Robert Mehrabian
Chairman, President & Chief Executive Officer at Teledyne Technologies
Thank you, Jason. Good morning, everyone, and thank you for joining our earnings call.
We began 2023 with record first quarter sales, operating margin, non-GAAP earnings and free cash flow. Overall, sales increased 4.7%, with revenue and operating profit growing in every segment. Excluding foreign currency headwinds, which negatively impacted first quarter sales growth by approximately 1.4%, growth in local currency would have been 6.1%. Excluding acquisitions, core growth in local currency would have been approximately 4.2%. GAAP operating margin of 17.5% and non-GAAP operating margin of 21.1% were also first quarter records.
First quarter GAAP earnings per share were $3.73 and non-GAAP earnings of $4.53 were also first quarter records. Given record first quarter cash flow, our consolidated leverage ratio declined to 2.3 even after completing the ChartWorld acquisition at the beginning of the quarter. We also repaid $300 million of debt which matured on April 3 on the first day of the second quarter.
Turning to our 2023 full year outlook, we are reaffirming our prior sales and non-GAAP earnings per share outlook. As supply chain challenges improved modestly, we were able to exceed our original first quarter sales and earnings outlook by pulling forward some revenue from the second quarter. Consequently, by maintaining the full year guidance, we've also modestly de-risked the quarterly sequential revenue and earnings slopes.
While our short-cycle businesses are more economically sensitive, they were resilient in the first quarter. We are now a little more cautious. On the other hand, we are more positive in our longer-cycle medical, aerospace, defense and marine businesses.
On revenue, specifically we'll continue to see total 2023 growth of approximately 5% or sales of approximately $5.73 billion with the second quarter being roughly $1.4 billion. Regarding margins, our earnings outlook now implies approximately 40 basis points of margin improvement for the full year 2023. Currently, we think the Instrumentation segment will be above average contributor to this, while margins in the other segments may increase more modestly.
I will now further comment on the performance of our four business segments. Our Digital Imaging segment was founded on our first acquisition in 2006 of Teledyne Scientific, our research laboratories -- and Imaging, which provides high-end infrared sensors for space and astronomy. Since then, this segment has grown organically and through acquisitions such as DALSA, e2v, Scientific Cameras, FLIR and most recently ETM and ChartWorld to contribute almost 56% of Teledyne's revenue today.
First quarter sales in this segment increased 4.7% on a constant currency basis with foreign currency translation contributing negative 1.8%. Sales increased year-over-year for industrial and scientific vision systems, as well as for our low-dose high-resolution digital x-ray detectors. But were offset by lower sales of unmanned ground systems for defense applications. Our product families increased or decreased more modestly with higher sales of surveillance, unmanned air systems and specialty semiconductor devices, offset by some lower sales of certain commercial infrared imaging and Marine's products.
GAAP segment operating margin increased 40 basis-points to 15.8%. And adjusted for a reduced intangible asset amortization, non-GAAP margin decreased 13 basis points and it was lower at 21.75%.
Turning to our Instrumentation segment, it is comprised of marine, test and measurement and environmental instruments and contributes about 24% to Teledyne's revenue. Overall, first quarter sales increased 8% versus last year's with sales growing in all fields noted above. Sales of marine instruments increased a healthy 14.6% in the quarter, primarily due to strong marine defense sales, especially autonomous underwater vehicles as well as ongoing recovery in offshore energy markets.
Sales of electronic test and measurement systems, which includes oscilloscopes, digitizes and protocol analyzers, collectively increased 5.3% year-over-year despite a tough comparison with the first quarter of last year. Some softness in sales of analyzers and electronic storage and high speed networking applications was more than offset by devices for wireless and video protocols as well as very strong sales of oscilloscopes and related accessories.
Sales of environmental instruments increased 3.4% compared with last year, with greater sales of air quality, process gas and safety analyzers, partially offset by drug discovery and laboratory instruments.
The other two segments of Teledyne are Aerospace and Defense Electronics and Engineered Systems that together contributes 20% of Teledyne's revenue. In the Aerospace and Defense Electronics segment, first quarter sales increased 4.2%, driven by growth of both defense and commercial aerospace products. GAAP and non-GAAP segment operating profit increased approximately 9.6%, with margins 132 basis points greater than last year.
In the Engineered Systems segment, first quarter revenue increased 9.1% and operating profit increased 6.4%, resulting in a modest 25 basis points decline in margin from last year.
Finally, first, because of our unwavering focus on improving on all aspects of Teledyne's operations, and second, prudent capital allocation, and third, the broad geographic and end markets that we serve from short-cycle to long-cycle commercial to defense, I'm optimistic that Teledyne will successfully navigate through today's uncertain economic times as we have consistently done so in the past. Our record also shows that we have successfully dealt with multiple economic turmoils and during the ensuing recoveries have been able to acquire complementary enterprises for compounded growth.
I will now turn the call over to Sue.
