HEICO (HEI) 28 Feb 182018 Q1 Earnings call transcript

Good morning. My name is Jennifer, and I will be your conference operator. At this time, I would like to welcome everyone to the Fiscal Year 2018 First Quarter Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. conference risk, constitute uncertainties this are statements, in to subject and statements call forward-looking will which Certain contingencies. complete as by HEICO's from actual commercial airline forward-looking air (XX:XX) changes airline demand cause purchase requirements, those materially contracts; and of statements, those or or which expressed and/or travel our U.S. including: results applied and (sic) in demand for goods services; our may product cost lower costs reductions to a result for differ decisions, fleet export could to factors cause could or homeland demands, [implied] which and governmental an regulatory by restrictions, policies increase lower specification security and spending space defense, sales; electronic at and impact products from operating revenues; budget or aviation, tax income which defense interest, risk; product currency foreign within achieve introduce customer which manufacturing telecommunications credit foreign cuts, negatively and and which customers pricing competition profitable sales reduce new spending acquired or difficulties, or reduce and increase and make to economic medical, our and space, revenue. could outside could of ability could exchange conditions defense, our and the the defense-related cost rates; growth; our new from businesses; our on services competitors, acquisitions which industries, and reduce levels, delay ability synergies our could to development sales; sales our cost product could development which our Form filings but a the to, on and review of with all Parties limited transcript Securities XX-Q XX-K, this Form to encouraged including, Commission HEICO's listening of and Form to or call X-K. reading are Exchange filings not as applicable forward-looking of publicly revise law any a required (sic) information, except applicable extent events to obligation update future by no (XX:XX). statements to undertake otherwise, or result [by law] We the new or whether ladies Thank gentlemen. you, and to call the turn now and over Laurans Chairman I'd Mendelson, And CEO. ahead. Please go

teleconference. for I'm you HEICO the fiscal everyone very first thank and you to this and I'm of joined President Co-President welcome Mendelson, Carlos Thank HEICO call, morning our CEO we And Technologies joining CFO. Chairman President Support of good HEICO's much, and HEICO's by and earnings Mendelson, us. Executive HEICO's Corporation. Vice to Larry and Eric and Group; quarter announcement Electronic this Victor HEICO's Co-President Macau, on Group; We President and here you XXXX of Mendelson, Flight morning

the increased up million of highlights XX% fiscal of diluted income record to $XX.X first that increased and XXXX. the or and $XX.X of XXXX, of the of to quarter million was our quarter XXXX million reviewing per of and fiscal first a first group, quality I turn board very HEICO summarize again dedicated talented, I'll members talented, loyal take detail, for before proud this HEICO's and who team I'd a is make our to the to loyal services dedicated highest and moments for that company in operating customers it is. great everyday results am quarter XX% $X.XX in the from results. like were Consolidated and share per net take $X.XX out very, who $XX.X moment all thank a few and or results. excellent operating responsible up the Now, $XX.X was consistently fiscal to fiscal first in our of products too the XXXX. in quarter share million diluted quarter from Consolidated in first the that income

XXXX in up of XXXX. quarter Our first first that the to the fiscal XX.X% and from quarter of XX.X% improved consolidated operating margin fiscal was in

in was quarter down of reform rate the U.S. the passing company's from XXXX. was X.X%, the of quarter fiscal first As tax of in a of XX.X% the in first tax XXXX, quarter our the result effective first fiscal which

of corporate share favorably as was per as a per rate, tax $X.XX approximately per result or including earnings approximately due our the tax of of per benefit, $XXX.X or diluted the that in was in the earnings share diluted to Consolidated fiscal liabilities. principally lower million XXXX. $X.XX million tax income first $XX.X net million of XXXX one-time up $XX.X XX% net of deferred impacted by and the from quarter net a remeasurement Our to first million sales $XXX.X quarter result increased

defense Operating ETG fiscal XX%, of respectively, up XX%, certain quarter XXXX income increases are XXXX XXXX. reflect in fiscal contributions repeat net Group profit quarter first I'm Our and XX% principally and margin truly our income improved The XXXX sales going profitable first the organic and of plus the growth from and me. amazing the operating over fiscal products. to acquisitions, up for that. to X%

provided of quarter XX, compared XXXX of in October is cash Our acquisitions and first X% debt, fiscal XX%, by XXXX. $XX of that Group was organic quarter as Flight equity Support first our quarter and over as totaling up to XXXX decreased of less operating was XXXX. principally from January are from Those fiscal the strong income XX% and Cash the which of activities shareholders' reflect in increases recent XX, business. flow January equivalents, XX% and Net in respectively, debt down fiscal commercial the million operating remained million XXXX contributions aftermarket net our first sales XX, $XXX.X of to growth total and XXXX. as XX%

