Ladies and gentlemen, thank you for standing by. Welcome to Enerpac Tool Group's Third Quarter Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, June 28, 2022. It is now my pleasure to turn the conference over to Bobbi Belstner, Senior Director of Investor Relations and Strategy. Please go ahead.

Our earnings release and slide presentation for today's call are available on our website at enerpactoolgroup.com in the Investors section. We are also recording this call and will archive it on our website. During today's call, we will reference non-GAAP measures such as adjusted profit margins and adjusted earnings. You can find a reconciliation of non-GAAP to GAAP measures in the schedules to this morning's release. We also would like to remind you that we will be making statements in today's call and presentation that are not historical facts and are considered forward-looking statements. We are making those statements pursuant to the Safe Harbor provisions of federal securities laws. Please see our SEC filings for the risks and other factors that may cause actual results to differ materially from forecasts, anticipated results or other forward-looking statements. Consistent with how we've conducted prior calls, we ask that you follow our 1 question, 1 follow-up practice in order to keep today's call to an hour and also allow us to address questions from as many participants as possible. Thank you in advance for your cooperation. Now I will turn it over to Paul.

Okay, thanks, Bobbi, and good morning everyone. Thank you for joining our Q3 earnings call. I'm pleased to have the opportunity to discuss our third quarter results with you and provide an update on our ASCEND transformation program. Before we get started, I want to first welcome Tony Colucci to the Enerpac team. Tony joined us as CFO on May 30, and we are very excited to have him onboard. While he has only been here four short weeks, he’s already getting up to speed quickly on the business and making an impact. Now to touch on the quarter, overall it was a solid quarter, driven by strong demand across many of the key end markets that we serve. Excluding the $10.8 million of additional receivable reserves related to a MENAC agent that we spoke about on our Q2 call operating results were positive and overall in line with our expectations. While the need for this additional reserve is certainly very disappointing, it is isolated to one agent in one country and has not impacted our operations there. We continue to do business in the MENAC region and are working directly with the end customers that were previously serviced through this agent. Without this additional reserve, adjusted EBITDA margin would have been 19.2% for the quarter. The last time we achieved an adjusted EBITDA margin that high was in Q3 of fiscal 2015, which I believe is an early indication we're on the right course. Tony will provide additional color on the Q3 financial results in a few moments. As we announced on our last earnings call, we launched our ASCEND transformation program focused on driving organic growth, operational excellence improvement, and greater efficiency and productivity in SG&A to enhance shareholder value. With the help and hard work of numerous…

Thanks, Paul and good morning, everyone. Let me first start by saying that I'm excited to have joined Enerpac at the end of May as the CFO of the company. I was attracted to the great brand recognition, quality product portfolio, and ASCEND transformation, and I'm very much looking forward to contributing to the value creation story here at Enerpac. I'm also glad to be leading such a professional and talented finance and IT organization. Now turning to Slide 8, let's review the adjusted third quarter results. Net sales were $152 million, which is a 10% increase in core sales when compared to the third quarter of fiscal 2021. Tool product core sales were up 12%. Service core sales were up 1%, and Cortland sales were up 18%. Adjusted EBITDA margin was 12%, which reflects the increase in receivable reserves that Paul mentioned earlier. This charge had an approximate 720 basis point unfavorable impact on EBITDA margin performance in the quarter. The tax rate for the quarter was 22% compared to 3% in the prior year. This resulted in an adjusted EPS of $0.16, including a $0.14 impact related to the increase in receivable reserve, down from the $0.28 in the prior year. Turning to Slide 9 for details on our sales performance. The strengthening of the U.S. dollar primarily related to the Euro and GBP resulted in just shy of a $5 million reduction in year-over-year sales. Product net sales increased to roughly 8% with approximately 80% of the increase attributable to our tools products, and the remainder to Cortland. As Paul discussed, we saw solid tools product growth across all regions, except Europe, which benefited from a large wind project in the prior year that did not repeat in the current year and was also impacted by the…

Thanks Tony. While demand remained strong, we have refined our full year net sales guidance for fiscal 2022. Due to the ongoing impact of the stronger U.S. dollar we are narrowing our previously issued range of $560 million to $580 million and we now expect full year net sales to be $560 to $570 million. While we continue to have potential tailwinds that could help support growth, we remain cautious. We continue to expect incremental adjusted EBITDA profitability of 35% to 45% excluding the impact of foreign currency and the incremental receivable reserve in the third quarter related to a MENAC agent. Our guidance is based on current economic conditions, such as foreign exchange and the macroeconomic environment. Before we open the line for questions, I'd like to reiterate my enthusiasm regarding the progress we've made on our ASCEND transformation program and we look forward to sharing more details with you at our Investor Day in the fall. As always, I would like to thank all our Enerpac Tool Group employees around the world for their hard work and dedication to serving our customers and for their excellent efforts in driving our ASCEND initiatives.

Operator that concludes today's prepared remarks. Please open up the line for questions.

Thank you. [Operator Instructions] Our first question today will be coming from Deane Dray of RBC Capital Markets. Please go ahead.

Thank you. Good morning, everyone.

Good morning, Deane.

Good morning.

Good morning.

Hey, this came up a couple of different times and we're pretty familiar with this phenomenon, but when you, in periods of spiking oil prices that the refiners are working so hard, 24x7, that the MRO activities just get pushed out. So it came up a couple of different times. Can you size for us what that impact is? And at certain point they have to do this maintenance because then it becomes a safety issue, but what's the perspective and any color there would be helpful?

