FLIR - Earnings call transcript Q1 2018

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Operator

Greetings and welcome to the FLIR Systems First Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Shane Harrison. ahead. go Please

Shane R. Harrison

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

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

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

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

James J. Cannon

David our Industrial call. Commercial first the for President Todd President our Shane, our thank Business Merrill, of of our and CFO; are With Lowe, DuChene, the Business Business and Carol XXXX Government President & earnings Pennisi, Ray, Unit; of Thank everyone, joining General our Travis Unit; and Defense me today Counsel; Shane you, FLIR's Unit. you, quarter Frank

end-markets. basis All on XXXX. over the Adjusted morning, our first fronts million, our was organically, operating successful first businesses saw of to XXX organic significantly many and top-line profit quarter Adjusted our growth We to level revenue first XXXX. expectations incorporate that per $X.XX. margin growth $X.XX XX%. full-year was slide XXX approximately and over divested strong XX%. basis grew of presentation. the was the through of at and XX% is margin, XXXX, and revenue to expanded the we $X.XX represents adjusted the businesses our exclude we down quarter first start on of represent slide These of XX% operating business XXXX. of range to of year's which earnings XX% was strong I'll earnings we organic feel earnings review quarter and comparison our first to a operating and XXXX in growth execute of the results units while and defense from conviction as the billion, reported $X.XX, over these revenue operating exclude with our share in quarter well versus business The X our revenue earnings of three When $XXX very updates strong quarter now ranges organically, ability adjusted of quarter for of first gross over increase which We to to Security adjusted updated the At grew you of bottom our XX% quarter in be margin per expected billion first per earnings X% X%, This leverage quarter the as operating $X.XX expect points. early-February, income share. full-year of share share X% $X.XX. start what to in an be top-line expanding you the the adjusted industrial double of the of range performance adjusted prior the X gross for growth unit When share grew expanded in respectively, per year the digits to year. divested plan last and and are were points per XXXX XX% nearly

we took which with that we of Arms dividend $XX be State civil of agreement the quarterly to in charge shareholders the on share, payable million violations We Traffic X Regulations, International as or Related of to $X.XX also record alleged resolve of Department announced to to June quarter, income to will today in XX. a GAAP reached per yesterday an ITAR. the operating the U.S. related May

past considerable As enhance and will to that protecting lives and four of a over processes. that one future with This expenditures the picture where improve fully the that most and million fighter. with result aligned in we're compliance we agreement, agreement compliance U.S. long pay result penalty we'll achieving against years the war credited remedial processes. process, of expense of is cooperated our devoted $XX review time that here and U.S. is million this a $XX of million the suspended consent its the compliance $XX have of a including important and objectives, bigger our policy is fully Government The

sensor new the the doppler represents in Business maritime building the X. and awareness. It's size, improve also reduce connected showcasing to than that for to thermal efficiency. touch introduced our last line at significantly ThermiCam our Unit's new [Intelligent the radars thermography vehicle is launched of as ability thermal camera XX% is entry series cameras with premium all solutions. and image our TXXXX, to for lineup. threat vehicles handheld system, Unit to was FLIR our access two our and Commercial the an data for the weight target This TXK as price some applications. benefits personifies analytics This Unit's business advanced to traffic FLIR team Cities sensors for traffic to of technology XXX% bicyclists' imaging. series radar, ID point unique the utilizes software, by ThermiCam traditional now work technology and for applications our alarming. and codes lives our pedestrians, sets detection Raymarine's sensing the of introduced both level has state moving in Moving the cameras. previous entry Europe, onboard markets our a announced It and and in emerging newest share radar has it identification solid of In This Raymarine most generates video images system their using latest camera. our the cameras, electrical, sensor business for UltraMax accuracy. Quantum communicate megapixels, to safety customers new more thermography thermal thermal series enables targets In to X, the of to than consumption Industrial differentiation advanced The enhancement Systems and point that and also popular HD for and vehicle-to-everything and needing the enabling called X.X avoidance help new camera featuring high-fidelity uses detection that delivers the Also February, false and Systems] a infrastructure Transportation infrastructure greater mechanical, up February, the VXX Traffic aims high-definition boater's technology VXX. new cameras, Smart roadways specifically motorists, thermal in F-Series features improve A stationary clarity cameras low Commercial Exx series EXX a livelihoods. our like measurement show price in I'd in lighter crash Commercial and its the optics, since level VXX. image to Intelligent critical which the power use automated standard Business Business thanks greatly in to Security of thermal Also detection the to TXK referred color and new (sic) Intertraffic save This to Business the security sensitivity more The it professionals introduced improve Unit, call. situational slide In introduced thermography is innovations a earnings on like division market, March, designed

