TransDigm (TDG) 8 Feb 242024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to TransDigm Group Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jaimie Stemen, Director of Investor Relations. ahead. go Please

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

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

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

us for Thanks joining morning. the on today. call Good

the additional Sarah as on are quarter and we this. we outlook. the both fiscal of strategy, on steady in focus usual through the cycle. overview believe well are some the our the reasons shareholder quarter. To our few off color and Then industry why To will a reiterate, comments 'XX the start believe about our in with give the quick as of all here our value times I'll Joel phases creation and unique aerospace summarize, consistency intrinsic we First, strategy discuss bad, good in of of

are products. period unique significantly follow stability revenues, with proprietary About content. of specifically, typically and of downturns. extended first, in proprietary any provided which strategy, our EBITDA operate net sales the from businesses XX% relative a consistent aftermarket our aerospace generated aftermarket over generally have have higher comes by own margins significant Most we long-term and We

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

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

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

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

to raised and QX for Our defined travel working are progress the is increase recover ahead market remain continues and as the as we expectations, and EBITDA favorable and Commercial our ran trends aerospace our have guidance the of sales industry towards year. aircraft Airline for prepandemic production. remains to traffic on normalization. Global aircraft air and OEMs remains also levels in closing high high. for new demand demand results

defense. commercial growth saw in a during the to revenues channels, healthy be quarter, and industry, for levels. aircraft progress pre-pandemic slightly rates to of production made X However, OEM our major we aftermarket adversely the for affected levels. In our market There total results to continue all and pre-COVID OEM, our in bookings and still remains well air travel is demand business, our levels pre-pandemic and remain be below comparison below commercial

in recovery strong the XX% defined strategy. focus as the was revenues, operating our with commercial along in QX aftermarket the quarter to EBITDA contributing margin Our on continued margin diligent and our

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

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

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

on significant X Device to a November as Device electronic earnings this $X.XXX As and CPI, last aerospace the call, leading serving is products business platforms. components proprietary CPI's by are Communications defense cash. we components global known our of the and manufacturer primarily strong Power highly aerospace and a presence manufactured agreed discussed market. Business for across also in The with we of billion and on aftermarket defense content engineered Electron Business major Industries, approximately & acquire Electron subsystems,

the Our We team year. proprietary close remain this U.S. acquisition diligently one of TransDigm adding about very our is as the and U.K., working business and to units. through this excited operating fiscal the is approval in process expected

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

environment look we focused months, see for next target-rich As out strategy. to over to acquisition the a XX we our continue XX

long mostly acquisitions in small midsize for I unchanged. are TransDigm our cannot closings, at targets on allocation fit or confident remain priorities potential are is capital the the that there usual, As a runway predict we and possible comment range. but portfolio. The

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

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

continue capital and As markets always, closely the to opportunistic. we remain monitor

during new the will Sarah detail from we of sizable debt mentioned of this quarter later. over balance issued As with $X.X cash on in the quarter. more includes comment ended billion, first which cash a billion our earlier, the $X

any liquidity opportunities of to in significant or financial readily future. requirements have other likely capital and range We meet flexibility the foreseeable

outlook for Moving to our fiscal 'XX.

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

Our as is excluded fiscal we Note the a quarter in the also guidance the year is acquisition growth or this XX%. results 'XX revenue guidance found and X follows growth acquisition from Device $X.XXX first rate approximately to strong year. the updating guidance The Slide assumptions regards that on, presentation. market, of 'XX can of of and that expectations for is now up our is the fiscal pending based current billion be on remainder market closed. rate guidance our current defense Electron Business In revenue for until midpoint of are full the as result for assumptions the this CPI's channel

Defense, percentage For high double-digit range. mid- previous now our to from percentage we expect single-digit to is low growth an guidance increase range. revenue the high This in single-digit of

We growth are not assumptions and have guidance and updating market channel our the on not market issued revenue commercial rate aftermarket previously commercial aftermarket rate based market meaningfully underlying full as assumptions. is fundamentals growth for commercial changed. channel still year OEM Commercial OEM

well along margin impacting acquisition. as points EPS other the margin likely the over of react higher guide anticipate with revenue around how an prior guidance XX% is $X.XXX revenue or the approximately now detail The recent approximately interest to mid-teens more XX%. fiscal updates. We of positioned incremental year. of basis We about develop move margins versus We'll some up the in the dilution defined EBITDA EBITDA and up our believe expense We billion the midpoint assumptions 'XX prior midpoint growth and remainder accordingly. markets to debt $XX.XX expected EPS and due for to or of remainder is will to around includes be from 'XX. capital primarily The year. adjusted decreasing financial continue of watch fiscal Sarah This EPS will XX% guidance Calspan of our and in the aerospace shortly expect expected factors our fund continue OEM we percentage growth to are the took with throughout associated is aftermarket and on XX% CPI. range. The up midpoint commercial commercial closely we of with XXX adjusted our discuss now

