Q3 2025 Enerpac Tool Group Corp Earnings Call

June 27, 2025

As a reminder, this conference is being recorded June 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.

Speaker Change: Thank you operator, good morning, and thank you for joining us for interventional group's third quarter fiscal 2025 earnings call on the call today to present, the company's results are tall Stern, Lee President and Chief Executive Officer, and Darren Kozak Chief financial.

Speaker Change: No Sir.

Speaker Change: Slides referenced on today's call are available on the Investor Relations section of the company's web site, which you can download and follow along.

Speaker Change: A recording of today's call will also be made available on our website.

Speaker Change: 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.

Speaker Change: Our Collins 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.

Paul: Now I'll turn it over to Paul.

Paul: Thanks, Travis good morning, and welcome from our New headquarters at the <unk> Center in downtown Milwaukee.

Paul: We were pleased with our performance in the quarter.

Paul: Two of our three geographic regions, along with a cortland biomedical business posted strong growth, including the acquired DTA business Paul year over year revenue growth was 6%.

Paul: While this represented record third quarter revenue since the relaunch of <unk> tool group in 2019, we are taking a cautious posture entering the fourth quarter, given the increasing level of economic and geopolitical uncertainty.

Paul: Nonetheless, we believe <unk> can continue to outperform its industrial peers in what remains a very soft sector.

Paul: 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 Gerry will provide more detail on the quarter, our fiscal 2025 guidance any impact in our response to tariffs.

Gerry: Thanks, Paul.

Speaker Change: On slide three <unk> revenue increased 6% on a reported basis to $159 million in the third quarter of 2025.

Paul: On organic basis, adjusting for foreign exchange and the acquisition of BCA, We grew 2%.

Paul: At our DNS business revenue increased one 5% organically year over year.

Paul: Both our product and service business grew this quarter with 1% growth in product sales and 3% growth in services.

Paul: We continue to implement <unk> commercial excellence for effects across our portfolio.

Paul: 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.

Paul: Cortland biomedical.

Paul: As reported in our other segment posted growth of 19% with good performance of existing products and market reception to our new product launches in particular, we enjoyed strength in sales to customers in diagnostics Bioprocess, Inc. And robotic surgery Cortland continues to partner with customers to develop innovative solutions with several quotes and prototype orders in the works.

Paul: From existing and new customers.

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.

Paul: 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 <unk> product portfolio and service offerings.

Paul: In the APAC region, we continue to generate solid performance as it enjoyed mid single digit growth in the third quarter.

Paul: A particular strength in the quarter was our heavy lifting technology <unk> 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.

Operator: 2025 Earnings Conference Call. As a reminder, this conference is being recorded June 27, 2025.

With high single digit organic growth the growth was driven by demand for our standard products and services.

Paul: More challenged end markets, including the steel industry in South Korea, and refining and petrochemicals in China.

Travis Williams: It is now my pleasure to turn the conference over to Travis Williams, Senior Director of Investor Relations. Please go ahead, Mr. Williams. Thank you, operator.

While there has been a bit of softness in the rail and general industrial and manufacturing sectors. We've seen particular strength in aerospace infrastructure and service for the nuclear industry.

Paul: In the EMEA region, we posted a high single digit decline organically driven by a decline in our <unk> 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.

We believe these industries align with <unk> product portfolio and service offerings.

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 <unk> business from a vertical market perspective, we are benefiting from major rail projects and maintenance needs in Thailand, Japan and the Philippines.

Travis Williams: Good morning, and thank you for joining us for Enerpac Tool Group's third quarter fiscal 2025 earnings call.

Travis Williams: 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.

Paul: Sector and ongoing wind projects.

Paul: However, we are seeing some softness in our service revenue in Europe.

Paul: To give an overall economic slowdown in western Europe.

Paul: Turning to slide five gross profit margin declined 140 basis points year over year to 54%.

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.

Travis Williams: Today's call will reference non GAP measures. You can find a reconciliation of GAP to non GAP measures in the press release issued yesterday.

Paul: This decline was attributable to our service project mix and the inclusion of DTA, partially offset by higher margins at Cortland biomedical.

Travis Williams: 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.

Paul: While we've continued to experience pressure on service margins and 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.

In the EMEA region, we posted a high single digit decline organically driven by a decline in our <unk> business, which had a strong performance in the year ago period, and as we said tends to be lumpy.

Paul Sternlieb: Now I'll turn it over to Paul. Thanks, Travis.

From a vertical market perspective, we're seeing strength from the infrastructure market and are benefiting from higher defense budgets spending in the oil and gas sector and ongoing wind projects.

Paul Sternlieb: 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 Acquire DTA Business, whole year-over-year revenue growth was 6%. 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.

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 jenna generating appropriate returns and changing our business model and certain countries all designed to improve service business margins.

However, we are seeing some softness in our service revenue in Europe.

Give an overall economic slowdown in western Europe.

Turning to slide five gross profit margin declined 140 basis points year over year to 54%.

Paul: On the selling general and administrative line adjusting for the restructuring charge in M&A expense adjusted SG&A improved 160 basis points year over year to 25, 5% of sales.

This decline was attributable to our service project mix and the inclusion of DTA, partially offset by higher margins at Cortland biomedical.

Paul: In light of the current soft market conditions, we recorded a restructuring charge of $5 9 million in the quarter.

While we continue to experience pressure on service margins and 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.

Paul: Of which approximately three quarters of people related severance to further right size our cost structure. Additionally.

Paul: Additionally, these restructuring actions are another step towards increasing the efficiency of our SG&A spend as we continue to standardize and automate processes.

We've also taken specific actions, including investing in equipment to support high margin service lines, we're fighting our fixed cost base to ensure each site is jenna generating appropriate returns and changing our business model in certain countries all designed to improve service business margins.

Darren Kozik: 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 2025 guidance, and the impact in our response to tariff. Thanks, Paul. As seen on slide 3, Enerpac's revenue increased 6% on a reported basis to $159 million in the third quarter of 2025. On an organic basis, adjusting for foreign exchange and the acquisition of VTA, we grew 2%. At our IT&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 service.

Paul: The remainder of the restructuring charge is a noncash lease impairment associated with our headquarters relocation.

Paul: We will continue to watch SG&A spending closely in the current environment.

