ESCO Reports First Quarter Fiscal 2025 Results

St. Louis, Feb. 06, 2025 (GLOBE NEWSWIRE) -- ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the first quarter ended December 31, 2024 (Q1 2025). Operating Highlights Q1 2025 Sales increased $28.7 million (13.2 percent) to $247.0 million compared to $218.3 million in Q1 2024.Q1 2025 Entered Orders were $275.0 million for a book-to-bill ratio of 1.11x, resulting in record backlog of $907 million.Q1 2025 GAAP EPS increased 54 percent to $0.91 per share compared to $0.59 per share in Q1 2024.Q1 2025 Adjusted EPS as defined in prior guidance increased 48 percent to $0.92 per share compared to $0.62 per share in Q1 2024.Beginning in Q1 2025 we are excluding acquisition related amortization (which was $0.15 per share in Q1 2025) from our Adjusted EPS calculation. Q1 2025 Adjusted EPS excluding acquisition related amortization increased 41 percent to $1.07 per share compared to $0.76 per share in Q1 2024. Net cash provided by operating activities was $34 million in Q1 2025, an increase of $25 million compared to the prior year period, as cash flow was positively impacted by higher net earnings and favorable working capital impacts. Bryan Sayler, Chief Executive Officer and President, commented, “Our fiscal year got off to an outstanding start as we delivered 13 percent top line growth, over 200 basis points of Adjusted EBITDA margin expansion, and a 41 percent increase in Adjusted EPS compared to the prior year. All three segments delivered solid revenue growth, highlighted by notable strength across our Navy, commercial aerospace and utility end-markets. It was also great to see our Test business deliver a solid quarter with improving order flow, double digit revenue growth, and over 500 basis points of margin expansion. “The ESCO team continues to build upon our strong position in attractive markets to increase value across the enterprise. Overall, it was a great way to start the year, with continuing momentum across our end markets giving us the confidence to raise our full year earnings guidance.” Segment Performance Aerospace & Defense (A&D) Sales increased $19.6 million (21 percent) to $114.3 million in Q1 2025 from $94.7 million in Q1 2024. The Q1 increase was driven by strength in Navy and commercial aerospace, partially offset by lower defense aerospace.Q1 2025 EBIT and Adjusted EBIT both increased $4.9 million to $21.6 million (18.9 percent margin) from $16.7 million (17.6 percent margin) in Q1 2024. Margin improvement was driven by leverage on higher volume and price increases, partially offset by inflationary pressures and mix.Entered Orders decreased $51 million (30 percent) to $121 million in Q1 2025 compared to $172 million in Q1 2024. The decrease in orders was primarily driven by large Navy orders for Virginia Class Block V surface hull tiles and Block VI long lead material procurement for the Light-Weight Wide Aperture Array (LWWAA) in Q1 2024, partially offset by higher Q1 2025 Navy ejection valve and spares orders. Orders in the quarter resulted in a segment book-to-bill of 1.06x and record ending backlog of $607 million. Utility Solutions Group (USG) Sales increased $3.7 million (4 percent) to $86.7 million in Q1 2025 from $83.0 million in Q1 2024. Doble’s sales increased by $7.9 million (12 percent) driven by a strong quarter for offline and protection testing products and services. NRG sales decreased $4.2 million (22 percent) due to moderation in renewable energy projects in the quarter.EBIT increased $2.9 million in Q1 2025 to $20.5 million from $17.6 million in Q1 2024. Adjusted EBIT increased $2.8 million to $20.5 million (23.6 percent margin) from $17.7 million (21.4 percent margin) in Q1 2024. Margin was favorably impacted by leverage on higher volume, price increases, and mix, partially offset by inflationary pressures. Entered Orders increased $13 million (16 percent) to $90 million in Q1 2025. Doble orders increased by $10 million (15 percent) on strength across their product portfolio and highlighted by a $4.3 million order for offline test equipment at Phenix. NRG