Enerpac Tool Group Q3 2025 Earnings Report

Enerpac Tool Group EPS Results

• Actual EPS: $0.51
• Consensus EPS: $0.47
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $0.47

Enerpac Tool Group Revenue Results

• Actual Revenue: $158.66 million
• Expected Revenue: $159.35 million
• Beat/Miss: Missed by -$690.00 thousand
• YoY Revenue Growth: N/A

Enerpac Tool Group Announcement Details

• Quarter: Q3 2025
• Date: 6/23/2025
• Time: After Market Closes
• Conference Call Date: Friday, June 27, 2025
• Conference Call Time: 8:30AM ET

Enerpac Tool Group (NYSE:EPAC) manufactures and sells a range of industrial products and solutions in the United States, the United Kingdom, Germany, Australia, Canada, China, Saudi Arabia, Brazil, France, and internationally. It operates through Industrial Tools & Services and Other segments. The Industrial Tools & Services segment designs, manufactures, and distributes branded hydraulic and mechanical tools; and provides services and tool rentals to the infrastructure, industrial maintenance, repair and operations, oil and gas, mining, alternative and renewable energy, civil construction, and other markets. It also offers branded tools and engineered heavy lifting technology solutions, and hydraulic torque wrenches; maintenance and manpower services; high-force hydraulic and mechanical tools, including cylinders, pumps, valves, and specialty tools; and bolt tensioners and other miscellaneous products. This segment markets its branded tools and services primarily under the Enerpac, Hydratight, Larzep, and Simplex brands. The Other segment designs and manufactures synthetic ropes and biomedical textiles. The company was formerly known as Actuant Corporation and changed its name to Enerpac Tool Group Corp. in January 2020. Enerpac Tool Group Corp. was incorporated in 1910 and is headquartered in Menomonee Falls, Wisconsin.

Enerpac Tool Group Q3 2025 Earnings Call Transcript

Key Takeaways

• Enerpac delivered 6% revenue growth in Q3 with record third-quarter revenue and 2% organic growth, driven by strong performance in two geographic regions and Cortland Biomedical.
• Gross profit margin fell by 140 basis points to 50.4%, largely due to service project mix and the DTA acquisition, despite sequential margin improvement from differentiated service actions.
• Estimated annualized tariff impact of $18 million on U.S. imports has prompted low-single-digit price increases and surcharges, though lingering cost pressure from tariffs remains a risk.
• The DTA acquisition is showing robust order growth and expanding backlog as Enerpac leverages its operational expertise to improve DTA’s manufacturing throughput.
• Investment in a new in-house innovation lab with 3D printers and CNC equipment cuts prototyping time from weeks to days, accelerating product development and competitive differentiation.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Enerpac Tool Group's Third Quarter Fiscal twenty twenty five Earnings Conference Call. As a reminder, this conference is being recorded 06/27/2025. 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 third quarter fiscal twenty twenty five earnings call. On the call today to present the company's results are Paul Sternleaf, 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 or follow along. A recording of today's call will also be made available on our website.

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

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.

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

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. Now I'll turn it over to Paul.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Thanks, Travis. Good morning, and welcome from our new headquarters at the Enerpac Center in Downtown Milwaukee. We were pleased with our performance in the quarter. Two of our three geographic regions along with the Cortland Biomedical business posted strong growth. Including the acquired DTA business, total year over year revenue growth was 6%.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

While this represented record third quarter revenue since the relaunch of Enerpac Tool Group in 2019, we are taking a cautious posture entering the fourth quarter given the increasing level of economic and geopolitical uncertainty. Nonetheless, we believe Enerpac can continue to outperform its industrial peers in what remains a very soft sector. In a moment, I will talk more about the actions we are taking to advance our innovation strategy and provide an update on DTA. But first, Darren will provide more detail on the quarter, our fiscal twenty twenty five guidance and the impact in our response to tariffs.

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

Thanks, Paul. As seen on Slide three, Enerpac's revenue increased 6% on a reported basis to $159,000,000 in the third quarter of twenty twenty five. On an organic basis, adjusted for foreign exchange and the acquisition of DTA, we grew 2%. At our IT and S business, revenue increased 1.5% organically year over year. Both our product and service business grew this quarter with 1% growth in product sales and 3% growth in services.

