Enerpac Tool Group Corp.

Ladies and gentlemen, thank you for standing by. Welcome to Interpac Tool Group's fourth quarter fiscal 2024 earnings conference call. As a reminder, this conference is being recorded October 16th, 2024. It is now my pleasure to turn the conference over to Travis Williams, Senior Director of Investor Relations. Please go ahead, Mr. Williams.

Thank you, Operator. Good morning, and thank you for joining us for Interpac Tool Group's year-end fiscal 2024 earnings call. On the call today to present the company's results are Paul Sternlieb, President and Chief Executive Officer, and Shannon Burns, our Interim Principal Financial Officer. The slides referenced on today's call are available in the investor relations section of the company's website, which you can download and follow along. A recording of today's call will also be made available on our website. Today's call will reference non-GAAP measures. You can find a reconciliation of GAAP to non-GAAP measures in the press release issued yesterday. Our comments will also include forward-looking statements that are subject to business risk that could cause actual results to be materially different. Those risks include matters noted in our latest SEC filings. Now I will turn it over to Paul.

Thanks, Travis, and good morning. For the full year, Interpac's financial performance came in essentially as expected. Although our top-line growth decelerated over the course of the year, we believe we continue to outpace the very soft general industrial marketplace as evidenced by continued positive revenue growth. As you can see in slide three, and Shannon will elaborate on, organic revenue grew 2.2% in fiscal 2024, including 2.7% growth in our core industrial tools and services or IT&S business. Moreover, because of our continued ability to capture efficiencies at the gross profit and SG&A lines, we enjoyed further expansion in profitability, achieving adjusted EBITDA growth of 8%, representing a margin of 25%. Let me turn the call over to Shannon to elaborate on our financial performance. He will also introduce our initial guidance for fiscal 2025. Following that, I'll speak about geographic trends, provide some color on targeted vertical markets, and of course, talk about our recent acquisition of DTA. Shannon? Thanks, Paul.

