UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM             TO            

COMMISSION FILE NUMBER 1-10596

ESCO TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

MISSOURI	43-1554045
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
9900A CLAYTON ROAD
ST. LOUIS, MISSOURI	63124-1186
(Address of principal executive offices)	(Zip Code)

(314) 213-7200

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ESE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Shares outstanding at July 31, 2024
Common stock, $.01 par value per share	25,752,712

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended
	June 30,
	2024		2023
Net sales	$	260,783	248,749
Costs and expenses:
Cost of sales		157,435	147,274
Selling, general and administrative expenses		54,955	55,376
Amortization of intangible assets		8,145	7,132
Interest expense, net		3,335	2,495
Other expenses (income), net		(259)	966
Total costs and expenses		223,611	213,243
Earnings before income taxes		37,172	35,506
Income tax expense		7,942	7,563
Net earnings	$	29,230	27,943
Earnings per share:
Basic - Net earnings		1.14	1.08
Diluted - Net earnings	$	1.13	1.08

See accompanying notes to condensed consolidated financial statements.

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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)

	Nine Months Ended
	June 30,
	2024		2023
Net sales	$	728,226		683,386
Costs and expenses:
Cost of sales		443,933		415,953
Selling, general and administrative expenses		164,020		160,555
Amortization of intangible assets		24,585		21,023
Interest expense, net		9,228		6,422
Other expenses, net		613		1,678
Total costs and expenses		642,379		605,631
Earnings before income taxes		85,847		77,755
Income tax expense		18,229		17,207
Net earnings	$	67,618		60,548
Earnings per share:
Basic — Net earnings	$	2.62		2.35
Diluted — Net earnings	$	2.62		2.34

See accompanying notes to condensed consolidated financial statements.

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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

	Three Months Ended			Nine Months Ended
	June 30,			June 30,
	2024		2023	2024	2023
Net earnings	$	29,230	27,943	67,618	60,548
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,001)	(821)	3,668	12,926
Total other comprehensive income (loss), net of tax		(1,001)	(821)	3,668	12,926
Comprehensive income	$	28,229	27,122	71,286	73,474

See accompanying notes to condensed consolidated financial statements.

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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

	June 30,		September 30,
	2024		2023
ASSETS
Current assets:
Cash and cash equivalents	$	63,042		41,866
Accounts receivable, net of allowance for credit losses of $2,387 and $2,264, respectively		213,592		198,557
Contract assets		134,637		138,633
Inventories		219,312		184,067
Other current assets		22,312		17,972
Total current assets		652,895		581,095
Property, plant and equipment, net of accumulated depreciation of $190,738 and $174,698, respectively		164,749		155,484
Intangible assets, net of accumulated amortization of $229,467 and $204,881, respectively		408,981		392,124
Goodwill		535,372		503,177
Operating lease assets		37,716		39,839
Other assets		11,342		11,495
Total assets	$	1,811,055		1,683,214
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	20,000		20,000
Accounts payable		83,411		86,973
Contract liabilities		113,653		112,277
Accrued salaries		42,662		43,814
Accrued other expenses		51,481		51,587
Total current liabilities		311,207		314,651
Deferred tax liabilities		77,570		75,531
Non-current operating lease liabilities		35,148		36,554
Other liabilities		40,444		43,336
Long-term debt		153,000		82,000
Total liabilities		617,369		552,072
Shareholders’ equity:
Preferred stock, par value $.01 per share, authorized 10,000,000 shares		—		—
Common stock, par value $.01 per share, authorized 50,000,000 shares, issued 30,809,483 and 30,781,699 shares, respectively		308		308
Additional paid-in capital		309,982		304,850
Retained earnings		1,050,748		989,315
Accumulated other comprehensive loss, net of tax		(20,301)		(23,969)
		1,340,737		1,270,504
Less treasury stock, at cost: 5,056,771 and 4,995,414 common shares, respectively		(147,051)		(139,362)
Total shareholders’ equity		1,193,686		1,131,142
Total liabilities and shareholders’ equity	$	1,811,055		1,683,214

See accompanying notes to condensed consolidated financial statements.

