HEICO (HEI) 28 Feb 232023 Q1 Earnings call transcript

Welcome to the HEICO Corporation First Quarter Fiscal 2023 Financial Results Call. My name is Samara and I'll be today’s operator.

Certain statements in today’s call will constitute forward-looking statements, which are subject to risks, uncertainties and contingencies. HEICO's actual results may differ materially from those expressed in or implied by those forward-looking statements as a result of factors including, but not limited to, the severity, magnitude and duration of public health threats such as the COVID-19 pandemic or health emergencies; HEICO's liquidity and the amount of and timing of cash generation, lower commercial air travel caused by health emergencies and their aftermath, airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services, product specification costs and requirements, which could cause an increase to our cost to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, space or Homeland Security spending by U.S. and/or foreign customers, or competition from existing and new competitors, which could reduce our sales, our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth, product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales, our ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest, foreign currency exchange and income tax rates, economic conditions including the effects of inflation within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries, which could negatively impact our cost and revenues, and defense spending or budget cuts, which could reduce our defense-related revenue.

Form call the to including Securities limited filings this HEICO's all but to and to with XX-Q filings and on listening are review encouraged of not Form Parties X-K. Form XX-K, Exchange Commission, or extent obligation as statements law. required of information, by update result otherwise, or any future forward-looking applicable We undertake events publicly except revise no new to whether a to the

Laurans Mendelson, I HEICO's and now over turn Officer. the Chief to call Executive Chairman

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

our exceptional that at growth companies reviewing detail, people to quarter, will companies record-breaking the thank throughout It's to results of delivering expectations. growth you operating to profitability very another optimistic talented exceed HEICO's to these strong that like in members another team continue and XXXX make and our I'd outstanding us produce operating for all of Again moment quarter. thank continue our beyond. a and The results. and be fiscal I take continues my Before our for

record as rebound our quarterly acquisitions. organic results the net net quarter from fiscal growth HEICO, results sales sales net Group, reflect the quarter XX% and first of results. fiscal products services. the first to Summarizing and improved driven XXXX XX% our net XXXX commercial in and Consolidated continued Flight of within for first consolidated fiscal XX%, and arising mainly our Support income of record record for XXXX. XXXX first the XXXX These and sales fiscal mainly highlights demand impact compared aerospace the principally from in by respectively, the fiscal operating Consolidated represent quarter sales XXXX quarter

net the or of quarter the Consolidated and XXXX, and be be XXXX, that million, XXXX. $XX of diluted were that the stock operating net fiscal of up from share, in share first per quarter in to favorably the from XXXX. and $X.XX fiscal analyzing first down first results, per $X.XX when should up was first million, information quarter fiscal XXXX considered discrete per between share, the option $X.XX net impacted share, to of margin diluted first to income attributable in per in – XXXX of increased XX.X% tax non-controlling quarter that interest XXXX. diluted in $X.XX of should in quarter This fiscal from control fiscal in fiscal the million XX.X% income of both comparative XXXX. improved quarter Consolidated and first fiscal or or XXXX XXXX, was million, the $XX.X $X.X net $XX.X from diluted of results was income It exercises. and HEICO benefit benefit a The by first fiscal the quarter or the X% noted

be quarter. acquisition $X.X our related results considered the by or costs in the of the approximately XXXX. analyzing million to should Exxelia company closing January income attributable $X.X And XXXX when that addition, to opinion, In first in fiscal per diluted that million decreased first In of International $X.XX the incurred the share. HEICO quarter net my of acquisition also

approximately tax Exxelia comparatively acquisition diluted by reduced costs onetime $X.XX. earnings the The and our lower option exercises stock benefit from

and cash XX, cash to Our January incurred debt net and XX.X% sorry, XXXX debt, of XXXX debt $XXX.X – was to that equivalents which million was increase the Obviously, as acquire equity, as we as to XX, that X.X% January Exxelia. shareholders' of of October XXXX. less XX, the compared compared total is of

debt-to-EBITDA acquisition principally XX, quarter X.XX was of times Our very, as of XXXX, XXXX in in ratio ratio. ratios debt October HEICO's January as Exxelia X.XX from largest the XXXX, net times to of that impact in still our and January net of that a the low debt-to-EBITDA price. very of the increase compared purchase first reflect ever fiscal purchase was in XXXX terms and The again

in million the strong $XX.X by in reflects The provided inventories fiscal fiscal increase support we for fiscal increase driven operating XXXX, working capital, quarter operating an compared quarter XXXX. by of flow first operations the to forecast cash and million provided in by to activities an in consolidated principally strong, increased first continue our from flow of in quarter that remained cash flow XXXX activities first Cash of XXXX. the $XX totaling to fiscal backlog

In cash This XXXX, January dividend share. paid semiannual dividend, we XX% our consecutive to which per our $X.XX since increased semiannual by cash have XXXX. we XXth regular represented

