FLIR Systems, Inc. (FLIR)
Q1 2010 Earnings Call
April 23, 2010 11:00 am ET
Wit Davis - SVP, General Counsel and Secretary FLIR Systems
Earl Lewis - Chairman, President and CEO FLIR Systems, Inc.
Andy Teich - President, Commercial Vision Systems
Bill Sundermeier - President, Government Systems
Steve Bailey - SVP, Finance and CFO
Previous Statements by FLIR
» FLIR Systems, Inc. Q4 2009 Earnings Call Transcript
» FLIR Systems, Inc. Q3 2009 Earnings Call Transcript
» FLIR Systems, Inc. Q2 2009 Earnings Call Transcript
Good morning. My name is Monica, and I will be your conference operator today. At this time, I would like to welcome everyone to the FLIR Systems first 2010 financial results conference call.
I will now turn the call over to Mr. Wit Davis, Senior Vice President, General Counsel and Secretary of FLIR Systems. Sir, you may now begin.
Good morning, everyone. Before we begin this conference call, I need to remind you that other than statements as to historical facts, the statements made on this conference call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations.
Words such as expects, anticipates, intends, believes, estimates, and variations of such words and similar expressions are intended to identify such forward-looking statements. All of these statements are subject to risks and uncertainties that could cause actual results to differ materially.
Please refer to the press release we issued earlier today for a description of factors that could cause actual results to differ materially from those forecast. The forward-looking statements we make today speak as of today, and we do not undertake any obligation to update any such statements to reflect events or circumstances occurring after today.
Let me now turn the call over to Earl Lewis, Chairman and CEO of FLIR Systems. Earl?
Thank you, Wit, and thank you for joining us this morning. We are very pleased with our performance in the first quarter. We are in $0.35 per share and a 6% increase in revenue to $287 million. Our commercial business did much better than they did last year. And this planned the government systems revenue was little changed. Gross margins and operating margins improved from Q4 and remained at near record level. Both of our commercial businesses reported better year-over-year margins in Q1. While our government margins were down slightly from last year, but remained very strong. Cash from operations was $82 million. And cash balances increased by 40 million during the quarter. Our 12 month backlog at the end of the quarter was $543 million down approximately 4%. And in line with our expectations.
With that, I am going to turn the call this call over the Andy to discuss Q1 commercial systems, Andy.
Thanks Earl, the new commercial systems vision has been together for nearly four months and we've made significant progress capitalizing on the combination. We are working to streamline the sales and marketing organization, leverage operational synergies and coordinate R&D efforts. When we are done, we expect to have a even stronger position as the market leader in commercial infrared.
Overall, Commercial Systems Division revenue in Q1 was a $129 million an increase of 17%, compared to the combined first quarter results of thermography and CDS a year ago. Operating income for Q1 was $34 million up 25% from the prior year. While operating margin was a very strong 26%, the promising signs of an economically recovery we saw in the fourth quarter were sustained throughout Q1 and led the healthy growth across most product lines. Thermography revenue in Q1 was $75.6 million, an increase of 18% from the first quarter of 2009. Excluding the impact of currency thermography revenue grew 11%. Operating margins were 27%, up from 25% last year, due to better gross margins and operating leverage.
The US improved substantially at the first quarter as growth in both the mid-range and the high volume segment accelerated. Asia-Pacific continued its strong growth across most product lines, applications and countries. EMEA revenue was up only slightly, however as the economic recovery in most European countries lagged the most recovery in the United States. We made some changes to our organization in Europe and expect better performance in the second half of 2010.
Thermography unit volume increased over 40% compared to last year a substantially better result than in 2009. Volumes were up across almost all product lines, indicating a return to the broad based multi-application demand drivers we experienced prior to the economic downturn. Turning to Commercial Vision Systems, revenue was $53.4 million an increase of 16% compared to first quarter a year ago. Backlog remained very strong at $101 million down just $2 million from year-end. Operating income for Q1 was $13.8 million up 22% from the prior year and the highest in CDS history. Operating margins were 26% up 1% from the prior year due to higher gross margins which were partially offset by increased operating expenses. Demand in the security and surveillance market was excellent as worldwide orders were up over 30% from the first quarter of the prior year driven by outstanding growth in Europe. Unit growth was up nearly 60% continuing the trend towards lower-priced short and mid-range uncooled cameras purchased with private industry funding. Our global distribution network now boasts 433 dealers worldwide up nearly 100 from a year ago and reflecting our focus on expanding distribution for long-term growth.
In the maritime market, orders were up dramatically compared to the prior year and reached the highest quarterly level ever. Demand was strong across product lines from the top of the line Voyager system to the new M-Series multi-sensor system to the new First Mate handheld camera. The maritime business has great promise for the future.