EPAC - Earnings call transcript Q4 2019 | Enerpac Tool Group Corp.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Enerpac Tool Group's Fourth Quarter Earnings Conference Call.

During this presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, September 26, 2019.

pleasure Corporate the Strategy, my Barb over now VP, Bolens, Investor is to conference turn to It Relations. Thank you, Ms. Bolens, begin. you may

Barb Bolens

Good thank and our earnings morning joining call. Dona. conference on XXXX fourth you us quarter Thanks, for everyone,

Director Bryan company's and us On Baker, Investor are Rasetti, today of Rick Chief are President present on Bobby Also Counsel; Officer; Randy Financial Executive Fab results Officer. Corporate the Johnson, Chief the and to Officer; Strategy. call Dillon, today [indiscernible], Chief the Accounting and call Relations General with

Our call earnings Investors Web enerpactoolgroup.com for release section. and slide the are site presentation today's in our available on at

We are it archive also will recording call we our site. and on Web this

to two. go slide Please

adjusted earnings. call, we reference today's such will and as measures During margins non-GAAP adjusted profit

non-GAAP to facts not remind in that making find GAAP morning's today's presentation reconciliation to call this to be are considered can in you like release. historical schedules a We also and and statements. statements press are of measures forward-looking we will would the You that

making materially or statements may SEC Federal our Safe Law. to risks Securities anticipated those forecast, to pursuant Harbor statements. see of for results differ other actual provisions factors Please cause the and other that forward-looking from results, filings are We

an many from calls, and we how questions follow-up to possible. have keep also ask with address one Consistent follow as allow to as conducted we hour, one to we call today's question prior us our that practice participants order in

EC&S reporting in July that an As divest agreement reached continuing financial announcement segment. we our we a operations reminder, are the results now have following to

operations be to-date, financial in including As the fiscal XXXX information all guidance reported a will format. continuing result,

over the to turn call will I Now, Randy.

Randy Baker

everybody. good morning and Barb, Thanks,

announce the and week, Enerpac today of our company but of of on the This into one commitment top-performing, our our history. is industry. future. transform I for new going stock the quarter the the clearly tool is symbol we to new slide want work set the are symbolic This review pure-play and to the years Tool officially three, and Actuant We company EPAC, pivotal to Group, stage the in most full-year and which hard multiple events results, I to to name company before start of tool a launched culmination

a is years Enerpac of providing a with industry. safe premium reliable, products history brand and XXX demanding high-precision, to

XX serving and billion. growth an serves company tool the on We're new growth for market ultimately customer company focused industry and XX our servable organic product lower tool of shareholder space margins, cash ample while both cyclicality. industrial and superior strategic total returns. product and Our $X spanning the delivering serving coverage heavy This light four vertical base environment for flow, a of a creates provides in The families, over acquisitions, categories, industries. and breadth stable

The general area and four the are past bolting focus hydraulic technology tool two more. categories the of power marketing. of development and we industrial tool lifting increased new products technology, of and the which years also carrier product The include growth, manufacturing, general aerospace, including applications, [ph] industrial, through many Bolting have acquisitions. in share variety systems, generation, pumps, market and widest our has is increased and

leader, a pumps to our Tool Enerpac cornerstone through market systems on compromise is efforts will The Lastly, always highest Group the precision quality in and and the have hydraulic commanding industry. and share innovation. been supply lifting market and of their never tools Enerpac a

of high-quality a rental slide business categories; and Now, Tools operations Service, moving is four, over comprised Enerpac & Industrial of sales which is three to comprised manpower.

of continued breadth organic profitability. platform our product industries XX provides sales sales, the widely well-positioned for company, from than in rental excellent we're above given growth line vertical and deliver which and conditions for Our high the XX% an margin consistent market tool the strategy emanates for remain participation of our growth. the to More

new product to goal in and investment beginning XX%. our of Second, contribution development approaching yield of is in is results our higher the sales form

our force for sales dealers successful. than effort years a the last X,XXX to three more has over create Lastly, more serving effective of worldwide been

key of the quality From with the Tool committed to success the and Group industry. is highest Enerpac any an operations perspective, to company, starts manufacturing markets, dedicated with and employees engaged serve precision tools our and comprised in locations positioned XX local our delivering the to

sheet, capital return quarter acquisitions, growth growth we growth, year. through plans; stated balance changed. earnings in have which in X firmly and our calls, the clarity a making invest shares. our allocation prior I've achieved not maintaining reside strategy organic strategic buybacks, our lastly, into through which capital priorities long-term As to fourth in shareholders We'll over of we'll provide in to and investor our purchase strong more We're opportunistic day tool million this committed share later during the

achieving our disciplined adherence of operations, growth, are organic consistent strict capital we approach making our world-class and strategy. However, in allocation acquisitions, to maintaining

turning five. over slide to Now,

expected, developing demand Our global weaker uncertainty. the was than impacted fourth by economic quarter

dealers by Our slower are becoming retail driven more demand. conservative,

earlier fourth by our seasonally lower efforts market. announced this East year, was impacted to we which quarter reduce part our as service of sales, the Middle and IT&S low Secondly, margin restructuring the