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

We continue to implement Enerpac Commercial Excellence or ECX across our portfolio. We believe this will add rigor and discipline to our sales process and funnel management, which we believe will contribute to our above market growth. Cortland Biomedical reported in our other segment posted growth of 19% with good performance of existing products and market reception to new product launches. In particular, we enjoyed strength in sales to customers in diagnostics, bioprocessing, and robotic surgery. Cortland continues to partner with customers to develop innovative solutions with several quotes and prototype orders in the works from existing and new customers.

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

Turning to slide four, which shows our growth by geography. We delivered another strong quarter in The Americas with high single digit organic growth. The growth was driven by demand for our standard products and services. While there has been a bit of softness in the rail and general industrial manufacturing sectors, we've seen particular strength in aerospace, infrastructure, and service for the nuclear industry. We believe these industries align with Enerpac's product portfolio and service offerings.

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

In the APAC region, we continue to generate solid performance as it enjoyed mid single digit growth in the third quarter. A particular strength in the quarter was our heavy lifting technology for HLT business. From a vertical market perspective, we are benefiting from major rail projects and maintenance needs in Thailand, Japan, and The Philippines. We also see growth opportunities in solar farms in Vietnam and wind projects in Japan. At the same time, there are some more challenged end markets, including the steel industry in South Korea and refining and petrochemicals in China.

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

In the EMEA region, we posted a high single digit decline organically, driven by a decline in our HLT business, which had a strong performance in the year ago period, and as we said, tends to be lumpy. From a vertical market perspective, we are seeing strength from the infrastructure market and are benefiting from higher defense budgets, spending in the oil and gas sector, and ongoing wind projects. However, we are seeing some softness in our service revenue in Europe and the effect of an overall economic slowdown in Western Europe. Turning to slide five. Gross profit margin declined 140 basis points year over year to 50.4%.

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

This decline was attributable to our service project mix and the inclusion of DPA, partially offset by higher margins at Cortland Biomedical. While we've continued to experience pressure on service margins from the project mix on a year over year basis, we did enjoy sequential improvement based on actions taken earlier this year to focus on migrating to a more differentiated and value added service opportunities. We've also taken specific actions, including investing in equipment to support high margin service lines, refining our fixed cost base to ensure each site is generating appropriate returns, and changing our business model in certain countries, all designed to improve service business margins. On the selling, general, and administrative line, adjusting for the restructuring charge and m and a expense, adjusted SG and A improved 160 basis points year over year to 25.5% of sales. In light of the current soft market conditions, we recorded a restructuring charge of $5,900,000 in the quarter, of which approximately three quarters is people related severance to further right size our cost structure.

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

Additionally, these restructuring actions are another step towards increasing the efficiency of our SG and A spend as we continue to standardize and automate processes. The remainder of the restructuring charge is a noncash lease impairment associated with our headquarters relocation. We will continue to watch SG and A spending closely in the current environment. As a result, adjusted EBITDA increased 3.4% for the third quarter. The margin declined 50 basis points year over year to 25.9% due to the mix of service projects and the inclusion of DTA.

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

Our core IT and S product portfolio margin remains strong in the current environment pointing to the resiliency of our brand. Adjusted earnings per share increased 9% to zero five one dollars driven by higher earnings, a lower effective tax rate and reduced share count. For the full year fiscal twenty twenty five, our earnings guidance remains the same with net sales of $610,000,000 to $625,000,000 representing total revenue growth of 3% to 6% and organic growth of 0% to 2%. Adjusted EBITDA is expected to be in the $150,000,000 to $160,000,000 range. However, based on year to date results and current macroeconomic and geopolitical conditions, we anticipate delivering towards the lower half of the range.

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

Turning to the balance sheet shown on slide seven, Enerpac's position remains extremely strong. Net debt was 50,000,000 at quarter end, resulting in a net debt to adjusted EBITDA ratio of 0.4. Total liquidity, including availability under our revolver and cash on hand, was 539,000,000. Through the first three quarters of fiscal twenty twenty five, cash flow from operations was $56,000,000 compared with $37,000,000 in the year ago period. Free cash flow of $40,000,000 increased 24 despite $11,000,000 in incremental capital spending primarily associated with the headquarters relocation.

