ESAB - ESAB Corporation Announces Fourth Quarter 2023 Results and Initiates Full Year 2024 Guidance

ESAB CORPORATION

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share data

(Unaudited)

Three Months Ended

Year Ended

December 31,
2023

December 31,
2022

December 31,
2023

December 31,
2022

Net sales

$

689,348

$

664,127

$

2,774,766

$

2,593,480

Cost of sales

434,623

439,738

1,759,015

1,707,950

Gross profit

254,725

224,389

1,015,751

885,530

Selling, general and administrative expense

144,639

139,343

587,475

533,369

Restructuring and other related charges

6,368

6,467

24,110

23,096

Operating income

103,718

78,579

404,166

329,065

Pension settlement gain

—

(5,836

)

—

(9,136

)

Interest expense (income) and other, net

26,243

18,434

85,074

37,950

Income from continuing operations before income taxes

77,475

65,981

319,092

300,251

Income tax expense

17,921

5,541

95,727

69,170

Net income from continuing operations

59,554

60,440

223,365

231,081

(Loss) income from discontinued operations, net of taxes

(8,082

)

1,830

(12,341

)

(3,068

)

Net income

51,472

62,270

211,024

228,013

Less: Income attributable to noncontrolling interest, net of taxes

1,233

1,563

5,739

4,266

Net income attributable to ESAB Corporation

$

50,239

$

60,707

$

205,285

$

223,747

Earnings (loss) per share – basic

Income from continuing operations

$

0.96

$

0.97

$

3.59

$

3.75

Income (loss) on discontinued operations

$

(0.13

)

$

0.03

$

(0.20

)

$

(0.05

)

Net income per share

$

0.83

$

1.00

$

3.39

$

3.70

Earnings (loss) per share – diluted

Income from continuing operations

$

0.96

$

0.97

$

3.56

$

3.74

Income (loss) on discontinued operations

$

(0.13

)

$

0.03

$

(0.20

)

$

(0.05

)

Net income per share – diluted

$

0.83

$

1.00

$

3.36

$

3.69

ESAB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Dollars in millions, except per share data

(Unaudited)

Three Months Ended

Year Ended

December 31,
2023

December 31,
2022

December 31,
2023

December 31,
2022

Adjusted Net Income

(Dollars in millions) ⁽¹⁾

Net income from continuing operations (GAAP)

$

59.6

$

60.4

$

223.4

$

231.1

Less: Income attributable to noncontrolling interest, net of taxes

1.2

1.6

5.7

4.3

Net income from continuing operations attributable to ESAB Corporation (GAAP)

$

58.4

$

58.9

$

217.7

$

226.8

Restructuring and other related charges – pretax ⁽²⁾

6.4

6.5

24.1

23.1

Acquisition - amortization and other related charges – pretax ⁽³⁾

9.0

11.7

36.9

34.2

Separation costs – pretax ⁽⁴⁾

—

6.6

—

16.3

Pension settlement gain – pretax

—

(5.8

)

—

(9.1

)

Tax effect on the above items ⁽⁵⁾

(3.7

)

(6.8

)

(14.7

)

(15.2

)

Discrete tax adjustments ⁽⁶⁾

0.7

(3.5

)

20.8

(7.2

)

Adjusted net income from continuing operations (non-GAAP)

$

70.8

$

67.6

$

284.8

$

268.9

Adjusted net income from continuing operations attributable to Russia (non-GAAP) ⁽⁷⁾

2.1

3.5

12.9

19.2

Core adjusted net income from continuing operations (non-GAAP)

$

68.7

$

64.1

$

271.8

$

249.7

Adjusted net income margin from continuing operations

10.3

%

10.2

%

10.3

%

10.4

%

Adjusted Net Income Per Share

Net income per share - diluted from continuing operations (GAAP)

$

0.96

$

0.97

$

3.56

$

3.74

Restructuring and other related charges – pretax ⁽²⁾

0.10

0.11

0.40

0.38

Acquisition - amortization and other related charges – pretax ⁽³⁾

0.15

0.19

0.61

0.57

Separation costs – pretax ⁽⁴⁾

—

0.11

—

0.27

Pension settlement gain – pretax

—

(0.10

)

—

(0.15

)

Tax effect on the above items ⁽⁵⁾

(0.06

)

(0.11

)

(0.24

)

(0.25

)

Discrete tax adjustments ⁽⁶⁾

0.01

(0.06

)

0.34

(0.12

)

Adjusted net income per share - diluted from continuing operations (non-GAAP)

$

1.16

$

1.11

$

4.67

$

4.44

Adjusted net income per share - diluted from continuing operations attributable to Russia (non-GAAP) ⁽⁷⁾

0.03

0.06

0.21

0.32

Core adjusted net income per share - diluted from continuing operations (non-GAAP)

1.13

1.05

4.46

4.12

__________

⁽¹⁾

Numbers may not sum due to rounding.

