Welcome to the ESCO Technologies Signature Management & Power Acquisition conference call. With us today are Bryan Sayler, President and CEO, Chris Tucker, Senior Vice President and CFO. And now, to present the forward-looking statement, I will turn the call over to Kate Lowrey, Vice President of Investor Relations. Thank you. Statements made in this release regarding future growth, growth strategy, expectations, beliefs, and benefits resulting from the acquisition, and other statements which are not strictly historical, are considered forward-looking statements within the meaning of the safe harbor provisions of the federal securities laws. There is no assurance that the acquisition will be consummated, and there are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein. The risks and uncertainties in connection with such forward-looking statements related to the acquisition include, but are not limited to, the ability and timing to consummate the acquisition, including obtaining the required regulatory approvals and financing to fund the acquisition, ESCO's ability to promptly and effectively integrate the business after the acquisition has closed, and ESCO's ability to obtain expected cost savings and synergies of the acquisition, operating costs, customer loss, and business disruption, including difficulties maintaining relationships with the employees, customers, or suppliers of the acquired business that may be greater than expected following the consummation of the acquisition, and other risks and uncertainties described in Item 1A, Risk Factors of ESCO's Annual Report on Form 10-K for the year ended September 30, 2023. Now I'll turn the call over to Bryan. Thanks, Kate, and thanks, everyone, for joining today's call. We're here today to discuss ESCO's planned acquisition of Signature Management & Power, which is a subsidiary of Ultra Maritime. We will be working from a set of call charts, which are available on the Investor tab of our website. Before we begin, I'd like to thank the large team of people on both sides of the transaction who have been working diligently throughout this process. Through an intensive process of diligence and discovery, ESCO and our board of directors have come to the conclusion that this transaction meets all of our stated M&A goals and will meaningfully advance our strategy to increase shareholder value by delivering highly engineered solutions in rapidly growing end markets. To the management employees of Ultra Maritime Signature Management & Power, we look forward to you joining our team of more than 3,000 employees who are dedicated to accomplishing our common mission to make the world more reliable, safe, and secure. We'll get started on slide number three. Adding SM&P to the ESCO portfolio extends our capabilities to support the Navy's mission to protect its ships from a wide range of threats while at sea. SM&P is the leading provider of signature power and management solutions for submarines and surface ships for the U.S. and U.K. naval defense markets. They bring a number of key technologies and intellectual property, which are essential to safely managing onboard power while minimizing the risk of detection by acoustic, magnetic, and electrical field sensors. The business includes both OEM and aftermarket solutions across a wide range of naval defense applications. SM&P has a long history as a supplier to shipbuilders in both the U.S. and U.K. for many decades, and has a strong track record of revenue growth with an attractive margin profile, and it provides ESCO with additional exposure to a rapidly growing end market. Let's go to slide number four and talk about the deal metrics. We're paying a total of $550 million for the business, which includes tax benefits worth approximately $30 million to ESCO. On an adjusted basis, the transaction will represent a multiple of approximately 11x the calendar year 2024 expected EBITDA for the business. The transaction is subject to regulatory approval in both the U.S. and the U.K. We do not expect there to be any major challenges to approval and anticipate a closing date in the first quarter of our fiscal 2025, which begins in October. We are paying for the deal in cash and have committed financing already in place. This will increase our leverage ratio to approximately 3x EBITDA at closing, but we have a clear path to reducing that leverage to approximately 2x by the end of fiscal 2025 through the application of operating cash flows from the combined business. This deal is the result of the ESCO strategic planning process that we have discussed with you in the past. It continues our shift towards high-growth end markets by adding complementary technologies and capabilities which align with our existing customer's stated mission focus areas. We expect the acquisition to be accretive to revenue growth, Adjusted EBITDA margins, and earnings, excluding one-time acquisition costs and related amortization. Let's go to slide five and