TransDigm (TDG) 10 Nov 222022 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Q4 2022 TransDigm Group, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. After speakers presentation, there will be question-and-answer session. advised conference be recorded. is Please Instructions] that call today's being [Operator would the Investor Director turn like Relations. over I to Stemen, call now to Jaimie of Please go ahead.

slide Conference Fiscal Thank Mike are morning Lisman. and Financial information. website Officer, and deck Kevin our Fourth to Jorge and Officer, President on at TransDigm's Please Executive obtain Chief you, Quarter call visit welcome TransDigm's a Earnings replay transdigm.com Officer, Stein; Call. Chief this Valladares; Presenting the Chief supplemental XXXX call to Operating and

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

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

for Good calling morning. today. Thanks in

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

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

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

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

good quarter another As the with release, considering the from you earnings environment. closed our out market we saw year

We continue favorable encouraged market commercial in in to trends remain aerospace traffic. see the and recovery by air the

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

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

have international domestic traffic fully We The recovery trends reopened in travelers. see are with majority global the air air leading the of to of to and international still up. travel continuation traffic air favorable happy catching countries

depressed I in our continued China's other quarter the robust was margin we bookings. the China commercial quarter. with COVID continues and remains growth to very that in focus that in to made experience limit has commercial recovery structure environment, Contributing our revenues another lags as XX.X% the air EBITDA strong our recovery travel. very and only China operational improvement pleased bookings, the seen of in policies is revenues, our and challenging from disciplined Domestic am COVID to despite our strict In cost strict aftermarket defined lows. along air travel traffic countries. margin saw this approach in However, air management. modest traffic international

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

We expect to through generate steadily significant additional XXXX. cash

capital activities priorities. allocation Next, and our an update on

to pleased aggregate we of in our billion are shareholders. to capital capital $X.X and During return fiscal have of allocated the about 'XX, M&A across

Specifically, these $XX.XX per DART share dividend Aerospace, of activities of included buybacks. share a special and the acquisition

earlier, XXXX readily cash exiting foreseeable we liquidity sizable likely to of the future. $X of opportunities balance with billion, fiscal meet approximately leaves mentioned with As which and flexibility other any capital requirements are a or in significant financial us range

for times. capital mostly on cannot pipeline, looking opportunities or we model. small to to is predict, that current markets specifically have remain are a comment so closings, confident Acquisition there actively and the fit acquisitions activity portfolio. of pipeline the in for long range. but in M&A our Both predict as M&A but always our that M&A the these runway possibilities possible fit midsize are and usual, Regarding decent opportunity we we continues, that a I difficult

Now moving outlook to XXXX. our for fiscal

will by and pandemic. Total I which markets 'XX based was commercial XXXX the The or on the revenue saw of 'XX supports fiscal the 'XX, comment no COVID-XX as fiscal that we commercial in commercial XXXX. disruption in encouraged trends. a full recovery acquisitions our in assumes related year by end for shortly. primary guidance. in were additional suspended earnings is we fiscal you a Throughout guidance and significant healthy bookings commercial commercial markets continued the result our in recovery As market exceeded double-digit previously current expectations release, booking to a divestitures Guidance the revenues sales seen our percentage fiscal on initiated end through end guidance, primary strong fiscal

We are continue cautiously optimistic conditions favorably. evolve prevailing that the will to

ongoing progress, revisions will conditions to the end continue risks uncertainty will 'XX as our the monitor market as in our necessary. impact markets react and could lead and conditions guidance our we to to fiscal market closely and XXXX. primary However, in Changes and for

$X.XX Our year initial approximately guidance fiscal operations can as follows or for and XX%. revenue found X is also Slide of guidance The fiscal midpoint the XXXX up on continuing presentation. our be is billion XXXX in

than reminder quarters revenue of QX rate EBITDA be market and growth guidance channel based revenues, with on As other 'XX. roughly fiscal XX% consistent the 'XX subsequent years, margins the with is quarters, three a This working EBITDA anticipated to and lower than past days assumptions. less following are

OEM single-digit throughout range, The percentage percentage We expect growth revenue to percentage the range, aftermarket believe be sequentially midpoint of defense anticipate impacting the revenue fiscal along acquisition. fiscal QX shortly finally, low in We mid-teens revenue the in also in range. 'XX. the growth commercial mid growth and mid-teens up commercial adjusted margin guidance we of the EBITDA up XXXX XX $X.XXX we our some up fiscal approximately XX% financial of dilution The margin recent XX%. well margin defined as detail $XX.XX EBITDA factors lowest other approximately with guidance enter expected the includes of with anticipated EPS DART Mike is as XX%. basis and or QX midpoint year, than more are about an with Aerospace to around our from lower is XXXX. EPS points billion will updates. This being of in or will move XXXX assumptions fiscal discuss positioned We and

develop to usual, how markets react As the closely we'll and continue watch and capital accordingly. aerospace

by focused value drivers, the of to to excellence. for structure to on through XXXX our consistent in We and our value continue me stakeholders that cost the company's and Let the stating sharply operational very pleased aerospace recovery look opportunity our I'm commercial conclude remain industry. with for strategy. We create this forward performance fiscal period