Let discuss me now our recent activity. acquisition

in we in our largest International, previously, Exxelia XXXX, terms January of revenue. purchase and ever mentioned acquired price As

growth HEICO, first continued supporting the to within earnings to expected We are excited opportunities, This and aerospace share defense their HEICO's is we closing. year the which about to Exxelia and the look plans. to per accretive acquisition European be of brings forward transaction

time, of Flight President At discuss Support of will Mendelson, Co-President the I he Flight to HEICO first of quarter Group. Eric this introduce the HEICO's results Support like and and Group, would Eric?

in $XXX.X XXXX of to XXXX, in the quarter $XXX.X from XXXX. profitable million fiscal from the acquisitions. net Group's first increase our up The fiscal fiscal fiscal first sales strong as quarter of The XXXX the impact well net million sales you. growth XX% Thank Flight record XX% increased quarter of organic as a the in first Support reflects

quarter as continued XXXX. resulting commercial in organic services travel The mainly the aerospace reflects of majority first global for fiscal from growth recovery increased air commercial products the to demand our and of compared

operating in of quarter record Group's first the XX% mentioned fiscal realized from fiscal of to and margin quarter operating a XXXX. the in the principally efficiencies volume. The Support quarter in first Flight $XX.X profit income gross previously fiscal from sales net the first million increased income of XXXX, growth, the net up increase XXXX, $XX.X improved The reflects million higher sales

impact gross products the XXXX first demand. quarter specialty parts to The margin lines net improved inventory of due replacement higher profit and reflects increased lower in of sales our obsolescence and principally expenses aftermarket within primarily product the fiscal

of SG&A the quarter the Fly quarter in The margin Support operating XXXX. operating improved quarter percentage first fiscal up from mainly XX.X% margin increase first a fiscal Group's efficiencies. the fiscal to previously mentioned net XXXX XX.X% as The the principally and in first previously reflecting expenses of the of XXXX improved sales, profit decreased of margin mentioned in gross reflects

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

Thank our net Group's The mainly to the fiscal up you, in sales fiscal XXXX XXXX Eric. increased million acquisitions. impact Technologies is attributable from first increase to XXXX. in quarter XXXX, net of sales Electronic The the of from quarter $XXX.X the million fiscal XX% and first $XXX.X

products products net consistent decreased reflected the fiscal organic electronics, Group's net sales XXXX in and defense sales. principally year with quarter prior net and sales were other offset Technologies commercial Electronic the by increased medical The first of aviation

in of sales of lower $XX.X gross principally X% other XXXX, net the operating The products, costs net offset from in and Electronic fees quarter in a by sales previously the quarter of Technologies related of of first profit principally and increased margin by Group's and higher decreased first income acquisition to income partially acquisition increased volume, The gross reflects sales margin. to the XXXX. million profit mentioned fiscal net lower $XX.X The reflects products. the up commercial increase fiscal Exxelia million the first XXXX aviation fiscal our offset higher partially electronics quarter defense in operating

Electronic of along lower reflects Group's of with The XX% gross as margin expenses to compensation the The first principally fiscal profit quarter offset by quarter percentage net lower as sales margin operating XX.X% compared the and margin operating fiscal increased a performance-based the was of Exxelia partially lower the in XXXX SG&A XXXX. acquisition costs, expense. Technologies in first

net as lower, record sales remains out have levels, Exxelia. our defense been at the even we ETG's backlog factoring anticipated, Although

high-reliability ETG a confidence unique is harsh customers' their subsidiary environment mission-critical, with for which strong forward. dynamic going required and Each very remains or our materially products backlog business are operate. supplying a and unique This but explains our they positive to are drivers, products

higher defense defense this aviation in. even have don't we strong our and expect and I spending ball, this defense or beyond, and in commercial the demand sales to year, previously later mentioned, a early next should as strengthen year While of I year as remain the kicks part budgets crystal

defense high-end become to ordering will very and chain at markets, expect conditions which have a and sales softer to patterns be will due also other ameliorate. record general I what We believe, manufacturers ahead reversion by our that to supply normal been as strong least report non-aerospace continue

single-digit pattern quarters. we upturn timing we've of believe our was should that on in low rate with coincides decades ETG XXXX. be organic since over has ETG growth business the to mid- this what experience a been the defense grower individual each. with the be literally the variations on Hopefully, the can't we with sales meaningful during This formed time though Consistent over often certain and said

on I be. believe calls what will these our asked margins When operating

ranges me You've the unknown economic within future acquisition realizes impact the is obviously that heard I operating before is remark would the margin the before considering accounting, acquisitions. margin margin now business our which cash which seeing true stay are we felt from and