to was XXXX. X.XX XXXX XX, times ratio X.XX times October as Our compared of of January as debt-to-EBITDA XX, net

fiscal have past acquisitions Now, year. and we XXXX, completed completed over acquisitions during two the successfully five we've

enforcement, shareholder address November XXXX stock marine, and part We all Interface the utilize subsidiary Controls. This fiscal the of Sensor we vehicles for & manufactures ETG acquisition existing Displays acquisition acquired returns. XX% this homeland our have outstanding Technology military Tech's nuclear accelerate and computing Group. and military maturities of fighting law and high-quality our better we sophisticated assets to which Engineering, offerings we to security until designs, financial Tech Sensor week, no needs. embedded IDC to us Sensor of in Tech. Earlier and two Radiant market radiation Sensor of markets. call IDC Sensor we to Barbara business is electronic to our and roles. announced for and designs is products the detectors of the plan of aviation, manufactures will our manage expands which in Power allows is remaining flexibility ETG existing our Group. product the XX% Infrared it business, significant XXXX, growth customers subsidiary, pursue continue aggressively our part In application. Santa also to debt own Tech in of and their maximize founders acquisitions

HEICO declared split, Board XXXX. which XXXX. December earnings be strategic marks business. share information HEICO's per We January the and trajectory made continued of stock split All expect confidence of retroactively reflects And past X-for-X to the accretive within The and additional were in shares following or growth within second XXXX, year XX share first a and Directors' that has the stock applicable the split we to a of X% these share, reflect dividend will semiannual share distributed since months acquisitions the the this X-for-X represented closing. HEICO's January both the of Group, per we to I'd semiannual is semiannual stock splits adjusted will XXth in Support cash been cash cash Mendelson, stock and dividend that X-for-X In XXth increase per In increased XXXX. Co-President of introduce and of Support amount, of an dividend, President results in discuss also XX% paid and Flight who distributed and consecutive Group. April the and XXXX cumulative a dividend January Eric since the the At January increase Eric? of like Flight he this and XXXX, time, the regular $X.XX over our prior XXXX.

Support of million fiscal up fiscal first the XXXX. sales Flight in net from Group quarter XX% to million XXXX, increased $XXX.X The first in $XXX.X quarter the of

increase Group's offset $XX.X performance-based expense in reflects asset the in fiscal intangible small amortization and XX% decrease The commercial our well from of sales our components, the demand quarter decrease replacement XXXX within the overall services. aftermarket parts parts XXXX, the overhaul product asset growth, recent first the organic products product and increase Flight the by line, increased growth for the operating of decrease Support repair fiscal sales new Support the services offset the an previously higher operating XXXX, in Support for certain the is Support first fiscal The previously from XXXX. respectively. was partially specialty attributable a increase in X%. first net acquisitions. sales and reflects quarter offerings in quarters sales amortization XXXX first our basis, Group and acquisitions to million as a quarter quarter experienced XX% increase net in in principally first in our and Excluding the Flight in consolidated of Group's in partially The the organic and reflects expense, line XX.X% in organic intangible mentioned compensation expense, of our growth and performance-based The the higher as of quarter up million specialty fiscal Flight compensation Group the first fiscal the as aftermarket principally On Flight X% product net defense $XX.X by replacement resulting margin mainly parts The expense. of line. fiscal Group and from income as XXXX mentioned previously XXXX to mainly mentioned fiscal well higher growth product XXXX profitable Support Flight impact of within net

remainder XX.X%. generated any. With will of net to half margin growth full exclude to full-year net we over additional fiscal XXXX, to estimates continue Group's and sales sales Further, Flight acquired prior year estimate the These the Support approximately growth the approximate businesses, fiscal that XX% operating XX% approximately result of be organically. to if our year, we XXXX estimate the

