TDG - Earnings call transcript Q1 2025 | TransDigm Group Incorporated

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Operator

Hello. Welcome to TransDigm Group Incorporated, Q1 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Jaimie Stemen, Director of Investor Relations.

You may begin.

Jaimie Stemen

Thank you, and welcome to TransDigm's Fiscal 2025 First Quarter Earnings Conference Call. this Stein; TransDigm's Reiss, Co-Chief Financial Sarah call Executive and and the Officer, Kevin Officer, Operating Wynne. on morning President are Chief Chief Presenting Officer, Joel Officer, today our call the for present Co-Chief Also Operating Mike Lisman. is

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

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

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

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

now turn Kevin. call I will over the to

Kevin Stein

morning. calling Thanks today. Good in for

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

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

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

follow a strategy, consistent specifically. long-term We

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

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

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

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

earnings you release, strong we a to saw start year. our from our had As fiscal

for channels. the defense During we growth both saw and quarter, in revenues commercial a market aftermarket healthy the our

pre-pandemic prior surpassed which OEM has aftermarket aerospace Bookings Commercial As has demand for persists. global and expanded remain in year, expected, modestly his major our further were returned favorable. traffic The as commercial trends market market discuss Joel X this segment will travel revenues air for channels. to compared commentary. normalization market robust quarter down QX of to all commercial in levels

aircraft In OEM the working continue for be for made the demand OEM increase progress new rates Airline by commercial affected performance. production. and results market, OEM there to our be to adversely is to remains are much aircraft OEMs and high still

X well recovery chain tell has remain will to felt. be strike fall's the continue right the impact how below rates production pre-pandemic strike aircraft effects as out. the last supply of time to month-long this to Boeing However, nearly levels pushed The its OEM and the ongoing lingering and machinist further plays

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

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

cash We additional of remainder the significant to throughout expect steadily XXXX. generate

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

repurchases exceed of average or our stock. repurchases will price share. market over just via view long-term any XXX,XXX This our deployed at to like opportunistically approximately equates we per QX, our capital We this million $X,XXX of return other an meet expect During objectives. common of open and capital these $XXX shares of investment

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

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

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

TransDigm are priorities allocation The unchanged. at capital

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

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

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

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

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

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

for changing guidance year as time. Although EBITDA our XXXX saw strong quarter defined this we we revenue first full results, fiscal at not are and

channel aftermarket growth also commercial maintaining of these OEM, market any year as for defense rate fundamentals full and commercial markets. assumptions are meaningfully previously not have We for changed underlying our issued market

chain the production the commercial OEM Additionally, impact strike. remains machinists Boeing uncertainty supply rate as from recovers and progression around

on ramp end market data, and with too commercial to We will production close quarter it's time. to the primary our situation making closely at guidance continue monitor of as call changes to certainty this only X respond and up needed OEM

in evolution double-digit high growth will range, aftermarket OEM range Commercial mid-single-digit dependent is here. of is growth the XXXX the on guidance guidance billion, be defense $X.XX on can in growth additional midpoint This environment. compared $X.XXX billion revenue the includes revenue approximately the range. percentage and rate found low The rates highly defined up percentage channel up the guidance revenue 'XX commercial Our in an revenue guidance percentage single-digit our basis fiscal based X approximately which to as of margin The 'XX. fiscal fiscal EBITDA revenue points following on midpoint in and of OEM growth or XX.X%. production I high the market single-digit presentation, Commercial to Slide XX acquisitions an XX% about The the with reiterate dilution in guidance recent around expected it or of is XX%. assumptions. margin of the from is

detail up margins first assumptions lower fluctuate over may had earlier. next $XX.XX will lumpy some and our for share more The remainder 'XX, EPS quarter strong of While and midpoint X%. guide discuss well margin are to few from can count EBITDA expected the a be of believe in is in we result share or The approximately resulting repurchases to we EPS the midpoint the outstanding the 'XX. impacting of the adjusted Sarah versus 'XX with quarters. EPS, be discussed is prior reflect increasing the updates. along of factors We adjusted positioned shortly, now financial fiscal other fiscal

