TransDigm (TDG) 7 Nov 242024 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2024 TransDigm Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jaimie Stemen, Director of Investor Relations. ahead. go Please

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

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

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

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

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

now the I Kevin. will turn call to over

Thanks morning. in today. for Good calling

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

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

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

with follow content. own specifically. long-term businesses We aftermarket significant a aerospace proprietary consistent first We strategy and operate

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

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

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

earnings EBITDA quarter. coming QX release, year total defined we out solid you both revenue operating another closed as from our with As good in strong. margin in the saw We and had with performance

revenue For EBITDA our guidance. in guidance. defined surpassed above 'XX the full the recently came margin year, fiscal fiscal end most In the published our of 'XX high as

our to results Commercial favorable In progress levels is aerospace air global the rates traffic in The continue persists. trends commercial there continues pre-pandemic travel for market pre-pandemic has to industry. and as still be OEM surpass made affected demand remain for in and market, productions. be normalized much commercial OEM adversely to comparison to the aftermarket

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

likely OEM to rates supply and recovery the resolved as well struggles pre-pandemic pushes production machinists of the it OEM remain recently right. lingering aircraft below strike further the the OEM However, persists levels the effects chain Boeing and at

commercial channels: commercial during healthy our OEM; major business, our the aftermarket; in X a revenues growth saw In all defense. market and quarter, for our of we

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

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

expect to We XXXX. generate additional through cash significant steadily

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

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

activities CPI dividend acquisition to Electron Industries, This of included Raptor is Scientific, a our and of per among SEI $XX others, business, the of these dividend $XX Device the special date. share. largest Specifically,

As you shareholders. return are and options, assessing know, to pleased are our our we continuously capital to capital very we allocation this

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

environment over continue not expanding out near do in term. to this as look an demonstrated see we we slowing and potential see the targets As horizon, M&A we pipeline of the year, time we this

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

capital The TransDigm at unchanged. priorities allocation are

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

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

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

we we fiscal cash cash balance with $X for still around have billion. 'XX earlier, a forma exited Pro balance the special paid sizable billion. dividend $X.X in of a mentioned of As almost October, sizable

any future. us other leave or significant Our requirements to flexibility liquidity the of in financial meet opportunities capital capital range readily allocation likely with actions and still foreseeable

continued is no to Moving on guidance or assumes fiscal expectations outlook primary and throughout acquisitions The for for commercial based current end divestitures markets in our our additional 'XX. performance fiscal 'XX.

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

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

percentage on the high production mid-single-digit of We and which highly low revenue rates expect commercial in dependent commercial defense the range. evolution revenue revenue growth range in aftermarket high single-digit growth environment. in Commercial single-digit growth the double-digit the OEM is percentage OEM the the to percentage in range

midpoint includes is This approximately XXXX our $X.XXX acquisitions. recent anticipate with fiscal QX sequentially margins and as an lower margin points XX.X%. of up expected up than EBITDA the about move guidance guidance QX XXXX. billion, the of fiscal dilution or around with throughout being XX% The lowest from additional of defined EBITDA margin an year, XX of basis We will

Sarah of impacting more updates. financial midpoint adjusted positioned we approximately as with The other X%. EPS will anticipated detail fiscal along are 'XX enter and in up believe to we some be the $XX.XX factors We assumptions discuss or 'XX. EPS is well fiscal shortly

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

and me value by focused structure Let drivers, the remain continue come cost our We look fiscal on strategy very have excellence. value stating us. that forward that pleased conclude you from to consistent the I'm our expect provide XXXX to to year. We this with performance operational will company's and expect

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

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

The same the in Electron the SEI both to basis year is and business both remainder of market prior a pro periods. discussion of compared of I'll recent the commentary mix Raptor own forma period businesses that Device Scientific assuming For acquisitions provide in the Industries, the the includes XXXX on call, we in CPI periods.

into our our the discussion we XX% to which OEM and typically of makes commercial will revenue, In market, split up aftermarket. close

year XXXX Our total in commercial year QX revenue OEM for periods. with full compared contracted the prior approximately Sequentially, commercial XX% revenues total by in X% increased and OEM fiscal QX. XX%

Boeing impact as last much this quarter. and XX hit only without of Bookings the in were strike, the from quarter days solid the too negative the

OEM again a reached but few supplier see shutdown and Time this the are We recovery is near once fragile. OEM the IAM aerospace the the seen agreement, how to have will difficult to the that strike, happy out. to remains continuing likely production but Boeing exacerbate an landscape Prior situation. years ease, across in position. now challenges that supply last these plays set tell will line somewhat were The X-week in the

since to uneven the varied. impact as is our and tiers TransDigm, the sub we businesses both affected Boeing across shift platforms, to on as well Specific

The commercial is what today build believe XXX and XXXX XXX for an MAX, guidance the around contains fiscal we we're production the OEM risk appropriate giving level rates of year.

