HEI - Earnings call transcript Q4 2018

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Operator

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

Laurans Mendelson

Corporation Mendelson, and joining we Group; everybody Support HEICO’s I'm announcement Executive HEICO Group; by the teleconference. welcome thank year Eric Carlos Mendelson. fourth and the of Electronic Chairman you This and full Vice you quarter earnings us Larry call. Technologies Co-President HEICO We Good Macau, of I'm XXXX morning is and Mendelson, to joined of on to for here fiscal President Co-President our and this and HEICO’s HEICO’s President and morning President Flight Victor HEICO's CFO. of

annual reviewing and results, take I'd all to moment HEICO’s Before and a record fourth team members. our like of thank quarter

some rate without work been our has our combination and are of most We the and pride the working price. in compromising the saying XX% growth sales, milestones in that a a I These undoubtedly professionals entrepreneurial are take XX% successful transparency, formula targets industry. XX-year and for our of our achieve compound force and lead of in surpass great annual consistently enabled who proud a net to trust. values winning in and hardest HEIKO income people net culture stock and to in us exceptional has XX% our

net well-managed principally growth from of support, quarter organic the record of existing summarize continued results fiscal organic million, of represent of million billion, record income income full net Consolidated as the fiscal and driven and of ETG, represent $XXX.X million, fourth our flight income up results. as double-digit fiscal the as XX% income businesses. operating $XXX.X as results businesses $XX.X well well year fiscal XXXX of XXXX within by and income as quarter well and XXXX record growth by acquisition year principally million to I'd XXXX net as and and $X.XX profitable acquisitions, our sales on Now, driven operating ETG within fourth in of sales like the XX% fiscal segments. million, highlights Consolidated in Consolidated operating net our operating income of our XX% some a both $XXX.X respectively XXXX net of increase the within growth organic and fourth $XXX.X of single-digit quarter mid-to-high net are sales.

our the quarter fourth of XXXX, XXXX in XX% in up increase quarter are in fiscal in to net fourth In Consolidated income addition, a from income XX.X% operating XX.X% of improved up on fiscal XX% fiscal consolidated net operating margin the XXXX. XX% respectively and and sales.

in improved income from up margin fiscal XXXX. per fourth operating XX% net diluted the to consolidated XXXX, quarter addition, in fiscal share $X.XX in of XXXX, Consolidated quarter in fiscal XXXX. up fiscal $X.XX In to the XX.X% fourth increased from XX.X% of

to increased in fiscal in XXXX, in fiscal XX% $XXX.X up from XXXX. income diluted quarter EBITDA from to increased XXXX. increased million quarter to up XXXX, fourth $X.XX that per year share in $XXX.X was fourth $X.XX fiscal the and in $XXX.X In XXXX, net fiscal addition, million EBITDA XX% In up consolidated million million Consolidated fiscal fiscal from of of XXXX. $XXX.X XX% the

as divided fiscal sales, net improved in in EBITDA to compared XX.X% define XX.X% approximately Our to XXXX. fiscal XXXX EBITDA we by margin which

as Focusing is operating of flow management principally up quarter million the a success net fourth $XXX.X quarter fiscal XX% fiscal of fiscal from XX% growth organic XXXX XX% to XXXX. over in million and fiscal the improving Cash of respectively by gross $XXX.X fiscal the Electronic set our million XXXX in operating core $XXX.X and to margin. improving technology in provided XXXX operating fourth profit philosophy. on sales strategic XX% HEICO improved increased XX% the cash and XXXX. activities fourth fiscal a XXXX was XXXX Cash and was that provided and net fiscal growth, set quarter of These over respectively that quarter fourth XX% million increases XXXX. generation fiscal reflect fourth hallmark up and margins. increased profit to income from double-digit record quarter in to acquisitions and fourth by XXXX as addition activities principally reported year of $XX.X XXXX. income a strong gross our fiscal and The and quarter reflect record increases well improved operating Support, in in sales Flight organic profitable flow

from As total as XX% of to debt the XXXX. October October was XXXX, XX, to that of equity XX, decreased down XX.X% company's shareholders’ and

Our net debt, less as improved October XX, that XX.X% to XX.X% of debt X.XXx XXXX, October from October X.XXx XX, to $XXX.X as XXXX. cash XXXX, Net to equivalents as was total of down decreased XX, we which to XXXX. and as ratio on shareholders' cash equity XX, October compared to million of define EBITDA of debt and

and During fiscal XXXX, acquisitions in additional an two completed successfully XXXX, November acquisitions. we four

we flexibility shareholder returns. have acquisitions and and so until aggressively will pursue XXXX we our to debt We which believe quality significant maximize maturities utilize no accelerate growth financial which to high fiscal plan will

since strategy were various journey. rewarding on our X, pleased and months, and semi-annual cash dividend which landing recently landed a Sierra that and advancing reported the cash I'm ICESat-X NASA's XD-Plus time mission-critical mission to to utilized and The missions. we to on in share well supplied amount components confirms VPT the cash XXXX. consistent our mission. factor internal Jet on kinds our subsidiary, be XXst payable we InSight, our growth, vehicle January cash subsidiary, represents declared per Mars, desire be as in fund Radar dividend semi-annual of cash components NASA and dividend to semi-annual Microwave shareholders, acquisitions. reported XX% announce capital increase Such of retaining HEICO $X.XX January Technological well-being equipment subsidiary consecutive stock on well human dividend at named in CubeSat as continue of The confidence over continues realm past equipment our NASA's we very same a for XXXX. the As our that growth, common Propulsion share in shareholders XXXX few to a to Laboratory increased semi-annual growth knowledge dividend innovation proud this high is sufficient NASA's of yesterday, crucial both record space represents This over part a $X.XX. and classes the per XX, prior

