Synopsis Historical Financial Analysis ESE's past financial results have demonstrated robust top-line growth. In 2021, it reported total net sales of approximately $715.40 million. In 2022, net sales grew 19.9% year-over-year to $857.5 million. This growth was driven by all three segments, which are Aerospace and Defence [A&D], Utility Solutions Group [USG], and RF Test & Measurement [Test]. Its A&D segment net sales increased 11.6%, which was driven by an increase in commercial aerospace sales as a result ...

St. Louis, June 05, 2024 (GLOBE NEWSWIRE) -- ESCO Technologies Inc. (NYSE: ESE) announced today that Chris Tucker, Senior Vice President & CFO, will participate in a fireside chat on Wednesday, June 12, at the Wells Fargo Industrial Conference. The fireside chat webcast will begin at 2:15 Central Time and will be available in the Investor Center on the ESCO website or through this registration link. ESCO is a global provider of highly engineered products and solutions serving diverse end-markets. It manufac ...

St. Louis, June 05, 2024 (GLOBE NEWSWIRE) -- ESCO Technologies Inc. (NYSE: ESE) announced today that Chris Tucker, Senior Vice President & CFO, will participate in a fireside chat on Wednesday, June 12, at the Wells Fargo Industrial Conference. The fireside chat webcast will begin at 2:15 Central Time and will be available in the Investor Center on the ESCO website or through this registration link. ESCO is a global provider of highly engineered products and solutions serving diverse end-markets. It manufac ...

PART I. FINANCIAL INFORMATION This section presents the company's condensed consolidated financial statements and management's financial analysis [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the condensed consolidated statements of operations, comprehensive income, balance sheets, and cash flows [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Three Months)](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(Three%20Months)) For the three months ended March 31, 2024, ESCO Technologies Inc. reported an increase in net sales, net earnings, and diluted earnings per share compared to the same period in 2023 Operating Results (Three Months) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :------------------------ | :------------- | | Net sales | $249,129 | $229,136 | $19,993 | 8.7% | | Net earnings | $23,219 | $17,878 | $5,341 | 29.9% | | Diluted - Net earnings (per share) | $0.90 | $0.69 | $0.21 | 30.4% | [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Six Months)](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(Six%20Months)) For the six months ended March 31, 2024, the company demonstrated strong financial performance with increased net sales, net earnings, and diluted earnings per share compared to the prior year period Operating Results (Six Months) | Metric | Six Months Ended March 31, 2024 (in thousands) | Six Months Ended March 31, 2023 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------ | :------------- | | Net sales | $467,443 | $434,637 | $32,806 | 7.5% | | Net earnings | $38,388 | $32,605 | $5,783 | 17.7% | | Diluted - Net earnings (per share) | $1.49 | $1.26 | $0.23 | 18.3% | [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Comprehensive income for the three months ended March 31, 2024, decreased compared to the prior year, primarily due to negative foreign currency translation adjustments, while the six-month period saw a decrease as well Comprehensive Income Details | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Six Months Ended March 31, 2024 (in thousands) | Six Months Ended March 31, 2023 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net earnings | $23,219 | $17,878 | $38,388 | $32,605 | | Foreign currency translation adjustments | (4,745) | 2,233 | 4,669 | 13,747 | | Total other comprehensive income (loss) | (4,745) | 2,233 | 4,669 | 13,747 | | Comprehensive income | $18,474 | $20,111 | $43,057 | $46,352 | [CONDENSED CONSOLIDATED BALANCE SHEETS](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2024, ESCO Technologies Inc. reported an increase in total assets and shareholders' equity compared to September 30, 2023, driven by higher cash, inventories, and long-term debt Balance Sheet Summary (Period End) | Metric | March 31, 2024 (in thousands) | September 30, 2023 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :-------------------------------- | :-------------------- | :--------- | | Total assets | $1,784,191 | $1,683,214 | $100,977 | 6.0% | | Total liabilities | $617,781 | $552,072 | $65,709 | 11.9% | | Total shareholders' equity | $1,166,410 | $1,131,142 | $35,268 | 3.1% | | Cash and cash equivalents | $59,436 | $41,866 | $17,570 | 42.0% | | Inventories | $211,338 | $184,067 | $27,271 | 14.8% | | Long-term debt | $171,000 | $82,000 | $89,000 | 108.5% | [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended March 31, 2024, the company generated positive cash flow from operating activities, a significant improvement from the prior year, while investing activities increased due to acquisitions and capital expenditures, and financing activities provided substantial cash primarily from debt Cash Flow Summary (Six Months) | Metric | Six Months Ended March 31, 2024 (in thousands) | Six Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net cash provided (used) by operating activities | $19,237 | $(5,461) | $24,698 | | Net cash used by investing activities | $(78,392) | $(34,124) | $(44,268) | | Net cash provided (used) by financing activities | $76,254 | $(10,719) | $86,973 | | Acquisition of business, net of cash acquired | $(56,179) | $(17,901) | $(38,278) | | Proceeds from long-term debt and short-term borrowings | $154,000 | $68,000 | $86,000 | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=7&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed notes on accounting policies, acquisitions, share-based compensation, and other financial statement disclosures [1. BASIS OF PRESENTATION](index=7&type=section&id=1.%20BASIS%20OF%20PRESENTATION) The interim consolidated financial statements are unaudited, prepared in accordance with Form 10-Q, and include normal recurring accruals. They do not contain all disclosures required for annual GAAP statements, and results for the interim period are not necessarily indicative of the full fiscal year - The accompanying consolidated financial statements are unaudited and presented in accordance with Form **10-Q**, thus not including all disclosures required for annual financial statements by GAAP[16](index=16&type=chunk) - Interim results for the three-month period ended March 31, **2024**, are not necessarily indicative of the results for the entire **2024** fiscal year[17](index=17&type=chunk) [2. EARNINGS PER SHARE (EPS)](index=7&type=section&id=2.%20EARNINGS%20PER%20SHARE%20(EPS)) Basic EPS is calculated using the weighted average number of common shares outstanding, while diluted EPS includes the impact of dilutive restricted shares Earnings Per Share Data | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Six Months Ended March 31, 2024 (in thousands) | Six Months Ended March 31, 2023 (in thousands) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Weighted Average Shares Outstanding — Basic | 25,792 | 25,800 | 25,794 | 25,831 | | Dilutive Restricted Shares | 55 | 95 | 52 | 88 | | Adjusted Shares — Diluted | 25,847 | 25,895 | 25,846 | 25,919 | [3. ACQUISITION](index=7&type=section&id=3.%20ACQUISITION) On November 9, 2023, the Company acquired MPE Limited for approximately $56.2 million, net of cash, integrating it into the Test segment. The acquisition resulted in $30.3 million in goodwill and $31.1 million in identifiable intangible assets, primarily customer relationships - On November 9, **2023**, the Company acquired MPE Limited (MPE), based in the United Kingdom, for approximately **$56.2 million**, net of cash acquired[19](index=19&type=chunk) - MPE is a leading global manufacturer of high-performance EMC/EMP filters and capacitor products for military, utility, telecommunication, and other critical infrastructure applications[19](index=19&type=chunk) - The acquisition resulted in **$30.3 million** of acquired goodwill and **$31.1 million** of identifiable intangible assets, mainly consisting of customer relationships totaling **$29.1 million**[19](index=19&type=chunk) [4. SHARE-BASED COMPENSATION](index=7&type=section&id=4.%20SHARE-BASED%20COMPENSATION) Share-based compensation expense for both performance-accelerated/time-vested restricted stock units and non-employee director grants decreased in the three and six-month periods ended March 31, 2024, compared to the corresponding periods in 2023. As of March 31, 2024, $13.1 million of unrecognized compensation cost remains Share-Based Compensation Expense | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Six Months Ended March 31, 2024 (in thousands) | Six Months Ended March 31, 2023 (in thousands) | | :------------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Compensation expense (PARS/RSU/PSU Awards) | $1,700 | $3,100 | $3,500 | $4,700 | | Compensation expense (Non-Employee Directors Plan) | $300 | $300 | $600 | $600 | | Total share-based compensation cost | $2,000 | $3,400 | $4,100 | $5,300 | | Total income tax benefit | $300 | $300 | $500 | $600 | - As of March 31, **2024**, there was **$13.1 million** of total unrecognized compensation cost related to share-based compensation arrangements, expected to be recognized over a remaining weighted-average period of **1.8 years**[23](index=23&type=chunk) [5. INVENTORIES](index=8&type=section&id=5.%20INVENTORIES) Total inventories increased to $211.3 million as of March 31, 2024, from $184.1 million at September 30, 2023, with increases across finished goods, work in process, and raw materials Inventory Breakdown (Period End) | (In thousands) | March 31, 2024 | September 30, 2023 | Change (in thousands) | Change (%) | | :------------- | :------------- | :----------------- | :-------------------- | :--------- | | Finished goods | $38,857 | $34,577 | $4,280 | 12.4% | | Work in process | $54,889 | $42,178 | $12,711 | 30.1% | | Raw materials | $117,592 | $107,312 | $10,280 | 9.6% | | Total inventories | $211,338 | $184,067 | $27,271 | 14.8% | [6. GOODWILL AND OTHER INTANGIBLE ASSETS](index=8&type=section&id=6.