Greg Konrad

Greg Konrad inquired about the recovery trajectory for Digital Imaging margins, specifically addressing the 24% target and expectations for Q4 and next year, while also seeking clarification on the full-year revenue outlook increase, including its organic component and Q4 seasonality across segments.

Answer

Executive Chairman Robert Mehrabian stated that Q4 Digital Imaging margins are achievable compared to 2023 and 2024, expecting full-year margins to be flat with last year despite significant cost reductions. He detailed the $30 million revenue outlook increase, attributing $10 million to FLIR, $10 million to Aerospace and Defense (organic), and $10 million to the Q-Optics acquisition.

Greg Konrad from Jefferies sought clarity on the recovery trajectory for Digital Imaging margins, including the 24% target, and requested a breakdown of the components contributing to the raised full-year revenue outlook of $6.06 billion.

Answer

Executive Chairman Robert Mehrabian indicated that Q4 margins for Digital Imaging should be comparable to the prior year, aiming for flat full-year margins despite cost-cutting. He detailed the $30 million revenue outlook increase, with $10 million from Teledyne FLIR, $10 million from organic Aerospace & Defense, and $10 million from the Q-Optics acquisition.

Greg Konrad sought clarification on the full-year revenue guidance in light of the flat Q3 outlook. He also requested more detail on the industrial and scientific vision business's 1.2x book-to-bill and asked for a breakdown of overall defense growth, including international contributions.

Answer

Executive Chairman Robert Mehrabian confirmed the full-year revenue guidance was raised to approximately $6.03 billion. CEO George Bobb noted that in industrial vision, machine vision cameras saw growth while sensors were up on orders but down on sales. Mehrabian detailed that US government defense grew 12.5% organically, while foreign government defense grew over 15%, boosted by a strong European manufacturing footprint and demand for unmanned systems.

Greg Konrad asked for clarification on the full-year revenue guidance, the drivers behind the 1.2 book-to-bill in industrial and scientific vision, and for more color on the overall defense business growth, including international contributions.

Answer

Executive Chairman Robert Mehrabian confirmed the full-year revenue guidance was raised by over $20 million. President & CEO George Bobb noted the strong industrial vision book-to-bill was driven by an orders uptick in both machine vision cameras and sensors. Mehrabian provided a detailed breakdown of defense growth, with U.S. government sales up 12.5% and foreign government sales up over 15%, driven by a strong European manufacturing footprint and demand for unmanned systems.

Greg Konrad asked for clarification on the full-year revenue guidance in light of the flat Q3 outlook, the drivers behind the 1.2x book-to-bill in industrial and scientific vision, and for color on overall defense growth, including international contributions.

Answer

Executive Chairman Robert Mehrabian confirmed the full-year revenue guidance was raised to about $6.03 billion. CEO George Bobb attributed the strong industrial vision orders to growth in machine vision cameras for semiconductor applications. Mehrabian detailed that US government defense grew 12.5% organically, while foreign government defense grew over 15%, boosted by Teledyne's European manufacturing footprint and strong unmanned systems portfolio.

Greg Konrad from Jefferies asked about the specific business impacts of the 1% revenue reduction in the outlook, the net effect of tariffs on margins, and current business trends in the China region.

Answer

Executive Chairman Robert Mehrabian explained the 1% revenue reduction is a broad assumption based on a potential GDP slowdown, primarily affecting the Digital Imaging and Instruments segments. He detailed that potential tariff-related cost increases would first impact inventory before hitting the P&L in later quarters, and the company has mitigation plans. Regarding China, he noted that only 2% of total sales are U.S. exports to China, with a significant portion being certified avionics that are less likely to be affected.

Greg Konrad requested a more detailed outlook for the Digital Imaging segment, asking for specifics on the performance drivers for FLIR defense, vision systems, and weaker areas like healthcare. He also questioned the sources of the strong margin expansion forecasted for 2025, given the modest volume growth assumptions.

