TransDigm (TDG) 9 Aug 222022 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the TransDigm Q3 Fiscal 2022 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. 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 Third 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

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

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

today. in calling for Thanks morning. Good

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

own well-proven, and simple, we with aftermarket proprietary methodology. value-based We Specifically, operate businesses utilize aerospace significant operating content. a

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

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

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

to you traffic As market from encouraged we quarter commercial recovery release, remain continue saw the air another in and the earnings by the considering environment. positive our trends we the see market. good aerospace had in We

in XXXX period we third which show 'XX, quarter in as fiscal same by pandemic. impacted of comparison results heavily to lapping growth QX are Our the the positive the was

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

Domestic With our policies we in long-haul our but the I air is strong these improve strong. to to and of drop-off our recent progress challenging remains sharp majority travel another the off cost recovery passengers the and revenues improved defined travel. traffic XX.X% demand COVID quarter. of see travel. and international aftermarket air that traffic are softened or air return most environment, in of fully restrictions our due lifted pleased low is robust management travel finally as as margin margin countries quarter strategy. strict Zero-COVID the been lows. focus in China us, am as business, International very leader the Contributing In EBITDA revenues was recovery, summer starting remains steady commercial and of the is travel saw few well upon bookings. careful commercial aftermarket to from the months passenger despite traffic commercial traffic continued traffic. in in continued China to happy we making season However, improvement to domestic structure the the growth limiting in its on in our as traffic our global past air more air has operating

Additionally, good with quarter $XXX over billion flow $X.X the million and in generation cash a closed operating we cash. had QX over of little of

to XXXX. expect cash continue of in We our final generating quarter additional fiscal

our XXX,XXX Next, approximately an our QX, open-market for during shares common at of equates This report that deployed capital an share. of we million allocation happy on to I of $XXX of update average capital via busy to quarter stock. activities. am $XXX price our repurchases opportunistically per

address exceed other Mike later. long-term pay press will to meet any dividend our our release, The we've more Also in a per like on repurchases. Although repurchases could allocation of this we addition to this our million expect repurchased of as in to we were and acquisition. mentioned X the remained or on are in quarter we a special paid over purchase and August share. this the investment be the after $XXX this decided million with repurchases We These we dividend these attractive, shares DART share capital the will quantum capital deployed our $XX.XX buybacks year QX XX. limited and total price completion will view the objectives. of respect for on approximately

generation $XXX value strategy. engineered aftermarket-focused acquisitions As well service a proprietary fits acquisition of that in quarter, helicopter Aerospace for solutions DART the during we mainly civilian leading the aircraft DART our cash. provider is highly completed unique for million with and and approximately

$XX contribute are Although the our we not million guidance, revenue. expect FY 'XX revenue formal we acquisition providing to DART approximately to

usual, decent current small the pipeline, of pipeline are for opportunities our and M&A we have midsize and opportunities actively possibilities, fit looking that range. in M&A the mostly a we model. as Acquisition continue, Regarding

predict possible billion. readily aggregate, in future. to there foreseeable liquidity Although range or have fit requirements activities. allocation value-generating any have of or sizable we with forma the a runway balance capital I In likely and of is acquisitions of payout to to for These comment confident dividend our long portfolio. year on late will a close remain about still meet that in $X.X actions $X that for leave closings, August, capital significant allocated for we this cannot us we capital still billion Pro flexibility expect financial the other opportunities cash special

of XXXX conditions bookings and with for XXXX. prevailing new call, our to have our commentary thus remain aftermarket fiscal earnings encouraged the at the last time, for our expect received we on earnings far evolve. revenues recovery moving the the and year, assuming the in outlook to we our commercial strong on call Now by fiscal guidance remainder continue We both OEM seen November to in this Consistent for reinitiate XXXX.

in although COVID-XX our recent air air our financial assumption due impact commercial our to We remain depressed on commercial have levels trends compared impact and adverse pre-pandemic that traffic the favorably. to results customer continue to under fiscal lower travel, an positive demand OEM both worldwide XXXX aftermarket final in to quarter could of will expect us