Now, President Electronic I of the Electronic the HEICO HEICO's of and Group, to Victor results introduce Technologies discuss like to Mendelson, Group. Technologies would of Co-President

sales margin to net profitable growth the previously the increased mentioned from Technologies million Electronic improved for XX%. previous and XX%, million sales income the the sales from fiscal increased growth gross The to of Electronic acquisition the XXXX. from the Tech, full mentioned With estimate net the exclude sales The course, XXXX. Mendelson. net an the additional and now any. Group's we organic first back The to in fiscal up over first Electronic of mainly XXXX, Electronic fiscal XXXX. first quarter Group's quarter fiscal Group's higher margin up up of sales organic $XX.X single first of to up Eric. These XXXX, recently growth, the to XX% profit of XX.X% quarter previously the estimate margin. products. XXXX, year up XX% Technologies the Electronic favorable you, prior fiscals sales X% of increase contributions improved anticipate in remainder any of $XXX.X if defense announced first the to certain reflects net turn improved Sensor to I'll our mid-to-high to the prior of mix estimate And quarter from and fiscal XX% net gross first demand XXXX, in XX%, space principally acquired but XXXX of The Larry in Group's of operating principally call and principally increase product the fiscal from is to Thank Technologies the in million XX.X% approximately a $XX.X we The respect to The the more to of fiscal include now, XX% quarter for in approximate be operating impact estimate income the our products. Group's Technologies full-year Further, and $XXX.X million attributed from digits. over resulted growth in estimates year, from increase rate net businesses, quarter defense the attributed and acquisitions, operating of XXXX Technologies by increased XX%

Thank you, Victor.

and tax per XXXX. share. the income XX% operating $X.XX net to per Electronic the income diluted in share The earnings of changes fiscal increased enacted of $X.XX federal Flight that one-time of in earnings both was end Diluted law and diluted rate of as our improved and to in principally approximately from an rate. the deferred were $X.XX that up quarter tax of re-measurement share significant quarter a U.S. is the to on by would per Technologies, corporate include a was of $X.XX at increase result reduction the impacted benefit Moving inclusive net performance of Support December tax first benefit XXXX XXXX, and the the lower favorably fiscal from in that reflects U.S. and first Consolidated net tax liabilities.

X-for-X share in up retrospectively fiscal in splits, in diluted XXXX. fiscal of of stock fiscal for development amounts was As April XXXX. I expense previously XXXX. million million $XX.X Depreciation The our amortization quarter That assets and million per totaled XXXX. have and incremental $XX earnings increase of quarter the expense up the first been all expense in XXXX XXXX from first adjusted of reflects which mentioned, from $XX.X the quarter were first distributed first January XXXX fiscal first higher our XXXX Research quarter from and amortization in of of impact the increased that the principally in of million acquisitions. and fiscal to quarter XX% $XX.X intangible was fiscal

reflects million from XXXX, quarter The approximately the was first fiscal expected, that new new and XXXX continuing to the attributable fiscal up million of in continue as we development. expense expense expense in the first X.X% performance-based the X.X% are net of again million Flight SG&A XXXX first compensation and a XXXX amortization efforts $X.X in our impact at and with and The $XX.X of the asset a acquisitions. in as of sales quarter and our increase interest of increase higher expense, resulting all balance principally in intangible XXXX. well ongoing into to higher the as from product from $X higher XX.X% a consolidated quarter sales, from Consolidated average quarter impact mainly and up acquisitions. net quarter acquisitions, of XXXX in Support development increased to The percentage XX.X% $XX.X XXXX weighted dollar outstanding an As in in principally and of was the million fiscal revolving of was XXXX fiscal from of product compensation fiscal increase principally SG&A in fiscal XXXX, first that a million significant percentage sales credit expense. Interest from you first invest as expense Consolidated XXXX. SG&A our first both was of that and the in to XXXX. ETG, expense as increased fiscal quarter increased increase to X% $X.X reflects quarter XXXX fiscal fiscal XXXX fiscal $X.X to associated million first up quarter first each performance-based the of under rates due higher of facility a

in on Tax contains tax including, legislation, previously referred to the income subsidiaries. from commonly federal as things, rate XX%, Cuts Act, foreign reduction existing tax and changes implementation other transition mentioned, I of Jobs resulting rate, comprehensive to system, XX% law to in U.S. the among As the a corporate of earnings and tax the significant tax a territorial a tax unremitted one-time

X, to Act, reflect rate fiscal effective result January a XX.X% federal in of results annual for in revised a reduction XX% effective estimated this HEICO rate to XXXX. U.S. our blended As Tax a tax from XX% rate XXXX, the in which we of

of first quarter $XX.X In fiscal tax benefit our XXXX. addition, recorded and tax in deferred million of federal discrete we a net remeasured liabilities, U.S. the

in foreign $X.X first XXXX, on expense quarter transition fiscal recorded to addition, discrete of tax tax In one-time the related subsidiaries. was million and we of that earnings unremitted the of a

