FLIR - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to the FLIR Systems Second Quarter 2019 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 introduce your host Carol Lowe, Executive Vice President and Chief Financial Officer. Ms. ahead. go please Lowe,

Carol Lowe

the morning that thanks and our on section. available referred Good flir.com section call. our in presentation joining Please to Investor under are call note earnings this & everyone, you. Presentations for of and the slides Events Thank press release

and Before Act the facts on statements statements are based on we within to of Private call this the that I you need of Securities forward-looking Reform Litigation other XXXX begin, meaning expectations. current remind made than our historical

such anticipates, similar results actual statements uncertainties intended forward-looking Words as and and estimates, believes, cause These words to to expects, and differ statements. are intends, risks could are subject materially. to and expressions that identify

today results description cause circumstances and undertake statements of Please today. to that could we differ factors to we or for as not after a to reflect forecasts. refer earnings make issued to the The actual of today events do occurring from press update statement materially these release speak forward-looking any such obligation today, earlier any we

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

over President my to With CEO Cannon, turn FLIR call Jim that, it's Systems. pleasure the to of and

Jim Cannon

President Senior Commercial Unit; and quarter of and you General Thank & Compliance Chief Galindo, With Business XXXX President Ethics Travis Secretary, today and you, President, for our me and second of Officer. FLIR's Business Sonia Defense earnings and joining Carol. call. our Good new Counsel, Unit, Ray, Government FLIR's Vice Merrill, Carol David thank morning, everyone, are

the executive and have wealth the of we're team. on brings experience to her excited Sonia

call On attend President Business and of we Unit Industrial to a call. travel unable on key a Pennisi, the few will is today's messages. conflict Frank focus our has

growth. we growth First, organic revenue achieved prior year double-digit while lapping

organic areas allowed expanding long-term margins the our have accelerated reinvestment for in operating for Second, poised growth.

our strong growth Third, sun-setting to & having programs. continues successfully large unit business Government replaced achieve Defense

And to on in Method progress will fuel, on drive the the slide focus long-term foundation of the our to the and feed more strategic a continue with highlights. our initiatives lastly, prepared business Carol three make of at start review I'll financial few color value exciting quarter the we FLIR later presentation with to the provide remarks. creation.

second an total reported revenue X% X%. revenue growth As expectations and at million, line was with with announced we this of $XXX our earlier growth quarter on morning, organic basis in

revenue posted Second the a XX% ago. growth laps quarter year organic organic growth

growth X%. for orders due currency the second materializing Total planned Foreign in prior exchange quarter by impacted originally down bookings to the to year compared quarter first of X% negatively were the year.

Recall, franchise we orders business in the unit program QX. and industrial wins Defense & in experienced and non-programmatic significant Government

of of current For to the company balance at increased XX% second up million XX% to XXXX, total compared total the $XXX end to are XXXX. half same period. bookings also the backlog XX-month the XX%, first backlog quarter over Total million the $XXX increased

margin X% gross quarter XX%. profit Adjusted second basis points gross decreased XX to versus Adjusted XXXX. increased

driven acquisitions. by through by the ramp organic Method were product in improvement and recent offset FLIR mix margins Continued gross productivity early initiatives the of

acquisitions. operating prior was in margin income points XXX operating of entirely recent dilutive to was basis year to last in year. line the effect Adjusted down Adjusted with comparison due

guidance. full year our maintaining XXXX are We

year continue in expect organic of We of growth to includes X% range to revenue XX%, the X%. growth full which approximately

half last particular year averages call quarterly the strength quarter. quarter expect return we first the to with fourth on in to outlined we seasonality unlike second As and historical

$X.XX. adjusted year full $X.XX to We also expect to continue per earnings of share

quarter first Endeavor adjusted of Robotics the EPS outlook acquisitions. dilution Labs Aeryon on call, and approximately communicated includes from our XXXX the $X.XX As

of the these second realized dilution the in quarter. and XXXX the that expect to fourth third of high the scale growth majority We quarter sequentially businesses from to

