Teledyne Technologies Q2 2025 Earnings Report

Teledyne Technologies EPS Results

• Actual EPS: $5.20
• Consensus EPS: $5.05
• Beat/Miss: Beat by +$0.15
• One Year Ago EPS: $4.58

Teledyne Technologies Revenue Results

• Actual Revenue: $1.51 billion
• Expected Revenue: $1.47 billion
• Beat/Miss: Beat by +$39.79 million
• YoY Revenue Growth: +10.20%

Teledyne Technologies Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 23, 2025
• Conference Call Time: 11:00AM ET

Teledyne Technologies (NYSE:TDY), together with its subsidiaries, provides enabling technologies for industrial growth markets in the United States and internationally. Its Digital Imaging segment provides visible spectrum sensors and digital cameras; and infrared, ultraviolet, visible, and X-ray spectra; as well as micro electromechanical systems and semiconductors, including analog-to-digital and digital-to-analog converters. This segment also offers cooled and uncooled infrared or thermal products, including sensors, camera cores, and camera systems; high-resolution, low-dose X-ray sensors, high-power microwave, and high-energy X-ray subsystems; and instruments for the measurement of physical properties and maritime products; as well as develops and manufactures multi-spectrum electro-optic/infrared imaging systems and associated products, such as lasers, optics, and radars, CBRNE (Chemical, Biological, Radiological, Nuclear and Explosive detectors), and unmanned air and ground systems. The company's Instrumentation segment offers monitoring, control, and electronic test and measurement equipment; and power and communications connectivity devices for distributed instrumentation systems and sensor networks. The company's Aerospace and Defense Electronics segment provides electronic components and subsystems, data acquisition and communications components and equipment, harsh environment interconnects, general aviation batteries, and other components; and onboard avionics systems and ground-based applications, aircraft data and connectivity solutions, hardware systems, and software applications. Its Engineered Systems segment offers systems engineering and integration, technology development, and manufacturing solutions for defense, space, environmental, and energy applications; and designs and manufactures electrochemical energy systems and electronics for military applications. The company was founded in 1960 and is headquartered in Thousand Oaks, California.

Teledyne Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Teledyne reported record Q2 sales (+10.2% YoY) with organic growth matching acquisition-driven gains, and non-GAAP EPS rose 13.5%, while orders exceeded sales for the seventh straight quarter.
• Positive Sentiment: All four segments grew, led by energy & defense technologies (unmanned air/subsea, space sensors, NATO spending) and strong performance in instrumentation (marine +16%, environmental +5.6%, T&M +5.5%) and digital imaging (FLIR book-to-bill 1.1×).
• Negative Sentiment: Management is cautious about potential customer order pull-ins ahead of U.S. trade policy changes, advising Q3 revenue to be flat sequentially versus Q2 despite recent momentum.
• Positive Sentiment: Despite $770 M in acquisitions YTD, Teledyne retains 1.6× debt/EBITDA leverage, $1.17 B in credit availability, and raised its share buyback authorization from $896 M to $2 B to optimize capital allocation.
• Positive Sentiment: For Q3, Teledyne forecasts GAAP EPS of $4.39–$4.54 and non-GAAP EPS of $5.35–$5.45, with full-year non-GAAP EPS guided to $21.20–$21.50, reflecting confidence in sustained margin expansion.

Presentation

[Operator]

Welcome to Teledyne's Second Quarter Earnings Call. Here's our first speaker, Mr. Jason Van Weiss. Please stand by. Thank you, and welcome to Teledyne's second quarter earnings call.

[Operator]

Here's our first speaker, Mr. Jason Van Wiese. Please go ahead.

[Jason VanWees, Vice Chairman at Teledyne]

Thank you, and good morning, everyone. This is Jason Van Wiese, Vice Chairman. I would like to welcome everyone to Teledyne's second quarter twenty twenty five earnings release conference call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Executive Chairman, Robert Moravian President and CEO, George Bob EVP and CFO, Steve Blackwood, and Melanie Cibic, EVP General Counsel, Chief Compliance Officer and Secretary.

[Jason VanWees, Vice Chairman at Teledyne]

After remarks by Robert, George, and Steve, we will ask your questions. But of course, before we get started, attorneys have reminded me to tell you that all forward looking statements this morning are subject to various assumptions, risks, and caveats as noted in the earnings release and our periodic SEC filings, and of course actual results may differ materially. In order to avoid potential selective disclosures, this call is simultaneously being webcast and a replay, both via webcast and dial in, will be available for approximately one month. Here's Robert.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you, Jason, and good morning, and thank you for joining our call. Today, we reported record quarterly sales. We've achieved greatest total for an organic sales growth in almost three years. Second quarter sales increased 10.2%, half organic half acquisitions and accelerated for three quarters in a row. Sales also increased organically in every segment.

[Robert Mehrabian, Executive Chairman at Teledyne]

Non GAAP earnings per share increased 13.5% from last year and were also a record for any second quarter. Finally, orders exceeded sales for the second seventh consecutive quarter. Our energy and defense businesses continue to perform very well due to market strength but also our specific portfolio of technologies serving growing sectors such as unmanned air and subsea systems, space based sensors, NATO defense spending, and offshore energy productions. Sales from our shorter cycle environmental and test and measurement instrumentation businesses also increased single digits mid single digits and this is about the greatest level in a few years. Organic sales growth in digital imaging was also the most in three years primarily resulting from healthy growth in our teledine flares defense and industrial businesses.

