Esab Corporation · NYSE:ESAB
Esab — Investor Day (December 2023)
66 slides from Esab's investor day presentation, Dec 5, 2023
Slide 1: ESAB Corporation
ESAB CORPORATION Ve a ——— —
Slide 2: Forward-Looking Statements & Non-GAAP Disclaimer
Forward-Looking Statements & Non-GAAP Disclaimer 2 DISCLAIMER This document has been prepared by ESAB Corporation, a Delaware corporation (the “Company” or “ESAB”), solely for informational purposes. References herein to the terms “ESAB” and the “Company” when used in the historical context prior to
Slide 3: ESAB Corporation
ESAB CORPORATION Ve a ——— —
Slide 4: Creating a Focused Premier Industrial Compounder
Focused Premier Industrial Compounder SHYAM P. KAMBEYANDA, PRESIDENT AND CEO CREATING A
Slide 5: Agenda
Shaping the world we imagine 5 Creating a Focused Premier Industrial Compounder Shyam P. Kambeyanda, President and CEO Accelerating Fabtech Growth and Margins Olivier Biebuyck, President Fabrication Technology Building a Global Gas Control Equipment Leader Piyush Sheth, VP & General Manager Gas Cont
Slide 6: ESAB 2023E snapshot
ESAB 2023E snapshot Focused businesses with global reach and scale 6 $2.6B Sales1 18% aEBITDA Margin1 9,000 Employees 150 Countries active 1904 Founded AMERICAS EMEA & APAC 46% 54% GLOBAL LEADER 17% 23% 60% FOCUSED ENTERPRISE Filler Metals Automation & Equipment Gas Equipment Emerging markets expect
Slide 7: Delivering on our financial commitments
Delivering on our financial commitments Successfully executing our strategy 7 Sales1 aEBITDA1 aFCF aEPS1 $2.43B $408M $219M $4.12 $2.48B – 2.53B $420 – 440M >$215M $3.80 – 4.00 2022A Original ‘23 Guide Mid vs. Mid $2.59B – $2.61B $465 – 475M >$240M $4.30 – $4.40 Guidance as of 3QAbove Guide 4% 9% 12
Slide 8: ESAB 1.0 2017-2023
Pl pay CORPORATION ESAB 1.0 2017-2023 Shaping the world we imagine.”
Slide 9: Different business at the end of ESAB 1.0
Different business at the end of ESAB 1.0 Built muscle and continuous improvement culture in ESAB 1.0 9 13%aEBITDA Margin -10%Sales Growth 4.3xWorking Capital Turns 0Acquisitions 18% 7% 5.5x 113 1 “Core” based on Colfax 10K adj for public company exp; 2 “Core” at mid of guidance; 3 11 acquisitions o
Slide 10: Strong execution on financial commitments
Strong execution on financial commitments The best compounders deliver year in and year out 10 Sales1,2 ($B) CAGR 1.7 1.8 2.0 2.1 1.8 2.3 2.4 2.6 2016 2017 2018 2019 2020 2021 2022 2023E 13.8% 13.9% 15.5% 15.2% 16.2% 16.8% 2016 2017 2018 2019 2020 2021 2022 2023E 13% 18% Covid Covid 6% aEBITDA1,2 Ma
Slide 11: Capabilities built in ESAB 1.0
Capabilities built in ESAB 1.0 Built capabilities to accelerate outperformance in ESAB 2.0 11 Gaining market share Beginning innings of rationalizing manufacturing footprint Limited capital for M&A Limited & aging equipment line Strengthened, retained, and upgraded key talent New and complete line o
Slide 12: Implemented EBX to drive breakthrough performance
Implemented EBX to drive breakthrough performance Our EBX culture will continue to deliver outperformance 12 24 2016 2023E ~100 +317% Manufacturing Footprint aEBITDA % New Products 4.3x 5.5x 20162 2023E2 +1.2x Working Capital Turns 45 27 2016 2023E - 40% 13% 18% 20161 2023E2 500 bps+ EBX – OUR VALUE
Slide 13: Shifted portfolio towards favorable mix
Shifted portfolio towards favorable mix Strong secular trends supporting ESAB’s growth 13 FILLER METALS AUTOMATION & EQUIPMENT GAS EQUIPMENT Productivity & connectivity Labor shortage Regulatory & safety requirements Global infrastructure investments
Slide 14: ESAB 2.0 2024-2028
Pl pay CORPORATION ESAB 2.0 2024-2028 Shaping the world we imagine.”
