에너팩 툴 그룹(EPAC) 2026 회계연도 4분기 실적발표 컨퍼런스 콜: 2027 회계연도 가이던스 및 SFE 인수

핵심 요약

• 에너팍 툴 그룹은 자체 성장률(organic growth) 4%를 기록하며 2026 회계연도 연간 매출 6억 5,200만 달러로 사상 최고치를 달성했습니다. 환율 효과는 보고된 매출 성장률에 약 2%포인트 기여했습니다.
• 산업용 공구 및 서비스(IT&S) 부문의 4분기 자체 성장률은 우수한 제품 및 서비스 실적과 특히 견조했던 미주 지역 수요에 힘입어 10%에 달했습니다.
• 2026 회계연도 잉여현금흐름은 1억 2,000만 달러로 전년 대비 30% 증가했습니다. SFE 그룹 인수 완료 전 기말 조정 EBITDA 대비 순부채 비율은 0.1배였습니다.
• 4분기 조정 EBITDA 마진은 사업 포트폴리오 구성, 성과급 지급 증가, 프로펠(Propel) 전략 투자 등이 반영되며 전년 동기의 26.5%에서 22.6%로 하락했습니다.
• 경영진은 2027 회계연도 매출 가이던스로 8억 2,500만~8억 4,500만 달러, 자체 성장률 4%~6%, 조정 EBITDA 1억 9,500만~2억 500만 달러, 조정 EPS 2.00~2.15달러를 제시했습니다.
• 에너팍은 10월 28일 약 4억 7,200만 달러 규모의 SFE 그룹 인수를 완료했습니다. 경영진은 이번 인수가 2027 회계연도 조정 EPS 증대로 이어질 것으로 예상하며, 3년 차까지 400만~600만 달러 규모의 시너지 효과 창출을 목표로 하고 있습니다.

주요 재무 데이터

사업 및 영업 실적

IT&S 성장은 미주 지역이 견인하며 연간 자체 매출이 10% 증가했습니다. 4분기 실적은 표준 제품, 중장비 리프팅 기술(Heavy Lifting Technology) 및 서비스 수요의 호조 수혜를 입었습니다. 경영진은 인프라, 데이터센터 건설, 발전, 방산 및 미국의 리쇼어링 활동을 주요 동인으로 꼽았습니다.

회사는 데이터센터 노출이 하이퍼스케일러에 직접 연결되기보다는 주로 발전기 및 기타 전력 설비 제조업체를 통해 이루어진다고 밝혔습니다. 수요에는 소형 중장비 리프팅 기술 갠트리 크레인과 이무버(E-mover)에 대한 재주문이 포함됐습니다. 경영진은 이러한 고객에게는 제품 조달 가능성과 짧은 리드 타임이 특히 중요하다고 언급했습니다.

유럽·중동·아프리카(EMEA) 연간 자체 매출은 3% 감소했습니다. 표준 제품 및 중장비 리프팅 기술의 성장은 북해 시장의 압박과 일부 중동 지역에 대한 접근 제한 등으로 인한 서비스 매출 약세로 상쇄됐습니다. 그럼에도 불구하고 4분기 EMEA 서비스 매출은 LNG 유지보수 및 셧다운 작업에 힘입어 성장세로 돌아섰습니다.

아시아·태평양 지역의 자체 매출은 중장비 리프팅 기술 성장이 서비스 매출 감소로 상쇄되며 1% 감소했습니다. 인도, 한국, 호주에서는 제품 모멘텀이 강하게 유지됐으나, 경영진은 이 지역의 상대적으로 작은 규모로 인해 분기별 실적이 변동할 수 있다고 주의를 당부했습니다.

코틀랜드(Cortland)는 신규 고객 및 프로젝트 수주에 힘입어 두 자릿수 성장을 유지했습니다. 4분기 신규 수주 비율은 3개 전 지역에서 두 자릿수 증가율을 기록했습니다.

에너팍은 2026 회계연도에 전년(5개)보다 늘어난 11개의 신제품을 출시했습니다. 지난 3년간 연구개발(R&D) 지출은 연평균 11% 증가했으며, 경영진은 제품 혁신 투자를 계속 확대할 계획입니다.

SFE 그룹 인수 및 자본 배분

에너팍은 SFE 그룹 인수를 위해 현금 약 4억 5,200만 달러와 거래 보너스 대신 지급된 주식 보상 약 2,000만 달러를 포함해 총 약 4억 7,200만 달러를 지불했습니다. 인수 가격은 SFE의 직전 12개월 조정 EBITDA의 10.6배 수준이며, 예상 시너지 효과를 포함할 경우 9.5배입니다.

SFE는 에너팍의 전체 잠재시장(TAM)을 약 10억 달러 확대합니다. SFE 매출의 약 74%가 미주 지역에서 발생하므로 통합 법인의 해당 지역 노출도가 높아집니다.

