TransDigm (TDG) 7 May 242024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to TransDigm Group Inc.

Second Quarter 2024 Earnings Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded. to Investor conference Relations. now Stemen, to like of Director would turn over the Jaimie I Please ahead. go

Thank you, this today the and Stein; Financial Quarter Officer, President Earnings Officer, welcome Operating Chief is Co-Chief to TransDigm's Call. and Reiss. Also Lisman; Joel on our Fiscal Operating Presenting Sarah Officer, Co-Chief the and Officer, Wynne. call call Executive morning Mike TransDigm's Conference are Kevin XXXX Chief Second for present

slide at transdigm.com call to Please deck visit supplemental and information. a our website replay obtain

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

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

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

turn Kevin. now the to will call over I

everyone. morning, Thanks Good for calling in today.

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

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

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

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

a shareholders long-standing with is market. Our the returns our liquidity goal to of public equity-like give private

as To do our both this, as we careful value of of well on the details stay focused creation capital. allocation

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

our our of favorable ahead raised remain traffic again ran industry results travel and QX for Our we the and as robust. demand for recover the aerospace towards levels air remains expectations, normalization. guidance year. progress Commercial and Global pre-pandemic surpassed has to once trends market continues

to increase working aircraft production. high, aircraft are Airline and the demand new for remains OEMs also

levels. much our revenues improved market aftermarket sequentially also However, the Revenues adversely be and growth and all channels. major below continue commercial rates in made and channels, levels. bookings progress rates production in our all to is X affected defense. OEM OEM quarter, comparison There we be to OEM, to our during a aircraft still pre-pandemic for results pre-pandemic saw our and of commercial for remain well of production market business, healthy to in X these bookings In

across in the allowing with the operating diligent strong all on the commercial in to margin QX which segments. defined as strength is continued our focus strategy, EBITDA expand quarter, along Our XX.X% our to is margin aftermarket of margin contributing performance

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

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

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

Regarding of year Communications the CPI, business known of and closure activities prior on expect continue Industries, a call. as Power fiscal current pipeline, earnings was Device Electron to we 'XX M&A the also of and announced which

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

As we potential we see XX next pipeline XX months, to expanding of look out targets. to over the M&A continue an

remains and actively expanding team these address our we time, are busy This a M&A to opportunities.

range, long detail the we on fit in acquisitions runway mostly but but cannot that possible are targets we smaller, that some there our comment see is recently nicely potential confident closed. acquisitions the portfolio. midsize Please XX-Q our for a or predict I small accretive usual, closings, As and remain on more that for

capital allocation unchanged. are at The TransDigm priorities

priority our accretive Our reinvest via do dividends. to and discipline our third, in M&A; capital first businesses; to return share or is second, shareholders buybacks to

option seems paying this debt this Before take down still though the unlikely we at time, consideration. into do

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

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

electron mentioned debt As $X raised our purposes. we which of the quarter of fiscal quarter was first billion issued business $X.X the corporate That cash during sizable general billion, for almost cash debt a of 'XX. balance the ended of earlier, device proactively includes acquisition with from and CPI's new

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

for 'XX. outlook our to Moving fiscal

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

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

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

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

OEM or points guidance is as EPS, some in or recent revenue now with is our guidance our [indiscernible] more EPS XX% assumptions XX% and an includes now midpoint prior commercial the impacting year. expect will fiscal in the billion defined discuss acquisition. 'XX EBITDA and be The and Sarah to to other margin from growth over dilution with commercial of range. revenue our is financial $X.XXX about higher approximately along shortly, detail margin growth XX% factors up $XX.XX due EBITDA aftermarket the updates. increasing anticipated adjusted mid-teens of XX.X%. guidance defined We primarily up around midpoint of XXX The basis expected percentage approximately This around of

the accordingly. are believe 'XX. of We to and we closely continue and well how second continue markets watch half positioned capital react We'll for aerospace fiscal develop the to

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

our it few other performance and to items. Lisman, Mike to TransDigm Let me Group hand a Co-COO, over our recent review

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

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

OEM commercial Our strong prior Bookings commercial support in aircraft. to period. the revenue total chain be compared to OEM increased levels were and 'XX. to appear compared year in challenges to the XX% airline revenue booking period. OEM by but for about guidance be year commercial continue supply compared revenues new same by elevated labor Sequentially, demand for These persist, XX% speaking, quarter fiscal to the XX% the we around QX. and continue OEM QX with healthy the growth total encouraged approximately Broadly prior for of grew progressing.