EBITDA quite majority even As with across most of all the more revenue from know, aftermarket. and diversified derived commercial we you platforms are so of defense and our the

Accurately predicting difficult task. a sit we OEM as XXXX here today build is for rates

previously agreement to Now targeted been that back we ramp-up an be monthly expect significantly the reached, the production rates to has delayed.

to recover quarter means on last OEM the in XXXX strikes, rates rates. prior of our have close production monthly taken we to environment ago year recently the call. a On XXXX, X X earnings expected backside than This pre-strike lower production fiscal our most to

To environment. at production actions of reductions, during expenses. range headcount units reduction These reduction weeks, prepare timeline our productivity structure cost OEM rightsize and projects, initiated for operating cost we other span initiatives XXXX to this, across this initiatives proactively reducing for furloughs, of aimed lower recent a our accelerations

increase commercial of lighter roughly our compared XX% this year approximately bit saw by expected. regards Sequentially, growth, to were quarter in total aftermarket with a previously than aftermarket we our Commercial full X% XXXX X% prior Aftermarket revenues aftermarket Total commercial on With flat fiscal the moving and the discussion. year-over-year increased year revenue QX. in business to Now QX for periods. rate was we commercial

be commercial lumpy. As we've before, can said many aftermarket times

So we trends. always not focus XX-month quarterly trends, on

up freight; X commercial of made aftermarket business submarkets: interior; Our jet. is passenger; and

as total X the year. growth aftermarket of but quarter, increased versus quarters Jet varied, as this quite was Business bit commercial still rate. was X% a stronger in growth of submarkets year. X across last the disconnected QX and All weaker the than This first Freight X seen submarkets not

double line versus into quarter, point In QX of submarket rate well distribution QX passenger the partners the the performed aftermarket of last commercial overall in data digits, increased with XX% year. approaching growth. our from the sales of fourth

versus and our with operating content the biz non-engine in original content For our very underperformed the the and full expectations solid exceeding those above In expectations. the full remained of group and on within passenger passenger for nicely, interior year, original the of excess units Staying with particular, freight, expectations. segment, our again posted year. all up our submarket engine year was our theme, jet strongest growth higher

nicely confidence which commercial the will we the These for us year. full factors 'XX. exceeded achieve guidance, Finally, give for fiscal aftermarket rate provided growth bookings sales Kevin

commercial XXXX, aftermarket two revenue to quick was progress likely notes. regard to With throughout how fiscal

quarter year fewer standpoint. working on XX% falls a 'XX is the a recent into basis, and second, owing lowest will on quarter the what some to of dictates likely the First, to lowest on softness timing QX growth days. quarter of expected a to fiscal percentage the be be dollar from shipment And bookings owing basis, also sales the QX that

Now Domestic air year the travel traffic about by turning pre-pandemic travel levels. data XXXX to Domestic expects driven up IATA Global growth miles broader in travel compared compared and XX%. revenue recent the above referencing traffic September levels most reach where significantly XXXX. China, since was XXXX levels air local IATA And domestic market for September, XXXX traffic by pre-pandemic. have XX% for was February and XXX% recently to in September. traffic traffic to dynamics continued growth most been up surpass September pre-pandemic. pre-pandemic to air reported surpass currently of prior to passenger was X% X% traffic surpassed in air has data outsized continues XXXX.

to for improved for or year was reported International nicely and the XX% the levels. below above year for about where levels XXXX versus of but X% has over being September up levels is travel the air Shifting International, traffic was U.S. ago. generally from past months recently domestic few XXXX hovered pre-pandemic has X above ago. from slightly data X% it September, pre-pandemic most levels X And this up

commercial XXXX, things the nicely. aftermarket shape for as into to up head summary, continue we In

you with returned slightly to ahead calls, As levels, on now rate levels, earnings longer. interior growth this running the passenger in passenger of moderate see a and in XXXX. prior has regard traffic in passenger it, the and pre-pandemic by would of for is our the for we the XXXX growth volume, commercial which older aided aftermarket bit now traffic and trends submarkets by slightly guidance continuing to driven we aircraft continued XXXX, to With our our positive expect submarkets in stated fly

