Enerpac Tool (EPAC) 25 Jun 242024 Q3 Earnings call transcript

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

As a reminder, this conference is being recorded June 25, 2024. It is now my pleasure to turn the conference over to Travis Williams, Director of Investor Relations. Please go ahead, Mr. Williams.

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

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

Enerpac's and slides on of the Investors will be today's Our in call section. recording available a 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 Paul. will it I over turn to

and good Travis, Thanks, morning.

We our operational SG&A productivity. continue we particularly ability progress to strategic capture efficiency and expansion pleased to enhance with further the we quarter, made in the margin be as

a in the to continued quarter we the we we sequentially outpace XXXX, While growth marketplace. third believe industrial slower fiscal of have soft general saw

toward a and we solutions objectives is Enerpac progress demonstrated and solid of our Moreover, premier long-term positioning financial continued provider. industrial the

Let the and year third full our our refined Shannon quarter guidance. to me to call performance turn review over

geographic end about speak some e-commerce. color on provide exciting targeted will our continued growth I'll Then in innovation and I our on additional markets. also progress Shannon? vertical our trends,

quarter-to-quarter shortfall on by X%. was with more revenue, X% a IT&S, Product revenue Paul. strong fluctuate a growth delivered modest X.X% in impacted and of region. HLT gain was and project Thanks, Asia based organic revenue a challenging or backdrop, year-over-year With the Service in revenue Services & our growth environment in which can timing expanded the Pacific industrial Enerpac quarter. business, still Industrial in Tools

line our by performance discuss, geographic region. will varied Paul top As

partially year-over-year Cortland by offset decline IT&S at XX% was growth Biomedical. a

in organic X productivity. year-over-year. overall increased operating Industrial continued such, basis, reflects impact sale fiscal progress foreign we've sales for declined divestitures year-over-year. and of excludes improving X.X% XXXX, Slide made exchange, company the the SG&A of net X.X% Due sales Cortland the late in total which on the to and an As the efficiency

gross The and improvement was XXX third mix transformation points as favorable a Industrial. the sales disposition the benefits Cortland expanded actions, ASCEND year-over-year of quarter, program basis pricing In a margins well driven operational to as related by to XX.X%.

benefit forward, in lean we chain Looking expect supply country additional manufacturing and operations, sourcing. initiatives to low-cost from our rationalization

Similarly, efficiency. Adjusted expense, which we that onetime SG&A ASCEND year-over-year. for continue excludes X% and to from benefit periods, both improve initiatives charges declined other SG&A

efficiencies, for improved believe basis As additional including a organizational service And rationalization, percentage and center further our XX.X%. leveraging improvement, sales, to of indirect points further are XX it spending opportunities we there operations. shared

in diluted operating from benefited EBITDA Adjusted basis, lower earnings X, adjusted from Turning which to a growth and and margins rate EBITDA $X.XX GAAP totaled continuing top gains count. effective quarter. productivity, in to On XX.X%. per from Slide a basis increased Adjusted operations line with XX% the and XX% improved EPS increased efficiency lower continued share share $X.XX X.X% a XXX both SG&A points tax year-over-year. to

$XX million continued and was to the improvement improvement third The ago related XXXX, compared year lower capital operations higher earnings, to period. cash management. cash in quarter due provided million fiscal In $XX working the payments net by ASCEND of in was

year-to-date IT&S X, As noted X.X% X.X%. on Slide organic increased year-over-year with ahead revenue

cash period. cash in free typically over keep Please margin generation year ago of an representing our a up EBITDA the is of our flow fourth increase Year-to-date, million, of XX%, XX% $XX largest XX.X%. quarter Adjusted we mind, generated is period.

of net million, EBITDA. leverage balance Enerpac's debt debt As we previously liquidity discussed, ratio X.Xx net remains At $XX resulting third the strong. sheet end the quarter, and adjusted of in was

create Total disciplined on capital enhance and strategy deployment returns shareholder a focused remain to We approximately liquidity was value. $XXX million.