경영진은 3년 차까지 400만~600만 달러의 시너지를 목표로 하고 있습니다. SFE의 잉여현금흐름 창출력에 힘입어 인수 완료 시점 약 2.3배였던 레버리지 비율이 첫해 말에는 약 2배 수준으로 낮아질 것으로 예상합니다. 부채 상환이 단기 우선과제이지만, 소규모 보강형(bolt-on) 인수합병 및 기회주의적 자사주 매입 가능성도 열려 있습니다.

에너팍은 또한 5년 만기 신용 한도 약정을 6억 달러에서 8억 5,000만 달러로 확대했습니다. 새로운 신용 구조는 3억 달러의 텀론(term loan), 5억 5,000만 달러의 회전대출(revolving facility) 및 최대 4억 2,500만 달러 규모의 아코디언 옵션을 포함합니다.

경영진 가이던스

경영진은 미주 지역의 지속적인 강세, 중장비 리프팅 기술의 모멘텀, 서비스 사업의 안정화에 힘입어 2027 회계연도 자체 성장률이 4%~6%를 기록할 것으로 예상합니다. 유럽은 주요 지역적 불확실성 요소로 남아 있습니다.

1억 9,500만~2억 500만 달러의 조정 EBITDA 전망치에는 프로펠(Propel) 추가 지출과 SFE의 재무, IT 및 기타 인프라를 에너팍 및 상장기업 기준에 맞추기 위한 필요 투자금이 포함됩니다. 경영진은 전망치 중간값이 약 24%의 조정 EBITDA 마진을 의미한다고 밝혔습니다.

순수 SFE 통합 비용은 총 약 1,000만~1,400만 달러가 소요될 것으로 예상됩니다. 이 비용은 미국 증권거래위원회(SEC) 공시 보고 및 법무 자원 등과 같은 경상적인 투자와는 별개입니다.

가이던스는 관세나 규제에 실질적인 변화가 없으며 2026 회계연도 4분기 말 시점과 대략 일치하는 경제 여건을 전제로 합니다.

리스크 및 주요 점검 사항

• 중동 분쟁이 일부 시장에 대한 접근을 계속 제한하고 있으며 서비스 사업의 불확실성을 가중시키고 있습니다.
• 유럽 지역의 둔화세가 지속되고 있으며, 경영진은 단기적으로 의미 있는 개선을 이끌 명확한 계기를 보지 못하고 있습니다.
• 중장비 리프팅 기술은 포트폴리오 평균보다 마진이 낮아 이 부문이 더 빠르게 성장할 경우 마진 믹스 압박이 발생합니다.
• 2027 회계연도 수익성에는 프로펠(Propel) 지출, SFE 통합 비용 및 경상적 인프라 투자가 반영될 것입니다.
• 원자재 인플레이션을 모니터링하고 있습니다. 경영진은 가능한 경우 선별적 가격 인상과 생산성 향상 조치를 활용해 비용 증가를 상쇄할 계획입니다.
• SFE 인수 이후 초기에는 레버리지 비율이 높은 수준을 유지할 것이며, 연간 잉여현금흐름 창출의 대부분은 통상 하반기에 집중됩니다.

애널리스트 Q&A 주요 내용

경영진은 4분기의 견조한 매출 실적에 일회성 수혜 요인이 의미 있게 포함되지 않았다고 밝혔습니다. 성장세가 광범위하게 이루어졌다고 설명하며 2027 회계연도에 4%~6%의 자체 성장률 전망을 유지했습니다.

마진과 관련해 회사는 전년 대비 하락의 주요 원인으로 마진이 낮은 중장비 리프팅 기술의 빠른 성장, 성과급 증가, 프로펠(Propel) 투자를 꼽았습니다. 경영진은 2027 회계연도에 자산 활용도 제고와 생산 거점 최적화를 지속 추진할 계획입니다.

데이터센터 분야에서 에너팍은 기업 대상 영업 및 신규 고객 확보에 집중하는 상업적 자원을 확충하고 있습니다. 경영진은 승인된 공급업체 지위와 이동식 장비를 신속하게 납품할 수 있는 능력이 점유율 추가 확대와 재주문을 뒷받침할 수 있다고 밝혔습니다.

자본 배분과 관련해 경영진은 SFE 인수 완료 후 부채 상환을 강조했으나, 소규모 보강형 M&A와 기회주의적 자사주 매입도 계속 검토 중이라고 밝혔습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Hello, everyone. Thank you for joining us, and welcome to the Enerpac Tool Group Fourth Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Christian Audi, Head of Investor Relations. Christian, please go ahead.