Exxelia And quarter that XXX margin in basis Keeping expense by which we couple of around hundred from points. expenses transaction is trimmed had noncash another amortization our that in meaningful mind operating points. the the basis our acquisition,

around has often have margins continue report margin into consolidated points the strong is acquisitions, margins Exxelia, will still before, I say unknown impact it companies asked a XXX in will Our of margins effect our overall I'm future any an taking should trim business, but of going overall margins around forward. would average what and be basis range. XXX, to overall. great than lower probably probably expected margins, course, which ETG excellent

the we we material shipments way, As reducing the shy of we year. supply progress our made somewhere call of and around throughout business our unevenly that By in though first delays, chain settings, expect roughly continue, little in $XX to delays has were a quarter, over margins conference Overall, second and estimate $XX versus the anticipated other million have which delayed during excited very reasonable in over prospects irreplaceable strong set our we of fourth quarter. and to ETG's the time this quarter growth XXXX's thrilled are about operate prospects. businesses fiscal the mostly remain of with million into group we last

turn over call Mendelson. I'll the back Larry to

the to in our and ahead of look we outlook, net anticipate fiscal majority to demand by the for sales XXXX Support remainder both growth driven as and And Victor. Flight for you, of Thank continue principally ETG, products. the

COVID-XX pressures mainly chain material costs. and stemming Additionally, pandemic, disruptions lingering continued inflationary from and supply to labor the higher

continue aggressive acquisition products further fiscal to we to During our strategy while and financial XXXX, developing an market strength and flexibility. plan services, and our new penetration commitments maintaining

closing, Thank continued thank operating to shareholders. support to for I of promising, you will would to and our commitment outstanding believe team fiscal I their like again great provide for spirit HEICO members unique for make to a all incredible what ownership and and remainder results In do culture our of for entrepreneurial XXXX The our you looks continue company. HEICO.

the like to line would open the I that, for and questions. floor with And

Thank our ahead. Instructions] from Suisse. take with we’ll go you. Credit Please [Operator Deuschle first question Scott And

morning. good Hey,

Good morning.

Good morning, Scott.

Or Eric, get your generally to do not LTAs willing the price reopen to with have that? of work been increases some been your airlines any to customers to have able early? aftermarket you through airline

we’ve yes, Scott, Hi increases. price to get been able

customers us permit business to depending at from been LTA of successful do yes, in with non-LTA on levels, although customers. we’ve customers price, it’s the us. the typically, But our our priced have LTAs Our as various well getting level capped adjust that as

little think them underearn then to five-year no causing relative of. what peers some the to at exposed I their inflation OE to of protection with to And and capable that’s Defense four basically all, your to LTAs Okay. businesses are are on side, Victor, Great.

for profitability any I So LTAs as the exposure defense constraint at And of you well? was just I on curious offer that’s all business. the to on side on guess if been a detail can you

a right? less don’t speaking, adjustments, pricing locked pricing those five-year have four Yes. We don’t lag But of year. we and on – definitely Generally generally is than in LTAs. on a a have effect there orders price

that over we there it a successful that say, We’ve can locked longer-term in, six do have companies time usually, some we filter effects. or all So months But feel some some our offsetting takes will a instances. in offset through. year, pricing time. inflationary let’s been delay be to in, Almost pretty the

for can and me, the whatever maybe maybe Okay. the And Thank in it how question quarter was you. compares what relative you year Carlos, or useful. trended backlog most last that’s then last just ETG to say the

Sure. million. and which, elevated, the the is The it look roughly is larger $XXX between million way at substantially end – was of by than the if $XXX XXXX, up, compared around QX it’s XXXX which pretty QX with consistent backlog for you it backlog, is XXXX, which XXXX in QX QX is was QX’s but it about

Okay. Thank you, everyone.

You’re welcome.

Thanks.

go comes ahead. question Baird. next with Arnett Our from Please Peter

you, morning, Larry. Eric… Thank good Hey, Carlos,

morning. Good

Good morning.

I lot we’ve to But where another a above strong maybe for just of margins you’ve seen XX%, margins reasons Hey, quarter and efficiencies. the given guess kind the second quarter in just on this forward? some Scott’s How you pass helpful. just on level talking going be to are of would ability there question about of Any margins color your price. thinking on

we’re materials sure margins I’ve the on to to Obviously, that said able cost our inflationary of make maintain this and increasing that are to labor we’re for treat in we’ve a margin in top our as well, year And we reasonable so, along sure continue make last we or pass to got cost. Yes. customers going both we environment, need it. plus get that to

– think we mix. the are. pretty we’re where quarter-to-quarter think area like where numbers But fluctuate good we I and depending So a in can I on

have We be up. these to will I some lot some. think costs received there’s margins. received And an as we of But get of not in inventories, price We’ve inventory going opportunity a more. course, replace

reluctant or predict to change I’m So forecast in the to margins.

customers as what’s a level. what’s of much the run of right end. I right And and the falls viewpoint very of out just is the sort our business reasonable and this think that business we really margin for the in for the

are So have I I what it’s these to but numbers forward. do a going reasonable to way be, tell don’t that going feel

