Teledyne (TDY) Q4 2025 Earnings Call Transcript

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Date

Wednesday, January 21, 2026 at 11:00 a.m. ET

Call participants

• Executive Chairman — Robert Mehrabian
• Chief Executive Officer — George Bobb
• Chief Financial Officer — Stephen Blackwood
• Vice Chairman — Jason VanWees

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Takeaways

• Quarterly Revenue Growth -- Sales increased 7.3%, reaching a company record for the fourth quarter.
• Non-GAAP Earnings Growth -- Non-GAAP earnings rose 14.1% in the fourth quarter and 11.5% for the full year.
• Free Cash Flow -- Free cash flow was $339.2 million, the highest in company history, up from $303.4 million in the prior year.
• Yearly Acquisitions -- Over $850 million was deployed on acquisitions in 2025, marking the company's second largest capital deployment year.
• Stock Repurchases -- $400 million in stock was repurchased during the fourth quarter.
• Leverage Ratio -- Ended the year with a net leverage ratio of 1.4 times, the lowest in recent years.
• 2026 Revenue Guidance -- Projected revenue is approximately $6.37 billion, aligned with consensus estimates.
• 2026 Earnings Guidance -- Non-GAAP earnings per share guidance is $23.45 to $23.85; GAAP earnings per share is $19.76 to $20.22 for the year.
• Digital Imaging Segment -- Fourth quarter revenue increased 3.4%, led by over 20% growth in infrared components and subsystems, with digital imaging margin at a segment record of 24.7%.
• Marine Instrumentation -- Achieved record quarterly sales of autonomous underwater vehicles, contributing to a 3.3% increase in marine instrument revenue.
• Environmental Instruments -- Sales increased 6.1%, driven by demand for gas safety and ambient air monitoring products.
• Electronic Test and Measurement -- Fourth quarter sales rose 1.4% year over year and more than 10% sequentially from the third quarter.
• Instrumentation Segment Margin -- Yearly non-GAAP operating margin increased by 36 basis points, reaching a record 28.4%.
• Aerospace and Defense Electronics -- Fourth quarter sales increased 40.4%, primarily due to acquisitions; segment margin declined due to lower margins at new businesses.
• Engineered Systems Segment -- Revenue fell 9.9% due to delayed contract awards, but margin rose 259 basis points through improved performance on fixed-price contracts.
• Book-to-Bill Ratios -- Fourth quarter total company book-to-bill was 1.07; all segments except Engineered Systems recorded book-to-bill of 1 or higher.
• Backlog and Awards -- Awarded prime contracts for space-based infrared detectors and a first production-rate contract in loitering munitions, each representing multi-year, $100-million-plus opportunities.
• Unmanned Revenue -- Combined air, ground, and underwater unmanned system sales totaled approximately $500 million in 2025 and are expected to increase to around $550 million in 2026.
• Acquisition Strategy -- Continued "string of pearls" tuck-in acquisition strategy with recent purchase of a UK-based gas sensor manufacturer, viewed as recurring and complementary to core businesses.
• Capital Expenditures and R&D -- Capital expenditures increased to $39.8 million for the quarter (up from $29 million), with annual R&D spend up 10%.
• Organic vs. Inorganic Growth -- Management expects organic revenue growth of 3.5%-3.6% in 2026; total growth including acquisitions projected slightly above 4%.
• Short and Long Cycle Businesses -- Management does not anticipate any short cycle business to contract in 2026 and expects both short and long cycle businesses to grow at similar rates.
• Digital Imaging 2026 Margin Outlook -- Segment margin is expected to grow by 80 basis points, targeting approximately 23.4%, with upside potential to 24%.
• Segment Guidance -- Marine instruments are projected to grow approximately 5%; FLIR is expected to grow near 4.6%; environmental and test-and-measurement around 2%.
• Commercial Aviation Exposure -- Commercial aviation accounts for 5% of business; only a third of this is OEM and a portion is Boeing-related, with no material change anticipated in 2026.
• Test and Measurement Drivers -- Growth powered by specialty oscilloscopes (auto, motor control, data centers) and Ethernet traffic generators, while protocol analyzers may start slower due to chip release cycles.
• Machine Vision and X-Ray -- Machine vision cameras and sensors grew single digits in Q4; 2026 expected to see low single-digit growth in industrial and scientific, while X-ray detector sales are anticipated to remain flat.
• Foreign Exchange Impact -- Full-year FX impact on digital imaging margins averaged 40 basis points, with variability across quarters.
• Management Change -- CEO transition to George Bobb and expanded responsibilities for multiple senior executives highlighted as part of strategic leadership realignment.

