Teledyne Technologies(TDY) - 2026 Q3 - Quarterly Results

Executive Summary & Financial Highlights This section provides an overview of Teledyne's Q3 2025 financial performance, key achievements, and an updated outlook, including executive commentary Overall Q3 2025 Performance Teledyne reported increased net sales for Q3 2025, driven by recent acquisitions, but GAAP net income and EPS decreased, while non-GAAP figures showed growth Overall Q3 2025 Performance | Metric | Q3 2025 | Q3 2024 | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | | Net Sales | $1,539.5 million | $1,443.5 million | 6.7% | | GAAP Net Income Attributable to Teledyne | $220.7 million | $262.0 million | -15.8% | | GAAP Diluted EPS | $4.65 | $5.54 | -15.8% | | Non-GAAP Net Income Attributable to Teledyne | $264.5 million | $241.3 million | 9.6% | | Non-GAAP Diluted EPS | $5.57 | $5.10 | 9.2% | | Operating Margin | 18.4% | 18.8% | -0.4 pp | | Non-GAAP Operating Margin | 22.1% | 22.5% | -0.4 pp | Key Achievements & Outlook Update The company achieved record quarterly net sales, non-GAAP diluted EPS, and cash from operations, raising its full-year 2025 EPS outlook and announcing a pending acquisition - Record quarterly net sales of $1,539.5 million, an increase of 6.7% compared with last year[3] - Record quarterly non-GAAP diluted earnings per share of $5.57, an increase of 9.2% compared with last year[3] - Record quarterly cash from operations of $343.1 million and free cash flow of $313.9 million[3] Full Year 2025 Diluted EPS Outlook Update | Metric | Prior Outlook | New Outlook | | :------- | :------------ | :---------- | | GAAP Diluted EPS | $17.59 to $17.97 | $17.83 to $18.05 | | Non-GAAP Diluted EPS | $21.20 to $21.50 | $21.45 to $21.60 | - Quarter-end consolidated leverage ratio of 1.4x[3] - Announced pending carve-out acquisition of TransponderTech[3] Executive Commentary The Executive Chairman highlighted record quarterly sales, non-GAAP EPS, and free cash flow, driven by Teledyne FLIR backlog and recovering commercial businesses, with a strong balance sheet for future growth despite U.S. Government shutdown concerns - Record quarterly sales, non-GAAP earnings per share, and free cash flow were achieved[4] - Total company new orders were a quarterly record, partly due to continued backlog growth at Teledyne FLIR[4] - Defense-related businesses, including new acquisitions, are performing extremely well[4] - The balance sheet is the strongest in years, providing capacity to pursue acquisitions or stock repurchases[4] - Expectations for new awards and shipments in the very near-term are measured due to the current U.S. Government shutdown[4] Segment Performance Review This section reviews the financial performance of Teledyne's four operating segments: Digital Imaging, Instrumentation, Aerospace and Defense Electronics, and Engineered Systems Digital Imaging The Digital Imaging segment saw modest net sales growth from commercial infrared imaging and industrial automation, but operating income slightly decreased due to higher R&D expenses Digital Imaging Segment Performance (Q3 YoY) | Metric | Q3 2025 ($ million) | Q3 2024 ($ million) | Change (%) | | :---------------------- | :------------------ | :------------------ | :--------- | | Net Sales | 785.4 | 768.4 | 2.2% | | Operating Income | 123.4 | 123.9 | -0.4% | | Non-GAAP Operating Income | 170.2 | 173.7 | -2.0% | - Net sales increased primarily due to higher sales of commercial infrared imaging components and subsystems, unmanned air systems, and industrial automation imaging systems[7] - The decrease in operating income was primarily due to higher research and development expense[7] Instrumentation The Instrumentation segment reported increased net sales and operating income, driven by stronger environmental and marine instrumentation