EPAC - Earnings call 4 2023 | Enerpac Tool Group Corp.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Enerpac Tool Group's Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, October 17, 2023. It is now my pleasure to turn the conference to Travis Williams, Director of Investor Relations. Please go ahead, Mr. Williams.

Travis Williams

morning, Group's you Call. Year-end Good for joining operator. Tool Enerpac Fiscal you, and for thank us Thank XXXX Earnings

the and present Sternlieb, to Officer. call results On Paul are the President Colucci, Tony company's CEO; Chief Financial and today

recording and call today's website a on call will will section. the Investors Our Today's available reference Enerpac's of slides be in non-GAAP measures.

slides press reconciliation of in of the measures release GAAP the the in yesterday. non-GAAP a as to find as can You issued well appendix

include that statements also to subject actual that to risks will our risks different. business comments Our in forward-looking results are cause SEC noted include could filings. matters latest be Those materially

turn Now call Paul. to the I'll over

Paul Sternlieb

in Thanks, It's here pleasure Travis, talk be good to a morning. 'XX. fiscal financial about and performance to Enerpac's strong

a us. to full We the program lot terms of ASCEND news behind of first with our of now in good success implementation report our transformation of also year have

expectations see exceeded revenues the the revenue revised on while end dispositions exceeded of expanded year of last upper Slide revised guidance full guidance As year. the X% up cash which flow sales, and XX% adjusted EBITDA core at toward Free And guidance. X%, year-over-year. high well also and over impact in Reported quarter. initial our you came upward our end million can the X, million expanded we $XXX exchange exclude of initial and foreign exceeded was were and our guidance prior the of $XXX of

profitability. Originally, XXXX. are and of schedule fiscal I'm to total $XX timing the million benefits benefits terms of growth designed the of adjusted implementation EBITDA accelerate our anticipated date, stage $XX ASCEND the to of fiscal pleased and program In to we in we ASCEND. annualized ahead moved by million of transformation Enerpac's we end report that of into XXXX, To

million. the guidance second $XX to $XX to that In raised million quarter, we

capturing ASCEND and benefits of achieved our year in ahead XXXX, fiscal goal, plan. a million of fact, In we $XX

that a we intend the improvement. focus ASCEND part While to an ahead we important power remains well leverage to are the company, of transition ASCEND on continuous of given schedule, of transforming to

As it noted cautious fairly fiscal the we for our have issued release, guidance keeping on in XXXX, our side. earnings

due is environment. to the the in This macro continued uncertainty

believe transformation, of and However, Asia we our includes firmly to well the Pacific. key to Enerpac on in customer-driven positioned is strategy, expansion and success growth the share innovation in continue markets, X-pillar expansion digital outperform vertical based gain industry which

I'll and guidance details review I'll XXXX. let strategy Tony? Then to our with ongoing and and performance benefits fiscal bottom cover line. the Tony return about more top our and for fiscal ASCEND XXXX our growth the

Anthony Colucci

Thanks, and good morning.

and the Enerpac core the declined East fiscal service foreign the time, basis, selective said, solid from to quoting on line more of particularly Middle revenues product which in On expanded XXXX. previously revenue excludes same fiscal region. implementation revenue, impact the bottom X% XX% a Core discussed year-over-year. the process, of in At due enjoyed X% XXXX. divestitures Paul growth and expanded exchange a As top

implementing will impact in X half another XXXX. we began this see fiscal process as anticipate we We of for back this quarters the

Africa X Within Asia which 'XX. X generated Tools Americas, Pacific our fiscal Service and the in and Europe, regions: of growth & geographic includes Industrial ESSA double-digit sub-Saharan segment, India

mining in demand rail demand dealer healthy enjoyed industry. and from Caspian, Australia, exit and by is service infrastructure is a selective mentioned includes to of the However, expected mid-teens region, The business. from dealer MENAC which neutral result the the the certain East, ESSA projects as revenue sentiment the declined for sentiment as in Pacific, Middle in cautious. positive In wind, region As North Asia most Africa driven from our just

softness by shipbuilding with particular and Japan somewhat broad-based, stable. and Americas, Overall offset in mills was manufacturing inventory channel growth spending inventory markets. is strength and infrastructure include infrastructure the appropriate. steel positives sales is Korea Japan, In from in Other China's in sectors. wind and Channel

our due slowdown the a to caution rate in conditions. However, of growth economic have with general some dealers expressed

and Beginning how of regions: MENAC EMEA, into X commercial company fiscal perspective. Europe, renewable in investment our oil manage geographic In We Asia unnecessary terms Africa and in we have inventory region, for East and Middle is in dealer energy a includes the Americas, the sentiment Pacific. which added Overall remain layer are is reporting mouthful. projects and They gas from streamlined consolidated also appropriate. 'XX, and these and acronyms know we neutral, an regions strong. our it

quarter, mentioned lead welcomed Jefferson last new As Phil region. our to we we EMEA

businesses with Solutions us leading industrial Motorola recently, joins roles and including Honeywell an extensive International. at background senior most Phil