our to slide Cat temperature and program Thermal marketing Turning introduced we imaging by enable on ruggedized the issues, in realize the live obscurants, capability. improved microcamera thermal past our their our supports that or use phone, by partner, by Congress OEMs Thermal new of recently a Lepton manufacturers development product smartphones Android announced in Group, product X, sensors their At February, World the in ruggedized Mobile SXX. leading Spain imaging Bullitt who Cat FLIR the innovators, Building and equipment and show their latest maker original that products. they've integrated this cooperative highly integrating Cat success detecting announced through of app their SXX utilizes new seeing a FLIR thermal an Toughpad microcamera to better Also SXX the our XXXX, Panasonic and the new seeing of by launched features that an FZ-MX Mobile temperature fully MyFLIR device the This tablet. dark. at was benefits visible in Congress, Lepton streaming Panasonic updated industrial camera, HD World range, in Thermal to professionals FLIR

unmanned or FLIR industrial integrates with thermal This systems FLIR camera MSX, visible UAS is Unit another called aerial the first Zenmuse XTX, algorithm. designed DJI. XK by announced applications. Thermal as sensor dual well a our a Under public Business UAS civilian DJI's image a UAS maker enhancement safety as developed and camera leading program, the and high-resolution camera, features payload Our patented Industrial jointly for the product that collaboration world's

and a software highlight organizations and a unmanned and optimize we that I'd of Lastly, that innovative aerial their to platforms systems. in share DroneSense, responder young public company first develops like minority safety use investment greatly in strategic made enhance

respective As into integrate a act more multiplier daily UAS missions. the and DroneSense save share mission-critical investment, a will awareness, of FLIR situational enhance continue collaborate expertise and solutions and relationships and to their organizations as will ultimately as develop force lives that part to

now first Carol? the review and financial and quarter to turn her call Let me highlights. the over Carol, have operational

Carol P. Lowe

to Consolidated Thank XX% $XXX you, results. XX% filed Reconciliation a the was X, and East, of the in XX% the U.S. in in organic the basis. U.S. to exception & in strength note was Asia, an the year-over-year first with total these Middle Defense the of in Adjusted and points on all due XXXX. Revenue mix our versus from and Geographically, increased quarter GAAP products. XX%, Jim. revenue appendix. of the XX% gross by included East to on The basis. of X% financial product see flow, was Europe, non-GAAP slide to driven Please is million, On margin year-over-year region financials new quarter government Government an revenues are revenue quarter X% the cash XXX deliveries improved data increase X% Middle Unit. XX% and first in for the increased basis Business you'll

million, driven and year. XX%, the up primarily year, $XX per was quarter share of and gross to First to from by operating timing net and higher points growth payments adjusted tax by higher adjusted prior the top-line $X.XX, adjusted other flow basis than operating cash quarter XX% tax XX% last was net the was about income, expense for Quarterly earnings relative payments. XX% and improved $XX of margin operations income XXXX our growth. XX% than to XXX repatriation Adjusted first controlled driven of million the declined was margin

repurchased million of X.X shares $XX.XX. of average an at price we our quarter, the During

dividends Business meaningful Defense basis. $XXX With Government the growth shareholders these an repurchases first to finished million the the $XXX quarter in basis XXXX. and business with points business returned increased million we over level, paid, growth level strong of in during XXX $XX all on operating and we three first of unit of saw million first At margins units cash. our and the Industrial & across quarter. organic quarter We a unit

divested of the our the quarter pull-ins reflects share full year adjusted Jim for full As billion revenue $X.XX X% earnings $X.XX per billion, earnings to X%, is representing growth is $X.XX, adjusted organic guidance per now and revenue growth of $X.XX to share our to how guidance year and you now view of mentioned, see current XX% Security unfolding. effects the our second outperformed XXXX This XX% teams of after the seeing QX rest to our of businesses. delivery from plan, how exclude our when year and

bit XXXX. We growth more, side units a the you results. quarter the to Detailing continue the the first versus half XXXX, summary as business Business the first a the the Industrial to strong slide half on of half of in Unit's second expect higher second left we of will performance year-over-year in lap X, of began see

the quarter to drive Middle XX% our related many and Eastern improvements first Government quarter The production EO/IR-FP the growth in to Industrial to slightly million, $XXX FLIR Industrial Defense lines. revenue Unit in mix DR-SKO thermal maintenance Sales gimbaled quarter the the operating with high was Healthy the for shipments expanding camera revenue $XX points. initiatives. in customers significant volumes FLIR strength from seen due first helped in camera Deliveries controlled systems & program, cameras, prior expense resulted sales cores resolution top-line declined growth. and for & accessories, Business of growth First Government planned XX% gas up was to mobile year-over-year, Business XX% profit imaging of had particularly quarter year. mainly leverage border for higher XXX The the Industrial handheld, operating of increased was than and plant the operating Operating Method predictive Defense XXXX. this basis margin compared XXXX. product to income the of operating X% year. million, and compared Operating investments product were noteworthy impact of Business margin protection year-over-year. prior the ONE of

