Enerpac Tool (EPAC) 20 Dec 232024 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Enerpac Tool Group's First Quarter Fiscal 2024 Earnings Conference Call.

As a reminder, this conference is being recorded, December 20, 2023.

It's now my pleasure to turn the conference over to Travis Williams, Director of Investor Relations. Mr. ahead. go please Williams,

Good Tool thank XXXX Group's operator. us Earnings for for Enerpac First morning, you, you and joining Call. Thank Quarter Fiscal

are Chief call Sternlieb, Colucci, the today present Officer. company's On to Chief Financial President Officer; Executive results and and Tony the Paul

Enerpac and the recording available a Investors the slides today's call in Our be section. will of on website

Today's call will reference non-GAAP measures.

yesterday. reconciliation measures in release issued You non-GAAP the to can of find GAAP a press

could cause Our noted also that to forward-looking business different. that materially statements in SEC filings. matters subject results comments are actual Those will include latest include be to risks risks our

Now to Paul. will the I call turn over

Travis, Thanks, morning and good all.

strong started on heels another with Following in fiscal quarter. financial fiscal of XXXX XXXX, we Enerpac's solid the performance

full and year the year will remain we guidance. While unfold geopolitical our full we the economic are fiscal affirming XXXX cautious as how uncertainty, given to

continued efficient, reflect growth organization our Our more Enerpac strategy the and business the with. transformation X-pillar that changes and results benefits across the easier to more program, making our do of clearly productive are ASCEND

can first year what to quarter referred previously was organic core you $XXX see X, revenue, we to million. X.X% period as from on ago up the revenue, As Slide

in EBITDA improvement fiscal million XX.X%. significant SG&A captured that, us and to adjusted enabling XXXX, we Moreover, the first With EBITDA adjusted expanded of margin efficiency. $XX to of XX% operating in quarter achieve an

of gains. by will quarter of introduce first market. I about our revenue estimates about fill year-over-year areas few details on positive and provide end exciting strategy review our performance Tony let I'll breakdown and Tony? about Then a geographic some our details the growth speak trends, the

and Thanks, morning. good

on now Slide We X. are

the XXXX. the of solid outstanding Cortland growth fiscal enjoyed industrial and the of quarter of in reflected EBITDA of line XXXX. fiscal expansion growth first in fourth As revenue year-over-year sale X% Paul business the said, Enerpac quarter Reported top

basis, exchange, foreign which revenue and the excludes On an X.X%. expanded organic divestitures impact of

comprised contribution a Service and of in segment, a well was in enjoyed volume organic as revenue a price and expansion Tools revenue X.X%, XX.X% positive increase product from growth segment Industrial the & mix. For as X.X% The services.

was related X.X% decline expected issue specific by Overall, in to customer Enerpac timing decline offset Cortland The some primarily was a programs. revenue growth Biomedical. a slightly

from gross Industrial basis to of success lean on benefited XX.X% margins standpoint, margins routes of operational optimizing price Gross focused Among and rates. and X, driven continued a quarter divestiture freight our excellence Slide from the we expense the initiatives, XXXX. also initiatives, On benefits. first business. renegotiating profitability XXX the This Cortland points expanded in fiscal by the was our improved of by

declined streamlining our down declined was initiatives period. and periods to the we back-office achieved adjusted certain SG&A expense, This optimization Similarly, organizational an both sales, our further XX.X% year-over-year, other efficiency. lower in by finance continue of IT basis, of all year offshoring functions. was XX% and structure SG&A sales onetime with which ago functions benefit and due charges of from to along On SG&A SG&A from ASCEND expense charges. XX% improved ASCEND from Adjusted that excludes benefit primarily X%.

to SG&A direction. As in we with our and goal spend have industrials, framework line move that continue said, is best-in-class our to we financial bring in

increased of period. from XX.X% X growth fiscal points, the margin basis top the margins recent with most and expansion, Adjusted quarter in EBITDA Slide to XX.X% both XXXX Turning EBITDA XXX to line adjusted year-over-year. expanded in XX% first

XX.X% tax year of but XX.X% XXXX more with and the $X.XX count $X.XX, adjusted normalized diluted in along compared the with totaled of the rate XX% with a compared basis, rate expansion, despite from quarter earnings EBITDA GAAP share in year-over-year to in Adjusted higher effective a first year. in continuing quarter. result a This increase On of prior primarily the EPS share was increased operations lower the ago a per $X.XX period.

