Teledyne Technologies (TDY) 26 Jul 232023 Q2 Earnings call transcript

Ladies and gentlemen, good morning. Thank you for standing by today's conference assembled [ph]. Welcome to the Teledyne Technologies Second Quarter Earnings Call. [Operator Instructions]

At this time, it's my pleasure to turn the conference over to our host, Jason VanWees. ahead. go Please

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

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

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

Robert. is Here

you as joining operating and Thank sales and segment. every thank operating X.X%. increased overall sales, all-time as the record we non-GAAP for you, quarterly with In our earnings sales increasing year-over-year in Furthermore, GAAP second Jason and quarter, well call. achieved margin profit

respectively. For the total XX company, GAAP and non-GAAP and basis operating margins increased points, XXX

negatively in headwind, second sales approximately quarter which currency impacted would X.X%. currency local growth Excluding have basis foreign points, growth by been XX

a was XX.X%. GAAP second record margin of operating operating quarter margin XX% and was non-GAAP

July, outlook bit the I'll the flare second declined quarter continued for finally, now and our $XXX of of per $X.XX consolidated the balance cost announced comment were X.Xx. non-GAAP debt Teledyne which leverage reductions the also of GAAP million about including earnings further and year-to-date, quarter Second And totaled to earnings year. on share repayment through a and the were records. performance $X.XX ratio

legacy operations the tax historical issues. most matters, FLIR, Department since and consolidated and some agreement portfolio In with the Defense we've State, exited we've of for years, resolved consent FLIR owned quality marketing the the significant product the corrected X in leadership

this took also focused Defense am technology. during that quarter. those we part a opportunities have As pleased much and view we differentiated truly the where of pursuing inflected aggressively to backlog second I Defense, of FLIR more book business, order significantly FLIR, of report the the specialty effort,

the For reference, business the digital second FLIR imaging, commercial DALSA in grew both across to organically quarter.

shipping we FLIR nearly lower this milestone the declined of to Defense man transportable the in robotic increment system achieved year-over-year, of all our was systems ground revenue Army. sales X,XXXth as While unmanned U.S. to,

UAVs sales Europe Overall, additional missile and were systems X.XXx FLIR utilizing orders customers radar and also X.Xx included the software at orders recently U.S. systems. announced counter to FLIR systems as of Military FLIR both AI-based not but Black Large well as Hornet at sales only UAV Nano imaging, all Defense. in UAV the for and

additional systems headcount. business, footprint more backlog, margin stabilized focus on morning are operating and improvement. foreign further stronger for for the not Having in it and time and the imaging the FLIR U.S. this surveillance including the execution customers. related Additionally, announced Thus, reduction charges is to the achieving

be are locates. the sites, which of of X Defense elimination all those other will exciting are of We FLIR most lease activities to facilities, relocated

pulling the again quarter. sales the forward from were to Today, challenges non-GAAP improve have once to revenue and Supply outlook -- we outlook, million -- covered. prior $XX we some million are our and year continued $XX and our original earnings able charges quarter third excluding exceed earnings reaffirming including second chain to that sales XXXX full by

third quarter continue X% sales billion, billion. or approximately total of with of roughly to approximately On $X.XX see revenue growth the specifically, $X.X we XXXX being

earnings segments. $XX.XX further non-GAAP of the comment see X of of the on charges business will I the performance to now the guidance, at midpoint referenced continue our above. excluding We

Digital ground segment asset systems Second of partially components by our industrial increased non-GAAP points for reduced higher for segment, X.X% was at and solutions margin GAAP XX.X%. quarter unmanned of points scientific X-ray segment sales, operating commercial Defense and sales basis products, XX.X% margin offset the applications. in XX increased basis and adjusted intangible to amortization lower XX sales Imaging cameras with infrared imaging greater

of last Turning sales second oscilloscopes, Sales due increased include markets, electronic year. strong primarily Instrumentation softness application the for protocol energy increased vehicles. center healthy a for underwater electronic collectively analyzers storage in digitizers sales We of which but increased XX.X% in than greater by some instruments protocols data test continued our sales of was Sales to Marine analyzers, this X.X%. Overall, more wireless offset as sales and and video systems, oscilloscopes. quarter offshore as also [indiscernible] well of quarter, to versus and measurement segment. autonomous X.X% in recovery ongoing and encountered of