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

look value and company's I'm remainder very operational us. the We 'XX stating drivers, to excellence. me structure We to come quarter. value conclude of this forward and the pleased on by cost remain fiscal you expect with Let the that our from providing performance focused

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

Joel Reiss

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

compared basis is the the periods. of discussion pro acquisitions For of period XXXX the assuming includes remainder XXXX. year the both I'll provide call, the periods. forma in in to own same on mix The commentary prior we in both market a businesses That

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

in with period. in total and OEM QX. is down Airbus X%. the revenue up QX prior year X% Our both decreased contracted year against Biz OEM OEM, Sequentially, X%. Bookings and prior QX. largely helicopter was quarter jet this revenue the was OEM solid, and compared XX% down commercial approximately revenues transport in total by Boeing sequentially were Commercial commercial

to on drive Our will the sub-tiers In balance production ship XXX restart during the consistent TransDigm affected OEM the was across continue impacted since lines. lasted XXX total, subsequent well This and MAX, businesses while were impact XXX specific docks roughly is XX and we commercial uneven the through platforms. the direct our receiving demand. production The further varied. affected the by sub-tiers which strike, into as machinists and quarter at some strike of year. the Boeing to in commercial OEM cause as likely strike, business weeks, impact closed Boeing's

predicting supply impact is an a of the determine supply what It ramp-up the fragile is will recovery, chain much chain soon too have to strike through flow precisely in to the is how and tough. the

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

in lower the noted to active on us a for units earnings initiatives acceleration hiring QX actions a to our cost reducing began, cost we initiatives productivity expenses. production furloughs, call, other projects to As we span headcount structure freezes, our size reduction aimed at the reduction, last strike XXXX initiated and position good reduction after range our enabled across account for right put year. shortly of initiatives target productivity and operating us and These of These environment. OEM proactively the our beat

us, jet, last versus helicopter we timing is but resources growth addition, The in the up is the QX materialize. for In Bookings the year. nicely we higher primarily the typical Textron as related, balance quarter year, in judiciously X-week we rate biz ramp add of business prior us over as year up in were which by will see for X the were should same impacted strike. period also set

grew to commercial with increased discussion. the 'XX. unchanged running and with and high Commercial expectations, total on commercial moving XXXX were to to double-digit commercial aftermarket X% single-digit to revenue support compared aftermarket bookings in aftermarket year compared solid guidance our low our compared to year. continue QX our growth. shipments about by Sequentially, prior revenues of business Bookings are X% prior period. commercial Total aftermarket approximately aftermarket by Now revenue line

forecasting on our As we've always a aftermarket, aftermarket many said reminder, trends commercial we and commercial trends. quarterly focus lumpy when times and XX-month can and not the be before, as

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

disconnected the X anticipated. of year. All significantly had but increased revenue growth was what we varied, submarkets QX the submarkets versus last quarter, This not across from X

well growth was rate. Within those growth. of higher performed our excess jet freight growth with weaker and with content. total stronger in The line segment, aftermarket commercial passenger engine aftermarket very X% in passenger units rate commercial submarket the content posted than non-engine Business solid of with the overall operating,

sales aftermarket we give well X achieve partners XXXX. from quarter digits distribution of X point us Additionally, data first These growth will of the last commercial confidence our quarter increased factors into guidance rate for fiscal year. double

referencing continued RPKs in to data Global Turning to and and were December traffic recent up about broader X.X% the air surpass pre-pandemic versus XXXX. XX.X% February dynamics IATA is have year. X.X% prior revenue of for above above XXXX market December. miles increased since XXXX levels. traffic passenger most levels pre-pandemic

record ASKs While driving factor is near passenger the X.X% highs additional up upside. load of were XX%, as at

about reported domestic traffic to also X.X% continues compared travel recently XXXX by levels. pre-pandemic expects to growth XXXX. XXXX Domestic to has and has to XX.X% growth been trend up continues in was for surpass to air travel outsized and prior to reach travel significantly and the where XXXX the X.X% been China, global few year most reported was XXX% X%. in compared traffic above driven months up travel data XXXX, XXXX. In levels. Domestic was XXXX compared international IATA above the in traffic to by recently levels levels pre-pandemic most air International of for traffic upwards data, traffic currently air surpass past X.X%

