Teledyne Technologies Incorporated Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
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Is Teledyne Technologies Incorporated a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $28.37b | Revenue (TTM) = $6.37b
Market Cap = $28.37b | Estimated Revenue = $6.62b
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $30.06b | Revenue (TTM) = $6.37b
Enterprise Value = $30.06b | Forward Revenue = $6.62b
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Teledyne Technologies Incorporated Stock Analysis
Analyst Opinions
17 Analysts have issued a Teledyne Technologies Incorporated forecast:
Analyst Opinions
17 Analysts have issued a Teledyne Technologies Incorporated forecast:
Teledyne Technologies Incorporated Events
Past Events
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SEP
10
Jefferies Global Industrials Conference 2026
15 days ago
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JUL
22
Q2 2026 Earnings Call
2 months ago
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APR
22
Shareholder/Analyst Call - Teledyne Technologies Incorporated
5 months ago
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APR
22
Q1 2026 Earnings Call
5 months ago
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FEB
12
47th Annual TD Cowen Aerospace and Defense Conference
7 months ago
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JAN
21
Q4 2025 Earnings Call
8 months ago
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OCT
22
Q3 2025 Earnings Call
11 months ago
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StocksGuide Free
Teledyne Technologies Incorporated — Jefferies Global Industrials Conference 2026
1. Question Answer
Well, good morning, everyone. Thank you all for joining. My name is Adam Samuelson. I'm Senior Vice President on the Aerospace and Defense equity research team here at Jefferies. I want to welcome you all to the second day of our Annual Jefferies Industrials Conference here in New York. Today, we're lucky enough to have Teledyne and their Vice Chairman, Jason VanWees here representing the company.
So Jason, thank you for joining.
Maybe just to start at a high level for newer investors, how do you define Teledyne today? Portfolio spans sensors, imaging, instrumentation, defense electronics, Engineered Systems, and other vertically integrated platforms from space to deep sea, probably missed a bunch of things in there as well. Kind of how do you -- how would you frame what Teledyne does and kind of why the model is differentiated?
Yes, sure. So again, Jason VanWees, Vice Chairman. I've been at Teledyne a little over 27 years as of last month. Principally, I'm responsible for M&A, capital allocation, I suppose, if you would like. And sometimes people are left thinking that Teledyne is very complicated and some of that's my fault because I'm willing to tell everybody everything we do in every market we serve and vertical and things like that, which really isn't the case.
It may sound counterintuitive after 75 acquisitions that we're actually a simpler company, but we are because virtually everything we bought has been a double-down acquisition in a market we're already in or a customer base we already serve circa 1999 when I joined. So certain things have gotten larger and more material. But thematically, what we build, like we said, principally, we're a sensor business. That's where most of our companies grew out of imaging sensors, acoustic sensors. Over time, though, we've grown in certain markets to be vertically integrated where we use our own sensors into cameras for applications ranging from machine vision, semiconductor wafer inspection, satellite imaging, things that look down like space development agency programs or big science things that look out, James Webb Space Telescope, Hubble Space Telescope, Nancy Roman Telescope just launched recently.
But again, we're still a merchant supplier of all those devices to any other market participants, sometimes our competitors, sometimes not. But again, in areas like unmanned systems, unmanned air, unmanned ground, unmanned subsea, we are vertically integrated and a complete system provider. But generally speaking, Teledyne is a sensor and subsystem company that in a few areas is vertically integrated and a system-level company. Now Jefferies has covered us out of A&D for more than 2 decades, and I think that's still a big part of our business. It's about 35% of our sales is defense.
Commercial aerospace, relatively small, but a good 5%. So we're still -- single largest end market is aerospace and defense, but that leaves another 60% of the company that is really, call it, high reliability industrial -- and those range from things like medical, sometimes commercial space imaging, someone like a Planet Labs as opposed to a Space Development Agency as an example. So similar type markets, but they tend to be commercial rather. And again, high reliability, not commoditized. Those are things that we try to avoid. Most of the markets that we're in tend to be a little bit nichey as one would say for the proverbial highly engineered product. Most of the competition are oligopolies. Sometimes we're #1, sometimes we're #2, maybe occasionally #3. But that's really Teledyne at the highest level, I would say.
That's a very helpful overview. Maybe we'll talk about kind of the recent performance, and we'll kind of dig in some of the individual businesses as we go. Maybe just start second quarter was the strongest quarter in the company's history for orders, sales, operating profit, 9% organic growth, 1.23 book-to-bill, kind of demand environment seems like it's really picked up over the last 6 months. And just how much of that is a step-up in backlog conversion versus kind of a real improvement in the underlying demand across your end markets?
Well, a little bit of both. I mean, again, the backlog has continued to grow. I mean I think we've actually had 11 consecutive quarters of book-to-bill north of 1. So yes, on an absolute basis, Q2 was the highest, both in terms of the ratio and in terms of the absolute order inflow to get backlog of about $5 billion funded backlog. We don't do in the defense world, we don't report contract ceiling, things like that. It's just fully funded orders in backlog. But yes, you're right, it's 9% organic growth.
I mean in the Digital Imaging segment, it was 11.9%. So that was the fastest. But in the other segments, it was good, too, mid- to high single digit to get to the 9% overall. Generally speaking, in the quarter, the defense business, which again, like I said, is about 1/3 of our sales, that was double digits for the company. But most of the high reliability industrial was maybe at worst kind of low single digit. Most of them were sort of mid-single digit. A few pockets a little bit stronger, but that's why the average organic was 9. Again, you had 1/3 of the company, nice double-digit growth, probably more like 12% than 10% on that 1/3, that's defense. But then you had a lot of sort of 3, 5, 7s on the commercial and industrial business. So it was a good quarter.
Yes. And with that, you raised your outlook for the year. I think it's about 7% organic growth in the guidance for the year. But relative to that first half with the 9% in the second quarter, it does imply some deceleration. And I just love to hear kind of the framing and thought process around have a view on end market slowing? Or is that just a view on you have short-cycle businesses that you don't have a lot of visibility to and a meaningful part of your business?
No, it's more of the latter. I mean most of the backlog-driven businesses when we talk about the $5 billion of backlog, the 11 consecutive quarters of book-to-bill north of 1, that's driven by the backlog businesses, which is about half the company, but at least a little less than half the company that is intra-quarter book and ship and the orders are usually because you get the order, you ship it. You could grow, you could contract, but it doesn't really build or consume backlog. So maybe there's a little bit of conservatism. And we did mention on the call that now maybe there's sort of $30 million, $40 million of upside based on trends as of July and to sort of split hairs, I think the organic guidance was pegged maybe closer to 6% and then the full year total growth closer to 7% because we have a few little bolt-on acquisitions.
But I acknowledge that, yes, there's probably a little bit of upside to that just the way things are even trending in July. So -- and the sell side is a little bit higher than the guidance by just about that $30 million to $40 million, but it's accurate. But I'd say, generally, we've been conservative. We try our best to underpromise and overdeliver. I think in the 27 years, 100-plus quarters I've been there, we probably missed our own guidance, I think, 3 times. So it's been a pretty good record. So again, it's not overly conservative, but I think we've tried to do a reasonable job of not guiding at the midpoint, say, the lower quartile.
That was not my implication. So maybe we'll go by end market because I think that's more just a broader -- better understanding for the investor community. Maybe we'll start in defense. And you said kind of 35% or so of your business is defense. And you tie in the commercial space pieces of it, maybe that's 40 or so if you think about that.
Maybe a little less, but in that neighborhood.
In the high 30s rate, growing at a high single-digit rate, maybe some pockets of double-digit demand, double-digit demand growth kind of -- can you talk about the areas where you're seeing kind of that high single-digit, low double-digit growth in space, unmanned systems, missile defense, electronic warfare kind of and elsewhere and kind of where the real kind of opportunity lies for the company over the next couple of years?
Yes. So just to frame it. So defense last year was about $1.9 billion, $1.95 billion. This year, it will be maybe [ $2,150 ]. So overall, kind of 10-ish percent, if you will, on a 2026 basis. If you had to break down that $2.1 billion, a little more than that, the single biggest sector is unmanned systems. That's about $575 million on a 2026 basis. Without getting too detailed, if you had to break that down, there's probably $225 million of unmanned air systems that will probably be up double digits or so this year. There's about $200 million that is components and subsystems, like I said, classic Teledyne to other people's unmanned air unmanned surface vessels, like you've probably seen some of the news about unmanned surface vessels and Strait of Hormuz and other parts in the Persian Gulf.
Those use our thermal imaging components, so they see at night. We're not a system provider there, but we're a component supplier in unmanned surface. But then we also are a system supplier in unmanned subsea. But the components and subsystems business that we sell to all of the above, that will probably be the fastest-growing thing this year, maybe up even 20%. So that's maybe a couple of hundred million. And that also includes components and subsystems for counter unmanned air. Ironically, it's kind of the same type of imaging components you use for counter unmanned that you'd use on unmanned. So yes, that as a theme, both counter unmanned and unmanned, both surface, subsea and air, that's probably the single fastest thing.
But overall, that $575 million of unmanned systems will be up double digits, but you probably got 15%, maybe even 20% in that components and subsystems, which touches every part of the market. The next fastest you mentioned is -- or the next largest rather is space, where this year, it will probably be about $450 million of revenue, almost exclusively sensors, some specialty radiation hardened semiconductors, but mostly imaging sensors in the Digital Imaging segment. One of the reasons why Q2, we had nearly 12% organic growth. A little more than half of that is infrared imaging, think Space Development Agency. It was after Q2, but some of the initial awards for Golden Dome that happened in July, those will use our sensors as an example.
But we also make, again, the visible light sensors for both commercial and defense applications, specialty hyperspectral sensors for both defense, but also things like weather satellites. We'll use some of our equipment as well. And then probably the other parts you mentioned, I won't break them down to exact revenue, but electronic warfare and infrared imaging systems that are non-space that might be just sold for things like helicopters or sniper sights, for example, that's a big wedge, electronic warfare components. Again, we're not a system supplier there, another wedge. Again, probably one of the faster-growing things, but a little smaller for us is components and subsystems for missiles and munitions.
There was a little press release today for a European order this morning that, that will probably grow from $200 million to $240 million. So that will probably be up 20% this year, but that's a smaller wedge. And then finally, unmanned subsea. So we actually -- untraditional business for Teledyne, but given our strength in the marine market and the unmanned subsea market, we actually make the current Navy Seal delivery vehicle. Again, that may not be a typical Teledyne business. You might think of a Huntington Ingalls or a Lockheed. But given our strength in unmanned subsea, we actually make a manned subsea vehicle as well for Navy SOCOM.
Okay. That's helpful. Maybe just staying on the unmanned for a second. As you think about that kind of market growth that you were describing maybe strongest, how do you think about the Teledyne offering and kind of whole systems offering and how that competes in the marketplace versus your customers on the component side? And kind of where you're seeing -- what market intelligence you're getting from the customer demand you're seeing on that component side and how that maybe iterates, if at all, your own development curve on your on your own drones?
Yes. Just maybe sort of to classify our business. I mean, so I think we're -- I'd consider ourselves a relatively low-cost producer of drones, meaning the average ASP, just order of magnitude for a Teledyne drone would probably be in the $10,000 to $100,000 range. That's kind of what we would sell. We're probably not interested in being a system supplier for very low-cost drone dominance programs, $1,000, $2,000 things that may not even have a radio, they may be tethered. They may not have electronic countermeasures. Some of those may not even have infrared, they may be daytime use. we're happy to sell infrared components to some of those folks, and we do.
We really don't want to be a system provider in our view, that kind of leans to the commodity and we avoid commoditized end markets. But if you want a highly capable drone at what I would think is a reasonably low cost, again, $10,000 to $100,000 where it does have thermal, it does have a radio. It is GPS jam resistant. It can work in GPS denied areas if it is jammed. So not immune, but very resistant to electronic warfare where some of those low-cost drones can just be dropped relatively easily. So again, we're a low-cost producer, but we're not a system supplier at the very, very low cost. But we do sell components and are happy to do that. But again, we sell to other people that have also, say, low-cost components. So the people you would think AeroVironment, for example, is in our neck of the woods and a very good customer and has been for many years for the Switchblade family of drones as an example, or even their observation class Puma, they're a customer of ours as well.
That's very helpful. And maybe before we move away from defense, you alluded to missiles and munitions being kind of the smaller part of the wedge. It's also an area where you've seen some very large framework agreements with DW and some of the key primes for things like PAC-3, AMRAAM, et cetera. Those could see production growth 2, 3, 4x over the course of the next several years as that industrial base has expanded. How do we -- I mean, should we be thinking about that smaller pieces of the wedge having kind of a much faster growth profile over the next couple of years? Or is there anything that we're missing?
No, I think it should. I mean, ironically, the 2 programs you mentioned. So AMRAAM is radar guided. And when I said we make electronic warfare and radar bits and pieces, we make it for AMRAAM. As an example, you mentioned, PAC-3. So again, we don't make the missile. We don't make the radars. We make some components for radars. But the seeker that Boeing makes that's on the end of the Lockheed missile for PAC-3, the Boeing seeker has sensors from Teledyne because you need those kind of components in the subsystems. So PAC-3 and AMRAAM are actually some of the larger pieces of that $200 million going to $240 million, which, again, a lot of those awards that you mentioned were just really recently. They were almost post quarter.
Right. Now this is all prospective. -- still getting the funding sorted out with the Congress on the framework agreements, but I mean they need to make a lot of PAC-3s.
No, on PAC-3, AMRAAM and then even to a lesser extent, some components and subsystems for Tomahawk, things like that. That should be a good business, indeed. But I also mentioned, it's not just missiles, a smaller wedge for us, very high growth rate, but some of the larger weds larger wedges like space, the Golden Dome awards didn't even happen until post quarter end. Some of the strength in digital imaging, you mentioned the book-to-bill in Q2 in that segment, it was over 1.4. And the single largest award in Q2 was a follow-on award to the award we got in December for Tranche 3 tracking layer from SDA. Because again, like I said, we only book fully funded orders. We don't book contract ceiling. So those contracts were awarded, I think, December 19. So in Q4, we got a sliver of an order for a tranche 3 tracking layer, but then we got follow-on awards for that in Q2. And then the Golden Dome goes -- didn't happen until July.
Okay. Maybe switching gears, you talked about digital imaging growth and some of that obviously is defense related, but talk about the nondefense parts of the Digital Imaging segment and kind of where you're seeing kind of any of the momentum there on the industrial, health care, et cetera?
Yes. One of the business we have is kind of on the long end of the short cycle. So it does have a little bit of backlog component where the other short-cycle stuff, like I said, is intra-quarter book and ship. But the specialty machine vision cameras that we make for things like semiconductor wafer inspection, and sounds like a different market, but some of the sensors that can see microns and nanometers and inch above a wafer aren't that different from sensors that you may make to a space-based imaging platform. So again, what do we make? We make very sensitive sensors. And when you do that, one of the verticals that you serve is semiconductor mask and wafer inspection. We do machine vision cameras for fill level in a bottle, but microns and nanometers don't matter.
In the other markets, they do matter. So that's kind of the long end of the short cycle. So you think key accounts like ASML or a KLA-Tencor as an example, a Lasertec in Asia with one of their competitors. That's been an area that's been getting better and good. But there has been increased revenue in that in Q2, probably double digits. There was a -- that was a component of the 1.4. I think some of that was more space. But one of the components of that backlog growth was semiconductor mask inspection on the commercial side. Most of the other commercial markets, again, like I said, they were positive, but health care was actually 8%, but let's call it, mid-single digits is sort of the guidance on the year, just had an easy comp in Q2.
Some of the electronic test and measurement business was 3% to 4%. So most of them were good. But yes, I don't think a standout on the commercial side. I would say machine vision cameras that are related to the semiconductor cap equipment was definitely a standout on the commercial side of the business. And to put that in perspective, that's maybe $200 or so million on an annual basis, but trending higher than that right now.
Okay. Maybe switching gears for something else kind of announced since the quarter was you announced the acquisition of Varex for $1.1 billion in early mid-August. Just provide an overview of the business, what attracted you to the asset? Kind of how does it impact your positioning or change your positioning in the health care imaging market relative to the existing portfolio that you have?
Yes. So I mean, at the highest level, we've been following the company for a long, long time. My first conversation with the CEO was 6 years ago. I think it was on a Saturday, maybe August 15 or 20 or something like that, I can't remember. But why was it interesting? And why do we do it now and not previously? Why was it interesting? The first thing I said at the beginning of this presentation was virtually everything we bought is a complementary product in a market that we're already in or customers that we already serve. We make a lot of vacuum devices for cancer radiotherapy in the health care domain.
We make some for electronic countermeasures jamming. We don't make any X-ray tubes. The processes aren't that different, but that's about 40% of their business. We understand it, but we don't make them all complementary. Some of the same key accounts like a GE that we currently sell X-ray detectors to. They also make X-ray detectors like us, so that's complementary. But it is complementary, not competitive. These are technology called amorphous silicon. Ours are mostly CMOS. They do a type of technology that's called photon counting. We don't do that.
So in terms of the actual use cases and why that matters and why it is complementary, not competitive, they're very certain cases where CMOS is, I think, better. That's what we do. If you want a really high-resolution image at a very low x-ray dose, think you're taking x-ray video, not an x-ray snapshot. Maybe you're doing orthopedic surgery or in your heart cath lab, you're doing a video, a lot of frame, frame, frame. You want to keep the radiation low because you have a lot of snapshots, if you will. CMOS works great. Where I mentioned we make vacuum devices for cancer radiotherapy. CMOS doesn't do very good, too high a radiation, they get zapped. So you need the other technology like Varex does as an example.
Why regarding the timing, again, I followed the company for a while. I think they had -- they sort of did a double-down acquisition prior to their spin, so it wasn't really theirs, but they were saddled with it, that I think was probably not the greatest and they ultimately shut that down and took a goodwill impairment in 2025. It's kind of cleaned up their own house a little bit. Then the balance sheet was a little bit stretched. They had a convert that would have been much more expensive than an M&A scenario with more equity if the convert goes into money. Then they had a bond with a make-whole premium. All that got cleansed in March of this year for a fully prepayable bank debt.
And then honestly, I think including our health care business and theirs and some of the laboratory and life sciences company, the Thermo Fisher, Danaher, Agilent, everybody had kind of been, including that wedge for us would have been a little bit of a post-COVID funk for 3 years or so. But that started turning around. Some of those names in Q4, some of those names like us in Q1, some in Q2. But I think the market got a little bit better. And hopefully, we try to catch a reasonable value at sort of the bottom of the cycle. So that was the reason for the timing.
Got it. And so as you kind of put Varex together with the rest of your medical exposure, that starts to get you to, what, 18%, 20% or so of the company is health care medical kind of related? Is that -- how do we -- how do you think about the growth opportunity, growth potential of that market, that platform for the [indiscernible] going forward?
Yes, sure. So first of all, I mean, most of Varex is health care, but that's only maybe about 65% to 70%. You'll also use X-ray detectors. There's CT systems for those who flew to this conference when you put your luggage or your handbag through TSA, I mean, that is an industrial CT system. And Varex makes some tubes for things like that. It's an X-ray device. So most of their business is health care, but a significant part of it is industrial nondestructive test, security and inspection, things like that is a reasonable part of their portfolio as well.
So to your point on health care and the size of the business, say, oh, maybe $600 million and change from Varex, coupled with our very clinical health care business, X-ray detectors and X-ray generators for cancer radiotherapy again, that's probably in the neighborhood of about $1 billion if you want to extend the definition to laboratory and life sciences sensors, where we serve those customers, like I mentioned, Agilent, Danaher, et cetera. That's probably another couple of hundred million. So you've got in the neighborhood of maybe $1.2 billion, so not quite, but kind of approaching on the $6.5 billion, $6.6 billion this year, yes, you're probably approaching 20%, but not quite on a pure laboratory health care, life sciences.
In terms of growth rates, I do think everybody had a little bit of a post-COVID funk in that domain on the health care side, but then it turned around positive for us. We were 8% in Q2. Varex was a little bit lighter, but positive in their Q2. I would say it's sort of a mid-single-digit, I think, growth market from here. But to be fair, there'll probably be a little bit of 80-20 around the edge on the Varex portfolio like some of our other acquisitions. So I personally think the Street sell side for them is a little bit too high for 2027. We'll probably shave off a few product lines that are less profitable. But then from that point on, I think 5%, but don't expect 5% in the first year will probably do a little bit of 80-20 on the margin.
Okay. And maybe to that point, how do we think about margin profile of the business as you kind of properly integrated, maybe do some portfolio pruning around the edges. How long does it take to get this business kind of -- or can it get to margins consistent with the rest of your medical portfolio?
Consistent with the rest of the medical portfolio. I think it might be a little bit lighter. I think gross margins maybe mid-30s, high 30s, I think EBITA, maybe 20%, where Teledyne as a whole, even with corporate cost is 23% in Q2 and gross margins are low 40s. So a little bit less because exotic stuff, high bill of materials. So gross margin is a little bit lower. But then SG&A shouldn't be as high as it is. You've got a handful of key accounts in both the security inspection and in the medical imaging domain. And so I think we can be a little bit leaner there. And of course, public company costs go out and things like that. So I do think it will be probably mid- to high teens soon, soon being public company costs and others 12 to 18 months. I think it will probably take maybe 2 to 3 years to get to the 20. It will be a little bit of harder work, if you will. But there's definitely a good path.
Okay. That's helpful. And maybe just maybe to close out on the M&A front. I mean, balance sheet is in great shape even after Varex. -- mean your pro forma leverage is going to be low 1 -- 1.2, low -- mid 1.1, 1.3, somewhere in that range. Just help us think about kind of the continued appetite for M&A, the capacity internally to do more deals and especially where -- I mean these aren't small -- these aren't very small tuck-ins anymore when they're $1 billion. I'm not saying they're transformative, but they're not small. So how do you think about the management capacity to start taking on kind of chunkier acquisitions going forward?
Yes. Well both management capacity as well as balance sheet capacity. So I mean really shouldn't be an issue. We've done 75, Varex pending at 76. So -- what typically we haven't done is will we do another health care acquisition immediately after Varex? Well, no, because I'd say we want the person who runs that business to be focused on that business. It's being tucked into a Teledyne company. It's a complementary business in a market that we're already in. We probably won't do one of those immediately. But that leaves another 80% of the portfolio that we just talked about that is not taxed at the management level, and we certainly have the corporate bandwidth, and we certainly have the balance sheet.
That said, we're price disciplined. I mean we've looked at a lot of aerospace and space acquisitions in the last 2 years. Most of those we've been outbid on. Most of those haven't closed or been announced, and we'll see what happens if time changes. But we're going to be price disciplined. I mean we're not a -- we win auctions. We're not a bottom fisher, but we're not going to also do anything silly -- pay high teens, 20-plus EBITDA, I don't think that's wise. But we'll do those, keep looking for acquisitions. We're not at the law of large numbers yet. So I think there's plenty of targets of opportunity to keep going even beyond this.
But on the other hand, we're opportunistic with share repurchases as well. We don't have an ongoing plan to buy back stock. We don't have a comment that we're going to buy so many shares per year to limit option creep or things like that. But we are relatively aggressive in after April 2024, when our stock sold off, we thought unfairly. We were quite aggressive in Q4 2025 when we think our stock sold off unnecessarily. And that may be the case now that we've gone from [ $690 to sub-$600 ] -- it's a tool in the toolkit. We don't say what we're doing, but we have the language in our K that we have more than $1 billion still authorized and don't be surprised if we may do some of that in the fading days of the quarter as well.
