ESE - Earnings call transcript Q1 2025

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Operator

Good day, and thank you for standing by.

Welcome to the First Quarter 2025 ESCO Technologies earnings conference call. [Operator Instructions] Again please be advised that today's conference is being recorded.

On the call today, we have Bryan Sayler, President and CEO; Chris Tucker, Senior Vice President and CFO. . And now I would like to hand the conference over to our first speaker today, Kate Lowrey, Vice President of Investor Relations. the have now you floor. Kate,

Kate Lowrey

the made limited Thank differ as due or current not and the expectations to uncertainties the X-K call, These materially operations environment, may the of undertake business to are or and and statements required We referenced assumptions, results those this issued historical you. safe but are are not may no on provisions applicable company's of filed. risk from company's Statements forward-looking . in as update strictly meaning the forward-looking be by the revise which company's the projected to today, in laws. regulations. including the factors which exhibit actual during risks statements based securities Form exist federal and release forward-looking press any be that harbor except laws statements within duty will to included to statements, in

call, atwww.escotechnologies.com this the most discuss operating be of Investor the today to measures during and describing release some these press results. GAAP link website A found addition, measures company's the in measures the company's found comparable can the In under issued financial the reconciliation non-GAAP may in Relations. on company

the I'll Now turn Bryan. call over to

Bryan Sayler

today's and Thanks, everyone, joining Kate, call. for thanks,

businesses. served our got off across strong and markets, execution our with QX positive by across results year Our teams momentum to a in great continued our driving start

to a efforts. employees ongoing Before and getting for into details you I to the about our moment want business, say thank do take their

have their to are success area. some month everyone's dedication unsettling major world. over our past with clearly members customers I which who the off. without want appreciate moments in experienced California-based mention of and possible I paying around wildfires Our over our company Southern employees consists the team not the and the our X,XXX commitment efforts, also to is

experience folks have we their challenging general we catastrophic appreciate injury our evacuation remain losses, ability disruption, we supporting through of focused and some our or work suffered people needed, none on these orders to While did and as conditions. employees

defense. Chris you of for the will give comments get financial run quarter. on a to to the But markets very segments. we I across regarding few for of continue meet with aerospace and that, aerospace Starting want each all you positive before our rates and long-term these end details through customer up outlook ramp remain our We the to Production Navy both demand. markets. to

revenue margin on as year. commercial quarter. customers in or XX% delivered particularly XX% million A&D continue to we and and strong over $XX are they focused were improvement production, the up ramp markets and growth supporting Navy in the Overall, efforts. sales prior aerospace up the were those Navy our Fundamentally,

the and think outlook Underlying very demand quite these and is for areas in strong, we XXXX of remains beyond. positive both

the address status jumping the do previously business Before of at space to of review business, next SMMP the I VACCO. want our announced to and quickly strategic acquisition

Kingdom. is in in now in to United process U.S. we conditions met, had the U.S. U.K. On we're hopeful closing and the U.K. the are final The be dialogue that as good SMMP and previously assessment. the government with the the subject and discussed, been regulatory of will We've regulators, concluded near stages this term. the of closing have approval the transaction the deal,

remaining in fiscal or would transaction in the QX early expectation of close to months QX. current Our be the

the we've improving. development Order VACCO, review business fixed Regarding the first input dealt is improved has contracts. price is outlook with from the challenges for very good effectively strategic performance of all, at and as business

defense. product related X lines operates today, and company space The but distinct

have X this not As separate businesses is X feasible. has we that lines product into determined review evolved, these splitting

or sell being VACCO by able more retain in now are path next moving business. well, As we process our we is This a a result, the announcement definitive whether provide along earnings anticipate process entire to to May. the forward evaluating and of in

Switching businesses now.