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

In addition to our headquarters, we continue to invest in automated manufacturing capabilities to improve the efficiency and drive additional productivity. For the full year, we are maintaining our free cash flow guidance at 85,000,000 to $95,000,000 In the third quarter, the company repurchased approximately 330,000 shares of common stock totaling $14,000,000 As we continue to generate cash, coupled with our current leverage, we have ample capacity to deploy capital for a disciplined M and A strategy as well as internal investments and continued opportunistic share repurchases. Turning to slide eight, we understand that the impact of The US tariff policy and associated uncertainty it has created is top of mind for investors. While the situation is fluid, we believe that Enerpac is well positioned to manage the impact given our global footprint and diverse supply base. The majority of our imported finished goods and components come from four countries, Netherlands, where we manufacture our HLT products China, The UK and Spain.

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

The Netherlands and China make up the bulk of our US imports that are subject to duties. We import a total of approximately $50,000,000 in finished goods and components into The US that are subject to tariffs. Under the current tariff framework, we estimate an annualized tariff impact of $18,000,000 which represents an incremental 12,000,000 to the total tariffs paid in fiscal twenty twenty four. In addition to these quantifiable direct impacts, we anticipate additional cost pressure on our US based suppliers who are importing components and raw materials. We believe we'll be able to mitigate the majority of the impact.

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

As noted on the second quarter earnings call, we implemented a low to mid single digit price increase at the March. And in May, we implemented a low single digit surcharge in The US to offset the announced tariffs. These pricing actions have been understood and accepted by our customers. Additionally, given the global nature of our business, we have the flexibility to secure alternative suppliers. We expect these actions to support our goal of remaining at least price cost neutral.

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

What we cannot calculate at this juncture is any impact of economic uncertainty and potentially slower growth on the revenue line. That said, we will continue to pursue our strategy focused on driving profitable growth and outperforming the industrial market. We will also continue to carefully manage expenses as appropriate to align our cost structure with market conditions in support of long term success. With that, let me turn it back to Paul.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Thanks, Darren. Over the past couple of years, we have talked about a series of Enerpac's differentiated new products and the strong reception in the marketplace. We are proud of our revamped innovation process, one based on listening to and working hand in hand with customers to build solutions that address their challenges, help solve their problems and fulfill their unmet needs. With the company's relocation to the Enerpac Center, we have invested in our new innovation lab, dedicating a significant portion of the new facility to take our innovation and R and D capabilities to the next level. And as shown on Slide nine, we have added a variety of new equipment and technologies, including three d printers, CNC mills, CNC lathes and cutting and machining capabilities, enabling our team to innovate even faster than before with far less reliance on outside vendors.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

In fact, what used to take a month or more can now be accomplished in as quickly as one week or even one day. We believe this provides a further competitive advantage for Enerpac. Let me also mention the heavy lifting technology we gained with the acquisition of DTA in September of twenty twenty four. As we have said, DTA adds a highly complementary horizontal movement capability to our existing vertical heavy lifting technology. Deliveries from DTA have been slower to ramp than expected as we continue to help DTA improve their operational capabilities to work through an expanded order book.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

We remain confident that this is where Enerpac's efficient manufacturing and supply chain expertise will add value. And on a commercial basis, we are excited by DTA's performance to date. Orders are robust and backlog is expanding as we successfully implement our strategy to cross sell DTA solutions across the existing Enerpac base and expand sales beyond its traditional stronghold in Europe. As I said at the top of the call, we have moved and are settling into our new Downtown Milwaukee headquarters. It is clear already that the move is achieving our goal of creating a more vibrant environment and collaborative culture, one that inspires our teams to advance customer driven innovation, achieve continuous improvement and execute our growth strategy. With that, we'd be happy to take questions.

[Operator]

Our first question comes from the line of Daniel Moore with CJS Securities. Please go ahead.

[Daniel Moore, Director of Research at CJS Securities]

Hi, Paul and Darren, this is Will on for Dan. Could you add some more color?

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

Hi, Will. Good morning. Hi.

[Daniel Moore, Director of Research at CJS Securities]

Good morning. Could you add some more color to what you are hearing from your customers in real time? And how are they managing or reacting to tariffs and macro uncertainty? Are they putting projects on hold? Have you seen an uptick in order cancellations?