Answer

Executive Chairman Robert Mehrabian explained that FLIR's growth in 2024 was driven by its defense and instruments businesses, which offset weakness in its commercial machine vision area. For 2025, he projects FLIR will grow nearly 4%, led by a healthy defense backlog. He stated that overall company non-GAAP operating margins are expected to expand by approximately 80 basis points in 2025, primarily driven by improvements in the Digital Imaging segment, while the Micropac acquisition will initially temper margin growth in Aerospace and Defense.

Greg Konrad asked for a performance breakdown of the Digital Imaging segment, inquired about visibility for long-cycle versus short-cycle businesses into 2025, and asked for the total defense growth in the quarter.

Answer

Executive Chairman Robert Mehrabian detailed that within Digital Imaging, historical Teledyne revenue declined 9.9% while FLIR grew 3.2%, driven by an 8.2% increase in its defense businesses. He noted that long-cycle businesses look healthy for 2025, but it's too early to predict the short-cycle recovery. He added that the U.S. government defense business was up about 2.5% organically, with additional strength from overseas programs.

Greg Konrad asked for more detail on the 20+ programs representing $20 billion in potential value over the next five years, specifically inquiring about the mix of competitive versus follow-on opportunities and the larger competitive decisions expected in the next six months. He also followed up on the award timing and opportunity tied to the Golden Dome for America program.

Answer

Chairman, President, and CEO Wahid Nawabi stated that AeroVironment is actively engaged in these 20+ programs and is a top contender in most, if not all, cases, expecting many to convert into backlog. He emphasized the company's high win rate and the significant magnitude of these opportunities. Regarding Golden Dome for America, Mr. Nawabi clarified that it is largely separate from the 20 programs and represents an additional opportunity. He highlighted AeroVironment's compelling, ready-to-implement solutions for homeland defense against drones and missiles, expressing confidence in rapid deployment if given the chance.

Greg Konrad asked about the composition of AeroVironment's $20 billion pipeline over the next five years, specifically the split between competitive and follow-on programs, and identified any major competitive decisions expected in the next six months. He also inquired about the award timing and opportunity tied to the Golden Dome program.

Answer

Chairman, President, and CEO Wahid Nawabi stated that the 20+ programs are largely competitive, with AeroVironment being a top contender in most. He emphasized the company's high win rate and the significant magnitude of these opportunities. He clarified that the $20 billion pipeline does not fully include Golden Dome, which represents an additional, immediate opportunity for homeland defense using existing, proven solutions.

Greg Konrad of Jefferies inquired about the discrepancy in the FY26 revenue guidance, where the high end of the segment guidance totals more than the overall company guidance. He also asked about the inclusion of synergies from the BlueHalo acquisition and the drivers for the high 70% revenue visibility.

Answer

CFO Kevin McDonnell explained that the segment guidance represents ranges of potential outcomes and the total company guidance reflects a consolidated judgment. He confirmed that cost synergies are included in the outlook, but it is too early to forecast significant revenue synergies. McDonnell noted that while visibility is similar across segments, the new Space, Cyber & Directed Energy segment has some longer-term contracts that contribute to the strong overall visibility.

Greg Konrad inquired about the financial bridge from the Q4 FY25 exit run rate to the FY26 outlook, considering the record backlog and reduced reliance on Ukraine revenue. He also asked about the most exciting growth areas for the pending BlueHalo acquisition.

Answer

Wahid Nawabi, Chairman, President and CEO, expressed high confidence in accelerating growth for FY26, citing a record backlog of nearly $750 million and a strong Q4 exit run rate that positions the company for a nearly $1 billion organic revenue year. For BlueHalo, Mr. Nawabi highlighted counter-UAS, space communications, and cyber/intelligence as the most exciting and complementary high-growth areas that will transform the company.

Greg Konrad requested an update on the international Switchblade pipeline, including new allies and conversion progress, and sought clarification on the guidance risks mentioned, such as a change in administration, given the company's 95% revenue visibility.

