Jim Ricchiuti

Robert gave segment full-year growth: Digital Imaging ~7.5% (FLIR over 9%), Instrumentation ~5.7%, Aerospace & Defense 7.2%, Engineered Systems ~5.6%, and updated unmanned to about $575 million.

Government directly investing in Teledyne capacity. Increased demand for drones, counter-drones, and underwater vehicles. Orders expected to pick up significantly in next 6 months.

Priority: tuck-ins first, midsized second, larger wait-and-see. Won't go outside portfolio for large deal requiring new segment. All segments except Engineered Systems targeted for M&A.

Q4: Instruments ~1.0, DI ~1.06, A&D 1.25, ES <1 (lumpy). Overall Q4: 1.07. Full year: 1.08. All segments at or above 1.

FY2025 unmanned ~$500M. Growing ~10% to ~$550M in FY2026. Corrected from '10% of revenue' to '$550M'. Air, ground, and subsea all growing.

George responded. DI 1.12 (strong). Instruments 0.9 (T&M 0.98, Enviro 0.95, Marine 0.8, lumpy, large backlog). A&D 0.84 (lumpy). ES >2x. Overall 1.09.

George responded. OPFL full rate production order (tens of millions, near-term). LASSO U.S. Army competition (initially millions, then growth). Black Hornet, counter-UAS, integrated surveillance for border protection. Virginia/Columbia class submarine interconnects. Government shutdown may delay timelines.

50-60bps margin improvement target maintained. Q2 delivered 57bps. Year-to-date at 55bps. On track.

George Bobb detailed: Energy ~40% of marine (subsea interconnects, geophysical streamers), defense ~30% (unmanned subsea vehicles for Baltic/Black Sea, Virginia/Columbia-class subs). Energy sustainable for several years subject to oil prices. Defense sustainable given geopolitical environment.

Historical pattern: generate record cash flow during stress, then acquire. Already spent $750M in Q1. Pipeline healthy for smaller and mid-sized deals. Leverage heading to 1.2x by year-end without further action. $1B annual cash generation provides capacity.

Qioptiq hitting A&D margins by ~200bps initially (down from 28.6%). Expected to improve every quarter per standard integration playbook. Will add $0.15 EPS accretion. Overall company margin improvement projected at 60bps for year.

T&M assumed 2.5% growth but could be higher given improving trend. New DI products expected to be more competitive. Conservative approach described as prudent.

Acknowledged surprise at slow recovery. Attributed to distributor inventory caution, China effect (both reduced imports and domestic sensor competition), and customers pushing for lower prices. Won't sacrifice margin for revenue.

Burns said RFID has a strong pipeline across retail, transportation, logistics, manufacturing, and government, with full-year growth expected despite a flat Q2 that was purely project timing. Use cases are broadening into parcel, fresh food and grocery, quick-serve restaurants, healthcare, and government, and new mobile devices and wearables with embedded near-field RFID are drawing strong customer interest. Winters added the Q3 EBITDA guide of ~22% is a slight step down on higher memory costs with a similar Q4 profile, and OpEx should scale about 1 point on higher volume plus completed first-half restructuring while continuing to invest in AI solutions and go-to-market coverage.

Burns said RFID declined in Q1 due to cycling large prior-year compares. Not a concern, expects growth in Q2 and for the full year. Pipeline strong across retail, T&L parcel, manufacturing, government. Fresh food/grocery and quick-serve restaurants are new opportunities. New mobile computers with embedded RFID expanding functionality.

Winters confirmed no changes to large deal pipeline. Mix of large deals and run rate both contributing equally to full-year guidance, consistent with prior earnings. Burns said focus is on expanding Zebra's lead through deep customer relationships and innovation rather than reacting to competitive transactions.

Burns confirmed high double-digit RFID growth expected in 2026. Broad-based across retail, T&L parcel, manufacturing, government, quick-serve restaurants, and healthcare. Fresh food/grocery expanding beyond apparel. Adding RFID to majority of new mobile computing devices to support growing adoption. Number one share in fixed and handheld readers and RFID printers.

Burns said 2026 assumes similar refresh activity to 2025. Every customer on a different cycle driven by applications, AI, OS, security, and technology transitions. Retail refreshes have normalized. Large T&L discussions progressing for 2027 deployments. Memory discussions getting customers to engage earlier on project planning.

Burns detailed EMEA softness from cycling strong mobile computing compares, auto manufacturing weakness, and French retail challenges. Softness degraded through Q2. North America strong across mobile computing, data capture, and RFID. APAC strength in Australia, NZ, India with new RFID applications like Indian rail.

Burns confirmed very similar go-to-market through value-added distributors and 2-tier distribution. Largest distributor is the same. Elo also sells direct. Different customer relationships in areas like quick-serve restaurants and fragmented health care segments.