Q1 2022 ESCO Technologies Inc Earnings Call

February 8, 2022

Good day and welcome to the ESCO technologies first quarter 2020 earnings Conference call. Today's call is being recorded with US today are they.

Speaker 1: Good day and welcome to the FCOA Technologies first quarter of 2022 earnings conference call. Today's call is being recorded. With us today are Vic Ritchie, Chairman and CEO , Chris Tucker, Vice President and CFO . And now to present the full looking statement, I would like to turn the call over to Kate Lawry, Vice President of Universal Relations. Please go ahead.

Richey, Chairman and CEO , Chris Tinker, Vice President and CFO and now to present the forward looking statement I would like to turn the call over to Kate Lowrey, Vice President of Investor Relations. Please go ahead.

Thank you Steve.

Speaker 2: Statements made during this call regarding timing of recovery and growth of our end markets. The amounts and timing of 2022 and beyond revenues impacts of and covariance and recovery expected as a result of vaccines. Recovery and commercial aerospace and utility markets impacts of supply chain issues and cost inflation availability of labor. Adjusted EPS, adjusted EBITDA, cash, shareholder value, the timing of Block 5 deliveries.

Statements made during this call regarding the timing of recovery and growth of our end markets.

From timing of 'twenty to 'twenty, two and beyond revenue impacts of Covid and Covid variance in recovery expected as a result of Covid vaccine recovery in commercial aerospace and utility markets impacts of supply chain issues and cost inflation availability of labor adjusted EPS adjusted EBITDA cash shareholder value the timing of block.

Five deliveries success in completing additional acquisitions successfully integrating acquisitions the results of cost reduction efforts and other statements, 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.

Speaker 2: success in completing additional acquisitions, success in integrating acquisitions, the results of cost reduction efforts and other statements which are not strictly historical are forward looking statements within the meaning of the safe harbor provisions of the federal securities law.

Speaker 2: 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 operation 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 8K to be filed. We undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

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 filed we undertake no duty to update or revise any forward looking statements whether as a result.

A new information future events or otherwise 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 Dot ESCO technologies Dot com under the link Investor really.

Speaker 2: 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'll turn the call to the next speaker.

<unk> now I'll turn the call over to Vic.

Speaker 3: Thanks, Kate, and thanks to everybody for joining today's call. At the risk of being redundant, I'd like to start to call off again, I think, our employees across the company for their ongoing efforts to manage the business. There continue to be a lot of challenges over.

Thanks, Kate and thanks to everybody for joining today's call to.

At the risk of being redundant and I'd like to start the call off again, let's say get our employees Cross company for their ongoing efforts to manage the business, they're continuing to be a lot of challenges to overcome on a regular basis, we continue to see supply chain challenges with delivery cost inflation and the nonrecurring variant of Covid impact.

Speaker 3: We continue to see supply chain challenges with delivery, cost inflation, and the omnichrome variant of COVID impacted our business.

Their businesses in spite of that our teams continue to demonstrate tremendous resilience. Our employees are working very hard and doing all they can to support our customers and drive the business forward very appreciably.

Speaker 3: In spite of that, our teams continue to demonstrate tremendous resilience. Our employees are working very hard and doing all they can to support our customers and drive the business forward. And for that, I'm very proud.

The business has continued to gain momentum as we start fiscal 'twenty two.

Speaker 3: The businesses continue to gain momentum as we start fiscal 22. 2 by 3 business segments delivered organic sales growth in the first quarter. We expect all three segments will deliver organic growth in the remaining three quarters.

Two of our three business segments delivered organic sales growth in the first quarter.

All three segments will deliver organic growth in the remaining three quarters, we have a lot of confidence in that outlook due to our continued strong quarter output.

Speaker 3: We have a lot of confidence in that outlook. Do our continued strong order output. If you recall, the fourth quarter of fiscal 21 had a order growth of more than 30%. Well, for the first quarter of 22, we cheap order growth of more than 40% compared to prior Q1. Our backlog is at record level, and Edbo's well for the balance of the fiscal 22 and beyond.

If you recall the fourth quarter of fiscal 'twenty, one had order growth of more than 30% over the first quarter of 'twenty. Two we achieved order growth of more than 40% compared to prior Q1, our backlog is at a record level and that bodes well for the balance of the fiscal 'twenty two and beyond.

Speaker 3: Crystal, get into some of the financial details in a few minutes. I'll start off with some top-level commentary of each of our business ag.

Chris will get into this.

On the financial details in a few minutes I'll start off with some top level commentary, although each of our business segments.

Speaker 3: Starting with the A&D, we see the recovery continuing for this bus.

Starting with the A&D, we see the recovery continuing for this business, we continue to monitor the commercial aerospace markets closely.

Speaker 3: We continue to monitor the commercial aerospace markets closely. It likely would be some more disruptions with travel as a pandemic situation continues. We're undoubtedly seeing higher levels of business activity from our commercial aerospace cro in peace off skincare a full

Likely be some more disruptions with travel as a pandemic situation continues we're undoubtedly seeing higher levels of business activity from our commercial aerospace customers.

2020 in 2021 were really tough years in this market. So we're glad to see the growth return.

Speaker 3: 2020 and 2021 were really tough years in his market. So we're glad to see the growth return.

Speaker 3: For A&D overall, we saw entered orders grow by 38%. Admittedly, we were coming off a low base. It is great to see the backlog rebound.

Our A&D overall, we saw entered orders grew by 38% admittedly, we're kind of all.

Coming off a low base it is great to see the backlog rebounding like this.

Speaker 3: The SOTA press release mentioned of challenges regarding supply chain performance and labor availability. Both challenges are definitely being talked by the AMD Group.

We saw in our press release mentioned of challenges regarding supply chain performance and labor availability. Those challenges are definitely being felt by the A&D group.

Speaker 3: In particular, our California based businesses of BACO, PTI, and Chris Air are saying challenges as we work to ramp the higher levels of business activity. We did mess themselves in a quarter because of these challenges.

In particular, our California based businesses of Banco <unk> and Chris There are some challenges as we work to ramp to higher levels of business activity. We did vessel sales in the quarter because of these challenges. The teams are highly focused on increasing capacity to meet our customer demand and we're confident that these are.

Speaker 3: The teams are highly focused on increasing capacity to meet our customer demand and we're confident that these are just timing issues within the year.

Just timing issues within the year.

Speaker 3: The last thing I wanted to mention regarding AND was our acquisition of MECO, which we were able to close in the first quarter, and we're excited about letting MECO breeze our portfolio. This business will fold into our PTO-City-Vary, bringing the solid management team with great product technologies. We're very happy to...

The last thing I wanted to mention regarding AMD was our acquisition of Nico, which we were able to close in the first quarter and we're excited about what the eco brings to our portfolio. This business will fold into our Pts subsidiary, bringing a solid management team with great product technologies, we're very happy to have them on board.