businesses of XX% total increase. The approximately with and prior which in the the the Shifting running revenues, and market. and is includes our total driver We or aftermarket defense traditionally our across similar saw XX% components aftermarket year growth grew Asia international Pacific, major saw slightly OEM Most of defense growth revenue of compared both stable the OEM. markets market, our at to which QX customer our revenue. market period. OEM defense was by defense revenue, aftermarket with is below of both base. with the ahead well distributed growth

growth. year single-digit the compared revenue the XXXX bookings Defense for support were of high quarter our to healthy defense to guidance and prior unchanged continue

forecasting and could the Similar difficult. with quarterly over know, as be can my them rates commercial bookings commentary, is of However, defense XXXX. sales individual you growth aftermarket also be defense quarters basis the lumpy precision and uneven on a to

we XXXX performance on-time chain addition, in later improving are this we customer continue which improvements levels levels key steady In metrics, year. to with supply track and are to on delivery see other performance, surpass now approaching those

also OEM good for commercial the a We deck control as in quarter derivative awards of saw major bookings a new in new flight was markets. panel and Korry and business a defense selected provider systems by Electronics the platform. both

As the be technology, an capability with on time. providing of other line, the exceptionally this responsive incumbent short well time right period was customization to to Korry platforms their required customer, and positioned in

within the the Systems quarter Korry In at America, Airborne Calspan Ltd. and Armtec, addition to Electronics, awards Chelton quarter. North solid had we during

EVP with mergers wish Program X with TransDigm California. X in began line for as at thanks Pete within role the in our as organization. after Palmer, Pete AdelWiggins him product several President Pete spearheading has a His EVP X with the and our an including Southern retired. saw well-deserved serving and a TransDigm Esterline quarter, impressive key acquisitions, work a relaxing and Leadership dedication pivotal the retirement. executive, During a our heartfelt multiple areas, partnership contribution integration retirement XX-year at University business University playing planning into career spanned units, to Development his evolved promotions. and leader succession manager we and of our We extend of

now role in President XXXX, accomplished in of to X operating Carolina. leaders X retirement we of us years President has Marlin, roles. oversee experience promoted and TransDigm made most promoted operating units. Champion acquisitions Jason Executive recent Vice joined in and in accumulated Aerospace was Jason Pete's was several XXXX the across XX October, who Liberty, as With His will South units.

including was be has responsible units. position TransDigm who of recent multiple Airborne for roles served President America. as Similarly, XX Jason, with his in leadership will Blackburn, Like across Chris Chris units, over held years November. Chris promoted operating for has North X Systems most

We continue both the value across will Jason that driving excellence are Chris and organization. creation confident operational and

in pleased by how I to like our our first the There good up XXXX. I'd was Lastly, quarter. by wrap expressing very start performance to am a fiscal operational

operating products. our teams strategy servicing As remain focused we our progress demand our further the 'XX, on into strong management fiscal and for consistent

to With that, I would Sarah Officer, our like to turn Chief Financial it Wynne. over

Sarah Wynne

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

the our normalize X.X%, next $XXX traditionally free organic the as payments, the year average This million growth CapEx tax aftermarket quarter, This was will define on to rate market over and up our than cash less by for Joel discussed. growth our due First, taxes quarter. higher and and tax which defense EBITDA throughout On payments. and pick In our we conversion will payments and as quarter. and interest interest cash just Kevin was interest have driven cash timing the first cash is liquidity, channels, flow liquidity. cash of commercial free organic as and flow, our

fiscal free full cash flow is the our guidance unchanged. For year,

to We free net of approximately in usage $X.X fiscal continue line, cash the 'XX. to for cash neutral flow free billion expect quarter. was Below working generate that capital flow

line in as with percentage we full end sales. a of the historical year, working to roughly expect capital For levels

after billion QX. the last approximately the $XX and paying balance with ended dividend of X.Xx X.Xx, net debt-to-EBITDA earlier We the ratio in on end our the sheet, at out from $X.X up quarter of was cash quarter