Christian Audi

Thank you, operator. Good morning, and thank you for joining us for Enerpac Tool Group's Earnings Call for the Fourth Quarter and Full Year Fiscal 2026. Joining me on the call today are our President and Chief Executive Officer, Paul Sternlieb; and our Chief Financial Officer, Darren Kozik. On today's call, we will reference non-GAAP measures. You can find a reconciliation of GAAP to non-GAAP measures in the press release issued yesterday and in the appendix of today's presentation. Yesterday, we also issued a separate press release announcing the completion of our acquisition of SFE Group.

Our comments will also include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include matters noted in our latest SEC filings. The slides referenced on today's call are available in the Investor Relations section of our website, which you can download and follow along. A recording of today's call will also be made available on our website. I will now turn over to Paul.

Paul Sternlieb

Thanks, Christian, and good morning, everyone. As you saw in our earnings release, we ended fiscal 2026 on an extremely strong note. Revenue in the fourth quarter exceeded our expectations with 10% organic growth in our Industrial Tool and Service or IT&S segment. That gain was driven by exceptional performance in the Americas. Moreover, we enjoyed strong sales gains in both IT&S' product and service businesses in the quarter. And while near-term uncertainty remains on the service side, given the fluid situation in the Middle East, we are encouraged by its progress in the fourth quarter as the actions we have taken to transition to a higher-margin service business while improving its cost structure are clearly beginning to show results.

In fact, the organic growth in the service business has improved sequentially every quarter in fiscal 2026 and turned sharply positive in Q4. Fourth quarter momentum drove record annual revenue of $652 million, our highest since the relaunch of Enerpac Tool Group in 2019, with full year organic growth of 4%. While full year margins remain impacted by several factors, which Darren will address, we delivered robust cash generation in fiscal 2026 with free cash flow up 30%, which positions us for better-than-anticipated balance sheet leverage following the acquisition of SFE. And as announced yesterday, we are very pleased to have completed the acquisition of SFE Group with the closing effective October 28.

We will share a lot more about SFE, the synergies we are targeting and the status of our integration progress at our upcoming Investor Day in New York next week. This morning, Darren will walk through our fiscal 2026 performance, provide details on our balance sheet and the SFE transaction and introduce our fiscal 2027 guidance. Then I will come back to give a preview of our next-generation profitable growth strategy, which we call Propel and highlight our successful innovation program. Darren?

Darren Kozik

Thanks, Paul. Turning to Slide 4. We finished the year with strong momentum. In product, growth was led by the Americas, supported by demand from data center build-out, power generation and defense and by the continued traction from the launch and commercialization of our newer products. In service, the actions we have taken are clearly beginning to show results, and the business grew nicely in the quarter, reversing the decline we saw over the first 9 months of the year. Cortland extended its run of double-digit growth as they continue to win new customers and projects.

As shown on Slide 5, the Americas led our growth in the fourth quarter with strong gains across standard products, heavy lifting technology and service. In addition to benefiting from a strengthening U.S. industrial sector and reshoring activity, we continue to make inroads into growing end markets, including infrastructure, data center build-out, power generation and defense. From a commercial standpoint, customer reception to our newer products continues to gain traction. We secured major contract wins, and we qualified for additional approved vendor list. Notably, to continue to position us well for serving the U.S. defense sector, in the fourth quarter, we received CMMC certification, which is the U.S. Defense's cybersecurity compliance program.

In EMEA, our standard product business grew in the fourth quarter. Our HLT business remained solid, but declined against a difficult comparison given a series of large deals in the prior year. The underlying trends are positive for this business. Finally, despite continued challenging conditions in the Middle East, service revenue in EMEA grew for the first time in fiscal 2026, helped by LNG maintenance and shutdown work. And in APAC, we saw strong product momentum in India, Korea and Australia, along with heavy lifting technology wins, including E-movers and gantries, while our service business was impacted by macro and geopolitical events. Please keep in mind that given the relatively small size of the business in APAC, quarterly results will fluctuate. Notably, all 3 regions saw strong double-digit order rate growth in the quarter.

Turning to Slide 6. For the full year fiscal 2026, our product business drove growth across IT&S, reflecting accelerating investments in Enerpac Commercial Excellence, or ECX and innovation. That more than offset the decline in service revenue, which was affected in part by our inability to access certain geographies in the Middle East due to the conflict as well as a softer North Sea market in the first half of the year. Combined with another standout year at Cortland, Enerpac delivered total organic growth of 4% for the year, with currency adding roughly 2 points to reported growth.

Turning to Slide 7. For the full year, the Americas drove our IT&S growth, up 10%, led by heavy lifting technology as the U.S. benefited from a strengthening industrial sector and reshoring activity. In EMEA, full year organic revenue declined 3%. Standard Products and Heavy Lifting Technology both grew. That growth was offset by service, which was pressured in the first half of the year by our U.K. business and the continued customer consolidation in the North Sea, which we have previously discussed. However, we are pleased to report that the major win secured in the second quarter continues to ramp well. In addition, the conflict in the Middle East continues to create uncertainty in our business.

