TransDigm (TDG) 6 Aug 242024 Q3 Earnings call transcript

Good day, everyone, and thank you for standing by. Welcome to the Third Quarter 2024 TransDigm Group Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will hand the call over to the Director of Investor Relations, Jaimie Stemen.

Thank you, and welcome to TransDigm's Fiscal 2024 Third Quarter Earnings Conference Call. this Stein; TransDigm's Reiss; Co-Chief Financial Sarah call Executive and and the Officer, Kevin Officer, Operating Wynne. on morning President are Chief Chief Presenting Officer, Joel Officer, today our call the for present Co-Chief Also Operating Mike Lisman. is visit supplemental deck a and to slide information. website transdigm.com replay Please our obtain at call

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

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

Thanks today. morning. Good for calling in

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

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

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

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

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

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

remains raised guidance demand Our travel as QX continues results favorable and Airline are to increase and to levels. continues once working we aircraft pre-pandemic for ran more traffic and to demand the also for ahead industry the the year. market new surpass high our progress Commercial aerospace and normalization. for Robust air remain aircraft towards production. global persists recover trends OEMs

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

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

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

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

and Next, for quarter an has update M&A. on our capital busy been and priorities. allocation exciting activities This a

over quarter, SCI can X Subsequent Electron of the of on releases Industries we and closed on and power the the XX, published expect quarter and earnings in that of each of of of business communications the long-standing the strategy, stability our website. In unique potential three acquisitions, completed businesses we capital found the our months. of fit the product we billion are and portfolio in exceed The each details $X.X to the to growth TransDigm's aggregate ]. press consistent Scientific During for meet we these July individual or the with acquisitions These past well acquisitions industries. Raptor long-term these with and [ previously closed return each offerings acquisition deployed exhibit Device existing have service acquisition X acquisition Further of be objectives. businesses. our

revenue contribute 'XX year a margin about to XX%. million to total in our acquisitions three approaching these $XXX expect and combined We fiscal

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

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

this we environment not do As see year, slowing this term. near demonstrated in we the

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

our reinvest first Our in priority businesses. is to

consideration. to Second, debt dividends. down share shareholders A return still do option this capital do fourth disciplined third, buybacks time, accretive paying this though via we unlikely or at seems and our M&A into take

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

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

billion. quarter a almost balance with sizable cash of As mentioned ended earlier, $X.X we the

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

outlook XXXX. to Moving our for fiscal

our raised these preliminary our business commercial midpoint, defined million, quarter expectations earnings The of our increasing guidance and strong [ the as or we and CPI for [ Industries, the acquisitions Device XXXX. well current no expectation guidance as each ] the as ] business the $XX based was that continued is months. At be over remainder SEI guidance in raised on year, ]. the necessary Please full our assumes markets Electron million. and our 'XX Scientific acquisitions [ the Raptor of sales results coming of EBITDA the sales remainder defined EBITDA to additional noted each in and for acquisitions are guidance primary reflect $XXX as expectations of throughout fiscal closed current was year divestitures As release, will as for to our third recent and performance end refined include note recently,

are now guidance and in billion on XX%. also of 'XX the follows as fiscal revenue growth the for the rate to on, market, be full current is 'XX midpoint assumptions the regards a current expectations remainder Our that we assumptions In found the is approximately guidance updating this and the strong year for defense channel is year. result results of presentation. The can for fiscal or based as growth of market our Slide $X.X rate revenue our guidance third X quarter

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

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

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

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

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

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

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

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

OEM same improving. approximately guidance year Sequentially, the commercial OEM the about commercial to commercial chain for and healthy labor challenges in year revenue levels period, growth the quarter prior total for in Our compared revenue compared Bookings revenues the grew OEM but increased support 'XX. OEM these QX compared persist, X% XX% period. to prior were by around fiscal continue with and supply to QX. of XX% to appear booking be total

you few ramp. rate how know, this will concerns of the out. Time months expected arisen over past the have production XXX As plays MAX many tell around

as we general, for we expect our up today Boeing an balance MAX sub their challenges contains rate on we about ] as of across quickly for impact do guidance they how ] XX build to As level QX build times. varied. of as would bill our the lead year. estimate fiscal of parts aircraft around somewhat commercial extended end average rates the XX [ risk target giving per the both we an [ are OEM production rate have as low We and rates. with will impact as OEM seeing month. The ramp ] [ high at In well appropriate monthly XX their to an the of are the shift tiers, is businesses as Overall,

will are than we expect ramp-up do yet for we production guidance expected. not While their rate XXXX, previously had slower providing be we

