Top-line sales growth of 35% combined with 380 points of adjusted EBIT margin expansion drove a 73% year-over-year increase in adjusted earnings per share from continuing operations to a Q1 record of $1.64 per share. Our exceptional financial results for the quarter are a testament to our strategic positioning across our served markets combined with disciplined execution by our global team. Chris will take us through all of the financial details in the quarter, but before we get to that, I want to give you ...

ESCO Technologies (NYSE:ESE) Q1 2026 Earnings call February 05, 2026 05:00 PM ET Company ParticipantsBryan Sayler - President and CEOChris Tucker - SVP and CFOKate Lowrey - VP of Investor RelationsConference Call ParticipantsJon Tanwanteng - Managing Director and Senior Equity Research AnalystTommy Moll - Managing Director and Senior Equity Research AnalystOperatorday, and thank you for standing by. Welcome to the first quarter 2026 ESCO Technologies earnings call. At this time, all participants are in a li ...

ESCO Technologies (NYSE:ESE) Q1 2026 Earnings call February 05, 2026 05:00 PM ET Company ParticipantsBryan Sayler - President and CEOChris Tucker - SVP and CFOKate Lowrey - VP of Investor RelationsConference Call ParticipantsJon Tanwanteng - Managing Director and Senior Equity Research AnalystTommy Moll - Managing Director and Senior Equity Research AnalystOperatorDay, and thank you for standing by. Welcome to Q1 2026 ESCO Technologies Earnings Call. At this time, all participants are in a listen-only mode. ...

Core Insights - ESCO Technologies Inc. reported a strong start to fiscal year 2026 with significant increases in sales, orders, and earnings per share, reflecting favorable market conditions and effective execution by the team [1][3][4]. Financial Performance - Q1 2026 sales increased by 35% to $290 million compared to $215 million in Q1 2025 [6]. - Entered orders surged by 143% to $557 million, resulting in a record backlog of $1.4 billion [6][32]. - GAAP EPS from continuing operations rose by 40.5% to $1.11 per share, while adjusted EPS increased by 72.6% to $1.64 per share [6][34]. Segment Performance - Aerospace & Defense (A&D) segment sales increased by 75.7% to $144 million, driven by strong Navy and aerospace performance [7]. - Utility Solutions Group (USG) sales remained stable at $87 million, with a slight increase from the previous year [8]. - Test & Measurement segment sales grew by 26.7% to $58 million, supported by higher demand in U.S. and European markets [12]. Operational Highlights - The company achieved a 320 basis points expansion in adjusted EBITDA margin, reflecting operational efficiency [3]. - Net cash provided by operating activities from continuing operations was $69 million, an increase of $40 million compared to the prior year [6]. Business Outlook - Full year revenue guidance for FY 2026 has been increased by $20 million, now expected to be in the range of $1.29 to $1.33 billion, indicating 18 to 21% growth over the prior year [10]. - Adjusted EPS guidance for the full year is raised to a range of $7.90 to $8.15 per share, reflecting a midpoint increase of $0.38 from previous guidance [10].

Financial Data and Key Metrics Changes - The company reported a 30% year-over-year increase in adjusted earnings per share from continuing operations, reaching a record $2.32 per share [4][10] - Adjusted EBIT margin expanded by 100 basis points to 23.9% [10] - Sales for the quarter were $353 million, representing a 29% growth, with organic growth at 8% [10][15] Business Line Data and Key Metrics Changes - Aerospace and Defense (A&D) segment saw orders grow by 60% on a reported basis and 12% organically, with sales increasing by 72% to just over $170 million [11] - Utility Solutions Group experienced 17% growth in orders, driven by Doble, while sales growth was muted at 2% [13] - The test business reported a 10% revenue growth, ending the year with a backlog of $187 million, up nearly 20% compared to the previous year [14] Market Data and Key Metrics Changes - Organic sales for the Navy market increased by 53% in the quarter and 24% year-over-year, reflecting strong demand for submarines [6] - Aerospace revenue was up over 10% in the quarter and 14% year-over-year, driven by increased production rates from Boeing [7] Company Strategy and Development Direction - The company aims to focus on the aerospace and Navy end markets, which present durable, long-term growth opportunities [5] - The successful acquisition of Maritime and divestiture of VACO are pivotal steps in the evolution of the company's portfolio [4] Management's Comments on Operating Environment and Future Outlook - Management remains positive about the long-term outlook for both aircraft and Navy markets, expecting increasing production rates to drive growth [6] - The company anticipates another strong financial year in 2026, with reported sales growth projected in the range of 16%-20% [17] Other Important Information - The company achieved record performance in 2025 across all key metrics, with orders exceeding $1.5 billion, a growth of over 56% [15] - Operating cash flow for the year was just over $200 million, significantly up from nearly $122 million in the prior year [16] Q&A Session Summary Question: Context on growth rates and margin trends at the segment level - Management provided guidance of 6%-8% growth for A&D, 6%-8% for Doble, and 3%-5% for test, with expected margin improvements across all segments [21] Question: Update on the integration of SM&T - The integration is on plan, with the Maritime business performing ahead of expectations, and positive new order activity noted [22] Question: Details on $200 million in ESCO maritime orders - The orders are associated with U.K. submarine-related programs, expected to generate revenue over two years [27][29] Question: Headwinds from canceled flights affecting aerospace - Management indicated no significant impact from recent shutdowns, with strong growth expected in aircraft manufacturing [30] Question: Insights on the energy business and potential inflection points - Management noted a potential downturn in the renewables market due to expiring tax credits but expects a return to normal growth rates in 2027 [39][41] Question: Capital allocation priorities moving forward - The company is focused on M&A opportunities within aerospace, navy, or utility markets, emphasizing disciplined investment strategies [42][43]