XXXX fiscal $X now tightened Moving full $XXX on of headwind, assumptions range. million to a revenue net we the FX to and behind X have X% to and of million. now to new with of adjusted million year sales We roughly $XXX reflect our us, organic growth guidance. revenue X% we guidance With quarters anticipate

EBITDA, $XXX and adjusted EBITDA project full for we of margin As narrowed to $XXX have the adjusted XX.X% adjusted EBITDA to with new of to year. for the compared raised midpoint, The guidance $XXX guidance the million of range year million full the now we an translates million $XXX XX.X% previous to million.

of million. expecting of million $XX this spending year lower million, project the now to CapEx $X $XX guidance and Lastly, are CapEx to we million from previous $XX down

The headquarter driven With first a the our the the to the Paul. spend into half fall guidance of significant of portion back Milwaukee. All to mainly XXXX. With lower let scheduled by projection timing company of other fiscal unchanged. CapEx that, remains turn call me is relocations downtown now

of are X across rollout in in mixed. That we seeing Thanks, was our regions Revenue are activity users demand to the very ECX solid end benefit we our and pipeline the from opportunities. Shannon. by project-specific and from digits. Enerpac ECX program encouraged Revenue growth track with early the discipline Excellence, said, the on low in single focus the Commercial Americas. tools of us Americas the or down a gives generating

Americas. declined is to distributor growth the challenging Distributor revenue continue basis, cautious for low in digits. given near-term year-over-year in environment the Pacific On the the in at Asia full sentiment, the year low levels. industrial double region, anticipate region inventory revenue we a expected single-digit and In

we we can performance While continue in region. opportunities we the outsized certainly to believe capture growth were the in disappointed

which the is our region. sector In the of APAC markets third quarter, in mining in we experienced one end larger Australia, softness the in

or and weakness technology upgrading custom by more the the We're our that heavy addressing support region. in also issue product larger, lifting products. experienced expanding HLT coverage sales, and commercial We in specifically sales

identify closer engineering to large specification with drive We relationships are projects. construction and cultivating into infrastructure also firms, and

the distributor remains perspective we it adding drive appropriate while inventory focus are increased is we partners believe From in Finally, region, channel verticals. cautious. growth sentiment at our an new that on levels

we markets. had success HLT to in positive double-digit broad-based believe levels. a strong expansion. in is at We continue on region particularly enjoy several The strong normal low the note, very business. across were region projects the due large revenue channel distributor Of to quarter performance gains service with inventory as the note, a in On EMEA end

As earlier, revenue again Cortland Shannon quarter. third at noted Medical declined in the

shipments inventory. that the was on customer's replenish We the we resumed to and to quarter, customer hold are at that second capacity running in

demand On related experience utilizing certain Cortland the surgical other softness we continue in hand, products. to procedures to

this customers' medical certain products a not but for us our Importantly, market applications. for demand issue is and market-share-related end driven by rather

launch. business long-term and In capacity product expand we that That the add for we opportunities to to Cortland. planned said, orthopedic fourth for increase and bullish the new another we're market. both continuing addressable to outlook invest capabilities a see enter third continue the quarter, the to funnel, mid- qualification And quarter supporting with in completed our

strategy, we of of part growth vertical more about Rail, X-pillar Enerpac's key targeted have markets. and I'll those wind X As infrastructure, X today. MRO. industrial talk

we subsea represents immersed project front, that the tunnel Fehmarnbelt selected excited have spanning miles are Germany infrastructure of will construction. global Enerpac and project, Denmark largest been solutions hydraulic project. to the infrastructure as connect which the longest the On This XX part of

of of about I encourage weighing hydraulic of the selected video the YouTube to on were elements, products to customers scale another each you and massive a tunnel XX applying our critical mission-critical align in reliability our to address project. challenges construction tons. the for applications, solutions help XX,XXX It's where example are paramount. this yet complex technology safety concrete Enerpac out aspect precisely short check a

the wind the Regulatory miles of energy the we flange overhaul new more and project how market, example Regarding by funded. success our Energy grid, are new the eliminating planned lines to U.S. encouraged and And grid new wind power could tool alignment This thousands change Enerpac's electric easier Federal is rules TFA. high-voltage spur it development. that the to Commission and a product or to is of tower front, solar make add on one barrier of

TFAs tower design to the impact of to sections errors. misalignment manufacturing are used of mitigate designed wind for and specifically solve and towers

their in wind integrated third turbine and manufacturer and quarter, have of TFAs OEM major the of widely by safety approved features. another now a because employed compact, turbine usage Enerpac, TFAs Our been solution major

to addition onshore and of price inquiries to is all day world received catalog, over confirming excited the the one turbines. that were we just from this and installation their We for the offshore approval after this a product see critical

the enjoy front, continue innovation strong innovative On products. new to we market to Enerpac's reception

into April, we our portfolio, of important full In growing clear competitive sizes. advantages. introduced category and with market the adding of we've handheld important product wrench, this to a torque an includes entered rollout line entry the our range Moreover, first Enerpac's battery-operated

