ESCO (ESE) 14 Nov 242024 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Fourth Quarter and 2024 ESCO Technologies Earnings Call. [Operator Instructions] 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. like today, the of Kate would our over Investor I speaker first Lowrey, now to conference hand to Relations. And Vice President you now the Kate, have floor.

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

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

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

great year to happy we ESCO. you out an at are give another as We update close

momentum great the business with we our significant in $X and markets like eclipsing pleased achievement, are quarter sales fiscal orders milestone a lot and we still a a feel This We fourth with hit but is serve. of there's billion. and year in results. XXXX our this We both

before all each comments give about I great But the of better we and of get run a feel financial through you about few to on the you we segments. the want even for year. details to future. we quarter that, Chris will the while feel the So XXXX,

aerospace and defense. with Starting

have outlook continue here. a We to strong

and record in As in just the strength you over $XXX of saw cash as release, Globe. XXXX year this with as The from in start on backlogs. a commercial growth aerospace finished progress big million. was strength That's at substantial make Navy see for move during and continued to continuing the backlog of quarter VACCO military and the we right on Notably, well it's did the we due orders focus direction. backlog our teams, reducing nice to been

quarters strike. in the XXXX. like anticipate strength see to of could Probably the in quarter. anticipate Boeing we strike remain I'd some the did that And backlog intact. are we might the business the address do that later. rescheduled. not is ramps anticipation We things any not overall resolved, movement any as some and There have, up get But to questions impact impact we be our fourth with for we that outlook financial between can XXXX now

improvement. Doble The expansion trends business. on sharply for their our both margin and nice These second the another have spending demand meet on margin focused to growth for in that picked parse the bit order increase were continues market we are to strength line see here, forecast our we the different as electricity The had and to sales Solutions utility is here customer business. when assets ongoing Group, capital as happy efficiently running compared good base team we current be Taking regulated they possible. markets side increased our of good see Next also growth third also where a year quarter, out to to a another here delivered. the up of top the quarter and and Utility to

really delivered orders team On in nice sales renewable fourth side, growth and the quarter. the the

still as will renewables electric to demand continue are have to power our for outlook a play positive role feel We overall we as increases. here on

Finally, I'll touch on our test business.

medical a less also when saw that sequentially improvement sequential the we our growth of responded segments the shielding the customer that through profitability The to We as the X ready We increase out. seen up team move activity are when is from business quarter really will the the turned with happy the activity. from the to recover, year. markets sales year news than key but team and Certainly, the business good of We And progressed. on capitalize saw here recover, business. be nice how our businesses, as the softened saw each is year. and other strong beginning we wireless the begin quickly we've industrial at

turn Chris through over I'll you financial for the the to details that, to With quarter. it run

Thanks, Everyone chart along Bryan. can on the follow presentation.

we the start have financial quarter. you see quarter. we will We Page where on fourth had . Starting the in of decline the where a overall X, XX% can highlights with orders of fourth

a points million. details through And We will driven year's Adjusted EBIT growth Group, growth comprised go high fourth in be XX%. ended XXX quarter should margins segments. it and noted by segment backlog which organic moment, Sales from Adjusted $X.XX but with year comp orders Defense record share, was were X decline Navy up the XX.X% up an from with the in tough had EPS Aerospace the quarter. of MPE a X acquisition. was with increase of that X.X% the and margin per last was all of we to increases the basis $XXX the were and in of X.X% point which

per was at $X.XX issues of the our an share, in VACCO space share, inclusive at was per from actual The to erosion business share. basis, potential profit excluded space the $X.XX of erosion $X.XX per $X.XX per to of adjusted or the range end was unfavorable $X.XX the $X.XX close quarter to share great it business. on which Guidance high so for the

covers Chart business. and X, Aerospace Defense is Next which the

year's As over year, you fourth with increase chart of mentioned to But show a backlog previously, million, comparisons orders, of we an so $XXX the drop. ended here right bottom the see sizable just we at we quarter had XX%. can for last tough of the

have improving certainly, VACCO Adjusted Sales XX%, across was XXX the basis points was to inside quarter still of of XX.X% commercial business. Really the aerospace. momentum offset Navy, in So to that than and the previously the issues defense growth up good group mentioned quite good, project tremendous sales. more were we also good profitability performance EBIT in able Space business. the from

to Chart on Moving X.