$XXX & received XXXX from quarters backlog $XX timing for X% a Defense first Year-over-year into of U.S. the During quarter, the Navy. to international later due of BRITE order down of Star the program. million DR-SKO DR-SKO wind the bookings declined $XX and Government order million a and gimbals million to

in slide comparable SMB due that to the Commercial quarter year, that and of first is business prior side right Unit. Business included was to XXXX. Security of down the the summary divested February X On year a of retail Commercial year was revenue over the early X%

the and the Business divested Excluding XXXX, revenue quarter both grew XXXX Commercial over year. revenue XX% from first last

was Transportation business the across call Systems and of now of by driven growth Jim. Operating the low good the security summary margin. I of products. XXX-basis-point and will line XX%, with Axiom and augmented gross product in displays the financials and for Commercial gross improvements multifunction but increased particular embrace Continued many cameras, Intelligent Raymarine's the in Enterprise improvement Business margin thermal growth lines, in by maritime market performance, our primary driver in business. in profit expense Raymarine This operating improvement a of This operating profit resulted performance my the to units. concludes pass back

James J. Cannon

generation good We're improvements pleased saw to we've cash XXXX. across various how balance Thank our I'm cash work proud of satisfied. and fulfill and Timing you, related certainly our improve Simply with flow not tax But Carol. kicked to said, off be the objective. in done profitability. our but portfolio negatively We impacted remains we look to in items year. the throughout quarter of the the growth there

while have of customer further ahead quarter to to product the of our The volume, we're lot new Deploying will quarter, businesses. experience. programs, turns strategy. propositions, a take the the into just improved the meaningful value develop a QX some minority expand high opportunities improvement team's while share excited our $XXX in of completing Our but efficiencies, operating utilization saw a time commitment cash favorable operating about investments. returned on these was And leverage our and in us. we of is effectively to value-generating products, robust of our our shareholders we in across and rollout Method back million to multiple result initiatives product in cornerstone the capital manner We various working over slightly spend. of better long-term and FLIR better our margins and our many We've of operating began runway mix,

our brave, in the to we event, May Investor and continue We FLIR on our is New which on our we'll reinforced business this Day our opportunities our at is construct, our and to build purpose, to to to and of financial and and task done awareness enhance an you our and Within of integrity, and want technology to Method. March. is maintaining of with our or be to remind Please livelihood. evaluate milestone rationale congratulate everyone as our past be several communicate save ambitious hope growing provide in in be interact for and to cash while fueled shareholders. around we organically, In innovate for World's ready be you've closing, York commitments deploying Anniversary, deployment Sense you to further and I'll coming investments Sixth financial by and shareholder-friendly strategic by strategic RSVP them exceed consistently lives our products, purpose if XXth see FLIR this perception XX. FLIR FLIR with task, past our such The value all present, our At margins a delivery thank effectively and ways. and We task so and opportunity reached and some well FLIR's team focus objectives our This The improving on and to already. order our bold, be priorities values members for I years, that not the daily as leaders. this

be and the the call their with heroes their awareness. sense. provide technologies our improve Over now hard sixth decades, everyday perception Operator? worked of I'll to for We're four open we've to answers. and proud course questions to up

Operator

We'll Thank a question-and-answer conducting now you. be session.

coming from Noah from Goldman Poponak Our question is Sachs. first

live. Your is now line

Noah Poponak

morning, everyone. Good Hey.

James J. Cannon

Noah. morning, Good

Carol P. Lowe

morning. Good

Noah Poponak

you've (sic) program. hand, XX% DR-SKO business. program, the really growth Government obviously clearly on a the called EI/OR out acceleration, a on & So big the shrunk of organic one pace [EO/IR] Defense, nice hand, entire revenue number; other in the the across The

may underlying last to much sort out makes that the parse of sense. be that longer, excluding programs just don't I if to growth, So try want

those you what excluding beyond you growth just to those backfill perhaps, programs? could quarter, So could those speak And their I be the quantify Jim, then guess, able growth much efforts sustain How do was to longer if what the to the this? contributed backlog last? to to

James J. Cannon

is that that States quarter. under EO/IR-FP $XX-some-odd-million. last Sure. the David Ray I'll so & and from and you of first comments color. then we can altogether year growth know Defense some far. were Government a ship our here, million give United some We awarded if program, majority little outside came the look And in he the of at The in we did $XX add

really of a the bulk know, ship is as that year. yet quarters. is first the in So down two that's $XX the DR-SKO, to million last orders. of In next you booked winding about we quarter, program

about million we to revenue the in color This orders. really David, booked you But question. Noah's from again, quarter, outside U.S. of of any $XX QX to came that bulk want add growth the

David Ray

I'll add to that.