OEM chains remain production ramp-up. the in bottleneck this primary Supply

At out. the are production MAX a many this Time this arisen As cautious around of recently MAX remain will tell we production backlog realignment the lower order you XXX watching of ramp. our how reflect to plays concerns know, expected current time, for potential rates. rate and have

guidance OEM are the commercial an production around level appropriate balance today our of The we the 'XX contains of for year. rate MAX build risk fiscal giving

other broader production While positioned sector, towards achieving across risks ramp-up the they well as rates support as both to occur. aerospace units our as well that risks remain MAX the higher optimistic XXX the the we're operating are

in commercial moving than would more on to seen rates growth a with increased those as compared revenue this aftermarket like across usual. aftermarket I prior the provide on approximately than Total year submarkets to color aftermarket much commercial typical submarkets Now variation by commercial period. our larger X% our discussion. the quarter business bit was is

largest driven was rate year submarket, perform submarket mentioned far this our submarket which well. to by continues our the and our exceptionally submarket. is XX% versus The in strength primarily Growth in the by X% prior passenger passenger was period, roughly growth continued

prior and saw this when good jet X% bid the by increases Freight submarkets. declines same our area. also freight and bid submarket was interior These year down was rate down about roughly growth in in QX. our compared in XX% jet offset of were to We

biz with primarily of was we few has pandemic what cost. of to earnings jet continued result is a consistent on result of capacity, decline tempering from the down biz past The freight return our flight the discussed come The calls. decline a continued which jet activity, belly

of commercial of strong, full results confident. commercial is and outlook. outlook full sales today's that growth in make QX in our a year aftermarket saw our us number ahead year, our as outpacing significantly For the running mid-teens the in and growth elements supporting bookings for you in were aftermarket expectations, We Mainly unchanged. saw guidance, the

up sales our decent which partners, Additionally, was distribution a the leading indicator a basis. can double our QX be of point percentage through significantly, on well into data digits

[indiscernible] the reminder can nonetheless. bookings, quarterly a not a both but aftermarket lumpy aftermarket, be as as basis, on lumpy commercial defense revenue Finally, and

of balance commercial our cargo total the note a and [indiscernible] across today this from Finally, jet year. drag our aftermarket, still fiscal the percentage that growth incorporates submarkets guide biz for mid-teens continued for

broader to to March XXXX levels market to of expects prepandemic most revenue do referencing turning Now in continue in so data pre-pandemic March. X% miles IATA currently traffic XXXX. the XXXX for 'XX for the March. Global first levels reach traffic passenger above IATA and recent February dynamics and about XXX% in was surpassed traffic air time and

a In air travel driven growth data Domestic to surpass significantly reported of up travel which traffic March, air down domestic to prepandemic. continues was levels. in China by has up March the been outsized for traffic to most March Domestic X% in compared a XXXX. global recently prepandemic growth prepandemic. XX% significant year is improvement X% This compared was from in China, being ago

about recently International was steady months. over past the to March the a first levels, down surpassed traffic. for domestic make few time has in domestic and was pre-pandemic prepandemic to travel down We X% above international most Shifting air February. U.S. marks over levels pre-pandemic about for significant data improvement X% X for reported just traffic the slightly In year market, continued compared improvement travel ago. the being from to this the March, XX%

aftermarket, the we the submarkets to our in growth post recovery. In summary, and continue continuing trends passenger indicative positive commercial COVID interior of the traffic in see for passenger

the we'd markets. are of current in Our biz freight submarkets as in their light expect jet underlying trends and

was of defense aftermarket XX% revenues, total market approximately Now customer across our OEM the traditionally and our year XX% shifting at businesses distributed grew and defense QX revenue, which market, growth which period. prior both defense revenue. is below by to compared includes with revenue our base. well The or

aftermarket both components with and of the of Additionally, our similar defense OEM. growth of rates OEM ahead market in the saw total aftermarket running slightly we

this here, defense the the full the expect XX%-plus balance to for quarter the We up year. and today. do not from revised bookings we for year see tell year. the as support given period can expect compared guidance defense revenue were same to rates guidance the and significantly continuing Defense growth as prior moderation some you this revenue or level of temporary growth

