Q3 2022 Teledyne Technologies Inc Earnings Call
Yes.
Okay.
[music].
Yes.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Teledyne Technologies' third quarter earnings Conference call. At this time all parties are in a listen only mode. Later, we will conduct a question and answer session instructions will be given at that time. If you should require assistance. During the call you can press star and then zero and as a reminder, this call is being recorded.
I'd now like to turn the call over to our host Mr. Jason <unk>. Please go ahead.
Good morning, everyone. This is Dave some bandwidth vice chairman at Teledyne and I'd like to welcome everyone to Teledyne's third quarter 2022 earnings release Conference call. We released our earnings earlier. This morning before the market opened joining me today are teledyne's, Chairman, President and CEO , Robert Mehrabian, Senior Vice President and CFO Sue main.
SVP General Counsel, Chief compliance Officer, and Secretary, Melanie <unk> and also Edwin Rogers Executive VP of Teledyne.
After remarks by Robert and Sue we will ask for your questions of course, though before we get started attorneys have reminded me to tell you that all forward looking statements made this morning are subject to various assumptions risks and caveats as noted in the earnings release, and our periodic SEC filings and of course actual results may differ materially.
Order to avoid potential selective disclosures. This call is simultaneously being webcast and a replay both via webcast and dial in will be available for approximately one month.
Here is Robert.
Thank you Jason.
Good morning, and thank you for joining our earnings call.
I am very pleased with our performance this quarter.
As well as teledyne's long history of navigating challenging markets.
Despite the strong dollar.
Supply chain constraints and inflation.
We achieved record third quarter sales earnings operating margin and free cash flow.
Excluding foreign currency headwind.
Negatively impacted third quarter sales growth by approximately 3% or $39 million.
Core growth in local currency would have been six 9%.
<unk> you.
Year over year as reported sales increased in all segments.
Despite the FX headwind.
non-GAAP earnings of $4 54.
Was it a third quarter record and just shy of our all time record.
And our earnings quality was also very high given our largest effective tax rate in several years.
Overall.
Orders and demand remains strong.
Which is a testament.
Through the strength of our balanced business portfolio.
Total company book to Bill was one point to six.
And while orders remain reasonably healthy in our short cycle commercial businesses that were particularly strong in our longer cycle government marine and aviation businesses.
At quarter end external backlog of approximately three.
Three $2 billion plus also had record.
Record third quarter free cash flow of $252 million.
Improved towards the second consecutive quarter.
Does the 110, 16% of adjusted net income.
Our acquisition pipeline is growing.
We're pleased to announce we were pleased to announce the pending acquisition of ETF earlier this morning.
Turning to our 2022 full year outlook.
With our strong operating performance in the third quarter.
We're able to increase our full year earnings outlook, while de risking.
The prior heavily weighed Q4 forecast.
On revenue.
Given our current exchange rate.
And the U S government's continuing resolution as well as the evolving semiconductor technology export controls, we're a bit cautious at this time and now project full year sales are probably roughly 545 billion.
In the third quarter.
We also took the opportunity to refocus teledyne clear by eliminating some smaller money losing product.
To help improve our margins.
And as a result, we add some cost.
Towards our revenue.
Finally.
While the supply chain constraints continue to limit shipments.
<unk> seen a modest very modest improvement in recent weeks at least with regard to availability of certain printed circuit boards as well as electronic components.
Components.
I will now further comment on the performance of our four segments.
Starting grid.
Okay.
Our digital imaging segment.
Third quarter sales include increased two 3% despite currency translation headwinds really nearly 4%.
<unk> growth was strongest for industrial and scientific vision sensors and systems as realized for our low dose hydro solutions digital detectors.
Sales of our commercial programs imaging cameras and components also increased.
GAAP segment operating margin was 17, two but adjusted for intangible asset amortization segment margin was 22, 9%.
<unk> 70 basis point improvement.
From the second quarter of this year.
In our instrumentation segment.
