FLIR
#Well, I think the issue, <UNK>, it's an interesting point that you raise, is how do we leverage technology from the security segment into the other portions of the business.
And they're actually quite applicable.
There's really two fundamental technologies there that can be used elsewhere.
And those are the VMS technology and the cloud-based technologies that the DVTel engineering team is working on.
Those are applicable.
The cloud-based technology is fundamentally applicable across each of our segments and the VMS technology can be utilized in surveillance, in maritime, and of course, it's already being used in the security segment.
The opportunity for having high-level integrated VMS system tied together with the C2 system and then backed up with cloud access capabilities is something that is quite attractive to boaters, for example, in terms of being able to keep an eye on what's going on, on a boat, both while at voyage and while the boat is at the harbor.
Also on the surveillance segment, at the end of the day, what we do in the surveillance segment is we provide ISR capabilities across a variety of platforms.
And the ability to both record and disseminate that information is becoming increasingly important and that's fundamentally what the security segment capabilities will bring to the other segments.
Sure.
Well, we continue to look at opportunities to leverage our core technology and there are still a lot of opportunities out there where thermal technology can be leveraged into other business spaces.
Examples there include machine vision, automation, there's additional opportunities in security, in surveillance, in the UAS space.
There are a number of different opportunities there.
We look at channel expansion opportunities out there as well.
So we have the ability to pick up organizations that will expand our footprint and reach to the market with our existing products.
And then we're also looking at technology expansion, so looking at other wave lengths in the imaging spectrum.
Today we cover sonar and radar, visible imaging, thermal imaging, but there are opportunities in other parts of the spectrum that I think can be leveraged as technologies that can be complementary to the imaging technologies that we do today.
Ask <UNK> to talk about that.
Yes, I think overall, we expect to stay, it won't be quite as strong as the second quarter compared to the net income.
We were a little bit behind in the first quarter.
We made up in the second quarter.
So as a percent of net income, it won't be quite the same range.
But it will still be a very strong second half that would still generate over 100% of net income in term of operating cash flow.
Thanks, <UNK>.
We don't break that out, but what I will tell you, <UNK>, is that it was lower in Q2 than the norm and primarily as a result of the changes that we made in our export licensing processes that delayed some shipments into the second half.
So we expect that to normalize in the second half.
We also, we mentioned in the prepared comments also the security comp for Q2 of last year was a pretty tough one because we had a significant amount of cooled long-range shipments in Q2 of 2015 and very few in Q2 of 2016 and that's just lumpy.
We have a very competitive product line there, but those programs tend to be lumpier than the normal cadence of the uncooled cameras in the security space.
There were.
I'm going to have <UNK> see if he can have that breakout.
I'm not sure if we have it at that level of fidelity, but we have seen a strong order uptake there.
As we mentioned in the prepared comments, our overall government revenues were up 32% and DoD was up 17% and we had very strong growth in the federal area; it was up 140%.
But that's not specific to OEM and emerging.
Do you have a number there.
Yes, the growth, <UNK>, the growth in the cores business that's going to government customers was strong.
It was north of 15% in the quarter.
Sure.
So if we first just look at what things went on from a geographical standpoint, in Q2, we saw the highest growth coming out of the Middle East.
That was up 10%.
US was up 9%, Asia was up 4% and Europe was down 12%, as mentioned previously.
As we previously mentioned, the US government oriented revenue was up 32%.
In terms of Brexit, our exposure there is not terribly significant.
Our total revenues in GBP are less than 4%.
From a cost standpoint, we think we're properly leveraged there so we don't expect to see a significant change in margin.
I think the big question here, and I'm sure everybody is talking about this, is what will the impact be on the EU in total.
We're currently expecting our European revenues to be flat with H1.
We actually had some aberrations last year.
H1 was stronger than H2 from a European revenue standpoint and this year we believe that, that will flatten out.
Last year, we saw that delta primarily because of the fact that we had price increases in a you few of the segments in Q2 of last year and it pulled orders from H2 into H1 and this year we won't see that recur.
Yes, so I mean, thematically, the demand there continues to be high.
Interest level and demand continue to be high as a result of the relevance of our intelligence reconnaissance targeting and explosives detections technologies are, I think, quite relevant and our CDMQ model, thematically, I think is quite well received by customers in the Middle East.
And we're spending a lot of time with it right now.
We're quite strong in border surveillance platforms and in airborne-ISR platforms in the Middle East.
The wild card there is it's just a market that's very difficult to predict.
Timing is, it's the most challenging market that we deal with in terms of predicting timing.
But that said, we're reasonably bullish on the performance that we'll see out of the Middle East in the second half.
Good morning, <UNK>.
We expect the long-term range to be in the low-20%s.
Well, fundamentally, we have revised our export licensing practices, tightened those up and added some additional documentation and process to that.
And that's an effort that <UNK> has been heading up that was carried out in Q2 and it had some aberrations in terms of the delay of the receipt of export licenses for international customers.
And that's revenue that won't go away.
It's revenue that will come back into the plan in the second half of the year.
But it was an aberration for us in terms of our normal cadence of the execution of international revenue.
Yes, some, but I don't have it quantified.
There were some licenses that were delayed from Q2 and that have been received in July.
Yes, the majority of it we'll get back in the third quarter.
That's total FLIR.
I'll have <UNK> look at it.
For the quarter, <UNK>, it's the Middle East for surveillance.
We have the detection business as well.
But for surveillance, which I think is the crux of the question, it was up.
A little over 5%.
For the year ---+
Yes.
5%.
For the year, I'll have to crunch some numbers here.
So we do.
I mean, we know exactly what we're selling in that space.
But I don't want to go to that level of fidelity on unit volumes.
But I can tell you a couple important factors here.
In terms of the number of thermal imaging cameras that are being flown on drones, both commercial and military today, we dominate that space by a long shot.
And we not only have a relationship with DJI, but we have a relationship with several of the other leading commercial drone manufacturers today.
In fact, most commercial drones that are being flown today with thermal cameras on them are being flown with either the FLIR Vue Pro or the DJI FLIR and use XT.
Growth in that business has been quite strong and the penetration is extraordinarily low.
As a percentage of the total number of commercial drones that are being sold today, it's still quite a small number.
But we expect that to continue to grow through three potential initiatives here.
One is product expansion line.
We're expanding the product offering there to be beyond the current product offering which is primarily [tou]-based.
So we'll be adding in lepton-based platforms as well.
We just added radiometric capability, which is remote temperature measurement capability, in the FLIR Vue Pro R and that will get expanded across other manufacturers as well so temperature measurements can be done.
The third issue is the back-end software processing.
The end of the day, these drones get the cameras in the air and the cameras capture images.
But, ultimately, what you do with those images is really where the value gets delivered.
The ability to create 3D orthomosaics and have those be radiometrically calibrated are important characteristics for that market and we've been working very aggressively, both independently and with partners, to develop that capability and we'll have more to talk about that during the second half of the year.
And <UNK>, the year-to-date Middle East is similar.
It's up about 6%.
Thanks, <UNK>.
Great.
Thank you.
I'd like to thank everyone for joining us on the call today.
I'd also like to take a moment to welcome the employees of Armasight and ISD to the FLIR family.
They join a dedicated team of more than 3,000 employees worldwide that are committed to our mission of becoming the world's sixth sense.
I look forward to reporting our progress on that vision on the call next quarter.
Thank you again for joining us today.
