Q2 2024 Teledyne Technologies Inc Earnings Call

July 24, 2024

Okay.

Yeah.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Teledyne's second quarter earnings call. At this time, all participants are in a listen-only mode.

Operator: Ladies and gentlemen, thank you for standing by and welcome to Teledyne's second quarter earnings call. At this time, all participants are in a 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. She's a require operator assistance during the call, press star zero on your phone's keypad, and as a reminder, this conference call is being recorded.

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to Teledyne's second quarter earnings call. At this time, all participants are in a listen only mode.

Speaker Change: Later, we will have a question and answer session and instructions for queuing up will be provided for you at that time should require operator assistance during the call Press Star zero on your phone's keypad as a reminder, this conference call is being recorded.

Operator: Later, we will have a question and answer session, and instructions for queuing up will be provided for you at that time. If you require operator assistance during the call, press star zero on your phone's keypad. As a reminder, this conference call is being recorded. Welcome everyone to Teledyne's 2nd Quarter 2024 Earnings Release Conference Call. We released our earnings earlier this morning before the meeting. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian, and CEO, Edwin Roks.

Jason VanWees: At this time, I'd like to turn the conference call over to your host, Jason VanWees. Please go ahead, sir.

Speaker Change: At this time I'd like to turn the conference call over to your host Jason Bandwidths. Please go ahead Sir.

Jason VanWees: Good morning, everyone and stay tuned then we used vice chairman I'd like to welcome everyone to Teledyne's second quarter 2024 earnings release Conference call. We released our earnings earlier this morning before the market opened.

Jason VanWees: Good morning, everyone. Jason VanWees. Ladies and gentlemen, I'd like to welcome everyone to Teledyne's second quarter 2024 earnings release conference call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian, CEO Edwin Roks, Senior Vice President and CFO Steve Blackwood, and Melanie Cibik, EVP, General Counsel, Chief Compliance Officer, and Secretary.

Speaker Change: Joining me today are teledyne's executive Chairman, Robert Mehrabian, CEO, Edwin Rock Senior Vice President and CFO, Steve Blackwood, and Melanie Civic EVP General Counsel, Chief compliance Officer, and Secretary, President and COO, George Bob would've joined us, but after getting stuck in airports late last week and the weekend.

Operator: Senior Vice President and CFO Steve Blackwood, and Melanie Cibik, EVP, General Counsel, Chief Compliance Officer, and President and COO George Bobb would have joined us. But after getting stuck in airports late last week at the weekend, George came back with COVID and is being isolated.

Jason VanWees: President and CEO, George Bobb, would have joined us after getting stuck in airports late last week. In the weekend, George came back with COVID and was being isolated.

Speaker Change: And it came back with Covid and has been isolated.

Operator: Anyway, after remarks by Robert, Edwin, and Steve, we will answer your questions. However, before we get started, our lawyers have reminded me to tell you that all forward-looking statements made this morning are subject to various presumptions, risks, and caveats as noted in the earnings release and our periodic SEC filings, and, of course, actual results. In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay, both via webcast and dial-in, will be available for about one month. Thank you, Jason.

Jason VanWees: Anyway, after remarks by Robert, Edwin, and Steve, we'll ask your questions.

Speaker Change: Anyway after remarks by Robert Edwin and Steve will answer your questions. However, before we get started our attorneys have reminded me to tell you that all forward looking statements made this morning.

Jason VanWees: However, before we get started, our attorneys never mind to me to tell you that all forward-looking statements made this morning. There's some serious questions missing, copy-outs as noted in the earnings release and our periodic SEC violence. And, of course, actual results may differ materially. In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay, both by a webcast and dial-in, will be available for about one month.

Speaker Change: 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.

Speaker Change: In order to avoid potential selective disclosures. This call is simultaneously being webcast and a replay both via webcast and dial in will be available for about one.

Robert: Here is Robert.

Robert Mehrabian: Here's Robert. Thank you, Jason, and good morning, and thank you for joining our earnings call. In the second quarter, Teledyne achieved all-time record pre-cash flow, allowing us to deploy approximately $852 million through July on debt repayment, acquisition, and stock repurchases. Non-GAAP operating margin increased from last year and increased in each of our three largest segments. Total sales and earnings increased sequentially and exceeded our most recent expectations.

Robert Mehrabian: And good morning. And thank you for joining our earnings call. In the second quarter, Teledyne achieved all-time record free cash flow, allowing us to deploy approximately $852 million through July on debt repayment, acquisitions, and stock repurchase. Non-GAAP operating margin increased from last year and increased in each of our three largest segments. Total sales and earnings increased sequentially and exceeded our most recent expectations. Although year-over-year comparisons remain especially difficult in certain commercial markets, such as industrial automation and electronic test and measure, I never did that.

Robert: Thank you, Jason and good morning, and thank you for joining our earnings call.

Robert: In the second quarter Teledyne achieved all time record free cash flow, allowing us to deploy approximately $852 million through July on that.

Robert: Debt repayment acquisition and.

Robert: Stock repurchases.

Robert: non-GAAP operating margin increased from last year.

Robert: And the increase in each of our three largest segments.

Robert: Total sales and earnings increased sequentially and exceeded our most recent expectations.

Robert Mehrabian: Although year-of-year comparisons remained specially difficult in certain commercial markets, such as industrial automation and electronic test and measurement, nevertheless, strong defense-related sales at Teledyne Flair and our own legacy space-based infrared imaging business, partially offset the expected declines in industrial imaging systems. Furthermore, despite the anticipated year-over-year decline in certain instrumentation product lines, total instrumentation sales were a second quarter record due to exceptional performance of our marine instrumentation businesses. Primarily driven by our aerospace and defense businesses, orders were greater than sales for the third consecutive quarter, and we ended the period with record backlog. We're reasonably confident that quarterly sales will again increase sequentially, and we will return to a year-over-year sales growth in the second half of 2024.

Robert: Although year over year comparisons remain especially difficult.

Robert: Commercial market, such as industrial automation and electronic test and measurement.

Robert: Nevertheless.

Speaker Change: Strong defense related sales at Teledyne flared.

Robert Mehrabian: Strong defense-related sales at Teledyne Flair and our own legacy space-based infrared imaging business partially offset the expected declines in industrial imaging systems. Furthermore, despite the anticipated year-over-year decline in certain instrumentation product lines, total instrumentation sales were a second-quarter record due to the exceptional performance of our marine instrumentation business. Primarily driven by our aerospace and defense businesses, orders were greater than sales for the third consecutive quarter, and we ended the period with a record backlog.

Speaker Change: And our own legacy space based infrared imaging business, partially offset the expected declines in industrial imaging systems.

Speaker Change: Despite the anticipated year over year decline in certain instrumentation product lines.

Speaker Change: Total instrumentation sales were a second quarter record due to exceptional performance of our marine instrumentation businesses.

Speaker Change: Primarily driven by our aerospace and defense businesses orders were greater than sales for the third consecutive quarter.

And we ended the period with record backlog.

Therefore.

Robert Mehrabian: We're reasonably confident that quarterly sales will again increase sequentially, and we will return to year-over-year sales growth in the second half of 2024. Finally, even with the significant capital deployment in the second quarter, our quarter-end leverage remained at 1.7.

Speaker Change: We're reasonably confident that quarterly sales will again increase sequentially.

Speaker Change: We will return to year over year sales growth in the second half of 2000.

Speaker Change: 2000 and Florida.

Robert Mehrabian: Finally, even with the significant caps of deployment in the second quarter, our quarter-end leverage remained at 1.7.

Speaker Change: Finally.

Speaker Change: Even with the significant capital deployment in the second quarter.

Speaker Change: Our quarter end leverage remained at one seven.

Robert Mehrabian: We plan to continue starkly purchases in the balance of 2009-24 as well as pursue acquisition.

Robert Mehrabian: We plan to continue stock repurchases in the balance of 2024, as well as pursue acquisitions. I will now turn the call over to Edwin, who will further comment on the performance of our four segments. Thank you, Robert. This is Edwin, and I will report on the first report on the digital emitting segment, which represents 54% of Teledyne's portfolio, and like Teledyne as a whole, this segment is a mix of long-cycle business, such as defense, space, and healthcare.

Speaker Change: We plan to continue strong stock repurchases in the balance of 2024 as well as pursue acquisitions.

Edwin Roks: I would not turn the call to Edwin, who will further comment on the performance of our four segments.

Speaker Change: I would now turn the call to Edwin who will further comment on the performance of our four segments.

Edwin Roks: Thank you, Robert. This is Edwin, and I will report on the first report on the digital emitting segments, which he presents 54% of televised portfolio. And like Teledyne as a whole, this segment is a mix of long cycle businesses such as defense, space, and healthcare, combined with short cycle markets, including industrial automation, semiconductor inspection, and infrared components and cameras for applications ranging from factory-condition monitoring to maritime navigation. Second quarter of 2024 sales declined 6.8% compared with last year. As expected, sales to industrial machine-vision markets declined approximately 30% year over year. However, this was partially offset by increased sales from free defense and from televised space-based infrared imaging detectors.

Speaker Change: Thank you Robert this is Kathryn and I have one for us.

Kathryn: First report on the digital imaging segment, which represents 4% of stabilized portfolio.

Speaker Change: I'd like to Teledyne as a whole.

Edwin: Our long cycle businesses.

Okay.

Edwin: Okay.

Edwin Roks: Combined with shorter cycle markets, including industrial automation, semiconductor inspection, and infrared components and cameras for applications ranging from factory condition monitoring to maritime navigation, second quarter 2024 sales declined 6.8% compared with last. As expected, sales to industrial machine vision markets declined approximately 30% year-over-year. However, this was partially offset by increased sales from freight defense and from televised space-based infrared imaging. Furthermore, for the fourth consecutive quarter, healthy margins across the entire Flair business portfolio helped us protect overall operating margin, even given the significant year-over-year reduction in sales of our typically highest contribution margin products. I will now report on the other three segments, which represent the remaining 46% of the population. The instrumentation segment consists of the merits of the Marine Corps.

Combined these shorter cycle markets, including industrial automation semiconductor inspection and infrared cameras for applications ranging from effectively a condition monitoring to maritime navigation.

Edwin: Second quarter 2024 sales declined six 8% compared with last year.

Edwin: As expected sales to industrial machine vision markets declined approximately 30% year over year. However, this was partially offset by increased sales from playing defense and from stabilized space based infrared imaging detectors.

Edwin Roks: Furthermore, for the fourth consecutive quarter, healthy margins across the entire free business portfolio help us protect overall operating margin even in the significant year-over-year production in sales of our typically highest contribution margin product lines.

Edwin: Furthermore, for the fourth consecutive quarter healthy margins across the entire fleet business portfolio helped us protect overall operating margin, even given the significant year over year production and sales of our typically highest contribution margin product lines.

Edwin Roks: I will now report on the auditory segments which represent the remaining 46% of televised. The instrumentation segment consists of marine environmental and test and measurement businesses, which contribute a little over 24% of sales. For the total segments, overall second quarter sales increased 1.6% versus last year. Sales of marine instruments increased 16% in the quarter, primarily due to strong offshore energy and subsea defense sales. Sales of environmental instruments increased 1.6% with greater sales of drugs, the recovery and laboratory instruments offset by lower sales of process gas, emission monitoring systems, and gas and flame safety analyzes. Sales of the products test and measurement systems which include oscilloscope, digitizers and protocol analyzes increased 15.8% year over year on a tough quarter in comparison versus 2023.

Edwin: I will now report on the other three segments, which represented the remaining 46% of settlement.

Edwin: There are limitations segment consists of American marine.

Edwin Roks: Environmental and Test and Measurement Businesses, which contribute a little over 24% of GDP. For the total segments, overall second quarter sales increased 1.6% versus last year. Sales of marine instruments increased 16% in the quarter, primarily due to strong offshore energy and subsea defense. Sales of environmental instruments decreased 1.6%.

Edwin: Mental and test and measurement businesses, which contribute a little over 24% of sales.

Edwin: For the total segment's overall second quarter sales increased one 6% versus last year.

Edwin: Sales of marine instruments increased 16% in the quarter, primarily due to strong offshore energy subsidy defenses.

Edwin: Sales of environmental instruments decreased one 6% with greater scale sales of drugs.

Edwin Roks: The Creator Sales of Drugs Discovery and Laboratory Instruments were offset by lower sales of Processed Gas Emission Monitoring Systems and Gas and Flame Safety. Sales of electronics-based measurement systems, which include oscilloscopes, digitizers, and protocol analyzers, decreased 15.8% year-on-year on a Tough Corny Comparison Versus... Overall Instrumentation Segment Operating Profits increased in the second quarter with gap operating margins of 136 basis points to 26.1% and 134 basis points on a no-gap basis to 27.1%. In the Aerospace and Defense Electronics segment, which represents 14% of Teledyne, second quarter sales increased four and a half, driven by the growth of commercial aerospace and defense microwave technology.

Edwin: And.

Edwin: Laboratory instruments offset by lower sales of course is gas emission monitoring systems and Gaslog flame safety on losses.

Edwin: Sure. So I'll take the tonnage test and measurement systems, which include also discuss Digitizes and protocol analyzers increased 58% year over year on a tough quarterly comparison versus 2023.

Edwin Roks: Overall instrumentation segments operating profit increased in the second quarter, with gap operating margins increasing, one of the 36 basis points to 26.1%, and another 34 basis points on a non-gap basis to 27.2%.

Edwin: Overall instrumentation segment operating profit increased in the second quarter with GAAP operating margins, increasing 136 basis points to 76, 1%. Another 34 basis points on a non-GAAP basis to 27, 2%.

Edwin Roks: In the aerospace and defense electronic segments, which represent 14% of televised sales, second quarter sales increased 4.5%. 1.5% driven by the growth of commercial aerospace and defense microwave products. Gap and non-GAAP segment operating profit increased year-over-year, with segment margin increasing approximately 77 basis points.

Edwin: In the aerospace and defense electronics segments, which represents 14% of settlement sales second quarter sales increased four 5% driven by the growth of commercial aerospace and defense microwave products.

Edwin Roks: Gap and non-gap segment operating profits increased year-over-year, with segment margin increasing approximately 77%. For the Engineered Systems segment, which contributes 8% to overall sales, second quarter revenue decreased 8.7%, and operating profit was impacted by lower sales and unfavorable programs.

Edwin: GAAP and non-GAAP segment operating profit increased year over year with segment margin, increasing approximately 77 basis points.

Edwin Roks: For the engineered system segment, which contributes 8% to overall sales, second quarter have new decreased 8.7%, and operating profit was impacted by lower sales and in favorable program mix.

Edwin: For the engineered system segment, which contributed 8% to overall sales second quarter revenue decreased eight 7% and operating profit was impacted by lower sales and a favorable program mix.

Robert Mehrabian: I will not pass the call back to Robert.

Robert Mehrabian: I will now pass the call back. Thank you, Edwin. In conclusion.

Speaker Change: I'll pass the call back to enrollments.

Speaker Change: Sure.

Robert Mehrabian: Thank you, Edwin. In conclusion, our second quarter performance was a testament to the strength of our balanced business portfolio. We also continued our proven strategy of increasing margins in those businesses which are growing, while reasonably protecting margins in businesses with more challenging markets. Our current full-year earnings outlook is identical to the last quarter, with some markets such as industrial automation and electronic test and measurement remaining difficult, although year-over-year comparisons are easier in the second half. While the outlook for our global defense, energy, and aerospace businesses remains strong and is supported by our record backlog.

Speaker Change: Thank you Edwin.

In conclusion.

Robert Mehrabian: Our second quarter performance was a testament to the strength of our balanced business portfolio. We also continued our proven strategy of increasing margins in those businesses which are growing while reasonably protecting margins in businesses with more challenging markets. Our current full-year earnings outlook is identical to the last quarter, with some markets, such as industrial automation and electronic test and measurements, remaining difficult, although year-over-year comparisons are easier in the second half, while the outlook for our global defense, energy, and aerospace businesses remains strong and is supported by our record backlog. Finally, we continue to review acquisition opportunities.

Speaker Change: Our second quarter performance.

Speaker Change: As a testament to the strength of our balanced business portfolio.

Speaker Change: We also continued our proven strategy of increasing margin in those businesses, which are growing reasonably protecting margins in businesses with more challenging market.

Speaker Change: Our current full year earnings outlook is identical to the last quarter with some markets such as industrial automation and electronic test and measurement remaining difficult although year over year comparisons.

Speaker Change: Easier in the second half, while the outlook for our global defense energy and aerospace businesses.

Speaker Change: Remains strong and is supported by our record backlog.

Robert Mehrabian: Finally, we continue to reduce acquisition opportunities, but given the strength of our balance sheet and cash flow, we also plan to continue purchasing our own stock under our current $1.25 billion dollar authorization.

Speaker Change: Finally.

Speaker Change: We continue to review acquisition opportunities.

Robert Mehrabian: But given the strength of our balance sheet and cash flow, we also plan to continue purchasing our own stock under our current $1.25 billion authorization. I will now turn the call over to Steve. Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full year 2024 outlook. In the second quarter, cash flow from operating activities was $318.7 million, compared with $190.5 million in the year 2023.

But given the strength of our balance sheet and cash flow. We also plan to continue purchasing our own stock under our current $1 billion to $5 billion.

Speaker Change: Our characterization.

Stephen Blackwood: I will not turn the call over to see. Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full-year 2024 outlook. In the second quarter, cash flow from operating activities was $318.7 million compared with $190.5 million in 2023. Three cash flow, that is cash from operating activities less capital expenditures, there's $301 million in the second quarter of 2024 compared with $163.2 million in 2023. Cash flow increased in the second quarter due to stronger working capital performance. Capital expenditures were $17.7 million in the second quarter of 2024 compared with $27.3 million in 2023.