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

a Now other few Group review let and Reiss, me items. our Joel to recent hand it our performance Co-COO, TransDigm over to

with morning. market our review typical category. key by start I'll results of Good

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

approximately revenue same year in XX% QX to OEM prior with were total period. Our the commercial compared the period. in compared year Bookings prior strong quarter increased the

Our progressing. challenges for strong but XX% fiscal and 'XX. guidance revenue chain around bookings support persist, OEM to be commercial continue growth to OEM of the labor supply appear

today chains plays tell OEM ramp MAX account into announced production airline We demand aircraft. takes the freeze commercial the this in continue per an recently Boeing's level expected continued increasing XXX for new primary and given this Supply MAX Boeing for out. commercial to of XX will will be month encouraged ramp-up. The slow risk rate. guidance The build steadily remain likely rate OEM production rates production and by around the OEM time at the production strong appropriate bottleneck how FAA's

across towards operating positioned While optimistic production sector, we ramp-up units they remain achieving as risks the as support this well such are others the targets higher occur. and broader that to the our are aerospace

business by period. aftermarket revenue continued submarket, approximately passenger by compared strength moving was submarket. largest on which primarily is in our discussion. our the prior with far Growth aftermarket to driven commercial by the XX% our year in Now increased Total commercial commercial revenue aftermarket

interior in very by our submarket well. decline our return what on of and strong We minimally offset the bookings biz also revenue driven aftermarket range levels compared fiscal jet in earnings QX consistent These to as in slight were by growth aftermarket growth aftermarket same year-over-year increases capacity slightly to for commercial period. saw support and prior up The the belly mid-teens a last for prior compared booking to submarket for year was good year were guide in freight with very 'XX. quarter's percent call. Commercial quarter discussed the we this continue our commercial strong

commercial rolling aftermarket, reminder, market. our due see in a booking the quarter, recent average end trend, this often to just look most forecasting we at a lumpiness As that we when always XX-month never historical

of in X%. was referencing remain XXXX and international improvement compared traffic in but the and for traffic air only about China X.X% significant to revenue passenger pre-pandemic reach passenger data our in to and December, IATA flat X% surpass was for traffic post-COVID levels Global expects travel year This traffic has dynamics also December. data summary, to and in still global most XXXX December XX% data and being pre-pandemic about China quarter see the the few the the only most Turning improvement travel improve strong below. traffic December to in aftermarket, continuing market is the levels compared pre-pandemic XXXX. Shifting X% for to down XXXX. In levels, positive the international Domestic to XXXX XXX% being a the slightly. over steady air was traffic interior was miles pre-pandemic XX% recently came December levels, up end trends December recently is air domestic to X% down traffic. most ago, to year a reported with we over domestic of International traffic levels. for travel up ago traffic make continues continued travel X% pre-pandemic at than in currently IATA pre-pandemic was for in Globally, traffic improvement December reported a XXXX ago passenger past Domestic in the indicative globally continue to significant below over expected pre-pandemic. XXXX U.S., levels. to about continues This September, broader commercial compared A about to in months. a air from full recent submarkets, lower growth is recovery. down but about December, depressed XXXX. In travel air was in of a return

their grew our expectations with revenues, businesses. market submarkets jet our defense biz traditionally revenue, total in and approximately and the by prior defense at OEM The in line our freight Our which revenue both was period. XX% point also is and are distributed which line growth performing underlying across defense revenue. the or in of market, includes this at year. Shifting with well year XX% below our aftermarket markets to with compared QX

prior easy level bear rates throughout the revenue an year. in period not comparable defense of was see would year However, that to mind continuing the comp. at expect the growth We this balance

some guidance. Defense the moderation significantly the here expect bookings as We can are year this quarter to period. up prior same from also you tell compared

revenue base, see our improvements distributed customer defense the While outlays continue spending defense across growth pretty quarter QX. to U.S. broadly was in we the government during this

them we and to will hopeful We the and know bookings defense are have accuracy continue see difficult. as We forecasting said many before, we lumpy. sales with improvement. times but is will and bookings precision can steady But come, be sales

sales in defense double-digit single-digit our updated for guidance the be as bookings. growth the As In Kevin this XXXX was to range. This well and to market QX good the reflects with percentage a now revenue QX the QX mentioned pleased was expect year operational defense low high good stronger-than-expected for performance. as to fiscal earlier, defense I year we start primarily fiscal closing, our