Okay. That's very helpful. Maybe pivoting kind of holistically on the margin side. I mean, second quarter kind of was a bit of a high watermark, maybe some extra benefits because of some of the tariff benefits that you kind of realized from refunds. But business as a whole growing kind of mid-single digit organically, help us think about kind of the operating leverage and kind of how that should translate to both margin expansion and kind of what the ceiling you think can be for margins for the company?
Yes. I mean just to reiterate, so yes, Digital Imaging in part because of the organic growth of the 11.9% in Q2, but in part because of the tariff refunds. I mean, yes, the margins were up in that segment, which is our largest, about 250 basis points. But in fairness, about half of that was tariff refunds. And the total company was about 120 basis points in Q2, though the tariff refunds were probably 60 of that or something of that nature. So still a good margin improvement really across the company, a couple of exceptions to that. But where there were exceptions it was because there were some tangible mix negative things, like unmanned subsea vehicles have lower margin than subsea sensors and unmanned subsea vehicles grew a lot in Q1 and Q2. So the margins were lower. Again, it's okay for sales, okay for EBIT, but if you're selling some of the systems have lower gross margin by their nature than just sensor content.
In terms of operating leverage, you saw it in Q2, we're expecting this year about 60 basis points to the total company level. Digital Imaging will be north of 100 even excluding tariffs because it has the highest growth. In all honesty, though, we're actually having a little bit of mix negative. Now again, we're growing fast enough that we're still getting margin improvement. But generally speaking, and not by a big margin, but all things defense are a little bit lower margin than all things commercial, and defense is growing faster than commercial. Now they're all doing well. I said defense this year might be double digits and the commercial stuff may be mid-single kind of at worst. But that said, that's actually a little bit mix negative. Again, you get enough operating leverage to sort of offset that, you still get margin improvement. But we've actually been probably negative mix the last sort of 6 quarters or so again, still we see margin improvement on the operating leverage and growth. But border line a little bit of mix negative behind the scenes.
Yes. Well, I mean, the way you framed the growth outlook earlier, it would seem like that mix kind of headwind is going to persist, if all else equal, some of the opportunities that are ahead on the defense side. So how do we think about kind of the ability for productivity, pricing initiatives to balance that?
I think it will balance. I mean it has balanced. It's just -- I'm trying to keep people's expectations on operating leverage a little bit more reasonable because the things that are growing the fastest, still very profitable, but just marginally less profitable than, say, something like semiconductor wafer inspection has higher contribution margin than, say, something like subsea vehicle. So that shouldn't be a surprise. And some of that is turning around. And that's what we saw in Q2 is that some of the things that have been slower growth on the commercial industrial side were mid- to high single or even in some wedges like, again, semiconductor wafer inspection were in the doubles as well.
That said, on pricing, I mean, yes, in fairness, there was probably 3 points of price in the 9% organic in Q2 because in certain areas, you needed it, and we're niche enough that you can get it. But you needed it where you have -- we're not a huge consumer of memory and there's talk about that, but we do buy some memory ironically, in some of those products that go to memory makers for semiconductor. And so price of the components is higher, the price of our product is higher. Certain -- most people have talked about rare earths or germanium or things like that. And yes, there has been price inflation. Nothing so far has constricted supply or constricted our shipments yet, but it has been an inflationary annoyance like Xilinx FPGA circa 2022. And we had probably $100 million of cost creep in 2022 for electronic components. And one of the reasons we had high single-digit organic growth was we had to probably put in 3, 4 points of price circa 2022. So we'll do that as necessary to combat inflation.
Got it. And so I mean you just called out some of the supply chain annoyances. Is there anything kind of that has maybe become bubbling up beyond the annoyance phase at this point on the supply chain and raw material or cost inflation broadly? Or is it still in the manageable realm?
It's certainly manageable. I mean it's been mostly an annoyance with regard to inflation and with an annoyance with regard to constraint of supply or constraint of shipment. I mean, again, the organic growth was pretty good at 9% and some of the businesses like defense that consume some of the more exotic stuff grew double digits in Q2. So it certainly has not been yet. It could be. I mean it's a risk factor in our 10-K. I mean it should be and everybody has it. But right now, it's been more of an inflation that we priced in than a limit in a shipment -- limit of shipments, for example.
Yes. Okay. So I mean, I think we talked about -- and the company has been growing inorganically over time. Is there any thought or how do you think about divestitures as part of that capital allocation toolkit? Is there any part of time as you see parts of the portfolio that maybe this isn't the right fit anymore, maybe the competitive set, the customer set isn't kind of where it had been originally and may not be a Teledyne business?
Yes. Not now. I mean we've interestingly, we've actually never sold anything that we've acquired. So it's not a private equity model. We try to seek a permanent home for businesses that we buy. Now again, there's a little bit of 80-20 in product pruning. One of the reasons why doing fantastic organically now, one of the reasons why revenue was kind of flattish at FLIR that we bought in 2021 for the first couple of years is there's probably about $130 million of the $2 billion of revenue that was not good revenue, and it's probably not divestible products. They weren't businesses. They were products that they were losing money on every unit. So those just went away, and that was okay.
But again, it did make FLIR look a little bit flattish for a couple of years. So there's 80-20 pruning. We're not -- especially when we buy a business, we're not married to every single product line. Sometimes people in my personal opinion, and this may even be us when you run a business unit, nobody wants to contract, right? You want to grow, but then suddenly you get married to products that you probably shouldn't be doing, where we're a little bit more dispassionate when you buy a business. And so there's been some 80-20 pruning. But that said, we have made a number of divestitures. I mean, since I joined, we probably -- if you go to original revenue, which was closer to $600 million, $700 million circa 1999, 1/3 of that doesn't exist. Now again, 1/3 of $700 million at today's $6.5 billion doesn't seem like a lot, but 1/3 of the company that we had just -- we divested over the years. So we've kind of finished with that process. What we have is what we like. But again, there's always a little bit of pruning here and there if the product line doesn't make sense, especially when you do an acquisition.
Okay. Great. Well, I think we're just about -- we're just out of time. So Jason, I want to thank you and thank everyone for joining us today.
All right. Thanks, everyone.
Teledyne Technologies Incorporated — Jefferies Global Industrials Conference 2026
Teledyne reports record Q2 orders and profits, defense and imaging lead growth, adds Varex to broaden healthcare exposure, and keeps M&A/buyback optionality.
📊 Key Message
- Core: Teledyne is a backlog-driven sensor and subsystem company seeing a demand step-up: Q2 was record orders, sales and operating profit, funded backlog ≈ $5.0B and book-to-bill >1.2. Growth is concentrated in defense (~35% of sales) and Digital Imaging; Q2 margins improved but included tariff refunds.
🎯 Strategic Highlights
- Defense: Unmanned systems (~$575M) and space (~$450M) are the fastest-growing wedges; components and subsystems are seeing very strong growth (management cited ~20% in parts of that wedge).
- Imaging: Digital Imaging grew ~11.9% in Q2 and had a segment book-to-bill north of ~1.4, driven by space awards and semiconductor inspection customers.
- Capital: Announced $1.1B acquisition of Varex to expand healthcare; pro forma leverage targeted ~1.1–1.3x and >$1B of buyback authorization remains; M&A remains price‑disciplined.
🆕 New Information
- Deal & backlog: Varex adds roughly $600M revenue (about 65–70% healthcare) and pushes healthcare toward ~20% of the company; fiscal‑year (FY) organic growth guidance was raised to about 7% with a stated potential $30–40M upside. Several Space Development Agency (SDA) awards occurred post-quarter.
❓ Analyst Q&A
- Backlog vs demand: Management said Q2 strength reflected both true demand and backlog conversion; guidance intentionally conservative with possible upside.
- Unmanned strategy: Teledyne prefers to sell capable, lower‑cost systems/components in the $10k–$100k range and to avoid ultra‑low‑cost commodity drones; they will sell both components and select systems.
- Margins & supply: Q2 margin gains (~120bps company) included ~60bps from tariff refunds; mix is shifting toward defense (slightly lower margin) but pricing, productivity and operating leverage are offsetting inflation and supply annoyances, which management describes as manageable.
⚡ Bottom Line
- Bottom line: Teledyne is benefiting from defense and imaging tailwinds and gains diversification via Varex in healthcare. Short‑term upside exists from backlog and SDA awards; margins should improve but will be tempered by a defense-heavy mix. Strong balance sheet, disciplined M&A and buyback optionality are positives for shareholders.
Teledyne Technologies Incorporated — Q2 2026 Earnings Call
1. Management Discussion
Welcome to Teledyne's second quarter earnings call. Here's our first speaker, Mr. Jason VanWees.
Good morning. This is Jason VanWees, Vice Chairman. I would like to welcome everyone to Teledyne's Second Quarter 2026 Earnings Release Conference Call. We released our earnings earlier this morning before the NYSE opened. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian; President and CEO, George Bobb; EVP and CFO, Steve Blackwood; Melanie Cibik, EVP, General Counsel, Chief Compliance Officer and Secretary.
After remarks by Robert, George and Steve, we will ask for your questions. But of course, before we get started, Tony's have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks and caveats as noted in the earnings release and our period of SEC filings. And of course, actual results may differ materially. In order to avoid potential selective disclosures, is call is simultaneously being webcast and a replay, both via webcast and dial-in, will be available for approximately 1 month. Here is Robert.
Thank you Jason. This morning, we were pleased to announce the strongest quarterly orders, sales and operating profit in the company's history. Specifically, sales increased 9.8%, and non-GAAP earnings increased 20.8%. Orders have now exceeded sales for the 11th consecutive quarter, and we ended June with approximately $5 billion of funded backlog.
Organic growth was greatest in our Digital Imaging segment where infrared detectors and systems for space, airborne and marine unmanned systems as well as counter unmanned applications increased significantly. Furthermore, we achieved mid- to single high digit growth in our other segments as well as each product line within the instrumentation segment.
Our second quarter performance reflected strong execution of the backlog we've been building for almost 3 years, but also the strength of our business portfolio and what Teledyne is today, a company with a broad set of sensors and vertically integrated platforms from space to deep sea. For example, we possess a unique range of precision sensors and devices, costly electromagnetic and acoustic spectrums. These include imaging sensors and optics from X-ray to infrared and transducers and sensor systems across the ultrasonic and acoustic frequency ranges.
Furthermore, while we continue to be a reliable merchant supplier of these products for applications in space, defense, health care, safety and energy, we also use these products in our proprietary products, sensors in our vertically integrated systems and platforms. Examples include unmanned area of systems top systems for counter UAS unmanned air systems applications, vision systems for in Maritime and manned surplus vessels, like the ones used in the Gulf of Hormuz and completely autonomous underwater vehicles, largely based on the strong Q2 performance, we now believe 2026 annual revenue will be $120 million greater than we forecast in April.
We're also raising our full year non-GAAP earnings outlook by $0.55 per share at the midpoint of our prior outlook to reflect the additional organic growth. Notwithstanding the acceleration of our organic growth we will continue to compound earnings and cash flow through acquisitions. In fact, approximately 90% of today's earnings are from businesses that Teledyne has acquired over the past 25 years. And with leverage at its lowest level in 6 years, we have more than ample flexibility to deploy significant capital.
George will now briefly comment on the performance of our 4 business segments.
Thank you, Robert. In the Digital Imaging segment, second quarter sales increased 12.7% and 11.9% organically due to well balanced growth among our defense and commercial businesses. Sales of infrared detectors for space-based imaging increased more than 20% as did revenue from infrared subsystems and cameras for our customers, unmanned air systems and unmanned maritime surface vessels as well as our products for border security and drone defense applications.
In addition, segment sales increased in each of our larger commercial end markets. That is sensors and cameras for industrial and scientific vision applications X-ray products for health care, commercial thermography cameras, electronics for maritime navigation and micro-electromechanical systems or MEMS.
Non-GAAP operating margin in the segment increased 353 basis points to 25% despite a 39 basis point increase in R&D expense within the segment. While tariff refunds contributed to the strong margin. The impact of refunds was nearly offset in dollar terms by the increase in R&D expense, inventory reserves and other accruals. In the Instrumentation segment, which consists of our marine environmental and test and measurement businesses. Second quarter sales increased 5.5% versus last year.
Overall sales of marine instruments increased 5.7% and primarily due to strong defense-related sales of unmanned subsea vehicles for applications such as anti-submarine warfare and mine countermeasures and interconnects for U.S., Virginia and Columbia submarines, which collectively increased approximately 20%. Instrumentation for offshore energy exploration and production also grew modestly.
Sales of environmental instruments increased 6%, due in part to a strong first full quarter of DD-Scientific, which we acquired in January as well as organic growth of gas and flame detection instrumentation partially offset by lower sales of laboratory and life sciences instruments. Sales of electronic test and measurement systems increased 4.3% with greater year-over-year orders of both Achilloscopes and protocol analyzers. Instrumentation non-GAAP operating margin in the second quarter decreased primarily due to product mix. That is the greatest year-over-year sales growth coming from autonomous underwater vehicles in marine, which carry lower margins. However, segment margin increased 160 basis points sequentially as sales of test and measurement instrumentation increased 14% from the first quarter.
In the Aerospace and Defense Electronics segment, second quarter sales increased 8.2%. Organic growth was relatively broad across defense electronics but highest at Qioptiq, which we acquired in early 2025. Commercial aerospace sales also increased slightly despite some delays in larger avionics retrofit opportunities. Non-GAAP segment margin increased 11 basis points year-over-year, even though there was a greater mix of defense electronics, which, as a whole, have a lower operating margin compared with commercial ABM. For the Engineered Systems segment, second quarter revenue increased 8.4% and segment operating margin increased 166 basis points, driven primarily by greater sales and execution related to commercial nuclear power and U.S. missile defense programs.
We'll now pass the call back to Robert.
Thanks, George. In conclusion, I'd like to be more specific about what drove the positive change in our full year outlook for both sales and earnings. As noted earlier, we believe 2026 full year sales will be approximately $120 million greater than our forecast in April, resulting in an annual increase of just under 7% to over $6.53 billion.
After our first quarter results, we set certain markets such as industrial inspection and health care we had seen headwinds we're beginning to inflect. This has indeed begun and where we previously forecast flat to low single-digit growth for our short-cycle businesses we're now comfortable with mid-single-digit growth collectively across our commercial portfolio for the year. Furthermore, orders and sales in our defense businesses have accelerated. And while many of our first and second quarter bookings were multiyear in nature. We think 2026 defense sales should increase at the high single-digit rate with pockets of double-digit growth.
Finally, the balance of our portfolio across markets and geographies has always been one of Teledyne's greatest asset. I should note that this is not a result of undue complexity but because many of our individual technologies and products from sensors to platforms serve multiple markets such as defense, energy and health care. Right now, most of our markets are moving in a direction that's positive. That is a combination of our investments in growth will help Teledyne 2x.
I will now turn the call over to Steve.
Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and I will discuss our third quarter and full year 2026 outlook. In the second quarter, cash flow from operating activities was $315.2 million compared with $226.6 million in 2025. Free cash flow, that is cash flow from operating activities less capital expenditures was $284.7 million in the second quarter of 2026 compared with $196.3 million in 2025. Cash flow increased due to favorable operating results in the second quarter of 2026 compared with 2025 as well as lower income tax payments.
Capital expenditures were $30.5 million in the second quarter of 2026 compared with $30.3 million in 2025. Depreciation and amortization expense was $85.7 million in the second quarter of 2026 compared with $86.5 million in 2025. We ended the quarter with $1.69 billion of net debt. That is approximately $2.03 billion of debt, less cash of $340 million.
Now turning to our outlook. Management currently believes that GAAP earnings per share in the third quarter of 2026 will be in the range of $5.10 to $5.25 per share non-GAAP earnings per share in the range of $6.05 to $6.15. And for the full year 2026, we believe the GAAP earnings per share will be in the range of $20.73 to $20.99 and non-GAAP earnings per share in the range of $24.45 to $24.65.
I will now pass the call back to Robert.
Thank you, Steve. We would now like to take your questions. Christine, if you're ready to proceed with the questions and answers. Please go ahead. .
[Operator Instructions] Our first question comes from the line of Amit Mehrotra with UBS.
This is Zack Walljasper on for Amit. I have 2 questions. First, between unmanned space, I think both those businesses are pegged to grow roughly 10% this year. At this point, how are we tracking relative to those targets? And what is the latest outlook for those 2? And then my second question is around orders. It seems like orders were up 20% in the quarter versus revenue growth of 10%. Can you just talk about the nature of the order and backlog increase? How much of its near-term book and ship versus kind of multiyear and what this can mean in terms of a very early framing for next year?
Thank you very much, Zack. Let me start with the second question and then move to the first. In Q2, we had really good orders. Overall, our book-to-bill was 1.23, led by digital hedging, which was higher than 1.4% -- 1.4x. So in terms of multiyear versus annualized, a lot of our longer-term order, especially in defense are multiyear. But having said that, the increases that we are projecting for this year, as I mentioned, $120 million in revenue versus April are really broadly across our various products, including defense and commercial. .
To break down exactly what is 1 year and what is multiyear, I don't have those numbers in front of me, but Jason can provide this -- those at the later time. Then on the unmanned versus space, both of those increased greater than 10%. And so that answers, I think, the first question.
Our next question comes from the line of John Godyn with Citi.
2. Question Answer
This is Bradley Oyester on for John Godyn. So I just want to dig in a little bit on the decent side of your business, particularly in missiles and munitions side. I know you have exposures on order munitions, but I just want to ask what kind of opportunities do you guys have on the programs that are attached to the MAC framework agreements. And just stepping back a little bit more broadly. I was hoping to provide a little bit of color, what percentage of the business is tied to missile munitions today. How should we think about the runway through the medium term, just given the strong demand globally?
Thanks. Let me just see if I can answer that misses and munitions, which would be microwave and energetic components and subsystems. Comprise about, I would say, somewhere between $200 million and $250 million of our revenue on a run rate basis. On the other hand, we do have a large number of other programs in the electronic warfare and radar which are kind of complementary to both of those. Now our various programs range from MRAM to past 3 to Hellfire, to Javelin and some new work for hypersonics that we are undertaking. With the use of missiles in the conflict, especially in Middle East, we're getting a lot of inquiries from our customers on increasing our production.
And in some cases, we've even had government investment in manufacturing upgrades to be able to meet those needs. As an example, in our Engineered Systems, we had over $10 million commitment to increase our manufacturing capabilities from government, specifically for those areas. And the other thing that's happening is some of the European customers are also like MBDA, we are also getting increases in all of those areas. So it's very hard to say what is specific about missiles and munitions. I said $250 million, but there are a lot of associated programs that feed into those, which make up the bulk of what is now about 30% to 35% of the company's sales that are going to defense worldwide.
Our next question comes from the line of Sheila Kahyaoglu with Jefferies.
It's Adam Samuelson on for Sheila. I guess, first, hoping to maybe disaggregate some of the margin drivers in the quarter, clearly, with this level of organic growth, there's going to be good volume leverage. But can you just -- just help us think about the specific tariff impact, kind of the impact of kind of cost inflation kind of broadly within your production base? And looking ahead, kind of how are you seeing cost inflation trends prospectively.
Let me start with the Adam, let me start with just the tariffs. I'm going to ask George to answer that question directly for Q2. George?
Sure. So the tariff benefit net of some other onetime items, was about a $10 million pickup in the quarter, mostly in digital imaging. And so from a margin standpoint, Digital Imaging had a 353 basis point improvement in margins year-over-year. And the tariffs contributed a little more than 100 basis points of that, call it, 120.
Let me go back to the other question, the overall margin. Total margin in our segments for Q2 was 25.1%. And once you put the corporate expenses against the total company margin was 23.4%, and that's 120 plus basis points better than last year. The segment itself themselves were 156 basis points better. These were primarily led by digital imaging, as George said, the margins grew 353 basis points. Even if you take the tariffs of the margins grew almost over 200 basis points. Also, we had some increases in our engineered system, and we had some headwinds in our instrumentation business, but we still had a 27% margin in our Instrumentation segment. So you're right. The increase in revenue Obviously, with a cost basis that we're very consciously controlling has led to improved margins across our portfolio. And I should add that margins in digital imaging both at player, especially and also [indiscernible] increase significantly.
Okay. And I guess just as a follow-up to that, is the strength in the quarter, maybe the top line implied decelerates through the balance of the year somewhat. But has your outlook for margin doesn't seem like the outlook for margins has really changed from where you were 3 or 6 months ago from the backing into the math correctly?
I think for the year, we're kind of being a little cautious. We think the margins will stay the same as we projected before. But there's -- if the revenues keep increasing right now, we're projecting overall revenue increase for the year of about 7%. If that -- which is, by the way, 200 basis points above what we projected in April. If that goes up, our margins would improve. Right now, we're thinking overall margin improvement across the company in 2026 versus 2025 of 56 basis points.
Our next question comes from the line of Jim Ricchiuti with Needham.
Robert, I apologize if you may have given this, but in terms of the growth by business segment. How should we think about it looking out for the full year, just given the nearly overall 7% growth that you're talking about for corporate as a whole?
Thanks, Jim. Let me start with Digital Imaging. We're right now thinking about 7.5% for the year, with flare growing over 9%. Instrumentation, we think about 5.7%. And then aerospace and defense, 7.2%, followed by Engineered Systems, about 5.6% which added together are just under 7%. We hope that we'll do better than that. But as you well know, we always have to be a little cautious to make sure the numbers that we mentioned are numbers that we can't meet.
Got it. Helpful. Yes, I know the question of sizing the unmanned business that you know as well comes up a lot. And I was wondering, you've talked in the past about $500 million or so in unmanned. I'm wondering if there's an update do that? And the other question I had on that is maybe in rough terms, how much of that comes in digital imaging and how much in the A&D bucket, if you can?
Yes. I think, in 2025, when we looked at year-end, Jim, the unmanned was about $500 million altogether. That includes air, ground and underwater. This year, we think that number is going to be more like $575 million, saw a significant growth, about a 12% growth. And then if you separate out air versus ground versus underwater, in 2025, about 400 of that was in digital imaging, and that includes air primarily air but some ground. And then underwater at the end of 2025 was about $100 million.
Now having said that, we have had some really good progress in both air and underwater, and we've been introducing new products. As you know, Jim, we really excel in our nano drones, our Black Hornet 4, which is now being sold is very successful. We'll probably introduce a whole series of new products in that domain. And in the underwater vehicles, we had some very good revenue and orders, especially in the U.K. and Europe. And we expect -- we're competing for some very large programs in that area. If successful, those would exceed the 2025 numbers. And finally, I should say we do supply subsystems for unmanned surface vessels. For example, our cameras were on board the surface vessel that unmanned surface vessel that saved our 2 pilots, helicopter pilots in the Gulf of Hormuz, and they were also on the surface vessel that was used unmanned surplus vessel to attack a submarine in the Gulf. So it's not just are underwater vehicles. But as I said, we try to kind of sell everything that we have from sensors to platforms. And some of them, while they're not very visible as final unmanned products are used in a lot of other unmet products. I hope that answers your question, Jim.
It does, Robert. And one maybe very quick one. Were there any pull-ins from Q3 or Q4 that added to the strength in Q2? Or is this basically just a pickup in activity across the board?