'XX, fiscal to and to continue in will is start a growth but Jet bounce should lap Business we the our year. Freight growth full to likely performance return to there so around, trends. comps positive easier return stronger to over expect

path commercial sure aftermarket quarterly the growth course know, that the on are mentioned lumpy, expectations coming uneven so will we of the a you I over the can be be As basis, year. to

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

growth. of similar of support we Defense OEM our and year high the full Additionally, OEM components bookings running the saw total for year the both ahead the prior with slightly guidance XXXX single-digit defense of revenue significantly rates in market, for and growth aftermarket aftermarket. surpassed

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

defense lumpy pull is or can push quarterly timing. smaller in with They get or forecasting and you bigger can be and on precision and size As difficult. right a them sales know, bookings basis on left

my So growth defense similar aftermarket over uneven quarters commentary, to rates commercial also the XXXX. the individual could be

Lastly, operating was XX and XXXX. good operating teams our we're finish unit fiscal with and a delivered they by accomplishments recognizing our the the year, pleased for to I'd performance strong of like shareholders. efforts It during

the meet into outlined management for operating our strategy, to growth teams demand fiscal stronger in unit too our today, our step year, for ready teams here prove conservative committed coming As we expectations than we've with remain and to the will operating consistent servicing enter demand our products should up strong be and our products XXXX higher demand. our new

I it would With that, over Wynne. CFO, like to to Sarah turn our

review for matters for Thanks, a 'XX. also Mike, to and additional and few good 'XX financial then our morning, fiscal going everyone. fiscal I'm expectations

and additional few liquidity. taxes points 'XX fiscal organic data a growth, First, on

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

their adjusted rate expected the finished On within year tax taxes, our and GAAP ranges.

that rate $XXX Our XX.X% interest we cash CapEx working levels capital cash million, the of billion net was GAAP liquidity, which approximately traditionally as cash taxes $X.X net flow the for the year. was tax fiscal free in sales. Below On 'XX with roughly ended and line, as historical consumed and rate flow, adjusted payments, cash less the year working capital percentage and line was free defined roughly cash and final XX%. a EBITDA

our As Kevin cash year ended October when on year-end, the the on down debt-to-EBITDA At approximately the last that XX. for ratio the of net with dividend, was X.Xx, the debt-to-EBITDA $XX dividend paid is mentioned, $X.X $XX around share sheet billion or Pro pro our quarter. forma balance at from X.Xx. ratio X.X we billion $X net forma of end for out the

in hand sufficient pipeline. support the that target a on don't cash amount we M&A both of as we through have like potential cash capacity on we While hand, have specific to to as all debt available capital incremental well

Over fair billion fund $X.X of in of and CPI to a We to earlier the the financing. form a billion course the acquisition support cash in year capital, our of fiscal in of billion $X of shareholders announced return dividend. bit billion of $XX 'XX, raised $X the $X we of the did

be range. to X the We ratio continue X comfortable net to operating in debt-EBITDA

providing value to has not to for the opportunities through strategy. best our go-forward Our deployment shareholders capital changed, continue and seek of leverage we strategy our

of various refinanced In stack. addition, tranches we our debt

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

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

is rate balance swaps XXXX. caps, XX% approximately rate through debt $XX and This of fixed is a interest fixed billion through achieved addition, notes, collars. combination fiscal of our In gross

fiscal more and billion fiscal in an going comments in interest This financial X.X%. year. expense rate about here assumptions approximately full note this the on give dividend $X.XX for Net a my the I'm around of estimate expectations, that fiscal interest of rate Special of the on count. X.X% to to 'XX SOFR Next, the expected taxes details to weighted average share and some equates average expense, 'XX, the payment assumes be XXXX. interest include is and data $XX of all

