Enerpac Tool Group Reports First Quarter Fiscal 2023 Results

First Quarter of Fiscal 2023 Continuing Operations Highlights^*

• Net sales were $139 million, with a 13% year-over-year increase in core sales driven by continued solid broad-based demand; the strengthening of the US dollar reduced sales by 6% year over year

• GAAP operating margin was 8.8% and adjusted operating margin was 16.6%

• Adjusted EBITDA margin was 19.1%, an increase of 570 basis points year over year

• GAAP diluted earnings per share ("EPS") was $0.11 and adjusted diluted EPS was $0.29

• Generated cash flow from operations of $18 million and free cash flow of $16 million

• Leverage (Net Debt to Adjusted EBITDA) was 0.7x at November 30, 2022

• Refinanced Senior Credit Facility

• Unveiled focused growth strategy at Investor Day, "Raising the Bar"

• No change to full year fiscal 2023 guidance

^*This news release contains financial measures in accordance with US Generally Accepted Accounting Principles ("GAAP") in addition to non-GAAP financial measures. Reconciliations of the GAAP to non-GAAP financial measures can be found in the tables accompanying this release.

MILWAUKEE, December 20, 2022--(BUSINESS WIRE)--Enerpac Tool Group Corp. (NYSE: EPAC) (the "Company") today announced results for its fiscal first quarter ended November 30, 2022.

"During the quarter we continued to experience solid broad-based demand across all our regions, and we delivered double digit core growth in both the Americas and Europe," said Paul Sternlieb, Enerpac Tool Group’s President & CEO. "We were pleased with our performance as demonstrated by our strong core sales growth, continued year-over-year EBITDA margin expansion, and solid free cash flow generation. We remain focused on supporting our customers and executing on our ASCEND transformation program to deliver profitable growth and ensure that the company is positioned for long term success."

Mr. Sternlieb continued, "We were excited to unveil our focused growth strategy and our new financial targets at our Investor Day in November. It was a great opportunity to interact with the investment community, highlight the strength of our management team, and demonstrate the exciting initiatives underway to unlock the full potential of the Enerpac Tool Group business. With the diversity of end markets we serve, our strong balance sheet, and the work that we are doing to execute on our ASCEND transformation program, we believe that we are well positioned to manage through an uncertain economic environment."

Consolidated Results from Continuing Operations
(US$ in millions, except per share)
	Three Months Ended
	November 30, 2022		November 30, 2021
Net Sales	$139.4		$130.9
Net Income	$6.4		$3.2
Diluted Earnings Per Share	$0.11		$0.05
Adjusted Diluted Earnings Per Share	$0.29		$0.16

• Consolidated net sales for the first quarter of fiscal 2023 were $139.4 million compared to $130.9 million in the prior year first quarter. Core sales improved 13% year over year, with product sales up 15% and service revenues up 3%. The impact from foreign currency exchange rates reduced net sales by 6% in the quarter compared to the prior year.

• Fiscal 2023 first quarter net income and diluted earnings per share were $6.4 million and $0.11, respectively, compared to net income and diluted EPS of $3.2 million and $0.05, respectively, in the first quarter of fiscal 2022. Fiscal 2023 first quarter net income included:

  • Restructuring charges of $1.0 million ($0.9 million, or $0.02 per share, after tax) attributable to ASCEND initiatives;

  • ASCEND transformation program charges ("ASCEND charges") of $9.4 million ($8.7 million, or $0.15 per share, after tax) including third-party fees for program implementation support;

  • Leadership transition charges of $0.4 million ($0.4 million, or $0.01 per share, after tax); and

  • Debt issuance costs of $0.3 million ($0.3 million, or $0.01 per share, after tax) related to the refinancing of the Senior Credit Facility.

• Fiscal 2022 first quarter net income included a restructuring charge of $2.7 million ($2.7 million, or $0.04 per share, after tax) attributable to changes to flatten and simplify the organizational structure and leadership transition charges of $3.8 million ($3.8 million, or $0.06 per share, after tax).

• Excluding the items detailed above, adjusted diluted EPS was $0.29 for the first quarter of fiscal 2023 compared to $0.16 in the comparable prior year period.

Industrial Tools & Services (IT&S)
(US$ in millions)
	Three Months Ended
	November 30, 2022		November 30, 2021
Net Sales	$127.3		$121.3
Operating Profit	$26.6		$18.1
Adjusted Op Profit (1)	$29.1		$19.6
Adjusted Op Profit % (1)	22.9%		16.2%
(1) Excludes approximately $0.9 million of restructuring charges and $1.5 million of ASCEND charges in the first quarter of fiscal 2023 and $1.6 million of restructuring charges in the first quarter of fiscal 2022.