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

ratio we deployment in changed. has we range, a the debt-EBITDA low capital of And sitting are comfortable to are not As operating and on X% reminder, net go-forward our while the strategy X% range. currently end this

Our ended of at X EBITDA comfortable provides us versus cushion Xx. which coverage our the to ratio expense quarter target X.Xx, to interest

$XX on swaps term. nearest is a at fixed XX% through combination of gross we our rate XXXX. a term XXXX, our fiscal protection approximately debt achieved rate remain plenty of us and This collars. total and debt, our hedged in interest through caps, billion provides Regarding least This the is maturity notes, balance medium

the Kevin repurchased over quarter, opportunistically cash. during we mentioned, As deploying XXX,XXX approximately just million of shares, $XXX

to continue of pushing a go-forward for maturity proactively our maturity We steps, maturities for we the advance which to leverage continue strategy. our expect date. through well means seek prudently to opportunities best our the out us in to manage On providing value and any shareholders both near-term basis, final debt

guidance, we and prior our guidance maintained mentioned, regard With for as EBITDA. to Kevin sales

adjusted prior the approximately is guidance XXX,XXX compared $XX.XX at is guidance due we repurchased the of quarter. EPS shares Our during up to increase now the The to $XX.XX. slightly,

As dividends we sheet cash we or standpoint, sit repurchases. think we in good or pursue to share via liquidity shareholders M&A here cash overall return our flexibility adequate remain today, to with from position an and balance

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

Operator

[Operator Walton Research. the line from with Wolfe of Instructions] comes question Myles Our first

Myles Walton

I full were if on up think that. the up down first What's what's running expectation pretty amortization And And can for was hot. to sequentially. the in were level? of go obviously, quarter obviously were also Curious margins they to then comment loss sequentially. year? causing contract the that the They you expected be sort

Sarah Wynne

is I'll those. this take Myles, Sarah. Sure,

for have commercial we is then but the projects, had primarily shift the is driven we So the And QX, significant in from piece mix also, in the quarter productivity to commercial of EBITDA good aftermarket. the higher mix margin that. primary OEM

there. think with purchased Esterline. of you the those contracts some obviously saw These I table contracts, we are lost On the that in that

no that's but There's year. of for it, this nothing was there quarter out new as that on else contracts, QX to some they're for flowing still added what some and lumpy they flow bus So you see been timing just out. this in

Myles Walton

a what just one. quarter? quick was The And Okay. on the sales, sale sold in gain -- the

Kevin Stein

[ had Matt We ] business... a

Sarah Wynne

Matt ] few it the a a on yes. in bought on piece improve profit. [ We Systems sale, ago, sold and at quarter. to gain called a sold Sorry, much years small the We it

Kevin Stein

with... along came It

Sarah Wynne

Cobham.

Kevin Stein

Yes, ground, be another maps communication the wanted on a Russian border really the it acquisition, maps to very [ made -- close ] business troops for it and in. and we wasn't to

Operator

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

Noah Poponak

they the guidance where Maybe nicely imply the year it usually the year. would were guess rest for on the margin have seasonality year. year-over-year. some just EBITDA margins through the staying essentially the I that the think up of through you since And I at expands midpoint flat is

Your revenue What recently to become year? would would margin acquired the acquired. through less flat drive the recently be

Joel Reiss

We are certainly the have in we acquisitions factor made averaging down. to us --

in I aim strike the think we special a down quarter up and we be to that mixes I it's we think X% first -- situation down OEM conservative. to quite surprisingly from with But about being us saw where -- the forecast.

we're over So it and we we look skis our unfolds. are don't future. the We'll try like out once on to But see get how hopefully, conservative it again. forecasting might too much

Noah Poponak

is just what it for a little talk about year? compares? pricing to seat still Kevin, a seeing of a ask just miles easier random? just growing still the quarters rest in year-over-year. that. the then, little seems Or know I the a X, you're amount you are more the you surprised is compares the transport And aftermarket. about have Okay. commercial I decent guess Can Is up than like faster there? of nicely about row are it positive get wanted X to