Summary

Teledyne Technologies (NYSE:TDY) reported record quarterly sales, orders, non-GAAP earnings, and operating margin, citing broad-based strength across longer-cycle defense and commercial businesses. Management forecasted 2026 revenue and non-GAAP earnings per share in line with consensus and does not expect contraction in any short-cycle businesses, with growth projected in all segments. Recent contract wins in space-based infrared and loitering munition programs are expected to contribute more than $100 million each over several years, reinforcing the company's multiyear backlog and market positioning.

• Management described 2025 as the second largest year for capital deployment due to a combination of acquisitions and opportunistic stock repurchases, enabled by sustained free cash flow generation that kept leverage at multi-year lows.
• Robert Mehrabian said, "I believe our results in 2025 proved the balance and the resilience of our business portfolio allowing us to cut costs, improve earnings, and significantly grow free cash flow and deleverage."
• Company expects continued organic growth of approximately 3.5%-3.6% in 2026, with similar growth rates forecast across all major segments.
• The "string of pearls" acquisition approach will continue, with tuck-in deals prioritized and management indicating increased interest in larger opportunities as market conditions evolve.
• Capital allocation remains focused on acquisitions and internal investment, as Teledyne has not historically prioritized share repurchases or dividends; management indicated no near-term changes to this strategy despite regulatory discussions regarding defense sector balance sheet use.

Industry glossary

• Book-to-bill ratio: The ratio of orders received to units shipped and billed during a period, indicating demand strength in a segment.
• Unmanned systems: Remotely operated or autonomous vehicles and devices used in air, ground, or underwater applications, often for defense or industrial purposes.
• Loitering munition: A type of weapon that can loiter in the air for extended periods before striking a target, blending characteristics of drones and missiles.
• FLIR: Forward Looking Infrared; refers both to Teledyne's thermal imaging product line and relevant business segment.

Full Conference Call Transcript

Robert Mehrabian: Thank you, Jason. We conclude the 2025 with the largest quarterly orders, sales, and non-GAAP earnings, as well as operating margin in the company's history. Consequently, we are optimistic about 2026, both due to the performance of our business in 2025 as well as the new leadership in place, with George Bobb as CEO and multiple senior executives with added responsibilities in our business segments. Getting back to 2025, fourth quarter sales increased 7.3% from last year while non-GAAP earnings increased 14.1%. For the full year, sales increased 7.9% and non-GAAP earnings increased 11.5%.

Throughout Teledyne Technologies Incorporated, our defense businesses remained healthy and our short cycle commercial businesses continued to recover with most product families increasing either sequentially or year over year. In digital imaging, Teledyne FLIR performed very well with particular strength in unmanned and other defense surveillance systems while within marine instrumentation, we achieved record sales of autonomous underwater vehicles. In terms of capital deployment, 2025 was our second largest year in history, with over $850 million spent on acquisitions throughout the year and $400 million for stock repurchases within the fourth quarter. Nevertheless, having generated approximately $1.1 billion in free cash flow for two consecutive years, we ended 2025 with a leverage ratio of just 1.4 times.

Last week, we continued our string of pearls strategy with the acquisition of Didi Scientific, a UK-based manufacturer of high-performance electrochemical gas sensors. Gas sensors are not only a critical technology component used in our environmental instruments, but such sensors are also an attractive consumable business with high recurring revenue. Turning to 2026, while it is still early, we are reasonably confident in our current outlook for both revenue and earnings. That is, we believe full-year 2026 revenue will be approximately $6.37 billion. On net and non-GAAP earnings at the midpoint, will be approximately $23.65. Both of which are consistent with current consensus estimates.

As in 2024 and 2025, we expect normal seasonality in 2026, approximately 48% of sales and 46% of earnings in the first half of the year. George will now comment on the performance of our four business segments.

