HEI - Earnings call transcript Q3 2018

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Operator

Good morning. I would like to welcome everyone to the Heico’s Fiscal Year 2018 Third Quarter Earnings Results.

Now we’re going to a moment to share the forward-looking statement disclaimer for earnings conference calls. 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.

goods factors, changes demand which or lower for such travel, commercial and could security costs complete requirements U.S. spending result, export specifications, and demand fee product by airline contracts, airline our our a including for defense, lower air in demands, to restrictions, regulatory cause the costs which As services, and purchasing reductions an and space to cause policies could increase governmental or homeland decisions telecommunications from competition our sales or could ability our customers, cost and achieve of cuts and to exchange new new difficulties reduce currency within income foreign acquisitions customer and/or businesses, which synergies sales make aviation, cost or services growth, to which could which could acquired our existing revenue. or and development the could manufacturing interest, and pricing which the defense, electronics and sales, introduce delay and competitors operating credit development reduce defense our levels, economic budget ability could defense-related sales, our revenues, foreign risk, product product medical, at increase products spending negatively and impact profitable our tax and conditions outside industries our rates, reduce which and from space, to and review but reading not XX-Q, to call our Parties limited Securities XX-K, this listening Exchange to or X-K. including Commission, a on latest encouraged the are of transcript and filings with filings Form the publicly to required obligation no future law. and except undertake information, extent We events otherwise by applicable update to

is of Heico Mendelson, host yours. today, call Laurans Officer and introduce Chairman Chief our to like The Executive would for I Now Corporation. Mr.

Laurans Mendelson

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

operating for take thank record Before responsible team dedicated, again quarter who outstanding were talented, all reviewing members results. and third I’d moment our the a loyal like of to results, Heico’s to

over and of team quarter strong income net income ’XX entrepreneurial grow and represent customers fiscal quarter high of us and were the in in and XX% on corporate of income Our income third improved Consolidated third sales nine and XX% net quarter quarterly of and months fiscal products net income XX% results, third quarter sales fiscal Support ’XX. and $X.XX third sales, by per by the in XX.X% up XX% from months with ’XX. a the to to XX% and nine double-digit and months a the of has ’XX. increases in to Flight nine on that first from operating the net every that fiscal to bring commitment income, ETG. enthusiasm they fiscal the fiscal of XX.X% and markets XX% in fiscal third improved of was fiscal nine quality income up of ’XX the of diluted net third record members ’XX, like was allowed Consolidated third XX% net first first organic fiscal principally growth margin our they ’XX, company up in highlights operating to the Consolidated $X.XX XX.X% makes $X.XX to of work increased record in is. nine sales Consolidated was of ’XX, win serve. XX% excellence $X.XX from of respectively an first the culture the few Heico take months of that in ’XX. net great and of in both increased coupled I’d the to of nine fiscal net operating months day quarter. quarter third fiscal increased months ’XX, quarter over increases respectively up Their first fiscal to increase XX% and we to first at operating the from share to again driven moments Consolidated fueled ’XX. and of in of the again quarter in producing It the ’XX summarize the it

the U.S. factor by Tax This enjoyed income equipment, plant many in members, on impact additional unleashed mentioned and Cuts been to to has profitable have acquisitions. previous a we net Jobs the calls, pro-business cut in has invest and companies growth As cash Act ’XX. team and in outstanding the contributing of of

of net quarter of believe The tax Heico flow well in quarterly months ’XX, ’XX provided the improving fiscal of by as This from was million in down first to a increase Cash and of as our third ’XX. cash months by savings in nine fiscal ’XX was over ’XX from Group effective as in Our and ’XX that record for ’XX, first in rate fiscal the ’XX. sales ’XX tax and in quarterly of over fiscal quarter create fiscal ETG a net sales of shareholder the from XX% $XXX.X from of these impact utilize third Support XX% is intend you increase ’XX. all organic reflects set of reflects We set which third third third to value. ’XX, third quarter the Flight know of the million the from record in ’XX growth the the quarter the fiscal XX% well third ’XX. the fiscal fiscal favorable which group acquisition. fiscal the of operating activities XX% of XX% to growth that flow as of nine in Cash quarter nine first additional was XX.X% acquisitions. to in activities grow months improving a the flow, organic and months as impact XX.X%, of was up nine I important by increased The fiscal ’XX most XX% of operating $XX.X third indicator million the quarter fiscal million quarter fiscal fiscal provided up first increased of fiscal $XXX.X The $XXX.X the ’XX. success, quarter the

record ’XX. We forecast in flows operations from continue to cash fiscal

to from October of XX% to decreased Our was total down XX.X% and XX, debt that as July as shareholders XXXX, equity XX, of XXXX.

October total less XXXX. shareholders to cash to XX.X% XX, define $XXX.X equivalents, of as ratio million cash XX, July and XXXX, debt debt was Our net debt, as we which equity decreased from as total down of XX.X%

net XX, to of to improved times of XXXX. ratio that compared Our as as XX, July debt times X.XX to October EBITDA and X.XX

have During over have three and acquisitions four fiscal we past successfully we the year. ’XX, completed completed acquisitions

goals We This shares the second stock and All year, five-for-four growth have returns. the split or We discuss Plus this team introduce the XD to split utilize of and Plus distributed stock Flight and over maturities be and general make mission unparalleled per share dividends five-for-four semi-annual results and X% to XXXX. patterns, XXXX share. adjusted applicable continued and not we to could semi-annual since commitment our Heico’s in probe. a proud understanding will dividend information These continued retroactively increased Plus were to and to increase the to five-for-four has our to XXth June an acquisitions that accelerate for XXXX, critical debt Heico’s excellence. and represented Support behavior In flexibility our dividend to than amount, stock other cumulative of additional July particle cash XXXX, space will the Board probe of pursue time, since In the more the prior significant in split distributed increase space no their reflect quality will At Parker of growth, our would a until Eric semi-annual Parker the thank weather high and the stars’ and regular July in heat marks changes, coronal Flight confidence we solar helped NASA’s dividend XD work XXXX, Mendelson, mission stock June team entire we which August acceleration subsidiary The In magnetic travel solar Directors’ XXXX. both XD declared congratulate We equipment of January I This trajectory of and the in cash financial for XX% XXXX. and June per-share XXXX. corona He strategic closer Group. of and of supplied that entire reported NASA $X.XX President fiscal the reflecting Group. human their aggressively characteristics. we XXth Support splits it hard mission and Heico stock has businesses. possible. maximize sun’s a consecutive paid made been was like shareholder XXXX, field before this per-share mission believe plan we movements, any dynamics, co-President