X% a core in declined quarter. result, the by As sales

year. our While adjusted sales steady quarter, operating maintained the last versus margin the impacted volume lower

EPS by flat expense. cash interest restructure to deploy reduce and costs, reduce our both actions business, driven year, the were we was to and to also last took results

we going the in quarter, third to detrimental continue Our the restructuring actions, slow. improve and should our position which will economy margins cost impact initiated forward, positively

expectations. reduce we lower swift the align with to to taking volume actions inventory Lastly, are

almost lines XX%, one a of very by profitability sales to objectives. growth over successful bringing The with fiscal step basis solid translated very high and and regions. to of year rationalization product XXX incremental terms to XXX%. growth, slide profit from us was closer increased strategy. EPS our of expansion, Operating a in of performance points, portfolio six, grew our Now, with our long-term profitability X% higher margin execution XXXX turning by most Core

products than best the advanced XXXX was market, to in which towards new new released many XX% years. our product goal. further our We introduction contribution XX us more

delivering strategic was focus the our of prevailing product above new achieved Our introductions. through market commitment sale and intense objective growth condition to

of Enerpac stated, As launch is Tool the the the Group our I new execution. earlier culmination strategy of portfolio

year, smaller the business in During sold System the & we Components two preparation Segments Engineered sales. for

confident sale continued company. in pure-play We fourth the with are will we tool progress occur calendar a separation of Overall, and quarter we're process, top-performing XXXX. very remain the the pleased becoming continuing the towards closure

call the quarter, with the on and market Rick I'll now, Rick? to turn come update back over I'll through And the to our a guidance. Dillon and go details

Rick Dillon

Thanks, Randy, and good morning everyone.

take fourth our So dive a deeper justice results. let's into quarter

excluded item one-time included Just a a that has in note appendix. been from of results adjusted reconciliation our quick the the is

if by So, in decreased X%. by X%, turn from down core were Cortland sales you net stronger to X%. an dollar the impact growth and sales additional by seven, reduced the service partially The sales medical slide XXXX fourth Tools fiscal quarter offset business.

in is turn we tool sales low eight, a core decline in lift If products. of digit It slide heavy mid-single double-digit to to products, tools and comprised a service, decline service declined core flattish and X%.

to year, inventory our levels of distributors demand We cautious uncertainty sales product flat line region, decelerated the being to on is in up U.S. market manufacturing this during are more and and believe largest due our America, with North prior the the ended conditions. quarter In indicators.

year But in Service demand. largest sales issues Brexit to we were this driver mid the was exit relatively Europe on world more to X%. earlier Product down geopolitical as less and rest of down weighed single-digits North flat. the low other are the American heavily access profitable, service also work. commoditized being strategic The was took

during but these impact profit the The a we was quarter, was impact anticipated top as the stronger line than favorable. little on exit activities

large third the year completed that service service decline. drove significant the quarter fourth expected, sequential and growth to oversight quarter As year-over-year a and projects in were this contributes

in bringing were other Heavy impact quarter, lift total in the which the products new XX. These the over offset full-year also by quarter products. launched custom and sales pricing, the as tariffs covered just of X we the continued We were costs. partially commodity large declines to down

XX% ended As we Randy few introduced years X%. last to closer of target from we over continue to of our year as sales to the mentioned, products get

on sales adjusted our operating held the noted despite core slide steady. reduction seven, in profit As

walk through drivers key turning nine. So to the let's slide

benefit As expected, an operating the profit, declines. North immediate offsetting American to partially other provided market-driven volume service strategic and exits restructuring

compensation includes positive increased expense the the Pricing, offset of of bad activity slightly exits, excluding or incentive the the margin productivity, decline net approximately tariffs XX%, on benefit debt corporate the margin and was non-commodity ECS profit would work. the decremental increases Continuing million projects as approximately profit costs operations be in was the lift costs lower volume these and for far heavy custom XX%. other and reduced elimination quarter. lower service sales XXXX from XX recoveries current The costs quarter, lower costs medical operating costs, the other as in strategic reflecting

to XX, we here. operating essentially as any process, you so spend story same If the slide the quarter overall adjusted the turn EBITDA for time is won't

to lower sales a expected, for the primarily lower GILTI XX, line slide quarter on core in than second and with moving And adjusted expected, than expense was tax. EPS driven result Tax earnings lower as European was of year. resulting last declined $X.XX in by

cover are this we reporting for purposes, is our only because we XX won't Slide compatibility included this slide. slide, we so normal segment continuing just operations

Slide our for core XX is sales ITS. trend

continues product be out provide new have Day stable, tools service relatively service and tools, historical Investor up. broken we our lift. from and and Group coming heavy more performance lifting, at both have heavy service. The information for Tool product on We'll the to We more Enerpac fluctuations and trend seen

was discontinuing to of the liquidity higher drivers expectations, capital working being cash lower now EBITDA and operations. generated we our well for during both million continuing on the below XX, quarter, slide and primary key $XX the which Turning

planned we increased timing of cash of actions. saw also We some restructuring our accelerate as the

fourth cash essentially last full-year, the continuing from was For miss. increased from quarter in the by stock million EBITDA the no improvements a $XX the year. capital working of cash refund option current offset payout, the primary tax basis, On compensation year-over-year fiscal large proceeds from year, we planning the costs our and and operations Viking bonus in generated XXXX received reflective increased