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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Nine Months Ended
	June 30,
	2024		2023
Cash flows from operating activities:
Net earnings	$	67,618	60,548
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation and amortization		41,358	37,699
Stock compensation expense		6,369	7,007
Changes in assets and liabilities		(53,839)	(72,346)
Effect of deferred taxes		(6,052)	(3,706)
Net cash provided by operating activities		55,454	29,202
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(56,383)	(17,694)
Additions to capitalized software and other		(8,556)	(9,263)
Capital expenditures		(24,949)	(16,993)
Net cash used by investing activities		(89,888)	(43,950)
Cash flows from financing activities:
Proceeds from long-term debt and short-term borrowings		193,000	88,000
Principal payments on long-term debt and short-term borrowings		(122,000)	(93,000)
Purchases of common stock into treasury		(7,998)	(12,401)
Dividends paid		(6,185)	(6,189)
Other		(1,516)	(2,557)
Net cash provided (used) by financing activities		55,301	(26,147)
Effect of exchange rate changes on cash and cash equivalents		309	(777)
Net increase (decrease) in cash and cash equivalents		21,176	(41,672)
Cash and cash equivalents, beginning of period		41,866	97,724
Cash and cash equivalents, end of period	$	63,042	56,052
Supplemental cash flow information:
Interest paid	$	8,430	5,564
Income taxes paid (including state and foreign)		25,952	18,313

See accompanying notes to condensed consolidated financial statements.

6

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The unaudited condensed consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures required for annual financial statements by accounting principles generally accepted in the United States of America (GAAP) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC on November 29, 2023.

The Company’s results for the three-month period ended June 30, 2024 are not necessarily indicative of the results for the entire 2024 fiscal year. References to the third quarters of 2024 and 2023 represent the fiscal quarters ended June 30, 2024 and 2023, respectively. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period presentation.

2.    EARNINGS PER SHARE (EPS)

Basic EPS is calculated using the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the weighted average number of common shares outstanding during the period plus shares issuable upon the assumed exercise of dilutive common share options and vesting of restricted and performance shares by using the treasury stock method. The number of shares used in the calculation of earnings per share for each period presented is as follows (in thousands):

	Three Months		Nine Months
	Ended June 30,		Ended June 30,
	2024	2023	2024	2023
Weighted Average Shares Outstanding — Basic	25,753	25,757	25,781	25,808
Dilutive Restricted and Performance Shares	87	70	63	82
Adjusted Shares — Diluted	25,840	25,827	25,844	25,890

3.    ACQUISITION

On November 9, 2023, the Company acquired MPE Limited (MPE), based in the United Kingdom, for a purchase price of approximately $56.2 million, net of cash acquired. MPE is a leading global manufacturer of high-performance EMC/EMP filters and capacitor products for military, utility, telecommunication, and other critical infrastructure applications. Since the date of acquisition, the operating results for the MPE business have been included as part of ETS-Lindgren in the Test segment. The acquisition date fair value of the assets acquired and liabilities assumed primarily were as follows: approximately $0.4 million of accounts receivable, $1.1 million of inventory, $1.7 million of property, plant and equipment, $0.7 million of accounts payable and accrued expenses, $7.8 million of deferred tax liabilities, and $31.1 million of identifiable intangible assets, mainly consisting of customer relationships totaling $29.1 million. The acquired goodwill of $30.3 million related to excess value associated with opportunities to expand the services and products that the Company can offer to its customers. The Company does not anticipate that the goodwill will be deductible for tax purposes. The Company paid a $0.2 million working capital settlement in the third quarter of fiscal 2024.

4.    SHARE-BASED COMPENSATION

The Company provides compensation benefits to certain key employees under several share-based plans providing for performance-accelerated and/or time-vested restricted stock unit awards, and to non-employee directors under a separate compensation plan.