On slide four, we highlight our full year fiscal 2024 financial results. For the year, we generated organic revenue growth of 2.7% in our industrial tools and services business. Within ITS, organic product and service revenue grew 1.7% and 6.6% respectively. Due to a 9.5% decline at Cortland Biomedical, Total organic growth was 2.2% in fiscal 2024. However, as Paul will discuss, we were pleased to see Cortland Medical resume to year-over-year growth in the fourth quarter. Due to the sale of Cortland Industrial in late fiscal 2023, total net sales for the company declined 1.5% for the year. Slide five reflects the continued progress we've made in improving operating efficiency and SG&A productivity. In full year fiscal 2024, gross margins expanded 180 basis points to 51.1%. This was driven by operational improvements related to the Ascend transformation, as well as other actions, including the impact of pricing and the disposition of Cortland Industrial. Similarly, we continue to benefit from initiatives that improved SG&A efficiency. Adjusted SG&A expense, which excludes Ascend and other one-time charges from both periods, declined 4% year over year. As a percent of sales, it improved 60 basis points to 27.6%. Turning to slide six, with both top line growth and continued gains in operating efficiency and SG&A productivity, full year adjusted EBITDA increased 8% year over year. Adjusted EBITDA margins improved 220 basis points from 22.8% in fiscal 2023 to 25.0% in fiscal 2024. On a GAAP basis, diluted earnings per share from continued operations totaled $1.50 for fiscal 2024, while adjusted EPS increased 19% from $1.45 to $1.72, which benefited from a lower tax rate and a 4% lower share count. The effective tax rate for adjusted EPS was 21.6% in fiscal 2024 as compared to 23.2% in fiscal 2023. On a cash flow basis, we hit the high end of our guidance with free cash flow of $70 million in fiscal 2024. That represents a conversion rate of 82% of net earnings in line with our expectations as we continue to invest in Ascend during the year. Of note, as we've laid out in the past, we expected free cash flow conversion to be lower in the first few years of the planning period due to investments made as part of the Ascend program and strategic growth initiatives. we have targeted at least a 100% conversion by fiscal 2026. As you can see on slide seven, we have captured significant gains since we launched our Ascend transformation program in fiscal 2022. As of fiscal year end 2024, we reached the official conclusion of the program with total investment of $75 million. Since fiscal 2021, adjusted EBITDA roughly doubled from $75 million to $147 million in fiscal 2024, with margin expansion of approximately 1,100 basis points. That represents benefits well above our initial target of $40 to $50 million and in excess of our revised targets of $50 to $60 million. And with the full year adjusted EBITDA margin of 25% in fiscal 2024, we achieved that objective a year ahead of plan. Starting to fourth quarter results highlighted on slide number eight, we delivered year-over-year organic growth of 0.9% in the quarter. ITS growth of 0.8% was comprised of service revenue growth of 9.7%, offset by a 1% decline in product revenue. In the fourth quarter, we continued to manage SG&A expenses through efficiency and productivity initiatives. At the same time, gross margins were negatively impacted by project mix and a higher percent of service revenue as compared to our standard products. Turning to the balance sheet, Interpac's position remains strong. As shown on slide number nine, net debt was $27 million, resulting in a net debt leverage ratio of 0.2 times adjusted EBITDA at year-end fiscal 2024. Total liquidity was $565 million. Subsequent to the end of the fiscal year, we completed the acquisition of DTA on a pro forma basis, including the financing of DTA, the net debt leverage ratio was 0.5 times. This leaves ample capacity to deploy capital for our disciplined M&A strategy, as well as our internal investments and opportunistic share repurchase. As outlined in our earnings release and on slide 10, we have presented our initial guidance for fiscal 2025. While we believe the general industrial market will continue to show a decline in the low single digit range for the year, we anticipate organic revenue growth of 0 to 2% at Enerpact. Net sales, including the full year contribution from DTA, is forecast at $610 to $625 million. That represents total revenue growth of 5% at the midpoint. Our forecast for adjusted EBITDA is $150 to $160 million, representing a margin of 25.1% at the midpoint in fiscal 2025. As I mentioned, we achieved our target of a 25% adjusted EBITDA margin ahead of schedule in fiscal 2024. Based on our financial framework, our objective has been to achieve a further 50 basis point improvement in subsequent years. In line with that framework, excluding the acquisition of DTA, our adjusted EBITDA margin guidance would have increased approximately 50 basis points, 25.5% in fiscal 2025. While VTA is nicely profitable and additive to EBITDA, it is dilutive on a margin basis in its first year. We project free cash flow of $85 to $95 million, with CapEx of $19 to $24 million. Note that CapEx is expected to be higher than prior years in fiscal 2025, primarily due to one-time investments for the build-out of our new headquarters, which we've discussed previously. As you can see from this slide, we have included our modeling assumptions, including interest expense, depreciation, and amortization, along with our adjusted tax rate. With that, let me turn the call back to Paul.