ECS million costs drove approximately these working year-over-year. increased could increased sales an and All cash million in subject to ECS the that working increase from flow capital and had year-over-year cash $XX Primary reduction. million working with potentially true-up $XX capital capital divestiture left post-closing the EBITDA, business the increased are a lower balances proceeds. for capital, during expenses. cash in year the the ECS $X These combined business of result

range million XXXX cash fiscal focus. management in to $XX of for a the higher inventory. guidance ended in year other our million. capital. the to levels, Working $XX $XX is divestiture anticipated million and for between CapEx anticipated area We of year be cash taxes specifically and will to capital working lower approximately restructuring This reduction $XX be for expected $XX will with cash next assumes charges. impact continuing We remain operations than and million. The offset interests flows

our $XXX allocation In shareholders. and XX the XX term million we capital million, and after So the ended on our of we return our term opportunistically in approximately million manage as X capital back a our over shares with prepaying million sheet buying another hand fiscal on it XXXX, $XX line of of priorities for paid stock down we both just million loan to at loan. cash quarter with all cost balance

and continues X.X at in leverage X.X down XXXX. sits times QX trend versus times Our to now

condition provides our flexibility of lot to execute to sheet a balance us growth strategy. with Our continue

behind over guidance. will assumptions fiscal I Randy, back I Before key to XXXX walk our through the call turn the

as divestiture exits a planning ECS well we year. of strategic the With the fiscal are some as in

a providing little here. are detail We more

be First, slide the rate for future, last walk see XX. us we so average to strong will our The look dollar a at negative this year. sales foreseeable from I'll with seems from on impact staying

In addition other will North lines during to non-core the exiting several lower we we impact from America, in product the have our identified profitable be service strategic exit year. of

relatively each products These a are include rack on offerings profit product margins. and cylinders. negative jacks and they tie these have connectors, our overall quarter, strand small, last discussed we sub-sea As impact

and year expect We so of completed far. these complete divestitures the one the to in front half have

guide have for line strategic year performance point, Using sales two for these and million see on and service will the core fiscal profits. what impact reduce Collectively, anchor the positive 'XX to ongoing product the changes will $XX about for operating we by starting we XXXX. business a exits sales

fourth tools quarter. We be are performance flat down single-digits environment expecting to the our market with similar markets low to to

to us outperform continue Our actions market and to the NPD by basis will XXX commercial points. allow approximately

fiscal we a are $XXX The will primary oversized will market projects of not flat down range had a fiscal We This driver also single-digits. to overall which us service low expected million service expect in year. $XXX the of to be in environment decline. the million 'XX for to to be sales XXXX, the get

Slide on our improvement to XXX basis points EBITDA fiscal of we margins. move XXXX. strategic we XX, margin expecting If operating on are improvement in impact reflects the decisions The in a

taken anticipating that the million ECS needed. are by recovery remaining $X of those will year and the no TSA approximately also billion throughout are as continuing either the $XX or reduced corporate operations We actions costs from services be longer

cash From the the impact quarter costs be ECS assumption million be for costs So to interest pay the EPS the through proceeds balance the term balance of year. transaction, we from used eliminated of of closing reducing made will perspective, $X will the the or this the expense down that loan will assumes the offset first an transaction and the year. have after

turn I'll to call that, With the back Randy. over

Randy Baker

Thanks, Rick.

major So including over through substantially GDP inflection changed have shifting the the and continue Europe general U.S. indexes future. XX, in Growth growth lower reached the to projected markets, near which are point. moving PMI slide rates, fourth an is in to the economic drivers quarter. to rates and the

repair a continue industries more and outlook impacted oil growth healthy, highway manufacturing, gas forecasts. aerospace, lower although industrial to a on and reflecting are inventory include maintenance, be general these Vertical civil lower dynamics surveys and off industry resulting by construction, Additionally, at in conservative rate. retail and vehicle

core sales has the covered projections. Rick fully

Enerpac I'll move new the Slide Group. the on XXXX So Tool XX. summary to on based new guidance of is guidance on full-year a structure

for stress our profitability. projections has to want which million As increases include increases which profitability, the impact, Rick $XX strategic an covered but XXXX access, I if approximate

sales of the will to be million result, million. $XXX range the a As in $XXX

be projected of Our $XX to EPS $XXX and million and range $XXX and in be $X.XX range share. will EBITDA million million. to range $XX million expected our $XX $XXX $X.XX in will is to EPS the million flow of $XX million the range of will of Cash $XX to in the in with quarter million of be be between million to first

Our is clear. objective in XXXX

We our the execute plus goal tool EBITDA of will Enerpac operating strategy, systematically performance achieving of company continue Tool Group while with XX% to our improving ultimate the a margin.

continued thank our to quality and I'd worldwide delivering tools also employees industry. commitments in like their the and highest distributors all for the of services

So operator Donna, let's open it up for questions.

Operator

KeyBanc Instructions] Our of is Jeff Markets. question Thank ahead. you. first [Operator coming from go Hammond Please Capital

Jeff Hammond

everyone. morning, good Hey,

Randy Baker

Good morning, Jeff.