Yes. wide-body yet? you up of the starting pick to pickup I wide-body And obviously, have we’ve in traffic appreciate that. Eric, mix any seen seen materially kind And globally.

yes. we’ve And strengthening seen wide-body, Yes, some pickup continued everybody markets. in anticipates in those

deleveraging deal. Thanks. if more going just one And following the kind your thoughts achieved on last or level net Carlos, where be Okay. one, up Any on comfort is facility to leverage of year. is just jumping this M&A

have a M&A, we on going pretty all the for full sense and we’re our Well, do shareholders. pipeline to deals that make

So find the if we that sense for shareholders, find transactions to company and way the a it. make we’ll do

been leverage about much. too number never We’ve really a concerned

that number now levered up. haven’t the than that I feel take found I – more said more to nothing for animal substantial in that levered, think opportunities Larry times past X just fit right to I’d we leverage mean leverage love would on hike get at we under find we’re yet. the like I and

our of and culture delever of to do if our we a make think an pattern that quickly. effort borrow, we hell do I However, operations suggests

we be acquisitions, move things that, on we of CapEx they forward, cash for, in use exposure we to other credit front come as us. reduce like and say, looking And can deals outside that our as so of so will reload of let’s

Thanks, that. guys. Appreciate

Thanks Peter.

Please Our next CJS Securities. Solow question Larry from ahead. comes go with

especially… everybody. good Great. Congrats really Thanks, our quarter morning, good on and

morning. Good

adjustments. of a I these you with couple especially quarter, questions Great guess, for first. Eric,

close growth, this it think look to if revenue XX% think was in last year, organic – I FSG I back the you somewhere XX%. it So QX, And I think quarter. was

year are ordering for still stuff? they – this was you see do building inventory? It new little trying on How a line. quarter. compared patterns an was like is comp, a were all this to you? and bit outperformance last little grasp Or considerable obviously, feels back pretty year on So Just really you easier get of to sales not. the amazing And top we where

Good morning, Larry.

morning. Good

quarter numbers. XX%. think, the very Yes, XXXX our first Actually, pleased with growth, I organic we’re was

top And it’s, quite far So which had on XX%, predicted. now more done internally is really than of XX% outstanding. we’ve we frankly,

with And sales going salespeople spoken understand well. continue over weeks understand to last our the couple on. to what’s I’ve of our businesses leadership do to Our very

anticipate anticipate number we basically are. the the to quarter, I I’m business. they reluctant X% fourth And level top the grew line. continued quarter-on-quarter growth we from the in mean, strength just where beyond

I our salespeople our think customers rate. that the believe see really that we’re running solid at want of a not understand do a quarters are. None And few to more I we really airlines where are overstocking. and to

our every of and by overshoot. asked But quarters, And over the to area. we followed in area? sales specifically of a the is is recovery we’re last that as this a have – Nobody any no. overshoot overshoot we course, leaders, I’ve number I downturn, in recovery we’re the question in do is thinks cautioned by followed the every that slight are answer indication everybody And

are optimistic. They’re So incredible. I’m cautiously phenomenal. The numbers

I capturing share, think unique HEICO. market this to is and we’re

increases, to on frankly, we industry-leading, inventory, and customers, right, regard they them others. able we’re HEICO hold making we result suppliers. the going value. being price treating with with that’s not that, is speak performance jamming – with what’s to get our outperforming we and And other sure aftermarket customers, think of to see at a as is that really We’ve our And the

we where about are. good very feel I So

historical And last at I a been that they’ve last running that margin all particularly? range. help sort the the maybe not changed or asked Has few know that of we’ve above bit XXXX on the over margins kind questions little mix quarters, could the years several of

Not Not particularly. particularly.

As amortization. had bit a we’ve of fact, little intangible a matter more

acquisition. the of have So as result that would a

would decreased the have that So margins.

really a don’t thing. So no, think mix I it’s

The result these are I of, decade ago. We’ve decades two we did we’re got that’s thing a think very frankly, a margins interesting efficient. think a is what great team. just I and that

long-term into I very we a treat the You what’s customers, and not people, that’s ago, done driving into year and much that you these place are. of right? numbers. ago, last years two. virtuous of we’ve your culture or They’re we where put the XX cycle, your When I as reaping think get benefits that’s we’re result treat the And what think the years in right, you over a XX

the have when people did. We parts other

of We a new the downturn. other products lot develop to PMAs continue through and

of surprising the We out why frankly, We all are us. continue to even that’s and take inventory. right things, these and coming did numbers

then you. this quick – Carlos, for Has the just I little tax bit of year just follow-up know full on your was your minutes. option rate tax the a of one a I stock Got And couple year little all commented don’t you a at if less guys. all changed full on credit for I higher bit from know to for quarter. – call do outlook outlook a changed? you rate? at the going Has

No, quarter The option, benefits fourth XXXX, benefit mentioned substantially from it the tax was this we than is Larry stock that the really tax hasn’t. lower the of tax larger experienced. quarter QX reason rate which

increase rate, the look XXX% due to the you at is it’s If of that.