As our growth XXXX flat fiscal prior revenue for to we're defense market, year. the revising for defense versus

limited result to outlays. We of delays primarily XXXX have supply chain U.S. revenue in spending delays due expectations defense as shipment government lowered our a for shortages and fiscal defense

and bookings this in often more this shipments know, in lumpy. Jorge section. market can will topic be quite you As color end provide on his

to rate fiscal surpass of commercial XX% XXXX to due full expect the aftermarket margin We year now EBITDA recovery.

note, about we acquisition includes DART of margin last As unfavorable the this well final XXXX. the believe for our headwind quarter this a of positioned of fiscal year. and acquisition are our guidance Cobham We

As how other assumptions Mike provide develop, markets aerospace XXXX details we'll will updates. capital closely fiscal we'll usual, on accordingly. watch and the financial react and and

for managing this period commercial remain industry. of cost I'm executing recovery strategy company's Let conclude our pleased the with by focused stating aerospace performance operating me that the and our structure. in on We

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

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

For close the revenue, DART discussion periods. both in the fiscal makes Aerospace we'll and and divestitures commercial which typically the into of XXXX prior acquisition our call, are to in basis of I'll to mix in OEM market, completed period year both of aftermarket. XX% the impact periods. of periods a pro remainder of the provide compared is XXXX, recent the forma color assuming businesses both now that The commentary the includes in on same market discussion removed In in our split own we up any

in at up significantly total OEM period. revenue build prior QX. year QX by were We're XX% commercial with steadily sales. compared compared the sales outpaced same strongly Bookings OEM encouraged the commercial compared prior and total again almost to Sequentially, improved Our increased the to commercial quarter X% in period approximately the year OEMs. rates progressing

due overall have shortages chain downward production OEMs there to However, rates issues. in supply been and labor revisions expected the commercial by primarily future

for Our to term, continue that OEM reduced. in expectation our remains the commercial demand the will short be products

global revenues Sequentially, strongly primarily compared commercial period. miles submarket, submarkets QX to business were to significantly increased on aftermarket commercial pre-pandemic year Total on significantly in sales. largest this our Now bookings XX% commercial aftermarket aftermarket and our revenue few compared levels. were QX. aftermarket although up our the consideration, prior points bookings prior of with demand by is was X%. moving year still in key commercial passenger our driven all passenger by Growth period, total in submarket, To robust depressed touch of year revenue a approximately aftermarket discussion. approximately prior same grew QX commercial to to are quarter by compared when up which outpaced Commercial revenue aftermarket compared

stronger positive most passenger the continued over international show to to have seen miles for showing down down progress from also U.S. the U.S. in domestic With levels. than recently reported been X% confirms demand has continues is international However, from domestic about only off to summer only air traffic the signs recovery strides passengers these only travel. in months recent in international revenue to returning remained steep policies. down in demand China over levels. most higher lifted, January about months. levels, down But airlines compared to past to traffic traffic government-imposed for the made recovery continued the travel. In the Europe is with international air months the XX% is of pent-up airline still was data The travel lead, than air due restrictions has passenger domestic IATA be to robust and pre-pandemic most primarily XX% of travel Zero-COVID recent compared drop-off many in strong variant. In travel from in strong to have prices few but season. travel travel recovery was continue beginning pullback The was The recently still in in trend travel, travel, recovery pre-pandemic travel slight after travel. demand upwards XX%. June, domestic air its international XX% to due traffic The March, have Omicron domestic June, has historical about that passenger long-haul past pre-pandemic. been to IATA for the data about its travel Commentary we Even reported travel. recently regarding ticket was the demand. especially

U.S. For better traffic the of XX% within is or and levels. international both Europe, pre-pandemic

travel air Pacific Global about to improving down is international but over the air overall still the impact cargo few Asia recovery continues traffic months. RPKs demand tempered has XX%. with unfavorably international past

change There's most As above data, cargo decline in as particularly remain COVID recent air structural confidence demand, jet lockdown for volumes, air another cargo in was prove of levels. possible improvement though from reflects in pandemic some demand biz month remains a but the in well levels. Asia, utilization above Commentary and eased to optimism business outlook. of IATA's operators time China. in OEMs Business measures they still It's to brought the year-over-year take jet that June will out. pre-pandemic that positive pre-pandemic jet

