ESCO Technologies(US:ESE)2022-08-09 00:50Financial 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]