Teledyne Technologies (TDY) 28 Jul 222022 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Teledyne Second 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] As a reminder, this call is being recorded. I would now like to turn the call over to our host, Jason VanWees. ahead. go Please

our good Chairman, and Teledyne's This Jason We is quarter morning. Thank I'd morning, like Vice released call. conference and earnings to earlier to VanWees, this XXXX you, release everyone. earnings welcome second everyone

we Chairman, are of Robert Main; Senior also Sue and CEO, Vice Edwin ask difficulty] Teledyne. and President, by General will Roks, Joining Vice Teledyne's Robert Sue, questions. and VP President After your me remarks and President today [technical Executive CFO, Senior Mehrabian; for Counsel, Chief

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

Robert. Robert Mehrabian joining $X.XX morning, for about you In XX% is earnings nearly Jason. you, call. increased thank second our and the billion. Good to quarter Thank sales Here

headwinds, impacted quarter count, approximately over was May accelerated Including closing the the per $XX by X.X% our in slightly disproportionate records. amount profit, of organic margins addition, in share of as a negatively X.X% from non-GAAP sales the XXXX. lower quarter resulted quarter second mid-quarter end second growth part last share currency operating the foreign FLIR, million, FLIR In first margin as or of of due were to year's both Non-GAAP and from growth operating time but earnings all at declined or near costs the GAAP XXXX. quarter to earnings well and Teledyne and sales increased relative transaction earnings which

Aerospace and short long sales businesses cycle also increased. quarter, the strongly grew cycle from and imaging Our Marine and our in commercial businesses instrumentation

our of outlays last reported FLIR including government sales and XXXX. increased defense lower demand product a Teledyne department the particularly US were with and in quarter all FLIR, continuing year-over-year approximately total Overall sales achieved lines. remained where of from strong was orders Finally, Orders remained from quarter, inventory company risk. segments cash in summary, we Teledyne second X.XX. increased year, flow book-to-bill elevated quarterly but despite In counter X.XX levels book-to-bill times. record to strong the first supply chain planned improved Free

reached targeted leverage are Finally, completed our having our X.X acquisition of we are to leverage pleased again small and pursuing range, acquisitions our ratio FLIR. times, and Teledyne recently declined to first bolt-on have

reported dollar, our our given year. prudent outlook, believe inflation, to to recent supply revise of adjusted chain the appreciation of earnings outlook and and and ongoing now modestly for XXXX the it's significant Turning the we US remainder constraints revenue the

impacts sales FLIR translation three currency our approximately considerably imaging segment, largest impacted and of more other our particularly, Teledyne with segments. Foreign than digital and XX% total

similar by sales material limit year. supply concerns are of negatively remainder $XX assuming shipments. approximately addition, component second the that Electronic and and quarter continue In impacted shortfall in other chain to million, continue will shortages the a we

greater full peak elevated over which Teledyne Despite compared from total we and headwinds of strong our billion. in initiatives XXXX, testing. these fourth than we $X.XX outlook see sales million included various countered FLIR Nevertheless, - each XXXX, prior of execution. from year reported over through X% sales year We sales these for the about headwinds, to of X% continue sales resulting organic slightly with have cameras in to just full of procurement FLIR growth quarters and $XXX which about estimated a year expect excludes full of organic skin X%, third in temperature roughly the sales of of both and few year-over-year X% growth company the

costs are currency at earnings. sales Teledyne, there impact foreign while reasonably Finally, is balanced and and no delays on

segment discovery to I'm XX.X%, organic of and but Instrumentation as was government high the cost and vision segments. detectors. $X.XX oscilloscopes, growth a - digitizers autonomous segment difficulty] quarter at intangible commercial a X.X% basis basis points, Defense increase XXX inflation, margin largely XX.X% XX.X% second quarter as growth will XXX and increasing businesses Electronics April. we're digital margin points remained industrial asset and call systems, therefore, [technical acquisition, space but over to sales for basis and resolution earnings amortization instrumentation energy our sales going now increased sales digital and instrumentation segment, increased our difficulty] sensors detection aerospace quarter our industrial remain increased cautious at the of no environmental adjusted measurement margin products. industrial sales to scientific outlook offset Sales XX.X% electronic our XX.X%. due and dose impact X.X% Sales driven by X.X% sales year-over-year. Overall, second X-ray for XX.X%, X.X% second versus increased [technical or growth in [technical for oceanography sales by Aerospace GAAP in with difficulty]. margin In strongest vehicles in XX.X%. operating well full of was our X.X% compared combined commercial year's. sales commercial imaging XX.X% and defense, by with increased modestly with segment, margin also Sales year certain improved include second and quarter points systems, to devices. adjusted We increased our continue and combined profit for sales of of due strong increased with lower In operating operating Sales marine intangible last turn imaging, excluding health gas and year, also In applications. both instruments was which laboratory I the underwater in human revising strong protocol of from approximately the than very record bit products regarding midpoint, greater of of FLIR test in asset operating business amortization. XX.X% sorry, drug performance with last increased the GAAP analyzers overall was in XXX defense lower quarter or low