I would say a little bit of pull in, very little. We usually -- you come to the end of the quarter, two things happen. First, you have book and bill that you have to do, book and ship. And sometimes for various reasons, including sometimes you're worried about making sure you get paid. So you might retold some shipments. But then you may have some things on the shelf that you can't ship. So there's a little bit of a trade-off between what you pull in and what you don't ship. But eventually, that kind of flattens out because what you don't ship you ship early the next quarter. So there's always a little balance on that, but it's not something that's a significant contributor to our revenue.
Our next question comes from the line of Andrew Buscaglia with BNP Paribas.
This is Ed Maji on for Andrew. Entered in the prepared remarks that we're at the lowest point of leverage since before the FLIR acquisition. And you guys weren't -- or you didn't seem to be that active on the buyback front this quarter. Going back to last quarter, I believe you characterized some of the prices paid for deals in the market are particularly crazy. I'm curious if you can give an update on what you're seeing in the pipeline and potentially what industries may be screening as more attractive versus where you may be not so keen to step in on a relative basis?
Thanks, Ed. That's a very good question. First, let me talk about our leverage that Steve outlined. At the end of the quarter, Q2, our leverage was 1.1 -- net leverage was 1.1. So net-net, we all, after cash, about $1.7 billion roughly. Interestingly enough, that $1.7 billion has an interest payment of about 2.5% and doesn't start until 2028 and subsequent. So with the cash that we're generating now, and we generally are projecting for the rest of this year. If we don't do anything else, by the end of the year, our leverage should drop to close to $1 billion, which is about our annual free cash flow. So that's the leverage part. So we also have ample capability to make acquisitions.
We have a $1.2 billion of untouched credit facility plus if we were dropped to our debt to capital, debt to EBITDA ratio was when we acquired FLIR, we probably have close to $4 billion or more in capability. Now our M&A is interest is really broad. It's across all of our portfolio, including both defense and commercial. Even though it appears like we haven't done many deals recently in the last, I would say, 2 years -- we've spent over $1 billion in acquisitions. We are currently.
And then to answer your last question, we're currently looking at acquisitions, both small and what we call range, which would be out the order of [indiscernible] more. And we're active in the market. On the other hand, we are not willing to pay some of the crazy prices that we see out there. Some people are outbidding us in some very simple acquisitions by 30% to 33%. And we feel in the long term, that's not going to benefit anybody. So in some cases, we drop out or drop, but we are at it that is for sure.
Very helpful color. I appreciate that. And then wondering if you could spend a few moments on the short-cycle side. You spoke to industrial and commercial having an inflection and you took the guide up for overall short cycle. So I was hoping you could dig a little bit more specifically into end markets that are screened viably and whether the growth is broad-based or a little bit more isolated?
I'll let George answer that question if I may.
Yes. So I think it's more broad-based. So if we look in the quarter, we saw growth across the short cycle. So the industrial and scientific vision applications, which are in our DALSA E2B business grew in the high single digit in Q2, a little over $0.08. So in areas like semiconductor inspection, for example, which is a strong business for us, very active now, electronic inspection, for example. Our health care business, where we do both x-ray sensors and radiotherapy equipment. Also high single-digit growth, grew a little over 8.5% in the quarter, seeing good demand there on the medical -- x-ray detector side of the business. And test and measurement is another good example, grew about $0.04 in the quarter, continue to see strong demand on the oscilloscope side of the business in high-bandwidth applications. And power applications, including people designing power supplies for data centers, also started to see -- we've been talking about pickup in the Protocol Solutions business, saw really good orders year-over-year in that business and quarter-over-quarter growth in sales quarter-over-quarter, starting to see more demand in [indiscernible] in that test and PCI Express solutions. So overall, good breadth in the short cycle.
And then if we kind of look for the year in areas like that, industrial and scientific vision systems, thinking that's going to be a solid mid-single-digit growth on the order of 5%. Health care, as I mentioned, the x-ray detectors, et cetera, are strong in Q2, still looking at kind of low single-digit growth for the full year at this point. And then in test and measurement, also low single-digit growth. So good Q2, breadth in the demand and pretty positive outlook for the rest of the year.
Ed, I hope that answers your question.
Next question comes from the line of Joe Giordano with TD Cowen.
Because, on the guidance here, look, I know you like to be conservative and put on numbers you can achieve. We all appreciate that. But like the fourth quarter, even if I take the high end of the full year, I mean, it's barely up like year-on-year, and we're talking about all these businesses accelerating here. How much of that is conservatism. Is there some sort of thing in the comps that we have to worry about. But when I hear space better than we thought the unmanned accelerating, test and measurement accelerating all these things, it just seems very conservative into the end of the year. And maybe that's just a conservative guide, but just curious for your color there.
That's very good, Joe. You want me to be less conservative. Okay. .
I just want color. I don't need you to do anything different.
That's good. One of the issues that we face, let me just go to the heart of your question, Q4. We do have a little tough comps with last year's Q4 especially in digital energy. Having said that, to move the needle, significantly. I don't -- I can't do that. On the other hand, it could be an upside of $30 million, $40 million in various businesses. We're counting on it. On the other hand, we -- the short-cycle businesses, as George just elaborated, they're doing well. We expect to be in the mid-single digits versus April where we were saying 0 to 2 or 3. Those are coming along. Part of the other parties, we have to be cognizant of the fact that there are some headwinds in the supply chain.
Let me be more specific. There is a good chunk of our revenue, annual revenue over $1 billion that depends on things like germanium supply and rare earth magnets. We've worked very -- we haven't talked about these issues before but we've been working on these issues very hard since over a year ago. We've even set up some machine shops to be able to capture, for example, scrap in germanium, which is 50% of the products you make lenses going to scrap. So we have those headwinds that we're worried about. And finally, besides this, there's -- the oil prices keep jumping up and down. We have this whole new set of tariffs that are being proposed. Hopefully, they'll be proposed on withdrawn like they've done before. But you never know, being a little conservative at this point, Joe, it's not a bad thing. On the other hand, I hope we'll have an upside to what we're in.
No, I think there's a big difference between like being conservative and prudent and actually seeing real cause for deceleration. It sounds like it's the more the former than the latter, which is totally fine. If -- maybe I could just ask on space. That's growing faster than we maybe initially talked about. How big do you think that business is by the end of the year?
I think it's going to be about over $400 million, maybe $450 million. We are doing really well in that domain. Both in tranche 3, but we are the primary supplier to just about everybody in the golden dog. We have great leadership in that area. And we're very bullish about our space business because we have really very unique capabilities in our mercateluride detectors, that go in all of those systems. And we're also, of course, trying to add more electronics to go with it. So I'm very bullish about that domain, and I think so is George.
Our next question comes from the line of Jon Siegmann with Stifel.
This is Sebastian on for John today. Given the lengthening orders and awards you're seeing in the defense business, does this impact how the company is kind of thinking about incremental investments in this portion? And do you think the mix of government commercial will sort of flex in the medium term?
Let me pass the first part of the question, Sebastian, to George.
Yes. So I think the answer is yes, it is affecting the way we think about investing in the business. We're investing more CapEx this year than we did last year, probably about a 30% increase in CapEx year-over-year. And why is that? It's because we have really strong demand in areas like infrared camera modules in radars and other sensors that go into surveillance and border protection in counter UAS, unmanned subsea vehicles, for example, in unmanned aerial vehicles. So certainly, seeing the demand and working to meet that demand with higher CapEx. But we also are getting investment, and Robert alluded to this earlier, getting investment in certain areas from the government and even actually on the commercial side in certain businesses where we're seeing higher demand, we've got some customers investing in their particular programs to increase capacity as well.
On the Sebastian, on the inflection issue, right now, defense altogether is about 30%, 35%, if you include the foreign defense of our portfolio, 65% of our business is commercial. We don't think there's going to be inflection there. It's taken a lot more defense to do that. On the other hand, the good thing about our portfolio is that -- of the remaining nondefense business, 26% of our total portfolio in commercial is in the U.S. and almost 49% is across the world. So that balance helps us kind of have some assurance that we will have a good nondefense portfolio going forward. But an inflection would be we have to grow defense very significantly, which I don't think it's in the car, 10% or a little less, in some cases, double digit is about what we're thinking the defense growth would be.
Got it. That's helpful color. And then maybe a quick follow-on and might be a bit early, but is there any more color you can share on the Canadian fabric manufacturing partnership contract you guys want? Are you able to kind of quantify the size of that MEMS foundry business, and do you guys plan on kind of providing more color around that in the future?
Well, that's been really a long-term very good plus for us. As you know, the men's foundry, the government, the Canadian government has invested significant amounts of money. We're talking about over a number of years, another $300 million investment, that's called the C2 MI in Canada, near Bromont, in Bromont, and we're quite investing a little bit, but that takes a lot of pressure on new equipment, new space, and we're going to larger wafer sizes. So it's really good. It's been a very helpful program for Teledyne from the Canadian government.
Our next question comes from the line of Rob Jamieson with Vertical Research Partners.
Just on the Industrial Scientific machine vision, I mean, nice growth in the quarter, 8% accelerating from the prior quarter. And just looking at some of the end markets in which you're exposed, whether that's semi inspection, OLED inspection and food sortation logistics, CapEx outlooks there are pretty helpful. Just curious on your customer conferation there, are you seeing that optimism reflected? And then also, how would you characterize where we are right now in the industrial machine vision cycle prior to -- or compared to prior cycles?
Well, obviously, as you well know, Rob, both in the semiconductors and inspection of other devices, that's a hot area and everybody wants to be able to inspect things as they go. On the other side, some of the life science businesses that we're in are relatively flat. There are some headwinds because of the China trade. But overall, I would say, in general, the industrial businesses are moving up. We find that the full year would be as high as, let's say, mid-single digits. So we have some pockets that are associated with semiconductors, obviously, data centers, et cetera, that are moving faster and some other areas that we're participating, but they're not moving as fast. So overall, I think mid-single digits is what we're projecting right now.
Okay. And then just on Qioptiq as that's rolled into organic performance now and was flagged as one of the strongest growth areas in aerospace and defense electronics. Just curious, where are you in the integration curve there just from some of the margin opportunities that we've talked about and discussed previously? And I guess, also, are you seeing any cross-selling wins from Qioptiq or Micropac? And is that starting to show up in the order books?
Well, Qioptiq been a great acquisition. Let me start there. It's grown 20% organically in Q2. Margins, I think we mentioned before, just like everything else, when we start the margins are not comparable to what Teledyne's margins are, but their margins have been consistently improving. It's a bet run set of businesses and great presence in the U.K. We're very bullish about Qioptiq. On Micropac, George, do you want to say something about Micropac?
Well, I think it's a similar story on Micropac. I mean we're seeing margin improvement, seeing good opportunities there in areas like for distribution, for example, where we are seeing some cross-selling opportunities, for example, the rest of spaces.
And then Qioptiq has brought some capabilities to us that make it possible to compete in programs, we couldn't, especially space programs in Europe where kind of there is a bias towards European production capability to make products in Europe specifically. So when you take some of the Qioptiq capabilities with some of our E2E capabilities in Europe, we're very successful in space programs.
Our next question is a follow-up question from Joe Giordano with TD Cowen.
Just curious on the test and measurement outlook, right? I mean I think the growth there was a little bit better than expected in the quarter. I know you had the tough protocol analyzer comps from late last year. But just curious -- the reason on the scope side is very positive at competitors and stuff into the second half. So how should we frame second half into '27 for a market that seems to be kind of hitting a stride here?
Yes. I'm going to let George answer that. But let me start by just kind of laying the groundwork. The oscilloscope business is doing well. but it could do better, especially as we make more products at the very high end. The protocol business, it's a kind of very interesting business, and I'll let George discuss it as to the sequence of events that take place before people adapt the new protocols. George?
Yes, that's right. So on the protocol side, really what you have is developers buying our protocol instruments as they develop new silicon, then when those go into production, you've got integrators that kind of pick up that next wave of equipment purchases. So I think in the Protocol business, we've -- in the first half of the year, it's been a little slower given some of those PCI Express and other devices get into market. We started to see some of those devices come to market as we got through Q2, and we expect that to continue in the back half of the year. areas like memory devices, CPUs, et cetera. So I think the big picture here is as Robert mentioned, the oscilloscope business just been hitting its marks, solid, doing well, growing at [indiscernible] year-over-year. the protocol business, lower in the first half. I'm kind of optimistic that in the second half, we're going to continue to see that pick up. Given Q1 and the contraction still think the full year is perhaps kind of around 3% overall for test and measurement. But I would say the trend headed into the back half of the year is more positive than the first half.
Yes. And I think, Joe, the -- if you look at PCI, which is our PCI first, which is our primary product, PCI Express 6 has got twice the speed of PCI Express 5. And on speed is not everything. And so we know that's going to be adapted broadly. It's just a matter of at what point does that break through. And when it does, it will be very healthy for us.
We have no further questions at this time. I'd like to turn the floor back over to management for closing comments.
Thank you, Christine. I would like to now ask Jason to conclude our conference call.
Thanks, Robert, and thanks, everyone, for joining us today. And of course, if you have follow-up questions, you could feel free to call me at the number in the earnings release or send me an e-mail, and I'll be happy to get back to you again. Thanks, everyone. Goodbye.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Teledyne Technologies Incorporated — Q2 2026 Earnings Call
Record Q2: sales +9.8% and non‑GAAP earnings +20.8%, backlog ~$5B, guidance raised and cash flow strong.
📊 Quarter at a Glance
- Sales: Q2 revenue up 9.8% year‑over‑year, broad-based organic growth led by Digital Imaging.
- Earnings: Non‑GAAP EPS rose 20.8% in Q2; company raised full‑year non‑GAAP EPS midpoint by $0.55.
- Orders: Book‑to‑bill ~1.23; funded backlog ~ $5.0 billion at June end.
- Cash: Q2 free cash flow $284.7M; net debt $1.69B (debt less cash) with net leverage ~1.1x.
- Margins: Company non‑GAAP operating margin ~23.4% (segments 25.1%); Digital Imaging margin up ~353 bps YoY.
🎯 What Management Says
- Backlog execution: Management attributes results to executing a multiyear backlog and the company’s vertically integrated sensor/platform portfolio across space, maritime, defense and commercial markets.
- Raised targets: 2026 revenue outlook increased by ~$120M versus April and EPS midpoint increased $0.55, reflecting stronger organic demand.
- Capital strategy: Low leverage and strong cash flow support elevated capex, continued M&A focus and flexibility to deploy significant capital when valuations are reasonable.
🔭 Outlook & Guidance
- Q3 guide: GAAP EPS $5.10–$5.25; non‑GAAP EPS $6.05–$6.15.
- Full‑year guide: GAAP EPS $20.73–$20.99; non‑GAAP EPS $24.45–$24.65; management expects full‑year revenue to exceed $6.53B (~+7% vs prior plan).
- Risks: Supply‑chain constraints (germanium, rare‑earth magnets), tariff impacts and tough Q4 year‑ago comps could limit upside.
❓ Analyst Q&A
- Order mix: Strong Q2 orders led by defense; many awards are multiyear but management didn’t fully quantify near‑term vs multiyear split.
- Unmanned & space: Unmanned business estimated rising from ~$500M (2025) to ~$575M in 2026; space business expected >$400M–$450M by year‑end.
- Margins & drivers: Q2 margin uplift aided by ~$10M tariff refunds, volume leverage and offsetting items (higher R&D, inventory reserves); management expects modest overall margin improvement for 2026.
- M&A capacity: Net leverage ~1.1x, ~$1.2B undrawn credit; company active on acquisitions but disciplined on price.
⚡ Bottom Line
- Implication: Teledyne delivered a record, backlog‑driven quarter, raised 2026 revenue/EPS targets and generated strong cash, leaving shareholders with improved organic momentum and financial flexibility—balanced by supply‑chain and tariff risks and conservative H2 assumptions.
Teledyne Technologies Incorporated — Shareholder/Analyst Call - Teledyne Technologies Incorporated
1. Management Discussion
Hello, and welcome to the 2026 Annual Meeting of Stockholders of Teledyne Technologies, Inc. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Robert Mehrabian, Executive Chairman of Teledyne. Dr. Mehrabian, the floor is yours.
Thank you. Good morning, ladies and gentlemen. I'm Robert Mehrabian, Executive Chairman of Teledyne Technologies Inc., and it's my pleasure to welcome you to the meeting. It's 9:15 a.m., and in accordance with the notice of the meeting, I call to order the Teledyne Technologies Annual Meeting of Stockholders. This year we are again holding our annual meeting virtually. This annual meeting is also being made available to the public in a listen-only webcast mode. An agenda and rules of conduct for the meeting have been posted on our virtual meeting site. All stockholders entitled to vote have the ability to do so online. After voting has been completed on all matters on the agenda, we have closed the polls and Ms. Cibik will present the preliminary report of the inspector of election.
I will now make certain introductions. Let me first introduce our directors who are also participating virtually. The directors who handed are reelection are Michelle A. Kumbier, Senior Vice President and President, Turf and Consumer Products, [indiscernible] and Robert A. Malone, Executive Chairman, President and CEO of First Sonora Bancshares, Inc. and retired Chairman and President of BP America, Inc.
Teledyne Directors whose terms are continuing, in addition to myself, are Laura A. Black, Managing Director of Miedema Company, LLC. George C. Bobb, the third President and CEO of Teledyne. Simon M. Lorne, Senior Adviser, and former Vice Chairman and Chief Legal Officer of Millennium Management LLC and former General Counsel, U.S. Securities and Exchange Commission. Vincent J. Morales, Senior Vice President and Chief Financial Officer of PPG Industries Inc. Jane C. Sherburne, Principal of Sherman, PLLC and former Senior Executive Vice President, General Counsel and Corporate Secretary of the Bank of New York Melon Corporation. Michael T. Smith, retired Chairman and CEO of [indiscernible] Electronics Corporation and Teledyne Director and Wesley W. von Schack, Chairman of AG Insurance Services and former Chairman, President and CEO of Energy East Corporation.
I would like to take a moment to express our deep gratitude to our director and friend, [indiscernible], who decided to retire from our Board of Directors following the expiration of its term at today's Annual Meeting of Stockholders. Throughout his 20-year service and has been a valued and dedicated member of the Board and we're deeply great for his many contributions to Teledyne. I would also like to introduce Stefan F. Blackwood, Executive Vice President and Chief Financial Officer of Teledyne and Melanie S. Cibik, Executive Vice resident General Counsel, Chief Compliance Officer and Secretary of Teledyne. Also present today is Adam Parrish of the Deloitte and Touche, the company's independent auditors. If questions arise during the discussion period that I am should appropriately address, he will be glad to respond. We're also being assisted today virtually by representatives of Computershare, Mark [indiscernible] will serve as inspector of election.
I will now move to the second agenda item. Melanie Cibik will report on the meeting of the notice of this meeting and the presence of a quorum.
This meeting is held pursuant to notice stated and mailed or made available to stockholders on March 12, 2026, to each stockholder of record on March 2, 2026 who is entitled to vote. A list of stockholders entitled to vote at the meeting has been available at company headquarters for the past 10 days and is also available for examination by any stockholder desiring to do so on the website used to access this meeting. All documents concerning the call and notice of the meeting will be filed with the records of the meeting. The preliminary count of shares present immediately before the start of this meeting indicated 93.76% of the outstanding voting stock of the company present in person or by proxy. This represents a quorum.
I hereby declare a quorum is present at the meeting. Now we will proceed to agenda item #3. The first matter to be acted upon by stockholders is the election of 2 Class III directors to serve until the 2027 annual meeting as provided in the proxy statement. Melanie Cibik will now put in nomination the name of the slate of directors listed in the proxy statement.
I hereby nominate for election as directors of the company the following directors: Michelle A. Kumbier and Robert A. Malone.
I second the motion.
Thank you, Steve. No recent notice was received by Teledyne that any other nominations would be made at this meeting pursuant to the nomination procedure provided for in the company's restated certificate of incorporation and bylaws. Therefore, I declare the nominations closed.
The next matter being submitted to stockholders for action is the ratification of the appointment by the Audit Committee of our Board of Directors of Deloitte & Touche LLP as our independent registered public accounting firm. In its steel operations, the Audit committee has worked regularly with Deloitte and Touche MP and has had the opportunity to evaluate their work. I move for the ratification of the appointment of Deloitte & Touche to audit the financial statements of the company had its subsidiaries for the year 2026.
I second the nomination -- or motion, sorry.
Thank you. The next matter being submitted to stockholders for action is the advisory resolution on executive compensation, commonly referred to as stay on pay on core. We're asking the stockholders to approve the nonbinding advisory resolution on executive compensation as described and set forth in the proxy statement. The Board has recommended a vote in favor of this nonbinding resolution. Therefore, I move for the approval of this resolution.
I second the motion.
Thank you, Melanie. The next matter being submitted to stockholders for action is the proposal to approve the amendment and restatement of Teledyne restated certificate of incorporation to adopt a stockholder right to call a special meeting of stockholders as described in the proxy statement. As noted in the proxy statement, the affirmative vote of a majority of shares outstanding is required to approve this proposal. The Board has recommended a vote in favor of this proposal. Therefore, I move for the approval of this proposal.
I second promotion.
Thank you, Steve. The next and final matter being submitted is the approval of the proposed amended and restated paradigm Technologies Incorporated 2014 incentive award plan as described in the proxy statement. Based on the recommendation of the Personnel and Compensation Committee, the Board adopted demented plan subject to stockholder approval. The Board has recommended a vote in favor of this purpose of, therefore, a move for the approval of this proposal.
I second the motion.
Thank you. Ms. Cibik is there any other business that this forum should consider?
Management knows of no matters to be properly presented for consideration at this annual meeting.
Thank you. Voting has now been closed. We will have a report of the secretary Melanie.
Mr. Chairman, the ballots have been counted in over 96% of the shares present in person or by proxy at this meeting have been voted for the election of each of the 2 Class II director nominees named in the proxy statement. Over 97% of the shares present in person or by proxy at this meeting have voted in favor of ratifying the appointment of Deloitte & Touche LLP as Teledyne's independent registered accounting firm to audit our financial statements for fiscal 2026. Over 95% of the shares present in person or by proxy at this meeting have been voted in favor of approving the advisory vote on executive compensation. Over 87% of the outstanding shares have been voted in favor of approving an amendment and restatement of the company's restated Certificate of Incorporation to adopt the stockholders' right to call special meetings of stockholders. Finally, over 93% of the shares present in person or by proxy at this meeting have been voted in favor of approving the amended and restated Teledyne Technologies, Inc. 2014 Incentive Award Plan.
I hereby declare that the nominees for directors have been duly elected. The appointment of Deloitte & Touche LLP to audit Teledyne's financial statements for our fiscal year 2026 has been duly ratified and the advisory resolution on executive compensation has been duly approved. I hereby declare that the proposal to approve an amended and restatement amended and restatement of the company's restated Certificate of Incorporation to adopt a stockholder right to call a special meeting of stockholders has been during approval. Finally, I hereby declare that the proposal to approve the amended and restated Teledyne Technologies, Inc. 2014 incentive award plan has been duly approved. We have now come to that part of the agenda providing for general questions and discussions. If there is or are stockholders entitled to go through this meeting and wish to ask a question, you may submit the questions by clicking on the message icon in the upper right corner of your screen and typing in your question. We will answer questions submitted by you after the meeting. This includes your e-mail address with your question. As there is no other business, this concludes our meeting. Thank you for joining and for your support and interest in Teledyne. The meeting is adjourned.
This concludes the meeting. You may now disconnect.
