FLIR Systems (FLIR) Q1 2012 Earnings Call April 27, 2012 11:00 am ET Executives William W. Davis - Senior Vice President, Secretary and General Counsel Earl R. Lewis - Chairman, Chief Executive Officer, President and Chairman of Strategy & Technology Committee Andrew C. Teich - President of Commercial Systems William A. Sundermeier - President of Government Systems Division Anthony L. Trunzo - Chief Financial Officer and Senior Vice President of Finance Analysts Michael S. Lewis - Lazard Capital Markets LLC, Research Division Noah Poponak - Goldman Sachs Group Inc., Research Division Timothy J. Quillin - Stephens Inc., Research Division James Ricchiuti - Needham & Company, LLC, Research Division Jonathan Ho - William Blair & Company L.L.C., Research Division Michael F. Ciarmoli - KeyBanc Capital Markets Inc., Research Division Josephine Lin Millward - The Benchmark Company, LLC, Research Division Jeremy W. Devaney - BB&T Capital Markets, Research Division Presentation Operator
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? Earl R. Lewis Thanks, Wit. And good morning, everyone, and thank you all for joining us today. As we anticipated, our first quarter 2012 financial results were soft. Revenue for the quarter was impacted by lower sales to the U.S. government as well as in Europe and in the Middle East. While our top line continues to be impacted by governmental budget and economic uncertainty, we were able to maintain overall gross and operating margins at levels very close to our first quarter 2011. We maintained a healthy level of R&D investment of 10.5% of revenue as we focused our development efforts on some exciting opportunities that we feel will yield growth and profitability long into our future. Selling, general administrative expenses declined by 6% compared to last year as we worked to gain efficiencies and optimize our sales activities. When we met last November at our annual analyst investor day, I mentioned that we are focused on producing instruments that provide people with valuable information, and that have an established -- and that we have an established model that allow us to produce them at lower costs. The strategy is still very much intact, and I am convinced it will not only help us grow and provide value to our shareholders but will also improve the world around us by saving energy and protecting people. We've only scratched the surface of beginning -- bringing these technologies to the world. Because of that, I'm excited today to be where we are.
We'll now let Bill and Andy talk, we will start with Andy and the Commercial business.Andrew C. Teich Thanks, Earl. The Commercial Systems division finished the first quarter with revenue of $202.3 million, growth of 4% over the first quarter of 2011. Overall division operating margin was 21.3%. Our TVM segment grew revenue at 7% over the prior year reaching $155.7 million. While revenue growth was slowed by lower end -- by lower high-end Thermography, security and Cores sales, unit growth of the TVM cameras and systems were strong at 34%. Raymarine revenue for the first quarter was $46.6 million and the operating margin was 8.2%. Raymarine saw a good growth in the U.S. and Raymarine new products are being well received. But while we increase the number of OEMs in Europe, their volumes have been down, which has weighed down our international results. Turning to our bookings for the quarter. TVM segment bookings dollars declined 4% versus the prior year. This decline was driven largely by the European and APAC regions while bookings in the Americas improves compared to last year. From a product line perspective, worldwide orders for our premium Thermography cameras, those with price points typically above $20,000, declined over 20% compared to Q1 2011, while our lower-priced and new E-Series and automation products performed very well. Course and Components bookings increased in units by nearly 60% but declined on a bookings dollars basis due in part to fewer high-end cooled products. The growth in units booked during the quarter illustrates continued progress in growing volume, particularly in the uncooled segment. Security bookings grew rapidly with dollar bookings up over 25% and unit bookings up 230%. Emerging markets such as critical infrastructure protection and commercial security has driven volume growth in our uncooled security products. We are also seeing expansion in the adoption of high-end cooled security products for mostly border protection solutions towards a more diverse set of customers and applications that protect infrastructure such as bridges, dams, power facilities and other high-value assets. Read the rest of this transcript for free on seekingalpha.com