Q1 2025 Teledyne Technologies Inc Earnings Call

One for joining us this is Jason <unk>, Vice Chairman and we're about to begin our first quarter 2025 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 rocks.

Speaker Change: And C O O choice, Bob and E. D E F O B Blackwood and finally, Melanie said that E. D. P General Counsel, Chief compliance Officer and Secretary.

Speaker Change: After remarks by Robert had been Georgia, who will answer your questions, but of course before we get started attorneys have reminded me to tell you that all forward looking statements made this morning are subject to various assumptions risks and caveats as noted in the earnings release, and our SEC filings and of course actual results may differ materially.

Speaker Change: In order to avoid potential selective disclosures this call to simultaneously being webcast and a replay via webcast and dial and be available for approximately one month.

Robert: Here is Robert.

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

Robert: The first quarter.

Robert: We achieved many records, including first quarter towards the sands, which increased seven 4% accelerating.

Robert: Well two quarters in Israel and growing at the greatest straight in years.

Robert: It has also increased organically in every segment.

Robert: non-GAAP earnings per share and GAAP earnings per share and operating non-GAAP operating margin were also records for any first quarter.

Robert: Were pleased to close the key optic carve out acquisition in the first quarter.

Robert: But I should note also that a few months before closing Q uptick was awarded a major new contract with both the U K and German Ministry of Defense.

Robert: One thing in multi year acquired backlog in any event.

Robert: Even excluding this our acquired backlog orders for Teledyne doesn't hold exceeded sales for the sixth consecutive quarters.

Robert: We continue to execute our strategy, which has delivered long term results, regardless of the economic and political uncertainty.

Robert: That is.

Robert: We maintained a balanced and resilient.

Robert: The mix of commercial and government businesses across a broad range of geographies and markets.

Robert: And we continue to improve margins in our existing businesses.

Robert: Acquire.

Robert: And integrate complementary companies.

Robert: Before commenting on the quarter I wanted to offer some perspective, given the current Brent unpredictable operating environment.

Robert: While we are going to focus on what we can control.

Robert: It's worth noting that following.

Robert: Hello, Diane has never believed that offshoring U S manufacturing and technology was a wise action as a result, we.

Robert: We have data on low cost country manufacturing.

Robert: We are in net exporters.

Robert: Most of our external sales are produced and sold within regions to be specific.

Robert: Approximately 80% of our sales are from U S based locations two U S based customers or.

Robert: Our international locations to international customers.

Robert: Of the remaining 20% off towards themselves approximately 80% or roughly 16% of the total.

Robert: Our U S export sales to international location.

But only 2% of total sales our U S export sales to China.

Robert: Finally.

Robert: Just 4% of external sales from Teledyne International locations two U S based customers, who have new titles may apply for our customers no.

Robert: Regarding our own supply chain.

Robert: We import relatively little from China, and Mexico with the 'twenty 'twenty four the annual value of each less than $25 million.

Robert: Our largest imports from Canada is internal sales of unmanned air systems for the U S. Military a large portion of which we believed would be subject to U S. D O D do defeat exemption.

Robert: While we are not immune to the current 10 plus.

Robert: Percent of tire for eight or center knee, the pre pause liberation they proposed kind of rates.

Robert: We are certainly planning actions to protect margins as the landscape evolves.

Robert: That includes.

Robert: Thinking further exemptions under the U S, Mexico, Canada agreement and from the United States Department of Defense.

Robert: As well as taking advantage of recent except exemptions for imports of certain electronic components and then finally of course pricing pricing actions wherever we find necessary.

Robert: Turning to our full year sales and earnings outlook.

Robert: Let's assume that the market uncertainty will have some impact.

Robert: While this is nearly impossible to quantify.

Robert: And negative sales impact of perhaps.

Robert: 1% of annual sales.

Robert: Offset by the key optic acquisition.

Robert: <unk> in 2025 estimated sales of approximately $6 billion.

Robert: Also.

Robert: While we exceeded our first quarter midpoint guidance of 405 $4 85.

Robert: And we expect their contribution from key uptick which is not included in our outlook.

Robert: I think it's wise to maintain our full year earnings outlook.

George: Every nine George let me now briefly comment on the performance of our four business segments.

George: Thank you Omar this is happening and I've already bought on the digital imaging segment, which represents approximately 52% of stabilized portfolio.

George: First quarter 2025 sales increased two 2% compared with last year.

Performance last year as reflected in.

George: An increase in sales per boat online first defense and industrial business and relatively flat sales across the balance of our portfolio were increased sales of space based infrared detectors and semiconductors were largely offset by ongoing weakness in certain markets such as X-ray detectors for consumer discretionary sensitive dental market.

George: non-GAAP operating margin improved 31 basis points, primarily due to the contribution of clear <unk> baseband central business.

George: I shall now important dollar tree segments, which represent the balance of <unk>.

Edwin: Thanks Edwin.

Edwin: Instrumentation segment, which consists of our marine environmental and test and measurement businesses first quarter total sales increased three 9% versus last year with organic growth of two 6%.

Edwin: Overall sales of marine instruments increased nine 5% six 5% of which was organic due to both strong offshore energy and subsea defensive.

Edwin: Sales of environmental instruments decreased 2%, primarily due to lower sales of laboratory instrumentation and emissions monitoring instruments. However orders were strong for the first quarter book to Bill of 111 times.

Edwin: Electronic test and measurement systems, which include oscilloscope protocol analyzers, and Ethernet traffic generators increased one 5% year over year.

Edwin: Instrumentation operating margin in the first quarter increased 97 basis points to 27% and 88 basis points on a non-GAAP basis to 27, 9%.

Edwin: In the aerospace and defense Electronics segment first quarter organic sales increased seven 8% driven by growth in defense electronics products.

Edwin: Including the two recent acquisitions sales increased to 36%.

Edwin: Overall segment operating profit increased year over year, but GAAP and non-GAAP segment margin decreased as expected due to transaction and integration costs as well as comparatively lower current margins and the new acquisitions.

Speaker Change: For the engineered systems segment first quarter revenue increased 14, 9% and segment operating profit increased 719 basis points due in part to an easy comparison with last year, which included higher cost to complete estimates on certain programs that did not recur in Q1 2025, I will now pass the call back.

Edwin: Right.

George: Thank you George.

Edwin: In conclusion.

Speaker Change: Despite recent volatility in capital markets as well as economic uncertainty.

Edwin: Our performance to date has been resilient and strong.

Edwin: Each of our total orders.

Speaker Change: Sales margins and earnings increased in the first quarter.

Speaker Change: While organic sales increased in each segment. We also completed two acquisitions and ended the quarter with a leverage ratio of.

Speaker Change: Just 1.8.

Speaker Change: While we cannot predict the future.

Speaker Change: I continue to believe our balanced mix of businesses.

Speaker Change: Strong cash flow.

Speaker Change: Healthy balance sheet and acquisition pipeline create more long term opportunities and risks for teledyne.

Speaker Change: If the current economic stress continues I will now turn the call over to 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 second quarter and full year 2025 outlook.

Speaker Change: In the first quarter cash flow from operating activities was $242 $6 million compared with $291 million in 2024 <unk>.

Speaker Change: Free cash flow that is cash flow from operating activities less capital expenditures was $224 6 billion in the first quarter of 2025% compared with $275 $1 million in 2020 for cash.

Speaker Change: Cash flow decreased year over year in the first quarter due in part to lower customer cash advances received in the first quarter of 2025% compared with 2024.

Speaker Change: Capital expenditures were $18 million in the first quarter of 2025, compared with $15 9 million in 2024.

Speaker Change: Depreciation and amortization expense was $87 million in the first quarter of 2025% compared with $78 million in 2024.

Speaker Change: We ended the quarter with $2 $5 billion of net debt that is approximately $2 $96 billion of debt less cash of $461 $5 billion.

Speaker Change: Now turning to our outlook, which includes the acquisitions of micro pack and key optic.

Speaker Change: Management currently believes that GAAP GAAP earnings per share in the second quarter of 2025 will be in the range of $4.00.

Speaker Change: The $4 15 per share with non-GAAP earnings per share in the range of $4 95.

Speaker Change: A $5 five.

Speaker Change: And for the full year 2025, we believe that GAAP earnings per share will be in the range of $17 35.

Speaker Change: To $17 83.

Speaker Change: And we are maintaining our prior non-GAAP outlook of $21 10 to.

Speaker Change: The $21 50 per share I will now pass the call back to Robert.

Jason VanWees: Good morning, and thanks everyone for joining us. This is Jason VanWees, Vice Chairman, and we're about to begin our first quarter 2025 earnings release conference call. We released our earnings earlier this morning, before the market closed.

Robert: Thank you Steve.

Our performance to date has been resilient and strong.

Robert: We would now like to take your questions operator if.

Each of our total orders.

Sales margins and earnings increased in the first quarter.

Jason VanWees: Joining me today are Teledyne's Executive Chairman, Robert Mehrabian, CEO Edwin Roks, President and COO George Bobb, and EVP and CFO Steve Blackwood, and finally Melanie Cibik, EVP, General Counsel, Chief Compliance Officer and After remarks by Robert, Edwin, George, and Steve, we will answer your questions. But of course, before we get started, attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks, and caveats, as noted in the earnings release and our SEC filings, and of course, actual results may differ.

While organic sales increased in each segment. We also completed two acquisitions and ended the quarter with a leverage ratio.

Robert: I think the question queue, you May press star two if you'd like to remove your question from the queue for participants using speaker equipment necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Just 1.8.

While we cannot predict the future.

I continue to believe our balanced mix of businesses.

Strong cash flow.

Robert: Yeah.

Healthy balance sheet and acquisition pipeline creates more long term opportunities and risks for teledyne.

Robert: Thank you. Our first question is from Greg Konrad with Jefferies. Please proceed with your question.

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

Speaker Change: Good morning.

If the current economic stress continues I will now turn the call over to Steve.

Speaker Change: Morning, Greg.

Greg Konrad: I appreciate all the detail, but maybe just to start with the tariffs. It seems like you took about one point out of of revenues, including the M&A contribution can you maybe just level set us where you see the biggest potential impact and maybe how does that correlate it with expected organic growth for the year.

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 second quarter and full year 2025 outlook.

Robert Mehrabian: Thank you, Jason.

Robert Mehrabian: And good morning, everyone. And thank you for joining our learnings call. In the first quarter, we achieved many records, including first quarter total sales, which increased 7.4%, accelerating for two quarters in a row, and growing at the greatest rate in years. There's also increased organically in every segment. Furthermore, non-GAAP earnings per share and GAAP earnings per share and operating non-GAAP operating margin were also records for any first quarter.

Steve: In the first quarter cash flow from operating activities was $242 $6 million compared with $291 million in 2020 for free.

Speaker Change: And also any change to expected FX headwinds.

Greg Konrad: Yeah actually.

Steve: Free cash flow that is cash flow from operating activities less capital expenditures was $224 6 billion in the first quarter of 2025, compared with $275 $1 million in 2020 for cash.

Greg Konrad: The 1% that I took out or Greg.

Greg Konrad: Revenue.

Greg Konrad: Well, it's from the total that included acquisition. So the total has increased because of the key uptick acquisition by $180 million.

Steve: Cash flow decreased year over year in the first quarter due in part to lower customer cash advances received in the first quarter of 2025% compared with 2024.

Greg Konrad: We took down about 100 from dish.

Greg Konrad: No.

Robert Mehrabian: We're pleased to close the Chioptic Carbot acquisition in the first quarter. But I should note also that a few months before closing, QOPTIC was awarded major new contracts with both the UK and German Ministry of Defense, resulting in multi-year acquired backlog. In any event, Even excluding this acquired backlog, orders for Teledyne as a whole exceeded sales for the sixth consecutive quarter.

Greg Konrad: The.

Steve: Capital expenditures were $18 million in the first quarter of 2025, compared with $15 $9 million in 2024.

Steve: Depreciation and amortization expense was $87 million in the first quarter of 2025% compared with $78 million in 2024.

Greg Konrad: I guess just.

Steve: We ended the quarter with $2 $5 billion of net debt that is approximately $2 $96 billion of debt less cash of $461 $5 billion.

Greg Konrad: The thought process behind that.

Greg Konrad: One point of revenue that came out of the outlook and maybe where you expect that to impact the business. The most.

Greg Konrad: I think most of that is really.

Steve: Now turning to our outlook, which includes the acquisitions of micro pack and key uptick.

Robert Mehrabian: We continue to execute our strategy, which has delivered long-term results, regardless of economic and political uncertainty, that is. maintained a balanced and resilient mix of commercial and government businesses across a broad range of geographies and markets. And we continue to improve margins in existing businesses and acquire and integrate complementary companies.

Greg Konrad: We're just looking at the GDP and assuming he is going to get our head count grew 1% so let's.

Steve: Management currently believes the gaps GAAP earnings per share in the second quarter of 2025 will be in the range of $4.00.

Greg Konrad: Kind of a bigger picture is not going to affect a couple of our segments at all.

Steve: To $4 15 per share with non-GAAP earnings per share in the range of $4 95 to.

Greg Konrad: It's going to probably.

Greg Konrad: A little bit of digital imaging and a little bit of instruments.

Steve: To $5 five.

Greg Konrad: Gonna say in digital imaging.

Steve: And for the full year 2025, we believe that GAAP earnings per share will be in the range of $17 35.

Greg Konrad: May be $20 million.

Greg Konrad: From before and in.

Steve: To $17 83.

Steve: And we are maintaining our prior non-GAAP outlook of $21 <unk> to.

Greg Konrad: Eastern months.

Robert Mehrabian: Before further commenting on the quarter, I wanted to offer some perspectives, given the current and unpredictable operating environment. While we're going to focus on what we can control, it's worth noting the following. Teledyne has never believed that offshoring US manufacturing and technology was a wise action. As a result, We have little low cost country manufacturing. We are a net exporter and most of our external sales are produced and sold within regions.

Greg Konrad: Maybe another 20 or so.

Steve: The $21 50 per share I will now pass the call back to Robert.

Greg Konrad: So youre looking at maybe 16 digital imaging maybe 'twenty in.

Robert: Thank you Steve.

Greg Konrad: Instruments.

Robert: We would now like to take your questions operator.

Speaker Change: Don't think it's going to affect our aerospace and defense our engineering systems.

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

Greg Konrad: Rounding up a quota.

Speaker Change: I think or what people think.

Believe it that as things continue theres going to be about a one percentage to the overall.

Robert: Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Growth in the <unk>.

