Teledyne Technologies(TDY) - 2025 Q3 - Quarterly Results

Third Quarter 2024 Financial Highlights The company reported strong Q3 2024 financial performance with increased net sales and diluted EPS, driven by robust demand, and raised its full-year earnings outlook - Orders exceeded sales for the fourth consecutive quarter, indicating strong demand and future revenue potential[1] - The company raised its full-year 2024 GAAP diluted EPS outlook to $17.28-$17.42 and narrowed its non-GAAP EPS outlook to $19.35-$19.45[1] - Capital deployment included approximately $354 million in stock repurchases year-to-date through October 2024, with a consolidated leverage ratio of 1.7x at quarter-end[1] Q3 2024 Key Financial Metrics (in millions, except percentages and EPS) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,443.5 | $1,402.5 | +2.9% | | GAAP Diluted EPS | $5.54 | $4.15 | +33.5% | | Non-GAAP Diluted EPS | $5.10 | $5.05 | +1.0% | | GAAP Operating Margin | 18.8% | 18.8% | 0.0% | | Non-GAAP Operating Margin | 22.5% | 22.8% | -0.3 p.p. | | Cash from Operations | $249.8 | $278.2 | -10.2% | | Free Cash Flow | $228.7 | $255.2 | -10.4% | Review of Operations This section details the varied financial performance across the company's four operational segments, with most showing growth except Digital Imaging Digital Imaging Net sales decreased by 1.0% to $768.4 million, and non-GAAP operating income fell by 7.4% to $173.6 million, driven by lower industrial automation and X-ray product sales Digital Imaging Q3 Performance (YoY, in millions, except percentages) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $768.4 | $775.8 | -1.0% | | Operating Income | $123.9 | $136.3 | -9.1% | | Non-GAAP Operating Income | $173.6 | $187.5 | -7.4% | - The decrease in operating income was primarily due to lower sales and unfavorable product mix, particularly from lower sales of industrial automation imaging systems[3] Instrumentation Net sales grew 6.3% to $349.8 million, with operating income increasing 12.6% to $96.3 million, primarily driven by strong marine instrumentation sales Instrumentation Q3 Performance (YoY, in millions, except percentages) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $349.8 | $329.1 | +6.3% | | Operating Income | $96.3 | $85.5 | +12.6% | - The increase in operating income was attributed to higher sales, favorable product mix, and improved margins in marine instrumentation[4] Aerospace and Defense Electronics Net sales increased by 9.2% to $200.2 million, and operating income rose 14.0% to $56.3 million, driven by higher sales in both defense and aerospace electronics Aerospace and Defense Electronics Q3 Performance (YoY, in millions, except percentages) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $200.2 | $183.3 | +9.2% | | Operating Income | $56.3 | $49.4 | +14.0% | - The increase in operating income primarily reflected the impact of higher sales and favorable product mix[5] Engineered Systems Net sales increased by 9.4% to $125.1 million, with operating income up 18.3% to $12.9 million, primarily driven by higher sales of engineered products Engineered Systems Q3 Performance (YoY, in millions, except percentages) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $125.1 | $114.3 | +9.4% | | Operating Income | $12.9 | $10.9 | +18.3% | Additional Financial Information and Outlook This section details the company's cash flow, capital allocation strategies, tax impacts, and updated financial outlook for the remainder of the year Cash Flow and Capital Allocation The company generated $249.8 million in cash from operations and $228.7 million in free cash flow, while reducing net debt and repurchasing $138.8 million in stock Free Cash Flow (Q3 2024 vs Q3 2023, in millions) | Item | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $249.8 | $278.2 | | Capital expenditures | ($21.1) | ($23.0) | | Free cash flow | $228.7 | $255.2 | - The company repurchased approximately 0.3 million shares for $138.8 million in Q3 2024, bringing year-to-date repurchases to $332.6 million[8] - Net debt decreased from $2,596.6 million at the end of 2023 to $2,237.0 million as of September 29, 2024[8] Income Taxes and Other Items The effective tax rate was -2.8% due to a $62.3 million tax benefit from a FLIR matter, while net interest expense decreased to $15.7 million due to lower debt - The effective tax rate was -2.8% in Q3 2024, compared with 19.2% in Q3 2023, mainly due to a $62.3 million