We're altar quarter sales increased six 7% versus last year.
Sales of electronic test and measurement systems, which include a similar scopes digitize theirs and protocol analyzers remained strong and increased nine 7% year over year with growth in all major geographies and product categories.
Okay.
Sales of protocol analyzers across numerous industry standards.
Such as peripheral component interconnect express or PCI Express.
Universal serial bus or USB and.
In high definition multimedia interface HDMI remained strong.
As well as sales of our CLO scopes, and our unique crossing product, which combine our senior scopes and protocol and as our annualized is together.
Sales of environmental instruments increased six 3% compared with last year with greater sales of <unk>.
Drug discovery and laboratory instruments, as well as air monitoring and processed gas analyzers.
Sales of Marine instrumentation increased five 1% in the quarter, primarily due to near record sales of autonomous underwater vehicles for both defense and commercial oceanography applications.
Overall.
Instrumentation segment profit increased 12, 9% in the third quarter with GAAP operating margin, increasing 126 basis points to 22, 2% and 82 basis points on a non-GAAP basis, excluding <unk>.
Intangible asset amortization the margins increased to 24.
<unk>.
In the aerospace and defense Electronics segment.
Third quarter sales increased four 8%, primarily driven by a 27% increase in sales of commercial aerospace products.
GAAP segment operating profit increased 22, 4%.
With margin.
349 basis points greater than last year.
And finally.
Our engineered systems segment third quarter revenue increased seven 2%.
Operating profit also increased slightly.
Before turning the call over to Sue I wanted to make a couple of <unk>.
Concluding remarks.
Over the last 18 months.
Have endured the same challenges as most companies that is.
Record inflation <unk>.
Hi chain constrained.
And now strong U S dollar.
At the same time, we completed the integration of Teledyne clear our largest acquisition.
And then we rapidly delever.
Leveraged.
While the operating environment remains challenging.
We're glad to be back to doing what we do best.
Investing in our businesses to drive organic growth.
Vigilant on costs and simplifying our operations to increase margins and finally, acquiring and integrating complementary businesses.
Now I will turn the call over to Sue. Thank you Robert and good morning, everyone. I will first discuss some additional financials for the quarter not covered by Robert and then I will discuss our fourth quarter and full year 2022 outlet.
In the third quarter cash flow from operating activities was $268 9 million.
And with cash flow of $192 8 million for the same period of 2021 Mister.
Third quarter of 2022 reflected stronger trade receivable collections compared with the third quarter of 2021 three.
Free cash flow that is cash from operating activities less capital expenditures was $252 $2 million in the third quarter and 2022 compared with $163 6 million.
2021, which included $2 1 million of after tax cash payments related to the <unk> transaction.
Capital expenditures were $16 $7 million into third quarter of 2022, compared with $29 2 million in 2021, depreciation and amortization expense was $80 8 million for the third quarter of 2022, compared with $92 million in <unk>.
Noncash inventory step up expense for the third quarter of 2021 with $35 $2 million with Nielsen handle amount recorded in the third quarter 2022.
We ended deployed over the past nearly $3.44 billion of net debt that is approximately $3 9 billion.
Less cash at $479 3 million.
Stock option compensation expense was $3 $7 million in the third quarter of 2022 compared to $5 8 million in 2000.
Between lines.
Turning to our outlook management currently believes that GAAP earnings per share in the fourth quarter of 2022 will be in the range of $3 67 to.
To $3 80 per share with non-GAAP earnings in the range of $4 46.
To Florida.
And for the full year 2022, our GAAP earnings per share outlook is $15 46 and <unk>.
$15 60.
And on a non-GAAP basis, $17 70, $217 82.
The 2022 full year estimated tax rate excluding discrete items is it.
<unk> 23, 1%.
I will now pass the call back to Ravi.
Thank you very much sue.
We would now like to take your questions operator, if you're ready to proceed with the questions and answers. Please go ahead.
