Enerpac Tool : Presentation Q1 2021

Fiscal 2021

First Quarter Earnings

D e c e m b e r 2 1 , 2 0 2 0

Forward-Looking Statements

Statements in this presentation that are not historical are considered "forward-looking statements" and are subject to change based on various factors and uncertainties that may cause actual results to differ significantly from expectations. Those factors are contained in Enerpac Tool Group's Securities and Exchange Commission filings.

All estimates of future performance are as of December 21, 2020. Enerpac Tool Group's inclusion of these estimates or targets in the presentation is not an update, confirmation, affirmation or disavowal of the estimates or targets.

In this presentation certain non-GAAP financial measures may be used. Please see the supplemental financial schedules at the end of this presentation or accompanying the Q1 Fiscal 2021 earnings press release for a reconciliation to the appropriate GAAP measure.

2

Fiscal 2021 First Quarter - Executing on Key Priorities

Employee Safety Remains #1 Concern

▪

▪

▪

Plants continue to operate with appropriate safety measures in place

Non-production personnel have started to return to the office (following guidelines from local governments) with ~40% currently working from home

Travel to customer/project sites varies by region but consistently finding ways to promote Enerpac products

Quarter over Quarter Improvement

• Sales and EBITDA all improved - despite quarantine challenges faced at a few plants
• Decremental margins
• Generated free cash flow year on year

	Remain Focused on Long-Term Strategy
	▪ NPD continues to deliver results
	▪ Capital allocation priorities remain unchanged
	▪ Balance sheet remains strong
	Supporting our Communities
	▪ Education support / scholarships
3	▪
	Making Enerpac an employer of choice

Market Update

Product Order Rates

▪ Order rates continued to improve during the quarter, with IT&S product core sales declines improving sequentially to 14% in Q1 from 20% in Q4

Top Graph - IT&S standard product orders in actual dollars; order dollars are trending positively.

Bottom graph - The year-over-year % change of IT&S standard product orders.

4

First Quarter 2021 Summary

Financials

• Sales: $119M
• Core sales decline of 18% (Product down 16% and Service down 24%)
• Adjusted EBITDA decremental margins of 18%, an improvement over our target range of 35-45%
• Adjusted EPS: $0.09
• Temporary cost actions provided ~ $6M in benefits in the quarter
• Free Cash Flow: $7M of cash generated compared to $25M usage in the comparable prior year period
• Leverage of 1.9x

	IT&S Regional Core Sales
	▪ Europe growth: ~low single digits%
	▪ Americas decline: ~high teens%
	▪ Asia Pacific decline: ~low 20%
5	▪ Middle East decline: ~mid 30%

Regional/Vertical Markets - IT&S Products

Americas / Europe

• Continued sequential improvement in the quarter with Europe's recovery (year-over-year growth in the quarter) still ahead of the Americas
• Key Verticals
• • Positive trends continued in Power Generation (Wind/Nuclear), Construction, Rail and Aero (non-commercial)
  • Mining activity picked up, particularly in Latin America (copper and iron ore)
• Distribution
• • Increase in customer / distributor site visits, but access is limited
  • Started to see an uptick in stocking orders from larger distributors along with a decrease in drop ship requests

Asia Pacific

• Recovery varied by country with China and Australia seeing fewer travel restrictions and a pickup in sales activity, while parts of South East Asia are still facing lockdowns
• Key Verticals
• • Mining continues to remain strong in Australia, Indonesia and parts of China (iron ore, gold and precious metals)
  • Continue to see positive trends in Power Generation, especially wind energy

	Heavy Industrial laneway (where majority of our products are sold) is improving but appears to be
6	recovering more slowly than Light Industrial, Commercial and Consumer laneways

Service and Operations

Service

• Experienced significant sequential improvement in the quarter (down 24% year-over-year compared to 45% last quarter)
• Routine maintenance projects picked up and some larger projects that were stalled due to COVID-19 resumed work
• MENAC region continued to be pressured with continued COVID-19 related lockdowns and curfews
• • However, region is beginning to see change in spending habits as new annual budgets are released in January, with more maintenance work scheduled to start in coming months

Operations

• Safety, Quality and On-Time Delivery remain a focus
• Uptick in utilization and efficiencies drove strong decremental margins
• Balancing customer demand with inventory management to ensure that we have product to meet orders without burdening the balance sheet
• Monitoring rising air freight and commodity costs

7

First Quarter 2021 Comparable Results

(US$ in millions except EPS)

$147		13.3%	12.2%
$111	$119		9.4%

NET SALES*

• Core sales decreased 18% - product -16% and service -24%
•	IT&S product sales -14%
	• Heavily impacted by COVID-19 pandemic
	• Rate of decrease improved from -20% in Q4
•	Other product -35%
• New Product Development (NPD) - 3 new products families launched
• NPD % of product sales ~10%
• Strategic exits ~$6M

Q1 2020 Q4 2020 Q1 2021

Net Sales*

10.2%

7.9%

4.2%

Q1 2020 Q4 2020 Q1 2021

Adjusted EBITDA %*

$0.12

$0.09

$0.02

• HTL acquisition ~$2M

ADJUSTED EBITDA*

• Decremental margins of ~18%

ADJUSTED OPERATING PROFIT*

• Year-over-yeardecline due to significantly reduced volume

ADJUSTED DILUTED EPS*

Q1 2020	Q4 2020	Q1 2021	Q1 2020 Q4 2020 Q1 2021
Adjusted Operating Profit %*	Adjusted Diluted EPS*

*Adjusted Operating Margin, EBITDA Margin and EPS excludes restructuring, impairment and other charges identified in the accompanying reconciliations to GAAP measures. In addition, see reconciliation of net

8 sales to core sales in the appendix.