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

the As lack we've to orders supply and shortages. half issues surround chain delays sales can said lumpy. many teams components. continue supply times, The mainly of bookings electronic XXXX, first of Similar defense due the to to our availability in chain be experience fulfilling of

spend revenue continue the but impacting outlays between our often implement market predict, U.S. overcome challenging to are is delays Our and U.S. operating Also lag spend There's the to issues. government longer defense units defense are defense government actions to the mitigating authorizations lag these in than delays these a hard outlays. typical. and

the this expectation were the earlier range I quarter. reasons just flat wrap single-digit with discussed, low to strong We pleased growth extremely how market our previously revenue expressing for revising As defense Kevin am and percent expecting for by growth. up XXXX. to mentioned our down fiscal operational performance I'd we're for like I about

to Financial it Our Chief Mike supply and significant pandemic chain focused value turn with We the excellence. disruptions. negative Officer, forth to like efforts impacts drivers executing continued put the that, and teams Lisman. to our our overcoming over have operational in I'd remain With on of

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

profitability First, about year-over-year improvement quarter. to million as of prior This in margin, QX. points. QX increased by basis up XXX in as EBITDA defined defined XXX represents about for margin basis EBITDA regard defined the quarter third XX% EBITDA Sequentially, year XX.X%. our was $XXX for points. as was of versus

XX% driven aftermarket quick our range few our quarter comments On Organic be end growth expect the was for to and XX% range for financial to cash for the Next, our and rate by to adjusted markets. a year. commercial on XX% quarter, metrics the select XX% tax and the XX% to be taxes, we OEM GAAP in growth in the year. the still and also rates in

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

excess flow billion For expect in cash we to provided. fiscal the the of now year, previously full generate $X target free

average on to hand. During investment, capital record of $XX.XX rate return. With to view represents new the the acquisition shares amount ended is repurchase quarter, cash payment other like to XX, weighted such date share with for purchase a share a any billion about we used XX. business, this a $XXX at of about The repurchases $X.X of as $XXX million and of per quarter cash the of We just the price these dividend payout date expect August August and gross similar regard billion. a the and morning the share be payout per announced of expected dividend, $X.XXX the is

sales is that strong later that cash of today, quarter. this XX-Q the in filed net Additionally, you'll see working resulted in a use growth being capital million our $XXX

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

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

to leverage levels. Moving on

Pro ratio X.Xx. debt-to-EBITDA our X.Xx be leverage currently dividend, net is for net forma Our will debt-to-EBITDA. the over just level at

fourth free shareholder come We any X.Xx fiscal during flow-positive expect by the to or ratio running level transactions will quarter, and down market from therefore continue barring distributions. cash the end this capital additional of year, the our

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

far acquisitions, in capital and to options buybacks reinvesting the available this have evaluate priorities strong finally, or overall our deployment we capital at an the continue repurchases; seems going off this option. paying From time cash businesses; as our balance share billion with of remains second, to full dividends. to operator of via we'll Q&A. year back that, range across past practices, dividends shareholders position capital we it regard us: kick but to own all The we I'll the in actions. $X.X and acquisitions; turn standpoint, third, allocated mentioned, Kevin and to forward. debt, options Finally, Consistent remain unchanged: thus which and first, range of liquidity are are a of pleased down to our With future believe this good with sheet returning an to unlikely

[Operator Instructions]. from David And our first comes with question Strauss Barclays.

pre-pandemic do business right? it -- about like is And get at XX% levels? around aftermarket Is of us looks to back this to back -- Kevin, the your when to point? air would you when you to pre-pandemic expect that levels transport now

Yes.

a directionally depends activity. that's I I -- think you're have flight accurate. It on really don't prediction.