Overall, slower economic growth across Europe weighed on results. That said, we have seen solid order flow in the EMEA region, with strength in the infrastructure market and large orders from the defense industry that will be beneficial in fiscal 2027. In Asia Pacific, organic revenue declined 1% as growth in heavy lifting technology was offset by lower service revenue. Looking ahead, we are encouraged by strong order rates and new product momentum in India, Korea and Australia. Stepping back, it's important to note that nearly half our business prior to the addition of SFE Group was generated from the Americas region, which we believe provides significant benefits over the next several years, particularly given the strength of the U.S. economy and industrial sector. Moreover, the skew to the Americas will be further bolstered by SFE Group, where roughly 74% of its revenue is generated in the Americas region.

Turning to Slide 8. Gross margin declined year-over-year, impacted by mix and higher bonus expense in the cost of goods sold. The increase in adjusted SG&A as a percent of sales was driven by investments in our new strategy and higher bonus expenses. We are proud of the fact that all permanent Enerpac employees are covered under our bonus plan, which rewarded the team for strong performance in fiscal 2026. As a result, our fourth quarter adjusted EBITDA margin was 22.6% compared with 26.5% in the prior year quarter, which was the highest margin quarter of fiscal 2025.

Turning to Slide 9. For the full year, gross margins were negatively impacted by mix, given the higher growth rate of our heavy lifting technology business and dilution from our service business. Overall, EBITDA margins were also impacted by our increased investments, including higher R&D and incentive compensation as well as investments in continued operational enhancements. As we move into fiscal 2027, we will drive opportunities to improve asset utilization and further optimize our manufacturing footprint.

Turning to Slide 10. Our asset-light model continues to generate strong cash. Fiscal 2026 free cash flow of $120 million expanded 30% year-over-year, driven by strong collections activity, inventory management and reduced cash taxes. Since fiscal 2022, we have nearly tripled free cash flow while keeping capital expenditures at roughly 2% of revenue in most years. And notably, we ended fiscal 2026 with net debt to adjusted EBITDA leverage of only 0.1x, which positioned us well for the subsequent completion of the SFE Group acquisition. Speaking of our financial flexibility, on October 16, we successfully renewed and expanded our credit facility with strong support from our banking group. All participating lenders increased their commitments, reflecting continued confidence in our business and financial profile.

As a result, we have increased the size of our 5-year credit facility from $600 million to $850 million. The new structure consists of a $300 million term loan and $550 million revolving credit facility, providing us with enhanced financial flexibility to support our strategic priorities and growth opportunities. The facility also includes an accordion option of up to $425 million, providing additional capacity for future M&A. Moreover, despite the significant increase in facility size, we were able to maintain the favorable pricing and key terms of our prior agreement, which we view as a strong outcome in the current financing environment.

Turning to Slide 11. As we highlighted when we announced the agreement to acquire SFE Group, the company provides a strong strategic fit and creates significant opportunities for value creation for Enerpac in addition to expanding our addressable market by approximately $1 billion. The approximately $472 million purchase price consisted of roughly $452 million in cash and about $20 million of equity awards granted in lieu of transaction bonuses. We funded the cash portion with cash on hand, our expanded term loan and borrowings under our new revolver. The purchase price represents a 10.6x SFE's trailing adjusted EBITDA or 9.5x, including the synergies we expect to realize within 3 years. And we expect the acquisition to be accretive to adjusted EPS in fiscal 2027. We continue to target $4 million to $6 million of synergies by year 3.

Thanks to our strong cash generation in fiscal 2026, we achieved a net leverage at closing of approximately 2.3x, down from our original estimate of 2.8x. With SFE Group's strong free cash flow profile, we expect to bring that down to approximately 2x by the end of the first year, well within our target range of 1.5 to 2.5x. That gives us the flexibility to continue our disciplined capital allocation strategy, including internal investments, bolt-on acquisitions and opportunistic share repurchases. Integration is already underway with our governance and cross-functional execution teams in place. We look forward to sharing more at our Investor Day next week. With that, our initial guidance for fiscal 2027 is shown on Slide 12. I say initial given that we just closed the SFE Group acquisition yesterday.

We are confident in our day 1 readiness, long-term synergy potential and the pre-close planning we have completed to leverage our combined human resources, IT, finance and legal infrastructure. Now that the deal has closed, we can begin working on the commercial side with customers and developing detailed plans to capture revenue synergies. As you evaluate guidance, keep in mind that fiscal 2027 will include approximately 10 months of SFE Group's performance. Adjusted EBITDA and adjusted EPS guidance for fiscal 2027 exclude M&A transaction charges and integration-related items. Adjusted EPS also excludes the amortization of acquisition-related intangibles.

