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ESCO Reports Second Quarter Fiscal 2024 Results

St. Louis, May 09, 2024 (GLOBE NEWSWIRE) — ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the second quarter ended March 31, 2024 (Q2 2024).

Operating Highlights

Bryan Sayler, Chief Executive Officer and President, commented, “Q2 was a solid quarter highlighted by both top and bottom-line growth. Revenue grew 9 percent as we continue to see favorable dynamics in our key aerospace, Navy and utility end markets. The sales performance translated to the bottom line very well as Adjusted EPS increased 24 percent compared to the prior year quarter.”   

Segment Performance

Aerospace & Defense (A&D)

Utility Solutions Group (USG)

RF Test & Measurement (Test)

Share Repurchase Program
During Q2 2024, the Company repurchased approximately 72,000 shares for $7.2 million.

Dividend Payment
The next quarterly cash dividend of $0.08 per share will be paid on July 19, 2024 to stockholders of record on July 3, 2024.

Business Outlook – 2024
Year-to-date performance has tracked to expectations and full year adjusted earnings per share guidance is being maintained in the range of $4.15 to $4.30 (12 to 16 percent growth). This represents ESCO’s third year in a row of double-digit earnings growth. This outlook is based on sales in line with our initial guidance range of $1.02 to $1.04 billion (7 to 9 percent annual growth). Management’s expectation is for Q3 Adjusted EPS in the range of $1.16 to $1.22.   

Conference Call
The Company will host a conference call today, May 9, at 4:00 p.m. Central Time, to discuss the Company’s Q2 2024 results. A live audio webcast and an accompanying slide presentation will be available on ESCO’s investor website. For those unable to participate, a webcast replay will be available after the call on ESCO’s investor website.

Forward-Looking Statements
Statements in this press release regarding Management’s intentions, expectations and guidance for fiscal 2024, including restructuring and cost reduction efforts, sales, orders, revenues, margin, earnings, Adjusted EPS, and any other statements which are not strictly historical, are “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. securities laws.
Investors are cautioned that such statements are only predictions and speak only as of the date of this release, and the Company undertakes no duty to update them except as may be required by applicable laws or regulations. The Company’s actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company’s operations and business environment including but not limited to those described in Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and the following: the impacts of climate change and related regulation of greenhouse gases; the impacts of labor disputes, civil disorder, wars, elections, political changes, tariffs and trade disputes, terrorist activities, cyberattacks or natural disasters on the Company’s operations and those of the Company’s customers and suppliers; disruptions in manufacturing or delivery arrangements due to shortages or unavailability of materials or components or supply chain disruptions; inability to access work sites; the timing and content of future contract awards or customer orders; the timely appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts or orders; weakening of economic conditions in served markets; the success of the Company’s competitors; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties or data breaches; the availability of selected acquisitions; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs and availability of certain raw materials; material changes in the cost of credit; changes in laws and regulations including but not limited to changes in accounting standards and taxation; changes in interest, inflation and employment rates; costs relating to environmental matters arising from current or former facilities; uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration; and the integration and performance of recently acquired businesses.

Non-GAAP Financial Measures
The financial measures EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS are presented in this press release. The Company defines “EBIT” as earnings before interest and taxes, “EBITDA” as earnings before interest, taxes, depreciation and amortization, “Adjusted EBIT” and “Adjusted EBITDA” as excluding the net impact of the items described in the attached Reconciliation of Non-GAAP Financial Measures, and “Adjusted EPS” as GAAP earnings per share excluding the net impact of the items described and reconciled in the attached Reconciliation of Non-GAAP Financial Measures.

EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, Management believes EBIT, Adjusted EBIT, EBITDA, and Adjusted EBITDA are useful in assessing the operational profitability of the Company’s business segments because they exclude interest, taxes, depreciation, and amortization, which are generally accounted for across the entire Company on a consolidated basis. EBIT is also one of the measures used by Management in determining resource allocations within the Company as well as incentive compensation. The presentation of EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS provides important supplemental information to investors by facilitating comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. The use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.

ESCO is a global provider of highly engineered products and solutions serving diverse end-markets. It manufactures filtration and fluid control products for the aviation, Navy, space, and process markets worldwide and composite-based products and solutions for Navy, defense, and industrial customers. ESCO is an industry leader in designing and manufacturing RF test and measurement products and systems; and provides diagnostic instruments, software and services to industrial power users and the electric utility and renewable energy industries. Headquartered in St. Louis, Missouri, ESCO and its subsidiaries have offices and manufacturing facilities worldwide. For more information on ESCO and its subsidiaries, visit the Company’s website at www.escotechnologies.com.
   