George Bobb: Thank you, Robert. In the digital imaging segment, fourth quarter sales increased 3.4% despite a tough comparison, primarily due to strong sales from Teledyne FLIR. Specifically, infrared imaging components and subsystems, many of which are used in our customers' unmanned systems, increased over 20% while sales of FLIR surveillance products and complete unmanned air systems also grew. Clear maritime sales were also a record due in part to imaging systems for unmanned surface vessels and continued positioning of the business to industrial and defense markets. Sales of sensors and cameras for industrial machine vision applications increased year over year but were offset by lower sales of X-ray detectors and scientific cameras.

In the fourth quarter, we were awarded our first production rate contract in the loitering munition market under the Marine Corps Organic Precision Fires Light or OPFL program. Also, on December 19, the US Space Agency awarded four prime contracts for 72 Tranche three tracking layer missile warning missile tracking satellites, and we were selected to supply space-based infrared detectors to three of the four primes. This continues our very strong participation across each of SDA's tracking layer programs and positions us well for future 180 basis points to 24.7%, a record for the segment since fully incorporating FLIR in 2021.

In the instrumentation segment, which consists of our marine, environmental, and test and measurement businesses, fourth quarter total sales increased 3.7% versus last year. Overall sales of marine instruments increased 3.3% due to strong sales of interconnects used in offshore energy production and for US Virginia and Columbia class submarines, as well as the record sales of underwater autonomous vehicles that Robert mentioned earlier. However, these were partially offset by some reduced sales of products for hydrography and oceanographic research. Sales of environmental instruments increased 6.1%. This primarily resulted from higher sales for gas safety, and ambient air and emissions monitoring instrumentation combined with stabilization in sales of laboratory and life sciences instruments.

Sales of electronic test and measurement systems, which include oscilloscopes, protocol analyzers, and Ethernet traffic generators, increased 1.4% year over year, but greater than 10% sequentially from the third quarter. Instrumentation non-GAAP operating margin in the fourth quarter decreased slightly on a tough comparison, however, it increased 36 basis points for the full year 2025 to a record 28.4%. In the aerospace and defense electronics segment, fourth quarter sales increased 40.4%, primarily driven by the KeyOptik and MicroPak acquisitions, as well as organic growth of other defense electronics, and commercial aerospace products. Non-GAAP segment margin decreased year over year due to comparatively lower current margins at the recently acquired businesses.

The Engineered Systems segment, fourth quarter revenue decreased 9.9% due in part to delayed contract awards originally anticipated in the fourth quarter. However, despite the lower revenue, segment operating margin increased 259 basis points to better performance on fixed price contracts. I will now pass the call back to Robert.

Robert Mehrabian: Thanks, George. In conclusion, I want to reflect on our performance over the last couple of years and the path forward. In 2023 and 2024, the strength of longer cycle businesses, including Teledyne FLIR, marine instrumentation, and aerospace and defense electronics, was largely masked by declines in certain short cycle markets such as industrial machine vision, electronic test and measurement, and laboratory and life sciences. I believe our results in 2025 proved the balance and the resilience of our business portfolio allowing us to cut costs, improve earnings, and significantly grow free cash flow and deleverage. While simultaneously deploying capital on acquisitions and opportunistic stock repurchases.

Throughout 2025, as comparisons eased in some industrial markets, and others began a nascent recovery and the strength of our longer cycle businesses began to show through today, we remain confident in executing our strategy of operational excellence focused acquisitions, and stock repurchases when we believe the market does not reflect the broad base of our technologies and competitiveness. As we enter 2026, we believe growth again will be led by our long cycle business. However, unlike the recent past, we currently believe that none of our short cycle businesses will contract on a full year basis. In addition, our leverage ratio remains at the lowest level in years, providing ample financial flexibility to continue our strategy.

I will now turn the call over to Steve.

Stephen Blackwood: Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our first quarter and full year 2026 outlook. In the fourth quarter, cash flow from operating activities was $379 million compared with $332.4 million in 2024. Free cash flow, that is cash flow from operating activities less capital expenditures, was $339.2 million in 2025, a record for Teledyne. Compared with $303.4 million in 2024. Cash flow increased year over year in the fourth quarter primarily due to favorable operating results in 2025 compared with 2024. Capital expenditures were $39.8 million in 2025 compared with $29 million in 2024.

Depreciation and amortization expense was $84.6 million in 2025 paired with $77.2 million in 2024. We ended the quarter with $2.12 billion of net debt, that is approximately $2.48 billion of debt less cash of $352.4 million. Now turning to our outlook. Management currently believes that GAAP earnings per share in 2026 will be in the range of $4.45 to $4.59 per share with non-GAAP earnings in the range of $5.40 to $5.50. And for the full year 2026, we believe that GAAP earnings per share will be in the range of $19.76 to $20.22 with non-GAAP earnings per share in the range of $23.45 to $23.85. I will now pass the call back to Robert.