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill increased to $535.7 million as of March 31, 2024, primarily due to acquisition activity in the Test segment. Intangible assets with determinable lives, particularly customer relationships, also saw an increase Goodwill and Intangible Assets (Period End) | (Dollars in thousands) | March 31, 2024 | September 30, 2023 | Change (in thousands) | Change (%) | | :--------------------- | :------------- | :----------------- | :-------------------- | :--------- | | Goodwill | $535,661 | $503,177 | $32,484 | 6.5% | | Patents (Net) | $1,229 | $1,298 | $(69) | -5.3% | | Capitalized software (Net) | $41,420 | $41,109 | $311 | 0.8% | | Customer relationships (Net) | $205,153 | $183,616 | $21,537 | 11.7% | | Other (Net) | $4,274 | $4,654 | $(380) | -8.2% | | Trade names (Indefinite lives) | $162,796 | $161,447 | $1,349 | 0.8% | - Goodwill increased by **$30.3 million** due to acquisition activity, specifically in the Test segment, and **$2.2 million** from foreign currency translation for the six months ended March 31, **2024**[26](index=26&type=chunk) [7. BUSINESS SEGMENT INFORMATION](index=9&type=section&id=7.%20BUSINESS%20SEGMENT%20INFORMATION) The Company operates in three reportable segments: Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test and Measurement (Test). Performance is evaluated based on Net Sales and EBIT, with EBIT being a non-GAAP measure used for operational profitability assessment and resource allocation - The Company classifies its continuing business operations into three reportable segments: Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test and Measurement (Test)[27](index=27&type=chunk) - Management evaluates and measures segment performance based on 'Net Sales' and 'EBIT' (Earnings Before Interest and Taxes)[32](index=32&type=chunk) - EBIT is a non-GAAP financial measure considered useful for assessing operational profitability, resource allocation, and incentive compensation, as it excludes interest and taxes[34](index=34&type=chunk) Segment Performance Data | Segment | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Six Months Ended March 31, 2024 (in thousands) | Six Months Ended March 31, 2023 (in thousands) | | :------------------ | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | **NET SALES** | | | | | | Aerospace & Defense | $114,701 | $98,982 | $209,434 | $181,965 | | USG | $87,309 | $79,161 | $170,293 | $150,206 | | Test | $47,119 | $50,993 | $87,716 | $102,466 | | Consolidated totals | $249,129 | $229,136 | $467,443 | $434,637 | | **EBIT** | | | | | | Aerospace & Defense | $23,377 | $18,795 | $40,040 | $31,331 | | USG | $17,575 | $14,061 | $35,200 | $30,192 | | Test | $5,542 | $7,226 | $7,321 | $12,637 | | Corporate (loss) | $(14,047) | $(14,463) | $(27,993) | $(27,984) | | Consolidated EBIT | $32,447 | $25,619 | $54,568 | $46,176 | [8. DEBT](index=10&type=section&id=8.%20DEBT) Total borrowings increased to $191.0 million as of March 31, 2024, from $102.0 million at September 30, 2023, primarily under a $500 million revolving credit facility maturing in August 2028. The company had $303 million available to borrow and was in compliance with all covenants Debt Summary (Period End) | (In thousands) | March 31, 2024 | September 30, 2023 | Change (in thousands) | Change (%) | | :------------- | :------------- | :----------------- | :-------------------- | :--------- | | Total borrowings | $191,000 | $102,000 | $89,000 | 87.3% | | Current portion of long-term debt | $(20,000) | $(20,000) | $0 | 0.0% | | Total long-term debt, less current portion | $171,000 | $82,000 | $89,000 | 108.5% | - The Credit Facility includes a **$500 million** revolving line of credit, with provisions for an additional **$250 million** increase, and matures on August 30, **2028**[36](index=36&type=chunk) - As of March 31, **2024**, the Company had approximately **$303 million** available to borrow under the Credit Facility, plus the **$250 million** increase option, in addition to **$59.4 million** cash on hand[37](index=37&type=chunk) - The weighted average interest rates were **6.8%** for both the three and six-month periods ending March 31, **2024**, compared to **6.0%** and **5.3%** for the corresponding periods in **2023**, respectively[38](index=38&type=chunk) [9. INCOME TAX EXPENSE](index=11&type=section&id=9.%20INCOME%20TAX%20EXPENSE) The effective income tax rate decreased to 20.5% for Q2 2024 (from 23.4% in Q2 2023) and 21.1% for the first six months of 2024 (from 22.8% in 2023), favorably impacted by discrete events like foreign valuation allowance release and share-based compensation tax benefits Effective Income Tax Rates | Metric | Q2 2024 | Q2 2023 | 6 Months 2024 | 6 Months 2023 | | :---------------------- | :------ | :------ | :------------ | :------------ | | Effective income tax rate | 20.5% | 23.4% | 21.1% | 22.8% | - Income tax expense in the second quarter and first six months of **2024** was favorably impacted by discrete events including the release of a foreign valuation allowance and excess tax benefit related to the vesting of share-based director compensation[39](index=39&type=chunk) [10. SHAREHOLDERS' EQUITY](index=11&type=section&id=10.%20SHAREHOLDERS'%20EQUITY) Total shareholders' equity increased to $1,166.4 million as of March 31, 2024, from $1,131.1 million at September 30, 2023, driven by net earnings and changes in accumulated other comprehensive loss, partially offset by share repurchases and dividends Shareholders' Equity Details (Period End) | (In thousands) | March 31, 2024 | March 31, 2023 | | :------------- | :------------- | :------------- | | Total equity | $1,166,410 | $1,080,795 | | Retained earnings | $1,023,578 | $933,499 | | Accumulated other comprehensive loss, net of tax | $(19,300) | $(18,018) | | Treasury stock | $(146,241) | $(139,178) | [11. FAIR VALUE MEASUREMENTS](index=11&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) The company estimates the fair value of its financial instruments, classifying forward contracts and interest rate swaps as Level 2 within the valuation hierarchy. Nonfinancial assets are not measured at fair value on a recurring basis, and no impairments were recorded during the reporting periods - The fair value hierarchy for disclosure of fair value measurements includes Level **1** (quoted prices in active markets), Level **2** (observable inputs for similar assets/liabilities), and Level **3** (unobservable inputs)[41](index=41&type=chunk) - The carrying amounts of cash and cash equivalents, receivables, inventories, payables, and other current assets and liabilities approximate fair value due to their short maturity[42](index=42&type=chunk) - The Company's forward contracts and interest rate swaps are classified within Level **2** of the valuation hierarchy and are immaterial[43](index=43&type=chunk) - No impairments were recorded for nonfinancial assets (e.g., property, plant and equipment, other intangible assets) during the three and six-month periods ended March 31, **2024**[44](index=44&type=chunk) [12. REVENUES](index=12&type=section&id=12.%20REVENUES) The company disaggregates revenues by customer type (Commercial, Government), geographic location (United States, International), and revenue recognition method (Point in time, Over time) for its three reportable segments. Remaining performance obligations totaled $837.7 million at March 31, 2024, with 70% expected to be recognized in the next twelve months Revenue Disaggregation (Three Months) | Three months ended March 31, 2024 (In thousands) | Aerospace & Defense | USG | Test | Total | | :----------------------------------------------- | :------------------ | :------- | :------- | :------- | | **Customer type:** | | | | | | Commercial | $49,382 | $85,220 | $34,537 | $169,139 | | Government | $65,319 | $2,089 | $12,582 | $79,990 | | **Geographic location:** | | | | | | United States | $92,161 | $55,763 | $27,543 | $175,467 | | International | $22,540 | $31,546 | $19,576 | $73,662 | | **Revenue recognition method:** | | | | | | Point in time | $53,463 | $70,285 | $10,301 | $134,049 | | Over time | $61,238 | $17,024 | $36,818 | $115,080 | Revenue Disaggregation (Six Months) | Six months ended March 31, 2024 (In thousands) | Aerospace & Defense | USG | Test | Total | | :---------------------------------------------- | :------------------ | :------- | :------- | :------- | | **Customer type:** | | | | | | Commercial | $86,591 | $166,689 | $69,615 | $322,895 | | Government | $122,843 | $3,604 | $18,101 | $144,548 | | **Geographic location:** | | | | | | United States | $172,062 | $111,725 | $49,795 | $333,582 | | International | $37,372 | $58,568 | $37,921 | $133,861 | | **Revenue recognition method:** | | | | | | Point in time | $92,928 | $136,989 | $18,280 | $248,197 | | Over time | $116,506 | $33,304 | $69,436 | $219,246 | - At March 31, **2024**, the Company had **$837.7 million** in remaining performance obligations (backlog), with approximately **70%** expected to be recognized as revenues in the next twelve months[52](index=52&type=chunk) [13. LEASES](index=14&type=section&id=13.%20LEASES) The company recognizes right-of-use (ROU) assets and lease liabilities for leases exceeding 12 months, using its incremental borrowing rate for present value calculations. Total lease costs for the first six months of 2024 were $4.9 million, with operating leases having a weighted-average remaining term of 10.8 years Lease Costs and Terms | (Dollars in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Finance lease cost | $588 | $626 | $1,204 | $1,255 | | Operating lease cost | $1,874 | $1,853 | $3,738 | $3,498 | | Total lease costs | $2,462 | $2,479 | $4,942 | $4,753 | Lease Costs and Terms (Period End) | Metric | March 31, 2024 | March 31, 2023 | | :-------------------------- | :------------- | :------------- | | Weighted-average remaining lease term (Operating leases) | 10.8 years | 11.5 years | | Weighted-average remaining lease term (Finance leases) | 11.1 years | 11.5 years | | Weighted-average discount rate (Operating leases) | 4.55 % | 4.40 % | | Weighted-average discount rate (Finance leases) | 4.68 % | 4.61 % | [14. NEW ACCOUNTING PRONOUNCEMENTS](index=17&type=section&id=14.