Teledyne Technologies (TDY) 24 Jul 192019 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Teledyne Second Quarter Earnings Call. [Operator Instructions] As a reminder, today's conference call is being recorded.

And I'd like to turn the conference call over to our host Jason VanWees. Please go ahead.

Thank you, and good morning, everyone. Executive Teledyne's and release second VanWees, welcome like conference Jason at everyone quarter is Vice I'd President to call. This XXXX earnings

market our released earnings this before We earlier the morning opened.

Senior Chairman, today me President Al CFO, President Senior are Main; Executive General Compliance Vice Joining Secretary Robert Counsel, Melanie and President Cibik. Chief Teledyne's and Mehrabian; CEO, and Vice Sue Pichelli; Officer and

for by Al and your ask questions. Robert, will remarks After we Sue

And tell and to that Of subject earnings and attorneys month. to and available being filings. noted before have materially. periodic statements webcast one course course, selective dial-in this differ all in their we for our replay about made me though, forward-looking is may started, In to get avoid reminded various via both caveats will the simultaneously SEC you a order be morning webcast actual disclosures, of are and assumptions, results potential this release call risks as

Here is Robert.

morning, thank per share strongest record. good history. earnings quarter and and the Jason Sales everyone in reported joining you, you our were call. we and Thank Teledyne's Today, earnings for all-time

magnitude. margin Operating an and significant record of exceeded also prior a by all-time these records each was

negative Specifically X.X%. sales X.X% in X.X% growth increased the organic of including second headwind, approximately currency quarter, was

businesses deployment the compared detection and Earnings time pleased to same continuing have XX.X% share compound on per XM's we On during acquisition are of Also in while $X.XX of of gas that growth cash at the flow. our quarter. capital to we margin disciplined year. last for increased announce earnings flame increased point, strategy improvement, our this and emphasis proven

third close to expect in the this We quarter. acquisition

but technologies markets. our of common complementary to balanced benefit serving from Teledyne end continues portfolio different,

or in our Our XXXX Defense machine -- Imaging declines Sciences Life businesses, than reflect vision offsetting in businesses. more industrial which strong some more and outlook growth

transform -- Space offset of to platforms. as air Defense some Electronics far should our avionics addition, certain lower sales and commercial In businesses more than

our strong. Finally, exceptionally balance remains sheet

our fact, quarter of end X.X% lowest ratio was leverage the years. In in five

call performance business Al he the will the to and our comment four pass on will I now segments. of

Thank increased was sales increased you, systems of The Sales second Robert. X.X% strong XX.X% measurement of overall from again year. test organically. protocol segment electronic led and by growth Instrumentation In last once analyzers. sales quarter our

However, sales at also oscilloscopes of increased double-digit rates.

sales of but environmental quarterly scientific quarter, selected sales largely instruments. the orders decreased In of instruments four result the greater domain, in X.XX was Marine increased of book-to-bill laboratory with largest a and and years. X.X% in Sales X.X% as the the backlog

improved simplification as cost we margin Instrumentation from benefited and increased operating each in In margins basis product increased grouping. reductions increasing addition, with business and segment's aggressive points profit profit XXX margins initiatives. XX.X% Overall

segment. Imaging Digital to Turning

Second increased year. Micro year-over-year. and for data increased Systems XX% grew over MEMS quarter of Defense last our Sales also significantly. increased XX.X%. proprietary or detectors Sales x-ray converters sales Space significantly compared dental medical Sales advanced and of to of Electro-Mechanical infrared detectors and

in the acquired with performed quarter Finally, in and X.X% the sales comparable nicely first period Roper industrial scientific from cameras increasing XXXX. pre-acquisition full

vision businesses, especially these Asia. serve industrial and in automation fact declines offset more in growth portion than our markets, of business, during strong The machine expected electronics in the consumer which

due the for second mix was profit part basis to sales of strong our increased And shipments And note, quarter. increased. points XX.X%, I to in record operating segment margin should nonrecurring GAAP that products. final XXX a segment. however, especially the in

level to of segment do half first operating However, the the of XXXX. half overall the second for resemble we the in expect margin year

the at not level of second quarter. the Just

Defense the Electronics to second majority strong our In growth the increased Aerospace XX.X% segment, of due and Defense sales quarter businesses. across Electronics primarily