Speaker Change: I'll now turn the call over to Steve.

Robert Mehrabian: Free cash flow, that is, cash from operating activities less capital expenditures, was $301 million in the second quarter of 2024, compared with $163.2 million in 2023. Cash flow increased in the second quarter due to stronger working capital performance.

Steve: Thank you Robert and good morning, I'll first discuss some additional financials for the quarter not covered by Robert and then I will discuss our third quarter and full year 2024 outlook.

Steve: In the second quarter cash flow from operating activities was $318 7 million.

Steve: Compared with $195 million in 2023 <unk>.

Steve: Free cash flow that is cash from ops.

Steve: That is cash from operating activities less capital expenditures was $301 million in the second quarter of 2024, compared with $163 2 million in 2023.

Steve: Cash flow increased in the second quarter due to stronger working capital performance.

Stephen Finis Blackwood: Capital expenditures were $17.7 million in the second quarter of 2024, compared with $27.3 million in 2023. Appreciation and amortization expense was $77.8 million in the second quarter of 2024, compared with $80 million in 2023. We ended the quarter with approximately $2.35 billion of net debt; that is approximately $2.8 billion of debt less cash of $443.2 million. Now, turning to our outlook. Management currently believes the adjusted earnings per share in the third quarter of 2024 will be in the range of $4.02 to $4.16, with non-GAAP earnings in the range of $4.90.

Steve: Capital expenditures were $17 $7 million in the second quarter of 2024, compared with $27 3 million in 2023.

Stephen Blackwood: The appreciation and amortization expense was $77.8 million for the second quarter of 2024 compared with $80 million in 2023. We ended the quarter with approximately $2.35 billion of net debt that is approximately $2.8 billion of debt, less cash of $443.2 million.

Steve: Depreciation and amortization expense was $77 8 million for the second quarter of 2024, compared with $80 million in 2023.

Steve: We ended the quarter with approximately $235 billion of net debt that is approximately $2 $8 billion of debt less cash of $443 $2 million.

Stephen Blackwood: Now turning to our outlook, management currently believes the gap earnings per share in the third quarter of 2024 will be in the range of $4.02 to $4.16, with non-gatherings in the range of $4.90 to $5. Now turning to our outlook, management currently believes the gap earnings per share in the third quarter of 2024. and for the full year 2024, our GAAP earnings per share outlook is $15.87 to $16.13, and we are affirming our prior non-GAAP outlook of $19.25 to $19.45.

Steve: Now turning to our outlook.

Steve: Management currently believes that GAAP earnings per share in the third quarter of 2024 will be in the range of $4 <unk>.

Steve: The $4 16.

Steve: With non-GAAP earnings in the range of $4 90.

Robert Mehrabian: $5.00. And for the full year 2024, our GAAP earnings per share outlook is $15.87 to $16.13, and we are affirming our prior non-GAAP outlook of $19.25 to $19.45. I will now pass the call back to Robert. We would like to take your questions. John, if you're ready to proceed with the questions and answers, please go ahead. Certainly. Ladies and gentlemen, for questions, please press 1 and 0 on your phone's keypad. If you're on a speakerphone, we do ask that you switch over to the handset if it's available. That keeps the echoes down.

Steve: The $5.

Steve: And for the full year 2024, our GAAP earnings per share outlook is $15 87 to.

Steve: To $16 13.

Steve: And we are affirming our prior non-GAAP outlook of $19 25.

To $19 45.

Robert Mehrabian: I will now pass the call back to Robert. We would like to take your questions.

Steve: I will now pass the call back to Robert.

Robert: We would like to take your questions.

Operator: John, if you're ready to proceed with the questions and answers, please go ahead. Certainly, ladies and gentlemen. For questions, please press 1 and 0 on your phone's keypad. If you're on a speaker phone, we do ask that you switch over to the handset if it's available. It keeps the echoes down. Once again there's 1-0 for questions, and if you'd like to choose to withdraw from the Q, press 1-0 again; we'll pull you out of the Q. Once again, the questions it'll be 1-0.

Robert: John if youre ready to proceed with the questions and answers. Please go ahead.

John: Certainly ladies and gentlemen for questions. Please.

John: Chris One then zero on your phone's keypad, if you will.

Speaker Change: Speaker phone, we do ask that you switch.

Speaker Change: Switch over to the handset it's available it keeps that goes down once again this one zero for questions.

Operator: Once again, it's 1-0 for questions. And if you choose to withdraw from the queue, press 1-0 again. Once again, questions, it will be 1-0.

Speaker Change: To withdraw from the Q1 zero again will pull you out of the queue.

Speaker Change: Once again questions that'll be one zero. Our first question is going to come from Jim Ricchiuti with Needham <unk> Company. Please go ahead.

Jim Ricchiuti: Our first question is going to come from Jim Ricciuti with Needham and Company. Please go ahead. Hi, thank you. Good morning.

James Andrew Ricchiuti: Our first question is going to come from Jim Ricchiuti with Needham & Company. Please go ahead. Hi, thank you. Good morning. I was hoping to get a little bit more color on the bookings, the book to bill. It sounds like the positive book to bill was largely driven by the aerospace and defense business. But I wonder if you could just elaborate on what you saw from an order standpoint in the quarter. Thank you, Jim. First, you're correct in general, but I think our overall book to build was 1.07. It was.

James Andrew Ricchiuti: Hi, Thank you good morning.

Jim Ricchiuti: I was hoping to get a little bit more color on the bookings, the book to bill. It sounds like the positive book to Bill was largely driven by the aerospace and defense business, but I wonder if you could just elaborate on what you saw from an order standpoint in the quarter.

James Andrew Ricchiuti: I was hoping to get a little bit more color on.

James Andrew Ricchiuti: On the bookings the book to Bill it sounds like.

The positive book to Bill was largely driven by the aerospace and defense business, but I Wonder if you could just elaborate on what you saw from an order standpoint in the quarter.

Speaker Change: Thank you Jim first.

Robert Mehrabian: Thank you, Jim. First, you're correct in generally overall, but I think our overall book to bill was 1.07. It was digital imaging was close to 1, like 0.98. Instrumentation was just over 1 at 1.04, but as you said, aerospace and defense was very strong at 1.41. An engineered system also strong at 1.25. Resolving a combined book to bill of 1.07 for the complete company.

Jim: Youre correct in generally overall.

Speaker Change: But.

Speaker Change: I think our overall book to Bill was one two at seven.

Speaker Change: It was.

Speaker Change: Digital imaging was close to 1.98.

Speaker Change: Instrumentation was just over one at one point go forward.

Speaker Change: But as you said aerospace and defense was very strong at 141.

Speaker Change: In engineered systems also strong at 125%, resulting in a combined.

Speaker Change: Book to Bill of 1.7 hundred towards the complete company.

Speaker Change: Got it that's helpful.

Robert Mehrabian: That's helpful, Robert. If we think about the backlog or longer cycle backlog and as it converts into the second half to revenues, that mainly defense converting.

Robert Mehrabian: Robert, if we think about the backlog, the longer cycle backlog, and as it converts into revenues in the second half, Ed, mainly defense converting. I'm wondering, you know, what other areas of the longer cycle business might drive growth in the second half and maybe related? What kind of expectations do you have for the short cycle business in the back half? Thank you. All right, let me start with the first part. Defense is obviously, as you said, very important and we have the long cycle business that's doing really well. The second area is energy.

Speaker Change: Robert if we think about.

Robert: The backlog of longer cycle backlog and as it converts into the second half to.

Speaker Change: To revenue is that mainly defense converting I'm wondering what other areas of the.

Robert Mehrabian: I'm wondering what other areas of the longer cycle business might drive growth in the second half and maybe related.

Speaker Change: The longer cycle business might drive growth in the second half and maybe related.

Robert Mehrabian: What kind of expectations do you have for the short cycle business in the back half? Thank you.

Speaker Change: What kind of expectations do you have for the short cycle business in the back half. Thank you.

Robert Mehrabian: Let me start with the first part. Defense is obviously, as you said, very important, and it's got the long cycle business that's doing really well. The second area is energy, and that's our marine instruments businesses. They've gone exceptionally well for the year and will continue to do so. And then the third area is aerospace, both aerospace from the computers that we have on commercial aircraft to aerospace and the aerospace from our imaging sensor business.

Robert Mehrabian: And that's our Marine Instruments businesses. They've done exceptionally well this year and will continue to do so. And then the third area is aerospace. [inaudible] Now, going back to the commercial shorter cycle businesses. What we're seeing is that digital imaging as a whole, total digital imaging should be relatively flat in the second half of the year, that's year over year flat, which is good because it declined in the first half of the year. Some of the recovery that we're seeing is early signs that come from our MEMS, microelectronic mechanical systems, which are kind of like the canaries in the mine.

Speaker Change: Alright, let me start with the first part.

Speaker Change: <unk>.

Speaker Change: Defense is obviously as you said very important then is.

Speaker Change: The long cycle business, that's doing really well the second area is energy.

Speaker Change: And Thats, our marine needs <unk> businesses.

Speaker Change: They've done exceptionally well towards the year end, we will continue to do so and then the third area is aerospace.

Speaker Change: Both aerospace strong.

Speaker Change: Few things that we have on commercial aircraft.

Speaker Change: Those space.

And the aerospace from.

Speaker Change: Imaging sensor businesses now going back to the commercial shorter cycle businesses.

Robert Mehrabian: Now, going back to the commercial shorter cycle businesses, what we're seeing is we think that digital imaging as a whole, total digital imaging, should be relatively flat in the second half of the year; that's year-over-year flat. Some of the recovery that we're seeing is early times that come from our men's microelectronic mechanical systems, which are kind of like the canaries in the mind. We're seeing some optics in order there, which is encouraging, especially from the semiconductor industry. And then we also have some indications that our machine vision systems, for example, have stabilized and booked to bill is reached one or a little better, which is encouraging.

Speaker Change: What we're seeing is with me.

Speaker Change: <unk>.

Speaker Change: Sure.

Speaker Change: Digital imaging as a whole.

Speaker Change: Total digital imaging should be relatively flat in the second half.

Speaker Change: The year.

Speaker Change: Year over year flat.

Speaker Change: Which is good because it declined in the first half of the year.

Speaker Change: Some of the recovery that we saw.

Speaker Change: Seeing is early signs that come from our Mems microelectronics.

Speaker Change: Mechanical systems, which are kind of like the canaries in the mine.

Robert Mehrabian: We are seeing some uptick in orders there, which is encouraging, especially from the semiconductor industry, and then we also have some indications that our machine vision systems, as an example, have stabilized, and book-to-bill has reached one or a little better, which is encouraging. We're hoping that these trends will continue with semiconductors coming back and inspection businesses that we have picking up, and some of our high-end thermal cameras also doing better than they have. So, I think overall we're positively inclined towards the second half of 2020. I got it.

Speaker Change: We are seeing some uptick in orders, there, which is encouraging especially from the semiconductor industry.

Speaker Change: And then.

Speaker Change: We also have.

Speaker Change: Some indications that our machine vision systems as an example have stabilized and book to Bill is reached one or a little better.

Speaker Change: It is encouraging.

Robert Mehrabian: We're hoping that these trends will continue, with semiconductor coming back and inspection businesses that we have picking up, and some of our high-end thermal cameras also doing better than they have. So I think overall, we're positively inclined towards the second half of the year.

Speaker Change: Hoping that these trends will continue with semiconductor coming back in.

Speaker Change: Inspection businesses that we have speaking up.

Speaker Change: Some of our high end thermal cameras also doing better than they have so I think overall.

Speaker Change: We are positively inclined towards the second half of the year.

Speaker Change: Got it that's helpful. Robert Thank you.

Jim Ricchiuti: That's helpful.

Jim Ricchiuti: Robert, thank you.

Andrew Muscalia: Thank you, Jim. Our next question comes from Andrew Muscalia with BNP. Please go ahead. Good morning, guys. Good morning, Andrew.

Jim: Thank you Jim.

Our next question comes from Andrew Buscaglia with BNP. Please go ahead.

Robert Mehrabian: That's helpful, Robert. Thank you. Thank you, Jim. Our next question comes from Andrew Buscaglia with BNP. Please go ahead. Hey, good morning, guys. Good morning, Andrew.

Yeah.

Andrew Edouard Buscaglia: Hey, good morning, guys.

Speaker Change: Good morning, Andrew.

Andrew Muscalia: You know, so long, that line of questioning, can you talk a little bit about, you know, you've kept the measurement has been a top market. A little bit, you know, weaker in Q2, but in line, I think with what you guys were suggesting. How do you see that playing out? You still feel like your expectations for a down 10% for the year are valid? Yeah, about, yeah, about that. I think that's not to be picky, but it's, we have 9.9%, which is very close to your 10%. But that's also tail of two cities there.

Speaker Change: Yes.

Andrew Edouard Buscaglia: Yeah, you know, so along that line of questioning, can you talk a little bit about, you know, the measurement has been a tough market, a little bit, you know, weaker in Q2, but in line I think with what you guys were suggesting. How do you see that playing out? Do you still feel like your expectations for a decline of 10% for the year are valid? Yeah, about that. Not to be picky, but we have 9.9%, which is very close to your 10%. But that's also the tale of two cities there.

Speaker Change: So long.

Speaker Change: Final question can you talk a little bit about.

Speaker Change: Test <unk> measurement has has been a tough market.

Speaker Change: A little bit.

Speaker Change: Weaker than Q2, but in line I think with what you guys were suggesting how do you see that playing out do you still feel like your expectations for down 10% for the year are valid.

Speaker Change: Yes about yes about that.

Speaker Change: Not to be picky ready, we have nine 9%, which is very close to 10%, but that's also a tale of two cities there.

Robert Mehrabian: In test and measurement, as you know, Andrew, we have two businesses. One is the oscilloscope business. And the other one is our protocol business, which is basically rules for communication between devices and devices and the cloud. That business, the protocol business, is coming back faster, and it's doing better, a little bit better. It's an oscilloscope business that is lagging behind. Having said that, we took costs out of that business, and fortunately for us, we took the costs out very early, and the margins on instruments have remained pretty well.

Robert Mehrabian: We noticed that measurement, as you know, Andrew, we have two businesses. One is the oscilloscope business. And the other one is our protocol business, which are basically rules for communication between devices and devices on the cloud. That business, the protocol business, is coming back faster and is doing better, a little bit better. It's the oscilloscope business, which is lagging. Having said that, we've taken cost out in that business. And fortunately for us, we took the cost out very early, and the margins of instruments have remained pretty well. We anticipate, for example, about almost 94 basis points in improvement in our total instrument portfolio, even with part of T&M being weak, partially because our marine is very strong and our environmental businesses are doing okay.

Andrew: In our test <unk> measurement as you know Andrew we have two businesses one is the <unk> business.

Andrew: And the other one is our protocols business, which are basically rules for communication between devices and devices in the cloud.

Andrew: That business the protocol business is coming back faster than is doing better a little bit better.

Andrew: Is that a similar scope business, which is lagging.

Speaker Change: Having said that.

Speaker Change: We took cost out in that business.

Speaker Change: And Fortunately for us.

Speaker Change: We took the costs start very early and the margins.

Speaker Change: Instruments have remained pretty well we anticipate for example.

Robert Mehrabian: We anticipate, for example, about 94 basis points of improvement in our total instrument portfolio, even with parts of TNM being weak, partially because our marine business is very strong, and our environmental businesses are doing okay. So I don't know whether that answers your question fully or not. Yeah. No, that's helpful.

Speaker Change: Almost 94 basis points improvement in our total instrument portfolio, even with parts at PNM being weak partially because our marine is very strong and our <unk> businesses are doing okay.

Andrew Muscalia: So I don't know whether that answers your question fully or not. No, that's helpful.

Speaker Change: I don't know whether that answers your question fully or not.

Speaker Change: No that's helpful.

Robert Mehrabian: Maybe sticking with instrumentation. Yeah, Marine has been really strong. Presumably, you have good visibility there.

Robert Mehrabian: Maybe sticking with instrumentation. Yeah, Marine has been really strong. Presumably, you have good visibility there for what? Can you parse out what's driving that exactly and the confidence that that continues into the second half? How should we think about that for the full year?

Speaker Change: And then maybe sticking with instrumentation marine has been really strong.

Speaker Change: Presumably you have good visibility there what can you can you parse out what's driving that exactly and the confidence that that continues into the second half.

Speaker Change: How should we think about that for the full year.

Speaker Change: Yes.

Speaker Change: Two areas.

Robert Mehrabian: Can you explain what's driving that exactly and the confidence that that continues into the second half? How should we think about that for the full year? Two areas. First is offshore oil production and discovery. We have, as you know, instruments that are deployed in streamers to look down at... Acoustic signals that bounce from the ocean floor and determine whether there's oil and gas there.

Speaker Change: First is the offshore oil production in discovery, we have as you know we have a <unk>.

Speaker Change: Instruments that are deployed.

Speaker Change: Streamers to.

Speaker Change: Luke.

Speaker Change: None at all.

Speaker Change: Acoustic signals that bonds from the ocean floor and determine whether there is oil and gas there. That's a strong business and continues to be the other part is of course, our connector businesses. They are doing really well.

Robert Mehrabian: That's a strong business and continues to be. The other part is, of course, our connector business. They are doing really well.

Robert Mehrabian: The other part is, of course, our connected businesses. They are doing really well. We actually, we're almost at capacity in that business.

Robert Mehrabian: We're actually almost at capacity in that business. And then the second part of the marine business is the defense part of the business. As you know, we have defense unmanned vehicles, and underwater vehicles.

