TransDigm (TDG) 9 Feb 212021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the TransDigm First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s call is being recorded. [Operator Instructions] I would like to hand the call over to Jaimie Stemen, Director of Investor Relations. ahead. go Please

Officer, welcome transdigm.com conference and are fiscal first deck visit replay Chief XXXX Executive Officer, call Chief Thank Lisman. and obtain Mike Presenting to a on earnings Please Executive and President call. Nick website morning Stein; the quarter and Chairman, Financial at you, our Howley; TransDigm’s Kevin to call information. TransDigm’s slide this supplemental

which made are company the like remind during would are this statements statements. call, historical Before we begin, forward-looking not you to fact in that

of For during cause EBITDA, to further The sec.gov. in materially the income are expressed per as footnotes that the I filings that be information EBITDA also our defined, the Nick. the reconciliation. would release referring about will advise important call, company you section SEC company’s implied the course actual from to in financial website the measures. factors could the net or turn or refer GAAP the non-GAAP now all call differ to to share, the tables Please comparable results presentation and see through measures earnings adjusted with and we to most of at a please of like latest forward-looking statements, the available will applicable those earnings related specifically of adjusted for over and investors directly which

Good morning. Thanks calling for in.

net and value To EBITDA as higher steady the all of creation consistency revenues, comes focus are are sales we provided Mike of expand unique believe of the we on cycle. with our overview follow quarter, good bad are as products, few a time over times which provider. the significant our for have well start shareholder both around come color. then sales our from strategy. here our Most about any I'll of quick the we generally industry more through the believe have phases source To and some generated intrinsic XX% and will strategy, summarize, from usual, and our of strategy consistent the As in through long-term comments which we this. and consistent give the Kevin in reiterate, a stability and three-quarters reasons We proprietary aftermarket downturns. by of products why About relative of are our a net extended period typically of sole margins in

Specifically, businesses proprietary content. and we aftermarket significant aerospace with operate own

Second, simple, we utilize a operating well-proven, methodology. value-based

organization businesses and closely structure unique Fourth, path aligned this we PE-like a system clear allocations our key lastly, methodology. a of where a strategy are capital our shareholders. structure we Third, value-creation we part a and a see compensation to decentralized And with acquire have that return. fit and

QX, our from aerospace the we're earnings saw environment, a had you As tough but commercial in still decent considering market. we release, a very

timing. in year stalling in positive, the was our regards aftermarket and saw goal aftermarket with details is XXXX to To travel indications sharply commercial concerns us steep are air though on likely the shocks, the drops as expected, and QX the creation bookings air careful portion but business, most private liquidity of a second our of the in bottom. decline commercial of revenue, equity-like there long-standing of to focused fiscal year some At other we the Sharp not QX, in to severe sequential point, fiscal market. value as returns Our public do both stay due shareholders To during happened of that this this, we have the give COVID. well our travel with The our our allocation significant to we following the dropped fiscal typically increases of capital. duration. of as XXXX, magnitude half largest year this the profitable recovery

Our commercial still starting recovery and in is happen again, fly lockstep. aftermarket somewhat not slowly necessarily worldwide not will clear. as This the people timing to is of though more erratically, recover simply but the

safety, some addition we continue the are things to items costs. on the managing One, most focus two control. we can, degree, to are our tightly important In we to

fiscal able part same. revenues impact low QX this down year about our continues impact. year of to aftermarket have impact Our down were significantly versus of our prior but are in we the commercial to XXXX, mixed but mitigate revenues costs been the QX, margins, The

was XXXX. additional assuring now that We at it. uncertain insurance billion Secondly, our will of money It we policy the raised an for liquidity. an these unlikely need of The year $X.X raised times. quarter fiscal beginning third seems

we $XXX We that with we substantial made of continued should in from about million to flow the firepower. with of closed almost the billion in This to generated of operations We this of positive is out or Absent cash. acquisition dislocation shutdown, cash QX and large $X come XXXX. prior additional generate some quarter cash January.

activity we general, caution, was to more did in lean this towards We opportunities uncertain difficult are continue In capital M&A allocation, and attentive but we times. than still our always but months for six so better always especially now M&A ago allocation. at to capital look predict, tend sure. and active. last capital the we are on to possible feel M&A to markets But in these quarter

a after I'm This high quarter price radio a purchase aftermarket good-sized saw, million. sole-source and business, does for with We antenna admit Connectivity I is good the we which Cobham sure an content. acquisition of $XXX play proprietary offense it As to made a bought feel Aero good you must business again. business, is end. the some

the diversity. also like We customer

to through we return TransDigm, are business roughly guidance is we We for nine for shipment we a Cobham giving with drop expect the it little to revenue XX% PE-like fiscal as impacted the cash months with The tax transaction. contribute impacts, in but right usual, business in not revenue Though the $XXX the for on somewhat overall the in versus earnings. of for on year than year get will running we Cobham this range. calendar by the defined paid As timing. less margins much hand, historical own this the expect million XXXX, EBITDA to that fiscal will XX%

