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ENERPAC TOOL GROUP CORP (EPAC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered above-market growth in a soft industrial backdrop: net sales $158.7M (+5.5% YoY), organic +2.0%; adjusted EPS $0.51 and adjusted EBITDA $41.0M with margin 25.9% .
  • Results were a modest beat vs S&P Global consensus: revenue $158.7M vs $156.5M estimate (+$2.2M) and adjusted EPS $0.51 vs $0.47 estimate; GAAP diluted EPS was $0.41 (underlying beat is on adjusted) . Values retrieved from S&P Global.*
  • Full-year FY2025 guidance was maintained (net sales $610–$625M, adj. EBITDA $150–$160M, FCF $85–$95M) with management now expecting outcomes toward the lower half due to macro/tariff uncertainty .
  • Call catalysts: tariff surcharge and pricing actions to remain price-cost neutral ; sequential improvement in service margins; strong Cortland Biomedical and APAC performance; DTA orders robust though FY revenue likely shy of initial EUR 20M target .

What Went Well and What Went Wrong

What Went Well

  • Organic growth resilience: Enerpac outperformed a “soft industrial sector” with +2% organic growth and +5.5% total growth; record third-quarter revenue since the 2019 relaunch .
  • Cost discipline and mix actions: adjusted SG&A as % of sales improved 160 bps YoY to 25.5%; sequential service margin improvement from focusing on higher-value projects and investing in equipment .
  • Segment/geo strength: Cortland Biomedical grew ~19% and APAC delivered mid-single-digit growth; Americas posted high-single-digit organic growth driven by standard products and services .

Quotes:

  • “Record third quarter revenue since the relaunch of Enerpac Tool Group in 2019… we are taking a cautious posture… given uncertainty.”
  • “We implemented price increases and surcharges to mitigate direct material cost increases.”
  • “Adjusted earnings per share increased 9% to $0.51.”

What Went Wrong

  • Gross margin pressure: GP margin fell 140 bps YoY to 50.4% due to service project mix and inclusion of DTA; adj. EBITDA margin down 50 bps YoY to 25.9% .
  • Restructuring costs: $5.9M restructuring charge (about three-quarters severance; remainder HQ lease impairment) to right-size costs in a soft market .
  • EMEA softness: organic decline in EMEA, with lumpiness in HLT and macro slowdown in Western Europe; service revenue softness affected Europe .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

MetricQ3 2024Q2 2025Q3 2025
Net Sales ($USD Millions)$150.4 $145.5 $158.7
Gross Profit ($USD Millions)$77.9 $73.4 $79.9
Gross Margin (%)51.8% (computed from GP/NS) 50.5% 50.4%
Operating Profit ($USD Millions)$33.4 $30.8 $31.7
Diluted EPS (GAAP)$0.41 $0.38 $0.41
Adjusted Diluted EPS$0.47 $0.39 $0.51
Adjusted EBITDA ($USD Millions)$39.7 $33.8 $41.0
Adjusted EBITDA Margin (%)26.4% 23.2% 25.9%

Q3 2025 vs S&P Global Consensus

MetricConsensusActualSurprise
Revenue ($USD Millions)$156.5*$158.7 +$2.2
Adjusted EPS ($)$0.47*$0.51 +$0.04

Values retrieved from S&P Global.*

Segment and Product Mix

MetricQ3 2024Q2 2025Q3 2025
IT&S Net Sales ($USD Millions)$145.9 $140.7 $153.4
Other (Cortland Biomedical) Net Sales ($USD Millions)$4.5 $4.8 $5.3
Product Sales ($USD Millions)$122.2 $118.7 $129.6
Service Sales ($USD Millions)$28.2 $26.8 $29.1

KPIs and Balance Sheet

MetricQ3 2024Q2 2025Q3 2025
Cash Balance ($USD Millions)$132.4 $119.5 $140.5
Debt Balance ($USD Millions)$195.7 $192.1 $190.9
Net Debt ($USD Millions)$63.3 (derived) $72.6 $50.4
Net Debt / Adj. EBITDA (x)0.5x 0.5x 0.4x
YTD Cash From Operations ($USD Millions)$37.0 (9M) $16.1 (6M) $56.0 (9M)
YTD Capex ($USD Millions)$5.0 (9M) $11.5 (6M) $16.4 (9M)
Share Repurchases ($USD Millions)$32.7 (FY2024 Q2 ref) $10.2 (Q2) $14.0 (Q3)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY2025$610–$625 $610–$625 Maintained; deliver lower half
Adjusted EBITDA ($USD Millions)FY2025$150–$160 $150–$160 Maintained
Free Cash Flow ($USD Millions)FY2025$85–$95 $85–$95 Maintained
DividendFY2025—Annual dividend $0.04/share payable Oct 17, 2025 Announced Post-Q3

