Enerpac Tool Group Q2 2025 Earnings Report

Enerpac Tool Group EPS Results

• Actual EPS: $0.39
• Consensus EPS: $0.39
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Enerpac Tool Group Revenue Results

• Actual Revenue: $145.53 million
• Expected Revenue: $139.80 million
• Beat/Miss: Beat by +$5.73 million
• YoY Revenue Growth: N/A

Enerpac Tool Group Announcement Details

• Quarter: Q2 2025
• Date: 3/24/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, March 25, 2025
• Conference Call Time: 8:30AM ET

Enerpac Tool Group (NYSE:EPAC) (NYSE: EPAC) is an industrial tools and services company that provides engineered solutions for the controlled movement, lifting, positioning, bolting and machining of heavy equipment and infrastructure. Its products are used in applications where precise force and load control are required.

The company’s portfolio includes high-pressure hydraulic tools, hydraulic pumps and cylinders, lifting and jacking systems, torque and tensioning equipment, specialized machining systems, and related accessories. Enerpac also provides field services and technical support, including equipment rental, maintenance, inspection, installation and onsite machining.

Enerpac Tool Group serves customers in industries such as energy, infrastructure, construction, industrial manufacturing, mining and transportation. Its products and services are marketed internationally through direct sales, distributors and service locations. The company was formerly known as Actuant Corporation and adopted the Enerpac Tool Group name after completing a strategic transformation focused on its industrial tools and services businesses.

Enerpac Tool Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Organic sales grew 5% year-over-year in Q2 with EBITDA margins at 23.2%, and management reiterated full-year fiscal 2025 guidance.
• Americas and APAC delivered high single-digit organic growth, while EMEA posted a low single-digit sales decline amid macro pressures and is rolling out the ECX commercial excellence program.
• Gross profit margin declined 110 basis points to 15.5% and adjusted EBITDA margins fell 160 basis points due to mix shifts toward lower-margin HLT and service projects, prompting targeted margin improvement initiatives.
• Free cash flow improved to $5 million, net debt remained stable at $73 million with $518 million total liquidity, the company repurchased $10.2 million of stock and maintains capacity for disciplined M&A.
• Enerpac is ramping new products from its innovation program, integrating the DTA acquisition, targeting key end markets like nuclear, infrastructure and renewables, but remains cautious on macro uncertainty and tariffs.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to Enerpac Tool Group's Second Quarter Fiscal 2025 Earnings Conference call. As a reminder, this conference is being recorded March 25, 2025. It is now my pleasure to turn the conference over to Travis Williams, Senior Director of Investor Relations. Please go ahead, Mr. Williams.

[Travis Williams, Senior Director of Investor Relations at Enerpac Tool Group]

Thank you, Operator. Good morning, and thank you for joining us for Enerpac 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 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 risks 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.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

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 Enerpac's global brand leadership, targeted growth strategy, customer-driven innovation, and continuous improvement through the execution of Powering Enerpac Performance, or PEP. Let me turn the call over to Darren to provide more detail on the quarter.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

Thanks, Paul. As seen on slide three, Enerpac'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 DTA acquisition, we grew 5%. At our IT&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 organization. Cortland Biomedical reported in our other segment posted growth of 33%, as anticipated, given comparisons with a year-ago period that was impacted by temporary shipment delays related to commercial negotiations. Turning to slide four, which shows our performance by geography, we delivered high single-digit growth in the Americas.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

This is due to share gains driven by Enerpac 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 HLT business. With ECX, we are improving overall commercial effectiveness by driving stronger growth in our sales funnel and improving the conversion win rate. We've expanded the implementation of ECX with a rollout in the India region earlier this year, leveraging the talent and skill set developed in the U.S. In the APAC region, we continue to generate solid performance as it 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.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

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, Larzep, as we onboard new distributors in Australia. While we posted a low single-digit decline in sales for the India 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 emerged as a 50.5% decline, 110 basis points year-over-year. On the product side, we had significantly higher growth in our HLT business, which carries slightly lower gross margins than our standard industrial tools.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

Additionally, margins were impacted by the mix of service projects in the quarter. As we have previously discussed, our service business is 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 improved slightly as the 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.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

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 DTA, 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 six, Enerpac'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.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