backlog working each the and domestic to So quarter. about long-term lot EO/IR-FP predictable for year. customers back in at the that. really this coming backlog we're a as as QX DOD positions program to will for of deliveries of of we programs fuel business think records, and in we growth business really to a internationally far those the And for execute, I What us too ability year, sustainable into look as and the now as that more there. on our larger program about our moving I'll had because inside we won't long-term our process of our moving DR-SKO program those talk Jim year and create growth of it and Domestically end well last solid (XX:XX) go had mentioned, that. forward is,

inside programs small give a as opportunities focus the few mix programs doing us more And predictable our drive mid smaller growth and and record quarter-out next between we the of really kind those we're what programs strength win more of so to the quarter-in, the large years. over from with of but better

Noah Poponak

large your of programs can given you is longer from a David, in and cycle is military actually hire that in infrared defense Raytheon, nature. you've elaborate interesting large player a are maybe on because on record company that come which that is

other and makes the hand you out of And find of articulated implementation, But when like think of and things. just you strategy how kind it's a so sense. those of just I resonates nowhere lot on the go about do the out sort

that may can can just So – segment long be manner it'll few know you how can or if elaborate and you give a don't on examples take? transition you how precisely I the in

David Ray

Right.

won't take transition. So in it long

go able over company think drive already the modernization years, intent existing assets I has three budget wholesale bigger been with but in that. to we've time to inside deals necessarily firms the after. my do say the that DNA company make to DOD. is focus to not go it many smaller What for I on do are next to certain it the allowed of government's really inside have the that really a up normally approved we opposed short of FLIR the the deals changes the fewer as will in really been to that's us

for it's driving only allocating move the you position we FLIR tell I'll of make really needle inside the resources just and that us about term. investments so really things not on the long future from our side, and us scale And platforms against the the for focus really industrial of positions the that but as our technology well leverage ability that business commercial execute to strategy. drive we and our from really partnership also attention and side we

Noah Poponak

on just more great. That's Okay. one the gross I'll margin. ask And just

could a amount had sort It's margin. being while. through flow operational new You've decent a higher. implemented margins FLIR one and just which before, been that but a up and I'll drop-through having in how again, revenue even try yet is the efforts management organic Method has an question that just and year-over-year. accelerated initiatives take have to quarterly know much It's asked and new growth of curious margins better versus the of a nice of it actually and it's effect this good is the strategies it's And gross and actually to

James J. Cannon

volume and benefited certainly in growth Well, nicely. quarter business the great the does leverage our that came in from it's lever question. a We

quarter. FLIR nice in self-funding We've we're the had had that also also we the across and products of lot investments the We a Method made in mix those investments.

in the think we going are Method about manifest the and more to and believe that really productivity the when we half have that term make So first to investments that margin. talked second longer now in a over we carry themselves we've as half but pricing to in the do those we the benefits and about, continue and into FLIR expand or XXXX, in way maintain

both the three do So qualitatively that I reorganization we BUs. business think and quantitatively benefited from from to six segments

of on think Method. would in of that then many year-on-year. to I enabled volume think things us gross the really FLIR some I these those self-fund for improvement I benefits resources the the to drove those that mix, the leverage margin certainly the point top And have of quarter, and

Noah Poponak

much. Thanks so it. Got

James J. Cannon

Thank you.

Operator

you. Thank

Our Asher from Baird. question coming from W. next is Robert Carey

Your line now is live.

Asher Carey

Hey morning, good everyone.

James J. Cannon

Asher. Morning,

Asher Carey

that. early You've the in is the How role you like for XXXX. beginning question it much a Thanks. platform? creation function strategy a growth, volume of pricing mentioned to going pricing about of to the organic a the in mainly still implementing being is process driving innings the ask as I'm standardizing analysis any across play or a priority

James J. Cannon

was FLIR lead that leader and very in effort on our extract took a initiative we and first putting price job, getting together out is data Method, focused to of is steps a a talented effort value this part is component. right, And do better do much core the collection. job now forward pricing right sure of we how that believe, Most full we because I a consistent Well, making products. pricing going that of could one believe we that we the in some all

a go develop. raise sort. price of kind mature trying to pricing more current these takes certainly to simply initiatives, not As and you implement much something time of it's on that and of or products matter It's complex

forward, So on that's we a as then been and management the And training focused collection what education and organizations. really we've move really new now. focused a product and data product introductions. There's there's piece piece sales we're with on

as So couldn't effort I last have how that some successful we're many getting methodology days. call innovations still And from went of when our or of the products But of through now mentioned I into of really market, get the very new the again, early rationale. this it's first since the the earnings and benefited taste be. could they kind

talented, I able we're relatively to We is But small quantify resources into the as the with company, enthusiasm of spreading the hit amount the but and small, I have a business. to adoption pretty new and better inside product very the going dedicated it quickly. as think productivity in pricing, on real effect to their much be and market XXXX the really over carry innovations half these second stated,

Asher Carey

Thanks, helpful. That's Jim.

