Announcer:
From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business. For over 230 years, the NYSE has been the beating heart of global growth. Each week we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and ICE's exchanges around the world. Now, let's go Inside the ICE House. Here's your host, Lance Glinn.
Lance Glinn:
Building industrial tools that stand the test of time is key to driving reliability and minimizing costly downtime. Durable, high-quality tools don't just save businesses' money, they keep operations running day in and day out. Safety first design is crucial not only to protect workers, but to meet strict industry standards that ensure peace of mind. When tools are built for maximum efficiency, customers unlock higher productivity without sacrificing precision.
Investing in tough, reliable tools means safeguarding both your workforce and your business, empowering you to perform at peak potential every single day. For over a century, Enerpac Tool Group, that's NYSE ticker symbol EPAC, has developed technically superior solutions that are easy to get, safe to use, and built to last.
Our guest today, Paul Sternlieb, has led the company as president and CEO since 2021 and has built on Enerpac's rich tradition and long-standing track record of success. Through strategic maneuvering and growth, he has positioned the company to take advantage of the opportunities ahead. Paul, thanks so much for joining us Inside the ICE House.
Paul Sternlieb:
Thank you. Pleased to be here.
Lance Glinn:
So Enerpac's origins trace back to 1910 when it produced water pumps for Ford's Model T, later pioneering hydraulic jacks in the 1920s. The Enerpac name didn't emerge until the late 1950s, but the company's strong reputation has been around since its inception over a century ago. So for those who just may not be familiar with the brand, can you just describe the company and its mission to customers today?
Paul Sternlieb:
Sure. So Enerpac Tool Group, we're headquartered in Milwaukee, Wisconsin, obviously publicly listed on the New York Stock Exchange and happy to be part of that and a member here. And we've been listed with New York Stock Exchange for over 35 years, I believe. So today we're about a $600 million revenue global manufacturer. Our primary focus is industrial tools, mainly high pressure hydraulic tools.
We're a very global business. Just about 40% of our revenue is in the Americas, but we have extensive presence all throughout the world, over 100 markets all throughout Europe, Asia-PAC, parts of Latin America. And we have about 2,000 team members across the world, and about 80% of our revenue is from our products. And then we also have a service business that we can talk more about, and that's about 20% of our revenue.
Lance Glinn:
So we just talked big picture about the company. Since the start of the 2020s, industries have rapidly evolved, with technological advancements reshaping, excuse me, operations and shifts in the workforce, transforming workplaces. So maintaining agility and avoiding complacency has become more critical than ever, no matter what industry you go into. So how has Enerpac evolved just over the past five or so years to stay ahead and continue innovation and make sure that that complacency doesn't happen?
Paul Sternlieb:
Yeah, sure. We've undergone quite a bit of, I would say, positive change in the company even just over the last several years. So if I backtrack just a bit for history, so the company was formerly known as Actuant from 2000 when it was spun out of its parent company until really 2019, when in the late teens it went through some portfolio changes and was relaunched and rebranded as Enerpac Tool Group in 2019. I joined when my predecessor made a decision to retire.
I joined in October of '21, so just a little over three years ago. Today we are a pure play industrial tools and services business, and we're really focused on helping our customers with mission-critical applications. We say that we make complex and often hazardous jobs possible safely and efficiently. So we need to be really great at what we do and we need to be great innovators for our customers.
And so over the last several years, we've really, I'd say in many ways, transformed the company. So part of that was undertaking what we called our ASCEND transformation program. I could certainly talk more about that, but there are elements of driving performance improvement in organic growth, as well as improvement in margin profile, COGS and SG&A, and we've done that. And that's really positioned the company for the next stage of growth and evolution as we sit here today.
We've also really spent a lot of time going back to basics on innovation. To your point, the company has a really strong history and heritage of innovation and bringing new products and technologies to the market. We're really at the forefront of that. We're extremely well-known for our products and the technology that we provide customers and what they expect from us.