⁽²⁾

Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, and other costs in connection with the closure and optimization of facilities and product lines.

⁽³⁾

Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.

⁽⁴⁾

Includes non-recurring charges and employee costs related to the planning and execution of the separation from Enovis. ESAB does not anticipate any further costs associated with the separation after 2023.

⁽⁵⁾

This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the proceeding line items of the table. ESAB estimates the tax effect of each adjustment item by applying ESAB’s overall estimated effective tax rate to the pretax amount, unless the nature of the item and/or tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment.

⁽⁶⁾

Discrete tax adjustments for ESAB include the impact of net discrete tax expenses related to law changes, certain dividend withholding taxes and the impact of unrecognized tax benefits due to adverse court ruling in a foreign jurisdiction.

⁽⁷⁾

Numbers were calculated following the same definition of Adjusted Net Income and Adjusted Net Income per share for total Company.

ESAB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Dollars in millions

(Unaudited)

Three Months Ended December 31, 2023

Year Ended December 31, 2023

Americas

EMEA &
APAC

Total

Americas

EMEA &
APAC

Total

(Dollars in millions) ⁽¹⁾

Net income from continuing operations (GAAP)

$

59.6

$

223.4

Income tax expense

17.9

95.7

Interest expense and other, net

26.2

85.1

Operating income (GAAP)

$

50.1

$

53.6

$

103.7

$

182.5

$

221.7

$

404.2

Adjusted to add:

Restructuring and other related charges ⁽²⁾

1.1

5.3

6.4

6.5

17.6

24.1

Acquisition - amortization and other related charges ⁽³⁾

5.0

4.0

9.0

20.9

15.9

36.9

Depreciation and other amortization

3.7

5.7

9.4

14.8

21.2

36.0

Adjusted EBITDA (non-GAAP)

$

59.8

$

68.6

$

128.5

$

224.7

$

276.4

$

501.1

Adjusted EBITDA attributable to Russia (non-GAAP) ⁽⁴⁾

—

2.7

2.7

—

18.4

18.4

Core adjusted EBITDA (non-GAAP)

$

59.8

$

65.9

$

125.8

$

224.7

$

258.0

$

482.7

Adjusted EBITDA margin (non-GAAP)

19.5

%

18.0

%

18.6

%

18.5

%

17.7

%

18.1

%

Core adjusted EBITDA margin (non-GAAP) ⁽⁵⁾

19.5

%

19.3

%

19.4

%

18.5

%

18.4

%

18.4

%

⁽¹⁾

Numbers may not sum due to rounding.

⁽²⁾

Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, and other costs in connection with the closure and optimization of facilities and product lines.

⁽³⁾

Includes transaction expenses, amortization of intangibles, fair value charges on acquired inventories and integration expenses.

⁽⁴⁾

Numbers calculated following the same definition as Adjusted EBITDA for total Company.

⁽⁵⁾

Net sales were $39.4 million and $153.8 million relating to Russia for the three months and year ended December 31, 2023, respectively.

ESAB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Dollars in millions

(Unaudited)

Three Months Ended December 31, 2022

Year Ended December 31, 2022

Americas

EMEA &
APAC

Total

Americas

EMEA &
APAC

Total

(Dollars in millions) ⁽¹⁾

Net income from continuing operations (GAAP)

$

60.4

$

231.1

Income tax expense

5.5

69.2

Interest expense (income) and other, net

18.4

38.0

Pension settlement gain

(5.8

)

(9.1

)

Operating income (GAAP)

$

33.7

$

44.9

$

78.6

$

136.2

$

192.8

$

329.1

Adjusted to add (deduct):

Restructuring and other related charges ⁽²⁾

2.3

4.1

6.5

11.4

11.7

23.1

Separation costs ⁽³⁾⁽⁴⁾

2.8

3.8

6.6

7.5

8.1

15.5

Acquisition-amortization and other related charges ⁽⁵⁾

7.8

3.9

11.7

20.1

14.1

34.2

Depreciation and other amortization

3.3

5.4

8.7

13.4

21.5

34.9

Other ⁽⁶⁾

(0.3

)

