TransDigm (TDG) 8 Aug 232023 Q3 Earnings call transcript

Good day! And thank you for standing by. Welcome to the TransDigm Group Incorporated Q3 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session [Operator Instructions]. Please be advised that today’s conference is being recorded.

to conference like speaker to now Jaimie. today, would hand over the your I ahead. go Please

information. President and you, earnings the are Reiss; Kevin Presenting quarter TransDigm's Officer, Operating conference on Executive Joel to present TransDigm's and Chief Stein; morning Co-Chief Mike our visit this Lisman. Thank call Also call obtain supplemental is deck for transdigm.com to slide a call. Officer, welcome Fiscal replay Financial and Wynne. Chief our today Officer, call Please website our and XXXX third Sarah Co-Chief Officer, at Operating

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

or that cause through statements, important further forward-looking website to company's implied please about refer For sec.gov. to expressed section filings Investors actual or available in could SEC information at with the the the differ factors our results of latest the those materially from

share, the to as The the defined, company EBITDA earnings like income in all for earnings non-GAAP will of also adjusted and specifically measures call per would presentation see that measures. net comparable applicable advise a directly and course the referring EBITDA, we GAAP the of most release related and adjusted of reconciliations. which be to during the tables Please are footnotes you financial

I will now turn to Kevin. the call over

Good morning. today. Thanks calling for in

the Sarah on overview and quarter. our of quick strategy, will with color comments Jorge usual fiscal discuss our quarter off about ‘XX few give start the I'll outlook. First a Then additional and

has than include co-COO, and transition his three as role the the fiscal Jorge the announced President, His co-COO's this made years. TransDigm a units. Valladares retire TransDigm joined we an COO of part Board XX. has end also three Jorge President at served been on Jorge of Jorge May has date. new and his the for long-term value retirement job to years previously thank Jorge cultural Executive his significant Joel Jorge creation of in quarter. we we May more him of outstanding XXXX Vice the XX, TransDigm's has year. TransDigm as the of been of of company. changes As a will of four in until Mike aid Reiss sincerely will XX past done of truly May company organizational and Directors for preservation Lisman the prior dedication. key the player TransDigm operating and integral and with roles

of continue happy to board. company's to the contributing the as growth We have a are Jorge member of TransDigm

Reiss was for XXXX. joined as president M&A two employee is the Operating our of He assumed a having Joel Lisman in the company at the becoming Mike that team of Joel CFO. to worked different TransDigm. long-time years. executive units, Aerofluid at eight the operating roles and the co-COO's. for vice president He and served Unit served Skirka and past Prior as at Products have Hartwell Aerospace. years TransDigm Mike to last TransDigm TransDigm an five CFO prior on Joel

operations of the Operating our president at becoming a Wright director Before Joel was Unit. Adams

having Products various held Sarah of our was Aerofluid operating the the Operating a with of TransDigm's and Unit Office. has Corporate Sarah and accounting accounting several TransDigm before controller she company Wynne for assumed five years reporting at past units. served CFO becoming role the the chief years. after officer to was Sarah controller for in officer been the TransDigm's has XX accounting positions Prior the financial as chief overseeing group that

to TransDigm They Mike, of proven a Joel are their roles. a Sarah range and experienced and all track businesses unique mix broad with bring of executives experience records. aerospace new

they perpetuate promote hallmark excited We TransDigm's the continue will these create to TransDigm. each to been to of that of has confident roles long-term long-tenured that value employees to of kind the I'm developed internally very unique are culture.

believe good in shareholder our reiterate focus to as of To today. and are value we well cycle. our Now all unique in of times strategy intrinsic business the steady moving bad the creation on industry the phases as the on we through consistency in of aerospace both

Most believe provided period summarize, from We To follow the stability significantly higher EBITDA and a generated reasons in relative why over of unique the some are long-term here our proprietary comes About are generally by which have revenues net any have aftermarket extended we typically XX% of this. sales specifically. our downturns. strategy consistent margins products. of

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

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

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

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

As we from release earnings saw you a quarter. solid our had

robust we margin revenue QX had strong Our was for EBITDA the defined total quarter. as a and

Additionally we once again raised our guidance for the year.