aftermarket discussion. compared with commercial revenue QX. compared Sequentially, the approximately Now to period. total our prior to on commercial by about moving revenues commercial X% aftermarket business grew aftermarket Total XX% year by increased

submarkets. Growth were and made more aftermarket is passenger, well. like submarket, in as the of year interior, June As comparable to end which period. a perform submarket This to our to This a prior business Year-to-date, revenues the jet. reminder, year of in of our commercial versus favorably data, X.X%. IATA our typical would our historically which the I a latest quarter XX% period. up commercial Passenger passenger X traffic continues exceptionally largest year-over-year growth aftermarket on passenger is compares about shows is up over freight color than June submarket provide submarkets: was up XX% our prior bit

roughly increased prior to year repair XXXX driven compared when sales submarket interior returned by X% yet have For to interior our is fiscal levels. primarily QX, as period. refurbishments This the not

compared roughly increased on Jet does These in by sequential For a decline X%. business fiscal submarket declines lumpiness any year our submarket, when the business jet partially Business was we calls. reverses our basis, freight earnings continued a few what item freight our one X%. saw to we a activity. aftermarket The primarily and On were with capacity was have roughly QX, the offset in increases to consistent commercial period prior period. [ discussed the temporary highlighting belly the down lower up of the QX, jet due return our in of ] number freight past of remain which watch flight result was XX%

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

point XX% our QX distribution our of up last same data period Additionally, from partners year. roughly the sales through was

of moderate. guide aftermarket will a expect has pre-pandemic our cargo Finally, balance rate both passenger that growth commercial aftermarket commercial total of lumpy levels, be still do across and to traffic reminder, Note a commercial the mid-teens continue revenue bookings. drag from as basis, the the incorporates that to growth We year. jet and on business a continued quarterly submarkets returned for aftermarket both our can the for

XXXX. Turning expects was and to [indiscernible]. traffic In passenger levels. levels, by by has referencing most just prepandemic China, of XXXX air traffic continue summary, improvement XX%. Domestic indicative XXX% levels have surpass in been in since growth XX% growth surpass in most traffic IATA significant ago. In for or recently of travel data travel year X% XXXX air to broader about and February data for past the months. domestic In for air hovered is see compared U.S. traffic to submarkets levels. year in to currently reach trends. the the pre-pandemic X% of prepandemic of commercial strong the traffic up was continues above up interior casual revenue to miles inter the slightly slightly driven Global global positive below has the up year compared few over the travel was the pre-pandemic continuing traffic was recent up traffic continued to for prior passenger domestic This June levels aftermarket, which our to the air dynamics below to for and surpass a XXXX XXXX XXXX. Shifting market generally levels. for trends also X XX% June, XX% levels recently this most to June levels. International from IATA XXXX outsized levels growth June from travel traffic reported we passenger June, reported data domestic significantly was XXXX

prior to revenue, in remains is below total bounce across jet comparisons well the and revenues, defense period. approximately market versus revenue. market, may compared light period, current growth a watch year-over-year item businesses includes or market. remain based grew our The XX% year OEM We defense trends was defense up QX traditionally and of which freight [indiscernible] Business prior and our to with XX% our base. in our expect on continue and revenue aftermarket to around. Shifting year-to-date customer distributed at underlying XX%, the is by which both year market

the year. strong same our the were the the bookings of supporting ahead period, revised Additionally, OEM OEM. Defense guidance aftermarket prior for we to both revenue saw aftermarket market and similar also defense components with running in full rates total in of of growth defense compared slightly year quarter the

defense growth QX. spending the in government U.S. saw we Additionally, outlays during

sales hopeful We many here. steady continue said see have will bookings be growth can and are defense as before, to we we But lumpy. times

Forecasting precision a difficult. them accuracy quarterly and basis with on is

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

SEI CPI Electron SEI of are update recent CPI integrations Device on Device Vice the well Electron acquisitions business Executive I President, provide will quick Next, a both our progressing acquisition of one experienced and under Patrick the The business. and Murphy. leadership of our

the little and aerospace dark bolted SEI Electron has existing Device far. SEI our owned one of are ]. for on months, to have operating businesses pleased with thus each acquisition We X CPI over a we been [ units, and

business California located We units. have Device in located Alto Device Middlesex business the Electron U.K. split Massachusetts operating into CPI products Palo two power and Beverly, Microwave to ] Woodland, Electron CPI [ and of and

pleased operational seeing I in businesses. In what are these we by early fiscal the pleased performance of businesses, we by quarter in express third I'd am like the to XXXX. closing, of how our ownership Although very in our are

demand remain the Chief and teams of management products Sarah strategy year. With the over to we it consistent the our to Our servicing for committed that, Officer, continue our our to I operating turn through like Wynne. would Financial as remainder robust

