FLIR - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to the FLIR Systems Fourth Quarter and Full Year 2018 Results 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 a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Jay Gentzkow. sir. go-ahead Please

Jay Gentzkow

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

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

it’s of Jim FLIR non-GAAP and to the of will of adjusted discussing is understanding because With morning's GAAP press measures ongoing pleasure information core that and results Systems. is turn non-GAAP useful for reconciliation the that, our this We the time. to earnings CEO Cannon, results between basis. quarter, over can operating We over comparison in believe release. be call facilitate President our consistent full A adjusted primarily my on results an it and enhance

Jim Cannon

for and President our David our General and Government CFO; Unit; review full-year for Travis XXXX Ray, President Commercial full-year Robotics. call, Business everyone, Carol priorities, detail Defense by results Frank Merrill, acquisitions the Pennisi, Endeavor XXXX quarter our call. on quarter on earnings two to followed further financial update today’s today On an for our was including truly before open you a our FLIR's defining Thank of we Industrial FLIR. call XXXX XXXX Aeryon strategic questions. outlook Labs me Counsel; our of Todd highlight financial our discussion and results With provide for thank morning, plan the fourth DuChene, Carol Unit. the of Unit; Jay and President your joining of fourth Good are year you, the Jay. and outlook Lowe, and recent the Business Business will and

During full-year revenue presentation. on EPS growth the the adjusted results start above financial year, business year’s performance $X.XX was line operating This the revenue with organic I’ll organic XXXX the top growth historically record margin flow. achieving of three finished expansion all cash units across review and and with growth of revenues X billion, X%, strong with board. with X%. XXXX We organic Slide strong drove

announced Adjusted XXX us outlook. margins XXX achieved to million also quarter adjusted from in full-year XX% reaching performance, This our of repurchases expectations flow Strong expanded margin operating a XX%. million. record to of cash enabled adjusted margin increasing repurchase initial brining fourth XXXX $X.XX to flow operations share. XX.X%. we EPS Our gross Cash total in per the and XX.X% record for shares grew morning,

delivering will give challenges. partial of us which down target. confidence of XX%, program organic includes shut the revenue effect organic of growth note heading franchise created announced X%. growth key order X% to Strong our has approximately XXXX I and growth momentum government in into We expect recently the wins

and recovering are timing However, any balance matter XXXX. over we the impact view this committed of largely to of a as

We accelerating recent long-term incorporates acquisitions in to XX%. XX% strategy, and our of includes our expect or transportation approximately XXXX ADAS, investments and This operating ITS. intelligent including systems adjusted margin unmanned solutions,

full-year delays by the of lumpiness expect and estimate of of products. quarter. be $X.XX information which to aggravated EPS unit. which for X% We adjusted ship business acquisitions. to of the includes or X $X.XX The challenged the $X.XX, range in expectations. fourth our million natural to shutdown, primarily the and Slide below secure fell on results we dilution defense Finally, revenue quarter, impacting Organic business the provides was revenue fourth the from licenses or in government the $X government our ability

previous growth to as the fourth program XXXX, compared growth revenue for fourth While bookings XX%, positioned well with well quarter quarters, was of recent than wins. significant of as less XXXX quarter we’re organic robust

announced March payable on XX. a to quarterly also our in share, increase be We X $X.XX of to per which X% dividend record as February will of shareholders

In were over well-positioned In business days, Soldier Reconnaissance unit, next from in continued as the we’re growth XX $XX two to Army SPS. Fuel, order remind priorities deliver strategic the progress. Feed, for Focus XXXX. business we update fourth that its we franchise program last quarter government business May, to the U.S. recent like Systems. the as to in bookings Black I’d we the you well Starting for method Turning shared on with a to Systems like program the Slide the million in now January, you awarded advanced on gain and many the of X. contracts Fuel, the FLIR X, to scale strong near-term Slide with Hornet was with our defense foundation. or phase and Borne in FLIR I’d awarded non-programmatic opportunities wins, to as our Personal

award the French next of in we December $XX million second over was an expect the years. from The Forces IDIQ to five deliver an Armed

fourth equal of has The approximately of deliver received the quarter defense already million. to order really $XX to proud and the first for ability I'm task been XXXX. government team's backlog

and $XX at the EO/IR-FP non-programmatic XXXX, programs, in X.X represented successfully consistent the end program future During ability of over approximately bookings, us of as franchise backlog XXXX of book-to-bill XXXX. ending to million sunsetting with addressed our growth. $XX we confidence wins, which compared drive million and DR-SKO gives strong Recent

Our optical largest safety monoxide, business with We’ve wins won and our in family fourth save quarter. order and across of offerings also aligned to detect sulfur and market numerous the hexafluoride, FLIR the gas we’ve livelihood. and as business in verticals. with earned to help several This camera errant imaging health this of process lives manufacturing the expanding unit the intention address carbon mission can regulations machine-vision in history invested industrial such methane, and gases

business Commercial to contract Haramain Arabia, that transportation FLIR's project representing the in in a division intelligent Germany. the our also represents ITS railway city a This fourth large-scale to commercial unit in significant project solutions. security Utilizing was history. our Hamburg, the connected expand the largest high-speed During differentiated and the commercial awarded was in awarded quarter, win XXXX platform secure thermal FLIR’s win Saudi and the offerings XXXX. strategy with solutions deliveries fuels over smart of

Turning to Slide X.