Speaker Change: GDP. So we're just taking it as a ballpark.

Robert: A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.

Speaker Change: And I guess just.

Speaker Change: Yes, more on the tariff side, you mentioned all of the moving pieces I mean.

Robert: Participants using speaker equipment necessary to pick up your handset before pressing the star of Q.

Robert: One moment, please while we poll for questions.

Speaker Change: How do you think about the net impact just thinking about margins given you mentioned some of the pricing and localize production. How do you think about the margin impact from those or potential margin impact.

Robert Mehrabian: To be specific. Approximately 80% of our sales are from U.S.-based locations to U.S.-based customers or are international locations to international customers. Of the remaining 20% of total sales, approximately 80% or roughly 16% of the total are U.S. export sales to international locations. But only 2% of total sales are U.S. export sales to China.

Speaker Change: Thank you. Our first question is from Greg Konrad with Jefferies. Please proceed with your question.

Greg Konrad: Yeah, Let me start Greg if I may.

Greg Konrad: Good morning.

Speaker Change: Good morning, Greg.

Speaker Change: There are two.

Speaker Change: I appreciate all the detail, but maybe just to start with the tariffs. It seems like you took about one point out of of revenues, including the M&A contribution can you maybe just level set us where you see the biggest potential impact and maybe how does that correlate with expected organic growth for the year and all.

Speaker Change: The components of the tariffs.

Speaker Change: As you well know the first component is what happens to our supply.

Speaker Change: Jane and the increase in the cost of the supplies.

Speaker Change: That we estimate.

Speaker Change: That could be we know that in 2020 for about $700 million of large.

Speaker Change: So any change to expected FX headwinds.

Robert Mehrabian: Finally Just 4% of external sales are from Teledyne international locations to US-based customers, where new tariffs may apply for our customers.

Speaker Change: Yes actually.

Speaker Change: The 1% that I took out.

Speaker Change: Products that supplies that we imported both internally and externally are going to be affected.

Speaker Change: Sure.

Speaker Change: Revenue.

Speaker Change: It was from the total that included acquisition. So the total has increased because of the key uptick acquisition by $180 million.

Speaker Change: And we assumed that.

Robert Mehrabian: Regarding our own supply chain. We import relatively little from China and Mexico, with the 2024 annual value of each less than $25 million. Our largest import from Canada is internal sales of unmanned air systems for the U.S. military, a large portion of which we believe would be subject to U.S. DOD duty-free exemption. While we're not immune to the current 10 plus percent of tariff rates or certainly the pre-pause liberation they propose tariff rates. We are certainly planning actions to protect margins as the landscape evolves. that includes Seeking further exemptions under the U.S.-Mexico-Canada Agreement and from the United States Department of Defense.

Speaker Change: If it goes from 1% to 15% that tariffs, so youre going to have a 14% increase which is about $100 million in cost.

Speaker Change: <unk> took down about 100 from dish.

Speaker Change: No.

Speaker Change: The.

Speaker Change: That we can mitigate some of that and reduce it to less than 70, which would probably drop to maybe $18 million at quarters.

Speaker Change: The reality of the.

Speaker Change: Outlook is that the impact of.

Speaker Change: Youre asking about tariffs first Greg I, just wanted to make sure I have this right, but I'm, assuming it's all somewhat related.

Speaker Change: The second part of the tariffs is the.

Speaker Change: On the revenue side.

That is.

Speaker Change: I guess just.

Speaker Change: How much is it going to affect our revenue.

Speaker Change: The thought process behind that.

Speaker Change: As I mentioned before we think that.

Speaker Change: One point of revenue that came out of the outlook and maybe where you expect that to impact the business. The most.

Speaker Change: That's going to have some effect only where we sell from U S based locations to international customers and Ive said before less than 2% to China. So 80% of what we make and sell is either made in the U S. So the U S.

Speaker Change: I think most of that is really.

Speaker Change: I'm just we're just looking at the GDP and assuming he is going to get our hands off 1%.

Speaker Change: Kind of a bigger picture is not going to affect a couple of our segments at all.

Speaker Change: Made internationally sold internationally.

Speaker Change: It's going to have probably affect a little bit of digital imaging and a little bit of instrument.

Robert Mehrabian: as well as taking advantage of recent exemptions for import of certain electronic components. And then finally, of course, pricing actions where we find necessary.

Speaker Change: Only 17% is based in locations.

Speaker Change: I'm going to say in digital imaging may be $20 million.

Speaker Change: <unk> two into.

Speaker Change: Selling to international comp customers from the U S. And then only 4% from Teledyne International location back to the U S. So.

From before and in.

Robert Mehrabian: Turning to our full year sales and earnings outlook, we must assume that the market uncertainty will have some impact. While this is nearly impossible to quantify, we've assumed a negative sales impact of perhaps. about 1% of annual sale. Offset. by the Chioptic acquisition, resulting in 2025 estimated sales of approximately $6 billion.

Speaker Change: Eastern time.

Speaker Change: I think it's important to put those to infer strength because they are a little different I look at the supply chain issue, which I, just said could be as much as $18 million a quarter in two ways.

Speaker Change: Maybe another 20 or so.

Speaker Change: So youre looking at maybe <unk> digital imaging maybe 20.

Speaker Change: Instrument.

Speaker Change: I don't think it's going to affect our aerospace and defense our engineering systems.

Speaker Change: First.

Speaker Change: There is a similarity to what we experienced in 2021 and 2022.

Speaker Change: It's just a rounding up of quota I think or what people think and I believe is that if things continue theres going to be about a one percentage to.

Speaker Change: We had to cough up a lot of money to brokers because of scarcity of material, especially the electronic components second.

Speaker Change: Our overall.

Speaker Change: Growth in the in our GDP.

Speaker Change: <unk>. So we're just taking it as a ballpark.

Speaker Change: Supplies that are coming again at a higher cost.

Robert Mehrabian: Also While we exceeded our first quarter midpoint guidance of $4.85, $4.85. And we expect a contribution from Chioptic, which is now included in our outlook. We think it's wise to maintain our full year earnings outlook.

Speaker Change: And I guess, just I guess more on the tariff side, you mentioned all of the moving pieces I mean.

Speaker Change: It really impacts the P&L immediately they go initially in our inventory so they affect the balance sheet.

Speaker Change: How do you think about the net impact just thinking about margins given you mentioned some of the pricing and localized production.

Speaker Change: We have inventory on hand, and if you look at three to four turns a year.

Speaker Change: How do you think about the margin impact from those or potential margin impact.

Speaker Change: It doesn't really affect the immediate core search it's going to probably start growing again in the Q3 Q4, and that's where we see an increased cost of goods sold.

Edwin Roks: Edwin and George will now briefly comment on the performance of our four business sectors. Thank you, Robert. This is Edwin, and I will report on the digital emitting segment, which represents approximately 52% of Teledyne's portfolio. First quarter 2025 sales increased 2.2% compared with last year. Our performance last year reflected an increase in sales for both Teledyne and Fliers defense and industrial business and relatively flat sales across the balance of our portfolio where increased sales of space-based infrared detectors and semiconductors were lastly offset by ongoing weakness in certain markets such as x-ray detectors for consumer-discretionary sensitive dental markets.

Speaker Change: Yeah, let me start.

Speaker Change: Greg if I may.

Speaker Change: There are two.

Speaker Change: The components of the tariffs.

Speaker Change: As you well know the.

Speaker Change: And this is all before we do our pricing actions.

Speaker Change: The first component is what happens to our supply chain and the increase in the cost of the supplies.

Speaker Change: Yes.

Speaker Change: I'm, giving you a very long answer because I think I'm going to get the same pricing multiple times.

Speaker Change: That we estimate.

Speaker Change: Yes, the tariffs are going to affect us overall GDP may go down 1%. We may go down 1%, but our revenue is still going to increase year over year, and we're assuming with acquisitions.

Speaker Change: That could be we know that.

Speaker Change: In 2024.

Speaker Change: About $700 million of large.

Speaker Change: Products that supplies that we enforce it both internally and externally are going to be affected.

Speaker Change: Average revenue for the year would go up about 6%.

Speaker Change: So I feel pretty good about all of the above.

Speaker Change: And we assumed.

Edwin Roks: Non-cap operating margin improved 31 basis points primarily due to the contribution of FLIR as well as space-based sensor business.

Speaker Change: If it goes from 1% to 15% tariffs.

Speaker Change: And then maybe just sneaking in one last one you said U S to international less than 2% of that is China I believe China is maybe 5% of your total sales can you maybe just talk about what youre seeing into that region given I'm.

Speaker Change: Going to have a 14% increase which is about $100 million in cost.

George Bobb: George will now report on the other three segments which represent the balance of Teledyne. Thanks, Edwin. In the instrumentation segment, which consists of our marine, environmental, and test and measurement business. First quarter total sales increased 3.9% versus last year, with organic growth of 2.6%. Overall sales of marine instruments increased 9.5%. 6.5% of which was organic, due to both strong offshore energy and subsea. Sales of environmental instruments decreased to primarily due to lower sales of laboratory instrumentation and emissions monitoring. However, orders were strong for the first quarter, book-to-bill, of $1.1 billion. Sales and Electronic Tests and Measurements.

Speaker Change: That we can mitigate some of that.

Speaker Change: Reduce it to less than 70, which would probably dropped to maybe $18 million of course dish.

Speaker Change: Im assuming that was probably already volatile before all of this just just broader trends within China.

Speaker Change: Second part of the tariffs is the.

Speaker Change: Yeah.

Speaker Change: On the revenue side.

Speaker Change: Going back to the overall overall is maybe 4% not quite five two of it coming from U S.

Speaker Change: That is.

Speaker Change: How much is it going to affect our revenue.

Speaker Change: I mentioned before we think that.

Speaker Change: So what do we sell this.

Speaker Change: Sure.

Speaker Change: One of the things that we sell there are embryonic.

Speaker Change: That's going to have similar effect, only where we sell from U S based locations to international customers and Ive said before less than 2% to China. So 80% of what we make and sell is either made in the U S. Soybeans in the U S.

Speaker Change: Computers that go onboard commercial airlines.

Speaker Change: <unk> have to be certified.

Speaker Change: We also sell.

George Bobb: Include oscilloscopes, protocol analyzers, and Ethernet traffic generators. Increased 1.5% year-over-year. Instrumentation operating margin in the first quarter increased 97%. 27% and 88 basis points on a non-GAAP basis to 27.9%.

Speaker Change: Hello Scopes.

Speaker Change: And protocol analyzers.

Speaker Change: Made internationally so the internationally.

Speaker Change: Some of the avionics.

Speaker Change: Actually are going to go there regardless of tariffs because they're needed.

Speaker Change: Only 17% is based in locations selling through into.

Speaker Change: If youre going to fly commercial airlines and Havent certified system.

Speaker Change: Selling to international customers from the U S. And then only 4% from Teledyne International location back to the U S. So.

George Bobb: In the aerospace and defense electronics segment, first quarter organic sales increased 7.8%. Driven by growth of defense electronics. Including the two recent acquisitions, sales increased 30.6%. Overall segment operating profit increased year-over-year, but gap and non-gap segment margin decreased, as expected, due to transaction and integration. as well as comparatively lower current margins in the new account.

Speaker Change:

Speaker Change: Of that then you go back and look at.

Speaker Change: Ausiello scopes that that's come strong U S high end, zillow scopes and that might affect us somewhat.

Speaker Change: I think it's important to put those to infer strength because they are a little different I look at the supply chain issue, which I, just said could be as much as $18 million per quarter in two ways.

Speaker Change: And some of them machine vision.

Speaker Change: Staff.

Speaker Change: It might be affected.

Speaker Change: First.

Speaker Change: They're not U S based really.

Speaker Change: There is a similarity to what we experienced in 2021 and 2022.

Speaker Change: Foreign based products that we make we make most of our machine vision products in Canada and in Europe. So they may be affected indirectly.

George Bobb: For the Engineered Systems segment, first quarter revenue increased 14.9%. and Segment Operating Profit increased 719 base due in part to an easy comparison with last year, which included higher cost to complete estimates. certain programs that did not recur in Q1 2025.

Speaker Change: We had to cough up a lot of money to brokers because of scarcity of raw materials, especially the electronic components second.

Scott: Yes, it's Scott.

Speaker Change: Supplies that are coming again at a higher cost.

Speaker Change: It's kind of caused a little pain.

Scott: But again, we'll make it up somewhere else.

Speaker Change: Really impact the P&L immediately they go initially in our inventory so they affect the balance sheet.

George Bobb: I will now pass the call back.

Speaker Change: I appreciate it thank you.

George Bobb: Thank you, George.

Speaker Change: Thank you Jay.

Robert Mehrabian: In conclusion... Despite recent volatility in capital markets, as well as economic uncertainty, our performance to date has been resilient and strong. Each of our total orders. Sales, margins, and earnings increased in the first quarter. While organic sales increased in each segment, we also completed two acquisitions and ended the quarter with a leverage ratio of just 1.8.

Speaker Change: We have inventory on hand, and if you look at three to four turns a year.

Speaker Change: Our next question is from Andrew Buscaglia with BNP Paribas.

Andrew Buscaglia: Hey, good morning, everyone.

It doesn't really affect the immediate core search it's kind of proud of that we start growing again in the Q3 Q4, and that's where we see an increased cost of goods sold.

Speaker Change: Good morning, Andrew.

Speaker Change: Maybe Robert on that the comment of 1% coming up can you comment about <unk>.

Speaker Change: Risk related to any government spending cuts that youre seeing is is any of that contemplated in that and how do you see telecom.

Speaker Change: And this is all before we do our pricing actions.

Speaker Change: Yes.

Speaker Change: Teledyne managing through that.

Speaker Change: I'm, giving you a very long answer because I think I'm going to get the same question multiple times.

To be very honest I don't think that's going to affect us.

Speaker Change: Yes, the tariffs are going to affect us overall GDP may go down 1%. We may go down 1%, but our revenue is still going to increase year over year, and we're assuming with acquisitions.

Speaker Change: The kinds of cuts, they're talking about with Dodge.

Robert Mehrabian: While we cannot predict the future. I continue to believe our balanced mix of businesses. Strong cash flow, healthy balance sheet, and acquisition pipeline creates more long-term opportunities than risks for Teledyne if the current economic stress continues.

Speaker Change: Yes, we do have things that may be at risk if they go to Nassau, we have some NASA programs and others.

Speaker Change: Average revenue for the year would go up about 6%.