Robert Mehrabian: Thank you, Steve. We would like to take your questions now. Operator, if you are ready to proceed, please go ahead with the questions and answers.

Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Greg Konrad with Jefferies. Good morning. Maybe just to start on the outlook for revenues, I mean, you gave a little bit of color around short cycle.

But just thinking about that, 4% growth, is there any way to parse organic versus inorganic given the smaller recent deals plus, you know, how you are thinking about, you know, long cycle growth in backlog versus maybe initial assumptions around the short cycle businesses overall?

Robert Mehrabian: Okay. Greg, let me start with organic versus nonorganic. We think most of the growth would be organic, about 3.6% nonorganic, a little over 4%, 4.2%, about. In terms of short and long cycle, I do not see a lot of differences between those two. We think that we have probably a little smaller increases in certain areas like environmental and test and measurement, maybe a little over 2%. But that will be offset with a healthy increase in our marine instruments. About 5% and we think FLIR will grow just under five maybe 4.6% to be accurate. So I do not see a lot of difference between short and long cycle.

And as I mentioned before, we do not believe over the years. The total year in 2026, we are going to see shrinkage of our short cycle businesses that we have before.

Greg Konrad: And then maybe just a follow-up that. I mean, you had really strong Digital Imaging margins in Q4. I think you called out a contingent liability reversal. But how are you thinking about the exit rate for digital imaging? And know, maybe the biggest opportunities into 2026 given you have talked about, you know, a 24% target in the past?

Robert Mehrabian: Yeah. Let me start with the question on the contingent liability. I think if you look at that and you balance it out versus, RIF costs, you know, we have been reducing costs as we go along. Fundamentally, it added about 50 basis points to our margins. So even with that, in Q4, we have a 24% margin or a little in excess of twenty four margin in February. For the full year, 2025, digital imaging margins came in at about 22.6%, which was about 30 basis points improved over the prior year.

2026 we are a little more hopeful and we believe that the margins would go up maybe another eighty basis points and, get to about 23.4% and up. With good luck, I hope we will get to the 24%.

Greg Konrad: Thank you, and nice quarter. Thanks.

Operator: Thank you. Our next question comes from the line of Amit Mehrotra with UBS. Please proceed with your question.

Zach Waljasser: Hey, this is Zach Waljasser on for Amit Mehrotra today. My first question is just implied 1Q guidance suggests about 10% earnings growth year on year. While the full year guidance, like, implies about 7%. Just gonna get some help just around the cadence of the year and, like, implied deceleration because compared to last year, the earnings comps are relatively similar one h versus two h. Thank you.

Robert Mehrabian: Yeah. You know, it is easier comps in Q1 versus last year. We improved, obviously, earnings, as you said, throughout the year. Traditionally, we have been about 48% in the first half of the year in revenue, and 46% in profitability. We believe that is about gonna be what happens the coming year. Now I am hoping that we can improve on both of those numbers as we get the year started. But it is the we just got through three weeks of the 2026, so I am hesitant to go further out on a limb than I have.

Zach Waljasser: Great. Thank you so much.

Robert Mehrabian: Thanks, Zach.

Operator: Thank you. Our next question comes from the line of Andrew Buscaglia with BNP Paribas. Please proceed with your question.

Andrew Buscaglia: Hey, good morning, everyone.

Robert Mehrabian: Morning, Andrew.

Andrew Buscaglia: I was hoping you could add some color to some of these bigger seemingly bigger defense awards you are talking about specifically the tracking which seems very topical currently. Can you any way you can size the size of that award or the contribution you expect Teledyne Technologies Incorporated to receive in '26 and beyond?

Robert Mehrabian: Yeah. I will I may perhaps that is a question I can pass to George.

George Bobb: Sure. So on the tracking layer, of course, we provide very high performance infrared arrays. And that program for us will be north of a $100 million over the next few years.

Andrew Buscaglia: And what are it sounds like you are selling to these, you know, three to four different primes. What can we in terms of margin contribution from something like that? Is it higher versus corporate average or lower? Or what?

