EPAC - Earnings call transcript Q2 2020 | Enerpac Tool Group Corp.

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Operator

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

During the 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, March 19, 2020. to President, conference Chief pleasure Bolens, to my Vice Executive Strategy now turn over the Barb It’s Officer. Please go ahead, Ms. Bolens.

Barb Bolens

Good Tool XXXX Thank us Kevin. morning you thank you, for on Enerpac conference Group’s earnings quarter second call. and joining

General Belstner, the Strategy; Operating On results and Baker, us Officer. Counsel; Officer; Dillon, Also are Executive Fab and Officer; Bobbi company’s Chief the with Chief to Financial Chief and Director Jeff Johnson, Randy and Accounting today Rick call Rasetti, of present IR President Schmaling, Bryan are Chief Officer.

doing of us calling days, many social As practicing various distancing from we are people these have we do are sites. and in

in than a if advance handoffs are little apologies usual. that longer take So there

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

X. Please go Slide to

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

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

in in how over participation. We one participants will hour our practice many have and making materially answer call question to we filings Thank Please of laws. from and to one your federal the those us we And calls, turn see anticipated order keep possible. ask allow results questions results forecasts, today’s Harbor from statements. as to for may I statements that with follow securities conducted you Randy. Safe forward-looking to are the the you risks also follow-up cause to now call an our advance as that Consistent other provisions differ factors for actual SEC pursuant to other or prior

Randy Baker

morning, Thanks, good Barb and everybody.

going on to start Slide are today X. We

had an captured two we has exception. impact which no obviously, clarity, and Enerpac the which Before coronavirus has quarter, we the companies on world special is the review have topics details headlines additional deserve to

approximately During Asian $X with issues the been our resulting operating travel quarter, we operations customer million. of of in quarter headwinds effectively operations idled approximately Asia. most the a profit The increased China and saw have sales $X million decline half for and experienced of

an Our team our plants providing job of supply chain able the has to component done solutions disruption. continue excellent minimal world to to with alternate were around ensure supply

We all have at plans developed handle emergency locations. of protocol potential contingency and for quantities to our enacted employees

our is one and number their families employees keep priority Our to safe.

one aspects in the Secondly, will many be the energy effect the impact will CapEx. reductions in the industry, This most experienced of oil largest has pronounced price and felt years. in industry all gas of upstream the but

most many impact will industry, exited revenue. to our and of the you conservative upstream service and require maintenance profile. the sales maintain As help we but of significant oil capacity, which downstream expect very are gas a spending midstream the Existing we and production of portion will aware, to assets

of our The year. world, service oil a will XX% half participates combination the has of gas the on unpredictable Approximately, coronavirus very sites revenue limiting the sector access back and market. over the job and of Additionally, which XX% to to and affect see created we the all in coronavirus the oil our operations. expect the reductions to is disruption

know strength changes there be headwinds. material to impact. have North To-date, an withstand not but America will we and an experienced any to these rates employees we seen temporary and team, in our Europe, order incoming have We dedicated financial the

business through As to quarter, will additional clarity provide we have changing dynamics. we updates progressed the we more as the

XX part volume of our the continues are started we quarter. sales North constraints multiple years. the Of which orders the the many quarter America somewhat quarter East inventory and decline. was oil the We increased affected be X, vertical markets, distributor And Now, and price we heavily latter the moving with volatile both mentioned many impacted regions. by one over sluggish was February. in Asia Aerospace to abrupt most the have Middle experiencing large by of affected positive by improved second Slide as in to during clients affected received earlier, has was the I sales which in coronavirus. been has seen

The was are impact expectations significant X% from rage. the within the Despite in from able best the consolidated in XX% maintain for to a sales and was products a year-to-date our sales region and the exceeded in sales quarter, of down rate performing and Europe resulting quarter on service. our guidance decline XX%, core growth we of basis. expectations, results

able cash are the to and resulting quarter results. prior our we capital our versus employed in use improve year Additionally,

but Our Group we Tool Enerpac at a in in the remain disciplined our of resulting very balance on sheet approach shape, results. great is difficult, leverage been the focused strategy net has to X.X. with level debt low Overall, our quarter a driving and second only

progress performing to over sales, in to company. moving towards we tool positive the on Now, the Core Slide was by impacted creation strategy make market our of side, conditions. the X, continue a top

our to product product new contribution XX% goal. has year-to-date contributed softened However, a which sales our the volume, on impact added these new our new has to basis over families three our has product unstable efforts conditions. catalogue exceeded Also, of new XX% development and sales

tool product a company the the On in addition has Group. to has UK, front, manufacturer HTL acquisition Tool first is which we and based Newcastle, several distributor. The The bolting acquisitions equipment Enerpac our high-quality completed effectively spanning new additions, provided line-up. of the of all line-up extreme premium, completed economy product capable of installed equipment global bolting serving the torque one base. comprehensive duty The the have most to will the Group Enerpac Tool our

business. and HTL headquarters operations. bring bolting European become the location the and Secondly, which lastly, processes, manufacturing management they of sales for experience will enhance our significant rental, will And in manufacturing our global engineering,

its of our efficiency deliver details the structural will has and divestiture of associated begun XXXX. the Solutions business. with and cost consolidation Engineered completion upon Rick already our project This review significant the fiscal synergies will in

which has million savings our run-rate our today. progress, and achieve track Most our as we an am on will to target which XXXX, exit are business absent very the our we annually. of reductions, $XX are cost However, pleased from accelerated EBITDA in significant market, XX% to importantly, million $XX volatile fiscal we between the with changes deliver any I environment

going the to Over Rick. a to I to going call Rick am He summary. on I through back going am quarter run Dillon. and with is the come you, to details the to over turn then

