[Management View]
Teledyne Technologies reported record quarterly sales with a 10.2% increase in Q2 2025, including 2% organic growth. Non-GAAP EPS rose 13.5% YoY, setting a second-quarter record. The Digital Imaging segment saw its highest organic growth in three years, driven by Teledyne FLIR's defense and industrial markets.

[Outlook]
Management projects GAAP EPS for the full year at $17.59-$17.97 and non-GAAP EPS at $21.20-$21.50. Q3 sales are expected to remain flat sequentially from Q2 2025. The company remains cautious about potential impacts from US trade policy announcements.

[Financial Performance]
- Total sales increased by 10.2% YoY in Q2 2025.
- Non-GAAP EPS increased by 13.5% YoY.
- Digital Imaging sales increased by 4.3% YoY.
- Aerospace and Defense Electronics sales rose by 36.2% YoY.
- Free cash flow was $196.3 million, down from $301 million in Q2 2024.

[Q&A Highlights]
Question 1: Just wanted to touch on your guidance for Q3 and some of the caution you're citing. Where exactly is this pull forward within your business segments? And can you comment on, you know, are you seeing this more on with some of the short cycle businesses versus long cycle? If you could add that to your comments.
Answer: The comment is primarily about short cycle businesses. Longer cycle businesses have good visibility, but short cycle businesses like instruments have short book-to-bill cycle times. We are cautious that $15 to $20 million may have been pulled in, mostly in short cycle businesses.

Question 2: Can you know you guys had a press release out order activity in some of these longer cycle businesses you know, supporting US's stance on dominance and wondering if you've seen an order uptick within unmanned systems or the component you supply to them.
Answer: Specifically, in unmanned systems in FLIR, we saw a book-to-bill of 1.17 in Q1 and just over one in Q2. Digital imaging excluding FLIR saw an uptick in orders with a book-to-bill as high as 1.2. Overall, our book-to-bill has been healthy at about 1.1 across our portfolio.

Question 3: So I did wanna kinda maybe push you a little bit on digital imaging. You know, the book to bill is strong. I think this is the January '1 book to bill or higher, but yet you still really only have, I think, modest organic sales growth factored into the second half. So could you just help us reconcile why we wouldn't see more of a meaningful pickup in sales just based on those bookings?
Answer: FLIR is strong, but some short cycle businesses like Dalsa have been down. While we are getting a little order pickup, it's easier to comp. We are cautious and expect some growth in Q4 and early 2026.

Question 4: The aerospace and defense margin did come in quite nicely. Would you maybe be able to elaborate a little bit, you know, was there any pricing or business mix factors, productivity? Maybe just give us a sense for what drove that margin strength. And is there anything that we should be bearing in mind the rest of this year we update our models?
Answer: Margins improve in acquired businesses over time. Excluding acquired businesses, margins are very healthy. Legacy defense electronics and aerospace businesses continue to be strong. Acquired businesses like MicroPack and KeyOptik are improving margins as we integrate them.

Question 5: Maybe just to follow-up on your guidance. That Q3 would look similar from a top line perspective. Relative to Q2. I mean, I know what you did with the EPS guidance, but has there been any change to the revenue guidance you gave on the last call just as we think about kind of expectations for Q4?
Answer: We expect some uptick from acquired businesses in Q3, similar to Q2, with very little organic growth. We have raised our guidance for the year by almost $20 million, expecting about $6.03 billion in revenue with 6.3% growth.

Question 6: And then maybe just to dig into industrial and scientific vision a bit. I think you called out the book to bill was 1.2 in the quarter, and you know, I appreciate some of the short cycle commentary. But any additional color in kind of what you're seeing in that business, either from an end market perspective and how you're kind of thinking about the outlook for
Answer: The machine vision cameras business saw year-over-year growth in applications like semiconductor mask and wafer inspection. The machine vision sensors business was down year-over-year on sales but had an orders uptick. Overall book-to-bill was 1.2, and we expect the business to be relatively flat for the full year.

Question 7: Can you give some color on what overall defense was up? And how maybe international contributed to that just given some of the positive commentary?
Answer: US government defense improved 12.5% year-over-year, primarily organic. Foreign government defense improved over 15%. Our defense portfolio is spread across different countries and products, with a strong presence in Europe.

Question 8: Do you guys have growth in orders versus growth in revenue or a book to bill for the first half of the year in what you would call broadly defined short cycle or in machine vision and instrumentation?
Answer: In instrumentation, book-to-bill is just above one. Digital imaging saw an uptick in Dalsa with Q1 at 1.02 and Q2 at 1.23. FLIR is healthy with book-to-bill over one.