Answer

Wahid Nawabi, Chairman, President, and CEO, confirmed that recent task orders included initial buys from Lithuania, Romania, and Sweden, while Taiwan and Greece have also publicly announced their intent to purchase. He expressed confidence that the international customer base for Switchblade will grow significantly. Regarding guidance, Nawabi explained that despite the strong 95% visibility, the company reaffirmed its outlook to prudently account for potential risks from the continuing resolution, a change in administration, and standard order conversion timelines, ensuring they can deliver on another record year.

Greg Konrad of Jefferies asked about the business mix between fixed-price development and production programs, the strategic importance of Edge Autonomy's inclusion on the UAS Blue List, and the structure and royalty opportunities for the newly formed SpaceMD entity.

Answer

CEO Peter Cannito clarified that the acquisition of Edge Autonomy improves the business mix by adding more production contracts. He described the Blue List inclusion as 'table stakes' that validates the Stalker platform for all U.S. government agencies. Regarding SpaceMD, he explained it's a strategic move to create a distinct brand to engage the pharmaceutical industry and unlock value through royalty-based agreements, citing the recent deal with Excessa Libera Pharma as a key proof point.

Greg Konrad inquired about the risks and opportunities from Europe's increasing independence in space and defense, and the impact of award lumpiness and budget uncertainty in the U.S. market.

Answer

Peter Cannito, Chairman and CEO, explained that increased European space and defense budgets present a significant opportunity, as funding will likely be reallocated to new programs if joint U.S. initiatives change. He noted that while the U.S. market is dynamic with near-term award delays due to administrative transitions, the long-term growth trends for national security space, defense, and programs like Golden Dome remain strong, positioning Redwire well for future opportunities.

Greg Konrad inquired about Redwire's underlying organic growth within the 2025 pro forma guidance, the key drivers of the guidance range, the expected trend for Estimate at Completion (EAC) adjustments, and the outlook for free cash flow conversion.

Answer

CFO Jonathan Baliff explained that the combined company is expected to grow around 20% organically, with the wide guidance range reflecting the lumpy nature of the space business. CEO Peter Cannito described the unfavorable EACs as 'growing pains' from developing new technologies on firm-fixed-price contracts, which are expected to diminish as programs move into production. Baliff added that the goal is for EACs to be neutral going forward and noted they are non-cash adjustments, which is why the company could still generate positive cash flow.

Greg Konrad from Jefferies inquired about how Redwire's four-part growth strategy might evolve into 2025 and asked for financial details on the Hera acquisition, including its contribution to 2024 guidance and the purchase price.

Answer

Chairman and CEO Peter Cannito identified the significant growth in the bid pipeline as the best leading indicator for 2025, driven by investments in production capacity and technology. CFO Jonathan Baliff added that this strategy mirrors past investments in ROSA, which are now yielding significant contract growth. Regarding Hera, Mr. Baliff explained it was a 'recycling of capital' funded by a separate disposition and that the acquisition's revenue contribution was factored into the updated $310 million guidance, along with organic growth.

Greg Konrad of Jefferies Financial Group inquired about the root cause and resolution status of the recently disclosed fuselage skin manufacturing issue and asked for clarification on the flight schedule dynamics, specifically why the research flight was delayed while the private astronaut flight timeline for fall 2026 was maintained.

Answer

CEO Michael Colglazier provided a technical explanation for the fuselage issue, related to the thermal expansion of different core materials during curing, and confirmed the team is resolving it by simplifying the core types. He explained that because the fuselage part was not on the program's critical path, the overall schedule impact was minimal, resulting in a slight shift for private astronaut flights but keeping them within the fall 2026 window.

Greg Konrad asked for details on the planned reopening of ticket sales in Q1 2026, specifically the size of the first wave and the ideal backlog size given the future flight cadence. He also inquired about the primary gating factors in the feasibility study for a second spaceport in Italy and the role of economics in that decision.

