Identify Customer Needs and Attack

Transcription

1 Identify Customer Needs and Attack 47

2 CDMQ: FLIR s DNA Commercially Developed, Military Qualified Faster fielding Significant Value proposition for our customers Lower risk with no funding required Scale/volume benefits apply to military buyers as well Global deployment and support capability Long term sustainability Greater flexibility and optionality Lower cost Superior customer service 48

3 Threat Detection and ID Need Affordable, field based solutions that have lab quality capabilities for detection and discrimination of emerging threats Solution Combining multi threat detection and identification technologies into single handheld and desktop instruments Benefit Smaller, easier to use, and more capable instruments where they they are needed the most in the field 49

4 Fire Fighting Need Tool that provides the ability to see people in smoke filled situations, find hot spots in fires, and has very good image quality at a low price Solution FLIR K Series (2 models) Benefit A thermal imager that is rugged and certified, will help firefighters worldwide save lives, has a price point that is over 50% lower than any other solution in the industry 50

5 ThermoSight Need Low cost thermal weapon sight for non game hunters and law enforcement Solution FLIR R Series, the world's first line of commercial thermal night vision rifle scopes for non game hunting starting at under $3,500 Benefit Ability to identify varmint and pests at night in order to control overpopulation 51

6 Traffic Need Vehicle sensing system for stop light control/optimization that avoids having to disturb road surfaces; reliable sensing and car counting; 24/7 operation; low cost Solution Thermal and visible camera systems VIP analytics boards/software Benefit Reliable detection of cars, bicycles, and people to minimize default state timed traffic signals for drastically improved traffic flow 52

7 Security Need Reliable, all hours, and automated surveillance system that minimizes time people spend looking at a monitor Solution Thermal imaging cameras that provide quality images with zero ambient light, sees through obscurants, and accurate analytics capability Benefit Eliminate effects of poor lighting/color Sees through most obscurants True 24/7 solution 53

8 Do it Yourself Security Need Low cost cameras that connect to the cloud and are easy to set up Improved motion detection to reduce false alarms Solution In the near future Integrating low cost thermal technology into Lorex systems to bring a truly differentiated product to market with a very high value proposition for consumers Benefit True 24/7 security Energy efficient Reliable alarming Covert solution 54

9 Analytics Value Proposition The problem with visible light cameras Unique value proposition with thermal Illumination necessary, consuming additional energy Low dynamic range can result in washed out video Conventional video motion detection = high false alarm rate 24/7 operation in pure darkness with no additional lighting required High dynamic range for reliable imaging in challenging environments High contrast ratio for stronger algorithms = low false alarm rate 55

10 Analytics Value Proposition 56

11 Enabling an Automated and Connected World Sensors are the connection between machines and humans Advanced thermal sensors provide a tremendous amount of data for connected machines to analyze and interpret in order to make life easier for humans Home automation, intelligent infrastructure, factory automation an endless list Enabling the 6 th sense for connected devices These sensors are now affordable enough to make this a reality 57

12 Fire detection External surveillance Lighting controls Internal security Home Automation HVAC control Factory quality control First responders Traffic control Substation security People counting Perimeter security Factory process automation Leak detection Power line monitoring Pipeline monitoring Substation monitoring Smart Street Lighting Loitering monitoring Vessel security 58

13 Cloud based Analytics Cloud based Analytics 59

14 Drive Brand, Distribution, and Innovation 60

15 Distribution Channels Each of our segments has a unique distribution channel Direct Sales Sales to OEMs and Governments Through Distributors & Integrators Sales of Instruments, Security, and Maritime products E Commerce Sales of Security, Maritime, and Emerging products Brick and Mortar Retail Sales of Security, Maritime, Instruments and Emerging products Presence and model is very difficult to replicate Significant competitive advantage because it enables us to attack new markets Competitors enter these markets with either a technology capability or a channel/domain capability, but FLIR has both 61

16 Multi Level Product Strategy Markets with entry barriers New applications All other markets FLIR sells a complete system FLIR supplies a core or component 62

17 Brand Portfolio Management Our emphasis is on building the FLIR brand There are cases and markets that allow for multiple brands: Value Test & Measurement brand We leverage their sourcing channels to develop our own FLIR branded product Value security system brand FLIR is the premium brand We leverage their sales and marketing knowledge to help us with our consumer initiatives Maritime electronics suite Strong brand and sales channel that would be difficult and time consuming to replicate 63

18 Branding and Brand Migration There are situations where it makes sense to go to market with the FLIR brand to leverage existing business and drive the FLIR brand Digimerge becomes FLIR FLIR now has a full suite of Security offerings, each product with the reliable FLIR name Puts the FLIR brand on many more products that are deployed worldwide 64

19 Industrial Design Harmonization 65

20 Industrial Design Harmonization 66

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22 Investing in Innovation $s in millions R&D Expense R&D as % of Revenue Improving Returns on R&D Investment More efficient R&D processes with restructuring Deeper analysis of development project market opportunity Improved tracking of project spend Patent Assets 1,374 Patent Assets 68

