Teledyne Technologies (TDY) 27 Oct 212021 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Teledyne Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, this call is being recorded. I'd now like to turn the conference over to our host Mr. VanWees. Jason sir. ahead go Please

And Brad and Vice welcome is VanWees, before conference everyone. to earnings released earlier this good of Teledyne, morning, morning call. release Chairman earnings to market third This course and we our our opened. Jason the quarter Thanks, of I'd everyone like

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

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

Robert. is Here

and in year achieved fourth you Furthermore, increased every exceeded Thank to financial achieved year Test strong in X.X. in Good than for less Instrumentation book-to-bill was greater per major GAAP businesses sales the remaining quarter. in quarter record share business increase Measurement where XXXX. orders GAAP last of third earnings morning and XX% in growth XX.X% but XX.X% XX.X% our last $X.XX was driven earnings quarter organically growth of our Electronic execution the both each quarter. than call. group, consecutive a $X.XX our than pleased our third thank for you, operational especially Imaging of organic greater sales and earnings for joining Revenue third FLIR. quarter performance the of record I'm compared Jason. and and Commercial the with contributed organic by XX.X% revenue increased very and by was We Teledyne our with

acquisition-related to Cash debt $X.XX XX.X% third excluding of flow third basis $XXX earnings of were million our quarter from at repayment the quarter. share XXXX. increase of we and per increasingly Teledyne charges allowing the while X.X% the in However, was its declined a about on efforts with swift X.X% in record ratio quarter a comparable an been performed excited full leverage strongly from of quarter. future second the end FLIR first Teledyne. long-term have Integration are

of the January to saving in with in to described continue XXXX announced as earnings and target cost We accelerate XXXX of achieve before as call transaction and we middle July the our expect pace the of planned of $XX the opposed we our annualized million when as XXXX currently synergies end noted to compared of XXXX.

not Teledyne execution our is in Regarding and challenges. quarter, chain supply immune to issues operational inflation the other

a which is XX% strong we've to to X.X% in are July. FLIR $X.XX on sales, year and Digital of gas flame were think XX.X%. Sales test acquisition, of as our very to-date exceptionally FLIR. and I from billion segment, reasonable last quarter. successfully organic in to was today in Digital the including organic safety oscilloscopes now government sales sales the a Imaging margin business transaction Imaging we levels. to quarter billion and discovery In pre-pandemic scientific was segment, systems navigating test last of outlook these accounting and industrial translates increase the strongest segments. our systems, Teledyne GAAP commercial XX.X% for Imaging our in being of purchase and total margin overall But of was quarter segment, and adjusted X.X% increased sales third managing been comment such XXX.X%, health four vision Sales excludes human This largely costs the which approximately Sales in On XX.X%. earnings compared And growth protocol versus X.X% presented performance and However, to levels. the and but growth $X.X Digital and of FLIR. Environmental of combined contribution analyzers returned include due from basis will XX.X%. quarter. sales forecasted we year Marine growth full with record year increased Sales further electronic increased also pleased Instrumentation and year. to outlook outlook X% In in increased detection sales X% full led to a our margin for segment almost by XXXX issues. Instrumentation measurement now operating related were year-over-year market healthcare Instruments drug at with strong businesses of record increased imaging and and sales and we

year's quarter a amortization. Instrumentation In X.XX. basis year. XX.X%, excluding Aerospace and XX.X% segment increased were operating six Overall, XX.X% Industrial margin increased the with points basis last by points Space tough X.X% strongest driven increased the Electronics in growth In profit operating or sales, Defense, combined margin sales quarter. book-to-bill increase commercial addition, with last operating GAAP products than increasing versus orders XXX XX% and Defense the asset segment intangible aerospace points quarters XXX sales with basis quarter of with of XXX pandemic-related in in segment, profit greater last a third