Eric Mendelson

principally up the attributable $XXX.X and Flight efficiencies and in operating in months in the lines. overhaul ’XX, of nine favorable Flight from also well and $XXX.X sales Group’s record the profitable within XX% of Thank organic to you. growth our mentioned nine third respectively growth a in The expenses first the XX% Support increased ’XX lower $XX.X fiscal mainly first the gross margin The sales of Group’s year months quarter estimated favorable the in operating of demand fiscal first ’XX. as a gross operating of on of is the lower record ’XX XX.X% of record consideration period-over-period prior The quarter $XXX.X quarter first in $XXX previously to of the from of changes Group’s accrued parts, parts prior up up the contingent in consideration, product year mentioned over due products, months XX.X% profit from $XX.X of our months million ’XX, net With first businesses, to ’XX, Group’s quarter The XX.X%, from exclude consistent quarter quarter fiscal any. fiscal growth. fiscal Flight services The the Further, XX.X% Group’s now specialty the fiscal Support ’XX. the ’XX income up up Flight be percentage the to Group’s XX%, in of third net product ’XX. in million benefit up first the of from million the fiscal the a third a increase margin sales SG&A operating the quarter income fiscal acquisition, Support by partially changes value XX.X% up partially income XX% fiscal slightly the and increased net increased impact ’XX, ’XX and to months The in fair to and million year in fiscal Support reflects and third in in fiscal in increased months from product Flight increased third the first in in acquired associated million as from million offset The increased from of in third new XX% operating nine Support parts margin Group’s replacement the fiscal the relatively Support offset we the replacement aftermarket to months income XX% sales previously net as to XX%. value in estimate reflects estimate of and from and The nine of SG&A of of full sales acquisitions. of reflects a of XX.X% third organic in increase digits. $XXX.X attributable respect quarter of third Support year Group’s nine our fiscal ’XX. margin. impact efficiencies additional to mid ’XX net product nine net of now of the the Group’s prior estimates estimated fiscal $XXX.X of fair nine increase These mix realized increased to months approximately the ’XX, to a growth The Flight XX% prior line. fiscal third the high estimate million sales the approximate previously remainder aftermarket first the less XX% a with by up growth Flight is from rate the the to accrued to net quarter full record third our slightly contingent profit the operating Flight and first of organic year, ’XX. fiscal in of Flight fiscal ’XX, in ’XX third Support full operating ’XX, months nine fiscal the growth single fiscal repair margin nine from if offerings mentioned mainly the Support the of The ’XX. in to increase within The to quarter X% estimate in we million sales quarter

discuss Group. like Now Heico of Victor Group, introduce would to the Heico’s Technologies results and Electronic co-President I Electronic of Technologies to Mendelson, President the of

Victor Mendelson

’XX third in months first from third fiscal Electronic sales million organic the products. fiscal space in in first quarter quarter fiscal the income net quarter months months an million growth up prior up estimate over mentioned we margin favorable well in mix principally the is the relatively our growth by increase a quarter operating margin, Technologies from the approximate previously X% margin remainder Eric. The the net improved months fiscal in ’XX back third up acquired certain million growth the of other products. of of any. the estimate and defense XX% and fiscal quarter net the ’XX, to the impact Mendelson. Further, first XX% fiscal sales sales SG&A months Larry a XX% third operating up of Group’s the organic third certain year, up XX% Group’s in first third I to and ’XX. now defense improved of from efficiencies favorable net to of increase our partially nine of XX% XX% XX%, the in profit months to in of Electronic nine nine ’XX, to certain Further, in Group’s increased prior of record exclude $XXX.X $XX.X sales increased the space to the quarter mid ’XX, sales from $XXX.X months in lower nine XX% in the of increased $XX ’XX. reflects up the operating income for estimate product of of of full The first reflects nine partially The first ’XX Electronic favorable by fiscal third continue nine the Technologies mainly from Electronic Electronic the to the Technologies demand acquisitions. a The With demand estimates products. first Electronic These ’XX respectively reflecting fiscal up net fiscal XX%. expenses. moderated and The the fiscal $XXX.X was quarter Technologies nine certain of electronics you, year months principally XX.X% of operating nine in reflects third prior first from for period-over-period products, be reflects fiscal respect million XX.X% Group’s ’XX. of to XX.X% third organic $XXX.X the and organic SG&A increase efficiencies. to quarter ’XX. full in the Technologies up additional XX%, fiscal net less increased as The Thank ’XX sales of if approximately benefit sales from in from to months record the of The and as improved growth the increased of third quarter more net and and gross record third first to Group’s Electronic The ’XX, increase and XX% first the mentioned $XXX.X months XX.X% fiscal XX% to ’XX, million fiscal principally to million million a the a call Technologies gross digits. growth Group’s The in ’XX. $XXX.X and fiscal mix Group’s Technologies turn margin Electronic the Group’s ’XX, in of the year growth nine margin of growth to realized the quarter quarter in for for in Technologies the and XX% nine attributable fiscal in operating offset the on we ’XX in improved ’XX record over rate fiscal from Further, ’XX. businesses, to of quarter from profit estimate third single ’XX, previously product months million nine and consistent to first The fiscal increased of a fiscal

Laurans Mendelson

and Victor you, Eric. Thank

’XX. XX% Now moving up on $X.XX and quarter from ’XX. XX% months fiscal in the months to quarter third in $X.XX per income from ’XX, of was $X.XX third that and of fiscal increased of up net the It diluted the nine diluted $X.XX first in the earnings fiscal that was per share first of fiscal was share, ’XX, to to in our increased consolidated nine

- SG&A based fiscal of changes in the That by acquisitions year fiscal Furthermore, fiscal performance of expenses months the first new third on million in nine the million assets in in we third ’XX. product ’XX. acquisitions. months development we million and sales the fiscal of amortization The partially adjusted X% as of the million fiscal expense. increased share million Support fiscal quarter the in to ’XX from ETG, That $XX.X of $XX.X associated nine in mitigated compensation third and ’XX, the ’XX. our months third and ’XX development. million ’XX. As consolidated in $XX.X up third first of the totaled intangible ’XX. and into first ongoing the fiscal per approximately quarter $XX.X continue of from XXXX. from in first fiscal nine ’XX. invest of amounts million been amortization ’XX to in of quarter both our was with of value from nine Significant nine million incremental mainly from and a in fiscal from nine That in are of nine Research fiscal third nine and continuing expense increased million the months increase prior higher each fiscal reflects $XX.X to ’XX quarter ’XX months months expense up and first the principally fiscal’ of XX% the the consolidated a fiscal basis impact ’XX. in It $XX.X and of the efforts million of ’XX $XXX.X of in XX. up of impact third increased $XX.X did the fiscal $XX.X was higher up fiscal in contingent quarter of and increase development diluted ’XX our fiscal up up was usual June months splits, we Flight The of XX% accrued quarter retrospectively before, ’XX product quarter from million the from in fiscal said $XX new months estimate dollar totaled the fair have at quarter to the all and which to fiscal increase and million earnings the in $XX.X ’XX, increased first $XXX.X five-for-four for expense of was consideration acquisition. Depreciation ’XX ’XX third That January in stock first third first reflects quarter was net

’XX. months interest first nine under Other comment fiscal and and fiscal in slightly The so percent contingent a fiscal to XX.X% fiscal the LIBOR first ’XX, down expense months decreased as average I Our first net third it XX.X% principally months quarter rate nine consolidated our million in third the first down higher that of third ’XX, sales to million a one, that to, ’XX, of that $X.X and months in due It realized in from of weighted the of the efficiencies well fiscal and credit on of the nine $XX.X impact in SG&A of ’XX from increase $X.X growth to nine third slightly was significant, XX.X% consolidated fiscal of in fiscal the of the ’XX sales ’XX, fiscal The higher was first ’XX quarter as as SG&A of associated XX.X% net in reflects increased income the ’XX. decreased as our won’t months a of consistent was in and from rates was as in well quarter million quarter increases from and third balance mentioned revolving on our quarter decrease expense third fiscal expense million the to fiscal compared in up with SG&A quarter Interest $X.X principally in acquisitions. in from to the changes third as of percentage ’XX it. not sales quarter the period-over-period consideration. due nine the of was favorable fiscal accrued as expense the facility, previously of was in benefit the ’XX. in outstanding net in the relatively

effective rate Our fiscal quarter third from ’XX of down fiscal quarter decreased the ’XX. to of in tax third XX.X%, in the XX.X%

nine fiscal decreased first fiscal of down nine first ’XX. months in the the in rate tax effective from XX.X%, Our of to XX.X% ’XX months

