Enerpac Tool Group Reports Strong Fourth Quarter and Full-Year Results; Introduces Full-Year Fiscal 2024 Outlook

Fiscal 2023 Continuing Operations Highlights^*

• Net sales of $598 million, a 5% increase, with core sales growth of 8%. ^**
• Operating margin was 14.0% and adjusted operating margin was 20.5%.
• Net earnings were $54 million, or $0.94 per diluted share.
• Adjusted EBITDA was $136 million, an increase of 65% year over year. Adjusted EBITDA margin was 22.8%, an increase of 830 basis points year over year.
• Generated operating cash flow of $78 million and free cash flow of $70 million, an increase of 57% year over year.
• Returned $58 million to shareholders through repurchase of 2.2 million shares.

Fourth Quarter of Fiscal 2023 Continuing Operations Highlights^*

• Net sales were $161 million, a 6% growth compared to the prior year, with a 9% increase in core sales. ^**
• Operating margin was 20.0% and adjusted operating margin was 23.0%.
• Net earnings were $23 million, or $0.41 per diluted share.
• Adjusted EBITDA was $40 million, an increase of 31% year over year. Adjusted EBITDA margin was 24.9%, an increase of 480 basis points year over year.

^*This press release contains financial measures in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in addition to non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the comparable GAAP measures are presented in the tables accompanying this release.

^**Core growth represents revenue growth excluding the impact of foreign exchange rates, acquisitions, and divestitures. A reconciliation of core sales to the comparable net sales are presented in the tables accompanying this release.

Enerpac Tool Group Corp. (NYSE:EPAC) (the "Company" or "Enerpac") today announced results for its fiscal year and the fourth quarter ended August 31, 2023.

"We are extremely pleased with Enerpac's performance in fiscal 2023," said Paul Sternlieb, Enerpac Tool Group's President & CEO. "We generated revenue and free cash flow at the high end of our guidance range, while adjusted EBITDA well outpaced our expectations. We were equally pleased with the benefit of our ASCEND transformation program. In fiscal 2023, the first full year of the program, we achieved our targeted adjusted EBITDA benefits a year ahead of plan and remain on track to attain our 25% adjusted EBITDA margin target by fiscal 2025. Through permanent change across the organization, we are making Enerpac more efficient, more productive, and easier to do business with."

"We continue to invest in our growth strategy, including expansion in targeted vertical markets, digital transformation, customer-driven innovation, and expansion in Asia Pacific," continued Sternlieb. "At the same time, we have returned $58 million in capital through our share repurchase program, while reducing our balance sheet leverage."

Fiscal 2023 Consolidated Results Comparisons

"On strong revenue growth, we captured exceptional improvement in operating profit and margins due to our transformational initiatives that enhanced productivity and efficiency at the gross profit and SG&A lines," stated Tony Colucci, Executive Vice President and Chief Financial Officer.

Consolidated net sales in fiscal 2023 were $598.2 million, compared to $571.2 million in fiscal 2022. Core sales increased 8% year over year, with product sales up 12% and service revenues down 7%, the latter due to the implementation of 80/20 analysis and a more selective process for quoting projects in the MENAC region. Core growth was driven by the execution of ASCEND go-to-market initiatives to accelerate organic growth and the implementation of our growth strategy.

Operating profit increased 174% year over year to $83.9 million, with an operating profit margin of 14.0%, up from 5.4% in fiscal 2022. Operating margin expansion was driven by initiatives to accelerate organic growth, improve operational efficiency, and reduce SG&A, partially offset by additional costs associated with the ASCEND transformation program and higher incentive compensation.

Adjusted operating profit for fiscal 2023 increased 87% to $122.7 million with an adjusted operating margin of 20.5%, up from 11.5% in fiscal 2022. Adjusted operating margin benefited from initiatives to accelerate organic growth, improve operational efficiency, and reduce SG&A, partially offset by higher incentive compensation.

