ESCO Technologies Inc.

Good day, and thank you for standing by. Welcome to the first quarter 2024 ESCO Technologies earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that this conference is being recorded. On the call today, we have Brian Saylor, President and CEO, Chris Tucker, Senior Vice President and CFO. And now, I would like to hand the conference over to our first speaker today, Kate Lowry, Vice President of Investor Relations. Kate, you now have the floor.

Thank you. Statements made during this call, which are not strictly historical, are forward-looking statements within the meaning of the safe harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions and actual results 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, the risk factors referenced in the company's press release issued today, which will be included in an exhibit to the company's Form 8K to be filed. We undertake no duty to update or revise any forward-looking statements except as may be required by applicable laws or regulations. In addition, 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.com under the link Investor Relations. Now I'm going to turn the call over to Brian.

Thanks, Kate, and thanks, everyone, for joining today's call. We really appreciate you taking time to get an update from ESCO this afternoon. We had a good start to the year, but before I talk to you about that, I'd like to take a moment to thank one of our directors who has retired this week. We had meetings with our board over the last few days, and that represented the last time that Jim Stultz will participate as one of our directors. Jim served on our board for 25 years, and he really had a tremendous impact in that time. Jim came to the board with deep financial experience, and ESCO really benefited from that immensely over the years. He has a great mind for business, and most importantly, always operated with a high level of integrity. His contributions to ESCO are too numerous to recall here, but suffice it to say that we're all going to miss him. So we offer our sincere thanks to Jim for his many years of service and wish him all the best in retirement. With that, let me pivot over to some summary comments about the business. The results were a bit mixed between the different segments this quarter, but overall we delivered growth on the top line and the bottom line and saw another significant increase in backlog. Most importantly, we're still on track to deliver the full year commitments that were provided back in November. In the quarter, sales grew by 6% and adjusted EBIT was up 8%. a solid start to the year. Two of the three segments delivered double-digit sales and adjusted EBIT growth. As we've been saying for a while now, our key end markets continue to have favorable dynamics and the drivers are in place for us to continue delivering meaningful organic revenue growth and margin expansion. Before Chris gets into the financial details, I do want to offer some top-level commentary about each of the business segments. First up is aerospace and defense, where we had a strong start to the year. Sales were up double digits as we continued to see good momentum from the aircraft component and Navy businesses. Margins in the quarter increased nicely, so it was good to see the growth translate to the bottom line for these businesses. Even with the strong sales and EBIT performance, We were even more encouraged by the continued order strength. We booked significant Navy orders again, similar to the fourth quarter, and have now built up a nice backlog in the globe business after a few years of burning off Block 5 backlog. Additionally, we saw a big order growth from the commercial and defense aerospace businesses. It's nice to see the momentum continue for that part of our business as well. Next up is the utility group. which continued a string of strong quarterly performance. The breadth of our offering for the core utility markets continues to provide a solid foundation for continued growth. Offline products and services were a key driver of growth during the first quarter, with the Phoenix product line in particular delivering a great quarter. On the renewable side, we had a strong sales again, but the book to bill ratio was below 1.0 for the second quarter in a row. We've now seen two quarters of moderating orders after a tremendous run up through June of 2023. Our backlog has come down a bit, but we are starting to see some good activity in the pipeline and feel good about the full year outlook for this business. Finally, I'll touch on the test business where we did have a tough start to the year. Chris will go through the details in a minute, but we did see a sizable reduction in sales and EBIT during the first quarter. Overall, the business does still have good levels of backlog, and we see a good pipeline of coming order activity. So longer term, we still feel great about where the business is headed. In the short term, however, we are seeing project construction taking longer than planned, and it's reducing our ability to deliver revenue in the near term. The project delays are not really on our end, but are more on the construction side of the business where job sites are not ready for our product, and so the timing of revenue tends to get pushed to the right. This is mostly a U.S. phenomenon, and we are going to take some restructuring actions as we manage through a soft patch. Margin improvement has been a key theme for us in the test business over the past year, and with the disappointing first quarter, it's appropriate for us to take action to take some costs out of the business. This will help us out in the back half of FY24. We mentioned on the November call that we had just closed on the MPE acquisition. It's an exciting deal for ESCO and for ETS Lindgren, and I'm happy to report that the integration between ETS and MPE is off to a good start, and we remain excited about the long-term prospects with MPE as a margin-enhancing part of our test business. To summarize, I would say 2024 is off to a good start. Really good performance at two of the three business and quick action underway at the third business to drive our long-term profitability objectives. Our outlook for 2024 is intact and we're working hard to deliver another record year. Now I'll turn it over to Chris to go through the financial details of the first quarter.