second systems. Finally, primarily electronics increased slightly, sales in Systems of margin the to Engineered fixed but quarter declined segment, lower profit revenue operating price and due

make Before a I concluding turning remarks. the want over to to call few Sue,

We on continue this execution to order chain now currency ongoing increased supply in headwinds. to minimize and risk, inflation strong focus

mix and government range environment operating businesses geographies commercial confident traditionally highly uncertain remains of a and example, and for broad difficulty] have the across we're we interest were opportunities small, the challenging, While the Teledyne, resilient cash paid Teledyne [technical market. of fixed created for acquisition for Furthermore, able our end FLIR to year in balanced in of for change euros. debt discount. just rate last repurchase negotiated issued times at a paid the and rates, first relatively was while And substantial

will acquisitions strength of and reduced call at the over we're in the now, balance continue balance of I to and seek And larger operations we further our to similar the with in ratio Given sheet management, the turn the future. to specifically year, now, expect be able which to X.X Sue. our times leverage

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

second compared The the of $XXX.X less of XXXX. with reflected payments inventories Free second of purchases tax $XX.X in from included XXXX, $XXX.X quarter after-tax of of payments Capital second cash million in that with expenditures quarter cash the transaction. flow, XXXX, for operating which to $XX.X higher million activities million related quarter periods. XXXX were second income approximately and is, of of expenditures was compared $X.X was quarter million of for million Stock periods. second ended higher net XXXX. the capital expense and Depreciation with cash the XXXX, FLIR cash both was expense midway compensation $XXX.X in million which quarter is million billion We of option acquisition debt through debt, FLIR $X.XX less for the of the second billion $XX.X compared both amortization with the quarter XXXX, quarter that $X.X second reflected billion - $X.XX $XX.X of approximately timing the million. quarter the

now non-GAAP I'll $XX.XX is Robert. Turning the full of quarter excluding earnings outlook. of earnings year outlook that with Management GAAP the non-GAAP earnings XXXX GAAP our $XX.XX, expected in estimated $XX.XX. a XXXX, on will year believes for $X.XX. rate, per to range is of third and to items $XX.XX back the call And discrete our basis in be range currently to $X.XX the $X.XX The per share, to XXXX XX.X%. full to per the in $X.XX to tax to share be share pass

Sue. We now please you, your proceed are Operator, questions. go to if Thank would ready take ahead. questions-and-answers, the to with you like

Konrad you. first go ahead. of Jefferies. Thank comes Greg the with Our from line [Operator Please Instructions] question

Good morning.

Good morning, Greg.

I us contingency there. mean it's a ratings imaging the guess segments? And running parse below. But color cut more some Teledyne the seems I commentary guidance, mean, and around I low your you last and you you're times, lot your about in name P be there give maybe might ahead helpful. to the is Interesting just thinking just But across it mean, way the any A&D to for maybe for guidance. have yes, outlook segments? margin digital just growth I mean Can uncharacteristic of I was how like guidance. of

seem you're that quarter things rolling have with and it. Greg, we admit uncharacteristic, and happened. inflation be overall would We right, parts Two, fairly and million basically be I three were every over. shortages. There and is It Right. over $XX dealing are that to successfully,

hard that that very total, foreign us The they at currency. in just So was continue level. hit one

of digital Foreign of where reason currency And imaging that's our it translation the basically we our the most hardest, currency hit affects have transactions. business. foreign XX%

slightly, currency million, is expect portfolio. Systems in only $XX QX Systems they You're X.X% it well. to but we Instruments million And now in revenue. that in us foreign hit our and and down about X% of okay. did QX. about Engineered right Engineered QX $XX or did was continue It's

three we could is times our that course, something one time. we And this year. in And fourth of that's move the it digital do, the handle the we continuing two, this we And that better think was as XX execute we'll is just at saw. it's headwinds mostly, change we Hopefully, much rest see. do We in third the in but years. except changed fundamental of I the too have the not along guidance not imaging.