Speaker Change: But is that in the bigger picture.

Speaker Change: It might even.

Speaker Change: No.

Speaker Change: Be good for us in some ways, because we would participate in space programs in there.

Speaker Change: Feel pretty good about all of the above.

Speaker Change: And then maybe just sneaking in one last one you said U S to international less than 2% of that is China I believe China is maybe 5% of your total sales can you maybe just talk about what youre seeing into that region, given I'm, assuming that was probably already.

Stephen Blackwood: I will now turn the call over to 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 second quarter and full year 2025 outlook. In the first quarter, cash flow from operating activities was $242.6 million, compared with $291 million in 2024. Free cash flow, that is cash flow from operating activities less capital expenditures, was $224.6 billion in the first quarter of 2025, compared with $275.1 million in 2024. Cash flow decreased year-over-year in the first quarter due in part to lower customer cash advances received in the first quarter of 2025 compared with 2024.

Speaker Change: A very healthy way and that's one of the domains that we're actually increasing our revenue.

Speaker Change: We participate in space programs.

Speaker Change: <unk> space.

Speaker Change: Which is pretty big for us and.

Speaker Change: It'll be for all of this just just broader trends within China.

Speaker Change: We also participate in defense space.

Speaker Change: Yes.

Speaker Change: Back to the overall overall is maybe 4% not quite five two okay coming from U S.

Speaker Change: In the defense space.

Speaker Change: Which is about 60% of our overall space programs, we think theres going to be growth.

Speaker Change: So what do we sell dish.

Speaker Change: One of the things that we sell there are embryonic.

Speaker Change: All of these activities.

Speaker Change: I'm going.

Computers that go onboard commercial airlines that have to be certified.

Speaker Change: Reduction and then increases in other domains. So the answer to your question the short and long answer to your question is that overall, we believe that.

Speaker Change: We also sell.

Stephen Blackwood: Capital expenditures were $18 million in the first quarter of 2025 compared with $15.9 million in 2024. Depreciation and amortization expense was $80.7 million in the first quarter of 2025 compared with $78 million in 2024.

Speaker Change: Ausiello scopes.

Speaker Change: And protocol analyzers.

Speaker Change: The <unk>.

Speaker Change: Effect to us is going to not be significant and if there is one it will improve our defence.

Speaker Change: Some of the avionics.

Speaker Change: Actually are going to go there regardless of tariffs because they're needed.

Speaker Change: Program in missile warning and tracking and intelligence surveillance et cetera, et cetera, everyone 'twenty defense programs related to space at the current time.

Speaker Change: Or if you're going to fly commercial airlines and Havent certified system.

Stephen Blackwood: We ended the quarter with $2.5 billion in net debt, that is approximately $2.96 billion of debt less cash of $461.5 billion.

Speaker Change: Uh huh.

Speaker Change: Of that.

Speaker Change: Then you go back and look at.

Speaker Change: A similar scopes that that's come strong U S. High end is cielo scopes and that might affect us somewhat.

Speaker Change: Okay got it.

Speaker Change: And yes, I think I think it's a logical assumption.

Stephen Blackwood: Now turning to our Outlook, which includes the acquisitions of Micropak and Chiappa. Management currently believes that GAP earnings per share in the second quarter of 2025 will be in the range of $4.00 to $4.15 per share, with non GAP earnings per share in the range of $4.95 to $5.05. And for the full year 2025, we believe that GAAP earnings per share will be in the range of $17.35 to $17.83. And we are maintaining our prior non-GAAP outlook of $21.10 to $21.50 per share.

Speaker Change: In terms of how Youre thinking about the top line. What are you seeing in terms of your short cycle sell more recently I seeing that.

Speaker Change: And some of them machine vision.

Speaker Change: That might be affected.

Speaker Change: Would that play out some some of that business and getting worse.

Speaker Change: They're not U S based really there.

Speaker Change: And specifically can you comment on test and measurement and machine vision, which had been struggling as of late.

Speaker Change: Foreign based products that we make we make most of our machine vision products in Canada and in Europe. So they may be affected indirectly.

Speaker Change: Yeah.

Speaker Change: I think.

Scott: Yes, it's Scott.

Speaker Change: The effects are going to be.

Speaker Change: Kind of caused a little pain.

Speaker Change: Somewhat minimal I think test and measurement may get affected a little bit.

Speaker Change: But again, we'll make it up somewhere else.

Speaker Change: Okay. Appreciate it thank you.

Speaker Change: Overall, we think for the year test and measurement is going to be fairly flat.

Jay: Thank you Jay.

Speaker Change: Our next question is from Andrew Buscaglia with BNP Paribas.

Robert Mehrabian: I will now pass the call back to Rob. Thank you, Steve.

Speaker Change: So that I think it has an effect.

Andrew Buscaglia: Hey, good morning, everyone.

Speaker Change: Is two months as a whole which includes <unk>.

Operator: We would now like to take your questions. Operator, if you're ready to proceed with the questions and answers, please go ahead. Thank you.

Speaker Change: Good morning, Andrew.

Speaker Change: Environmental Marine and test and measurement.

Speaker Change: Maybe Robert on that the comment of 1% coming up can you comment about.

Speaker Change: He is going to be okay, it's going to grow maybe.

Speaker Change: 2.5% to 3%.

Speaker Change: Risk related to any government spending cuts that youre seeing is any of that contemplated in that and how do you see.

Operator: We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate you're lining up for the question. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2 button.

Speaker Change: Going back to machine vision.

Speaker Change: There are two parts to it as you know there is the FLIR part.

Managing through that.

Speaker Change: Uh huh.

Speaker Change: To be very honest I don't think that's going to affect us.

Speaker Change: And that.

Speaker Change: <unk> is.

Speaker Change: He is doing actually pretty well, especially clear defense.

The kinds of cuts Theyre talking about.

Speaker Change: There is some effect on the industrial.

Operator: One moment please while we poll for questions.

Speaker Change: Yes, we do have things that may be at risk if they go to Nash, we have some NASA programs and others.

Speaker Change: Cameras, especially in further handheld and stationary cameras.

Gregory Konrad: Our first question is from Greg Konrad with Jefferies. Please proceed with your question. Good morning. Morning, Greg. Appreciate all the detail, but maybe just to start with the tariffs, it seems like you took about one point out of revenues, including the M&A contribution. Can you maybe just level set us where you see the biggest potential impact? And maybe how does that correlate it with expected organic growth for the year? And also any change to expected FX headwinds? Yeah, actually, the 1% that I took out for revenue was from the total that included acquisitions. So the total had increased because of the key optic acquisition by $180 million.

Speaker Change: But he is in the bigger picture.

Speaker Change: But that's going to be fairly flat year over year.

Speaker Change: It might even.

Speaker Change: <unk>.

Speaker Change: Be good for us in some ways, because we would participate in space programs.

Speaker Change: We think.

Speaker Change: What what will happen in the FLIR side is the defense is doing so well that that will offset any negativity there.

Speaker Change: In a very healthy way and that's one of the domains.

Only area of digital imaging that we believe it could affect.

We are.

Speaker Change: Actually increasing our revenue.

Speaker Change: We participated in space programs.

Speaker Change: Is the continuing weakness in our sensors sales our cameras are coming back this.

Speaker Change: Science space.

Speaker Change: Which is pretty big for us and we.

Speaker Change: This is legacy digital imaging, our cameras are coming back a little slower than we hoped.

Speaker Change: We also participate in defense space.

Speaker Change: In the defense space.

Speaker Change: The answers are lagging even more because people who buy our sensors have to develop new cameras and the market incentives are in three lead there but.

Speaker Change: Which is about 60% of our overall space programs, we think theres going to be growth.

Speaker Change: From all of these activities.

Speaker Change: But if you come back and look at it as a whole big pictures.

Speaker Change: Going.

Speaker Change: Reduction and then increases in other domains. So the answer to your question their short and long answer to your question is that overall, we believe that.

Speaker Change: Our book to Bill across the company is one to five.

Robert Mehrabian: We took down about 100 from there. Now, the reality of the Outlook is that the impact of, you're asking about tariffs first, Greg, I just want to make sure I have this right. Well, I'm assuming it's all somewhat related. So I guess just, you know, the thought process behind the, you know, one point of revenue that came out of the Outlook and, and maybe where you expect that to impact the business the most. Yeah, I think most of that is really, I'm just, we're just looking at the GDP and assuming it's going to get a hit of 1%.

Speaker Change: Our instruments book to Bill is one point to afford.

Speaker Change: The <unk>.

Speaker Change: Overall digital imaging book to Bill is 111.

Speaker Change: The effect to us is going to not be significant and if there is one it will improve our defence.

Speaker Change: Aerosol and aerospace and defense is slightly under one and engineered systems, which is very lumpy business isn't there one, but we're not worried about that because we had revenue increases there. So.

Speaker Change: <unk>.

Speaker Change: Programs in missile warning and tracking and intelligence surveillance et cetera et cetera.

Speaker Change: 'twenty defense programs related to space at the current time.

Speaker Change: <unk> I'd say.

Speaker Change: Yes, we see some short term effect.

Speaker Change: Okay got it.

Speaker Change: In some of our short cycle businesses.

Speaker Change: And yes, I think I think it's a logical assumption.

Speaker Change: Overall, we should be fine.

Speaker Change: In terms of how you're thinking about the top line. What are you seeing in terms of your short cycle sell more recently I seeing that.

Speaker Change: Okay very clear thank you.

Robert Mehrabian: So let's, it's a kind of a bigger picture. It's not going to affect a couple of our segments at all. It's going to probably affect a little bit of digital imaging and a little bit of I'm going to say in digital imaging, maybe $20 million. of the group. Thank you. maybe another 20. So, and so you're looking at maybe 16 digital imaging, maybe 20 in instrument. I don't think it's going to affect our aerospace and defense or engineering system. It's just a rounding up of what I think, or what people think, and I believe it, that if things continue, there's going to be about a 1% hit to the overall growth in our GDP.

Speaker Change: Our next question is from Jim Ricchiuti with Needham <unk> company.

Speaker Change: Would that play out some some of that business and getting worse.

Jim Ricchiuti: Hi, Thanks, good morning.

Speaker Change: And specifically can you comment on test and measurement and machine vision, which.

Speaker Change: Question about.

Speaker Change: It had been struggling as of late.

Jim Ricchiuti: <unk>.

Jim Ricchiuti: Steps actions you may take in terms of offsetting some of the pressure.

Speaker Change: Yeah.

Speaker Change: <unk>.

Speaker Change: I think.

Speaker Change: The effects are going to be.

Speaker Change: That you might see on margins Robert I'm wondering.

Speaker Change: Somewhat minimal I think test and measurement.

Speaker Change: How youre thinking about driving margin improvement and some of the newly acquired businesses over the next several quarters.

Speaker Change: They get affected a little bit we overall, we think for the year test and measurement is going to be fairly flat.

Jim Ricchiuti: Jim that's it that's it.

Speaker Change: Really great question.

Speaker Change: So that I think it has an effect.

Speaker Change: First.

Speaker Change: If I look at the overall margin for the year across all of our businesses.

Speaker Change: Is two months as a whole which includes.

Speaker Change: Environmental Marine and test and measurement.

Speaker Change: We are projecting margin improvement of about 60 basis points for the year.

Speaker Change: He is going to be okay, it's going to grow maybe two.

Speaker Change: 2.5% to 3%.

Speaker Change: In Q1, we had margin improvement of about 80 basis points.

Speaker Change: Going back to machine vision.

Speaker Change: There are two parts to it as you know there is the FLIR pod.

Speaker Change: Year over year.

Robert Mehrabian: So we're just taking it as a ballpark. And I guess just, I guess more on the tariff side, you mentioned all of the the moving pieces.

Speaker Change: And one of the reasons that we think the margins are improvements.

Speaker Change: Hmm.

And that.

Speaker Change: <unk> are going to be slightly less is because of the acquisitions.

Speaker Change: Its doing actually pretty well, especially flared defense.

Speaker Change: And if you take an acquisition like Q uptick.

Robert Mehrabian: I mean, how do you think about the the net impact just thinking about margins given you mentioned some of the the pricing and, and localized production? You know, how do you think about the the margin impact from those or potential margin impact?

Speaker Change: There is some effect on the industrial.

Which moves the needle a little bit.

Speaker Change: Cameras, especially in further at handheld then stationary cameras.

Speaker Change: In the first quarter.

Speaker Change: Their margins were lower as we always have when we acquire a business.

But that's going to be fairly flat year over year.

Speaker Change: Theyre going to hits, our aerospace and defense.

Robert Mehrabian: Yeah, let me start, Greg, if I may. There are two components of the tariff. As you well know, the first component is what happens for supply chain and the increase in the cost of the supply. That we estimate that that could be, we know that we, in 2024, about $700 million of our products that supplies that we imported both internally and externally are going to be affected. And we assumed that if it goes from 1% to 15% tariffs, so you're going to have a 14% increase, which is about $100 million in cost. That we can mitigate some of that and reduce it to less than 70, which would probably drop to maybe 18 million a quarter.

Speaker Change: Overall by 200 basis points, but the way we look at it every quarter going forward their margins are going to improve as we have done with every acquisition in our.

Speaker Change: <unk>.

Speaker Change: We think.

Speaker Change: What what will happen in the FLIR side is the defense is doing so well that that will offset any negativity at all.

Speaker Change: In the area of digital imaging that we believe it could affect it.

Speaker Change: Portfolio.

Speaker Change: And eventually.

Speaker Change: The continuing weakness in our sensors.

Speaker Change: They have the same margins and does everything out there.

Speaker Change: Our cameras are coming back.

Speaker Change: So in a way I look at it and say okay.

Speaker Change: This is legacy digital imaging, our cameras are coming back a little slower than we hoped.

Speaker Change: What is the effect right now.

Speaker Change: In Q1, we only had them for two months for the year, we're going to have them for 11 months, it's going to hit aerospace and defense, where RG is somewhat.

Speaker Change: Sensors are lagging given more because people who buy our sensors have to develop new current cameras and the market incentives are in three lead there but.

Speaker Change: But.

Speaker Change: And he is going to decrease it may be a 180 basis points, but our defense margins before that we're 28, <unk> aerospace and defense were 28, 6%.

Speaker Change: But if you come back and look at it as a whole big picture.

Speaker Change: Our book to Bill across the company is 1.25.

Speaker Change: So and Theyre going to improve every quarter. So by next year, it's all going to be.

Speaker Change: Our instruments book to Bill is one point to report.

