Fourth Quarter 2016 Earnings Summary (Preliminary Results)
Disclaimer and Use of Non ‐ GAAP Measures This presentation contains forward ‐ looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding expectations for FLIR's performance are based on current expectations, estimates, and projections about FLIR’s business based, in part, on assumptions made by management and involve certain risks and uncertainties. Actual results could materially differ due to factors in the presentation and in the risk factors section of our Form 10 ‐ K and other reports and filings with the Securities and Exchange Commission. FLIR does not undertake any obligation to update any forward ‐ looking statement to reflect events or circumstances after the date of this presentation, or for changes made to this document by external parties. FLIR reports financial results in accordance with U.S. generally accepted accounting principles (GAAP) and additionally on a non ‐ GAAP basis. The terms “adjusted” and “adj” in this presentation refer to adjusted results, which is a non ‐ GAAP measure. See GAAP to non ‐ GAAP reconciliations in the Appendix to this presentation. These non ‐ GAAP measures of financial performance are not prepared in accordance with GAAP and computational methods may differ from those used by other companies. These non ‐ GAAP metrics remove certain non ‐ core items (including gains and losses) that FLIR management believes are not reflective of ongoing operating performance, such as restructuring charges, gains and losses on disposal of non ‐ core assets, discrete tax items, business acquisition ‐ related expenses, and amortization expense related to acquired intangible assets. FLIR management believes these adjusted earnings metrics provide a view of the Company’s core ongoing operating results and facilitate consistent comparison of financial results over time. A full reconciliation of GAAP to non ‐ GAAP financial data can be found in FLIR’s Q4 2016 earnings release issued on February 14, 2017, which should be reviewed in conjunction with this presentation. 2
Q4 Summary Q4 2016 Revenue EPS Operating Profit $475 million 19% 22% Adj $0.45 GAAP $0.52 Adj Up 8% vs PY Down 190 bps vs PY Down 80 bps vs PY Down 12% vs PY Up 4% vs PY Organic up 2% vs PY Commercial products revenue up 13% year ‐ over ‐ year, Government products revenue up 3% • Adjusted gross profit increased 6% over the fourth quarter of 2015 • Adjusted operating income increased 5% over the fourth quarter of 2015 • Cash flow from operations reached $97 million for the quarter, up 24% year over year • Total backlog finished at $592 million, down 8% from Q3`16 • Select new product introductions: • ─ Third ‐ generation FLIR ONE and FLIR ONE Pro ─ FLIR Duo and Duo R cameras for drones ─ C3 thermal camera for building inspectors and contractors ─ Broad array of new Outdoor and Tactical thermal imagers ─ GFx320 intrinsically safe gas detection thermal camera for oil and gas ─ Second ‐ generation Meridian network video recorder ─ Griffin G465 mobile gas chromatograph ‐ mass spectrometer Acquired Prox Dynamics, leading maker of nano ‐ drone for covert surveillance applications • 3
Acquired Prox Dynamics Q4 2016 Products Personal Reconnaissance System (PRS) Turn ‐ key solution: controller, charger, LCD screen, and • Rationale BlackHornet sensor (nano helicopter) Pocket ‐ sized drone for troop ‐ level deployment • Highly differentiated nano aerial sensing platform • Proven success in selling to global military customers • Leverages Lepton capabilities • BlackHornet Sensor Strong fit with FLIR’s CDMQ model • Smallest tactical drone on the market • Platform for innovating next ‐ generation nano ‐ drone • Extremely quiet operation enables covert reconnaissance solutions • Aircraft weight of less than one ounce • Visible and/or thermal (Lepton) sensor payloads • Transaction Proprietary low power motors and flight control enable • Acquired for $134 million in November 2016 • flight times of 25 minutes on one charge Funded using FLIR’s existing foreign cash balances • Advanced mission flight control, sensor stabilization, and • $0.01 dilutive to Q4 2016 GAAP EPS (no impact to • encrypted data communications link Adjusted EPS) 4
