Enerpac Tool (EPAC) 21 Mar 242024 Q2 Earnings call transcript

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

As a reminder, this conference is being recorded March 21, 2024.It is now my pleasure to turn the conference over to Travis Williams, Director of Investor Relations. Please go ahead, Mr. Williams.

operator. you, Thank thank Group's and joining for us Good quarter you fiscal Tool second XXXX Enerpac morning, for earnings Call.

today and and On Paul Principal call to company's the the results Financial Sternlieb, Officer. President Burns, Chief Shannon Officer; Executive our Interim present are:

in a measures. website Investors slides on and will available will of recording Our section.Today's call call today's be Enerpac's the non-GAAP reference

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

risks that Our include cause that comments latest business also turn subject will Paul. materially matters risks over I'll it our could statements results Those are be forward-looking in to SEC actual filing.Now to to include different. noted

seasoned that Shannon who like as we welcome industrial He we second progress, to improving good Moreover, and of serving a as finance the despite Enerpac macroenvironment CFO to or as full take our to in overall next I let fiscal Travis, we Shannon progress further as sector. the organic growth growth leads major solutions sales quarter Thanks, X% our we particularly continue organic made search broader the to the second continue performance, goals solid of and halfway revenue longer-term executive We remain to product process. Interim point growth make with pleased profitability.I'd industrial XX%, SG&A our margin Enerpac's And toward everyone. quarter the review on solid were growth achieve marketplace.At is our experience Enerpac level as continue the is Burns and and XXXX, productivity. call. we believe expansion decision the posted another and geographic key and our support quarter in business progress morning, efficiency operating advance office Enerpac's about we speak our segment leadership Industrial to to initiatives premier track in with brings few of financial a of Shannon will guidance. & a Services, outpace the EBITDA innovation the provider.Shannon? adjusted trends, will year IT&S from X% Tools other continues several corporations.I'll and then slowdown

quarter team Paul work business, by line Paul. a slightly mentioned, X.X% Service another our declined a in of Tools in specific in solid year and largely Services services. executed X.X% the driven revenue our growth enjoying & Industrial ago period, within onetime increase X.X% top product revenue year. projects from a decline Thanks, some prior with

XX/XX lines.[ higher our projects to at quality, growth XX% and on Biomedical. decline offset was by differentiated approach, continue In we focus a addition, Cortland more service through IT&S ] partially

of key finalize hold. we with on second end some shipments customer, concluded resumed As the and at temporarily commercial the negotiations shipments We quarter. the Cortland negotiations a were

demand softness Additionally, there certain to related Cortland surgical in some has procedures utilizing been products.

improvements we've X of an On the long-term midterm Cortland made X.X% declined softness.We the exceptional of divestitures promising organic the differentiated fiscal X.X%.Slide a the there's basis, improvement to offset excludes the the for the pricing well technology quarter, driving commercial However, sector.Due that driven expanded decline Industrial.Similarly, efficiency. second and demand on Biomedical Industrial SG&A as we improved and exchange, its funnel related basis of we reflects device of sales as by and continued excludes medical on company year-over-year both as was mix disposition Adjusted innovation, X% a expense, basis, in sales offerings ASCEND declined Cortland improving manage ASCEND for outlook and efficiency continue the year-over-year for favorable late foreign SG&A to Cortland XX.X% productivity. macro responsibly from sale remain margins the gross to onetime net total initiatives approximately of bullish our periods, year-over-year. the Cortland given other to to SG&A increased Cortland's operational in points charges from at to favorable and XXX with the the volume-driven The coupled despite actions sales trends the business discretionary continue the In operating aforementioned opportunities Biomedical. transformation margins which which the XXXX, benefit in impact progress spending.

gains compared was Slide tax in basis, operations second As guidance.In With expected, have net substantially.Turning lower the growth quarter as and to for incentive cash use primarily ASCEND from On by as transformation declined the the GAAP in to compared of onetime our timing XX.X% year-over-year. line earnings. improvement well $X the in fiscal the to as primarily and to increased second basis as higher charges range improved other due payments, the rate our in The the to year benefit ASCEND productivity, prior was provided to of of EBITDA the to per as continuing quarter. ago quarter diluted year by Adjusted top share [Indiscernible] share operations adjusted lower cash a X.X% SG&A compensation X. points tax EBITDA due XX.X%. XXXX, XXXX operating from to higher ASCEND and efficiency provided margins rate rate.The in quarter XXX both the tax of charges of million fiscal was $X.XX EPS $X.XX efforts count be higher in the was payments annual a by well totaled significantly was offset a of period. $XX million effective a lower earnings Adjusted continued $X.XX