On adjusted in be and GAAP anticipated tax fiscal taxes, XX% all the XXXX XX%. are to to range our cash of rates

count, share shares XX.X we average weighted fiscal to expect in million our 'XX. the be On outstanding shares

we dividend to billion assuming we Xx leverage interest liquidity to the taxes, is the and cash With traditionally ratio and year close After transactions, payments, $X less defined paying sheet, flow for as a with imply for metric estimate and regards $X.X fiscal would we fiscal per or the 'XX, out this would billion. from TransDigm, free cash operations balance cash as market no cash end 'XX. capital to net end additional define, CapEx be on around again EBITDA at would our of acquisitions which share $XX at of the debt-to-EBITDA around which

been change in our to allocation to ratio a as think debt And average approach X there's in or how target we capital the about reminder, typical with range. X net our no

will ratio coverage through our interest of pursue to capital EBITDA to cash value We allocation as expense this to we our of interest strategy. options along watch the shareholders maximizing with continue ratio actively

or note that, pursue to remain to cash position M&A adequate final the or So by course of think good with 'XX. return on we additional shareholders our flexibility fiscal dividend in a we buyback during a on

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

the Kahyaoglu line of [Operator Our from Sheila Instructions] comes first question Jefferies. from

you look to When the baked organic you about your you're year? quarter passenger fiscal does 'XX. markets how And terms was are it good, acceleration the why I you it fiscal pretty in X the of in in 'XX? about the performance? performance. How talk picking aftermarket each And mentioned maybe XX in know X% months thinking on in commercial Kevin, of Interiors but at that you is What growth want maybe, into even accelerates expect we folks number. 'XX? perform in next growth So think about 'XX? Can

will Sure, it's one. that Mike. Sheila, I take

here. good this we guidance about as sit we're the First, we giving feel morning

know, we've unit covered unit. us op while. As guys is based a you approach This by op for bottoms-up a

it. into of dialogue aftermarket op where based This customers As growth the specific process with accurate the about our XX in coming results, going feel XX by plan approach the feed a teams. good past unit assumptions for produced back to is the next part we've on with the us used regard are that annual what's good We while. It's months. our same in commercial results

So the we digit about the we for high commercial guidance as feel at digit look aftermarket to low good total. single double

year, we 'XX. obviously into that basis percentage As the bit ago weaker into guidance we mentioned than little freight were as headwind a biz we for a FY the comments, we next of We a gave we expected jet, don't on as bit we took FY a which year from head this and 'XX. when to continue in head year expect

We largest takeoffs the well, as commercial our head revenue growth. to together nicely should landings with is expect Passenger, the submarket and to up as 'XX. into we which aftermarket FY return grow are both within forecasted that

short we all, 'XX. Specific are still for aspirations in in FY to there. came growth see a little bit interiors, things that well. of all So in we'll 'XX FY have up expectations shaping

because willing of market of to take in out be terms the expect But and interiors they little some work pulled the some can't deployed need good there interior do of we XXXX. the slowdown being of I they as in seen a out airlines to aircraft the and in service growth be refurbs. to think in we've bit just a well do

about it was Mike, do tell in decelerate? us passenger think any is the you way 'XX 'XX? how it Does in stay or you there could same and what

positive. bit up was will passenger XX%, just landings, of the year, prior in in and It XX%, of the versus then the next close segment. still the submarkets. increase nicely passenger be that coming And XX% to year, heading the nicely obviously, into were So decelerate sort takeoffs below XXXX, down with for ballpark a but others terms

for next moment our question. One

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

you Just on biz revenue at ASMs, forecast, are jet, assuming commercial miles XX What What know What that. grows following are flight course questions. or you set you of months? that of aftermarket that just up hours, next all in over last it? your airline want to are you've got however the I freight, the assuming cut you passenger, passenger assuming

forecast that's done build level. op at the We the unit

hey we issue RPM So the the needed what to growth a in going coming is say, don't top-down guys, year. op here's and be to units

number XX a forecast based unit this. it's part bottoms-up detailed customer-by-customer, same Now the And next going more at a op this year. go We us very produced Again, the took levels. on your again, accurate out do that's forecast for approach, that approach months.

give baked them in we behind assumptions don't RPM set So a it. of

And it. dig the a Got little Okay. to margin on in EBITDA bit. wanted forecast

XX.X% side. which amount fair So this aftermarket mix past included of quarter, great did acquisitions, not on a the you recent your a just dilution from

relatively in bit bit improvement. bit better a You a next a of assume of And expansion you're the while a better. margin a think underlying weak forecasting way you margins next not talked year? to the margin about would XXX mix growth, year year. get aftermarket the typically forecasting ton aren't acquisition more XXX I Why looks OE with -- I you around target bps

as gets think into per year new us That acquisition it target. more we to year. basis to fold of the a XXX, points we dilution points, about of to in percentage has little like with full expansion you a go I dilution. XXX our When do that maybe

of improvement Okay. acquisitions XX.X% next Yes. had -- about hit the XX for at of the I mean you in off that midpoint just you're you taking from and I year. this quarter, forecasting and bps were was

of getting that's at. kind I what So was

most of closed agree. to I closer year. end at the -- the Yes, acquisitions of the you But -- the when

guidance. of forecast a So impact you've dilution 'XX year full or of got that our in