Finally, $X.XX record payable will quarterly dividend of share September shareholders to August the per of Xth be the as which we announced of XXrd. on

strategic continued made our few developments highlight feed priorities Method. more I'd strategic to also business specifics the feed the business We've fuel, FLIR that plan on near-term, second with in foundation. like our Method as address to of quarter fuel and the FLIR delivery will the progress of a focus its our and key

the the Defense to with to awarded start In accessories deliveries purchase opportunities We'll & robots, on $XX U.S. deliver quarter scale robots a the fourth business advanced on business. near-term the of quarter many was PackBot million Defense associated unmanned in order with and gain beginning Government of FirstLook slide fuel Department XXXX. second we from four where unit the

with of alignment the evidence position unmanned further solutions provider is plan of our FLIR unmanned fighter. the the utilizing include priorities modernization to order DOD's leading This which solutions long-term as a protect war strategic to

Our Commercial also business to programs. franchise continue Industrial & units advance

solution a part FLIR commercial program an win in visible a with project is second the history. was example capabilities security testament the in thermal to and $XX Asia protect camera, This proposal. of largest nationwide winning As win representing all critical million camera to software our awarded orientation quarter infrastructure FLIR's FLIR's in growing s

portfolio feature provide sensor data has environments accurate sales customer I'd for conversion month metrics. call more traffic launched this FLIR shopping Unit employee across products people our Industrial the and to five, X. highlight since Brickstream with counting XD few. launched businesses call. retail to many and like This slide the Earlier includes new the exciting Business earnings version the business new last retail new filtering a to unique Gen And Turning a designed

communicate software capabilities to livelihood. classify for camera more is save integrating Business sensors in FLIR an traffic our is thermal of and and track, traffic with detect, Additionally, acquired in insights product how thermal great This Unit facilitate safer intelligent customers to is recently to cities. a cyclic analytics data decisions managers. conditions, example lives solution into integrated operates making Commercial June more This smarter the TrafiData, to intelligent traffic a that sensor all launched platform and the a

in the Griffin for to introduced responders field the during analyze Also on & effectively the identify chemical the Government as as and operations. new quick help to XXX other hazardous several business portable upgrades and chemicals to agents XXX library, substances mass access and drugs, features June Defense search spectrometer users and more Major an gas faster onboard toxic substance. well give drug expanded new capability G unit

dataset XX,XXX annotated our classes regional over multiple images vehicle introduced set much autonomous we San XX weather many the image makers. developers. data across for second at dataset Lastly, epicenter Francisco ADAS With in for developed this The conditions. enhanced features improved

to a warning XXX,XXX demonstrate over in XX years of the cars and has FLIR the only increased in the that as experience serves is safety our today thermal therefore brings awareness qualified that systems. challenging conditions sensor It thermal reference for automotive With driver automotive environment. urban over in deployed

highlighted we that will made strategic investments the on long-term slide of As additional feed our in six plan. delivery strategic second quarter

access global or investment investment we continued company in in provides to the you networks. Surveillance businesses operations one base, UAS Aerial strategy our via minority Unmanned drone April of largest early pilot know drone that a our As

leader well quarter focus manufacture as used optical the optical solutions of and enhanced design second by zooming New the Their in cameras. controller, assemblies are applications thermal niche zoom acquired for lens performance provides and Systems as a thermal England electronic maintenance while NEOS during metrics. Also end high recognized lens we for NEOS, multi-spectral Optical enabled visible, predictive or the which

to solution This our Business complete customers. commercial vertical the defense investment to to continues welcome delivering integration camera pleased team our the Industrial a We're NEOS and strategy Unit.

