Enerpac Tool Group Corp - Ordinary Shares - Class A Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
Is Enerpac Tool Group Corp - Ordinary Shares - Class A a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $2.01b | Revenue (TTM) = $634.08m
Market Cap = $2.01b | Estimated Revenue = $652.80m
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $2.08b | Revenue (TTM) = $634.08m
Enterprise Value = $2.08b | Forward Revenue = $652.80m
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF) | ex SBC
📈 What is it?
EV/FCF compares a company’s enterprise value with its free cash flow. The metric therefore shows the multiple of current free cash flow at which a company is valued. EV/FCF ex SBC additionally accounts for stock-based compensation (SBC). While SBC does not represent a direct cash outflow, issuing shares as compensation can dilute existing shareholders. Therefore, SBC is deducted from free cash flow in this adjusted version.
🧮 How is it calculated?
EV/FCF ex SBC = Enterprise Value ÷ (Free Cash Flow (TTM) − SBC)
🏛️ Why is it important?
EV/FCF provides a valuation based on free cash flow and therefore complements earnings-based valuation metrics such as the P/E ratio. The ex SBC version additionally accounts for the economic impact of stock-based compensation and provides a more conservative view from a shareholder perspective.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF means that enterprise value is low relative to current free cash flow. The reasons should always be considered in the context of the company and its industry.
- A high EV/FCF means that enterprise value is high relative to current free cash flow. This can, for example, reflect high growth expectations or temporarily weak cash generation.
- When SBC is positive and adjusted free cash flow remains positive, EV/FCF ex SBC is generally higher than the standard EV/FCF.
- The metric is particularly useful for companies with relatively stable and predictable cash flows.
- If free cash flow is negative or very low, EV/FCF has limited usefulness and should not be interpreted like a standard valuation multiple.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🧮 Calculation
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF) | ex SBC
📈 What is it?
Free cash flow shows how much cash remains after a company has covered its operating and capital expenditures. FCF ex SBC additionally deducts stock-based compensation (SBC) to adjust the cash flow for the effect of non-cash SBC.
🧮 How is it calculated?
Free Cash Flow ex SBC = Operating Cash Flow − SBC − Capital Expenditures (CAPEX)
🏛️ Why is it important?
FCF reflects a company’s actual financial strength – independent of reported accounting earnings. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction. FCF ex SBC also deducts stock-based compensation and shows how much cash generation remains after SBC.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow indicates that a company has strong financial strength – independent of reported earnings.
- It is often a solid basis for sustainable dividends and share buybacks.
- Declining FCF can be a warning sign, even if reported earnings remain stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net Margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free Cash Flow Margin | ex SBC
📈 What is it?
The Free Cash Flow Margin shows how much free cash flow a company generates relative to its revenue. In simplified terms, free cash flow is calculated as operating cash flow minus capital expenditures. The Free Cash Flow Margin ex SBC additionally accounts for stock-based compensation (SBC). While SBC does not represent a direct cash outflow, issuing shares as compensation can dilute existing shareholders. Therefore, SBC is deducted from free cash flow in this adjusted metric.
🧮 How is it calculated?
Free Cash Flow Margin ex SBC = (Free Cash Flow − SBC) ÷ Revenue × 100
🏛️ Why is it important?
The Free Cash Flow Margin shows how efficiently a company converts its revenue into free cash flow. Strong free cash flow can provide financial flexibility for dividends, share buybacks, debt repayment, or further investments. The ex SBC version additionally accounts for the economic impact of stock-based compensation and therefore provides a more conservative view of cash generation from a shareholder perspective.
🧮 Calculation
🎯 What does this mean for investors?
- A high Free Cash Flow Margin shows that a company converts a high proportion of its revenue into free cash flow.
- This can provide greater financial flexibility for dividends, share buybacks, debt repayment, or investments.
- The Free Cash Flow Margin ex SBC additionally accounts for potential shareholder dilution from stock-based compensation.
- The long-term trend is particularly important. Declining margins can, for example, result from higher investments, changes in working capital, or weaker operating performance.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 SBC | in % Revenue
📈 What is it?
SBC (Stock-Based Compensation) refers to equity-based compensation granted by a company to its employees and executives. The percentage shows SBC relative to revenue.
🧮 How is it calculated?
SBC as % of Revenue = (SBC ÷ Revenue) × 100
🏛️ Why is it important?
Stock-based compensation is a real cost factor for shareholders. It can increase the number of shares outstanding and therefore dilute existing shareholders. The percentage of revenue shows how heavily a company relies on equity-based compensation and how significant this form of compensation is relative to the size of the business.
🧮 Calculation
🎯 What does this mean for investors?
- A lower figure is generally positive: Stock-based compensation is relatively small compared with the company's revenue.
- A high figure can indicate greater reliance on stock-based compensation and a higher potential risk of dilution. However, it is also important to consider whether the company offsets dilution through share buybacks.
- The trend over time should also be considered. A high but declining percentage presents a different picture from a persistently high or increasing percentage.
- A single-digit SBC-to-revenue ratio is not unusual among many growth-oriented and technology companies.
📘 SBC as % of FCF
📈 What is it?
SBC (Stock-Based Compensation) refers to equity-based compensation granted by a company to its employees and executives. The percentage shows SBC relative to free cash flow (FCF).
🧮 How is it calculated?
SBC as % of FCF = (SBC ÷ Free Cash Flow) × 100
🏛️ Why is it important?
Stock-based compensation is a real cost factor for shareholders. It can increase the number of shares outstanding and therefore dilute existing shareholders. The percentage of free cash flow shows how significant SBC is relative to the cash generated by the company. Since SBC is non-cash compensation, it is typically not deducted as a cash outflow when calculating FCF.
🧮 Calculation
🎯 What does this mean for investors?
- A lower value is generally favorable. Stock-based compensation is relatively small compared with the company's cash generation.
- A high value means that SBC represents a significant portion of the company's reported free cash flow, even though SBC itself is non-cash.
- The higher the value, the more significant SBC can be as an economic cost to shareholders, particularly when it results in share dilution.
📘 SBC Growth 1Y
📈 What is it?
SBC Growth 1Y shows how much a company's stock-based compensation has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
SBC Growth shows whether stock-based compensation is becoming more or less significant for shareholders. If SBC increases significantly, it can lead to greater shareholder dilution over time. At the same time, SBC is a non-cash expense that reduces earnings on the income statement but is added back in the cash flow statement.
🧮 Calculation
🎯 What does this mean for investors?
- A high positive value is generally negative, as rising SBC can increase the burden on shareholders, particularly through potential dilution.
- What matters is whether the development of SBC is sustainable over the long term. Some level of SBC is common among many growth and technology companies.
📘 Share Count Growth 1Y
📈 What is it?
Share Count Growth 1Y shows how much the number of shares outstanding has increased or decreased over a one-year period.
🧮 How is it calculated?
🏛️ Why is it important?
The number of shares determines how many shares the company's earnings and assets are distributed across. If the share count decreases, existing shareholders' relative ownership increases. If it increases, existing shareholders are diluted. The metric therefore makes dilution and share buybacks directly visible.
🧮 Calculation
🎯 What does this mean for investors?
- A negative value is generally positive, as the number of shares outstanding is decreasing.
- A positive value indicates dilution of existing shareholders.
- A declining share count is not automatically positive: It also matters at what price the shares are repurchased and how the buybacks are financed.
📘 Shareholder Yield
📈 What is it?
Shareholder Yield measures how much capital a company returns to shareholders through dividends and share buybacks, relative to its market capitalization. It goes beyond dividend yield by also including share buybacks.
🧮 How is it calculated?
🏛️ Why is it important?
Dividend yield only tells part of the story. When a company buys back shares and the share count falls, each existing shareholder owns a larger part of the company. When the share count rises, for example through stock-based compensation or new share issuance, existing shareholders are diluted. Shareholder Yield combines both into one metric.
🧮 Calculation
🎯 What does this mean for investors?
- A higher Shareholder Yield indicates more capital being returned to shareholders.
- A negative value means the company issued more new shares than its dividends and buybacks make up for.
- Share buybacks are most beneficial when shares are repurchased at attractive valuations.
- Investors should also consider whether dividends and buybacks are sustainable over time.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Revenue per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Enerpac Tool Group Corp - Ordinary Shares - Class A Stock Analysis
Analyst Opinions
9 Analysts have issued a Enerpac Tool Group Corp - Ordinary Shares - Class A forecast:
Analyst Opinions
9 Analysts have issued a Enerpac Tool Group Corp - Ordinary Shares - Class A forecast:
Enerpac Tool Group Corp - Ordinary Shares - Class A Events
Past Events
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OCT
29
Q4 2026 Earnings Call
8 days ago
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JUL
8
Q3 2026 Earnings Call
4 months ago
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MAR
26
Q2 2026 Earnings Call
7 months ago
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DEC
18
Q1 2026 Earnings Call
11 months ago
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OCT
16
Q4 2025 Earnings Call
about one year ago
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StocksGuide Free
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q4 2026 Earnings Call
1. Management Discussion
Hello, everyone. Thank you for joining us, and welcome to the Enerpac Tool Group Fourth Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Christian Audi, Head of Investor Relations. Christian, please go ahead.
Thank you, operator. Good morning, and thank you for joining us for Enerpac Tool Group's Earnings Call for the Fourth Quarter and Full Year Fiscal 2026. Joining me on the call today are our President and Chief Executive Officer, Paul Sternlieb; and our Chief Financial Officer, Darren Kozik. On today's call, we will reference non-GAAP measures. You can find a reconciliation of GAAP to non-GAAP measures in the press release issued yesterday and in the appendix of today's presentation. Yesterday, we also issued a separate press release announcing the completion of our acquisition of SFE Group.
Our comments will also include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include matters noted in our latest SEC filings. The slides referenced on today's call are available in the Investor Relations section of our website, which you can download and follow along. A recording of today's call will also be made available on our website. I will now turn over to Paul.
Thanks, Christian, and good morning, everyone. As you saw in our earnings release, we ended fiscal 2026 on an extremely strong note. Revenue in the fourth quarter exceeded our expectations with 10% organic growth in our Industrial Tool and Service or IT&S segment. That gain was driven by exceptional performance in the Americas. Moreover, we enjoyed strong sales gains in both IT&S' product and service businesses in the quarter. And while near-term uncertainty remains on the service side, given the fluid situation in the Middle East, we are encouraged by its progress in the fourth quarter as the actions we have taken to transition to a higher-margin service business while improving its cost structure are clearly beginning to show results.
In fact, the organic growth in the service business has improved sequentially every quarter in fiscal 2026 and turned sharply positive in Q4. Fourth quarter momentum drove record annual revenue of $652 million, our highest since the relaunch of Enerpac Tool Group in 2019, with full year organic growth of 4%. While full year margins remain impacted by several factors, which Darren will address, we delivered robust cash generation in fiscal 2026 with free cash flow up 30%, which positions us for better-than-anticipated balance sheet leverage following the acquisition of SFE. And as announced yesterday, we are very pleased to have completed the acquisition of SFE Group with the closing effective October 28.
We will share a lot more about SFE, the synergies we are targeting and the status of our integration progress at our upcoming Investor Day in New York next week. This morning, Darren will walk through our fiscal 2026 performance, provide details on our balance sheet and the SFE transaction and introduce our fiscal 2027 guidance. Then I will come back to give a preview of our next-generation profitable growth strategy, which we call Propel and highlight our successful innovation program. Darren?
Thanks, Paul. Turning to Slide 4. We finished the year with strong momentum. In product, growth was led by the Americas, supported by demand from data center build-out, power generation and defense and by the continued traction from the launch and commercialization of our newer products. In service, the actions we have taken are clearly beginning to show results, and the business grew nicely in the quarter, reversing the decline we saw over the first 9 months of the year. Cortland extended its run of double-digit growth as they continue to win new customers and projects.
As shown on Slide 5, the Americas led our growth in the fourth quarter with strong gains across standard products, heavy lifting technology and service. In addition to benefiting from a strengthening U.S. industrial sector and reshoring activity, we continue to make inroads into growing end markets, including infrastructure, data center build-out, power generation and defense. From a commercial standpoint, customer reception to our newer products continues to gain traction. We secured major contract wins, and we qualified for additional approved vendor list. Notably, to continue to position us well for serving the U.S. defense sector, in the fourth quarter, we received CMMC certification, which is the U.S. Defense's cybersecurity compliance program.
In EMEA, our standard product business grew in the fourth quarter. Our HLT business remained solid, but declined against a difficult comparison given a series of large deals in the prior year. The underlying trends are positive for this business. Finally, despite continued challenging conditions in the Middle East, service revenue in EMEA grew for the first time in fiscal 2026, helped by LNG maintenance and shutdown work. And in APAC, we saw strong product momentum in India, Korea and Australia, along with heavy lifting technology wins, including E-movers and gantries, while our service business was impacted by macro and geopolitical events. Please keep in mind that given the relatively small size of the business in APAC, quarterly results will fluctuate. Notably, all 3 regions saw strong double-digit order rate growth in the quarter.
Turning to Slide 6. For the full year fiscal 2026, our product business drove growth across IT&S, reflecting accelerating investments in Enerpac Commercial Excellence, or ECX and innovation. That more than offset the decline in service revenue, which was affected in part by our inability to access certain geographies in the Middle East due to the conflict as well as a softer North Sea market in the first half of the year. Combined with another standout year at Cortland, Enerpac delivered total organic growth of 4% for the year, with currency adding roughly 2 points to reported growth.
Turning to Slide 7. For the full year, the Americas drove our IT&S growth, up 10%, led by heavy lifting technology as the U.S. benefited from a strengthening industrial sector and reshoring activity. In EMEA, full year organic revenue declined 3%. Standard Products and Heavy Lifting Technology both grew. That growth was offset by service, which was pressured in the first half of the year by our U.K. business and the continued customer consolidation in the North Sea, which we have previously discussed. However, we are pleased to report that the major win secured in the second quarter continues to ramp well. In addition, the conflict in the Middle East continues to create uncertainty in our business.
Overall, slower economic growth across Europe weighed on results. That said, we have seen solid order flow in the EMEA region, with strength in the infrastructure market and large orders from the defense industry that will be beneficial in fiscal 2027. In Asia Pacific, organic revenue declined 1% as growth in heavy lifting technology was offset by lower service revenue. Looking ahead, we are encouraged by strong order rates and new product momentum in India, Korea and Australia. Stepping back, it's important to note that nearly half our business prior to the addition of SFE Group was generated from the Americas region, which we believe provides significant benefits over the next several years, particularly given the strength of the U.S. economy and industrial sector. Moreover, the skew to the Americas will be further bolstered by SFE Group, where roughly 74% of its revenue is generated in the Americas region.
Turning to Slide 8. Gross margin declined year-over-year, impacted by mix and higher bonus expense in the cost of goods sold. The increase in adjusted SG&A as a percent of sales was driven by investments in our new strategy and higher bonus expenses. We are proud of the fact that all permanent Enerpac employees are covered under our bonus plan, which rewarded the team for strong performance in fiscal 2026. As a result, our fourth quarter adjusted EBITDA margin was 22.6% compared with 26.5% in the prior year quarter, which was the highest margin quarter of fiscal 2025.
Turning to Slide 9. For the full year, gross margins were negatively impacted by mix, given the higher growth rate of our heavy lifting technology business and dilution from our service business. Overall, EBITDA margins were also impacted by our increased investments, including higher R&D and incentive compensation as well as investments in continued operational enhancements. As we move into fiscal 2027, we will drive opportunities to improve asset utilization and further optimize our manufacturing footprint.
Turning to Slide 10. Our asset-light model continues to generate strong cash. Fiscal 2026 free cash flow of $120 million expanded 30% year-over-year, driven by strong collections activity, inventory management and reduced cash taxes. Since fiscal 2022, we have nearly tripled free cash flow while keeping capital expenditures at roughly 2% of revenue in most years. And notably, we ended fiscal 2026 with net debt to adjusted EBITDA leverage of only 0.1x, which positioned us well for the subsequent completion of the SFE Group acquisition. Speaking of our financial flexibility, on October 16, we successfully renewed and expanded our credit facility with strong support from our banking group. All participating lenders increased their commitments, reflecting continued confidence in our business and financial profile.
As a result, we have increased the size of our 5-year credit facility from $600 million to $850 million. The new structure consists of a $300 million term loan and $550 million revolving credit facility, providing us with enhanced financial flexibility to support our strategic priorities and growth opportunities. The facility also includes an accordion option of up to $425 million, providing additional capacity for future M&A. Moreover, despite the significant increase in facility size, we were able to maintain the favorable pricing and key terms of our prior agreement, which we view as a strong outcome in the current financing environment.