Similar to A&D, our test business also had a great orders performance in the first quarter.

Speaker 3: Some of the A&D, our test business, also had a green order's performance in the first quarter.

Speaker 3: Quarter from nearly 68 million for the first quarter, compared to 43 million in prior year first quarter.

Orders were nearly $68 million for the first quarter compared to $43 million in the prior year first quarter. So the growth is significant and broad based with double digit increases in all global markets sales growth was a little lighter in Q1, which we expected and we're planning to see strong sales performance over the <unk>.

Speaker 3: So they grow to the significant and broad base. The double-vision increases in all global markets.

Speaker 3: Tail stroke was a little lighter in Q1, which we expected, and we're planning to see strong sales performance over the coming quarters for tech.

During quarters for test.

Speaker 3: We continue to face some challenges with profit margins during the 1st quarter.

We continue to face some challenges with profit margins during the first quarter for test the margins are slightly down compared to what we had in our internal plans and.

Speaker 3: The margins are slightly down compared to what we had in our internal plans. And as you saw in a press release, you're also down versus prior to the year.

And as you saw in our press release Youre also down versus prior year.

Speaker 3: This has been a key focus for us. No doubt inflation challenges are in huge for tests. So we have programs around cost management and price realization. Couple of other margins is removed both.

This has been a key focus for US no doubt inflation challenges are cute for test. So we have programs and our cost management and price realization.

Drive the margins as we move forward.

Speaker 3: This segment is our largest user of freight services. As we all know, they are higher cost increases in this area, which is also impacting our market.

This segment is our largest user of freight services and as we all know they are they are higher cost increases in this area, which is also impacting our margins margin expansion. These to come as we grow this business. That's a key part of our value story here and we're focused on achieving that result.

Speaker 3: Margin Expansion needs to come as we grow this business. But to keep part of our value story here and we're focused on achieving that result.

For USG. The story in Q1 was a bit mixed you hadn't expected sales contributions from the recent acquisitions. So it was nice to see that coming through integration of the acquired businesses is going well and is on track. We also saw another strong order quarter for NRG.

Speaker 3: For USG, the story Q1 was a bit mixed. We had to expect the sales contributions from their recent acquisitions, so it was nice to see that coming through. Integration of the acquired businesses is going well, and it is on track.

Speaker 3: We also saw another strong order for NRG, so things continued to go very well in every year in the state.

Continued to grow very well in the renewable space.

Speaker 3: We did experience some challenges at Doble. Approximately 3 million of the sales shortfall was really the supply chain challenges with our contract manufacturer.

We did experience some challenges at doble approximately $3 million of the sales shortfall was related to supply chain challenges with our contract manufacturer.

Speaker 3: We also had tough cops all last year's Q1. With customers release some funding for calendar year in person.

We also had tough comps of last year's Q1 with customers release, some funding for calendar year end purchases.

Speaker 3: We didn't see a repeat of that in this first quarter. But the comparison is eased for no longer coming quarters. And we expected growth to kick back in, very Q2 and Q3.

We didn't see a repeat of that this first quarter, but the comparisons ease for durable over the coming quarters, and we expect the growth to kick back in Q2 and Q3.

We continue to feel strongly that utility markets have very favorable growth characteristics over the long term and we also feel this portfolio of companies. When we put together will be very well positioned to take advantage of this growth.

Speaker 3: We continue to feel strongly that utility markets have very favorable growth characteristics over the long term, and we also feel that the portfolio of companies that we put together will be very well positioned to take advantage of this growth.

Speaker 3: Overall, the quarter came in right on top of the internal projections we had when the quarter started.

Overall, the quarter came in right on top of the internal projections, we had for the quarter started.

Speaker 3: high-order activities for their higher level of sales, but we couldn't get that out the door, given supply chain and labor challenge.

The order activity supported our higher level of sales.

Couldnt get that out the door given supply chain and labor challenges at the end of the day. We are on track for the 22 expectations that we laid out in November the plant is back end loaded divestment system with our original projections and supported by backlog bottom line, we feel good about where we are after the first quarter.

Speaker 3: As in the day, we'll entrap for the 22 expectations that we laid out in November . The plan is back and loaded, the best consistent with our original projections and supportive up back.

Speaker 3: By the mind, we feel good that way we are after the first quarter. Now I'll turn those chairs.

Now I will turn it over to Chris.

Thanks, Vic I'll start with an overview of the consolidated financial performance in the quarter.

Speaker 4: Thanks, Vic. I'll start with an overview of the consolidated of the National Performance in the Quarter.

Speaker 4: Sales in the first quarter of 9% compared to last year, excluding the impact of acquisitions sales for down 1%, with growth from the aerospace and defense and test businesses being offset by decline in the utility solutions group. The acquisition that at 15 million to sales.

Sales in the first quarter were up 9% compared to last year, excluding the impact of acquisitions sales were down 1% with growth from the aerospace and defense and test businesses being offset by a decline in the utility solutions group the.

The acquisitions added $15 million of sales in the first quarter.

Speaker 4: Adjusted EBIT margins were 9.3% in the quarter compared to 11.1% in the prior year quarter. The margin decline was driven by decreases in the test and USG business.

Adjusted EBIT margins were nine 3% in the quarter compared to 11, 1% in the prior year quarter.

The margin decline was driven by decreases in the test and USG businesses.

Interest expense in the quarter was 733000 compared to 541000 in the prior year due to higher borrowing levels.

Speaker 4: Interest expense in the quarter was 733,000 compared to 541,000 in the prior year due to higher borrowing levels.

Speaker 4: Taxes were 22.3% in Q1 compared to 22.5% in the prior year.

Taxes were 22, 3% in Q1 compared to 22, 5% in the prior year.

Speaker 4: All these items delivered adjusted EPS of 46 cents per share, below prior years, 52 cents per share, but consistent with our internal forecast.

All of these items delivered adjusted EPS of <unk> 46 per share below prior year's 52 per share, but consistent with our internal forecast.

Speaker 4: Operating cash flow in the quarter was 1.9 million compared to 24.8 million last year. The decrease was mainly due to milestone payments received last year, which did not repeat this year, and also payouts of accrued expenses that extended prior year amount.

Operating cash flow in the quarter was $1 9 million compared to $24 8 million last year.

The decrease was mainly due to milestone payments received last year, which did not repeat this year and also paths of accrued expenses that exceeded prior year amounts.

Inventory increases were unfavorable to cash in the quarter, but this was more than offset by good performance on accounts receivable and accounts payable.

Speaker 4: Inventory increases were unfavorable to cash in the quarter, but this was more than offset by good performance on accounts receivable and accounts payable.

Capital expenditures were $14 1 million in the quarter compared to $6 million in the prior year quarter. This.

