Earnings call transcript: ESCO Technologies Q3 2025 sees EPS fall short

ESCO Technologies Inc. reported its financial results for the third quarter of 2025, revealing an earnings per share (EPS) of $1.60, slightly below the forecasted $1.63. The company’s revenue also fell short of expectations, coming in at $296.3 million compared to the projected $310.67 million. Following the announcement, the stock saw a decline of 1.1%, closing at $189.87 in after-hours trading. According to InvestingPro data, the company has demonstrated remarkable strength with a 63.79% return over the past year and maintains a "GOOD" overall financial health score. Four analysts have recently revised their earnings estimates upward for the upcoming period, suggesting continued optimism despite the current miss.

Key Takeaways

• ESCO Technologies’ EPS of $1.60 missed the forecast by 1.84%.
• Revenue was below expectations by 4.63%.
• Stock price dropped by 1.1% in after-hours trading.
• The company raised its full-year EPS growth guidance to 21-24%.
• Significant growth in orders and a record backlog of $1.2 billion.

Company Performance

ESCO Technologies demonstrated robust performance in Q3 2025, with orders increasing significantly, resulting in a book-to-bill ratio of 1.3. The company achieved a 27% increase in sales on a reported basis and an 11% organic growth. Adjusted EBIT margins improved to 21.1% from 19.3% in the previous year, reflecting efficient cost management and operational improvements.

Financial Highlights

• Revenue: $296.3 million, missing the forecast by 4.63%
• Earnings per share: $1.60, a 25% increase YoY
• Adjusted EBIT margins rose to 21.1% from 19.3%
• Record backlog of nearly $1.2 billion

Earnings vs. Forecast

ESCO Technologies’ Q3 2025 EPS of $1.60 fell short of the $1.63 forecast, marking a surprise of -1.84%. This miss contrasts with the company’s historical trend of meeting or exceeding expectations. Revenue also missed projections, coming in at $296.3 million against a forecast of $310.67 million, a surprise of -4.63%.

Market Reaction

Following the earnings release, ESCO Technologies’ stock fell by 1.1% in after-hours trading, closing at $189.87. This movement places the stock closer to its 52-week high of $198.34, indicating relatively stable performance despite the earnings miss. The decline reflects investor sentiment reacting to the earnings and revenue shortfall. InvestingPro analysis indicates the stock is trading above its Fair Value, with a P/E ratio of 41.57 and an EV/EBITDA multiple of 24.29. The company’s strong liquidity position is evidenced by a healthy current ratio of 2.05, while maintaining a moderate debt level. Discover 12 more exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Outlook & Guidance

The company raised its full-year guidance, projecting adjusted EPS growth of 21-24%. ESCO anticipates continued growth in the aerospace and navy markets, with increased naval platform content. The outlook for 2026 remains positive, supported by strong demand drivers in the electricity market and recalibrating U.S. renewables market. InvestingPro data shows the company has maintained dividend payments for 17 consecutive years, demonstrating consistent shareholder returns. With analyst targets ranging from $168 to $215 and a strong consensus recommendation of 1.33 (Buy), ESCO’s growth trajectory appears well-supported. Access the complete Pro Research Report, available for over 1,400 US stocks, for detailed analysis and actionable insights.

Executive Commentary

Brian Saylor, President and CEO, expressed optimism about the company’s future, stating, "ESCO’s future remains bright, and we continue to see a path for value creation and enhancement." He also highlighted the positive trajectory in the navy sector, saying, "We’re very upbeat about the Navy progression and what it means for our business." Chris Tucker, Senior VP and CFO, noted the favorable pricing trends in the aerospace sector.

Risks and Challenges

• Macroeconomic uncertainties and potential tariff impacts
• Supply chain disruptions affecting production
• Market recalibration in the U.S. renewables sector
• Competitive pressures in the naval and aerospace markets
• Integration challenges following the Maritime acquisition

Q&A

During the earnings call, analysts inquired about the company’s naval content and order pipeline, margin progression in aerospace and defense, and the impact of the VACCO divestiture. Executives also addressed potential opportunities related to the AUKUS submarine program, highlighting strategic initiatives to leverage these prospects.