Turning to Slide 11. As we highlighted when we announced the agreement to acquire SFE Group, the company provides a strong strategic fit and creates significant opportunities for value creation for Enerpac in addition to expanding our addressable market by approximately $1 billion. The approximately $472 million purchase price consisted of roughly $452 million in cash and about $20 million of equity awards granted in lieu of transaction bonuses. We funded the cash portion with cash on hand, our expanded term loan and borrowings under our new revolver. The purchase price represents a 10.6x SFE's trailing adjusted EBITDA or 9.5x, including the synergies we expect to realize within 3 years. And we expect the acquisition to be accretive to adjusted EPS in fiscal 2027. We continue to target $4 million to $6 million of synergies by year 3.
Thanks to our strong cash generation in fiscal 2026, we achieved a net leverage at closing of approximately 2.3x, down from our original estimate of 2.8x. With SFE Group's strong free cash flow profile, we expect to bring that down to approximately 2x by the end of the first year, well within our target range of 1.5 to 2.5x. That gives us the flexibility to continue our disciplined capital allocation strategy, including internal investments, bolt-on acquisitions and opportunistic share repurchases. Integration is already underway with our governance and cross-functional execution teams in place. We look forward to sharing more at our Investor Day next week. With that, our initial guidance for fiscal 2027 is shown on Slide 12. I say initial given that we just closed the SFE Group acquisition yesterday.
We are confident in our day 1 readiness, long-term synergy potential and the pre-close planning we have completed to leverage our combined human resources, IT, finance and legal infrastructure. Now that the deal has closed, we can begin working on the commercial side with customers and developing detailed plans to capture revenue synergies. As you evaluate guidance, keep in mind that fiscal 2027 will include approximately 10 months of SFE Group's performance. Adjusted EBITDA and adjusted EPS guidance for fiscal 2027 exclude M&A transaction charges and integration-related items. Adjusted EPS also excludes the amortization of acquisition-related intangibles.
Starting with the top line. We expect fiscal 2027 revenue of $825 million to $845 million, with organic growth of 4% to 6%. We expect adjusted EBITDA of $195 million to $205 million, which includes incremental investments in our new strategy and support for SFE. For adjusted EPS, we are guiding to a range of $2 to $2.15. Our other modeling assumptions, including depreciation and amortization, interest expense, CapEx, adjusted tax rate and share count are shown on the slide. Our guidance assumes no substantial change to the current tariff or regulatory environment and economic trends similar to those as we exited the fourth quarter of fiscal 2026. With that, let me turn it back to Paul.
Thanks, Darren. As previously announced, we will be hosting our Investor Day in New York next week. Among the many topics we plan to discuss, we will introduce our next-generation growth strategy, Propel. As shown on Slide 13, Propel is built on 3 pillars. First, we will grow in Attractive End Markets with Commercial Excellence. We plan to deploy next-generation Enerpac Commercial Excellence known as ECX, our commercial engine to accelerate growth across all products and regions, driving share gains through differentiated channels, digital reach and application-led selling. We also plan to accelerate the growth of SFE Group by leveraging Enerpac's global distribution and key account capabilities.
Second, we will differentiate through Product-First, Application-Led Innovation. As I will discuss in a minute, we have steadily increased our R&D investment and with it, accelerated the pipeline of mission-critical customer solutions. And third, we will expand through Operational Excellence Initiatives, including our PEP operating system, Inventory Management and Service Expansion into higher-margin applications. We look forward to sharing the full story along with our multiyear financial objectives on November 4. Of course, a critical part of our growth strategy is our commitment to innovation.
As you can see on Slide 14, we have significantly increased our investment in R&D, growing it at an 11% compound annual rate over the past 3 years. More importantly, we are seeing the benefits in the pace of new product introductions. In fiscal 2026, we launched 11 products, up from 5 the prior year. Heading into fiscal 2027, we have a lot to be excited about at Enerpac. Our product business continued to deliver broad-based strength across the Americas. Our service business is showing encouraging trends with sequential improvements every single quarter in fiscal 2026.
Our strong cash flow and balance sheet provide the flexibility to pursue our growth strategy. And the addition of SFE Group with its premium brand platform and market-leading products further strengthens our position as a premier industrial solutions company. With that, we'd be happy to take questions.
[Operator Instructions] Your first question comes from the line of Will Gildea with CJS Securities.
2. Question Answer
So congrats on the strong quarter and closing the deal. Can you just expand some more on the assumptions embedded in your guidance?
Yes, sure. Happy to, Will. Thanks for the question. So look, first, we are really excited about where we're headed. I think there's a lot to be really pleased about, particularly having finally closed the acquisition of SFE. That's a business with very premium products and margins. In fact, I was with the team at a major trade show, FABTECH in Las Vegas last week. It showed really well. They had a number of new products on display, very strong customer receptivity on those. That team has demonstrated the ability to drive very strong growth, both organically and inorganically.
And frankly, they have exposure to higher-growth end markets and attractive geographies with over 70% of their revenue in the Americas. So that will be, we think, a nice tailwind for us as well. Of course, very complementary position that expands our addressable market by about $1 billion, and it comes with a great strong management team who will stay on with Enerpac and is incentivized and motivated for the long term. So we're really, really excited and pleased that we were able to close on that. In terms of guidance, I'll turn that over to Darren, and he can talk a little bit about our thinking behind that.
Thanks, Paul. Will, as we look at 2027, I would say a couple of things. First, just as a reminder, we're only going to have 10 months of SFE, okay? So as you kind of work up your estimates and models, just remind yourself of that. But then as we look at the year, we see organic sales of roughly 4% to 6%, okay? And kind of behind that, we see continued strength in the Americas. That was very strong in Q4. We see that progressing into next year. In addition to that, our HLT business has been on a really strong growth front. So we expect to see that positive momentum.
And then service is stabilizing. That business did turn around in Q4. We're still looking for strong profitable work there. So we want to make sure we get the right work in service. I'd say the wildcard is still, as we talked about even this time last year is Europe, okay? There really is no impetus for a significant change there. So as we think about our business, roughly 40% in Europe, we still have our eyes there. That part of the portfolio is a little bit slower, although our product order growth rates were very strong in Q4, okay? So I'd say that's kind of the volume front. As we go down the P&L, we will have some leverage from that volume, but there's 2 places we need to invest back in.
Number one is SFE, okay? That team is very strong. They have great products, great operations. put their finance and IT infrastructure in some other places, we just need to invest back because they're not at public company standards or Enerpac standards. So those will be investments we make. And second is Propel. Paul started to allude to that. But next week, we have a lot of great things to show you kind of around grow, differentiate and expand and where we can invest back to get stronger growth in the future.
So that's the shape, the investments. And when we think about it at the midpoint, that will turn about a 24% EBITDA margin, which is very strong. $2.07 EPS, which is up double digits. And that includes SFE accretive in year 1, okay? So we're very happy about that as well. So that's the guide that's out there. The business is in a really good position.
That's great color. And then just looking at the quarter, really, really solid organic growth. 24% organic sales growth in the Americas, it's very impressive. I mean, can you talk about the drivers of that? How much of that was price versus volume? And can you also kind of expand on the drivers behind lower margins in the quarter?
Yes, sure, Will. So I think, look, yes, we were extremely pleased with the growth overall in the quarter and particularly in the Americas, very robust. Certainly, clearly, the industrial sector in the U.S. is very robust, improving, and I would say, performing better than really any other significant country or region in which we operate. That's obviously a plus for Enerpac where nearly half of our revenue comes from the Americas region. And as we talked about with the addition of SFE, over 70% of their revenue generated in the Americas. So on a pro forma basis, we'll be in the mid-50s, I think, on a revenue basis, skewed to the Americas. So I think it's really driven by the strength of the U.S. industrial sector.
Clearly, we see a lot of growth tailwinds, particularly in end markets like infrastructure, data center build-out, power generation and the defense sector as well. I think we also see very nice continued tailwinds from reshoring activities here in the U.S. market. And we think that those are not only robust but sustainable over the mid and potentially long term. So we're quite bullish about that. I think outside the Americas, as Darren talked about, obviously, slower growth, but we did see very solid order flow in EMEA, particularly with strength in infrastructure and large defense orders, and we think that will be beneficial here in fiscal '27 as well. So overall, yes, I think, again, we were quite pleased with the performance in the quarter and particularly with the growth rates that we saw here in the Americas region.
Yes. And Will, to kind of talk about the fourth quarter margin, as a reminder, we were comparing to our highest margin quarter of last year at 26.5%. So we did have a tough comp there. But as you unpack some of that change year-over-year, probably in the first position here was there's some mix dynamics there. We talked a lot about HLT growth in the Americas. And as a reminder, HLT margin tends to be a little bit lower than the portfolio average because it's a capital good, that will run in the mid-40s. So that puts a little bit of pressure overall.
Second, with that strong quarter from an organic growth rate as well as free cash flow generation, we did have to increase for some incentive comp, okay, which we're happy to reward our people for that strong performance, but that put a little bit of pressure in the quarter. But then third, we invested in Propel, okay? In the second half of the year, we really started to invest behind that strategy because we see a strong market, particularly in the U.S. So we want to get ahead and get those investments in to drive growth in 2027. So those are the large drivers. We are excited about Propel. We're excited to invest behind that because we think that will be a catalyst for growth, and we thought that was a wise move.
Yes. And I would just add a color on that, which is we'll talk a lot more next week at Investor Day about Propel. But to Darren's point, the reality is, I mean, we've been executing on that internally now for many months. Obviously, we have a public unveiling effectively next week, but the team has been hard at work executing on that growth strategy. And frankly, as Darren said, we've been investing behind that for a while now.
Great. And then just one more for me. Leverage is going to be a half turn lower after the close of this deal than previously expected. So back in your target range? How are you thinking about cash generation and the new credit facility?
Sure, Will. So we were pleased to close the credit facility. We had great support from our banks. As we sit here today, probably around 2.3x levered. And I would say, and just as a reminder, free cash flow generation for us is really strong in the second half of the year. So a lot of that leverage will come down in Q3 and Q4, just given the first half of the year for us has a lot of tax payments, bonus payments, things of that nature. So that will be the kind of profile of leverage throughout the year. As we look at that, given where we sit today and with the credit facility, obviously, debt paydown is top of mind.
We haven't had this amount of leverage in a while, so that will be a focus of ours. But that's not to say we won't look at opportunistic share repurchase or even bolt-on M&A. We think we've got a platform now and a profile for a company that's in a really good spot that we can add on other industrial tools and solutions players. So I think we tend to look at it, Will, as everything is on the table, but we will focus to get that leverage down, and that's our commitment.
Your next question comes from the line of Ross Sparenblek with William Blair.
I mean really good quarter there on the top line. It looks like the highest in company history since you guys got here. Anything onetime to call out? I mean it feels like you're maybe abundance of caution going into next year or if there was anything with the data centers as a big HLT cell or something of that nature that would give you pause for a potential deceleration in '27?
Yes, Ross, thanks for the question. Really nothing in terms of any meaningful one-offs to note in the quarter. It was just overall a very strong robust performance by the team. Yes, and I think we're pleased with the progress we've been making there. I think it was broad-based. I mean we talked about a number of end markets where we're seeing really nice tailwinds and kind of favorable dynamics there. And we expect that to continue here into fiscal '27. I think on the organic growth, I mean, obviously, finishing the full year at around 4% organic growth, we feel like the guide of 4% to 6% here for fiscal '27 makes sense, and we'll continue to evaluate as we progress throughout the year. But just given the market dynamics and the execution of the team, we feel that's appropriate. So yes, I think overall, that's where we sit today.
Okay. That's helpful. On the data center and power side, can you just remind us of kind of what the sales cycle looks like? Is it a similar dynamic with other large projects where kind of a onetime purchase, so you see more of a recurring cycle there? -- equipment going on job sites.
Right. Yes. No, thanks for the question, Ross. It is pretty interesting. I'd say specifically on data center. So our exposure is less so on the data centers themselves or the hyperscalers. It's sort of one step back. So we are generally selling to folks that are manufacturing equipment that goes into a data center like gensets or other power equipment, et cetera. And then we're providing equipment and support for either their own manufacturing facilities as they're making that equipment, need to move it around in their plants or ultimately to transport it or to install it into a data center. Our equipment doesn't typically sit permanently in the data center.
What I would say is we are seeing a number of repeat or recurring orders in that space. Most of the work that we see tends to revolve around our smaller HLT gantries, which are really a very nice substitute for more permanent overhead crane solutions. So as you see other industrial manufacturers building out new capacity, whether it's expansion or even new manufacturing facilities, they don't necessarily want to make these large onetime investments in overhead cranes, which are fixed in a facility and they can't easily move. It also are very expensive and also have very significant lead time. So our smaller gantries are really an exceptional substitute that allow them to get that with very short lead times and its mobile equipment.
So plays very well there. E-movers, another one of our HLT products, also is supporting those customers, particularly in those applications. And we have, as I said, seen a number of repeat orders. I would say the cycle time or the lead time for those is generally shorter than what we typically see in our HLT business. Probably most important for these customers is availability. I would say price is probably a much less critical element for them, frankly. So we've been making investments behind inventory and operational improvements to be able to support very quickly.
Okay. That's helpful. Do you get the sense then that you're kind of expanding that TAM customer by customer? -- when you think like just competitive landscape, I maybe going out there kind of big game hunting to make sure that your brand is well -- people know about it and they know that you have the ability to deliver.
Yes. It's a great question. Ross, we will talk more specifically about this on our Investor Day next week. Phil Jefferson, our Chief Commercial Officer, will speak exactly to that. But suffice it to say, we have been and we are continuing to make additional investments in more resources behind commercial sellers specifically focused on the data center market, including a focus on enterprise selling as well. So we already have some very strong established customer relationships, but we have more active hunting work underway with more resources and feet on the street dedicated to that activity.
Your next question comes from the line of Steve Silver with Argus Research.
My congratulations on the closing of the acquisition as well. So you guys mentioned major contract wins in the data center space as well as approved vendor list. So I was wondering if you could provide a little more color on that and really what the implications might be for the business moving forward?
Yes. Look, I think those wins that we talked about, they really reflect the commercial traction that we're building, particularly in the Americas. And also, I'd say the disciplined sales process that we have built, we call ECX, Enerpac commercial excellence. I think we're making particular gains in infrastructure, as we talked about data center build-out, power gen, defense industries. I do think we are taking share. We see good evidence of that. And as I said, we're continuing to invest and accelerate investments, particularly commercially as well as operationally and from an inventory selective perspective behind that.
And some of these approved vendor list also, I think, position us well into the future because, again, we become the easy button, frankly, for these customers and the one-stop shop. And if they build increasing confidence behind our capability to deliver for them on short notice with very high-quality product that meets their needs, and frankly, is a great substitute for what otherwise would be expensive and long lead time investments for them. It's really a no-brainer for those sort of customers.
Great. And so a key component of the Propel strategy talking about is product innovation. And I know you guys have been talking about this for quite some time in terms of new products. Yet you've done this pretty much with a modest R&D expense on an absolute basis. You mentioned the 10% CAGR in R&D growth, but still a pretty low number on an absolute basis. I'm just curious as to whether that will likely be accelerated either on an absolute basis or as a percentage of sales moving forward.
Yes. We've been extremely pleased, Steve, with the progress that our innovation team has made over the last several years. As you may recall, we previously talked about effectively, it was a reboot strategy from 4 or 5 years ago. We've come a long way in terms of building out the process, the capability the team behind that. Obviously, the road map now executing in terms of launches and commercialization. So I think we've made really exceptional progress, kudos to our team on that and launching 11 products here in fiscal '26. And frankly, a similar target or if not better here in fiscal '27.
We will talk a lot more specifically about innovation at our Investor Day next week. Mart Hinnen, who heads up our innovation function and our HLT business globally, will spend quite a bit of time going into really significant detail behind innovation, how we run it, what the future looks like. We have been and we will continue to increase our level of investment in R&D here. We think that we are a clear technology leader in our space, and we want to continue to be front and center in the industry in that respect. The only other comment I'd make in terms of absolute levels of investment -- it's hard to compare, but I think at the end of the day, just bear in mind, the bulk, if not really the vast majority of our innovation spend is on our product business.
So when you look as a percent of revenue, you really have to think about percent -- the denominator effectively being our IT&S product business overall. So I think we'll continue to invest behind product innovation, but frankly, also supporting areas like our field service and our applications expertise as well, which I think is a key differentiator and maybe the unsung hero of our business in many respects.
Your next question comes from the line of Ross Sparenblek with William Blair.
Just a couple on the margins. Can you maybe help us pinpoint what this integration and growth investment cost is for '27. We have the SFE targets. It's something like around $20 million. I don't know if that's all in FY '27, and it seems like there's maybe some other moving parts there, too. You guys didn't say anything about material inflation. I know others are having that issue. I just wanted to verify that that's not an issue for you guys as well.