Pre-cash flow of $5 million, up 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 million 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 repurchases. With that, let me turn it back to Paul.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Thanks, Darren. Let me start with some color on key end markets. On the power generation front, we've seen a pickup in nuclear business in the U.S., including orders related to maintenance as well as decommissioning. For the refinery and petrochemical industry, our customers and distributors indicate a positive sentiment. Specifically, some refineries are actually just catching up with the shutdowns that were delayed during COVID. We are also seeing a steady level of new investments and assets coming online. Additionally, we see continued oil and gas investments in the Middle East. In the Americas, we are seeing strong growth and demand from the aerospace industry, and we've expanded our focus globally to target opportunities in the EMEA and APAC regions. On the defense side, we're optimistic about the outlook as European governments look to increase their defense budgets.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

For the rail market, we've seen some short-term tightening of budgets in the Americas, although we expect that a couple of upcoming rail-focused trade shows will generate special projects and orders. In the EMEA region, rail has remained solid, mainly due to activity in Italy and Spain, and we are encouraged by our rail-focused new products, some of which have already been approved by Network Rail in the U.K. and others in the process of approval. General and industrial manufacturing, particularly in the U.S., remains soft, and mining, specifically in Australia, remains under pressure as we shared the past few quarters. Regarding the wind market, while there has been some negative sentiment towards the sector in recent months, Enerpac's domestic business has been strong, a trend we expect to continue.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

As we've said, our product line serves the full lifecycle of wind turbines, from manufacturing and installation to operations and maintenance and eventual decommissioning, which has proven to be a real asset. At the same time, we continue to pursue growth opportunities outside of the U.S., and we remain bullish about the wind sector in Europe and parts of Asia. For the infrastructure vertical, while the benefits of the domestic infrastructure bill are only just starting to materialize, we are seeing very good signs of project activity, including scoping, bidding, and permitting. We are also experiencing good activity in infrastructure outside of the U.S., particularly in Europe and the Middle East. Additionally, we are encouraged by the German government's recently announced spending package that will include additional infrastructure investments of some EUR 500 billion. We expect that will present a favorable tailwind in the coming years.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Speaking of infrastructure investments, as you can see on slide seven, Enerpac's SyncHoist synchronous hoist system is being used to position concrete bridge beams for a new railway bridge over the Bovio River in central Chile. Enerpac SyncHoist technology was selected for this delicate job as it enabled the bridge contractor to install asymmetric-shaped beams over a nearby commuter highway and rail track using only a single crane. This is yet another example of how we help our customers make complex, often hazardous jobs possible safely and efficiently. Let me comment on a couple of other ongoing initiatives. Last year, we announced a number of new products as a result of our revamped innovation program. We are pleased to see them ramping well, with very positive reception from our customers across the globe.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Our team is also looking forward to settling into our expanded innovation lab at Enerpac's new downtown Milwaukee headquarters, and we expect to announce a number of product line extensions and upgrades in 2025, with even more to come in 2026. Regarding DTA, which we acquired in September 2024, we're progressing well on its integration into our heavy lifting technology, or HLT, business. We are actively cross-selling DTA technology through the Enerpac commercial team, as evidenced by a recent sizable order from a legacy Enerpac customer. We're also leveraging our global sales capabilities to expand DTA's reach beyond its traditional stronghold in Europe. In fact, just last week, DTA exhibited at Promat, one of the leading trade shows for material handling, logistics, and supply chain solutions held in Chicago.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

At the show, DTA showcased its innovative mobile robotic solutions, strengthening relationships with industry professionals and generating a high level of potential new business opportunities. We believe Enerpac is well positioned to help DTA as we implement more efficient manufacturing processes and tools to increase throughput. Finally, Enerpac will be exhibiting at the Bauma Trade Show next month. Held in Munich, Germany, every three years, Bauma is the world's leading fair for construction machinery and equipment. We will focus on HLT and feature DTA at our booth, and we will also exhibit a range of standard industrial tools. In the past, Enerpac has benefited from orders placed at the show and the opportunity to build relationships with both distributors and end users.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

As I said at the top of the call, we have maintained our guidance for fiscal 2025, though we remain cautious in light of the high level of macro uncertainty and the prospect that tariffs could bring higher inflation and lower growth. What we are certain of is that Enerpac will be relocating to our new downtown Milwaukee headquarters in a space designed for our specific needs and a building proudly featuring the Enerpac logo, as seen on slide eight. Next quarter, we will be speaking to you from our new location at the Enerpac Center. With that, we'd be happy to take questions.

[Operator]

Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star one again. Your first question comes from the line of Will Gildea from CJS Securities. Your line is open.