Thank you, ladies and gentlemen, if you do wish to ask a question. Please press one and then zero on your telephone keypad.
To withdraw your question at any time by repeating that one zero command and if you're using a speakerphone. Please pick up the handset before pressing those numbers again, it's one zero to ask a question.
And one moment.
We'll go first to Greg Konrad with Jefferies. Please go ahead.
Good morning.
Greg.
Maybe just to start digital imaging had a nice margin pickup in recovery from kind of H. One can you maybe talk about the margin dynamics around price mix and how you think about the recovery there or maybe expectations for the year.
Well, let me.
Start with.
Expectations for the year.
And then see if I can answer the rest.
Actually if you.
You look at the year.
We have net pricing improvement.
Across all of our businesses are about three 6% of sales.
That includes digital imaging.
On the other hand, we.
Have also against that we have inflation Greg.
And price increases in the products that we buy.
The price increases in the products that we buy have been about three 4%. We also have salary increases of about 4%.
Net pricing increases.
Have kind of offset that.
The headwind that I have that we have from price increases to us that is inflation.
The flipside of that is that we've had to pay a little extra for scarce.
Products.
Like complex FPGA and others that we could not built into our price. So that we have had a headwind there I'm going to say about 2% above $50 million so fundamentally.
Digital imaging.
He has done well.
They have improved their margins.
But.
It's been a relatively.
Tight tier up to know.
Okay.
And then can you maybe comment on the defense business more broadly I mean, it seems like you're getting quite a few of.
Contract Summit's full year, some of the broader business and broader market commentary.
I think that demand outstrips supply right now I mean, how do you think about the timing of some of these new defense opportunities that kind of the outlook there.
I think the.
In general.
We are finding is that in our defense businesses are.
Book to Bill has improved significantly.
For the third quarter actually our government businesses were down slightly but the book to Bill which is the important part for us.
Has improved both in player is.
Close to one but.
Our aerospace and defense electronics is closer to one five.
And in engineered systems to 135.
D.
What we're finding is that.
The demand for electronic components.
And systems.
Including.
Cost are going to.
Javelin and others.
<unk> that are being depleted.
Those are coming back strong we also have.
Really good.
<unk> orders.
In.
Systems that are being developed like wild wide field of yield tracking layer, which is for missile striking basically.
We've had.
Or there's good orders and we with other programs out of about $60 million over two years and that goes across a lot of our products.
In general you're right.
We've had we've seen strength in our diverse businesses and some moderation in our <unk>.
Commercial businesses as time has gone on.
And then just last one kind of a clarification question you called out the 3% headwind from FX just want to clarify is that only a translation headwind or are you seeing any changes to competition when youre competing with maybe a local currency competitor.
No.
Really a headwind from FX translation only.
It started the year at.
About 1%.
Went to 2% in Q2, 3% in Q3, we're estimating about 2% in Q4 for a total Greg <unk>.
$110 million hit that.
We are taking to our revenue for the full year. So if we didn't have this translation only.
We would have revenues and others understand $10 million in revenues.
Thank you.
Thank you Greg.
And next we'll go to Joe Joe Giordano with Cowen. Please go ahead.
Hey, guys good morning Marni.
Morning, Joe.
So.
Last quarter very modest cut I think took some people by surprise now a bit of a range here, we're kind of in the same zone.
At the end of the day, despite all of that so kind of like what are the big changes at some kind of.
Key risks that you were thinking about next last quarter, maybe not materialized to the same extent.
Because it was kind of like a lot of movement to get to the same place I guess at the end of the day.
Yeah, well you know.
Ill.
When we started.
Lasse core search.
We weren't sure how much prices, we could of our price increases would stake.
Obviously, we were also concerned whether we could.
Non HR margins that take cost starts to improve our margins.
All of those coupled with the fact that our commercial orders held up pretty well.
Liking the imaging businesses helped us along the way.
So.
In a way.
Yes.
