Good day, and thank you for standing by. Welcome to the third quarter 2023 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 one one on your telephone. You will then hear an automated message that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is recorded. On the call today, we have Bryan Sayler, President and CEO, Chris Tucker, Senior Vice President and CFO. Now, I would like to turn the conference over to our first speaker today, Kate Lowrey, Vice President of Investor Relations. Kate, you may 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, 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 as an exhibit to the company's Form 8-K 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 the 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'll turn the call over to Bryan. Thanks, Kate. Thanks, everyone, for joining today's call. We really appreciate you taking some time to get an update from ESCO this afternoon. Our year has gone really well through the first three quarters. I'm excited to talk to all of you about that. Before I do, I'd like to take a moment to thank all of our employees. ESCO has racked up a number of strong quarters with impressive top and bottom-line growth. Our industries are growing. It takes a dedicated and capable team to truly deliver on these positive industry trends. It hasn't been easy over the last few years. Our teams continue to show real commitment and dedication. Chris and I had a chance in July to visit most of our operating locations. It's always energizing to see the teams in action and to witness firsthand the success that they're achieving. The teams across the world are very engaged. They're winning, so it's fun to be in a strong culture like that. Again, I just want to say thanks to everyone at ESCO for their tremendous effort and support. With that, let me pivot over to the quarterly results. We had a really great third quarter with strong sales and earnings growth. Sales increased nearly 14% in the quarter, with positive trends continuing in most parts of our business. On top of that, we had nice margin expansion, which ultimately led to adjusted earnings per share growth of over 20%. We are very happy with this performance and excited that we have continued to exceed expectations through the first three quarters of FY23. We have over $700 million of backlog now, so the outlook going forward remains positive. We did see orders drop compared to the prior third quarter of last year. Chris will take us through those details in a few minutes, but that's mostly an issue of timing and due to the lumpy nature of multiyear orders for certain parts of our business. Year to date, our book-to-bill ratio is over 100%, and we're optimistic about our growth outlook as we look beyond 2023. Before Chris gets into the financial details, I did want to offer some top-level commentary about each of our business segments. Starting with A&D, where we had a solid quarter. Sales were up double-digit as we continue to see good momentum in the commercial and defense aerospace businesses. The aircraft components business certainly led to growth this quarter for A&D. This continues to be the part of our business with the most challenges from a supply chain perspective. This continues to constrain the potential growth and contributes to some past due backlog. The teams continue to manage this aggressively, and we're delivering on the growth, but the challenges industry-wide persists. Orders for aerospace and defense were down in the quarter, again, that's mostly a timing issue with some large multiyear orders booked in Q3 of the prior year. The outlook here remains solid, with Navy, commercial, and military aerospace all expected to drive future growth. Next up is the utility group, which had a really great quarter. Revenue growth was up over 30% in the quarter. Adjusted EBIT dollars grew by more than 50%. This business has seen a nice burst of growth in 2023. The core utility customer base continues to invest in their infrastructure. We're seeing broad growth across all of our product lines, with protection testing, condition monitoring, and offline testing all delivering good growth. On the renewables side, growth continues to exceed even our expectations. 2023 will be a phenomenal year for NRG. The Inflation Reduction Act has provided long-term visibility for renewable infrastructure build-outs. Our USG teams at both Doble and NRG are beginning to see benefits from that activity. On the supply chain side, we've seen a big improvement at USG. While our backlogs are elevated, very little of that is past due. I'll touch on the test business, where we saw a sales decline again in the 3rd quarter, which was in line with what we described during our last conference call. We've seen flattish results domestically, as growth paused over last year's strength from power line filters and test and measurement projects. We've seen continued weakness in China, where business was significantly impacted as the economy opened back up after the pandemic. We have not seen business pick up much since that time. The team here continues to do a great job, and they increased our EBIT dollars in the 3rd quarter despite the lower sales volume. This is good performance and positions us well to capture additional growth as these markets start to recover in the future. To summarize, I would say it's been a great 9 months to start 