Speaker 4: Capital expenditures were 14.1 million in the quarter compared to 6 million in the prior year quarter. This increase was driven by the purchase of the NRG headquarters building in Q1. We were presented with a unique opportunity to purchase the building at a favorable price relative to annual rents and drive a cost reduction for this business.

This increase was driven by the purchase of the NRG headquarters building in Q1.

We were presented with a unique opportunity to purchase the building at a favorable price relative to annual rents and drive a cost reduction for this business.

Speaker 4: Turning to segment performance highlights in the quarter are as follows.

Turning to segment performance highlights from the quarter are as follows.

Andy you did see a return to growth in the quarter with reported sales up five 4% excluding.

Speaker 4: A&D did see a return to growth in the quarter with reported sales at 5.4%. Excluding the impact of the NECO acquisition, these businesses delivered 4.1% sales growth.

Excluding the impact of the <unk> acquisition. These businesses delivered four 1% sales growth.

Speaker 4: In Q1 we saw the return of growth in the commercial aerospace markets with an increase of 11% driven by our PTI subsidiary.

In Q1, we saw return the return of growth in the commercial aerospace markets with an increase of 11% driven by our <unk> subsidiary.

Speaker 4: Military aerospace was very strong with 36% growth. Chris Air and Mayday were key drivers of this growth.

Military aerospace was very strong with 36% growth, Chris there and made a were key drivers of this growth.

Speaker 4: The Navy business grew 4% while sales to industrial customers, which are a smaller part of the overall segment, were down 43%.

The Navy business grew 4%, while sales to industrial customers, which are a smaller part of the overall segment were down 43%.

Speaker 4: As Vic mentioned previously, we did see very strong order growth by the A&D Group in Q1. Orders were up 38% with good activity across the military and commercial aerospace markets as well as Navy business.

As Vic mentioned previously we did see very strong order growth by the A&D group in Q1 orders were up 38% with good activity across the military and.

In commercial aerospace markets as well as Navy business.

Speaker 4: PTI, Chris Air, Mayday and Westland all posted significant order gains and more the drivers of the 38% increase for the business.

Hi, Chris there Mayday and Westland, all posted significant order gains and where the drivers of the 38% increase for the business.

Speaker 4: USG saw reported sales growth of 16.4% in the quarter.

USG saw reported sales growth of 16, 4% in the quarter.

Speaker 4: Excluding the impact of the Altenova and Phoenix acquisitions, revenues were down 10.2%. This decline was driven by Doble, which saw sales come in approximately 7 million below prior year. About 3 million of this was driven by the supply chain challenges. Vic mentioned earlier with the balance related to soft end markets.

Excluding the impact of the Ulta, Nova in Phoenix acquisitions revenues were down 10, 2%.

This decline was driven by <unk>, which saw sales coming in approximately $7 million below prior year about $3 million of this was driven by the supply chain challenges as Vic mentioned earlier with the balance related to soft end markets.

Speaker 4: The renewables business at NRG had another strong quarter and delivered 21% growth.

The renewables business at NRG had another strong quarter and delivered 21% growth.

Speaker 4: Adjusted USGE bit margins in the quarter were 21.8% compared to 24.5% in the prior year Q1.

Adjusted USG EBIT margins in the quarter were 21, 8% compared to 24, 5% in the prior year Q1.

Speaker 4: The reductions were driven by D leverage on the sales of the client double and delusion from acquisitions.

The reductions were driven by deleverage on the sales decline at Doble and dilution from acquisitions.

Orders for USG in Q1 came in at $66 2 million, which was a 36% increase.

Speaker 4: Orders for USG and Q1 came in at 56.2 million, which was a 36% increase.

Speaker 4: backlog finished at 94.4 million compared to 44.9 million in the prior year quarter. Approximately 34 million of this increase was driven by the acquisition.

Backlog finished at $94 4 million compared to $44 9 million in the prior year quarter, approximately 34 million of this increase was driven by the acquisitions.

Speaker 4: For the test business, we saw sales growth at 4.2% in the quarter. The growth was led by strength in China, which has continued to see very high levels of activity for test and measurement projects.

For the test business, we saw sales growth of four 2% in the quarter. The growth was led by strength in China, which is continuing to see very high levels of activity for test and measurement projects.

Speaker 4: We did see margin pressure in this business during the quarter as adjusted even when margins went from 12.9% in the prior year to 9.2% in the current quarter.

We did see margin pressure in this business during the quarter as adjusted EBIT margins went from 12, 9% in the prior year to nine 2% in the current quarter.

Speaker 4: The business is experiencing inflation driven by materials, labor and freight as they manage increasing demand.

The business has experienced inflation experiencing inflation driven by materials labor and freight as they manage increasing demand.

Speaker 4: We're very focused on driving cost containment, productivity and price increases to offset these impacts as we move forward.

We're very focused on driving cost containment productivity and price increases to offset these impacts as we move forward.

Speaker 4: On the orders front, we saw continued strength in the pace of business for tests. Ordered for 67.9 million in the quarter, which is an increase of over 50% compared to last year.

On the orders front, we saw continued strength in the pace of business for test orders were $67 9 million in the quarter, which is an increase of over 50% compared to last year.

Speaker 4: The top line outlook for this business is strong with order strength being experienced in all world areas.

The top line outlook for this business is strong with order strength being experienced in all world areas.

Speaker 4: That represents the summary for Q1 financial performance. As Vic mentioned, it looked like we could get a little better, do a little better than our internal projections as the orders were so strong during the quarter. But with persistent supply chain and labor challenges, we ended up a bit constrained on the top line.

That represents a summary for Q1 financial performance as Rick mentioned it looked like we could get a little better do a little better than our internal projections as the orders were so strong during the quarter.

But with persistent supply chain and labor challenges, we ended up a bit constrained on the top line, but.

Speaker 4: But we are still on track to deliver the year as laid out during our November earnings announcement and call.

But we are still on track to deliver the year has laid out during our November earnings announcement and call.

Speaker 4: If we turn to the guidance in the release, we reiterated the earnings for shared guidance for fiscal 22 calling for adjusted EPS in the range of $3.10 to $3.20, or growth of 20% to 24%.

If we turn to the guidance in the release, we reiterated reiterated the earnings per share guidance for fiscal 'twenty to calling for adjusted EPS in the range of $3 10 to $3 20.

Oil growth of 20% to 24% this year.

Speaker 4: This earnings per share range assumes 2022 sales in the range of 815 to 835 million are growth of 14 to 17%.

This earnings per share range assumes 2022 sales in the range of $815 million to $835 million or growth of 14% to 17%.

Speaker 4: We're not breaking out guidance by quarter for 22, but we do expect only modest DPS growth in the second quarter and very strong growth in Q3 and Q4.

We're not breaking out guidance by quarter for 'twenty, two but we do expect only modest EPS growth in the second quarter and very strong growth in Q3 and Q4.