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Well, yeah, I'd say I mean, obviously, it's a very dynamic environment. I think it definitely varies depending on the customer and the end market. We've not seen any meaningful movement in terms of project cancellations from our perspective. I think we do have customers certainly that are being cautious or evaluating, you know, if and when they're gonna make, you know, large capital investment decisions, you know, just in light of the uncertain environment that we're in. But I think, you know, the positive side there is that companies do need to invest, you know, for capacity and growth.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

I think, again, some may be waiting just to see how things shake out in the current environment and the tariff situation, but the underlying needs are there. So, again, I think it varies depending on the end market, but but we've not seen any meaningful signs of any sort of project cancellations from that perspective. And then from a pricing standpoint, I think, you know, you know, Darren referenced in the remarks earlier. I mean, we have taken some pricing actions from our and, you know, to, at least offset, the inflationary, you know, aspect we saw from some of the recent tariff moves. And I think by and large, at least through the channel, we've seen some good indication that channel partners seem to be passing that along to their customers, and that's generally our understanding.

[Daniel Moore, Director of Research at CJS Securities]

Thank you. Super helpful. And, did you see any, you know, revenue being pulled forward at all in q three in anticipation of tariffs? And what are your thoughts on the level of inventory in the channel today?

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Yeah. I I wouldn't say anything, extremely meaningful. There there probably was a little bit of buy in. You know, we obviously give some advanced notice, of course, to our customers on some of the, pricing actions that we took in the quarter, but I wouldn't say that there was anything hugely significant from our perspective that we could see at this point in time.

[Daniel Moore, Director of Research at CJS Securities]

Thank you. And then, just one more. Could you provide any, you know, more additional detail regarding the, restructuring actions during the quarter? And what is the, you know, anticipated cost savings? Thank you.

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

Sure. You know, from a restructuring perspective, we've been keeping a close eye on expense levels and to level set everyone. This is not a programmatic activity like Ascend or anything of that nature. We just looked at the global uncertainty, geopolitical risk, and, you know, decided it was time to take some of those cost actions. Now we do believe, you know, we've got automation and process standardization underneath, which is gonna help us scale at the back end of these actions.

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

So that was the landscape for the cost piece. Now to remind everyone, three quarters of that was severance for people, and about a fourth of that was a noncash lease impairment charge associated with our move to Downtown Milwaukee. So we think this sets a good foundation for the future.

[Daniel Moore, Director of Research at CJS Securities]

Thank you.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Thank you.

[Operator]

Our next question comes from the line of Tom Hayes with ROTH Capital Partners.

[Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners]

Morning, guys. Thanks for taking the call.

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

Good morning, Tom. Hey, Tom.

[Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners]

Darren, maybe one more question on the pricing actions you guys took. Were those implemented in the quarter? And then did you see the the the the, you know, positive impact or or sell those pricing actions going into effect in the quarter?

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

You know, we took one in March and one in May. So, you know, some of those started to trickle in, throughout the quarter, but the real impact will be in the upcoming quarter, in the fourth quarter we're in now.

[Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners]

Okay. And then, Paul, on the the North American, performance, up high single digits, I I I may have missed a little bit. I think you called out aerospace and and what other segment kind of helped drive that actions.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Yeah. I mean, we did see, I think, good performance, Tom, in those, sectors. Obviously, as you know, we have pretty diversified end markets, that we ultimately serve either directly or through our channel. We do think that's one of the kind of competitive advantages of Enerpac is that we do have a very diverse set of customers in end markets. So in my view, we're not overly reliant on any single end market, And one may be up, one may be down, etcetera.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

But that that's what we saw in the quarter. And, obviously, we'll continue to monitor. Clearly, it's a very dynamic environment.

[Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners]

Okay. I guess one more along the same lines, and and it's I think it's buried in the one big beautiful bill. I was just wondering your your thoughts on on your wind business. It seems that the a lot of the renewable energy credits are are maybe on on the chopping block. Do you see any feedback you're getting from your wind customers as far as the outlook for that market?