Starting with the top line. We expect fiscal 2027 revenue of $825 million to $845 million, with organic growth of 4% to 6%. We expect adjusted EBITDA of $195 million to $205 million, which includes incremental investments in our new strategy and support for SFE. For adjusted EPS, we are guiding to a range of $2 to $2.15. Our other modeling assumptions, including depreciation and amortization, interest expense, CapEx, adjusted tax rate and share count are shown on the slide. Our guidance assumes no substantial change to the current tariff or regulatory environment and economic trends similar to those as we exited the fourth quarter of fiscal 2026. With that, let me turn it back to Paul.

Paul Sternlieb

Thanks, Darren. As previously announced, we will be hosting our Investor Day in New York next week. Among the many topics we plan to discuss, we will introduce our next-generation growth strategy, Propel. As shown on Slide 13, Propel is built on 3 pillars. First, we will grow in Attractive End Markets with Commercial Excellence. We plan to deploy next-generation Enerpac Commercial Excellence known as ECX, our commercial engine to accelerate growth across all products and regions, driving share gains through differentiated channels, digital reach and application-led selling. We also plan to accelerate the growth of SFE Group by leveraging Enerpac's global distribution and key account capabilities.

Second, we will differentiate through Product-First, Application-Led Innovation. As I will discuss in a minute, we have steadily increased our R&D investment and with it, accelerated the pipeline of mission-critical customer solutions. And third, we will expand through Operational Excellence Initiatives, including our PEP operating system, Inventory Management and Service Expansion into higher-margin applications. We look forward to sharing the full story along with our multiyear financial objectives on November 4. Of course, a critical part of our growth strategy is our commitment to innovation.

As you can see on Slide 14, we have significantly increased our investment in R&D, growing it at an 11% compound annual rate over the past 3 years. More importantly, we are seeing the benefits in the pace of new product introductions. In fiscal 2026, we launched 11 products, up from 5 the prior year. Heading into fiscal 2027, we have a lot to be excited about at Enerpac. Our product business continued to deliver broad-based strength across the Americas. Our service business is showing encouraging trends with sequential improvements every single quarter in fiscal 2026.

Our strong cash flow and balance sheet provide the flexibility to pursue our growth strategy. And the addition of SFE Group with its premium brand platform and market-leading products further strengthens our position as a premier industrial solutions company. With that, we'd be happy to take questions.

Operator

[Operator Instructions] Your first question comes from the line of Will Gildea with CJS Securities.

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Will Gildea

So congrats on the strong quarter and closing the deal. Can you just expand some more on the assumptions embedded in your guidance?

Paul Sternlieb

Yes, sure. Happy to, Will. Thanks for the question. So look, first, we are really excited about where we're headed. I think there's a lot to be really pleased about, particularly having finally closed the acquisition of SFE. That's a business with very premium products and margins. In fact, I was with the team at a major trade show, FABTECH in Las Vegas last week. It showed really well. They had a number of new products on display, very strong customer receptivity on those. That team has demonstrated the ability to drive very strong growth, both organically and inorganically.

And frankly, they have exposure to higher-growth end markets and attractive geographies with over 70% of their revenue in the Americas. So that will be, we think, a nice tailwind for us as well. Of course, very complementary position that expands our addressable market by about $1 billion, and it comes with a great strong management team who will stay on with Enerpac and is incentivized and motivated for the long term. So we're really, really excited and pleased that we were able to close on that. In terms of guidance, I'll turn that over to Darren, and he can talk a little bit about our thinking behind that.

Darren Kozik

Thanks, Paul. Will, as we look at 2027, I would say a couple of things. First, just as a reminder, we're only going to have 10 months of SFE, okay? So as you kind of work up your estimates and models, just remind yourself of that. But then as we look at the year, we see organic sales of roughly 4% to 6%, okay? And kind of behind that, we see continued strength in the Americas. That was very strong in Q4. We see that progressing into next year. In addition to that, our HLT business has been on a really strong growth front. So we expect to see that positive momentum.

And then service is stabilizing. That business did turn around in Q4. We're still looking for strong profitable work there. So we want to make sure we get the right work in service. I'd say the wildcard is still, as we talked about even this time last year is Europe, okay? There really is no impetus for a significant change there. So as we think about our business, roughly 40% in Europe, we still have our eyes there. That part of the portfolio is a little bit slower, although our product order growth rates were very strong in Q4, okay? So I'd say that's kind of the volume front. As we go down the P&L, we will have some leverage from that volume, but there's 2 places we need to invest back in.

Number one is SFE, okay? That team is very strong. They have great products, great operations. put their finance and IT infrastructure in some other places, we just need to invest back because they're not at public company standards or Enerpac standards. So those will be investments we make. And second is Propel. Paul started to allude to that. But next week, we have a lot of great things to show you kind of around grow, differentiate and expand and where we can invest back to get stronger growth in the future.

So that's the shape, the investments. And when we think about it at the midpoint, that will turn about a 24% EBITDA margin, which is very strong. $2.07 EPS, which is up double digits. And that includes SFE accretive in year 1, okay? So we're very happy about that as well. So that's the guide that's out there. The business is in a really good position.