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

and if have I of recall, at kind renewal, that and contract end of on what status the about there a the ask this calendar expired the OEM which, of contract year to the old was you. given terms renegotiation strike Wanted

happens. see get just 'XX? Does And that terms the forecast baked that what for final into contract? fiscal When wondering, we expect is would Just your to pushed new the on out?

things. on with actively comment too working customers, don't of negotiations it couple much negotiating continuing on the active to Correct it move A our on We We're but timing. the is front. along impact and we have guidance as months comes of negotiations factored out to some and resolution. the the the in of as get proceed a final those into they in it coming

And what happens December do if old what by it's not the happens? done or XX, apply terms

important is Boeing customer. an

this We to with in continue resolve a near them work line to the actively on term. time

One our moment question. for next

Our line next Bank Epstein America. question of of will come from from Ron the

story, So M&A with the opportunities, M&A right? you with be important maybe there change? of an you Would new environment administration the guys bigger expect to change? some and is maybe different changes, So opportunities do for the part forward going that

my control don't outside of to somewhat things. on like understanding. I and those Yes. It's speculate really

will get anticipating I'm it So worse. not

disciplined We in way very analyze approach in them. diligent are we and how the we deals

and So We see of came behind the this transactions tend off and in closing. record year don't administration of of that. we're It last pretty not the only conservative of here. pushing and year and a to Esterline be I really didn't what I like, impacting number that don't changing, is hurt see us any we the terms disciplined, year envelope

slowing. that a don't So see I and phenomenal year,

there attractive Got suggested to stuff answer. along you going has it. that one. anything another lines, And to might the they're that it. Boeing in maybe you? can sell same some be that then of pile if Got stuff. it. Got Is

and some look Yes. possibly It's are of aware, that all like I just speculate think that, that like But don't I'm can't there in assets comment. aware that. are see. but to I attractive, have on to I public you beyond early assets M&A. on we'll larger company pretty

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

perhaps as come wondering Kevin, also aerospace a little quarter that in I in on been you going be I that's expectations QX. on your an and think causes the might the strong bookings of QX as in hadn't that? you could aftermarket you the to bit elaborate was some behind below what have mentioned impact the if thought,

impact Rob. too at to We've an say We've a bit exactly, could heard It's of units, in things. QX. seen much anecdotally of on our those but about there kind op and have airlines pulling hard inventory been not back some it little there directly of

With you at my just booking impact forecasted as head guidance about will the next good timing here that into bit in as growth But on schedule. we see a the phasing outlook the softness of QX we with takeoffs I the percentage in landings regard we of next being to year, and sit feel quarterly comments, did the as mentioned look and We lowest potentially a for some year, QX today. basis.

following at well. to doing, product our know that But perform market positions, aftermarket guidance and commercial follow know feel we for look We because what generally is the we low single-digit and just high market. the it's should the full we year, really good about double-digit and hitting the

number, as increases give coming guide normal but Right. forecast? price well. TransDigm you have for And then, On Mike, this might be specific in that of you a assumed XXXX, won't levels I you know that for to aftermarket

price slot slightly ahead of and approach year. we're to same aim inflation, taking always that's We the this

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

deploy the at of the special that way Scott might next it? repos to think thoughts of on is year about the than XX capital. the share Is Sarah, the Mikus Spingarn. Rob you versus need end is net end over right dividends months? of turns to more what by back be towards if for X any get This there X And to billion M&A turns $X or year, you Kevin, on leverage Mike, used for

that, I'll Sarah it on start finish then up. and can

right I to at is way it. directionally think it look the

looking that things that M&A commented were We deals if comes powder anything have earlier, on the pass. larger we're for these of at, plenty of any including dry to

I So think great position. we're in a

I priorities businesses our invest want our in the that capital, is, we give and first. you of to

the is then, second look we're that from that And us returning And shareholders. seen You've looking thing. third, of to then course, M&A disciplined at we historically. for

that available have coming to of here after go in leverage we along anything We plenty capacity see marketplace. the

