FLIR - Earnings call transcript Q3 2017

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Operator

Greetings and welcome to the FLIR Systems' Third Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As are reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd DuChene. ahead. go Please

Todd DuChene

section Please presentation everyone. on our press & earnings call Good referred note that and Presentations Events the slides available to flir.com/investor. will release are morning, under that of be this referred

need believes of Before that estimates, remind Litigation and the we other historical our we The on Private circumstances words to current statements and Words call, statements forward-looking undertake Act actual do forecasts. expects, to call, you not forward-looking those facts, a could based this Securities and for intends to Please to are could issued intended from description we are events that of today statements on anticipates, and subject risks factors statements within release to are today conference actual begin of than statements. this differ speak materially earlier we results I and made differ after the Reform XXXX today. expressions of uncertainties forward-looking These similar such reflect results obligation are to such and expectation. identify as as that today to statements any refer cause materially. make update cause press occurring to or meaning the

operating measures the morning. release be can GAAP and it enhance non-GAAP for will and that We our reconciliation time. is between discussing an consistent is our our in press A facilitate results useful because over the ongoing quarter adjusted non-GAAP core on primarily results results adjusted comparison this basis. full of information We of believe understanding

FLIR Jim? Chief to over Executive call the Officer Cannon, Jim turn now President me and Systems. of Let

Jim Cannon

segments CFO XX% third earnings year. revenue and growth SVP President cash and of QX Unit us and and Acting finishing improvement X led grew for $XXX a Todd, over Bookings of growth, quarter I'll income operating the of highest with the Travis million, With and are Development; year. Corporate XX% Business versus organic a million, quarter revenue our third on President which Overall history. quarter Shane third gross basis. Unit. in quarter XX% to of for morning, an in in joining Todd of Frank you, the the quarter thank was everyone today our reported me Slide on our prior X% increase strong their Merrill, presentation. Thank Industrial the and the XXXX and Commercial revenue of of backlog Business Harrison, call. an the you the of $XXX we start quarter FLIR's the margin six Pennisi, our was operating All and review prior over This third XXXX level of of flow FLIR's

government profit over products the quarter grew gross approximately products Adjusted adjusted our year revenue XX% level X%. of commercial operating grew Segment and XX and respectively. prior Our margin expanded segment was XX% operating broad income over third growth and XXXX grew basis the points. XX% revenue and

for share by XX% finished offset of rate. quarter second year's per represents the quarter. the at growth million last was $X.XX, X% increased slightly of versus higher corporate EPS and Adjusted quarter $XXX Total the growth $XX tax the this end expenses earnings million backlog XX-month $X.XX. were or up company Now which adjusted over

$X.XX. the by revenue the to in accelerated $X.XX be of adjusted in were the of as to to our from QX that in to a shipment range to some billion have full was range XXXX $X.XXX our year and requirements. a billion EPS Consequently, $X.XXX for pulled in narrowed QX in our revenues ahead expect expectations expectations, be of was performance Our we of partially due customer continue businesses

December on of $X.XX dividend be of November payable We of realignment. as XX. operational quarterly I record announced today everyone to shareholders also our want share, will remind X a to per of which

next also shows management improved shareholder on on September beginning focus. improve businesses. six operational as is It ability reduce that to operations create task business in to discussed in and our agility, segments. and we three sustained our grow team our to and shown feed rather January fuel, Streamlining Slide this synergies, begin my X, As will leads the focus value. units better leads way strategy than enable me to to to goal It's X and increased our Slide to the collaboration reporting our that enhance purpose. expected we and in complexity, This this unlock will

our commitments Our save exceed sense to to these lives with task innovate purposes at employees shareholders. operate and all We'll and time is drive our and intention the the mind succeed to entity in consistently and in is sixth will our our order we livelihood. customers, in shareholder to our eyes strategies with and of integrity with world's the

FLIR primary the be by first to develop On are which the effort, bold, of Slide ambitious. at actionable, this values, our that results One employees. values can and of our you'll my ready, articulation better the brave was in be better of X, owned goals months aspirational be core following they're my and so core be a more see

and for values best And and well to possible always. These accomplish we'll pushing our brave decision-making win, be to technology and tasks which behave people our the actions as continue ethics FLIR. our and and the with in the operate daily First We tenacity utmost to landscape. the prioritizing technology to not utmost daily of speaks need in be pioneer in ever-changing be both ambitious that integrity agility to to collaborate our reacting innovate the in the ways in at will is standards operations. our our bold our We'll respect to exhibit our as and a but ready, boundaries be to which will an speed and with customers. will find by what's serve lastly, teammates we usually core