is provide for pharmaceuticals expect acquisition acquisition ODE to November be As always, XXXX, frame accretive Products, appointed as first earnings markets. variety its stock and and applications of Support of Microwave, and following of we're within innovation which in that acquired our flap XX% well by Optical civilian XX Moog that It in oil and is the part silicone persistence displays we closing. has manufactures screens Aerospace for aerospace, drive of testing, for months Apex subsidiary to excellence FAA-PMA per defense, ETG to Part it manufacture the Group we the measurement, used that and international components ODE. they of as ODE Specialty to holds and acquired the gas, distributor our products as earnings wide of reported Microtechnology. In served And Board also this a of research, ETG to for and the Mayrhuber, per as design leading expect through months Blue cooperation we to repair outstanding Group hybrid, Silicone we monolithic, to Blue reported demanding outstanding week, of enhance focusing last a growing August modules of LCD defense, the VPT accretive Board the we We're edge on our share following of Display of in acquired closing. sole we we applications. refer for partnership. our other XXXX, mutually aircraft. Group F-XX precision also thank of we age designs display Apex a its SSP material XXXX. is supply aviation business the of look our Station It and an first ability industrial, November OEM and and Wolfgang the March Aerospace and part and Board it expect all since that In earnings we note, repairs. very as support our XXXX month, In This HEICO's stock F-XX and XXX% On capabilities an F-XX as which their execution. assets of military medical forward Blue and had power range their to will and happy XX. part of XXXX, earlier to humbled sad accomplishments accretive FAA-authorized Engineering, to be XX their XXX advisor to analog XX worldwide. XD-Plus business passed open first Sierra is and and share Directors for Apex success following Wolfgang away at within closing. acquisition months refer Aerospace since be the authority operators further for used and on system. aerospace, expand to test beneficial we Repair and we member this nose-to-tail Flight

participation to the HEICO and HEICO, pass on he Health Board, Flight will others results great he his Committee Mendelson, I to of so to over will in humility, over deeply of tired of his Environmental, Executive counted about and he the listening long missed knowledge and of advice and talk his to and HEICO's work, President Flight I'm Wolfgang friend with the aviation was - our combination be like business, must that the and you Group great will Committee. open-mindedness, served affairs, technology, insight many trademark miss people. On a we us, this and after to course several decades Support be into Support And would compassion, humor, Group. of determination, on hard wise going and We HEICO. counsel experience, Co-President the legendary and and he culture now, Safety, possessed of Eric and world introduction, at me,

Eric Mendelson

the quarter sales Support fiscal Flight fourth favorable and the Thank fiscal to outlook a mix million of XXXX better up and within $XX.X contingent consideration changes increased with fourth XXXX, product the accrued organic increased operating to to fourth an year by improved an profit fiscal $X.XXXX from all gross improved net quarter XX% of year XX% XXXX, XXXX of than an The much. and income very in prior in our fiscal Group's resulting XX.X% aftermarket margin gross lines million of the quarter year increased The growth partially in $XXX.X the is up to product Support XXXX of XX% our profit fiscal in operating line, year reflecting up year net attributable fourth The principally of you reflects million net mentioned million in up XXXX. product of $XXX.X Flight to Group's Support fourth resulting principally fiscal year line. estimated a billion in XXXX. offset the mainly previously previously fiscal in fiscal products up in from year both gross increased fourth increase mainly estimated record respectively and quarter The reflects of principally mentioned Group's is associated acquisition value profit XXXX to a fiscal and million in higher the of of Group's Support XXXX attributable previously fiscal XX.X% improved our fourth from more net increase XX% million mainly fiscal a XXXX, from The year The XXXX from XX% fiscal fiscal Group's acquisitions. margin. $XXX.X sales $XX.X Support performance. $XXX.X sales within from Support operating growth within reflecting year XXXX Flight the specialty in Flight margin increase of Flight and to income replacement sales margin increased previously in demand quarter Flight quarter $XXX.X record of the improved in in in and Group's fiscal fiscal XXXX, fourth in million X% fair parts the and XXXX, The XX.X% net from quarter from The record and increased XXXX. product quarter in The XXXX. fourth the mentioned fiscal operating growth quarter sales year a of the XXXX. increase the the

sales fiscal impact estimating the growth changes moderated any. the of additional are fourth in of Additionally, estimated of XXXX if 'XX. Support from exclude the estimates XX%. to year X% increased prior businesses, by the fiscal unfavorable Group respect margin Flight to organic the operating accrued the approximately in we single-digit With 'XX, growth consideration. over margin X% value fiscal contingent mentioned year approximate we partially to previously fair was and in quarter estimate operating Further, full acquired These net mid-to-high

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

Victor Mendelson

quarter increase Electronic you, of principally acquisitions the the X%. and fourth further XXXX as Thank quarter in partially for quarter of the that The XX% products in record and growth $XXX.X the by as fiscal demand fiscal well Eric. in growth XXXX, other the and resulted XXXX quarter up fiscal over demand XX%. fourth fourth to aerospace of space sales of organic million growth from Technologies for The fourth lower mention moderated electronic a of fiscal quarter organic certain XXXX $XXX.X XXXX fiscal from The in increased in million of Group's products reflects was our fourth increased certain should net I organic XXXX XXXX.

