FLIR Systems Overview

FLIR Systems Overview

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Description: Operating Portfolio: Surveillance- Airborne systems, Maritime systems, Land systems, Border surveillance, Tactical vision, Command & control software; Detection- Radiation detectors, Explosives detectors, Chemical-biological threat detectors, Mass spectrometry systems; Security- Thermal security cameras, Visible-light security cameras, DIY security systems, Software and analytics; Instruments- Building inspection cameras, Electrical / mechanical cameras, Lab / R&D cameras, Test & measurement tools, Firefighting cameras; OEM & Emerging- Thermal camera cores & components, Intelligent traffic systems, Mobile accessories; Maritime- Multifunction displays, Instruments, Sonar, Radar, Thermal cameras.

 
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Contents:
FLIR Systems
Overview
July 2015

DISCLAIMER
This presentation contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements regarding expectations
for FLIR's performance are based on current expectations, estimates, and projections
about FLIR’s business based, in part, on assumptions made by management and
involve certain risks and uncertainties. Actual results could materially differ due to
factors in the presentation and in the risk factors section of our Form 10-K and other
reports and filings with the Securities and Exchange Commission. FLIR does not
undertake any obligation to update any forward-looking statement to reflect events
or circumstances after the date of this presentation, or for changes made to this
document by external parties.

2015 © FLIR Systems, Inc. All rights reserved.

2

OPERATING PORTFOLIO
2014 Revenue
($Millions)

Surveillance

2014 Operating
Margin*

$520







$86

Instruments

25%

Airborne systems
Maritime systems
Land systems
Border surveillance
Tactical vision
Command & control software

Detection

2014 Revenue
($Millions)

$1.5 B

$354

31%

• Building inspection cameras
• Electrical / mechanical
cameras
• Lab / R&D cameras
• Test & measurement tools
• Firefighting cameras

2014
Revenue

13%

2014 Operating
Margin*

OEM & Emerging

• Radiation detectors

$199

25%

• Thermal camera cores &
components

• Explosives detectors

• Intelligent traffic systems

• Chemical-biological threat
detectors

• Mobile accessories

• Mass spectrometry systems

Security

$179

14%

• Thermal security cameras
• Visible-light security cameras
• DIY security systems
• Software and analytics

18%

Operating
Margin*

$226 M
$1.48

Operating Cash
Flow
EPS*

Maritime

$193






13%

Multifunction displays
Instruments
Sonar
Radar
Thermal cameras

* Income amounts exclude restructuring charges.
2015 © FLIR Systems, Inc. All rights reserved.

3

OPERATING PERFORMANCE - LAST 12 MONTHS
$1,524 M

LTM Q1'15

$1,499 M

LTM Q1'14

$758 M

LTM Q1'15

$724 M

LTM Q1'14

LTM Q1'15
LTM Q1'14

LTM Q1'15
LTM Q1'14

$291 M
$253 M

$225 M
$183 M

Margin: 19%
Margin: 17%

Margin: 15%
Margin: 12%

Margin: 50%
Margin: 48%

Revenue
Growth

+2%

Gross Profit
+5%
Growth

EBIT
Growth

+15%

Net Income
+23%
Growth
Income amounts exclude restructuring charges.
2015 © FLIR Systems, Inc. All rights reserved.

4

HISTORICAL MARKET TRENDS
U.S. (Ex U.S. Gov’t)

U.S. Government

Rest of World

Europe

$500

$400

$300

$200

21%

-9%

5yr CAGR

8%

5yr CAGR

5yr CAGR

12%

5yr CAGR

$100

$0
2009 2010 2011 2012 2013 2014

2009 2010 2011 2012 2013 2014

2009 2010 2011 2012 2013 2014

2009 2010 2011 2012 2013 2014

Revenue in millions.

2015 © FLIR Systems, Inc. All rights reserved.

5

Surveillance

$$$$

SOLUTIONS

Integrated
Systems

OEM &
Emerging

PRICE

Instruments

Star
SAFIRE
SeaFLIR
380HLD
380HD

Star
SAFIRE
380HDc

SeaFLIR
280HD

Star SAFIRE
260HLD
Ranger
HRC

Maritime

Recon V

Security

Detection

$

S150
HISS

Few

Value Proposition
• Lowest Total Cost of Ownership
• Ability and Time to Deliver
• Global Customer Support
• Common Platforms

ThermoSight
R-Series

UNITS

Scout II

Many

Applications
• Air & Ground-Based Surveillance
• Search & Rescue
• Border Protection
• Defense and Special Ops
2015 © FLIR Systems, Inc. All rights reserved.

