HEICO (HEI) 29 May 242024 Q2 Earnings call transcript

Welcome to the HEICO Corporation Second Quarter 2024 Financial Results Call. My name is Samara, and I will be your operator for today's call. Certain statements in this conference 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. Factors that could cause such differences include the severity, magnitude and duration of public health threats such as the COVID-19 pandemic. for amount airline of purchasing fleet could lower the commercial generation, decisions, and services. cause travel, and air changes demand liquidity and cash timing lower which HEICO's goods our or airline

new Product from specification cause to and which regulatory cost U.S. competitors, our security restrictions, and foreign which existing reductions complete or governmental space export and/or an spending our or contracts, homeland increase reduce to demands, sales. and costs requirements, and could policies competition in customers could defense, by

Our at which ability growth, could sales and delay product to product introduce new manufacturing increase sales could profitable reduce products services and or difficulties, which pricing and development levels, manufacturing our development or costs our sales.

any obtaining of and applicable synergies conditions, currency our and telecommunications impact and including acquisitions, including domestic electronics achieve foreign exchange rates; effects approvals risk, make within defense, costs to acquired and of ability which from revenues. outside negatively interest, governmental space, could operating economic and industries, medical, the the customer aviation, and businesses; credit foreign tax and/or income Our inflation

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

to CFO. President by you HEICO Group; joining I'm this of Larry much, Co-President we Mendelson, you HEICO's us, Eric I'm Mendelson, for We the of this Mendelson, Flight and Support 'XX and Co-President very our And Technologies call. HEICO on Samara, Carlos Teleconference. everyone Thank Executive to CEO Announcement Group, Victor of and Chairman and and Fiscal President morning and welcome good President HEICO's joined Macau, Quarter HEICO's Earnings HEICO's Second morning you and here Electronic Corporation. the Vice thank

our HEICO's thank members detail, another in team like for moment of excellent results all reviewing I to take talented to quarter. delivering a Before operating would

this Your and has results focus themselves thank operational on our and about future. or remain the record I and excellence served our also have quarterly extremely vendors and customers I everyone country. for call, customers who provided team family great on HEICO's members to HEICO want the shareholders, optimistic members

the had of forces support we freedom. sacrifice made of role your is hope the and proud HEICO the allies. States play United our whom for I in of our you of the thoughts in ultimate Memorial Some these on patriots Day. armed

quarter impact income the 'XX mainly of sales by the improved from results well Support acquisitions represent the improved parts as highlights ETG. our XX% Flight the replacement net quarter The as the in I results. fiscal net growth 'XX. to and quarter XX%, 'XX aftermarket results in and the second at fiscal Consolidated and second and second record XX% of profitable 'XX reflect results organic as respectively, for an compared operating will summarize sales 'XX fiscal of fiscal HEICO

$XXX.X 'XX, per diluted in net up in the Consolidated income to quarter from diluted $X.XX second increased was million million share and XX% that $X.XX per or record fiscal $XXX.X a fiscal the up $XXX.X 'XX. of XX% or that quarter 'XX. of second million quarter in million $XXX.X from was of of and fiscal 'XX, fiscal the second second the to EBITDA increased Consolidated quarter in share

second very 'XX. XX.X% in a Our quarter consolidated fiscal the EBITDA of healthy was margin

and organic mainly XX%, increased 'XX, our XX% The income overhaul reflects and and acquisitions records from fiscal quarter fiscal of Group, parts strong the and the the profitable to quarter impact in over of repair improving operating Flight sales respectively, second parts 'XX and demand XX% net attributable second increase quarterly fiscal services. Support aftermarket Group 'XX. an set of all-time for The and replacement 'XX growth and principally Flight Support enormous

debt-to-EBITDA net $XXX.X second Wencor X.XXx was up flow of acquisition. provided lower Xx fiscal track 'XX quarter of We XX% 'XX. as of April million down million increased fiscal Cash was months the Our XX, operating within 'XX. $XX.X was leverage in from the post by 'XX. remain XX of October on to to the and activities second quarter X.XXx and That in as XX the ratio to that XX, our

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

the Thank XX% very growth increased organic high-quality and replacement in an and $XXX.X net and 'XX, wins impact second net product The and strong fiscal to in million HEICO. reflects a mainly Wencor results Wencor of $XXX.X that our legacy record growth. reflects sales Both in quarter culture Flight investment products and the fiscal exceed parts operations prove HEICO's increase continue net producing produce Wencor's you to a XX% much. fiscal Both The of Support in organic excellent up the the marketplace. continues the from Group's The entrepreneurial acquisitions quarter organic hikes was expectations, sales the growth within from line. sales 'XX to record our our aftermarket XX% 'XX. 'XX for of million second

for and their Our customers and repair in to our needs. overhaul continue great parts product value find component aftermarket larger aerospace offerings

as and stand-alone time-tested operating a continue operation. well-known Wencor philosophy, we operate to business HEICO's with Consistent

working and customers. together serving our we However, good made have progress

we working sharing include vendors. cooperation to tremendous Wencor noncompetitive now how HEICO's sales our Wencor at and regulatory base cooperation and HEICO manufacturing benefits and all is where yield examples Engineering that commercial lists expect Wencor utilization defense of products, Some and new stations, platform best-in-class appropriate, for we quote and together PMAs. of HEICO repair utilizing all are all the to e-commerce DERs PMAs company aftermarket

mentioned the million million of in increase intangible due as quarter income expense. in agreement asset operating 'XX. The by amortization net increased higher a acquisition. consideration 'XX, reflects operating sales growth. obsolescence Group's the expected fiscal The quarter the $XXX.X prior $XX.X termination and expense fiscal second Flight the to Support partially second inventory from amendment the Wencor principally from to a previously offset record impact of contingent The and increased income up XX% year of

fiscal Group's the 'XX. in to compared margin The was in 'XX operating second Support the as quarter of XX.X% fiscal of second Flight XX% quarter

the quarter of and XX.X%, operating our before is and amortization, consumed amortization in The margin in absolute EBITDA, Given it. basis points around which around XXXX, that margin. XXX known intangibles was second that terms, as we acquisition-related cash extremely of excellent are pleased FSG otherwise with

prior as percentage intangible the termination reflects operating previously sales by agreement mentioned and partially impact contingent the year decrease The expense mentioned net income previously compensation asset lower amendment amortization and expense, sales. higher percentage of the of net a offset a principally in from of a consideration as performance-based