Speaker Change: Actually we are almost at capacity in that business and then the second part of the Marine business is the defense part of the business as you know we have defense.

Robert Mehrabian: And then the second part of the marine business is the defense part of the business. As you know, we have defense unmanned vehicles underwater vehicles. We also provide connectors for submarine. That business is doing really well. And our underwater vehicle businesses are doing really well. So it's a combination of offshore oil production and discovery. And defense and security.

Speaker Change: Unmanned vehicles underwater vehicles.

Speaker Change: We also provide connectors.

Speaker Change: For submarines that business is doing really well and are underwater vehicle businesses are doing really well. So it's a combination of offshore oil production in discovery and defense and security.

Robert Mehrabian: We also provide connectors. For submarines, that business is doing really well. And our underwater vehicle businesses are doing really well. So it's a combination of offshore oil production and discovery, and defense and security. Okay, thank you. Next is Conor Walters with Jeffries.

Unknown Speaker: Okay, thank you for sure. Next is counter-Walters with Jeffries. Go ahead, please. Hi, guys. Thanks so much for taking my questions.

Speaker Change: Okay. Thank you.

Speaker Change: Sure.

Speaker Change: Next was counter Walters with Jefferies go ahead. Please.

Counter Walters: Hi, guys. Thanks, so much for taking my questions just.

Conor Walters: Go ahead. Hi guys, thanks so much for taking the time to answer my questions. Just to start off, any update on the free cash flow guidance for the year? Despite a somewhat constrained top line in the first half, free cash flow is tracking well ahead of your $1 billion target. What do you expect for the year and which are some of the drivers just given such a strong start in the first? That's a good question, Connor.

Unknown Speaker: Just to start off, any update to the pre-casual guidance for the year, despite somewhat constrained top line. The first half pre-casual is tracking well. How do you $1 billion target? What do you expect? For the year and what are some of the drivers just given such a strong start in the first half? That's a good question, Connor. I don't want to be effervescent about that because, in the first two quarters, we've generated $576 million. They'll pre-casual. I think in the second half, we have some bond payments coming due. We have some taxes coming due. So I think it's going to be less.

Speaker Change: Just to start off any update to the free cash flow guidance for the year. Despite somewhat constrained top line in the first half free cash flow is tracking well ahead of your $1 billion target. What do you expect for the year and what are some of the drivers just given such a strong start in the first half.

Speaker Change: That's a good question Connor.

Speaker Change: I don't want to be have her reticent about that because in the first two quarters, we've generated $576 million or free.

Speaker Change: Free cash flow.

Speaker Change: I think in the second half we have some bond payments coming due we have some taxes coming due so I think it's going to be less.

Connor-Walters: We are hoping that our pre-casual would be above $900 million. That's where we're sitting right now, with the front end being heavily loaded. But having said that, we're confident in our cash position to continue our purchases of our own stock. Okay, got it. That's very clear.

Speaker Change: Hoping that our free cash flow would be above $900 million.

Speaker Change: That's where we're sitting right now.

Robert Mehrabian: We are hoping that our free cash flow would be above $900 million, where we're sitting right now, with the front end being heavily loaded. But having said that, we're confident in our..., in our cash position, to continue our purchases of our own stock. Okay, got it. That's very clear. And maybe just jumping over into defense a little bit more.

Speaker Change: Sure.

Speaker Change: The front end being heavily loaded, but having said that.

Speaker Change: We have confidence in us.

Speaker Change: Cash cash position.

Speaker Change: To continue our.

Speaker Change: Purchases of our own stock.

Speaker Change: Okay got it that's very clear, maybe just jumping over into defense a little bit more we've seen a lot of technology announcements for teledyne, some new wins in areas such as loitering munitions just given this how are you thinking about the funds going forward any divergence within the exposure and the electronics and engineered.

Conor Walters: We've seen a lot of technology announcements for Teledyne, some new wins in areas such as loitering munitions. Just given this, how are you thinking about defense going forward and any divergence within the exposure and A&D electronics and engineered versus where you are in digital imaging? No, I think we should just look at the major programs that keep coming out. There's a whole slew of them.

Robert Mehrabian: Maybe just jumping over into defense a little bit more. We've seen a lot of technology announcements for Teladine, some new wind scenarios, such as loitering emissions. Just given this, how are you thinking about the funds going forward in any divergence within the exposure and the electronics and engineered versus where you are in digital imaging? No, I think, let's just look at the major programs, like the announcements that keep coming out. There's a whole slew of them. The most important one, I would say, that's new. is our loitering unmanned aerial vehicle, which now is weaponized, what we call Rogue One, and we already have our first order for over the hundred systems for that, and it computes very well against the competition, both in terms of precision, but also with the fact that you can send these vehicles to target, and if you decide to bring them back, you can do that easily.

Speaker Change: Versus where you are in digital imaging.

Speaker Change: No I think let's just look at the major programs that the announcements that keep coming out.

Speaker Change: There is a whole slew of them.

Robert Mehrabian: The most important one, I would say, that's new, is our loitering unmanned aerial vehicle which is now weaponized, what we call Rogue One. And we already have our first order for over 100 systems for that. And it competes very well against the competition, both in terms of precision but also with the fact that you can send these vehicles to targets. And if you decide to bring them back, you can do that easily. That's a distinguishing feature.

Speaker Change: The most important one I would say that's new.

Speaker Change: Is are.

Loitering.

Speaker Change: Unmanned air aerial vehicles, which now is weaponized, while we called Rogue one.

Speaker Change: And we already have our first stores there quarter over 100 systems towards that.

Speaker Change: <unk>.

It's very well against the competition.

Both in terms of precision, but also with the fact that you can send us.

Speaker Change: <unk>.

Speaker Change: To target.

Speaker Change: And if you've decided to bring them back you can do that easily.

Robert Mehrabian: That's a distinguishing feature, and of course the other part is accuracy. The next example, as you may know, is, again, staying with vehicles, are very small mini drones. We saw the whole bunch of them over the years, what we call Black Hornet 3, which are about six inches in size. Black Hornet 4 was introduced this year, and we got the first production order for about almost a thousand systems recently. We expect that that program will continue and be a very strong contributor to our defense businesses, and these orders are from the US government right now.

Speaker Change: That said distinguishing feature and of course, the other part is the accuracy.

Robert Mehrabian: And of course, the other part is accuracy. The next example, as you may know, is again, staying with vehicles are very small mini drones. We saw a whole bunch of them over the years, what we call black hornet trees, which are about six inches tall.

Speaker Change: The next example, as you May know is again staying with vehicles are very small mini drones.

Speaker Change: We sold a whole bunch of them over the years, what we call Black Hornet Threes, we took about six inches.

Robert Mehrabian: Inside, Black Hornet 4 was introduced this year, and we got the first production order for about almost 1,000 systems recently. We expect that that program will continue and be a very strong contributor to our defense businesses. And these orders are from the U.S. government right now. Then we have, as I mentioned, inserts for the Virginia or connectors for the Virginia and Columbia class submarines.

Speaker Change: Inside.

Speaker Change: Blackboard coordinate Ford was introduced this year and we got the first production order.

Speaker Change: Sorry about that.

Speaker Change: Almost a tarzan systems.

Speaker Change: Recently, we expect that that program will continue and be a very strong contributors to our defense businesses and these orders are from the U S government right now.

Robert Mehrabian: Then we have, as I mentioned, we have the inserts for the Virginia or connectors for the Virginia and Columbia class submarines. Those businesses have really good backlogs and are doing well. We also have drones that come out of our Canadian operations, our 70 and our 80. We have orders for those, and we also have counter UAV systems that are being deployed in Europe. Finally, this is our example. We have a very lightweight, uncooled target recognition system, what we call the FWS family of weapon systems. We have the development order for it, and we have the first production order for it.

Speaker Change: Then we have as I mentioned, we have the.

Speaker Change:

Inserts for the Virginia or connectors for the Virginia, and Columbia class submarines. Those businesses have really good backlogs and are doing well. We also have drones that come out of our Canadian operations, our 70 and 80.

Robert Mehrabian: Those businesses have really good backlogs and are doing well. We also have drones that come out of our Canadian operations, the R-70 and R-80. We have orders for those. And we also have counter UAV systems that are being deployed in Europe. And finally, these are just examples. We have a very lightweight, uncooled target recognition system, what we call the FWS, Family of Weapons System.

Speaker Change: We have orders for.

Speaker Change: Where it goes.

Speaker Change: And we also have counted UAV.

Speaker Change: Systems that are being deployed in Europe and finally.

Speaker Change: This is an example.

Speaker Change: We have a very light weight on crude.

Speaker Change: Target right.

Speaker Change: Recognition system, we call the FWS family of weapon systems.

Robert Mehrabian: We have the development order for it, and we have the first production order for it. Those two together cost over $70 million, and we expect about $500 million in IDIQ contracts. Those are just examples.

Speaker Change: <unk>.

Speaker Change: Have the development or the employees and we have the first production order for those two combined over $70 million and expect about $500 million in Q contracts. Those are just examples I think our defense businesses, especially layered defense has picked up the pace.

Robert Mehrabian: Those two combined over $70 million, and expect about $500 million in IDIQ contracts. Those are just examples.

Robert Mehrabian: I think our defense businesses, especially Clear Defense, has picked up the pace very well, and we're very excited about that. Great.

Robert Mehrabian: I think our defense businesses, especially FLIR defense, have picked up the pace very well, and we're very excited about it. Great, that's super helpful. I'll leave it there. The next question is from Joe Giordano with TD Cowen. Please go ahead.

Speaker Change: Very well.

Speaker Change: <unk>.

Speaker Change: We're very excited about that.

Speaker Change: Great that's super helpful I'll leave it there.

Unknown Speaker: That's super helpful.

Unknown Speaker: I'll leave it there.

Joe Giordano: Thank you. Next question is from Joe Giordano with TD Cullen. Please go ahead. Good morning. Robert, you said you're seeing some stability in the machine vision business, which is good to hear. I think you mentioned it was down 30 years on year.

Speaker Change: Thank you.

Speaker Change: Next question is from Joe Giordano with TD Cowen. Please go ahead.

Joseph Craig Giordano: Hey, good morning.

Joseph Craig Giordano: Hey, good morning. Robert, you said you're seeing some stability in the machine vision business, which is good to hear. You mentioned it was down 30 percent year on year. What was that compared to 2Q? And what's the expectation for like 3Q and 4Q? What was that compared to 1Q?

Speaker Change: <unk>.

Speaker Change: Robert You said Youre seeing some stability in the machine vision business, which is good to hear.

Robert Mehrabian: And what's the expectation in 3Q, 4Q versus the second? Well, I think basically, they were down 30 in Q1 and Q2, as Edwin indicated. I think that's now going to be about 10 and 10 in Q3 and Q4. So for the year, it would be about 20. So it's going to improve. Partially, it is improving. Partially, it's because comps are getting easier, to be frank and very straightforward about it.

Speaker Change: I think you mentioned it was down 30 year on year, what was that compared to Q and what's your expectation for like <unk> and <unk>.

Joe Giordano: What was that compared to 2Q, and what's the expectation for like 3Q and 4Q? What was that versus 1Q, and what's the expectation in 3Q, 4Q versus the 6Q?

Speaker Change: What was that versus <unk> and what's your expectation for Q versus the second quarter.

Robert Mehrabian: Incorder. Well, I think basically there were down 30 in Q1 and Q2, as Edwin indicated. I think that's not going to be about 10 and 10 in Q3 and 4. So, for the year would be about 20. So it's going to improve partially. It's improving.

Speaker Change: Well I think.

Speaker Change: Basically they were down 30.

Speaker Change: In Q1, and Q2 as Ed indicated I think thats not going to be.

About $10 10 in Q3 and four so for the year would be about 20.

Speaker Change: So it's going to improve partially it's going it's improving a partially because comps are getting easier to be Frank and very straightforward in the body.

Robert Mehrabian: I think I'm very straightforward about it. That market began softening last year in Q3. So the comps are going to get easier, but also we're seeing, as I indicated before, we're seeing some optic in certain areas. And as you know, the semiconductor industry is coming back and coming back strong, and our products are used in the inspection system all over the world.

Robert Mehrabian: That market began softening last year in Q3, so the comps are going to get easier. But also, we're seeing, as I indicated before, an uptick in certain areas. And as you know, the semiconductor industry is coming back and coming back strong. And our products are used in inspection systems all over the world. And just to be clear, like, are the dollars for that business in 2Q higher than 1Q? And will they be higher in like the second half of dollars versus one half of dollars? I think our expectations right now are that they'd be relatively flat, maybe a little better in the second half.

Speaker Change: That market began softening last year in Q3, so the comps are going to get easier, but also we're seeing as I indicated before we are seeing some uptick in certain areas and as you know semiconductor industry is coming back and coming back strong and our products are used in the inspection.

Speaker Change: <unk> systems.

Speaker Change: All over the world.

Joe Giordano: And just to be clear, like, are the dollars for that business in two Q higher than one Q, and will they be higher in like the second half dollars versus one half dollars? I think our expectation expectations right now are that they'd be relatively flat. Maybe a little better in the second half. I don't want to be certainly in Q4.

Speaker Change: And just to be clear like are the dollars for that business in <unk> higher than <unk> and will they be higher in the second half dollars versus one $5.

Speaker Change: I think our expansion expectations right now.

Speaker Change: Relatively flat.

May be a little better in the second half.

Robert Mehrabian: I don't want to be certain, but in Q4 we expect it to be stronger, but right now, we have to be very careful not to drink our own bathwater because while things are looking good, we have both division systems, which are visual systems, as well as our infrared systems. So we have, we're looking at the combo there. And I think flat would be a good word to describe the situation with Q4 picking up. Okay. Um, we're also hearing some people talk about things like Boeing.

Speaker Change: Don't want to be.

Speaker Change: Certainly in Q4, we expect it to be stronger, but right now.

Robert Mehrabian: We expect it to be stronger, but right now we have to be very careful not to drink our own bath water because what things are looking well, good. We have both the vision systems, which are visual systems as well as our infrared systems. So we have, we're looking at the combo there. And I think flat would be a good word, with Q4 picking up.

Speaker Change: We have to be very careful not to not to drink our own bath water because.

Speaker Change: While things are looking well good.

Speaker Change: We have both the vision systems.

Speaker Change: Which our job.

Speaker Change: Visual systems as well as our infrared system. So we have we're looking at the combo, there and I think flat would be a good words with Q4, peaking up.

Joe Giordano: Okay. We're also hearing some people talk about, like, Boeing finally telling suppliers to cool off a little bit. I know that their production has gone down, but they've been still receiving components from suppliers at the same pace.

Okay.

Speaker Change: We're also hearing some people talk about like Boeing.

Robert Mehrabian: Finally, telling suppliers to cool off a little bit. I know that their production has gone down, but they've been still receiving components from suppliers at the same pace. And are you seeing any of that where they're pushing back a little bit? We're not seeing that as much.

Speaker Change: Finally, telling suppliers to cool off a little bit I know that production has gone down, but they've been still receiving components from suppliers at the same pace.

Robert Mehrabian: And are you seeing any of that where they're pushing back a little bit? Well, we're not seeing that as much. There's some rotation going on there in our OEM products, but we're not only supplying OEMs. We're also the aftermarket business; there is very important to us, and we're doing okay there. I think overall our aerospace business is pretty healthy.

Speaker Change: Are you seeing any of that where they're pushing back a little bit.

Speaker Change: Okay.

Speaker Change: Bob.

Bob: We're not seeing that as much.

Robert Mehrabian: There's some rotation going on there in our OEM products. But, we're not only supplying OEMs. We also have the aftermarket business there, and we're doing okay there. I think overall, our aerospace business is pretty healthy. I'll get back in line.

Bob: There is.

Bob: There is some rotation going on there in auto OEM products, but.

Speaker Change: We're not only supplying Oems where also the aftermarket business. There is very important to us and we're doing okay, but I think over all our aerospace business is pretty healthy.

Joe Giordano: Okay, I'll get back in here. Thank you.

Speaker Change: Okay I'll get back in queue. Thanks, guys.

Speaker Change: Yeah.

Guy Hardwick: Next question is from Guy Hardwick with Freedom Capital. Markets, go ahead, please. Hi, yeah. Good morning. Good morning, Guy. Going back to the free cash flow issue.

Guy Drummond Hardwick: Next question is from Gaiam hardwood with Freedom capital markets go ahead. Please.

Robert Mehrabian: Thanks, guys. The next question is from Guy Hardwick with Freedom Capital Markets. Go ahead. Hi, good morning.

Guy Drummond Hardwick: Hi, good morning.

Guy Drummond Hardwick: Good morning, guys. Going back to the free cash flow issue, what's your sense of where you would have deployed the free cash flow in terms of acquisitions, share of purchases, and debt repayments? Well, Guy, we think... Because our free cash flow was so strong in the first two quarters, and you have to also keep in mind our liabilities, which is our debt. Our debt is set up pretty well; it's fixed.

Guy Drummond Hardwick: Morning, guys.

Guy Drummond Hardwick:

Speaker Change: Going back to the free cash flow issues.

Guy Hardwick: What's your sense for when you look back on this year, where you would have deployed the free cash flow, in terms of acquisition, share repurchases, and debt repayments? Well, Guy, we think... because our free cash flow was so strong in the first two quarters, and you have to also keep in mind of our liabilities, which is our debt. Our debt is set up pretty well. It's fixed. It's only will pay, have to pay like a hundred and fifty million dollars in October timeframe. Other than that, our payments start in 2026, and if you roll everything that we owe over the years, our interest payments are about 2.35%.

Speaker Change: What's your sense for when you.

Speaker Change: Look back on this year, where you where you would deploy the free cash flow in terms of acquisition share repurchases and debt repayments.

