FLIR - Earnings call transcript Q2 2020

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Operator

Greetings, and welcome to FLIR Systems Second Quarter 2020 Results Conference Call. (Operator Instructions) Please note, this conference is being recorded. I would now like to turn the conference over to your host, Lasse Glassen of ADDO Investor Relations. Thank you.

You may begin.

Lasse Glassen

thank joining and call. everyone, morning, you the for Good Presentations and earnings referred available Please Investor and our www.flir.com/investor. release website in of presentation at Relations Events are note that call press slides FLIR's this to the section on

intends, expectations. to I'd XXXX facts on Securities historical subject actual Words earnings issued the materially our to you from that believes a forward-looking Litigation press the and Private as statements on are others, could within expectations. Reform as and differ SEC such to and forward-looking to estimates, to cause Before COVID-XX. this and FLIR refer expects, uncertainties related results like similar among today from earlier or today of intend undertakes filings Please and statements statements, current expressions could and to our other of not results intended we statements. for of call discussed duty are we anticipates, future based words description that FLIR's for no All on remind begin, well call of These to as differ circumstances. these events Act factors than are that made as release the identify does including, to risks update this the actual is information materially statements meaning cause are risks

the measures. Jim? Jim non-GAAP now CEO is call, it's press Systems. full the to With available earnings During to morning's Cannon, of financial from pleasure A this release. GAAP my over and will and GAAP non-GAAP FLIR turn in discuss reconciliation President to measures we call that,

James Cannon

Second Earnings Good for joining Lasse. Call. Quarter thank you you, morning, and Thank XXXX Conference everyone, FLIR's

help commentary quarter Sonia today me results second My General to Counsel. highlights performance on of Carol and on the the will of and Galindo, Chief Here financial playing year. remainder including COVID-XX. additional Carol products Officer; critical of the are update call cover technology combat our role will our and the the operational follow an on remarks is on Financial around Lowe, world quarter with our details second the with spread our the

to especially front serve I'm of who've which First, I our the worked our and employees, across and franchise tirelessly humbled margins improving solid like line, extremely an thank time. on delivered to the our during we appreciate maintain safe mission to dedication the livelihood to pleased operational to consistent crucial and second quarter, safety, and all and continued customers FLIR environment. in to while healthy your backlog, record wins, COVID-XX, light program your performance dedication Please our that total Highlights this #X I'm in lives those to challenging continuing ensure include growth. would by to priority. globe. we I a save earnings of remains inspired commitment execution, turn Slide report through volatile despite and workplace X.

from are fundamentals low year. earlier point believe the the of our I underlying in improving business Importantly, core a

that continue confident product industrial applications of a defense are and to the portfolio forward, As will we amidst diversity strategy we move conditions. macroeconomic defensible our dynamic provide within

related applications an segment, to of quarter. up flat in of $XXX detail. by and customer. particular, EST reported our Total XX% OEM book-to-bill quarter second prior X% revenue year order our quarter related $XXX Industrial Technologies for million, skin driven resulted more demand a the in temperature from We or products performance reflecting large the screening elevated to million, a in to EST X.XX over and ratio with Looking were prior and not XXXX quarter financial of of of at in bookings first growth the compared year

solutions, which in and also experienced segment more Technologies shortly. detail Defense Our we'll demand unmanned discuss systems continued our for

at for $XX million a of and products million Additionally, total EST wide $XXX across for end, a our products comprised markets. was non-EST million, backlog $XXX variety record quarter of end

would operating Our businesses as higher the the the revenue Industrial segment XXX color like from X% in the the at as total resulting we as quarter reductions expenses. of backdrop, both to to up income and gross I in year-over-year, increase in second lower-margin now Adjusted volume within XX% provide profit the to Industrial the turn increased XX% as the segment, Technologies Technologies EST more and by and offset to impact operating shift backlog out largely balance product XXXX. of end increased year-over-year, a compared that gross due well second on points revenue. operating basis primarily With saw consumer-centric the this business an profit headwinds Slide by higher-margin on lower with a were tailwinds. how Please play Adjusted Starting to related X. our first the pandemic, quarter. was reflects the adjusted due tailwinds and margin mix in

variety a mentioned experience applications before, to continue I from camera As industries. for wide of EST thermal we demand

entering essentially million thermal airports, terminals, detect the military to line orders the such first After EST factories. installations, quarter we most experienced temperature and of large that and as as and skin in COVID-XX, have effective demand disruptions million approximately defense the in year businesses cameras the were during that train facilities, Revenue we diagnose with the cannot first $XX during $XXX approximately an these approximately of or products chain tool of quarter, surge quarter. EST the in report pleased $XX we've customer to surface and a Although serve hospitals, they recorded in been contributions EST-related million, earlier backlog of booking groups measure from do $XX solutions people approximately supply of initial the from period I'm second ended the second resolved. million.