Rick Dillon

good and Randy Thanks, morning, everyone.

was Sales start XX% the at a our down Core second million recap. the quarter end were and here down quarter. with product of and flat. was $XXX essentially Let’s jump right X%. the into bottom of Cortland were for results sales Service range

despite XX% $X tax EBITDA a margins As softness. declined the line XX% Randy of XX rate was approximately COVID-XX. also greater in guidance We headwind was range some in expectations. Adjusted with The had impact offset our impact acquisition should the our the $X.XX quarter XX% $X approximately million. was sales from mentioned, for NPD of or was EPS consecutive than approximate market $X.XX of from effective the I The in basis for quarter and of points say. the the to million helped second which positive coronavirus quarter, HTL.

order just On we been the America in this rates North we levels sales X, to to down Randy stronger mentioned product progressed. sales Product an low distribution to As about. varied the was sales our were to by up talking returning larger turn national dollar sales region quarter. projected basis, impact due consolidated quarter. illustration double-digits of what soft, start down to the have slow XX%. as both from flat waterfall with quarter If and were in pricing a remained The were Sales the Slide core minimal a

to and be lower seeing smaller they especially our our automotive spend demand. on vertical track oil North of to to in cautious and and declined America pockets coal, sales and are continued distributors of year-over-year, inventory gas, However, Many continue steel. softer markets they

quarter the and business, generation If and wind and to we relatively oil were As from focus were good we Europe became overall heavy power single decline better coming XX – what the like we another back price benefit projects in in year. digits. year, product of our half our came year sales China. was the visibility We also the than was before particularly flat that year-over-year. providing into result the performance the half expected actually our online have slightly of standard the of have virus the headwinds shock, year the of outlook large world the an has back don’t the forward. days benefit changed in half the Randy also second things a positive in we Randy continues should few lift COVID saw pandemic in as discussed, on half of noted, should low Sales But would a back highlight in in the anticipated currently look quarter ago, going perform APAC to despite a the region to

On XX% was expected. the down the most service in side, sales were quarter, which of

on year. you on If – scope with up of The several XX% sales performance the last additions. were projects was large service recall, strength

the particularly end projects half the the those in year for XXXX, decline quarter, year of we and the at to sales first As difficult core due wrapped fiscal of comps. anticipated up for the

did we projects, delays the extent, attributable see early lesser certain much to of small impact a to and to some of a but addition, of portion which was In push coronavirus.

our carefully have optimize to prices, of the not situation While been as as manage a any ensure to oil the resources cancellations unfolds. notified of site we result we attempting utilization are we

labor QX more will movement close our projects As and some borders even various their challenging, seasonally affected. will become it’s of heavy likely of be mobilization service countries

continue full COVID-XX Randy and we’ll to as manage through noted, our unfolds. way impact As the monitor of

completed and X. COVID-XX lower EBITDA So XX% Slide the from our of year. our prior let’s offset actions to Savings service versus and in partially XX.X% XXXX at sales margins the adjusted our on waterfall the on restructuring year. on in in fiscal product China impact current EBITDA move were Adjusted operations

ended the in approximately of is XXXX. $X.X QX our The HTL. capital sheet now balance reduction expenditures results Slide a of used XXXX. our of and $XX liquidity acquisition million revenues increase in in versus at million of the on EBITDA the the and leverage to million the million quarter in working the $X with second fiscal adds HTL we of $XX We hand of well use quarter $XX for leverage X.Xx of by driven If of million versus improvement quarter sits The due QX on million. as X.Xx were during to million cash in approximately million we $XX capital $X cash slight as $XXX X, and turn in versus cash of annually.

goodwill assets have intangible $X million purchase price our and We of million approximately estimated preliminary and allocation. $XX of

During put quarter under blackout our us $XX.XX. XXX,XXX when approximately significant second post share continue purchases we to otherwise We’ll market pre-existing last purchased to price to to average our plan be plan evaluate period, we following would an the and XXbX-X forward. shares going disruption, the exhausted under of end buying. This from allow restricted buy have able used in opportunistic plan. at plans during quarter XXbX-X place periods the be was allocation We in approximately we and future

provides priorities. difficult remain executing capital a balance that managed have on liquidity We through ample these and strong focused we allocation as strategy sheet our and times very

on progression So our expansion from margin let’s lastly Slide XX. me, revisit EBITDA

announced we the to closer As enhancing segment of the is redundancies company, and Randy to our between get restructuring the our even corporate the of focused and customers. processes functions, marketing our and mentioned, today elimination simplification on commercial

and savings exit will have We opportunities expect of as fiscal XXXX to complete million as we some accelerates plus savings that we we QX we expected plus right-size This to still of provider $XX and in the they our service had deliver annual these actions contracts. executing cost XXXX.