Thanks, Shannon. As you just heard, we are committed to capturing further growth and margin improvement going forward. That effort outlined on slide 11 will be enabled by what we call Powering Air Pack Performance, or PEP. which is our continuous improvement program and a natural extension of Ascend. With PEP, we are focused on standardization and simplification of all processes, from manufacturing to procurement to finance and marketing, eliminating unnecessary steps, reducing complexity, and ensuring best practices are consistently applied across the organization. PEP also means challenging ourselves to be better as we drive innovation, improve customer satisfaction, and unlock additional opportunities for growth. PEP will utilize the same framework, tools, and methodology that we established for ASCEN with the same level of rigor. I'm excited about this journey of continuous improvement and the benefits that will accrue to InterPAC as we move forward. Switching to our geographic performance, as shown on slide 12, revenue growth across our three regions was mixed. Fiscal 2024 revenue in the Americas was up in the low single digits. While demand has been flat to declining for ITS standard products and services, heavy lifting technology or HLT remains strong with an expanding funnel. Distributors sentiment remains cautious and they are tightly managing inventories accordingly. In Asia Pacific, our smallest region, full year revenue declined in the mid single digits. Performance in the region continues to be impacted by softness in the mining sector. However, as discussed last quarter, we continue to add distributors and expanded commercial support. With that and the recently launched e-commerce in Australia, we expect the APAC region to return to growth in fiscal 2025. In the EMEA region, we continue to enjoy strong performance with high single-digit revenue expansion for the year. The gains were broad-based across end markets. And with the recent introduction of e-commerce in Europe and the rollout of Interpac Commercial Excellence, or ECX, which establishes a more disciplined sales process, we expect to capture further market share gains. In the fourth quarter of fiscal 24, consistent with overall market trends, revenue growth at EMEA slowed from prior quarters to the low single digits in the fourth quarter. Fourth quarter sales in the Americas region were flat year over year, and the APAC region was down mid-single digits. As Shannon mentioned, Cortland posted its first year-over-year revenue growth in fiscal 24 in the fourth quarter. With the resolution of commercial negotiations earlier in the year, we expect Cortland to resume organic growth in fiscal 2025. Several new products recently began commercial launch or are on the path, having completed regulatory approval or customer qualification. That should help as we move through the year. Turning to product innovation and slide 13. Over the past year, we've introduced several new products, including our first battery operated handheld torque wrench lineup, the 100 ton hydraulic lock grip cooler, the 40 ton hydraulic pin puller kits, and our two new battery powered portable pumps. These have been the result of a refocused product innovation program aligned with customer needs in our key vertical markets. I'm pleased with the progress we're making on innovation and excited about our roadmap moving forward. An important part of gaining traction in the marketplace is our participation at key trade shows, including three we attended in late September. For the first time, we exhibited at the InnoTrans International Trade Fair in Berlin, Germany, the leading fair globally for rail transport technology. At the show, we focused on introducing our brand and launching our RP-70A rail stressing kit in our TL-248 track lift system. Aided by a mock-up of a live piece of track as shown on slide 12, both products were highly popular with a large cross-section of attendees. The show exceeded our expectations, generating a large number of new leads and many requests for live demonstrations at customer sites. About the same time, we also exhibited at the Mine Expo show in Las Vegas. At that show, Interpac featured a range of heavy lifting technology, as well as new standard products. And with a new approach to marketing, which included extensive pre- and post-show activity, we've rigorously tracked and advanced a significant number of opportunities. Additionally, as shown on slide 14, we exhibited at Wynn Energy in Hamburg, Germany. which attract industry professionals from across the globe. Enterpact's presence at this event focused on networking with key industry decision makers, as well as showcasing our latest solutions, including high-performance battery tools, such as our FC and XC2 cordless battery pumps and the BTW battery torque wrench product line. Attendees were particularly interested in how Enterpact's tools can enhance the efficiency of wind farm maintenance and operations. And speaking of the wind market, trends in this target vertical continue to provide a positive environment for InterPAC. In fact, according to the Energy Information Administration, wind turbines generated more electricity than coal-burning power plants in the U.S. in March and April of this year. That crossover is occurring as breakthroughs in technology have lowered the cost of building wind turbines and battery storage. Analysts estimate that the percentage of electricity from wind will more than double to around 35% by 2050. We believe these favorable dynamics in the wind market provide a very positive environment for Interpac's highly competitive product lines that serve the full lifecycle of wind turbines, from manufacturing and installation to operations and maintenance and eventual decommissioning. Moving to slide 15. In July, we announced the appointment of Eric Chack as Executive Vice President of Operations. Eric brings a record of operations leadership and deep industrial manufacturing experience. In only a short time, he's established a clear operation strategy and detailed playbook to create value through functional excellence, manufacturer effectiveness, and supply chain efficiency. And as announced in a separate release yesterday, Darren Kozik will be joining Interpac as Executive Vice President and Chief Financial Officer on October 28th. Darren joins us from Manpower Group, where he led their global business, financial planning and analysis, mergers and acquisitions, treasury, procurement, and investor relations functions. He also had a 17-year career at General Electric in roles of increasing scope and global responsibility. We are very much looking forward to having him as part of the team. Finally, turning to slide 16, we are excited about the acquisition of DTA, which we announced on September 5th. DTA's product line provides an excellent complement to Enerpac's heavy lifting technology. Combining our focus on vertical lift with DTA's specialization in horizontal movement enables us to provide more comprehensive solutions for our customers. We anticipate meaningful revenue synergies as we seek to greatly expand DTA's sales and distribution capabilities and reach beyond Europe, which currently accounts for approximately 90% of its sales. On the cost side, we believe DTA will benefit from Interpac's disciplined operating processes while leveraging shared procurement and back office expenses. We are already well along in the integration of DTA and have established a lead generation process for cross-selling our equipment. More broadly, DTA is a good example of our M&A strategy. Like DTA, the vast majority of our funnel is based on proprietary targets. While those deals can take longer to develop, like DTA, which took about a year, they are based on building a deep relationship and understanding of the strategic fit and value creating opportunity. Before we open the call to questions, I'd like to thank our employees across the globe, including our newest team members from DTA, for their excellent work in fiscal 2024. I'd also like to take this opportunity to thank Shannon for his interim leadership of the finance function over the past couple of quarters as we conducted the CFO search. Our finance organization continues to operate extremely effectively and efficiently under Shannon's strong and capable leadership, and I'm extremely grateful for all the support he provided. Going forward, Shannon will continue to lead our Business Decision Support Office and play a key role in helping drive further growth and productivity enhancements across InterPAC. With that, we'd be happy to take questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press star one again. Your first question comes from the line of Tom Hayes from CL King. Your line is open.