So just in the last year, most recent fiscal '24 that we completed, we launched six major new products, including a new product category entrant, our Battery Torque Wrench lineup, into the market. And those are all really differentiated. One of the things that we like to say is things only Enerpac can do in a very differentiated way. We help customers do things that are very difficult to do.
We solve their problems. We meet their unmet needs and address their pain points in their particular markets or applications. And we do that very effectively with technology that our team develops every day. And they do that based on customer insights. We have a team that gathers what we call VOC or voice of customer. They're out in the field within customers understanding what they do, what their issues are, and how we can make their lives better.
Lance Glinn:
And so as we sit here now with the New York Stock Exchange, it's early 2025, as you assess the current standing of Enerpac Tool Group and project or look ahead and try to figure out what the rest of the year is going to look like, what would you say is the standing for success and the prospects for achievements in the months to come?
Paul Sternlieb:
Yeah, I mean, I think we have pretty bold, ambitious plans for where we'd like to take the company. I mean, we've made good progress and our teams worked exceptionally hard to drive those results the last few years and we've sustained that. But we're super excited, frankly, about the path ahead. We have our own organic growth strategy that we've built and are executing.
There are four key pillars to that around our focus on a select set of vertical markets that we are investing in disproportionately to drive accelerated growth, our digital transformation program, which is progressing extremely well. All the work we're doing, as I just talked about or alluded to, on customer-backed innovation, and then all the work we're doing to drive accelerated growth and expansion in the Asia-Pacific region.
So organically, I think we've made good progress and excited about the journey ahead in each one of those pillars. We can certainly talk more about those. And then inorganically, we have a lot of opportunities. We operate in a very large, fragmented, and pretty healthy set of end markets. We believe our addressable market today is four to 5 billion, and we're a roughly $600 million company.
We've got plenty of runway to play and to penetrate and drive more market share gains and also over time to expand that addressable market both organically, but particularly I think through inorganic growth. So we've got an extremely healthy balance sheet with, just as we sit here today, about half a internal leverage at the end of our most recent quarter. And that gives us a lot of capability and capacity from a capital perspective to really not only invest in the core business, but to do things in organically that create value for our shareholders.
Lance Glinn:
And you mentioned the four pillars for organic growth. Can you just dive further into those pillars and how they help lead Enerpac into the future?
Paul Sternlieb:
Yeah, so I'll take them in turn. The first is, and we launched this at our investor day here in New York in November of 2022, just a little over two years ago, and we've been executing on that growth agenda since. So the first is our vertical market strategy. So one of the nice benefits of Enerpac from a shareholder perspective is that we have quite a set of diverse end markets that we serve today. Truly, I would say dozens. So in my vantage point, we're not really overly reliant on any single end market for Enerpac to perform.
One market may be performing better up or down and offset by another market. And so we enjoy that diversity, which is particularly helpful. But at the same time, we also want to drive focus. So we'll continue to serve those end markets, but we selected four specific vertical markets that we think are really attractive end markets in terms of the underlying fundamentals, the growth prospects in those markets, and secondarily our right and our ability to win and be successful and drive market share gain.
Those four markets are infrastructure, rail, industrial MRO, and the wind sector. And we still feel good about all those and we've made good gains even in the last two years in each of those markets. We do that through strong commercial execution, partnerships with our channel, direct interface and relationships that we continue to build and develop with end users in each of those markets like Class I rail operators, for example, in the rail sector and through deep innovation and working closely with our customers to iterate on those products and innovation that we bring to market.
So that's the first of the four pillars and we've made good progress there. The second is all the work we're doing as I talked about digital transformation. There's really two aspects. Part of that is the work that we've invested behind our IoT we call Enerpac Connect, which is about connectivity to some of our products, particularly some of our newer products where we allow customers to get insight from the operation and usage of those products, logs, diagnostics, over-the-air firmware updates, so they don't have to take the product offline and bring it to a site to get updates.