Will Gildea

That's great color. And then just looking at the quarter, really, really solid organic growth. 24% organic sales growth in the Americas, it's very impressive. I mean, can you talk about the drivers of that? How much of that was price versus volume? And can you also kind of expand on the drivers behind lower margins in the quarter?

Paul Sternlieb

Yes, sure, Will. So I think, look, yes, we were extremely pleased with the growth overall in the quarter and particularly in the Americas, very robust. Certainly, clearly, the industrial sector in the U.S. is very robust, improving, and I would say, performing better than really any other significant country or region in which we operate. That's obviously a plus for Enerpac where nearly half of our revenue comes from the Americas region. And as we talked about with the addition of SFE, over 70% of their revenue generated in the Americas. So on a pro forma basis, we'll be in the mid-50s, I think, on a revenue basis, skewed to the Americas. So I think it's really driven by the strength of the U.S. industrial sector.

Clearly, we see a lot of growth tailwinds, particularly in end markets like infrastructure, data center build-out, power generation and the defense sector as well. I think we also see very nice continued tailwinds from reshoring activities here in the U.S. market. And we think that those are not only robust but sustainable over the mid and potentially long term. So we're quite bullish about that. I think outside the Americas, as Darren talked about, obviously, slower growth, but we did see very solid order flow in EMEA, particularly with strength in infrastructure and large defense orders, and we think that will be beneficial here in fiscal '27 as well. So overall, yes, I think, again, we were quite pleased with the performance in the quarter and particularly with the growth rates that we saw here in the Americas region.

Darren Kozik

Yes. And Will, to kind of talk about the fourth quarter margin, as a reminder, we were comparing to our highest margin quarter of last year at 26.5%. So we did have a tough comp there. But as you unpack some of that change year-over-year, probably in the first position here was there's some mix dynamics there. We talked a lot about HLT growth in the Americas. And as a reminder, HLT margin tends to be a little bit lower than the portfolio average because it's a capital good, that will run in the mid-40s. So that puts a little bit of pressure overall.

Second, with that strong quarter from an organic growth rate as well as free cash flow generation, we did have to increase for some incentive comp, okay, which we're happy to reward our people for that strong performance, but that put a little bit of pressure in the quarter. But then third, we invested in Propel, okay? In the second half of the year, we really started to invest behind that strategy because we see a strong market, particularly in the U.S. So we want to get ahead and get those investments in to drive growth in 2027. So those are the large drivers. We are excited about Propel. We're excited to invest behind that because we think that will be a catalyst for growth, and we thought that was a wise move.

Paul Sternlieb

Yes. And I would just add a color on that, which is we'll talk a lot more next week at Investor Day about Propel. But to Darren's point, the reality is, I mean, we've been executing on that internally now for many months. Obviously, we have a public unveiling effectively next week, but the team has been hard at work executing on that growth strategy. And frankly, as Darren said, we've been investing behind that for a while now.

Will Gildea

Great. And then just one more for me. Leverage is going to be a half turn lower after the close of this deal than previously expected. So back in your target range? How are you thinking about cash generation and the new credit facility?

Darren Kozik

Sure, Will. So we were pleased to close the credit facility. We had great support from our banks. As we sit here today, probably around 2.3x levered. And I would say, and just as a reminder, free cash flow generation for us is really strong in the second half of the year. So a lot of that leverage will come down in Q3 and Q4, just given the first half of the year for us has a lot of tax payments, bonus payments, things of that nature. So that will be the kind of profile of leverage throughout the year. As we look at that, given where we sit today and with the credit facility, obviously, debt paydown is top of mind.

We haven't had this amount of leverage in a while, so that will be a focus of ours. But that's not to say we won't look at opportunistic share repurchase or even bolt-on M&A. We think we've got a platform now and a profile for a company that's in a really good spot that we can add on other industrial tools and solutions players. So I think we tend to look at it, Will, as everything is on the table, but we will focus to get that leverage down, and that's our commitment.

Operator

Your next question comes from the line of Ross Sparenblek with William Blair.

Ross Sparenblek

I mean really good quarter there on the top line. It looks like the highest in company history since you guys got here. Anything onetime to call out? I mean it feels like you're maybe abundance of caution going into next year or if there was anything with the data centers as a big HLT cell or something of that nature that would give you pause for a potential deceleration in '27?

Darren Kozik

Yes, Ross, thanks for the question. Really nothing in terms of any meaningful one-offs to note in the quarter. It was just overall a very strong robust performance by the team. Yes, and I think we're pleased with the progress we've been making there. I think it was broad-based. I mean we talked about a number of end markets where we're seeing really nice tailwinds and kind of favorable dynamics there. And we expect that to continue here into fiscal '27. I think on the organic growth, I mean, obviously, finishing the full year at around 4% organic growth, we feel like the guide of 4% to 6% here for fiscal '27 makes sense, and we'll continue to evaluate as we progress throughout the year. But just given the market dynamics and the execution of the team, we feel that's appropriate. So yes, I think overall, that's where we sit today.

