Financial Performance - Sales increased by 208% from $1814 million in Q3'21 to $2191 million in Q3'22[6] - Adjusted EBIT increased by 343% from $230 million in Q3'21 to $308 million in Q3'22[6] - Adjusted EPS increased by 328% from $067 in Q3'21 to $089 in Q3'22[6] - Entered Orders increased by 251% from $2038 million in Q3'21 to $2549 million in Q3'22[6] - The company's record ending backlog was $707 million[7] Segment Performance - A&D segment Entered Orders increased by 159% from $951 million in Q3'21 to $1102 million in Q3'22[11] - USG segment Entered Orders increased by 341% from $555 million in Q3'21 to $744 million in Q3'22[14] - Test segment Entered Orders increased by 321% from $532 million in Q3'21 to $703 million in Q3'22[17] Cash Flow - Operating Cash Flow decreased from $754 million YTD Q3'21 to $417 million YTD Q3'22[8] - Capital Expenditures increased from $179 million YTD Q3'21 to $259 million YTD Q3'22[9] FY'22 Guidance - The company expects Q4 Adjusted EPS to be in the range of $112 to $118 per share, representing growth of 32% – 39% over the prior year[22] - The company narrows Adjusted EPS to be in the range of $312 to $318 per share for the full year[22]

Financial Data and Key Metrics Changes - Reported sales increased by over 20%, marking the second consecutive quarter of sales growth exceeding 20% [7] - Earnings per share (EPS) increased by over 50%, with adjusted EPS up 33% [7][17] - Orders increased by 25%, with a record backlog of $707 million [8][17] Business Segment Data and Key Metrics Changes - Aerospace and Defense (A&D) segment saw sales and margins increase, with orders growing 16% compared to the previous year [10] - Utility Group experienced nearly 17% sales growth excluding acquisitions, and over 40% growth including acquisitions [13] - Test business reported sales growth exceeding 20% for the second consecutive quarter, with order activity remaining elevated [14][24] Market Data and Key Metrics Changes - The company noted ongoing supply chain issues primarily affecting the Utility and Aerospace businesses, contributing to past due backlog [9] - The Utility Solutions Group saw order growth of 34% and sales growth of 41%, indicating strong market demand [22] Company Strategy and Development Direction - The company is focused on managing high levels of past due backlog and addressing supply chain challenges [9][39] - There is optimism regarding the recovery of certain end markets post-pandemic, with a positive outlook for ESCO [28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging economic environment but expressed confidence in the company's order strength and backlog [28] - The company is prepared to act appropriately in response to potential economic downturns, with a focus on maintaining momentum across business segments [27][28] Other Important Information - Operating cash flow is lagging due to investments in working capital, with capital expenditures increasing driven by acquisitions [19][20] - The company has resumed share repurchases, totaling just shy of $20 million year-to-date [20] Q&A Session Summary Question: Consistency in Doble's performance - Management noted that product development during COVID has positioned Doble for potential growth, with expectations for new products to drive additional revenue [31] Question: Past due backlog and cash flow visibility - Management indicated that past due backlog has stabilized, with ongoing supply chain challenges impacting delivery times [36][38] Question: Order intake and deferred spending - The majority of orders are based on current needs, with some pent-up demand observed in the Test business [42] Question: Impact of recession on order book - Management suggested that the Test business may be the first to feel the impact of a recession, while Utility and A&D businesses are expected to remain stable [44][45] Question: Organic growth breakdown - Organic growth was attributed to approximately 3% from pricing and the remainder from volume [46] Question: Inflation and pricing power - Management expects to continue driving price increases to improve the price-cost equation, despite ongoing inflation challenges [49][50] Question: Capital allocation priorities - The company remains active in seeking acquisition opportunities while also prioritizing share repurchases [51] Question: Impact of climate bill on business - Management anticipates positive impacts from the climate bill, particularly for the NRG and Doble businesses as the grid modernizes [53][54]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022 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) (I.R.S. Employer Identification No.) Titleofeac ...

1 ESCO Technologies Second Quarter FY 2022 Earnings Call Vic Richey Chairman, CEO & President Chris Tucker Sr. Vice President & CFO May 9, 2022 Forward Looking Statement Statements in this presentation and made during today's conference call regarding the timing and magnitude of recovery in the Company's end markets, the continuing impacts of COVID-19 on the Company's results, sales, Adjusted SG&A, Adjusted EBIT, Adjusted EBITDA, Adjusted EPS, cash flow, results of cost reduction efforts, margins, growth, t ...

ESCO Technologies, Inc. (NYSE:ESE) Q2 2022 Earnings Conference Call May 9, 2022 5:00 PM ET Company Participants Kate Lowrey - Director, IR Victor Richey - Chairman, President & CEO Christopher Tucker - SVP & CFO Conference Call Participants John Franzreb - Sidoti & Company Jonathan Tanwanteng - MD Operator Good day, and welcome to ESCO Technologies Second Quarter Earnings Conference Call. Today's call is being recorded. With us today are Vic Richey, Chairman and Chief Executive Officer; Chris Tucker, Vice P ...