Speaker Change: Overall digital imaging book to Bill is 111.

Speaker Change: Find in every acquisition. We've made does the same thing lowers the margin will actually contribute to the bottom line and as we said we expect to update <unk>.

Speaker Change: Aerosol and aerospace and defense is slightly under one and engineered systems, which is very lumpy business is under one but we're not worried about that because we had revenue increases there. So.

Robert Mehrabian: The second part of the tariffs is the On the revenue side. that is. How much is it going to affect our revenue? As I mentioned before, we think that That's going to have some effect only where we sell from U.S. based locations to international customers, and I said before, less than 2% to China. So 80% of what we make and sell is either made in the U.S., sold in the U.S. Made internationally, sold internationally. Only 17% is based in locations selling to international customers from the U.S. And then only 4% from Teledyne international locations back to the U.S.

Speaker Change: Add another 15 cents to our overall earnings.

Speaker Change: Got it.

It's helpful. Robert the follow up question I had.

Speaker Change: I'd say.

Speaker Change: Yes, we see some short term effects.

Speaker Change: Historically in periods like this tell us.

Speaker Change: In some of our short cycle businesses.

Speaker Change: <unk>.

Speaker Change: Taking advantage of the opportunities I'm just wondering.

Speaker Change: Overall, we should be fine.

Speaker Change: Are you seeing more potentially more acquisition opportunities in the current environment.

Speaker Change: Okay very clear thank you.

Speaker Change: Our next question is from Jim Ricchiuti with Needham <unk> company.

Speaker Change: Or is it too early.

Speaker Change: Well, it's a little early but but.

Jim Ricchiuti: Hi, Thanks, good morning.

Jim Ricchiuti: Question about.

Jim Ricchiuti: Historically as he said Jim.

Jim Ricchiuti: <unk>.

Jim Ricchiuti: Steps actions you may take in terms of offsetting some of the pressure.

Speaker Change: Every time, there has been stress economic stress.

Speaker Change: We've taken a little hit just like everybody else, but they've done two things.

Speaker Change: That you might see on margins Robert I'm wondering.

Speaker Change: How youre thinking about driving margin improvement and some of the newly acquired businesses over the next several quarters.

Speaker Change: The three times that I remember they were similar economic stresses.

Robert Mehrabian: I think it's important to put those two in perspective because they're a little different. I look at the supply chain issue, which I just said could be as much as $18 million a quarter, in two ways. There's a similarity to what we experienced in 2021 and 2022, where we had to cough up a lot of money to brokers because of scarcity of materials, especially electronic components. Second Supplies that are coming in at a higher cost. Don't really impact the P&L immediately. They go initially in our inventory, so they affect the balance. We have inventory on hand.

Speaker Change: We increased our cash free cash flow.

Speaker Change: Jim that's it that's it.

Speaker Change: We have record cash flow last year, we had a record cash flow of over $1 billion.

Speaker Change: Really great question.

Speaker Change: First.

Speaker Change: If I look at the overall margin for the year across all of our businesses.

Speaker Change: <unk> to have something close to that this year.

Speaker Change: As we come out of these things are even during these.

Speaker Change: We are projecting margin improvement of about 60 basis points for the year.

Speaker Change: We make acquisitions in 2017. As example, we brought the <unk> following 2014 to 16.

Speaker Change: In Q1, we had margin improvement of about 80 basis points year over year.

Speaker Change: Depression.

Speaker Change: This year, we bought quixotic and we also bought.

Speaker Change: And one of the reasons that we think the margins are improvements are going to be slightly less is because of the acquisitions.

Speaker Change: Micro pack.

Speaker Change: Having said that our pipeline is relatively healthy both in smaller and what we like to call mid sized acquisitions, we've already spent about $750 million in the first quarter buying two businesses.

Speaker Change: If you take an acquisition like QR stake.

Speaker Change: Which moves are neither lay a little bit.

Speaker Change: In the first quarter.

Robert Mehrabian: And if you look at three to four turns a year, It doesn't really affect the immediate quarter. It's going to probably start rolling in in the Q3, Q4. And that's where we'll see an increased cost of goods sold. And this is all before we do our pricing act.

Speaker Change: Their margins were lower as we always have when we acquired a business.

Theyre going to hits, our aerospace and defense.

Speaker Change: And we if we don't do anything else.

Speaker Change: Overall by 200 basis points.

Speaker Change: But the way we look at it every quarter going forward their margins are going to improve as we have done with every acquisition in our <unk>.

Speaker Change: Our debt to.

Speaker Change: EBITDA ratio, which is now at one point date will go to one two.

Speaker Change: Because of our cash generation, so I'm looking forward to making some acquisitions and it really depends on how competitive the environment is because there's some others doing the same thing as we are there are some things available, but we don't want to overpay because if you overpay then you pay for it.

Robert Mehrabian: So, yes, I'm giving you a very long answer because I think I'm going to get the same question multiple times. Yes, the tariffs are going to affect us. Overall, GDP may go down 1%, we may go down 1%. But our revenue is still going to increase year over year. And we're assuming with acquisition... Our average revenue for the year would go up about 6%. So I feel pretty good about all of them.

Speaker Change: Portfolio.

Speaker Change: And eventually.

Speaker Change: They'll have the same margins and everything else.

Speaker Change: So in a way I look at it and say okay.

Speaker Change: What is the effect right now in Q1, we only item for two months or the year, we're going to have them for 11 months. It is going to hit aerospace and defense, where rgs somewhat.

Speaker Change: Later, rather than sooner.

Speaker Change: Thanks very much.

Speaker Change: For sure.

Speaker Change: But.

Speaker Change: And he's going to decrease it maybe a 180 basis points, but our defense margins before that we're 28 aerospace and defense were 28, 6%.

Speaker Change: Our next question is from.

Speaker Change: Myeloma with bank of America.

Robert Mehrabian: And then maybe just sneaking in one last one, you said, US to international, less than 2% of that's China, I believe China's maybe 5% of your total sales. Can you maybe just talk about, you know, what you're seeing into that region, given? Yeah, I'm assuming that was probably already volatile before all this just just broader trends within China.

Speaker Change: Hey, good morning.

Speaker Change: Good morning, Jordan.

Speaker Change: So and Theyre going to improve every quarter. So by next year, it's all going to be.

Speaker Change: Could you guys talk a little bit about.

Speaker Change: What youre expecting in.

Speaker Change: Your aerospace and defense segment, we're familiar with the U S. FY 'twenty six budget moving to Australian dollars and also European <unk>.

Speaker Change: Find in every acquisition we've made does the same thing lowers the margin.

Speaker Change: Truly contributes to the bottom line and as we said we expect Q uptake.

Robert Mehrabian: Yeah, going back to the overall overall is maybe 4%, not quite five, two of it coming from us. So what do we sell? One of the things that we sell there are avionic computers that go on board commercial airlines that have to be certified. We also sell. Oscilloscope. and Protocol Analyzer.

Speaker Change: Where should we be looking to see at Teledyne.

Speaker Change: Another 15 cents to our overall earnings.

Speaker Change: Yeah, Let me let me just first say.

Speaker Change: Got it.

Speaker Change: Helpful. Robert the follow up question I had.

Speaker Change: Let's just stay with the defense for a second.

Speaker Change: Historically in periods like this teledyne has.

Speaker Change: Two parts, obviously in Q U S defense increases.

Speaker Change: Taking advantage of opportunities I'm just wondering.

Speaker Change: You're going to have.

Speaker Change: Are you seeing more potentially more acquisitions.

Speaker Change: Our increased sales.

Speaker Change: In Q1.

Speaker Change: <unk> opportunities in the current environment.

Sure.

Speaker Change: Defense sales year over year increased about 18, 7%.

Speaker Change: Or is it too early.

Speaker Change: Well, it's a little early but.

Robert Mehrabian: Some of the avionics actually are going to go there regardless of tariffs because they're needed for if you're going to fly commercial airlines and have a certified system. Off that, then you go back and look at oscilloscopes. That comes from U.S. high-end oscilloscopes, and that might affect us somewhat. and some of the machine vision stuff. that might be affected. They're not US based, really. They're foreign based products that we make.

Speaker Change: No.

Speaker Change: Yeah.

Speaker Change: Historically as he said Jim.

Speaker Change: There are two parts, obviously U S defense is going to increase because we have some healthy product.

Every time, there has been stress economic stress.

Speaker Change: Range ranging from unmanned vehicles.

Speaker Change: We've taken a little.

Speaker Change: Hit just like everybody else, but they have done two things.

Speaker Change: Really one of the only companies that I can name that have unmanned vehicles in the air on the ground and underwater vehicles.

Speaker Change: The three times that I remember they were similar economic strength as.

Speaker Change: We increased our cash free cash flow.

Speaker Change: <unk>.

Speaker Change:

Speaker Change: The defense. We also of course make all kinds of components that go into the defense domain.

Speaker Change: We have record cash flow last year, we had a record cash flow of over $1 billion.

Speaker Change: <unk> to have something close to that this year.

Speaker Change: They make some very unique products, where our defense, let me move to Europe, because that's just as important.

Speaker Change: As we come out of these things are even during these.

We make acquisitions in 2017. As example, we brought the <unk> following 2014 to 16.

Speaker Change: Currently.

Robert Mehrabian: We make most of our machine vision products in Canada and in Europe. So they may be affected indirectly. Yeah, it's going to cause a little pain.

Speaker Change: So in 2024, let's say, we sell $447 million of.

Speaker Change: Depression.

Speaker Change: Product into European Defense.

This year, we bought key uptick and we also got.

Speaker Change: Many countries.

Robert Mehrabian: But again, we'll make it up somewhere else. Appreciate it.

Speaker Change: If.

Speaker Change: Micro pack.

Speaker Change: The defense budget.

Speaker Change: Having said that our pipeline is relatively healthy both in smaller and what we like to call mid sized acquisitions, we've already spent about $750 million in the first quarter buying two businesses.

Speaker Change: And that includes by the way I'm kind of taking key uptick that we just bought and going backwards and saying well how much did they sell last year.

Andrew Buscaglia: Our next question is from Andrew Buscaglia with BMC Paribas. Hey, good morning, everyone. Morning, Andrew.

Speaker Change: And so I'm, putting that in that $4 47 in the small and micro pack acquisition.

Speaker Change: And we.

Robert Mehrabian: Robert, on that the comment of 1% coming out, can you comment about risk related to any government spending cuts that you're seeing? Is any of that contemplated in that and how do you see Teledyne managing through that? To be very honest, I don't think that's going to affect. The kinds of cuts they're talking about with DOJ. Yes, we do have things that may be at risk. If they go to NASA, we have some NASA programs and others. But in the bigger picture, it might even be good for us in some ways. Because we participate in space programs. in a very healthy way.

Speaker Change: If we don't do anything else.

Speaker Change: If you look at our defense budget.

Speaker Change: Our debt to.

Speaker Change: About three 3% if I'm correct of our GDP.

Speaker Change: EBITDA ratio, which is not one point date will go to one two.

Speaker Change: European Defense budgets at about 500 billion.

Speaker Change: Because of our cash generation, so I'm looking forward to making some acquisitions and it really depends on how competitive the environment is because there's some others doing the same thing as we are there are some things available, but we don't want to overpay because if you overpay then you pay for it.

Speaker Change: Been about 2% of the GBP everything we hear.

Speaker Change: There's they're planning to increase that to $8 billion to $900 billion over the next five years.

As a minimum.

Speaker Change: We expect to maintain our share with what we have which is.

Speaker Change: Later, rather than sooner.

Speaker Change: Thanks very much.

Speaker Change: The 447 growing proportionate to what they increase their budgets with.

Speaker Change: For sure.

Speaker Change: Our next question is from Liana <unk> with Bank of America.

Speaker Change: Yes.

Speaker Change: Furthermore, we think considering the kinds of products that we make.

Liana: Hey, good morning.

Robert Mehrabian: And that's one of the domains that we're actually increasing our revenue. We participate in space programs, both science space. which is pretty big for us, and we also participate in defense space. In the defense space. which is about 60% of our overall space programs, we think there's going to be growth. from all of these activities going up, reduction, and then increases in other domains. So the answer to your question, the short and long answer to your question is that overall, we believe that the effect to us is going to not be significant. And if there is one, it will improve our defense.

Speaker Change: Going to enjoy Getty.

Speaker Change: Good morning, Jordan.

Speaker Change: Getting more of the.

Speaker Change: Could you guys talk a little bit about.

Speaker Change: What youre expecting in.

Speaker Change: More of the.

Speaker Change: Share of those primarily.

Speaker Change: Your aerospace and defense segment, we're familiar with the U S. FY 'twenty six budget moving to Australian dollars and also European re our men wear.

Speaker Change: Due to the fact that we have unique products that they need like Ark I just mentioned our unmanned systems, but also we have a good manufacturing footprint of our defense products.

Speaker Change: Where should we be looking to see teledyne.

Speaker Change: Yeah, Let me let me just first say.

Speaker Change: Europe.

Speaker Change: We have it in the U K.

Speaker Change: That just stay with defense for a second.

Speaker Change: We have it in Sweden.

Speaker Change: We haven't seen other locations, we make our unmanned vehicles some of it I mean in Iceland, we have them in Denmark et cetera. So there are two fold one we already enjoying secondly is growing we're going to grow and we did and third there is gonna be don't mistake manufacturing requirements that are going on.

Speaker Change: Two parts.

Speaker Change: <unk> U S defense increases we're going to have.

Speaker Change: Increased sales.

Speaker Change: In Q1.

Speaker Change: Defense sales year over year increased about 18, 7%.

Speaker Change: Go into all of the new program.

Speaker Change: No.

Speaker Change: There are two parts, obviously U S defense is going to increase because we have some healthy product.

Speaker Change: Which we enjoy our footprint in Europe, I've said, we don't have a manufacturing footprint inside.

Robert Mehrabian: programs in missile warning and tracking and intelligence surveillance, etc, etc. We have about 20 defense programs related to space at the current Okay, got it.

Speaker Change: Range, ranging from unmanned vehicles, but probably one of the only companies that I can name that have unmanned vehicles in the air underground and underwater vehicles second.

Speaker Change: In southeast Asia, we've avoided it but not in Europe, because we bought a lot of businesses that we've invested in European defense.

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

Speaker Change: Thanks.

Robert Mehrabian: And yeah, I think I think it's a logical assumption in terms of how you're thinking about the top line.

Speaker Change: The defense.

Speaker Change: We also of course make all kinds of components that go into the defense domain.

