ESCO Technologies

Second Quarter FY 2023 Earnings Call

Bryan Sayler

President & CEO

Chris Tucker

Sr. Vice President & CFO

May 9, 2023

Forward Looking Statement

Statements in this presentation and made during today's conference call regarding Management's expectations for fiscal 2023, the effects of continuing inflationary pressures, higher interest rates, pressures related to supply chain performance and labor shortages, our guidance for 2023 including revenues, revenue growth, Adjusted EPS, Adjusted EBIT and Adjusted EBITDA margin; the effects of acquisitions, 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, 2022; the availability and acceptance of viable COVID-19 vaccines by enough of the U.S. and world's population to curtail the pandemic; the continuing impact of the COVID-19 pandemic and the effects of known or unknown COVID-19 variants including labor shortages, facility closures, shelter in place policies or quarantines, material shortages, transportation delays, termination or delays of Company contracts, and the inability of our suppliers or customers to perform; the impacts of natural disasters on the Company's operations and those of the Company's customers and suppliers; the timing and content of future contract awards or customer orders; the 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; the success of the Company's acquisition efforts; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; changes in the costs and availability of certain raw materials; labor disputes; changes in U.S. tax laws and regulations; other changes in laws and regulations including but not limited to changes in accounting standards and foreign taxation; changes in interest 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 of recently acquired businesses.

During this call, the Company may discuss some non-GAAP financial measures in describing the Company's operating results. A reconciliation of these measures to their most comparable GAAP measures can be found in the press release issued today and found on the Company's website at www.escotechnologies.comunder the link:

Investor Relations.

In addition, the financial results presented in this presentation include certain non-GAAP financial measures such as EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS. These non-GAAP financial measures are reconciled to their respective GAAP equivalents in the "Reconciliation of Non-GAAP Measures" presented below.

2

Q2 Results ($ in Millions, except per share amounts)

Entered Orders

236.5

251.6

Q2'22

Q2'23

Sales

229.1

204.9

Q2'22

Q2'23

Adjusted EBIT

27.9

23.0

12.2%

11.2%

Q2'22

Q2'23

Adjusted EPS

$0.76

$0.65

Q2'22

Q2'23

Entered Orders

Q2'22

Q2'23

Delta $

Delta %

• Orders up 6% on strength in A&D and renewables

Entered Orders

$236.5

251.6

15.1

6.4%

• Book-to-Bill of 1.10 & Record ending backlog of $741M

Sales

204.9

229.1

24.2

11.8%

Sales

• Sales increased 11.8% - double digit growth in A&D & USG

Adjusted EBIT

23.0

27.9

4.9

21.5%

• COVID related disruptions in China impacted Test

Adj EBIT Margin

11.2%

12.2%

+1.0 pts

• Continuing to manage supply chain disruptions

Adjusted EBIT

Adjusted EBITDA

35.1

40.5

5.4

15.3%

• Higher margins in A&D & USG, partially offset by lower margins in

Adj EBITDA Margin

17.1%

17.7%

+0.6 pts

Test related to Q2 Covid impacts in China

EPS GAAP

$0.64

$0.69

$0.05

7.8%

EPS Adjusted

$0.65

$0.76

$0.11

16.9%

3

A&D ($ in Millions)

Entered Orders

111.7

94.6

Q2'22

Q2'23

Sales

99.0

84.8

Q2'22

Q2'23

Adjusted EBIT

19.6

14.5

19.8%

17.1%

Q2'22

Q2'23

Entered Orders

  • Aerospace - Crissair, Mayday & PTI all higher
    • Mayday +$6M (+42%) - OEM build rates, market share gains & pricing
    • PTI +$5M (+23%) - Large aftermarket order (+$4.1M)
  • CMT added $7M of acquired backlog
  • Record ending backlog of $435M, +$27M from 9/30/22

Sales

  • Underlying growth of 14%, CMT adds 3 pts of growth
  • Commercial Aero +$8M (+27%) & Defense Aero +$2M (+13%)
    • Commercial aero recovery & pricing
  • Navy +$2M (+9%) & Space ($0.5M) (-3%)

Q2'22

Q2'23

Delta $

Delta %

Entered Orders

$94.6

111.7

17.1

18.1%

Sales

84.8

99.0

14.2

16.7%

Adjusted EBIT

14.5

19.6

5.1

35.2%

Adj EBIT Margin

17.1%

19.8%

+2.7 pts

Prior YE

Q2'23

Delta $

Delta %

Backlog

$408.3

435.2

26.9

6.6%

Adjusted EBIT

•

Higher margin (+2.7 pts) driven by leverage on increased volume

•

Price increases mostly offsetting wage and material cost inflation

4

USG ($ in Millions)

Entered Orders

86.5

84.6

Q2'22

Q2'23

Sales

79.2

64.2

Q2'22

Q2'23

Adjusted EBIT

14.1

11.3

17.8%

17.7%

Q2'22

Q2'23

Entered Orders

• Utility ($8.0M)/ (-11%)

Q2'22

Q2'23

Delta $

Delta %

• Lower due to multi-year $12M DUC contract renewal in Q2'22.

Entered Orders

$86.5

84.6

(1.9)

-2.2%

• Bookings strength continues across product portfolios - highlighted

by strong condition monitoring orders

Sales

64.2

79.2

15.0

23.3%

• Renewables +$6.0M (+54%) - Wind & Solar (SRM orders in U.S. & Europe)

Adjusted EBIT

11.3

14.1

2.8

24.1%

• Ending backlog of $143M, +$15M (+11%) from 9/30/22

Sales

Adj EBIT Margin

17.7%

17.8%

+0.1 pts

• Utility +10.5M (+19%) - condition monitoring +$3M, Phenix +$4M &

Prior YE

Q2'23

Delta $

Delta %

Services +$3M

• Renewables +$4.5M (+47%) - strength across all product lines

Backlog

$128.2

142.7

14.5

11.3%

Adjusted EBIT

  • Driven by leverage on higher revenue and price increases, partially offset

by wage and material cost inflation, mix, and in-person events/travel

5

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Esco Technologies Inc. published this content on 09 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 May 2023 20:46:29 UTC.