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and related notes for the specified periods [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements and detailed notes for ESCO Technologies Inc [Condensed Consolidated Statements of Operations (Unaudited) - Three Months](index=2&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)%20-%20Three%20Months) This section presents the unaudited condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :---------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net sales | $204,928 | $165,894 | | Net earnings | $16,583 | $15,404 | | Basic EPS | $0.64 | $0.59 | | Diluted EPS | $0.64 | $0.59 | - Net sales increased by **23.5% to $204.9 million** in Q2 2022 compared to **$165.9 million** in Q2 2021. Net earnings also rose by **7.7% to $16.6 million**, with diluted EPS increasing from **$0.59 to $0.64**[6](index=6&type=chunk) [Condensed Consolidated Statements of Operations (Unaudited) - Six Months](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)%20-%20Six%20Months) This section presents the unaudited condensed consolidated statements of operations for the six months ended March 31, 2022 and 2021 | Metric | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | | :---------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net sales | $381,938 | $328,568 | | Net earnings | $28,107 | $28,222 | | Basic EPS | $1.08 | $1.08 | | Diluted EPS | $1.08 | $1.08 | - Net sales for the first six months of 2022 increased by **16.2% to $381.9 million** from **$328.6 million** in the prior year. Net earnings remained relatively stable at **$28.1 million**, resulting in consistent diluted EPS of **$1.08**[8](index=8&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) This section presents the unaudited condensed consolidated statements of comprehensive income for the three and six months ended March 31, 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net earnings | $16,583 | $15,404 | $28,107 | $28,222 | | Foreign currency translation adjustments| $(2,811) | $116 | $(5,311) | $5,465 | | Comprehensive income | $13,772 | $15,520 | $22,796 | $33,687 | - Comprehensive income for the three months ended March 31, 2022, decreased to **$13.8 million** from **$15.5 million** in the prior year, primarily due to negative foreign currency translation adjustments of **$(2.8) million**. For the six-month period, comprehensive income significantly decreased to **$22.8 million** from **$33.7 million**, also driven by foreign currency translation adjustments[10](index=10&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This section provides the unaudited condensed consolidated balance sheets as of March 31, 2022, and September 30, 2021 | Metric | March 31, 2022 (in thousands) | September 30, 2021 (in thousands) | | :-------------------------- | :---------------------------- | :-------------------------------- | | Total current assets | $513,398 | $466,154 | | Total assets | $1,625,786 | $1,577,345 | | Total current liabilities | $277,795 | $274,995 | | Total liabilities | $604,613 | $557,649 | | Total shareholders' equity | $1,021,173 | $1,019,696 | - Total assets increased to **$1.63 billion** at March 31, 2022, from **$1.58 billion** at September 30, 2021, driven by an increase in current assets, particularly inventories and contract assets. Total liabilities also increased, mainly due to higher long-term debt[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section presents the unaudited condensed consolidated statements of cash flows for the six months ended March 31, 2022 and 2021 | Cash Flow Activity | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Operating activities | $23,003 | $57,322 | | Investing activities | $(41,034) | $(21,860) | | Financing activities | $17,253 | $(44,535) | | Net decrease in cash | $(1,908) | $(6,907) | | Cash and cash equivalents, end of period | $54,324 | $45,653 | - Net cash provided by operating activities decreased significantly to **$23.0 million** in the first six months of 2022 from **$57.3 million** in the prior year, primarily due to higher working capital requirements. Investing activities used more cash, increasing to **$(41.0) million**, largely due to business acquisitions and capital expenditures. Financing activities provided **$17.3 million**, a reversal from the prior year's use of **$(44.5) million**, driven by increased long-term debt proceeds[16](index=16&type=chunk)[101](index=101&type=chunk) [1. BASIS OF PRESENTATION](index=7&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This section outlines the basis for the unaudited financial statements, including compliance with Form 10-Q and management estimates - The financial statements are unaudited and include normal recurring accruals, presented in accordance with Form 10-Q, and do not include all disclosures required for annual GAAP statements. Management's estimates and assumptions are used, and certain prior period deferred revenue amounts were reclassified to noncurrent[18](index=18&type=chunk)[19](index=19&type=chunk) [2. EARNINGS PER SHARE (EPS)](index=7&type=section&id=2.%20EARNINGS%20PER%20SHARE%20(EPS)) This section details the calculation of basic and diluted earnings per share for the reported periods | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Weighted Average Shares Outstanding – Basic | 25,953 | 26,038 | 26,008 | 26,038 | | Dilutive Restricted Shares | 92 | 163 | 90 | 154 | | Adjusted Shares – Diluted | 26,045 | 26,201 | 26,098 | 26,192 | - Basic EPS is calculated using weighted average common shares outstanding, while diluted EPS includes dilutive common share options and restricted shares. Diluted shares decreased slightly in both the three-month and six-month periods of 2022 compared to 2021[20](index=20&type=chunk) [3. ACQUISITION](index=7&type=section&id=3.