the through of onset crisis. we the share me saw of pandemic, the we've the trends surge. early some you In business demand of Let COVID with EST May, our much days in since into insights seen the

quickly strategies time, possible. this wide fully to of both for placed essential array they solutions and enterprises reopen businesses, across nonessential safely a as and explored as initial as orders our During

the second EST quarter, implement to progressed. their advance test half began technology a eventual in led first to enterprise-wide quarter our scale deployments. deceleration deployment opting shifting their Towards on approach large-scale the customers the more to approach of certain to instead of smaller of measured This as a demand behavior,

demand ahead second ultimately for our a there for we to first of we adoption. experienced As demand EST are of likely the level applications quarter. variables in we levels EST of headwinds the that in the the dictate the below Though products customer number the look will duration at second helped year, stabilize, to by the half expect offset and half year pandemic. of The driven what

Technologies the businesses. Within we experienced Industrial year for weaker compared demand to segment, prior commercially centric our levels

start cautiously signs in the indicate that businesses a the to optimistic about second However, those the half of may for are we recovery year.

Our Defense delays process sign-offs Technologies foreign sales. for encountered segment securing licenses administrative-related in also some and has customer

instrumental into Although diversification environment. believe and ability of in to bookings lost our timing delays revenues orders, strategic we we produce We long-term of have solid in believe portion resulted not do difficult the priorities, later strategy operating and results been these in the intentional some of have including business XXXX. of has our our shifting essentially a

new emphasize on outlined strategic Slide with presentation, continue X or solutions, focus customers in autonomous market a professional and second and execute significant reconnaissance exited quarter, sensor company to of wins program the Both the against leadership priorities solutions, intelligence, and backlog generating second record end momentum in on quarter. with priorities decision segments surveillance, targeting, the Our unmanned ISRT, for the we continued support. to longer-term these key and as

to X. Now turning Slide

a in Technologies Industrial and thermal of as products a as OEM variety cameras continued demand bookings the million of EST-related from We a across orders healthy non-EST-related significant customers well came and large Within segment, a industries. from customer for applications. approximately customers EST-related balance wide $XX order new received from from

Demand Turning our strong. Technologies remains segment Slide solutions our to unmanned X. for Defense on

Army from we personal or reconnaissance The upon contract quarter, for deliver Hornet $XX million program. $XX This system, awarded level the back were Xs, PRS. Black unit and X and vehicles Borne an platoon support the capabilities. Soldier Black small to the surveillance U.S. support U.S. reconnaissance aerial awarded the Army nano-unmanned contract During Sensor a FLIR FLIR XXXX to million advanced Hornet contract initial the builds in

executing are to and UAVs We on currently FLIR delivered and defense more these has worldwide. Hornet Black already contracts than forces Nano security XX,XXX

our X.X second infrared were and addition, a RXXD SkyRaider quarter, contract In during Developed imaging customers, Marine processing to other the system SkyRaider on small SkyRaider U.S. forward some most high-resolution defense system. offers pounds night loads can that of and deliver carry asset Corps. airframe day long to aerial external U.S. RXXD features situational unmanned available FLIR range, the extraction provide specialized federal deliver aerial to the up $XX and government embedded The for million unmanned powerful resupply, electro-optical awareness. sensors missions. awarded artificial intelligence we also the a and for

medium-sized or the Increment II, system Robotic and X $XX.X of and The related identify orders a Army's confirm, through are than Transportable is UGV the of the XXX to and being ground Centaur Man II, deliver U.S. to received from spares remotely also we a detect Inc X operated, dispose for provides sourced plus that hazards. program. Army separate capability accessories. million Finally, contracts standoff System Navy unmanned MTRS combined vehicles, FLIR's more Centaur

this So Army, Centaur Force the FLIR far has for $XX year, and United nearly million XXX UGVs Navy, more Air orders from totaling than States Marines. announced

while safety Slide recent and are drive release outlined priorities, professionals. to releases products and X. of our of continue to few improving new on efficiency simultaneously product support We strategic for growth our A

thermal the Ignite and series camera introduced offer new connected the solution, the back this FLIR when the to cameras. store popular professionals CX up Industrial to The of series WiFi CX, CX to a segment addition to the directly FLIR in During is pocket Technologies quarter, allows and first the cloud. images upload, to our which in cloud portable

FLIR Project existing measurement enhanced that up which easiest EST cost execute software, operate, which over on term. Be for quarters FLIR launched designed to Ready opportunities several reality term offerings, we and to increase to in the augmented record situational clarity To with also have to to in speed view frontline make noncontact Screen-EST and compete, are and for continue of years temperature complement overlays help enabling ensure and is the sources fast and increase of simultaneously. accuracy we elevated help been set and video to image-aiding interface, tools decisions. of the our visual the provides HD our X, safe, screening. by momentum and support to multiple aims the We deliver business cameras very XXXX hardware skin cameras. to to helps and These announced and deployed future screening. our deployment we user our The front cameras previously improve upgrade software both work reduce our thermal EST ability allows new smarter The screenings. announced as of segment the continue most it backlog operators near evidenced that innovative XXX and the new Star FLIR broadly XXXX we're with automatic on including is products hardware, marketplace. the the update Project model offers models, in better, highlighted systems, Slide Technologies Star to frontline upgrade Overall, SAFIRE and speed The Ready, for features To the the the HDc. mapping scale deployed bring The gimbaled for us, software XXX our removing better here our to Defense to our I'm SAFIRE announced EST operators firmware while win pleased longer complexity Be ahead. designed capitalize generating awareness

