TransDigm (TDG) 11 May 222022 Q2 Earnings call transcript

Hello, thank you for standing by and welcome to the Second Quarter 2022 TransDigm Group Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jaimie Stemen, Director of Investor Relations. ahead. go Please

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

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

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

today. Cleveland, Good for in morning from and calling thanks

period To net which have our aerospace we with our well value both the by good color proprietary our a believe steady typically a about sales in and quarter. XXXX and EBITDA on usual Jorge with well-proven revenues, as extended strategy the all reasons in margins cycle. quarter, as start products. outlook. shareholder I'll unique and are we reiterate, times of higher the content. businesses this: our here of specifically. additional strategy, of To summarize, consistent on operate will few Most About generally the off XX% aerospace of significant in overview why unique industry significantly the aftermarket have fiscal give of Mike methodology. are through of intrinsic are some any the First, the our focus a over phases our and value discussion generated bad, creation from quick relative We based stability utilize We comments Then aftermarket downturn. own consistency the long-term proprietary simple We operating follow provided and strategy, in comes of

and to acquire where aligned a a like compensation have fit decentralized see clear this shareholders. closely PE structure unique with system, We returns. and organizational We businesses path that we strategy

our and structure are key creation methodology. part value allocations capital a Our of

public stay longstanding creation, liquidity as as with a capital. we our equity on of Our shareholders returns of our like To to both this, well the careful details the focused do goal private is give market. of value allocation

good saw you market from had we the release, environment. our quarter, another As considering earnings

encouraged and in the among in trends We traffic see the factors. commercial to recovery air are other market continue aerospace by

comparison second in relative then pandemic period as of lapping in of are we growth fiscal availability to positive show the vaccines. the and the was results which QX Our by impacted XXXX, same heavily quarter XXXX,

be they travel air unfavorably levels comparison depressed. for have our Although remains results improved, to as pre-pandemic demand continue the affected to in

travel low's pullback to the limiting over as the traffic In and for forward pleased has world our the slowly approximately both traffic after both quarter. and a margin January another defined that sequential this strict and of travel, to was am strong challenging China very saw continued XXXX. commercial traffic QX well commercial revenues, beginning aerospace To travel, EBITDA in environment, is quarter this This business, air as our due management we However, though zero restrictions. of of domestic moving driven for our primarily strong was governments watch the bookings or air during travel in XX.X% remained a as to softened as in be structure a lifted further sharp policies There with domestic by Omicron careful continued despite the COVID the QX commercial bodes the date, international improvement traffic international revenues steady have total throughout our is improvement I fiscal across up impacting XXXX. slight point travel. as in despite fully aftermarket December in off Omicron cost in the but and result progress demand our Contributing has is to the margin focus travel the variant the in of near China momentum and of China quarter. achieved leisure the is continued flight then. recovery pent-up encouraging. traffic in aftermarket the of drop well It commercial illustrates on strategy. since holiday as our recovery travel continued XX% variant recovery operating continues was in many the global COVID air

with to almost QX. billion of we a generation little continue cash flow generate We in had of XX million Additionally, closed the cash. over and cash operating quarter X.X

steadily remainder to of generate cash significant the expect XXXX. throughout additional We

priorities. half expected year is DART forma civilian agreed equates is ending fiscal for well the expect with approximately expected leading of XX, allocation of to This later. Next, aircraft. repurchase million and acquisition, the fits strategy. meet we an focused an stock. is mainly the currently shares XXX cash will any proprietary like we we of QX, This share quarter, $XXX XXX to of our acquire report dark DART We I December at generation return Aerospace address for our our X of open of more Mike DART value which the activities objectives. will engineered our to XXXX. to together capital Also $X forma it close unique XXXX our view this assumes our common and via and this during for calendar service of generate during update capital share. balance repurchase expect cash. highly to to announced in closing, for happy these during investment price second market helicopter close that sizable in XXX approximately and am billion. value The provider aftermarket billion and pro closing average a capital exceed have approximately DART deployed to or of the investments. still Pro opportunistically long-term generating on X approximately million repurchases million solutions that acquisition capital allocates other revenue of a per