sales, particularly in gas detection and offshore energy/defense markets Instrumentation Segment Performance (Q3 YoY) | Metric | Q3 2025 ($ million) | Q3 2024 ($ million) | Change (%) | | :---------------------- | :------------------ | :------------------ | :--------- | | Net Sales | 363.6 | 349.8 | 3.9% | | Operating Income | 98.8 | 96.3 | 2.6% | | Non-GAAP Operating Income | 102.1 | 99.8 | 2.3% | - Net sales increase resulted from an $8.1 million increase in sales of environmental instrumentation (stronger gas detection products) and a $5.3 million increase in sales of marine instrumentation (stronger offshore energy and defense markets)[9] Aerospace and Defense Electronics This segment achieved significant growth in net sales and operating income, primarily driven by recent acquisitions contributing to defense electronics sales Aerospace and Defense Electronics Segment Performance (Q3 YoY) | Metric | Q3 2025 ($ million) | Q3 2024 ($ million) | Change (%) | | :---------------------- | :------------------ | :------------------ | :--------- | | Net Sales | 275.5 | 200.2 | 37.6% | | Operating Income | 70.4 | 56.3 | 25.0% | | Non-GAAP Operating Income | 77.3 | 56.5 | 36.8% | - Net sales reflected higher sales of $75.6 million for defense electronics, including $69.0 million from recent acquisitions[11] - The increase in operating income primarily reflected the impact of higher sales, partially offset by higher transaction and integration costs as well as higher acquired intangible amortization expense[11] Engineered Systems The Engineered Systems segment experienced a decrease in both net sales and operating income, primarily due to lower sales in engineered products and energy systems Engineered Systems Segment Performance (Q3 YoY) | Metric | Q3 2025 ($ million) | Q3 2024 ($ million) | Change (%) | | :---------------------- | :------------------ | :------------------ | :--------- | | Net Sales | 115.0 | 125.1 | -8.1% | | Operating Income | 12.2 | 12.9 | -5.4% | - Net sales reflected lower sales of $9.2 million for engineered products and lower sales of $0.9 million for energy systems[12] Additional Financial Information This section provides further financial details on cash flow, debt, liquidity, income taxes, and other corporate expenses Cash Flow Cash provided by operating activities significantly increased in Q3 2025 due to favorable accounts receivable timing, while capital expenditures also rose - Cash provided by operating activities was $343.1 million for Q3 2025, up from $249.8 million in Q3 2024, driven primarily by favorable timing of accounts receivable collections[13] - Capital expenditures for Q3 2025 were $29.2 million, compared with $21.1 million in Q3 2024[14] Free Cash Flow (Q3 YoY) | Metric | Q3 2025 ($ million) | Q3 2024 ($ million) | | :-------------------------------- | :------------------ | :------------------ | | Cash provided by operating activities | 343.1 | 249.8 | | Capital expenditures | (29.2) | (21.1) | | Free cash flow | 313.9 | 228.7 | Debt and Liquidity Net debt remained stable with a slight increase from December 2024, as the company repurchased senior notes and maintained significant credit facility availability Net Debt Position | Metric | September 28, 2025 ($ million) | December 29, 2024 ($ million) | | :------------------------ | :----------------------- | :----------------------- | | Total debt | 2,533.4 | 2,649.0 | | Cash and cash equivalents | (528.6) | (649.8) | | Net debt | 2,004.8 | 1,999.2 | - In Q3 2025, the company repurchased and retired $84.9 million of principal of its fixed rate senior notes for $77.7 million in cash[15] - As of September 28, 2025, $1,168.7 million was available under the $1.20 billion credit facility[16] Income Taxes The effective tax rate for Q3 2025 was 19.3%, a significant increase from Q3 2024's negative 