ESAB Corp (ESAB) 2022 Q2 法說會逐字稿

Okay, and thank you for standing by. Welcome to the ESAB Corporation Second Quarter 2022 Earnings Call. (Operator Instructions). I will now turn the conference over to Mark Barbalato. Please go ahead.

好的，謝謝你的支持。歡迎參加伊薩公司 2022 年第二季度財報電話會議。 （操作員說明）。我現在將會議轉交給 Mark Barbalato。請繼續。

Thanks, operator. Welcome to ESAB's Second Quarter 2022 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 our SEC filings and today's earnings release. Actual results might 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.

謝謝，接線員。歡迎參加伊薩 2022 年第二季度財報電話會議。今天早上，我們的總裁兼首席執行官 Shyam Kambeyanda 加入了我的行列。和首席財務官凱文約翰遜。請記住，我們所做的一些陳述是前瞻性的，並且存在風險，包括我們提交給美國證券交易委員會的文件和今天的收益報告中所載的那些。實際結果可能會有所不同，我們不承擔任何義務或打算更新這些前瞻性陳述，除非法律要求。關於今天電話會議中提到的任何非公認會計原則財務措施，與這些措施相關的隨附對賬信息可以在我們的收益新聞稿和今天的幻燈片演示中找到。

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

有了這個，我想把電話轉給我們的總裁兼首席執行官 Shyam Kambeyanda。

Thank you, Mark. Good morning, everyone, and thank you for joining us today. We continue to make strong progress on our long-term goals. Our second quarter was another step forward in that direction. Before talking about the results, let me take the time to recognize our teams across the globe and particularly our team in China, who worked extraordinarily hard during the quarter to ensure we served our customers during the lockdowns. We have the finest set of associates, and I'm proud and appreciative of what they do every day to make ESAB successful.

謝謝你，馬克。大家早上好，感謝您今天加入我們。我們將繼續在我們的長期目標上取得重大進展。我們的第二季度是朝著這個方向邁出的又一步。在談論結果之前，讓我花點時間表彰我們在全球的團隊，特別是我們在中國的團隊，他們在本季度非常努力地工作，以確保我們在封鎖期間為客戶提供服務。我們擁有最優秀的員工，我為他們每天為使 ESAB 取得成功所做的一切感到自豪和感激。

Turning to Slide 3. We had another record quarter for ESAB. We delivered record sales of $661 million with organic growth of 9%. Excluding Russia, organic growth was 13%. Our organic revenue growth reflected strong price realization as our teams continue to execute our EBX process on pricing to offset inflation. EBITDA was a record $111 million in the quarter, up 6%, and we expanded EBITDA margins by 10 basis points to 16.7, a solid achievement despite geopolitical currency and inflation headwinds. In addition, we remain on track to deliver our free cash flow guidance.

轉到幻燈片 3。我們為 ESAB 創造了另一個創紀錄的季度。我們實現了創紀錄的 6.61 億美元銷售額，有機增長 9%。不包括俄羅斯，有機增長率為 13%。我們的有機收入增長反映了強勁的價格實現，因為我們的團隊繼續執行我們的 EBX 定價流程以抵消通貨膨脹。本季度 EBITDA 達到創紀錄的 1.11 億美元，增長 6%，我們將 EBITDA 利潤率擴大了 10 個基點至 16.7，儘管存在地緣政治貨幣和通脹逆風，但仍取得了可觀的成就。此外，我們仍有望提供我們的自由現金流指導。

Lastly, we successfully extended our $600 million term loan and fixed it at competitive rates. Kevin and our Treasurer, [Mark Kurish], did a fantastic job. Kevin will share more details a little later.

最後，我們成功延長了 6 億美元的定期貸款，並以具有競爭力的利率進行了修復。 Kevin 和我們的財務主管 [Mark Kurish] 做得非常出色。稍后凱文將分享更多細節。

Turning to Slide 4. I've discussed our digital strategy several times in the past. Let me take a bit of time to calibrate us. When I joined in 2016, ESAB was in the early innings of its digital journey. And what I discovered was we had a strong foundation, which included WeldCloud Universal Connector and CutCloud, all developed using an open architecture. At this time, we also discovered our customers who are using their welding equipment less than 10% of the time. They had a strong desire to automate and digitize, which we have defined as a second wave of robotics.