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

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

compared DART color period For the call, we the to provide in of remainder includes pro mix removed the assuming both completed acquisition same and are That periods. in both market of periods both The XXXX year in in of fiscal of in prior XXXX. divestitures the businesses own discussion forma I'll periods. any commentary is a basis Aerospace on the impact the recent

OEM this analysis in typically and makes split discussion DART market we'll quarter XXXX. the In XX% discussion our in revenue, also fiscal market, into included commercial aftermarket. third of to our of up We which the close

improved We're strong increased prior XXXX at with compared again with due compared achievement Our commercial and but aerospace issues year OEM approximately labor quarter year remain full-year X% across Sequentially, for to periods. in the outpaced to the OEM and and regard fiscal rates compared supply revenue sales. targets total XX% the shortages roughly total commercial XX% OEMs, rate steadily sales build to by to approximately broader QX certain chain of QX. Bookings progressing ongoing commercial the risks prior sector. the same period were OEM in production encouraged

a air recovery demand Commentary zero-COVID traffic in to recent be travel passenger remained flat stronger for the passenger September, levels. Europe and back than increase as a year fall few there RPMs This the ongoing significantly traffic prior August and to our months was Global revenue to lead, U.S. and primarily commercial domestic XXXX travel summer generally be has came due XX% domestic from few the our regarding only continue data submarket, the airline result for The strong in passenger Despite compared softer our continues passenger than prior in August. was the The have quarter demand U.S. business for QX. of all to to compared compared remained our domestic demand airlines was traffic sales. by passenger domestic largest once IATA travel. ticket to Sequentially, travel. season. commercial international in approximately which bookings full-year over to primarily the QX up months, in Growth Commercial A compared miles year revenue were robust XX% X%. of prior total miles aftermarket discussion. Now were upwards increased fiscal and by year to same submarkets compared past QX submarket, commercial with consider. revenue bookings grew aftermarket in commercial levels. to prices, was pullback to remained moving and a to revenues reported the although recently strong positive. travel is September aftermarket lower China on outpaced when strong by again policies. down continued most commercial trend has to aftermarket pre-pandemic. relatively to showing close domestic continued pre-pandemic points this continues in September XX% demand entered Total slight In aftermarket approximately Revenue we key aftermarket periods. driven season period in is although pre-pandemic

the another China's reopened traffic was due levels. within international there international ago, or in about America within compared down travel countries However, pandemic. travelers, compared The data was off is traffic have pre for of only about pre-pandemic COVID travel throughout Europe, months XX% international International travel. strict is continued of In has fully September in to reported progress to so pre and pent-up in most demand Many recently IATA to was is policies had travel Approximately six pandemic. down to international make XX% steep domestic September down still XX% air about traffic for traffic XX%, pre-pandemic. North about drop XXXX. but XX% and recovery international long-haul

the travel cargo international still past the months. Global over months, past demand has are RPMs XX%. made air progress Pacific pulled Asia down about over back good has but

optimism data, China near-term was support for reopening. restrictions below month though decline showed re-openings most IATA's air regarding full improvement in cargo were continue factory pre-pandemic the jet September recent that levels. has in levels. easing of air and cargo, of in jet which As come and uncertainty to There strong business Business is a Further to near-term. pandemic from remains demand industry, volume in and OEMs pre-pandemic timeline above another time the year-over-year China's well structural pandemic-related could change operators pandemic is jet tell. Business favorable brought down the forecast still utilization will growing highs, but

market for total to is aftermarket to and X% government U.S. or prior XXXX the often on with softer-than-expected XXXX. in year in on irregular by grew revenues, a the There's and and approximately our which which main supply our sales fiscal our defense Negatively by and of revenue, The defense predict. below and market when and bookings. periods. fed followed U.S. of revenues contributors the lag market, to our outlays both hard Moving year in includes This a lumpy defense lag X% traditionally declined approximately chain QX were the defense typical outlays defense federalization OEM spend XX% pattern revenue. shortages at compared lag delays impacting were defense The government defense outlays. performance and for defense between full-year is

While improvement activity. have quarter, been we defense longer future these typical, which for did some bodes delays order than this in bookings see well

chain, the our On continued surrounding delays part supply due experience teams components. to shortages electronic to

order operating implement these do in business challenging units the current mitigating to and book. are our fiscal proactively issues. chain XXXX engaged Our expect due the to supply We actions strength overcome with to to our defense continue of expand