to continue and follow indicator landings that are activity. and that for We think takeoffs aftermarket best closely the

from like you a where And for I your pre-pandemic to, perspective, Okay. acquisitions adjusting today an and on are as levels guess, to you can divestitures. headcount apples-to-apples you maybe baseline What us basis? much as can looks headcount relative

for Yes. the I'll to job a done did of a I exact the pre-pandemic numbers we say result have that levels to and teams one. the restructuring accounting I'd managing on the don't of have the bulk held as nice COVID we've the the acquisitions. resources. take crisis, that

from Herbert Markets. comes our RBC next And with Capital question Ken

up segmentation Can terms any inventory XX% there And any or seeing Kevin, up in what in quarter. in on shipments the quarter? in sort -- over of any or transport, you maybe was onetime commercial market? the corrections of on further anything were distributors that detail to maybe provide the the you're aftermarket by items else or

think Jorge I onetime don't though. there let were that. any items handle I'll

that drove quarter Working onetime with any this were of Kevin. concur I There backwards, unique performance. the last items Yes. no

all good but are aftermarket strong seeing our in we're seeing submarkets passenger strength. mentioned, of I our I say submarket, performance would As pretty

as are U.S. then domestic the continued bit I in but Europe. mentioned, seeing markets some we and has been we're recovery. seeing recoveries a little there. It's, the international the So slower, And

And obviously, that, of that to a incremental get pricing could price maybe has in been broader pricing commentary some of you your the slower pressure Helpful. Okay. on the any ability just I know, capacity or some next any slowdown With aftermarket? concerns, on sort growth year into I seeing from of airlines on if tailwind. about are to

Yes.

to a philosophy I are inflationary level remains get And We pricing real the of seeing. we're job good think trying look that increase price doing some above the on some our of inflation. costs to teams unchanged. pass

question And Poponak Noah Sachs. with our from Goldman comes next

if point wondered that starting the margin diving soon. I favorable more a there know stands obviously, but It has And out. anything in spend also if time you price/cost Or we into a going Is quarter. aggressive? the changes that know sequentially been but could use mixed I as doesn't that little don't the just dynamic probably there? unusual Can in up, forward? is you've I then change. performance

thoughts So on progress any how here? from moving forward you

right -- going from I think tremendously we're benefiting to we're the now. mix

have OEM to well was. We that is it now, aftermarket expect we where right it behind is or where be And would an expanding.

going has to a come to that mix blend be there's So back.

build product, So still in limitations we'll now, in Right have OEMs book to to, of order build OEM as seeing we're the curve see alluded though how rate is rates. request up the building. for their even Jorge come the terms

Do margin strip year out through you seasonality if the acquisitions? have we organically

from you I by QX. mean know exactly sure think as you but the quarterly QX past, seasonality, you a margin Noah, not through go what step-up there's from I'm

as always... QX

going seeing You're forward. that

weakest It's of is Yes. always the quarters QX OEMs like. on for inventory QX. one and year, speaking, quarter, End a is our focused of generally poor always us.

guidance the else were original to of we'll want November but a FY I that. to where could at unusual And or comment go think And we 'XX from give on until no standpoint accounting point, -- where we from the during on we here to go here, this with Noah, no to call. there were margin items do regard back the there don't we go from quarter. -- one your anything But questions,

now? any spend give you could from other back another pipeline on When just maybe there? things Okay. minute acquisition closing what's could can And it color What's right Just holding unusual? you change? and the Kevin,

This Yes. question. is biggest the

sometimes in things companies. access taking it's the know pipeline not cash We're cash As always our may we then we I busy. fall this when will acquisition as dividend, disciplined have that not we handle We be on is that a us. pay in we're believe the things see comment and pipeline acquisition out. the to And interested businesses. we to piece flyers on will difficult can enough predict I forward coming unfortunate people close. lot looking The sometimes reflect of that we team full. look at very at that approach, a great very is not

disciplined our we and our We're very time. take approach. So structured in

Robert our And from Melius next comes question with Spingarn Research.