We were looking at we were in trouble.
Trouble in any ways, we just kind of very cautious because the headwinds were.
On predictable.
But as we took some cost out and increased prices.
And we had good cash flow by the way.
It's given us a lot more confidence solely raised our outlook and Derisk Q4 at the same time.
Yes, no that's fair.
When we spoke last quarter your view for digital imaging margins, but something like 22 ish percent for this quarter and then maybe 'twenty three for next quarter. It looks like your three months ahead of that so youre at 23 now.
Shall we expect.
Digital imaging margins to increase further in the fourth quarter.
And then I'd.
I think.
Overall.
In the fourth quarters, well, let me talk to the year, which is easier for me to do for the year, We think we will be at.
22, 2%, which would be about 20 bps better than last year.
So.
I think Q4 is going to be.
<unk>.
But 'twenty.
2.9, $22 seven of that range.
Again, I'm, a little cautious here because.
<unk>.
There is some softness in the commercial market, but again, our defense businesses are picking up.
Yes that makes sense and then just last from me I mean, I know, it's early and we don't want to talk about 'twenty three but I know that there was this bogey out there for a while now about the potential for you guys do give or take around $1 billion of free cash flow in 2023 is that still in this world like a reasonable target to shoot for.
Or is it is that kind of not achievable given FX and all these other things we've talked about for the last six months.
Let me, let me say I think $1 billion or 23 is a little too high.
Because.
We are we have capitalized R&D that we have to worry about but having said that if you look at the big picture, which is the way I approach. It is.
We started the year.
We started out there's a fair acquisition.
Net debt.
Debt to EBITDA of three seven.
We're down to about two 5% now.
By the end of the year everything goes.
Going along will be down to two four.
If all goes well by the end of next year and then buy it.
And the 24 would be down 2.9.
And that gives us a lot of cash to do acquisitions and that includes making maybe $500 million of acquisitions in the interim so the way I look at cash flows.
Longer term view, we probably will make the billion will come close, but most importantly, we'll delever and be able to make acquisitions at the same time and put us in a position where we can do something bigger if we want to later on.
Thanks, guys.
And next we'll go to Elizabeth Grenfell with Bank of America. Please go ahead.
Hi, good morning.
Can you give us a few details around the acquisition that you announced this morning.
Yes be.
Happy to.
Really.
I'd say, while we didn't disclose the terms, it's got about 112 employees, it's in northern California.
What it does is really it.
Gives us two very important.
Components to our ads towards <unk>.
Products that we don't have first.
In the microwave area, we make traveling wave tubes.
But in order to drive these tubes, you need a power supply so far we've had to go to other people to buy the power supplies for our tubes.
We've been looking for that and there's a scarcity of suppliers in that domain with this acquisition now we can.
Essentially supply system.
Both tubes and power supplies.
For example in a given application we were studying we sell the tubes and they add up to about $300000 towards that application, while we put the car supply with the tubes together, we can sell it over $2 million. So thats in the defense area.
Second area is in our medical.
Field, where we supply products that going to <unk>.
Cancer therapy, Radiotherapy X Ray systems too.
<unk> cancers.
We basically have.
Product.
That makes microwave.
High energy cost microwave that are used in that system.
We've added to that we used to sell that for about $10000.
We've added to that more components, and we've gotten to where we sell above $40 $50 of products in our system.
But again, while we didn't have is the par supply cooling system. The whole system that you can use in developing the high energy X Ray and that again is something that the ATM brings to us. So what happens is a content that used to be 10000, we have grown into a maybe 40.
Now can grow over $100 per radiotherapy system.
They have really good customer contacts and they have been accepted by the customers.
We dealt with our own products. So that's why we're making this acquisition is complementary to both our defense as well as our radio therapy businesses.
Okay, great. Thank you and then the impact of the <unk>.
Fully shaping you did within Teledyne clear this quarter, how much of an impact did that have on margins.