%20ACQUISITION) This section describes the acquisition of Networks Electronic Company, LLC (NEco) and its financial impact - On November 4, 2021, the Company acquired Networks Electronic Company, LLC (NEco) for approximately **$15.2 million**, net of cash acquired. NEco provides miniature electro-explosive devices for defense and aerospace, and its operating results are included in the A&D segment under PTI[21](index=21&type=chunk)[103](index=103&type=chunk) - The acquisition included **$8.1 million** in identifiable intangible assets, primarily customer relationships (**$6.3 million**), and **$5.7 million** in goodwill, which is expected to be tax-deductible[21](index=21&type=chunk) [4. SHARE-BASED COMPENSATION](index=7&type=section&id=4.%20SHARE-BASED%20COMPENSATION) This section provides details on share-based compensation costs and related income tax benefits for the reported periods | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Six Months Ended March 31, 2022 (in thousands) | Six Months Ended March 31, 2021 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | PARS/RSU Compensation Expense | $1,500 | $1,100 | $2,800 | $2,100 | | Non-Employee Directors Compensation Expense | $300 | $300 | $600 | $600 | | Total Share-Based Compensation Cost | $1,700 | $1,400 | $3,400 | $2,700 | | Total Income Tax Benefit | $300 | $300 | $500 | $700 | - Total share-based compensation cost increased to **$1.7 million** for Q2 2022 (from **$1.4 million** in Q2 2021) and **$3.4 million** for the first six months of 2022 (from **$2.7 million** in 2021), primarily due to higher PARS/RSU awards. As of March 31, 2022, **$10.9 million** of unrecognized compensation cost remains, expected to be recognized over **1.9 years**[22](index=22&type=chunk)[25](index=25&type=chunk) [5. INVENTORIES](index=8&type=section&id=5.%20INVENTORIES) This section presents a breakdown of inventory categories and their changes between reporting periods | Inventory Category | March 31, 2022 (in thousands) | September 30, 2021 (in thousands) | | :----------------- | :---------------------------- | :-------------------------------- | | Finished goods | $37,434 | $32,998 | | Work in process | $46,447 | $34,201 | | Raw materials | $91,271 | $79,949 | | Total inventories, net | $175,152 | $147,148 | - Total inventories, net, increased by **$28.0 million** to **$175.2 million** at March 31, 2022, from **$147.1 million** at September 30, 2021. This increase was primarily driven by higher raw materials, work in process, and finished goods across all segments, reflecting anticipated demand and manufacturing timing[26](index=26&type=chunk)[100](index=100&type=chunk) [6. GOODWILL AND OTHER INTANGIBLE ASSETS](index=8&type=section&id=6.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) This section details the composition and changes in goodwill and other intangible assets | Asset Category | March 31, 2022 (in thousands) | September 30, 2021 (in thousands) | | :------------------------- | :---------------------------- | :-------------------------------- | | Goodwill | $508,406 | $504,853 | | Patents, Net | $1,178 | $1,159 | | Capitalized Software, Net | $31,385 | $29,931 | | Customer Relationships, Net| $203,954 | $207,648 | | Other, Net | $8,670 | $8,779 | | Trade Names (Indefinite Lives) | $162,016 | $161,733 | - Goodwill increased by **$3.5 million** to **$508.4 million** at March 31, 2022, primarily due to **$6.0 million** from acquisition activity and adjustments, partially offset by foreign currency translation. The NEco acquisition contributed **$5.7 million** to goodwill in the Aerospace & Defense segment[27](index=27&type=chunk)[29](index=29&type=chunk) [7. BUSINESS SEGMENT INFORMATION](index=9&type=section&id=7.%20BUSINESS%20SEGMENT%20INFORMATION) This section provides financial information and descriptions for the Company's three reportable business segments - The Company operates in three reportable segments: Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Shielding and Test (Test)[30](index=30&type=chunk) - A&D focuses on specialty filtration, fluid control, and naval products for aerospace and defense. USG provides diagnostic testing solutions for electric power grids and decision support tools for renewable energy. Test designs and manufactures products for identifying, measuring, and containing magnetic, electromagnetic, and acoustic energy, including RF shielding[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) | Segment | Q2 2022 Net Sales (in thousands) | Q2 2021 Net Sales (in thousands) | 6M 2022 Net Sales (in thousands) | 6M 2021 Net Sales (in thousands) | | :------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Aerospace & Defense | $84,821 | $82,528 | $155,065 | $149,144 | | USG | $64,191 | $39,555 | $127,676 | $94,095 | | Test | $55,916 | $43,811 | $99,197 | $85,329 | | Consolidated Total | $204,928 | $165,894 | $381,938 | $328,568 | | | | | | | | Segment | Q2 2022 EBIT (in thousands) | Q2 2021 EBIT (in thousands) | 6M 2022 EBIT (in thousands) | 6M 2021 EBIT (in thousands) | | :------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Aerospace & Defense | $14,349 | $17,006 | $24,304 | $25,266 | | USG | $11,314 | $6,725 | $24,705 | $19,456 | | Test | $8,494 | $5,688 | $12,459 | $11,030 | | Corporate (loss) | $(11,469) | $(8,838) | $(23,210) | $(18,090) | | Consolidated EBIT | $22,688 | $20,581 | $38,258 | $37,662 | [8. DEBT](index=10&type=section&id=8.