George Bobb: I would say it is it is it is about average. I mean, we

Robert Mehrabian: Yeah. It is as George mentioned, these are going to probably be fixed price contracts. So our performance will improve again as it always does as a function of time. So early on, maybe our margins will be a little less, but overall, these are really good programs for us.

Andrew Buscaglia: And it is I imagine this is multiyear. You will see that so you will see additional contribution years out or just you know, something 2026 that subside thereafter?

George Bobb: So we will start to perform in 2026, but it will be over a two or three year period.

Andrew Buscaglia: Got it. Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Jim Ricchiuti with Needham and Company. Please proceed with your question.

Jim Ricchiuti: I apologize if you gave this on the call. I had to jump off momentarily. But did you provide an order number and, Robert, any color as to how the book to bill was in the main segments of the business?

Robert Mehrabian: Not yet, Jim, but I will now. First, we in the fourth quarter, which is our most recent numbers that I can get, we think instrumentation as a whole would be is about one. Digital imaging is about one. Or one point o six Aerospace and defense is higher at 1.25. Engineer systems is under one, but that is a lumpy business, and we have had some big orders. During the year. So total, for Q4 is one point o seven. And then for the full year, if you take everything for the full year, it is about one point o eight.

So we feel very comfortable that the in all our of our segments, we are either at one or better than one.

Jim Ricchiuti: Got it. Thank you for that. What, what were the full year sales from the unmanned business again, if you provided it, I apologize. And I am wondering how you are thinking about the growth in the total unmanned business in 2026. Just given the pipeline? 20 yeah.

Robert Mehrabian: In 2025, I would say our Aman businesses combined. All combined. Are about $500 million. We think that will be a little higher in '26 maybe 10% of our overall revenue.

Jim Ricchiuti: Great. Thanks very much.

Operator: Thank you. Our next question comes from the line of Jonathan Siegmann with Stifel. Please proceed with your question.

Jonathan Siegmann: Maybe just following up on autonomous and unmanned, the record underwater vehicle sales, can you talk a bit more about the drivers? Last year's reconciliation bill had significant funding increases in this area. And just how relevant is this to your business, and are you seeing any benefit of it? Thank you.

Robert Mehrabian: Yeah. As you know, we have in the underwater vehicle, both we have both manned and unmanned. In the manned vehicles, we are the sole supplier to the Navy SEALs. And we not only have provided all the vehicles, but there is continuous revenue from parts and maintenance. The new stuff that we are doing goes to a whole range of sub c product. Some of them have to do with the infrastructure anti submarine warfare, and some of them have to do with just observations and measurements. For example, our glider are deployed in front of large naval operations. To measure temperature, and density and salinity, which all of these affect acoustic sensors and speeds.

So you have to compensate for those. We also have really good program wins, just in The US, but especially in Europe. For security of harbors We provide a whole range of underwater vehicles from very shallow ones that go only a thousand meters down deep to very large vehicles that go as deep as 3,000 meters. So or more. And so we have a whole suite of I would say, I am just looking at a picture I think I see about 10 or 12 different underwater vehicles. That we are selling not just in The US, These are autonomous vehicles. But also especially in Europe.

Jonathan Siegmann: Great. And then on the Lord and Munitions congratulations on that production award. Can we expect to hear anything about developments with the army with your product? Thank you very much.

Robert Mehrabian: Thank you. Well, there is a program called Lasso you may be familiar with. It is a development program. And, it has not all been announced. But it is coming up. We are one of the participants in that program. But, overall, I would say, there is not just the loitering munitions that we have introduced. But we are working on some new ones. As well. So hear more about that as we both develop our products as well as we win programs.

Jonathan Siegmann: Good luck with the year.

Robert Mehrabian: Thank you. I just want to make sure that when I was talking about the unmanned on a question that Jim asked. Our 2025 revenue on unmanned both air ground, and underwater was about $500 million. We think that will grow about 10%. I said it would be 10% of revenue in 2026. But it would probably be closer to $550 million. Sorry. I needed to correct that. Go ahead, please.

Operator: Thank you. Our next question comes from the line of Guy Hardwick with Barclays. Please proceed with your question.

Guy Hardwick: Hi, good morning. Good morning, Robert.

Robert Mehrabian: Good morning, Guy.