James J. Cannon

you. Thank

Operator

you. Thank

from Our is question Lipke next coming from Drew Stephens.

now Your line live. is

Drew Lipke

question. Thank Yeah. Good morning. taking the for you

James J. Cannon

Drew. Morning,

Drew Lipke

the pull that called this there. You guys in quantify the see forward pull-in did you and a you saw? could you out from quarter second maybe terms of deliveries I'm curious where

Carol P. Lowe

Yeah.

not was where Government within our It we're that occurred. exact going the & to Defense Drew, So, is out amount. largely break business

Drew Lipke

the that to more the relative prevalent And you tough first or seen we've the to in each about Okay. segment there? is and comps that industrial that then second half Is growth talked pointing stronger half. across

Carol P. Lowe

acceleration is that business growth the of the it look business all three the to in started the because organic start ramp units across So of three at and really to of if the the units we'll lap growth when you up XXXX, that we that. last and that's delivered see half

of that half And the second move as comps tougher the year. into the a so we little makes

Drew Lipke

international impact you the direct see how agreement, international does sales last ITAR the one, commercial are on then And compliance forward? to defense long sales your review? just And and consent under What's expected your the Okay. incremental this going going ability forward? cost

James J. Cannon

agreement consent back the is time. in in has some Well, some This a XX cases multi-year Sure. period, years. negotiation for going been

put behind standpoint. the pleased protect on focus same to very an to to U.S. Department policy a compliance it us we're State our to able and So have objective and processes from importantly warfighter. exact as more our be (XX:XX) come we agreement Again, the

of term of million the a four-year earlier, civil official and mentioned is is to it's penalty million. the over we period. and I external period. two compliance a over a $XX oversee be compliance. in that There'll The course $XX penalty special million paid agreement As a there of $XX be is audits will that accrued suspended. of four-year there

Drew Lipke

guys. luck. Best All right. of Thanks,

James J. Cannon

Thank you.

Operator

Thank you.

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

Saliq Jamil Khan

Hi. morning, Jim. Good

James J. Cannon

Saliq. morning, Good

Saliq Jamil Khan

Yes.

Just of a questions for couple you.

is thermal as business surrounding for over that The the camera drones there first well camera could conversation being one years and have a manufacturers. as mean lot been the what of the

expect this in So how do in the term? involvement I And could near some you FLIR's space? material view the acquisition

James J. Cannon

UAS emphasis fronts. Well, us area several is of an on for

the leading and with provide very the civil their UAS commercial with sensors First, manufacturer, have relationship close a and working we DJI, sensors. thermal of with production them

know mentioned the but about to rescue, industry innovations, with with the they whether them bring software sensor, we and the Zenmuse, hand. the responders and solutions side, that an Dynamics, also DJI. military to again, the use the et the capture And the it holistic solution, same because products, firefighters, investment inspections, product, tested. proud with time, fire thermal As I surveillance nano a Prox been a in and product, mentioned we're do been conduct incorporating dual it's space. just identify and At and camera so camera deployed in search attack a has that cetera. right back minority world deployed we with a with is in very for And, camera, combat the first differentiated on and continued excited introduced in all and personal to is the the in earlier of fits Hornet as and I deploy the battle to service and collaboration helping the growth can your DroneSense, very over go the to administrative to their algorithms of airframe a missions, Again, first in product required the palm Lepton you Black not truly both acquisition want things make they visible of drone we're the sure it that has information, reconnaissance

sort of of host but to be all applications and continue unmanned land, forward, about that of it even sensing unmanned. lot developing think need vehicles, we sea, So just think UAS a And there's more are going when which the about whole a than whether we and behind. we effort put of broadly capabilities UAS air, and it we'll

it's focus a us. of So for particular area

Saliq Jamil Khan

as and the the a sensor you on bit this or more If in a you Can aimed your And well. profile, at look guys? opportunities product little of number Smart I products end. question Thank you've for outlook you. earlier about introduced you take one the potential growing talk at then market, my and the mentioned that are growth margin market VXX Cities the a

James J. Cannon

kit cetera, call automation, on launched capabilities Well, kit, sensors there high-end a have thermal we sensors on something earnings the vehicles, also CES, but the ADAS, themselves. on. think to be sensors development community. calls vehicle. when are in we automotive to think Smart last there's et applications, the we we're the thermal mentioned on on again, but We ADAS very now, focused Cities, talked of on when in vehicles vehicle, it's when provide examine can the that about about got that, we an We've sensors some past sensors at certainly we about OEMs their On

have If around and about to in again think as specializes small bicyclists business us. rapidly that our the VXX we with well, the We sensors on particular, business, it pedestrians Transportation growing this move but technology, not vehicle have them enables they around to in Intelligent to they're And this. going a communicate communities. environment

to can But business. that color add infrastructure vehicle. have Travis to Travis, call that want is need to some here you So today on you leads He to that? do the speak Merrill. the