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

in just growth organic and and organic liquidity, was discussed. On market and $X.X year-to-date cash which on Kevin EBITDA CapEx on cash cash for to third contributed quarter, payments, a flow, free growth, quarter, million First, the as roughly as channels taxes around basis. and all this cash the was our defined billion $XXX rate XX.X% growth coming less we In and liquidity. Joel traditionally interest

was in $X For the historical to dollars cash we billion. Below flow capital net levels a of now with invested consumed annual million, cash year, above line, $X.X sales. as we debt-to-EBITDA for on June free We closed similar primarily the $X.X free to billion quarter, working as our on billion full net generate to balance working at expect we continue approximately with fiscal capital percentage expect ended CPI acquisition that which was that roughly and QX, to flow slightly align $XX and for we net ratio the quarter sheet, acquisitions approximately paid X. the X.Xx, our X.Xx, cash in of last

end for we addition, million In the quarter quarter the the and QX acquisition would cash July closed $X.X on after balance the billion. Pro acquisition. Raptor acquisition, XX forma have $XXX on been approximately that for deployed Raptor

available we'd to hand, especially of timing predict. amount given happy closing While don't be are of to have support specific have of these on to some like cash of a can to cash that M&A, the we we target difficult

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

to Our us against EBITDA range interest which coverage the to quarter comfortable provides ratio cushion at right ended X.Xx, with that of expense Xx. X target

debt strategy of ] debt monitor capital manage our plus $X.X We term closely maturities a [ to continue their loan debt and prudently repriced and always favorable to allocation more both billion to X.X our stacks [indiscernible]. rate SOFR approximately our proactively

protection, which Our XX, term us short at plenty in nearest least November test. of the gives maturity is

our guidance, and as $XX to by us the any sales Kevin term. With respectively. a and rate XXXX. at billion rate to is mentioned, rising continues This gross fiscal against cushion debt million, swaps In rates, achieved interest approximately fixed adequate is in balance million EBITDA caps addition, through This fixed combination our increased we collars. notes, XX% of and regard midpoint immediate through provide $XXX $XX least of

strong quarter for Given current year, with along the newly including closed acquisitions. the expectations the our

the EBITDA. EPS of adjusted higher $XX.XX now compared in of Our guidance guidance is support prior to the $XX.XX

here overall adequate to from off we think cash we repurchases. With our Q&A. M&A to shareholders an remain good turn in the return and operator opportunities continue pursuing it I'll to As sit to today, dividend cash the liquidity flexibility with we kick back position sheet standpoint, balance or that, or by

[Operator line Melius Spingarn from comes with the it Research. Instructions] of Robert And

November. fourth Typically, Mikus report Scott for Joel decision Spingarn. is Kevin, results Mike, quarter Sarah. in a This capital fiscal when announced on allocation Rob you you

an So that I'm deployment administration, to curious, a more does capital given little XXXX? for thought powder going M&A that and keeping potentially process in be change open for might M&A, dry we a FTC change have potential might that and your into extra on balance the sheet maybe

one. that think here. something year, Currently, to take Yes, we coming mean, closing I'll got We've here last Sure. today, we're I did close I few of as dollars fiscal sit do cash. we out billion 'XX [indiscernible] obviously,

close we we'll the heading make think sometime I as the 'XX, that by end the look 'XX but so out to of into decision year. fiscal calendar

then And ramp and at struggling time, but especially airlines market, U.S., the are Airbus Boeing deliveries. to have flagging passenger up Okay. the their in overcapacity the been in same

So have order commercial products, flow aftermarket from in airlines? the from for but the strong any you distributors, change mentioned the seen you directly orders

some the nothing I we but quarter, think for significant. changes, saw

would any, think And the think I I what strong as in the set have for well the the significant has quarter their distribution quarter. not have us -- year say, said as And change well you from we As for we've the commercial. QX. as full patterns. had POS we for we book-to-bill overall, And -- in seen there that's was solid I think partners up within noted, very --

is Research. next of with Vertical line from Stallard our And question the Robert

freight are perhaps you It's older your could for and on are more bit Joel. into planes anything a specific here in things that, Kevin an dig having bookings was aftermarket whether the aftermarket around there I moving they any that or and or impact that's revenues? as little whether if customers probably retire wondering

back majority driven vast XXXX, we were where through the is this the freight just think belly from capacity. back XXXX. was to really in of change I In

it to swung dedicated has a During was with international switch back quickly period, to freighters. the dramatically COVID the big time capacity. and over belly Obviously, markets pretty it recovering,