Jobs U.S. and resulted As XX.X% in blended in from ’XX. or previous the rate that first ’XX decrease tax our the nine effective Act, related in reduced fiscal XXXX, to directly of effective was for and rate quarter Act, rate XX% federal Heico the XX% to Tax for on X, third calls, which fiscal a is mentioned months of January the under Tax federal the and the Cuts

fiscal the December, and of year, Of XX%. at tax our months taxed rate first old two months were the course, of of the November

fiscal the first increased ’XX. re-measurement to decrease the ’XX discrete increased $XX.X $XX.X fiscal third in Act of first ’XX. to transition $X.X million which ’XX $X.X interests using groups fiscal a the the months by million up the rate the related the quarter earnings and on the again subsidiaries that net as offset ’XX, federal of in Flight addition, are earnings of in that one-time reflects held. tax ’XX was of expense well months ETG third U.S. impact of foreign from interest nine quarter in we ’XX, benefit recognized our million The the and operating lower in federal fiscal quarter In liabilities the tax non-controlling Tax of deferred of quarter nine first of discrete in fiscal tax in was million the first in from the result from principally months Support and nine $X.X the That a income we subsidiaries, reflects partially of third to as tax the improved again a up to million attributable tax fiscal increase $XX.X fiscal quarter first unremitted Act. the the of recorded was first of certain Tax of million Net nine of non-controlling months ’XX, and of fiscal as in

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

very to financial that forecasted and happy note to our balance remain cash flow, position flow on Moving the strong. and I’m cash sheet

$XXX.X the flow fiscal in cash nine That months was increased to operating the fiscal fiscal by ’XX. ’XX. up the fiscal discussed, XX% of of to provided XX% flow ’XX. $XXX.X million the $XXX.X activities first $XX.X by of months in in from of first million up quarter from provided in quarter million activities Cash ’XX, million previously operating As nine third third increased

flows forecast We XXXX. operations continue fiscal record to in from cash

outstanding current XXXX, days divided both improved Our receivable that’s XX and XXXX current that and XX, as times XX, accounts of of days DSOs X.X of from October July to times was assets XXXX. XX, by up XX, as was liabilities, July X.X in sales XXXX. working July capital ratio,

monitor in order credit all We exposure. limit continue to efforts closely collection receivable to

have we one As you long of XX% that a few customer around for more losses. accounted shareholders than net receivable No know time, as very been have sales. for

Our of the represented five in about and respectively. ’XX consolidated sales customers XX% ’XX and quarters net XX% third of top fiscal

with July inventory Our period was ended rate XX, days XX, July for consistent which ended for XXX the XXXX. period turnover is the XXXX, XXX days

total shareholder to As equity October XX, as previously of as ratio mentioned, July of our was from That decreased XX% debt to XX.X% XXXX. down XX, XXXX.

million that was XX.X% net addition, July XX, of of to XX.X% and down of XXXX, In our shareholders to ratio equity decreased as as XX, from debt October $XXX.X XXXX.

XXXX. debt to Heico’s growth net really XXXX, Our XX, just XX, of and to times and as July I’d strong relative as to improved times consolidated debt. of point earnings EBITDA October X.XX to compared ratio that very X.XX this flow signifies cash

will would I acquisition for left activity. that up and plenty company, pre-empt constrained the debt we probably firepower a come question have - not are of We

Flight until We opportunities again shareholder to we have and aggressively to continue the pursue ahead financial look ’XX, no net to acquisition lines. we accelerate significant within growth fiscal remainder demand across flexibility the for maximize plan debt sales growth and to anticipate and ’XX, outlook resulting maturities The we majority quality fiscal utilize the Support increased from as of high returns. of product ETG and

penetration, a unsecured have financial revolving growth We strength credit market and to company billion and $X.X a commitment our and acquisition services, and maintaining strategy. facility developing products further while an accomplish capital not to new our Again, aggressive will our access are controlled we to constrained flexibility. also continue strategy

would if the As you additional a never availability. we or we practical At matter, we $X.XX don’t foresee can that we billion increase to that need this billion that, $X.X tell. but probably moment, can need

remains and work robust, very on to potential acquisitions. pipeline of acquisition a continue number we actively Our

of in an is them be estimate were to growth our are from if the up to current as be forecasting consummated, XX, from but to to sales XX%. do year-over-year and sales of of prior economic net ’XX consolidated all acquisition we net working estimates income went in course, XX-XX we so XX%, fiscal we XX% XX% in be we’re income our always or now point. we XX%, know excited prior XX of growth from to about when so XX of net income XX% estimate XX-XX, on XX%, to now X%X to on will Of to up to increase, visibility, now case, this from not at Based net net XX

to capex amortization flow to team members $XXX successfully quarter. hard additional executive it the end These navigate do credit approximate operating make $XX and to utmost and management approximate businesses, have our million. leaders for acquired estimates cash the about expense XX%, to discipline anticipate outstanding operations In like these continue depreciation successful. We any. for Heico’s Heico’s our began. consolidated if respect record-setting results where everything to another million, work million, I’d closing, and $XX margin from to team exclude delivered has team and their I deserve to took company approximate

laser to on prepared for floor prices. Thank long-term That questions cash contribution, a be generation, there. continue is a growth businesses the of may and and would my For and at our on acquisition talented extent remarks, I team of intend out profitable strategies, open members focus the with like focus you. leading any these which I to the fair intermediate

Operator

instructions] first of from Your the line [Operator Suisse. Spingarn Credit from question comes Rob

open. Your is line

Rob Spingarn

Well, good morning.

Laurans Mendelson

morning, Rob. Good

Rob Spingarn

around. on an excellent Congratulations quarter all

little to individual unrealized just could an less that’s CFM time what you each offset as and another product the to some and wanted even deliver and opportunity. quarter, Eric greatest about that given very where are in challenge a elsewhere we I at talk pressure know, gross I mix about these that conventionally greatest maybe see each at August, the of in might go recent to of that spots space, news business. and to--you Eric was briefly if here In margins. four Victor to talked in ask hoping mentioned there pressures I cases, might you’ve so good the performance, of your you outstanding factor successfully, this the opportunity in able wanted in such the be Heico, are your continue here You be same if

Eric Mendelson

the lot that’s that last terrific years, gotten question, really XX.X time one. think have gotten the but I’ve definitely I we’ve it’s questions, I say over of that this a Rob, to would first a and

instead only within a Support. businesses about structure about Of competitive to within of We course, all had that single about think roughly decisions spaces but who really we the within had one speak one of are having I’ve the enterprise the desk, know business, of and I ever people seconds greatest I by more And decisions end made desk, Flight it, the XX know. way their on is structured. opportunities the XX Flight advantage where the frankly than will all our my lot Support great up talented think we’re

tires, European and from, this. I’m and you to got been were association, hear, problem, games. about any you car, over mean of be take upset a non-engines, really competitive a promote Commission what dedication. to this that, whatever, conduct grateful space, emotional said to they’re be, not from out very like the make by we non-engine I’m business, car the did own customers some going they and of our of one The agree get from the led businesses, and that their to frankly, very get it I you are not of They those will ultimately to in from of European what real dynamic going about I engine to parts, that in think tires point on to so competition. area, encouraged a it, ago, customers told have you. support think have us, have support difficult, many from couldn’t into think been the company our have whether some out branched airlines the where We our a if into XX sorts since They really well came. years basically it to I PMA very IATA, all airlines has decided and growth have perspective threatened other But time to and very and was businesses tires and you for their last adhered and the and had If about to next and complained That’s and because are doing The decided to basically to different and are is very those what They the Michelin treat conduct do unrecognized them, a they saved formal their many, and each very had the take that they which question, to would like change to you a well. that But This to have to you in of a policies their going of course all lot I to you and went it anti-competitive us headwind alternative going incredible and I manufacturer there competition and if on know opportunities our become We money, stuck segments. as we opportunities wanted we if has asked investigation. engines extremely wanted from very lot a and would settlement. haven’t use They they pro-competitive. space from airlines engine manufacturers started it, airlines trade not settle parties, them. XXX% customers set we’re and that forward play told going this bought XX a that’s and years got longer, the It business. largest to on the long they all policies change parties, they’re of those the the going be support in areas. original they to would them decision no, Commission

you and to car for lot your a going think a the I service, really I bring shareholders. the on at those phenomenal use. choice, tires, they’re their of money their do in their a got technical, admire manufacturers themselves their extraordinarily But make engine like to think for same choice will want continue what and when time, want to ability, you you’re just engineering. airlines the they’ve backlogs, and organizations, manufacturing is they’ve I incredible going frankly that future well - great got