Speaker 4: We are watching closely as the Almacrown variant was disruptive across the economy in January , creating more employee absences and supplier disruptions as well. It appears that things are stabilizing and as you can see, we certainly have the backlog in place to drive to the guidance range.

We are watching closely as the AMA Crown variant was was disruptive across the economy in January <unk>.

Waiting more employee absences and supplier disruptions as well it appears that things are stabilizing and as you can see we certainly have the backlog in place to drive to the guidance range.

So now I'll turn it back over to Vic.

Speaker 3: Hey, Chris, if that's not quite a few of my thoughts or were in my commentary, I'll just offer a few more comments before we move into Q&A.

Thanks, Chris as I touched on quite a few of my thoughts earlier in my commentary. This offer a few more comments before we move into Q&A.

We feel good about the start of 2022 are excited about the forecast we have out there.

Speaker 3: We feel good about the start of 2022. We're excited about the forecast we have out.

Speaker 3: Lots of growth coming as we move in a second quarter and beyond. Back a lot of support to outlook and we hope that that's a good place right now.

It's a growth coming as we move into the second quarter and beyond.

Backlog supports the outlook and we feel that ESCO is good place right now.

Speaker 3: The cycles of our different businesses are starting to kick in and that bodes well not just for 22 but the future years as well.

The sizes of our different businesses are starting to kick in and that bodes well for 'twenty two with the future years as well.

Speaker 3: All of our subsidiary management teams will be in the Senate. We'll ask next week, that our const jury will be focused on all the activities that must take place to get...

Our subsidiary management teams will be here in St. Louis next week.

I assure you we'll be focused on all the activities that must take place.

22 delivered well.

Speaker 3: See the burglaries again in an April recession more focused on long-term growth and profitability. It's probably the fun time of the year and we'll have two in-depth touch points coming up.

You'll see the businesses again in April for SaaS, and more focus on long term growth and profitability. It's always a fun time of the year and only we will have to in depth touch points coming out. This allows us to drive proper alignment with the operating leadership and moves us toward our ultimate goal of profitable growth efficient use of capital at higher returns.

Speaker 3: This allows us to draft proper alignment with the operating leadership and move just toward our ultimate goal of proper growth, but this usually can't go in high returns.

So I don't think we're ready for Q&A.

Speaker 1: If you have a question, you need to press star 1 on your tele.

That's a question you press star one on your telephone.

Speaker 1: To withdraw your question, just press the Pound key. Please send by or we'll compile the Q&A run.

To withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

Speaker 1: First question, a confluent of Tom Mall from Stevens. Your line is open. Good afternoon and thanks for.

Our first question will come from the line of Tommy Moll from Stephens. Your line is open.

Good afternoon, and thanks for taking my questions.

Hi, Tommy.

Speaker 4: I wanted to start on double today if I heard you correctly Chris I think you said for the quarter the change was down seven which was three million from

I wanted to start on Doble today, if I heard you correctly, Chris I think you said for the quarter. The change was down 7%, which was $3 million from supply chain issues that your contract manufacturer and then.

Speaker 4: another four on the tough compares from the budget flush at the end of the last calendar year. So did I hear those numbers right and can you give

Another four on the tough compares from the budget flush at the end of the last calendar year.

So did I hear those numbers right and can you give any more context around it.

Speaker 4: Yeah, you got it right. You know, I would say last year in Q1, the growth wasn't explosive in this segment. I think it was around 3%. But we were still kind of newer into the pandemic at that point. And honestly, we expected.

Yes, you got it right.

I would say last year in Q1.

The growth wasn't explosive in the segment I think it was around 3%, but we were still kind of newer into the pandemic at that point and honestly we expected.

Speaker 4: you know, the numbers to be a fair bit lower last year. We did see that kind of flush of year and stuff. You mentioned that kind of gave us that growth a year ago. So that's kind of the reference to that and the software in markets this year where we didn't see a similar kind of activity, but you had it right on the 7 and the 3.

The numbers to be a fair bit lower last year.

We did see that kind of flush of year and stuff you mentioned that kind of gave us that growth a year ago.

So that's kind of the reference to that in the softer end markets. This year, where we didn't see a similar kind of activity.

But you got it right on the 7% to 30.

And just in terms of any context, you can share on the the issue there with the contract manufacturer does it feel like.

Speaker 4: And just in terms of any context you can share on the issue there with the contract manufacturer, does it feel like?

Speaker 4: and all of that has been resolved as you go into Q2 or that might...

All of that has been resolved as you go into Q2 or that might be a nagging headwind for some time.

Speaker 3: I would say more it's going to resolve itself over the next six months. I mean, I'd like to say it's all behind us, but you know, it's almost all chip issues. I mean, the boxes are built already go, but you know, we do have some chip shortage at those places that I do want to make sure that I understand it when I set on our hands this way, if you think that happened, I mean, we redesigned about 90 boards at the old well last year.

I would say more is going to resolve itself over the next six months I'd like to say, it's all behind us.

It's almost all chip issues among the boxes are built and ready to go.

We do have some chip shortage.

Places that do.

I do want to make sure everybody understands when I sit on our hands just waiting for things to happen I mean, we redesigned about 90 boards available last year.

Speaker 3: to make sure we keep up with things. We can get all the way there, but have we not gone through that process over the past 12 months, I think?

To make sure we can keep up with things that we can get all the way there, but had we not gone through that process over the past 12 months.

Speaker 3: The impact of this fly chain would have been much more significant. And that's probably something that we're going to continue to do in the United States through the first half of this year. Is these things kind of flush themselves?

The impact of the supply chain, whether it would have been much more significant and that's probably something that we're going to continue to do.

Through the first half of this year as these things kind of flush themselves out.

Speaker 4: Thank you, Vic. And just moving to the higher level here again, around USG and maybe double.

Thank you Vic and just moving to the higher level here again around USG and maybe double specifically.

Speaker 4: In the release, you pointed to some of the themes that are probably become a little better known at this point just in terms of the overall electric utility market.

The release, you pointed to some of the themes that are probably would come a little better known at this point just in terms of the overall electric utility markets impacted by.

Some of the reduced consumption.

Potentially pandemic related at the same time in your outlook.

Speaker 5: related the same time in your outlook.

Speaker 5: I think it's pretty safe to assume you're implying growth for double on a four-year basis. So if you could just help us reconcile those.

I think it's pretty safe to assume you're you're implying growth for noble on a full year basis. So if you could just help us reconcile those two data points or provide any context that'd be appreciated. Thank you.

Speaker 4: Yeah, I think, you know, if you go back to last year a little bit, Tommy, again, it's a little bit, I hate to talk about the comps too much, but we had quite a soft second quarter there. And then even in the third and the fourth, we didn't see the...

Yes, I think.

If you go back to last year, a little bit Tommy again, it's a little bit I hate to talk about the comps too much but we had quite a soft second quarter there.