Slide 15: ESAB 2.0, 2024 – 2028
ESAB 2.0, 2024 – 2028 Creating a focused premier industrial compounder Less cyclicality, higher margins & strong cash flow 15 aEBITDA % 18% $2.6B 22%+ Accelerate share gain Increase differentiated automation solutions Complete manufacturing footprint optimization Continue to add technology to drive
Slide 16: Proprietary formulations drive growth
FABTECH FILLER METALS Proprietary formulations drive growth Proprietary filler metal business driving higher margins and cash flow 16 Sales ($B)1 2016 2023E 2028E $1.6B $2.0B $1.1B ▪ Strong brands and global reach ▪ Proprietary filler metal formulations ▪ Improved product mix ▪ Expansion into higher
Slide 17: Focused on growth, margins and less cyclicality
FABTECH AUTOMATION & EQUIPMENT Focused on growth, margins and less cyclicality Cutting-edge equipment and automation solutions fueling growth 17 ▪ Market share gain with Next-Gen equipment ▪ Cobots expanding automation TAM ▪ Will embed AI to improve the business ▪ ~$200M of value-creating M&A sales
Slide 18: Leveraging existing business drives specialty & medical expansion
GAS EQUIPMENT Leveraging existing business drives specialty & medical expansion Building unrivaled scale in the global gas equipment business 18 2016 2023E 2028E $0.45B $1.0B $0.2B Organic Sales Growth: MSD Gross Margin: 40%+ $5B+ Market2 Sales ($B)1 ▪ Completed GCE acquisition ▪ Increased R&D inves
Slide 19: Track record of M&A execution since 2017
Track record of M&A execution since 2017 Strategic M&A accelerating favorable product mix 19 STRATEGIC CRITERIA FINANCIAL FRAMEWORK Value Creation ▪ Disciplined valuation ▪ ROIC > 10% over 3-5 yrs Financial Criteria ▪ MSD+ growth; 40%+ GM ▪ High synergy potential Strategic Criteria ▪ Strong secular
Slide 20: Recent M&A activity driving growth & reducing cyclicality
Recent M&A activity driving growth & reducing cyclicality Strategic M&A accelerating favorable product mix 20 2023E Sales Growth% ESAB Base1 Acquisitions 6% 9%+ 300bps+ ESAB Base1 Acquisitions 36% 40%+ 400bps+ RECENT M&A PERFORMANCE VS. ESAB BASE 2023E Gross Margin % Less Cyclicality Higher Margin A
Slide 21: Funnel for future M&A growing
Funnel for future M&A growing & driving acquisition opportunities Robust pipeline with near term actionable targets 21 Current Prospects Qualified Engaged 2028 M&A Targets $4B $2B $0.4B FABTECH GAS EQUIPMENT $3B $1B $0.3B
Slide 22: Expanding ESAB's total addressable markets
Expanding ESAB’s total addressable markets Creating new avenues for growth in our core areas of expertise 22 $8 $5 $2 $13 $12 $5 $15 $17 $8 $40B Filler Metals Automation & Equipment Gas Equipment $30B $15B HOW WE ARE EXPANDING THE TAM Bolt-on acquisitions Innovative products and solutions Geographic
Slide 23: Purposeful leadership
Purposeful leadership Leveraging our experiences to be a premier industrial company 23 Shyam P. Kambeyanda President & Chief Executive Officer 28 Years Experience Eaton | ESAB Kevin Johnson Chief Financial Officer 22 Years Experience Howden | ESAB Michele Campion Chief Human Resources Officer 25 Yea
Slide 24: Shaping a better world
Shaping a better world Committed to the environment and community 24 Protecting Our Environment Community Investment Eco-Friendly Products Support Diverse & Inclusive Teams Health & Safety Responsibility 30% reduction in GHG by 2030 Supporting charitable causes & communities Ecodesign for sustainabl
Slide 25: Running the ESAB playbook: Creating a compounder
Running the ESAB playbook: Creating a compounder Built capabilities in ESAB 1.0 to accelerate outperformance in ESAB 2.0 25 Organic Growth Margin Expansion Free Cash Flow M&A 2028E LT Target 2023 Estimate1 $2.6B Sales 18%+ aEBITDA % >90% FCF conversion $4B+ Sales 22%+ aEBITDA % >100% FCF conversion
Slide 26: ESAB Corporation
ESAB CORPORATION Ve a ——— —
Slide 27: Fabtech Growth & Margins
Fabtech Growth & Margins OLIVIER BIEBUYCK, PRESIDENT FABRICATION TECHNOLOGY ACCELERATING
Slide 28: Fabtech 2023E snapshot
Fabtech 2023E snapshot Global leader serving growing end markets 28 $2.2B Sales1 35% Gross Margin1 7,300 Employees 150 Countries active 27% 73% PRODUCT GROUPS END USE MARKETS General Manufacturing Repair & Maintenance Automotive Rail, 4% Commercial Vehicles, 4% Renewables Infrastructure O&G Mobile M
Slide 29: ESAB 1.0 Fabtech 2017-2023
Pl pay CORPORATION ESAB 1.0 Fabtech 2017-2023 Shaping the world we imagine.”
