HEI - Earnings call transcript Q1 2020

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Operator

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 as a result of factors, including lower demand for commercial air travel or airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services; product specification costs and requirements, which could cause an increase in our cost to complete contracts; governmental and regulatory demands, export policies and restrictions; reductions in defense, space or homeland security spending by U.S. and/or foreign customers or competition from existing and new competitors, which could reduce our sales; our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth; product development or manufacturing difficulties, which could increase our product development costs and delay sales; our ability to make acquisitions and achieve operating synergies from acquired businesses; customer credit risk; interest, foreign currency exchange and income tax rates; economic conditions within and outside of the aviation, defense, space, medical, telecommunications and electronics industries, which could negatively impact our costs and revenues and defense spending or budget cuts, which could reduce our defense-related revenue.

Parties listening to or reading a transcript of this call are encouraged to review all of HEICO’s filings with the Securities and Exchange Commission, including, but not limited to, filings on Form 10-K, Form 10-Q and Form 8-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

you XXXX by, Conference First thank the welcome Call. gentlemen, Year Fiscal Quarter and for and standing to Ladies Earnings Results [Operator Instructions]. that being Please conference advised be today’s recorded. is Instructions] [Operator

speaker ahead, sir. turn over this I Laurans will go to now your Please Mendelson. today, conference Mr.

Laurans Mendelson

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

I Before dedicated customers thank who, loyal quality for shareholders. outstanding reviewing moment were our and services to a that I our ones team unique detail, and members talented results. products the the our to returns in truly operating are produce to for again, maintaining would take culture like results am continue and highest our all entrepreneurial responsible proud HEICO’s of of delivering this while to they strong group,

that XXXX. our I’d in quarter of share the income of to up $XXX.X like the diluted first summarize Consolidated $XX.X $X.XX the fiscal share from $X.XX per diluted per first and first net million XXXX results. quarter was highlights fiscal million increased in of or XX% or to quarter

tax were XXXX mainly benefit of option both benefit period. optionees’ quarter stock appreciation in approach the as benefits discrete as from XXXX The $XX.X first XXXX by These during fiscal stock and as stock attributable options favorably and quarter million, the the exercised holding income net to a income The in expiration XXXX tax price first fiscal strong HEICO in million and driven HEICO’s they being impacted exercises. more were of by was well respectively. approximately $XX.X the fiscal

I comment, can the next a to and operating because the is taxes confusing little in normal the bit think, earnings. critical be very benefit And tax increase

an fiscal that amazing in So I me, with message out both send credit income impact that’s XX% accomplishment per great I clearest report. we and the and XXXX. should share in our XXXX, I periods, and And team those XXXX tax that the think to of benefit point that results. And be producing diluted net of excluding the quarter in XX%, that earnings members entire this want to increased first respectively

Consolidated that was from and operating income XXXX. XX% $XX.X margin quarter fiscal to XXXX, the the to first quarter sales million up in of up XXXX net million million increased the that first and first of XXXX, of first increased X% of in $XXX.X of fiscal quarter from quarter the of Consolidated first fiscal fiscal in the fiscal was in $XXX.X XX.X% XXXX. million Consolidated quarter $XXX to quarter in improved first the in fiscal XXXX. up from operating XX%

increased In summary, net our XXXX consolidated sales first quarter X%.

of increased income and excluding impact, income, are pleased with very we And XX%. operating Our hope XX%, these increased our the and stock we option all all too. shareholders net results, are, our

acquisitions and first Those XXXX. up products. the in XX% fiscal the quarter and quarter group’s fiscal of very XXXX defense our strong double-digit increases as first from XX%, ETG well profitable our in respectively XXXX of XXXX and organic well-managed sales and the impact reflect fiscal growth as operating income Our net for are

lines growth XXXX are and the XXXX. of as first our within of and first fiscal improved income operating reflect XX%, profit respectively, product the quarter organic Those margins. quarter sales Our Flight gross well Support Group X% as fiscal all over up of net in

flow XXXX XXXX. $XX.X of up strong of that million by the in from to was first operating fiscal quarter a quarter XX% the and fiscal first Cash provided $XX.X increased activities million in

forecast balance strong for of cash to operations flow XXXX. the We from fiscal very continue

generate also flow cash our an We focused our to developing remaining entrepreneurial that by on on products commitment significant members serving continue strategic focuses and bureaucracy structure our minimizes to for niche and shareholders customers. team

shareholders’ of January of XX.X% from October to as debt XX, as total Our XXXX. XX.X% XXXX, equity down to XX, decreased