before earnings outlook. call increased to our comment but Engineered quarter margin declined the turning earlier in on and the segment, Systems turbine exited margin third to since we profit X.X% the want year. business over I slightly, revenue and engine higher-margin Sue, operating Finally, this But

move we've teens operating several to our the overall XX%. from been low on margin journey For years, a to over

notwithstanding forecast supply now approximately pandemic chain to, charges acquisition-related our Over progress points outlook Today, XXX the in earnings the margin, is $X tremendous at further approximate and last excluding of the year increase XXXX basis recent XX% made X.X years, we've our with – inflationary And result the is which and primarily pressures. better improvement the full July. our Sue. from in operating forecasted XX% in

some first financials discuss $XXX.X from quarter and the fourth outlook. morning, discuss activities operating XXXX Thank In flow covered including I was all costs. third you, our will the Robert full-year Robert, additional and I cash quarter quarter by then million, and good will for everyone. acquisition-related not

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

FLIR third XXXX. same in the million for $X.XX acquisition, inventory was compared option That In XXXX. less for stock the FLIR third expense of to expense of billion was $X.XX of cash million. quarter quarter addition, of quarter the net of $X.X $XX.X for is step-up We debt. million the million quarter expense of the ended from restricted employees compensation non-cash Resulting $XXX.X the approximately for of Stock unit third period debt approximately XXXX billion XXXX $X.X with was million. $X.X

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

XXXX. In XXXX tax addition, now to the less in back currently call with Robert. discrete items pass I'll we expect compared

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

Please go to Konrad Instructions] And can Jefferies. [Operator we with ahead. now right go Greg

great and morning Good quarter.

Greg. you, Thank

seems a sustainability mean mean has I I drivers of outlook I Maybe you've mean just lot how least the margin higher of previously the I think had do around it about on there much a or per think broad-based segments. always changed margin. talked the capture tailwinds beat given you how pretty you to target as And At year. on about just higher? the start to anything potential margins headwinds? expansion and reset based that you'd like have across

our our Greg, may think, margins the points maybe And still is to projected. we -- are. our increasing, said basis but XXX up where QX. we above per XX as I basis that I XX% perhaps on margins will points that have year I We expectation say have it's think moved Well, earlier keep

tougher we but margins to we little to go going it's So improve intend get along. a as

mean, the the And what the take drive next year. to that you accelerating out productivity pull I does allowed forward? And you what FLIR business? mean potential then, mentioned and to just that -- the maybe synergies middle I longer-term for costs mean, of of

are -- lobbyists. do legal been thing manage million. addition that important The frankly, able in think, I we've more to consultants, benefits significant to savings is wages, third-party dependence to on about reduce which net $XX about and

As you don't Teledyne. lobbyists at we have know, Greg,

legal others, But third-party course, I'd $XX those fees and the Board $XX help. million. public say and and So, relations million, of so and on, consultants lobbyists

business for one I I risk supply mix. to pricing? me. about specific briefly much more last price there? before. the -- flexibility are mean, of within mean, just you of there around the How the inflation do you then, about how versus offsets And think have Just you mentioned think trying areas broader maybe where chain

anticipated look XX%, some our not So come us part much out price experiencing of more are Good of Having with have We're we PPI, at them. of said in recently it suppliers. that, as to high. the have long-term the with we far some from as price increases. is, pretty inflations agreements our we when suppliers XX% pressure

So those would moderate.

on obviously other What to businesses, to long-term that businesses, contracts about so As have increase this prices. the ability year, we the X%. do have increase because can't prices, some ourselves, prices But means, in been we've we average for able in Greg. far increase we

X%. So on the average, we've increased

Our we'll see much our elasticity how intention and especially, year, start perhaps, is have next we doing prices. early to continue And in that.

Thank you.

you, Thank Greg.

Please Research. Maugeri Wolfe to go And Mike can ahead. the of next line go with we

time. Hi. the Good you for morning, Thank everyone.