the domestic recovery see pre-pandemic travel still International is and progress the trends and commercial in market aerospace favorable and as travel. also Global has remains air demand to surpassed continues up to travel are traffic making to continue domestic recovery high. levels. catching lead for We

bookings in Commercial continue commercial However, the is three revenues levels. made slightly adversely also affected to in total to three diligent strong quarter aftermarket remains is comparison industry in focus along channels. our has we all aftermarket with market these levels. to market operating Contributing strategy. EBITDA XX.X% in the pre-pandemic improved on results our revenues major for defined below saw In this margin recovery our to defense. in the and improved during pre-COVID sequentially OEM, of quarter. commercial healthy for all There still progress continued Revenues to business travel our margin channels. the a demand be and of our our and be air growth

of cash the QX ended in operating billion we over generation of Additionally and million with $XXX good cash. quarter to $X.X close had flow

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

update and an capital priorities. our activities on allocation Next

to Regarding the fit we M&A our opportunities actively current model. look that for pipeline M&A continue

As Comment the and usual fit XX small we look possible mostly long as that closings but is are on runway mid-sized. to XX in remain months that the potential the next a for out over acquisitions there targets our portfolio. we confident

are The allocation priorities at capital TransDigm unchanged.

disciplined take do into reinvest this is seems time this down M&A buybacks unlikely priority in second or a debt to Our third option dividends. first shareholders and do via paying creative our fourth at consideration. business, capital return A our to still though we share

continually options always capital both of difficult allocation capital We all M&A evaluating our predict. are and to but markets are

capital range allocation prepared likely readily to continue liquidity We our financial during maintain in the remarks. flexibility requirements further to opportunities meet future. other or and her foreseeable on Sarah capital will significant any of commentary provide

XXXX. outlook our to fiscal for Moving

or of sales continued guidance commercial $XXX defined As noted strong markets in was earnings year. and the our quarter of our are defined primary current acquisitions expectations full results At fiscal raised guidance remainder and 'XX in sales the recovery additional remainder our guidance to million the raised was ‘XX divestitures. end no increasing reflect for release and our fiscal assumes our million. midpoint year throughout The EBITDA's third we guidance in EBITDA's $XXX the the

be of in presentation. follows Our as guidance billion fiscal and found midpoint also $X.XXX The current ‘XX. now guidance approximately revenue on Slide X the or XX% can year our up versus is is

and be result market In the progressing on an as and for increase to is for growth strong we commercial low remainder has XX% guidance revenue regards a fiscal third our 'XX well to defense for in The aftermarket the QX current commercial commercial channel growth fiscal for range guidance from based our we We and is in range that of of rate our aftermarket aftermarket the continue the expect quarter updating plan XX%. been of year assumptions to assumptions and now expectations year. that growth previous to fiscal market through beyond. results full this XX XX% which revenue are the the rate

and guidance the the to with with out be a commercial conservative is to ship into going few aim aftermarket orders future. or advanced only we many this and the months However, predict being so book as harder bookings

we digit assumptions. previously percentage single mid is single from high to percentage OEM increase range. revenue to digit Commercial low issued expect now rate an This guidance the mid defense on of range. channel growth is our in growth our For based revenue previous guidance still market

commercial We channel rate OEM as full year growth not fundamentals for underlying market meaningfully updating changed. have are not the market

the an the expect is continue now of from margin of expected includes recent about OEM up defined dilution We of and CalSpan of approximately points revenue to EBITDA around XX% billion or $X.XXX Dart XX range. XX% commercial growth with acquisition the guidance points dilution guidance basis as about XX margin margin aerospace midpoint basis to in our from acquisition. This The XX.X%. XX%

fiscal The forma year EBITDA dilution our believe of the for margin for EPS had over increasing our we if guidance as is from CalSpan primarily due we fiscal owned more will some quarter defined updates. discuss fiscal positioned anticipated shortly assumptions Sarah We other detail and our now 'XX. in are up 'XX The 'XX midpoint meaning of basis CalSpan last to or XXX to adjusted all points. $XX.XX approximately be of financial the pro just is higher XX%. and well

markets capital to to We and watch continue react the and develop aerospace will closely accordingly. continue how

by me recovery Let structure this company's on and commercial very pleased the drivers remain throughout our industry. quarter I'm focused value of this that operational excellence. cost the stating conclude and We with performance aerospace

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

typically both That typical commentary Kevin discussion. to by mix Corporation excluded XXXX revenue. basis of everyone. category the a pro commercial which XX% of we prior I'll results May is from to call. market close for periods. year this CalSpan the in same Thanks the is of market period XXXX. businesses The in good the with I'll balance makes the compared our assuming In up our morning market forma provide of start of acquisition own key and on review

into split and aftermarket. OEM will We our discussion

OEM quarter commercial in period. the with total QX. grew robust revenue prior commercial revenues were X% approximately compared to year sales. compared in to OEM XX% total QX by period Bookings compared the outpay Our the Sequentially significantly year prior same and increased about

and rates supply increasing OEM We airline production and persist but OEM demand are making steady commercial the aircraft. still to be chain by new labor appear for challenges encouraged progress.