We our not these $XX XX% fiscal in two XXXX the roughly model for former small sold and were in did range. million, also businesses for that so fit The about businesses revenues non-proprietary was far million EBITDA revenue Esterline in XXXX. total year $XX

we of don't still too general, with defense our soon have sale us We point, sell don't businesses. these the continue this it's few to other for strategy. guidance. as clarity if know when give long-term sufficient clears XXXX the We businesses well fit At to investigate less a of proprietary that to smoke believe guidance. consistent the tight on right When about accordingly. feel will or enough well watch a to confidence, expenses to We market reinstate react be see and we as control We'll are more the and hold pickup. as our clear more we develop keep now. until we'll planning we flat signs for organization In positioned roughly can are we

let on give performance hand our thoughts. recent to and information QX review Now to Kevin it other more and to me over

the key by business I'll on XXXX my comment Today, and for quarter. fiscal some review Nick. and I'll results first of of outlook profitability topics. also market provide Thanks, regular the COVID-XX-related

QX, aerospace QX quarter, from the achieve as in business industry are sequential see for a continued a In impact another pandemic unfavorable which EBITDA that challenging continued were improvement on as that the travel remained the Our commercial QX depressed. across global the we I fiscal from considering QX these we able our slowdown economy. a difficult headwinds, has margin defined to we significant defined Despite EBITDA a was to approaching demand margin. XX%, am pleased as was XXXX

by review revenues our market we will category. Now,

For assuming to and discussion provide color forma will on of the basis prior businesses XXXX the we own in XX% mix OEM revenue periods. compared aftermarket. that same of our period remainder typically the of close the our up we the a call, commentary both commercial is into market split pro In year in which makes to I

impact XX% QX approximately compared OEM has revenue commercial year significant pandemic with market. negative when The the OEM total QX in period. caused on a the of Our market prior declined commercial

that to demonstrated OEM of evolve. airlines significant reductions deferring compared OEM we term, OEM of sequential fiscal reduced the to or likely continues on QX improvement under markets commercial be a fluid uncertain and throughout rates an orders. canceling is - new XXXX impact OEM to end But anticipate of are our commercial certain bookings demand in continue assumption negative our for which for slowing. note, indicator positive destocking time. will COVID-XX is the production and QX, Longer to products On impacts period due We aircraft some

multiple price. countries in has it minimal, will to although route likely encouraging that MAX added is business the near-term been the to re-certified the impact given Additionally, back low build our and be schedules,

was our discussion passenger the transport On on but quarter, approximately to decreased a quarter the commercial Now impactful approximately QX demand by at aftermarket also aftermarket. commercial X% sequentially freight revenues aftermarket In increase current business transport note, by decline of rate. aftermarket the revenues year was decline the when XX% the This less to fiscal in a QX There transport increased primarily the commercial the comparing the QX commercial a submarkets. compared when moving prior with in was declined driven total by in commercial the total market, in and by positive XXXX. aftermarket period. driven commercial interior

and were with observed the decrease demand travel declines aftermarket resulting uncertainty in in commercial down bookings air surrounding COVID. quarterly from line traffic Our flight

QX calendar of QX forecast few final of of airlines. an demand off outpaced on miles XXXX bookings still prior be touch XXXX. improvement miles are at from most the QX XXXX slowing below is year sequential for calendar was global will unprecedented To at though the compared as lows sales. be passenger weaker This and also pandemic. result the as all-time XX% to a result in Cargo have pre-COVID the declined to likely recent significant points IATA bottom levels to high that reported However, average key in the consideration, crisis demonstrated year expects FTKs a bookings about levels. XX% passenger and traffic destocking revenue crisis of revenue XXXX COVID-XX the modestly

to than growth has of to a current impacted data utilization loss operations flight cargo the jet due was and disruption. demand restrictions stagnant Business lesser belly by a pointing reduced to be commercial extent However, COVID-XX cargo to before travel. passenger helped passenger

for Now in and outlook the jets the the unpredictable. pandemic remains during aftermath business

flights As were business to and jet business rebounding to leisure opposed travel. personal travel as due but

we trend to now the this and face winter the is However, sustainability of foresee. especially difficult typical season slower

impacts the longer-term Although to pandemic predict. of the are hard

will travel vaccines across market recovery. this greatly will calendar the aid the activity long a the to recent air recover aftermarket increase. global the will in and and passengers demand revenue business a of continue of of globe and believe back commercial forecasts travel return The as followed by due continues is percentage time personal as improve. there to pent-up several this approval will believe in indicate still for personal for largest to half and travel. is accounted passenger We We rollout later seem traffic in Historically year, in miles pickup flight travel

