Enerpac Tool Group Corp.

Ladies and gentlemen, thank you for standing by. Welcome to InterPAC Tool Group's first 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 the star key followed by the number one on your telephone. If at any time during the conference you should need to reach an operator, please press star zero. As a reminder, this conference is being recorded. December 21, 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 first quarter fiscal 22 earnings conference call. On the call today to present the company's results are Paul Sternlieb, President and Chief Executive Officer, and Rick Dillon, Chief Financial Officer. Also with us is Barb Boland, Chief Strategy Officer. Our earnings release and slide presentation for today's call are available on our website at enterpactoolgroup.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 Paul.

Thanks, Bobbi, and good morning, everyone. Thank you for taking the time to join our Q1 earnings call. I want to start by saying that I am truly honored to be leading Interpac Tool Group into the next phase of our journey, focused on growth and margin expansion. And I'd like to thank the board for this amazing opportunity and Randy Baker, our former CEO, for his support in helping to ensure a smooth leadership transition. While I've met or spoken with many of you, I am looking forward to meeting more of our shareholders in the coming weeks and months. I'd like to share some of my perspective on what makes Interpac such a great company with so many wonderful opportunities and what attracted me here. What I observed in my research on the company when I was initially contacted was a strong foundation with an unparalleled brand known for safety, precision, durability, and reliability. a company with exceptionally strong market positions, a very experienced team, global breadth coupled with a very sizable distribution network, a strong balance sheet, and a company where the heavy lifting of portfolio work is now done, where we have successfully navigated through the pandemic, and where we are well positioned for growth. In my short time with the company, I have been pleased to have confirmed all of that and more. What excited me about the company before joining is still very much what excites me today. In my initial days at Interpac, I have spent much of my time visiting our facilities, meeting our team, and visiting with distributors and customers. The feedback has been very positive. It's clear that we have many strong capabilities, and our customers and distributors value the products and services we offer. And while we've done a lot of work since the EC&S divestiture on structure, growth drivers, and productivity, I also see many more opportunities to become an even greater company with stronger execution and more consistent delivery of results. To better understand the opportunities in front of us, we are performing a deep-dive, holistic review of the business, looking at both growth opportunities and further operational improvement and productivity opportunities. We're also looking for ways to simplify the business through the lens of 80-20, standardize our processes, and drive accelerated growth. With that, let me address some of the additional observations and key objectives that I've shared with our team. First, we intend to maintain a high degree of focus and discipline in what we do and how we operate. That means continuing and accelerating our pure play industrial tools strategy and updating that strategy along with the underlying initiatives that will enable us to consistently deliver best-in-class returns through growth of our core businesses. Our organic growth will come through commercial execution initiatives, innovation, and new product developments. And while in their early stages of development, I expect our digital and IoT initiatives will offer us unique opportunities to be more closely connected to our customers. We're also doing more work on driving growth in key vertical markets, where we have outsized opportunities for further penetration. Additionally, we'll maintain a balanced capital allocation framework always through the lens of the shareholder and recognizing that we have many exciting opportunities for investment within our base business. We'll also look selectively at inorganic opportunities focused squarely on our pure play tool strategy and maintaining appropriate discipline such that any acquisitions must meet our strategic, financial, and operational criteria. And we'll also continue to be focused on innovation that creates value based on meaningful voice of the customer and where we solve their biggest pain points and unmet needs. Finally, we'll continue to evaluate our cost structure in an effort to simplify and flatten our organization. And we'll pursue additional cost savings opportunities, including overhead cost reductions and further operational efficiencies to drive value for our shareholders. Toward the objective of simplifying our structure, we recently made some organizational changes with the departure of two EVPs, including the COO role. Additionally, as we announced earlier this morning, we hired a new EVP of Marketing and President Americas, a newly combined role filling two other open leadership positions with one. These changes will enable us to create a more nimble and agile company and establish a strong foundation for growth. Now, let me turn briefly to an update on our markets and market conditions. Demand continued to be solid in most regions. As we anticipated, supply chain challenges persisted throughout the quarter, and we announced additional pricing actions, which Rick will cover in more detail. We returned to our normal Q1 seasonal trends which we expect to continue throughout the fiscal year. And typically, we see Q3 as strongest, followed by Q4, Q1, and then Q2. With that said, COVID variants are causing some continued restricted access to distributors and customers, with challenges remaining around travel to certain regions or countries, and in some cases, continued quarantine requirements that are impacting our ability to serve our customers and therefore our overall service utilization rates. I'll now provide some commentary on our regions, including key verticals and notable channel trends. In the Americas, core sales improved solidly with approximately 20% year-over-year growth, and we continue to see recovery in several of our key verticals, including infrastructure, PowerGen, and rail. The growth was driven by both product and service, And within products, we saw a broad-based recovery throughout our channel with national accounts outpacing others and broadly across our product set. The service increase was primarily related to specialty machining. Additionally, the heavy lift portion of our business continues to be positive with a high level of quoting and activity in the first quarter. In Latin America, mining continues to be strong driven by continued elevated copper prices driving demand. We were pleased to see the activity given the continued COVID-related challenges in that region. Moving on to Europe, this region was the first to return to growth in the first quarter of fiscal 21 with strong sales in our heavy lift and wind-related projects, along with service work in the North Sea and Germany. The lumpiness of our HLT business created a tough comparable And as a result, the region was down mid-single digits. We have seen some nice opportunities arise, particularly related to bridge and construction work, along with nuclear and wind projects. We anticipate that these trends will persist into the coming quarters, given continued government spending and the focus on renewable energy. Now, moving to Asia Pacific, the region delivered approximately 10% year-over-year core sales growth. While COVID is still present, the region is starting to see less daily disruption and continues to trend toward a more positive outlook with the majority of the verticals that we serve starting to stabilize. We saw recovery in oil and gas driven by higher oil prices and the expectation that energy demand will continue. In addition, mining and power generation were also positive in the quarter for the region. Moving to slide seven in the MNAC or Middle East region, MNAC experienced modest core growth but continues to face challenging COVID-related travel restrictions that change on short notice and project delays that pushed out into the second quarter. From a vertical perspective, the stability in oil and gas pricing is providing confidence to some of our customers. As a result, we're starting to see an increase in spending and budgets being released for maintenance-related projects, along with new large CapEx spend being awarded. This provides some level of optimism, but overall, the vertical has not returned to pre-pandemic levels. Activity in power generation, particularly wind and construction, were also positive in the quarter and supports our efforts to diversify the region's vertical penetration beyond oil and gas. Now, moving on to Cortland, the business experienced core growth of 32% year-over-year in the first quarter, continuing our trend from fourth quarter's growth of 28%. On the medical side of the business, the strong demand for our products continued, resulting in a significant improvement on a year-over-year basis. In the quarter, we completed the development phase and started production of components used in sports medicine and cardiovascular applications and we expect revenues from these products to ramp up through the current fiscal year. As for the industrial side of the business, order rates have improved but have not fully returned to pre-pandemic levels. Marine and industrial showed year-over-year growth, while mining and oil and gas remained soft with limited project work in the Gulf of Mexico. Lead times have continued to improve throughout the quarter and are now at competitive levels. The business continues to work through supply chain and logistics challenges on a daily basis. With that, I'll hand it over to Rick to take us through the financials, as well as an update on operations and supply chain. Rick?