So I'm closer the that while watch you're within a with new are operating eye is just ramps there under your continuing items starts government resolution? or like U.S. significant programs keeping curious, any on business, this

Mike. Yes,

our and I Systems other Engineered proposals think is on. just there and then Marine businesses to a an bid me soliciting about The with -- XX% by our bidding on we is eye that that the the there's of are start gliders we underwater underwater two government vehicle opportunities medium our we're are vehicles let total. that keeping things. do government that underwater saying are large first XX%, on on. and we businesses And And together, across expect like UUV the

other early warning the view in the -- wide field satellite. of for That's Imaging, or WFOV Some us. we of called opportunity Digital what's have an

resolution. next-generation a NASA MASI, it program, what is But downside, And on are persistent new but us of there's available we one. Mission risk downside, overall, this be later a another rebid to would the Our is even infrared, always we range later. there's there the call continuing is overhead that bid our yet, that. have OPIR, whole to which when doing Systems the if you're program year. a programs under And is We the decision at

talk then, you And would recovery now in the it. early in about sort of next business, the release business? your trends the year that to that to about longer-cycle point be you you're that into seeing Got willing the have the within

have I would well our the businesses quarter. a you're book-to-bill say we of up oil because would had Right be Mike, significantly. prices, opportunities And this moved Marine now, primarily, X.XX as in that aware

computers of more. maybe more as $XX may longer-cycle $XX to We we upside that number also go that all especially an a right. We aircraft. have that on side businesses, controls, Marine start is which similar That people have think can and on aerospace million traveling our next million. in Those Aerospace and various businesses, opportunities $XX have think they far will so the million are look year and Defense

with side T&M, Instrument, we and which our And overall. cycle well. the we that a of that we have year shorter other developing X% measurement enjoyed products the doing will that increase our keep is And test the some next bump new hope too. On

it. Thank Got you.

Thank Mike. you,

America. of with And of go next ahead. the we can Bank line Please Elizabeth to go Grenfell

headroom FLIR the think the do about see morning. you savings, to we I top and into mean had savings? there headwind timeline think how before Hi. additional we cost achieving or potentially cost could how When Good achieving $XXX been the much and the to, synergies integration to side the think additional I is additional upside acceleration much where and million. initial additional

I I me hope misquote didn't start with, let Elizabeth, myself.

as our which opportunities, more those we that vision factored all yet, in of the Like up move developing systems really are those. still top But we're well. make between opportunities. the said working margins. moved we because software Raymarine of and Marine, coupled be offerings businesses on at away will but their right our Our And to still right $XX rest But and down, the high-end from other and and and we're million. our businesses for we haven't now offerings. businesses, very XXXX underwater side FLIR's cost the in savings that's working that the XXXX opportunities midrange There Having systems think help our of integrating. revenue improve and revenue some keep integrated stuff. are on quickly. in Teledyne's are vision and and we worked make there We've they synergies opportunities businesses out software We're products Karas. Raymarine we've Marine Like, that, there would is between there the businesses forward

we those we more As think go create that I savings do would forward. as

M&A to or environment about additional continue you grow considering how thinking you are to opportunities the as then, and inorganically? And Okay. delever,

Yes. be down Elizabeth, not would take to net EBITDA. that we're We the by X.Xx hope our X.X debt on delivering, at the end first about to XXXX. sitting to marker. That of

when a But eight, because that look get take at that potentials acquisition to at nine at go little the look things months. kind are start we confident looking at of, there we to start acquisitions. smaller interim, and you're As you you're, getting larger those will looking in time we going

As to quickly XXXX assets. We high. also did next years. was eXv, debt delevered $XXX But in smaller back the interim pretty we of bought we in million we when our about acquired ratio EBITDA over the three very

longer targets. shorter we We'll term, the do promised very small we that term. So but are the sure we'll can do the we've hit we won't rating do anything acquisitions. In our big agencies then

Okay. Thank you.