couple the The industrial our at family differentiated central compelling LC the the December, business. technology Neutrino key lowest advantage fruition of Neutrino growth product brought announced I’ll Our technologies new power to three quarters business unit save most to recent is for were fuel advanced to In continually and just lives level the cooled, livelihood to introductions. of lightest is for cores, with a the smallest, highlight one additions available. entire the to of innovating midwave weight, efforts a to Neutrino those. them consuming and camera innovate model

the effort in to an performance commercial camera Both distance midwave from definition We is crisp experience. strategy imagery performance owners Neutrino resolution that docking in boat DockSense the models example from core. full technologies is is introduced DockSense. DockSense quarter providing the DockSense sensors and continued Neutrino to thermal at gathered also move in of of extension docking intelligence The January, maintaining produces company models simplifies highest assist to resolution both the automates our to we introduced provide our to the offering midwave imagery leverages SXXX performance the while Neutrino on groundbreaking across Also, view. from business tight QX docking a highest field an a market. system of surrounding advancing video, unit, wide camera long while assisted unmanned solutions. offering high FLIR’s integrate maneuvering. as Raymarine

to Slide X. Turning

that recall public and lift sensors, takeoff from payload establishes world opportunity long-term of Skyranger articulated operations. leader market the we UAS leading interface, Solutions software. quad-copter month use in solutions. to for Nano a Black reinforces surveillance, announced as infrastructure Labs Aeryon and capability safety, Aeryon vertical further You’ll products in strategy is UAS further space, thermal Aeryon market critical Aeryon’s and Investor the FLIR UAS UAS around strong strategy. Hornet intelligence, May, turnkey acquisition Group unmanned Labs in developer UAS two leading provide a advance and a including acquisitions The FLIR’s landing the militaries a user military, we the our last Day expand for made technology, the XX with a and the markets. of management feed larger reconnaissance X advanced that complete flight XXXX different multiple our high-performance portfolio. is integrates and acquisitions our to upon success Building significantly strategy to long-term We’ve to start solutions. of to

a Transportable significantly talented and UGV to the well second more of defense. has the the cash, models. solutions UGVs stand-off cash and developer ground Endeavor are sensing franchise the combined to as for advance X,XXX credit over of to business in Endeavor completion, as acquisition is of ground several defense of Turning they team in lives innovating signing solutions. Endeavor operate momentum Monday, well-positioned hazardous the public the suite U.S. expand XX that Army's has countries, leading be are borrowings agreement critical vehicles proven the DoD reconnaissance, facility. for than They ordnance a UGVs of these hand, Man highly recently advanced a range. to is X. in infrastructure be integrated on unit. the mobile The while providers The and for and additions battle-tested, announced Aeryon are in shipped largest better one unmanned Robotics Endeavor within systems Upon funded easy in to wins. acquire of field. to an was safety, to material Having sensor our solutions Slide customers Dynamics, we with to tactical penetration support with with provide utilize existing inspection, at with and Endeavor unmanned acquisitions market Robotics. current applications. our military, Prox save heritage at the as On disposal, a Aeryon or explosive global our space will funded leader robots partially unmanned Endeavor join Furthermore, System and under other division Endeavor Robotic Increment unmanned program strategy CBRNE Department and with government Aeryon MTRS, known will the US Having II, and won the of

dilute specifically, to $X.XX While by share. acquisitions expect we’re XXXX combined not financial adjusted EPS we discussing the approximately per

We XXXX thereafter. expect to be the in and accretive acquisitions

or our Turning business, and these TFM made to solutions integrated long-term to making the ITS. out to efforts margins talent, Slide with investments the and organic to we're build us XXXX we’ve inorganic processes, the XX. from win and self-funding in our with savings of maintain the FLIR unmanned, in-line enables tools significant Along strategies operating and advance we’ve method high-growth targets. the rapidly long-term. categories ADAS, markets continued in unmanned Harvesting TFM systems

vehicles core. sensors example industrial in machine thermal vision second-generation vision with first leverages vehicles that multiple glare, a The car fog, at launched ADAS, visible an autonomous The to and enhanced critical cameras the provide algorithms provide business capabilities unit demonstrate object camera the sun with CES improve lidar we thermal ADK, the Boson other vehicle. features January, Paired FLIR automatic decision as of or and classification. features integration experience view shadows, FLIR’s autonomous today. equipped CES, car such safety our found featuring on at straight thermal high-resolution XXX-degree data our smoke, cameras breaking. camera test radar, challenges, darkness, to Also, efforts introduced haze. also As emergency feed making ADK and thermal ADK of for in autonomous industry’s thermal commercial autonomous where

opportunities position will solutions attractive long-term continue target to to in trajectories. feed with our We markets growth differentiated

Turning to Slide XX.