Ross Sparenblek

Okay. That's helpful. On the data center and power side, can you just remind us of kind of what the sales cycle looks like? Is it a similar dynamic with other large projects where kind of a onetime purchase, so you see more of a recurring cycle there? -- equipment going on job sites.

Paul Sternlieb

Right. Yes. No, thanks for the question, Ross. It is pretty interesting. I'd say specifically on data center. So our exposure is less so on the data centers themselves or the hyperscalers. It's sort of one step back. So we are generally selling to folks that are manufacturing equipment that goes into a data center like gensets or other power equipment, et cetera. And then we're providing equipment and support for either their own manufacturing facilities as they're making that equipment, need to move it around in their plants or ultimately to transport it or to install it into a data center. Our equipment doesn't typically sit permanently in the data center.

What I would say is we are seeing a number of repeat or recurring orders in that space. Most of the work that we see tends to revolve around our smaller HLT gantries, which are really a very nice substitute for more permanent overhead crane solutions. So as you see other industrial manufacturers building out new capacity, whether it's expansion or even new manufacturing facilities, they don't necessarily want to make these large onetime investments in overhead cranes, which are fixed in a facility and they can't easily move. It also are very expensive and also have very significant lead time. So our smaller gantries are really an exceptional substitute that allow them to get that with very short lead times and its mobile equipment.

So plays very well there. E-movers, another one of our HLT products, also is supporting those customers, particularly in those applications. And we have, as I said, seen a number of repeat orders. I would say the cycle time or the lead time for those is generally shorter than what we typically see in our HLT business. Probably most important for these customers is availability. I would say price is probably a much less critical element for them, frankly. So we've been making investments behind inventory and operational improvements to be able to support very quickly.

Ross Sparenblek

Okay. That's helpful. Do you get the sense then that you're kind of expanding that TAM customer by customer? -- when you think like just competitive landscape, I maybe going out there kind of big game hunting to make sure that your brand is well -- people know about it and they know that you have the ability to deliver.

Paul Sternlieb

Yes. It's a great question. Ross, we will talk more specifically about this on our Investor Day next week. Phil Jefferson, our Chief Commercial Officer, will speak exactly to that. But suffice it to say, we have been and we are continuing to make additional investments in more resources behind commercial sellers specifically focused on the data center market, including a focus on enterprise selling as well. So we already have some very strong established customer relationships, but we have more active hunting work underway with more resources and feet on the street dedicated to that activity.

Operator

Your next question comes from the line of Steve Silver with Argus Research.

Steven Silver

My congratulations on the closing of the acquisition as well. So you guys mentioned major contract wins in the data center space as well as approved vendor list. So I was wondering if you could provide a little more color on that and really what the implications might be for the business moving forward?

Paul Sternlieb

Yes. Look, I think those wins that we talked about, they really reflect the commercial traction that we're building, particularly in the Americas. And also, I'd say the disciplined sales process that we have built, we call ECX, Enerpac commercial excellence. I think we're making particular gains in infrastructure, as we talked about data center build-out, power gen, defense industries. I do think we are taking share. We see good evidence of that. And as I said, we're continuing to invest and accelerate investments, particularly commercially as well as operationally and from an inventory selective perspective behind that.

And some of these approved vendor list also, I think, position us well into the future because, again, we become the easy button, frankly, for these customers and the one-stop shop. And if they build increasing confidence behind our capability to deliver for them on short notice with very high-quality product that meets their needs, and frankly, is a great substitute for what otherwise would be expensive and long lead time investments for them. It's really a no-brainer for those sort of customers.

Steven Silver

Great. And so a key component of the Propel strategy talking about is product innovation. And I know you guys have been talking about this for quite some time in terms of new products. Yet you've done this pretty much with a modest R&D expense on an absolute basis. You mentioned the 10% CAGR in R&D growth, but still a pretty low number on an absolute basis. I'm just curious as to whether that will likely be accelerated either on an absolute basis or as a percentage of sales moving forward.

Paul Sternlieb

Yes. We've been extremely pleased, Steve, with the progress that our innovation team has made over the last several years. As you may recall, we previously talked about effectively, it was a reboot strategy from 4 or 5 years ago. We've come a long way in terms of building out the process, the capability the team behind that. Obviously, the road map now executing in terms of launches and commercialization. So I think we've made really exceptional progress, kudos to our team on that and launching 11 products here in fiscal '26. And frankly, a similar target or if not better here in fiscal '27.