I strategy consistent Sarah our strong focused our Chief to continue that, we our the demand balance it remain turn over would for We of the operating throughout the and as Wynne. products to Officer, Financial on like will servicing year. With

and everyone. more and financial Joel, the for Thanks, information then provide good I'll update. on guidance recap the the highlights quarter first morning, some

to contributed million and growth interest cash organic cash payments First, This Kevin is and which next primarily CapEx to liquidity, less free interest Cash for as we a the was full market and first the the just our of $XXX discussed. and and quarter our Joel XX.X%, than and cash up on for and payments. the was flow organic have average this and as our guidance conversion free taxes, the due rate fiscal channels year, timing quarter. liquidity. is for in will free pick On flow cash all define tax quarter, the again roughly tax growth cash In cash interest quarter, flow, payments, growth unchanged. EBITDA traditionally higher

in fiscal free flow of net continue in a close free to flat. prior years We to flow cash amount than in expect to to capital generate close cash working coming line, $X that consumed 'XX. Below cash smaller billion of

markets our influx happy few working large For our primary years, post strong the rebound a past we this experienced saw We capital as of obviously cash COVID. end commercial increase. into were very to support

working the Going invested expect the net we moderate years, seen levels amount for to forward, our X fiscal exact dollars is pinpointing investments the from of elevated in 'XX difficult. but annual over capital prior

at balance $X.X from payment X.X typically last the rebound the our ratio forma longer the Xx, impact as pro dividend. does when down $XX was accounts the the receivable with have slightly know, you in of As market was on OEM that bucket customers end debt-to-EBITDA of terms. We cash quarter our channel ended net sheet, approximately quarter of and billion

reminder, end X X operating ratio sitting of range. we comfortable debt-EBITDA the to this are strategy range, we on currently a of a not the changed. are has capital in while deployment net And low go-forward As

cushion Our forma EBITDA [indiscernible] comfortable X basis, expense quarter ended which on with coverage to range us X.Xx to target provides of our ratio Xx. pro versus a at the

proactively the of towards still Business, and raised corporate Device going to the market the of debt, CPI's subject with acquisition Electron to went we general purposes. quarter, approval is first rest the During $X regulatory billion which

can expense updated by estimate for guidance. our debt, As in the interest 'XX additional as a increased $XXX million, interest fiscal you result today's see of expense

maturity maturity rate advance collars. expect any the we rate well adequate provides XX% which means at Out now cushion caps, our in notes, against in deck us on billion debt, fixed XXXX. a hedged immediate maturity stack, debt least is combination This that debt term term. interest through total and prudently maturities final derives gross we near-term and both the us and achieved proactively managing out through in of for balance of pushing a to appropriately rates is swaps remain our continue $XX fiscal Regarding This near XXXX, date.

guidance, With $XX increased quarter or expectations midpoint for $XX sales Kevin as mentioned, by million, and year. regard current we million our strong respectively, given to EBITDA the and the

prior reduction guidance $XX.XX expense. The $XX.XX. would is Our EPS is be now compared to of guidance additional $XX.XX. interest to that, it due Without

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

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

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

could Kevin, comp aftermarket it kind versus QX? calibrate a -- then QX? of how terms aftermarket about sequential bring the very have growth maybe basis a Any you saw tough in aftermarket on on QX. we you growth in what talk you And QX in looks of should

we're forecasting We in a unfolds. up. percentage. there. I bookings revise QX. year and It the that, shipments see that saw continue. mid-teens It how QX, quarter we in in anticipate increase have The to We'll strong was sequential might think a will are

deal? all. Okay. quick has don't there there by you Is how a change I change around said before there there been think closing the at know if the the any QX, end A the any think in year-end, was follow-up. I of you're timing I meaningful previously seeing on CPI --

we it Yes. yes, approval on now, the X difficult positive just timing. CPI going incredibly and predict to process about happening. We're Right It's the through positive do. There's acquisition. with anything still overlap it's very we're

know, this As year. little but bit a things are longer, taking you fiscal anticipate we

of Sachs. line Poponak the from with Our next Noah comes question Goldman

the on sheet balance leverage deploy year capital CPI? generate after target range looks end over of ability quarters or you the remaining at to you're elaborate free and the to cash. CPI you pipeline M&A and the mentioned Because basically going in being opportunities low Maybe the the of cost could how

not to raise So leverage. actually going your that's

So much capital how And more the are you looking that? to term? near how at deploy in opportunity is managing there

And at we'll deploying to The a evaluate. probably -- usual, we fiscal There's think we ton to I a the we of didn't pipeline. a on. continue coming. there's as during that closer targets out pipeline year, going is M&A M&A lot sort like look of fiscal the the names much the see lot end capital of year

I think something and -- not our match the that criteria encouraging acquire extremely it's and products aftermarket. on, continue that's in stay to the incredibly TransDigm to to in disciplined highly list. is aerospace on doesn't the that our mean targets M&A. we're going We're point about of with so engineered disciplined I something going we're there's to access many

-- they Now and ones for small lot to medium-sized easiest Those there's targets. are the of exercise. us a

as Okay. In the has rate decelerated? there the inflation deceleration broader that aerospace aftermarket, any in of has of increase price change held in has in Or that rate despite been decel?