higher about OE talked With commercial a build in you've OE And result? get than past, less labor rates been could labor-intensive that investing that And pre-COVID? as the in with back levels, aftermarket. believe be the activity, would being margins bit a than Kevin, automation. accommodate you've pre-COVID I more OE you you if needed to

I always this in productivity think focus on business. we

focused to of We better the seeing across we pressures inflationary of with some try volume board. that before. shipping materials, part our reasonable really It's the, belt to it's as always ongoing dramatic years a under be Whether that of ramp have business. productivity on you lot overcome we this the the there's that labor OEMs But our is than productivity do pressure we'd high or able expect could things at to since realize, historically were we're it. on as inflation

slightly better a it and seeing. offset hard that, model to quantify inflationary will against productivity you have pressures helps allows that believe that us and we're but that inflationary along a the position, to pressures, something we're is on. be is always laser-focused but we us And We in pass I that have those

you you're just seeing while what above inflation, inflation? clearly that, are And pricing terms in wage on of

different it's by region. Well,

any. on pick really can't You

regions for Jorge, what are and seeing of labor? the you California direct think, in some I

the towards regional it labor where more seen seen we've we've entry-level increases. mean I Yes. pool,

a and market, as -- indicator, probably that anywhere hearts. higher current might little bit a again, be is X%. labor side. as lagging side the technical near the probably pressures inflationary But our continue X% of mentioned, seen little job the The on to we've well, than a entry-level Kevin in right? the productivity teams and But between So bit dear

opportunities to their best do continue offset they So increases. to to those find

And Jorge, are you are getting need people the you or you behind?

No.

far, any support been teams needs. But hiring able little some bit significant the seeing takes material impacts we're to So the or not have There's resource longer. timing a due issues. to labor

comes Vertical question Stallard from next Our Robert with Research.

Kevin, are on we've feeling was paid, there? prices wondering your the pretty of can what's latest under again, M&A what aerospace sort on if the calculations? on clearly topic work side still things being make Because some recently. your out high you I the particularly seen multiples

things still can We make work. Yes.

been of it run prices as come our under LBO through. think we pressure can some that I the some corrections. model we think there's work I have But recently still make in

focused on not products. -- we're is certain goal Our

the businesses aerospace find as way to in for, very it long those drive aftermarket, we the and the is will in proprietary of look to approach stay types find. to sits has disciplined we world, continue our a we As and are returns

same you chain seeing any you Right. on -- And medium this remain issue, term, pretty the same? expect getting defense, much in better? the any Or particularly in of sort the the are of then sign supply

Yes.

-- the think take that I'll one. I

I think the stable, but situation is challenged. somewhat still

future, are trying But et the jobs teams electronic with for components, the on foreseeable doing good continue those mitigate the probably cetera. to that's those going primarily issues issues. So semiconductors, to

comes Khanna Cowen. question from next our with And Gautam

on that Or And of bookings then Is if just... I how is both? to just function out just was to could And it the so, parse this -- that much -- or following wanted was it up is chain? on a guidance question. supply Rob's ask you a reduction is -- each? there, it

There's a impact. bit of little

bookings move -- seeing there's of me we're in Let when a and little not slowdown due we're In see. necessarily both. the outlays react defense defense And product. -- in are industry. our sees. else to to That's slowdown We want of follow impact defense do on, when what a bellwether industry. the It's a bit things minds, It's a the what a just larger and they not we everyone you before -- we problem.

supply can there's is there? And how to any any ability of line dragged the sight deliver chance your Okay. there chain quantify has to and you much if improvement

work think we it's seeing slowing drag driver as on it. a I'm a I it defense But don't it the that's a not ways around I our drag and major necessarily as down. -- industry to so because on find a business. whole, see as

So to that. put quantum on me it's hard for a

region enough. the you where differences sit? last in aftermarket, it question, particularly know, better. discernible just quarter? aftermarket? Fair on soft is by regionally getting could from And any Was you don't I China the speak in Anything

Yes.

