Enerpac Tool Group Reports First Quarter Fiscal 2024 Results and Affirms Full-Year Guidance

First Quarter of Fiscal 2024 Continuing Operations Highlights^*

• Net sales were $142 million, a 1.9% increase year-over-year, with organic growth of 5.5%**
• Gross margin expanded 360 basis points year-over-year to 52.3%
• GAAP operating margin was 20.2% and adjusted operating margin was 22.8%
• Net earnings were $18 million, or $0.33 per share
• Adjusted EBITDA was $35 million, an increase of 31% year-over-year. Adjusted EBITDA margin was 24.6%, an increase of 550 basis points year-over-year.
• Returned approximately $26 million to shareholders through share repurchases

^*This press release contains financial measures in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) in addition to non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the comparable GAAP measures are presented in the tables accompanying this release.

^**Organic growth, formerly referred to as core growth, represents revenue growth excluding the impact of foreign exchange rates, acquisitions, and divestitures. A reconciliation of organic sales growth to the comparable net sales growth is presented in the tables accompanying this release.

Enerpac Tool Group Corp. (NYSE: EPAC) today announced results for its fiscal first quarter ended November 30, 2023.

“We began fiscal 2024 with another good quarter, underscored by solid top-line growth and greatly expanded profitability,” said Paul Sternlieb, Enerpac Tool Group’s President & CEO. “While we maintain a cautious tone regarding full-year results, given economic and geopolitical uncertainty, our performance demonstrates the continued benefits of Enerpac’s ASCEND transformation program, four-pillar growth strategy, and the permanent changes across the organization that are making Enerpac more efficient, more productive, and easier to do business with.”

First Quarter Fiscal 2024 Consolidated Results Comparisons

“First quarter gains in operating profit and margins reflect the success of our transformational initiatives that enhance productivity and efficiency at the gross profit and SG&A lines,” stated Tony Colucci, Executive Vice President and Chief Financial Officer. “Additionally, reported results reflect lower ASCEND-related charges.”

Consolidated net sales for the first quarter of fiscal 2024 were $142.0 million compared to $139.4 million in the prior-year period, an increase of 1.9%. Organic sales, excluding the disposition of Cortland Industrial and the impact of foreign currency, increased 5.5% year-over-year, with product sales up 4.2% and service revenues ahead 10.1%. Net sales growth for the Industrial Tools & Services (IT&S) reportable segment of 7.6%, with organic growth of 5.8%, was partly offset by a year-over-year decline at Cortland Biomedical, which comprises the Other operating segment.

Gross margin expanded approximately 360 basis points year-over-year to 52.3%, driven by operational improvements related to ASCEND, favorable sales mix, volume leverage, carryover price increases from fiscal 2023, and the disposition of Cortland Industrial. Selling, general and administrative expenses of $44.6 million were $9.6 million lower year-over-year. Adjusted SG&A was 29.0% of sales, down from 31.2% of sales in the year-ago period.

Operating profit increased 133% year-over-year to $28.7 million, with an operating profit margin of 20.2%, up from 8.8% in the first quarter of fiscal 2023. Adjusted operating profit increased 40% to $32.4 million, with an adjusted operating margin of 22.8%, a 620 basis point expansion over the prior-year period.

First quarter fiscal 2024 net earnings and diluted EPS were $18.3 million and $0.33 respectively, compared to $6.4 million and $0.11, respectively, in the year-ago period.

First quarter adjusted EBITDA was $34.9 million compared to $26.6 million in the year-ago period, achieving an adjusted EBITDA margin of 24.6%, up 550 basis points from 19.1% in the first quarter of fiscal 2023.

Net cash used by operating activities was $6.7 million for the first quarter of fiscal 2024 as compared to $17.5 million of cash provided by operations in the prior-year period. The decrease in cash from operations was primarily due to the timing of annual incentive compensation payments along with payments made for the ASCEND transformation program. In fiscal 2023, the annual incentive compensation payment was recorded in the second quarter.

IT&S Results Comparisons

First quarter fiscal 2024 net sales for IT&S were $137.0 million, ahead 7.6% year-over-year with organic growth of 5.8%. Organic growth was driven by a 4.5% increase in product sales and a 10.1% increase in service revenues. The segment’s operating profit margin increased 510 basis points to 26.0% and adjusted operating profit margin improved 520 basis points to 28.1%.