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

to debt XXXX, XX, from improved October X.XX X.X down times and EBITDA that of Net XXXX. times XX, of was to as ratio as Our January

We a are financially not challenged company.

firepower and anything and have major course, line to behind do, are do pursuing acquisitions, of we that We standard aggressively to the really we R&D development. want our

those plan pursue which We regular to a semiannual acquisitions maximize to the paid utilize XXrd and increase our returns. flexibility, cash increased have no XX% dividend again, we since significant XXXX, financial per cash shareholder In And our over January fiscal until maturities and $X.XX prior per semiannual dividend of amount. high-quality debt we XXXX, represented semiannual share, share XXXX. consecutive was it an

of subsidiary illuminated Spectralux, well Power group, of deck, human annunciators, light keyboards line to and within acquisition lighting. Radiant closing. designs, business XXXX, the machine as acquired the first and is accretive assets indicators our Power December HMI to the of months the deck as repairs, and flight be ETG manufactures, earnings XX controls part In expect product we interface, lighting following our panels, or Radiant of XXX% and

XX stock connector during XX, In first months a RFI closed the acquisition our acquisition EMI, are and acquired transient solutions has following Quell protection of we to group. to the and who and closing. earnings the into fiscal first in XXXX, Corporation, The manufactures And integrated expect and well quarter accretive of of XXXX ETG successfully wide within that be XX.X% of which very variety we aerospace December defense. designs products

In mission first the January pride system NASA, components contributors our and in subsidiary radiation out we space leading views that sun’s the how our solar reported being by of the earth. energetic European along home XD-Plus’ through XD-Plus the the mission-critical this provide effort. and with on regions XD-Plus will We on mission. to Orbiter and project historic planet carried HEICO solar Agency blasted the at mission. this will from investigate supplied Solar unchartered impact highly and sun intense wind numerous involvement congratulate the its polar numerous XXXX, and the partners reliability Space this takes in other particles Airbus, That

like Mendelson, will of Group, Co-President President discuss and Eric of time, Flight this of HEICO’s Flight I’d to results HEICO Support at Support the introduce the Group. Now and he

Eric Mendelson

Support across fiscal fiscal due million to increased quarter The you. The $XXX.X line. in attributable $XX.X X% $XX of Group’s X% Group’s and Support XX% the new net our XXXX, Flight XXXX. quarter all XXXX. offerings sales in first thank to million million to Good in increased quarter fiscal increased operating growth, of of first demand the up $XXX.X million of product income to from first morning, The and quarter increase up of first fiscal Flight organic XXXX, from is the mainly the product in

sales income favorable consider it keeping consideration. profit and more our mainly product phenomenal team increase increase mix expenses accomplished to appreciation income, customers. of since contingent out a improved long-term attributable and to in like XX% growth all impact of operating an related be our a loyalty mentioned lines. of and favorable the operating gross while to estimated value our achievement, on net to organic incentivized reflects model members from margin, changes The in And our point a near not product especially increase fair maintaining minimal previously are I’d and principally a that within I price was focused accrued the lower sales. The

well increased was our decrease margin XXXX, increase in The of this in fair Flight Again, by first a up a increase from the accomplished accrued realized maintaining consideration. of expenses that expenses in of related sales, of net estimated SG&A lower as to in lower as value the quarter the the low-price mentioned the margin quarter from model. and gross growth fiscal Support reflects previously contingent fiscal as to percentage changes XXXX. profit mentioned efficiencies XX.X% sales the principally XX.X% net Group’s from and was first mainly The operating previously

the to XX.X% to fiscal the estimate XXXX. to respect impact the XX%. XXXX, the over additional With remainder to we estimate year, growth prior up margin acquired Further, outbreak, mid- the operating margin XX%, the if coronavirus single-digit X% full any. of businesses from estimates continue estimate approximate exclude sales These single estimate to net Support recent to we and operating in fiscal organic mid- of to Group now continue high from – to growth year Flight prior and X%