drug XX asset a profit flat Sales environmental were the quarter, with second increasing analyzers basis, of laboratory greater in gas, XXX reduced increased of excluding air to compared XX.X% offset last year and safety points amortization instruments. to basis XX.X%. discovery margin by process intangible instrumentation Overall, with quality, points sales instruments GAAP XX.X% basis non-GAAP to on segment and operating operating

increase from XXX year. Systems quarter approximately in In basis profit last increased operating year. by Defense XXX revenue Commercial second profit margins operating Electronics points with XX.X%, increased of over greater increased segment, and XX.X%, GAAP growth XX.X% and non-GAAP segment, last Electronics basis products. second Aerospace the In driven than segment margin quarter points XX% Defense sales both Engineering and Aerospace and increased representing the

growing short-term, resilient year-over-year, second more remained in conclusion, In economically although businesses second half. in the our collectively become quarter, more for comparisons do some the sensitive difficult

to Cycle Defense all-time our continued operating well. Aerospace, very an addition, Medical, our in Marine and longer Quarterly segment margin In businesses was Instrumentation record. perform

digital quarter And through last combination fully a second segment Operating record imaging growth, sales the aggressive cost and expect of Aerospace and more the and grow slightly fourth margins mentioned operating of the our was over than to considerably time. just margin now year. in actions leverage less earlier, Electronics quarter I Defense

going to turn Sue. I'm to now the over call And

you, and for additional the first then I Thank morning, that discuss is third expenditures financials second quarter, cash was good and for and full from second amortization Depreciation quarter million of $XX second XXXX. discuss from I and in XXXX. million. activities $XXX.X with quarter some was cash will Robert XXXX quarter capital the second expense XXXX the covered cash the of Free In our the XXXX operating compared $XX.X Robert everyone. in operating million. million by quarter not outlook. flow, $XX.X year flow was in $XXX.X in less million million activities expenditures $XX.X compared compared were million of with $XXX.X quarter Capital will with XXXX

$XXX.X We XXXX approximately ended cash in compared is $X.XX debt the of debt. XXXX. quarter That of million with approximately billion in Stock-based expense of billion quarter million was less $X.XX with $X.X compensation $X.X million. net of second the

earnings $XX And earnings year for estimated the quarter of $X.XX Both tax non-GAAP costs, to and outlook on discrete basis, believes to be full is to that $X.XX XXXX share be charges rate, the year $XX.XX. estimated earnings non-GAAP further pretax full maintaining outlook integration we expected is $XX.XX $XX.XX. excludes outlook of to a third prior the are excluding FLIR with our outlook. per And to our Management items, for the full XX.X%. to in range will quarter of Turning share GAAP $X.XX currently GAAP third per range in share, in of the XXXX, non-GAAP per our $X.XX. year the XXXX

I'll Robert. now call to pass the back

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

from our [Operator of Ricchiuti. And today the Jim will Instructions] first line question come

Robert, year-on-year If a we bit, I about the little if talk were exclude it imaging. sequentially. revenues may, looks and wanted down like I to acquisitions, your digital

partly it's that be I ground? And FLIR. because on some just large seeing could a what a category if in what seeing covers you're at lot wonder digital of But due imaging expand to this just you you're of may

Well, thank you.

over are have year-over-year digital was especially decline be X.X% a programs declined is see little First, we growth what in think government in organic the in year-over-year. you're exact. referring -- imaging, or things: I that to X% FLIR, there several that decline We to

hand, we quarter, orders other Europe. first very half, getting especially products a I the in second successful had and in On as here mentioned, for both

part that, the is feel we of that business So stabilized.