In debt in the discussed, capital remains X.Xx adjusted at the $XXX At quarter, net million, have and liquidity and, strong. was particular, improvements debt Enerpac's was addition, Total in second liquidity management end working balance we from X.Xx of last approximately drive million. a end net $XX efficiency.As resulting EBITDA, down the of leverage quarter. of sheet in we inventory continue to ratio

said We remain disciplined we million. call $XXX to a up the on capital back to related facility M&A deploying that, let to we've the me focused have returns.With in credit turn Paul. accordion option request strategy the to as enhance an previously, Additionally, to

Shannon. Thanks,

regional the performance In quarter. growth the saw in a Americas, to low we single-digit Turning the IT&S. of

As amongst we cautious in we to prior said channel given growth partners. XXXX, our sentiment expect low the single-digit neutral Americas the quarter, the in in

with in quarter. inventory business we While and and service levels distributors, or our heavy strong are momentum.In starting above average funnel has business, solid and the the third a technology EMEA quarter into lifting the saw growth mid-single-digit backlog a the few the HLT, solid quarter region, a is going

our strength the in by MRO, particular the government engineering markets, enjoying are although and vertical strength construction We vertical revenue in remains single-digit investment our in driven targeted products infrastructure industrial enjoyed weaker region We sales across market. wind XX% the large direct sentiment companies.Distributor increasing trends is standard region projects general in cautious including to the with over in industrial inventory and decline approach and the The with quarter. Asia due growth appropriate, a low saw in Pacific for region. our

tracking discussed flow levels.On new generated elevated while the of development channel some HLT, very launch safe sentiment portable productive sales in is railcar of which pumps launched a meaningful addition a our well we without large our battery-powered be lock hydraulic Australia. The I'm generally with shaft way new ahead the disciplined, is vertical damage very and with albeit markets. for with was puller to the we quarter, by in innovation marketplace product included in of year portfolio to these of the process. are the to product large and to have remove can a pumps products key neutral competitive XXX-ton X maintenance. pleased which However, we pockets lumpy, Dealer being new believe quarter grip ago cautious, inventory in say a that customer-focused mounted clear front, Last down is provides our from received end period, components plan.This appropriate, we project sharply advantages that puller. a pleased are

puller way in more off-highway hydraulic involve pin dangerous a kits We pins and facilities.And mining, The hammering. XX-ton and pin Americas. lancing replaces remove and by methods series joint used force, that in PPH new in or pin launched manufacturing vehicles hydraulic torching, found the also on to easy using puller the equipment provide puller safe a

Americas. is new mission and of All Enerpac unique highly Enerpac's its hazardous second retired in Cube were problems.In Jacks and and complex, used jobs permanent or speaking customers to move. the application We This possible quarter, Excellence, the ability to rollout program the ECX another Space making support these efficiently.And the our safely in complex world-class of products were often of of example recently be critical the move at display the jobs, solve challenging California Enerpac's of to Center. Commercial help technology products of handle Enerpac's our Science Endeavor yet location Shuttle to began this we proud involved to

early our realigned on sales As coverage. to you we may force recall, optimize

We our room of compensation will the account optimize significantly including ECX potential sales playbook, also intelligence. for there our from but the systems terms process, CRM and and with regional improvement incentive to support to tracking.With a our structure forecasting proprietary financial to ECX, the improve and platform performance, significant with we for ECX. reward additional commercial is disciplined raises of believe effectiveness modified in bar tools business with and also integrate planning we and everything segmentation market

leading line overall better indicators on as overall improving business deepen we meaningful by rate. our conversion channel result, and in relationships step including expect sales a our in improving of a partners and We stronger commercial funnel As effectiveness end the and driving opportunities, win key growth and achieve with sight see this users. to our