FLIR in divesting XXXX, May, Day strategy. customer the of re-orienting improve efforts was we products? with customers points businesses our As the I detailed products, focus our most FLIR customers our and substantial and how targeted And method experience. most end-to-end Investor sell our one importantly, products? FLIR’s continues ship opportunity months our around quote of focused all our at on manufacturing the mission. communicate? strategic behind gains commercial parts The the focus will have towards at operating principally businesses to service our did priority using We efforts our the to XX critical made their certain the world-class In experience to a How improvement. not believe professional, mission, our we transform lean that fit of largely and foundation long-term and significant there to How past touch service on products over and the months, we business. continuous XX into in is

talent acquisition method, XXXX I an over to review global integration focus forward, highlights. increased out include now Carol Carol? call and will will for of financial the turn notably As FLIR elements building on development. discipline we other the of and her go

Carol Lowe

fourth the year-over-year. Jim. Organic appendix. you’ll results. Reconciliation in the Consolidated on you, was of the of our XX, revenue for Slide growth non-GAAP quarter On was cash a a data these XXXX. XXXX decrease the to a basis. summary exception note $XXX of Please full-year fourth see revenue and with is million, in-line GAAP Thank financials are X% quarter flow, fourth included filed with all quarter financial

as was While compared are recent XXXX fourth as growth organic XX%, robust well-positioned quarter of previous program revenue fourth franchise growth quarters, bookings quarter wins. we XXXX, with well to for less than significant

in Fourth fourth operating million. Fourth units. with margin basis improved higher Gross $XXX XX%. margin quarter year-over-year XXX expansion adjusted the business year favorable gains, at FLIR by driven by was was quarter XX-month method. to finished XXX improvement driven XX%, quarter margin than productivity last backlog gross Our and points margin adjusted basis mix the all point

XXX-basis of $XX led X% million, leverage share, the as make the Act, for the of impacted income prior EPS point effective Cuts decrease favorably well X% taxable than of higher net Jobs adjusted primarily quarter fourth up $X.XX to adjusted of of a the versus in operating We enactment Solid This our our year. the U.S. by was quarter jurisdictional record as prior income. net XXXX. income due the Tax achieved QX in and Adjusted year. to shift tax per rate of was a

flow growth This for from the a we representing operation to million. cash $XXX the quarter, full-year operation over generated last working $XX the During driven flow million, record solid XXXX of a brings cash increase capital improvement. earnings year, our and from XX% same period by

repurchases fourth Turning bringing per an $X X or to $XXX average total In at XXXX capital approximately allocation. million shares repurchased shares of share, million. price the to our million $XX.XX quarter, we

as expect compensation to our We delusion covering equity with continue well with our as repurchases. programs, being share associated opportunistic

our full-year million We to dividends also to increasing million. $XX of $XX the returned dividend shareholders through payment payments

the announced cash X.X net on not the do the XXXX. of Including acquisition, of impact cash recent our the and year-end acquisitions, enabling primarily our expect solid we balance exceed hand. of execution leverage by liquidity to $XXX is Our end million times with

full-year On his see XX, the right Slide Jim you’ll covered financial results, opening comments. in side of which our

business of and quarter Moving Operating Defense XXXX, and industrial UAS by to Business in X% fourth the to product unit $XX business Beginning prior year uncooled solutions, million, & our and revenue was fourth with the The Product year-over-year, margin quarter of the of XXXX will fourth was in security divested fourth fourth from shutdown. year-over-year, quarter prior strength to by UAS highlight productivity improvement instruments declines quarter Government productivity maritime I income X%, The with cooled points for unit, driven higher Defense $XX basis the million top than over performance each quarter XX, Government gains. comparables. improved the mix XX-basis compared in year-over-year. Deliveries the thermal $XXX due industrial in-line was and offset Slide early in automotive XXXX. unit’s quarter. fourth to system, revenue cores, growth commercial by retail down income were of impact line industrial business of business and revenue government X.X% XXXX. prior and revenue Operating point favorable contributed and was systems saw from but the year. in offset year. from due in operating cores XX a strength. decline mix strong gains solutions, Revenue systems million CBRNE declines to was units integrated down the margin and XX%

prior quarter Operating grew momentum Commercial Commercial basis improved impacted divestitures, import renewed these operating by in income revenue the continued expansion Unit security. This strength the margin year-over-year. million challenges, in year. million year in Excluding and for points Business and mix. saw by U.S. Unit's was ITF, over We from decrease Margin X% the product divested X% $X last decreased tariff security affects. fourth operating Business businesses Despite income driven primarily was $X XXX in expanded year-over-year.

outlined XXXX revenue, and Turning to fourth provide including With as impact XX% on to we I’d results guidance. this color backdrop, on of for representing well $X.XX our XXXX quarter recently the year, our X% $X.XX from Slide more the billion, first the expect government the that shutdown billion Jim acquisitions. full-year has of to on noted have half impact. XX like revenue XXXX we growth as announced outlook XXXX over to the XXXX,

organic to revenue contribute expect X%. growth approximately We

operating adjusted priority XXXX first have we We front-end growth revenue to to first in revenue the quarter and from while margin line from in accelerated half. previously the via We of strategic with loaded also for expectations growth top second income incorporates growth, the estimate include be productivity wins our investments acquisitions stronger XXXX the mentioned in-line and Adjusted funding quarter impacts margin expect expect method. operating XXXX, was XX% and FLIR and long-term XX%. to

expectation per $X.XX also tax million $X.XX adjusted from effective as XX.X% a share. in Adjusted of EPS earnings diluted guidance recently includes million announced $XX.X the share as of $X.XX adjusted our shares. and interest Finally, XXX.X dilution full-year It to count acquisitions. rate per is share expense, well includes net

be our $XX I to approximately In to Jim. XXXX. expect to pass addition, million CapEx now million will we $XX the call back in