XXXX fiscal very finish and recognizing market we mentioned for accomplishments of to challenging team's earlier, chain experienced low revenues. during to pandemic efforts the strong operational range defense negative to disruptions like performance ability our our our Kevin mid As we year. the fiscal teams single-digit by in this the overcome by year. impacts percent and and I'd growth expect pleased the our throughout of I'm supply

year, and demand Officer, to the teams operating to our that, management on for our their products. Lisman. and our remain As our Financial With Chief our new meeting enter like over consistent we focused I'd it turn Mike strategy fiscal

quickly I'm for everyone. then for going hit 'XX. to a fiscal also financial our morning, few additional fiscal Good and 'XX on matters expectations

by taxes, rates fourth the liquidity. points growth year and tax a quarter, and growth, aftermarket our On First, their markets. driven was and GAAP data end adjusted In organic the rebound rate fiscal XX%, our 'XX OEM ranges. taxes few continued organic our on the commercial within and finished expected

was ended X.Xx approximately our that paid bit and $X.X higher last that the under on CapEx in ratio less rate driven down level the the we rate just had Our payments, We year was $XX.XX $X FY performance operating sheet. good free over EBITDA which as for traditionally originally was Kevin quarter per share at from balance And mentioned. the finished forma On we the when where billion end, flow, quarter cash cash taxes and than was in tax just August. adjusted net we the X.Xx, Jorge interest and billion the debt-to-EBITDA GAAP and you a of XX% cash expected, pro the cash with dividend 'XX by we $X.X cash define liquidity, XX%. year, primarily billion

our one We a rate continue through provides term. our regard us We years, through approach watch least to environment time. billion at but to to envision Though total could the any how ratios rate rise in boost potential in to and balance swaps slightly business. the the develops approach rising caps this closely. cash $XX next the a interest debt returns, anticipate equity to changes interest using the scenario operating of historically interest remain operated comfortable three leverage XX% big changes combination any and where we'll our see cushion of interest we've hedged on rate do the at XXXX. back debt basis against over in environment type not rates where With net adequate our the This on debt-to-EBITDA coverage achieve to we immediate dial any a been long-term gross

of forward estimate rate the 'XX, fiscal really limitation the LIBOR the to interest cash X.X% net fiscal and in year an versus details it how prior fiscal $X.XX average LIBOR rates manner count. taxes versus range our weighted assumes current adjusted to give based approximately XX%. expense, full is the about the interest which increase interest this the average to the quickly to curve. slight anticipated are fiscal This rate expectations. for is existing of assumptions was our in on a X.XX%. 'XX XX% simply around on GAAP year, under Net expected financial equates to years. rate all in interest is which in going Next, to tax On the consensus taxes, billion prior average calculated FY 'XX cash legislation is tax share of deduction 'XX computed the be on due for in mainly I'm some expense more and be The and

our to expect fiscal count, figure shares year fiscal during continue this liquidity but and 'XX, million the assumes With during share and no we 'XX, regard fiscal be the positive year. for to takes $XX.X occurred expect additional On the we 'XX to account free running throughout year. cash average flow repurchased during fiscal the leverage X.X buybacks weighted we million into 'XX the shares

define is 'XX. be defined interest, traditionally CapEx our in again this we fiscal which as a better metric cash cash estimate As little area, and in free we the billion $X.X less cash maybe flow, taxes, EBITDA to

cash, transactions, defined with Assuming cash $X acquisitions leverage and on XX, of area an liquidity to position Q&A. during we'll be or good adequate no start to at turn that buybacks of operator 'XX. flexibility to September or and share the as remain EBITDA it additional the end year in capital net With back or M&A the Xx standpoint, we return to fiscal the shareholders pursue markets that, well estimate From our sheet I'll in XXXX. north think dividends the balance our will via billion balance sheet we with overall cash of

coming that First question will Wolfe from have Walton Myles Please Research. ahead. [Operator be of we Instructions] go

builds cash working had were clarification. to a build healthy 'XX? in anticipated you where morning Mike, a into growth on of Good pretty you just And -- of maybe the consumption ahead. guys. pick as flow Sure. similar free capital a just you Thanks. up amount obviously, fiscal Is

down that is Or leverage. or to bringing down well? gross leverage maybe as leverage EBITDA about? you consider net something net debt thinking Would about is bringing talked you're Thanks. that not what the You the

Sure.