plus operational impressive the beyond at of battery-operated and entire across distinct points torque an feature products meticulous accuracy minus far Our calibration many their XX wrenches standard X X% torque competing of points, range. or

most significant is differentiator the of use. our ease perhaps tools, But

As products complex that reflected designed setup operate. that requirements rigorous Ready for configuration often in contrast and in have tools our to them many are make can competitive difficult features to our Torque, tagline, extremely Set easy

wrenches wind many including battery-operated of the end array broad is well ramping of torque our already Our a across with application segment. markets,

from lock At the the positive on innovation [indiscernible] same the time, been with and very portable our received customers. pumps XX-ton are this grit pleased fiscal and the by X introduced the marketplace. hydraulic we including XXX-ton we the have seeing are Overall, polar, year, battery-powered earlier well new the reception hydraulic products we progress program

have XX% digital revenue Finally, up as growth is in of is discussed, the one fiscal Americas. transformation. in To we XXXX, pillars Enerpac's e-commerce date,

for return and campaigns here. benefiting We our and advertising wind. ROAS, continue advertising rail from our to vertical targeted also We're products see strong spend, new or marketing investments from in outbound our on

XX we've fact, campaigns, leads. since generated nearly digital launching these impressions million X,XXX over and well In

Europe marketing live transaction before launched our flow our we've from promoting now and through countries. Even campaign, site quarter, Europe. we e-commerce third the digital In in are in seen XX also good

gain our of I'm efficiency a ongoing sales, tools that portion Enerpac's advance our growth proud represents performance relatively growth still e-commerce, new profitability meaningful product Moreover, provides e-commerce small a channel. fuel the direct marketing commercial and the is we gains into strong customer continue that insight While continued we and objectives. ongoing establishing initiatives, the overall including connection incorporate of valuable long-term to innovation, and product innovation. our and

hard team every work the and I my we'd be day. happen to every around take that, sincere all happy globe people their With it our our make it's that to our single want in And customers thanks serving day. questions. dedication to for express

comes line with of Instructions] Your Ross the William Blair. from [Operator Sparenblek first question

with quarter the Maybe off we for end year? the expectations the to volume of start during the could price just versus maybe outlook and

Thanks the say, we had in of for the Yes. Sure. combination quarter, mix. Ross. mix I a and would both a question, Yes, price

in range more low price from a because, we XX,XXX you as bit challenging I For they is little over comparison know, as sell us, can to SKUs. $XX volume millions. mean may

So SKUs overlap. the we is don't necessarily that any the in sell given lot of year, reality a same with

Some them are more of common.

Some are not.

our valuable not measure way to for So a volume of each is because growth lot are very a SKUs similar us other. and always substitutes for

favorable talk means effectively do in which quarter, And we about our But that we quarter. ticket more we So price did that mix expectation the higher going in items the and is I selling both here. mix. think have were forward

new and the the mix, and how on that SKU accretive? conceptualize product And overall your just I to contribution us index then products vitality expectation strategy? And going like relates mean, to all is then this these to maybe be rationalization that help are Okay.

sure. Yes,

I'd points as margin product a as is I to So innovation our referenced that And accretive for an from company. our identified we're problems the because tends customer really solving or say, really speaking, most to also customers. remarks, overall needs perspective, generally we're thumb, developing be margin what that are differentiated solutions are business general part, of in pain back accretive my innovation or the for very

obviously, So real pay for customers out with that. a need willing to these market good value And are there. products are

do we see margin profile. up, see reflected picks So the the certainly, volume that in we'll as leverage volume And those. from

As -- mean, an ongoing our we that's process. SKU as I rationalization goes, far

apply our to framework many an including to of continue product business, lineup. We aspects XX-XX this

number a last taken SKUs As X years. over the you we've out of know,

the single We at would that year. to roughly lineup. in And our yes, XX,XXX that's say that have add continue relatively every SKUs, our to but small still a does some comparison we portion look I innovation in

region, on your APAC decline. products just helpful. That's brand maybe in second Okay. new the And sticking the then launch and low double-digit very

how on mining that You can weaker noted Australia many update just going? but is -- you was an second of adoption provide brand

Sure. Yes.