Paul: As a result, adjusted EBITDA increased three 4% for the third quarter, our margin declined 50 basis points year over year to 25, 9% due to the mix of service projects and the inclusion of DTA.

On the selling general and administrative line adjusting for the restructuring charge in M&A expense adjusted SG&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 9 million in the quarter.

Paul: Our core <unk> product portfolio margin remained strong in the current environment pointing to the resiliency of our brands.

Of which approximately three quarters of people related severance to further right size our cost structure. Additionally.

Paul: Adjusted earnings per share increased 9% to <unk> 51.

Additionally, these restructuring actions are another step towards increasing the efficiency of our SG&A spend as we continue to standardize and automate processes.

Paul: Driven by higher earnings a lower effective tax rate.

Darren Kozik: 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 a new product launches. In particular, we enjoyed strength and 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.

Paul: And reduced share count.

Paul: For the full year fiscal 2025 of our earnings guidance remains the same with net sales of $610 million to $625 million.

The remainder of the restructuring charge is a noncash lease impairment associated with our headquarters relocation.

Paul: Representing total revenue growth of 3% to 6% and organic growth of zero to 2%.

We will continue to watch SG&A spending closely in the current environment.

As a result, adjusted EBITDA increased three 4% for the third quarter, our margin declined 50 basis points year over year to 25, 9% due to the mix of service projects and the inclusion of DTA.

Paul: Adjusted EBITDA is expected to be in the $150 million to $160 million range. However, based on year to date results and current macroeconomic and geopolitical conditions, we anticipate delivering towards the lower half of the range.

Our core <unk> product portfolio.

Paul: Turning to the balance sheet shown on slide seven <unk> position remains extremely strong.

Folio margin remained strong in the current environment.

Turning to the resiliency of our brand.

Paul: Net debt was $50 million at quarter end, resulting in a net debt to adjusted EBITDA ratio of zero point for <unk>.

Darren Kozik: 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 offering. 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 vests.

Adjusted earnings per share increased 9% to 51.

Driven by higher earnings a lower effective tax rate.

Paul: Total liquidity, including availability under our revolver and cash on hand was $539 million.

And reduced share count.

For the full year fiscal 2025 of our earnings guidance remains the same with net sales of $610 million to $625 million.

Paul: Through the first three quarters of fiscal 2025 cash flow from operations was $56 million compared with $37 million in the year ago period.

Representing total revenue growth of 3% to 6% and organic growth of zero to 2%.

Paul: Free cash flow of $40 million increased 24%.

Adjusted EBITDA is expected to be in the $150 million to $160 million range. However, based on year to date results and kirt.

Paul: Despite $11 million in incremental capital spending primarily associated with the headquarters relocation.

Paul: Listen to our headquarters we continue to invest in automated manufacturing capabilities to improve the efficiency and drive additional productivity.

Macroeconomic and geopolitical conditions, we anticipate delivering towards the lower half of the range.

Darren Kozik: 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 petrochemicals in China.

Turning to the balance sheet shown on slide seven <unk> position remains extremely strong.

Paul: For the full year, we are maintaining our free cash flow guidance at $85 million to $95 million.

Paul: In the third quarter, the company repurchased approximately 330000 shares of common stock totaling $14 million.

Net debt was $50 million at quarter end, resulting in a net debt to adjusted EBITDA ratio of zero point for <unk>.

Total liquidity, including availability under our revolver and cash on hand was $539 million.

Paul: As we continue to generate cash coupled with our current leverage we have ample capacity to deploy capital for our disciplined M&A strategy as well as internal investments and continued opportunistic share repurchases.

Through the first three quarters of fiscal 2025 cash flow from operations was $56 million compared with $37 million in the year ago period.

Darren Kozik: 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%.

Free cash flow of $40 million increased 24%.

Paul: Turning to slide eight we understand that the impact of the U S tariff policy and associated uncertainty. It has created a top of mind for investors while.

Despite $11 million in incremental capital spending primarily associated with the headquarters relocation.

Paul: While the situation is fluid we believe that <unk> is well positioned to manage the impact given our global footprint and diverse supply base.

Listen to our headquarters we continue to invest in automated manufacturing capabilities to improve the efficiency and drive additional productivity.

Paul: The majority of our imported finished goods and components come from four countries, Netherlands, where we manufacture our HFC products, China, the UK and Spain.

For the full year, we are maintaining our free cash flow guidance at 85% to $95 million.

In the third quarter, the company repurchased approximately 330000 shares of common stock totaling $14 million.

Paul: The Netherlands, and China make up the bulk of our U S imports that are subject to duties.

As we continue to generate cash coupled with our current leverage we have ample capacity to deploy capital for our disciplined M&A strategy as well as internal investments and continued opportunistic share repurchases.

Darren Kozik: This decline was attributable to our service project mix and the inclusion of DTA, partially offset by higher margins at Cortland Biomed. 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 opportunity. 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.

Paul: We import a total of approximately $50 million in finished goods and components into the U S that are subject to tariffs under.

Paul: Under the current tariff framework, we estimated annualized tariff impact of $18 million.

Turning to slide eight we understand that the impact of the U S tariff policy and associated uncertainty. It has created a top of mind for investors while.

Paul: Which represents an incremental $12 million relative to the total tariffs paid in fiscal 2024.

Paul: In addition to these quantifiable direct impact.

While the situation is fluid we believe that <unk> is well positioned to manage the impact given our global footprint and diverse supply base.

Paul: We anticipate additional cost pressure on our U S based suppliers, we're importing components and raw materials.

The majority of our imported finished goods and components come from four countries, Netherlands, where we manufacture our HLA products, China, the UK and Spain.

Paul: We believe we've been able to mitigate the majority of the impact as noted on our second quarter earnings call. We implemented a low to mid single digit price increase at the end of March and in May we implemented a low single digit surcharge in the U S to offset the announced tariffs.

Darren Kozik: On the selling, general, and administrative lines, adjusting for the restructuring charge and M&A expense, adjusted SG&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 $5.9 million in the quarter, of which approximately three-quarters is people-related severance to further right-size our cost structure. Additionally, these restructuring actions are another step towards increasing the efficiency of our SG&A spend as we continue to standardize and automate processes. The remainder of the restructuring charge is a non-cash lease impairment associated with our headquarters relocation. We will continue to watch SG&A spending closely in the current environment.

The Netherlands, and China make up the bulk of our U S imports that are subject to duties.