%20NEW%20ACCOUNTING%20PRONOUNCEMENTS) The FASB issued ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), which will expand disclosure requirements in fiscal years 2025 and 2026, respectively. These pronouncements are not expected to change the company's consolidated financial statements, only requiring additional disclosures - ASU **2023-07**, 'Segment Reporting,' expands annual and interim disclosure requirements for reportable segments, effective for fiscal years beginning after December 15, **2023** (interim periods after December 15, **2024**)[61](index=61&type=chunk) - ASU **2023-09**, 'Income Taxes,' provides qualitative and quantitative updates to rate reconciliation and income taxes paid disclosures, effective for fiscal years beginning after December 15, **2024**[62](index=62&type=chunk) - Management does not expect these new accounting pronouncements to change the consolidated statements of operations, financial position, or cash flows, only requiring additional disclosure[61](index=61&type=chunk)[62](index=62&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=18&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of the company's financial condition, operating results, and liquidity [OVERVIEW](index=18&type=section&id=OVERVIEW) In the second quarter and first six months of fiscal year 2024, ESCO Technologies Inc. achieved significant increases in sales, net earnings, and diluted earnings per share compared to the corresponding periods in 2023 Financial Overview (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | Sales | $249.1 | $229.1 | $20.0 | 8.7% | | Net earnings | $23.2 | $17.9 | $5.3 | 29.6% | | Diluted EPS | $0.90 | $0.69 | $0.21 | 30.4% | Financial Overview (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | Sales | $467.4 | $434.6 | $32.8 | 7.5% | | Net earnings | $38.4 | $32.6 | $5.8 | 17.8% | | Diluted EPS | $1.49 | $1.26 | $0.23 | 18.3% | [NET SALES](index=18&type=section&id=NET%20SALES) Consolidated net sales increased by 8.7% in Q2 2024 and 7.5% in the first six months of 2024, primarily driven by strong performance in the Aerospace & Defense and USG segments, partially offset by a decrease in the Test segment Net Sales by Segment (Q2) | Segment | Q2 2024 Net Sales (in millions) | Q2 2023 Net Sales (in millions) | YoY Change (in millions) | YoY Change (%) | | :------------------ | :------------------------------ | :------------------------------ | :----------------------- | :------------- | | Aerospace & Defense | $114.7 | $99.0 | $15.7 | 15.9% | | USG | $87.3 | $79.2 | $8.1 | 10.2% | | Test | $47.1 | $51.0 | $(3.9) | -7.6% | | **Consolidated** | **$249.1** | **$229.1** | **$20.0** | **8.7%** | Net Sales by Segment (Six Months) | Segment | 6 Months 2024 Net Sales (in millions) | 6 Months 2023 Net Sales (in millions) | YoY Change (in millions) | YoY Change (%) | | :------------------ | :------------------------------------ | :------------------------------------ | :----------------------- | :------------- | | Aerospace & Defense | $209.4 | $182.0 | $27.4 | 15.1% | | USG | $170.3 | $150.2 | $20.1 | 13.4% | | Test | $87.7 | $102.5 | $(14.8) | -14.4% | | **Consolidated** | **$467.4** | **$434.6** | **$32.8** | **7.5%** | [Aerospace & Defense (A&D) Sales](index=18&type=section&id=Aerospace%20%26%20Defense%20(A%26D)%20Sales) A&D net sales grew by 15.9% in Q2 2024 and 15.1% in the first six months of 2024, primarily driven by increased commercial aerospace, defense aerospace, and navy revenues Aerospace & Defense Net Sales (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | A&D Net Sales | $114.7 | $99.0 | $15.7 | 15.9% | Aerospace & Defense Net Sales (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | A&D Net Sales | $209.4 | $182.0 | $27.4 | 15.1% | - Sales increase in Q2 **2024** was mainly due to a **$5.1 million** increase in commercial aerospace shipments, a **$3.1 million** increase in defense aerospace shipments, and a **$7.1 million** increase in navy revenues[66](index=66&type=chunk) [USG Sales](index=18&type=section&id=USG%20Sales) USG net sales increased by 10.2% in Q2 2024 and 13.4% in the first six months of 2024, driven by higher service revenue, cybersecurity/compliance (DUCe) revenue, and continued strength in the renewables end-market, primarily solar, at NRG USG Net Sales (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | USG Net Sales | $87.3 | $79.2 | $8.1 | 10.2% | USG Net Sales (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | USG Net Sales | $170.3 | $150.2 | $20.1 | 13.4% | - The increase in USG sales was mainly due to an increase in service revenue, cybersecurity/compliance (DUCe) revenue, and an increase in net sales at NRG driven by continued strength in the renewables end-market, primarily solar[67](index=67&type=chunk) [Test Sales](index=18&type=section&id=Test%20Sales) Test segment net sales decreased by 7.6% in Q2 2024 and 14.4% in the first six months of 2024, primarily due to lower wireless, filters, and acoustic volumes in U.S. and European operations, and timing of test and measurement chamber projects Test Segment Net Sales (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | Test Net Sales | $47.1 | $51.0 | $(3.9) | -7.6% | Test Segment Net Sales (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | Test Net Sales | $87.7 | $102.5 | $(14.8) | -14.4% | - The decrease in Test segment sales was primarily due to lower wireless, filters, and acoustic volumes from the Company's U.S. and European operations, and timing of test and measurement chamber projects[68](index=68&type=chunk) [ORDERS AND BACKLOG](index=18&type=section&id=ORDERS%20AND%20BACKLOG) Backlog increased to $837.7 million at March 31, 2024, from $772.4 million at September 30, 2023. New orders for the first six months of 2024 totaled $532.8 million, up from $480.5 million in the prior year, with Aerospace & Defense contributing the largest share Orders and Backlog Data (Period End) | Metric | March 31, 2024 (in millions) | September 30, 2023 (in millions) | Change (in millions) | Change (%) | | :------- | :--------------------------- | :------------------------------- | :------------------- | :--------- | | Backlog | $837.7 | $772.4 | $65.3 | 8.5% | Orders and Backlog Data (Q2) | Segment | Q2 2024 New Orders (in millions) | Q2 2023 New Orders (in millions) | YoY Change (in millions) | YoY Change (%) | | :------------------ | :------------------------------- | :------------------------------- | :----------------------- | :------------- | | Aerospace & Defense | $116.1 | $111.7 | $4.4 | 3.9% | | USG | $79.0 | $84.6 | $(5.6) | -6.6% | | Test | $43.9 | $55.3 | $(11.4) | -20.6% | | **Total New Orders**| **$239.1** | **$251.6** | **$(12.5)** | **-5.0%** | Orders and Backlog Data (Six Months) | Segment | 6 Months 2024 New Orders (in millions) | 6 Months 2023 New Orders (in millions) | YoY Change (in millions) | YoY Change (%) | | :------------------ | :------------------------------------- | :------------------------------------- | :----------------------- | :------------- | | Aerospace & Defense | $287.7 | $208.9 | $78.8 | 37.7% | | USG | $156.0 | $164.8 | $(8.8) | -5.3% | | Test | $89.1 | $106.8 | $(17.7) | -16.6% | | **Total New Orders**| **$532.8** | **$480.5** | **$52.3** | **10.9%** | [SELLING, GENERAL AND ADMINISTRATIVE EXPENSES](index=20&type=section&id=SELLING%2C%20GENERAL%20AND%20ADMINISTRATIVE%20EXPENSES) Selling, general and administrative (SG&A) expenses increased in Q2 and the first six months of 2024, primarily due to higher sales, inflationary impacts, and acquisition impacts within the USG and A&D segments, though as a percentage of net sales, they decreased SG&A Expenses (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (Q2 2024) | % of Net Sales (Q2 2023) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | :----------------------- | :----------------------- | | SG&A Expenses | $55.1 | $53.9 | $1.2 | 2.2% | 22.1% | 23.5% | SG&A Expenses (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (6 Months 2024) | % of Net Sales (6 Months 2023) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | :------------------------------- | :------------------------------- | | SG&A Expenses | $109.1 | $105.2 | $3.9 | 3.7% | 23.3% | 24.2% | - The increase in SG&A was mainly due to higher sales, inflationary impacts, and acquisition impacts within the USG and A&D segments[73](index=73&type=chunk) [AMORTIZATION OF INTANGIBLE ASSETS](index=20&type=section&id=AMORTIZATION%20OF%20INTANGIBLE%20ASSETS) Amortization of intangible assets increased in Q2 and the first six months of 2024, primarily due to higher amortization of capitalized software and intangible assets related to the MPE and CMT acquisitions Amortization Expense (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | Amortization of intangible assets | $8.6 | $7.0 | $1.6 | 22.9% | Amortization Expense (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | Amortization of intangible assets | $16.4 | $13.9 | $2.5 | 18.0% | - The increase in amortization expense was mainly due to an increase in amortization of capitalized software and amortization of intangible assets related to the MPE and CMT acquisitions[74](index=74&type=chunk) [OTHER EXPENSES (INCOME), NET](index=20&type=section&id=OTHER%20EXPENSES%20(INCOME)%2C%20NET) Other expenses, net, increased in Q2 and the first six months of 2024, primarily due to approximately $0.5 million in restructuring charges (severance) within the Test and A&D segments Other Expenses (Income) (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | Other expenses, net | $0.7 | $0.3 | $0.4 | 133.3% | Other Expenses (Income) (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | Other