points sales. Doble was up orders quarter from products. We offerings we service X% have the saw sales XX.X% solid really up continued sales and and XX up to A as of growth basis Solutions with Utility X% here X%, monitoring adjusted Group. growth condition EBIT

quarter close growth strong Utility of for strong overall sales -- a to with helped Additionally, year the business renewables was growth X% drive the the Solutions margin another the it had good sales and improvement, a Group. so

the Test. is XXXX. X to down which Orders business. Chart at $XXX ended is was but were Next it a Overall, nice X.X%, in million, of quarter September slight compared backlog test for a really increase

points and has of quarter. earlier EBIT quick nice cost XX.X% helped sales NPE Importantly, volumes. X%, adding we X the this year basis reductions growth. improvement growth mitigate lower points increased impact Margins slightly with the down a XX Sales in up action as were result really of to acquisition by on saw and and the organic approximately the sales adjusted team's

been nicely. for quarter XXXX have this We trend from watching sequential fourth throughout and continued business improvement the that

year-end. the chart that Moving orders year on to here nice page Chart up the over illustrates Navy for businesses growth The financial and earnings adjusted across and and ESCO, full and led of backlog up X, XX% to by up compared with was $XXX sales share very X%, XX% another up year this million the the the charts All up record aircraft XX%, XX%. summarizes which bar really highlights. was ending trends was top adjusted EBIT show or over It order the per component nicely. prior

in XX% was sales, also 'XX Defense with by years a Solutions was that and increase X The strong 'XX group and coming For of Utility strong X%, quite led an group. increase. after for growth with Aerospace

sales Notably, and offset good margin a which on. Utility, A&D the first were by business. are strong metrics to for ESCOs for milestone Profitability that time an we somewhat the drop exceeded improvements from in Test with important billion were $X excited history, build

CMT operating Next on performance over and is in at very was year Chart the compared their with increase deal increase. XXXX. to a A&D strong full last X and the finished and than drove the the came year being who share working with to year $XX a cash businesses cash with NPE just capital was XXXX the flow $X well moderated flow primarily increased growth We substantial investing somewhat this from in million, finished bit larger growth Capital in closed year highlights. million are the were million. repurchases support outlooks. and $XXX the XXXX This Acquisition transaction that spend at from as earnings spending year increase the over

chart will XXXX. The final chart our be guidance for

year. A&D year in segments sales we for the of the of last sales sales expect X% segment, had per charts range to expect adjusted X% this the couple single-digit over XX%. see with and at of in earnings high range from that bottom the we've growth continue trend nice can the share that growth see and you to You earnings USG can a to XX% in we years, By next growth the and and

For as to in somewhat expect test, we growth more the for continued to offset subdued industrial X% be medical by growth wireless at market. softness is a X% the customers bit and

double-digit $X.XX gets adjusted EBITDA driving the and growth of us share. $X.XX per to in to EPS both EBIT and full for are for We year XXXX that range

the adjusted to first $X.XX share earnings Also range per we for quarter, in the of $X.XX. expect

SM&P no company from space Lastly, clear on configured. impact no business VACCO. review strategic of and at the that guidance based the the how is I That from currently is acquisition this the be want means to impact

we close the an after hopeful -- of And now it since and outlook are uncertain, acquisition We concludes Bryan. our the back can But financial the portion fiscal second to timing turn an is provide that call. I'll wait the That in updated SM&P update closing. will over quarter.

Thanks, Chris.

prospects see, quarter record backlogs, double-digit as we looking to with great long-term ESCO. another of earnings the about can you good we So growth. had year and at another feel for continue are

filings a ago, give Power I is that and Timing on to on States quick but we're met. Q&A, our hard but that predict July. mentioned release, the will in and regulatory waiting to Before this the wanted second term. in a United deal press the I the that be quarter, are And the Kingdom. and back closing touched let conditions front. acquisition on always U.K. Management as this in have that updated fiscal get both on on We're Signature for we the Chris completed we'll to approvals done United update was know announced moving process securing minute the we as in to these want have and still required everybody the in all things. successful U.S. been in optimistic that hopeful news we you getting keep near the

call, talented expand group of As ESCO exciting I on the the quarter serve in Navy market for last a to bring and Management U.K. this as employees U.S. is and very capabilities deal a Signature we our the said growing in Power on

remarks, question-and-answer for we lines a and up can That opening concludes the open period. the

[Operator Stephens Inc. from the line of Tommy Moll question of Instructions] first comes Our

the X% to Bryan, in start on to you I for the A&D X% fiscal growth wanted outlook provided coming the year.

shouldn't on there suspect state have impact that big of but mentioned play. full you there conservatism also any given some year, I that may in the just for the embedded You Boeing be

commercial helpful. be anything aero there's assumptions, your that if do would you So to can unpack

Well, yes.