I and last think year. where for we should the of kind XX% fell year, out between fall we XX%,

I think up we’ll year. wind this that’s where

Thanks Appreciate all the Got you. guys. color.

Larry. Thanks,

go Pete Securities. ahead. Osterland Our with comes next question Please from Truist

our Good questions for morning. Thank you today. taking

the lockdowns? for choppiness Chinese fiscal could wanted to result Support of the into any seeing year? any sales And you just market? tailwind strong been rest potential seeing I that there demand are pandemic emergence the for ask, from as in market a be the the Group, are product their FSG what a over of within First, that sales Flight Has you

in very the we’re detail But in market. well and in a tend benefit Frankly, continue I I of recovers. markets to – think to like are we Good frankly, share to have or tell the recovers. it Hi. competitive pick positioned specific you not This that Chinese we year good sales what over presence market into market to lot that continue I and really is we We’ve to were been as Eric. think last of got we’re I where there up excess Yes, XXXX. tend to customers to quite on and our get that market be doing mean, nicely we we’re I morning. predicted outstanding a very for can – doing had And we’ll reasons. well. grow there, as

one Could you good interest Thanks. to use? what the And year? any be just quarter provide level estimate expense for to for you Is Carlos. That’s the a helpful. get had then you I expect there? for first help rate Or could an run

close our Exxelia. just borrowed I interest debt. X% our We Well, running variable. right $X.X on is think to It’s billion now for

really be haven’t I if forecast it’s that. million. somewhere given our outstandings, So a to $XX going But on take at you

that. a could million something a about you’re If around thinking run be rate, it $XX like quarter,

Thanks. Appreciate the help.

Morgan our question from ahead. Liwag take We’ll next Please Kristine Stanley. go with

guys. Hey

up for Following you on that some got you’ve of the leverage. acquisitions. Laurans, pipeline questions a on said busy

should balance for historically you a And But accretive? would peak willing portions? book. use the we So under think mean A guys run do of about how and also very deals you the what we how about those incremental is how and to this? if you’re are you the the consider finance before, I acquisitions be finance stock to have available leverage think the levered underlevered business guys Class financing

now want underdrawn continue right you will use on Basically, that credit to which Do we’re we line. to credit answer? line, our

go million can And and billion, $X.XXX we – Carlos go $X.X like now we that. billion. have or we’re facility have something We right to $XXX to to what

million. $XXX around Yes,

$XXX million.

always with need and we in we’ve would moment, can them that room further do of to said, the that. no plenty we larger, fully spoken supportive In them have event that. going additional of funds, and our we So At that. like the have to. we we the banks much consider request spoken into if banks event the that to to we But on we something do were have are

reduce we’d find and the quickly. stock As for cash A our and Class because flow, HEICO acquisition. we cash issuing do debt that We because pay strong an that rather normally balance don’t of

much never area Xx the said we a manageable We’ve long as Xx down to we Xx. amounts at the which would in go not leverage been to do as them could intend bring that And Does amount, to to increase answer question? Xx, Carlos been – your to We’ve to Xx. company. continue be EBITDA. I Xx, earlier, at go Xx Xx of some that. as low-levered will consider We more a do never always we As EBITDA below. We companies

Yes, Very could Thank if another question. you. that’s great. helpful. I And ask

were them. cost During COVID, lot airlines a for were conscious a priority and more PMAs

Now that share sustained, customers’ seen we’ve is that your air that market of And we most would appreciated. PMA could talk regarding and where use evolved terms traffic your XX PMA be some your continue if are to maybe and about in customers for the be information strong of you how priorities? Can seeing globally. airline top provide you

happy things. Yes, do of I’d couple to be A that.

that actually, many course, they’re at they were that actually, customers approving that moment. interesting the so parts Of during alternative pandemic, problems don’t – know were see I

would were those very we ultimately confident parts that get we However, approved.

manufacture So to we them the through pandemic. continue to continue develop,

when pandemic getting started the approved. of end, parts we So a lot got to the

that a We not it’s growth And industry. PMA unique that hear parts, our specific item. these these is repairs. our the for I item; really customers HEICO developed from a really is developed that, HEICO HEICO think

in describe PMA. a So And I’d I be broad as very not it interest would careful.

I think HEICO. a is in interest this broad specifically

ability financial we’re that. billion market As we’ve a gotten strong and We’ve customers cap see and our $XX technology got larger, company. deep

right I unique rewarded think with a opportunity been now. And we’ve

repairs. continue develop goes, of in as but We’ve a to lot we progress. – as far a parts So got HEICO lot and

are businesses from very in market others. taking share distribution Our doing well

last continued I over So anticipate growth, the certainly did that year. numbers we

of frankly, reluctant quarter of our mature the couple at so to were, and that for like predict I’m to of increases park off the next Again, out level. quarters, we numbers first those this

would but First, saying that we that I months when our we hitting no call two I’m and quarter ago, not hitting be did had we’re numbers – belief fourth we now. these frankly, won’t, that

anticipate off to little last year. but of conservative do I So, a going I prefer bit growth forward, continued be

everyone. Great. Thanks, and Eric, thanks

Thank you.