expenses, net | $0.9 | $0.7 | $0.2 | 28.6% | - The principal component of other expenses, net, in Q2 and the first six months of **2024** was approximately **$0.5 million** of restructuring charges (primarily severance) within the Test and A&D segments[75](index=75&type=chunk) [EBIT](index=20&type=section&id=EBIT) Consolidated EBIT increased to $32.4 million (13.0% of net sales) in Q2 2024 and $54.6 million (11.7% of net sales) for the first six months of 2024, reflecting improved operational profitability across most segments EBIT by Segment (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (Q2 2024) | % of Net Sales (Q2 2023) | | :------------------ | :-------------------- | :-------------------- | :----------------------- | :------------- | :----------------------- | :----------------------- | | Consolidated EBIT | $32.4 | $25.6 | $6.8 | 26.6% | 13.0% | 11.2% | EBIT by Segment (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (6 Months 2024) | % of Net Sales (6 Months 2023) | | :------------------ | :-------------------------- | :-------------------------- | :----------------------- | :------------- | :------------------------------- | :------------------------------- | | Consolidated EBIT | $54.6 | $46.2 | $8.4 | 18.2% | 11.7% | 10.6% | [Aerospace & Defense EBIT](index=20&type=section&id=Aerospace%20%26%20Defense%20EBIT) A&D EBIT increased in Q2 and the first six months of 2024, driven by leverage on higher sales volumes and price increases, despite inflationary pressures and restructuring charges Aerospace & Defense EBIT Performance (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (Q2 2024) | % of Net Sales (Q2 2023) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | :----------------------- | :----------------------- | | A&D EBIT | $23.4 | $18.8 | $4.6 | 24.5% | 20.4% | 19.0% | Aerospace & Defense EBIT Performance (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (6 Months 2024) | % of Net Sales (6 Months 2023) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | :------------------------------- | :------------------------------- | | A&D EBIT | $40.0 | $31.3 | $8.7 | 27.8% | 19.1% | 17.2% | - The increase in A&D EBIT was mainly driven by leverage on higher sales volumes and price increases, partially offset by inflationary pressures and mix. EBIT was negatively impacted by **$0.3 million** of restructuring charges in both periods[79](index=79&type=chunk) [USG EBIT](index=22&type=section&id=USG%20EBIT) USG EBIT increased in Q2 and the first six months of 2024, primarily due to leverage on higher sales volumes at Doble and NRG, price increases, and favorable mix, partially offset by inflationary pressures USG EBIT Performance (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (Q2 2024) | % of Net Sales (Q2 2023) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | :----------------------- | :----------------------- | | USG EBIT | $17.6 | $14.1 | $3.5 | 24.8% | 20.2% | 17.8% | USG EBIT Performance (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (6 Months 2024) | % of Net Sales (6 Months 2023) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | :------------------------------- | :------------------------------- | | USG EBIT | $35.2 | $30.2 | $5.0 | 16.6% | 20.7% | 20.1% | - The increase in USG EBIT was mainly due to leverage on higher sales volumes at Doble and NRG, price increases, and mix, partially offset by inflationary pressures[82](index=82&type=chunk) [Test EBIT](index=22&type=section&id=Test%20EBIT) Test segment EBIT decreased in Q2 and the first six months of 2024, mainly due to lower sales volumes in U.S. and European operations, inflationary pressures, and restructuring charges, partially offset by price increases and cost reduction actions Test Segment EBIT Performance (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (Q2 2024) | % of Net Sales (Q2 2023) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | :----------------------- | :----------------------- | | Test EBIT | $5.5 | $7.2 | $(1.7) | -23.6% | 11.7% | 14.2% | Test Segment EBIT Performance (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | % of Net Sales (6 Months 2024) | % of Net Sales (6 Months 2023) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | :------------------------------- | :------------------------------- | | Test EBIT | $7.3 | $12.6 | $(5.3) | -42.1% | 8.3% | 12.3% | - The decrease in Test EBIT was primarily due to lower sales volumes from the segment's U.S. and European operations and inflationary pressures, partially offset by price increases and cost reduction actions[83](index=83&type=chunk) - EBIT was negatively impacted by **$0.2 million** of restructuring charges in Q2 **2024**, and **$0.3 million** of inventory step-up charges and **$0.2 million** of restructuring charges in the first six months of **2024**[83](index=83&type=chunk) [Corporate EBIT](index=22&type=section&id=Corporate%20EBIT) Corporate costs included in EBIT decreased in Q2 2024 due to lower executive management transition costs compared to the prior year, remaining stable for the six-month period Corporate EBIT (Loss) (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | Corporate (loss) | $(14.0) | $(14.5) | $0.5 | -3.4% | Corporate EBIT (Loss) (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | Corporate (loss) | $(28.0) | $(28.0) | $0.0 | 0.0% | - The decrease in Corporate costs in Q2 **2024** was mainly due to executive management transition costs incurred in the prior year period[84](index=84&type=chunk) [INTEREST EXPENSE, NET](index=22&type=section&id=INTEREST%20EXPENSE%2C%20NET) Interest expense, net, increased in Q2 and the first six months of 2024 due to higher average interest rates and increased average outstanding borrowings Interest Expense, Net (Q2) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :----------------------- | :------------- | | Interest expense, net | $3.2 | $2.3 | $0.9 | 39.1% | Interest Expense, Net (Six Months) | Metric | 6 Months 2024 (in millions) | 6 Months 2023 (in millions) | YoY Change (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | :------------- | | Interest expense, net | $5.9 | $3.9 | $2.0 | 51.3% | - The increase in interest expense was mainly due to higher average interest rates (**6.8%** in **2024** vs. **6.0%** in Q2 **2023** and **6.8%** in **2024** vs. **6.3%** in **6** Months **2023**) and higher average outstanding borrowings[85](index=85&type=chunk) [INCOME TAX EXPENSE](index=22&type=section&id=INCOME%20TAX%20EXPENSE) The effective income tax rate decreased in Q2 and the first six months of 2024, favorably impacted by discrete events such as the release of a foreign valuation allowance and excess tax benefits from share-based compensation Effective Income Tax Rates | Metric | Q2 2024 | Q2 2023 | 6 Months 2024 | 6 Months 2023 | | :---------------------- | :------ | :------ | :------------ | :------------ | | Effective income tax rate | 20.5% | 23.4% | 21.1% | 22.8% | - Income tax expense was favorably impacted by discrete events including the release of a foreign valuation allowance and excess tax benefit related to the vesting of share-based director compensation[86](index=86&type=chunk) [CAPITAL RESOURCES AND LIQUIDITY](index=22&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) The company maintains a strong financial position and liquidity, with working capital increasing to $333.0 million. Net cash provided by operating activities significantly improved, while capital expenditures and acquisitions increased, supported by a robust credit facility - Working capital increased to **$333.0 million** at March 31, **2024**, from **$266.4 million** at September 30, **2023**[87](index=87&type=chunk) - Net cash provided by operating activities was **$19.2 million** in the first six months of **2024**, a significant increase from a net use of (**$5.5**) million in the prior year period, mainly driven by lower accounts receivable balances due to increased collections and higher earnings[88](index=88&type=chunk) - Capital expenditures increased to **$16.3 million** in the first six months of **2024** from **$10.3 million** in **2023**, primarily due to building improvements and machinery & equipment within the A&D segment[89](index=89&type=chunk) [Acquisition (MPE)](index=24&type=section&id=Acquisition%20(MPE)) The acquisition of MPE Limited for approximately $56.2 million, net of cash acquired, on November 9, 2023, was a key investing activity, integrating into the Test segment - On November 9, **2023**, the Company acquired MPE Limited (MPE) for approximately **$56.2 million**, net of cash acquired, with its operating results included as part of ETS-Lindgren in the Test segment[90](index=90&type=chunk) [Credit Facility](index=24&type=section&id=Credit%20Facility) The company has a $500 million revolving credit facility, with $303 million available to borrow and an additional $250 million increase option, alongside $59.4 million cash on hand, ensuring sufficient liquidity for capital requirements and operational needs - At March 31, **2024**, the Company had approximately **$303 million** available to borrow under its bank credit facility, a **$250 million** increase option, and **$59.4 million** cash on hand[91](index=91&type=chunk) - The Company had **$191 million** of outstanding borrowings under the credit facility at March 31, **2024**[91](index=91&type=chunk) [Share Repurchases](index=24&type=section&id=Share%20Repurchases) During the first six months of 2024, the company repurchased approximately 72,000 shares for $7.2 million under a $200 million program, with $160.4 million remaining available for repurchase - During the first six months of **2024**, the Company repurchased approximately **72,000** shares for approximately **$7.2 million**[92](index=92&type=chunk) [Dividends](index=24&type=section&id=Dividends) The company paid quarterly dividends of $0.08 per share, totaling $2.1 million each, in October 2023, January 2024, and April 2024 - A dividend of **$0.08** per share, totaling **$2.1 million**, was paid on October 17, **2023**, January 