Full transcript - ESCO Technologies Inc (ESE) Q3 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Q3 twenty twenty five ESCO Technologies Earnings Conference Call. With us today are Brian Saylor, President and CEO Chris Tucker, Senior VP and CFO and Kate Lowry, Vice President of Investor Relations. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session.

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker, Kate Lowry. Please go ahead.

Kate Lowry, Vice President of Investor Relations, ESCO Technologies: Thank you. Statements made during this call, which are not strictly historical, are forward looking statements within the meaning of the Safe Harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions, 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 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 eight ks to be filed. We undertake no duty to update or revise any forward looking statements except as may be required by applicable laws or regulations. In addition, during this call, the company may discuss some non GAAP financial measures in describing the company’s operating results.

A reconciliation of these measures to 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 over to Brian.

Brian Saylor, President and CEO, ESCO Technologies: Thanks, Kate, and thanks, everyone, for joining today’s call. The past few months have been a transformative period for ESCO. Early in the third quarter, we completed the Maritime acquisition. And after the close of the third quarter, we finalized the VACCO divestiture. The completion of these key transactions marks an important step forward in the execution of our portfolio strategy.

With the addition of Maritime’s signature and power management solutions, we now have a meaningfully larger presence in the navy market. Maritime broadens our product offerings and adds significant US and UK naval platform content. With the exit of the space market, our aerospace and defense segment now has a clearer focus on serving the aircraft and navy end markets, both of which we believe have durable long term growth drivers in place. This period of transition has involved an extraordinary level of hard work from our team members related to closing these deals and integrating Maritime into the ESCO portfolio and business system. In addition to supporting these efforts, our team was also busy managing day to day operations and delivered another outstanding quarter for ESCO.

I wanna personally acknowledge and thank our dedicated employees whose hard work is what makes this possible. In addition, I would like to take one more opportunity to welcome our new ESCO Maritime teammates in both The US and The UK. As we’ve now had a number of interactions with the Maritime team, it is clear that they are a strong group that is dedicated to a very important mission, which is aligned with ESCO and our core values. We are thrilled to welcome them to the team. I would also like to thank the maritime staff for their hard work in supporting the ongoing integration, which does require considerable time and focus from across the organization.

As I know we are all aware, the macroeconomic picture has been somewhat complicated this year with evolving trade policies and geopolitical uncertainty in the headlines. It’s difficult to know exactly how these impacts will play out, but we are monitoring these changing dynamics closely and believe our teams have done a good job of managing the risks and opportunities to this point. While there have been some additional costs, we have been able to mitigate the impacts and deliver exceptional operating results. Going forward, we are in good shape in this regard and are confident in our ability to manage any potential future risks associated with tariffs during the balance of the year. Chris will run you through all of the financial details for the quarter.

But before we get to that, I want to give you a few comments on each of the segments. Let’s start with Aerospace and Defense. We remain very positive regarding the long term outlook for the aerospace and navy markets. Production rates across both end markets need to increase to meet underlying customer and market demand. We see fundamental drivers for additional commercial and defense aircraft and expect increasing production rates to drive growth going forward.

Overall, our aerospace revenue was up almost 20% in the quarter and is up 15% on a year to date basis. On the navy side, we’ve been talking for a while about the procurement process for the next 17 Virginia and Columbia class submarines. It’s taken a little bit longer than expected, but it was great to see those orders begin to flow through during q three with Globe booking over 80,000,000 in orders during the quarter for block 5.2 and block six on the Virginia class platform along with orders for initial content on the next three Columbia class boats. By any measure, the A and D segment has had an exceptional quarter, achieving double digit organic growth, a five sixty basis point increase in margin, and ending the period with record backlog. Switching businesses now, let’s discuss the utility group, which had a bit of a flattish quarter from a sales and margin perspective, but did experience strong orders.