I'm there maybe more appreciate side. have all is but you're say, concerns? And the I or mean supply tech thinking are is we've spending the from And anywhere mentioned tech risk. that than saying what of heard kind on where you've side, areas demand some I seen more Or that. demand this and I really of about the guess mean let's the mean, I you everything companies. and supply I FX driven? rather deterioration any book-to-bill,

Yes.

quick the answer think no. I is

has demand which function Our businesses, have a some especially strong. discretionary may primarily been demand are Maybe our we time, of very really in as decline, Raymarine.

But demand demand the So softer. pretty has good. been there, was think the I board, across

XXXX some Is deliver kind just let cadence me. that on guess last you these? Or kind better. We've maybe XX% that of I seen they just mentioned awards FLIR getting and to given thinking one with does the item, there. nice think me the supply chain supply then about you're How about a intersect the And ability of more above chain? And bookings, there? mean I of for sales. just how were defense

challenges as chain businesses. our across have I supply think there we we have

first there I than in fourth mostly improving we're and our in fourth we - the at is two third fourth think quarter in quarter. what the have looking quarter the and revenue in quarters the better

over have is So hard been the same runs to early the you sold and we've imaging you across month minute it, last revenue. we the chain FLIR, Edwin in hard last that quarters. that who have FLIR the that's week some unusual to historically cause our board. the businesses is more very working to the slowly sales quarter correcting and if the last had issues because supply the causes And on, that miss digital of Roks, problems linearize issues, on has can than - situation At we're and always especially

consideration into that put So we're we've release. all in taking out of earnings in what our

you. Thank

question Cowen. ahead. is next Giordano, from Our Please Joe go

Joe, how are you?

maybe and have this way guys. the you market doing guys changing a going you I'm morning. just been Hi, bit? recently, about quarter little and what little price Thanks, well. changes? talk Good Is more Can to in you're doing the FX a bit given

Yes.

Our X%, It's instrument anticipate businesses it to a of QX. really the just in we're was be for been in little it than price QX, X% that not some our in where the some could, be has about put increases than was more it and QX. we increases QX less year, and of QX prices, sales. would especially in - which in in In we

by April, the part. change say, the that The of cost that that side kind kind hard happen suddenly I'd about we I'm of and that worked X%. have rate causing and that at The and starting X.X%, But was Joe, it's overall, thing to also in in that's issues. X.X%, of going the and So increases flip of would kind the out due exceeded wages knew hard. is that came to say, on exchange inflation we was some very that, we us

margins, hot have the OE when I mix in in content imaging. people AD&E lower thought on than So look now at running lower would the then just running with and

As like good what's those quarters, a start thinking normalized. the representative couple are of like the of totally none probably of you next about -

of like this difficulty] think So out about we [technical situation? a normal coming more margins in

me would to way which versus be good April, Well, let a go. start with

for before, we by year. from XX we commercial run in know think have the there, add that's now, Digital points. up, be year, that's said And points When that XX the Aerospace primarily improvements points smaller I summary said, basis what good expect in for so we decline XX I As basis company. which it's is. That's about and full to the of our the is expect of lower In - maybe we and improve basis instruments decline. to you as Defense, versus is points you lastly, segment, a April, because In full points. Imaging basis it XXX I expect a XX margins back, in margin aerospace Engineered across all XXX about basis to segment, coming - what

hard early But And to of in too for of run rate I I to second a second know have. specifically think grow though, margins that are is that it's if about Like And to a going out like think comp? half Aerospace to is a guidance. to coming at of the if out versa, this this, attractive was was from? Imaging Or Aerospace, I level like exit the look the from vice about too like improve coming to 'XX on? rate pretty which you Thanks. does versus Imaging half provide like

has correct high. already I up on go pretty Defense. think of is which full you're XX.X%, bit. year a It Aerospace could It little margins and

The XX%. be Engineered I healthy and are Systems. in think in in opportunities there are approaching to instruments pretty already going Digital also margins Imaging

Thanks, guys. pass along. I'll

go Elizabeth Grenfell, line the from is Bank ahead. of of question next Our America. Please

Hi, good morning.

Elizabeth. morning, Good Hi.