Slide accountable overview values every and business these find teams performance. X, in you'll doing our to our improvement day continuous and of see we're each upholding we The Method. results our expect by calling that FLIR an On tangible so, initiative for expect to business We feel

begin processes profitability this increase enhancing units our products method development quarter, will enable organic generate investment returns. growth, customer's to globally better excess business programs, our facilities cash FLIR exceed world-class at enhance expanded is our continue that and Each various our better to we this develop utilize long-term business implement dedicated lead ways will talent a implementation on shareholder leaders of that strategy, the practices integration best our acquisition who expect our While that our will will product standardizing have to refining boost expectations. globally, pricing terminology core productivity, focus share and and in

confident future some my return. announced let During will the most innovation of importantly, firsthand earnings FLIR component innovation, employee increase that the The of our on satisfaction am few a our raise since our business I Method people. call. about continue And will persistent business be briefly key continuous in and strengthen for shareholder a as quality our I've months growth, of that strength all of The aspects technology. improvement become and we've CEO, engine our job global we innovation journey through to me the now engine of fuel first culture. last the our power functions way the will of of focus on new that our seen of all subject a products our

we geo-tagging sunglass, segment of is the our visible emerging core the GPS, and for which First analyte its commercial Series. the fog. use allows R. total The lighthouse camera purposes. sensors the that mapping, potential switch camera bullet turning enable new in-flight darkness introduced In thermal and specified FLIR FLIR operator onboard version between Boson FB-Series fidelity latest Okay., thermal our features security This hybrid camera called are smoke called perimeter enhances a of for called business segment ThermoSight which Slide tactical drone to and applications line tech high in launched mapping streaming Pro a that week, radiation the this responders on of the our August, data more used IGM logging, imaging, Infrared environmental for introduced their applications new our In sensor making to in and and these Each XXX device offers to financial motion, Detection OEM now XXX. our trade for by problems, X, which systems detector. systems In Pro the data new surveillance, the outdoor scoping a Maritime, their unique thermal DM to a or used security a and that based radioisotope within numerous scopes, rifle announced Guided dust software, with Duo display CM and the is DM for and I'll this third that's small RXXX lineup operational is have or the our of image as functionality electricians and identification revolutionary Shane released XXX tools to the already operating radiation in unmatched accuracy. sensitivity segment easier. of well-received that detecting Shane? the announced efficient system and an And addition Measurement of high thermal The allows our long distances displays. measurement detect and to accuracy RIID and identify people from allows quarter and combination RXXX, of jobs newest identiFINDER intruders our Instrument meters and test segment review highlights, this multifunction latest month,

Shane Harrison

Please Adjusted Slide third organic XX%, improved and Thanks increase Consolidated included higher a gross was filed manufacturing a million cost. flow, the quarter in all basis an driven exception our $XXX of are data XX% growth Reconciliation acquisitions you'll rate. and quarter XXXX points these was results. XX X, GAAP than note is the by as last of third financials Jim to year, mentioned quarter see margin financial on about cash to the X% compared revenue non-GAAP for basis. Jim. On with the appendix.

taxable or of we and mix Due prior-year. XXXX, net full-year XXX% the higher EPS XX% million the for XX% margin higher adjusted of XXXX share, be year. last tax to rate adjusted of last by was rate our relative operations adjusted income income. negatively versus XX.X%. $XXX flow XX than last to quarter to expectation Our XXX-basis cash was and adjusted a was expect to increase $XX tax XXX% net flow million impacted about Net our higher now Quarterly up year, was per approximately income, year. was adjusted XX.X%. than operating X% the of effective points was $X.XX million, mainly Adjusted due income to than in current was income quarter point Through months cash spend nine our which from of geographic third $XX.X to operating basis net for year prior the R&D lower

quarter. quarter, $XX $XX of the increased outstanding fully the to our under facility and increased the X% revolving Middle of balance cash we in Surveillance Geographically, to of by versus form end the our X% the We prior During of year. cash, we Europe. million repaid $XX in East third region these Revenue in slower credit U.S. in in the returned in $XXX weakness dividends. was borrowings total segment. activity at to revenue revenue our million the the and million million XX% U.S. to uses shareholders Despite saw it increased government XX% due and

increased legal in side bit of results. on of costs corporate segment on the revenue details experience higher increased Slide income in summary leverage the XX, Slide more, spend, reduced X, Digging operating left the increased side operating of across third form did a a the Board. compensation will surveillance and into you the the quarter see We result the accruals. in of of Moving right on and segment

grew in X% addition for Nano drive X% and surveillance XXXX. by Army the to was U.S. Protection nonetheless up XX% generation quarter do $XX year support over XX% quarter-over-quarter from to with the third RAID land receded and October, in in included prior added during prior this This $XXX EOIR personal solution. ratio but Surveillance $XXX.X were the million prior order notable of a Not comparison their helped growth margins. due UAS Third the of this a the surveillance of Army next Airborne business to program. backlog, a $XX.X for and gimbels surveillance million million and revenue times variant was Force reconnaissance key UAS offset UAS our strong, quarter a difficult due year stone Australian X.XX for Black business consistent the portable the our backlog operating Solution, our man of particularly for year. up a a inorganic million compared revenue surveillance decline book-to-bill received to products order million. from to income increased we the from Program, the partially all bookings year products win $X Operating in the Hornet and for

from ChemBio On our was saw to year-over-year third products DR-SKO is from million end which segment, States of DR-SKO detection Slide finished quarter Homeland margin partially higher Spectroscopic offset drove a quarter basis increase, $XX.X a by of with Personal million. our XX backlog XX%, the offsetting on the to the Partially Timing summary Radiation order to in Detection softness down right Operating shipments radiation the which Detectors. under of and of grow increases under primarily order. which Domestic Compact Detection previous side Securities of decline of third Detection deliveries operating Office in the $XX Nuclear products. expense United large improved XX% due for the was of another revenue $X base. the and Department of XXX QX, RXXX backlog, program revenue million points result the was the explosives the the