Yes, Ross, let me take a couple of pieces there. I would say, first, pure integration costs, we think that is in the ballpark of $10 million to $14 million. I would say that's to put the businesses together to get the ERPs to work, those types of dynamics, okay? Outside of that, there is some core investment we need to make in SFE to stand that up that will be recurring costs in the business. So really, there's investments of 2 types there. one, just to get it up and running, which we put out at $10 million to $14 million; and two, some core investments in things call the SEC reporting or legal resources that we need on a recurring basis. So there's kind of a combination of both there from an integration perspective.
Second, on material inflation, it's -- we read the news too. We see some impacts of it, but it's -- I would say it's not as exorbitant as some may be led to believe. Obviously, we have our eyes on the ball there. And obviously, we have a sourcing team that is driving all the cost that we can. But as we enter '27, it feels like an environment similar to '26 that we're prepared for.
Yes. And I think as always, Ross, from an inflation standpoint, our goal is to at least offset that through a combination of pricing where appropriate and productivity actions here in the business. We continue to firmly believe we can do that, if not over recover a little bit to maintain margin profile. As you know, from a pricing standpoint, we typically take 1 to 2 price increases a year. That's never peanut butter. We evaluate that by geography, by product line, even at SKU level, but we'll continue to evaluate that here in fiscal '27.
Okay. I mean it's hard to tell what the core incrementals should be as our starting point for '27. Can you just give us a sense of what the organic should be before we start layering in some of these costs?
Yes. I think on the incrementals, what I would say is we're going to share more specifics around that, not to sound like a broken record, but we will specifically address incremental and actually decrementals should those occur next week at our Investor Day. So stay tuned. But we'll talk specifically next week around sort of the fixed versus variable cost structure of the business and why that gives us confidence in our ability to deliver on the numbers that we'll share for the incremental and decrementals.
Yes. And Ross, I would just add that we've been on a journey here. Free cash flow has tripled almost over the last couple of years here. We've done the acquisition. We feel the time is right in a good market to invest back in the business and get growth above market, and that's what we're here to do.
I never had a doubt on the free cash flow. You guys -- you're on a tight ship over there. And then just one more here just on the -- I believe that we had SFE accretion around $0.25 for year 1. So 10 months of that, about $0.20 is kind of the starting point when we think about the organic EPS. Just trying to back parts.
That's in the range, Ross. I think you got to kind of look at that business in a couple of components. One, kind of take that down to 10 months; two, look at the current interest rate environment; and then three, the incremental investments we need to make back in that business. So that might get you to something that's a little bit less than that in the grand scheme of things.
[Operator Instructions] There are no further questions at this time. I will now turn the call back to Paul Sternlieb, CEO, for closing remarks.
Okay. Well, we hope that you'll join us for Investor Day being held next week on Wednesday, November 4 at the New York Stock Exchange. In addition to Darren and myself, we'll be joined by other members of Enerpac's leadership team, providing a comprehensive overview of our strategic vision and an in-depth review of our products, capital allocation strategy and financial objectives. Attendees will also be able to see our products close up through live demonstrations and meet the management team at a lunch in following the presentations.
If you are unable to attend in person, the presentations will be webcast and accessible on the Investor Relations section of our website. In addition, we will be participating in the Baird Global Industrial Conference in Chicago the following week on Tuesday, November 10. We hope to see you there. And I'd be remiss if I didn't end with congratulations to the Milwaukee Brewers for winning the World Series, well deserved. With that, thanks again for joining us, and have a great day.
This concludes today's call. Thank you for attending. You may now disconnect.
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q4 2026 Earnings Call
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q3 2026 Earnings Call
1. Management Discussion
Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enerpac Tool Group Q3 Fiscal 2026 Earnings Conference Call. [Operator Instructions].
I would now like to turn the call over to Darren Kozik, CFO. Please go ahead.
Thank you, operator. Good morning, and thank you for joining us for Enerpac Tool Group's earnings call for the third quarter of fiscal 2026. Joining me on the call today is our President and Chief Executive Officer, Paul Sternlieb. Also joining us is our new Senior Director of Investor Relations, Christian Audi. Christian brings more than 25 years of capital markets experience at Enerpac. Most recently, he served as Head of Investor Relations at ADNOC Gas, one of the world's largest energy companies. Earlier in his career, he was a top-ranked institutional investor analyst at Morgan Stanley and Santander. I know you will all enjoy working with him as your primary contact. Christian?
Thanks, Darren. It's great to be here. I look forward to working with all of you. On today's call, we will reference non-GAAP measures. You can find a reconciliation of GAAP to non-GAAP measures in the press release issued yesterday. Our comments will also include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include matters noted in our latest SEC filings. The slides referenced on today's call are available on the Investor Relations section of the company's website, which you can download and follow along with us. A recording of today's call will also be made available on our website. Now I'll turn it over to our CEO, Paul.
Thanks, Christian, and welcome to the team. There was a lot to be pleased about in the third quarter of fiscal 2026. Last quarter, we said we expected to capture mid-single-digit growth in our product business and generate improving trends in our service operations. I'm very pleased to say that we delivered on that plan, albeit with a greater-than-anticipated headwind from the protracted conflict in the Middle East, but more on that in a few minutes.
Clearly, the major news, which we announced yesterday afternoon is that we have signed a definitive agreement to acquire Specialized Fabrication Equipment Group, or SFE Group, which we expect to close in the first quarter of fiscal 2027, subject to regulatory approvals and customary closing conditions. If I can step back a moment, over the past several years, we have communicated that M&A is a key aspect of Enerpac's overall growth strategy.
We have also emphasized the disciplined nature of our process, ensuring that any transactions meet our strategic and financial objectives and create shareholder value. At the same time, we have been clear about our pursuit of high-quality assets that boast premium brands and strong margins similar to Enerpac. With SFE Group, we believe we have found a company that meets or exceeds all of these criteria. As shown on Slide 5, SFE Group is a leading global provider of specialized fabrication and industrial tool solutions for critical industries.
Like Enerpac that dates its brands back to 1959, SFE Group is comprised of complementary market-leading brands, the oldest dating back to 1936. Today, SFE Group offers products across 3 categories: pipe beveling and on-site machining, orbital welding and cutting and tools and lifting equipment. Importantly, as shown on Slides 6 and 7, the acquisition of SFE Group will expand and strengthen our position in attractive high-growth verticals, including defense, power generation and semiconductors and data centers.
With SFE Group's reputation for quality, durability, reliability and innovation, we believe the acquisition will enhance our portfolio and create additional opportunities to leverage our global scale, distribution network and technical and applications expertise. And with the addition of SFE Group, we will also expand Enerpac's addressable market by approximately $1 billion, raising our total SAM from roughly $4.5 billion to $5.5 billion. The addition of SFE Group will also bring a seasoned and talented management team. In addition to their manufacturing, operations and commercial expertise, they have a demonstrated record of successful acquisitions and integrations, a skill that will aid Enerpac in the future as we continue on our growth trajectory.
At the same time, we believe Enerpac can add value to their growth and capture revenue synergies. Presently, approximately 70% of SFE Group sales are in the U.S. As such, we see an opportunity to leverage our international distribution and accelerate international expansion. And that is just the beginning as we can utilize Enerpac's U.S. national account relationships to further drive penetration. These are just 2 examples of the accelerated growth we believe that we can achieve together. Additionally, we expect to achieve key cost synergies over time, which Darren will elaborate on a bit further.
Let me turn the call over to Darren to discuss some additional financial aspects of the acquisition.
Thanks, Paul. As shown on Slide 8, SFE Group generated trailing 12-month sales through March 31, 2026 of approximately $170 million and adjusted EBITDA of approximately $44 million. With a purchase price of approximately $472 million, that translates to a multiple of 10.6x trailing adjusted EBITDA. We intend to fund the acquisition through a combination of borrowings under our revolving credit facility and the activation of approximately $225 million under the accordion feature of our senior credit agreement. We have maintained a conservative balance sheet, and this transaction reflects the disciplined deployment of that financial flexibility.
Upon closing the acquisition, Enerpac's net debt leverage will be approximately 2.8x adjusted EBITDA. Based on our expected cash flow generation of the combined Enerpac and SFE Group businesses, we anticipate reducing leverage to approximately 2.2x within 12 months after closing, with most of the reduction in the back half of fiscal 2027. That will put us well within our target range of 1.5 to 2.5x leverage. We expect the acquisition to be accretive to adjusted EPS in fiscal 2027. We have modeled the near term assuming minimal cost synergies as we view SFE Group as a strong stand-alone business. As such, our return expectations are based on the quality of the business, its growth potential and future revenue synergies rather than near-term cost reduction opportunities.
That said, we do see upside to our already strong return expectations as we capture cost synergies over time from our combined scale and the structures we have established at Enerpac through the execution of our ASCEND transformation program and our Powering Enerpac Performance or PEP, continuous improvement program. More specifically, we believe there are opportunities to leverage portions of our existing human resources, IT and finance infrastructure. At the same time, we expect to make targeted investments in systems, controls and reporting capabilities as we transition SFE into the Enerpac operating model and public company environment. Altogether, by year 3, we anticipate adjusted EBITDA synergies of $4 million to $6 million based on our expected revenue and cost synergies.
Overall, we believe the acquisition represents an attractive use of capital, enabling us to add meaningful scale with the addition of a high-quality business with strong margins, compelling growth characteristics and opportunities to create additional value over time. We currently anticipate closing the acquisition during the first quarter of fiscal 2027, subject to regulatory approvals and customary closing conditions. Now let me switch gears and make a few brief comments about our third quarter, starting with Slide 10.
For the third quarter, IT&S product sales increased 5% organically. Strong product sales were partially offset by a decline of 8% in the IT&S services business. But as you may recall, last quarter, we announced actions to address a market slowdown in the service business in the EMEA region. We also announced a new 5-year service contract that we signed with a major U.K. North Sea oil and gas company. Aided by the initial benefits of both, our service business improved sequentially with a 17% gain in revenue and better profitability quarter-over-quarter, reflecting progress as we pursue our strategic transition toward higher-margin service business and profitable growth objectives.
At Cortland, shown in the other segment, we continue to deliver strong organic growth of 25% in the third quarter due to our ongoing success generating new customers and projects. Turning to Slide 11, which shows organic growth performance by geography. IT&S revenue in the Americas grew 6% year-over-year. Within that, product revenue increased 10% in the region. While the strength was broad-based, as Paul will discuss, the standout end market was power generation, which includes our heavy lifting technology business or HLT, which specializes in heavy lifting and moving solutions for the build-out of data centers and infrastructure. Revenue in the Asia Pacific region, which was flat, was impacted by the conflict in the Middle East. In the oil and gas sector, refineries have delayed shutdowns in order to maximize production, which resulted in orders being pushed out. More broadly, higher inflation is causing our end customers to look for ways to economize by delaying purchases. However, within the APAC region, Australia, Japan and South Korea were strong.
Turning to the EMEA region. Third quarter revenue in the region was flat as the gains in product revenue was offset by a decline in service revenue. Of note, performance in the EMEA region was also impacted by the ongoing conflict in the Middle East. As of last quarter's call, we were only 2 weeks into the conflict. Given its protracted nature, the impact has been greater than anticipated. While difficult to estimate an exact amount, we are specifically aware of a $3 million service project for a long-term customer that was scheduled for the third quarter, but delayed due to the conflict. That, in addition to other customer delays that impacted shipments in the region, resulted in a higher-than-expected headwind in the quarter. Overall, given the fluid nature of the situation in the Middle East, we're expecting a similar environment in the fourth quarter, but hope to see a return to more normal flow in the first half of fiscal 2027.
Turning to Slide 12. Overall, as Paul mentioned, we executed the operational levers that we laid out last quarter. In addition, we recognized a $6 million net benefit from the expected refund of the IEEPA tariffs. Excluding the benefit of the tariff recovery, gross margins were negatively impacted by mix given the higher growth rate of our heavy lifting technology or HLT business and continued dilution from our service business. Adjusted SG&A expense was higher, up 90 basis points as a percent of revenue. We continue to invest in the business with a higher R&D spend and expenses associated with new product launches, including the recent ConExpo, where we launched 6 products.
On a per share basis, we reported adjusted earnings of $0.60 in the third quarter of fiscal 2026, of which $0.08 was related to the tariff recovery. That compared with $0.51 in the year ago period. Cash flow was strong. On a year-to-date basis, cash flow from operations of $69 million compared with $56 million in the year ago period. Free cash flow expanded by $20 million to $60 million for the first 9 months of fiscal 2026. And we were pleased to continue our share repurchase program in which we repurchased approximately $15 million in the quarter. Looking ahead, while we are pleased with the solid mid-single-digit growth in our product business and the sequential improvement in service in the third quarter, we have adjusted our full year guidance.
The delay in service revenue in the Middle East due to the ongoing conflict has an outsized impact on margins given the high fixed cost nature of the business. Additionally, we expect a margin impact driven by mix given the higher growth of our HLT business, which carries slightly lower margins. As shown on Slide 13, we now anticipate organic growth of 1% to 2% for the full year fiscal 2026, and we are guiding to adjusted EBITDA of $151 million to $156 million and adjusted earnings per share of $1.84 to $1.89. Given the strong cash flow performance to date, our free cash flow guidance remains unchanged.
With that, let me turn it back to Paul.
Thanks, Darren. As Darren said, and illustrated on Slide 14, the power generation vertical has been a source of particular strength for Enerpac's HLT business in the Americas region. We have benefited from proactive engagement with existing customers. We have also launched a campaign targeting data center customers. These marketing initiatives have resulted in strong commercial activity, a growing funnel and an expanding backlog as we promote the application of our mission-critical moving systems to data center build-outs and to those manufacturers making equipment in support of data centers. And as I mentioned earlier, the addition of SFE Group will provide even greater exposure to the attractive power generation and data center end markets. SFE Group offers an extensive range of standard and customized solutions to ensure reliable performance and support critical operations in the power generation industry, including renewables and nuclear power.
We also expect SFE Group to continue to generate meaningful sales in the data center market where piping and tubing are critical components of the cooling infrastructure. At the beginning of the call, I also mentioned Enerpac's strong position in the growing defense market. As such, I am pleased to announce that we just signed a contract with a major European military contractor for nearly $5 million to provide specialized lifting systems that support maintenance activities on a key vehicle. We expect to ship the vast majority of that project in fiscal 2027. Another aspect that makes SFE Group such a good fit for Enerpac is our shared culture of innovation. At Enerpac, we are pleased with the accelerated pace of innovation this year and the market's reception to our recent product introductions as we continue to commercialize these launches.
As shown on Slide 15, our new LU Series lightweight torque wrench pump, a portable pump for intermittent duty bolting applications is a natural extension of our existing portfolio, addressing a sizable recurring applications opportunity. Moreover, like our other new products, we believe its design, features and high reliability support Enerpac's premium market position. We are also excited about the launch of the dual machine skate set, our first integrated solution combining our heavy lifting technology with DTA's moving and positioning technology. This system is purpose-built for in-factory movement of high-value prefabricated data center modules and further strengthens our end-to-end heavy lifting and positioning portfolio, spanning lift, jack, support and controlled transport solutions. We have now introduced 8 new products to date in fiscal 2026 and are on track to deliver 10 for the full year, double the pace we achieved in fiscal 2025.
Looking ahead, as outlined on Slide 16, we believe Enerpac can continue to capture mid-single-digit growth in our product business, given our position in attractive verticals and geographies, complemented by the success of our innovation program. Meanwhile, the service business continues to improve in terms of growth and margins. And when the Middle East conflict resides, we do see an opportunity to support rebuilding efforts through both our product and service businesses.
Finally, as you saw, we continue to generate strong cash flow and remain effective stewards of capital. Before we open the call to your questions, I'd like to take this opportunity to let everyone at SFE Group know just how excited we are to have them join the Enerpac team. We believe that our shared commitment to customers, quality, innovation and operational excellence, combined with shared cultural values makes us a natural fit as we combine our complementary products to enhance our position as a premier industrial solutions provider.
With that, we'd be happy to take questions.
[Operator Instructions] Your first question comes from Will Gildea with CJS Securities.
2. Question Answer
Paul -- congrats on the acquisition. Can you talk a little more about what you like about the company, what's attractive? And it would also be helpful to know what the organic profile has looked like at SFE over the past few years and where it can go with revenue synergies and your global distribution network.
