Teledyne Technologies (TDY) 23 Oct 192019 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Teledyne third quarter earnings call. [Operator Instructions].

As a reminder, this conference is being recorded.

I'd now like to turn the conference over to Jason VanWees. ahead. go Please

released thank Vice and to This Jason Call. is Third before this Good market the and you, I'd Executive opened. We Conference Release President, XXXX everyone earnings like VanWees, earlier Quarter morning morning, Earnings everyone. our to Teledyne's welcome

by and Compliance Cibik. CFO, today and Sue are President SVP, Chairman, Al Officer Senior Melanie Pichelli; Robert, General Robert Executive me Al we remarks Vice for Chief and Sue, Main; After Secretary, questions. Joining your Mehrabian; Counsel, will Teledyne's CEO, and President and ask

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

Robert. is Here

morning, free Thank all-time Operating Thank Teledyne's a and to compared good operating margin was Sales, for XXX and in strongest margin we share earnings reported once were also everyone. record you, the quarter our you third for per history. basis points earnings cash call. Jason, period. flow Today, and joining again, increased quarter records. last year, any

X%. million and XX.X% headwind, $XXX increased for first was sales exceeded of quarter, approximately the currency time. the In organic growth Including X%

Record double-digit well last in first rates XX.X% of business organic in increased Given over earnings by each year. $X.XX share time as to growth increased sales the acquisitions, per compared strong the XX years. as for segment

earnings strategy X. XM's business on the cash we're emphasis of and acquisition complete compound our of flow. Gas in growth margin proven Detection on and improvement, increased capital August were We to deployment we've pleased for disciplined our continuing While Flame

immediately applications. for we also Electro Systems August the technology Micralyne Mechanical capacity with of acquisition increased In or biotech our MEMS on XX, microfluidic addition, while unique manufacturing Micro adding

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

in some XXXX to imaging in vision Our continues life markets. industrial declines businesses, strong sciences defense machine than more our offsetting reflect and outlook growth

electronics more than offset commercial Our OEM space avionics sales transport defense to businesses of and lower will air some platforms. certain

in addition, years. recovery ended four In quarter instrumentation early-stage largest the sales, marine the We orders and growth strong continued. achieved with and in of backlog the over

X.X%. balance its Finally, despite exceptionally strong closing two our quarter, acquisitions the remains ratio leverage sheet in of with quarter-end

reporting call reported realigned note turning no the that management this want financial to and are our This amortization, current structure, restructuring match purchase slightly with Al, new or accounting, structure. to any the Before segments. want conform for the was to of we been have our morning done restated to a reporting emphasize to results basis, compensation, charges. results stock I financial of adjustments GAAP solely historical our all Furthermore, that I on charges, other acquisition to

performance comment on of the segments. our business Al will four now

sales as of sales as products increased quarter comparison. grew more from services systems of to given analyzers Growth test tough tough measurement specialty level some protocol and oscilloscopes. industrial of In comparisons in Thank year-over-year electronic XX.X% and offset X.X% highest test and third a well than measurement but digitizers and you, sequentially XXXX, year. Instrumentation our the Robert. in last overall segment, Sales increased

X.X% of for organically customers exceeded quarter, to consecutive the also marine increased Detection business XX% environmental Gas but and as domain, the greater of result offset a pollution laboratory of our In of sales in sales sales quarter. instruments fifth and lower instrumentation, Sales by largely process gas Flame and sales organic acquisition recent the analyzers of instrumentation in certain control Asia. the increased orders

increased instrumentation. addition, significantly as simplification marine increased points, cost and measurement Overall, and margins and operating for In reductions and margin margins test prior we profit basis improved Instrumentation XX.X% aggressive segment business benefited initiatives. XXX from current with profit increasing

and margin acquisitions accounting, also and Gas environmental purchase instrumentation. Detection within Flame the increased related Excluding