6

SOLUTIONS
Surveillance

Instruments

Commercially Developed, Military Qualified
Significant Value Proposition for Our Customers
Faster fielding

Lower risk with
no funding
required

Scale / volume
benefits apply
to all customers

Global deployment
and support
capability

Long-term
sustainability

Greater flexibility
and optionality

Lower cost

Superior customer
service

Line extensions

Merlin tracking
software

OEM &
Emerging
Maritime

Security

Detection

Product Development
New platforms
within value ladder

New applications

2015 © FLIR Systems, Inc. All rights reserved.

7

$$$$

SOLUTIONS

SC-Series

Surveillance

A-Series
GF-Series

PRICE

Instruments

Txx-Series
Exx-Series

K-Series
Ex-Series

OEM &
Emerging

Ax8
C-2
TG-165
Test &
Measurement

$

Maritime

Few

Security

Detection

UNITS

Value Proposition
• Early Detection of a Multitude
of Problems
• A Camera for Every Application
• High Durability
• Training and Support
• Software Eco-System

Applications
• Building Diagnostics
• Electrical & Mechanical Predictive Maintenance
• R&D / Labs
• Gas Imaging
• Factory & Process Automation
• Firefighting
• Electrical & Environmental Test and Measurement

Many

2015 © FLIR Systems, Inc. All rights reserved.

8

$$$$

SOLUTIONS
Surveillance

Apache
Neutrino

Emerging

Quark 2

PRICE

Instruments

Tau 2
Muon

OEM & Emerging

NVIII

Mobile

$

Maritime

Few

Security

Detection

Traffic
Lepton

Value Proposition
• Size, Weight, Power, Cost
• Image Quality
• Ease of Integration
• Volume Scalability

UNITS

Many

Applications
• Consumer Electronics
• Automotive Night Vision
• Security and Surveillance Systems
• Robotics / Machine Vision
• UAVs
• Targeting / Missile Warning Systems
2015 © FLIR Systems, Inc. All rights reserved.

9

SOLUTIONS
Technology Leader

Surveillance

Instruments

MUON

LEPTON

FLIR ONE

Simplified OEM
Integration

Revolutionary Thermal
Imaging Core Technology

Thermal Imaging for
the Rest of Us

For Android and iOS
Platforms

OEM & Emerging

Maritime

Security

Enabling an Automated and Connected World
Detection

2015 © FLIR Systems, Inc. All rights reserved.

10

Surveillance

$$$$

SOLUTIONS

MU-Series

Instruments

M400

PRICE

M3 & M6
Series

OEM &
Emerging

MD-Series
Ocean Scout
Autopilots

Maritime

Detection

Multi-Function
Displays
Instrument
Displays

$

Security

Radar

Few

Value Proposition
• Confidence & Safety while Boating
• Innovative / Integrated Products
• Global Dealer Support Network
• Robust & Reliable

UNITS

Many

Applications
• Navigation
• Situational Awareness
• Fishfinding / Sonar
• Autopilot Control
2015 © FLIR Systems, Inc. All rights reserved.

11

Surveillance

$$$$

SOLUTIONS

HRC-Series
D-Series

Instruments

PT-Series

PRICE

F-Series

OEM &
Emerging

FC-Series
TCX-Series
Mini Bullet

Maritime

NVR/DVRs
Visible-Light
Cameras
Lorex

Detection

FX

$

Security

Few

Value Proposition
• True 24/7 Operation
• See Through Obscurants
• See Over Long Distances
• Low False Alarms

UNITS

Many

Applications
• Perimeter Security
• Commercial Security
• Critical Infrastructure Security
• Home Security / Baby Monitoring
2015 © FLIR Systems, Inc. All rights reserved.

12

SOLUTIONS
Surveillance

Instruments

Identifying Customer Needs in the Security Market
Connected Home

Thermal Security

MPX

OEM &
Emerging
Maritime

Security

Detection

Consumer Ease of Use

Affordable Thermal
Technology

Cost-Effective
Retrofitting to HD

2015 © FLIR Systems, Inc. All rights reserved.