轉到幻燈片 4。我過去曾多次討論過我們的數字戰略。讓我花一點時間來校准我們。當我在 2016 年加入時，伊薩正處於其數字化之旅的早期階段。我發現我們有一個堅實的基礎，其中包括 WeldCloud Universal Connector 和 CutCloud，它們都是使用開放式架構開發的。此時，我們還發現我們的客戶使用他們的焊接設備的時間不到 10%。他們強烈希望實現自動化和數字化，我們將其定義為機器人技術的第二波浪潮。

To accelerate our digital solutions strategy, we added 4 fantastic acquisitions. Starting with TBi, which is a leader in robotic arm torches. We added to our analytical capabilities with HKS, which provides real-time weld analytics. To continue to strengthen our portfolio, we then acquired WeldNote, which provides our customers with a library of weld processes. To put it all together, we acquired OCTOPUZ, a leader in offline robotic software. All of these solutions create InduSuite, which we launched in the second quarter. I'm thrilled about our progress and even more excited about our future.

為了加快我們的數字解決方案戰略，我們增加了 4 項出色的收購。從 TBi 開始，它是機械臂火炬的領導者。我們通過提供實時焊縫分析的 HKS 增加了我們的分析能力。為了繼續加強我們的產品組合，我們隨後收購了 WeldNote，它為我們的客戶提供了一個焊接工藝庫。綜上所述，我們收購了離線機器人軟件的領導者 OCTOPUZ。所有這些解決方案都創建了我們在第二季度推出的 InduSuite。我對我們的進步感到興奮，對我們的未來更加興奮。

To accelerate the commercialization of our digital strategy, we have been looking for strategic partners, which brings me to our next slide.

為了加速我們數字戰略的商業化，我們一直在尋找戰略合作夥伴，這將我帶到了我們的下一張幻燈片。

Turning to Slide 5. Let me introduce our partnership with Hexagon. Hexagon is a global leader in manufacturing software solutions based in Sweden and is complementary and a great cultural fit with ESAB. This collaboration creates a premier software welding solution to help our customers increase efficiency and productivity of their weld operations. This collaboration also opens a larger customer set for ESAB to serve. We're excited about this partnership, and we'll be sharing more in the future quarters.

轉到幻燈片 5。讓我介紹一下我們與海克斯康的合作關係。 Hexagon 是一家總部位於瑞典的製造軟件解決方案的全球領導者，與 ESAB 具有互補性和良好的文化契合度。這種合作創造了一個一流的軟件焊接解決方案，以幫助我們的客戶提高他們的焊接操作的效率和生產力。此次合作還為 ESAB 服務打開了更大的客戶群。我們對這種夥伴關係感到興奮，我們將在未來幾個季度分享更多信息。

Moving to Slide 6 and EBX. We're taking EBX up a notch and are laser-focused on leveraging our EBX toolkit to streamline our supply chain processes across all regions. We have kicked off our product line simplification initiative to drive growth and margin expansion. I know many of you like to see examples of EBX. On the right side of the slide, I've provided a recent example of a distribution center Kaizen in North America, where we successfully streamlined our order pick process. This Kaizen significantly eliminated waste and improved order pick efficiency. The results were a reduction of order backlog by 72% and a reduction in time to pick by 53%. During the quarter, we completed over 37 Kaizens, each improving our productivity, efficiency and safety at ESAB. And as I've said before, we are a continuous improvement organization, and EBX is in our DNA.

轉到幻燈片 6 和 EBX。我們將 EBX 提升了一個檔次，並專注於利用我們的 EBX 工具包來簡化我們在所有地區的供應鏈流程。我們已經啟動了產品線簡化計劃，以推動增長和利潤率擴張。我知道你們中的許多人喜歡看 EBX 的例子。在幻燈片的右側，我提供了一個最近的北美配送中心 Kaizen 示例，我們成功地簡化了我們的訂單揀選流程。這種改善顯著消除了浪費並提高了揀貨效率。結果是訂單積壓減少了 72%，揀貨時間減少了 53%。在本季度，我們完成了超過 37 次改進，每一次都提高了我們在伊薩的生產力、效率和安全性。正如我之前所說，我們是一個持續改進的組織，EBX 是我們的 DNA。

Turning to Slide 7 and our performance in the quarter. As I mentioned earlier, sales rose to a record $661 million, a 5% year-over-year increase, 9% organically and 13% excluding Russia. Our markets in North America, India and the Middle East had strong end market demand. Europe and South America were resilient as expected. And we expect improving market conditions in China for the second half. Price realization across all geographies remained strong. We delivered record EBITDA dollars, expanded margins by 10 basis points, 80 basis points, excluding Russia, despite a strong U.S. dollar.