the Turning segment. Imaging Digital to

serves given of industrial machine Asia. Third quarter space expected defense a year-over-year. detectors in our offset growth electronics markets, proprietary portion machine largely and resulting in profit factory converters and of decreased did sales significantly devices medical product increased grew in businesses segment X-ray favorable from Sales less advanced the increased infrared which nicely detectors X.X% as these industrial generally consumer general lower mix strong and The vision declines applications. XX.X%. our data sales. again especially and GAAP Sales of dental business, MEMS automation operating of also for vision sales

manufacturing, warfare increased increased margin also programs, the offset to just margin by our Aerospace declined primarily defense systems. energy Defense Segment lower businesses, for with the sales businesses. points communications. sales and of operating to defense increased XX the across Systems but but quarter and Electronics in revenue from the In but to sales strong missile partially a was improvement and third XX.X%, growth slightly In sales, particular, increased segment, operating and profit Engineered strong of strong operating XXX margin XX.X% satellite due electronic third basis our The due points marginally resulted majority record electronic defense XX.X%, devices segment, interconnects microwave of aerospace and greater radar, of space related for year-over-year. basis to Segment the across quarter segment. sales majority marine

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

organic that acquisitions, billion expect points believe previously from a full that full as year favorable XXXX. for rate with to primarily year XXXX by tax reflects more contribution basis as our headwind higher detection currency be to year XXX margin over effective rate $X.XX full XXXX. Along approximate camera, we XXX greater scientific and The flame gas continue basis points. well revenues than increase the the of roughly year will the of full in in translates said, Micralyne revenue than X% XXXX outlook That XXXX inclusive earnings the year our of tax anticipated the and full improvement in to the forecasted. We

I to over the call Sue. now turn will

Thank and cash for with you, our covered from and quarter morning, year partially reflected $XXX.X of flow outlook. operating the the everyone. quarter by acquisitions, some will flow was cash flow offset good third XXXX Al, activities recent the additional from fourth discuss for the record XXXX I and of Robert first same quarter, then not discuss third XXXX. income income $XXX.X higher of payments. will financials and by higher by operating million million Al, cash quarter and I full compared in impact the provided The period of tax activities cash In operating

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

million less net ended with cash quarter the quarter ratio Stock is debt. the third That option debt $XXX.X with expense the We of of of debt-to-capital million in of $X.X of net million XXXX for $X.X XX.X%. million XXXX. compensation of compared was third a quarter $XXX.X million in $XXX.X

The XXXX earnings is outlook Management compared XX year GAAP to rate to earnings prior year $XX.XX, $XX.XX XXXX $X.XX that XXXX. range full Turning in will excluding year $X.XX to full be per estimated tax GAAP per the increase discrete outlook. is our fourth from be the for to the items XX.X%, currently our the to XXXX, quarter share a to an believes And $X.XX outlook per expected point in increase of of full share. $X.XX. basis of share

compared expect increase mentioned, In items over discrete our rate addition, XXX effective currently points. XXXX we XXXX, as with tax Al XXXX, less would in which tax basis in

pass will Robert. call to I the now back

now go ready questions with Thank questions. you're to if answers, your to Operator, We'd like you, ahead. please proceed take the and Sue.

Instructions]. [Operator

Konrad with We Jefferies. with will line Greg begin the of

with specifically start on surprised upside? I of side the it way longer-cycle And in wanted short-cycle any the more Just I that is growth quarter. stronger was the Is has business? to there or to the organic what about than expected. think mean, think

had Fundamentally, good marine our we growth in I think businesses.

that As Al mentioned over X%, good And about. backlog, was X.X% before, we're revenues. increased enjoying a

up We of average with really plus electronic our came good defense XX% about about over in growth. and Defense an also Aerospace had resulted growth growth XX%-plus Engineered -- businesses, also Systems on for Electronics. And XX% which

add okay. Instruments and -- X%. just of was So you when shy those It up of all did

the circuit flat X%. consumer with all some up And those of so of other care down, to board Imaging products health that flight made the and electronic when serve said, up, manufacturing display add Digital panel Al inspection with our the -- was and about programs. it electronics you significantly with comes