on region. our pillars. the and brand. as growth continue execute have we very key our of that know, last So Asia you to second is Pac one our firm We growth in still utilizing opportunity belief brand a in strategy,

and good terms We Pac. sign-on ] of continue I Cendant to see product. our strategy for say, good traction brand the [ in distributor second Asia would market, and buy-in in of

despite that kind the I sector So in part was overweighed that APAC, or the we saw some from to lifting that technology we in impact continue referenced strategy significant from growth of on which of brand HLT that. mining of as execute we're really second by a it experiencing our in over heavy some and business. that also is Australia, lumpiness, country of the the just on the business

key in in market Having is growth more after and that, actions referenced my several said underway addressing opportunities as see really we those I getting potential what remarks, have there. we the

quarter? the to growth willing Yes. second frame And what you would like looked the in in that brand Paul, be

it's specifically starting it to we time. since haven't Yes. be over shared that obviously But meaningful growing I expect mean out smaller region. in brand. on But the just second we're do we details

have focused we with we Enerpac we brand the segment second strategy really effectively never really in brand. really, market have participated a targeting previously, at premium of the is meaningfully is call As the mid-tier said segment a which that position before, is essentially what

It that, as And perspective basis. is large segment market mid-tier from sizable. of as the believe dollar dollar that premium be a on segment a potentially very the we could

we have, there. plenty So room believe, we for of growth

from comes the question next of Your CL from Tom line Hayes King.

expectations? were could wondering, business changes line conditions as in saw discuss just the progressed? our quarter with was generally your maybe And I change overall you how you those

it's strong I think finish would that mean think -- I in I we say we general quarters, tend in our our I as quarters, to and a QX. Yes. saw

the that, say, us month, really I any within be beyond lumpy. fairly as So would for expectations, per think our I quarter, can

into quarter. would speaking, of So say, the much month-over-month as I conditions. we generally in kind too of But wouldn't played out read more expected sort I

the on we see that's QX is seen that went outperform market again, the dynamics. I, peers, softer have regional we we environment, And macro into of of the look industrial and the broader on But although environment highlight, remarks that the conditions. would that belief did call of but we're certainly detail industrial again, around our some and results broader other kind experiencing did our at kind

your stood up nicely X% Okay. know I anything lumpy but I as year-over-year far it service it in to revenue? a Great. tends -- out be mean, over really on nature, was was as it basis. almost

and of things. is say of is, definitely Yes. XX/XX of a Middle would our certainly bit it I year, but in last undertake East to seasonality, applying about business, that some talked mean service of more particularly, One framework may selectivity in the little kind say, I we've I would focused we X that recall on you projects we the and kind region.

of playing perhaps of amount good growth strategy trying we've of But business actively where kind importantly, lines service our us. as expected And is part say even would year-to-date, newer fair business. out cultivating a and the on fairly we've seen to been service differentiated so we that and we service execute behind probably some I that on as a focus on that's more been

gears Okay. Great. Maybe to the front. margin shifting

nice Another great run talk sustainability the any the you've that, and rate gross the of because you of job this just on had margin. a that provide can the granularity maybe kind quarterly on the of year. maybe about drivers on

would program. been terms the overall well. Yes, ahead I say, that's one the plan. mean, obviously, Ascend pleased of effectively progress. as impact program, a case ahead with the thanks. of margin only certainly transformation with enabler of potentially Send of And has growth the driver And key certainly, plan. We're the the but not overall in the I of year

really on by have gross I margin, think mean aspects. I driven improvement. been it you multiple has seen margin

Shannon logistics, driven productivity as our And SG&A, initiatives well we've pricing That's well. manufacturing, benefit. COGS, call the and improvement as on referenced as by remarks overall been et to as some in in efficiency on in right, the then remaining continued cetera, distribution, see

be sustain targeted to So is is able which to mix, We exactly margins. think it really those expect what do and to I see. a expected we

to expect we frankly, to And drive benefits time. additional over continue

see to think as at improvement continued all official comes of a executed we though of continue the SG&A. mentioned close have do And been benefits I in to and for that it of Ascend, not and even to opportunities substantial frankly, this in the date. program us several Shannon remarks, end COGS one fiscal of of is active initiatives drive a very funnel pursue in sort nearly an we them we to of have that the

the lot in So pipeline things we have remaining. a great of

that, add sourcing, important country spending can going just to that forward different and project opportunities going our those referenced is to continue very I low-cost improvement we I'd it's us. just evaluating how or rationalization continuous for whether where indirect And lower mindset be as are, through projects.