2.8%, primarily due to a prior-year FLIR acquisition tax benefit Effective Tax Rate (Q3 YoY) | Metric | Q3 2025 | Q3 2024 | | :------------------------ | :------ | :------ | | Effective tax rate | 19.3% | -2.8% | | Net discrete income tax benefits | $4.9 million | $62.3 million | - The Q3 2024 benefits were primarily related to the resolution of an uncertain tax position related to a pre-acquisition FLIR tax matter[18] Other Financial Items Corporate expense increased due to higher employee compensation, while net interest expense decreased due to lower outstanding borrowings - Corporate expense was $22.0 million for Q3 2025, up from $18.7 million in Q3 2024, primarily due to higher employee compensation costs, including severance costs[19] - Interest expense, net, was $12.6 million for Q3 2025, down from $15.7 million in Q3 2024, due to lower outstanding borrowings[19] Outlook This section presents Teledyne's earnings per share outlook for the fourth quarter and full year 2025, distinguishing between GAAP and non-GAAP figures Earnings Per Share Outlook Teledyne provided its GAAP and non-GAAP diluted EPS outlook for Q4 and full year 2025, with non-GAAP figures excluding specific acquisition-related adjustments Q4 2025 Diluted EPS Outlook | Metric | Low | High | | :------- | :-- | :--- | | GAAP | $4.76 | $4.98 | | Non-GAAP | $5.73 | $5.88 | Full Year 2025 Diluted EPS Outlook | Metric | Low | High | | :------- | :-- | :--- | | GAAP | $17.83 | $18.05 | | Non-GAAP | $21.45 | $21.60 | - The non-GAAP outlook excludes acquired intangible asset amortization, transaction and integration costs, inventory step-up expense, and FLIR acquisition-related tax matters[20] Non-GAAP Financial Measures and Forward-Looking Statements This section explains the company's use of non-GAAP financial measures and provides cautionary notices regarding forward-looking statements and associated risks Use of Non-GAAP Financial Measures Teledyne uses non-GAAP financial measures to supplement GAAP reporting, offering additional insights into performance by adjusting for infrequent acquisition-related items, but these are not GAAP substitutes - Non-GAAP financial measures provide management, financial analysts, and investors with additional useful information for evaluating the company's performance, particularly for understanding operating results and trends by adjusting for certain expenses and benefits[21][48] - These measures are not meant to be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP[49] - Non-GAAP adjustments typically exclude acquired intangible asset amortization, transaction and integration costs, inventory step-up expense, and FLIR acquisition-related tax matters, as these are considered infrequent or non-recurring[50][51][53][56] Forward-Looking Statements Cautionary Notice The report contains forward-looking statements subject to risks and uncertainties, including governmental policies, economic tensions, and acquisition integration, which could cause actual results to differ materially - Forward-looking statements involve risks and uncertainties and are based on the current expectations of management[22] - Actual results could differ materially due to factors such as U.S. Presidential Administration policies, U.S.-China economic and diplomatic tension, U.S. Government shutdowns, inability to develop new competitive products, changes in tax laws, foreign currency exchange risks, rising interest rates, supply chain shortages, inflation, labor shortages, global economic disruptions, geopolitical conflicts (Israel, Russia-Ukraine), and acquisition integration risks[24][25][26] - Teledyne assumes no obligation to update forward-looking statements to reflect circumstances or events that occur after the date they were made[28] Condensed Consolidated Financial Statements (GAAP) This section presents