And we'll continue to innovate and add that feature and functionality to new products as we launch them. But the second aspect is also all the work we've been doing on e-commerce. We have a budding and growing e-commerce program where we sell direct to end customers on our website. And that's a way of, again, having that direct relationship with end customers and basically being wherever customers want to buy our product.
We just want to be universally available so they can find us, and that's one outlet that we've made available and accessible to those end customers. So that's a pretty exciting area of growth for us, and we've seen really strong growth in that, in particular in the e-commerce channel. I'd say third is, frankly, all the work on innovation, and that's really directly tied to the vertical market. Over the last three years, we basically had to reboot our innovation program and we went back to basics on what do we need to gather the right voice of customer?
What are the right skills? How do we build those relationships with end users? How do we reset our own internal processes to be most effective? And then I'd say thoughtfully going through the current at that time product roadmap and making sure that what we have in there was really driven and born out of true customer insight, not just what I would call engineer with a good idea, and also has a strong return at the end of the day for the company, our shareholders.
And then we spent a lot of time just out in the field gathering real insights. Then fiscal '24 was that year where we really brought it to the floor and launched a number of successful products that we still see ramping and commercializing today. And that's very focused in those vertical, frankly. And then I'd say finally is Asia-Pacific. It's about 15% of our revenue today, but it's obviously a huge part of the world and population.
Of course, lots of needs there for our products and services. And we have extensive presence throughout the region, but I say we've not come close to meeting our full potential of what we can accomplish there. So we've invested in new commercial resources, but we've also invested behind our second brand strategy. We call that brand Larzep, and that's really about penetrating the mid-tier segment.
Enerpac has historically been playing almost exclusively in the premium sector of the market. And with Larzep and our second brand, we can offer a feature-rich product at a more cost-effective price point for customers who need that in those markets. And that's exactly what we're doing in Asia-Pacific right now.
Lance Glinn:
Is it a challenge to break through in those markets that you may not have as strong a foothold as you say want?
Paul Sternlieb:
Yeah. I mean, it'll take time. I think the good news is we already have existing customer relationships and channel partners there, and obviously we have the infrastructure. We have sales offices. We have logistics. So we don't need to invest from scratch. What we are doing is investing marketing behind the brand to drive more awareness, credibility, and make sure customers understand what our offering is. It's not the full set of 30,000 Enerpac SKUs, but there is a subset that we offer and we are seeing good growth in that.
Lance Glinn:
You mentioned these four pillars, right? And none of them are possible without obviously the employees that make up the large majority of Enerpac, and employee safety and employee development are top priorities for the company. And the company's full year 2024 safety results exceeded industry standards. What do these results reveal about Enerpac's commitment to making sure the employees have a safe time at work, have an enjoyable time at work, and have the opportunity to develop both their business life, their career, as well as personal?
Paul Sternlieb:
Yeah, look, it's hugely important to us. We have five core values. Safety is first and most paramount, frankly. And that's true I think largely in the industries we serve, because ultimately, customers are using our products in what they consider mission-critical applications where productivity and efficiency are really important, but safety is hugely important.
I think it's born out of that, but Enerpac has always had a really strong safety culture internally, as you referred to, but also externally in terms of how we think about product development and our service offerings to our customers. And so we are extremely proud of our safety track record and also about the quality of our products that enables customers to get and perform jobs extremely safely and effectively.
And yeah, it's something we talk about literally every single day. We start every single management meeting on the topic of safety and we review that performance. And it's important to us that all of our team members around the world keep that top of mind, and ultimately that we send people home at the end of the day the way they came to work. And so it's so ingrained in our culture.
In fact, we do an employee engagement survey roughly every year, and we ask lots of questions, including about safety, but we also ask people to describe just some words, like a word cloud of top things that come to mind when we think about Enerpac. Every single year top word, safety. It comes out.