And you the risk A&D driving areas any then think any A&D we visibility strength? is business mentioned I And electronics. then there within Any way defense specific mean, the into about from maybe the head to XXXX? just as electronics a potential CR?

problem. Well, us. CR can't a -- always is for I

we're contracts, businesses XXXX, looking we're strong. the of good which most growth we're would months stays to looking our X primarily are XX contracts going our of say defense electronics other think the -- because multiyear at Right that On now, ahead right electronics now, long-term defense businesses. in hand, in we at enjoy backlog, contracts. to in I

had looks good. our quarter the marine This we've fourth good is that businesses. Also, in marine orders

our for defense-related our which for as order, of marine received underwater are some example, We businesses know, you also, vehicles. just Gavia And an are businesses. vehicles,

also, of doing some are gliders our of -- And some our well.

as special I we part well, the our announced of vehicles just expansion marine for the in -- businesses. defense electronics our of work course, we for think just across that of as -- gone our ops. well defense segment, our underwater Engineering That's is Systems And an doing so overall, into portfolio, production. very announced the marine now all of And

to Needham Jim go we Ricchiuti & Company. with Next, of will line the

might able some rest of some the the little is clearly, How wondering bookings the color the marine in you're was -- continuing about if if, Robert, of of I you good provide the business? orders. I mean, a of other be to on on see to segments. bit --

overall, to think, with one, I one. marine close over being we're

that's but short-cycle our very one, of and probably slightly somewhere T&M also and are businesses below businesses, are those X because weeks. between Some X environmental

we'll shy were just shy all of we'll So be X. general, you X, end Engineered X.XX, and year say, businesses. Aerospace when Systems it's one. over Imaging, Digital year across cut one. a In to the the I'd we QX, one. over think will X.XX. just Defense I Electronics I In predict. hard our is think but of end And little

bit little you business. the a wondering you business? as some to on the it the this had color been that. just just standpoint about I'm wondering if And you you've talk growth of could Okay. acquisition, growth on to I that capacity-constrained. the I'm MEMS -- the you've allowing from What Micralyne assuming guess it's if accelerate help provide does could do of well. going in

Jim, two Yes, things.

we resources those there. But in First, capabilities. Bromont are facility it's in capacity. our been -- constrained significant We've making spent even expand with our we're investments of we've to expansions, a terms -- of MEMS amount

substrate us brings also capabilities, products Micralyne then facility. And What there What is -- is can Micralyne. we in use we polymer products MEMS have kinds We devices. the larger to most usually there a lines MEMS that those which developing and X-inch gold new is capability silicon biotech. and with it to XXX-millimeter are and good those So transitioning substrates lines. converted also our or of enjoy our lot of being has of for for substrates don't

It's good a really business.

of invest On where develop other of and some would have when concerned been production business the to new next customers phase the in they that the hand, be. as products,

to able to us. or MEMS primarily number independent and products that have as in X-inch good world. to for puts the multiproduct offer those because transition That our them a we they facility. X-inch we're Now a foundry one us XXX-millimeter acquisition facility, can It's

Got it.

broadening sounds getting like new sounds like presence it -- out it getting -- it's So in getting also it well? as also your -- market customers some

Absolutely. area. biotech Especially in the

And we will Cowen. go the next, line Joe to of Giordano with

bit can or with just now in something. new scale little XXXX into maybe add a or have radiation the we business, in surgical customers shift? those of get what talk visibility years assuming of technology that fields over what And kind don't you for the might a you sensing we then if mammography, couple dental customers of Can from new about kind

Yes.

should be have and customers new saying like good expect me to [ph], continue. Nano any that without mid-single the we we in Right in Let XXXX, start now, and by we think orders, it applications digits.

capabilities we're that terms have our also other new of to also coming the there. in out. to are customers top the some scale hand, what we our provide add up we moving And On products