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tariffs & PricingDirect China imports < $20M; pricing leadership; ready for intra-year hikes if needed ~$50M U.S. imports subject to tariffs; annualized tariff impact ~$18M; implemented low single-digit surcharge; goal: price-cost neutral Intensifying tariff focus; proactive mitigation
ECX (Commercial Excellence)Rolling out ECX; improving funnel and discipline; Americas/EMEA ramp ECX contributing to above-market growth; continued rollout Execution strengthening
Service Business MarginsComplementary but margin-dilutive; focus on higher-quality projects Sequential margin improvement from mix actions and investments Improving sequentially
DTA Integration (HLT)Integration on track; robust orders; cross-selling; ProMat presence Orders “extremely strong”; FY revenue likely shy of EUR 20M; expanding U.S. sales; subject to U.S. tariffs Commercial traction strong; operational ramping
Regional TrendsEMEA resilience despite macro; APAC mid-single-digit growth; Americas cautious Americas high-single-digit organic growth; APAC mid-single-digit; EMEA decline on HLT lumpiness Mixed; APAC/US strong, EMEA softer
Innovation/R&D & e‑commercePEP/innovation pipeline; e‑commerce up 36% 1H25; 43% in Q2 New innovation lab enabling rapid prototyping; dedicated equipment installed Accelerating product velocity

Management Commentary

  • “Enerpac’s results in the third quarter continued to reflect our ability to outperform the soft industrial sector with organic revenue growth of 2% and total revenue growth of 6%.” – CEO Paul Sternlieb .
  • “We recorded a restructuring charge of $5.9 million… three-quarters people-related severance… remainder non-cash lease impairment associated with our headquarters relocation.” – CFO Darren Kozik .
  • “Under the current tariff framework, we estimate an annualized tariff impact of $18 million… We implemented a low single-digit surcharge in the U.S. to offset the announced tariffs… goal of remaining at least price-cost neutral.” – CFO Darren Kozik .
  • “Our R&D organization is… benefiting from our new and expanded Innovation Lab, enabling faster prototyping and more rapid product development.” – CEO Paul Sternlieb .

Q&A Highlights

  • Tariff impact and mitigation: Management reiterated price-cost neutrality via surcharges and alternative sourcing; highlighted ~$18M annualized tariff headwind and ~$50M imports subject to duties .
  • Restructuring details: $5.9M charge in Q3 FY2025 (severance plus HQ lease impairment); foundations for SG&A efficiency and automation .
  • Pricing cadence: Low-mid single-digit price increase in March and low single-digit surcharge in May; greater impact expected in Q4 .
  • DTA outlook: Sequential revenue improvement but FY sales likely below EUR 20M; orders tracking “more than EUR 20M”; U.S. demand remains healthy despite tariffs .
  • e‑commerce momentum: +43% YoY in Q2 and +36% in 1H FY2025; expanded to Europe and Australia with digital advertising driving traffic .

Estimates Context

  • Q3 FY2025 beats: Adjusted EPS $0.51 vs $0.47 consensus; revenue $158.7M vs $156.5M consensus. Values retrieved from S&P Global.*
  • Implications: Estimate models should reflect persistent gross margin pressure from service/DTA mix, partially offset by pricing/surcharges, and stronger APAC/Americas execution. Guidance maintained with lower-half delivery suggests limited upward revisions to FY top line/EBITDA; but adj. EPS beat supports modest EPS upward tweaks assuming continued price-cost neutrality .

Key Takeaways for Investors

  • Mix-driven margin pressure remains the central watch item; sequential service margin improvement and pricing actions should temper downside risk .
  • Tariffs are manageable near term given surcharges and global sourcing flexibility; monitor execution on price-cost neutrality and any demand softening .
  • DTA integration is strategically compelling (HLT horizontal movement); orders robust even if FY revenue undershoots initial target; expect growing contribution into FY2026 .
  • Cortland Biomedical and APAC strength diversify growth drivers; EMEA remains lumpy, especially in HLT .
  • Balance sheet capacity (net debt/adj. EBITDA 0.4x) enables continued buybacks ($14M in Q3) and disciplined M&A; FY FCF guidance intact .
  • Guidance maintained with a lower-half bias: position for solidity rather than upside surprises; Q4 typically strongest margins seasonally per management .
  • Near-term trading: modest beat plus clear tariff mitigation could support shares, but margin mix and macro tone likely cap multiple expansion pending evidence of Q4 margin ramp .

Footnote: Values retrieved from S&P Global.*