$XXX So just capital. came net first, less went peak capital That's fiscal trough we is working point. about plus as on out if back look primarily how From XXX the to COVID, working AR of payables, About net it define in it. which during million during 'XX. at you inventory

got million, So go. million about more $XXX we've to $XXX

We we down coming think 'XX. at where to how pre-COVID. we'll and so That's the have then hedges it because leverage during gross out the the of taken about back also to getting see fiscal lower. far happen of of rates were and paying we the year, of of this And we expect environment the debt any bulk when the going debt time, and a we generally $XX and interest rate benefit bulk the the point, balance that on were lot don't anticipate of billion fiscal benefit having that a better

comfortable net don't, But a going and leverage higher in we've debt-to-EBITDA debt. the basis. forward, paying hasn't next your they're do a response have envision there have months XX about have We're about of market no, percentage level historically, on the often. time, really current years it the know, think a the the where that We to now you rates any three we gross this operating But were subject with ago. we look And not if we'll higher they changed. down it than points to approach at the interest benefit business given we X as to been We at hedges. just question, think similar methodology we tend

All right. Thank you.

Melius of The is Robert from Research. coming next question Spingarn

open. line Your is

morning. good Hey

morning. Good

Good morning

commercial the up, growth the aftermarket rate in might number on opens that guidance, if Kevin, China addressed? how

the activity happening. to it percentage percentage Well, of fleet, you not flight significant flight And activity I as a a is of much prior COVID. know there's think

up. a real could that be tailwind us it to back as So opens

zero inflation, than in hard conflicts, enough uncertainty in the COVID mid-teens the market it growth uncertainty the global just more There's their with potential to out put what we now. China recession forecast and was Given right there.

it's half saying it math XX% of make and the number. that as maybe market Does and Is just XX% a so as simple it's recovered any sense? it's

get It like sense. at look like could don't around numbers. baked things to those don't make that. We We regionally

directionally probably accurate. it's However,

We've today down the come amounts M&A in quality on notwithstanding, down And but you again. come also that? commercial assets seen public for markets, then Have just content. they've in valuations seen significant aftermarket markets private Okay. with the of

finish haven't that busy, We get say available been finish deals of middle-sized across of business, the seen unfavorable a haven't around a marketplace. wouldn't to had in activity. are the just speaking, generally restricting them it's across certainly that financing There's businesses. but that. I in couple Unfortunately, quarters we've we able line to since anything to get very an line a small of ago. DART's for lot sentiment not us, the market I any due do how We're

it's for disappointing. think So altogether, stay in M&A market, headwinds are There been bit some and a general little I we the aggressive.

Okay, Thank great. you, Kevin.

Yes.

one while And of moment get Robert question. next your is the Vertical from next for you The I question. Research. we ready Thank Stallard have question for

Your line is open.

morning. Good Thanks so much.

Good morning.

Kevin, the squeezed maybe on they in situation. to as bidding activity deployment things any getting guys Are following in or sell the aggressively change or assets? higher even were other the the seeing up financial they you sentiment capital just for past buyers? not rates? perhaps these Are Are direction having interest from by Rob's question about or

happening. businesses that of number people that there can don't certainly but bid on number believe market. slowing seen come can limiting businesses It's selling is I we've today, the assets, that to anybody of I is think think we squeezing the and

on And a as maybe area this Okay. then well. follow-up

in perhaps the more European buying moment, strength dollar you the Given in interested are assets aerospace going more the U.S. defense forward? and at

do. returns way business. really at We can that on they what a don't all really We factor based the them evaluate on into we look

usual. at So we're geographies, regions. more Europe looking look not businesses for in any all than We

everywhere. So we're encouraged and looking

that looking folks speak. M&A But Europe, it. focus of for opportunities certainly team we on additional are no in there's as a have We

Yes. That's great. Thanks Kevin.

Sachs. get be question for One your Thank And I while the the you question. next have will we next moment ready question. of from Poponak Goldman that coming for Noah

is open. line Your

everyone. good Hi, morning

morning, Good Noah.

Good morning.

deployment. Can the it and leverage you environment in stays interest the mean that capital more Mike, bid-ask lower shares extent will all the to And to what Just maybe net keep make alluded hold Can to you here. potential would sure a define on you you rate to you're looking you debt capital or what what to if repurchase of I quantify define -- M&A slightly year start structure that have here? And to few coverage to environment, mentioned challenge EBITDA? off there? in ratio. then what maintain look to the spread this you quantify the terms the

Sure.

So the the a interest ratios coverage and how shares of repurchase on point, leverage couple we things think and point. about I'll tell to come you around can I it.