us, this products. lower-margin for ] more us impacts products. So [ with ULD like really typically type Things the

difference from capacity you EBITDA the belly it standpoint, significantly more from is really a us revenue impact passenger freighters. versus it impacts of than it up actual that revenue a of on less way products But the just although the mix freight the standpoint. see shows dedicated So is the

you rises. restructure And as and opportunity start for like down. rate it Right. to rates going trying said your interest What looks this the do could way, cost the be coming of a one then cushion follow-up, Sarah. sort Fed looking language, reduce your the to at to debt In But against other move? does you see forward you're if

as we're mean we're done We've year. you of financing XX% know, -- and I already a as lot said, Yes. hedged. I this

any then next if But always have as until So becomes ] the Because XXXX. we've just a you those try and we rates the obviously, refinance we're could we're would breakage of But rates the loans recent exercise, of wanted reduce looking math a on math our dates substantially, already some pretty some refinancing, the in and stuff fees good opportunistically. done sense. go that stuff maturity at with fees any drop [ makes position, the after all and got to know, break we've right? If pay the of of to recently. it we this if

Ken That with RBC comes Herbert the from of Markets. Capital line

you aftermarket or between on XX%? can side Kevin, the relative you the explain Joel Maybe point-of-sale to growth growth strong the passenger discrepancy the the for saw in up

From our Obviously, include happened piece. I would which probably XX% and slightly about passenger up as There's of distribution bit we in product of have up amount. mix destocking partners. the submarket impacted the products how that a of was same level we're POS to full into year inventory terms I that know is sales don't a where some probably of shipped the anything terms any basis, are dramatic dramatic. products in that different distribution roughly a out. little know in there's us well, the sales There's sell don't difference. that there

quarter of a terms was well anything there's for is it I know really significant. don't selling versus we're by in that point-of-sale when some So beyond of the timing product. as piece if

And are anything on you certainly of sequentially, the like the helpful. sort yet seeing confidence to but see timing gives That's some visibility there, the you Okay. accelerate? of that you could, interiors more retrofit improvement of sounds upgrade these just sort might beyond or if piece, I or any on when it of any repair sales starting

think thinking started would I we it when see fiscal we year. to we start 'XX, were this

certainly, level enough enough able to just that an to challenge the you from airline put of of at this as it's aircraft I point, that interior had XXXX don't good the pull them to certainly aircraft we the impact of some number is, has out for wasn't it work. putting We're aren't But And planes some would the better can pushed fact this service probably as be [indiscernible] we know. this together guidance that. year the at and think don't the of right. Part delivering products as to some do thought be of planes refresh. we of new can the now. to service that OEMs And in seeing out service. think know. entire know we're for together pulled numbers, point, not obviously, smaller as do of there's quantities there's be we we'll out Any I

well. has on as certainly that us impact an So

of from question is line Ron with next the of America. Bank Epstein Our

on out of of shortages? Are own that people own kind of chain thing? want any deploy in in where watch eye to areas some Where that there you supply terms an your could you're areas help be to keeping suppliers, your there

what we would Today, the the today over characters it's probably electronic more significantly final others, say the are So in components we you probably and improved areas. hear issues would than it's years. from past same castings two probably XXXX. X see I caster is back did Overall,

we've I to is, I to needed. to XX work their improve highly we don't levels, know. get stay think our have with the will I when of groups quarter-over-quarter. supply it overall, But to But see structure separate chain progress. One see great as that close benefits or teams of decentralized specific and back it continued closely continue think before we good And XXXX them

that long of then been And M&A a you change? had months too we more at of more Are is your it ago. the there? about there Investor mean, follow-up. Or maybe just Day stuff one couple Good. I out Has not there now, much When how just out at was a there? it's environment and just look ago? there opportunities

busy about was continue the year, it's difficult collection good when next We think businesses hard the it's predict We're to the year but possibly of for horizon, adding M&A Again, year things it This I end been unbelievable between meet on that of be quarter, same. and continues near-term market the what this commented couple we at acquired. an least front a We're and very months the criteria, second it we will same the ago. looks M&A I of there's see the resources, a But work to has and on the it, coming best busy. last as some on year. record. our very stuff EBITDA on now to year good evaluating. of we're remain

it's very So been encouraging.

