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ET

ENERPAC TOOL GROUP CORP (EPAC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 delivered above-market top-line growth: net sales $145.5M (+5.1% YoY) and organic +5.0% despite a soft industrial sector; adjusted EPS $0.39 and adjusted EBITDA $33.8M with margin 23.2% .
  • Mix shift toward Heavy Lifting Technology (HLT) and service projects compressed gross margin to 50.5% (-110bps YoY) and adjusted EBITDA margin (-160bps YoY); management highlighted initiatives to improve service margins while sustaining high profitability .
  • Guidance reiterated: FY2025 net sales $610–$625M, adjusted EBITDA $150–$160M, organic growth ~0–2%, FCF $85–$95M; note FCF range had been reduced in Q1 from $89–$99M set in Q4 FY2024 and remains unchanged this quarter .
  • Stock reaction catalysts: revenue beat vs consensus and continued confidence in H2 volume leverage and productivity (PEP/ECX) offsetting mix headwinds; incremental color on DTA integration and e-commerce growth may support sentiment .

What Went Well and What Went Wrong

What Went Well

  • Strong organic growth: Company-level +5.0% YoY; IT&S +4.2%; Cortland Biomedical +33.1% due to normalized shipments; Americas/APAC grew high-single digits with ECX rollout aiding share gains .
  • HLT strength and new product ramp supported product sales; management reiterated above-market performance and maintained FY2025 guidance confidence, expecting stronger margins in H2 from volume and productivity .
  • Balance sheet and capital return: Net debt $72.6M (0.5x net debt/adj EBITDA); $10.2M buybacks (~220k shares) in Q2; liquidity remains ample for M&A and repurchases .

What Went Wrong

  • Margin mix headwinds: Gross margin fell to 50.5% (-110bps YoY) due to HLT/product mix and service project mix; adjusted EBITDA margin 23.2% (-160bps YoY) including DTA dilution .
  • EMEA softness amid macro pressures (France/Germany) breaking a two-year growth pattern, though management believes outperformance continues; Australia remains weak on mining and tariffs impact .
  • Service margins remain dilutive vs products; management noted initiatives to improve profitability (higher-quality projects, differentiated offerings, technician/equipment investment), indicating execution needed to realize improvements .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$158.714 $145.196 $145.528
GAAP Diluted EPS ($USD)$0.43 $0.40 $0.38
Adjusted Diluted EPS ($USD)$0.50 $0.40 $0.39
Gross Profit ($USD Millions)$77.402 $74.652 $73.431
Gross Margin %—51.4% 50.5%
Operating Profit Margin %18.9% 21.4% 21.2%
Adjusted EBITDA ($USD Millions)$38.6 $34.3 $33.8
Adjusted EBITDA Margin %24.3% 23.6% 23.2%

Notes: Q2 2025 YoY comps were: Revenue +5.1% YoY; GAAP EPS +15% YoY; adjusted EPS +8% YoY .

Actual vs Wall Street Consensus (Q2 2025)

MetricConsensus*Actual
Revenue ($USD Millions)$141.5*$145.528
Primary EPS ($USD)$0.395*$0.39

Values retrieved from S&P Global. Company reported adjusted diluted EPS of $0.39 .

Segment Net Sales

Segment ($USD Millions)Q4 2024Q1 2025Q2 2025
Industrial Tools & Services (IT&S)$153.360 $140.134 $140.716
Other (Cortland Biomedical)$5.354 $5.062 $4.812
Total$158.714 $145.196 $145.528

Product vs Service Net Sales

Line ($USD Millions)Q4 2024Q1 2025Q2 2025
Product$130.395 $111.149 $118.692
Service$28.319 $34.047 $26.836
Total$158.714 $145.196 $145.528

KPIs

KPIQ4 2024Q1 2025Q2 2025
Net Debt ($USD Millions)$27.0 $62.6 $72.6
Net Debt / Adjusted EBITDA (x)0.2x 0.5x 0.5x
Share Repurchases (Shares, $USD Millions)1.3M FY24, $38.4 ~110k, $4.4 ~220k, $10.2
Cash from Ops (period) ($USD Millions)$44.471 (Q4) $8.649 (Q1) $16.108 (H1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY2025$610–$625 $610–$625 Maintained
Organic Sales Growth (%)FY2025~0–2% ~0–2% Maintained
Adjusted EBITDA ($USD Millions)FY2025$150–$160 $150–$160 Maintained
Free Cash Flow ($USD Millions)FY2025$89–$99 $85–$95 Lowered in Q1; reiterated in Q2
CapEx ($USD Millions)FY2025—$19–$24 (HQ build-out) New detail reiterated
Cash From Ops ($USD Millions)FY2025—$61–$76 (guidance reconciliation) New detail reiterated