Teledyne Technologies Incorporated — Shareholder/Analyst Call - Teledyne Technologies Incorporated
🎯 Key Message
- Narrative: Teledyne emphasizes governance discipline and shareholder alignment at its annual meeting. The agenda concentrates on board renewal (two new Class III director nominees) and a slate of governance resolutions—auditor ratification, an advisory vote on executive compensation, a stockholder right to call a special meeting, and an updated incentive plan—designed to strengthen oversight, risk management, and long-term value creation for investors.
🧭 Strategic Highlights
- Board refresh: Nomination and election of two Class III directors to ensure continuity and independence.
- Governance rights: Approval of a stockholder right to call a special meeting enhances shareholder influence.
- Compensation alignment: Advisory vote on executive compensation and updated 2014 Incentive Award Plan link incentives to long-term performance.
🆕 New Information
- What's new: Governance-focused actions only: director elections, auditor ratification, advisory compensation vote, special-meeting rights, and incentive plan approval. No earnings, product, or market guidance disclosed.
⚡ Bottom Line
The meeting reinforces Teledyne’s governance framework and board continuity, with broad support for the proposed measures. While no financial or product news was released, the results sustain oversight quality and the potential for long-term shareholder value.
Teledyne Technologies Incorporated — Q1 2026 Earnings Call
1. Management Discussion
Welcome to Teledyne's First Quarter Earnings Call. I would now like to introduce our first speaker, Mr. Jason VanWees. Jason, please go ahead.
Thank you. Good morning, everyone. This is Jason VanWees, Vice Chairman. I'd like to welcome everyone to Teledyne's First Quarter 2026 Earnings Release Conference Call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian; President and CEO, George Bobb; EVP and CFO, Steve Blackwood, and Melanie Cibik, EVP, General Counsel, Chief Compliance Officer and Secretary.
After remarks by Robert, George and Steve, we'll ask for your questions. But of course, before we get started, all forward-looking statements made this morning are subject to various assumptions, risks and caveats as noted in the earnings release under 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 via webcast and dial-in, will be available for approximately 1 month. Here is Robert.
Thank you, Jason, and good morning, everyone, and welcome to our conference call. We started 2026 with record first quarter sales, earnings per share and operating margin. Specifically, sales and non-GAAP earnings increased 7.6% and 17.2%, respectively. In addition, despite a 30 basis point increase in R&D expense, non-GAAP operating margin increased 58 basis points year-over-year.
And while we acquired DD-Scientific in January and increased our capital expenditures significantly from last year, our leverage ratio declined to the lowest level in 5 years since before the acquisition of FLIR in 2001. Excluding the impact of acquisitions, sales increased 5.3% due in part to the performance of our Digital Imaging segment, while organic growth was 6.9%.
Sales of visible light sensors, infrared detectors and specialty semiconductors for space applications, each increased at double-digit rates as did FLIR infrared cameras for unmanned air vehicles as well as our own complete unmanned aerial systems. Also within the Digital Imaging segment, our industrial imaging and x-ray businesses is returned to year-over-year growth, which helped contribute to the strong margin performance in the first quarter.
Given stronger sales in the first quarter, but also record orders and backlog with a book-to-bill of 1.16, which is our tenth consecutive quarter of book-to-bill of over 1, we're comfortable in increasing both our expected sales and earnings for 2026. We believe now sales will be in the range of $6.415 billion or 70 basis points higher than we communicated in January. We're also raising our earnings outlook at both the bottom and top of our prior range. to about $24 at midpoint or $0.35 overall in increase. George will now briefly comment on the performance of our 4 business segments. George?
Thank you, Robert. In the Digital Imaging segment, first quarter sales increased 7.9% due to well balanced growth throughout the segment, including Teledyne imaging sensors, Delta e2v and Teledyne FLIR. As Robert mentioned, sales of visible and infrared detectors for space-based imaging increased nicely. Sales of infrared subsystems and cameras for our customers' unmanned air systems and unmanned maritime service vehicles also increased. .
In addition, revenue from our own complete unmanned air systems increased due to continued growth of the highly differentiated Black Hornet nano drone as well as full rate production deliveries of our Rogue 1 loitering munition. Interest in counter drone activity also remains elevated. And in the first quarter and early Q2, we received orders for infrared cameras and subsystems, totaling in the tens of millions of dollars for counter drone applications. There were also bright spots outside of defense.
For example, industrial machine vision cameras and sensors for semiconductor inspection and X-ray products for health care increased year-over-year and sales of micro-electromechanical systems or MEMS, grew over 20%, primarily due to demand for micromirrors used for optical switching and high-speed networking applications. Finally, non-GAAP operating margin in the segment increased 107 basis points to 23.2%, despite a 59 basis point increase in R&D expense within the segment.
In the Instrumentation segment, which consists of our marine, environmental and test and measurement businesses, first quarter sales increased 5.3% versus last year. Overall sales of marine instruments increased 8.3%, primarily due to strong defense-related sales, including unmanned subsea vehicles, which increased more than 20% for applications such as anti-submarine warfare and mine countermeasures as well as sales of interconnects for U.S. Virginia and Columbia class submarines.
Interconnects for offshore energy production also continued to grow. However, these were partially offset by reduced sales of marine instruments for hydrography and oceanographic research. Sales of environmental instruments increased 6.7%. This primarily resulted from higher sales for gas safety and ambient air monitoring instrumentation, partially offset by lower sales of laboratory and life sciences instruments.
Sales of electronic test and measurement systems decreased 3.7% year-over-year with greater sales of oscilloscopes, offset by lower sales of protocol analyzers. However, we continue to expect full year sales growth as semiconductor suppliers increase their shipments and data centers increasingly adopt devices, utilizing the newest, fastest data transfer protocol.
Instrumentation non-GAAP operating margin in the first quarter decreased primarily due to product mix. That is a decline in higher-margin test and measurement, [ first growth ] in autonomous underwater vehicles in marine, which generally carry lower margins.
In the Aerospace and Defense Electronics segment, first quarter sales increased 14.4% due to 1 additional month of results from the Qioptiq acquisition and with organic growth of 8.4% across defense electronics, partially offset by slightly lower sales from the commercial aerospace market due to a result of a tough comparison. Non-GAAP segment margin increased nearly 200 basis points year-over-year due to higher sales and corresponding operating leverage, improved margins at companies acquired in 2025 and in this case, a relatively easy comparison.
For the Engineered Systems segment, first quarter revenue decreased 2.6%. However, segment operating margin increased 113 basis points. I will now pass the call back to Robert.
Thank you, George. In conclusion, we are excited to begin 2026 with a strong first quarter with continued orders and sales momentum in our backlog-driven businesses, specifically defense where Teledyne has meaningful exposure to low-cost drone, counter drone technologies, space-based sensing, electronic counter measures and maritime surveillance.
Furthermore, certain markets such as industrial inspection and health care, which have had headwinds in the past are now inflecting. Finally, with a leverage at a 5-year low, we are actively pursuing a number of acquisitions, but at the same time, we're investing more in R&D and capital expenditures to accelerate our own organic growth. I will now turn the call over to Steve.
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 second quarter and full year 2026 outlook. In the first quarter, cash flow from operating activities was $234 million compared with $242.6 million in 2025. Free cash flow, that is cash flow from operating activities less capital expenditures was $204.3 million in the first quarter of 2026 compared with $224.6 million in 2025. .
Cash flow decreased due to higher inventory purchases, partially offset by greater operating results in the first quarter of 2026 compared with 2025. Capital expenditures were $29.7 million in the first quarter of 2026 compared with $18 million in 2025. Depreciation and amortization expense was $87.2 million in the first quarter of 2026 compared with $80.7 million in 2025.
Now turning to our outlook. Management currently believes that GAAP earnings per share in the second quarter of 2026 will be in the range of $4.75 to $4.90 per share with non-GAAP earnings per share in the range of $5.70 to $5.80. And for the full year 2026, we believe that GAAP earnings per share will be in the range of $20.08 to $20.44 and non-GAAP earnings per share in the range of $23.85 to $24.15. I will now pass the call back to Robert. .
Thank you, Steve. Operator, we would like to start the questions. If you're ready to proceed, please go ahead. .
[Operator Instructions] Our first question comes from the line of Greg Konrad with Jefferies. .
2. Question Answer
Maybe just to start on the revised revenue guidance of $6.415 billion. Can you maybe just talk about organic versus inorganic? And then if you think about some of the derisking or things that have gotten better since the guidance you gave last quarter, where are you seeing the most outperformance just from a segment basis?
Of course, Greg. First, fundamentally, we're seeing about a 4.9% total growth for the year right now, which is about 70 basis points higher than we had in January. About 4% of [ that solid 4% ] is organic and about 0.9% is from acquisitions, 1 early in 2025 and 1 small one early this year. From a segment perspective, we think the highest growth will probably be in our Digital Imaging and Aerospace and Defense with Aerospace and Defense probably over 6% and Digital Imaging overall about 5% led by really FLIR which we expect will grow about 6.5%. I hope that answers your question. .
Yes, that's perfect. And you gave a little bit of color on the opening, but just following up on defense. How much was it up overall in the quarter? And then you mentioned FLIR. Can you just maybe give a little bit more color on FLIR defense growth? And then what's kind of driving the outperformance in A&D electronics just given that growth, thinking about that broader portfolio?
Okay. Let me start with FLIR defense I think we're looking at about 9% growth in that area. Pretty much all of our products in the FLIR Defense are growing, specifically drones, nano drones, loitering drones, surveillance systems, you name it. And of course, we do supply both include visible and more importantly, infrared detectors, not only to our own drone manufacturers but also to everyone else across the world that's making drones.
From from an A&D perspective, the growth has been again in a variety of our components. As you know, we make everything from lasers to detectors, readouts, semiconductors, switches. All of these are seeing various degrees of growth. And it's -- the business is very healthy, both supplying our own products, but more importantly, supplying products from -- that are required as the various conflicts are increasing both in Europe and the Middle East.
The next question comes from the line of Amit Mehrotra with UBS.
This is a Zach Walljasper on for Amit today. So just 2 questions from me. Can you just help give some color on the order trends between segments? And then the second question for me is just around the full year guide. So high level, the first quarter came in a little above and then raising a little above that. So there's not too much incremental pickup expected, but if you help flesh out the puts and takes for the balance of the year that you're seeing that will be helpful. And then like should the typical earnings seasonality still hold for 2026?
Sure. Let me start with the overall, which I mentioned, the overall book-to-bill right now is 1.16. It is led by digital imaging and specifically, both FLIR as well as DALSA e2v that's where we have probably the highest book-to-bill higher than certainly we talked about in January. Digital Imaging right now is looking like about 1.38 in book-to-bill in instruments, a lot of short-cycle stuff, but it's still holding above 1, just slightly over 1.
A&D, which it's a little lumpy because both A&D and Engineered systems are lumpy because we get big orders, then there's a period of quiescence and then we pick up orders. They're just below 1 right now. certainly A&D. But I think what's happened to us is for whatever products that we're able to put out an increased production, there's very strong demand, and that's why we think across our portfolio, we're going to do very well. We would think that we'll have a little more sales in the second half versus the first half.
And in January, we were saying the first half would be a little much -- a little lower than we had. So we're kind of guiding our second half maybe at 51% versus first half at 49%. But as in January, we were thinking the first half would be more like 48% than the second half 52% in terms of our revenue. So we remain bullish but also cautious, not to over promise what we can deliver and stay within the framework that we've operated for the last 25 years.
The next question comes from the line of Andrew Buscaglia with BNP Paribas.
Just wanted to touch on the Q2 guidance. Just that it reflects the point at the midpoint EPS declining sequentially, which is atypical, historically like it's seasonality. I'm wondering where is the biggest pain point. I think my guess is the instrumentation like the test and measurement area being a little weaker than expected in Q1. But wondering, yes, what are the dynamics affecting that Q2 guide?
Let me just put it the big picture is the following. In Q1, we had some good tax benefits year-over-year. Our tax benefits increased because of stock option exercises increased about [ $0.10, $0.11 ] year-over-year. In Q2, where we sit right now, we're not projecting similar tax benefits.
Now if our stock were to move up and our people start exercising more options, that would change. But right now, we're not projecting that. So we're taking that part out, we're projecting more like $0.03 rather than having the increase that we have. So primarily, that's it, just to cut through it, everything else I'm comfortable with.
.
Maybe could you comment further then on that instrumentation comment I made earlier, just that was a weak start to the year. What do you think drove that? And how do you see that the cadence of that unleash over the next 9 months?
Well, I'm going to just make 1 short comment and then I want to let George answer that. The different parts through instrumentation, strong marine performance for us, especially under water vehicles. These are vehicles that are used across the world, some of them for mine counter measures, very strong performance, but slightly lower margin than some of our high-margin like test and measurement. I'll let George kind of [indiscernible] a little bit, George?
Yes. So I think I will focus on test and measurement, which is where we had the decline in Q1. And there are 2 parts of that business. Really, there's the oscilloscope side of the business, where we saw year-over-year growth and continue to see good demand in high-bandwidth applications power applications, for example, the people who are designing power supplies for data centers and from sales into the in-vehicle networks market. .
Protocol sales were down year-over-year, and that was really due to the timing of PCI Express Gen 6 CPUs and GPUs. So we go through on the protocol side, kind of 2 phases. There's a silicon designer phase where we sell silicon designers, and then there's a phase of integration of chips when they come to the market. So what we expect this year is for those chips to come to market in the second half of the year, and we still expect full year growth in the low single digit in test and measurement. So overall, as Robert said, strong performance in marine, strong performance in environmental, test and measurement is a little weaker in Q1, but still expect full year growth in the low single digits.
That's great. George mentioned the various aspects. We still expect instrumentation to grow over 4% for the year. .
And the next question comes from the line of Jim Ricchiuti with Needham & Company.
I know it's probably early yet, but are you seeing signs of potential increases in your defense business just related to the conflict in Iran?
Yes. [indiscernible] first, we are being approached by the government actually, the government is making some investments. We haven't announced it yet, but they're making some investments in getting our capacities increased in certain specific areas, which I can't go into until the releases are approved.
Second, we're seeing obviously increased demand for anything that has to do with drones and counter drones. And we're also seeing some demand for underwater vehicles. There are a lot of inquiries right now, some orders, but we expect orders to really start picking up in the next 6 months.
Got it. That's helpful, Robert. And just on the M&A pipeline, just given valuation levels, are you still thinking the focus this year is going to be mainly tuck-ins? Or is there the potential for something larger?
I think tuck-ins, first, maybe some midsized acquisitions like we did early in 2025. The larger ones they come not that frequently, and we're looking at some, obviously, but people are willing to pay some outrageous prices to get the revenue, and we'll have to see. But I would say the answer to your question specifically, tuck-ins first; midsized, second; larger, we'll have to wait and see what fits our portfolio. We don't want to go outside our portfolio too much in getting a very large acquisition and then have to do a whole new segment, et cetera. That's not us. So there we are.
And mainly in the instrumentation, digital imaging? Or are there still some potential opportunities in A&D?
I would say in all of our segments, probably with the exception of Engineered Systems, where we're not looking at acquisitions because it's a business that's growing and the government is investing in that. So it means almost all of our segments depends on what we get.
The next question comes from the line of Jordan Lyonnais with Bank of America. .
On the growth that you guys called out for space, can you give us a sense if that is related to Golden Dome? And then two, just for the FY '27 budget request, the $70 billion that they want for drone funding and the [ Dawn ] program. How are you guys thinking about that if that funding gets approved? And for that much funding to come through, can you support those volumes of own systems and as a supplier to everyone?
Yes. Let me start by saying that right now, as Steve mentioned so the George, we're investing in our businesses both from CapEx with increased CapEx, about 35% over last year in the first quarter and expect to keep doing that throughout the year. So we've investing in capacity because we, frankly, our demand is larger than our capacity in certain areas. So we're investing in that. Second, we're also increasing some R&D expenditures. We increased our R&D by $10 million just in the first quarter. That's to us -- to me, that's about $0.14 a share that we added in our investments because we think those are going to be good investments, there's going to be good demand for you.
Now having said that, I'll let George talk about Golden Dome. Right now, we're pretty well set on tranche programs, the SDA tranche programs, we've won just about everything with minor exceptions here and there. So I don't expect to get much more than that. But going to the Golden Dome, I'll have George answer that.
Sure. So just as a follow-on to that, what I would say is, certainly, on the tranche programs, as Robert mentioned, we've done very well there, and that's what's driven a lot of the growth on the infrared imaging space side of the business. And we think we're very well positioned for Golden Dome as it evolves, given the fact that we've been on all of these [ space development agency ] tranche programs.
We'll see how much budget goes in there in reality, right? Asking for increased budgets is one thing, getting it is another. But eventually, there will obviously be some monies either way, we're ready. But right now, with what we have and what we're seeing in terms of the book-to-bill, we feel we should invest in our own businesses, which is very unusual for us at this point in the year. .
The next question comes from the line of Joe Giordano with TD Cowen.
you had previously last quarter talked about your unmanned business, $500 million, growing about 10%. I think the general view is that feels pretty conservative given recent events. Just curious for a bit of an update there. And then if you can maybe talk about the subsea stuff specifically, like where are you positioned on potential like Strait of Hormuz mine sweeping, what types of products would that be for you? Just any sort of color you can give there and how that might materialize over the next couple of quarters here?
Sure. Sure. Okay. Let's start with the unmanned. As you know, we make unmanned systems air, ground and Subsea. I don't know if there are many companies that are able to do all of that, our unmanned air systems is growing very fast. Our Black Hornets, which are the nano drones. Over the last bunch of years, including this year. Just that one drone Black Hornet 3, now Black Hornet 4 will have revenues of about $500 million over that period. We expect -- and we have received already orders for Black Hornet, both in this country and some for Europe.
And of course, Middle East conflict is demanding more. Second, we've introduced the our Rogue 1, which is armed drone. We have our first contracts. Those would increase substantially with time. We have other systems coming along the way. And then if we go to subsea, we have different kinds of underwater drones. They're not just any. We have, for example, gliders that can stay on very long periods of time and can go to large distances. And then we also have our [ Gavia ] vehicles, various ranges of it that go to different depths.
And those are the ones that are used for detecting mines, and we have some nice orders for that in Europe. Overall, I'd say, I would remain with the $500 million for now for -- but it's -- some of the pockets are growing higher than 10%. So Broadly speaking, I think we're approaching almost $2 billion in revenue between defense, global defense, U.S. defense, drones EW, missiles, munitions, et cetera. That's a big chunk of our revenue for this year. It's about 30% to 35% of the whole company.
So when you get a part of your portfolio growing that fast and you're actually investing dollars the way we are, we've always been kind of very cautious with our money that ought to tell you that we're kind of bullish about this area.
Next question comes from the line of Guy Hardwick with Barclays.
I was wondering if you could maybe update us on your margin outlook, particularly in digital imaging, where it seems that you've had a positive mix effect with the industrial scientific cameras picking up?
I think as George mentioned and [indiscernible] mentioned a little bit, for the quarter, our margin went up about 58 basis points. We're projecting that to continue throughout the year. So we think we'll end up the year about 60 basis points above last year, and it will be led by digital imaging at over 100 basis points, 105, 107 basis points, which is something that we've been striving for ever since the acquisition of FLIR.
But now FLIR'S doing well and the legacy digital imaging with DALSA e2v is picking up. So the margins overall would grow about 60 basis points, led by Digital Imaging. Aerospace & Defense is not far behind at about 70 basis points.
And just generally talking about your, say, long cycle versus short cycle trends, it sounds like you don't think there's a bump to the order book in the defense side, yes, perhaps in the next 6 months. Does that suggest a pretty good outlook for defense for next year rather than kind of an acceleration this year in terms of revenues?
No, I hope I didn't give the impression that we don't expect acceleration this year. We do because our orders are way up right now in our defense businesses. We expect it to pick up more. I don't mean to be greedy, but we expect it to pick up more in the next 6 months or so because of the use of munitions, the significant use of munitions in the Middle East. Having said that, we are already experiencing very strong defense orders across all of our portfolio from components to systems.
The next question comes from the line of John Godyn with Citi.
I wanted to just ask or kick off with a big picture question about M&A and the strategy. A couple of years ago, we saw new issues. IPOs business is being created that really focused on kind of roll-ups and industrial rollups with an aerospace and defense focus. More recently, they've been that plus broader industrials as well. And when you think about the amount of new kind of industrial compounders, industrial roll-ups, companies focused on finding niche highly engineered products, et cetera, it definitely feels a little more crowded today than maybe years ago.
You guys started this theme, I mean, decades ago in the history books, you started it, but even just one decade ago, you were ahead of many of the others. I wanted to just sort of take the temperature on the market at large. Are you rubbing up against competitors more? Is it harder to get deals done? Are sellers reshaping the processes in the face of different and maybe more buyers seeking the same opportunities? I just feel like with all the IPO activity, it's worth kind of level setting, recalibrating and taking your temperature.
Yes. I don't know. It's a very kind of difficult question to answer. We've always had competition. Some of the -- let me begin somewhere else. In the last 12 months, 13 months, we've already spent $900 million in acquisitions. In the last 25 years, we've spent $12.8 billion in acquisitions, only $4 billion of it with our stock. So $10.8 billion of it with cash, which we generate. And in the last 12, 13 months, $900 million. So I think our -- and we've made 75 acquisitions in the past 25 years. Yes, it's getting crowded.
On the other hand, people that are conglomerates that are putting things together. They also have a tendency to put them together and then take them apart. If you look at various conglomerates, we've been the beneficiary of taking them apart. We've gotten a few businesses from conglomerates that suddenly decide, well, this thing doesn't fit or we want to concentrate.
So we have been getting some really nice carve-outs in the recent past. We've always had competition. We always have going forward. That's not what worries me. What worries me is the crazy prices that people have been willing to pay. Fortunately, some of that is switching over to this AI and data center domain and bless them, let them spend their money in that area, and we will stick to the things we know. So I don't really see a lot of competition increases.
Okay. That was great color. And if I could just sort of clarify some of the commentary on defense and maybe a little bit on aerospace. But it's very loud and clear that defense demand signals are strong. Bookings are strong. One of the challenges in the past at different times, with Teledyne is that the bookings are strong, but doesn't necessarily translate into the immediate quarters.
And there could be some confusion about kind of short versus long cycle exposure. But when we see all these strong demand trends in defense, is that going to translate immediately? Like can you maybe just talk about the short-cycle elements of your portfolio a little bit more? You mentioned munitions. I just want to make sure that we're all kind of hearing that loud and clear, but also translating into the models the right way.
That's a good question. That's a very good question. Let me just say it's mixed. Yes, some of our orders that we get are long 2, 3, 4 years in duration. Some of our orders are yet to come because of the conflicts in the Middle East. And of course, there's European growth in defense, where we're getting some healthy orders.
By and large, when we think about part of our portfolio growing 9%, 10% organically, that's very healthy. We haven't had that for a while. On the other hand, I'm not going to be the one standing here and telling people that we're going to grow 20% a year, like I've heard others do. That's not us. It might happen if the munitions that are being used are replaced faster.
But the government cycles are tedious even when there's urgent need. So I would balance it to say that we do have the great backlog. We have about $4.6 billion in our backlog right now, and those will translate into revenue. The good thing is that based on what we see, both in the Middle East, but also European defense increases as well as Ukraine conflict as well as what's happening in China and Taiwan, all of these directionally, all of these things favor the portfolio that we've developed both in legacy Teledyne and of course, with Flir acquisition.
That's great. If I could slip in just 1 more related question on aerospace. I know your aerospace exposure is very small and your commercial aftermarket exposure is even smaller as a percentage of that. But is there any tea leaf reading there just on the back of what's going on in the Middle East, high oil prices, it's obviously much more topical with the companies that are more kind of aerospace, heavier aerospace pure plays.