Jim Cannon

to our Carter Last Carol. reserves in end you, World FLIR honor Wildlife Project, WWF, parks rhino had an organization bring to using a Thank CEO, between Rising or to CES the illegal game collaboration technology. month, joining the I of at Kifaru Roberts Fund, and XX announce in poaching Kenya

Our collaboration of and Kifaru a represents with FLIR signifies Technology in scale the endangered vital to WWF help Rising protection for the step Project these wildlife save broadest animals. deployment

XXXX professionals lives its FLIR. for and decisions strategy. our set this in effort. the in and a save key transformational that success. dramatic part In Kenya. social corporate scale WWF vision project's It’s learn confident smaller testing program strategy responsibility revolutionize introduced the to Rising published a awareness with the new can FLIR company's flair.com year. the The conditions as Hero, Again, make in based purpose, was will more and Kifaru Please for is livelihood. on of observed better so new we’ve our important human We that visit and rangers about Project rapidly work We’re first perception to introduced platform the that year flagship results XXXX, last advance to we

efforts XXXX Operator? now not satisfied. mission. want our the never in Q&A. proud teammates commitment for for to FLIR I’ll could all for around to team call open yet of world their of I I up thank be Lastly, their customers FLIR our more the the

Operator

coming Thank Baird. Peter from is Our you. from Instructions] [Operator Arment today question first

line Your live. is now

Peter Arment

Carol. Jim, morning, Good thanks. Yes,

Carol Lowe

morning. Good

Peter Arment

ago, the just the a financial on given to you business? hasn't equity I give given color a the know business details a you what firm into not the changed, better a years us just be maybe get get price but purchased can purchase going how lot has Endeavor private closed the few of company seems just that some understanding the what high of and know, yet, you're deal to very

Jim Cannon

well the by technologies that TTPs, deal when the three and if since course, that of branches going Army, to look together as as but general, there’s coming right going not we’re also priorities understand to you at yet worked specific know the space X in been we're adapt other the and close cited detailed the the particularly great time you give to past modernization details, have years stride. conduct were defense and as in secretary how to strategic And around Principally teaming. Absolutely. of unmanned they’re in the the as manned/unmanned you DoD,

has air capability as industrial as a commercial learning cetera. capability we're more of and machine business and well unmanned the algorithms software about Endeavor. see flight collaboration CBRNE months the just as these Whether sensor we're of to required come in I’ll as but we And ground that of all So, grow. a between vehicles. programs company, lot Also, seen and just use infrastructure suites win, trucking XX, vehicle on transportation that We manned on, EO/IR, sensor decision-making continuing our in a will detection, unmanned have ADAS, touch II, unit lot sensing excited why of out our speaking coming and the we customers Endeavor solutions into to the doing core it’s our XX, and other ADAS, over unmanned have a sort programs to but lastly, got with a intelligent period unmanned passenger, with MTRS at sensors amplifies progress transportable there of unmanned come in it’s synergies build with decision the XX of deliver to with And And to ground, we're mentioned DoD, fruition. that robot mentioned systems, lot begun doing opportunity you for work that around know so work see time some value teaming, to end certainly teaming, look vehicles, are and and working several cases, unmanned future autonomous around that opportunities, being purposes. over ADAS. that forward program we they man ground air we not et of we

more the So, excited what FLIR. future can about bring we be of Endeavor to couldn't

Peter Arment

that’s you the are three follow-up, And if since expect show kind continuing offset, really a to just CBRNE just segments year expecting XXXX to in great. Yes, growth does of ask, – as organic to I down should in all government? a or could we have

Jim Cannon

We that that others. all we’re growth. XXXX business some on all Day divisions are an we that’s our there a deliver we to targeting for outlook expect last mentioned organic growth whole units are contribute deliver targeting business three organic to X% the important Again, organic Investor more Certainly, a year, growth units businesses that. three us. and have expect of at optimistic than to CAGR. again, metric to But And we all do and

and an moving executed continuing say grow we’re is and now core to healthy us. priority sizable sure As we’ve is business making first, forward let's some time, that the obvious have done acquisitions that in for

Peter Arment

Jim. thanks Appreciate and the color

Jim Cannon

Thank you, Peter.

Operator

Thank you.

is from Michael today question Robinson Humphrey. next Ciarmoli Our coming from SunTrust

now is line Your live.

Michael Ciarmoli

good guys. to this healthy for evaluation to contract. a got taking Maybe, you here. be CRS-I on know sales. but questions harp the follow-up on just not it, and Jim, what Thanks based upcoming looks on complication, the Hi, morning very Endeavor that, They’ve to

there. is QinetiQ the player other I think

pulling scale, or that would comfortable with rate sort figure make contract the outcome confidence you potential why the did decision? Endeavor I umbrella trying to did from would of the of they those close some additional Just programmatic customer got did you acquisition how under know, to into that that award that hear factor program? provide anything kind lacking of mean, with you certain hit out the the and so of how a unknowns capabilities decision? Endeavor purchase You in increased your where of

Jim Cannon

That’s up. Well are there coming are several right. that programs

interested programs and programs the as lot You already diligence, before all various of the at that’s than let's these think when, you us, has to it portfolio into IP immediately, believe and because due fielding that you are future. slide the space, one also that right knowing we that there which with that of the sooner has looked they of look The in in know really we out learned folks unmanned there say the the often with a it timing happen are probability with we but it’s well-positioned. the the is, Endeavor, that lessons technology of mentioned

non-programmatic nations. opportunities or it's been at programs. and A with special OCO Endeavor looked our also you has we defense military non-programmatic strength to funds other opportunities. focused lot allied as in forces or largely know, operations, U.S. has whether on know, historically capture government You trying DoD of business, the been allied

that So that’s then, an area we our we some mentioned sensor And like Endeavor going you feel forward. could bring synergy to suites.