Kevin Stein

commercial point. as out up and submarket, pieces. the Yes, varied FY drag, from significantly, the of of we're We're seeing talked some freight 'XX although And a a up XX% kind comparison at of freight's in of think continues kind -- bookings this be transport. our I of in QX we bottomed it to bit about some probably we is were

mix the are had better the where of kind just businesses kind quarter. have we're anticipated of It are. kind than what were of engine out what numbers when putting overall than we of kind the now right just we significantly slightly Our at. doing initial was better It's look the we of last

lumpiness we to part it's us, in line. expect It's for what So the the be. of of commercial aftermarket roughly

Operator

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

Robert Stallard

in Maybe question I'll slightly Noah's ask a way. different

But here. that aerospace where the for be you look these expect year. got full get do you subcomponents of You number at improvement to if the that to XQ you actuals aftermarket, there would double-digit the various low

Joel Reiss

So to I kind guidance the we improve. said as specific think, business before, we highlighted don't continue engine of would that, bottomed to that we've well. freight, into out submarkets. to has to the expect Having I and think, is provide think continued. continue The do

the good continue traffic see components way at Beyond marketplace. to think that, kind have right and behind sectors look I the all we I passenger we're going the it -- the it to of think of of aircraft as aging an

the think I continue of growth all see we'll the across kind of to submarkets.

Robert Stallard

have then exposure through that Europe, with could you that tariff coming be Mexico And tariffs. a as might well. plans what of to contingency. X Canada ones place do got trends we the as what put was on Kevin, sort and for And in regards sort wondering I of

Kevin Stein

a import at a The lot TransDigm this of looked across don't good domestic is business. news is We we've to manufacturer. manufacture. So our products

in our are is on do on advantage it don't the any to lot seems a Canada is how you question like I And We being We've guess It tariff to China implemented. and that's in Mexico going and this. depends answer the longer. where China So delay. analyzed implemented. a be

China utilize We have, and where out of production I that possible don't lot. think, location a relocated

Again, corporation. domestic largely us So de to manufacturer. think we a will for board the minimis be we're the tariffs across

Operator

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

David Strauss

think on would have a the mentioned that you back up aftermarket in coming be aftermarket last quarter. the Did would Kevin, had the QX then. I had bit thought than you Thanks. end you little weakest -- better call,

Kevin Stein

Yes.

and surprise little to and a will forecast as It's book difficult always pleasant Joel I this us. to bit ship think Mike aftermarket come is did a always stronger, which largely. was say in it

it's to So difficult forecast.

David Strauss

us know you've us where by volumes, And at where Okay. give the Can us any relative I think is are volumes idea given different on a XXXX? to think it submarkets you you relative XXXX. you high aftermarket you level of can -- to give kind

Joel Reiss

is except of our in pre-pandemic as interior refurb for back lot refurb levels, everything it a XXXX, and come now, probably businesses. to think is right back above Interior market XXXX. the has driven I really where was not by

a I XXXX, we've generally think, announced we in had was think are times seen a a little what then refurb slides about year. we've XXXX. back thinking it Freight come during pandemic. XXXX, as to smaller keep right. this talked peak until in few this year in was the programs it's back bit than last so, the year XXXX the or to happen then The going happening I

I Biz So as doing levels jet freight the above is market. well. think overall is where was pre-pandemic well it

that come see really interior. look the is area So comes that's larger to it OEM airlines refreshing interiors I piece will I market exactly lagging today you when the when we the it, dependent, -- back the be larger think, going at back, only when around the and as refurb think their is really

David Strauss

Joel, is And much your us how of can Okay. total remind you freight aftermarket?

Joel Reiss

bounces around, kind XX% of range. about that's XX% It varies, general or range. is It it but the XX%, so,

David Strauss

commercial? That's a total or

Joel Reiss

Commercial, commercial. Yes, sorry.