Speaker Change: Our next question is from Danielle <unk> with UBS.

Andrew Buscaglia: What are you seeing in terms of your short cycle sales? More recently, are you seeing that play out some some of that business is getting worse?

Speaker Change: Layer makes some very unique products for our defense, let me move to Europe, because thats just as important.

Hey, good morning, everyone.

Speaker Change: Good morning Damian.

Speaker Change: Good morning, all.

Robert Mehrabian: And specifically, can you comment on test and measurement and machine vision, which, you know, have been struggling as of late? Yeah. I think the effects are going to be. Somewhat minimal, I think test and measurement may get affected a little bit. We overall, we think for the year, test and measurement is going to be fairly flat. So that, I think it's an effect. Instruments as a whole, which includes environmental marine and test and measure. I think it's going to be okay. It's going to grow maybe Two and a half to three percent.

Speaker Change: Currently.

Speaker Change: I was wondering if you might be able to clarify your prior comments about.

Speaker Change: So in 2024, let's say, we sell $447 million of.

Speaker Change: 1%, lower GDP and factoring that into the full year guidance.

Speaker Change: Product.

Speaker Change: Into European Defense.

Speaker Change: Have you actually started seeing any slowdown in digital imaging and instrumentation.

Many countries.

Speaker Change: If.

Speaker Change: The defense budget.

Speaker Change: For say the last month since all this tariff news than that.

Speaker Change: And that includes by the way I'm kind of taking key uptick that we just bought and going backwards and saying well how much did they sell last year.

Speaker Change: That started.

Speaker Change: Are you just kind of be risking because of this cloud of uncertainty if you will.

Speaker Change: Because I guess, if I think about all of those are book to Bill numbers that you cited they were they were all pretty positive.

Speaker Change: And so I'm, putting that in that $4 47 and <unk>.

Speaker Change: Micro pack acquisition.

Speaker Change: So if you look at our defense budget.

Speaker Change: I think I think yard.

About three 3% from core earnings of our GDP.

Speaker Change: Twofold first we do see some weaknesses in certain areas, but there's nothing new about that test and measurement is halo scopes.

Robert Mehrabian: Going back to machine vision. There are two parts to it, as you know, there's the flare part. And that. He's doing actually pretty well, especially player defense. There is some effect on the industrial cameras, especially infrared handheld and stationary cameras, but that's going to be fairly flat year over year. We think What what will happen in the FLIR side is the defense is doing so well that that will offset any negativity there.

Speaker Change: European defense budgets at above 500 billion.

Speaker Change: Been there Budd.

Speaker Change: Some of the stuff, we sell overseas like few China, Yeah, that's affected but I think youre right. Its my guess, it's a good it's a guess somebody might say, 1% is too much somebody might say, 1% is too little.

Speaker Change: 2% of the GBP everything we hear.

Speaker Change: They are planning to increase back to $8 billion to $900 billion over the next five years.

Speaker Change: As a minimum.

Speaker Change: We expect to maintain our share with what we have which is.

Speaker Change: That's my guess if it turns out not to be there I'd be very happy.

Speaker Change: The 447 growing proportionate to what they increase their budgets.

Speaker Change:

Speaker Change: I think we all will be.

Speaker Change: Thank you for that.

And then not be.

Speaker Change: A dead horse here on on tariffs, but you mentioned that some of the higher costs.

Speaker Change: Ads.

Speaker Change: Furthermore, we think considering the kinds of products that we make.

Speaker Change: <unk>.

Speaker Change: See that in the P&L immediately.

Speaker Change: We're going to enjoy getting more of the.

Robert Mehrabian: The only area of digital imaging that we believe it could affect is the continuing weakness in our sensor sales. Our cameras are coming back. This is Legacy Digital Imaging. Our cameras are coming back, a little slower than we hoped. Sensors are lagging even more because people who buy our sensors have to develop new cameras, and the market incentives aren't really there. But if you come back and look at it as a whole, big, big Our book to build across the company is 1.05. Our instruments book to build is 1.04. Overall digital imaging book to build is 1.11.

Speaker Change: As it sits in inventory, but I'm just curious have you had.

Speaker Change: More of the.

Speaker Change: Have you taken any.

Speaker Change: Share of those primarily.

Speaker Change: Price actions, so far or made any adjustments in your supply chain.

Speaker Change: Due to the fact that we have unique products that they need like Ark I just mentioned our demand Cisco, but also we have a good manufacturing footprint of our defense products in Europe.

Speaker Change: To offset.

Speaker Change: Some of this cost inflation that you expect to creep in.

Speaker Change: Yeah first.

Speaker Change: Obviously, just like 2021 22 Damian.

Speaker Change: We have it in the UK.

Speaker Change: We jumped on that very fast first you got them.

We have it in Sweden.

Speaker Change: We haven't seen other locations, we make our unmanned vehicles some of it I mean in Iceland, we have them in Denmark et cetera. So there's two parts to it one we already enjoying secondly is growing we're going to grow with it and third there's going to be domestic manufacturing requirements that are.

Speaker Change: So a good analysis of.

Speaker Change: What's happening and how it's going to affect you. So we start there.

Speaker Change: Then there are exemptions.

Speaker Change: Those as I mentioned for example, we make a lot of unmanned vehicles.

Speaker Change: Oh.

Speaker Change: In Canada.

Speaker Change: To go into all of the new programs.

Speaker Change: And we import into the U S.

Speaker Change: Which we enjoy our footprint in Europe, I've said, we don't have a manufacturing footprint in.

Robert Mehrabian: Aerospace and defense is slightly under one and engineered systems, which is very lumpy business, is under one, but we're not worried about that because we have revenue increases there. So overall, I'd say, yeah, we see some short term effects. in some of our short cycle businesses. But overall, we should be Okay, very clear.

Speaker Change: No.

Speaker Change: Studying very carefully to make sure that we enjoyed the D or the exemptions in that domain.

Speaker Change: In southeast Asia, we've avoided it but not in Europe, because we bought a lot of businesses that we've invested in European defense.

Speaker Change: Sometimes you cannot also assemble some input into.

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

Speaker Change: Turning to our products in a different location, where you manufacture the components and assemble them somewhere else, we're looking at that.

Speaker Change: Thanks.

Speaker Change: Our next question is from Damien <unk> with UBS.

Speaker Change: Finally, we have to take price action wherever he is getting hurt we will do that and we will.

Damien: Hey, good morning, everyone.

Jim Ricchuti: Our next question is from Jim Ricchuti with Niemann Company. Thanks. Good morning.

Speaker Change: Good morning Damian.

Damien: Good morning, all.

Speaker Change:

Speaker Change: Pass some of that on so in totality, there's a whole bunch of things.

Speaker Change: I was wondering if you might be able to clarify your prior comments about.

Jim Ricchuti: question about steps, actions you may take in terms of offsetting some of the pressure. that you might see on margins.

Speaker Change: 1%, lower GDP and factoring that into the full year guidance.

Speaker Change: The most important one is.

Speaker Change: The longer it takes four things to affect us the better it is for us in terms of going from inventory.

Speaker Change: Have you actually started seeing any slowdown in digital imaging and instrumentation.

Robert Mehrabian: Robert, I'm wondering how you're thinking about driving margin improvement in some of the newly acquired businesses over the next several quarters? Jim, that's it. That's a really grand question. First If I look at the overall margin for the year across all of our businesses, We are projecting margin improvement of about 60 basis points for the year. In Q1, we had margin improvement of about 80 basis points. year over year. And one of the reasons that we think the margins of improvement are going to be slightly less is because of the acquisition. If you take an acquisition like Q-Optic which moves our needle a little bit.

Speaker Change: To us.

Speaker Change: For say the last month since all this tariff news than that.

Speaker Change: Cost of goods sold.

Speaker Change: Get started.

Speaker Change: And <unk>.

Speaker Change: Having time to take actions to offset what's coming our way pricing opportunities.

Speaker Change: Are you just kind of be risking because of this cloud of uncertainty if you will.

Speaker Change: Well, because I guess, if I think about all those book to Bill numbers that you cited they were they were all pretty positive.

Speaker Change: We're going to use them wherever we can and.

Speaker Change: You know in the first quarter to react Chile had a volume increase of.

Speaker Change: I think I think yard.

Speaker Change: Two point.

Speaker Change: Twofold first we do see some weaknesses in certain areas, but there's nothing new about that test and measurement of Zillow scopes.

Speaker Change: Two 3% or so in our products so.

Speaker Change: Even with some <unk>.

Speaker Change: Pricing actions that we took so.

Speaker Change: Some of the stuff, we sell overseas like the China, Yeah, that's affected but I think youre right. Its my guess, it's a good it's a guess somebody might say, 1% is too much somebody might say one percentage to lido.

Speaker Change: Worries me, but now that we've been through this before <unk>.

Speaker Change: A number of times and once you got to do is hunkered down and do what you do best to be very disciplined.

Speaker Change: Two small things very well and don't expect miracles to happen.

Robert Mehrabian: In the first quarter. Their margins were lower, as we always have when we acquire a business. They're going to hit our aerospace and defense model overall by 200 bases. But the way we look at it, every quarter going forward, their margins are going to improve, as we have done with every acquisition. in our portfolio. And eventually, They have the same margins and everything else. So in a way, I look at it, I say, OK, what is the effect right now? In Q1, we only had them for two months. For the year, we're going to have them for 11 months.

Speaker Change: That's my guess if it turns out not to be there I'd be very happy.

Robert: That makes total sense. Thanks, a lot Robert good luck out there.

Speaker Change: Yes.

I think we all will be.

Speaker Change: Thank you.

Speaker Change: Thank you for that.

Speaker Change: And then not to beat a dead horse here on on tariffs, but you mentioned that some of the higher costs.

Speaker Change: Our next question is from Joe Giordano.

Speaker Change: TD Cowen.

Speaker Change: Paul.

Speaker Change: Hey, guys how are you.

Speaker Change: See that in the P&L immediately.

Speaker Change: Good morning, Joe.

Speaker Change: And it takes an inventory, but I'm just curious have you have you taken any.

Speaker Change: Kim can you kind of go through the backlog with US I know you mentioned it is at all time highs, but there was also some acquired backlog of some major multiyear stuff you got from key optics, so like how does that look.

Speaker Change: Price actions, so far or made any adjustments in your supply chain.

Speaker Change: Tend to offset.

Some of this cost inflation that you expect to creep in.

Speaker Change: Excluding that.

Speaker Change: But the key I think backlog that we had acquired the increased about $60 million because of the two new programs.

Speaker Change: Yeah first.

Damian: Obviously, just like 2021 'twenty two Damian.

Robert Mehrabian: It's going to hit aerospace and defense wargames somewhat. But. And it's going to decrease it, maybe 180 basis points, but our defense margins before that were 28 points, aerospace and defense, were 28.6%. So and they're going to improve every quarter.

Speaker Change: Overall backlog.

Damian: We jumped on that very fast first you got to do.

Speaker Change: I think year over year is up.

Damian: Good analysis.

Speaker Change: At the highest we've had including kiosk big.

Damian: What's happening and how it's going to affect you. So we start there.

Speaker Change: It's about.

Speaker Change: I'm going to say about $4 billion, which for us is pretty healthy.

Damian: Then there are exemptions.

Damian: So those as I mentioned for example, we make a lot of unmanned vehicles.

Robert Mehrabian: So by next year, it's all going to be fine. And every acquisition we've made does the same thing. Lowers the margin, but actually contributes to the bottom line. And as we said, we expect Qoptic to add another $0.15 to our overall earnings.

Speaker Change: That's about <unk> key optics for 10% key uptick the rest.

Uh huh.

Damian: In Canada.

Speaker Change: Our legacy Teledyne.

Damian: And we imported to the U S. So.

Speaker Change: And you know some of that is obviously a multiyear.

Damian: Studying very carefully to make sure that we enjoyed the D. R D and exemptions in that domain.

Speaker Change: But the way we look at it as always.

Speaker Change: Is.

Speaker Change: What is your book to Bill in each quarter.

Damian: Sometimes you cannot also assemble some input.

Jim Ricchuti: Got it. That's, that's helpful, Robert.

Speaker Change: Annualized.

Robert Mehrabian: The follow up question I had is Historically, in periods like this, Teledyne has taken advantage of opportunities. I'm just wondering, are you seeing more, potentially, more acquisition opportunities in the current environment? Or is it too early?

Speaker Change: And.

Speaker Change: How are you doing in the short cycle businesses that you don't have much backlog.

Damian: In turn our products in a different location.

Damian: Where you manufacture the components and assemble them somewhere else, we're looking at that.

Speaker Change: That's the one area that we are always very concerned and always very attentive to cause some products, we book and ship in two to three weeks some of our products environmental products, maybe a month.

Damian: Finally, we have to take price action wherever he is getting hurt and we will do that and we will.

Robert Mehrabian: Well, it's a little early, but but Historically, as you said, Every time there's been stress, economic stress. We've taken a little hit just like everybody else, but they've done two things. The three times that I remember, there were similar economic stresses. We increased our cash, free cash flow. We have record cash flow. Last year, we had a record cash flow of over $1 billion. I expect to have something close to that this As we come out of these things, or even during these, we make acquisitions. In 2017, as an example, we bought E2V following the 2014-16 depression.

Damian: Pass some of that on.

Speaker Change: Our.

<unk> cameras, whether infrared or visible could be two weeks to four weeks. So that's the area that we kind of keep an eye on very carefully the longer term backlog.

Damian: So in totality, there's been a whole bunch of things.

Damian: The the most important one is.

Damian: The longer it takes four things to affect us the better it is for us in terms of going from inventory to us.

Speaker Change: No worry too much about that.

Speaker Change: Yes.

Speaker Change: What about on the some of the stuff that.

If we talk about <unk> and some of the NASA.

Damian: Cost of goods sold.

Damian: And <unk>.

Speaker Change: NASA stuff that you have that's more personnel at fly control kind of thing.

Damian: Having time to take actions to offset what's coming our way pricing opportunities.

Speaker Change: Can you talk about the margin profile of the things that are at risk versus the margin profile of the things that you think are still growing.

Damian: We're going to use them wherever we can and.

Speaker Change: Well on the margin profile on things like <unk>.

Damian: You know in the first quarter to react truly had a volume increase of.

Speaker Change: Space are like.

Speaker Change: Like the.

Damian: Two point.

Speaker Change: Base station.

Damian: Two 3% or so in our products so.

Speaker Change: Wherever we do a lot of work.

Speaker Change: And.