Guy Hardwick: I just wonder how you guys feel about M and A, particularly maybe larger M and A versus share repurchases. Obviously, saw you bought back $400 million of stock in Q4. The stock price big move upwards since then. Maybe that looks relatively less attractive than M and A, but I think a sense from a few months ago that you were not particularly encouraged by M and A prices, except for maybe bolt on deals. Maybe you can give us an update of the M and A picture and whether small versus large.

Robert Mehrabian: Sure, Guy. First, let me let me go back to the stock repurchases. We have been very conservative about stock repurchases. When you look at our twenty six year history, we have all in bought maybe $1.2 billion. And only at times where our stock was really we believe was really undervalued with respect to our peers, and the market. So I would say the fourth quarter purchase was opportunistic. As it was twice before in our history that we bought stock. Our primary driver is always been acquisitions. And you mentioned larger acquisitions.

First, we consistently like to buy what we call the string of pearls small acquisitions that we can tuck in like the one we just announced, BD Scientific in The UK. With like to do that continuously regardless of whatever else happens. On the larger acquisitions, we have a pretty good list of what is coming up. Both from private equity people who bought a range of products and businesses and combined them. And we do not mind paying a reasonably good price for an acquisition. As long as the quality of the mix of the businesses we are getting is there.

While we are hesitant, and we mentioned before, while we are hesitant is when we are buying a fixer upper, and we are bidding 15, 16 times EBITDA, Somebody else walks in and pays 21, 22 times. We really do not think that is for us. But having said that, based on what we see, there is a whole range of acquisitions, what we call, for us, large. Would be let us say, we pay a billion dollars of the or thereabouts. There is a whole range of those that are coming and we would be more encouraged than we were in 2025.

Guy Hardwick: K. Thank you. Just that is very helpful. Just one quick modeling follow-up question. In digital imaging, was the FX contribution in the quarter?

Robert Mehrabian: I can just talk to you about in general the total contribution in for the year was about 40 basis points. It started negative in the year, picked up, ended in Q4 about 80 basis points in Q1. and averaged out for the whole year at 40 basis points. So it was it was there, but it was not that significant.

Guy Hardwick: Thank you.

Operator: Our next question comes from the line of Joe Giordano with TD Cowen. Please proceed with your question.

Joe Giordano: I wanted to ask on memory. Obviously, prices are up a ton, and I believe there would be applicability for you guys having to buy that across you know, whether it is instrumentation or T and M and elements of digital imaging. So you comment on what you are seeing there? How big a percentage of sales it is, and how effective you have been able to pass that through to people?

Robert Mehrabian: Yeah. Thanks, Joe. First, we do not see a risk net risk. In that area. Some of our businesses, as you said, specifically more geared towards test and measurement instrumentation, do use memory. And may have some constraints in supply cost inflation. Ironically, memory and storage suppliers are also reasonably large customers of our test and measurement instrumentation businesses. So if they spend incremental CapEx by for proper by to for their memories. Then that is generally good for us because that is higher margin contribution business for us. But coming back to what I summarized, net risk is not there.

Joe Giordano: That is good to hear. Curious I guess two more for me. One, can you just run us through the organic kind of by segment, what you are thinking for next year? And then I also would like a bigger picture. Do you think and there has been talk from the government about restricting defense companies and what they can do with their balance sheets and how they spend their money. Do you see yourself I think I know your answer, but do you see yourself in that population of companies that would be potentially targeted there? And if no, does it does it make you wanna do things that others cannot because you have less restrictions? Thank you.

Robert Mehrabian: Yeah. Well, let me tell you. We have never been driven by what others do anyways. So as I said, our preference is buying companies and investing in our businesses. But let me go back Teledyne Technologies Incorporated, I said, we rarely bought our shares back. So $1.2 billion in share buybacks over the twenty six year history is not a whole lot considering we generate that much cash in the last two years every year. Having said that, we have never paid a dividend and we are more concerned about investing. If we cannot buy companies, we are more inclined to invest in our businesses.

For example, just last year, we increased our CapEx by 40% and we increased our R&D spending by 10%. So if we cannot find really good acquisitions, even though last year was a good year for acquisitions, we invest in CapEx and R&D and we are gonna do that moving forward. There are pockets of our businesses that are performing really well and, like, where we supply cooled and uncooled infrared sensors and cameras to our various customers will increase more CapEx there. Having said all of that, we have always been a commercial company. Albeit we do have significant defense businesses. Can go as high as 30%. But overall, also, most of our defense businesses are fixed price businesses.