-- defense and growth we we're U.S. the as to sales we bed steady lumpy. quarter, continue have see can many hopeful be spend government bookings saw we'll before, this times and in Additionally, but here growth outlays, said

the bookings and basis quarterly accuracy sales with forecasting them on know but We a and will precision, come, is especially difficult.

mentioned in stronger-than-expected guidance earlier, our the growth This now market sales for be for defense defense QX Kevin to we primarily range. defense bookings. this the as well updated year As expect QX reflects mid-teens percentage as good revenue

our an am Lastly, market of by drivers Even in delivered our up results lumpiness some job unit -- commercial the of value this strong operational though I'd second we how like performance on saw quarter wrap most fiscal our aftermarkets, teams quarter. generate executing in by did end profitable to operating pleased exceptional I that expressing 'XX. our

consistent management demand year. I'd servicing Wynne. balance to our the we With and for to robust that, turn strategy the Our to products teams continue committed CFO, of Sarah our it as operating over our through like remain the

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

liquidity. growth to and organic just the contributed as and quarter, our First, all channels XX.X%, discussed. growth market has growth was Kevin on Mike, second In organic this rate

and $XXX year-to-date cash cash interest traditionally cash we as On taxes payments, a CapEx basis. liquidity, quarter, in flow, coming million was $XXX around the which on EBITDA roughly defined cash for million less free and

QX was higher of the payments. flow tax free interest timing average fiscal cash than As and our to a due reminder, our

the fiscal unchanged. guidance is flow full our For year, cash free

and free We $X continue AR that higher our flow of the million, net half year. line, quarter to in the of sales cash XXXX. consumed flow billion support we expect capital to generate free as driven $XX cash the approximately Below working with in fiscal inventory second by

seen our X the investment an of from prior elevated We invested levels amount continue to over expect difficult. 'XX annual in is net pinpointing years, fiscal but to dollar we've dollars moderate working capital the for exact

quarter. quarter on was of debt-to-EBITDA our the net with balance at X.Xx, down end ended from last We the billion approximately cash sheet, ratio Xx of the and $X.X

is As reserved reminder, anticipated a $X.X billion approximately of cash the of for acquisition. CPI this the closing

continue slightly and strategy. while We of range, we the see in our our low comfortable shareholders we has ratio X X range end and the be deployment opportunities are currently to sitting continue this strategy our to capital operating net changed, the to below leverage debt-EBITDA for of to not go-forward best providing value through

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

fiscal financing plus by X of repricing XXXX. financing the loan This nearest pushing maturity stack including During quarter, date years quarters. billion nearer-term pushes from activity effectively completed objectives, out we term with along few our our for debt approximately $X our a term out to [indiscernible] [indiscernible] fiscal debt [indiscernible]

debt that. stack Our is actions to and always prudently and our manage accomplish these both maturity strategy capital proactively allocation

slightly for financing interest expense on fiscal The activities an expense million annualized our reducing 'XX, or $XX $XX by reduced basis. million

combination throughout note, you'll fiscal net approximately the on our primarily as $XX guidance $XX decreased expense notes, However, driven is and our caps, gross has We and a the project year-to-date bonds XXXX. interest hedged of colors. interest remain through for rate billion by income This for interest total we achieved XX% swaps rate by received million, 'XX. fixed

and immediate given $XX least to year, the we $XX increasing strong XX% provide with mentioned, regard rates EBITDA expectations midpoint to to for increased sales million, million as cushion guidance, our current at and XX.X%. and guidance any by against along With the adequate EBITDA us respectively, rise quarter in our the continues term. This in Kevin margin from

the guidance adjusted Our to prior of EPS is $XX.XX. compared now guidance $XX.XX