Elizabeth. Thank you

Jim Please can the And next with ahead. to Ricchiuti Company. we go of line Needham go &

last business. morning. Robert, much it okay. Organic to don't question of a contribution of business appears an was Is this looks any good the And growth there realignment? be fairly like commercial FLIR Hi, on QX. I either in Their modest. having recall year's doing them EST portfolio

Is machine think a probably their was that little vision government business it was I pretty healthy. the business slower? related

-- QX businesses, which Actually the was out about last million. $XXX Jim million. was about million, third generated sensors if year's their in may their businesses quarter was and This revenue million revenue business, I components, the million which their last including QX the is year $XX of $XXX they and solutions say $XX EST in $XX commercial make solution let's to year that the

revenue. you if -- So with EST no

it, to year if of million $XXX apples-to-apples the $XXX you're like more the versus $XXX looking out were So you million, look and last million. at a take $XXX million the million, $XX

there. significant growth there's So

segment the this the had of from versus in Defense they've year, systems. good year primarily last coming growth about our Defense had -- segment, Second, FLIR we've reasonably X.X% unmanned

the been businesses. there's So commercial as the as well in growth in defense

third sales you last quarter. moderate if things you EST subtract If to to the were were year

Thanks that. for No. clarifying

about that a Robert. contribution. out, QX though did that's still $XX Thanks million to fairly was pointing even $XX significant in They right. for it You're million and QX, down

do guys business? and in anything wondering gains? share the really the market? business, performed the you share I'm well what Is you that On there. analyzer in in have is business? structurally And seeing scopes is in gaining you're test you think Are activity business there Is protocol the measurement changing market it that it

Yeah, cylinders first businesses. protocol on all, all hitting Jim on both. analyzer our we're What -- of

see oscilloscopes you Express, quarter. video combine strong high-definition multimedia our a sales for like as analyzer If protocol analyzers all-time demand as this We protocol our us, products. and well record very record PCI was that for

been interfaces combined amount The our at are products. which we've successful winner And that's analyzers, other time that our saves significant of thing between that for real a engineers oscilloscopes is protocol we've us. with developing been for

So Good together two market market new and combination. it's you combine when products. an oscilloscopes, a for upside the for great protocol analyzers with

questions. two Got quick final it. And

and disruption identifiable may to question to -- have say challenging to but the parts? to any there's you can next been to you revenues. do that quarter environment component in just would fairly well. you wondering revenues be be able Just whether answer, it's I'm the words, difficult perhaps achieve this -- But if navigating been other but you seem In just get

Yeah. Jim, track answer one that that's a closely. very that great can question. Yeah, I because we

we quarter, shortages. not didn't million First, probably revenue have because could of $XX in we the that enjoy I'd of about say

way as Now of fortunate you're business in we can of very places. portfolio up the our because that we other laid some make with were familiar is out

moved We by have those are sales. portfolio we a And to not everything just the these not lost They do. balanced and QX. hitting are shortages way

We similar next of looking year at see expect QX. similar QX issues. in to and a number We're have

make So our PCBAs an to kind the components have -- that, computer access other get also we need. have our with us but of have we -- the our side some our we thing. interestingly they're we that up a we from They also have procurement by and East go the game, automation, in dedicated procurement we the major with that chips where Far in people doing And it suppliers the provide it's shifting of in procurement active a we initiative said portfolio. us Having other of components working Far East extremely from those pulling into helping same but have program and in PCBAs. -- some who parts

So it and million before forward, this pull it's forward. $XX a Take -- in said stuff million, from combination. the of navigating next it. we're I where Then take push push it kind as current quarter, can some $XX we

okay. so far, we've done think I

Got book-to-bill and... it. you Marine. of the sense Digital alluded to various you fairly And book-to-bill A&D last Can strong in question give Imaging a us the a in and segments Robert,

Sure. Sure, Jim.

gave that. that measurement, me I T&M -- had test QX. with Let Marine. QX. X.XX had sales in we environmental we start in Recall In it's and and record in

I'd X.XX Imaging good. our overall, So businesses to X.XX; AD&E Engineered is that brings Jim; about about is Digital and pretty say it Defense X.X. X.XX; and which Systems Aerospace X.XX

Got Congratulations quarter. very it. on the Thanks much.