of As achieved actions Ready this operational we of expense realize million savings the Project and In late operating $XX to year, objective meaningful XXXX execution could million. we in may with the recall, savings. first by areas launched began be $XX identified expense you annual the of Be to quarter these reducing where

upon build adjusted in contribute momentum, operating XXX During year-over-year the improvement which to has to helped this basis point that quarter. quarter, we second were margins able the

with show long in Additionally, savings remotely, to of with identifying work operate realizing X/X the we're additional significantly more continuing trade reduced ways along and to our entertainment and and term. travel activity, efficiently employees and

to result, run at we high $XX our extremely annual the end million range. an announced achieve confident we'll previously a that As rate $XX of savings feel million

forward Project to savings reinvest Be portion progress enterprise. savings. made ongoing across the operational the look Ready into team expect and back harvesting the I'm by with progress our in on the I'm management sharing identifying We pleased to globe. execution the our of employees business very our with We long-term of the now happy drive team's this possible front quarter, to in our these and solid in calls. future second performance across growth

Our and resiliency results, on our across professional diverse end our of demonstrates consistent challenges, end of This, strength unprecedented strategy of the speaks to macroeconomic markets. our cash strength amidst focus the our validates operating with coupled to technology our business. flow, users

shareholders of our With Our for additional we commitment the execute the for that that, details turn over forefront the And FLIR priorities. value to strategic key I at now remains on is I'll to positioned financials. to well second driving to call do. continue feel Carol? Carol everything against quarter confident

Carol Lowe

Jim. you, Thank

with a are presentation. in reconciliation a for of the rates, growth million you'll foreign X%. Slide XX, second GAAP by to was which at $XXX second the is Please A the revenue basis. of reduced find these financials $X generated summary in data included financial quarter our approximately quarter. the negatively of note, currency supplemental million non-GAAP Revenue We or all impacted revenue, on exception of Looking results. by appendix exchange

segments. bookings or of million second of by strength by Technologies $XXX quarter XX% quarter driven totaling the compared $XXX $XXX Positive to at record Second million in and of which Defense our both quarter backlog, year, current. XX% delivered prior approximately consecutive our demand is grew end, trends million Industrial

Adjusted in gross by the systems gross Technologies the by $XXX adjusted Industrial large backlog quarter, compared Adjusted $XX resulting improved a to order. to total year gross new increased XXX reflecting increased Our OEM margin wins year-over-year primarily relative profit XX% basis segment. and in quarter, prior driven million to of XX%. favorable product margin year points in million, prior our mix unmanned

EST lower half be with margin pleased of XXXX, slowdown of improvement higher to rate mix resulting compared reduction Ready an revenue million, businesses quarter reflects as initiatives. increase as do margin income marketing are costs demand. in XX%, gross items and XXX indicative adjusting Be an was by as discrete of second trends expect the and points the in GAAP After we expense, and impact compensation deferred Project XX% $XXX operating well basis the first second selling, expenses, overall of our general flowing year of The recovery Adjusted XX% adjusted of income an through Industrial from in COVID-XX profit tax begins operating performance, to commercially gross achieved it driven in for was Technologies administrative in centric we as second travel income a adjusted the during to reduction for savings prior to quarter While with operating product the not in such compared the and the quarter. effective costs, expenses, normalize quarter tax cost XXXX. and of of

currently XX%. tax $X.XX quarter. certain rate per for earnings expect amortization Our XXXX We jurisdictions. be the tax timing Adjusted full in of was share our diluted to second of rate fiscal expected in the increased the as result benefits year

marketing products security of up as combination million, Segment travel, compensation a commercial will segments. driven Turning million, volume, volumes applications. and product Technologies, maritime performance with quarter to income year-over-year, year-over-year, were expenses. sales up to COVID-XX. for due for Slide cameras highlight deferred was partially operating XX. revenue the of $XXX was of mix lower Beginning business a primarily in I markets, as $XXX screening Industrial EST offset and the our higher favorable and end by second Revenues such thermal by demand result increased lower quarter second X X% XX%

percentage revenues the In in reflecting $XXX XX.X on Technologies were were for result, revenue The to X% year-over-year. cameras. Technologies increase of points XX% unmanned a Industrial that to is EST the million, second contracts book-to-bill a backlog year-over-year. for margins second quarter, large volume OEM reflecting bookings an offset segment systems. the XX, certain Defense X.XX. quarter million Total completion decline by As compared the demand quarter the of primarily XXXX, customer XXXX, based year-over-year of revenue year June prior of at in contributed for a award increased decrease the partially ratio to was segment second million operating a increased $XXX and quarter, $XXX attributable timing

half administrative-related volume. revenue year-over-year mentioned, delays revenues due back we into delays the licenses Technologies $X.X of and experiencing timing declined As in These to year. million of are and for some shifting sales. the in Defense also portion process Jim customer securing defense the sign-offs Segment for lower bookings operating income have foreign resulted the of