talk a little bit more about the business. Now, as we mentioned, SM&P is focused on technical solutions for the U.S. and U.K. naval defense markets and has existing content on nearly every operational platform. These systems are designed in from the conception of the ship and do require maintenance throughout the life cycle. At the bottom of the slide, you can see some of the breakdowns. The business is 90% sole source due to SM&P's unique capabilities and IP portfolio.... There are some technical applications that benefit the broader defense industry, but 85% of the business is focused on Navy applications. There is a strong aftermarket component to the business, which results in approximately 34% recurring revenue. The business is just about evenly split between the U.S. and U.K. The business has outstanding revenue visibility due to the predictability of Navy programs, and currently has a funded backlog of approximately $350 million, which represents two years of coverage of the calendar year of 2024, expected revenue of $175 million. Additionally, the business has been awarded another $100 million in contracts, which are not yet fully government-funded and are likely to move into backlog in the near term. Given the current projections of naval investments, we currently estimate the growth to be at least 12% compounded annually over the next few years. Let's switch to slide 6 and discuss the business's technologies. There are two major product lines which exist on both sides of the pond. Signature management is a set of technologies which improve the stealth characteristics of the ship to prevent detection by underwater sensors and mines. These technologies include modifying the magnetic, electrical, and acoustic signature of the vessel through active and passive techniques. The business has been a leader in this space for more than 30 years. Power management and control is a set of technologies which enable the onboard power and propulsion systems to operate with high reliability under the most extreme conditions that may be present during conflict at sea. The business has been a trusted supplier of these systems on U.S. and U.K. submarines and surface ships for more than 50 years. As part of ESCO, these businesses will continue to invest in development of critical IP to serve the current and future needs of the U.S. and U.K. Navies in an increasingly complex and dynamic competitive environment. Moving to slide seven, let's talk about the transaction's benefits. From an ESCO strategy perspective, this transaction expands our focus on high margin, high growth end markets, while adding additional scale to our aerospace and defense portfolio. From our customer's perspective, this enables them to leverage a single trusted supplier that is focused on innovation, quality, and superior customer service. The transaction builds on our existing shipset content for Virginia-class and Columbia-class submarines, while adding shipset content for Arleigh Burke destroyers and future builds of Ford-class aircraft carriers. SM&P expands our international presence with substantial content on the Astute and Vanguard replacement submarine platforms. We will also gain substantial growth from the next generation AUKUS SSN-A submarine platform, which is currently in development in the U.K. From a shareholder perspective, this deal is accretive to our overall revenue growth and EBITDA margins. We expect that the acquisition will be accretive to ESCO Adjusted EPS in the first year post-closing, excluding one-time acquisition costs and related amortization. To illustrate this beneficial change in mix, let's go to slide eight. As you can see here, the addition of SM&P increases our A&D segment to just over 50% of our overall portfolio. Within A&D, Navy is already the fastest-growing part of the portfolio today, and it will now represent nearly 50% of our A&D business. We see this as a very favorable overall mix change, with SM&P coming in with three years projected compound growth of at least 12% and EBITDA margins in the mid-20s. Slide nine will illustrate how SM&P complements our existing Navy portfolio. On this diagram of a typical submarine platform, ESCO's existing content is highlighted with blue text, while the additional content from SM&P is overlaid with gold text. As you can see, ESCO already has a substantial amount of content, which are focused on the stealth aspects of the boat. SM&P takes this to another level. Let's go to slide 10 to discuss how the transaction meets our stated M&A goals. We've been very thoughtful and deliberate about the enterprise-level strategy for ESCO. We want to acquire businesses which have a leadership position in a business or market where we already have a presence. As a leader in naval defense, SM&P clearly meets those criteria. We prefer businesses with a high degree of technology-driven IP, products, and services. Again, SM&P clearly meets that criteria. We look for businesses with demonstrated