Hey, good morning, Paul. Good morning, Tom. Hey, appreciate the time this morning. Just a couple questions first on DTA. You know, nice acquisition. Just maybe if you could maybe call out what you see as maybe some of the most prominent opportunities for you at DTA in this upcoming fiscal year.

Yeah, sure. Thanks, Tom. We are super excited about DTA. We were happy to get that deal done right here at the beginning of the fiscal year. It's a great business that has an excellent track record of really solid, strong organic growth. led by, you know, the previous owners who are still continuing to run the business going forward as part of the Interpac team. I think what we like probably particularly and most about DTA, there's probably, I guess, three things I'd highlight. First and foremost, it's extremely complementary, particularly to our existing HLT business, as I referenced in my remarks earlier. You know, really their specialty is horizontal movement, a very, very heavy industrial load. As you No, our HLT business is really all about vertical lifting. There are many applications where customers need both of those. Previously, we didn't really offer horizontal movement. And so we have existing customer relationships, both at the Interpac side and the DTA side, where we can leverage that kind of combined synergy from a commercial perspective. I think the second, as I referenced, is we see lots of opportunity for geographic expansion. the vast majority of DTA sales really are and have been in the European region, given their location there in Spain. They've actually never had dedicated sales resources outside of Europe. And so we can leverage the existing sales channel and network that we have in many parts of the world, including here in the Americas, to really help expand. And that process is now actually well underway, super excited about the funnel of opportunities we're building there. And I think thirdly, there's a lot of complementarity, particularly in the end markets that we serve, including things like wind and rail that are obviously key verticals for us, where they are strong and where we continue to drive growth and gain share. So I think in all of those, we see really interesting opportunities to continue to drive growth in the DTA business.

No, that was great. Would you say that if you look at, you know, your customers are using your HLT technology, they have the need for the more, you know, side-to-side moving solutions that DTA brings? Are they going elsewhere for those solutions now? And just kind of how does that fit into the competitive picture?

Right. Yeah, it depends on the customer. Not all of them do, but in some cases, yes, they absolutely need that. In fact, it's a bit, I guess, funny because we actually discovered post the acquisition that DTA was bidding on some projects where we just didn't literally offer the side-to-side solution with our existing customers. So, I mean, it definitely points to there's a very specific need and opportunity out there. You know, those are a handful of cases where obviously we're now joined up in doing that. But it clearly highlights that there is that shared application and opportunity in many of our customers.