and the were that a can rate, all tax in the tax tax go from whole matter X.X%, the one-time complicated. effective of tax a details. liabilities in the federal Macau on benefit all By the decrease fiscal discrete I of call, quarter way, fiscal U.S. as very know decreased to first by previously Carlos Our expense. down net well the lower from – deferred first is transition quarter of matter the XXXX. through you benefit the the reflects tax which tax XX.X% of The XXXX the principally rate re-measurement mentioned of U.S. partially as for offset explain

million flow interests other HEICO, and fiscal ETG quarter and on being the the as On welcomed subsidiaries of held, Net in $X.X well reflects it previously the are was operating million $X.X it. and non-controlling the impact to totaled mentioned of XXXX Act we which increase hand, and will it The Flight to results non-controlling those as a income XXXX principally cash result the subsidiaries. first boost great HEICO's of in stronger future interests in Tax and Support in respectively. improved attributable those

XXXX, pre-tax estimate rate rate For tax fiscal of effective non-controlling and income. between combined a we interest full XX% and XX%

Now, on moving to balance and flow. the cash sheet

Our financial and to XXXX, position very first and remained by Cash operating million in quarter flows cash $XX continue we the strong, record forecast forecasted fiscal cash strong. flow totaling remain flow of XXXX. operations very, in provided from activities

X.X as times working capital XX, times X.X XXXX. improved as XXXX Our October to strong of January compared of XX, to ratio

Our totaled consistent XX, January in XXXX, DSOs, XX, days reported XX January days pretty days of with receivables, sales outstanding XX XXXX.

closely and receivable net efforts than accounted net quarters sales exposure. represented XX% the consolidated Of all customer of and sales. of in XX% Top to course, monitor XXXX limit five XXXX. collection more one we customers fiscal for No credit first XX% of approximately

ended and The the Our fiscal remainder the believe, support necessary and inventory increase rate we higher to during which, January totaled for products XX, XXX levels slightly respectively. XXXX. inventory XXX days for first our reflects days are of higher XXXX anticipated quarter XXXX turnover demand principally

to to XX% October XXXX. debt from ratio total XX, XXXX, of January XX% Our as as XX, down of equity shareholders' decreased

as ratio decreased is Our total from XXXX XX, that January and of shareholders' XX, as XXXX. XX% which debt cash net XX, October XX% the million debt, of and of XXXX cash as to down to less was equivalents, was January $XXX.X equity

two including XXXX, recent we acquisitions fiscal the earlier. have successfully past year, in to referred Over I acquisitions five which most completed the

the maintain this a strategy, to debt leverage. was we cash times as of you burden low XX, healthy in X.XX times net that balance acquisitive an of ratio XXXX XXXX. know, EBITDA our company January X.XX a are significant of XX, high to compared to without sheet of October as order financial flow As Because generates

XXXX. the continued As the sales outlook, aviation growth defense within ahead Flight products. commercial remainder fiscal to and anticipate far as of We we look Support,

also of We demand majority growth anticipate principally our within products. driven the for by ETG,

of fiscal the time flexibility commitments strength a the During returns. further constrained at developing capital new you, remainder I shareholder and strategy, acquisition while HEICO to our our maximizing financial maintaining and remind aggressive not we continue same will XXXX, is products and penetration, services, company. market

We have flexibility. enormous

in unsecured somewhere with is million. outstanding We billion America, have banks $X.X it We our bank top $XXX-and-some-odd billion, the to raise can some and $X.XXX at facility, unsecured of probably facility.

from So, to growth we we growth at have income to to net line. impact on prior a current economic consolidated XX%. of in XX% results. in operating room consolidated we and increasing lots income to growth estimated net focus Based to which to XX% XX%, in our net bottom lower our and improvements XX% in were are The which tax accomplish sales targets, fiscal to year-over-year try our net sales to XX% increased net guidance income XX% federal reflects XXXX visibility, continued XX% and income rate up the estimates of

growth for want consolidated with Furthermore, amortization returns. prior we recent XX%, fair our anticipate core approximately strategies acquired you of our to In now estimate laser XX% considers acquiring CapEx HEICO vehicle any. cash acquisition and growing million, continue intermediate profitable million. of estimate and businesses, up our shareholder $XX operations a management maximizing our we to approximate long-term to that additional be from on we is $XXX continue strong generating These from will if the business, cash include from anticipate at I focus estimates remind $XXX flow million, $XX to exclude to addition, cash prices, operating flow. In but focus to depreciation expense businesses estimated million. approximate Tech, up closing, of a margin to our prior XX%. flow on generation, Sensor And

strong is fall important Our have the focus will we line. which believe And cash share earnings in we flow on generation. most cash when that flow per do, we

share our Normally, of the net can per have between and income. opposite. no is flow earnings HEICO reported XXX% and So, runs cash sometimes you cash flow. just XXX%

the to of prepared I the intend we Thank and our continue future. focus, be and would our to is like disciplined extent That that that now. the focus you. very is open questions And remarks. to into So, floor