orders increased by $3 million in the quarter. The segment book-to-bill was 1.03x in the quarter and resulted in an ending backlog of $123 million. RF Test & Measurement (Test) Sales increased $5.5 million (13 percent) to $46.1 million in Q1 2025 from $40.6 million in Q1 2024. Sales growth primarily related to higher U.S. shielding, Test and Measurement in EMEA, and MPE filter sales.EBIT increased $2.6 million in Q1 2025 to $4.4 million from $1.8 million in Q1 2024. Adjusted EBIT increased $2.8 million in Q1 2025 to $4.9 million (10.6 percent margin) from $2.1 million (5.1 percent margin) in Q1 2024. Margin was favorably impacted by leverage on higher volume, price increases, and cost reduction efforts, partially offset by inflationary pressures and mix. Entered Orders increased $20 million (43 percent) to $65 million in Q1 2025. The increase was driven by a strong quarter for EMC Test & Measurement, A&D, and medical and industrial shielding orders. The segment book-to-bill was 1.41x in the quarter and resulted in ending backlog of $177 million. Business Outlook – 2025 Beginning in Q1 2025, acquisition related amortization will be excluded from our Adjusted Earnings calculation. Our current assessment of FY 2025 acquisition related amortization does not include the impact of the pending SM&P acquisition. The initial fiscal 2025 guidance issued in our November press release is revised as follows: Guidance RangeNovember FY 2025 Adjusted EPS Guidance $4.70 $4.90Acquisition Related Amortization $0.60 $0.60Revised November FY 2025 Adjusted EPS Guidance $5.30 $5.50 Due to strong market conditions and continued improvement in operational performance, we are raising our full-year guidance by $0.25 to a range of $5.55 to $5.75 (16 to 21 percent growth over the prior year) from $5.30 to $5.50. This guidance is in line with our initial revenue guidance range of $1.09 to $1.11 billion (6 to 8 percent annual growth). Guidance RangeRevised November FY 2025 Adjusted EPS Guidance $5.30 $5.50Guidance Increase $0.25 $0.25Revised FY 2025 Adjusted EPS Guidance $5.55 $5.75 Management’s current expectation is for Q2 Adjusted EPS in the range of $1.20 to $1.30, which represents 10 to 19 percent growth over the prior year quarter. Guidance RangeQ2 2025 Adjusted EPS Guidance (prior methodology) $1.05 $1.15Acquisition Related Amortization $0.15 $0.15Q2 2025 Adjusted EPS Guidance $1.20 $1.30 SM&P AcquisitionAs announced on July 8, 2024, ESCO has agreed to acquire the Signature Management & Power (SM&P) business of Ultra Maritime for a purchase price of $550 million. The closing of the transaction is subject to certain conditions, including the completion of the regulatory approval processes in the United States (US) and the United Kingdom (UK). The US closing conditions have been met. We are in the final stages of the UK government assessment of the transaction and we are optimistic that the assessment will be positively resolved in the near term. Our current expectation would be to close the transaction either in our second or early in our third fiscal quarter. SM&P’s sole source product offerings will add significant scale to the ESCO Navy business, providing increased content on domestic Navy submarine and surface ship programs and expansion into vital UK and AUKUS navy platforms. Dividend PaymentThe next quarterly cash dividend of $0.08 per share will be paid on April 17, 2025 to stockholders of record on April 2, 2025. Conference CallThe Company will host a conference call today, February 6, at 4:00 p.m. Central Time, to discuss the Company’s Q1 2025 results. A live audio webcast and an accompanying slide presentation will be available in the Investor Center of ESCO’s website. Participants may also access the webcast using this registration link. For those unable to participate, a webcast replay will be available after the call in the Investor Center of ESCO’s website. Forward-Looking StatementsStatements in this press release regarding Management’s intentions, expectations and guidance for fiscal 2025, including restructuring and cost reduction