• Year-over-yeardecline as the result of significantly reduced volume due to COVID-19

Net Sales Waterfall*

(US$ in millions)

$155
$150
	$1.5	$5.6
$145
$146.7
$140			$16.8
$135
$130
$125			$8.9
$120				$2.5
$115					$119.4
$110
$105
$100
$95
Q1 FY20 Net	Fx Translation	Strategic Exits	Volume - ProductVolume - Service	HTL Group	Q1 FY21 Net
Sales				Acquisition	Sales
9

• See the reconciliation of net sales to core sales in the appendix.

Final quarter of strategic exits (as outlined in Q4 of fiscal 2019) along with the impact of the COVID-19 pandemic, and sluggish Oil

• Gas prices resulted in lower sales year-over-year

Adjusted EBITDA Waterfall*

(US$ in millions)

$35
$30
			$3.8	$9.4
$25		$6.4
$20
	$19.4				$3.8
$15	12.3%					$5.5		$1.2	13.3%
							$2.5		$14.6
$10
$5
$0
	Q1 FY20	COVID-19	Restructuring	Volume -	Volume -	Mfg Variances	SAE	Other	Q1 FY21
	EBITDA	Initatives	Savings	Product	Service				EBITDA
	10

* Includes certain Non-GAAP financial measures. See the accompanying reconciliation tables for additional details.

Adjusted EBITDA decreased year-over-year primarily due to COVID-19 product/ service volume decreases, partially offset by restructuring and other cost savings initiatives resulting in decremental EBITDA margins of 18%, an improvement over our target range of 35-45%

Liquidity - Positioned for Success

(US$ in millions)

$10														$286
		$7		$207																					1.9
																							1.8
								$152			$159		$255			$255
	Q1 2020 Q4 2020 Q1 2021									0.8
$25
	Free Cash Flow					Q1 2020 Q4 2020 Q1 2021			Q1 2020 Q4 2020	Q1 2021		Q1 2020 Q4 2020 Q1 2021
					Cash Balance					Gross Debt					TTM Financial Leverage

Free Cash Flow	Leverage
• Proactively managing Receivables and Inventory	•	Remains well within target range of 1.5-2.5x
•	Divestiture of EC&S eliminated significant cash drag	•	Slight uptick was expected due to COVID quarters with
•	First time since fiscal 2017, generated free cash flow in Q1		lower EBITDA

11

Thoughts on Fiscal 2021 Second Quarter

▪

▪

Despite typical Q2 seasonality, we expect that Q1 trends will continue Continue to control what we can control

• Remain focused on cost management to deliver comparable decremental margins
• Continue to invest in long-term growth through new product development and commercial effectiveness
• Manage liquidity and maintain strong balance sheet

Near-term Industrial Production Estimates (Annualized q/q %) *

Calendar				Low		High
Q4 20	-15.9%	-2.1%
-14.6%
Q1 21	-2.1%			15.4%
Q2 21				17.9%
	-0.6%
Q3 21				11.2%
	-1.2%
Q4 21				12.7%
	-0.2%
Q1 22		10.3%

Chart shows high and low estimates of industrial production from certain economists. Continues to be a wide disparity of what the near future looks like

	Due to continued uncertainty and lack of forward visibility into market conditions, Enerpac Tool Group
	is not providing financial guidance at this time
12	*Source: Bloomberg. Data used includes estimates updated on or after 11/13/2020.

Clear Value Creation Model - Long Term Vision

CORE GROWTH ABOVE MARKET

~5% CORE GROWTH CAGR OR

200-300bps CORE SALES GROWTH > MARKET

▪	Product innovation	▪	Commercial effectiveness
	Expand industries and		& share capture
▪
	regions	▪	Incremental growth
			through strategic M&A

STRONG CASH FLOW GENERATION

+100% FCF CONVERSION = FUEL FOR GROWTH

▪ Margin expansion	▪ Drive working capital
	velocity

• Low capital intensity (Capex ~2% of sales)

DRIVING EFFICIENCY AND PROFITABILITY

~25% EBITDA MARGINS

▪ 35%-45% incremental	▪ Completion of service &
margins	product line restructuring
	exits

• Optimized manufacturing

footprint	▪	Strategic sourcing
▪ Structural cost reduction	▪	Proprietary products