We are him board. on to have pleased

XX.X% of As increase greatly revenue and to see profitability. points. the in and can XXXX, showing X, we Slide grown you improved XXXX fiscal to period, XXX from have on XXXX 'XX, an gross fiscal expanded consistently margins basis XX.X% In

driven in our the and part excellence. focus operational our Lean was This initiatives success by on of continued

plans place about implement to We and Similarly, beneficial. initiatives our efficiency them. operational broad and operations in and the improvement we lead improve to productivity are prove have SG&A engaged the in excited operational team

improved and to ASCEND charges expense, points onetime other SG&A basis for XX.X%. periods, Adjusted XXX which excludes both

in of the a sales percentage goal spend bring over efficiency best-in-class is with further of us improve time, our industrials. as line Our to and SG&A

million, XX.X% was fiscal EBITDA With from adjusted For fiscal in expanded 'XX, adjusted XX.X% year-over-year. fiscal 'XX. to that, an and margins EBITDA of XXXX, in increase XX% $XXX

earnings ago period. fiscal Diluted from $X.XX 'XX, per 'XX. operations $X.XX in share the approximately share fiscal increased compared in earnings per to year totaled to continuing $X.XX $X.XX up XX% Adjusted from in

million, we capital strong the improvements, costs. driven and by offset onetime growth generated working free ASCEND EBITDA of For year, cash $XX partially by

fiscal free million. This is of a substantial $XX increase over cash 'XX's flow

fourth revenue the revenue prior of while reported fiscal Regarding X% quarter over year. X% total expanded core increased 'XX,

'XX, up quarter from We fiscal an EBITDA XX.X% adjusted of in continued period. ago to improve year profitability XX.X% the in of the with margin fourth

we our year fiscal as keep typically XX% mind enhance While as there 'XX, in we higher translates the back to profitability half exit of in some goal continue margin. is higher volume that the fiscal of seasonality towards expect to to

capital our As to we organic along our our our the investments ample and also acquisitions. providing program, capacity fiscal adjusted opportunistic 'XX, our to to pursue drive strategic priorities, repurchases our strong execute have remaining allocation ASCEND X.Xx below X.Xx pursue capital growth, X.X transformation At was support share and to range leverage liquidity well with of year-end on sheet balance and EBITDA meaningful to deployment. liquidity including discussed, internal target

the shares repurchased $XX we returning authorization. million During to are remaining shareholders. current shares, under fiscal million There 'XX, X X.X million

press As Enerpac's July, business, completed in pure-play we sale the the Cortland in release our industrial noted focus. of further sharpening

with Cortland For minimal to on Industrial $XX in fiscal impact revenue million modeling purposes, 'XX EBITDA. contributed approximately

half October, in through with of orders of Looking that leaving us about quarter Entering X%. rebounded $XXX and net macro 'XX, growth ahead, of a fiscal fiscal quarter. the mind, underlying of core of degree to thus year-over-year million anticipate in the fair continued XXXX September guidance we approximately for sales first environment. flat in reflects caution but first given to X% far our the With $XXX in the uncertainty declined the million,

in growth both For we year, expect product service the revenues. and

for fiscal we we've continue the core to in term, growth with XXXX, X% we a horizon revenues our apples-to-apples fiscal XXXX. about CAGR the through divested in goals industrial at laid the business we a the Longer over Investor from a November X% revenue deducted true Cortland target As note, 'XX, baseline out talk comparison. when Day to planning from organic

with million a to EBITDA of represents EBITDA $XXX are the $XXX adjusted of year We full forecasting adjusted that midpoint, And of at growth margin X%, XX.X%. million. year-over-year

we expect higher generate to of with in is enhancements. 'XX. $XX investments upgrades million and automation flat be to in in equipment continued invest XXXX, manufacturing million We fiscal to of million expected support fiscal $X.X to in the growth cash to free million relatively $XX CapEx $XX to our million compared and flow efficiency $XX range as

In ASCEND-related levels, partially lower to costs. by to increase offset normal are addition, cash taxes expected

be 'XX XXX%. flow Excluding program discontinued approximately with onetime fiscal associated ASCEND charges operations, cash conversion the free would and

see can slide, As depreciation including expense, along tax this with have adjusted assumptions, we modeling included and rate. amortization, you from our interest

in of ASCEND As vast benefit targeted Paul said, majority we effectively from achieved our XXXX. fiscal the

a we which processes continuous rigor will break improvement longer from no out forward, to program, and leverages ASCEND, ASCEND transition all the we Going as benefits. specific

inception As the per since booked side we approximately $XX of of program, the totaling the ASCEND, expenses have expense million.

charges. $XX includes million That XXXX, remaining leaves million in let to of to that, $XX me $X million With anticipated us Paul. with call turn back fiscal to restructuring $X in spend million the which

