ESCO Technologies(ESE) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Order growth in Q3 2024 was substantial at 46%, resulting in a record backlog of nearly $890 million [12][4] - Sales increased by 5%, driven by 4% organic growth and a 1% contribution from the MPE acquisition [12] - Adjusted EBIT improved by 50 basis points, and adjusted EPS increased by over 6% [12] Business Segment Data and Key Metrics Changes - Aerospace & Defense segment saw order growth of 79%, with sales up nearly 11% [13] - Utility Solutions Group orders increased by 17%, with Doble delivering a 30% increase [14] - Test business orders increased by over 40%, although sales were down 5% on an organic basis [15] Market Data and Key Metrics Changes - The Utility Solutions Group experienced a modest sales growth, with orders for NRG decreasing by$ 4 million compared to last year's record [14] - The Test business showed sequential improvements in both sales and margins, with adjusted EBIT margins at 16.6% [11] Company Strategy and Development Direction - The company is reviewing strategic alternatives for its VACCO Space business, which has sales of approximately $55 million [9] - The addition of two new board members with deep utility industry backgrounds indicates a focus on expanding the Utility Solutions group [6][5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects for the company, citing record backlogs and a strong outlook across all business platforms [18][4] - The company anticipates continued sequential growth in revenue and margins, particularly in the Test business [32] Other Important Information - The company completed regulatory filings for the Signature Management & Power acquisition, expecting to close the deal in Q1 of fiscal 2025 [18] - Adjusted EPS guidance for 2024 is set at$ 4.10 to $4.20, excluding potential profitability erosion from the VACCO space business [17] Q&A Session Summary Question: Navy orders and shipset content realization - Management indicated that recent Navy orders were primarily for spares, with larger orders anticipated in the future [20] Question: Revenue growth expectations for A&D segment - Management acknowledged the potential for double-digit revenue growth in the A&D segment, given the significant backlog [21] Question: Profitability of VACCO Space business - Management stated that the profitability of the VACCO Space business is below segment averages and is still under review [24] Question: Incremental improvements in the Test business - Management expects continued sequential growth in revenue and margins for the Test business, particularly in the U.S. market [32] Question: Factors affecting Utility Solutions Group performance - Management noted some softening in the renewable side compared to the previous year but highlighted strong growth in Doble's services and hardware [37]