Teledyne Dalsa, Digital Imaging, Q3 2020 Sales Results

Earlier today, Teledyne Technologies Inc published its financial results for Q3 which show that both sales revenue and net income developed negatively during the quarter. The companies overall sales revenue reached $749.0 million, compared with $802.2 million during Q3 2019, a decrease of -6.6% year-on-year. Overall net income reached $93.9 million, compared with $106.7 million during Q3 2019, a decrease of -12% year-on-year. These results reflect the aggregated performance of the companies four reportable segments:

  1. Instrumentation
  2. Digital Imaging
  3. Aerospace and Defense Electronics
  4. Engineered Systems

The Digital Imaging Segment

The digital imaging segment encompasses a portfolio of digital imaging products for use in industrial, government and medical applications. This includes sensors, cameras and systems, within the visible, infrared and X-ray spectra, such as it’s series of CMOS based X-ray detectors. The segment also includes its semiconductor business, analogue-to-digital converters as well as micro-electro-mechanical systems (“MEMS”). The digital imaging segment has principal operations in the United States, Canada, France, the Netherlands and the United Kingdom. 

The sales revenue from digital imaging reached $239.7 million, compared with $244.0 million in Q3 2019, a decrease -1.8% year-on-year. This took cumulative sales to $724.0 million, compared with $724.8 million in Q3 2019, a marginal decrease of -0.1% year-on-year. The operating income from digital imaging reached $45.5 million during the quarter, compared with $41.2 million in Q3 2019, an increase of +10.4% year-on-year.

The third-quarter sales primarily reflected lower sales of X-ray products for dental and medical applications, partially offset by greater sales of infrared detectors for defence applications, geospatial imaging systems and $2.3 million in incremental sales from acquisitions completed during 2019 (Roper & Micralyne). The increase in operating income during the quarter primarily reflected favourable product mix. From a healthcare perspective, the sale of x-ray detectors for dental applications were significantly lower due to the on-going negative effects of the coronavirus pandemic. During the Q3 earnings callRobert Mehrabian, Executive Chairman commented: “we think the dental business will start to pick up at the end of the fourth quarter”. He also noted that the medical imaging business “bottomed during the third-quarter” and he doesn’t expect the magnetron business to pick up until 2021. These are magnetrons that go into radiotherapy instruments use for cancer diagnosis and treatment.

Sales growth led by acquisitions

The sales growth during the first nine months of 2020 is a deviation from a longer-term growth trend for the digital imaging segment which has delivered a sales CAGR of 27.2% between FY15 and FY19. This growth has been mainly driven by the acquisitions of e2V, Roper Technologies and Micralyne.

On March 28th 2017, the company completed the acquisition of e2v Technologies PLC for $770.7 million. Teledyne funded the acquisition with borrowings under its credit facility and cash on hand as well as $100 million in a newly issued term loan. The e2v business provides high-performance semiconductors, image sensors, custom camera solutions as well as components and subsystems that deliver high-reliability radio frequency power generation for healthcare, industrial and defence applications. This includes power generation for medical radiotherapy equipment. This acquisition builds upon Teledynes existing capabilities within the development and manufacture of X-ray detectors for medical and life science applications. The combined Teledyne e2v business now offers a range of CCD and CMOS image sensor solutions and services geared toward optical tomography and dental X-ray as well as X-ray for minimally invasive surgical procedures. Principally located in Chelmsford, United Kingdom and Grenoble, France, e2v had sales of approximately £236 million for its fiscal year ended March 31, 2016. e2v’s results have been included since the date of the acquisition and include $274.2 million in net sales and operating income of $37.3 million, which included $8.3 million in acquisition-related costs and $11.2 million in additional intangible asset amortization expense for 2017.

On February 5th 2019, the company acquired the scientific imaging business of Roper Technologies for $224.8 million in cash. The acquired businesses included Princeton Instruments, Photometrics and Lumenera. These businesses are principally located within North America and now form part of the digital imaging segment. This group of companies provide a range of imaging solutions, primarily for life sciences, academic research and customized OEM imaging solutions. Princeton Instruments and Photometrics manufacture state-of-the-art cameras, spectrographs and optics for advanced research in physical sciences, life sciences research and spectroscopy imaging. Applications and markets include materials analysis, quantum technology and cell biology imaging using fluorescence and chemiluminescence. Lumenera primarily provides rugged USB-based customized cameras for markets such as traffic management, as well as life sciences applications.

On August 30th 2019, the company acquired Micralyne Inc for $25.7 million in cash. Micralyne is a foundry providing MEMS devices. Micralyne possesses unique microfluidic technology for biotech applications, as well as capabilities in non-silicon-based MEMS (e.g. gold, polymers) often required for human body compatibility. Based in Edmonton, Alberta, Canada, the acquired business is part of the digital imaging segment.

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