support able impact create With to we that cost our XX% top COVID-XX for allow a further these but actions, line to cost taking to we performance, growth. Obviously, be now the EBITDA profitable well-positioned structure may a will actions are run-rate. us margin

the to cost We of $XX restructuring $X back savings, of to half in plus million achieve $X million million in million which year. $X annual of we the see incur expect to should

that, will With I you. back the Randy, to over call turn

Randy Baker

Rick. Thanks,

project extreme we the it the in a what the call but reached market to world normally the in will have the in conditions uncertainty market business cover conditions future. guidance, We where be and volatility and make the impossible point

and of product a and our visibility. M&A or our people, our Because As we our made updates not for the strategy. result, strategy. progress we our are more have significant margin will developments, very and QX EBITDA We guidance when in confident we QX new of providing to we strength company execution of in provide today execute ability are progression,

allocation foremost the Given We ample quarter and are balance the facilities. flexibility. liquidity with first exited financial and strong debt priorities of our cash, credit low and untapped million very capital volatility, maintain sheet leverage, a $XXX

investing ensure evaluate very And fund as third, Second, M&A growth we important, our in but commercial sales such we and NPD effectiveness. and are internal our to will share repurchases initiatives share opportunistic on continue stability until do to we but will see repurchases pipeline, and expect work return we markets. we the – M&A to to transactions our execute not any not

today dedication Enerpac these employees keeping your challenging call on would all it I of away let’s from I who and your operating stays virus. Thanks work at And during healthy of Q&A. And and like times. families us operator, the to thank all I up today. Group. open our Tool the and business finally, And for keep hope safe to appreciate everybody are our hard joining

Operator

Thank Wells you. Fargo. [Operator question Instructions] Poliniak is today Our coming from from first Allison

now line is live. Your

Allison Poliniak

Hi, guys. Good morning.

to comments thought would China to are your relative obviously on reference around trying slowly. it’s want get this, of to I you been more little in guess you you back color come out of terms this said little of starting terms are year, production coming you a have of you time where color any Maybe to where Just bit a there? in

Randy Baker

working of idled. from employees and shipping half It products. not was second All for quarter. are we were shutdown or effectively home producing we Well, our

terms you in saw under absorbed. of So, in our numbers that

We brought stream. on have back slowly that

to a We region be plants, particularly that that, chain an is our back market and impact speed market to around we have America we we not going very our that, not have back give China, in detail, is as full let time, will Our yet. supply for In that full been not of updates difficult how you So to point absence in becomes flow we Allison, but done the to what we I keep so. will working. providing through are whatever projected and able speed is quarter. potentially having full – impact get it And in precise If that we material is this year? you know the clarity are full going we in our to are quarter. the more be putting at that expect the fourth to giving Europe. the we North change. there apologize third we we go But do steam but full to that to to various from honestly, ring probably does that quite still tell and of you back don’t It to the

Allison Poliniak

credit lot concerns of of of the quality And understand. any I sort credit, fair. worried here, customers a today? liquidity about of thoughts, that’s in Now, folks, then on just terms obviously your

Randy Baker

to to we anything Well, a but an good want liquidity other distributors of cold few you on. had in terms ability that and America, cold to haven’t something numbers. that’s you got our watch is in our eye their from pay, Certainly, that North that customer, see keep can certainly, extremely than you

track good think great and company investment have one we behind our best thesis I margin of record today a that is minimal and cash it’s debt the of for it.

shape, greater we but closely. question in are we so And your watching are very

Allison Poliniak

Thanks Great. will I pass on. much. so it

Operator

you. Thank

Dobre next from Baird. Our coming is from question Mig

Your is now live. line

Mig Dobre

in I Good uncharted difficult guidance. to understand you provide territory very it’s first we and question, morning, everyone. my here are for Yes,

provide a at recession, for of the is business, not downturns your and at maybe a what the our various really like? starting own specifically move perspective. historical assumptions, kind look going can more the I extend you to you could you be really looks if asking framework needle end can When guidance, that maybe think asking And would difficult you be comment but helpful? would but look sense we probably am or helpful, make prior like? with you that than because recession So markets, us IT&S be to typical you for markets, ones that less give look that the I to various that I am a difficult again, this end What for

Randy Baker

different not resulted company. a effect. So, back mind XXXX, what of extraordinarily Mig, I for Tool again. you the the things the around we was that are It the disruption to stream to only a the bring market revenue was into back difference your fast credit to. in business that That cast very, is of the was market when life applicable XX% predict. The hard rather this broad tool ‘XX moving type Enerpac came and a have point be necessarily if our XXXX can to experiencing as Obviously, broad we decline today. got probably always admired things that to and that’s we one It very that quickly, and in have crisis and came is in to potential year result about the the back condition you business a revenue of disruption

lead XXXX but example. to used probably back shouldn’t that exact indicator, as looking the the it be certainly So best is

Mig Dobre

sure. No,

has you saying from You I decline running how sense are for are in a cost on be of us the do swing? to what standpoint, a you expect this changed lot and terms give company, am can low of you in been that business essentially on there inside double-digit wondering theory kind planning decremental a structure your

Randy Baker

elements business. margin attractive There in tools that of the Yes, number do machine have factories have cause have Enerpac any base is like type when always a projected are we to we we as terms where this fixed we and them a back would quite that Group that because of market of low have high Tool massive come There couple under-absorb. the of is at with a keep at cost decrementals are very to things and factories, level running life. in you

still at Rick what decline and So and idea if will run Structurally, what color like look revenue there to help can we we actual it would terms fairly a more is. that is too much nature. perspective, minimal company. you things we some give assembly be structure isn’t you on from have and decrementals short-term let our we on cost the are But in level know of a the that to well good to I positioned going a think vibrant the of and a of needs take but healthy like, I the you that in business. projecting decrementals in probably labor

Mig Dobre

I am sorry, go ahead.

