ESCO TECHNOLOGIES INC. ESCO Technologies
Third Quarter FY 2023 Earnings Call
Bryan Sayler
President & CEO
Chris Tucker
Sr. Vice President & CFO
August 8, 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 expectations and guidance for 2023 including sales and sales trends; revenues and revenue growth, earnings and 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 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, 2022; the effects of a resurgence of the COVID-19 pandemic, or the emergence of another pandemic, 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 climate change and related regulation of greenhouse gases; 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.
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Q3 Results ($ in Millions, except per share amounts)
Entered Orders
254.9 | |
213.3 | |
Q3'22 | Q3'23 |
Sales | |
248.7 | |
219.1 | |
Q3'22 | Q3'23 |
Adjusted EBIT
38.4 | |
30.8 | 15.4% |
14.1% | |
Q3'22 | Q3'23 |
Adjusted EPS
$1.09 | |
$0.89 | |
Q3'22 | Q3'23 |
Entered Orders | ||||||
Q3'22 | Q3'23 | Delta $ | Delta % | |||
• | Orders down 16% | |||||
• Strength in commercial aerospace & renewables | ||||||
Entered Orders | $254.9 | 213.3 | (41.6) | -16.3% | ||
• Order timing for A&D and softer orders for Test | ||||||
• Q3 Book-to-Bill of 0.86 / Year-to-DateBook-to-Bill >1.0 | Sales | 219.1 | 248.7 | 29.6 | 13.5% | |
• Ending Backlog of $705M, +$10M from 9/30/22 | Adjusted EBIT | 30.8 | 38.4 | 7.6 | 24.4% | |
Sales | ||||||
• | Sales increased 13.5% | Adj EBIT Margin | 14.1% | 15.4% | +1.3 pts | |
• USG +34% - Utilities +32% & Renewables +45% | Adjusted EBITDA | 42.8 | 51.1 | 8.3 | 19.5% | |
• A&D +12% - Aerospace +32%, partially offset by lower Navy & Space | ||||||
Adj EBITDA Margin | 19.5% | 20.6% | +1.1 pts | |||
• Test (7%) | ||||||
Adjusted EBIT | EPS GAAP | $0.89 | $1.08 | $0.19 | 21.3% | |
• Margins improve 130 basis points as price increases more than offset | EPS Adjusted | $0.89 | $1.09 | $0.20 | 22.5% | |
inflation impacts. Leverage on increased sales | ||||||
3
A&D ($ in Millions)
Entered Orders
110.2 | |
81.9 | |
Q3'22 | Q3'23 |
Sales | |
103.5 | |
92.6 | |
Q3'22 | Q3'23 |
Adjusted EBIT
20.7 | 21.7 |
22.4% | 20.9% |
Q3'22 | Q3'23 |
Entered Orders | |||||
Q3'22 | Q3'23 | Delta $ | Delta % | ||
• Aerospace order strength continues - Crissair, Mayday & PTI all higher | |||||
• VACCO ($35M) | |||||
Entered Orders | $110.2 | 81.9 | (28.3) | -25.7% | |
• $30M order for SLS long lead material in Q3'22 | |||||
• Timing due to customer delays on Space and VA Class orders | Sales | 92.6 | 103.5 | 10.9 | 11.7% |
• Ending backlog of $414M, +$5M from 9/30/22 | Adjusted EBIT | 20.7 | 21.7 | 1.0 | 4.5% |
Sales | |||||
Adj EBIT Margin | 22.4% | 20.9% | -1.5 pts | ||
• Underlying growth of 8%, CMT adds 4 pts of growth | |||||
• Commercial Aero +$8M (+24%) & Defense Aero +$7M (+54%) | Prior YE | Q3'23 | Delta $ | Delta % | |
• PTI, Crissair & Mayday all >25% growth in Q3 | |||||
• Partially offset by lower Navy & Space sales in the quarter | Backlog | $408.3 | 413.7 | 5.4 | 1.3% |
Adjusted EBIT
- EBIT +$1M / Lower margin (-150 basis pts) - Aerospace strength somewhat offset by lower Space / Navy volumes and margin erosion on Space
development contracts | 4 |
USG ($ in Millions)
Entered Orders
85.5 | |
74.4 | |
Q3'22 | Q3'23 |
Sales | |
90.0 | |
67.2 | |
Q3'22 | Q3'23 |
Adjusted EBIT
20.5 | |
13.1 | 22.8% |
19.5% | |
Q3'22 | Q3'23 |
Entered Orders | ||||||
Q3'22 | Q3'23 | Delta $ | Delta % | |||
• | Utility +$1.9M/ (+3%) | |||||
• | Renewables +$9.2M (+67%) | Entered Orders | $74.4 | 85.5 | 11.1 | 15.0% |
• Solar and wind project pipeline continues to be strong | ||||||
• | Sales | 67.2 | 90.0 | 22.8 | 33.9% | |
Ending backlog of $138M, +$10M (+8%) from 9/30/22 | ||||||
Sales | Adjusted EBIT | 13.1 | 20.5 | 7.4 | 55.9% | |
• | Utility +17.6M (+32%) - Strength across Services, Offline Testing, | |||||
Protection Testing and Condition Monitoring | Adj EBIT Margin | 19.5% | 22.8% | +3.3 pts | ||
• Renewables +$5.2M (+45%) - Strength across all product lines | Prior YE | Q3'23 | Delta $ | Delta % | ||
Adjusted EBIT | ||||||
Backlog | $128.2 | 138.2 | 10.0 | 7.9% | ||
• | Driven by leverage on higher revenue and price increases, partially offset | |||||
by wage and material cost inflation and higher commissions, travel, and | ||||||
trade show expenses |
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Esco Technologies Inc. published this content on 08 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 August 2023 22:25:02 UTC.