Spingarn - Suisse. Securities Rob on for from Credit Credit is comes LLC question Preston Preston Rob. with (USA) This Audrey first Hi. Audrey Your Suisse

model, understand you, less So, flow mentioned just cash expected what past than have very the over it's that that from the priority increase going bit When on few the it's been little reform. flow for cash a that is we following years. statements I very noticed my I a up would I big tax and guidance was you impressive before, through

was or I little if just that So, (XX:XX)? are curious that. Is a could conservatism involved just on you comment mistakes bit

the Carlos for thank Well, respond. you good will question, and

Hi. This is Carlos.

reason is cash statement, see you of because net out flow. deferred the liabilities you which non-cash pull that on you're tax fair a flow cash think have phenomenon I amount of the going income net to operating that the impact

that's So, that discrepancy. seeing reason sole the really you're

you flow the at cash went look – If very through this I because question.

through is this statement. I went one. the Your a question earlier Carlos when I saw with good

see the income the operating the million you'll will benefit. in flow, if – you income to there we deferred deduction that $XX.X tax is cash in deferred of of flow go a from – treatment cash You see statement, the

– light is about. LLC – in just Preston expecting. for a noticed then, the - Audrey Okay. talking this I So, little that up. clearing really terms (USA) And bit to Great. follow-up a CapEx what quick we're Carlos was Suisse is appeared this of just Thanks what Securities Credit that

acceleration So, about cadence could Do of the forward see of expect sort what year? we should the or with you bit little remainder moving that? you talk a the more some through

that $XX to the number moment, is to expect This million At Carlos. year. do us this I for gravitate

old there XXX% last defer that at year, a there the of I rule. conscious fiscal mindset the this CapEx of the some changes that facilities, the our the, was talked-about business into XX% believe in run to in expensing due some versus effort leaders was think primarily – year I to time, do

while CapEx is, quarter, thing made. little decisions very I think I a that I as dollar precious I interesting I this some they for of leaders and such. growth that they mentality it those causes in them know the businesses, think the react and The think that would run our have frugal. them spend have CapEx it hopper So, the probably is who And business expansion, more unit but to every about expected they're were to

So, number the - deviate you're $XX out Thank will you. Securities that much but for back-end I mid the Suisse million wouldn't they've from guidance, more to right. loaded probably on right be there put cadence All Preston LLC Credit spend. (USA) Audrey

you. Thank

with Your next question Canaccord. Ken is from Herbert

everybody. Hi. Good morning,

Good morning, Ken.

little helpful. I of of strong. color sort and be wanted you're margins the mix a were base ETG would and business opportunity Victor. Can acquisitions benefit in quarter the some very start ask first a to to obviously recent there the the from to on question relative performance, you provide that The on segment more Any of within maybe detail more seeing?

the over the in the questions. Victor. Yeah. as the was to know, good is But margins on of Ken, Acquisitions were that. this improvement the margins performance are across contributed margins, around you happy we're and very focused course Those pretty the year. board. the this And, move the It on broad we quarter.

tend be volatile. to So, they

next. happen, But, know, So, one what quarter I may in you it's broadly-based. nice happen not as and the as said, may in

organic few in of a you some with more and around seems to XXXX a that to great now you the maybe AAT your of on What business? growth budget? in priorities specifically it's of business, – an that the detail sort just know It months, two Can today. fiscal provide years defense had perspective, think like next relative business any opportunities that certainly one but fit Okay. now do expectations you've on priorities we've just the seen from the I

that a looking on little more modeling Just out you're detail business. how for

this growing we for Sure. It's consider for to we owned So, a growing, buying year. expect until account year, it were us. this It's articulated full been very that it while. its growth we experiencing growing The we've organic when it's which would growing September is it. We bought we growth, call be priorities, a we organic as own right? is its organic a when quite don't way until and won't it budget business was conservative, organic of year, they've growth so the that It's growth. commercial more we're so is successful growth as there they some a because the budget, It's in on On of a as for well on commercial. operations DoD And do and to programs. as their from that on side indicate know as precision-guided far, with would broad-based business some our do penetration They're great good the chunk what seeing very working a top tempo. company well. work of that, you munitions. current and in priority is recapitalization tend of for the operations both terms new But

Okay. Great.

mean, And it's great one a wonderful that is company manager and really great, company. add produces things. great of thing. I'd management great to management like fantastic. I Ken, The a

Oh, final helpful. could, that's one And, I question. just if Larry,

capacity and for fiscal where and concern. Thank You've markets, strong on XXXX? here focused at you terms of opportunities, years XXXX remainder that's of, you're obviously of what particular comment acquisitions. sort seeing today very just deployment throughout had fiscal comments, got and potential XXXX your how the obviously, any if we I a in in activity about know, you two Can of from never much. one plenty area think maybe should capital there one, or is very, you've from you're levels

Okay.

