Enerpac Tool Group Reports Third Quarter Fiscal 2024 Results

Third Quarter of Fiscal 2024 Continuing Operations Highlights^*

• Net sales were $150 million, a 4% decline year-over-year, due to the disposition of Cortland Industrial
• Organic sales increased 1.2% year-over-year^**
• Gross margin expanded 200 basis points year-over-year to 51.8%
• Operating margin was 22.2% and adjusted operating margin was 24.6%
• Net earnings were $23 million, or $0.41 per share, and adjusted net earnings were $26 million, or $0.47 per share
• Adjusted EBITDA was $40 million, an increase of 6% year-over-year
• Adjusted EBITDA margin was 26.4%, an expansion of 240 basis points year-over-year
• Narrowing full-year organic revenue growth to 2% to 3% and raising the midpoint of adjusted EBITDA guidance

^{*This press release contains financial measures in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) in addition to non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the comparable GAAP measures are presented in the tables accompanying this release.}

^{**Organic sales, formerly referred to as core sales, represents net sales excluding the impact of foreign exchange rates, acquisitions, and divestitures. A reconciliation of organic sales to the comparable net sales is presented in the tables accompanying this release.}        

MILWAUKEE, June 24, 2024 (GLOBE NEWSWIRE) — Enerpac Tool Group Corp. (NYSE: EPAC) (the “Company” or “Enerpac”) today announced results for its fiscal third quarter ended May 31, 2024.

“We were pleased with our continued progress in the quarter, particularly on capturing further margin expansion as we focus on driving enhanced operational efficiency and SG&A productivity,” said Paul Sternlieb, Enerpac Tool Group’s President & CEO. “While we experienced sequentially slower growth in the third quarter, we believe we are continuing to outpace the soft general industrial marketplace. Moreover, we continue to make solid progress toward our long-term financial and strategic objectives.”

Third Quarter Fiscal 2024 Consolidated Results Comparisons

Consolidated net sales for the third quarter of fiscal 2024 were $150.4 million compared to $156.3 million in the prior-year period, a decrease of 3.8%. Organic sales, excluding the disposition of Cortland Industrial and the impact of foreign currency, increased 1.2% year-over-year, with service revenue growth of 7.3% and flat product sales. Net sales growth for the Industrial Tools & Services (IT&S) reportable segment was 1.3%, with organic sales growth of 1.8%, partially offset by a year-over-year decline at Cortland Biomedical, which comprises the Other operating segment.

Gross margin expanded 200 basis points year-over-year to 51.8%, driven by benefits from pricing actions, a favorable sales mix, and the disposition of Cortland Industrial. Selling, general and administrative expenses of $43.7 million declined $7.4 million year-over-year because of lower ASCEND transformation program expenses and a continued focus on managing discretionary spending. Adjusted SG&A was 27.0% of sales, down 50 basis points from 27.5% of sales in the year-ago period.

Operating profit increased 31% year-over-year to $33.4 million, with an operating profit margin of 22.2%, up from 16.3% in the third quarter of fiscal 2023. Adjusted operating profit increased 9% to $37.0 million, with an adjusted operating margin of 24.6%, a 290 basis point expansion over the prior-year period.

Third quarter fiscal 2024 net earnings and diluted EPS were $22.6 million and $0.41, respectively, compared to $17.0 million and $0.30, respectively, in the year-ago period.

Third quarter adjusted EBITDA was $39.7 million compared to $37.5 million in the year-ago period, achieving an adjusted EBITDA margin of 26.4%, up 240 basis points from 24.0% in the third quarter of fiscal 2023.

Net cash provided by operating activities was $30.3 million for the third quarter of fiscal 2024 as compared to $17.3 million in the prior-year period. The increase in cash from operations was primarily due to lower ASCEND transformation payments as well as higher net earnings. In addition, the Company continues to drive improvements in working capital management and inventory efficiency.

_{⁽¹⁾Excludes approximately $1.5 million of restructuring charges and $1.1 million of ASCEND charges in the third quarter of fiscal 2024 as compared to approximately $1.1 million of restructuring charges and $2.5 million of ASCEND charges in the third quarter of fiscal 2023. The nine months ended May 31, 2024 excludes approximately $4.1 million of restructuring and $2.9 million of ASCEND charges in the third quarter of fiscal 2024 as compared to $4.6 million of restructuring charges and $5.8 million of ASCEND charges in the prior year period.}

IT&S Results Comparisons

Third quarter fiscal 2024 net sales for IT&S were $145.9 million, ahead 1.3% year-over-year with organic growth of 1.8%. Organic growth was driven by strong performance of service revenues. The segment’s operating profit margin increased 300 basis points to 28.1% and adjusted operating profit margin improved 230 basis points to 29.9%.

Corporate Expenses from Continuing Operations

Corporate expenses were $8.9 million and $12.7 million for the third quarter of fiscal 2024 and fiscal 2023, respectively due to lower ASCEND-related charges during the third quarter of fiscal 2024. Adjusted corporate expenses⁽²⁾ of $7.9 million for the third quarter of fiscal 2024 were flat compared to the prior year.