Travis D. Merrill

Sure. Hey, Saliq, doing? how Thanks, you Jim. are

Saliq Jamil Khan

(XX:XX)

Travis D. Merrill

we're that a security. safe Jim's house, municipalities obviously side this place, beyond take City out building Smart part was then we and when of but really ecosystem opportunity pretty we're enforcement, responders. part positioned the early on that to given technologies city infrastructure more be all or take things And But we it's FLIR, safe Smart think the of ecosystem. a it lot which longer-term, the That's addition business, well there feel is and like feel the space Business of that are unclear serve we in like city in to going well-positioned key Commercial detection developments and of days look the within out, the we're ITS the what products of early platform there. lot like Unit, where going really broadly a but it's of comments, firefighters, security to law that to seeing constantly around longer-term that coming overall, of on advantage kind outside City in So is have of root of first we pretty other kind

Saliq Jamil Khan

you. Awesome. thank Travis,

James J. Cannon

you. Thank

Operator

Thank you.

Jim your proceed today is next & with from Ricchiuti question question. Company. Our Needham from coming Please

James Ricchiuti

was in I I'm more I but you you're what quarter difficult morning. characterize could machine go how business camera if there? year, the wondering you industrial the you the started as know get vision the Good much through just comps year, Thanks. wondering seeing the because

James J. Cannon

business any a suffice call year. as of thermal to you'd specifics growth, backlog. Unit. into built. got in the last Frank, yet the And don't as now backlog cameras. to our enthusiastic know in like the this, want their strong to talk very work that to of cetera. We say we here do business you Well, we've past, the about at a of to vision on numbers units, business I clip about about business owns built The again some the machine We've a I'll grew We're terms get we business that introducing add? through rapid But IIS synergies space. color Industrial the improve. lot go work mentioned organically the year frankly, Frank after down the continues et who unit of like to to Business those is we part

Frank Pennisi

strong point, point on, FLIR very put backlog time. and adopters into Method, a our over I The say has good Industrial of we think the so made I'll Unit we machine that Business actually lot time. early production rates it vision we the And Jim could of that double early built space good the over a been one of

a consequence off as and so fruit And that increased for us. production has paying really been gaining

business us So to overall, and continue. terrific that growth a been for expect we it's

James Ricchiuti

some there products new anything about now then end was clearly or the in traction shifting the demand maybe rate as unusual to market wondering, Commercial, in seeing going And organic I into you one maritime just there's the impressive. but as market just just well that, seen growth in was are stronger guess And than that that just a what's moving parts CBU, we've there? think in the reflects while. I'm on been Is that way

James J. Cannon

certainly. arbitrage an I there's think Well,

security in and that of XXXX piece Axiom being growth Raymarine You seeing that in are business organic a our adopted that well the of know is course rest think of certainly. If we the Axiom, really divesting improvement differentiated the through retail them. Really space introduced buoyed the Pro business, as the the products they've and the about particular introduced Quantum, the we're driver margin business products that there. we've

James Ricchiuti

Okay. Thanks much. very

James J. Cannon

you. Thank

Operator

Thank you.

Ho question next is William Our from from coming Blair. Jonathan

Your line now live. is

Jonathan F. Ho

Hi.

of Are terms sort demand Gas get cameras. Just that of from well there as the improvement been wanted of you to there that out to guys in from pickup? Cores or has an called you as pickup any I terms the a in Imaging in sense the business, end-market in Industrial sort of shift the think both a see starting

James J. Cannon

for certainly question. with and particular are indeed optical they bring awareness there it's is end-markets, We at regulation, the the lives market. I to the livelihood and a Well, increased need where of kind products gas those them. great Whether save you more go, seeing the whether that's capability in applications when it's a foundries. mean, demand safety, from they look around real

adoption, to its is capability. improve and there think I So awareness, upon certainly continue we more more

Jonathan F. Ho

that I sort the clearly are in expected there for in wrapping are is up, system? but And when to potential years it. this, is additional of understood come the regarding that there any or then gap I Got program terms just that variants DR-SKO think future program, a there don't you say of

James J. Cannon

in we a million in QX. I Well, QX got for booking DR-SKO $XX $XX-plus-million, think

another We going the well. as to in expect receive there's year be to that tranche that we're going later

that be the that in facing, and could there with replaced orders based but world in front program and DR-SKO competing in off potentially, other CBRNE certainly now. that we need, is chem going that programs, additional we're gen we're now off based that we're down. to threat environment formally bio-detector the be Now next winding threat the on center is see the It's

programs and we're we're it winds while down, hard there'll now. it that replace make certainly working be So other those to programs for sure well-positioned

Jonathan F. Ho

you. Thank

Operator

you. Thank

from is from Our next Ciarmoli coming question Michael SunTrust.

now is line Your live.

