Executive Summary / Key Takeaways

• Enerpac Tool Group ($EPAC) is a specialized industrial leader transforming its operations and portfolio to drive above-market growth and margin expansion, underpinned by a strong brand and differentiated high-pressure hydraulic technology.
• The company's strategic initiatives, including the successful ASCEND program and its successor, Powering Enerpac Performance (PEP), have significantly improved profitability, with adjusted EBITDA margins reaching 25% in fiscal 2024, a year ahead of schedule.
• Recent financial performance in fiscal 2025 shows modest organic sales growth of 1% amidst a soft industrial macro environment, with strong cash flow generation supporting strategic capital deployment for internal investments and M&A.
• The acquisition of DTA The Smart Move, S.A. strategically enhances Enerpac's Heavy Lifting Technology (HLT) capabilities, adding horizontal movement to its vertical lifting expertise and opening new avenues for cross-selling and geographic expansion.
• Despite macroeconomic uncertainties, geopolitical risks, and tariff pressures, Enerpac maintains a cautious yet optimistic outlook for fiscal 2025, guiding for 0-2% organic revenue growth and adjusted EBITDA in the lower half of the $150 million to $160 million range, while targeting sustained free cash flow and continued operational efficiencies.

The Foundation of Force: Enerpac's Strategic Evolution in a Fragmented Industrial Landscape

Enerpac Tool Group Corp. ($EPAC), founded in 1910, has evolved into a premier global provider of industrial tools, services, technology, and solutions, serving mission-critical applications across more than 100 countries. This transformation was cemented in January 2020 with its rebranding from Actuant Corporation, signaling a focused shift to a pure-play industrial tools and services company. This strategic pivot was further reinforced by the divestiture of its former ECS segment in October 2019 and the Cortland Industrial business in July 2023. Enerpac's overarching strategy is to create sustainable shareholder returns through above-market organic growth, margin expansion, robust cash flow generation, and disciplined capital deployment.

The industrial tools and services market is highly competitive and fragmented, featuring both larger diversified players and numerous smaller, specialized companies. Enerpac positions itself as a premium player, competing primarily on customer service, product quality and availability, and engineering and research and development expertise. While larger competitors like Illinois Tool Works Inc. (ITW), Parker-Hannifin Corporation (PH), Ingersoll Rand Inc. (IR), and Dover Corporation (DOV) possess greater scale and broader portfolios, Enerpac differentiates through its specialized focus on high-force hydraulic and mechanical tools. Its strong brand recognition, including ENERPAC and HYDRATIGHT, fosters customer loyalty, particularly in niche, demanding applications where reliability and safety are paramount.

Enerpac's core technological differentiation lies in its high-pressure hydraulic tools and controlled force products, designed for the precise positioning of heavy loads. These tools operate at very high pressures, typically ranging from approximately 5,000 to 12,000 pounds per square inch (psi). This capability provides tangible benefits to customers, enabling them to apply controlled force and motion to increase productivity, reduce labor costs, and enhance safety in challenging environments such as refinery/petrochemical production, infrastructure maintenance, and mining. The company's commitment to innovation is evident in its rising R&D expenditures, which increased from $9 million in fiscal 2023 to $14 million in fiscal 2025. A significant investment in a new innovation lab at its Milwaukee headquarters, equipped with 3D printers, CNC mills, and lathes, is dramatically accelerating product development, reducing prototyping time from weeks to mere days or even hours. This enhanced capability directly contributes to Enerpac's competitive moat by allowing faster market introduction of new, customer-driven solutions, such as its recently launched battery-operated handheld torque wrenches, 100-ton hydraulic lock-grip pullers, 40-ton hydraulic pin puller kits, and battery-powered portable pumps.

The broader industrial landscape presents a mixed picture. While the general industrial macro environment remains sluggish, characterized by weak manufacturing PMI and industrial production trends, certain verticals offer significant tailwinds for Enerpac. The wind market, for instance, is experiencing robust growth, with wind turbines generating more electricity than coal-burning power plants in the U.S. in March and April 2024. Analysts project wind electricity generation to more than double to approximately 35% by 2050, a trend that directly benefits Enerpac's product lines serving the full lifecycle of wind turbines. Similarly, global infrastructure spending, including a €500 billion package announced by the German government, and a pickup in the aerospace and defense sectors, are expected to drive demand for Enerpac's specialized tools and services.

Operational Excellence and Strategic Portfolio Enhancement

Enerpac's journey to enhanced profitability is largely attributed to its rigorous internal transformation. The ASCEND program, launched in March 2022 and completed by August 31, 2024, was instrumental in accelerating organic growth strategies, improving operational excellence through Lean methodologies, and driving efficiency in selling, general, and administrative (SG&A) expenses. This program, with total costs of $75 million (including $19 million in restructuring charges), yielded substantial results: adjusted EBITDA nearly doubled from $75 million in fiscal 2021 to $147 million in fiscal 2024, and adjusted EBITDA margins expanded by approximately 1,100 basis points, achieving the 25% target a year ahead of schedule.