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

Victor Mendelson

up quarter net is from and expectations favorable our first up million XX% space XXXX as planning as The balance the a during the within well the you, $XXX.X Technologies expect for increased mainly of which Eric. from by Thank XXXX, XXXX. impact year. products, increased due fiscal growth, to to fiscal and XXXX defense quarter was $XXX.X increase our lower X% fiscal partially million the first acquisitions which products, and sales The demand for our of of level Electronic some organic in to we the of offset in sales the attributable quarter our Group’s first to in

decrease by sales offset XX% mainly to products. XXXX. of partially previously of $XX.X from fiscal to up increased our the principally The operating the the gross of a due Electronic our of mentioned million XXXX, the reflects first a quarter profit income increase space margin, defense Group’s sales products, in million The growth, offset net lower previously quarter the net Technologies by mentioned increased net in partially sales $XX.X in fiscal first

the decrease by from approximate operating exclude and XX% of growth to the additional coronavirus businesses we prior we anticipate X% fiscal to to to fiscal XXXX. year to X%, approximately any. acquired our recent margin in XXXX. to organic to impact estimate prior as the Group’s growth sales Electronic decrease offset to single-digit in as continue estimate of due remainder mid-to- first of due outbreak, the low of XXXX, and year, in Further, up now net from compensation Electronic XX.X% the realized mentioned sales the estimate full the These Group’s compared SG& X% Technologies XXXX, gross partially The performance-based profit margin decrease well A as efficiencies of to is mainly XX% from fiscal was With respect quarter percentage in net a lower previously a quarter growth. a expense mainly expenses net sales, to margin, in as operating The the the first XX%. over estimates Technologies if fiscal continue X%

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

Laurans Mendelson

Thank you, Victor.

share fiscal on earnings the the Consolidated from $X.XX to fiscal to quarter first per that $X.XX and diluted Moving XXXX, was per share. up increased in XXXX. of income diluted from quarter first XX% of net

benefit, mentioned, from and the in XXXX the fiscal the diluted discrete XXXX. exercises increase option of in quarter share reflects per earnings recognized As fiscal non-controlling stock of previously interest tax first net

in Excluding, both benefits and per periods, Technologies performance tax again, I the strong diluted Flight repeat, within earnings in XX% reflects Group. excluding the share increase the of the impact Support Electronic both

and this that, I think that mention focus item a to because them – out in think shareholders like of their on. to missed and kind to other, very point analysts of want some would for to report, or it’s a didn’t important analysts Somehow I I number

XXXX. amortization and in increase million in $XX in principally first up the and fiscal the impact incremental the that was quarter quarter the quarter fiscal the XXXX, fiscal fiscal And XXXX XXXX of acquisitions. totaled first of from from our million Depreciation $XX.X and XXXX reflects expense first of

of first $XX.X are Support the we of in first Flight ETG development. each to product XXXX. $XX.X continuing to Research that approximately XXXX, and quarter invest of as both development fiscal million quarter development up XX% product increased sales in Significant efforts at new the fiscal was continue X% and expense from dollar million and new in ongoing

estimated reflects to increased later of of XXXX the and Carlos explain expenses partially impact that. principally value know the XXXX fiscal if want consideration. related on fair you lower the fiscal can SG&A, in details contingent to and to acquisitions, offset you accrued consolidated by expenses our changes

in mainly due – in That, a percentage XX.X% to XX.X% changes the a as is related fair XXXX, a first decreased percentage as sales. net net to expense, the quarter lower fourth contingent and in consideration XXXX. in net is SG&A sales, efficiencies, and net very expense mentioned the down estimated decrease was Consolidated first down of accrued the of to in from quarter change. growth, which that of of consolidated SG&A as course, of positive of quarter that a And fiscal compensation performance-based sales a value expense sales of expenses decrease we percentage realized previously from

