IntrinsicIntrinsic
← All summaries

ESCO TECHNOLOGIES INC

ESE
Financials & Chart →

Business Summary

ESCO Technologies Inc. operates as a global provider of highly engineered components and systems for aviation, Navy, defense and industrial customers; an industry leader in designing and manufacturing radio frequency (RF) test and measurement products and systems; and a provider of diagnostic instruments, software and services to industrial power users and the electric utility and renewable energy industries. The company classifies its business operations into three segments for financial reporting purposes: Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test & Measurement (Test).

Significant competitors of the A&D segment include Pall Corporation (a subsidiary of Danaher Corporation), Moog, Inc., Safran (Sofrance), CLARCOR Inc., TransDigm (PneuDraulics), Parker Hannifin, Collins Aerospace, L3 Harris and Leonardo DRS. Significant competitors of the USG segment include OMICRON Electronics Corp., Megger Group Limited, Vaisala, and Qualitrol Company LLC (a subsidiary of Ralliant Corporation). The Test segment is a global leader in EM shielding, with significant competitors including Rohde & Schwarz GMBH, Microwave Vision SA (MVG), TDK RF Solutions Inc., Albatross GmbH, IMEDCO AG, Universal Shielding Corp., and Schaffner.

The company generates revenue through the design, manufacture, sale and support of highly engineered products and systems across three operating segments. Revenue is recognized when control of goods or services is transferred to the customer either at a point in time or over time. The A&D segment recognizes approximately 52% of its revenues at a point in time and approximately 48% over time. The USG segment recognizes approximately 81% of its revenues at a point in time and approximately 19% over time. The Test segment recognizes approximately 19% of its revenues at a point in time and approximately 81% over time.

The A&D segment accounted for approximately 44% of total revenue from continuing operations in 2025, 37% in 2024 and 34% in 2023. This segment has nine facilities in the United States, two in the United Kingdom, and one in Mexico. The companies within this segment primarily design and manufacture specialty filtration, fluid control and naval products, including hydraulic filter elements, fluid control devices and precision-tolerance machined components used in aerospace and defense applications, naval magnetic signature management systems, naval power control and conversion systems, products and systems to reduce vibration and/or acoustic signatures and otherwise reduce or obscure a vessel's signature, and other communications, sealing, surface control and hydrodynamic related applications to enhance U.S. and UK Navy maritime survivability; and miniature electro-explosive devices for military aircraft ejection seats and missile arming devices.

The USG segment accounted for approximately 35% of total revenue from continuing operations in 2025, 40% in 2024 and 40% in 2023. This segment has eight facilities in the United States, one in Canada, and ten outside North America. The segment's operations consist primarily of Doble Engineering Company, Morgan Schaffer and Altanova (collectively, Doble), and NRG. Doble is an industry leader in the development, manufacture and delivery of diagnostic testing and data management solutions that enable electric power grid operators to assess the integrity of high-voltage, high-current and high-power delivery equipment. NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar. The Test segment accounted for approximately 21% of total revenue from continuing operations in 2025, 23% in 2024 and 26% in 2023. This segment has five facilities in the United States and eight outside the United States. The segment's operations consist primarily of ETS-Lindgren, an industry leader in designing and manufacturing products and systems to measure and control RF energy for research and development, regulatory compliance, and medical and security applications.

In April 2025, the company acquired the Signature Management & Power (SM&P) business of Ultra Electronics Holdings Limited, comprising Ultra PMES Limited (subsequently renamed as PMES I Limited), Measurement Systems, Inc., EMS Development Corporation, and DNE Technologies, Inc., for a purchase price of approximately $472 million , net of cash acquired. In July 2025, the company completed the sale of its former A&D subsidiary VACCO Industries for net sales proceeds of approximately $270 million and recorded a $172.6 million after-tax gain on the sale. In November 2023, the company acquired MPE Limited for a purchase price of approximately $56.2 million , net of cash acquired. In February 2023, the company acquired CMT Materials, LLC and its affiliate Engineered Syntactic Systems, LLC for a purchase price of approximately $18 million , net of cash acquired. The company declared dividends of $0.32 per share during 2025, totaling $8.3 million in dividend payments. The company did not repurchase any shares during 2025. During 2024, the company repurchased approximately 80,500 shares for approximately $8.0 million .

Sales and net earnings from continuing operations in 2025 were $1,095.4 million and $116.3 million , respectively, compared to sales and net earnings from continuing operations in 2024 of $919.1 million and $102.6 million , respectively. Diluted EPS – GAAP from continuing operations for 2025 increased 13.1% to $4.49 , compared to Diluted EPS – GAAP from continuing operations for 2024 of $3.97 . Diluted EPS – GAAP for 2025 was $11.55 compared to Diluted EPS – GAAP for 2024 of $3.94 . Diluted EPS – As Adjusted for 2025 was $6.03 excluding $52.1 million of pretax charges. Diluted EPS – As Adjusted for 2024 was $4.77 excluding $26.7 million of pretax charges. At September 30, 2025, cash on hand was $101.4 million and outstanding debt was $186 million , for a net debt position of approximately $84.6 million . Entered orders for 2025 from continuing operations were $1,564.8 million resulting in a book-to-bill ratio of 1.43x . Backlog at September 30, 2025 was $1,133.6 million , an increase of $469.4 million , or 70.7% , compared to backlog from continuing operations of $664.2 million at September 30, 2024.