momentum, of which elements one FLIR with continuous we FLIR of an and acquisition and emphasis we introduce implementing talent while elements integration are customer the Management improvement. the building comprised In Turning in six driven management. seven, is slides Lean our discipline, XXXX upon innovation XXXX and the Method, on XXXX

recently continues With refined. and as to to and of our process performance largest technology world-class strive people, planned element. of recently integration acquisitions acquired we FLIR's this around the some discipline history TFM completed, businesses unmanned around continues the be The achieve in

the customer excellence FLIR years. for to three the in an of each driven example last Award winning Dot Red design of our industrial As innovation, prestigious in point can

the to Lastly, management the like discuss talent of Method. FLIR element I'd

Global to addition providing leadership Review or with In robust to employees Talent with GTR our align opportunities, key talent a we and objectives. hold development strategic long-term

second In annual Virginia our in fact, new we completed headquarters. our in here Arlington GTR June

review to Let turn of the Carol? call the me financials. her quarter second for Carol now over

Carol Lowe

GAAP these included Thank you, all results. Please financial of non-GAAP summary basis. in with flow to Jim. of a Reconciliation is our financials exception second slide is are on appendix. a cash filed note, the quarter data of the eight On

QX, as a basis adjusted X.X%, of adjusted growth revenue of XXXX, XXXX in QX, and income margins profit our year-over-year operating expanded highlighted with X% while operating on decline flat already has growth organically. Jim gross increase both compared

As previously critical especially the forward look half expected impacted unmanned their of investments contribution advance the communicated made to acquisitions our our are and strategy to we to These long-term margins. in second to our negatively strategy and execution positive QX. performance

XXXX. as due compared Operating assets well in to other half and cash liability. operating cash $XXX capital was flow first in compared as flow of the reached working $XXX balances million to half The timing first million in of the certain decline to XXXX operating as XXXX and

share year-to-date approximately to repurchased XXX,XXX the X buyback shares million for In $XX approximately we've increasing our second shares. million quarter,

$XX also $XX We dividend payment year-to-date in QX the payment for shareholders million. of to million returned through of

approximately at XX, Our June cash balance XXXX million. $XXX was

to includes organic revenue XXXX As growth Jim we our full-year to regarding mentioned range approximately which X% continue growth XX% expect the in of of outlook X%.

communicated half generated versus be expect revenues XXXX We we have second both expect higher revenue than outlook since in with QX first the to higher currently we half. QX February, the our growth As last of and year. the stronger earnings quarter first in providing stronger

half quarter per $X.XX earnings reflected outlook of of adjusted $X.XX recent acquisition of share year our unmanned full slightly with dilution than second $X.XX dilution already Our approximately in from includes results. more the that to

will Unit, from the UAS million strength to in offset the from I offering. driven thermal units. Beginning lower that our by $XXX nine, handheld with by second revenue quarter based and cores demand was product transition Business each performance for of highlight cooled and was business largely measurement slide to test Turning Industrial

income for the product margin improved through higher to favorable gains the XXX is million, was and of point important impressive It than FLIR Industrial XXXX. $XX driven productivity XXXX. Industrial X% growth QX, Operating Operating year-over-year mix QX Business Method. XX% basis note in by Unit achieved that delivered

by Defense The previous On the business Endeavor business an XX% basis growth XX% and Aeryon & the organic lapping Government unit the grew year. year-over-year from Robotics of including organic contribution revenue XX%, Labs saw acquisition. growth

to compared led all UAS strength second decline XXXX. Defense income X% across basis margin showed in businesses. and quarter Surveillance. operating of Government Government acquired due businesses operating unmanned & Defense and recently the XXX entirely was the Total by & points increased growth to

to During for backlog the the current end-of-life Defense reached a & the X.X over second of stands XXXX, Government Government half. increase million quarter, large having quarter, for XX% replaced at end the second successfully book-to-bill $XXX first & quarter program, Defense

was correlates directly to negative The Unit second including business Commercial The of exchange. currency negative Business Maritime revenue industry down condition. impact X% X% that is experiencing foreign year-over-year quarter growth

right realignment and and OTS Security to healthy margin second income We But XX% has quarter Operating businesses. pleased for respectively. the effort topline with and year-over-year headwind. points ITS the our operating business products the in for created basis our the reposition Additionally, we're decreased professionals. XXX commercial and team's near-term experienced the