Answer

CEO Michael Colglazier explained that an ideal backlog is one to two years, which supports yield management. He stated that sales will reopen in waves to provide a 'white glove' customer experience and allow for price adjustments, with the goal of supporting an annual flight capacity of about 125 flights. Regarding the Italian spaceport, Colglazier identified clarifying airspace requirements as the most significant current factor, followed by facility needs. He noted that the Italian government has already designated funds for developing the region as a spaceport.

Greg Konrad asked about the flight ramp-up cadence for the Delta fleet in 2027, the number of test flights planned for 2026, and the timeline for reopening the order book for new astronauts.

Answer

CEO Michael Colglazier stated that Virgin Galactic should be on track for its target flight pace in 2027 after a prudent ramp-up. President of Spaceline Mike Moses added that the test campaign will combine development and operational testing, with approximately 6 to 10 spaceflights planned to test the systems before the first private astronaut flight. Colglazier also indicated that the company would likely begin opening sales for new tranches of tickets toward the end of 2025.

Inquired about the 2025 free cash flow outlook, asking if there were any changes given the growth capital commentary. He also asked if the cash burn rate would re-accelerate with new growth initiatives and sought clarification on the allocation of the $300 million growth capital.

Answer

Doug Ahrens confirmed no change to the 2025 free cash flow outlook, which is expected to trend down from 2024, with an exit rate below $100 million per quarter. He noted that cash burn will continue to improve into 2026 as the first two Delta ships begin generating revenue. The growth capital will primarily fund the new mothership's design, tooling, and parts fabrication.

Greg Konrad questioned the relationship between the Civil segment's strong 37% backlog growth and its more modest mid-single-digit revenue growth outlook, suggesting a change in backlog conversion. He also asked about regional strengths in civil aviation.

Answer

Executive Andrew Arnovitz clarified that a primary driver of the large backlog increase was the consolidation of the SIMCOM JV and its associated 15-year Flexjet contract, which spreads revenue recognition over a long period and is not reflected in a single year's revenue. COO Nick Leontidis identified Asia as the strongest region for training demand, while the Americas are currently more muted. He noted business aircraft demand is relatively stable.

Greg Konrad of Jefferies asked how much of the forecasted accelerating growth is from won versus competitive programs and inquired about the key drivers for the C5ISR business, particularly the contribution from hypersonics.

Answer

CEO Eric DeMarco stated there are "zero must-win" competitive programs required to achieve the forecasted growth, as the key programs, particularly in hypersonics, are already won on a sole-source basis. He described the C5ISR business as a "one of a kind" merchant supplier of mil-spec hardware for nearly every U.S. air defense system, missile, and radar program.

Greg Konrad asked about the drivers of accelerating growth next year and the key programs within those drivers, plus the drivers of C5ISR.

Answer

CEO Eric DeMarco stated there are zero must-win programs. He highlighted the hypersonic franchise and C5ISR's support for air defense systems.

Greg Konrad of Jefferies inquired about the specific contribution of pricing actions in Q1 and the potential revenue synergies from the recent Engineering division acquisition, particularly concerning its expanded customer base.

Answer

CFO Blaine Browers clarified that Q1 results reflected normal annual price increases, with tariff-related countermeasures planned for Q2. He expressed confidence in offsetting current tariff pressures. Executive Warren Kanders detailed the synergy strategy, highlighting that the acquisition provides a U.K. manufacturing footprint and access to key international customers like Sellafield and Fukushima, creating opportunities to cross-sell products from Cadre's Alpha Safety brand.

The analyst inquired about the size of the sales pipeline, the shipment cadence for the current backlog of 370 terminals, and the market size of the ground terminal opportunity compared to space-based terminals.

Answer

The CEO declined to provide specific metrics on the forward-looking pipeline. Regarding shipments, the cadence is driven by customer launch schedules, with volume shipments expected to start in the current year and continue over the next 12 months. The opportunity in space is larger, but the ground station market is seen as a significant and meaningful new opportunity, despite having smaller quantities.