19, **2024**, and April 16, **2024**[93](index=93&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=24&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Management believes its accounting policies are reasonable and appropriate, requiring significant judgment and estimates based on historical experience, industry trends, and external information, as detailed in the Company's Annual Report on Form 10-K - Management believes the accounting policies used are reasonable and appropriate, requiring significant judgment in selecting assumptions for financial estimates[94](index=94&type=chunk) - Judgments are based on historical experience, industry trends, information from customers, and other outside sources[94](index=94&type=chunk) [OTHER MATTERS (Contingencies)](index=24&type=section&id=OTHER%20MATTERS%20(Contingencies)) The company is involved in various claims, charges, litigation, and environmental remediation efforts. Management believes the aggregate costs for these matters are adequately reserved, covered by insurance, or would not have a material adverse effect on the company's financial results or competitive position - The Company is involved in various claims, charges, litigation, and environmental remediation relating to its business[95](index=95&type=chunk) - Management believes the aggregate costs involved in the resolution of these matters are adequately reserved, covered by insurance, or would not have a material adverse effect on the Company's results from operations, capital expenditures, or competitive position[95](index=95&type=chunk) [FORWARD LOOKING STATEMENTS](index=24&type=section&id=FORWARD%20LOOKING%20STATEMENTS) This report contains forward-looking statements regarding future events and results, which are subject to various risks and uncertainties detailed in the company's 10-K and other factors. The company undertakes no duty to update these statements except as required by applicable laws or regulations - Statements in this Form **10-Q** regarding future events and the Company's future results are considered 'forward-looking statements' under Federal securities laws[96](index=96&type=chunk) - Investors are cautioned that such statements are only predictions and actual results may differ materially due to risks and uncertainties described in Item **1A**, 'Risk Factors,' of the Company's Annual Report on Form **10-K** and other factors[98](index=98&type=chunk) - The Company undertakes no duty to update forward-looking statements except as may be required by applicable laws or regulations[98](index=98&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=27&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks stem from changes in interest rates and foreign currency exchange rates, which it manages using derivative financial instruments like forward contracts and swaps - Market risks primarily result from changes in interest rates and foreign currency exchange rates[100](index=100&type=chunk) - The Company selectively uses derivative financial instruments, including forward contracts and swaps, to manage these market risks[100](index=100&type=chunk) - There has been no material change to the Company's market risks since September 30, **2023**[100](index=100&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=27&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024. Furthermore, there have been no material changes to the company's internal control over financial reporting during the period covered by this report - The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, **2024**[101](index=101&type=chunk) - There has been no material change in the Company's internal control over financial reporting during the period covered by this report[101](index=101&type=chunk) PART II. OTHER INFORMATION This section includes disclosures on unregistered sales of equity securities, use of proceeds, and a list of exhibits filed with the Form 10-Q [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first three months of 2024, the company repurchased 72,344 shares of common stock for approximately $7.2 million under a $200 million program, with $160.4 million remaining available for repurchase Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :---------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | January 1-31, 2024 | 6,901 | $99.90 | 6,901 | $166.9 million | | February 1-29, 2024 | 20,072 | $98.86 | 20,072 | $164.9 million | | March 1-31, 2024 | 45,371 | $99.50 | 45,371 | $160.4 million | | **Total** | **72,344** | **$99.37** | **72,344** | **$160.4 million** | - The share repurchase program, approved on August 5, **2021**, authorizes repurchases up to **$200 million** and is scheduled to expire September 30, **2024**[103](index=103&type=chunk) [ITEM 6. EXHIBITS](index=28&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, share award agreements, certifications, and XBRL financial data - The exhibits include Restated Articles of Incorporation, Amended Certificate of Designation, Articles of Merger, Amendment of Articles of Incorporation, Bylaws, Amended and Restated Credit Agreement, Form of Director Share Award Agreement, Certifications of CEO and CFO, and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[104](index=104&type=chunk) [SIGNATURE](index=29&type=section&id=SIGNATURE) The report is officially signed on behalf of ESCO Technologies Inc. by Christopher L. Tucker, Senior Vice President and Chief Financial Officer, on May 10, 2024 - The report was signed by Christopher L. Tucker, Senior Vice President and Chief Financial Officer of ESCO Technologies Inc., on May 10, **2024**[108](index=108&type=chunk)

NEWS FROM Exhibit 99.1 For more information contact: Kate Lowrey - VP of Investor Relations (314) 213-7277 / klowrey@escotechnologies.com ESCO REPORTS SECOND QUARTER FISCAL 2024 RESULTS - Q2 Sales increase 9% to $249 Million - - Q2 GAAP EPS increases 30% to $0.90 - - Q2 Adjusted EPS increases 24% to $0.94 - ST. LOUIS, May 9, 2024 – 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 S ...

ESCO Technologies (ESE) is a Zacks Rank #5 (Strong Sell) as earnings estimates have tracked lower after a recent earnings beat.  The company is best known for its software that enables the vision of what energy information can accomplish for a utility. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.DescriptionESCO Technologies, Inc. is a producer of engineered products and systems, which engages in the provision of utility, industrial, aerospace, and c ...

Financial Data and Key Metrics Changes - Sales grew by 6% in Q1 2024, with adjusted EBIT up 8% [14][29] - Adjusted earnings per share increased by 3% in the quarter [29] - Cash flow swung to a positive $9 million from a cash use of $9 million in the same quarter last year [26] Business Line Data and Key Metrics Changes - Aerospace & Defense segment saw double-digit sales growth, with a book-to-bill ratio of 1.8, leading to a backlog of over $560 million [22][23] - Utility Solutions Group experienced a decline in orders but is starting to see increasing order pipeline activity [24] - Test business faced a 12% decrease in orders and a 21% reduction in sales, primarily due to project delays [25][30] Market Data and Key Metrics Changes - Overall orders increased by 28%, resulting in a record backlog of $848 million [22] - The commercial and defense aerospace markets showed strong performance, contributing to the sales growth [30] Company Strategy and Development Direction - The company is focused on margin improvement and restructuring actions in the Test business to enhance long-term profitability [21][60] - Continued integration of the MPE acquisition is progressing well, with no surprises reported [78] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the full-year commitments and delivering another record year [13][28] - The company anticipates a growth range of 11% to 13% for the Aerospace & Defense group, up from the previous 8% to 10% [27][34] Other Important Information - The company is experiencing project construction delays primarily in the U.S., impacting revenue recognition [20][56] - The Doble Conference is expected to return to pre-pandemic attendance levels, with excitement around product development [77] Q&A Session Summary Question: Insights on Aerospace & Defense revenue growth guidance - Management expects consistent growth throughout the year, with commercial and defense aerospace leading the growth [42][43] Question: Impact of 737 MAX issues on revenue outlook - No significant revenue risk from 737 MAX issues is anticipated for FY '24, with production rates expected to remain stable [44][45] Question: Confidence in Utility Solutions Group growth despite order softness - Management is optimistic about achieving growth due to recovering orders from key customers [50][53] Question: Reasons for restructuring in the Test business - Restructuring is necessary due to delays in project execution, not a lack of orders, with targeted savings of $2 million to $2.5 million for the year [56][60] Question: Liquidation schedule for Virginia orders - Orders from the Virginia Class submarine program will start flowing into revenue this year, with a boost expected in FY '25 and '26 [63][64] Question: Broader supply chain issues affecting the company - Supply chain challenges persist, particularly with lower-tier suppliers, impacting production capabilities [66] Question: Magnitude of delayed revenue from the Test business - Approximately $10 million to $15 million in revenue has been pushed out to FY '25 due to project delays [68][70]

