Good morning, welcome to the ESAB Fourth quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Mark Barbalato, Vice President of Investor Relations, you may begin your conference. Thanks, operator. Welcome to ESAB's Q4 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 may differ, 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. Good morning, everyone, and thank you all for joining us today. Twenty-twenty two was a beginning of a new era in ESAB's 118-year rich history. We had a strong finish to 2022 and are entering 2023 with positive momentum as we continue to shape ESAB for the future. Let me take a moment to highlight a few accomplishments. We successfully launched as an independent company. We are well-positioned to compound value for our shareholders. We again demonstrated our innovation leadership by introducing several exciting new products like Renegade VOLT battery-powered welder and our new heavy industrial product, the Warrior Edge. We took our business system, EBX, up a notch. Our EBX process helped drive price and working capital improvements in a challenging environment. Our strengthened balance sheet and robust cash flow funded three acquisitions that moved our strategy forward. We continue our progress on ESG initiatives, and I'll share more on this later. Before I highlight the fourth quarter, let me take a moment to acknowledge the hard work and commitment of our associates. They embody our purpose and values and have been relentless in their focus on our customers and key stakeholders. Moving to slide three on our performance in the Q4. As I said before, we had a strong finish to 2022. Organic sales increased 11%. Adjusted EBITDA rose 10%, and margins expanded to 17.4% as our EBX initiative drove margin and working capital improvement. We made two acquisitions in the fourth quarter that further strengthened our enterprise, shaping ESAB towards higher growth, lower cyclicality, higher margins, and higher cash flow. Moving to slide four. We met all of our key financial metrics, reflecting strong execution despite the challenging operating environment. Full year organic revenue grew 13%. All of our regions contributed to our growth. India and the Middle East were standout performers. We achieved $470 million of EBITDA, which was $7 million higher than the midpoint of our guidance. We delivered $4.21 of EPS, which was $0.16 higher than the midpoint of our guidance. To appreciate the team's EBITDA performance, I would like to highlight that we absorbed approximately $10 million of unfavorable currency pressure or roughly $0.12 a share compared to our original guidance. On free cash flow, we generated $219 million of cash with a strong finish in the Q4. The key takeaway on this slide is ESAB delivered on all of its commitments. We're on a clear, continuous improvement path towards our long-term strategic goals of 20% EBITDA and 100% free cash flow conversion. Moving to slide five. Over the last six years, we worked hard to reshape our company. With the recent acquisitions of Swift-Cut and Therapy Equipment, we continue our journey to compound value. Therapy Equipment strengthened our gas control business by broadening our product offering and extending our geographic reach. Like our Ohio Medical acquisition, Therapy Equipment is immediately accretive to our margins. Swift-Cut is a leader in light industrial automated cutting and provides us with an opportunity to extend our process leadership as well as grow our aftermarket. There's an opportunity to accelerate growth and expand margins by plugging in Swift-Cut's innovative products and solutions into our global distribution network. Turning to slide six, let me share an example of EBX at work. We're all aware of the supply chain issues at the start of 2022. We felt this was a perfect situation to use our powerful EBX tools to drive improvement. We used product line simplification, AI forecasting, enhanced standard work, improved shop floor Gemba, and glass boards to systematically optimize and improve our inventory levels. As the chart indicates, we were able to reduce inventory by $60 million over the course of the second half of 2022. In 2023, expect us to raise the bar and continue to reduce our inventory days. Moving to our fourth quarter financials on slide seven. As I mentioned before, Q4 sales grew 11% organically. Our markets remained resilient, with particular strength in our emerging markets. Acquisitions added 2 points of growth and are performing as expected. Our integration and synergy plans are off to a good start. I recently had the opportunity to visit with our team at Ohio Medical for our 100-day integration plan review. This includes implementation of our strategic vision as a global leader in gas control equipment, as well as leveraging EBX across the business to drive growth, margins, and cash flow. It was evident that there was great energy in the room. Ohio Medical has fit right in, and the team is excited about our future opportunities together. Similarly, I'll be visiting both Swift-Cut and Therapy Equipment for their 100-day reviews in the Q2. Continuing with the impact of EBX, we're pushing price to offset inflation, and our cadence of innovative new product introductions are driving excitement within our sales team and our customers. I'm encouraged by the strength of our sales funnels and the activities that will drive both an increased share of wallet as well as bring new customers to ESAB. Strong price and cost-saving execution helped offset both inflation and currency headwinds in the quarter. As a result, EBITDA margins expanded 40 basis points YoY and 80 basis points