Q3 2023 Teledyne Technologies Inc Earnings Call

Okay.

That's right.

Speaker 1: Ladies and gentlemen, thank you for standing by. Welcome to Tel Avine's third quarter, Ernie's call. At this time, all participants are in listen only mode. Later, we will have a question and answer session. And instructions for queuing up will be provided for you at that time. Should you require operator assistance? Press star zero on your phone's keypad. And as a reminder, this conference call is being recorded.

Ladies and gentlemen, thank you for standing by and welcome to Teledyne's third quarter earnings call.

At this time all participants are in listen only mode. Later, we will have a question and answer session and instructions for queuing up will be provided for you at that time should you require operator assistance press Star zero on your calls keypad and as a reminder, this conference call is being recorded.

Speaker 2: I would now like to call over to your host, Mr. Jason VanWees. Please go ahead. Thanks, John . Good morning, everyone. This is Jason VanWees, Vice Chairman. And I'd like to welcome everyone to our third quarter, 2023, earnings release conference call. We released our earnings earlier this morning before the march.

I would now like to turn the call over to your host Mr. Jason bandwidth. Please go ahead.

Thanks, John and good morning, everyone. This is Jason then we used space chairman and I'd like to welcome everyone to our third quarter 2023 earnings release Conference call. We released our earnings earlier this morning before the market opened.

Speaker 2: Joining me today are Teledyne's Chairman, President and CEO Robert Morabian and Senior Vice President and CFO Sue Main. Also joining today are Steve Blackwood, who will assume the roll-up, SVP and CFO on December 1st.

Joining me today are teledyne's, chairman, President and CEO, Robert Mehrabian, Senior Vice President and CFO. Sue main also joining me today are Steve Blackbird will assume the role of SVP and CFO in December 1st.

Speaker 2: Melody Civic currently senior vice president general counsel chief compliance officer and secretary Who will be promoted to executive vice president on January 1st and Edwin rocks and George Bob currently Executive deputies of tele line will assume the roles of CEO and president and CEO of respectively on January

Melodies.

Currently senior Vice President General Counsel, Chief compliance Officer, and Secretary will be promoted to executive Vice President on January one.

Edwin rocks enjoying Bob currently executive VP, the Teledyne will assume the roles of CEO and President and COO, respectively on January one.

Speaker 2: After remarks by Robert and Sue, we will ask for your questions. Of course, before we get started, our 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 their periodic SEC filings. And of course, actual results made different material.

After remarks by Robert and Sue last few questions of course before we get started our 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 in order to avoid perpetual.

Speaker 2: In order to avoid potential selected disclosures, this call is simultaneously being webcast and a replay of both of my webcasts and dial-ins will be available for approximately one month. Here's Robert.

The 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 and good morning.

Speaker 3: and thank you for joining our earnings call. These are exciting times.

And thank you for joining joining.

Earnings call.

These are exciting times for Teledyne we.

Speaker 3: We have new leadership coming in, but we also have continuity and resilience in our programs, in our job.

We have new leadership coming in but we also have continue it.

And resilient Kroger.

Programs.

Speaker 3: operations and our ability to meet what we say we would do.

Operations and.

Our ability to meet.

What we say we would do.

Our earnings.

Speaker 3: In the third quarter, as a example, we achieved record operating margin and earnings per share.

In the third quarter guys. Thank you Brian.

<unk> record operating margin and.

And earnings per share.

GAAP operating margin of 18, 8%.

Speaker 3: Gap operating margin of 18.8% was a...

What was the a third quarter record.

On a non-GAAP basis, the operating margin was 22, 8%, which was an all time record for any quarter.

Speaker 3: On a non-gap basis, the operating margin was 22.8%, which was an all-time record.

Speaker 3: Likewise, gap earnings per share of $14.15.

Likewise GAAP earnings per share of $14 and 15.

Speaker 3: was a third quarter record and non-GAP earnings per share of $5.05 was an all-time record.

Was it third quarter record and non-GAAP earnings per share.

$5 and five.

It was an all time record for Teladoc.

Compared to last year.

Speaker 3: Compared to last year, gap and non-gap operating margins increased 119 and 86 basis points respectively. And both gap and non-gap earnings per share increased approximately 11%.

GAAP and non-GAAP operating margins increased $110 19, an.

86 basis points, respectively, and both GAAP and non-GAAP earnings per share increased approximately 11%.

Our overall third quarter performance was led by growth.

Speaker 3: Our overall third quarter performance was led by growth in our marine, medical, aerospace and certain defense businesses coupled with vigilant cost control.

Marine medical.

Aerospace and certain defense businesses, coupled with vigilant cost control.

Speaker 3: There was, however, some deterioration in certain end markets, such as industrial automation and laboratory instrumentation. Never delay.

There was however, some deterioration in certain end markets.

Such as industrial automation and laboratory instrumentation. Nevertheless.

Given our focus on operational excellence operating margins increased both sequentially and year over year in digital imaging and instrumentation segments, helping generate.

Speaker 3: given an art focus on operational excellence, operating margins increased both sequentially and year over year in digital imaging and instrumentation segments, helping generate record earnings.

Record earnings.

Given continued.

Speaker 3: That repayment, through September , we start of about $680 million a year to date, on our consolidate leverage ratio declined to just under two times. That repayment, through September , we start of about $780 million a year to date, on our consolidate leverage ratio declined to just under two times.

Debt repayment through September, which totaled about $680 million year to date.

Our consolidated leverage ratio declined to just under two times and finally.

Speaker 3: We're pleased to have added xenon networks to our test of measurement businesses, which also continued to perform very well in a challenging environment.

We're pleased to have added Zeno networks to our test <unk> measurement businesses.

We also continued to perform well.

Very well in a challenging environment.

In terms of our outlook.

Speaker 3: We now see total sales for 2023 growth of

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Teledyne's third quarter and earnings call. At this time, all participants are in listen only mode. Later, we will have a question and answer session. And instructions for queuing up will be provided for you at that time. Should you require operator assistance, press star zero on your phone's keypad. And as a reminder, this conference call is being recorded.

We now see total sales for 2023.

Growth of about 4%.

Speaker 3: or a little less than the second half versus our July outzook. With the fourth quarter sales being roughly 1.45 billion.

Or a little less than.

The second half versus our July outlook with the fourth quarter sales being roughly 145 billion.

Speaker 3: Approximately half of this change in incremental is due to incremental currency translation headwind

Approximately half of this change in incremental is due to incremental currency translation headwind.

Jason VanWees: I would now like to call over to your host, Mr. Jason VanWees. Please go ahead. Thanks, John.

Jason VanWees: Good morning, everyone.

Jason VanWees: This is Jason VanWees, Vice Chairman, and I'd like to welcome everyone to our third quarter, 2023, earnings release conference call. We released our earnings earlier this morning before the market opened.

Speaker 3: from July to now, and the balance being further deterioration industrial automation and laboratory instrumentation markets mentioned earlier.

From July to now.

And the balance being further deterioration in industrial automation and laboratory instrumentation markets mentioned earlier.

Jason VanWees: Join me today, our television chairman, president and CEO, Robert Mehrabian, and senior vice president and CFO, Sumein. Also joining today are Steve Blackwood, who will assume the rollup, SCP and CFO on December 1st. Melody Cibik, currently senior vice president, general counsel, chief compliance officer and secretary, who will be promoted to executive vice president on January 1st. And Edwin Rocks, and George Bob, currently executive DPs of Tel-Ain, who will assume the rolls of CEO and president and CEO of respectively on January 1st.

Hi, Eric.

Speaker 3: Given the strong margin and earnings achieved in the third quarter, we've raising our non-gap earning cost.

Given the strong margin and earnings achieved in the third quarter, we are raising our non-GAAP earnings outlook.

Speaker 3: to $19.25 at the midpoint from a prior outlook of $19.10.

$19.25 at the midpoint from our prior outlook of $19 10.

Speaker 3: I would not further comment on the performance of our poor sex.

I would now further comment on the performance of our four segments.

Third quarter sales in our digital imaging segment were flat compared to last year.

Speaker 3: Third quarter sales in our digital imaging segment were flat compared to last year.

Speaker 3: sales of extra products, infrared imaging detectors, and surveillance system increased year over year. But we're all set by lower sales of unmanaged ground systems and microelectromechanical systems or men.

Sales of X Ray products.

Jason VanWees: After remarks by Robert and Sue, we will ask your questions. Of course, before we get started, our attorneys have reminded me to tell you that all four looking statements made this morning are subject to various assumptions, risks and caveats as noted in the earnings release in their periodic SEC filings. And of course, actual results made different materially. In order to avoid potential selected disclosures, this call is simultaneously being webcast and to replay both via webcast and dial and will be available for approximately one month.

Infrared imaging detectors and surveillance system increased year over year, but were offset by lower sales of unmanned ground systems and micro electro mechanical systems or Mems.

Speaker 3: Sales of commercial marine hardware and software

Sales of commercial marine hardware and software.

Speaker 3: were flat, but declined organically. Finally, cameras and sensors for industrial automation declined compared to last year. Like.

We're flat but declined organically finally.

Cameras and sensors for industrial automation declined compared to last year.

Robert Mehrabian: Here's Robert. Thank you, Jason, and good morning. And thank you for joining our earnings call.

Like Teledyne as a whole.

Speaker 3: The digital imaging business port for you is exceptionally well balanced across market segments and geog...

The digital imaging business portfolio is exceptionally well balanced across market segments and geographies.

Robert Mehrabian: These are exciting times for Tel-Ain. We have new leadership coming in, but we also have continuity and resilience in our programs, in our operations and our ability to meet what we say we would do. In the third quarter, as a example, we achieved record operating margin and earnings per share. Gap operating margin of 18.8% was a third quarter record. On a non gap basis, the operating margin was 22.8%, which was an all time record for any quarter.

Speaker 3: with the help of bolt-on acquisitions and growth in our medical and defense markets.

With the help of bolt on acquisitions and growth in our medical and defense markets.

Speaker 3: We were able to offset declines in industrial automation and it's and the small portion of our overall portfolio that is associated with consumer discretionary spending.

We were able to offset declines in industrial automation and it's and the small portion of our overall portfolio that is associated with consumer discretionary spending.

Despite the flat revenue margin performance improved considerably to.

Speaker 3: Despite the flat revenue, Margie's performance improved considerably to record levels, with the FLIR businesses collectively slightly higher than segment average margins.

To record levels with the player businesses collectively slightly higher than segment average margins.

Turning to our instrumentation businesses this segment.

Speaker 3: Turning to our instrumentation businesses, this segment.

Robert Mehrabian: Likewise, gap earnings per share of $14.15 was a third quarter record and non gap earnings per share of $5.05 was an all time record for Tel-Ain. Compared to last year, gap and non gap operating margins increased 119 and 86 basis points respectively and both gap and non gap earnings per share increased approximately 11%. Our overall third quarter performance was led by growth in our marine, medical, aerospace and certain defense businesses coupled with vigilant cost controls.

Speaker 3: consists of marine instruments, test and measurement and environmentalism.

Consists of marine instruments test and measurement and environmental instruments.

Speaker 3: Overall, third quarter sales in instrumentation segments increased 7.4% versus last year.

Overall third quarter sales in instrumentation segment increased seven 4% versus last year.