income products, expense fiscal less fiscal slightly amortization to Electronic to principally Electronic fiscal but fiscal margin. well The in improved electronics improved from With Group's certain mentioned product in space moderated sales very continued XXXX. in gross up operating performance-based fiscal margin. favorable million So partially XXXX, fiscal XXXX, in asset asset mentioned operating a performance-based in improved in fiscal despite margin of as Technologies net partially up XXXX in sales the sales markets resulted attributable up decrease proud mentioned team the margin margin previously estimate the increased turn principally in a increase the offset by and mostly a XX% intangible partially record gross 'XX, quarter higher Electronic aerospace certain favorable acquired comp, fiscal XX% $XXX.X for XXXX. products principally mix and fiscal approximately reflects over Electronic and million slight year exclude win back fiscal margin net product and increase quarter The to acquisitions operating $XX offset our the low-to-mid product net defense expense. The as $XXX.X growth for for an products. 'XX. XX%. for income prior million fourth Mendelson. to organic and over and organic X%. fiscal well estimates XXXX XXXX XXXX single-digit and increased sales These products. in from fourth year and of growth The Further, the to sales Group's record of any. certain mix the approximate Larry quarter I XX% Group's fourth anticipate defense we million profit Group's profit growth million additional defense demand and record for fiscal The previously gross the year in gross in in fourth the by fiscal organic the resulted XX.X% intangible Group's increase previously call reflects Technologies from for products strong. expense to quarter growth Group's XXXX, from quarter respect fiscal of operating businesses, in in favorable an increased The certain in from in partially space Technologies product quarter if sales increased compensation XXXX, fourth the very increased Technologies XX% and The $XXX.X fiscal Electronic compensation net of fiscal as fiscal more the Electronic income Technologies increase XX.X% $XX.X The to mix by decreased of amortization up in $XXX.X mentioned profit in growth I very products. a improved of full fiscal fourth certain is XX% principally a difficult they the by XXXX XXXX. to operating that the The to we am decrease XXXX, The Technologies increased is higher our serve fiscal at performed million as XXXX net principally of in mix a XXXX. previously from a sales net a XX.X% are XXXX quarter in to mainly fiscal level. other the estimating XX.X% offset the in attributable improved to increase less more to The the Further, any growth high the from favorable XX% previously XXXX a XXXX margin from of profit certain operating net to remained expense fourth reflects mentioned the XXXX

Laurans Mendelson

Victor you, Eric. Thank and

per to further from income quarter XXXX. fiscal diluted and XX% share $X.XX it on and XXXX, $XX.X expense XXXX was to Moving increased quarter quarter XXXX fiscal in increased quarter in fourth $X.XX information, fiscal the the diluted XXXX. up amortization earnings fourth in of that the net fourth and fiscal consolidated that share, fiscal up of to per the in from XX% was of $X.XX million in fourth $XX.X fiscal Depreciation XXXX up in $X.XX million totaled from and

quarter it For incremental the of $XX.X the intangible assets fiscal new the of in quarter dollar reflects fourth quarter invest increase sales million efforts Support $XX.X from $XX.X of continuing for million totaled Flight million fiscal Research that XXXX. each in XXXX XXXX expense fiscal Significant fourth XXXX.The XXXX and we ETG approximately of in at our totaled XXXX $XX.X expense continue X% respectively and year higher ongoing fiscal and new in the and increased XXXX fourth $XX.X and from from development SG&A expense impact amortization the year up million the development $XX.X XXXX $XX.X totaled product $XX.X XXXX of in and was that million development. and and product up both and and to year, fiscal was million quarter acquisitions. fourth in are million respectively. and XXXX fiscal of to in million as

unfavorable million the XXXX XXXX, XXXX reflects well increase and as impact it year, fourth fiscal good The associated changes as quarter than in from fiscal cost up compensation improved an resulting value from XXXX in of million That's in is, The For estimated and happen year an but estimated year our and principally of line of prior in bottom consideration in increased it with fair fiscal fourth performance. increase sentence, fiscal the acquisitions XXXX confusing $XXX.X a also accrued us was operating expense. the from to to a higher performance-based $XXX.X more, reflects XXXX. better thing for acquisition to a but very it previously us. it outlook contingent kind quarter

he If fiscal percentage the interest $X.X in was fourth quarter rates you can and to income in quarter outstanding XXXX. percentage fourth and in our to in a discuss comment accrued principally XXXX XXXX fiscal fiscal XXXX that and fiscal rates. net in credit XX.X% associated increase you, quarter fiscal fiscal to I revolving XXXX want average on million to million net fourth good not to the fiscal as late $X.X detail it facility and fourth as respectively $X.X was interest expense sales it Consolidated situation and higher fiscal fiscal XXXX was with and fourth XX.X% fourth $XX.X higher like a happens, quarter it. well compared in as what increase reflects due The weighted and million of in The expense XX.X% The year compared as of due of that SG&A balance later you're XXXX welcome XXXX a on, the material, in million fiscal from sales and in acquisition. in XXXX under as we're in of the and and XXXX SG&A higher Other was expense XXXX won't mentioned the were quarter was to XX.X% I consolidated increase respectively too. of but happy. when very more with XXXX contingent earlier, a Carlos in a the quarter Interest changes impact a in XXXX Again, thing. expense the consideration. explain

XXXX, in XX.X% from decreased Our of to in down from XXXX. effective fiscal tax rate fourth decreased XX.X% in and fiscal in quarter XXXX XX.X% to fiscal XX.X% the XXXX fourth quarter

quarter the and which X, full mentioned the As tax Tax effective Act the Job XX% tax decrease from XX% XXXX. and under effective Act the federal directly is in related calls, fourth on for Cuts Tax XXXX the we U.S. rate rate reduced to fiscal was January to previous have or

As discrete of and Company recorded remeasured Tax a $XX.X benefit a in net the of tax result million fiscal its liabilities U.S. the Act, tax federal deferred XXXX.

addition, the a one-time subsidiaries discrete again XXXX the $X.X In the Company tax recorded Tax Company's provisional of of fiscal that and Act. related in a of million foreign unremitted the tax was to earnings transition expense on as a result

certain in XXXX of quarter of well the XXXX In totaled in as to mainly and interest rate XXXX million of addition, surrender The Again, non-controlling earnings fiscal in increase held life subsidiaries offset is XXXX impact the and fourth the million unfavorable of decrease $XX.X respectively quarter XXXX compensation $XX.X Flight in income exempt our policies in as fiscal quarter the in unrealized fiscal totaled reflects values Support to a XXXX good fourth was Electronic tax in $X.X a cost non-controlling respectively. which net impact million insurance improved by leadership The plan. and Tax the partially fourth of Technologies which interest effective $X.X and the attributable related are tax cost. the in and Act. HEICO million of gains operating Corporation lower cash and fiscal

effective rate non-controlling rate tax XX% XX%. about happy a of we're and The full estimate year interest that. 'XX, tax So to combined approximately fiscal - we

know, the remain financial balance strong. cash as all cash and very to you our position flow, and flow sheet on Moving forecasted

to by the fourth previously operating of in in fiscal I again fiscal flow XXXX. activities As and operating cash million million quarter was increased XX% $XXX.X XXXX provided to $XXX.X up activities that Cash discussed, $XX.X fiscal of million quarter XXXX. XXXX flow XX% in up million by and from increased fiscal $XXX.X fourth provided from

monitor outstanding efforts and capital we both course, of XXXX XX, exposure. respectively. and was collection sales DSOs, XX, receivables as XXXX XXXX receivable XX closely days in X.Xx X.Xx of credit ratio order working of to October Our XXXX was and and all days limit October

one know, receivable of sales you have HEICO, XXX XXX XX% turnover Inventory of followed five As Top years more rate have net respectively. and who represented XXXX consolidated customer customer we and and No for XXXX low XX, was very ended October people sales. XX% than XXXX and accounted days respectively. days net fiscal in XX% the XXXX for losses.