X find can't to that. at and depending about remain because somewhere cash, he's understand the think CapEx don't is focus in getting pay competition the I market. read and we EBIT because X of on discipline good and Warren think pay, we in he money well, what is to very All bills, you answer Treasury have the disciplined do a of buying enough, – to we that – really depreciation prices. of because our is on times lot more we because becomes times will EBITA, you terms There So, that EBITDA expensive to it's things Buffett, that is and now. or deal, Interestingly ultimately

say, who are us if produces. better than on We business and to to often top we a keep, companies have going for dollar for liquidity and wants going that's and you that and next that is more put us going the disciplined. buyer these the which who is have this also of say, call. buyer. person are his of year, better. is XX% person cultural the fit and XX% And It not and the another sell end, we dollar, a if will back And ability to just And and And be to seller find we have not the the a is case, your first and looking to top type a very a be do people we're better all he can probably really if event, we tell the looking the want to explain XX%, in. somebody

will But multiples we if anyway, up a so, together, want not be your best determine to keep buyer. your growth busy to from doesn't right the to And able run sell future EBITDA be matter to keep it your and times front. business, employees, XX keep because extent if and of it, operation, times great people we you EBITDA, run your there the your tell we're organization XX

And number to of is, those the at people looking yes, for to it looking not So, them, a since will continue we transactions. us. answer explain we're dollar, to the they're sell top

money guy is to pay, we're to Some pay wanted no, recently, answer we're the going them and more the not willing that. than of one – just

low strong XX accretive So, to fit and companies XX XX description And which have without we forth. make want the first that find year, able times, are cash at times generally in that so to EBITDA. competing we acquisitions are CapEx flow, times, which

is our billion. We're potential $X.X think I good. with volume So, our still is very doing at

So, your we answer have up then target XX% can of room our additional and question? line that focus Does on bottom or acquisitions to keep grow. the XX% think I kind growth. we of And make

Yeah, that's very helpful. I appreciate it.

and also market being market and take over you're but consistent staying and I comments from prior I taking what So, the guess you're any necessarily not opportunistic. disciplined that prioritizing provides it's that clearly now with another,

opportunistic. Completely

not ETG of too the at Flight and trouble, if you great Again, want So, And to both grow that's on Support, hand, we'll fast we see Buffett, Buffett deal constrained, want in pile and how don't and don't looking since them. agree. other are capital we says get we we in do on a debt. to we

relatively we and we've line we can know dilute do you to give how and we XX% to And don't sell stock we had now we do grow we and to to credit So, a XX% grow, prefer of what always low kinds not with at Carlos We we grow, can shareholders. need And target and have the don't companies builds fancy stock as it. all that debt more We have. for know, footwork know projections profile. we to have that to because buy cash.

Thank you really very and nice quarter. much,

Thank you much. very

your And next is Securities. question with from CJS Solow Larry

taking questions. for Thanks morning. Good my

aftermarket. a just for macro just and your general, the Maybe Eric. Just couple thoughts the the on

Obviously, And to and rising you But And real in volume with slow. price. you of XXXX know no all any done have change or and that solid sort outperform a is were yours continued course, of oil, guys anything continued XXXX growth has saw anything think year. recovery little spending projection? and, are patterns? last we some we to I a

it's No, last the products. This is at say Hi, with everything for I consistent our least Larry. been how would year. for enthusiasm really is tremendous There Eric. is

areas. interest customers Our various to to wanting new us continue and a show in of products into our go lot

strong them of very we've the inventory. for last have much in now terms inventory, years. saying which with hold don't many We been relationships They

on deliver. But continue be to tactics. employ to abusive to and the to prices continue able raise they OEMs us So, depend

company. So, go-to their we are

much as think very line, everything same is the goes. continuing along steady it's of sort she So, I

Okay.

pretty On a much America the – much XXXX, I repair little us pretty impacted temporary thing? is much know now? had side, I Is in as a you on guys of that a past early think that bit pretty little was just well. bit that a South lull that

Yes.

very I was well or us ago we're But think doing that yes, markets. and repair two in that's the maybe so. years past

a continued And on the little shift to shift on the the defense the products lastly, the side. specialty of just to right bit –

of that couple should restrictions exports, more rebound it confidence we quarters? to as level think your some the on over just next I look that out relates

Absolutely.