Yes. the into to we you same the And so confirm, yes. did, just way math tied

question line the will of from come Our next from Wolfe Myles Walton Research.

uncorrelated Have think lead to skew? distribution I had ever the fourth in to XX% growth I non-distribution your the indicator? growth that that or aftermarket in implies X% a channel kind distribution guess and of had you tending mentioned and a that be channels. X% lag quarter, is And to close you

things It's a hard data the total uncorrelated. to posts. can commercial quarterly the sometimes aftermarket POS on say. get noisy I from say basis would These it's and disconnect generally what

what I goes knows about think total as distribution is commercial XX% through XX% bounces to of around our aftermarket. -- everyone

a XX% to and those generally, distributors, a at as it, they So indicator not to market. a replenish of then chunk, of sales meaty then the once we because probably need it's leading out it look the bit been what's north of happen sold but from

Okay. And rates. back mentioned then, to the a prior production get Mike, I was think year strikes you taking for to expectation

to price mid-single-digit build does just flat looking you're as with to up that get you roughly year-on-year mean your from then Airbus growth? output Boeing and guidance, the growth so assumed to some And you've guys

of what inventory level their like the that and comment assumptions factor and that built say customer, on do all they it dialogue rate know It's hard we they build up unit on so in. their and is, with op it at to the because can they based macro specific

keep we as we more we and you of demand upside we reasons need. But just that the the to in prior state up, and parts the for should the And here add evolves. the need happy we guys where the When the step we I messy anticipate, that I we're and been understand. think think up probably demand can the be we're fragile said think as commentary conservative given Boeing And that I clean in surprised give the bit others. hopefully, they resources Airbus, hit obviously a If stronger than have supply year chain, how and we strikes stand than do get come and both in to we to conservative. aim OEM the guidance, to

come of from Scott will the line from Bank. Deutsche question Deuschle Next

and revenue sense that outpacing Joel, commercial can year. TransDigm's growth you mentioned give from for asking perspective engine? I'm And breaks is because this down airframe a you the aftermarket us airframe how in engine between a

revenue So X sense between just bifurcates how some that curious those channels? for to get aftermarket

at other look the don't terms in how overweight about and see we few across really the the pockets doing that quarter. Harcos pumps we the of strength this side we're no folks more in the engine focused But and weighted business. a or our airframe market we're that and Auxitrol that engine were of the we're up spend that OEM those aircraft sensors providing did on and about We airframe, around of spare the towards but it, businesses above is of are different. seen vicinity we market, parts engine As generally based significantly more market-weighted. on size there

expect engine the and outpace as And next given MRO pent-up engine demand shops? well, at airframe you existing would backlog year Okay. to just the

shops head MRO filled, year, given we right of slots next the across expect into just as the see what and MRO we similar something engine about, we'd what the read world being around and high guys now. is side on just all Based write probably you demand about there the

line from come the of will UBS. Gavin question next Parsons from Our

any in all terms and acted the of work as that in of chain relative tier of way health broader keep you whipsaw the that, supply your Boeing might aspect to kind between healthier? kind X? have suppliers own suppliers buffer Just prevent smaller Is any to of the Seattle, to from guys your going there stoppage

landscape, We our too stuff in. that much. op want shops factor units always out, We size up stress never go tell to the mom-and-pop we to and our obviously supply

the to op potentially suspect higher ready step on. targets. And in has said some have than we'll I that think we gone come the will be today, demand, as the meet be Boeing, ready I up Airbus units to rates here the prepared of forecasted if in build and hit we So and inventory and the commentary, and our

sense And freight, that tend it then to months growth? long returned Give for revenue dedicated resuming a to couple roughly take to translate how looks on ago. growth Okay. like freight Great. into flights a of

to hard say. It's

transition the put corner in up and as turns. time it the Hard turn quarters back coming head though, things seen, rolled to that belly peaks COVID of next cargo -- internal That's I expect to see as from because we continued it's as a we into all, we to I and the growth. belly more as been of positive good it's stabilize down towards see here. transition what we it, to forecast has then year, on line market first a suspect we've the couple hopefully, think

come Our Ken next line question the RBC Markets. Herbert Capital of from from will

or wanted I defense on Mike Kevin the to side. ask

Was to 'XX guide. guide, over as outperformed see really can some see of where initial you think You that Or that this market? really you in on into at look in in didn't 'XX upside the activity it relative as where potential into then expect? XX% [op upside and areas? And kicked defense that conservatism appreciate we did the I initial there do defense? the and year, look maybe you you -- by tempo] sort things were about in 'XX But

