ESCO Technologies (ESE) Q3 2024 earnings summary

Executive summary

• Q3 2024 saw sales rise 5% year-over-year to $260.8 million, with organic growth of 4% and 1% from the MPE acquisition; orders surged 46% to $311.7 million, driving a record backlog of nearly $890 million as of June 30, 2024.

• Adjusted EBIT rose 8% to $41.4 million, and Adjusted EPS grew 6.4% to $1.16; GAAP EPS was $1.13, up 5% year-over-year.

• Two new directors with utility industry experience joined the board, enhancing governance.

• Strategic review underway for the VACCO Space business, considering carve-out, sale, or partnerships due to margin pressures.

• Major acquisitions announced, including $550 million for Signature Management & Power, expected to add $175 million in annual revenue to Aerospace & Defense.

Financial highlights

• Orders grew 46% year-over-year, with all segments posting book-to-bill ratios above 1.1; Q3 book-to-bill was 1.20.

• Q3 net sales were $260.8 million, up 4.8% year-over-year; YTD sales reached $728.2 million, up 6.6%.

• Q3 Adjusted EBITDA was $55.2 million (21.2% margin), up 8% year-over-year.

• Operating cash flow YTD was $55.5 million, up from $29.2 million prior year.

• YTD Adjusted EPS was $2.72, up 11% year-over-year.

Outlook and guidance

• Full-year 2024 sales expected at $1.02–$1.03 billion, up 7–8%; Adjusted EPS guidance raised to $4.10–$4.20, representing 11–14% growth.

• Q4 Adjusted EPS guidance is $1.38–$1.48, up 10–18% year-over-year.

• Guidance excludes potential $5–$7 million EBIT impact from further VACCO Space business profitability erosion.

• Record backlog and strong order trends support expectations for continued double-digit earnings growth.

• Signature Management & Power acquisition expected to close in Q1 fiscal 2025, funded with cash and incremental debt.