Speaker 3: Sales of marine instruments increased 20.5% in the quarter, primarily due to ongoing recovery in offshore energy markets and also greater sales of acoustic.

Sales of marine instruments increased 25% in the quarter, primarily due to ongoing recovery in offshore energy markets and also.

Greater sales of acoustic imaging systems.

Speaker 3: Sales of electronic test and measurement systems, which includes a fellowships, digitizers, and protocol analyzers collectively increased 2.5%.

Sales of electronic test and measurement systems, which includes casino scopes digitize their exam protocol analyzers collectively increased two 5%.

We continue to see some softness in sales of analyzers for electronic storage of data center application, but.

Speaker 3: We continue to see some softness in sales of analyzers for electronic storage and data center applications. But...

Robert Mehrabian: There was, however, some deterioration in certain end markets, such as industrial automation and laboratory instrumentation. Nevertheless, given our focus on operational excellence, operating margins increased both sequentially and year-over-year in digital imaging and instrumentation segments, helping generate record earnings. Given continued debt repayment through September, we thought of about $680 million year to date, our consolidate leverage ratio declined to just under two times. And finally, we're pleased to have added xenon networks to our test and measurement businesses, which also continued to perform very well in a challenging environment.

Speaker 3: This was more than offset by sales of devices for wireless and video protocols, as well as continued strong sales of oscilloscopes.

This was more than offset by sales of devices for mobile wireless and <unk>.

Video protocols as well as continued strong sales of <unk>.

Demand for high speed networking customers remained very healthy.

Speaker 3: Demand for high-speed networking customers remains very healthy. And we see the Zina acquisition enhancing our alterings in this market.

We see the zena acquisition enhancing our offerings in this market.

Speaker 3: Sales of environmental instruments decreased slightly compared to last year, with sales of air quality and gas and flame safety analysis analyzers of settings.

Sales up.

Environmental instruments decreased slightly compared to last year with sales of air quality and gas flame safety analysis analyzers.

Setting.

Some decline in drug discovery and laboratory instruments.

Speaker 3: some decline in drug discovery and laboratory instruments.

Overall.

Speaker 3: Instrumentation segment operating profit increased over 20% in the third quarter with gap operating margins increasing 277 basis points to 26% and 253 basis points on a non-gap basis to 27%.

Instrumentation segment operating profit increased over 20% in the third quarter.

GAAP operating margin, increasing 277 basis points to 26% and 253 basis points on a non-GAAP basis to 27%.

Robert Mehrabian: In terms of our outlook, we now see total sales for 2023 growth of about 4%. Or a little less than the second half versus our July outlook, with the fourth quarter sales being roughly 1.45 billion. Approximately half of this change in incremental is due to incremental currency translation, Edwin, from July to now, and the balance being further deterioration in industrial automation and laboratory instrumentation markets mentioned earlier. However, given the strong margin and earnings achieved in the third quarter, we've raising our non-gap earnings outlook to $19.25 at the midpoint from a prior outlook of $19.10.

Speaker 3: These were all time records for this.

These were all time records for this segment.

Third quarter sales in our aerospace and defense Electronics segment increased eight 1%.

Speaker 3: Third quarter sales in our aerospace and defense electronics segment increased 8.1 percent.

Speaker 3: driven by growth, both in defense electronics and commercial aerospace products.

Given by growth both in defense electronics, and aerospace commercial aerospace products.

Speaker 3: Gap and non-gap operating profit increased 11.5%, with margins 81 basis points greater than last year.

GAAP and non-GAAP operating profit decreased 11, 5%.

With margins 81 basis points greater than last year.

Finally.

Speaker 3: Finally, in the engineering system segment.

In the engineering systems segment.

Speaker 3: Third quarter revenue increased 4.1%, but operating profit declined slightly, given an unfavorable product mix, but also a tough comparison with the prior year period.

Third quarter revenue increased four 1%, but operate operating profit declined slightly given.

Unfavorable product.

Robert Mehrabian: I will now further comment on the performance of our fourth segment. Third quarter sales in our digital imaging segment were flat compared to last year. Sales of extra products, infrared imaging detectors, and surveillance system increased year over year, but were all set by lower sales of unmanned ground systems and microelectromechanical systems or men's. Sales of commercial marine hardware and software were flat but declined organically. Finally, cameras and sensors for industrial automation declined compared to last year.

But also the tough comparison with the prior year period.

So in conclusion.

Speaker 3: We are pleased to continue to do what we know best.

We are.

Pleased to continue to do what we know best.

Speaker 3: growth sales and margin in businesses with favorable markets.

Gross sales and margin in businesses with favorable markets.

Speaker 3: while cutting costs and protecting margins in those businesses where market trends are more challenging.

While cutting costs protecting margins in those businesses where market trends are more challenging.

At the same time.

Speaker 3: Especially now that our leverage continues to decline, we should acquire and integrate complementary businesses. Before.

<unk> now that our leverage continues to decline, we should acquire and integrate complementary businesses.

Before turning the call to Sue.

Speaker 3: I want to thank her for her more than 34 years of service to Teledyne, and I wish her a very, very well-earned retirement. I will greatly miss her.

I want to tanker for more than 34 years of service to Teledyne.

And are we shared very very well earned retirement I will greatly miss it.

Robert Mehrabian: Like it's exceptionally well balanced across market segments and geogas, with the help of both on acquisition and growth in our medical and defense markets, we were able to offset declines in industrial automation and the small portion of our overall portfolio that is associated with consumer discretionary spending. The third level with the player business is collectively slightly higher than segment average margins. Turning to our instrumentation businesses, this segment consists of marine instruments, test and measurement and environmental instruments.

Speaker 3: And finally, I want to congratulate our other executives.

And finally <unk>.

I want to congratulate our other executives.

Speaker 3: on their well-deserved promotions announced yesterday, and I and the entire board are delighted that the same talented group of executives will continue to serve Teledyne's leadership.

On the well deserved promotions.

Yesterday, and I and the entire board.

We are delighted that the same talented group of executives will continue to serve teledyne's leadership.

Sue.

Speaker 4: Thank you, Robert, for the kind words and good morning, everyone.

Thank you Oliver for the kind of light and good morning, everyone.

Speaker 4: 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 2023 outlook. In the third quarter, cash flow from operating activities was $278.2 million. Free cash flow, that is, cash from operating activities less capital expenditures was $255.2 million in the third quarter of 2022.

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 2023 outlet in the third quarter cash flow from operating activities was $278 2 million.

Free cash flow that is cash from operating activities less capital expenditures was $255 $2 million in the third quarter of 2023.

Robert Mehrabian: Overall third quarter sales in instrumentation segment increased 7.4% versus last year. Sales of marine instruments increased 20.5% in the quarter, primarily due to ongoing recovery in offshore energy markets and also greater sales of acoustic imaging systems. Sales of electronic test and measurement systems, which includes oscilloscopes, digitizers and protocol analyzers collectively increased 2.5%. We continue to see some softness in sales of analyzers for electronic storage and data center application. But this was more than offset by sales of devices for wireless and video protocols as well as continued strong sales of oscilloscopes.

Speaker 4: compared with $252.2 million in 2020.

Paired with $252 $2 million in 2022.

Speaker 4: Capital expenditures were $23 million of the third quarter of 2023 compared with $16.7 million in 2022.

Capital expenditures were $23 million.

Third quarter, 2023, compared with $16 7 million.

2022.

Speaker 4: depreciation and amortization expense was $76.9 million for the third quarter of 2023 compared with $80.8 million.

Depreciation and amortization expense was $76 9 million for the third quarter of 2023 compared with $88 million.

Speaker 4: We ended the quarter with approximately $2.74 billion of net debt. That is approximately $3.24 billion of debt less cash of $508.6 million.

We ended the quarter with approximately $2 $74 billion at NEP.

Net debt that is approximately $3 billion to $4 billion of debt less cash of $508 6 million.

Our stock based compensation expense was $8 million in the third quarter of 2020.

Speaker 4: Our stock-based compensation expense was $8 million in the third quarter of 2023, compared with $6.7 million in 2012.

Compared with $6 $7 million in 2022.

Speaker 4: Turning to our outlook, management currently believes that GAAP earnings per share in the fourth quarter of 2023 will be in the range of $4.07 to $4.21 per share, with non-GAAP earnings in the range of $4.95 to $5.05.

Turning to our outlook management currently believes that GAAP earnings per share in the fourth quarter of 2023 will be in the range of $4 70.

Two $4 21 per share with non-GAAP earnings in the range of $4 95.

Robert Mehrabian: Demand for high speed networking customers remained very healthy and we see the Zeno acquisition enhancing our alterings in this market. Sales of environmental instruments decreased slightly compared to last year with sales of air quality and gas and flame safety analysis analyzers of setting some decline in drug discovery and laboratory instruments. Overall instrumentation segment operating profit increased over 20% in the third quarter with gap operating margins increasing 277 basis points to 26% and 253 basis points on a non-gap basis to 27%.

To $5 and five.

Speaker 4: And for the full year 2023, our gap earnings per share outlook is now $15.82 to $15.96. And on a non-gap basis, we are raising our outlook to $19.20 to $19.30.

And for the full year 2023, our GAAP earnings per share outlook is now $15 an ADT.

$15 96.

And on a non-GAAP basis, we are raising our outlets to $19 and 22.

$19 30.

Speaker 4: Both the fourth quarter and full year non-GAAP outlet excludes estimated pre-tax charges for further FLIR integration.

Both the fourth quarter and full year non-GAAP outlook excludes estimated pretax charges, but further integration costs. The 2023 full year estimated tax rate excluding discrete items is expected to be 22, 1% I will now pass the call back to Atlas.

Speaker 4: The 2023 full year estimated tax rate, excluding discrete items, is expected to be 22.1 percent.

Speaker 3: Thank you, Sue. Operator, we'd now like to take questions. If you're ready to proceed with the questions and answers, please go ahead.

Thank you Sue.

Operator, we'd now like to take questions. If youre ready to proceed with the questions and answers. Please go ahead.

Speaker 1: Thank you, sir. Ladies and gentlemen, if you're using a speakerphone or a Bluetooth connected device, please switch over to your handset, if available, so we can hear you clearly. To queue up, press 1-0 on your phone's keypad. You'll hear a tone indicating you've been placed in queue and can withdraw from queue by pressing 1-0 a second time. Once again, to queue up, please press 1, then 0. And we'll go to our first question. It's coming from Jim Ricciuti with Needham & Company. Please go ahead.

Thank you, Sir ladies and gentlemen, if you're using a speaker phone or a Bluetooth connected device. Please switch over to your handset are available. So we can hear you clearly.

Robert Mehrabian: These were all time records for this segment. Third quarter sales in our aerospace and defense electronic segment increased 8.1% driven by growth both in defense electronics and aerospace commercial aerospace products. Gap and non-gap operating profit increased 11.5% with margins 81 basis points greater than last year. Finally, in the engineering system segment, third quarter revenue increased 4.1%, but operating profit declined slightly, given an unfair above product needs, but also a tough comparison with the prior year period.

<unk> one zero on your phone's keypad, and you will hear a tone, indicating you've been placed in Q, Ken withdraw from Q pressing ones here a second time.

Once again to queue up please press one zero.

And we will go to our first question is coming from Jim Ricchiuti with Needham <unk> Company. Please go ahead.

Yeah.

