ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today
reported its operating results for the first quarter ended December
31, 2022 (Q1 2023).
Operating Highlights
- Q1 2023 GAAP EPS increased 30 percent to $0.57 per share
compared to $0.44 per share in Q1 2022. Q1 2023 Adjusted EPS also
increased 30 percent to $0.60 per share compared to $0.46 per share
in Q1 2022.
- Q1 2023 Sales increased $28.5 million (16.1 percent) to $205.5
million compared to $177.0 million in Q1 2022.
- Q1 2023 Entered Orders increased $4.5 million (2 percent) over
the prior year period to $228.9 million (book-to-bill of 1.11x),
resulting in record backlog of $718 million.
- Net cash used by operating activities was $9 million in Q1
2023, as cash flow was negatively impacted by higher inventory
related to increased backlog, lower accrued expenses related to the
timing of payments in the quarter, and the effect of deferred
taxes.
- Net debt (total borrowings less cash on hand) was $80 million,
resulting in a 0.72x leverage ratio and $610 million in liquidity
at December 31, 2022.
Bryan Sayler, Chief Executive Officer and President, commented,
“Our fiscal year got off to a strong start with double digit
revenue growth and improved operating margins across all three of
our business segments. We saw broad strength across our
end-markets, highlighted by 30 percent growth in commercial
aerospace and 45 percent growth in renewables revenue compared to
the prior year. While we continue to feel some pressures related to
supply chain performance and labor shortages, our teams across the
Company are navigating those challenges well and have executed at a
high level.
“We had another solid quarter for entered orders, driven by
strength across our commercial aerospace, Navy, electric utility,
and renewables end-markets. With $229 million in orders and a
book-to-bill of 1.11x, our record ending backlog of $718 million
gives us confidence as we work toward delivering the guidance for
2023 that was communicated in November.”
Segment Performance
Aerospace & Defense (A&D)
- Sales increased $12.8 million (18 percent) to $83.0 million in
Q1 2023 from $70.2 million in Q1 2022. Revenues were strong across
all end-markets, led by commercial aerospace sales which increased
$6.9 million (30 percent) to $30.0 million in the
quarter. In addition, sales to defense aerospace, Navy,
and space markets also achieved double digit growth compared to the
prior year Q1.
- Q1 2023 EBIT increased $2.5 million to $12.5 million from $10.0
million in Q1 2022. Adjusted EBIT also increased $2.5 million in Q1
2023 to $12.7 million (15.3 percent margin) from $10.2 million
(14.4 percent margin) in Q1 2022.
- Entered Orders increased $7 million (8 percent) to $97 million
in Q1 2023 compared to $90 million in Q1 2022. The
increase in orders was driven by Columbia and Virginia Class
funding and a strong quarter for Navy spares. The orders strength
in the quarter resulted in a segment book-to-bill of 1.17x and
record ending backlog of $423 million.
Utility Solutions Group (USG)
- Sales increased $7.5 million (12 percent) to $71.0 million in
Q1 2023 from $63.5 million in Q1 2022. Doble’s sales increased by
$3.0 million (6 percent) driven by a strong quarter for protection
testing, both instruments and PowerBase™ software. NRG
sales increased $4.5 million (45 percent) on continued strength in
the renewables end-market.
- EBIT increased $2.7 million in Q1 2023 to $16.1 million from
$13.4 million in Q1 2022. There were no adjustments to Q1 2023 EBIT
of $16.1 million (22.7 percent margin), which increased $2.3
million from Q1 2022 Adjusted EBIT of $13.8 million (21.8 percent
margin).
- Entered Orders increased $14 million (21 percent) to $80
million in Q1 2023. The orders growth was primarily driven by a $10
million (18 percent) increase at Doble related to strong calendar
year-end utility spending. Continuing strength in protection
testing (hardware and software) and condition monitoring and
services opportunities driven by Altanova in EMEA contributed to
the orders growth in the quarter. NRG orders increased by $4
million (35 percent) related to continuing strength in wind and
solar. USG’s book-to-bill of 1.13x in the quarter resulted in
ending backlog of $137 million.
Test
- Sales increased $8.2 million (19 percent) to $51.5 million in
Q1 2023 from $43.3 million in Q1 2022, primarily due to increased
test and measurement projects in the U.S and Europe and domestic
medical shielding.
- EBIT increased $1.4 million in Q1 2023 to $5.4 million (10.5
percent margin) from $4.0 million (9.2 percent margin) in Q1
2022. There were no adjustments in either year for the
Test segment.