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

fiscal from increased core net mainly by to sales 'XX, second sales end had to to Electronic we double-digit $XXX.X Technologies quarter were past $XXX.X and in of sooner The organic the attributable Eric. market pleased products, increase quarter net net 'XX. other offset the very aerospace of in million X% even reflecting million second electronic than is sales Group's ETG defense expected. organic We X% you, net The sales this see of up Thank fiscal growth partially traction lower of the gained in previously organic products. growth, quarter

it early event third would see would turn an be more thought likely quarter when up. previously we we that As

overall net quarterly While believe lumpiness we remain trend in we defense will our term continue over positive. to long in expect sales, the the variation

sales decreased Electronic The 'XX. improved second 'XX, electronics growth. profit quarter net The partially the million improved fiscal gross in income sales $XX.X our million from products profit margin an other of defense sales. gross principally reflects margin income mentioned $XX of offset increase by increased in up reflects operating of operating expected and second The previously net products Group's net the the fiscal Technologies quarter principally was

the of fiscal quarter Technologies margin to of Electronic operating Group's second XX.X% improved in quarter fiscal second 'XX XX.X% The 'XX. the up in from

we that second Given quarter, the margin points cash consumes record around amortization with are sales XXX previously finished net lower during Growth that increase and we margin partially before a that defense XX.X%, order and of which basis note reflects favorable in the acquisition-related around the backlog. margin, in intangibles principally mix with pleased it. profit sales operating margin of very terms, net our absolute ETG a was is gross commercial mentioned sales excellent the amortization The efficiencies. and by product quarter product offset contributed to SG&A aerospace we and growth, operating

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

you, Victor. Thank

outlook. Now the for

Notably, that to products a defense-related X backlog. optimistic months we ahead from 'XX as and contributions in the ETG's and is the anticipate grow over driven fiscal by 'XX our the expand well both growth on its products. for FSG supported principally demand As sales remainder 'XX net opportunity to we remain and of we continue fiscal look of majority the net of of sales our next strong 'XX, acquisitions by to ETG, fiscal as and

to flexibility. financial we to and plan services, while our further strength and our continue commitment and Additionally, penetration products new developing maintaining market

commitment I like members for and support dedicated would to In their team loyal continued HEICO. our closing, and to thank

future. engineered production the markets Our winning healthy, to to HEICO be HEICO'S highly a make marketplace. for highly the of great about I'm dedication Thanks company. niche customers, all serve team end to The and remain and very optimistic members do products strategy we high-quality, in you a continues

would to for I now floor the And like questions. open

our Spingarn first [Operator Robert from question Melius And take we'll Instructions] Research. with

wanted dig businesses Good just excellent the another into Congrats a on morning, bit. quarter. I little to everybody.

in would I especially the start second just something But sounds with your be the about and for half So you and I and well. as have margins comments. then -- on better, talked it like improvement, your based should Victor, Victor, you you prior mix Eric,

something think, for full XX% the like I saying year.

years the good here Or there? So depreciation other of In we that is number are that that ago? keep of toward does for words, back a move implies half. next year? us a the to starting step-up couple getting from second And a margins in

of year which the to to margin, about being this going that kind confusion. around little quarter that an that I've yes, had our comments to. analysts And elevate I in aspire in segment's quarter of I'm back, XX% came that's plus, the battered been dive would XX% with margin thought for there a half. The we -- quarter XX%. we defense maybe because full a to we're were last of come know at. get my here we'll Rob, expected don't bunch posted during what accretive second a average the comments be that's topic, we where year, conversations and I this last My the as that sometime that at to is fiscal

clarifying thank there, global for NVIDIA's there partners which one centers? have all hardware that. and one in for is support you're a Microwave demand Okay, Data bit acceleration see other your to largest And and if within got orders data about businesses & you wanted of RFPs seeing for Victor, this to you. qualitative Tech of little division, then ETG or you've thinking more I Connect an

data is definitely expect centers Yes. I Rob, Tech continue. it's Connect seeing and for on to And increased would NVIDIA good that demand products. question.