Paul: These pricing actions have been understood and accepted by our customers.

We import a total of approximately $50 million in finished goods and components into the U S that are subject to the tariffs under.

Paul: Actually given the global nature of our business, we have a flexibility to secure alternative suppliers.

Under the current tariff framework, we estimated annualized tariff impact of $18 million.

Paul: We expect these actions to support our goal of remaining at least price cost neutral.

Which represents an incremental $12 million relative to the total tariffs paid in fiscal 2024.

Paul: But we cannot calculate at this juncture as any impact of economic uncertainty and potentially slower growth on the revenue line.

In addition to these quantifiable direct impact.

Paul: We will continue to pursue our strategy focused on driving profitable growth and outperforming the industrial market.

We anticipate additional cost pressure on our U S based suppliers, we're importing components and raw materials.

Paul: We will also continue to carefully manage expenses as appropriate to align our cost structure with market conditions in support of long term success.

We believe we've been able to mitigate the majority of the impact as noted on our second quarter earnings call. We implemented a low to mid single digit price increase at the end of March and in May we implemented a low single digit surcharge in the U S to offset the announced tariffs.

Darren Kozik: 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 BTA. Our core IT&S product portfolio margin remains strong in the current environment, according to the resiliency of our brand. Adjusted earnings per share increased 9% to $0.51, driven by higher earnings, a lower effective tax rate, and reduced share costs. For the full year fiscal 2025, our earnings guidance remains the same with net sales of $610 million to $625 million, representing total revenue growth of 3% to 6% and organic growth of 0% to 2%.

Paul: That let me turn it back to Paul.

Paul: Thanks Darren.

Paul: Over the past couple of years, we have talked about a series of Interconnects 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 <unk>.

These pricing actions have been understood and accepted by our customers.

Italy, 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.

But we cannot calculate at this juncture as any impact of economic uncertainty and potentially slower growth on the revenue line.

Paul: <unk> and fulfill their unmet needs.

Paul: The company's relocation to the <unk> Center, we have invested in our new innovation lab dedicating a significant portion of the new facility to take our innovation and R&D capabilities to the next level.

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: As shown on slide nine we have added in a variety of new equipment and technologies, including three D printers.

Darren Kozik: Adjusted EBITDA is expected to be in the $150 to $160 million range. However, based on year-to-date results and current macroeconomic and geopolitical conditions, we anticipate delivering towards the lower half of the range.

Paul: Thanks Darren.

Paul: C Mills, C&C lays and cutting and machining capabilities, enabling our team to innovate even faster than before with far less reliance on outside vendors.

Paul: Over the past couple of years, we have talked about a series of interconnected 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.

Darren Kozik: Turning to the balance sheet shown on slide 7, Enerpac's position remains extremely strong. Net debt was $50 million at quarter end, resulting in a net debt to adjusted EBITDA ratio of 0.4. Total liquidity, including availability under a revolver and cash on hand, was $539 million. Through the first three quarters of fiscal 2025, cash flow from operations was $56 million, compared with $37 million in the year-ago period. Pre-cash flow of $40 million increased 24% Despite $11 million in incremental capital spending, primarily associated with the headquarters relocation. In addition to our headquarters, we continue to invest in automated manufacturing capabilities to improve the efficiency and drive additional productivity.

Paul: In fact, what used to take a month or more can now be accomplished and as quickly as one week or even one day.

Paul: We believe this provides a further competitive advantage for <unk>.

Paul: <unk> and fulfill their unmet needs.

Paul: With the company's relocation to the <unk> Center, we've invested in our new innovation lab dedicating a significant portion of the new facility to take our innovation and R&D capabilities to the next level.

Paul: Let me also mentioned the heavy lifting technology, we gained with the acquisition of DTA in September of 2024, as we have said DTA adds a highly complementary horizontal movement capability to our existing vertical heavy lifting technology.

Paul: And as shown on slide nine we have added in a variety of new equipment and technologies, including three D printers, CNC mills, C&C lays and cutting and machining capabilities, enabling our team to innovate even faster than before with far less reliance on outside vendors.

Paul: 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, we remain confident that this is where <unk> efficient manufacturing and supply chain expertise will add value.

Darren Kozik: For the full year, we are maintaining our free cash flow guidance at $85 to $95 million. In the third quarter, the company repurchased approximately 330,000 shares of Comstock totaling $14 million. As we continue to generate cash, coupled with our current leverage, we have ample capacity to deploy capital for a disciplined M&A strategy, as well as internal investments and continued opportunistic share repurchase.

Paul: 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.

Paul: And on a commercial basis, we are excited by Dta's performance to date.

Paul: We believe this provides a further competitive advantage for <unk>.

Paul: Orders are robust and backlog is expanding as we successfully implement our strategy to cross sell DTA solutions across the existing <unk> base and expand sales beyond its traditional stronghold in Europe.

Paul: Let me also mentioned the heavy lifting technology, we gained with the acquisition of DTA in September of 2024.

Paul: As we have said DTA adds a highly complementary horizontal movement capability to our existing vertical heavy lifting technology.

Paul: 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 advanced customer driven innovation.

Darren Kozik: Turning to slide 8, 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. The Netherlands and China make up the bulk of our U.S. imports that are subject to duty. We import a total of approximately $50 million in finished goods and components into the U.S.

Paul: Deliveries from DTA had been slower to ramp than expected as we continue to help DTA improve their operational capabilities to work through an expanded order book we remain.

Paul: I'm confident that this is where our <unk> efficient manufacturing and supply chain expertise will add value.

Paul: Achieve continuous improvement and execute our growth strategy.

Paul: And on a commercial basis, we are excited by Dta's performance to date.

Paul: With that we'd be happy to take questions.

Paul: So ask a question simply press star followed by the number one on your telephone keypad again that is star one to ask a question.

Darren Kozik: that are subject to tariffs. Under the current tariff framework, we estimate an annualized tariff impact of $18 million. which represents an incremental $12 million relative to the total tariffs paid in fiscal 2024. In addition to these quantifiable direct impacts, we anticipate additional cost pressure on our U.S.-based suppliers who are importing components and raw materials. We believe we've been able to mitigate the majority of the impact. As noted on the second quarter earnings call, we implemented a low to mid-single-digit price increase at the end of March. And in May, we implemented a low single-digit surcharge in the U.S.