[Robert Mehrabian, Executive Chairman at Teledyne]

Nevertheless, we're being a little cautious worrying about whether SWAT second quarter strength in our short cycle businesses resulted from accelerated demand in advance of planned U. S. Trade policy announcements in the third quarter. Consequently, we're currently forecasting that total sales in the third quarter will remain essentially flat with the second quarter. Despite spending $770,000,000 year to date on acquisitions, Our current debt to leverage ratio, debt to EBITDA is 1.6 with only fixed rate debt and approximately 1,170,000,000.00 out of 1,200,000,000.0 available in our credit facility.

[Robert Mehrabian, Executive Chairman at Teledyne]

While we're pursuing a number of our positions, mostly smaller ones at this time, We will consider stock repurchases where we feel larger acquisitions are too pricey as we found in the second quarter and where Teledyne offers the best value. Therefore, our board of directors increased our stock repurchase authorization from $896,000,000 to $2,000,000,000 and we will use that as I said before if appropriate. George will now briefly comment on the performance of our four segments.

[George Bobb, President & CEO at Teledyne]

Thank you, Robert. In the Digital Imaging segment, second quarter sales increased 4.3%, which was the greatest year over year growth in three years. The performance largely reflected record growth of Teledyne FLIR, where the defense and industrial businesses increased nicely, largely driven by international defense sales, as well as complete unmanned air systems and commercial infrared components and subsystems for the overall unmanned market. We had another quarter of strong orders with a total digital imaging book to bill of 1.1 times, but it was especially nice to see bookings of 1.2 times in our industrial and scientific vision systems businesses collectively. Non GAAP operating margin decreased marginally due in part to greater severance costs, which we did not exclude from non GAAP margins.

[George Bobb, President & CEO at Teledyne]

In the Instrumentation segment, which consists of our Marine, environmental and test and measurement businesses, second quarter total sales increased 10.2% versus last year. Overall sales of marine instruments increased 16% due to both strong offshore energy production and subsea defense sales. Sales of environmental instruments increased 5.6%, primarily due to higher sales of process gas safety and emissions monitoring instrumentation. Sales of electronic test and measurement systems, which include oscilloscopes, protocol analyzers, and Ethernet traffic generators, increased 5.5% year over year. Instrumentation operating margin in the second quarter increased 149 basis points to twenty seven point six percent and one hundred and thirty four basis points on a non GAAP basis to 28.5%.

[George Bobb, President & CEO at Teledyne]

In the Aerospace and Defense Electronics segment, second quarter sales increased 36.2, primarily driven by acquisitions and organic growth of defense electronics products. While commercial aerospace aftermarket sales increased, this was offset by a decline in OEM sales due in part to on again off again export restrictions. Overall segment operating profit increased year over year, but GAAP and non GAAP segment margin decreased year over year, but increased sequentially primarily due to comparatively lower current margins at our recently acquired businesses. For the Engineered Systems segment, second quarter revenue increased 3.3% and segment operating profit increased three ninety five basis points due in part to a relatively easy comparison with last year, but also strong execution on a number of government programs. I will now pass the call back to Robert.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you, George. In conclusion, I want to thank everyone at Teledyne for delivering a double digit top and bottom line growth. Also, we're very optimistic about their long term outlook. Our growth in our long cycle business portfolio remains very stable and most of our short cycle businesses have returned to reasonable sales and orders growth. As I mentioned earlier, we're a bit cautious because of the near term pull ins perhaps as a consequence of various tariff scenarios.

[Robert Mehrabian, Executive Chairman at Teledyne]

Having said that, we remain very optimistic about the future given our portfolio and where the markets in our domain are moving. With that, I want to turn the call to Steve.

[Stephen Blackwood, EVP & CFO at Teledyne]

Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full year 2025 outlook. In the second quarter, cash flow from operating activities was $226,600,000 compared with $318,700,000 in 2024. Free cash flow, that is cash flow from operating activities less capital expenditures was $196,300,000 in the 2025 compared with $3.00 $1,000,000 in 2024. Cash flow decreased year over year in the second quarter primarily due to higher income tax payments in the 2025 compared with 2024.

[Stephen Blackwood, EVP & CFO at Teledyne]

Capital expenditures were $30,300,000 in the 2025 compared with $17,700,000 in 2024. Depreciation and amortization expense was $86,500,000 in the 2025 compared with $77,800,000 in 2024. We ended the quarter with $2,300,000,000 of net debt that is approximately $2,620,000,000 of debt less cash of $310,900,000 Now turning to our outlook. Management currently believes that GAAP earnings per share in the 2025 will be in the range of 4.39 to $4.54 per share with non GAAP earnings per share in the range of $5.35 to $5.45 And for the full year 2025, we believe that GAAP earnings per share will be in the range of $17.59 to $17.97 with non GAAP earnings per share in the range of $21.2 to $21.5 I will now pass the call back to Robert.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you, Steve. We'd now like to take your questions. Carrie, if you're ready to proceed with the question and answer, please go ahead.

[Operator]

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press two if you would like to remove your question from the queue.

[Operator]

And our first question will come from Andrew Buscaglia with BNP Paribas Asset Management.

[Andrew Buscaglia, Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas]

Hey, good morning, guys.

[Robert Mehrabian, Executive Chairman at Teledyne]

Good morning, Andrew.

[Andrew Buscaglia, Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas]

Just wanted to touch on your guidance for Q3 and some of the caution you're citing. Where exactly is this pull forward within your business segments? And can you comment on, are you seeing this more on with some of the short cycle businesses versus long cycle, if you could add that to your comments?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah, I think Andrew, the comment is primarily about short cycle businesses. Because as longer cycle businesses, we have reasonably good visibility as to where things are and where our programs are. Short cycle businesses, especially things like instruments, we get like sometimes two weeks, three weeks book to bill cycle times. And we kind of are a little cautious. We're that maybe $15,000,000 to $20,000,000 mostly in that domain may have been pulled in.