Let's outstanding talk utility which group, quarter. had about an the

business growth utility continue life double-digit and utilities delivered Doble expansion and at market extend as to related they was and margin revenue orders revenue lower significant end strength assets. existing needing maintain core to Our now, their of moderation to the as in see The the QX conditions coming some long somewhat across market the revenue dynamic off feel of landscape projects that positioned in for strongly ESCO we term. is saw right on XXXX. are but renewable we utility well NRG's record

renewables in have place from the Doble the tax by while on offset prior renewables expect utilities more than by softness side. any given bit regulated the uncertain investments a utilities, status our would markets of to business administration. the strong on seeing drifted are put be the We incentives We

Group. The we dynamics satisfied, it a is driving remain place as in Solutions expect Utility overall positive ESCO's result power and demand that story for demand to in

start the strong the year, orders on which and growth. had business, XX% sales to over organic a touch I'll double-digit Finally, test really up with

cycle and that are some discussed in term, the have complex we challenges and some long working a has Test quarters, growth As good next environment in business the for the China. team wireless here The phase protect right to beyond business taken related in we been the to has seeing market. recent through steps wireless development

our here XXXX. business and say feel as has trajectory we further the good about So move that I we would into stabilized,

that, XXXX to year. with X performance In us business it quarter enabled details financial for ESCO, through run the and is the has I'll raise a really outperform in you in Chris the guidance start turn summary, of to great to all the our quarter. to good which full segments, With over off for

Christopher Tucker

Everyone follow on along Bryan. the Thank presentation. chart can you,

Page earnings we on reporting. where discuss the X, will We adjusted to start share change will per

the $X.XX year's earnings amortization. quarter. year the add-back in in an this the acquisition-related table $X.XX prior impact As share quarter all per the which stated was adjusted and page earnings at now bottom the first our will of release, The first reflect of shows in

right last The a quarter. achieved on basis, quarter we share. $X.XX that nearly of per to range the per new provided the share bar of first the $X.XX shows The in compared back EPS year's to would adjusted $X.XX to XX% November $X.XX in which was graph above

So we come in during ahead to the nicely able of plan quarter. were

Chart to X. on Moving

with XX%, of XXX%, organic. was first in overall million, some the quarter. the quarter orders financial of down have during a finished book-to-bill our experienced all was but and We record were the Navy Orders amount. highlights large year which overall, $XXX were up the we first in the the prior quarter we Sales quarter backlog as quarter,

to margins XX.X%. adjusted increased Additionally, EBIT basis by XXX points

all reporting segments we growth sales saw Importantly, deliver EBIT margin and adjusted during quarter, X the improvement. first

noted per prior quarter. by XX% share and during chart, Lastly, as the on first adjusted the earnings increased

highlights, a the which comparison. Aerospace a starting the down Orders Navy year Next, quarter. we created through will segment large in and This tough is where ago, were the go orders with Defense. we the had

However, continues and the still book-to-bill over backlog $XXX was above record to million. XXX% enjoy business levels of

in offset is basis the nearly EBIT performance and growth good, points, terrific Commercial leverage the the XX% sales growth, growth, by was up by EBIT saw Aerospace was with dollar good adjusted XX% as up we Navy. margins nearly XXX led quarter unfavorable The were mix. with some on adjusted Margins

Group. the Utility X Solutions Next, on is Chart

growth NRG delivering a great over double-digit We and at Orders strong Doble quarter also order XX% here. both growth. posted was with

Sales down seen which driven NRG, business the moderation side, was growth XX% were by at was last sales growth X%, at the over where few some On the quarters. Doble. has

adjusted strong the also product experienced margins EBIT very mix, drive in quarter. as was growth XX.X% favorable Profitability at for this which leverage the helped we the business Doble and to

was from start the markets. results EMC, we pretty at were saw as was XX% Next, performance well we will and growth the year, over industrial last and we to broad-based the the cover medical increase. quarter. NPE. nice over it comparing Test first and where test, with all nice to year the fueling Order saw U.S. and when especially European a we good shielding in as A&D, as had up excellent at XX% Measurement, challenging Sales growth

quarter cost XX.X%. EBIT drove as and from adjusted nicely rebounded to year's margins growth Margins last efforts the volume reduction first benefits