I think it shows you the power of what we can accomplish as a team when we set our mind to it and when we put so much importance and investment behind that, again, in our own operations for our own employee base, but also in our thinking of how we design products for our customers.
Lance Glinn:
So I want to shift the conversation now to just Enerpac's overall development and growth. And in 2024, you launched Powering Enerpac Performance. It's a cross-functional continuous improvement program aimed at enhancing processes and products. What just, first and foremost, inspired this initiative and how does it support Enerpac in achieving its goals while, of course, staying true to its value and core mission?
Paul Sternlieb:
Yeah, sure. Well, I'll start with, we set some objectives back when we launched at our investor day over two years ago, and one of those was a financial framework, and that has our targets for what we'd like to achieve in terms of organic growth over our multi-year timeframe and also margin expansion. We set a target there to achieve 25% adjusted EBITDA margins by fiscal '25 and thereafter roughly 50 basis points a year.
The fact is through the last several years in the execution of our ASCEND transformation program, we actually got there a year early, 25% in fiscal '24. We've built into our guidance effectively this year at the midpoint, excluding the recent acquisition, 50 BPS of margin expansion. So that is our continuing objective. Now, how do we accomplish that? The reality is it's the continuation effectively of ASCEND. So PEP is the evergreen version of ASCEND.
It is our internal continuous improvement program and our culture here at Enerpac. It's the way we operate the business, the mindset, the mentality, but also the mechanics of how we drive that rigor, that cadence of that program in terms of idea generation, initiatives that we form, how we execute them and how we track progress and results and sustain those results, and make sure that we see the impact in the P&L and the balance sheet.
And that's exactly what we did through ASCEND, and it's the same framework and mechanics that we're using with PEP, Powering Enerpac Performance, today.
Lance Glinn:
And so I'm doing my research as I'm preparing for this podcast, and I'm reading about PEP and the word sustainability pops up whether it be remarks that you had made regarding it, notes written down. So how does PEP incorporate sustainability into its daily operations, reducing waste, and just frankly, overall enhancing efficiency?
Paul Sternlieb:
Yeah, it's certainly fundamental. It's one core component, right? I mean, we look at sustainability in our business and we look at it from the standpoint of what's the right thing to do for all of our constituents? What are our shareholders value? And also what makes good business sense? And certainly where those line up, I mean, it's a natural obvious thing to go do, and we found many opportunities to invest behind those initiatives. And we'll continue to do that going forward. So not all of PEP is directly related to sustainability, but there certainly are key aspects of those initiatives that are tied to it.
Lance Glinn:
So you mentioned earlier you joined in 2021, just over three years. What brought you to Enerpac? How did you not even just get into this industry, but what specifically when you're thinking of your next career step and you see this opportunity at Enerpac, what drew you to wanting to join and grow within this company?
Paul Sternlieb:
Yeah, look, I mean, when I was contacted about the opportunity, my predecessor made a decision to retire and the board launched a search, and that's how I initially learned about the opportunity. Obviously at that time, I did quite a bit of research. I was somewhat familiar with the company and the brand. But the more I learned about it and the more conversations I had, the more excited I got.
Because I just saw this as such significant untapped potential in the business to really take what looked like it was a really good business and make it a really great business, and really a top tier, world-class industrial manufacturer. And we have, I believe, every right to be that. And I think we're well on the journey to reaching that marker or milestone.
Part of that is just the premium nature of the product and some of the key competitive advantages that we enjoy, thanks to predecessors of mine and other management and employees over decades that have built this business, but they consist of many. I mean, we have key competitive advantages like our channel. We have 900 channel partners roughly globally.
Those are relationships that have built over decades. They're extremely well steeped in Enerpac and our technology, our products. Many of them are authorized service and repair centers. So they're really a part of who we are and a key element of how we go to market and serve our end customers, ultimately. The power of the brand itself. People would ask me early on when I joined, what surprised you the most?