the company's GAAP condensed consolidated statements of income, segment performance, balance sheets, and cash flows Statements of Income (Loss) Presents the GAAP condensed consolidated statements of income for Q3 and nine months ended September 28, 2025, and September 29, 2024, detailing net sales, costs, operating income, and net income attributable to Teledyne Condensed Consolidated Statements of Income (Loss) (GAAP) | Metric | Q3 2025 ($ million) | Q3 2024 ($ million) | 9M 2025 ($ million) | 9M 2024 ($ million) | | :-------------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Net sales | 1,539.5 | 1,443.5 | 4,503.1 | 4,167.7 | | Total costs and expenses | 1,256.7 | 1,172.8 | 3,682.8 | 3,415.7 | | Operating income (loss) | 282.8 | 270.7 | 820.3 | 752.0 | | Income (loss) before income taxes | 273.8 | 255.1 | 773.3 | 712.3 | | Net income (loss) attributable to Teledyne | 220.7 | 262.0 | 619.2 | 620.7 | | Diluted earnings per common share | 4.65 | 5.54 | 13.06 | 13.01 | Summary of Segment Net Sales and Operating Income (Loss) Provides a detailed breakdown of net sales and operating income by segment for Q3 and nine months ended September 28, 2025, and September 29, 2024, highlighting percentage changes Q3 Segment Net Sales and Operating Income (GAAP) | Segment | Q3 2025 Net Sales ($ million) | Q3 2024 Net Sales ($ million) | % Change Net Sales | Q3 2025 Op. Income ($ million) | Q3 2024 Op. Income ($ million) | % Change Op. Income | | :------------------------------ | :---------------------------- | :---------------------------- | :----------------- | :----------------------------- | :----------------------------- | :------------------ | | Digital Imaging | 785.4 | 768.4 | 2.2% | 123.4 | 123.9 | (0.4)% | | Instrumentation | 363.6 | 349.8 | 3.9% | 98.8 | 96.3 | 2.6% | | Aerospace and Defense Electronics | 275.5 | 200.2 | 37.6% | 70.4 | 56.3 | 25.0% | | Engineered Systems | 115.0 | 125.1 | (8.1)% | 12.2 | 12.9 | (5.4)% | | Total Net Sales / Operating Income | 1,539.5 | 1,443.5 | 6.7% | 282.8 | 270.7 | 4.5% | 9M Segment Net Sales and Operating Income (GAAP) | Segment | 9M 2025 Net Sales ($ million) | 9M 2024 Net Sales ($ million) | % Change Net Sales | 9M 2025 Op. Income ($ million) | 9M 2024 Op. Income ($ million) | % Change Op. Income | | :------------------------------ | :---------------------------- | :---------------------------- | :----------------- | :----------------------------- | :----------------------------- | :------------------ | | Digital Imaging | 2,313.4 | 2,248.6 | 2.9% | 365.3 | 351.2 | 4.0% | | Instrumentation | 1,074.5 | 1,013.7 | 6.0% | 293.1 | 269.5 | 8.8% | | Aerospace and Defense Electronics | 782.8 | 580.3 | 34.9% | 192.7 | 165.3 | 16.6% | | Engineered Systems | 332.4 | 325.1 | 2.2% | 35.1 | 23.1 | 51.9% | | Total Net Sales / Operating Income | 4,503.1 | 4,167.7 | 8.0% | 820.3 | 752.0 | 9.1% | Balance Sheets Presents the GAAP condensed consolidated balance sheets as of September 28, 2025, and December 29, 2024, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (GAAP) | Item | Sep 28, 2025 ($ million) | Dec 29, 2024 ($ million) | | :-------------------------------- | :----------------------- | :----------------------- | | ASSETS | | | | Cash and cash equivalents | 528.6 | 649.8 | | Accounts receivable and unbilled receivables, net | 1,331.0 | 1,213.2 | | Inventories, net | 1,058.1 | 914.4 | | Prepaid expenses and other current assets | 305.2 | 167.2 | | Total current assets | 3,222.9 | 2,944.6 | | Property, plant and equipment, net | 820.4 | 745.2 | | Goodwill and acquired intangible assets, net | 10,765.7 | 10,003.4 | | Prepaid pension assets | 240.2 | 227.6 | | Other assets, net | 319.5 | 279.7 | | Total assets | 15,368.7 | 14,200.5 | | LIABILITIES AND EQUITY | | | | Accounts payable | 459.5 | 416.4 | | Accrued liabilities | 893.6 | 844.9 | | Current portion of long-term debt | 450.2 | 0.3 | | Total current liabilities | 1,803.3 | 1,261.6 | | Long-term debt, net of current portion | 2,083.2 | 2,648.7 | | Other long-term liabilities | 921.4 | 734.8 | | Total liabilities | 4,807.9 | 4,645.1 | | Redeemable noncontrolling interest | — | 6.0 | | Total stockholders' equity | 10,560.8 | 9,549.4 | | Total liabilities and equity | 15,368.7 | 14,200.5 | Statements of Cash Flows Presents the GAAP condensed consolidated statements of cash flows for Q3 ended September 28, 2025, and September 29, 2024, detailing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (GAAP) | Activity | Q3 2025 ($ million) | Q3 2024 ($ million) | | :-------------------------------------- | :------------------ | :------------------ | | Net income (loss) including noncontrolling interest | 220.9 | 262.2 | | Depreciation and amortization | 84.5 | 76.9 | | Stock-based compensation | 10.5 | 8.7 | | Changes in operating assets and liabilities and other operating activity | 27.2 | (98.0) | | Net cash provided by (used in) operating activities | 343.1 | 249.8 | | Purchases of property, plant and equipment | (29.2) | (21.1) | | Purchases of businesses, net of cash acquired | (6.6) | (0.1) | | Other investing, net | 0.1 | 0.1 | | Net cash provided by (used in) investing activities | (35.7) | (21.1) | | Proceeds from (payments) on fixed rate senior notes | (77.7) | — | | Proceeds from exercise of stock options | 13.0 | 5.0 | | Acquisition of noncontrolling interest | (27.2) | — | | Purchases of treasury stock, including excise tax | — | (138.8) | | Other financing, net | 3.2 | (0.7) | | Net cash provided by (used in) financing activities | (88.7) | (134.5) | | Effect of exchange rate changes on cash | (1.0) | 23.6 | | Changes in cash and cash equivalents | 217.7 | 117.8 | | Cash and cash equivalents—beginning of period | 310.9 | 443.2 | | Cash and cash equivalents—end of period | 528.6 | 561.0 | Reconciliation of GAAP to Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP financial measures to their non-GAAP counterparts, including income, EPS, operating income, and net debt Non-GAAP Income and EPS Reconciliation Reconciles GAAP income before income taxes, net income, and diluted EPS to non-GAAP counterparts for Q3 and nine months, adjusting for transaction costs, inventory step-up, acquired intangible asset amortization, and FLIR tax matters Q3 GAAP to Non-GAAP Income & EPS Reconciliation | Metric | GAAP Q3 2025 ($ million) | Adjustments Q3 2025 ($ million) | Non-GAAP Q3 2025 ($ million) | GAAP Q3 2024 ($ million) | Adjustments Q3 2024 ($ million) | Non-GAAP Q3 2024 ($ million) | | :-------------------------------- | :----------------------- | :-------------------------- | :------------------------- | :----------------------- | :-------------------------- | :------------------------- | | Income Before Income Taxes | 273.8 | 57.2 | 331.0 | 255.1 | 53.5 | 308.6 | | Net Income Attributable to Teledyne | 220.7 | 43.8 | 264.5 | 262.0 | (20.7) | 241.3 | | Diluted Earnings per Common Share | 4.65 | 0.92 | 5.57 | 5.54 | (0.48) | 5.10 | 9M GAAP to Non-GAAP Income & EPS Reconciliation | Metric | GAAP 9M 2025 ($ million) | Adjustments 9M 2025 ($ million) | Non-GAAP 9M 2025 ($ million) | GAAP 9M 2024 ($ million) | Adjustments 9M 2024 ($ million) | Non-GAAP 9M 2024 ($ million) | | :-------------------------------- | :----------------------- | :-------------------------- | :------------------------- | :----------------------- | :-------------------------- | :------------------------- | | Income Before Income Taxes | 773.3 | 174.3 | 947.6 | 712.3 | 155.2 | 867.5 | | Net Income Attributable to Teledyne | 619.2 | 125.6 | 744.8 | 620.7 | 57.6 | 678.3 | | Diluted Earnings per Common Share | 13.06 | 2.65 | 15.71 | 13.01 | 1.21 | 14.22 | Non-GAAP Operating Income and Margin