financial performance and predictable revenue streams in high-growth markets. SM&P easily clears these hurdles with 90% sole source revenue, EBITDA margins in the twenties, and a projected growth rate in excess of 12%. The combination of SM&P and ESCO's existing naval business provides complementary and synergistic capabilities, which OEM and aftermarket customers will come to appreciate. We'll conclude the presentation on slide number 11. The addition of SM&P's strengthens ESCO's already compelling investment story. We have a well-tested operating model with demonstrated performance and a strong track record. We serve technology-oriented end markets with long-term organic growth trajectories. Our exposure to commercial and defense aerospace will continue to drive value as build rates increase to meet projected demand increases over the next two decades. Our increased exposure to Navy submarines will drive substantial growth as both the U.K. and the U.S. continue to make fleet investments to counter geopolitical threats worldwide. Our utility solutions business will continue to benefit from increased investments in the utility infrastructure as worldwide demand for electrification places increasing demand on an aging grid, as society strives towards net zero targets in the coming decades. ESCO is executing on our stated plan to supplement organic growth with strategic M&A. SM&P is a prudent investment, which allows us to achieve our strategic objectives while maintaining leverage inside 3x with a clear line of sight to a leverage ratio of 2x. We continue to maintain our focus on returns with a high degree of alignment between management and shareholders. In summary, ESCO is a good investment, which will be strengthened by the actions that we are taking to grow the portfolio and increase our exposure to end markets with compelling growth for decades to come. With that, we can open up the call for Q&A. Thank you. If you'd like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from Tommy Moll with Stephens Inc. Your line is open. Good morning, and thank you for taking my questions. Hi, Tommy. Bryan, you talked about a revenue outlook in the low double digits in terms of the CAGR for the next few years. I, I presume a lot of that is, is on conversion of the backlog. But any of the inputs to that outlook that you could provide would be helpful. And then also, if we just zoom out a bit and look either beyond that three-year horizon or, or maybe, back at some of the historical performance of this business, what kind of growth rates could you use to anchor us for either of those frameworks? Thanks. Thanks, Tommy. Yeah, the growth that we're projecting in the first three years is partly from a conversion of backlog, but this is a business that has a lot of forward-looking growth opportunities, particularly with the Vanguard replacement program that they're a key part of over in the U.K., with additional content on U.S. ships. And then they're part of this SSN-AUKUS program, which will be a big part of that overall growth story. ESCO is taking a conservative posture with regard to the forecast of this business. We're saying it's probably at least 12%. It could be quite a bit more. And we would anticipate that that would be sustainable throughout that five-year window that we kind of think about as our planning window. That's helpful, Bryan, and a related follow-up there on the go-to-market here. What, if any, kind of sales synergy opportunities do you see, even if beyond the three- or five-year planning window? Just if you've got a sizable existing business with the U.S. Navy, for example, now you go to market with a much larger business, what kind of synergy opportunities could we contemplate here? So we have built some amount of synergies into our five-year plan, but I want to be clear that that is not really the basis for this deal. The intrinsic growth that we see and the margins here are sufficient to justify this on an economic basis. But we do have synergies built in. A lot of that is really related more to, you know, SG&A leverage over time, you know, doing a good job on the sales and marketing side of kind of selling a larger portfolio. We do think that there could be some potential for, you know, cross-selling and upselling, you know, down the road between the U.S. and the U.K. But of course, that's really subject to both governments' willingness to exchange, you know, critical IP that is really national security protected. So, we can't. We didn't make any assumptions there because, but as part of the overall AUKUS program, we anticipate that there will be increased sharing between those two governments. Last question from me, and I'll turn it back. Just stepping back to a broader portfolio discussion. So you're at 3x pro forma leverage line of sight to 2x by the end of next fiscal year. I presume that's entirely on an organic basis once this transaction is closed. But, but I also wonder now, that you've clearly