actions, sales, orders, revenues, margin, earnings, Adjusted EPS, acquisition related amortization, 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 presentation, 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, 2024 and the following: the timing and outcome, if any, of the Company’s strategic alternatives review of VACCO and its Space business; of the Company’s pending acquisition of SM&P; 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 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 acquired businesses. Non-GAAP Financial MeasuresThe 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. About ESCOESCO 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 MonthsEndedDecember 31,2024 Three MonthsEndedDecember 31,2023 Net Sales $247,026 218,314 Cost and Expenses: Cost of sales 148,642 134,151 Selling, general and administrative expenses 58,784 53,968 Amortization of intangible assets 7,993 7,868 Interest expense 2,257 2,667 Other (income) expenses, net (591) 206 Total costs and expenses 217,085 198,860 Earnings before income taxes 29,941 19,454 Income tax expense 6,468 4,285 Net earnings$23,473 15,169 Earnings Per Share (EPS) Diluted - GAAP$0.91 0.59 Diluted - As Adjusted Basis$1.07 (1)0.76(2) Diluted average common shares O/S: 25,834 25,846 (1)Q1 2025 Adjusted EPS excludes $0.16 per share of after-tax charges consisting primarily of $0.01 of restructuring charges within the Test segment and acquisition related costs at Corporate and $0.15 of acquisition related amortization. (2)Q1 2024 Adjusted EPS excludes $0.17 per share of after-tax charges consisting primarily of $0.03 of MPE acquisition inventory step-up and backlog charges and acquisition related costs and $0.14 of acquisition related amortization. ESCO TECHNOLOGIES INC. AND SUBSIDIARIESCondensed Business Segment Information (Unaudited)(Dollars in thousands) GAAP As Adjusted Q1 2025 Q1 2024 Q1 2025 Q1 2024 Net Sales Aerospace & Defense$114,301 94,733 114,301 94,733 USG 86,660 82,984 86,660 82,984 Test 46,065 40,597 46,065 40,597 Totals$247,026 218,314 247,026 218,314 EBIT Aerospace & Defense$21,596 16,663 21,622 16,663 USG 20,489 17,625 20,489 17,745 Test 4,422 1,779 4,887 2,052 Corporate (14,309) (13,946) (9,310) (8,600) Consolidated EBIT 32,198 22,121 37,688 27,860 Less: Interest expense (2,257) (2,667) (2,257) (2,667) Less: Income tax expense (6,468) (4,285) (7,730) (5,605) Net earnings$23,473 15,169 27,701 19,588 Note 1: Adjusted net earnings of $27.7 million in Q1 2025 exclude $4.2 million (or $0.16 per share) of after-tax charges consisting primarily of restructuring charges within the Test segment and acquisition related costs at Corporate, and acquisition related amortization. Note 2: Adjusted net earnings of $19.6 million in Q1 2024 exclude $4.4 million (or $0.17 per share) of after-tax charges consisting primarily of MPE acquisition inventory step-up and backlog charges and acquisition related costs, and acquisition related amortization. EBITDA Reconciliation to Net earnings: Adjusted Adjusted Q1 2025 Q1 2024 Q1 2025 Q1 2024 Consolidated EBITDA$46,005 35,573 46,498 36,408 Less: Depr & Amort (13,807) (13,452) (8,810) (8,548) Consolidated EBIT 32,198 22,121 37,688 27,860 Less: Interest expense (2,257) (2,667) (2,257) (2,667) Less: Income tax expense (6,468) (4,285) (7,730) (5,605) Net earnings$23,473 15,169 27,701 19,588 ESCO TECHNOLOGIES INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets (Unaudited)(Dollars in thousands) December 31,2024 September 30,2024 Assets Cash and cash equivalents$71,284 65,963 Accounts receivable, net 202,661 240,680 Contract assets 131,404 130,534 Inventories 219,383 209,164 Other current assets 20,779 22,308 Total current assets 645,511 668,649 Property, plant and equipment, net 168,468 170,596 Intangible assets, net 396,302 407,602 Goodwill 532,312 539,899 Operating lease assets 38,710 37,744 Other assets 13,761 14,130 $1,795,064 1,838,620 Liabilities and Shareholders' Equity Current maturities of long-term debt$20,000 20,000 Accounts payable 75,881 98,371 Contract liabilities 129,737 124,845 Other current liabilities 90,491 106,638 Total current