And would little rates I been a puts to that's we've historically, underperforming So Boeing bit that frankly, a that less because the say little have rate that published been they bit. out. forecast that's a at than prudent always build build

businesses on to that did I think work able offset from backlog. year, confident some with down could of Boeing we'll Two due their impact we the there other past that or customers. there specific be but feel is our work be this impact contracts

squared closer this running the we're at to away at requirements we're with the for bit us. Listen, Boeing. their We this rooting they're behind little guys think going strike get a So point. to

this expect see years that we follow. think to good and growth is the significant growth I see clear path would the to in to year,

which provide can onetimers make And is back to you'll amortization. to sure what just . fiscal presuming M&A specifically circle on excluded information comments second When for in announced, originally. excludes you be whatever 'XX some about want your the Chris, you now, to accretive context, I with but the it I year, we're close SM&P. in need excluding And It's quarter, and excluding guidance adjust. prepared first wanted the at helpful fiscal point, indicated the to you the was deal would the

it's So the you'll X-part point that those do That's items. asset Do do two, you a excluding one. accordingly, I when it you'll year there. anticipate point once you it a Chris, update in. guess from have of only then fold impact And question both you partial guidance,

anything seasonality there terms if be so Thank that we the And there's noteworthy might as in you. be for of should mentioning prepared worth that well.

-- Yes. the break I updated the components of we'll would down you when we the there. guide definitely acquisition, give say, Tommy, inclusive we'll

the acquisition kind understand you'll So impacts of on the outlook. and other sizable amortization

And through We'll that to guide, any now. kind whenever ramp don't today. flag -- we we as year again, dynamics. we guys have or you do to there's seasonality, -- guidance certainly if the you that for unusual would they're there's the to need going give if issue what's be far as nothing of As that flag know let there there left right of but anything other I a we about highlight don't we

sit adjust resisted goes. of but it step elections, you'd underwriting just your post . how back. assumptions any like asking and I to I'll see we'll if tight

and answered. Asked

of comes Our the from John line Company. of Sidoti question & next Franzreb

embedded of and expectation I'd Is like in over to growth. the pivot to in your any that of Test X% better to results business outlook? assumptions China there there X%

embedded not improvement significant in China. have We

I things uncertain -- say, over are relatively still, would we're think there. I

So an the some this be improvement no, a is going haven't in that anything there. to in at but We not goes. or baked think opportunity forecast it like there, have baked turnaround Longer term, we as it's that think big time. we steady for there I

you process change maybe go-forward that of a question NRG, less an there a . basis? And of administration energies. do I'll kind utility administration thought towards think in renewable about what's friendly and put out the How on

Well, market we increasing. sure. is about underlying listen, so steadily Sure, by start the thinking which demand,

regardless of market more transmission. so build-out more build-out of and the And generation more of policy, electrification, is requiring

and with as cases, new are assets, that's we a those good seeing utility a more business. What investments. you're reflected of mix we're really balanced on we we regulated our perspective, customers steadily what And new in from increasing side as watch approach So capital think doing watch they're the investment some think some assets. from them of that, I seeing gas a wind solar assets our

assets very, markets Utility Group the of have. customer that think And But IRA base growth the think all might the on most a place is the that a our And we really play. of most there will is our those do Solutions role regardless to policy get be. we incentives out story. In anticipate little thing for the changes the renewables plays they continued the a that threat imperative to be renewable of But well of have are with to side, that the diminished. I what really that in meantime, bit in already could very

line I of On tend the And that mix all to in debt are cost the out a are goods coming SG&A just on there agree. and SG&A? adjustments. sold? out is items of of and question Or a there the restructuring, coming refinancing what they

debt the actually, mix. there's financing interest line. Yes, And expense a hit the

of of So a loan we revolver committed we had kind our of show the kind acquisition. backstop pay to bridge announced when for financing kind to and our for

hit OID. were that's worth the about side, interest on then the items And to going million those line. So hit restructuring $X

at EBIT in the line. that So comes

in the . this So quarter. main saw the X where you adjustments those come places were

Our of next from John the CJS. of comes Tanwanteng line question

what And are . should are ask with Really quarter? completely all If the be more that nice you've performance had. bit QX strategic headwind number you even and I where space the Do for more into is you that. dig Just in the could two, to run the there number clean one? think through, issues there the little work a to a through the business? review? prospects you Or

really still product working those but actually is Well, working contracts been news few sure. the steady delivering fixed-price troubled A through. these us on of now. now. got a couple that we've listen, development Sure, been we've We we're on that progress behind development, making good we're are