Speaker Change: Signing experiments training gas or not.

Damian: Even with some <unk>.

Damian: Pricing actions that we took so it worries me, but now that we've been through this before.

Robert Mehrabian: This year we bought Keyoptik and we also bought Micropax. Having said that, our pipeline is relatively healthy, both in smaller and what we like to call mid-size acquisition. We've already spent about $750 million in the first quarter buying two businesses. And we, if we don't do anything else. Our death to EBDA ratio, which is now at 1.8, will go to 1.2. Because of our cash generation. So I'm looking forward to making some acquisitions. And it really depends on how competitive the environment is. Because there's some others doing the same thing as we are. There's some things available, but we don't want to overpay them.

Speaker Change: Coordinating.

Speaker Change: Spaceflights whatever.

Speaker Change: <unk> started lowest margin business.

Damian: Number of times and once you got to do is hunkered down and do what you do best we're very disciplined.

Speaker Change: 6% to 7% the overall margins in our engineered systems business.

Damian: Small things very well and don't expect miracles to happen.

Speaker Change: Which influence what tweaks that fixed cost and cost plus half on half.

Speaker Change: Makes total sense. Thanks, a lot Robert good luck out there.

Speaker Change: Are the lowest margins in the company around 10%.

Robert: Thank you.

Speaker Change: Uh huh.

Speaker Change: Having said that.

Joe Giordano: Our next question is from Joe Giordano with <unk>.

Speaker Change: Some of the space stuff, that's coming out whether it's the Golden dome.

Robert: Cowen.

Joe Giordano: Hey, guys how are you.

Speaker Change: Whether it's putting satellites in space.

Robert: Good morning, Joe.

Speaker Change: Kim can you kind of go through the backlog with US I know you mentioned it is at all time highs, but there was also some acquired backlog of some major multiyear stuff you got from key optics, so like how does that look.

Speaker Change: To be able to do.

Luke Dong: Luke Dong.

Speaker Change: What.

Speaker Change: Mr Warning and tracking.

Speaker Change: Some of the.

Excluding that.

Speaker Change: Ground based simulation stuff.

Speaker Change: Well the key optic backlog that we had acquired the increased about $60 million because of the two new program.

Robert Mehrabian: Because if you overpay, then you pay for it later rather than later.

Speaker Change: Those are higher margin businesses and of course, our unmanned systems.

Robert Mehrabian: Thanks very much. For sure.

Speaker Change: Sure.

Speaker Change: Overall backlog.

If you add them all up if we if some let's say something happens to the NASA budget T. I would take a hit in revenue, but it's not going to affect us so much in our bottom line because thats, our lowest margin business.

Speaker Change: I think year over year.

Speaker Change: At the highest we've had including kiosk big.

Jordan Lyonnais: Our next question is from Jordan Lyonnais with Bank of America.

Speaker Change: It's about.

Speaker Change: I'm going to say about $4 billion.

Speaker Change: On the flip side, if that money is not a program into other space programs were going to enjoy those because we have very healthy margins and we have tremendous heritage in space just to give you an example.

Jordan Lyonnais: Hey, good morning. Morning, Jordan.

Speaker Change: Which for us is pretty healthy.

Robert Mehrabian: Could you guys talk a little bit about what you're expecting in your aerospace and defense segment or FLIR with the US FY26 budget moving to a trillion dollars and also European rearmament? Where should we be looking to see Teledyne? Yeah, let me let me just first say, let's just stay with defense for a second.

That's about <unk> 50, as key optics show, 10% uptick the rest.

Speaker Change: Legacy Teledyne.

Speaker Change: And you know some of that is obviously a multiyear.

Speaker Change: And the science space, which in a way translates to our military and defense space.

Speaker Change: But the way we look at it always is.

Speaker Change: What is your book to Bill in each quarter.

Speaker Change: Uh huh.

Speaker Change: <unk> participated in 162 mission science missions.

Speaker Change: Annualized.

Speaker Change: And.

Speaker Change: How are you doing in the short cycle businesses that you don't have much backlog.

Speaker Change: We have spent 1.8.

Robert Mehrabian: are two parts. Obviously, if you us defense increases, we're going to have increased sales and in Q1 our defense sales year-over-year increased about 18.7 percent. Uh, no. The two parts, obviously, U.S. defense is going to increase because we have some healthy products ranging from unmanned vehicles, probably one of the only companies that I can name that have unmanned vehicles in the air, on the ground, and underwater vehicles. Second, The defense. We also, of course, make all kinds of components that go into the defense domain.

Speaker Change: Well 1800 mission years in space.

Speaker Change: That's the one area that we are always very concerned and always very attentive to cause some products, we book and ship in two to three weeks some of our products environmental products, maybe a month.

Speaker Change: We have a lot of detectors.

Speaker Change: Most of that positive detectors out there with zero or device failures or the government starts investing in this space, they're going to look for companies like ours that can actually make those very sophisticated stuff that they have made before and I don't have a track record. So I think if the.

Our.

Speaker Change: Cameras, whether infra red are visible could be two weeks to four weeks. So that's the area that we kind of keep an eye on very carefully the longer term backlog.

Speaker Change: Bush thing flips the way it looks like there is some low margin businesses may go away higher margin businesses more difficult things to make come back I didn't give it to our advantage.

Speaker Change: I don't worry too much about that.

Speaker Change: Yes.

Speaker Change: What about on the some of the stuff.

Speaker Change: If we talk about those and some of the you know.

Speaker Change: NASA stuff that you have that's more personnel at fly control kind of thing can you talk about the margin profile of the things that are at risk versus the margin profile of the things that you think are still growing.

Speaker Change: I think that's an important point and if I could just sneak in one last thing.

Speaker Change: Stuff that you are selling to China outside of the knee.

Robert Mehrabian: FLIR makes some very unique products for our Let me move to Europe because that's just as important. Currently, we sell in 2024, let's just say we sell $447 million of Product. to European Defense across many countries. The defense budget. And that includes, by the way, I'm kind of taking key optic that we just bought, and going backwards and saying, well, how much did they sell last year? And so I'm putting that in that 447 and the small micropack actually. So if you look at our defense budget, it's about 3.3%, if I'm correct, of our GDP.

Speaker Change: Like the commercial Aero avionics stuff that you said it is.

Speaker Change: Well on the margin profile are things like.

Speaker Change: It has to go regardless as the rest of that stuff and I'm thinking of silver scopes and environmental kind of.

Speaker Change: Space.

Speaker Change: Like the.

Speaker Change: Space station.

Speaker Change: Wherever we do a lot of work.

Speaker Change: Environmental equipment is that basically at zero now like with tariffs and 100 point it sounds like effectively an embargo one tariffs at that high.

Speaker Change: And.

Speaker Change: Designing experiments training gastro nuts.

Speaker Change: Coordinating.

Speaker Change: You can say that it's not zero, but it's it's going down yeah.

Speaker Change: Spaceflights whatever.

Speaker Change: <unk> start lowest margin business.

Speaker Change: Everybody is waiting to see what happens some of our distributors are putting a hold on things some of them are taking the higher cost materials, because they have no choice.

Speaker Change: 6% to 7% the overall margins in our engineered systems business.

Speaker Change: Which influenced worth tweaks that fixed cost and cost plus half on half.

Speaker Change: We'll deal with that.

Speaker Change: The lowest margins in the company around 10%.

Speaker Change: You know when you look at the export to China. Two person you say half of it is really not going to be affected.

Speaker Change: Having said that.

Speaker Change: Some of the space stuff, that's coming out where there is the Golden dome.

Speaker Change: Yeah, I worry about that but I don't worry too much about it.

Speaker Change: Whether it's putting satellites in space.

Robert Mehrabian: European defense budgets at about 500 billion have been about 2% of the Everything we hear. says they're planning to increase that to $800 to $900 billion over the next five as a minimum. We expect to maintain our share with what we have, which is The 447 growing proportionate to what they increased their budget. with. Furthermore, we think considering the kinds of products that We're going to enjoy getting more of the more of the share of those primarily. Due to the fact that we have unique products that they need like our But also, we have a good manufacturing footprint of our defense products in Europe.

Speaker Change: You know, we don't make stuff in China that we bring to the U S. That's for sure some of our cameras grocery China some of our stuff like.

Speaker Change: To be able to do.

Speaker Change: Look down.

Speaker Change: What.

Missile warning tracking.

Speaker Change: X-ray detectors for dental systems, we've already suffered the consequences of China like everybody else does when they sell product there.

Speaker Change: Some of the.

Speaker Change: Ground based simulation stuff.

Speaker Change: Our higher margin businesses and of course, our unmanned systems.

We sell product there pretty soon the product is imitated produced and sold at a lower cost. So once you got to do is move up market that make more sophisticated products continuously you have worried but not a whole lot.

Speaker Change: No.

Speaker Change: If you add them all up if we if some let's say something happens to the NASA budget T. I would take a hit in revenue, but it's not going to affect us too much in our bottom line because thats, our lowest margin business.

Speaker Change: Thanks, guys.

Speaker Change: On the flip side is that money is not a program into other space programs.

Speaker Change: We're going to enjoy those because we have very healthy margins and we have tremendous heritage in space just to give you an example.

Speaker Change: Our next question is from Guy hardwood with freedom capital markets.

Speaker Change: Hi, good morning.

Speaker Change: Thank God.

Speaker Change: I know you touched on it earlier, but could you just maybe explain a little bit more about the Canadian business I mean, you'll filings reveal what say substantial business.

Speaker Change: And the science space, which in a way translates to our military and defense space.

Speaker Change: We've participated in a 162 missions science missions.

Speaker Change: Could you how much obviously telco space there.

Robert Mehrabian: We have it in the UK. We have it in Sweden, and we have it in other locations. We make our unmanned vehicles, some of them in Iceland. We have them in Denmark, et cetera. So there's two folds to it. One, we already enjoy it. Second, it's growing. We're going to grow with it. And third, there's going to be domestic manufacturing requirements that are going to go into all of the new programs. which we enjoy our footprint in Europe.

Speaker Change: How much the business is commercial versus government because you said that the government business may be exempt from tariffs and it's also the content rules that they understand that if I put out since as much as 20% U S content it could be exempt as well so.

Speaker Change: We have spent 1.8.

Speaker Change: Well 1800 mission years in space we.

Speaker Change: We have a lot of detectors.

Speaker Change: That causes detect there's out there with zero a device failures or the government starts investing in this space, they're going to look for companies like ours that can actually make those very sophisticated stuff that they have made before and hadn't have a track record. So I think if the.

Speaker Change: So that's my first question. Your second question on their $700 million Cogs I presume that is components for you.

Speaker Change: Ported into the U S.

Speaker Change: Yeah.

Speaker Change: We answered the second question first because.

Robert Mehrabian: I said we don't have a manufacturing footprint. In Southeast Asia, we've avoided it, but not in Europe, because we've bought a lot of businesses there and we've invested in European digital. Got it.

Speaker Change: I have it in my hands right away I got a kind of Victor and stuff.

Speaker Change: First thing flips the way it looks like there is some low margin businesses may go away higher margin businesses more difficult things to make come back I think you'd be to our advantage.

Speaker Change: On the 700 is composed of two parts.

Speaker Change: Things that we make and bring in the U S.

Damian Karas: That's helpful. Thank you so much.

Speaker Change: And then.

Speaker Change: Supplies that flight material supplies that we buy including electronics that go into products that we make in the U S.

Speaker Change: I think that's an important point and if I could just sneak in one last thing.

Damian Karas: Our next question is from Damian Aras with UBS. Hey, good morning, everyone. Morning, Damian. Morning.

Speaker Change: The stuff that youre selling to China.

Speaker Change: Outside of the.

Speaker Change: Yes.

Speaker Change: No.

Speaker Change: Like the commercial air Avionics, Scott that you said.

Speaker Change: So if you go to <unk>.

Speaker Change: Just the stuff that we make and bring into the U S.

Speaker Change: It has to go regardless as the rest of that stuff and I'm thinking of solar scopes and environmental kind of.

Robert Mehrabian: I was wondering if you might be able to clarify your prior comments about 1% lower GDP and factoring that into the full year guidance. Have you actually started seeing any slowdown in digital imaging and instrumentation over, say, the last month since all this tariff news and the tit-for-tat, you know, started? Or are you just kind of de-risking because of this cloud of uncertainty, if you will? Because I guess, you know, if I think about all those book-to-bill numbers that you cited, they were all pretty positive. I think I think you're And twofold. First, we do see some weaknesses in certain areas, but there's nothing new about that.

Speaker Change: As would be both commercial and defense.

Speaker Change: Environmental equipment is that basically at zero now like with tariffs it sounds like effectively an embargo when tariffs were that high.

Speaker Change: Some of the defense stuff like I mentioned.

Speaker Change: Unmanned air vehicles, obviously.

Speaker Change: You can't say that it's not zero, but it's it's going down yeah.

Speaker Change: Are these buying them because they need them.

Speaker Change: Use them.

Speaker Change: Some of the commercial stuff like cameras.

Speaker Change: You know everybody is waiting to see what happens some of our distributors are putting a hold on things some of them are taking the higher cost materials, because they have no choice.

Speaker Change: They might be subject to.

Within that 700 million that might be subject to the 10% or so tariffs.

Speaker Change: We'll deal with that.

Speaker Change: We'll work with that.

Speaker Change: You know when you look at exports to China. Two person is half of it is really not going to be affected.

Speaker Change: It's.

Speaker Change: It's not going to as I said before multiple times, where it gives me if I repeat myself it wont affect us immediately cause that stuff goes into inventory, we already have inventory that's going to be used to make products, let's say for Q2.

Speaker Change: <unk>.

Speaker Change: Yeah, I worry about that but I don't worry too much about it.

Speaker Change: <unk>.

Robert Mehrabian: That test and measurement oscilloscopes, some of the stuff we sell overseas, like to China, yeah, that's affected. But I think you're right. It's my guess. It's a good, it's a guess. Now, somebody might say 1% is too much. Somebody might say 1% is too little. That's my guess. If it turns out not to be there, I'd be very happy. I think we all will be.

Speaker Change: You know, we don't make stuff in China that we bring to the U S. That's for sure some of our cameras grocery China some of our stuff like.

Speaker Change: And the inventory rose three to four times a year, so we'd see some of it in Q3 than a full glory Q4, maybe.

Speaker Change: X-ray detectors for dental systems, we've already suffered the consequences of China like everybody else does when they sell product there.

Speaker Change: But in the meantime, there is a lot of things that can happen, including actions that we take now going back to how much we making Canada.