Slide 30: Fabtech 2016: A challenged filler metals business
Fabtech 2016: A challenged filler metals business Addressing 2016 challenges created runway for breakthroughs 30 33% -10% 4.5x 0 35% 5% 5.6x 83 Gross Margin Sales Growth Working Capital Turns Acquisitions 20161 2023E2 1 “Core” based on Colfax 10K; 2 “Core” at mid of guidance; 3 8 acquisitions occurr
Slide 31: Fabtech 2016: A challenged business with great potential
Fabtech 2016: A challenged business with great potential Addressing 2016 challenges created runway for breakthroughs 31 Focused on high-margin specialty and high-alloy filler metal Limited innovation Aged portfolio in Automation & Equipment and losing share Limited pricing discipline 22 manufacturin
Slide 32: Implemented EBX to drive breakthrough performance
Implemented EBX to drive breakthrough performance Our EBX culture will continue to deliver outperformance 32 Manufacturing Footprint GM% 4.5X 5.6X 20161 2023E1 +1.1x Working Capital Turns 39 22 2016 2023E - 43% 33% 35% 20161 2023E1 +200 bps 22 67 2016 2023E +205% EBX – OUR VALUES, PROCESSES, AND TOO
Slide 33: ESAB 2.0 Fabtech 2024-2028
Pl pay CORPORATION ESAB 2.0 Fabtech 2024-2028 Shaping the world we imagine.”
Slide 34: Fabtech 2024 – 2028: Accelerating growth & margins
Fabtech 2024 – 2028: Accelerating growth & margins Well positioned to deliver further growth and margin expansion 34 Gross Margin 31% 20161 73% 27% 69% 65% 35% 2028E22023E2 Automation & Equipment Filler Metals Sales $2.2B $1.5B ~$3.0B 33% 35% 38% Deploy EBX to drive manufacturing and commercial exce
Slide 35: Leadership in Filler Metals
LEADERSHIP IN FILLER METALS Proprietary formulations addressing customer needs Local presence and global scale delivers unique value proposition 35 ENGINEERED PRODUCTS 80+ scientists/engineers 200+ patents granted and pending 4,000+ proprietary formulations STRONG PORTFOLIO OF BRANDS >50% of sales f
Slide 36: Differentiated Automation & Equipment
DIFFERENTIATED AUTOMATION & EQUIPMENT Full array of equipment and workflow solutions Created market-leading equipment and automation solutions 36 All new light industrial product families for retail and distributors Revitalized heavy-industrial product families with digital connectivity for large en
Slide 37: Example of a key win for equipment in North America
EXAMPLE OF A KEY WIN FOR EQUIPMENT IN NORTH AMERICA Collaborating with distribution to sell our newest products Innovation opens new commercial doors 37 ▪ Supplier of welding gases and equipment ▪ 360+ stores across the US ▪ Customer looking for differentiated innovation ▪ Demo of new VOLT machine a
Slide 38: What we do and do not do in automation
WHAT WE DO AND DO NOT DO IN AUTOMATION Our focus is on distinctive welding packages Focused on less cyclical higher margin automation 38 Welding Process PackageMaterial Handling Systems Integrated process package delivering high-productivity workflow solutions Capex Higher cyclicality Opex Lower cyc
Slide 39: Fabricator of large steel structures
FABRICATOR OF LARGE STEEL STRUCTURES Creating workflow solutions for large end users Our digitally-enabled offering changes the conversation with customers 39 BEFORE AFTER ▪ Fabricator of large steel structures for O&G and renewables ▪ Connected Warrior welding machines ▪ InduSuite digital workflow
Slide 40: Leading fabricators in renewables