Financial Data and Key Metrics Changes - The company reported a 30% year-over-year increase in adjusted earnings per share from continuing operations, reaching a record $2.32 per share [4][10] - Adjusted EBIT margin expanded by 100 basis points to 23.9% [10] - Sales for the quarter were $353 million, representing a 29% growth, with organic growth at 8% [10][15] Business Line Data and Key Metrics Changes - Aerospace and Defense (A&D) segment saw orders grow by 60% on a reported basis and 12% organically, with sales increasing by 72% to just over $170 million [11] - Utility Solutions Group experienced 17% growth in orders, while sales growth was muted at 2% [13] - The test business reported a 10% revenue growth, ending the year with a backlog up nearly 20% compared to the previous year [14] Market Data and Key Metrics Changes - Organic sales for the Navy market increased by 53% in the quarter and 24% year-over-year [6] - The aerospace market saw revenue up over 10% in the quarter and 14% year-over-year, driven by increased production rates from Boeing [7] Company Strategy and Development Direction - The company aims to focus on the aerospace and Navy end markets, which present durable, long-term growth opportunities [5] - The successful acquisition of Maritime and divestiture of VACO are pivotal steps in the evolution of the company's portfolio [4] Management's Comments on Operating Environment and Future Outlook - Management remains positive about the long-term outlook for both the aircraft and Navy markets, expecting increasing production rates to drive growth [6] - The company anticipates another strong financial year in 2026, with reported sales growth projected in the range of 16%-20% [17] Other Important Information - The company achieved record performance in 2025 across all key metrics, with orders finishing in excess of $1.5 billion, a growth of over 56% [15] - Operating cash flow from continuing operations exceeded $200 million, a significant increase from nearly $122 million in the prior year [16] Q&A Session Summary Question: Context on growth rates and margin trends at the segment level - Management provided guidance for A&D business growth at 6%-8%, with expected margin improvements across all segments [21] Question: Update on the integration of SM&T - The integration is on plan, with the Maritime business performing ahead of expectations and positive new order activity noted [22] Question: Details on $200 million in ESCO maritime orders - The orders are associated with U.K. submarine-related programs, expected to generate revenue over two years [27][29] Question: Impact of canceled flights on aerospace - Management indicated no significant impact from shutdowns, with strong growth expected in aircraft manufacturing [30] Question: Thoughts on capital allocation moving forward - The company is actively looking at M&A opportunities, focusing on businesses that fit into aerospace, navy, or utility end markets [42][43]