equity to mentioned, decreased XX.X% to That October down of previously I of XXXX. XX% XX, was XX, As from October as total shareholders' as debt XXXX.

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

debt-to-EBITDA X.XXx October of net Our ratio to XXXX. as improved compared to October as X.XXx of XX, XXXX

end XXXX, fiscal again November we recently During year after in successfully mentioned and XXXX. acquisitions two completed four I completed

across growth and from now shareholder to high-quality acquisitions which and resulting product We we accelerate to aggressively maximize our until Support have the sales no financial flexibility returns. And outlook. Flight fiscal XXXX growth look significant and debt ETG maturities fiscal 'XX will We in for lines. net of and plan ahead to majority demand the our utilize anticipate pursue increased

the cash expense and upon growth want significant million. Based and further XX% and commitments in businesses, exclude current in through operations maintaining maintaining drives on while at substantial sales services new from our financial We additional $XX consolidated you approximately acquisition my a opportunities on team of that income in CapEx XXXX members think are million, want net and to net thank growth that we strategy, flexibility. million, market operating a HEICO $XXX strategy, culture income. many part if services, XX% year feel focus HEICO the focus time, We around success. dedication is is - provide visibility, and estimating Operator? strong I develop products the profitability. same as One with and We results to Company relentless net culture, believe to XX-year the we new well that questions. and factor other what have operating approximate our the of X% will sales continue and acquisition aggressive year XXXX. around course, believe our culture. for penetration, of discuss members year of amortization planned continue Company for XX% is products developing approximately members any generation to working to achieved Thank over the and will closing, the floor fiscal full also they heard it's strength acquired and to depreciation XX.X%, make continue $XX like margin their that, and strong team owners penetration We anticipate making market me in That's economic our of growth as financial estimates These our thank open I fiscal the cash extent are flow team disciplined to growth a HEICO rate we full in critical net our position, financial comments, again XX% have compound the having and point to efforts I'd with annual to of any. In increasing XX% you.

Operator

Yes sir.

Laurans Mendelson

ask a open number I'd remarks prepared - please floor I'm questions. have questions. like would believe of Yes, for we people I and waiting the to you my finished with

So that? would you please handle

Operator

question from comes first Your from Robert line Credit Spingarn the Suisse. of Instructions] [Operator

now line is open. Your

Robert Spingarn

issues? level seeing macro anywhere high you rates a you business your in for would that growth is moving to little specific across do but headwinds because see Are business and around of like question first the slowdown, macro are a it's that's indicate that know all just that a The the the business, and and ask bit I forming you. any sounds I any

Laurans Mendelson

don't. we Rob, the answer is not, absolutely

strong confident the pretty we out and they are conservative by telling subs we've of we know material We issue with is and like their don't the upon inventory, historically the we have balance to visibility more I sandbag enough coming the inventories increase big are no, as we in at start to I and the up acquisitions fill access as to you up as answer able projection subsidiaries we've operating hand - is our if guidance had think to be fact, the the move - bottoms hopefully. as increased had question and ability customers. meaning from results, guidance. to given very us. matter of confident some the to business We say see to mean, into our I you'll we orders. order their things additional the on that us, digest but year see that, but look a increase based progresses sheet, what get we've that to our been materials - see they of as supply have we've a feel you inventories they your to and demand

So the we not have seen slowdown.

Victor Mendelson

Rob, this is…

Robert Spingarn

So Larry that's…

Victor Mendelson

add I'll just that… to

Robert Spingarn

Yes, go ahead.

Victor Mendelson

that and that it's the people and a times, across and customer be the always the material, my with. whether the a always markets there's we're or times and the the of worst again a notwithstanding worst and I will board, of will end I've spent the a XX about said almost of our product process ago businesses days case, father mean, strength case, or to universally I on difficulty budget eight general very board and conditions. or roughly that to so the or see subsidiaries challenge with visiting and I week up our tenor always, that in those almost I weeks that's the strong there the was the there something expect say struggling in that as last best of and in - market getting the supplies, doing always but components times, in road is seems would dealing out we greatest seven, times, be there's our a was people is have be across that, in or always business best and generally, see

Now whether our businesses more the media slowdown time talks the aren't will economy it. seeing into a tell. but don't, Hopefully, they well, broadly,

Robert Spingarn

in Larry something on expanded I actually this. the question inventory. on a and said, had was Carlos Victor for you increase

$XXX in at - You're a growing if remember for have you'll capital cash a I should XX% I about correctly, seems your also net growth. use your so XXXX, million use XXXX. in represents income say XX% cash working you'll like XXXX, of of flow similar was in There cash operating

capital, suppose like a So pieces spending the and could seems continued what talk you moving to if on I inventory. on working

Carlos Macau

with situations keep demand. did see we to to, material folks enough where Yes Rob, you our mentioned, this we pre-buy guys material as if the year meet had to would,

as of process in going more years. change that how this next much than So we continuing inventory estimates had thought our we do I sort between well, we're in year see a overall what cash flow into but the year, budgeted as in about the not far slight increase,

- think for right we're at I levels the principally was days turnover XXX works us. the at rate now, our

of saw down. good, the So you capital see payments, collections the our next on our cash for dragging a of days able very out been see are very and we're days rest what outside maintain huge large to I have tend we The year players don't to aggressive year, of but inventory. this the are receivables side sales use sales working guys