Rick Dillon

This Rick. is

think of about now, dropped. was line all in Randy’s because terms I to provide. right we normalized of part didn’t the can I I as speaker point, that’s the whatever reason, for the And front question hear apologize decrementals

Randy Baker

Yes, is our impact the as given that environment within to the the to that operate the decremental. question company Mig? accurate margin would Is structured be

Mig Dobre

different ‘XX workforce in might as of That’s anything environment headcount changing or to by talking Pretty we’re here in very of much, obviously. in declines pretty that And kind you be on don’t gist the sort being are what downturn. to active volume significant about know your I planning or prior are responding mean now it. yes, of if I versus again, what

Randy Baker

already. positive news, been as any good we here news that The working towards is there if had

to to EBITDA confidence. a high was change had the the we of structurally of XX% margin degree were efforts contingency indicating imagine, So our – to can company. that And plans you get composition we

steps and it the but mentioned, we but our we executed as respond of Arguably ahead the just will like it changes, we’ve it. get been made large acceleration downturn. environment, clearly as accelerated protect us on could us So have helped we part this market that that’s first Rick why the that from fairly feel to luck we accordingly, to

Rick Dillon

in structural nature. more are we elsewhere And

look – at we than in say but definitely But and in are plant a ‘XX-ish, as saw make decisions been operations workforce, we at different had comments, to have cost course, impact. earlier definitely this to oil time look fixed want want of certainly you ‘XX, significant better progress a structure to responsive we there. there haven’t have the we you last we’ll ‘XX that is So ‘XX, would and

to – We better the in thus are this a as take structure, a acceleration, unfolds. we and appropriate monitor from we position but action as have still

Mig Dobre

Great. guys. Thank you, luck. Good

Operator

you. Thank

question is coming from Our Elliott next Stifel. Stanley from

line is now Your live.

Stanley Elliott

the a to good everybody. it? would think tooling trying have there March orders and starting Hey, guess just could services on morning the kind that how this say versus hear visibility for trended then off, Nice to time. in and that and have Thanks your products voices. you piece you about way is of the maybe of I maybe the

Randy Baker

a order have report we basis. Stan, global from Well daily a

and in Jeff and order have sees the Europe, for drivers that two his inbound comments see, receipts. which can team script inbound And my order drop. made revenue biggest revenue daily So not our we seen and a myself is a have America North

he to as expect with haven’t don’t know significant change prudent be but may well. sitting can at Jeff some we today, call And in of I point here that’s it, of me magnitude order is as as comment the definitely our rate. in we mentioned we and why a that seen think it’s one

Jeff Schmaling

Yes, I’d what echo Randy just said.

as it fairly far middle far. got flat. back bit sluggish part down You we the Randy’s but so QX to been we those March, rates normal come from a lot drama they so February, not we and to our now and quarter comments, Europe out in little end track late particular and pretty have of good have of a and daily know, has tick started relatively in up see Again we do a did push,

Stanley Elliott

meaningful – you kind good, see I the be I mean, we’ll Thank year business. are remember negative down you’re cash with capital the of but year? remind still cash could coming piece, flow is us – about to tracking thinking seasonally that the characteristics into to very you half assume free the generating in being you. obviously flow first help of And the some the part, of still and going stronger fair contribution move working it the

Randy Baker

business Yes, or – say the about some short revenue end the of be I’d tend service the of a you Mideast, in a but are, that the margin only very we like have cash to the cash cycle. of to have DSOs the we longer the DSO is very high a The of world, remainder little attractive. thing

generation our good. capability So cash quite is

You if on know our margins – are revenue the margins are smaller margins. they basis, extraordinary a arguably are still outstanding at

we XXX%. So expect convert to to do continue close at to

Now many points that, flexes as any is breakeven run. had can the change do business business the those processes have better an that and type in to these at will I to volume is than many company. up industry don’t time tell we healthy it lot we and of certainly us but cash our weather you things with participated this point ever mining extraordinary that you very of thinking a cash. a stop ability could for very, of the mind, what generate I spent generating and years, overplay about in I thought have down, but is company a this want that

Rick Dillon

flow to the conversion I been generation. so will thing we say It EBITDA, cash our is be EBITDA cash the starts rate averaging strong, with down, the will traditionally strong. would XX%. see at always some pressure extent that comes the Obviously on Well, has

are is working continued inventories. into of this which year the coming help the EBITDA. and in offset in We get higher of now right we year, quarter. in will down with the the benefit saw think we the should the the back where will come those decline I of benefit half some capital see We positioned inventories

year to our like earnings seasonally Can’t quality the back comment in So, EBITDA. the usual are then know good, numbers half for just the the of cash cash. really half monitoring down, those flows feel that generate a like have we back better about feel like about the strong front won’t feel half historically other been be that than through but you sure ability what on look we

Stanley Elliott

Best you Thank so much. Perfect. guys luck. of

Randy Baker

Thanks.

Operator

Thank you.

from Jeff coming from is question KeyBanc next Markets. Capital Our Hammond

Your now live. line is

Jeff Hammond

morning. good Hi,

Randy Baker

morning Good Jeff.