If you look at the year to date results, the story remains quite positive, and we are confident that the long term demand drivers remain intact. Numerous factors are contributing to the growing demand for electricity, including data centers, artificial intelligence, electrification of transportation, heat pumps, reshoring activities, and more. Expanding the grid will be a long term and complicated endeavor. And during that process, increased electricity demand coupled with an aging infrastructure and extreme weather events will make maintaining utility assets more important than ever. Doble will continue to be a critical partner supporting the utilities as they both maintain and expand the grid.

Order growth in the quarter was strong, which points to continued sales momentum in the quarters to come. The US renewables market continues to recalibrate right now in the wake of the big beautiful bill. Our team is managing well through some uncertainty, and we remain confident that renewables will continue to have an important role to play in energy markets worldwide and in The US over the long term. Finally, I’ll touch on the test business, which had another strong revenue quarter with 21% growth over the prior year. Year to date, the revenue is up by 15%, and it’s great to see continuing strength in their test and measurement, industrial shielding, and services sales this year.

Their margins improved by 350 basis points sequentially, but were down a bit year over year. The team has taken the right steps to reduce costs over the past several quarters and has done a great job driving the segment EBIT margin back into the mid teens. Overall, the test business has stabilized, and we feel good about the trajectory there moving forward. Overall, we are optimistic about our market positions across each of our segments and expect to outperform industry growth. Accordingly, we are again raising our full year guidance, which reflects over 20% adjusted EPS growth compared to the prior year.

With that, I’ll turn it over to Chris to run you through the financial details of the quarter.

Chris Tucker, Senior VP and CFO, ESCO Technologies: Thanks, Brian. Everyone can follow along on the chart presentation. We will start on page three, which shows the financial highlights for the quarter. Before jumping into the numbers, I do want to point out that we are looking at everything on a continuing operations basis. Now that VACCO has been sold, it has been classified as a discontinued operation in our financial statements, so the commentary will exclude any P and L impacts for discontinued operations.

Now turning to the numbers, you can see that by all measures, ESCO delivered a great quarter. Orders showed a significant increase in the quarter. We will go through segment details coming up, but a big driver of the reported increase relates to the acquired backlog at Maritime. Excluding that, we still had good orders performance with a 1.3 book to bill ratio. We ended Q3 with backlog of nearly $1,200,000,000 a new record for ESCO.

Sales performance was also strong with growth in the quarter of nearly 27% on a reported basis and 11% on an organic basis, which excludes the impact of the Maritime acquisition. Adjusted EBIT margins increased from 19.3% last year to 21.1% in this year’s third quarter. Lastly, adjusted earnings per share increased by 25% to $1.6 per share. I would also point out on the bottom right of the chart that we did have sizable a sizable amount of add backs for adjusted earnings. This was driven by the Maritime acquisition where we had significant costs related to closing of the deal as well as inventory step up charges, stamp duties in The UK, and an increase in acquisition related amortization.

Next, we will go through the segment highlights starting with aerospace and defense. Orders increased significantly, but you can see that $364,000,000 of it related to the backlog acquired at Maritime. Beyond that, Maritime delivered another $50,000,000 of orders in the two months they were owned by ESCO. On an organic basis, orders were also quite strong with Globe receiving large Virginia and Columbia class orders. Backlog for A and D finished at $832,000,000 From a sales perspective, growth was up 56% on a reported basis and 14% organically.

You can see the maritime impact was significant, but the core business also performed very well. This translated nicely to margins, which increased over 500 basis points with positive contributions from across this set of businesses. The margin increase was due to favorable impacts from price, mix, and leverage on the growth. Moving on to chart five, we have the Utility Solutions Group. Orders momentum remained healthy with growth of 5.5% in the quarter.

This was driven by Doble, where orders increased nearly 7%, while NRG orders in the quarter were flat. On the sales side, growth was a bit more muted with only 2% growth. This lower growth was also driven by Doble, where timing of shipments resulted in lower revenue growth in the third quarter. We see this as a temporary issue and expect to return to higher growth in the fourth quarter. As you can see on the chart, backlogs are healthy and have increased nearly 15% compared to prior year end.