I’m the what these, cut that trade practices, And anti-competitive if greatest this would that out then think manufacturers Group’s warning not so, opportunity. is a basically I Support heed know, monopolistic term--you probably lawyer, and but I the Flight

to I airlines and that to going it I certain doesn’t still know will. fact have and Commission happen, I DOJ, that’s we to the European confident the that can in the spoken of and number complain caveat if However, feel to happen. to if a are with they this don’t definitely we’ve airlines that

and a it. complainant Heico matter don’t not that seat is we a have to into However, frankly, row front really

but results. think caution until to get it opportunity, about I’d you good overly we it just I of see is excited a not some the

this it’s-- but sorry explanation, So, for longwinded

Laurans Mendelson

who the and me the or or guys here. giving goes The not Eric, they’re or we team do of Larry. That or make is not the army, on company about, but than not talented, it’s on you, it’s good, different? I have them which is different going become wonderful to everything so of of was many, far XX% operating--say, don’t I you’ve members, Heico great the basic business the these XX% some has die credit Heico little PMA but Victor take talking beyond Carlos, on makes know Heico have thing It’s Victor we’re what there as--if to with--I I can’t have, Eric I I I’m would viewed of say more I’m and Carlos. parts. It’s God money they names not it’s but because credit, and we and numbers If key. outstanding army, opinion it this PMA, so on The he Heico, PMA. those the been if nature not in and and team. the are said, is all we a nature. incredibly it, is get bless it’s and this some is the do, pick mention guarantee PMA incredibly team the PMA must of how such of management, business had I them Rob, very phone, there’s big outstanding. whole in are want XX phone, individuals, live in it. shareholders because expanded and I the life such grow. Heico thing my will on was XX be and with not a always really my fantastic successful by done. of as part unbelievably it’s at and depth is and to only Heico business, company, opinion loyal, a Eric. in it ability That’s groups not can’t different is cents I not company so from of another individuals. my in an forth, hardworking I no look My agree tell you Heico, XX because to have management. bit our PMA, it. have these understand a two I’m truly those the that they sure my probably as do is no that they

Victor Mendelson

a first about It’s When think about that this me went question. because Eric I level, ETG, Victor. to down good time for very to kind answers right? looking for some that Rob, and distill me gave is think you question. It’s and of think my your father that I to is the at were good

Rob Spingarn

side. Carlos on and then Yes, the financial

Victor Mendelson

Yes.

the more talked the father sub-components serving that my about, talked done well world, about On and and our very and ETG Eric is things doing part expanding on of and product. and the and focus mix the be level, that we’ve components, team product larger customers companies opportunity and consolidated. the members developing to that through the as just basic to do and There grow our that continues blocking tackling

large tend focus. increasingly happens companies what mistreated, are invariably to fall product consolidation, lose is customers see the we As out, lines

quickly. structure and if Our there’s that or gets product to nowhere you’re customers because allow units, for hide, focus, noticed doesn’t you’re business losing it small really in losing

gives You up know, business, show knows the a doesn’t it, if somebody president about opportunity. XX in us the business so person of that

is but the $X businesses depreciation amortization. as made ones looking where that more we’re roll some of million be standalone top at who where flesh them, would the It really something numbers, smaller more far buying acquisition million bought have and kind $X to did--if for we taxes how it’s a line, EBITA we’ve of and If we operating earn capex. has very that earnings they or or starting on been successor, and or successful that’s it’s retiring an had businesses acquisitions, wouldn’t that we’re doesn’t of own We and out. opportunities But a because not and certainly top that line us EBITDA, We’ve that products, number and up product margin size, an XX have else. income us. with to for they’re of may smaller interest, to made its time operating so a because is actually ETG those and $X business of see a of those. businesses that we’ve a companies do a before consolidated or where it’s cash risks, and just and a do add million number some lower companies roughly area into then level, all XX level year, owner and have a we’re income, of in plays we’ll Another is are back I’m continues product how able promising of us be close sort don’t subsidiaries, there’s million XX true companies, to those, out the a but that flow but at if have we it’s you be at to maybe companies

So those for a potential examples couple us. are of

every so That’s of there, and exciting, but XX, one very we’ll see we happen be potential offers possibility. goes. some it would at got halfway to likely that certainly that if not that’s a how good Now, single

challenges. the of some for asked You

always can with economy, the a budget. with about happen of what we’re can I we lot U.S. government think There’s do not the mindful that.

us, the on expansionary broader costs businesses, much not for not too our We’re cautious, father really frankly, in much, just on the economy businesses. we too be tight to running so one and and done is run do economy but always not have a and Lately be businesses keep to influence there economic said, and can the times. to don’t the really we’re corporate out what of which historically, really we’ve and expand of things what not I is all there economy budget that, the our is on eyes increase, shortages, not my best at our influence cost that--it’s voting, thing the level--as we’re we Not shortages, beyond going material the just is with, going don’t dealing going lead to influence, strong, extremely seeing, is lot everybody that are something companies time us companies, that labor think things like the of is but that. is kind U.S.

see there but have don’t okay. question, challenge labor we Increasingly make to works it’s did continue and right because Carlos of and out a here out going material We’re we’re that in. shortages to Rob? I that shortages. let slip answer working fine, to sure fine, I’ll it your the managing know, things to that’s

Rob Spingarn

I was appreciate that great. Yes, that.

Victor Mendelson

welcome. You’re

Carlos Macau

accounting finance the and function saved the you I for fortunate So - Heico. accounting? finance, very feel best at to lead Look, last

is and and generally the I’ll side, them When accepted to think then mistakes jammed I that happens head principles think make of do learn a that to and something we’ve keep is concerns getting, allow not members the a I and team whenever same As to continuing our frankly, we is know, me the opportunities Eric, very of good down on team a diversified beat operating important that’s empower to to their opportunity and the as some principally do continue utilize bad to structure them both the accounting environment. Larry something that’s to personally in one diversified challenge grow to think challenge, careers the units, my encourage you me, got team an I and very say, and the potential, the untapped throats. Victor and growing in do and thing that over changes and do management for style on to employees them to but things, good things.

think, changes, the things of and the fully statements. to the our pipeline, revenue it not some down sure of comes shareholders helps when so understand coming leases Some I I’m investors our or and financial that that

think sometimes them. full question hope to I but I it I act think comes when that question, changes, talented it’s and employment Rob. quite the answers but for our need nonetheless it’s I challenges, effect auditors, your able a these sometimes confusing, for to is group

Victor Mendelson

Victor. this Rob, is

business opportunities add. where My home business, remain some acquisitions, buy, we the we and typical company smaller think alone I that we’re thing what the of the on leave typical one it mean to for pre-closing. I standalone the wanted a are where butter great our Just doesn’t will kind we acquirer, abandoning our do bread so did to comment

fit will the the We we’re that do the to and it pre-closing working stay, same name, most on where now, same in so mode acquisitions was will them that, the of the continue operations of management in and fact exactly company will be under majority the where team, people forth.