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Performance-Accelerated Restricted Stock Unit (PARS) Awards and Time-Vested Restricted Stock Unit (RSU) Awards, and Performance Share Unit (PSU) Awards

Compensation expense related to these awards was $2.0 million and $5.5 million for the three and nine-month periods ended June 30, 2024, respectively, and $1.4 million and $6.0 million for the corresponding periods in 2023. As of June 30, 2024, there were 221,595 unvested stock units outstanding.

Non-Employee Directors Plan

Compensation expense related to the non-employee director grants was $0.3 million and $0.9 million for the three and nine-month periods ended June 30, 2024, respectively, and $0.3 million and $1.0 million for the corresponding periods in 2023.

The total share-based compensation cost that has been recognized in the results of operations and included within selling, general and administrative expenses (SG&A) was $2.2 million and $6.4 million for the three and nine-month periods ended June 30, 2024, respectively, and $1.7 million and $7.0 million for the corresponding periods in 2023. The total income tax benefit recognized in results of operations for share-based compensation arrangements was $0.5 million and $1.4 million for the three and nine-month periods ended June 30, 2024, respectively, and $0.2 million and $0.9 million for the corresponding periods in 2023. As of June 30, 2024, there was $11.0 million of total unrecognized compensation cost related to share-based compensation arrangements. That cost is expected to be recognized over a remaining weighted-average period of 1.5 years.

5.    INVENTORIES

Inventories consist of the following:

	June 30,		September 30,
(In thousands)	2024		2023
Finished goods	$	41,955	34,577
Work in process		59,837	42,178
Raw materials		117,520	107,312
Total inventories	$	219,312	184,067

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Included on the Company’s Consolidated Balance Sheets at June 30, 2024 and September 30, 2023 are the following intangible assets gross carrying amounts and accumulated amortization:

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	June 30,		September 30,
(Dollars in thousands)	2024		2023
Goodwill	$	535,372	503,177
Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,551	2,516
Less: accumulated amortization		1,322	1,218
Net	$	1,229	1,298
Capitalized software
Gross carrying amount	$	130,648	121,883
Less: accumulated amortization		89,737	80,774
Net	$	40,911	41,109
Customer relationships
Gross carrying amount	$	327,537	296,927
Less: accumulated amortization		127,322	113,311
Net	$	200,215	183,616
Other
Gross carrying amount	$	15,122	14,232
Less: accumulated amortization		11,085	9,578
Net	$	4,037	4,654
Intangible assets with indefinite lives:
Trade names	$	162,589	161,447

The changes in the carrying amount of goodwill attributable to each business segment for the nine months ended June 30, 2024 is as follows:

					Aerospace
(Dollars in millions)	USG		Test		& Defense	Total
Balance as of September 30, 2023	$	353.6		34.0	115.6	503.2
Acquisition activity		—		30.5	—	30.5
Foreign currency translation		0.9		0.8	—	1.7
Balance as of June 30, 2024	$	354.5		65.3	115.6	535.4

7.    BUSINESS SEGMENT INFORMATION

The Company is organized based on the products and services that it offers and classifies its continuing business operations in three reportable segments for financial reporting purposes: Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF Test and Measurement (Test).

The Aerospace & Defense segment’s operations consist of PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair), Globe Composite Solutions, LLC (Globe) and Mayday Manufacturing Co. (Mayday). The companies within this segment primarily design and manufacture specialty filtration, fluid control and naval products, including hydraulic filter elements and fluid control devices used in aerospace and defense applications; unique filter mechanisms used in micro-propulsion devices for satellites, custom designed filters for manned aircraft and submarines; products and systems to reduce vibration and/or acoustic signatures and otherwise reduce or obscure a vessel’s signature, and other communications, sealing, surface control and hydrodynamic related applications to enhance U.S. Navy maritime survivability; precision-tolerance machined components for the aerospace and defense industry; metal processing services; and miniature electro-explosive devices utilized in mission-critical defense and aerospace applications.