think I you know, the track region. as we don't by aftermarket specific

travel of activity. U.S. to now right laggard track I regional Asia in travel being be domestic don't think, international the generally, bit little we're recovery. we stronger seems travel. of and the specific seeing international a with and But what showing some of trends the larger Europe, terms macro-level Obviously,

Baird. And our next question comes from Peter with Arment

just their are above pre-pandemic -- further structural jet there you you levels -- you you the well biz Kevin, around there in on kind the side? up about, what jets to ability even biz could -- Maybe back and being rates shift. talk of some to post was seeing commentary take are

seems order room world book a It for is rates support them busy. there's market. This their business jet time for it. up think special the to very as to take is I

time and anything add jet business on much on is busier this Jorge, a aftermarket it market. we're So that? OEM both that to else for seeing

Yes.

on and larger There's aircraft. cabin the for -- obviously think the good I demand only cabins. thing some I'd we're is seeing increased the larger add performance

to related How narrow-body? how narrow-body to versus starts should break in just just a wide-body. about Okay. the reengage, as we it to then you portion And levered don't smaller there? are it still know wide-body -- out aftermarket. compared is I think But versus still, recovery wide-body you

I think, fleet between wide-body. generally, we're market-weighted narrow-body based on and the

on be seem we the You between some X. But might market-weighted particular any operating generally, have to unit. noise

wide-body. or yes, -- we it's we And don't if narrow-body care

profitable both segments. with are We

Our Seifman JPMorgan. next question comes with Seth from

is probably thinking But we poking how the a Booz that think small I Justice closed the deal I to year about was doing ago. landscape. wondering Northrop current reports around about asked years FTC you Allen deal. $XXX a see X relatively the or so. million is prevent I M&A that And Department now you're in ago trying from this The anti-shop of

company traditionally M&A, be a landscape? think you that's focused what on been in may how So as kind do changing about of the

cognizant impacted on M&A. that watching in all of. we're haven't our say It's cognizant is on active hasn't that And can closely. it us activity. still we're it. It we're things color. certainly of. to probably something that derailed It I something of We're or speculate I kind not that's that Well, provide And tend

That's as on deployment. it. helpful. capital just also And then a follow-up Got

another M&A first if Or 'XX, options deployment? mentioned move quarter. of you limited probably think with us what it out? this deal all, an X.X X.X option? something of DART the to I this that that the year, guess, at stock dividend? fiscal more you to And for that Is pay dividend, second pro limited share First on potential this for forma, in buy I pretty the the like of is you pay update capital or can give the all, of half could you with point? the of repurchases wanted much were the end you this by are an the dividend size

we as capital and what like unchanged, our in share spend coming ahead with to are in dividends on comments, terms priorities mentioned the acquisitions repurchases. just we'd of the Well, of

been. So same has that's as the it always

agreement basket guys familiar On the I do credit cap you payments we have a with. our think dividend, that restricted are in

size thinking our So fourth over into course tick nicely But of that down where the quarter, end we and the continue year we the to there. play on quarter. down should here closer did ended we'll to this the

or have more all do deals, pay us. to month, decide things is we'll M&A So every use enough dividends materialize just for buyer quarter options those the capital go shares, if and of what power than repurchase best to continuously evaluate we every there, don't

Liwag Our next Morgan from question comes Kristine Stanley. with

there are of additional the in opportunities to market for share? breadth and you Kevin, the supply portfolio, some Jorge, chain, step with tightness in gain TransDigm suppliers struggling the

business are Yes. their good portfolio always products. I and improve teams opportunities our I looking for opportunities mean, to think and new

And teams part engaged job some the as business. current the as done chain I standard OEs. nice issues. are airline business and focus new with new the customers we'll supply think hopefully, But our profitable very navigating on opportunities. think our well that's get a I They've of

to as And and maybe the [indiscernible] question levels, aftermarket stay right up, volumes at need margins pretty the get mean you're see. I better or XX% go OEM trend and step I quarter. shy mix to I margins. With up on above continue much margin to to and in a pre-COVID still to sustainably? on up to mean, got ways shift and earlier just following getting you do Noah's see

I Well, think...