ramp achieving towards the up remain aerospace across sector. broader risks the While

operating the units We our cautiously targets. positioned that to support are are optimistic well production higher

commercial moving in up to were in our QX on year significantly revenue by compared when aftermarket strength market, which discussion. of commercial our period. sub Total with was passenger year increased continued commercial the compared our primarily in sub the aftermarket Now Growth prior business approximately revenue all commercial XX% market is sub although by markets prior our to driven QX. aftermarket largest aftermarket

this period. total increased the bookings to compared aftermarket strong prior commercial by revenues X%. approximately aftermarket quarter Sequentially were same for year Commercial

Turning recovery and to signal commented but now market IATA of better Global broader over still XXXX passenger to growth they XX% air to has the for revenue expect lower months past continued levels. see demand dynamics. levels travel than reach few traffic in passenger air pre-pandemic revenue than XXXX a they remain forecast miles recently miles outlook XXXX total steady momentum. previously

air for traffic in was expects significant June continues being the levels. up compared data months recovery in only up travel also In down progressed December. in air air XX% June compared The This recently XXXX global pre-pandemic to to levels. traffic pre-pandemic a IATA the over in from and levels. surpassed China has further ago most XXXX. travel to and XX% return a IATA domestic levels to X% improve improvement few reported traffic China was past six months pre-pandemic Domestic is domestic in

data XX% March by for up quarter June recently air XX%. A internationally surpasses in was about June U.S. the made traffic international globally just reported most for has traffic levels. months is ago and pre-pandemic catching travel in past year-to-date levels slightly IATA of travel about down about to X%. compared was but the traffic domestic pre-pandemic few above strides only But International over depressed travel came pre-pandemic end to the at recovery. the domestic

levels International within and X% traffic XX%. in is above pre-pandemic North America Europe is

to recent these improve about Asia versus travel air progresses. still pre-pandemic was continued data China in to Pacific volumes prior the lower bit. but reopening most year-over-year the should the Global to but year continue compared international down hopefully be has IATA cargo as June levels a moderated periods and XX% contraction

to demand. Going forward provide in major could cargo improvements in economies potentially a inflation tailwind air

but remain the is in there jet in It's levels XXXX stabilize is cargo where belly this air for more flying will growth pre-pandemic body cargo temper. continue over closely. wide normalizes too jet continued this to but Business the months. will and to pre-pandemic the with below trends However especially passenger hole upcoming recovery early we space Business transport. continues how watch determine tell the utilization to above does activity highs time available

defense year revenue grew by QX our market at up revenue. which aftermarket the prior are includes and with traditionally bookings by of significantly approximately when also compared our OEM compared defense market same XX% The below to revenues quarter period. prior year Shifting revenues XX% is Defense total to in or this which total the grew Sequentially approximately period. XX%. both

performance this U.S. outlays quarter government defense is in in spend revenue our reflected This we improvements defense quarter. to which began the see

defense but as have and can bookings said before be will hopeful lumpy. improvement times are we We continue many steady see sales to we

expect earlier this range. to single revenue high the market year As for growth defense be now mid Kevin digit mentioned in our to we percentage

provide I recent our will quick update Next acquisition a CalSpan on of Corporation.

CalSpan our established leadership discussed commercial acquisition that Executive earnings and focused As well range testing services positions that past aerospace The defense utilizes stability offerings both for tunnel diverse Vice on our across consistent and call in $XXX the of state a of cash. progressing and under CalSpan Paula the transonic center has unique are with President the testing aerospace acquisition development completed of and growth May aftermarket and markets. art Wheeler. this including it the we perform components CalSpan's for wind is exhibit to million a earning CalSpan the businesses. integration defense service potential last

we thus acquisition We are have and now with pleased owned the CalSpan far. months for three