no There's change our overall really to philosophy approach. been and

to continue level same units is value all see. they're and market-based see the inflationary offset inflationary the that to operating look of that. product to We generally do trying what pressures the to I not Obviously, And offset to that's pressures.

pricing are of pretty with side pretty each though, Is time a they is there Or where the other the quickly? Okay. cost to window here marked is not? decelerating

Yes.

on we've that productivity. Obviously, team, be our our the The teams X teams make I focused close priced sure think appropriately. to are same product going to are driving another. they're pretty trying generally to

Our comes next Spingarn Robert line Melius from question Research. of the with

defense, price and commercial on I groups asking let's work follow-up OE of may have of which where a if much stale X is LTAs? year some different still real So renegotiated, there's think to question tied be is would As those that long-term I'm agreements than over How pricing upside answer, say, can to base next or two? can on time. the we in that about be revenue think through commercial what you inflation, would and in because aftermarket last Noah's on that

of the say and off our LTAs business bulk continue roll I OEM on be those would renegotiated. to and is Yes,

thing constant a space. the really throughout that's So

you So couple yes, you've to -- to improve is for had years. to able that haven't opportunity been clawback there a over of eat inflation

a So yes, always possibility. that is

Okay. And Kevin, just high-level workforce. question on your

or And and those for we industry, we to You on. executing so than guys people from margins consistently everyone there issues. labor are things workforce characterize where just But workforce recovering expect Is the is else TransDigm? fair there would that folks better. or it COVID, in trained see? the Or different are are getting can't

Yes.

models. business different there's -- people think I

that. excellence I always also think our marketplace to we else inflation not along we're is day machine, able that means let's make Anything to drive the ought business. have But our an the constantly to adequate incredible and our we be best sure respond to resources productivity drive businesses, labor and and to pass every people we that in that ability investing TransDigm operations forget in add, and Joel? in to

turnover I'd helpful. to we I Yes. higher years locations Kevin And had certainly improve said, add what ago. a the where to the labor thing of some which is other think mean, saw continue And couple markets I unfortunately, we

in really mitigates of levels, lot what but back think the that's more our place, few is. training and Kevin to kind the over we've impact said, time more to more a automation put as effort last which we've into And and folks. of that certainly normal worked of years put I gone

I think forward. well so going we're And positioned

of from with comes Louis Raffetto next Our Wolfe Research. question the line

So OE. aftermarket outpaced I you within know said growth defense,

Just like is different curious magnitude similar. what just or pretty there

but up aftermarket defense Defense more aftermarket did defense not significant, it was was OEM. outpace

to And drove but of easy won't comp extent, that I that say anything else there? stood was but -- that growth? you sort some know there anything I onetime, in out said

Yes.

to actually sector to majority aftermarket. as the the defense businesses businesses. we our normal was first, wasn't easier comp. QX had really of was vast shipments within time. good countermeasures our work the business It calling we in coming solid Obviously, pretty I comparison at just a -- our QX the mean, X similar across business onetime for same kind of of commercial Armtec, and was year-over-year mentioned, the So broad there's and a of were I QX. it lumpiness a certainly kind -- versus of the kind where flare increase year they a ago set saw have out pretty

question Stallard Research. Robert of comes next with from Our the Vertical line

Sarah. probably It's a for question

why On did could given debt Devices still issuance, was the you now, the it if you it time be acquisition on I comment some wondering could until Electron closes?

Yes. I we're line always to cash for at markets be to mean pending We to be up the don't that ready opportunistic proactive front. want we be want obviously going And having on acquisitions. time open. except against weren't any

Okay. to And to in and rates follow-up, most you're as have going balance down we're and make probably rate you try be be do derivatives a sheet XX over a months. adjusting place changing coming next interest in the the rate you could that? think environment, then the interest of the How

looking always the of opportunistic to benefit market be We and we're with Obviously, at structure. trying have that the hedges. debt do

be as hedged. up, some coming continue we'll to debt we perspective, enough we've stuff opportunistic got We've from XX% have look that forward. comes our and long and fortunate to So with can

with next Our of comes TD Khanna Cowen. line from question Gautam the

a originally could just that... given service done maybe has what also entertaining I hardware-oriented these you us to Is you stuff? is could if And pipeline, you it little update kind if Calspan on of small things still the were you are was assets? the midsize? how in you give thinking talk relative there bit -- guys to M&A an mentioned wondering of some about Or skewed to

that aerospace mostly the it's medium-sized businesses, for we in There's need to and they also let go as long within targets aerospace would although of Joel think as going I pipeline great do. if so of hardware, a services But while. of clear criteria. don't still businesses we're small, at open not many defense. our some I'll comment. business. outside And we're and always this defense, meet in It's of see not In after looking some those

Yes.