second declined at Technologies million $XXX As X% a million, basis reflecting X.XX. of ratio XX XXXX, segment XX, $XXX margins the operating was were result, down year-over-year. a Defense backlog bookings book-to-bill In points. quarter, June Total

million and our capital pleased higher million said, the to dividends. Turning X.Xx quarter, cash XXXX, in improved to flow Cash working I and we to announced, due proactively growth payment quarter, completed and address expenditures the in the down X, our overall earnings. million flow borrowing our which capital June the provided operations are million and in investing the sheet notes XXXX. higher returned facility. from we net an as year million, the operations were $XXX through XX, credit offering cash We June After turns under $XX had the due cash notes We million XX. $XXX a we to by balance the on approximately our capital inventory balance At XX, August to capacity of primarily ago. $XXX X.XXX% partially invested in $XXX to Slide second of used our as priorities year due our with previously seeing prior million of allocation $XX up levels, capital $XX That was of quarter, in approximately was fund by to quarter, offset business X.X% approximately shareholders. cash slightly returning in in XXXX, shareholders from value from our am of end trends X.Xx the

us We half on capital liquidity we maintain has expect year. to current emphasis cash our light flexibility In month. We ongoing as the redeem our optimization. our with notes emphasis enter on financial comfortable believe second our provided the allocation position optimization and XXXX of uncertainties, this we remain the near-term cash of will with

remain long-term priorities revenue X investments, our well committed dividends. to as drive growth our providing the strategic that we in supporting to of will shareholders our However, quarterly as returns form

In share driven remain repurchases, to time, to of by to terms no committed reinitiate the significant excess we light we the foreseeable shareholders uncertainty plan while pandemic. COVID-XX share repurchases for returning of in have the future over capital

the question-and-answer the session, over turning discuss for like call I operator Before would outlook. near-term the back to our to

COVID-XX, from announced, provided our continued previously year As resulting for macroeconomic XXXX. given have withdrawn fiscal we the previously uncertainty outlook

per be will or We revenue at guidance quarter XXXX also not or this for specific year time. full the providing adjusted third share earnings

share on half based second However, we current expectations of for today. of on XXXX to conditions trends thoughts the would like our key and as market

we a Industrial While coming for Technologies gross year, in of margin somewhat continue, in in our the in the than levels mix change to first will on be in solutions segment the the and products expect EST our pressure resulting believe at it downward product demand and quarters. lower we half

of our the We believe forward recovery. of of this businesses and continue year backlog experiencing we in during showing are and as anticipate second XXXX. Defense Industrial are recovery record core the noted, half Jim balance will signs move the we As we Technologies

we and of you the half fourth we based line growth on that, That the to XXXX. margins second your half expectations XXXX. open operating prepared the revenue show Operator? fiscal like for time for our more call that and half second are With remarks. adjusted to to first earnings in attention. compared know of the weighted questions. with now revenue the uncertainties year we'd half, of compared relatively for like towards the concludes both emphasize first Thank our to remain, heavily today, quarter While what I'd modest expect to

Operator

[Operator Instructions].

Our of Peter first line Arment comes the question Baird. from with

Peter Arment

details helpful. Jim, EST, the thanks it's for all very the on and

of types that smaller larger exactly Can mentioned come to that implies there the at You of of in you describe or a some the deceleration. scale of potential in started scale the kind just just maybe in examples orders what a future? order there, trends terms

James Cannon

Sure, Peter.

EST camera, types E-Series cameras of much businesses. came would our describe essential more about I of they're in demand on tripod or businesses, of a implemented as earnings set call, many imaginable look really removed. be the hoc used tripod-mounted end wave was then from at kind Those cases, for and market And can quarter ad up towards temporary cameras nonessential in pieces. and There and/or curve sort on are the basis of came on they the the initial products when you the demand, handheld that last our demand, talked if every were really first the handheld and that a So used that being from that X industry demand quickly camera. were we T-Series and of and in or of

as fixed-mount end all we a the demand, So more very, a $XXX A-Series of the camera, much as in second quarter, that to which And about essential customers a industries the from call, larger back the collection operations. we of last to more we QX. customer initial demand And sorts shift somewhat very saw then saw entered well, changed we of new is wide mentioned of as across and focused, profile the camera. on of million flurry the

one for solution, commercial be would becoming real and much organizations, an the So looking how integrated organizations, large estate more long conducted a were they hospitals and elegant, term. much part a even for solution, manufacturing that's of enterprise-level military or large different installations business

was of when, very to technology, TSA, for workplace. we there in now last of integrate we're ground they're passengers the more from again, implement and looking procedures that how kind the after X customers decisions then widespread TSA we stories bit as do in large use the they'll -- now. and to in demand on and airports. quickly, business. earlier software, the tranche, And to it technologies larger be much And that's deliberate the An they they'll a into diligence where seeing et saw from on And very going or Canadian this implementation X the these do them a these have shift month use if screen many other a more we're where to implementations. very that slow about example demand full how AI, or across more fixed how conducting So our the making airports, airports are would a of Canada major these but offering, are get cetera. those do were can Organizations safe purchasing importantly, the hardware part picked dynamic anything week has how customers, solutions and Canadian to they deliberate roll orders smaller out third they to of implementations,