Yes. No, we'd be happy to. Thanks again for the question. Look, we're extremely excited about this acquisition. As we highlighted in the prepared remarks, SFE is a business that has premium products and margins, much like Enerpac's positioning in the marketplace. It has the ability to drive strong growth, we believe, both organically and inorganically. In fact, its organic growth has been in the high single digits or better in recent years. So we're extremely pleased with the performance of the underlying business. It has exposure to higher-growth end markets and geographies, as we talked about, and really a complementary position that expands our addressable market by about $1 billion.
It also, by the way, comes with an extremely strong management team who will stay on and become part of the Enerpac Tool Group team here. So we're super excited in terms of the talent addition that it brings here at Enerpac. And then also, as we talked about, both opportunities on revenue and cost synergies over time. I think on the top line, our view is we certainly can leverage Enerpac's international distributor network and our relationship with key national accounts. But also SFE has access to other channels that Enerpac is underpenetrated in today. So I think it really does go both ways.
And then as we talked about or Darren mentioned, I think early on, cost synergies may be limited as we lean more into the integration, bringing up to public company standards and driving more on the top line. But we do, over time, certainly see opportunities for operational synergies in terms of HR, IT, finance and also, frankly, sourcing synergies, which we think may be some more low-hanging fruit. So all in all, we're just super excited. We've been taking our time diligently to explore opportunities in the marketplace, and we believe this is really, for us, an extremely great fit.
And Will, I'd just add is you look at the business that Paul described and that we saw through diligence, it is a high-quality business that we think we got an attractive valuation. So we're very happy to bring the SFE Group into the family because we think it will propel growth forward in the future.
And by the way, we're looking forward to the CJS conference tomorrow in White Plains, so we can share more.
Yes. We're looking forward to having you there. So the 10x EBITDA multiple for that very attractive business is pretty reasonable. Was it a competitive process? Just curious why the multiple wasn't somewhat higher? Are there near-term macro or other headwinds or anything like that, that we should be thinking about?
Yes. This was completely proprietary, Will, not in a process at all. In fact, the business wasn't planning to sell at all. The owner, Gladstone is sort of effectively an evergreen fund, so they don't have any sort of near-term needs to sell. And I think we just got together -- and we're able to strike a deal that was meaningful for both parties and make it work. And so as Darren referenced, we think it's an attractive valuation, certainly at a multiple below where Enerpac is trading, frankly. And so overall, I think it was a great deal all around.
Your next question is from Thomas Hayes with ROTH Capital Partners.
Darren, maybe first on guidance, maybe could you provide a little bit more color on the rationale for some of the changes, key drivers? And just kind of along those lines, are there any transaction costs from the SFE transaction in the fourth quarter? Should we expect anything?
No. Great question, Tom. So I think where we sit today, as we look at the business for the last couple of quarters, we're very proud of the mid-single-digit product growth, okay? That's been the strength over the last couple of quarters. It's been our service business. We've talked about that the last few quarters. That is slightly dilutive to the overall portfolio. And obviously, we've been trying to reposition that business. We put on top of that the conflict in the Middle East, that's been a drag on earnings, okay?
So as we look at Q4, as we look at the total year guide, Q4 looks candidly very similar to Q3, albeit we won't have the tariff recovery to help the margin rate out. So we're thinking about Q4 in the same lens, candidly as Q3, low single-digit growth, EBITDA margin in 23%, 24% range at the midpoint, okay? So as you kind of step back, that's where we are today. Now from a transaction perspective, what we will do is that is not in the guide. We will carve out those costs. We'll tend to look at adjusted EBITDA, excluding M&A costs and any noncash acquisition charges going forward, but we'll share more on that in the future.
Yes. And you will see in our Q, we did, of course, have some charges for this transaction in Q3, and there will be some follow through in Q4 as well.
Okay. And then maybe just shifting gears a little bit to the product side. I know we had a chance to see some of your new products at ConExpo earlier this year. But maybe just kind of dive in a little bit more on the data center opportunity. You had mentioned it in the -- in your prepared remarks, just kind of where you see Enerpac finding a niche there? And also how does maybe the SFE kind of extend that further?
Yes. No, happy to, Tom. Look, I mean, while it's certainly small today, we do see it as an outsized growth opportunity for us, and we referenced that in our prepared remarks. First off, for HLT specifically, and it's in the slide deck, I think on Slide 14, we've built -- we've seen nice growth and built a nice backlog there. And we do see a lot of that driven through either data center or data center-related activity. What I'd highlight mostly is our products aren't going maybe directly into a data center, meaning our customers aren't hyperscalers themselves per se.
More often, they are manufacturers that are making heavy equipment that has to go into a data center, and they need our equipment and tools to help manufacture produce that equipment, move it around their facility and ultimately move it into and position it inside a data center like some of these modular solutions. So we are really pleased with the progress there.
As we talked about, we've launched some specific marketing campaigns focused at the data center market. And then also, as we referenced on the prepared remarks, we did just launch our new battery-powered dual machine skate set. And that's pretty exciting for us because now that we've owned DTA for about 1.5 years, we've been able to leverage some of the technology that, that team has developed and actually integrate it into our HLT solutions. So some of the early technology synergies that we had hypothesized are really coming to the fore at this point. And that solution allows for very precise movement of prefabricated data center modules. And so again, small to start, but really good growth prospects in those markets given our products and what they can help our customers do.
Your next question is from Ross Sparenblek with William Blair.
Congrats on the acquisition this morning. Maybe just kicking off there. Can we maybe just speak to the competitive landscape? It sounds like they're 15%, 20% of their own TAM. Just any other competitors to be aware of?
Yes. It's -- I would say, Ross, like Enerpac, it's a fairly large and fairly fragmented market. For most of what SFE does, they are, I would say, either market leader or in top 2 or 3 positions in the market. That's probably more true in the Americas given their weighting in this geography, which obviously is one of the reasons we're excited about the revenue synergies and our ability to help them grow more internationally. But their set of brands are very premium positioned and enjoy really nice share in the market today.
But again, there is a whole host of sort of fragmented competitors, which, by the way, over time, may present additional inorganic growth opportunities. One of the things that we also liked as we talked about regarding SFE has been their ability to grow inorganically, and they've added on a number of businesses and brands over the years that Gladstone has owned them. And they actually come with the funnel of other opportunities as well. So in time, I think that will help boost our own corporate development opportunities here.
Okay. I was just trying to get a sense if there's anybody else that really stands out as being the dominant provider across any one of these end markets. And if you look back the last 5 years or so, do you get the sense that they're organically taking share or just kind of growing with the market? And if they are, what is it in that strategy? Has it been geographic or more just end market related, brand related?
Yes. I would say there's no standout in my view, competitor. There is a whole host of them. And certainly, over time, we can share more in our investor materials around that. But just like Enerpac, I mean, we always remain paranoid around the competitive set and our positioning in the market, so does SFE. But again, I feel confident in their positioning today. I think our view is that they have been taking share over the last few years. I think they've been excelling in terms of commercial execution in the marketplace. some of the innovation that they've launched as well. And I think the combination of those things has really allowed them to effectively grow faster than the market is our view.
Okay. That's good to hear. And then just thinking about kind of their end market exposure to power gen infrastructure versus Enerpac, -- have you seen those end markets grow? And then maybe just the ability to leverage that go-to-market, what would that look like going forward in the 2 product portfolios?
Yes, absolutely. I mean if you look at Slide 7, that does break down end market exposure. And again, that was a really attractive element as we evaluated this opportunity with SFE. I mean they've got fairly extensive exposure on the power gen and energy market as well as aero and military and defense. So those are markets that are, I think, very attractive with what we believe have long-term really positive fundamentals underlying them. And then, of course, the semiconductor and data center market as well, where they, I would say, have more significant exposure than we do today. I mean if you step back and think about it at a very high level, basically, almost all of SFE's portfolio are tools used for round stuff for pipes to make it very simple.
Anywhere you need a pipe, you need to cut a pipe, put pipes together, weld pipes, things like that. That is, in essence, what a lot of their tools enable for their customers, obviously, with high precision, high quality. And if you think about these end markets, there's a lot of round equipment, round pipes in those markets, especially things like data center and semiconductors where they need pipes for cooling. So again, just a really attractive element for us. So -- and I think the combination of the 2 gives us more leverage to drive more penetration collectively in those end markets.
Okay. Well, I mean kind of looking on the website, it appears to be more nuclear renewables. When we think about that 35% energy as PowerGen, what is kind of the oil and gas mix?
It's a pretty important element. Yes. I mean I think the website, I would take sort of just as color, but the data that we share, I mean there's a good element in there that is refinery, petrochem related as well. And they do, do a fair bit of nuclear, which, as you know, is a good end market here for Enerpac. We even have some specialty product lines dedicated to the nuclear market. So yes, they participate in wind as well like we do, probably similar exposure to what Enerpac has in wind today, single digits.
Your next question is from Steven Silver with Argus Research.
Congratulations on the deal as well. So the leverage for the company, you guys have brought down to 0.5x through Q3, and you've estimated it going up to about 2.8x at the closing of the deal and then forecasting a return to about 2.2x after the end of year 1. I'm just curious as to whether that -- those forecast changes your views of your capacity or appetite for additional tuck-in M&A? Or are you really focused on bringing your leverage back within the range?
Good question, Steve. So I would say to give everyone some flavor on SFE Group, their profile, their cash generation profile is very similar to ours, okay? When you look at their business, their CapEx as a percent of revenue runs 1% to 2%, very similar to us. So we're confident in that ability to pay down that debt to get to our target leverage of 1.5 to 2.5. As we look at the next 12 months, that will be a focus, but we will also have access to additional capital to do tuck-in M&A or potentially share repo. So we do have options ahead of us, and we do have flexibility just given where our leverage will stand.
Yes. And I would add, Steve, again, as referenced, the team at SFE does actually come with an existing funnel of additional inorganic opportunities. Some of those are smaller tuck-ins, and we may look to pursue those just given the strength of our balance sheet. So I mean, obviously, we wouldn't be looking to do anything outsized until we get back to a more comfortable leverage position, but smaller things are certainly in the realm of possibility.
Great. So just circling back to the Middle East. I know you guys talked about in the prepared remarks, really what you're seeing in terms of the protracted conflict there. But you also mentioned that you expect some or at least see recoveries being more likely in fiscal '27. So I'm just curious as what you guys see as the potential risk or the pain points coming out of that conflict given the fact that the situation does remain so fluid even like 5, 6 months into this conflict at this point?
As a reminder, the Middle East and our business, it's roughly about 10% of our business or about $60 million. So that's kind of the size of it. As we look at what happened in Q3, we did have one big shutdown that was pushed out, Steve. Obviously, given the news over the last couple of days, there may still be more pushouts. I think as Paul and I look at the Middle East and we think of the opportunity, it's not if it's when, okay? And that's the lens we're taking. We do think there will be opportunities for us there in the future. Just with the conflict, it may take time.
Okay. Great. And then one more, if I may. The prepared remarks talked about SFE having about 1,400 active distributors. And I know you guys have done quite a bit of work over the last couple of years consolidating your own distributor network. So I'm just curious as to whether there's a lot of overlap there in terms of the distribution network and how you guys plan to really just consolidate that distribution network post closing?
Yes. Great question, Steve. I mean as we get into integration planning, that's certainly a key area of focus on the commercial side of how we leverage the strength of both of our channels to drive accelerated growth for both Enerpac and SFE. They've got a really exciting, strong, very extensive distribution channel partner network. There's certainly some overlap with what Enerpac does today, but it's like a Venn diagram, right?
There are areas where we have a distribution or types of channels that they don't have or aren't as strong in. And there are areas where they have channel partners that traditionally we aren't as strong in. I'll give you an example, the welding channel, given what they do with Aker and some of their other product lines is a reasonably strong channel for SFE, a channel that Enerpac really hasn't traditionally played in. So we'll evaluate that at the appropriate time through the commercial organization, but we do think there are some opportunities to leverage the combined scale of the distribution networks.
There are no further questions at this time. I'll now turn the call back over to Paul Sternlieb for any closing remarks.
Okay. Well, thank you again for joining us on the call this morning. As I mentioned, we will be attending the CJS 26th Annual New Ideas Summer Conference in White Plains tomorrow. So please join us if you're able. Thanks again, and have a great day.
Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q3 2026 Earnings Call
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q2 2026 Earnings Call
1. Management Discussion
Hello, and welcome to Enerpac Tool Group Second Quarter Fiscal 2026 Earnings Call. Please note that this call is being recorded. [Operator Instructions]
I'd now like to hand the call over to Darren Kozik, CFO. Please go ahead.
Thank you, operator. Good morning, and thank you for joining us for Enerpac Tool Group's Earnings Call for the Second Quarter of Fiscal 2026. Joining me on the call today is our President and Chief Executive Officer, Paul Sternlieb. The slides referenced on today's call are available on the Investor Relations section of the company's website, which you can download and follow along. A recording of today's call will also be made available on our website.
Today's call will reference non-GAAP measures. You can find a reconciliation of GAAP to non-GAAP measures in the press release issued yesterday. Our comments will also include forward-looking statements that are subject to business risks that could cause actual results to be materially different. Those risks include matters noted in our latest SEC filings.
Now I will turn the call over to Paul.
Thanks, Darren, and thank you, everyone, for joining us this morning. As we look back at our second quarter of fiscal 2026 performance, there was a lot to be pleased about. Within our Industrial Tools & Service segment or IT&S, product sales accelerated growing 6% organically year-over-year. That represents the highest growth in products that we've enjoyed in 10 quarters since the fourth quarter of fiscal 2023. Through February, we saw some strengthening in the U.S. market with the PMI reflecting 2 consecutive months of expansion in the manufacturing sector. Likewise, U.S. industrial distributor survey data through February suggests improving sentiment. At Enerpac, we continue to see favorable trends with overall product order rates growing mid-single digits and gains in each of our 3 geographic regions.
Within our Services business, which represented approximately 20% of the IT&S segment in fiscal 2025, we took decisive actions to address the market slowdown in the EMEA region that has weighed on overall growth and profitability. With the announced restructuring, we are rightsizing our Hydratight service operation in the region and reducing headcount to align with current market conditions. The restructuring will also support our strategic transition toward higher-margin service business and profitable growth objectives. At the same time, we are very pleased to announce a 5-year contract award with a major oil and gas company operating in the U.K. North Sea. Under that contract, which is worth several million dollars annually we will provide maintenance and pipeline service work.
I'm particularly proud of the fact that we were able to secure this win against significant competition. Much like the premium Enerpac tool brand our Hydratight brand on the service side is synonymous with superior technical know-how, value-added support and world-class job performance. In fact, the customer indicated that Hydratight was selected for this critical work as they felt we are the only ones who could ensure reliably leak-free results.
With that, let me turn the call over to Darren, who will provide more detail on our second quarter performance as well as geographic and end market trends. Then I'll come back to talk about our progress on the innovation front and our successful presence at ConExpo. Darren?
Thanks, Paul. As seen on Slide 4, Enerpac's second quarter revenue of $155 million expanded 2% on an organic basis. IT&S sales increased 1% organically as a 6% gain in product sales was offset by a 17% decline in service revenue. And while there's still softness in the industrial MRO end market, we continue to enjoy growth in power generation, infrastructure and defense end markets on a global basis.
At Cortland, shown in the other segment, we continue to capture exceptional growth of 27% in the second quarter due to its ongoing success generating new projects.
Turning to Slide 5, which shows our performance by geography. We delivered solid 4% growth in the Americas. Year-over-year growth of nearly 6% on the product side with particular strength in standard products was somewhat offset by an 8% decline in service revenue. On the product side, we were particularly pleased with gains we made with national accounts.
Turning to the EMEA region. Let me first draw your attention to the pie chart on Slide 5, which shows the revenue breakdown between product and service for each region in fiscal 2025. Of note, it illustrates the greater relative importance of service in the EMEA region and how its performance significantly affects overall results. As such, while product revenue expanded 7% in the EMEA region, with gains for both standard product and HLT, second quarter revenue in the region was down 1% due to a 21% decline in service revenue. Geographically, on the product side, while conditions were soft in Northern Europe, Southern Europe enjoyed good performance including some project work on the power generation side.
In Asia Pacific, we resumed modest growth, led by our products business. While we continue to experience weakness in China, there were several bright spots. In India, we had another strong quarter growing double digits due to strength in steel, process industries and heavy equipment manufacturing. And in Australia, we continue to benefit from recovering in the core mining sector as well as healthy demand from oil and gas.
Turning to Slide 6. Gross margins declined 410 basis points year-over-year. While gross margins on the product side remain at healthy levels, overall gross margins were under pressure due to lower volume in our service business. On the other hand, SG&A expense continued to reflect a disciplined cost management and benefit from moving resources to our low-cost shared service model. As such, adjusted SG&A declined to 26.4% of revenue compared with 28.3% in the year ago period. As a result, the adjusted EBITDA margin was 21.3% compared with 23.2% in the year-ago period. We enjoyed margin improvement in the products business. However, that benefit was offset by pressure in the service business and to a smaller extent, an FX impact of roughly 50 basis points.