We necessary on be are remain make business continue uncertain. case timing focused is the the drivers. of this the the now, meantime, for value in and we And will the will recovery decisions our hopeful to

defense in OEM primarily below me are X% bookings. compared Defense with prior QX both market, The defense driven at our aftermarket traditionally when in which or bookings total about speak the by let defense revenue. includes which XX% declined revenues a market, the by slightly grew aftermarket decline quarter period. year approximately in and modest of our Now

said defense we lumpy. As can have many bookings and be sales times

We throughout continue business order of defense the book. current due to the to expect to year our strength expand our

performance of primarily the XX%. and operating amid impact by XX% margin was were under efforts low approximately focus pleased talk defined was prior expand industry as in $XXX defined quarter commercial aftermarket our made by able possible Moving as defined. sequentially. EBITDA This sales. result down operating EBITDA that just of margin We as million for mitigation profitability, basis of to our going EBITDA on for spite points commercial QX. aerospace mix consistent a and in was QX XX versus defined disrupted strategy. to our the I'm to cost about about I’m as our EBITDA

a in our formal Now Nick this for moving to position not defined mentioned, EBITDA as sales, XXXX, and income previously outlook net as are guidance fiscal issue to at we XXXX time.

suppliers of This look to is more vacation will second most of vaccination clearer by guidance in will be half We remain realize driven we and We personal a the meaningful and of aero towards an picture the like a reinstitute calendar initial activity and there year. that increased return hopeful have the recovery will less when availability future. uncertainty we travel.

encouraged are quarter. by and in in commercial we now aftermarket recovery OEM bookings the For the first

call, for year. the the QX and prior we earnings market percent defense mid-single low-single digit XXXX fiscal we defense to in As for expect on the revenue as growth versus digit said range

the given commercial market in channels earnings consistent our Additionally, on with continued and uncertainty QX the the call. commentary

which margin. recovery, Connectivity, EBITDA Aero of QX commercial rate the to fiscal assumptions year. commercial We in are assume be aerospace substantial higher could XXXX we other Cobham continue margin commercial any the not a on fiscal dollar disruptions details of dilutive area limited defined With forward other full our providing lower fiscal have This and XXXX recovery. margins or Mike effect XX%, anticipate year. roughly this will move for financial as expected aftermarket XXXX updates. Barring up going EBITDA to for EBITDA and based being revenue throughout industry EBITDA provide the should year range We aftermarket the which will in expect steady includes of fiscal an lowest. increase the on the

an have part Additionally, our I government's beginning ESG journey. integral ESG social for was our ESG of a building initiatives for XXXX of an year touch the are with on program still our our conversations would efforts. like evolving we environmental in our of though initiative. to ESG Ongoing stakeholders, progress been and

posted As forward These information aerospace we continuous as industry recognize our More leadership our move we ESG is on extend well. journey. homepage. TransDigm can a recently to on priority report our to our ESG a that stakeholder as the in leader industry, need within we regarding and are XXXX the initiatives ESG dedicated we initiatives to published be initiatives improvement found are

although be industry strategy, performance as the end our us. Let result efforts company's in it over me fiscal are XXXX primary commercial with our the commercial consistent by I our Mike of ready challenging like of weakness from expect value the demand value to will of Officer, markets. industry. our and conclude pleased to I Financial am focus have ongoing our commitment We drive QX remainder you stakeholders. continue the would pandemic that that am by I stating the provide that disruption that There impacted this our strategy significantly for from Lisman. our aerospace to forward and monitoring expect commercial aerospace a Chief in time company and to in is XXXX continue can have that uncertainty what always ongoing act With developments strongly back. to and strong the to about we ensuring to to control while aerospace it turn come confident but look commercial is to management as is now still comes market, ready much quickly respond operating we The will tenured team emerge of as we focused the necessary. more that mitigation and controlling team also swift the cost the on on the with to

Good morning, financial quickly to going few on everyone. I'm hit additional a matters.