channel color. maybe Theirs great. the above I was a a was. talked bit heavy. That wondering you that average Appreciate in was the highlighted was are just quarter kind Okay. and last inventories. third maybe Americas I think -- We where guys quarter? the we of of And on bit we are pockets APAC

that where we Yes. don't And as in this see to would levels. any relatively we we the concerns pretty in point? normalized I in from inventories an remarks, anything elevated perspective I mean, be I think we to mean that much at effectively in expected the have indicate the overall said channel access data

Okay. Maybe X I if more, could.

clarification. a just -- one Just

new mentioned, I missed think the part. that sales for that region? adding APAC Paul, you you're that I partners. Was

is. it Yes, Yes.

either But certainly, caps our in talked APAC for Pac, the including some additional distribution the one cases, region. Asia that strategy, obviously, key we part or in earlier. is brand second coverage growth is we have aspect multipronged, upgrading that adding So about of rollout

pretty new nature. battery-powered in on just provide reactions maybe just your customer seems maybe lastly, color because some And rollouts, Okay. especially product be tools. then it on your to Maybe innovative

I significant pleased our X expressed of battery-driven the we're battery made. The with number battery launch in end who that excitement And of power super enthusiasm obviously, torque products. is pumps and about the wrench year. progress this earlier we've launched Yes, these Tom. of mean, users after the product third distributors absolutely, talked the a a customers, team have has our both in year. about you fiscal amount

differentiation, in on, significant torque these focused mind, in no me-too I the differentiation have we're of view and be spaces. Each these different. right? in our relatively player products, say, guess, including marketplace bear a in the to trying We're again, significant not pretty wrench wrench I'd is Torque battery the offerings

talked users on some So the those operation that frankly, and end particularly obviously, technical nature about of of the accuracy tool, very, But torque aspects for aspects. the important are the tool. the the I the of the call, very technical of the simple utilize

this in pick tools the just space of can press to really it up be operate. lot A Surprisingly, don't and you button. complex the

in so launches customer the and seen our we've receptivity good date. to product case, was But And response really a focus. that key to

fully -- those now? just those available are Are

Yes, they are. Yes.

them e-commerce buy site. them we our available through globally all have can point channel, enerpac.com our you So at distribution also of on certainly, sale our and for this partners

Research. line from of question next Steve from comes Argus Your the Silver

hoping EMEA. whether little you strength could basis, of growth a and APAC. IT&S I terms that's regional divergence of think about you've But discuss on In that a the already in had you sustainable? bit drivers other just discussed double-digit you hand, the the was on of

Steve, was I were I And business. of growth. double-digit the and low very for markets it broad-based in the growth, with think pleased EMEA end should overall or continued across double-digit very region, frankly, saw the scope growth we Yes, that and progress the really, the say. we question.

increasing I we continue this that confidence that to can sustain. gives is think us something

And seen -- of significant the that of channel focus. it's say our by extremely frankly, really market really, brand targeted would we've would success I EMEA And relationships we I or the driven some region I partner benefiting, in the by, think, date vertical say, have. in power the to strong

with call Europe. talked the I fact, them Fehrman In the project in X of belt mean, on the project, we about tunnel

obviously alignment of some been, wind Tower region, I and outsized those in our an the the with the driven the we've flange that had the EMEA early in tool And in tool in tolerance way, success have both sector, even wind. would tunnel alignment certainly, say,

pleased that to region. we be kind broad-based So in continue with the of performance

one I And last, helpful. if can. That's

X% You've revenue organic 'XX. was to through CAGR think projected, it X% growth fiscal I

softness that the seeing marketplace, that the the achieving you're With have prospects curious on if any for you objective. just in thinking industrial updated

Yes. Sure, Steve.

we've of point, to any financial this kind framework. made at our So not modifications longer-term

changes planning now our QX But we're on fiscal as think Thank and guidance that But next on Given no start call. growth about we're for we issuing again, we point, a plan, the ahead planning in to largely the and that the with phases earnings our perspective. budget our pleased in 'XX, or you. made we're this of margin we've progress from effectively outlook perspective fiscal 'XX front. particularly certainly our margin as at

closing session. Paul question-and-answer call turn some our for remarks. over will concludes back final That I now the to

Well, will joining the we XX. participating the again Please on XX, Stanley on Conference Conference Conference XX King Okay. September morning. us on and September August Seaport thanks in Ideas Laguna Morgan the Best note, this CL Annual Global be for

Travis be questions. any follow-up will to great see there. to as a always, we day. And Thanks, take so available you And hope have and

today's conference your Thank participation. concludes for call. This you

disconnect. now may You