It improved margins slightly but more importantly, what we're doing is we took the costs by reducing the workforce.
He was a product line for example that they bought.
Just before at acquisition in December of 2009.
20.
We bottom in May of 2021, it was a product where they were trying to produce.
Basically commercial industrial commercial Uavs unsuccessful.
Business to be in.
We have.
In player we have really good product in the defense domain.
That we sell a substantial amount of that to compete in the industrial domain.
That was a product that we had SKU.
Yes.
Okay, and then if I could shift.
Sneak one more in please.
How are you thinking about the supply chain headwinds now.
When you think that will abate.
And then the sales that are being lost because of challenges. It is continuing to shift to the right alright.
To disappear.
Any way to think about that.
But let me answer the second part of the question first.
What's happening to US is that we have about a $60 million shortfall in sales that rolls over quarter over quarter. So it's not cumulative is not like you have four quarters of $60 million loss in sales that now to $240 million to $60 million what happens it gets delayed we get parked.
The next quarter, we ship, what we Couldnt ship that way.
<unk> get delayed again, so we may start that clock, there looking saying, it's going to hurt us by $100 million, we recovered from that I'm, sorry, it's a $60 million.
For us right now.
The flip side the first part of your question.
We're seeing some improvement, especially in the more.
Simpler.
<unk>.
Printed circuit Board assemblies for example.
To sell our cameras.
From Teledyne doll song that need to be.
We need about a thousand circuit boards date.
Okay.
And that was drawing up for various reasons.
Manish to address that problem.
So that's good we all saw some improvement in components.
Having said that.
We still have really tight market for more complex systems like field programmable gate arrays with.
Greater Asia, which are FPGA and there what's happening is to supply shortages are such that people are allocating certain number two each company we have a very.
Effective effort underway to combine all of our needs across teledyne prior prioritize them and give our priority numbers to our suppliers, having said that that is not improving.
Some of our suppliers are asking for noncancelable orders that go out a year from now.
So you have to make choices there obviously.
We are also doing that so part of it is <unk>.
Relaxing.
The PCB as a part of it with the field programmable gate arrays, that's not so it's a mixture, but I would say overall there is improvement.
Great. Thank you very much.
Sure.
And next we'll go to Jim Ricchiuti with Needham <unk> Company. Please go ahead.
Thank you good morning.
Robert you alluded to.
Short cycle business.
Holding up reasonably well and I'm just wondering as you think about that area of your business.
A mild recessionary environment, which areas do you see.
The business beginning to soften the first thing or are you seeing any signs of that in your bookings and Andy of that short cycle business.
Yeah.
In some of the products that we make I'll start with digital imaging.
And some of the products that we make for example that go into warehouses as the demand is softening in that domain. Then obviously, they don't need as much of our products for automation and improvement of the Liberty deal there.
Products.
On the other hand.
Because we have such a broad portfolio of products.
That range from security to traffic to firefighting.
Not all of them are kind of getting impacted simultaneously. That's why we think it's the downward pressure is not as great for us because of the diversity of our products now if you went outside digital imaging for example.
Our instruments domain, where we have environmental instruments, we have.
Ausiello scopes protocols, we have marine is two months, we have marine vehicles.
We're seeing certainly a lot better we think it might soften, but it hasnt soften much yet.
We are getting.
In these two months.
Book to Bill is still 1.25, so what happens is that that's the that's the thing that Jason and I always talk about is the.
The breadth of our product.
Both in terms of.
Who we supply to them.
People buy our products work, but also the diversity of our geographic diversity of our product.
Thats protecting this so we might have softness in some areas, but overall I think we're doing okay.
Okay.
Just on the comment that you've made.
About M&A and certainly the.
You can see the net leverage really coming down fairly meaningfully over the next one to two years you alluded to 2024 potentially.
Potentially.
Giving you the opportunity to do a big deal are you.
Averse to doing a larger deal in 'twenty three or is it a case of there are a lot of.