Business Outlook

The company continues to seek opportunities to supplement its growth by making strategic acquisitions. The acquisition of the Signature Management & Power business (Maritime) in April 2025 is expected to be highly complementary to current naval programs, with Signature Management providing solutions for surface ships and submarines that provide magnetic and electric field countermeasures to prevent underwater mine and sensor detection, and Power Management providing innovative and highly-engineered motors that drive critical ship propulsion systems with an ultra-quiet design ensuring low vibration levels to increase stealth capabilities. The company also continues to focus on new products that incorporate proprietary design and process technologies.

The company's corporate strategy is centered on a multi-segment portfolio serving established high-growth, high-margin end markets. The company's Company-wide 'ESCO Operating System' initiative, begun in 2025, has already produced numerous velocity and cost improvements. Management is committed to delivering shareholder value through organic growth, ongoing performance improvement initiatives, and acquisitions.The filing does not contain a specific operational outlook for supply chain, manufacturing capacity, technology infrastructure investments, or headcount strategy.

Capital expenditures from continuing operations were $36.3 million in 2025 and $28.3 million in 2024. The company incurred expenditures for capitalized software and other of $15.8 million in 2025 and $11.9 million in 2024. There were no commitments outstanding that were considered material for capital expenditures at September 30, 2025. The company did not repurchase any shares during 2025. During 2024, the company repurchased approximately 80,500 shares for approximately $8.0 million . In August 2024, the Board of Directors approved a common stock repurchase program authorizing repurchases up to a maximum total repurchase amount of $200 million over a three-year period expiring September 30, 2027. The company declared dividends of $0.32 per share during 2025, totaling $8.3 million in dividend payments.

Sales to the U.S. Government and its prime contractors and subcontractors represent a significant portion of the company's business. In 2025, approximately 23% of revenues from continuing operations were generated from sales to the U.S. Government or its contractors, primarily within the A&D segment. These sales are dependent on government funding of the underlying programs, which is generally subject to annual Congressional appropriations and periodic authorization of increases in the Government debt ceiling, and they may therefore be adversely affected not only by failure to obtain timely and adequate appropriations but also by extended Government shutdowns or by changes in Government spending priorities. A significant portion of Globe's and Westland's sales involve major U.S. Government programs such as U.S. Navy submarines. A reduction or delay in Government spending on these programs could have a significant adverse impact on financial results which could extend for more than a single year.

In 2025, approximately 34% of net sales from continuing operations were to customers outside the United States. The company is subject to the risks of doing business internationally, including executive branch actions such as the imposition of tariffs, changes in the global trade environment, trade restrictions, ongoing trade tensions between the U.S. and other countries including China as well as traditional trading partners such as Canada and the E.U., changes to U.S. and non-U.S. government policies, future decisions of the UK Government which might significantly reduce funding for its naval programs, fluctuations in international currency exchange rates, volatility in international political and economic environments, imposition of domestic and international taxes, export controls, tariffs, embargoes, sanctions, compliance with a variety of non-U.S. laws, and unforeseen developments and conditions, including terrorism, war, epidemics and international tensions and conflicts.

Risk Factors

Sales to the U.S. Government and its contractors represented approximately 23% of revenues from continuing operations in 2025, and a reduction or delay in government defense spending, particularly on programs such as U.S. Navy submarines, could have a significant adverse impact on financial results. The company derives a significant portion of revenues from non-U.S. sales, with approximately 34% of net sales from continuing operations in 2025 to customers outside the United States, exposing it to risks including tariffs, trade tensions, currency fluctuations, and geopolitical volatility. A significant part of manufacturing operations depends on a small number of third-party suppliers; for example, Doble has arrangements with six manufacturers which produce and supply a substantial portion of its end-products, and one of these suppliers produces approximately 23% of Doble's products from a single location within the United States. The company enters into fixed-price contracts which could subject it to losses if cost overruns occur, and the long-term nature of many contracts makes estimating costs inherently risky. The company may not be able to identify suitable acquisition candidates or complete acquisitions successfully, which may inhibit its rate of growth.