The USG segment’s operations consist primarily of Doble Engineering Company and related subsidiaries including Morgan Schaffer and Altanova (collectively, Doble), and NRG Systems, Inc. (NRG). Doble is an industry leader in the development, manufacture and delivery of diagnostic testing solutions that enable electric power grid operators to assess the integrity of high voltage power delivery equipment. It combines three core elements for customers – diagnostic test and condition monitoring instruments, expert consulting, and testing services – and provides access to its large reserve of related empirical knowledge.

9

NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar.

The Test segment’s operations consist primarily of ETS-Lindgren Inc. and related subsidiaries (ETS-Lindgren). ETS-Lindgren is an industry leader in designing and manufacturing products and systems to measure and control RF and acoustic energy. It serves the acoustics, medical, health and safety, electronics, wireless communications, automotive and defense markets, supplying a broad range of turnkey systems, including RF test facilities and measurement systems, acoustic test enclosures, RF and magnetically shielded rooms and secure communication facilities, and providing the design, program management, installation and integration services required to successfully complete these types of facilities. It also provides a broad range of components including RF absorptive materials, filters, antennas, field probes, test cells, proprietary measurement software and other test accessories required to perform a variety of tests and measurements, and offers a variety of services including calibration and product tests.

Management evaluates and measures the performance of its reportable segments based on “Net Sales” and “EBIT”, which are detailed in the table below. EBIT is defined as earnings before interest and taxes.

	Three Months			Nine Months
	Ended June 30,			Ended June 30,
(In thousands)	2024		2023	2024	2023
NET SALES
Aerospace & Defense	$	114,450	103,469	323,884	285,434
USG		90,277	89,966	260,570	240,172
Test		56,056	55,314	143,772	157,780
Consolidated totals	$	260,783	248,749	728,226	683,386
EBIT
Aerospace & Defense	$	21,356	21,665	61,396	52,996
USG		22,155	20,351	57,355	50,543
Test		9,292	8,643	16,614	21,280
Corporate (loss)		(12,296)	(12,658)	(40,290)	(40,642)
Consolidated EBIT		40,507	38,001	95,075	84,177
Less: Interest expense		(3,335)	(2,495)	(9,228)	(6,422)
Earnings before income taxes	$	37,172	35,506	85,847	77,755

Non-GAAP Financial Measures

The financial measure “EBIT” is presented in the above table and elsewhere in this Report. EBIT on a consolidated basis is a non-GAAP financial measure. Management believes that EBIT is useful in assessing the operational profitability of the Company’s business segments because it excludes interest and taxes, which are generally accounted for across the entire Company on a consolidated basis. EBIT is also one of the measures used by management in determining resource allocations within the Company as well as incentive compensation. A reconciliation of EBIT to net earnings is set forth in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – EBIT.

The Company believes that the presentation of EBIT provides important supplemental information to investors to facilitate comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. However, the Company’s non-GAAP financial measures may not be comparable to other companies’ non-GAAP financial performance measures. Furthermore, the use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.

8.    DEBT

The Company’s debt is summarized as follows:

	June 30,		September 30,
(In thousands)	2024		2023
Total borrowings	$	173,000	102,000
Current portion of long-term debt		(20,000)	(20,000)
Total long-term debt, less current portion	$	153,000	82,000

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The Credit Facility includes a $500 million revolving line of credit as well as provisions allowing for the increase of the credit facility commitment amount by an additional $250 million, if necessary, with the consent of the lenders. The bank syndication supporting the facility is comprised of a diverse group of seven banks led by JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and Commerce Bank and TD Bank, N.A. as co-documentation agents. The Credit Facility matures August 30, 2028, with balance due by this date.