exercised exercises first the up agreements. and Other option during generated recognized an $XX.X first XXXX. optionees’ to the fiscal this result in fiscal fiscal The income the holding of their was and the fiscal million stock the decreased quarter quarter expense in cash that and quarter period. due $XX.X average strong first expense options from $X.X down outstanding lower in first a of fiscal from to both We an as options million more both income XXXX credit income date. first respectively. significant. decrease of as quarter first revolving of from in option $XX.X the tax quarter fiscal $X.X was exercised Interest of tax majority the not was weighted to – in million HEICO larger our stock stock interest under windfall of in appreciation the well borrowings of and the quarter incurred approaching of exercises for stock tax XXXX was rate recognized $X.X HEICO’s expense discrete XXXX benefit the XXXX the XXXX, expiration XXXX which fiscal years in on of benefit in XX-year were HEICO million price mainly compared million benefit The being

have comment, years to them the year, that accounting rules, are bit over make of and all – items vesting. accrued my confusion personal – I to this by change annual options all In I’ll a one year. I do we the Had permitted little moment. approximately this personal one have windfall year big companies of to those a on mention. that wouldn’t adjust folks at this have which permit those with According the we not were we not increases eliminate opinion, to don’t run XX in had windfall fair and seem would one a Accounting they an Board, market and all should basis, a the to sudden, those that accrue

held the in of quarter interests down paid by principally first to million certain fiscal Lufthansa the in HEICO transfer decrease was $X.X XXXX non-controlling a impact non-controlling back in interest and subsidiaries June and $X.X to that the Support of attributable XX% million interest And Support of of Flight operating Net income in that the reflects XXXX the that partially first fiscal non-controlling improved by in XXXX ETG, of effectively quarter Group. of Technik from eight which the results resulted dividend subsidiaries existing HEICO was offset and are Flight held. in of by our Aerospace

combined non-controlling interest of tax to year effective fiscal income. we rate full estimate of XX% to rate XX% approximately a pretax continue the For XXXX, and

balance provided flow. of $XX.X operating XX% cash first flow by XXXX and fiscal quarter the million in in up quarter very, to to activities $XX.X increasing was very from sheet fiscal on first strong, Cash million of Moving XXXX. the

working October XX, Our XXXX, X.X times times X.X compared XXXX. ratio January capital of of XX, improved as to to as

XX to January days days XX XXXX. XXXX. or January – receivables that of XX, compared And to day as DSOs sales of improved day XX, outstanding Our of as

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

receivable We have little loss very historically. in accounts

net than sales. more for XX% accounted customer one of No

XXXX, January in was XX% XX Our sales days period first and respectively. the of the January as XXXX. approximately XX, of the consolidated of turnover for rate of XXX customers Inventory top XX% as rate same five fiscal represented the quarter net

Now for the outlook.

look ahead net growth commercial product As we defense remainder to we lines. and XXXX, Support, anticipate continued Flight sales the of aviation fiscal within

We growth our driven also demand ETG, by the of within anticipate for principally majority products.

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

in Based net And to over and net approximately continue to up visibility, fiscal year now prior upon X% estimate growth XX% from our to economic estimate X% growth in we that XX%. we growth income, our XX% year sales of full XX% full estimate current XXXX. was to

exclude our if They to estimates the to continue potential consolidated our impact uncertain to is margin amortization businesses, These operations million. and $XXX also XX.X% to addition, $XX impact and In approximate flow the acquired from any. predict. we to anticipate difficult exclude cash operating $XX approximate from XXXX recent and additional million. outbreak XX%. business coronavirus fiscal any to Depreciation CapEx of about as approximate expense million

intend acquisition long-term In to our continue laser growth strategies disciplined growing we flow executing and and acquiring while to at focus our intermediate prices. profitable focus of cash a strategy businesses on closing, on earnings with fair

of this hard thanks deliver All results. our and company team is outstanding success. X,XXX members worldwide expectations Again, exceed and approximately the them – dedication these HEICO’s by their made customer continue work possible to of making that team XX a for management

and company to our that happen want as possible. success we is as the who I it makes we emphasize ones And culture company, and look because really their HEICO their the consider team make believe upon that they that the members

to the With extent our are of – that, floor like those open for prepared questions. my and remarks, the we’d

Operator

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

Robert Spingarn

morning. Hi, good

Laurans Mendelson

Good morning.