13

Surveillance

$$$$

SOLUTIONS
DR SKO
Griffin 460

OEM &
Emerging

IBAC

PRICE

Instruments

Griffin 824
FIDO X3
IndentiFINDER
R400

Maritime

IdentiFINDER
R300

$

Stride

Few

Security

Detection

Value Proposition
• Field-Ready Form Factor
• Lab Quality Capability
• Multi-Threat Detection / Identification
• Ease of Use

UNITS

Many

Applications
• Chemical Threat Spectrometry
• Radiation Detection
• Biological Agent Detection
• Explosives Detection
• Multi-Point Sensor Systems
2015 © FLIR Systems, Inc. All rights reserved.

14

Automotive

Intelligent
Transportation

Outdoor Recreation

Industrial Sensing

First Responders

Professional Security

Home Automation

Benefit

Smartphones

THE BENEFITS OF THERMAL SENSORS

See in Total Darkness
See Through Obscurants
Measure Temperature
Enhanced Long Range Imaging
Accurately Detect People & Animals
2015 © FLIR Systems, Inc. All rights reserved.

15

THERMAL AS A SOLUTION FOR MANY MARKETS
As of 2014

Viable
Intelligent
Transportation

Mobile
Accessories

Viability of Thermal

Unmanned Aerial
Systems

Professional
Security

• Extend utility beyond the
image
• Differentiated value
proposition

Automotive
Industrial
Sensing

Home
Automation

• New applications emerging

st

1
Responders

Outdoor
Recreation

Not Known

• Lowering costs

Military

Known

Awareness of Thermal
• Well known in Military
markets

Smartphones

• Rapidly gaining traction in
Security
• Lower prices driving
volumes in Industrial

Medical

Note: Size of bubble represents relative market
opportunity based on FLIR estimates.

Not Viable
2015 © FLIR Systems, Inc. All rights reserved.

16

OUR STRATEGY

Control the
Corners

Lower Costs,
Increase
Awareness

Identify
Needs

Brand,
Distribution
& Innovation

Build
Trust

Financial
Discipline

2015 © FLIR Systems, Inc. All rights reserved.

17

Own the entry-level and
high-performance price
points in each market to
serve the entire
customer base and create
significant competitive
advantage

Technology leadership

Create virtuous cycles of demand

Strong value
ladders
PRICE

Domain knowledge

Vertical integration

Defensible
competitive
position

Channel breadth
Economies of scale

$

Intellectual property

Innovate next-generation technologies

$$$$

Control
the Corners

Continuous cost reduction

Few

UNITS

Many

2015 © FLIR Systems, Inc. All rights reserved.

18

Thermal is our growth driver and core

Aggressively lower the cost
and increase awareness
of IR technology to enable
high-volume markets

Lower Costs,
Increase
Awareness

LEPTON
CORE

Develop broad-scale awareness of
thermal imaging

Lead in cost

Nearly 200 patent assets
106 production capacity today
Wafer-level optic

FLIR One

TG165

Ax8

C2

FLIR One
Next Gen

FLIR ASIC
MSX® image enhancement
TCX

2015 © FLIR Systems, Inc. All rights reserved.

19

Pioneer new thermal applications

Identify customer needs
that are best solved by our
capabilities then open and
attack every viable market

Identify
Needs

Invest resources efficiently

Open new markets for our technology

Airborne

Firefighting

Maritime

Building & Electrical
Diagnostics

Traffic

Man-Portable

Hunting

Mobile

Freshwater
Boating
2015 © FLIR Systems, Inc. All rights reserved.

20

Brand
Distribution and
Innovation

Prepare for the future of
sensors everywhere by
driving multiple strategic
strengths—top brand,
broadest distribution, and
most innovative products
and services

Leverage #1 market share

Innovate solutions for new markets

Build the top brand in thermal

Direct Sales

E-Commerce

Through Distributors

Brick and Mortar

2015 © FLIR Systems, Inc. All rights reserved.

21

Build Trust

Innovation

Build trust with
stakeholders, including
current and future
customers, shareholders,
our fellow employees, and
our communities through
ethical conduct in all of
our business practices

Quality

Deliver On
Our Promise

Trust is our most valuable asset

Focus on value delivery via product
quality and support

Uncompromising foundation in
ethical behavior

Education

Warranty &
Support

2015 © FLIR Systems, Inc. All rights reserved.

22

Revenue and
profit growth cornerstones

Financial discipline will
enable and define our
ability to deliver value for
stakeholders

Financial
Discipline

Superior long-term returns on
investment

Efficient use of capital

Last Five Years

Uses of Cash (Cumulative 5 Year)
R&D

Operating Cash Flow 128% of Net Income

28%
CapEx & Other

Operating CF

13%

Net Income
$0

$200

$s in millions

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Share Repurchase

29%

M&A

23%
Dividends

8%

2015 © FLIR Systems, Inc. All rights reserved.