Speaker Change: Yes.

Speaker Change: Well.

Speaker Change: Hi.

Speaker Change: Inc.

Speaker Change: Because of our free cash flow was strong in the first two quarters.

Speaker Change: And you have to also keep in mind.

Speaker Change: Our liabilities, which is our debt our debt is set up pretty well.

Speaker Change: It's.

Speaker Change: Thanks.

Guy Drummond Hardwick: It's only we will have to pay like $150 million in the October timeframe. Other than that, our payments start in 2026. And if you roll everything that we owe over the years, our interest payments are about 2.35%.

Speaker Change: It's only related pay have to pay like $110 million to $50 million.

Speaker Change: October timeframe are there.

Speaker Change: Other than that our payments start in 2026, and if you roll everything that we over the years.

Speaker Change: <unk>.

Interest payments are about to three 5% no.

Robert Mehrabian: Now, for the year, we think that we will continue buying our stock, maybe depends on the stock price, right? We've bought back quite a bit in the first half of the year. We expect to continue to do that, but we're also looking at acquisitions at the same time. So we're balancing the two as we go forward right now because of our very serious efforts in 8020 and ability to generate cash. We think that we're in a really good situation.

Robert Mehrabian: Now, for the year, we think that we will continue buying our stock, maybe it depends on the stock price, right? We bought back quite a bit in the first half of the year. We expect to continue to do that, but we're also looking at acquisitions at the same time. So we're balancing the two as we go forward. Right now, because of our very serious efforts in 80-20 and ability to generate cash, we think that we're in a really good situation. We just renewed our line of credit for another five years, and we haven't touched it.

Speaker Change: For the year.

Speaker Change: We think that.

Speaker Change: We will continue buying our stock.

Speaker Change: Maybe it depends on the stock price right.

Speaker Change: <unk>.

Speaker Change: We bought we bought back quite a bit in the first half of the year. We expect to continue to do that well. We are also looking at acquisitions at the same time.

Speaker Change: So we're balancing the two as we go forward right now.

Speaker Change: Cause.

Speaker Change: Very serious efforts in <unk>, 'twenty and ability to generate cash.

Speaker Change: Think that bringing a really good situation.

Robert Mehrabian: We just renewed our line of credit for another five years. We haven't touched it. We have about $1.2 billion on touch. So, with no debt payments, big ones coming to our interest rates being 2.35% over the many years, we feel good that we can do whatever we want. Right now, focused on buying back stock and looking at acquisitions as well.

Speaker Change: Just renewed our line of credit for another five years.

Speaker Change: We haven't touched it we have about $1 2 billion tons.

Robert Mehrabian: We have about $1.2 billion untouched. So with no debt payments, big ones are coming due. With our interest rates being 2.35% for many years, we feel good that we can do whatever we want. Right now, we are focused on buying back stock and looking at acquisitions as well. Thank you. Just as a follow-up, would you mind updating us on your margin expectations by segment, or has nothing changed since the last quarter? No, I can do it if you wish.

Speaker Change: So.

Speaker Change: With no debt payments big months coming due.

Speaker Change: Our interest rates being 235% over the many years.

We feel good that we can do whatever we want right now focused on.

Speaker Change: Buying back stock and looking at acquisitions as well.

Guy Hardwick: Okay. Thank you.

Speaker Change: Okay. Thank you and just as a follow up would you mind updating us on your margin expectations by segment towards nothing changed since the last quarter.

Robert Mehrabian: Just so as a follow-up, would you mind updating us on your margin expectations by segment, or has nothing changed since the last quarter? No, I can do it if you wish. I can do it for the full year. We think that for the full year in instruments, as an example, it should be up about 90 to 100 basis points, which is pretty healthy for us. We'll go from what was last year at 26.6 to 27.5 plus. In digital imaging, we think that margins for the year may go down a little bit, even though, you know, I mentioned the headwind that we have there.

Speaker Change: No I can't do it. Thanks, you wish I can do it for the full year.

Robert Mehrabian: I can do it for the full year. We think that for the full year, in instruments, as an example, it should be up about 90 to 100 basis points, which is pretty healthy for us. It'll go from what it was last year at 26.6 to 27.5 plus. In digital imaging, we think that margins for the year may go down a little bit, even though you know I mentioned the headwind that we have there.

Speaker Change: Let me think.

Speaker Change: For the full year.

Speaker Change: <unk>.

Instrument.

Speaker Change: As an example.

Speaker Change: Should be up about 90 to 100 basis points was pretty healthy quarter.

Speaker Change: From what was last year at $26 six to 27.

Speaker Change: Five plus.

Robert Mehrabian: But if you look at the whole portfolio, while margins went down in our DALSA A2B businesses, they went up significantly in our FLIR businesses. So we think they might go down modestly, maybe 30 basis points for the year, maybe 20. Aerospace and Defense.

Speaker Change: In digital imaging, we think that margins.

Speaker Change: For the year May go down a little bit even though I mentioned the.

Speaker Change: The headwind that we have there, but if you look at the whole portfolio, while margins went down and in <unk>.

Robert Mehrabian: But if you look at the whole portfolio, while margins went down in our DAW side to businesses, they went up significantly in our flea businesses. So, we think they might go down moderately, maybe 30 basis points for the year, maybe 20.

Speaker Change: I will say <unk> businesses, they went up significantly in our flavor businesses. So we think that might go down modestly maybe 30 basis points for the year.

Speaker Change: Maybe 20.

Robert Mehrabian: Aerospace and defense, I think we're doing really well, maybe over 100 basis points. And engineering systems, which is our smallest segment, I think margins are going to be going down primarily because of the first half. And overall, we think the segment margins should be about 14, 15 basis points up from last year, considering all the headwinds that we have.

Speaker Change: Aerospace and defense.

Robert Mehrabian: I think we're doing really well, maybe over 100 basis points, and Engineered Systems, which is our smallest. I think margins are going to be going down, primarily because of the first half, and overall, we think the segment margins should be about 14-15 basis points up from last year. Considering all the headwinds that we have, that's pretty good. Thank you. The next question is from Rob Jamieson with Vertical Research Partners. Go ahead. All right, thanks, guys. I guess, just real quick, one clarification with digital imaging.

Speaker Change: Thank you.

Speaker Change: We're doing really well maybe over 100 basis points.

Speaker Change: Engineered systems, which is our smallest.

Speaker Change: Segment, I think margins are going to be going down primarily because of the first half.

Speaker Change: And overall, we think the segment margins should be about 14 15 basis points up from last year, considering all the headwinds that we have that's pretty good.

Robert Mehrabian: That's pretty good. Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Rob Jamieson: Next question is from Rob Jamieson with Vertical Reachers Partners. Go ahead, please. All right. Thanks, guys.

Speaker Change: Next question is from Rob Jamieson with vertical research partners go ahead. Please.

Robert Gregor Jamieson: Alright, thanks, guys.

Robert Gregor Jamieson: Should we, you know, in the next two quarters, 3Q, 4Q, is there much differential between the quarters on margin to kind of get to that down, you know, 20, 30 basis points? Well, let's see if I can answer that. Well, I think in the first half.

Rob Jamieson: I guess just real quick, one clarification, just with digital imaging. Should we, you know, next to quarter, three, two, four, two, is there much differential between the quarters on margin to kind of get to that down, you know, 20, 30 basis points? Well, let me see if I can answer that well. I think in the first half, if you look at Q1, the margins were about 21.8 percent overall in digital imaging. You look at Q2; they dropped about 20 basis points to 21.6. We're thinking Q3 will pick up to over 22 percent, 22.2 maybe, and then go as far as 23 and 2.4.

Robert Gregor Jamieson: Just real quick one clarification, just with digital imaging should we you know in the next few quarters. During Q <unk> is there much differential between the quarters on non margin to kind of get to that down 2030 basis points.

Speaker Change: Well no.

Speaker Change: Let me see if I can answer that.

Speaker Change: Well.

Speaker Change: Zinc.

Speaker Change: In the first half if.

Robert Mehrabian: If you look at Q1, the margins were about 21.8% overall in digital imaging. If you look at Q2, They dropped about 20 basis points to 21.6. We're thinking Q3 will pick up, to over 22%, 22.2 maybe, and then go as high as 23 and 24. So we should end the year at 22.2, even with a weak first half. So I think margins are going to keep improving, both because of the cost action that Edwin and his people have taken but also because some of the markets are coming.

Speaker Change: If you look at Q1 the.

Speaker Change: The margins were about <unk>.

Speaker Change: 21, 8% overall in digital imaging.

Speaker Change: You look at Q2.

Speaker Change: They dropped about 20 basis points to 21 six.

Speaker Change: We think in Q3, you'll pick up.

Speaker Change: Two over 22% 22 to May be and then go as high as 23 in Q4.

Robert Mehrabian: So we should end the year at 22.2, even with a week first half. So I think margins are going to keep improving, both because of the cost action that Edwin and his people have taken, but also because some of the markets are coming back.

Speaker Change: So we should end the year at 22 point to.

Speaker Change: Even with a weak first half so I think margins are going to keep improving both because of the cost action that Edwin Ninety's people I've taken.

Speaker Change: So because some of the markets are coming back.

Rob Jamieson: Perfect. That's helpful.

Speaker Change: Perfect. That's helpful. I was actually going to ask about that next.

Robert Mehrabian: That's helpful. I was actually going to ask about that next. And, look, I know this is a pretty small part of your business, but I just wanted to ask a little bit more about the oscilloscope within instrumentation and test and measurement.

Rob Jamieson: I was actually going to ask about that next.

Rob Jamieson: And look, I know this is a pretty small part of your business, but I just wanted to ask a little bit more on the oscilloscope within instrumentation and test and measurement. Just one of your competitors this morning cutting their outlook on delayed R&D spend and government and China-related spend, just curious if there's anything in the end market and markets that you're seeing within test and measurement on the oscilloscope side that's maybe weaker or starting to improve more, or is it just all kind of a little bit soft and lagging the protocols business. Any additional color there would be great.

Speaker Change #100: And look I know this.

Speaker Change #101: Pretty small part of your business.

Speaker Change #102: But I just wanted to ask a little bit more on DSL scope within instrumentation and test and measurement.

Speaker Change #103: Just wondering your competitors this morning cutting their outlook.

Speaker Change #103: On delayed R&D spend in government.

Speaker Change #104: And China related it's been just curious.

Robert Gregor Jamieson: Just one of your competitors this morning cutting, you know, their outlook on delayed R&D spend and government and China-related spend. Just curious if there's anything in the end market, end markets that you're seeing within test and measurement on the oscilloscope side that's, you know, maybe weaker or starting to improve more, or is it just all kind of a little bit soft and lagging the protocols business? Any additional color there would be great.

Speaker Change #105: If there is anything in the end market.

Speaker Change #105: And Mark is that Youre seeing within test and measurement on the <unk> side.

Mark: Maybe weaker or starting to improve more or is it just all kind of a little bit soft and lagging the protocols business.

Speaker Change #107: Any additional color there would be great.

Robert Mehrabian: Yeah, I think you've explained it very well. I think people are hesitant to spend discretionary caps. So in the high end oscilloscope where you make really good money is slow down. We expect the whole business to be done about 10% year over year, but having said that, as with many other years, we were probably the first one out of the box early in the year in April to one. And subsequently, you see everybody else, of course, having to do the same. The advantage that we had in doing that was that in knowing that the market was going to soften, we took stock late in Q4 and early in Q1.

Mark: Yeah I think.

Robert Mehrabian: Yeah, I think you've explained it very well. People are hesitant to spend discretionary cash. So the high-end oscilloscope business, where you make really good money, has slowed down. We expect the whole business to grow by about 10% year over year. But having said that, as with many other years, we were probably the first one out of the box early in the year in April to warn. And subsequently, you see everybody else, of course, having to do the same.

Speaker Change #108: I think you've explained it very well I think people are hesitant to spend discretionary capex.

Speaker Change #109: The high end of similar scope, where you can make really good money.

Speaker Change #110: Is <unk>.

Speaker Change #110: Slowed down.

Speaker Change #110: We expect the whole business to be done in about 10% year over year.

Speaker Change #110: But having said that.

Speaker Change #110: As with many others.

Speaker Change #110: We were probably the first one out of the box early in the year in April to one.

Speaker Change #110: Subsequently youll see everybody else of course, having to do the same.

Robert Mehrabian: The advantage that we had in doing that was that, knowing that the market was going to soften, we took costs off late in Q4 and early in Q1. And as a consequence, the margins in that business have been exceptionally healthy. Absolutely. Now, thank you for that.

Speaker Change #110: The advantage that we had in doing that.

Speaker Change #110: Was that.

Speaker Change #110: In.

Speaker Change #110: Knowing that the market was going to soften we took cost out.

Speaker Change #110: Late in Q4 and early in Q1 and as a consequence, the margins in that business and have been exceptionally healthy.

Unknown Speaker: And as a consequence, the margins in that business have been exceptionally helpful. Absolutely. Now, thank you for that. I appreciate you all taking my questions. Oh, of course.

Speaker Change #111: Yes, absolutely now thank you for that I. Appreciate you all taking my questions.

Robert Mehrabian: I appreciate you all taking my question. Oh, of course. Thank you. We have one more in queue. Once again, as a reminder, if you have additional questions, press 1 and then 0 on your phone's keypad. We're going now to Jordan Leonate from Bank of America.

Speaker Change #112: Of course, thank you.

Operator: Thank you. We have one more in queue. Once again, as every reminder, if you have additional questions, press one, then zero on your phone's keypad.

Speaker Change #111: Yes.

We have one more in queue. Once again as a reminder, if you have additional questions press one zero on your phone's keypad, we're going now to Jordan <unk> from Bank of America go ahead. Please.

Jordan Leone: We're going now to two Jordan, Leone from Bank of America. Go ahead, please. Good morning, Vic. We're taking a question. How should we think about if the US puts more restrictions on to ASMR and Tokyo Electron? What would that impact be for the digital imaging segment? I don't see that impacting us much. We supply products to their customers. I don't want to mention the name, but this is a large customer. And we, they use. This is a US customer. And they use as ASMR equipment, which uses a critical part that we make. In our men's factories.

Jordan Leonate: Go ahead. Good morning, thanks for taking the question. What should we think about if the U.S. puts more restrictions on ASML and Tokyo Electron? What would that impact be on the digital imaging segment? I don't see that impacting us much. We supply products to their customers. I don't want to mention the name, but this is a large customer, and we, they use, this is a U.S. customer, and they use ASML equipment, which uses a critical part that we make in our MEMS factory. We don't expect to see a change in that because we're, frankly, supplying customers of ASML. And It's not a huge business, maybe a 20-25 million business, but it's very profitable. Got it. Thank you, for sure.

Jordan <unk>: Good morning, Thanks for taking the question.

Speaker Change #114: How should we think about.

Speaker Change #115: If the U S puts more restrictions on to ASML and Tokyo electron.

Speaker Change #116: What would that impact be for the digital imaging segment.

Speaker Change #117: I don't see that impacting us from us.

Speaker Change #117: We supply product to.

Speaker Change #117: To their customers.

Speaker Change #118: I don't want to mention the name, but this is a large customer and they use this is a U S customer and they use as ASML equipment, which uses a critical parts that we make in our mens factories.

Jordan Leone: We don't expect to see a change in that because we're frankly supplying the customers of ASMR. And it's not a huge business, maybe 20, 25 million dollar business, but very profitable. Got it. Thank you.

Speaker Change #118: We don't expect to see a change in that because we have frankly supplying.

Speaker Change #118: Supplying.

Speaker Change #118: The customers don't for ASML and.

It's not a huge business may be 2000 $25 million business, we're very profitable.

Got it thank you.

Operator: For sure. At this time, we have no additional callers in queue.

Speaker Change #119: For sure.

At this time, we have no additional callers in queue.

Operator: At this time, we have no additional callers in... Thank you very much, John. I'll now ask Jason to conclude. Thanks, Robert, and thanks everyone for joining us this morning. If you have follow-up questions, of course, feel free to email me or call me at the number on the earnings release. All our earnings releases are available on our website, as is this webcast. And John, if you could include the call and give the replay information, it would be much appreciated.

Jason VanWees: Thank you very much, John.

Jason: Thank you very much John I'll now ask Jason to conclude the conference call.

Jason VanWees: Our last ask Jason to conclude the conference call. Thanks, Robert. And thanks, everyone, for joining us this morning. If you have follow-up questions, of course, feel free to email me or call me at the number on the orange release. All the orange releases are available on our website as this is webcast.

Jason: Thanks, Robert and thanks, everyone for joining us. This morning, if you have follow up questions of course feel free to email me or call me the number on the earnings release.

Jason: The earnings releases are available on our website as of this webcast and John If you could conclude the call and give the replay information.

Operator: And John, if you could include the call and give the replay information. Thank you.

Speaker Change #121: Appreciate it thank you.

Operator: Absolutely.

Operator: Absolutely, ladies and gentlemen, a recorded replay of this conference call will be available from today at 10 a.m. Pacific time through August 24th of this year, 2024 at midnight. To access the replay, from domestic areas, call 866-207-1041. Enter the access code 562-3764. International callers use 402... 970-0847 and the same access code, 5626. Once again, replay is available from 10 a.m. Pacific today through August 24th. Domestic callers use 866-207-1041.

John: Absolutely, ladies and gentlemen, a recorded replay of this conference call will be available from today at 10 Am Pacific.

Operator: Ladies and gentlemen, a recorded replay of this conference call will be available from today at 10 a.m. Pacific through August 24th of this year, 2024 at midnight. To access the replay from domestic areas, call 866-207-1041. Enter the access code 562-3764. International callers use 402-970-0847 and the same access code 562-3764. Once again, replay available from 10 a.m. Pacific today through August 24th. Domestic callers use 866-207-1041. Enter the actual callers use 402-970-0847 and the access code for either is 562-3764. That does include your conference call for today.