if capabilities, forward our CBRNE programs. on to pretty Endeavor proud capabilities. of it know, products their are they and We're when utilize You we’re these EO/IR capabilities that proud pretty detection core of will ability sensing bring our comes SWaP-C around compete sensors, those and

area forward. program appetite win your we to to a pending have would our technology to question, So, that if specifically not that that’s see, of their be one not dampened synergies position that’s Endeavor of answer But I going FLIR. an bring guess did part strengthens again we any

we trajectories a growth long-term. continue require hazardous management, We decades in but DoD, that know, come. future about the where the all to have just stand-off, see of will lot to in capabilities, unmanned of infrastructure, in long-term Unmanned participating also the areas material ourselves industrial grow conviction you not critical applications the

Michael Ciarmoli

of and the margin dilution then, or to maybe up SG&A, year-over-year. from looked guidance kind got R&D step acquisitions? assuming you’ve Could how mean the margins investment bridge year-over-year? or in organic maybe the like Carol, I operating if XX% I the just to have on may, helpful. is even margins those spending Got a may there’s from XXXX, what but And extremely much more you it. No, just flattish XX% color and that’s a little

Carol Lowe

the commented that Method, utilize we’ll Robotics sure XX%, that, borrowings the commitment the so not was interest Agreement we’re able long-term XX% EPS as May, in investment the than strategies you think other A address around additional margin. expense benefits, have we attributable but out Yes, businesses reinvestment, the topline for move that total. that the for to operation. of in absorbing we’re strategic the things plan providing to just dilution of it's also is in in transaction. to portion at a Jim inflationary year long-term operating the of if we’ll to our other the target dilution leveraging the for acquisitions portion be about a to make deliver some the that investing breaking approximately standard not because associated with and FLIR compensation of the to Overall, Endeavor growth fund maintain which well fact and need our And needed about we that on a the we’re just shared type about XX% world-class to increases absorbing towards of and Consent as

in happy very at able actually these XXXX maintain XXXX that we’re to investments what XX%. fund of margins We’re our margin and target a was operating

Michael Ciarmoli

back the queue. much Thank No, helpful. guys. turn very Perfect. in that’s I’ll you

Jim Cannon

Michael. Thanks,

Operator

Thank you.

today question Poponak Noah Our Sachs. from from is Goldman next coming

Your line is now live.

Noah Poponak

everyone. morning good Hi,

Jim Cannon

Noah. morning, Good

Noah Poponak

something to your can inorganic sheet these there must asked, three of take want one margins different was think take paid are and I just this It price many at just in I would of I – I rightfully significantly. ask years and your the strategy well? pretty get acquisitions? three just hardware questions sort that question for related, so it’s same already shot the business only and sort Jim, you in you the acquisitions, had much your to then, from to can discussed in are as hate imagine considerably different? a three you’ve to more you the and see just morning times, these analytics data and already multiple address kind that. go as had shot quite years and sort of more could just oriented, I also And to wanted if that thought I in will into revenue so, on stakeholders Just we software like ago, price high more backup last ago, very And continue than so guidance, this the see what backlog paid balance to seem wanted somebody but changed pretty at position something one you’ve the Is secured? a two them, of

Jim Cannon

lot mentioned us. retread a as think in the the except I are at compelling we long-term growth compelling strength, you for look opportunities ground earlier, growth … mean that It’s space is Well, a say, I I Sure. to won’t fit of that we FLIR’s unmanned know, uniquely,

Noah Poponak

that number lower…? So, be three must industry would the seen The ago, years so why have much right?

Jim Cannon

we were in a Yes, mean three something are I ago, go, take could you employ, know, and technology weekly, could mean, different place, in was I SWaP-C, three years awkward them, operator that be to these these are three the of that and now. very years dedication a operate if we position, that you they have industry sensors know, very out at it mean, if I very have moving to so and board Hornet, the in sight, that things three application, technologies much still you many could is monthly. and more weighs of ago, drive it cases, the ago, on years just at would unmanned user X look and nearly into the Black Hornet different with real requiring it I look not military this Hornet capabilities a you put XX grams, we X where look capabilities that ago, has to from Black know, years from standpoint if was equipment. at a room we the Black what

more head with – autonomously. ultimately, we up hope hands more we semi you up, working, manned/unmanned teaming, you know you Now and fully the know, working know, want

about be a and the build make capabilities, EO/IR need it and applications, know, more of to I think as piece intelligent, in Aeryon that sensors you it processing, I just is has it’s around around know, think as of software you data these unmanned know, autonomous, ADAS historically suite you the software, Also, mentioned we push we, you analytics, know, move lot that a and capabilities immature at adoption learning, user are Aeryon It and we the now. software in a why will unmanned particular, cetera, going making technology an think businesses. about know, right I where well ITS perfectly. as FLIR all about they industrial feel, two to machine capability We et need this couples years, because the we’re Certainly, I quickly, area three more and to standoff and has edge with deals, that professionals ours organic moved; fits and continue intelligence two to data sensors of that legacy well and investment defense to these and CBRNE hardware sensor It investments think continuing with have well. investments that to been organic with lot we’re as of get in as, But to stronger those and applications, specific when So, really how SWaP-C; acquisitions of Endeavor, particularly again, is sensors. attracted a continue out more we but still strength analytics, artificial organically. autonomous, about these you you the strong. proliferates benefit Endeavor’s, know, has that's forward, between question good our in