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

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

[Operator Research. from comes Walton Instructions] Myles The first Wolfe with question

touch if the And parse growth you in the freighter out that. half you if Kevin, I on back aftermarket wondering and the in to can of rate complement reacceleration the quarter was year? the implied particular, the could in

actually on freighter aftermarket. I their for GE outlook the call think their on raised year

to think I'm data drag year, seeing align rest different becomes it know that trying the X you to and of not less but So the what But points. fair is said you're drag And the I that that, incorporates for just overall? less. guidance

bookings segment, of commercial outpaced mid-teens which the both one. solid half Mike. to Passenger mentioned. and significantly the us Myles, interior for regard We nicely year that with had it's aftermarket the sets Sure, we take sales that very quarter. we the for I'll overall, well aftermarket, up were a Overall, and percentage commercial expectations. growth back ahead in our

the color more we we there, a X XX%. on we and maybe was last your of were little to calls. what about on foreshadowed questions That bit expected, think, address bit about point A some down I freight and the it, worse,

as on the systems. I facilitate you belly freight and and as movement guys we both well have full freighters freight into cargo past that as know, op that bucket about think X fall aircraft, the of units

our towards freighter or the And as I guys think depending And bit bucket. it's quarter, XX% so bucket. minus that a submarket, about there's into commercial you We the plus in within towards that's passenger on market, being full aircraft, belly freighters back within of capacity away the been trend the coming systems. carried and market the wait a passenger of the that on know, aftermarket or more more freight freight from deli

trended I shift they've more towards bit more weighted. in freighter a couple slightly their belly, and units the of we've we've a as seen stuff seen of be specifically, has got rest a a that product that, said, of our tends aftermarket across we commercial sales. lower a bit margin some as It that and market And op decline off us that's of they're And for to bucket.

much not of drove as decline, see there's result So of what sales margin a that's XX% impact drop. the of and too But or drag part you it. a the

strength we the good some in see to the expect balance into of feel of side, we factored continuing here that the mid-teens the do year, the freight half. the half we've growth, given the rate in continued that We back headwinds For see our 'XX and on guidance, the percentage had the year. back we about bookings. in But do fiscal

The question Robert Research. Spingarn from comes Melius with next

This flagging is been Scott up particularly Mikus for MRO question, for Myles' Spingarn. on elevated Kevin, in on Rob follow turnaround times have airlines to shops, engines.

any wondering, high isn't fast the that as as operating engines on getting growth components shops So expect, for was your as they pre-COVID. units I'm just would because are it volume of throughput as just the at isn't MRO sense

Mike It's again.

We that have much not action. really of seen

products, across . at the this point seen think commercial engine of point pretty aftermarket strength this the all the in and on good across fiscal off I at year. -- we've our engine of both different

I percentage say we would to But a probably have business. aftermarket as exposure engine our of lower

cells XXXX. Armtec the munitions late you've awards And Okay. some on large a characterized production single-digit by and wants to organic Army grower. it related defense per as artillery contracts XXX-millimeter historically, Got artillery. to increase has and month XXX,XXX then to low it. market, seen end

forward? the thinking should about . trajectory sales defense how be So your long-term going growth we for

It's aftermarket. year their of that some and have for go But some broadly op percentage pretty guidance OEM mentioned. about facility, as is product We program our units. do submarket know Armtec, Day range mid-teens has you We're this coming shipments of up June, good long-term of all by the feel across this good to in year as seeing well year. don't defense. we the want in outside distributed flare particular, this and we across which [indiscernible] Analyst give growth think had strength California an and ahead the XXX-millimeter you guys that I out

couple for continue of a That years. growth should

next might X Defense You of the -- Department some documents years the for or in so. the have budget seen of

there, just our X evenly X remain units. been or it's but It's we full optimistic driven by really growth So not about outlook distributed across group. the operating pretty

As that growth of we expect to some be in or so there's half to seen first lumpy. got This said, we've we the moderation continue, there. of is year XX% just this defense always don't

of It's close expected, the anywhere it's in Fortunately, lumpy first benefit, expect but going XX%. we to term. moderation probably grow not our bit a to better for this year, us, the in been half to some we than do long