[Will Gildea, Equity Research Associate at CJS Securities]

Hi. Can you provide some more color regarding the mix?

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Hi, Will.

[Will Gildea, Equity Research Associate at CJS Securities]

Hi. Good morning. Can you provide some more color regarding the mix shift toward HLT? Where are you seeing strength from a geographic and market perspective? What are your expectations for the back half of the year from a mix and gross margin perspective? Thank you.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Yeah, sure. Maybe I'll just start, and Darren can add a few comments, especially about the back half. Yeah, I mean, we saw good growth, as you can see this quarter, organically. HLT, in particular, had a lot of strength. I would say, particularly in the U.S., but also we saw some nice activity in HLT in Europe in the quarter. HLT is good margin business. It's just not as strong gross margins as our standard products. With that mix shift, along with some of the mix shift in service in the quarter, that was really what impacted gross margins and consequently the margins in the quarter. Darren can talk about the second half in particular.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

Yeah. Typically, when you look at our business in the second half, we do north of 50% of our revenue, typically in the 52% range. With that additional revenue, obviously, we get some volume leverage that comes out of that. We expect to see a higher profitability in the back half of the year. It is not only volume. We do have our productivity initiatives. We have PEP ongoing. We will continue to drive that. We should improve profitability in the second half of the year, which is why we are confident about our guidance for the year.

[Will Gildea, Equity Research Associate at CJS Securities]

Thank you. Super helpful. Just one more. How is the DTA integration going relative to your expectations? Any surprises so far, either positively or anything more challenging than expected? Thank you.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Sure. Yeah. No, I'd say the DTA integration is going well. We continue to be very excited about the strategic fit with Enerpac, particularly with our HLT business. We've been pleased with the progress we're making, pleased with the customer response we've seen in the order activity. I would say we remain bullish about the overall fit with the business as well. Everything remains on track from that perspective. As I mentioned on our prepared remarks, we're extremely excited to have DTA represented at our booth at the upcoming Bauma exhibit next month in Munich, Germany.

[Will Gildea, Equity Research Associate at CJS Securities]

Thank you.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Thank you.

[Operator]

Your next question comes from a line of Tom Hayes from CL King. Your line is open.

[Tom Hayes, SVP and Senior Analyst of Analyst Marketing at CL King & Associates]

Thanks. Good morning, guys. Appreciate all the color.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Morning.

[Tom Hayes, SVP and Senior Analyst of Analyst Marketing at CL King & Associates]

Maybe just to Paul on the geographic breakdown. In Q1, the Americas was down mid-single digits. Now it was up high single digits in the second quarter. I think Darren called out the commercial excellence program. I was just wondering, maybe provide a little bit more detail on that, or in addition to kind of some of your internal initiatives. Was there any maybe end markets that kind of stood out in the second quarter that kind of helped push the Americas forward?

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Right. Yeah. Thanks, Tom. Yeah. I mean, we were certainly particularly pleased with the growth in the Americas as well as in Asia-Pac. And even in Europe, I think, as Darren remarked, I mean, we had really a strong number of quarters of solid growth in Europe. So I mean, despite the fact we saw a slight decline in the quarter, I think we're still pretty confident that we're outperforming the market and some of the challenges they're seeing in Europe. I think in particular, the strength in Americas we saw was pretty broad-based in terms of end markets and verticals and customers. That was good news for us. I think, as I mentioned earlier, HLT as well was particularly strong for us in Americas in the quarter.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Finally, to the point that Darren referenced earlier, we do see ECX or Enerpac Commercial Excellence really, I think, starting to take hold, and we are seeing the benefits of that. ECX for us is really around kind of systematizing the process for sales and for managing much more actively our sales funnel. We have much better visibility into leading indicators as opposed to just orders. Also managing salespeople's activity and time and focus on where they're calling on customers. Just kind of basic hygiene, I'll say, around pre-call plans and post-call visit notes and things like this that become extremely useful tools if put in place rigorously. That's really what we've done is adopted that process and put it in place and really mandated it.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

I think it's now starting to become the culture of the business, and we're rolling that out, as we referenced in the prepared remarks, in the EMEA region as well. Pleased with the progress we're making, and I think that's part of why we're seeing the organic growth performance that we saw in the quarter.

