ENERPAC TOOL GROUP CORP Q4 FY2024 earnings call

• Financial Performance: Full year organic revenue growth 2.2%, adjusted EBITDA grew 8% to 25% margin. GAAP diluted EPS from continued operations was $1.50, adjusted EPS was $1.72. Free cash flow was $70 million in fiscal 2024, hitting the high end of guidance.
• Geographic Performance: Americas had low-single-digit revenue growth; APAC had mid-single-digit decline but expected to return to growth in fiscal 2025; EMEA had high-single-digit revenue expansion.
• Product Innovation: Introduced new products like battery-operated handheld torque wrenches, participated in trade shows in rail, mining, and wind markets.
• Leadership: Eric Chack appointed EVP of Operations; Darren Kozik to join as EVP and CFO on October 28th.
• Acquisition of DTA: DTA's product line complements Enerpac's heavy lifting technology, expected revenue synergies and cost benefits from operating processes and shared expenses.

For fiscal 2024, organic revenue grew 2.2%. In the Industrial Tools & Services (IT&S) business, organic revenue grew 2.7%. Within ITS, organic product revenue grew 1.7% and service revenue 6.6%. However, Cortland Biomedical had a 9.5% decline, but Cortland Medical resumed year-over-year growth in the fourth quarter. Total net sales declined 1.5% for the year. Gross margin expanded 180 basis points to 51.1% in fiscal 2024 due to operational improvements and pricing. Adjusted SG&A expense declined 4% year-over-year. Adjusted EBITDA increased 8% to a 25% margin. In the fourth quarter, organic revenue grew 0.9%, ITS growth was 0.8% with service revenue up 9.7% offsetting a 1% decline in product revenue. Gross margins were negatively impacted by project mix and service revenue composition.

• Fiscal 2025 organic revenue growth expected 0%-2%.
• Net sales including DTA forecast $610 million to $625 million.
• Adjusted EBITDA forecast $150 million to $160 million (25.1% midpoint).
• Free cash flow forecast $85 million to $95 million.
• CapEx expected $19 million to $24 million in fiscal 2025.

• General industrial market softness.
• Regulatory, labor, and permitting issues impacting infrastructure projects.
• Inflationary pressures requiring pricing actions to offset costs.

Q: Could you call out prominent opportunities for DTA in the upcoming fiscal year?

A: DTA is complementary to Enerpac's HLT business, has opportunity for geographic expansion outside Europe, and complements in key verticals like wind and rail. Also, DTA has a service/reoccurring revenue component for aftermarket growth.

Q: Thoughts on market growth across geographies and if organic growth is second half loaded?

A: Overall market likely to decline low single-digit. Organic growth comprises strong commercial execution, muted pricing, and new product launches predominantly in second half of fiscal 2025.

Q: Update on capital allocation strategy and industry consolidation?

A: Target leverage ratio 1.5 to 2.5 times. Priorities are internal investments, inorganic growth, and opportunistic share repurchase. No significant signs of wider consolidation in the industry but DTA is an opportunity for Enerpac's inorganic growth.