• First quarter fiscal 2023 net sales were $127.3 million, 5% higher than the prior fiscal year’s first quarter net sales. Core sales increased 11% year over year. The increase in core sales is attributable to volume growth due to strong customer demand and the impact of pricing actions taken to offset inflationary pressures.

• Adjusted operating profit margin increased year over year to 22.9%, primarily due to increased sales volume, pricing actions, and savings from cost management and restructuring initiatives implemented in prior periods, despite increased material and freight costs.

Corporate Expenses and Income Taxes from Continuing Operations

• Corporate expenses were $15.8 million and $10.4 million for the first quarter of fiscal 2023 and fiscal 2022, respectively.

• Adjusted corporate expenses⁽²⁾ of $7.4 million for the first quarter of fiscal 2023 were $1.9 million higher than the comparable adjusted prior year period expense of $5.5 million, primarily due to insurance and incentive compensation slightly offset by restructuring savings.

• The fiscal 2023 first quarter adjusted effective income tax rate from continuing operations of approximately 16% was slightly higher than the first quarter fiscal 2022 adjusted rate of approximately 15%.

(2) Excludes approximately $0.1 million of restructuring charges, $7.9 million of ASCEND charges and $0.4 million of leadership transition charges in the first quarter of fiscal 2023 compared to $1.2 million of restructuring charges and $3.8 million of leadership transition charges in the first quarter of fiscal 2022.

Balance Sheet and Leverage
(US$ in millions)
		Period Ended
		November 30, 2022		August 31, 2022		November 30, 2021
Cash Balance		$129.2		$120.7		$126.5
Debt Balance		$202.2		$204.0		$175.0
Net Debt to Adjusted EBITDA**		0.7		0.9		0.7

Net debt at November 30, 2022 was approximately $73 million (total debt of $202 million less $129 million of cash), which decreased approximately $10 million from August 31, 2022. Net Debt to Adjusted EBITDA from continuing operations was 0.7x at November 30, 2022.

**August 31, 2022 and subsequent periods calculated in accordance with the terms of the Company’s September 2022 Senior Credit Facility. Prior periods calculated in accordance with the terms of the Company’s March 2019 Senior Credit Facility.

Outlook

Mr. Sternlieb continued, "Through our ASCEND transformation program, we have made significant changes and enhancements across the organization in the past several months. We are changing the way we operate as a business, serve our customers, and deliver value for our shareholders. With our talented new management team, new mission, and clear strategic focus, we are excited about unlocking the full potential of Enerpac Tool Group."

Mr. Sternlieb concluded, "We are not making any changes to our fiscal 2023 guidance announced in September, which continues to be full-year net sales of $565 to $585 million and an adjusted EBITDA range of $113 to $123 million, including an ASCEND EBITDA benefit of $12 to $18 million. Our guidance is based on foreign exchange rates as noted in September and assumes that there is not a broad-based recession."

Conference Call Information

An investor conference call is scheduled for 10:00 am CT on December 21, 2022. Webcast information and conference call materials, including an earnings presentation, are available on the Enerpac Tool Group company website (www.enerpactoolgroup.com).

Safe Harbor Statement

Certain of the above comments represent forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. In addition to statements with respect to guidance, the terms "may," "should," "could," "anticipate," "believe," "estimate," "expect," "objective," "plan," "project" and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with such statements, risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements include, without limitation, the economic impact of the COVID-19 pandemic and other general economic uncertainty, market conditions in the industrial, oil & gas, energy, power generation, infrastructure, commercial construction, truck and automotive industries, the impact of geopolitical activity, including the invasion of Ukraine by Russia and international sanctions imposed in response thereto, the ability of the Company to achieve its plans or objectives related to its growth strategy, market acceptance of existing and new products, market acceptance of price increases, successful integration of acquisitions, the impact of dispositions and restructurings, the ability of the Company to achieve its plans or objectives related to the ASCEND program, including any assumptions underlying its calculation of expected incremental EBITDA or program investment, operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor, or overhead cost increases, tax law changes, foreign currency risk, interest rate risk, commodity risk, tariffs, litigation matters, impairment of goodwill or other intangible assets, the Company’s ability to access capital markets and other risks and uncertainties that may be referred to or noted in the Company’s reports filed with the Securities and Exchange Commission from time to time, including those described in the Company’s Form 10-K for the fiscal year ended August 31, 2022. Enerpac Tool Group disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

Non-GAAP Financial Information

This press release contains financial measures that are not measures presented in conformity with GAAP. These non-GAAP measures include EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted earnings from continuing operations, adjusted diluted earnings per share from continuing operations, adjusted operating profit from continuing operations, segment adjusted operating profit and adjusted EBITDA, free cash flow and net debt. This press release includes reconciliations of non-GAAP measures to the most comparable GAAP measure, including in the tables attached to this press release. Management believes the non-GAAP measures presented in this press release are commonly used financial measures for investors to evaluate Enerpac Tool Group’s operating performance and financial position with respect to the periods presented and, when read in conjunction with the condensed consolidated financial statements, present a useful tool to evaluate ongoing operations and provide investors with metrics they can use to evaluate aspects of the Company’s performance from period to period. In addition, these are some of the financial metrics management uses in internal evaluations of the overall performance of the Company’s business. Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies.