Financial Data and Key Metrics Changes - The company reported a 30% year-over-year increase in adjusted earnings per share from continuing operations to a record $2.32 per share [4][10] - Adjusted EBIT margin improved by 100 basis points to 23.9% [10] - Sales for the quarter were $353 million, representing a 29% growth, with organic growth at 8% [10][11] Business Line Data and Key Metrics Changes - Aerospace and Defense (A&D) segment saw orders grow by 60% on a reported basis and organic growth of 12%, with sales up 72% on a reported basis [11] - Utility Solutions Group experienced 17% growth in orders, while sales growth was muted at 2% [12] - The test business had a 10% revenue growth, ending the year with a backlog up nearly 20% compared to the previous year [13] Market Data and Key Metrics Changes - Organic sales for the Navy market were up 53% in the quarter and 24% year-over-year [6] - The U.S. and U.K. customer bases are focused on increasing build rates for submarines, positively impacting sales and order rates [6] - The renewables market is currently facing headwinds, but long-term growth drivers remain in place [8] Company Strategy and Development Direction - The acquisition of Maritime and divestiture of VACO are pivotal steps in the evolution of the company's portfolio, enhancing its presence in the Navy market [4][5] - The company aims to focus on aerospace and Navy end markets, which present durable, long-term growth opportunities [5] - The company is actively looking for M&A opportunities that fit into its aerospace, navy, or utility end markets, which are expected to have long-term growth characteristics [41] Management's Comments on Operating Environment and Future Outlook - Management remains positive about the long-term outlook for both aircraft and Navy markets, expecting increasing production rates to drive growth [6] - The company anticipates another strong financial year in 2026, with reported sales growth expected in the range of 16%-20% [17] - Management acknowledges challenges in the renewables market but believes the business is well-managed and positioned for normalized growth in the future [39] Other Important Information - The company achieved record performance in 2025 across all key metrics, with orders finishing in excess of $1.5 billion, a growth of over 56% [15] - Operating cash flow for the year was just over $200 million, significantly up from nearly $122 million in the prior year [16] Q&A Session Summary Question: Context on growth rates and margin trends at the segment level - Management provided guidance for A&D business growth at 6%-8%, with similar expectations for Doble and 3%-5% for test [21][22] Question: Update on the integration of SM&T - Integration is on plan, with the Maritime business performing ahead of expectations and positive new order activity noted [23] Question: Details on $200 million in ESCO maritime orders - Orders are associated with U.K. submarine-related programs, expected to generate revenue over two years [28][29] Question: Impact of canceled flights on aerospace - Management did not see significant impact from recent shutdowns and expects continued growth in aircraft manufacturing [30] Question: Thoughts on capital allocation moving forward - The company is focused on disciplined M&A in aerospace, navy, or utility markets, leveraging a strong balance sheet [41]

Core Insights - ESCO Technologies Inc. reported a strong performance in Q4 2025 and FY 2025, with significant increases in sales, orders, and earnings per share, driven by strong market demand and strategic acquisitions [1][4][6] Financial Performance - Q4 2025 sales increased by 29% to $353 million, with entered orders rising by 30% to $321 million [1][7] - FY 2025 sales grew by 19% to $1.1 billion, with entered orders increasing by 57% to $1.6 billion [1][7] - Q4 2025 GAAP EPS from continuing operations rose by 14% to $1.73, while adjusted EPS increased by 30% to $2.32 [1][7] - For FY 2025, GAAP EPS from continuing operations increased by 13% to $4.49, and adjusted EPS rose by 26% to $6.03 [1][7] Segment Performance - Aerospace & Defense (A&D) segment saw Q4 2025 sales increase by 71.6% to $170 million, with organic sales up by 13.1% and Maritime contributing $58 million [6][30] - For FY 2025, A&D sales increased by 40.4% to $478 million, with organic sales up by 12.5% [6][34] - Utility Solutions Group (USG) reported Q4 2025 sales of $110 million, a slight increase of 1.6%, while FY 2025 sales rose by 3% to $380 million [10][34] - Test segment sales in Q4 2025 increased by 9.6% to $72 million, with FY 2025 sales up by 13.2% to $237 million [10][34] Operational Highlights - The company completed the divestiture of VACCO Industries, recognizing an after-tax gain of $173 million [12] - Management expects double-digit growth in sales, Adjusted EBIT, Adjusted EBITDA, and Adjusted EPS for FY 2026 [13][18] - The next quarterly cash dividend of $0.08 per share is scheduled for January 16, 2026 [13] Business Outlook - For FY 2026, sales are expected to grow by 16% to 20%, with A&D projected to grow by 33% to 38% [18] - Adjusted EBIT is anticipated to increase by approximately 21% to 25%, with margins improving to 20.9% to 21.5% [18] - Adjusted EPS for FY 2026 is expected to rise by 24% to 29%, reaching a range of $7.50 to $7.80 per share [18]