press You on detail and slides all for see adjusted revenue, EPS the today. the call and in release can EBITDA

detail. in going to So rehash that I'm not

is tax declines by quarter, rate that the the the by expected from This note compensation tax be this XX% For unchanged. driven just cash still GAAP end organic benefits the arising first Kevin our for taxes, significant the tax our quarter, negative to quick full is, rates That GAAP all tax lower growth anticipate equity quarter expectation for deviations range. to on we the the in and XX% driven commercial was A was than barring market rate deductions. rates some is timing adjusted year in mentioned. XX% in

through flow cash capital Free flow. CapEx Moving liquidity, cash less we EBITDA on was plus come last of this to that representing net quarter. Finland going billion defined which now up by quarter than free QX $XXX and define a that's net of price facility higher Aero cash was billion was interest to piece We acquisition this ratio X.X There purchase end our then accounts on $X.X the taxes soon. of debt as majority roughly forma ended traditionally saw the closing Note approvals Cobham cash and one a nice January of the with at and working the cash, we our TransDigm cash million that payments remaining shade quarter prior of of Pro cash is out of acquisition had the to collections. of should of the Connectivity for regulatory receivable $X.X a acquisition, X% times. We EBITDA at the $XX which business additional an million. closed X. close driven from is

depressed ratio pre-COVID QX fiscal up out EBITDA the Assuming air LTM ticking travel will rolls through end the last remaining our when quarter remains of continue XXXX computation. of the this of

off QX ratio for standpoint, balance potential should From and think our commercial the liquidity Beyond start markets the prepared to the fiscal that, the to remain we some overall end an commercial should XXXX, with sheet it we I'll environment back time. cash stabilize Q&A. turn good of currently position improvement rebound. With for withstand and depressed quite the operator in well to to kick

first with from Our Sachs. question Goldman Poponak Noah Instructions] [Operator comes

is line Your open.

the terms framed end Nick, very from into planning business were the you top you business limited in of line, how the market. early side. downturn, you cost And in with visibility the the framed

to to you planned each assumed you spoke for what market costs. therefore, So end

and guidance planning is the vis-à-vis on official end-market limited of side? speak given to, lieu aerospace the side, in point, this at of pace cost possible to recovery wondering the you're the it was I visibility, how so still And

Noah, I to I up don’t guidance, because don’t don't want I to piece-by-piece… it end think, want give giving we

Yes.

By the markets.

Correct.

is the tight for hold will our essentially, and costs think I cost, about we But we expect here basically what that, flat.

Now, that's And be other, if or The that of unclear truth that's I think that as recovery. about wrong the want just rather as going But one direction. to on move better in I than is it worse. we are, we're volume. rate on we I'd hopeful to way we're the the much go gets other say.

on taken you it a I or wasn't it would Yes. proved question not, accurate. and And if answered reasonably sure at way you had shot down, that but the

would in the increase much I check. aftermarket, sequential quantify up? in thought you can picked The bookings I how that So

OEM It like the XX%. XX%, and was was up

So, I a like slightly over shipments. said significant book-to-bill modest uptick. ahead, And

So we the did encouraging that's bookings. to a see OEM think I commercial a - nice as the aftermarket a on And we snapback is had quarter in side. side such

off very know that's guess level that to happen Do is? pre-pandemic far I how you rate the order from easy compares.

Yes. It's right? about half,

Yes.

still It's about half.

Okay.

about is. it half what It's of

were As in flight fall I my comments, the with said line bookings QX in and our activity.

Okay.

we of now So under-booking, kind caught we're essentially and were up.

Yes.

it now kind went of matched So up to with it's and nothing, revenue.

right. That's

quickly, And last actual you consolidated that but Cobham margin? gave is what just you I range to business. right the margin - that there, margins get were you then it? business this And last TransDigm the one a Can the just you can know bought before

have the get good get things you kind And it, into business, TransDigm the a We'll - it of model we'll To calibrate get but don't to aftermarket we Yes. the time. to not proprietary change, don't can't And to as range. only to our actual how way. And it's model. of yet. to exactly margins hope over TransDigm that of kind exact it Can margins get solid high. return, see. know of exactly to that's the model return. see which but kind know. we're We very we ownership. didn't is how that We didn't conservatively, margins? you bought short we the We have does of you we not get But up because disclose course, some just The range, it speed we before gave

from comes with Carter question next Our Research. Copeland Melius

open. line is Your

I'll here. be quick

color. short two Just give one, some you just then us little clarification,

in of more the just I I was? piece it you the mean, stuff if given of And that sort weaker how give patterns, any would much aftermarket, sales customer customer anything a weaker note lot interiors there be be that there. us buying respect helpful. Thank that color get the in of can discretionary you that just just behavior, distribution, are just with within to sub-segment? weaker then the a On of you've Any meaningfully to going that's to would sense that seen assume difference where you.