On the margin story on the margin front, the story is similar to sales with the margin drop in the quarter driven by Doble. On a year to date basis, the Utility Solutions Group has delivered adjusted EBIT margins that are 130 basis points ahead of last year’s first nine months. So while we have seen some weakness from NRG in the year, the double performance has been strong and we feel good about the full year outlook there. Next, will cover test where the team delivered another strong quarter. Starting with orders, where we did see a decline of nearly 6% in the quarter.

We had some tough comparisons to last year, but honestly feel good about where the business is trending. Year to date orders are up over 30%, and you can see that backlogs are up nearly 24% compared to year end. So the momentum here has been strong during 2025. Sales were very good with a 20.7% increase, which drove adjusted EBIT to increase by 15.4%. Margins here were down slightly as we’ve experienced unfavorable mix and some tariff impacts.

Year to date margins are up 140 basis points, so 2025 has been a positive step for this business after a couple of tough years in 2023 and 2024. Moving to chart number seven, we have year to date p and l highlights. As you can see, the results have been terrific through the first nine months of 2025. Brian mentioned all the portfolio work earlier, which is very important. This chart shows that the core company has continued to deliver and we are now starting to see the impacts of the Maritime deal come through.

Orders have been great. If you take out the Maritime backlog impact, we have growth of 17. The sales story is also quite positive with A and D up 12% organically and nearly 28% when Maritime is added in. Test sales are up 15%, while The US growth USG growth is a bit more modest at 4% due to weakness for NRG so far this year. Earnings are up double digits with adjusted EBIT margins increasing by 200 basis points and all three segments posting nice margin improvement over the first three quarters of the year.

Finally, adjusted earnings per share is up over 24%. So by any measure, the company has performed very well year to date in 2025. Next is chart eight, where we have cash flow highlights. The first nine months of fiscal twenty twenty five delivered strong operating cash flow results as working capital performance has been favorable compared to the first nine months of 2024. This is true for continuing operations and it should be noted that the cash flow for discontinued operations was also quite strong through the first nine months of fiscal twenty twenty five.

Capital spending is up for the first nine months due to various programs in the A and D and utility businesses. Our strong cash generation and the delay in getting the Maritime deal closed means that our leverage position is in good shape as of June 30 at 1.74 times. With the VACCO divestiture getting finalized in July, we expect to have the balance sheet in great shape as we close out the year. Last, we will discuss updated guidance for the year, which is covered on Chart nine and ten. Chart nine is the words that go with chart 10, so I’ll just talk to slide 10 here.

Fundamentally, the guide represents another increase for us. You will remember that last quarter, we still had VACCO in the guidance, and we had included estimates for Maritime as well. Now we need to remove VACCO as that deal has now closed. That reduces sales projections by approximately $125,000,000 and adjusted EPS comes down by approximately $0.50 For the continuing operations, we are increasing the guide for the year. On the sales side, we are coming up by $20,000,000 at both the low end and the high end of the range.

For adjusted earnings per share, we are tightening the range with only one quarter to go. So the bottom of the range is coming up by $0.40 and the high end is coming up by $0.25 This adjusted EPS range represents 21 to 24% growth compared to prior year. The additional sales is delivering nicely to the bottom line. And while we are seeing some tariff impact in the numbers, it is at the low end of our ranges that have been guided previously. So obviously, it is shaping up to be another record year at ESCO, and we are excited to share this updated outlook with you today.

That concludes the financial portion of the call, and now I’ll turn it back over to Brian.

Brian Saylor, President and CEO, ESCO Technologies: Well, thanks, Chris. As you heard, the first nine months of our year have gone really well, and we’re excited about our ability to increase our full year outlook, and we’re excited about the portfolio moves that I discussed earlier. ESCO’s future remains bright, and we continue to see a path for value creation and enhancement as we move forward. We just wrapped up our board meetings earlier this week, which gave us a chance to visit our Morgan Schafer operation, which is part of Doble in the USG. This business is located in Montreal and was an ESCO acquisition in 2017 that’s focused on condition monitoring of transformers.

It was a really great session with our board and an opportunity for us to show them the exciting things going on at ESCO where, you know, we’re developing exciting technologies on a regular basis that are being deployed to help customers solve real world problems. We thank the board for their ongoing support, and we’re excited about the many things going on across the ESCO set of businesses. With that, I think we’re done, and, we could turn it over for the q and a.