Rick Dillon

Good morning.

Jeff Hammond

just tough once, to I flesh know, all just particularly Thanks. product I maybe wanted through, cadence comps, then, you and that on you they quarters and you how just of comps, of touch bit service So, where just clarify, exits, sounds you out? the nine, mentioned, $XX really you and know, it to the down the or don't you're flow also do million if like there's think to these, understand particular the five lines little better selling know have, sold a I the trying

Randy Baker

off Okay. some hand strategic on Well, the surrounding the to and try that I'm I'll predicted issues this lines, cover some internally a then would exited product broader from the result to Jeff, it in it questions as because me to standpoint many through of go let from strategic cover to details going so first financials. investors, we Rick

and and well, of sector revenue company our decision we limit needed to that dealt changed of Tool EC&S for to the then and service very also some original strategic remarks, the component original manufacturing the as particularly the aspects, Enerpac mentioned small as structurally so we the third remnants to through we talk in low as prepared margin the and has sold remnants that impact. our very positive businesses two about As and in a and energy Group, in be I talked the quarter, with prepared sale, we

of You $X XX%. in quarter, out flow the the through of under sales of saw coming that, was million

business to So, continue running we profitability, fun, think do, an intend stuff picked and we thing not that. we're a the right important not it's for that to I and for

it So, connector product a the the systems the original about which first dealt over to unfortunately comes for with, the talk business. complex and sub-sea remnant been had is a company, a secondly, not of divested pipelines, repair and very inherently one is be so that strategy business lines, time was The it's sub-sea provides when from had to I'll it connectors business one far energy that away and it tool particularly that profitable. and our is

be its long which is been goes with Uni-Lift tie cylinder of manufacturer of a to one for called our and two a Uni-Lift, Cylinder screw many it's that manufacturing, a Milwaukee time, Group ECS the was as Number which in And part of manufacturing long, business and rod moving the system really Actuant establishing one. manufacturing, money, stream. was in back has -- Cylinder. part a also out is due component tool never has again, to Milwaukee terms company or a our Company, as the and and industrial in adaptation that's much business the final the a or is group it and it of in part simply it So out years, dealt either location The line product of of jack component. called convenient an the revenue had it been largely, but made

it you high-quality make to so, formation really company. we the complete was that all to together, of needed a tool bundle when that steps And the final

it thing was right the painful, do. Although to

more had that insight little Rick into over you turn to I'll a questions. the provide So, to financials

Rick Dillon

Sure.

that us, exiting largely in and that in said away right QX expect to if million, QX. about service. year, is see comps terms the so QX and we where $XX is is That So, perspective, revenue project for had coming a behind at through. you activity we million look of last large From we $XX starting of the

if top of going to particularly So, that, down, line North you have strongest you're the service comps. as well impact about going American that's where tough as terms the think in

From profitability, front-half complete and about our in That line one them think our no expect from revenue that's products, million, of low, -- in in either in product back-half, mentioned we early I little completed those year, EBITDA, was the or a perspective, show very to so perspective, we that'll of a QX the in be little all QX. $XX itself and on cases some with QX. but comes in impact a top but the there's mostly bit non-core

Jeff Hammond

kind little getting some Okay, maybe it or it heavier, where a talk great. like little markets just just and end back in geographies of And Europe more slowing of about theIT&S resilient? is the business, bit feels then to sounds conversely heavier a but

Randy Baker

rates, was through that quarter and the in announced progress And almost around Europe. was market, saw quarter, -- the immediate of we reaction the as with increase we that U.S. when early there in just in in other and southern some the rates. and world, an the order wasn't parts the a was we what new Jeff, were issues saw it order tariffs developed things quarter, improved, distinct had

of have market been in countries that the issues some it's that in is some We've seen parts slowing. of reality Northern Southern the European the Europe. feels So, slowing like

repair well a there. few distributors. different side, weeks lot wind out on which manufacturing, a was in activity And is from the going Europe civil general but into those of part on ship to at and visits we multiple definitely is new playing weaker as the still look dealer During in that significant, farms sites if I amount of, a of wind my as energy The extent you vehicle those assembly a we're several big just from a markets, offshore vehicle there side. are ago, last job Europe

nuclear some gas, the on In fairly the which strong. fluctuation onshore but has gen, we've onshore oil, of energy and seen really the been certainly U.S. the surrounding in good is bolting, power wind side, market,

and to major bag, markets, see So, really stress lot of in the on things is again, and wanted two which potential participate do of that widely sell mixed customers I Europe, little of bit provides the to. U.S. to a continue a one XX to we locations we a verticals, and

sales a that So, marketing that improved coverage and the our fact helped great and has we've deal.

and America, and we've some role, need they in Now, mining mining, maintained, into be fleets slowing of in a bigger you that where still obviously Latin when have equipment Australia fairly shift we've into seen well but large and markets. those mills to done plays processing

distinct and effect the There world, why a in that and Asia have another story. occurring. Now, been is all slowing part know very of China that's we

it three we forecast on that sales up think where feels forward the as and look think the in see at should to an is there, don't the tool I think laid we that certainly but single-digits, in some right XXXX projection I about our the we side instance mid a forward distinct down into So calling is of the potential moment, business, X% for I be I decremental do there. down

Operator

you. Thank

is from Please go Poliniak Our next of coming ahead. Wells Fargo. question Allison

Allison Poliniak

Hi morning. guys. Good

Randy Baker

Allison. Hi,

Rick Dillon

Hi, Allison.