On our of of at you digital look business there, if expansion in part the significant rest which imaging, and health medical. is been health care there's care,

with, parts any If digital you has deal say, there commercial of aero, been satellite that expansion. communication let's at imaging look

includes that some with capabilities. of making that there commercial is in in our new high. exposure headwind imaging Far but we're I digital the part up of artificial our that the in there products is -- not East And intelligence think some

our our Digital feel Imaging. of we commercial So with comfortable aspect

of in in say summary, parts offset there that -- East, would our that on is So and U.S. I products we digital but by pressure a manufacture this China imaging the especially Europe for other the is Far little

is would maybe year-over-year. a which referring flat, to what I'm little to, I relatively say vision, machine So going is down be

about parts But of be to healthy. And the feel pretty we other Imaging that. good Digital are going

of inspections, all, big et to from machine ranging in flat a portfolio for displays, it's automated portfolio to part panel all pretty space semiconductor our varied it's vision but medical So cetera. a

resilient pretty like to Teledyne is conditions. it's So economic various

an update just you could bit cost seeing had. on little be inventory it the rate that you at talk you question, that just follow-up gotten may has chain how And component if the of like in better wonder general, through you're part sounds -- business? of a supply and burning about I that higher some which And

Yes.

right. think I you're

moderated. than As -- some first supply perhaps did at year-to-date, quarter chain paying to as of second year. I but last mentioned XX% have XX% as much quarter significantly our the lower still issues premiums earlier, we We're

supply remained our issues a So But premium quarter. and first we're between fairly the that's second some paying we're our going as inventory reduce of flat for to year. these inventory But positive. relax, chain and remainder quarter the still

about chain. with good didn't I the a of We of really whole supply lose So dealt lot because feel revenue that. we've how

one but could pull-in more apologies in, for from would that QX. about I if you size wonder talk I us. And some did you just if slip

side try inventory have million, that, have customers But that we also flip hope in when I'm the a have shortages. is going of a do to of Jim, opportunity anticipating will going that. we're to a ordered and I lot say whole future the approximately The our of lot $XX not we and lot.

along they us balancing all about that So us -- have our again, the ship but we're portfolio help resistent of in ordered before balanced stock because, all directions. letting those that

TD question the Joe next come Cowen. representing of line Our from Giordano, will

DI. are I get margins questions first the percent want on investors guess I continue there. I from of the say XX-plus to I'd about

probably they below quarters, I think outlook thought. in probably market mean, talk a come like over the on machine I there. about last a of I like little about slightly into So elements, you -- what's what's high-margin what in some there's margin declines baseline bit come and that they you side? But the been couple vision, think And the has we is? for you than really thought how margin different of kind should business realistic can XXXX, assumption know

start XX up with points. is margin flat. Actually, quarter about but the year, points think we maybe me second Let margin. second XX be basis about probably down -- might XX Imaging points Digital it That's it year-over-year. relatively basis will basis And a XX for or flat, quarter

flat. the going bit. going to as think of happen revenue and half the I lower Defense they're the are slower we've Basically, or be margins turning it's -- legacy a in in first we decline But historic had, around what digital a I as to what's had before, mentioned think and little to We've mentioned that's is earlier, to increase imaging, year-over-year, going revenue somewhat year. I that the going now. flare

rest help That's to the of all the about year. going that's about really say think I I So for can the margins. us

of second I we an year-over-year, saw think XX to points. improvement about quarter XX basis

flat not maybe the much. basis points or down XX but year, whole be it For might

our is, going the if The balanced And it margins look basis the side at year, us. portfolio expansion. And second Aerospace increased is there you quarter and help flip Defense XX basis segment, really points. we're again, to projecting XXX of points for

we yes, what Defense, that's at a then but in digital we portfolio, Defense bunch in And talked -- doing have our before. about really imaging, whole of look we which when -- Defense programs sometimes, are and Defense differentiate Aerospace I've well. So

okay. we're, So overall, think I

sequentially, quick DI were one Just were margins but revenue. clarification. know the they down year-on-year I on higher up

mix & So Measurement. there? there going And was quick on Test have question a like then change on I a

something so concerned That's sequentially there your not out. balances Go points. about itself down I'll I'm XX worries say were please. moving that. me. area, There's They not all in it about many That's what, know. parts that. don't basis I that with about that other just ahead so

you slow any is -- if to like strong, versus -- on things there? the revenue replenished on color the curious have out? How oscilloscopes curious much fast I'm now? of like? looks same intake order And delivery Just revenue what are revenue is the at you know order that how like for it kind starting backlog have? do coming just orders like the trend Like being is the I that pace? Like

Yes.