2023. It puts us on a good path overall as we drive to deliver on our targets for the full year, which we are increasing again this quarter. Now I'll turn it over to Chris to give some more financial highlights on the third quarter. Thanks, Bryan. Everyone can follow along with the chart presentation. We'll start on page three, where we have the overall financial highlights. As you can see, we had another great quarter, with sales up over 13%, adjusted EBIT up over 24%, and adjusted earnings per share up over 22%. We will go through the segment details in a minute, but on the sales side, the Utility Solutions Group delivered exceptional sales growth of over 30%, and Aerospace & Defense was also strong at 12% growth. Orders were down in the quarter. You can see they dropped by 16% to $213 million. Again, I will cover this in the segment details, but we had some tough comparisons with large items booked last year. The good news is that backlog still stands at over $700 million as of June 30th. Moving on to Chart 4, we'll start to get into the segment details, beginning with Aerospace & Defense. Starting with orders, you can see the orders in the third quarter were down over 25%. We had some large orders in the space business last year, which are the key driver to the decline. On the sales side, we are up 12%, with organic sales up 8% and the CMT acquisition adding 4 points of growth. The commercial and military aerospace businesses were the key drivers to the overall growth. We continue to see good momentum there. Adjusted EBIT was up 4.5% in dollar terms, margins were down 150 basis points, as improvements from the commercial and military aerospace businesses was offset by margin erosion on some space development contracts. Next is chart 5 in the Utility Solutions Group. Here, the performance was exceptional. Orders were up 15%, with the renewables business leading that growth. Sales were up nearly 34%, as you can see on the chart, the Doble services, offline testing, protection testing, and condition monitoring product lines all contributed. On the renewables side, with NRG, we once again saw explosive growth, 45% in the quarter. The top-line performance for this group overall converted to a nice margin expansion, with adjusted EBIT up 330 basis points. This improvement was driven by leverage on the higher sales growth and favorable impacts from price increases, which more than offset inflationary headwinds. Next is chart 6, where we have the test business. Bit of a mixed story here. You can see orders were down nearly 35%. A big drop as last year we had significant order activity for test and measurement orders, which did not repeat this year. We have also seen continuing weakness in China, as the overall pace of business has been slow since the reopening from COVID earlier in the fiscal year. Sales were down 7%, the good news here was margins, as EBIT dollars increased 3.5%, even on the lower sales. This is a margin improvement of 150 basis points, driven by cost reduction efforts as well as price increases. Next is chart 7 and our cash flow highlights. We did see operating cash flow improvement in the third quarter compared to our first 2 quarters, but we are still running behind last year's operating cash flow amount of $42 million. Working capital increases from accounts receivable, inventory, and contract assets have been a cash headwind, and we've also seen sizable negative cash impact from higher taxes paid and interest paid. Capital expenditures are down approximately $9 million year to date. You'll recall that last year we had a building purchase at NRG, and that's the main driver of this year's decrease. Acquisition spending is relatively flat, with NEco acquired in fiscal 2022 and CMT acquired in fiscal 2023. Lastly is share repurchase, where we completed just over $12 million in buybacks this year, compared to approximately $20 million through the first nine months last year. The last chart is our guidance chart. You can see here that we are projecting adjusted earnings per share growth in the range of 13%-15%. We put our initial guidance out in November of last year of $3.45-$3.60 per share, and the midpoint of our guidance has gone up each quarter since then. We are now looking at a range of $3.62-$3.68. Good double-digit growth for the year, coming, coming after 24% adjusted earnings per share that we delivered in fiscal 2022. This represents two strong years for ESCO, we are excited not only about the strong years in 2022 and 2023, but what comes next in 2024 and beyond. That concludes the financial update, and now I'll turn it back over to Bryan. Thanks, Chris. Since I touched on a number of my thoughts earlier, I will just offer a few more comments before we go to Q&A. You saw the numbers from Chris, obviously, a great 2023 with very strong financial performance. The company is operating at a high level, and we continue to have confidence as we look to the future. We serve very strong end markets with well-established customers. We have great teams here at corporate and out at the businesses around the world. This forms a powerful combination, and we're excited about what's next for ESCO. Before Q&A, I did wanna mention that we recently published our ESG report covering our 2022 activities. You can find this on the corporate citizenship section of our website. I would encourage you to go out and take a look at the report. It's