All evaluate three remain continue regarding individually, options to capital on and months then backs next We our but buy nine table. also share Each the in or acquisitions, options allocation potentially some activity with or over additional the M&A combination and/or back still any company foreseeable dividend capital substantial the share currently significant anticipated the Any buy with other future. the opportunities so. in requirements to and readily will liquidity leave flexibility deal financial dividends.

attentive markets times. allocation. M&A predict, in our possible especially We to capital always M&A continue capital these are to look opportunities and so but to difficult and Both the are at always

levels. model. opportunities the that our M&A M&A are Regarding to current continues looking line, pipeline accelerate opportunity for activity Acquisition approaching fit we and actively pre-COVID is

or small that midsize and of runway on a decent we range. as pipeline portfolio. our predict possible the mostly remain that is a for usual in have comment cannot long possibilities acquisitions there I We closings, confident fit

Now, our outlook to moving for XXXX.

the result a We financial of provide a guidance end full primary commercial as in are to continued markets. still position in our not disruption

evolve have seen time, earnings reinitiate and We received OEM on continue conditions to aftermarket guidance we expect to thus favorably. in recovery continue for in be this our the At the far XXXX. strong and November for fiscal we prevailing assuming XXXX fiscal the our year, encouraged revenues new by call both commercial bookings to

commercial an in continue provided. XX% our trends previously financial demand traffic adverse to to impact travel, have OEM are of air levels the commercial throughout internal planning aftermarket range teams fiscal us ahead commercial due for and could on our to depressed revenue of grow expect to recent favorably. air our that planning, now XXXX aftermarket We resource assumption regard With the worldwide to pre-pandemic lower both although will impact the compared under remainder customer results, remain sizing to XX% positive to COVID-XX

well, We to as grow expect commercial but rate our a less aftermarket significantly than the at OEM commercial revenue of growth. rate

aim be As conservative. you to know, we

growth fiscal XXXX As for end Jorge the on more the year, will the single despite first percent half versus defense expect we for of low range market. prior defense our the defense still digit slow year. color market, revenue provide in

XX% approaching of We aftermarket anticipate year. half this to our fiscal due know, you of a will often rate move on XXXX EBITDA the now throughout margins end up market basis. lumpy recovery. be continue full-year second be the margin As quite quarterly to to We EBITDA fiscal commercial expect can

and As markets financial a percent of guidance provide for about and believe and as fiscal fiscal watch second half see the will note, the Cobham of includes they year. margin the unfavorable accordingly. are and XXXX a capital other of this updates. develop on XXXX, usual, acquisition details this closely we assumptions we'll aerospace how our react well-positioned Mike half one of We headwind

our XXXX to stakeholders. the the on Let operating through by to of commitment cost full performance fiscal value to continue our recovery and this a We this remain of look create and focused strategy. driving executing our industry industry. strategy period for commercial we stating for as with recovery of our structure opportunity commercial company's our consistent the pleased to the the in for stakeholders path forward our remainder I'm We that me continue aerospace with gradual managing value to conclude aerospace in on

over it a other our Now, let items. me performance to and few hand Jorge review to recent

review start Thanks, by of key Kevin. typical market with I'll our results category.

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

to the increased almost commercial Sequentially, sales. in Our bookings QX, XX% were the with almost QX same compared period significantly prior sales strong, and quarter compared revenue approximately improving compared in period. pays prior XX%, out year XX%. year Bookings improved with to again the OEM total

our be the by rates progressing commercial encouraged gradually While we to at for demand are to continue OEMs. short-term, OEM the commercial we build expect products reduced in

global bookings on sales. To compared both variant to few by and and a remain was our commercial prior was the year year is up when aftermarket with miles XX%. revenues modest moving by to consideration, decline period. There passenger strongly year of of depressed. sub approximately which increased period were XX% travel. market, driven bookings aftermarket significantly business and sub our outpaced in to market, grew to quarter, compared in up primarily compared miles although to January aftermarket tough aftermarket QX QX commercial revenue prior revenue largest increased comparison commercial the same markets a this holiday approximately all aftermarket Total by aftermarket revenue Growth bookings commercial revenue total Omicron Now our points Sequentially, in were Commercial discussion. on key December due passenger in touch commercial demand sequential passenger sub our prior in a QX. the