Rite for Kirk following president my of the the to Before are president unit was the Adams QX. would Hartwell sales of served improve as Kevin to strength co-COO. years. our that during Airborne We to I for director resources McHenry concluding our our for five we and additional talent recently Rite was role. review our years President to work newest Executive worked of operating Operating This have Kevin Prior over change Vice Kevin promoted our like recently at XX TransDigm Kevin occurred that one Executive executive to has most the Hill Aerospace. business We gives Systems and to Vice we our Units as of Adams continually to oversee and bench happy also Aerospace need us President. promotable promotion and units promotion

operational up wrap our for and stating products. am our on customer how drivers value to like I'd by increased third Lastly pleased I quarter in our this XXXX. focused meeting performance fiscal demand of remain by We

like it would turn Officer With that Chief Financial I to to our Wynne. Sarah over

for few provide Joel an the everyone. Thanks going year. morning and to a for good on and overview financial quarter expectations I'm full matters fiscal the

in aftermarket free our end markets. million liquidity. and rebound flow define continued cash cash driven XX.X% liquidity organic payments, the In and EBITDA $XXX traditionally interest was rate OEM cash the we cash taxes roughly CapEx commercial and which the growth less for as on On our quarter. quarter First was organic by growth third and

cash For the during flow saw year free target $XXX the that consume expect to provided. approximately flow networking full the free continue million to of Below excess in we cash cash $X.X we fiscal capital billion quarter. generate line previously of

to standpoint. slightly from As does sales support on to ramp build the receivable a the The the ongoing OEM and we tend to of both networking business. sides more both and up continuing continue intensive accounts aftermarket be capital inventory and OEM

X billion was net times on X.X the average the at to the from debt net times We basis with to us and $X.X pre-COVID a last X.X quarter ratio puts On sheet cash balance X the times. of end this level down EBITDA quarter. our ended of of the approximately EBITDA debt year below

line is with cash comfortable a operated to EBITDA right operating been Additionally historically interest ratio and the in business. covered times interest which X at such expenses where pre-COVID we've as

the we closely. the environment continue watch higher markets always interest the of As and debt to state rate current

bit pushing refinancing of $X the out half of to in XXXX. our billion maturities In a did As a of quarter. in we year first XXXX the due term over the first nearest out of the reminder half last over year, pushing fair out the

to maturity and expect managing We debt final our stacks, advance proactively prudently pushing continue both term for us maturities means maturity which well any date. the near in out of

XXXX. now Our term maturity nearest is

or adequate This fixed billion rising of interest at is rate a combination through debt balance us Over fixed provides immediate our XX% XXXX. swaps collars. gross in least the any fiscal our notes, cushion of XX This total achieved and rate rates, caps, term. is hedged against through

here we adequate good flexibility share we via to balance an from today think position M&A standpoint, or liquidity to we'll As repurchases. pursue return shareholders and sit a sheet overall cash or in with remain cash our dividends

a Regarding market we capital likely the calendar current conditions. by on allocation, of end based it year the is decision make

to We of cash All allocation three to when a with $X.X significant aim cash to cash share have sizable and form we close and buybacks have consistent table. billion shareholders the options, a the back dividends our another. get balance amount available, capital remain we on in of or one acquisitions, significant history

off to I'll operator back kick to turn that, the the it With Q&A.

Thank you.

Instructions] Strauss of conduct Our now of the Barclays. first will question line We answer from ahead. and Go a question [Operator session. comes David

morning. Good Thanks.

morning. Good

at comments for around Kevin, I your the for just if out pipeline was M&A it least me. cut everyone or don't know me, but

had standpoint? mind think Raytheon maybe you So you what and property you happened interest the repeating from pipeline a I in are would there. kind of some where

can't We put on process. that place. as to you comment can't you in NDAs the we Well, comment due know deals

reread though we M&A we The comment. whether my I'll I pipeline said don't words. not, So is, interested were or

our actually opportunities fit look for model. to that M&A continue We

we over out continue typical we As have potential than months slightly pipeline to months, XX to the look stronger of XX next targets.

yada usual, last said I similar can't yada. quarter. what to As comment It's we

We predict properties a which, approach. if interesting for M&A closely are our that becoming pretty a to following we any seeing difficult available now. are are disciplined will time long lot of time in A of again, extremely have we right been them close, and

quick A follow-up. Thanks. Okay.

that to your to, for both in basis sequential In outpacing went just maybe and comment and around bookings bookings strong. slide a prior rate be new side? to bookings read was relative quarters, the we shipments. So equipment aftermarket were the this the you anything quarter, Do are that on things kind the of on

we think I business, across the Well, built backlog.

book-to-bill So It positive is in still things year. of there the have slowed was still of some rate bit, positive. little OEM a for a the change company that the book strengths was Aftermarket be and true lumpy. to defense. the We order little bit, but can book a expansion for of saw build

All right. much. Thanks very

Thank you.

of line question Liwag next ahead, from the Our Kristine Morgan from Go comes Kristine. Stanley.