Full Year 2016 Summary Q4 2016 Revenue EPS Operating Margin $1.7 billion 18% GAAP 20% Adj $1.20 GAAP $1.69 Adj Up 7% vs PY, 3% organic Down 180 bps vs PY Down 140 bps vs PY Down 30% vs PY Up 2% vs PY Total Backlog Growth Summary Operating Cash Flow ($s in millions) ($s in millions) Year ‐ Over ‐ Year Revenue +7% Adj. Gross Profit +3% Adj. Operating Income 0% $312 $604 $592 Adj. Net Income 0% $276 $547 $226 Adj. EPS +2% Cash Flow from Operations +13% 2014 2015 2016 2014 2015 2016 5
Full Year 2017 Outlook Q4 2016 • Revenue of $1.78 – $1.83 billion ─ An increase of approximately 7% to 10% over 2016 • Adjusted EPS of $1.81 – $1.91 ─ An increase of approximately 7% to 13% over adjusted 2016 EPS • Announced 25% increase to quarterly dividend, to $0.15 per share ─ Dividend payable on March 10th to shareholders of record as of February 24th • Announced share repurchase authorization of 15 million shares over the next 2 years ─ Repurchased 6.3 million shares under the previous 15 million share, 2 year authorization Note: With respect to the outlook for the full year 2017, 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. 6
Q4 Financials Review Q4 2016 Revenue by Geography $s in millions Q4'16 Q4`15 Q4 Q4 YoY ($s in millions, except per share amounts) 2016 2015 Chg % $49.2 $62.0 11% 13% $32.7 $36.0 U.S. Gov’t 7% 8% U.S. Gov’t Revenue $474.7 $437.6 8% $104.9 $117.9 $255.6 $242.8 $83.6 $98.1 54% 24% 56% 25% Adj. Gross Profit 221.1 208.8 6% 19% 21% Adj. Gross Margin % 47% 48% ‐ 115 bps $26.3 $26.0 5% 6% Adjusted Operating Income $103.3 $98.7 5% $s in millions U.S. Canada/LatAm Europe Mid East/Africa Asia Adj. Operating Margin % 22% 23% ‐ 79 bps Key Cash Flow Items Adj. Net Income $71.9 $69.6 3% $s in millions Q4 Q4 YoY 2016 2015 Chg % Diluted Share Count 137.5 139.0 (1%) Cash Flow from Operations $97.1 $78.3 24% Acquisitions / Investments (376.8) (66.6) Adjusted EPS $0.52 $0.50 4% Capital Expenditures (8.3) (18.1) Share Repurchases ‐ (29.8) Cash Flow from Operations $97.1 $78.3 24% Dividends (16.4) (15.2) Other Cash Flow Items (12.0) (1.2) Net Change in Cash ($316.3) ($52.6) Ending Cash Balance $361.3 $472.8 (24%) 7
Full Year Financials Review Q4 2016 Revenue by Geography $s in millions 2015 2016 FY FY YoY ($s in millions, except per share amounts) $175.6 2016 2015 Chg % $195.9 11% 12% $125.8 $130.9 8% 8% U.S. Gov’t U.S. Gov’t $830.5 Revenue $1,662.2 $1,557.1 7% $321.4 $903.6 $416.3 53% $338.8 $338.9 54% 21% 25% Adj. Gross Profit 782.3 760.1 3% 20% 22% $86.2 Adj. Gross Margin % 47% 49% ‐ 176 bps $93.0 6% 6% Adjusted Operating Income $324.7 $325.0 (0%) $s in millions U.S. Canada/LatAm Europe Mid East/Africa Asia Adj. Operating Margin % 20% 21% ‐ 134 bps Key Cash Flow Items Adj. Net Income $233.9 $232.8 0% $s in millions FY FY YoY 2016 2015 Chg % Diluted Share Count 138.5 140.8 (2%) Cash Flow from Operations $312.3 $275.8 13% Adjusted EPS $1.69 $1.65 2% Acquisitions / Investments (419.2) (66.6) Capital Expenditures (35.9) (68.3) Share Repurchases (66.1) (123.2) Cash Flow from Operations $312.3 $275.8 13% Dividends (65.9) (61.4) Other Cash Flow Items 163.4 (15.0) Net Change in Cash ($111.4) ($58.6) Ending Cash Balance $361.3 $472.8 (24%) 8
Segments Summary Q4 2016 Q4 Q4 YoY FY FY YoY ($s in millions) 2016 2015 Chg % 2016 2015 Chg % Revenue Surveillance $158.5 $150.7 5% $532.5 $503.0 6% Instruments 96.0 98.6 (3%) 336.1 347.5 (3%) Security 73.1 68.4 7% 240.0 226.6 6% OEM & Emerging 76.1 49.2 55% 243.7 186.7 31% Maritime 38.3 36.0 6% 185.7 177.9 4% Detection 32.7 34.7 (6%) 124.1 115.3 8% Total Revenue $474.7 $437.6 8% $1,662.2 $1,557.1 7% Adjusted Operating Income Surveillance $47.6 $50.1 (5%) $151.5 $149.6 1% Instruments 31.5 35.1 (10%) 98.8 115.1 (14%) Security 8.9 9.5 (7%) 15.9 29.4 (46%) OEM & Emerging 18.1 8.2 119% 66.2 43.8 51% Maritime 2.1 1.4 52% 18.6 17.4 7% Detection 9.7 10.4 (7%) 35.3 30.3 17% Segment Adj. Operating Income $117.9 $114.6 3% $386.3 $385.5 0% Segment Adj. Operating Margin % 25% 26% ‐ 136 bps 23% 25% ‐ 152 bps Corporate Expenses (14.6) (16.0) (8%) (61.6) (60.5) 2% Total Adjusted Operating Income $103.3 $98.7 5% $324.7 $325.0 (0%) Total Adj. Operating Margin % 22% 23% ‐ 79 bps 20% 21% ‐ 134 bps 9
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