products. recall, smarter, if If a our get a year, you get and we to so know, can of just last cameras built beginning technology city, we’re end-to-end a called we imagery, that investment that that learning you with populate artificial can will, company made synthetic now, minority CVEDIA you

is I will know at think – more costs, to a more is and build points more know, look and that we and unmanned So, has out is proliferate. potential firm as the, other – DoD, investment. believe you but as know, certainly return the tremendous applications we got and years this out price capabilities, had come go healthy you appreciate growth we on you we PE direction that specifically because responder down into first industrial know, their set that, the more But a with

Noah Poponak

all that I appreciate detail.

Just one this more major program question, year in the organic government and defense roll-offs. business, you into had two the coming

a expansions have And the much the forecasting wins backlog guess, I those segment then, organically. or the to gap? the you in You at being programs point? those comment of on about just covered filled addressed, just the you’re you’ve secured for is you Have know, grow this year revenue and totally how forecast made had

Jim Cannon

as receive million about as however, right not we DR-SKO about mentioned of Yes, last had we programs; [XX I now extend and Right we’ve earlier, million]. in $XX just EO/IR-FP formally do so backlog DR-SKO the – tranche backlog. between our the for million last did year, in got They now, think we $XX now.

those the programs, or life. you need be challenges current future need under that both, any demand potentially continues for do that to coming will for could think is the technology, vehicle just still in understand business the very David, product. historically There very color you that also that have. to could meet G-BOSS(NYSE:E) are they that’s forward that, with that? included new We called unmanned much that want an likely there the be the to has work standoff clarity. know, solutions know, as advancement wins, drive decided perhaps, you going well How future for under threats, different new look program fit EO/IR and a non-programmatic know, demand, the that there DR-SKO could but rate in continued they going do of evolve. a for Now is out forward. there’s to DR-SKO accounted DR-SKO Other yet we type the need of to need a get EO/IR-FP area for program. smaller products. where is There there's upon. that program in the you as continued add But with to perhaps and DR-SKO Again,

David Ray

only is XQXX, you not look answer. that of discussed, the add that first that would our million we’ve at a picture week the does week which that that $XX I I think backlog it award, versus that SBS was XXXX says – previously the when The covered got No, include that – backlog we $XX of January. thing versus great Jim million

the $XX week XXXX first that in, if January. of to X, where So, we X week million count QX actually of from were week month you up we’re

our it speaks So, program those what we teams to of all non-programmatic the those to with the good being continue done the accelerate scrappiness to thing, work call ramps coupled bookings. by

the positioned continued quarter-in business and really growth and long-term So, quarter-out. predictable for

Noah Poponak

much. so thanks Okay,

Jim Cannon

Thanks, Noah.

Operator

you. Thank

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

live. now is line Your

Josh Sullivan

good Hi, morning.

when know timing just two a of but revenue actually on I You on XXXX? of on start clarification the the X% look you to QX the the the QX going the What’s XX% Just close to XXXX, like is said guidance. the for acquisitions in acquisitions? curious timing know, assumption contributing

Jim Cannon

is close now. obviously, the when it days expectation XX Aeryon, should Endeavor Yes, will And in close. is closed of

Josh Sullivan

And one vision on know, just the, machine you the market.

and market XXXX electronics at know, from this You consumer just point? is at how what know, You looking into has bottomed you’re looking it here?

Jim Cannon

second in demand Yes, all with production, the know, et vision of really the in half – comparables back tough given smartphone half you cetera. XXXX business, machine XXXX mobile, in the had Asia

XXXX, new consumer know, the still. pretty I’ll slow et for you through, process business has that a around time and inspection, won that fruit But say, of is new lot since right know, electronics You business team verticals, hard worked really cetera. and us now

of that because XXXX pretty growth about growth business, in to bookings color modest business? Frank, expect do We dynamics. add you want any booked the through but those

Frank Pennisi

said. Yes, I’ll Jim reinforce some of what

the smartphone consumer in know, XXXX. You huge general, the market in market, was

So, of a we Essentially up ourselves. had worked go to in our XXXX, comps some really large pivoted again. we through system and that lot

us well large We’re engine people measurement life counting, sciences our that been or – of lot of in a machine where we has to or cameras. whether as growth thing, sort a inspecting related as put which and for not test vision a whether equipment its optics

offset electronics bookings businesses able and been growth in largely that’s XXXX. strong So, set for us consumer to the up really

Josh Sullivan

the back you. queue. in Thank get I’ll Good.

Jim Cannon

Josh. Thanks

Operator

Thanks.

and from Needham next Our Company. question from Ricchiuti is Jim today coming

now Your line live. is

Jim Ricchiuti

thanks. Hi,

did you talk wins several allude about they of contracts, million-dollar the bit on some side, You can applications were to a vision little that machine for? the types

Jim Cannon

Frank? Sure.