demonstrated, an appetite to acquire in the A&D space... I presume that appetite would also apply to the utility space. Does this news potentially open the aperture from a divestiture standpoint, to enable you to acquire even more aggressively in one of these other priority areas? Or is it premature to think about that today? Well, so I do think it's a little bit premature to be thinking about that at the moment. However, let me answer your first question first. Yes, we certainly have an appetite to grow our utility business as well as our A&D business. We think these are both businesses that have exemplary long-term macro growth trajectories, okay? The fundamental markets that they serve are going to grow for decades to come at much better than the normal rates. So we do intend to continue to be aggressive in the space. We're comfortable at the 3x leverage. At that point, we're not in a position where we have to do anything, either on the acquisition or the divestiture side, nor are we prevented from taking any action that we wish to take. Thanks, Bryan. I'll turn it back. Thank you. Our next question comes from Jon Tanwanteng with CJS. Your line is open. Hi, thanks for taking my questions. I was just wondering if you could compare the per boat or per vessel content in the business compared to, you know, your existing Navy business and kind of how that flows through, and exposures to, you know, relative U.K. and U.S. geographies. Yeah, I would say that on the U.S. side for Columbia-class and Virginia-class, the business adds some content there. It's substantially less than the, you know, the numbers that we have communicated about. You know, we have about $45 million of content on each Virginia-class now. It's a lower number than that. We do not currently have content on, you know, things like Arleigh Burke or on the aircraft carriers, and so that's a big add for us. Over in the U.K., we don't have substantial content on Vanguard replacement or Astute or on SSN-AUKUS, so that's certainly a big add for us. But listen, their content on those vessels would exceed our content on Virginia-class today. Got it. Thank you. And then, what kind of production rates is implicit in the forecast for that growth? You know, I know that the Navy plans to increase Virginia to, you know, in excess of two a year, but I was wondering if you could shed some light on what is the assumption underlying the growth, both in the U.S. and in the U.K. Sure. So I think you're really asking about the U.K. build rates, because I think you probably know what the build rates are here in the U.S. quite a bit. Listen, there are, you know, currently four Vanguard replacement vessels that are in the pipeline. And there will be... Yeah, they're still wrapping up kind of the Astute program right now, and then they are anticipating, you know, something like eight to 12 of the SSN-AUKUS that will go to sea in the 2030s. I think what's different about SM&P compared to our current business is that the SM&P content goes into the ship very early in the process, you know, before the hull is closed. Whereas the ESCO current content, you know, the exterior hull coatings, that goes on, yeah, outside of the vessel, you know, later in the overall stage. So in terms of where the revenue flows in the overall build process, SM&P's revenue flow is much more much sooner. So when you look at published, you know, dates on what to expect for when you might see Vanguard replacement or SSN-AUKUS, you know, being put to sea, you kind of got to back off of that by a few years to see where our revenue would fall. Got it. That's helpful. Could you talk about the recurring revenue component? What does that consist of? Yeah. So a lot of this equipment are, you know. So think of it as, you know, if you, if you look at the photographs that are on page six of the. What you'll see, there's a lot of rack-mounted types of equipment. So those large rack systems would go into the submarine or the surface ship, right? And then inside of those racks are modular power supplies and other devices, instrumentation, which is hot swappable in the field. And so over time, some of those things will wear out and have to be replaced, or will malfunction because of, you know, extreme conditions that they've been put under. And so there is a, you know, pretty robust replacement cycle on that equipment. Got it. Thank you. And then finally, just can you talk about the cash flow profile of the business, before financing costs, just to help us understand what kind of cash flow generates? Yeah, I mean, I think it's the cash profile is very good. I mean, they-- in some of these big contracts, you know, they operate in kind of a prepayment environment where, you know, they get funded a lot upfront. Frankly, it keeps the working capital quite low, even negative. And where they are in some of these big programs that are kind of early in the development phase, you know, they are getting a lot of that upfront funding. So we