%20DEBT) This section outlines the Company's debt structure, including borrowings, credit facilities, and interest rates | Debt Category | March 31, 2022 (in thousands) | September 30, 2021 (in thousands) | | :-------------------------------- | :---------------------------- | :-------------------------------- | | Total borrowings | $196,000 | $154,000 | | Current portion of long-term debt | $(20,000) | $(20,000) | | Total long-term debt, less current portion | $176,000 | $134,000 | - Total borrowings increased to **$196.0 million** at March 31, 2022, from **$154.0 million** at September 30, 2021. The Company has a **$500 million** revolving credit facility, with an option to increase by an additional **$250 million**, maturing September 27, 2024. As of March 31, 2022, **$296 million** was available to borrow, plus the **$250 million** increase option, and the Company was in compliance with all debt covenants[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) - The weighted average interest rates were **1.29%** for the three months and **1.23%** for the six months ended March 31, 2022, compared to **1.27%** and **1.40%** for the corresponding periods in 2021[42](index=42&type=chunk) [9. INCOME TAX EXPENSE](index=11&type=section&id=9.%20INCOME%20TAX%20EXPENSE) This section discusses the effective income tax rates for the reported periods and any significant impacting factors - The effective income tax rate remained stable at **23.5%** for the second quarter of both 2022 and 2021. For the first six months, the rate was **23.0%** in 2022, slightly down from **23.1%** in 2021, with no significant unusual items impacting the rates[43](index=43&type=chunk)[99](index=99&type=chunk) [10. SHAREHOLDERS' EQUITY](index=11&type=section&id=10.%20SHAREHOLDERS'%20EQUITY) This section details the components of shareholders' equity and the factors influencing its changes | Equity Component | March 31, 2022 (in thousands) | March 31, 2021 (in thousands) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Common stock | $307 | $306 | | Additional paid-in capital | $298,353 | $295,796 | | Retained earnings | $854,946 | $799,884 | | Accumulated other comprehensive loss | $(7,472) | $1,808 | | Treasury stock | $(124,961) | $(107,134) | | Total equity | $1,021,173 | $990,660 | - Total shareholders' equity increased to **$1.02 billion** at March 31, 2022, from **$990.7 million** at March 31, 2021. This was primarily driven by net earnings and stock plans, partially offset by an increase in accumulated other comprehensive loss due to foreign currency translation and higher treasury stock purchases[44](index=44&type=chunk) [11. FAIR VALUE MEASUREMENTS](index=12&type=section&id=11.%20FAIR%20VALUE%20MEASUREMENTS) This section explains the Company's approach to fair value measurements for financial and nonfinancial assets and liabilities - The Company uses a three-level hierarchy for fair value measurements. Cash, receivables, inventories, and payables approximate fair value due to their short maturity. Forward contracts and interest rate swaps are classified within Level 2 of the valuation hierarchy and are immaterial[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - Nonfinancial assets like property, plant, and equipment, and other intangible assets are not measured at fair value on a recurring basis but are subject to impairment adjustments. No impairments were recorded during the three and six-month periods ended March 31, 2022[48](index=48&type=chunk) [12. REVENUES](index=12&type=section&id=12.%20REVENUES) This section disaggregates revenue by customer type, geographic location, and recognition method, and details backlog | Revenue Category (Q2 2022) | Aerospace & Defense (in thousands) | USG (in thousands) | Test (in thousands) | Total (in thousands) | | :------------------------- | :------------------------------- | :----------------- | :------------------ | :------------------- | | **Customer Type:** | | | | | | Commercial | $33,562 | $63,379 | $51,903 | $148,844 | | U.S. Government | $51,259 | $812 | $4,013 | $56,084 | | **Geographic Location:** | | | | | | United States | $72,621 | $41,458 | $31,071 | $145,150 | | International | $12,200 | $22,733 | $24,845 | $59,778 | | **Recognition Method:** | | | | | | Point in time | $35,666 | $51,202 | $14,838 | $101,706 | | Over time | $49,155 | $12,989 | $41,078 | $103,222 | - For Q2 2022, commercial customers accounted for **$148.8 million** of total revenues, while U.S. Government contributed **$56.1 million**. The majority of revenue (**$145.2 million**) was generated in the United States. Revenue recognized over time (**$103.2 million**) slightly exceeded point-in-time recognition (**$101.7 million**)[51](index=51&type=chunk) - Remaining performance obligations (backlog) stood at **$670.9 million** at March 31, 2022, with approximately **77%** expected to be recognized as revenue in the next twelve months. Contract assets and liabilities were **$111.5 million** and **$113.0 million**, respectively, at March 31, 2022[57](index=57&type=chunk)[59](index=59&type=chunk) [13. LEASES](index=16&type=section&id=13.