quite one. mean company, if for versus company? And give a what's broadly one about doing well the well? whole it. then last sort do book-to-bill? sense maybe the has defense? as that the been to were is you like book-to-bill Got of it. for And what for guys you commercial look I just How defense Got think Because

front. was expanding. usually We everyone strong The ink I about a defense year-to-date, don't think OEM, positive It's maybe our [ amassed say that ]. But get as yes, quarter well recent so is the we're and book-to-bill wasn't have and commercial that business we in given is year I the The book-to-bill very strong, only backlog parsing aftermarket expect throughout area but would which what Yes. commercial very was into we've out. running reading on above is strong year. commercial that been this X. OEM, would and growing

the from line with of Bank. Scott Deutsche comes it And Deuschle

Kevin, side? consistent what easier Or fourth any does the that with aftermarket quarter comp in fairly you is on the the this get quarter? freight saw

I -- think what looking I at and it just quarter. it's looks was we fairly pretty I number, consistent saw this the similar. from don't

inventories good happen Okay. the do that sense And are like like OEM product do they're units shipments OEM doing and some get rates? job up to production for matching the their the XX? XX their a business then actual of or Joel, feel you platforms Or doesn't you that building seeing assuring of

you when Again, somewhat think to the XX you delivery units, this of operating key the date. ship I is Part is to have varied. have

we this make work in line you is so level. what if up kind orders, we do the think to we to out can. the or negotiate significant when the order end of can, see to if more deal hard to we with push change, in is. And to still OEM product getting to don't do them work have rise in But willing inventory, than we the needed but trying we so is ship that with not fall Ultimately, then that have they're we that

line Barclays. the with Our next question from of comes Strauss David

year-to-date, assume going in guidance for QX. EBITDA quarter, or relative sequential $XX done million, improvement adjusted EBITDA, to though acquired you're you've EBITDA fourth little QX imply to just million would if up full even take pick I to -- I to the the what year, seem absolute relative $XX The in would very

I that am math? what guess, missing I in So

detail. also at money acquisitions. Yes, get we quite more defense to in them We as it, look it's in to just be growth. and seeing a question. We at the more pile We looked did of and we're the of a conservative. is make always don't where And need there defense side. on good We aim much

a somewhat So it's mixture a how in think unfolding. markets just predicting in of at the we not the like. we look we're difficult We're conservative year certainly practical conservatism and look what being

to growth mid-teens for aftermarket Got year, it. the you hit And quarter fourth Okay. the the the hit your much full how for sequential relative -- do need QX? in forecast aftermarket

bookings. it think I our mean, I looks like

quarter. last shipments our of ahead are bookings Our

we're We're mid-teens place. I in the a now think right at year. good for

mid-teens bookings we think shouldn't getting unfolding, any year. the the I the problem have for way are

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

pool, at M&A, of widening discussing Kevin, of of of two can of discuss slightly extra of would M&A [ but ] Day, broader the magnitude you're this aperture more Any since your how you [indiscernible] focus? kind Analyst focused maybe I is it? pipeline on targets? would mean as that you opportunities A&D, seen you clearly pipeline on of the staying into logistics if size maybe of seeing weigh have directional sort you deep helpful. be stated or Are

in great we only it double defense. areas. ever in however, looking in aperture. Yes. TransDigm, other places successful of put and our is to not of I nice for acquisition provide TransDigm been the defense don't They're area of We're aerospace and like opportunities that creating stay and the think will are another to broadens other solid to markets We aerospace slightly work. we've these for capital think out recently want accessories us. these certification that but And defense. additional market instrumentation and some helicopter going there and to so in testing aerospace This

models question ]. the could from players helpful. profit PMA. add mean more cost PMA in like time, airlines, another That's and if seeing At HEICO success same especially And enter the there's business Yes. the more in of light I industry the aerospace aftermarket we're PMA success seeing I Okay. your commercial [ recent consciousness on of focused cuts.

Your in do are seeing and PMA defensible anything you well. portfolio fact, as more And Like time has cycle? historically different this PMA you against in this very defensible been yourself players.

so. think don't I

player used aftermarket the to a claims limited monitor not out. is of being scrapped Obviously, this. in We because material continue

PMA. Like PMA as necessary -- complicated to said share I've times monitor nor goes, far -- very gives lend and like themselves [ cases that all lion's very publishes Investor we closely. our closely. can are team it date, FAA has And continue very Day, The us anything to seen at we the haven't concern. that this many a As products the many we it said, of to our do lend they of products to monitor PMAs -- volumes don't have PMA these The themselves said follow to in we of causes constantly. tend that to and ] our approved massive the

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

Kevin, on help if aftermarket? obvious results, statement you growing think, OEM for and benefit TransDigm's weigh some OEM of curious, of in maybe below you comments, continued faster you is lower margins on is levels? And pre-pandemic your what that I to year-end in do might are production that comment I'm if 'XX than negotiations But mentioned a OEM to also which, the can into on sales. your OEM pricing

Yes.