[Robert Mehrabian, Executive Chairman at Teledyne]

Now we're not sure, but listening to our folks, that seems to be maybe the case. There's little of that in our lives longer cycle businesses like field defense, for example.

[Andrew Buscaglia, Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas]

Okay. That's helpful. Can you order activity in some of these longer cycle businesses? I know you guys had a press release out supporting US's stance on dominance and wondering if you've seen an order uptick within unmanned systems or the components you supply to them.

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah, I think specifically if you look at our unmanned systems in FLIR and generally in FLIR, First quarter we saw book to bill of 1.17, this quarter just a little over one, even digital imaging excluding FLIR, recognizing that the comps are easier, we saw an uptick on orders book to bill as high as 1.2. In the other businesses, lumpy businesses like engineered systems is way over one but we know that's lumpy. Overall I think our book to bill has been healthy and as we mentioned earlier this is like it's about 1.1 across all of our portfolio and it's seventh consecutive quarter that we've seen that. Looking at that you have to be positive. And I am.

[Robert Mehrabian, Executive Chairman at Teledyne]

But we're always a little cautious, maybe too cautious. Let me leave it at that.

[Andrew Buscaglia, Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas]

Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thanks, Andrew.

[Operator]

Next question comes from Damian Karas with UBS.

[Andrew Buscaglia, Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas]

Hey, good morning everyone.

[Damian Karas, Executive Director at UBS Group]

Better to be safe and cautious than sorry, Robert. I do wanna ask you. Yeah, so I did want to kind of maybe push you a little bit on digital imaging. Know, the book to bill is strong. I think this is the second quarter of 1.1 book to bill or higher.

[Damian Karas, Executive Director at UBS Group]

But yet you still really only have, I think, modest organic sales growth factored into the second half. So could you just help us reconcile why we wouldn't see more of a meaningful pickup in sales just based on those bookings?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah. You know, it's a kind of story of two chapters. FLIR is strong. Even when some of the short cycle businesses like in cameras, etc, in dossier A2B go down, our industrial businesses seem to be holding up pretty well in the FLIR. You know, both our ability to sell cores, infrared cores as well as cameras, they seem to be alright.

[Robert Mehrabian, Executive Chairman at Teledyne]

Of course, FLIR defense is just doing really well. Some of the problems that we have is in our GALSA e two b. Now remember that business has been on a it's been down. And while we're getting a little order pickup, it's easier comp when you go to book to bill the business that's done. On the other hand, George and the managers in that business have been able to take cost out, reorganize where necessary.

[Robert Mehrabian, Executive Chairman at Teledyne]

As George mentioned, we took a little hit in Q2 because we count our cost cost out expenses in our non GAAP. So that business is stabilizing. Again, we think some of our longer cycle businesses that we see growing are going to be more like Q4 and maybe early twenty six. Maybe that's why that was kind of where we are in terms of what you mentioned being a little cautious.

[Damian Karas, Executive Director at UBS Group]

Okay. But just to clarify, you haven't really seen the short cycle start falling off in kind of real time, but your assessment was, hey, maybe there's 15,000,000 to $20,000,000 of a little uplift that we got, but you haven't seen that yet.

[Robert Mehrabian, Executive Chairman at Teledyne]

No. You know, there are different forces operating in our management. Some of them are a little more cautious than others and frankly over the last twenty five years we've learned the hard way that being a little cautious pays dividends over the long term even though sometimes you look at your stock after an earnings like today and say no, no good deeds should go unpunished. Having said that, we'll be fine. I think we're just gonna be fine.

[Damian Karas, Executive Director at UBS Group]

Okay, fair enough, really appreciate that. And then my second question, the aerospace and defense margin did come in quite nicely. Would you maybe be able to elaborate a little bit, you know, was there any pricing or business mix factors, productivity? Maybe just give us a sense for what drove that margin strength. And is there anything that we should be bearing in mind the rest of this year as we update our models?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah, Damian, I'm going to let George pick some of this up. But in general, happens is if you look at the margins, when we make acquisitions, the margins go down because our acquired businesses by and large have a lower margins and if you look at Q1, Q2, Q3, Q4, our margins improve in those acquired businesses. Now if you exclude the acquired businesses, yes, our margins are very healthy, excellent execution. George, you want to comment on that? Yeah, I think I would just

[George Bobb, President & CEO at Teledyne]

say in the legacy defense electronics businesses and the aerospace business, margins continue to be strong. In the new acquisitions, we acquired two companies here in the last several months, MicroPack and KeyOptik. We had a good uptick in Q1 in the margins in MicroPack and in both of those acquisitions, we're doing what we always do, which is work on improving the margins as we integrate those companies.

[Robert Mehrabian, Executive Chairman at Teledyne]

Yes, Damian, just to kind of put things in perspective, I think my benefit our shareholders might benefit from this analysis. If you for a second, if you exclude FLIR, we've spent $1,900,000,000 in cash acquiring businesses that are of some significant, 47 of them. What we paid for them at the time we acquired them was nine times EBITDA. If you look at the same businesses today and you look at the EBITDA and say what did we pay for it, it's 3.4 times. So that is really just simply improved margins.

[Robert Mehrabian, Executive Chairman at Teledyne]

Even when you include FLIR, which is what we've only had in three years, even there what we paid when we acquired and what it is today, there's about 100 basis point improvement. Having said that, that's really the operating book that we have. Acquired businesses, don't overpay, focus on improving margins, do your eightytwenty, anything else you have to do, and go from there. You look at our overall businesses no matter which year, how many, which segment, it's the same story.