Despite Method, financial currency second import improvement exchange in quarter. OTS FLIR business and the negatively foreign record in tariff and businesses, productivity U.S. our Maritime performance revenue the impacted declines our through

expect are we it these challenging headwinds was guidance. full-year to our a and XXXX committed persist, quarter we for While to commercials

pass I the will to now Jim. call back

Jim Cannon

proud with in me performance satisfied. second as you, hear our not But I'm Thank delivered I'm pleased team the but the Carol. quarter. often we overall say;

are year XXXX growth XX%. driving stronger second to of positions current well for to committed backlog of the and deliver We revenue X% us growth the our in organic half to

integrity world's exceed consistently to accelerate our the leveraging sixth the FLIR our commitments in to with purpose and sense continue diligent lives to innovate and/or and daily will tasks We Method our save to livelihood. efforts remain

I'll for call now Q&A. open up Operator? the

Operator

ask please the Thank we coming follow-up Asher today Carey ask question, return Baird. [Operator then you. to We'll from conducting First question-and-answer one is question from you now a session. We queue. Instructions] one

Your now line live. is

Asher Carey

in you have What first cost $X of that previously that Hey, charge wasn't clarification; just million adjusted included. Jim, quarter? out was the

Carol Lowe

looking GAAP So, are at you the reconciliation?

Asher Carey

That's right. Yes.

Carol Lowe

mean…? items, specific Which I Okay.

Asher Carey

It's classified other, as X.XXX?

Carol Lowe

that and matters had existed certain prior to to purchased older for there So were those some that that FLIR expenses product acquisition. as related a some company as extended legal to warranties contracts warranty well the

So company. operations two dated current three it very past years items the were to within related the from for not any that that to

Asher Carey

it. Got

as we right. a strength, you a Okay. hear And just segment – weaknesses follow-up I areas on to up the Thank saw industrial you. that was still of wondering but tough if All had you quarter. the curious quick was comps, specific of about in areas could you in quarter? performance, any great

Jim Cannon

Yes.

we're business, the strong years organic to have the our feed really various of important we some really good FLIR success. uncooled projects proud components in in Method great the one heart at the the they mentioned. sensors industrial prior Neutrino ramping They companies FLIR with lap -- note business as of the are of our and Our as industrial that as it OEM are there business Boson, well And as lean scaling continues makes other rest a well they've in-sourcing really cores, that and for other And business. cores. probably as of to of production cooled vision Also done job products machine business. earliest throughout adopters the performance the

that Asia. was different for production thing smartphone industries, That of as to know it quarter the we've a a boom on example host to bookings seen in in return from difficult And very comp. America. positive focus North sciences, life in they You a benefited a

of quarter half. Business efforts and efforts we second proud the the really So, throughout in go Industrial as continued the Unit's

Operator

Thank you.

Company. Our from next & coming is Ricchiuti from question Jim Needham

Your line is now live.

Jim Ricchiuti

second the of are half the business Question by as a sequential business Or that Defense the sequential just Government the normal in driven to business? the respect you. some expecting QX. from with Is ramp and seasonality to QX other mainly Thank & units conditions well? stronger in you

Jim Cannon

businesses. Yes. really it We all of see across most our

stronger had year You we half. strong second a than year. know was half. a a FLIR abnormal an very Last has first first last half Typically year

strength of and We the just that with sort As fourth at stronger year noted, the Defense, of and see more particular we but backlog that QX the current see second look QX a host a bookings to & ramp particular across not made normal Government in we seasonality into versus businesses return we've with entering half the in quarter. as the from quarter. first we in half fourth a

Jim Ricchiuti

Jim. Thank you. And just I if a follow-up may, question

you of I And what's as to think areas headwinds specific some little earlier commercial and you're the could from bit in the of a be I some to where more alluded industrial changed regard You seeing the business. and wonder if year? maybe in that

