ESCO Technologies(US:ESE)2019-08-10 04:23Financial Data and Key Metrics Changes - The company reported Q3 adjusted EPS of $0.81, exceeding the guidance range of $0.75 to $0.80 and the consensus estimate of $0.77, representing an 11% increase from Q3 2018's adjusted EPS of $0.73 [12] - Q3 adjusted EBITDA increased by 9% to $38 million, while year-to-date adjusted EBITDA rose by 15% to $100 million [13] - Year-to-date sales increased by 7%, led by a 17% increase in the Filtration segment [13] Business Line Data and Key Metrics Changes - The Filtration segment experienced a significant sales increase of 17% [13] - The company successfully lowered SG&A as a percentage of sales despite ongoing cost inflation, contributing to a 32% increase in year-over-year adjusted EPS through June 30 [14] Market Data and Key Metrics Changes - The company reported a $50 million increase in backlog since the start of the year, reflecting strong order growth across all operating segments [6][45] - The submarine business showed robust order growth, particularly with new contracts related to the Virginia Class and Lot 5 [42] Company Strategy and Development Direction - The company is focused on executing its M&A strategy and supporting future growth both organically and through acquisitions, while maintaining a focus on return on invested capital (ROIC) and increasing shareholder value [17] - The integration of the recently acquired Globe is progressing smoothly, and the company is actively seeking additional acquisitions to support organic growth [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering commitments for the remainder of the year, citing strong year-to-date performance [6] - The company anticipates a strong finish for the year, with no significant areas of softness in order trends [45] Other Important Information - The company is experiencing a timing issue with cash generation related to navy programs, but expects a significant improvement in Q4 [63] - Management indicated that the current market for acquisitions is somewhat frothy, but they are actively pursuing opportunities [54] Q&A Session Summary Question: Were there any push outs in the test segment this quarter? - Management acknowledged a slight push out primarily related to site preparation in China, estimating a revenue impact of about $3 million [23][25] Question: Can you quantify the pushed out revenue? - Management estimated the pushed out revenue to be around $3 million, with an EBIT impact of approximately $400,000 to $500,000 moving to Q4 [25] Question: What are the growth opportunities for the new products? - Management indicated that while it is hard to quantify, they expect significant sales growth from new products next year [27] Question: Can you comment on order trends exiting the quarter? - Management noted that order dollars remain robust, with no softness observed, and anticipate solid dollar growth in orders [40][41] Question: What is the state of your appetite for M&A? - Management confirmed they are actively pursuing M&A opportunities and are seeing good prospects in the market [36] Question: What is the expected accretion from the recent acquisition? - Management indicated that the recent acquisition is expected to provide positive accretion, with meaningful growth prospects [56] Question: How would you grade your cash generation performance this quarter? - Management graded their cash generation performance as a C or C-, citing timing issues but expecting significant improvement in Q4 [62]