Hey, good you doing? morning, guys. How are

morning. Good

of are are any MRO the availability come could Can How parts by aftermarket after a normal volume to growth difficult versus you this and wear we aftermarket? parts the that linked dynamic? shop next color with limited are to essentially aftermarket, limit year much does And that sell even to hearing the the about heavy should or maintenance think that. year booked your in tear? of we're you and strong in the provide even of So MRO slots year fully how facilities terms

what implications think the we don't I MRO the are. the specific around have and Yes, data

to pre-pandemic as continue down continue XX long commercial as miles positive we people the our I momentum below and we aftermarket submarkets, expectancy the continue the as trends see continue the to growth see all year-to-date. continue to think levels see now in move to think to We're I passenger up fly. percent continue revenue just and to of

do in if that Great. I hearing new supply terms, have follow-up. from commercial chain the for OE and parts And one, there another improving What OE pricing Thanks. we're could side. airplane is been

the guys, volume could that you benefit experience materialize ramp you also get and starts of should back the that expected? could for coming you that could does than sooner mixed that alleviate some So mean of OE when some pricing headwind

comment fair aftermarket always It board. say as is usually on that is and margins think I we increases across don't the to more state, our we profitable.

Our pass in to inflation. pricing along is goal

in environment. seen have all We we inflationary definitely a money more So comment very That's probably that. we aftermarket. the make on can

Great. Thanks, guys.

Thank you.

Go line next Myles the comes Our from Myles. from ahead question of Research. Walton Wolfe

Aftermarket Thank you with in the lower also, sequentially. go given you would of basis much. have bit on percent is I do particularly into in. and more the quarter mix why sequentially, in sequentially down were Kevin, sales been the would strong, they're XXX going a the adverse to as what think a so I that margins guess, that XQ? little CalSpan quarter actually dynamics comment would then Can help a points folding

as we the any look and Well, it some adjustments at I tell yet conservative us. that and or forecast quarter. significant new a been at this we business. makes is see it was We'll hope of were look successful happen, a for for more quarter, forecast significant we reductions That's future. might so it the on margins performance such that business it's business anything aftermarket across what conservatively see a of in for prudent the real Even to have There the as not cost driver progress you how booked one-time programs outcome little given be the line, business. selective conservative a the the isn't for numbers, us we accounting to out. pleasant the these I'll continue that it plays

thanks, Kevin, follow-up. quick and a just

back EBITDA interest given lower, As net a the going next kicked basis year, of hundred availability, because down coming tax interest of I you points? Thanks. is up to the go know rate, rate kick couple the tax expenses rule into now EBITDA's higher

all at guidance. into but on a quarter we'll 'XX a it, look guidance get really Sarah, we'll we next when rates pieces. and I question and think the tax That's for detailed give give we'll interest the have and

fair, If then. question you until that can Is your Sarah? hold

planning the haven't yet. through gone Yes, process that's right. I

Okay. Thanks again.

Thank you.

Capital Herbert line from Markets. question next Ken comes of go ahead. RBC Our Please from the

Hey, good morning. Kevin.

morning. Good

stick aftermarket. just to on Maybe the

aftermarket for each guidance raised you've think growth quarter this year. I

of initial guidance terms if the You're could going growth. call as to the sort anything you in I'm in there's likely gone out just at end where wondering the relative year expectations, you've XX, particular source that to come maybe initial through particular it's fiscal unexpected upside that's sort you of that's was where the think 'XX been significant from? of really outperformance a of or

I think China player. We That the was at our initially in unclear the planning. big that didn't had the our look business. point see was we

we're So have I we today better recovery and us a of a due really think I been any lot seeing what for when upside anticipated to planned than and favorably think the revisions expanding market the of initially year. that

Is the the how 'XX? 'XX activity? concern pulled booking Just and in the the you about the that 'XX a of could relative outlook that headwind there do of 'XX Any some initial the in seen be strength sales into to of think strength? any potential elevated aftermarket sort you've into

Joel?

increase. XXXX. continues our book Flight evolve. any not provide we're order look, But to towards guidance continues obviously to to Well, activity going

in said You below the still increased level. traffic about Pacific has the is still XX% traffic even XXXX Global below pre-pandemic there Asia air levels. significantly. But

changing. and I the anything change back get to that beyond slow the I as see So some all think don't we that think closer we're pre-pandemic you of rate else levels. But point has to at realistic closer

you. Thank Great.

Thank you.

Our next Stallard a Please Research comes Robert of question Group. from Vertical go line from ahead.

much. morning. so Thanks Good

Good morning.