market if separate access of announced a building when comes solution integrated entering also whatever a into a device a or think commercial the your entered solution. access, you approach something also not when to so earlier, control, gain leader your a to is screened. in, is an card access it or completely large But that, We with like factory that it's the part step. swipe Lenel turnstile It's or whatever or get Lenel. as being gating having office to is partnership you about the badge, mechanism control. we integrated a really that's EST And you're you the

you the kind could not can your how implementations they're these because, of we're and of Peter. So real demand's variables how as global nature, mentioned, some deployments sites, and -- third there we of large the this tranche, are evolved, of of if widespread be. If year in the them in how half as question, just answers now back what will, multiple again, to that be some the

Peter Arment

that it just And little does. I a as half it revenues on follow-up, kind Carol, helpful. guidance, half. be that specific No, there not first sounds a of would still Industrial is and second you to see out parse bit going should we Can the know color the but like giving higher? you're Defense commentary. that than be better transitioning be is Any down

Carol Lowe

out color can increase. I provide prepared it more we're guess segments. on So But -- not mean the little just what moderate bit we X by we to a by break I

So think we total in this point mid-single-digit the about for range in FLIR.

Operator

comes Our line with the Jim Company. next Ricchiuti of question from Needham &

James Ricchiuti

we like? about order color provide any wonder additional I Is Industrial in talked information a as can just us look could could OEM you a that. You or in sense several when what that -- there's you there if on some if instances. can large see That's And might the to deliveries segment. give perhaps the application

James Cannon

products are line the disclose to XXXX. that actual not our an the application. liberty integrated aerospace That components at and of business for and Yes. through into it's ship product ultimately and is will I'm customer, defense in

James Ricchiuti

we on gross then stages Can that. that business of of the scale? you've clarifying you're expecting Okay. a provide see ramp to Thanks accelerating from be past And update the should in deliveries as this? for be Presumably, early to half this would drag we margins. on the that as developing? business some the thinking And the second talked has, unmanned margin in the also how it side profile business the you some about in starts

James Cannon

right. That's

we offering over old. it's now, think when about So full little again, we business unmanned a that unmanned -- our a year the have and

users, say wholesale the they're our in be mentioned. excited adoption. adopted year Sensor the new, course, or new to point the by part of really SkyRanger, ground SkyRaider, very than more robots. old began really These that's technologies. acquisition Aeryon, then When quickly new I'll the in award million gaining quarter, they're for ultimately, Soldier I Endeavor, FLIR the So follow-on in a widespread and Prox of Hornet, with we and to way $XX the Hornet the nano Black a little a Borne quickly, being of a Black are drone,

$XX.X Additional branches robot, it's by our we from the learning adoption Common the vehicle, continues. across transportable the of of partnered as largest ground And think about it came Textron X pieces, combat quarter, robotic as ground the U.S. quarter, with orders about army for and in margin describe up the you in German current last all robots, with the service adoption you know adopted in man we System-Heavy the Centaur Army and if million And profile, come and I the curves. would where Robotic really

the fielded incredibly the with But as was success, up with lean, because in scale working at commercial FLIR when it Method ever gaining was to aggressively nothing flow, we The been more Hornet, supply scale. expensive like the certainly not production we got automation came Black ever produced, it that curves, and produced implement beginning in adoption had chain. So learning first

So line the the position the to a FLIR. we of expect it that And for accretive maintain averages to margin company. Black Hornet standpoint now at from to continue is accretion gross

and would and closely Second SkyRaider behind following SkyRanger. the be

chain, curves. accretion the exit do move earlier, drive beginning overall to the now average and just on order is doing into whole we The work is RXXD margin, right get those mentioned to production. dilutive have robots its Marine gross adoption. we're We're now, full most the we're but continue ground up robot Corps, adoption thing. maturing And the it to line we ground that really our to same the We're are to we're as by the side. to we supply on the example, year able learning So for coming

Common is Robotic the yet program, those into So real production, into not the Subterranean is MTRS production. get the full program System-Heavy

such. stage It combat prototyping, mature expect FLIR lean, through that gates same and robotic to we XXXX very our Method the we accretion supply playbook get average much that unmanned expectation that the moves implement But to to early follow as our volume. course, line better in to or is Of vehicle is chain. business

Operator

from the with Our next line Louie question William of comes Blair. DiPalma

Louie DiPalma

first there Technologies determine trying a is if to the And in guess have OEM I'm Defense related, general, XXXX. In year that division. will anything I rebound to Industrial Technologies to suggest

infrared will aircraft think orders you've for you Northrop Grumman Northrop previously program that a in. countermeasures indicated X was be I for program. also, that that months? a two in partnered that And Over awarded for were know next the you has sometime large are the I won contract do program? was G-BOSS(NYSE:E) past months, wondering, And with its still you several interested