Robert Spingarn

you more is talked margin, math what I the on think, I’m the give us did you earlier. about these on guide there? raise the little and incremental start, happening if mean, think you Could mix margin about the doing with margins, and Eric, color strength and about the talk XX%, right, I I’ll I your side mix. a talked the

Eric Mendelson

be would morning. happy I good to, Yes. Rob,

team simple. of and on our and I to on leadership compensated revenue, and get compensated most things on know, our members earnings. very they’re our focused They income. revenue. don’t operating know, And As not We try focused shareholders are on think incentivized keep get they you

So on the and the higher-margin products. we’ve is where products, I think lower-margin And in seen. think see continue we of what income a that operating improvement that shift more deemphasize we we the driver focus is I to really

drive particularly in comments, mentioned I alienating margin without to were our my I’m able And happy, customers. we that this increase in as

We maintain increase price model. a continue to low very

to choice us. want develop appreciate that vendor So with customers to we’re they want and come they of more that we items make the sure – want back our and And us.

happy focusing company. very by particular were I’m able the we operate that basically margin products and So accomplish it that and with increasing that The we wasn’t area. the say I to these on in any margin. broad-based new was very would increase how consistent one

Robert Spingarn

then And Okay. that is coronavirus to play is topic to to out. was know know up just don’t brought how earlier. I the – this tough switching we going

guide. the your in of in it or in late But have even early have the part either evidence second seen the spare the parts here you of yet quarter first don’t You of beginning quarter? slowdown demand a the any in

Eric Mendelson

as I’ve late so reports morning, we change and actually, far, seen in or this gotten delivery. No, material as have any orders our not

customers some a in want customers, financial We been reported to customer having but a few mention few which don’t that watching are names, as press the challenges. I have and

the two flag them to to was HEICO especially irresponsible strong is just if continue to, we timing know, them. the start the for that at it it take will But to at demand. this to But given good of to We’ll I you the just able seen There that that in clearly, this is. to point, going that so estimate a take be we what been date. closely. of change we watching us impact sure date this so keeping industry. what be. we’re think report thing. be make will, before But So well support And question impact to There’s very quarter, in and for with that see because, meanwhile, their difficult impact X now fairly would a think chains we order want you sense, their be this much another opinion, is But ground we’re to with second able as mean, happens the we’ve my intelligent very it focused we’re, our will that pattern to what February has customers. the I depends care on make on sure continues It months do not supply a could of are and have we really the what as to our ear on air travel. course, happen our virus to that. people as no the

Robert Spingarn

is sells on outside for that, accounts that think how into XX-K I sales, of more just way country Asia-Pacific to XX% of the no calibrate And no company but total country, says much your U.S., any than the single FSG there region?

Carlos Macau

Carlos. is this Rob,

right. don’t Support will specifically. doesn’t ETG have can disclose because consolidated just like also. that I You’re it Group, this Flight something We you affect the tell that the on impacts

digits. So when consolidated Asia, single the sales basis, our are a the it about Chinese low areas you in into think particular, in on

dependent not that We’re market. on

In stated on that for And the you opportunity to another it the of us the want side fact, question that’s I things. next emphasize before in because supply be future. pose thing growth may chain just a we’ve

Trump, product China, guys that enjoying I President Trump now that had tariffs on is from find that put HEICO sourcing One of guess, to a that when were the region is of alternatives. his our right benefits lot

for And least so sources. at second – or look

have China it’s of so backup right so on guys plans, product impact as out to executing that company. now, not And dramatic and moving do quickly, an of are as is the we our not that, as

Robert Spingarn

extra the it in said time. over like might quickly, you. will the a I had then some on And of think just which space, and I just impact this could strength side. just your headwinds in if have margin? then was bit more slight looks wondering the Victor, a thank you And elaborate little reverse on defense Okay, on you

Victor Mendelson

expecting of the and up just planning, programs year it with was were We in half. budgets hitting and expecting are and the still but picking half, did. that definitely still when back as the wears shipping, timing say, more would in programmatic when and are That year. orders we’re back back our half, that Yes. first I half orders on, of our in not

Robert Spingarn

Thank you, great. all. Okay,

Eric Mendelson

Eric. By the is way, Rob. This

you on our VPs a is on serious. do due solutions that may supply-demand week heads is tell of regions, a go cost-saving getting more finish in-depth countries, last our our just on to imbalance opportunities. I there to thing, the customers I of potential of that don’t to of into Just what tell can historically to impact there Carlos while sales number coronavirus. as that result a whenever up you, an was a on our with that specific very increase information one And review I focused and add saying. the any become speculated And can they coronavirus, a cost-saving on seen want We’ve are I met a lot at significant in customers. have be to sales airlines part or products, this

something I seen what turn reasons, get into into in definitely a where definite good that. to regions, it – say for welcome this competitors and would our there has customers, we’re what can’t hopeful don’t been I interest. have of products, call, want will we what So on type but And HEICO. competitive increase Again, I I to that due