Good morning.

said, are is that the out ago, up three as interesting high. asset pretty same saying is things you pipeline, similar you to starting prices thing. this too comments else everyone Kevin, quite looking to sound But that on months the some there. all, I'm your bid these M&A of And what worried first said of

that think time, criteria. can of assets overpay good you fullness don't our In for I meet

about not If meet the to competition. I'm our more worried meet rise will we businesses criteria, So challenge.

still this Okay. to it standard that months then their I price? that secondly, quite how you of fairly by interesting thought So on do pulled had have was a XX Is or are year. they pre-increase are some something increase? the another businesses doing, forward And your this price, months, on you aftermarket two

a couldn't Could hear of you I You bit, up repeat question? your details. broke the some and

Yes.

hoping And to pulled usual are Sorry, you increase if XX-month businesses TransDigm's that price I months. was forward was your I price Kevin. their or are wondering another catalog CFM had two that sticking there's by increases? doing, something

I pricing the catalog dynamic increases, in price becomes think of we but a high do regular more inflationary environment, norm.

businesses are really necessarily that augured they're year. think don't I once into, a on seeing. only depends inflationary It the our So inputs

Okay. That's great. Thank you.

you. Thank

Our comes next line Research. ahead. go question a Spingarn from from Robert of Please Melius

Hey, good morning.

morning. Good

morning. Good

just to margins overtakes some Kevin, just pricing, headwind that on can point aftermarket? assuming side, mitigate other in productivity on here, margins, at you as OE the OEMix from that, growth growth aftermarket increases, and perhaps the from

in I goals we strong meaning we're they that aftermarket. challenges OEM growth as that. our but there general to aspirational be business will aftermarket certainly and the slower to are It be in go somewhat think one our be more that, but as forward muted very drive of growth, improvements there's difficult to we pressure seeing doing would have will to continue as up, to the to drive cost ramp improvements

for while into a in maybe the the we in but up us, years, future, this enjoy the over future. last really that aftermarket still I the not think seen wild segments, for very recovery the market of continue conditions, think even favorably set I we've to the our two market in that all

much. Thanks so

Thank you. next One the second question. for

from Our ahead. next from Baird. Arment Peter Please comes go question

nicely. you We're of last starting that to on recovering see uptick broader quarter Yes, made comments wide-body morning, your Kevin, could side the really just some kind been thanks. you interior's comment across if things. I a give has maybe everyone. an the really know of business Good board, and

Thanks. further any Just color would there helpful. be

good the Yes, seen a say trend it'll are future the interior now. beneficial existing To-date, the on on continue we're refurbishments. seeing Obviously, year we've for I'd quarters I'd aftermarket, utilize positive a being driven in in several overall and it's Joel, continuing for they the side, we're for repair as commercial as the to a but nice be primarily increase side, I us think year, say seeing by trend we over the interior, recovery. similar fleet, and modifications the this

And made Joel. aftermarket kind quickly, last to comment shaking improve? that, still appreciate you of or Thanks. year light. that out, follow-up that a about quarter I there I how was volumes then as Is Kevin, a being just that see the XX% starting know is to XX% still

pre-pandemic. but Well, see and which RPMs XX% opportunity. and it I in XX% have percent certain I they plus opportunity below suppressed still still return. below I were are think I will demand, where landings quarter, regions still every every belief improves takeoff still see

it. Kevin. Thanks Appreciate

Yes.

Thank you.

Next line ahead. of Please question a Gursky comes Citibank. Jason from of go

good everybody. Hey, morning,

Morning.

going I the to be of congratulate probably I'm can't everybody congrats respective to all and on them. promotions retirements, their but to first believe

always Thank that. hear. for good doing to you It's

Sometimes moving we're forget machine keeps and the people just that. that

No, level all that goes appreciate hard that success. the for into sure of work I achieving

engine might more of perhaps kind here? expansive be out to aircraft Do year in don't Just opportunity come if GTF accelerate to sense maybe a at the of XXXX I'm here this grounded quick some will engines situation that the there GTF. how engines some hearing about that think trying customers you you're bringing a question there's that. Pratt to over of with had that XXX deal how for more Do TransDigm. what think then might some the under related going would They're gets and for when XXX, next planes to of impact get curious term from I'm and normal your all course? I of come for the kind you so. issue just an of with or they're know, work talking work you desert done these get later in, the you about the engines near in come

I'll kick I comment. one He's to to close for Joel and think the that businesses. customers Yes, very

difference. Yes, the of I what set think really components has don't to they're another change. and because coming sooner or the and you and components flying set stops then replaced but earlier makes to want their on starts do one it them takeoffs the in of get landings, maintenance think means what, engine, there's we significant going Engines big have any that

makes that of change anything hearing seeing today. we're significant not we're a what think I

Okay, with great. one. Thanks, guys. I'll it leave

Thanks.