Connect not important is part and company, business. a of our a it's huge Tech great Now while it's

we're In It's think don't not material other I a in of part the centers. seeing related terms data ETG. lot of to our a business companies,

of lack XX%? other same the organic a better any growth there Eric, but Okay. you this just way parse same past, -- of growth, share And terms question In just driving store And outstanding your in then, words, in expression, aftermarket I parts market same for that to business, what's at customers, gains? XX%. of quickly, versus the in parts asked parts sort versus pricing is

this Eric. is Rob,

we -- capture numbers capture to a it units, order business. would as all we drive very from don't operate in business be to that. So very difficult know, you And decentralized of those that the

bit know a we've So finite specific to that little that. don't I pricing. can you answer I the gotten tell of But

and comfortable I've As very to on the are to on with do customers in our manufacture prior pass increases to need our mentioned our that cost calls cost our business.

maintain order least our And so have in margins, to by our go that prices to at amount. up

they understand we've So to able and do that, been that.

increase price a increases driving price been of terms has amount in there -- So certain increases. cost

half as but far it's front half and guess as the is the as know, then businesses said, That that hadn't this. probably might half existing -- product I in year half, do I specific the products balance, my I me, the And the in new don't that ago don't period. of the, increased been sale penetration and of have some be sold of get numbers capture would

able just on not am to certain to said my but of increase it it. why But a price I'm sort what I we say And I So feeling that's for are companies. see able story. that's

that So it's we're would maybe less these we're even of is -- not number. guess that even XX% raising -- less increase My price than XX% be because price a less driving XX%. than return, X/X far is than X/X,

would of increases. it volume most So be

are GTF that. significantly and part CFMXX they to Okay. and that GTF. And the the as prior engines VXXXX lack a for We turnaround of is know are PMAs approved then just times of DERs than sort for and LEAP for gen and this LEAP longer and of follow-up final

ramp these these X might that started activity FSG's cycle, on kind and to knowing engine are types? work if on of expect what we those early So HEICO's new see in for wanted programs activity you've to or their I life

need as So we imagine, you you platform. question. that's I you to due eyes we're our can us. we'll to on willing sell Rob, on tell that new that But particular be some there the to specific we're And can commit a information really But be platform and speculation develop any sensitive reasons, competitive sure very it. about as Yes, have giving great we know, on will product opportunities. make to able to that customers based

the basis why we exist pointed why exist. customers agree you. with I You us want out and and question, the your And in reason to our

sources is. at I'm wouldn't if I we've think it really as of on dire parts we are to But situation focused be on the of But the where point. were say, at alternative to needless there have pass the supply, as moment, going that to people got market. that all

take our Kahyaoglu We'll Jefferies. next with from question Sheila

you a Great into you your quantify so those that and parts about a comments certain on see Maybe increase and much. in how you Are if a prepared starting wondering together you're you quarter. how tracking you I just made combine or force. you results. Wencor working few Thank remarks, you're could Eric, was to you're sold if and way there. could any customer looking that the internally. into as elaborate the sales

Got it.

very is the in we're answer It's capture numbers to combined specifically don't get what what's So interest the to we interest what do and those and do businesses their their to trying in And are. is to what's HEICO the just capture. hard interest. do customers'

but the was We were PMAs, and just very I looking not and you a repair of is the complementary. There lot from I that unfortunately, companies Wencor at various overlap. DERs number, said significant. extremely Wencor was always product have So both HEICO don't at selections areas, can the the a of breaking the PMAs that tell station down, use

and weaker and to in swap other to in they've they've are just figure each multiple buy when pre-acquisition we it to you areas product to technologies. stations and me PMAs, LRU these by been and but got able sense imagine So swap extent, by being products. able other's certain was this being purchase able use strong overhauling share repair been done which, where where makes able without that an We've rationalize to a line, overhaul each technology out and able to certain other's obviously being themselves DERs orchestrating can areas, to

this hard really to measure And as a it's stuff. result,

So don't try. we even really

the can charts extraordinary. it the airline excellent products I'd And good the we provide opening it really potential tell really doors who be I but outstanding. far that's that these been off We cooperation, for a sales are you, each of airlines of terms would with say aftermarket thought is As as We've in meetings have been of number other. together very, putting all of service. had very the unique that increased support excited so has and

defense In examples of sources. are that we terms of were other there market, all the we've international -- already the aftermarket, in procuring parts sorts where from

HEICO buying buying Wencor versa. are legacy Now from companies we're the the vice companies it and

well. good. that's we able and we Having what -- excellent parts extremely platform, the on very that working that's So is, see able are and been the when the see HEICO Wencor are to to list we

of all XX products development lot think it's I having open of yet. down terms manufacture businesses makes to and the really manufacturing numbers. new future aggressive benefited product In manufacturing course, the the Wencor very benefit has sense, benefited It to and of hasn't products road, HEICO program that of going a a new

by and as more cooperation, a able discussions I engineering then of they're best-in-class we're of with well. tell the very And both terms lot that's In the in excited talents pooling regulatory substantial can done. FAA, sharing obviously, businesses that also you about to And vendors. get

So give the speak I I'm where frankly but letting you results for in And is with thought see it number, which happy can't I'm we just organic themselves. our that I'm I growth so them I margin in would our you be. sorry specific beyond expansion, a that think and

your through coming down. maybe we net price efforts development about as years? see that know through make all even line you throughout No, And it I impact? inflation I price. wanted that product as that growth. or said in new do price How comes Does net think and narrow? really appreciate sense? last X/X on Wencor Eric. discount is we about that, the Do of should another top to we see with that to that X narrow one contribution we OEM coming see higher then And the ask the I do X/X widened your And

I you we the No, OEM, at I prices low. sell that can yes. I how as that and would understand your question, percentage an say, are of all-time tell a unfortunately

going make want raised -- I And while wants increase. faster we price OEMs must it feels to up, even understand, on especially folks value. much take So say raised sales We I to easy, choose what we than because wants you're to to I are sure though the it walk trying when know nobody said, prices. price in nobody so I delivering a appears costs prices price pass get to a these increase, that have our as have increases need that,

our while been have some at recapturing costs is, drive OEM can and cases, our at we're we at an successful So market in increased a our to as of maintaining space low. this said, the the value we bit little all-time that for sell percentage capture think which customers and in we by plus in I exceptional continue And parts philosophy. we

And with from we'll question Deuschle Deutsche Scott take our next Bank.

