Ladies and gentlemen, thank you for standing by and welcome to the Teledyne first quarter earnings call. At this time, all participants are in a listen-only mode. Later, we'll have a question and answer session. Instructions will be given at that time. If you should require assistance during today's call, please press star then zero. As a reminder, today's call is being recorded. Now to th e call over of your host, Jason VanWees. Please go ahead. Good morning. Thank you, everyone. This is Jason VanWees, Executive Vice President, and I'd like to welcome folks to our first quarter 2021 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, Al Pichelli, Senior Vice President and CFO, Sue Main, and SVP General Counsel, Chief Compliance Officer, and Secretary, Melanie Cibik. After remarks by Robert, Al, and Sue, we will ask for your questions. Of course, though before we get started, our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions and caveats as noted in our SEC filings and/or periodic earnings releases. In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay, both via webcast and dial-in, will be available for approximately one month. Here is Robert. Thank you, Jason, good morning, and thank you for joining our earnings call. We began 2021 with the best first quarter sales, earnings, operating margin, and cash flow in the company's history. We achieved these GAAP results despite incurring $39 million, or $0.79 per share, of expenses related to the pending acquisition of FLIR. Excluding these non-recurring charges, earnings increased 39.2% compared to last year. Operating margin increased 426 basis points, and free cash flow nearly doubled. I'm very pleased with the breadth of our financial performance across Teledyne. Year-over-year sales increased in nearly every major business category except commercial aerospace, which is now only 4% of our total sales. The recovery in our short cycle commercial business is unfolding nicely, and our government businesses are also growing and performing well, in both c ases, strongest within our Digital Imaging segment. Also, in the first quarter, we received all-time record orders with a book-to-bill of 1.15x, resulting in quarter-end backlog of approximately $1.8 billion. Given our strong first quarter, we now think a reasonable outlook for the total company organic sales growth in 2021 is approximately 6%, led by forecasted growth of about 10% in digital imaging, excluding FLIR. Now, with respect to the FLIR acquisition. Over the last few months, while transaction certainty progressively increased, Teledyne performed in-person visits covering 90% of all FLIR on-site, several on multiple occasions. Most importantly, we were also granted access to the operating management in all key functional areas. To summarize, FLIR's people, products, technology, and manufacturing are outstanding. I am now even more excited about the prospect for FLIR as part of the Teledyne family. Regarding timing, our respective stockholder votes are scheduled for Thursday, May 13, and pending approval, we expect to close early the following morning. Assuming closing occurs as planned, we expect to update our outlook in the July earnings release and include FLIR. We remain confident of immediate pre-tax annual synergies greater than $40 million. We continue to expect EPS accretion even on a GAAP basis in 2022 with EPS accretion excluding amortization being substantially greater. Al will now comment on the performance of our four business segments. Al? Thank you, Robert. In our Instrumentation Segment, overall first quarter sales increased 0.5% versus last year. Sales of environmental instruments increased 5% from last year. Sales of most product categories increased, with the strongest year-over-year organic growth resulting from the gas and flame detection products acquired in 2019. Sales of our electronic test and measurement systems increased 4.8% year-over-year. Sales of marine instrumentation decreased 6.7% in the quarter. However, operating profit increased due to aggressive cost management and business simplification and standardization initiatives. Overall, Instruments segment operating margin increased 291 basis points to 20.7%. Turning to Digital Imaging segment, first quarter sales increased 6.7%. GAAP segment operating margin was 19.7%, an increase of 200 basis points year-over-year. Now turning to the Aerospace and Defense Electronics segment. First quarter sales declined 3.3%, as greater defense sales were more than offset by a 28.5% decline in sales of commercial aerospace products. GAAP segment operating margin increased over 1,000 basis points to 18.7% versus 8.6% in 2020. In the Engineered Systems segment, first quarter revenue increased 8.5%, primarily due to greater sales from defense and other manufacturing programs, as well as electronic manufacturing services products. Segment operating margin increased 242 basis points when compared with last year. I will now turn the call to Sue, who will offer some additional commentary regarding the second quarter and our full year 2021 outlook. Thank