And then even in the third and fourth we.

We didn't see.

Speaker 4: We didn't see the business kind of recover the way we were expecting, you know, from those pre-pandemic levels. So.

We didn't see the business kind of recover the way we were expecting from those prepaying demick levels. So.

Speaker 4: We expect growth really, you know, as we go into the second quarter, just based on kind of how weak it was a year ago. And then again, we feel like the second half of the year, the overall activity levels should continue to stabilize. And, you know, I would tell you in the fourth, we have pretty conservative numbers in. So overall, it's just a little bit of.

We expect growth really as we go into the second quarter, just based on kind of how weak it was a year ago.

And then again, we feel like the second half of the year.

The overall activity levels should continue to stabilize.

And I would tell you in the fourth we have pretty conservative numbers in so so overall, it's just a little bit of.

Speaker 4: easier consoles we move through the year and kind of continue into get into elits let's say hopefully a more normalized environment in those markets yeah i'm just saying i mean i think

Easier comps as we move through the year and kind of continuing to get into let's say hopefully a more normalized environment in those markets.

Yes, I would just add I mean I think.

Yes.

I'd like to say those are all really hard things that we can point to where we're really at our comfort that we're going to see that kind of growth over the remainder of the year's really talk to the customers and so we have a lot of people that are constantly interfacing with the customers and so we've kind of engage where.

Speaker 3: I'd like to say those are all really hard things that we've been going to really get our comfort and we're going to see that kind of growth over the remainder of the years really talk about the customer.

Speaker 3: So, you know, we have a lot of people that are constantly interfacing with the customers, and so we kind of can gauge where, you know, whether their assignment is what kind of buying activity they see. The other thing I think is going to be really important for us is, you know, the best year, everything that we did with the customer in particular.

Or are there some of it is what kind of buying activity. They see the other thing I think it's going to be really important for us as well as last year everything that we did with the customer virtual.

Speaker 3: And so we got our client conference last year. We didn't have the life of transport, the former adverse last year. We're doing that.

So we have not had our client conference last year, we didn't have reliably transport former adverse last so we're doing that this year.

Speaker 3: And so while I think attendance will be certainly less than it's been historically, getting many people in the same room, getting excited, having them see our new products.

So while I think it's and this will be certainly less than it's been historically given any people in the same room get them excited have an MCR new products and just kind of a quarter remember we did introduce a number of new products over the second half of last year and I think those will get traction in the remainder of the.

Speaker 3: And I think it's just kind of important to remember we did introduce a number of new products over the second half of last year. And I think those will get traction in the remainder of this year. So I do think that all of the overall utility spaces are picking up as quickly as we've hoped.

This year, so I do think that although the overall utility space is picking up as quickly as we'd hoped.

Speaker 3: I think for us with the areas that we're in, we're gonna see some growth this year. Appreciate it, Vic.

For us what are the areas that we're in we're going to see some growth this year.

I appreciate it appreciate it Chris I'll turn it back.

Thanks Tommy.

Speaker 1: A question on the one line right now of Cristian Charman Je? Bolsonaro. For into the dpi he may begin.

Our next question will come from right now.

John <unk> from Sidoti.

You may begin.

Speaker 6: Good afternoon guys and thanks for taking our questions. Given the increases in the material and labor costs, where are you having the most success amongst your businesses and raising prices to offset those costs? And by what magnitude can you do it by?

Good afternoon, guys and thanks for taking my questions.

Given the recent increases in material and labor costs are you, having the most success amongst your businesses in raising prices to offset those costs and by what magnitude can you do it by.

Speaker 3: Yeah, I do probably the two biggest places are in our test business. Although it takes a little time to pick that up, you know, to feel or realize that because, you know, you increase the price, you already have contracts and that's such a quick turn to business.

Yes, I'd say thats, probably the two biggest places or in our test business model. It takes a little time to pick that up be able to realize that because.

We increased the price already have contracts and thats, such a quick turn business.

Speaker 3: that you know, you don't necessarily get on one contract or maybe get on an accident. So we had some success there. And the aerospace side as well, I think we've seen a good bit of opportunity. And then pieces of our utility post, but I would say that's led less broad.

Ed.

You don't necessarily get it all on one contract and then given the actions. We had some success. There is only aerospace side as well I think we've seen a good bit of opportunity and then pieces of our utility business, but I will say this word less broad based.

Speaker 6: And when you look at the portfolio in a broad sense, which business is the most concerned that this still exists inventory in the channel that you have to work through before you reach, maybe a revenue equilibrium?

Okay.

When you look at the.

Portfolio in a broad sense.

Which businesses are most concerned that there's still excess inventory in the channel that you have to work through before you maybe revenue equilibrium.

Speaker 3: I don't really view that there's a lot of inventory, finished inventory that's customer has they have to work through. The most part of me, I think.

I don't really view that Theres a lot of inventory finished inventory that the customer has they have to work through for the most part I think the fact that our.

Speaker 3: Ordered levels have been so high over the past two quarters is kind of evidence of this.

Order levels have been so high.

Over the past two quarters is kind of evidence of that.

Speaker 3: I mean, there's probably some people are just like we're trying to get ahead of the thing and buy more product, buy more raw material. I'm sure there's some of that with you with with our customers. I think the vast majority of just to pick up of the business. I don't think there's a lot of inventory after it has to be worked.

Theres, probably some where people are just like we're trying to get ahead of the thing and buy more product by more raw material I'm sure. There's some of that.

With our customers and I think the vast majority of that just to pick up.

So I don't think Theres a lot of inventory out there that has to be worked through we have to remember, particularly on some of the commercial aerospace based up on for awhile.

Speaker 3: We have to remember particularly on some of the commercial aerospace. They stopped buying for a while. I mean, it would be seven. Seven, you know, they just stopped buying. And so now is that ramps up? You know, they wanted, yes.

Seven.

Buying in and so now as that ramps up.

They wanted to.

Speaker 3: So that's the other challenge you always have when you have these kind of creep up.

Okay.

So that's the other challenge you always have when you have these kind of quick uptake.

Speaker 6: Okay, and just one more. A lot of the recent acquisitions, but there are any core savings benefits that you might be able to realize in the coming year that you wanna call out and let us know about.

Okay, and just one more in light of the recent acquisitions are there any cost savings benefits that you might be able to realize in the coming year that you want to call out and let us know about.

Speaker 3: So yeah, we were looking at my, I would say on the, the,

So we were looking at.

I would say on the utility side I don't think its as much cost savings it is leveraging the technology and the.

Speaker 3: The utility side, I don't think it is as much cost savings, it is leveraging the technology and the sales force that we have. The rep network, and those type of things. So I think what we're going to see there is more work.

US sales force so we have the rep.

Rep network and those type of things. So I think what we're going to see there is more.

More.