Thanks.

Goldman from next line of a Noah ahead, Noah. comes of Go Poponak Our Sachs. question

morning, good Hey, everyone.

Morning.

the to X.X greater Was all in bill than markets? book three

that or but we I For to still company aftermarket. was give usually. granularity kind don't It year-to-date? for of up off, across positive. slightly the It date quarter really guess was year the

Okay.

Does it up him? clear for that

pretty it up. on happened the that Yes, you trailing clears started that defense Yes. has wide authorization these you have on that higher I And are what growth referenced sustained another easy and spend of What period gap your there? up. outlays You'll customer from are then minute there? compares a and is catch seeing time? how to for rates You and outlay mean, hearing side, and can

in the solicitations are terms a compared orders bit The runway shipment, mentioned, think levels, think seeing we there. Kevin outlays Well, I some into to outlays. converting of steady I to stronger historical anticipate than still improvement we're as just in slow little so bookings continue but were

market three bookings commercial OEM, stress favorable segments, our enough. commercial future. slowed really all all so of quarter. three in bookings to and, and can lumpy ever slightly quarter think in including all our that defense Yes, I aftermarket maybe aftermarket, look the can't although Remember, be of quarter commercial into this I

it. Appreciate guys. Thanks, Okay.

Yes.

Thank you.

Our comes ahead, America. go a Epstein Ron of ahead. next Please question Bank from of line Please Ron. go from

mute. on Ron's

Oh, mute. on Yes. sorry about was that. I

to... trying Just

go. we Here

Yes.

Just right want upper to but stuff, there, TransDigm? I you asked at stuff is mood style been what's one, M&A fits mean, you out as upper? your just a has the, good stuff that in a look do kind fixer the of with fixer stuff Kevin, for long or quick kind of

where not talked heavily and the IR upper M&A stand the might fit invest and for make we those generate always usually see good you're per must se, threshold in we don't fixer against and activities. them fixer return. on for Generally them, much though, of, businesses. returns? that speaking, about quartile as guess own look listing, likelihood I XX% better. but, We've we we I'm A everything private uppers. its the We do upper equity-like it's acquire

mean, Got a what it. sense. just just it. it. to Got it. Got it. -- Got trying I'm I Got get

are the I in? need not think you lot think a open -- what do I are to mean, you you of interested people

aperture?

look. GAAP –yes The

per I at No, Sorry. to think the I -- to don't do think got -- Yes. you we we you need se. need aperture don't mean, I look think to open

the plenty one, activity us in just deals to we of I for do stay a It's there's M&A. two still aerospace for world Historically, creative important disciplined. think year. a

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think And expect in were at Yes. Should good I margins XX%. one. one to last we does. Yes, Gross really I quick quarter continue? quite it may, if that the just

Our goal margins always is to drive up.

I that So speaks think, our record, track itself. in for

Thank All right. it. Got much. very you

Thank you.

comes line Morgan. of go Our next the question from ahead. Seth JP of Seifman Please

much very Thanks morning. good and

morning. Good

morning. Good

are I category. said think of back you midsize capital of majority in deployment, small going M&A of opportunities the kind to and the naturally Just question the

for capacity as and opportunity should there there about that investors small And if the shakes really capital so significant have something that is is thinking given midsize be by in return loose, unless you'll well? plenty category end, that of year something

remain capital Yes. and allocation I mean, priorities unchanged.

continue year. operate we'll disciplined We'll at the We'll But So calendar of do so. our over we the evaluate to course look. the continue approaches. to options conditions market how ultimately, see

right. All

Okay.

past kind know business the focused on it's a the business at part we tracking aftermarket quarters. in you. year-to-date. plus flight U.S. of that quick the the Thank aftermarket, hours generally follow-up, flight And but then jet the couple And price. flat some I been of think gets have least been of kind Okay. revenues most, most, hours up as about maybe not of pretty just the Bizjet and And helicopter XX%

And is it really growing the that right accounts continued there, there seems just that that given point like, for now? something the so to strong you growth underlying market isn't much end

of some shipments. think timing bookings of it's I Well, and the

pandemic monitor, only So quarter. really continue I in remarks. It's has said, each the during expanded something the opening pretty to we'll slowly Bizjet my as significantly market reduced and

Great. Thanks very much.

Thank you.

Our the comes next from of Ciarmoli from question Michael line Truist.