Yes. Go ahead, Mike.

basis. I on think uncertainty and the say it's to plays going where way from quarter-by-quarter forward market margins the just in a go hard here the the given mix out

we And fiscal go the call next where on I guidance. give expectations year our November we'll when we to formal some guidance for any there terms in think give hesitant going we're environment. in on more give this of forward the just So

to mind OEM going some that there margins higher you'll on comes have keep let's will when But know right next Guidance balancing see other come when said. Mike more. call, We happen. we're that that to OEMs as mix environment favorable that now. experiencing And the just ship back come Yes. is shipments way in a we that's review back, until

comes with Our Alembic from Peter Skibitski next question Global.

Or this Just if kind does years. defense next of defense the you generally from? maybe or European a defense you on the guys in benefit to -- directly one spending are bit Is more speaking, me in couple to expect pass, all domestically on that much of come wondering internationally? side. Kevin, side, left the surge exposed of for versus you I'm something are more

Yes. exposed well. to defense as We're international nicely

predict I way you think, at yes, or some business difficult but understand. some to expect of might it's this come would point, our

as all Union recognize domestic happen TransDigm see. within I part there, we'll think But that do would may possibly. mind expect consumption international favorable of have production or to we have the orders. production we to all be of we as as some that environment it. But forward. we is we this locally of in The so for well this a European will keep favorability, that in have of should well, this some that We -- be look will degree

unpacks some also have now. we'll right see how there's the of desires whether if steam social concern loses to future. think I this this spending additional in maybe overcome all military issues Again, the

with Ciarmoli next comes Truist Securities. from Michael And question our

you on kind probably probably assuming Device difference of stay Corp. Data seeing color to the the impact any defense, seeing -- that's there? then or And between OEM? any I'm shortages. outsized probably But you're semiconductor guys your noticeable aftermarket Just are of it's

Yes.

defense better in defense think I OEMs. a is the there the bit hanging little than aftermarket

And timing noted. the just that of be of outlays, as some we could

naturally In more the impact. that businesses and it's of more I portfolio think fair the are terms components, look that electronic across are seeing of to electronics-based those

to chain assuming of start Okay. to I we mean think but defense you're easy you 'XX in chain Do alleviation pretty and headwind some the based Or going of first nice know year you're get not improvement, talk you going the supply a the is seeing? level growth to some comps. yet, of 'XX? maybe get with I some some off we supply just can tightness comps half do we're of think there kind

Kevin think specific mentioned. Mike and Yes. 'XX we're I any the comment don't guidance on have position comparisons, in to FY as a or

chain going I overnight. think We anytime don't the soon to this supply strained. away or see be continues

from with comes Nicholas Credit question next Zhang our Suisse. And

you me Can hear all right?

Yes.

Yes.

build in defense, you're order some book you're and seeing issues supply aftermarket, seeing in also chain you're like So recovery up. seeing commercial strong

going more what look And of operations So does CapEx expansion there like? forward? will be existing

I'll comment on CapEx.

for investment businesses, there's we're for in always looking I think constantly opportunity internal those. and our

-- additional back. investment are all looking select our some at We pay these in of again, But businesses. some things

before. the have standards payback same as We

additional So but any maybe see selectively, trend don't be of spending. major I some there'll

Yes.

with last we've automation the in been any general, over they've to very focused the expect CapEx significant run I at. that don't overall But the us in shift ideas, we traditionally come and different in operating think, units X to years. X

did about capacity, of something we talking looks demand. improvements each over couple of in looking to and the In leverage support the additional But team years that process terms past something to environment. restructuring and this activities that that's constantly that at we're of some individually the we're

we with think facilities are footprint. I area some one doing selective that some help greenhouse of our investment is our solar at gas

for reasonable as more have spending those looking across And businesses. opportunities are our are that we as nature investments we little that a money that's So a payback on now well. something of

I conference Jaimie like turn would Stemen to the now remarks. closing back to for

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

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

You disconnect. may now