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's analysis of its financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Contains the unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and related notes [Condensed Consolidated Statements of Operations](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Details the company's revenues, expenses, and net earnings for the first quarter of fiscal years 2024 and 2023 Condensed Consolidated Statements of Operations (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $218,314 | $205,501 | $12,813 | 6.2% | | Total costs and expenses | $198,860 | $186,602 | $12,258 | 6.6% | | Earnings before income taxes | $19,454 | $18,899 | $555 | 2.9% | | Income tax expense | $4,285 | $4,172 | $113 | 2.7% | | Net earnings | $15,169 | $14,727 | $442 | 3.0% | | Basic EPS | $0.59 | $0.57 | $0.02 | 3.5% | | Diluted EPS | $0.59 | $0.57 | $0.02 | 3.5% | [Condensed Consolidated Statements of Comprehensive Income](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Reports net earnings and other comprehensive income, such as foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $15,169 | $14,727 | $442 | 3.0% | | Foreign currency translation adjustments | $9,414 | $11,513 | $(2,099) | -18.2% | | Total other comprehensive income (loss) | $9,414 | $11,513 | $(2,099) | -18.2% | | Comprehensive income | $24,583 | $26,240 | $(1,657) | -6.3% | [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Outlines the company's assets, liabilities, and shareholders' equity at the end of the reporting period Condensed Consolidated Balance Sheets (As of December 31, 2023 vs. September 30, 2023) | Metric | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total current assets | $603,202 | $581,095 | $22,107 | 3.8% | | Property, plant and equipment, net | $159,262 | $155,484 | $3,778 | 2.4% | | Intangible assets, net | $422,053 | $392,124 | $29,929 | 7.6% | | Goodwill | $537,601 | $503,177 | $34,424 | 6.8% | | Total assets | $1,772,526 | $1,683,214 | $89,312 | 5.3% | | Total current liabilities | $304,693 | $314,651 | $(9,958) | -3.2% | | Long-term debt | $152,000 | $82,000 | $70,000 | 85.4% | | Total liabilities | $618,432 | $552,072 | $66,360 | 12.0% | | Total shareholders' equity | $1,154,094 | $1,131,142 | $22,952 | 2.0% | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | | :--- | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $8,746 | $(9,008) | $17,754 | | Net cash used by investing activities | $(66,969) | $(7,586) | $(59,383) | | Net cash provided (used) by financing activities | $66,504 | $(29,626) | $96,130 | | Net increase (decrease) in cash and cash equivalents | $9,530 | $(45,802) | $55,332 | | Cash and cash equivalents, end of period | $51,396 | $51,922 | $(526) | - Acquisition of business, net of cash acquired, was a significant investing activity at **$(56.179) million** in Q1 2024, compared to none in Q1 2023[12](index=12&type=chunk) - Proceeds from long-term debt and short-term borrowings increased significantly to **$99.0 million** in Q1 2024 from $17.0 million in Q1 2023[12](index=12&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=6&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed disclosures and explanations for the line items presented in the primary financial statements [1. BASIS OF PRESENTATION](index=6&type=section&id=1.%20BASIS%20OF%20PRESENTATION) Explains that the interim financial statements are unaudited and do not include all annual GAAP disclosures - Interim financial statements are **unaudited** and prepared per Form 10-Q, not full GAAP annual disclosures[14](index=14&type=chunk) - Results for the three-month period ended December 31, 2023, are **not necessarily indicative** of the full fiscal year 2024[15](index=15&type=chunk) [2. EARNINGS PER SHARE (EPS)](index=6&type=section&id=2.%20EARNINGS%20PER%20SHARE%20(EPS)) Details the calculation of basic and diluted earnings per share, including weighted average shares outstanding Weighted Average Shares Outstanding for EPS Calculation (in thousands) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | | :--- | :--- | :--- | | Weighted Average Shares Outstanding — Basic | 25,797 | 25,863 | | Dilutive Restricted Shares | 49 | 80 | | Adjusted Shares — Diluted | 25,846 | 25,943 | [3. ACQUISITION](index=6&type=section&id=3.%20ACQUISITION) Describes the acquisition of MPE Limited, its business focus, and its integration into the Test segment - Acquired MPE Limited on November 9, 2023, for approximately **$56.2 million** (net of cash acquired)[17](index=17&type=chunk) - MPE is a leading global manufacturer of high-performance EMC/EMP filters and capacitor products for military, utility, telecommunication, and other critical infrastructure applications[17](index=17&type=chunk) - MPE's operating results are included as part of ETS-Lindgren in the **Test segment** since the acquisition date[17](index=17&type=chunk) [4. SHARE-BASED COMPENSATION](index=6&type=section&id=4.%20SHARE-BASED%20COMPENSATION) Outlines the costs associated with share-based compensation plans for employees and non-employee directors Share-Based Compensation Expense (Three Months Ended December 31) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Performance-Accelerated/Time-Vested RSU/PSU Awards Expense | $1.9 million | $1.6 million | $0.3 million | 18.8% | | Non-Employee Directors Plan Expense | $0.3 million | $0.3 million | $0.0 million | 0.0% | | Total share-based compensation cost (SG&A) | $2.2 million | $1.9 million | $0.3 million | 15.8% | | Total income tax benefit | $0.2 million | $0.1 million | $0.1 million | 100.0% | - As of December 31, 2023, **$15.5 million** of total unrecognized compensation cost related to share-based arrangements is expected to be recognized over a remaining weighted-average period of **2.0 years**[21](index=21&type=chunk) [5. INVENTORIES](index=7&type=section&id=5.%20INVENTORIES) Presents the breakdown of inventory balances, including finished goods, work in process, and raw materials Inventories (in thousands) | (In thousands) | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Finished goods | $37,996 | $34,577 | $3,419 | 9.9% | | Work in process | $54,656 | $42,178 | $12,478 | 29.6% | | Raw materials | $109,925 | $107,312 | $2,613 | 2.4% | | Total inventories | $202,577 | $184,067 | $18,510 | 10.1% | [6. GOODWILL AND OTHER INTANGIBLE ASSETS](index=7&type=section&id=6.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Details the composition and changes in goodwill and other intangible assets, such as patents and customer relationships Goodwill and Intangible Assets (in thousands) | (Dollars in thousands) | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Goodwill | $537,601 | $503,177 | $34,424 | 6.8% | | Intangible assets, net: | | | | | | Patents | $1,264 | $1,298 | $(34) | -2.6% | | Capitalized software | $41,528 | $41,109 | $419 | 1.0% | | Customer relationships | $210,869 | $183,616 | $27,253 | 14.8% | | Other | $5,183 | $4,654 | $529 | 11.4% | | Trade names (indefinite lives) | $163,209 | $161,447 | $1,762 | 1.1% | - Goodwill increased by **$34.4 million**, with **$30.3 million** from acquisition activity (MPE) and **$4.1 million** from foreign currency translation[24](index=24&type=chunk) [7. BUSINESS SEGMENT INFORMATION](index=8&type=section&id=7.%20BUSINESS%20SEGMENT%20INFORMATION) Provides a breakdown of net sales and EBIT for the company's three reportable operating segments - Company operates in three reportable segments: **Aerospace & Defense (A&D)**, **Utility Solutions Group (USG)**, and **RF Test & Measurement (Test)**[25](index=25&type=chunk) Net Sales and EBIT by Business Segment (Three Months Ended December 31, in thousands) | (In thousands) | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **NET SALES** | | | | | | Aerospace & Defense | $94,733 | $82,983 | $11,750 | 14.2% | | USG | $82,984 | $71,045 | $11,939 | 16.8% | | Test | $40,597 | $51,473 | $(10,876) | -21.1% | | Consolidated totals | $218,314 | $205,501 | $12,813 | 6.2% | | **EBIT** | | | | | | Aerospace & Defense | $16,663 | $12,536 | $4,127 | 32.9% | | USG | $17,625 | $16,131 | $1,494 | 9.3% | | Test | $1,779 | $5,411 | $(3,632) | -67.1% | | Corporate (loss) | $(13,946) | $(13,521) | $(425) | 3.1% | | Consolidated EBIT | $22,121 | $20,557 | $1,564 | 7.6% | - **EBIT** (Earnings Before Interest and Taxes) is a non-GAAP financial measure used by management to assess operational profitability, resource allocation, and incentive compensation[31](index=31&type=chunk) [8. DEBT](index=9&type=section&id=8.%20DEBT) Summarizes the company's debt structure, available credit, interest rates, and covenant compliance Debt Summary (in thousands) | (In thousands) | Dec 31, 2023 | Sep 30, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total borrowings | $172,000 | $102,000 | $70,000 | 68.6% | | Current portion of long-term debt | $(20,000) | $(20,000) | $0 | 0.0% | | Total long-term debt, less current portion | $152,000 | $82,000 | $70,000 | 85.4% | - The Credit Facility includes a **$500 million** revolving line of credit with an option to increase by an additional **$250 million**, maturing August 30, 2028[33](index=33&type=chunk) - As of December 31, 2023, the company had approximately **$322 million** available to borrow under the Credit Facility, plus the **$250 million** increase option, and **$51.4 million** cash on hand[34](index=34&type=chunk) - Weighted average interest rates were **6.8%** for Q1 2024, up from **4.6%** in Q1 2023; the company was in compliance with all debt covenants[35](index=35&type=chunk) [9. INCOME TAX EXPENSE](index=10&type=section&id=9.%20INCOME%20TAX%20EXPENSE) Reports the effective income tax rate for the current and prior-year periods - The effective income tax rate was **22.0%** in Q1 2024, consistent with **22.1%** in Q1 2023, with no significant changes between periods[36](index=36&type=chunk) [10. SHAREHOLDERS' EQUITY](index=10&type=section&id=10.