Commentary be its international progressing zero to is about recovery of Many in January. most in resilient lifted while lockdowns to international passenger the volumes Global a Though which they to could air has to volatile traffic traffic air government the from for been localized cargo impacts have Russia rapid XXXX, international. miles conflict, forecast. freight down the travel variant due for trend although improvement to in recently. optimism year recovery the freight data revenue unfavorable momentum, time pre-pandemic from of limited This air the on recovery return in softened pre-pandemic, end caused to is previously be remainder travel entirely, will demand with This slow, the in activity in the levels began more bit passengers for remains IATA earlier pace policies, strong have Russia to travel. of which the show higher is provides was conflict, reported In hopeful operators was underlying down continue we're along appeared continue recently has Business the compared air of drop-offs X%. stated Ukraine air travel. recovery remainder continue traffic although strong domestic for robust. impact the improve Ukraine which and since in air China international lockdowns expect positive February than of steadily jet jet also based at passenger and due has on domestic more The the recently willingness of Europe the and from a OEMs Business of imposed of tell. XXXX. than However, COVID traffic and the been near-term. travel the to tempered demonstrates demand utilization continues which and March, The that these Omicron continue year in XXXX. strong, to it XX%, travel, U.S. and on current pace Business the the only travel levels of IATA progresses, China continued to travel remains or likely domestic the to encouraging. jet as restrictions and The demand air travel

Now, our X% about me OEM revenues traditionally let approximately when and by with defense QX at year defense includes in speak our compared or total The which the XX% prior aftermarket revenue. below revenue, both is market of which decreased period. market,

supply chain times, many of fulfilling defense we've our issues teams challenged continue As lack of the be components. be said Similar chain primarily lumpy. QX, orders. can availability with electronic and sales supply to The in delays around induced bookings to

to actively issues. overcome Our pursuing operating units actions are mitigating these

XX% and sequentially book QX. defense improved Our strong this bookings quarter versus remains order

our business to the expand expect throughout remainder the year. of We defense

like efforts low-single-digit As Kevin expect defense to our teams Mike the and Lisman. our products. impacts our growth We meeting our chain With strong mentioned turn we of of our like XXXX demand Chief for and revenues. for to I'd supply to value I'd earlier, range in it on finish to percent remain the pandemic Officer, to over focused continue recognizing the fiscal continuing negative drivers disruptions. market and increased by that, overcome the Financial

additional the going everyone. expectations financial some matters quarter I'm morning, full Good to year. the fiscal on for our hit quickly and also for

was EBITDA regard As This QX First, margin XXX in million our profitability of for quarter, up for about QX. our quarter Defined approximately versus Defined represents XX.X%. in second in EBITDA As was improvement XX% to points versus by the prior increased the improvement Defined of year. XXX this about and last balance for the versus we QX Sequentially, quarter last margin points to continue expect As of fiscal EBITDA the margin basis XX basis of year. year-over-year

quarter to additional XX%. expected On a the year full-year. few slightly comments adjusted of the and quarter, also for Organic in OEM Next, XX% metrics revising on rate and rebound was our end by fiscal taxes, commercial the again our XX% downward financial growth aftermarket markets. driven the a this select range to for tax for we're

expected to Our GAAP XX% and unchanged guidance and cash is still range. the XX% to be tax rates in

free cash CapEx less quarter liquidity, traditionally TransDigm at cash interest positive taxes Defined and $XXX as of define roughly over EBITDA flow. was million. cash flow, another which we Moving Free payments, As and had to cash we cash

is this but noted amount release, As press timing. the was in lower just this quarter, slightly this

due to date we an interest payment Specifically, April X, made was April quarter-end extra on picked of the up that X. cash

addition, cash higher in we the had tax quarter. In payments

can the tax payments, As before, cash and cash lumpy quarters. payments across be we interest mentioned