I with growth treat that a know, of payables - a it's that, or we very to in So very whether the that also. well, and to sales not us things commensurate our vendors, lot thing good like is normal see we the and I our growth are see, accruals the that to timing customers, you allow don't our but well them function receivables vendors inventory treat the one of customers, and good be we our folks but only

perspective. from big as so capital So you've real our historically in there, similar working I would say movement changes seen no

Operator

line Your UBS. Louis next from question comes from Raffetto the of

line Your open. now is

Louis Raffetto

next CapEx with it came stick the like looks year, to spend finally you be closer flow going it's high another to going just to the spending cash and you'd you we're year. now, thought So where for

under million? So the specifically is the it's is on growing, $XX base there - anything anything to going just business that or

Carlos Macau

if Louis, do, CapEx you budget up We have, of total what and three and our the reported columns the on mean what This critical Board nice than those is Yes call The are required larger sort approves tend, more we Carlos. columns you through is what to our nothing in call and much nice critical we'll what with We think and that I required, subsidiaries number can right $XX box, to, three underestimate the how out I actually to tend capital that don't under-spend imagine then doing? to those of go we we me and budgets, come we you of coming want critical ask for to year as they and CapEx. spend would to have be every we sorry million the would than it's spend. now. we but hard

you ratchet around think sometimes as passes, look historically think out we auction it's I going down. and number we new to have that million, we'll at buy used back as $XX to now right spending buy time if we'll So equipment, equipment opposed and for

let's capital So nothing think sufficient for but growth be unusual. year that progresses, year. and our budget there's that how principally will in see I the It's upcoming

Louis Raffetto

that's going And so you of sustainable well. rate more a as forward I think guess

Carlos Macau

I where way the a think you're sustainable if of X% is I falls at to budget the our sales out. looked rate at, looking have X.X% generally CapEx

a a less, that's but more, barometer. sometimes little little Sometimes a good

Louis Raffetto

but for it's know, payments usually contingent in the K, I jump then here. And consideration XXXX, any ahead

Carlos Macau

we'll have one We'll payment have one - in QX. in

it. but out at it QX, that's QX of the Sorry, end either or will early go in

Louis Raffetto

the you of a I I don't final And don't guys then about. expense, quarters rate, sort think tax tax know I combination the over usually so, know, I will the average three give sort area go XX% and the just saw is of forward interest saw minority think of to one, also we

Carlos Macau

way. right Larry That's to tax think that think wouldn't out basis will I look the it, breaks be rate of XX% we way roughly best that we're at it on think of was looking it now. how X% a to mentioned combined I that X% XXXX-XXXX The and No, XX% it earlier kind to NCI. at

Louis Raffetto

to is NCI the combined tax. the the, sorry, XX% and So XX%

Carlos Macau

correct. That's

Louis Raffetto

missed the right down that. know I guess info us $XX is based any give any say and on in All can organic growth way or but the sorry, employees November last million it one, going size, to that guidance can from little then XXX him I from the mean add bit, a leverage size go you deals will up I any sales. a to around earlier. guess Okay, again, on you I

Carlos Macau

in acquisitions the in size - employees. haven't haven't we other that than we November, made sales actually, disclosed We we and

will I think normal can kind for employees good could can, employee segment, at type we you accretive of close, be acquisitions, the single, that if look XXXX. to double they you you some the revenue do you size, math, each us you in and number of get per probably were acquisitions in give HEICO

Operator

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

Your line open. is now

Peter Arment

maybe aren't growth is be give and you FSG little know or would question is pushing of a you're there know, guys organic more this really Maybe for there seeing, products you new Eric just a I XX% so you color this the all on can is impressive that new price, on whether benefits volume color Thanks. any customers us helpful.

Eric Mendelson

is Hi, Eric. Peter, this

we more even get roughly right XX% pricing. growth X% only was You're that I think the exceptional somewhat organic considering

across customer world. much the on parts increase as older basically some XX% is board it to volume, base parts it's a as existing the we've would our well to sell some of had. new everybody getting and combination is of it's in So it our sales pretty sold lines volume-related that strength in say that We in and I all all product of

picking names are just and new reasonable terms price. is everybody, think it customers, in we good lot support penetration if HEICO business of we our increased really there So out is because very customer doing you new base at it because shows value there not already the but has a basically up got provide I a that at will, with

Peter Arment

on look I to of to achievable an and introduction you you products? XXX the guys to that a Eric, for XXX just new you think could is like continuing just that, know related about still been have if mean, develop XXXX? Could year, I you how parts plan

Eric Mendelson

consistent and there of with right development now we've we're and really open great wide got practice lot past products running a the yes, is in It does, pipeline there. running

Operator

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

is line Your open. now

Ken Herbert

second quarter much more within I FSG that got see step obviously half should you inflection continue easy get relatively how down organically first I FSG, you number full to first, Eric, double-digit just fiscal full the difficult helpful. we to in Carlos year? and of the would to the it of again through wanted the then comps, the - regarding in year after the half fair the maybe but a about within Do color first comps of just little cadence bit to mean in guidance then regarding seen assume half mean the XXXX. of or a around we the with XXXX sort ask to you've growth you you've be here XXXX think third is I maybe or the

Carlos Macau

is Carlos. this Ken,

of FSG, we orders know, of the month within principally majority the get the the shipment. you in As

got so what, interest. So I visibility and would we look let's reasons like our in fluctuations out right and quarterly say the the too a ETG's not be but of for of based if it of that at best it is now give cadence, far sense the is sort outside one you lack to say, QX pretty for have what backlog guidance FSG's of try difficult would future, right guess we in good would to in which on pipes the why is going is and we now, don't

we the for linear of cadence can we in would we're course, I quarterly type guidance prepared give and within be think us guys wise think I at to the and at moment, as are looks any at move our growth budgets, but least not point. forward, that this it and sort projecting of don't of our like adjust or budget