Allison Poliniak

guess, or of feel of Just now? it's overall bit do sort little of, sales sounds some systems like color inventory macro just of concerns the there expanding the build, the been like pollinated [ph], sort right the had weakness any a inventory driving you it commentary, that's an on I

Randy Baker

and, side our we Well, number through is quarter from a miss to first tools in resulted through in directly the that wholesale manageable. quite as company number can we our that fourth quarter. is plan work our It's inventory and the actually from work

chain is and Tool we've before quite are that our because distributors is the inventory stock do about not I our wholesale large quantities of Group to many quite turn products the Enerpac of One actually short, of probably they do and that investors there that think with quickly. catalog unique discussed our extensive this our is quite retail openly product things

as a as to six familiar in turn up with, between some the ratio at the dealers looked going turn So XX have rate high I'm and if they're very average cases. you of of

or that they're they're context items from in So, not supply the in Europe that quite they're stocking, that quickly, to the things that in able quickly. either U.S. warehouses stocking, turning we're the our

you the so through and next work it we effectively inventory in quarter. but immediate that build quite And see part, can our respond over

to the through first as cash and that, with that's thing aligned now, definitely something draw go QX. and right the we that's the our watch sure quarter which So plan significant on inventory making certainly report associated all it's we an down with are we'll

Rick Dillon

more when estimates biggest quickly, just a the fourth our tools actual and starting you So, we the for adding for little there, decelerate inventory think side, in about the our quarters, we quarter. on positioned year, things quarter really that, as the saw obviously star had July,

it the that up, ended we've the for to levels to back is we of set inventory with inventory, Randy's place working So it's August we moving, expect kind we to the we've business. but that already plan more in planned would point, and that in already drive capital

inventory plans control, any a on that have but to for concerns did the whole the high we nature under our normalized lot have business the back and to today a to don't drive level. just So ability get end of

Allison Poliniak

Great, are of in sort you on once then positive That's price XXXX in impact well? there guidance, and thanks. net again assuming your just certain helpful as

Randy Baker

positive, Slightly slightly positive.

Allison Poliniak

thank you. Perfect,

Randy Baker

you. Thank

Operator

you. Thank

W. Robert from Mig question Baird. ahead. go is of Dobre Please next coming Our

Joe Grabowski

This Joe Mig this for Good morning, morning. everyone. Grabowski on is

Randy Baker

Good morning.

Joe Grabowski

here in to deceleration said seeing again, demand if more know, North bit mentioned talk of continues little that in and demand you But you're the comfortable is stabilized risk just about decelerated could a you guidance. rate future in morning. on the if, September you Good sales quarter another things with trends, product I sales America, just decelerate? what core quarter, demand guess during your question fourth you the

Randy Baker

our very watch visibility things that the we backlog of scheduled rates we which one our Group come wholesale, to the is from. it's And products it's very to Enerpac our tight and Tool daily plant well organized of quite have Well, order closely. with is

rebound that that I think and And the four And walked the two seeing people our quarter, work. tariffs a we the of I we're got Europe early we're was mind of was as environment followed the they to of settle as as so those lot the rates, a in around the the months comfortable in a fact order of on. went what going going quarter. strong new first back final we quarter quarter by down mentioned, the very on watch as And there that daily in reaction through political months to their was

And so we're watching I forward our closely. correct it today. believe is that But forecast we it do know as very

Joe Grabowski

it. Got

Okay, will will actually on I'm exits. negative be of again than than be core chart, exits, calculation there core acquired the reported an sales thanks. calculation calculation out circling the that just or And then waterfall million less of strategic on the sort but sort $XX sales that the less that makes sense. provided of actually like the a sales then back and negative, curious sales those will strategic backed core be of was the adjusted if core sales guidance out like sort an adjustment of

Randy Baker

our the you. an forward reporting. we So basis And out These show that to exits, we'll always -- sales to try guidance. in be sales give core clear of our we adjust a strategic report even will core on will with equivalent will we'll going that number

forward just with the on So, did we'll go the what exits, the with forward strategic business call and bridges, we and go these core we'll then there. activity we really like the start

lowest will you at product, service same product the which exits, $XX piece a somewhat color strategic the or until quarters, will And on number is about $XX being number be QX million that that when million the the QX little just more evenly then happen with of look that. over the

you you'll those see gives kind year-over-year how that on drops. some of So spacing

Operator

Thank you.

coming ahead. Capital next Dray Our Deane question Markets. go of from Please RBC is

Deane Dray

Thank everyone. you. Good morning

Randy Baker

morning. Good

Deane Dray

expectations I pace mid-year, stranded of like ramping the should was on year-end? or next corporate today? go costs after year where's down, hoping costs regarding exit Yes, sale. EC&S the either look what you the through could the And it

Randy Baker

Sure.

