ESCO Technologies : Q4 2022 Earnings Presentation

ESCO Technologies

Fourth Quarter FY 2022 Earnings Call

Vic Richey

Chairman, CEO & President

Chris Tucker

Sr. Vice President & CFO

Bryan Sayler

Utility Solutions Group President

November 17, 2022

1

Forward Looking Statement

Statements in this presentation and made during today's conference call regarding the timing and magnitude of recovery in the Company's end markets, the continuing impacts of COVID-19 on the Company's results, sales, Adjusted EBIT, Adjusted EBITDA, Adjusted EPS, cash flow, results of cost reduction efforts, margins, growth, the financial success of the Company, the strength of its end markets, the outlook for the A&D, Test and USG segments, the ability to increase shareholder value, the timing and success of acquisition efforts, internal investments in new products and solutions, the impacts of inflation, the long-term success of the Company, and any other

statements which are not strictly historical are "forward-looking" statements within the meaning of the safe harbor provisions of the federal securities laws.

Investors are cautioned that such statements are only predictions and speak only as of the date of this presentation, 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, 2021; 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 Executive Order 14042 and other vaccine mandates on our employees and businesses; 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.

During this call, the Company may discuss some non-GAAP financial measures in describing the Company's operating results. A reconciliation of these measures to their most comparable GAAP measures can be found in the press release issued today and found on the Company's website at www.escotechnologies.comunder the link: Investor Relations.

In addition, the financial results presented in this presentation include certain non-GAAP financial measures such as EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS. These non-GAAP financial measures are reconciled to their respective GAAP equivalents in the "Reconciliation of Non-GAAP Measures" presented below.

2

Q4 Results ($ in Millions, except per share amounts)

Entered Orders

258.5	244.7
Q4'21	Q4'22

	Sales
	256.5
205.5
Q4'21	Q4'22

Adjusted EBIT

	42.8
28.2	16.7%
13.7%
Q4'21	Q4'22

Adjusted EPS

	$1.21
$0.85
Q4'21	Q4'22

Entered Orders

• Book-to-Billof 0.95 - record quarterly revenue > Q4 orders
• Continuing strength in commercial aerospace & renewables
• PY included acquired backlog at Altanova & Phenix

Sales

• Sales increased 25% - Organic +19% and Acquisitions +6%
• Organic Growth driven by commercial and defense aerospace, Navy, space, utility spending, renewables, medical/industrial shielding & power filters

Adjusted EBIT

• Higher margins in A&D and Test, USG down slightly (23.7% vs 24.3%)

	Q4'21	Q4'22	Delta $	Delta %
Entered Orders	$258.5	$244.7	($13.8)	-5.3%
Sales	205.5	256.5	51.0	24.8%
Adjusted EBIT	28.2	42.8	14.6	51.6%
Adj EBIT Margin	13.7%	16.7%	+3.0 pts
Adjusted EBITDA	40.0	54.9	14.9	37.1%
Adj EBITDA Margin	19.5%	21.4%	+1.9 pts
EPS GAAP	$0.78	$1.19	$0.41	52.6%
EPS Adjusted	$0.85	$1.21	$0.36	42.4%

3

A&D - Q4 ($ in Millions)

Entered Orders

88.6	97.5
Q4'21	Q4'22

	Sales
	103.7
80.1
Q4'21	Q4'22

Adjusted EBIT

	23.6
	22.7%
14.7
18.3%
Q4'21	Q4'22

Entered Orders		Q4'21	Q4'22	Delta $	Delta %
• Primarily driven by commercial aerospace recovery
Entered Orders	$88.6	97.5	8.9	10.0%
•	OEM production ramps & increased MRO
Sales	Sales	80.1	103.7	23.6	29.5%
•	Aerospace - Commercial +50% & Defense +22%	Adjusted EBIT	14.7	23.6	8.9	60.9%
• Navy +28% and Space +20%	Adj EBIT Margin	18.3%	22.7%	+4.4 pts
•	Partially offset by Industrial - VACCO
Adjusted EBIT		9/30/21	9/30/22	Delta $	Delta %
• Driven by leverage on higher volume & price increases, partially offset	Backlog	$367.2	408.3	41.1	11.2%
	by wage and material cost inflation
• Strong recovery for PTI, Mayday & Westland

4

USG - Q4 ($ in Millions)

Entered Orders

96.0	87.8
Q4'21	Q4'22

	Sales
	83.5
61.1
Q4'21	Q4'22

Adjusted EBIT

	19.8
14.9	23.7%
24.3%
Q4'21	Q4'22

Entered Orders

• Decrease driven by timing of orders booked in Q4'21 related to acquired backlog - Altanova & Phenix
• NRG +$7.2 (+76%) - Wind & Solar strength

Sales

• Altanova & Phenix +$10.6M
• Doble Organic +$10.2M (+22%) - increased electric utility spending
• NRG +$1.6M (+16%) - strong demand across renewables product lines

Adjusted EBIT

• Driven by leverage on higher revenue and price increases, partially offset by wage and material cost inflation, unfavorable mix & higher commissions

	Q4'21	Q4'22	Delta $	Delta %
Entered Orders	$96.0	87.8	(8.2)	-8.6%
Sales	61.1	83.5	22.4	36.6%
Adjusted EBIT	14.9	19.8	4.9	33.2%
Adj EBIT Margin	24.3%	23.7%	-0.6 pts

	9/30/21	9/30/22	Delta $	Delta %
Backlog	$91.6	128.2	36.6	39.9%

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