I'll let George address that one, please?
Yes, you mentioned that it's a relatively smaller part of the business, which it is. It's about 4% of our revenue, give or take. The business actually is split about 1/3 OEM, 2/3 aftermarket. What we've seen in the aftermarket, the aftermarket was healthy in Q1. So I'm not seeing anything in the near term as a result of that conflict. .
The next question comes from the line of Noah Poponak with Goldman Sachs.
Robert, is it possible to state or quantify what short-cycle industrial revenue growth was in the quarter and what defense revenue growth was in the quarter and then what's in the full year 2026 revenue guidance for each of those?
Right. Let me start with the government, we had a 9% growth in U.S. government. We had in non-U.S. government total, we had another 4% growth. This is organic. Where we grew most also was in international domain. We had a little shrinkage in the U.S. commercial, but we grew significantly internationally.
What's happened to us now is our international businesses have become 48% of our portfolio now, 20 years ago, that was less than 15%. So the growth has been international and U.S. government, U.S. government being at 9% and international about 8.5%. I don't know whether I picked up everything you asked.
And I guess what would -- are you able to quantify what growth was in short-cycle industrial, I guess, as you've defined it, during the downturn you experienced in machine vision, test and measurement, semiconductor. I guess I'm trying to get a sense for how much that recovered in the quarter in the 5% organic total company that you had?
Yes. I think generally, the short cycle grew at about lower single digits, 3% to 4%; defense, high single digits. There's difference between machine vision and semiconductors, they're very healthy. We have good growth there. On the other hand, we have a little shrinkage in test and measurement. So the first quarter, that's where [indiscernible]
That helps. And I think you've discussed this a little bit, but just the revenue number you're now providing for the full year, I think, would require the organic to slow a bit through the rest of the year. It sounds like defense orders would suggest it can hold or accelerate. Maybe [ 9 ] is just a tough large number starting point. And then it sounds like short-cycle industrial still has room to accelerate? Why would total company organic not accelerate?
Well you got me there. I'm a little conservative. Noah as you know us to be, we expect revenue to keep growing throughout the year. Year-over-year, we had growth in the first quarter. We expect growth in the second quarter in the third and the fourth quarter. So when I look at the rest of the year, in January, we thought the first half of the year would be 48% of the total second half, 52% of the total.
We switched that now. We think the second half would be a little less. And the reason for that is, frankly because a little conservatism. And we think we're going to have less benefit in the second half of the year from foreign exchange. We got some nice benefits in the first half of the year. In Q1, we had about 2%. We think that will drop down to maybe 0.6% in Q2 and then we're projecting 0 in the last 2 quarters. Now if that were to flip, so when we look at the year, we're thinking now our foreign exchange is going to be 0.6%, 0.5%. If that shifts, of course, our revenue would increase correspondingly. Some of the conservatism has to do with foreign exchange.
I understand. Last one for me is just on the instrumentation margin. Maybe you can just maybe just talk about how you see that progressing through the rest of the year. And then I guess that segment had really nice margin expansion in the last 3 or 4 years. Now we have this quarter, what -- how should we think about the right kind of medium term a few years out instrumentation margin?
Let me start by saying, historically, our instrumentation margins have been the healthiest in the company. We think with progression through the year this year, our margins will keep increasing. I think this was our lowest margin quarter and primarily because of test and measurement. We think the margins will go up every quarter, and we should end the year closer to 27.5%. To get there, we're projecting 29% margin in the fourth quarter for that segment. So as George said, our underwater vehicles don't have as great a margin as do our test and measurement. But we're anticipating a comeback in our protocol analyzers. Our oscilloscopes are already doing well. So I think margins will increase as the year goes on.
the next question comes from the line of Rob Jamieson with Vertical Research Partners.
Just a couple just on Aerospace and Defense margins. Much better in the quarter than I expected. I was just curious on the better expansion outlook for that quarter or for [indiscernible] segment versus last quarter. Was there anything mix related that we saw in this quarter or that you're expecting through the rest of the year? Or is this more some of the cost efficiencies from the Qioptiq acquisition and integration?
I think I'll let George answer this, but it has to do a lot to do with acquisitions. .
Yes, that's right. So I'll answer it maybe a couple of ways. One, on the acquisition side, our playbook is pretty simple. We acquire companies at reasonable valuations and then we work to improve them. And we've really seen over the last year with the Qioptiq acquisition and the [ MicroPact acquisition ], in the Aerospace and Defense Electronics segment, a lot of good work there on margin improvement. Also did benefit a little bit from mix in Q1. We sell, for example, our avionics spares and high reliability semiconductors, things like that, that were somewhat better year-over-year. But fundamentally, I think cost discipline always improving the acquisitions and then, yes, a little bit of benefit from mix.
Perfect. And then just quick, can I get an update on just how you're thinking about free cash flow for the full year. And then just with the increase in CapEx investment that you called out as well. How should we think about that kind of in like the 2.5% of sales range for the year?
Let me start with free cash flow. We've been fortunate in the last -- in '24, '25 to generate over $1 billion in free cash flow. We expect that to happen again this year. First half is a little slower than that, but I will pick it up the second half of the year because we're spending more on CapEx this year, we're projecting at about $150 million, which is an increase versus last year. And of course, we're spending a little more on inventory. We're spending a little more on where we have some cautions approach to some of the product or supply chain that comes out of China with the restrictions.
So we're investing in some inventory. We're investing in some machining facilities for germanium, et cetera. Having said all of that, [ $115 million ] CapEx, over $1 billion in free cash flow, I hope we'll get to $1.1 billion.
This concludes the question-and-answer session, and I'd like to turn the call back over to management for closing remarks.
Thank you very much. I'll ask Jason to conclude the conference call. .
Thanks, Robert, and again, thanks to everyone for joining us today. And of course, if you have follow-up questions, please feel free to call me or send me an e-mail. My number is on the earnings release. Thanks all. Bye. .
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Teledyne Technologies Incorporated — Q1 2026 Earnings Call
📊 Quarter at a Glance
- Revenue: +7.6% YoY; organic growth +6.9% (ex acquisitions)
- EPS: Non-GAAP +17.2% YoY
- Margin: Non-GAAP operating margin +58 bps YoY
- Backlog: Book-to-bill 1.16
- Guidance: 2026 revenue $6.415B; GAAP $20.08–$20.44; Non-GAAP $23.85–$24.15
🎯 What Management Says
- Strategic focus: Backlog-driven momentum across Digital Imaging, Aerospace & Defense Electronics; defense, unmanned systems, space sensing and counter-drone capabilities highlighted
- Capital allocation: Invest in capacity and R&D; pursue selective tuck-in acquisitions to accelerate organic growth
- Outlook: Raised 2026 targets as orders and backlog remain strong, signaling continued earnings momentum
🔭 Outlook & Guidance
- Q2 guidance: GAAP $4.75–$4.90; Non-GAAP $5.70–$5.80
- Full-year 2026: GAAP $20.08–$20.44; Non-GAAP $23.85–$24.15
- Note: FX and tax-benefit timing as risks; capex ~ $150M; backlog supports steady growth
❓ Analyst Q&A
- Growth mix: Discussion of organic vs. acquisitions; a focus on Digital Imaging and A&D margins with mix effects
- Defense cadence: Near-term orders strong; emphasis on long-cycle vs short-cycle revenue timing
- M&A posture: Preference for tuck-ins and selective midsize deals; larger deals evaluated cautiously
⚡ Bottom Line
Teledyne opened 2026 with record quarterly sales, earnings and margin, underpinned by robust backlog and defense demand. The company raised full-year targets and plans higher capacity and R&D investment while pursuing selective acquisitions. This suggests a constructive path for shareholders as the mix shifts toward defense, space sensing and high-end imaging.
Teledyne Technologies Incorporated — 47th Annual TD Cowen Aerospace and Defense Conference
1. Question Answer
Okay. All right. We're going to get started here. Thanks, everyone, for joining us. My name is Joe Giordano. I'm the industrials analyst at TD. Excited to have Teledyne with us today. We got George and Jason, and we're just going to jump right into the conversation. If anyone has any questions, just raise your hand, I'm happy to stop and we can do that. Otherwise, I'll just kick it off.
Guys, thanks a lot for being here. Appreciate it. Maybe just given the theme of the conference, and we're going to dive into like the components of it, maybe just frame out for everybody what your -- how your A&D exposure is, and then we'll dive into like the subcomponents and all.
Sure, sure. So there's about 30% of our business is defense, and I can break that down at some point. About 5% of the business is commercial aviation and another, call it, 6%, 7% is space.
So I wanted to dive into the unmanned stuff because that's where we're getting a ton of questions. So you've said this, it's $500 million. It's growing maybe 10% in '26. What's driving that right now? Yes.
So probably good to understand what makes up that $500 million. Let's do that, right? So about $200 million of that $500 million is unmanned aerial systems like our Black Hornet drone, our SkyRaider, our Rogue 1 loitering munition. About $150 million of that is components that go primarily on to unmanned aerial systems built by other people or on to unmanned surface vehicles or subsea vehicles, for example. Then maybe about $100 million round numbers is subsea vehicles that we make, including our autonomous gliders and our Gavia self-help vehicles and then about another $50 million of ground robots basically. What's driving that is obviously the Black Hornet sales, the Rogue 1 loitering munition, which we just got our first production contract on and then selling a lot of components to others who are making unmanned aerial vehicles. And then finally, subsea, places like the Black Sea, the Baltic Sea, U.K. Royal Navy purchasing a pretty significant number of our subsea vehicles.
It strikes me as a conservative estimate here. So like is it one? Or is there things that we should consider as headwinds from a funding standpoint anywhere?
Well, I think we're probably always prudent in guidance, right, particularly as it relates to government funding and timing of government funding. So...
Yes. What are the key things like the programs that we should all be tracking for you?
So I mentioned the Organic Precision Fires-Light or OPFL, which is a U.S. Marine Corps contract. We just got our first production contract for the Rogue 1 loitering munition. So that has entered production. Then there's an Army program called LASSO, a similar program that we think will be more development this year, production next year.
Yes. Okay. Yes. So we were at -- we were just talking, we were at one of the production facilities 2 days ago. They seem very bullish on Rogue 1. So can you maybe talk about the outlook there and the opportunity? And what are the competitive dynamics with that program?
Sure. I mean it's a very versatile platform, right? It's -- we compete, for example, on the OPFL, we're competing with companies like Anduril and AeroVironment. It has the ability to be recalled, right? So it's not just a one-way munition. It can actually be recalled up to very, very close to when it strikes. Good, and it's been a robust platform. It's pretty lightweight. It weighs about 10 pounds.
And is that program -- I think DoD budgeting is almost for like a $50 million increase just in '26 for just Rogue 1, right? Is that the right number?
So for us, in 2026, it's probably more like $30 million.
Yes. I mean, technically, the ceiling on that initial contract was a $250 million ceiling. The initial development contracts were all small. I think it was like $10-ish million for Aero environment and/or Teledyne. I think we're the only production contract so far that I've seen, but it's only 42. So it could be more because the contract ceiling is there, but how much and when TBD, but also on programs, I mean unmanned is clearly significant. It's about $500 million a year of business.
But another area where there actually is a larger program that's been in the news is roughly the $400 million of space business we have, where December 19, the next -- the latest version, Tranche 3 Tracking Layer was awarded. We're on 3 of the 4 prime teams, and we were basically on all of the teams to that date on Tranche 0, Tranche 1, Tranche 2. So space-based imaging, either the current version of tracking layer or whatever the future architecture for a golden dome may be, that's a good area for us.
And we're definitely going to dive into that. I just wanted to finish off on some of the unmanned first and then I want to delve into space for sure. You mentioned LASSO. How should we think about the potential for something like that compared to the Marine Corps program and where that could be?
Yes. I think it's a very similar kind of similar track. So if you look at the Marine Corps program, it was a year of development, relatively small amount then into production. I think LASSO looks pretty similar, maybe later this year, development phase, development/testing, followed by production phase in 2027.
And is there like -- how should we read the success on one versus like into foreshadowing success elsewhere? I mean I assume that they're looking for the same characteristics.
I would think so. We're getting good feedback. Yes.
Okay. We spoke with the team on site about the drone dominance program. It was an interesting discussion, right? So you guys are selling camera cores, right, into these things and not making the drones themselves. They seem pretty bearish on the actual devices that are being...
Yes on the systems.
Correct. Correct. Like as being viable in the field. So maybe what -- how should we think about Teledyne's exposure to something like that? And like what is like the optimal way of this playing out?
So I think it's important to know when we think about business that we are going to pursue, right, what do we normally think about? We're going to think about a business that, a, we're confident we can technically do; and b, is going to have relatively limited competition, right? We're competing with 1 or 2 or 3 other competitors, not 25, right? So to the extent we're talking about drone dominance and driving drones down to $3,000, $5,000, $1,000 a unit, that's not a space that we're interested in competing in. To the extent that some of those at some level would need uncooled IR cores, for example, could benefit us. But in general, we're providing higher-performance drones, right, in that kind of $10,000 to $100,000 plus range.
So is the way that we should think about that is if those -- if families of platforms like that in that few thousand dollars can succeed, you probably sell some components there. And if ultimately, they don't and the end game is something more sophisticated, that's where you can come in as a platform.
Well, I still think you're going to need. So take our SkyRaider, for example, right, that has imaging devices and can have chemical biological, radiological nuclear detectors. You're not going to do that with a $1,000 drones, right? So there's always going to be a market for that. Think about our Black Hornet that can fly in a GPS-denied environment. It's got great imaging capability, et cetera. Again, you're going to need a more robust platform to do some of those things. So yes, I think the niches we're in, we feel good and they're sustainable to the extent there's a mass proliferation of lower-cost devices -- then we can supply those.
Yes, I think it's fair to say that I think of us as a low-cost producer of highly capable drones. Again, if you want to order like George said, $10,000 to $100,000 GPS denied environment, all have thermal, not just visible. But yes, if you're looking for a DGI replacement, that's first person view, maybe not thermal imaging, only visible, maybe no radio, maybe a fiber optic tether, thousands dollars might -- we don't want to be in that business.
I mean even the cores would be half the price of the drone at that point, something like
Hundreds to $1,000. Something like that.
Okay. We also got the CD counter UAV there, which was interesting. How large is that specifically? And where can that go? It seems like it's a less fully like fully fleshed out.
Yes. So I'd say for us, that's probably right now in the mid-tens of millions of dollars a year. What are we doing? We're providing imaging devices and radars primarily. But we've got our own integrated kind of detection classification device for that. And then we're also selling to partners that are pairing our kind of eyes and ears with their kinetic device, right? So again, that's a -- there are a lot of people playing in that complete integrated solution, right, with whatever modality they're using to defeat the drone. And so much like the rest of our business, we're open to selling to all those people, our infrared devices, our radar devices. We do have -- I mean, again, we do have kind of an integrated device for that, but we're not -- at the moment, we're not playing in the full system ourselves with the kinetic solution.
Is that interesting to you to have the full solution?
Again, I think there are a number of people in that space. So it's interesting, but we'd be very methodical about whether or not we thought we had a real advantage that would be sustainable over time and not be in a very crowded space.
So my view is that there's probably too many market participants. And I mean there are people who have kinetic solutions like towards end the day shoot the drone. There's people who have electronic warfare drop the drone. There's other people who have directed energy, microwave the drone, but there's probably too many. Clearly, counter drone is going to be a growing market. I mean all you have to do is not just look at Ukraine, Israel, Houthis, Red Sea. I mean, clearly, there's a need for those type of products. But there's a lot of market participants. So at the moment, we've taken, if someone wants to do the last mile solution, Kinetic, directed energy, microwave, EW, that's fine, but they need to see it. They need to identify it, they need to classify it. Is it bird? Is it drone, what am I going to do? We're happy to sell gear at that level right now.
And are you exclusive like when you pick up -- I think they mentioned something like I think it was BAE for one and Kongsberg for...
Not exclusive.
Not exclusive?
Not exclusive.
So -- and they mentioned that there is no partner currently for like directed energy. If you make something like -- if you do something like that, you make a partnership, it's just -- that's all it is. It's just go-to-market framework and you can keep selling to other players and...
That's same thing typically.
Okay. That makes sense. A couple of other things from the trip that I thought was interesting. I wanted to talk. They mentioned that the teams there when they're building these drones and designing these drones, they don't really use a lot or as much as they should from like the rest of the Teledyne portfolio. I think maybe just talk us through what the potential is for that? And how do you break behavior? Because these are legacy FLIR, like they've been doing this a long time. Like how do they get either the knowledge of the totality of the portfolio or like get comfortable using it?
So I'd say a couple of things. I mean one, we do have -- we do expose people to the broader portfolio on a regular basis. We have quarterly operations reviews, lots of people come in from around the business. But the other thing we have done even just recently is the FLIR Defense business, JihFen Lei, who runs that business, now also has responsibility for our Aerospace and Defense Electronics business, for example. So those teams are a lot more connected or getting more connected on understanding what they do and areas that they could perhaps cooperate in.
They also mentioned like I would have thought that you're almost doing like an offense versus defense scrimmage, right, like at these buildings where you have guys -- you have people making drones and you have people stopping drones. And like how can I -- what makes your life miserable I want to focus on. And they said that there isn't as much sharing on that as you would think. And that struck me as somewhat odd. What can you do as like a leadership team to push that kind of behavior, incentivize that type of behavior?
Sure. No, I think it's important. Look, we've acquired -- we've acquired 75, 76 companies over the last 25 years, right and really built scale in a couple of these areas. It is -- certainly, it's more about bringing these groups together so that they kind of collaborate more across them. Having said that, you always have to separate out what's the theoretical collaboration that could happen with what's actually the specific thing that could add value to the business.
Fair. We're talking about big potential growth in some of these things, budgets, people are talking 50% increases. Who knows where that shakes out. But if it is on the larger side, do you feel like you have capacity? And if you need to ramp significantly for some of these things, if you win, like what does that entail from a spend standpoint?
Yes. No, I think we do. I mean if you take space imaging, for example, that's still a relatively low-volume application. We've invested CapEx there. The government has invested CapEx there. So when it comes to infrared detectors for space, for example, we've got the capacity to do that. When we think about missiles and munitions, where we provide a variety of electronic components. There are a lot of those factories where we do that, we have the ability to add shifts, for example. Where we do camera cores, we're investing more CapEx in that business, invested more last year, invest more this year to ramp. So again, I think it's -- we can adjust in many of our facilities, we certainly have the ability just to start by adding additional shifts.
And maybe just last on this topic, like how should we think about your business to U.S. DoD versus like allies and the rest of the world?
So the 30% defense is about 22% of that is U.S. and about 8% is rest of world.
And what do you think like -- where can that go on the rest of the world type applications? Like how penetrated do you feel like you at some of these?
Sure. I feel like we've got good opportunities continuing in border surveillance, in ground vehicle sensors, for example, in Europe, a lot in the Middle East, certainly APAC as well. So it's been a growing area. I think it will continue to grow.
And some of those -- would those be the same solutions that you're selling like DHS for some border control and things like that?
Yes. If anything, some of the pockets of faster growth like unmanned, they're probably a little bit more weighted rather than that 228, they're probably a little bit more European weighted in part because things like our drones are actually not made in the U.S., made in Canada, Norway, Iceland, some of the specialty sonars, some of the other subsea infrastructure stuff is made in the U.K. and/or Denmark. So it's been -- it has been an area for growth, but it's been an area for growth in the growthier areas as well.
There seemed like there were some regulatory elements to where can you -- what amount of a particular arm you can manufacture overseas and then you have to bring it here to complete certain elements of it?
So you're probably referring to in our R70, R80 drone, which is a larger quadcopter. There are certain elements that make it ITAR control. So produced in Canada but then imported in the United States, features added to it then for the U.S. government.
Okay. And that's all -- like that's all purely regulatory-based where you're...
Correct.
Yes. Okay. All right. Let's move over to space. You mentioned it's $400 million. Maybe you want to flesh out the -- what brings out.
Yes. So it's mostly imaging devices, infrared and visible imaging devices, again, primarily used for things like missile tracking, earth observation, climate studies, for example. It's become much more defense weighted compared to historically, it was kind of probably more NASA deep space missions, astronomy, things like that. It's been much more about earth observation. And then we provide a variety of other electronic components, space glass for satellites, things like that. But primarily imaging is what's driving it and what's driving the growth.
And within that, like which are the specific programs that are driving the majority of that?
Yes, it's really the Space Development Agency tranche programs have been very big for us and certainly the largest programs that we have.
Yes. And so -- and you mentioned Tranche 3 now. What does that imply for the expansion of that program from like current levels to next level.
Yes. I mean look, I would -- keep in mind, this is tranche 3. There was a tranche 1, tranche 2, right? So it's been kind of a continuing business. It tends to be a little bit kind of over a 2- to 3-year period. We tend to deliver on the earlier side of that. So again, the tranche 3 is worth more than $100 million to us in total. And maybe some incremental in 2026 just based on timing.
Okay. And so as we move forward towards like Golden Dome, like a fully fleshed out Golden Dome, like what does that mean for you?
Well, I think when we get the details on what fully fleshed out Golden Dome actually means, then that will be an easier question to answer. But having said that, look, we've been pretty dominant in space-based imaging, particularly for missile tracking. So that's one element to it. And then to the extent that some of it is more tactical earth-based, whether it's drones, whether it's more like an iron dome missile shield, for example, then certainly, our imaging capabilities and other capabilities would play there.
And what about on the commercial side? Like what have been the developments there? And then we're talking about the huge constellations, people talking about million satellite constellations, talking about moon colonies. Like where can you play as these things.
Yes. Again, so we provide imaging devices, both the kind of exquisite ones that look down at earth, but others that could be used for what I call space situational awareness, if you want to know what's around you, for example, on a satellite, a variety of hardened rad-hard semiconductor solutions, electronics, things like that. So to the extent you've got growth in space, it's good for us. To the extent it's defense exquisite imagers, it's very good for us. Generically, growth in space is good for us.
Is there a major difference in like the margin profile of stuff you're doing on the defense side versus things you might do on the commercial side?
No. I mean, in general, we're selling pretty standard products with tweaks.
I'd say our share of wallet is greater on a missile tracking satellite that needs infrared to see heat or see through clouds and say, a visible sensor on the Planet labs. I mean they're all generically good for us, but our dollar content on the infrared side would be more.
And what about the NASA business, like DOGE implications and where are we?
So of that $400 million, that does not include -- we do have a space services contract at the Marshall Space Flight Center. That's about $60 million a year. That really -- I mean, maybe it was $70 million, now it's going to be $60 million. We haven't taken much of an impact there. It's a low-margin business. On the space hardware side on that $400 million, not really seeing much of an impact there. Most of what we're doing even on the civil side is more like NOAA weather satellites, things like that.
Yes. It seemed like there was maybe more fear earlier in '25 about what those businesses might look like.
At least for us, it hasn't. Yes.
It just hasn't materialized.
No.
Okay. Maybe we shift a little bit more broad to the rest of the portfolio. Do you want to give us maybe an update on the non-aero defense markets, where we stand and what you're thinking?
Sure. So yes, I mean, if you look at the corporation as a whole, about half of it is that longer cycle, which is aerospace, defense, space. The other piece of that probably to call out is energy. That part of the business continued to be strong. It's on the order of, call it, $250 million, $280 million a year for us. That's where we're providing connectors for subsea data and power to subsea trees and oil production continues to be strong. If I switch over to the short-cycle side, so the other half of the business, really been a story of recovery over the last few quarters and stabilization. So industrial and machine vision, we're seeing kind of starting to see some growth there.