Digital of So about we're overall. Imaging bullish kind health businesses our care

single-digit, -- as Now if those we would mid-single-digit get we course, growth customers, increase. of new

shifted Okay. look you've And a maybe optimization margins It that seems of a comped I at high-class incrementally, portfolio the of your bit cultivations is portfolio internally. kind a sizable context, gap. set on versus if little that a bit like you're from to pretty gross some competitive there against, basis in

pull some of minds, could can the that couple to of the you like get talk But with is, close? over what next that is R&D to are Some levers spend. understandable cost-plus that available to you it's the structural, in your in years? there nature of what gap And

Yes.

sure. For

are. margins it'd year margins up thought continuously year this XX it XXX. this year we more should with to improving Last last be be like basis could been quarter, from we start to XXX XX. year. Let's finish our started thinking year, the where points, XX. When we maybe We the about We've be our

think year. it's be to going higher year the when close this we Now we

So we're improving our margins.

having because will obviously; by which first to if around you year-end, margin, be total okay low, this at XX.X% But our was was XX%. said quarter quarter that, operating go

make said three of basis report all gap got next years. having think XXX sift a that at -- I the how we year. next of probably XXX to and P&Ls lot like products we we're to I But not to a our various A the expect the at should should and you we would one much of undertaking us kind primarily reporting. get I there's opportunity activities conservative making one so not customers should where lot et for which couple making points that, non-GAAP -- which I through we're we cetera. much they're us. of the what numbers, can because see look abandon, year, money many our that our certainly you focus margins, points think an with money businesses do on our and XXX comps there's say in using money improve over to of concepts of basis depending are now we XX-XX, on to to to a comps look our and on of bottom the for of

with that So I everything think acquisitions, that's the good improving part. We've been and bought. been the we growing we've

improve Now can and margin at earn I have businesses. basic be very I the to hate that. of go. And we to $XX.XX like and the think also our frankly, top I nowhere

by us sequential then last the outlook And maybe seeing helpful. very margin bottoming the machine segment vision? for in industrial least for are a you me, And can take That's you year? your at full normal through

Yes.

semi area. panel introduced signs now and still There are I right the in some large, we being help. area, the weak. and cetera. seeing will In new think positive By in electronics, things actually, are an existing et bottoming, for products there's flat overcapacity handheld the we're some devices, some which think consumer

I think some coming. So electronics, in we -- remains see the we what that see consumer improvements

bottom, it's So upside. -- it's I'd with probably probably you're close the to some potential say right,

inspection I have we from an of battery is control, And food side in which opportunity the for flat new mention, It it, just of adjacent health cetera, lithium-ion I MEMS, that traffic balanced And think et Teledyne. like is inspection, areas Electronics you displays goes saw. portfolio adjacent flip to markets overall as cetera. from markets, of that et are will Digital being expand panel to care The to should to some a us. that declines our sourcing, to we offset know,

basis Maybe you go if XXX, Now year. significant year. for that if asked. think last last we over XXX points to that may, questions should I the year, margin over the We full improvement instruments margin enjoy

So implies up XX% -- kind in XX.X%, of That we an over XX XX.X%. should end QX. about

we'll That expect it way implies QX. maybe QX, had in in year, Imaging, In all we Digital with but not XX.X%, QX to Aerospace, about strong. be that margins our that last think will XX.X%. and what I improve to I the flat be Defense over

XX%, stay XX.X%. I about we'll over think XX.X%, maybe

we made-to-print because of our of of Engineered Systems, products some the that some sent segment. realignment, into

Jim, of quarter, -- we So we XX.X% sorry. points think little end had We end Joe margins a think should basis And X.X%. enjoy last about total XXX about hope think margin -- last up a I I year meant, XX.X%, year. we added our up contraction XXX year. at segments end above from should said last considering margin, X.X%, basis I helps. I with low points above you if first Joe, should above Overall, the company, that the

with line we will the to Next, go CLK. Godfrey of George

Nice I jumped quarter, apologize. me -- in it, company give If call as got I missed segment? Can a always. or release I saw just the as I heard press the organic for revenue heard by your growth, the whole. on -- the that I you late.