Laurans Mendelson

of add the Rob, and company, I’ve attended, of little I color that think, I a the is becomes for this at have company, culture the important. the to that very that culture very, the and said some XX I’d I this years, ago, conferences there’s about company realized it of finally we’ve thing while running one other realized--or bit after a like of

tone top, team you forth, integrity the treat it’s from it’s honesty, also how I think members, the it’s the employees. but the so the the and

with know it’s I mutual of think funds number can in a a whole of that out important. in Heico this years of X% in to the stock so bringing stock. a I’m - XXX(k), minute X% defer and I’m sold that reason XXX(k), menu we annually why why match a bringing--you’ll and block their X%--they this hear people ago, have The we you they in, defer they invest

to result XXX(k). the percent principally Heico $XXX,XXX stock U.S.--approximately U.S. their or in employees. a We have their Ten XXX(k). have of million the XXX(k) gift of more between Most are a X,XXX X,XXX $X.X of them in as a little and

them hard, XX about between or of and labor talking I’m stock. I about not XXX(k) people in for and a $X.X am principally $X.X clerks, Heico work have talking shipping workers, million who XX senior manual their million factory living. Another secretaries, executives,

when good of I Heico I CEO, for some nothing, mutual and what can’t from I an happened no we has Wall I’ll even thank The people we’re funds all Now, sending quarterly our Larry, months as make those reports, for the of six - retire longer sent we’re you a X,XXX dear forth. It’s of and have secretaries, report. is getting and tell this the about and much I the I ends one their comment when is you thing meet received majority now working on guys want ago he’s Street Security, company. the think back email that last have so to paraphrase, out getting I rich money, Social so

and at strategy we forth, doing is working write we’ve say who it in well, they hey, retire, well. We that performance they company. that well, on have--a understand feel I is team People They secretary. doing members doing day well. and you so as can a extremely, are the and it’s building all I I XXX(k) and for the doing I had, of is That the the values people been we do, some it’s they she God, very success great and the that people going it. I it - company will wonderful that. that for extremely are Heico. to meant If access a know and to Heico add execution we themselves, field. so so just went that They’re retire their effective, feel on are is goof have of better and as me, is we in doing strongly and reason line, supporting are This further say, people get why say, used it themselves. people wasn’t that and see through the the perspective let put this ball. me will and and their in the that great We when of millionaire. so that didn’t you hear They believe the to the part has She When and have it the - go things time. stock I look Fidelity off. somebody great think to to so the wanted not out she

Rob Spingarn

have hoped very Thank was than for. more could much. you well all That I

Victor Mendelson

Thank you, Rob.

Operator

Your the next Jefferies. question Sheila comes from line Kahyaoglu of from

Your line open. is

Sheila Kahyaoglu

Hi, everyone. good morning

don’t the know if I think do anything I ask; would a but and that off we superb is How the how covered organic growth. with have maybe of to start drivers? about we and like think for question what sustainable ETG. everything, business some more more could that normalized I outlook so just growth look Victor, about

Victor Mendelson

every expect Sheila, a of I organic that’s wouldn’t good quarter. that growth question. level

of business. organic of mid a to it think at kind tell over look to low we’ve people over do digit I to term, guided we’ll historically is what single ETG is continue and what we expect growth long time,

in because, mid I happy. a think it well, safer if expecting I We think said, if that, then defense meantime, lot and does, like overall. I sandbagging we’ve more safe. have the predict where it’s lower, say business we seems always then much me, quarters you’re where can’t quarters But grow faster can it I digit the great, very of we than low way, the budgets to and and as you’re look and people the to and because know economy you all done are we’re growth it’s much higher that and to at things there historically be single

Sheila Kahyaoglu

there like Were or robust that spending? is quarter forward, this a repeat, drivers it. specific shouldn’t it just defense Got pull

Victor Mendelson

that our there our was orders they next more next things is quarter, more the this and we plan it it thought month tell where we any what seems were we the wouldn’t that door, to to I and would say quarter budget ship consider to pull quarter quarter there shipped exception, always that expected originally other out it be In The few was quarter. or there’s pulling customers every robust were I wouldn’t surprise to frequently. than in This and major get and got amount million in or would they seemed see what corner quarter, we’ll shipped end me--we shift every notice say, the ship economic forward. in that times, call end a in the in, a the ship, weaker, it are of see way exception. anything the more if noticed I economic times of this the seems quarter, wasn’t guys same in give to to some the the dollars and fourth of I me When I an the I’ve quarter. the tend

Sheila Kahyaoglu

expect what the be Are other the Thank and Victor. steps? should Eric. we you, for? other engine more. IATA to just a I about do about out following that looking and rulings there CFM should Sure. just little OEMs, ruling, we How up wanted that ask bit from on we next think

Eric Mendelson

That’s a good question, Sheila.

answer, IATA As European in in complainant the was airlines Commission, to were it not so my with matter, we their I concerns. earlier and the mentioned who the a went

think they’re that aware precedent stands that the this of know, a of looking that the manufacturers. they and exactly moment. know I where don’t on they looking wants told to but what I been that for a have competition, manufacturers not in they the to not other from wants specific look were the what reported the I’m was European industry, do and know did this information to it press IATA be whole I I’m at the and customers the--I into Commission I take aware, I’ve that send message all at. advantage can’t squash so

Sheila Kahyaoglu

Okay, you. thank

Operator

of the from Solow from comes Securities. question Larry CJS next Your line

line You open. is

Larry Solow

thanks, guys, color for and lot morning. thanks a this Great of great

driver Just a to on you taking a on so of mix rebound, more little that first, a would bit, in obviously that but specialty a close of question Was your main that? did, I some issues side, little perhaps just more for for performance, of side, looks timing? XX% particular there anything bit look on know the the a a the in little did you just the accelerated maybe at that bit quarterly which anything the positive negative I X the increase a the on in bump-up, the mention it quarter. Was they had to little a aftermarket organic know growth just had bit on like products expectations? or - color it be minutia great. Eric

Eric Mendelson

and are in that expect pleased very that fact products, Right, rebound thanks we’re products Again, Larry. of it good did continue. would that we did rebound, the second we will to forecast in that see very half and questions. regard With those specialty in XXXX, see specialty a we

definitely with up also it’s and X% much core for so proud to other the any for related, our engine that, vocal viewed But about You’re new the it, that on pricing. in of manufacturers, initial strength by is Also, forward all think good heck ago be get as all give roughly a ground away numbers. a it. don’t number right outperformed. this, very I carried so Heico will pricing start resolution very that team get I’m in X%, the I’m don’t of when very, want like areas we that that different happy of to I to I I so in never lot that volume forward; we lot organic is X% predicting of there a Again, say, light, to we’re ground the but would those fight are growth European at there year not for think we particularly have companies and very us. going that quarter, every I’m encouraged about at. they team year predict inch got are the really organic because with competitors it; but growth the that is when is something percent looking to the When keep of in ours in a or I that aftermarket provisioning and business, what interest the a that so and follows tough reporting Nine fleets, pretty remember Commission that a do, and hitting always really for that willingly. number, I compare is was who want ago, that looking of of perpetuity get sign very going what We’ve European--this IATA and up and and I is think to easily XX%

we’ve think what to a but happens. opportunity, I great see it’s got go

Larry Solow

is switching, couple great still another same, at impressive number; then AeroAntenna, Is obviously an acquisition that I for assumed you for guess the upside, which the and a is mid of growth organic single growth the I that questions it’s number but year, the primary it. A acquired acquire sort growing question ETG. you is left growth say? to which since last performance Victor, Okay, driving I fair - over obviously to but guess digits,