Thank you, Jim.

And to with we'll line the Berenberg. ahead. move go Buscaglia of Please Andrew

guys. morning, Good

Good morning.

On that -- indicate Imaging, book-to-bill you can bookings for how FLIR? comment, within Digital can are you

They're they're modest, X.X side. in the but Digital the in Imaging

Okay.

Okay.

So still though? X above

Yes.

Okay.

then And what Okay. was sorry -- that?

Digital side. -- the in total The I No said Imaging yes.

you Okay. talked about And fairly government. positively

there could horizon then for you much government You're spot see are winning awards in potentially. maybe to? to still in anything terms on fair kind not And of sore always talk term, of new share the near FLIR related your help FLIR XXXX a that awards Would that so but gaining any you that meaningful? -- was are of as them

own for US we delivered tell example you orders especially Yes. little control have systems. we're light I holding Things to to border the in right. there. the some Probably vehicle a nice surveillance got where got we that moved our

look we again, lead if holding that in I is FLIR, on do they me focused suffered too to we'd other our portfolio. because -- is, activities government and Andrew what balanced we're program I portfolio. okay. a could what's unfortunately, bit the think important own We Overall, even there have protected little expect have biosystems. But our personal some a may with the have -- to you businesses And at DARPA

Aerospace Defense portfolio and then balanced in between And of Systems, our our programs a both have the unmanned Defense. course FLIR and systems. and air systems we Engineered We our have ground integrated

in we organic, in about should growth the gained with can government in programs may look we That happy in going QX. XX.X% we but So pace when forward, you programs okay. I'm modest keep of -- X.X% this overall our sound be that If that. those time at

with Okay. bit. tied but maybe businesses longer-cycle to Energy of you're up And going Energy can on know a just small, I lastly, pick your on what's comment you just exposure? specifically sales it's seeing your some

Yes.

get of a up about increase the million. total XXXX oil that to little I a say, from that, more $XXX get businesses. then think all fall I'll think prices, here back the $XXX said first sales having going again, but get of on our okay. be short-cycle Defense. X% in we think We expect -- we're that's from million we're hitting get as constructed on we than is X% I Digital XXXX cylinders We But We our what let's X.X%. Energy. more portfolio. get it We there. about to That's there. like course We we've to X%, because maybe X% Imaging, And

there's all but on together not I'm the as have we to of whole because know So, on that The downside Andrew. the move company it would in by protect that you put way us whole move pieces counting well Energy, the upside company. the

Robert. Thanks Okay.

Thank have coming you. up. Do questions other any we

we have Currently nobody's open following is -- line and Joe. just Joe's

Okay. Joe?

me? hear you can Guys

Yes. Yes.

rate were kind you're the that FLIR ex like to hinted think at already, exiting growth think into if is you rate a you into So is the 'XX? but EST, about 'XX? kind true of this you of kind And XXXX of do sustainable that what

which digits, no be we like we Teledyne EST mentioned, in year, now, just it I as would should you be. out Right this I subtract if mid-single revenue think had think the

were you go -- to if yes, then, ahead. contemplate And Yes.

we said I'll No. be say we the X%. we organic X.X% started we year, our Joe, to just -- would When this. growth year, started the when

I X% to it'd in it'd X.X%. July, came and between said get be X.XX%. And today, we X.X%, we when we be said summertime As then,

be when us So, that a beginning the hoping that I good I'm use hoping word and say would X% year. mid-single next for I like digits

Understood. Yes.