Sure.

the On the you last think we looking slowdown. place are I That's as a just, what in general, side, do is people said, to are seeing work. interior

heard lowest-performing in it Although, or any nice seen, but disti base. sector recently, of, a any we've seen still customer nor is I the difference business. aftermarket have of difference On the by in have activity, the behavior uptick sales, in not ordering I

to Okay. Are mean, is the be And clear, being the we down XX, in XX, Or XX? too I thing we I Or magnitude? am it - talking talking are on that down harsh? is just piece. aftermarket. interior the whole

No. not just off rest business. far. than slightly worse, that our of dramatically. not the so It's It's It's

Okay. I will somebody All right. else ask. let Thanks.

freight in Kevin, the offset that's by direction Just business? the other some

Yes.

with Our next Myles comes question from UBS. Walton

Your open. line is

IRR, sort of maybe the target. your at as could the look But the low or struggling, what midpoint, a EBITDA backdrop might and track you we in margin I to of to, XX.X% performance. had the obviously, range well Is percentage And of on, to given incentive how end absolute a percent you that high know as I'm historically, there XX% blanks basis. just financials that had on performance as you And XX% changed the wanting like? the end the metric? changes, your an I EBITDA can fill align the quickly question that is moved to

good given Myles, go this all, is the here, specifics challenging - comped And against industry don't about Obviously, sounds the like, I target. we what XX% on that's the to for too Yes. many year. you gave into the through it the want think margin that's feel you've it's we year, as for been pretty what so details, we we're circumstances. we're proxy what what

Okay, okay.

we at - Myles had. have would on expect, end XXXX parameters kind same add, that the of reset, historically world might we would the stabilizes, I value-creation expect assuming to we of the

was got things very hard to right disrupted, do so Just that that it now.

And aero unpack aftermarket Okay. was could aftermarket? your cargo much you this of the Kevin, how maybe transport What your just down? remind point? No, at. air sense. if at makes And is me, that transport Or cargo

we've XX% to XX%, said.

XX% cargo. neutral of of to submarkets All the down, the And XX%, except the of best but the it's to of freight much has It's performed segment. still any performance. the aftermarket closer

next Herbert Ken Our Canaccord. with from question comes

Your line is open.

Is Kevin, few the next And aftermarket through to - of do in sequential does it to commercial improvement bookings about appropriate, kind that think the of when continue X% see sort sequential improvement when we your quarters? sales? in

into if X% the that I XX the going know, future. months XX bookings sales. to to put and is when Yes. continue in can to don't we will translate Remember,

period of it can to a be this we'll trend. see. have It's how certainly revenue, over positive time. translates Exactly, So a to

the quarter, that it maybe expect that's in I that range. few and the I easier XX% could so much much the Okay. talk you of second speak, that a your for XX%, out if half and giving And the how anniversary expect comps growth in effect, to next guidance, know you third sales a anniversary quarters, in sort about to year improvement XX%, to the you in easier see? sequential opportunity of comps maybe of can you're mid-single-digit whipsaw you implies ambitious. run - Is as you kind But but not of start obviously

in somewhat flat expecting to will said we be Yes a first what the up we've way. I is looked don't, I half. that to we're communicate What it haven't continue that in and things little at

if we're modest activity. set in what second and I and some all linked seen second that that And communicated travel it on improvement happens. saying, a be to we've That's think that the half increase hangs but remains and in small half, the vaccinations that to with

I if it? And Got could…

hopeful to been are towards now just we personal we're for. delayed pickup. forecast we forecast that’s that pickup many we We a - travel little yes, and it's would see that have that a frankly substantial reticent right in - a hoped But have because from what people

that's Yes, right.

I that first on the final shoots. did evidence bookings there of fourth quarter, the point your that recovery just question. the of relative see a of guess anything second to hope any tangible one mean - but the the sort you obviously, up, of quarter, could sort fourth what I to In point, you as quarter half calendar was obviously in be fiscal were year? we to green

activity seen. green the only comment commented activity can't shoots the I only or Yes, I have bookings shoots, sequential bookings on I've green that's that the we've on, that

Our Robert Spingarn next Suisse. with question comes from Credit

is open. line Your

commercial aftermarket can with up beating bit up whether not we end see on is or might dead a Nick or I or that at this you flat point think horse QX the I little something here. QX. QX, just can But Kevin is identify this fiscal topic,

that's we something not yet can see. No,

is at get And so to for least all second some higher can really see half going it half aftermarket, what the relative just we enough we I second have if you you first drivers back is said a to recovery? some guess you're saying pulp. in versus

Yes recovery. that's right, if some we get

depends We to unknown. This I've have whether people on well. all follow flying read reports flying and as are and Nick analyst people I that's still of and all your both said as as -

here. all think formula that's complicated Rob that a mean I I’d I don't it's very is, And add to

more start to to the But it's probably sell aftermarket be [lockstep]. stuff won't people into more fly until As all then, we’ll start it's speculative. just

end this the point, year insight year now you that channel into of at almost end what's a about Do we're in any have better this a thing?

aftermarket. the for except really small don't amount our commercial We of

of percent I Now the inventory aftermarket. the the rest through can’t what’s is XX-ish that of distribution see of rest levels its the in goes partners.