And I would say, I'm still amazed by the power of the Enerpac brand. And I would say that today. It is so substantial. For our end customers and users, they really value Enerpac, what it stands for and what we provide in our product and service. And ultimately, that's about quality, durability, reliability, and safety. And we talked about some of those earlier. And ultimately, that's the brand promise that we have to and we do deliver on.
And there are many other aspects. We have such a breadth and depth of product lineup in our portfolio. 30,000 SKUs that we offer. We're kind of a one-stop shop for many, if not most of our customers. And we've got great applications experts in our business, people with decades of experience.
So when we have end customers that are trying to get a job done and don't quite know how to do it or what tools to use, they call our experts and we help specify that and direct them into a channel partner to go buy it. So as I looked about all those things, I looked at the P&L, I looked at the strength of our gross margins, even back then I thought this is really just significant untapped potential, and that's what we've been going after over the last few years.
Lance Glinn:
Where are you originally from?
Paul Sternlieb:
I grew up just north of Boston, Salem, Massachusetts.
Lance Glinn:
So you're used to the cold weather?
Paul Sternlieb:
As I tell people, I'm used to it, but it doesn't mean I like it.
Lance Glinn:
Got it. No, trust me, winter is my least favorite season by far. I'm a much more of a summer guy. I'm here born and raised in New Jersey, so not as cold as Boston or say Milwaukee, but we still obviously get some cold weather during those few months. So have you migrated over from, I'm assuming, Sox, Patriots, Bruins, to now Packers, Brewers, Bucks?
Paul Sternlieb:
Yes. I mean, you can't live in Wisconsin anywhere without being at least a Packers fan. Otherwise, you get thrown out. So we're certainly Packers fans in my household and obviously the Brewers and the Bucks as well. So we are fortunate, we live in a great sports town and we enjoy watching those teams perform.
Lance Glinn:
What makes Milwaukee right for Enerpac?
Paul Sternlieb:
Yeah, I mean, it's the heritage of the company. I mean, we've been based in Milwaukee since the early days, as you talked about, since 1910. I think what's great about us is Milwaukee is a small city, but it has all the trappings that you would come to expect and that make life comfortable. I mean, we really have everything and all the benefits that you could expect from even a bigger city in terms of arts and culture, in terms of sports teams, as we talked about.
And then you can get places pretty easily. We're an hour and a half from the Chicago O'Hare Airport, as well as we have our own Milwaukee Airport. So there's a lot of attractions. We have a great talent base in Milwaukee. State of Wisconsin has invested a lot behind that state is in great fiscal shape. So I mean, it's an attractive place for people to want to settle and build a career and a family. And so we've got a phenomenal workforce. We have a great team in Milwaukee.
We'll be moving to our headquarters. We can maybe talk about that too to downtown soon, but that will create even more enrichment for our workforce, just being in a new lively space with access to amenities in the downtown area. And that will create, I think, stronger talent retention and attraction opportunities for Enerpac as well. So we're excited to continuing to be part of the Milwaukee community, and we're really invested in it.
And we participate in various aspects of the community through our engagement and volunteer work in our Enerpac Lifts Up program, et cetera.
Lance Glinn:
So 2024, Enerpac expanded. Eric Chack joined as executive vice president of operations, Darren Kozik joined as EVP and CFO. How have their strengthened the company's operations and contributed to building a real all-star team for you?
Paul Sternlieb:
Yeah, we've made quite a number of key changes, not only in senior management but even deeper in the organization over the last three years. And part of that was realigning our talent base to have the right skill set and background for what we needed to accomplish and what we need to do going forward. And I think Eric Chack and Darren Kozik are really emblematic of that.
They both bring a real depth of experience. They're really hands-on, very capable leaders, great people leaders, but also technically astute and adept at what they do in their own functions. They've been a key part of driving and will be going forward for a number of years driving the key change here at Enerpac. For US, operations when I joined the company was not a global function.