can the It able higher to XX% do you previously? us than give range to bit should margins Carlos, XX% you year? you're an this looks the be think good a tracking operating on like update FSG you outlined

thinking long guys towards out want wouldn't segment point that The I'm XX-plus a still you bunch. once performing of thinking at high through I'll exceptional what call, is, or you don't sort for percent FSG mix guide we period us or sure within term now. having of exceptionally growth settle get once this conservative are kind the this, not right I And out. about I'm maybe in. But to well obviously, one, we And -- margins. settles throw the the the thinking of end and caution we I'll flattens get it's at 'XX is number out I

on margins, a natural our quarter, strong as think of is don't continue And not to little commercial the us parts business. Repair as down to by the business. flat exceptional settles front I And just do we build have side. aftermarket strong these growth had in is a tendency come in the product see a OEM to as Now specialty the that but was a and have reason for way, overhaul that footprint during the parts strong, down, we'll products the I impediments see margin little.

normal, So I see growth that answer question, slight might depression ton. patterns a back your but that get think segments, as Scott? XX%, a to those not Does we their of

that's first I trying figure XX.X you to down drives you're Yes, your out what it It up? it versus mean second XX.X% and half I'm does. half typically first half of like kind did stronger. the -- second teeing half? in what just sounds

At lose so growth we to it's I'm point, what that this I'll call going exceptional momentum going in sure are be some to not mix. year.

now exceptionalism there I we demand keep margins they're But the growth of They're have to So that's probably will can't just an and this running predict and team doing up I members. the and our out mean, with deal bounce the around. the to that employees operations with way the job. business everything. exceptional

going So margin the view management in, this as that cautioning running we're to once be team. my to would I I'm happy XX%, we're a is hope just mix very if continue. XX% you settles

seen. is short And the you, can has think are one, members is achievements not this This achievements shout-out of Eric. is tell is And from this I Scott, Eric. ever our that amazing. sandbaggers many incredible a super bunch away nothing are -- I've biggest their this HEICO meant talented. on of I and they're call. And got ever who But to because that you've this team Scott, their take to

Carlos I that, conservative. I they are. tend said as sandbaggers. call having However, they to -- them around and know be They very joke said, internally, We Carlos who

sandbagger [indiscernible] too? Carlos think I

know all of you're on, quantify. taking low. you including it contingency the because areas it's reasons, hard the of encourages But stuff at go these is very it's reason it. result, all -- to there's sorts is a we're at cause up very And understand talk numbers XX because going crazy that that all really and a it that numbers as take the positive a we them had and and go rolling we they're often number and about we could They we down? up strike meteor to to even why I performing got this, and them just come when possible risk. all fight I the -- -- is it don't There very to sorts are the achieve and potential look with to the supply effort all and And in sandbagging And will, of technology numbers. on of if of them can And there focused a sorts Herculean they of chain what are much to processes, things wrong these sorts go are that things. can wrong. go very

a hard result, work most since those as almost time, factors, And they overperform. the so of to they mitigate always

sort of So cycle, are business we to in it. that it up gotten, numbers on based do mean better. I that's in what variations the this where we've to. we're rolls hoping the is But

that. So sort we go just of with

that. munitions, slowed guess, that driven you, lot to guess go half back of of if like a bit XXXX the I I 'XX, And while I I the has Eric, crazy. Okay. was growing and have rate then. quite by specialty Yes, but first products appreciate a I the growth was since

expect that profile to to my see products need So you then order might happen? is, guess I you to for we have specialty in do for when to sense see return a what and stronger question growth

Got it.

referring mention 'XX, to is HEICO when don't want answer make that missile make do doesn't what the short you're happen. think actually, -- it's defense. to fiscal I to in any going we munitions I we So to is think that is

have the missile there are and area, it's platforms. although missile other high So defense defense very don't there the on interceptors, But explosives themselves. we content we some offensive. more suppose I a But is in on in we active make the typically,

significant numbers, be at next When on of the a look orders going produce. we strong. got to And significant we've in year to just We've businesses. very had now is the number And anticipating have you we're ramp-ups books.

Record backlog.

really Record the backlog. very, in products specialty good We're very area.

very anticipating on I'm XXXX in that. good So results

expect Eric pointing to But incredibly it out with that's one I is to and to projects. by say at good [indiscernible] their ramp big in expect don't And the is like be the think to lumpy. in 'XX out, And just be I'm growth. growth thing record you point what have this 'XX. can in big high, way, Not serve that backlog I business defense these do that Scott, ETG, to year, area. we just for us things

still Got like it. historically accretive margin been? it's growth And

Yes, on correct. the defense side, that's

next our question Solow CJS take with from Larry I'll Securities.

disparity to the simplified where XX% between to really high the is share parts on it just that part question, and on that sounds capturing gains? great at the sort single growth Is like too Or and different that the business, difference of the or market repair-service it? First you're mid- look digits, overhaul. on of way

Yes.

I think is there gains. are There share there. some market market share Eric. are gains Larry, this

business in that think ship the parts. typically our I parts area. we Remember, -- discrete

this of sitting have the part an ship in beholden and held part one the bill is big numbers is the up, in it. the a we few got got and that's can't chain. many part And can just it's if got different we've really case and being to basically material business, we're backlog, there. to So the businesses, actually supply hundred which we've in we're shelf, LRU on We able different sell it, whereas the component repair

sort that's on I what's so think, there. of, going And also

maybe a for Carlos. Got question you. And

a I Just notice bit reversal there Was that did was a contingency in in FSG? of quarter. the

it was. Yes, Yes, was. it

a quarter, and we about had like for was our this It was line. took million we some net then $X a $X reduction -- had inventory reserves the in product we million. it So contingency,

contingent million due due acquired And reversal. contingent related a the to in was to margin net had that so And earnout $X about pickup an to earnout we Wencor acquisition.