Building on this success, Enerpac introduced "Powering Enerpac Performance" (PEP) in fiscal 2025. PEP is a continuous improvement program designed to further drive standardization, simplification, and automation across all processes, from manufacturing and procurement to finance and marketing. A key initiative under PEP is the optimization of the supply base, with the company having reduced its supplier count from over 6,000 at the start of ASCEND to fewer than 5,000 today, aiming for further reductions to leverage buying power and enhance cost, quality, and delivery. On the SG&A front, Enerpac has achieved a remarkable 650 basis point reduction as a percentage of sales over the past three fiscal years, largely through offshoring transactional processing and certain finance, IT, and human resource functions. The next phase involves simplifying, standardizing, and automating these key processes.

The company's digital transformation efforts are also yielding results. Its e-commerce program, launched direct-to-end users around late 2021/early 2022, has grown substantially, with e-commerce revenue up 43% year-over-year in Q2 fiscal 2025 and 36% in the first half of fiscal 2025. This digital expansion, including rollouts in Europe and Australia, is driving significant website traffic and is a key component of its customer engagement strategy.

Fiscal 2025 Performance and Outlook

Enerpac's fiscal 2025 performance reflects a resilient business operating in a challenging environment. For the full fiscal year 2025, total net sales reached $617 million, a 5% increase year-over-year from $590 million. This growth was supported by a $2 million favorable foreign currency impact and a $20 million contribution from the DTA acquisition, resulting in 1% organic consolidated sales growth. Product sales increased 6% to $500 million, with 1% organic growth driven by strong performance in the Americas and APAC regions. Service sales rose 1% to $117 million, also achieving 1% organic growth, primarily from the Americas. Gross profit margin remained consistent at approximately 51% for fiscal 2025. Operating profit increased by $11 million to $133 million, benefiting from gross profit flow-through and improved SG&A efficiency. The effective tax rate for fiscal 2025 was 23.20%.

The Industrial Tools & Services (ITS) segment, Enerpac's core, reported net sales of $596 million in fiscal 2025, a 4% increase from fiscal 2024, with approximately 1% organic sales growth. ITS operating profit grew by $11 million to $164 million, achieving a 27.50% operating profit margin. The Americas region demonstrated high single-digit organic growth in Q3 fiscal 2025, driven by standard products and services, with particular strength in aerospace, infrastructure, and nuclear industry services. The APAC region also posted mid-single-digit growth, benefiting from Heavy Lifting Technology (HLT) and major rail and wind projects. Conversely, the EMEA region experienced a high single-digit organic decline in Q3 fiscal 2025, impacted by lumpiness in HLT and an economic slowdown in Western Europe.

A significant strategic move was the acquisition of DTA The Smart Move, S.A. on September 4, 2024. This acquisition, with an initial purchase price of $26.7 million and a potential €12 million earn-out, strategically complements Enerpac's HLT business by adding DTA's specialization in horizontal movement of heavy loads to Enerpac's existing vertical lifting capabilities. While DTA's deliveries initially ramped slower than expected, orders are robust, and backlog is expanding, driven by successful cross-selling through Enerpac's global commercial network. Although DTA is expected to be margin dilutive in its first year, it is profitable and additive to EBITDA, with orders tracking to more than its €20 million sales guidance for fiscal 2025. The "Other" operating segment, primarily Cortland Biomedical, also demonstrated strong growth, up 19% in Q3 fiscal 2025, driven by new product reception in diagnostics, bioprocessing, and robotic surgery.

Enerpac maintains a robust financial position, with cash and cash equivalents of $152 million at August 31, 2025. Cash flow from operating activities for fiscal 2025 was $111 million, a $30 million increase year-over-year. Free cash flow stood at $91.94 million. The company's net debt was $50 million at Q3 fiscal 2025, resulting in a low net debt to adjusted EBITDA ratio of 0.4x, and total liquidity of $539 million. Capital allocation priorities remain consistent: funding internal investments (including the new innovation lab and headquarters relocation, which contributed to higher CapEx of $19 million in fiscal 2025), pursuing disciplined M&A, and opportunistic share repurchases. The company repurchased $68.7 million in shares in fiscal 2025 and authorized a new $200 million share repurchase program in October 2025.

For the full fiscal year 2025, Enerpac's guidance anticipates net sales of $610 million to $625 million, representing total revenue growth of 3% to 6% and organic growth of 0% to 2%. Adjusted EBITDA is projected to be in the $150 million to $160 million range, with management expecting to deliver towards the lower half due to ongoing macroeconomic and geopolitical uncertainties. Free cash flow guidance is maintained at $85 million to $95 million. The company targets at least 100% free cash flow conversion by fiscal 2026.

Conclusion

Enerpac Tool Group stands as a compelling investment proposition, demonstrating resilience and strategic agility in a dynamic industrial landscape. Its transformation into a focused industrial tools and services provider, coupled with the success of its ASCEND program and the ongoing PEP initiatives, has fundamentally reshaped its profitability profile. The company's commitment to customer-driven innovation, exemplified by its new innovation lab and a steady stream of new product launches, reinforces its competitive edge in specialized high-force applications.

While macroeconomic headwinds, geopolitical tensions, and tariff impacts present ongoing challenges, Enerpac's diversified end markets, global footprint, and proactive cost management strategies position it to outperform its industrial peers. The strategic acquisition of DTA further strengthens its Heavy Lifting Technology portfolio, promising meaningful revenue synergies and expanded market reach. With a strong balance sheet, disciplined capital allocation, and a clear roadmap for continuous improvement, Enerpac is well-equipped to power through uncertainties and deliver sustainable long-term value to its shareholders.