I OEM But aftermarket. they the contracts the lion's OEMs working side, our on always with always come stated of share the clearly as on think we're profits we from as have expire.

On say we in probably side, similar we're been I have profitability historically. the to OEM where would

to provide. awful for on no of We have we need renegotiating we're now, Yes. of update working right seen an account but and lot that inflation to contracts that in real

detail, $XX raise, one think, million $XX areas implies other million make XXX% helped other in And than that that in or something if organically sales. -- EBITDA was margins? incremental follow on then I income XXX% I Is could. greater The there

that -- don't nonbusiness related There's is nothing is her that We can identify. to shaking Sarah we me. that, at quickly head No.

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

at classic to majority acquisitions, of in we proprietary? this going deals the likely are the looking as wheelhouse, or total on to next if funnel still Just the we're ] dual funnel opening going if aftermarket posted aperture? you define or the if category to your the out that are looking -- of that be airplane it zoom [indiscernible] back topic likely I guess this up to be at rich it things the source, opening to your and of guess are X Or line in aperture your not finish are in majority Kevin. parts, than the I [ not? the maybe are be XX M&A, could I your Or and

to aperture, of down will that majority for of to bulk just it's future. at fairway aftermarket but to historically vast put the be the The lion's component our and the in that's that seen always -- M&A right be the as opening want still -- The bulk we've components, share will content, done, money of what don't looking oversell we're business our we everything smart the other for would the why I you've what history. work, the around activity the places that's absolute but us acquire say,

margin you much in fourth dilution on is Great. number a have there EBITDA quarter margin? do And how Okay. the acquisition Sarah,

Yes, XXX X new ones. points. over It would be just basis

then working you be if full one recall free on year over looking being cash, full little how Okay. Great. is, much that including to defined where the And And capital. Is got you'd at just can't with for now? stands or working conversion. how terms I XXX% of are capital billion year it's excluding? for other the you one in that use $X a you

Yes.

For the I $XXX quarter capital, think got so we've [ working ] about another full just full go. year we're year, like million to

track more sales. we're I bit think throw generally trying to but it maybe a percent So of a there, you as

excluding $X the be that And or including billion head... would that

sorry. no, would it. be That No, excluding

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

mind wouldn't negotiations [ customers. was wondering going question on with I the some Myles' ] have OEM if Kevin, you about going back that of to your you

bang, suggested a that ahead just of kind by every things. Or skis there of each on through Just do your of contract know that's, XXX on part But increase your you margin context get going an the single that's curious margins I all negotiation disparate shape many here? I and of going a the as your you X kind at happen. have important your look in one of out just of that to so Investor don't timing you renegotiations for operations of you've bigger Day like broader store on, units? one to to I you tenet think business go about talked is of that sure want a the points think, understanding to ability basis what at key being making forward, XXX, might and continues the of us that going because

Yes.

unit. really OEM There's we've unit than of the corporate-driven, couple to our negotiate negotiated I them. only owner, more the one think every that that decentralized is with operating of the idea with that So the sit that live are have really to They're Boeing who larger, in kind that, contracts to structure, and mean, that are contracts, the like have our past. Other obviously referred a units an act are like ones a contract. operating operating highly ones we these by and

hiring kind Okay. in what people follow-up places seeing just side recently. right get your the just and And of Great. as the and a in. then you're I'm things on what line there been the right has curious to of quick trend here ability the

Yes.

continue we to I that improve. think see

we turnover think has where for time largely, I back XXXX frame. gone us, to back to in were

that's than hiring think are that was before, other skilled today don't vast think know of a a think changed I it locations. And that I highlighted quite overall, harder typically ago. think, it's I operating has bit years we've highly I the and of also units improved better positions. significantly our engineers materially majority than I so. But couple

Jefferies. the Our with line next from of question comes Ellen Page

XXX we the do It or How Just dilution next the to about it's not profitability might takes and given bps going like favorable? puts from back to year. mix seems M&A. be so think as

that up. repeat You you broke question? Could

Sorry.

going to Just from dilution M&A. the back

As a margin think about about less takes fiscal EBITDA the think we of mix? we 'XX, puts and do favorable potentially how to dilution bps and XXX given

want 'XX call. Yes. quarter We'll get We don't cover that just next to forecast the into our yet. on

we you then bottoms-up out to teams, roll Our that and practice you. forecasting we know, as

on acquisitions dilution the wind 'XX, into we future 'XX. a right going now, it's basis now. So process our teams on that will depends Obviously, but lot points that Right down acquisitions are of the also That complete. see. yes, for through we dilution will and that depends -- XXX

to difficult forecast. So

You agree with that, Sarah?