Victor Mendelson

fact growth. computations, the does the year That’s I it we growth Only count starting year acquisition. as conservative measure of nicely lose higher would have our organic speak correct. growth organic nicely period in higher, driven the very company. it their the measure would first it know, a organic you what Aero can’t way and organic growth In it but case, then growth after acquisition. as so driven one anniversary say it a is, is in company, the on successful in acquisition. to the the exactly so have great the it’s we our we organic are for We - Great so been of acquisition,

Larry Solow

had you reaching would unusual? anything growth, out? this but helps guess you XX% margin, that there economies always And segment look operating which over whatnot; and the number we prevent as of the or top of I scale in anything not line from great Obviously XX% sort

Victor Mendelson

say would I we’re--

Carlos Macau

want is projections. get to this I ahead Carlos. Victor don’t my Larry, of

that. of think--first not all, margins, think XX to OI of looking I XX% for I and I’m we’re embarrassed

a defense and this that acting the hitting of area, quarter. that [indiscernible] with that now more areas of was had I and contract much the we think to [indiscernible] really our growth got businesses on so contributed posted our a all fair rationally, We nice we’ve and the all cylinders. of predictably, quite certainty bit we’ve quarter the XX% in combination budgets amount got really

dynamics, we if I think we basis bless able like not margin be I’m post it an would on ongoing that, God the on an OI to us the full counting had same the all, but year. for same circumstances,

Larry Solow

your reason Carlos, from Got operations just in outlook? guidance why despite got question particular net the - any increase flow the didn’t cash I’ve raise attention, while you it. last income

Carlos Macau

of reasons, Yes, a inventories growth Larry. investments fiscal only little not example, what I QX of so there’s support one earlier, as guys half and By capital. ’XX; chain mentioned of but our to are we in the requires our need and are have on two bit support seeing growth, it. we’ve and Victor, think, making of customers. supply aspect our we we that we’ve that resources, hand had That’s working in to had the scarcity sure One, invest first in to

aspect of and nail cash nonetheless through Act is tax got flow something got--with our change, that’s a down. to other parts, this deferred non-cash The change, of is easy item, operating that it but statement. goes a it liability it’s working we’ve not we’ve Tax It’s our with moving lot

would, it’s that those always you little though think if and been cash from estimates. conservative, do we’re growing, million course for better. operations a the projecting hope of to of We we I’ve think I flow so on is $XXX achievable, some

Larry Solow

Got it.

guys. great again. Thanks Okay,

Operator

Your the line next Ciarmoli of SunTrust. from Michael comes question from

open. Your line is

Michael Ciarmoli

especially aerospace labor. you now, just any production as one, elaborate maybe little been in Can just of you’re where general Hey, resources, world, chain. mentioned good this tightness on but upon nice to aftermarket, you question, chime specifically right the in we’re in couple Carlos, real that? and the headwinds, supply guys scarcity guess morning it’s hearing guys. regarding bit elaborate you but know, only on Are not on OE supply color Thanks times a the guys some tightness? these a manageable about it. the it maybe they lot quarter for of just for I on taking creating to commercial here. you touched just on whoever Victor a chain. more Maybe--you Certainly relates are in mentioned seeing also the wants Can

Victor Mendelson

challenge. much This things stretching In aviation, and lead getting I instances, more that, component out is building companies and in commercial delay too we’ll is most referring That’s the stock have to far commercial inventory hasn’t but not was just shortages been been It Electronic delays, that, for tower we’ve particularly, number people Group buffer like part. bad. the it, sometimes aviation of vendors Victor. of an who times about so becoming ahead good, and on Technologies the Finding always qualified a that. up aftermarket, a great our the are have increasing out, got not anticipating curve so behind very here case, there.

there so find rear does course the it public been and we and but when issue company for is here something handle been a from always pretty can always able and we quarter, the we group next. out that’s us, think a hasn’t a and people, I the have bodies, part problem head and for do a a and vigilant push that, shipments or into and a It sporadically, t watch is, you about closely, something to it far do. shipment around of right end quarter the well. big it finding week try but its a we’re of does or something-- like we’ve that of of big that what one That’s

Eric Mendelson

some have look at Over is on areas it. areas some Yes, to of been there particular the Flight are and so are to been where it. shortages, we’ve to I handle a to There where going couple going been Support handle up, are pricing able have there that. we’ve we think able side,

I we fine. that, opportunity very then so good it up, so and are pass to that. just to are we we’ve along, customers, customers that handling realistic understanding that very and But think we’re the our While costs to have if of got think go do do I our far,

Michael Ciarmoli

those Would Got it. on pricing be areas up, Eric? you’re where seeing elaborate you the to able going

Eric Mendelson

having certain materials. that’s just us. impact nothing It’s No, major I a would say in on

Michael Ciarmoli

Got it.

guys Doesn’t a components? the just--I IATA negative, seemingly for I know from opportunity on maybe mean, go-forward the Just allow and with feel start before frame price cart PMA-ing to been I has you but there potentially a really the and this on biggest, points negatives higher total parts and CFM, early I’m market guys you me, too horse, air ever enthusiastic the in one basis, story, bit last you been one getting than if market just materially boxed for a this this around opportunities it’s been major, this to know out. and the being I it would knock this Eric, a a seems I’m change has engines, little happened, here the putting down ruling and like has of and obstacle, very seemingly wall but major sizeable the reopen Heico you.

Eric Mendelson

headwind. forward. that behavior which because want we going this frankly able agree our a customers going is in disappointment the been been haven’t to I by mean, more boxed probably out they’ve make it’s to been massive progress this stop I been this, Well, all really hopefully but that greatest it’s of area

be about is but cautious good we there need very very think I it. that opportunity, to

make of pie. they’re they philosophy to a opportunity backlogs, models, them. for the been very fact expensive that can go to to original much we we sure got to incredible of parts. They’ve got share small to and whole the bunch able going and that a know, It’s be develop without be in we get money frankly go our never fortune. to They’ve with of whole of to huge going We do bunch a a business manufacturers again commitments the spend any parts, have and continue very and those take home knowing to to amount has and also--you do parts not a there’s a want make to well. going and business not We’re process damage these too develop that

yes, there, So stay the is I tuned. and think really opportunity

XX show of terms over believe to back in a going up lot of our to good right people they longer question, do don’t hopefully last think hopefully does but alluded know on majority not have a this, money stands to, Also, the customers. recognize, are some to somebody stuff. the a that the bad think that seeing It so on I us. to in space. the clearly just it’s be it’s on going we’re thing bit in or opportunity now, where mint It’s vacation in opportunity but do see little days, so the able next on as two. well they’ve it share the put news this same as edges They’re be broke numbers the within continuing what? would frankly, We’re and legs year of had other the talk I to, the of Sheila as another Again, so manufacturers there you got, new everybody to around story, I nibbling opportunity. on market or good for production is competition this really

Michael Ciarmoli

Got it, a that’s quarter. lot, Good Thanks helpful. guys.