Conference Operator: Thank you. At this time, we will conduct the question and answer session. And our first question comes from the line of Tommy Moll of Stephens. Your line is now open.

Tommy Moll, Analyst, Stephens: Good afternoon, and thanks for taking my questions.

Brian Saylor, President and CEO, ESCO Technologies: Hi, Tommy.

Tommy Moll, Analyst, Stephens: Brian, I wanted to start on the A and D orders, in particular, for Globe, where you reported some pretty big orders in the quarter. Any update on shipset content? I’m guessing probably nothing changed versus what you’ve communicated previously. And anything you can tell us just about how that has progressed through the order pipeline? I I know you don’t wanna get in the business of guiding future orders, but just give us some sense of where, some of the discussions are for those, Virginia and Columbia class subs.

Brian Saylor, President and CEO, ESCO Technologies: Yeah. I would say no big change, from what we have communicated before, on the, on the Globe side. We we obviously, we we have some additional content for Virginia class and Columbia class that comes through, on the maritime side. I don’t think we’re quite in a position yet to to communicate that, in detail. And I’ll ask for a little bit of patience as we kinda work through our f y, yeah, 26 planning process.

So we’ll we’ll be in a position to communicate that kinda detail, in the future, but I’m I’m not sure we’re quite ready for that today.

Tommy Moll, Analyst, Stephens: Sure. On sticking with A and D and here, I’ll I’ll ask the question, on an organic basis so we we could think about this ex maritime, ex the backhoe noise. The margin progression, even peering through both of those changes, looks pretty solid here. And so I’m you called out several of the factors. Specifically, though, on price cost.

I’m just curious for an update there and versus what you would have hoped for for some of the incremental margins flowing through. How did the quarter shape up and how do you feel going forward?

Chris Tucker, Senior VP and CFO, ESCO Technologies: Yeah. Tommy, this is Chris. I would say the margins there in the core company were really phenomenal, really good flow through on kind of the underlying sales growth. I would kind of point out the price first. We’re we’re seeing some real good, you know, mostly on the aircraft component side, we’re seeing some very nice price flow through.

You know, those are efforts that are kind of always ongoing in that business, but sometimes there can be a lag before some of that price flows through just based on working through LTAs and and things like that. So so we’re really seeing some good flow through there. So that’s certainly kind of the the top driver. I would say on the material side, we’re we’re frankly in in pretty good shape. You know, generally, the material inflation has probably been a little bit better than what we expected coming into the year.

So so we’ve got the price good guy, and and we’ve got less of a material headwind. And so so that’s been a pretty good equation for us so far this year. And, you know, then the other things I would point to there, we are we did see some good mix in the quarter. You know, mix can kinda move you around a little bit quarter to quarter. It was favorable this quarter, so that was another kind of boost.

So you won’t see that every quarter necessarily, but it came through nicely. And then, again, with a good double digit kind of underlying growth, we we had nice leverage on on the sales as well. So I I would point to all those things as kinda kinda key drivers for us here in the quarter.

Brian Saylor, President and CEO, ESCO Technologies: Yeah. I think we’re getting a little bit of traction from some of the early stages of our ESCO operating system implementation as well. That’s really coming through in the A and D numbers for sure.

Tommy Moll, Analyst, Stephens: A little bit might be an understatement, but we’ll settle that later and I’ll turn it back for now.

John Tanwanteng, Analyst, CJS: Thank you.

Conference Operator: Thank you. And our next question comes from the line of John Tanwanteng from CJS. Your line is now open.

John Tanwanteng, Analyst, CJS: Hi, guys. Thanks for taking my questions. I was wondering if you could talk about the increase in the outlook, maybe what businesses or product lines that’s coming from. It looks like a pretty small increase in revenue, but quite a big increase in the earnings. I was wondering if if you could dig dig a little deeper into that and just tell us where that’s all sourcing.

Chris Tucker, Senior VP and CFO, ESCO Technologies: Sure. So I I would say that on the revenue side, you know, we’re frankly getting pretty big, increases as we’ve moved through the year from test. So that business has kind of outperformed. So we’re seeing that come through. I would say on the a and d side, we’re also getting a little bit of incremental volume, which is helping, obviously.