Yes, absolutely.

And Seth JPMorgan. with Seifman it's the line from of

the the headwinds? start we about on seeing year should should thinking pre-COVID more aftermarket sustainable? Seth. growth is capacity to 'XX, fiscal [indiscernible] started Or rate double-digit start in is for we This to the growth growth How travel some catch given slowing up and levels? commercial Is

you that's growing next a know look -- will unpacking a you next guys ourselves of forward. I and and -- exciting what our and on we'll call. interest markets, into get next we to offer flavor there's still that what lot that of like. that in want give it's And as look We're don't quarter. still more year Obviously, to We we'll

Great. then that And areas specific are or year? programs this any there Yes. growth Understood. the in strong aftermarket are defense driving

our driven when actually it's had a isn't any a significant pretty businesses. that been bookings. look standpoint, one No, almost defense we across there of that's some really number. couple program the But at every larger one across widespread from There's have it revenue

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

year. do on expire two OEM questions. was renegotiations, of When the this that have contracts One, some contract renewals. curious I the I actually end of those big is at

we time So of before like those? Or do just know outcome time much the of that's I'm the have how sort we frame? curious

up Well, are in to years. contracts that expiring, X first, OEM we always some have of number LTA are typical contracts a X

our had of them, that currently number Kevin one year single up That some reflects we're certain there's of contracts Beyond not that, renewal a at that was this all always referred of Boeing of a OEM for I or come renegotiation. negotiating. think every It group that businesses, one to year. the end expires

That's that's Okay. helpful. And a...

the all To coordination involve sites they top. those the renegotiations handle -- a lot some well from of as on as the

involved this in process. all our are So sites of

want Got Is the you you. products, relative you're commercial That's on however Where just ask helpful. thing aero whether you're seeing there of characterize data it? on to discretionary, thematic strength? any to aftermarket. the I also they're nondiscretionary, want within seeing types

say well I'd engine thing out. only shops, The are booked is the obviously,

significant well. doing same there data there's between was and looking at versus businesses really difference that. I varied non extremely more some that is after [indiscernible] as much are think not. discretionary really I It's

part, on there the data wasn't of needs when discretionary probably are looked just how one inventory significant any [indiscernible] it's the but the specific think between nature not. I carrying the at airlines that I difference and and much

the it's of And Parsons with line from UBS. Gavin

growth a aftermarket what given pull of range little aftermarket been means strong has the bit kind Just and strong language of with a on pretty rates. wanted to bookings wide

lumpy. comment appreciate that any just be on So if that's above I revenue? can bookings

and in ahead [ freight this we Yes. in quarter, bookings We've that true booked was year-to-date. certainly this year, I don't out. of this our a shipments. booked basis actually, true shipped And ] were basically, have on from CAM any even year-to-date I but every quarter quarter remember was certainly we've that if a full market, think, basis, year better

quarter's Okay. would I less know That's visibility is helpful. typical what don't have into And aftermarket nowadays, or you more next but kind of than say you growth typical?

is remained think terms to is ship business. We actually there's change I about before our the in the do. in always highly of number. books to lumpiness what we've And we this -- shipment It's said booking the a until booked we dramatic lumpy. is that a up that what out. and I what going and quarter shifts somewhat aftermarket But percentage show they don't of quarter know why orders same. no the talk have It's are visibility to

it's from Ciarmoli of line Securities. And with Michael Truist the

given of in engine stay the I better short-cycle what's all scheduled new close chain on marketplace, nature But scheduled to these OE out. and Joe, of mean way that aren't commentary. you extended -- out going visits than some to on challenges getting appreciate in I shop is this I and the and out? kind as kind shops of I are question book-to-bill, visibility really do of can even the are year, think supply Ron's of The the you mean, normal? Just on going capacity maybe would back say is tight airlines topic. -- there's just that the you planes. kind mean,

think change. a significant don't I there's

in in commercial to [ times aftermarket the lead the the defense we side. Our comparison ] relatively certainly loan are for have short,

that portion we significant don't dramatic QX. we of QX visibility. amount in orders a A will book so And get of in the shipped

get be work out we the or extra expect, orders booked they're use of the guidance although be orders several We but engine of based on that or give So some years, level don't may don't get level doing. we us to we of on able may to what quarters volume the same shops may comfort visibility.

back you've you opening then of got of it. one I just, to -- Kevin, XX on M&A it. more operating couple said aperture. a Got times, Got mean units. And different this the

you issues? aperture the that in to kind just to and antitrust those might regulatory challenging finding opening You've up may of scale. what lot middle of parts, stay a got of clear steer given of that up Are airline of or of issues on thinking more fairway you're of or be it kind some crop the kind