the in of million the last be quarter stranded talking the business. means is costs". assumed That is about transaction. started would will we we've to of incur a guide $X business allocated fourth million ECS $XX So that close quarter usual, otherwise "ECS of about we'll have the What costs

of as required, remainder the the the either naturally the down agreement imbursement assumed go we've that take transition those to or For we'll services we year, no the costs will those are eliminate through either longer get $X directly costs. from million actions and services will

year the $X of we expect reflected last operations. see we perspective, million continuing million $XX costs, a ECS from to So, where for included only in year year those the

costs, corporate call, costs, as opportunities from standalone still company, a we've activity. guide you working talked flat corporate to of we'll our last but roughly perspective, a smaller continue we able TSA, structure have of got be we some see still through basically year, we a $XX in corporate align moves far to through restructuring to the take As business. for as our to million as those migrate structural last those that We're is corporate which

be end by we those million So ECS structure. corporate fully our But gone. now, will services million on start $XX come with expect stranded of a go-forward it's of the And million assumes associated the set announce year, right by there start a should level $X to the position that, we end basis. year, be in them guide charges the And of and it to the will costs. the we'll out that $XX of as on

Deane Dray

expecting? the range, up just on, back circle you're XXXX you verticals, what you're XXX XX that your growth market of And is maybe on at by of bottom detail. the detail basis land next if on helpful then and outgrowth the basing the really how look, basis then we did layer for that That's this

Rick Dillon

So Dean bottom-up markets to way forecast of to that believe manager we country all from a always to we what the a with look start a the gauge like. region they what do, is going

And landed. you've also We at at look rates industries, we of And a I time of the orders start I've and of forward those economics, coming kind their rates have macro. those carried lot mineral look this a going macro to up you that. from company. And it the can that the you to of middle where the we've then trends sequentially out bring long on with the of run for from level. had And together, macros landed. at a then I look when time, the looking build at third, industry come those spend order do be standpoint, then bottom, from you all And see as it's you a to corporate it you it from think where where

capable beat a basis that? then about were how do the And points, the we by company pretty years, of XXX that's doing force what effective think a okay, three market you elements the past build now. of over about you So sales

achieves, We know, have all salesman sales goals we where down have world. level over who to We we areas. know the a weak

and blank For the our started through really distribution spots. first working time development where ever, we we have

excitement of lot of soft new you've So got an companies we're is our new builds expansion out, desire capability that. channel as and support, of a in time. coming market it as customers the offset dealer will long, And from dealer regard, name well that balance better and been extremely that a your I it's development, in products that array products well do when as because sales helps then long help good can a as

when that pull we've how you that. that expect outperform. we can that's all do shown together, to And So that we

Operator

you. Thank

next go from Please Duignan JPMorgan. is question of Ann ahead. coming Our

Ann Duignan

good Hi, morning.

Rick Dillon

Ann. Good morning,

Ann Duignan

looking we the lifting went business? chart what the to is where the service, you put of pie If have into heavy into ongoing that slide back breakdown of we XX, and XXXX, tools, a mix

Rick Dillon

Just a second, we're flipping pages.

we about it's the same as think to turn appendage. I

Ann Duignan

this that is but just and XX% service, right? it tools, heavy is like Yes, quarter lifting is is the what XX% rest what

Rick Dillon

service products it the XX% of about products terms and revenues. and XX% talked in We

Randy Baker

Ann, X, you to the refer slide chart was of profile on business which if really the today. the

so And roughly sales, including XX% Cortland business. all the is product

generally are XX% margin So high products.

all margins, high high definitely of but certainly value, product is are within product, is but is is side high is there margin margin the tools. the the which Cortland Now medical real remainder categories lower that a

from called out as that that it that us quite service margin The very, tool very And to rent it's rental. our with we that customer this in well. equipment, equipment And piece ran other to two thing simply goes a has it within want a out a have large fleet, have reps. going I profile And goes just service out the rental they're a our It's which we point we profitable. to attractive is revenue, ways. is

opening So be. that's I now very the that And true very something is it's is the in quite that reasons place statement my rental unique of believe my And revenue a high comes one to is comments from XX% tool company our our of why plus product that margin. well-positioned. and

Ann Duignan

business also my distribution? reminds changed. really all many tool so of Is wasn't of because it percent that us direct distribution? have What point. the tools things the Yes, Randy, business is versus

Randy Baker

distribution. is percentage high Yes,

XXXX XXXX to of dealers, going sales. many, of address verticals XXXX they're points the that have we talked with about. XX dealers those many We over Of

points. the full developing We do have And the covered a opening surround rental be will And XX that is service filling are that's retail thing have I that that test between that our space necessarily to with blown our very, retail true we stores competition store. service case area. We and it's Park, it's not well of distribution, important center. essentially, in company that also is supplemental in Enerpac center where think very Texas, running contiguous our creates grand actually through a trade XX entire not and most did distributors a first and dispatch primarily Tool Deer portfolio of we in good white

take our think strength that in to companies other I've channel. our with company been strength of years develop is my But it the distribution seen channels very one, done. effectively Enerpac XX plus in tasks that really has in it I always

those serve gives that the ability all something to vertical And industries. us

Ann Duignan

And geographically the Okay, business now remind in thank you. mix us tools overall?