John: Through August 24th of this year 2024 at midnight.

John: To access the replay from.

Speaker Change #122: From domestic.

Speaker Change #123: Areas call 86620710 of four 1%.

Speaker Change #123: The access code five six to $3 706 for.

Speaker Change #123: International callers used for zero to <unk>.

Speaker Change #123: <unk> 700847 in the same access code five six to $3 764. Once again replay available from 10 am Pacific today through August 24th domestic callers use 8662071041.

Speaker Change #124: International callers used for zero to 9700847 and the access code for either is five six to 3764 that does conclude your conference call for today, we do thank you for your participation and for using AT&T conferencing you may now disconnect.

Operator: We do thank you for participation and for using AT&T Event Conferencing. You may now disconnect. We're sorry, your conference is ending now. Please hang up.

Speaker Change #125: We're sorry your conferences ending now please hang up.

Operator: David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David David Ladies and gentlemen, thank you for standing by and welcome to Teledyne's second quarter earnings call. At this time, all participants are going to listen only most. Later, we will have a question and answer session, and instructions for queuing up will be provided for you at that time.

Speaker Change #125: [music].

Operator: The international callers should use 402-970-0847, and the access code for either is 562-3764. That does conclude your conference call for today. We thank you for your participation and for using AT&T Event Conferencing. You may now disconnect. We're sorry, your conference is ending now. Please hang up. And welcome to Teledyne's second quarter earnings call. At this time, all participants are in a listen-only mode.

Jason VanWees: Later, we will have a question and answer session, and instructions for queuing up will be provided for you at that time. If you require operator assistance during the call, press star zero on your phone's keypad. As a reminder, this conference call is being recorded. I'd like to turn the conference call over to your host, Jason VanWees. Please go ahead, sir. Good morning, everyone. This is Jason VanWees, Vice Chairman. I'd like to welcome everyone to Teledyne's second quarter 2024 earnings release conference call.

Speaker Change #126: Later, we will have a question and answer session and instructions for queuing up will be provided for you at that time should require operator assistance during the call Press Star zero on your phone's keypad and as a reminder, this conference call is being recorded.

Operator: She will require operator assistance during the call. Press star zero on your phone's keypad, and as a reminder, this conference call is being recorded.

Jason VanWees: At this time, I would like to turn the conference call over to your host, Jason VanWees. Please go ahead, sir. Joining me today are Teledyne Executive Chairman, Robert Mehrabian, CEO Edwin Roks, Senior Vice President and CFO Steve Blackwood, and Melanie Cibik, EVP, General Counsel, Chief Compliance Officer, and Secretary.

Speaker Change #126: At this time I'd like to turn the conference call over to your host Jason Bandwidths. Please go ahead Sir.

Jason VanWees: We released our earnings earlier this morning before the market open. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian, CEO, Edwin Roks, Senior Vice President and CFO, Steve Blackwood, and Melanie Cibik, EVP, General Counsel, Chief Compliance Officer, and President and COO George Bobb would have joined us. But after getting stuck in airports late last week at the weekend, George came back with COVID and is being isolated.

Speaker Change #127: Joining me today are teledyne's executive Chairman, Robert Mehrabian, CEO, Edwin Rock Senior Vice President and CFO, Steve Blackwood, and Melanie Civic EVP General Counsel, Chief compliance Officer, and Secretary, President and COO, George Bob would've joined us, but after getting stuck in airports late last week and the weekend.

Jason VanWees: President and CEO, George Bobb, would have joined us after getting stuck in airports late last week and the weekend. George came back with COVID and was being isolated. Anyway, after remarks by Robert, Edwin, and Steve, we will ask your questions.

Speaker Change #128: And it came back with Covid and has been isolated.

Jason VanWees: Anyway, after remarks by Robert, Edwin, and Steve, we will answer your questions. However, before we get started, our lawyers have reminded me to tell you that all forward-looking statements made this morning are subject to various presumptions, risks, and caveats as noted in the earnings release and our periodic SEC filings, and, of course, actual results. In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay, both via webcast and dial-in, will be available for about one month. Thank you, Jason. And good morning.

Speaker Change #129: Anyway after remarks by Robert Edwin and Steve will answer your questions. However, before we get started our attorneys have reminded me to tell you that all forward looking statements made this morning.

Jason VanWees: However, before we get started, our attorneys never mind to me to tell you that all forward-looking statements made this morning. There's one thing to share: questions written copy out there, noted in the earnings release and our periodic SEC violence, and, of course, actual results may differ materially.

Speaker Change #129: 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.

Jason VanWees: In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay, both by a webcast and dial-in, will be available for about one.

Speaker Change #129: In order to avoid potential selective disclosures this call and simultaneously being webcast and replay both via webcast and diamond will be available for about one.

Robert Mehrabian: Here is Robert. Thank you, Jason, and good morning, and thank you for joining our earnings call. In the second quarter, Teledyne achieved all-time record pre-cash flow, allowing us to deploy approximately $852 million through July on debt repayment, acquisition, and stock repurchases. Non-GAAP operating margin increased from last year and increased in each of our three largest segments. Total sales and earnings increased sequentially and exceeded our most recent expectations.

Robert: Here is Robert.

Robert Mehrabian: And thank you for joining our earnings call. In the second quarter, Teledyne achieved all-time record free cash flow, allowing us to deploy approximately $852 million through July on debt repayment, acquisitions, and stock repurchase. Non-GAAP operating margin increased from last year and increased in each of our three largest segments. Total sales and earnings increased sequentially and exceeded our most recent expectations, although year-over-year comparisons remain especially difficult in certain commercial markets, such as industrial automation and electronic test and measure. I never did that.

Robert: Thank you, Jason and good morning, and thank you for joining our earnings call.

Robert: In the second quarter Teledyne achieved all time record free cash flow.

Owen: Owen goods to deploy approximately $852 million through July.

Owen: Debt repayment acquisition and stock repurchases.

Owen: non-GAAP operating margin increased from last year.

Owen: And the increase in each of our three largest segments.

Owen: Total sales and earnings increased sequentially and exceeded our most recent expectations.

Robert Mehrabian: All the year-of-year comparisons remained specially difficult in certain commercial markets, such as industrial automation and electronic test and measurement. Nevertheless, strong defense-related sales at Teledyne Flair and our own legacy space-based infrared imaging business partially offset the expected declines in industrial imaging systems. Furthermore, despite the anticipated year-over-year decline in certain instrumentation product lines, total instrumentation sales were a second quarter record due to exceptional performance of our marine instrumentation businesses. Primarily driven by our aerospace and defense businesses, orders were greater than sales for the third consecutive quarter, and we ended the period with record backlog.

Owen: Although year over year comparisons remain especially difficult.

Owen: Commercial market, such as industrial automation and electronic test and measurement.

Owen: Nevertheless.

Owen: Strong defense related sales at Teledyne player and our own legacy space based infrared imaging business.

Owen: Partially offset the expected declines in industrial imaging systems.

Owen: Furthermore, despite the anticipated year over year decline in certain instrumentation product lines.

Owen: Total instrumentation sales were a second quarter record due to exceptional performance of our marine instrumentation businesses.

Owen: Primarily driven by our aerospace and defense businesses orders were greater than sales for the third consecutive quarter.

Owen: We ended the period with record backlog.

Robert Mehrabian: Therefore, with reasonably confident that quarterly sales will again increase sequentially, and we will return to a year-over-year sales growth in the second half of 2024.

Owen: Therefore.

Owen: We're reasonably confident that quarterly sales will again increase sequentially.

Owen: With a return to year over year sales growth in the second half of 2020, Florida.

Robert Mehrabian: Finally, even with the significant caps of deployment in the second quarter, our quarter-end leverage remained at 1.7, and we plan to continue stockly purchases in the balance of 2009-24 as well as pursue acquisition.

Owen: Finally.

Owen: Even with the significant capital deployment in the second quarter.

Owen: Our quarter end leverage remained at one seven.

Owen: We plan to continue strong stock repurchases in the balance of 2024 as well as pursue acquisitions.

Edwin Roks: I would not turn the call to Edwin, who will further comment on the performance of our four segments. Thank you, Robert. This is Edwin, and I will report on the first report on the digital-emitting segments, which he presents 54% of televised portfolio. And like Teledyne as a whole, this segment is a mix of motorcycle businesses such as defense, space, and healthcare, combined with short motorcycle markets, including industrial automation, semiconductor inspection, and infrared performance and cameras for applications ranging from factory-condition monitoring to maritime navigation.

Owen: I would now turn the call to Edwin who will further comment on the performance of our four segments.

Edwin Roks: This is Edwin, and I will report on the first report on the digital emitting segment, which represents 54% of Teledyne's portfolio, and like Teledyne as a whole, this segment is a mix of motorcycle business, defense, space, and healthcare. Combined with shorter cycle markets, including industrial automation, semiconductor inspection, and infrared components and cameras for applications ranging from factory condition monitoring to maritime navigation, second quarter 2024 sales declined 6.8% compared with last year. As expected, sales to industrial machine vision markets declined approximately 30% year-over-year.

Owen: Thank you Robert this is Catherine and I will hit pause on their first report on the digital imaging segment, which represents 54% of stabilized portfolio.

Edwin: Like Teledyne as a whole this segment is a mix of longer cycle businesses, such as defense space and healthcare combined with shorter cycle markets, including industrial automation semiconductor inspection and infrared for foreigners and cameras for applications ranging from effectively a condition monitoring to maritime navigation.

Edwin Roks: Second quarter-2024 sales declined 6.8% compared with last year. As expected, sales to industrial machine-vision markets declined approximately 30% year-over-year. However, this was partially offset by increased sales from free defense and from televised space-based infrared imaging detectors. Furthermore, for the fourth consecutive quarter, healthy margins across the entire free business portfolio help us protect overall operating margin, even given the significant year-over-year reduction in sales of our typically highest contribution margin product lines.

Edwin: Second quarter 2024 sales declined six 8% compared with last year as expected sales to industrial machine vision markets declined approximately 30% year over year. However, this was partially offset by increased sales from playing defense and from generalized space based infrared imaging detectors.

Edwin Roks: However, this was partially offset by increased sales from Freight Defence and from Teledyne Space-Based Infrared Imaging. Furthermore, for the fourth consecutive quarter, healthy margins across the entire Flair business portfolio helped us protect overall operating margin, even given the significant year-over-year reduction in sales of our typically highest contribution margin products. I will now report on the other three segments, which represent the remaining 46%. The instrumentation segment consists of the merits of the Marine Corps.

Furthermore, for the fourth consecutive quarter.

Edwin: <unk> margins across the entire fleet business portfolio helped us protect overall operating margin, even given the significant year over year reduction in sales of our typically highest contribution margin product lines.

Edwin Roks: I will now report on the other three segments, which represent the remaining 46% of televised. The instrumentation segment consists of marine environmental and test and measurement businesses, which contribute a little over 24% of sales. For the total segment, overall second quarter sales increased 1.6% versus last year. Sales of marine instruments increased 16% in the quarter, primarily due to strong offshore energy and subsea defense sales. Sales of environmental instruments decreased 1.6%, with greater sales of drugs, the recovery and laboratory instruments offset by lower sales of gas emission monitoring systems and gas-of-flame safety analyzes. Sales of marine products test and measurement systems, which include oscilloscopes, digitizers, and protocol analyzers, increased 15.8% year-over-year on a tough quarter in comparison versus 2023.

Speaker Change #131: I will now report on the other three segments, which represented the remaining 46% of settlement.

Speaker Change #131: There is limitation segment consists of American marine.

Edwin Roks: Environmental and Test and Measurement Businesses, which contribute a little over 24% of GDP. For the total segment, overall second quarter sales increased 1.6% versus last year. Sales of marine instruments increased 16% in the quarter, primarily due to strong offshore energy and subsea defense. Sales of environmental instruments decreased 1.6%.

Speaker Change #131: Environmental and test and measurement businesses, which contribute a little over 24% of sales for.

Speaker Change #131: For the total segment's overall second quarter sales increased one 6% versus last year.

Speaker Change #131: Sales of marine instruments increased 16% in the quarter, primarily due to strong offshore energy and subsidy defense shifts.

Speaker Change #131: Sales of environmental instruments decreased one 6% with greater sale sales of drugs.

Edwin Roks: The Creator Sales of Drug Discovery and Laboratory Instruments Offset by Lower Sales of Processed Gas and Emission Monitoring. Sales of Electronics Test and Measurement Systems, which include oscilloscopes, digitizers, and protocol analyzers, decreased 50.8% year-on-year on a Tough Corny Comparison Versus 22. Overall Instrumentation Segment Operating Profits increased in the second quarter with gap operating margins of 136 basis points to 26.1% and another 34 basis points on a no-gap basis to 27.1%. In the aerospace and defense electronics segment, which represents 14% of Teledyne, second quarter sales increased four and a half, driven by the growth of commercial airspace and defense microwave.

Speaker Change #131: And.

Speaker Change #131: Laboratory instruments offset by lower sales of processed gas emission monitoring systems and Gaslog flame safety on losses.

Speaker Change #132: Sure. So I'll take the tonnage test and measurement systems, which includes Arsenal stubs, Digitizes and protocol analyzers increased 58% year over year on a tough quarterly comparison versus 2023.

Edwin Roks: Overall instrumentation segments operating profit increased in the second quarter, with gap operating margins increasing one of the 36 basis points to 26.1% and another 34 basis points on a non-gap basis to 27.2%. In the aerospace and defense electronic segment, which represents 14% of televised sales, second quarter sales increased 4.5%, driven by the growth of commercial aerospace and defense microwave products. Gap and non-GAAP segment operating profits increased year-over-year, the segment margin increasing approximately 77%.

Speaker Change #132: Overall instrumentation segment operating profit increased in the second quarter with GAAP operating margins, increasing 136 basis points to 76, 1%. Another 34 basis points on a non-GAAP basis to 27, 2%.

Speaker Change #132: In the aerospace and defense electronics segments, which represents 14% of settlement sales second quarter sales increased four 5% driven by the growth of commercial aerospace and defense microwave products.

Speaker Change #132: GAAP and non-GAAP segment operating profit increased year over year with segment margin, increasing approximately 77 basis points.

Edwin Roks: and Bass Sports.

Edwin Roks: For the engineering system segment, which contributes 8% to overall SEALs, second quarter have new decreased 8.7%, and operating profit was impacted by lower SEALs and their favorable program mix.

Speaker Change #132: For the engineered systems segment, which contributes 8% to overall sales second quarter revenue decreased eight 7% and operating profit was impacted by lower sales and a favorable program mix.

Robert Mehrabian: I will not pass the call back to the lower SEALs. Thank you, Edwin.

Edwin Roks: I will now pass the call back. Thank you, Edwin. In conclusion.

Speaker Change #133: And I'll pass the call back to enrollments.

Speaker Change #133: Sure.

Speaker Change #134: Thank you Edwin.

Robert Mehrabian: In conclusion, our second quarter performance was a testament to the strength of our balanced business portfolio. We also continued our proven strategy of increasing margins in those businesses which are growing, while reasonably protecting margins in businesses with more challenging markets. Our current full year earnings outlook is identical to the last quarter, with some markets such as industrial automation and electronic test and measurements remaining difficult, although year-over-year comparisons are easier in the second half. While the outlook for our global defense, energy, and aerospace businesses remains strong and is supported by our record backlog.

Speaker Change #135: In conclusion.

Robert Mehrabian: Our second quarter performance was a testament to the strength of our balanced business portfolio. We also continued our proven strategy of increasing margins in those businesses which are growing while reasonably protecting margins in businesses with more challenging markets. Our current four-year earnings outlook is identical to the last quarter, with some markets, such as industrial automation and electronic tests and measurements, remaining difficult, although year-over-year comparisons are easier in the second half, while the outlook for our global defense, energy, and aerospace businesses remains strong and is supported by our record backstop.

Speaker Change #136: Our second quarter performance was a testament to the strength of our <unk>.

Speaker Change #136: Balanced business portfolio.

Speaker Change #136: We also continued our proven strategy of increasing margin in those businesses, which are growing reasonably protecting margins in businesses with more challenging market.

Speaker Change #136: Our current full year earnings outlook is identical to the last quarter with some markets such as industrial automation and electronic test and measurement remaining difficult although year over year comparisons.

Speaker Change #136: Easier in the second half, while the outlook for our global defense energy and aerospace businesses.

Speaker Change #136: Remains strong and is supported by our record backlog.

Robert Mehrabian: Finally, we continue to acquisition opportunities. But given the strength of our balance sheet and cash flow, we also plan to continue purchasing our own stock under our current $1.25 billion authorization.

Speaker Change #136: Finally.

Speaker Change #136: We continue to review acquisition opportunities.

Robert Mehrabian: [inaudible] We continue to review acquisition opportunities, but given the strength of our balance sheet and cash flow, we also plan to continue purchasing our own stock under our current $1.25 billion authorization. I will now turn the call over to Steve. Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full year 2024 outlook.

Speaker Change #136: But given the strength of our balance sheet and cash flow. We also plan to continue purchasing our own stock under our current $1 billion to $5 billion our characterization.

Stephen Blackwood: I will not turn the call over to Steve. Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full year 2024 outlook. In the second quarter, cash flow from operating activities was $318.7 million compared with $190.5 million in 2023. Three cash flow, that is cash from operating activities less capital expenditures, there's $301 million in the second quarter of 2024 compared with $163.2 million in 2023. Cash flow increased in the second quarter due to stronger working capital performance.

