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SEC filingEnerpac Tool Group Corp. reported Q2 2026 net sales of $154.8 million, a 6% increase year-over-year from $145.5 million in Q2 2025. Gross profit was $71.8 million (46.4% margin), down from $73.4 million (50.5% margin) in the prior year period. Operating profit declined to $25.0 million from $30.8 million, primarily due to restructuring charges of $3.3 million and continued pressure in the service business. Net earnings were $16.3 million compared to $20.9 million in Q2 2025. The company generated $29.0 million in cash from operating activities but used $75.3 million in financing activities primarily for share repurchases. Foreign currency fluctuations favorably impacted sales by $6 million (4%).
Enerpac Tool Group reported mixed Q2 2026 results with revenue growth but declining profitability. Net sales increased 6% year-over-year to $154.8 million, driven by a 10% increase in product sales to $125.3 million, partially offset by a 13% decline in service sales to $23.4 million. Foreign currency fluctuations provided a $6 million (4%) benefit to sales. However, profitability metrics deteriorated significantly, with gross margin declining 410 basis points to 46.4% and operating profit decreasing 19% to $25.0 million. The company recorded $3.3 million in restructuring charges related to rightsizing its Hydratight service operation and reducing headcount in the EMEA region. Net earnings declined 22% to $16.3 million, with diluted EPS of $0.31 compared to $0.38 in Q2 2025.
Revenue growth was driven entirely by the Industrial Tools & Service (IT&S) segment, which represents the company's core business. IT&S segment sales increased 6% to $148.7 million, with product sales growing 10% to $125.3 million and service sales declining 13% to $23.4 million. The product sales increase was attributed to tariff-related actions and increased demand, while the service decline reflected continued pressure in the EMEA region. The Other segment, which does not meet reportable segment criteria, contributed $6.1 million in sales, up 27% year-over-year. Geographically, foreign currency translation had a significant positive impact, adding $6 million (4%) to total sales. Organic sales growth was approximately 2% for the quarter when excluding currency effects.
Profitability metrics showed significant pressure in Q2 2026. Gross margin declined 410 basis points to 46.4% from 50.5% in the prior year period, primarily due to continued pressure in the service business, particularly in the EMEA region, and restructuring costs. Operating margin declined to 16.2% from 21.2% in Q2 2025, with the $3.3 million restructuring charge representing 2.1% of sales. The IT&S segment operating profit margin declined to 21.2% from 27.5% in the prior year period. Selling, general and administrative expenses were $42.0 million (27.2% of sales), slightly improved from $41.4 million (28.5% of sales) in Q2 2025. The effective tax rate increased to 26.3% from 24.5% in the prior year period, primarily due to less favorable tax impact from stock compensation.
Cash flow from operations was $29.0 million for the six months ended February 28, 2026, compared to $16.1 million in the prior year period. The improvement was primarily driven by timing of payments and increases in contract liabilities. Cash used in investing activities was $6.7 million, primarily for capital expenditures. Cash used in financing activities was $75.3 million, driven by $65.9 million in share repurchases under the company's $200 million repurchase program authorized in October 2025. The company ended the period with $98.7 million in cash and cash equivalents, down from $151.6 million at August 31, 2025. Total debt was $187.5 million, with $177.3 million classified as long-term. The company had $399.5 million available under its revolving credit facility.
The company's restructuring plan aims to rightsize the Hydratight service operation and reduce headcount in the IT&S segment, primarily in the EMEA region, to align with current market conditions. Management noted continued pressure in the service business and higher tariff-driven costs flowing through cost of goods sold. The company maintains a strong liquidity position with $399.5 million available under its revolving credit facility and believes this, combined with existing cash and anticipated operating cash flows, will be adequate to meet operating, debt service, acquisition and capital expenditure requirements. Risk factors include supply chain issues, geopolitical activity impacting shipping, decreased demand from oil & gas customers, and foreign currency exchange rate fluctuations.