Enerpac Tool(EPAC) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Net sales for Q1 2023 were $139 million, a 13% increase in core sales over Q1 2022 [31] - Adjusted EBITDA margin was 19% in Q1, reflecting a currency-neutral incremental profitability of 64% [31] - Adjusted EPS for Q1 was$ 0.29, up $0.13 from the prior year, representing an 80% increase year-over-year [32] - Free cash flow for Q1 was$ 16 million, compared to negative $8 million in Q1 2022 [44] Business Line Data and Key Metrics - IT&S product core sales increased by 14%, service core sales by 3%, and Cortland core sales by 26% in Q1 [31] - Cortland business delivered core growth of 26% year-over-year, with strong performance in oil and gas, aerospace, and defense [29][30] - New product launches, including battery-powered machine skates, contributed to growth in Q1 [18][19] Market Data and Key Metrics - Americas experienced core sales growth in the high teens, driven by product growth and demand in rail and wind sectors [22][23] - Europe saw low double-digit core growth, benefiting from government investments in infrastructure and rail [24] - Asia Pacific had low single-digit core growth, with challenges in China due to COVID restrictions [26] - MENAC region experienced low single-digit core growth, driven by oil and gas investments [28] Company Strategy and Industry Competition - The ASCEND transformation program aims to drive organic growth, operational excellence, and efficiency, with an expected$ 40 million to $50 million adjusted EBITDA benefit by fiscal 2024 [12][16] - The company focuses on four growth verticals: infrastructure, wind, rail, and industrial MRO, with a long-term target of 6% to 7% organic revenue CAGR [9] - Innovation is a key aspect of the growth strategy, with new products like battery-powered machine skates driving customer demand [18][19] Management Commentary on Operating Environment and Future Outlook - Management remains confident in the company's ability to grow and execute, despite macroeconomic uncertainty [11][48] - Order rates remained solid in the first few weeks of Q2, with no signs of a recession in the business [20][47] - The company expects to see continued easing of supply chain challenges and commodity price increases, but some headwinds may persist into 2023 [41][42] Other Important Information - The company reduced the number of legal entities, simplifying the business and reducing associated costs [15] - Pricing actions contributed approximately$ 8 million to the top line in Q1, offsetting the impact of inflation [34][43] - The company's leverage ratio is 0.7 times, well below the target range of 1.5 to 2.5 times [44] Q&A Session Summary - No specific Q&A session details were provided in the document [50]