Speaker Change #136: I will now turn the call over to Steve.

Robert Mehrabian: In the second quarter, cash flow from operating activities was $318.7 million, compared with $190.5 million in 2023. Free cash flow, that is, cash from operating activities less capital expenditures, was $301 million in the second quarter of 2024, compared with $163.2 million in 2023. Cash flow increased in the second quarter due to stronger working capital performance.

Steve: Thank you Robert and good morning, I'll first discuss some additional financials for the quarter not covered by Robert and then I will discuss our third quarter and full year 2024 outlook.

Steve: In the second quarter cash flow from operating activities was $318 7 million.

Steve: Compared with $195 million in 2023 <unk>.

Steve: Free cash flow that is cash from ops.

Steve: That is cash from operating activities less capital expenditures was $301 million in the second quarter of 2024, compared with $163 2 million in 2023.

Steve: Cash flow increased in the second quarter due to stronger working capital performance.

Stephen Blackwood: Capital expenditures were $17.7 million in the second quarter of 2024 compared with $27.3 million in 2023. Depreciation and amortization expense was $77.8 million for the second quarter of 2024 compared with $80 million in 2023. We ended the quarter with approximately $2.35 billion of net debt that is approximately $2.8 billion of debt, less cash of $443.2 million.

Stephen Finis Blackwood: Capital expenditures were $17.7 million in the second quarter of 2024, compared with $27.3 million in 2023; appreciation and amortization expense was $77.8 million for the second quarter of 2024, compared with $80 million in 2023. We ended the quarter with approximately $2.35 billion of net debt, that is approximately $2.8 billion of debt less cash of $443.2 million. Now turning to our outlook, management currently believes the adjusted earnings per share in the third quarter of 2024 will be in the range of $4.02 to $4.16, with non-GAAP earnings in the range of $4.90.

Steve: Capital expenditures were $17 $7 million in the second quarter of 2024, compared with $27 $3 million in 2023.

Steve: Depreciation and amortization expense was $77 8 million for the second quarter of 2024, compared with $80 million in 2023.

Steve: We ended the quarter with approximately $235 billion of net debt that is approximately $2 8 billion of debt less cash of $443 $2 million.

Stephen Blackwood: Now turning to our outlook, management currently believes the gap earnings per share in the third quarter of 2024 will be in the range of $4.2 to $4.16, with non-gap earnings in the range of $4.90 to $5. and for the full year 2024, our GAAP earnings per share outlook is $15.87 to $16.13, and we are affirming our prior non-GAAP outlook of $19.25 to $19.45.

Steve: Now turning to our outlook.

Steve: Management currently believes that GAAP earnings per share in the third quarter of 2024 will be in the range of $4 <unk>.

Steve: The $4 16.

Steve: With non-GAAP earnings in the range of $4 90.

Stephen Finis Blackwood: $5.00. And for the full year 2024, our GAAP earnings per share outlook is $15.87 to $16.13, and we are affirming our prior non-GAAP outlook of $19.25 to $19.45. I will now pass the call back to Robert. We would like to take your questions. John, if you're ready to proceed with the questions and answers, please go ahead. Certainly. Ladies and gentlemen, for questions, please press 1 and 0 on your phone's keypad. If you're on a speakerphone, we do ask that you switch over to the handset if it's available. That keeps the echoes down.

Steve: To $5.

Steve: And for the full year 2024, our GAAP earnings per share outlook is $15 87 to.

To $16 13.

And we are affirming our prior non-GAAP outlook of $19 25.

Steve: To $19 45.

Robert Mehrabian: I will now pass the call back to Robert. We would like to take your questions.

Steve: I will now pass the call back to Robert.

Robert: We would like to take your questions.

Operator: John, if you're ready to proceed with the questions and answers, please go ahead. Certainly, ladies and gentlemen. For questions, please press 1 and 0 on your phone's keypad. If you're on a speaker phone, we do ask that you switch over to the handset if it's available. It keeps the echoes down. Once again, it's 1-0 for questions, and if you decide to choose to withdraw from the Q, press 1-0 again; we'll pull you out of the Q. Once again, the questions will be 1-0.

Steve: John if youre ready to proceed with the questions and answers. Please go ahead.

John: Certainly ladies and gentlemen for questions. Please.

Speaker Change #137: Press, one then zero on your phone's keypad, if you will.

Speaker Change #140: Ill speaker phone, we do ask that you switch over to the handset.

Operator: Once again, it's 1-0 for questions. And if you choose to withdraw from the queue, press 1-0 again. Once again, questions, it'll be 1-0.

Speaker Change #137: So it keeps that goes down once again this one zero for questions and if you choose to withdraw from the Q1 zero again will pull you out of the queue.

Speaker Change #138: Once again questions that'll be one zero. Our first question is going to come from Jim Ricchiuti with Needham <unk> Company. Please go ahead.

Jim Ricchiuti: Our first question is going to come from Jim Ricchiuti with Needham and Company. Please go ahead. Hi, thank you. Good morning. I was hoping to get a little bit more color on the bookings, the book to bill. It sounds like the positive book to Bill was largely driven by the aerospace and defense business, but I wonder if you could just elaborate on what you saw from an order standpoint in the quarter.

James Andrew Ricchiuti: Our first question is going to come from Jim Ricchiuti with Needham & Company. Please go ahead. Hi, thank you. Good morning.

Robert Mehrabian: I was hoping to get a little bit more color on the bookings, the book to bill. It sounds like the positive book to bill was largely driven by the aerospace and defense business. But I wonder if you could just elaborate on what you saw from an order standpoint in the quarter. Thank you, Jim. First, you're correct in general, but I think our overall book to build was 1.07. It was.

James Andrew Ricchiuti: Hi, Thank you good morning.

James Andrew Ricchiuti: Hoping to get a little bit more color.

Jim Ricchiuti: <unk>.

Speaker Change #143: The bookings the book to Bill it sounds like.

Speaker Change #141: The positive book to Bill was largely driven by the aerospace and defense business, but I Wonder if you could just elaborate on what you saw from an order standpoint in the quarter.

Jim Ricchiuti: Thank you, Jim.

Robert Mehrabian: Digital imaging was close to one, like 0.98, and Instrumentation was just over one, at 1.04. But, as you said, aerospace and defense was very strong at 1.41, and Engineers Systems was also strong at 1.25, resulting in a combined Book to bill of 1.07 for the complete company. Got it. That's so that's helpful. Robert, if we think about the backlog, the longer cycle backlog, and as it converts into the second half to revenues, Ed, mainly defense conversion.

Speaker Change #142: Thank you Jim first.

Robert Mehrabian: First, you're correct in generally overall. But I think our overall book-to-bill was 1.07. It was digital imaging was close to 1, like 0.98. Instrumentation was just over 1, at 1.04. But, as you said, aerospace and defense was very strong at 1.41. An engineer systems also strong at 1.25, resulting in a combined book to Bill of 1.07 for the complete company.

Speaker Change #144: Youre correct in generally overall, but.

Speaker Change #145: I think our overall book to Bill was one two et cetera.

Speaker Change #146: It was.

Speaker Change #147: Digital imaging was close to 1998.

Speaker Change #148: Instrumentation was just over one at one point to go forward.

Speaker Change #149: But as you said aerospace and defense was very strong at 401.

Speaker Change #149: In engineered systems also strong at 125%, resulting in a combined.

Speaker Change #149: Book to Bill of one point to 7% towards the complete company.

Robert Mehrabian: That's helpful, Robert. If we think about the backlog or longer cycle backlog and as it converts into the second half to revenues, that mainly defense converting. I'm wondering what other areas of the longer cycle business might drive growth in the second half and maybe related. What kind of expectations do you have for the short cycle business in the back half? Thank you.

Speaker Change #149: Got it that's helpful.

Speaker Change #149: Robert if we think about.

Robert: The backlog of the longer cycle backlog and as it converts into the second half.

Ed: To revenue as Ed mainly defense converting I'm wondering what other areas of the.

Speaker Change #151: The longer cycle business might drive growth in the second half and maybe related.

Speaker Change #152: What kind of expectations do you have for the short cycle business in the back half. Thank you.

Robert Mehrabian: Let me start with the first part. Defense is obviously, as you said, very important, and it's got the long cycle business that's doing really well. The second area is energy, and that's our marine instruments businesses. They've done exceptionally well for the year and will continue to do so. And then the third area is aerospace, both aerospace from the computers that we have on commercial aircraft to aerospace and aerospace from our imaging sensor.

Robert Mehrabian: I'm wondering, you know, what other areas of the longer cycle business might drive growth in the second half and maybe related? What kind of expectations do you have for the short cycle business in the back half? Thank you. All right. First off, defense is obviously, as you said, very important and has the long cycle business that's doing really well. The second area is energy.

Speaker Change #153: Alright, let me start with the first part.

Speaker Change #153: It's.

Speaker Change #154: Defense is obviously as you said very important then is.

Speaker Change #154: The long cycle business, that's doing really well the second area is energy.

Speaker Change #154: And Thats, our marine needs <unk> businesses.

Speaker Change #154: They have done exceptionally well for the year and we'll continue to do so and then the third area is aerospace.

Speaker Change #154: Both aerospace strong.

<unk> is that we have on commercial aircraft to air.

Speaker Change #154: Aerospace.

Speaker Change #154: And the aerospace from.

Speaker Change #154: Imaging sensor businesses now going back to the commercial shorter cycle businesses.

Robert Mehrabian: Now going back to the commercial shorter cycle businesses, what we're seeing is we think that digital imaging as a whole, total digital imaging should be relatively flat in the second half of the year. That's year-over-year flat, which is good because it declined in the first half of the year. Some of the recovery that we're seeing is early signs that come from our men's microelectronics mechanical systems, which are kind of like the canaries in the mind. And we're seeing some optics in order there, which is encouraging, especially from the semiconductor industry. And then we also have some indications that our machine vision systems, for example, have stabilized and booked to bill is reached one or a little better, which is encouraging.

Speaker Change #154: What we're seeing is we think that.

Speaker Change #154: Digital imaging as a whole.

Total digital imaging should be relatively flat in the second half.

Speaker Change #154: The year.

Speaker Change #154: Year over year flat.

Speaker Change #154: Which is good because it declined in the first half of the year.

Speaker Change #154: Some of the recovery.

Speaker Change #155: Seeing is early Tonight that come from our Mems microelectronics.

Speaker Change #155: Mechanical systems, which are kind of like the canaries in the mine.

Speaker Change #155: We are seeing some uptick in orders, there, which is encouraging especially from semi conductor industry.

Speaker Change #155: And then.

Speaker Change #155: We also have.

Speaker Change #155: Some indications that our machine vision systems as an example have stabilized and book to Bill is reached one or a little better.

Speaker Change #155: It is encouraging.

Robert Mehrabian: We're hoping that these trends will continue with semiconductor coming back and inspection businesses that we have picking up and some of our high-end thermal cameras also doing better than they have. So I think overall, we're positively inclined towards the second half of the year.

Speaker Change #155: Hoping that these trends will continue with semiconductor coming back.

Speaker Change #155: Inspection businesses that we have speaking up.

Speaker Change #155: And some of our high end thermal cameras also doing better than they have so I think overall.

Speaker Change #155: We are positively inclined towards the second half of the year.

Robert Mehrabian: That's helpful, Robert. Thank you. Thank you, Jim. Our next question comes from Andrew Buscaglia with BNP. Please go ahead. Hey, good morning, guys. Good morning, Andrew.

Jim Ricchiuti: That's helpful.

Speaker Change #155: Got it that's helpful. Robert Thank you.

Jim Ricchiuti: Robert, thank you.

Andrew Muscalia: Thank you, Jim. Our next question comes from Andrew Muscalia with BNP. Please go ahead. Good morning, guys. Good morning, Andrew.

James Andrew Ricchiuti: Thank you Jim.

James Andrew Ricchiuti: Our next question comes from Andrew Buscaglia with BNP. Please go ahead.

James Andrew Ricchiuti: Yes.

Andrew Edouard Buscaglia: Hey, good morning, guys.

Speaker Change #156: Good morning, Andrew.

Andrew Muscalia: You know, so long that line of questioning, can you talk a little bit about, you know, you test the measurement has been a tough market, a little bit, you know, weaker in Q2, but in line, I think with what you guys were suggesting. How do you see that playing out? You still feel like your expectations for down 10% for the year are valid? Yeah, about, yeah, about that as not to be picky, but it's 9.9%, which is very close to your 10%. But that's also tail off two cities there.

Andrew Edouard Buscaglia: Yeah, you know, so along that line of questioning, can you talk a little bit about, you know, the measurement has been a tough market, a little bit, you know, weaker in Q2, but in line I think with what you guys were suggesting. How do you see that playing out? Do you still feel like your expectations for down 10% for the year are valid? Yeah, about that. Not to be picky, but we have 9.9%, which is very close to your 10%. But that's also the tale of two cities there.

Speaker Change #156: Yes.

Speaker Change #157: So along that.

Speaker Change #157: That line of questioning can you talk a little bit about.

Speaker Change #158: Test <unk> measurement has had been a tough market.

Speaker Change #159: I have a little bit.

Speaker Change #160: Weaker than Q2, but in line I think with what you guys were suggesting how do you see that playing out do you still feel like your expectations for diamond, 10% for the year are valid.

Speaker Change #160: Yes.

Speaker Change #161: Yes about that.

Speaker Change #162: Not to be picky ready, we have nine 9%, which is very close to 10%, but that's also a tale of two cities there.

Robert Mehrabian: In test and measurement, as you know, Andrew, we have two businesses. One is the oscilloscope business. And the other one is our protocol business, which is basically rules for communication between devices and devices and the cloud. That business, the protocol business, is coming back faster, and it's doing better, a little bit better. It's an oscilloscope business, which is like... Having said that, we took costs out of that business, and fortunately for us, we took the costs out very early, and the margins on instruments have remained pretty well.

Robert Mehrabian: We, you know, test our measurement as you know, Andrew. We have two businesses. One is the oscilloscope business. And the other one is our protocol business, which are basically rules for communication between devices and devices on the cloud. That business, the protocol business, is coming back faster and is doing better, a little bit better. It's the oscilloscope business, which is lagging. Having said that, we've taken cost out in that business. And fortunately for us, we took the cost out very early, and the margins of instruments have remained pretty well. We anticipate, for example, about almost 94 basis points improvement in our total instrument portfolio, even with part of TNM being weak, partially because our marine is very strong and our environmental businesses are doing okay.

Speaker Change #162: In our test <unk> measurement as you know Andrew we have two businesses one is the zillow scope business.

Speaker Change #162: And the other one is our protocols business, which are basically rules for communication within devices.

Andrew Edouard Buscaglia: <unk> devices in the cloud.

Andrew Edouard Buscaglia: That business the protocol business is coming back faster and it's doing better a little bit better.

Andrew Edouard Buscaglia: Oscilloscope business, which is lagging having.

Andrew Edouard Buscaglia: Having said that.

Andrew Edouard Buscaglia: We took cost out in that business and Fortunately for us.

Andrew Edouard Buscaglia: We took the costs start very early and the margins.

Instruments have remained pretty well we aren't.

Speaker Change #163: Dissipate for example.

Speaker Change #163: Bob.

Bob: Almost 94 basis points improvement in our total instrument portfolio, even with <unk> being weak partially because our marine is very strong and our environmental businesses are doing okay.

Andrew Muscalia: So I don't know whether that answers your question fully or not.

Speaker Change #164: So I don't know whether that answers your question fully or not yet.

Robert Mehrabian: No, that's helpful. Maybe sticking with instrumentation. Yeah, Marine has been really strong. Presumably, you have good visibility there for what? Can you parse out what's driving that exactly and the confidence that that continues into the second half? How should we think about that for the full year?

Robert Mehrabian: Maybe sticking with instrumentation. Yeah, Marine has been really strong. Presumably, you have good visibility there.

Speaker Change #165: No that's helpful.

Speaker Change #165: And then maybe sticking with instrumentation marine has been really strong.

Speaker Change #166: Presumably you have good visibility there or what can you can you parse out what's driving that exactly and the confidence that that continues into the second half.

How should we think about that for the full year.

Speaker Change #166: Sure.

Robert Mehrabian: Two areas. First is the offshore oil production and discovery. We have, as you know, we have instruments that are deployed in streamers to look down at acoustic signals that bounce from the ocean floor and determine whether there's oil and gas there. That's a strong business and continues to be. The other part is, of course, are connected businesses. They are doing really well. We actually, we're almost at capacity in that business.

Speaker Change #167: Two areas.

Speaker Change #167: First is the offshore oil production and discovery.

Speaker Change #167: As you know we have.

These tumors that are deployed and streamers to.

Speaker Change #167: Luke.

Speaker Change #167: <unk>.

Speaker Change #167: Acoustic signals that bonds from the ocean floor and determine whether there is oil and gas there. That's a strong business and continues to be the other part is of course, our connector businesses. They are doing really well.

Robert Mehrabian: That's a strong business and continues to be. The other part is, of course, our connector business. They are doing really well. We're actually almost at capacity in that business. And then the second part of the marine business is the defense part of the business. As you know, we have defense unmanned vehicles, and underwater vehicles. We also provide connectors for submarines. That business is doing really well, and our underwater vehicle businesses are doing really well. So it's a combination of offshore oil production and discovery and defense and security. Okay, thank you. Next is Conor Walters with Jeffries.

Speaker Change #167: Actually we are almost at capacity in that business and then the second part of the Marine business is the defense part of the business as you know we have defense.

Robert Mehrabian: And then the second part of the marine business is the defense part of the business. As you know, we have defense unmanned vehicles underwater vehicles. We also provide connectors for submarine that business is doing really well and are under water vehicle businesses are doing really well. So it's a combination of offshore oil production and discovery and defense and security.