Good morning, Jim.

Speaker 1: One moment, your line didn't open properly, Jim. One second, please.

Oh, one moment Youre line is open Papa Jim one second please.

Yes.

Speaker 1: Okay, there you go. It just got hung up. Go ahead. You may proceed.

Okay. There you go it just got hung up.

Go ahead.

<unk>.

Speaker 5: Thank you. By the way, congratulations to and congratulations to everyone else on the new appointments. Robert, maybe a question for you.

Thank you.

The way, Kevin Congratulations Sue and congratulations to everyone else.

On the.

New appointments.

Robert maybe a question for you.

Speaker 5: You talked about the booking strength at FLIR last quarter, and I'm wondering, how did that business fare Q3 from a booking standpoint, and what's the near term outlook look like in the Teledyne FLIR business? And maybe as a follow up, if you could provide a little bit more color on the overall level of bookings and various bookings at the segment level. Thank you.

You talked about.

The bookings strength at Leer last quarter and I'm wondering.

Robert Mehrabian: So, in conclusion, we are pleased to continue to do what we know best. Gross sales and margin in businesses with favorable markets, while cutting costs and protecting margins in those businesses where market trends are more challenging. At the same time, especially now that our leverage completely used to decline, we should acquire and integrate complementary businesses.

How did that business fair Q3 from a booking standpoint, and whats the near term outlook look like in the Teledyne clear business and maybe as a follow up if you could provide a little bit more color on the overall level of bookings.

Various bookings at the segment level. Thank you.

Speaker 3: Thank you, Jim. I would say on the FLIR specific.

Thank you Jim I would say on the player specific.

Speaker 3: We're moving up to 0.93, 0.95 at the present time with improvements in the defense segment.

We're moving up to $93 95 at the present time with <unk>.

Improvement in the defense segment.

Robert Mehrabian: Before turning the call to Sue, I want to thank her for her more than 34 years of service to Teledyne and I wish her a very well-earned retirement. I will greatly miss her. And finally, I want to congratulate our other executives on their well-deserved promotions and our yesterday and I and the entire board are delighted that the same talented group of executives will continue to serve Teledyne's leadership.

Speaker 3: The defense is going to be over one, actually, for fluid defense. We have any inflection in the defense businesses there in the second quarter. And we have some really good new awards that makes us feel good about that domain. Going to the rest of overall...

The address is.

Going to be over one actually for our fluids business, we had any inflection.

In the defense businesses, there in the second quarter.

And we have some really good new award that.

It makes us feel good about that domain going to the rest of overall.

Book to Bill Jim.

Speaker 3: book-to-bill, Jim, I will exclude the engineer system because sometimes it would, when big lumpy orders might increase book-to-bill to 1.4, 1.5 or drop it to 0.6 depending on the quarter. So if I exclude that, I think we will be over 0.9 at this time.

I will exclude engineered systems, sometimes they would.

Big lumpy orders might increase.

Sue: Sue?

Book to Bill to 1415 were dropped to six depending on the quarter. So if I exclude that.

Sue: Thank you, Robert, for the kind words 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 2023 outlook. In the third quarter, cash flow from operating activities was $278.2 million. Free cash flow, that is, cash from operating activities less capital expenditures was $255.2 million in the third quarter of 2023, compared with $252.2 million in 2022.

I think we will be over nine.

Nine at this time.

But.

Speaker 3: That is not a big concern at the present because where we have some softness in certain markets, we are gaining traction in markets like energy, defense, health care, and that's why our margins are improving and we're projecting better earnings as we go forward.

That is not a big concern at the present, because we're we have some softness in certain markets.

We are gaining traction in markets like energy defense healthcare.

And that's why our margins are improving.

We are projecting.

Sue: Capital expenditures were $23 million in the third quarter of 2023, compared with $16.7 million in 2022. Depreciation and amortization expense was $76.9 million for the third quarter of 2023, compared with $80.8 million. We ended the quarter with approximately $2.74 billion of net debt, that is approximately $3.24 billion of debt less cash of $508.6 million. Our stock-based compensation expense was $8 million in the third quarter of 2023, compared with $6.7 million in 2022.

Better earnings as we go forward.

Got it.

Speaker 5: Got it. And can you give an update on the facilities, realignment, and clear? And when do you expect to see the meaningful improvement on margins as it relates to these moves? Or maybe you're already starting to see some of those benefits? Right.

Can you give an update on the facilities realignment at year end.

And when when do you expect to see the meaningful improvement on margins as it relates to these moves or maybe you're already starting to see some of those benefits.

Yes, Jim we are already seeing those benefits first of all.

Speaker 3: Yeah, Jim, we're already seeing those benefits. First of all, most everything will be done in the March to April timeframe. The reductions in four.

Most everything will be done in the March to April timeframe the reductions in force.

Speaker 3: Majority of them have happened and the risk will happen in the Q4 time frame

A majority of them have happened and the rest will happen in the Q4 timeframe.

The facility closures transfer of one facility to another that will happen in early next year, but having said that.

Speaker 3: The facility closures, transfer of one facility to another, that would happen in early next year. But having said that, coming back to the margins.

Sue: Turning to our outlook, management currently believes that gap earnings per share in the fourth quarter of 2023 will be in the range of $4.7 to $4.21 per share with non-gap earnings in the range of $4.95 to $5.5. And for the full year 2023, our gap earnings per share outlook is now $15.82 to $15.96. And on a non-gap basis, we are raising our outlook to $19.20 to $19.30. Both the fourth quarter and four-year non-gap outlook excludes estimated pre-text charges or further flair integration costs. The 2023 full-year estimated tax rate excluding discrete items is expected to be 22.1%.

Coming back to the margins.

Speaker 3: Flair margins have really improved this quarter, both because of the cost reduction also, because of the mix of businesses that we have, and digital imaging as a whole, which includes the all-sided to be.

Flare margins have really improved this quarter, both because of the cost reduction also because of the mix of businesses that we have and digital imaging as a whole which includes the answer I need to be.

Speaker 3: At the end of last quarter, we were looking at perhaps a little margin detriment of 15 patients.

At the end of last quarter, we were looking at perhaps a little margin detriment up 15 basis points that is now turned around we expect.

Speaker 3: That has not turned it on. We expect for the year to be margins to be up 20 basis points. So about 35 basis points, 40 basis points improvement over a quarter because of the focus on.

For the year to the margins to be up 20 basis points. So.

About 35 basis points 40 basis points improvement over a quarter because of the.

Sue: I will now pass the call back to others. Thank you, Sue.

Focus on costs.

Operator: Operator, we'd now like to take a question if you're ready to proceed with the question and answer, please go ahead. Thank you, sir. Ladies and gentlemen, if you're using a speaker phone or a Bluetooth connected device, please switch over to your handset of available so we can hear you clearly. To queue up, press 1-0 on your phone's keypad. You'll hear a tone indicating you've been placed in queue and can withdraw from queue by pressing 1-0 a second time. Once again, to queue up, please press 1-0.

Got it thank you very much.

Speaker 5: Got it. Thank you very much and I'll go back into the kit.

I'll go back into the queue.

Thank you Jim.

Our next question comes from Ron Epstein with Bank of America.

Speaker 1: Our next question comes from Ron Epstein with Bank of America. Mr. Epstein, go ahead, please. Hi, good morning. This is Jordan. I'm Ron.

Go ahead please.

Hi, Good morning, this is Jordan on for Ron.

Yes.

Good morning, Jordan.

Speaker 6: So, I just have a quick question. Could you guys walk us through any of the exposure you guys have to the Israel-Palestine conflict? And if you're seeing any increase in Heritage FLIR program interest or any big changes coming from outlays? It's really bad, specifically. I think...

So I just had a quick question could you just walk us through any of the exposure you guys have today, Israel Palestine conflict.

Jim Ricchiuti: We'll go to our first question is coming from Jim Ricciuti with Needham and Company. Please go ahead. Good morning, Jim. No, one moment. Your line didn't open properly, Jim. One second, please. Okay, there you go. It just got hung up. Go ahead. You may proceed. Thank you.

And if youre seeing any increase in heritage clear program interest.

Big changes.

Coming from outlays.

Okay.

I think.

Damian.

Speaker 3: We have some background noise. I think basically, we expect in the long term.

We have some background noise.

<unk>.

We expect in the long term to have.

Robert Mehrabian: By the way, congratulations, Sue, and congratulations to everyone else on the new appointments. Robert, maybe a question for you. You talked about the booking strength at FLIR last quarter. And I'm wondering, how did that business fair queue three from the booking standpoint? And what's in your term now? Look, look like in the color dying clear business. And maybe as a follow-up, if you could provide a little bit more color on the overall level of bookings and various bookings at the segment level, thank you.

Speaker 3: to have some borders in our defense businesses from that.

To have some orders in our defense businesses from that.

Speaker 3: We are a supplier, obviously. And we...

We are a supplier.

Lee.

And.

We.

Think that.

Speaker 3: conflict, unfortunately, to conflict is what it is. But I think I'm not that liberty to disclose, but we have contributed to some of the...

The conflict. Unfortunately, the conflict is what it is but I think.

I'm not at Liberty to disclose but we have contributed to some of the.

Defense mechanisms that are used.

Speaker 3: defense mechanisms that are used by Israel. The other part is...

By Israel.

The other part is that.

Yes.

Speaker 3: The first thing that will happen is that there will be a refreshment of the stock files in the defense business.

The first thing that will happen is that there'll be a refreshment of the stockpile files.

Robert Mehrabian: Thank you, Jim. I would say on the FLIR specific, we're moving up to 0.93.95 at the present time with improvements in the defense segment. And defense is going to be over one, actually, for FLIR defense. We have any inflections in the defense businesses there in the second quarter. And we have some really good new awards that makes us feel good about that domain going to the rest of overall book to build Jim.

In the defense businesses.

Speaker 3: both because of the conflict in Israel, but also as well as the conflict in Europe . And these are present themselves as obviously long-term opportunities. What the FLIR Defense Program, but also our aerospace and defense sector.

Both because of.

The conflict in Israel with us as well as the conflict in Europe.

These are present themselves as obviously long term opportunities.

Player defense programs, but also our aerospace and defense segment that has a lot of components and sub systems that go into various.

Speaker 3: that has a lot of components and subsystems that are going to various products.

Products.

Great. Thank you.

Thank you George.

Robert Mehrabian: I will exclude the engineer system because sometimes when big, lumpy orders might increase book to build to 1.4, 1.5 or drop it to 0.6 depending on the quarter. So if I exclude that, I think we will be over 0.9 at this time. But that is not a big concern at the present because where we have some softness in certain markets, we are gaining traction in markets like energy defense, health care. And that's why our margins are improving and we're projecting better earnings as we go forward.

Speaker 1: Next for go, Jo Joe geodorll with the P D coor. Go ahead Please. Good morning guys.

Next we'll go GA Joe Giordano.

With the TD Cowen go ahead. Please.

Hey, good morning, guys good.

Morning, Joe.

Speaker 7: Just curious on the management changes that you articulated for January 1st. Is there any real change in the org structure internally just in terms of how the businesses are going to roll up? You have a COO now. It's just curious if there's any kind of like...

Just curious on the on the management changes that you articulated for January one is there any real change in the org structure internally and just in terms of how the businesses are going to roll up.

As you all know.

