ARLINGTON, Va.--(BUSINESS WIRE)--FLIR Systems, Inc. (NASDAQ: FLIR), a world leader in the design, manufacture, and marketing of intelligent sensing technologies, today announced financial results for the fourth quarter and full year ended December 31, 2020.
Commenting on FLIR’s fourth quarter and full year results, Jim Cannon, President and Chief Executive Officer, said, “FLIR ended 2020 on a strong note with fourth quarter revenue growth of 7% compared to the prior year quarter. Over the course of the year, we continued to execute on our strategy, delivering new program wins, releasing new, innovative products for our customers, and realizing cost savings from Project Be Ready. I am very proud of our team’s performance. Their dedication and hard work ensured the pandemic did not have a material impact on our consolidated financial performance, and most importantly, allowed us to meet the needs of our customers throughout this challenging year.”
Mr. Cannon added, “We are entering 2021 with strong momentum, and are confident that our combination with Teledyne will create an even stronger organization. The joining of our companies will provide a broader springboard for growth and innovation to meet the evolving needs of our industrial and defense customers, drive enhanced stockholder value and create new opportunities for our employees.”
Fourth Quarter Summary Results
Revenues for the quarter were $524.3 million, compared to $489.0 million in the prior year quarter. Bookings totaled $424.2 million in the quarter, representing a book-to-bill ratio of 0.81. Backlog at the end of the quarter was $809.7 million, reflecting a 0.3% increase relative to the prior year quarter.
GAAP Earnings Results
Gross profit for the quarter was $246.5 million, compared to $232.4 million in the prior year quarter. Gross margin decreased to 47.0% from 47.5% in the prior year quarter, primarily attributable to product mix in the Defense Technologies segment. Earnings from operations for the quarter were $102.4 million, compared to $54.1 million in the prior year quarter. Operating margin increased to 19.5% from 11.1% in the prior year quarter, primarily due to the aforementioned higher revenue and associated gross profit, decreases in restructuring expenses and related asset impairment charges, lower consent agreement costs, operating expense reductions from Project Be Ready, and decreases in marketing and travel costs. Diluted EPS was $0.57, compared to $0.01 in the prior year quarter.
The weighted average diluted share count for the quarter was 132 million, down from 136 million in the prior year quarter primarily due to stock repurchase activity in the first quarter of 2020.
Non-GAAP Earnings Results
Adjusted gross profit for the quarter was $256.2 million, compared to $248.8 million in the prior year quarter. Adjusted gross margin decreased to 48.9% from 50.9% in the prior year quarter, primarily attributable to product mix in the Defense Technologies segment. Adjusted operating income for the quarter was $122.5 million, compared to $101.7 million in the prior year quarter. Adjusted operating margin increased to 23.4% from 20.8% in the prior year quarter, primarily due to the aforementioned higher revenue and associated gross profit, operating expense reductions from Project Be Ready, and decreases in marketing and travel costs. Adjusted diluted EPS was $0.78, compared to $0.53 in the prior year quarter.
Fourth Quarter Segment Results
Industrial Technologies Segment
Industrial Technologies revenues for the quarter were $298.3 million, representing an increase of $20.0 million, or 7.2% compared to the prior year quarter. The increase was primarily attributable to heightened demand for EST solutions due to the COVID-19 pandemic and an increase in maritime product sales, partially offset by lower volume in certain commercial end markets such as security products.
Industrial Technologies segment operating income was $85.2 million, compared to $71.8 million in the prior year quarter. Segment operating margin increased to 28.6% from 25.8% in the prior year quarter, primarily attributable to the aforementioned higher revenue and associated gross profit, operating expense reductions from Project Be Ready, and decreases in marketing and travel costs.
Industrial Technologies bookings totaled $235.4 million for the quarter, representing a book-to-bill ratio of 0.79, and was impacted by the timing of awards and related shipments. Backlog at the end of the quarter was $284.8 million, reflecting a 6.0% increase relative to the prior year quarter, primarily due to long term order award timing and an increased volume of maritime orders during the fourth quarter.
Defense Technologies Segment
Defense Technologies revenues for the quarter of $226.0 million increased by $15.3 million, or 7.2% compared to the prior year quarter. The revenue increase was primarily attributable to improved volumes for unmanned systems.
Defense Technologies segment operating income was $55.3 million, compared to $50.1 million in the prior year quarter. Segment operating margin increased to 24.5% from 23.8% in the prior year quarter, primarily attributable to decreases in marketing and travel costs, partially offset by lower gross margins due to product mix.
Defense Technologies bookings totaled $188.8 million for the quarter, representing a book-to-bill ratio of 0.84, and was impacted by the timing of awards and related shipments. Backlog at the end of the quarter was $524.8 million, reflecting a 2.5% decrease relative to the prior year quarter, primarily due to order volume and subsequent deployment timing, partially offset by increased demand for unmanned systems.
Full Year Summary Results
Revenues for the full year were $1,924 million, compared to $1,877 million in the prior year. Bookings totaled $1,924 million for the full year, representing a book-to-bill ratio of 1.00.
