Enerpac Tool Group Corp.

Ladies and gentlemen, thank you for standing by. Welcome to InterPAC Tool Group's second quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question and answer session. At that time, if you have a question, please press star followed by the number one on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded March 24, 2021. It is now my pleasure to turn the conference over to Bobbi Belsner, Director of Investor Relations and Strategy. Please go ahead, Ms. Belsner.

Thank you, Operator. Good morning, and thank you for joining us for Interpac Tool Group's second quarter fiscal 21 earnings conference call. On the call today to present the company's results are Randy Baker, President and Chief Executive Officer, Rick Dillon, Chief Financial Officer, and Jeff Schmaling, Chief Operating Officer. Also with us are Barb Bolins, Chief Strategy Officer, Fabrizetti, General Counsel, and Brian Johnson, Chief Accounting Officer. Our earnings release and slide presentation for today's call are available on our website at interpactoolgroup.com in the Investor section. We are also recording this call and will archive it on our website. During today's call, we will reference non-GAAP measures, such as adjusted profit margins and adjusted earnings. You can find a reconciliation of non-GAAP to GAAP measures in the schedules to this morning's release. We also would like to remind you that we will be making statements in today's call and presentation that are not historical facts and are considered forward-looking statements. We are making those statements pursuant to the safe harbor provisions of federal securities law. Please see our SEC filings for the risks and other factors that may cause actual results to differ materially from forecasts, anticipated results, or other forward-looking statements. Consistent with how we've conducted prior calls, we ask that you follow our one question, one follow-up practice in order to keep today's call to an hour and also allow us to address questions from as many participants as possible. Thank you in advance for your cooperation. Now I will turn the call over to Randy.

Thanks, Bobby, and good morning, everybody. We're going to start today on slide three. Before we review the details in the quarter, I'd like to provide an overview of Interpac's progress in our recovery from the global pandemic. As always, safety is our number one concern for our employees worldwide. And as of today, we still have approximately 40% working from home offices. In the quarter, we were affected by regional spikes in the infection, resulting in full border closures in the Middle East. We responded by returning to the broad lockdown processes we've been using throughout the pandemic. Unfortunately, this did have an impact on our sales and slowed our recovery progress. Despite these factors, we were able to improve the performance in the quarter to near parity with our first quarter results. This is not our typical cycle within a fiscal year, as the second quarter is normally a low point for both sales and profit. Secondly, our cost efforts continue to support very positive decremental margins which are in line with our expectations of 35 to 45%. As I discussed in prior quarters, we have protected our ability to execute the long-term strategy, including new product development, sales coverage, and our capital allocation priorities. Our focus on the balance sheet has enabled us to pay down an additional $45 million in debt in the quarter, which further enhances the long-term performance of Interpac. Lastly, as we emerge from the pandemic, Interpac is focusing on developing and improving our company. We firmly believe without engaged, well-trained employees, we cannot successfully execute our strategy. With that in mind, we have launched programs to recruit, develop, and retain team members and ensure everyone is proud to be part of Interpac. Moving over to slide four. Our weekly and monthly sales is our most monitored metrics we use to understand the progression towards full recovery. And consistent with prior quarters, this chart provides a graphical representation of our normal operating range and the actual results experienced in the quarter. As you can see, the second quarter was firmly back within the operating range of a normal year with the upward trend we expect. We believe this progress will continue through the balance of the fiscal year and position Interpac at near normal levels as we progress through the third and fourth quarter. Now flipping over to slide five. As I mentioned earlier, the second quarter was essentially flat with our first quarter results. Core sales declined by 11% in the quarter, comprised of down 11% in products and 12% in service. The increased infection rate experienced in the quarter resulted in border closures in several Middle Eastern countries which slowed our recovery. Absent these factors, the top line would have been very close to achieving our prior year sales. Our adjusted EBITDA decremental margin was 29%. We're at the low end of our expected range. And year-to-date, we have achieved a 21% decremental result. Our focus on cost controls continues to pay dividends and help protect our ability to execute this strategy. Free cash flow in the quarter was positive, which is not the typical result for our second quarter. And on a year-to-date basis, we have improved our free cash flow by more than $40 million year-over-year. This enabled Interpac to pay down an additional $45 million in debt and access the quarter with a leverage of 2.1. Sales results varied by region, but were consistent with prior quarters. Europe and Asia Pacific have been our best performing regions in terms of consistency and progress towards normal sales volumes. The Americas improved sequentially during the quarter, but are still in the mid-teens decline versus prior year. And as earlier mentioned, mid-east operations was affected by border closures, which resulted in a decline year-over-year in the low double-digit range. Overall, we are progressing towards normal sales and operating ranges, and delivering increasing profitability. Now I'm going to turn the call over to Jeff and Rick and review the details on the quarter, and then I'll come back with the market projection and some forward guidance.