Enerpac Tool Group Corp.

Thank you, operator. Good morning, and thank you for joining us for InterPAC Tool Group's second quarter fiscal 2025 earnings call. On the call today to present the company's results are Paul Sternlieb, President and Chief Executive Officer, and Darren Kozik, Chief Financial Officer. The slides referenced on today's call are available on 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 gap to non-gap 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. With that, I will turn it over to Paul.

Thanks, Travis, and good morning. We were pleased with our performance in the quarter. Organic sales grew 5% year over year. We believe our performance continues to reflect above-market growth and strong execution in what remains a very soft industrial sector. EBITDA margins came in at 23.2% for the quarter, down a bit from the prior year due to the impact of mix, but still at top tier levels. Moreover, we are maintaining our full-year fiscal 2025 guidance and are confident our future will reflect Interpac's global brand leadership, targeted growth strategy, customer-driven innovation, and continuous improvement through the execution of powering InterPAC performance or PEP. Let me turn the call over to Darren to provide more detail on the quarter. Thanks, Paul.

As seen on slide three, InterPAC's revenue increased 5.1% in the second quarter of 2025 on a reported basis. On an organic basis, adjusting for foreign exchange and our recent PTA acquisition, we grew to 5%. At our IT and S business, revenue increased 4% organically year over year. Both product and services were ahead this quarter, with growth of 4% in product sales and 3% in services. The gain in products was driven by strong performance in our heavy lifting technology business, the continued ramp of new products, and focused effort by our commercial organizations. Cortland Biomedical, reported in our other segment, posted growth of 33%, as anticipated, given comparisons with the year-ago period that was impacted by temporary shipment delays related to commercial negotiations. Starting at slide four, which shows our performance by geography, we delivered high single-digit growth in the Americas. This is due to share gains driven by Interpac Commercial Excellence, or ECX, a program we introduced a year ago in the region, along with continued execution of our targeted growth strategy and strong growth in our HLP business. With ECX, we are improving overall commercial effectiveness by driving stronger growth in our sales funnel and improving the conversion and win rate. We've expanded the implementation of ECX with a rollout in the India region earlier this year, leveraging the talent and skill sets developed in the US. In the AFAC region, we continue to generate solid performances that also enjoyed high single digit growth in the second quarter. Among the highlights, we are seeing industrial construction growth in several countries, notably India and Singapore. While we experienced continued weakness in Australia with cost pressure in the mining sector, and the impact of steel and aluminum tariffs on metal producers, we are seeing benefits from continued orders for our second brand, Larzap, as we onboard new distributors in Australia. While we posted a low single-digit decline in sales for the EMEA region, breaking a two-year pattern of consistent growth, we believe that we continue to outperform in a region beset by significant macro pressures, especially in our largest markets of France and Germany. From a commercial standpoint, the region continues to make progress in the rollout of ECX. Turning to slide five, gross profit margins of 50.5% declined 110 basis points year over year. On the product side, we had significantly higher growth in our HLP business, which carries slightly lower gross margins than our standard industrial tools. Additionally, margins were impacted by the mix of service projects in the quarter. As we have previously discussed, service business as complementary to our product business, as we perform work at customer sites and gain strong insights for new product development. Given the recent margin trends in the service business, we have specific initiatives underway to improve the margin profile, as we focus on higher quality projects, more differentiated service line offerings, and invest in additional field service technicians and equipment to support growth. Adjusted SG&A improves slightly as a percent of revenue to 28.3%, versus 28.4% in the year-ago period. We continue to carefully manage costs and are considering additional actions, as appropriate, to align our cost structure in 2025 and beyond for long-term success. Altogether, adjusted EBITDA margins declined 160 basis points in the second quarter due to the aforementioned impact of mix on gross margins and the inclusion of BTA, the acquisition we completed in early September. The effective tax rate returned a more normalized 24.3% compared to 27.3% in the year-ago period. Adjusted earnings per share were $0.39 for the quarter, compared with $0.36 in the year-ago period, an 8% increase. Turning to the balance sheet, shown on slide 6, Interpac's position remained extremely strong. Net debt was $73 million at quarter end, resulting in net debt to adjusted EBITDA ratio of 0.5. Total liquidity? including availability under our revolver, was $518 million. Through the first half of fiscal 2025, cash flow from operations was $16 million compared with $7 million in the year-ago period. Pre-cash flow of $5 million, all slightly year-over-year, was impacted by one-time capex associated with the headquarters move. For the full year, we are maintaining our cash flow guidance at $85 to $95 million, as cash generation increases with higher revenue in the second half of the year. In the second quarter, the company repurchased approximately 220,000 shares of common stock, totaling $10.2 million. As we continue to generate cash, coupled with our current leverage, we have ample capacity to deploy our capital for our disciplined M&A strategy, as well as internal investments and continued opportunistic share of our purchases.