Jim Cannon

places of two flourish, really professional. you'll decision Tactical parts and the or we we're continues leading seeing business two that's are a Business pace our headwinds growing Business at if There the the the Commercial expanding these Commercial Business traffic margin. Unit, our and year Yes. Unit, Commercial where Outdoor our in inside OTS towards a In Systems business, deliberate to company Unit. reorient that made recall But last to

moves we're some what offering. paramilitary we upon business near-term different the seeing as channels the And focusing foreign expected enforcement We're that to made professional law or product in headwinds rationalized organizations. is market. we So, we towards pivot business. We

The concern. Maritime though some macroeconomic from business, seen headwinds have

macroeconomic into in we in We that is partially sales the others Ass know to our good Maritime weather with in Show you growth the the MFDs, other with assisted boat general innovations and concerns Maritime registrations the year But we Maritime concerns we entered due negative Boat great and had that the product solution and boat down, our see at we Miami that growth premiered down. slowing translated docking DockSense business. Axiom new across see industry response. has business with

Maritime that focus in expand our we working business customers upon. to been the have also we Now,

We've SINS boat enough MFDs boat with the to rescue in we in our So, sales affect Maritime some new water we've program the the to with And features the and professional offset help Coast XXXX late that won new Guard. not But innovating search areas. the border protection. wins our and slowing been into directly. seen those registration business and on

Operator

you. Thank

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

now is line live. Your

Michael Ciarmoli

first, questions Thanks guys. Carol, the for Hey, taking housekeeping. good here. morning maybe just

On considering above the closer that showing to the nine coming in of where slide accurate, something book-to-bill But it X.XX. X.X the I -- backlog expanded the for mean showing one segments, up government Government a book-to-bill Is year-over-year. you're I'm you're with quarter? the second was

Carol Lowe

we so X.X at the quarter well Yes, -- X.X half, for book-to-bill, then and total. on in we for for -- the the for the government second we're have

Jim Cannon

half. first the For

Carol Lowe

Yes, in for and is the amount. the half the quarter first lower

Michael Ciarmoli

program get three-year the that looks there small, Got in kind maybe either even Okay. maybe and how opportunities deal international -- or government, are what Any and marketplace in a little to on of current sticking just domestic color a it. the with budget with large we the be view pipeline. then of bit place? could out And your

Jim Cannon

you do question? want David, Yeah, to address that

David Ray

Sure.

some to continuing that going the also the in opportunities there core second that a half the in gimbal is that has Combat efforts [Indiscernible] really will of expect second of to bookings new as expect out well close to opportunity business. sort the budget part as current acquisitions, see There respect and a promising as year. in that think see franchise with we to growth, to second our the longer-term modernization in of is half. government programs flourish our we some we Vehicle rate for the we're some of now But in in So, Robotic some half efforts program have deals We to Endeavor see new expansion our the internationally there. benefit continue place

build we building of second in good year. mix half to built backlog of going to those first continuing the we've was with continuation into balance of franchises It's that half a the backlog the execute XXXX. expected on So, between be the and in

Jim Cannon

And add, I'll David. just

is second with System important Borne us program. The half really Soldier to our

year. you that Black hard we really to the to program. field awarded were Hornet. As know, It's been earlier in initial the to working that fielded units been the receive We've now

make that important the we're half very through program it so, the on to the sure hard protect battlefield. successful soldiers working year so second And our to of is as is

Operator

Thank you.