know, And revenue. of Measurement, product we have other is oscilloscopes, and are the lines. short-term One you on relatively protocols. the distinct As Test is X both those

backlog, make So lot which difference. doesn't whole a big of

good. really revenue oscilloscopes Our outstanding, QX in was

revenue out are flat pick September up. and that and that's was expect because protocols coming new revenue in we protocol Our to partially, relatively

whole to we're our not We year-over-year, have we're like fine. to think look are in you to oscilloscope products. quarter first right. at If be as much X.X% quarter going fourth but and the all as growth and going think that protocol third year, the They expand may to something be X% going we

close on In question Measurement and book-to-bill just very that X.XX. Test of your backlog, X, in answering it's is terms to

would it's I say So X.

something So concerns right not that it's again, now. me

the question will be line from Greg Jefferies. next Konrad with Our of

-- you but Maybe for just I one guidance it clarification. didn't brought year down seems change digital mean imaging. like down brought the you

margin to guidance year the maybe A&D. instrumentation like above about and talked A&D is given been company for the change Has You overall continues slightly in seems strength just tracking ahead it to there any be expectations? the

going if Again, points. significant. guidance I'd XX Yes. is you April to say, went margin basis back down nothing today, versus probably

For XX expect about to basis the to points full year, up year-over-year. we XX margin go

something of year-over-year. products, as a So points. overall, because up mentioned that will several up basis points example, XX our because Systems I've go of about Defense, XX XX and that's basis diversity not XX similarly, -- Instruments will me concerns times, our for it's points. margin Engineered Even to Aerospace basis go

digital flat time. anything change doesn't a So this imaging at

really mean, orders thinking money coming talked on A&D you're what are I and to kind seeing what relates the of top runway Defense mean, the in just then, strong Teledyne kind and 'XX you it some order And across FLIR you you about about seeing Defense? front of and the was And of as quarter. performance how line budget given are through? I

Yes.

coming change digits As more started there Overall, would look The Defense money you are single businesses, mentioned, budgets the has been growth through time. to mid-single across wasn't say with fairly we a I in budget probably our and and it for a everything, year-over-year. but come long through healthy comfortable recently.

good are And in We our a in book-to-bill our are just good and the had enjoying It's pretty orders U.S. businesses. mentioned, actually Defense defense QX. legacy as fleece businesses margins Defense. around I not and turning

countries, Defense NATO we well like a defense for of sales have South traveling as expenditures overseas, our significant things amount Defense, also in at are look like Defense tubes including missile in wave in products both places If that Korea. and as you increasing

it's a pretty right So environment now. healthy

Instructions] to Manosh line with [ph]. let's [Operator go the Jordan And BOA of

is of This [indiscernible] Bank America.

too, I of for seeing we quick the also, deliveries specific years? them And Defense. for should come out So guys or expect that that those the any constraints the question through into at for the a risk? just Are on backlog could wins, majority put extend 'XX had you to

in some will -- will starting 'XX come QX. and come Some in in through to

million, million. drone or some example, would give do come Europe, me counter example of to about just are let $XX probably products that that Most 'XX. For in going $XX have We one two. you

the hand, only year, will X just million, other this Black of we about the years. is Hornet it XX% announced On that the for Army the come in future come U.S. $XX rest will

a balance. it's So

years. I think of and year we'll some get in lot future it of this it a

of Guy line go with to Suisse. we'll Credit And the Hardwick

for I little out XX% is delivered over what margins margins And in XXXX? in imaging us, time. think considerably little that digital I this the prepared mean Could imaging exceed sort that bit a think could should that Robert, digital over grow remarks that of flesh said a bit time? you you your levels

answer even margins be that is The businesses that Yes. yes. we and margins increase say for And our -- reason And out around Digital higher we I as overall I mentioned. than are think the the just cost projecting I legacy year, take XX.X%. this And is, that Imaging in the to already as that. will margins we're FLIR especially

do XXX 'XX, to point can expansion. that. Yes, basis go to So we

out last negative business. in quarter, price pointed lag I increases, think you Medical think, mix, the had I of

there was Because sequential that X held else expect any for we QX? ago, may you than I of, talked aware improvement full year? anything margins? effects other Is have back XX So think other Defense you be up basis which there points in mix the should about that months and did

Yes.