23 Build Trust 69

24 Build Trust DELIVER ON INNOVATION QUALITY EDUCATION WARRANTY & OUR PROMISE SUPPORT ANDY SAVING LIVES ITC 70

25 Warranty Unique reliability promise 2 year on the full camera 5 years on the battery 10 years on the detector the most expensive part of the device Unmatched warranty program is supported in every geography Enabled by our vertical integration 71

26 Execute with Financial Discipline 72

27 Strategic Priorities to Drive Shareholder Value Strategy Execute Innovate Aggregate volumes Develop new markets Amplify value to price ratio Maximize profitability Strategic Priorities 2013 and 2014 Restructure cost base and physical footprint Realign lines of business for efficient operations and effective go to market Superior Total Shareholder Return Advance R&D Capital investment M&A Optimize capital structure Scalability Efficiency Control Execute on consumer market entry Reinvigorate government business Improve margins, asset utilization, and thus ROE Expand use of shared services Generate and deploy cash efficiently 73

28 Historical Performance $1,600 $s in millions $1,400 Revenue Growth 10yr CAGR 2013 $1,200 ROW 25% 6% $1,000 $800 Europe 15% 10% $600 $400 U.S. 15% 16% $200 U.S. Gov t 16% 5% $

29 Gross Margin Evolution 56% 54% 52% 50% 48% 46% 44% 42% 40% 53.7% TVM 0.9% Absorption of fixed production overhead due to slowed unit volumes Surveillance 0.7% Product volumes shift with less high end gimbal systems Detection +0.3% Reduction in cost plus contract R&D work 52.3% Lorex 1.5% 25% gross margin business Surveillance 0.9% Product volumes shift with less high end gimbal systems Int. Systems 0.8% MSC program at breakeven margin TVM +0.5% Selective price increases and improved production volumes 49.3% 75

30 Cost Discipline RESTRUCTURING THE BUSINESS FOR LONG TERM BENEFITS ~$37 Million in One Time Restructuring Charges $20+ Million in Annual Cost Reduction Accelerate R&D Innovation and Idea Sharing Create Centers of Excellence for Components (lasers, optics) Increase Production Efficiency Reduce Global Operational Footprint 76

31 Cost Discipline BUILDING A MORE EFFICIENT BACK OFFICE Lower Supply Chain Costs Improve Tax Rate More Effective R&D Improve Systems and Reporting Collective one FLIR materials procurement Paperless and shared A/P Prioritizing inventory requirements Centralized, global tax planning Fully utilize existing lowtax jurisdictions Consolidated Rack and Stack system Common platform development R&D performance metrics Standardized R&D project tracking SAP harmonization Paperless T&E IT systems improvements (hardware standardization, call center) Improve Scalability, Efficiency, and Control for Maximum Operating Leverage 77

32 Cash Generation $400 $s in millions $350 $300 $250 Operating Cash Flow $1.6 Billion over 5 years Uses of Cash Cumulative 5 year 14% Capex & Other $200 $150 $100 $272 $255 $244 $286 $355 40% Share Repurchases 8% Dividends 39% M&A $50 $

33 Improving Inventory to Unleash Cash 4.0x 3.5x Peers Inventory Turnover FLIR Inventory Turnover 3.0x Enhance inventory management processes One FLIR purchasing Align compensation with working capital management 2.5x 2.0x $135 million Peers: FEIC, GRMN, MKSI, MTD, NATI, PKI, ROP, RSTI, TRMB, WAT. 1.5x Q Q Q Q Q Q Q Q Q Q Q Q

34 Strong Balance Sheet Investment grade credit rating Enables strategy Provides nimbleness Allows for flexibility S&P 500 (median) Current Assets Cash Current Liabilities Debt Other Liabilities Current Ratio Debt / Equity 24% 61% S&P 500 (median) Return on Assets 9% 6% Long Term Assets Equity Return on Equity 12% 14% 80

35 Return on Equity Product mix shifts Weakened global defense market Increased inventory Acquisitions of not to scale businesses Note: Excludes impact of restructuring charges and one time items. 81

36 Restoring a Premium Return on Equity Commercial Markets 10% annual growth 23% operating margin Inventory Improvements 3.5x inventory turnover Share Repurchases Reduce equity in shareholderfriendly manner Government Markets 3% annual growth 26% operating margin CBRNE 5% annual growth 15% operating margin 82

37 $60 $s in millions $50 Dividends Paid ($M) Payout Ratio 30% 25% Returning Capital via Dividends $40 20% Dividend initiated in 2011 $30 $20 $38 $42 $51 15% 10% Philosophy: grow payout with earnings and cash flow 16% CAGR since initiation $10 5% Current quarterly dividend of $0.10 per share $ % Yield remains below peer group average 83

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39 Smart M&A Alignment with strategic priorities Create or extend our sockets for thermal technology IRR hurdle north of 15% Accretive to earnings Quality management teams Leverage our unique technology add 85

40 25 Words Identify needs, and attack where appropriate. Lower cost and increase awareness. Control the corners. Drive brand, distribution, and innovation. Build trust. Execute with financial discipline. 86

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