Enerpac Tool Group (EPAC) Q3 2024 earnings summary

Executive summary

• Net sales for Q3 FY24 were $150M, down 3.8%-4% year-over-year due to the Cortland Industrial divestiture, but organic sales rose 1.2% with service revenue up 7.3% and flat product sales.

• Adjusted EBITDA increased 6% to $39.7M–$40M, with margin expanding 240 basis points to 26.4% year-over-year.

• Gross margin expanded 200 basis points to 51.8%–52%, driven by operational improvements, pricing, and favorable mix.

• Operating profit increased to $33M–$33.4M, with adjusted operating margin up 290 basis points to 24.6%.

• ASCEND transformation program drove operational and margin improvements, running ahead of plan and expected to deliver $50–$60M in annual operating profit improvement by end of FY24.

Financial highlights

• Organic revenue grew 1.2% year-over-year, with IT&S up 1.8% and service revenue up 7.3%.

• Adjusted EPS rose to $0.47, aided by a lower tax rate and share count.

• Net cash from operating activities was $30.3M–$37M for Q3 FY24, up from $17M–$27M a year ago; free cash flow YTD up 66% to $32M.

• Cash balance at quarter-end was $132M–$132.4M; net debt/adjusted EBITDA at 0.5x.

• 71,536 shares repurchased for $2.6M in Q3; 2.9M–2.86M shares remain under buyback authorization.

Outlook and guidance

• FY24 organic sales growth guidance narrowed to 2–3%, with net sales expected between $585M–$590M.

• Adjusted EBITDA guidance raised to $147M–$150M, reflecting better-than-expected margin performance.

• Free cash flow for FY24 projected at $60M–$70M.

• CapEx guidance lowered to $8M–$13M due to timing of HQ relocation.

• No changes to long-term financial framework or growth outlook.