It was actually regionally siloed. And so we've globalized that. We have a leader in Eric Chack that takes an enterprise-wide global view, and that's really powerful in terms of the benefits that we can accrue from that.
Lance Glinn:
I want to shift now to M&A. And September of last year, Enerpac acquired DTA, a global leader in industrial heavy loads transportation. Just first, what was the strategic rationale behind the acquisition and how does it add to Enerpac's portfolio to help better serve customers?
Paul Sternlieb:
We've been hard at work in our M&A program now for a couple of years. We have a dedicated leader, I, myself, and Darren, my CFO, we spend a lot of time in that area increasingly more because it is a core part of our overall growth strategy for the company. I think we're well aligned with our board and our shareholders on that, and we've got an extremely strong balance sheet as well to support it.
So we're excited about our growth agenda from an M&A standpoint, not just organically. And I think DTA is a good example. We spent a lot of time building our funnel over the last couple of years and it's now very rich. And we have lots of interesting conversations in our deal flow, including small, medium, and even larger size deals. I think DTA is a good example of something that's on the smaller side. We expect that to generate for us about 20 million euro revenue this year.
It's such a great strategic fit for us because what DTA does is they have unique technology in robotics, automated guided vehicles for movement, as you said, of industrial loads, but they do it horizontally and they do it in manufacturing sites. They do it externally outside as well. And they have very diverse set of applications, including some key end markets that overlap with what we do today in some of our target markets as well.
And so it's extremely complementary in particular with what we call our HLT or heavy lifting technology business. It's based in the Netherlands, but it's a global business for us. That's a business that essentially lifts things vertically, up and down, very heavy loads, precisely. And in concert, with DTA, it's extremely complementary because we have a lot of customers that need to do both, to lift things vertically and also position them horizontally.
And so just for that alone, it made strategic sense. But the other nice thing we liked about DTA, I mean, there's so many things, first is their performance. I mean, they had grown double digits now for multiple years, and they'd done that basically on the back of still only about 90% of their revenue being in Europe. They're a Madrid, Spain-based company, and they never really had much sales focus or even resource here in the US market.
Whereas obviously this is our home market. We have extensive coverage and sales presence here. And so part of the thesis on the commercial synergies is helping them globalize their business. And that's exactly what we've been doing since we completed the acquisition in early September. And so far, the integrations are going extremely well.
Lance Glinn:
And so you talk about the why financially it makes sense, right? And of course, that's a huge reason for why you go about an acquisition. But of course, just because something financially makes sense on paper doesn't necessarily mean when push comes to shove, it's going to work out.
So how do you and your leadership team when you're evaluating potential M&A prospects determine that this partner, this potential partner, will be the right fit culturally, will align with our workforce, will align with our values? Because you could have everything makes sense financially, but if you start to bring the companies together and they don't work out, it could really blow up in your face.
Paul Sternlieb:
Yeah, no, I mean, that's exactly very right and true. And I think we are extremely disciplined for that very reason in how we assess acquisitions. And we've been very measured and methodical about our approach here. There are certainly plenty of things we could have done, but we didn't, chose not to because they were not the right fit, even if they did make economic sense.
And I think DTA is just an example where not only do the economics line up and we feel confident this can generate a really great return for our shareholders, but it was just such a good fit in terms of culturally how the company aligned their values, how invested they are in innovation and technology. And frankly, it's a two-way street. I mean, they were not for sale.
They hadn't even contemplated it. So part of it was convincing that team what's in it for them and why is it going to be great to be part of Enerpac? And if you ask them today, and I was just there two, three weeks ago, their thrilled. Their whole team is really excited to be part of Enerpac, a bigger organization. They feel like they've been embraced appropriately and supported, and yet they're getting on to do what they do well.