James Cannon

again not warning Yes. of missile specific and that regard. to and can about question advancing we legacy regard OEM I talk systems houses Grumman, content components for such. in that line can't I cutting-edge division the quickly? systems, I'm or to to countermeasures, customers Louie, airborne technologies firms, a on question very specifics regard. what that that business point our however, that to and cameras was real is provide about focused Northrop your with at specific program But liberty second customer say, Louie, targeting aerospace defense And in content

Louie DiPalma

Yes. Any G-BOSS(E)? update on

James Cannon

don't That's right. that know I is We for protection have there demand some specific No. a force towers. now. update

of to those DLA secure or access otherwise contracting right systems other now seeing things may we've much licensing, -- time, the meet but to the have and/or still to for of there, is we're demand What defense that also we're significantly. cultivate process agencies, or is example, processes through foreign slowed. need. has demand are not side the slowed the the to working It's working been But and they slowed just on some slowed orders processing as and pursuing the So opportunities like and also. remote, go Pentagon, G-BOSS(E) have have decisions that for the licensing hard and

We side. also the see it international on

any said of is delays pandemic. canceled have or or seen prepared just seen expect the natural losses what impact formally the opportunities significant So not we of you but would have be programs stopped, significant as we the or because certainly any we in remarks,

Louie DiPalma

Okay.

And any begin Defense contributing so for your than you're programs would for outlook you of in expect the such current do XXXX, that large XXXX that contribute or be programs to conditions? the better in those pursuing,

James Cannon

look I on like Yes. prepared specific mean, now. XXXX give would guidance we're think what not to we

and look business, business, to cautious pieces. There's about want do do in of X If Industrial our Defense, at mentioned I'll those awards and defense going major the such, that on earlier, components at had what unmanned giving firms what in grow. it In prototyping we business XXXX, on programs. move that to XXXX. are look that we the that in If Technologies will line larger that. be in at components begin we look I But say are So into I this. through will I now that to we've production programs we

We also expect that business to grow.

into remarks, sorts line to gimbals, et a XXXX, in overlays, feed, AI, buttonology our more widely surveillance, legacy sensors us is the which XXXHD go see of airborne providing prepared our new I significant mentioned adopted the as business. HDc the products product all upgrade and of camera we cetera. in launch now You'll XXXX,

of introduced an as Probably but progress there this the Now through the those as first get be immediate XXXX, impact? year not XXXX, we revenue will certainly, accelerate year. half in and exiting and

Operator

Berenberg. from line Your next Buscaglia with question comes the Andrew of

Andrew Buscaglia

us fade to to question the say to of from I just are will had what what IT sort on able your what the of the specifically was an a margins, into -- contribution EST give back you magnitude second cameras, half? idea of

James Cannon

So of million second parse products to about that you let and or exactly quarter. be $XX why out explain. tell margin we me what EST-related would Hard the in contribution -- shipped

chain you constraints. exiting going we As QX, had into QX supply know,

were the of And EST prioritized we can combat so that lot specifically knew spread we help want this of really the all demand EST do a because to we customers virus. we to

spread certainly contribute what accretive did But same demand went the half, customers prioritized come of our the also to those the average. is non-EST-related line were it It the for T-Series in margins. this gross second first. of be related, million into we from EST to efforts $XX backlog that again, was normally into while business demand as A-Series, cameras, would pandemic industrial to E-Series, because So strong cameras we combat core

the be with there I host customers estate from Because implementations. of coming So TSA, into the they just this with it's we it's hard like hit real larger products, and EST saw these because, medical a go applications. to for And when we this owners, $XX,XXX QX don't used think The the now a half commercial thermography more into carve dynamic of permanent as again, larger those cameras out but that will predict those orders real for resolution are business. multimillion-dollar hope, It a to I implementations, QX course, pandemic implementations. second like core is, into also balance is ranging certainly Canadian of difficult, thing separately to these do very to exiting year. to us those $X,XXX us how orders for the will when large and other manufacturing larger make take decisions and large these from $XX,XXX about then in

Andrew Buscaglia

more give back So of cameras buy that that's the testing to some trying are playing sort come some point? but people with to it, could commentary at

James Cannon

That's to goes rate there would off right. we QX. if kind back airport And of or and right? be it's a a early never virus whole right. then expansion, if the of cetera. this. again, vaccine there's demand fall a And and would of sharp a of would a resolution, demand lower Whether continuum run That's pandemics, seasonally curve saw a we And replacements away was et go kind curves be There look there demand or at like seen we've outcomes. past QX, like

organizations a for part just to technology. integrated how of protocols but as they long imagine, very future seeing do with are to the want and business other what combat this, decisions, they're you will technology could those going Now could large a that and/or term that's be thoughtful you're in But not outbreak. put forward,

facilities and ultimately see teams our lead decisions to their we or test a development trials forward. or prototyping to work these IT making lot effort they business may we have different not with larger them So may go otherwise, shift how of that so technical do teams, their to teams, to efforts, beds