Next Herbert from Capital comes Ken with question Markets. RBC

and down either saw in see somewhat I Kevin, in reflects more can is could there's acceleration record on half. you second left to appreciate the appreciate an of on think half, lumpiness year. to a But to to growth. in the particular specifically if gives can Mike sort the get or conservatism to of anything some conservatism out pulled cautious wanted you either track second wondering lumpiness, anything to step-down first you maybe you'd just defense the in half but the drill be just the call you commentary. shipments I of year I about that probably there the as full reason guide the or if the things relative

our that year. on imply in But guidance. I bring, a going We to take strive would down. I the to basis, our guidance obviously, back always be did quarter for we're think predict. point It's difficult up that we conservative your

market is we're space what this orders finally coming think seeing demand finally the product. the is out. I defense in placing backlog, clearly the that They're the for

the will that but anticipate this in for of us, predict times at industry accurately. to would the visibility it it's tailwind lack given so good hard defense We be a

really any bit things our a break as we we on to want conservative out our So of more we little don't choose over get be to submarkets, skis up.

cycle maybe then, in about versus of one other aftermarket, backlog-driven? is think way sort your I of how if defense could And it that. Appreciate to a would classify short Kevin, particular, much you

longer different cycle, can happen there's drop-ins be aftermarket everywhere. but that than think to I be still commercial aftermarket. It defense tends

with comes question from Barclays. Strauss David Next

the drop it This [indiscernible] what mix guidance. on wanted to ask David. similar second Why for in on is a QX margins in quarter? the be half Josh the EBITDA from would would second to I appears like

I year comfortable surprised We're will be can these at we not on things. for don't into the But positive to where goal we We -- conservative. quarters want lumpy. the get giving sit. pleasantly by EBITDA comfortable again, this business unfolds. were quarterly quarter. future think we're to guidance the Yes, be We're our is how

that that our So sticking with. . we're forecast now is for

Okay. aftermarket I it just first in And question easier then baking QX half, you sequential sequential Or QX? wanted comps to follow up are any on about improvement? second just the the in is and in

the implied the aftermarket. aftermarket, to you'd the expect year up commercial probably we second the guys I ramp commercial for highest and half if think But in on end to tend as the at be quarterly did how balance guidance what's the half, some don't think you by first market. we look QX we as proceed I in you through give know, of

The comes Deuschle next question Bank. Deutsche from Scott with

there M&A. XX pipeline for on pipeline optimism second months? specifically? are still to on half Or this the about just the optimistic Kevin, the of the you next Is XX year more about

picky will very do has probably to businesses I M&A. that been it I the Again, M&A to that. it constantly, and doesn't We I'm names. unpack into And it for optimistic It's we remain choose that remain in continue we busiest difficult quarterly going tell the the optimistic in future. you to me future we've the M&A most what the about follow for close. It's about holds buckets. what's ever our tracker

comments, size. lot going said are a lot businesses, a X but of in very out on have our the small opening and as smaller We in sized busy. nicely announced We today accretive, in medium there's that I We're activity my yes, there. XX-Q

quarters. Mike, has than few then a at you're faster bit on And over growing. It leverage like Great. but been looks seeing least gross the sales, SG&A good really margins, last

see operating if So when what's I'm a expect we better specifically? then SG&A could to And should you leverage bit that outstrip on curious that to expense growth sales? about driving talk line

you that raw is which can spend I that the today, what the going Yes, that quarterly A it. some . noncash you'll just sales, see see the to that large increase portion the When in speak one. of down. comp into of at that stock on enlisted plays see you'll you look

The next with question comes TD Khanna Cowen. from Gautam

distribution act. was in expand if comments to remarks the versus what the differences prepared you channel wondering seeing I could in you're about your upon

you you're maybe more seeing et a cetera? where to So not could that's just yet, sell-through the market tell and or us if if little better freighter applying