- Entered Orders decreased $16.4 million to $51.5 million in Q1
2023 compared to $67.9 million in Q1 2022. The decrease was due to
large orders related to power filters and test and measurement
projects in the U.S. and China in the prior year quarter. Test’s
book-to-bill of 1.0x resulted in flat ending backlog of $159
million compared to the prior year end.
Share Repurchase ProgramDuring Q1 2023, the
Company repurchased approximately 58,000 shares for $5.1 million,
of which $4.1 million was paid in the quarter and the remainder
settled in January, 2023.
Dividend PaymentThe next
quarterly cash dividend of $0.08 per share will be paid on April
18, 2023 to stockholders of record on April 3, 2023.
Business Outlook –
2023 Management’s expectations
for 2023 remain consistent with the details outlined in our
November 17, 2022, release. Our 2023 guidance represents
mid-single digit revenue growth driving Adjusted EBIT and Adjusted
EBITDA margin expansion, despite continuing inflationary pressures
and higher interest rates.
The strength of our Q1 results gives us added confidence in our
2023 forecast and we are narrowing our full year guidance to $3.50
to $3.60. Consistent with prior years, revenues and Adjusted EPS
are expected to grow sequentially throughout the year. Our
expectation is for Q2 Adjusted EPS to be in the range of $0.68 to
$0.74 per share.
Acquisition Update On February 1, 2023, the
Company acquired CMT Materials, LLC and its affiliate Engineered
Syntactic Systems, LLC (CMT). CMT, based in Attleboro,
Massachusetts, is a leading supplier of syntactic materials for
buoyancy and specialty applications. They are experts in designing
and manufacturing custom syntactic foam components and systems,
which are utilized in industrial, oceanographic, military, and
naval applications. CMT brings
proprietary technology and capabilities to our A&D business and
will strengthen our offerings on underwater platforms for the Navy.
The business has annualized sales of approximately $15 million and
will become part of Globe Composite Solutions within our A&D
segment.
Conference CallThe Company
will host a conference call today, February 8, at 4:00 p.m. Central
Time, to discuss the Company’s Q1 2023 results. A live audio
webcast and an accompanying slide presentation will be available on
ESCO’s investor website at https://investor.escotechnologies.com.
For those unable to participate, a webcast replay will be available
after the call on ESCO’s investor website.
Forward-Looking
StatementsStatements in this press release regarding
Management’s expectations for fiscal 2023, the effects of
continuing inflationary pressures, higher interest rates, pressures
related to supply chain performance and labor shortages, our
guidance for 2023 including revenues, revenue growth, Adjusted EPS,
Adjusted EBIT and Adjusted EBITDA margin; the effects of
acquisitions, and any other statements which are not strictly
historical, are “forward-looking statements within the meaning of
the safe harbor provisions of the U.S. securities laws.
Investors are cautioned that such statements are only
predictions and speak only as of the date of this release, and the
Company undertakes no duty to update them except as may be required
by applicable laws or regulations. The Company’s actual results in
the future may differ materially from those projected in the
forward-looking statements due to risks and uncertainties that
exist in the Company’s operations and business environment
including but not limited to those described in Item 1A, “Risk
Factors”, of the Company’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2022; the availability and
acceptance of viable COVID-19 vaccines by enough of the U.S. and
world’s population to curtail the pandemic; the continuing impact
of the COVID-19 pandemic and the effects of known or unknown
COVID-19 variants including labor shortages, facility closures,
shelter in place policies or quarantines, material shortages,
transportation delays, termination or delays of Company contracts,
and the inability of our suppliers or customers to perform; the
impacts of natural disasters on the Company’s operations and those
of the Company’s customers and suppliers; the timing and content of
future contract awards or customer orders; the appropriation,
allocation and availability of Government funds; the termination
for convenience of Government and other customer contracts or
orders; weakening of economic conditions in served markets; the
success of the Company’s competitors; changes in customer demands
or customer insolvencies; competition; intellectual property
rights; technical difficulties; the success of the Company’s
acquisition efforts; delivery delays or defaults by customers;
performance issues with key customers, suppliers and
subcontractors; changes in the costs and availability of certain
raw materials; labor disputes; changes in U.S. tax laws and
regulations; other changes in laws and regulations including but
not limited to changes in accounting standards and foreign
taxation; changes in interest rates; costs relating to
environmental matters arising from current or former facilities;
uncertainty regarding the ultimate resolution of current disputes,
claims, litigation or arbitration; and the integration of recently
acquired businesses.
