ESCO Technologies(US:ESE)2025-11-20 23:00Financial 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]