Got itself... you. Wencor

quarter impactful recall, more maybe right X.X point X.X% you that to a was That's the had, reversal if that's a now. of of in earnout. our Now something $X margins. maybe to on million renegotiations or year, margin. That remember like margin. we that a the bit had -- we And for numbers contingent remember, the little Last the was same

So Net-net, it this was quarter. for actually us a headwind

the of to Year-over-year, [indiscernible] decline It bit year. gives half us of little a little a benefit And bit bit Wencor... of a just little for sequential guess. going I this quarter, the a that a reason in of a but maybe was back

appreciate. us I appreciate supporting you I on that.

Yes, Yes. absolutely.

of opportunities a that the a you X distribution similarities of than lot stand-alone. and Wencor, normal and most still subsidiaries more blend sort beauty I on -- as that you and of Eric your Just Wencor think run And operate? is there of Being large operating companies -- where of together core somewhat sort whatnot. the business kind those merge HEICO in parts autonomously. PMA mentioned this as your HEICO so of and has Are to

to a that's lot unique in ability, about find the has businesses know, question. our size in people And spaces direct you as that make don't same sort single typically the similar so traffic of that we other And each operate great of and maintain most important don't the hurt A entrepreneurial which thing company sure you HEICO of that I so have wondered a to spirit. the that. Larry, we they and can do. think is

aerospace due sensitive from the of interest the part the did on presentation trends And of actually, are Association is of I terms week, of a aerospace people And lack in the because market. to experience. aerospace synergy. that going can that, defense PwC is they're people people meeting. was or when all speaking And to -- feel mission last Governors about with in that. level. and at not even Aerospace they interesting have was employment to think fact some the regard what it's Industries If wonderful Just there's Board about what's put the they do pigeonhole recognize costs not don't good I that. that processes, a to certain things join unique earnings and like eliminate HEICO. that the get functionally We large due no companies, to question able can we And feel thing about they there's due together, the the drive that's we It's

motivational your very stay enthusiasm, that But the sure it, entrepreneurial this work to and have desire manufacturing to it, nature, is process inspecting needs what to late our where what for to kills is it, in it the responsibility procuring late, it. the what does And selecting designing product you accounting from it, is up it team. it, make you very, customer the the for selling full accomplish

So plan to no, your no question, answer to this put together. there's

their the and to more efficient we more that just benefits cost have organic and opportunities There still work our the and these if people. got, there just with individual outside tremendous are frankly, is to having but opportunity together the growth giving However, hire And internal spirit retain could by and entrepreneurial cooperate. go people become we've their focus. internal promotional not businesses

our people gotten put if to see see, their of I going heads and we're in So we've equals job to -- opportunity X cost reductions. do to I where But the continue don't will, out to for but synergies terms already X think figure together X.X I the you point plus focus.

really it's plus X. or or cuts, X companies X And kind this be not equal handle So X that's of to the some X other focus. can job And through the going way thing.

double-digit don't guys for could was on growth, on mind, side if the the it. stand negative I Victor, X% products. there? If Anything on defense just some color. kind on one of offsets extraordinary spend that the that of Got sort in offset out appreciate growth other of What you that slip just the side. I organic

It's a for you feeling question, question. was the thank neglected. I and good Larry,

the up order I'm to here or some and it's the year. there green board. the across expect tick but was non-aerospace the recall certainly last seeing question. in and weakest half shoots So we're of other quarter, said kidding markets, back may being third several they're you I the couple not which glad to and lower, a in defense all not rates aside, or anticipate would But start that fourth markets, answer calls. I whether to and the part sure the the to

lead I inventories longer, a But the timing little our had and of They And And to have a up orders result the customer it's industry that really companies of they're done, bit case. done lot have in think is and will off start and inventory working that this those channels. turn. point. much the after industries have then a way continue at you same our stocked for

little So a we had lead time.

about or to those we on optimistic know, I go I'm of probably negative have but so couple quarters So comparisons. businesses, think I left don't

with from question Baird. comes Arment next Our Peter

quarter. details all for the great Thanks and

comments kind wondered PMA So -- about partnership your in made your with you Wencor traditional made that of business. Eric, I remarks, and some prepared you the -- you

new is kind is Wencor that mentioned that, Wencor. manufacturing-based get utilizing to more what on for You opportunity Curious HEICO's products. color of

are pretty it's think it. We substantial. They're established they product base. remain making Wencor excellent has not, moving general, from and vendor that base an vendors loyal to in who vendor

right towards with HEICO businesses HEICO as And them Products in HEICO opportunity Wencor industry the of and And our working in third-party redirect know, customers, is are I've opposed focused been great, for Head there Specialty more customers to However, have our capacity, with businesses. to as they're on I the and the now, even stay frankly, virtue our only we well. out Specialty as when of businesses. tight we Products supply the very Group individual you the to and third-party to working because Group explain want manufacturing the

going an it's what's able and very know to competitively for we're move when customer, internal them. on But you priorities clearly

in and mean, on industry. really HEICO the key and quality. that terms of absolute to that the supply best able in also the we been are sure a making the focus I Wencor So for that's for products focus

have that them. there the the and dividends unique specialty So is in profit I our we terms I think stuff this do. products all timely they products high-quality a supplying that our -- There and can to something specialty XX can margin as a these vast There's HEICO in companies to group, is parts more businesses pay frankly, XXXX that capability. we And both of companies. of majority by as, well start are opportunity lot deliveries in of will customers different in internal think make after, our to