Frank Pennisi

sciences. We’ve measurement thing life whether its those same mentioned that designed other something, its spectroscopy, test ourselves the gotten of before. to are in into that��s those that that basically Yes, were bulk I a do systems number and whether sold The whether systems. inspecting of customers

a areas designing semiconductor we're retail happen as airports, of The you’re to tracking whether engine in a looking lot industry those other environment, areas and people is. are counting a the be where where large of at growth electronics in consumer it’s

we in have they over low you will offset and it something penetration time. is have If strong

Jim Ricchiuti

it. Got

needs On the breakthrough of been we’ve you be that potentially may this to order in is to this adopting market be those wins while, gets where types this highlighted, develop it of imaging a that of technology? market gas for one waiting for your terms

Jim Cannon

gas will order I as just of we of XXXX in our I that but particular. it all wouldn't continued strength optical products. saw in think finding throughout characterize don't say breakthrough, I

as go products a lot solution. ability quantify have and across of and you innovation think around gases the developments and and conversion make been solutions and that we the to with an product of you about more finding We kind focused see also sensing we be sensing about of the in to think like see more new accessible that XXXX on capabilities optical and know, and to able markets we industry right, gas through of will that I’ll autonomous that moment, out unique of with to industries, go optical gas have the regulation, saw ways interesting health for we deliver but growth safety and other it’s findings various but see tied as capabilities we available A lot interesting is to it. in to unmanned and need around back neighborhoods such, with to a XXXX unmanned

Jim Ricchiuti

Endeavor, Fido if just the that the over to relationship you have these the detection slip of bunch business know years were supplying detector the work robots. continued them Has with on just And respect years? one could of a PackBot the explosive it. more maintained I side you Got I with into to over been in,

Jim Cannon

answer? David, want do you to

David Ray

partnership it Office has but the been, with Army and the been has detection. through it Joint the Program for chem-bio So,

in have opportunities So, to there as have a our And customer. been historical capabilities, concert had relationship we've with and they developed collaborate a that that office. relationship have through

delivering the that capability this a an leverage gives collective forward within that be the now through one now take acquisition been those to Army. function it's now with know, Does principally, step and total as power FLIR able next-generation the were exist conversations opportunity us capabilities that You really solution to R&D move to and a But those that were our make U.S. through accelerating FLIR. under and detection partnership sense? UGVs that today chem-bio

Jim Ricchiuti

Got a Yes, lot. it. it Thanks does.

Jim Cannon

Jim. you, Thank

Operator

you. Thank

Pete today question is Alembic next Global. coming Our from Skibitski from

Your line is now live.

Pete Skibitski

Good very two morning guys. on Couple the of deals. quick ones

and government most they the the one revenue? of commercial of of second is their First, in is, Are first does? government in That’s of and both revenue your XX%] non-government? them, for on sell rest terms both do to [XX% terms they kind government one. split both And of terms like then the business the the of

Jim Cannon

Endeavor in have government yes and right the principally as lot first operate military are related Aeryon military does are now business, non-programmatic, think on time, we commercial some allied But teams together military Principally, of I like historical but bring government go-to-market some non-DoD our with and entirely I Yes, focused mentioned DoD- programs, focused strength have government we the applications. both both and businesses their some as of specifically commercial businesses earlier, as at business, on of We synergies mentioned we UIS spending. almost and in look applications. responder much a over ours.

David Ray

to of than those case. more to of that transitions a that level approach, grow Largely to think customer say traditional we government some question look transaction. your opportunities the you DoD allows about commercial the phase space for program MTRS get I and will is, a a world that The that that’s of in because an operate. that’s programs us development I bigger that only thing I add franchise like have would inside EMD commercial but production, engagement, more increases will they which that’s the as a non-programmatic customer traditional opportunity where traditional terms like

Carol Lowe

initially as that the program MTRS, around FLIR's winning record terms Robotics team the new really focused in Jim in that the couple last what business been noted Endeavor it the their been see David, The and created referenced at wanted and programs new really significantly a Also, and response of that the release different towards robots. over value. And press mentioned on to The We That last years, specifically much paid assessment very way of shifting couple vocal the what two about very program of been UGV is very opportunity has we the is We Department in strategic the about valuation robotics meaningful. including the that has questions MTRS successful. has of three Endeavor they’ve very have really the introducing in the in emphasize value was has his acquisition. versus you just program our of about greater differentiated. since of that’s Defense that. years. PE a funding awarded. firm

Pete Skibitski

while are integration? kind plus million night just and deals size focus you evolving guys, in shaping and one that level, maybe vision level, the the size deals, breather on and some of of Okay. and in And of last much the then There’s one very on kind talking at consolidation I for – $XXX market bigger portfolio thank kind take about of for post a defense them from and last wondering OEM these some you of still similar a me, guys think Jim. ongoing that the space or been I'm are units

Jim Cannon

to a right principal of the task us Yes, successful mean I execute now, ahead integration. is

method, elements FLIR for integration us that’s of now. one right the discipline focus in the something is acquisition particular mentioned I As

the worked mentioned for organically, want remain to unmanned of the want in our strategy. develop grow specifically to to our gain We We longer-term, Investor part scale better company. the space. advance these Over acquisitive Day. the opportunities we We deliberately to long-term an with we’ll throughout year guidance at the but very

be approach. these to continue term, the successfully that So, you'll focus our in deals. see But now, us deals for strategic right to integrate very near deliberate, is we certainly

Pete Skibitski

Thank you.

Operator

Thank you.

Our from William Louie from next question today is Dipalma coming Blair.

now Your line is live.