you, Al. Good morning, everyone. I will first discuss some additional financials for the quarter not covered by Robert and Al, and then I will discuss our second quarter and full year 2021 outlook. In the first quarter, cash flow from operating activities was $124.9 million, compared with cash flow of $76.4 million for the same period of 2020. Record first quarter free cash flow, that is cash from operating activities less capital expenditures, was $107.3 million in the first quarter of 2021, compared with $56.2 million in 2020. Excluding after-tax cash payments related to the FLIR transaction, first quarter free cash flow was $110.1 million. Capital expenditures were $17.6 million in the first quarter, compared to $20.2 million for the same period of 2020. Depreciation and amortization expense was $29.3 million for both the first quarters of 2021 and 2020. We ended the quarter with $9.1 million of net debt. That is approximately $3.24 billion of debt less cash of approximately $3.23 billion. The prior cash and debt balances at April 4th, 2021 included the proceeds of debt incurred to fund the cash portion of the consideration for the FLIR acquisition. Stock option compensation expense was $4.2 million for the first quarter of 2021, compared to $7.4 million for the same period of 2020. Turning to our outlook, management currently believes that earnings per share in the second quarter of 2021 will be in the range of $2.85- $2.95 per share. For the full year 2021, our earnings per share outlook is $12- $12.20. In each case, these do not reflect the pending acquisition of FLIR and related acquisition of financing costs. The 2021 full year estimated tax rate, excluding discrete items, is expected to be 22.6%. In addition, we currently expect less discrete tax items in 2021 compared with 2020. I will now pass the call back to Robert. Thank you, Sue. We would now like to take your questions. Sean, if you're ready to proceed with the questions and answers, please go ahead. Thank you. Ladies and gentlemen, if you do have a question for today's conference, please press one, then zero on your touch-tone phone. You'll hear acknowledgment that you've been placed in queue. You may remove yourself from queue at any time by pressing one, zero again. Our first question is going to come from the line of Greg Konrad from Jefferies. Please go ahead. Good morning. Good morning, Greg. Maybe just to start on margins before I get to FLIR. It seems like at least in Instrumentation and Engineered Systems, you're probably running well ahead of the guidance that you laid out last quarter. Can you maybe just update us on your thoughts on organic margins for the year? Yeah. Greg, the Instrumentation, when we started the year, because it's primarily a short cycle business, we were not sure about how much revenue, and therefore margins, we would have. We projected margin improvement of about 10 basis points. We think the margins are now going to be closer to 140 basis points for the year, which is an increase of about 130 basis points. Moving to the second one, which is Engineered Systems that you mentioned. We had a very strong first quarter, primarily because we shipped all of our turbine engines that were due to finish that production cycle in the first quarter. Our margins were a healthy over 14.2%. We were initially projecting margins for the year of about 15 basis point improvement. Currently, because primarily of the first quarter, we think overall margins for this segment would increase to about 180 basis points, with the rest of the year moderating closer to the 12%-12.2% that this business has normally experienced. I think those were the two areas that you asked about. That's helpful. You mentioned that you guys have visited over 90% of the FLIR sites. Any update, just when we think about synergies or maybe some of the potential longer-term revenue synergies, just anything surprising as you continue the diligence into the close? I think the most important thing that we found out in our visits were the quality of the operations and the people. We really haven't focused yet on revenue synergies, but we've looked at synergies in the operating area. Primarily by using some of the methodologies, Greg, that we've used in our own operations, such as procurement savings, which have been substantial for us last year and are supposed to be same this year. As well as some of the cost reductions that we mentioned earlier, vis-a-vis the $40 million of cost savings that we expect to enjoy in the first year and growing to $80 million over time. Those would be the synergies that at this time, in terms of revenue synergies, w e haven't really looked at that very closely. Frankly, we operate in different markets. The things that we can obviously look at very quickly would be how do we jointly go to market in areas where we have complementary products. Just last one. I remember back to e2v, you gave us adjusted numbers because there were large expenses, and you did that this quarter, and I'm assuming that will continue going forward. Any updated thoughts on, even if it's not the presented