And then those are kind of offsetting the NRG business in utility where we’ve seen a little bit of a takedown there as we move through the year just because of some of the kind of uncertainty in the renewables market that you heard Brian talk about earlier. So those are kind of the those are the sales impacts, would say. You’re seeing that flow through at a reasonable rate, let’s say, 30% or so. We’ve also got, I I mentioned the tariffs would kinda be at the low end of the range we talked about last quarter. So we said two to four last quarter as a tariff impact.

We’re really gonna be more like two, maybe even slightly below two. So a little bit of a pickup there. And then I would also point out that with the VACCO closure, we’ve got some some pretty big proceeds here in July from that that helped the interest in the fourth quarter. So that’s kind of flowing through as well. So all of those things are what are getting you to kind of that lift you see in the press release there.

John Tanwanteng, Analyst, CJS: Got it. That’s very helpful. And then just for modeling purposes, how should we think about the the impact of VACCO in in ’26 as you lap the the sale?

Chris Tucker, Senior VP and CFO, ESCO Technologies: Well, listen. I mean, I I would say that it’s you know, if if you you kinda look through what we’re gonna file in the numbers now, you’ll see kind of, you know, VACCO kinda comes out and goes to discontinued operations. So so you’re gonna have kind of the company, there and the a and d results without VACCO in it. And then it just becomes a a a picture of kinda how do you think about the growth, for ’26 and beyond. And and and I think there, John, you know, we’ve kinda talked a lot about kind of the navy dynamics being strong, you know, kind of high single digits, similar for aircraft components.

And then you’re gonna have kind of the the kind of partial year to full year impact good for Maritime since we only had five months this year. So so all those things, you know, we think contribute to a pretty nice outlook for ’26. We we’re not really in a position to kinda give specific guidance around that, but I think where we sit today, honestly, we feel really good about how we’re looking going forward.

John Tanwanteng, Analyst, CJS: Okay. Understood. Last one for me. Just on the naval side, you obviously are showing strong orders. I was wondering if the pace of deliveries is gonna stay relatively constant or if you’re seeing a pickup there either near term or long term as as the navy tries to, you know, increase the throughput of all these things.

Brian Saylor, President and CEO, ESCO Technologies: Well, I think that we we believe that it will increase. I think that it’s a little hard to answer the question because, you know, in in our as you model our numbers, you gotta mix both the the globe, you know, all of our existing navy business along with the maritime side. I think the other thing that you’re gonna need to start thinking about more is what’s happening over in The UK, in addition to what’s happening in The US. So I do think the pace is gonna pick up, a little bit. You know, we’ll we’ll be able to provide a better guide on that when we come together in November for the full ’26.

But we’re listen. We’re we’re very upbeat about the Navy progression and and what it means for our business.

John Tanwanteng, Analyst, CJS: Great. Thank you.

Conference Operator: And we have a follow-up question from Tommy Moll of Stephens. Your line is now open.

Tommy Moll, Analyst, Stephens: Had a few more I was hoping we could get through today.

Brian Saylor, President and CEO, ESCO Technologies: Sure.

Tommy Moll, Analyst, Stephens: On the guidance you provided for earnings per share, Chris, I heard you say that interest is probably a good guy for q four just because of the timing of VACCO. Good guy versus what you would have guided to previously. But I’m just putting everything together. It it does look like, the range you provided is 25¢ to 40¢ increase for the year does assume a better 4Q operationally than what you would have communicated previously. I just wanna make sure I’m reading that correctly because there’s there’s a lot going on this quarter.

Brian Saylor, President and CEO, ESCO Technologies: Yeah. That’s correct.

Chris Tucker, Senior VP and CFO, ESCO Technologies: I I would say that the fourth quarter has come up, from what we communicated last time. You know, again, I think, obviously, we’re we’re we’re three months along the road. We had a solid solid third quarter as you see. And so the fourth quarter is absolutely higher than what we had baked in last time.