to growth of our predictive Slide strength the over was line maintenance automation both well handheld profit XX% $XX.X to up drove of and imaging as instruments of quarter slower cameras. revenue. slightly XXXX. volume Broad line XX% and business by was integrated grew all-time quarterly sales up driver accessories cameras third particular mobile Lepton year-over-year $XX.X XX, premium plant versus high XX% acquired emerging reach X% operating to Moving and did in product due with as and XXX and points operating offset emerging increased million, UAS primarily of yield or emerging the to from The over in to this The higher shown million, cooled initiatives. due $XX.X Order the third XX% expenses, revenue Instruments growth of cameras, revenue increase higher OM margin Organic quarter as on and million in quarter during was improvement the profit million. operating revenue year. OEM OEM for backlog XX quarter X% well. was basis and of OM growth. of $XX.X third XX% are emerging year, to results quarter and the cores third increased Slide to an the solutions of third segment revenue. of the million decline related operating development the prior product $XXX last cores XXXX increasing this

the operating year. reduction the expenses. was topline SG&A approximately year-over-year in will we Maritime income by million the segment the strategy in Security channel revenue camera We growth Visible solutions prior negative strong grew their of wire-free selling pushed system prior thermal see QX. these major new revenue Hurricanes and function, to Moving restructured compared security Professional to operating year, our you'll in million year-over-year, LOREX reduced was due which flat Slide security and grew products A XX, some bundle from market. of XX% despite to two year's their left X% was of $X business XX% in retailers, our Security $XX.X Ultra a the annually. improve quarter. XX% segment up revenue realize on due LOREX security saw to of significant million, were web $X.X R&D the well. U.S. quarter. versus In in Securities XK up while grew the the portion the third HD $XX.X to of third significantly last million segment FLIR-branded to sell-ins side, to and to segments quarter, as impact

to of growth processes. XX% weakness thermal Raymarine broad margins New offset That Jim. the $X.X controlled gross in spending pass customer increased by due business, QX was operating grew resulting of drove partially which XX% cameras products with I'll to Stronger this and million to to quarter across back vetting segments. points Maritime compared income revenue. mix now another or over XXXX. summary XXX operating the in it of time operations of the improvement, my basis margin concludes financials by

Jim Cannon

Shane. to of and growth, we going. momentum the keep like especially flow results, I This improvement, Thank post light third results the with gross in margin well am not in strong of topline quarter, the net favorable ability unless proud team's the largest backlog the of cash will we a of you, business, did organic was history. but our satisfied income and leadership not and good very ahead change be I of the am this reorganization satisfied quarter

Financial do. creating second with fourth we've Harrison to to November expect Chief this will industrial a QX hired after she and while deliver But in his that join we this new growing to longer-term York, Chief challenges throughout Acting responsibility, President face-to-face to thank search, announced thorough a CFO we our shareholder able our so Monday, expect onboarding up plans took Executive in she the of on new leadership, year accounting I Executive we Investor team his pulled finance, the this corporate security we the company and Shane ongoing Shane the hard revenue QX the regard. quarter where the in as that there New present into on Details revenue addition be pressure as the you, task in guided can Financial Officer, Chief value Please retail Officer. IR weeks. want EPS and business. in poses companies work that as while duties skillset The we're to dedication Thank and quarter's the We're meaningful joining will event And leading Shane. be as and excited on Officer. the business. coming Vice planning and their M&A Carol and we've also from added Financial solid deep Officer. We coming to Chief event vision note our a we out have the as in some multinational a some us to operations. experience on saw Carol XX for and strategies performance. quarter of in to and results Lowe, in and follow our meet was brings we're the

answers. of and efficient, in more more even procedures day, As call I better at am work with sixth saying, these bring methods, members can livelihood. valuable world's will to at implementing able off great end more even and save customers lives to enhance open midst make excited to believe sense FLIR even to team customer the the to over this company of and effectively to new started we up the and questions we're so life focused awareness, that and to expectations more our the I'll I Operator? that exceed shareholders. for call the our continue thinking our X,XXX the innovate now perception

Operator

conducting you. with proceed is Needham question-and-answer coming & Our instructions] question Ricchiuti session. question. Please Jim first from from your Company. We'll now be [Operator a Thank today

Jim Ricchiuti

Thank OEM you. Good morning. first emerging The the question I on is segment. question have, and

And couple been coming of a we organic wondering all Grey was? anniversary I about seasonal think the throughout more quarters? how anyway. that of you're also business, industry specific you Machine wondering don't I about maybe accounts anticipating the And the over question in which believe give the us Point know the pretty I'm if Industrial and that Vision revenues up the if perhaps this, what strong is slightly. business mentioned should some next think then growth by have little weakness or is the on acquisition this you're I I can you up bit were

start can we just maybe So there.