is area November fiscal to free guidance unchanged maybe anticipate the in call. better. flow cash is, earnings we be billion That still free our year, year, a fiscal X flow full for the For from little the the cash

and of program. the cash about $XXX these to cash. acquisition share X.X new we open used capital X.XX through we of about the did similar it million investment shares shares the other market XXX repurchased We any repurchases view repurchase and model like million purchase quarter a of In ended per with mentioned, average during at price billion an of share the and return. expect business, just as rate quarter Kevin and total, a such weighted repurchase of As

in resulted capital This sheet cash million quarter. later rebound Additionally, XXX of today, our our resulted quarters. filed less use strong this in being than networking that you'll booked XX-Q to prior sales in is being that a balance cash see in the

the to investment rebounding glad and As mentioned have and we're commercial this see therefore previously, cash driving end we our need. fund markets this primary to

happen recover to our The COVID’s which uncertain, As and expect should will networking timeline XXXX global this recover of track we'd we back generally continue from go travel, million to into on recovery. to to activity but impact capital. levels, XXX over additional XXX million remains the an cash

Moving on leverage levels. to

currently X.Xx, the to debt fiscal at at quarter. XXXX ratio end at net our peak Our of from its down X.Xx is EBITDA second

running continue keep of year progresses. balance such the our additional any will XXXX to the expect debt-to-EBITDA our or flow dividends as net as share ratio We year activities for down positive barring ticking markets cash repurchase, free fiscal capital

We environment on adequate out our balance year of combination in us through calendar gross hedged XX% that XXXX. and go interest are a cushion watching closely. through This the rise rate swaps rate XX rising interest caps debt rates. any billion We remain against provides

to commercial I'll turn to a remain aerospace summary, good today's included and position sheet slide standpoint, range will three month but sensitivity still in be values. prepared for withstand depressed, With some an environment table it time. Q&A. shows off have interest well LIBOR kick of expense now operator to we the that quite from in balance overall annual you deck the what rebounding at back that, the and supporting liquidity cash cash We In our a

with question Our comes Robert Stallard Vertical from Research. you. Thank Instructions] [Operator first

You your with question. may proceed

thanks morning. much good and so Yes,

morning. Good

or percentage also of if I any the impact revenue follow-up COVID terms there already wanted to on in experienced is and you're just of sort short-term this a there exposure China the bookings you've comments at from And there impact of sort having already locked? what Kevin, have your moment? on

in in and depressed China activity well China, China we've now. So, bookings China. numbers commentary, seen our is flight Obviously,

some starting of is show shoots, of the Asia. to green rest Asia Although activity in

the So, there. how confident defense China of the comment year gauge and on On much should very OEMs, remain some, we do as remain so think to aftermarket you starts Jorge for encouraged to I increase bookings had This continue – heard does strong defense hard spending. the as on on. flying and upside as be why we future unfolds It's optimistic encouraged so bookings us, and defense, for sort remain internationally. bookings, domestically

you. Thank great. That's

Thank you.

question with Poponak Noah Our comes from Sachs. Goldman next

proceed. may You

Hi, good morning everyone.

Good morning.

growth Your true the a with aerospace industry for the flight as activity the compared that a also, off was way bottom few guess aftermarket has exceeded and coming the that's on industry average now row quarters very after you declining down. Can average well. in to I in-line

can is? aftermarket your business you time spend the more faster why is little a that now growing right So, market on aerospace how than sustainable and end bit

I we know it's can any inefficiencies orders The have efficient. we that and commentary underperform, of the just on don't not lumpy. the think at chain can might outperform shipments at times appear I outperforming be be and today. times I exact to supply is why market.