   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations (Unaudited)  
(Dollars in thousands, except per share amounts)  
    
          Three Months
Ended
March 31, 2024
  Three Months
Ended
March 31, 2023
 
                 
Net Sales   $ 249,129   229,136  
Cost and Expenses:          
  Cost of sales   152,347   142,296  
  Selling, general and administrative expenses   55,097   53,877  
  Amortization of intangible assets   8,572   7,030  
  Interest expense   3,226   2,269  
  Other expenses (income), net   666   314  
    Total costs and expenses   219,908   205,786  
                 
Earnings before income taxes   29,221   23,350  
Income tax expense   6,002   5,472  
                 
    Net earnings $ 23,219   17,878  
                 
    Earnings Per Share (EPS)          
                 
    Diluted – GAAP $ 0.90   0.69  
                 
    Diluted – As Adjusted Basis $ 0.94 (1 ) 0.76 (2 )
                 
    Diluted average common shares O/S:   25,847   25,895  
                 
(1 ) Q2 2024 Adjusted EPS excludes $0.04 per share of after-tax charges consisting of: $0.02 of MPE acquisition backlog charges and $0.02 of restructuring charges (primarily severance) within the Test and A&D segments.
                 
(2 ) Q2 2023 Adjusted EPS excludes $0.07 per share of after-tax charges consisting of: $0.04 of executive management transition costs at Corporate, $0.02 of CMT acquisition inventory step-up charges and $0.01 of restructuring charges within the A&D segment.

   
   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations (Unaudited)  
(Dollars in thousands, except per share amounts)  
    
          Six Months
Ended
March 31, 2024
  Six Months
Ended
March 31, 2023
 
                 
Net Sales   $ 467,443   434,637  
Cost and Expenses:          
  Cost of sales   286,498   268,679  
  Selling, general and administrative expenses   109,065   105,179  
  Amortization of intangible assets   16,440   13,891  
  Interest expense   5,893   3,927  
  Other expenses (income), net   872   712  
    Total costs and expenses   418,768   392,388  
                 
Earnings before income taxes   48,675   42,249  
Income tax expense   10,287   9,644  
                 
    Net earnings $ 38,388   32,605  
                 
    Earnings Per Share (EPS)          
                 
    Diluted – GAAP $ 1.49   1.26  
                 
    Diluted – As Adjusted Basis $ 1.56 (1 ) 1.36 (2 )
                 
    Diluted average common shares O/S:   25,846   25,919  
                 
(1 ) YTD Q2 2024 Adjusted EPS excludes $0.07 per share of after-tax charges consisting of: $0.05 of MPE acquisition backlog and inventory step-up charges and acquisition costs and $0.02 of restructuring charges (primarily severance) within the Test and A&D segments.
                 
(2 ) YTD Q2 2023 Adjusted EPS excludes $0.10 per share of after-tax charges consisting of: $0.06 of executive management transition costs at Corporate, $0.02 of CMT acquisition inventory step-up charges and $0.02 of restructuring charges within the A&D segment.

   
   

    ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information (Unaudited)
(Dollars in thousands)
   
        GAAP   As Adjusted  
        Q2 2024   Q2 2023   Q2 2024   Q2 2023  
Net Sales                  
  Aerospace & Defense $ 114,701     98,982     114,701     98,982    
  USG   87,309     79,161     87,309     79,161    
  Test   47,119     50,993     47,119     50,993    
    Totals $ 249,129     229,136     249,129     229,136    
                       
EBIT                    
  Aerospace & Defense $ 23,377     18,795     23,640     19,595    
  USG   17,575     14,061     17,575     14,061    
  Test   5,542     7,226     5,745     7,226    
  Corporate   (14,047 )   (14,463 )   (13,262 )   (12,963 )  
    Consolidated EBIT   32,447     25,619     33,698     27,919    
    Less: Interest expense   (3,226 )   (2,269 )   (3,226 )   (2,269 )  
    Less: Income tax expense   (6,002 )   (5,472 )   (6,290 )   (6,001 )  
    Net earnings $ 23,219     17,878     24,182     19,649    
                          
Note 1: Adjusted net earnings of $24.2 million in Q2 2024 exclude $0.04 per share of after-tax charges consisting of: $0.02 of MPE acquisition backlog charges and $0.02 of restructuring charges (primarily severance) within the Test and A&D segments.
                       
Note 2: Adjusted net earnings of $19.6 million in Q2 2023 exclude $0.07 per share of after-tax charges consisting of: $0.04 of executive management transition costs at Corporate, $0.02 of CMT acquisition inventory step-up charges and $0.01 of restructuring charges within the A&D segment.
                       