23

BUILDING THE BARRIERS TO ENTRY
FLIR is Uniquely Positioned to Capitalize on the Proliferation of Thermal Technology
Volume
Leader

Brand
Name

Distribution

IP Portfolio

Lower Cost to
Manufacture
Sensors

High-end
Heritage,
Evolving to
Broader
Recognition

Established
Footprint In
Dozens of
Industries

1,374 patents,
growing at 19%
per year

1374

2014
2009

Growing,
Sizable Share

577

Market Share of
Uncooled Focal
Plane Arrays and
Modules

52%

2014
2009

23%

Market share: Maxtech International Inc.

2015 © FLIR Systems, Inc. All rights reserved.

24

DRIVING GROWTH
Revenue Growth Imperatives
Pioneer New Markets

Focus on and solve customer needs with continuous innovation

Enhance Value Proposition

Utilize software and analytics to propel technology adoption

Develop Product Platforms

Create and cultivate sockets for advanced low-cost sensors

Strategic Acquisitions

Add products, capabilities, and channels opportunistically

Broaden Channels to Market

Invest in brand and sales reach

Expand in Existing Markets

Leverage cost advantage to deepen market penetration

Stabilize Government Businesses

Continued revenue mix shift towards higher growth segments
2015 © FLIR Systems, Inc. All rights reserved.

25

DRIVING EXCESS SHAREHOLDER RETURN
Value Creation Imperatives

Strategic M&A

Acquire when strategy and cash returns clear defined hurdles

Disciplined Capital Deployment

Use cash in a measured and opportunistic fashion

Improve Cash Flow

Continuous improvement of working capital

Financial Discipline

Execute initiatives for cost and process improvement

2015 © FLIR Systems, Inc. All rights reserved.

26

RETURNING VALUE TO SHAREHOLDERS
Utilizing a balanced, measured, and opportunistic model for cash deployment
$500
$450
$400
$350

Share Repurchases

$300
$250

Dividends
$200

Capital Expenditures

$150
$100

R&D Expense

$50

Shares
Repurchased

57.3M

Dividends
$188M
Since Initiation
CapEx as % of
Revenue

4%

R&D as % of
Revenue

9%

$0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Revenue in millions.

2015 © FLIR Systems, Inc. All rights reserved.

27

M&A STRATEGY
M&A Filtering to Find Meaningful Long-Term Value
STRATEGIC FIT

OPPORTUNITY

• Channel into a new or existing market for thermal technology

• Product that is complementary to FLIR’s product suite

• Technology capability that is additive to FLIR’s operations

• Consolidation of existing market for scale benefits

• Ability to scale-up Target’s products via FLIR’s infrastructure

• Blocking technology

• Opportunity to improve Target operations / products via FLIR’s
guidance

• Customer base for FLIR products
• Vertical integration for lowered costs

FINANCIAL

• Substantiate a 5 year cash flow IRR several points above WACC

MANAGEMENT

• Strong management in place or within FLIR to operate

INTEGRATION

• Achievable integration plan

Excess Shareholder Return
2015 © FLIR Systems, Inc. All rights reserved.

28

M&A – UNCOVERING OPPORTUNITY
Turning Acquisitions into Better Businesses






Revamped product lines
Addition of thermal products
Rationalized facilities
Right-sized OH

• Reduced cost-plus contracts
• Reduced facilities footprint
• Streamlined R&D and G&A

7%

8%

• 20%+ revenue CAGR
• Rationalization of product
lines

10%

2009

23%

22%

2012

(2%)

0%
2009

2011

27%

11%

10%

6%

• Addition of thermal products
• G&A leverage

2011

2012

2012

(5%)

2013

2014

2012

2013

2014

Showing operating margin for the last full year prior to acquisition and first 2 full years after acquisition.
2015 © FLIR Systems, Inc. All rights reserved.

29

IMPROVING ROE
2014 & Q1 2015
• Margin improvement
• Reduction in equity via repurchases,
dividends, and foreign exchange

18.2%

Continuing Improvement
16.4%

14.3%

12.3%

13.2%

13.9%

• Grow revenue
• Maintain margins

2010

2011

2012

2013

2014

Q1`15 LTM

• Distribute capital to shareholders

Note: Amounts exclude restructuring charges.

2015 © FLIR Systems, Inc. All rights reserved.

30