FLIR Systems Announces Second Quarter 2018 Financial Results
WILSONVILLE, Ore.--(BUSINESS WIRE)--Jul 25, 2018--FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the second quarter ended June 30, 2018. “We are pleased with our second quarter results,” said Jim Cannon, FLIR President and Chief Executive Officer. “Strong organic sales growth and meaningful margin improvement drove adjusted earnings per share growth of 31%. In addition to excellent sales and earnings performance, FLIR significantly improved operating cash flow for the first half of 2018, up 46% over the same period of 2017.”
Mr. Cannon continued, “Our team embraced a number of new business initiatives while maintaining focus on the customer to drive solid first half results. We’re taking this momentum into the second half of the year as we continue executing our mission of innovating technologies that increase awareness and insight so professionals can make more informed decisions that save lives and livelihoods.”
Second Quarter 2018
Second quarter 2018 revenue was $452.7 million, up 4% over second quarter 2017 revenue of $434.1 million. Organic revenue growth was 11%, which excludes the second quarter results in 2017 of the previously disclosed divested security businesses that closed in the first quarter of 2018.
GAAP Earnings Results
GAAP gross profit in the second quarter increased 12% to $232.6 million, or 51.4% of revenue, compared to $206.7 million, or 47.6% of revenue in the second quarter of 2017. GAAP operating income in the second quarter increased 33% to $88.7 million, compared to $66.6 million in the prior year, representing a 430 basis point improvement in operating margin.
Second quarter 2018 GAAP net earnings were $71.6 million, or $0.51 per diluted share, compared with GAAP net earnings of $51.4 million, or $0.37 per diluted share in the second quarter last year.
Cash provided by operations was $153.3 million in the first half of 2018, compared to $105.3 million in the first half of the prior year, a 46% increase. Approximately 2.0 million shares were repurchased in the first half of 2018 at an average price of $50.52.
Non-GAAP Earnings Results
Adjusted gross profit was $236.4 million in the second quarter, representing 52.2% of revenue and increasing 11% over adjusted gross profit of $212.4 million in the second quarter of 2017. Adjusted operating income was $102.0 million in the second quarter, which was 26% higher than adjusted operating income of $81.0 million in the second quarter of 2017. Adjusted operating margin increased 390 basis points to 22.5%, compared with 18.7% in the second quarter of 2017.
Adjusted net earnings in the second quarter were $77.4 million, or $0.55 per diluted share, which was 31% higher than adjusted earnings per diluted share of $0.42 in the second quarter of 2017.
Business Unit Results
Revenue from the Industrial Business Unit was $188.4 million, an increase of 14% over the second quarter results of last year, with strength in optical gas imaging, automotive, and industrial unmanned aerial systems (UAS). The Government and Defense Business Unit contributed $161.0 million of revenue during the second quarter, up 11% over the prior year, driven by increased deliveries of gimbaled systems, DR-SKO, and UAS systems. The Commercial Business Unit recorded revenue of $103.3 million in the second quarter, down 17% from the prior year, but up 5% excluding revenue related to the divested security businesses. Strong results in the maritime, thermal rifle scopes, and intelligent transportation systems product lines contributed to the organic revenue growth.
Revenue and Earnings Outlook for 2018
Based on financial results for the second quarter and the outlook for the remainder of the year, FLIR now expects revenue in 2018 to be in the range of $1.780 billion to $1.800 billion, increased from the previous $1.760 billion to $1.790 billion amount provided in the first quarter earnings call. Adjusted net earnings per diluted share is now expected to be in the range of $2.17 to $2.22 per diluted share, up from the previous outlook of $2.11 to $2.16 per diluted share.
FLIR’s Board of Directors has declared a quarterly cash dividend of $0.16 per share on FLIR common stock, payable September 7, 2018 to shareholders of record as of close of business on August 24, 2018.
FLIR has scheduled a conference call at 9:00 a.m. ET (6:00 a.m. PT) today to discuss its results for the quarter. A simultaneous webcast of the conference call and the accompanying summary presentation can be accessed online from a link in the Events & Presentations section of www.flir.com/investor. A replay will be available after 12:00 p.m. ET (9:00 a.m. PT) at this same internet address. Summary second quarter and historical financial data may be accessed online from the Financial Info Database link under the Financials & Filings section at www.flir.com/investor.
About FLIR Systems
Founded in 1978 and headquartered in Wilsonville, Oregon, FLIR Systems is a world-leading maker of sensor systems that enhance perception and heighten awareness, helping to save lives, improve productivity, and protect the environment. Through its nearly 3,500 employees, FLIR’s vision is to be “The World’s Sixth Sense” by leveraging thermal imaging and adjacent technologies to provide innovative, intelligent solutions for security and surveillance, environmental and condition monitoring, outdoor recreation, machine vision, navigation, and advanced threat detection. For more information, please visit and follow @flir.
Definitions and Financial Measures
Organic revenue growth is defined as total revenue growth less the sales of companies acquired and divested in the past twelve months. Operating margin is defined as operating income as a percentage of revenue. Management uses operating income and operating margin as key measures to assess the performance of the Company as a whole, as well as the related measures at the segment level.
Non-GAAP Financial Measures: In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release makes reference to non-GAAP measures. With respect to the outlook for the full year 2018, certain items that affect GAAP net earnings per diluted share are out of the Company’s control and/or cannot be reasonably predicted. Consequently, the Company is unable to provide a reasonable estimate of GAAP net earnings per diluted share or a corresponding reconciliation to GAAP net earnings per diluted share for the full year. Additional information regarding the reasons the Company uses non-GAAP measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included below, following the GAAP financial information.
Statements in this release by Jim Cannon and the statements in the section captioned “Revenue and Earnings Outlook for 2018” above are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” “estimates,” or similar expressions) should be considered to be forward-looking statements. Such statements are based on current expectations, estimates, and projections about FLIR’s business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including the following: changes in demand for FLIR’s products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, the impact of self-imposed or government mandated remediation efforts related to FLIR’s compliance with U.S. export control laws and regulations and similar laws and regulations, the timely receipt of any necessary export licenses, constraints on supplies of critical components, excess or shortage of production capacity, the ability to manufacture and ship the products in the time period required, actual purchases under agreements, the continuing eligibility of FLIR to act as a federal contractor, the amount and availability of appropriated government procurement funds and other risks discussed from time to time in filings and reports filed with the Securities and Exchange Commission. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and FLIR does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release, or for changes made to this document by wire services or internet service providers.
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