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

Your line live. is now

Jeff Kessler

control And -- out know had registrations introduction you products the a did panels you're amount just what decline that before. I with of have new wondering the for -- new amount control boats. there, very you you. the But product you Thank even Maritime situation systems, is visited the of large I'm offset saying? wondering particularly in

Jim Cannon

decline arena. Enforcement Law Maritime we in that et That's with real quite correct, cetera, able again the our boat with the the efforts to the to products. other aren't in offset am products earlier. those professional to into new capture controls. boat pleased I directly Jeff. Protection mentioned with mature those see of drives effort the Yes, our Maritime Border and performance with of share we've We adoption still typically MFDs the DockSense sales sales we're team's I and mentioned markets and new shift enough pleased but Also, that been

So yes, Jeff, you're state. correct with that

Jeff Kessler

a the safe company I am tailed If of includes adoption because for very various type of you including safe that I'm where sensors that what idea model give you progress civilian securities -- know various we cities know once call a sensors there this area just asked me that terms see and secure cores I I'm most on. cities your to cities the cores very cameras wondering as the long programs a use just in the goes what move those and some I of is use year, as of something purposes your going call security into familiar. the And long where that of and are -- we twice of in or the both or it's But, programs? we an of in to development

Jim Cannon

connected intersection remarks, mentioned systems. We fusion really earlier traffic and management see TrafiData and now. traffic and areas, management, that more We in as well two our that intelligent the between Yes. safe as of cities. monitoring see the prepared adoption right we've with I introduced more in a

acquisition set safe and help and did that Acyclica, we So, year intersections not last with data traffic with just having that management, sensors the the cities. in but of management such along with software, data along

quarter, our of whether utilities of its for infrastructure, Also strength largest more I we because in data butter long $XX and centers, on, really our mentioned, obvious products the secure critical bread in and business. kind we water, award core benefits. we've see using cameras, our ever power, data more and thermal something or their million to focused staple had centers, security Monitoring

dog integrating well. with We've that also analytics been camera a low introduced, it's or a can pedestrian visible that's with with whether those Saros approaching the IR-fused working deer, a solutions to radars, and perimeter -- combined, as determine a cost sensors and versus

and So, cyber we more critical world, particularly more persist. real North also across but securing see continue a being security concerns and and America, brand our strength otherwise infrastructure the where brand U.S. around company to

Operator

Thank you.

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

live. now is line Your

Josh Sullivan

Hey, good morning.

Jim Cannon

Good morning, Josh.

Josh Sullivan

Just the that QX. in for two-year portfolio. resolution and the but still a outlook within Does provides your accelerated continuing that factored deal anyway? short backdrop, already on QX we that even The in? in if guidance get impact Is here defense growth

Jim Cannon

we issued can't a bookings shutdown now. and our et have But with that have that resolution the any Right anticipated now the confidence we of the guidance the shutdown. we have have that to I or guidance. absolutely now, inside guidance That that though would we issued. backlog we've government certainly, confidence bookings, we some in sustained there continued a that now want in with we fully but don't go cautiously Again, we is with have have. of capture, backlog the cetera, we've form optimistic, that our want that's Again, if still business. we're do CR Well, say impact we

Josh Sullivan

in strength? you outperforming Right. are Asia? Any to the portfolio. Can dig standout And on then industrial just into the Where underperforming the or product one performance? geographic

Jim Cannon

In in in we've some seen softness. vision, in Asia. Asia, seen The U.S. machine We've business the our strength softness is been really some

boon first have that will, U.S. the we but really Now a our Europe, particularly half lot in had strength. import address. for to that seen the and But some attributed cooled partially U.S. down that our production related to needed slowed, to we slow also issues be in that smartphone you a we in in cores had but if the can of instruments business,

the centric, So performance say, North as probably geographic Europe -- U.S. principally, or America also but I'd well.

Operator

you. Thank

Our coming DiPalma next is question Louie Blair. from William from

now Your line is live.

Louie DiPalma

Travis morning, and Carol, Good Jim, Sonia. David,

Jim Cannon

You Louie. got a Good morning cover, soft to you.

David Ray

Good morning.

Louie DiPalma

Defense Endeavor Is media the MTRs which in in how over XXXX Endeavor that next report over generally suggests consistent around XXXX. shows from X,XXX to for to for Sensor increasing from million and program media budget, Robotics next that the And scales with the scale million $XXX budget Borne includes to for the published in X,XXX three Sensor U.S. your budget, Soldier expectations Sensor three-years? $XXX report Borne the Army's systems II the Soldier and three-year Borne President's Soldier over outlook the request is set program systems the years.