Jeff Hammond

a seen us COVID that difference, think and your here a maintenance do So, near-term, are made about maintained have just that an clearly nuance expectation from and and capacity what trends give what gas, seeing sense your repair customers, you just couple this we a are you there and maybe just at the looking publicly are versus CapEx on I maintaining have and of you you of hearing have oil having in business comments about frame them cycles and you but what to business? but of within you saying drop, how seeing to

Randy Baker

price you see our Okay. drop, throttling of major OPEC a I back lot hand am to market, activity to will very it off When you going is Mideast start Jeff, am and such he going dramatic where oil producers typically it and on. close to see reaction to I over because a from that of going is shipping.

they out, We is And million is barrels were. fact, in where up haven’t that. projecting OPEC which XX somewhere going seen around from

to still assets oil, maintain it of their of mid of implication downstream that’s you ship Now, running flow root in those to properly. are have if they that said, in country, have got is and that going a means you some company, but maintain cause assets. the have their to probably that, there that degree And that to cash cash flow amount your that

companies they just cash maintenance that at availability, their oil but probably way from learned are schedules going have failures of to sites. because in conservative maintenance when past certainly catastrophic they many plain very so And some experience They spending away will constraint that. think be maintenance learn And activity. from also on hard I on the see they walk

that going catastrophic be of will there think think I it’s don’t Jeff, activity. to a do I impact, be but an maintenance all stoppage So

it you in to right some more give he over into insights the going am maybe what’s can going I So hand Jeff, to Mideast now?

Jeff Schmaling

Yes, good morning, buckets. of we have couple Jeff. of different our activities a kind Yes, from

in those people result up and to We in outages. and the in Certainly, well COVID are of country planned get some have we as that out we major restrictions. advance being pushed get of step and primarily travel are a and those outages do some ready

activities of they Randy Saudi, lot mentioned ongoing is maintenance a the were oil The where than the processing lot in a they side more especially and really, other whole oil coin previously. whole more as are for pumping example,

We to opportunistic. are will admit I going it. be

there have people of additional of turn the up in out country to country could activities. ramps have also other it’s going ready as volume work there to one countries and that up, We come scopes we out where be

might balance, of those potentially get other our as delayed, but we focus countries the activities, So, in utilize to to jobs is jobs we resources maintenance best pushed tackle have out doing on opportunities. maintenance get the can the some on

are ground balance and but it to do and a of cases, we it weekly as So we folks some we are have go on lot managing in ready to the almost trying daily just we can. about to

Rick Dillon

the movement complex we resources. manage to where those think, price I assets Jeff drop, start last out, but borders you What and the having that went mobilization our minute down the – see tightly through makes to against the about that be more Jeff to oil see up is the we region goes have of delays, was Yes, us of shutting this and calls we talking of last utilization the have will and comment labor. push all these delays. the kind maintained, and

seeing think on ground we really stay the less capture this makes what where and as opportunistic the to than that’s there, will border have to have predictable going are So we I projects and be restrictions a we delayed. out little try just boots to

Jeff Hammond

– it savings, you cost just the that I maybe quantify forward it of looks expense know, rest then on down about on and And in we right the would, but and how savings just then year? is that pulling late, it flows through of thought I quarter do run-rate? And don’t as the the kind like maybe the talk corporate the came the savings was you Okay. in cost as

Rick Dillon

level. segment let’s segment we, our of do versus corporate high as – level at activities a From commercial as changes, some we start redundancy even the these Sure. of business the level the first,

stays redundant to been have of costs functions the I that can’t to bucket look down okay, you coming restructuring what efficient, merge out those get just goes We is into things to have look is versus the be – these post what and a more is corporate run-rate? as segments corporate the at will saying we that some say, are what of and lines completely still blurred. and at at we One really less

of I can to These of with of us We get savings? are headcount what will back half the worth annual come million in year. So that through actions $XX expect million that largely is related. mostly the $X say the done

coming And feel the through the good year. so about half of in the back offset to million we we $X some the challenges have will of

I look quarter this corporate assumptions. any don’t you of corporate terms run-rate, make and think can in what In at see you

even I as think it look different year. the will we through and the next end go quarter of

Jeff Hammond

much. thanks so Okay,

Operator

you. Thank

next Your Dray from coming from is RBC Markets. Deane question Capital

line Your is live. now

Deane Dray

Thank morning, you. Good everyone.

Randy Baker

morning. Good

Deane Dray

thing disclosures one is in change would The And you this the and order the that far morning. all appreciate no there are up that providing rates order includes if clarified color yesterday until daily in right out rates. I that the so jumped is of presume. terms you I

just So they could order of say when coming some business, how there that you daily was maybe maybe start commentary and some much this today rates, the ones electronically and there start some but if – you can your seeing how of – must then is there? in where Thanks. de-stocking, be with distributors, stand this smaller the we about and do

Randy Baker

Okay.