轉向幻燈片 7 和我們在本季度的表現。正如我之前提到的，銷售額上升到創紀錄的 6.61 億美元，同比增長 5%，有機增長 9%，不包括俄羅斯的銷售額增長 13%。我們在北美、印度和中東的市場有強勁的終端市場需求。歐洲和南美正如預期的那樣具有彈性。我們預計下半年中國的市場狀況會有所改善。所有地區的價格實現仍然強勁。儘管美元走強，但我們交付了創紀錄的 EBITDA 美元，將利潤率擴大了 10 個基點、80 個基點，不包括俄羅斯。

Moving to Slide 8 and our Americas business. Americas had a strong quarter. Sales rose to $291 million, growing 15% organically, reflecting strong price utilization. We continue to introduce exciting new products, many of them focused on our North American equipment market. EBITDA Increased 28% and margins expanded by 170 basis points, reflecting strong execution by our teams.

轉到幻燈片 8 和我們的美洲業務。美洲有一個強勁的季度。銷售額增長至 2.91 億美元，有機增長 15%，反映出強勁的價格利用率。我們繼續推出令人興奮的新產品，其中許多產品專注於我們的北美設備市場。 EBITDA 增長 28%，利潤率擴大 170 個基點，反映了我們團隊的強大執行力。

Moving to Slide 9 and our EMEA and APAC business. Our EMEA and APAC segment performed well. China worked through restrictive COVID measures, and demand in Europe was in line with what we expected. Our second quarter sales climbed 4% organically on the back of strong price. Excluding Russia, organic sales increased 11% and margins improved 10 basis points year-over-year. We expect margins to continue to expand as we execute our product simplification initiative.

轉到幻燈片 9 以及我們的 EMEA 和 APAC 業務。我們的 EMEA 和 APAC 部門表現良好。中國採取了限制性的 COVID 措施，歐洲的需求符合我們的預期。由於價格強勁，我們第二季度的銷售額自然增長了 4%。不包括俄羅斯，有機銷售額增長 11%，利潤率同比提高 10 個基點。隨著我們執行產品簡化計劃，我們預計利潤率將繼續擴大。

Lastly, I'm proud of our team as they continue to build momentum for our new products, and we've had some notable wins leveraging our InduSuite software solution. With that, let me turn it over to Kevin for Slide 10.

最後，我為我們的團隊感到自豪，因為他們繼續為我們的新產品建立動力，並且我們利用 InduSuite 軟件解決方案取得了一些顯著的勝利。有了這個，讓我把幻燈片 10 交給凱文。

Thanks, Shyam. Good morning, everyone. Since we separated, we have been working hard on finalizing our financing, and I'm pleased to say that we have now completed this work. We successfully extended our $600 million term loan and fixed this loan at a blended rate of 4% using both interest and currency swaps.

謝謝，夏姆。大家，早安。自從我們分開以來，我們一直在努力敲定我們的融資，我很高興地說，我們現在已經完成了這項工作。我們成功延長了 6 億美元的定期貸款，並使用利息和貨幣掉期將這筆貸款固定為 4% 的混合利率。

Today, this means over half of our debt is now fixed, and we have around $550 million of borrowing capacity, which provides us with ample financial flexibility for the next few years. We finished the quarter with net leverage of approximately 2.6x, and we will continue to focus on driving cash flow and paying down our debt during the rest of the year.

今天，這意味著我們一半以上的債務現在是固定的，我們有大約 5.5 億美元的借貸能力，這為我們在未來幾年提供了充足的財務靈活性。我們在本季度末的淨槓桿率約為 2.6 倍，我們將在今年剩餘時間繼續專注於推動現金流和償還債務。

Turning to Slide 11. We are reaffirming our 2022 guidance. As in our prior guidance, we've only included Russia for Q1 and continue to exclude it from Q2 to Q4. Total revenue guidance remains at 2% to 4%. But under the bonnet, there were a few changes that we did make. Organic growth increased the point as we went for more price due to inflation. This was offset by 1 point of FX due to a stronger U.S. dollar and had an approximately $4 million negative impact on our full year adjusted EBITDA.

轉到幻燈片 11。我們正在重申我們的 2022 年指導方針。與我們之前的指導一樣，我們僅在第一季度將俄羅斯包括在內，並在第二季度至第四季度繼續將其排除在外。總收入指引保持在 2% 至 4%。但在引擎蓋下，我們確實做了一些改變。由於通貨膨脹，我們追求更高的價格，有機增長增加了這一點。由於美元走強，這被 1 個外匯點所抵消，並對我們全年調整後的 EBITDA 產生了約 400 萬美元的負面影響。

Given the global backdrop, we have been working hard on cost reduction opportunities. We are accelerating our manufacturing consolidation and transformation projects and expect to drive some additional savings in the first half of 2023. We continue to target free cash flow of greater than $210 million, a strong second half of the year in line with what we expected in our guidance as we burn off inventory that we built up during the first half to offset supply chain pressures. We also paid out our first dividend in July, a $0.05 per share quarterly dividend, and we expect to continue this in the future.