Our environmental business, where we're doing -- selling lab equipment, we're selling process air quality and safety equipment, so air quality monitoring equipment, safety equipment to find gas leaks, for example. Again, that business has been growing. It's grown over the last kind of 3 quarters year-over-year. And then test and measurement business as well, where we're selling oscilloscopes and protocol analyzers, kind of 5 consecutive quarters of very modest but quarter-over-quarter growth. So what I would say about all of those short-cycle businesses, and I'll come back to one, we see kind of modest growth, and we're thinking about low single-digit modest growth in 2026.
Health care, where we provide x-ray sensors, both for surgical x-ray and dental and also some radiotherapy equipment, there, it's kind of flat in 2026. But overall, what I would say, if I went back to last year when I was sitting here, I think there was a lot more uncertainty on the short-cycle side. Now short cycle by its nature, there is uncertainty in it, right? But when we listen to our customers, see the order flow, look at what's happened over the last few quarters, that short-cycle business has really started to recover at a modest pace, which I think is giving us more confidence in the overall picture, which is the long-cycle business remains strong. We're in good spots, right, unmanned, all the things we talked about. short-cycle business, we're not filling any holes. We're not seeing any holes that we're going to need to fill. So we're starting to see more of that long-cycle strength come through.
On the short-cycle side, I know there's still a lot of debate out there to like where we are. Does it strike you? So I mean, within the understanding that it's a guidance, you're being prudent here. But like is low single-digit growth coming off of like kind of a multiyear kind of sluggishness, it doesn't feel like much. Does it feel like a normal cycle to you? We're seeing this everywhere, right? It just seems like we've had this lull and like we're not coming out very forcefully out of it.
Yes. All I can do. I guess all I would say is all we can do is listen to our customers and look at our order flow and look at our pipelines, and that's how we generate the guidance, and then we can hope things are going to be better than that. I would certainly say there's still a lot of caution in the market, right, when it comes to placing orders for CapEx, be it test equipment, be it something else. And people are still in this pattern where they're probably more likely to wait than to lean forward and place an order. Having said that, the order flow has been pretty good, and we're seeing that kind of low single-digit year-over-year growth.
So when you look at that, which areas of those markets do you think have like, if you were wrong, have the most upside bias and which ones maybe have the most downside bias?
Yes, it's a good question. I think that the industrial and machine vision business, which is a good business for us, did go through a trough, has started to recover. It's a higher-margin business. given that we've got some semiconductor inspection exposure there and things like that and electronics inspection exposure, perhaps that's got some upside potential, but it's all theoretical, right? I'm not -- from a downside perspective, there's no individual one of those markets I look at, and I'm more worried about than the other.
What do you think -- what's required to get some of those medical businesses moving again?
Yes. So really, the downturn we had in that medical business was related to dental x-ray, where some of that is really extraoral dental x-ray. And some of that was just probably related to higher interest rates, making small dentist office not want to spend as much money. There was some competition there. So I think from this point, from where we are, we'll see reasonably steady growth once we get through 2026 in the core kind of things we do, which is x-ray for large surgical equipment, cancer radiotherapy.
Maybe we could just talk quick on the test and measurement piece. Can you just walk us through kind of like where you play in that? Because I think there's been a lot of differing reads, right, from Ralliant versus National Instruments, and we'll see what Keysight says. But like maybe walk us through the competitive landscape there and where you're targeting?
Sure. So the business is about half oscilloscopes, half protocol analyzers. On the oscilloscope side, we're selling into high-bandwidth applications where we compete with the Keysight, for example. That business has been pretty good for us over the last year. We also are selling into certain power applications like people building power supplies for data centers, for example, and in-vehicle networks. So moving data around the vehicle, additional cameras, et cetera, right? So development of all those things. So for us, and I know some of the comparisons, right, people have suffered a little bit when they were probably heavier weighted to electric vehicles, for example. That really didn't impact us as much because we still had that mix of high bandwidth plus mid-range oscilloscopes that were playing in that some in the EV, but really, we've been able to pick a lot of that up in the power supply development, et cetera.
On the protocol side, that's really about protocols like PCI Express and HDMI and Bluetooth and WiFi. And what we've seen there is we're a little bit between kind of product cycles that -- the pace of that business has a lot to do with when chips are released in the next-generation chips. So seeing a little bit of a, I'd say, a gap there kind of in between product cycles. There we're primarily competing with VIAVI, for example. But we feel good about our position there, and it's a good business, right? If we're talking about moving more data, managing power, moving data, lower power, et cetera, it's good for us.
So fair to think the orders for the oscilloscope business should be tracking like well above revenues kind of like these other competitors?
I think the oscilloscope side has been a little stronger over the last year, for example.
What about on the marine energy side? It's been a great business. It's been strong. I feel like we've almost been waiting for it to weaken and it really hasn't. And what's the outlook there? Has it changed post some of these developments.
No, it's interesting. I mean that is an area, obviously, that we keep a close eye on, right? And what we're hearing from our customers and what we're seeing in commentary, and we really look at the number of trees that are going to be awarded that, that number over the next 2 to 3 years looks like it's going to be stable or increasing. And so yes, the business grew dramatically, say, from 2023 to 2025. I don't think it grows at the same rate 2026 and beyond. But certainly in the next year or 2, at least, based on everything we're seeing and hearing from our customers, it doesn't feel like the business is going to decline.
Yes. And it felt like maybe a year or so ago, maybe we were thinking, that could, right? Like is that...
Yes, I think we were getting a little -- look, as you saw oil prices come down a little bit, kind of naturally thinking about where that's going to go. I think the oil price is in the 60s. Again -- and we've got close relationships. We've got good customers there, close relationships with our customers. I feel like the outlook is good, again, at least as far as we can see.
Yes, that's fair. I wanted to touch on AI a little bit. Maybe first, we start about what you're doing internally to harness it and use it as a tool.
Yes. So we've spent the last, I would say, 1.5 years on what I'd call prototyping and projects, right? So we've had just a number of disparate teams because we run a fairly decentralized organization, just testing various applications, right? So for code development, marketing generation, customer support, technical support, things like that. We're kind of reaching the phase now where it's about implementation. But like everything we do, it's going to be like a methodical, very methodical approach, of, okay, we've had a few business units demonstrated capability in code development, for example. Now how do we take that, create a blueprint for that, put it across the corporation, do it in a way that we know we're going to get return on it and that it makes sense for us, right? And then we can manage all the risk.
So I'd say we're exiting what I'd call that prototyping and test and evaluation phase and stepping into that next phase. But like everything we do, we don't do -- like we're not a company that does like some big bang of like now this is all going to happen everywhere all at once in every international facility that makes no sense, right? We're going to just take a methodical approach and make sure that we're getting a return for whatever that investment is.
And who owns this? Like do you want AI to look differently across all the elements of Teledyne?
I think from the internal functions, it should look pretty similar. I mean where we see benefit in the things I said, which are the primary areas, I think that we're going to benefit from on the first go. I think we want to see similar utilization for code development and things like that.
Yes. So it's like idea generation is maybe coming from the BU side and it's scaling from the corporate.
That's exactly right. So and that's the beauty of a company like Teledyne right with the diversification. You can have all these teams doing all this kind of testing, see what works, then that's right. Then at the corporate level, we bring it in, we look at it and we lay out a plan, working with the people in the business unit, you got champions, whatever, right, to go do it, again, without moving either too slow or too quickly, I think it's kind of thing we have to be prudent about, but we have seen some opportunity there.
Have you had to create new roles within the organization for this? Or is it outside of the expertise of?
Yes, we've actually -- we've brought a couple of people in who have experience and then we've had some people who are highly capable within the organization who know the organization and kind of know the lay the land, who I think will be able to manage it.
What about external threats from AI from a competitive standpoint?
Look, I know, obviously, that's a topic, right? But for us, we don't see it as much as a threat to us. Why is that? Because primarily, we're providing hardware. We do -- we provide software with our hardware. Typically, we're not charging for that software. It just comes with the hardware. And if anything, we're a sensor provider. We're providing not just the ability to see, but often coupled with a processor that then allows somebody to put their solution on it, right? So we're kind of thinking about it a couple of ways.
One is make sure we embed the right AI tools in our products for target recognition, target tracking, license plate reading from gimbals, whatever it is, but then also making sure the architecture we're creating for our customers allows them to very easily use our sensors to run whatever application they want to run, right? Because I think if you're a sensor provider, you understand you can't possibly solve every problem that your sensor could be used for, and you'd be foolish to go off and try to do all those things. So we want to provide the best sensor with the right architecture that allows other people to go do that niche thing they're trying to do with the sensor.
And the thought process of AI makes it easier to do any of these things is just -- you just disagree with the premise of that.
AI makes it easier to do what?
To take the output of a sensor and either make sense to track something or do any of that.
Oh, no, I think it -- yes. No, certainly, it makes it easier to take the output of the sensor. I guess what I'm saying is we want to provide the sensor and the ability for our customers to go do that. In certain cases where it's important to us strategically, we want to have the capability in our product. So autonomy, target recognition, things like that. But what I'm saying is our sensors are used across 100-plus different applications, right? We wouldn't want to go try to solve each of those things because we don't necessarily understand each of those end applications as well as our customers do. So we want to create that capability for our customer then to use AI tools with our sensors to solve that problem. Yes.
Okay. Let's move to capital deployment because it's such a critical element of it. Maybe first, maybe walk us through your process and how target identification and what the process internally is for diligence and towards execution and what sort of metrics you're looking to.
Do you want to take that?
Sure. So by unit count, typical Teledyne bolt-on acquisition that's been, call it, 60 of the 75 companies we bought. But basically an answer to an open-ended question from the businesses themselves. What is that other provider in the market that sells a complementary product to a market you're already in, to a customer base you already serve? And that's your classic Teledyne bolt-on like the one we bought 2 weeks ago, a small company in the U.K., $20 million of revenue. you accounting to scientific makes gas sensors for industrial air monitoring, continuous missions monitoring, that's great. That's your average Teledyne bolt-on. So I'd call it a bottom-up from the business, a head of engineering, a head of sales, a General Manager, that's sort of the bread and butter.
The larger deals that are what I call maybe a little bit more top-down a public company, a FLIR, the Excelitas divestiture of this company, Qioptiq that we bought, that's largely from a couple of people, largely me in some case, tracking those for many, many years. And either the timing is right for us, the timing is right for them or both. And the first meeting we had with FLIR was 10 years before we bought the company. We looked at pieces of Excelitas when before it was Excelitas, when it was Perkin Elmer, before was Perkin Elmer, it was EG&G, been tracking the company for 25 Finally, it was the time that the private equity firm who owned it just needed to divest and delever.
So the timing was right. But it's usually a long process. We get banker books, teasers come in my e-mail, five a day. But pretty much everything we bought either top down or bottom up has been something we've looked at for a long, long time. It's just the timing is right. And the price has to be right. We're not a bottom fisher, but we're also not going to pay 20x, 22x EBITDA for an average industrial business. That's not us. We will buy our own stock. it's the lowest risk, best price available, and we did that in Q4. But we can be very mobile. I mean, middle of April 2024, we were all in stock buyback, then some people got punished for overpaying, some of which we made reference to and markets got a little bit more rational. We did nearly $1 billion of transactions between Qioptiq and half a dozen bolt-ons. And we went all in buyback again in Q4. And now we'll see where we are. So it's fluid. It depends on what week you ask me, which alternative will be. But the preference is still to buy companies that fit well with Teledyne. That's the overwhelming preference, but sometimes it makes sense, sometimes it doesn't.
I mean you definitely showed the willingness and ability to be tactical with the buyback. Is that something Is that how we should think about it in the future? Is it -- do you want to use it more consistently as a baseline and then flex it? Or should it just be like this is -- we're going to be traders on that?
It's opportunistic. I mean, again, the preference is good companies that fit well with Teledyne that we understand that are in markets we know, not a big risk, not a gamble, not a change of strategy. That's clearly the preference. But if our stock trades down, we're trading at 15, 16x and people are paying 20, 22, we'll do the former all day long. But again, the preference is to grow.
And now what's the landscape today? I mean, valuations are tough. Aerospace popular market, it's hard to find things. So where are you looking now?
Yes, there's certainly more available now sort of across the spectrum. I mean, not just aerospace and defense, a lots available. general industrial land, there's from private equity exits that were maybe vintage 2021, 2022, eventually are looking for an exit or they have to divest and delever in the higher rate environment. A lot available, but pricing is high. And it's hard to predict the pricing. We've looked at a handful of things this year that were -- consideration was $1.2 billion or $1.4 billion, where we thought the business is worth maybe more like $900 million to $1 billion. And if someone wants to pay that, we're not going to chase it just to chase it. But availability is good. I would say if I had to guess, maybe the next 18 months look like the last 18 months that one of those will be attractive and either it will be at the right price or we're deemed the best buyer that's high certainty to close either from a financial point of view or a regulatory point of view.
So maybe there's a medium-sized deal and a half a dozen bolt-ons over the next 18 months, spend $1 billion like we did over the last 18 months, which is still less than 1 year's free cash flow. So still we could do more, have the bandwidth financially and management-wise to do more. But again, we're not going to do anything stupid.
And I'll say this, this is a stupid question. So I appreciate that. Do you feel like in a way, you've almost been punished or murdered for being held to like a high standard of return? Like when we start -- when everyone starts to add back amortization and create fake earnings, and you guys have a very strict mandate on what your return profile is, but I feel like it's easier to show accretion now and it's easier to show kind of missage numbers and valuations are high. So like are you passing on things that maybe you would not be punished for chasing to some extent?
I think you're ultimately rewarded or punished appropriately, although that may not be the case in the ultra short term -- no, but it's true. I think people -- in certain environments, people like M&A regardless of the returns, regardless of the price. But then that ends up in the sell-side model, that ends up with a hurdle you have to hit and then things tend to reverse themselves. And that happened with some of the T&M peers or other people as well that chase certain things. So eventually, things are rational in the -- not even in the long term, intermediate term, things are rational. But yes, we're not going to chase something in a given quarter, just...
Sometimes it's hard to wait.
It is. I mean, to my point before on a lot of what we bought, we've looked at not just for years, but many years, occasionally for decades. There was some trends -- one of those things I made reference to those north of $1 billion in 2025. I had personally visited sites 20 years ago. But too high, so we didn't do it.
Fair enough. I mean you've been asked multiple times, many times by me about a dividend as part of the capital structure. What are your thoughts there?
Look, never say never, but we've never done it to date. So the logical assumption should probably be no. Maybe at some point, I mean, if it goes 3, 4 years, and we're still underspending free cash flow and we're net cash on the balance sheet, maybe that's different. But today, the preference has been to buy good companies that fit with what we do. And we're not at the law of large numbers yet. So I think we'll be able to fill that use of funds for the foreseeable future. But 10 years from now, who knows?
Maybe last in a few minutes here, we'll touch on margins. Some of the pushback I get from like a pitch standpoint is that if you look at the portfolio, it's high margin, high quality. There's not a lot of obvious upside when I look at things like the instrumentation business is high, Aerospace and Electronics is high. Engineered Systems is cost plus. So I think there's -- yes, there's opportunities in DI, but across the portfolio, where is the juice? So like how should I think about that? And what are you pushing internally?
Yes, probably a couple of ways to think about it. So number one, DI margins, which you mentioned, right, which got better in Q4, projecting to be better in 2026, and there's some room to continue to improve there. There's also just -- what's our model. We go buy companies. And we typically are resetting margins in each segment on a pretty regular basis, right? Because we're going and buying a company that is quality that might have 20% margins and then we work to bring them up to our standard margin. And then beyond that, what I would say is we've got a pretty good track record of kind of 50 basis point a year improvement over the long term from one place or another. And that remains kind of the benchmark that we strive for, notwithstanding the fact we've got high margins.
Just maybe last on the Aerospace and Defense Electronics specifically, I mean, that's an area where the margins picked up huge. I know some of it was mix. I know -- I think there was a point where even you guys publicly were like I don't know how much higher this can go, maybe there's downside. It's held up really well. Like is this a number that we're now more comfortable with this being like a forward number?
I think it is. I mean you have to keep in mind, as OE increases as defense increases versus commercial aerospace aftermarket, that's a little detrimental to margins. Having said that, we have these new acquisitions. We're improving their margins as we go. So I think this level we're sitting at is sustainable.
Yes. Any last minute questions from the audience here? All right. I think I'll leave it there then. Guys, thank you very much. It was a pleasure to see you.
Thanks Joe.
Have a good rest of the day. Thanks, everyone.
Teledyne Technologies Incorporated — Q4 2025 Earnings Call
1. Management Discussion
Welcome to the Teledyne Fourth Quarter Earnings Conference Call. Here is our first speaker, Mr. Jason VanWees.
Good morning, everyone, and thank you for joining the earnings call. This is Jason VanWees, Vice Chairman, and I'd like to welcome everyone to our fourth quarter and full year earnings release conference call, and we released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian; President and CEO, George Bobb; EVP and CFO, Steve Blackwood; and Melanie Cibik, EVP, General Counsel, Chief Compliance Officer and Secretary. After remarks by Robert, George and Steve, we'll answer your questions. But of course, before we get started, attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risk factors 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 1 month. Here is Robert.
Thank you, Jason. We concluded 2025 with the largest quarterly orders, sales and non-GAAP earnings and as well as operating margin in the company's history. Consequently, I'm optimistic about 2026, both due to the performance of our businesses in 2025 as well as the new leadership in place with George Bobb, as CEO, and multiple senior executives with added responsibilities in our business segments. Getting back to 2025, fourth quarter sales increased 7.3% from last year, while non-GAAP earnings increased 14.1%. For the full year, sales increased 7.9% and non-GAAP earnings increased 11.5%. Throughout Teledyne, our defense businesses remained healthy and our short-cycle commercial businesses continued to recover with most product families increasing either sequentially or year-over-year.
In Digital Imaging, Teledyne FLIR performed very well with particular strength in unmanned and other defense surveillance systems, while within marine instrumentation, we achieved record sales of autonomous underwater vehicles. In terms of capital deployment, 2025 was our second largest year in history with over $850 million spent on acquisitions throughout the year and a $400 million for stock repurchases within the fourth quarter. Nevertheless, having generated approximately $1.1 billion in free cash flow for 2 consecutive years, we ended 2025 with a leverage ratio of just 1.4x. Last week, we continued our string of pearls strategy with the acquisition of DD-Scientific, a U.K.-based manufacturer of high-performance electrochemical gas sensors.
Gas sensors are not only a critical technology component used in our environmental instruments, but such gas sensors are also an attractive consumable business with high recurring revenue. Turning to 2026. While it's still early, we are reasonably confident in our current outlook for both revenue and earnings. That is we believe full year 2026 revenue will be approximately $6.37 billion and non-GAAP earnings at the midpoint will be approximately $23.65, both of which are consistent with current consensus estimates. As in 2024 and 2025, we expect normal seasonality in 2026 with approximately 48% of sales and 46% of earnings in the first half of the year. George will now comment on the performance of our 4 business segments.
Thank you, Robert. In the Digital Imaging segment, fourth quarter sales increased 3.4% despite a tough comparison, primarily due to strong sales from Teledyne FLIR. Specifically, infrared imaging components and subsystems, many of which are used in our customers' unmanned systems, increased over 20%, while sales of FLIR surveillance products and complete unmanned air systems also grew. FLIR Maritime sales were also a record due in part to imaging systems for unmanned surface vessels and continued positioning of the business to industrial and defense markets. Sales of sensors and cameras for industrial machine vision applications increased year-over-year but were offset by lower sales of X-ray detectors and scientific cameras.
In the fourth quarter, we were awarded our first production rate contract in the loitering munition market, under the Marine Corps Organic Precision Fires-Light or OPF-L program. Also on December 19, the U.S. Space Development Agency awarded 4 prime contracts for 72 Tranche 3 Tracking Layer missile warning, missile tracking satellites, and we were selected to supply space-based infrared detectors to 3 of the 4 primes. This continues our very strong participation across each of SDA's tracking layer programs and positions us well for future Golden Dome related contracts. Non-GAAP operating margin in the segment increased 180 basis points to 24.7%, a record for the segment since fully incorporating FLIR in 2021. In the Instrumentation segment, which consists of our marine, environmental and test and measurement businesses, fourth quarter total sales increased 3.7% versus last year.
Overall sales of marine instruments increased 3.3% due to strong sales of interconnects used in offshore energy production and for U.S. Virginia and Columbia class submarines as well as the record sales of underwater autonomous vehicles that Robert mentioned earlier. However, these were partially offset by some reduced sales of products for hydrography and oceanographic research. Sales of environmental instruments increased 6.1%. This primarily resulted from higher sales for gas safety an ambient air and emissions monitoring instrumentation combined with stabilization in sales of laboratory and life sciences instruments. Sales of electronic test and measurement systems, which include oscilloscopes, protocol analyzers and Ethernet traffic generators increased 1.4% year-over-year, but greater than 10% sequentially from the third quarter.
Instrumentation non-GAAP operating margin in the fourth quarter decreased slightly on a tough comparison. However, it increased 36 basis points for the full year 2025 to a record 28.4%. In the Aerospace and Defense Electronics segment, fourth quarter sales increased 40.4% primarily driven by the Qioptiq and Micropac acquisitions as well as organic growth of other defense electronics and commercial aerospace products. Non-GAAP segment margin decreased year-over-year due to comparatively lower current margins at the recently acquired businesses. For the Engineered Systems segment, fourth quarter revenue decreased 9.9% due in part to delayed contract awards originally anticipated in the fourth quarter. However, despite the lower revenue, segment operating margin increased 259 basis points due to better performance on fixed-price contracts. I will now pass the call back to Robert.
Thanks, George. In conclusion, I want to reflect on our performance over the last couple of years and the path forward. In 2003 and 2024 -- '23 and '24, the strength of longer-cycle businesses, including Teledyne FLIR, marine instrumentation and Aerospace and Defense Electronics was largely masked by declines in certain short-cycle markets such as industrial machine vision, electronic test and measurement and laboratory and life sciences. I believe our results in 2025, prove the balance and the resilience of our business portfolio, allowing us to cut costs, improve earnings and significantly grow free cash flow and deleverage, while simultaneously deploying capital on acquisitions and opportunistic stock repurchases.
Throughout 2025, as comparisons in East, in some industrial markets, and others began a nascent recovery and the strength of our longer-cycle businesses began to show through, today, we remain confident in executing our strategy of operational excellence, focused acquisitions and stock repurchases when we believe the market does not reflect the broad base of our technologies and competitiveness. As we enter 2026, we believe growth again will be led by our long-cycle business. However, unlike the recent past, we currently believe that none of our short-cycle businesses will contract on a full year basis. In addition, our leverage ratio remains at the lowest level in years, providing ample financial flexibility to continue our strategy. I will now turn the call over to Steve.
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 first quarter and full year 2026 outlook. In the fourth quarter, cash flow from operating activities was $379 million compared with $332.4 million in 2024. Free cash flow, that is cash flow from operating activities less capital expenditures, was $339.2 million in the fourth quarter of 2025, a record for Teledyne compared with $303.4 million in 2024. Cash flow increased year-over-year in the fourth quarter, primarily due to favorable operating results in the fourth quarter of 2025 compared to 2024. Capital expenditures were $39.8 million in the fourth quarter of 2025 compared with $29 million in 2024.