Next Jefferies. with question go comes from Kahyaoglu Please ahead. Sheila

last you, levels. good just are there. point, for has sales that XXXX X% in gross the minimal morning Eric, Thank time. your everyone. guessing Thanks on I’m above price FSG

a point, coming because market where talk your product? I think And gaining share it you to with demanding bit same about the you out do the additional customers customers it? share? appreciate little on are that? additional regional Is it earlier So products, growth? Are just Can more color. you’re Is products you

good and it’s for it strength I the board. Sheila morning, – your Yes, thanks is question. would across say a

We of who purchased significant not sales customers customers are getting had parts before. purchased those not parts – those to

when I customer all they their continued a switches increase us. us, there. So, Normally, buy anticipate to of from demand

doing So yes, and we out principles sell part a strong, seeing course, well we’re it PMAs helping and has part very distribution of we’ve the and and those of we’re very products also very well. increasing. been parts well. as distribution And of of PMA their are and products those own out is it volumes recovery is our But been the new large worked coming getting then, with and between And sold. flow-through that’s pain

we We have primarily know, markets are would still from broad-based geographies, opportunity, I a say, – as as report. as recovery it’s still So – have lagging, result Asia your in the far still really those as strength. weekly you of

there. So, very, that. about we’re are really we I very think numbers opportunity happy our that XXXX – there’s But continued yes, and past

I Victor one Carlos. and have for for Great. one

bps outside are Exxelia, margins of calculating XX Exxelia. still dilution So we’re Victor, terms about from points down contribution, year-over-year in then one of basis XX of and of month

how So nondefense? you about And impact kind Is long mix think it the of talk specifically products that can that what you is? the are just specialty continue? will more of

Sheila. Sure,

dilution the assume include from I numbers think transaction those I the expenses.

And nonrecurring defense. probably quarter. for mix accounted other and are of a they that that and markets. Exxelia majority So variety of – is very aerospace But in good then those portion a the that have expenses, the was

Some of energy. it is

of energy. is it clean Some

of Some initiatives. it trains, for is transportation, example, other and electrification

pretty it’s margins. than lower are their board, generally the And base. a So just product our across broad margins

a make move as over want wouldn’t prediction I that. those surprised that be up. time to I don’t to

that, it’s an five and too been think the they upward are their don’t early last, certainly do little margin-focused years. on to margins trend have know, four, over I a but I

as we So well. like that

you. Great. last the for million, million for pretty which Carlos, $XX And $XX unusual is following guys. XXXX, Inventory use one you was fiscal in the in then, of quarter, cash about

we So how of unwinding? about do kind think that

distribution question, this either or was certain that good that renewed We a million contracts concentrated have $XX that buys renew. spend knew to spend million, The we roughly was rate quarter would Sheila. a of to this rather related that That’s that quarter. $XX relate

And $XX we don’t some yes, million bulking area. last backlog. do investment I supporting like so that about huge of in our right we worth million $XX have if inventory up for spend, felt we have year. had anticipate probably the inventory you pull – it’s out, that just in –

interest fact, to also I’ve to they the don’t going In I’ve in customers. them encouraged with want we told they demand, don’t rates the But them situation have that smart to where have if subs that. customer product up, be support be on a

as But level I you’ll delicate that this for of investment don’t the same year have believe did see last a us we year. it’s So year balance. the full

you. Thank great. Okay,

Sheila. Thanks,

go ahead. question next Capital from with comes RBC Markets. Ken Our Please Herbert

sort for than little a to Yes, supply low question next chain in of the that line ETG hi, in markets, It for growth slower of And of good expected maybe Victor Carlos. first full like, do look the top of mid-single or up on commentary defense particular, pace organic your terms Victor, of segment few this still year? sounds the does morning. the how the a Maybe sort in recovery see quarters? over you recovery year

low single I digits right, to mid this that’s growth. Yes, I probably – would would think is organic Victor.

think think well mean this moves recovery when possibly businesses improving I our for defense are of just year, from across board Supply on a next I mean, just tell our with a as we mentioned lot I it’s of least defense early I absolute people, like by by companies the definitely again, But would that see for comments the Not a – way. still been I it’s kind I up expect it. are is improving. in little don’t the year, – either in way timing, easy. little chain budget really certainty. bit that at the my not into or later deteriorating. But doing would saying to mean, not And I terms. I it’s other in air. us I bad us, know. vendors our in and the

that’s good sign. So a

[ph]? we the should prebuys the Okay. associated some and maybe or ETG different than Was the core sort obviously about add it impact? obviously it’s how lower for the backs bit Or course margins, structurally do still seems a of been. in there in excluding margins, And it’s think investments when even like costs higher little the amortization the anything with maybe I segment of ETG Exxelia