About Enerpac Tool Group

Enerpac Tool Group Corp. is a premier industrial tools, services, technology and solutions provider serving a broad and diverse set of customers in more than 100 countries. The Company makes complex, often hazardous jobs possible safely and efficiently. Enerpac Tool Group’s businesses are global leaders in high pressure hydraulic tools, controlled force products, and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin. Enerpac Tool Group common stock trades on the NYSE under the symbol EPAC. For further information on Enerpac Tool Group and its businesses, visit the Company's website at www.enerpactoolgroup.com.

Enerpac Tool Group Corp.
Condensed Consolidated Balance Sheets
(In thousands)
	(Unaudited)
	November 30,				August 31,
	2022				2022
Assets
Current assets
Cash and cash equivalents	$	129,243			$	120,699
Accounts receivable, net		97,707				106,747
Inventories, net		90,664				83,672
Other current assets		35,059				31,262
Total current assets		352,673				342,380
Property, plant and equipment, net		41,784				41,372
Goodwill		261,659				257,949
Other intangible assets, net		41,031				41,507
Other long-term assets		77,254				74,104
Total assets	$	774,401			$	757,312
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable	$	74,673			$	72,524
Accrued compensation and benefits		23,441				21,390
Current maturities of debt		1,875				-
Short-term debt		-				4,000
Income taxes payable		4,992				4,594
Other current liabilities		49,165				50,680
Total current liabilities		154,146				153,188
Long-term debt, net		200,359				200,000
Deferred income taxes		7,887				7,355
Pension and postretirement benefit liabilities		11,902				11,941
Other long-term liabilities		65,784				66,217
Total liabilities		440,078				438,701
Shareholders' equity
Capital stock		16,706				16,679
Additional paid-in capital		215,194				212,986
Treasury stock		(742,844	)			(742,844	)
Retained earnings		974,204				966,751
Accumulated other comprehensive loss		(128,937	)			(134,961	)
Stock held in trust		(3,239	)			(3,209	)
Deferred compensation liability		3,239				3,209
Total shareholders' equity		334,323				318,611
Total liabilities and shareholders' equity	$	774,401			$	757,312

Enerpac Tool Group Corp.
Condensed Consolidated Statements of Earnings
(In thousands, except per share amounts)
(Unaudited)
	Three Months Ended
	November 30,		November 30,
	2022		2021
Net sales	$	139,382	$	130,903
Cost of products sold		71,476		71,277
Gross profit		67,906		59,626
Selling, general and administrative expenses		53,247		48,477
Amortization of intangible assets		1,368		2,005
Restructuring charges		982		2,737
Operating profit		12,309		6,407
Financing costs, net		2,815		961
Other expense, net		702		480
Earnings before income tax expense		8,792		4,966
Income tax expense		2,383		1,781
Net earnings from continuing operations		6,409		3,185
Earnings (loss) from discontinued operations, net of income taxes		1,044		(397	)
Net earnings	$	7,453	$	2,788
Earnings per share from continuing operations
Basic	$	0.11	$	0.05
Diluted		0.11		0.05
Earnings (loss) per share from discontinued operations
Basic	$	0.02	$	(0.01	)
Diluted		0.02		(0.01	)
Earnings per share*
Basic	$	0.13	$	0.05
Diluted		0.13		0.05
Weighted average common shares outstanding
Basic		56,886		60,261
Diluted		57,317		60,621
*The total of earnings per share from continuing operations and loss per share from discontinued operations may not equal earnings per share due to rounding.