high sales of microwave specialty reliability communications, radar as electronic are interconnects warfare But and well satellite as devices in particular, their semiconductors. and

primarily XX.X% due Segment to operating to Aerospace margin Defense improvement sales, our the to basis but of and also margin businesses. majority due greater increased across XXX points

with of to increased Systems revenue second missile strong sales quarter by related lower sales cruise segment, space Engineered programs, engines. and the In X.X%, partially nuclear offset manufacturing

profit significantly quarter first improved from declined the XXXX. slightly year-over-year, operating Segment but of

to Before want offer I regarding increased commentary additional our outlook. Sue, turning to some XXXX

continue that full the XXXX. headwind organic in points We to be will revenue year the half approximately basis of of roughly currency of growth X%, inclusive believe in XXXX XXX first

full to year with of Along scientific the billion, for translate contribution greater, $X.X increase primarily acquisition margin that our full anticipated over earnings reflects in revenue outlook XXXX. the camera's from The year improvement. just the

to will Sue. over turn I the now call

Al, and morning you, good Thank everyone.

for discuss our financials $XX.X In additional Robert $XXX.X flow was full-year the XXXX. then flow some quarter XXXX and by and covered discuss period cash of the Al, million first quarter, and will activities second cash third of with the quarter compared from not for same will million I operating I outlook.

collection, in operating income of capital first of receivable income The higher activities the quarter operating payments. requirements, partially of higher the cash by and timing offset provided by impact accounts XXXX, including the lower tax reflected working

XXXX. Free that from million million were is, activities XXXX the expenditures million the in to $XX.X the quarter $XX.X was quarter expenditures second in XXXX. capital for compared $XX.X compared operating Capital second cash of period flow with $XX.X cash same less million of in

debt million quarter $XX.X period second of Depreciation with $XXX.X to was of the net ratio the and of million is $XX.X of less million XXXX. expense for amortization We for ended a XX.X%. quarter compared million of debt-to-capital cash that debt, net $XXX.X $XXX.X same million the in

was XXXX. expense of XXXX the quarter Stock compensation quarter option compared second in million million in $X.X of with second $X.X the

our of believes, currently $X.XX of be per will for quarter $X.XX. per outlook $X.XX Turning range XXXX, XXXX to to per our earnings And $X.XX is to from third earnings the the of full GAAP share. the outlook increase year in Management $X.XX, to share the that prior an GAAP share in outlook, $X.XX

year to rate compared full XXXX XX.X%, tax basis is excluding discrete to full The XXXX. be estimated year point items XX a increase expected

XXXX discrete currently we expect compared in addition, XXXX. In tax items less with

to back pass I Robert. the will now call

now you're take Nick, Please if to We question-and-answers. questions. your you, to would like Thank with proceed ready the go ahead. Sue.

queue. [Operator few you. do Thank in We Instructions] questions a have

go from with Konrad ahead. is Please Jefferies. Greg question first The

Good morning. Great quarter.

you, Greg. Thank

could I maybe initiatives was for sense the also Instrumentation other expectations and maybe margins? year. around those Electronics nice how into your of I'm some maybe mean, you've just of hoping outside and segments the the the step-ups. the baseline to mix a had both done for margins I Digital margins. that And plays you maybe get of trying Imaging

try. Sure, Greg, I'll

expect me but walk margin, the with through fairly overall as you improvement of half mentioned, First, Al we year, let the but some in the margins. consistent first various

of instruments, XX.X%. about year, the margins half the at If you look were the first

was off the that better you expect that finish total I little that in XX.X%. remind and to We I'll a mentioned April, than year at that XX.X% in

improvement the about XX.X%. average moving up the quarter year XX%. first Imaging, some XX.X%, of margin have first we full higher low up. Digital of half at with was second for should quarter In We So we ended and as was think be now right

good and average the In -- year Aerospace really first XX.X%. The quarter. had half we for second quarter Defense, a the was of about

bit -- probably up for a little the to will XX.X% to about that pick year. are We expecting