number, at least presenting ex amortization, just given that's probably going to be fairly accretive as you get into the next year? Yeah. I think the EPS accretion, assume in e2v was substantial, partially because there we really improved margins. For FLIR, on the other hand, if we exclude intangibles, which as you said, would be substantial, and the one-time cost that we will, we think that in 2022, we should have EPS accretion of about 20% or more. Of course, again, excluding the intangibles, which is substantial. The reason for that is twofold. One is the savings, what I mentioned. The other is, even in last year's revenue and earnings that they had in 2020, their margins, operating margins, after all of those one-time costs on a GAAP basis, were 16.5%, which to us is a very healthy margin. As you know, this quarter we went up to 17.5%, but 16.5% is very good, and if we can improve that, then obviously we'll get substantial accretion, ex intangibles. Thank you. Thank you, Greg. Thank you. Next we're going to go to the line of Blake Gendron from Wolfe Research. Please go ahead. Yeah. Thanks for the time this morning. Just wanted to follow up on the synergy question. Maybe not so much focused on cost or revenue, but working capital here, in terms of supply chain overlap, is there any way we can think about maybe free cash conversion on a standalone basis versus incremental synergies there when you combine the two entities? I think, again, to do this properly, Blake, I have to exclude the one-time charges because while we have some handle on our charges at this time for the rest of the year, we don't have a really good handle on what FLIR's charges would be. The one area, I think the conversion overall is going to be better than 100%. Having said that, in inventory build-up at FLIR, from what we saw in 2019 and 2020, was substantial and partially because of the elevated skin temperature programs that they enjoyed. They have a significant inventory build-up in that and some other areas that we have to look at very carefully. We may have to write those up, we may have to write those down. We'll see as we get to it. Overall, our projections are that we ourselves should have a free cash flow that slightly surpasses last year. Last year was a record year for us at $547 million, $445 million. If we can exceed that ourselves and do well with the free cash flow, that's very important, Blake, because we intend to pay down our debt as fast as we possibly can over the next two years. That's really helpful color. Wanted to switch gears to digital imaging. You called out strength in some of the short cycle markets, specifically industrial, scientific, and geospatial. Does that include healthcare? Because we're seeing hospital volumes improve, so I'm wondering if that could be an incremental tailwind as we move forward here in the vaccine rollout and normalization. Very small exposure to commercial aero in digital imaging, but wondering how you expect that to evolve over the medium to longer- term. Let me start with the healthcare. Healthcare year-over-year, 2019 to 2020, we had about a 13.7% decrease in revenue from $255 million- $220 million. This year, we're starting to see some improvements, and we anticipate that between our CMOS X-ray panels, as well as some of the equipment that we supply for X-ray sources, we will have an increase of about 9% over last year to approximately $240 million. That kind of speaks to what you just said. The recovery is a little slower than we anticipated, but it is there. We're getting some really good orders in that domain. More in the flat panel displays with the x-ray sources kind of lagging a little bit, but still coming up. Going back to the question vis-à-vis the commercial systems. Commercial aero in digital imaging, first, it's small. Second, it's not that dependent on airline traffic. It's different than anything else. It's primarily in space domain. We have not seen any deterioration there. Actually, we think that on our aerospace and defense in the digital imaging domain, we think we'll see about a 7% improvement in revenue this year from $270 last year to maybe $290 this year. The only area of aerospace that we've taken some punishment is in the aerospace businesses in Teledyne's normal defense and aerospace domain. Makes sense. Really appreciate the time. Thanks for the answers. Sure, Blake. Thank you. Next, we'll go to the line of Jim Ricchiuti from Needham & Company. Please go ahead. Hi, good morning. Just a couple of questions. You alluded to the fact that you've seen a little bit of a stronger margin profile in parts of the instrumentation business. I'm just wondering, as you look out into the second half of the year, where do you see the most opportunity for margin expansion in the different business units? Sounds like with healthcare coming on, digital imaging margins look better. If you go to instrumentation, we did have some significant improvements in margin in environmental and test and measurement in the first quarter, and we expect those to continue for the rest of the year. We also had