ESCO Technologies (ESE) Q3 2024 earnings summary

Executive summary

• Achieved record backlog of $889 million as of June 30, 2024, driven by a 46% surge in orders and strong growth across all business segments.

• Q3 2024 sales rose 5% year-over-year to $260.8 million, with organic growth of 4% and 1% from the MPE acquisition.

• Adjusted EPS increased 6% to $1.16, and GAAP EPS rose 5% to $1.13 in Q3 2024.

• Strategic review underway for the VACCO Space business, which has $55 million in sales, considering carve-out, sale, or partnerships.

• Added two new directors with utility industry experience to strengthen governance.

Financial highlights

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

• Q3 net earnings were $29.2 million, up from $27.9 million in Q3 2023.

• YTD Q3 2024 net sales reached $728.2 million, up 6.6% year-over-year.

• Adjusted EBITDA margin expanded by 60 basis points year-over-year to 21.2%.

• Net cash from operations YTD was $55.5 million, up from $29.2 million prior year.

Outlook and guidance

• 2024 sales growth outlook of 7%-8% to $1.02–$1.03 billion, with adjusted EPS guidance of $4.10–$4.20, representing 11–14% growth year-over-year.

• Q4 2024 Adjusted EPS expected in the range of $1.38–$1.48, up 10–18% year-over-year.

• Guidance excludes potential $5–$7 million EBIT downside from VACCO Space business profitability challenges.

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

• Management expects strong liquidity and capital resources to support ongoing operations and acquisitions.