Smaller deals that you could do and you all just maybe gauge how the tobacco environment is and whether valuations potentially come down for certain larger assets.
Good point.
Right now.
If you look at the market for public companies does Jason often says people always look in the rearview mirror right. So everybody is looking in the rearview mirror, including us and Youre seeing 52 week highs driving back might be nine months ago.
Is there so expectations are what you're seeing in your.
Yield mirrored.
If we go forward then things persist the way they are.
And people see lower numbers looking backwards, then I think we'll have more opportunities.
Now what our focus is to see if we can do more bolt ons as we've done historically.
We acquired <unk> in 2017.
Our.
The ratio net debt to EBITDA ratio went up almost to the street.
While we did it came down by.
By the end of 'twenty two.
Five years later or so he came down to essentially zero and we in the meantime, with another 500 million self acquisition.
During that period. So the number I quoted for 2024 and includes being able to spend maybe $600 million of smaller acquisitions.
As to the bigger acquisitions, I think we ought to wait a little.
We have some things in mind, but we ought to wait a little bit before.
People.
People are not so effervescent about.
Evaluations.
And is your interest.
Mainly in the commercial area or has anything changed with respect to how the defense environment looks.
Ah.
Right now.
We still like our commercial businesses, but we're also seeing as you saw.
<unk>.
We also bought something at least in a bolt on in the defense domain, partially both come in.
Partially defense in the bolt on with additional bolt ons in the defense, especially if they.
Fit our portfolio, but on the larger stuff.
It would be either commercial or a mixture of the two like clear roads there was.
60% commercial 40%.
Defense end.
So we will look at whether it's 70 30 or 60 40, we look at the combo.
Got it thanks, very much and congratulations on the quarter.
Next we will go to Andrew Buscaglia with Aaron Berg. Please go ahead.
Hey, good morning, guys.
Andrew.
Along the lines of the short cycle discussion.
Specifically can you.
Comment on Twitter.
More industrial assets, which can be pretty volatile.
It can move pretty quickly, especially to the downside in <unk>.
Downturn.
What are you seeing with.
Pace of orders or anything any indication how thats trending in that business and then generally.
How FLIR margin settling and I know they've been they've been kind of volatile.
The integration process.
Can you update us on how you feel about that.
Sure, let me start with the product.
Generally I would say because of the breadth of the product.
Well there are some softness in some areas just like our rest of our digital imaging.
<unk> book to Bill right now is close to $1 98.
Which is in some ways better than <unk>.
Yeah.
From.
Because of the.
Again, because of the breadth of the products that they have.
<unk> tomography instruments to infrared detectors.
Two.
Maritimes systems security traffic.
I don't think we're going to get hit on all of those all at once and we're not the only problem that we have a clear.
I may call. It that is that historically the revenues have been more skewed to the end of the quarters rather than.
Evenly pace during the quarter like the rest of our digital imaging is so the only risk. There is you get closer to the end of the quarter and something unforeseen happens and then it can hurt you. We're working very hard to flatten that out it will take US we had the same.
Every acquisition, we've made large acquisitions, whether it was <unk> or <unk> or others.
So we are working very hard to flatten that curve the shipments curve.
Having said that coming back to margins I think margins are settling in.
From it.
non-GAAP perspective.
Well, there's been some volatility as you appropriately noted.
I think we've settled by the end of the year with centrally to about.
Overall in digital imaging to 22, 2%.
Player would be a little Ford dawn from that but generally we should be okay. We're looking forward to.
Really last year was an odd year, because we bought sphere in the middle of the second quarter and we essentially shipped.
12 weeks of <unk>.
With eight weeks of cost again because of that.
And of course their shipments that I mentioned, so that skewed the numbers, but things are fairly well stabilized now and I think what we're looking for is make sure we get to our 22, 2% by the end of the year for all of our digital imaging and then hunkered down and improve that next year.
Yeah.
Okay.