Systems, Engineered first of the a half we to in Going modest margin X.X%. had

to first mentioned year. XX.X% the margin company then the we -- at in margin that's XX% a that which for up add -- be of that quarter. if about now your somewhat April of together, And question, that expect right segments the for about segments up by are in I year And total margin the you the to of end of XX.X%, all operating hope X.X% against lastly, expect we answers April. the to We XX% is the operating Greg. backdrop expecting about improve end the total from I margin

a deals the done larger I have that just corporations. general been continue views on carve-outs that one ago? to year just kind you're the And mean, an That seeing two opportunity And M&A? was you've pipelines do very last helpful. I today of then more that maybe is more. mean, from versus

We have pipeline, healthy a Greg.

the the ratios with reason as -- -- companies. larger P/E something more have we their expectations companies like reasonable. out that Usually dealing as are carve-outs we're they the and carve when not high is have reasonable that is valuation are expectations we We stand-alone the

Having like that said lot. of that's kind So opportunistic. that, a we

we While to of it a small that, hit anticipate reasonably funnel healthy year. it's potential -- and Having them we for some to do would we in two in said be future. like of able medium-size and hopefully acquisitions to one it the acquisitions in have look general, some forward move we

you. back in Thank queue. get I'll

Thank you, Greg.

& of Jim line the with Needham from Ricchiuti question a Company. have we Next,

I've thank Hi, And of color bit give follow-ups. can Thank the segments. wonder the you you. if us got for a I a couple of various on little then, book-to-bill you. Robert,

Jim. I'll Yes. try

by driven -- it's book-to-bill the are businesses instruments primarily mentioned, the that is in Marine as X.XX, over X, is Al over above instruments X.X. First our

Defense is we in a a just little X.X, under probably the over would lumpy. X, is under maybe one Imaging good Systems full-year, first we different the others, for X.XX. is instrument because there So especially is than quarter We think X.XX. and lumpy. somewhat X. X.XX, Defense Aerospace orders be think Digital and book-to-bill again had are it probably the Engineered about

programs. we have know, you As big

X.XX, was second book-to-bill is about one. quarter quarter First

end maybe the stable. we overall, we'll the maybe X.XX, year would one think fairly at over the be so We for little And about X.XX. a expect book-to-bill year one,

do we all of right. We downs, but our believe have because some ups and portfolio, we'll balanced

one? for So, quarter, like around sounds the book-to-bill it

it's but have of kind quarter. with X.XX, you to -- X.XX, as goes it about balance It's first versus everything

First was quarter X.XX.

those balance one. slightly two, you over it's when So,

out test How in business, to seeing scopes anticipating quarter? there. Great. particularly continue I with a starting That's you even keep then helpful. business you the pretty is that? slowing growth but and good showing strong in to What measurement you're to results this show and sustainable some call

we're really -- connectivity the and two this protocol helping a it. primarily emphasis our in is businesses, cloud the are continually businesses. developing Yes And -- of Internet as Express business serving the lot that's and which computing about of There protocol driven parts know to cloud growth There growth the and we scope increased of good and Jim. we the you had XX%. by computing products. And there on PCI In protocols. quarter, are we're two new Things industry developed our are cloud next-generation are us to the

but we growth still had quarter, the to X.X% in for we though anticipate we've and perhaps be in overall reasonably side, the of and scope have growth the good test as in year we On a as should excess measurement. second robust indicated not

area that we're of in putting we a frankly, money -- R&D and So, lot money area. like that

On X% think you the what's X% in we we then driving gain average to sales that's come get R&D over in R&D and the spend X.X% us from to about new spend T&M market are helping Teledyne, share. product, I XX% especially, we across our outside. of When and which

we're seeing your industrial bottom think you That's do it. a yet Got business? helpful. Rob, machine vision in

I don't so. think

think predict. difficult I to it's

of depends course it between on happens Some of China. what and us

areas is think to Digital the our In in. endeavor area you displays hit Imaging look million machine $XX have I being about of as at our that businesses, is that business different overall businesses, flat-panel we hard. which machine

you into market at that whole consumer in we though, Imaging there know, from and food batteries. are have in do we in such cameras some To electronic sales batteries vehicle looking seeing systems, sensors as intelligent specific and inspection, that on. trying as a into line moved Digital have interest for and and have even other we adjacent of we're But in we offset to so we're our move we things some bunch scan that traffic segment, x-rays

as those the then immune know, are scientific to from kind that we did and businesses Roper And of of acquire market. camera part the you

that's conservative not little I time we're I'm So, recovery. vision yes, on this Digital much in a counting why businesses, businesses. recovery our expect any our don't Imaging machine at