%20SHAREHOLDERS'%20EQUITY) Presents the components and changes in shareholders' equity, including retained earnings and treasury stock Shareholders' Equity (in thousands) | (In thousands) | Dec 31, 2023 | Dec 31, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Common stock (ending balance) | $308 | $307 | $1 | 0.3% | | Additional paid-in-capital (ending balance) | $305,283 | $300,697 | $4,586 | 1.5% | | Retained earnings (ending balance) | $1,002,420 | $917,682 | $84,738 | 9.2% | | Accumulated other comprehensive income (loss) (ending balance) | $(14,555) | $(20,251) | $5,696 | -28.1% | | Treasury stock (ending balance) | $(139,362) | $(132,037) | $(7,325) | 5.5% | | Total equity | $1,154,094 | $1,066,398 | $87,696 | 8.2% | - Foreign currency translation adjustments contributed **$9.4 million** to accumulated other comprehensive income (loss) in Q1 2024[37](index=37&type=chunk) [11. FAIR VALUE MEASUREMENTS](index=10&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) Describes the methodology for measuring fair value and confirms the valuation of financial and nonfinancial assets - Fair value measurements are categorized into a three-level hierarchy (Level 1, 2, 3) based on the transparency of inputs to the valuation[38](index=38&type=chunk)[39](index=39&type=chunk) - The carrying amounts of cash, receivables, inventories, payables, and other current assets and liabilities approximate fair value due to their short maturity[40](index=40&type=chunk) - **No impairments** were recorded for nonfinancial assets (property, plant, equipment, other intangible assets) during the three-month period ended December 31, 2023[42](index=42&type=chunk) [12. REVENUES](index=11&type=section&id=12.%20REVENUES) Provides a disaggregation of revenue by customer type, geographic location, and recognition method Disaggregation of Revenues (Three Months Ended December 31, in thousands) | (In thousands) | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Customer type:** | | | | | | Commercial | $153,765 | $152,894 | $871 | 0.6% | | Government | $64,549 | $52,607 | $11,942 | 22.7% | | Total revenues | $218,314 | $205,501 | $12,813 | 6.2% | | **Geographic location:** | | | | | | United States | $158,114 | $142,816 | $15,298 | 10.7% | | International | $60,200 | $62,685 | $(2,485) | -4.0% | | Total revenues | $218,314 | $205,501 | $12,813 | 6.2% | | **Revenue recognition method:** | | | | | | Point in time | $114,148 | $98,736 | $15,412 | 15.6% | | Over time | $104,166 | $106,765 | $(2,599) | -2.4% | | Total revenues | $218,314 | $205,501 | $12,813 | 6.2% | - Remaining performance obligations (backlog) totaled **$847.8 million** at December 31, 2023, with approximately **66%** expected to be recognized as revenue in the next twelve months[49](index=49&type=chunk) - Contract assets, contract liabilities, and accounts receivable totaled **$138.4 million**, **$131.9 million**, and **$194.4 million**, respectively, at December 31, 2023[50](index=50&type=chunk) [13. LEASES](index=13&type=section&id=13.%20LEASES) Discloses information about the company's operating and finance leases, including costs and lease terms - The company recognizes Right-of-Use (ROU) assets and lease liabilities based on the present value of future lease payments, excluding leases with terms of 12 months or less[51](index=51&type=chunk) Lease Costs (Three Months Ended December 31, in thousands) | (Dollars in thousands) | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Finance lease cost | $616 | $629 | $(13) | -2.1% | | Operating lease cost | $1,864 | $1,645 | $219 | 13.3% | | Total lease costs | $2,480 | $2,274 | $206 | 9.1% | - Weighted-average remaining lease terms for operating and finance leases were both approximately **11.1 years** as of December 31, 2023[54](index=54&type=chunk) [14. RECENT ACCOUNTING PRONOUNCEMENTS](index=14&type=section&id=14.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) Discusses recently issued accounting standards and their potential impact on the company's financial statements - FASB issued ASU 2023-07 (Segment Reporting) effective for fiscal years beginning after December 15, 2023, expanding annual and interim disclosure requirements for reportable segments[56](index=56&type=chunk) - FASB issued ASU 2023-09 (Income Taxes) effective for fiscal years beginning after December 15, 2024, providing updates to rate reconciliation and income taxes paid disclosures[57](index=57&type=chunk) - Management expects these ASUs to result in additional disclosures but **no changes** to consolidated statements of operations, financial position, or cash flows[56](index=56&type=chunk)[57](index=57&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=15&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Provides management's perspective on financial performance, liquidity, and capital resources for the first quarter of fiscal 2024 [OVERVIEW](index=15&type=section&id=OVERVIEW) Presents a high-level summary of the company's financial performance for the first quarter of fiscal year 2024 Q1 2024 Financial Performance Overview (in millions, except EPS) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | $218.3 million | $205.5 million | $12.8 million | 6.2% | | Net earnings | $15.2 million | $14.7 million | $0.5 million | 3.4% | | Diluted EPS | $0.59 | $0.57 | $0.02 | 3.5% | [NET SALES](index=15&type=section&id=NET%20SALES) Analyzes the changes in net sales, detailing performance drivers across the company's business segments - Net sales increased by **$12.8 million**, or **6.2%**, to $218.3 million in the first quarter of 2024[60](index=60&type=chunk) - The increase was driven by a **$12.0 million** increase in the USG segment and an **$11.7 million** increase in the Aerospace & Defense segment[60](index=60&type=chunk) - This growth was partially offset by a **$10.9 million** decrease in the Test segment[60](index=60&type=chunk) [Aerospace & Defense (A&D) Sales](index=15&type=section&id=Aerospace%20&%20Defense%20(A&D)%20Sales) Details the sales performance of the Aerospace & Defense segment, highlighting key product and acquisition contributions - A&D net sales increased by **$11.7 million (14.1%)** to $94.7 million in Q1 2024[61](index=61&type=chunk) - The increase was primarily due to approximately **$7.0 million** higher aerospace shipments at Mayday, Crissair, and PTI, and a **$4.7 million** increase at Globe driven mainly by the CMT acquisition[61](index=61&type=chunk) [USG Sales](index=15&type=section&id=USG%20Sales) Details the sales performance of the Utility Solutions Group segment, driven by offline testing and renewables markets - USG net sales increased by **$12.0 million (16.9%)** to $83.0 million in Q1 2024[62](index=62&type=chunk) - The increase was mainly due to a **$7.6 million** increase at Doble from higher sales of offline testing products and services, and a **$4.4 million** increase at NRG driven by continued strength in the renewables end-market[62](index=62&type=chunk) [Test Sales](index=15&type=section&id=Test%20Sales) Details the sales performance of the Test segment, which saw a decline due to the timing of chamber projects - Test segment net sales decreased by **$10.9 million (21.2%)** to $40.6 million in Q1 2024[63](index=63&type=chunk) - The decrease was primarily due to **$7.5 million** of lower sales from the segment's U.S. operations and **$3.4 million** of lower sales from Asian and European operations, all attributed to the timing of test and measurement chamber projects[63](index=63&type=chunk) [ORDERS AND BACKLOG](index=15&type=section&id=ORDERS%20AND%20BACKLOG) Reports on new orders received during the quarter and the resulting total backlog at period-end Orders and Backlog (in millions) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | New orders received | $293.7 million | $228.9 million | $64.8 million | 28.3% | | Backlog (Dec 31, 2023 / Sep 30, 2023) | $847.8 million | $772.4 million | $75.4 million | 9.8% | - Of the new orders received in Q1 2024, **$171.5 million** related to Aerospace & Defense, **$77.0 million** to USG, and **$45.2 million** to Test products[64](index=64&type=chunk) [SELLING, GENERAL AND ADMINISTRATIVE EXPENSES](index=15&type=section&id=SELLING,%20GENERAL%20AND%20ADMINISTRATIVE%20EXPENSES) Analyzes the change in SG&A expenses, attributing the increase to higher sales and acquisition impacts Selling, General and Administrative Expenses (SG&A) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | SG&A expenses | $54.0 million | $51.3 million | $2.7 million | 5.3% | | SG&A as % of net sales | 24.7% | 25.0% | -0.3% pts | | - The increase in SG&A was mainly due to higher sales, inflationary impacts, and acquisition impacts within the USG and A&D segments[65](index=65&type=chunk) [AMORTIZATION OF INTANGIBLE ASSETS](index=15&type=section&id=AMORTIZATION%20OF%20INTANGIBLE%20ASSETS) Explains the increase in amortization expense, primarily due to capitalized software and recent acquisitions Amortization of Intangible Assets | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Amortization of intangible assets | $7.9 million | $6.9 million | $1.0 million | 14.5% | - The increase was mainly due to an increase in amortization of capitalized software and amortization of intangible assets related to the MPE and CMT acquisitions[67](index=67&type=chunk) [OTHER EXPENSES, NET](index=17&type=section&id=OTHER%20EXPENSES,%20NET) Discusses the components of other net expenses, noting the absence of prior-year restructuring charges Other Expenses, Net | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Other expenses, net | $0.2 million | $0.4 million | $(0.2) million | -50.0% | - The principal component of other expenses, net, in Q1 2023 included approximately **$0.2 million** of restructuring charges within the A&D segment, which were not present in Q1 2024[68](index=68&type=chunk) [EBIT](index=17&type=section&id=EBIT) Provides an analysis of consolidated and segment-level EBIT, a non-GAAP measure of operating performance Consolidated EBIT (in millions) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Consolidated EBIT | $22.1 million | $20.6 million | $1.5 million | 7.3% | | EBIT as % of net sales | 10.1% | 10.0% | 0.1% pts | | - **EBIT** is a non-GAAP financial measure used by management to evaluate the performance of its operating segments[69](index=69&type=chunk) [Aerospace & Defense EBIT](index=17&type=section&id=Aerospace%20&%20Defense%20EBIT) Details the significant increase in A&D EBIT, driven by higher sales volumes across its businesses Aerospace & Defense EBIT | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | A&D EBIT | $16.7 million | $12.5 million | $4.2 million | 33.6% | | A&D EBIT as % of net sales | 17.6% | 15.1% | 