Speaker Change: We sell product there pretty soon the product is imitated produced and sold at a lower cost. So what you got to do is move up market and make more sophisticated products continuously it worries me, but not a whole lot.

Speaker Change: <unk>.

Speaker Change: I have to say that.

Robert Mehrabian: Thank you for that. And then not to beat a dead horse here on tariffs, but you mentioned that, you know, some of the higher costs, you know, you won't see that in the P&L immediately as it hits an inventory. But I'm just curious, have you, have you taken any price actions so far or made any adjustments in your supply chain to offset some of this cost inflation that you expect to creep in?

Speaker Change: There's two sides to that as we make our as I said drones and military products. We are about to Thomson in Europe in Canada, we have I'm going to say.

Speaker Change: Thanks, guys.

Speaker Change: Our next question is from Guy hardware with Freedom capital markets.

Speaker Change: Maybe 2000 employees.

Speaker Change: And if you take the average revenue per employee in Canada.

Speaker Change: Hi, good morning.

Speaker Change: Hey, guys.

Speaker Change: <unk>.

Speaker Change: I know you touched on it earlier, but could you just maybe explain a little bit more about the Canadian business I mean, you'll filings for bandwidth say substantial business.

Speaker Change: I don't know it would be maybe.

Speaker Change: Maybe 250000 per employee so you can multiply that out I'm talking about what.

Robert Mehrabian: Yeah, first, obviously, just like 2021-22, Damian, we jumped on that very fast. First, you got to do a good analysis of what's happening and how it's going to affect you. So we start there. then there are exemptions. To those, as I mentioned, for example, we make a lot of unmanned vehicles. in Canada. and we import them to the U.S. So we're studying very carefully to make sure that we enjoy the DOD exemptions in that domain. Sometimes you can also assemble some internal products in a different location where you manufacture the components and assemble them somewhere else.

Speaker Change: Could you how much obviously del sur space there.

Speaker Change: $500 million.

Speaker Change: As you know.

Speaker Change: How much the business is commercial versus government because you said that the government business may be exempt from tariffs and it's also the content rules has to understand that if I put up just as much as 20% U S content it could be exempt as well so.

Speaker Change: <unk>, Canada.

Speaker Change: And the.

Speaker Change: The beauty of Teledyne is we don't make everything anywhere else, except the U S. We make pieces of things here in Europe, and Canada pieces of it in England pieces of it in Iceland personnel grading Netherland, which.

Speaker Change: So that's my first question just a second question on their 700 million of Cogs I presume that is components for you.

Speaker Change: Sporadic trials.

Speaker Change: Western countries.

Speaker Change: And that's good for us because.

Speaker Change: Ported into the U S.

Speaker Change: When we make stuff in Europe, that's not going to be subject to European tariffs, obviously and Oh.

Speaker Change: Yeah.

Speaker Change: We answered the second question first because.

Speaker Change: I have it in my hands right away I got a kind of big.

Speaker Change: So yes, we're going to we're going to have to take some hits if there's.

Speaker Change: The rest up.

Speaker Change: On the 700 is composed of two parts.

Speaker Change: Environment continues.

Speaker Change: Things that we make and bringing in the U S.

Speaker Change: And I worry about it but it doesn't keep me up at night.

Speaker Change: And then.

Speaker Change: Surprised that light materials supplies that we buy including electronics that go into products that we make into the U S. So.

Speaker Change: But just to be cancelled.

So fannie bonds.

Robert Mehrabian: We're looking at that. Finally, we have to take price action where we're getting hurt, and we will do that, and we will. pass some of that on. So in totality, there are a whole bunch of things. The most important one is, the longer it takes for things to affect us, the better it is for us in terms of going from inventory to Cost of Goods Sold, and Having time to take actions to offset what's coming our way. Pricing opportunities, we're going to use them wherever we can. You know, in the first quarter, we actually had a volume increase of 2.3% or so in our products.

Speaker Change: Commercial and governmental or was it more weighted towards government in Canada.

Speaker Change: Okay.

Speaker Change: I would think that most of it more commercial that governments.

Speaker Change: If you go to a J.

Speaker Change: Just the stuff that we make and bring into the U S. Those would be both commercial and defense.

Speaker Change: Our defense business coming from Canada is not that large I would say 70, 30 80 20 of that I don't have the numbers in front of me and I don't want to take a.

Speaker Change: Some of the defense stops like I mentioned unmanned air vehicles, obviously, the U S with Dod these buying yet because they need them.

Jason: Guesses, but I can't I can get you those numbers and have Jason supplied to you.

Thank you.

Speaker Change: Use them.

Speaker Change: For sure.

Speaker Change: Some of the commercial stuff.

Our next question is from Rob Jamieson with vertical research partners.

Speaker Change: <unk> cameras.

Speaker Change: They might be subject to.

Rob Jamieson: Hey, good morning.

Speaker Change: Within that $700 million, there might be subject to the 10% or so of tariffs.

Rob Jamieson: Just a couple of quick ones, just one clarification on tariffs.

Rob Jamieson: Sorry, I joined late but.

Speaker Change: We'll work with that.

Rob Jamieson: The underlying calculation that you're assuming on the impacts of everything that you laid out which is very clear is that like China at $1, 45% and then just what's what's been presented by the administration so far.

Speaker Change: It's.

Speaker Change: It's not kind of as I said before multiple times, where give me if I repeat myself.

Speaker Change: It won't affect us immediately cause that stuff goes into inventory, we already have inventory that's going to be used to make products, let's say for Q2.

Robert Mehrabian: So even with some , and the pricing actions that we took. So it worries me, but not a lot. We've been through this before. number of times. And what you got to do is hunker down and do what you do best. Be very disciplined. do small things very well and don't expect miracles to happen. Makes total sense.

Rob Jamieson: Yeah, I guess, you can say, China, all the doors there.

Rob Jamieson: If.

Speaker Change: And the inventory rose three to four times a year, so we'd see some of it in Q3 than a full bore in Q4, maybe.

Rob Jamieson: Maybe a little higher maybe wrong 50 160.

Rob Jamieson: Canada 25.

Rob Jamieson: United Kingdom 11.

Speaker Change: But in the meantime, there is a lot of things that can happen, including actions that we take now going back to how much we make in Canada.

Rob Jamieson: France, 10, Denmark, 10, and then when you roll it all up it's over.

Robert Mehrabian: Thanks a lot, Robert. Good luck out there. Thank you.

Rob Jamieson: About 15%.

Speaker Change: <unk>.

Rob Jamieson: Across our portfolio.

Speaker Change: I have to say that.

Speaker Change: There's two sides to that as we make as I've said.

Rob Jamieson: Perfect. Thank you.

Joseph Giordano: Our next question is from Joe Giordano with TD Calendar. Hey guys, how are you? Morning, Joe.

Speaker Change: And then just on capital allocation I. Appreciate the color you gave on acquisitions and how that looks but how should we think about prioritization between deleveraging and buybacks over the next couple of quarters.

Speaker Change: Drones and military products, we are about 2000 in Europe in Canada, we have I'm going to say.

Joseph Giordano: Can you kind of go through the backlog with us? I know you mentioned it's at all-time highs, but there was also some acquired backlog of some major multi-year stuff you got from KeyOptics. So, like, how did that look We're excluding that. Well, the key optic backlog that we acquired increased about $60 million because of the two new programs. Overall backlog, I think year over year, is at the highest we've had, including Keyoptik. It's about... I'm going to say about $4 billion, which for us is pretty healthy. Of that, about $4.50 is KeyOptics, so 10% KeyOptics, the rest is legacy Teledyne.

Speaker Change: Let me go to the buybacks.

Speaker Change: Maybe 2000 employees.

Speaker Change: We buyback bought our stock back.

Speaker Change: And if you take the average revenue per employee in Canada.

Speaker Change: Only two times.

Speaker Change: <unk>.

Speaker Change: I don't know it would be maybe.

Speaker Change: And we bought them back when our stock price well below what we thought was prudent.

Speaker Change: Maybe 250000 per employee so you can multiply that out I'm talking about what.

Speaker Change: We bought stock back in 2015.

Speaker Change: $500 million.

Speaker Change: At about a 2015 to 2016 about $100 a share.

Speaker Change: <unk>, Canada.

Speaker Change: <unk>.

Speaker Change: The beauty of Teledyne is we don't make everything anywhere else, except the U S. We make pieces of things here in Europe, and Canada pieces of it in England pieces of it in Iceland personnel.

Speaker Change: The board when I say about $225 million of our stock.

Speaker Change: Last year.

Speaker Change: Our stock dropped.

Speaker Change: Another man, which sporadic trials a western.

Speaker Change: 350, 355, or so and we bought it.

Speaker Change: Countries.

Speaker Change: And that's good for us because.

Speaker Change: But then we stopped when it at 400.

Robert Mehrabian: And you know, some of that is obviously multi-year. But the way we look at it always is What is your book to build in each quarter? are anualized and How are you doing in the short cycle businesses that you don't have much back? That's the one area that we're always very concerned and always very attentive to, because some products we book and ship in two, three weeks. Some of our products, environmental products, maybe a month. Some of our cameras, whether infrared or visible, could be two weeks to four weeks. So that's the area that we kind of keep an eye on very carefully.

Speaker Change: Where we make stuff in Europe, that's not going to be subject to European tariffs, obviously and.

Speaker Change: It's very important to look at the window of when we buy the stock we can always buy the stock, but it's prudent we cant get much murdered returns in buying companies improving them and.

Speaker Change: So yes, we're going to we're going to have to take some hits us.

Speaker Change: [noise] environment continues.

Speaker Change: And I worry about it but it doesn't keep me up at night.

Speaker Change: Having both revenue and EPS accretion like we're talking about <unk> as a recent example or fear.

Speaker Change: But just to be cancelled.

Speaker Change: I was saying to <unk> bonds.

Speaker Change: Three years ago.

Speaker Change: Commercial and governmental or was it more weighted towards government in Canada.

Speaker Change: So.

Speaker Change: The buyback would be it.

Speaker Change: Exceptions.

Speaker Change: I would think that most of it more commercial than government.

Speaker Change: When our stock is low.

Speaker Change: And there's nothing really available that we can look at our preference is always.

Speaker Change: Our defense business coming from Canada is not that large I would say 70, 30 80 20 of that I don't have the numbers in front of me and I don't want to take the.

Speaker Change: To buy a car.

Speaker Change: Companies. So we'll buy back opportunistically, when we have to or we have nothing else to do.

Speaker Change: Guesses, but I can't I can get you those numbers and have Jason supplied to you.

Robert Mehrabian: The longer term backlog . I don't worry too much about Yeah.

Speaker Change: In terms of capital right now we're sitting at one eight.

Robert Mehrabian: What about on the, um, you know, some of the stuff that if we talk about Doge and some of the, you know, NASA stuff that you have, that's more personnel at flight control kind of things, what, like, can you talk about the margin profile of the things that are at risk versus the margin profile of the things that you think are still growing? Well, on the margin profile of things like space like the space station. where we do a lot of work in designing experiments, training astronauts, coordinating space flights, whatever. That's our lowest margin business.

Speaker Change: Thank you.

Speaker Change: For sure.

Speaker Change: By the way, we have long term debt that Steve mentioned, and we have cash, but if you look at our long term debt, it's all fixed.

Speaker Change: Our next question is from Rob Jamieson with vertical research partners.

Speaker Change: And it's fixed at the average of two 4%.

Rob Jamieson: Hey, good morning.

Speaker Change: Just a couple of quick ones, just one clarification on tariffs.

Speaker Change: <unk> spreads from two years, hence after 2029, 2030, and frankly, we can pay that down but it would be stupid, because we can get better.

Speaker Change: Sorry, I joined late but.

The underlying calculation that you're assuming on the impacts of everything that you laid out which is very clear is that like China and 145% and then just what's what's been presented by the administration so far.

Speaker Change: Interest rates.

Speaker Change: Our immediate market now while we are paying so.

Speaker Change: Yeah, I guess, you can say China doors there.

Speaker Change: We're generating cash we're sitting at 1.8, if we don't do anything or debt to cap.

Speaker Change: If.

Speaker Change: Maybe a little higher maybe 150 160.

Speaker Change: EBITDA ratio will go down to $1 two by year end and if we don't do anything yet another year, where you go down to five.

Speaker Change: Canada 25.

Robert Mehrabian: 6 to 7% the overall margins in our engineered systems business, which includes both fixed cost and cost plus half and half. are the lowest margins in the company, around 10%. Having said that, Some of the space stuff that's coming out, whether it's the Golden Dome... whether it's putting satellites in space. to be able to look down at what This is a warning on track. Some of the ground-based simulation stuff, those are our higher margin businesses and of course our unmanned systems. If you add them all up, if let's say something happens to the national budget, yeah, we'll take a hit in revenue, but it's not going to affect us too much in our bottom line because that's our lowest margin business.

Speaker Change: United Kingdom 11.

Speaker Change: So we have a lot of.

Speaker Change: France, 10, Denmark, 10, and then when you roll it all up.

Speaker Change: We have a lot of.

Speaker Change: Muscle to buy things and we will if the price is right and if it has strategically fits with what we're doing is you're not going to just go out and buy stuff because.

Speaker Change: It's about 15%.

Speaker Change: Across our portfolio.

Speaker Change: Perfect. Thank you.

Speaker Change: And then just on capital allocation I. Appreciate the color you gave on acquisitions and how that looks but how should we think about prioritization between deleveraging and buybacks over the next couple of quarters.

Speaker Change: Its available or were going to buy stuff that we can draw on it fits with our portfolio on north strategy. So.

Speaker Change: And we generate about $1 billion cash a year. So we are going to be fine.

Speaker Change: Let me go to the buybacks.

Speaker Change: We buyback well bought our stock back.

Speaker Change: Yeah.

Speaker Change: That's great very clear. Thank you and then just one last one on customers and I know, it's a small business for you guys.

Speaker Change: Only two times.

Speaker Change: Let's broadly in line with expectations any puts and takes you can give us just on the end markets that you serve there and how trading developed through the quarter.

Speaker Change: And we bought them back when our stock price Glyn.

Speaker Change: So what we thought was prudent.

Speaker Change: We bought stock back in 2015.

Speaker Change: Yeah, we sell primarily due to product and one small or.

Speaker Change: At about.

Speaker Change: Our product the primary product that we sell our oscilloscope.

2015 to 2016, I bought $100 a share.

Speaker Change: And.