Speaker 3: True flavoring it more orders is a result of having those together because again we talked about some of the last calls. It truly is a matter of having a stronger presence in Europe and Asia and I think it's going to help. You know, not only the businesses that are already serving that market but we think there will be some pull through of double products in those markets. And vice versa that some of the products that.

Throughput, we can get more orders as a result of having those together because again as we've talked about some of the last calls it truly is a matter of having a stronger presence in Europe and Asia I think is going to help that.

Ali the businesses that are already serving that market, but we think there'll be some pull through of available products in those markets and vice versa with some of the products that.

Speaker 3: are being sold currently in Europe , we're building to bring some of those back in the US. So I think that's really the play on that side. I would leave go with two relatively small acquisition. We are going to move them out of their current facility in the PTI facility. So people will be able to take some significant costs, again, all the one small business out of that business.

So currently in Europe .

We're bringing some of those back in the U S. I think that's really the play on that side with Nikko, which is relatively small acquisition, we are going to move them out of their current facility and the Pts facility. So it will be able to take some significant cost again, although on a small business out of that.

That business.

Okay, great. Thanks, I'll get back into queue.

Speaker 1: And once again, that's Star Wars Requestion Star Wars.

And once again Thats star one for questions.

Speaker 1: Our next question will come from line of John 1010 from CJS securities. We may begin.

Our next question will come from the line of Jon <unk> from CJS Securities you may begin.

Speaker 7: Hi, thanks for taking my question. I actually just wanted to follow up on that, that the previous question is just about all pomellum and how you're expanding in Europe . How is that going kind of, have you seen that pull through of your product yet, or is it still going to take some time to realize those kinds of revenue synergies?

Hi, Thanks for taking my question actually I, just wanted to follow up on that.

Yes.

Question, just about ought to know about how youre expanding in Europe , how is that going and kind of have you seen that.

All three of your products, yet or is it still going to take some time to realize those kinds of revenue synergies.

Speaker 3: I think it's gonna take a little bit, you know, we, a little bit of time and we've assumed some pick up across the business this year, but it really kicks in next year. Because it

I think we can dig a little bit.

At a time when we have assumed some pick up across the business this year, but it really kicks in next year because.

Speaker 3: The big thing we've done so far is kind of rationalize the organization and the Salesforce. And again, kind of making sure we have the best reps at each of the areas.

The Big thing we've done so far is kind of rationalize the organization.

And the sales force and again kind of making sure we have the best reps in each of the areas.

Speaker 3: you know, making sure people are focused on the right thing. He's getting trained on each other's products. And so, you know, that's a bit of a process, if you will. The next step will be kind of looking at the products, making sure we're selling the best products.

Making sure people are focused on the right and it is good and trained on on each other's products and so that's a bit of a of a process. If you will the next step will be kind of looking at the products, making sure. We're we're selling the best products.

Speaker 3: you know, of each company in each location. So I think you'll see the big pickup with that combination in, you know, late this year and going into this.

Of each company and each location, so I think youll see the big pick up with that.

Combination.

Late late this year and going into next year.

Speaker 7: Understood. Thanks. And then just moving on to the test business. What's driving the strength and the activity that you're seeing there? That's a pretty big orders numbers is that sustainable number one and then number two, I guess what when do you get back to your historical margins? It was with the inflation away, and then you know, the offsets that you're trying to

Understood. Thanks, and then.

Moving on to the test business whats driving the strength in the activity that youre seeing there thats a pretty big.

Orders number is that sustainable number one and then number two I guess when do you get back to your historical margins there with the inflation related.

The offsets that you are trying to.

Ramp up.

Speaker 3: So I see the biggest thing that we talked about in the last call are these filters that we're making for Mp filters that were making for data centers and we do those for some commercial

Sure. So I'd say the biggest Sanjay you talked about on our last call are these filters that were making for the A&P filters that were making for data data centers and we do those for some commercial.

Speaker 3: customers, but the largest driver right now is the US government. And so they're putting a lot of data centers in and it's not like they're shared data centers. So each of the different agencies have their own data centers.

Customers, but the largest driver right now is the U S government and so they're putting a lot of data centers and it's not like they're shared data centers. So each of the different agencies have their own data centers.

Speaker 3: That's been a big, big driver for us this year and everything they're telling us and I think they have put insight into the next couple of years is that that piece of the business is pretty sustainable going forward. The interesting thing, which is different than what we've seen in past years is

That's been a big big driver for US this year and everything they are telling us and I think they have with insight.

Into the next couple of years.

That piece of the business is pretty sustainable going forward the interesting thing, which is different than what we've seen in past years.

Speaker 3: We typically would have a very large project kind of flowing through it, right? We'd have a large automotive project or large defense project that was flowing through You know coming out back or going through the sales channel and right now we don't have those yet We're able to grow the business now some of those opportunities go up

We typically would have a very large project kind of flowing through right. We'd have a large automotive projects or large defense project that is falling through.

Coming out of backlog going into the sales channel and right now we don't have those yet we're able to grow the business and as some of those opportunities are still out there, but it's very encouraging to me that we're able to.

Speaker 3: But it's very encouraging to me that we're able to grow the business at the same time, not pull those big projects through. Second, I have your question. As I mentioned earlier, I think it's going to take a little time. We're now pricing some of those cost increases into the bid. And so I think you're going to see pretty steady.

Grow the business.

At the same time not pulling those big projects.

Second half of your question as I mentioned earlier, I think it's going to take a little time now.

Now pricing some of those.

Cost increases into the bids and so.

Youre going to see pretty steady.

Speaker 3: Margin Road throughout the year, four to reasons one, at the grab our higher level of volume, so to be leveraging our overhead, and then the other one is some of these price increases, if you know, it should be hitting, you know, the next quarter and I think even more so, and such.

Margin growth throughout the year for two reasons, one the revpar higher level of volume certainly leverage leveraging our overhead and then the other one is some of these price increases.

Should be hitting.

Next quarter, and I think even more so on the subsequent two quarters.

Speaker 7: Okay, great. And then lastly, just a higher level question. What's giving you the confidence to reiterate your guidance for the year? I think I get the demand side that seems pretty evident. But what's your thinking about when and how to supply chain issues resolve where the more repricing pass through that you're aiming for as opposed to, you know, seeing a relief from the inflation and lay of supply chain issues?

Okay, Great and then lastly, just a higher level question.

What's giving you the confidence to reiterate your guidance for the year I think I get the demand side that seems pretty evident.

But what's your thinking about when and how the supply chain issues are resolved or is it more of a pricing.

Pass through that Youre aiming for it as opposed to.

Being a relief from the inflation in labor and supply chain issues.

Speaker 3: So it's both of those and I would say the other thing is we're putting in additional capacity to be able to ramp up.

So it's both of those and I would say the other thing is we're putting in additional capacity to be able to ramp up the business.