I'm just curious if theres any kind of like a.

Speaker 7: structural changes and how the business is going to report.

Structural changes in how the business is going to report.

Speaker 3: Yeah, I think that's a good question, Joe. The two things. First,

Yes, I think that's a good question Joe.

Two things first.

Speaker 3: We have one sub-segment, which is in the instruments businesses. Remember, instruments consist of marine environmental test and measurement. The marine already report...

We have one.

Subsegment, which is in the instruments businesses remember instruments consists of marine <unk>.

Environmental test and measurement.

Robert Mehrabian: Got it and can you give an update on the facilities, realignment, and clear and when do you expect to see the meaningful improvement on margins as it relates to these moves or maybe you're already starting to see some of those benefits. Yeah, Jim, we're already seeing those benefits. The reductions in force, majority of them have happened and the rest will happen in the Q4 timeframe. The facility closures transfer upon facility to another that will happen in early next year, but having said that coming back to the margins.

The marine already reports through George Bob.

Speaker 3: the test and measurement and environmental report to me. Those would begin reporting to George in January .

The test and measurement and environment that reports to me those would begin reporting to George.

In January.

Edwin its been running our biggest segment, which is our.

Speaker 3: Edwin has been running our biggest segment, which is our digital imaging segment.

Digital imaging segment.

He'll continue running that for a while.

Speaker 3: But as time goes on over the next 12 to 18 months

But as time goes on over the next 12 to 18 months.

Speaker 3: They would begin harmonizing George learning more about the digital imaging businesses and have been more learning more about the businesses that George is running at the present time.

That will begin.

Harmonizing.

George learning more about the digital imaging businesses in ethylene more learning more about the businesses that Georgia is running at the present time.

The resilience to all of this is that I'm not going anywhere.

Speaker 3: The resilience to all of this is that I'm not going anywhere. We'll continue to work together, the three of us, also, of course, with others like Jason and Steve Blackwood and Melanie, to make sure that all the assignments.

Robert Mehrabian: Clear margins have really improved this quarter, both because of the cost reduction also because of the mix of businesses that we have. And digital imaging as a whole, which includes also need to be at the end of last quarter, we were looking at perhaps a little margin detriment of 15 basis points. That has not turned it on. We expect for the year to be margins to be up 20 basis points. So about 35 basis points, 40 basis points improvement over a quarter because of the focus on cost. Got it. Thank you very much and I'll go back into the queue. Thank you Jim.

We will continue to work together.

The three of Us all.

Also of course with others like Jason and <unk>.

Steve Blackfoot and Melanie to make sure that all of the assignment changes happen slowly orderly and don't upset any of our markets.

Speaker 3: changes happen slowly or there and don't upset any of our market leading products that we're focused on. So I see this as a continuum.

Leading products that we're focused on.

I see this as a continuum.

Speaker 3: But one in which both Edwin and George take more responsibility, and I move to more to worrying about how to allocate capital with Jason, do more M&A, and also improve our margins, which is something we have to do.

But one in which both Edwina George take more responsibility.

And I move to more to worrying about how to.

Allocate capital with Jason do more M&A and also improve our margins, which is something we have to do continuously.

Jordan: All right, next question comes from Ron Epstein with Bank of America. Distracting. Go ahead, please. Hi, good morning. This is Jordan on for Ron. Good morning, Jordan. So I just had a quick question.

I appreciate that color there.

Speaker 7: I appreciate that fellow there. If I go over to DI margins, I mean obviously that's been a focus area for investors and for you guys.

If I go over to GI margins I mean, obviously, that's been a focus area for investors and for you guys.

Speaker 7: pretty substantially higher than maybe what people anticipated this quarter. Here's if there was any kind of one-off type benefits going on this quarter then maybe we have to consider reversing out. And then, you know, into next year, we have time before we get there, but I think you guys have been at conferences recently talking about maybe 23% as a good target for next year as an early, you know, early target. You're kind of gonna be there now if you think this year's up up 20 bits, you're kind of gonna be almost at 23 for this year.

Pretty substantially higher than maybe what people anticipated. This quarter curious if there was any kind of one off type benefits going on this quarter than maybe we have to consider reversing out and then into next year and we have time before we get there, but I think you guys have been at conferences recently talking about maybe 23% is a good target for next year is it early.

George Bobb: Could you guys walk us through any of the exposure you guys have to the Israel Palestine conflict? And if you're seeing any increase in heritage flare program interest, where any big changes coming from outweighs? It's really good. I think we have some background. I think basically we expect in the long term to have to have some borders in our defense businesses from that we have we are a supplier, obviously. And we think that the conflict is unfortunately the conflict is what it is.

Early target Youre kind of going to be there now if you think this year is up 20 bps youre kind of going to be almost a 23 for this year. So.

Is that does that target now just become that much more conservative how should we think about that.

Speaker 7: Is that target now to become that much more conservative? How should we think about that?

Uh huh.

Speaker 3: That's that's good one. Actually, you're right. The margins have improved right now. We're projecting for the full year.

That's a good one.

Actually you are right the margins have improved right now we are projecting for the full year.

Speaker 3: a 23 to be at 22.7%. So it's very close to the 23% that you mentioned.

'twenty three to be at 22, 7%. So it's very close to the 23% that you mentioned.

Speaker 3: Moving further up, of course, that's what we're going to strive for. We have to take a little more cost out in Dulce E2V as we've done in FLIR and we're doing that right now.

Moving further up of course, that's what we're going to strive for react to take a little more cost out in <unk> as we've done in FLIR and we're doing that right now and.

George Bobb: But I think I'm not that liberty to disclose, but we have contributed to some of the defense mechanisms that are used by Israel. The other part is that the first thing that will happen is that there be a refreshment of the stock file in the defense business. Both because of the conflict in Israel but also as well as the conflict in Europe. And these are present themselves as obviously long term opportunities. What the Flair Defense Program, but also our aerospace and defense segment that has a lot of components and subsystems that are going to various products. Great. Thank you. Thank you, George.

Speaker 3: The other part that I think would affect it is that some of the markets that are declined like semiconductor, automation sensors in our businesses.

The other part that I think would affected is that some of the markets that are declined like semiconductor automation sensors in our vision systems. Those are going to come back and then finally, we have some new markets for our digital imaging.

Speaker 3: Those are going to come back. And then finally, we have some new markets for our digital imaging. For example, inspection of lithium ion baths.

Sam for inspection of lithium ion batteries.

Speaker 3: You remember now most of that manufacturing is beginning to switch back to North America and we do have some really good systems.

You remember now most of that manufacturing is beginning to switch back to North America, and we do have some really good.

Our systems.

Speaker 3: for quality control, and you can guess in a lithium-ion battery, a flaw can be catastrophic. So these new cameras, new markets will offset some of the declines we have now, but I also think that the semi-market will come back. So if all of that takes place, as I've just outlined, obviously our margins should improve.

For quality control.

And you can guess.

<unk> battery.

<unk> can be catastrophic. So these new cameras, new markets will offset some of the declines we have now but I also think that the semi market will come back. So if all of that takes place as I've just outlined obviously our margins should improve.

Joe Giordano: Next we'll go to Joe Giordano with TD College. Go ahead, please. Good morning, guys. Good morning, Joe. Just curious on the management changes that you articulated for January 1st. Is there any real change in the org structure internally just in terms of how the businesses are going to roll up? You have a COO now? It's just curious if there's any kind of like structural changes and how the business is going to report.

Speaker 7: If I could just sneak in one last one. If I think about your social business, I know that's growing very quickly now on delivery of backlog, but if you think about where orders have been all year.

If I can just sneak in one last one if I think about your so let's hope business I know thats growing very quickly now on delivery of backlog, but if you think about where orders have been all year.

Speaker 7: And let's say we don't like abstinent inflection in your term in orders. Is that a business that likely declines just given where your backlog is and what you're delivering this year, if I think into 24?

And let's say, we don't like absent an inflection in near term in orders is that a business that likely decline just given where we are in your backlog is and what you're delivering this year and if I, if I think into 'twenty four.

Robert Mehrabian: Yeah, I think that's a good question, Joe. The two things. First, we have one sub-segment, which is in the instruments businesses. Remember instruments consist of marine environmental test and measurement. The marine already reports to George Bob. The test and measurement and environmental report to me those would begin reporting to George in January. Edwin has been running our biggest segment, which is our digital imaging segment. He'll continue running that for a while, but as time goes on over the next 12 to 18 months, they would begin harmonizing.

No I think I think we feel very good about our <unk> business first remembered as you said part of it is oscilloscope part of it is digitizing.

Speaker 3: No, I think, I think we're very good at about our tier-end business. First, remember, as you said, part of it is oscilloscope. Part of it is digitizers. And if very fast-growing part has been our protocol analyzes, where we've just made the acquisitions in our acquisition, the...

And its very fast growing part has been our protocol analyzers read we just made.

Acquisitions in our acquisition.

The.

Book to Bill in that business.

Speaker 3: It's between 9495 at this time. 49495.

Is between 94% 95 at this time 90 495.

Speaker 3: By the way, in protocols, we don't really see declines, what we see is a little push out because new standards are continuously evolving and our protocols are at the forefront of those standards. So people will be adapting those. But while those have softened a little bit, the oscilloscope, because we are also offering new products, are doing fine.

Any decline by the way in protocols, we don't really see declines what we see is a little pushout because new standards are continuously evolving in our protocols are at the forefront of those standards. So people will be adapting dose, but while those have softened a little bit the oscilloscope because we.

Robert Mehrabian: George learning more about the digital imaging businesses and Edwin more learning more about the businesses that George is running at the present time. The resilience to all of this is that I'm not going anywhere. We'll continue to work together. George, the three of us, also, of course, with others like Jason and Steve Blackwood and Melanie, to make sure that all the assignments changes happen slowly, orderly, and don't upset any of our market leading products that we're focused on.

We are also offering new products are doing fine.

Speaker 3: I know that market may not look as exciting now that it has known before, but it is for us. It's very exciting.

I know that.

That market may not look as exciting now.

As it is known before but it is Florida is very exciting.

Thanks, guys.

Thank you.

Speaker 1: Unless we will go now to Greg Conrad with Jeffries. Go ahead sir. I couldn't...

And next we will go now to Greg Conrad with Jefferies Go ahead Sir.

Good morning.

Good morning, Greg.

And maybe just to level set the guidance for the year in terms of revenue I mean, you mentioned industrial automation and laboratory instrumentation softening, but can you just remind us where FX is the biggest headwind given you said that was off of.

Speaker 8: Maybe just to level set the guidance for the year in terms of revenue. You mentioned industrial automation and laboratory instrumentation softening, but can you just remind us where FX is the biggest headwind menu that was half of the impact just kind of thinking about the segments for the rest of the year?

Robert Mehrabian: I see this as a continuum, but one in which both Edwin and George take more responsibility, and I move to more to worrying about how to allocate capital with Jason, do more M&A, and also improve our margins, which is something we have to do continuously. I appreciate that fellow there.

The impact just kind of thinking about the segments for the rest of the year.

Speaker 3: Yeah, the effects that I've mentioned is versus what we were looking at in July . And things have tightened. And it's costing us.

Yes.

The FX that I mentioned.

<unk> is versus what we were looking at in July and things have tightened and it's costing us about a percent and it's mostly focused in our.