We continue XX% in to full the the to to be for expect effective XX% rate range. year tax adjusted our

first the fiscal quarter payments XXXX, the operating higher cash the cash a timing bonus and fiscal bonus quarter. from XXXX, payment. related out In of $X the was the was of ASCEND cash use paid million, resulting second of In in

$XX On discussed, opportunistic as growth, of including X.Xx end net sheet share of drive adjusted in debt have the capital At investments we leverage repurchases. million, to support internal acquisitions, allocation the and quarter, liquidity a debt Enerpac's first Slide and our X, net strong organic balance priorities, ratio EBITDA. was resulting strategic

liquidity Total was approximately million. $XXX

up credit accordion to we an to $XXX facility the request the Additionally, option million. M&A have in

a acquisition exploring and place, As leader full-time with previously development in targets to while our adhering strategic criteria. actively corporate mentioned, financial we are disciplined

returned we repurchase board end, repurchase to authorization. of shares quarter, million quarter's shares. approximately about the share X through the X million $XX million against the During had we shareholders XX remaining At million

let that, With back Paul. me turn call to the

Thanks, Tony.

organization discussed XXXX We regions: call, Europe, and which has Middle includes forward. and as into additional we some X our synergies. fiscal Americas; The savings geographic cost cost as Africa; Asia well going our early Pacific. As synergies anticipate on EMEA, we streamlined East realignment year-end enabled revenue

we to cautious a see Americas, neutral continue sentiment to partners. channel the among In our

in channel wind, single-digit are broad-based believe across with Overall, perhaps strength We with appropriate and verticals a is few expecting XXXX. inventory construction, The rail. the we in in mid-single-digit first generally quarter low organic calendar exceptions. our experienced growth growth was

we region, high services, in growth and our In the organic EMEA, newly in growth products have digits. yielding combined top single solid line geographic

we discussed, the Middle service new While previously in as East, business offset than certain low-margin more projects. we with exited that

cautious. to sentiment dealer overall forward, Looking neutral is

a low plant especially The to investment periods. India. investment the of solid Asia in strong translate We're opportunities, encouraged by saw inquiries but and Japan, spend with should and pace which single-digit revenue associated growth order in power the quarter, growth, Pacific in subsequent in wind activity infrastructure in organic China, growth region

investors mix. that know interested we've greater as of gears, Enerpac's developed our market which estimate We participation end revenue by show market best we insight Enerpac's know, in growth on Slide our that Switching are you provides end, and vertical market, To into stability X. opportunities. diversified highly add end

the is our X gas, downstream, which general markets. you along are with see, oil primarily sector, and As largest end industrial can

to rail included category, As the fiscal our totaled X% it is XX% which sales targeted the XXXX. about Wind verticals, in generation in sector, infrastructure is power of in relates included category. a