business put So I our think generation by where place. team got seeing. as our we're we're now, of bit integration. structure. by We're the body point the of employ. in a and through this leadership that at, we're model, strategy I We've encouraged at unit ahead in going we're teams we're the what running we We've think right encouraged And

Just as pipeline, mean, the -- I mostly has nice a Is hardware is stuff? a really in follow-up is it defense-oriented it just there blend M&A any of...

defense. blend It's No, of defense hard to and commercial only It's a it's actually control. just assets. not

You will throttled can't at the be dictate you. pitches what really

have to them they So let's say nice Right isn't the is. now, see case, you when come just to always react balance. we along. a That it

one. Okay. versus customer? channel And any just last rates growth differences direct the commercial aero into distribution between discernible the my to aftermarket, In

about So shipments. our XX% distribution represents of to XX% commercial aftermarket

difference. As we look markets our significant There's at that the point partners to comparable in seeing distribution are another. no close one of sale pretty is

next Our Liwag line from comes question the Kristine of with Morton Stanley.

on question another Kevin, the pipeline.

point you're have entertain you open current your on be to weren't exposure. thinking? available the update available? past, you proportion based us that You've that deals some would to Can what you've mentioned the willing up doing before. target-rich environment industrial and maximum what's coming mentioned that this on In assets And are industrial at

after a question percentage out. or there are a certain thumb our business, don't plus there's would nose go acquisition. in don't that its those we industrial but our only. totality, rate XX% but kick we look be deal defense. at if anything into can internal it We to we look that interesting gets of me don't at a and want businesses, for speculation. and in want scantily return that's to We and at achieve know non-aerospace I Yes, If defense It's okay. it, business that products aerospace don't

predominantly it aerospace. to So has I would be guess

out scarcity purchasing an potentially if proactively have the mean, there's I clear could break-and-fix I are in follow-up maybe airlines that question. product? customer And volume a aftermarket, hoc ad you're versus of behavior, How from thing Great. there. aircraft coming much type seeing With of assets

watch to real of I kind to way they're in and trends think have significant our why not hard don't we color meaningful in They over ship. understand that. get vast majority but of the orders sure that any typically of get and we bookings they're level aftermarket of The make no don't commercial terms come advanced booked to to there's of try granularity. We moves, inventory a buying. are

comes from line Matt with of Akers the Fargo. question well next Our

guess I the main the you're seems the at to looking ticket valuation? get deals you thing it more. What's like you've closed. and the it at M&A deals that because sheet looked do the that haven't strategic Is balance preventing

prefer Yes. they It's highly biggest want We is commercial they reason criteria. property, aerospace We engineered they're have the and meet We IP, defense, the really whether key. it whether aftermarket do content. disciplined to want defense. be to intellectual -- our see that's over but

what we for look proprietary against. when what would screen that's them we So And it's and things fall as apart, because to aren't that's like deals be. we as

we and not we're being the so product like business. else. to walk me-too IP, that in high -- in in I aftermarket. space want We defense away print mean high everyone trying build from we're not access interested And aerospace engineering content to the the has

slowing comment the in you're what to down? your for more issues. for of And year? OE on I supply of are more Is going Airbus XXX in chain, Got And it. guess, general around back your suppliers this aerospace MAX your it kind sort of possible chain to comments assuming that then some is supply just

Yes.

specific not the around it's So comments for chain. us supply the

is what that others. hearing from think I we're generally

I couple through away. largely, I we castings for job have electronic components, our of of those and the team done level, I Last of last of chain randomly supply a a the think issues the from that's that but a some working next think I up better, in of years. to challenges about too that although we're really normal to we comparison were has going prepandemic getting new persist is were do think the where there's think persisted in for kind where gone talking level more pop solid have likely year, that years. couple

I don't think that's material. of any

well pretty we numbers off our around guidance is conservatism always We not Boeing's number. is doing. I a think right little of hearing now, our in think Boeing are. terms set current I are we're what And what so bit assumption rate around FAA's stated of the and of think we level is far put what Airbus based -- the

Kahyaoglu Our comes with of the from Sheila next question with Jefferies. Jefferies line

ask to margins. wanted I about

First with owned had margin, guys for XX% for this about now you're at it, quarter. looks was quarter, it and the first It XX% like Calspan. you

it XXX which guiding would is year basis imply margins going the to you're for to to dilutive, So It be end you're business. points XX% conservative. that still obviously at

raise So this bps last XXX I to organically? what do did quarter? margins business And can guess, the guys where be you in

going term. not know it's go I I'm sure Well, where to long

continue to maximize to to Our generation goal strategy. think We'll a it's implement the value our work business. good We value. is

a TransDigm, think continue In terms over value overall beyond we I work that the we've improve to other we'll level obviously, in at -- it's the dilutive, any that, of and highlighted we mean long comparison it's I ownership. to guidance think at to