That's helpful. And then you gave some nice color on the ATM deal I might've missed it but how big is the company and maybe any information you can provide on their margin profile, where you expect those to go.
Ah.
Alright.
Obviously, we've been hesitant to talk about it but it's going to be filing our Q anyways.
Few days May maybe later on but.
It's got about 110 12 people the reason I'm a little hesitant about the sales which are about $50 million is that they also buy products from us so they buy our traveling wave tubes, including with their power supplies and they sell them. So.
The deal is going to be accretive.
How many cents depends on how you look at the cost of borrowing could be accretive to <unk> is the way to say the cost of borrowing is four 5%.
On the other hand, our cost of borrowing is not four 5% because our average cost of borrowing.
With our fixed.
Borrowings on Kashi is more like 2% so.
It's got to be accretive revenue, a little shy shy around 50 with some pass through of our own products.
I don't know if thats helpful. Okay very.
Very helpful. I'm, just trying to get an idea of the Lasalle.
Hi.
Okay. Thank you guys.
Thanks Robert.
Sure.
Next we'll go to Kristine <unk> with Morgan Stanley . Please go ahead.
Hey, good morning, everyone.
Robert.
On the supply chain it really sounds like it's starting to ease for you and your mitigating actions have been paying off but can you provide a quantitative update last quarter. You had mentioned that 800 or 900 missing components were resolved where are we at this quarter and.
How does that trend from here.
It's getting better.
You are correct, but we started the year.
This year Kristine by having about 36% of our missing components of course, the components were lower number when we started the year there will be more like.
500 components, and where we're at 35% that we couldnt get at that time.
We're now over a thousand components 1100 components, but the missing percentage has gone down to about six 7%. So you're absolutely right. There is the improvement.
Flip side is that it.
700 components, where we're missing maybe 65 or as I said 60 open part.
The delay in those are kind of getting longer and the demand on us is okay. We're going to allocate so many to you.
And Youll get it next April the <unk>.
Flip side is it's a noncancelable orders.
I wish I had products like that that would love to be in that business myself.
So, it's getting better but still a challenge.
I see and then in terms of maybe back to our digital imaging.
You mentioned a return to portfolio simplification activities now you've pruned, a very small loss, making product line, but as you SaaS that portfolio, having on Florida now for a few quarters.
Are you evaluating potentially larger cost cutting initiative or a divestiture or is this kind of insulated and minimal.
Yes, I think I think it's the latter no.
<unk>.
In all of our products.
All of our businesses, we do AB 2008, which means we take some products that are unique.
They don't make money, we take the product lines out and then increase.
Our products that are making us a lot of money were doing that a player like we do at teledyne, but no we're not going to.
Divest any large parcel flair, we're happy with what we have and we are actually probably going to add some to certain areas.
Very helpful color and if I could sneak in one more.
Back to your comment on the supply chain, you mentioned that for some of the missing items that lead times are getting longer.
Driving.
Those incremental headwinds I mean, I would think with some of the demand and other parts of semiconductors. For example, we're seeing rolling consumer demand shouldnt that free up capacity for your orders and I guess I'm just surprised that we're seeing some things continue to lengthen instead of.
Do they get resolved sooner.
Yes.
Some of that.
Discrete components like you're using.
Commercial domain things.
Things are okay. They are improving on the other hand in some of the memory.
Staff.
It's Todd.
Leg is getting longer the lead times are longer but.
Depends on the complexity.
Let me, let me just kind of go through it.
If you look at memory devices.
Lead times are getting.
Lower.
On the other hand, if you look at more complex devices.
Like.
Microcontrollers processors the lead times are still four to 16 weeks.
So.
It's kind of a mixture that depends on what device, we're looking brokered the simpler components.
As I said.
Printed circuit boards, we're making some real improvements there that we feel very.
Very good about that but some others also required are people going to the suppliers factory and schedule our products on a daily basis to get involved.
So it's a mix shift.
Great. Thank you very much.
Sure.