Ken Herbert

the fair buying or customer seen any another haven't in That's you heading calendar guess earlier the to FSG habits you based haven't one then just guess and fourth helpful. comments inflection patterns? I to quarter, seen from change or way on third I the or here say

Carlos Macau

in to be Ken really for particularly of a perspective, in mentioned high from value great airlines still purchasing got see equipment a think a find and to benefit the may have our FSG, my I others and We before, I I materials. and this new I've builds you running, We coming one. the we environment, need the think we've - and the proposition No, offer customers. older all special had the to all I

It's stopped. fantastic robust a but to is fiscal for of We that regard. that environment XXXX, are the we're in sky, for always pretty us a trees there pattern Inevitably, environment. continuation grow now don't right and been them for seeing that hasn't what

Ken Herbert

in these markets And if and it's before aircraft I accelerates you Middle airlines, legacy Eric, us, those customers your what down particular are and these talk fleet big areas China you as I the Asia maybe that larger for I in side can upon as know China can maybe you East level position customers about on business, off markets the but markets have to mean, maybe seeing not time, years today a you're be in just of as sweet thinking few but and road. set in depending could, about lot those emerging potentially growth access how could really you're evolve in from the to just the hit much commercial been doing a better aerospace typically a over probably penetration. spot as some and of fleets what

Eric Mendelson

happy to be to speak that. I'd

you the, in We the call are them say if doing want would emerging to I nicely markets.

comes potential and out business products is we nice of further do no majority of Americas in for and up the time, great we're much markets Europe a very chunk to I those very There's continuing well. that for in in There's and lot emerging the there. I are growth the expect of anticipate there think but we I business think still us a markets. them and nicely. our focused picking interest as that on quite some We're to continue our question of

Ken Herbert

Is to think States reason those or a airlines same structurally any Europe? United the have in opportunity the airline legacy as that there wouldn't

Eric Mendelson

they're going mature, out No, demand to I of areas. think of as coming those lot things a have

Ken Herbert

for intangible implies the expense? Carlos can one us fiscal ETG, for the And final you give just guidance XXXX amortization within what one

Carlos Macau

big pretty X% roughly is it. expense with amortization a ETG, for of sales. slug It's Yes,

between I think X%. and it's ran historically X%

closer getting are now. to right X% We

Operator

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

open. now is line Your

Sheila Kahyaoglu

any Maybe for of one you. you first my

consolidation. bigger deal? bigger about potentially You've a maybe lot How deals guys think and do capacity the a a such do of seen your transaction space, in just you to

Laurans Mendelson

Other that's have question. good a Well, people asked question. that

our own, do. we very what don't so We revenue, so, as disciplined individually we per makes company gets you the own cash share, are sense. want compensation, We in bigger don't for that many bottom compensation Sheila, a and of and earnings growing because based the gross the our to that executive largest it office are We we which equity, sake the and the is line and grow its grow saying shareholders benefit know, probably sure and CEO make flow, players on we growth. on to want and buy corporate we

million of motivates So so not to line what top us. grow we compensation dollars a the in is couple gain

to So something going line. that bottom to focus we're comes on down the

We with many to XX%. opportunities our to around XX% it merge have is shown been generally before other operating but not on tempting whatever amortization to unfortunately acquire, operating us, margin that's To margin. because call all-in amortization you entities, X% want or corporate very America runs a eliminating

for So for get kind of we're bigger. just bigger not going to that thing getting the of to sake go

to So we have careful we what be buy. on

don't additional companies could size where but we margins have gain bigger at lot the operating some we of possibly companies have. - expense, flow, these cash sales, have companies companies, consolidate make our these looked line to we larger like an trim a acquisition, Now, possibly or some that bottom and

can firepower, we we could are billion, capital the a company. companies, not So $X constrained because we certainly maybe probably spend more we buy have

not around now that could very debt-to-EBITDA that. if our and and know future, right at poke not pig the most are all disciplined we acquisitions, we plan You anything and but we look do most acquisitions, may cash we entrepreneurial the going successful. in because very to in acquire one the is are They and you to they it probably get a buy be want are acquire flow time, we with truthfully to we so want stuck do

flow. on focus do growth we cash bottom However, and line

look opportunity if we something out or the and do to do six willing buy times, answer to do take juice So with we can I've and is still times. that much would orange get something but how and we on to for, or a merge determination, larger be would also it and an we of and we my make that get much the it get the we we bottom is like would been entity asked TransDigm can we the debt going line seven

say to down couple the two within However, a three it's three of level two years, come years got to around time to - level. time

that don't initial down ability debt to We level, many over articles are when like debt it's press that particularly place all expenditure, it. in there into service and to the a current debt we quickly jackpot manageable excess could today are about So in but the to to not bring times get the and want that. handle a the how

to We intend pretty XX As you well, to know, we years. have continue. over close grown XX%

earnings. the and flow the bottom line cash compounding of Our the and is growth

know don't that's answer to question, I a long I So your I've hope light. some - given but you

Sheila Kahyaoglu

at in defense you what on guess that your about Robertson, look they're are bigger how I talk seeing space organic if you two deals, maybe going note, your you and Victor, into And could as of XXXX? and and growth, AeroAntenna

Victor Mendelson

of Victor. is We're XXXX both to this for those so them. proven excellent very great companies had pleased be with Yes, Both far We're They've years. them. Robertson of and excited AeroAntenna acquisitions. about

are the we fiscal on what mode like optimistic sharp, staying are terms those so defense or growth they're for they do, XXXX, well regarded curve budgets occupy in meaning they overall ahead and their in they develop our businesses. to product, which new important competitive and are they see very very there harvest know, and that of customers, way. defense internally they stay in They're very for I'm you out XXXX. they developers, both by in beyond continue just what is the that critical As also spaces, they market product of anything are there positions stay our market businesses in not of for short-term in and focused XXXX that And beyond

We might on careful, same so happen the all we the what the speak newspapers are of out and reports budgets. same very Washington with read to