liabilities 316,109 349,854 Deferred tax liabilities 75,520 75,333 Non-current operating lease liabilities 36,400 34,810 Other liabilities 38,102 39,273 Long-term debt 92,000 102,000 Shareholders' equity 1,236,933 1,237,350 $1,795,064 1,838,620 ESCO TECHNOLOGIES INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(Dollars in thousands) Three MonthsEndedDecember 31,2024 Three MonthsEndedDecember 31,2023Cash flows from operating activities: Net earnings$23,473 15,169 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 13,807 13,452 Stock compensation expense 2,524 2,180 Changes in assets and liabilities (7,151) (22,539)Effect of deferred taxes 1,521 484 Net cash provided by operating activities 34,174 8,746 Cash flows from investing activities: Acquisition of business, net of cash acquired - (56,179)Capital expenditures (5,208) (7,848)Additions to capitalized software (2,587) (2,942)Net cash used by investing activities (7,795) (66,969) Cash flows from financing activities: Proceeds from long-term debt 42,000 99,000 Principal payments on long-term debt and short-term borrowings (52,000) (29,000)Dividends paid (2,064) (2,064)Purchases of common stock into treasury - - Other (6,031) (1,432)Net cash (used) provided by financing activities (18,095) 66,504 Effect of exchange rate changes on cash and cash equivalents (2,963) 1,249 Net increase in cash and cash equivalents 5,321 9,530 Cash and cash equivalents, beginning of period 65,963 41,866 Cash and cash equivalents, end of period$71,284 51,396 ESCO TECHNOLOGIES INC. AND SUBSIDIARIESOther Selected Financial Data (Unaudited)(Dollars in thousands) Backlog And Entered Orders - Q1 2025 A&D USG Test Total Beginning Backlog - 10/1/24$600,382 119,943 158,644 878,969 Entered Orders 120,606 89,574 64,825 275,005 Sales (114,301) (86,660) (46,065) (247,026) Ending Backlog - 12/31/24$606,687 122,857 177,404 906,948 ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures (Unaudited) EPS – Adjusted Basis Reconciliation – Q1 2025 EPS – GAAP Basis – Q1 2025$0.91 Adjustments (defined below) 0.16 EPS – As Adjusted Basis – Q1 2025$1.07 Adjustments exclude $0.16 per share consisting primarily of $0.01 of restructuring charges within the Test segment and acquisition related costs at Corporate and $0.15 of acquisition related amortization. The $0.16 of EPS adjustments per share consists of $5,490K of pre-tax charges offset by $1,262K of tax benefit for net impact of $4,228K. EPS – Adjusted Basis Reconciliation – Q1 2024 EPS – GAAP Basis – Q1 2024$0.59 Adjustments (defined below) 0.17 EPS – As Adjusted Basis – Q1 2024$0.76 Adjustments exclude $0.17 per share consisting primarily of $0.03 of MPE acquisition inventory step-up and backlog charges and acquisition related costs and $0.14 of acquisition related amortization. The $0.17 of EPS adjustments per share consists of $5,739K of pre-tax charges offset by $1,320K of tax benefit for net impact of $4,419K. EPS – Adjusted Basis Reconciliation – Q2 2025 Guidance Low High EPS – GAAP Basis – Q2 2025$1.05 1.15 Adjustments (defined below) 0.15 0.15 EPS – As Adjusted Basis – Q2 2025$1.20 1.30 Adjustments exclude an estimated $0.15 of acquisition related amortization. The estimated $0.15 of EPS adjustment per share consists of $5.0 million of pre-tax charges offset by $1.15 million of tax benefit for net impact of $3.85 million. EPS – Adjusted Basis Reconciliation – FY 2025 Guidance Low High EPS – GAAP Basis – FY 2025$4.94 5.14 Adjustments (defined below) 0.61 0.61 EPS – As Adjusted Basis – FY 2025$5.55 5.75 Adjustments exclude $0.61 per share consisting primarily of $0.01 of restructuring charges within the Test segment and acquisition related costs at Corporate and an estimated $0.60 of acquisition related amortization. The estimated $0.61 of EPS adjustments per share consists of $20.5 million of pre-tax charges offset by $4.7 million of tax benefits for net impact of $15.8 million. SOURCE ESCO Technologies Inc.Kate Lowrey, Vice President of Investor Relations, (314) 213-7277

ESCO Reports First Quarter Fiscal 2025 Results

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