Rob Hey, to are the obviously, for margins. trying back And mix. good But, guys OEM congrats. taking in the execute I think sales? does and OEM peaked? pricing drive And at the ramping morning, Thanks questions I and maybe brought to always about OEM your of around some commentary guys. up apply think you, Kevin, as just But you ramping, margins margin, have OEM that higher. dynamic then, commercial we your guess, to

again, different speaking, that's, pressures. Commercial doesn't. still, pass on yes, And you your generally we strive be But, more the or to What question? part way OEM what the do. first find it inflation. to, But to Yes, along little of was two like inflationary can a a side. year longer, OEM to any address tends

record the I margins. in Just, mean, level EBITDA -- quarter

they they is expand. to see isn't No, And capital still We're those don't That's to that's room opportunities. to the to consistent, improvement There's room M&A, we still operate. there to Have look looking haven't for continue continue any grow machine That's disciplined, steady, to our to peaked? and why allow goal allocation And it. improve. peaked. reason how right. at I

leave Thanks, guys. I'll Got it. at that. Helpful. it

Thank you.

comes ahead. of a Please Khanna from Gautam Our next of line Cowen. question TD go

to everyone. morning, congrats Hey, guys. And good

morning. Good

queuing to wanted versus quickly have patterns have Thanks. any far discernible if the impacted times, Is in change direct. Is on seen by a through they patterns just demand your less they ordering just that you've Let's don't be well? might difference how place bookings in distribution there of whether something shortening as channels advance? as ask roles. have, that lead to Good impacting customers? And morning. an effect Hey, I because order

well partners, with we at look Yes, sale pretty we're point our direct go seeing it matches so customers. distribution as what of when we information the from to

anything we're own times, It lead same. times seeing I for often lead not customers. set to They're So significant unit there. products operating don't unique and of the sets think their comes every

to be recovery seen the inventory we've support the in Given that customer able aftermarket, to the in we've the invested base.

change, real significant of direct, point or due no the from no time. distribution out least either helped the, and that's to seeing I'm significant what seeing think I at a bit. little But we're what change lead from sale

different follow we up curious, oriented. because service different profile, little margin quick its have businesses? its to respect a Calspan, I'm anything to think about be it's just then more potential should a a and over hardware relative any that time Thanks, just that'll you, of surprises, on integration with bit or the

don't I think so.

providing We three we're but creation it's innovative as three. approach. remarks, We on optimize value Paula opening our business, to a cost and seasoned our think run, that's is structure mentioned my of pricing on think integration, pronged in looking I the executive similar solutions. We've focus our it, done formula. goal well last of leverage quarter, got recently based we've view said and think a, fit and managing Wheeler products, all value is we've past I to closed into our TransDigm it, Jorge a only acquisitions. a I think We've as been it'll what well on to and the leading we got great

that you're more just respect businesses, more of that your one, last And to you're also that pipeline? Is seen in with is stuff in? sorry, of M&A interested oriented service something kind

what compelling us. like quartile And equity, return will as Calspan identify just few a absolutely we're of we're for. the them, looking that we've think that's of I upper as nothing us. deliver I looking end that Calspan private No, for to for that seen believe plus, we can the we mean, at businesses was always XX% that today day,

Thanks a lot, it. appreciate guys,

Thank you.

Jeffries. Our of comes Sheila. Sheila line the from next Go question from ahead, Kahyaoglu

questions. negatively aftermarket going are Thank to you. time. the up margins Good for get promotions. all and morning, bias you and guys. the to congrats quarter Good put Thank XX% you growth XX% to When

yield in negative whether So cost softness? carriers it's seeing bear cooling, or Are low you here. me with aftermarket, the any cargo, signs weakness, seeing inflation,

and do to add aftermarket. the cargo in maybe Joel, anything think to have business I softening jets some that? you

down forward. some impact going months yields to international cargo are I shakes We'll capacity significantly. shakes last in think how we have as all travel but has it this out, of we see them the obviously on think kicked increased several the had up. the They've out for the And significant that it amount has see quarter. how side, belly

being, the XX Thank that. for Calspan you And basis XXXth they diluted ton expanded high, points EBITDA on margin. then all think XX% given think, despite margins, just I I sequentially XX%,

the or So drove just Calspan margin in what we wrong quarter? the expansion margins on are

think of the The was I quarter. it strong Calspan all performance results, mix, the and for didn't QX. in own market we

house. I think but go that the quarter, OEM impact just us we forward, as in bit will around strong and a good it more the aftermarket little side all of the a was performance

you. thank Great,

would the to I showing Stemen back now closing to Thank turn this further questions I'm no Jaimie you. conference at time. like remarks. for

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