FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the second quarter ended June 30, 2018. “We are pleased with our second quarter results,” said Jim Cannon, FLIR President and Chief Executive Officer. “Strong organic sales growth and meaningful margin improvement drove adjusted earnings per share growth of 31%. In addition to excellent sales and earnings performance, FLIR significantly improved operating cash flow for the first half of 2018, up 46% over the same period of 2017.”
Mr. Cannon continued, “Our team embraced a number of new business initiatives while maintaining focus on the customer to drive solid first half results. We’re taking this momentum into the second half of the year as we continue executing our mission of innovating technologies that increase awareness and insight so professionals can make more informed decisions that save lives and livelihoods.”
Second Quarter 2018
Second quarter 2018 revenue was $452.7 million, up 4% over second quarter 2017 revenue of $434.1 million. Organic revenue growth was 11%, which excludes the second quarter results in 2017 of the previously disclosed divested security businesses that closed in the first quarter of 2018.
GAAP Earnings Results
GAAP gross profit in the second quarter increased 12% to $232.6 million, or 51.4% of revenue, compared to $206.7 million, or 47.6% of revenue in the second quarter of 2017. GAAP operating income in the second quarter increased 33% to $88.7 million, compared to $66.6 million in the prior year, representing a 430 basis point improvement in operating margin.
Second quarter 2018 GAAP net earnings were $71.6 million, or $0.51 per diluted share, compared with GAAP net earnings of $51.4 million, or $0.37 per diluted share in the second quarter last year.
Cash provided by operations was $153.3 million in the first half of 2018, compared to $105.3 million in the first half of the prior year, a 46% increase. Approximately 2.0 million shares were repurchased in the first half of 2018 at an average price of $50.52.
Non-GAAP Earnings Results
Adjusted gross profit was $236.4 million in the second quarter, representing 52.2% of revenue and increasing 11% over adjusted gross profit of $212.4 million in the second quarter of 2017. Adjusted operating income was $102.0 million in the second quarter, which was 26% higher than adjusted operating income of $81.0 million in the second quarter of 2017. Adjusted operating margin increased 390 basis points to 22.5%, compared with 18.7% in the second quarter of 2017.
Adjusted net earnings in the second quarter were $77.4 million, or $0.55 per diluted share, which was 31% higher than adjusted earnings per diluted share of $0.42 in the second quarter of 2017.
Business Unit Results
Revenue from the Industrial Business Unit was $188.4 million, an increase of 14% over the second quarter results of last year, with strength in optical gas imaging, automotive, and industrial unmanned aerial systems (UAS). The Government and Defense Business Unit contributed $161.0 million of revenue during the second quarter, up 11% over the prior year, driven by increased deliveries of gimbaled systems, DR-SKO, and UAS systems. The Commercial Business Unit recorded revenue of $103.3 million in the second quarter, down 17% from the prior year, but up 5% excluding revenue related to the divested security businesses. Strong results in the maritime, thermal rifle scopes, and intelligent transportation systems product lines contributed to the organic revenue growth.
Revenue and Earnings Outlook for 2018
Based on financial results for the second quarter and the outlook for the remainder of the year, FLIR now expects revenue in 2018 to be in the range of $1.780 billion to $1.800 billion, increased from the previous $1.760 billion to $1.790 billion amount provided in the first quarter earnings call. Adjusted net earnings per diluted share is now expected to be in the range of $2.17 to $2.22 per diluted share, up from the previous outlook of $2.11 to $2.16 per diluted share.