Paul: And we'll pause for a moment to compile the Q&A roster.

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

Paul: As I said at the top of the call. We have moved and are settling into our new downtown Milwaukee headquarters.

Will: Hi, Paul and Dan This is will on for Dan.

Paul: It is clear already that the move is achieving our goal of creating a more vibrant environment and collaborative culture.

Moderator: Could you add some more color by well good morning, everyone.

Moderator: Hi, Good morning could you add some more color of what you're hearing from your customers in real time.

Paul: One that inspires our teams to advance customer driven innovation.

Moderator: And how are they managing are reacting to tariffs and macro uncertainty.

Paul: <unk> continuous improvement and execute our growth strategy.

Moderator: Are they putting projects on hold.

Moderator: We've seen an uptick in order cancellations.

Paul: With that we'd be happy to take questions.

Moderator: Well, yeah, I'd say I mean honestly, it's a very dynamic environment I think it definitely varies depending on the customer and the end market.

Darren Kozik: to offset the announced error. These pricing actions have been understood and accepted by our 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.

Paul: So ask a question simply press star followed by the number one on your telephone keypad again that is star one to ask a question.

Moderator: Not seen any meaningful movement in terms of project cancellations from our perspective, I think we do have customers certainly that are being cautious.

Paul: And we'll pause for a moment to compile the Q&A roster.

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

Moderator: We are evaluating if and when theyre going to make large capital investment decisions just in light of the uncertain environment that we're in.

Darren Kozik: 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 carefully manage expenses as appropriate to align our cost structure with market conditions in support of long-term success.

Will: Hi, Paul and Dan This is will on for Dan.

Speaker Change: Could you add some more color by well good morning, everyone.

Moderator: But I think the positive side, there is that companies do need to invest for capacity and growth.

Speaker Change: Hi, Good morning could you add some more color of what you're hearing from your customers in real time.

Speaker Change: And how are they managing are reacting to tariffs and macro uncertainty.

Moderator: Again, some may be waiting just to see how things shake out in the current environment of the tariff situation.

Speaker Change: Are they putting projects on hold.

Speaker Change: Have you seen an uptick in order cancellations.

Paul Sternlieb: With that, let me turn it back to Paul. 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 market.

Moderator: But the underlying needs are there. So again I think it varies depending on the end market but.

Speaker Change: 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.

Moderator: 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.

Speaker Change: 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.

Moderator: Darren referenced in our remarks earlier I mean, we have taken some pricing actions from our end.

Paul Sternlieb: 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 www.Enerpac.com 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&D capabilities to the next level. And as shown on slide 9, we have added a variety of new equipment and technologies, including 3D 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.

Moderator: To at least offset.

Speaker Change: We are evaluating if and when theyre going to make large capital investment decisions just in light of the uncertain environment that we're in.

Moderator: The in place here.

Moderator: I ask that we saw from some of the recent tariff means 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.

Speaker Change: But I think the positive side, there is that companies do need to invest for capacity and growth.

Speaker Change: Again, some may be waiting just to see how things shake out in the current environment of the tariff situation.

Moderator: Thank you Super helpful.

Moderator: Did you see any revenue being pulled forward at all in Q3 in anticipation of tariffs and what are your thoughts on the level of inventory in the channel today.

Speaker Change: But the underlying needs are there. So again I think it varies depending on the end market but.

Speaker Change: 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.

Moderator: Yeah, I wouldn't say anything extremely meaningful there probably was a little bit of a buy in we obviously give some advance notice of course to our customers on some of the <unk>.

Speaker Change: Darren referenced in our remarks earlier I mean, we have taken some pricing actions from our end.

Paul Sternlieb: 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.

Speaker Change: To at least offset.

Moderator: <unk> actions that we took in the quarter.

Speaker Change: The in place here.

Moderator: But I wouldn't say if there was anything hugely significant from our perspective that we can see at this point in time.

Speaker Change: I ask that we saw from some of the recent tariff means 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 thats generally our understanding.

Paul Sternlieb: Let me also mention the heavy lifting technology we gained with the acquisition of DTA in September of 2024. As we have said, DTA adds the 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. We remain confident that this is where Enerpac's efficient manufacturing and supply chain expertise will add value.

Moderator: Thank you and then.

Moderator: Just one more could you provide any.

Moderator: Additional detail regarding the restructuring actions during the quarter and.

Speaker Change: Thank you Super helpful.

Moderator: What is the anticipated cost savings.

Speaker Change: Did you see any revenue being pulled forward at all in Q3 in anticipation of tariffs and what are your thoughts on the level of inventory in the channel today.

Moderator: Thank you.

Moderator: Sure 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.

Speaker Change: Yes, I wouldn't say anything extremely meaningful there probably was a little bit of buy in we obviously give some advance notice of course to our customers on some of the <unk>.

Moderator: <unk> political risk and decided it was time to take some of those cost actions. We do believe we've got automation automation and process standardization underneath which is going to help us scale at the backend of these actions.

Speaker Change: <unk> actions that we took in the quarter.

Paul Sternlieb: And on a commercial basis, we are excited by BTA'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.

Speaker Change: But I wouldn't say if there was anything hugely significant from our perspective that we can see at this point in time.

Moderator: So that was the landscape for the cost piece to remind everyone three quarters of that was severance for people.

Speaker Change: Thank you and then.

Speaker Change: Just one more could you provide any.

Moderator: And about a fourth of that was a noncash lease impairment charge associated with our move to downtown Milwaukee.

Speaker Change: Additional detail regarding the restructuring actions during the quarter.

Speaker Change: What is the anticipated cost savings.

Moderator: So we think this sets a good foundation for the future.

Paul Sternlieb: 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.

Speaker Change: Thank you.

Speaker Change: Sure 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.

Moderator: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Tom <unk> with Roth Capital Partners.

Tom <unk>: Good morning, guys. Thanks for taking the call.

Speaker Change: <unk> political risk and decided it was time to take some of those cost actions. We do believe we've got automation automation and process standardization underneath which is going to help us scale at the backend of these actions.

Speaker Change: Good morning, Tom.

Tom <unk>: Hey, John.

Tom <unk>: Maybe one more question on the pricing actions you guys took where those implemented in the quarter and then did you see the Dod.

Operator: With that, we'd be happy to take questions. To ask a question, simply press star followed by the number one on your telephone keypad. Again, that is star one to ask a question and we'll pause for a moment to compile a Q&A roster.