Management emphasized H2 volume leverage and PEP productivity offsetting DTA’s first-year margin dilution (ex-DTA, the model targeted ~+50bps adj EBITDA margin YoY) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024 & Q1 FY2025)Current Period (Q2 FY2025)Trend
Mix & Margins (HLT/service)Q4: service % rose; margin mix headwind . Q1: gross margin 51.4% impacted by service/Cortland normalization .Gross margin 50.5% (-110bps YoY) driven by HLT and service mix; initiatives underway to improve service margins .Mix pressure persists; margin actions in progress
ECX (Commercial Excellence)Rolled out in Americas in FY2024; planned EMEA rollout in FY2025 .Driving share gains in Americas; rollout to EMEA underway; improved funnel, conversion/win rates .Expanding; positive impact
PEP (Productivity)PEP as ASCEND extension; aim for +50bps margin annually; FY2024 adj EBITDA 25.0% achieved .Maintains rigor; supports H2 margin lift (volume + productivity) .Ongoing; margin support
DTA IntegrationAcquisition announced Sep 2024; complementary to HLT; margin dilutive year 1; revenue synergies targeted .“Going well”; cross-selling, global expansion; showcased at ProMat; further presence at bauma .Integration progressing; pipeline building
Regional TrendsQ4: EMEA strong; APAC soft (mining); Americas cautious . Q1: EMEA/APAC growth; Americas soft .Americas/APAC high-single-digit growth; EMEA low-single-digit decline but outperformance continues; Australia weak .Mixed; Americas/APAC improving, EMEA under macro pressure
Tariffs/MacroQ1: Direct China imports < $20M; Canada/Mexico negligible; price actions as needed .Similar positioning; cautious tone re tariffs/geopolitics; reiteration of guidance .Monitoring; manageable direct exposure
E-commerce & DigitalQ1: Direct e-commerce growth; geographic rollout .E-commerce +43% YoY in Q2; +36% H1; digital ads driving traffic in UK/Australia .Accelerating growth

Management Commentary

  • “Organic sales grew 5% year-over-year… EBITDA margins came in at 23.2%… we are maintaining our full year fiscal 2025 guidance” — Paul Sternlieb, CEO .
  • “Gross profit margins of 50.5% declined 110 basis points year-over-year… we have specific initiatives underway to improve the margin profile [in service]” — Darren Kozik, CFO .
  • “Given our growth through the first half of fiscal 2025, we are reiterating full-year guidance, including sales and adjusted EBITDA growth of 5 percent at the midpoint” — Paul Sternlieb, CEO .
  • “Net debt was $73 million… total liquidity… $518 million… ample capacity to deploy capital for disciplined M&A and share repurchases” — Darren Kozik, CFO .
  • “We remain bullish about the wind sector in Europe and parts of Asia... product line serves the full life cycle of wind turbines” — Paul Sternlieb .

Q&A Highlights

  • Mix and margin cadence: H2 typically >50% of revenue (~52%); expected higher profitability in H2 from volume leverage and PEP productivity; strongest margins historically in Q4 .
  • DTA integration progress: Strategic fit with HLT; customer response and orders positive; aftermarket opportunity noted for accretive margins .
  • Tariffs exposure: Direct imports from China < $20M; negligible Canada/Mexico; prepared to mitigate via dual sourcing and pricing actions .
  • ECX rollout details: Discipline in sales process, end-user focus, data-driven funnel management; faster uptake in EMEA leveraging Americas playbook .
  • E-commerce ramp: +43% YoY in Q2, +36% H1; digital ads boosted traffic in UK/Australia; expanding globally .

Estimates Context

  • Revenue beat: Actual $145.5M vs consensus $141.5M; positive surprise on top-line in a soft sector (consensus from S&P Global)* .
  • EPS near in-line: Primary EPS $0.39 vs $0.395 consensus; slight miss driven by mix and DTA inclusion; adjusted diluted EPS reported at $0.39 .
  • Implications: Estimate revisions may lift revenue in H2 given management’s confidence in volume/productivity; margins likely modeled with mix-sensitive trajectory and Q4 seasonal strength .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue resilience with clear mix headwinds; focus on HLT/product innovation and ECX should sustain above-market growth; watch service margin initiatives for inflection .
  • Guidance intact despite macro/tariff caution; setup favors H2 operational leverage and PEP benefits; DTA dilutive year 1 but strategic accretion longer term .
  • Regional positioning: Americas/APAC momentum vs EMEA macro pressure; ECX rollout in EMEA could drive share gains as conditions normalize .
  • Capital allocation: Low leverage (0.5x), strong liquidity, ongoing buybacks and M&A optionality; supports balanced growth/returns .
  • Trading lens: Near-term—revenue beat offsets modest EPS shortfall; H2 margin cadence and service margin actions are key; watch bauma/DTA orders and e-commerce metrics .
  • Medium-term thesis: Continuous improvement (PEP), commercial excellence (ECX), innovation pipeline, and targeted M&A (DTA) underpin sustained share gains and margin expansion potential ex-mix .
  • Risk checks: Mix shifts (HLT/service), EMEA macro/tariffs, Australia mining; management has levers (pricing, sourcing, project selection) to mitigate .