EBITDA Reconciliation to Net earnings:           Q2 2024 –   Q2 2023 –  
        Q2 2024   Q2 2023   As Adjusted   As Adjusted  
Consolidated EBITDA $ 46,550     38,162     47,174     40,462    
Less: Depr & Amort   (14,103 )   (12,543 )   (13,476 )   (12,543 )  
Consolidated EBIT   32,447     25,619     33,698     27,919    
Less: Interest expense   (3,226 )   (2,269 )   (3,226 )   (2,269 )  
Less: Income tax expense   (6,002 )   (5,472 )   (6,290 )   (6,001 )  
Net earnings $ 23,219     17,878     24,182     19,649    
                       

    
   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information (Unaudited)
(Dollars in thousands)
   
        GAAP   As Adjusted  
        YTD   YTD   YTD   YTD  
        Q2 2024   Q2 2023   Q2 2024   Q2 2023  
Net Sales                  
  Aerospace & Defense $ 209,434     181,965     209,434     181,965    
  USG   170,293     150,206     170,293     150,206    
  Test   87,716     102,466     87,716     102,466    
    Totals $ 467,443     434,637     467,443     434,637    
                       
EBIT                    
  Aerospace & Defense $ 40,040     31,331     40,303     32,330    
  USG   35,200     30,192     35,320     30,192    
  Test   7,321     12,637     7,797     12,637    
  Corporate   (27,993 )   (27,984 )   (26,557 )   (25,691 )  
    Consolidated EBIT   54,568     46,176     56,863     49,468    
    Less: Interest expense   (5,893 )   (3,927 )   (5,893 )   (3,927 )  
    Less: Income tax expense   (10,287 )   (9,644 )   (10,815 )   (10,401 )  
    Net earnings $ 38,388     32,605     40,155     35,140    
                          
Note 1: Adjusted net earnings of $40.2 million in YTD 2024 exclude $0.07 per share of after-tax charges consisting of: $0.05 of MPE acquisition backlog and inventory step-up charges and acquisition costs and $0.02 of restructuring costs (primarily severance) within the Test and A&D segments.
                       
Note 2: Adjusted net earnings of $35.1 million in YTD 2023 exclude $0.10 per share of after-tax charges consisting of: $0.06 of executive management transition costs at Corporate, $0.02 of CMT acquisition inventory step-up charges and $0.02 of restructuring charges within the A&D segment.
                       
EBITDA Reconciliation to Net earnings:           YTD   YTD  
        YTD   YTD   Q2 2024 –   Q2 2023 –  
        Q2 2024   Q2 2023   As Adj   As Adj  
Consolidated EBITDA $ 82,123     71,086     83,582     74,378    
Less: Depr & Amort   (27,555 )   (24,910 )   (26,719 )   (24,910 )  
Consolidated EBIT   54,568     46,176     56,863     49,468    
Less: Interest expense   (5,893 )   (3,927 )   (5,893 )   (3,927 )  
Less: Income tax expense   (10,287 )   (9,644 )   (10,815 )   (10,401 )  
Net earnings $ 38,388     32,605     40,155     35,140    
                       

     
   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
   
        March 31,
2024
  September 30,
2023
             
Assets          
  Cash and cash equivalents $ 59,436   41,866
  Accounts receivable, net   187,535   198,557
  Contract assets   139,303   138,633
  Inventories   211,338   184,067
  Other current assets   24,310   17,972
    Total current assets   621,922   581,095
  Property, plant and equipment, net   161,811   155,484
  Intangible assets, net   414,872   392,124
  Goodwill   535,661   503,177
  Operating lease assets   38,322   39,839
  Other assets   11,603   11,495
      $ 1,784,191   1,683,214
             
Liabilities and Shareholders’ Equity        
  Current maturities of long-term debt $ 20,000   20,000
  Accounts payable   81,961   86,973
  Contract liabilities   107,357   112,277
  Other current liabilities   79,612   95,401
    Total current liabilities   288,930   314,651
  Deferred tax liabilities   80,648   75,531
  Non-current operating lease liabilities   35,444   36,554
  Other liabilities   41,759   43,336
  Long-term debt   171,000   82,000
  Shareholders’ equity   1,166,410   1,131,142
      $ 1,784,191   1,683,214

   
   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
       
    Six Months
Ended
March 31, 2024
  Six Months
Ended
March 31, 2023
Cash flows from operating activities:        
Net earnings $ 38,388     32,605  
Adjustments to reconcile net earnings to net cash        
provided (used) by operating activities:        
Depreciation and amortization   27,555     24,910  
Stock compensation expense   4,144     5,309  
Changes in assets and liabilities   (47,869 )   (67,140 )
Effect of deferred taxes   (2,981 )   (1,145 )
Net cash provided (used) by operating activities   19,237     (5,461 )
         