Speaker Change: That was the landscape for the cost piece not to remind everyone three quarters of that was severance for people.

Tom <unk>: The positive impact or those pricing actions going into effect in the quarter.

Speaker Change: And about a fourth of that was a noncash lease impairment charge associated with our move to downtown Milwaukee.

Tom <unk>: Okay.

Tom <unk>: It took one in March and one in May so some of those started to shrink Cohen.

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

Speaker Change: So we think this sets a good foundation for the future.

Tom <unk>: Throughout the quarter, but the real impact will be in the upcoming quarter and the fourth quarter. We're in now.

Speaker Change: Thank you.

Paul Sternlieb: Hi, Paul and Darren, this is Will, on for Dan. Could you add some more color to what you're 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? 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 if and when they're going to make large capital investment decisions, just in light of the uncertain environment that we're in.

Tom <unk>: Okay.

Speaker Change: Thank you. Our next question comes from the line of Tom Hayes with Roth Capital Partners.

Tom <unk>: And then Paul on the North American.

Tom <unk>: Performance.

Tom <unk>: High single digits.

Speaker Change: Maybe I missed a little bit I think you called out aerospace and one other segments kind of helped drive that actions.

Tom Hayes: Good morning, guys. Thanks for taking the call.

Speaker Change: Good morning, Tom.

Tom Hayes: Hey, John.

Speaker Change: Yeah, I mean, we did see.

Speaker Change: Maybe one more question on the <unk>.

Speaker Change: I think good performance Tom in those sectors, obviously as you know we have pretty diversified end markets.

Speaker Change: Pricing actions you guys took where those implemented in the quarter and then did you see the green deal.

Speaker Change: That we ultimately serve either directly or through our channel.

Speaker Change: The positive impact or those pricing actions go into effect in the quarter.

Speaker Change: We do think that's one of the kind of competitive advantage as a better package that we do have a very diverse set of customers and end markets. So in my view, we're not overly reliant on any single end market.

Speaker Change: Okay.

Speaker Change: Took one in March and one in May so some of those started to trickle.

Speaker Change: Throughout the quarter, but the real impact will be in the upcoming quarter and the fourth quarter. We're in now.

And one may be up one may be down et cetera, but.

Speaker Change: That's what we saw in the quarter.

Speaker Change: And obviously, we'll continue to monitor clearly, it's a very dynamic environment.

Speaker Change: Okay.

Speaker Change: And then Paul on the North American.

Speaker Change: Performance.

Speaker Change: Okay, I guess, one more along those same lines I think it is buried in the one big Beautiful Bill I was just wondering your thoughts on your wind business. It seems that the a lot of the renewable energy credits or maybe on the chopping block you Sidney feedback youre getting from your wind customers as far as the outlook for that market.

Paul Sternlieb: But I think, you know, the positive side there is that companies do need to invest, you know, for capacity and growth. I think, again, some may be waiting just to see how things shake out in the current environment of the tariff situation, but the underlying needs are there. So, again, I think it varies depending on the end market, 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, Darren referenced in the remarks earlier, I mean, we have taken some pricing actions from our end, you know, to at least offset the inflationary, you know, aspect we saw from some of the recent tariff moves.

Speaker Change: High single digits.

Speaker Change: Just a little bit I think you called out aerospace and one other segments kind of helped drive that actions.

Speaker Change: Yes, I mean, we did see.

Speaker Change: I think good performance Tom in those sectors, obviously as you know we have pretty diversified end markets.

Speaker Change: Yeah, I mean, we still look fairly I would say positively at the wind market.

Speaker Change: We ultimately serve either directly or through our channel.

Speaker Change: We do think that's one of the kind of competitive advantage as a better pack is that we do have a very diverse set of customers and end markets. So in my view, we're not overly reliant on any single end market.

Speaker Change: 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.

Speaker Change: And one may be up or maybe down et cetera, but.

Speaker Change: So we still see fairly good demand profiles, there, but certainly I would say it is and has historically been stronger in Europe and the U S.

Speaker Change: That's what we saw in the quarter.

Speaker Change: And obviously, we will continue to monitor clearly, it's a very dynamic environment.

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.

Speaker Change: Okay, I guess, one more along those same lines and I think it is buried in the one big Beautiful Bill I was just wondering your thoughts on your wind business. It assumes that the a lot of the renewable energy credits or maybe on the chopping block you Sidney feedback youre getting from your wins customers as far as the outlook for that market.

Speaker Change: That said I think we still see opportunities here in the U S market. Some of the recent changes from administration here I think are more favorable than we initially expected.

Paul Sternlieb: Thank you, super helpful. And did you see any, you know, revenue being pulled forward at all in Q3 and anticipation of tariffs? And what are your thoughts on the level of inventory in the channel today? Yeah, I wouldn't say anything extremely meaningful. There probably was a little bit of buy-in. You know, we obviously give some advance 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. Thank you.

Speaker Change: So we continue to put focus and resource behind that as appropriate and.

Speaker Change: And we haven't changed our overall strategy, but at the same time as you know we have a focus on several kind of core vertical markets, including infrastructure and we continue to see that play out well in terms of the investment.

Speaker Change: Yes, I mean, we still look fairly I would say positively at the wind market.

Speaker Change: Levels that are going into that sector, while Israel, 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.

Speaker Change: So we still see fairly good demand profiles, there certainly I would say it is and has historically been stronger in Europe and the U S.

Speaker Change: Okay I appreciate the color, but just lastly.

And then.

Speaker Change: That said I think we still see opportunities here in the U S market. Some of the recent changes from administration here I think are more favorable than we initially expected.

Paul Sternlieb: Just one more.

Darren Kozik: 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. 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 going to help us scale at the back end of these actions.

Speaker Change: The current tariff environment, and maybe kind of a more sluggish industrial environment have you seen any change in the appetite.

Speaker Change: For for M&A, Obviously, you know it takes two to get a transaction done, but just any change in the environment for that I appreciate it.

Speaker Change: So we continue to put focus and resource behind that as appropriate.

Speaker Change: Yes, I would say I mean.

Speaker Change: Broadly speaking from our perspective, the answer is no we remain focused.

Speaker Change: Focused and committed to M&A as part of our overall growth strategy as we've talked about multiple times.