Jim Cannon

Yeah Absolutely. sure.

emerging grow So, our and did modestly OEM business organically.

there Grumman remember Northrop got last comp, got year. a because order a they last you to was really Now big year large

business business. So, Point and an the as to being know, able the itself team. last of seen complete or we're have say to team that be meet that we've with And in will quite our and growth was the performance Grey comp acquisition one-year and mark that thrilled you for We'll November. of absolutely the IIS that anniversary we that in to compliment

the I now. it work we that there can't core well efforts underway, team Now we we the it's some quarter strong addition mentioned synergies and growth in positive pretty has opportunity the that growth new at emerging that products Point slow business. with of the and we think the of the Grey, core encourage things bullish about really team's about a we're forward particularly a underway part as OEM two continue as bit had us some of development the or And from we've for Automotive and to past effort that will lot of sector as one-year and as go time, continue and continued mark hard about to strong that and on very it well the in strong we machine vision segment for as Point the but that that see see performance, IIS we've Thermal, team team. enthusiasm enough example customers to call lot it of November anniversary as work some but Grey we space, work in again and will a as in out expect the had

Jim Ricchiuti

Jim. Thanks Okay.

Just jump on queue. in I'll and instruments back question the my business, the this is last

if share quarters there and market seeing of you're of wondering stronger market You benefiting but case had market new the getting looks just general, I from it stronger products, I taking like you're growth better wondering a getting demand be this back some am also and the products? am the you're in conditions, good as is of solid benefit may lineup where

Jim Cannon

of lot benefit done the around that it's of the the say has the products. work new team principally would I

in part for of IGM series teams of with earlier, to front lot gas that hard in future. product is finder, instruments a going Now to well strong, the as are products their team but the introduce see the foot the markets the a to year innovation. mentioned that come you're the more products, work some instruments on whole very and continue volume I There better to

these seeing hit to the we're of products So, beginning really benefit the market.

sell-in had new might users from capabilities. of to that are a with products is introducing feedback Now strong an that we've a begin getting go the forward, we really the bit sort great that as we're taper some but

Jim Ricchiuti

quarter. on Congrats Thanks. Okay. the

Jim Cannon

Thank you, Sir.

Operator

is And the proceed question next you. Baird. today coming Asher with from from Thank Carey Please question. your

Asher Carey

Hey. part could parse wondering I commercial, by to you're how some you're X% if drivers organic and of Good being that of viewing that driven business? Is seeing you morning. describe the versus and in was the back what side the there government particularly to growth out any organic it thanks? way

Jim Cannon

we don't it's drivers detail and Well, in walk of the from. organic growth where coming our exactly

overall commercial growth, As our XX%, government our I mentioned products earlier, by grew products X%. grew our

RAID Maritime are across in the recent host all a quarter, we mentioned products We've for is program have may program, new which million. of a the market. $XX It's the team. instruments for EO/IR of we segments segments a to history mentioned, largest this We XD demonstrating Lighthouse. of we which quarter. really like the book-to-bill growth products orders We seen very Maritime our Instruments of and first which got FP hit, whole time great surveillance for all Maritime. was market. had or things coming mentioned detection X.XX and we've is announcement you seeing bevy had I as of fueled Pro business, by a -- in as about or the and finders the had surveillance the to fish got great extension growth hitting mentioned the by of for businesses Axiom many got We've the

got We a the of issues some time that. if just chain in will. shipped you that supply we've bit tiny we lead Now got prime

going first XXXX. You're of the really see half to benefit in the begin come to and really first that quarter of

Asher Carey

Thanks Great. Jim.

Jim Cannon

you. Thank

Operator

you. Thank

Please is question. next Blair. Ho from Our your Jonathan coming from proceed with question William

Jonathan Ho

fourth Good the could and of us from maybe morning. to? little wanted I if of early what the received you terms segments give in a to selling quarter orders Hi. see bit color more first just that you you're magnitude

Jim Cannon

that was the it in there $XX of of fourth million of Yeah bulk go that DR-SKO half about more was that we revenue quarter would into came probably the the in business. expected and Detection our than third

You will actually world is backlog quarter. can't a that products. added It's DR-SKO, we when a we real to very in needs ending that the We always customer second In business third faces backlog the know DR-SKO product. predict the those for critical the but operate Obviously, threat the lumpy. it $XX we around in had DR-SKO I say quarter, with in million.

about the of the $XX months share third that's far XX delivered quarter. but over $XX so, the Now it's to next got or be pulled the the lion's million, got million by in that was DR-SKO

Jonathan Ho

it. just launch? stocking the Just around a get to little benefit can pressure little maybe business, about Got the a this product channel And quarter then bit the maybe Was more bit? follow-up, there? that and dissipates a wanted sense talk seeing that as you new largely a you're happening in little the retail bit what's security just given

Jim Cannon

we it mentioned for a third quarter, the Well quarter in stronger artificially the but QX our pressure typically because is high. was retail business,

our second the security had back get we a of that In indeed in second July, quarter highlighted remember for into business. retail customers that we quarter Retail load businesses month out quarter, you we for that our a the the of fantastic timing in Security If expected third happened. to came and

So now the we as look run fall out. at that into if we rate, quarter, will fourth go

Jonathan Ho

you. Thank Great.