- very to normalization is at ourselves we fact so the too you've the think run excellent we kind base assume that line known company be cost we keep even that defense that get to cautiously do that budget when us I that time, excited be so conservatively for and we to our to the very deliver that our job competitively. going there assumptions structure the well always of long really don't and when times we that growth has to there good, term, same on customers to and but and to are enjoy want for to want an and deliver we our them the and in

we So all that take mix. into of the

Laurans Mendelson

those they financial and of which to really the and capability Robertson, appear Larry, that It's U.S. are dedication, sheet and happen. applies on to the critical is fantastic. our Shelia, are AeroAntenna in focus, operate and add of in quality the is it want balance this mix that is the statements, don't really two one the They're but companies specifically of make brilliance just this the guys subsidiaries. ability the fantastic many thing, the and companies, those and the managers and they that but managers. to the They have

Operator

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

open. now is line Your

Michael Ciarmoli

change of bit in a the can that quick us maybe housekeeping contingent value, the was value the first, headwind quarter little just the FSG? consideration you the for in fair Carlos, of give

Carlos Macau

was upon we Yes, some the outlook periods, also roughly that for we back couple that forth earlier, based in and things you but a charge charge went but going over a took QX, mentioned tick is through. got as little between dollars million a just was it it's a a - rosier that and that FX

Michael Ciarmoli

million And us expense, a XXXX is rate, for kind given assume of of line interest barometer for a that XXXX? run this line should then you've we detail by $XX good lot

Carlos Macau

investments, how does it depends you're that million mean million look, $XX think, it I and Yes, the - estimating that LIBOR right If the and wrong, to. between able ferrets guidance we'll impacts we're out. how Fed see be going right if estimating. the we're I I'm generate to I going further find but what depends. just that's we're that and $XX to think, be what if million interest to now in and that's probably in $XX tied somewhere to you're at cash we we both

Michael Ciarmoli

this mean high at with there of I is if I there been kind hit multi-year in here coming there growth. I correlation fleet any guess the warranty, organic have look there just then is on And XXXs, Eric the FSG, the - you've maybe, growing, getting mean delivered there just can were and before planes obviously, on that we then maybe is broad-based so any XXXX. on, haven't new between any seems parts, distribution? or you other differences XXX - during repair color before? some platforms like off you growth strength, that seen And or Are you but it noticeable

Eric Mendelson

distribution, are of doing over I repair, it's It's business. well. is broad really in the very all the specialty based, businesses Mike, manufacturing, Yes, those say all parts, would strength quite

programs, In specific on we're terms I doing the and doing the also historical we're on of any platforms new of all platforms. say well nicely would

which of look their earnings able to said are are always the proud very, think than value more businesses above you the sales very to XX% and as And organic speaks close again, they because that HEICO customers very since, growth, go we've on these know, was even the into in very of proud say over growth would any responsibility, our with roughly and HEICO what smaller it's authority competitors of the, that based. with I'm businesses I time, kind telephone average it's and have organic, have that that of businesses, growth on proposition of based. the rather it to these way of the it businesses that I'm all operating income broad the broad would not structured at I was and we and structure strength, they in are had but the we just all if because XX% seeing it, specifics whatever creates operating drive you but our call, course, I

Michael Ciarmoli

sort just IATA that any they've CFM or of can then give one developments And maybe last on changes competitive us and agreement one, you the update or come with. up

Eric Mendelson

buzz grow That at notice taken effect happened Sure, of this. takes here there there's and in been decent I independents the cover about the agreement of the that airlines talk for believe, in and end opportunity be I and to should to lot a for February, really and opportunity HEICO industry some have ground. of decent what's think lost marketplace

Operator

from comes question next Joshua line from Seaport Your the Sullivan of Global.

line open. is now Your

Joshua Sullivan

way can of your any of attractive in guidance, hear said know continuation what's your for trends maybe I the interested expectations parse but - and the approach air seeing some us. in just on bottoms-up growth beyond. just to traffic that thoughts I for out you're you XXXX here, you specifics

Eric Mendelson

marketplace I information. the I we growth mean get be it seeing is clearly it Rob our and upfront our in Eric. see sales do the think we looks various asked we be supportable. we're the about believable. that the and any no that to and strength. This continued it's changes frankly at consistent I believe mean to We I that see where mean very and read businesses we question in believe everybody we that's same reports analyst

is pointing I positive a everything So direction. in think

Laurans Mendelson

and this those why business, the been figures that this that's has Boeing and coming and putting growth too an it's in out and can growing shrinking been so kind true world days of to back miles the very enormous and it's has a and the the growth terms double area out growth, about growing of we're and particular kind of its the the we years, growth in only strength of this industry go those Street of and industry that's in believe which analysts month, it's XX believe aerospace is business, HEICO - past analysts, we few world Wall GDP the depends if we anywhere airline the from X% strong pointed a see and A it industry X%, trade continuation you like because of of few growth. of on over weeks somewhere, but seat talking

pulled the we'll in business. forth, as general little strong and Now, industry very more or slow over next is a economy a XX - the if years growth is our this a trend next why over but we're outlook yes, see back, that's and down so the

Joshua Sullivan

And then more front, it reasonable, with valuation had change behavior impact the recent any the given in expectations, M&A on just targets, on conversations volatility market getting M&A here, are any there?

Laurans Mendelson

is think I probably that normalized, which are we good.

due we'll four we're predict We're opportunities. we deals, I on and acquisitions, can't last year, think the number we make a companies We November, of of closed I moment. doing in two. but these diligence think that at seeing did lots

I a little getting think higher. pricing is

I think in a of they're competitive. lot and private money equity pocket has their

of the more So number normal to acquisitions, want of us but little think can and outset, we to our it. options culture to of because build normally We back forever make private answer tell sell of it that won't intend so pay. that a different out keep else and makes years, differentiate we price we're our lipstick the your cut financial we opportunities. be equity ourselves likes do keep can want all price on dump that one at the sell but somebody are it highest the equity difficult, because and good to engineering question, to and to the we we we a going kinds pay five and I and opposite. that and people for to not to see Companies we expenses, pig, it Private then of company to just essentially things types things

to wants to and So to interference for management today the what pressures for wants running a tomorrow. that and the minimal a with is profits in term, longer immediate that company company it continue look and be we get

but think I fine. answer, and fine, long we acquisitions a that's our see of number it's it's So

Operator

Ducharme question the from Instructions] of next line from Capital. Sterling [Operator comes Your Colin

now line open. is Your

Colin Ducharme

over clarification, you other have, geos in a again in of particular OEMs. and Eric, you Could it's that, that Can on believe - might IATA, force, rolling for said implications that the broader us the question remind for in you February. quick coming of said other a remind summer. more us of I Just in the CFM you ruling

curious Just there.