Reconciliation Reconciles GAAP operating income and margin to non-GAAP counterparts for Q3 and nine months, adjusting for transaction costs, inventory step-up expense, and acquired intangible asset amortization Q3 GAAP to Non-GAAP Operating Income & Margin Reconciliation | Metric | GAAP Q3 2025 ($ million) | Adjustments Q3 2025 ($ million) | Non-GAAP Q3 2025 ($ million) | GAAP Q3 2024 ($ million) | Adjustments Q3 2024 ($ million) | Non-GAAP Q3 2024 ($ million) | | :---------------------- | :----------------------- | :-------------------------- | :------------------------- | :----------------------- | :-------------------------- | :------------------------- | | Operating Income | 282.8 | 57.2 | 340.0 | 270.7 | 53.5 | 324.2 | | Operating Margin | 18.4% | | 22.1% | 18.8% | | 22.5% | 9M GAAP to Non-GAAP Operating Income & Margin Reconciliation | Metric | GAAP 9M 2025 ($ million) | Adjustments 9M 2025 ($ million) | Non-GAAP 9M 2025 ($ million) | GAAP 9M 2024 ($ million) | Adjustments 9M 2024 ($ million) | Non-GAAP 9M 2024 ($ million) | | :---------------------- | :----------------------- | :-------------------------- | :------------------------- | :----------------------- | :-------------------------- | :------------------------- | | Operating Income | 820.3 | 174.3 | 994.6 | 752.0 | 155.2 | 907.2 | | Operating Margin | 18.2% | | 22.1% | 18.0% | | 21.8% | - Detailed segment-level non-GAAP operating income reconciliation is provided, showing adjustments for acquired intangible asset amortization, inventory step-up expense, and transaction and integration costs for each segment[44] Non-GAAP Net Debt and Outlook Reconciliation Reconciles total debt to net debt and provides a reconciliation of GAAP to non-GAAP diluted EPS outlook for Q4 and full year 2025, detailing specific adjustments Non-GAAP Net Debt | Metric | Sep 28, 2025 ($ million) | Dec 29, 2024 ($ million) | | :------------------------ | :----------------------- | :----------------------- | | Total debt – non-GAAP | 2,533.4 | 2,649.0 | | Less cash and cash equivalents | (528.6) | (649.8) | | Net debt – non-GAAP | 2,004.8 | 1,999.2 | Q4 2025 GAAP to Non-GAAP Diluted EPS Outlook Reconciliation (Adjustments) | Adjustment Item | Low | High | | :-------------------------------- | :--- | :--- | | Transaction and integration costs | $0.03 | $0.01 | | Inventory step-up expense | $0.02 | $0.01 | | Acquired intangible asset amortization | $0.92 | $0.88 | | FLIR acquisition-related tax matters | $— | $— | Full Year 2025 GAAP to Non-GAAP Diluted EPS Outlook Reconciliation (Adjustments) | Adjustment Item | Low | High | | :-------------------------------- | :--- | :--- | | Transaction and integration costs | $0.18 | $0.16 | | Inventory step-up expense | $0.07 | $0.06 | | Acquired intangible asset amortization | $3.53 | $3.49 | | FLIR acquisition-related tax matters | $(0.16) | $(0.16) | Explanation of Non-GAAP Financial Measures Provides detailed definitions and rationale for each non-GAAP financial measure, explaining the exclusion of acquisition-related items for clearer ongoing operational performance and comparability - Acquired intangible asset amortization is excluded to provide an alternative way for investors to compare operations pre-acquisition to post-acquisition and to competitors with internal growth strategies[56] - Transaction and integration costs (e.g., legal, accounting fees, employee separation, facility consolidation) are excluded because they do not reflect ongoing financial performance[56] - Inventory step-up expense, a non-cash expense from purchase accounting, is excluded as it is not indicative of ongoing operating results[56] - FLIR acquisition-related tax matters (e.g., post-acquisition interest on tax reserves, tax benefits/costs from resolution) are excluded as they do not reflect ongoing financial performance[56]