Depreciation and amortization expense was $84.6 million in the fourth quarter of 2025 compared with $77.2 million in 2024. We ended the quarter with $2.12 billion of net debt. That is approximately $2.48 billion of debt less cash of $352.4 million. Now turning to our outlook. Management currently believes that GAAP earnings per share in the first quarter of 2026 will be in the range of $4.45 to $4.59 per share, with non-GAAP earnings in the range of $5.40 to $5.50. And for the full year of 2026, we believe that GAAP earnings per share will be in the range of $19.76 to $20.22 with non-GAAP earnings per share in the range of $23.45 to $23.85. I will now pass the call back to Robert.
Thank you, Steve. We would like to take your questions now. Operator, if you're ready to proceed, please go ahead with the questions and answers.
[Operator Instructions] Our first question comes from the line of Greg Konrad with Jefferies.
2. Question Answer
Maybe just to start on the outlook for revenues. I mean, you gave a little bit of color around short cycle, but just thinking about that 4% growth, is there any way to parse organic versus inorganic given the smaller recent deals, plus how you're thinking about long-cycle growth in backlog versus maybe initial assumptions around the short-cycle businesses overall?
Okay. Greg, let me start with organic versus nonorganic. We think most of the growth would be organic about 3.6%, nonorganic, a little over 4%, 4.2%, about. In terms of short and long cycle, I don't see a lot of differences between those 2. We think that we have probably a little smaller increases in certain areas like environmental and test and measurement, maybe a little over 2%, but that will be offset with a healthy increase in our marine instruments, about 5%. And we think FLIR will grow just under 5%, maybe 4.6% to be accurate. So I don't see a lot of difference between short and long cycle. And as I mentioned before, we don't believe over the years, the total year in 2006 -- '26, we're going to see shrinkage of our short-cycle businesses that we have before.
And then maybe just a follow-up to that. I mean, you had really strong digital imaging margins in Q4. I think you called out a contingent liability reversal. But how are you thinking about the exit rate for digital imaging and maybe the biggest opportunities into 2026, given you've talked about a 24% target in the past?
Yes. Let me start with the question on the contingent liability. I think if you look at that and you balance it out versus roof costs. We've been reducing costs as we go along. Fundamentally, it added about 50 basis points to our margins in Q4. So even with that, we have a 24% margin or a little in excess of 24% margin in 2025 fourth quarter. For the full year 2025, digital imaging margins came in at about 22.6%, which was about 30 basis points improved over the prior year. 2026, we're a little more hopeful, and we believe that the margins would go up maybe another 80 basis points and get to about 23.4%. And with good luck, I hope we'll get to the 24%.
Our next question comes from the line of Amit Mehrotra with UBS.
This is Zack Walljasper on for Amit Mehrotra today. My first question is just the implied 1Q guidance suggests about 10% earnings growth year-on-year, while the full year guidance like implies about 7%. Just can you give some help just around the cadence of the year and like the implied deceleration because compared to last year, the earnings comps are relatively similar 1H versus 2H.
Yes. It's easier comps in Q1 versus last year. We improved obviously, earnings, as you said, throughout the year. Traditionally, we've been about 48% in the first half of the year in revenue and 46% in profitability. We believe that's about going to be what happens the coming year. Now I'm hoping that we can improve on both of those numbers as we get the year started. But it's the -- we just got through 3 weeks of the 2026, so I'm hesitant to go further out on a limb than I have.
Our next question comes from the line of Andrew Buscaglia with BNP Paribas.
I was hoping you could add some color to some of these bigger -- seemingly bigger defense awards you're talking about, specifically the tracking layer program, which seems very topical currently. Can you -- any way you can size that -- the size of that award or the contribution you expect Teledyne to receive in '26 and beyond?
Yes. I will -- perhaps that's a question I can pass to George.
Sure. So on the tracking layer, of course, we provide very high-performance infrared arrays. And that program for us will be north of $100 million over the next few years.
And what are -- you sound like you're selling to these 3 of the 4 defense primes. What can we expect in terms of margin contribution from something like that? Is it higher versus corporate average or lower or what?
I would say it's about average. I mean, we -- yes.
Yes. It's -- as George mentioned, these are going to probably be fixed-price contracts. So our performance will improve again as it always does as a function of time. So early on, maybe our margins will be a little less. But overall, these are really good programs for us.
And this -- I imagine this is a multiyear, you'll see this -- so you'll see additional contribution years out or is this something in 2026 that subsides thereafter?
So we'll start to perform in 2026, but it will be over a 2- or 3-year period.
Our next question comes from the line of Jim Ricchiuti with Needham & Company.
I apologize if you gave this on the call, I had to jump off momentarily. But did you provide an order number? And Robert, any color as to how the book-to-bill was in the main segments of the business?
Not yet, Jim, but I will now. First, we -- in the fourth quarter, which is our most recent numbers that I can get, we think instrumentation as of whole would be -- is about 1. Digital imaging is above 1 or 1.06. Aerospace and defense is higher at 1.25. Engineered Systems is under 1, but that's a lumpy business, and we've had some big orders during the year. So total for Q4 is 1.07. And then for the full year, if you take everything for the full year, it's about 1.08. So we feel very comfortable that in all of our segments, we're either at 1 or better than 1.
Got it. What were the full year sales from the unmanned business again? If you provided it, I apologize. And I'm wondering how you're thinking about the growth in the total unmanned business in 2026, just given the pipeline?
In -- yes, in 2025, I would say our unmanned businesses combined, all combined are about $500 million. We think that will be a little higher in '26, maybe 10% of our overall revenue.
Our next question comes from the line of Jonathan Siegmann with Stifel.
And maybe just following up on autonomous and unmanned. The record underwater vehicle sales, can you talk a bit more about the drivers? Last year's reconciliation bill had significant funding increases in this area? And just how relevant is this to your business? And are you seeing any benefit on it?
Yes. As you know, we have -- in the underwater vehicle, where we have both manned and unmanned. In the manned vehicles, we are the sole supplier to the Navy Seals, and we not only have provided all the vehicles, but there's continuous revenue from parts and maintenance. The new stuff that we're doing goes to a whole range of subsea products. Some of them have to do with infrastructure, anti-submarine warfare and some of them have to do with just observations and measurements. For example, our glider are deployed in front of large naval operations to measure temperature and density in salinity, which all of these affect acoustic sensors and speeds.
So you have to compensate for those. We also have really good program wins, not just in the U.S. but especially in Europe for security of harbors. And we provide a whole range of underwater vehicles from very shallow ones that go only 1,000 meters down deep to very large vehicles that go as deep as 3,000 meters so -- or more. And so we have a whole suite of, I would say, I'm just looking at a picture, I think I see about 10 or 12 different underwater vehicles that we're selling not just in the U.S. These are autonomous vehicles, but also especially in Europe.
Great. And then on the loitering munitions, congratulations on that production award. Can we expect to hear anything about developments with the Army with your product?
Thank you. Well, there is a program called Lasso, you may be familiar with. It's a development program. And it hasn't all been announced, but it's coming up, and we're one of the participants in that program. But overall, I would say, there's not just the loitering munitions that we have introduced, but we're working on some new ones as well. So you'll hear more about that as we both develop our products as well as we win programs. I just want to make sure that when I was talking about unmanned on a question that Jim asked, our 2025 revenue on unmanned, both air, ground and underwater was about $500 million. We think that will grow about 10%. I said it'd be 10% of revenue in 2026, but it'd be probably closer to $550 million. Sorry, I needed to correct that. Go ahead, please.
Our next question comes from the line of Guy Hardwick with Barclays.
I just wonder how you guys feel about M&A, particularly maybe larger M&A versus share repurchases. Obviously, I saw you bought back $400 million of stock in Q4 and the stock price's big move upwards since then. And maybe that looks relatively less attractive than M&A, but I think a sense from a few months ago that you weren't particularly encouraged by M&A prices, except for maybe bolt-on deals. Maybe you can give us an update of the M&A picture and whether small versus large.
Sure, Guy. First, let me go back to the stock repurchases. We've been very conservative about stock repurchases. When you look at our 26-year history, we've all in bought maybe $1.2 billion and only at times where our stock was really -- we believe was really undervalued with respect to our peers and the market. So I would say the fourth quarter purchase was opportunistic as it was twice before in our history that we bought stock. Our primary driver has always been acquisitions. And you mentioned the larger acquisitions. First, we consistently like to buy what we call the string of pearls, small acquisitions that we can tuck in like the one we just announced, DD-Scientific in the U.K., would like to do that continuously regardless of whatever else happens.
On the larger acquisitions, we have a pretty good list of what's coming up, both from private equity people who bought a range of products and businesses and combined them. And we don't mind paying a reasonably good price for an acquisition as long as the quality of the mix of the businesses we're getting is there. Where we're hesitant -- and we mentioned before, where we're hesitant is when we're buying a fixer upper and we're bidding 15, 16x EBITDA, somebody else walks in and pays 21, 22x. We really don't think that's for us. But having said that, based on what we see, there's a whole range of acquisitions, what we call for us large would be, let's say, we pay $1 billion or thereabouts. There's a whole range of those that are coming, and we're more encouraged than we were in 2025.
Okay. And just -- that's very helpful. Just one quick modeling follow-up question. In Digital Imaging, what was the FX contribution in the quarter?
I can just talk to you about the general, the total contribution in -- for the year was about 40 basis points. It started negative in the year in Q1, picked up, ended in Q4 about 80 basis points and averaged out for the whole year at 40 basis points. So it was there, but it was not that significant.
Our next question comes from the line of Joe Giordano with TD Cowen.
I wanted to ask on memory. Obviously, prices are up a ton, and I believe there'd be applicability for you guys having to buy that across whether it's instrumentation or T&M and elements of digital imaging. So can you comment on what you're seeing there? How big a percentage of sales it is and how effective you've been able to pass that through to people?
Yes. Thanks, Joe. First, we don't see a risk, net risk in that area. Some of our businesses, as you said, specifically more geared towards test and measurement instrumentation do use memory and may have some constraints in supply cost inflation. Ironically, memory and storage suppliers are also reasonably large customers of our test and measurement instrumentation businesses. So if they spend incremental CapEx buy -- for proper buy to, call them, memories, then that's generally good for us because that's a higher margin contribution business for us. But coming back to what I summarized, net risk is not big.
That's good to hear. Curious -- I guess 2 more for me. One, can you just run us through the organic kind of by segment, what you're thinking for next year? And then I also like a bigger picture, do you think there's been talk from the government about restricting defense companies and what they can do with their balance sheets and how they spend their money. Do you see yourself -- I think I know your answer, but do you see yourself in that population of companies that would be potentially targeted there? And if no, does it make you want to do things that others can't because you have less restrictions?
Yes. Well, let me tell you, we've never been driven by what others do anyways. As I said, our preference is buying companies and investing in our businesses. But let me go back. Teledyne, as said, we've rarely bought our shares back. So $1.2 billion in share buybacks over a 26-year history is not a whole lot considering we generate that much cash in the last 2 years every year. Having said that, we've never paid a dividend. And we're more concerned about investing. If we can't buy companies, we're more inclined to invest in our businesses. For example, just last year, we increased our CapEx by 40%, and we increased our R&D spending by 10%. So if we can't find really good acquisitions, even though last year was a good year for acquisitions, we invest in CapEx and R&D, and we're going to do that moving forward. There are pockets of our businesses that are performing really well and like where we supply cooled and uncooled infrared sensors and cameras to our various customers will increase more CapEx there.
Having said all of that, we've always been a commercial company, albeit we do have significant defense businesses, can go as high as 30%. But overall, also most of our defense businesses are fixed price businesses. I don't think it really applies to us. But nevertheless, since we don't buy a lot of our own stock, I don't think I'm so concerned about that. Now you asked about revenue. Organic, we believe organic revenue growth, I mentioned this before, but I'll do it very quickly. In Digital Imaging, it'd be about 3.5%. Overall, it'd be around that 3.5%, 3.6%. Aerospace and defense may be a little higher. Instruments would be around that. But we like the fact that it's around 3.5% to 4% in our various businesses. We don't expect any of our businesses to decline.
Our next question comes from the line of Alex Preston with Bank of America.
I just wanted to touch on 737. It seems like we got some more certainty on rate increases at the end of '25. Just wondering if there's been any change to your thinking on destocking into '26.
I'll ask George to answer it. I don't think so. But George?
Yes, I would say no major change. And I would just keep in mind that our overall Commercial Aviation business is only about 5% of the business and only about 1/3 of our aviation business is OEM and only a portion of that is Boeing. So no major change there for us.
Our next question comes from the line of Rob Jamieson with Vertical Research Partners.
Guys, nice quarter. Just quickly on test and measurement. Just can you go through some of the demand drivers there? Was that mostly the Ethernet test again that was driving the strength? And did you see any kind of improvements in some of the other end markets that you serve that might be related to like auto or anything like that, that you could provide insight on?
Yes. I would say, Rob, in the immediate future, our oscilloscopes, high-end specialty oscilloscopes are doing well and will continue to do so, both from the auto market as well as from motor control and power control in the larger data centers. And also, we have product, a small company that generates Ethernet traffic capability, so we can simulate that. And basically, what's happened to the Ethernet, it's moving to the terabit range, 1.6 terabit to be accurate. And we do have products in that domain. In some of our protocol analyzer business, we expect a little slower start in '26, primarily because that business is very dependent on where the large suppliers issue or produce chips. Before they produce their chips, they use our protocol analyzers, the engineers to develop the chips. But until they issue the chips, the users don't buy our protocol analyzers. So there's a little gap in that domain with the 2 major producers of chips having delayed things. But as we move into the year, that will even itself out. So that's the best answer I can give you.
No, that's helpful. And then just looking at some of the legacy machine vision and CMOS X-ray businesses in digital imaging. Are there any -- as you see the machine vision business starting to recover and you don't expect that to be negative this year, are there any particular end markets or exposures there where you'd expect the most upside? And then I guess on the X-ray CMOS sensors business, just some of the commentary that we've seen recently from DENTSPLY that they're expecting recovering sales in the second half of '26. Just kind of aligned with -- I know you talked about seasonality in the second half, but would you continue to expect like a sequential improvement for the medical portions within DI as we move through 2026?
I'll ask George to pick that up, please. But in general, I'd say we're going to do okay in the machine vision domain because of mask and semiconductor inspection, et cetera. I'll let the X-ray for George to comment on.
Yes. I would also just add on the machine vision side, we saw good single-digit growth in both machine vision cameras and machine vision sensors in Q4. And we expect in that overall industrial and scientific vision to be up kind of low single digits in 2026. So we were certainly seeing the recovery there. And as Robert mentioned, that's areas like semiconductor mask and wafer inspection and the inspection of electronic components. On the X-ray side, really, we're kind of anticipating flat year-over-year in 2026. We have not built in a recovery in that business in 2026.
Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to management for final comments.
Thank you very much, operator. I'll now ask Jason to conclude our conference call.
Thanks, Robert. And again, thanks, everyone, for joining us today. And of course, if you have follow-up questions, my number is on the earnings release and all our news releases are available on our website. So thanks, everyone. Talk to you later. Bye-bye.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Teledyne Technologies Incorporated — Q4 2025 Earnings Call
📊 Quarter at a Glance
- Q4 Revenue: +7.3% YoY; Full-year Revenue: +7.9% YoY
- Q4 Non-GAAP EPS: +14.1% YoY; Full-year Non-GAAP EPS: +11.5% YoY
- Free Cash Flow (Q4): $339.2M; two-year FCF ≈ $1.1B; Net debt: $2.12B; Leverage: 1.4x
- Capital Deployment: Acquisitions >$850M in 2025; $400M in Q4 stock repurchases; DD-Scientific acquisition completed
- Book-to-Bill: Q4 1.07; Full-year 1.08
🎯 What Management Says
- Strategic stance: 2025 demonstrated portfolio balance and resilience; leadership changes bolster confidence for 2026.
- Growth outline: 2026 targeted revenue ≈ $6.37B; non-GAAP EPS midpoint ≈ $23.65; seasonality similar to prior years.
- Capital allocation: continued “string of pearls” acquisitions and opportunistic buybacks; leverage remains low to fund growth.
🔭 Outlook & Guidance
1Q26 GAAP EPS $4.45–$4.59; non-GAAP $5.40–$5.50. FY26 GAAP EPS $19.76–$20.22; non-GAAP $23.45–$23.85. Revenue ≈ $6.37B; ~48% of sales and ~46% of earnings in H1. Organic growth ~3.6%; inorganic ~4.2%; none of the short-cycle businesses are expected to contract in 2026.
❓ Analyst Q&A
- Growth cadence: Organic ≈ 3.6% and inorganic ≈ 4.2%; FLIR ~4.6%; marine ~5%; short-cycle growth aligns with long-cycle.
- Tracking Layer program: >$100M over the next few years; margins around the company average; early contracts may be fixed-price.
- Unmanned revenue trajectory: Unmanned (air/sea/underwater) ~10% of 2026 revenue (~$550M); 2025 unmanned ≈ $500M; pipeline remains robust.
⚡ Bottom Line
Teledyne closed 2025 with strong quarterly metrics, healthy free cash flow and a disciplined capital plan centered on acquisitions and selective buybacks. With a diversified, long-cycle oriented portfolio and a low leverage footprint, the company projects steady 2026 revenue and earnings growth, supported by strategic M&A and robust backlog.
Teledyne Technologies Incorporated — Q3 2025 Earnings Call
1. Management Discussion
Welcome to Teledyne's third quarter earnings call. Here is your first speaker, Mr. Jason VanWees.
Thank you, and good morning, everyone. This is Jason VanWees, Vice Chairman, and I'd like to welcome everyone to Teledyne's Third quarter 2025 earnings release conference call. We released our earnings earlier this morning before the market opened.
Joining me today are Teledyne's Executive Chairman, Robert Mehrabian; President and CEO, George Bobb; EVP and CFO, Steve Blackwood; and Melanie Cibik, EVP, General Counsel, Chief Compliance Officer and Secretary. After remarks by Robert, George and Steve, we'll ask for your questions.
But of course, before we get started, attorneys have reminded me to tell you that all forward-looking statements made 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, via webcast and dial-in will be available for approximately one month. Here is Robert.
Good morning, everyone, and welcome to our conference call. First, I must say, I'm very pleased to announce that we had record -- all-time record quarterly sales, non-GAAP earnings per share and free cash flow. Sales increased 6.7% from last year. Non-GAAP earnings increased 9.2% and free cash flow was a record $314 million. Furthermore, total company new orders were also a quarterly record due in part to continued backlog growth at Teledyne [ fleet ].
Given our strong third quarter performance, recovering commercial short-cycle businesses, and also robust backlog growth, we're raising our full year earnings outlook at both the bottom and the top of the forecasted range. Likewise, last quarter, we expected 2025 full-year sales to be about $6.03 billion. But now we believe we may achieve sales of $6.06 billion.
Our defense-related businesses, including our new acquisitions are performing extremely well. And we continue to pursue a number of significant contract opportunities not yet formally awarded or reflected in our backlog. However, given the current U.S. government shutdown, we had a bit measured on expectations for new contract awards or acceptance of allowance of shipments that we need export licenses for. And of course, cash collections from the government will be somewhat delayed.
The prior shutdown in December 2018 and early 2019 lasted about 35 days. I believe today, we're in the 22nd or 23rd day. In that -- at that time, between 2018 and '19, we didn't really experience any significant impact from the short term. And we similarly don't expect to have much impact, except if the shutdown were to stretch for months and god forbid, til the end of the year. It may affect about -- if it goes that long, it may affect about 25% of our sales somewhat, which are related to the government but any temporary impact to commercial shares for which we may be dependent on U.S. government exports may be somewhat affected. Overall, I do not think this is going to affect Teledyne significantly.
Also, you may have noted that China has designated Teledyne FLIR LLC as an unreliable entity. While customers in China represent only 4% of our sales in 2024, '25 [indiscernible] sales by Teledyne FLIR LLC were less than 0.4%. So we don't expect much effect from there. Actually Teledyne Brown engineering was added to the same list in December of 2024, but it's sales to customers in China are zero.
Finally, I must note, despite spending $770 million in cash year-to-date on acquisitions, our current balance sheet is the strongest since prior to the FLIR acquisition in 2021. We also expect to close a small transponder tech carve-out from [indiscernible] very soon. having recently received approval from the government of Sweden. And furthermore, we continue to pursue a number of other acquisition activities.
George will now briefly comment on the performance of our business segments.
Thank you, Robert. In the Digital Imaging segment, third quarter sales increased 2.2%. Teledyne FLIR sales continued to grow, but this was also the first quarter in two years in which sales from our legacy Delta e2v businesses collectively increased modestly. For example, Sales of our sensors and cameras for industrial and scientific vision systems increased year-over-year and accelerated for the second quarter in a row. However, this was partially offset by ongoing weakness in sales of X-ray detectors especially for the more consumer discretionary dental market. Both the overall Teledyne FLIR defense and industrial businesses increased with sales of unmanned systems, counter unmanned air systems, and infrared components and subsystems being the strongest performers.
Third quarter digital imaging book-to-bill was 1.12x. And as Robert mentioned, we continue to pursue a number of opportunities not yet awarded. These include, for example, unmanned aerial systems opportunities, such as a full rate production order for our Rogue 1 loitering munition under the Marine Corps Organic Precision Fire Light or OPFL program, as well as a potential new award under the U.S. Army's Low Altitude Stocking and Strike Ordinance or LASSO program, for which we are competing. There also remains several unawarded contracts, both domestic and international for FLIR's airborne, land and maritime surveillance systems.
Non-GAAP operating margin decreased 92 basis points, primarily due to greater cost reduction expenses, which we did not exclude from non-GAAP margins as well as 90 basis points of increased R&D expense.
In the Instrumentation segment, which consists of our marine, environmental and test and measurement businesses, third quarter total sales increased 3.9% versus last year. Overall sales of marine instruments increased 3.2% due to strong sales of interconnect used in offshore energy production and for U.S., Virginia and Columbia class submarines. However, these were partially offset by difficult comparisons in offshore energy exploration and some reduced sales of products for hydrography and Oceanographic Research.
Sales of environmental instruments increased nicely at 7.5%. This primarily resulted from higher sales for process gas safety and ambient air and emissions monitoring instrumentation due in part to demand for new natural gas-fired power plants and other energy infrastructure.
Sales of electronic test and measurement systems, which include oscilloscopes, protocol analyzers and Ethernet traffic generators increased modestly, both sequentially and year-over-year. In particular, sales of high bandwidth oscilloscopes used by customers developing or testing high-speed networking devices increased nicely but were partially offset by sales to customers in the automotive and consumer electronics markets. Instrumentation operating margin in the third quarter decreased slightly on a tough comparison. However, we continue to expect a slight increase for full year 2025.
In the Aerospace and Defense Electronics segment, third quarter sales increased 37.6%, primarily driven by acquisitions and organic growth of defense electronics products. Commercial aerospace aftermarket sales increased and OEM orders for 2026 deliveries were strong in the quarter, but OEM-related shipments declined from last year given some continuing customer destocking. Overall, segment operating profit increased year-over-year, but GAAP and non-GAAP segment margins decreased slightly year-over-year due to comparatively lower current margins at recently acquired businesses. Nevertheless, overall margin increased sequentially for the second consecutive quarter since closing the acquisitions.
For the Engineered Systems segment, third quarter revenue decreased 8.1% given an especially tough comparison with last year. However, despite the lower revenue and also a tough comparison, operating margin increased 30 basis points from last year.
I will now pass the call back to Robert.