Operator

you. Thank

your Imperial Capital. Our next proceed from coming is Saliq Khan question. with today Please from question

Saliq Khan

everyone. morning, Good right. All

Jim Cannon

morning. Good

Saliq Khan

Hey Jim.

on stream million more timing guys revenue the entire details talking the sector, to the of For September army. that also the $XX useful you received the the us you Surveillance back profile? about some contract margin for realization of Can the U.S. and

Jim Cannon

Yeah absolutely.

material about of million I million will. that units I $X get, $XX the to again, some out change million have We a was shipped. about did if quarter. A So have $XX and few in think you it think

governor look that's for now, going to we items long in we we've or lead our As the to time fourth read the supply that our couple really quarter from be chain got got of get quarter. fourth to

but is quarter the as there the of delivery should of fully we to a is XXXX. be there, a primed end first bubble go XXXX. into happen by The bit So, that expected

I've XX month by quality experiences real bases end we're in had been our four units operating XXXX guess got business them the it's somewhere I really unsolicited for the AUSA, at commanders passionate or they about. to of really proud just it of, EO/IR recently or expect cops months recounted an very testament where at of it's lot FP the to products help we four of distance. it's with towers that and delivered we're programmer a somewhere threats detect So, Again, the from all but and feedback to at great have those now, field a really that rate or soldiers and only

product really it's delivery question, very cycle. we're So, and XXXX a to proud answer but through of, is future capability your the

Saliq Khan

it's Shane the you Okay. highlight the see to happened strategy a And the mentioned incline and led something what this you was had security XX% that in Can then improved. again quarter back good up to strategy about year-over-year? being selling

Jim Cannon

can customers product house. around teams the in government drove launched a market great commercial there obscuration the the can are have among others various in business, work go Series Board happening collaborate product continued unique thinking of can ways really we've different Travis distance commercial innovation we thermal as systems that primers where with and that of thing is is work synergies but with is as about security, synergies biggest the that well I is we third of for partners. mentioned development also business. those core business had our channel to some business I our on projects security and drove see you in reorganized lot of innovation the we that going that mentioned president to back closely, etcetera side see and defense, more expected into and now together that team was the that you're as the across through Well, in commercial as quarter the to into industrial at for that intelligent partner and X unit and know highlighting fell business traffic business the the it QX that Merrill, QX the orders growth who that retail

Saliq Khan

question my to innovation very innovative the lines. different mentioned across continues FLIR Okay. you is One on product word last which be end, and all

comes you pressure portion earlier security. However, to of when seeing was you it ongoing also retail mentioned

So, think still your and relevant? six about as while about the become your you do Is down going Is portion strategy forward? overall 'XX, thinking How go will the segments be? I it into you future to about go security What less units. becoming it going within three of portfolio from relevant? to retail

Jim Cannon

good a how that. we're That's Well approaching question. here's

operating place As value, it. to is on on I make right call, execute we coming out in around been last focus earnings the we putting organize my rhythms mentioned and figuring then how sure Board, it identifying to

we now, concise execute. that security we the roadmap for to clarify on Travis door what reorganization who's sure make a things just that down the very the the not and call, articulate that moving retail role business business to about of notably just implemented our month has post of that his been business, do the is. and three been center next new but that I've by a So, the strategy the is we've will strategy cadences right in for is doing on security most earnings establishment Merrill to of rhythms the business of exactly at roadmap whole. And objective the company, business, units go across

and or technologies compelling when security that technology we cameras on the thermal about infrastructure, compelling lot airports space. absolutely is long etcetera, a kind the that to Now that right market, you when can centers bring do cost the FLIR plants lower you in Even of I together has continue data have come about think do in to there believe term space We're play to or think it. differentiate. in though are critical a the power to of to going

question the We his you working earnings and to Travis next that is are the but the the team up as products working and intend call. on in right there space answer question bundles absolutely hard on and are retail bring introduced now. we well, have new

Saliq Khan

Great. Thank Jim. you,

Jim Cannon

Thank you.

Operator

question. Inc. instructions] question Lipke your is from Thank coming Drew from proceed Please you. [Operator with next Our Stephens

Drew Lipke

Thanks question. Yeah. for Good the taking morning.

Jim Cannon

Drew. Sure

Drew Lipke

pricing FLIR more? employed little if product on putting curious talked you bit you mentioned strategy. I about dedicated your method refining Jim, that maybe and each a elaborate segment can was a then you

Jim Cannon

improve something improve. the to capital want about, purpose want improvement be to to and It's The but outputs we Absolutely, in always the efficiency. method of passionate to FLIR drive is the going really improve drive and excited way we organic rooms there margin is our want to really I'm continuous FLIR we about. task our future and obviously to method, growth, etcetera,

tools if margin. we can ways FLIR going we are on part improvement, pricing designing that customers or at look in be that for but products market, pricing value a driving shareholder better part a levers So, of are of strategies gross that. maximize engineering our Working affect is the to that to few programs, There win another win is method, the that we very certainly the making productivity effective is continuous one, and sure our value. or have the

growth, pricing pricing disciplines method continuous capital the with intent is tools lean organic company and and other improving the across with efficiencies. FLIR that the along be margins professional part Six introducing that dozens of etcetera, tools driving So, will the output Sigma and measurable etcetera, of dozens like a

Drew Lipke

sheet. on but Okay. a that That's could this is under-levered with efficiency pretty historically be perhaps theme for FLIR CFO, balance And sticking better helpful. then question capital and a the incoming maybe operated

may free both curious debt relates to opportunities be You're and to optimal stance and just your it as essentially shareholders? to debt net approach today. returning what's I'm levels M&A cash