Okay.

slowed uptick an both destocking there in probably a was either bit or little consumption was increase and there Clearly, means that of is true.

and Okay quickly. just

it's think the much the bookings. to be consumption up as hard could Yes that as

mean. I right, That's

No change.

for change no Yes that.

this for for major a had just year? quick I one Mike moving you, pieces just flow Okay, cash

Sure.

should focused we Anything on?

before No, what cash other other no because slightly down interest expense we flow discussed billion, refi to did major significant the nothing, items. from - changed already than prior of no but guidance nothing we the $X.XX

comes with Jefferies. from Greg next question Our Konrad

line Your is open.

on I’m the expected the through going you to to not think OE ask you're what I you year to reduced mentioned about you XXXX. mean fiscal aftermarket, just about OE switch I seeing mean, commercial when but bookings.

the with you are another wide-body step some line or rate? destocking pretty build of in also Is for step cadence in Some and down rates? down there OE

were rates at So we I think rates the in we're business. build build to conservative with the look probably probably in way line

So yes, QX commercial uptick orders in We're that's to feel significant good. in encouraging. at I looking OEM QX from

And the defense a OE at eventually trend quarter there then and in that is expect are mean the second just, does leading this I reverse? continue you that side to I a on think aftermarket. or is aftermarket least was that headwinds row or

surprised, the the Yes what very I time spent defense understand to to it's every gets in in think what's lumpy. side. on influencers I many I'm defense, happen. There going are hard It's predict.

orders go can I a know know, I forward we and So book we and know shipments strong have order we don't as be that lumpy. defense

comfortable than pretty still the we feel original And guidance.

mid yes. yes Yes, to low single-digits

David from Our with next comes question Strauss Barclays.

open. is line Your

on cash to that Mike, question. flow follow-up want

a fair a So cash consume balance Obviously benefit. your to was going in were of working I year. capital it guess you initial QX, this amount

for still on year? free around XX% reverse So cash flow and just at EBITDA we're looking for adjusted - you full timing the was expected this conversion to

did I The working on unchanged. would. is capital we this thought better quarter than We XX%

The low of But internal the coming - been they've additional collections, models OP at coming or XXs the And capital that's drove Our XXs. have the drove and quarter. of source tough. But of for accounts million good million it's out driving receivable. cash really of $XX high into they've us. out working collections. job DSO done the teams down a are what units positive didn't $XX the days Usually, of this

go to it as has and about to starts is years on forecast said go out that depending of were But recovery; accounts accounts last the on of call, ago, come see we back in. a months XX the into rough it'll from a on probably the as You'll roughly we going year continues, cash your And have where back couple of then of be, recovery pace amount at on based it's the $XXX the receivable, million of which couple justice. take to to that receivable. going

I of out would mean, look expect, as capital we and maybe structurally to the back pre-pandemic? better? years, of were it's percent out next where little as capital, over kind you working sales of a couple we bit is changed settle on anything Or working net a

get and in sales once capital in the way used at, net changes be all out expect structural low out the to to XXs, percentage of of recovery. No of wouldn't to from the come the we fullness XX% the for changed time, what We we have area. working

Okay.

know is another or receivables. reason any that As one faster quickly think Mike to will And slower moves the time. the if way, I saying any this don't there's pay industry

Yes, that's changes. right. No structural

the how deal. tax as exactly okay. and benefit what Yes the purchase part for? accounted acquisition, price And of tell noted, of the had us Cobham Can you I you much that is a think then,

somewhere structure benefit, for the that, That it's million reduces use, included roughly But taxes that that what that annual the it million sizable $XXX discount depending the you million But it. million business. bought. NPV, $XX to Cobham from will the we on reduce - $XX we million, arises sized cash the paid and of way is tax deal basically expenditures rate got $XX we on $XX we between Yes, for in million. $XX a tax obviously

Spread over...

over about Spread XX years.