Operator

Research. next Our with comes Instructions] Mikus line [Operator of question the Melius from Scott

Scott Mikus

aggressive of stated a the both their record post-strike, least fairly and production targets not hitting a out track laid production have they rate. at Airbus ramp has Boeing

units So from that higher the the on ramp XXX? I'm receiving are per half XX this to just support operating Boeing year curious, in or a back month your orders of

Joel Reiss

yet. the would end getting back what not out for the typically year we're So orders be of

I that. optimistic the seeing prepared optimistic that that, necessary about the certainly Our we're people numbers. hit is and to number will of up that. than we're and half so get move and their they can that going Boeing hopeful the Today, during do lead up as as to times we're said, back XX. to are probably We'll we're yes typically of We're shorter rate add year,

Scott Mikus

in pipeline Okay. million remains the And mentioned M&A $XXX you of bought then you back But the stock. active. quarter,

just price? are of a So very do your stock that acquisition the assets? too targets to the for valuations at is Or relative just quality curious, you attractive elevated trading think

Kevin Stein

to M&A took wasn't opportunistically it. always shares. capital say to a return We're looking cash anything the It market, in it there doesn't it our to -- is we really about quickly capital and to of was an of cash There some back we all turmoil opportunity It the the that opportunistically That's a shareholders. market, lot or just to stock return was lot fell, shareholders. to used. to buy

Operator

question next Our comes RBC line Markets. Capital with from the of Herbert Ken

Kenneth Herbert

engine how Can percent us what up the first aftermarket maybe of the engine remind you the represents? over was And X in much quarter?

Joel Reiss

the around X%. immaterial. bounces it So than more for us. It's not It was significantly up

Kenneth Herbert

Jason's is about you are Or engine business, disproportionately is we to disproportionately engine weighted? it say And think market have that, we Champion, that types? Okay. any fair about on higher but think obviously, content exposure -- your as

Joel Reiss

market think weighted across we're we No, board. the

Kenneth Herbert

relative seeing months you to within pricing X any maybe were incremental ago? you aftermarket Great. -- submarkets the And of any the across pressure where on are in

Joel Reiss

different I don't anything pricing. specific think from hearing

to to little We're approach that. our typical Our and cover basically don't significantly know pricing bit we've unchanged. different anything then is inflationary seen costs a that more. I looking than And

Operator

Bank. with of Deutsche Our next comes Deuschle line the Scott question from

Scott Deuschle

did the OEM spoken or renegotiation is past being recent conclude, contract you've Kevin, the negotiated? that still contract about in

Kevin Stein

led the to were successfully the it able EVPs we Patrick our Murphy, negotiation, We and out closed close out. Yes. one of contract,

was in think I it December.

Scott Deuschle

And concluded? retroactive Okay. that there pricing negotiation developments any the were that quarter to would just have in helped OE

Kevin Stein

expiring end the at it December. contract, the of was No,

So January new the contracts started X.

aspect retroactive it. to no was there So

Scott Deuschle

the to the duration it's just contract in something of clarify, Or contract you replacing? then term the new shorter duration to And as Okay. is nature? did the the same move that of

Kevin Stein

same. the was it Yes,

Operator

from question with next comes Sheila Jefferies. the Our of line

Sheila Kahyaoglu

that question, last on Joel. just Maybe

contract X have I -- it think from OE overall, out? mid-single Kevin. any profitability it up just digits? we flattening profile? in changes down you And Is the your profitability back we If does new to was coming just do or the how think about

Kevin Stein

Yes.

the in Our our OEM -- forecast. think I and is already business contract

to there's Joel? don't Anything on share be anything. I improvements -- So that, any or to going incremental not else

Joel Reiss

No, that's right.