net discrete income tax benefit from a pre-acquisition FLIR tax matter[10] - Net interest expense decreased by 14.7% YoY to $15.7 million, driven by reduced outstanding borrowings[11] Financial Outlook Teledyne raised its full-year 2024 GAAP diluted EPS outlook to $17.28-$17.42 and narrowed its non-GAAP EPS outlook to $19.35-$19.45, with Q4 projections also provided Q4 and Full Year 2024 Diluted EPS Outlook | Period | Metric | Low Estimate | High Estimate | | :--- | :--- | :--- | :--- | | Q4 2024 | GAAP EPS | $4.27 | $4.41 | | | Non-GAAP EPS | $5.13 | $5.23 | | Full Year 2024 | GAAP EPS | $17.28 | $17.42 | | | Non-GAAP EPS | $19.35 | $19.45 | Financial Statements and Reconciliations This section presents the company's condensed consolidated financial statements, including income statements, balance sheets, and reconciliations of GAAP to non-GAAP measures Condensed Consolidated Statements of Income For Q3 2024, Teledyne reported net sales of $1,443.5 million (+2.9% YoY) and net income of $262.0 million (+31.9%), with diluted EPS of $5.54 Income Statement Summary (in millions, except per share) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,443.5 | $1,402.5 | $4,167.7 | $4,210.5 | | Operating Income | $270.7 | $264.3 | $752.0 | $762.9 | | Net Income (to Teledyne) | $262.0 | $198.6 | $620.7 | $562.6 | | Diluted EPS | $5.54 | $4.15 | $13.01 | $11.75 | Summary of Segment Performance In Q3 2024, revenue growth was led by Engineered Systems, Aerospace and Defense Electronics, and Instrumentation, while Digital Imaging saw a slight decline Q3 2024 vs Q3 2023 Segment Performance (% Change) | Segment | Net Sales % Change | Operating Income % Change | | :--- | :--- | :--- | | Digital Imaging | (1.0)% | (9.1)% | | Instrumentation | 6.3% | 12.6% | | Aerospace and Defense Electronics | 9.2% | 14.0% | | Engineered Systems | 9.4% | 18.3% | | Total | 2.9% | 2.4% | Condensed Consolidated Balance Sheets As of September 29, 2024, total assets were $14.53 billion, with total liabilities decreasing to $4.93 billion, leading to increased stockholders' equity of $9.59 billion Balance Sheet Summary (in millions) | Item | Sep 29, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $2,990.2 | $2,981.4 | | Total assets | $14,530.9 | $14,527.9 | | Total current liabilities | $1,496.4 | $1,766.1 | | Total liabilities | $4,931.2 | $5,302.1 | | Total stockholders' equity | $9,594.2 | $9,221.2 | Reconciliation of GAAP to Non-GAAP Measures For Q3 2024, GAAP diluted EPS of $5.54 was adjusted to non-GAAP EPS of $5.10, with similar adjustments for operating margin, primarily due to FLIR-related items Q3 2024 GAAP to Non-GAAP EPS Reconciliation | Item | Per Share Amount | | :--- | :--- | | GAAP Diluted EPS | $5.54 | | FLIR integration costs | $0.06 | | Acquired intangible asset amortization | $0.80 | | FLIR acquisition-related tax matters | ($1.30) | | Non-GAAP Diluted EPS | $5.10 | Q3 2024 GAAP to Non-GAAP Operating Margin Reconciliation (in millions, except percentages) | Item | Amount | Margin | | :--- | :--- | :--- | | GAAP Operating Income | $270.7 | 18.8% | | FLIR integration costs | $3.7 | | | Acquired intangible asset amortization | $49.8 | | | Non-GAAP Operating Income | $324.2 | 22.5% | Explanation of Non-GAAP Financial Measures The company utilizes non-GAAP measures to offer a supplemental view of performance by excluding infrequent items, aiding investors in evaluating ongoing operating trends - Management believes non-GAAP measures provide a better understanding of short-term and long-term financial and operational trends by adjusting for items that have an infrequent or non-recurring impact[36] - Key adjustments to derive non-GAAP figures include acquired intangible asset amortization, FLIR integration costs, and FLIR acquisition-related tax matters[41] Disclosures This section contains important cautionary notices regarding forward-looking statements and associated risks Forward-Looking Statements This report contains forward-looking statements subject to numerous risks, including supply chain issues, geopolitical conflicts, and economic tensions, which could impact actual results - The forward-looking statements are based on current management expectations and are not a guarantee of future performance[15] - Key risk factors include supply chain shortages, inflation, geopolitical conflicts, changes in defense spending, trade sanctions, cybersecurity threats, and risks related to integrating acquisitions[15]