Robert Spingarn

the for Thanks extra the market color share. Okay. on

Victor Mendelson

beyond that’s where it And will period think I look I’ll that at knows a to companies we are it becomes this Victor. over And Asia time, under in is people make under is gets and But control. how and And beyond of nobody control. out. which spread comment play And affect we This will, on expecting it short-term and But just what’s different China. eventually, other different ultimately, it. �� one effectively, different places some way it believe, ways. effect. the COVID-XX, gets

Robert Spingarn

you. Thank Sure.

Victor Mendelson

You’re welcome.

Operator

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

Sheila Kahyaoglu

good for everyone. Hi, the Thank morning, you time.

Eric Mendelson

Good morning, Sheila.

Sheila Kahyaoglu

capacity on Do order also then maintenance you to deemphasizing And are given can now a incrementals FSG then to the low lead little wanted a airlines about the were your products visibility of expand made in this Rob. I work? guess, through your been the on book? tight mentioned do could to talk If you going One, talk And corona? that? you few time just what And bit time I ask you do margin to market? roof. with just think react, take you you has have, they and comments about why Eric, you given how sort

think how you it minimis? is sales you. Thank about the how impacts So, for that growth de Or year?

Eric Mendelson

I’d Okay. Sheila. happy, be

the of regard that both I with So, the of patterns, we to distribution, would the of business, our receive and – orders PMA parts month most say sorry, in the shipment. order in time shipments I’m in

on there Within top XX probably to on the visibility that. it’s XX top So, And another is days probably, days out. in of days XX it’s that. of XX repair, specialty products, probably, say, another

see impact on we rather that is the think order I will an it demand, quickly. when So, there

that to it’s it And haven’t date. so we seen interesting somewhat

airlines perform other maintenance. that yes, opportunity with now Going I of think A to maintenance, your they’re additional position. with taking have question out this that to come regard to number

to that that, think happen. going we So is

reasons the an haven’t haven’t we why impact. seen – that’s perhaps of a one seen So

I is regard HEICO. ongoing at continuing With margin this focus improvement, the think to the just

rather I When our pervasive. people this metrics. go members are course, developing XX is keep As But way. the margin than business mentioned, metrics; we thing focused on we’re them are over We team to And to important most in the the profitability. those about we margin. focused talk try on on do single talking reviews, of right companies make that sure focus we all about

So I’m really very happy the performance. about

the year, the we were quarter, XX% If we I whereas estimated you noticed, in think XX.X%. for

we’re customers happy of sort margin think that in and of to maintain going sure right a it’s this but we that at level while I the of making on and I’m do So increases. our we’re saying in not doing focus this incredible up backs trickle customers continuing that terms not just price keep that activity, now, our the

Sheila Kahyaoglu

Great.

much. Okay, you Thank the queue. in I’ll jump very back

Eric Mendelson

Thank you, Sheila.

Operator

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

Robert Stallard

morning. Good much. so you Thank

Eric Mendelson

morning. Good

Robert Stallard

virus then? you and whole could But thing. us period in this saw company this went belabor the to what customers be the if respond was how SARS through you Not different? how wondering might I remind And

Eric Mendelson

giving say That’s This is Robert. they than then. of is immediate business, are shape need one. we to perhaps a date. Eric. SARS impact, an Number the pattern better And they were very flow airlines question, people to the that which maintain would seen we in that financial saw haven’t two, today an significantly number I good more confidence the period, in SARS of orderly

bottom. coming mean in the the XXXX. shock Of off the were that events really after as followed of course, they the at just in in SARS XXXX, we I economic and X/XX happened time, that were, bottom

So, hold the were long inventory to, ill-prepared view. very if will, take to and the able sort of be airlines you