some improvement in margin in the marine businesses, even though revenue, as Al mentioned, was down somewhat. We think the revenue will catch up the rest of the year, and as that does, the margins there will improve also. We think overall, the instrumentation, we have the best margins in environmental area, about 23%. Second-best margins in our test and measurements, over 21%, and marine is approaching over 19%. When you roll it all up, we're going to get close to 20.9% in instrumentation. I think that's going to be healthy for us, especially if marine, as we expect, because of the oil prices going up to about 65 currently. If that improves, I think that segment is going to do really well. That's why I said our outlook for the margins has improved 130 basis points since January of this year. Got it. Robert, with all of the well-publicized reports about component constraints, and now maybe you want to respond to this, are you guys seeing any disruption in the business from this, or are you able to manage the supply chain well enough? Both. First, obviously, we're seeing constraints, Jim. There's no question about that, both in the electronics material components as well as in printed circuit boards. It's affecting a lot of our businesses. Having said that, even though we do have very tight control of our inventory, we have approved buying some of the critical components ahead of time. The other thing is, because of our collaborative and across Teledyne effort in procurement, we're able now to approach our suppliers as one fairly large customer, get their forecasts in terms of their timelines for delivering product, and put in orders ahead of time. Having said all of that, we're managing it, but we also are getting products from foundries, for example, that come to our wafers that we get. In that case, we're fortunate because the guys who supply us wafers are also our customers. In some areas, we think we're going to be okay. In other areas, I'm very cautious to be optimistic. This thing can really spin out of control, and then we'd have to deal with it again. Yeah. Okay. Well, last question. Thank you for that. Last question. Just with your nice bookings number for the quarter and backlog, and I'm just wondering, as we think about the way you're characterizing the business and the acceleration in growth that seems to be suggested in the recent filings looking out to next year, where do you see the potential for accelerating growth? In which areas of the business? I assume some of the businesses that have been weaker, that recover, but I'm just wondering if there's anything else you can call out. I think our primary area is digital imaging. For me to say digital imaging is going to grow organically 10% year-over-year, I don't know if I've ever done something like that, so I feel pretty bullish to kind of predict that. I think we'll end the year with the book-to-bill in digital imaging of 1.08, maybe 110. That's our first area. I think in the instrumentation area, we're right now just over one, but a lot of that is short-cycle businesses. If marine comes back as we expect and the other areas come back as we expect, we think, especially in test and measurement, we could have as much as 8% growth, in environmental 6%, 6.5%. If marine comes back, that would be another 2%. Overall, I think instrumentation should give us about 5.3%, 5.2% for the year. For us, that's again, very good because those are the highest margin businesses. Engineered systems, I think, would be fairly flat year-over-year. We don't expect aerospace to really come back that much this year. It's probably a two-year cycle. Our defense businesses are doing okay. I anticipate in aerospace and defense combined to enjoy a 4% margin, 4% revenue improvement this year. Roll all of that together, and you're going to end up with about 6% for the company, which would be one of our healthier organic growth rates in revenue in the recent past. Okay. That's very helpful. Thank you. Thank you, Jim. Next we're going to go to the line of Joe Giordano from Cowen. Please go ahead. Hi, everyone. Good morning. Good morning, Joe Yeah, I just wanted to talk about semiconductor and test and measurement and how you're thinking about the sustainability of strength there, given some of the plans from some of the large manufacturers. I know you're more on the R&D side, but just curious for your color there. Well, test and measurement, let me start there. We're really enjoying a good year in test and measurement, primarily because of being able to put out new products continuously. As you know, we have two areas that we focus on there. One of them is oscilloscopes, and the other is protocols, which are the rules that chips communicate with one another. We continue to put new products out. Like last week alone, we announced three products in oscilloscope and protocols. More importantly, what our guys have been able to do is marry those two products together. Now people can do protocol development and analysis using the oscilloscopes as real-time observation of the signals. That's going to be very good for