鑑於全球背景，我們一直在努力尋找降低成本的機會。我們正在加速我們的製造業整合和轉型項目，並希望在 2023 年上半年節省一些額外費用。我們繼續將自由現金流定為超過 2.1 億美元，這與我們在我們在銷毀上半年積累的庫存以抵消供應鏈壓力時的指導。我們還在 7 月份支付了第一筆股息，即每股 0.05 美元的季度股息，我們預計未來將繼續這樣做。

With that, let me hand back to Shyam on Slide 12 to wrap up.

有了這個，讓我在幻燈片 12 上交還給 Shyam 以結束。

Thank you, Kevin. To summarize, we delivered a strong first half, and I'm very proud of our team as we continue to bring innovative new products to the global market and build momentum in our digital solutions through InduSuite. Our financing is in place. We're using EBX to drive growth, higher profit and cash flow. We're executing well on our strategy to create long-term shareholder value.

謝謝你，凱文。總而言之，我們上半年表現強勁，我為我們的團隊感到非常自豪，因為我們繼續為全球市場帶來創新的新產品，並通過 InduSuite 為我們的數字解決方案建立動力。我們的融資已經到位。我們正在使用 EBX 來推動增長、更高的利潤和現金流。我們在創造長期股東價值的戰略上執行良好。

Thank you again for joining us. Operator, please open the line for questions.

再次感謝您加入我們。接線員，請打開電話提問。

(Operator Instructions). Your first question comes from the line of Nathan Jones with Stifel.

（操作員說明）。您的第一個問題來自 Nathan Jones 與 Stifel 的對話。

I'll just start with some of the numbers on Russia here, I know you've excluded it from 2Q onwards. Have you not exited the Russia business? Are you still intentionally doing business in Russia, but just excluding it from your results? Or are you getting out of Russia? Can you just talk about what's going on with that?

我將在這裡從俄羅斯的一些數字開始，我知道您已將其從第二季度開始排除在外。你沒有退出俄羅斯業務嗎？您是否仍然有意在俄羅斯開展業務，但只是將其排除在您的結果之外？還是你要離開俄羅斯？你能談談這是怎麼回事嗎？

Yes, Nathan, what we've said, if you remember our announcement back in May that we had stopped supporting the business. We are no longer exporting from Western Europe into that business, and we're working out a transition plan. It is a complex process, and we continue to work through it. So we have nothing more to add on that front. When we do, we'll make that announcement.

是的，內森，如果您還記得我們在 5 月份宣布停止支持該業務的公告，我們已經說過。我們不再從西歐向該業務出口，我們正在製定過渡計劃。這是一個複雜的過程，我們將繼續努力。所以我們在這方面沒有什麼要補充的了。當我們這樣做時，我們會宣布這一消息。

Okay. Fair enough. Maybe you could talk a little bit about the rest of Europe? Obviously, there's concerns over there with high energy prices, rising inflation, [titer] rates, all those kinds of things. But I think ex the Russia business, you still saw organic revenue growth. Can you just talk about the trends that you're seeing there, what you're expecting out of Europe for the second half of the year?

好的。很公平。也許你可以談談歐洲其他地區？顯然，高昂的能源價格、不斷上升的通貨膨脹、[滴定]率，所有這些都令人擔憂。但我認為除俄羅斯業務外，您仍然看到有機收入增長。你能談談你在那裡看到的趨勢，你對下半年歐洲的期待嗎？

Yes. So out of Europe, we are expecting flattish volume for the rest of the year. There could be some upside as we see sort of the semiconductor space unwind itself and supply chain issues resolve, we think the auto market could come back and give us a bit of upside. Where we do see a lot of momentum within our business is in India, the Middle East and also to some extent in the South Pacific, especially in Australia and the Southeast Asia region.

是的。因此，在歐洲以外，我們預計今年剩餘時間的交易量將持平。隨著我們看到半導體空間自行放鬆和供應鏈問題得到解決，可能會有一些上行空間，我們認為汽車市場可能會捲土重來，給我們帶來一些上行空間。我們確實在印度、中東以及在一定程度上在南太平洋地區，尤其是在澳大利亞和東南亞地區看到了我們業務發展勢頭強勁的地方。

So all in all, what we define as an EMEA and our APAC region continue to have some green shoots with some flattish volumes out of Europe.