[Damian Karas, Executive Director at UBS Group]

Okay. Great. Thanks a lot. Good luck out there.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you, Damian.

[Operator]

Our next question comes from Greg Conrad with Jefferies.

[Greg Konrad, SVP - Equity Research at Jefferies Financial Group]

Good morning.

[Robert Mehrabian, Executive Chairman at Teledyne]

Good morning, Greg.

[Greg Konrad, SVP - Equity Research at Jefferies Financial Group]

Maybe just to follow-up on your guidance that Q3 would look similar from a top line perspective relative to Q2. I mean, I know what you did with the EPS guidance, but has there been any change to the revenue guidance you gave on the last call just as we think about kind of expectations for Q4?

[Robert Mehrabian, Executive Chairman at Teledyne]

Well, let me stay with Q3 for a second, if I may, Greg. The way we're looking at it is we're looking at getting some uptick from acquired businesses in Q3, maybe about 5% similar to q two and very little organic. And again, the reason we're doing that is we're just kind of looking at our short cycle businesses. It's almost impossible to predict where they're going to end up. We have raised overall, we've raised our guidance for the year, of course, primarily because Q2 came in higher, but even with a flat Q3, we've raised our guidance for the year in terms of revenue by almost $20 plus million.

[Robert Mehrabian, Executive Chairman at Teledyne]

And given our conservative nature for us that's a hefty increase. So we think for the year we'll have probably about 6,030,000,000 maybe a little more. We have growth of 6.3. We're assuming most of that 4% plus 4.2% would come from acquisitions, maybe two plus percent from organic, but then we are also looking at FX effects and other things. So, you know, there's a lot of moving parts, but that's the best we can do at this time.

[Greg Konrad, SVP - Equity Research at Jefferies Financial Group]

Thank you. I appreciate that. And then maybe just to dig into industrial and scientific vision a bit. I think you called out the book to bill was 1.2 in the quarter, and I appreciate some of the short cycle commentary. But any additional color in kind of what you're seeing in that business, either from an end market perspective and how you're kind of thinking about the outlook for the

[Robert Mehrabian, Executive Chairman at Teledyne]

Sure. So why don't I ask George to address that one too?

[George Bobb, President & CEO at Teledyne]

Yeah, sure. So in that part of the business, industrial scientific vision, what we saw in Q2 is the machine vision cameras business had year over year growth in applications like semiconductor mask and wafer inspection. The machine vision sensors business was down year over year on sales, but had an orders uptick year over year. So both machine vision cameras, machine vision sensors had increases in orders year over year. So as you mentioned, overall book to bill was 1.2.

[George Bobb, President & CEO at Teledyne]

We still think that business for the full year is relatively flat, but I think we're encouraged by some of those order trends that we saw in Q2.

[Robert Mehrabian, Executive Chairman at Teledyne]

And then as we mentioned before, George and even before George, we took cost out. And so we've kind of stabilized, we feel we've stabilized that business to a revenue stream that is lower than it used to be. So now we can focus on improving the margins. As we've done in other businesses, George, did that in marine as an example.

[George Bobb, President & CEO at Teledyne]

That's right. I would say we run the same playbook always, right? Which is we focus on getting the cost structure right and growing from there.

[Greg Konrad, SVP - Equity Research at Jefferies Financial Group]

And then maybe just sneak in one last one. I mean, you gave a lot of positive defense commentary. I mean, if we think across the businesses, can you give some color on what overall defense was up how maybe international contributed to that, just given some of the positive commentary?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah, there are two parts. And I think that's a really relevant question at this point. We have US government defense and we have foreign government defense. The US Government defense improved 12.5% year over year and it was primarily organic, primarily. Foreign government also improved and over 15%, and there's a very good reason for that.

[Robert Mehrabian, Executive Chairman at Teledyne]

Our defense portfolio is spread across different countries and different products. We have a very strong presence in Europe. For example, our very well known nanodromes are not made in The US, they're made in Europe. On the other hand, some of our other drones are made in Canada and some are made in The US. So when we look at growth, we look at Europe where defense spending is increasing, we have a nice footprint of manufacturing facilities across Europe.

[Robert Mehrabian, Executive Chairman at Teledyne]

And as you well know, in country production is the insourcing is a key. So if you already have an existing footprint, that's really good. The other thing is that everybody is talking about unmanned. Yes. Well, unmanned systems are not new to Teledyne.

[Robert Mehrabian, Executive Chairman at Teledyne]

Like we built our first unmanned drones during the Vietnam War. We built 5,000 Firebees that were used as targets and intelligence gathering. Unfortunately, when we got our divorce from Allegheny, they sold our best drone business which was the Global Hawk. They sold it for $155,000,000 to Nordstrom. And so that business just went away and it's only come back because of FLIR.

[Robert Mehrabian, Executive Chairman at Teledyne]

But FLIR has a very strong portfolio of drones, both very small nano drones and others. But the other part that we are enjoying is that in the first twenty years of our history, new history, we got unmanned vehicles. We bought 21 companies, underwater companies, marine companies, and we have underwater unmanned vehicles that are equal to as many as we sell that are above water. And finally, the issue on drones is low cost. And the lower the cost the better.

[Robert Mehrabian, Executive Chairman at Teledyne]

And we are fortunate because of FLIR that we can supply sensors, EOIR sensors, both for our drones as well as other people's drones. And we're happy to sell people sensors. That's a big market for us. So the combination of being the company in infrared, having infrared and visible sensors and packaging them for our drones and selling them for other people's drones, it's put us in a nice place in this environment. I I know that's a very long answer to a short question, but I think the context is important. Drones are nothing new to Teledyne.