The company's other shipbuilding, category aerospace, the automotive, and paper vehicle exposure military, to rescue. includes wood, and repair, marine, off-highway

color in on of to Pacific. expansion growth Finally, pillars: and I'd innovation two like provide Asia some our

with On with vertical our have markets. focused map reconfigured key we've and the process disciplined X over past development customer innovation needs X the align road we as new product mentioned, front, program and a years, our on

time rail, And wide we pumps battery-powered competitors Enerpac's the share oil we pumps, pumps are These battery competitive example, believe wind new or portfolio. applications recently X array are of used. of serving rounding launched pumps in from terms have For of capable out applications They sectors. currently speed, advantages clear these pump a run can portable best-in-class in across where capacity. and end MRO, and within advantages air being markets with take electric small cordless

these and perform detailed are to receive allowing service updates track customers Moreover, Enerpac CONNECT, equipped records. firmware product information, products with

wind as mentioned, we're power projects Pacific, excited I and Asia in plant infrastructure, the region. In about

the expressway. a bridge disruption jack-up a role prevented modular Lack Enerpac of Japan, shows a traffic removed the on for XXX-ton our in road slide units, runway the critical to extension. International the entire Airport of ahead at was use of equipment minimizing overpass Narita planned of used space One the mounted of thus customer self-propelled use the on remove Enerpac where the Instead, the overnight, bridge crane images removal. on JSXXX transporters bridge in

We're with with the also rollout of dollar segment several the our we size of roughly advancing which premium To we've targeting order early on mid-tier segment, untapped a are par second brand, offering relatively Larzep, activity. new market be distributors basis. date, at a and signed could believe up pleased the a

in new Asia Singapore added drive in region, brand to help distributors leveraging and we're demand growth. We've accelerate and also customers loyalty. And our the in Academy Southeast leaders new train build Enerpac to commercial

our is our regions, critical we know of other training penetration. engagements a component customer on equipment in from and As providing experience

can initiatives, our Enerpac benefits X we've performance, efficiencies. you and programs operating the our past over consistent years, the transformation strategy, capturing enhance from and from growth As to this see our implemented ASCEND quarter is

more We come as that work to are we there is to financial framework. confident long-term achieve our

industrial I'd our to open tools to the a making my business. are that thanks our questions, to the Enerpac global and customers workforce like premier to call service we and extend advancing commitment Before sincere their deep initiatives for for

Now we'd any happy be questions. to take

Tom [Operator today Instructions] question is from Hayes first coming Our from CLK.

it sounds bit. sounds on digits could little market the you the if you Congratulations give of up on like like were wondering was year. maybe the -- quarter. or more the It us Paul, I for in a Americas, conditions market color outperformed the the detail you a little bit mid-single like start

expectations you customers mentioned think market some can I as conditions it's for your wondering I color the single-digit any us largest just were your low there. that other give was the as growth year. of you region from

Sure. Yes.

new. mentioned I several 'XX. And kind low that prepared really their business quarters. remarks, growth calendar of that what generally cautious And of that. for talking We've outperform are in in hear partners channel think sentiment. from referenced did overall, to not is more my as I've that's neutral they for a -- we We probably been we about expecting single-digit

business our in globally it certainly is is in of strength that and the think very I Americas broad-based.

early I are quarters I significantly markets. that, bill. from become we're for Still say to U.S. bullish us will are think tailwind come expectations still wouldn't days But in that the of we've nice in our quite And diversified the a We in seen impact. years. here the yet and any quite coming what's meaningful end terms infrastructure about

So hear I the partners. of our sentiment think we channel from some remain optimistic cautious that despite where we

about gross margin that what trends, balance margin they was quarter-over-quarter us on Just certainly, several the probably then of rates that provide outpaced just as drivers as improvement? not out margin maybe -- should thoughts rate. as on you of color far margin trend granularity gross called there. touch then you you performance, the year. Okay, strong sustainability as fabulous. year start the Any certainly maybe Is any far of the just we expecting. that a something And could And of Tony, thinking that that? the And that through as on can much I for give any

first efficiencies through, other ] we [ of mix all, say margin, happy on initiatives. would factors. and I I saw We I products stronger improvement that QX. profitable we're more BSN with the Sure. pertains would a to several to that points also operational that XXX there. that say, the Yes. basis in we're very performance gross seeing have mean, of come certainly here

mix. and we rates profit we'll to some Gross growth our here But the as throughout different will investments initiatives year with through still capacity while needs and benefits also in fluctuate automation have well. through continue regional see other coming

mean, it is fluctuate year So here I throughout the would up and down will say. I what

