Enerpac Tool Group Corp. Q1 FY2026 earnings call

• Industrial tools and services segment product sales grew 4% organically with strong order growth. - Invested in business to support growth strategy, including innovation, commercial organization expansion in regions like India, Australia, Philippines, and e-commerce platform improvement. - Noted attractive verticals like power generation and infrastructure, with Enerpac well-positioned in nuclear and infrastructure markets. - Travis Williams accepted a position at another company, with Darren Kozik as main investor contact until replacement is found.

In the industrial tools and services (IT&S) segment, product sales grew 4% organically. In EMEA, product revenue grew 5%. In the UK, product revenue declined 10% due to timing. Gross profit margin was 50.7% in line with recent quarters, affected by tariff-driven costs but offset by pricing and productivity actions. Adjusted EBITDA was $32.4 million, margin 22.4%. First quarter adjusted earnings per share was $0.36, impacted by higher effective tax rate.

• Maintained full-year fiscal 2026 guidance: organic revenue growth 1% to 4%, adjusted EBITDA growth at midpoint 6%, free cash flow $100 million to $110 million, earnings per share $1.85 to $2.

• Forward-looking statements subject to business risks that could cause actual results to differ materially, including matters noted in latest SEC filings.

Q: What caused the sudden sharp decline in service revenue this quarter and were you surprised by it?

A: The decline was largely driven by a contraction in the UK market. We were disappointed, and we're actively consolidating service footprint and making growth investments while expecting margin expansion in fiscal 2026.

Q: Can you add color to changes in services to capture higher value business?

A: Taking initiatives like moving from agent to direct model, investing in field service capabilities and capital equipment to capture more growth opportunities and market share.

Q: Can you add color on pricing strategy heading into calendar year 2026?

A: Took a small low single-digit price increase in early December, will roll through channel, and will look to make up for tariffs and hold margin through price and productivity actions.

Q: Can you add color on new product launches and R&D trajectory?

A: Launched 5 new products in fiscal 2025, targeting more launches in fiscal 2026, with increased R&D spend over last three years, and innovation expected to drive future growth.

Q: Any visibility on backlog sizing?

A: Backlog ticked up due to strong order activity, order growth outpaced revenue growth, leading to maintenance of current guidance.

Q: Can you quantify inventory ramp and key products beyond HLT?

A: Inventory up about 15% heading into the quarter, order rates stronger than product revenue growth in the quarter.

Q: Any change in M&A funnel for strategic M&A?

A: M&A activity picked up, actively evaluating several opportunities, remaining disciplined and focused on creating value for shareholders.