start is prior strong to $X Cash the Chart cash year. we that the performance. $XX in the cash million year was where and to X, which off Next highlights. operating were flow, a quarter, the in driver the main million compared was on flow The improved collections strong have got cash of

million was quarter. $X.X spend acquisition and Capital than last first less we X spending had this year's year, during

improvement big in ratio cash delivered we debt-to-EBITDA So dropped our and X.Xx. saw to leverage free flow

earnings guidance. The discuss our next full chart year will

impact X, Chart last from show year where amortization full year. on on the of the and we numbers quarterly First, acquisition

the to old year $X.XX amortization see impact November You to the can the we the acquisition range end in per per guidance to by table of the at adding per and low $X.XX of that our $X.XX $X.XX share. updated share, guidance $X.XX of back increasing first $X.XX full an share. was per per becomes the share, Operationally, and of guidance $X.XX high in $X.XX share ranges for are

bottom impact $X.XX and is shows on this reference FY and the share, the Second for of quarter guidance amortization is $X.XX for your acquisition table to for page 'XX. per by the quarter

page is you unchanged XX% guidance, XX% share at sales growth. in compared bottom guide, earnings which our EPS show trends My targeting to XXXX, increased of And fiscal guidance XXXX. graph when with we our the to growth chart strong. discusses at the have see are can the X% growth now last adjusted XXXX per to The since been X%

now the the clear more the concludes on could provide We impacts guidance excludes have on review excludes I'll of here, and And also our impacts is VACCO. these call. certain. of to acquisition updates outlook, their the strategic of items turn to of pending items portion the financial Bryan. when also and Both impact it at it the want That and this we the process those be over impact will back SMMP significant timing

Bryan Sayler

Thanks, Chris.

we're the a we're for we the and a year impacts heard, excited come and are there's confident enhancement starting excited of ability for full portfolio to moves that to to increase you we continue come. are bright, this ESCO's see forward. and actively remains The in as to the creation So we're our path through year. some worked outlook, our and future off value that on. about great of to being about start as results, move more

our utility utilities this and to long-term recognize who his principal years out Lee in of Before electric applied solutions to we we on of retirement healthy those Board ESCO's Lee the directors, XX Olivier, the be over and Board On of he business go strategic benefited our take for his his business and shareholders as catch our encouraging experience retired in over moment like kind industry will behalf we week. built missed. a our fish served the questions, long decades one as ESCO's years, best to a would Over I Lee's and Lee every there disposition. decade. and of from I you shareholders, knowledge, is. as all acumen, his personally past wish continues to adviser quest upbeat Lee,

With Q&A. that, can the we turn we're with remarks, prepared and it over to done

Operator

[Operator Instructions]

from first Moll Tommy Our with question Stephens. comes

Thomas Moll

double revenue your start quarter X. Doble, north Bryan, was to on was I this wanted well up still digits, of but book-to-bill

So are drivers that tailwind any durable? context could there kind calendar are any you here? some year-end some context helpful. . Just was maybe would Or be more of give, there

Bryan Sayler

generally would the capital that is this their I electrification a wide Well, really there's heading home is a range say right This not year investments increases in demand is vehicles, electric full different that broad-based the of by tell anticipating mean lot utilities making are data existing and direction energy think and assets multiple distribution. we aspects event. I And they the we to we're AI, electricity we heating, of centers, make and we're now, in maximizing is a fact generation, maintaining onetime of and took as making benefiting about probably just our driving need in think broad they a things of are transmission -- investments right reshoring investments driven here. up that that demand. is throughput What guidance in

Thomas Moll

really is for a year. Second on the the question guidance I X-part ask wanted to full

the on On raised range then revenue reaffirmed and you side, the EPS.

had X in on to And revenue you getting previously updated versus your there out? in the you you increased in there Is was want the might the so side, level X the here. let talk X but thinking, expected to there. at terms segment maybe on total One anything NRG prior some do call just utility the outlook. us the . but the I better if or particular, you you places. is company, margin And parts I'll headwinds of are pick where than from then