So we're not crowding them out and suffocating them. We're managing the integration appropriately. But I think culturally it was a great fit and just technologically. Again, there's such good alignment between the way that we do things and how we think about making really top tier, high quality product for our customers with such a customer bent and focus. And that was all what DTA was about. So it just was an incredibly good fit. And you're right, I mean, that's so important as we think about executing M&A.
Lance Glinn:
I want to shift now to innovation, and we talked earlier about how innovation is done. You speak to customers. They express to you some problems they might be having, some solutions that they need to obviously fix those problems. And then it's your job to go about creating technology, creating tools to then help them out. One product I want to focus on specifically is the series Battery Torque Wrench, the BTW series, Battery Torque Wrench. Now, look, I am not a handyman myself.
I can do pretty much the basics, as I'm sure a lot of people listening. We can do the basics. You need something fixed in my apartment, I could do it. We don't necessarily need to call the super for that. But when it comes to this Battery Torque Wrench and the products that are involved with it, can you just walk me through the science behind it? What about this product stands out and how does it then help the customers or what solution is it used for to then help customers?
Paul Sternlieb:
Yeah, sure. So look, I mean, this is a new product category entrant for us, and there are others obviously in the space today. So we knew it was an attractive category, but we had to find a way to enter it, as I said, in this only Enerpac fashion with something that was going to be very differentiated. And I think we achieved that. So we launched a lineup. It's not a single tool. And these are, again, professional industrial tools. So they're not for domestic use or any of that sort of thing.
Lance Glinn:
I took a look. I took a look at what one of them looks like, and I doubt I'll ever have my hands on one.
Paul Sternlieb:
Pretty heavy-duty, but really impressive what the team accomplished. I point to two key differentiators in my mind. I think one is when you look at a lot of players in this space, these tools can get exceptionally complex to operate. And I know that sounds crazy because it looks like it should be pretty simple tool, but many of them have really complicated configuration screens and calibration modes and the like.
And so it makes it very hard for an end user who's maybe not using it every day to just fundamentally pick up the tool and use it, right? And some of these tools, you literally can't operate unless you go through a whole configuration step and process. And so we wanted to simplify it and make it very easy for our customers to use. The other thing is that one of the things we're really well-known for is just the accuracy of our tools.
And in this space, when you have torque intention tools like our battery torque lineup, it's really imperative and critical that these tools operate extremely accurately. It does what it says on the box or label. And so we've gone above and beyond really the majority of our competitors in the space. And we've built that level of accuracy throughout the whole stream of the torque range and the tool offering.
We've done that precise engineering so that customers can be confident when they're using the tool at whatever torque value, that that's the output that they're getting. So again, that's a very technical feature. But if you're an end customer in this space, that matters to you and that's a differentiator for Enerpac.
Lance Glinn:
So we recently spoke obviously about the acquisition of DTA, and DTA adds to the Enerpac portfolio that includes Larzep, Hydraulics, Simplex, Hydratight as well. How do you leverage the strengths of everything under your portfolio to work together to make sure that they support the overall Enerpac Tool Group brand? How do you bring all these different entities together to come together as one?
Paul Sternlieb:
Yeah, I mean, over the years certainly, I mean, we have I would say rationalized some of the brands, but some of these, like you referenced, Simplex, Larzep, still have a lot of brand value in the marketplace. So I think we've tried to achieve best of both in the sense that ultimately Enerpac is the parent brand. We're not trying to hide that, and customers know that these products are built by Enerpac Tool Group.
And so these products are either focused on specific customer needs or certain markets or applications or a tier segment in the case of like a Larzep. But what stands behind it they know is Enerpac. In the case of Enerpac, the main Enerpac brand as an example, we stand behind that with effectively a lifetime warranty for Enerpac products. So that's extremely important to customers.
And yet warranty cost on our P&L is di minimis. And so that just speaks to the level of quality expectation in our delivery against that. So we do have multiple brands and our service business, we haven't talked a lot about that, but Hydratight is primarily how we go to market. And that's exceptionally well-known and respected in the industry, and I would say top tier class in that sector.