At June 30, 2024, the Company had approximately $321 million available to borrow under the Credit Facility, plus the $250 million increase option subject to the lenders’ consent, in addition to $63.0 million cash on hand. The Company classified $20 million as the current portion of long-term debt as of June 30, 2024, as the Company intends to repay this amount within the next twelve months; however, the Company has no contractual obligation to repay such amount during the next twelve months. The letters of credit issued and outstanding under the Credit Facility totaled $5.5 million at June 30, 2024.

Interest on borrowings under the Credit Facility is calculated at a spread over either an Adjusted Term SOFR Rate, Adjusted EURIBOR Rate, Adjusted CDOR Rate, Alternate Base Rate or Daily Simple RFR, at the Company’s election. The Credit Facility also requires a facility fee ranging from 12.5 to 25 basis points per annum on the unused portion. The interest rate spreads and the facility fee are subject to increase or decrease depending on the Company’s leverage ratio. The weighted average interest rates were 6.7% and 6.8% for the three and nine-month periods ending June 30, 2024, respectively, and 6.05% and 5.57% for the three and nine-month periods ending June 30, 2023. As of June 30, 2024, the Company was in compliance with all covenants.

9.    INCOME TAX EXPENSE

The third quarter 2024 effective income tax rate was 21.4% compared to 21.3% in the third quarter of 2023. The effective income tax rate in the first nine months of 2024 was 21.2% compared to 22.1% for the first nine months of 2023. Income tax expense in the first nine months of 2024 was favorably impacted by discrete events that occurred during the second quarter of 2024 including the release of a foreign valuation allowance and excess tax benefit related to the vesting of share-based director compensation.    

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10.    SHAREHOLDERS’ EQUITY

The change in shareholders’ equity for the first three and nine months of 2024 and 2023 is shown below (in thousands):

	Three Months Ended June 30,		Nine Months Ended June 30,
	2024	2023	2024	2023
Common stock
Beginning balance	308	308	308	307
Stock plans	—	—	—	1
Ending balance	308	308	308	308
Additional paid-in-capital
Beginning balance	308,065	304,184	304,850	301,553
Stock plans	1,917	1,371	5,132	4,002
Ending balance	309,982	305,555	309,982	305,555
Retained earnings
Beginning balance	1,023,578	933,499	989,315	905,022
Net earnings common stockholders	29,230	27,943	67,618	60,548
Dividends paid	(2,060)	(2,061)	(6,185)	(6,189)
Ending balance	1,050,748	959,381	1,050,748	959,381
Accumulated other comprehensive income (loss)
Beginning balance	(19,300)	(18,018)	(23,969)	(31,764)
Foreign currency translation	(1,001)	(821)	3,668	12,925
Ending balance	(20,301)	(18,839)	(20,301)	(18,839)
Treasury stock
Beginning balance	(146,241)	(139,178)	(139,362)	(126,961)
Share repurchases, net	(810)	(184)	(7,689)	(12,401)
Ending balance	(147,051)	(139,362)	(147,051)	(139,362)
Total equity	1,193,686	1,107,043	1,193,686	1,107,043

11.  FAIR VALUE MEASUREMENTS

The accounting guidance establishes a three-level hierarchy for disclosure of fair value measurements, based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:

● Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial Assets and Liabilities

The Company has estimated the fair value of its financial instruments as of June 30, 2024 and September 30, 2023 using available market information or other appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, receivables, inventories, payables, and other current assets and liabilities approximate fair value because of the short maturity of those instruments.

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Fair Value of Financial Instruments

The Company’s forward contracts and interest rate swaps are classified within Level 2 of the valuation hierarchy in accordance with FASB Accounting Standards Codification (ASC) 825, and are immaterial.

Nonfinancial Assets and Liabilities

The Company’s nonfinancial assets such as property, plant and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. No impairments were recorded during the three and nine-month periods ended June 30, 2024.

12.  REVENUES

Disaggregation of Revenues

Revenues by customer type, geographic location, and revenue recognition method for the three and nine-month periods ended June 30, 2024 are presented in the tables below as the Company deems it best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors. The tables below also include a reconciliation of the disaggregated revenue within each reportable segment.