And next we'll go to Noah <unk> with Goldman Sachs. Please go ahead.
Hey, good morning, everybody.
Good morning.
Robert I just wanted to go back to your commentary around the bid ask spread in the M&A process.
Some other companies that have a similar strategy to yours have pointed to that but it's pretty recently, suggesting that hasnt really broken yet.
You have a deal. This morning, you are saying the pipeline looks good.
Quantifying, where you could potentially spend in the immediate term so.
I guess, maybe in some ways you've already answered this but I'm just really curious to put a finer point.
Now that public markets peaked.
A year ago has that bid ask spread.
Challenge correct in that that spread has narrowed or are you just saying that it.
It hasnt, yet, but it eventually has to.
I think in the private deals.
It's probably cracked a little bit and the reason for that is.
Private entrepreneurs.
Looking at things.
They're looking at the world not the way it is evolving dry by uncertainties in.
In the future is becoming.
Much more pronounced at this time, so entrepreneurs that have built up business like the one we just bought.
That those people have been in business since 1973, they are becoming more reasonable because they see things are not going to get better in the short term.
So on the smaller deals like that I think youre right were seeing some.
Better pricing, having said that on the bigger deals in public companies. They are still seeing 52 week highs in the background until we get beyond that which is going to be another six months four months.
Where people are not looking at my high was $500 and I am not trading at 350 base look into back mirror and say my high was more like $400 and now we're at $3 50, and I think he's going to be more actionable.
Okay.
Helpful.
You referenced <unk>.
<unk> cost and also price increases can you just provide a little bit more detail on where in the business you've done that.
How sizable are we talking on each side.
Yes, it depends on the business. Some businesses, we we have a hard time, increasing prices because of the programs that we have long term programs, but let me just give you an <unk>.
Example.
In digital imaging.
<unk> for example, we've been able to increase prices above four 7%.
In marine where we supply.
Unmanned vehicle, but also.
A lot of.
Connectivity products for oil and gas, we've also been able to increase prices about four 7%.
On the other hand in some of our.
Defense products.
Hardly crack price our garden bar, one or 2%, having said that on the average across the company our price increases have been about three 6% year to date and against that we have wage increases that are <unk>.
And then products.
<unk> of that we buy.
Data have been about three 4% that's excluding <unk>.
The extra 2% that we pay for.
Scarce materials so those.
That's been a wash between the price increases and the inflation, where we've hired it is of course, we are spending.
<unk> 50, plus million dollars extra on getting our scarce product. So I think over time they'll go away.
Okay.
And lastly.
Which products or segments did you allow to roll off a flare.
Just really there was just an all tambien.
Product that they bought in December of 2000.
<unk> about four or five months before we bought them actually we were already in discussions with them and they pick that up and it was there.
I think there is basically an industrial commercial drone business.
No.
In a very difficult market Theyre 20 companies that of that ilk.
That are competing with one another me on that don't may not either by truck and 14 are very.
Really advanced.
Imaging systems on somebody else's truck I don't want to build those.
Expensive trucks, so that's the one.
Okay. Thank you.
Sure no.
And currently no further questions in queue.
Thank you very much.
Good.
If you would be kind enough operator, I'm going to ask Jason to conclude our conference call on them with strong.
Thanks, Robert and again, thanks, everyone for joining US. This morning are Brian if you could give the replay information at the end of the call that would be great and if you have follow up questions certainly feel free to call me as well bye bye.
And thank you, ladies and gentlemen, the call will be available for replay after Ken o'clock Pacific time today and running through November 6th at Midnight, you can access the AT&T replay system at anytime by dialing one 806 2071041 and entering the access code 11481.
One five.
International parties May dial four zero to 90 700847 <unk>.
Again, one 806 2071041.
International parties for zero to 90 700847 with the access code one <unk> four <unk> hundred 115 that does conclude our call for today. Thanks for your participation for using AT&T teleconference. You may now disconnect.