The that we we do that to get goes of indicator come, correlate distributors it's little around it CAM X about on behalf usually our they to it. our decent don't or our can leading POS what future directly. distribution so that then always of in inventory terms sales. And XX% the we've our to quickly what we product bit, orders so it's of a through their but got will customers, obviously, through replenish with and What see now, perfectly bounces because a distributors then hold out sell XX%

go where the us move come over we basis exactly indicator they is to eventually aftermarket the But as full a for in of as direction. gives what be time, decent to right see, And see a always some the to commercial sales today of So the the likely aftermarkets here but remarks, balance heading. don't look confidence quarterly year. out tends they pretty that's on the leading POS -- commercial replenish sales, in we the

again? Do turn freighter jet positive you might we're on Or the in comment early specifically? that think that when business [indiscernible]. you Helo can and And innings what's declining? of biz actually your for expectation

with great the back freighter 'XX [indiscernible]. it's think decline during to 'XX of now is goes. hard market full most what via and goes But market the to the take the we back, done sort expect had of the to what just terms COVID freighter via and of a correcting freighters, full business. come runoff goes year We the where having generally, on be It the the freighter levels in I on say. where [indiscernible] it, depends capacity you'd

So year 'XX the be to correction. going is that biggest for probably

next Arment Peter question comes Baird. with from The

on want you talk from maybe you on an Nice about back comments were a Or you any to doing, seeing results. markets perspective gave of big differences? some the what maybe about Joel, travel color I aftermarket some could about any the international you're -- passenger of you're basis? some talked circle just just call out Could regional versus you domestic, if if China. seeing

A comes We in basically we don't and growth by benefiting into our great the lot go sales. Asia. great lot that of our get don't highest rates supports We it. the data, it We're, it. to split-outs course, China referenced commercial visibility aftermarket get when via would A region of distributors. from of IATA being

think the I seen region. but we by strength we don't great data bookings have, that we've get in

That's Okay. helpful.

curious. always what supply And chain? in on an the Obviously, in was any just something assume? us that seeing the then you seeing on latest update give Wakao,I has chain. you're could solely in it's it's supply improved, just you're what been Just just but the color And

electronics, to yet, XX have chemicals XX months issues get to continue to continues back not continued like castings, but where XXXX was or better, where but progress. better materials, ago, than it it say items I'd in months was with certain ago, certain it

Research. comes next with Vertical Robert The question Stallard from

be might This for Kevin.

[indiscernible] you something months did, And comments else quarter? ago. did the reduce [indiscernible]? Boeing actually that by situation be I your offset X Boeing expectations if you offset on Your being OEM was if must wondering commercial said on this you what

that Rob. take one, I'll

better the like first the OEM, half in little plus I bit full our ran of think year commercial guidance XX%. than something a

overall Boeing a outlook I rate around and an the level of here risk forecast think we're the potential on cautious OEM change. incorporates appropriate commercial in OEM

Our a they're what forecast on I you as forecast our bottoms-up from a reminder, based think, units know, is and it's seeing.

actions taking hearing on, we're what our as into of units. on corporate could based who mandate go from or build goes What often specific on lot a based those the should seeing of they're XX -- bill seeing hearing not on It's their we nature that independently to as unit. rate just off say, doesn't they're a content It a It's they're top-down sub-tiers so. components And what well. their direct reminder, given op the you at for be the a selling, Boeing. MAX aircraft to bottom-up assume hey,

today nutshell, good we've into the the around of any we've XX% reductions given a guide about feel for the guidance in for the But baked year year. potential we and

better. also it's say Airbus to to do think I is continuing that fair

So that's hole going the to continue to backfill possible by the Boeing some term. in of short created

just that Kevin, change is you the there that? What it follow-up, can a as on on the busy to sort you're as of any is think of then your discussed? M&A remember. seeing being do driving change given and And your any amount target comment as you pricing tracker And Yes. being

around understand. It's Yes. whether just I me expectations that's now, would I It to busier I speculate. to seems wish a right be slow help when better knew difficult know down It the it's segment. time. busy to market just things and that. a for time don't me

have we as all. We since same haven't the expectations beginning. the our changed view business standards our way still or We at

the pitches today. that years So you at used and say swing Nick to still as get true can ago, thrown that's only

with comes next Goldman The Sachs. Poponak Noah question from

you understand How curious drag inside back growth help better aerospace passenger freight you . aftermarket are total faster in the compares is rate a does if jet me the in or half. if is assuming was Or helicopter the half? just aftermarket else? I could of it back the is and half, Biz the in and accelerate back growth side, something the the that

on it a think how we what in know continuing and growth to at to the strong addresses see is get bookings half that half I'll Freight, continued passenger, we we're side the trying at. hopefully which in I on bit the booking that you're there, -- seen of likely and take slight based see stab see the Noah second really the We've there. we're it, softness continued back a we've to year. decline some in