That's of NPV Okay. it? the

Yes.

question Peter next from comes Baird. with Our Arment

line is open. Your

encouraging more in a aerospace and approaching commercial a Cobham good commercial this sounded deal. environment? with enter talk kind that you seems see there, need maybe just bit - front? little the on back M&A, like about, waters on Could on What it deals you the to offense to Nick, of

we're I still seeing - be what our not but Yes you model and with if would returns. and obviously to fact a deal of meets you deals. lot we - our the interested, mean, see, commercial we're it is, But got

people Some, now, they businesses or help but aerospace depressed, aren't it's - selling the commercial right not aren't commercial. - most selling if it. People can

next Stallard question Robert comes Vertical Our Research. with from

is line open. Your

of give sales say, forma an of that, pre-pandemic. sort pro percentage of on would idea Cobham Thanks. can be of your aerospace, probably, Nick or Kevin business, particularly the versus are That what defense us kind helpful. you

in We business, as it's press disclose select predominantly the release. applications products. But not with predominantly said for commercial exact as before some we've did It's an it. defense percentage those a for defense well

But significant international...

for Significant goes international. defense. of About close to revenue XX% the

call the is acquisitions? like able you'll terms, given so selling to other you're on saying you commercial rebase that, be that And on, aftermarket, Okay. percentage that, might international what

think too comment much want Yes. on... I don't we to

days We're Yes. owning of early it. in the

early Very

Sorting through the more getting with and business. familiar

any able to ways price make to statement about hard it yet. you'll So be

sequential to? bookings, then just if there any that on the And us that's the finally, idea related was can specific some Okay. in improvement you give programs OEM

across was there. It the There weren't really large one-time any items nicely in board.

So linked increase not AXXX rate or it's the like to that? anything

No.

question Stanley. Kristine Morgan comes Liwag from Our with next

Your line open. is

COVID I recovery, With ask the to all on about topics and switch wanted Esterline. focus

give Looking in Esterline? that outlook? with you've embedded back cost year, the how takeout And cost could to with the we addition incremental here? for terms in in margin much done that, from else And is the in then you idea your are us that transaction, an can you go in outlook of also, where XX% takeout where

the So, on the again, that. question, Esterline, of repeat part first

Sorry.

us in business an you've accomplished with terms initially… with takeout For Esterline, just you give cost what what have update that of versus

obviously, we've on So on think takeout. I takeouts; cost progress, cost made

takeout continues. cost Our

of in. time. than we has prior come up had then quarters, business in some I going have think our in communicated we've reductions more expectations the than But COVID that and reductions and out model As lived to

kinds drive activities that and might somewhat reductions improvement continuous for we reduced activities of will its go Esterline, over that think be those and as productivity forward. headcount cost-management now or I

may margins for the a that, think We acquisition fullness right longer company. I the time, may to TransDigm still that has get closer. struggle initially in it to communicated would believe get that the been fantastic still it of we Esterline and chute and of be out

your of EBITDA then the XX% cost that outlook? outlook part the for second Great. margin And margin much year, the question, in expectation, is for incremental on takeout embedded which how that is more

more. Nothing significantly

look cost and takeout go because some continue as continue to be continued costs, we will of businesses. forward. this we And to at We European timing with and manage unions there

still As bit them get we're longer. all it but a aware, it done, - little takes you takes

So second uptick there think, Nick is the takeout. level as some I But with gradual some half. activity said still in earlier, at we're costs, looking in

did the, think us. step-down we COVID safe I stuff behind is to extraordinary it's say sort that about for of,

behind about It’s us. Yes.

what see. revenue. And us. the see happens then to behind we'll About We'll

Our Keay next from with comes Research. question Wolfe Hunter

Your line is open.

things market, about A couple more Kevin, the do as uptick a think you next little interiors airline drive world? some for think had driving can working in maybe for you What's the give the you me. customers some are about the had where maybe over few years, past ability you And to for new specifically on? What you us innovation, interiors? the in color around the guys guys on priorities your that?

seemed in you Trying aftermarket still of I and interiors, antiviral looking is of a talked our future? we to of in for bit are commercial aftermarket. are at We do the a but the uptick interiors. may in an these little interiors past. performer, the about little the it some flooring, we're starting new worst important see unusual seat the I is uptick guess, give commercial that. it like materials Interiors color, parts our So, of some to We've not surrounds have were What for submarkets. in better, like. and miscommunicated - materials, lowest-performing But businesses, our things did

also a bins of options seat as well have antiviral as our and belt. for host webbing for touch-free We bathrooms overhead

interiors. activity regions We'll some world interest that are the as be there's usually don't on activity. business. we real most it a is that it is the focusing of of will interior this yes, orders. now into from improving discretionary more the in see of their there's any So, But if and But for see activity march side long booked interiors and our from

just mentioned personal you're embedded there and And leisure used jets on biz sort the travel. pricing? Is making? on there of that comment being in then an observation that Or were that you - is more for

just an observation. it's No,

Okay.