John Tanwanteng, Analyst, CJS: Thank you. Also

Tommy Moll, Analyst, Stephens: wanted to ask on the USG margins. If it’s possible to look just at Doble, can you comment on how the margins progressed year over year there? And if it wasn’t what you would hope, maybe what some of the drivers were.

Chris Tucker, Senior VP and CFO, ESCO Technologies: Yeah. Listen, I I would say that, honestly, the the the margins in the first and second quarter were were probably ahead of where we would have anticipated. So so we had, you know, really good kind of flow through and mix in the first six months. And so, you know, that’s why we’re trying to kinda not overreact to the third quarter. I I would say that, certainly, it was below kinda what we anticipated when the quarter started.

But a lot of that was a little bit of sales miss, and I and I kind of alluded to the timing of some sales, you know, here in the third quarter as we closed out the quarter. You know, we just didn’t have some things that we anticipated getting out the door and such. So we had a little bit less sales, and so we lost this the the flow through from that. You know, I think if we gotten that, you you you know, we’d we’d be right kinda where we needed to be. So so I would not say that we’re concerned or disappointed with the q three margins.

I mean, I guess, sure, we’d always like a little bit more, but I I think how the business has trended for the first nine months is is honestly quite positive. And, and we feel like the momentum and the factors that Brian talked about that are kinda driving the market there, we we think those are all still, you know, in place. But certainly, as we go quarter to quarter, we’re gonna see some ups and downs, you know, and I and I think is so we’re a little shaky there, on the utility side, but the the a and d folks, you know, had a had a great quarter from a margin perspective. And what I would say, Tommy, is in our model, you’re gonna see some of that. Right?

So next quarter, you know, we might see the a and d a and d margins, you know, not quite so strong, but then the pickup in utility. So we’re gonna have those kind of puts and takes a little bit quarter to quarter. But but generally, long term picture still looks very good.

Brian Saylor, President and CEO, ESCO Technologies: Yeah. And I’d point out that the orders for doable were very strong in the quarter. And that, you know, that points to, you know, better things in the the next quarter or two as we move forward.

Tommy Moll, Analyst, Stephens: Last question, and then I’ll turn it back for good today. Brian, in in the news recently, there was reference of a treaty between Britain and the Aussies on nuclear subs. I realize that it may take some time before maritime sees any benefit here, but if there’s anything you can do to frame for us on the outside what how impactful that could be, or just any observations you had would be appreciated. Thank you.

Brian Saylor, President and CEO, ESCO Technologies: Yeah. Listen. I I, I think every step in that direction is a is a positive, not just for our business, but probably for, the mutual defense, for, you know, the English speaking world. You know, I I think you’re aware that there’s a a review going on in the in the defense department right now of the AUKUS program that’s kinda limited to what happens in the twenty thirties with with regard to earlier generation Virginia class submarines that are currently slated to be sold. We don’t think that there’s a lot to that.

We think that, you know, the decision on whether The US will will follow through on on those sales, that’s a decision that could be made, you know, several years from now. But I think that the thing we believe about that is it just increased our conviction that the investments we’ve made, in the Royal Navy and the shipbuilding in The UK, that those investments are are gonna pay off. And if anything, you know, you know, our our belief is that they may pay off sooner. Now I’d be clear to say that the the AUKUS program envisions, you know, things that are gonna happen in the eight, ten, twelve years from now. So that’s a little bit outside of our planning horizon, but it does bolster the commitment that we would see from from the shipbuilders in The UK to follow through on some of the of the orders and revenue that we anticipate in the, you know, the next three to five years.

Tommy Moll, Analyst, Stephens: Thank you, Brian. I’ll turn it back. Appreciate the time.

Conference Operator: Thank you. I’m showing no further questions at this time. I would now like to turn it back over to Brian for any closing remarks.

Brian Saylor, President and CEO, ESCO Technologies: Well, thanks for, taking some time, to hear from us today. You know, we’re excited, that, we’ve been able to complete these large portfolio moves. And I think we’re even more excited that the underlying, performance of the core business has been really, really strong. And, so so we really look forward to the things that are that are in our future, and we look forward to talking to you again next quarter.

Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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