I Okay. to just commercial wanted it And then see that outperform aftermarket. ask Again, you aftermarket. defense, defense our about often given

about And defense do where Armtec. mentioned What perhaps? cycle we maybe leans commercial think margins business OE oriented? You percentage to relative your more short of is

defense Defense are kind defense than equivalent margins offer the We of -- margins a markets. world. are commercial discount to typically lower comparable their

the are standpoint there and that. a not, of order there's I I'm not that is out. us get the in. an In of solicitation, terms kind for weapon of visibility systems, get don't helps I on respond. ways, that beyond is sure like. don't that, have lot what the if color the We'll the detailed that coming lumpiness In commercial of not we in to any defense good, work orders have And when more some we generally a But any I as different of said, so than world split good looks aftermarket outlays

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

XXX you've past, business each expansion about the across basis supporting talked organically points about the in Kevin, the of cycle. margin year

As the that are just we think next the business? organically or couple relative mixing where maybe is the margins over down for of we commercial OE as with to years framework defense think still right about and about aftermarket today,

to to at going improvement be XXX. still I it. But don't it back always down here, XXX, XXX running through I points basis you believe, work I it's XXX going to there's what Yes, math your I sequentially know and it say way of been think is. and we've that think expand. it's still, may but to I is change. got involved

obviously, run volume just And areas there the Okay, still price? piece lean where that's maybe you've Operationally, significant relative can Or or execution improvement? are business to business, pretty point, moving forward of and as to great. the you opportunities see across for as look maybe relative bigger tight. pretty always be a mix to that you a at ship the kept look today, you costs

again our strategies. for value-generating of Well, is this one productivity, X

the of Our cost inflation to teams to entire over work themselves are business. the challenged offset

automation so X looked across. come make sense. would down continues wasn't price, ago, we in Those didn't capability The that but or things to And there. X come have years at

look to at we materials opportunities continue where to possible. how resource We

So of TransDigm it, always can as there's we business since us for at years good they a encouraged before XX, I and XX a they looked weren't when to continue I partly productivity. are or XX, level times believe there. that we at productivity. That's of I'm opportunity because acquired lot achieving see long-term think things in better still

reduce a We to an the new new business, find continues And ways won it well. X to great as the business. those sizable opportunity about things new also cost to you amount new of of products give of

think where are focus. think all X I So drivers want value we to we

question comes Our next with Jason Gursky from line of Citi. the

supply what your forward. kind of need hold above of things going contractual curious to on rates, OEM to with somewhere. quick moving just producing is asking some the chain has be actually got on the but of do Boeing be I'm question with production go you've inventory continue to schedule, a that have it, they're and their on producing the going the commercial kind as Just you terms got One to inventory? to working of something potentially capital master customers them

might all it of that sheet? works. inventory how from I'm of some curious contractual kind balance a the land your kind So curious, might Just of where land on perspective, just

think we don't I Yes. have any of that.

noise needs as we For year picture as that if of Boeing, from a that asking And bigger future level. fairly whole, net flat percent especially and a perspective, project level, go with model it capital would for a sales forward anything. with if being you're working as use be through noise we we working the small, very capital

Right.

quick whether just follow-up airlines. gotten feedback all on here That's and you've of likely where your bookings your is XXXX. aftermarket plans the and demand of helping you the the any grappling customers that with it's from Is strong going you then hard Okay. that they're in helpful. curious Kevin, if stocking here OEGs suggest in of what's going we're bookings what of know kind and And the seen near we're of this your to you've into for calendar quarter, on side the rate year term, the a here the perspective, recently guidance. pressure the to on coming strike from that how saw. In see the seeing or with by kind airline But GTF aftermarket upward that, that's potential fix as on you the kind planned from, I'm that it's kind mentioned exactly

what's of you that statement kind if that's made driving there? Just that curious

slight at it. a think probably Yes. tailwind a business. has look the to We've it We for take tried

older our were of also on engine. obviously, GTF businesses, helpful. that few flying fewer is getting This a out, we're But the planes helping it's are those platforms hours more. For

are to on longer some of those flight kind hours of So benefit other sites start that see that missing some out. would

we've we for tailwind net, for net the think a at think as it's it, business. looked slight I

comes question America. line the Mora next with Bank of Perez Our Mariana of from

costs My volumes, And much being pricing? guidance price how question like on is aftermarket. inflation much of bit that you commercial aftermarket? just how chain this and able driven like is peel And demand a the pricing, that I'd to much have, disruption much actually environment the is supply is, through in On mid-teens to is and that how the things? this onion excess labor little like how passing by

for comment assess that don't of price -- out. It's anyway. that split that We on and difficult and kind and to volume us

that color. So yes, of we don't give kind

actually For gave prepared we in price volumes you is to are what we and but is looking where we then see and out expand. return is ahead much to landings, continue offer our at volume and get going takeoff I can how comments clearly, RPMs, proved, going in volume. we don't much to and into growth all parsing that of we And how we volume, XXXX believe think grow here, may were is

to at to conversations have And are increase you our price customers able least? discuss how open

can part means pricing that on on provide needs. the that their think I focus and conversation time of our the quite is simpler performance you often products because excellence operational to

question, if Why something now? are Has available deals second my right on And may, M&A. M&A I so many changed?