our if like Parker-Hannifin business that dealers have we also commentary a it’s even nationalized some second be that a break over and and as call OEMs dealers on of is look then one you companies the buckets, mentioned saw we do So dealers. like would that distribution major different Caterpillar use Fastenal well nationalized profile. XX quarter. types our ordering in Grainger, tools marginal OEMs basis think like in And they about our large each we those others actually and and growth in big with We distributors it those footprint, top, global our X,XXX and two at contract

them with And up, flat, was balance, some on but on of were prior essentially par of some were them year. it

really that. are with happy we So,

some comments about inventory where have conservative. to where the order a the dealers. and That’s may owner and The extremely they you The a are small smaller are work – and credit the approach, less the not of be question about, of the worry be what rates I broader that can bank a actually is positioning lines the to of because concerned about they have operator distributors to to the we a certainly long-term that we going see handle to account – have about very inclined think thinking the ones that of needed. just don’t daily about stoppage. liquidity conservative distributors

them So period virus, not if actually that have up for. many they XX-day because for the that’s to are of prepared of something shop close

So go extraordinarily you’re going don’t states our because for a that honestly to occurs, at basis to quantifiable going to QX, us that’s for don’t know looks QX is now. time you is that that a in then part disruption, – makes what what a have quite like order. to know certain we and to difficult point certainly are place the with it provide decide stay right we revenue If and revenue

it Deane, we’ll then that’s you, but when where do, that is. share we with So

whether those period a order then our enter dealers via dealer is are part within desk, Your sending of they it’s ones, in in second come a the that of EDI portal. get most emails then or them of electronically, the capable the we from will central question US, XX-hour the of files orders, bigger entered have or And lot via Europe here our on but system.

not of three it desk the they’re are typically looking hours order sitting waiting something. entry, within the on them for someone’s receiving days for distributor. for luckily happens notice from So They an

Deane Dray

heard question they would called be, HD construction in the or the Supply real Boston at the verticals, cited Area. helpful. construction and out being and about a second business us fall-offs then And That’s you have aerospace how positive, around both could yesterday give color because more some you they we Bay the least the shutdowns

in some major – metro effect? you’re construction, your So are business a ripple is expecting down that yet? this have seeing you And shutting getting you to areas

Randy Baker

original for anticipated that’s in was of full year in the guided down on down the the – already, softness to year, which three we’ve part in essentially whole We had one original we Well, up that had issue company guide. three multiple sectors.

are medical, obviously Now sectors sector, technically not in all civil the as are but which there exact And zone that’s statistics distributor vehicles, highway, general my and we in on that has one commentary including down of The us. but maintenance hard the spread then make tools retail to there’s that out up. visible. pretty remainders that activity, our repair But and remaining for certainly that still no for what still now. is there it’s our industry mentioned participate the they and plenty is in it’s that generally I is are is positive, all red surveys aero telling reporting speaking, part the are construction

Deane Dray

That’s great.

will XXXX/XXXX this to know I to so We’ve way do, seen appropriate update? we think, give do. expected suspend curious from how quarter, is around would updates the to plan that’s I the there lastly, that’s inter quarter, do supposed when you Just releases, like said press guidance within you thing but before a there you was you’re that, you to quarter during what’s fully what perspective, be right the give our an the

Randy Baker

of which reported, disruption revenue have and that the and dynamics work people any point. term we the reversal getting US all means be Europe of chance time, and back cycle clear a for inflection see where a a period in that can shorter is are shorter of the investor start our now. any the company on to a right hope containment of of at cases What we to in think a quick less we needs that’s kind I in on

like we’re certainly I inflection referring is is now inflection to and that going is, potentially think right as provide to that the more what worst we then when year we we going and see is look updates points point, is we’re then full looking the point, some those to what market provide guide. to CEO At that’s think where us. what every clarity business for can behind

Barb Bolens

done likely a And Deane, that press to be press would that. a visibility or release release have allows us certainly public that in forum, we do but once other

Rick Dillon

that we need here quickly. need, stability we But may not some definitely come and

we’ll So is an now as basis. Right be in changing clear to position this as get all a happening we soon space, more. hourly on know

hopefully we’ll earlier able quarter So I the do don’t know in come, when to be something. this will

Deane Dray

And color luck candor. all the to and I everyone. appreciate best course, Of of

Randy Baker

Thanks Deane.

Operator

you. Thank

from Our next Duignan question JPMorgan. from is coming Ann

live. now is line Your

Ann Duignan

had specifically and on where there you said about just wins several market you but the give Yes, around on you forward? what color hi, seeing and comment I seeing, the answered, you’re during questions you project us good made thinking been lot look color quarter, my if and a morning. as I that could of new you on A industry wonder think more a but have you’re just what aerospace you’re

Randy Baker

essentially and equipment. single piece inspect very Yes, level inspection turn we the turning so every is a tool company tools precise jet engine of to a turbine what large and in tools on for to the orders have turning the allows

order And that so nice we that’s a have gotten.

order, related to our is nice extent jet business the very helicopter helicopter smaller a engine is primarily but also military is one and industry maintenance. maintenance to Second and aerospace

a impact we aircraft the so today have things commercial And provided placement essence issue. also those industry. within military GE that primarily product No large they are in the then MAX and lines from the

seen to our haven’t at all. any business We fundamental impact there

Ann Duignan

Okay.

into there and more old with So brought they airlines being to reverse more if by there’s fact all primarily so. itself are in that’s of or aircraft for week capacities older that about cuts with well back, brought from out, was the being these benefiting MAX to capacity back maintenance, the aircraft last are the the

business way to from that a perspective? is that about think the So fundamental

Randy Baker

re-commissioning has of versions I MAX I caused Yes, know if older haven’t that. of don’t the XXX, heard

don’t airline even it and we that’s Again the this some to at the intervals. point. I is predict think on that the with their pushing us start hours look future not dialing the maintenance out they’re back for will the centers into getting how thing industry the impact, MRO know dynamics the they’re of maintenance airframe because those to on planes

looking at that’s and centers, they from MRO So what an probably aerospace are tracking those maintenance intervals. are undoubtedly

also aerospace, FAA on not piece airframe the it’s trigger clearly hours, only it to time aircraft approved. an a keep so on timed, Now is it’s

