Enerpac Tool Group Reports Third Quarter Fiscal 2023 Results, Raises Full-Year Earnings Guidance

Third Quarter of Fiscal 2023 Continuing Operations Highlights^*

• Net sales were $156 million, with a 4% year-over-year increase in core sales^**; the strengthening of the US dollar reduced sales by 1% year over year
• GAAP operating margin was 16.3% and adjusted operating margin was 21.7%
• Adjusted EBITDA margin was 24.0%, up from 12.0% in the prior-year period
• Record gross profit margins and adjusted EBITDA margins since the launch of Enerpac Tool Group in 2019
• GAAP diluted earnings per share (“EPS”) was $0.30 and adjusted diluted EPS was $0.39, an increase of 144% year over year.
• Leverage (Net Debt to Adjusted EBITDA) was 1.0x at May 31, 2023
• Repurchased 0.8 million additional shares for approximately $21 million
• FY23 full-year guidance: Updating revenue to high-end of the range, and raising adjusted EBITDA

^*This news release contains financial measures in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”) in addition to non-GAAP financial measures. Reconciliations of the GAAP to non-GAAP financial measures can be found in the tables accompanying this release. ^**Core growth represents organic revenue growth excluding the impact of foreign exchange rates, acquisitions, and dispositions.

Enerpac Tool Group Corp. (NYSE: EPAC) (the “Company” or “Enerpac”) today announced results for its fiscal third quarter ended May 31, 2023.

“We delivered solid performance in the third quarter, driven by the focused execution of our global team. Once again, we saw year-over-year core growth in three out of four regions, highlighted by double digit core growth in Europe and Asia Pacific. For the second consecutive quarter, we achieved record gross profit margins and adjusted EBITDA margins since the launch of Enerpac Tool Group in 2019. In addition, reflecting the Board’s confidence in management and in alignment with our balanced capital allocation strategy, we returned approximately $21 million to shareholders during the quarter through share repurchases under our March 2022 authorization,” said Paul Sternlieb, Enerpac Tool Group’s President & CEO.

Mr. Sternlieb continued, “We continue working towards further developing our culture of continuous improvement. We are driving sustainable improvements to our cost structure, simplifying the business for efficiency and greater productivity, and enhancing how we bring products and services to market. While the global macroeconomic environment remains dynamic, we believe the structural improvements underway at Enerpac coupled with our vertical and geographic diversity have us well positioned to deliver enhanced shareholder value.”

Consolidated net sales for the third quarter of fiscal 2023 were $156.3 million compared to $151.9 million in the prior-year third quarter. Core sales improved 4% year over year, with product sales up 9% and service revenues down 13%, as the Company continued its implementation of 80/20 and a more selective process for quoting service projects (particularly in the Middle East region) that is focused on more differentiated solutions. We estimate core sales growth was negatively impacted by approximately 200 basis points as a result of the more selective process for quoting in the Middle East in the third quarter. The impact from foreign currency exchange rates reduced net sales by 1% in the quarter compared to the prior year.

Fiscal 2023 third quarter net earnings and diluted earnings per share were $17.0 million and $0.30, respectively, compared to net earnings and diluted EPS of $4.1 million and $0.07, respectively, in the third quarter of fiscal 2022. Fiscal 2023 third quarter net earnings included:

• Restructuring charges of $2.3 million ($1.8 million, or $0.03 per share, after tax) attributable to ASCEND initiatives;
• ASCEND transformation program charges (“ASCEND charges”) of $5.9 million ($3.3 million, or $0.06 per share, after tax), including third-party fees for program implementation support;
• Leadership transition charges of $0.1 million ($0.0 million, or $0.00 per share, after tax); and
• M&A charges of $0.2 million ($0.1 million, or $0.00 per share, after tax).

Fiscal 2022 third quarter net earnings included:

• A restructuring charge of $0.5 million ($0.4 million, or $0.01 per share, after tax) attributable to further actions to flatten and simplify the organizational structure;
• ASCEND charges of $3.9 million ($3.0 million, or $0.05 per share, after tax) primarily related to the use of external services for support in the design and development of the program;
• Leadership transition charges of $2.8 million ($2.5 million, or $0.04 per share, after tax);
• Business review charges of $0.5 million ($0.3 million, or $0.01 per share, after tax) related to external support for the deep dive business review prior to the launch of ASCEND; and
• A gain on the sale of a facility, net of transaction charges, of $0.6 million ($0.5 million, or $0.01 per share, after tax) related to footprint rationalization.
• Excluding the items detailed above, adjusted diluted EPS was $0.39 for the third quarter of fiscal 2023 compared to $0.16 in the comparable prior-year period. Fiscal 2022 third quarter results reflect a $10.8 million increase in receivable reserves ($0.14 per share, after tax) related to an agent in the MENAC region.

Consolidated net sales for the nine months ended May 31, 2023 were $437.6 million, compared to $419.4 million in the comparable prior-year period. Core sales increased 7% year over year, while the impact of foreign currency decreased net sales by 3%.

Net earnings and diluted EPS for the nine months ended May 31, 2023 were $30.5 million and $0.53, respectively, compared to net earnings and diluted EPS of $9.4 million and $0.15, respectively, in the comparable prior year period.

Third quarter fiscal 2023 net sales were $144.1 million, 3% higher than the prior fiscal year’s third quarter net sales. Core sales increased 4% year over year.

Operating profit margin and adjusted operating profit margin increased year over year to 25.1% and 27.6%, respectively, primarily due to the impact of ASCEND initiatives, pricing actions, and savings from cost management and restructuring initiatives implemented in prior periods, despite increased material costs.

Third quarter fiscal 2022 adjusted operating profit margin of 13.8% included an unfavorable impact of 770 basis points due to an additional receivable reserve in the MENAC region.

Corporate Expenses from Continuing Operations

Corporate expenses were $12.7 million and $13.7 million for the third quarter of fiscal 2023 and fiscal 2022, respectively.

Adjusted corporate expenses⁽²⁾ of $7.9 million for the third quarter of fiscal 2023 were $1.2 million higher than the comparable prior-year period expense of $6.7 million, primarily due to increased incentive compensation, partially offset by favorable health benefit claims and restructuring savings.

Net debt as of May 31, 2023 was approximately $93 million (total debt of $235 million less $142 million of cash), which increased approximately $8 million from February 28, 2023. Net Debt to Adjusted EBITDA from continuing operations was 1.0x as of May 31, 2023.

Outlook

Mr. Sternlieb concluded, “Taking into consideration our solid year-to-date performance, the success of our ASCEND transformation program, and our view on the remainder of the fiscal year, we are updating our expectations for full-year net sales to the high end of the previously disclosed range at $590-600 million, and we are increasing our expected adjusted EBITDA range to $123 to $130 million. Our guidance is based on current foreign exchange rates and assumes that there is not a broad-based recession.”

Conference Call Information

An investor conference call is scheduled for 7:30 am CT on June 22, 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 “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, 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 achieve its plans or objectives related to the ASCEND program, including any assumptions underlying its calculation of expected incremental EBITDA or program investment, operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, 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, 2022 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 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, free cash flow and net debt. This press release includes reconciliations of non-GAAP measures to the most comparable GAAP measure, including in the tables attached to 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 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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