if changed. I anything's don't know

wave. I it just waves of sort in think a comes sign

where You so. last, of it's of have the good up been time encouraging periods We've where year It's an time periods some it's or deals. a lower. and I time think, over seen way But to it Unfortunately, not aware outside It's table. just we moving any seen I'm is. of out, not more work forces and things the the to had pass we've deals some on.

with Our comes Arment next question Baird. line Peter of the from

it's exposure of much what you results. kind do, you're defense X just know you XX% mix. have I there? and about Defense. quick Kevin, international your from seeing maybe a just Nice on Do of if

products facilities We Yes, we products manufacturing provide our and have provide Europe do we that in to defense to international have directly European contractors. also exposure. allies defense

just differences change kind of there rates? at rate Any of still or normalized

seen you any, Joel? Have

I U.S. foreign don't in is I cases, the know U.S. versus they're the if there's anything many same. significant buying supporting and the military mean

ends separate hard the other. it some level to kind So of of to one up co-mingled versus and

Clearly, U.S. it skeptical. improving the faster I whether rate I'm than is improving, think is international defense

color rates? just rates you up you seeing of broadly to published general, to provide just Joel. kind little Okay. your still kind that up? you synced more kind I what the of color any on and catch And MAX in if Is seeing That's quick a this a follow-up. was OEM wondering behind, opportunity the and of could helpful, be you're and just When gave an everyone Are seemed is are the suppliers. on on like suppliers

to you're -- like well saying the because obviously as as... in as When suppliers airframers we sell

Yes.

Your suppliers.

-- well opening we're well there's aircraft still was significant. month. think, as put pre-COVID. I we're that peak mean to don't I in below Kevin XX suppliers were I still remarks, per anything at think the at Our we running his XXX, us.

And suppliers don't our standpoint, that think, issue. so that I from have

get higher ramp-up anything very we're material, that We ramp they've there's -- been think are in, now the specific where we support rate. but right can't well don't to I sporadic. and think know up. a we certain I a component believe just it's can for I positioned got it

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

commercial actual the flagged a to function booking from any engine? Is Kevin, more Anything activity narrow-body trends? maybe know noticeable retrofit interiors. just demand back result. that sales, airframe or maybe just of wide-body, you aero or aftermarket. out Nice I trends you parse

have innings refurbishment. programs. side, slid get we to originally likely next as and thought think we're the I year really have this few of starting the early to the year. those I interior we into of happened just on earlier them that Again, in of the seeing end A of more of few early see might we're right. think We're a to anticipating

the if continuing tell international in In terms encouraged improving you, of single-aisle the data we're Certainly, passenger, versus wide-body. market. I we trends have know to any specific don't by

part of that but come some So continues number know widebody, single-aisle on a of of lags around that at too that back unfortunately, don't good be growth. specific try rate single-aisle I any numbers to it's level have mean to we still the specific granularity. I to we difficult market sell, the data. to with

Got on Kevin, it. just X M&A. Got it. X And then maybe, last

the and kind medium-sized transaction? of big pipeline. about $XXX I sort range talking What million. definition? CPI, I How the keep guess, You of upper mean medium-sized small your is of of sort is

that us. Yes, probably $X becomes plus. But bigger not billion around billion somewhere $X for

gives some -- you there's science here. that no hopefully, So

comes UBS. question from with the next Our of Parsons Gavin line

big the driving what's CapEx, step-up this year? on Maybe

Yes.

needs help based to on to in mentioned the what usual we machinery always and to like the the provide the infrastructure value. add units just looking big efficiencies value On other provide and units CapEx driving obviously, Nothing drivers. CapEx, with much we're units the that up their thing op cash one improvement, the just and Joel drive our in It's productivity there. to

Yes.

comes it process, -- Our these requests from sites. the come

to. where is thing from of years CapEx to bulk And the fully that's different productivity keep also goal funded. our if see them they But in wouldn't X projects, us I done need our great So that's the payback, we're now but programs say CapEx goes would more solar on for we of doing have They past. is added been side. have past has that that the an types great

get Appreciate needs And automation know Interesting. do of detail. lot a I but you time? that in aerospace much manual, how can work think you business be to the over

highlighted. I don't we numbers. have that I of kind know any specific

X me polishing painting they've brazing X If of the same to operations, able you I I a continue years and month, probably impressed last our been question answer. to automated be asked ago, that by operations. the have very ways operations, we've businesses the was incorporate different in U.K.

prices continue cobots think comes us it. is to costs as I that optimistic to that as it down incorporate easier the easier down and for we come So automation becomes be

-- Our mix low high-mix, manufacturer. a sorry, low-volume were challenges

believe numbers, so still just we do automation, be that. subset there's lot be part And many to opportunity parts. challenge I able is many, of the And of do to able for small but it X not a for think very to

think And guys it. ease spread. I about Got kind Noah input cost to price you costs or Have asked not starting seen of your the yet?