Operator

next Our Mike SunTrust. the Ciarmoli comes question of line from with

Michael Ciarmoli

or are the what that in maybe Jim the a talked Carol, competition? revenues I did I bookings. up talking $XXX been snarky, to little tracking I are I not mean, But And guess. sounds just the there you about guess some seeing environment the here. preannounce million bigger So But demand you had And with you're bit your Honeywell, bogey building talk I the have here. they've Or everybody existing solutions? light can like couple integrators? they big seamlessly guys Jim, the you guess, solutions installations, going of there? from using you're about of cheaper Or expectations mean, opportunities about where mean I airport infrastructure out they a about Are already rates? integrate I bigger this demand you competitors of waves are can any But got their you closing environment. as mean, seeing customers, talked obviously losing technology, already. are existing you with going they elsewhere? are came

James Cannon

I lower trying as work competitors ever are different was our competitors' XX many shifted of competitors. question. XX a host learned, we the and efficacy how pandemic that that goes experience. this reading XX years core and The use back measure started. lessons really the all beginning government I'm trials months, a larger Yes, feel in Certainly, the head-to-head have larger and also evaluate and hard And and no of very to make marketplace. lot do being X to options, there on for We big of the with some the I sure the time. start particularly pandemic. technology competitive, that doing out against it that's are in customers a to say get mentioned, This customers ago, effort stop we a and that that to we is to be didn't In their right organizations of to this sure XXX% the confident applications. we how Basically, example, close begin have of competed of that with confident, with you a really to to I of against and the times, part that, that very the to now there whole market discussion won't opportunity, lot the fact or our that's camera encourage ability of the do. solutions thing and we you I competitors, to great to first they're some a out very respect want is spread our can chose we've them. case, competitors earlier, thing, rate they course gain for where different kind that there they'll when precedent. products. there foremost, started without accuracy the said and at are, of evaluate go in you with, with price But is to win that a enterprise some And handheld lot matter like has important there We about And this most of capable have point, very help of demand it's and frankly, cost such. And want our detector competitors the do that done solutions.

control and augment right a So or if software goes ranging we and and it's course, workforce thing, handheld, spread. I the the enterprise-wide completely right of don't competitor, help fixed, to either their to begrudge in have customer offering. whole that can protect in, But integrate tripod any through bolt the host a solutions, stop that from of a cameras, full access complete solutions other

menu, a you in hardware, tasting analogy, that tip et we from else's are buy la get implement where software, camera our operating solutions can carte pieces think someone it good software from full that example, or and use everything have And us, so to to enterprise you can cetera. a order AI, tail, same

we're saying, it's So guess but there's them. big with to of clumsy a competition, yes, way happy I compete

Michael Ciarmoli

And mean it. the think presumably, anything the you if products, this some specifically then Marine XX%. boat one. if was was EST sounded underlying like Got quarters. I bottom? distancing maritime, Industrial bottom and in mean, to maritime -- up if the in of down for figure you Did pull-through last about see it disproportionate then I out guess, And in a quarter activity this blowout I different mean there? anything put social I just, that's quarter? is marks quarter manufacturers this the good And did this your ex just the trying

James Cannon

of million this health to of because, what's of question. that customers and spread first the out true combat revenue as supply it's a I business regard prioritized the constrained $XX is from hard With question, mentioned EST EST the at Right. pandemic. look to remaining earlier, Great with just chain, of business the Industrial to again, a strip help we indicator the

now America, operations the remaining. debate maintenance, thermography, shape Americas recovery, you than those and quickly, confidence the stripping going right quickly. tell very demand Europe, North core we We I'll we're with kind a into still picking up, I some In stronger to business In we're Is this about though, preventative demand recover demand green gaining what's it of see see from see So Europe. that nicely. QX we what regionally. there from in is projects. out rebound probably rebounded plant going back just shoots to has optimistic of bit slow core more the and EST seeing so. of in say U-V channel such guardedly Asia whole QX a demand recover, at hope QX? beginning looking recovering that Industrial We essential that When business

fully It now. about and of in a steady Raymarine to smaller So a I minor lot X say boat online regional, sharp shopping We to we've down. a seen declines business. the quarter, or that revenue. from purchases won't first months to What's were With the they I it's perhaps into steadily upgrades X to Raymarine, were but improve. very in shut as different going think in quarter that maritime began through quarantine with recovered, compared of very quarter, folks dynamics. saw builders improvement making -- the second second the our own months regard boats ago, ago, And decisions lot

Operator

Our next with Herber the Canaccord. of from comes question Ken line

Kenneth Herbert

things timing ideally the of procurement within year? in called was in on process like soon, the administrative Jim, sounds to the Can see normalize the specifically catch extent what you as quantify to what -- you issues. wanted delays of I first and those up you -- to here that expect COVID-related, quarter or here just comment sort do and out some a to just perhaps it business. is half second Defense

James Cannon

that be in at and half the in second remote, in to work-remote anywhere year. going the X hope as we they licensing. to just to be their access of government has secured up that the lot to We We don't to our X-week delay when stuff and it's to But normal a work catch to fashion, customers, the upon continue DDTC, to need certainly what predicated systems really, have the conditions able be process do of the they they or such same licensing. look they know continue would the a processing from of

process from a assign or to we just a to a to X- anywhere hard but the probably decision-making. month X -month in X.X delay naturally So number in it see a