LEADING FABRICATORS IN RENEWABLES Tailored automation system for wind Unparalleled capabilities for the fast-growing renewables market 40 ▪ Leading global manufacturer of towers for wind energy sector ▪ Intelligent autonomous welding process—Adaptio ▪ High deposition rates with patented technology (
Slide 41: Running the ESAB playbook: Accelerating Fabtech growth and margins
Running the ESAB playbook: Creating a compounder Accelerating Fabtech growth and margins 41 $2.2B Sales 35%+ Gross Margin 5.6x Working Capital Turns $3B Sales 38%+ Gross Margin % 6.7x+ Working Capital Turns +300bps 1.1x +$0.3BMSD Organic Growth Gross Margin Expansion Working Capital Turns M&A 2028E
Slide 42: ESAB Corporation
ESAB CORPORATION Ve a ——— —
Slide 43: Building a Global Gas Control Equipment Leader
Global Gas Control Equipment Leader PIYUSH SHETH, VP & GENERAL MANAGER GAS CONTROL BUILDING A
Slide 44: Gas Control Equipment 2023E snapshot
Gas Control Equipment 2023E snapshot Uniquely positioned to grow in highly fragmented global markets 44 $0.45B Sales1 1,600 Employees 130 Countries active AMERICAS EMEA & APAC 49% 51% EXPANDING GLOBAL FOOTPRINT 12% 38% 50% UNMATCHED PORTFOLIO MIX Specialty Gas Medical Gas Industrial Gas Expanding gl
Slide 45: Gas Control Equipment is mission critical for our customers
Gas Control Equipment is mission critical for our customers Mission-critical nature drives continuous customer engagement 45 People Safety Project & Lifecycle risks Regulatory Compliance Productivity & Efficiency Operations Continuity G A S C O N T R O L E N V IR O N M E N T Managing high pressure,
Slide 46: ESAB 1.0 Gas Equipment 2017 – 2023
ESAB 1.0 Gas Equipment 2017 – 2023
Slide 47: Underperforming business with great potential
GAS CONTROL EQUIPMENT Underperforming business with great potential A business with meaningful upside potential 47 41% -12% 2.9x 0 43% 14% 4.6x 33 Gross Margin2 Sales Growth1 Working Capital Turns Acquisitions 2016 2023E 1 Organic sales estimates include GCE 2017 sales, prior to acquisition; 2 2016
Slide 48: Building the foundation
GAS CONTROL EQUIPMENT Building the foundation EBX and successful acquisitions created a solid foundation in ESAB 1.0 48 Growing globally Industrial gas equipment focused Poor operations & pricing discipline Limited R&D investment Completed GCE, Ohio & Therapy acq. Expanding to specialty & medical ga
Slide 49: Implemented EBX to drive breakthrough performance
Implemented EBX to drive breakthrough performance Extending strong EBX muscle to acquisitions 49 6 5 2016 2023E -17% 41% 43% 2016 2023E +200 bps GM%1 2.9x 4.6x 2016 2023E +1.7x Working Capital Turns Manufacturing Footprint EBX – OUR VALUES, PROCESSES, AND TOOLS— , , 2 33 2016 2023E +1,550% 1 2016 gr
Slide 50: ESAB 2.0 Gas Equipment 2024 – 2028
ESAB 2.0 Gas Equipment 2024 – 2028
Slide 51: Ascending to a gas equipment global leader
GAS CONTROL EQUIPMENT 2024 – 2028 Ascending to a gas equipment global leader Building unrivaled global scale 51 Gross Margin1 43% 45%41% $0.2B 100% 2016 50% 38% 12% 2023E 34% 41% 25% 2028E Specialty Medical Industrial Accelerating share gain Building med & spec gas platforms Global expansion & comm
Slide 52: Large industrial manufacturing facility
LARGE INDUSTRIAL MANUFACTURING FACILITY Gas management solutions to reduce total cost of ownership Digital offerings, unmatched equipment & industry leading expertise 52 ▪ Energy equipment manufacturer ▪ $5M annual gas consumption ▪ 300 welding stations ▪ Increasing operations cost ▪ No visibility o
Slide 53: New pediatric hospital
