Enerpac Tool Group Corp. (NYSE: EPAC) Q3 2025 Earnings | 6/27/2025

Enerpac Tool Group Q3 2025: Strong Growth in Americas & APAC, Navigating Tariff Headwinds

Enerpac Tool Group reported its third quarter fiscal year 2025 results, showing a 6% increase in total revenue to $159 million, marking a record third quarter since its 2019 relaunch. Organic revenue growth was 2%. The company experienced strong growth in the Americas and APAC regions, as well as in its Cortland Biomedical business, despite a cautious outlook for Q4 due to increasing economic and geopolitical uncertainty. Enerpac is actively mitigating the impact of new tariffs and continuing its innovation strategy.

Q3 FY25 Financial Highlights:

• Total Revenue: $159 million, up 6% reported (2% organic, adjusting for FX and DTA acquisition).

• IT&S Business Revenue (organic): Increased 1.5% year-over-year, with product sales up 1% and services up 3%.

• Cortland Biomedical Revenue (in "other" segment): Posted strong 19% growth.

• Gross Profit Margin: Declined 140 basis points year-over-year to 50.4%, due to service project mix and the inclusion of DTA, partially offset by higher margins at Cortland Biomedical. Sequential improvement in service margins was noted due to strategic actions.

• Adjusted SG&A: Improved 160 basis points year-over-year to 25.5% of sales. A $5.9 million restructuring charge was recorded, primarily for severance and a non-cash lease impairment from headquarters relocation.

• Adjusted EBITDA: Increased 3.4%, but margin declined 50 basis points to 25.9%.

• Adjusted EPS: Increased 9% to $0.51, driven by higher earnings, a lower effective tax rate, and reduced share count.

• Net Debt: $50 million, resulting in a net debt to adjusted EBITDA ratio of 0.4x. Total liquidity of $539 million.

• Cash Flow from Operations (YTD FY25): $56 million, up from $37 million in the prior year.

• Free Cash Flow (YTD FY25): $40 million, up 24%.

• Share Repurchases: Repurchased approximately 330,000 shares totaling $14 million in Q3.

Geographic Performance (Organic Growth):

• Americas: High single-digit growth, driven by demand for standard products and services. Strength noted in aerospace, infrastructure, and nuclear industry service, despite softness in rail and general industrial manufacturing.

• APAC: Mid-single-digit growth, with strong performance in Heavy Lifting Technology (HLT). Benefiting from major rail projects in Thailand, Japan, and the Philippines, and solar/wind projects in Vietnam and Japan. Some challenges in South Korea's steel industry and China's petrochemicals.

• EMEA: High single-digit decline, driven by a decline in HLT business (lumpy nature) and overall economic slowdown in Western Europe. Strength observed in infrastructure, higher defense budgets, oil & gas, and wind projects.

Strategic Initiatives & Operational Updates:

• Enerpac Commercial Excellence (ECX): Continued implementation across the portfolio to add rigor and discipline to sales and funnel management.

• Cortland Biomedical: Strong performance from existing products and positive reception for new launches, particularly in diagnostics, bioprocessing, and robotic surgery.

• Innovation Lab: Significant investment in a new innovation lab at the Enerpac Center headquarters in Milwaukee, adding 3D printers, CNC mills/lathes, and cutting/machining capabilities. This is expected to dramatically reduce prototyping time from weeks to days/hours, providing a competitive advantage.

• DTA Acquisition (September 2024): Adds complementary horizontal movement capability to existing vertical heavy lifting technology. Deliveries have been slower to ramp than expected, but Enerpac's manufacturing and supply chain expertise are adding value. Orders are robust and backlog is expanding, with successful cross-selling of DTA solutions into Enerpac's existing base and expansion beyond Europe. Orders are tracking to more than 20 million euros for the year.

• Headquarters Relocation: The move to the Enerpac Center in downtown Milwaukee is achieving its goal of creating a more vibrant and collaborative culture.

Tariff Impact and Mitigation:

• U.S. Imports Subject to Tariffs: Approximately $50 million in finished goods and components, primarily from Netherlands and China.

• Annualized Tariff Impact Estimate: $18 million, representing an incremental $12 million compared to FY24.

• Mitigation Actions:

  • Price Increases: Implemented low to mid-single-digit price increases in late March and a low single-digit surcharge in May in the U.S., which have been accepted by customers.

  • Global Footprint & Diverse Supply Base: Flexibility to secure alternative suppliers globally.

• Goal: To remain at least price-cost neutral.

• Uncertainty: While direct impacts are being managed, the impact of overall economic uncertainty and potentially slower growth on revenue cannot be fully calculated.

Full Year FY25 Guidance:

• Net Sales: $610 million to $625 million (total growth of 3% to 6%; organic growth of 0% to 2%). Anticipates delivering towards the lower half of this range due to macroeconomic and geopolitical conditions.

• Adjusted EBITDA: $150 million to $160 million.

• Free Cash Flow: Maintained at $85 million to $95 million.

• Capital Allocation: Ample capacity for disciplined M&A, internal investments, and opportunistic share repurchases, given strong cash generation and low leverage.