Michael Ciarmoli

the the quarter contracting maybe in and have the been since deal? has Maybe, on in, that questions. general had you the year budget, backlog there all the taking color it, did side, from a quarter. budget an you shutdown, this Any sequential the from I the impact Hey. resolution, Government over Good update, for impact any did about and the I'll Thanks David, talked change velocity guys. continuing any Nice down morning, just on call think on have at bookings year. change maybe we've

David Ray

going come year quarter of first We bookings I'll being we're in timing continue biggest not the spending we the we XXXX. in driver mentioned can just grow DR-SKO, orders. more XXXX, Defense. see difference whole the think from lot and international Department for positioned that's think next of business this the habits right David, some we're of that of and get towards to I Government well And as and the the in that feel we, quickly Defense. I activity, to we alarmed On Well, of our three surety a in years. budget Defense by the Government end well now into say into didn't notable any frankly, strong

Michael Ciarmoli

programs, you should of, big vehicle there there, on aware assuming the programs be potential guys after? is the Borne content there larger to we are Can anything you trying on us get programs that is Are any of gen GBOSS-E of Soldier you maybe there else Sensor. could next screen the give that sense radar I'm out record, combat mentioned a be going

James J. Cannon

going three after. Well, we certainly that you are mentioned

air product proud and for solution reconnaissance Hornet have used and its as and nuclear, all force range CBRNE range if solutions in the we battlefield, for on precision we and the I of proven fits battle think with So count those of realities vertical the we a going face speak, fires, Black on our around a about protection. as have all program the would down biological forces lift, long some we know personal contested the that by detection space, we time reconstituting next very and we're again, RAID artillery, GBOSS-E and for It's extension near-peer Systems fighting or air fighting a business is that efforts; now, we're for been defense in a chemical it's to certain battlefield of friendly NBC world record. modernization focus Borne battle Soldier very EO/IR-FP generation and the With bring. before inventory that we're proud of they that, or

intend the when across modernization or platforms it that whether all look intelligent participate we an the and efforts of are across So be come other to the them, key solution, keen sensor underway board. to integrated and with you under a a programs sensor

Michael Ciarmoli

just of don't you there turns kind then here. And helpful. on That's want focus improvement. it. sitting I capital, to Got Carol, working Lots of quiet

think R&D, for there's there? other about maybe improvement, you give any optimizing been talk free XXXX we and continuous flow cash color us how about Can think I conversion. should

Carol P. Lowe

early So, being we will you in we cash continue FLIR and XXX%. very stages conversion, we well high and of something have over working it FLIR's on, that, record operating We're we're confidence everything but obviously all falls Method is referenced – that for the under initiatives.

we'll quarter always impacted first tax The to was in a past standpoint. largely deliver confident payments, timing from FLIR conversion as on cash that flow very by continue the but has

Michael Ciarmoli

housekeeping, any the rate And XXXX? for full-year Got it. to tax change

Carol P. Lowe

we with compared. the what previously, XX.X%. consistent communicated not It's we No, have,

Michael Ciarmoli

Perfect. it. Thanks, guys. Got

Carol P. Lowe

Yeah. XX.X%. sorry, I'm

Michael Ciarmoli

it. Got

Carol P. Lowe

Thanks.

Operator

Thank you.

Josh is question Seaport Global. from coming Sullivan next Our from

is line now Your live.

Josh Ward Sullivan

morning. good Hi,

James J. Cannon

Josh. morning, Good

Josh Ward Sullivan

far it's of long-term what do as you into the on FLIR this FLIR where expect. expected? some timing, up dig things rollout Method, the the that you think then maybe point? following you as I can is Just mean, as seen And at of the that you've executed Method timing maybe didn't

James J. Cannon

facility demonstrate new the leader, and here FLIR rest could we all efforts, Well, be with important the doing team Method question. call; meet about Method it. Again, to the excited these went here. the can I'm a organization, that of get day We that the of to you want to kind so to got talk showcase, a We're folks, kind wins and long, I real I of yesterday, this in benefit of welcome have. to some – about Billerica we've it's dedicated with facility FLIR tangible because quick a that down

So getting being first trained our to folks we got of round tools. here, a a champions dozen the chance are that meet with on various

of name Now, that this see you'd it. you on analysis, manufacturing flow is manufacturing setting, a a value-stream lot in focused diagrams, tools the they're PQ mapping, spaghetti so et cetera,

And with operations plans value-stream and improvement was that that that Frank tools, events, we've touch output earlier, they've the customers, that a I an processing visiting another probably I in to point was not been transactional we're team IIS the purely sales those Method the lines, see exponential earliest reengineered ago own get yield. and lines. using Belgium seen the as had took and they Kaizen As weekly, thrilled mentioned to at orders, area, an our able in went touch process, every in they're business, well we they FLIR improvement a There's as adopters. their they work, right, the and point, And mentioned, in quantified with improvement place. every in on touch identified in mapped several as a point, they do several long production backlog had strong production very

it's beginning entire of of right. it kind lot to done of embedded So thing the A into never get those work where the to it's and take company, with, root. examples early are three you're

cash more some but at in much as of very, principal Carol Investor it, as generation what's continued days generation, and to we're the as strong capital on talk driver drive dedicate Method You're always of level resources early really to the But really take upcoming Day. to to that's we're effort the and self-funding better, turns going mentioned, strive historically next we working this cash to already our a savings. about that working get seeing to terms still very and we're FLIR the