On a per share basis, we reported earnings of $0.31 in the second quarter of fiscal 2026 versus $0.38 in the year ago period. On an adjusted basis, earnings were $0.39 in both periods. In the second quarter, we booked a restructuring charge primarily related to the service business, totaling $3.3 million. We expect to see the initial benefit of the savings in the third quarter and anticipate a payback period of about 1 year.
Turning to the balance sheet, shown on Slide 7, Enerpac's position remains extremely strong. Net debt was $89 million at the end of the second quarter, resulting in a net debt to adjusted EBITDA ratio 0.6x. Total liquidity, including availability under our revolver and cash on hand was $499 million. Cash flow was strong with year-to-date cash flow from operations of $29 million compared with $16 million in the year ago period. In addition, year-to-date free cash flow expanded by $18 million from $5 million in the first half of fiscal 2025 to $23 million in the first half of fiscal 2026.
During the quarter, we returned significant capital to shareholders, repurchasing $51 million worth of stock. Out of the $200 million authorized by our Board in October of 2025, approximately $135 million remains, and we will continue to opportunistically repurchase stock. Looking ahead, while our product business remains strong, the service side of our business continues to experience pressure in the near term. Additionally, we recognize that the evolving conflict in the Middle East could have a direct impact on our business in the region as well as potential ramifications as it relates to global inflation and economic growth.
As such, we have narrowed the guidance range for fiscal 2026. We are now guiding to a full year net sales range of $635 million to $650 million that represents organic sales growth of 1% to 3%. But keep in mind that growth rate is composed of solid product growth in the mid-single-digit range or even a bit better, which is offset by projected service contraction in the low to mid-teens range. We are now guiding to adjusted EBITDA of $158 million to $163 million and adjusted EPS of $1.85 to $1.92. We held free cash flow guidance at $100 million to $110 million, given our strong cash flow generation year-to-date.
As we look forward, the restructuring and rightsizing of our EMEA service operations will establish a more competitive cost structure and a platform for growth. In addition, through the execution of Powering Enerpac Performance or PEP, we see further opportunities to improve operating efficiency with our continued focus on procurement and the productivity of our manufacturing footprint, which supports our healthy product business.
With that, let me turn it back to Paul.
Thanks, Darren. As you may know, we recently exhibited at ConExpo, North America's largest construction tradeshow. Attendance and engagement were extremely strong. At the event, we demonstrated our latest infrastructure lifting and smart transport solutions, including several newly launched innovations. The conversations with customers were very productive resulting in some meaningful orders booked at the show itself. And this was the first major U.S. trade show where we exhibited our DTA automated guided vehicles.
Among featured solutions included on Slide 9 were a new line of split-flow pumps, the diesel-powered split-flow pump, which we added with the recent acquisition of the Hydra Pac assets, enables operation without an external power source. As such, it provides greater mobility and application flexibility, which can be a significant advantage for customers across many end markets including infrastructure and power generation. We also introduced our Battery Split Flow Pump. Not only does it allow for operation without a power source, but it also enables use in enclosed spaces by eliminating emissions and significantly reducing noise.
And we also showcased and launched our Intelli Lift 2.0 wireless gantry controller. With this controller, Enerpac has introduced the world's first software-defined wireless and scalable heavy lift control platform capable of operating up to 8 hydraulic gantry legs in synchronous fashion, from a single control unit. It also provides the foundation for recurring software updates, multi-application expansion and long-term ecosystem value. In addition, we launched our new Cribbing Rings, our updated Skid Track system and a new Lightweight Toe Jack. These products are just a sample of what's come from our increased and more focused investment in innovation, an effort that continues to respond to our customers' needs and build the strength of the Enerpac brand.
Before we open the call to your questions, I'd like to thank our team across the globe. I applaud their talent and dedication. I also appreciate each and everyone's role in building a culture of ownership, accountability and teamwork here at Enerpac Tool Group. Particularly rewarding on a personal note, is the way our employee engagement scores have improved every year since 2022 and now exceed industrial manufacturing industry benchmarks. It is our people and shared culture that make Enerpac a premier industrial solutions provider.
With that, we'd be happy to take your questions.
[Operator Instructions] Your first question comes from the line of Will Gildea of CJS Securities.
2. Question Answer
Can you talk about how much of your business comes from the Middle East? And are you seeing an impact in the region due to the current conflict?
Yes, sure. So revenue from the Middle East by the way, including product and service is about 10% of our total revenue for the company. What I'd say on the impact, I mean, we don't obviously know how long this conflict will last and if it would materially impact our outlook for the year. But certainly, it does create a greater level of uncertainty, no doubt. We have seen, since the conflict with Iran, some pause and service work in the Middle East mainly due to inability to access facilities, customers shutting sites or deferring work. And I would say largely, we believe that's work that's been pushed to the right. That work will need to take place. In some cases, given some of the damage to facilities, there'll be more work post the conflict. But beyond the Middle East itself, of course, there are impacts more broadly from higher oil prices inflation general economic headwinds that the conflict has created.
So what I'd say and what I've said to our team is we're working on what we can control, which is obviously keeping our people safe in the region which we are doing and have done, and certainly trying to proactively identify additional commercial opportunities on a global basis to mitigate any impact to our business.
That's super helpful. And on the updated guidance, can you provide some more detail on your expectations? And maybe talk about how you're thinking about the cadence from quarter-to-quarter?
Sure, will. As we kind of look at revenue, I would say in the first place, as we talked about our product business is very strong. IT&S product in the first half is up 5%, okay? We expect to see mid-single-digit growth for that business for the total year. So we've been very pleased with that performance. On service, we have continued pressure in the third quarter, okay? But we expect to see a little bit of a rebound in that business in Q4. And as you saw in our prepared remarks, we think that business for the total year will be down a decline of the low to mid-teens, okay? So that's the framework for a revenue perspective.
As we look at gross margin, we expect to see sequential improvement into Q3 and then into Q4. That's coming off of roughly 46% and just north of that in Q2. So we expect to see that improvement in the second half. SG&A, when we look at that, obviously, our goal is simple, maintain or improve SG&A as a percent of sales for the year. So I think that's kind of the framework we have on the lines of the P&L. Obviously, from a free cash flow perspective, strong, strong performance, $23 million, up $18 million year-over-year. So we held that guidance.
As we step back, I think we look at the business, we still see opportunities to improve the margins, okay? We are looking at the service business. We've got ongoing initiatives in procurement and our manufacturing footprint. And obviously, we have PEP running to improve those margins in the second half. So that's kind of the framework and how we think about the business.
Your next question comes from the line of Ross Sparenblek of William Blair.
This is Sam Karlov on for Ross. I guess starting on the HLT business. I'm curious, specifically, have you seen any project slowdowns as a result of the macroeconomic uncertainty over the past month or so?
No. Nothing to date, Sam. In fact, our HLT business remains, I would say, quite strong and healthy, good backlog. It's a product line where I would say we're extremely differentiated. We continue to see really robust engagement with customers, good order rate activity. We are also encouraged by activity we see, particularly for HLT in the data center end market. Although still a relatively small portion of our overall revenue as a company today, we do see good upside opportunities, and we did have good engagement with customers at the ConExpo Show in Las Vegas, specifically around data centers, including some repeat orders.
Got it. That's good to hear. I guess switching gears a little bit. We noticed there was some incremental M&A costs as well as some sizable share repurchases in the quarter. Can you give us an update on what your M&A pipeline looks like and maybe update us on your near-term capital allocation priorities?
Yes, absolutely. I can talk about some of the M&A and Darren can talk more broadly around capital allocation. But I think clearly, value-creating M&A remains a very key focus and key part of the overall growth strategy for the company. We continue at any point in time to evaluate interesting opportunities that we think could be value creating and could have synergies and good strategic and financial fit with our company. Yes, we did incur some more significant costs in the quarter related to different opportunities that we've been evaluating. I would say that we continue to have and cultivate a fairly robust funnel. And at any point in time, we are having a good number of ongoing discussions at various stages of evolution with different target opportunities.
Obviously, it's -- we can't really comment more specifically, but I do feel that the M&A environment overall is robust, that our funnel is extremely robust and that we're spending certainly appropriate time engaging on that in the marketplace and with particular targets. And of course, as you know, we've got a balance sheet to support from a capital perspective, really anything that we think would be appropriate for the company and our shareholders.
Yes. Thanks, Paul. I would just add from a capital allocation perspective, Sam, our first priority is obviously investing organically back in the business. You'll see our CapEx trends there. We want to improve our operations, whether it be IT or in the factory footprint, we are doing that CapEx in the first priority.
I would say then secondly, when we see an opportunity in the market for share repurchase, we'll take it. We obviously saw some of that in Q2. But that doesn't prohibit us from other activities. I mean you can see our leverage at 0.6x. You can see we haven't tapped the revolver. So we've got plenty of firepower left for M&A. So we're really consciously balancing all those activities across those 3 priorities.
Got it. That's good color. And then quickly one more. Maybe comment on the size and strategic fit of the Hydra Pac acquisition. It sounds like you guys have added some products using that platform.
We did. That was really effectively a small tuck-in. It was an asset purchase, really not material in terms of the cost for us to acquire that. But it is a partner we've worked with for a long time. And that particular product line is very additive to what we do. It was a specific gap we had in our portfolio on split-flow pumps powered through alternative sources, in this case, diesel for portability and remote site applications. So we're extremely pleased to get that across the finish line and to be able to announce and show it at ConExpo, where we actually did get quite a degree of interest. It's been a product that's been in the market and successfully so for quite a number of years, but we do believe Enerpac's global presence, our distribution network and just the strength of our brand overall that we can continue to grow that product line much more significantly. So we were super excited to get that over the line.
Your next question comes from the line of Tom Hayes of ROTH Capital Markets.
Thanks, guys. Good morning. On the service business, I know you guys have taken -- I think you mentioned 2 restructurings in the past year. Can you maybe just talk about the scope, the payback and kind of where you have the service business position now?
Sure, Tom. We did take 2. Our first was in the third quarter of 2025. Now what I would say, that was roughly a $6 million charge, but only about $4 million of that was related to people. That was really global reductions and some of those activities just take time to mature through the business. So as you saw in Q2, our SG&A was rather favorable versus prior year. So we're starting to see some of that come through. Overall, that restructuring had about a 12-month payback, okay?
Then just in this quarter, we announced another restructuring of just over $3 million. That was primarily tied to our service business. We've seen some pressure there, specifically in Europe and the Middle East. So we did make those adjustments. Now what I will say is that chart, the benefit of that will flow through both direct costs and SG&A just given the nature of our service business. So we think from a service perspective, we've got the right footprint now. Obviously, you heard Paul talk about the big deal we've won. So -- and even in our guidance, we think 3Q is going to be tough, but 4Q should be a rebound in our service business. So we think we're in a good spot.
Okay. I appreciate the color. And it was a really nice catch up with you guys at ConExpo. The booth was great and seemed busy for the days I was there. But I was just wondering, can you provide a little bit more detail on the pace of the introductions of the new products? And kind of should we expect some impact to the top line this year? Is it more of a next year contribution from the new products?
Yes. Thanks, Tom. Yes, we were extremely pleased with the team's progress on innovation and our ability to launch quite a number of new products at the ConExpo show, 6 in total. Those are all really new to market opportunities, not only for Enerpac, but in most cases, new to the world in terms of differentiation on the product lines. And we talked about that in our prepared remarks, but some of these are really exciting, extremely differentiated technology that just isn't available to customers today until we launch. So the team has done a great job there. You can see that we're picking up and accelerating the pace of innovation.
Last year, we launched 5 new products in fiscal '25. I think we said last quarter, we hope to come close to doubling that. Obviously, we're well on pace. First half of the year with 6 already launched. We do have more products planned for launch in the back half of this fiscal year. So stay tuned on that. But I think that is the benefit of our very focused investment that we've been making in innovation, the investments we made behind our innovation lab here at our headquarters in Milwaukee, our prototype facilities, et cetera, that's really allowing us to dramatically increase the pace of innovation and reduce the time to market, just with the ability to do prototyping kind of on the fly in real time and effectively overnight in many cases on parts.
So in terms of the incremental revenue as typical for our markets and Enerpac products, most new products we launched, frankly, take multiple years to ramp for a few reasons. One, it's just the nature of our end markets seeding these products and customers taking time to understand them and then to trial them and then ultimately buy them in bigger quantities. Secondly, of course, we globalize them over time and commercialize them in different regions where we're operating in. And that does take time for us to be able to, in some cases, get certifications and get inventory levels at the appropriate amounts depending on the country or the region. Even with products that we've launched over the last 2 or 3 years, we continue to see those ramp commercially quarter-over-quarter. So we will see some revenue benefit, I believe, in the second half of this year from these products launch, but it's not going to be hugely meaningful. Again, we expect to see more significant benefit over the next 12, 24, 36 months.
Okay. Great. I appreciate the color. And maybe if I could just throw one more in there. Is there anything you can talk about a little bit about the new U.K. service contract, maybe timing of when that's going to begin and kind of any expected financial impact?
Yes. We were, again, very pleased with that, very competitive process, great customer. And as we referenced, this is a 5-year award that we were given that is worth several million dollars per year. And we were awarded really on the basis of our technical proficiency and world-class performance. And so that is, I think, extremely exciting. We do expect to start to see revenue flow from that contract in Q4 of this fiscal year. And as I said, that will run for about 5 years.
And of course, that's not the only thing, obviously, in that market we've been working on as we referenced in last quarter's call. Although we've had our challenges in the service business in EMEA, particularly, our team commercially has been hard at work on trying to offset that with additional opportunities. And this is just one great example we wanted to highlight that we thought quite meaningful.
[Operator Instructions] Your next question comes from the line of Steve Silver of Argus Research.
Paul, it was great to hear about the strong leads and the industry response coming out of ConExpo. I'm curious, including the new leads that you've also previously discussed coming out of the DTA acquisition, can you discuss a little bit about the current lead pipeline versus any historical trends there?
Yes. Steve, thanks for the question. Yes, I would reference back actually to our Enerpac Commercial Excellence or ECX program. And that has really been the foundation that we've set for Commercial Excellence and how we drive kind of lead management, lead cultivation here at Enerpac globally across all our regions. And we've really seen that significantly strengthen, I'd say, over the past year. That's a program that we built proprietary for Enerpac. We first rolled out in the Americas region and then over the last year or so more globally. We use that to manage our funnel process and drive lead conversion. But with our CRM, we use salesforce.com to track all of our leads globally. We can get real-time dashboards on quantity, quality of leads, conversion rates, days and stage, all sorts of interesting stats that give us kind of some leading indicators around health of our pipeline. And what I'd say broadly is that's looking quite favorable.
And then, of course, you see that more of a lagging indicator in order rates, which again, we referenced in our prepared remarks, the order rates in the quarter were strong with strong growth in every single region year-over-year. So I'm really encouraged by the progress that our team has made commercially on ECX. I think it is having a real impact for us, is driving focus on our commercial team and it's making sure that we follow up in a timely manner as we generate new leads. We also have some interesting opportunities, by the way, where we're piloting some implementation of AI in our business, specifically on the front end around lead generation. And I think we'll see that continue to bear some additional fruit for us in terms of new lead identification qualification over the next few quarters.
Great. And one more, if I may, for Darren. The tax rate -- the tax guidance range for fiscal 2026 is pretty fairly wide at this point. While you narrowed the guidance range operationally, is there anything you can discuss in terms of jurisdictions or any puts and takes around the tax guidance range at this point of the year?
I think from an overall tax guidance perspective, we kept the range. There's obviously tax planning that's underway and it's always difficult to determine when some of those things will happen. So we do keep that range a little bit wider. From a One Big Beautiful Bill perspective, we don't see a significant impact on rate and a little bit of benefit on cash there, which we baked in our guidance, but we did hold that rate at 21% to 26%.
I'd now like to hand the call over to Paul for final remarks.
Okay. Well, thank you again for joining us this morning. And if you have any follow-up questions, please feel free to reach out directly to Darren, and have a great day.
Thank you for attending today's call. You may now disconnect. Goodbye.
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q2 2026 Earnings Call
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q1 2026 Earnings Call
1. Management Discussion
Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enerpac Tool Group Corporation Q1 Fiscal 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Travis Williams, Senior Director of Investor Relations. Please go ahead.
Thank you, operator. Good morning, and thank you for joining us for Enerpac Tool Group's earnings call for the first quarter of fiscal 2026. On the call today to present the company's results are Paul Sternlieb, President and Chief Executive Officer; and Darren Kozik, Chief Financial Officer.