Rick Dillon

Europe-ish. North XX% About XX% America,

Randy Baker

Certainly is. Yes, breakdowns America, the Asia. the and about for day, remainder that's new we is the Latin regional directionally investor but will will sheets that what the fact it provide give

Ann Duignan

you. Thank

from Our your with next question. Bergner Please Justin Gabelli Company. coming ahead of go & question is

Justin Bergner

Rick. Good morning, morning, Randy. Good

Randy Baker

morning. Good

Rick Dillon

Good morning.

Justin Bergner

understand to better million year the if $XX fiscal exits possible wanted XXXX would EBITDA specific margin or of at just don't be provide I a be guide? and looking about, for improvement businesses to you're exclude the number what you exiting, your your you it talk expected would

Rick Dillon

margin with came I do product. the But mentioned won't profitability. $XX by as no We little million to

look at up-cross have you we of I given bridge, bridge, if the the impact exits. think So

the… And so

Randy Baker

bear right with We're us, get Justin. to trying answer. Just to make sure the we

Rick Dillon

there's removing OP. EBITDA profitability little sales, And but That's very by as into no, said, line. points basis product getting driven without there's really improvement no the in So largely a basis we by those and that's XXX there.

with So ECS improvement. that that combined we of the XX drive year-over-year million costs

Justin Bergner

Okay.

So no EBITDAs OP of. may little be sort a

Rick Dillon

Yes.

Randy Baker

Yes, definitely.

Justin Bergner

XXXX CapEx CapEx in then XXXX X% current something and guide, sub should and out run XXXX, of can understand mean, flow my And sales higher of fiscal Okay. in cash was of restructuring we million is or how past other this the making capital, that for some in look but up then the we year question as you that working flow, XXXX a in is, for the I free year? cash was normal of is much on and I adjust cash $XX shortfall rate, think

Rick Dillon

get we we XX XX-ish, and So, for year assumed to but for normalized look that. was us number five in anything, kind at CapEx restructuring, definitely you cash is the the XXXX. approximately short-term of then million maybe number, any don't real drivers restructuring about When in cash foresee and a

Operator

Please coming Thank Mig Robert of up question. you. line Dobre W. with [Operator of Instructions] Our proceed Baird. your follow next question from the is

Joe Grabowski

Thanks or did the M&A there'll after 'XX wanted Good year I kind you during organization and of for is internal year. business to year some M&A, upcoming fiscal be morning, more about a be on the expect year What's the thoughts of of going my activity to sale? again. taking Joe It's up. ask for the fiscal M&A pipeline guys. look follow like

Rick Dillon

working pipeline been able of we time our couple expense years at but pretty the to of hard because to get product ability, the was we've last investing a we areas had products of wanted we been organic to do look didn't the on M&A. what building for really really families significant side the be doing be build Well, it pipeline to feel internally. the that We've coming out, or growth

I are want We'll see M&A will quality the activity. going make you the XXXX, to is to we that cautious stress, sure some about want we in at it. but distribution that another company. that's our fits company very, want, advanced verticals aspect be So we fact very within in technology, or the advance either we in believe that brings not firmly that only really and can the some that

that about. it to that working investor want we're but actively right were away make go would any a going decision worried repeat we So something thinking bad to they're don't that now, on I

I'm how quite not I'm of so if honestly, the look types not picky of very they're companies. on And on we I'm product at disciplined worksheet interested. very on lines, And probably businesses target M&A, our and and

quarters. stick just So us with couple on for this

You'll see later more on that on.

Joe Grabowski

glad guidance maybe it here. it maybe points year to does I'm The those of XX% to just additional and upcoming to that, how going capture what out to of fiscal XXX long-term can it there? and versus take at sort margin for take one I just I'm thought kind be everyone Great. get EBITDA margin sure one. EBITDA covered will sneak sure basis XX% 'XX, last hear goal the I is but throw Investor this I'd the is Day, in then if long

Randy Baker

you Rick if of to going on you, and level walk is it's kind Well, give I'll view top the give a that. just

We past in felt and get recall Enerpac We've know there mid-XXs. to can we Tool to have very that XX%. QX, that back you well operated was Group, Enerpac is if in the The just the

going is because $X also headwind So company, we're of then, the short-term. in corporate which expenses with pre-closure, was take services so we costs, work with But we in we prep exit mentioned, the the obviously company $X smaller it's structure about million those And at in look there the actions be billable, worth Rick that's our transaction. with this was the been working in is sunk we've as as then transition it that there business functions really she out costs going will tool to long-term, obviously unnecessary And agreement, also the of know business, much as that. it's QX, about through we of a for which do through million go the to doing. then, align a And which transaction. the can't

over flip but I'll Rick's taken hope haven't him. So I I away to it everything from comments,

Ricky Dillon

similar at just but if and of incremental million, of you a the in look more kind ECS. guide, midpoint incremental discussion we'll of X X million into It's go savings take the No. at look you're from the right, detail, this our

restructuring. rate run savings the million talked of full the at we of look from service You about XX savings

talked streamlining the, well of non-core at as as of lines. and business the operation exiting these some about look Randy You product improving the Cortland

together but things us XX%, to not the All we're get done. essentially of those will

that so and a the a look business the to taken at corporate costs doesn't scale. of needed run hard capture And size our

to we that So to believe organization. post-sale state we're sight size collecting we goal line clear and the XX. actions is of can of right your of exceed to kind the to all the structure The of