So things. two

first part costs X.XX% time still TransDigm. First, well debt debt the extent year this just regard To as that's XX.X% The of trading have a in area cost piece of equity, simply targeted preference is can, pretty that to leverage, with to the question, the capital the cost benefit had and much than the X% easy. it's X% today the based the cheaper, remains is is of here true coming long we right? our equity we've on the for implied that at yields, right, debt which below now with with with use to debt and a of because cheaper approach we hedges return as

prudently that's interest easy. coverage to in environment. that important practically rising of piece second, this and So the on at gets the of ratios. equity, value And we cash of stupid more on the take we equal and without coverage is interest right? rate and But or cash point, this the jeopardizing interest that's how and pretty And look then much kind being to coverage debt EBITDA can question,

many have you bounce take of out have as Xx sort debt that the strip EBITDA, if time So interest and see that to average net years Xx about if ballpark a period, the around five instead we you'd been period. interest ratio and expense, ratio, you same about in has that when for Xx like frequently to last That's ballpark talked but EBITDA of in X.X. Xx an Xx call COVID on And with coverage and heard cash the you at it focused average one the this to guys past to times, TransDigm. on that just look you

the So to along hedges, two And because we debt-to-EBITDA debt at we're nicely brackets, not and environments, ratio interest now that interest forward. more EBITDA of we lost And a fiscal 'XX in got of fiscal coverage because with ratio you ratio. to feel have we the only that if net running TransDigm than three going past, comfortable think the ballpark of in team. look hedges of the that in about And out as the in a we've lot on we for specifically, those that's benefit XXXX those and again, and us that's right? But 'XX well. because middle that and took lower management as rate kind

that mentioned we to I benefits ballpark. environment. dial Xx could leverage rate envision for debt that three, have lower it a be of those today, Xx EBITDA for the And coverage ratios next think -- of we not might years three sort about to because to That's out have quite those the back the often. to prior in benefits, sort where got the if and time we we case benefit of interest the the we of the a or hit won't And haven't have interest four the taken bit So know years. you the we didn't we didn't have and hedges

we continue many second on options. Kevin has and as And bands into hopefully said Noah, at you coverage some least question, business insight of think long-winded running are to a share around around that's priorities repurchase I coming way The it about So the your at three putting the the think, at. ratios evaluate some giving then to before, how that unchanged. all comfortable we're TransDigm point, times we'll

First, reinvest in our own businesses.

then and down capital debt last, return prior did go M&A. dividends. And third, not both, as do to our balance. via buybacks we at And year. or do look gross this shareholders Second, We'll maybe then -- pay could both

detail, Mike. that Thank you. Okay. I appreciate all Super helpful.

Sure.

moment. Thank now the you next a for your for question And question.

Our next Jefferies. question from Kahyaoglu come from Sheila will

is line open. Your

Good Great. so Thank much. guys. you morning

morning. Good

morning Good

margins, basis we aftermarket of How of 'XX margin about expansion? XXX think about despite When think puts do Thanks. EBITDA the points commercial your up points and XXX adjusted up XX OE dilution have implies basis fiscal the I above takes XX%. you we to guess and acquisitions. guidance target from

of And think some that. We we've year, restructure at we the been saw generally, went reduction focus get through historically, we've business pandemic. flow some I during on expect COVID well returns. that gains next units. types of seeing we're think to the And real amount able heavy fair of we I this crises the year as to got the as these due and operating and a going business to the the and productivity would that on with throughout that restructuring through

guidance particular and given assumptions of the feel terms the I we've think aftermarket general guiding market the segments in we're environment. that's that the and this and we in to OEM comfortable assumptions with comfortable where

lot Yes, that a makes of sense.

as a this Sheila, we're times, also company. a forecasting top-down would not world, we're say, we've many said in -- I bottoms-up,

going a can to over businesses all our RPM be And us. of their be. approach what that I more think this than So is top-down time, of is the many accurate guessing roll growth forecast they work of up to

I is forecast accurate successful think with it. way to this been very business, we've and the most the

that. And just a on follow-up

do preparing few profitability that? are impact you times How supply for script. chain a than expect in any your your that? to And mentioned You you

Yes.

early when XX, the really of months active think supply XX back been we trouble started going have the see chain. to with signs teams I

to we through to really inventory And to Mike in top we've we help been of stay the with system situation. back on that's as putting engaged the suppliers. and details his the remarks. recovery, the what have So support continue found We're noted into this us

So to we're seeing pressures. the teams to seeing. that but don't pressure, like And I any at stay think inflationary unusual to anticipating level. detailed continue our rest Obviously, the world the is of battle trying we're we're best the inflation do engaged

Great. Thank you.

question. Cowen. the Thank next coming next while you we for And Khanna of One moment the from your question question. for Gautam is prepare

open. Your line is

guys. morning good Hey,

morning. Good

Good morning/

questions. of I had just a couple

recover carryover quantify you sales supply what of can just if any on you whatever, defense there's shortfalls impact wondering, expect was and year? sales the or all-in chain I next First, to