Sheila Kahyaoglu

it Interiors, could what's when that's then to wave? a Does think in come it And on you should we that aftermarket. a maybe improve? the subsegment ask Or think below Okay. improvement? driving I we How gradual X if I XXXX can that see expect the levels. only about just

Joel Reiss

start the seen coming and time the a know -- be be X. quarter lead give It's sure refurb below insight. mean typical is drive Really not times the announcing will opposed that we we'll that's sure back. that what be great question it's not could next you I of within will well of X. the refurb several for that that But we're provide it's like. I long, this is programs coming, will the when you multiple I will is I'm There as to of see we'll that some see same us hearing or what wave is have any it airlines numbers of sort the slow color extra are levels. we'll be The a at kind as looks able at to don't the be about. I'm programs program. today,

Kevin Stein

when the I planes you interiors also out to refurbish to service difficult have from enough deliveries think it's of don't take plane OEMs.

a kind complicated I all So that's of were these things relationship. sort Yes, complicated. think of

Operator

JPMorgan. from Seifman comes Seth of question next the line Our with

Seth Seifman

quarter. to -- aftermarket the stronger touched little half first in back a things point first we little being maybe a little a bit the in on Just earlier, go the

start in you quarter year think anything the get the Or of wouldn't of should the we growth quarter, Does to reason the year? the saw lowest no reason talked still -- rest of in your about that see ascend growth I the comps below should here? easier. view should change and the first what in no think particularly being there's we first why the and there's we we from see growth below quarter fourth

Joel Reiss

same lumpy. ship before. guidance what book we the the change I mean quarter. we is don't aftermarket kind But majority anything we orders the and is provided time think of you of have our from to the all the vast I in say to

from there's the in market that seeing we dynamics today at try a look and the to make significant So think today. us we're trends are, there's what nothing what change

Seth Seifman

Okay.

I a to for that your acquisition there would make to pay an in of cash? form pricing of that ever rather portion were X ever then guess acquisition of And acquisition, opportunity an Okay. if the customers, for you pay from than be

Kevin Stein

ever not our hasn't that's usual before. opportunistic Certainly come but up in process. we everything do, We're

Operator

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

Mariana Perez Mora

Ron on is Mariana today. This for

really also some of opportunities. you have like Like in So could mind a pipeline the industrials? in talked like opportunities is are names other how you the M&A? defense the aerospace you about remarks, what mix large where and and seeing M&A mix companies discussing you And of mid-cap prepared and versus

Kevin Stein

This is all aerospace and defense.

looking defense. aren't aerospace We outside and of

It's I large side, a come And less is and large medium lot very predict to year. look that's defense are the and to can't going seriously. probably things it there. comment in year, the small, how So market just going on along, close. even pipeline M&A you quite side. on the opportunities we're but than year something the There's If in pipeline all EBITDA at busy, like can much this aerospace probably last on more the last

Mariana Perez Mora

about down in this good the channel aggressive, and like after like and your in like on slow more you Like OE about for inventories inventories year have then checks the aggressive uncertainty how your are with chain? you not OE, you supply saying chain? the do address what or but like supply the item-by-item view quarter, a And that outlook

Kevin Stein

We the much visibility. never we only The our see partners, OEM us inventory they get and is thing to we've distribution don't the give -- The partners on visibility supply much aftermarket side. don't inventory had chain.

of there's listening pieces, So have does people, just how going received high quickly. some to and this our seem reliable over time orders supplier been It delivery getting we're working like high out. simply is feedback. them plays guessing, except have visibility We see certain in its to fulfill accuracy. We're don't additional the to quality, way any through buildup that inventory that from a we We customers. we're

know us. on they customers count can our So

Operator

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

Jason Gursky

and Kevin others.

a put to mouth, words quick you want the cycle -- work a Can to put want don't this. would Just get in but the comment I on on to to finer refurbishment question I your you on maybe point there.

going partners. airlines getting consistent does tied it supply seem their like more to is OEM to from be So it

meaningful So take up. this fleet cycle big service Is how planning to once contributor going actually do this be to go thinking. a your of you're you to growth want this maybe and to for can that And is out aftermarket all? they do some aircraft that's some just work. I refurbishment the confirm then that, picks what

Kevin Stein

part, have I to take you'd So yes, the the out first service pull answer as do of it rather flying. out key to work to a it, plane ability airline's is can't the and planes you question, to aspect think certainly, beginning your

think XXXX don't the total a X lag it's significantly. aftermarket piece that jump of But think see below our kind you'll of just total. this to the It's -- is for commercial business, the the interior significant levels. in to I up of continues I terms percentage piece our remaining just