that area. You also asked me about semi. In digital imaging is primarily where we focus on the semi market, and there is mask and wafer inspection. That's been a really good market for us. If I look at our growth in vision systems, which includes flat panel displays as well as semi-inspection, we anticipate that year-over-year to be about 12%-13% revenue growth. That kind of speaks for that. Lastly, I would point out one example of why digital imaging and relevant semiconductor markets are doing so well for us. We do have a product that comes off our MEMS foundry in Canada. These are pellicles, which are very thin, one-tenth of a human hair thickness, but six to eight inches in diameter, consumable products that are used in extreme UV lithography for very fine semiconductors. They essentially are screens that protect the wafers below them. In that area, we've really done well and have now captured that market, and we have a wonderful customer there. Overall, to answer your question, test and measurement, I talked about, and in the semi, the products that we supply to them are doing pretty well. Just to follow up on one of the other questions asked already about your ability to source components and the scarcity going on. How do you get comfortable with FLIR's ability to do that historically, and now that you're taking over there, like your ability to be able to source that much additional that you'd need to cover their operations as well as smoothly as you've covered your own? The answer is, Joe, I don't know yet. Having said that, because as I mentioned, they do have substantial inventory, and we have to obviously dig into that to see what areas it's in. I think that would be, right now, an area that we'll have to bring our procurement to it. On the other hand, FLIR also gets wafers, and they also make a lot of their own sensors, both on the cooled and the uncooled side. As long as we can enjoy having the wafers, and as long as we can enjoy doing some of the development, especially in indium antimonide for the cooled and VOx, for the uncooled, I think we should be all right. Having said all of that, we just haven't looked at it that deeply. We anticipate that there'll be some challenges, but we'll deal with those just like we deal with challenges that come up in our businesses. Thank you. Thank you, Joe. Once again, ladies and gentlemen, if you do have a question, please press one then zero at this time. Next we'll go to the line of Andrew Buscaglia from Berenberg Capital Markets. Please go ahead. Morning, guys. Morning, Andrew. I was hoping you could talk a little bit about, so just to clarify, digital imaging, are you calling for 10% full for the full year growth? I know you gave the sub-components there. Then, I don't believe you talked about a couple of the segments. I don't believe you talked about margins for digital imaging or A&D electronics, which at least for A&D, had a really strong start to the year. What's your outlook on those margins there? Okay. Let me start with the margins, please. Right now, we think digital imaging margins should go up about 150 basis points over last year. Just north of 21%, let's say 21%. Aerospace, Defense, and Space Systems, we're going to have significant margin improvement. As Al mentioned, we had a really good uptick in the first quarter, partially because we had one-time charges last year in our aerospace. Nevertheless, having said that, we think the margins are going to be approaching 18.5%, maybe 18.6%, which would be 490 basis points improvement over last year. Engineered Systems is going to be relatively flat. If you take the instruments margin that I mentioned before, which was 20.9%, and bring it all the way down, we think the company operating margin, I mentioned in January that we thought it'd be about 17%. Now we're projecting the total company operating margin to be closer, for the year, to 17.6%. Okay. All of this is excluding, of course, anything that has to d o with the acquisition of FLIR. I don't know whether I answered all your question. Digital imaging, the top line there, I know you gave some sub-components that I would look there, but I think you had called for about 9% growth for the year. Is that now closer to 10%, like you were saying? Yes. It's closer to 10%- Okay. led by our vision products, cameras, including scientific camera sensors, as I mentioned, for semi, flat panel display, et cetera. Everything there is going to do well. The only area that may be flat year-over-year is our geospatial. Everything else seems to be going really well. Lastly, I'm having a little bit of difficulty just getting to the midpoint of your guide, and I think it might be, should we be modeling in some transaction costs to add back? Secondly, the interest expense was elevated this quarter. I guess you can't really assume a flat line, or you got to add that back. I guess, how do you get to the midpoint of your guide with some of the below the line items? If you look at the guidance that Sue provided, the $12-$12.20, that excludes FLIR's transaction costs. You have to look at it, at this time, you