The slides referenced on today's call are available on the Investor Relations section of the company's website, which you can download and follow along. A recording of today's call will also be made available on our website.
Today's call will reference non-GAAP measures. You can find a reconciliation of GAAP to non-GAAP measures in the press release issued yesterday. Our comments also include forward-looking statements that are subject to business risks that could cause actual results to be materially different. Those risks include matters noted in our latest SEC filings.
With that, I will turn the call over to Paul.
Thanks, Travis, and good morning, everyone. For our first quarter of fiscal 2026, results were essentially as expected, and there were some favorable developments and encouraging trends. In our Industrial Tools & Services segment, or IT&S, product sales grew a healthy 4% organically, which we believe is a reflection of our ongoing ability to gain market share and outperform our broader industrial peers.
Additionally, we saw strong IT&S product order growth for the quarter, increasing our confidence in the outlook for the year. And as I will talk about later, we continue to invest in the business to support our growth strategy.
With that, let me turn the call over to Darren, who will provide more detail on our first quarter performance as well as geographic and end-market trends. Then I'll come back to talk about our investments in growth and some important projects where we are supporting customers for mission-critical applications. Darren?
Thanks, Paul. As seen on Slide 4, Enerpac's first quarter revenue of $144 million decreased 1%. IT&S sales declined 3% organically. However, as Paul mentioned, on a positive note, product revenue increased a solid 4%. Within product revenue, standard products were up low single digits, and we enjoyed double-digit growth year-over-year at our Heavy Lifting Technology business as we continue to capture additional applications in the infrastructure end market.
The first quarter also included strong performance at DTA, which is now incorporated in organic growth as it has been part of Enerpac for a full year. Cortland also posted another high-growth quarter with an exceptional 27% year-over-year gain.
Offsetting the gains in product was a 26% decline in service revenue. This was largely focused in the EMEA region and particularly in the U.K. That market has continued to slow due to lower production and customer consolidation in the oil and gas industry, which is predominantly where we provide service.
That said, our team is pursuing a number of attractive opportunities in that market. As a reminder, we continue to streamline service operations in EMEA and invest where we see opportunities for service growth globally.
Turning to Slide 5, which shows our performance by geography. We delivered strong 5% growth in the Americas, led by an 8% expansion in product revenue. Service revenue declined slightly, mainly due to the timing of some specific projects. As we anticipated, we are enjoying strength from the infrastructure market as well as strong demand from power generation.
Revenue in EMEA, the region we previously described as a wildcard for fiscal 2026, given the underlying economic conditions; declined 10%. Again, it's meaningful to separate product from services. In EMEA, product revenue grew 5% with continued strength from infrastructure and government spending and a solid performance in Southern Europe.
In APAC, revenue declined 8% in the first quarter of 2026 due to a decline in our lumpy HLT business. Additionally, political uncertainty in Southeast Asia and a slowdown in China was a drag on our performance. Nonetheless, with continued strength in India, recovery in Australia and an excellent HLT funnel, we expect the APAC region to resume year-over-year growth in the second quarter and for the full fiscal year.
Turning to Slide 6, for the first quarter of fiscal 2026, gross profit margin of 50.7% was in line with our performance over the past few quarters. As expected, margins were affected by higher tariff-driven costs flowing through cost of goods sold. However, we were able to successfully offset these on a dollar basis through pricing and productivity actions.
We expect the margin pressure from tariffs to ease as we enter the second half of fiscal 2026. Additionally, we enjoyed a favorable mix shift within the portfolio, which was offset by lower service margins.
On the selling, general and administrative line, we were able to hold spending essentially flat year-over-year, offsetting the inflationary impact from compensation and incremental spending on innovation with tight cost controls. As a result, adjusted EBITDA was $32.4 million, representing a margin of 22.4%. First quarter adjusted earnings per share was $0.36 compared with $0.40 in the year-ago period. A higher effective tax rate negatively impacted earnings by $0.02 per share.
Turning to the balance sheet, shown on Slide 7, Enerpac's position remains extremely strong. Net debt was $49 million at quarter end, resulting in a net debt to adjusted EBITDA ratio of 0.3. Total liquidity, including availability under our revolver and cash on hand, was $539 million.
For the quarter, cash flow from operations was $16 million compared with $9 million in the year ago period. The resulting free cash flow of $13 million in the first quarter of 2026 was an increase of $10 million year-over-year. This increase in free cash flow is due to the timing of receipts and payments in the quarter.
Capital expenditures were also lower as the year ago period included additional CapEx for our new headquarters. Finally, with our balanced capital allocation strategy, we repurchased $15 million of stock in the first quarter, while we maintain ample dry powder for strategic M&A.
Based on our performance in the first quarter and encouraging trends on the order front, we are maintaining our full year fiscal 2026 guidance, as shown on Slide 8. Our expectations include organic revenue growth of 1% to 4% and adjusted EBITDA growth of 6% at the midpoint, free cash flow of $100 million to $110 million and earnings per share of $1.85 to $2.
With that, let me turn it back to Paul.
Thanks, Darren. As I mentioned at the top of the call, we enjoyed a pickup in order rates in the first quarter, a trend we achieved across all 3 geographic regions. Demand has been particularly healthy from the infrastructure, defense and power generation markets. At the same time, we have a strong backlog and excellent pipeline in HLT.
And with the global rollout of Enerpac Commercial Excellence, or ECX, we are benefiting from more discipline and rigor in our sales process and funnel management. In light of the strong order flow, we built additional inventory in the first quarter to ensure that we have the right products in the right locations to meet customer demand on a timely basis.
As we've discussed, we are investing in our business to support Enerpac's growth strategy. As Darren mentioned, we are increasing spend on the innovation front as we expect to deliver even more new product introductions in fiscal 2026. We are also investing in our commercial organization, expanding sales capabilities, coverage and distribution in countries like India, Australia and the Philippines.
And we are enhancing our e-commerce capability with the implementation of a new technology platform that will improve the user experience and provide us with even more sophisticated marketing and analytical tools, all of which we expect to result in higher conversion rates.
The topic of innovation and growth was front and center during our recent Annual Global Leadership Conference, which is a gathering of Enerpac's roughly top 50 leaders, held each year in Milwaukee. I was truly inspired by the excitement and energy amongst the team and the work completed to further refine our growth strategy and update our strategic growth initiatives.
Speaking of growth, two of the attractive verticals we mentioned over the past few quarters are power generation and infrastructure. In the former, the proliferation of AI data centers and growing demand for electricity, including a resurgence in nuclear energy, underscores the need for Enerpac's products and services.
As seen on Slide 9, Enerpac provides a range of standard and specialized products and services that support the nuclear industry in multiple regions across all phases of building, operations and maintenance, inspection, refueling and decommissioning.
In addition to our standard Industrial Tools & Services that many of you are familiar with, Enerpac sells a line of specialized tensioners under the Biach name that have been the industry standard for refueling and inspection for more than 50 years. The Biach lightweight Self-Contained Tensioner, SCT, shown here is used to tighten reactor pressure vessel head studs. The SCT brings greater safety, reduces manpower and shortens critical path time.
With decades of experience serving the industry and sizable market share in specialized products, we believe we are well positioned to capitalize on growth opportunities in nuclear.
Another strong market we've addressed over the past few quarters is infrastructure, where we've enjoyed significant contract wins for bridge and tunnel projects, both in the U.S. and internationally.
Recently, Enerpac was selected to design and build a bridge launching system for the Juneau Creek bridge in Alaska, which can be seen on Slide 10. Our custom hydraulic cylinders and computer controls will pull bridge segments into place. When completed, the bridge will be the highest crossing in the state at 285 feet and the longest single-span bridge built in Alaska since 1982.
As we continue to drive profitable growth at Enerpac, we believe we are well positioned with multiple product lines in these key end markets to take full advantage of these secular trends and the opportunities in the market.
Before we take questions, I would like to address a change on the Investor Relations front. Travis has accepted a position at another company and his last day with Enerpac is tomorrow. Travis has done an outstanding job building relationships and communicating Enerpac's story to investors.
Moreover, he's been an invaluable resource internally, sharing intelligence and insight into the industry and capital markets. I would like to take this opportunity to thank him for his many contributions and wish him all the best in his new role.
We have a search underway for Travis' replacement. Until we fill the role, Darren will be the main point of contact for investors.
With that, we'd be happy to take questions.
[Operator Instructions] Your first question comes from the line of Will Gildea with CJS Securities.
2. Question Answer
You've talked for a number of quarters about efforts to improve profitability of the service business and invest in ways that enable you to tap higher-margin opportunities. What caused a sudden sharp decline in service revenue this quarter? And were you surprised by it?
Right. So yes, I think we're certainly disappointed on the top line performance in the service business this quarter after a strong fiscal '25 year of growth actually for service. The issue, as I referenced in the remarks, was largely driven by a contraction in the U.K. market. And as part of our ongoing initiatives to capture higher-margin service business, we passed on lower-margin projects, as we've talked about in the past.
But given the consolidation and softness in the oil and gas market, we've not yet successfully backfilled all of that with more profitable business, particularly in the U.K., given some of the market conditions there. I would say, as a reminder, our service business is a mix of rental and manpower. And overall, it is margin dilutive to Enerpac.
We are actively consolidating our service footprint. We've already taken actions underway on that in Europe while selectively continuing to make growth investments in the business. And I think it will take some time to work through the dynamics on the service side. But keep in mind that based on our reiterated guidance, we do anticipate growth and margin expansion in fiscal '26.
That's helpful. And then I guess just a follow-up question on that. Can you add some more color to the changes you're making in services to capture higher-value business? I know on the last call, you gave the example of transitioning Algeria from an agent-based model to a direct-based model. Can you talk about the reasoning behind that? And if an initiative like that is successful, how long of a runway do you have to make that change in other regions?
Yes. Thanks, Will. So we're taking a number of initiatives. Some are commercial, like you referenced, where we're moving from an agent to a direct model. That's -- the direct model is more the norm for our business, the agent is more the exception.
In the case of agents and moving to direct, we end up with, obviously, the direct customer relationship, which allows us to do more follow-on business, obviously capture more margin as well and just get a closer overall relationship with the customer. So we feel good about that model and the progress that we're making to transition to multiple markets there.
We're also investing in our service business, both in field service capabilities, but also in capital equipment and tools. We've invested in the European market in our leak sealing business, for example, and some new capital equipment that will allow us, we believe, to capture more growth opportunities and more market share in that service line and be able to respond to customers more quickly for their needs in that kind of service business.
So we're making a number of improvements like that. We're continuing, as I talked about, to optimize our footprint as well, not only from a cost standpoint, but to be able to react quickly to customer needs.
And switching gears, can you add some color on your pricing strategy heading into calendar year 2026? Should we be expecting an annual price increase at the beginning of the year?
Yes. Will, good question. So just as a reminder for everyone, what we talked about in Q4, going into the year, we saw about 2 points of benefit in price from the actions we took last year.
As we look at this year, we will look to kind of remain, obviously, from a tariff perspective and a price perspective, we're going to make up for those on a dollar-for-dollar basis and hold our margin.
So with that, we did take a small low single-digit price increase in early December here. That will take some time to roll through the channel as we do have notice periods for that. But we constantly look at price and productivity to keep our margin targets and margin high.
Your next question comes from the line of Ross Sparenblek with William Blair.
When we think about your 2026 organic guide, a little bit of price, what is contributing there from new products and kind of the cadence of your new product launches as we think about the rest of the year or fiscal '26?
Yes. Ross, we're super excited by our innovation program. We highlighted that on the last Q4 earnings call. We launched, you may recall, 5 new products in fiscal '25. We're pleased with the market acceptance. They continue to ramp commercially and globally. We also have a pretty ambitious innovation program and a set number of launches that we're targeting for this fiscal, which are more than we launched in last fiscal.
So we're continuing to accelerate our innovation efforts. Part of that is driven by additional investments we've made in innovation over the last few years. In fact, if you look at our 10-K, actually over the last 3 years, you'll see incremental R&D spend on a dollar basis as a percent of revenue every single year. So I think that's a good indication.
Also, some folks may have visited our new innovation lab here at our global headquarters in Downtown Milwaukee. That's another investment we've made to drive improvements in our innovation program and faster time to market.
So we're pretty excited by the innovation progress we've made, excited about the commercialization and the ramp of those products and excited about the products we're planning to launch here in fiscal '26.
Okay. Well, when we think about kind of early days on this R&D flywheel, what is kind of the trajectory here as we think about the longer-term growth algo? I mean are you trying to get a couple of extra points of growth from new products? Are we targeting new adjacent TAMs? Or is it just kind of upgrading and more defensive of the core portfolio?
Ross, I think as we think about growth, I mean, you heard us reaffirm our guidance for this year, kind of 1% to 4%. I think as we think of the macro, Europe was the wildcard for us. But as we look at the higher end of that range, that encompasses a little bit of price recovery in the market and obviously successful launches of our new products.
Beyond that, obviously, innovation and the product investments we're making, as Paul referenced, really that increase in R&D over the last 3 years, we'll see that start to take off into the future.
Yes. And Ross, yes, it's certainly part of the growth algorithm. It is part of how we believe that we are targeting to perform or outperform our peer set. And we believe we've been able to do that successfully here. But I would also make the comment that, obviously, we look very closely at our direct competitors and what they're doing from an innovation perspective.
And we continue to firmly believe that we are outpacing not only investment spend, but just the pace and the intensity and the level of new product launches relative to our competitive set. So we never rest on our laurels, but we're pleased with the progress we've made, particularly relative to the competitive set.
I can appreciate that. I mean it looks like you guys are running around 2% of sales in your R&D spend. It has been ticking up slowly. I guess I'm just trying to get a better sense of what your visibility looks like into your R&D funnel? Like how robust of opportunities you see today? Or are we still kind of early days of planting the seeds and buying the equipment and helping the guys get to the point where they're empowered to start building out that pipeline?
Yes. So we do have a multiyear innovation funnel. So we're always looking several years out. We're working on now updating that funnel for another year out as we execute on products and projects for this year.
And just a reminder, again, we launched 5 new products in fiscal '25. Our target is to nearly double that number of new product launches here in fiscal '26. So I think you'll see us gain additional pace and acceleration. -- and just, again, reflective of the investments and the focus and the new processes that we've put in place. So that all is part of our overall growth algorithm at the end of the day.
Okay. So we should anticipate a more measured pace of R&D growth going forward?
Yes. I...
3.5% of sales or 5% tomorrow?
Yes. No, I mean, I think you'll see a consistent ramp over prior years. But we've talked consistently about beating the market by several hundred basis points in terms of top line growth at the end of the day. And part of that clearly will be driven by our innovation program.
Okay. I appreciate that. And if I can just have one more here. If I go back to last year, the backlog seemed pretty immaterial, but now we're speaking to confidence in kind of these secularly growing project funnels.
Just any visibility there on sizing where the backlog kind of stands versus on a normalized basis and what's kind of underwriting that confidence?
Yes. I mean I'll make a few comments, Darren may weigh in as well.
I think we do -- we're not a very heavy backlog business. As you know, we tend to be more book-to-bill or shorter cycle. And most of our products are what we would classify as more OpEx spend by our customers, although we do have a capital equipment business in HLT, inclusive of DTA that has more backlog. And those backlogs tend to be sort of 6- to 12-month time frames.
That said, I think we have seen our backlog tick up, and that was driven by, as we referenced on the remarks earlier, pretty strong order activity and growth in overall orders in the quarter, and we were very pleased with that.
And that order growth actually outpaced revenue growth in the quarter, so again, giving us just more increasing confidence in our overall outlook for the year, particularly as we go through the year. So I think all of that just led us to maintain our current guidance for the full year.
The only thing I would add, Paul, is, Ross, as we kind of look at the business, obviously, we acquired DTA last year. So DTA being part of our HLT business now is really helping that as those markets take off, we now have more products for our customers. As we talked about in Q4, the cross-sell opportunity is huge. So we're bullish on HLT for the year.
Your next question comes from the line of Tom [ Hayes ] with ROTH Capital.
Just wanted to go back to one of Will's questions on the pricing, Darren. Was that pricing that you put in place in December across all product families and globally?
And then kind of a related question on gross margin for the year, how are you thinking about the margin flowing through the balance of the 3 quarters? You guys have done a great job of offsetting the tariffs. Just wondering your thoughts on kind of puts and takes on the margin front for the balance of the year.
Sure, Tom. I would say, from the recent pricing actions, those were in the Americas and in Europe. Now we did kind of release in this earnings a little bit more of a pie chart to give you a flavor for what our product business looks like. So just remember that low single-digit price increase is solely on product. So it's not in the total portfolio. So when you factor that into the math, just make sure you look at that aspect of it.