Corporate Expenses from Continuing Operations

Corporate expenses were $8.9 million and $15.8 million for the first quarter of fiscal 2024 and fiscal 2023, respectively. The year-over-year decline was driven by significantly lower ASCEND-related charges during the quarter. Adjusted corporate expenses⁽²⁾ of $8.1 million for the first quarter increased $0.7 million compared to the prior year, as a result of higher incentive compensation.

Net debt at November 30, 2023, was $96.5 million, resulting in a net debt to adjusted EBITDA ratio of 0.9x. The Company repurchased approximately one million shares of its common stock in the first quarter of fiscal 2024 for $26 million under its share repurchase program announced in March 2022.

Outlook

“With the solid start to fiscal 2024, we are on track to achieve our full-year financial objectives,” concluded Sternlieb.

As such, the Company affirms its fiscal 2024 guidance, projecting a net sales range of $590 million to $605 million. The forecast anticipates organic growth of approximately 2% to 4%, with expected adjusted EBITDA in the range of $142 million to $152 million, and free cash flow between $60 million to $70 million. This forecast is based on key foreign exchange rate assumptions and assumes the absence of a broad-based global recession. The key foreign exchange rates and other guidance assumptions are included in the presentation materials accompanying the earnings webcast.

Conference Call Information

An investor conference call is scheduled for 7:30 am CT on December 20, 2023. Webcast information and conference call materials, including an earnings presentation, are available on the Enerpac Tool Group company website (www.enerpactoolgroup.com).

Safe Harbor Statement

Certain of the above comments represent forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. In addition to statements with respect to guidance, the terms “outlook,” “guidance,” “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with such statements, risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements include, without limitation, general economic uncertainty, market conditions in the industrial, oil & gas, energy, power generation, infrastructure, commercial construction, truck and automotive industries, the impact of geopolitical activity, including the invasion of Ukraine by Russia and international sanctions imposed in response thereto, as well as the armed conflict involving Hamas and Israel, the ability of the Company to achieve its plans or objectives related to its growth strategy, market acceptance of existing and new products, market acceptance of price increases, successful integration of acquisitions, the impact of dispositions and restructurings, the ability of the Company to continue to achieve its objectives related to the ASCEND program, including any assumptions underlying its calculation of expected incremental operating profit or program investment, operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, risks related to reliance on independent agents and distributors for the distribution and service of products, material, labor, or overhead cost increases, tax law changes, foreign currency risk, interest rate risk, commodity risk, tariffs, litigation matters, impairment of goodwill or other intangible assets, the Company’s ability to access capital markets and other risks and uncertainties that may be referred to or noted in the Company’s reports filed with the Securities and Exchange Commission from time to time, including those described in the Company’s Form 10-K for the fiscal year ended August 31, 2023 and most recent report on Form 10-Q. Enerpac Tool Group disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

Non-GAAP Financial Information

This press release contains financial measures that are not measures presented in conformity with GAAP. These non-GAAP measures include organic growth, EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted earnings from continuing operations, adjusted diluted earnings per share from continuing operations, adjusted operating profit from continuing operations, segment adjusted operating profit and adjusted EBITDA, adjusted corporate expense, adjusted SG&A expense, free cash flow and net debt. This press release includes reconciliations of non-GAAP measures to the most comparable GAAP measure, included in the tables attached to this press release or in footnotes to the tables included in this press release. Management believes the non-GAAP measures presented in this press release are commonly used financial measures for investors to evaluate Enerpac Tool Group’s operating performance and financial position with respect to the periods presented and, when read in conjunction with the condensed consolidated financial statements, present a useful tool to evaluate ongoing operations and provide investors with metrics they can use to evaluate aspects of the Company’s performance from period to period. In addition, these are some of the financial metrics management uses in internal evaluations of the overall performance of the Company’s business. Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies.

About Enerpac Tool Group

Enerpac Tool Group Corp. is a premier industrial tools, services, technology, and solutions provider serving a broad and diverse set of customers and end markets for mission-critical applications in more than 100 countries. The Company makes complex, often hazardous jobs possible safely and efficiently. Enerpac Tool Group’s businesses are global leaders in high pressure hydraulic tools, controlled force products, and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin. Enerpac Tool Group common stock trades on the NYSE under the symbol EPAC. For further information on Enerpac Tool Group and its businesses, visit the Company's website at www.enerpactoolgroup.com.

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