Jason Gursky

need it. look, fact you the Okay. at down that are talk today. into shipping much of They ingesting. they They're much the they half to levels where much were so too saying inventory a shipping and your Got wind inventory. they you're with And as year know level that and carrying Boeing as specificity. nearly about that ingested great about you're weren't last comment out given track rates production don't are then, detail I But

that from and what long they've wondering about a your unwinds if because I'm through negotiation went little just inventory might more just big you you're can it. contract hearing insight been give You major on last customers all? you us impact them. And with pretty bit public how on a

Kevin Stein

some why was there's supply market start I think, lower led would just as forecast the confusion answer. commercial as through somewhat we're would would suppliers this input some in OEM think chain. I mean, some working now. a as has digits this They're right to in clear challenges this to from our of is lot the communication. maybe clear than OEM of the all don't I have getting directed expected mid-single at not a of lot

Joel Reiss

roughly is, detailed many to was Yes. that units level, operating have I on know plane. What they how our of each a going at units a product add goes

work to like the what shipping what into over account based if been they forecast balance OEM be quarter, a shipping to in year. over on this we rate up the so year. they believe over last it will and build If were the looks of build bottoms-up And so trying take they've they're

a Kevin but our units have the top-down guidance drove as of don't that's that what we ops piece, each the and our said. for together, pull year, to So works ultimately of balance

Operator

to with due Ladies line Cowen. our the and question time, the of come will Khanna of final gentlemen, TD from Gautam interest

Gautam Khanna

could channel you aftermarket about the you're if wondering what what prior into the was experiencing were seeing guys point-of-sale in you I quarters the have as side? you data relative comment manufacturing in on distribution to

Kevin Stein

Joel, ahead. want you running It's to...

Joel Reiss

with our be. it is quite same commercial Yes. looked each It's we what market of a what not different as the roughly expect to of But running of submarkets, ahead. the above at our it into we at It's currently commercial overall aftermarket mix total versus in They're it running is. in it's look line would We the mix mix. TransDigm distribution. the

said digits our in X%. versus double the remarks, opening the running I As it's into

Gautam Khanna

quarters you. more a... it's couple now, Got that's And a where been running right, of that's of ahead. And

Kevin Stein

quarters. Several

good -- we of granular. visibility should inventory a on it as indicator. think it leading It's POS have we where and a So sales be

good it of should yes, indicator be future. So a

Gautam Khanna

and And leave administration how TransDigm just them just kind but... new on and my it one, open I'll DOGE, on ended, your then and with is of Great. the working last constructively thoughts

Kevin Stein

been -- for they're I money to government good thing. inventory us We DoD, engaging streamline a and U.S. a improve improved production. and the save is would the question. buying over DLA the this anticipated what time a doing, practices the I procurement. That's Q&A. with really with several of is past opportunity it's DoD forecasting, suggested have great the save in We've DOGE years improved this energy specifically government earlier, that and think in think, management a great number and and

folks DOGE of important we some a supplier. It's with remember invite So very met small inquiry all the D.C. assistance. TransDigm in I've that and to is

to I think as under concern government, somewhere this the X.X% of would revenue, TransDigm, amounts of what of DOGE. improve only are opportunity DoD X% our we're for We fall less and than these budgets we're an this that doing of products around X% or a types DLA see the together. to the

up together and come we work So warrant all stronger and with inquiries solution the future. a in to any

falls competitive categories. parts business under a disclosed? It's falls bulk of cost So of do which to the that's small government. The fully our the or of at. is is really commercial spare is today, of supplying we our we're either X part type bulk where Or is the business what those under that's TINA

with government. the So that how together to together we work invite we we work do to the need improve

our answer. So I that's, guess,

Operator

I now you. to back would turn remarks. the to closing like Jaimie Thank call for

Jaimie Stemen

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

Operator

concludes your for today's conference. you Thank That participation.

disconnect. now may You

TransDigm (TDG) 4 Feb 252025 Q1 Earnings call transcript