2.5% pts | | - The increase in A&D EBIT was mainly due to **higher sales volumes** at Mayday, Crissair, and Globe[71](index=71&type=chunk) [USG EBIT](index=17&type=section&id=USG%20EBIT) Analyzes the growth in USG EBIT, which resulted from increased sales volumes at both Doble and NRG USG EBIT | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | USG EBIT | $17.6 million | $16.1 million | $1.5 million | 9.3% | | USG EBIT as % of net sales | 21.2% | 22.7% | -1.5% pts | | - The increase in USG EBIT was mainly due to **higher sales volumes** at both Doble and NRG[72](index=72&type=chunk) [Test EBIT](index=17&type=section&id=Test%20EBIT) Explains the sharp decline in Test segment EBIT, caused by lower sales and acquisition-related charges Test Segment EBIT | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Test EBIT | $1.8 million | $5.4 million | $(3.6) million | -66.7% | | Test EBIT as % of net sales | 4.4% | 10.5% | -6.1% pts | | - The decrease in Test EBIT was primarily driven by **lower sales volumes** from the segment's U.S. and Asian operations[73](index=73&type=chunk) - EBIT in Q1 2024 was negatively impacted by **$0.3 million** of inventory step-up charges related to the MPE acquisition[73](index=73&type=chunk) [Corporate Costs (EBIT Impact)](index=17&type=section&id=Corporate%20Costs%20(EBIT%20Impact)) Details the increase in corporate costs, which was mainly due to share-based compensation and acquisition expenses Corporate Costs (included in EBIT) | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Corporate costs (included in EBIT) | $13.9 million | $13.5 million | $0.4 million | 3.0% | - The increase in Corporate costs was mainly due to an increase in **share-based compensation costs** and costs related to the **MPE acquisition**[74](index=74&type=chunk) [INTEREST EXPENSE, NET](index=17&type=section&id=INTEREST%20EXPENSE,%20NET) Explains the rise in net interest expense, driven by higher interest rates and increased average borrowings Interest Expense, Net | Metric | Q1 2024 (Dec 31, 2023) | Q1 2023 (Dec 31, 2022) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest expense, net | $2.7 million | $1.7 million | $1.0 million | 58.8% | - The increase in interest expense was mainly due to **higher average interest rates** (6.8% in Q1 2024 compared to 4.6% in Q1 2023) and higher average outstanding borrowings[75](index=75&type=chunk) [INCOME TAX EXPENSE](index=18&type=section&id=INCOME%20TAX%20EXPENSE) Reports a stable effective income tax rate with no significant changes between the current and prior-year periods - The effective income tax rate was **22.0%** in Q1 2024, compared to **22.1%** in Q1 2023, with no significant changes between the periods[76](index=76&type=chunk) [CAPITAL RESOURCES AND LIQUIDITY](index=18&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) Assesses the company's financial position, highlighting strong liquidity, improved operating cash flow, and key capital activities - The company's overall financial position and liquidity remain strong, with working capital increasing to **$298.5 million** at December 31, 2023, from $266.4 million at September 30, 2023[77](index=77&type=chunk) - Net cash provided by operating activities was **$8.7 million** in Q1 2024, a significant improvement from net cash used of **$(9.0) million** in Q1 2023[78](index=78&type=chunk) - Capital expenditures increased to **$7.8 million** in Q1 2024 from $4.8 million in Q1 2023, mainly due to building improvements and machinery & equipment within the A&D segment[79](index=79&type=chunk) [Acquisition (MPE Limited)](index=18&type=section&id=Acquisition%20(MPE%20Limited)) Details the acquisition of MPE Limited, which was funded through borrowings under the company's credit facility - On November 9, 2023, the company acquired MPE Limited for approximately **$56.2 million**, net of cash acquired, integrating its operations into the Test segment[80](index=80&type=chunk) [Credit Facility](index=18&type=section&id=Credit%20Facility) Outlines the company's available borrowing capacity and outstanding debt under its bank credit facility - As of December 31, 2023, the company had approximately **$322 million** available to borrow under its bank credit facility, plus a **$250 million** increase option, and **$51.4 million** cash on hand[81](index=81&type=chunk) - Outstanding borrowings under the credit facility totaled **$172 million**[81](index=81&type=chunk) [Dividends](index=18&type=section&id=Dividends) Reports on the quarterly cash dividends paid to shareholders during and subsequent to the first quarter - A dividend of **$0.08 per share**, totaling **$2.1 million**, was paid on October 17, 2023[82](index=82&type=chunk) - A subsequent quarterly dividend of **$0.08 per share**, totaling **$2.1 million**, was paid on January 19, 2024[82](index=82&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=18&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Affirms the use of reasonable accounting policies and references the detailed disclosure in the Annual Report on Form 10-K - Management believes the accounting policies used are reasonable and appropriate, acknowledging that they require significant judgment and estimates[83](index=83&type=chunk) - The most significant areas involving management judgments and estimates are detailed in the Critical Accounting Policies section of the company's Annual Report on Form 10-K[83](index=83&type=chunk) [OTHER MATTERS](index=19&type=section&id=OTHER%20MATTERS) Addresses contingencies and forward-looking statements relevant to the company's operations and financial reporting [Contingencies](index=19&type=section&id=Contingencies) Discloses the company's involvement in routine legal and environmental matters and management's assessment of their potential impact - The company is involved in various claims, charges, litigation, and environmental matters as a normal incident of business[84](index=84&type=chunk) - Management believes the aggregate costs for these matters are adequately reserved, covered by insurance, or would not have a **material adverse effect** on the company's results[84](index=84&type=chunk) [FORWARD LOOKING STATEMENTS](index=19&type=section&id=FORWARD%20LOOKING%20STATEMENTS) Provides a safe harbor statement cautioning investors about the risks and uncertainties inherent in forward-looking statements - Statements regarding future events and results in this Form 10-Q are considered **'forward-looking statements'** under federal securities laws[85](index=85&type=chunk) - Investors are cautioned that actual future results may differ materially from projections due to various risks and uncertainties, including economic conditions, supply chain disruptions, and competition[86](index=86&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=20&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) States that the company's exposure to interest rate and foreign currency risks has not materially changed - Market risks primarily result from changes in **interest rates** and **foreign currency exchange rates**[88](index=88&type=chunk) - The company selectively uses derivative financial instruments, including forward contracts and swaps, to manage these market risks[88](index=88&type=chunk) - There has been **no material change** to the company's market risks since September 30, 2023[88](index=88&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=20&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Confirms the effectiveness of the company's disclosure controls and procedures as of the end of the reporting period - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2023[89](index=89&type=chunk) - There has been **no material change** in the company's internal control over financial reporting during the period covered by this report[89](index=89&type=chunk) PART II. OTHER INFORMATION This section includes information on equity securities, other disclosures, exhibits, and the report's formal signature [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=20&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Reports that the company did not repurchase any shares of its common stock during the first quarter of fiscal year 2024 - The company did **not repurchase any shares** during the first quarter of 2024[90](index=90&type=chunk) [ITEM 5. OTHER INFORMATION](index=20&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Discloses that no director or officer adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the first quarter of fiscal 2024[91](index=91&type=chunk) [ITEM 6. EXHIBITS](index=21&type=section&id=ITEM%206.%20EXHIBITS) Provides a comprehensive list of all exhibits filed with the Form 10-Q, including corporate and financial documents - Exhibits include Restated Articles of Incorporation, Amended Certificate of Designation, Articles of Merger, Amendment of Articles of Incorporation, Bylaws, Amended and Restated Credit Agreement, Form of Fiscal 2024 Performance Share Unit Awards, Certifications of CEO and CFO, and XBRL Instance Documents[92](index=92&type=chunk) [SIGNATURE](index=22&type=section&id=SIGNATURE) Contains the formal signature block, confirming the due authorization and submission of the report - The report was signed on behalf of ESCO Technologies Inc. by Christopher L. Tucker, Senior Vice President and Chief Financial Officer, on February 9, 2024[96](index=96&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-10596 ESCO Technologies Inc. (Exact name of registrant as specified in its charter) Missouri 43-1554045 (State or other jurisdic ...

256.5 272.6 Q4'22 Q4'23 Sales 42.8 44.0 Q4'22 Q4'23 Adjusted EBIT 16.7% 16.1% $1.21 $1.25 Q4'22 Q4'23 Adjusted EPS 244.7 339.6 Q4'22 Q4'23 Entered Orders Entered Orders • Record Quarterly Orders • Orders +$95M (+39%) - Strength in Aerospace, Navy, Test & Utilities • Q4 Book-to-Bill of 1.25 • Record Ending Backlog +$67M (+9%) from 6/30/23 Sales • Sales increased 6% – Organic +5% / CMT Acquisition +1% • Organic Growth driven by commercial and defense aerospace, utility, and renewables spending 2 Q4 Results ($ ...