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Yeah. I mean, we still, look fairly, I would say, positively, at at the wind market. We did say or I think Darren said in the remarks in the EMEA region that we did see some benefit actually in the quarter from ongoing wind projects, particularly in the EMEA region. So we still see fairly good demand profiles there. Certainly, would say it it is and has historically been stronger in Europe and in The US.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

That said, I think we still see opportunities here in The US market. Some of the recent changes from administration here, I think, are more favorable than we initially expected. So we continue to put focus and resource behind that as appropriate, and we haven't changed our overall strategy. But at the same time, as you know, we have a focus on, you know, several kind of core vertical markets including infrastructure, and we continue to see that play out well in terms of the investment levels that are going into that sector, all those rail, where we continue to innovate for our customers, including some of the new products that we've talked about this quarter. So, we continue to apply focus in those other markets as well.

[Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners]

Okay. I appreciate the color. Maybe just lastly, with with the the current tariff environment, maybe kind of a more sluggish industrial environment, have you seen any change in the the appetite on on for for m and a? I obviously know it takes two to get a transaction done, but just any change in the environment for that? Appreciate it.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Yeah. I would say I mean, you know, broadly speaking from our perspective, the answer is no. We remain, you know, focused and committed to m and a as part of our overall growth strategy as we've talked about multiple times. We continue to be very active on that front in terms of managing and proactively moving forward opportunities in our m and a funnel. I think from the end market perspective, we do see interest and appetite from potential sellers to engage in discussions, You know?

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

And so I I'd say from that standpoint, really nothing has changed. Certainly, you know, our focus on remaining highly disciplined, however, you know, that as well has not changed. So, you know, anything that we do has to be, you know, extremely rigorous in terms of meeting both strategic and financial hurdle rates. And and I would say, you know, we're certainly not afraid to walk away from things that don't meet those criteria or where the value expectation valuation expectations are simply, unreasonable. So but, but we can continue to remain very active on that front.

[Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners]

Great. I appreciate the time this morning. Thank you.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Thank you. Thanks, Ben.

[Operator]

Our next question comes from the line of Ross Staurenblack with William Blair. Please go ahead.

[Sam Karlov, Research Associate at William Blair]

Hey, good morning. This is Sam Carlevon for Ross. Thanks for taking my questions.

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

Good morning, Sam.

[Sam Karlov, Research Associate at William Blair]

So you provided a gross annualized tariff impact of $18,000,000 but is there any way to frame what the net impact of tariffs expected to be in the fourth quarter and fiscal twenty twenty six?

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

You know, I think when we look at the tariff, obviously, you saw you know, we laid out where the 50,000,000 comes. Think from our goal for Enerpac is to really remain price cost neutral. So that's kind of the premise that we've had throughout this as the tariffs go up and down. You know, even in the second wave of tariffs that did come in, we purposely launched a surcharge so we could kind of flex and be nimble with the market. But our goal remains to be price cost control.

[Sam Karlov, Research Associate at William Blair]

Okay. That's helpful. And then just a couple on DTA. It looks like DTA sales were better than expected in the quarter, but still trending below the €20,000,000 guidance. Has your expectation for the, €20,000,000 guidance changed?

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Yeah. Here's what I would say, Sam. I think the integration of DTA is continuing to go quite well. We're pleased with the progress we've made and certainly, pleased, continue to be pleased with the underlying investment thesis and the progress on the acquisition. I do think that the business will likely come in a bit shy of our original revenue guidance for the year.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

But that said, revenue has increased on a sequential basis, particularly as Enerpac's operational discipline and our supply chain expertise is helping them improve their throughput in their facility in Spain. So we're continuing to see good progress there. I'd say probably more importantly, particularly on a commercial basis, orders at DTA are extremely strong, and we're seeing that play out in terms of the very successful cross selling of their, you know, horizontal movement technology to our Enerpac's existing distributor and customer base. And so for the year, I would say orders are tracking to more than €20,000,000.

[Sam Karlov, Research Associate at William Blair]

Got it. That's helpful. And then kind of a follow-up to that. How do tariffs impact or US tariffs on Europe impact DTA's cross selling ability into The US?

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

I mean, certainly, they'll be subject to tariffs because currently, the the equipment and the vehicles are produced in Spain. That said, we do see plenty of appetite from customers and opportunities here in The US market. By the way, our HLT products are made in Europe and The Netherlands as well. Those are subject to The US tariffs. But we've not seen, I would say, any diminishing, demand profile from US customers for for that equipment.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

So I think we continue to be have a fairly optimistic outlook both for t and for ETA here in The US market.

[Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners]

Got it. That's helpful. I'll leave it there. Thanks, guys.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Thank you. Thanks.

[Operator]

And our final question comes from the line of Steve Silver with Argus Research. Please go ahead.

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

Thanks, operator, and thanks for taking my questions. I was hoping you guys could put some context around the pipeline size and the scalability for the new in house innovation lab and maybe just some thoughts around previous new products, whether most of those were using outsourced vendors compared to your previous in house capabilities, and maybe the thoughts on the potential impact on overall r and d costs given the high number of SKUs in the portfolio.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Yeah. Good morning, Steve. Thanks for the question. Look. I think, you know, historically, it was really a mix.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Certainly, we had some in house capabilities for prototyping previously before moving to our new headquarters in this innovation lab that we set up here. But we did utilize a lot of external vendors and services. And to some degree, that will still be required, of course, especially for, you know, specialty type services. But we're we're certainly pretty excited about the investment we've made in this innovation lab. And while I think there will be ultimately some, you know, cost advantages and, of course, you know, in the slides, we highlighted a case study example of that.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

I think my view is that the the much more significant benefit will be, you know, the the time improvement that we make in terms of bringing, new products to market. You know, we're able to, you know, dramatically reduce the time that it takes prototype components and parts literally, you know, from weeks to days or days to hours as we talked about in this case study, through the cat you know, capital investments that we made in the facility here. So I do expect that that will help increase, you know, the overall pace of our innovation and how quickly we can bring things to market. I know our team is extremely excited about that, and they've already gotten to work, as you can see, in utilizing, you know, these, these new tools and capabilities that we've added to our innovation lab. So I think it from from our perspective, it was a great investment.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

I think it will ultimately have a really strong return both from a measurable dollars perspective, but ultimately, you know, the impact on on our innovation rate.

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

Great. That's helpful. And, on a similar note, you guys mentioned on the last call that the first half of fiscal twenty twenty five was more focused on commercializing some of the fiscal year 2024 launches, but that the second half of twenty twenty five would be more focused on new product innovation. Curious as to how Q3 played out compared to your expectations.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Yeah. I I think that's right. You know, we certainly spent, I would say, more focused in the first half on continuing to commercialize some of the new products we launched in fiscal twenty four, and we're seeing that good progress. Many of the products we launched are continuing to ramp commercially and globally, to good effect, and we're certainly excited about that. And we've added new capabilities, and new launches to enhance or add complimentary aspect to some of those new products.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

As an example, for our BTW, product that we launched last fiscal, we've now launched, calibration benches so that customers can get those products calibrated in region. And we were actually able to sell some of that calibration technology to some of our channel partners as well. So that is complementary to the launch of the BTW. But then here in the second half and in q three, we have brought some new products to market. For example, in the rail industry, our team created a solution for pulling nails out of bridges, which really combines our new Enerpac pin pullers with a battery pump hoses hoses couplers and a custom, made interface socket that connects with that pin puller.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

So that's a new product that we launched here in q three that's specifically focused on the rail market, and that's just one example. So I think we continue to have a good mix between focus on commercialization and ramp of products we've launched, but also bringing new products to market. You know, I'd say particularly focused on our our key verticals that we've talked about.

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

Great. Thanks for all the color and best of luck for the rest of the year navigating the challenging markets.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Okay. Thank you.

[Operator]

And this concludes our q and a session. I will now turn the call back over to Paul for closing remarks.

[Paul Sternlieb, CEO, President & Director at Enerpac Tool Group]

Okay. Well, thanks again for joining us this morning. Enerpac will be participating in the CJS annual new ideas summer conference on July 10 and the Seaport Research Partners annual summer conference on August. We hope to see you there. Thank you, and have a great weekend.

[Operator]

Thank you everyone for joining. This does conclude today's conference. You may now disconnect.

Participants

Executives

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

Analysts

• Daniel Moore, Director of Research at CJS Securities
• Tom Hayes, MD & Senior Equity Analyst at Roth Capital Partners
• Sam Karlov, Research Associate at William Blair
• Steve Silver, Senior Equity Research Analyst at Argus Research