Louie Dipalma

strong. double-digit Good industrial remained U.S. while industrials the the declines, third experienced very and business sales Jim quarter morning. in the Frank in Europe

being fourth chart that million was in Industrials wondering extraordinary general in anything is Europe for unit? the year-over-year quarter. there Europe $XX Your down is pie in the business shows I occurring the

Jim Cannon

Frank do to? you want

Frank Pennisi

In of going the the is the or macroeconomic on a little actually world. sluggish things I'll say things to general, rest in relative is, just Europe the indicators one that of Europe are why what bit a with we key drivers transitions sluggish. was one that that is big large bit that had. of comparables growth little our some prior the to say had tied of Europe year would along I we

customers move smaller-type we had from we're or As consumer over everything to we over. professional, Boson, we some over transitioning moved buys to as

we of that had and playing us also that macros So, things were large we're that actually that transitions into And of year gave I'll seeing. one that comps. of say that, prior some that's very Europe the side

this else Nowhere Europe world, in is the though. largely

Louie Dipalma

margin expansion are on for what horizon in Carol, XXXX? for in inning Method-related there in And of Are FLIR specific expansion? Okay. we any the projects margin terms

Carol Lowe

of Jim as there reminder FLIR a all and just Method, his have in as most company. just this elements multiple our across some leveraging well the that we noted and focus the So, initiatives ongoing units, and the and lean FLIR and sit comments processes back-office are entire improvement, beyond that continuous at across of we're the of business them Method, all as looking of three around

and results ramping that, we in for XXXX. our up XXXX they modeled are on could in realized P&L we're guidance we in So, the actual see

company. the Of into support to our back take and a course, goals them for that we've business invest long-term want large of those highlighted to strategic we the portion

margin think see our which XX% horizon, to date, with planning at some we So, XXXX. staying over future a margin operating we this still we're but strategic do at will runs targeted the be through expansion, able time

Louie Dipalma

in future really the Okay. one that Soldier nice the extend will all And David, Is that some win. Sensor Borne years? was to for Or in of XXXX? $XX million last into units a delivered of be

David Ray

So, that deliver over we program period. production to XX-month XX-month to expect

months. our As capacity increase to looking what to trying is part XX but drive we're at short deliver, to we of XX answer months production we're how

Louie Dipalma

radar there the for time is infrared prospects? update line the And any G-BOSS on and Okay.

Jim Cannon

to that's path no That's will that, that have something now. the be update again that we or decided right when be they determined still if It's there's No. go.

Louie Dipalma

Thanks sounds Okay, good. everyone.

Jim Cannon

you, Louie. Thank

Operator

Thank you.

Our Reed Imperial coming final Motulsky question Capital. from from today is

Your line live. is now

Reed Motulsky

and regarding behalf unmanned on important do in security Kessler. as Jeff markets of civil focuses speaking Hi, you cameras vehicles? going What specifically applications see forward

Jim Cannon

Yes.

we've the which So, our security important – securing had railway is project Saudi Arabia been that commercial we've largest for mentioned we us. very awarded in to-date in Haramain,

have to We Travis infrastructure core Why critical etcetera. continue markets look President color? in some I don't add our the more applications at CBU

Travis Merrill

Yes sure.

at will dealership the if is things we tends lots, largely but expand think continue technology outdoor into of commercial and we way car commercial the at bread-and-butter to few applications, look at today thermal are that look public which unpenetrated taking perimeter also it resources. a focusing that products That's protection attractive segments and are to future, to really so. parks, it auto like still market, look to security our Critical thermal for can where from be etcetera. us be looking the infrastructure different I we our line and and to it our for we're

attractive smart in a And well. to as we've and key thermal to which lot XX that visible of vertical, market our us So cities safe development be XX last then on vertical. that months side, the an leveraging technology, months in new successes continue the our will finally enterprise had new be and a for capabilities security largely segments a technology longer-term in is

Jim Cannon

with more And it's with intelligent, can effort coalesces vehicles. some ADAS cities ways in our and we touches sensors safe more intersections smart communicate the effort on intelligent, they as make interesting, cities

and driving about ultimately autonomous it, standpoint, well. from but think also security not We assisted just solutions as a commercial

Reed Motulsky

good you of Thank used Camera in types being you. guys do color. And what That cores these applications? cores? was see

Jim Cannon

be but the and Boson, boundaries cooled, the continue to to weight we high-rate cooled both power SWaP-C able camera push have size, uncooled. could be need again depending best and to right now for the will mean develop cores, the with and our I leading be on core uncooled production it

Travis Merrill

well. when Lepton necessary We'll use as

Jim Cannon

with good a a a so pedestrian if we've applications where dog determine integrated perimeter cameras, great EO it's have is can Saros and initiate Yes, cameras. security or analytics that you example two can thermal with Lepton

the commercial as Lepton the security FLIR for So, core but available suite sensing capabilities well, being full is of folks. used is

Reed Motulsky

Great. for our questions. taking Thanks

Jim Cannon

Thank you.

Operator

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

Jim Cannon

you first XXXX quarter when Again, to I Thank everyone. want look report to progress interest on FLIR. thank and our us your we our for in updating you today on We results. the financial call forward joining you,

Operator

teleconference. Thank today's you. That does conclude

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

Teledyne FLIR (FLIR) 13 Feb 192018 Q4 Earnings call transcript