Enerpac Tool Group Corp. (NYSE:EPAC) Q2 2025 Earnings Conference Call March 25, 2025 8:30 AM ET Company Participants Travis Williams - Senior Director of Investor Relations Paul Sternlieb - President and Chief Executive Officer Darren Kozik - Executive Vice President and Chief Financial Officer Conference Call Participants Will Gildea - CJS Securities Tom Hayes - C.L. King Steve Silver - Argus Research Operator Ladies and gentlemen, thank you for standing by. Welcome to Enerpac Tool Group's Second Quarter F ...

Summary of Conference Call Notes Industry or Company Involved - Focus on the export-oriented economy and Chinese export companies, particularly in the context of U.S. tariff policies and their implications for performance and investment opportunities Core Points and Arguments - Recent months have seen low performance in the export-oriented economy due to market instability caused by White House policy disruptions, particularly regarding tariffs and interest rates [2][3] - The Trump administration's acceleration of global taxation has raised concerns about the controllability of tariff impacts, especially with the U.S. maintaining a no-rate-cut stance, leading to worries about economic sustainability [2][3] - Market sentiment is shifting towards companies with reasonable valuations and lower positions, as the volatility in U.S. tariff policies has affected export company valuations [3][4] - The U.S. has adjusted its tariff policies, delaying tariffs on specific industries such as automotive and pharmaceuticals, while applying differentiated tax rates based on country relations, benefiting Southeast Asian countries [5] - Chinese export companies are encouraged to leverage their strengths, such as overseas production capacity and strong cost control, to mitigate tariff impacts [6][7] - Companies like Giant Star Technology are less affected by uncertainties in U.S. manufacturing return and consumer demand due to their robust demand-side certainty [9][11] - Zhejiang Dingli is highlighted as a promising investment opportunity due to its favorable performance outlook and low valuation, benefiting from U.S. power project progress and reduced tariffs [14][15] Other Important but Possibly Overlooked Content - The current market environment favors companies with overseas production capabilities, high supply chain dependency, strong channel bargaining power, and effective cost control [7] - The uncertainty surrounding U.S. manufacturing return and consumer demand may lead to overestimated performance for export companies, but those with strong demand-side certainty remain resilient [9] - The price increase of Nestlé products illustrates consumer behavior's insensitivity to price changes, which may stabilize industry growth [10] - Giant Star Technology's strategy of overseas production and new retail channels has led to increased market share and stable profitability, with 80% of its exports to the U.S. covered by overseas capacity [11] - Other tool-related demands, such as those from Full Han and Chuangke Industrial, are also worth monitoring, as they benefit from interest rate changes [12] - Zhejiang Dingli's revenue growth in the U.S. is projected at 20%-30%, making it a highly predictable year for the company [13]

Financial Data and Key Metrics Changes - Revenue increased by 6.5% to $14.6 billion, with organic growth of 6.5% or 6.8% in local currencies [7][10] - Net profit rose by 14.9% to $1.12 billion, with a net profit margin improvement of 60 basis points to 7.7% [9][10] - Free cash flow reached $1.6 billion, a 23% increase from $1.3 billion in 2023, representing a 142% conversion of net profits [17] - Earnings per share increased by 15.1% to $61.43 [9] Business Line Data and Key Metrics Changes - Power Equipment division, accounting for 94% of total revenue, grew by 7.3% or 7.6% in local currencies to $13.7 billion [10][11] - Milwaukee brand achieved sales growth of 11.6% in local currencies, while Ryobi Power Tools grew by 6.7% [8][10] - Floorcare and Cleaning divisions saw a revenue decline of 4.5% in local currency, but operating profits increased by 4.73% [10][11] Market Data and Key Metrics Changes - North America, contributing 76% of revenue, grew by 5.5% in local currencies [11] - Europe, making up approximately 16% of the business, experienced over 10% growth in local currencies [11] - The rest of the world, led by Australia, delivered impressive local currency growth of 12.5% [11] Company Strategy and Development Direction - The company emphasizes innovation and a strong culture as key drivers of success, aiming to maintain market leadership through continuous investment in R&D [4][12] - Focus on expanding into new markets and user segments, leveraging the strengths of the Milwaukee and Ryobi brands [30][32] - The strategy includes a relentless focus on safety and productivity solutions for core trades, with a unique approach to embedded partnerships [68][69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue delivering strong financial results, highlighting a culture of innovation and collaboration [19][46] - The company is aware of potential disruptions in the market and is committed to continuous innovation across all business aspects [39][40] - Future growth is expected to be driven by expanding product offerings and enhancing customer engagement [30][32] Other Important Information - The Board recommended a final dividend of HKD 118 per share, a 20.4% increase compared to the previous year [10] - The company aims to achieve a net cash position by 2025, with a focus on reducing high-cost debts [17][18] Q&A Session Summary Question: What are the growth opportunities for Ryobi and Milwaukee? - Ryobi is focusing on expanding its cordless ecosystem, which has seen a 15% compounded annual growth since 2016, and aims to convert users from legacy power sources [49][50] - Milwaukee is committed to enhancing safety and productivity for core trades, with a unique strategy that has resulted in 12% sales growth in 2024 [70][71] Question: How does the company plan to maintain its competitive advantage? - The company emphasizes its culture and people as key competitive advantages, fostering collaboration and innovation across all levels [19][22] - Continuous investment in breakthrough technology and understanding user needs are critical to maintaining market leadership [85][86]