Okay, maybe just one last one on DTA. Do they have a service or recurring revenue component that would be complementary to your service business?

Yes, they do, actually. So because it's capital equipment, it obviously requires regular maintenance and parts and the like. That is a nice and growing business for them. We do think, like many businesses in this space, certainly smaller businesses, historically the focus has been on the sale of new equipment. And I wouldn't say aftermarket has been an afterthought. They serve their customers well, but we believe there's certainly an opportunity for us to drive more focused growth on the aftermarket side of the business, and that's one of our key growth initiatives for DTA. Okay. And that also tends to be margin accretive within the business.

Okay, just maybe shifting gears a little bit to your 25 outlook, I was just wondering if you could provide a little bit more color as how you see your key target verticals performing in 25 vis-a-vis your guidance. I mean, you mentioned wind a little bit, but maybe some commentary on the rail, the MRO, the infrastructure market. More specifically on the infrastructure market, as we seem to be getting some market signals that maybe projects aren't moving as fast as people had originally anticipated, but maybe that'll pick up in the back half of the year. So any color you can provide on that would be great.

Yeah, sure. I think on our key verticals, if I take them in turn, we obviously referenced we were recently exhibiting at a number of key shows. In fact, I was at the two shows in Germany for wind and rail. And I think in both of those end markets, We continue to see reasonably positive signs in terms of demand profile and investment activity happening there. So I think we feel good going into FY25 here around what that could look like and support our overall organic growth. And we continue to drive additional or disproportionate resources and investment against wind and rail and markets, including innovation that I talked about in my remarks earlier. I think in the infrastructure space, We still, you know, certainly see the opportunity set, particularly given, obviously, all the funding activity. And that's probably most, you know, robust here in the U.S. But I'd remind folks that, you know, that level of infrastructure investment in many cases is happening around the world. We see that in Japan. We see that in other parts of Asia. We see that in many parts of Europe with aging infrastructure. So the need is there. you know, funds are being made available. I think it's slower than most of us would like to see in terms of the rollout, particularly here in the U.S., but what does give me a little bit more comfort is, you know, we've got access to some more proprietary data sets that give us insight into some of the more leading indicators around where these projects are in their lifecycle, and we do see them progressing, and that gives us access to kind of early stage in the bidding process to be able to you know, drive kind of brand specification and preference for Interpac. So we are hopeful we'll see more of that infrastructure activity play out, you know, into actual, you know, revenue here in fiscal 25. We wouldn't really ascribe much, I would say, in fiscal 24.

Maybe just one follow-up, then I'll go back to the queue. On the infrastructure, I'll call it slowness. I've got some kind of mixed drivers for that. I was just wondering your thoughts on kind of what's maybe slowing down the project flow. Is it regulatory issues? Is it setting? Is it just, I'm assuming it's not financing. Is your thoughts on that?

Yeah, I don't think it's financing per se. I think some of it might be permitting. I think there's also just practical labor availability, which is still a challenge, you know, just given the tight labor market still here in the U.S. market. But those are the things that we hear. But I think, you As you said, the funds obviously are being made available, and I think it's just a matter of working through, you know, the typical timelines on a process to get these things bid out and get the permitting done. As you know, where Interpac participates, it tends to be sort of towards the latter stage of the cycle, right? I mean, you know, it's, you know, projects get bid out and the funds are awarded and, you know, it's not really until materials show up at site and they actually need to start truly physically putting things together, the Interpac tools come into play.

Okay. Appreciate the color. Thanks, Paul.

Okay. Thanks, Tom.

Your next question comes from the line of Ross Barenbleck from William Blair. Your line is open.

Hey, good morning, gentlemen.

Morning.