Hi.

supply because at be As that Or... challenges, date? be about things to have a right shipped the going are we chain able later to later of those to slipped think

Yes. Good question. Very good question.

second. back started me a we supply QX, let we had First, chain challenges. up When

of a in We program a techniques. variety challenges in strong millions through to buyers offset were Asia chain And our have buying able we by about of procurement. own brokers, supply by $XXX by very buying plus

what that, That where additive. And quarters in left revenue But way to are next the we plus our it's - said million that right It's going that it's lost from. early that's have for Whether There's time, think to so but just we inventory. is two estimates our next time elevated not in of now, the over later happens is that. continue us this lost couldn't. And rolling offset million that is that coming not about the and we quarter-to-quarter, that's a we having revenue that question is $XXX going was the million lost $XX going for it's inventory $XX danger. that and going with to because But to is being. dissipate. year over or next revenue no time time year, this not be over

to improve. it's So going

very Thank Great. you much.

you. Thank

Jim Please go question from next ahead. Our Ricchiuti, is & Company. Needham

this you. in Have that it's Good But in in I and supply it would not this guys wanted currency. sooner? appreciate perhaps you underestimated you've and been that Thank getting just thought with to to improve sudden morning. better I right. change little something you'd supply you go what back tracking All maybe a Or line Robert, is was just expected? could of impact the chain. or the chain

able we're yes, it's improved only because find parts. to Jim, more

example, if to XXX - XXX, of about located They have we're various call, XXX, we systems missing for And have, our go through computer at from processes. cetera. into range chips vision We out parts. we we've et year-to-date, what FPGAs critical look that you about the important the actually

Sometimes, can, redesigned the if easy redesign. we if to it's very product, we

part to buy it. a we qualify and have we obviously Sometimes

sometimes, estimate and would through they as just sometimes finding out But through much XX% was we didn't expensive part. as - as the - estimate when parts What that's premium the that going and purchases buy part as they're broker we be the not buy unusual. the We're same I broker because a are. So for brokers. it's within paying

to put XX in for XX some also we the - us to is happens, work high-end where quoting orders. places suppliers asking that change to a complex that comes create is. right? they're that money. eventually, vacuum orders you lot a it noncancelable components making and If are underestimated that you And supply So months eventually, doing got going be of I only the may air is that chain to in, pretty very are good these and brokers would and say are When of our The out.

you helpful So be latter, of in to course. have the very

that counting better So it And don't not it. in getting underestimated It's at get I the think on the didn't of we all. things year. just we're better rest

XXXX is it mean, going redesign way beyond it. going we'll go is, be think think I different. eventually XXXX. to the just this some and I I continues it's the it of we'll to come more products. way of don't stuff If out is, redesign way

this growth seen of bit by going the years, Got I it. business. toward struck the it's more be a pattern might indicative at And QX. - more in things Is over Defense was of that shown period? the more we've the FLIR - thought skewed where you one have I to the little just QX just

Yes.

side which this of year, primarily defense last Actually, revenue you them, they being year Here's looked of FLIR while the up, Defense after outlays we a increased to constricting quarter QX That sold they and their problem, second QX the FLIR before full sold much just last X%. kind at of the business I Overall, It's quarter. down dam if year. the X.X% primarily of the particularly, the versus you look FLIR not. Raymarine, because FLIR's are that side due versus constricting side of of at that's budgets defense they them, how increased are was we at was actually much that flow. how sold much this up The defense you flip acquired But are up year-over-year. if flat the is how a side it like discretionary. of look QX the look maritime at of or commercial X%. FLIR is mentioned, acquired that slightly It's

leadership Research career Deputy at to that. with our very JihFen, So went acting who there in recent Department Defense Engineering. feel the very of good under used to And about with end of ended her we be businesses Secretary have and defense strong to very of up be us, awards, we this

And there. So we expecting that. about feel we things good are to improve

Raymarine me, But from and the way mentioned deteriorates portfolio question impacted. macroeconomic FLIR. given the queue into potentially be that just the go last back now And I'll the just is as could has with changed environment you

you more portfolio, broader the in quickly? change which might of if at precursors some look areas business demand be the you economic might that changes of see environment potentially the As

COVID if health really be reasons it's But say a way, of I a example, be different have we I overall, very is for our taking us declines exposure certain are us. the have and consumer We affecting Imaging There our think say Those well products. want saw of the because we Energy. now to demand, growing to would soft. it, relatively in Imaging some Digital canary it - for market going small, see we But you some - in the commercial for signal share. XX% to some be very Medical, commercial that areas. things going doing in care, mine, put Defense, market our Imaging because our of We're fast went not limited because and are would Digital good to we But markets Aerospace, is that don't perspective. from portfolio - fine. Digital

All right. Thank you.

the next of Andrew question from Please Berenberg. our Buscaglia, go line And comes ahead.