Christopher Tucker

beat Yes. we say, had a nice some quarter look we you side, at the in obviously, I upside essentially, did first the margin if would pretty where have good margin the A&D. Tommy, on at quarter,

and to some starting through. move get better, past of that are into see so little We that and due that a flowed backlog

we first had we quarters. in how good still I should a on testing things, look quarter then And the loaded didn't of results of of in. balance had those our testing also the the out mix of the kind particularly we some off-line and product legacy on some side, highest sales. utility And we of that those the happened fundamentally, as had We good think think mentioned year, out about there We protection feel are reduce anything margin there. good Doble. in Those quarter kind the and you

kind you of first see that flowing quarter performance through. so And

side, we're sales the I pretty yes, mean, consistent. On

You're right.

from if side, sales the that little we the perspective. again, a upside we renewable a year we're of I performance. to because quarter from perspective, the a side it on again, revenue from think first bit good shape And offset would an there. upside might the in doable maybe EBIT softness of any little say a we But see just would see on side,

really all frame of that's that kind I up. would So how

remains sales the firmed It were consistent. for good. think tests at nicely would first I in quarter up, outlook tests the I the so say, orders because really

think outlook as along plugging then of year So good I pretty that and again, for A&D, made . rest good us outlook about well well. And that we're feel there. feel there the the about the

Operator

Instructions] [Operator

with from next Our CJS John question Tanwanteng comes Securities.

Jonathan Tanwanteng

Bryan, was thing you demand same I could space. if the that know in . in were if seeing going at the was but delineate you're you seeing it you Navy, or guessing you mentioned improving ATCO, that I Navy. if space wondering have don't on I'm

Bryan Sayler

of on the line there's but past, see We to space that on talked a us. Yes. than about large we've there starting A little procurement for bit in of the space. that coming I submarine the share business is front. probably in what are amount Navy through aware mean you're going our some definitely with

business the doing well. So is really

kind As I fixed-price said of improving the and in we're contracts past is the outlook my comments, definitely development there. problems

Jonathan Tanwanteng

or pattern, strong or large one any was just broad-based? orders strong Okay. Great. And of projects in then the more the quarter just think. a Was of other in maybe are It's test there? you there can characterize it of the QX unusual there sector I that order strong kind to see

Bryan Sayler

centers. the would was we're typically piece. Yes. know, turnaround We got saw A We and you of kind is resumption We data a in testing, Europe. electromagnetic the a We've which, see good lot in got broad to based regulatory-driven that with of of activity. wireless. China. as the medical I it And of a are a orders filters going electro to even starting improvement EMP -- U.S. of say very the compatibility got lot exception some

got saw investment those. large utility EMP center of a we an couple a in a we the for And control in protected U.S. So

defense aerospace through say would us the of of little for I activity stuff coming as there. a and electronic warfare kind So bit drives is

get So XG a a clarity trundling likely we to sustainable technology until along, pretty of going kind at about But little broad-based, pretty level. of to improve head. where wireless substantially the I thing that's bit the not is think, is

Jonathan Tanwanteng

the Okay. handful Great. is it there stuff M&A closing actionable? Are Or with . pipeline? And any just other update the And then environment? SMMP? on is in you

Bryan Sayler

SMMP capacity I imminent, at first look our to we not still interesting But review strategic anything and you are probably itself. those at before things say there. would you see actions is opportunities, that that my VACCO some see new any would that us so action prioritizing Yes, seeing we're closure the we say then I have other and but of guess out is strongly manifest X would close

Operator

from comes Tommy question Stephens. with next Our Moll

Thomas Moll

May be if pulled segment would you're implication VACCO, to full qualitative Bryan, your insight get until you or give the if to on quantitative update the out on margin. of the us VACCO we'll but A&D what wait any able

Bryan Sayler

for strongly ESCO. margins, would accretive It the be to for and A&D

Thomas Moll

the direction. for here. Chris That points then, follow-up right in question maybe us And Okay. a

a working of made comment past the dues about You some A&D. through in

sense what could you of give and implications helpful. inning us forward a any going If capital would working in you're be there, for

Christopher Tucker

Yes.