I ease for probably different this are at to think, dramatically seen It's the significant I planned. think something but there's overall too fiscal for as don't innings really that us we're market, I the have Labor point. that. than know year still early anything early in in see in you the costs, to starting

line Seth next Seifman question from the JPMorgan. Our comes with of

be stuff go was to changed to of of ask may since to sort here, then. of million $XXX even if the I pre-COVID -- back something about about balance think misremembering the pre-Sterline days, days, A I Wanted the range. has we but cash kind in maybe think lot

think we about now. I billion forward? and appropriate pro we about do acquisition, balance for pending what's right the think now $X going the do cash forma at How probably if

like have specific you more have amount obviously we're the CPI any into $X cash but us. that pointed We're pop cash And happy happy billion We're run a acquisition, pending opportunities, hand that any not of keep or to on to say. we the up obviously is support than anchored sheet. Yes. investments which as to you balance to we out, other business, on need for other M&A could

Okay.

in Okay. of then we down, the I When of Great. I OE And hit answer pandemic maybe most last that commercial part business follow-up. think and piece. labor-intensive quick was interesting. more your you -- the Gavin's came the just rates all to when about is a question the think thought

is be up, an that adding came expectation And employees. so as there probably you'd rates

has up, the with certainly of we're of kind added from of have more? you so it And the might amount And less kind far bottom. come off you've Has consistent why? or off expected, that bottom, fully been we've the back but what labor

X to think X, to I teams hard projects. years our have worked find the over continue last good productivity

those the speed. said, couple is rates lower some curves specific up years don't learning And turnover with of ago. a front think news in the folks have anticipated I at better we what years so good me, trending if looking numbers but I to I if we're I to a -- we've the We I would X, would that X get but had, than I ago, good we've with were had thing have same opportunity of we think any that probably had

we well going positioned forward. think think So I we're

Our with Scott next the Deuschle from Deutsche question comes of line Bank.

of at been portion all point? aftermarket that's can significant quickly defense on then recently? at a aftermarket revenue you this And growing comment how F-XX is Joel,

give have around any you. I specifics any don't platform to

defense us. a I for the as was quarter said, we aftermarket think good solid

of I the was business number think distributed. considering it

benefiting on the it as to every we that's from platform. effectively in supply, for not saw us. just beneficial many platforms We're F-XX continues a Certainly, think many, single one. I quarter,

And us more good so more are things in the just certainly, general. that's the used, for

what on then, a of working big Jason's is up It the question. Can on outlook year? headwind was sort following capital Sarah, Okay. year. And you clarify pretty this last

curious where quarter had first a strong here. from on. I just things here go You was

Yes.

about, year. last million think, $XXX I of had right. influx You're an it's We

the a forward, we'd to think that working now we position capital So expect follow good going we're so revenue. in

As a percent of goes sales, up a as percentage. revenue

Any Okay. And Kevin. Day. one then last question, Investor another for been plans sometime the a last It's soon? while since

this Yes, expected. Yes. more summer. than We it. on planning We're

not have shortly. will this It officially sometime it's be another summer, will think but tuned. announced, one. I we Stay announced soon So

We All in Great. right. could finally person. meet

Sounds good.

nice. be would That

You can always Cleveland though. come to

Bert next question the Stifel. line comes our And with Subin of from

I know. it. Tracking

it headwinds So to is inflating USM radar expenses not question, maintenance-related seek that that? impact I as guess down shown to get calling Or first from those they year, are as be my trying have just competition, out unit or your markets seeing are you airlines do there. given up on been really this any smaller? just broader PMA costs Are

kind which we've is seen for USM very, typically think of big heard not for the any -- in USM typically of of us. the products any specific what our factor are is I don't year. percentage material And what that I've small changes think very and change we've I going we is PMA from systems have in past. for a $XX,XXX a are. don't really more, seen world

it. Got

small the the guys like you part but What's of just go Are cargo through been a of as balance improve 'XX? it all? of your is in space has I a cargo little to you And a know drag. do, towards as that sounded view FY Okay. what expecting you a belly at bit increase follow-up,

mean XXXX. all big traffic popped cargo I last you us, belly little sure year. the the was I bit a passenger So up cargo obviously, thing give specifics. the Over that a for to the down within mean, of I'm not the was from during market year,

I bit in we're and going up think anticipate we to market. back think most the a follow underlying moving XXXX, little folks that

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

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

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

disconnect. may now You