Teledyne Technologies Reports First Quarter Results

THOUSAND OAKS, Calif.–(BUSINESS WIRE)–Teledyne Technologies Incorporated (NYSE:TDY):

• Orders of $1,433.2 million, an increase of 7.8% compared with last year
• Sales of $1,350.1 million
• First quarter GAAP operating margin of 17.4% and record first quarter non-GAAP operating margin of 21.2%
• GAAP diluted earnings per share of $3.72 and record first quarter non-GAAP diluted earnings per share of $4.55
• Record first quarter cash from operations of $291.0 million and all-time record free cash flow of $275.1 million
• Revising full year 2024 GAAP diluted earnings per share outlook to $16.02 to $16.27, compared with the prior outlook of $17.15 to $17.53, and revising full year 2024 non-GAAP earnings per share outlook to $19.25 to $19.45, compared with the prior outlook of $20.35 to $20.68
• Announced pending acquisition of Adimec Holdings B.V.
• Recently completed acquisition of Valeport on April 10, 2024
• Consolidated Leverage Ratio improved to 1.7x
• Further reduction in gross debt with a $450 million debt maturity payment made after quarter-end on April 1, 2024
• Planned capital deployment to include stock repurchases of approximately $250.0 to $300.0 million under the company’s new authorization

Teledyne today reported first quarter 2024 net sales of $1,350.1 million, compared with net sales of $1,383.3 million for the first quarter of 2023, a decrease of 2.4%. Net income attributable to Teledyne was $178.5 million ($3.72 diluted earnings per share) for the first quarter of 2024, compared with $178.7 million ($3.73 diluted earnings per share) for the first quarter of 2023, a decrease of 0.1%. The first quarter of 2024 included $49.4 million of pretax acquired intangible asset amortization expense, $2.2 million of pretax FLIR integration costs and $0.3 million of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the first quarter of 2024 was $218.3 million ($4.55 diluted earnings per share). The first quarter of 2023 included $49.7 million of pretax acquired intangible asset amortization expense and $0.3 million of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the first quarter of 2023 was $217.2 million ($4.53 diluted earnings per share). Operating margin was 17.4% for the first quarter of 2024, compared with 17.5% for the first quarter of 2023. Excluding the non-GAAP items discussed above, non-GAAP operating margin for the first quarter of 2024 was 21.2%, compared with 21.1% for the first quarter of 2023.

“We achieved record first quarter non-GAAP operating margin, adjusted earnings per share and free cash flow,” said Robert Mehrabian, Executive Chairman. “While overall orders remained strong, sales were impacted by deterioration in some of our shorter cycle imaging and instrumentation markets. We had previously assumed no full year sales growth in industrial automation as well as test and measurement markets. However, those markets weakened more than planned in the first quarter, and we now forecast full year sales in those product families to decline meaningfully in 2024. Nevertheless, we believe such sales declines will be offset by our marine, aviation and certain defense businesses resulting in flat full year sales compared with 2023. Despite those anticipated sales reductions in what are among our highest margin businesses, we believe overall operating margin will remain flat. For example, driven by organic growth and strong margin improvement at Teledyne FLIR, we were able to protect first quarter operating margin in the Digital Imaging segment despite a significant year-over-year reduction in sales related to industrial automation. Finally, given our even stronger balance sheet and record free cash flow, we believe it is an opportunistic time to add stock repurchases to our capital deployment plans.”

Review of Operations

Comparisons are with the first quarter of 2023, unless noted otherwise.

Digital Imaging

The Digital Imaging segment’s first quarter 2024 net sales were $740.8 million, compared with $772.5 million, a decrease of 4.1%. Operating income was $113.8 million for the first quarter of 2024, compared with $122.2 million, a decrease of 6.9%. The first quarter of 2024 included $2.2 million of pretax FLIR integration costs, and there were no comparable costs in the first quarter of 2023. Acquired intangible amortization expense for both the first quarter of 2024 and 2023 was $45.8 million. Excluding these items, non-GAAP operating income for the first quarter of 2024 was $161.8 million, compared with $168.0 million, a decrease of 3.7%.

The first quarter of 2024 net sales decreased primarily due to lower sales of industrial imaging cameras and micro-electro-mechanical systems (“MEMS”), partially offset by higher sales of infrared detectors and subsystems as well as unmanned systems. The decrease in operating income was primarily due to lower sales and unfavorable product mix.