Three months ended June 30, 2024	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	45,404	$	88,076	$	42,327	$	175,807
Government		69,046		2,201		13,729		84,976
Total revenues	$	114,450	$	90,277	$	56,056	$	260,783
Geographic location:
United States	$	95,265	$	54,063	$	32,575	$	181,903
International		19,185		36,214		23,481		78,880
Total revenues	$	114,450	$	90,277	$	56,056	$	260,783
Revenue recognition method:
Point in time	$	53,148	$	72,985	$	11,426	$	137,559
Over time		61,302		17,292		44,630		123,224
Total revenues	$	114,450	$	90,277	$	56,056	$	260,783

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Nine months ended June 30, 2024	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	131,993	$	254,765	$	111,951	$	498,709
Government		191,891		5,805		31,821		229,517
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226
Geographic location:
United States	$	267,325	$	165,789	$	82,370	$	515,484
International		56,559		94,781		61,402		212,742
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226
Revenue recognition method:
Point in time	$	146,076	$	209,973	$	29,706	$	385,755
Over time		177,808		50,597		114,066		342,471
Total revenues	$	323,884	$	260,570	$	143,772	$	728,226

Revenues by customer type, geographic location, and revenue recognition method for the three and nine-month periods ended June 30, 2023 are presented in the tables below.

Three months ended June 30, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	45,574	$	88,442	$	48,407	$	182,423
Government		57,895		1,524		6,907		66,326
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749
Geographic location:
United States	$	86,031	$	55,011	$	32,246	$	173,288
International		17,438		34,955		23,068		75,461
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749
Revenue recognition method:
Point in time	$	48,496	$	74,128	$	11,496	$	134,120
Over time		54,973		15,838		43,818		114,629
Total revenues	$	103,469	$	89,966	$	55,314	$	248,749

Nine months ended June 30, 2023	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	128,016	$	236,715	$	137,587	$	502,318
Government		157,418		3,457		20,193		181,068
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386
Geographic location:
United States	$	237,481	$	154,410	$	87,253	$	479,144
International		47,953		85,762		70,527		204,242
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386
Revenue recognition method:
Point in time	$	129,355	$	194,240	$	32,565	$	356,160
Over time		156,079		45,932		125,215		327,226
Total revenues	$	285,434	$	240,172	$	157,780	$	683,386

14

Revenue Recognition

Payment terms with our customers vary by the type and location of the customer and the products or services offered. Arrangements with customers that include payment terms extending beyond one year are not significant. The transaction price for these contracts reflects our estimate of returns and discounts, which are based on historical, current and forecasted information to determine the expected amount to which we will be entitled in exchange for transferring the promised goods or services to the customer. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from one to two years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Under the typical payment terms of our long term fixed price contracts, the customer pays us either performance-based or progress payments. Performance-based payments represent interim payments based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments of costs incurred as the work progresses.

For our overtime revenue recognized using the output method of costs incurred, contract cost is estimated utilizing current contract specifications and expected engineering requirements. Contract costs typically are incurred over a period of several months to one or more years, and the estimation of these costs requires judgment. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our projections of costs quarterly or more frequently when circumstances significantly change. In addition, in the USG segment, we recognize revenue as a series of distinct services based on each day of providing services (straight-line over the contract term) for certain of our USG segment contracts. Under the typical payment terms of our service contracts, the customer pays us in advance of when services are performed. In addition, in the Test segment, we use milestones to measure progress for our Test segment contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts.

Remaining Performance Obligations

Remaining performance obligations, which is the equivalent of backlog, represent the expected transaction price allocated to contracts that the Company expects to recognize as revenue in future periods when the Company performs under the contracts. These remaining obligations include amounts that have been formally appropriated under contracts with the U.S. Government, and exclude unexercised contract options and potential orders under ordering-type contracts such as Indefinite Delivery, Indefinite Quantity contracts. At June 30, 2024, the Company had $