總而言之，我們定義為 EMEA 和我們的亞太地區的地區繼續有一些萌芽，但歐洲以外的數量持平。

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

您的下一個問題來自 Loop Capital 的 Chris Dankert。

The Hexagon news is certainly exciting. So I'll come back to automation a little bit more broadly, I guess. Historically, automation and cutting sales combined have been near 12-ish percent of sales, if I remember correctly. Is that still the case today? And how should we think about automation growth and kind of the cadence there going forward?

Hexagon 的消息無疑是令人興奮的。所以我想我會更廣泛地回到自動化。如果我沒記錯的話，從歷史上看，自動化和削減銷售額的總和接近銷售額的 12%。今天還是這樣嗎？我們應該如何看待自動化的增長和未來的節奏？

Yes. What we have defined within -- if you remember, even during our Investor Day and then since then, is that we're expecting that segment to grow by close to about $150 million through the next 3 to 5 years. And so if you look at some of the numbers that we've provided to you in the past and then add that number, you can sort of see it sort of creates a significant business within ESAB going forward.

是的。我們在內部定義的內容——如果你還記得的話，即使在我們的投資者日期間以及從那時起，我們預計該細分市場在未來 3 到 5 年內將增長近 1.5 億美元。因此，如果您查看我們過去提供給您的一些數字，然後添加該數字，您可以看到它在 ESAB 內部創造了一項重要的業務。

We're excited about it, thrilled about the partnership that we've signed on to with Hexagon. But more importantly, there were several other things that we've also done. We've got some exciting things happening in our heavy industrial line, we've created specific products with our filler metal line that drives specifically towards that second wave of automation going forward and continue to innovate on the cutting process as well to continue to serve our customers well.

我們對此感到興奮，對我們與海克斯康簽署的合作夥伴關係感到興奮。但更重要的是，我們還做了其他幾件事。我們的重工業生產線發生了一些令人興奮的事情，我們用我們的填充金屬生產線創造了特定的產品，專門推動第二波自動化向前發展，並繼續在切割工藝方面進行創新，以繼續為客戶服務我們的客戶很好。

And our intent on that particular front is to sort of be a process leader rather than provide a fully integrated solution going forward, which we believe allows for lower cyclicality, better margin profile over the long term to ESAB.

我們在這方面的意圖是成為流程的領導者，而不是提供一個完全集成的解決方案，我們相信這可以降低週期性，從長遠來看，伊薩的利潤狀況更好。

Got it. That's really helpful. And then not to get too granular here, but what kind of gives you confidence in that back half outlook? And maybe how growth is turning through July here? Are we expecting a pretty typical seasonal step down into the third quarter here?

知道了。這真的很有幫助。然後在這裡不要太細化，但是什麼樣的讓你對後半場的前景充滿信心？也許到七月這裡的增長情況如何？我們是否期待這裡進入第三季度的一個非常典型的季節性步驟？

That's right. And Kevin, maybe you want to sort of give them a view on that one, on the seasonality?

這是正確的。凱文，也許你想給他們一個關於季節性的看法？

Yes. So Chris, what we're expecting, we are sort of going back to normal seasonality, stepping down in Q3. And we've given a little bit more color in the appendix. We expect to step down sort of in that 23% to 24% of full year sales and stepping up in Q4 to around 25% to 26%.

是的。所以克里斯，我們期待的是，我們有點回到正常的季節性，在第三季度下台。我們在附錄中給出了更多的顏色。我們預計將在全年銷售額的 23% 至 24% 中有所下降，並在第四季度升至 25% 至 26% 左右。

And on that, as you kind of walk your way through the year, we're expecting sort of sequential decrementals and incrementals in that kind of mid-20s range as we're walking out for the rest of the year. And I think, as Shyam mentioned, growth assumptions in the second half to exclude Russia, as I mentioned in my script, and under there, we're expecting strong price sort of high single digits and flattish volume in the back half of the year.

在這一點上，當你在這一年中走自己的路時，我們預計在今年剩下的時間裡，我們會在 20 年代中期的範圍內出現某種連續的遞減和遞增。而且我認為，正如 Shyam 提到的那樣，下半年的增長假設不包括俄羅斯，正如我在腳本中提到的那樣，在此之下，我們預計今年下半年的強勁價格會出現高個位數和持平的交易量.

(Operator Instructions). There are no further questions at this time. I will turn the call to Mark Barbalato.

（操作員說明）。目前沒有其他問題。我將把電話轉給 Mark Barbalato。

Thank you for joining us today, and we look forward to speaking to you on our next earnings call. Have a good day.

感謝您今天加入我們，我們期待在下一次財報電話會議上與您交談。祝你有美好的一天。

This concludes today's conference call. You may now disconnect your lines.

今天的電話會議到此結束。您現在可以斷開線路。