Speaker Change: We continue to.

Speaker Change: Be very active on that front in terms of managing proactively.

Speaker Change: Proactively moving forward opportunities in our M&A funnel.

Darren Kozik: 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 non-cash lease impairment charge associated with our move to downtown Milwaukee.

Speaker Change: Okay I appreciate the color, but just lastly.

Speaker Change: I think from the end market perspective, we do see.

Speaker Change: The current tariff environment, and maybe kind of a more sluggish industrial environment have you seen any change in the appetite.

Speaker Change: Interest and appetite from potential sellers to engage in discussions.

So we think this sets a good foundation for the future. Thank you.

Speaker Change: <unk>.

Speaker Change: So I'd say from that standpoint, really nothing has changed.

Speaker Change: For for M&A, Obviously, you know it takes two to get a transaction done, but just any change in the environment for that I appreciate it.

Speaker Change: Certainly our focus on remaining highly disciplined however.

Speaker Change: Yes, I would say I mean.

Tom Hayes: Our next question comes from the line of Tom Hayes with Ross Capital Partners. Good morning, guys. Thanks for taking the call.

Speaker Change: That as well has not changed so.

Speaker Change: Broadly speaking from our perspective, the answer is no we remain.

Speaker Change: Anything that we do has to be.

Speaker Change: Focused and committed to M&A as part of our overall growth strategy as we've talked about multiple times.

Speaker Change: Extremely rigorous in terms of meeting.

Darren Kozik: Morning, Tom. Hey, Darren, maybe one more question on the pricing actions you guys took. Were those implemented in the quarter? And then did you see the positive impact or fellow pricing actions going into effect in the quarter? You know, we took one in March and one in May.

Speaker Change: Both strategic and financial hurdle rates.

Speaker Change: We continue to.

Speaker Change: Be very active on that front in terms of managing proactively.

Speaker Change: And.

Speaker Change: And I would say, 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.

Speaker Change: Proactively moving forward opportunities in our M&A funnel.

Speaker Change: So I think from the end market perspective, we do see.

Speaker Change: <unk> remained very active on that front.

Speaker Change: Interest and appetite from potential sellers to engage in discussions.

Speaker Change: Great I appreciate the time this morning. Thank you.

Paul Sternlieb: So you know, some of those started to trinkle in throughout the quarter, but the real impact will be in the upcoming quarter in the fourth quarter right now. And then Paul on the North American performance of high single digits. I may have missed a little bit. I think he called out aerospace and one other segment kind of helped drive that action. 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 and end markets.

Speaker Change: <unk>.

Speaker Change: Thank you thanks Pam.

Speaker Change: So I'd say from that standpoint, really nothing has changed.

Ross: And our next question comes from the line of Ross <unk> with William Blair. Please go ahead.

Speaker Change: Certainly our focus on remaining highly disciplined however.

Sam: Hey, Good morning. This is Sam qualify for Ross, Thanks for taking my questions.

Speaker Change: That as well has not changed so.

Speaker Change: Anything that we do has to be.

Speaker Change: Good morning, Sam.

Speaker Change: Extremely rigorous in terms of meeting.

Speaker Change: So you're providing a gross annualized tariff impact of $18 million, but is there any way to frame what the net impact of tariffs is expected to be in the fourth quarter and fiscal 2026.

Speaker Change: Both strategic and financial hurdle rates.

Speaker Change: And.

Speaker Change: And I would say, 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.

Speaker Change: Okay.

Speaker Change: I think when we look at the tariff obviously you saw we laid out where the $50 million comes I think from our goal for <unk> is to really remain price cost neutral. So that's kind of a premise that we've had throughout this as the tariffs go up and down even in the second wave of tariffs that have come in we purposely launch there.

Speaker Change: Unreasonable, so, but but we can continue to remain very active on that front.

Speaker Change: Great I appreciate the time this morning. Thank you.

So in my view, we're not overly reliant on any single end market. And one may be up, one may be down, but that's what we saw in the quarter. And obviously, we'll continue to monitor. Clearly, it's a very dynamic environment.

Speaker Change: Thank you. Thank you ma'am.

Ross: And our next question comes from the line of Ross <unk> with William Blair. Please go ahead.

Speaker Change: Surcharge, so we can kind of flex and be nimble with the market, but our goal remains to be price cost control.

Speaker Change: Hey, Good morning. This is Sam Carlin on for Ross, Thanks for taking my questions.

Paul Sternlieb: Okay, I guess one more along the same lines, and I think it's buried in the one big beautiful bill. I'm just wondering your thoughts on your wind business. It seems that a lot of the renewable energy credits are maybe on the chopping block. Is there any feedback you're getting from your wind customers as far as the outlook for that market? Yeah, I mean, we still look fairly, I would say positively 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.

Speaker Change: Okay. That's helpful. And then just a couple on DTA and it looks like DTA sales were better than expected in the quarter, but still trending below that $20 million guidance.

Speaker Change: Good morning, Sam.

Speaker Change: Our expectation for the 29 year old guidance changed.

Speaker Change: Okay.

Speaker Change: Yeah, Here's what I would say Sam I think the integration of DTA has continued to go quite well. We're pleased with the progress we've made and certainly please continue to be pleased with the underlying investment thesis and the progress on the acquisition I.

Speaker Change: I do think that the business will likely come in a bit shy of our original revenue guidance for the year, but that said revenue has increased on a sequential basis.

So we still see fairly good demand profiles there. Certainly, I would say it is and has historically been stronger in Europe than in the U.S. That said, I think we still see opportunities here in the U.S. 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, as well as rail, where we continue to innovate for our customers, including some of the new products that we've talked about this quarter.

Speaker Change: Surcharge, so we can kind of.

Speaker Change: And being nimble with the market, but our goal remains to be price cost control.

Speaker Change: Particularly as <unk> operational discipline in our supply chain expertise is helping them improve their throughput and their facility in Spain.

Speaker Change: Okay. That's helpful. And then just a couple on DTA and it looks like DTA sales were better than expected in the quarter, but still trending below that $20 million guidance is your expectation for the 21 year old guidance changed.

Speaker Change: So we're continuing to see good progress there I would say probably more importantly are particularly on a commercial basis.

Speaker Change: Or is that DTA are extremely strong and we're seeing that play out in terms of the very successful in cross selling of their horizontal movement technology to our <unk> existing distributor and customer base and so for the year I would say orders are tracking to more than 20 million euros.