Enerpac Tool Group Corp.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Three Months Ended
	November 30,				November 30,
	2022				2021
Operating Activities
Cash provided by (used in) operating activities - continuing operations	$	17,814				(3,941	)
Cash used in operating activities - discontinued operations		(281	)			(785	)
Cash provided by (used in) operating activities	$	17,533			$	(4,726	)
Investing Activities
Capital expenditures		(3,028	)			(3,293	)
Proceeds from sale of property, plant and equipment		493				133
Cash used in investing activities - continuing operations		(2,535	)			(3,160	)
Cash used in investing activities	$	(2,535	)		$	(3,160	)
Financing Activities
Borrowings on revolving credit facility		14,000				5,000
Principal repayments on revolving credit facility		(11,000	)			(5,000	)
Proceeds from issuance of term loan		200,000				-
Payment for redemption of revolver		(200,000	)			-
Swingline borrowings/repayments, net		(4,000	)			-
Payment of debt issuance costs		(2,417	)			-
Stock options, taxes paid related to the net share settlement of equity awards & other		3				(1,308	)
Payment of cash dividend		(2,274	)			(2,409	)
Cash used in financing activities - continuing operations	$	(5,688	)			(3,717	)
Cash used in financing activities	$	(5,688	)			(3,717	)
Effect of exchange rate changes on cash		(766	)			(2,216	)
Net increase (decrease) from cash and cash equivalents	$	8,544				(13,819	)
Cash and cash equivalents - beginning of period		120,699				140,352
Cash and cash equivalents - end of period	$	129,243			$	126,533

Enerpac Tool Group Corp.
Supplemental Unaudited Data
Reconciliation of GAAP Measures to Non-GAAP Measures
(In thousands)	Fiscal 2022																Fiscal 2023
	Q1			Q2			Q3			Q4			TOTAL				Q1			Q2		Q3		Q4		TOTAL
Sales
Industrial Tool & Services Segment	$	121,313		$	125,940		$	140,395		$	139,694		$	527,342			$	127,297		$	-	$	-	$	-	$	127,297
Other		9,590			10,659			11,499			12,133			43,881				12,085			-		-		-		12,085
Total	$	130,903		$	136,599		$	151,894		$	151,827		$	571,223			$	139,382		$	-	$	-	$	-	$	139,382
% Sales Growth
Industrial Tool & Services Segment		8	%		12	%		5	%		4	%		7	%			5	%		-		-		-		5	%
Other		32	%		35	%		18	%		14	%		23	%			26	%		-		-		-		26	%
Total		10	%		13	%		6	%		4	%		8	%			6	%		-		-		-		6	%
Operating Profit from Continuing Operations
Operating profit	$	6,407		$	4,484		$	6,643		$	13,125		$	30,660			$	12,309		$	-	$	-	$	-	$	12,309
Impairment & divestiture charges		-			1,116			-			1,297			2,413				-			-		-		-		-
Restructuring charges		2,737			1,832			517			3,049			8,135				982			-		-		-		982
Gain on sale of facility, net of transaction charges		-			-			(585	)		-			(585	)			-			-		-		-		-
Leadership transition charges (benefit) (2)		3,759			1,747			2,800			(37	)		8,269				400			-		-		-		400
Business review charges		-			2,500			502			-			3,002				-			-		-		-		-
ASCEND transformation program charges		-			-			3,856			9,760			13,616				9,419			-		-		-		9,419
Adjusted operating profit	$	12,903		$	11,679		$	13,733		$	27,194		$	65,510			$	23,110		$	-	$	-	$	-	$	23,110
Adjusted Operating Profit by Segment
Industrial Tool & Services Segment	$	19,646		$	15,654		$	19,421		$	31,878		$	86,600			$	29,099		$	-	$	-	$	-	$	29,099
Other		(1,257	)		334			1,017			1,853			1,947				1,424			-		-		-		1,424
Corporate / General		(5,486	)		(4,309	)		(6,705	)		(6,537	)		(23,037	)			(7,413	)		-		-		-		(7,413	)
Adjusted operating profit	$	12,903		$	11,679		$	13,733		$	27,194		$	65,510			$	23,110		$	-	$	-	$	-	$	23,110
Adjusted Operating Profit %
Industrial Tool & Services Segment		16.2	%		12.4	%		13.8	%		22.8	%		16.4	%			22.9	%		-		-		-		22.9	%
Other		-13.1	%		3.1	%		8.8	%		15.3	%		4.4	%			11.8	%		-		-		-		11.8	%
Adjusted Operating Profit %		9.9	%		8.5	%		9.0	%		17.9	%		11.5	%			16.6	%		-		-		-		16.6	%
EBITDA from Continuing Operations (1)
Earnings from continuing operations	$	3,185		$	2,121		$	4,061		$	10,224		$	19,591			$	6,409		$	-	$	-	$	-	$	6,409
Financing costs, net		961			755			951			1,719			4,386				2,815			-		-		-		2,815
Income tax expense (benefit)		1,781			1,337			1,377			(95	)		4,401				2,383			-		-		-		2,383
Depreciation & amortization		5,175			4,986			4,822			4,617			19,600				4,193			-		-		-		4,193
EBITDA	$	11,102		$	9,199