ENERPAC TOOL GROUP CORP Q1 FY2025 earnings call

• The industrial macro environment is sluggish with weak manufacturing PMI and industrial production trends. - EMEA region had positive year-over-year growth despite tough comparisons, Asia Pacific region returned to year-over-year growth, while Americas region was cautious. - DTA acquisition showed solid progress with $3 million revenue and $5 million order volume, and expectation of €20M sales in 2025. - Cortland Biomedical had 2.6% YOY revenue growth. - PEP continuous improvement program aims to drive profitable growth and margin improvement. - Sourcing optimization is underway with goal to reduce supply base. - Adjusted SG&A as a percent of sales reduced by ~650 basis points over past three fiscal years. - Annual Global Leadership Conference held to review growth strategy, evaluate challenges, and generate action plans.

Enerpac's total revenue increased 2.3% in the first quarter of 2025. The IT&S business had a 2.3% YOY revenue increase with a 1% organic sales decline (5.6% service revenue increase offset by 3% product sales decrease). Cortland Biomedical reported a 2.6% YOY revenue increase. The DTA acquisition, which closed on September 4th, contributed nearly a full quarter of revenue, with $3 million in revenue and $5 million in order volume in the quarter, and the company maintains the expectation of full year 2025 sales of €20 million from DTA. Gross profit margin declined 90 basis points YOY to 51.4%, adjusted SG&A held flat at 29% of revenue, adjusted EBITDA margins declined 100 basis points, and adjusted earnings per share were $0.40, a 3% increase from the prior year. Net debt was $63 million, total liquidity was $529 million, and free cash flow improved $11 million.

• Maintains expectation of full year 2025 sales of €20 million from DTA. - Sees growth benefits from combining DTA with Heavy Lifting Technology business and expanding DTA sales beyond Europe. - Actively monitoring costs in short term and has long-term strategy to enhance profitability.

• Sluggish industrial macro environment challenging business performance. - Potential impact of tariffs on import/export of products and components. - Market competition affecting margins. - Risks associated with integration of acquisitions.

Q: Good morning, guys. I was just wondering, I think when we spoke on the fourth quarter and you called it out today, obviously, the industrial environment is a little bit weaker and continues to be weaker. I was just wondering, obviously you guys don't provide quarterly guidance, but did 1Q play out generally as you had expected. Is there anything maybe positive that you saw in the quarter besides pretty strong results?

A: Yeah, thanks for the question, Tom. I think as we mentioned in our remarks on the call, it played out pretty much as we expected, frankly. I mean, we knew it was a tougher comp lapping Q1 of fiscal '24, and obviously just the environment that we're seeing. So, we suspected it was going to be a little bit more challenging here, certainly in Q1, our expectations are, at this point, built into our guidance essentially for the rest of the year for better top-line performance. And I think we're optimistic just given the things that we referenced on the call around some of the potential new policies from new administration, and also just frankly, what we hear in terms of latest, I'll call it, voice of customer research from our customers and our channel partners even over the last week or two. There's, I'd say, a fair amount of optimism. I mean, certainly that has to ultimately translate into demand and orders, but I think people are relatively hopeful about what to expect in calendar '25. So -- but yeah, really, Q1 played out essentially as expected for us.

Q: Good morning, guys. Can you hear me?

A: Good morning, Ross.

Q: Apologies. Yeah, I was on mute. Forgive me, maybe I missed it, but anything on pricing within the U.S. in the quarter and kind of what you're seeing more globally?

A: Sure. Yeah, so as a general rule of thumb, I mean, we're always evaluating our price positioning. As you know, we tend to be the a premium or the premium player in our space for most of where we're positioned. And generally speaking, we would look to take price increases either one to two times a year to at least recover or at least -- recover, over recover from any inflationary costs that we see. And we are still, I remind folks, in an inflationary environment as we can see in the data. And in fact, we actually just announced around the price increases in both the Americas and our EMEA region that will be effective at the beginning of January. It's a very low-single-digits, but that's pretty typical in the norm for us. And certainly, we monitor what's happening in the marketplace. I'd say, generally, what we see as a behaved -- observer -- behavioral kind of aspect of the market is that we typically see competitors follow within a period of time, and we'll continue to monitor that, but we typically tend to be the price leader in our space.

Q: Thanks, operator. And good morning, everybody. So, great to see the return to growth in APAC this quarter. I'm curious whether you could provide some context in terms of what drove that return to growth given the continued softness in mining. Whether it was just a return to growth among the core products or whether there was some benefit of the implementation of the second brand strategy?

A: Yeah, I think it actually was all of the above, Steve. I mean, certainly, the more challenging areas we referenced is Australia, and that market is still soft just due to the mining sector. But beyond that, it was pretty broad-based in Asia Pac. Most of the other countries where we operate with scale, we saw good growth year-over-year. It was in both our core product and we saw some good performance on our HLT business as well. So, overall, I think it was pretty broad-based that gives us some increasing confidence as we go into the rest of the fiscal year here. Certainly, on second brand, we continue to execute that. We've got increased commercial focus on our team behind that, and we have made some incremental progress -- good progress, I think, on adding additional distributors in the region to cover second brand. Obviously, that is definitely a multi-year effort to get the channel partners, the network built up for the second brand, and also to continue to drive overall marketing and brand awareness, but we feel good about where we are with that to date.