Speaker Change: I do think that the business will likely come in a bit shy of our original revenue guidance for the year, but that said revenue has increased on a sequential basis.

Speaker Change: Got it that's helpful. And then kind of a follow up to that how does tariffs impact of U S. Tariffs on Europe impact DTA is cross selling ability into the U S.

Paul Sternlieb: So we continue to apply, focus in those other markets as well.

Speaker Change: Particularly as <unk> operational discipline in our supply chain expertise is helping them improve their throughput and their facility in Spain.

Speaker Change: I mean, certainly there'll be subject to tariffs because currently the equipment of the vehicles are produced in Spain.

Okay, appreciate the clarification.

Paul Sternlieb: Lastly, with the current tariff environment, maybe kind of a more sluggish industrial environment. Have you seen any change in the appetite on for M&A? I obviously know it takes two to get a transaction done, but just any change in the environment for that?

Speaker Change: So we're continuing to see good progress there I would say probably more importantly are particularly on a commercial basis.

Speaker Change: That said, we do see plenty of appetite from customers and opportunities here in the U S market.

Speaker Change: Or is that DTA are extremely strong.

Speaker Change: By the way our <unk> products are made in Europe in the Netherlands as well those are subject to the U S tariffs.

Speaker Change: And we're seeing that play out in terms of the very successful in cross selling of their horizontal movement technology to our interfax existing distributor and customer base and so for the year I would say orders are tracking to more than 20 million euros.

Paul Sternlieb: Appreciate it. 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&A as part of our overall growth strategy. As we 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&A funnel. I think from the end market perspective, we do see interest and appetite from potential sellers to engage in discussions. You know, and so 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.

Speaker Change: But we've not seen I would say any diminishing demand.

Speaker Change: Profile from U S customers for that equipment. So I think we continue to be have a fairly optimistic outlook, both for tea and for DTA here in the U S market.

Speaker Change: Got it that's helpful. And then kind of a follow up to that how do tariffs impacts our U S. Tariffs on Europe impact DTA is cross selling ability into the U S.

Speaker Change: Got it that's helpful I'll leave it there thanks guys.

Speaker Change: Thank you.

Speaker Change: I mean, certainly there'll be subject to tariffs because currently the equipment and the vehicles are produced in Spain.

Steve: And our final question comes from the line of Steve <unk> with Argus Research. Please go ahead.

Speaker Change: 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 product.

Speaker Change: That said, we do see plenty of appetite from customers and opportunities here in the U S market.

Speaker Change: By the way our <unk> products are made in Europe in the Netherlands as well those are subject to the U S tariffs.

Speaker Change: But we've not seen I would say any diminishing.

Speaker Change: 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&D costs, given the high number of Skus in the portfolio.

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.

Speaker Change: Demand profile from U S customers for that equipment. So I think we continue to be have a fairly optimistic outlook, both for <unk> and for DTA here in the U S market.

Speaker Change: Got it that's helpful I'll leave it there thanks guys.

Steve: Yes, good morning, Steve Thanks for the question.

Speaker Change: Look I think historically it was really a mix 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.

Speaker Change: Thank you.

Steve: And our final question comes from the line of Steve <unk> with Argus Research. Please go ahead.

Speaker Change: Thanks, operator, and thanks for taking my questions I was hoping you guys could put some context around the <unk>.

Paul Sternlieb: Great.

I appreciate the time this morning.

Speaker Change: But we did utilize a lot of external vendors and services and to some degree that will still be required of course, especially for specialty type services.

Thank you.

Speaker Change: Pipeline size and the scalability for the new in House innovation lab, and maybe just some thoughts around previous new product.

Sam Karlov: Our next question comes from the line of Ross Sparenblek with William Blair. Please go ahead. Hey, good morning.

Speaker Change: But were certainly pretty excited about the investment we've made in this innovation lab.

This is Sam Karlov on for Ross. Morning, Sam. So you provided a gross annualized tariff impact of $18 million, but is there any way to frame what the net impact of tariffs is expected to be in the fourth quarter and fiscal 2026? You know, I think when we look at the tariff, obviously, you saw, you know, we laid out where the 50 million comes, I 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.

Speaker Change: Whether most of those were using outsourced vendors compared to your previous in house capabilities and maybe the thoughts on the.

Speaker Change: I think there will be ultimately some cost advantages and of course in the slides. We highlighted a case study example of that I think my view is that the much more significant benefit will be the time improvement that we make in terms of bringing new products to market.

Speaker Change: Potential impact on overall R&D costs, given the high number of Skus in the portfolio.

Steve: Yes, good morning, Steve Thanks for the question.

Speaker Change: We were able to dramatically reduce the time that it takes to prototype components and parts literally from weeks to days or days to hours as we talked about in this case study.

Speaker Change: But we did utilize a lot of external vendors and services and to some degree that will still be required of course, especially for specialty type services.

Speaker Change: Through the capital investments that we made in the facility here. So I do expect that that will help.

So we could kind of flex and be nimble with the market. But our goal remains to be price cost neutral. Okay, that's helpful.

Speaker Change: Increase the <unk>.

Speaker Change: But were certainly pretty excited about the investment we've made in this innovation lab and while I think there will be ultimately some cost advantages and of course in the slides. We highlighted a case study example of that I think my view is that much.

Speaker Change: 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 have already gotten to work as you can see in utilizing these these new tools and capabilities that we've added to our innovation labs, So think of it from.

Paul Sternlieb: 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 million euro guidance. Has your expectation for the 20 million euro guidance 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.

Speaker Change: Much more significant benefit will be the time improvement that we make in terms of bringing new products to market.

Speaker Change: From our perspective, it was a great investment I think it will ultimately have a really strong return both from a.

Speaker Change: Measurable dollars perspective, but ultimately the impact on on our innovation rate.

Speaker Change: We were able to dramatically reduce the time that it takes to prototype components and parts literally from weeks to days or days to hours as we talked about in this case study.

Speaker Change: Great that's helpful and on a similar note you guys mentioned on the last call that the first half of fiscal 'twenty five was more focused on commercializing some of the fiscal year 'twenty four launches, but that the second half of 'twenty five would be more focused on new product innovation I'm curious as to how Q3 played out compared to your.

