Enerpac Tool Group Corp (EPAC) Reports Solid Q1 Fiscal 2024 Results, Affirms Full-Year Guidance

• Net sales increased by 1.9% year-over-year to $142 million, with organic growth of 5.5%.

• Gross margin expanded by 360 basis points to 52.3%; Adjusted EBITDA margin grew by 550 basis points to 24.6%.

• Net earnings rose to $18 million, or $0.33 per share; Adjusted EBITDA up 31% year-over-year.

• Company reaffirms full-year guidance, projecting net sales of $590 million to $605 million and adjusted EBITDA of $142 million to $152 million.

On December 19, 2023, Enerpac Tool Group Corp (NYSE:EPAC) released its 8-K filing, announcing financial results for the first quarter of fiscal year 2024. The company reported a modest increase in net sales and significant improvements in profitability, reflecting the success of its strategic initiatives and operational efficiencies.

Financial Highlights and Performance

The first quarter saw net sales of $142 million, marking a 1.9% increase compared to the same period last year. This growth was driven by a 5.5% organic increase, with product sales up by 4.2% and service revenues by 10.1%. Gross margin saw a notable expansion from the previous year, reaching 52.3%, attributed to operational improvements, favorable sales mix, and carryover price increases from fiscal 2023.

Operating profit surged by 133% to $28.7 million, with GAAP operating margin at 20.2% and adjusted operating margin at 22.8%. Net earnings for the quarter were $18 million, or $0.33 per diluted share, compared to $6.4 million, or $0.11 per diluted share, in the prior year. Adjusted EBITDA increased by 31% to $35 million, resulting in an adjusted EBITDA margin of 24.6%, up from 19.1% in the first quarter of fiscal 2023.

Segment and Operational Review

The Industrial Tools & Services (IT&S) segment reported a 7.6% increase in net sales, with organic growth of 5.8%. The segment's operating profit margin improved to 26.0%, and adjusted operating profit margin increased to 28.1%. Corporate expenses decreased year-over-year, primarily due to lower ASCEND-related charges.

Net cash used by operating activities was $6.7 million, compared to $17.5 million provided by operations in the previous year. The decrease was mainly due to the timing of annual incentive compensation payments and payments for the ASCEND transformation program.

Balance Sheet and Shareholder Returns

As of November 30, 2023, Enerpac Tool Group Corp had a cash balance of $148 million and a debt balance of $244.5 million. The net debt to adjusted EBITDA ratio stood at 0.9x. The company returned approximately $26 million to shareholders through the repurchase of about one million shares of its common stock.

Outlook and Management Commentary

President & CEO Paul Sternlieb commented on the results, stating,

We began fiscal 2024 with another good quarter, underscored by solid top-line growth and greatly expanded profitability."

He also affirmed the company's full-year guidance, projecting net sales between $590 million and $605 million, with anticipated organic growth of 2% to 4%, adjusted EBITDA between $142 million and $152 million, and free cash flow of $60 million to $70 million.

Executive Vice President and Chief Financial Officer Tony Colucci highlighted the impact of the company's transformational initiatives, noting,

First quarter gains in operating profit and margins reflect the success of our transformational initiatives that enhance productivity and efficiency at the gross profit and SG&A lines."

For further details, investors are encouraged to review the full earnings presentation and listen to the investor conference call scheduled for 7:30 am CT on December 20, 2023, available on the Enerpac Tool Group company website.

Enerpac Tool Group Corp is a leading provider of industrial tools, services, and solutions, with a focus on high-pressure hydraulic tools and controlled force products for precise positioning of heavy loads. The company operates globally and is headquartered in Menomonee Falls, Wisconsin.

The information provided in this summary is for informational purposes only and does not constitute investment advice. Investors are advised to review the full earnings report and consult with financial advisors before making investment decisions.

Explore the complete 8-K earnings release (here) from Enerpac Tool Group Corp for further details.

This article first appeared on GuruFocus.