[Tom Hayes, SVP and Senior Analyst of Analyst Marketing at CL King & Associates]

Okay. Appreciate that. That's great. Maybe just lastly, you touched on a little bit in your prepared remarks, and I know it tends to change by the hour or by the day or the tweet. Just wondering if you could provide any thoughts on the talk of the tariffs, whether they're coming from Mexico, Canada, and kind of how you're positioned, whether from either selling into those regions or buying products from those regions.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Yeah. I think as we referenced on last quarter's call, we do think, I'd say we're in a relatively favorable position as it comes to potential impact of new tariffs. Obviously, as you mentioned, I mean, it is a bit of a dynamic environment for sure. We are trying to react and be as responsive as we can to new news, of course. On a direct basis, we mentioned last quarter, we estimate that both finished products and components imported into the U.S. from China specifically is less than $20 million. Imports into the U.S. from Canada and Mexico for us are basically negligible. The direct impact, I think, is pretty clear to be able to calculate depending on the changing tariff environment. I think what's more important perhaps, though, is the indirect impact from our suppliers, which is admittedly a bit harder to measure.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

That includes really two aspects. One are domestic U.S. suppliers who may themselves source material or components from China or from Canada or Mexico, but also domestic suppliers who maybe have not increased their capacity, but they are facing higher demand from customers. In both of those situations, we have seen some price inflation from those aspects of kind of indirect impact. The good news is that I think we have a fair amount of experience across our team in terms of adapting to a pretty changing tariff policy. I think also given the global nature of our business, we have quite a bit of flexibility to secure alternative supply and to be able to ship from different facilities around the world. Finally, in addition, I mean, we certainly will and have taken pricing actions as necessary to offset inflation that we cannot otherwise mitigate.

[Tom Hayes, SVP and Senior Analyst of Analyst Marketing at CL King & Associates]

I appreciate that. Maybe just lastly, I think it was you and Darren both mentioned the expectations for some new product rollouts this year. Is that pace different from the last couple of years? I know you were pretty robust in rolling out products last year. Just wondering any more color you can provide on, I do not want to steal your thunder on the new product rollouts, but just kind of the pace of the rollouts maybe.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Yeah. No, I wouldn't say different. I mean, it's a bit episodic on the timing and the kind of complexity of the development efforts, but we have a pretty robust innovation program. We continue to invest, we believe, appropriately in it. I'd say the first half of this fiscal year has been more focused on commercializing the new products that we did launch in fiscal 2024. We have seen good customer reception and good commercial ramp from those. I think you can expect to see more innovation launches in the second half and obviously more into as well the first half of fiscal 2026. We certainly remain committed to bringing innovative products and technology to the market for our customers. We're pretty excited about the pipeline that we've developed.

[Tom Hayes, SVP and Senior Analyst of Analyst Marketing at CL King & Associates]

I appreciate it. Looking forward to seeing your new offices this year. Best of luck. Appreciate the time.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Or a week. Yeah. We'll be there in a week or less. Thanks, Tom.

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

Thanks, Tom.

[Operator]

Again, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Steve Silver from Argus Research. Your line is open.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

Thanks, operator. Good morning. Congratulations in advance on the new headquarter opening next week you guys talked about.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Thanks, Steve. Good morning.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

Good morning. How are you guys? In the prepared remarks, you touched on ECX and the positive impact that it's having in the Americas. I'm curious as to whether there's any color you could provide on the implementation progress in Europe and maybe where you are in the process as compared to in the Americas.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Sure. We actually started the rollout and implementation of ECX in Europe, I guess, about one or two quarters ago now. I'd say we're pretty pleased with the progress we're making there. We've actually leveraged one of our senior leaders who was deeply involved in the rollout of ECX in the Americas region. That person has now been charged with leading and directing that program as we roll it out in EMEA as well. I think because of that, we've seen really faster uptake. Obviously, we've taken the lessons learned from the rollout in the Americas as we apply it into EMEA. Overall, I think we're pleased with the progress we're making, and we expect that it'll ultimately, over time, drive similar levels of impact in the European region.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Just maybe to recount what it's about again, I mean, it's really about aligning our growth focus with our strategic direction. It's around this consistent commercial approach that's driven by very focused sales activity, I would say, particularly end-user-focused calls from our sales team as opposed to kind of managing the channel, if you will. We have seen it drive what I would classify as really a winning positive culture that's driven, in the case of ECX, really by data, by discipline, collaboration. Frankly, it's allowing us in the business to deliver more predictable performance because we can now track from actions to results. There is a lot more detail behind what ECX is and the program and how we've implemented it. I think those are some of the key benefits that we're seeing come to the fore.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

