the Mexico component, you gave some color there. I appreciate that. I guess, as far as how that's trended in July and August to date, has there been any thought there? Or are we still kind of in a holding pattern?

No, some timing. I think the view for us -- a couple of things came at us in Q2, as I mentioned. We acquired a whole set of new customers last year. We sort of had great momentum and share momentum in the market and then sort of this Q2, we were kind of coming up against sort of those wins that we had and those customers sort of fundamentally sort of going into a pause mode. They've since come off the pause mode, but not at the rates that they were at in Q2. So we see a slow recovery back into Mexico. We think once the trade deals get done, Mexico begins to sort of really move in the right direction. That being said, U.S. MCA is fine, so we're specifically talking about Mexico business for Fab TEC.

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

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

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