Unmanned vehicles underwater vehicles.

Speaker Change #167: We also provide.

Speaker Change #167: Excellent.

Speaker Change #167: For submarines that business is doing really well and are underwater vehicle businesses are doing really well. So it's a combination of offshore oil production in discovery and defense and security.

Unknown Speaker: Okay. Thank you for sure. Next is counter-Walters with Jeffries. Go ahead, please. Hi, guys. Thanks so much for taking my questions.

Speaker Change #168: Okay. Thank you.

Speaker Change #168: Sure.

Conor Walters: Go ahead. Hi guys, thanks so much for taking my questions. Just to start off, any update on the free cash flow guidance for the year? Despite a somewhat constrained top line in the first half, free cash flow is tracking well ahead of your $1 billion target. What do you expect for the year and what are some of the drivers just given such a strong start in the first half?

Next was counter Walters with Jefferies go ahead. Please.

Counter Walters: Hi, guys. Thanks, so much for taking my questions just.

Unknown Speaker: Just to start off, any update to the pre-cashlow guidance for the year. Despite somewhat constrained top line, the first half pre-cashlow is tracking well out of your $1 billion target. What do you expect for the year, and what are some of the drivers, just given such a strong start in the first half? That's a good question, Connor. I don't want to be a professor about that because in the first two quarters, we've generated $575 million of pre-cashlow. I think in the second half, we have some bond payments coming due. We have some taxes coming due.

Speaker Change #169: Just to start off any update to the free cash flow guidance for the year. Despite somewhat constrained top line in the first half free cash flow is tracking well ahead of your $1 billion target. What do you expect for the year and what are some of the drivers just given such a strong start in the first half.

Robert Mehrabian: I don't want to be effervescent about that, because in the first two quarters, we've generated $576 million of free cash flow. I think in the second half, we have some bond payments coming due, and we have some taxes coming due. So I think it's going to be less. We are hoping that our free cash flow would be above $900 million, where we are sitting right now with the front end being heavily loaded. But having said that, we're confident enough in our cash and cash position to continue our purchases of our own stock. Okay, got it. That's very clear. And maybe just jumping over into defense a little bit more.

That's a good question.

Speaker Change #170: I don't want to be have her reticent about that because in the first two quarters, we've generated $576 million of free cash flow.

Speaker Change #171: I think in the second half we have some bond payments coming due we have some taxes coming due so I think it's going to be less we are hoping that our free cash flow would be above $900 million.

Connor-Walters: So I think it's going to be less. We are hoping that our pre-cashlow would be above $900 million. That's where we're sitting right now, with the front end being heavily loaded.

Speaker Change #171: That's where we're sitting right now.

Speaker Change #171: With the front end being heavily loaded, but having said that.

Connor-Walters: But having said that, we're confident in our cash position to continue our purchases of our own stock.

Speaker Change #171: We have confidence in us.

Speaker Change #171: In our cash and cash position.

Speaker Change #171: To continue our.

Speaker Change #171: Purchases of our own stock.

Connor-Walters: Okay, got it.

Speaker Change #172: Okay got it that's very clear, maybe just jumping over into defense a little bit more we've seen a lot of technology announcements for teledyne, some new wins in areas such as loitering munitions just given this how are you thinking about the fence going forward any divergence within the exposure and the electronics and engineered.

Connor-Walters: That's very clear.

Robert Mehrabian: And maybe just jumping over into defense a little bit more. We've seen a lot of technology announcements for Teladon, some new winds and areas, such as loitering munitions.

Robert Mehrabian: Just given this, how are you thinking about the fence going forward in any divergence within the exposure and the electronics and engineered versus where you are in digital imaging? No, I think let's just look at the major programs, like the announcements that keep coming out. There's a whole slew of them. The most important one, I would say, that's new. is our loitering unmanned aerial vehicle, which now is weaponized, what we call Rogue One, and we already have our first order for over the hundred systems for that, and it computes very well against the competition, both in terms of precision, but also with the fact that you can send these vehicles to target.

Speaker Change #173: Versus where you are in digital imaging.

Speaker Change #174: No I think let's just look at the major programs that are announced.

Speaker Change #174: I mean, Doug keep coming out.

Doug: There is a whole slew of them.

Robert Mehrabian: The most important one, I would say that's new, is our loitering unmanned aerial vehicle which is now weaponized, what we call Rogue One. And we already have our first order for over 100 systems for that. And it competes very well against the competition, both in terms of precision but also with the fact that you can send these vehicles to targets. And if you decide to bring them back, you can do that easily. That's a distinguishing feature.

Doug: The most important one.

Speaker Change #176: I would say that's new.

Doug: Is our.

Speaker Change #176: Loitering.

Speaker Change #176: Unmanned Eric aerial vehicles, which now is weaponized, while we called Rogue one.

Speaker Change #176: And we already have our first store there quarter over 100 systems towards that.

Speaker Change #176: <unk>.

Speaker Change #176: It's very well against the competition.

Speaker Change #176: Both in terms of precision, but also with the fact that you can send us there.

Vehicles.

Speaker Change #176: To target.

Robert Mehrabian: And if you decide to bring them back, you can do that easily. That's a distinguishing feature, and of course the other part is accuracy.

Speaker Change #176: And if you've decided to bring them back you can do that easily.

Speaker Change #176: That said distinguishing feature and of course, the other part is the accuracy.

Robert Mehrabian: And of course, the other part is accuracy. The next example, as you may know, is again staying with vehicles or very small mini drones. We saw the whole bunch of them over the years, what we call black hornet trees, which are about six inches tall.

Robert Mehrabian: The next example, as you may know, is, again, staying with vehicles, are very small mini drones. We saw the whole bunch of them over the years, what we call Black Hornet 3s, which are about 6 inches in size. Black Hornet 4 was introduced this year, and we got the first production order for about almost a thousand systems. Recently, we expect that that program will continue and be a very strong contributor to our defense businesses, and these orders are from the U.S. government right now. Then we have, as I mentioned, we have the inserts for the Virginia or connectors for the Virginia and Columbia class submarines.

Speaker Change #176: The next example, as you May know is again staying with vehicles are very small many drones.

Speaker Change #176: We saw the whole bunch of them over the years, what we call Black Hornet Threes returned.

Speaker Change #176: Yes.

Speaker Change #177: Inside <unk>.

Robert Mehrabian: Blackthorn Hornet 4 was introduced this year, and we got the first production order for almost 1,000 systems recently. We expect that that program will continue and be a very strong contributor to our defense businesses. And these orders are from the U.S. government right now. Then we have, as I mentioned, inserts for the Virginia or connectors for the Virginia and Columbia class submarines.

Speaker Change #177: <unk> four core net four was introduced this year and we got the first production order.

Speaker Change #177: For about almost a tarzan systems.

Speaker Change #177: Recently, we expect that that program will continue and be a very strong contributors to our defense businesses and these orders are from the U S government right now.

Speaker Change #177: Then we have as I mentioned, we have the.

Speaker Change #177: Inserts for the Virginia or connectors for the Virginia, and Columbia class submarines. Those businesses have really good backlogs and are doing well. We also have drones that come out of our Canadian operations are $70 $80.

Robert Mehrabian: Those businesses have really good backlogs and are doing well.

Robert Mehrabian: We also have drones that come out of our Canadian operations, our 70 and our 80. We have orders for those. And we also have counter UAV systems that are being deployed in Europe.

Speaker Change #177: We have orders.

Speaker Change #177: For those and we also have commentary UAV.

Speaker Change #177: Systems that are being deployed in Europe and finally.

Robert Mehrabian: And finally, this is our example. We have a very lightweight, uncooled target recognition system, what we call the FWS family of weapon systems. That's, we have the development order for it, and we have the first production order for it. Those two combined over $70 million and expect about 500 million in IDIQ contracts. Those are just examples. I think our defense businesses, especially Clear Defense, has picked up the pace very well, and we're very excited about that.

Speaker Change #177: This is an example, where we have a very light weight on crude.

Speaker Change #177: Target.

Speaker Change #177: Coordination system will be called the FWS family of weapon systems.

Speaker Change #177: <unk>.

Speaker Change #177: We have the development order for <unk> and we have the first production order for those two combined over $70 million.

Speaker Change #177: About $500 million in Q contracts. Those are just examples I think our defense businesses, especially layered defense.

Robert Mehrabian: I think our defense businesses, especially FLIR defense, have picked up the pace very well, and we're very excited about it. Great, that's super helpful. I'll leave it there. Next question is from Joe Giordano with TD Cowen. Please go ahead. Hey, good morning.

Speaker Change #177: Has picked up the pace.

Speaker Change #178: Very well and is where.

Speaker Change #178: We're very excited about that.

Unknown Speaker: Great. That's super helpful.

Speaker Change #179: Great that's super helpful. I will leave it there.

Unknown Speaker: I'll leave it there. Thank you.

Speaker Change #180: Thank you.

Joe Giordano: Next question is from Joe Gerdano with TD Cullen. Please go ahead. Good morning. Robert, you said you're seeing some stability in the machine vision business, which is good to hear. I think you mentioned it was down 30 years on year. What was that compared to 2Q, and what's the expectation for like 3Q and 4Q? What was that versus 1Q and what the expectation and 3Q, 4Q versus this thing? Corp. Well, I think basically there were down 30 in Q1 and Q2, as Edwin indicated. I think that's not going to be about 10 and 10 in Q3 and Q4.

Speaker Change #180: Next question is from Joe Giordano with TD Cowen. Please go ahead.

Joseph Craig Giordano: Hey, good morning.

Joseph Craig Giordano: Hi.

Joseph Craig Giordano: Robert, you said you're seeing some stability in the machine vision business, which is good to hear. I think you mentioned it was down 30 percent year on year. What was that compared to 2Q? And what's the expectation for like 3Q and 4Q? What was that compared to 1Q?

Joseph Craig Giordano: Robert You said Youre seeing some stability in the machine vision business, which is good to hear.

Speaker Change #181: I think you mentioned it was down 30 year on year, what was that compared to Q and what's your expectation for <unk> and <unk>.

What was that versus <unk>, and what the expectation for Q versus the second quarter.

Robert Mehrabian: And what's the expectation in 3Q, 4Q versus this segment? Well, I think basically, they were down 30 in Q1 and Q2, as Edwin indicated. I think that's now going to be about 10 and 10 in Q3 and Q4. So for the year, it would be about 20. So it's going to improve. Partially, it is improving. Partially, it's because comps are getting easier, to be frank and very straightforward about it.

Speaker Change #182: Well I think.

Speaker Change #183: Basically that we're down 30.

Speaker Change #184: In Q1 and Q2.

Speaker Change #184: We'd indicated.

Speaker Change #184: That's not going to be.

Speaker Change #184: About 10% and 10 in Q3 and four so for the year would be about 20.

Joe Giordano: So for the year, would be about 20. So it's going to improve partially. It's improving. I think I'm very straightforward about it.

Speaker Change #184: So it's going to improve partially it's going it's improving partially because comps are getting easier to be Frank and very straightforward about it Doug.

Joe Giordano: That market began softening last year in Q3. So the comps are going to get easier, but also we're seeing, as I indicated before, we're seeing some optic in certain areas. And as you know, the semiconductor industry is coming back and coming back strong, and our products are used in the inspection system all over the world. And just to be clear, like, are the dollars for that business in two Q higher than one Q? And will they be higher in like the second half dollars versus one half dollars? I think our expectations right now are that they'd be relatively flat, maybe a little better in the second half.

Speaker Change #185: That market began softening last year in Q3, so the comps are going to get easier, but also we're seeing as I indicated before we are seeing some uptick in certain areas and as you know semiconductor industry is coming back and coming back strong and our products are used in the inspection.

Robert Mehrabian: That market began softening last year in Q3, so the comps are going to get easier. But also, we're seeing, as I indicated before, we're seeing some uptick in certain areas. And as you know, the semiconductor industry is coming back and coming back strong, and our products are used in inspection systems all over the world. And just to be clear, like, are the dollars for that business in 2Q higher than 1Q? And will they be higher in like the second half of the year versus the first half?

Speaker Change #185: <unk> systems.

Speaker Change #185: All over the world.

Speaker Change #186: And just to be clear like are the dollars for that business in <unk> <unk> higher than <unk> and will they be higher in the second half dollars versus $100.

Robert Mehrabian: I think our expectations right now are that they'd be relatively flat, maybe a little better in the second half. I don't want to be, certainly in Q4 we expect it to be stronger, but right now we have to be very careful not to drink our own bath water because while things are looking good, we have both the vision systems, which are... visual systems, as well as our infrared systems.

Speaker Change #187: I think our expansion expectations right now.

Speaker Change #188: The relatively flat.

Speaker Change #188: May be a little better in the second half.

Robert Mehrabian: I don't want to be certain; in Q4, we expect it to be stronger.

Speaker Change #189: I don't want to be.

Speaker Change #189: Certainly in Q4, we expect it to be stronger, but right now.

Robert Mehrabian: But right now, we have to be very careful not to drink our own bath water because what things are looking well, good. We have both the vision systems, which are visual systems, as well as our infrared systems. So we have, we're looking at the combo there. And I think flat would be a good word with Q4 picking up.

Speaker Change #189: We have to be very careful not to not to drink our own bath water because.

Speaker Change #189: While things are looking well good.

We have both divisions systems.

Speaker Change #189: Which our job.

Speaker Change #189: Visual systems as well as our infrared system. So we have we're looking at the combo, there and I think flat would be a good words, a Q4, peaking up.

Robert Mehrabian: So we have, we're looking at the combo there, and I think flat would be a good word with Q4 picking up. Okay, um, we're also hearing some people talk about Boeing finally telling suppliers to cool off a little bit. I know that their production has gone down, but they've been still receiving components from suppliers at the same pace. And are you seeing any of that where they're pushing back a little bit? We're not seeing that as much.

Speaker Change #189: Okay.

Speaker Change #190: We're also hearing some people talk about like Boeing.

Speaker Change #191: Finally, telling suppliers to cool off a little bit I know production has gone down, but they've been still receiving components from suppliers at the same pace.

Robert Mehrabian: And are you seeing any of that where they're pushing back a little bit? We're not seeing that as much.

Speaker Change #192: Are you seeing any of that where they're pushing back a little bit.

Speaker Change #192: Okay.

Speaker Change #192: Bob.

Bob: We're not seeing that as much.

Robert Mehrabian: There's some rotation going on there in our OEM products, but we're not only supplying OEMs. We're also the aftermarket business; there is very important to us. And we're doing okay there. I think overall our aerospace business is pretty healthy.

Bob: There is.

Bob: There is some rotation going on there in our OEM products, but.

Bob: We are not.

Bob: Already supplying Oems, where also the aftermarket business. There is very important to us and we're doing okay. There I think overall, our aerospace business is pretty healthy.

Joe Giordano: Okay, I'll get back to you. Thank you.

Speaker Change #193: Okay I'll get back in queue. Thanks, guys.

Guy Hardwick: Next question is from Guy Hardwick with Freedom Capital Markets. Go ahead, please. Hi. Yeah. Good morning. Good morning, Guy.

Guy Drummond Hardwick: Thanks, guys. The next question is from Guy Hardwick with Freedom Capital Markets. Go ahead. Hi, good morning.

Guy Drummond Hardwick: Next question is from Guy hardwood with Freedom capital markets go ahead. Please.

Guy Drummond Hardwick: Hi, good morning.

Robert Mehrabian: Good morning, guys. Going back to the free cash flow issue, what's your sense of where you would have deployed the free cash flow in terms of acquisitions, share of purchases, and debt repayments? Well, Guy, we think... Because our free cash flow was so strong in the first two quarters, and you have to also keep in mind our liabilities, which is our debt. Our debt is set up pretty well; it's fixed.

Guy hardwood: Guy.

Guy hardwood:

Guy Hardwick: Going back to the free cash flow issue. What's your sense for when you look back on this year, where you, where you would have deployed the free cash flow, terms of acquisition, share repurchases, and debt repayments? Well, a guy we think. Because our free cash flow was so strong in the first two quarters, and you have to also keep in mind of our liabilities, which is our debt. Our debt is set up pretty well. It's fixed. It's only will pay, have to pay like 150 million dollars in October timeframe. Other than that, I think it's going to be a lot better.

Speaker Change #195: Going back to the free cash flow issues.

Speaker Change #196: What's your sense for when you.

Speaker Change #197: Look back on this year, where you where you would deploy the free cash flow in terms of acquisition share repurchases and debt repayments.

Speaker Change #196: Yes.

Speaker Change #196: Well.

Speaker Change #196: Hi.

Speaker Change #196: Thank.

Speaker Change #196: Because our free cash flow was strong in the first two quarters.

Speaker Change #196: And you have to also keep in mind.

Speaker Change #196: Our liabilities, which is our debt our debt is set up pretty well.

Speaker Change #196: It's.

Speaker Change #196: Thanks.

Robert Mehrabian: It's only we will have to pay like $150 million in the October timeframe. Other than that, our payments start in 2026. And if you roll everything that we owe over the years, our interest payments are about 2.35%.

Speaker Change #196: It's only related pay have to pay like $110 million.

Speaker Change #198: October timeframe.

Robert Mehrabian: And that our payments start in 2026. And if you roll everything that we owe over the years, the interest payments are about 2.35%.

Speaker Change #198: Other than that our payments start in 2026, and if you roll everything that we over the years.

Speaker Change #198: Interest payments are about to three 5%.

Robert Mehrabian: Now, for the year, we think that we will continue buying our stock. Maybe depends on the stock price, right? We've bought, we've bought back quite a bit in the first half of the year. We expect to continue to do that, but we're also looking at acquisitions at the same time.