Maybe just starting with the 2025 guidance, the organic front. Can you maybe help us frame just your assumptions as we think about market growth across the three geographies? I believe you called out APAC is improving, but also annual price and market share expectations from the new products. I mean, I always get the sense that the expectation here is that it's going to be more second half loaded on the guidance and the organic front.

Yeah, I think, you know, if I start from a market perspective, I mean, you know, Shannon did walk through that. You know, our kind of view around fiscal 25 guidance at this point, and as you know, we're not doing or issuing quarterly guidance, so we're really trying to call for the next 12 months, which is not the easiest thing to do sitting where we are at this date and time. But I think our view is that the overall market will likely continue to show a decline. probably in the low single-digit range. That's kind of the starting point. Obviously, where we're talking about organic growth, we do continue to believe we'll be performing above market, obviously above a weaker market condition. That's really comprised of a number of things. Certainly, strong commercial execution. We continue to drive Interpac Commercial Excellence, or ECX. We actually will be rolling that out in the EMEA region in fiscal 25. after we've completed the rollout and implementation in Americas. So we think that will be a nice driver of continued commercial execution for us. There will be some pricing activity. I think it will be more muted than in recent years. Certainly, we'll take pricing actions as needed to continue to cover and offset, if not more than offset, inflationary pressures that we have seen. And I'd remind folks, we do continue to see an inflationary environment that's decelerated, but it's not deflationary, right? So we There are pricing actions we need to take to cover inflationary costs. And then we do have plans not only to drive stronger commercial execution and full rollout, and I say carryover effect of products launched late in fiscal 24, but also new product launches that we're planning, I would say predominantly in the second half of fiscal 25. So it really is a combination of all of those. And again, I'd remind folks, I mean, generally speaking, we tend to be a little bit second half or back half weighted overall in the InterPAC revenue as you think about our revenue flows for the year.

Yeah, and I just add on, as we think about the 50 basis point improvement that we talked about in the base business pricing, but it also is that continuous improvement program that Paul highlighted, PEP, and, you know, that's going to drive SG&A productivity and operational efficiency as we continue to move forward and execute very similar projects as we did 2SM.

Okay. So, when we think about kind of the margin guidance then, it's somewhat of a broad range. Maybe flat volume with some productivity initiatives gets you towards the higher end with some price, and then maybe the just baking in, you know, maybe not as great share gains offsetting the low single-digit market decline. Maybe could you also layer in also what the dilution is from the DTA on the margin front, if you can say that already?

Yeah, sure. No, I think you're right on your comments earlier. I mean, obviously, we are providing a range, and I think certainly there is a component of volume in there and just getting the overhead benefit from that and the overhead absorption benefit. But You know, regardless, as Shannon referenced, I mean, we will continue and we do have a funnel that will continue to execute of continuous improvement initiatives, just like we're executing in Ascend. We're calling that PEP, Powering Interpac Performance. We're running that just the same with the same mechanism as we ran Ascend. So from the perspective of anybody here within the four walls of Interpac, it will feel very much consistent with the way that we executed the Ascend program. We're just not calling out or adjusting out externally any one-time charges related to that. Those will just flow through the P&L. I think from the standpoint of DTA, what we said is, you know, it is margin dilutive at this point in time, certainly in year one for Interpac, but we still believe it's a great business and we think we have opportunities not just on the growth side I talked about earlier, but also from a margin improvement perspective. Generally, Shannon referenced, you know, excluding DTA, we would have been targeting about 50 basis points of EBITDA margin expansion for fiscal 25 year-over-year. With DTA, effectively, we're close to flat, so you can kind of do the math behind that.

Got it. Okay, that's helpful. And then thinking about, you know, free cash flow conversion targets for 2026 with this end stepping down, I know distributors and skew rationalization has been part of the working capital narrative, but Can you just maybe remind us of any other levers that are at your disposal to help get that free cash flow conversion up?