Okay. we there anything year? Has years? bit Is Maybe speed anything about kind I still of changed far the go X if One, could. I'm to seasonality, on up as getting to previous as through a story. little the as more, that need think we versus

changes. of half we'll second to Still No, that versus continue no kind see. half first dynamic

Okay. me. I it. Maybe just one for last appreciate

talk as new like projects. maybe to pertaining a be but offshore be sounds I pause. on exposure kind can an that projects seeing some would It to about specifically your great. wondering any Or offshore projects, issue? be to may out seems just that wind called was wind provide that As I you moving some of we're just you wind. area Is far of you think lately to or maybe slowing that, if could stories color okay, those

Yes, sure.

market. So provided exposure more gen mentioned, that part that. for power us. is roughly The of we've end estimate We a by terms I XX% out, broken is of category color in a bit wind we show as our

we're market still is is still a wind significant view a overall sector. in very small relatively that and meaningful it but bullish revenue, growing on potential. So obviously the today, has our Enerpac still And part of

not onshore. it's We installations. still demand see If of offshore, it's plenty for

good, connectivity say, a have We I to both. would

So we're other, or not versus the overly offshore. X onshore reliant on

power wind In fact, the today. onshore up makes U.S. the bulk of market

what up will And from see research wind again. and on the expectations offshore industry based we ramp is experts,

over recent a sighting published, that of is some turbine decade, wind from and technicians Bureau the to occupation the Labor Statistics be will was there going of fact, fastest-growing service XX% employment increase next the statistics in U.S. the In article that

sector, long to energy. over I medium, for given I and just that. part to think play a about term point in meaningful the confidence just incredibly need the we're that us So And think the growth well another clean gives positioned in shift increasing that over around data the the short, the dynamics

Great. Appreciate jump the the in back queue. color. I'll

Larry Blair. De from next Your coming question William Maria from is

Just wind. -- maybe geographical like what mostly talk a Can are there outside referencing follow were up opportunities? on I the the about think maybe does of But that, domestic U.S.? look it you you the opportunities.

Yes. No, think a make few would I there. I points

across broad on call wind. So the whole, I first life off, have cycle would exposure we what

established have manufacturers turbine we their and O&M decommissioning and as turbines. of installation relationships work, operations as some So good OEM, maintenance wind well well even older are and as suppliers, or with of that key commissioning, folks and as doing ultimately,

about significant geographic a were looking have any U.S., in earlier I Europe part broad at other including parts of of and So say think that markets, the have relying but of my on in we in activity single market. And pipeline We're would comments I from not that we Asia. similarly standpoint, overly exposure. we're

good So we we in energy. just the parts have And wind, geographically. of for I given increasing in exposure think investment to different again, world clean see interest really broad-based shift the activity

makes sense. That Okay.

talked about you optimism most outlook. question, guess, I in of how think to about and the sort Well, APAC. orders some about, you is there's Second brewing your Europe talked and cautious growth

some you for terms the regional in give Can growth drill year? magnitude down more maybe and of

Americas out is to of can the mean, are. in channel. across I say, Yes. I Europe, by cautious, the we see of I the sort mean, region. haven't mean sentiment what I said and broken similar neutral would we think I actuals probably terms it you

for in. I think our to above this to pleased affirmed guidance mean go. reason year this So still to I at quarters delivered growth that full we've X ultimately, we but have organic quarter we're expectation we year, X% We quarter, differently don't our any X% point. X believe have the X.X%

we're of see where So being hear to just in of that sentiment XXXX, us mindful we'll take dynamics some I neutral we but channel. the cautious think from that

the XX.X% sense. Last tracking start to Makes adjusted year that Okay. with targets. question. on ASCEND in We're good Obviously, EBITDA margins. about

when I you ASCEND update, So beyond? And do update 'XX think might how and update, in get can we about guess? we just an

