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07 May 2020
Thermal imaging company sees widespread spike in demand across numerous industries.
FLIR Systems has reported a surge in demand for its thermal imaging cameras and core sensing modules for monitoring elevated skin temperature (EST), as governments and industries around the world look to emerge from coronavirus lockdown measures.
While the EST screening technology cannot directly detect the presence of the virus, and is not a perfect solution, it is increasingly seen as part of a package of measures that will enable economies to re-open.
FLIR has prior experience from the earlier outbreaks of SARS in 2003, as well as swine flu, bird flu, and ebola, that the company believes has given it a head start on the implementation for Covid-19 screening.
$100M order surge
Reporting the Arlington, Virginia, firm’s latest quarterly financial results, CEO Jim Cannon revealed that FLIR had already booked some $100 million in EST-related orders. Typically the quarterly number is in single-digit millions.
“Demand has come from a wide variety of customers and numerous industries, including hospitality, transportation, manufacturing and others,” he told an investor conference call discussing the latest results, adding that nearly half of those orders had already shipped.
“Many companies are looking to install this technology in their facilities in anticipation of lifting the shelter-in-place orders and as the global economy shifts to plans for reopening business,” Cannon added. “In fact, we've been using our own technology to screen employees for EST when they enter our facilities.”
The CEO pointed out how several FLIR models now offer a “screening” mode, offering a built-in feature that detects people with an elevated temperature compared with the sample of average temperature value. That mode is designed to enable faster screening, while maintaining the EST monitoring accuracy.
Supply chain stress
While in the past FLIR would have seen only a small ongoing run rate of business used for spare parts and replacements at airports in Korea and Japan, Cannon explained that he is expecting the current level of EST demand to continue for the rest of the year.
“This feels very different,” he told investors. “We know we don't have a vaccine. We know this virus transmits unlike any other. We expect [that] through the summer and into the fall and winter, we [will] have to continue to take precautions. Again, we’ve never seen anything like it.”
The CEO said that, like many firms, FLIR was battling against operational challenges to meet the EST-related demand - even though the company is deemed an essential business, and all of its manufacturing sites remain open.
“The demand has put stress on our supply chain and manufacturing capacity,” Cannon admitted. “To address this, we're re-allocating internal resources, leveraging the strength of our relationships with our world-class suppliers, and optimizing manufacturing capacity through investments of relatively small amounts of capital that allow us to exponentially scale EST camera production to meet growing customer demand.
“We will continue to do everything we can to deliver this technology to all of those on the front line to help mitigate the spread of Covid-19 around the world.”
Guidance withdrawn; stock bounces 10%
That EST camera demand has helped to offset a predictable dip in FLIR’s current commercial business, exacerbated by delayed processing of customer sign-offs and license procurement caused by the disruptive shift to remote working elsewhere.
As a result of that and the rest of the Covid-related uncertainty, Cannon and his executive team have withdrawn the full-year financial guidance they had previously issued. Back in February, they had pencilled in sales expectations of around $1.9 billion for 2020.
For the opening quarter of the year, FLIR posted net earnings of $15.4 million - down from $61.7 million a year ago, even though quarterly sales ticked up slightly to $451 million.
That earnings decline was partly due to restructuring charges as the company reorganized into new operating segments, and partly due to higher operating expenses.
• Despite withdrawing financial guidance - something that would normally spook markets - FLIR’s financial update prompted nearly a 10 per cent increase in the company’s stock price.
After closing at just over $45 on the Nasdaq on May 6, FLIR’s market capitalization stood at $6.1 billion. That is more than double the valuation it had slumped to in mid-March, and around 20 per cent down on pre-pandemic levels.
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