Non-GAAP Financial MeasuresThe financial
measures EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted
EPS are presented in this press release. The Company defines “EBIT”
as earnings before interest and taxes, “EBITDA” as earnings before
interest, taxes, depreciation and amortization, “Adjusted EBIT” and
“Adjusted EBITDA” as excluding the net impact of the items
described in the attached Reconciliation of Non-GAAP Financial
Measures, and “Adjusted EPS” as GAAP earnings per share (EPS)
excluding the net impact of the items described and reconciled in
the attached Reconciliation of Non-GAAP Financial Measures.
EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS
are not recognized in accordance with U.S. generally accepted
accounting principles (GAAP). However, Management believes EBIT,
Adjusted EBIT, EBITDA and Adjusted EBITDA are useful in assessing
the operational profitability of the Company’s business segments
because they exclude interest, taxes, depreciation and
amortization, which are generally accounted for across the entire
Company on a consolidated basis. EBIT and EBITDA are also measures
used by Management in determining resource allocations within the
Company as well as incentive compensation. The presentation of
EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS
provides important supplemental information to investors by
facilitating comparisons with other companies, many of which use
similar non-GAAP financial measures to supplement their GAAP
results. The use of non-GAAP financial measures is not intended to
replace any measures of performance determined in accordance with
GAAP.
ESCO is a global provider of highly engineered products and
solutions serving diverse end-markets. It manufactures filtration
and fluid control products for the aviation, Navy, space, and
process markets worldwide and composite-based products and
solutions for Navy, defense, and industrial customers. ESCO is the
industry leader in RF shielding and EMC test products; and provides
diagnostic instruments, software and services to industrial power
users and the electric utility and renewable energy industries.
Headquartered in St. Louis, Missouri, ESCO and its subsidiaries
have offices and manufacturing facilities worldwide. For more
information on ESCO and its subsidiaries, visit the Company’s
website at www.escotechnologies.com.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES |
|
Condensed Consolidated Statements of Operations (Unaudited) |
|
(Dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
Three MonthsEndedDecember 31,2022 |
|
Three MonthsEndedDecember 31,2021 |
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
205,501 |
|
177,010 |
|
Cost and
Expenses: |
|
|
|
|
|
|
Cost of sales |
|
126,383 |
|
108,305 |
|
|
Selling, general
and administrative expenses |
|
51,302 |
|
46,635 |
|
|
Amortization of
intangible assets |
|
6,861 |
|
6,467 |
|
|
Interest
expense |
|
1,658 |
|
733 |
|
|
Other expenses,
net |
|
398 |
|
33 |
|
|
|
Total costs and
expenses |
|
186,602 |
|
162,173 |
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
|
18,899 |
|
14,837 |
|
Income tax
expense |
|
4,172 |
|
3,313 |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ |
14,727 |
|
11,524 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted -
GAAP |
$ |
0.57 |
|
0.44 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted - As
Adjusted Basis |
$ |
0.60 |
(1 |
) |
0.46 |
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Diluted average
common shares O/S: |
|
25,943 |
|
26,142 |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Q1 2023 Adjusted EPS
excludes $0.03 per share of after-tax charges associated with
executive management transition costs at Corporate and
restructuring charges within the A&D segment. |
|
|
|
|
|
|
|
|
|
(2 |
) |
Q1 2022 Adjusted EPS