sequentially. Moving to slide eight. Americas had a solid quarter and performed as expected. Sales rose 5% organically as the team executed on price. Volume in the Americas reflected a tough year-over-year comparison. We made strong progress on penetrating new channels, accelerating our product line rationalization, and improving our operational efficiency. Acquisitions added 4 points of growth. As a result, adjusted EBITDA increased 9%, margins expanded by 20 basis points, and 100 basis points on a sequential basis. Turning to slide nine, and our EMEA and APAC segments. They had a strong quarter again. Our fourth quarter sales rose 15% organically, reflecting 8 points of price and 7 points of volume. Acquisitions added another 100 basis points. We saw particular strength in India and the Middle East. In the quarter, both regions made significant progress on equipment, digital solutions, and automation sales. Adjusted EBITDA improved 10%. Margins expanded 60 basis points YoY, reflecting strong execution and despite being impacted by a strong U.S. dollar. With that, let me turn it over to Kevin for slide 10. Thanks, Shyam. Good morning, everyone. ESAB had another strong quarter for free cash flow, $35 million higher than the prior year, and a cash conversion greater than 100%. I am proud of the work the ESAB team has completed during the year, particularly on inventory, which we reduced by a further $30 million in the Q4. We funded our new acquisitions with our strong free cash flow and ended the year with net leverage of 2.7 turns, 0.1 turns better than we expected last time we spoke. As we look forward to 2023, new technology is being implemented that will further improve our cash generation. We are confident of delivering on our long-term goal of cash conversion greater than 100% in the next few years. Turning to slide 11, we provide our 2023 guidance. Our guidance numbers exclude our Russian business for the full year, 2022 and 2023. Total sales growth is expected to be 2%-4%, with sales seasonality similar to 2022. Organic growth of 3%-5% includes 1-2 points of volume and the rest from price. We expect 2.5% from acquisitions and a 3.5% FX headwind due to a stronger U.S. dollar impacting the first half of 2023. We expect a year-on-year incremental in the mid-20s with an adjusted EBITDA guidance of $420 million-$440 million. This includes $15 million of investment we are making to drive growth for our gas control and equipment products. As we discussed last year, we successfully fixed half of our debt at a 4% interest rate, and we are assuming the Fed will increase the cash rate to around 5% by the end of Q2. Our interest expense is guided to $70 million-$72 million. 2023 adjusted tax rate is expected to be 24%-25%, a 50 basis point improvement at the midpoint versus 2022. We expect to consistently lower our adjusted tax rate over the next few years. Overall, 2023 adjusted EPS guidance is $3.80-$4.00. Finally, our cash flow conversion guide is greater than 90% as we continue to generate strong free cash flow with a similar quarterly seasonality to 2022. To assist with modeling, we have included a more detailed guidance slide in the appendix. With that, let me hand back to Shyam on slide 12 to discuss our ESG progress. Thank you, Kevin. Let me highlight some of the exciting things we've been doing with ESG. At ESAB, we've established five work streams that are aligned to our purpose of shaping the world we imagine. We've reduced our footprint by 30%. As a result, reduced our energy, waste, and water usage by the same proportion. We've improved our safety performance, and our performance is in the 90th percentile amongst industrials. Every voice is valued at ESAB, and diversity is a big part of it. As part of our design process, all of our new products meet eco-standard designs. We use over 20% recycled steel in our consumables business and are making great progress on sustainable packaging for our products. Lastly, the communities we're part of. ESAB believes in participating and growing the communities we live in. As a result, our associates have volunteered, and ESAB has funded several initiatives globally to ensure shared success. We are using ESG to make ESAB a better business for our customers, our associates, and our communities. Turning to slide 13 to wrap up, I'm very proud of our team. ESAB delivered a strong year of performance in a challenging environment. There is more to come from EBX as we drive growth, expand margins, and generate cash. We have a healthy funnel of bolt-on acquisitions as we continue our compounder journey. We have made strong progress on our ESG initiatives, and we'll be doing much more in this field. ESAB has had a solid start to the year, and as I've said in the past, our best is yet to come. Thank you again for joining us. Operator, please open the line for questions. At this time, I would like to remind everyone, in order to ask a question, press star, then 1 on your telephone keypad. Your first question comes from the line of Tami Zakaria from J.P. Morgan. Your line is open. Hi. Good morning. Thanks so much for taking my question. My first question is, it seems like volume in the Americas was down in the quarter, about 3%. Could you expand on that a little bit? What drove that, and what are you seeing now quarter to date? Good morning, Tami. Thank you for the question. The first aspect to answer your question is we actually performed as we expected in the Americas. We felt that we had a really strong performance in the quarter from a margin perspective. We made great progress with some of the initiatives that I spoke about, which was around creating