Imaging, that, Having segment said of X.X% high X% X.X% that -- of X% X.X% we'll organic X% still or from we somewhere Digital get growth expect another as as plus excluding all the to acquisition. maybe in between acquisitions, of

we Digital So, over year in to end this market Imaging, at in negative the that overall growth segment. on XX% kind expect where of everybody is

it. Congratulations the on Got Thanks. quarter.

much. Thank you, very

DeGasperi Andrew of line Berenberg. the to with go we'll Next

guess for of flight services. for close of connected opportunity first they or partnership be service Thank the know big I Viasat by X,XXX this I think is my your plan X,XXX about year. with to Yes. How end question aircraft I the an you? you. on would that deck today they

robust that. us, I I for but Andrew, little for it's little partnering tell think to how opportunity them, but you quantify for a successful it's a to side, have on be it's be. to good the early it's delighted flip to a with to me how and going me estimate We're early

a satcom. We're new that it's -- area as with flight over There you is from data know domain. streaming familiar

customers in domain. satcom other the have We

-- be. a robust more, So to little would early but that it's how we estimate hope what

Thanks. of getting second that side, are return Marine at you the And Do your growth going comps maybe I half. at to this into stage? on the easier know -- expect sort

Yes. is The yes. answer

a expect as that have the approximately We X% domain. the X.X% growth little for in high we over will maybe year as Marine that

Al But orders very you were As know in our are contraction the mentioned, X.X%. had as -- have robust. second we over quarter. we They

other the -- both And and the picking growth X% be that's somewhere up numbers are thing data that would exploration offshore exploration numbers and happening the is between production X%. and indicate production

years. seen that number some Christmas tracking we're that. trees are There of the year last Christmas the we've this three highest coming of And so orders for trees, kind good projected in the in are

of we do growth expect X%. So over

gas Got idea to that's business, of lastly what it. XM's flame you expect Or just I it? have maybe been an absorb how you do was it do detection do once and And you growing? wondering

Yes.

a the there of our piggyback in think it's from it is single-digit area they be while So world world different the underlying than play very are into for ours. the us, they products and in market us, synergy environmental to some that little We technologies low should we'll be We areas of able the very complementary, in growth between of products. in better we that because that serve and business. serve their the primarily that a the they're think that

single-digit, now, that the us scientific right the camera we it by businesses that single-digit it. think acquired after low but did think we improve I should So way

So doing. right on now we're what improve hopeful that we can they're

Robert. Great. Thanks,

Thank you, Andrew.

Cowen. Next we with have a question Giordano from Joe

you. Good afternoon Good guys. Hey, for morning

Joe. morning Good

Hey.

I on So Instrumentation start to margins. wanted

most You've higher think guys lot higher I lot but there, obviously different ,but modeling think got as a people margins a than came than are of businesses in were I anticipating also much well. you within

happened too faster? it Was bit? through you of came have or So little the else in there talk through Was a quarter there? expecting coming what us that weren't that you kind something savings just mix? that Can cost maybe

our best footprint, the say margins our and from -- was improvement of been instrumentation there. in businesses. kind reducing suffering would improved I a Joe There our the things margin are we that reorganization in workforce I thing area we've Marine think Yeah. the in had perspective our our but significantly happened colder margins cutting from now getting

-- XXXX. measurement their others when part XXX that a basis us. We we've span of the is points it The time, in the had happened this margin what's really margins at helped in surprised look And test area. and acquired improvement about and during to back LeCroy of we

the or both were in were revenues because we in our So protocols and anticipated -- significant higher oscilloscopes, margins surprisingly significant second than quarter.