-- So somewhat. America, I through continue Also, that lot decision-making. work like May, but probably expect March saw international earlier, customers, you at if look mentioned of down to all and June, as all and remote customers, we into of really and beginning kind much in international a shut the

beginning that that's quickly means back and give exactly for now you be slowly at up, to outlook. up to me time impossible So how would frankly, to it open a us, firm it opens this what back

Kenneth Herbert

in sort inventories what year full for exactly And is? how to and maybe I color the quarter, could, Significant more expect the maybe, and inventory next That's then, wanted if -- build up for as that the liquidation helpful. Can course, you year? your you. of of you And on Carol, I timing provide to the this obviously, just Okay. maybe on year. into the any follow comments. of then

Carol Lowe

Yes.

Ken. you, thank So

And be issues the front we so had. we to the inventory addressing chain of as were was supply build on the of wanting some anticipating and side

for So we uses other supporting there well. made cameras noted, those specific the to like used as A-Series, decisions demand. demand the example, for that for are EST, Jim relative are as And EST and

decisions we some months. within ability would worst and should UIS ramp of manage and we we'll EST made to our any some there. to within, sure next had the security then that also, inventory those level be we X-month make able be over the and in supply sure has a and able to while X in shortfall And demand, So make probably comfortable to not runoff X- But to period, programs we're of a buy dropped we case. levels to inventory shift, to to specific of the have the have very X with say,

Operator

of question line Imperial Kessler final from Jeff Our comes the with Capital.

Jeffrey Kessler

chip you able health to greater questions are on acute are -- care X use move with the get next for away vehicle at types our we people what doing years as priorities regard discussions assist going -- toward longer-term just and ADAS from over my not care up of in use? health to perhaps to answered, describe been manufacturers what has COVID X being the Most or Can not priorities. but have in of will lot I you just ultimately, has the the throw of backed by by been ADAS. end But but into that gone Obviously, users. period, this on a this, planning by during obviously,

James Cannon

absolutely. Yes,

As of with braking. use ADAS we're participate the the seeing traffic pedestrian autonomous military existing before, or Certainly, those higher vehicles and lot to levels work a markets most unmanned on ground on of work same into we've is we're that thermal intelligent with addressable the more, to communicate safety to from trucking roadway our help a what automated automation commercial but to create to for to larger features business use forward, more going driving OEMs, in technology go doing one lessons companies as technologies lastly, mentioned demand the is using working and combat safer there's companies vehicle the lot a of customers. for that really with vehicles, well. emergency of to like Also, and exciting everything, And are sensors flow, help we demand areas. help intersection the systems our with several or us thermal car

robo how solutions can't larger to some and or driving but longer it's by thermal taxi a I'm really a some quarter As very excited curves, sensors we OEMs, studying the cases, continued their for of et saw us with factories lot the whether across that's of effective, mentioned with low OEM in to current our as is be looking ceased braking. automatic is. provider, not lot customers, be in saw host now our cetera, we're that efforts the is autonomous partnerships automotive with manufacturers We signed we about earlier, have very there's near-term the board, auto such, thermal different in but name, components the automotive at business what R&D business, where a the AEB other But production. such really, with shutdown. demand second again, I with in the emergency they decline term, you And much mentioned light be all are sun sharp aggressive through companies or a cameras pandemic, quarter, is and and sensor of things slowed providing whether production conditions, of conditions, second like and integrated core we it name initiate glare, where technologies term, to existing whether thermal it Longer formally of business. thermal

and on customer the kind second engagement through effort quarter So we're really R&D had the of we've encouraged by front. that

Jeffrey Kessler

out away? so years X -- is we can't any this because is -- -- is or there. there obviously, start we is when give thinking X being you to Or this that you think on X is X something having this that that -- years about effect should it Is some FLIR? start X greater away, to this timing something can But

James Cannon

the Yes, that question. is and multi-million dollar million Right. certainly

to X X it's think to years X I away.

example, going when standard onto certainly working the features, the communities. it's to safety going implemented as integrating technology, autonomy, beginning Well, we -- to to moving our look see level lot to on move because model. to higher so we to X X we such. be be inside certainly, ADAS, and model to There's in Now hope we're years, to But that's beginning going of But of know how are X years hard have it, for have not X the a of company. at should where a to debate. it's we're levels with it's an revenue going develop we if

Operator

like end to We've I our turn reached of for call back remarks. to closing over would Mr. the Cannon session. And the question-and-answer any

James Cannon

you our passion, and hard appreciation fall. employees Please for all quarter your supply to like Thank work, our for today -- and my results thanks to around their to for your stay company. our to report want and and updating the all you you We FLIR of our safety call I'd of world thank Well, to the forward I reiterate third chain in all. joining interest dedication on our when mission. look healthy. safe this and progress later our we also

Operator

This concludes today's teleconference.

this you and Thank for your at disconnect wonderful lines participation, have now a time. may your day. You

Teledyne FLIR (FLIR) 6 Aug 202020 Q2 Earnings call transcript