new channels, driving better equipment sales, continuing to win our share of wallet with our existing customers going forward. We did have a year-over-year comparable issue. If you remember from my call last year, the Americas business actually grew 31% in Q4 of last year. We're also running the playbook around our product line rationalization, which is really the 80/20 strategy. For us, what we find in North America and South America is that we're right where we wanna be. We're positioning the business to be less cyclical, better margin, and a better profile for long-term growth. Really thrilled about the work the team is doing to set ourselves up to sell more equipment, a better process automation in the market. We're off to a good start in Q1. Looking forward to how the business performs in the year. Got it. Thank you so much. One more from me. Can you remind us which of your key end markets, you still see sort of volumes below pre-COVID levels and hence you expect, you know, some sort of recovery in the next couple of years? We were really encouraged by how the emerging markets performed. I sort of highlighted in my commentary that we really were thrilled with how the business in India, which, as you know, is a public company and is doing quite well, along with the Middle East business performed. We really saw some really emerging shoots, with a broad-based recovery and sort of activity above sort of COVID, pre-COVID levels, in the emerging markets. We're seeing the auto market recover in Europe, giving us a bit of tailwind as we finish out Q4, and we've started off nicely also in Q1. In the North America market, we've seen sort of ag and general industry continue to be strong, where we are seeing, and we've been reading about the same, is that the retail space is seeing a bit of a weakness on that particular front. As I've mentioned before in some of my commentary, that we're new to that space, so that every dollar of sales that we get is actually accretive to us. Really excited about what that drives for ESAB in 2023. Got it. Thank you so much. Your next question comes from the line of Nathan Jones from Stifel. Your line is open. Good morning, everyone. Morning, Nathan. I'd just like to pick up on part of your answer to one of those questions there, Shyam. You talked about product rationalization through the use of 80/20. Maybe you could give us a bit more color around what's going on there. I know 80/20 is somewhat of a, you know, a new initiative for ESAB. What kind of impact that could have to the sales number and what kind of impact that could have to the margins over the next few years? A couple of aspects, you know, and then I sort of ended my call by stating that, you know, we're exactly where we wanted to be, positioned to invest in the things that we believe creates long-term value, for all of our stakeholders. 80/20 as an initiative, as you know, takes a bit of time to gain traction. Nathan, you've been around this a while, really thrilled about what the North American team was able to do as we finished out the year. The biggest portion on that exercise is that it's not just a pruning exercise, it's also a growth exercise as to where you wanna see your business grow, where do you wanna add value to your customers, and where you see yourself creating a significant amount of efficiency within your shop floor and your facilities. What I'd say to you is that we're in the early innings on that particular front. I expect us to be in the mid-innings as we go through 2023 and really drive significant value as we get into 2024. As we sit here today, very confident about the goals that we set of creating a 20+ EBITDA% business at ESAB. We think 80/20 is a big part of it, along with the mix change that we talked about to gas control and equipment as we go through the next couple of years. You know, we know exactly what we need to do. We've been talking to a few people that have done this in the past. We have a roadmap to get there. For us, it's about reaching the task of 20 and then taking it up a notch from there. Great. Thanks for that. My follow-up question is gonna be on price cost. Can you talk about where you ended the year on price cost from a dollar basis? I assume price cost was probably dilutive to margin, so if you could give us the impact for that. The outlook for 2023, where you expect to be on price cost, as we go forward here. Thanks. Nathan, as we've talked about before, we've built some very strong processes around the management of price, and ensuring that we've got a good visibility of what's happening on the inflation side. We've continued to, you know, play that playbook during 2022. As we exited, you know, the year 2022, we were price cost neutral. As we step into 2023, we are continuing to see inflation across the world. We are in certain pockets continuing to go after price to cover that inflation. Our assumptions in the 2023 guidance are that we will be price inflation neutral. Yeah, I think Nathan, on that front, one of the things that we've proved to ourselves over the last three years is our execution skills on it, whether it be related to inflation or FX. I think that stays solid within the DNA of our business, a really strong EBX process. As you know, as we look out into the horizon, we always expect to be price cost neutral. We've got some activities that could end up being showing a bit of favorability, but otherwise very confident in how we've set the business up. Kevin, when you say price cost neutral, you're talking on a dollar basis, correct? That's correct, yes. All right. Thank you for taking my questions. Thank you. Your next question