_{⁽²⁾Excludes $1.0 million of ASCEND charges and minimal restructuring charges in the third quarter of fiscal 2024 compared to $3.5 million of ASCEND charges, $1.1 million of restructuring charges, $0.2 million of M&A charges, and $0.1 million of leadership transition charges in the third quarter of fiscal 2023.}

_{^*Calculated in accordance with the terms of the Company’s September 2022 Senior Credit Facility.}

Net debt on May 31, 2024, was $63.3 million, resulting in a net debt to adjusted EBITDA ratio of 0.5x. The Company repurchased 71,536 shares of its common stock in the third quarter of fiscal 2024 for a total of $2.6 million. There are approximately 2.9 million shares remaining under the 10 million share authorization announced in March of 2022.

Outlook

The Company is narrowing its fiscal 2024 guidance, projecting organic sales growth of approximately 2% to 3%. With a $5 million headwind from new foreign exchange rate assumptions, that translates to a net sales range of $585 million to $590 million. At the same time, the company increased the midpoint of adjusted EBITDA guidance, projecting a range of $147 million to $150 million based on better-than-expected margin performance. Free cash flow guidance is unchanged at $60 million to $70 million. The updated key foreign exchange rates and other guidance assumptions are included in the presentation materials accompanying the earnings webcast.

“Enerpac’s continued success across our strategic and operational initiatives is supporting our growth and profitability objectives and advancing our position as a premier industrial solutions provider,” concluded Sternlieb. “The benefits of our transformational ASCEND program and our focused growth strategy, combined with our strong balance sheet, are the foundation of our shareholder value creation strategy.”

Conference Call Information

An investor conference call is scheduled for 7:30 am CT on June 25, 2024. Webcast information and conference call materials, including an earnings presentation, are available on the Enerpac Tool Group company website (www.enerpactoolgroup.com).

Safe Harbor Statement

Certain of the above comments represent forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. In addition to statements with respect to guidance, the terms “outlook,” “guidance,” “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with such statements, risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements include, without limitation, general economic uncertainty, market conditions in the industrial, oil & gas, energy, power generation, infrastructure, commercial construction, truck and automotive industries, the impact of geopolitical activity, including the invasion of Ukraine by Russia and international sanctions imposed in response thereto, as well as the armed conflict involving Hamas and Israel, the ability of the Company to achieve its plans or objectives related to its growth strategy, market acceptance of existing and new products, market acceptance of price increases, successful integration of acquisitions, the impact of dispositions and restructurings, the ability of the Company to continue to achieve its objectives related to the ASCEND program, including any assumptions underlying its calculation of expected incremental operating profit or program investment, operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, risks related to reliance on independent agents and distributors for the distribution and service of products, material, labor, or overhead cost increases, tax law changes, foreign currency risk, interest rate risk, commodity risk, tariffs, litigation matters, impairment of goodwill or other intangible assets, the Company’s ability to access capital markets and other risks and uncertainties that may be referred to or noted in the Company’s reports filed with the Securities and Exchange Commission from time to time, including those described in the Company’s Form 10-K for the fiscal year ended August 31, 2023 and most recent report on Form 10-Q. Enerpac Tool Group disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

Non-GAAP Financial Information

This press release contains financial measures that are not measures presented in conformity with GAAP. These non-GAAP measures include organic sales, EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted earnings from continuing operations, adjusted diluted earnings per share from continuing operations, adjusted operating profit from continuing operations, segment organic sales, adjusted operating profit and adjusted EBITDA, adjusted corporate expense, adjusted SG&A expense, free cash flow and net debt. This press release includes reconciliations of non-GAAP measures to the most comparable GAAP measure, included in the tables attached to this press release or in footnotes to the tables included in this press release. Management believes the non-GAAP measures presented in this press release are commonly used financial measures for investors to evaluate Enerpac Tool Group’s operating performance and financial position with respect to the periods presented and, when read in conjunction with the condensed consolidated financial statements, present a useful tool to evaluate ongoing operations and provide investors with metrics they can use to evaluate aspects of the Company’s performance from period to period. In addition, these are some of the financial metrics management uses in internal evaluations of the overall performance of the Company’s business. Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies.

About Enerpac Tool Group

Enerpac Tool Group Corp. is a premier industrial tools, services, technology, and solutions provider serving a broad and diverse set of customers and end markets for mission-critical applications in more than 100 countries. The Company makes complex, often hazardous jobs possible safely and efficiently. Enerpac Tool Group’s businesses are global leaders in high pressure hydraulic tools, controlled force products, and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin. Enerpac Tool Group common stock trades on the NYSE under the symbol EPAC. For further information on Enerpac Tool Group and its businesses, visit the Company’s website at www.enerpactoolgroup.com.

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Contact:
Travis Williams
Director of Investor Relations
+1.262.293.1912

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