That's or on curious out Perfect. with regional what that. on Just on or you great an basis? strength Eric, seeing call to international perspective, pockets of color. you're seeing travel are any And anything you from a weakness just, just then staying just

I spoke week China. we're as East, so and The -- overall as It's with and Americas all tremendous the seeing the details, well of our strength Asia, Middle last world. Europe heads remains around and sales strong on

we're board. travel, both to People for strong. strength leisure. business The seeing the good across as want extremely seems very So as market well

X look very areas of I broad-based. particular So good. things say say X strength. I'd it's wouldn't or there's

Great. And had I then Victor QX. some, quickly you on on guess, just some in timing delays

about, Just chain thinking for the think how year? is looking about are the when How back that? your you supply obviously, half of of ETG kind are the you

Victor. is this Yes,

chain hear though about back to and some that it certainly, do don't to noise normal, our much about chain chain extended We supply me there maybe wasn't it level but fairly pretty think pandemic things So supply -- no are the issues to in not quite much then. really longer But supply people mostly are again, companies entirely it. just think too are still I times But deliveries delayed. focus I pockets to There small talk too that. that normal. of either. here before much close. seems of returned where some or sense I as didn't about are But afraid has much and issues, the unheard were are my is lead

called -- QX, is pursuing? And there that Victor, Or I new is R&D opportunities just for guys you're you know out in efforts, that Okay. orders? that existing really your

it it remain development funded, we of as meaningful our lot aerospace that's And things It's revenue, key it today, industry, a time generally speaking, revenue future in the and for revenue. part like mean It's that. product I its a before in products. activities very customer R&D of some strong. combination. expenses to takes into And do. R&D ETG NRE it years is to start or a for up turns what related But shows something of

to going. investment keep So that have constant we

subsidiaries something successful very our with I period think very of been in successful been have long we've with a time. over it's

spend we X%, sales in I That's what sometimes we R&D. pretty That's of roughly company-wide, Peter, quarter, should... X% this on consistent. Yes, saw

And businesses, reasons probably that have above a ETG some for because is probably we is variety of than X% on R&D. higher ETG

all details. Appreciate the

question with from Subin Our next Stifel. Bert comes

maybe just to with Victor, start you.

what's ETG, You there. good color get some in on

you group a on forward, would organic the growth little to do stabilize? of our volatility the you do see in you you thought for growth that seen we bit think 'XX? see last You've that in as quarters mid-single-digit track expect several And over still

But quote expect other overall think case. different upward I by ETG don't I a this case Historically, the reached growth trend, and think has to been to supported would that's I Yes. the that by that it's and continue the backlog, quarter-by-quarter. trend rate. we've the volatile positive And things. for supported it's be activity suddenly a is run

it. Got

Eric, for one then, And Okay. you...

And Carlos to to that. add going is

I think versus ETG implies year, just that which growth to want in to statement what you for add low about to Bert, quarters. next we've we volatility expect the still X date the mid-single-digit if done

going So we up to expect mid-single-digit I to year it's think Victor is down, right, do growth organically. but and for the be the low

it. Got

Okay.

volume side maybe of driven travel demand, the inventory. repairs aging of we've fleet seen largely been air question lot a variety on for of what like what seem little the high combination just would just of you, macro expecting you're But more has seeing side, for level. parts by FSG the just in a features. a you're A Eric, depressed terms the in On and and what global there

you Carlos, strength over It the you're made in normalization how you today seeing look concern as like that, Is out? from there in Like do trends comments were some term? the some what sounds near you seeing about think what Eric, you you about that board. saying, might time. anything you macro change across those

about that's Bert, we time. So the all something that think

we've to to be the positioned what's got everything. this a long-term really come However, to got to have around well know we corner, going you've but view. And industry, for be order in never in

substantially. appreciated price understand Yes, also have believers year. We out certain the players very be is commercial and that's down -- on So that customers. of major fleet there in are aging something our that's of yes, but a we're the going fleet X aircraft really well. really by most a military that them is as percentage good there in. increased of strength, result spaces are aviation. fundamental to issues XX,XXX We a We're a to think there these extraordinarily year massive And of other per fleet we tremendous

right we're air why that's that do over-levered. to to sure, cash there, be in happen, our here very don't there that like So program, is a key always but And which a we make be acquisition want we've sure area, we plenty the little could to we of think good do. we pocket successful absolutely could or to continue thing everything got that to

going very matter what we're out there. happens strong be And to no

I there's the of course, but we out look look we always XXXX, XX The for the then from since strong I And every swan also what one, we've is to years point at and most some event. dramatic organically how at black were and better of via grown obvious, company transformed a so, the mean, percentage as years, So last or roughly then. when acquisition and it. sales this in our tremendously, emerged doing has absolutely mean, both X

we well very for remains that. and And the result people to and happening capacity strengthened the gets is down will, pockets mean road. we could air world economy we travel of where, a look, don't all or calculate. manufacturer strong we becomes soaked I want worry hope So little it a out anybody because that as have -- up, you that mean, we can to new benefit be could I if the paint hope about, I what impossible the scenario

heads So confident business, the well. and on down we just do I'm we're and to going keep very focus our

Thank Eric. you

Just one quick follow-up for Carlos.

leverage. On just to the wanting over Eric side, expense interest not mentioned

You still guys were we down path of about some sort that pay same you the quarter? started glide expense follow Should interest debt. talking to last to expect

Yes, so. I think

from $XX movements million each on -- to I we this wind principal going up running It's or I'm be paydowns. million probably this from will rate. probably any quarter interest ran XX down We counting think debt so the think not $X quarter. in I really just after

to we're expense. year interest this the see what to that's be going probably as will that we So continue delever