Speaker Change: Through the capital investments that we made in the facility here. So I do expect that that will help.

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 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 million euros. Got it.

Speaker Change: Increased.

Speaker Change: 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 these these new tools and capabilities that we've added to our innovation labs, so think of it.

Speaker Change: Expectations.

Speaker Change: Yeah.

Speaker Change: Yes, I think thats right.

Speaker Change: We certainly spent I would say more focus 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 or are continuing to ramp commercially and globally to good effect and we're certainly excited about that and we've added new capabilities.

Speaker Change: From our perspective, it was a great investment I think it will ultimately have a really strong return both from a.

Speaker Change: Measurable dollars perspective, but ultimately the impact on our innovation rate.

Speaker Change: And new launches to enhance or add.

Speaker Change: Elementary aspect to some of those new products as an example for our btw.

Speaker Change: Product that we launched last fiscal we have 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.

That's helpful. And then kind of a follow up to that.

Paul Sternlieb: How do tariffs impact or US tariffs on Europe impact DTA's cross selling ability into the US? I mean, certainly, they'll be subject to tariffs because currently the equipment and the vehicles are produced in Spain. That said, we do see plenty of appetite from customers and opportunities here in the U.S. market. By the way, our HLT products are made in Europe and the Netherlands as well. Those are subject to the U.S. tariffs, but we've not seen, I would say, any diminishing demand profile from U.S. customers for that equipment. And so I think we continue to have a fairly optimistic outlook, both for HLT and for ETA here in the U.S.

Speaker Change: Expectations.

Speaker Change: Yeah.

Speaker Change: Yes, I think thats right.

Speaker Change: We certainly spent I would say more focus 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 made in the products, we launched our continuing to ramp commercially and globally to good effect and we're certainly excited about that and we've added new capabilities.

Speaker Change: Then here in the second half and in Q3, we have brought some new products to market for example in the rail industry.

Speaker Change: Our team created a solution for pulling nails out to bridges.

Speaker Change: We're truly combines our new <unk> with a battery pump posers hoses couplers and a custom made interface socket that connects with that pinpoint. So that's a new product that we launched here in Q3, that's specifically focused on the rail market and Thats. Just one example, so I think we continue to have a good mix.

Speaker Change: And new launches to enhanced or <unk>.

Speaker Change: AG complimentary aspect to some of those new products as an example for our btw.

Speaker Change: <unk> that we launched last fiscal we have 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. Let then here in the second.

market. Got it. That's helpful. I'll leave it there. Thank you.

Speaker Change: Between focus on commercialization and ramp of products, we've launched but also bringing new products to market I'd say, particularly focused on our key verticals that we've talked about.

Steve Silver: And our final question comes from the line of Steve Silver with Argus Research. Please go ahead. Thanks, operator. And thanks for taking my questions.

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

Speaker Change: Happened in Q3, we have brought some new products to market for example in the rail industry.

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&D costs, given the high number of SKUs in the portfolio. Yeah, good morning, Steve. Thanks for the question. Look, I think, you know, historically, it was really a mix. 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.

Speaker Change: Okay. Thank you.

Speaker Change: Our team created a solution for pulling nails out to bridges.

Speaker Change: And this concludes our Q&A session I will now turn the call back over to Paul for closing remarks.

Speaker Change: Which really combines our new <unk> with a battery palm Posers hoses couplers and a custom made interface socket that connects with that pin polar. So that's a new product that we launched here in Q3, that's specifically focused on the rail market and that's just one example, so I think we continue to have a good <unk>.

Speaker Change: Okay, well, thanks again for joining us this morning, <unk> will be participating in the CJR annual new ideas Summer conference on July 10.

Speaker Change: And the Seaport Research partners annual Summer conference on August 19th and 20th we hope to see you. There. Thank you and have a great weekend.

Speaker Change: Between focus on commercialization and ramp of products, we've launched but also bringing new products to market.

Speaker Change: Thank you everyone for joining this does conclude today's conference you may now disconnect.

Speaker Change: Particularly focused on our key verticals that we've talked about.

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

Paul Sternlieb: 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 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. I think my view is that the much more significant benefit will be, you know, the time improvement that we make in terms of bringing new products to market.

Speaker Change: Alright, thank you.

Speaker Change: And this concludes our Q&A session I will now turn the call back over to Paul for closing remarks.

Speaker Change: Okay, well, thanks again for joining US. This morning are pack will be participating in the CJR annual new ideas Summer conference on July 10.

Speaker Change: And the Seaport Research partners annual Summer conference on August 19th and 20th we hope to see you. There. Thank you and have a great weekend.

You know, we're able to, you know, dramatically reduce the time that it takes to 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 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 new tools and capabilities that we've added to our innovation lab.

Speaker Change: Thank you everyone for joining this does conclude today's conference you may now disconnect.

Speaker Change: Yeah.

Paul Sternlieb: So, from our perspective, it was a great investment. I think it will ultimately have a really strong return, both from a measurable dollars perspective, but ultimately, you know, the impact on our innovation rate.

Great, that's helpful.

Paul Sternlieb: And on a similar note, you guys mentioned on the last call, that the first half of fiscal 25 was more focused on commercializing some of the fiscal year 24 launches, but that the second half of 25 would be more focused on new product innovation. Curious as to how Q3 played out compared to your expectations. Yeah, I think that's right. You know, we certainly spent, I would say, more focus in the first half on continuing to commercialize some of the new products we launched in fiscal 24. 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 complementary aspects to some of those new products. 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 Q3, we have brought some new products to market.

Paul Sternlieb: For example, in the rail industry, our team created a solution for pulling nails out of wood bridges, which really combines our new Enerpac pin pullers with a battery pump, hoses, couplers, and a custom-made interface socket that connects with that pin puller. So that's a new product that we launched here in Q3 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 key verticals that we've talked about.

Great. Thanks for all the color and best of luck the rest of the year navigating the challenging. All right, thank you.

Operator: And this concludes our Q&A session.

Paul Sternlieb: I will now turn the call back over to Paul for closing remarks. Okay, well thanks again for joining us this morning. Enerpac will be participating in the CJS Annual New Ideas Summer Conference on July 10th and the Seaport Research Partners Annual Summer Conference on August 19th and 20th. We hope to see you there. Thank you and have a great weekend. Thank you, everyone, for joining.

Operator: This does conclude today's conference. You may now disconnect.

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