got a lot of good information on ESCO's ESG program overall. It also has a nice profile of our NRG business and their capabilities around helping to enable renewable energy. The team here put a lot of work into the report. We hope that you find it useful. With that, we can start the Q&A. Thank you. We will now conduct the question and answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by as we compile the Q&A roster. Our first question comes from Jonathan Tanwantang at CJS Securities. Please go ahead. Hi, good afternoon. It's Pete Lucas for Jon. Can you talk a bit more about the Virginia-class timing shift, and does that impact when you expect to generate earnings and revenue from those orders? Sure. What's happening right now on Virginia class is there's a multiyear procurement process that's in place. We do expect that that's gonna take a few more months. We, we would expect to get some Block V expansion orders in the near term, probably within the fourth quarter. Then we expect to see a pretty significant tranche of as many as 12 Virginia class submarines at some time, you know, perhaps early next year. We are in a really good position on that project, we don't think it's gonna have any impact on our ability to generate earnings. We might see a modest expansion, based upon some additional aspects of the submarines that they're gonna be adding going forward. Very helpful. Thanks. Then jumping to the supply chain issues, can you give us a little more color on those? Is it your internal throughput, your suppliers, or parallel downstream partners? Where are you seeing the biggest issues there? Well, we're really talking about the Aerospace & Defense business here at ESCO. The rest of our business seems to have largely recovered. Within the Aerospace & Defense industry, there's an industry-wide challenge right now with regard to supply chain. The biggest issue is that lower-tier suppliers are struggling, and that has a cascade effect. We're not able to replace suppliers very easily in this industry, and so that kind of puts us in a position where we have to, you know, wait for a product rather than swapping them out. You know, so over in the utility segment, for example, you know, we were able to redesign, you know, circuit boards to be able to swap out components for a more available, you know, type of memory chip or something like that. We don't have that luxury over in Aerospace & Defense. The good, you know, the good news is we are making good progress, and we are driving the growth, but, you know, this is really an industry-wide challenge that many companies are facing, and this is a big topic of discussion at the Paris Air Show back in June. You know, I, I would say the industry consensus is, it's gonna take, you know, several more quarters to really unwind the challenge. Last one for me, just an update on the M&A environment, what it looks like relatively. Is it more or less attractive compared to the past couple of quarters? If acquisitions aren't out there, kind of talk about the priority in terms of capital allocation. Sure. Yeah, so the good news is it's improving. We're seeing more opportunities presently than we have for the last couple of quarters. You know, based on our, you know, market research and intelligence, we are seeing more opportunities that will be coming to market later this year. We do have a couple of good programs that we're engaged on, but I don't think we're close to getting anything done. We certainly don't want to comment on any details, but we feel pretty good about our opportunity to get some investment done in the near term. Very helpful. Thanks. I'll jump back in the queue. One moment for our next question. Our next question comes from Tommy Moll at Stephens Inc. Please go ahead. Good afternoon, and thanks for taking my questions. Hey, Tommy. Hi, Tommy. Bryan, I want to start on the A&D side of the business. What, if any, update can you provide from your review of that segment? Then specific to commercial, where the growth rates continue at rather elevated levels, if you, if you look at the build plans and the content that you have specced in,... Is there any reason to think that the, the growth momentum in the double-digit range, even if, if at a moderating rate from this year, is, is unreasonable through your planning horizon? So listen, the, the build rate from Airbus and Boeing, in particular, continue to accelerate, and we're seeing a lot of that benefit in our aircraft businesses. You know, we feel like we're responding well to that, and that we should have growth rates that are in the high single digits over the next year or two, maybe, maybe a touch higher in the, in the, in the, the shorter term. The biggest challenge for us will be, you know, continuing to work through this supply chain piece. You know, we continue to make progress there, but the orders keep piling up. So we feel pretty good about, you know, where that business is headed. Then in terms of your review of, of the A&D portfolio, Bryan Sayler, any update you can provide there? Listen, first of all, we've got some great businesses there. We, we don't have any strategic announcements to make today. I think all the businesses are, are performing well. We do think that there are opportunities to expand on our position in some of those spaces, in particular, Navy and commercial aerospace. You know, we're looking at ways to do