ESCO Technologies Inc. Q2 FY2026 earnings call

Brian thanked employees for their dedication and discussed positive momentum across business platforms with strong orders and record backlog. Announced the acquisition of Mega Group Limited, with regulatory filings started and expected to close in Q1 2027. Commented on each segment: Aerospace and defense had order strength in Navy and commercial aerospace; Utility Solutions Group had strong orders led by services, etc.; Test business had strong orders driven by EMC tests, etc. Chris presented financial details, highlighting 33.5% revenue growth, 63% increase in adjusted EPS to $1.91, etc.

Aerospace and Defense: In Q2, orders were nearly $184 million compared to $96.5 million in the prior year quarter. Organic orders increased by 35% with strong growth from commercial aerospace and Navy businesses. Sales in the quarter were $150 million, with organic growth of 14%. Adjusted EBIT margins improved to 28.6%, an increase of 160 basis points. Adjusted EBIT and adjusted EBITDA dollars increased by 78% and 72% respectively. Utility Solutions Group: Orders were up 10% in the second quarter, driven by 20% growth at Doble but soft at NRG due to soft renewables markets. Sales in the quarter were up a modest 3%, with double sales growth of 11% offset by declines at NRG. Adjusted EBIT dollars in the quarter were up nearly 11%. Test Business: Orders were up 21% and sales up more than 27%. Adjusted EBIT margins improved to 15.4%, an increase of 300 basis points from the prior year's second quarter.

Increased full-year 2026 guidance for adjusted earnings per share to $8 to $8.25 per share, representing a 33% to 37% increase compared to fiscal 2025, expecting another record year.

Risks and uncertainties in the company's operations and business environment, including risk factors in the press release, potential differences between actual and forward-looking results, impact of regulatory processes on acquisitions, etc.

Q: On test business, increasing conviction and margin aspiration; A: Brian stated the outlook is improving and they aim for 20% EBITDA margins sooner.

Q: On Megger accretion and return parameters; A: Brian said it's accretive in the first year and significantly accretive in subsequent years, with IRR better than the weighted average cost of capital.

Q: On Doble's condition monitoring demand and pricing; A: Condition monitoring is accelerating with double-digit growth, and orders growth isn't faster than the 20% headline number for Doble orders.

Q: On renewables business; A: It's volatile due to policy changes, but the business is profitable and expected to return to growth.

Q: On commercial airline demand impact on consumables; A: No meaningful impact seen yet, and they're optimistic about the OEM side.

Q: On revenue guidance moving parts; A: Maritime is slightly under the prior range, Doble is better, NRG offsets, and aerospace and defense have mixed results.

Q: On inflation and pricing; A: They're able to push pricing faster than inflation and may need to adjust prices based on signals