GAAP Earnings Results
Gross profit for the full year was $947.0 million, compared to $929.4 million in the prior year. Gross margin was 49.2%, consistent with the prior year. Operating margin increased to 16.5% from 14.5% in the prior year, primarily due to the aforementioned higher revenue and associated gross profit, operating expense reductions from Project Be Ready, decreases in marketing and travel costs, lower intangible asset amortization, and a decrease in separation, transaction, and integration costs. The favorable impacts were partially offset by an increase in restructuring expenses and related asset impairment charges. Diluted EPS was $1.60, compared to $1.26 in the prior year.
The weighted average diluted share count for the year was 133 million, down from 137 million in the prior year primarily due to stock repurchase activity in the first quarter of 2020.
Non-GAAP Earnings Results
Adjusted gross profit for the year was $986.0 million, compared to $972.5 million in the prior year. Adjusted gross margin decreased to 51.3% from 51.5% in the prior year, primarily due to the ramp up of lower margin programs in the Defense Technologies segment, partially offset by favorable product mix in the Industrial Technologies segment. Adjusted operating income for the year was $428.9 million, compared to $395.7 million in the prior year. Adjusted operating margin increased to 22.3% from 21.0% in the prior year, primarily due to the aforementioned higher revenue and associated gross profit, operating expense reductions from Project Be Ready, and decreases in marketing and travel costs. Adjusted diluted EPS was $2.48, compared to $2.16 in the prior year.
Full Year Segment Results
Industrial Technologies Segment
Industrial Technologies revenues for the year were $1,156 million, representing an increase of $64.0 million, or 5.9% compared to the prior year. The increase was primarily attributable to heightened demand for EST solutions due to the COVID-19 pandemic, partially offset by lower volume in certain commercial end markets such as maritime and security products.
Industrial Technologies segment operating income was $344.4 million, compared to $276.2 million in the prior year. Segment operating margin increased to 29.8% from 25.3% in the prior year, primarily attributable to the aforementioned higher revenue and associated gross profit, favorable product mix, operating expense reductions from Project Be Ready, and decreases in marketing and travel costs.
Industrial Technologies bookings totaled $1,179 million for the year, representing a book-to-bill ratio of 1.02.
Defense Technologies Segment
Defense Technologies revenues for the year of $767.6 million decreased by $27.3 million, or 3.4% compared to the prior year. The revenue decrease was primarily attributable to the completion of certain contracts that contributed to revenue in the prior year, partially offset by increased volumes for unmanned systems.
Defense Technologies segment operating income was $168.5 million, compared to $196.6 million in the prior year. Segment operating margin decreased to 21.9% from 24.7% in the prior year, primarily attributable to the aforementioned lower revenue and associated gross profit and the ramp up of lower margin programs, partially offset by decreases in marketing and travel costs.
Defense Technologies bookings totaled $744.6 million for the year, representing a book-to-bill ratio of 0.97.
Corporate Developments
Altavian Acquisition
On December 2, 2020, the Company acquired 100% of the outstanding stock of Altavian, Inc. ("Altavian"), a privately held manufacturer of small unmanned aerial systems (sUAS) for defense and public safety customers. The transaction consideration of $34.1 million included a cash payment of $26.8 million and shares of the Company’s common stock valued at $7.3 million. In addition to the above transaction consideration, $2.5 million in Company shares will be payable as share-based compensation over a three-year period. The acquisition advances the Company's strategic pillars and expands franchise program opportunities in defense, public safety, and industrial markets.
Teledyne Agreement
On January 4, 2021, we entered into a definitive agreement to be acquired by Teledyne Technologies Incorporated, a manufacturer and supplier of sophisticated instrumentation, digital imaging products and software, aerospace and defense electronics, and engineered systems. The Teledyne transaction will enable the combined company to create a stronger platform for growth and innovation and be even better positioned to meet the evolving needs of our customers, drive stockholder value and create new opportunities for our employees. Together, we will offer a uniquely complementary end-to-end portfolio of sensory technologies for all key domains and applications across a well-balanced, global customer base. In addition, both our business models include serving respective markets and customers with sensors, cameras and sensor systems.
The transaction is expected to close in the middle of 2021 subject to the receipt of required regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, approvals of Teledyne and the Company stockholders and other customary closing conditions.
Balance Sheet and Liquidity
FLIR ended the year with $297.8 million in cash and cash equivalents and approximately $595.4 million in borrowing capacity under its credit facility based on current profitability levels and leverage covenants.
COVID-19 Update
As previously announced, FLIR’s businesses have been deemed essential for critical infrastructure under the Cybersecurity and Infrastructure Security Agency exemption, and all of its manufacturing facilities remain operational. FLIR has implemented stringent safety protocols and continues to monitor recommendations and guidelines issued by the Centers for Disease Control, the European Centre for Disease Prevention, and the World Health Organization to ensure the health and safety of its employees.
Given the high degree of uncertainty in the current macroeconomic environment resulting from COVID-19, the Company remains focused on cash optimization activities and disciplined capital allocation.
Shareholder Return Activity
FLIR’s Board of Directors has declared a quarterly cash dividend of $0.17 per share on FLIR common stock payable on March 19, 2021 to shareholders of record as of close of business on March 5, 2021.
About FLIR Systems, Inc.
Founded in 1978, FLIR Systems is a world-leading technology company focused on intelligent sensing solutions for defense and industrial applications. Our vision is to be “The World’s Sixth Sense,” creating technologies to help professionals make faster, better decisions that save lives and livelihoods. For more information, please visit www.flir.com and follow @flir.