%20LEASES) This section provides information on the Company's lease accounting, including ROU assets, lease liabilities, and lease costs - The Company recognizes Right-of-Use (ROU) assets and lease liabilities for leases exceeding 12 months, based on the present value of future lease payments. The incremental borrowing rate is used for discount rate calculation when implicit rates are not stated[60](index=60&type=chunk) | Lease Cost Component | Q2 2022 (in thousands) | Q2 2021 (in thousands) | 6M 2022 (in thousands) | 6M 2021 (in thousands) | | :------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Finance lease cost | $898 | $803 | $1,807 | $1,608 | | Operating lease cost | $1,578 | $1,424 | $3,131 | $2,877 | | Total lease costs | $2,476 | $2,227 | $4,938 | $4,485 | - Total lease costs increased to **$2.48 million** in Q2 2022 (from **$2.23 million** in Q2 2021) and **$4.94 million** for the first six months of 2022 (from **$4.49 million** in 2021). The weighted-average remaining lease term for operating leases was **9.9 years** (vs **5.8 years** in 2021) and for finance leases was **12.5 years** (vs **12.2 years** in 2021) as of March 31, 2022[64](index=64&type=chunk)[66](index=66&type=chunk) [14. ADJUSTED QUARTERLY FINANCIAL INFORMATION](index=18&type=section&id=14.%20ADJUSTED%20QUARTERLY%20FINANCIAL%20INFORMATION) This section presents adjustments to prior period financial statements due to identified immaterial errors - The Company identified immaterial errors in Westland's historical financial statements for Q2 2021, leading to a revision. Net sales were overstated by **$0.8 million**, inventory overstated, and cost of goods sold understated by **$0.4 million**. The tax impact was a **$0.3 million** reduction in tax expense[68](index=68&type=chunk) | Metric (Q2 2021) | As Reported (in thousands) | As Adjusted (in thousands) | | :------------------------- | :------------------------- | :------------------------- | | Net sales | $166,644 | $165,894 | | Cost of sales | $103,113 | $103,553 | | Earnings before income taxes | $21,339 | $20,149 | | Income tax expense | $5,025 | $4,745 | | Net earnings | $16,314 | $15,404 | | Diluted earnings per share | $0.62 | $0.59 | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=19&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial condition, results of operations, and liquidity, addressing COVID-19 impacts and critical accounting policies [COVID-19 TRENDS AND UNCERTAINTIES](index=19&type=section&id=COVID-19%20TRENDS%20AND%20UNCERTAINTIES) This section addresses the ongoing challenges and impacts of the COVID-19 pandemic on the Company's operations and markets - The COVID-19 pandemic continues to pose challenges, including supply chain constraints and adverse impacts on commercial aerospace and electric utility markets. However, Navy, defense aerospace, space, and Test segment end-markets have remained solid, with recovery observed in previously affected core markets[71](index=71&type=chunk)[72](index=72&type=chunk) - The Company is encouraged by growing strength in orders across commercial aerospace, electric utility, and renewable energy, expecting strong growth in the second half of fiscal 2022. No material asset impairments are currently anticipated due to COVID-19[72](index=72&type=chunk)[73](index=73&type=chunk) [RESULTS OF OPERATIONS](index=19&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the Company's financial performance, including sales, earnings, and segment-specific results [OVERVIEW](index=19&type=section&id=OVERVIEW) This section provides a high-level summary of the Company's financial performance for the reported periods | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | 6M 2022 (in millions) | 6M 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Sales | $204.9 | $165.9 | $381.9 | $328.6 | | Net earnings | $16.6 | $15.4 | $28.1 | $28.2 | | Diluted earnings per share | $0.64 | $0.59 | $1.08 | $1.08 | - In Q2 2022, sales increased by **23.5% to $204.9 million**, net earnings rose to **$16.6 million**, and diluted EPS was **$0.64**. For the first six months of 2022, sales grew by **16.2% to $381.9 million**, while net earnings and diluted EPS remained stable at **$28.1 million** and **$1.08**, respectively[75](index=75&type=chunk) [NET SALES](index=19&type=section&id=NET%20SALES) This section analyzes the changes in net sales across the Company's business segments - Net sales for Q2 2022 increased by **$39.0 million (23.5%) to $204.9 million**, driven by increases in USG (**$24.6 million**), Test (**$12.1 million**), and A&D (**$2.3 million**). For the first six months of 2022, net sales increased by **$53.3 million (16.2%) to $381.9 million**, with USG contributing **$33.5 million**, Test **$13.8 million**, and A&D **$6.0 million**[76](index=76&type=chunk) [Aerospace & Defense (A&D)](index=19&type=section&id=-Aerospace%20%26%20Defense%20(A%26D)) This section details the net sales performance and contributing factors for the Aerospace & Defense segment - A&D net sales increased by **2.8% to $84.8 million** in Q2 2022 and by **4.0% to $155.1 million** for the first six months of 2022. This growth was primarily due to increased commercial aerospace sales at Mayday, PTI, Globe, Westland, and Crissair, driven by the COVID-19 rebound, partially offset by a decrease in sales at VACCO due to timing of navy defense projects[77](index=77&type=chunk) [USG](index=21&type=section&id=-USG) This section details the net sales performance and contributing factors for the Utility Solutions Group (USG) segment - USG net sales surged by **62.1% to $64.2 million** in Q2 2022 and by **35.7% to $127.7 million** for the first six months of 2022. This significant increase was mainly due to higher product and service revenue at Doble, driven by the acquisitions of Altanova and Phenix (contributing **$10.4 million** in Q2 and **$25.0 million** in 6M 2022), and increased product sales at NRG[79](index=79&type=chunk) [Test](index=21&type=section&id=-Test) This section details the net sales performance and contributing factors for the RF Shielding and Test segment - Test segment net sales increased by **27.6% to $55.9 million** in Q2 2022 and by **16.3% to $99.2 million** for the first six months of 2022. This growth was primarily due to higher sales from U.S. and Asian operations, partially offset by a decrease in European operations due to project timing[80](index=80&type=chunk) [ORDERS AND BACKLOG](index=21&type=section&id=ORDERS%20AND%20BACKLOG) This section provides information on new orders received and the Company's total backlog | Metric | March 31, 2022 (in millions) | September 30, 2021 (in millions) | | :---------------------- | :--------------------------- | :------------------------------- | | Backlog | $670.9 | $592.0 | | New Orders (Q2) | Q2 2022 (in millions) | Q2 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | | Total | $236.5 | $176.2 | | A&D | $94.6 | $88.2 | | USG | $86.5 | $43.6 | | Test | $55.4 | $44.4 | | New Orders (6M) | 6M 2022 (in millions) | 6M 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | | Total | $460.9 | $333.9 | | A&D | $184.8 | $153.6 | | USG | $152.7 | $92.4 | | Test | $123.4 | $87.9 | - Backlog increased to **$670.9 million** at March 31, 2022, from **$592.0 million** at September 30, 2021. New orders in Q2 2022 totaled **$236.5 million**, up from **$176.2 million** in Q2 2021, with significant increases in USG and Test segments. For the first six months, new orders reached **$460.9 million**, a substantial increase from **$333.9 million** in the prior year[81](index=81&type=chunk)[82](index=82&type=chunk) [SELLING, GENERAL AND ADMINISTRATIVE EXPENSES](index=21&type=section&id=SELLING,%20GENERAL%20AND%20ADMINISTRATIVE%20EXPENSES) This section analyzes the trends and drivers of selling, general, and administrative expenses | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | 6M 2022 (in millions) | 6M 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | SG&A Expenses | $48.0 | $38.7 | $94.6 | $79.7 | | SG&A as % of Net Sales | 23.4% | 23.3% | 24.8% | 24.3% | - SG&A expenses increased to **$48.0 million (23.4% of net sales)** in Q2 2022 and **$94.6 million (24.8% of net sales)** for the first six months of 2022. This rise was mainly due to higher expenses at Doble from the Altanova and Phenix acquisitions, and increased corporate acquisition-related costs and professional fees[83](index=83&type=chunk) [AMORTIZATION OF INTANGIBLE ASSETS](index=21&type=section&id=AMORTIZATION%20OF%20INTANGIBLE%20ASSETS) This section discusses the amortization expense related to the Company's intangible assets | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | 6M 2022 (in millions) | 6M 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Amortization Expense | $6.5 | $4.9 | $13.0 | $9.9 | - Amortization of intangible assets increased to **$6.5 million** in Q2 2022 (from **$4.9 million** in Q2 2021) and **$13.0 million** for the first six months of 2022 (from **$9.9 million** in 2021). This increase was primarily driven by the Company's recent acquisitions of Phenix, Altanova, and NEco[84](index=84&type=chunk) [OTHER INCOME, NET](index=21&type=section&id=OTHER%20INCOME,%20NET) This section details the components and changes in other income, net, for the reported periods | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | 6M 2022 (in millions) | 6M 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Other Income, Net | $0.6 | $1.9 | $0.6 | $1.9 | - Other income, net, decreased to **$0.6 million** in Q2 2022 and for the first six months of 2022, compared to **$1.9 million** in the corresponding periods of 2021. The prior year's higher income was mainly due to a **$2 million** gain from the final settlement on the sale of the Doble Watertown, MA building[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [EBIT](index=23&type=section&id=EBIT) This section analyzes the Company's earnings before interest and taxes (EBIT) at a consolidated and segment level | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | 6M 2022 (in millions) | 6M 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Consolidated EBIT | $22.7 | $20.6 | $38.3 | $37.7 | | EBIT as % of Net Sales | 11.1% | 12.4% | 10.0% | 11.5% | - Consolidated EBIT increased to **$22.7 million** in Q2 2022 (from **$20.6 million** in Q2 2021) and **$38.3 million** for the first six months of 2022 (from **$37.7 million** in 2021). However, EBIT as a percentage of net sales decreased in both periods[88](index=88&type=chunk) [Aerospace & Defense EBIT](index=23&type=section&id=%E2%80%93%20Aerospace%20%26%20Defense%20EBIT) This section details the EBIT performance and contributing factors for the Aerospace & Defense segment - A&D EBIT decreased to **$14.3 million (16.9% of net sales)** in Q2 2022 and **$24.3 million (15.7% of net sales)** for the first six months of 2022. This decline was mainly due to lower sales volumes at VACCO and unfavorable product mix at PTI and Crissair, partially offset by higher sales volumes at