Instrumentation

The Instrumentation segment’s first quarter 2024 net sales were $330.4 million, compared with $333.5 million, a decrease of 0.9%. Operating income was $86.0 million for the first quarter of 2024, compared with $80.7 million, an increase of 6.6%.

The first quarter of 2024 net sales decrease resulted from a $15.9 million decrease in sales of test and measurement instrumentation as well as a $6.8 million decrease in sales of environmental instrumentation, partially offset by a $19.6 million increase in sales of marine instrumentation. The increase in operating income primarily reflected the impact of higher marine instrumentation sales and improved marine instrumentation product margins.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s first quarter 2024 net sales were $185.7 million, compared with $173.2 million, an increase of 7.2%. Operating income was $51.9 million for the first quarter of 2024, compared with $47.0 million, an increase of 10.4%.

The first quarter of 2024 net sales reflected higher sales of $10.1 million for aerospace electronics and $2.4 million for defense electronics. The increase in operating income primarily reflected the impact of a higher percentage of segment sales being aerospace electronics, which has higher product margins.

Engineered Systems

The Engineered Systems segment’s first quarter 2024 net sales were $93.2 million, compared with $104.1 million, a decrease of 10.5%. Operating income was $2.7 million for the first quarter of 2024, compared with $10.0 million, a decrease of 73.0%.

The first quarter of 2024 net sales reflected lower sales of $10.1 million for engineered products and $0.8 million for energy systems. The lower sales for engineered products primarily reflected decreased sales from defense and maritime programs. The decrease in operating income was primarily driven by program mix and unfavorable estimate changes related to electronic manufacturing services contracts.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $291.0 million for the first quarter of 2024 compared with $203.0 million, with the increase driven by stronger working capital performance in the first quarter of 2024. Depreciation and amortization expense for the first quarter of 2024 was $78.0 million compared with $82.1 million. Stock-based compensation expense for the first quarter of 2024 was $12.0 million compared with $7.9 million, with the increase related to timing of grants, including certain grants that were fully expensed in the first quarter of 2024.

Capital expenditures for the first quarter of 2024 were $15.9 million compared with $24.4 million. Teledyne received $9.1 million from the exercise of stock options in the first quarter of 2024 compared with $10.2 million.

As of March 31, 2024, net debt was $2,333.9 million which is calculated as total debt of $3,246.3 million, net of cash and cash equivalents of $912.4 million. As of December 31, 2023, net debt was $2,596.6 million representing total debt of $3,244.9 million, net of cash and cash equivalents of $648.3 million. Subsequent to the end of the quarter, the Company made a $450 million debt maturity payment.

As of March 31, 2024, $1,128.2 million was available under the $1.15 billion credit facility, after reductions of $21.8 million in outstanding letters of credit.

Income Taxes

The effective tax rate for the first quarter of 2024 was 20.6%, compared with 20.1%. The first quarter of 2024 reflected net discrete income tax benefits of $4.4 million compared with $6.6 million. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 22.5% for the first quarter of 2024, compared with 23.0%.

Other

Corporate expense was $20.1 million for the first quarter of 2024 compared with $17.4 million, with the increase driven primarily by higher compensation cost, including higher stock-based compensation expenses. Non-service retirement benefit income was $2.7 million for the first quarter of 2024 compared with $3.3 million. Interest expense, net of interest income, was $12.7 million for the first quarter of 2024 compared with $21.0 million. The decrease was due to reduced outstanding borrowings with lower weighted average interest rates compared to the first quarter of 2023.

Outlook

Based on its current outlook, the company’s management believes that second quarter 2024 GAAP diluted earnings per share will be in the range of $3.57 to $3.70 and full year 2024 GAAP diluted earnings per share will be in the range of $16.02 to $16.27. The company’s management further believes that second quarter 2024 non-GAAP diluted earnings per share will be in the range of $4.40 to $4.50 and full year 2024 non-GAAP diluted earnings per share will be in the range of $19.25 to $19.45. The non-GAAP outlook excludes acquired intangible asset amortization for all acquisitions, further FLIR integration costs and acquisition-related tax matters. The company’s annual expected tax rate for 2024 is 22.5%, before discrete tax items.

Use of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). We supplement the reporting of our financial results determined under GAAP with certain non-GAAP financial measures. The non-GAAP financial measures presented provides management, financial analysts, and investors with additional useful information in evaluating the performance of the company. The non-GAAP financial measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Further details on reasons that we use non-GAAP financial measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included following our GAAP financial statements.