[Greg Konrad, SVP - Equity Research at Jefferies Financial Group]

That was great. Thank you.

[Operator]

Moving on to our next question, Noah Poponak with Goldman Sachs.

[Noah Poponak, Research Analyst at Goldman Sachs]

Hey, good morning everyone.

[Robert Mehrabian, Executive Chairman at Teledyne]

Good morning, Noah.

[Noah Poponak, Research Analyst at Goldman Sachs]

Do you guys have growth in orders versus growth in revenue or a book to bill for the first half of the year in what you would call broadly defined short cycle or in machine vision and instrumentation?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah. I think in instrumentation, which would be short cycle, except for parts of marine NOAA that are defense related, which are underwater vehicles again. I think it's just above one because in Q1 it was 1.04, in Q2 it's 0.97, so average is a little over one, let's say one. And that doesn't change much across the businesses. Environmental is a little healthier, surprisingly.

[Robert Mehrabian, Executive Chairman at Teledyne]

T and M is healthy, but still just below one. And marine is obviously above one. On digital imaging, as George mentioned and I mentioned, we're kind of getting a little bit of an uptick in our Dulce E2V where we took some cost out and we had lower revenue. But, you know, q one was 1.02. Q two is 1.23.

[Robert Mehrabian, Executive Chairman at Teledyne]

We're cognizant of the fact that, you know, you get good book to bill when your revenue is down. But nevertheless, it's way over one. And FLIR is really healthy over one. It's It's 01/2017 Q1, 1.02 Q2. So average is way over one. We feel good about those businesses right now.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay. Yeah. I mean, we're all thinking about the same thing here with the back half growth guide, and I recognize the pull forward you're mentioning, but 15 to 20,000,000 is 1% of the revenue in the quarter. So if you had the acceleration to the 6% organic growth in the quarter, and you're saying 3Q and 4Q are one and one, you're sorta saying what was six and one is five and two. So you're still, adjusted for the pull forward, you're still projecting a not insignificant decel in total organic revenue growth when the long cycle's growing five to seven and you're telling us the short cycle's getting better. Guess, is the short cycle meet, I guess if instrumentation book to bill is still below one, and you've only seen a short window of digital imaging orders getting better, plus there's just a lot happening in the macro. I guess I'm trying to get at how much of what you're saying about 3Q is a very bottom up plan versus you guys said, hey, given all those mixed inputs and we need a little more time to feel good about short cycle, let's just call the third quarter flat sequentially and hope to beat it and see what the indicators are in three months.

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah, no, exactly. In the next three days, starting right after this meeting, we go into operations reviews with all of our businesses across the globe, and they all come in here. And what we got to do is George and I have to sort through that they don't sandbag us. You know, people have a tendency to be cautious and we got to challenge him without getting him to become too effervescent. So it's a balance.

[Robert Mehrabian, Executive Chairman at Teledyne]

I am hoping that we get some of these pull ins in Q3 and Q4. Right? I mean, long as this whole international trade is volatile, who knows?

[Noah Poponak, Research Analyst at Goldman Sachs]

Yeah. I thought volatile trade was causing push outs, not pull ins. So I wonder if you guys aren't telling me that.

[Robert Mehrabian, Executive Chairman at Teledyne]

The reason I say that is it's both. If people think tariffs are going to go up in a certain area from a sales perspective, then they might like to get their orders in and get under the tariffs. On the other hand, it could be the reverse if tariffs are high and they think they're going to go down. Right now it's so uncertain. Every day you pick up the paper, no, today is Japan 15%, somebody else is at 18%.

[Robert Mehrabian, Executive Chairman at Teledyne]

So we're very cautious and we're looking at that just like you are.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay. I get it. Fair enough. Could you spend another minute on the digital imaging margins and what you're thinking happens in the back half, and you've spoken to your medium term framework, just given those stepped back a little bit in the quarter.

[Robert Mehrabian, Executive Chairman at Teledyne]

Noah, here's again, that's tale of two cities. In FLIR, margins have continuously increased. For example, in FLIR Defense, when we acquired the business our margins were more like just below 15%. Today they're over 20%. Over a three year period that's a pretty healthy improvement.

[Robert Mehrabian, Executive Chairman at Teledyne]

Clear margins by and large have improved. Now the flip side is because of the downturn in our camera and sensors, especially sensor business, the margins in the Ausse A2V have gone down. Now overall, together, if you look at and by the way, we also as George mentioned, we have some charges we took in Q2 to kind of right size the business. So the margins, if you look at Dulce E2V year over year, they've gone down 100 basis points, but I would attribute most of that to the cost out. Flip side, player margins are as high as 24.2% in Q2 of this year and they've gone up about 30 basis points.

[Robert Mehrabian, Executive Chairman at Teledyne]

So when you look at the overall digital imaging, even with the 100 basis points done in Dulce A2B, digital imaging as a whole even with the cost out is only down 10 basis points or flat. And that to me is encouraging because for a long time everybody was saying, gee, what are you doing with FLIR? Well, FLIR is doing really well. It's carrying the day. And as soon as we straighten out, which we are, George straightens out with his people, the Dulce ATLV pictures, we're gonna be fine.

[Noah Poponak, Research Analyst at Goldman Sachs]

Interesting. Okay. That's super helpful. What what did you take in charges in millions of dollars in the quarter?

[Robert Mehrabian, Executive Chairman at Teledyne]

About 5.3. A 5.3, the way I look at it, every 600,000 is a penny.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay.