So thinking something certainly we’re it but about. may not may not a – it’s lot, it changed

Ann Duignan

a just think what question that detrimental but don’t directly, is of expectation then And cycle? few clarifications, Okay. margins normalized the you answered I your

Randy Baker

to we Yes, can it you our have be. been. you to number, tell normal what know always I I’ll Rick know conditions, what one was increments the business our turn a this – that would give if decrements We

not you, is Ann, So, flip scenario. to problem the but it’s over normal a Rick. it I’ll

I on you what for So that’s caveat what put those we think would is normalized that to we they saw... take conditions market if numbers in a have see what it’s are, a

Ann Duignan

think normalized Yes, that, all the target. but I we that, us give appreciate understand we

Randy Baker

Rick, Okay, us? hear can you

Rick Dillon

I can.

normalized our which think Randy I are is what can give I is saying normalized. All historical, a guys you I half fully can’t you is the aware back give of, EBITDA.

don’t know. we So

Ann Duignan

last it What was cycle?

Randy Baker

last you certainly cycle, Well, to the individual incorporation. if broke components, the actual the business we were down its

the we always you to take have But to the increment around what try Enerpac decrements decrementals, sector. flow can’t a have is just Tool increments, into you going XX% manner. XX% somewhere to actual on to said similar the So in drill

situation, the cost of end enough to attack Now, we the lower would fast as margin to then range, down cost going a always under which we fast are that you the absorbed. the we try out cost we to could in to can manage see, extent the In that you situation close have To structure. you higher that is the going XX to track to could. normalized keep are because pull because in can’t enough, it pull decremental we

higher, and in operating business months structure, when online piece we again, that to case greater or but XX% going And can decremental to try be it dark that’s force cost a go hit little can’t maybe so basis best on that if range. minimal level to bring tomorrow element end have and we on between to case revenue as the have. X And margins the hit is we think because somewhere that and will a just XX% always we in then try high I we are think higher we a around the of a there can’t don’t XX% minimalized to is to purposes, have tell worst that a you for tell be Rick XX%, modeling Ann, proven decrement. into said or I want predict, on incremental about a we don’t other The it that normalized that, going in XX% is know which side, you back another and you going back factory because less, there is be to of to the you is

Rick Dillon

of So shutting ball a Randy’s think facilities then I our different completely lose down operations. we of is the companies If announcements certain it’s saw today big game. for one difference point to factory segments, We should you if impact. the And if of different a don’t expect. fuel/energy terms provide company go those in what the even we this historically were very really profile good back, indicator we

to can manage decremental as able environment, the not this we get may we in leverage to structured as quickly all can. be point of have Randy’s which the fixed so what XX% managing to reset a today, XX% business the think have pause But we down. those to down, managing we scenario this that normal the that operating I with for we up, out

Ann Duignan

Yes, we of totally appreciate all that.

final know appreciate gas just what’s on I and how business, that’s you of going that regionally Then to that out one your so in oil region could one for business? track the other by we So us, break small and color.

Randy Baker

Yes.

it regionally, upstream, to Ann, lot platforms Investor you if to disclosed is mid over not on talk depending essentially never oil all a that because fluctuate on slight have North producing does Day, kind types. platforms. project we but We our about wellhead, of think because which Sea, it’s it’s back upstream,

a are in for Sea. we That’s North the us. nice well positioned stream revenue So

sites. Europe, Continental onshore primarily in on conversion and chemical are We

operations but Continental we specifics think then in three but Mideast about have our well on Mideast technically, mid-to-down of smaller all area we Mideast States then Sea, that, revenue, into midstream of conversion it. and it’s to for primary piece And So, the lastly, certainly strongest operations given in and it’s terms to but Gulf Europe the operations, of America, margin the operations and down. has And been sites. never and areas chemical is equation, that’s a the that’s North have North whole but in always do

Ann Duignan

refining Gulf generally chemical State exposure downstream? Okay. assuming the also And am I is

Randy Baker

and do streams, the Yes, are conversion great sites tool labor its supplemental they revenue refineries because really opportunity. great and sales big reoccurring need

sales believe we are are we we because So sites to actually there. have it’s are job we a those rent are we strong sell and able such I why able is when on tool to and

So it is quite helpful.

Ann Duignan

Thank I you. Okay, the I in color. line. get appreciate will back

Randy Baker

Thanks Ann.

Operator

Instructions] you. from today coming G. next is from Thank Research. Justin Our [Operator question Bergner

Your is now line live.

Justin Bergner

Thanks for morning, Good Randy. morning, taking Good Rick. my questions.

Randy Baker

morning. Good

Rick Dillon

Good morning.