have to look at that excluding interest expenses related to the FLIR acquisition, as well as some of the legal expenses that come above the line. Once we acquire FLIR, assuming the shareholders approve the transaction, then what we will do is we'll have to put the interest for the total company as part of our moving forward normal costs in GAAP. There are gonna be some other costs associated with the transaction that are gonna be substantial. Those would be one-time charges, and as we talked earlier, we call those intangibles. Later on also would be some inventory write-ups and other things. Having said all of that, the $12-$12.20 excludes FLIR's transaction costs, which in the first quarter were about $39 million. $5.9 million of it was above the line, which was legal fees and also fees for bankers. The rest of it, or about $33 million, was interest in getting the bonds and redeeming some of the bonds that we already had outstanding. I hope that answers your question. Come July, we'll kind of clean this up and do it, what did we say in April as Teledyne standalone? How are we looking at FLIR, what we expect to happen there? We'll learn a lot more about them as they do their own earnings, I think it's May 6th. We'll project what the combined company would be like with and without the one-time costs. As I mentioned earlier, we think it's going to be accretive even on a GAAP basis in 2022. Got it. I was hoping, Robert, could you provide a little more color on one more thing? In the S4, the internal projections that FLIR had for their defense technology business was about a 12% CAGR. It seems like as you learn more about this company, you're talking about quality of the assets and the people. Are those some of those projections something you'd sign off on, that there is a lot of growth in that defense segment which just hasn't transpired for that company to date? Yeah. Let me start, Andrew, if I may, with a little precaution. How should I put it? We're a little bit concerned that maybe the projections for them were a little aggressive in the S4. Having said that, we have now looked at their businesses a little differently than the way they reported in the two segments, which is the industrial segment and the defense segment. We've gone back, Andrew, and looked at the businesses from a divisional perspective the way they were in 2014, which were 6 divisions. We've gone back, and fortunately, they were kind enough and good enough to provide us with the financial data in those divisions. They've added two new things to it, and I'm going to come to the defense question that you asked. One of them is a small vision product that they bought in Canada, Point Grey, which they report as part of their components business. That business is fairly stable. It's a small business of the order of $80 million. Coming to the next area, which is new. Now they have, if you look at it the way I just mentioned, they have eight divisions, the way we look at it. The way we look at the defense segment, it really has one part of it that is really new, and that's their unmanned systems, both UAV and ground-based unmanned systems. That has enjoyed really good growth, primarily because they've made some good acquisitions, and they've also, starting with an acquisition they made in 2016, Prox Dynamics, which makes the very small UAVs. They've enjoyed about $260 million in revenue in 2020 in that unmanned segment, which is both ground-based and UAVs. That business, I think, will grow, and I think that business will grow significantly from our perspective. I'm hoping that it will grow enough to make up for some of the detriment that we see from the business that they provide at the elevated skin temperature products that are going to go down. Maybe last year were over $100 million, go down to less than 20 or whatever. Having said that, we're hoping that, as you mentioned, the defense businesses, because of the acquisition now kicking in four years, that those would make up the decrement in the EST business. I don't know if I've answered your question, but I think that's the best I can do at this time. No, it's helpful. Thank you. Thank you, Andrew. At this time, I have no further questions in queue. Thank you, Sean. I would now ask Jason to conclude our conference call. Jason? Thanks, Robert. Again, thank you everyone for joining the call this morning. Of course, if you have follow-up questions, please feel free to call me at the number on the earnings release. Sean, if you could end the call and provide the replay details for everyone, I'd appreciate it. Goodbye. Yes, thank you. Ladies and gentlemen, today's call will be available for replay after 10:00 A.M. today through 5/28/2021. You may access the AT&T Teleconference replay system at any time by dialing 866-207-1041 or internationally at 402-970-0847 with an access code of 5556868. Those numbers again are 866-207-1041 or internationally a t 402-970-0847 with an access code of 5556868. That does conclude our conference for today. Thank you for your participation, for using AT&T Event Services. You may now disconnect.