[Robert Mehrabian, Executive Chairman at Teledyne]

It's about 9¢. $8.09 cents.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay. Got it. Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you, Noah. By the way, thank you for sending those three prepared questions. It's very helpful to me.

[Noah Poponak, Research Analyst at Goldman Sachs]

Oh, good. Glad to hear that. We'll keep doing it. Thanks again.

[Operator]

Thank you. Our next question comes from Jim Ricchiuti with Needham and Company.

[James Ricchiuti, Senior Analyst at Needham & Company]

Thanks. Good morning. Wondering just given the moving parts in terms of the overall revenue outlook, the sales outlook for Q3 and Q4. I'm wondering if your expectations for margin improvement for the full year have changed at all. I think versus your earlier expectation, correct me if I'm wrong, you were talking, I think about 60 basis points of operating margin improvement?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah. We're still there. We did that in Q2. We improved it 57 basis points not to nitpick. Right now, we're at 55 for the year.

[Robert Mehrabian, Executive Chairman at Teledyne]

Fifty, sixty is a good number. George, what do you think?

[George Bobb, President & CEO at Teledyne]

I think that's right. I think, yeah.

[Robert Mehrabian, Executive Chairman at Teledyne]

That's Got it. It is.

[James Ricchiuti, Senior Analyst at Needham & Company]

And, you know, looking at the instrumentation business, the the marine portion of that business, the marine instrumentation business has has generated strong growth. It seems like for the better part of a couple of years now. And I wanted to if we could maybe just if you could talk a little bit about the drivers there. It's both, I think, both defense and commercial subs. Is it sustainable at these given what you're seeing?

[Robert Mehrabian, Executive Chairman at Teledyne]

I'm going to let George answer that. From a sustainability perspective, there's two ways to look at it. One of them is the growth. Are you going to sustain a 15% growth going forward year in year out? The answer is no.

[Robert Mehrabian, Executive Chairman at Teledyne]

Is it sustainable because it's at a high level? Yes. Because we have really unique products. George, you want to add to that?

[George Bobb, President & CEO at Teledyne]

Yeah, I would just add. So the energy part of the business is about 40% of the marine business. We've seen continue to see strong growth there in the subsea interconnects for oil production, for example, offshore streamers for geophysical surveys for oil and gas exploration. We expect that to continue at least for the next few years, subject of course to oil prices, which we can't predict. On the defense side of the business, that's probably give or take 30% of the marine business. What's driving that? Subsea unmanned vehicles, a lot of demand for unmanned vehicles globally in particular.

[George Bobb, President & CEO at Teledyne]

And then we also have a nice submarine interconnect business there where we're on platforms like the Virginia and Columbia class submarine and that business is doing well. So I think in that case on the defense side, certainly think that's sustainable given the overall environment geopolitically, particularly where we're selling vehicles into places like the Baltic Sea, the Black Sea, and certainly submarines are among the US Navy's top priorities.

[James Ricchiuti, Senior Analyst at Needham & Company]

Last question, I could just slip one other one in. It sounds like MicroPact margins were up, that's going well. Are you still thinking in terms of KeyOptik being able to add about $0.15 to EPS this year?

[Robert Mehrabian, Executive Chairman at Teledyne]

The answer is yes. Both in MicroPag and KeyOpti, as we look q one, q two, q three, q four, margins are consistently improving and projected to improve. That's our storybook, right?

[James Ricchiuti, Senior Analyst at Needham & Company]

Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne]

KeyOptics turned out to be a really good acquisition.

[Robert Mehrabian, Executive Chairman at Teledyne]

It's very interesting. There's a part of it that's in The US which are energetics, etc. When you separate missiles from what drives them. But then in Europe, especially in The UK, it's a lot of military applications which are very closely tied to what FLIR makes. So what George has done is has The UK part report to JIFEN, by the way that's spelled J I H capital F E N, reports to JIFEN Lee who runs our FLIR Defense.

[Robert Mehrabian, Executive Chairman at Teledyne]

So she's integrating that into FLIR Defense even though we're reporting in a segment. It doesn't matter. It's how you manage it and how you enjoy the fruits of having similar products, different customers. KeyOptik makes products in Europe. We can sell those products now in The US.

[Robert Mehrabian, Executive Chairman at Teledyne]

And, of course, the opposite is true with FLIR. So there we go.

[James Ricchiuti, Senior Analyst at Needham & Company]

Thank you.

[Operator]

Moving on to Jordan Lyonates with Bank of America.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Hey, good morning.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Could you guys cover so on the drone exposure overall, how are you thinking about the opportunities? Black Hornet was added to the blue UAS list. But is it the driver for you guys is really just the camera systems you'll sell to everybody versus your own drone products?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yes. I think you got it. I think we sell it to our drone products and our drone products are obviously not just the ability to put our sensors in, but we're developing new drones all the time. The latest drone that's going to go into preproduction is a weaponized drone. We have a very competitive drone there called the R1.

[Robert Mehrabian, Executive Chairman at Teledyne]

And the other thing is that we have unique drones in the small nano drones, which you've seen, the Black Hornets, which are growing in revenue and in adoption by many countries. But then on the sensor side we have this large business in Santa Barbara that makes cooled and uncooled infrared and infrared plus visible sensors. I will sell them to anybody. We're not going to just sell it to our own. Actually we make a lot more revenue selling it to other people, but out of $200,000,000 worth of product plus that they make, they also enable another $800,000,000 of revenue across Teledyne by the sensors.