I is. will thus maturity So do the just lot far, Again, to believe figure in seen that we’ve there of sort stability we’re market. trying we impact, be and more a think impact out where an but

the One other MAX that out unique things of now, fleet of of going is service. the on course, is

they if that to think added about. that will, you capacity have So got that, perhaps they’ve don’t

economic activity right things put the So, that now. together have Also, keeping strong. airlines I’d I is think all are of to those say pretty confident

the States think I in strong. confidence is United

are things direction. overall, right think I the moving So in

Laurans Mendelson

time engine. then, diversified is Larry, this product, in we SARS that, one – one that both Since in through one concentrated through were we other have in add result like and thing. a one and ETG. was as I’d essentially Back to XXXX, this aerospace of Robert, – JTXD highly

than a impact, impact, have and the be will it it during footprint SARS the think individual was I broader we than much was for us much less problem. So,

Robert Stallard

quick a just that. follow-up And helpful. very That’s on

to to you across say, it versus of how different the your their required that if Is continue and look by upgrade this is discretionary airlines know element retrofit, and look say, of at But me, If I There’s an in products huge say products. you this fair here? non-discretionary? have of hundreds say of a most to is much were not you hundreds operation.

Eric Mendelson

say you’re that, would that definitely Yes. I correct.

Laurans Mendelson

defense the We’re also talking about component.

our you So is from really XX%. defense I total any change coming as don’t know, company that. see like in

really I the Eric absorbs again, said, we And revenue. as so as so other our very in – Eric far, parts, immediate. then SARS, that of out, saw XX% it, pointed And

it’s not immediate. Now so

you. it would or seen haven’t else we We tell

Robert Stallard

Yes.

Carlos Macau

this Robert, Carlos. is

if Just one but Eric earlier, this on what the in point to get puts to point financial customers a to out, our customers. is to of final save HEICO them non-discretionary. a serve it to in and that the unique discussion. do I position value that, want impact I actually want whereby coronavirus made our you as the does is We, service money don’t their health airlines save lost believe money. point. proposition industry, out Eric allow spend provide to HEICO other pointed add this Hence, really a

Robert Stallard

you That’s great. Thank much. very

Carlos Macau

you. Thank

Operator

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

Peter Arment

Carlos. Good Larry, Yes, Eric, thanks. Victor, morning,

Carlos Macau

morning. Good

Peter Arment

question like you for MAX. I regarding about we the last this give year Eric, feel So, every quarter the

you’ve that and Or going net of persisting, grounding lot you the see like or have quantify? to benefit able it this mentioned you can just around You it’s anticipated you – any color seeing able sounds longer kind than yet that? year. been any persist to a Are to been

Eric Mendelson

– definition a We been put able I’ve been hard benefit. around the clearly, there be – to with it and some definitely to It’s to get number sort regard can’t. to some tried of very we’ve but really that. has aftermarket, helped, with We

be I balance that to have new do content that, hurt our continued impacted to aftermarket been year. been specialty do first the that we definitely on aircraft because has helped quarter while business have has and in our of the mention been has has impacted estimate this throughout and with However, to products

for suppress it’s first in growth this quarter while did of the it overall, year. So positive, our net HEICO, definitely a organic

Peter Arment

and sounds it’s Okay. line, Radiant. pipeline, for fit if M&A like the a And I very on the just obviously, good product up, follow HMI could then Larry,

– Just of a you’re regarding looking of there’s in kind kind have the any seeing done in get general, anything been that because that you few equity of the the regarding change pricing in MAX, private didn’t are the press at? deals or deals

Eric Mendelson

it. seen No, not have yet. really not We

lots of at deals. looking We’re

– looking doing you and at of seen not really we’re dil. yet. the in looking ones, pricing, we’re know, time haven’t But much we as spending we’re lot looking lot, a a change due We’re big

Peter Arment

color. the Appreciate Thanks.

Operator

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

Peter Lucas

for It’s Peter Lucas Hi, good Larry. morning.

Eric Mendelson

Yes, hi.

Peter Lucas

Hi.

guys everything. – covered covered most most You guys you

one quick had Just question.