We'll take (sic) RBC from next RBS with [ Capital Markets. question our ] Kenneth Herbert

more us the When mix and off. the that's book you can long-term just selling remind Good maybe quarter. -- you're aerospace of was your and nice Eric, sales we about what under really versus within a start ship? FSG the contracts to think morning segment, maybe what

front sort don't XX-XX of when our the But of it's the I all businesses, that -- of have information. I'm across me. in getting in have area. it's don't go you I in guessing specific that But I'm information

information. As a probably guess of result lot as of is it's structure. a that area. my as earlier, mentioned half I the a But the decentralized We result, and capture don't around half

the or that do best? to customers trying businesses large you what's Or of something the organizationally your And maybe drive is are operating book-and-ship with airline way for maybe to citing renewals, other maybe are scenario? more comfortable some Okay. them of up units one you contracts say, you skew have trying coming strategically, is to in the a you're to

business, is both about parts looking and Well, distribution. PMA entire at our includes so comment my XX-XX the which

would to probably than less less in the due will I XX%. distribution So XX%, contracts, other be PMA more than the and think words,

there sort dichotomy the at. I looking of that was that's So

protect too got price, customers Clearly, we and to they having to protected and them. commit they on idea the happy us. product that in to long-term the idea for a like with want like that. procure Our agreement, do of we to But out regard and can because if be them go turn, they've we're PMA, to

over well XX%. on So would definitely, contracts guessing percentage -- be the of PMA side, the I'm

Okay.

finally, lumpiness. Victor, Okay. That's to of helpful. put And a on then sort point the maybe finer just

Do growth should of back a we of half Space Or within that to year, up especially fair still -- the and half ETG you're businesses fourth those defense is backlog assume strength down back tough seeing in the that the quarter. bit half within in sales it Defense You're you maybe in the the into see we could little the this some in pretty comps of see considering just year? 'XX? the second against this

I think like I I the Yes, out. growth. quarter. think organic the it's good it to fourth, more challenging. And flatter, I'm at shipment third feeling X% the I'd a see But the if look at about moment schedules, plays how like we had

one. comp. tough QX in so be think a Yes, ETG to going last I that's a tough year it's so

don't let I it where to We'll it's easy, but out. goes. goes. think play think I see we we'll have it so it where see

Next with question comes Securities. from Sam Struhsaker Truist

kind that certain any seeing maybe strength others? particular the even aftermarket. strength out the at [indiscernible] there across -- areas weakness, growth just versus weakness, little you it I you from were guys maybe that in more quester. nice of not a Could curious break more. looking or and engines of sorry, whether or try Was Airframe interiors areas was or support bit be but

be of I what broad-based. the it's skewed into particular it it of are on by overall, taking heavily inventory to that get would very quarter, hard In packages can depending and say, sort product was sort place. type

think into it people would not to extrapolate misleading get that I for because correctly. So at and perhaps view me the would be it moment,

you mind, mentioned broad-based. is start rather as it really quarter the very don't If be that of perhaps broad-based as next and I'd to earlier, punt we talk But about does appear to support see I some this.

Wencor, then about going in still enough. of forward long integration you the but guys guys M&A thinking are term? you And Fair of sort on obviously, kind of the how working are

we can the HEICO's as see, display are then over Xx completed purchased and We M&A. after chunk strategy, levered It a of nice we drives it acquisition. part unit we product growth. Honeywell And committed is key our you XXX% also a -- the of were fully Wencor line. to We

Now we're down to X.XXx.

companies. We're with of many. to the very, We are choice. in be finding discussions very acquirer in teams focused M&A Our really hard work great

fortunate our appeals this I are and which of decentralized model, that we people to in sort competitive think is lucky well. that advantage very

a were to put mean the I tell these offer of much of offering and they part X supported Wencor customers. acquisition I mean at HEICO all our competitive really and this. who But X our wanted out of the X say, course, customers a there. want that most And who it's was because I and And their visit I different when us we least together in even processes, could I so more about and bidders I very, believe lines by people I tell tell can is it of are acquirer. you, also, do we our unique excited doing is would preferred our and mean, out focused. ones approach very they we teams much were product that airline knows of leadership the what supportive customers. really it, companies,

very, So that very we're going to in area. active remain

take from We'll next Wolfe question our Raffetto Research. Louis with

a just you. for couple Eric, Great.

Wencor X% sales sales growth were to legacy FSG mid-single right digits. the looks thinking about think down were to sequentially, way I line, Wencor flat but up look Is sequentially about up if even at think sort was I Honeywell while your product about in and the it it? that of acquired like

I way mean, say we mean, Wencor don't year. no. I I down. I performing They're Wencor specifics, up wouldn't as but sales get mean to well. last is into were that extremely compared the

chain. mercy happier. of suppliers the supply at well. you couldn't winning performing businesses, at look And But Wencor we've this very, are So significantly very got we be of I the well, any sway can the they're I actually. mean, extraordinarily performing got -- we're a business, And late. can of who is you've lot that new that tell quarters

you're the appreciate one sort the right, interesting about of not is parts only MRO. All hear supply the And insights. -- to limiting mentioned the

-- would confirmed be assumption? low I guys kind if FSG. I out kind seems that, Is the to So I going high mean, of low confirmed it above for you mid-single-digit of to I think Eric single-digit laid know for that. And that the end you high to just double-digit the mean growth ETG. not certainly low guess growth good I for -- like fair at a you're that Carlos insight. to of

stick for going with to year. growth high I to we're think low the the double-digit