Jim Cannon

Sure.

a allocation last balanced capital I As call strategy. I believe mentioned the in on

to regard, So, part as forming we're very debt strategy, sure acquisitive dividends, buying We're see on growth as the amount that well acquisitions in us going see have of regard forward. conservative shares we of and a our I acquisitions, etcetera. as making back considering we and come portfolio always as central the active that Board in company. you're and are an going I right

continue be balanced. to to So, us see you're going

We think year worked come Now several available up I that capital last fruition. for shares. at then this we build didn't for time, quarters the had to we an repurchased to that acquisition some

course I'll ask Shane that you'll approach, debt, consistently. bit But You balanced maybe but question. saw a pay to see dividends us on of paid down elaborate us some have a

Shane Harrison

company. Drew, acquisitive. intend We Sure. be -- we've to a acquisitive to be continue been fairly

the investment we want We we when let's rated. basically have on deals. we comes So, investment rated. to is a if But ready right in far company. there haven’t but a like can our can of for grade different it, chance deals times, that. we firepower ways grade take being we could that we say do deal want the How across to that seen above that leverage like along, it lot take X.X just it's

where of So, I've our lot processed and by of looking lot a M&A been is pipeline of still kind to rebuild in trying through especially and time sit a four from my did we rebuild deals. We today of the spending XXXX. those deals we've

we intend some acquisitions. So, be more to doing

we other reasons a that we to but like yeah, we bandwidth There was So, and part that's revolver. the last want that's six hasn't over say and months. we swap reasons, changed let's that that having we do other have sure realized reason these gain down to couple make the a of couple that pay like did and bandwidth

Drew Lipke

at keep just it That's I'll two. helpful. Thanks.

Jim Cannon

Thanks Drew.

Operator

you. Thank

question next proceed question. with Our coming today from Ciarmoli Please SunTrust. your Michael is from

Michael Ciarmoli

morning, guys. quarter? two defense for low high $XX the taking the million range? two of Maybe going can on maybe continuing you end range to the puts of might us guidance takes into got about bridge with pretty the here. and into left that months the the tie kind questions takes revenue Thanks to fourth be guidance but what's wide rolled end Jim just We've questions this resolution. Hey. does range and for the here. puts on Good just give with and maybe the budget us one, that the and to

Jim Cannon

stated third the we've well think throughout year. that what secured Sure, quarter performance. with guided We we've

didn't we We got that range the DR-SKO. that's Now didn't the EPS narrow and could of the big pieces fourth business revenue mentioned do quarter why we've and we narrowed We lumpy come some it. in the range.

now $XX us and but opposed million as range. that as Now much bit as well the to to EO/IR that of of be on drive in supply QX, wider some issues that backlog in again, But that a numbers working program. that a possible. of happens right Again FP to I big chain it’s we some are pretty quarter, $XX lead of the as mentioned unknown as came able much those How it's to into million. built uncertainty We're that some does actually. the

but in to proud I quarter. I'm do QX We it. our make mentioned, performance, I want the to as team think here maximize our satisfied. Now also, all got now quarter And of one fourth we effort I've into not sure

to QX typically can us in bigger we've maximize got quarter's a is and one wanted still have can card. That to in for much marks we use So, hard our quarter everything I up experience. because about new guide obviously Full of the as said, how as I the all be shareholders. on conservative I bit our show a that job. pushed results guidance for we

Michael Ciarmoli

good. margin. margins or certainly or outlook I am some an and margins, to ask one That's I on just but for maybe legal more conservative Got appreciate XXXX I and that's down it. heard help. not higher are weighing obviously No, going the savings, R&D the else, on that at anything restructuring and year-over-year sounds going organically. strategy, should It looking on yield you grow we some the to trying like operating guys to How trend lot accruals. expect there's pencil, a margins sharping the forward

on color margins? more any Just expect what from to

Jim Cannon

from expenses from look we legal had and it and pressure corporate income, mentioned legal at our say really R&D of that we investments. came or adjusted XX I'll that operating Bps if as came we Sure,

some R&D piece, the really about. excited things Now we're got we've

is concept to Some going that mentioned the business continue business to feed technologies to that over that. one we're feed and have the some that incubate come on are part that's fuel and technologies of I we more to the focused to to some going time we as want time and I approach develop of that take

to in was that best and ensure training we export always the legal people that have and controls lot as making sure we compliant with place that are have With processes world-class the we're expenses, a around in etcetera. it recognized and being and compliance regard of

but world is our not it that's we that to So, in save an livelihood into our necessary company do. obligation that's I to the at places. moral look compliance, be in and that is just customers mentioned doesn’t go make best the and to and work technology help sure this of as business wrong in the I our part this investment something really safeguarding that the lives our

Michael Ciarmoli

Jim. I'll Got jump it. back Thanks here. queue in the

Operator

Thank you.

Sullivan next your proceed Josh Seaport from question. Please Our question coming with is Global. from

Josh Sullivan

Hey. Good morning.

Jim Cannon

morning, Good Josh.