is I the now on think our businesses. I which commercial would kind really say Crissair say aircraft that we're right probably and PTI to of I side, main businesses X would there it's framework. tried think put from that through if do fifth capital I numbers. there, in some I come or to the there, sixth working you're starting to And benefits kind inning it of already see the

the last the really the it We than defense. wasn't was the saw in aerospace it did an That in the elsewhere was what in we year, less cash good build company. You had kind quarter. but build have in of inventory quarter, inventory in and quarter and first

saw us So liquidate I and think the fourth you receivables from quarter. -- strong

you're it's first I the because the continuing towards Obviously, quarter focused in starting innings, hopefully, question, that mid- high flow the we're to cash benefits the quarter. past the think good see progress way original that on yes, first always drive late to So was start to off we're nice anyway, there. we the on getting there. to your nice dues, But to and highly normally, see back don't conversion, and to see it

Operator

with CJS Our Securities. next question John from comes Tanwanteng

Jonathan Tanwanteng

back, those about kind I'm are while performance opportunities. what SMMP, revenue acquired there? you is wondering the when quick of agreements seeing the expectation of you've and excited if been think today. you kind playing business follow-up announced a . on for Could what provide as the and out I you're me. Just the a expected of pretty an update the

Bryan Sayler

Yes, told We performance we're optimistic we I their XXXX and pretty would about was that detail with that. more than in can't stand. say get that line But are much they commitments. into expectations where

We and all good with idea major of have we indirectly as the Navy and -- major that's what's the pretty encouraging going the -- a well. with on shipbuilders stuff

Operator

next Our with Josh question Sullivan comes Benchmark. from

Joshua Sullivan

evening. Good

we you a a to re-ramp about just coming and if as you're don't seeing as in specifically resolution. Just far I And look 'XX curious have to generally what beyond. OEM what want a seeing supply chain customer, you strike as talk at mean . Boeing guys in here the been

Bryan Sayler

you you're not about talk in the business, Boeing. aircraft Well, can't if

So we're their the talking strike able it. were them process that see begin of about happy comfortable little Listen, of the backlog. did to bit we're rescheduling of get we they doing kind a of resolved,

We are to work. of -- our have tied businesses directly X really OEM that

is the We recovery pretty And were a of piece. business see little in kind bit third able to production closer to manage The started already around there. of to that QX. effectively we've

aftermarket so pretty good we feel about some We've that. got activity, good

We second lays rates on our growth are our going -- forecast to counting see overall into to we're We're year, and out this way of things business. to good pretty I is growing calendar this still from into of build modest their half drive guess in we're the build Boeing getting about year. going businesses. lot Boeing begin to aircraft rate next year for a our get and really positive that's starting

Joshua Sullivan

your look in it. larger the contracts supply on pool perspective? then the negotiation. stock does just at from Got just the this maybe like through point And still . side, builds, chain with defense one What the

Bryan Sayler

what does what the look like? sorry, I'm

Joshua Sullivan

on . the on general submarine and Just surface pull ships

Bryan Sayler

the set steady them is continuing making it's it's continuing that to build We're but progress up mean has grow. get definitely taken that. desired them, business rates to us to on Congress workman-like -- generally for that -- longer I for I mean they're listen, Yes. positive. they're

a some the have a We year, of expansion content for of as contracting seen has over there's little -- which slowdown our there, been seen as been the there. We bit far favorable we've last us. goes,

that Some Navy might related. be be related of that might Congress

or but orders so. an shifted commitment a be related, might timing kind quarter from are the but of in out has they Some the no shipbuilder that perspective, change overall of

Operator

now like for Brian to remarks. showing Sayler to We're turn at this back you. questions no further it I Thank time. would closing

Bryan Sayler

about you listen, thanks right. hear forward from talking outlook All to some taking good and to everyone, Well, another we look time be in continue for to We're May ESCO. the excited quarter. about -- to

Operator

for This concludes today's you participating. conference call. Thank

may You disconnect. now

ESCO (ESE) 6 Feb 252025 Q1 Earnings call transcript