margin instruments about first XX.X% overall in know was quarter. So, as the in QX you XX.X% versus

still XXXX. pretty we which is go probably we'll that XX.X%, expect compared full We good for XX.X%, at the year, won't at stay but to

in XXX improvement XX.X% over a points had that's that we the XXXX. basis So,

so were for just you mentioned quarter below I assume and marine marine So currently? me? was Can margin, far is you year-on-year where a that down. scale average scale marine on segment nicely you up up how revenues Can

sustainable because Having Let second to nice the as The we margins and XX%. of marine us. have I that half expect which marine be approximately in now had, just marine organic whereas over me is improvement revenue for was also X%, and would over XX.X%, see. we the because noted, the in in that, right year hopefully end growth cost-out pickup segment, very said the XX%, the are

ago of right that humming really this segment back it’s than higher And was couple business business was years to correct? a average, when I'm that -- say

was of to A XX%, XX%. been couple XX% on couple wasn't just was but XXXX, I would It XX%, to years ago, years a XXXX. XX%. It was of XX% it XX%. average of high as say ago. as it let's the It's say,

up climbing slowly plateau. So we're to that

can for Okay. and then sounds little talk temporary lighter maybe us a the in you that year? the bit quarter. with last commentary receivables, cash capital free some reconciles but the through me flow rest And of throughout some The working on how somewhat

for half. between million it'll significantly. should saying you to second in somewhere We think up improve My told we looking million. We $XXX think We me big the the improved it end at year, too them number. CFO think $XXX is a

They more challenging, and prefer fine. less it’s

Why you got do. it

Thanks, guys.

you. Thank

[Operator Instructions] We'll go Godfrey to George the King. line with CL of

Thank Good morning, you. Robert.

George. morning, Good

Digital adding areas? four fifth to and a the the out Instrumentation are. on perhaps at segment? remaining relates job businesses question of perhaps the you well these in excellent you the Engineered that Imaging, below A&D added? leg pretty always, stool. the outside Thanks. see margin three looking being System, other is Or acquisitions you Systems As see execution. then, operating the Do of area Engineered see could another company divestitures in And My and what Do

Yeah. that goal it's think fact segment will portfolio a think Good outside fifth The one, don't broad so. go I stool markets. know, of about now tough we question. right recognizing our to that what of a products have maybe of that George, the leg and just

machine of you about example, about Imaging Digital For that. segment, at serve if our is the we look third vision it talked in we

quarter care, we health cetera. geospatial, we that's quarter, then and Aerospace have have another the that We MEMS in then of we et have and and in about of have Defense, LiDARs a then course and

medical radiation. that in lot broad we domain. were devices for that things we're a businesses. add and just are treatments It'll portfolio knowledgeable medical it's because more for if that x-rays There those, the easier and other also we about the of of to So to be do cancer stuff we're

those from in away can think like areas Having scientific we Roper. we said from move did that, some of we cameras

to have portfolio fifth we think go because nice to don't lap, a I we need of businesses. a So, balanced

Regarding it adds from that far don't sometimes second XX%. don't in divestiture, we there $X.XX Systems we're businesses. as of kicks it's make and I $XX Engineered that make to the getting earnings. and a up divest about XX%, paying I in business. segment, see part a divesting about taxes those assets by which of as margin we how off The million your $X.XX And $XX think that $X.XX, being million the simple the approximately $X.XX our try -- can very though just is question little reason yeah, goes that to and very is would cash IBT, that to business

The of by final we they would there have move into is systems lot have a that fields going area a ourselves. do helping as problem are talent engineering we there, in us other

For Navy. gliders we to example, the sell

For gliders in example, of and Engineered we Navy deployed system's single our year, our this of it have XXX of one capability kind operations only Systems. a in that

you So, big know, a there course, of gliders' have sales program, combat lot of our SEAL. Navy developments we coming as program very and in underwater shallow a for are strong our and, water very vehicles

we like instruments Marine things or of water combat sonars instruments So, the sell because a they our use that, that lot vehicles whether from detecting answer they mines for are the not detecting would is images, likely shores. shallow whether are

doesn't don't So, make see that. It I first sense.

businesses. get nice a into other for it's without us platform Secondly, businesses to systems

Understood, Robert. Thank taking question. you for my

Thank you, bet. George. You

there are queue. time, this questions no further At in

Well, now you, conclude Nick. I Jason conference please. would our thank call ask to

this thanks again, and us Robert for joining morning. Thanks, everyone

to and release of number well course, news free questions, the on follow-up at our have other replays feel earnings are me teledyne.com. releases website, in you as the please call as on If the

appreciate for give the replay if could Thank conclude call, we'd you information and it. Nick, everyone you. the

beginning running for and Today's XX:XX will available XX. a.m. be conference through call August Time Certainly. replay Pacific at

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