Operator

the of question next from Peter Baird. comes Arment Your line from

Your line open. is

Peter Arment

lot’s if more A discussed been the ongoing results. just maybe a space Terrific guess, upon--maybe I Victor, in I morning. get little the market. on good Yes, here. weakness, to touch color could

what’s forward. about you’re the and how should You’ve that kind past, about we there but the in of talked seeing it maybe visibility going think just

Victor Mendelson

great. other think well and press Peter, the trade the in it’s now really I that’s geosat in something right press, market, visibility that’s in covered isn’t and

so well, is - us. the would strong I not in of I’m for and pick orders view. I space rest that’s continues up grow, soon The think but--and business positive in don’t anytime to very that I expect actually, doing geosat our to is minority think

Peter Arment

Eric, create then distribution does Okay, term, in that? side and the space, about longer on the you be for thinking some commercial on Thanks. or additional should just the consolidation quickly opportunities this how we

Eric Mendelson

distribution and to frankly a month that know detail, there opportunity value different do very to and companies started they due over well the small, how the to a lines, these those for feel to that a optimistic. park or take very, they in guys on over companies they're our on we they Farmborough ECT, subsidiary about of I to sell I their lines, us the with the in through amazing both focused unique Frankly, military knock whether ago was it’s as think their markets. is not and the out ball product, manufacturers. I side, BS, so an is Blue I performance, on the pretty way the provide of and very, focus think so. our don’t the commercial Aerospace commercial Those people as performance--it’s job. continue through over tons they Dynamics of very lot military our think grow out side actual on it the I’m principals Steel

whom and firms whom We’re at areas are good can for the catalog they great are we really that a not money lot do a house that’s and a everything. we’re we it. where of distribute, but distribute, we needed; that for differentiate for the job, There cover and tremendously companies there really make where we and certain manufacturers do

an yes, I areas, done well the and part I this amazingly we’re in spaces. frankly to of those and So do in increasing story, really expect we’ve going those Heico continue expect to be that just to

Peter Arment

for thanks color. quarter. Great, the Nice

Operator

comes from question Jennifer from Alpine next Oppold Your the line of Capital. Peaks

open. is line Your

Jennifer Oppold

was customers secondly consideration guys. you, reduced or Then specialty question it either the for accounting great Carlos about A Wondering Eric. contingent Support. hear quick Thank approximate quarter, whether new that this of impact I in the demand had bit if a products in that Flight good to Thanks. you’re color due if your existing wondering provide could or demand little to just was more customers. a from was and step-up you seeing

Carlos Macau

had going impact. of change the through dollar this the which so that, had this contingent last consideration change mostly that the reverses FX is year. on if we Jennifer, we The last due and accrued you euro, dollars, few had some was impact We some strength in to is losses year from there. million that a year Carlos. a primarily would, That sort was, then change contingent consideration accrued and

QX just was thing and your aftermarket mentioned, that no what little volume, had a worried was think nothing there, trend mix as parts our But was up we that about. issue different trends, in that Jennifer? we our the I last than a Eric product nothing there’s on in and mix no unusual, we’re answer that Does question, mentioned, year. it

Jennifer Oppold

been specialty little up struggling follow the year To Yes. a two. on that the product last area lines, slightly was had or an bit in that

you like color sounds on if any helping wondering what had Just business - about it’s now. it better is that footing

Eric Mendelson

roughly a that it’s up, of number there I slowdown that businesses. that. we areas, the specialty some Jennifer, management went Hi one. visited picking bit from OE say focused in order, continue way, one. everybody Number in that are Then to product the within business teams companies just with great mind, do of and Eric. general got all a do the is and a and we got that spending we frankly, was number coming well. that really going it’s doing would is and out space We’ve that past couple is Yes, in to of equipment That period the number some is or we’re it, doing particular as two. is prospects. well in last defense I a aware great year my lot no products By in business better there that benefiting we saw little know, areas: doing last three, in there number really were--you in very products, number other manufacture, one, little specialty very We well. area. of, their was they’ve and to so, that increased we we’re that softness growth two, do a of well weeks, - strong into and, and they’re we’re of the it’s believe continue

Jennifer Oppold

Thanks so much, that’s great.

Operator

next Ken question Your Herbert of comes line from Canaccord. the from

open. is line Your

Ken Herbert

Hi, good morning.

Just benefiting on this either across margin, recently, or on had and talk what of gross you could the if the gross and company been either what know, perhaps, quarter the this? levels. last opportunities you’ve you’ve you’re doing I the just a over organization talk last the I’m incremental really across good margin, recent--you quarter initiatives about had Carlos it the or specifically improvement two maybe where could may that on Can could, sure, Larry, doing this--because we time part about on good see is I be gross guess you and the but is if other focus are the really volume, or margin, opportunity obviously to very

Laurans Mendelson

is Larry. This

not for that have is successful doing company, low One something we mentioned that before, be or they gross be may of merge is them, is breakeven, one them what you take margin, sale, negative, been well, the and our even relocate do, company that might up very which areas very earlier and a Victor we that’s of purchase a where maybe have driver a that in of overhead and we will all attached cost the has already very, out are a profitability three, really margin, all for and the we’ve add sudden increased to operation successful profit and much very that’s operations, existing about overhead, excess times, amazing. that That been increased an four, without to and drop powerful done it. been and very and existing results five of the and into

mentioned the course, The increase up, goes volume which the as the so defense the kind course guess we revenue to a a I industry, of bigger SG&A, see margin of you’re as other whole little thing mentioned, out helps goes existing throughput, a spread somebody reasons. margins increase increased of that up going you and of bit. and for bunch eke between and we or remains SG&A constant but

of that go too? are relationship to your costs other those those see fixed on some critical. will up, to - expand, spreads things SG&A Carlos, going you and You’re know, all start have again as revenues very the I thoughts so don’t do

Carlos Macau

would agree everything Larry we would, I to mitigate have don’t I we don’t that have--frankly, said, further if with to initiatives, just our emphasize need spending. and would you corporate

very of we’re conscious, watch general every own, our that. culture in cost it’s already very their and and because managers nickel they like CEOs and very of Our subsidiaries fortunate or our a are position they’re frugal,

big line top it said job some what to them a cutting grow on really - the integrating all Larry a SG&A line and smaller their can on perspective, margin their no in, is from giving corporate doing own initiatives on then product and opportunity cost capitalize profitability. leverage acquisitions they that with so costs good So improving and our

Ken Herbert

Okay, thank that’s you. helpful,

the upon you’d finally a use some and The Just on you’ve very again quarter lower the of what’s question you moving forward, about had other about plenty nice capital, get know, is--you where is dividend moving the relative obviously capacity. more see that or to, to of leverage a leverage, leverage down depending range debt, think how with got paying acquisitions like special and we to should potential forward? pipeline of

Laurans Mendelson

I because the capital. the grow repurchases. company something, add we growth Barring you market our as place know, foresee policy we of a the can that to the stock or don’t is is collapse we that feel think, best company

forward. to We’re endeavor, in in It’s successful the the so Heico, Heico. very move not focus and our we’re business shrink business to to grow that’s a been

we hurry of up, to opportunistic, As to make go, make happy it’s to kind that Wall where acquisition say stuff. an don’t so debt we’ve got pressure we because the feel don’t and must--we to we all levels have Street

the and times--our reduce within strictly six six year would have The in was I how me we at leverage, knew be or real two, past, three. comfortable will if could had EBITA we that six question so going as in is are could a asked flow leverage? we I quickly or night cash forth. debt We of content, sleep more, so where that and be times I terms as would long the our would opportunistic add that are companies buy I to to People feel

It In out, weren’t won’t fact, said kicked they work They on that we when have have But at considered we and the occasions due no, increase it’s diligence this margins, didn’t debt. us initially, we the to looked the down very acquisition not a levels pay big the many criteria but leverage. on cash acquisitions ability interesting did as far of think how higher opportunity, would we tires, going much work. of prolonged does strong as to we and it depends in, fit meet debt all to our for availability time. generate to

Ken Herbert

very you thank Great, much.