– I probably around But were, over listen, bouncing XX%, within more Sure, is know et don’t and Low cash reasonable, the to the always where people XX%, you I’ve finding of of that and ourselves time that’s is which where say, kind are margin, XXs, to on of before that in of in or think in I we exactly. that’s we’re my that think XX%, where remarks kind margins what have less transaction I XX% the right? going said calls said, these listen, to think give is was I are where range. we origin expenses, be. I alluding then me, cetera. of look, And you would do particular, And

that and So less definitely shift And sensitive. selling it’s products is In margin is right time. But defense, to that’s we’re which sensitive. we mean, I tends definitely over now. mix mix do some I reasonable that that sensitive. higher have think mix of

Carlos. is this Ken,

$X.X didn’t clear the be in this to because million. we include Just

and in deal add if you the to that’s $X.X margin, in the million add million throw you there ETG $X for to the then amortization costs related If another new. in

last was was to get out. to a what year we Victor – You that’s to margin similar very what back pointing had trying

Perfect. Thanks, Carlos. Appreciate the color.

You’re welcome.

Khanna question Cowen. go The Gautam comes from next with ahead. Please

guys. morning, Good you. thank Hey,

morning. Good

on point Carlos’ clarification. of follow-up first last just I

of items the of there was was the [ph] So there? transaction in flowed amortization terms X.X through it million million the ETG things X onetime it other plus related were in that Exxelia at or quarter, to

close such in $X.X It was $X for some there out amortization things million. was to time what took that million, new has the amortization. relates purchase inventory on It of So was we pointing as one and January. month accounting additional And stuff the that write-ups, I amortization. to was

is element So inventory for lasts write-up only couple a or The a and kind that quarters. there’s of half term. short that an of a quarter something like or

cost. So that not $X which a there’s it’s an million, additional of element one-time really

that was XX% at forward. is all margin, the the the year what stuff of kind what of is time. we last point a trying that make ETG to going if operating factor I point that was amortization posted have the which That to statement. running was in, We’re around you But this going

Yes.

curious, support Thank we Okay. helps. is supply past I that if having ETG challenges? And you. chain, also some flight in about so, supply also of the was chain. there challenges chain dues any? if what hear supply the kind Is often on No, seen

would what we’re planning HEICO. is that’s decentralized and most, a Yes, stay Soviet structure. chain figure Gautam. Yes, than we at our as This businesses to is sales better everything how the got in let do and customers. very our their not to I parts within of we need. at these higher. definitely FSG. which able We earnings all the If Eric. moment. Central challenges don’t We Look, out hi, designed. think supply – be get have we’re close we they They result doing even Frankly, seen That’s

results you’ve manufacturers curve result, major processes; for of definitely the quality, and shelf. the I seeing were a how very a certain And as they relatively suppliers. on people ago, are saw aerospace particular the at think There talking many you our in seen do the our you'd and we materials the and on inventories And having world inventory that go of ahead and year manufacturers the and now same to are had challenges aftermarket. is were small will to inventories able up. and continues our be again of good our support we’re how supply surprised the loss retire be in around companies. now we I'm up labor position yes, products going are to But high quantities be recipe made around level sales sort to chain in you and of, this if And customers go hopefully up to

to they've getting been processes. acceptable. to not So parts And able that struggled trained those have replicate people be often, they make

but in So, are think getting things that regard. I better definitely

maybe maybe supply then you're and chain just Okay. things worse, Just has on got you elaborating how mind, No, don't really any? where bottlenecks if where the that's helpful. just if incrementally the improved seeing And Victor, also curious still.

rather that effectively and industry. of so silicones they hard side, I the businesses – thank items, the an dual I'm have them things are you. This FPGAs, keep components. and sole-source consistently generally mean difficult, we not on I'd Those falling still on. subcomponents it's rather things I but us, and Certain materials, on different of and everybody parts there short it's easier on components, things this And and source by some nature. I in for mean, side. for where it's call metals out and raw been are vendors is, to where the like other many like component that think so slipping. aware electronic some publicly area remains plus situations our have component where

us improving or way. the more – at the close than static half – of But it half our to our minority companies improving, is going who see it's is it about it's company small that other and report to minority least

what that's I say. So

the I uneven it quarter direction. little progress. forward, be It bit continue make right in generally backward, think on a one maybe we'll will next to one but

more I the or probably exactly don't the going because to mean. there's and six a or in be will it's to happen And that's in the companies out that over have generally And know. put on year months manufacturing nine period a think think or time, generally, I gone of whether chain people reversion manufacturers some the shelves. I

Thank you, guys. Appreciate it.

Thank you.

The ahead. next question Josh with from Company. Sullivan Please The Benchmark go comes

Hi. Good morning.