] new Yes. anything. marketplace terms in as HSR of [ in something I review or the don't see it

tried smart M&A think portfolio. to I about we've our be always

market more aperture aerospace trying So that deals to in we're through, because to makes desire not and larger that of are M&A sense it's for if us. on businesses, consume good the get there defense-type opening capital a

for And still are number don't a [ number just ] there to simply down an taking in are fast it's what defense. components there are matches that very of disciplined yet, criteria. We we're we airplane in the finding marketplace. so our tremendous So believe still we and a we continue the the of marketplace advantage the on that look opportunities parts traditional of aerospace many in that supply see fairway can

us opportunity So lot still. of as there's of I out, ahead look a

the from Arment it's And of with line Baird. Peter

biz of item. called kind market or comment watch you a Kevin can jet Joel, the you maybe just on out is --

and your out. of quarters, in but quarter Otherwise, that kind of QX had X and aftermarket. you're negative You've calling last you've was good it really X only had growth, the growth,

a you seeing could provide maybe what on more just you're there? little Just color

from the by takeoffs had see in just FAA out data driven up. it kind and -- comes every it's terms think data of pool I landings the the we of larger being picked month and

like levels, it to XXX% at something of one or that. it's I kind like XXX% point like XXX%, of closer XXXX think modulated now was and

I an takeoffs the overall slowing in landings. we're So and seeing just think

think And us moderating going that so to into decreasing, translate lower I or [indiscernible] see into when we you it's or generally think shipments.

kind item. of out it the that's I called reason think as we've a watch

line it comes Skibitski with Global. the from Alembic And of Pete

some to I airlines. at the growing pressure just but of pricing global want topic airline to this return traffic

you your on the -- touched wondering any trend with was on airlines belts tightening I I to of where your you're just discretionary Or discretionary for bifurcate but it kind of airline mandatory? exposure not of maybe area be their us kind of not tend points would belt? it's earlier, -- area are spend? that know if of if an sort should to are tighten products don't you wondering guys look was low aftermarket, more And it you think if seeing price could its Just enough versus an that an your we

couple is I thousand of points aftermarket. general, per think in We point in price our the part say in dollars pretty price the aftermarket per a low.

manage on, to as at to industry. If scrutiny operate it best doesn't performance we trying inventory closely. quality, the discretionary is in you commented activity some places. itself any to Are lend slowdown, of out Joel and the comments the airlines seen read of much as aftermarket from many any the -- we've But are maybe -- possible deliver airline what delivery there there certainly there's times. highest continue So maybe in that

business business, seen item. haven't of always relatively for continues as looking any our a seem it We to watch any to translate we're that necessarily but Things be usual. changes. And

the And line it Bert Subin comes with of Stifel. from

a on impacting that the a your on Joel, Is regional seen color sort -- follow-up, little of commercial Is a standpoint there progressing. of aftermarket bit just in you just globally. had you've is a geographic trends because of divergence lot capacity mix? sort questions Maybe from a we've any the provide can of how

your if sorry. missed could just Sorry, of question, I the you middle part repeat it again

a that's from just or we've translated Europe. East mix standpoint, relative XXXX change sales was bit seen capacity your America North the to sort in Middle if into aftermarket? at diverge of looking asking curious I Sure. I'm geographic any at levels, least of Asia geographic or in you're or the whether a growth typical

get data airlines. and for No. [indiscernible] through as goes distributors I OEMs to mean, through by great don't demand it inventory first, the or we region

don't know know to it material. few the don't figure to that out. looked times try one it call next significantly I a try anything I that seeing as and I would region we're we've to to note that out if it different at So

for Kevin, just a Got follow-up you. it. And

your few side, testing continue are M&A the have postmortem interest and of progressing those building to deals more what those what's is spaces? curious And On a your just and services recent I'm deals on how the of is? side. your equipment sort into focused

would first foray Those -- into that. Calspan, ahead And Calspan or at our the is running acquisitions, model. our of was I say that acquisition

on we continue to a looked continue is businesses. like core to for that's still it's we to that at space. But Raptor have much acquisition we've to why And will certification, the components favorably component be So a -- And was the at year content, testing, will that why look in look would successful instrumentation our acquisition business. done that we and aftermarket largest continue CPI, our And focus. date. traditional

spent other acquisition which disciplined you are these strategy, pieces time it into businesses of these Some so understand do. them and other fits how explaining that we our interesting, clearly

the Thank for the turn I remarks. conclude and to back will Q&A call with Jaimie today, that, you. Stemen And we'll for closing session

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

conference. all today's you for And in participating thank

disconnect. now may You