Fiscal 2023 net earnings and diluted EPS were $53.6 million and $0.94, respectively, compared to $19.6 million and $0.33, respectively, in fiscal 2022.

Fiscal 2023 adjusted EBITDA was $136.3 million compared to $82.8 million in fiscal 2022. The adjusted EBITDA margin expanded 830 basis points from 14.5% to 22.8% in fiscal 2023.

Fourth Quarter Consolidated Results Comparisons

Consolidated net sales for the fourth quarter of fiscal 2023 were $160.6 million compared to $151.8 million in the prior-year period. Core sales improved 9% year over year, with product sales up 14% and service revenues down 12%.

Operating profit increased 145% year over year to $32.2 million, with an operating profit margin of 20.0%, up from 8.6% in the fourth quarter of fiscal 2022. Adjusted operating profit increased 36% to $36.9 million in the fourth quarter of 2023 with a 510 basis points expansion in the adjusted operating margin to 23.0%.

Fiscal 2023 fourth quarter net earnings and diluted earnings per share were $23.1 million and $0.41, respectively, compared to $10.2 million and $0.18, respectively, in the fourth quarter of fiscal 2022.

Fourth quarter adjusted EBITDA was $40.1 million compared to $30.5 million in the year-ago period, achieving an adjusted EBITDA margin of 24.9%, up from 20.1% in the year-ago period.

IT&S Results Comparisons

Fiscal 2023 net sales for IT&S were $555.2 million, 5% higher than fiscal 2022, with an 8% increase in core sales. Operating profit margin increased 960 basis points to 24.5% and adjusted operating profit margin increased 1,040 basis points to 26.8% from 16.4%.

Fourth quarter fiscal 2023 net sales for IT&S were $152.9 million, ahead 9% year over year with an 8% increase in core sales. The segment's operating profit margin increased 720 basis points to 27.9% and its adjusted operating profit margin increased 680 basis points to 29.6%.

The drivers of the year over year improvement in operating margin and adjusted operating margin for the IT&S segment are the same as those noted above in our consolidated results.

Corporate Expenses from Continuing Operations

Corporate expenses were $62.9 million and $48.8 million for fiscal 2023 and fiscal 2022, respectively. Adjusted corporate expenses⁽²⁾ of $31.2 million in fiscal 2023 increased by $8.1 million year over year, primarily due to higher incentive compensation expense.

Corporate expenses were $16.8 million and $16.3 million for the fourth quarter of fiscal 2023 and fiscal 2022, respectively. Adjusted corporate expenses⁽²⁾ of $8.6 million for the fourth quarter of fiscal 2023 increased by $2.1 million.

Net debt at August 31, 2023 was $60 million, resulting in a net debt to adjusted EBITDA ratio of 0.6x. The company purchased approximately 1.4 million shares of its common stock in the fourth quarter of fiscal 2023 for a total of approximately $37 million under its share repurchase program announced in March 2022.

Outlook

"Our guidance for fiscal 2024 reflects a fair degree of caution, given the continued uncertainty in the macro environment," concluded Sternlieb. "However, we are confident in Enerpac's ability to outperform the industry and gain share based on the success of our four-pillar growth strategy, and we remain committed to our multi-year financial framework of 6% to 7% compound annual growth of organic revenue through fiscal 2026."

The company set its full-year fiscal 2024 net sales guidance range at $590 million to $605 million, with core growth of approximately 2 to 4 percent, adjusted EBITDA guidance at $142 million to $152 million, and anticipated free cash flow of $60 million to $70 million. This forecast is based on the Company's key foreign exchange rate assumptions and assumes that there is no broad-based global recession.

Conference Call Information

An investor conference call is scheduled for 7:30 am CT on October 17, 2023. 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 "outlook," "guidance," "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, 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 continue to achieve its plans or objectives related to the ASCEND program, 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 and most recent report on Form 10-Q. 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, adjusted corporate expense, free cash flow and net debt. This press release includes reconciliations of non-GAAP measures to the most comparable GAAP measure, included 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.

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