rollout new underway and XXXX. plans Falls space by location follow.Finally, Pacific the of may collaboration new ability to a and have our the As to headquarters business strong for our from have to area remodel relocate approximately to district we Asia corporate many as you amenities, attract should and downtown our our as location Americas, Milwaukee vibrant announced inspire in retain website, rightsized I early downtown Milwaukee enhance on suit suburb innovation. Menomonee is XXX-person located seen will needs.With new local the mentioned, well be the EMEA our to proximity its with The talent and to regions workforce as in well top in

part to to are revitalization return excited of area. Milwaukee the a We downtown particularly and be of

work our and profitability every will to thanks I'd our with to workforce like serving to and of for customers take headquarters addition, beneficial level we'd to Enerpac.Speaking and my next the and of questions. be the happy move our deepest in our services their all growth Enerpac be world-class express and globe, that, In team products the around hard for taking financially day.With

from question Instructions] comes Hayes [Operator first Tom CL King. Our from

you opening yesterday, give in called out if could on activity? big was just us would I coming think kind helpful. wondering kind kind your of a you of discuss seeing slowing industrial activity you think I outlook industrial what of levels. a be QX what the that kind release and Maybe least I at Paul, the of of now? in saw out picture you're

Yes, that slow Tom. QX. think nice I organic growth a Thanks, QX. bit certainly Obviously, saw Sure. enjoyed in you in we sequentially, some here

data of kind sure pockets now we we're still certainly, that a and regions, generally would remains, I'd kind We've I we then see, And some are In reaffirming our that firm in kind is some not quarters. subscribe outlook new. own broader think saw slowness data of I across Enerpac, that's our frankly. signals. some think year. just still of our inventory. speaking, indicate reference market, marketplace, in cautious earlier more from for tone just our but some there market we comments then the some say, but did the quite for of of talked the are there the of there, of for we in cautionary several elevated We I'm there what bit there here full the remain about what broadly.So not mixed industrial distributors levels to that entirely in

year end the X% As guidance, you our can X%. organic full the see higher through close to of we're of the to growth kind first half,

to reason modify at so this point, that. we no And see

geographic make broad I I I single-digit Australian sure in it the kind I front, APAC then more of some the sounds was it Did It low demand. on maybe think it region driven on right? declines, And versus the to was right. customer change get that like just understood want the more --

Yes.

of our our referenced quarter Pac, we Asia We It lumpier, growth had in and our or still kind QX But That's the what would year nice Asia we saw in here XX% business, conditions the the Pac. think pretty pretty HLT basically market we I'd in last I tend for standard amount we aspect I heavy over of lapping of sales Pacific Asia good, decline, in what call that's have generally reasonable be call were sales in Asia actually do business. lifting does for capital growth we core strong a in products. in single-digit low region. some that HLT but equipment. the help to otherwise and say, drove Pacific.So see technology,

kind there your of the pillars, One, actually the wind? what see on you mixed seeing? little far growth ] of we as of a a our activity discuss some -- of messages to rail you're X Maybe challenge wanted more. seeing guys and of maybe bit just I couple -- levels is the think -- [ getting some are you what as

Yes. Sure.

the in add of to MRO. on select includes in of and say also sectors, feel rail probably for obviously, infrastructure continue we generally.I in key build-out funnel see are think fiscal drive promising of rail and X wind if customers broadly [ sector the engagement our a I the pillars of I remains that good investments, there there And We late them recovery. to our last kind some with months, sector, wind, see rail about that the Tools one in to the opportunities. new acquisition XX been -- to think portfolio. with given very year. wind I some ], I the very more our for temporal we very some one we continue of sector amongst focus OEMs slowdown point, our this space. our work a believe your a in do rail sector and shoots the given of over faced to turn, I'd the has the of in the still some rail ] in the operators.And call levels the is in including last I including launch still safety we We investments As although our X still rail the But and of on likewise, small innovation kind profile of infrastructure, of energy the We on energy sector, quarter. to of issues place that's the over that's wind that in the macro best rail last good you products take others, pipeline which, particularly and clean one but government transition demand conversations innovation remains. say The build that here to referenced remains.We think need with on in did think X The industrial set that to would mentioned, Track and technologies clean still verticals, growth the believe going address that's need. Class green in the of the we including fundamentals of forward lot [ today robust, in

remain doing activity in driving wind we're on And we we're sector. the doing and forward focused on the work so the very

your I I Maybe One, X down if more, revenue service could. year-over-year. was noticed

was Just timing -- seasonal issue? was believe -- go Was I a back wondering or QX I and what you'd] because [ think but didn't -- say that double a up that check, nicely. I