Eric Mendelson

front the, me. of before they would - they settlement to in of The was informal an General between going Commission there Well, number CFMI. in we to started it become a I formal that European and a believe through IATA history. specific decided GE, association just a IATA investigation of launch got trade say the practices the CFMI end number it have was has Electric worldwide and complained airlines don't a into I of at of the to as what of was investigation, and upset, - bit That European their little informal Commission. investigation OEMs, looking agreement at clauses,

manufacturer I now So the things they want and basically, I it were get to that online, doing permitted. it but think not be doing behavior can details, don't not I is sorts have from prohibits to but were certain of that all you miss-speak, the careful there

agreement, issues in. sure are if companies road. presumably other what's because go in think the what they I think regard that interested that it of that at consistent everybody I how the airlines whatever they with With note is the that in to So want outside may impacts and in is was they down this behave agreement other manufacturers, taking to have industry make

to of but if see want think you get sort what online. that's specifics, So can are we I that hearing, you the

Colin Ducharme

then various XXXX, trend, clearly kind on trying an guide call, exit memory in of comments thus triangulate a FSG line year QX on higher you a the yet And far versus for but the the bit from the just just basis box the out to guidance going last got lower. here, follow-up box fantastic top in just of of with rate a out little consolidated CapEx serves, if expectations a

comments material I sure around just is base the there context because seeing So it and weakness making not windshield understand, sure through I'm color I putting primarily was the larger you're properly to that be now want that. your

Carlos Macau

is Carlos. This

to X% and just out excited it. came actually very the year, that for growth I out think guidance most so guidance a maybe organic X% the with but last we about growth, is happy out are all of is part, we're box where pretty under, consistent tick with our put the this we

would, in earlier mentioned have year going see that dynamics attitude the the the, I we've and we right under-promise industry think that seeing but to space, over-deliver I bottoms-up on growth would if suggest As the that at more the now a prefer we line we're that quarterly to of a and for call, top fantastic to from in you we we the and and least we'll adjust earlier. what we're go We mentioned guidance that through X% X% as give don't as as perspective, budgeting kind visibility. year get is

won't that from be So the perspective, to going which robust be We Company kind indicative of the of is to hard now. that's single-digit we to to my to of out that and articulate cadence able expect you, is that's but mid-to-high right growth growth, growth articulate. organic what

Colin Ducharme

see comments starting and payload on with space or of for of begin get lower space question Victor, And relationships slightly but you kind companies launch is side higher-level et here more about side talked the of larger kind I are cetera for the kind space both? exposure currently how guess private positioned, the and sales on private or seeing? the to of then just where final you products, wanted think the vehicles commercial we're Is to traction broader - some it's there what launch on trending vehicle ETG chipset positioned of the trend. you're How of Thanks. I

Victor Mendelson

payload on This is launch We space the on is the we is of the very it not related side, in Victor. launch vehicles. little do vehicles. overwhelming actually of do that what Most is ETG on majority

to on and weighted weighted focus space - sector. really let's stays tends be is our been up commercial So more our say what business the sector and heavily to has commercial toward in there the always

in geosynchronous the satellite and continues been, Although in segment. space weakness we rest the there the be large has have business the very very strong. well. Where for has us of good been pretty to The earth as be orbit defense strong has a business

call a where ready does identify it. space had weakness us. good Thank but that I like been has sounds business was business wouldn't there that overall, been and that it we we're is our for - very it offset question. offset to next weak, So for but some very strength Operator, you. it's the - it the and

Operator

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

Your line is now open.

George Godfrey

XXXX coming looked coincidental ahead roll time indicators things here with or we the about good of year. I know is it Thanks down X%. kind that I revenue rate comments great say back back business the the say, simultaneously? leading all the accelerated the QX, of and If any of were that was organic If it to frame heard there XXXX Were you and is south what nice more in and that and a and the and in actually 'XX signs was was great, XXXX, foreteller all hindsight, roll perhaps or I've growth job. clock went benefit through

Laurans Mendelson

would completely I it situation and and seeing than the went when down just concern became it pretty different. panic different right went spending hit, the immediately are clear world and that a financial we now, say mode George. Yes, into crisis was totally mode whole

saw everybody. back action we so being immediate And then by taken

that there able airlines be OEMs any today mean back be I than it recall situation get different you be money. more the concern If because able to is. wouldn't then deliver backlogs couldn't the to was wouldn't the

in see We strength customers. with market, strength continue our to our end

see quite saw then now we to like So would that in market we I we're something dislocation say back panic the have order major see and and a to contrary. seeing would right

Victor Mendelson

Victor. But, seasons. the business for have careful and because more said what and to George. This know stay way we we be the reason with is happen we will never within always it's all the the we Having do lean run it's be broader all our cautious we Company that, why to want and economy and prepared

George Godfrey

you very much. Understood. Thank

Victor Mendelson

are there You're welcome. don't questions. more Operator, Are any I think there?

Operator

no are you There time. further may continue. Presenters, questions this at

Laurans Mendelson

in We all is this for HEICO. We thank again. Mendelson interest appreciate it. So, Larry you your

available we are February and very from us you a Year and Eric, if unless wish you have we a release a year Carlos, questions, healthy holiday, hear next when further give Victor, quarter first New wonderful we happy first we will around speak all myself to We quarter you results. you, and call,

signing now. is right that So and are we're all done. Operator, off we

Operator

concludes conference you Thank This all call. joining. for today's

disconnect. may You now

HEICO (HEI) 18 Dec 182018 Q4 Earnings call transcript