ENERPAC TOOL GROUP CORP Q2 FY2026 earnings call

• Industrial tools and service segment (IT&S): Product sales in IT&S accelerated 6% organically Y/Y, highest in 10 quarters since Q4 2023. Enerpac had mid-single-digit growth in product order rates across three geographic regions. Services business in IT&S, ~20% of segment in fiscal 2025, took restructuring actions in EMEA region to address market slowdown, right-sizing hydrotite service operation and reducing headcount. Announced five-year contract award with major oil and gas company in UK North Sea worth several million dollars annually for maintenance and pipeline service work. - At ConExpo: Exhibited at North America's largest construction trade show, attendance and engagement strong. Demonstrated latest infrastructure lifting and smart transport solutions, including newly launched innovations like diesel-powered split flow pump, battery split flow pump, IntelliLift 2.0 wireless gantry controller, new line of split flow pumps, new cribbing rooms, updated skid track system, and new lightweight tow jack. - Employee engagement: Employee engagement scores have improved every year since 2022 and now exceed industrial manufacturing industry benchmarks.

InterPAC's second quarter revenue of $155 million expanded 2% on an organic basis. IT&S sales increased 1% organically, with a 6% gain in product sales offset by a 17% decline in service revenue. In the industrial tools and service segment (IT&S), product sales in IT&S grew 6% organically year over year. The services business, representing ~20% of the IT&S segment in fiscal 2025, had a 21% decline in service revenue in Q2. At Cortland, second quarter growth was 27% due to ongoing new project success. Americas delivered solid 4% growth, with 6% year-over-year growth on the product side offset by 8% decline in service revenue. EMEA region had 7% expansion in product revenue but 1% decline in second quarter revenue due to 21% decline in service revenue. Asia Pacific resumed modest growth led by products business, with India growing double digits and Australia benefiting from core mining recovery and oil and gas demand. Gross margins declined 410 basis points year over year, adjusted SG&A declined to 26.4% of revenue, adjusted EBITDA margin was 21.3%. Earnings per share were 31 cents in Q2 2026 vs 38 cents year-ago, adjusted earnings $0.39 in both periods. Restructuring charge of $3.3 million in Q2 related to service business, expected initial benefit in Q3 with 1-year payback. Net debt $89 million at end of Q2, net debt to adjusted EBITDA ratio 0.6 times, total liquidity $499 million, cash flow from operations $29 million YTD, free cash flow $23 million YTD first half 2026, repurchased $51 million worth of stock in quarter.

• Full year net sales range $635 million to $650 million, organic sales growth 1 to 3%, with product growth mid-single-digit and service contraction low to mid-teens. - Adjusted EBITDA $158 million to $163 million, adjusted EPS $1.85 to $1.92. - Free cash flow guidance held at $100 to $110 million. - Expect sequential improvement in gross margin in Q3 and Q4. - Service business expected to be tough in Q3 but rebound in Q4.

• Evolving conflict in the Middle East could have direct impact on business in the region and broader impacts from higher oil prices, inflation, general economic headwinds. - Service business continues to experience pressure in the near term.

Q: Can you talk about how much of your business comes from the Middle East and are you seeing an impact in the region due to the current conflict?

A: Revenue from the Middle East, including product and service, is about 10% of total revenue. Impact: Conflict creates uncertainty, seen pause in service work in Middle East due to inability to access facilities, customers shutting sites or deferring work, but work pushed to right may need to take place, and beyond region, impacts from higher oil prices, inflation, economic headwinds.

Q: On the updated guidance, can you provide some more detail on your expectations and maybe talk about how you're thinking about the cadence from quarter to quarter?

A: Product business strong, IT&S product up 5% in first half, expect mid single digit growth for total year. Service has pressure in Q3 but expected rebound in Q4. Gross margin expected to improve sequentially in Q3 and Q4. SG&A goal to maintain or improve as percent of sales. Free cash flow guidance held.

Q: Starting on the HLT business, I'm curious specifically, have you seen any project slowdowns as a result of the macroeconomic uncertainty over the past month or so?

A: No, HLT business remains strong and healthy, good backlog, robust engagement with customers, good order rate activity, encouraged by activity in data center market, had good engagement at ConExpo.

Q: Switching gears a little bit, we noticed there was an incremental M&A cost as well as some sizable share repurchases in the quarter. Can you give us an update on what your M&A pipeline looks like and maybe update us on your near-term capital allocation priorities?

A: Value creating M&A remains key focus, have robust funnel with ongoing discussions at various stages. Capital allocation priorities: first priority investing organically back in business, secondly share repurchase when opportunity in market, with balance sheet to support other activities.

Q: On the service business, I know you guys have taken, I think you mentioned, two restructurings in the past year. Can you maybe just talk about the scope, the payback, and kind of where you have the service business position now?

A: First restructuring in Q3 2025, ~$6 million charge, ~4 million related to people, global reductions, 12 month payback. Second restructuring in Q2 2026, over $3 million, primarily tied to service business, benefit flows through direct cost and SG&A, service business has right footprint now, 3Q tough but 4Q expected rebound.

Q: Can you provide a little bit more detail on the pace of the introductions of the new products and kind of should we expect some impact to the top line this year or is it more of a next year contribution from the new products?

A: Launched six new products at ConExpo, more products planned for back half of fiscal year. Most new products take multiple years to ramp due to nature of end markets, seeding, globalizing, getting certifications. Will see some revenue benefit in second half of year, more significant benefit over next 12 - 24 - 36 months.

Q: Is there anything you can talk about a little bit about the new UK service contract, maybe timing of when that's going to begin and kind of any expected financial impact?

A: Five-year award worth several million dollars per year, expect revenue flow from contract in Q4 or this fiscal year.

Q: Including the new leads that you've also previously discussed coming out of the DTA acquisition, can you discuss a little bit about the current leads pipeline versus any historical trend there?

A: Reference Interpac Commercial Excellence (ECX) program, foundation for commercial excellence, strengthened over past year, uses Salesforce.com to track leads globally, real-time dashboards on quantity, quality, conversion rates, etc., looking favorable, piloting AI in lead generation.

Q: The tax rate, the tax guidance range for fiscal 2026 is pretty fairly wide at this point. While you narrowed the guidance range operationally, Is there anything you can discuss in terms of jurisdictions or any puts and takes around the tax guidance range at this point of the year?

A: Overall tax guidance range kept, tax planning underway, difficult to determine timing of things, range 21 to 26%, no significant impact on rate expected, some benefit on cash baked in guidance.