ESCO Technologies Inc. (NYSE:ESE) Q4 2022 Earnings Call Transcript

Chris Tucker: So, on average, for €˜22, we had about 2% interest rate, and we are looking at something more in the 6% plus range for next year. We are €“ we will be a little bit better than that in Q1 for some of the three-month and six-month money we had locked up coming into the quarter. But overall, as we get through the year, we are expecting it to be 6% plus.

Jon Tanwanteng: Okay. Fair enough. And then just I was wondering, as you look at the A&D business, it seems like that there has been a fairly good recovery, as you mentioned, what’s the limit for that business as you get towards the full recovery is maybe why better returns and international travel returns? How much better can it be than it was, I guess before the pandemic? I know you have taken share through the past 3 years. Just help us understand what the upside is as we get to a full recovery?

Chris Tucker: Well, I think we would say we feel like it’s €“ we had a couple of pretty tough years, and this was a nice kind of recovery, but we still have some legs to go there. I mean I think it was certainly kind of single-aisle driven platforms that are kind of driving a lot of the sales growth that we put up this year. And I think even with some of our businesses like Crissair and Mayday if you compare them back to the €˜19 levels, they are just €“ they have still got a fair bit to go to get there. Now, their order books have been pretty good, but it’s been a little bit slower to materialize through the sales line. And so the double-aisle stuff is, again, I think still out in front of us from a sales perspective, and that we expect to kind of carry on for that’s €“ you are talking in years there, I think before you get back to kind of prior peaks.

As far as the overall single aisle, the only thing I would say about that is, if you hear kind of a lot of the commentary from the big OEMs out there, I think they are generally not quite to the build rates we are trying to get to. So, if you look at those forecasts, again, those still show pretty nice growth out over the next coming years.

Vic Richey: Yes. I think another way to think about it is we were really ramping that business up when the pandemic hit. I mean we had the best first quarter we would ever had and then the pandemic had and kind of bottom fallout. So, I think if you go back and look at pre-pandemic, I mean I think when it gets back to full recovery will be above that in addition to just that kind of that normal growth, I mean we have won some additional projects, particularly on the space side and on the Navy side with Westland’s really recovered nicely. So, I think that longer term, and I am not talking 5 years from now. I am talking about a couple €“ over the next couple of years, I think we will get back above the levels that we had going into the pandemic.

Jon Tanwanteng: Okay. Great. And then the same kind of question on just the USG business, are your utility customers at the €“ back towards where they were pre-pandemic, or is there more room to grow and kind of how much was it?

Vic Richey: Yes. I think the quick answer there is the domestic business is kind of back. I think they are kind of back at the level they were previously. The European business is still not back and the Asian business. So, I think we will see some growth there over the next couple of years. And then as I have mentioned in my prepared comments, we have had some new product developments, which I think will add a little upside as well.

Jon Tanwanteng: Understood. Thank you everyone.

Chris Tucker: Thanks Jon.