0.2

(0.1

)

—

—

—

Adjusted EBITDA (non-GAAP)

$

49.6

$

62.3

$

112.0

$

188.6

$

248.2

$

436.8

Adjusted EBITDA attributable to Russia (non-GAAP) ⁽⁷⁾

—

5.0

5.0

—

28.4

28.4

Core adjusted EBITDA (non-GAAP)

$

49.6

$

57.3

$

107.0

$

188.6

$

219.8

$

408.4

Adjusted EBITDA margin (non-GAAP)

17.5

%

16.4

%

16.9

%

16.7

%

16.9

%

16.8

%

Core adjusted EBITDA margin (non-GAAP) ⁽⁸⁾

17.5

%

17.3

%

17.4

%

16.7

%

16.9

%

16.8

%

⁽¹⁾

Numbers may not sum due to rounding.

⁽²⁾

Includes severance and other termination benefits, including outplacement services as well as the cost of relocating associates, relocating equipment, lease termination expenses, and other costs in connection with the closure and optimization of facilities and product lines.

⁽³⁾

Includes non-recurring charges and employee costs related to the planning and execution of the separation from Enovis within the Selling, general and administrative expense line within the Consolidated and Combined Statements of Operations.

⁽⁴⁾

Amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.

⁽⁵⁾

Includes transaction expenses, amortization of intangibles, fair value changes on acquired inventories and integration expenses.

⁽⁶⁾

Relates to the adjustment for certain items included within the Interest expense (income) and other, net line within the Consolidated and Combined Statements of Operations.

⁽⁷⁾

Numbers calculated following the same definition as Adjusted EBITDA for total Company.

⁽⁸⁾

Net sales were $49.9 million and $163.6 million relating to Russia for the three months and year ended December 31, 2022, respectively.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Change in Sales

Dollars in millions

(Unaudited)

Sales Growth ⁽¹⁾

Americas

EMEA & APAC

Total ESAB

$

Change %

$

Change %

$

Change %

For the three months ended December 31, 2022

$

283.6

$

380.6

$

664.1

Components of Change:

Existing businesses (organic sales growth) ⁽²⁾

25.1

8.8

%

5.6

1.5

%

30.7

4.6

%

Acquisitions ⁽³⁾

2.2

0.8

%

2.1

0.6

%

4.3

0.6

%

Foreign Currency translation ⁽⁴⁾

(3.5

)

(1.2

)%

(6.2

)

(1.6

)%

(9.7

)

(1.5

)%

Total sales growth

23.8

8.4

%

1.5

0.4

%

25.3

3.8

%

For the three months ended December 31, 2023

$

307.3

$

382.0

$

689.4

⁽¹⁾

Numbers may not sum due to rounding.

⁽²⁾

Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.

⁽³⁾

Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business.

⁽⁴⁾

Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

Core Sales Growth ⁽¹⁾⁽²⁾

Americas

EMEA & APAC

ESAB

$

Change %

$

Change %

$

Change %

For the three months ended December 31, 2022

$

283.6

$

330.7

$

614.2

Components of Change:

Existing businesses (core organic sales growth) ⁽³⁾

25.1

8.8

%

0.2

0.1

%

25.3

4.1

%

Acquisitions ⁽⁴⁾

2.2

0.8

%

2.1

0.6

%

4.3

0.7

%

Foreign Currency translation ⁽⁵⁾

(3.5

)

(1.2

)%

9.6

2.9

%

6.1

1.0

%

Total core sales growth ⁽⁶⁾

23.8

8.4

%

11.9

3.6

%

35.7

5.8

%

For the three months ended December 31, 2023

$

307.3

$

342.6

$

649.9

⁽¹⁾

Numbers may not sum due to rounding

⁽²⁾

Excludes Russia related sales of $39.4 million and $49.9 million for the three months ended December 31, 2023, and December 31, 2022.

⁽³⁾

Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.

⁽⁴⁾

Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business.

⁽⁵⁾

Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

⁽⁶⁾

Numbers calculated following the same definition as total sales growth for total Company.