excludes $0.02 per share of after-tax charges associated with the
Altanova & NEco acquisition inventory step-up charges and
Corporate acquisition related costs. |
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES |
|
Condensed Business Segment Information (Unaudited) |
|
(Dollars in thousands) |
|
|
|
|
|
|
|
GAAP |
|
As Adjusted |
|
|
|
|
|
Q1 2023 |
|
Q1 2022 |
|
Q1 2023 |
|
Q1 2022 |
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
Aerospace &
Defense |
$ |
82,983 |
|
|
70,244 |
|
|
82,983 |
|
|
70,244 |
|
|
|
USG |
|
71,045 |
|
|
63,485 |
|
|
71,045 |
|
|
63,485 |
|
|
|
Test |
|
51,473 |
|
|
43,281 |
|
|
51,473 |
|
|
43,281 |
|
|
|
|
Totals |
$ |
205,501 |
|
|
177,010 |
|
|
205,501 |
|
|
177,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT |
|
|
|
|
|
|
|
|
|
|
|
Aerospace &
Defense |
$ |
12,536 |
|
|
9,955 |
|
|
12,735 |
|
|
10,150 |
|
|
|
USG |
|
16,131 |
|
|
13,391 |
|
|
16,131 |
|
|
13,841 |
|
|
|
Test |
|
5,411 |
|
|
3,965 |
|
|
5,411 |
|
|
3,965 |
|
|
|
Corporate |
|
(13,521 |
) |
|
(11,741 |
) |
|
(12,728 |
) |
|
(11,561 |
) |
|
|
|
Consolidated EBIT |
|
20,557 |
|
|
15,570 |
|
|
21,549 |
|
|
16,395 |
|
|
|
|
Less: Interest expense |
|
(1,658 |
) |
|
(733 |
) |
|
(1,658 |
) |
|
(733 |
) |
|
|
|
Less: Income tax expense |
|
(4,172 |
) |
|
(3,313 |
) |
|
(4,400 |
) |
|
(3,503 |
) |
|
|
|
Net earnings |
$ |
14,727 |
|
|
11,524 |
|
|
15,491 |
|
|
12,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1: Adjusted net
earnings were $15.5 million in Q1 2023 which excludes $0.03 per
share of after-tax charges associated with executive management
transition costs at Corporate and restructuring charges within the
A&D segment. |
|
|
|
|
|
|
|
|
|
|
|
|
Note 2: Adjusted net
earnings were $12.2 million in Q1 2022 which excludes $0.02 per
share of after-tax charges associated with the Altanova & NEco
acquisition inventory step-up charges and Corporate acquisition
related costs. |
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Reconciliation to Net earnings: |
|
|
|
|
Q1 2023 |
|
Q1 2022 |
|
|
|
|
|
Q1 2023 |
|
Q1 2022 |
|
- As Adj |
|
- As Adj |
|
Consolidated EBITDA |
$ |
32,924 |
|
|
27,742 |
|
|
33,916 |
|
|
28,567 |
|
|
Less:
Depr & Amort |
|
(12,367 |
) |
|
(12,172 |
) |
|
(12,367 |
) |
|
(12,172 |
) |
|
Consolidated EBIT |
|
20,557 |
|
|
15,570 |
|
|
21,549 |
|
|
16,395 |
|
|
Less:
Interest expense |
|
(1,658 |
) |
|
(733 |
) |
|
(1,658 |
) |
|
(733 |
) |
|
Less:
Income tax expense |
|
(4,172 |
) |
|
(3,313 |
) |
|
(4,400 |
) |
|
(3,503 |
) |
|
Net
earnings |
$ |
14,727 |
|
|
11,524 |
|
|
15,491 |
|
|
12,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES |
Condensed Consolidated Balance Sheets (Unaudited) |
(Dollars in thousands) |
|
|
|
|
|
December 31,2022 |
|
September 30,2022 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
51,922 |
|
97,724 |
|
Accounts
receivable, net |
|
159,658 |
|
164,645 |
|
Contract
assets |
|
122,518 |
|
125,154 |
|
Inventories |
|
181,743 |
|
162,403 |
|
Other current
assets |
|
18,930 |
|
22,696 |
|
|
Total current assets |
|
534,771 |
|
572,622 |
|
Property, plant
and equipment, net |
|
155,722 |
|
155,973 |
|
Intangible assets,
net |
|
394,824 |
|
394,464 |
|
Goodwill |
|
498,383 |
|
492,709 |
|
Operating lease
assets |
|
42,156 |
|
29,150 |
|
Other assets |
|
10,133 |
|
9,538 |
|
|
|
$ |
1,635,989 |
|
1,654,456 |
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
|
|
Current maturities
of long-term debt |
$ |
20,000 |
|
20,000 |
|
Accounts
payable |
|
73,770 |
|
78,746 |
|
Contract
liabilities |
|
121,220 |
|
125,009 |
|
Other current
liabilities |
|
77,770 |
|
94,374 |
|
|
Total current liabilities |
|
292,760 |
|
318,129 |
|
Deferred tax
liabilities |
|
81,213 |
|
82,023 |
|
Non-current
operating lease liabilities |
|
38,346 |
|
24,853 |
|
Other
liabilities |
|
45,272 |
|
48,294 |
|
Long-term
debt |
|
112,000 |
|
133,000 |
|