Speaker Change #198: No.

Speaker Change #198: For the year.

Speaker Change #198: Think that.

Speaker Change #198: We will continue buying our stock.

Speaker Change #199: May be depends on the stock price right.

Speaker Change #199: <unk>.

Speaker Change #199: We bought back quite a bit in the first half of the year.

Speaker Change #199: We expect to continue to do that while we are also looking at acquisitions at the same time. So we're balancing the two as we go forward right now.

Robert Mehrabian: So we're balancing the two as we go forward right now because of our very serious efforts in 80 20 and ability to generate cash. We think that we're in a really good situation.

Speaker Change #199: Because of our very serious efforts in <unk>, 'twenty and ability to generate cash.

Speaker Change #199: We think that we're in a really good situation.

Robert Mehrabian: We just renewed our line of credit for another five years. We haven't touched it. We have about $1.2 billion on touch. So, with no debt payments, big ones coming to our interest rates being 2.35%. Over the many years, we feel good that we can do whatever we want. Right now, focused on buying back stock and looking at acquisitions as well.

Speaker Change #199: We just renewed our line of credit for another five years.

Robert Mehrabian: We haven't touched it. We have about $1.2 billion untouched. So with no debt payments, big ones coming due, our interest rates will be 2.35% over many years. We feel good that we can do whatever we want.

Speaker Change #199: We haven't touched it we have about $1 $2 billion in cuts so.

Speaker Change #199: With no debt payments big months coming due.

Robert Mehrabian: Right now, they are focused on buying back stock and looking at acquisitions as well. Thank you. Just as a follow-up, would you mind updating us on your margin expectations by segment, or has nothing changed since the last quarter? Yes, I can do that if you wish.

Speaker Change #199: Our interest rates being 235% over the many years.

Speaker Change #199: We feel good that we can do whatever we want right now focused on.

Speaker Change #199: Buying back stock and looking at acquisitions as well.

Robert Mehrabian: Thank you. Just so as a follow-up, would you mind updating us on your margin expectations by segment, or has nothing changed since the last quarter? No, I can do it if you wish.

Speaker Change #200: Okay. Thank you and just as a follow up would you mind updating us on your margin expectations by segment towards nothing changed since the last quarter.

Robert Mehrabian: I can do it for the full year. We think that for the full year, in instruments, as an example, it should be up about 90 to 100 basis points, which is pretty healthy for us. It'll go from what it was last year at 26.6 to 27.5 plus. In digital imaging, we think that margins for the year may go down a little bit, even though, you know, I mentioned the headwind that we have there.

Speaker Change #200: No.

Speaker Change #202: Can't do it. Thanks, you wish I can do it for the full year.

Robert Mehrabian: I can do it for the full year. We think that for the full year in instruments, as an example, it should be up about 90 to 100 basis points, which is pretty healthy for us. We'll go from what was last year at 26.6 to 27.5 plus in digital imaging. We think that margins for the year may go down a little bit, even though, you know, I mentioned the headwind that we have there. But if you look at the whole portfolio, while margins went down and in our daughter to businesses, they went up significantly in our fleet of businesses.

Speaker Change #201: Let me think.

Speaker Change #201: For the full year.

Speaker Change #201: In.

Speaker Change #201: Instrument.

As an example.

Speaker Change #203: Should be up about 90 to 100 basis points was pretty healthy quarter.

From what was last year at $26 six to 27.

Speaker Change #203: Five plus.

Speaker Change #203: In digital imaging, we think that margins.

Speaker Change #203: For the year May go down a little bit even though I mentioned the.

Speaker Change #203: The headwind that we have there, but if you look at the whole portfolio, while margins went down in <unk>.

Robert Mehrabian: But if you look at the whole portfolio, while margins went down in our DALSA AQB businesses, they went up significantly in our FLIR businesses. So we think they might go down modestly, maybe 30 basis points for the year, maybe 20. Aerospace and defense.

Speaker Change #204: I'll say to these businesses they went up significantly in our flavor businesses.

Robert Mehrabian: So we think they might go down moderately, maybe 30 basis points for the year, maybe 20. Aerospace and defense, I think we're doing really well, maybe over 100 basis points. And engineers systems, which is our smallest segment, I think margins are going to be going down primarily because of the first half.

Speaker Change #204: We think that might go down modestly maybe 30 basis points for the year.

Maybe 20.

Robert Mehrabian: I think we're doing really well, maybe over 100 basis points, and Engineer Systems, which is our smallest, I think margins are going to be going down, primarily because of the first half. Overall, we think the segment margins should be about 14-15 basis points up from last year. Considering all the headwinds that we have, that's pretty good. Thank you. The next question is from Rob Jamieson with Vertical Research Partners. Go ahead. All right, thanks, guys. I guess, just real quick, one clarification with digital imaging.

Speaker Change #204: Aerospace and defense.

Speaker Change #204: Thank God.

Speaker Change #204: We're doing really well maybe over 100 basis points.

Speaker Change #204: Engineered systems, which is our smallest.

Speaker Change #204: Segment, I think margins are going to be going down primarily because of the first half.

Robert Mehrabian: And overall, we think the segment margins should be about 14, 15 basis points up from last year, considering all the headwinds that we have.

Speaker Change #204: And overall, we think the segment margins should be about 14 15 basis points up from last year, considering all the headwinds that we have that's pretty good.

Robert Mehrabian: That's pretty good. Thank you.

Speaker Change #205: Okay. Thank you.

Speaker Change #205: Thank you.

Rob Jamieson: Next question is from Rob Jamieson with Vertical Reachers Partners. Go ahead, please. All right. Thanks, guys. I guess just just real quick, one clarification just with digital imaging. Should we, you know, next to quarter-shrinking 4Q, is there much differential between the quarters on margin to kind of get to that down, you know, 23 basis points? Well, let me see if I can answer that well. I think in the first half, if you look at Q1, the margins were about 21.8% overall in digital imaging. If you look at Q2, they dropped about 20 basis points to 21.6.

Speaker Change #205: Next question is from Rob Jamieson with vertical research partners go ahead. Please.

Robert Gregor Jamieson: Alright, Thanks, guys I guess, just real quick one clarification, just with digital imaging should we in the next few quarters. During Q <unk> is there much differential between the quarters on non margin to kind of get to that down 2030 basis points.

Speaker Change #206: Well that's.

Speaker Change #207: Let me see if I can answer that.

Speaker Change #207: Well.

Speaker Change #207: Think.

Speaker Change #207: In the first half if you look at Q1 the.

Robert Mehrabian: If you look at Q1. The margins were about 21.8% overall in digital imaging. You look at Q2. They dropped about 20 basis points to 21.6. We're thinking Q3 will pick up to over 22%, 22.2 maybe, and then go as far as 23 and 24. So we should end the year at 22.2, even with a weak first half.

Speaker Change #207: The margins were about <unk>.

Speaker Change #207: 21, 8% overall in digital imaging.

Speaker Change #207: You look at Q2.

Speaker Change #207: They dropped about 20 basis points to 21 six.

Robert Mehrabian: We're thinking Q3 will pick up to over 22%, 22.2 maybe, and then go as far as 23 and 2.4. So we should end the year at 22.2, even with a week first half. So I think margins are going to keep improving, both because of the cost action that Edwin and his people have taken, but also because some of the markets are coming back.

Speaker Change #207: We think in Q3, you'll pick up.

Speaker Change #207: So over 22% 22 to May be and then go as high as 23 in Q4.

Speaker Change #207: So we should end the year at $22 two.

Even with a weak first half so I think margins are going to keep improving both because of the cost actions that ethylene ninety's people I've taken but also because some of the markets are coming back.

Robert Mehrabian: So I think margins are going to keep improving, both because of the cost action that Edwin and his people have taken but also because some of the markets are coming. Perfect. That's helpful. I was actually going to ask about that next. And look, I know this is a pretty small part of your business, but I just wanted to ask a little bit more about the oscilloscope within instrumentation and test and measurement.

Rob Jamieson: For every debt cell phone, I was actually going to ask about that next. And look, I know this is a pretty small part of your business, but I just wanted to ask a little bit more on the oscilloscope within instrumentation and test and measurement. I'm just wondering competitors this morning cutting their outlook on delayed R&D spend and government and China-related spend. Just curious, if there's anything in the end market and markets that you're seeing within test and measurement on the oscilloscope side that's maybe weaker or starting to improve more, or is it just all kind of a little bit soft and lagging the protocols business?

Speaker Change #208: Perfect. That's helpful. I was actually going to ask about that next.

Speaker Change #209: And look I know this.

Speaker Change #210: Pretty small part of your business.

Speaker Change #211: But I just wanted to ask a little bit more on DSL scope within instrumentation and test and measurement just.

Robert Gregor Jamieson: Just one of your competitors this morning cut, you know, their outlook on delayed R&D spend and government and China-related spend. Just curious if there's anything in, you know, the end market and markets that you're seeing within test and measurement on the oscilloscope side that's, you know, maybe weaker or starting to improve more, or is it just all kind of a little bit soft and lagging behind the protocols business? Any additional color there would be great.

Speaker Change #212: Just wondering if competitors this morning cutting their outlook.

Speaker Change #212: On delayed R&D spend in government.

And China related spend just curious if theres anything in there.

Speaker Change #213: The end market.

Speaker Change #213: And markets that Youre seeing within test and measurement on the <unk> side.

Speaker Change #214: Maybe weaker or starting to improve more or is it just all kind of a little bit soft and lagging the protocols business.

Robert Mehrabian: Any additional color there would be great. Yeah, I think you've explained it very well. I think people are hesitant to spend discretionary caps. So the high end oscilloscope where you make really good money is slow down. We expect the whole business to be done about 10% year over year, but having said that, as with many other years, we were probably the first one out of the box early in the year in April to one. And subsequently, you see everybody else, of course, having to do the same. The advantage that we had in doing that was that in knowing that the market was going to soften, we took stock late in Q4 and early in Q1, and as a consequence, the margins in that business have been exceptionally hard.

Speaker Change #214: Any additional color there would be great.

Robert Mehrabian: Yeah, I think you've explained it very well. I think people are hesitant to spend discretionary capital. So the high-end oscilloscope business, where you make really good money, is slowed down. We expect the whole business to be down about 10% year over year. But having said that, as with many other years, we were probably the first one out of the box early in the year in April to launch.

Speaker Change #215: Yeah I think.

Speaker Change #216: I think you've explained it very well I think.

Speaker Change #217: People are hesitant to spend discretionary capex.

Speaker Change #218: The high end of similar scope, where you can make really good money.

Speaker Change #218: Is <unk>.

Speaker Change #218: Slowed down.

We expect the whole business to be done about 10% year over year.

But having said that.

Speaker Change #218: As with many others.

Speaker Change #218: We were probably the first one out of the box early in the year in April to one.

Robert Mehrabian: And subsequently, you see everybody else, of course, having to do the same. The advantage that we had in doing that was that, knowing that the market was going to soften, we took costs off late in Q4 and early in Q1. And as a consequence, the margins in that business have been exceptionally healthy.

Speaker Change #218: Subsequently youll see everybody else of course, having to do the same.

Speaker Change #218: The advantage that we had in doing that was that.

Speaker Change #218: In.

Speaker Change #218: Knowing that the market was going to soften we took cost out.

Speaker Change #218: Late in Q4.

Speaker Change #218: Early in Q1, and as a consequence, the margins in that business have been exceptionally healthy.

Robert Mehrabian: Absolutely. Now, thank you for that. I appreciate you all taking my question. Oh, of course. Thank you. We have one more in queue. Once again, as a reminder, if you have additional questions, press 1 and then 0 on your phone's keypad. We're going now to Jordan Leonaid from Bank of America. Go ahead. Good morning. Thanks for taking the question. What should we think about if the U.S. puts more restrictions on ASML and Tokyo Electron? What would that impact be for the digital imaging segment? I don't see that impacting us much.

Unknown Speaker: Absolutely. Now, thank you for that. I appreciate you all taking my questions.

Speaker Change #219: Yes, absolutely now thank you for that I. Appreciate you all taking my questions.

Unknown Speaker: Oh, of course.

Operator: Thank you. We have one more in queue. Once again, as every reminder, if you have additional questions, press one, then zero on your phone's keypad.

Speaker Change #220: Of course, thank you.

Speaker Change #219: Yes.

Jordan <unk>: We have one more in queue. Once again as a reminder, if you have additional questions press, one and then zero on your phone's keypad, we're going now to Jordan <unk> for.

Jordan Leone: We're going now to two Jordan, Leone from Bank of America. Go ahead, please. Good morning. Thanks for taking the question.

Jordan <unk>: Bank of America go ahead. Please.

Jordan <unk>: Good morning, Thanks for taking the question.

Jordan Leone: How should we think about if the US puts more restrictions on to ASMR and Tokyo Electron? What would that impact be for the digital imaging segment? I don't see that impacting us much. We supply products to their customers. I don't want to mention the name, but this is a large customer. And we they use this is a US customer. And they use it as an equipment, which uses a critical part that we make. In our men's factories. We don't expect to see a changing that because we're frankly supplying the customers of ASMR. And it's not a huge business, maybe 20, 25 million dollar business, but very profitable.

Jordan <unk>: How should we think about.

Speaker Change #221: <unk> puts more restrictions on to ASML and Tokyo electron.

What would that impact be for the digital imaging segment.

Jordan Leonate: We supply products to their customers. I don't want to mention the name, but this is a large customer, and they use, this is a U.S. customer, and they use ASML equipment, which uses a critical part that we make in our MEMS factory. We don't expect to see a change in that because we're frankly supplying customers of ASML. And it's not a huge business, maybe 20-25 million dollars, but very profitable.

Speaker Change #222: I don't see that impacting us from us.

Speaker Change #222: We supplied product to.

Robert Mehrabian: Got it. Thank you, for sure. At this time, we have no additional callers in... Thank you very much, John. I'll now ask Jason to conclude the conference. Thanks Robert and thanks everyone for joining us this morning. If you have follow-up questions, of course, feel free to email me or call me at the number on the earnings release. All our earnings releases are available on our website, as is this webcast. John, if you could conclude the call and give the replay information, it would be much appreciated. Absolutely.

Speaker Change #222: To their customers.

Speaker Change #223: I don't want to mention the name, but this is a large customer and they use.

Speaker Change #223: This is a U S customer.

Speaker Change #223: They use as ASML equipment, which uses a critical parts that we make in our mens factories.

Speaker Change #223: We don't expect to see a change in that because we have frankly.

Speaker Change #223: <unk>.

Speaker Change #223: The customers don't for ASML and.

Speaker Change #223: It's not a huge business may be 2000 $25 million business, we're very profitable.

Jordan Leone: Got it.

Jordan Leone: Thank you. For sure.

Speaker Change #224: Got it thank you.

Speaker Change #224: For sure.

Yeah.

Operator: At this time, we have no additional colleagues in queue. Thank you very much, John.

Speaker Change #225: At this time, we have no additional callers in queue.

Jason: Thank you very much John I'll now ask Jason to conclude the conference call. Thanks.

Jason VanWees: Our last ask Jason to conclude the conference call. Thanks, Robert. And thanks, everyone, for joining us this morning. If you have follow-up questions, of course, feel free to email me or call me at the number on the earnings release. All the earnings releases are available on our website, as this is webcast.

Jason: Thanks, Robert and thanks, everyone for joining us. This morning, if you have follow up questions of course feel free to email me or call me. The number on the earnings release, our earnings releases are available on our website as of this webcast and John If you could conclude the call and give the replay information.

Jason VanWees: And John, if you could include the call and give the replay information, be much appreciated. Thank you.

Speaker Change #226: Much appreciated thank you.

Operator: Absolutely.

Operator: Ladies and gentlemen, a recorded replay of this conference call will be available from today at 10 a.m. Pacific through August 24th of this year, 2024 at midnight. To access the replay, from domestic areas, call 866-207-1041 and enter the access code 5623764. International callers use 402... 970-0847 and the same access code, 5626. Once again, replay is available from 10 a.m. Pacific today through August 24th. Domestic callers use 866-207-1041. International callers use 402-970-0847, and the access code for either is 562-3764. That does conclude your conference call for today. We do thank you for your participation and for using AT&T Event Conferencing. You may now disconnect.

Operator: Ladies and gentlemen, a recorded replay of this conference call will be available from today at 10 a.m. Pacific through August 24th of this year, 2024 at midnight. To access the replay from domestic areas, call 866-207-1041. Enter the access code 562-3764. International callers use 402-970-0847 and the same access code 562-3764. Once again, replay available from 10 a.m. Pacific today through August 24th. Domestic callers use 866-207-1041. International callers use 402-970-0847 and the access code for either is 562-3764.

John: Absolutely, ladies and gentlemen, a recorded replay of this conference call will be available from today at 10 Am Pacific.

John: Through August 24th of this year 2024 at midnight.

Speaker Change #227: To access the replay from.

Speaker Change #228: From domestic.

Speaker Change #228: Areas call 8662071041.

Speaker Change #228: The access code five six to $3 706 for international callers used for zero to <unk> <unk>.

Speaker Change #228: <unk> 700847 in the same access code five six to $3 764. Once again replay available from 10 am Pacific today through August 24th domestic callers use 8662071041.

Speaker Change #229: International callers used for zero to 9700847 and the access code for either is $5 six to 3764 that does conclude your conference call for today, we do thank you for your participation and for using AT&T event conferencing you may now disconnect.

Operator: That does include your conference call for today. We do thank you for participation and for using AT&T Event Conferencing.

Operator: You may not.

Q2 2024 Teledyne Technologies Inc Earnings Call

Request a DemoDemo

TDY

Teledyne Technologies

Earnings