do versus that the past? about the balance that remarks, the Okay. with how Fair done of bit you the repurchase, capital Kevin, thinking the minute? mean, a on spend how decision prepared at on time you've touched about enough. you you're And I I the share special you you know dividends little that could of in but size that's in appropriate and deployment think more do how

decide will share a the or which everything's repurchases. we determine but in on time out in is Well, move it's are do, past of table. forward repurchase I There we've right no opportunistically, repurchases. done looking as at said sizable go, magic the M&A all terms evaluating we has options happened dividends. get thinking on and with shareholders. We're historically opportunities There's deployment as when comments, any we M&A decide this, not right, of back it kind as now. the other way capital to the table in as to that formula we capital about share my will to It We're the differently. We're deals

look up given that is sizing not would brought through leverage repurchases? year, the and the say down in where even the for the prospects there larger you deal you've there at Are scenario end activity, of

to on share we that, Well, to. to We've see come it repurchases. the than along. this the powder enough to We're ensure we and similar have that any billion go can't any much along from that. more comment deals acquisition we evaluating returns. just have want opportunities of used sizable believe X.X like I of that options. in coming all see I extent. Again, we I do pre-authorization million we XXX model Board an We dry think depends

Okay. Thank it. you. Appreciate

you. Thank

from comes Robert question next Spingarn Melius. with Our

may with your question. proceed You

to extent on recruiting Kevin, morning. good what Hey, what's a this the both attrition, labor the latest constraint? is side, and and

I'll that, we're our direct Rob. the at labor levels pressures perspective, Yes, of lower take some in seeing From general.

know, it's of really you turnover staff, little of in resource properly But bit always, in to a labor we've in to marketplace. more requirements as As on a little it's as situation. the the bit resources cautious most going wouldn't commercial of seen support still OEM, we're of back adding engineering a that uptick dynamic I be competitive a commercial say significant most are we're think the aftermarket. we any the so by the driven improvement

Europe And your elsewhere? the growth defense, single low defense defense outlook has and digits given just Kevin, evolving obviously, long-term Okay. National level Security then the at for Environment sales on changed and in budgets high latest the and a

we optimistic us I the trickle obviously to supplier, but the see for us Well, down favorable environment up think for future. a we're a to budgets future on a do while as in takes defense about in defense. It shaping that component

you. Thank Okay.

you. Thank

with Myles from comes question Walton UBS. next Our

You may proceed.

you is just want range, maintained said? like put it the it aftermarket of XX% there what bogey I Kevin, greater XX% previously your just of new that to morning. you closer you're out would year, wondering, for the if ahead commercial you track flat or targeted was you rest do looks a XX%, the good than said Hey, or to

giving said resource – I we not I to we want see that, we XX% planning Yes, guidance. that my in say prepared to on I say XX% target. would we're to remarks did that think that outperforming

We we – still [ph] is [limb] market tend be right go that conservative there has our we're isn't on to happen. guidance so and and book shift not higher and to communicate a are out now that the stable going to where in

So, right sticking but XX% that know outperform you finer to we're with, now. XX% initially it we to at put year, we're going point gave the on not the a

think you pricing, Okay. can't net question level benchmark? is Thanks. inflation your currently Any reason on to sequentially asking grow? you're of about And then just base through? sort the not price, the passing level I’m base your inflation other what's just

comment don't on we pricing specifics. Well,

overcome Our of many pass over is we a need historically from we is evaluate is CPI our job is and along seen decades. you've Inflation pressures running to and focus inflationary It to very goal that the values see. that part inflation. what as high to

in doing successful we So been that. have far,

Thanks. Alright. Okay.

you. Thank

Gautam Khanna Our from next Cowen. comes with question

You may proceed.

Good thanks. Hey, morning, guys.

morning. Good

of the you you've pickup bookings of of side, I do lumpy in bookings isolated a the was the areas. past, think broad it it was defense I wondering but couple ongoing how the in as on to sort saw about it know talked demand based, representative product being you were? big was quarter’s

of DoD the quarter. There broad specific general, throughout general In the the wasn't budget the in it think passage We nature. one that. programs pickup was two driving Yes. based we with or in saw

of DLA the So, little with are we and up may be DoD a playing bit that expect catch that there delay. that there

you will that has next, are by some do then quarter these you you if that bookings fiscal then, put expect into the be still third have in of you trend and funds And see sustained that the because Interesting. to? continued will of seeing end contract fiscal the on it the expect year government to would

can general, In be lumpy. these

on seeing hope will we're cautious here, comment a position right being we're time but in increases we're and what tell. So, not any now whether to we

we're seeing an out think [Multiple Speakers] defense aftermarket uptick I in

That's the [Indiscernible] weighted towards fair. market.