Management Priorities

Management's message emphasizes that the company continues to operate with meaningful growth prospects in its primary served markets and with considerable financial flexibility. Management is committed to delivering shareholder value through organic growth, ongoing performance improvement initiatives, and acquisitions. The company's corporate strategy is centered on a multi-segment portfolio serving established high-growth, high-margin end markets. Management highlights that the sale of VACCO was made as part of a strategic portfolio analysis focused on positioning the company to serve high-growth markets that have high margin potential. The company's Company-wide 'ESCO Operating System' initiative, begun in 2025, has already produced numerous velocity and cost improvements.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Products
  2. [2] Item 1, Business — Products
  3. [3] Item 1, Business — Products
  4. [4] Item 1, Business — Products
  5. [5] Item 1, Business — Products
  6. [6] Item 1, Business — Products
  7. [7] Item 1, Business — Products
  8. [8] Item 1, Business — Products
  9. [9] Item 1, Business — Products
  10. [10] Item 7, MD&A — Highlights of 2025
  11. [11] Item 7, MD&A — Divestiture
  12. [12] Item 7, MD&A — Highlights of 2025
  13. [13] Item 8, Note 2 — Acquisitions
  14. [14] Item 8, Note 2 — Acquisitions
  15. [15] Item 7, MD&A — Highlights of 2025
  16. [16] Item 7, MD&A — Dividends
  17. [17] Item 7, MD&A — Share Repurchases
  18. [18] Item 7, MD&A — Share Repurchases
  19. [19] Item 7, MD&A — Highlights of 2025
  20. [20] Item 7, MD&A — Highlights of 2025
  21. [21] Item 7, MD&A — Highlights of 2025
  22. [22] Item 7, MD&A — Highlights of 2025
  23. [23] Item 7, MD&A — Highlights of 2025
  24. [24] Item 7, MD&A — Highlights of 2025
  25. [25] Item 7, MD&A — Highlights of 2025
  26. [26] Item 7, MD&A — Highlights of 2025
  27. [27] Item 7, MD&A — Highlights of 2025
  28. [28] Item 7, MD&A — Highlights of 2025
  29. [29] Item 7, MD&A — Highlights of 2025
  30. [30] Item 7, MD&A — Highlights of 2025
  31. [31] Item 7, MD&A — Highlights of 2025
  32. [32] Item 7, MD&A — Highlights of 2025
  33. [33] Item 7, MD&A — Highlights of 2025
  34. [34] Item 7, MD&A — Highlights of 2025
  35. [35] Item 7, MD&A — Highlights of 2025
  36. [36] Item 7, MD&A — Highlights of 2025
  37. [37] Item 7, MD&A — Highlights of 2025
  38. [38] Item 7, MD&A — Highlights of 2025
  39. [39] Item 7, MD&A — Highlights of 2025
  40. [40] Item 7, MD&A — Highlights of 2025
  41. [41] Item 7, MD&A — Capital Resources and Liquidity
  42. [42] Item 7, MD&A — Capital Resources and Liquidity
  43. [43] Item 7, MD&A — Capital Resources and Liquidity
  44. [44] Item 7, MD&A — Capital Resources and Liquidity
  45. [45] Item 7, MD&A — Share Repurchases
  46. [46] Item 7, MD&A — Share Repurchases
  47. [47] Item 8, Note 8 — Capital Stock
  48. [48] Item 7, MD&A — Dividends
  49. [49] Item 7, MD&A — Dividends
  50. [50] Item 1A, Risk Factors — Restrictions in authorized U.S. Government defense spending
  51. [51] Item 1A, Risk Factors — Risks Related to our International Business
  52. [52] Item 1A, Risk Factors — Restrictions in authorized U.S. Government defense spending
  53. [53] Item 1A, Risk Factors — Risks Related to our International Business
  54. [54] Item 1A, Risk Factors — A significant part of our manufacturing operations depends on a small number of third-party suppliers
  55. [55] Item 8, Consolidated Statements of Operations
  56. [56] Item 8, Consolidated Statements of Operations
  57. [57] Item 8, Consolidated Statements of Operations
  58. [58] Item 8, Consolidated Statements of Operations
  59. [59] Item 8, Consolidated Statements of Operations
  60. [60] Item 8, Consolidated Statements of Operations
  61. [61] Item 7, MD&A — EBIT
  62. [62] Item 7, MD&A — EBIT
  63. [63] Item 8, Consolidated Statements of Cash Flows
  64. [64] Item 8, Consolidated Statements of Cash Flows
  65. [65] Item 8, Consolidated Balance Sheets
  66. [66] Item 8, Note 7 — Debt
  67. [67] Item 8, Consolidated Balance Sheets
  68. [68] Item 8, Note 7 — Debt
  69. [69] Item 7, MD&A — Income Tax Expense
  70. [70] Item 7, MD&A — Income Tax Expense
  71. [71] Item 7, MD&A — EBIT
  72. [72] Item 7, MD&A — EBIT
  73. [73] Item 7, MD&A — EBIT
  74. [74] Item 7, MD&A — EBIT
  75. [75] Item 7, MD&A — EBIT
  76. [76] Item 7, MD&A — EBIT
  77. [77] Item 8, Consolidated Statements of Operations

Analysis on 6/8/2026