Forward-Looking Statements Cautionary Notice

This earnings release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, with respect to management’s beliefs about the financial condition, results of operations, acquisitions and product synergies, integration costs, tax matters and businesses of Teledyne in the future. Forward-looking statements involve risks and uncertainties, are based on the current expectations of the management of Teledyne and are subject to uncertainty and changes in circumstances.

The forward-looking statements contained herein may include statements relating to stock-based compensation expense, tax rates, anticipated capital expenditures, stock repurchases, and product developments, and other strategic options. Forward-looking statements generally are accompanied by words such as “projects”, “intends”, “expects”, “anticipates”, “targets”, “estimates”, “will” and words of similar import that convey the uncertainty of future events or outcomes. All statements made in this communication that are not historical in nature should be considered forward-looking. By its nature, forward-looking information is not a guarantee of future performance or results and involves risks and uncertainties because it relates to events and depends on circumstances that will occur in the future.

Actual results could differ materially from these forward-looking statements. Many factors could change anticipated results, including: changes in relevant tax and other laws; foreign currency exchange risks; rising interest rates; risks associated with indebtedness, as well as our ability to reduce indebtedness and the timing thereof; the impact of semiconductor and other supply chain shortages; higher inflation, including wage competition and higher shipping costs; labor shortages and competition for skilled personnel; the inability to develop and market new competitive products; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards; disruptions in the global economy; the ongoing conflict in Israel and neighboring regions, including related protests and the disruption to global shipping routes; the ongoing conflict between Russia and Ukraine, including the impact to energy prices and availability, especially in Europe; customer and supplier bankruptcies; changes in demand for products sold to the defense electronics, instrumentation, digital imaging, energy exploration and production, commercial aviation, semiconductor and communications markets; funding, continuation and award of government programs; cuts to defense spending resulting from existing and future deficit reduction measures or changes to U.S. and foreign government spending and budget priorities triggered by inflation, rising interest costs, and economic conditions; impacts from the United Kingdom’s exit from the European Union; uncertainties related to the 2024 U.S. Presidential election; the imposition and expansion of, and responses to, trade sanctions and tariffs; the continuing review and resolution of FLIR’s trade compliance and tax matters; escalating economic and diplomatic tension between China and the United States; threats to the security of our confidential and proprietary information, including cybersecurity threats; risks related to artificial intelligence; natural and man-made disasters, including those related to or intensified by climate change; and our ability to achieve emission reduction targets and decrease our carbon footprint. Lower oil and natural gas prices, as well as instability in the Middle East or other oil producing regions, and new regulations or restrictions relating to energy production, including those implemented in response to climate change, could further negatively affect our businesses that supply the oil and gas industry. Weakness in the commercial aerospace industry negatively affects the markets of our commercial aviation businesses. Ongoing issues with Boeing’s 737 MAX product line could result in manufacturing delays and lower sales of our products to Boeing. In addition, financial market fluctuations affect the value of the company’s pension assets. Changes in the policies of U.S. and foreign governments, including economic sanctions, could result, over time, in reductions or realignment in defense or other government spending and further changes in programs in which the company participates.

While the company’s growth strategy includes possible acquisitions, we cannot provide any assurance as to when, if or on what terms any acquisitions will be made. Acquisitions involve various inherent risks, such as, among others, our ability to integrate acquired businesses, retain key management and customers and achieve identified financial and operating synergies. There are additional risks associated with acquiring, owning and operating businesses internationally, including those arising from U.S. and foreign government policy changes or actions and exchange rate fluctuations.

Additional factors that could cause results to differ materially from those described above can be found in Teledyne’s Annual Report on Form 10-K for the year ended December 31, 2023, as well as subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are on file with the SEC and available in the “Investors” section of Teledyne’s website, teledyne.com, under the heading “Investor Information” and in other documents Teledyne files with the SEC.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. Teledyne assumes no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

A live webcast of Teledyne’s first quarter earnings conference call will be held at 11:00 a.m. (Eastern) on Wednesday, April 24, 2024. To access the call, go to www.teledyne.com/investors/events-and-presentations approximately ten minutes before the scheduled start time. A replay will also be available for one month starting at 12:00 p.m. (Eastern) on Wednesday, April 24, 2024.

This condensed consolidated financial statement was prepared in accordance with U.S. GAAP.

This condensed consolidated financial statement was prepared in accordance with U.S. GAAP.

This condensed consolidated financial statement was prepared in accordance with U.S. GAAP.

Contacts

Jason VanWees

(805) 373-4542

Read full story here