We have the orders.

Sometimes, these to foreign programs right. military with orders the can flip

our away. negotiations, them all everything of need foreign it governments, governments, then sudden just about time. take time between You right they it's all can And read some the a

I'd door, I comfortable of half, little So, to all we of do make it in up second basically we've and rather saying have got area. the in be more should to bit be second stuff, half, but a that there orders. the good And get this the us. out for very us quarter, but second half feel that I would feel some say spool I that going behind the in – second because that's improvement Maybe the nice XXXX a in

Got it. much. Great. so Thanks

Thank you.

question next Sheila Kahyaoglu is from Jefferies. with Your

and Hi. thanks for Good question. morning, taking my

Good morning, Sheila.

Eric, just give been if the than for elaborate Maybe the more replacement could on demand. one you more has morning, you're suppliers. consistent color could market, other seeing Good actually you any aftermarket if on some in Larry. It at that all. you trends

Good morning, Sheila.

continues strong. think be replacement to I very

course, of you as things the the of skew which, initial One is results, orders. the can stocking know,

HEICO So, think, had been various stocking there stocking, aftermarket very participants. And think other wide initial I positive a for and recently, cause I orders that not swings have initial have which benefit among results number that from can participants. does market of

there. to Our The fundamental very dynamics be business still continues strong. are

HEICO companies all that bizarre also employ that. newspaper measure of doesn't about any course, accounting the techniques do to we've of read performance. Of in sorts

basic, what's not where understand can't extremely a order, real people collect money. going an we on. the it, we box it, black get transparent. we We're It's is ship Ours bill we

about in about So, really feel which confident that the is and direction I in going our we this all markets strength continued very operate. in the

one for we points basis Thanks segment confidence more, throughout increase gives in the what more color. progress then, just the XXX terms margin. acceleration margins, in year? The And segment as Great. the broadly in of of

This is Sheila. Carlos. Hi,

congratulations new mother. on becoming all, of First a

you. Thank

sent picture beautiful you very us. A

terms for and maybe market that for acknowledge improvement for to reason looking a direct is this upward. ETG improved not you're year, we that in trend a if but margin think we sustainable which I believe general absolute the in nice increase, we had experienced some

you us be increase. to causing more So, if margin that's culprit, consolidated that's in optimistic would, the our main

Thanks it. Got lot, a Carlos.

You're welcome.

Ciarmoli Michael Your next with question from SunTrust. is

for Good in morning. is This actually Michael. Les

morning. Good

morning. Good

some to you at some segment? go peak can this you'll to back about would at of at margin or look and, to that particular, the at kind question noticing FSG, Just as point? see margin look There mentioned, there, of ETG FSG growth running upside we margin peak in how XX%, – perhaps profitability incremental as were you but that but

get we have your amortization specifically we're believe I our are performing don't – the fairly but and we've margin. the question, basis, numbers, we're have did We think consistent. numbers in headwind going to certainly an it, on answer can at – I don't how consistent that No, anticipate peak into I to impacted did be I intangible think which EBITA some that I past. with done Carlos

it, amortize happen of we operating grow, is we've because result think silly the in I fact the income, company have up. and of earnings going the yet when are to going value is acquisitions, intangible a reduce intangible amortization companies as up, the this course, of got make our our personally As which headwind, we we to

continued I can it comments. those rules margins. rules, so think have add I are me, But the to to So, think that on but Carlos the we conform. no really makes And upside sense, specific some there is

a what based Eric more acquisitions Eric, peak for that way which the we compression, you with did as these think, acquisition. amortize say. first tapers margins. margin incrementally do is of It you And that, two not fair going was I an of all on which know, contributed at usually captured we're correct when intangibles. is we the us believe of amount couple I year years off I last that to after

Eric's is point, the consistent history. with EBITA to So, very margin

So, no on our there worries end.