Andrew. morning, Good

Good morning, guys. Good morning.

the maybe quarter, in moving last is your positive net potential on in awards embedded world. projects this obviously, do in And what's year-end? view What some currently with before bit outlook sounded on more going foresee at or that you a guys guidance you awards the aren't little point? Defense, your So

yes. Well,

the are recently had and the a of Andrew, news our area. And been we we've out know, as FLIR that European most of on you little a them. awards in in by of think succession them - put releases awards some of delayed. most Defense So, have We

As to Ukraine, if to NATO countries. you get one go to for you know, through have the to of example, things get, were you other

very expect of the family site million for taking are Ministry devices is immediately. award the so phase, periods from are flip time. than those come mounted some rifles, Danish rather major starting Norwegian a And that in to expect that's early individuals, forward also mobile in production future we're come the But from future the that will had more our side in revenue had we those revenue awards reward. to AUVs, full weapons we announced, of will small-scale we now. lead that awards, of award that those as systems. production We've go $XXX And as increased awards that been shipments the are And in rate a from small had, the are which we nice a example, to prototype really of US The which had, for we we some for larger we've the they've Black for production. for sensor And made, move government. Hornet small Defense or Army's while

So we feel very good especially about that. But the we're worst that we've to going had Europe. and some get that in

much activity activity way, evaporate? dependent And of another this your new is put this conflict or you dives product solely continuing? Ukraine down, interest and how that in see on the some of Russia Or if do

No.

I away think And budgets in in going I programs that's any NATO we're countries. think the greater foreseeable participating future. they're don't in just and US go to really the

you are related we As budgets track And I And are been stay. you in US sensors situation their you that budgets invasion US where in the think high-performance There's There cannot going judge, those that's and programs budgets domains. the to is missiles. to up, think can up here space all to in stay. - that in are of going a to liable. alliance infrared be tighter participate the Ukraine are in I to has a NATO here getting everybody lesson

balance under that are to What about is now may, you outside Or your leverage M&A one of this more a you? targeting on that areas And more interest fall if target. at bit the Okay. is to just maybe - going talked topic, because it in area a positively more, Imaging I of - is your you Digital broaden your Is little portfolio? to defense?

businesses. exclude in businesses, type strictly would would things segments. I We've services seen across all say probably areas, I government our

So segment it's one or another. necessarily pure not

are emphasis and Our margins continue, our has Imaging areas been like businesses But and instruments. like are defense aerospace to superior certain connector of else. Digital where in everything there will we our

not would that. we something. buy We won't So exclude

participate in for government example. We something services will not the business, in

Robert. Thanks, Okay.

you. Thank

the Please next Kristine Our line ahead. is of Liwag, Instructions] from Stanley. [Operator Morgan question go

everyone. morning, good Hi,

Good morning, Kristine.

there's a You've leverage thresholds? to in M&A at that the return terms you now wait come mentioned prices interest hit your think is to to down of And environment economic timing, sharp you've With look these see in to target assets also, your uncertainty. or return Do asset have rates, increase unfolds? seen preserve time economic now lot and range. how a the you of

Great question, Kristine.

part Let first of question. go the to me the first

expectations and think will of XX%, XX% have stock I down some year. with the almost to market S&P moderated, moderate, is there especially out continue down, the this

So expectations are somewhat. moderating

to times which is go do continue second down. don't to ratio do, now our if me Let which we part, anything, has times. year-end, will X.X X.X the going be By it'll

If you next the the on forth. year so end, times X.X by anything don't and do so be and you'll

credit going $X said have, if can the our buy of the not do over we to So by way, buy things billion. always very things. overstretch to overpay Having to ourselves from we liquidity things. liquidity, line for been that, not our careful Right now, we've we at and look

look now. stronger. We'll markets some come and XX when think this look at bolt-ons. thing economy getting I same you are what last the things declined, We happening of is or so, months at better. So further if time forward the happened out But

because that's when And don't. people declined. buy we able are Some prices their to them market have

right So XX% exposure floating. rates interest our look no debt we at time, it's this X% to other fixed, a have We increased profile, continuing we at process. our now, - of that's is if the almost debt because

cash have floating. which against also is We that,

this at debt fixed XXX% have we time. So

of good credit. we and - a line have So

color. all Thank the you for

Thank you, Kristine.

are this time at there in other And questions queue. no

you, Thank I Jason ask now call. would operator. conference to conclude our

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

feel Maxine, or follow-up the the replay please the earnings on Thank give have we questions, information, release me and would number If it. If appreciate call to me conclude you free call you could you. at directly. the email

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