this I Biz was year, was jet, thus QX it QX, a up in bit, far a think, bit. down

flattish. year, about it's the For

for lump passenger strength covering the elsewhere bit little better in But we you that the out vast weakness strength half. some bucket, we're buckets look last as months. That aftermarket We up really maybe driving commercial expect of aftermarket the when X something overall there good to is majority back the see seeing is and really a the continued that, the those like interior. X in of together commercial that's what's and

qualitatively it did there. or compares like similar that you're to end maybe gets XQ, better, in as is a is sounds aggregate Okay. market something growth you they XQ if rate expect freight I to accelerate and freight are little in a guess easier, directionally somewhat the passenger and segment you saying XQ significantly. passenger But little I better do the and Yes, for but guess

I think that's Yes. right.

Okay.

much Okay. rate change change quarter? Did aftermarket price the the second of the in in very in

Not appreciably, no.

we ahead I as you price think And guys we unchanged. know, of that's always, the inflation. seek slightly

same always look for what teams our execute to . and the have quarter, as expectation units on. This we operating

I talking or in productivity. emphasizing think we've spend we enough the about Well, made time gains

approaching back We That's productivity facilities. much very to are we is and projects -- our reluctant volumes as comparable clearly on where real impact our we were heads down EBITDA. to thousands in compared of comparable volumes. have add that productivity engineering having at are been an driving

Yes, the definitely in can see that margins. you

Okay. Kevin, curious you're mentioned to kind you team. people the many people percentage Can to base Just the that? making? of relative adding what you increase M&A how there. Like or quantify

looking I Yes. to add M&A X X -- folks our don't or we're more team. to

of a We to deals lot ones. as are interesting smaller-sized and much seeing through small as time deals really go take bigger

go some need we more that. through help to So

more desks as come opportunity produce before. our we will things haven't us some this hopefully, we're that seen So seeing across for

comes with question Kahyaoglu Jefferies. Sheila from next The

your were you we But XX% First, do to XX% I and an having back averaging and we an guys assumption points of aftermarket freight several where think of you speed asked the question. headwind. up think that's been at about and of held wanted which we peers outside power, freight, [indiscernible]? XX% out on take ways. is quarter what aftermarket about do X how about price more How X%. aftermarket, If up there, It's another just

X% whole with the you We the always about percentage as here feel really good follow before. But see mid-teens the to a can I full bit not said across outlook we lumpy. there. saw strong math we the I'm little the a said how sure business, basis, on quarterly think year growth on can bookings be of drag. really today, that for exactly lumpiness as we our

seeing we I booked the mean, and We're Yes. in bookings robust sequentially commercial side. more aftermarket. aftermarket on the

I right. optimistic, think right? That's feel we

Okay. gave myself I Great. Kevin, to math just And some time to productivity do count then us. head that the buy on you had

up below count significantly XX% XXXX. while So sales levels, above is XXXX are head I think

that productivity with think in half we how benefit second bps decelerating margins the So do mind, over about EBITDA XXX in half? half

Yes. trying your aware take QX. our any conservative forecasting. see EBITDA. I we're We the of the our to on don't had strong forecast very yearly certainly point. aim in We're stick have We'll be hopefully year how back half a Again, negatives to of. we unfolds. that large to We

So think conservatism. standard it's I just our

OEM, on tailwind, we're remain This don't any -- trends here our the to the over commercial and segments OEM, of both all a We have on commercial bookings side. trying good strong is We concerning and across optimistic. peanut butter that or anything. a really defense clearly aftermarket

from Liwag Stanley. comes question Next with Kristine Morgan

and size struggling chain produce and is, an point talked this PMA excuse And you about more disclosed per you think PMA you've TransDigm guess your Investor I today like is? been was had I attractive XXX,XXX parts. in previous has there since in -- you where supply Can you're as is color wondering if still Kevin, year. on Days, you've averaging this. few to SKUs me, time it something of a XXX,XXX ago environment clearly how a about could able provide market and think I SKUs. was where that also that portfolio a in how were years you percent the

topic update But significant Day I color a consider of top to coming give just from end PMAs and our we Investor of our more on level, a this at the think we impact business. at June. up don't be can