Speaker 3: about a percent and it's mostly focused in our digital imaging and instrumentation businesses. Having said that, overall, if you look at year over year, we do get a little tailwind, but it tightens significantly from our July meeting to today. Eb.

Robert Mehrabian: If I go over to DI margins, obviously that's been a focus area for investors, and for you guys, it was pretty substantially higher than maybe what people anticipated this quarter. If there was any kind of one-off type benefits going on this quarter, then maybe we have to consider reversing out. And then, you know, into next year, we have time before we get there, but I think you guys have been at conferences recently talking about maybe 23% as a good target for next year, as an early target.

Digital imaging and instrumentation businesses, having said that.

Overall, if you look at year over year, we do get a little tailwind but.

<unk> tightened significantly from our July meeting through today.

Speaker 3: We'll deal with it like we deal with any market softening here and there. I mean, basically focus on getting products off where there's a good market, cut costs where we don't have the market in through our margins. And if we can do what we just did, beat and raise.

We'll deal with it like we deal with any market softening here and there I mean basically focus on getting product software there is a good market.

Robert Mehrabian: You're kind of going to be there now, if you think this year is off of 20 bits, you're kind of going to be almost at 23 for this year. Is that target now just become that much more conservative? How should we think about that?

Costs, where we don't have the market improve our margins and if we can do what we just did beat and raise.

Okay and then.

Robert Mehrabian: That's a good one. Actually, you're right. The margins have improved. Right now, we're projecting for the full year, 23 to be at 22.7%. So it's very close to the 23% that you mentioned. Moving further up, of course, that's what we're going to strive for. We have to take a little more cost out in Dalsa E2V, as we've done in FLIR, and we're doing that right now. And the other part that I think would affect it is that some of the markets that are declined like semiconductors, automation sensors in our vision systems, those are going to come back, and then finally, we have some new markets for our digital imaging, for example, inspection of lithium ion batteries.

The operating discipline and definitely comes through.

Speaker 3: You know, the operating discipline definitely comes through, you know, given those two markets that you did say were deteriorating, how does price play into this? Just thinking about maybe what you're able to capture. Does that kind of change the pricing equation at all, you know, thinking about it into your end? Yeah, I think what we have been able to do is...

Given those two markets, but you did say were deteriorating how does price play into this just thinking about maybe what youre able to capture does that kind of change the pricing equation at all thinking about into year end.

Yes, I think.

What we have been able to do is increase prices successfully and businesses that are doing well like on our aerospace and defense businesses or certain parts of Florida.

Speaker 3: in businesses that are doing well, like on our aerospace and defense businesses, or certain parts of our environmental. And for example, Marines, where we have a really strong market at the present time, we've increased prices, that often...

Robert Mehrabian: You remember now most of that manufacturing is beginning to switch back to North America, and we do have some really good systems for quality control. And you can guess in a lithium ion battery, a flaw can be catastrophic. So these new cameras, new markets will offset some of the declines we have now, but I also think that the semiconductor market will come back. So if all of that takes place as I've just outlined, obviously our margins should improve.

Environmental.

For example, marine where we have a really strong market at the present time, we've increased prices that offsets.

Speaker 3: prices that we have not been able to increase in the environmental area. So it changes across our portfolio up and down, but generally we are successful in raising prices across the board. We have been this year versus let's say...

Prices that we have not been able to increase in the environmental area. So it changes.

Across our portfolio up and down but generally were successful in raising prices across the board we have been this year.

Versus.

Let's say last year.

And we think that.

Speaker 3: The stability that's happening for our businesses will allow us to increase prices.

So stability that's happening for our businesses will allow us to increase prices.

Speaker 3: but more modestly going forward than we have aspirations for. But I think Stern Iran will do it.

But more modestly going forward than we have aspirations for better if things turn around we'll do it.

Thank you I'll leave it at that thanks.

Robert Mehrabian: If I could just sneak in one last one, if I think about your fiscal business, I know that's growing very quickly now on delivery of backlog, but if you think about where orders have been all year, and let's say we don't, like absent an inflection in your term in orders, is that a business that likely declines just given where, where your backlog is and what you're delivering this year, if I think into 24? No, I think, I think which is very good about our theorem business, first remembered, as you said, part of it is oscilloscope, part of it is digitizers, and a very fast growing part has been our protocol analyzes where we've just made the acquisitions in our acquisition.

Thank you.

Speaker 1: Next we'll go to Andrew Baskaglia with VNP. Glad, please. Hey guys, thanks for taking my question.

And next we'll go to Andrew Buscaglia with BNP.

Go ahead please.

Hey, guys. Thanks for taking my question.

Good morning, Andrew.

Hey, Robert.

So maybe.

Speaker 9: You guys mentioned, or Robert, you mentioned your book to Bill's just over 0.9, which is not too inspiring heading into 2024. But you talked about some optimism in some areas, like digital imaging, some of those markets coming back. I'm wondering, can you comment?

You guys mentioned, a Robert you mentioned your book to Bill just over <unk> nine.

Which is not too inspiring heading into 2024.

But you know.

You talked about some optimism in some areas like digital imaging.

All of those markets coming back I'm wondering.

Can you comment on that.

Speaker 9: You know, your expectation heading into the New Year, you know,

Your expectation heading into the new year.

Last quarter, you talked about backlog, possibly or defense backlog.

Speaker 9: Last word you talked about backlog possibly, or defense backlog converting into Q4.

Robert Mehrabian: The book to bill in that business is between 9495 at this time, .9495. Any decline, by the way, in protocols, we don't really see declines. What we see is a little push out because new standards are continuously evolving and our protocols are at the forefront of those standards. So people will be adapting those, but while those have something that little bit, the oscilloscope, because we're also offering new products, are doing fine. I know that market may not look as exciting, now that it does not before, but it is for us. It's very exciting.

Converting into Q4.

<unk>.

Speaker 9: And now you're sounding more optimistic around new awards as well, materializing. So I'm just wondering, can that book-to-bill change on us heading into the new year? Or how are you feeling going into, you know, January , February ?

And now Youre sounding more optimistic around new awards as well materializing. So I'm just wondering can that book to bill change on us heading into the new year or how are you feeling going into January.

In February.

Yes, I think.

Speaker 3: Yeah, I think to cut to the chase, we still have...

Two to cut to the chase.

We still have.

Over 3 billion of backlog, which is very healthy at some short cycle businesses that.

Speaker 3: over three billion of backlog, which is very healthy. There are some short cycle businesses that, there always have been short cycle, especially in the environmental areas as an example. Point nine, point nine, three.

Now rates have been short cycle, especially in the environmental area as an example.

$9 93.

Speaker 3: does not bother me only because we have a loss or a slew of new products that are coming to market. For example.

Does not bother me only because we have a law suit slew of new products that are coming to market for example.

Robert Mehrabian: Thanks, guys. Thank you.

Greg Conrad: Unless we will go now to Greg Conrad with Jeff. Go ahead, sir. Good morning. Morning, Greg. Maybe just to level set the guidance for the year in terms of revenue. You mentioned industrial automation and laboratory instrumentation softening, but can you just remind us where FX is the biggest headwind menu that was half of the impact, just kind of thinking about the segments for the rest of the year. Yeah, the effects that I mentioned is versus what we were looking at in July and things have tightened and it's costing us about a percent and it's mostly focused in our digital imaging and instrumentation businesses.

Speaker 3: uh just take going back to flare

Just take.

Going back to flare.

Speaker 3: going back to flare defense, we just introduced a new nano drone called Black...

Back to flare defense.

We just introduced a new.

Nano.

Drawn.

Of the.

Black Hornet Ford.

Speaker 3: which can go twice as high as the one we have, which is black horn at three, was only 10,000 feet. This can go up to 20,000 feet last longer. Be a lot more, do a lot of other things. We also have new programs in concerts. We also have new programs in concerts.

Can go twice as high as the one we have which is black Hornet three was only 10000 feet. This can go up to 20000 feet last longer.

Be a lot more.

So a lot of other things we also have.

New programs in Concord.

UAS.

Speaker 3: UAS and the other thing that is exciting for us

And the other thing that is exciting for us.

Speaker 3: that we're just starting to get some traction on, is understanding where we can bring our intelligence systems, if you wanna call it our sufficiently intelligent, to bear. We have not bought 250 to 300 million dollars of product.

That we're just starting to get some traction on is understanding where we can bring guard.

Intelligent systems, if you want to call it artificial intelligence.

Greg Conrad: But it's tightened significantly from our July meeting today. We'll deal with it, like we deal with any market softening here and there. I mean, basically focus on getting products out where there's a good market, cut costs where we don't have the market, improve our margins and if we can do what we just did, beat and raise. And then, you know, the operating discipline definitely comes through, you know, given those two markets that you did say were deteriorating, how does price play into this, just thinking about maybe what you're able to capture.

To bear we have now, but 250 to $3 $300 million of products.

Speaker 3: that are benefiting from not just being sensors, but being systems, cameras that provide intelligent information. So, it doesn't bother me the slight detriment in backlog. It's primarily because certain parts of the market, like semiconductor, is done. But also my conducted inclusive across teladine is less than 10%. So,

That are benefiting from not just being sensors, but being systems cameras that provide it.

<unk> information.

So.

It doesn't bother me.

Slight detriment in backlog, it's primarily because certain parts of the market like semiconductor.

He has done.

But all semi conductor inclusive across teledyne is less than 10% so.

Speaker 3: It doesn't bother me. I think the more important thing is can we just keep bringing new product and make the acquisitions that we are not able to do because our leverage is down and Do what we've always done

It doesn't bother me I think the more important thing is can we just keep bringing new product.

Greg Conrad: Does that kind of change the pricing equation at all, you know, thinking about it to your end? Yeah, I think what we have been able to do is increase prices successfully in businesses that are doing well, like on our aerospace and defense businesses or certain parts of our environmental. And for example, Marines where we have a really strong market at the present time, we've increased prices that offsets prices that we have not been able to increase in the environmental area.

And make the acquisitions that we are not able to do because our job.

Leverage is down and do what we've always done.

Acquire integrate and increase our earnings per share.

Speaker 3: as film

Yes, okay.

Speaker 9: Yeah. Okay, well that sub-tells into my next question around M&A. Yeah, with your leverage now back below two, which, you know, what are you seeing in the pipeline for next year, and then maybe, you know, if you don't see M&A materialized, what are your thoughts on Sherry Purchase? It's just giving more your evaluation.

Of dovetails into my next question around M&A.

Yes.

Sure.

Leverage now back below two ish.

What are you seeing in the pipeline for next year and then maybe.

If you don't see M&A materialized, what's your what are your thoughts on share repurchase just given where your valuation.

Greg Conrad: So it changes across our portfolio up and down, but generally we are successful in raising prices across the board. We have been this year versus let's say last year. And we think that the stability that's happening for our businesses will allow us to increase prices, but more modestly going forward than we have aspirations for whether it thinks turn around, we'll do it. Thank you. I'll leave it at that. Thanks.

Speaker 3: I'll answer the M&A question. I mean, sharely purchase is something that we haven't done. We've only purchased shares, or I'm gonna say 10, 12 years ago, but $400 million, I mean, you look at our market cap versus that, very small fraction. I think our M&A opportunities are there.

Hi.

I'll answer the M&A question around share repurchases.