ESAB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Change in Sales

Dollars in millions

(Unaudited)

Sales Growth

Americas

EMEA & APAC

Total ESAB ⁽¹⁾

$

Change %

$

Change %

$

Change %

For the year ended December 31, 2022

$

1,128.3

$

1,465.2

$

2,593.5

Components of Change:

Existing businesses (organic sales growth) ⁽¹⁾

60.5

5.4

%

101.1

6.9

%

161.6

6.2

%

Acquisitions ⁽²⁾

43.7

3.9

%

20.2

1.4

%

63.9

2.5

%

Foreign Currency translation ⁽³⁾

(17.5

)

(1.5

)%

(26.7

)

(1.8

)%

(44.2

)

(1.7

)%

Total sales growth

86.7

7.7

%

94.6

6.5

%

181.3

7.0

%

For the year ended December 31, 2023

$

1,215.0

$

1,559.8

$

2,774.8

⁽¹⁾

Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.

⁽²⁾

Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business.

⁽³⁾

Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

Core Sales Growth ⁽¹⁾

Americas

EMEA & APAC

ESAB

$

Change %

$

Change %

$

Change %

For the year ended December 31, 2022

$

1,128.3

$

1,301.6

$

2,429.9

Components of Change:

Existing businesses (core organic sales growth) ⁽²⁾

60.5

5.4

%

83.6

6.4

%

144.1

5.9

%

Acquisitions ⁽³⁾

43.7

3.9

%

20.2

1.6

%

63.9

2.6

%

Foreign Currency translation ⁽⁴⁾

(17.5

)

(1.5

)%

0.5

—

%

(17.0

)

(0.7

)%

Total core sales growth ⁽⁵⁾

86.7

7.7

%

104.3

8.0

%

191.0

7.9

%

For the year ended December 31, 2023

$

1,215.0

$

1,405.9

$

2,620.9

⁽¹⁾

Excludes Russia related sales of $153.8 million and $163.6 million for the year ended December 31, 2023, and December 31, 2022.

⁽²⁾

Excludes the impact of acquisitions and foreign exchange rate fluctuations, thus providing a measure of change due to organic growth factors such as price, product mix and volume.

⁽³⁾

Represents the incremental sales in comparison to the portion of the prior period during which we did not own the business.

⁽⁴⁾

Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

⁽⁵⁾

Numbers calculated following the same definition as total sales growth for total Company.

ESAB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Adjusted Free Cash Flow

Dollars in millions

(Unaudited)

Three Months Ended

Year Ended

December 31,
2023

December 31,
2022

December 31,
2023

December 31,
2022

Net cash provided by operating activities (GAAP)

$

122.4

$

91.4

$

330.5

$

214.4

Purchases of property, plant and equipment (GAAP)

(19.3

)

(18.2

)

(48.2

)

(40.2

)

Proceeds from the sale of certain properties ⁽¹⁾

—

—

2.8

2.5

Payments related to the Separation ⁽²⁾

—

5.8

4.4

19.0

Payments related to discontinued operations

2.8

3.8

15.0

23.1

Adjusted free cash flow (non-GAAP)

$

105.9

$

82.8

$

304.5

$

218.8

⁽¹⁾

Includes proceeds from the sale of certain properties related to restructuring efforts for which previous cash outlays were included in Net cash used in investing activities.

⁽²⁾

Separation payments relate to one-time non-recurring professional fees and employee costs incurred in the planning and execution of the Separation from Enovis.

ESAB CORPORATION

2024 Outlook

Dollars in millions

(Unaudited)

ESAB 2024 Outlook

2023 Core net sales

$

2,620.9

Organic growth

2.5%-4.5%

Currency

(1.0%)

2024 Core net sales growth range

1.5%-3.5%

2023 Core adjusted EBITDA

$

482.7

2024 Core adjusted EBITDA range

$495-$515

ESAB CORPORATION

CONSOLIDATED BALANCE SHEETS

Dollars in thousands

(Unaudited)

December 31,
2023

December 31,
2022

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

102,003

$

72,024

Trade receivables, less allowance for credit losses of $25,477 and $23,471

385,198

374,329

Inventories, net

392,858

416,829

Prepaid expenses

61,771

56,637

Other current assets

55,890

68,851

Total current assets

997,720

988,670

Property, plant and equipment, net

294,305

284,226

Goodwill

1,588,331

1,529,767

Intangible assets, net

499,535

517,167

Lease assets - right of use

95,607

92,033

Other assets

353,131

342,152

Total assets

$

3,828,629

$

3,754,015

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable

$

306,593

$

316,265

Accrued liabilities

313,489

285,310

Total current liabilities

620,082

601,575

Long-term debt

1,018,057

1,218,643

Other liabilities

542,833

545,339

Total liabilities

2,180,972