Justin Bergner

going the the and are margins to was component ask margins they the given the company and Just the in on and service or at covered to are therein? average start, incremental company the the higher below oil they geographic gas side, gas about are I and the contribution average decremental breakdown, oil you that, or

Randy Baker

Investor Well, laid we composition our our back let’s revenue Day really where stream. out go to of the

when the service pure O&G to it you to are XX% of and coverage sales, that’s is purely which revenue very we margin in overall down is call stream. So sales, but think tool where high XX% obviously that, tool of

of as XX% it is is revenue small the of piece that labor that rental XX%. of both margins call a that coming operations plus a Investor piece Day but stream from fairly of small services, So plus everything, streams a has at I the stream when service in we lowest is revenue which pure is revenue very our hire and and said our for margins

and going So it sales. labor pure operations piece gas comprise our is tool for is it’s a exposure a of think XX% of overall. to about rental to it it is revenue And XX% when piece piece in, exposure a and hire, of that you oil of all

Justin Bergner

as larger higher it than a than that business That’s service rental and of oil whole, that a and XX%? component your to fair say gas helpful. Is has

Randy Baker

it forward. we definitely exposure, you when got to we was exploration. lot Anything type Yes, type And at remember and go going CapEx development got remember related, is O&G but $XX can you a is sure extreme to environment. to come of in it’s the or not, – it’s work That were of imagine difference the to of is, that’s makes downstream had a to is whether oil big on you which Actuant if certain reporting going days halt. as upstream back not complete a well this

Our exposure to has eliminated. been that largely

in fall have maintenance and you $XX the still over I have and dollars they will all all of where be there’s still you assets of assets of $XX maintain maintained assets or oil we is, they are our world over billions the billions world think So got to the that still whether those are to apart. decay oil, or strength those and

the would you vanish know of capital fundamental the but see downturn, like a going we just in never So side to going have it’s business. it’s to

Justin Bergner

Great. My other question...

Rick Dillon

XX% and business, of our gas is lower business that margins. oil in is business clearly carries that and service clearly and concentration incremental

a if think sense you concentration that you overall I looks business So relative that like. of the of what kind that think gives to about

Justin Bergner

that you million deal in normal sort there of EBITDA expect of like the was the on stabilizes, a into unusually anything multiple? $X.X understand HTL Great. a comments the on My unusual just from this of it in that high of translates terms world second And the provided and of acquisition, given sort about could deal. any accretion X.Xx there, great seems question is congratulations type that market to a you environment? metrics Once

Randy Baker

to think a what normalized not That that the thing remember synergies. I pure number profitability. paid main of we versus number their is with is to just

this lot why relatively a great small, acquisition that’s so And it although of serves us. for things

a our all, for us which that’s have the really we and are base if going economy us product existing installed our customers fully thing have to because with range, when gives you tools interesting running it massive to environment, right access interchangeable dealers line looking essentially to an side, product the their in installed are bolting me of base and equipment is keep First think parts that. complete we and – for that entire helps on we’re in about quite and now an it interested now

required evaluating a do our were that has is not one a Secondly, us some footprint location, capital to would European consolidate think we that’s big which I very been and for how small to number. help have into that

also to site So contain well in it’s it’s and their X Castle. New is facilities miles one very is – the in enough away large New and nice our primary about run Castle, manufacturing in

So our people on plan there engineers, a are is manufacturing through and world-class a up and as how no stand impact manufacturing right we that site. to working now assembly

not only us purpose-built footprint to having averted us a deploy into help arguably product it did new range, great in it problem and a consolidate So to will and sites from us manufacturing solved the the line, which CapEx give new product there future. gives it to us

a So run it. was proceeded home I feel we this like why with one just that’s

Operator

you. Thank

KeyBanc a Capital question from follow-up next Hammond Jeff is Our from Markets.

live. is line Your now

Jeff Hammond

guys. Hi,

lot capital happening stock change? thinking how but on not small the dislocation allocation, conversations have in staying M&A you just Just how may some as given thinking with is or this how these near-term, of obviously landscape buybacks are and change the are maybe of you privates a the you about

Randy Baker

again. Well, that will I that I made script, recap my on comment a but on

our fundamental we On a still that, of strategy. buybacks, the that’s share believe allocation capital part

XXbX-X shares. million You and we X.X purchased trigger program around could had we see that a did that

sure very we that So, that balance make very, looking it hard Obviously, clear that, when cash. point. conserve we our that below are that we and to sheet, is dipped in happened trigger want

We don’t what hold. the know are very future now, right healthy we but will

our continue group. and good bit build comments and there to cash a to buybacks additions to opportunistically to at like believe but we continue our their we still anymore my stabilize about is opportunity we M&A, it’s So that M&A good that We this are before to we plenty deploy will surroundings we targets see are obviously, look think pipeline to of that. the that us and But we pipeline continue it. obviously matter tool look going interest towards of activity. would very a Are like. it so expenses low envious goes to is we of is a everything with would company weather and looks low approach, sheet the take storm, hope now right think a because type this public It extraordinary that our market ability what are that a puts any having one healthy an for, our to absolutely condition because debt no balance the position things in position slow share

So, very to approach we a want both to take keep will and so and pragmatic slow that intact we topics.

Operator

you. Thank

the management or turn We would the end our have of like session. floor question-and-answer closing further for back any to I comments. to reached over

Barb Bolens

Thank you us everybody for today. joining

follow-up We you appreciate support any have your and questions should of Enerpac for be will Tool today available Group.

Operator

teleconference. Thank you. That today’s does conclude

your at this disconnect have you wonderful line time today. and day. for may participation a thank You We your

Enerpac Tool (EPAC) 19 Mar 202020 Q2 Earnings call transcript