I think that's still a good assumption, Louis.

with next, Gautam our question take And Khanna we'll TD from Cowen.

announced guys that far MRO whole than with I with was know kind bigger the comment Wencor's product the was stronger already those So and there curious, and you it guys the much airlines. were airline and the to you deal to companies just your introductions I have, the to that legacy of of each on at Wencor how to when suite how a the have was customers of facilities vice I'm take like already have. was long curious -- HEICO's those are versa? time guys kind does product make will, contracts HEICO you catalog you added those if -- introducing

Yes.

the it what was originally you're got the its So I but They to referring with in that is stations. said focus Gautam, can think more still repair of airlines, in was dealt of of I we their that historically, sort with vice stations, focus Wencor it the cooperation you But going and sort originally repair is was the well. extremely versa more tell HEICO.

both customers relationships are -- there of Wencor to able had a both companies presence. those customers of the products. advantage each are And so the helping And where HEICO that more introducing are sides a We where be can presence of and and go ahead are had they on other. history in their in take airline airline we folks more sell

to that continue as is we speak. that that, to XXXX. happening I think going And anticipate I occur So that's in

will in good the I continue area. that think very we results to see

it from guys traction the that are of traction some opportunity? sales been already there cross-selling getting like comp? is already Or Has commercial you still on

we've And -- that's the no. because have and see that sales I you have margins we you No, on already organic realized growth rate, it. the the benefits. the see We reasons received one of think we

lot there's And think far. a come. I -- we to but thus them more recognize

is now. right bogey over that helpful. long guys call, you term. are this But the I of it At Or That's higher just know term Wencor? long-term of you framework? you I have longer margin than think know but point, could structurally you. kind still one that a And the XX% with there's Carlos, do that? addressed FSG it better reasons the be earlier in you was Got sense then, do

that, you a around improvements long-term that is sort XX% look period year, -- little to the prior over probably COVID do of the you you margin decade And think will I back our look and in back every over pretty get think consistent margin it. we that rate. the the and ignore I is if that that if see

the I heading we to going to the my used a pace from be we think expectation move mix mentioned forward term. as what where within we're That's he footprint there segment we're look that I earlier, is get of and got efficiencies. like, towards those to back then kind when long to normal little it -- and

in from quarter, points We've basis we I as mentioned, amortization. Eric. the Gautam, course, got, had is XXX And of intangible this

that add you and approaching outstanding. So EBITDA which an we're really XX% on basis, is

XXX Yes, to absolutely. developed And then it each to introductions, Wencor you now terms What's that? the you know XXX. it the with that have one, I parts Is year. than last own is just higher talked product Or XXX the of XXX right past, in in experience Eric, them. PMA same about some number number,

those and manufactured getting I very same. think the getting it's Yes. develop XXX to focus the Wencor would them. parts to The continues key buy obviously, airlines to all closer the HEICO, area. and is a of aggressive number products.

not continue of we that -- we're back and in capability, going any the got we've to So to area. cut

take Louie our William And we'll from question with Blair. DiPalma next

and Victor Eric, good Carlos, morning.

One both products the of of the the and to on consistently ability FSG to new the market. your business themes introduce side is ETG recurring

more You terms the in long new a just and year. runway? inspiring products demand parts of ideas wondering there I of what new Similarly, ETG is the mentioned for types Ukraine products? target XXX of And PMA new is still per year. doing was per is new And

do subsidiaries. have each meet the very do and this because a question. know one my large we most good Thank is new we do annual introduction. it industry. see I each that number, part it's in and very -- ETG at the with meeting things at think their it's and in is products new And We numbers we with a and active year and probably a it new a I each the of look it's higher And year, we sense the budget people don't is so is many introduced look I rate. one Victor. an Louie, we review company a budget. actually you. regular the It's of bottoms-up when of But do number it's very than product

and cut a earlier is so very bad, business times And that salvation, good R&D very, was at spending business for if my the because or to So the why illusion And do how to that. over on particular continue, it's will look basis. the and that with in it happy we critical in a very moment right? time. And that's R&D spending don't us long-term weaker in grow we ultimately, that's our we

has to their defense sales company with term. and a meant the of significant of in of I of effect In it's in Ukraine's of interesting our Europe, is which that's yes, friends in Europe. terms we think introduction and And headquartered we there. our happened, And we're in more in is Exxelia stimulated January some the because company The sales Ukraine, our an need completed spending has expand businesses in that's France acquisition in XX right? a product happening, Ukraine allies sustainably reminded as investment operations well. long our acquired, And and had number -- it new businesses seeing more

the of we the as Ukraine And in the the to as products allies us our U.S. was what the supplies. and one on war well does as, impact to U.S. companies. way, offer U.S. attracted opportunity here business was that and know, that friends that to the an have things by And obviously,

expect look they So I it I defending to when hope that think I at what course, have how an enduring would and that themselves of when it. continue. soon, spend And ends ends, people effect that conflict and but on to ends, then it do will

Are you like counter and microwave have the of a components. some of you Great. number terms And supplying and of I air to microwave product think defense functionality? in OEMs drone

within part part out of as is that is specific And can't Sure. that -- of the I business definitely but the programs, we course, of imagine, point do. and it's can of ambit say you can what I

conference for concludes additional remarks. closing that you or this today's turn back to session. the At And I'll any question-and-answer time,

Mendelson. We with their X on some quarter now. about speaking in be this Larry will HEICO. third you for when from look interest we everybody want So forward months thank and this report that to is I to time call results

call. have safe. your very a this believe, will, extremely So meanwhile, be and the enjoy that's of you, well. Thank summer, I end And do good summer, HEICO

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

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