Randy Baker

come. to More

Operator

you. Thank

question. company. is Please Our proceed next Bergner your of question with & coming follow Gabelli Justin from up

Justin Bergner

before you confidence could XX get to because of expectation of profitability was to a have better prior business follow-up. is the of it for the there like an close you that XX% you even but was answered the that the low can million it or divested. do conclusion? in to that seems thank being inclusive set that than fair Is of target, you Oh, that most And XX% in regards questions,

Randy Baker

Yes.

the too certainly, But don't get make I'm money. XX%. to want that action that. it helps we being XX the required was million and think not maybe It I an as blunt, accelerate do said, businesses not to I if

them strategic with for us. better the better it's for that it's We will businesses and and place place make owners them that certainly can can employee money with similar

truly a It to pure are play beyond takes the on connectors in the of that cash of company. the Group other XX%. is OEMs to unwilling and XX sorts of the it, management get companies, invest all oversight. not jacks investment not and tools to tool us components it. stage for It So, and or for That sets and a divestiture Tool high are helps tools. clearly said, run cylinders catalyst XX world screw in cannot for types a you tie to as the not to all And the there shouldn't systems sold million over Enerpac get tools, I quality order are to was is be the if sub-sea And million rod not own you those that suppliers takes businesses. it takes lifting

brings monetization truly the so company. those helps it businesses make And of in tool some cash. quality small And us a high

Rick Dillon

to XX, back the take through we all So, more the to months needed XX. well. we It XX couple of there million the able so is the to actions it and the of three includes walk is XX, as similar to XX in of think coming XX questions the that to - get QX exceed XX%. doesn't a on is you you if you over how get point, XXXX can out, to reflective how million, get At quarters and fiscal we were

didn't caveat So the with that at like can did, that I from get we better walk even QX change just QX. were we just

Justin Bergner

not guide, mean the spoken restructuring much flows sort the add how And restructuring lastly EBITDA I rate Okay. service then over much in on but fiscal you've beyond XXXX, is can that X the run about to back captured piece, of of 'XX? that obviously we service how million, year or piece, year fiscal

Rick Dillon

XX, We plan. captured million 'XX. about that's is so million in have in said There our incremental $X to Sure. of million $X you to not $X it XX

Operator

Thank you.

coming from Duignan question. is Morgan. Please with question of proceed Ann your next J.P. follow-up Our

Ann Duignan

the margin lower investors that's Hi, what's to not mean, whatever, look mean, it's metric Randy, XXXX I if also make surprised the but you cash expecting? free focused me, is or will the I be because flow to have XX% I that on to much at us what by allocated or a numbers know several million XXX in we're XX% number important were margin. EBITDA is roughly. at, committed and you mean, we could there? a more XXXX, purchases that's I an there, so I'm for much you sitting lesson growth Yes, to money on important maybe and learned $XXX everybody

Randy Baker

our strategy forward. to up let's So try going frame

that Investor give going will of our in will profile come cash So, forward. we the Day generation up,

A Now to of the it did one the come group, that remember point, about very where from? percentage from Actuant, large thing the important original very state tool its in very, came large remainder Actuant our cash of percentage.

that the about terms and free and And quite we've so, if of reported just XX, you last is we the guided that what flow, think of close. reported of and numbers XX between in today, year today we numbers alignment the cash

and to had a industrial as business flowing those of that we have company a forward and said, retained, tool was strategy, to returns fundamental to keep to that execute believe significant we strategy deploy going fundamental ECS pure-play businesses businesses through then separation Now, investing that which to cash were was the to amount in would of try I've to keep we business more we did the very diversified if the to same going the that not have weren't was unwise.

the is great how companies for record bring company. run growth, a and strategy profile, balance on that's want less on you extremely high, little Enerpac a about of we separation post a to started when of to strategic XX%. And going greater quality final strategy be exactly and up you've in the Tool north [ph] that very margin There build but the now reported to so, profile Gross $XXX profiles somewhere as that looking XX% the million to of ratio XX%. if that business products hand, everything of do percentage high compelling a X.X, there liquidity all great I will a is of we of are says or think that on Cortland, of rate is is high going very thesis everything forward about, at run you you cash today of with are at above you than new at can say very think you above debt-to-EBITDA because that's got can't then acquisitions Group, margin have a margin track cyclicality, how sheet, wind rate, that sell you why and that modeling organic

this that from strategy I the original a think departure profile. realized TSR but to is it's deliver XX-year strategy, the a much over going better So next

Operator

to time, turn At you. to I'd comments. over floor this back any Thank additional closing for the management or like

Barb Bolens

today. us joining for everybody you Thank

Investor call, date. in Tool be we we and we interest in Group. scheduling out Enerpac again have As Day Thanks will back the later mentioned once formal solidified an for the and interpretation the this will touch your in be year, we that send

Operator

for Ladies event. your and This you gentlemen, thank participation. concludes today's

You may have disconnect wonderful time your this lines and at a day.

Enerpac Tool (EPAC) 26 Sep 192019 Q4 Earnings call transcript