Josh Sullivan

Australians as Hornet on as some the every for on Black annualizing come know just just opportunities up that combat acquisition plan I expand the you well? the to we almost with of Can too the Hornet. equip

in a I some big how marine exercise, think but maybe at performed can how and matriculate may maybe just that completed point? you UAS the the that Marines exercise about domestically dollars into contract talk

Jim Cannon

Army, for obviously I in me pretty if we combat special seen enough analyzes think about the interest my systems, have a talk operations Josh, time big Norwegian the army it mentioned the mentioned extensively year soldier-borne old, an We've as Black environments. been November. command, with and foreign problem is used fielded various enthusiasm acquisition I the got know you for units as it's the with don't Army, it Marines, It's militaries, we've lot and itself about is and Marines I of opportunity have that day a but Royal Hornet. of in to the French

want And so, about they in etcetera. things we've add features feedback users field lot of that they that a want, the gotten from to

full detachable or next. cameras, is are got Black to the procedures great capability to Black capability you something change EO/IR, change awareness, what needs when increases what fire is and about on racing that this original product saves don't Now go reasons. we're the and because because detail this for our of X next-generations as the about not on level now develop want lives into squad think the call team But and the we it soldiers, is the additional situational got capabilities teams to team etcetera. a at current roadmaps that We're are initially more what's this will how now battlefield Hornet we on stop excited obvious between special been where even I that modularity think battery its for adopted highlight soldier of we we lot by and the has that can a individual we're operations is The tactics and systems. of just is biggest the for can techniques really opportunity This from happens. time, with capability, and borne by it We're etcetera, already units developing about examples to and that that can already it's point it's some Hornet though used forces small it. satisfied

through am right fundamental time that's possible. of else's on a rather Soldier of borne Black proud never push with we made soldier satisfied and it because we're there flows but envelopes A, really it systems the to Black would until would reaches opportunity. We're we'll of Black we'll now performed, be take and can Hornet. of how go I contact your always element been this have Hornet in what's satisfied possible smallest afraid already. some and forces about never be everybody warfare it the -- be land a and fielding The could Josh. on premise say There up I be Hornet large that with maneuver throes will I'll won't be but working conventional we a

Josh Sullivan

I'll IIS. products then was technology offering holes you that political do the future? Point of it, see penetration secondly, you FLIR in guess to machine the fill And day but question to maybe I any Grey's into I want over How know. progressing? the next Okay. into I'll vision ask areas of on movie

Jim Cannon

grown what's a has business technology. lot, grown IIS is The really but its core

that continue certain. adoption own from there organic the synergy potential this it's That's that. developed technologies, core there been the came is their with thermal products at focus acquisition to IIS, stated future principally think There's think for we'll and been that our around the they’ve new it's mediocre. Now technologies for we a new on, innovation. I'd do but and but opportunity and introducing some core We of improved,

Josh Sullivan

Thank you. Got it.

Jim Cannon

you. Thank

Operator

you. Thank

coming Our Sachs. Noah Goldman today Please question. with next proceed question from Poponak is from your

Noah Poponak

Good Hey. morning, everyone.

Jim Cannon

morning, Good Noah.

Noah Poponak

re-segmentation you in six of have revenue XXXX accelerate which business, Jim, current segment piece announced segments do to the you've recognizing its operating 'XX? a unlikely organic the in is of form, think a growth segment the versus of

Jim Cannon

etcetera. at We the we're went now backlog, that XXXX the through getting looking operating in sales through midst up we're right view our their first the businesses going by their of the forecast bottoms Well, iteration plan.

The second weeks. that happens actually two round of in

it just the level that segment operating to be because bit going diligent frankly at XXXX me now now a BU So, of even the I premature think we're will level state right for plan. as part or that through the

Noah Poponak

looking scenario that either tail way year it's model a the market I piece my looking could the segment and that of forecast in because shake am for growth analysis the by I of that less its end at I'm out? in of ends was because Okay. like telling revenue more anything next every have segment -- actually comparisons guess or me top-down I just year-over-year if crazy the if there's least scenario, accelerate or

Jim Cannon

like as develop been that's full new done work also bevy on and I instruments, that well it's rate in into done not EO/IR done. Maritime FP third products, quarter, we that quarter there, increased The significantly year get and biggest but have been work XXXX. backlog know the delivers are record in and we of And that to at made back has when program XXXX biggest whole we smaller as again XXXX. We and this several and intent the IIS others the it's the the as all-time the into the we backlog that is quarter. mentioned to would in thing second XXXX run that backlog, our company didn't point second full year million. much certainly in our the work done went far been a in that pieces statement Well, same that on where was rate XXXX they'll The the security that's a backlog run is $XXX items the as from

the principle So growth for company. is a objective organic certainly,

Noah Poponak

decline, based Good. the or called The have just input start you that out the surveillance of do surveillance, view and actual Middle you geography if stops that view out not can when in that annualizing growing do East flatten least the weakness within -- a have lapping order you again? a on on based start at

Jim Cannon

in the our strong region a business XXXX last think big we there, that I really certain, comp, if be forecast going after, East I potential business difficult for surveillance the had opportunities I was universe coating year. actually look in a orders region look of that's Middle activities can Timing we're to the activities, at if for increasing. of but etcetera at the development

hope in that's Now the that for region and We of lot in realize that really to activity an we the happen timing which a and predict. of now lapping difficult again become certainly close is order, when tough to softness through as the a those opportunities year difficult us timing that begins XXXX, the comp. right but see to We principally predict. but precut is go of

Noah Poponak

me remind the the level you of Can you that level. that tough first faced quarter

Jim Cannon

Shane. after answer have get We You you had know we would be that to call. an might when the something

Shane Harrison

if year. was you it's a and got we couple big a QX get. comp. that been It's Noah you was at big a a basis, also on orders orders comp that really choppy, it's tough QX it's XX-month know, look we difficult yes, as tough trailing but a comp. get of very Deliveries last choppy

Noah Poponak

that you So, 'XX sort into as move of reset.