I'll that. Yes, handle

been in think it's minimal I nature.

that chain orders orders You got you work supply you've existing with a supply. of issue offset with might run impact to backlog where handful that a the and into other the

terms seeing would So impact the and any material influence results, form carryover in a significant not we're that guidance. 'XX 'XX shape or in a of we're not FY FY anticipating

anything already in aerospace That's that that commercial any amplified you've reactivation discretionary anything? seeing that of out helpful. Anything aftermarket, that the can by was the or reported? discern nondiscretionary And of and Okay. is aircraft parked parse kind 'XX trends within of between versus results aftermarket you aero, maybe you on you're can sort

Yes. high recovery. of the last and the I the as at the think of some overall Certainly, enjoyed up. a I three benefit quarters mean, the level, restrictions industry returned opened travel

parts, noted, parts, other. portfolio components, spare and think the We've largest don't I product in the is structural type passenger I been participating any versus in just terms trend of across the we've to avionics, one travel. in submarket, type submarket, interiors, full strength air we that think includes of our there's unique products. as seen the return which enjoyed the

guys. you Thank

Thanks.

And Fargo. while you next one will Matt next for get the be moment your coming question. ready Akers for question. of the And question from we Thank Wells

is open. line Your

they some wonder or sort seen at in forecast get target OEM rate seen? back the any And need I could if build of given what delays their you've morning. some just talk Good do also, thanks. the about kind and to you of of assuming risk there, just you're for rates of and mid-teens? ahead delays that stuff to the it have Boeing, Yes, kind is call edge next that from to that of may there you hit that the we've like you something early delivered year given

and individual Yes. as a mean, well-established planning bottoms-up each unit. again, noted, process Kevin got we've at I forecasting operating

utilize what to and what the future the it's each they in looks in of and closest other Airbus OEs And it provide, we that customers, at Airbus terms unit and they're are terms and they deliveries that Boeing date they in and So the deliveries. to means the at thinks to information close the of being airframers. Boeing the

unit guidance. at information we But looks scenario. again, and use operating as So its we a each bottoms-up their do process best specific

you. Okay. Thank

Thank the you for question. your ready next get question. One moment for while we

Scott be Deuschle will Our coming Suisse. next of Credit from question

Your line is open.

volume address of contemplated help you price as Hey, you me you good Kevin, to mid-teens scope and the Thank taking morning. can increases aftermarket market for ask price? desegregate guidance? Or question. way, and my the guide timing in the can between it another

so things split well, don't -- these It's out we carefully. Yes.

for what's numbers that. we've larger year-over-year. numbers there's is Our bottoms it uncertainty it because don't that out much Right by along of to to as pass these seen to specific it goal our we that But forecast the so have is put with all split to year-over-year hard up price that mid-teens in business. forecast on such always it's a a we Asia some forecast teams growth happen inflation. in There's from now, product, going inflation. Obviously, differs in than number always

has it the trying look inflationary business. and I definitely our to see across to along. been pass pressures we're think what We inflation at way that is

Okay. for business guide high on implies And next end. the X% in Mike, the Obviously, amazing. I think, are capital sales CapEx returns at this year, around of the then

see. curious that's for? think about great just the talk you. I Thank bit So what you is if to can a spend But

Yes.

I think elevated. slightly It's

paybacks right, money driving that's good two And see good I years. of X.X%, unit think or that productivity. years some X.X% teams you're We're from in and sales what's because op X.X% versus our prior projects less. we of the investing

of here. on investments, you projects couple we've One of expansion paybacks in driving that. make the good good margin because we're productivity particularly behind California, a generally, of elevated the because have improvement. here of But and money then CapEx We're incentives, guys behind and that projects our good the we're in see three tax the got drivers value investing putting sense that projects it. good solar are some margin onetime -- state a And and seeing EBITDA where it's of that bit, and

guys. Okay, great. you Thank

will the next while Thank for And Liwag for you question question. we One Morgan coming of the from moment next question. be Kristine Stanley. the prepare

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handle I'll that. Yes,

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job, that you through. So you're go really and I teams have think the done as seeing fantastic a margins the benefit

of And always our that priced We're hot. inflationary terms we've Inflation seeing always think obviously, an the and don't competitive of trying today. aware we're always focus threats going That's that on us. has at I marketplace. the changed the running for are get employed. what's the market goal structures. to And In in to understand continually been active what been terms of ultimately, in op pricing, market our cost incremental price has is in inflation. If our strategy units slightly above the pressures

question? the PMA And Great.