And problem. is Be at year, Defense marine In Engineered Electronics it's we're We about year, X.X%. for Aerospace a I with if it's projecting Imaging instruments, for but you to. by concludes Systems the XX.X%, leading at X.X%, the followed happy XX.X%, No overall, QX, is X% increase. -- don't and which the flat. at Digital know the X%. X% quarter. caught

Robert. did, I And Yes, then...

headwind, Al XXX foreign includes basis mentioned. that exchange And as of points

ago or Imaging, the was margin's that just quarter? down a What the higher either it. this the year products lower one other margin And then year-over-year. specifically mix, Got contributed product on is the the question margin Digital the

for general, I the panel flat in businesses display. the are higher-margin think, machine vision in

And there. over margins and when good we -- good We have enjoy very position there, that a XX%. probably

in health care, margins development than -- the was of large even product are development multiyear taking And a have orders. we up, little we're because lower health still some Some care there. that though orders, programs

programs defense Some space Digital of in Imaging our are programs. and cost-plus

if nature, margin. broader So job the would be Digital lower-margin think little the at go aspect will that, probably this of lower XX.X%. was, QX, that But a -- I think recover George. XX% course, over -- XX.X%, at look I XX.XX by the XX.X%. its think of that hope is I We helps, XX.X%. lower it, you maybe in quarter are QX margins Imaging,

And next, Company. the with Jim of we'll go back to Ricchiuti & Needham line

be test measurement against it comps you're business, the tough like wondering also Yes, I scopes any was Or some macro the and I in analyzers. just in I is there if case looks weakness? might signs market, in comparisons? I'm what a tough the automotive guess, oscilloscope electronic of weakness. wondering some know you're of of have macro-related that, up exposure. some protocol business you Is in seeing, any this

is with businesses, transitioning accepted X Express, X -- always to example our Chinese comps There $X little totally is whole exposure on I your It's being we in is And our to for we're and customer. some imposed to a Having customers, correct. compared million. a observation that, also X. tough are competitors'. order We're restrictions Gen less first protocol low not there think primary from Gen of said that PCI used. until is of wait our new than the and issue relatively Gen But going, in people series products.

timing is So a of weakness some issue. that

Going the oscilloscopes. back to

I think comp a that's issue. more of

relatively businesses. demand in a our about issues to us. seem affecting have you protocol of business. trade positive oscilloscope about headwind in a I'm But As automotive little Certainly, some be China There very are we our might I'm our Europe. businesses. bullish good indicated,

Good. final me, question Robert. from Then

past to it? pipeline You active seeing be like? the some there? what is made How out appear would acquisitions the What's And you over nice are year. what

do two have companies, because a midsized see month in We're that, recent up small acquisitions. do that other Well, two little hopefully, those on we the is being really have midsized acquisitions our some companies, large two acquisitions. see feel did and are of especially the to hassle. same. carve fortunate pipeline, This nice billion we very acquisitions is XM. in is to And stiff, acquisitions we But we to pretty within very capacity couple We have fit that well larger acquisitions be in we which said over some portfolio. -- what with certainly to want. the competition $X period one most from And Having our a positive. there

Instructions]. [Operator

call. I think we're okay, would like Jason I okay. to Operator, conference it's if conclude our

and thanks for today. Linda, joining us the Thanks, everyone, call again, on

month. the of our e-mail If speak. our you the have follow-up are to for schedule, call at replay releases certainly website. And time everyone. all the me call to free feel the available Thanks, is the release, earnings on Goodbye. do number And or me questions, on again, news approximately available this one

will and midnight. available replay XX Ladies Pacific XX gentlemen, after conference through today a.m. this November at be for

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