I would say, the second piece from a margin perspective, Q1 was where we thought it would be, okay? Q2 will probably look more like Q1. And then as we get into the second half of the year, some of those higher cost tariffs will work out their way through the system, so margin will improve as we enter the second half of the year.
Okay. Great. Appreciate that. I appreciate the color on the product sales by region, but I'm not sure if you gave it by -- for APAC. Is that something you guys can share?
Yes. I think it's actually in the slides on Page 5. But in APAC, we actually saw growth in this revenue in standard products. We saw -- we did see a sharp decline in APAC on HLT. I mean it's a small business, and HLT tends to be lumpy. So that just varies quite a bit from quarter-to-quarter.
Okay. Maybe just lastly, in respect to time, an area we don't talk about a lot, but you called it out on one of the early slides, the continued strong growth in Cortland. Just kind of remind us a little bit about the business and kind of what's driving that strong growth.
Yes. We continue to be really pleased with the progress the team is making at Cortland. As you recall, that's effectively our other segment, and that's Cortland Biomedical, so roughly a $20 million revenue business annually.
Obviously, not connected to our core tools business, but it is a very strong, very solid, high-growth and high-margin business. And it doesn't draw undue investment or sort of management time or attention. So it runs relatively independently.
But that business is very long cycle, very sticky. They design and develop and manufacture custom biomedical textile fibers for -- specifically for particular medical devices for given OEM customers. So those are spec-ed in, and those ultimate products that the customer has are obviously FDA qualified. So it's a very sticky business.
There's a lot of growth happening in that market. Cortland is exceptionally, we believe, well placed to support customers. We've won a number of new commercial opportunities, and you've seen that materialize in the ramp in revenue. So we continue to be quite bullish about the growth opportunities, the margin prospects, and we like the funnel of opportunities that we have there.
Your next question comes from the line of Steve Silver with Argus Research.
I'd like to offer my best wishes to Travis as well. So in the prepared remarks, you guys mentioned the pickup in order rates, and you also mentioned building inventory heading into Q2. I'm curious just whether you can quantify at all the magnitude of the inventory ramp and maybe identify any key products beyond HLT?
No, great question. I mean as we think about inventory as we head into the quarter, I mean, it's up about 15%, okay? So we had a really strong Q4. As you think about Q1, our product sales were at 4%, okay? So we were very pleased with that.
With all those product sales coming through, we had to work the plants a little bit harder to get the inventory in place to deliver Q2, and we're very bullish on that because our order rates were stronger than our product revenue growth rates in the quarter.
Great. And one more, if I may. You guys have talked quite a bit in recent quarters about the balance sheet being in a very strong place to support strategic M&A and also about the macroeconomic factors facing the industry. Curious as to whether there's been any change in the M&A funnel, if you will, just in terms of companies that are dealing with the macro issues that might be kind of gravitating towards M&A at this time?
Yes. Sure, Steve. I would say I'm pretty encouraged there as well. I mean I do think M&A activity overall in the market and here for Enerpac has picked up reasonably considerably in the last quarter or 2. We are actively evaluating several opportunities. So we're spending a lot of our time focused there. The pace and the quantity of deal flow has definitely picked up, and we're having very robust dialogue on any number of opportunities.
So I feel more positive and optimistic around that. At the same time, I would say we remain extremely disciplined. As always, we will certainly not overpay. And our focus ultimately is, of course, on creating value for Enerpac shareholders at the end of the day.
[Operator Instructions] There are no further questions at this time. I will now turn the call back over to Paul Sternlieb for closing remarks. Please go ahead.
Okay. Well, thanks again for joining us this morning. We will be participating in the CJS New Ideas for the New Year Virtual Conference on January 14 and the Annual ROTH Conference in Laguna Niguel, California in late March. Thank you. And to all our team members around the world, customers, partners and shareholders, best wishes for a wonderful holiday season and a happy new year.
Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q1 2026 Earnings Call
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q4 2025 Earnings Call
1. Management Discussion
Ladies and gentlemen, thank you for standing by. Welcome to Enerpac Tool Group's Fourth Quarter Fiscal 2025 Earnings Conference Call. As a reminder, this conference is being recorded, October 16, 2025. It is now my pleasure to turn the conference over to Travis Williams, Senior Director of Investor Relations. Please go ahead, Mr. Williams.
Thank you, operator. Good morning, and thank you for joining us for Enerpac Tool Group's Fourth Quarter and Year-End Fiscal 2025 Earnings Call.
On the call today to present the company's results are Paul Sternlieb, President and Chief Executive Officer; and Darren Kozik, Chief Financial Officer. The slides referenced on today's call are available on the Investor Relations section of the company's website, which you can download and follow along. A recording of today's call will also be made available on our website.
Today's call will reference non-GAAP measures. You can find a reconciliation of GAAP to non-GAAP measures in the press release issued yesterday. Our comments will also include forward-looking statements that are subject to business risks that could cause actual results to be materially different. Those risks include matters noted in our latest SEC filings.
With that, I will turn the call over to Paul.
Thanks, Travis. Good morning, and thank you for joining us for our year-end fiscal 2025 earnings call.
As I look back at the year just ended, I am extremely proud of our team, our many achievements and the fundamentals that truly differentiate Enerpac. Obviously, we're operating in a very challenging and dynamic environment marked by ongoing weakness in the industrial sector and widespread economic uncertainty. That said, Enerpac posted record revenue in fiscal 2025. We also delivered a robust adjusted EBITDA margin of nearly 25% with opportunity for further improvement in the coming years.
On the innovation front, we launched 5 new products with more to come in fiscal 2026. Notably, these products continue to ramp commercially. We successfully integrated the acquired DTA business, which, as Darren will elaborate, ended the year on a very strong note. And our E-commerce business continues to gain traction with customers, posting 32% growth in fiscal 2025. We've also continued the rollout of our disciplined commercial process, Enerpac Commercial Excellence, or ECX. As of year-end fiscal 2025, we began introduction into our third and final region, APAC.
And in the fourth quarter, we repurchased a record $40 million in Enerpac stock, bringing the total for fiscal 2025 to $69 million.
As we look to fiscal 2026, we are cautiously optimistic. While Europe remains a wildcard, the prospect of lower interest rates and greater certainty around tariff policy, along with healthy activity in the infrastructure sector are encouraging. Let me turn the call over to Darren, who will walk you through the highlights of fiscal 2025. He'll also provide our initial guidance for fiscal 2026, then I'll come back to share some more color on key initiatives and several exciting project wins. Darren?
Thanks, Paul. As seen on Slide 4, Enerpac's fiscal 2025 revenue of $617 million increased 5%. On an organic basis, adjusting for foreign exchange and the acquisition of DTA, we grew 1%, that put us near the midpoint of our previously provided guidance range as we benefited from multiple initiatives, continued strong performance at Cortland, growth in Heavy Lifting Technology, or HLT, and an excellent fourth quarter at DTA.
At our IT&S business, revenue increased 1% organically for the year. Including DTA, IT&S revenue increased 4% with a 5% growth in Product Sales and a 1% growth in Service. As I mentioned, DTA's robust year-end performance brought us to full year revenue of $20 million. Enerpac's operational discipline and supply chain expertise is improving throughput at DTA's facility. At the same time, we are successfully cross-selling DTA's Horizontal Movement Technology to Enerpac's existing distributor and customer base. In fact, some 45% of DTA's orders were new or crossed over sales to existing Enerpac customers, demonstrating the power of commercial synergies that underscore the strategic value of the acquisition.
Turning to Slide 5, which shows our performance by geography. We delivered growth in two of our three regions in fiscal 2025, with low single-digit growth in the Americas and strong high single-digit growth in APAC. Across Enerpac as a whole, we believe this is another year of share gains for the company. In APAC, our growth in 2025 was comprised of solid performance in Standard Products and even better growth in HLT. Geographically, we benefited from enhanced sales coverage in India, driving double-digit growth and have high expectations in fiscal 2026 and beyond.
We also saw improvement in the mining industry in Australia, a sector that had been a soft spot. Overall, our investment in commercial leadership and sales coverage in APAC is paying dividends, as we capture share in the region.
In the Americas, while standard product revenue was flat in fiscal 2025, we posted double-digit gains in HLT and Service revenue. We enjoyed good demand for the infrastructure, petrochemical and power generation markets, the latter of which includes some wins from the nuclear sector. On the other side, wind and general construction were weaker end markets in the region. Geographically, Latin America has been softer due to macroeconomic issues and tariff-related policies.
Offsetting growth in the Americas and APAC was a mid-single-digit decline in the EMEA region. For fiscal 2025, revenue from Standard Products was about flat. However, our HLT business, while posting a relatively good year, was down compared with a very strong fiscal 2024. As a reminder, HLT is a capital equipment business and tends to be lumpy.
In the EMEA region, there are several cross-currents going into fiscal 2026, including ongoing economic weakness in Central and Southern Europe. Nonetheless, we expect to benefit from good traction on the new product front and on a pickup in HLT, which will include DTA. We also expect to make further progress on our other key growth initiatives, including our continued focus on the infrastructure market, our ongoing digital transformation and additional enhancements to our ECX program, to name a few.
Turning to Slide 6. For fiscal 2025, gross profit margin came in at 50.5%. The slight year-over-year decline was largely as expected, primarily driven by the inclusion of DTA and the mix in our Service business. On the selling, general and administrative expense line, adjusting for the restructuring charge and M&A expenses, SG&A improved by 80 basis points to 26.8% of revenue as compared to 27.6% in fiscal 2024. The company continues to optimize SG&A efficiency, including standardizing and automating processes and leveraging our lower cost centers of excellence.
Altogether, our team managed through a complex and dynamic environment to deliver full year adjusted EBITDA growth of 4% to $154 million. That represented a margin of 24.9%, near the midpoint of our guidance. And for the full year, adjusted earnings per share of $1.81 compared with $1.72 in fiscal 2024 increased 5%. For the fourth quarter of fiscal 2025, revenue was up 6% with organic revenue decline of approximately 2% as gains in the Americas and APAC were offset by the performance of the EMEA region.
Product revenue declined 1% year-over-year on an organic basis, while Service revenue declined 7%. Cortland continued to generate healthy growth, and as mentioned, DTA revenue expanded significantly to $9 million. Adjusted EBITDA increased 15% year-over-year and margins were strong at 26.5% for the fourth quarter, benefiting from the geographic mix and volume leverage at DTA. Adjusted EPS grew 4% to $0.52. Effective tax rate for adjusted EPS was 24.9% as compared to 15.7% in fiscal 2024. Share count was down about 2% year-over-year and the quarter.
Turning to Slide 8. Given our extremely strong balance sheet and excellent cash flow, we continue to focus on opportunities to deploy capital. With early signs of a healthier and more robust M&A environment, coupled with incremental M&A resources, we expect to expand the funnel and increase deal flow. We will also continue to opportunistically return capital to shareholders. Speaking of which, since the authorization was approved by our Board in 2022, the company has returned approximately $240 million to shareholders through the repurchase of 9 million shares at an average cost of just below $27 per share.
Today, we are pleased to announce that the Board has approved a new share repurchase authorization for $200 million, which we believe speaks to the confidence and our ability to continue to create meaningful shareholder value. On the balance sheet, net debt was $38 million at year-end, resulting in a net debt to adjusted EBITDA ratio of 0.3x. Total liquidity, including availability under our revolver and cash on hand, was $551 million. As you can see, we have ample financial flexibility to continue our balanced capital allocation strategy and are maintaining significant dry powder for our disciplined strategic M&A process.
For fiscal 2025, cash flow from operations was $111 million compared with $81 million in fiscal 2024. Free cash flow of $92 million increased by $22 million or 32%, even with $8 million in incremental capital spending, primarily associated with the headquarters relocation as well as continued investments in our automated manufacturing capabilities and IT enhancements to improve efficiency and productivity. Per our practice, at year-end, we provide initial guidance for the year ahead, which is shown on Slide 9.
Starting with the top line, we anticipate revenue of $635 million to $655 million with underlying organic growth of 1% to 4% with an assumption of the U.S. dollar to Euro exchange rate at $1.16. We believe our organic growth forecast represents Enerpac's continued out-performance relative to the industrial markets. The low end assumes little to no improvement in the macro environment, while the upper end of the range assumes a modest improvement. Our forecast for adjusted EBITDA is $158 million to $168 million. At the midpoint, that translates to year-over-year growth of 6% and an adjusted EBITDA margin of 25.3%. We are projecting free cash flow of $100 million to $110 million with CapEx of $10 million to $15 million. Also this year, we are introducing annual EPS guidance. For adjusted EPS, we are guiding to the range of $1.85 to $2.
As you can see from this slide, we have included our modeling assumptions, including interest expense, depreciation and amortization, along with the adjusted tax rate. Our guidance also assumes no substantial change to the current tariff or regulatory environment. As for the first quarter of 2026, we expect some pressure on margins as higher tariff-impacted costs flow through the cost of goods sold. As we progress through the year, that should subside, based on the actions we have taken to offset higher input costs.
As we discussed in our third quarter earnings call, we expect to be price/cost neutral for the full fiscal year. With that, let me turn it back to Paul.
Thanks, Darren. While conditions remain volatile in the industrial marketplace, we are excited about the specific actions Enerpac is taking to continue to gain market share.
We have continued to invest across the organization under the Powering Enerpac Performance program, known as PEP, to drive continuous improvement as we simplify and automate the business, improve operational capabilities and support growth. On the Service side, we have been taking actions to capture more differentiated and value-added service opportunities, including investing in equipment to support higher-margin service lines. We are also changing our business model in certain countries to improve Service business margins.
For example, in Algeria, we have transitioned from an agent-based to a direct model, which we expect to support long-term growth and profitability. And in fiscal 2025, we opened a new service center in Saudi Arabia, as you can see on Slide 10. Given expanding opportunities in the country and the broader Middle East region, we expect this to be a meaningful growth engine.
We have also added new commercial capabilities and stronger leadership underpinned by ECX to continue to gain share. These teams are supported by our global marketing organization, which continues to drive awareness, brand recognition and lead generation. For example, in the fourth quarter, we executed a global campaign around our battery-powered torque wrench, a product line we launched in late fiscal 2024. With a full range of sizes, our lineup not only offers meticulous calibration, but a significant differentiator in terms of the tool's ease of use. With the campaign, which has included nearly 1,000 customer demos across the globe, we have significantly improved the size and quality of our sales funnel, as the market continues to respond well to this innovative technology. Moreover, this direct end-user interaction has helped drive valuable insights for our innovation road map. At the same time, we are employing 80/20 to further optimize our distribution channel.
As shown on Slide 11, in fiscal 2025, we reduced the number of distributors globally by 13% to fewer than 800. By focusing on the most productive distributors, we can improve the efficiency of our channel relationships, commit resources to the highest return outcomes and win with the winners. And of course, during the year, we relocated to our new global headquarters in downtown Milwaukee. The move, which includes a substantially expanded innovation lab with significantly greater in-house capabilities also supports collaboration and our ability to attract top talent.
Reflecting on our mission, it's always nice to showcase a few relevant examples of where we are helping our customers and where Enerpac plays an important role in high-profile projects.
In fiscal 2024, we announced Enerpac's involvement in the massive Fehmarnbelt tunnel infrastructure project connecting Denmark to the rest of Europe, which will be the longest immersed tunnel in the world, when completed. We were pleased to receive significant follow-on orders associated with the project in the fourth quarter, demonstrating Enerpac's continued value for this important customer.
Separately, we have been part of another major infrastructure project in Denmark, a bridge connecting Copenhagen to Fehmarn. As shown in Slide 12, using Enerpac's JS250 Jack-Up System, the 32-meter long and 8-meter wide bridge element weighing more than 100 tons was successfully positioned with millimeter precision. And in Saudi Arabia, Enerpac's HLT systems will support the building of a new football stadium in preparation for the 2034 World Cup.
Finally, Enerpac was proud to be part of the relocation of a 160-year-old Swedish Church. Workers utilized Enerpac's EVO Synchronous Lifting System and 19 high-tonnage cylinders to carefully raise the nearly 700-ton structure onto a relocation rig. The 2-day move of the historic Wooden church to a new location was a major event in the country, drawing international media attention and even the King of Sweden.
Our role in these projects highlights, how we live our mission every day and how Enerpac's technology makes complex, often hazardous jobs possible, safely and efficiently for our customers. Speaking of HLT, we will be exhibiting at CONEXPO in Las Vegas, the largest construction show in North America in March 2026. We believe our presence at large, well-attended industry shows like this, is a critical part of advancing the Enerpac brand, and this year's exhibit will be complemented by the inclusion of DTA's Horizontal Moving Technology.