NEW PEDIATRIC HOSPITAL Highest safety suction & oxygen therapy equipment Patented Push-To-Set & digital offering for highest patient safety 53 ▪ 400,000 children annually ▪ 2 million sq ft, 446 beds ▪ Highest safety expectation ▪ Critical care children’s hospital ▪ Clinician & respiratory therapist
Slide 54: Pharmaceutical laboratory
PHARMACEUTICAL LABORATORY Creating safe and reliable gas control solution Safe & reliable offering for lifetime of highly complex laboratory 54 ▪ Lead Pharma company ▪ Highly complex 132 gases (flammable & toxic) ▪ 1800 seats, 160,000 sq ft ▪ Unplanned downtime, lab underutilization ▪ Safety, reliab
Slide 55: Running the ESAB playbook: Becoming a global gas equipment leader
Organic Growth Margin Expansion Working Capital Turns M&A 2028E LT Target 2023 Estimate1 Running the ESAB playbook Becoming a global gas equipment leader 55 $0.45B Sales 43% Gross Margin % 4.6x Working Capital Turns $1.0B+ Sales ~45% Gross Margin % 6.0x+ Working Capital Turns +200bps 1.4x +$0.4BMSD
Slide 56: ESAB Corporation
ESAB CORPORATION Ve a ——— —
Slide 57: Delivering Shareholder Value
Shareholder Value KEVIN JOHNSON, CHIEF FINANCIAL OFFICER DELIVERING
Slide 58: Financial flywheel strategy
FINANCIAL FLYWHEEL STRATEGY Aligned with creating a focused premier industrial compounder Creating long-term shareholder value 58 Sales Growth Margin Expansion Strong FCF Generation Disciplined Capital Allocation Capital Allocation Aligned to Strategy EBX Accelerating Innovation & M&A Driving Growth
Slide 59: Accelerating innovation and M&A delivering growth
Accelerating innovation and M&A delivering growth Continue to invest in business to accelerate growth 59 R&D investment driving organic growth Investing in commercial excellence M&A adding ~$0.7B of sales by 2028 Organic growth LSD MSD–HSD MSD 23% 17% 60% 2023E1 $2.6B 49% 26% 25% 2028E1 $4.0B+ Fille
Slide 60: EBX driving margin expansion
EBX driving margin expansion Building on track record of profitable growth 60 22%+ 2023E1 2028E1 ~18% ~400 bps Dynamic price/cost management Product line simplification (PLS) Mfg. footprint & supply chain optimization AI simplifying operating model/SG&A M&A driving portfolio reshaping ROBUST aEBITDA
Slide 61: Strong free cash flow generation & financial flexibility
Strong free cash flow generation & financial flexibility Robust cash flow funding compounding strategy 61 2023E 2028E >90%+ ~100% >$2B FCF FCF growing with future earnings Utilizing AI to improve working capital turns Committed to net leverage ~2x >$2B of free cash flow IMPROVING FCF CONVERSION %
Slide 62: Aligning capital allocation to strategy
Aligning capital allocation to strategy Driving growth, reducing leverage and funding M&A 62 ~15% ~85% Dividends M&A Grow dividend Maintain a strong balance sheet and ~2x net leverage Disciplined bolt-on M&A Fund innovation to drive organic growth through income statement OUR FUTURE ALLOCATED CAPIT
Slide 63: ESAB Corporation
ESAB CORPORATION Ve a ——— —
Slide 64: Creating a Focused Premier Industrial Compounder
Focused Premier Industrial Compounder SHYAM P. KAMBEYANDA, PRESIDENT AND CEO CREATING A
Slide 65: Proven track record and set to achieve ESAB 2.0
Proven track record and set to achieve ESAB 2.0 Creating a focused premier industrial compounder 65 Strong roadmap for accelerated growth and share gain Focused on improving the mix of the business Raising the bar with EBX to deliver higher margins and cash flow Generating >$2B of FCF for value crea
Slide 66: We'll be right back
We’ll be right back 66