if in savings talk FLIR, whatever by imply for run want of like a to does getting to about you EBITDA, that easiest talking what I there? mid an about? is rate talk margin $XX you're mean, to for 'XX kind million If

think, I XX.X%. XX way, the anticipate Well, our EBITDA -- improve our is margins this or whether And year-over-year. EBITDA it's I company by we mentioned XX across about points now basis was non-GAAP to to -- the quarter earlier,

will our that margins think non-GAAP improve up. help I

is it's non-GAAP purchase today, for XX%, about FLIR historically. expect stuff and of which the significantly than the intangibles excludes XXXX enjoyed margin, higher For we've And overall associated margin, which the with accounting. we course our cost

you on what contribution happy XX% contribution If coming giving FLIR's you and that. of with to Joe. year. if some I'm FLIR, the throughout on January be top Again, go seeing we can -- from next in points this we'd that, with I'm enjoy XX basis of very happening me bear

As we do the I'll to January, now, nothing with world, right the better. XX hopefully if basis But happens terrible points. we'll get stay in

-- And just that more can then suborbital you positioned with? means China guys about what where high you for and last develop with like one space-based like about given of been need this can and gliders question detection just and to level. nuclear sensing talk threats how new talk stories further, There's market and there are deal recently -- kind we and that

Yes.

can I that examples give two you. have We

One of our is, Engineered segment. in them Systems

a you hot tunnel wind to of that tunnel. nature test be contract, to the able wind we're that to where And tunnel that -- developing have wind because We vehicles mentioned. are to important that's have very a a hypersonic do for vehicles, you just want a

program which we will by for program, that be think million, small a hypersonic $XX have another is vehicles. We specifically followed bigger

various of here edge starts imaging too series strong A&D -- other programs of we one have and do have in computers On used Imaging are that that, that the locates we other vehicles. multiple businesses But That of And Digital have are infrared I that on products. And on high-speed also side, then detection to Oaks cannot sensors classified meant really We do that's vehicles those sensors satellites are – market programs in for if we're and in we FLIR developed missiles. segment some growth of we and sensors programs a space located have led especially have say, being I then and the the opportunities. one do that computers that and good programs. our general. -- imaging program in a I enjoying Thousand actually describe much. very And our growing

guys. Thanks,

much. very you Thank

a have Mike to line do go ahead. We'll Please follow-up the with go of Maugeri Research. Wolfe question. We

let me for be segments horn on to you I around change go guidance? the in at rate the somewhere Thanks Unless, Hey. that it back-on. in change the missed growth drove able in would Robert, the

Yeah.

can I see. me do Let that.

anticipated we about So rate Digital X%, that In in and growth expect continue. July, July, would we about to the that Instruments to raising in XX.X%. Imaging we X.X%. X.X%, When Systems that now XX%. July, in and will In be we about to be would X.X% to We're Engineered about in anticipated and growth Aerospace our expect shrink segment X.X%. anticipated that it add up, be those closer Mike it'll and about you we shrink X%. about July we X.X% organic anticipated our think we in it Defense

them it'll let's up, horn the be X.XX% say, X.X% add I And round going mentioned growth. the up organic between to X% you that's If that of just as you around mentioned. numbers kind

Thank you.

For sure.

further And questions in currently, no queue.

Thank you, conference Jason Brad. conclude call I'll now ask to please. the

appreciative. feel Thanks, be And my you everyone. number replay if again, release. is to Please and if could the Thanks on free the conclude anyone call the has follow-up call information e-mail give and we'd Robert. earnings Brad, And questions me.

will the running gentlemen, And you. a.m. and and Pacific be today midnight. XX:XX after replay ladies through Thank for available Certainly. at conference November XX

dialing and XXX-XXX-XXXX participation XXX-XXX-XXXX. XXXXXXX. parties are for with Thanks teleconference. International may XXXX-XXX-XXXX any at the access XXXX-XXX-XXXX replay international AT&T code the dial using XXXXXXX. for and the time can AT&T access does That You conclude your numbers access our call by entering code again system for Those today. and

disconnect. now may You