Jim Cannon

Yes, I'd say directionally.

we want push to again, Now adoption. much more

As with why sight its the Reconnaissance when of I Personal level. and and learning the that's lifesaving the Combat and it's we're squad Its at are as at earlier, Division we been adopting the about they Airborne and now, third XXnd techniques Again, procedures the non-line more couldn't of believe the look capability System. tactics to give now. use. team that Soldier media It second now is in important so Brigade right been us noted we to fielded half mentioned has Borne

makes yes, systems. I there's that of is DOD lot unmanned say sense. So happening, major discovery priorities of I still that think of would one know a the we directionally But modernization

that and small of company Aeryon, we Group proliferate know And And as over acquisitions very with capability. organic squad platoon we're the battlefield. level that unmanned know to the to focused continue you going One, that's on Endeavor that

around doctrine of going techniques unique with of accessible, that So, and to while in to and published find number again more to I we hope now, capability we're tactics think such is their that defining we higher deployed fighter. have as coming these part continue to we and that them, provide a and a agree as systems those the innovate years make in comments what quarters made can develop get sort we and evolve got because capable them we it's push to war in directionally

Louie DiPalma

counter the but in talked your to about about of I general rule Sea-Air-Space the earnings contractors what that a Can different on Okay. discuss, the in systems high counter it weeks lot unmanned Last defense Middle at at drone guys by drone ago there talk call. system week, involvement a it drone of or in the a of down this and Show two that on counter-drones, might guess you systems, or a subject FLIR's taken about have really And East systems? FLIR you you haven't been plays vocal role high incident been can was a you being guys the plan level, counter profile UAS?

Jim Cannon

areas. Sure, what several we do in

say, mentioned That First, part aircraft. Neutrino down that you've was I'm a that of article our that it system the that core. was proud to cooled

that their the at sensor into sensors other participate and we UAS cooled companies So, we other level cores counter solution. with provide

own our own working UAS demonstrated we've solution are in several applications our it radars, EO/IR counter also using our systems. and on We own

detect on loop. We don't any around the Now solutions the have defeat we technologies focused or loop.

our cooled UAS defeat of is folks as that pursuing well integrating emphasis counter to focused into any technologies the our organic and that own solutions, been and other as counter UAS So sensors components But their has solution. on are providing on not we're detect. have UAS loop now solution domestic don't technologies more applications right any our We solution. to on counter

Operator

you. Thank

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

live. now line Your is

Noah Poponak

morning good everyone. Hey,

Jim Cannon

Noah. morning, Good

Noah Poponak

phone. on Can cell I'm you feedback, me, I'm hear a okay. hearing and some

Jim Cannon

now. you got I've Yes.

I You cut out hear you for but a well. can now minute,

Noah Poponak

And quarter. But cash bit a historically, the just there GAAP also because actually flow, it I quarter the shout. earnings I'll adjustments been there to there. the in to is larger from is the go flow weak. cash always they're to more and Maybe is right. little and the to in adjusted back just wanted to adjusted cash flow pertains as All the

to first at expenses, a of point is I have in the part do management the the intangible cash in was time the transition at getting these time cleaner to of point Carol number? in understand on cash, I should then not expect number, you're amortization but acquisition So, the free just we expenses. what know And -- in other we we non-cash, point just, to it's question expenses, all what where year have earnings free At relative for guidance? time do the lumpy the cash quarter-to-quarter, what adjusted your but a come

Carol Lowe

and first. non-GAAP about So, items GAAP let's talk the

we'll to the have at adjusted some noted, intangible how we you items, assets companies continue one not report as related to that reconciling of income, operating as the So, That's because address the EBITDA. acquisitions of amortization different.

executive the costs be of expect at transition We this year the largely end complete complete. to