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the you for will we from question next question. question. the of coming Thank One Seth Siefman your Morgan And Stanley. next prepare moment while for be

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sorry it's sorry, Yes, -- JPMorgan. from Yes. Seth

Okay. Good morning.

sure was to year-on-year-ish comfortably higher margin curious, I EBITDA will just don't guys sequentially solid very be I flat I'm nitpick, a and quarter, flat want -- you it So the revenue. despite but only there the for were above just you kind with in forecast line margin But line XXXX. current costs about or some elevated XX%? to that the the of led being of incrementals don't what -- in

about from had we acquisition. think the of drag point I X.X DART

as was about other So is the impact year-over-year, there's right? And quarter-over-quarter, commercial some element OEM up XX% there mix well.

Great.

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one then component coming was next about over your that Boeing least guess, it think back might and in mean showed their Do business? guys at had years? that that a than Investor growth past. they're is with for thought and week a I being And lower the think growth, slide what backlog wave stepping at much anticipating. And XX% the the several of think XX% I all retirements looking replacement Okay. which slides a When you the about longer-term, they you where for maybe for replacement interesting I last of Meeting they

of be there's it's while I think rates lot there's think of aircraft, up right always build a now going demand. the a [indiscernible], difficulty to need to actual risk OEM think and supply but before I to a catch I

to not speaking, lot aerospace industry in less slowly. evaluate aftermarket have there platforms more coming lot to we're look or get think we'll market that setting demand planes conditions to really the something that, arena lot retirements out older. I'm of future. are in like, So I going these a new don't After But Generally technologies. new they the see. horizon. past. different of the as very the for five-year worried than we'll -- up they into a are go There's the A changes come next have ourselves in what as

and side that commercial true think set side. should we company, the several again, the it be this years, for pretty on to look the the both on going up I next as defense forward, favorably is over we're also comfortable

That's very one could more sneak it. helpful. I If appreciate I in quick. really

this on to aftermarket were a guys we when call about talked ago, -- XX% you guys You year XX% growth.

thinking it than year? much not have impact looking China was situation all? anticipated I you that and and is XX% would XXXX. the imagine in would did backward not of at the Do you that sense this but the you anybody at at November XXXX, business, just worse much forward Or Do You to looking about the how -- the to in hurt guys way if situation look that China of all? have any in

aerospace certainly, we is plus look don't look market what front in participate But We of XX% whatsoever. more, opportunity significant think way that the the travel, us. is of at out minus. little almost China at maybe didn't it. that's or It's a I a

Most back So of yes, to the -- numbers to have just a recovery better our a better Asia that come already. headwind results close in other down and and levels. was really to even was region. It's the pre-COVID pretty regions

much. Great. Thank you very

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the for good question. Thanks guys. morning Hey, taking

morning. Good

Good morning.

close worst-case pretty there. you've year we the apples-to-apples, of just go got an to mean And as it do contribution, revenue on guidance -- lot kind baked of this a headwinds but get I about like said I the we way I exit of are approach, you just sounds seem inflation, aftermarket potential incorporates a the to like sounds mid-teens just I'm to dark say I do really year, hate you guidance. it would thinking on peak? but life you've it maybe through the know is bottoms-up Kevin, we like in risk, as conditions. range lot in also of recessionary pre-COVID contemplated the that this China, some risks. scenario, addition back of potential guess And but the economic sort I a to mean, wondering, in And

that prior for we I us and still the -- on how at unpacks. it's COVID think happen defense again, on sometime commercial see lot a parity aftermarket look with up to across think it, the There's happen. approaching have it 'XX that levels. has a -- think comfortable that to that's yes, that board, way I for all in to to will that I in sets we're achieve favorably to But We'll Asia side.

with up Any Got seem range? low I guidance? range that of if a thinking It would the about you came lot on the the it. on end it. more guys already? Got it? in this mean color mean, of be just I like risk would factors

out teams, it's aftermarket book to It be. it's of going and problem from bottoms-up The with that approach and is go what they a our could they happen. lot look and the This at is think not ship booked, a is quarter. within

corporate. So are But to than their at customers up you closer are forecasting we things they're are here unknown. that

conservative. hope as to So hope market, this tend is We We out significant don't that we'll see. it's impact -- their aerospace all the to to have numbers. that any of trust come why things these we

I customers. at And don't the inventory we practical the visibility airline our any just at levels have matter, add, would to

build their forecasts. and So the the that up can and try plans using communication to the teams directly with are they all customer

That's Thanks Got Perfect. Appreciate it. it. helpful. guys.