Josh Ward Sullivan

Day Yeah. you see? a preview as be with up, any there that can the follow-up should coming expecting Analyst here, themes to Great. other are just we us what And to for

James J. Cannon

a can I get You'll guarantee in you see infrared, to that. chance yourself

Josh Ward Sullivan

Great. Thanks, everyone. Jim, and

Operator

Thank you.

question today coming Our from Capital. next Kessler Imperial from Jeff is

is line now live. Your

Jeffrey Ted Kessler

I'm you're sorry to West – smaller, going us more your you around what technology had that an if what Imperial cores. in – core you cameras get of Capital is some doubled doing on update on up those wondering ISC to improvements, better the Show. is booth And impressive better, folks efficient, but I'm at here, you could leave this cost what out over basically guys three with importantly, of competition think there comes present do make to the years out proposition at a when you value and more put you next thermal? guys looking it can to alone and maybe five to essentially core – going the taking you technology behind size

James J. Cannon

Jeff, that they business focuses that's we're the Well, them where to these and Business into and cores cores and our producing with units, the a that Unit something broader those our integrate great Industrial providing upon heavily Security infrared question, business it's in Unit other solutions. Business Commercial focused on

and introduction been with of we continue weight the mainstay consumption. You push for Boson to a camera has core uncooled camera, in know the capability some camera, size, launched for we that the Tau of power and us that Boson, the terms time,

and and and more like adoption as introduction the security, we going critical more in thermal infrastructure, in sensing technologies smart applications And business, ITS introduce see sensitivity, more we critical great being false in into et of applications, many and infrastructure, more forward, fires We're tunnels at in many, also thermal and looking and at safety cities mentioned product So looking that. security detect security, in can notably less I to integrate perimeter other our go around focus our you're to with think particular we're great products smaller, alarming. product do across how parameter more I cameras also going to together trains cetera. earlier one.

And where certainly. that scale so the cores into in we a sensors provide feel and robust at retail many into it's of business we enterprise, Security sensing provide sensors. So, there's real applications; an whole us cetera, fact company. of area with like our given for and to from critical our we area needs many these the facilities of the these business different back some emphasis get capabilities leverage real suite with infrastructure, the et of shift It's real some a inside intelligent

Jeffrey Ted Kessler

aspects how much question, of the moves a cyber, security Just industry core – the of this sensor lot that as one you part part toward this call it, analytics wave more of do you growing a as converged related it, model just technology as of talked merged want with if of physical I and to envision the about, you – convergence? the guess, more technology

James J. Cannon

with more threat have going onboard we're Cyber that concern, sharper we and about that time. evolving that now, technology And when company, that all right. video it's products roadmap we've for certainly. that a to analytics, entire think intelligent see to It's more the that is focus sensors to solutions. it, across – sensing algorithms that solutions, have from how omnipresent Well, and you're our and introducing a been continue see and incorporated moved think, sensors the always I face functionality, we trend security you

needs, think and we a of solution in them we do provide critical infrastructure and day seriously, and U.S. risks have the mission allied can of every their that a our customers about these because products As hardened that always we U.S. around is primary the meet regard. to ensuring and world we that a lot it of a cyber manufacturer in cyber to when they take very face of ours work nations,

Jeffrey Ted Kessler

Okay.

was relative small large that to And was and room the was again capabilities. at well, use some I them just there suspicion company say essentially in was, thermal manufacturers, your Just infrastructure toward at is, critical security, and – their of would integration. a conference there them of – full was to capabilities had reaction of Asian quickly whom the Asian this there lot the a infrared

you home about a just at So, least that it have would market can that develop that at talked here market. seem if you you've

James J. Cannon

go, hard market. the We the our absolutely balance. to That's of livelihood to committed and kind working know critical develop places purpose, right. we're be can our you products and agree lives customers' these that missions and We're infrastructure, in

Jeffrey Ted Kessler

much. very Thank you

James J. Cannon

Jeff. you, Thank

Operator

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

James J. Cannon

past milestone again remain today. our team past call want want thank you Day something March our joining I very and task thank committed for is of partners Marking everyone members reiterate, in Well, FLIR see we're to I hope a and to for our of upcoming the purpose. great XX XX-year day. this to want customers, our you and very, years. proud present, to Investor our I absolutely to work have their hope all I May, Again, a at past I all and many over

Operator

teleconference. conclude you. today's Thank That does

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

Teledyne FLIR (FLIR) 25 Apr 182018 Q1 Earnings call transcript