Paul Sternlieb

Tony. Thanks,

the yielding centered ambitious we're the As of solid 'XX, growth and I a the top generated already fiscal said key growth with around X pillars. pleased very results at reflection our of in strategy, call,

for provide from secular infrastructure transition rail, wind, large markets, vertical Not growth targeted share the in do markets They're industrial bill clean and expansion U.S. solid expansion. including involves opportunities to only spending and fragmented benefiting also energy. these global pillar first in infrastructure market the the Our and MRO. dynamics exciting

months, Just to approved the project. past administration examples. the few offshore within the share U.S., ever the few wind has a largest In

Enerpac. Department Railroad These round a billion for rail applications for a significant expansion Transportation for and infrastructure wind, of funding $XX the projects. for a Administration nearly environment all the spend addition, In has announced $X.X the billion growth in opened for of Moreover, of infrastructure new funding Federal rail bridges. represent nation's favorable initiatives in funding XX levels and

the for Additionally, capacity, we a a of macro Enerpac. durable tailwind reshoring industrial be believe provides to appears which positive trend

the our area both sustain tripled our of long-term digital fiscal program. We the through Enerpac's internal as pillar significantly continue we plan. the Enerpac digital we're Connect, and excited about strategy in the to XXXX, enhance 'XX for fiscal and will e-commerce as and to transformation. our our level ability proprietary make implementation nearly digital in customer And beyond. channel In marketing includes sales relationships. is our second this IoT solution progress and of This e-commerce our products well connectivity we beat believe through acquire robust Our digital

program. Our third pillar growth customer-driven our innovation is

we've new and substantially generating importantly, aimed while road map customers' critical X ROI Over the solving of for now markets, program reconfigured aligned key Most issues an product and discipline strong product our our increased in with most well development vertical our with at the is past processes. X all our level customer Enerpac. insight years,

believe of support of we in Pacific. We in which in for currently small to we part China, are of growth a geography are opportunities underpenetrated outside Enerpac's the implementing have such, today. relatively the substantial Finally, exciting and business and especially presence is an our as initiatives set Asia expand region

of of offering margins. and quality high strategies addressable good to our second providing reach our the market. caliber Enerpac expand rollout relatively offer while and brand, value untapped a in customers Pacific One our segment includes a products Asia mid-tier These delivering

as well as We distributor Asia are existing new in the out of rolling this channel process in through Pacific.

Beyond often helping our M&A these to solving we strategy growth, focused true our needs an mission pursuing organic targeted on hazardous customers customer execute while of complex, vertical opportunities markets, are to for safely jobs and efficiently. within staying

for Enerpac's our board, of element dedicated With we a Development are grown to robust, for Corporate and criteria recently companies value have financial shareholders. analysis, highly experienced create a leader with pipeline we cultivation, lead on the our growth and are and recruited the strategic about important to a disciplined this coordinate excited our of opportunities more has that integration identification, We fit. We approach comprehensive program M&A acquisition returns of now Head strict and and evaluating. M&A for

track for we property September, a brand and acquired In tools. intellectual licensed related

near-term of it's railroads. our impact, terms While material to not strategy solutions it in for integrated financial provide reflects

relationships system Specifically, eliminating also solution advantage service traditional that a the systems. the and the for to or than adds operation global Track rail maintenance safer lifting of disruptions tools minimizing tool we customer has providing can while sell established track marketplace.

me talk success switch transformation gears about ASCEND let to briefly of our the Now program.

project rail our to better our shows, the industry funding. and strategy, in our addition X focus through government note, match our universe of several realigned reach go-to-market and follow-up opportunities media we terms focused in on Of trade of expand vertical key new generation activities demand we've also customer have expanded business rail markets. our to recent social on targeted resources resources. We've In development sales on

We excellence and also numerous improving have production initiatives efficiency. implemented around operational

driving in for while are We performance. We manufacturing, as our good on-time progress ambitious chain productivity and our improving logistics SKU sourcing our to made rationalization backlog times and in due XXXX normalize. past delivery and reducing goals continuing initiatives started fiscal supply we've set also lead more

a organization. as operational industrial continue to gross of our that efforts create substantially improvement attributed reduce us we percentage the employing to discussed, margins. in work these achieving agile expect already already a levels of SG&A As leaner have also Tony to efforts expansion in toward We're sector over Similarly, a executing a we productivity best-in-class more have series technology SG&A solid and sales, initiatives enabled time. a trend as to

progress to be premier and our the industrial They of none around to a without possible are as for this like course, would us globe. force Enerpac all of you year-end a their employees driving Of XXXX, in the tools results which transformation thank I'd business. our fiscal work us the for employees enabled strong service joining and call. to hard morning behind deliver Thank contributions for commitment team. our our

you, to Global always, the for Industrial a on As Conference be have interested, those Chicago. take X who any available are Baird and attending And Travis day. questions. will follow-up good in November Thank will be

Operator

your appreciate participation. does you. Thank We teleconference. This conclude today's

Enjoy at this day. You may the your rest of disconnect time.

Enerpac Tool (EPAC) 17 Oct 232023 Q4 Earnings call transcript