Thank you, George. Let me just conclude by saying there are always going to be near-term challenges to overcome and we have a strong history of doing that. We have a portfolio that varies from market to market. And no one market in our portfolio goes down at once. At the same time, no one market goes up all at once. Nevertheless, our strong portfolio always protects us from market turbulence.
The government shutdown, of course, is a problem for everybody. And there is a market volatility that we're dealing with. But we're resilient, we're well positioned and we have a number of very strong growing markets with tangible critical products and solutions, as George mentioned.
For example, in our unmanned air and subsea system as well as our space-based electronics and imaging sensors for both the U.S. government and our NATO, we're very strongly positioned. The ongoing need for new energy sources and new or renewed power generation are positively impacting our instrumentation businesses. And the development and inspection of advanced semiconductors utilize our electronic test and measurement instrumentation and our digital imaging solution.
Finally, regarding M&A activities, while we have a very strong balance sheet, and we have -- as I mentioned before, we have about $1 billion in free cash flow. We're going to be aggressive, but we're also going to be prudent not to overpay for things that are trading much higher than our own multiple.
Let me just conclude with one remark. First, I want to congratulate George Bobb for being added to our Board last night, but I also want to note that I our plan to be the Executive Chairman of the company for at least another three years.
With that, I'll now turn the call over to Steve.
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 fourth quarter and full year 2025 outlook.
In the third quarter, cash flow from operating activities was $343.1 million compared with $249.8 million in 2024. Free cash flow, that is cash flow from operating activities less capital expenditures, was $313.9 million in the third quarter of 2025, a record for Teledyne compared with $228.7 million in 2024. Cash flow increased year-over-year in the third quarter, primarily due to favorable accounts receivable collections in the third quarter of 2025 compared with 2024. Capital expenditures were $29.2 million in the third quarter of 2025 compared with $21.1 million in 2024. Depreciation and amortization expense was $84.5 million in the third quarter of 2025 compared with $76.9 million in 2024. We ended the quarter with $2.0 billion of net debt. That is approximately $2.53 billion of debt less cash of $528.6 million.
Now turning to our outlook. Management currently believes that GAAP earnings per share in the fourth quarter of 2025 be in the range of $4.76 to $4.98 per share with non-GAAP earnings per share in the range of $5.73 to $5.88. And for the full year 2025, we believe that GAAP earnings per share will be in the range of $17.83 to $18.05 and non-GAAP earnings per share in the range of $21.45 to $21.60.
I'll now pass the call back to Robert.
Thank you, Steve. We'd like now to take your questions. Operator, if you're ready to proceed with the question and answers, please go ahead.
[Operator Instructions] And our first question is from the line of Andrew Buscaglia with BNP Paribas.
2. Question Answer
So last quarter, there was some uncertainty around some of the strong growth you saw and whether that was pulled forward or not. And it seems -- can you maybe run through several segments where -- and talk about how that shook out? In some areas, it seems like it didn't, in some areas it didn't seem like growth really resume that strong. But in your mind, how did things progress?
Well, I think overall, with acquisitions, we had a 6.7% growth across our portfolio. I think what we're looking at is various businesses differently, as you mentioned. For example, our marine businesses continue to grow very strongly. And we're winning contracts both in the defense domain, which is our underwater vehicles, as an example, as well as in energy development.
In some of our instruments, there's a variation between various instrument businesses in our gas and flame businesses for safety, we're doing very well. While we see a little softness, for example, in our water and products that we -- that are used in drug development. Overall, I'd say we also did have some pull-ins into Q2 maybe a little more in test and measurement than other areas. But going back to some of the other things that we mentioned before, FLIR's growth was 3% organic. We also had stronger growth in some of our commercial FLIR businesses and our unmanned systems which are both air, ground and systems grew 10%. So there's a variation in our portfolio.
And going back, Andrew, to what I said before, we have a fairly diverse portfolio, some things go up, some things go down. But overall, the truck is moving forward, and it's moving forward handsomely based on what I see.
Okay. And what about -- specifically in Digital Imaging, you made the comment, industrial automation or imaging equipment for that market presumably that's machine vision starting to pick up. So maybe is that one area that grew last quarter nicely, but it seems like sustained growth from here?
Well, I'll answer part of it maybe George would want to add something to that. I think overall, the Industrial and Scientific Vision Systems grew about 3.4%, which to us is very attractive. Overall, the also e2v, which is the rest of the digital imaging rather than FLIR was relatively flat, both quarter-over-quarter and we expect year-over-year. But George has really taken some very strong actions to take cost out of the part of that business that has slowed down over the last two years. And as a consequence, he and I believe that what will happen is that the margins now will start improving going forward. And that business will pick up because we've skinnied it down to where it should be much more healthy. George, do you want to add anything?
I think the only thing I would add is in the industrial side, we saw sales increases year-over-year in both the machine vision cameras business, where we're doing applications like semiconductor [indiscernible] and wafer inspection, inspection of electronic components. And we also saw an increase year-over-year in our machine vision sensors business, where we make sensors for other OEMs.
The next question is from the line of Greg Konrad with Jefferies.
Maybe just putting a finer point on digital imaging margins. I mean, you called out some of the headwinds in the quarter between R&D and the restructuring. But I think in the past, you talked about a 24% target. How do you think about the margin recovery into Q4 and maybe into next year for digital imaging?
I think the margins between '23 and '24 are at least in Q4, are obtainable, achievable. I think what will happen is that for the year, when you add the first two -- three quarters and then Q4, for the year, we should be flat with last year. Even though we took a significant amount of cost out in the first three quarters, including Q3 that we just concluded. So with all of that said, if we can maintain the same margins as last year with all the cost out, then going ahead, I think 2040 is achievable.
And then maybe just to put a finer point on the revenues. So you raised the full year outlook by 0.5% to 6.06%. Is that all organic? And then it looks like maybe there's a $20 million step-up sequentially in Q4. Can you maybe talk about seasonality into the final quarter of the year and maybe which segments you expect to see a step up versus maybe where there's a step down tied to just typical seasonality?
Well, first, let me start with Digital Imaging. $10 million of the $30 million comes from FLIR we expect higher revenue in that area. $10 million of it comes from aerospace and defense organic and then another $10 million comes from our acquisition from Qioptiq. So it's a $30 million increase. It's not a big number. But there's also a little conservatism building to that, of course.
Our next question is from the line of Jim Ricchiuti with Needham & Company.
Just -- George, I think you gave a book-to-bill number, and I wasn't sure if that was a book-to-bill in the Digital Imaging business, but maybe if you could, are you able to -- can you give us -- provide a book-to-bill for the various three major segments?
Sure. Happy to do that. Yes, the book-to-bill ratio I gave you was for Digital Imaging, 1.12. In the Instrumentation segment, we had a book-to-bill overall of 0.9, a little higher in T&M, for example, 0.98, environmental closer to 0.95, Marine closer to 0.8, about 0.8. But keep in mind, that's a longer cycle business, a little lumpiness in orders there. We have a lot of backlog in the energy business. So not concerned about that short-term lower book-to-bill ratio. And then in aerospace and defense electronics, again, longer cycle business, lumpiness in some larger orders, book-to-bill ratio was 0.84. And Engineered Systems was over 2x in the quarter. But again, that's a long-cycle business. And so we tend to look at the longer-term view there, not one quarter at a time. Yes. And the overall book-to-bill ratio, 1.09.
Terrific. And you alluded to in the earnings announcement, the potential for significant contract opportunities. And I'm just wondering if you can give us some color on which areas of the defense business there are some potential large contracts. And any idea at the time line just given the government shutdown.
Yes. I wouldn't want to opine too much on the timeline of the government shutdown. What I would say is...
Not about the shutdown just -- sorry, just as it relates to the timeline for these contracts, sorry.
Sure. No problem. I would say we have some near-term opportunities, particularly in the unmanned space. I mentioned a couple of them in the opening for our loitering munition program, both with the U.S. Marine Corps, that's the Organic Precision Fire Light program. We're looking for a foray production order there. Again, we think that would be relatively near term, hopefully, in Q4, depending on the timing of the government operations. And that would be in the range of tens of millions of dollars. The last program that I mentioned, the U.S. Army program. That initial order, again, hopefully, near term, would be initially more kind of millions of dollars and grow from there. And overall, what I would say is unmanned systems, things like our Black Hornet drone, our sales into counter-UAS systems, both of our sales and where we're selling to other OEMs, integrated surveillance solutions for both border protection and defense, et cetera. So I think those are the strongest areas. Also, we continue to see a lot of strength in our submarine business, where we provide interconnect on the Virginia and Columbia class submarines.
Our next question comes from the line of Jordan Lyonnais with Bank of America.
On the 737 rate increase step up, how are you guys thinking about that into 4Q and next year given the comments on some destocking?
Yes, this is George. So what I would say there is, we expect that destocking really to continue through most of next year. So we won't see much of a benefit from the OEM Boeing 737 MAX rate increase next year, although the demand there continues to be strong and we received a large order for 737 MAX 2026 delivery. So backlogs there. Just from a year-over-year comparison standpoint, we won't see much benefit from that slight increase in 2026 to the production rate.
Okay. Got it. And then on defense, do you guys have any concerns about critical minerals availability, specifically for the sensor products for FLIR?
We have a little exposure there. On the other hand, we've been very diligent to cover that exposure. So overall, I don't think that's going to affect us in the short term.
The next question is from the line of Damian Karas with UBS.
You've mentioned -- yes, I was hoping to dig in the weeds a little bit more on your comments about cameras and sensors being up year-over-year. Could you just perhaps elaborate on that? What do you think is driving the improvement? And have you been seeing those trends continue into the fourth quarter?
Yes. I can tell you, first of all, the comps are a little easier with respect to last year. The -- our cameras are up about 11%, and our sensors are up about 5%. Some of our scientific cameras that are very specific applications are down a little bit about -- so all in all, and that's probably because the export. All in all, when you add it all up, we're up about 3.4%. I think what has happened, as I mentioned before, with taking the cost out of the DALSA, e2v businesses aggressively this year, that business has stabilized, it's going to grow, and the margins are going to improve as time goes on. So we're positive about that.
It's that -- when you look at the total imaging businesses, initially right after we acquired FLIR, everybody was worried about FLIR, FLIR , FLIR. While we solve that problem, FLIR is doing great, FLIR's defense is just hitting every milestone we expect. And now DALSA, e2v is stabilized. So we're very positive about our Digital Imaging segment altogether.
That's really helpful. And Robert, I just was wondering if you could maybe give us your perspective on the macro outlook. Have -- are there any changes to your view since your last update. And I know it's early to be giving guidance for 2026. But just seeing where our trends are -- and if you were to ballpark today, where do you suspect kind of growth could line up in 2026 if the current conditions kind of remain?
Let me just kind of answer it first broadly. We are very positive about our defense businesses. With all the geopolitical problems you see. If you, for example, look at Europe, they are going to increase their defense spending. We, Teledyne, have 5,100 employees in Europe, distributed among many countries. We make drones in Sweden, we make other products, we make stuff in Norway, we have people that go in and out of Ukraine, [indiscernible] Denmark. Those guys are under a lot of pressure when we talk to our folks, they have to increase their defense spending.
So macro level, if I look at that with all of our people [ dead ] and all the need for in-country production, I see very positive trends for us in Europe. Today, we probably produce something close to $0.5 billion in revenue in European defense, and I expect that to increase as we go forward.
Coming back to the -- just the bigger picture of defense. George talked about our loitering munitions. As you well know what they mean by loitering munitions, you got something that's flying around and can essentially attack a target totally. Most of our competition has fixed wing aircraft. We have rotating wing aircraft or quad aircraft. Interestingly enough, that also can fit in a tube and be fired out of a tube, and it can go vertical takeoff and landing and we're very positive about that. So the reason I'm talking about this stuff is because defense is going to be a pretty active area, both in Europe and of course, in the Far East.
And then I have to say our small drones, what we call our nano drones, by the end of next year, we would have sold $0.5 billion of these nano drones that you can hold in your hand, we probably have the strongest position there. So between all of the above, I think we're going to do fine in the defense. In the commercial domain, we see machine vision recovering, as I said earlier, with a reduced cost structure, we see our test and measurement recovering. And we do have long-term opportunities in power generation.
So all in all, '26 should be a good year for us, barring any unforeseen catastrophies across the world, which I don't expect. And we're just doing our plans for '26 and we're very positively inclined.
Our next question is from the line of Kristine Liwag with Morgan Stanley.
Robert, that was really helpful color on what you provided with European defense. And I just wanted to clarify a few things. When you said $0.5 billion, is that encompassing all of your defense exposure to Europe? Or is that specifically only on the drone exposure that you were discussing? And then also more broadly speaking, I guess my question is really trying to understand more your go-to-market for these things. When you're looking at the drone and counter drone market, how are you thinking about being a prime and selling your nano drones versus your core competencies historically on sensors and those kinds of things? And how do you look at the opportunity set for those kind of different go-to-market?
Okay. Kristine, let me start from the beginning. The $0.5 billion applies to two things. First, our total military sales this year in Europe. Also $0.5 billion applies, if you add everything that we saw all the nano drones that we've sold would be selling through next year, that's another $0.5 billion. So there's kind of only [ 60 or 70 ] without the first $0.5 billion is the nano drones. So let's put that to one side.
What we're doing is we bought prime, prime defense as well as soft. Prime For example, in loitering munitions, we're prime, in nano drones, we're prime, in some of our counter UAS systems, we have partners. And so it's a mixture. But we also have strong presence in all of these countries, which is very important because everybody, both in Europe and the Middle East is driving towards in-country production of the defense products. And we have presence everywhere. So that works for us. It works for us in Europe, of course, out of 15,600, 15,700 folks in our company, 5,100 are located in Europe. So that's how we go to market. And where necessary, we established new entities to be able to operate from.
Next question is from the line of Guy Hardwick with Barclays.
Just a little -- I want to ask a little bit more about the digital imaging margins. So I think based on your comments that the reason for perhaps digital imaging margin be lower than expectations being R&D and also the severance costs. Obviously, you get the benefit of severance costs, particularly next year. But is R&D a permanent step-up effectively funded by the reduction in the cost base? And kind of looking a bit further forward for 2026, as a follow-up to Damian's question about the top line. What kind of -- what should we be aware of in terms of margin mix, digital imaging in 2026? Is it FLIR versus medical versus industrial? What kind of margin dynamics could we potentially expect?
Let me take a piece of that and then see if George wants to add to it. First, in R&D, there are very, very specific areas that we've decided to invest, for example, in our test and measurement systems. We've decided to invest, especially in protocol analyzers and the marriage of our oscilloscopes and protocols as well as our very high end, oscilloscopes, we intentionally decided to do that.
Switching over to Digital Imaging. There's an area of digital imaging that we think we can be extremely successful and that's in our sensor businesses. We've decided to invest a little more in our sensor businesses. And frankly, that's worth for us because some of our sensors, whether they are for [indiscernible] systems or for infrared systems are doing very well, our in infrared sensors, we're also investing in because we are the supplier of infrared sensors to almost everybody that flies a drone in the United States or producers it [ thereon ]. So the investment in R&D is very specific or specific -- cut across all of our products.
On the margin improvement, for next year. I'll let George talk a little more about that.
Yes. What I would say is, first, as I mentioned before, obviously, we've taken the costs out. We're seeing the recovery in the short-cycle business. So it's early really to talk about really what the mix is going to look like next year, what 2026 numbers are specifically going to look like. But in general, as the machine vision margin comes back, that's positive. As we continue to grow in defense, that's a little perhaps negative in certain areas on the overall margin. So overall, I'd say mix is probably neutral headed into next year. but we certainly should benefit from the cost reductions that we took this year.
Our next question is from the line of Jonathan Siegmann with Stifel.
So you've commented already unmanned. Demand signals globally are very strong. but there also seems to be substantial aspirations by customers of getting these capabilities at much lower cost. So you have great market positions in sensors and cameras, and you've already highlighted the prime opportunities that you have. But could you comment on how attractive is the potential to supply some of these components and drones at much lower prices, but substantially higher volume and maybe comment on, is there opportunities to invest more capital in this area?
Well, thank you very much. That's a really good question that I would say much lower that's in due course. I think people are willing right now to pay for accuracy and for ability to defeat desired targets. So we are actually, in a lot of ways, a lot of our drones are low cost compared to others and also because they're highly capable. So for example, George mentioned and I mentioned our what we call the Rogue 1, which is quadcopter. It's the lightest weight of the competition. It only weighs about 10 pounds and as you can imagine, as we decreased the size, the cost goes down. So we're very cost competitive there. The nano drones, which I mentioned earlier, Again, those are produced in volume, very cost competitive. What I think will happen is people may go to the low end of the cost structure, but they'll have to give up some capabilities. And so you may -- in defeating an armored vehicle, you may have to have massive warhead in your drone. Whereas in our case, we can do the same thing much more accurately with a smaller vehicle with a smaller warhead. So I don't know. It's a given. The whole experience in Ukraine, which we've had as far as that there is no one solution for what's happening. They obviously are doing very well. On the other hand, they don't have to have that many capable stuff to just fly over the horizon and hit somebody. So cost is important, but I think accuracy and weight are going to be just as important.
The next question is from the line of Joe Giordano with TD Cowen.
Can you hear me?
Yes, sure, Joe.
Yes. Okay. Great. Yes. So for unmanned, we've been talking about $450 million across all on [indiscernible]. It feels like kind of for a while, it feels like a little bit of a dated number. Maybe -- how can we frame out that over the next couple of years? I mean we've talked about potential opportunities here. But if we want to look 3, 4 years out, like is that -- what can that $450 million if things break correctly for you really become -- how material can that business really get?
Yes. I think we're around $500 now versus $450 million that we talked about before. We're investing in that area and we're gaining market share not just on drones that we've talked a lot about, but also under water. As you may know, that we're probably unique as a company where we have products for air, unmanned, ground unmanned and underwater unmanned. And I'll let George talk a little bit about the underwater domain because that's our growth domain right now, and we're really excited about that. So the $500 million will grow for sure. How fast, I'll know in about a month or two when we do our plan for the next couple of years, but grow it will.
Yes. I would add on the subsea unmanned side, we have both our subsea colliders, which are kind of long duration, long endurance can stay on station for a long time. Useful, as you can imagine, in areas like antisubmarine warfare and other areas. But we also have propelled AUVs, particularly out of our Iceland business, Teledyne Gavia. Those vehicles shorter in time and duration, but bigger can carry more payloads, again, for things like mine countermeasures, antisubmarine warfare. So yes, I think we see growth both in the unmanned aerial side, the ground side. But also we're seeing significant demand with regard to the subsea vehicle vehicles, given needs in the Black Sea, Baltic Sea and Asia Pacific.
That makes sense. And just a follow-up. If you're thinking about your full year EPS growth year-on-year, how much would you attribute that to M&A? And how much would you say is organic this year?
For this year, I would say probably most of it is organic but we have a little bit from M&A because of our acquisition that we made. I'm going to say maybe $0.20, $0.25 from acquisitions primarily because as George mentioned earlier and I have before, when we make acquisitions initially, it drives our margins down in reality because they don't have the margins that we enjoy. But as you look at our products, if you look at across all of our acquisitions, after a few years, the margins improved significantly. And so they kind of become the standards that we have for instruments, defense otherwise. So the margins this contribution from acquisitions are relatively light but they'll improve next year.
Thank you. At this time, we've reached the end of our question-and-answer session, and I'll hand the floor back to management for closing comments.
Thank you, operator. I'll now ask Jason to conclude our conference call.
Thanks, Robert. And again, thanks, everyone, for joining us this morning. Of course, if you have follow up questions, please feel free to call me, and my number is on the earnings release. And all our earnings releases and a replay of this call via webcast is available on our website.
Operator, if you could please give the replay information, that would be ideal. And again, thanks, everyone. Bye-bye.
Thank you. This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.
Teledyne Technologies Incorporated — Q3 2025 Earnings Call
📊 Quarter at a Glance
- Sales: +6.7% YoY; record quarterly sales as backlog grows across defense, FLIR, and instrumentation.
- EPS: Non-GAAP +9.2% YoY; driven by volume strength and ongoing cost actions and acquisitions.
- Free cash flow: $314M (record); operating cash flow $343M supports strong liquidity.
- Orders: Quarterly record; backlog expansion across multiple segments, including defense and unmanned systems.
- Outlook: Full-year sales guidance raised to $6.06B (from $6.03B) amid solid demand.
🎯 What Management Says
- Defense strength: Defense-related businesses performing extremely well with robust backlog and large near-term contract opportunities.
- M&A posture: Aggressive but prudent balance-sheet approach; pursuing acquisitions and a transponder carve-out, aiming for accretion over time.
- Market positioning: Expanding in unmanned and space-related sensing; emphasis on in-country defense production in Europe and growth across segments.
🔭 Outlook & Guidance
- Q4 EPS: GAAP $4.76-$4.98; Non-GAAP $5.73-$5.88.
- Full-year EPS: GAAP $17.83-$18.05; Non-GAAP $21.45-$21.60.
- Risks: Government shutdown timing could delay awards/shipments; export licenses add uncertainty; China designation for FLIR modest impact.
❓ Analyst Q&A
- Margins & mix: Digital Imaging margins pressured by R&D and restructuring; recovery anticipated as cost actions bite and mix normalizes; 2026 outlook uncertain.
- Defense opportunities: Near-term unmanned and submarine programs cited; timing tied to government operations, with multiple potential orders in the 2024–25 window.
- Destocking & 737 trend: 737 rate increases unlikely to boost 2025–26 due to destocking; long-term demand remains robust in defense and in-sourcing in Europe.
⚡ Bottom Line
Teledyne delivered record quarterly sales, non-GAAP earnings and free cash flow, lifting full-year guidance to about $6.06 billion in revenue. Backlog strength and growth in defense, unmanned systems, and sensors underpin optimism, though near-term government timing and export licensing pose headwinds. The company signals disciplined M&A alongside targeted investments, positioning for 2026 growth.
Financial data from Teledyne Technologies Incorporated
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 6,374 6,374 |
8%
8%
100%
|
|
| - Direct Costs | 3,612 3,612 |
7%
7%
57%
|
|
| Gross Profit | 2,763 2,763 |
9%
9%
43%
|
|
| - Selling and Administrative Expenses | 964 964 |
25%
25%
15%
|
|
| - Research and Development Expense | 335 335 |
25%
25%
5%
|
|
| EBITDA | 1,478 1,478 |
18%
18%
23%
|
|
| - Depreciation and Amortization | 224 224 |
8%
8%
4%
|
|
| EBIT (Operating Income) EBIT | 1,255 1,255 |
20%
20%
20%
|
|
| Net Profit | 975 975 |
13%
13%
15%
|
|
In millions USD.
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Teledyne Technologies Incorporated Stock News
Company Profile
Teledyne Technologies, Inc. engages in the provision of electronic and communication products for wireless and satellite systems. It operates through the following business segments: Instrumentation; Digital Imaging; Aerospace & Defense Electronics; and Engineered Systems. The Instrumentation segment includes monitoring and control instruments for marine, environmental, and industrial applications. The Digital Imaging segment offers sensors, cameras, and infrared systems. The Aerospace & Defense Electronics segment provides electronic components, data acquisition, subsystems, and communications equipment. The Engineered Systems segment develops and produces electrochemical energy systems and small turbine engines. The company was founded in 1960 and is headquartered in Thousand Oaks, CA.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Bobb |
| Employees | 15,800 |
| Founded | 1960 |
| Website | www.teledyne.com |