[Robert Mehrabian, Executive Chairman at Teledyne]

And I'm sure other people are enjoying the same thing. Basically, you want to make sensors for other people and it's very simple. The math is really simple. The larger the production floor, you spread your cost and development across a broader sales channel. And the more sales you have, the better your margins consequently because you have more.

[Robert Mehrabian, Executive Chairman at Teledyne]

So we'll sell it to anybody and we do actually. We sell to competitors, we sell to people that are not competitors, and we sell to both defense companies and non defense companies.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Got it. Okay. And then for the one big beautiful bill that passed, are there any changes that we should consider for the R and D tax changes or any other new programs that you guys see a lot of runway from?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah. There are two. One has to do with the writing down the R and D, which obviously is good if you can accelerate it. But the other part is really the cash tax portion. And we think that would be lower in the second half of the year by as much as $30,000,000 So flip side, R and D credits, you can accelerate.

[Robert Mehrabian, Executive Chairman at Teledyne]

The other side you're expected to pay $30,000,000 more in taxes than we're expecting now to where calculations show and we're obviously very busy trying to figure out all the R and D expenditures that we have across the company. It's been good from that perspective.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Got it. Thank you.

[Operator]

Question comes from Jonathan Siegman with Stifel.

[Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional]

Good morning. Thanks for taking my question.

[George Bobb, President & CEO at Teledyne]

Of course.

[Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional]

On Golden Dome, there seems to be some funding coming through to that program. Can you talk a little bit about which Teledyne products have the most relevance to? And are you already engaging with some of the industry partners? And just give a sense of how big of an opportunity that could be for the company? Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you. It's a little too early to kind of be too specific, but we have a lot of activity there, coordinated activity. I'm going to let George answer that.

[George Bobb, President & CEO at Teledyne]

Sure. So the One Big Beautiful Bill Act did include some funding to advance the Golden Dome concept. In general, we've got a large presence in space based imaging and electronic subsystems that go into things like missile tracking. So we would expect given our presence on, for example, the space development agency tranche programs, overhead persistence infrared programs, things like that, that we'd have opportunities mostly in the space based sensing but also some of the electronic subsystems.

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah, and we're trying to coordinate our response. We're getting some early requests for proposals from some of our customers and we're positively inclined towards that. Now historically we have participated in the defense systems that they use in Middle East that Israel uses. But this is very different obviously. It's bigger, it's broader, it's more space based.

[Robert Mehrabian, Executive Chairman at Teledyne]

And because we have a pretty rich heritage of space imaging, both in science and defense, by the way they overlap, and as George mentioned, we play in all of those domains and you're going to have to use those if you're going to have any kind of a broad defense system looking down. I don't know if that answered your question.

[Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional]

Thank you. It's very helpful. And on the share buyback authorization, I'm just curious whether we should be taking that as an indicator that the pipeline of activity is slowing down or whether you're starting to see value in the stock. If you can maybe expand on that, that'd be helpful.

[Robert Mehrabian, Executive Chairman at Teledyne]

Sure. It's again, tail off to cities, right? Last time we bought stock was the stock was at $400 now it's over $500 So you ask yourself, is that a wise thing to do? I think the most important thing is to have the optionality on the table. In terms of acquisition availability, there are available acquisitions, but they're insane in prices.

[Robert Mehrabian, Executive Chairman at Teledyne]

People are paying nineteen, twenty times EBITDA for products, for businesses that you've got to go and do three, four years of hard fixing. One case, as an example, without mentioning the exact nature of it, we bid a price which we thought was a stretch for us and somebody bid a price 30% higher. I just blew us out of the water. So there are acquisitions with the insanity of the price until it kind of moderates. We're going to sit on the sideline.

[Robert Mehrabian, Executive Chairman at Teledyne]

We may our buyers stack back if that's the best value. Would also, if we look at, we have all fixed debt going forward. The longest fixed debt, the cost to us in terms of is about 5%. And right now, we're earning just north of 4%. So you look at that and you say, what do you do?

[Robert Mehrabian, Executive Chairman at Teledyne]

Sit on eight hundred nine hundred million dollars of cash or do you use some of that, not all of it, some of that to redeem some of the bonds? The good thing is our debt to EBITDA ratio is 1.6. If we do nothing, it will go down to 0.5 in the next year. So it's a nice place to be. We may buy our stock. We may buy businesses if sanity prevails.

[Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional]

Thank you very much.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you.

[Operator]

We'll go next to Joe Giordano with TD Cohen.

[Joseph Giordano, Managing Director at TD Cowen]

Hey, guys. Thanks for taking my questions.

[Robert Mehrabian, Executive Chairman at Teledyne]

Hi, Joe.

[Joseph Giordano, Managing Director at TD Cowen]

Apologies if you said this in the beginning. Missed the very beginning of the call. But just relating to the pull forward potential there, I know it's not a huge number, but like, were you seeing like tangible reductions in orders in like early July that confirmed something like this? Or is it more just like something that you're just maybe worried about but aren't seeing evidence of it?

[Robert Mehrabian, Executive Chairman at Teledyne]

The answer is no, we didn't see it. It's the cautious nature of Teledyne to kind of not be effervescent. We haven't seen it. I hope we won't see it and I hope we can say next quarter that we pull forward but we haven't seen any evidence, no.

[Joseph Giordano, Managing Director at TD Cowen]

Got it. Okay. And then last quarter, given all the controversy around tariffs and we didn't know what's going on and raising prices, you guys were building in some kind of contingency on the demand side related to price actions you may have to take to combat. Now as tariffs have de escalated, have you removed any of that kind of contingency from the guide now that we're three months further along and the tariffs are coming in at lower rates?