Something that we haven't done we've only purchased shares or I'm going to say 10, 12 years ago about $400 million.

And when you look at our market.

<unk> versus that very small fraction I think our M&A opportunities are there.

We're looking out smallish.

Speaker 3: We're looking at smaller acquisitions at the present time. We'd want to, what I call mid size, several hundred mid size.

Acquisitions at the present time with one or two what I'll call mid size.

Several hundred million did acquisitions.

Speaker 3: in the potential pipeline. The one thing we have to be careful about is there's some...

Andrew Buscaglia: Thank you. Next, we'll go to Andrew Baskaglia with BNP. Go ahead, please. Hey guys, thanks for taking my question. Good morning, Andrew. Hey, Robert. So maybe, you know, you guys mentioned or Robert, you mentioned your book to Bill, just over 0.9. You know, which is not too inspiring heading into 2024. But you, you know, you talked about some optimism in some areas, like digital imaging, some of those markets coming back. I'm wondering, you know, can you comment on your expectation heading into the new year.

In the potential pipeline.

The one thing we have to be careful about is there's some.

Speaker 3: really outrageous prices that people are paying for some of the acquisitions we've looked at.

Really outrageous prices that people are paying for some of the acquisitions we've looked at.

Speaker 3: of multiples of sales going up.

Multiples of sales going.

15 times and that's just not us while we are looking at smaller acquisitions, both here and in Europe and.

Speaker 3: 15 times and that's just not us. Well, we are looking at smaller acquisitions, both here and in Europe and they'll come along just like we've done before, what we call the string of pearls. And we will make those acquisitions. If we don't make any acquisitions on the flip side, by the end of the...

They'll come along just like we've done before we call the string of pearls, and we will make those acquisitions, if we don't make any acquisitions on the flip side.

Andrew Buscaglia: You know, last year you talked about backlog possibly or defense backlog converting into Q4, and now you're sounding more optimistic around new awards as well, material. I think I'm just wondering, can that book to build change on us heading into the New York, or how are you feeling going into January February? Yeah, I think to cut to the chase, we still have over three billion of backlog, which is very healthy. There are some short cycle businesses that there always have been short cycle, especially in the environmental areas as an example.

By the end of next year.

Our leverage ratio would be one.

Speaker 3: which was actually less than that before the Flair acquisition.

Which was actually.

Less than that before the FLIR acquisition.

<unk>.

<unk>.

Speaker 10: Cash also will help our earnings, but our primary focus is gonna be our position. Okay, thanks Robert.

Cash.

Also we will help our earnings but our primary focus is going to be acquisition.

Okay. Thanks Robert.

Sure.

Next we go to Rob Jamieson with UBS go ahead.

Hey, Thanks for taking my questions just a couple.

Speaker 9: Hey, thanks for taking my questions. Just a couple. Can we run through the segment, each segment and what you're embedding for organic and margin expectations just for the rest of the year? And then also just the head on your net leverage comment there. Is it safe to kind of assume that you guys are going to be able to produce above maybe a billion and free cash loans 24?

Run through this segment.

Each segment and what you're embedding for organic and margin expectations just for the rest of the year.

Andrew Buscaglia: 0.9, 0.93 does not bother me only because we have also a slew of new products that are coming to market. For example, just going back to Flair, going back to Flair defense, we just introduced a new nano drone called the Black Hornet 4, which can go twice as high as the one we have, which is Black Hornet 3, was only 10,000 feet, this can go up to 20,000 feet last longer, be a lot more, do a lot of other things.

And then also just.

Head on your net leverage comment there is it safe to assume that you guys are going to be able to produce above like maybe 1 billion in free cash flow in 'twenty four.

Let me answer the last question first.

Speaker 3: Let me answer the last question first. We're right in the middle of our planning cycle for our operating plan. I made presentations to our board yesterday, and the answer is yes.

Right in the middle of our planning cycle for our operating plan and made presentations to our board yesterday and the answer is yes.

Speaker 3: Let me now go back to the organic question that you asked for this year.

Let me now go back to the organic that question that you asked for this year.

<unk>.

Speaker 3: Fundamentally, we're going to have, organically, we're going to be relatively flat in our overall digital imaging business, maybe a little

<unk> mentally.

We're going to have.

Organically, we're going to be relatively flat.

Our overall digital imaging business, maybe a little.

Andrew Buscaglia: We also have new programs in concerts of UAS, and the other thing that is exciting for us, that we're just starting to get some traction on, is understanding where we can bring our intelligence systems, if you want to call it artificial intelligence, to bear. We have now about 250 to 300 million dollars of products that are benefiting from not just being sensors, but being systems, cameras that provide intelligent information. It doesn't bother me the slight detriment in backlog, it's primarily because certain parts of the market, like semi-conductor, is done. But also, my conducted inclusive across Teladine is less than 10%, so it doesn't bother me.

As a percent down.

Speaker 3: But that's partly because we're also cleaning up some stuff that are not...

That's partly because we're also cleaning up some stock that or not.

Profitable.

Speaker 3: On the other hand, we have organic growth of almost 6% in our instrumentation.

On the other hand, we.

We will have organic growth of almost 6% in our instrumentation.

From Mentation businesses.

Speaker 3: which as I said, is environmental, test and measurement and marine.

As I said is environmental test and measurement and marine.

Speaker 3: We're going to have similarly over 6% in our aerospace and defense organic growth and about 8% in our engineer system.

We're going to have similarly over 6% in our aerospace and defense organic growth and about 8% in our engineered systems.

Speaker 3: So those are very healthy grotes for this environment.

So those are very healthy.

Growth.

Sure.

This environment that we're all experiencing.

Thank you that's helpful and then I guess just one.

Speaker 9: Thank you, that's helpful. And then I guess just one specific, so I test the measurement. You said you had a new protocol product that was coming to market in September , just wondering what the uptake is and how customers are reacted to that. And is that could that be an incremental benefit to that sliver of instrumentation in fourth quarter?

Specific to alright, that's the measurement you said you had a new protocol.

Product that was coming to market in September just wondering what the uptake is and how.

Customers have reacted to that and is that.

Robert Mehrabian: I think the more important thing is, can we just keep bringing new products and make the acquisitions that we are not able to do because our leverage is done, and do what we've always done, acquire, integrate, and increase our earnings per share. Yeah, well, that subtells into my next question around M&A. Yeah, with your leverage now back below, too, which, what are you seeing in the pipeline for next year, and then maybe, if you don't see M&A materialized, what are your thoughts on sharing purchase, just give them where your valuation is?

Could that be an incremental benefit to that sliver of instrumentation in fourth quarter.

Speaker 3: Yeah, the new protocol is the PCI Express Gen 7. The life cycle of that is usually a couple of years. I think we'll see some.

Yes, the new protocol is the PCI Express Gen seven.

The lifecycle of that is usually.

Couple of years, I think we'll see some.

Speaker 3: benefit from that next year, probably, later next year. But the flip side is the protocol business that we just bought, Xenon, is fulfilling a gap that we had in our protocol businesses, which was the high-speed network protocol. And they filled that gap very well.

Benefit from that next year, probably later next year, but the flip side is the protocol business that we just bought.

Zeno is full.

Fulfilling.

GAAP.

That we had in our protocol.

Businesses, which was the high speed.

Network protocols and they feel that gap very well so.

Robert Mehrabian: I'll answer the M&A question. I mean, sharely purchase is something that we haven't done. We've only purchased shares almost at 10, 12 years ago, but 400 million dollars. I mean, you look at our market cap versus that, very small fraction. I think our M&A opportunities are there. We're looking at smaller acquisitions at the present time with one or two of what I'm called mid-size, several hundred million dollar acquisitions in the potential pipeline.

<unk>.

Speaker 3: We love our protocol businesses and hope that we can find more of them as time goes on.

We love our protocol businesses.

Hope that we can buy more of that as time goes on.

<unk>.

Great. Thank you very much.

Thank you.

Speaker 1: Next we go to Christine Lee Wagg with Morgan Stanley . Please go ahead

Next we'll go to Kristine leeway with Morgan Stanley. Please go ahead.

Speaker 11: Hey good morning everyone and congratulations on the leadership changes. Robert I hope that this change means you get some extra free time.

Hey, good morning, everyone and congratulations on the leadership changes Robert I Hope that this change means you get some extra free time.

Yes.

I hope so too.

Speaker 3: I have my new leaders shaking their head across the table from me, but I hope I will. Yes, thank you.

Yes.

I have my new leaders that shaking their head.

Robert Mehrabian: The one thing we have to be careful about is there's some really outrageous prices that people are paying for, some of the acquisitions we've looked at, multiples of sales going 15 times, and that's just not us. We are looking at smaller acquisitions both here and in Europe and the delcom along, just like we've done before, what we call the stringed-up pearls, and we will make those acquisitions. If we don't make any acquisitions on the flip side, by the end of next year, our leverage ratio would be one, which was actually less than that before the FLIR acquisition, and cash also will help our earnings, but our primary focus is going to be acquisition.

Across the table from me, but I hope I will yes. Thank you Christine.

Well, great and it's been wonderful to following your career and what you've done for Teledyne.

Speaker 11: Well, great. And it's been wonderful to follow your career and what you've done for Teledyne. So maybe with, you know, the leadership changes and sometimes there's also a change in strategic focus. I mean, Teledyne is a much broader and bigger company than it was over 20 years ago. You mentioned earlier that M&A is still a priority over share buyback.

With the leadership changes and sometimes just also change in strategic focus I mean, teledyne has a much broader and bigger company than it was over 20 years ago. You mentioned earlier that M&A is still a priority over share buybacks I guess as we look out the next 510 or even 20 years and maybe that that question is on <unk>.

Speaker 11: I guess, you know, as we look out the next five, 10, or even 20 years, and maybe that that question is a little too broad of a scope for this call, but how do we think about the strategic direction for teledine? Like, where to from here?

Little too broad of a scope for this call, but how do we think about the strategic direction.

For teledyne like where to from here.

Well first let me answer the first question.

Speaker 3: The way we operate in the current teladine.

<unk>.

We operate.

In the current tenant is a lot of the M&A ideas come from our businesses. We are proactive at any one time, we have been large funnel.

Speaker 3: A lot of the M&A ideas come from our businesses. We are proactive.

Speaker 3: At any one time, we have a large funnel of businesses that we look.

Robert Jamieson: Okay, thanks Robert. Thanks for going to Rob Jamieson with UBS, go ahead. Hey, thanks for taking my questions. Just a couple. Can we run through the segment, each segment, and what you're embedding for organic and margin expectations just for the rest of the year? And then also just to hit on your net leverage comment there. Is it safe to kind of assume that you guys are going to be able to produce above, like maybe a billion and free cash loans, 24?

The businesses that we're looking at but that will not change because.

Speaker 3: But that will not change because it comes from digital imaging, it comes from instrumentation, and marine, and A&D. And these are areas that the two leaders that are taking over are responsible for. So I don't think in the short term things will change.

It comes from digital imaging it comes from instrumentation and marine.

And the and these are areas that the two leaders that are taking over a responsible for it. So I don't think in the short term things will change.

Speaker 3: Also, in the short term at least, I'm still going to be here and of course Jason helps make a lot of the capital allocation decisions.

Also in the short term at least.

Still going to be here and of course, Jason helps make a lot of the capital allocation decisions.