+ 目录 1 公司近年业绩承压，24年显著修复 2 工具电池：重回上行周期，公司量利齐升 2.1 去库完成， 24年国内电动工具、OPE出口高景气 2.2 美国处于降息周期， 工具需求有望持续向上 2.3 公司电池订单修复，实现量利齐升 3 非工具电池： 布局BB U等新场景，有望打造第二增长曲线 3 . 1 BBU电池： AIDC新增BBU备电方案，看好电池端国产替代，公司具备先发优势 3.2 其他电池： 积极拓展拓宽智能出行、低空、机器人等非工具场景 4 金属物流 业绩稳定，LED景气向上 4.1 金属物流业务预计稳健增长 4.2 景气修复， LED业务盈利显著改善 5 风 险提示 摘要 ■ 投资逻辑 投资逻辑： 公司是全球小圆柱电池领先企业，主业工具电池去库结束，重回上行周期，公司实现量利齐升， LED业务景气改善，实现扭亏为盈，新拓展BBU电池，有望实现国产 代，打造第二增长曲线。 工具电池： 重回上行周期，公司量利齐升。 1）去库结束，工具电池需求上行:下游经历两年低迷后，24年工具链重回上行，国内电钻、电动链锯、割草机出口数量同 +32%/+29%/+72%，下游泉峰控股收入同比+25%~30%， ...

Financial Data and Key Metrics Changes - The company generated total adjusted revenues of $730 million in Q4 2024, resulting in 6% organic growth, which was above expectations [18] - For the full year, total adjusted revenue was $2.76 billion, with 1% organic growth [19] - Adjusted EPS for Q4 was $1.42, exceeding guidance by $0.04, and for the full year, adjusted EPS was $4.90, representing 5% growth year over year [21][22] Business Line Data and Key Metrics Changes - Life Sciences segment generated $336 million in Q4, up 5% on both a reported and organic basis, but down low single digits for the full year [25] - Diagnostics segment generated $393 million in Q4, up 4% on a reported basis and 6% on an organic basis, with 4% organic growth for the full year [27] - The Life Sciences instruments revenue was down high single digits in Q4 and down low double digits for the full year [25] Market Data and Key Metrics Changes - In Q4, organic revenue growth was 5% in Life Sciences and 6% in Diagnostics, with mid single digits growth in the Americas, low single digits in Europe, and mid single digits in Asia, particularly high single digits in China [23] - For the full year, China experienced low single digit growth in diagnostics and mid teens growth in life sciences, but overall, China declined in the low single digits organically [24] Company Strategy and Development Direction - The company plans to step up strategic internal investments in 2025, expecting organic growth to improve [9][31] - A new Life Sciences Solutions business unit will be established, representing approximately 85% of the Life Sciences segment, reflecting a re-segmentation of the Applied Genomics business [14] - The company aims for adjusted operating margin expansion of 20 to 40 basis points in 2025, despite increased investments [31] Management's Comments on Operating Environment and Future Outlook - Management noted that while demand trends have stabilized, the pace of recovery remains uncertain, leading to a cautious outlook for 2025 [39] - The company expects total organic growth in 2025 to be in the range of 3% to 5%, with balanced growth expected throughout the year [30] - Management expressed optimism about the potential for recovery in the Applied Genomics business as it transitions to the Life Sciences Solutions portfolio [63] Other Important Information - The company repurchased $185 million worth of shares in Q4, bringing total buyback activity for 2024 to $370 million [22] - Free cash flow for Q4 was $151 million, with a full year total of $578 million, equating to 96% conversion of adjusted net income [22] Q&A Session Summary Question: Insights on key end markets and recovery areas - Management acknowledged a path to recovery but emphasized uncertainty in the pace of return to normalcy, with diagnostics and software businesses showing signs of improvement while instrumentation remains a concern [39][40] Question: Guidance for China and stimulus impact - Management expects China to align with company growth averages, with modest stimulus impact anticipated [41][42] Question: Segment outlooks relative to overall guidance - Diagnostics is expected to perform above the company average, while Life Sciences is projected to be in the low single digits [46][47] Question: Expectations for reagents growth - Management indicated that the reagents business is gaining market share and is expected to grow in mid single digits for fiscal 2025 [48][50] Question: Q1 guidance and margin visibility - Management noted that Q1 margins are typically below the full year average, with a similar cadence expected as in 2024 [54] Question: Applied Genomics recovery expectations - Management expressed optimism about the recovery of the Applied Genomics business as it transitions to the Life Sciences Solutions portfolio [63] Question: FX impact on margins - Management clarified that FX does not have a material impact on operating margins [66] Question: Strategic investments for 2025 - Management highlighted increased investments in digital capabilities and expanding sales channels as part of their strategy for 2025 [70]

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