Yes. Thanks Deane. Yes, this is Paul. So yes and I think you're right. We did comment on that. I think it particularly impacted our ESSA region more significantly in Q3 and we did see just given the high oil prices, and frankly, obviously the energy demands as countries there in Europe trying to offset some of the energy demands and the need for energy that can't be met obviously with all the traditional Russian imports, there were sort of running over time. So we do see that happening and that has delayed some of our service work and maintenance projects. We haven't sized that externally, but what I would say is you're right, we -- you know, that, that can't go on forever. There is a period in time when they can opt to continue to run the assets, but at some point maintenance requirements will catch up. Obviously there are assets also coming back online and being utilized more. So as we see the supply-demand imbalance come to more of a balance in the coming quarters, we expect that we'll see a return to kind of more traditional maintenance levels, particularly in the ESSA region. We did see strong activity as we noted in oil and gas in our service business in the Americas. And frankly, even in MENAC we saw some nice recovery there. So it's really most predominantly in ESSA, but we do expect that should come back to benefit us in the coming quarters here.

Great. And just as a follow up, I really appreciate all the color around the disruptions in China, the COVID shutdowns and the ripple effects on all the ports and it sounds like you've been proactive about using alternative ports, so that's really helpful. If we just step back and say, are you seeing any signs of a slowdown, maybe if you could give us the cadence of organic revenue growth in the month or by month and was there any change in kind of like the day rates, order rates as you progress through the quarter? Thanks.

Yes, I would say Deane, demand was really strong, honestly, throughout Q3. We did not see any tail off in activity and actually it's remained solid in the first four weeks of our fourth quarter here, so no signs to date or indications of any slowdown that we can see at an overall macro level obviously, when you get into granular details of specific accounts or certain countries here and there, but at an overall level across our regions and across our whole book of business, we haven't seen any significant drop in demand.

That's real helpful. Thank you.

Yes. Thank you.

[Operator Instructions] The next question is coming from Jeff Hammond of KeyBank Capital Markets. Please go ahead.

Hey, good morning guys.

Hi, good morning, Jeff.

Good morning.

Just wanted to hit on kind of the ASCEND strategy and kind of where your early spending is being spent. And, and if you started to get a better sense of what you think the maybe year one savings is coming out as we look into fiscal ’23?

Yes, sure. So again, we remain really excited and optimistic around the progress we've made on ASCEND. We still continue to believe the numbers that we communicated last quarter was $40 million to $50 million of incremental adjusted EBITDA as a run rate exiting fiscal 2024. We spent, as I referenced in my earlier remarks, the last three months a pretty detailed kind of bottoms up design work across dozens of initiatives. I'd say the focus was really in kind of five key areas. We’ve done a lot of work on product and go to market strategy, including SKUs and SKU rationalizations. We've done an extensive amount of work on pricing, and that's what we're talking about in ASCEND is what we call strategic pricing. So the pricing that we've taken to date, sort of I'll call it transactional pricing to cover -- over cover for inflationary costs is just that. But what we're looking at is then strategic pricing. We've done quite a bit of work on building out our analysis and initiatives that we'll be able to implement around that. We've also done an extensive amount of work on sourcing related initiatives, as well as manufacturing and footprint. And then finally on, on overall G&A spend and how we can be more efficient in different models of making that work more effectively in our company. So as I referenced, it's been -- we've involved dozens of people across the company, I think close to 200, have been pretty deeply involved in various initiatives and aspects of the program to date. So we have not set out guidance for next fiscal, either overall guidance or what we expect as benefits and costs from ASCEND, but we do expect to lay that out at our Investor Day in mid-November in New York. We would expect to see some additional charges in Q4. The costs in Q3 were minimal, I think close to $4 million that was largely related to some external support as we ramp up the start of the program, and we expect to see some additional costs in Q4 as we go forward with further implementation around ASCEND. But again, we'll be able to share, I think a lot more details at our Investor Day in the fall.

Okay. And then just on supply chain, I mean, it seems like in a lot of respects, it's gotten worse and, or more complicated, and I think you said past due backlog got worse, you think it's going to get better? Like what's the confidence that you can start to make a lot of progress on that past due backlog and kind of get back to neutral?

Yes. Look, I think as we talked about, we continue to see supply chain and logistics challenges in the quarter. I don't think that's dissimilar from other industrial businesses as far as we hear and understand. Certainly the Russia-Ukraine conflict has created some incremental concerns. And frankly, I think we expect to see that for the foreseeable future, more than likely through this calendar year. Having said that I think our operations and supply chain teams globally have done just an exceptional job working through that, just dealing with all the whack-a-mole as I call it of chasing parts and managing through all the logistics and freight challenges between port backup and Shanghai. Well probably won’t be a port backup here in the U.S. as things ship from Asia to the West Coast obviously the potential port strike on the West Coast itself. So I think we've been pretty diligent at trying to get as best as we can ahead of many of the challenges, but we're not immune to the issues that are facing many companies like ours. So we did see an increase in the past due backlog in the quarter. We do expect to make a decent dent in that here in Q4, but I think it remains to be seen how long these impacts will take effect. That said, with China lockdowns largely behind us, we -- our production was down for about 10 days in China at our plant and then we slowly ramped back up and tried to close loop, manning process there. But with that largely behind us, we expect to see a little bit more favorability in pick up, barring any other unknowns happening here in Q4 from a logistics challenge perspective. But that's where we -- that's our current sort of perspective on where we're going to be in Q4.

Okay, I appreciate it.

Okay, thank you.

Thank you. At this time, I would like to turn the floor back over to Mr. Sternlieb for closing comments.

Okay. Well, thank you for joining our Q3 earnings call today. Have a good day, and we look forward to speaking with you again next quarter and at our Investor Day in New York City in mid-November. Take care and have a good day.

Ladies and gentlemen, thank you for your participation and interest in Enerpac Tool Group. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.