As it of auction larger that needed and the that's we're again will involved driven doing. on investment terms acquisition-related to of special terms legal competing for that primarily deal just going expenses, required. well by an or volume of relates who and bankers depend valuation or for the services are those M&A continue other to it's in those is not will we size largely whether by in bring we determined are as the process their in be of are support the Those items. that and And see and to

driven first we it's really the to timing XXXX. when to when cash thing in we when decline in of I realized June you more relate by clarity are XXXX you about guess flow, one As then little to bit that sales compared June as to XXXX the at a year-over-year -- provide compared look compare to of of cash XXXX the flow, higher had just and sales

sales, and $XX it to half This cash timing for was receivables benefited flow the again first it's by a was of just on net year a year, $XX last million timing. cash positive flow. So million, negative

the So that's net million. cash to $XX you're delta flow XXXX approximately cash flow of when XXXX comparing

So flow. it. guidance really of that's impact not a on big cash provided We've

flow We operations that to deliver at will a to be continue to from the been than more on expect basis. exceed year-on-year to expect level. continue at to able always and cash XXX% We've

Noah Poponak

acquired first government margin, kind and to then and XX the wanted I quarter. of don't than last dilute in Okay. the I ask potential really and change, the efforts year, XX grow revenues change the the them but them, helpful. dilute change margin sustainably. at the much significantly know that. the and of appreciate some totally get they how And this margin, end And quarter but just XX I and new the I to businesses to of on That's there from

And last of normalized of run that three to indicative margin more so of two quarters in rate is I year kind the business? guess, four which out the

Jim Cannon

that have specific we about margins Well, business non-programmatic Defense don't effect, could for as Unit, I and innovations say to to dilutive we've our Government arbitrage future guide accretive. as We're talked programs of that as Business competing between the be a managing & can before. except mean, driving want larger that constantly well

Government mentioned year You the to talked margins about there the to to through expect the acquisitions & business. dilution inside advance them in Defense is and we the we quarter they positive begin contribute

level, that points macro operating business exceeding Government the guidance. and at XX said Defense or us margin we've we to & is key as a to are the contributor still maintaining So committed

Operator

Thank you.

a from Our is Michael follow-up Ciarmoli from next SunTrust. question

Your line is now live.

Michael Ciarmoli

Hey, Thanks thanks taking follow-up here. for guys. the

to there government XXXX Just maybe for out on mean, bogey I you've XX%, the margin. got stay that.

So and is you're headwinds target XX%, mean put XX% it separately, you you've to And close with like up the instrument for then Industrial that that front, got that dealing in margins. XXXX still of some I sounds good? even margins on

term there we upside then and be longer be basically still to should margin good So thinking government? XX% could industrial that for

Jim Cannon

still mean, a that drive points kind in of talked I the all across units couple can those of of we've in remain about Day, Yes. directionally XXX our quarter-to-quarter, business the lumpiness one to businesses. But we margins we or basis committed margins have and Investor as our other. way

Commercial I as will we're and/or productivity. all but also dilution for well, So after working and quarter the flows, particular, business FLIR Defense. but across and I say, mix industrial really in that's drive to with Government the wouldn't sustained Government Method & Industrial, ebbs Again Defense hard upside as the one for note businesses,

now well beginning effort into XXXX to effect. seen And take that we've

So got -- mentioned, of right recent of headwinds we've now effect We've a tariff real of or I'm whether acquisitions. engine some the proud it shifts in the Unit be the as mix or Business beginning dilutive fire. that's Commercial productivity some that that we seen to

at the back very Day still what Investor to we're So, to we much and that communicated with what we in guiding year again as direction. line go now, in

Operator

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

Jim Cannon

interest for company. in Well, well as joining I call to as of the want again our your you today, all thank

We XXXX forward As want continued on third you X,XXX to to the always results thank for across globe FLIR their updating and quarter the you. dedication customers. October. passion Thank our look in over our to employees especially financial I

Operator

today's conclude That you. Thank does teleconference.

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

Teledyne FLIR (FLIR) 24 Jul 192019 Q2 Earnings call transcript