We all across the was on our side they're their ranch A little the of a TransDigm businesses. But saw at work couple on across specific others, terms stronger here strength landscape, based pretty uniform doing Avtech, bit than uniformly just across units. it defense the were growth. of really in of op pretty the Armtech, defense the

many ballpark guys to kind a XX% know, been for in have now the row. that positive of As you in X% outlays quarters

those that causing the terms and forth So of that of landscape, delay and threat them consistent bringing probably growth come to on us kind I'm numbers I has in a of front about. sure, bit has think gone aided

'XX business. As on FY we bookings really have year, year our side head the into in defense next good this of we

it high year. confidence hit next we're target going So us for to single-digit gives that that

you can aftermarket OE? defense high getting exiting And a just versus between of even at frame up the now mix level 'XX, maybe

bounce commercial year. We grew on half, X parts and about and It's and side, aftermarket It a not But the half bounces year-by-year. quarter-by-quarter that growth different tends somewhat all around closely not and very this disconnected. both OEM it's to half business. and the of and half bit side around the roughly our and different from saw both consistent

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

of to forward whether And and in just has you an inventory wanted seeing just here, on inventory could there distribution. kind perspective whether the X expect and circle inventory the talk the I the X maybe been last channel? trends through sales and in or quarters of back kind from over just any what channel going what you're you interesting movement

great things. that op from not don't in get of units couple inventory data of in from lack the just of you detail airlines. So It's We terms holding they're stock. trying, what kind get of but for don't from our them

terms on So what we've in never it's airlines to of that and front have. say, the hard intel exactly great gotten

here of way them. they're As end to the might and the a they the will We on about want to pertains to it a have distribution, But FY 'XX, have be. should months about on as where where today to of we parts the expect always or we as And hand holding they we distributors so supply. that continue. have be way, that we're or this we into on in It head oscillate sit user parts hand need hand should terms our supply time. at month as

as maintaining So year. to into forward we on months we head look similar hand next

on relative the remarks of market? I'm maybe currently what walk today relative disciplined maybe valuation the in term. through do is going And Are always pre-pandemic if is Or maybe remaining were wondering and Great. you we Okay. relative then, and to and some in you're if relative Q&A done? to talk Kevin, are where timeframe. of on going you've can what history 'XX to about where prepared a a your 'XX, I'm you you kind just multiples that M&A. curious we remain mentioned disciplined just to it is disciplined

It's businesses so goes target acquire. commercial high commercial look many that are more disciplined in ticked for. what things these very or what to I of having into But it. We've IP, of we that just businesses. mean of all terms what we times We want off today are than did hopefully the pay acquisition. Multiples a to doubt up, about math ago. We're about few years no disciplined. That's there's the we more

We every the changed We before targets. that it. we model trigger XX% our look would IRR on we deal haven't on for pull still

as long business as much your So a to Yes, we're as about a what paying criteria matches the model you often in about have worry the price if criteria. something discipline. the it, and which little I you discipline can mean that's our meets you more. pay But not

from comes from will Baird. question next Arment Our Peter

like one historically, you And X% sales. quick investments the to It seems a been I could maybe closer you're maybe to highlight that's to that, going Just implies CapEx. some closer of X%. if just on the guide making think you've of be because

dynamics going there. Just curious if any there's on

continue of heavily make CapEx investing a Sure. our got of one, really year. and units next guidance but Yes. we to new on We're increasing operating a we're sure lot that we want for in. productivity, good that lot the have productivity have the We've infrastructure to done projects M&A, new

this, certainly at that months about available of and we're calls necessarily cobots think, where years we've Kevin Mike and stuff some available ago, but ago, are projects that on now let talked seeing weren't on some and I the this, of can point I price becoming elaborate robots. -- a prior

So in spending productivity, of more our help time invest and that drivers. our one with and money to value

structure us too. the spend percentage And investments. that see just the [incremental] of gets That's good of to majority of the is on productivity benefits Kevin point, mentioned is good that a in you Sarah's some what bit plus the CapEx margin CapEx cost the that projects point from side. us help margin That's there

session. question-and-answer would for back over And closing remarks. this to to turn concludes Jaimie it the now I like

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

This program. conference. today's does in participation your the for you conclude Thank

may You have a disconnect. Everyone, now day. great