Speaker Change: Primarily high end CLO scopes.

Speaker Change: We bought what I'd say about $225 million off of our stock.

Robert Mehrabian: On the flip side, if that money is not reprogrammed into other space programs, we're going to enjoy those because we have very healthy margins and we have tremendous heritage in space. Just to give you an example, in the science space, which in a way translates to our military and defense space. We've participated in 162 missions, science missions. We have spent 1.8 1,800 mission years in space. We have a lot of detectors, almost 1000 detectors out there with zero device failures. When the government starts investing in this space, they're going to look for companies like ours, that can actually make those very sophisticated stuff that they have made before and have a track record.

Speaker Change: High bandwidth.

Speaker Change: Last year.

Speaker Change: Frequency.

Speaker Change: Our stock dropped to 353 scraped fiber so we bought it.

Speaker Change: And then the second thing we sell our protocols protocols are basically the rules with rich devices communicate with one another or devices communicate with the clock.

Speaker Change: But then we stopped when it at 400.

Speaker Change: It's very important to look at the window of when we buy the stock we can always buy the stock when it's prudent.

Speaker Change: We also have a very small piece of.

Speaker Change: Ethernet generators that we bought.

Speaker Change: Can't get much murdered returns in buying companies improving them and having both revenue.

Speaker Change: Which is growing fast, but it's small.

Speaker Change: Used to be 15 million, it's going to be 30 media, but the primary products, we make ourselves scrubdown protocols.

Speaker Change: And EPS accretion like we've talking about <unk> size with recent example, or fear.

Speaker Change: And.

Speaker Change: Three years ago.

Speaker Change: They can be somewhat affected.

Speaker Change: So.

Speaker Change: The buyback would be it.

Speaker Change: By economic circumstances, because there's capital equipment, especially similar scopes.

Speaker Change: Exceptions, when our stock is low.

Speaker Change: And there's nothing really available that we can look at our preference is always.

In Q1 protocols were not as revenue oscilloscopes went down.

Speaker Change: <unk> bye.

Speaker Change: Companies will be.

Speaker Change: Internet generators went up.

Speaker Change: Buy back Opportunistically, when we have to or we have nothing else to do.

Robert Mehrabian: So I think if the Doge thing flips the way it looks. That is some low margin businesses may go away, higher margin businesses more difficult things to make come back. I didn't give it to you or that. Yeah, I think that's an important point.

Speaker Change: There is one thing that we do that is very unique in that we also use our sealer scopes.

Speaker Change: In terms of capital.

Speaker Change: Now we're sitting at 1.8 by the way we have long term debt that Steve mentioned, and we have cash, but if you look at our long term debt, it's all fixed.

Speaker Change: In our protocol analyzers. So that's a unique offering that we're able to make since we have such a strong position in protocols. So we can sell things protocol analyzers that utilize our filler scopes. So all in all its a nice beautiful business with very high margins.

Joseph Giordano: And if I could just sneak in one last thing, the stuff that you're selling to China, outside of the like the commercial air avionics stuff that you said is, you know, it has to go regardless. Is the rest of that stuff, you know, I'm thinking oscilloscopes and environmental kind of environmental equipment, is that basically at zero now? Like with tariffs at 140? Is that like effectively an embargo when tariffs are that high? You can't say that. It's not zero, but it's going down. Yeah. You know, everybody's waiting to see what happens. Some of our distributors are putting a hold on things.

Speaker Change: And it's fixed.

Speaker Change: The average of two 4%.

Speaker Change: And it spreads from two years, hence after 2029 2030.

Speaker Change: And.

Speaker Change: But it is subject to economic downturn.

Speaker Change: And frankly, we can pay that down but it would be stupid, because we can get better.

Speaker Change: Great. Thank you.

Speaker Change: Current straights.

Speaker Change: The immediate market now while we are paying so.

Speaker Change: Thank you there are no further questions at this time I would like to hand, the floor back over to management for any closing comments.

Speaker Change: We're generating cash we're sitting at 1.8, if we don't do anything or debt to EBITDA ratio will go down to $1. Two by year end and if we don't do anything yet another year, where you go down to five.

Speaker Change: Thank you Paul I'll ask Jason to conclude our conference call.

Speaker Change: Thanks, Robert and again, thanks, everyone for joining us this morning.

Speaker Change: Good questions certainly feel free to call me or send me a note on my numbers on the earnings release and again, Thank you everyone.

Robert Mehrabian: Some of them are taking the higher cost materials because they have no choice. We'll deal with that. You know, when you look at the export to China, 2%, half of it is really not going to be affected. Yeah, I worry about that, but I don't worry too much about it. You know, we don't make stuff in China that we bring to the US. That's for sure. Some of our cameras go to China. Some of our stuff, like X-ray detectors for dental systems, we've already suffered the consequences of China, like everybody else does when they sell product there.

Speaker Change: So we have a lot of.

We have a lot of.

Speaker Change: <unk>.

Speaker Change: Muscle to buy things and we will if the price is right and if it has strategically fits with what we're doing is you're not going to just go out and buy stuff because it's.

Speaker Change: Talk to you later bye.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Speaker Change: It's available we're going to buy stock that we can draw on it fits with our portfolio on our strategy.

Speaker Change: So.

Speaker Change: And we generate about $1 billion cash a year.

Speaker Change: So we are going to be fine.

Speaker Change: That's great very clear. Thank you and then just one last one on customers and I know, it's a small business for you guys.

Speaker Change: It's probably in line with expectations any puts and takes you can give us just on the end markets that you serve there and how trading developed through the quarter.

Robert Mehrabian: We sell product there. Pretty soon the product is imitated, produced and sold at a lower cost. So what you got to do is move up market and make more sophisticated products continuously. It worries me, but not a whole lot.

Speaker Change: Yeah, we sell primarily due to product and one smaller.

Speaker Change: Product the primary product that we sell our oscilloscope.

Speaker Change: And.

Speaker Change: Primarily high industry loss scopes.

Guy Hardwick: Thanks, guys.

Speaker Change: High bandwidth high frequency.

Guy Hardwick: Our next question is from Guy Hardwick with Freedom Capital Markets. Hi, good morning. Morning, guys.

Speaker Change: And then the second thing we sell our protocols protocols are basically the rules with rich devices communicate with one another or devices communicate with the clock.

Robert Mehrabian: I know you touched on it earlier, but could you just maybe explain a little bit more about the Canadian business? I mean, your filings reveal it's a substantial business. How much of obviously Dulce is based there, how much of the business is commercial versus government because as you said that the government business may be exempt from tariffs and there's also there's content rules I understand that if a product is as much as 20 percent U.S. content it could be exempt as well so that's my first question. The second question on those 700 million of cogs I presume that is components for you imported into the U.S.

Speaker Change: We also have a very small piece of.

Speaker Change: Ethernet generators that we bought.

Speaker Change: Which is growing fast, but it's small.

Speaker Change: He used to be 15 million is going to be 30 media, but the primary products when we make our suite of Sculpsure on protocols.

Speaker Change: And.

Speaker Change: They can be somewhat affected by.

Speaker Change: Economic circumstances, because theres capital equipment, especially as filler scopes.

Speaker Change: In Q1 protocols were not as revenue oscilloscopes went down.

Robert Mehrabian: Yeah, let me answer the second question first, because I have it in my head right away. I got to kind of dig the rest up. on the 700 that's composed of two parts. things that we make and bring in the U.S. And then supplies that like material supplies that we buy, including electronics that go into products that we make in the U.S. The if you go to just the stuff that we make and bring into the US, those would be both commercial and the Some of the defense stuff, like I mentioned, unmanned air vehicle. Obviously, the DOD is buying it because they need them.

Speaker Change: Internet generators went up.

Speaker Change: There is one thing that we do that is very unique.

Speaker Change: In that we also use our oscilloscope.

Speaker Change: In our protocol analyzers. So that's a unique offering that we're able to make since we have such a strong position in protocols. So we can sell things protocol analyzers that utilize our filler scopes. So all in all its a nice beautiful business with very high margins.

Speaker Change: And.

Speaker Change: But it is subject to economic downturn.

Speaker Change: Alright, thank you.

Speaker Change: Thank you there are no further questions at this time I'd like to hand, the floor back over to management for any closing comments.

Thank you Paul I'll ask Jason to conclude our conference call.

Robert Mehrabian: And use. Some of the commercial stuff, like cameras. They might be subject to... within that 700 million, they might be subject to the 10% or so tariff. We'll work with that. It's not, as I said before multiple times, forgive me if I repeat myself, it won't affect us immediately because that stuff goes into inventory. We already have inventory that's going to be used to make products, let's say for Q2, and the inventory rolls three to four times a year. So we see some of it in Q3, then a full bore in Q4 maybe.

Speaker Change: Thanks, Robert and again, thanks, everyone for joining us this morning.

Speaker Change: Our questions certainly feel free to call me or send me a note on.

Speaker Change: On my numbers on the earnings release and again, thank you everyone.

Speaker Change: Talk to you later bye.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Robert Mehrabian: But in the meantime, there's a lot of things that can happen, including actions that we take.

Robert Mehrabian: Now, going back to how much we make in Canada. I have to say that there's two sides to that. We make, as I said, drones and military products. We have about 2,000 in Europe. In Canada, we have, I'm going to say, maybe 2000 employees. And if you take the average revenue per employee in Canada, I don't know, it'd be maybe $250,000 per employee, so you can multiply that out. I'm talking about what? $500 million in all. made in Canada. And the beauty of Teledyne is we don't make everything anywhere else except the US. We make pieces of things here, in Canada, pieces of it in England, pieces of it in Iceland, pieces of it in the Netherlands, which spread across Western countries.

Robert Mehrabian: And that's good for us because when we make stuff in Europe, that's not going to be subject to European tariffs, obviously. And so, yes. We're gonna we're gonna have to take some hits if this environment continues. And I worry about it, but it doesn't keep me up.

Robert Mehrabian: But just to be clear, so, I mean, you're saying it's a fairly balanced business between commercial and government, or is it more weighted towards government in Canada? I would think most of it more commercial than government because our defense business coming from Canada is not that large. I would say $70, $30, $80, $20 of that.

Robert Mehrabian: I don't have the numbers in front of me and I don't want to take guesses, but I can get you those numbers and have Jason supply it to you.

Unknown Executive: Thank you. For sure.

Rob Jamieson: Now our next question is from Rob Jamieson with Vertical Research. Hey, good morning. Just a couple quick ones. Just one clarification on tariffs. Sorry, I joined late. But the underlying tariff rates that you're assuming on the impacts and everything that you laid out, which is very clear, is that like China at 145%? And then just what's what's been presented by the administration so far? Yeah, I guess you can say China of that order. If maybe a little higher, maybe 150, 160. Canada, 25. United Kingdom, 11. of France 10, Denmark 10. And then when you roll it all up, it's about 15%.

Rob Jamieson: across our portfolio.

Rob Jamieson: Perfect. Thank you.

Rob Jamieson: And then just on capital allocation, I appreciate the color game on acquisitions and how that looks.

Rob Jamieson: But how should we think about prioritization between deleveraging and buybacks over the next couple of quarters? Let me go to the buyback. We've bought our stock back. Only two times. And we bought them back when our stock price went below what we thought was prudent. We bought stock back in 2015. at about 2015 to 2016, about $100 a share. And we bought, I want to say about $325 million of our Last year, our stock dropped to $3.50, $3.55 or so, and we bought it. But then we stopped when it hit 400.

Robert Mehrabian: So it's very important to look at the window of when we buy the stock, we can always buy the stock, but it's prudent, we can get much more returns in buying companies, improving them, and having both revenue and EPS attrition, like we talked about Q-Optics as a recent example, or FLIR. three years ago. So The buyback would be exceptions when our stock is low, and there's nothing really available that we can look at. Our preference is always to buy companies. So we'll buy back opportunistically when we have to, or we have nothing else to do.

Robert Mehrabian: In terms of capital, right now we're sitting at 1.8. By the way, we have long term debt that Steve mentioned, and we have cash. But if you look at our long term debt, it's all fixed. and it's fixed at average of about 2.4 percent. And it spreads from two years hence up to 2029, 2030.

Robert Mehrabian: And frankly, we can pay that down, but it would be stupid because we can get better interest rates in the immediate market than what we're paying. So we're generating cash, we're sitting at 1.8. If we don't do anything, our debt to EBDA ratio will go down to 1.2 by year end. And if we don't do anything another year, we'll go down to 0.5.

Robert Mehrabian: So we have a lot of, we have a lot of muscle to buy things and we will, if the price is right and if it has strategically fits with what we're doing, we're not going to just go out and buy stuff because it's available, we're going to buy stuff that we can run, it fits with our portfolio and our strategy. And we generate about a billion or cash a year. So we're going to be That's great. Very clear. Thank you.

Robert Mehrabian: And then just one last one on test and measurement.

Robert Mehrabian: I know it's a small business for you guys, but with broadly in line with expectations, any puts and takes you can give us just on the end markets that you serve there and how trading developed through the quarter? Yeah, we sell primarily two products and one smaller product. The primary product that we sell are and primarily high-end oscilloscopes. high bandwidth, high frequency. And then the second thing we sell are products. Protocols are basically the rules with which devices communicate with one another or devices communicate with the cloud. We also have a very small piece of internet generators that we bought, which is growing fast, but it's small.

Robert Mehrabian: used to be $15 million, it's going to be $30 million. But the primary products we make are oscilloscopes and protocols. They can be somewhat affected. by economic circumstances because there's capital equipment, especially oscilloscopes. In Q1, protocols went up, the revenue, oscilloscopes went down. and Internet Generators. There is one thing that we do that is very unique in that we also use our oscilloscope. In our protocol analyzers. So that's a unique offering that we're able to make since we have such a strong position in protocols. So we can sell things, protocol analyzers that utilize our oscilloscopes.

Robert Mehrabian: So all in all, it's a nice, beautiful business with very high margin. And, but it is subject to economic Great, thank you.

Operator: Thank you.

Operator: There are no further questions at this time.

Jason VanWees: I'd like to hand the floor back over to management for any closing comments.

Jason VanWees: Thank you, Paul.

Jason VanWees: I'll ask Jason to conclude our conference call. Thanks, Robert. And again, thanks, everyone, for joining us this morning. If you have follow-up questions, certainly feel free to call me or send me a note of my numbers on the earnings release. And again, thank you, everyone. I'll talk to you later. Bye.

Operator: This concludes today's conference, you may disconnect your lines at this time. Thank you for your participation.