BEST-IN-CLASS RETURNS AND DISCIPLINED CAPITAL DEPLOYMENT

~20% RETURN ON INVESTED CAPITAL

▪	Organic growth: products,	▪	Debt reduction; maintain
	services & people		strong balance sheet
▪	Strategic acquisitions	▪	Leverage target of

1.5x - 2.5x

• Opportunistic share repurchases

13	The timeline to achieve these goals will be re-established as soon as practicable once the market has appropriately recovered

Q&A

Appendix

Fiscal 2021 Annual Modeling Assumptions

• Tax Rate: ~25%
• Depreciation/Amortization: ~$20-24 million
• Interest Expense: ~$6-8 million
• Capital Expenditures: ~$10-15 million
• Cash Taxes: ~$5-7 million

16

EBITDA Margin Expansion - Controlling What We Can Control

Fiscal 2019

Fiscal 2020

Fiscal 2021

Timing Dependent on Market Recovery

Strategic Vision

									Incremental Profit
									Incremental
									on Growth
					Continue Footprint		Growth
					Optimization				~275-325bps*
		Structural			~150-200bps*
		Cost Reduction						▪	Profitability on
									Incremental Profit
			✓	Cortland plant				incremental product
		~200-300bps*			consolidation				on Growth
						▪	sales from 35-45%
	✓		▪	Enerpac plant	~$5M	Focus on value
	Eliminate EC&S
	~$3M	optimization		added service and
		stranded costs
~200-300bps*								rental
✓	Redundancy in segment				▪
				Growth from market
		vs corporate costs
✓ Enerpac/Hydratight				~$10M				and NPD
✓	Reduced third party
Consolidation
	support costs

EBITDA ~15%

EBITDA ~25%

• Based on structural actions taken and when markets return to growth, positioned to generate EBITDA margins of 25% or better.

Impacted by

COVID-19

Cost structure progression in Fiscal 2020

Actions to Date

	$15M			$13M		$5M
					$33M Structural Cost Out
✓	Enerpac/Hydratight		✓ Eliminate redundancies	✓ Cortland plant		✓ Operational structure
		✓	Eliminate EC&S stranded	consolidation
	restructuring			positioned for growth
				costs

17 *based on 2019 Adjusted Revenue and EBITDA

First Quarter 2021 GAAP vs Non-GAAP Reconciliation

(US$ in millions except EPS)

		Less
		Impairment &
		Divestiture	Restructuring
	GAAP	Charges	Charges	Adjusted
Sales	$119.4			$119.4
Operating Profit	$9.1	($0.1)	($0.2)	$9.4
Income Taxes	$2.3	$0.0	$0.0	$2.3
Net Income	$4.8	($0.1)	($0.2)	$5.2
Effective tax rate	31.9%
Diluted EPS	$0.08	$0.00	$0.00	$0.09

Impairment & Divestiture Charges include:

• $0.1 million charge related to the impact of previously divested product lines/businesses

Restructuring Charges include:

• $0.2 million charge primarily related to footprint rationalization

18

Reconciliation of Non-GAAP Measures

(US$ in millions)	Adjusted EBITDA
		Q1	Q1
		2021	2020
	Net Earnings	$5	$6	0
	Net Financing Costs	$2	$6
	Income Taxes	$2	$1
	Depreciation & Amortization	$6	$5
	Restructuring Charges	$0	$2
	Impairment/Divestiture	$0	($1)
	Adjusted EBITDA	$15	$19

Free Cash Flow

		Q1			Q1
		2021			2020
Cash From Operations	$		9	$	(23)
Capital Expenditures	$		(2)	$	(5)
Other	$	-		$	3
Free Cash Flow	$		7	$	(25)

Core Sales

		Consolidated			IT&S Segment
	Q1 2021	Q1 2020	% Change		Q1 2021	Q1 2020	% Change
Net Sales	$119	$147	-19%	$112	$136	-17%
Fx Impact	$0	$2		$0	$2
Acquisition	($2)	$0		($2)	$0
Strategic Exits	$0	($6)		$0	($6)
Core Sales	$117	$143	-18%	$110	$131	-17%

• The Enerpac Tool Group fiscal 2021 Q1 earnings release and full GAAP to non-GAAP reconciliation is available online at:
  19https://www.enerpactoolgroup.com/investors/quarterly-results/

Adjusted Operating Profit Waterfall*

(US$ in millions)

$30

$25
		$3.8	$9.5
$20	$6.4
$15
$15.0				$3.8
$10		$9.2			$5.5		$0.7
						$2.3		$9.4
$5
$0
Q1 FY20 OP	COVID-19	Restructuring	Volume -	Volume -	Mfg Variances	SAE	Other	Q1 FY21 OP
	Initatives	Savings	Product	Service
20

* Includes certain Non-GAAP financial measures. See the accompanying reconciliation tables for additional details.

Adjusted Operating Profit decreased year- over-year primarily due to COVID-19 product/service volume decreases, partially offset by restructuring and other cost savings initiatives