comes from a line of Mig Dobre from Baird. Your line is open. Thank you. Good morning. I want to follow up on this price discussion. You know, one of the things that we're consistently hearing is that lower steel costs are starting to impact many of our covered company P&Ls. I guess I'm curious how you see that dynamic playing through to the consumable portion of your business, if there's any difference between first half and second half of 2023 in the way you kind of frame your pricing outlook. If you are able to hold price positive, what gives you that ability in an environment in which, you know, steel prices are retrenching a bit? Good morning, Mig. Great to hear from you. Let me start by saying we have seen steel prices abate a bit, but they've, for the most part, been stable. In some regions, there's still some amount of volatility and inflation on steel prices. It's not a broad-based retreat on steel prices across the globe. You know, to answer a second part of your question, which was, hey, you know, in the past, what we've had is the ability to be able to hold on to price as commodities have abated. That is again, our intention this year. So far, the market continues to be rational. Obviously our intention is to hold on to as much of that price on the way down as we possibly can. On, on the point around, you know, whether we see the second half, let me hand it over to Kevin, and he can sort of talk to you how we've sort of planned our pricing, at least in the guidance for the second half. Yeah. I mean, our, in terms of comps in the first quarter and first half of the year, you'll expect, you know, higher price, you know, year-over-year. The second half of the year, you know, we are expecting to go for some price, but there'll be less price in that second half of the year. I think the thing, you know, that we've proven out of the last few years is no matter what happens on the inflation side, we'll respond to that with price. We have extremely strong, you know, processes today within the business. Regardless, you know, if we do see more inflation, we'll go for more price. If we do see inflation abate, we'll try to hold on to as much price as we can on the way down. Then to answer a bigger piece of your question, where you talked about how is it specifically impacting our consumable business, what we find is that there's other inflation that's out there, some of it associated with energy, some of it associated with the indirect pieces of it that allows us to continue to hold on to some of the price in spite of, you know, some of the steel or raw material costs as you talked about going down. We see, you know, we've always liked the neighborhood that we're in on that front, Nick, and I know you and I have talked about that in the past. So we continue to see the opportunity to be able to hold on and continue to push price into the market in case there's inflation-related activity out there. Okay. Understood. If I may follow up then with a question on volume in your APAC segment, 7%. You know, frankly, this was a lot better than what I was guessing. Can we get a little more color here? You talk about Middle East and India being strong, maybe what those regions contributed to this number and maybe how Europe has progressed. Yeah. As I mentioned earlier, our playbook on all of this is actually quite simple. We have a really strong process around our sales growth plan. We create really strong territory plans. We create regional plans off of it, and then growth bridges within our business. What we've seen over the last couple of years is our sales teams really inculcate that into their DNA and drive that as we move forward. When you look at our EMEA and APAC business, we did see a lot of strength in India. The same things that we've spoken about in the past, Nick. We've seen investment in infrastructure. We've seen investment in ag. We've seen investment in renewables, and then also investment in LNG and oil and gas. What you're seeing is that India is sort of benefiting in general, for the general industry rising, especially ag and infrastructure, the Middle East on LNG, oil and gas, and investments. What I call in the Middle East, more slightly so that gives us a lot of confidence, is the fact that it's a steady investment. It's not been this sort of massive investment upfront. It's been a steady state of investment within the Middle East region across all geographies there, that's driving for capacity improvement, especially as it relates to LNG, and processing of crude oil. We really like those two spaces. Europe, I mentioned it briefly in my commentary, earlier. We're seeing the auto market rebound, and then just the market being resilient. That's probably the best word that I could use for Europe. It continues to be resilient with some auto business coming back, a strong focus into renewables. The other piece that I'm really proud of our team on is that we had a chance to visit with a couple of customers this past week, and we're looking at building partnerships where we're providing digital, consumable, and equipment solutions to our customers, creating a full workflow solution set. That's gained traction, giving us confidence about the mix change that we've talked about, creating with the ESAB, where today we're at about a 70/30, and we'd like to continue to improve that over the next three to five years, to get closer to 60/40. We're really pleased about our initial onset, how our sales teams have approached it, and more importantly, how the customers have engaged with us, in that sales process. Okay. If you'll allow me one final one, maybe this one's for Kevin. How are