Thank there. it leave I’ll Okay. you.

Thank you.

with from comes Strauss Barclays. David next Our question

proceed. may You

Thanks. that Good some level? levels? to is pre-pandemic still commercial XX%, the from right set, is morning. level of been about divestitures, Kevin, acquisitions, just aftermarket Is kind there’s some transport down XX% your

We aren't splitting out pieces. the

segments in key up are have so markets increased doing We're and far. All of gone think most any of I the though segments. has, activity splitting out not market That the the the sub better.

interior Okay. you the And what are what the seeing strongest, passenger side? being about, on you talked about

as some has The still think that improved there first the freight I as on, growth think heard was seen also only the that quite be until would bit slow up touched time growing, markets Jorge a already interiors, all the are It's is starting the the sub right. only, but of sub across we've I the Interiors slowdowns, surprisingly. little of but to markets. something we've sector pronounced its all

start to to of these levels or Okay. And that hold over start the does Mike, kind it off? bleed how lost amortization, that out does play the Does next year? at

contract bleed to lost It amortization acquisition? from the Sorry, [indiscernible] starts down. the

came probably you remember with we when think out I it.

and We trails the year million or of area off. expect in to $XX it a $XX so something million

deal, right, five completely. coming you're So, ends down. post that as we get further will out, years then about it And amount continue

Great. Okay.

Well, see trend to down a continue you'll bit. that

Thank it. Got Okay. you.

you. Thank

Herbert Capital next Our from RBC Ken comes with question Markets.

You may proceed.

wanted follow-up on the transport further? probably some the in bookings good to you in quarter I helicopters bookings fair any to cargo and your relative jets to saw Kevin, the you Business quarter it Hey, aftermarket the the morning. assume parse-out aftermarket or the in comment. related bookings of for just comments can Is softness from that or

continue. concentration as take that that across particular Yes, any one. we I'll will Jorge. recovery saw wasn't decent general, There optimistic any market in noted, is This and all in Ken. this we’re Hey, markets. we've specific the cautiously sub

to airlines. know, you As we levels inventory get don't the visibility the at any

much like [ph], inventory you industry are And how then the own [airlines] operations your shop at maybe your view either your you and inventory visibility, how viewing distributors? but how across floors? you with course, sounds of don't of And it's own do levels the levels distribution

limited inventory Yes, at on distribution. we views have

is a everyone accordingly. kind we with destocking and from I the general, on cycle hopeful out airlines that running to season the believe is in travel summer and gas trying of prepare busy think, the commentary of

Great. Thanks, Jorge.

Thank you.

Akers Our question of Matt from next comes Fargo. Wells

You may proceed.

sequentially Could if defense what guidance kind year-over-year so that morning. in talk half half? year-over-year question. of you kind there's like look full good implies, Just wondering for really a Thanks that Hey, year it basis, the about that talk makes QX the on bigger is? about can the comparison you the back like big of a versus second like acceleration than looks

but Jorge get as to Yes, single into next I confident to want as the over be that hold the range strengths for look year. going feel in we we able that think mentioned, digit revenue quarters don't quarterly low there defense a booking to were generally pretty given out we're the outlooks, and such two guidance we on

So, expectations… be don't we up QX how think will want point, I get to your quarterly a of but and in big terms to ramp quite forecasting big QX the quarter? the on each

defense But bookings we with the up XX%, beginning why the communicated we're year. with clearly at of what that's still sticking

things a budget alluded to, the being just As bit, we'll opening up are signed, Jorge see.

hit those are upside [indiscernible] then Got that get and to, touched guess you does those supply of earlier, or kind I this kind are that but disruptions there of it. chain the – there to better? guidance are fixed if And signs those get that Thanks. need there on there easing is within

with fair probably are to what amount six challenges still half, The anticipate primarily go Yes. would expect base. be working second headwinds, some and details the able electronic do and the those. there's clear we seeing teams components. in daily we’ll of excuse are the that but with months I We communicating as customer to mean the we're on I me difficulties noted,

can get we end there by think the we year. of So, the

you. Thank Okay.