Josh. Good morning,

that portfolio that But talked and PMA your the On of the the when realize value to is HEICO data they longer, about Are airline customers maybe long-term parts HEICO's switch all? PMA's how aircraft any the over HEICO retirement entire impacting be value. you you seeing this given customers, offer, planning because delaying aircraft can decisions suggests fleet decisions? profitable kept for legacy at any

considerable partly cost an parts on more can And still commit much airlines we give impact is for that's and where of years, heard the long-term that, have customers the nice yes, XX% to don't when our at them to various us also our products into We as and drive of money. pricing manufacture a designed consideration. a can equipment. get places be know of the a customers. I we lot margins us older very if that many our get to below we But we operation protection, can save area and as after OEM have

there's aircraft So I of I old. want simplification, in the that but aircraft, stuff. them, cost no the get cost of But major they for a reliability, to are driver think is larger especially what do of do overall think it's the factor as all factor, the terms question a fleet we that

Thank it. you Got for time. the

you. Thank

next from take We'll Wolfe the Research. question ahead. with Louis Instructions] Raffetto go [Operator Please

morning, Good guys.

morning. Good

morning. Good

for you aero. Eric, organic out guess XX% I growth commercial called the

of is versus sort defense Can just up end guess ETG? that you I more. So market defense in even your differentiate

So was market defense area, the we we've a Support have We certain push in the I we're defense big into constraints year-over-year. lot And the has. in don't over electronics market on defense a doesn't it greater nicely. that chip the let's with have big side, difference, general regard a can ETG with up see, yes. that. of to on very and Louis, percentage. the numbers. a got, the particularly ETG components supply that of bounce would the, is pleased strong have The very stuff is to support susceptible issues. do say defense, made Look, that defense the there. get same and the lot around doing We've – missile Flight more flight I'm we're

So driver that's main really there. the

That's It's but opportunity. probably to Defense underwhelmed, has know big hear. great that's I an color. it's glad a been been say area

headway some to that good it's there. you're making hear So

area. have we big and focus opportunity, a huge in a is It Yes. that

to backlog ETG. Great. in Carlos, just back the

Is $XXX million little said the $XXX just again, from you think Exxelia that year. that's from million and bulk or up through so from the of over so the that or to I a gauge $XXX $XXX million quarter. the trying million million, $XXX last

Yes.

of QX the a looking that majority adding up So – of majority Exxelia the lot – at backlog, we picked it, but if in it on is all of January. not yes, you're of

the, more accrued there on was one quarter. the in a contingency change then in And small just the

sort Was of was impacted? that headwind that Or which another FSG? Just segment that an within ETG?

of and affected both discount combination rates broadly FX, a which was segments. That

very perfect. right. All you Thank much. That’s

Thanks Buddy.

with comes And Epstein go of question Please from our ahead. America. Ron Bank next

good morning guys. Hey,

been for some that you. you One XXX the Just available be things the supply not that M&A pick of pandemic from sheets before? of not situation. investments for suppliers go that needs the down would then or that and aggravated smaller other interesting, hearing some from today the perspective that chain before down might is albeit thing Has are suffering any are and balance by out questions to a maybe an you the playing upside tiers maybe been we've companies working kind opportunities up created of couple have because of all when into lower of making capital

But are having Yes. Ron, not has the not Eric. I been the that are in companies say this in folks sort with. area. that normally who of is we're the those area, issues, would Yes, working there that general, that's opportunity some

mean, I to companies in So take the their it a anticipate the supply don't sure general have care as earlier at large us. huge from point, they of are have that that paid companies I being think And been I getting realm. more for they those government this frankly, paid opportunity base. make

us to the applicable revenues. to of as not it's So kind

two when pandemic. sort think of went we on then everything And kind following up older if the it. the of about a global just the earlier, of – said in debt years PMA maybe because Got was coma question fleet

So you've that's a older. fleet got two years

for seeing that on long-term much a your anymore. They They Are might out to that got contracts You've of products be aircraft? warranty. of in de-check not third demand some you for a be aircraft de-check. maintenance on a these are pickup might closer like

Yes.

yes, on our are do that. aware we yes, are believe I anticipated. But selling I that a am that don't sales. we I checks been think have parts I part of that. think it's not But information don't specific benefiting for I large from had that

it. Got

you thank very Okay, much.

Ron. Thanks,

And turn [Operator to appears additional are call any additional I'll at or back it remarks. no the Instructions] there speakers questions the for this time. closing

interest Thank you. in to thank everybody Again, HEICO. this your on and this I is Larry call Mendelson, for want

And If call you do which have questions, we Eric, Carlos, now. QX so give or us look we earnings at from months a you are e-mail. the can three forward be call, available, myself, Victor, in to you about will speaking to

a So day, have we'll good you and all, to speak you soon.

your And this today's for call. Thank you participation. concludes

disconnect. may now You