Lance Glinn:
And so with the range of these brands under the Enerpac umbrella and the innovation taking place that we touched on earlier too, how do you measure company success? Is it solely in a quantifiable number, or are there intangibles that dictate to you we're on the right path, we're moving forward as we should?
Paul Sternlieb:
I mean, there are many aspects. I mean, first and foremost, look, we are a public company. We're owned by shareholders, and our responsibility ultimately is, of course, to deliver long-term shareholder value. I and my management team and our board take that extremely seriously. That's one of our key objectives. And obviously we can measure that, of course, in multiple regards through the financial performance and the valuation ultimately the company.
And that's important, hugely important. It's not the only metric. I mean, beyond that, we obviously are also here to serve our customers at the end of the day. And without them, there's no reason for being. So it's really important that we see that we're delivering real value to our customers, that we're really helping solve their problems, and that we measure that. We measure that through feedback that we get from our customers.
We see that based on how we transact with our customers and whether they choose to do business with us or a competitor. Retention rates and like, those are hugely important. Again, some quantitative, some more qualitative. And then I'd also talk about our employees. I mean, again, as you referenced earlier, we can't accomplish anything without, frankly, the great team that we have at Enerpac Tool Group.
And then we're a 2,000 person strong team around the world, and it's really thanks to them that we are able to serve our customers and deliver on our commitments at the end of the day. And so we also have a real role to play in making sure that we're supporting our employees and their families, that we're supporting their career development objectives as well, and that they feel like this is a place that is enriching for them, that they can really build a career and develop and enjoy being a part of what we have to offer as a company.
As I talked about, we complete engagement surveys. We've done three of them since I've been here at the company over the last three years. Every single year we see increasing engagement scores. And I think at the end of the day, that is, I think, a good reference point around how we're investing behind our employee base to do the right things by them.
Lance Glinn:
So Paul, as we begin to wrap up and look ahead not just for the remainder of this year, which we talked about earlier, but for the years to come, how are you and the leadership team planning Enerpac's future to position yourselves for the best long-term success possible?
Paul Sternlieb:
Yeah, I mean, look, at the end of the day, it's always a balance. We do have to deliver on near term commitments in our guidance expectations in any given fiscal year or quarter, and we work hard to do that. But we're also here for the long-term. Most of our shareholder base are long-term investors and they want us to deliver over a multi-year timeframe, and some may be even decades or longer.
And so our job is to invest behind that appropriately and make sure that even for the next generation, we're leaving this a better place, not just for our shareholders, but the next folks who will run this company. And so we balance that appropriately. We do make, I think, appropriate investments, whether it's OPEX or capital investments in the business. And we're looking for good returns, but we allow reasonable timeframe to achieve those, whether those are organic investments or inorganic acquisitions like DTA that we recently completed.
So again, we're extremely bullish, I think, around the potential and the opportunities for our company just given the markets that we're participating in, given all the key competitive advantages I talked about, the playbook and the growth strategy that we're executing, the strength of our balance sheet and the things that we can do inorganically to grow and create more value for our shareholders and be a better partner and supplier to our end customers, and ultimately, fulfill our mission at the end of the day, which is making our complex and often hazardous jobs possible safely and efficiently for our customers.
And that's why we're here, for them. So we're investing behind that. It's never a perfect science, but we try our best and we work as a management team with our board to choose those investments wisely and make sure that we have really strong confidence and conviction behind the business model and the investment choices we're making, that we can generate those returns and improve the overall performance of the business over the long term.
Lance Glinn:
Well, Paul, it's been a pleasure speaking with you today. Thank you so much for joining us Inside the ICE House.
Paul Sternlieb:
Well, thank you very much for having me. I appreciate it. Take care.
Announcer:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen and follow us on X @ICEHousePodcast. From the New York Stock Exchange. We'll talk to you again next week Inside the ICE House.
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither I nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information, and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes.
Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