I landings, jet is If afford get business don't travel the to we and want involved. travel I usage, takeoff to can business growth leisure think level the and same to activity. drive see of think just do have in going to world eventually

So, to travel to it's take just see business we're off. eventually, have that going

with Our Global. next question comes Alembic from Pete Skibitski

open. is Your line

would defense if I'm question if we to one - back business regard wondering with the budget side on have was Army towards shifts kind any towards some from you or impact your budget, big in or Force the the interested to defense just How space. on Just you your Just thoughts? in of maybe positive Air defense see of structure that away business, thoughts expect negative? Navy, your

Navy just for you of to us. - Army scenario and from the all think space, I Well, are good Air and those predicted Force

As us. we remote move more all good observation to more for drones, monitoring, technology, more that's

engaged our on in that are products really world. focused side We of the those and are heavily technology aerospace platforms,

Our next Seth JPMorgan. comes Seifman from with question

is open. line Your

of the side. the that the on to the of pandemic fairly about out When hot where kind conceptually downside starts kind demand situation obligation is just One Are certain thing I've and in are strong? of you if think guys and coming of of lot a you wondered, other we to are or there are there are sole-sourced, as shortages, under if a parts shortages, your really you that's it? demand portfolio, and provide run

are And if a we're responsive. there are on delivery Yes, I take our there if we we fill personally shortages, ship mean we rates shortages. that so our much can't it and focus and why so quality of so that's on-time products, part.

obligation there no at contractual but like is all? Right,

no. No,

okay… Right,

are. well the whole range rules. what mean there's - are they I of Well, they they defense

it. do the - across to guess have should we with a I certain some But, about limitation business. are we it's not Boeing And that contractual now there thinking items have assignment I'm delivery or I say, that performance, huge

safe the the it, it's had never we when have Historically, [ph]. we say and to think in competitive we've issue I needed capacity particularly capacity an with step-up that aftermarket. very adequate

right. that's Yes,

a to with highlighting really their Okay, what traffic cool. outlook year, was week, And amount as they I the release to then, as aero forecast back just for the pointed half fair the for [ph] as of out far XXXX. downside the last of know

XX% calendar year, only Maybe were XXXX little to work something on for little I if a so, to the guys so then harder? to more the ahead get And And up, we cost running saw situation guys in where three in or and Would side months a cause your XX% that don't bit dig know, the entire AFKs to like - fiscal XX%? a that. are year? have you you to of

I guess know I the answer. is don't

cost it on some side have in dig maybe to I'd will that about We always the more. think the case,

Right, that you margin gave, then deal. the of drivers? The that value the final one, Cobham before just is application And target the okay. on

Yes.

we'd to what this that's about see Yes, year. expect

Yes that’s right.

as of exactly sit - it's And improvements the in months. here first the or we like hard sort the in and today, can't we nine six timing crank of

Ciarmoli with Securities. Our from Truist Michael next question comes

Your line is open.

wide-body want or you're any And peak? play booking color could wide-bodies the give But to for at, revenues to for taking real you just big material the back a seeing bookings of that I'm the need that out Kevin, the wide-body to to or us we're younger, I'm a how there we sense kind prior in parse warranty. the I international Nick travel parse your component into maybe questions you get - can of here. trying how sort see aftermarket say fleet about But narrow-body? much maybe weakness in is versus And under a side recovery? what do to don't there? Thanks guess the and seeing on to in thinking get so international might now I sense is of the getting I'm or out the

it hold So, to we're that continues past, said market-weighted. in we've today, and the

We're wide-body a there isn't levels. activity. activity lot in market-weighted So of our

narrow-body It's get a what back I That been to very not. part is market slower. able wide-body the wide-body rate today - side. clear, wide-body to be to that is of RPMs activity need it's by we will on do COVID today. activity have seeing orders not are we international work just well granularity say, to or true have of strong But very a that. we on And So prior performed levels, I've an the encouraged to in is performance. important really more of and we've

reassurance and narrow-body. So are look is again, the market-weighted, me that wide-body way at the it versus should we that gives you

it. Got

business. the of aerospace the business portion smaller larger of a It's

Got the second it. then as on in ROE all And margins have more your you're obviously and half We I'm here, have that But levels your EBITDA of your depressed stays this just margins that we pre-pandemic, - aftermarket recover higher-margin to think the differential? faster just XX%, OE favor recovery forecast. XX% you're the forecasts. assuming Should you of snapback, and if your business? given get have mixing aftermarket thinking even margin OE to own the those potential sort recovers you

way hate have the in. mix I future that. think the comes on don't to it's possible, I but know. We'll on And speculating see I certainly the

calculation. One I one or change mean, of rate it the a move faster other. relative than changes could way the simply it's other,

further the to closing turn call Jaimie to no remarks. over are I'd questions. any Stemen like back for There

for call. you joining This today's call. all today's Thank concludes

throughout follow-up to for We address will your day. joining. available be again questions Thanks the

gentlemen, this and conclude does the program. Ladies

great a day. You have may now Everyone, disconnect.