you thinking about working capital in 2023? You hinted at additional room to work down inventory. As you're thinking about free cash flow, how would you frame your leverage and the way you're kind of looking at deploying capital, if at all, for 2023? Yeah. Firstly, you know, I think Shaym already mentioned it as part of his part of today's presentation. We do still see opportunity on inventory. When we look at the DSI, we have certain parts of our business where we believe we are, you know, in really good shape, but we have other parts of the business where we believe we have, you know, opportunity to improve. Certainly as part of our key plan for this year, we have targeted to make further strides in, you know, further reducing our inventory levels. You know, you'll see more to come on that part. In terms of, you know, in terms of capital deployment, we're gonna continue to be disciplined in our capital deployment. You've seen with the acquisitions that we did in 2022, we funded that out of the free cash flow that we generated, and we'll continue to manage our leverage within the 2-3 times range. We'll be focusing on bolt-on M&A, so smaller acquisitions that will, you know, immediately be accretive and don't require a great deal of cash to fund. Yeah. I think the way to think about that one, Nick, is that what we have done today is created an optimal inventory state for each of the regions and more importantly, for each of our facilities. Through our EBX process and what I talked about is strong visual board, strong daily management is to manage our plans to achieve or create a glide path to achieve that optimal inventory level. Kevin and I, you know, something that Kevin has done incredibly well since he took over as our CFO is manage our cash. I'm very confident between our EBX process and the processes that Kevin has put in place in terms of his weekly and daily management on cash that we are in a strong position to continue to deliver on our commitments on that front. Okay. Thank you for the color. Your next question comes from the line of Chris Dankert from Loop Capital Markets. Your line is open. Hey, morning, guys. I guess looking at the 2023, you know, organic sales guidance here, can you give us any detail, you know, Americas versus international and maybe just kind of how you're looking about Europe in, you know, specifically in terms of growth in 2023 here? Yeah, we haven't broken that out yet, Chris Dankert. Let me sort of give that a little bit more consideration and get out. In general, you know, it's still early in the year and best to probably think about both regions performing at similar levels as we at least get off the get out of the gate. Very soon it'll be the second quarter, and we'll be able to give you a little more color on that particular front. As of right now, probably best to assume that both businesses performing at similar levels as we exit. As I mentioned earlier, we're off to a good start to Q1. Again, in just about eight weeks we'll be out talking to you about the first quarter, so we'll be able to give you more color. Understood. Sounds good there. Forgive me if I missed it, but, you know, kind of circling back to Swift and Therapy Equipment here, is the sales contribution similar for each of those businesses? On an EBITDA margin basis, how do those kind of look versus company average here? Yeah. I think we sort of mentioned already we haven't given individual sales numbers, but I know it's in the back and you can sort of pull those numbers out. $20 million is the total impact of those two businesses for the full year with Therapy Equipment being accretive immediately. I am very confident that Swift-Cut has a really strong game plan, but the gross margins are accretive today, and we expect EBITDA to get accretive as we finish out the year. Got it. If I could sneak in one more, maybe this is more for Kevin as well. You know, again, given some of the more uneven macro headlines, and you highlighted the 2-3x debt leverage being a comfortable range, I guess heading into, you know, a little bit of a cloudier macro, does that change, you know, where you feel comfortable in that range? Or just any thoughts as we think about, you know, leveraging cash deployment going forward? The one thing, Chris, that ESAB's proven is strong ability to generate strong, you know, free cash flow. As we step back to during COVID, we actually generated over 130% cash conversion over that period. Given we're short cycle, we generally cycle down our inventory pretty quick when things turn. That gives us a lot of confidence in terms of our abilities, strength of our balance sheet to, you know, go through any type of debt that at this point we don't see happening. Yeah, but. Gotcha. Understood. Maybe to highlight that, I think the view for us is that we wanna stay within that 2.5-3 range and stay disciplined. The great thing about the acquisition strategy that we have and the funnel that we have, nothing sort of is out there that pushes us to move those targets. We're very confident that we can create, be a compounder, create a really strong global leader in gas controls, strengthen our FABTECH business, and stay well within that range of 2.5-3 in the foreseeable future. Great. Thanks for the color, guys, and then best of luck in 2023 here. Thank you. Thank you. There are no further questions at this time. Mr. Mark Barbalato, I turn the call back over to you for some final closing remarks. Thank you for joining us today, and we look forward to speaking to you on our next call. This concludes today's conference call. Thank you for your participation. You may now disconnect.