see, you know, a cash profile that's quite good. Great, thanks. I'll jump back in queue. Thank you. Our next question comes from John Franzreb with Sidoti & Company. Your line is open. Good morning, everyone, and thanks for taking the questions. Could you tell us a little bit about the motivation behind Ultra selling this asset? Sure. So, this was originally a part of a, I believe it was part of Cobham, and they were acquired by private equity in about 2020. So what the current private equity sponsor has been doing is rationalizing the business and cutting it up into pieces. So this is one of the logical pieces that's come out, and this is the one that fit best with the ESCO profile. Great. And then thank you. I, I appreciate that. And when I look at the—that slide six that you pointed out- Yeah. How much of the revenue is signature versus power management, and there's a margin differential between the two products? Margins are comparable, but I think it weighs a little bit more heavily towards the power management side. Probably something like... I don't think we have a slide on that, but I think it's something like 60/40 power to signature. Got it. And, oh, I apologize for the limits of my knowledge, but are there any constraints on foreign content on either the Astute or the AUKUS programs? Yes. These are, yeah, obviously, when you're dealing with military content, there's quite a lot of restrictions in place, both on the export side, and in terms of sharing of knowledge, you know, in the U.S., we call it ITAR. And so the business. One of the things we actually wanted to really spend a lot of time on during the diligence process, and they've got really good systems and controls in place for that. There's a limited amount, you see about 3% of the content, which is, you know, outside of the U.S. and the U.K., and that's primarily selling, you know, systems that would go into navies elsewhere in the world. I don't wanna get into naming them all, but suffice it to say, they would be allied navies elsewhere in the world. Great. And, I guess one last question. Since this was under PE, can you talk a little bit about the capital needs and CapEx requirements as these, you know, programs kind of expand out? Yeah, I would say the capital needs that we've got modeled in are quite modest, typically $2 million or less a year, and that's, you know, consistent with kind of the seller's plans. All right, great. Thank you for taking the call, questions, sorry. Thank you. Our next question is a follow-up from Jon Tanwanteng with CJS. Your line is open. Hi, thanks for the follow-up. As long as we have you on the line, I was wondering if you could provide an update just on the core businesses, specifically what's going on in test, and if there's any update on Boeing as a customer. Listen, I think things are pretty consistent with what we communicated back in May. I think we've told you that at Test we saw a little bit of a slowdown in China, saw a little bit of a slowdown in wireless. Those two are probably fairly related, since a lot of our business in China has been wireless related. But listen, it's a good business, and it's continued to do well. We expect that we'll return to growth in the future. I'm sorry, what was the other question? Oh, and Boeing. Yeah. So listen, the Boeing build rates are, you know, kind of puttering along. As I think we said previously, we've been able to kind of reallocate some of our capacity to others. I can say Airbus is doing very well. Several of our other aerospace programs are also doing quite well. Great, thank you. And then just one more. Could you talk about potential permanent financing for the acquisition? I think you have a bridge loan facility in place, but I was wondering what your long-term plans are. Yeah, the plan is to get a term loan A that would sit on top of the revolver we have now for $350 million. So that would be kind of in the pro rata bank market. That would be, you know, kind of a SOFR plus type instrument, and, you know, it would be fully pre-payable, and give us nice flexibility, but obviously allow us to pay for the deal. So that's what we'll be focused on here in the near term. Got it. Is there any appetite for issuing equity at some point in the future, especially if there's more, if there are more acquisitions to do? No, listen, I think we feel pretty comfortable where we are today, and never say never, but that's not part of our current planning. Understood. Thank you. Thank you. Thank you. I'm showing no further questions at this time. Please proceed with any closing remarks. Well, listen, everyone, thank you very much for spending a little time with us today. We're clearly excited about this opportunity to advance our overall strategy, and we believe that we're gonna be able to get this closed, as we said, sometime in our fiscal first quarter. And we look forward to keeping you updated on the rest of the business. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.