As you heard in our remarks, we are proud of the actions we have taken this past year to advance Enerpac's competitive position, and we remain excited about the future. Thank you to our team members worldwide for your ongoing commitment to our customers and partners and for making Enerpac a premier industrial tools and solutions provider. With that, we'd be happy to take questions.
[Operator Instructions] Your first question comes from the line of Tom Hayes with ROTH Capital Partners.
2. Question Answer
Paul, I was wondering, could we dig into the EMEA market a little bit? It seemed like it got a little bit weaker as the year progressed. Is that primarily Europe? Or maybe just kind of flesh that out a little bit? And then I know you don't give guidance by region, but maybe just your thoughts on the market conditions as the year starts?
Yes. Sure, Tom. Yes, I think it is primarily Europe. That's the bulk of our EMEA region, and I think we did see softening from a macro standpoint, I would say, particularly in Central and Southern Europe, which has been weak and persistently weak.
And so I think that's been a challenge, just the macro. I would also say, in addition, our Service business in the region was lapping a pretty significantly large project that we had in Q4 of fiscal '24. So that was just another challenge on the year-over-year comp.
Okay. So I mean -- so you should have relatively easier comps this year? I would assume.
Yes. I think assuming the macro doesn't worsen or gets better, yes.
All right. Maybe shifting gears a little bit. Congratulations on the strong E-commerce performance. I know we've talked about it before, and it seems like it's taking off. If you can remind me, is that primarily U.S.? Or is that -- have you rolled that out globally now?
Sure. Yes, it's actually global. So we -- if you recall a few years ago, when we really started this effort, of course, we started in the U.S., and that's really well in place now, and we've been investing behind that.
And then about 1 year or so into it, we did roll it out across most markets in Europe. I think we're in something like 18 or 20 countries in that region, including the U.K. And then we rolled it out in Australia about 1 year ago as well. So we'll still evaluate whether it makes sense to roll out in additional markets. Those will obviously be smaller. But at the same time, we're continuing to invest in the technology, the marketing, the analytics, just to continue to drive strong growth on our E-commerce business, which is margin accretive for us as well.
Okay. Maybe just lastly on the DTA integration, looks like it really kind of picked up steam in the fourth quarter. Where are you seeing really good traction that maybe is either geographically or end markets that you think you still have further opportunities there? Because like you said, you've got about 45% of your revenue came from cross-sells. My guess is there's probably more opportunity out there. Just your general thoughts on DTA kind of going into year 2?
Yes. No, we were really pleased with the progress that our team made on DTA and both the integration and obviously, the commercial synergies. They had an excellent quarter. I'd say orders have been robust. Our backlog has expanded as we've implemented our strategy to cross-sell their solutions to the existing, I'll call it, Enerpac-base of customers and also expand their sales beyond their traditional stronghold, which, of course, was Europe.
So a lot of the growth opportunities that we've seen have been in the U.S. market. And that's where I think we see a lot of the lead activity and a lot of the upcoming order activity as well. So they posted a pretty strong Q4. Obviously, that's ramped throughout the year. And I think that's just a testament to the strong work that our team has led in conjunction with DTA on driving more efficient manufacturing process, improvements and bringing our supply chain expertise to bear to DTA. So we're really pleased. I think the investment thesis is truly playing out as we expected, especially from a commercial synergies perspective.
Your next question comes from the line of Daniel Moore with CJS Securities.
You gave good color, and so maybe it's a little redundant. And I know you don't disclose backlogs per se, but just entering fiscal '26, obviously, Europe a little weaker, you just described that. Overall -- pipeline of opportunities, how would you kind of describe it relative to maybe how we entered the year, a year ago in fiscal '25? And any other color by geography would be great.
Yes. I can start. Darren can also add some color, I think. But Dan, I think our view is probably similar spot, frankly, where we started the prior year just from a macro standpoint. I mean, obviously, there's still a lot of uncertainty. While we have now seen the impact or at least the implementation of tariffs, of course, there's still a lot of uncertainty about where those will end up.
I'd say most notably, obviously, with China in the current situation. So I think just given the uncertainty from a macro standpoint, we're probably in a similar spot, why? Our guidance is a bit wider range this year at 1% to 4%, just depending on the macro and how that plays out over the next 12 months.
But I think at the same time, we have some reasons to be optimistic. Clearly, if the tariff policies do kind of get solidified, if interest rates continue to come down, those will help. And I think we're still pretty bullish and optimistic around the infrastructure market. We've seen really good progress there, a lot of projects coming online that our team has been supporting, some that we highlighted on our prepared remarks. So I think on balance, yes, reasons to be cautious, but maybe cautiously optimistic just as the macro situation plays out.
No, I think you're right, Paul. It's definitely the infrastructure vertical, Dan, where we see, really the build from an infrastructure perspective, that's both in the U.S. If there are bright spots in Europe, it's in infra and some of that defense spending, while the rest of that economy is a little bit slower. So that's where we're obviously dedicating resources and keeping our eyes on and looking for growth there.
Absolutely. Good color on DTA and obviously, good progress there. Maybe just the cadence for your fiscal '26 outlook, Darren. I appreciate the color on margins for Q1. When we think about growth overall fiscal '25, up 1% organically, Q4 down 1% to 2%. So do we think of fiscal Q1 kind of starting off similar to Q4 or closer to the low-end of your full range? Just want to get a better sense for how you see things playing out for the first quarter or 2?
Yes. No, good question. I think just a reminder for everyone, from a business perspective, whether it be margins or free cash flow, a significant amount of that comes through in the second half of the year. You saw that this year, we'll see that next year.
Margins in Q1, we'll see those tariff costs come through, Dan, as we talked about. So we will see pressure there. I think from a growth perspective, as Paul talked about earlier, a large part of the first half of the year will depend on Europe, right? We need to see some of that momentum come back. I do think we're positive on the Americas. So you saw good performance in the Americas and APAC. We expect that to continue. And Europe is a wildcard as we talked about. So that's how we see it play out.
But I do think when you look at the comparables, we had a strong Q2 last year. So that will be a little bit tougher to lap, but I expect Q1 to maybe look a little bit more like Q4.
That's helpful. And then maybe sneak in one more. Just obviously, really good progress continues on SG&A. Just talk a little color around the assumptions for gross margin as well as SG&A embedded in the '26 guide? And I'll circle back for any follow-ups.
Yes. We don't specifically guide per line item, Dan. How I think about it is our gross margins kind of the last couple of quarters is where we're sitting. I think we're comfortable with that level. We do continue to work on the Service business, that's a key piece of this. As that continues to improve, there could be some upside there in the second half of the year from a gross margin perspective.
And really on SG&A, we are laser-focused on that. You saw the benefits of that in Q4. I mean our SG&A as a percent of revenue was under 25%. A lot of that is driven by volume leverage. So as we think about the first half of next year, that will ride up a little bit, but that will come back down in the second half as volume plays-out. I think that's a little bit of the guide we start to think about both lines in the P&L.
Yes. And I would add to that comment, Dan. I think you'll recall in Q3, we announced a smaller restructuring program. We really didn't see any impact, nor did we expect to see that in Q4 benefit yet, but we'll see that play-out through the course of fiscal '26. So that will be some benefit for us on SG&A as well. And then I think Darren is right-on gross margin.
But I would say, over the midterm, we still have ample opportunities through PEP, Power Enerpac Performance to drive continued improvement in terms of conversion costs, in terms of sourcing and material costs. Frankly, even footprint, we continue to look at opportunities there. Obviously, there's some longer pole in the tent items that take time to execute. But I think we still feel very good about the funnel of initiatives that we've got, based on COGS and obviously impacting gross margin in the midterm.
Yes. And just to circle back, Dam, we think of the 1% to 4% organic growth as another year of beating the market and share gain, and that's the premise. We have been doing that, and we believe we can continue to do that with the products we have.
Your next question comes from the line of Steve Silver with Argus Research.
In the prepared remarks, it sounded like the outlook for M&A maybe sounded a little bit more bullish compared to some recent quarters. And in the past, I know you guys have talked about the philosophy of acquiring high-quality and performing businesses not really looking at distressed or turnaround situations.
So I was hoping you could provide a little color in terms of what the thinking is for the more constructive outlook on M&A? Whether it's just more the strength of Enerpac's balance sheet or any other competitive landscape changes that you're seeing?
Yes. Sure, Steve. Thanks. Yes, I think we remain pretty busy on the M&A front. We're spending a lot of time and energy and resource there.
Certainly, from a balance sheet perspective, obviously, very healthy with a lot of capacity and financial flexibility. And as we've remarked, we're retaining effectively a lot of dry powder to do things inorganically and sort of strike when the iron is hot. If I reflect on the past few years, I mean, we've looked at certainly a lot of interesting opportunities. But I think fundamentally, on majority, valuation has been an issue. And we've always said that we will not overpay and certainly, we'll walk away from things that don't create value for Enerpac and our shareholders.
That said, I think looking forward, I'm pretty encouraged by our funnel of opportunities. I would say that, that has picked up pace. It continues to grow nicely. We've also augmented our resources from an M&A standpoint to expand the number of targets in our funnel, as we head here into fiscal '26. And I think just the pace and the quality of deal flow overall has picked up, I would say, considerably in the past couple of quarters, and we continue to have very robust dialogue with any number of opportunities. So it's at the forefront of our work and thinking. But certainly, we remain extremely disciplined in our process with not only strategic, but obviously, a financial and returns lens as well for our shareholders.
Great. And one more, if I may. So APAC was really a key growth driver in fiscal '25 with the high single-digit growth. Curious as to what proportion of that growth was seen from the second brand strategy and really as you're entering fiscal '26, the outlook for continued growth in that second brand strategy?
I think from a couple of pieces to talk. I'll talk to the geography and then turn it to Paul to talk about kind of the branding and second brand.
Like what you heard in the prepared remarks is we had a fantastic year in India. That continues to be a double-digit growth geography for us. We continue to invest there, more sales coverage, and we're seeing great returns out of India. I'd say the second piece is we did see that return in Australia, specifically in the mining sector. So there was bullish growth coming out of both of those geos, which really helped, and we see a bright future of both of them in FY '26 and beyond.
Yes. And Steve, I would just comment on second brand specifically. Obviously, that's an initiative, that we launched now a couple of years ago. It's certainly we view as a long-term initiative. Year-over-year, we continue to see growth and good progress.
But I'll just remind folks, I mean, it is a limited number of SKUs. We're talking in the mid-200s range versus obviously tens of thousands of SKUs for Enerpac. That said, we did see growth. We expect to see continued growth in the second brand, particularly in Asia Pac here in fiscal 2026. And part of that will be, as we expand distributors and channel partners for the second brand. We continue to do that in second half of fiscal '25 and going into '26 here. And then also, we are adding some additional product lines in fiscal '26 or SKUs or different product categories, to that second brand. So we expect that to help us drive growth. But part of it is also a long-term investment in marketing appropriately for that brand, the LARZEP brand, so that becomes more well known in the region. But we're pleased with the progress that we've made so far.
[Operator Instructions] Your next question comes from the line of Daniel Moore with CJS Securities.
I appreciate the comments on the M&A outlook. Obviously, balance sheet extremely strong and cash flow is only going to tick higher.
Just talk about with the stock pulling back here, your -- maybe if not the cadence, willingness to be a little bit more aggressive in terms of redeploying the $200 million repurchase authorization and how you're thinking about balancing M&A versus buybacks here in the near term?
I think as we've talked about really from a buyback perspective, we're opportunistic. Q4 is a perfect example of that. We saw window. We were able to invest back in ourselves and that was the largest repurchase we've done since the relaunch of Enerpac. But we will take advantage of those opportunities, Dan, when they're out there.
In the absence of that, we continue to really push hard on M&A. DTA is now behind us. It's integrated. You've seen the success we can drive with that. I mean nothing better proof positive than what we did in Q4 with DTA. So we will balance them equally. But if there's opportunities from a repurchase perspective, we'll take them when we see them.
Yes. And I would just -- I'd echo Darren's comments. I mean, obviously, as we said, it's always balanced capital allocation approach. First priority is investment in the business. We feel we've done that and are continuing to do that. We referenced in the prepared remarks, a number of cases where we've made capital investments in manufacturing and IT to drive further productivity, efficiency, support, stronger growth engine for the business. And then certainly, a heavy focused lens on M&A, but with a very disciplined approach.
But at the same time, we are pleased that our Board authorized a new $200 million share repurchase authorization. So that does give us, obviously, the go-ahead to, as Darren said, be opportunistic when we see that the stock is, in our view, undervalued in the marketplace, and we'll continue to do that throughout the year where it makes sense.
Really helpful. And just on the M&A front, you gave a lot of color, but are you seeing potential sellers now willing to come back and have dialogues at rational multiples? I guess, obviously, early days of the tariffs, a lot of uncertainty kind of put things on pause. Are you seeing that -- those discussions open back up a little bit?
Yes. I don't know it's so much that, Dan. I think it's a mix. I think we're seeing a lot of newer opportunities come into the funnel that are really interesting to evaluate. Again, obviously, they have to pass muster in terms of strategic and financial returns criteria. But we continue to have dialogue with folks that we have in the past as well and situations may change there. So I think it's really a mix. But I would say, broadly, our team has done a really nice job at sort of priming the funnel with a lot of newer interesting opportunities that we've been evaluating.
The only thing I would add is obviously... I was going to say, Dan, we're obviously investing more resources from an M&A perspective. We talked a little bit about that. We do see opportunities opening, and we want to be ready when they're there. So we are making that investment back to find the right deals for the company.
Perfect. Cortland-Bio, up again, mid-teens this year, 10% Q4. Just talk about the outlook and whether double-digit growth again is kind of reasonable and embedded in your guide?
Yes. I think we remain very bullish on Cortland. Obviously, it's in our other segment. It is our other segment. It's certainly not related to our core Tools business, but we definitely like the business a lot.
In our view, really strong growth engine, margin accretive effectively for us. We continue to invest appropriately in the business that has exposure to high-growth end markets. We've got really blue-chip customers in that business. We continue to drive a strong commercial funnel, bring new products to market and ramp those commercially in partnership with our customers. So the business continues to perform well, and our outlook continues to be very positive on that business from a growth and margin perspective.
That concludes our Q&A session. I will now turn the call back over to Paul Sternlieb, President and Chief Executive Officer, for closing remarks.
Okay. Thank you for joining us this morning. And for anyone [ coming at ] CONEXPO or planning to in March, please reach out to Travis so we can show off our HLT and DTA technology at the show. We will also be participating at the Baird Industrial Conference in Chicago on November 12.
And as a proud Milwaukee company, I'd be remiss if I didn't add "Let's go brewers". Thank you, and have a good day.
That concludes today's conference call. Thank you all for joining. You may now disconnect. Everyone, have a great day.
Enerpac Tool Group Corp - Ordinary Shares - Class A — Q4 2025 Earnings Call
Financial data from Enerpac Tool Group Corp - Ordinary Shares - Class A
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| May '26 |
+/-
%
|
||
| Revenue | 634 634 |
4%
4%
100%
|
|
| - Direct Costs | 316 316 |
5%
5%
50%
|
|
| Gross Profit | 318 318 |
4%
4%
50%
|
|
| - Selling and Administrative Expenses | 173 173 |
4%
4%
27%
|
|
| - Research and Development Expense | - - |
-
-
|
|
| EBITDA | 145 145 |
4%
4%
23%
|
|
| - Depreciation and Amortization | 6.62 6.62 |
48%
48%
1%
|
|
| EBIT (Operating Income) EBIT | 138 138 |
2%
2%
22%
|
|
| Net Profit | 93 93 |
5%
5%
15%
|
|
In millions USD.
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Enerpac Tool Group Corp - Ordinary Shares - Class A Stock News
Company Profile
Enerpac Tool Group Corp., doing business as Enerpac Tool Group, designs, manufactures, and distributes a range of industrial products and systems worldwide. The designs, manufactures, and distributes branded hydraulic and mechanical tools; and provides services and tool rentals to the industrial, maintenance, infrastructure, oil and gas, energy, and other markets. It also offers branded tools and engineered heavy lifting technology solutions, and hydraulic torque wrenches; and energy maintenance and manpower services. It also provides high-force hydraulic and mechanical tools, including cylinders, pumps, valves, and specialty tools; and bolt tensioners and other miscellaneous products. The company markets its branded tools and services primarily under the Enerpac, Hydratight, Larzep, and Simplex brands. The Others segment designs and manufactures synthetic ropes and biomedical assemblies. The company was formerly known as Actuant Corporation and changed its name to Enerpac Tool Group Corp. in January 2020. Enerpac Tool Group Corp. founded in 1910 and is headquartered in Menomonee Falls, Wisconsin.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Sternlieb |
| Employees | 2,100 |
| Founded | 1910 |
| Website | www.enerpactoolgroup.com |