Robert Mehrabian: Let me answer the last question first. We're writing the middle of our planning cycle for our operating plan and make presentations to our board yesterday, and the answer is yes. Let me now go back to the question that you asked for this year. Fundamentally, we're going to have organically, we're going to be relatively flat in our overall digital imaging business, maybe a little percent down, but that's partly because we're also cleaning up some stuff that are not profitable.

But having said that.

We will probably focus more around commercial businesses as we go forward.

Speaker 3: We will probably focus more on commercial businesses as we go forward. And.

<unk>.

We will.

Speaker 3: get some defense businesses, but we don't want our defense businesses to grow beyond where they are today. We have a healthy balance of 25% defense, 75% commercial.

Get some defense businesses.

We don't want our defense businesses to grow beyond where they are today, we have a healthy balance of 25% defense, 75% commercial.

Speaker 3: almost half or 47% of our commercial businesses are overseas. We're also expanding some defense business in the NATO countries and the Middle East. But having said that, I think my colleagues and I agree that we do not want to change our portfolio from what it is today to something that

Almost half or 47% of our commercial businesses on overseas. We're also expanding some defense business and in the NATO countries in the Middle East.

But having said that.

Robert Mehrabian: On the other hand, we will have organic growth of almost 6% in our instrumentation businesses, which, as I said, is environmental testing measurement and marine. We're going to have similarly over 6% in our aerospace and defense organic growth, and about 8% in our engineered systems. So those are very healthy growth for this environment that we're all experiencing.

My colleagues and I agree that we do not want to change our portfolio from what it is today too.

Something that.

<unk>.

Speaker 3: is not sustainable. You know, if you're singularly focused on one market, when that market suffers, then it takes the whole company down. Our balance portfolio is our resilience.

It's not sustainable.

Singularly focused on one market when that market suffers.

It takes the whole company.

Sure.

Our balanced portfolio is.

Our resilience and our ability to.

Tolerate changes.

Speaker 3: tolerate changes and as you can see while we have some weakness in certain areas We have strength in other areas. We have growth in instruments in the engineering systems And so I don't think that'll change now. I'm not talking about three years

As you can see while we have some weakness in certain areas. We have strength in other areas. We have growth in instruments in ANZ engineered systems, and so I don't think that will change now.

Robert Mehrabian: Thank you, that's helpful. And then I guess this one specific, so I test the measurement. You said you had a new protocol product that was coming to market in September, just wondering what the uptake is and how customers are reacted to that, and is that could that be an incremental benefit to that sliver of instrumentation in the fourth quarter? Yeah, the new protocol is the PCI Express, Gen 7. The life cycle of that is usually a couple of years.

No I am talking about three years.

Speaker 3: If you go beyond that, then I can't predict, because you know...

If you go beyond.

That.

Then.

I can't predict because you know.

Speaker 3: The world is changing so much right now. And it's such a difficult environment in some cases. It'll depend on what happens. And our strategy is really well.

The world is changing so much right now it's such a.

Difficult environment in some cases, it will depend on what happens in our strategies will evolve.

Robert Mehrabian: I think we'll see some benefits from that next year, probably later next year. But the flip side is the protocol business that we just bought, Xenom is fulfilling it. There's a gap that we had in our protocol businesses, which was the high speed network protocol, and they feel that gap very well. So, we love our protocol businesses and hope that we came by more of a much time goes on.

Great. Thank you for the color and congratulations again.

Thank you.

A quick reminder, for additional questions press, one zero and we have one more in queue. At this time, we'll go on Mount to Noah <unk>. Please go ahead.

Speaker 1: A quick reminder, for additional questions, press 1-0. We have one more in queue at this time. We're going now to Noah Papenock. Please go ahead.

Yeah.

Hey, good morning, everybody.

Good morning Noah.

Speaker 12: Congratulations to everybody on the new seats or responsibilities.

Congratulations to everybody on.

The new seats or responsibilities.

Robert I just wanted to go back to the margin.

Speaker 12: Robert, I just want to go back to the DI margin.

You just printed a number.

Speaker 12: You just printed a number that you previously said you would get to in two years.

Robert Mehrabian: Great, thank you very much.

Robert Mehrabian: Thank you.

Previously you said you would get to in two years.

Kristine Liwag: Next we go to Kristine Liwag with Morgan Stanley. Please go ahead. Hey, good morning everyone, and congratulations on the leadership changes. Robert, I hope that this change means you get some extra free time. I hope so too. I have my new leaders shaking their head across the table from me, but I hope I will. Yes, thank you, Kristine.

Speaker 12: It sounds like you're saying the majority of the explanation for that is that you performed an incremental cost out.

It sounds like Youre, saying the.

Already of the explanation for that is that you performed and incremental cost out.

Speaker 12: And so if that's the driver, wouldn't that kind of sustain in the margin from here?

And so if that if that's the driver.

Wouldn't that kind of sustain in the margin from here.

Speaker 12: And therefore why would that margin pull back from the level that you just read?

And therefore, why would that margin pullback.

From the level that you just reported.

Bob.

I mentioned the margin for the year of 22, seven in Dci, which is 35 basis higher than.

Speaker 3: I mentioned the margin for the year of 22.7 in DI, which is 35 basis higher than it was what I quoted in Q2.

Robert Mehrabian: Well, great, and it's been wonderful to follow your career and what you've done for Teledyne. So maybe with the leadership changes, sometimes there's also change in strategic focus. Teledyne is a much broader and bigger company than it was over 20 years ago. You mentioned earlier that M&A is a priority over share buybacks. I guess, you know, as we look out the next five, 10 or even 20 years, and maybe that that question is a little too broad of a scope for this call. But how do we think about the strategic direction for Teledyne? Like, where to from here?

It was what I quoted.

In.

Yes.

Q2 at the end of Q2.

What has happened is that the costs start is important.

Speaker 3: What has happened is that the cost of this is important because it's not just people, it's the consolidation of...

Because it's not just people is the consolidation of <unk>.

Speaker 3: uh, our facilities as well. We have not done that. We were all focused on at first fixing our export control issues, fixing our tax liabilities. We're still working on tax liabilities somewhat, but

Our facilities as well we have not done that we were all focused on at first fixing our export control issues fixing our tax liabilities were still working on tax liability somewhat but.

Robert Mehrabian: Well, first let me answer the first question. The way we operate in the current Teledyne is a lot of the M&A ideas come from our businesses. We have proactive at any one time. We have a large panel of businesses that we're looking at, but that will not change because it comes from digital imaging. It comes from instrumentation and marine and A&D. And these are areas that the two leaders that are taking over are responsible for.

Speaker 3: What's happening is that the defense businesses.

What's happening is that the defense business.

Speaker 3: as digital imaging specifically flare are getting better.

Digital imaging, specifically flair or getting bearish.

Speaker 3: And machine vision, while it's getting worse at the present time, it sooner or later, it's gonna have to come back. And so I was a little cautious about, you know, for next year when I was asked about the margins and I stayed with the 22.7, maybe 23%.

And machine.

The machine vision, while it's getting worse at the present time is sooner or later is going to have to come back.

So I was a little cautious about for next year. When I was asked about the margins in our state we did $22 seven maybe 22%, but over the long term. There's no reason that these margins in these businesses could not be like margins in our aerospace and defense.

Speaker 3: But over the long term, there's no reason that these margins in these businesses could not be like margins in our aerospace and defense, which

Robert Mehrabian: So I don't think in the short term things will change. Also, in the short term, at least, I'm still going to be here. And of course, Jason helps make a lot of the capital allocation decisions. But having said that, we will probably focus more on commercial businesses as we go forward. And we will get some defense businesses, but we don't want our defense businesses to grow beyond where they are today. We have a healthy balance of 25% defense, 75% commercial.

<unk>.

Speaker 3: We're predicting this year to be 27.6% for our instruments. We are 26.1%

We are predicting this year to be 27, 6% or our instruments with our 26, 1%.

Speaker 3: There's no reason that margins cannot improve and

There is no reason that margins cannot improve and get there.

Okay.

Speaker 12: Okay. That's helpful context.

That's helpful context.

Speaker 12: I understood part of the challenge to be that, you know, there's been volatility in defense outlays compared to what's been authorized at the end market level. And so, with regard to your defense business inside of digital imaging.

If I understood part of the challenge to be.

That.

There has been volatility in defense outlays compared to what's been authorized at the end market level and so with regard to your defense business inside of digital imaging.

Speaker 12: you were gearing up for higher defense revenue that then just kind of surprisingly didn't come through. And so did that come through in the third quarter, or what was the growth rate, I guess, in the defense piece of digital imaging in the quarter?

You were gearing up for higher defense revenue that then just kind of surprisingly didnt come through and.

Robert Mehrabian: Almost half or 47% of our commercial businesses are overseas. We're also expanding some defense business in the NATO countries and the Middle East. But having said that, I think my colleagues and I agree that we do not want to change our portfolio from what it is today to something that is not sustainable. You know, if you're singularly focused on one market, when that market suffers, then it takes the whole company down.

And so did that come through in the third quarter or what was the growth rate I guess in the defense piece of digital imaging in the quarter.

We have several large programs that came through in the third quarter.

Speaker 3: We have several large programs that came through in the third quarter and

And.

Speaker 3: large for us is you know things that below about 10 million 20 million for example we got some content

Large.

<unk>.

Below above $10 million $20 million for example, we got some.

Commentary.

Unmanned.

<unk>.

Speaker 3: systems that we partner with Ponsberg. That was a nice leaning to a tree. We've also penetrated some of our nano-tron.

Systems that we partnered with Kongsberg.

Robert Mehrabian: Our balance portfolio is our resilience and our ability to tolerate changes. And as you can see, while we have some weakness in certain areas, we have strength in other areas, we have growth in instruments in the engineering systems. And so I don't think that will change.

Is it nice leaning Q3, we've also penetrated.

For our.

Nano drones.

Speaker 3: are now moving into India. We had a nice award from there.

We are now moving into India, We had a nice award from there.

Also our.

Speaker 3: surveillance program, we have to straighten out some of the issues with our...

Surveillance program, we have to strengthen some of the issues with our.

Robert Mehrabian: No, I'm not talking about three years. If you go beyond that, then I can't predict. Because, you know, the world is changing so much right now and it's such a difficult environment in some cases. It'll depend on what happens and our strategies will evolve.

Speaker 3: Gimbal and vibration and products that we inherited when we straighten those out and we have now a Navy award that's about thirty five million so surveys is group in Q3 and I think with the mini drones and

Gimbals and vibration and products that we inherited when we straighten those out and we have now.

Navy Award that's about $35 million. So surveillance is grew in Q3 and I think with the many drones in our newer products.

Speaker 3: our newer product, we think...

We think.

Speaker 3: We'll do fine. Our unmanned programs, we expect to grow in Q4.

We'll define our unmanned programs, we expect to grow in Q4.

Operator: Great. Thank you for the color and congratulations again. Thank you. A quick reminder for additional questions, press one zero.

Speaker 3: Overall, what we've been able to do is really take some unprofitable stuff out.

What we've been able to do is really take some unprofitable stuff out.

Noah Poponak: We have one more in queue at this time.

Speaker 3: Consolidate facilities that should not be separate to begin with. Focus on the things that we can deliver.

Consolidate facilities that should that shouldnt have been separate to begin with.