Yes.

timing Actually, our Generally with of we're in I to bit nice a speaking, is comments, quarter there business referenced entering think momentum our remains service backlog. this healthy. I in it, some we Tom. think

is say systemic specific our It opportunities about was where still we it's one where some to So saw I of particular anything regions more decline. than truly. only feel would in we good it are. But we

working this the also -- impact. And that Yes. some of we're our an mentioned XX/XX have and comments still philosophy, I through did in that quarter that

Right.

Research. comes next Our Argus question from from Steve Silver

on Congratulations It's great to see. expansion margin the continued momentum.

Following initial remarks. the the in up given the cited that one prepared questions, sector on in you of industrial slowdown the

as on to sense get looks sheet sheet? balance It you're play remaining balance the to that is under ratio. trying the target seeing Just a like the leverage how out

year. free for your guidance cash full reaffirming the flow You're

updated on you M&A might given macro get environment, Just thoughts trying any challenges? have the to the

team about well, leverage I bringing feel Yes, last from obviously, think continues Steve. execute sequentially the the responsibly. our our where Thanks, quarter, Yes. balance managing good landed we to down quarter. I in sheet

quite certainly healthy there. So

we're team to nice particular.I continues deploy today, and we sit I make our certainly think capital to with continue And further capital. positioned ability certainly think the perspective optimize opportunities on well year-over-year, and progress working well. inventory particularly inventory in from as where a capital we managing have to to

deployment, kind would CapEx balanced I maintained We remains here capital to business. priority allocation. and approach projects have of and in disciplined the Certainly, first capital say a

guidance to disciplined. comprehensive share strategic particularly to support that announced strategy and haven't linked repurchase is to returns sheet would we're and to well it. this the the bit perspective. opportunistically.But and financial and the And from to years our both And prior pretty progress to that boxes evaluate year markets.So have of got terms some work but good both again, really look we're the M&A process continue and we've good funnel that. say balance on point, check quantity internally, done to anything for our all opportunities remain of to we your focus certainly positioned. in we're are of a that, a shape well vertical Anything looking do on we about Our a in of very our front, quality is we continue we than we've work. we'll we of at And higher quite but Obviously, feel making date, of I'd at, things

of highlighted brand. if one quarter Last I you last the the Larzep one, rollout guys can. advancing And

order promising flow. new distributor deals cited You and some early some

front quarter? any on Just that update there's curious this if

sure. Yes,

parts those our the initiatives call we in is what of second essentially which key mid-tier brand of segment market, the really a one again, is growth second particularly So targeting initiative, driving markets functionality utilized -- offers.And own segment for the needs features, which of addressing and a a where a Pacific Enerpac need good really much so already brand, in smaller played. spot I Latin subset on generally the we mean, built we've more and that of of really is not mid-tier range It's a performance we're America, has we there space. the speaking, feel Larzep in premium the all that products. of and are not of player, market. certainly what SKUs with of Asia a but necessarily of of quality our historically Enerpac product, But the

far good. So been the has progress

already in have signed nice and and Asia there. America. network up Pacific Asia Latin some some progress sales existing also the utilizing We distributor getting distributors in some of We're Pacific

think And I'd the back step say exciting take for for roll to early so some It But traction. seeing again, it's early we're we thing though, when is out.I us, obviously good will days us. time believe view the our as of the analysis on is a those size market. basis segment do of tier regions roughly size and mid-tier the and premium the a dollar that from market, the same in we

So that some haven't [ opens participated historically for broader market nice TAM it to in. we ] capture share pretty of really additional a opportunity up us a

Paul over to I concludes like turn our closing comments. This question-and-answer Sternlieb the floor for to session. would back

thanks Well, us for again morning. joining Okay. this

Materials questions. Products there. the attending hope in Conference Bank Annual As & interested, And in We you June Global York you. see Buildings any will to be take Wednesday, we those available New follow-up to on Thank for X. Deutsche always, addition, be Travis Industrials, will XXth

This concludes teleconference. today's

time. you this your disconnect Thank may lines for participation. your You at