that. Fair enough. Thank you. I also wanted to ask about utility or, or really Doble, specifically. Another quarter with a impressive growth rate in the third quarter, it feels like you've hit a good operating cadence post-pandemic, where there were some, some rough quarters there. What is favorably changing in terms of the underlying demand there? If you take a step back, pre-pandemic, even a number of years pre-pandemic, Bryan, I, I think it's fair to say that was probably a high single-digit kind of market opportunity to go after. There were some years leading into the pandemic where that dipped a little bit. Does it feel like in terms of the outlook going forward, there's been a re-acceleration in terms of the growth rate of that opportunity? Yeah, I would say that utilities at large, I think it's really dawned on people that, you know, in order to facilitate this clean energy transition, we've got to make enormous, you know, investments in grid infrastructure. I think that that is a big, big driver in the general, you know, build-out that we're seeing. I do think that the Inflation Reduction Act and the Infrastructure Act before that, have both had a very positive impact. What's the most positive about it is not the fact that it's short-term money, it's long-term money. You know, we've got a 10-year runway here, where which is giving, you know, folks a lot of confidence to go ahead and make big capital investments, and that's really fundamentally healthy for our business. In addition to that, I think that, you know, folks, you know, in the utility space are realizing that they really need to get smarter about how they handle these assets. You know, the bet that we made a number of years ago on, you know, heavy investment in both inorganic and organic development of our condition monitoring capabilities is really helping us there. Some of the new products that we have, have talked about for the last couple of years are really starting to get some traction. I'd say we're hitting a pretty sweet spot there. Over on the renewable side, you know, that, that business has been lighter than air this year. It's been very difficult for us to predict exactly what would happen, except for every time we pick up the phone, it's more good news. That's been a fun story to be a part of. You know, I guess the bigger question is, okay, where do we go from here? The reality is, is that, you know, in order to facilitate this, this transition, there's a lot more investment that needs to be made. I mean, in terms of trillions of dollars worldwide. We will, you know, we will certainly benefit as those kinds of investments are made. Appreciate the insight, Bryan. I'll turn it back. Thanks, Tommy. One moment. One moment for our next question. Our next question comes from John Franzreb at Sidoti & Company. Go ahead, please. Good afternoon, guys, congratulations on a great quarter, and thanks for taking my questions. I'd like to start on the Test side of the business. You've kind of characterized that business as coming out of COVID. China's been an issue, just getting in the door. Now, China seems to be weakening in and of itself. Can you talk a little bit about what your expectations are in Test in China in the coming quarters? Has the competitive landscape changed in light of that demand environment? Yeah, I, I would say that, you know, the test business as a whole, you know, this is our, you know, strongest business through the COVID period. You know, while other parts of our business were, you know, softening up, the test business was really strengthening and growing. You know, fortunately, they've been able to kind of maintain that higher level of overall, revenue. China has been a little bit of a, of a challenge for us this year. We had an exceptional year last year, so on a comparisons basis, yeah, I think our China business is down very, very significantly year-over-year. You know, we're still making money over there. We're still building product, but the, the level of demand that we're seeing from customers and our ability to get out on the job sites still is a little bit impaired. We do not believe that that is a competitive landscape difference. We think that that's a difference in the fundamentals of the Chinese economy. I think that's being borne out by what we're seeing in, you know, as we read about what's going on overall in China. I mean, the good news is, it's a relatively small part of our overall business. It's a, a, a, a reasonably, a reasonable subset of the, of the test and measurement business. Meanwhile, here in North America, you know, the business has kind of, you know, been flattish. What we're seeing there is a little bit of a transition, probably more EMP and, you know, that sort of work and a little less of the wireless activity. You know, continue to see activity with EV and that sort of thing. What's been interesting for us this year is our European business has been quite strong. That's driven probably a little bit by some of the security stuff we're seeing. You know, we've got a big presence in Finland, and their joining NATO has been a positive. Overall, listen, we still continue to be optimistic about this business. We're kind of moving along sideways at this kind of upper end of our, of our revenue over the last several years. Got it. Got it. That, that actually helped a lot. Going back to your, your utility comments, to be