Robert Mehrabian: We're going now to Noah Poppinock. Please go ahead. Hey, good morning, everybody. Good morning, Noah. Congratulations to everybody on the new feats or responsibilities. Robert, I just want to go back to the DI margin. You just printed a number that you previously said you would get to in two years. It sounds like you're saying the majority of the explanation for that is that you performed an incremental cost out. And so if that's the driver, you know, wouldn't that kind of sustain in the margin from here.

<unk>.

Focus on the things that we can deliver.

Yeah.

Unmanned systems.

Speaker 3: using our own sensors. Other people have unmanned systems in various conflicts that use our sensors. So, we're happy to send them our sensors, but we also can incorporate them in our systems. So, we kind of think that the defense business there in DI has had an inflection point and is really turning positive.

Using our own sensors other people other people have unmanned systems.

These conflicts that use our sensors. So we're happy to set up our sensors, but we also can incorporate them in our system. So.

Robert Mehrabian: And therefore, why would that margin pull back from the level that you just reported? I mentioned the margin for the year of 22.7 in DI, which is 35 basis higher than it was what I quoted in Q2 at the end of Q2. What has happened is that the cost of this important because it's not just people, it's the consolidation of our facilities as well. We have not done that. We were all focused on at first fixing our export control issues fixing our tax liabilities.

Are you kind of.

I think that the defense business.

They're in DIY.

Has had an inflection point that is really turning positive.

Speaker 12: Okay, that's helpful. And then just one last one in DI, what do you now expect the rate of decline to be for the year in the machine vision piece and do you

Okay. That's helpful. And then just one last one in DIY.

What do you now expect.

The rate of decline to be for the year in the machine vision piece.

And do you have enough.

Speaker 12: order book or visibility to have a sense for what that revenue does in 24 or is it too short cycle?

Order book or visibility.

Two.

Have a sense for what that revenue does in 'twenty four or is it too.

Two short cycle.

Speaker 3: I think, overall, we're going to see...

I think.

Overall.

We're going to see.

Speaker 3: an increase in revenue in DALSA E2P part of DI, as much as

An increase in.

In revenue in <unk> to be part of the pie.

As much as.

6%.

Some of it coming from acquisitions.

Speaker 3: in the other part of the eye, which would be clear.

The other part of the.

Which would be flair.

Speaker 3: We expect that we may have a slight decline, let's say, to.

We expect that we may have.

Slide decline, let's say too.

Robert Mehrabian: We're still working on tax liabilities somewhat, but what's happening is that the defense business as digital imaging specifically flare are getting better, and Machine Vision, while it's getting worse at the present time, it's sooner or later it's gonna have to come back and so I was a little cautious about you know for next year when I was asked about the margins and I stayed with the 22.7 maybe 23% but over the long term there's not a reason that this margins and this businesses could not be like margins in our interspersion and defense which we're predicting this year to be 27.6% or our instruments we are 26.1% there's no reason that margins cannot improve and get there.

Yes.

Speaker 3: 1839, 1.834, let's say from 1.84 from what was then 1.86 last year, which is very minor. And some of that comes from Ray Marine, you know, where we consumer products that

18, 39, 183 forward, let's say from one date forward from what was then 186 last year, which is very minor.

Some of that comes from Raymarine.

Consumer.

Products that.

<unk>.

Speaker 3: are more discretionary at this time. But overall, I don't see a huge decline in digital imaging because I'll say 2B has grown.

Our more discretionary at this time, but overall I don't see a huge decline.

In digital imaging because <unk> grown.

Speaker 3: uh, and we are weathering, uh, the downturn in some of our other, uh, commercial products very well. And then we, of course, have some really good upsides in things like healthcare, uh, where, uh, markets, even in, let's say, in Q3, uh, are, uh, we had almost 12 percent, uh, increase in revenue in that area. So...

And we are weathering the downturn.

And some of our other job commercial products very well and then we of course have some really good upside in things like health care.

Sure.

Markets, even in let's say Q3.

Are we had almost 12% increase in revenue in that area. So.

Robert Mehrabian: Okay that's helpful context. I understood part of the challenge to be that you know there's been volatility and defense outlays compared to what's been authorized at the end market level and so with regard to your defense business inside of digital imaging you were gearing up for higher defense revenue that then just kind of surprisingly didn't come through and so did that come through in the third quarter or what was the growth rate I guess in the defense piece of digital imaging in the quarter.

Speaker 12: It's valid. All right. Those comments are on total digital imaging revenue.

Its balance sorry, that's those comments are on total digital imaging revenue.

Youre, saying sort of digital imaging revenue yes.

Speaker 3: You're saying? Total digital imaging revenue, yes.

Speaker 12: Okay, that's appreciate that. I just so it's clear, I was asking on just machine vision within digital imaging. Or just machine vision? Yeah. Okay.

Okay. That's I appreciate that just so it's clear I was asking on just machine vision within digital imaging.

Or just machine vision.

Okay.

Speaker 3: There's different parts of it. There's some machine vision at DALSA E2V and there's some machine vision in FLIR. I haven't added those two together. If I were to add those two together, I'd say the full year might be down 2%.

There's different parts of it Theres some machine vision at the I'll say <unk> machine vision in flair.

Robert Mehrabian: We have several large programs that came through in the third quarter and large for us is you know things are below about 10 million, 20 million for example. Well we got some counter unmanvedical systems that we partner with Constberg and that was a nice winning 2-3. We've also penetrated some of our nano drones are now moving into India we had a nice award from there. Also our surveillance program we have to straighten out some of the issues with our gimbals and vibration and products that we inherited when we straighten those out and we have now a Navy award that's about 35 million.

I haven't added those two together if I were to add those two together.

The full year might be down 2%.

Speaker 3: But, again, it could be a little higher, but it doesn't bother me that much, no, only because

But again.

Could be a little higher but it doesn't bother me that much no only because.

As I mentioned before we have new products like in battery inspection.

And with more emphasizing guard.

Relative to put some information and intelligence.

Devices cameras and move up market.

This market is going to turn it is not going to stay where it is semiconductors and I are going to stay down forever.

I think.

We are well positioned for growth once those turn a little bit.

Yeah that's.

It's interesting it's much different than the.

Peer set so.

Seems it seems well position, okay, alright, well. Thanks. Thanks again, thanks for the time I appreciate it thank.

Robert Mehrabian: So surveillance is grew in Q3 and I think with the mini drones and our newer products we think what to find are a man programs we expect to grow in Q4. Overall what we've been able to do is really take some unprofitable stuff out. Consolidate facilities that should that shouldn't have been separate to begin with focus on the things that we can deliver unmaned systems using our own sensors. There's other people but other people have unmaned systems various conflicts that use our sensors.

Thank you very much Noah.

And we have no additional questions in queue at this time. Thank you.

Speaker 3: And we have no additional questions in queue this time. Thank you, operator. I'll now ask Jason to conclude our conference call.

Operator.

I'll note that as Jason.

Concludes our conference call.

Speaker 1: Thanks, Robert. And again, thanks, everyone, for joining us today. If you have any follow-up questions, please feel free to call me, members on the earnings release, or, of course, send me an email. And all the press releases are available on our website, as is the replay. John , if you could give the dial-in information for the replay at the end of this call, that would be great. Certainly. Ladies and gentlemen, this call has been recorded and will be available for replay from today at 10 a.m. Pacific.

Thanks, Robert and again, thanks, everyone for joining us today, if you have any follow up questions. Please feel free to call me.

On the earnings release workforce and email and all the press releases are available on our website as is the replay.

John If you could give the island information for the replay of.

It was called out would be great.

Certainly ladies and gentlemen, this call has been recorded and will be available for replay from today at 10 a M Pacific.

Robert Mehrabian: So we're happy to send them our sensors but we also can incorporate them in our system. So we kind of think that the defense business is there in D.I, has had an inflection point and is really turning pause. Okay. That's helpful.

Speaker 1: through midnight on November 25th, 2023 to access the replay, dial 866-207-1041 and enter access code 6439556. International participants dial 4021.

Through midnight on November 25, 2023 to access to replay dial 8662071041.

And then our access code 64 390 556.

International participants dial 402.

Speaker 1: 940-0847. And once again, those numbers are 866-207-1041 per domestic. And for international, it's 402-9400-847. And the access code again is 6439-556. And that will conclude your conference call for today. Thank you for your participation. And for using AT&T Event Conferencing, you may not disconnect.

9400847.

Robert Mehrabian: And then just one last one in D.I. What do you now expect the rate of decline to be for the year in the machine vision piece? And do you have enough order book or visibility to have a sense for what that revenue does in 24 or is it two short cycle? I think overall we're going to see an increase in revenue in Dulce to be part of D.I. As much as 6% with some of it coming from acquisitions in the other part of D.I.

Once again those numbers are 860, <unk> 071041 for domestic and for international It's four zero to 90 400847, and the access code again is 6439556 and that will conclude your conference call for today. Thank you for your participation and for using AT&T.

Conferencing you may now disconnect.

Robert Mehrabian: Which would be clear. We expect that we may have a slight decline. Let's say to 1839 1.834. Let's say from 1.84 from what was then 1.86 last year. It's very minor. And some of that comes from Ray Marine. You know, where we consumer products that are more discretionary at this time. But overall, I don't see a huge decline in digital imaging because I'll say to we is grown up. And we are weathering the downturn in some of our other commercial products very well.

Robert Mehrabian: And then we, of course, have some really good upside in things like health care where markets, even in let's say 2, 3, we had almost 12% increase in revenue in that area. So it's balanced. So those comments are on total digital imaging revenue. You're saying? What was digital imaging revenue? Yes. Okay. That's appreciate that. I just so it's clear I was asking on just machine vision within digital imaging. Or just machine vision.

Robert Mehrabian: Yeah. Okay. There's different parts of it. There's a machine vision at the outside to be and there's a machine vision in flare. I haven't added those two together. If I were to add those two together, I'd say the four year might be down 2%. But again, it could be a little higher, but it doesn't bother me that much. Not only because as I mentioned before, we have new products like in battery inspection.

Robert Mehrabian: And we're more emphasizing guard ability to put some information and intelligence in our devices, cameras, a move up market. So this market is going to turn. It's not going to stay where it is. Some are conductors not going to stay down forever. And I think we're well positioned for growth once those turn. Yeah, yeah, that's interesting. It's much different than the pure set. So, yeah, seems well positioned. Okay.

Noah Poponak: All right. Well, thanks. Thanks again. Thanks for the time. Appreciate it. Thank you very much, Noah.

Operator: And we have no additional questions in queue this time. Thank you operator. I'll note that as Jason to conclude our conference call. Thanks, Robert. And again, thanks everyone for joining us today. If you have any follow-up questions, please feel free to call me. Numbers on the earnings release or, of course, some email and all the press releases are available on our website as is the replay. John, if you could give that island information for the replay, at the end of this call, that would be great.

Operator: Certainly, yeah, ladies and gentlemen, this call has been recorded and will be available for replay from today at 10 a.m. Pacific through midnight on November 25th, 2023 to access the replay dial 8662071041 and enter access code 6439556 International participants dial 402 940847. And once again, those numbers are 8662071041 per domestic and for international, it's 402 940847 and the access code again is 6439556. And that will conclude your conference call for today. Thank you for your participation and for using AT&T event conferencing. You may now disconnect.