Speaker 3: So, for instance, our test business, because it's kind of an outsized growth that we're seeing. So we, we, additional facilities, we'll have that up and running in a second half of a year. You know, we're.

For instance, in our test business because it is kind of an outsized outsized growth that we're seeing so we've leased additional facilities, we'll have that up and running in the second half of the year.

We are.

Speaker 3: We can move in some of the lower end products into different locations to make sure that we have all these filters in one place where we can perform on those, rad in another shift in our facility in Mexico to be able to manage some of the growth. So it's really a combination of...

Can move in some of the lower end products into different locations to make sure that we have all these filters in one place where we can perform on those we're adding another shift in.

And our facility in Mexico to be able to demand in some of the growth. So it's really a combination of.

Speaker 3: more capacity, price and should be better, particularly a second half of the year. And you know, it's a supply chain. You know, I think we're understanding it better. And so I think you understand it better. You make some of the changes you have to make to be able to work through that process. Thank you very much.

More capacity pricing should be better, particularly in the second half of the year.

Either the supply chain I think we're understanding it better and so I think you understand it better you make some of the <unk>.

<unk> have to make to be able to to work through that process.

Great. Thank you.

Thanks, Sean.

Speaker 1: Thank you. And I'm not showing any further questions in the queue at this moment. I'd like to kind of call back over to the speakers for any closing remarks.

Thank you and I'm not showing any further questions in the queue. At this moment I would like to turn the call back over to the speakers for any closing remarks.

Speaker 3: Okay, well, that's thank everybody for their interest. We'll end the call now and before the talk to you in our next call.

Okay, well, thank you everybody for their interest in the <unk>.

Call now and look forward to talking to you in our next call.

Speaker 1: and this concludes today's conference call. Thank you for participating. You may know this connect. Everyone have a great day.

And this concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Speaker 8: ????

Yes.

[music].

Okay.

Good morning.

Hi.

Okay.

Thanks.

[music].

Okay.

[music].

Speaker 8: I.

[music].

Speaker 1: Good day, welcome to the Ethical Technology's first quarter of 2020 to the earnings conference call. Today's call is may be recorded with us today, our big, richy, Chairman and CEO Chris Tucker, Vice President and CFL. And now to present the full looking statement, I would like to turn the call over to Kate Laurie, Vice President of Otoless Relations. Please go ahead.

Good day and welcome to the ESCO technologies first quarter 2020 earnings Conference call. Today's call is being recorded with US today are they richey, chairman and CEO , Chris Baker, Vice President and CFO .

Now to present the forward looking statement I would like to turn the call over to Kate Lowrey, Vice President of Investor Relations. Please go ahead.

Thank you.

Speaker 2: Statements made during this call regarding the timing of recovery and growth of our end-markets. The amounts in timing of 2022 and beyond revenues, impacts of COVID and COVID variants and recovery expected as a result of COVID vaccines. Recovery in commercial aerospace and utility markets, impacts of supply chain issues and cost inflation, availability of labor, adjusted EPS, adjusted EBITDA, cash, shareholder values, the timing of block-5 deliveries.

Statements made during this call regarding the timing of recovery and growth of our end markets the amounts and timing of 'twenty to 'twenty, two and beyond revenue impacts of Covid and Covid variance in recovery expected as a result of Covid vaccine recovery in commercial aerospace and utility market impacts of supply chain issues and cost inflation availability of law.

Labor.

EPS adjusted EBITDA cash shareholder value timing of block five deliveries success in completing additional acquisitions and successfully integrating acquisitions. The results of cost reduction efforts and other statements, which are not strictly historical are forward looking statements within the meaning of the safe Harbor provisions of the federal Securities laws.

Speaker 2: and completing additional acquisitions, success and integrating acquisitions. The results across production efforts and other statements which are not strictly historical are forward looking statements within the meaning of the safe harbor provisions of the federal security clause.

Speaker 2: These statements are based on current expectations and assumptions and extra results may differ materially from those projects in the forward-looking statements. Due to risks and uncertainties that exist in the company's operation 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 8K to be filed. We undertake no duty to update or revise any forward-looking statements whether it is a result of new information, future events, or otherwise.

Payments are based on current expectations and assumptions and actual results may differ materially from those projected in the forward looking statements.

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, whether as a result of new information future events or otherwise.

Speaker 2: 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 issue today and found on the company's website at www.eskatechnologies.com under the link investor relations. Now we'll turn the call on.

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 our press release issued today and found on the company's website at Www Dot ESCO technologies Dot com under the link Investor Relations now I will turn the call over to Vic.

Speaker 3: HK and thanks to everybody for joining today's call. I had the risk of being redundant and I'd like to start to call off again that thing in our employees across the company for their ongoing efforts to manage the business. There continue to be a lot of challenges over.

Thanks, Kate and thanks to everybody for joining today's call.

Risk of being redundant and I'd like to start to call off again, I think in our employees across the company for their ongoing efforts to manage the business. There continue to be a lot of challenges to overcome on a regular basis.

Speaker 3: We continue to see supply chain challenges with delivery, cost inflation and the on the crime variant of COVID impacting our business.

To see supply chain challenges with delivery.

Cost inflation, and the omicron varian or COVID-19 impact their businesses in spite of that our teams continue to demonstrate tremendous resilience. Our employees are working very hard and doing all they can to support our customers and drive the business forward and for that I'm very appreciative.

Speaker 3: Despite of our team continue to demonstrate from Minister resilience, our employees are working very hard and doing all they can to support our customers and drive the business forward. And for that I'm very proud.

Speaker 3: The businesses continue to gain momentum as we start fiscal 22. Two of our three business segments delivered organic sales growth in a first quarter. We expect all three segments will deliver organic growth and it remaining three ports.

The business has continued to gain momentum as we start fiscal 'twenty two.

Two of our three business segments delivered organic sales growth in the first quarter. We expect all three segments will deliver organic growth in the remaining three quarters, we have a lot of confidence in that outlook due to our continued strong order output. If you recall the fourth quarter of fiscal 'twenty, one had order growth of more than 30%.

Speaker 3: There's a lot of confidence in that outlook. Do our continued strong order output. If you recall, the fourth quarter of fiscal 21 had a order growth of more than 30%. Well, for the first quarter of 22, which each order growth of more than 40% compared to prior Q1. Our backlog is at record level, and that goes well for the balance of the fiscal 22 and beyond.

For the first quarter of 'twenty, two we achieved order growth of more than 40% compared to prior Q1, our backlog is at a record level and that bodes well for the balance of the fiscal <unk> and beyond.

Speaker 3: Crystal get into some of the financial details in a few minutes. I'll start off with some top-level commentary of each of our business ag.

Chris will get into the to some of the financial details in a few minutes I'll start off with some top level commentary, although each of our business segments.

Speaker 3: Starting with the A&D, which is the recovery continuing for this post.