[Robert Mehrabian, Executive Chairman at Teledyne]

Yeah, there are two parts to this as you well know. One of them is on the sales side and the other part is on the cost side. Let me deal with the first with the sales side. The good thing about Teledyne is that it's in terms of tariffs is that 82% of our revenue on the sales side come from U. S.-based businesses that are selling to U.

[Robert Mehrabian, Executive Chairman at Teledyne]

S.-based customers or international locations selling to international customers. So in that way 82% of our product is under the tent and we don't worry that much about it. Of the other 18% of the sales, approximately 75% or 14% of the total 18 are U. S. Exports to international locations.

[Robert Mehrabian, Executive Chairman at Teledyne]

That can have an effect but fortunately for us only 2% of our sales are to China in that domain. Finally, four percent of our external sales are from Teledyne international locations to U. S.-based customers where new tariffs may apply but we have products that are extremely unique like magnetrons for the treatment which are unique products and we think that's not going to be affected much. Having said all of that, we'll see some impact but it won't be very large. On the cost side, that's a different story.

[Robert Mehrabian, Executive Chairman at Teledyne]

We import about $700,000,000 of material which enters our cost of goods. And if you assume tariffs are let's say 11%, that's $80,000,000 We can probably mitigate some of that by using U. S, Mexico, Canada and the fact that we're doing U. S. Military DoD products and that leaves maybe $60,000,000 in the cost which is $15,000,000 a quarter which we have to make up with price increases.

[Robert Mehrabian, Executive Chairman at Teledyne]

I don't know. That's as wholesome a picture as I can give.

[Joseph Giordano, Managing Director at TD Cowen]

I guess what I'm getting at is I think you guys were factoring in like every percent of price that you need to do will kind of like destroy demand to a certain extent. Do you still feel that way? And is that kind of is that contingency still No, in the

[Robert Mehrabian, Executive Chairman at Teledyne]

the answer is no. We've become less cautious in that domain.

[Joseph Giordano, Managing Director at TD Cowen]

Okay. Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne]

Thank you.

[Operator]

We'll go next to Rob Jamieson with Vertical Research Partners.

[Robert Jamieson, VP - Industrial Technology at Vertical Research Partners]

Hey, guys. Thanks for taking my question. Just a quick one, just to go back to, the full year guidance on EPS. Just can you walk us through a scenario and what would need to happen across the portfolio if you hit the high end of the guidance range or maybe even exceed it? What would need to happen?

[Robert Mehrabian, Executive Chairman at Teledyne]

Teledyne's history would repeat itself. How's that? It I all depends on our short cycle business because we have a really good view on the long cycle. We're seeing growth in, as George mentioned, we're seeing growth in our test and measurement. We're seeing growth in our environmental surprisingly. And if those hold up, we'll be fine.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Great. And then just, can you talk a little bit

[Robert Jamieson, VP - Industrial Technology at Vertical Research Partners]

more about the test and measurement business and the performance during the quarter and and your expectations for second half? I think last quarter you called out that you saw strong Ethernet test sales, you know, and that's that's related to AI. Just curious if there are any additional areas of strength you saw during the quarter, any additional color?

[Robert Mehrabian, Executive Chairman at Teledyne]

I'll let George answer that please.

[George Bobb, President & CEO at Teledyne]

Sure. So we had about 5.5% organic growth in the test and measurement business in Q2. It was our third consecutive quarter of year over year growth. And fundamentally, the protocol sales drove most of that growth, but the oscilloscope sales were also slightly higher. On the oscilloscope side, it's driven by some of the high speed applications, also driven by some power and motor drive analyzers.

[George Bobb, President & CEO at Teledyne]

And on the protocol side, yes, it's been driven by those network applications, high speed communications, things like PCI Express. So we continue to again, that business has stabilized. We've seen nice consecutive growth in three quarters year over year. We still expect the business to be up kind of low single digits for the full year. And it's a solid thing.

[Robert Mehrabian, Executive Chairman at Teledyne]

Anything that increases traffic, increases requirements for larger storage capacity and anything to do with AI is of course just that would benefit our protocol businesses.

[Robert Jamieson, VP - Industrial Technology at Vertical Research Partners]

Perfect. Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne]

So, Teri, how are we doing?

[Operator]

This actually does now conclude our question and answer session. I would like to turn the floor back over to our speakers for closing comments.

[Robert Mehrabian, Executive Chairman at Teledyne]

Okay, let's go to Jason then.

[Jason VanWees, Vice Chairman at Teledyne]

Again, thanks everyone for joining us today. If you have follow-up questions, feel free to call me at the number on the earnings release. Kerry, if you could give the replay information over the call, appreciate it. Goodbye, everyone. Thank you.

[Operator]

Thank you, ladies and gentlemen. Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

Participants

Executives

• Jason VanWees, Vice Chairman
• Robert Mehrabian, Executive Chairman
• Stephen Blackwood, EVP & CFO

Analysts

• George Bobb, President & CEO at Teledyne
• Andrew Buscaglia, Executive Director, Equity Research - U.S. Industrial Technology at BNP Paribas
• Damian Karas, Executive Director at UBS Group
• Greg Konrad, SVP - Equity Research at Jefferies Financial Group
• Noah Poponak, Research Analyst at Goldman Sachs
• James Ricchiuti, Senior Analyst at Needham & Company
• Jordan Lyonnais, Equity Research Associate at Bank of America
• Jonathan Siegmann, MD - Aerospace & Defense at Stifel Institutional
• Joseph Giordano, Managing Director at TD Cowen
• Robert Jamieson, VP - Industrial Technology at Vertical Research Partners