Yes.

a that with we're we So of pleased really perspective. have well have again, a margins expected through through and we the full the QX percentages in tracking ahead rest bit here the in margins that as year say, from have year, EBITDA schedule to the we're here on timings XX.X%. we're with guided in we some if Again, of benefits that with EBITDA performance coming the track would not, -- But line And we'll of what for bit I to perhaps least and that at in both here with we're ahead. well. with gross investments various making be, fluctuations

ASCEND So really more From through. perspective, to coming still an there are that that. initiatives see happy are

we our 'XX, of year ahead we schedule. we fiscal ASCEND achieved ended As last as a year, mentioned benefits

not the we're 'XX, here FY from excited tailwinds that initiatives executing but new that. in we're getting against. that really So Still only about

said call, we're breaking out in point. view not we just the benefits from the ASCEND as -- to as business has into really, our benefits this And migrated going last just a at comprehensive natural we're

come So And what -- with I'll but improvements say. is we're track on we to guided. what still

but active we're to still made. add much of improvement comment what progress think of initiatives a continuous only the yes, and got at It execute stages right. Tony my we're various I more would maturity. with And I framework. is, continuing funnel that But to pleased into Yes. very we evolves We're ASCEND, we've program our said he's

that. about So we feel good

for to But confidence fiscal to our around financial say, year, of -- would framework deliver framework on us that. QX that targeting increasing adjusted our that guidance 'XX. and this by XX% an able or certainly, not our QX given fiscal we're meet what 'XX, beat I gives revised last or about we've margin in ability point, likewise, remains EBITDA this And at

Next from Argus from Research. Silver question coming is Steve

the market oil a for of I wondering the exposure could So and if petrochemical you areas was little presentation largest as the end bit earnings company. cites expand and gas just to on this, that you curious to new Just upgrades mid? that and the compared also maintenance versus market's exposure business up mentioned as of in more primarily markets. terms downstream builds

a get how as that to think we to trying sense the should Just in growth market broadly. about end

think our down, I highs certainly, of predecessor our That would Yes, it market. the days, largest is say, considerably company. come from has Actuant I

will over that years verticals rail, wind. down our as industrial, come focused growth in around like not further, dollar percentage we basis, a is on expectation coming more and as Our drive but an the likely infrastructure, accelerated absolute

oil also what the sector of gas in we do It's area in little of and of to bit and the midstream. majority maintenance. today, tied a largely largely downstream But the that is

in So It's there. but maintenance not exposure I say, of what the assets. tied to would build-out existing on minimal do CapEx X, to is most we new obviously, is relatively

sector. and a cyclical overall say exposure I But that So gas certainly, that cyclical and our large, by oil sector. is the part of less is would

continue space. And some obviously, see think do the to so fluctuations, we're with what market we'll positioned but well given dynamics, that in we we

may. That's helpful. one more, I And if

the announced the views to core synergies can on Tools there rail the growth business? maybe speak Regarding and opportunity acquisition, you you perhaps your recently what see Track with

for it acquisitions what verticals, very We're case, rail. of towards absolutely. is Yes, are that focused complete in strategic. acquisition. it was linked this in first excited small, Certainly, to really our And doing material the we're not us, although it's that our

some creates acquisition. was our functionality space, us and it's end benefits key Track technology for in that interest very significant in the which, differentiated is, really importantly, that most the users part first exciting the for marketplace obviously, Tools And for about and

essentially our brand a speak. in working in we're very scale major on the sector that in focused existing customer small globally, we relationships it's and only and many given really in excited and our actively markets our is today presence we're Secondly, in markets, as ability to all business U.S., about of relatively what those that rail the although

of excited time. about overall as time, drive commercial of and synergies And improve the efficiencies So we're the out growth production product over cost over potential. we cost can the some frankly, of the some the

So it pleased but we're was the really early acquisition, progress we're days, a making. exciting with

the quarter as on Congratulations well.