Jim Cannon

Right.

Noah Poponak

more, in just up, defense you I with model the grow largest into Got it's am that margin, surveillance it of see getting sneak input business it. can XXs that sure at history in Jim, If to volume studied mix margin if the different you've the one I on naturally back the could better supercritical levels. nice segment just and much given a the

margin So, with on poking the view is? sustainable five segment long guess run it three up you I I'm XX if what right surveillance to operating a curious about again now have

Jim Cannon

we've de-levers as the X.XX. backlog levers was it this of $XXX $XXX almost with increase that's QX million got book-to-bill mentioned volume. XX% in and ending about Right quarter the in Well nicely now, million, you

that I continue is maintain think now it’s where probably is going to itself. it where to

foot. its in We that that also making that investments ensure and some need business our are in business investments front technology on to make to stays

where here now a are that of. is is at range itself. where XX, is there doing it's throughout we of result going that there I So, it's you're But lot XX grow XXXX where hold work to in think we probably the the now again low

Noah Poponak

Thank Okay. you.

Jim Cannon

Noah. you, Thank

Operator

you. Thank

with your question question. next from follow-up is SunTrust. Our Michael proceed from a Ciarmoli Please

Michael Ciarmoli

is Hey guys. the the you follow-up taking Army would demand? couple heard Jim here? new products more are -- Is I this on just rate for I satisfying a EO/IR times. have incrementally guys out through Thanks going contract, demand there on mention would or these so you you Can just have there color field many on a do what's from repair just more or gimbels give been in there replacing those upgrading. perspective? the us of simply that

Jim Cannon

very, that the testament this what replace the you it renamed replacing conditions it it as really they some of in Electrooptical in at Program. but got continuation the that's team the a product. a program. it RAID etcetera, continuation work is the great out discrete that not Infrared war or certain circumstances it's over need capability It's to FP very threats, there this harsh It's identify threats EO/IR fighters a to a for is hard all been may put Sure, distances, our together. unit enables think And Protection and of Force of the can detect it's do great additional of world

So, protection. is additional force the this that for has demand military

Michael Ciarmoli

it. Got

much. Thank helpful. you very That's Okay.

Jim Cannon

you, Thank Michael.

Operator

Thank you.

final your Kessler Imperial with Capital. from Our question. today Please coming is question Jeff from proceed

Jeff Kessler

quickly Thank these to complemented and core there ask just a segments development are you we question that by let's core had technology, terms in What like of Boson or to developments? has product I thank core be technology doing for is What a types or out doing? you. taking the about the of core, we going obvious should obviously see become staple. which to you new in going that new time supplanted what you're question. for some you are watching some in taking and when core want in be other left say you've for are application just Thank the impacted and of now and core development which by specifically markets my right general

Jim Cannon

the earlier example we across you Well, have Lepton, across instruments more of mentioned Hornet for as has and product you as Lepton. many have important well. capable products as Black mentioned, Boson a host is all Smaller, applications into our Jeff, that of future size, at one weight core matter. if lot is cores don't in the intended segments. our so enabled doing go Suffice detail know Lepton always all what and no and to business a really our forgive as you'll the development core the technology I say power about we're development. best world. of about me of

do and of introduced we I'll me. we etcetera. stop UAS can fidelity short effort for stated segments, size, about that is size, and first there detail UAS mentioned new countless etcetera the about any across Santa our you the underway applications and critical of applications real If on increase product for in you'll we that application. the light etcetera, the our commercial is forgive improving given that for and I power well firefighters, they as with as so, has working if dual think the capability, as inspection has weight, weight IR hard to the team visible And continue the power as But for fidelity, Barbara infrastructure for responders, all example very always frankly that

Jeff Kessler

-- we core will seeing from products development now. year a shows is year out next be be right couple some assumption half these in you the Okay. you're new that year a of may out doing My to will

Jim Cannon

We're our constantly innovating core.

So yes.

Jeff Kessler

Okay.

Okay. talk Great. answering later for about much We'll Thank that. the you very question.

Jim Cannon

Jeff. Thanks Okay.

Operator

our reached end session. closing of turn floor Thank comments. you. the or question-and-answer to back over to We've further for management the I'd like any

Jim Cannon

for accomplish our FLIR exceed so teammates want hard to task, team joining shareholder want I to thank to call. you commitments all thank work I very great senses day. XXXX and and innovate proud integrity all six so so of have our our are a and can to you lives world's with the purpose, especially to the much the that Again. over save Thank customers livelihood.

Operator

does That conclude you. teleconference. Thank today's

you disconnect may a and You your wonderful for today. day. time have your this We at line thank participation

Teledyne FLIR (FLIR) 25 Oct 172017 Q3 Earnings call transcript