Core Insights - ESCO Technologies Inc. reported a 27% increase in Q3 sales to $296 million, while GAAP EPS from continuing operations decreased by 13% to $0.96. Adjusted EPS from continuing operations increased by 25% to $1.60 [1][4][5] - The company raised its FY 2025 adjusted EPS guidance to a range of $5.75 to $5.90, reflecting a growth of 21% to 24% [1][10][11] Financial Performance - Q3 2025 sales increased by $62.7 million (27%) compared to Q3 2024, with organic sales (excluding Maritime sales) increasing by $25.6 million (11%) [5][6] - Entered orders surged by 194% to $749 million, resulting in a book-to-bill ratio of 2.53x and a record backlog of $1.17 billion [1][5][7] - Net cash provided by operating activities from continuing operations was $88 million YTD, an increase of $25 million compared to the prior year [5] Segment Performance - Aerospace & Defense (A&D) segment sales increased by $49.1 million (56%) to $136.3 million, driven by a 200% increase in Navy sales [6][29] - Utility Solutions Group (USG) sales increased by $2.1 million (2%) to $92.4 million, with Doble's sales up by 1% and NRG sales up by 8% [12][29] - Test & Measurement segment sales increased by $11.6 million (21%) to $67.7 million, with EBIT and adjusted EBIT increasing to $10.7 million [12][29] Business Outlook - The company expects FY 2025 revenue from continuing operations to be in the range of $1.075 to $1.105 billion, reflecting a 17% to 20% increase over the prior year [10][11] - Q4 adjusted EPS from continuing operations is expected to be in the range of $2.04 to $2.19, representing a growth of 14% to 22% over Q4 2024 [13] Dividend Information - The next quarterly cash dividend of $0.08 per share is scheduled for payment on October 16, 2025, to stockholders of record on October 2, 2025 [14]

Financial Data and Key Metrics Changes - Orders increased by nearly 22% in the quarter, resulting in a record backlog of $932 million [15] - Sales rose by 6.6% in the quarter, with all three segments contributing to the growth [15] - Adjusted EBIT margins were at 18%, with incremental margins on sales growth at 56%, leading to adjusted earnings per share of $1.35, a 24% increase year-over-year [15][21] Business Segment Data and Key Metrics Changes - **Aerospace and Defense**: Orders were up 5% with nearly 8% sales growth, driven by commercial aerospace and Navy orders. Adjusted EBIT margins increased by 400 basis points, with EBIT dollars up 28% due to favorable pricing and mix [16][17] - **Utility Solutions Group**: Orders grew nearly 17%, with sales growth of 4%. Adjusted EBIT margins improved to 23%, up 290 basis points year-over-year [18] - **Test Business**: Orders surged by 75%, with sales up 9%. Margins improved to 12.4%, benefiting from volume leverage and price increases [19] Market Data and Key Metrics Changes - The aerospace and defense market is expected to continue growing despite macro uncertainties, with strong demand for commercial and defense aircraft [8] - The utility market is experiencing a favorable business cycle, driven by increased electricity demand and aging infrastructure [11] - The renewable energy market is recalibrating, but order activity is improving compared to the previous year [12] Company Strategy and Development Direction - The company completed a major acquisition of SMMP, rebranding it as ESCO Maritime Solutions, which is expected to enhance margins and growth [10] - The strategic planning process assessed end markets and strategies to achieve above-market growth [7] - The company remains focused on navigating macroeconomic challenges while leveraging its diverse business mix [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic challenges and highlighted strong operational performance [5][25] - The outlook for the aerospace and defense markets remains positive, with expectations for continued growth despite recent order moderation [8] - Management acknowledged potential impacts from tariffs but emphasized proactive measures to mitigate risks [34] Other Important Information - The company updated its earnings guidance for 2025, projecting adjusted earnings per share in the range of $5.85 to $6.15 [23] - The acquisition of ESCO Maritime Solutions is expected to contribute adjusted earnings per share of $0.20 to $0.30 for the remainder of the fiscal year [23] Q&A Session Summary Question: Update on the sale of VACCO - Management indicated ongoing interest in the sale process, with a decision expected by May [28] Question: Performance of the underlying business - Management noted improvements in overall business performance, with stabilization observed compared to previous years [30] Question: Clarification on tariff impacts - The estimated tariff impact of $2 million to $4 million is a net figure, factoring in pricing adjustments and operational changes [34] Question: Cash generation from Maritime Solutions - Management expects strong cash flow benefits from the Maritime acquisition, with ongoing assessments as integration progresses [42] Question: Thoughts on shipbuilding budgets and orders - Management expressed confidence in the shipbuilding budget and order flow, particularly for Navy programs [45][76] Question: Insights on commercial aircraft orders - Management noted a moderation in commercial aircraft orders but remains optimistic about future demand normalization [72] Question: Pro forma capital structure and leverage profile - Management indicated a leverage ratio of just over 2.2 at closing, with expectations to reduce it below 2 as debt is paid down [81]