We commercial we We around it monitor part sell somewhere defense. regularly. XXX,XXX that and across numbers have do

you We our are creator aftermarket. we into into on parts sell products, how sell in the that's the space that PMA largest our of

impact very, business It you small aren't on that significant that to leak -- for impacted. go-forward other past. So similar basis. to that. and aren't us mean much basis, what I day-to-day to very regular a business, our seen and PMA are more doesn't there struggling think opportunities The a But a again, it's the suppliers. in exist used some certainly parts serviceable materials the in on a -- We replace situation we've see We our if it's will.

more investing Sarah, in team follow count up and Kevin, a medium your deals split clearly I But dividend M&A guys mean, head you the special leverage. if the paying there between fund and Thanks, near incremental I you if on are about think could with in term, -- versus to do no the add. how buybacks? share doing are

capital the you cash, of our we them I at M&A, both do time. is Yes. we first we and look the and the of know. obviously, then at plenty businesses to on look invest and and And those all mean, we're at look as those, X, in obviously, sitting foremost obviously,

X cash. future, to and we sense decision make do point look some to the a makes best what at in the So which on with

-- I paid QX. -- I dividend add we just we to we to think in think that, a

to able our be about make decision in we'll this think probably I year QX a plants.

for KeyBanc. the moment question. with next One next question from The comes Michael Leshock

previously there growth we're out there that . demand of I you just needs ahead volumes, we're to happen still some view? had meet given XXXX. seeing? And that constraints the aftermarket grow in alluded out volume to seeing within look now? further, aftermarket to within to the right strong you that that could continue if bit is anything a we think And your call is And

Sorry, is commercial growth aftermarket will volume the about XXXX question continue? whether

right. that's Yes,

are landings at generally, a couple and relative continue think, as it's it's years the in at come folks forecasts to the pace that out and to bank been to IATA, RPMs takeoffs generally tick said, moderating That there, you I year. as we past up from look expecting of out investment the of COVID. forecast what next are

in, of some that XXXX. growth So seen as moderation. still but it say, there's We've high was quite already maybe not as

RPM flying IATA lot. at forecasts, growth. fly. forecast, you to the continue if in other world takeoffs landings course, and People But reflected and look yes, of That's a expected is

very much result we as that continued growth of volume So aftermarket. expect commercial a in

the anything on way Could targeting, talk you reinvesting to of most invest on any you're whether business. areas making? just allocation investments And business then capital be or priority the bottlenecks just the organic you in what to you're or of frame it your the expect to

to biggest and automation Kevin the productivity earlier, Yes, investment our the been projects. made capital has of use comment it's

when quarter. we an or in head of that. margins have We we said we it's exceptional count back done ratably That's better job of that centers facilities basically amount cost depths come That's today. and as this reduce finding have costs the the the or good haven't head unit increase automation cobots the the of movers in automation And were to reflected we count, projects, the out and -- have operating delivered teams whether done said it, before, new the will in footprint. as why we material we reduce not COVID machining of you're their seeing add

The Truist Osterland Securities. next with Pete from question comes

I on bottoms-up expectations. share the the you what gave assumptions your forecast. could rate MAX directionally, on guidance are a just the on what I for would color the question balance just Boeing monthly on there of Ciarmoli. estimate specifics are appreciate you follow-up to any you But year? on your had currently embedded you And producing for to approach the in the Michael production average?

they're I sometimes think it off varies from a subtiers, we lot their the unit of said. Obviously, customers. by demand on unit seeing as based that

of there's rate, it's some of exactly across that hard kind is hard what averaging a expect it calculate but to kind go some their little bit around into So maybe it's XX, back something hands. say to and I'd less,

meaningful your between bookings? follow-up, any Have a just . No. of you as showed and some in Understood. then environment And bookings we've heard shift production has deliveries OEM around up the any delayed in way uncertainty OEM commercial the Okay. aftermarket? seen in the and about

Continued guidance strength both. the with on supports that

time. turn further back the to Jaimie no this closing would show like I questions for to now remarks. over call at I

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

does today's call. for participating. This conclude Thank conference you

may You now disconnect.