Thank you.

Seifman question next comes Our JPMorgan. with from Seth

You may proceed.

and much very morning. Thanks good Hey.

Good morning.

the doing company And outlook stuff how think you opportunistic the of we when from market in that of March being probably just call very to weird changed quarter. the in going the right was from do much what stock it about of now. here gather you're kinds all hasn't should – that, Kevin, to it repurchase think terms for role share the is amount of

better looks in return today. So, I'd proposition probably imagine guys that your

should a about cash? balancing continue be expect to think terms or the lot with more we that you there uses opportunistic very potential to in that is regard just other to of So, of in

on think I'll well. chip let this – I as in we Mike

be will opportunistic. We

We on will table. options keep the all the

We be return this bullish said, the remain on share at would As business. we price. the very clearly better

So, want as that? Mike, market to recovery. the see anything do you we to add

We're always looking at on table. options, week, everything's the all every

Right.

And not just might spending Europe a a does the made guess and I in as M&A opportunities acquisitions for where so then bit time become defense you great. opportunities, you with much? at increase there, looking spend have okay, far place little more as times in or guys that Okay,

those higher opportunities look but where to in had than them and open for grow excellent Europe We we world. actively want and will exposure. opportunities. be, we think look continue generally for are evaluating table company We're don't to value I opportunities around defense in we're commercial always acquisitions. we've including Certainly all the options Europe, luck on a aerospace defense opportunities, the doing

Great. Thank you very much.

you. Thank

with Our next Morgan Stanley. Liwag Kristine question comes from

may You proceed.

Hey, good guys.

morning. Good

looking traffic, quarter, things? we opportunity in are saw about attractive up environments parts you at and growth example, it we XX%, those to, starting travel XX%, up. in in opportunities how more above not after-market open to guys the seems you're When how starting today? in other this the about engine like engine those pick like become as aftermarket International post guys to it's are started air Do where the you For present? the PMAs, of of thinking thinking

player. PMA big a not are We

a developer. heavily are product We engineered

sure we're of looking that comfort lead areas of aerospace at products unless to our out acquisitions make or into other us there. So, not get zone we I'm getting the

to see. follow a Kevin, I in for mean, That's how you environment, in rate have do mind? a rising And here business? think you sustainable could a we're if longer, helpful maybe on, I interest if really leverage I going be the Do do about context. target the for

interest I'll rates. I say, environment, it's in let jump rate that in would still very even low just rising interest and Mike historically this

have…? long mentality us to allocation way do for not or go. there's So, debt? It's capital changing Mike, around my you a

I too. guys as that's we're hedged think you And No, right. know

near the of the in hedges. somewhat just of the the rates is So, impact offsetting impact, by term rise any impact muted

Kevin. Thanks Great. Mike. Thanks

Sure.

Arment from comes Peter question next with Baird. Your

proceed. may You

the so – we've second to the that? be of about you. in multiple come year? quarters thinking way kind I you're over this the spread How million just saying stronger half clarification for recovery morning XXX million a comment everyone. capital, made, seen right Good a maybe see kind to commercial big Mike, the you the what's working of Yes. Is it on capital or attracts back markets, want, in we networking going in to XXX of that

sort payables back I spread and where right? hard say, the go to multiple quarters with we think in go, there hard somewhere lumpy we've there's markets got so were to happens, working million and but have revenue From more right. be it'll so XXX million XXX peak-to-trough, order pace of It That's where it's some to or XXX it of end the that the on XXX when back to look we down gone it's have exactly inventory, been attracts pinpoint or go to It date, look on or and has the it. things still and recovers. commercial will over the receivables, that million we'll you balances. go but so into and is so still how at see, which capital over depends going working to XXX how to about we during capital XXX at COVID, like

do just yourself you inventory comments guys just the carrying related see you of little Kevin, a guess, more with chain supply That's strategically I really electronic that, because helpful. to more then side? talked have just about And the

inventory inventory complete that not skimp in not acceptable. having teams not our environment and is not necessary encouraged being on certainly a able this to We've sale to

a need help we options. extra certainly those this bridge we've to little through to our at if look So, teams time, us told bit

Appreciate all the color. Thanks.