Yeah, I can make a few comments. Shannon can add color as well. But I'd say first and foremost, I think the team continues to do a nice job on working capital. We've made multiple improvements this year. We still see runway to drive continued improvements on optimizing working capital. With Eric Chack on board, we see more opportunities on inventory optimization as well. I think the team's done a nice job with regards to AR and DSO. You know, I think, I'll say working against us, but one factor that Shannon referenced is in our CapEx for fiscal 25, you know, we do have a higher amount, which we've talked about previously, just because of the HQ or headquarter one-time relocation costs and the build-out of that, which is on plan and on budget. It's just

hit those those costs largely hit or the capex largely hits here in fiscal 25. yeah and i just added i mean given you know versus the last couple years there's just less noise in terms of a lot of ascend charges and cash flows so you know we should have a much cleaner year in fiscal year 25. perfect thank you guys thank you your next question comes from the line of steve silver from argus research your line is open

Thanks, operator, and thanks for taking the questions, and congratulations on a productive year. The first question, as the leverage in the company continues to be below the target range with the continued strong free cash flow and the cash position even after the DTA deal, that combined with the robust share repurchase activity, just wondering if there are any updated thoughts or color around the thinking around the capital allocation strategy.

Yeah, sure. Thanks for the question. You know, our focus remains the same. I would say our target leverage ratio still remains one and a half to two and a half times on a normalized basis. Obviously, we are below that even with the kind of pro forma of DTA here, you know, as we start off fiscal 25. You know, that in mind, you know, I think our priorities are really unchanged. I'd say number one focus continues to be, you know, internal investments. capital investments, and we continue to support any and all of those that have great business case and good returns for our shareholders. Unfortunately, that's never going to use up all of our available capital resources. So from there, it's really a balanced approach between maintaining enough capacity or dry powder for inorganic growth and acquisitions like DTA, and then opportunistically returning capital shareholders, predominantly through share repurchase, as we've done, right, through $38 million of share repurchase in fiscal 24. And we still have roughly, I think, 2.7 million shares remaining under the current authorization. So we'll continue to look at that, discuss with our board on an opportunistic basis about share repurchase, because certainly we're bullish about the future of InterPAC and the investments we're making. But we do want to maintain sufficient dry powder. We've been doing a lot of work behind the scenes on continuing to build out our funnel for acquisitions. Obviously, those take time and they are episodic. DTA, as an example, took about a year, right, from start to finish. And so, you know, these are just a long process. But really, I'm pleased with the progress we're making on the funnel buildout, the quality and the quantity, the vast majority of what we've got in that funnel. remain proprietary targets with good conversation. So we just want to maintain, you know, a really superior, uh, balance sheet to be able to support those decisions when we take them.

That's helpful. Great. And one more, if I may, um, given the fact that the tool industry and the industrial industry at large remains really fragmented, um, are you seeing any signs of a wider consolidation in the industry? given the macroeconomic challenges that you cited earlier and just really the still elevated interest rate environment? Is there any signal of increased consolidation across the industry?

Yeah, I wouldn't highlight anything of note, Steve. There are from time to time acquisitions that get done, but I wouldn't say there's any consistent indication of significant consolidation by one or two large acquirers. But you're right, it is an opportunity, and it's an opportunity for InterPAC. I mean, the market, as I've referenced multiple times, remains quite fragmented, especially through the lens that we look at it and the adjacencies that we're also looking at. DTA is a good example. And so that does present, I think, a very unique opportunity for us on our inorganic growth program. But to date, no, I don't think there's anything that I would highlight where we've seen particular kind of focused and consistent consolidation efforts by others.

Great. Thanks for the color and best of luck in the upcoming year.

Okay.

Thank you, Steve.

And that concludes our question and answer session. I will now turn the call back over to President and CEO Paul Sternly for some final closing remarks.

Okay. Well, thanks again for joining us this morning. We will be presenting and hosting one-on-one meetings at the upcoming Baird Global Industrial Conference on November 14th in Chicago. And on December 3rd and 4th, we will be at the UBS Global Industrials and Transportation Conference in Palm Beach, Florida. In the meantime, Travis will be available to take any follow-up questions. Thank you and have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.