Prestopino Gary from is Next coming question from Barrington Research. today

your question be Just at? building small to acquisition of markets? acquisitions companies a product a board on really quick that things looking specific of are you're your these are lot private to across Would say in pipeline. safe it they and Or that the the terms kind of are very

Gary. Yes,

size close I'll from types So and bit what go really to companies has. say we're I'd it's stay a just terms across board our the for to of trying what in our we're perspective, from -- that funnel a say of the back are looking knitting we've as looking technology say. here, We're We're or would then is that what our well. innovation discussing. been in that for us that I here help key looking And tuck-ins. targets vertical our expand help the product expand markets would for targets us

mean, targets, our in I in that's So funnel. on our what of we what and we're focused that's terms have

Gary. add And Yes. would to I that,

as quality significantly full-time we Our and development I fully about quantity, to dedicated say current ago that. on would who's brought now improved leader year corporate a a funnel, half both has

that or second small classify I as we would deals of have larger-sized funnel. the thing and both what say in kind medium I'd is

could asset them, be we things as we to different businesses. and to got as good, more But these and continue know meaningful yes, characterized on conversations So availability. many tend held have depend in kinds all there episodic privately be of kinds we've of

early outreach and got stage disciplined cultivation, identification transacting pretty target ultimately we've So to and deals. through integrating from a process

a your the to lastly, just at ASCEND program. prior this question, adjusted target. quarter, least was EBITDA then I And margin hit, Okay. It think you on close

of. that just lot a taken forward, productivity Going targeting fruit What margin from help the on mean, care to as continual to ASCEND drive even are has improvement, you control that would areas lower-hanging move assume maybe been ASCEND of further? I whatever. you the cost

helpful. expenses? it that, do bank to products, going still control what you you're can products? tightly to forward? the a on go give -- vision margins able where us really grow Is would program you that on SG&A higher-margin you Are So be Any through going going you're to

Yes, sure.

actively we productivity I a of there cost think referenced as efficiencies, are Tony more investments, opportunities automation, a earlier, From goods somewhat manufacturing ample to have in other through those. we're things. exploring we few perspective, drive and capital believe investment, still and

have drive work. have sourcing, supply say, more would definitely to we more sourcing. best we more are there complex and country in secondarily, believe opportunities chain cost I a still engineering We relatively still vendor consolidation, value opportunities

and look continue evaluate opportunities for footprint We there. to our

Tony say there's opportunities we've we've then we're yet been pleased greater best-in-class the made. side, what doing. SG&A to as And the I I high as his on And see more referenced we're we remarks, progress I still as over in drive there think industrials, with mean, relative efficiencies to would time

speaking, funnel. particularly there marketplace, driven, and would course, work if ultimately in pricing say, especially our would would what's expect of product it really I verticals I to on most our by benefits, be then, mix in is truly we that do margin say, in our which the innovation, accretive, core differentiated a be And the innovation. will we is our some and focus of generally especially

time. be should favorable that over all So

we Of course, some growth. reinvest to organic accelerated to may drive of choose that

expansion. will still So margin to bottom that opportunities not balance, all of see the we for on drop line. But

just the but last the next agree. we type of our over to that the the we well here really that terms there taking would really are level X mindset. And a ideation I a board, I Yes, that continuous have of pipeline did driving. years, and have initiatives across in there's more we are to improvement of a lot lot just and opportunities are add of we still as in this that opportunities here work moving

much. very you thank Well, Okay.

comments? does That our session. conclude you question-and-answer closing any you. further have Do Thank

joining us this thanks morning. again for I would to just like say

to everyone new Best a for any happy As and to a follow-up always, take available season wonderful Travis year. holiday wishes be questions. will

Thank you. today's That does teleconference webcast. conclude

You have your at time thank day. may today. participation disconnect your line We and wonderful a this you for