We will talk a lot more specifically about innovation at our Investor Day next week. Mart Hinnen, who heads up our innovation function and our HLT business globally, will spend quite a bit of time going into really significant detail behind innovation, how we run it, what the future looks like. We have been and we will continue to increase our level of investment in R&D here. We think that we are a clear technology leader in our space, and we want to continue to be front and center in the industry in that respect. The only other comment I'd make in terms of absolute levels of investment -- it's hard to compare, but I think at the end of the day, just bear in mind, the bulk, if not really the vast majority of our innovation spend is on our product business.

So when you look as a percent of revenue, you really have to think about percent -- the denominator effectively being our IT&S product business overall. So I think we'll continue to invest behind product innovation, but frankly, also supporting areas like our field service and our applications expertise as well, which I think is a key differentiator and maybe the unsung hero of our business in many respects.

Operator

Your next question comes from the line of Ross Sparenblek with William Blair.

Ross Sparenblek

Just a couple on the margins. Can you maybe help us pinpoint what this integration and growth investment cost is for '27. We have the SFE targets. It's something like around $20 million. I don't know if that's all in FY '27, and it seems like there's maybe some other moving parts there, too. You guys didn't say anything about material inflation. I know others are having that issue. I just wanted to verify that that's not an issue for you guys as well.

Darren Kozik

Yes, Ross, let me take a couple of pieces there. I would say, first, pure integration costs, we think that is in the ballpark of $10 million to $14 million. I would say that's to put the businesses together to get the ERPs to work, those types of dynamics, okay? Outside of that, there is some core investment we need to make in SFE to stand that up that will be recurring costs in the business. So really, there's investments of 2 types there. one, just to get it up and running, which we put out at $10 million to $14 million; and two, some core investments in things call the SEC reporting or legal resources that we need on a recurring basis. So there's kind of a combination of both there from an integration perspective.

Second, on material inflation, it's -- we read the news too. We see some impacts of it, but it's -- I would say it's not as exorbitant as some may be led to believe. Obviously, we have our eyes on the ball there. And obviously, we have a sourcing team that is driving all the cost that we can. But as we enter '27, it feels like an environment similar to '26 that we're prepared for.

Paul Sternlieb

Yes. And I think as always, Ross, from an inflation standpoint, our goal is to at least offset that through a combination of pricing where appropriate and productivity actions here in the business. We continue to firmly believe we can do that, if not over recover a little bit to maintain margin profile. As you know, from a pricing standpoint, we typically take 1 to 2 price increases a year. That's never peanut butter. We evaluate that by geography, by product line, even at SKU level, but we'll continue to evaluate that here in fiscal '27.

Ross Sparenblek

Okay. I mean it's hard to tell what the core incrementals should be as our starting point for '27. Can you just give us a sense of what the organic should be before we start layering in some of these costs?

Paul Sternlieb

Yes. I think on the incrementals, what I would say is we're going to share more specifics around that, not to sound like a broken record, but we will specifically address incremental and actually decrementals should those occur next week at our Investor Day. So stay tuned. But we'll talk specifically next week around sort of the fixed versus variable cost structure of the business and why that gives us confidence in our ability to deliver on the numbers that we'll share for the incremental and decrementals.

Darren Kozik

Yes. And Ross, I would just add that we've been on a journey here. Free cash flow has tripled almost over the last couple of years here. We've done the acquisition. We feel the time is right in a good market to invest back in the business and get growth above market, and that's what we're here to do.

Ross Sparenblek

I never had a doubt on the free cash flow. You guys -- you're on a tight ship over there. And then just one more here just on the -- I believe that we had SFE accretion around $0.25 for year 1. So 10 months of that, about $0.20 is kind of the starting point when we think about the organic EPS. Just trying to back parts.

Darren Kozik

That's in the range, Ross. I think you got to kind of look at that business in a couple of components. One, kind of take that down to 10 months; two, look at the current interest rate environment; and then three, the incremental investments we need to make back in that business. So that might get you to something that's a little bit less than that in the grand scheme of things.

Operator

[Operator Instructions] There are no further questions at this time. I will now turn the call back to Paul Sternlieb, CEO, for closing remarks.

Paul Sternlieb

Okay. Well, we hope that you'll join us for Investor Day being held next week on Wednesday, November 4 at the New York Stock Exchange. In addition to Darren and myself, we'll be joined by other members of Enerpac's leadership team, providing a comprehensive overview of our strategic vision and an in-depth review of our products, capital allocation strategy and financial objectives. Attendees will also be able to see our products close up through live demonstrations and meet the management team at a lunch in following the presentations.

If you are unable to attend in person, the presentations will be webcast and accessible on the Investor Relations section of our website. In addition, we will be participating in the Baird Global Industrial Conference in Chicago the following week on Tuesday, November 10. We hope to see you there. And I'd be remiss if I didn't end with congratulations to the Milwaukee Brewers for winning the World Series, well deserved. With that, thanks again for joining us, and have a great day.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.