And we so have cost solid for being a really estimate on basis basis. able a the go-forward to

And so we've adjusted all the EACs accordingly.

the to no to and that's product. thing. what's We're working had on longer adjusted. we're So cost why be to originally the develop had to what's going than take bit it's And a the produce estimated, EACs anticipating higher little we now

tell but believe risk never has would risk, X do that the I been you So that largely there's mitigated. we

to business that towards with what we question, X. would look did we your throughout a take the to do efficiently. really business can't conclusion the second came it split we into deep economically As quarter. that at take the or frankly, recent the to view most a up And

be going what now our we that we we we today, answer by answer to sell believe We what really an question business. have forward. we're have question able in you And communicate to will that be don't forward. an the plans VACCO considering would February, that our the so question going together is entire options to back but get And to with are should whether the time

a there? Okay. private change it risk administration an how the the more add kind And question. to bit maybe Great. of with just the are Helpful. out there Is or administration to contractors that support . space might to little on VACCO and asset

be a program. really is term, solid could I very we the risk be come. the long But for our long some risk. -- some the SLS there in to to years very could term, would think for I really backlog few in -- say, mean there I

question of from next Our Sullivan Instructions] the the Benchmark of Company. comes [Operator Josh line

Just growing transitioning side? . around curious you aftermarket as a what momentum for on the baking about growth as far conversation into 'XX, I'm there. assuming from OEM, 'XX aftermarket A&D are just outlook There's what the you're to

doesn't our -- know, as We Navy of so aftermarket. business have you sure. part Sure, substantial the a

and used talking military things we thing. would that. exposure systems things that where are like filters helicopters where business The make of that Mayday our that that built then be aftermarket So go the biggest rebuilds and Hawk we're PTI our aerospace. has and part our here like bushings and we really primarily of Black business about sort commercial And landing on the in business, the gear maintenance of

We are pieces putting success. grow we and of do we'll have on those to a pretty significant effort some anticipate business, that

aircraft significant of an XXX just gear need their we to for Mayday the us an and won rebuild kind have a content that. As those systems That's targeting example, We've age shipset of the a a that each time a that and out few we're that's think getting driver full of where business. to pretty big for they of X those, are act already to happens. going be landing

like have the lead others. it a issues weathering they higher talent easier than to longer supplier wages that jumping issue seems an need. need There it. maybe But with the seems a with some for to the just labor they from builders are getting naval negotiating Pentagon be attract Got that larger times of the the bit little outlook. the And suppliers the then over side of ship perspective, the

or you Just that fall lead of whether you're and an big seeing to right kind it's issue. curious maybe group as of if into some that longer now with times impact not any

What fast go we're we at Yes. We're as this being point. any not can. impact to as is told seeing

been not that at rate not are they're building have targeting. We the where yet we

acceleration some revenues our anticipate reflected in will be going in should that you build rates forward. So

there's our opportunities of might are of see sort could primes But meaningful always be you'll business like some the We as hearing spares that things listen, on some right and a Navy a now. be the backfit reason that result you we the that. There's believe seeing slowdown and Navy in from side. That things that of thing. don't any

large the FM&P close tentpole X this And out just the is to point? over mean, be should one, Anything watching deal acquisition. last what just get on I the then for. to we big at

Well, back obviously, that that in security so be detailed Act, that and of or United Kingdom, any implications. National builder, is implemented called 'XX this certainly review they comprehensive Infrastructure to yes, strategic in national you 'XX, requires the them a there. and acquisition do as law And the a Security has new submarine aware a may implied

at take I forth will . We've of where period kind think responses next the that after are days they And we probably a least We're a unilateral normally review our they in They business had now XX that anticipate them. to right a with additionally. and days. back inputs. them. to So from reviewing hearing have do in our would receiving XX period them extend

out nothing what ordinary don't bureaucratic to kind of feels moving forward a of so normal problem, And the there We here. it's anticipate but of pace. a being kind like us

the I Sir? now Bryan to turn back like would you. closing Thank Sayler for conference to remarks.

into We're really work a thanks our for to hard I business extend going time our today. the business. these continue prospects worldwide who are listen, update. really are want thanks lot to entire the our team hard worked Well, Thanks for make to future. results have employees build of to for excited and about to to everyone, the the

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

now disconnect. may You