That's helpful. Thanks. One more, if I may. On previous calls, you discussed the digital transformation of the business and progress in your e-commerce initiatives. Curious as to whether there's any update that you could give on the direct business.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Yeah. Yeah. We're actually absolutely quite pleased with the progress. If you recall, I mean, we essentially rolled out our e-commerce program direct to end users just about three years ago now. That has grown, I would say, substantially over that period of time, admittedly off of a small base. We remain, I would say, quite bullish about our e-commerce business. In fact, in Q2 of this fiscal year, our e-commerce business was up 43% year-over-year. Through the first half of fiscal 2025, e-commerce revenue was up 36%. More recently, we've done a lot of work to roll out e-commerce in other parts of the world. Last year in multiple markets in Europe and more recently in Australia.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Just in the last quarter, we actually invested behind and turned on digital advertising in both of those markets, U.K. and Australia, which we saw drive very significant growth in website traffic, which is a pretty good for us leading indicator of what we expect to see in terms of order inflow in the months to follow. Overall, I think quite positive, and we're pleased with the progress we're making there.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

Great. Thank you so much for all the color.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Thank you.

[Operator]

Your next question comes from a line of Will Gildea from CJS Securities. Your line is open.

[Will Gildea, Equity Research Associate at CJS Securities]

Just to follow up and thank you for your time today. With two quarters left, how should we think about the cadence of revenue, margins, and profitability from Q3 to Q4 embedded in your FY25 guidance?

[Darren Kozik, EVP and CFO at Enerpac Tool Group]

Yeah. So you think about our second half, that is incremental revenue, and it's heavily weighted towards the second half. Typically, we see about 52% of revenue in the second half. With that comes the volume leverage, and we'll see an increase in our EBITDA margins. Typically, if you look at history and you look at our guide, we'd expect to see our strongest margins in Q4. We will ramp as we go through the second half of the year here.

[Will Gildea, Equity Research Associate at CJS Securities]

Very helpful. Thank you. Do you have any incremental updates on the M&A pipeline, and what parts of the portfolio are you most focused on enhancing? Thank you.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Sure. Yeah. I would say we continue to spend, I would say we continue to spend a fair amount of time on M&A activity. We have what I would classify as a pretty good kind of quantity and quality of targets in our funnel with good active conversations. I would say that is fairly robust. The process that we have developed is also quite robust. I continue to be pleased with the activity there. Obviously, by its nature, it is episodic. Things will come and go depending on asset availability and timing and the like. I do not know that we have really seen anything in terms of material changes in valuation expectations at this point in the market, but we remain focused on the same sort of targets that we have talked about previously. Certainly, very high-quality businesses, strong gross margins with ability to drive accretion of those gross margins over time.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Obviously, core strategic fit with Enerpac. Not necessarily kind of mirroring exact things that we do today, but more complementary products or services to what we offer today, where we could sell a broader basket of goods and services to our existing customer base. I think DTA would be a real prime example of that, very simply complementary to HLT in that we offer now a DTA horizontal movement of heavy loads, whereas before it was only vertical lifting, and we have customers that need applications for both. I think the funnel remains robust. We're spending a lot of time there. Obviously, if and when we can announce things, certainly we will. It is a key part of our overall growth strategy, and we're excited about that.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Finally, I'd say, of course, we continue to have a very healthy balance sheet that is there to be able to support anything we need to do fundamentally from a capital allocation perspective, including M&A activity.

[Will Gildea, Equity Research Associate at CJS Securities]

Thanks again.

[Operator]

That concludes our question and answer session. I will now turn the call back over to CEO Paul Sternlieb for closing remarks.

[Paul Sternlieb, President and CEO at Enerpac Tool Group]

Okay. Thanks again for joining us this morning. We'll be presenting at the Wolf Research SMIT conference in New York in early June, and we hope to see you there. Thank you again, and have a good day.

[Operator]

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

Participants

Executives

• Paul Sternlieb, President and CEO
• Travis Williams, Senior Director of Investor Relations
• Darren Kozik, EVP and CFO

Analysts

• Tom Hayes, SVP and Senior Analyst of Analyst Marketing at CL King & Associates
• Steve Silver, Senior Equity Research Analyst at Argus Research
• Will Gildea, Equity Research Associate at CJS Securities