I do not think it really applies to us. But, nevertheless, since we do not buy a lot of our own stock, I do not think I am so concerned about that. You asked about revenue. Organic we believe organic revenue growth. I mentioned this before, but I will do it very quickly. In digital imaging, it would be about 3.5%. Overall, it would be around that, 3.5, 3.6%. Aerospace and defense may be a little higher. Instrument would be around that. But we like the fact that it is around three and a half to 4% in our various businesses. Do not expect any of our businesses to decline.

Joe Giordano: Thanks, Robert.

Robert Mehrabian: Sure. Thank you.

Operator: Our next question comes from the line of Alex Preston with Bank of America. Please proceed with your question.

Alex Preston: Hey, good morning. Thank you for taking the question. I just wanted to touch on 737. It seems like we got some more certainty on rate increases at the '25. Just wondering if there has been any change to your thinking on destocking into '26.

Robert Mehrabian: I will ask George to answer it. I do not think so. But George.

George Bobb: Yeah. I would say no major change. And I would just keep in mind that, you know, our overall commercial aviation business is only about 5% of the business. And only about a third of our aviation business is OEM, and only a portion of that is Boeing. So no major change there for us.

Alex Preston: Got it. Appreciate the color.

Robert Mehrabian: Thanks, sir.

Operator: Thank you. Our next question comes from the line of Rob Jamieson with Vertical Research Partners. Please proceed with your question.

Rob Jamieson: Hey, guys. Thanks for taking my questions. Nice quarter. Just quickly on test and measurement. Just can you go through some of the demand drivers there? Was that mostly the Ethernet test again that was driving strength? And did you see any kind of improvements in some of the other end markets that you serve that might be related to, like, auto or anything like that you could know, provide insight on?

Robert Mehrabian: Yeah. I would say, Rob, in the immediate future, our oscilloscopes high end specialty oscilloscopes are doing well and will continue to do so. Both from the auto market as well as from motor control and power control in the larger data centers. And, also, we have a product a small company that generates Internet traffic capability. So we can simulate that. And basically, you know what is happened to the Internet. It is moving to the terabit range, 1.6 terabit to be accurate. We do have products in that domain.

In some of our protocol analyzer business we expect a little slower start in '26 primarily because that business is very dependent on where the large suppliers issue or produce chips. Before they produce their chips, they use our protocol analyzers the engineers, to develop the chips. But until they issue the chips, the users do not buy our protocol analyzers. So there is a little gap in that domain. With the two major producers of chips. Having delayed things. But as we move into the year, that will even itself out. So that is the best answer I can give you.

Rob Jamieson: That is helpful. Thank you for that. And then just looking at some of the legacy, you know, machine vision and, CMOS X-ray businesses in digital imaging. You know, are there any you know, do you see the machine vision business starting to recover and you do not expect that to be negative this year, are there any particular end markets or exposures there where you would expect the most upside? And then I guess on the X-ray CMOS, sensors business, you know, just some of the commentary that we have seen recently from, Dentsply that they are expecting recovering sales in the 2026.

This kind of aligned with I know you talked about seasonality in the second half, but would you continue to expect, like, a sequential improvement for the medical portions within BI as we move through twenty six?

Robert Mehrabian: I will I will ask George to pick that up. Please. But in general, I would say we are we are gonna do okay in the machine vision domain. Because of mask and semiconductor inspection. Etcetera, I will let the X-ray for George to comment on.

George Bobb: Yeah. I would also just add on the on the machine vision side. We saw good single digit growth in both machine vision cameras and machine vision sensors in Q4. And we expect in that overall industrial and scientific division to be up kinda low single digits in 2026. So we certainly seeing the recovery there. And as Robert mentioned, that is areas like semiconductor mask and wafer inspection. Any inspection of electronic components. On the X-ray side, really, we are kind of anticipating flat year over year in 2026. We have we have not built in a recovery in that business in 2026.

Rob Jamieson: Okay. Okay. Thank you for that. Appreciate it.

Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to management for final comments.

Robert Mehrabian: Thank you very much, operator. I will now ask Jason to conclude our conference call.

Jason VanWees: Thanks, Robert. And again, thanks, everyone, for joining us today. And of course, if you have follow-up questions, my number is on the earnings release. And other news releases. Are available on our website. So everyone. Talk to you later. Bye.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

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