sure, the renewable markets are doing well, but more the traditional, utility spend. It sounds like you're enthusiastic about the slope of that business going forward. Can you talk a little bit about what you're seeing as far as traditional utility spending? Is it pent-up demand that's, that's coming back, or do you really see a fundamental long-term shift in the demand cycle on the utility side? Well, you know, I think it would be wrong for me to say there's, there, there was no pent-up demand because, you know, during the period that Tommy was talking about a couple of years ago, during the pandemic, you know, the way the utilities operated, they kind of, you know, took a hands-off approach and said, "Hey, listen, we got to maximize uptime and generation and make sure we keep the lights on and not mess around too much." Then as we came out of the pandemic, they, you know, a lot of that, you know, activity had to be made up for. I think we're largely past that now. I do think there has been a shift in the way the utilities think about, particularly about more advanced techniques. You know, we've, we've got new products that, that are able to satisfy their requirements for digital testing. We've got products now that are enhanced for this condition monitoring piece. You know, we're seeing a lot of activity in, in those areas. Listen, utilities, you know, they're, they're recognizing the fact, you know, if you, if you do the math on all these net zero targets, even if you, you cut them in half and say that they're, you know, we're not gonna achieve them, you know, by 2030 or 2040 or 2050, as is, as has been stated, it still points to enormous amounts of growth. The electric vehicle build-out, in and of itself, is an enormous demand driver for utilities. What they see there is revenue streams that they can capitalize on, but they've got to be able to deliver the services, so they're making the necessary investments now. Fair enough. Just one last question on A&D. My understanding is that some of the lower-tier suppliers, there was actually a search for alternative suppliers that might have required some recertification in the process of the whatever they're making. Is that not the case, or is it just going slower than expected? Can you just... A A little clarity there would be helpful. It's going slower than expected, and I think, and I think when you think about it as an industry-wide phenomenon, just think about the people that are actually doing those recertifications. They're being inundated by requests, right? Okay. You know, it's a very conservative industry that, you know, is very change-averse. So in, in a lot of cases, we, we really are put in a position where we don't have many choices. I mean, we have definitely, you know, design, made design changes, and we've made, you know, we've made changes to material certifications and that sort of thing. I, I think the other thing I would, I would point out is, if we look at our past due backlog, it's a small number of parts and programs that are driving a large piece of this, of this overall, past due. You know, the, the, the, the meat and potato stuff that are going into, 737, A320, that sort of thing, most of that is, is running along nicely. There a lot of our other programs, you know, are where you're seeing a lot of the past due. Okay, great. That helps a lot. Thank you very much, Bryan. I'll get back to you. Those are programs with smaller quantities, and so the justification for going through a recertification program is, you know, less, you know, less obvious. Yeah. Great. Thank you. One moment for our next question. Our next question is from Tommy Moll at Stephens Inc. Your line is open. Tommy Moll, your line is open. Yep, I just wanted to make sure we hit on utility margin today, so thanks for letting back, letting me back in here. On an adjusted EBIT basis, you just reported a, a 23%, which is a zip code where you've been before, if you go back far enough in history, but more recently, you haven't been there on, on any sustained basis. I'm curious if there's anything one-time favorable in this quarter, or if some of the recent margin improvement there feels like a more sustainable base that you can operate at? Thanks. Yeah, Tommy, I, I wouldn't say there was anything particularly one time in there. Again, you know, we're, we're just kinda obviously driving really nice leverage on the big growth. You know, I, I think we did see a little bit of favorable mix that was kinda unfavorable earlier in the year, so that helped us slightly. Again, it's more just kind of price and cost management and those kind of things. You know, listen, we're not gonna be there every quarter at that level, but obviously, we're looking to drive back to the historical peaks, you know, as we, as we go into 2024 and beyond. You know, that's kinda how I'd answer it. Really nothing special, good leverage, and, you know, we, we feel confident about the ability to drive the margins up as we go forward. That's helpful. Thank you, Chris. That's all for me. Thank you. I am showing no further questions at this time. I would now like to turn the conference back to President and CEO, Bryan Sayler, for closing remarks. Well, thanks, everyone. Yeah, thanks, everyone. It's been good to talk to you this quarter, and we'll look forward to talking to you again next quarter. Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.