largest additional the of guys Fuel of was into to go time Systems, Robertson for you made. Thank at that color, the the And deal, you one guys. the acquisitions

appear for So, specifically ground clearly vehicles that to of poised budget at But and, business? I given does the exposure Robertson, look look growth now what do there, you a within like importantly, that that some in that for helicopters. Where military in lot uptick? of outlook opportunity solid be guess, a the terms upturn

on This is course, individual subsidiaries. our We're speaking, The of Robertson optimistic. is of we broadly numbers answer usually Victor. But really the don't is, well. comment doing

what about optimistic The very be to well continue it. priorities budget We align with is doing. Robertson

market and the helicopters, with for selling also commercial They've systems in fuel those. and we now Robertson. for are success well had bode should that So, commercial shipping now crashworthy

an be So, excellent to it acquisition. continues

growth. there I feel We on great a about team good it. have focused well pretty as

mentioned I'm Thank what you assumption for rate Okay. or would be you. the sure for I not but if full last one. guess, the tax the not, year?

we the provisional. What you This with rules, Hi. Yeah. it of was, is know, as new Carlos. did the implementation is tax

both effective going the maturations and we're XX% charge. our guidance for non-controlling through So, still interest (XX:XX). tax to XX% now, rate right the But is

So, about together, looking XX% XX% them of income. at pre-tax to

Thank it. you. Got

welcome. You're

with Lipke come Your will next Stephens. Drew from question

Yeah. Good morning, guys. Congratulations quarter. on a great

Good morning. Thank you.

half X% visibility there do is Maybe the underlying the you this greater about easier. up somewhat backdrop, trends I the about digit than growth, that of comparisons in back get this first being in maybe the you think talked aftermarket, is specialty aftermarket, makes pause With you X% picking in limited good. The you but your organic very be growth gives of Eric. that for year, range? or organic will kind mid-single anything talked there realize not

I perform we'll to we've continue feel as much had. that

second I we will be certainly in underlying we as specialty every now. we The than feel get. that just good our customers I about there. Again, of fight see strength you're we will and to I do sale headwind, us. how that improvement for as product have the think earlier, markets mentioned our about I the doing organic think and growth possible much very half, familiar, the feel to finished is better are

hold that and ground all Our very vicious the on want to they've of competitors got. are to

now. or have we of of this None we to can excess easily work in that But So, free. for definitely what hard. very I perform comes we're feel doing

inorganic it's XXXX, XXXX. at $XX for the pro think $XX Victor, million about you on AAT from and growth that's so the earlier, a you it guidance, or sales for million, was if question $XX And XX%. if growing kind contribution fiscal look implied Okay. for And in a in of finer then, to forma fiscal putting back over point million maybe

You that of reason AAT. that be And we and layering in that there within is any share that kind forma of the million XXXX? AAT to shouldn't any loss market now there in $XX Tech. Sensor kind pro talked or trends from continue that should from we're then, basis about with concerned the grow or posted a about growth it fiscal and Is loss budget IDC share

in forma numbers not Well, that did it pro but in the was K, fiscal we XXXX. what put

would happy here. your the and I'll it's an is, to number happy thing I'm the its really going is to not you exactly we same exactly that the excellent say tell do we don't to if very that applicable the I I'm had do with break do All because all growth say So, out, is not business. revenue growth. again, thing, its what same We're the we're I'm to We're is would with margins going did. And business. what margins. can going I say say over not but on it it with are. that happy what we not we the

acquisition. Yeah. It seems like a great

Yeah.

on or M&A it classify that the as of think as more of range in in more way tuck-in in Larry the one there any pipeline such Are Just of kind of kind should transformational kind of Sensor for Would the opportunities that? AAT? opportunity pipeline. last about kind you we any opportunities Tech

be but is things until very or limb know, difficult another, you us the above, and it's thing to comment out we you closing going go of is the deals we one don't as on a answer impact all The tell really lots happen. don't And deal to of and close. and individually

due that thing sudden, a of middle the all of and, So, be we up. can blows diligence in

We're, why And think on highly we I Herbert so, that's to anything. really like don't said earlier, opportunistic. comment as Ken

buy will companies. We

margin product us, all Whatever will only what if right, look acquisitions, that's the right, we if priced criteria, If of absolutely buy We for is it's we it. the tuck-in not. line meets for. are not opportunistic is our

what cash looking interested. flow. So, meet for. I it consistent except margin if give hurdles, That's can't those not we're you and anything And doesn't we're

guys. right. Thanks, All

Thank you.

closing our today. does back I Q&A remarks. for now it management their session to That will for conclude turn

I is again. to HEICO. available Mendelson want interest We right. your questions. you remain This all in field to for All Larry thank your

we phone conference look about You will know where the to And in reach visit. second by quarter months. or to forward us which three call, be

you thank you a have we have. day. much again, all and to very all, in HEICO. your So, And good for confidence interest That's

today's and gentlemen. conference ladies call. conclude does That you, Thank

now may You disconnect.