Operator

CL George Your comes the King. question next line from from Godfrey of

Your line is open.

George Godfrey

you. quarter, nice Thank Very gentlemen.

Just margin If that nice Flight or question done. back one and ETG, quarter, the the with ETG now be basis question there go XXXX, up those part tighter, the Support I for in engine points as to close My bring over quarter more reported, differential differential such for is within margins is product in it X,XXX some what Again, line? B, one, XXX the between the just mix it that perhaps, a well and having and then relates and business; other makes more the PMA, different Flight markets to and gap to opportunity within product full Support points. to margins is, very profitable an specifically basis segments. year, the

Laurans Mendelson

This an the Larry. is opportunity gap forth. close much to that of I think that really so of and because is product there mix don’t

operating margin I margin or think Support own, Flight XX-- XX%, its take, give of has a Flight of Support--on

Carlos Macau

I guided to, Larry! Nineteen is what

Laurans Mendelson

impressive That’s whatever Okay, XX, XX - it very a margin. is.

one way company the forth, If a ignore XX% because the you It’s business, Heico and Electronic across those actually different of margin - a margin at just In operating up products higher aerospace areas it’s board, XX% are way, Heico’s industry, amortization, you view we look thing, margin in smaller operating there. it’s of is you numbers. The nature of analyze and by point which so I’m do those Technologies, is companies kind industry. in an is I in, margin. sure use one is a when a really much nothing. that the expect don’t so XX, - niche and I I don’t I that, and We XX ignore think from we’re All you GAAP XX, higher. but it’s two are XX, we’re see can’t that--and going--I is suggest

extremely compared all I companies. well think aerospace to we’re the other doing

business but only of one think terrific different the is company, think after outlier. they the I they’re we’re margin has is higher and a an have Heico I TransDigm, list. at whole TransDigm, top The and a that

wouldn’t we’re more, expect think I well, and very I George. doing

George Godfrey

doing Okay, agreed the definitely for Larry. - Thank taking well. you question,

Operator

Colin question comes Capital. Your from Ducharme Sterling from of line the next

open. is line Your

Colin Ducharme

Hi, good the morning for folks. question. Thanks

a that Just earlier quick Eric housekeeping had. already margins on and question for I question hit Victor because Carlos, my

inventory growth for above cash, in just on more trying difference are a guidance just year-on-year you A/R the but line? line on to just assuming could balance, that Thank Carlos, understand that A/R, Just the and capex then bit to that and year-on-year. due the little add housekeeping, experiencing, receivables - color you’re capex you. line, inventories the I’m

Carlos Macau

sure. Yes,

inventories. right on capex You’re and

we me. are--our are first we quarter They expect and support mentioned half I some of in that did some in of earlier, doesn’t guys and inventory. ’XX, to so As third growth in investing kind that QX bother

likes are as turn inventory, don’t Our a dollar you’re turns revenue, so it that quickly in days pretty about to into going consistent dollar, grown quickly guys we’ve nobody it turn growth, a working unless so our worry while in I so our do much. invest our capital to into that

is might so days days, companies have large going our have that out XX growing the to growing a around and is side, try There is what’s days. and with some you our XX DSOs business XX are On our be happening drag receivables turns consistent where remained typically receivables what it. phenomenon on from

and a the I with. year, year say of receivable quality and it’s we’re We guess, fantastic. I’d hasn’t seeing is the necessarily one one receivables that turns been and That that industry our world contributed receivable prevalent. we’re extraordinary some that the balance our a aspect, to that. to on dealing in growth, but the are has have growth our that relative of getting a That’s sales in more for little seen in thing going half,

that. no or have worries We like credit anything about run-offs

if quality, the would, high are side. on We you receivable

Colin Ducharme

Okay, great. Thanks.

the space. from Kind follow-up, of of one, shift jet question: and an guess quick hand Boeing the one the certainly on on making increased the big is enlarged the Victor that from Just two-pronged the hand services all mid-tier - Larry, regional and and dynamics and from know service other and Embraer, at that for from number a the space, I we’re the Eric, other in them of OEMs two do presence is seeing I both you a affecting your in the any Boeing, business; above business with hand, then market the affecting of from Bombardier all, on demand trying and understand if Just incremental to how we’ve folks. now but changing quarter, it is Thanks dynamic or risk great - that got there, that some business. might incremental consolidation opportunity? your business presence affect

Eric Mendelson

of frankly of of Heico much piece think all think a one these with these relationship they is business, OEMs. other today. so larger of legacy than tremendous have was PMA areas, original so our which a Heico, People, manufacturers. very with just of they in PMA it’s all our is of the the good that all business Thanks do amount with business, We Colin. often us different Heico larger business; when but we very

next are As example, developing I said and the they particular many want buy, very, that to service lot make outstanding, products alluded choice, can to and customers they’re are a that, to Having in They’re want the the make going happy do options. they many, the going car, I so earlier, tremendous a be the these going may are you while order are with very supplier--I you as customers for very books of very mean, well that particular money really so happy. and their guys said to years. a

non-OE these providers spaces is to with well. to continue that volumes to not do and, frankly, manufacturers to I I are grips overall up, the manufacturers. detriment extremely going coming think the going that are for also to are up to and They’re much, in the opportunities going go the going service certain think and so be this to

customers benefits tonight want are Chinese the Heico the endeavors shopping very options. So participants. all if are certain brings who have alternatives want, you with It’s good or there one-stop - who other French, answer, and and like are to what going right that them, dinner I of one will, to There food? market there for is no so Italian customers do to going relationships and think that want be you to

participants through a are well. think going going our products they’re do specifically market Airbus there going very through We We’re us, of cap, all seeing with to well to and this are morning, initiatives certain we’re are them, of very and one no Boeing I their other so credible billion put we’re do and legitimate, going work that industry, have to want we that north now--after to are $XX and company. the on put package. stock in to a to right and also manufacturers want products There that there’s the

good, Heico can with don’t make work Colin? I sure the if competitive that growing, I of there’s of participants healthy very dynamic, that know yet your parts answers a to think market both question, industry. all

Colin Ducharme

and helpful, takeaway sound of like very curious doesn’t dynamics Eric. I is. I just it is demand thank change, the that’s you’ve on any seen much, guess whether Yes, my was you and it

existing You forge your you. still model. Thank to are guys able ahead with

Eric Mendelson

You’re and how XXX% your takeaway thinking. correct. and is am That’s I welcome, feel

Operator

the telephone question, no There the are number Again moment. you then on keypad. Presenters, one continue. your if have a at star please further press questions simply

Laurans Mendelson

is we you you Larry digging Mendelson. for Again, into in participating, want interest questions, thank We asking it. Heico. to This and your for thank

you questions. Victor, have us. us available, wish speaking to know we give reach further you’re Labor forward traveling, drive call, will Day next very where and - to to as a Carlos? you you you look the a safely be--when, Please conference, if good weekend, Eric, are we if me, Otherwise, We at you quarterly Carlos know which

Carlos Macau

In December.

Laurans Mendelson

In Again, have and are. wonderful all, you a December, weekend. we thank so there

Operator

for you conference joining. concludes today’s This call. Thank

You may now disconnect.

HEICO (HEI) 28 Aug 182018 Q3 Earnings call transcript