We've business, X-ray good I slowdown that for put both as products, China. think components out before, panels as had significant as said care well our is there our health in things are really for I is the we systems. expansion, X-ray us. in some in And that

whole, they there If hear even some you has though contraction about been look some China it, you have as contraction don't had at a there.

is hand, sold other less to the than On of XX% China. portfolio our

really is development So Digital again, products our The us. programs flip higher-margin that overall balanced we've that helps portfolio Imaging. side some helping gotten good also are

bookings okay. a I been little have think Shipments are but slower

say, have, China. commercial worries somebody in again, that imaging not something don't that me, would system buy So it's where a we let's

the today profitable and more but than up bit world. little that's may uncertainty I at anybody earnings the go are pick custom I'm commercial. resilience profitable. area we're change products quarter-over-quarter. I have a side, we the else's wouldn't that which looking down with portfolio Actually, here we'll And our around sit just flip and very considering One On year-over-year, somewhere our else. it all the it developing, of

In Just that QX benefited half given the the margin? one for you and from one mix that Aerospace in that good there. continued a guidance Defense Is assume you second continues me. Electronics, your -- mentioned think last has and that had in previously, I particularly presumably, for

in Yes. think a lower may second have We revenue half. little we the

has we that for hand, be than On be expanded, know, well other pre-COVID. but might commercial aircraft. QX, you margins go to make primarily products QX the that little market will as QX. Aerospace and Defense in the a in Aerospace very close it QX And higher than lower

So don't in see area. I again, that inflections major

We'll go Needham. the with line of a from Jim Ricchiuti follow-up

you pieces gave us provide if of book-to-bill got some wondering just book-to-bills segments. the us like the feel different You I've could and I'm perhaps I in it.

well in our as led oil Marine Instruments, so is production. those about really X, Imaging little is are Aerospace X.XX, businesses, our and Jim, in as -- lumpy In which are much book-to-bill In Digital about discovery Systems, a and both the over book-to-bill by more vehicles doing as more Defense, and underwater X.XX. the orders. =- well, Engineered whole, a that's Sure.

about quarter-over-quarter we both may change segments book-to-bill is the in across company, Overall, grow. So because but our it's book-to-bill -- that much X. revenue affecting the revenue both expect to not

question Okay. me. And last for

changed general, what be I'm know pursuing? specific anything for look you wondering, the might down, acquisitions, about -- over just M&A is next pay including as debt but any to your you thinking appetite has And I'm quarters? change several can't be I the areas with out given that in respect wondering in you Just if how just

year today, net $XXX taken earlier, to paid Well, Jim, That's effective ratio I mentioned say. our on let's debt-to-EBITDA as this million we X.X%.

billion out that debt of million on the Sue we pay $X have mentioned, $X variable, fixed. is rest debt that $XX which that's plus of We -- left our the of billion X%, about

we So other than are interest because credit. which a very our place haven't million, years, our future touched payments $XX that X.X% line healthy is to really of in be

as bolt-on to X we paying were our did about Last capability a we and year, even $XXX have million. of last spent debt we acquisitions. down, acquisitions So lot year,

We acquisitions. that expect to continue bolt-on

acquisitions, we do anything, if if and is side in flip our we we going -- else, year than less don't to X debt-to-EBITDA that because if X.X anything don't is years. the don't On about doing go make a ratio

at bullish larger we're course, about including we we looking if continuously ones, them. can acquisitions, So of that. are And find

The was, very is would what's general last attractive. I in question area now, areas. Right say what the instrumentation

We done imaging acquisitions. digital have some

made acquisition Instrumentation I we the But We made our we know, acquisition. for you our nice think if As some find acquisition. it'd could in ETM be things area.

this we participants other no at up have And queued time.

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

audience, free talk who And would all the everyone. our and to Thanks, appreciate number it. news release. feel thanks, to want replay To the give earnings those call Thanks, information Thomas. are me please I And available the me, to again, Bye. Robert. for releases the in to

XX AT&T please that for August and for Absolutely. X-XXX And me, by the month and dialing using at To Event access in lasting of Pacific playback the this that available we or the at Thank midnight and XX the it And you the today may me X you, patience to service please thank through for you, will any code in be your time replay, AT&T number starting excuse and ladies dialing, Services. at be XXX-XXX-XXXX. in through XXXXXXX available by morning will midnight. a.m. XX gentlemen. and you or dial enter August at Zone Time goes access get

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