Enerpac Tool Group Corp Q1 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Will Gildea - CJS Securities - Analyst : You've talked for a number of quarters about efforts to improve profitability of the Service business and invest in ways that enable you to tap higher-margin opportunities. What caused a sudden sharp decline in Service revenue this quarter and were you surprised by it?

Question: Will Gildea - CJS Securities - Analyst : That's helpful. And then I guess just a follow-up question on that. Can you add some more color to the changes you're making in Services to capture higher-value business? I know on the last call, you gave the example of transitioning Algeria from an agent-based model to a direct-based model. Can you talk about the reasoning behind that? And if an initiative like that is successful, how long of a runway do you have to make that change in other regions? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 18, 2025 / 1:30PM, EPAC.N - Q1 2026 Enerpac Tool Group Corp Earnings Call

Question: Will Gildea - CJS Securities - Analyst : And switching gears, can you add some color on your pricing strategy heading into calendar year 2026? Should we be expecting an annual price increase at the beginning of the year?

Question: Ross Sparenblek - William Blair Capital Partners - Analyst : When we think about your 2026 organic guide, a little bit of price, what is contributing there from new products and kind of the cadence of your new product launches as we think about the rest of the year or fiscal '26?

Question: Ross Sparenblek - William Blair Capital Partners - Analyst : Okay. Well, when we think about kind of early days on this R&D flywheel, what is kind of the trajectory here as we think about the longer-term growth algo? I mean are you trying to get a couple of extra points of growth from new products? Are we targeting new adjacent TAMs? Or is it just kind of upgrading and more defensive of the core portfolio?

Question: Ross Sparenblek - William Blair Capital Partners - Analyst : I can appreciate that. I mean it looks like you guys are running around 2% of sales in your R&D spend. It has been ticking up slowly. I guess I'm just trying to get a better sense of what your visibility looks like into your R&D funnel? Like how robust of opportunities you see today? Or are we still kind of early days of planting the seeds and buying the equipment and helping the guys get to the point where they're empowered to start building out that pipeline?

Question: Ross Sparenblek - William Blair Capital Partners - Analyst : Okay. So we should anticipate a more measured pace of R&D growth going forward?

Question: Ross Sparenblek - William Blair Capital Partners - Analyst : 3.5% of sales or 5% tomorrow?

Question: Ross Sparenblek - William Blair Capital Partners - Analyst : Okay. I appreciate that. And if I can just have one more here. If I go back to last year, the backlog seemed pretty immaterial, but now we're speaking to confidence in kind of these secularly growing project funnels. Just any visibility there on sizing where the backlog kind of stands versus on a normalized basis and what's kind of underwriting that confidence?

Question: Steven Silver - Argus Research - Analyst : I'd like to offer my best wishes to Travis as well. So in the prepared remarks, you guys mentioned the pickup in order rates, and you also mentioned building inventory heading into Q2. I'm curious just whether you can quantify at all the magnitude of the inventory ramp and maybe identify any key products beyond HLT?

Question: Steven Silver - Argus Research - Analyst : Great. And one more, if I may. You guys have talked quite a bit in recent quarters about the balance sheet being in a very strong place to support strategic M&A and also about the macroeconomic factors facing the industry. Curious as to whether there's been any change in the M&A funnel, if you will, just in terms of companies that are dealing with the macro issues that might be kind of gravitating towards M&A at this time?