Question 9: Could you spend another minute on the digital imaging margins and what you're thinking happens in the back half and you've spoken to your medium term framework just given those stepped back a little bit in the quarter.
Answer: FLIR margins have continuously increased, while Dalsa margins have gone down due to cost out. Overall, digital imaging margins are flat, with FLIR carrying the day.

Question 10: Could you talk a little bit about the drivers there. It's both, I think, both defense and commercial subs. Is it sustainable at this you know, given what you're seeing?
Answer: Energy part of the marine business is about 40%, with strong growth in subsea interconnect for oil production. Defense side is about 30%, driven by subsea unmanned vehicles and submarine interconnect business.

Question 11: Could you guys cover so on the drone exposure overall, how are you thinking about the opportunities Blackhorn, it was added to the blue UAS list. But is it the driver for you guys is really just this the camera systems you'll sell to everybody? Versus your own drone products.
Answer: We sell sensors to our own products and to others. We have a large business in Santa Barbara making cooled and uncooled infrared sensors. We sell to competitors and non-competitors, both defense and non-defense companies.

Question 12: Can you talk a little bit about which Teledyne Technologies Incorporated products have, the most relevance to? And are you already engaging with some of the industry partners and just give a sense of how big of an opportunity that could be for the company.
Answer: We have a large presence in space-based imaging and electronic subsystems for missile tracking. We expect opportunities in space-based sensing and electronic subsystems.

Question 13: On the share buyback authorization, I'm just curious whether we should be taking that as an indicator that the pipeline of activity is slowing down or whether you're starting to see value in the stock. If you could maybe expand on that, that'd be helpful.
Answer: The optionality is important. There are available acquisitions, but prices are high. We may buy back stock if it's the best value. Our debt to EBITDA ratio is 1.6, and if we do nothing, it will go down to 0.5 by the end of next year.

Question 14: Just relating to the pull forward the potential there. Know it's not a huge number, but, like, were you seeing like, tangible reductions in orders in, like, early July that confirms something like this? Or is it more just, like, something that you're just, you know, maybe worried about but aren't seeing evidence of it?
Answer: We haven't seen tangible reductions in orders. It's the cautious nature of Teledyne Technologies Incorporated to not be effervescent. We haven't seen any evidence of pull forward.

Question 15: Last quarter, given all the controversy around tariffs and we didn't know what's going on and, you know, raising prices, you guys were building in some kind of contingency on the demand side. Related to, you know, price actions you may have to take to combat. Now as tariffs have deescalated, have you removed any of that kind of contingency from the guide know, now that we're three months further along and the tariffs are coming in at lower rates.
Answer: We have become less cautious in that domain. 82% of our revenue is under the tent, with 75% of the remaining 18% being US exports. We import about $700 million of material, and we can mitigate some of the cost impact with price increases.

Question 16: Just can you walk us through a scenario and what would need to happen across the portfolio? You'd hit the high end of the guidance range or maybe even exceed it? What would need to happen?
Answer: It all depends on our short cycle business. We have good growth in long cycle businesses, and if short cycle businesses hold up, we will be fine.

Question 17: Can you talk a little bit more about the Test and Measurement business and performance during the quarter? And your expectations for second half? I think last quarter, you called out that saw strong Ethernet test sales, and that's related to AI. Just curious, you know, if there are any additional errors in strength you saw, during the quarter? Any additional color?
Answer: Test and Measurement business saw 5.5% organic growth in Q2, driven by protocol sales and oscilloscope sales. We expect the business to be up low single digits for the full year.

[Sentiment Analysis]
The tone of the management was cautiously optimistic, emphasizing strong performance but expressing concerns about potential impacts from trade policy changes. Analysts' questions focused on understanding the cautious guidance and the drivers behind the company's performance.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|---------------------------------|---------------|---------------|
| Total Sales | +10.2% YoY | N/A |
| Non-GAAP EPS | +13.5% YoY | N/A |
| Free Cash Flow | $196.3 million| $301 million |
| Capital Expenditures | $30.3 million | $17.7 million |
| Net Debt | $2.3 billion | N/A |

[Risks and Concerns]
- Potential impacts from US trade policy changes.
- Decrease in free cash flow due to higher income tax payments.
- Volatility in international trade affecting short cycle businesses.

[Final Takeaway]
Teledyne Technologies reported strong Q2 2025 results with record sales and non-GAAP earnings. The company remains cautious about potential impacts from US trade policy changes, particularly on short cycle businesses. Management's strategic focus includes balancing acquisitions and capital return strategies, with an increased stock repurchase authorization. Despite some concerns, the company's diverse portfolio and strong order momentum position it well for future growth.