Cash flows from investing activities:        
Acquisition of business, net of cash acquired   (56,179 )   (17,901 )
Capital expenditures   (16,301 )   (10,305 )
Additions to capitalized software   (5,912 )   (5,918 )
Net cash used by investing activities   (78,392 )   (34,124 )
         
Cash flows from financing activities:        
Proceeds from long-term debt   154,000     68,000  
Principal payments on long-term debt and short-term borrowings   (65,000 )   (60,000 )
Dividends paid   (4,125 )   (4,128 )
Purchases of common stock into treasury   (7,189 )   (12,217 )
Other   (1,432 )   (2,374 )
Net cash provided (used) by financing activities   76,254     (10,719 )
         
Effect of exchange rate changes on cash and cash equivalents   471     801  
         
Net increase (decrease) in cash and cash equivalents   17,570     (49,503 )
Cash and cash equivalents, beginning of period   41,866     97,724  
Cash and cash equivalents, end of period $ 59,436     48,221  

   
   

    ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data (Unaudited)
(Dollars in thousands)
   
Backlog And Entered Orders – Q2 2024   A&D   USG   Test   Total
  Beginning Backlog – 1/1/24 $ 560,893     127,439     159,436     847,768  
  Entered Orders   116,110     79,025     43,937     239,072  
  Sales     (114,701 )   (87,309 )   (47,119 )   (249,129 )
  Ending Backlog – 3/31/24 $ 562,302     119,155     156,254     837,711  
                     
                     
                     
Backlog And Entered Orders – YTD Q2 2024   A&D   USG   Test   Total
  Beginning Backlog – 10/1/23 $ 484,069     133,459     154,834     772,362  
  Entered Orders   287,667     155,989     89,136     532,792  
  Sales     (209,434 )   (170,293 )   (87,716 )   (467,443 )
  Ending Backlog – 3/31/24 $ 562,302     119,155     156,254     837,711  

   
   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Unaudited)
       
EPS – Adjusted Basis Reconciliation – Q2 2024    
  EPS – GAAP Basis – Q2 2024 $ 0.90
  Adjustments (defined below)   0.04
  EPS – As Adjusted Basis – Q2 2024 $ 0.94
       
  Adjustments exclude $0.04 per share consisting of: $0.02 of MPE acquisition backlog  
  charges and $0.02 of restructuring charges (primarily severance) within the Test    
  and A&D segments in the second quarter of 2024.    
  The $0.04 of EPS adjustments per share consists of $1,251K of pre-tax charges    
  offset by $288K of tax benefit for net impact of $963K.    
       
EPS – Adjusted Basis Reconciliation – Q2 2023    
  EPS – GAAP Basis – Q2 2023 $ 0.69
  Adjustments (defined below)   0.07
  EPS – As Adjusted Basis – Q2 2023 $ 0.76
       
  Adjustments exclude $0.07 per share consisting of executive management transition costs
  at Corporate, CMT acquisition inventory step-up charges and restructuring charges within
  the A&D segment in the second quarter of 2023.    
  The $0.07 of EPS adjustments per share consists of $2,300K of pre-tax charges    
  offset by $529K of tax benefit for net impact of $1,771K.    
       
EPS – Adjusted Basis Reconciliation – YTD Q2 2024    
  EPS – GAAP Basis – YTD Q2 2024 $ 1.49
  Adjustments (defined below)   0.07
  EPS – As Adjusted Basis – YTD Q2 2024 $ 1.56
       
  Adjustments exclude $0.07 per share consisting of: $0.05 of MPE acquisition backlog  
  and inventory step-up charges and acquisition costs, and $0.02 of restructuring charges  
  (primarily severance) within the Test and A&D segments in the first six months of 2024.
  The $0.07 of EPS adjustments per share consists of $2,295K of pre-tax charges    
  offset by $528K of tax benefit for net impact of $1,767K.    
       
EPS – Adjusted Basis Reconciliation – YTD Q2 2023    
  EPS – GAAP Basis – YTD Q2 2023 $ 1.26
  Adjustments (defined below)   0.10
  EPS – As Adjusted Basis – YTD Q2 2023 $ 1.36
       
  Adjustments exclude $0.10 per share consisting of executive management transition costs
  at Corporate, CMT acquisition inventory step-up charges and restructuring charges within
  the A&D segment in the first six months of 2023.    
  The $0.10 of EPS adjustments per share consists of $3,292K of pre-tax charges    
  offset by $757K of tax benefit for net impact of $2,535K.    

        
SOURCE ESCO Technologies Inc.
Kate Lowrey, Vice President of Investor Relations, (314) 213-7277


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