Thank you.

Our next question comes Global. Pete with from Alembic Skibitski

proceed. may You

Good everyone. morning,

talk should margins point like about or Just through you're prior just one kind year, relative prior or for of now side because seems to you've below that little confident pretty your keep and on forward, only, you mix it about this opportunities to for the so or going with flat talk you're going got a peak? And necessary we more, year next magnitude so me. adjusted shift break risks your a Can regard of guys certainly you peak? be the call the margins it to maybe volumes

margins, obviously some You generally always as March know, run see we'll guidance markets, just upward is, where it's want to end given to in but can business. By do. and we point, giving your by hard give to think upward, we guys I year. as say the our far much, the how trend you margins year to at this is when like hard the mix way know next to should we We each to go should guidance exactly stability aftermarket say, given much think back and I there how but impact the but generally hard how commercial don't shift say goes,

Okay. No, the thanks for color.

lose we operator? our Did Operator?

Thank you.

Our next Ciarmoli Michael with from question comes Truist Securities.

proceed. You may

guys. good Hey morning Nice results.

Good morning.

that. Sorry about

No that maybe do outperforming questioning worries. and kind having your that get you know that's bit can think that. little trying and from if dovetail to hike, and called are kind go to I out better there's customers some restocking, comment? do some I to you're line a it's of If been there seeing I the practices than back Myles’ questioning Maybe a in guys you that's, you're considering even trying price under maybe peers guess chatter just if of you you on some of just mean, to ordering of guys think don't if your you Kevin, but think case, due pricing customers airlines do to hike, pricing. price mid-year Noah’s ahead of

our we pricing. take this general, don't one. In is Yes, Michael, Jorge. that I'll provide specifics about

real generally is still and has environment a inflationary higher the above in inflation. get been Obviously, prices goal goal. to Our long-standing approach the we're

we're get some above it. inflationary to So, increases And level. that trying we that's how approach prices real

of with And on, it to tightness, kind thoughts on-hand, stock some I available? little know Got over so marketplace do to you I in think but on but there's of going it not buffer ordering, have it. of looking it. everybody Got inventory came that necessarily restocking, bit kind then that a seems on is any airlines, chain mean, thoughts have up, the supply

general as would industry, chain there. that, inventory are in issues enough any on extent to airlines, some and supply what I any terms the arise and we just try get doing visibility shelf distributors good in buyer have think right, don't

Fair Thanks enough. guys. Appreciate Okay. it.

comes Instructions] Thank Our from you. [Operator next question with [indiscernible] Jefferies.

proceed. may You

morning. good guys, Hi

pretty the [ph], ongoing we for but and significantly pretty were how per up what XXX, around or pretty OEM] for XX OE’s been headwinds the improvement steady business? the opportunity sequential [Commercial Max you expected [indiscernible] month there from at on do about we saying is that here but have quarter-over-quarter, is Just think when look is

Yes.

different lead with FAA we across think and quarter, business. continue times to increases of any resolving don't everyone the recently on a guidance Max later commented space, I business rate outstanding see basis. those Mike future XXX. the Boeing depends the may entire this think has increasing in they in in issues and by work general, our as enter and rate, earlier, on I XXX terms But where production they expectations announced provide their Obviously quarter-to-quarter the

lead there longer the side is where on in chain just times supply And growth? the the any limit Okay. business, area of commercial may

to Right MRP’s that need prospects of concentrated couple supporting pretty at all. growth adapt and for limiting prior the the any the and towards have side. our don't now, over additional plan quarters commercial electronic a the and active see happen, do supply to as adjust businesses, issues that our their we but might growth trying on been they anything been not more defense again little see teams we on It's bit components,

you. Thank

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rest today's day. appreciate good today. We you your concludes have for and a This call. joining of us time all Thank your

you. Thank conference call. concludes participating. today's This for you Thank

now disconnect. may You