Sure.

from One ahead. will Thank And we our question. take David be moment -- have go we coming question. your Strauss you next of for while question our next Barclays. Please

morning. Good Thanks.

this in what much these about distribution that the -- And into visibility see us airline through on channel? maybe of terms So side, do about at distribution on your that running how following new up days? point, last how much comment is inventories, of you aftermarket what update is but

Yes.

distribution, roughly think teams work we're growth. XX% point forecast the been that the of of are exclusive inventory through The assumptions in And are distribution-type future making. range to that improving have with sales distribution levels each in quarter. the think what support of teams to based on agreements. kind right XX% the I And reasonable we the all runs to partners their each

back inventory -- now pandemic. capital. your I they you were Mike, a Okay. want chain? are about projected for and specifically about bit you -- where concerns Are carrying sales are? from pre about supply around inventory just of inventory right yourselves your Or to are levels. working these in any They the ask talked about where sort to extra levels basically levels around right

little risk. that's what given purchasing. supply frankly, supply based mitigate the just units We're obviously, We the risk the And risks. off-unit extra bit chain to do on and by carrying of shipments off-unit a just done of are, op they're specifics chain that,

the ramping but bit little of in 'XX into ahead the I to a we up level. growth taking just elevated exact and also revenue an amount and can't going there. put that in for it, there's extra product see dollar So we're

this would one, look last to Mike, would XXXX How you with And expect far loan? term that? out Okay. when you deal at

August in later We year. often. of it this 'XX goes look at current, It obviously,

So it we'd of August out to take by 'XX. have

cash We do have enough to that.

at into day think bit at I we or things as upfront, weeks on debt we to to stacks, right. stuff so come to we focus a white see two we -- look opening out worst look last worst, you and slides the with and And different up if seems space and market every manage plenty in maximize it, want the cash we'll the at transactions maturities in that at a from be present out and the all we'll push moment, came the the types time that push now. the have But up guys that of point of bit to given what generate open operations. in

stress. point spends debt lot looking this daily. of important it's on is something to time an That's team at a allocation, capital This refinancing, Yes.

much. very Thanks

One for you. moment our Thank next question.

follow-up Noah a We Poponak Goldman of question have Sachs. from

you been were But equipment through sort rates coming you asked seeing commercial demand business and And feeling of saying better? now pool there's have to production to Kevin, on a they're if rates the stuff feeding Is the about. the it -- that. units Airbus a and talking up the original just about been is I the obviously, update you. has forecast talking of chain ahead that guess, your curve there. production wondered not to you're speaking and have you us closer about? Boeing up Is from bit been Or aerospace disruption lot changed? just to -- large OEs linking out could little getting building you've this spoke of it supply I how you're not you the

Noah. one, that take I'll Yes.

generally, I they're within the shortages. of chain working a as of obviously tracking the Boeing pool as stated tolerance think Airbus noted a band supply rates. issues has variety has been through reasonable production labor demand well

varies to So operating units from it a unit, little operating bit.

Boeing I continues And bit to hopeful a think we've improvement fair and probably rates. resolve the the seen -- it's we're hits last its some to say little issues of of all over quarter. that

then business, chain headwinds, few playing behind and this that pace. that Okay. the had your similarly, last in But authorization the defense market -- strangely we've entire -- outlay is labor end months, see you that line. your the order do caught seen And of that supply has pace that's inflection see Is better? getting defense better up How dynamic moving and little forward? an a bit there? we in your top Is out getting rate

QX the growth the OEM in I which Yes, aftermarket, of in order see of the generally, is think at quarter that market, both improvement what's and rate 'XX. defense did terms the level across we've last we -- 'XX, supporting provided FY forecast XXXX this FY in

for to this starting to what in end low last upside being -- quarter, if a if we what be maybe ago it's don't that want Okay. with much that it But splitting that assume the some on I only to to of trend months it yet. recovering fully quite imply estimate strip the doesn't but going you've we interpret safe market what's units. forecast as there? Is maybe seen mid-single, it if XX you to be, mean back in out price quarter, outlay authorization, keeps so there recovered difference

in at look we conservative we 'XX. supply it's to had Noah, stronger think, could We good and harder was like industry 'XX is 'XX. in that defense what outlays. and being by hit business but the I the think a just Well, issues think in bookings forward seems predict not And this defense and lumpy become I Kevin, difficult quarter chain industry surprised I defense were the QX to we're through been a little as being it

little a think. here, more we're taking approach bit So conservative I

sense. Make

Okay. Thanks again.

Yes. Sure.

of you for Scott question last question. as your Suisse. Credit is from Thank our coming Deuschle follow-up And a

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use for taking for quick is and to rate the you deferred compensation a XXXX? year, follow-up. run stock expense is next that Thank the Hey, Mike, beyond good

good a it is Sorry, what?

Run rate to use XXXX? beyond

a moderate so but think for I some gauge, it's I obviously fair think headcount, with yes. uptick

Thanks. Okay.

of to concludes I Q&A call Director like closing over ahead, Jaimie back the Investor for Go That turn the session. to remark. please. Relations Stemen, would

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