Westland, Mayday, and Globe. The six-month EBIT was negatively impacted by a **$0.3 million** inventory step-up charge from the NEco acquisition[93](index=93&type=chunk) [USG EBIT](index=23&type=section&id=-USG%20EBIT) This section details the EBIT performance and contributing factors for the Utility Solutions Group (USG) segment - USG EBIT increased to **$11.3 million (17.6% of net sales)** in Q2 2022 and **$24.7 million (19.3% of net sales)** for the first six months of 2022. This increase was primarily driven by higher sales volumes at Doble and NRG. The six-month EBIT was negatively impacted by approximately **$0.5 million** of inventory step-up charges related to the Altanova acquisition[94](index=94&type=chunk) [Test EBIT](index=23&type=section&id=-Test%20EBIT) This section details the EBIT performance and contributing factors for the RF Shielding and Test segment - Test segment EBIT increased to **$8.5 million (15.2% of net sales)** in Q2 2022 and **$12.5 million (12.6% of net sales)** for the first six months of 2022. This growth was mainly due to favorable product mix and higher margins on projects, particularly from Asian and U.S. operations[95](index=95&type=chunk) [Corporate EBIT](index=24&type=section&id=%E2%80%93%20Corporate%20EBIT) This section analyzes the corporate-level EBIT, including unallocated expenses and their impact - Corporate costs included in EBIT increased to **$11.5 million** in Q2 2022 and **$23.2 million** for the first six months of 2022. This rise was mainly due to increased amortization expense of acquired intangible assets related to the Phenix, Altanova, and NEco acquisitions[97](index=97&type=chunk) [INTEREST EXPENSE, NET](index=24&type=section&id=INTEREST%20EXPENSE,%20NET) This section discusses the interest expense, net, and its drivers, primarily related to outstanding borrowings | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | 6M 2022 (in millions) | 6M 2021 (in millions) | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Interest Expense | $1.0 | $0.4 | $1.8 | $1.0 | - Interest expense increased to **$1.0 million** in Q2 2022 and **$1.8 million** for the first six months of 2022, compared to **$0.4 million** and **$1.0 million** in the corresponding periods of 2021. This increase was primarily due to higher average outstanding borrowings, which were **$197 million** in Q2 2022 and **$190 million** for the first six months of 2022[98](index=98&type=chunk) [INCOME TAX EXPENSE](index=24&type=section&id=INCOME%20TAX%20EXPENSE) This section analyzes the effective income tax rate and any factors influencing its changes - The effective income tax rate remained consistent at **23.5%** for Q2 2022 and 2021. For the first six months, the rate was **23.0%** in 2022, slightly down from **23.1%** in 2021, with no significant or unusual items impacting the rates[99](index=99&type=chunk) [CAPITAL RESOURCES AND LIQUIDITY](index=24&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) This section assesses the Company's financial position, cash flows, and available capital resources - The Company's financial position and liquidity remain strong. Working capital increased to **$235.6 million** at March 31, 2022, from **$191.2 million** at September 30, 2021, driven by a **$28.0 million** increase in inventories[100](index=100&type=chunk) - Net cash provided by operating activities decreased to **$23.0 million** in the first six months of 2022 from **$57.3 million** in 2021, mainly due to higher working capital requirements. Capital expenditures increased to **$20.7 million**, including a **$10 million** purchase of the NRG building[101](index=101&type=chunk)[102](index=102&type=chunk) [Acquisition](index=24&type=section&id=Acquisition) This section provides details on the NEco acquisition and its impact on capital resources - On November 4, 2021, the Company acquired Networks Electronic Company, LLC (NEco) for approximately **$15.2 million**, net of cash acquired. NEco specializes in miniature electro-explosive devices for defense and aerospace, and its results are integrated into the A&D segment[103](index=103&type=chunk) [Credit Facility](index=24&type=section&id=Credit%20Facility) This section outlines the Company's credit facility, available borrowing capacity, and compliance with covenants - As of March 31, 2022, the Company had **$296 million** available to borrow under its **$500 million** credit facility, plus a **$250 million** increase option, and **$54.3 million** cash on hand. Outstanding borrowings under the facility were **$196 million**[104](index=104&type=chunk) [Share Repurchases](index=25&type=section&id=Share%20Repurchases) This section details the Company's share repurchase activities under its publicly announced program - During the first six months of 2022, the Company repurchased approximately **229,000 shares** for **$18.0 million** under a **$200 million** common stock program approved in August 2021, which expires September 30, 2024[106](index=106&type=chunk)[119](index=119&type=chunk) [Dividends](index=25&type=section&id=Dividends) This section reports on the dividends paid by the Company during the reported periods - The Company paid quarterly dividends of **$0.08 per share**, totaling **$2.1 million**, on October 15, 2021, and January 19, 2022. A subsequent dividend of **$0.08 per share**, totaling **$2.1 million**, was paid on April 19, 2022[107](index=107&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=25&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) This