Starting with the A&D, we see the recovery continuing for this business.

Speaker 3: We continue to monitor the commercial aerospace markets closely. There likely be some more disruptions with travel as a pandemic situation continues. We're undoubtedly seeing higher levels of business activity from our commercial aerospace complex

We continue to monitor the commercial aerospace markets closely there'll likely be some more disruptions with travel as a pandemic situation continues we're undoubtedly seeing higher levels of business activity from our commercial aerospace customers.

Speaker 3: 2020 and 2021 were really tough years in his market. So we're glad to see the gloves return.

2020 in 2021 were really tough years in this market. So we are glad to see the growth returning.

Speaker 3: For AMD overall, we saw that inter-orders grow by 38%. Admittedly, we were coming off a low base. It is great to see the backlog rebound.

Our A&D overall, we saw our entered orders grew by 38% admittedly we were coming off a low base. It is great to see the backlog rebounding like this we saw in our press release mentioned of challenges regarding supply chain performance and labor availability. Those challenges are definitely being felt by the A&D grew.

Speaker 3: In SOTA Press release, mention of challenges regarding supply chain performance and labor availability. Both challenges are definitely being talked by the AND Group.

Speaker 3: In particular, our California-based businesses of BACO, PTI, and Chris Air are saying challenges as we work to ramp the higher levels of business activity. We did mess themselves in a quarter because of these challenges.

<unk>.

In particular in our California based businesses of Banco <unk> and Chris There are some challenges as we work to ramp up to higher levels of business activity. We did vessel sales in the quarter because of these challenges. The teams are highly focused on increasing capacity to meet our customer demand and we're confident that these.

Speaker 3: The teams are highly focused on increasing capacity to meet our customer demand. They were confident that these are just timing issues within the year.

Or just timing issues within the year.

Speaker 3: The last thing I wanted to mention regarding AND was our acquisition of Niko, which we were able to close in the first quarter, and we're excited about what Niko briefed our portfolio. This business will fold into our PTO-City-Vary, bringing a solid management team with great product technologies. We're very happy to...

Lastly, I wanted to mention regarding AMD was that our acquisition of Nico, which we were able to close in the first quarter and we're excited about what <unk> brings to our portfolio.

This business will fold into our Pts subsidiary, bringing a solid management team with great product technologies, we're very happy to have them on board.

Speaker 3: Seller of A&D, our test business also had a green order's performance in the first quarter.

Similar to A&D, our test business also had a greater orders performance in the first quarter.

Speaker 3: Quarter from nearly 68 million for the first quarter, compared to 43 million in prior year first quarter.

Orders were nearly $68 million for the first quarter compared to 43 million in the prior.

Prior year first quarter. So the growth is significant and broad based with double digit increases in all global markets.

Speaker 3: So they grow to significant and broad base. The double-vision increases in all global markets.

Speaker 3: Sales growth was a little lighter in Q1, which we expected, and we're planning to see strong sales performance over the coming quarters for tests.

Sales growth was a little lighter in Q1, which we expected and we're planning to see strong sales performance over the coming quarters for test we.

Speaker 3: We continue to face some challenges with profit margins during the first quarter.

We continue to face some challenges with profit margins during the first quarter for test the margins are slightly down compared to what we had in our internal plans.

Speaker 3: The margins are slightly down compared to what we had in our internal plans. And as you saw in a press release, you're also down versus prior to the year.

And as you saw in our press release Youre also down versus prior year.

Speaker 3: This has been a key focus for us. No doubt inflation challenges or acute protest. So we have programs around cost management and price realization to help drive the margins as we move forward.

This has been a key focus for US no doubt inflation challenges are cute for test. So we have programs or our cost management and price realization to help drive the margins as we move forward.

Speaker 3: The segment is our largest user of freight services. As we all know, they are higher cost increases in this area, which is also impact normal.

Speaker 3: Martin Expans in the East to come is who grow this business. But to keep part of our value story here and we're focused on achieving that result.

Speaker 3: For USG, the story Q1 was bitmixed. We had to expect to sales contributions from their recent acquisitions, so it was nice to see that coming through. Integration of the acquired businesses is going well and is on track.

For USG. The story in Q1 was a bit mixed we hadn't expected sales contributions from our recent acquisitions. So it was nice to see that coming through integration of the acquired businesses is going well and is on track.

Speaker 3: We also saw another strong order for NRG, so things continue to go very well in a reusable space.

We also saw another strong order quarter for NRG. So things continue to go very well in the renewable space.

Speaker 3: We did experience some challenges at Doble. Approximately 3 million of the failed shortfall was really the supply chain challenges with our contract manufacturer.

We did experience some challenges at doble approximately $3 million of the sales shortfall was related to supply chain challenges with our contract manufacturer.

Speaker 3: We also had tough cops all last year's Q1. With customers release some funding for calendar, year in person.

We also had tough comps to last year's Q1 with customers release, some funding for calendar year end purchases, we didn't see a repeat of that here in this first quarter, but the comparisons eased for durable over the coming quarters, and we expect the growth to kick back in during Q2 and Q3.

Speaker 3: We didn't see a repeat of that in this first quarter. But the comparison is used for no longer coming quarters. And we expected growth to kick back in, there in Q2 and Q3.

Speaker 3: We continue to feel strongly that utility markets have very very well grown characteristics over the long term. We also feel that the portfolio of companies that we put together will be very well positioned to take advantage of this growth.

We continue to feel strongly that utility markets have very favorable growth characteristics over the long term and we also feel its portfolio of companies. When we put together will be very well positioned to take advantage of this growth.

Speaker 3: Overall, the quarter came in right on top of the internal projections we had when the quarter started.

Overall, the quarter came in right on top of the internal projections, we had for the quarter started.

Speaker 3: high-order activities for their higher level of sales, but we couldn't get that out the door given supply chain and labor challenge.

The high order activity supported a higher level of sales, where we couldnt get that out the door given supply chain and labor challenges at the end of the day. We are on track for the 22 expectations that we laid out in November the plant is back end loaded divestment system with our original projections and supported by backlog.

Speaker 3: By the mind, we feel good that way we are after the first quarter. Now I'll turn those chairs.

Bottom line, we feel good about where we are after the first quarter now I will turn it over to Chris.

Speaker 4: Thanks, Vic. I'll start with an overview of the consolidated financial performance in the quarter.

Thanks Vic.

Start with an overview of the consolidated financial performance in the quarter.

Speaker 4: Sales in the first quarter of 9% compared to last year, excluding the impact of acquisitions, sales were down 1%. With growth from the aerospace and defense and test businesses being offset by decline in the utility solutions group. The acquisition that had 15 million to sales.

Sales in the first quarter up 9% compared to last year, excluding the impact of acquisitions sales were down 1% with growth from the aerospace and defense and test businesses being offset by a decline in the utility solutions group.