Shareholders'
equity |
|
1,066,398 |
|
1,048,157 |
|
|
|
$ |
1,635,989 |
|
1,654,456 |
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES |
Consolidated Statements of Cash Flows (Unaudited) |
(Dollars in thousands) |
|
|
|
|
|
Quarter Ended December 31, 2022 |
|
Quarter Ended December 31, 2021 |
Cash flows from operating
activities: |
|
|
|
|
Net earnings |
$ |
14,727 |
|
|
11,524 |
|
Adjustments to reconcile net
earnings to net cash |
|
|
|
|
provided by operating
activities: |
|
|
|
|
Depreciation and
amortization |
|
12,367 |
|
|
12,172 |
|
Stock compensation expense |
|
1,860 |
|
|
1,685 |
|
Changes in assets and
liabilities |
|
(36,920 |
) |
|
(30,837 |
) |
Effect of deferred taxes |
|
(1,042 |
) |
|
7,402 |
|
Net cash (used) provided by
operating activities |
|
(9,008 |
) |
|
1,946 |
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
Acquisition of business, net of
cash acquired |
|
- |
|
|
(15,592 |
) |
Capital expenditures |
|
(4,791 |
) |
|
(14,133 |
) |
Additions to capitalized
software |
|
(2,795 |
) |
|
(1,958 |
) |
Net cash used by investing
activities |
|
(7,586 |
) |
|
(31,683 |
) |
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
Proceeds from long-term debt |
|
17,000 |
|
|
74,000 |
|
Principal payments on long-term
debt and short-term borrowings |
|
(38,000 |
) |
|
(30,000 |
) |
Dividends paid |
|
(2,067 |
) |
|
(2,079 |
) |
Purchases of common stock into
treasury |
|
(4,147 |
) |
|
(9,997 |
) |
Other |
|
(2,412 |
) |
|
(2,737 |
) |
Net cash (used) provided by
financing activities |
|
(29,626 |
) |
|
29,187 |
|
|
|
|
|
|
Effect of exchange rate changes
on cash and cash equivalents |
|
418 |
|
|
33 |
|
|
|
|
|
|
Net decrease in cash and cash
equivalents |
|
(45,802 |
) |
|
(517 |
) |
Cash and cash equivalents,
beginning of period |
|
97,724 |
|
|
56,232 |
|
Cash and cash equivalents, end of
period |
$ |
51,922 |
|
|
55,715 |
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES |
Other Selected Financial Data (Unaudited) |
(Dollars in thousands) |
|
Backlog And Entered Orders - Q1 2023 |
|
Aerospace & Defense |
|
USG |
|
Test |
|
Total |
|
Beginning Backlog
- 10/1/22 |
$ |
408,269 |
|
|
128,156 |
|
|
158,597 |
|
|
695,022 |
|
|
Entered
Orders |
|
97,265 |
|
|
80,175 |
|
|
51,460 |
|
|
228,900 |
|
|
Sales |
|
|
(82,983 |
) |
|
(71,045 |
) |
|
(51,473 |
) |
|
(205,501 |
) |
|
Ending Backlog -
12/31/22 |
$ |
422,551 |
|
|
137,286 |
|
|
158,584 |
|
|
718,421 |
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Financial Measures (Unaudited) |
|
|
|
|
|
EPS – Adjusted
Basis Reconciliation – Q1 2023 |
|
|
|
|
EPS – GAAP Basis – Q1
2023 |
$ |
0.57 |
|
|
Adjustments (defined
below) |
|
0.03 |
|
|
EPS – As Adjusted Basis – Q1
2023 |
$ |
0.60 |
|
|
|
|
|
|
|
Adjustments exclude $0.03 per
share consisting of executive management transition |
|
|
|
|
costs at Corporate and
restructuring charges within the A&D segment. |
|
|
|
|
The $0.03 of EPS adjustments
per share consists of $992K of pre-tax charges |
|
|
|
|
offset by $228K of tax benefit
for net impact of $764K. |
|
|
|
|
|
|
|
|
EPS – Adjusted
Basis Reconciliation – Q1 2022 |
|
|
|
|
EPS – GAAP Basis – Q1
2022 |
$ |
0.44 |
|
|
Adjustments (defined
below) |
|
0.02 |
|
|
EPS – As Adjusted Basis – Q1
2022 |
$ |
0.46 |
|
|
|
|
|
|
|
Adjustments
exclude $0.02 per share consisting of Altanova & Neco
acquisition inventory |
|
|
step-up charges and Corporate
related acquisition costs in the first quarter of 2022. |
|
|
|
|
The $0.02 of EPS adjustments
per share consists of $825K of pre-tax charges |
|
|
|
|
offset by $190K of tax benefit
for net impact of $635K. |
|
|
|
SOURCE ESCO Technologies Inc.Kate Lowrey, Vice President of
Investor Relations, (314) 213-7277
Grafico Azioni ESCO Technologies (NYSE:ESE)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni ESCO Technologies (NYSE:ESE)
Storico
Da Giu 2023 a Giu 2024