section describes the accounting policies that require significant management judgment and estimates - Management believes its accounting policies are reasonable and appropriate, requiring significant judgment in selecting assumptions for financial estimates. These judgments are based on historical experience, industry trends, and external information[108](index=108&type=chunk) [OTHER MATTERS](index=25&type=section&id=OTHER%20MATTERS) This section addresses various claims, litigation, and environmental matters affecting the Company - The Company is involved in various claims, charges, litigation, and environmental remediation matters. Management believes that the costs for resolving these matters are adequately reserved, covered by insurance, or would not materially adversely affect the Company's operations, capital expenditures, or competitive position[109](index=109&type=chunk) [FORWARD LOOKING STATEMENTS](index=25&type=section&id=FORWARD%20LOOKING%20STATEMENTS) This section provides cautionary statements regarding forward-looking information and potential risks - This section contains forward-looking statements regarding future events and results, including impacts of COVID-19, market recovery, credit facility adequacy, litigation outcomes, future revenues, and fair values. Investors are cautioned that actual results may differ materially due to various risks and uncertainties[110](index=110&type=chunk)[111](index=111&type=chunk)[113](index=113&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) This section details the company's exposure to market risks, primarily from interest rates and foreign currency fluctuations - The Company's market risks primarily stem from changes in interest rates and foreign currency exchange rates. Derivative financial instruments, such as forward contracts and swaps, are selectively used to manage these risks. There has been no material change to the Company's market risks since September 30, 2021[114](index=114&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=27&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting - Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2022, concluding they were effective. No material changes in internal control over financial reporting occurred during the period[115](index=115&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes information on equity security sales, exhibits, and official signatures [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's equity security repurchases under its publicly announced program during the quarter ended March 31, 2022 | 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, 2022| N/A | N/A | — | $190.0 million | | February 1-28, 2022| 42,217 | $71.04 | 42,217 | $187.0 million | | March 1-31, 2022 | 71,131 | $70.27 | 71,131 | $182.0 million | | Total | 113,348 | $70.56 | 113,348 | $182.0 million | - During February and March 2022, the Company repurchased a total of **113,348 shares** at an average price of **$70.56 per share**. As of March 31, 2022, approximately **$182.0 million** remained available for repurchase under the **$200 million** program approved in August 2021, which is scheduled to expire on September 30, 2024[117](index=117&type=chunk)[119](index=119&type=chunk) [ITEM 6. EXHIBITS](index=29&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including organizational documents, compensation plans, and certifications - Key exhibits include Restated Articles of Incorporation, Bylaws, Sub-Plan for Compensation of Non-Employee Directors, Form of Director Share Award Agreement, and certifications from the CEO and CFO. XBRL Instance Document and related schema documents are also submitted[121](index=121&type=chunk) [SIGNATURE](index=30&type=section&id=SIGNATURE) This section contains the signature of the authorized officer, certifying the filing of the report - The report was duly signed on behalf of ESCO TECHNOLOGIES INC. by Christopher L. Tucker, Senior Vice President and Chief Financial Officer, on May 10, 2022[124](index=124&type=chunk)[125](index=125&type=chunk)

ESCO Technologies Inc. (NYSE:ESE) Q1 2022 Earnings Conference Call February 8, 2022 5:00 PM ET Company Participants Vic Richey – Chairman and Chief Executive Officer Kate Lowrey – Director, Investor Relations Chris Tucker – Senior Vice President and Chief Financial Officer Conference Call Participants Tommy Moll – Stephens John Franzreb – Sidoti Jon Tanwanteng – CJS Securities Operator Good day and welcome to the ESCO Technologies First Quarter 2022 Earnings Conference Call. Today's call is being recorded. ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR | --- | --- | --- | |---------------------------------------------------------------------------|-------------------|-------------------------------------------------------------| | ...

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, 2021 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 oth ...

ESCO Technologies Inc. (NYSE:ESE) Q4 2021 Earnings Conference Call November 18, 2021 5:00 PM ET Company Participants Kate Lowrey - Director, Investor Relations Vic Richey - Chairman and Chief Executive Officer Chris Tucker - Senior Vice President and Chief Financial Officer Conference Call Participants Tommy Moll - Stephens John Franzreb - Sidoti Jon Tanwanteng - CJS Securities Operator Good day and welcome to the Q4 2021 ESCO Technologies Inc. Earnings Conference Call. Today’s call is being recorded. With ...