But mentioned ETG strong in down by Sorry, this expect you space defense. to was prior level acquisitions off. and quarter, driven was that

any space visibility more forward. color on if you wondering give for the could going Just segment us

Victor Mendelson

the we’re went when Yes. we orders believe up was case will We’ve that customers those us GEO order. led be quotations that believe seen our those from into indications turn sat start placing turn to We’ve orders lead quoting that to orders. activity And things market. that the the in into particular timing picking year. us they as together would will last seen materialize Those Also this year Hi, budgets of is have on. the from Victor. see to some for an increase, and to would putting indications customers as

that’s looking year but that, a like same. certain think the what back indications it’s remain be we So event can’t of and half the us. We why that’s it’s for on

Peter Lucas

Very helpful. Thank you.

Victor Mendelson

You’re welcome.

Laurans Mendelson

Thank you.

Operator

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

Ken Herbert

Hi, good morning.

Laurans Mendelson

Good morning, Ken.

Ken Herbert

wanted you. start I to Eric, with first just

you’ll should out gives maybe you call implied – growth an organic we the You out confidence point still organic tough get the the remainder little to year. step-up the Is single-digit watch the of the mid- maybe you’d as of for driving that or growth outlook half are the in very inflection – FSG maintained anything easier to in or there quarter, – back high for segment you’ve in for in year? Comps the that the segment. second a obviously

Eric Mendelson

that Support of this. two-year a had which I organic followed mentioned That’s incredible commented Ken. I’m XXXX a fourth first point. have in of of year. by we I speculate the if by hindsight, a first that was morning, think realized XX%, that some on some quarter the wondered prior over good pain. the think XXXX, may that customers, of call unsustainable business is the strong quarter I mentioned us, on period And has XX% fourth Flight year our came growth was that good organic numbers – fourth I pulled and perhaps so Hi, the not growth into in, mentioned quarter of Once And quarter that organic probably quarter you at last happened. of, quarter our this in quarter perhaps XX%. fourth that I I and glad the little really in the bit from that fourth growth we call of

that a would fourth So first result, a been. larger bit And quarter in growth otherwise a result, terms perhaps the than the as a think quarter it smaller. perhaps as little bit little was have of was organic we

be So, numbers visibility gives if balance think you and the to projected. think we why we me that I and that some, is that of confidence going will, into the at growth year the organic

Ken Herbert

Okay. That’s helpful.

So, point no if of specific you’d there’s the as you it, sort but normalization through you go you – sounds year, normalize to, thing a one it like.

Eric Mendelson

instructed. That

Ken Herbert

Any just But products. I X% get up. the partially weakness in we’ll fourth Obviously, some of there? quarter, up the repair there wanted out in first else other specialty Is the queue. call takes to And quarter growth? Yes. was for the the I details you’d MAX-related follow you in organic and trends. you, know puts anything specifically out but called strong in maybe very

Eric Mendelson

Yes.

what this quarter while nicely, would and in it think the instead curtailment in of still year I have grew, of not MAX referring did products was the grounding been the first it specialty had was more it the grown not to but and weakness, production. it I for

strength. activities, those problem, in we particular but absent I the say numbers there. that really would area. but by what that I And we hurt there’s higher – good been even wouldn’t of meant have MAX any got area we still was, So posted

very the Support entire We’re line. really across very, much strength, Flight seeing good product broad-based

every support team, we everything customers. our specialty strong So, business from as just doing I’m repair, market area, speaking penetration really quite result, more a be whether in products, our increasing there. way to the encouraged it’s we Very frankly, with seem we’re with parts, winning in that our and customers treat

Ken Herbert

if That’s obviously, obviously, Carlos. And final great. for could, company. it’s quarter. focus generation the for know, question the good, Really I just in a cash high I one

specifically, is about a things the different, little the anything we kept first else full year maybe you’d there profile guidance which on intact. Is the or contributing highlight moving Carlos, cash operationally, anything to doing you’re You that better quarter forward? think as

Carlos Macau

to I on special improvement. into and line gross high-margin and bottom we our that think continue SG&A and fact the efficiencies ultimately to I grow ever at those we’re our then that sales and The as margins also leverage businesses, anything drop – slightly catch not we expanding unique does margin cash. or so That HEICO. here think turns and doing maintain we’re

stagnant, for how get But if things the we to chose with be right December a I year. you, and on this the industry. now, visibility wouldn’t for would, helpful. we the be uncertainty guidance keep of the going candid it different airline been outlook I that’s into our have coronavirus, So – impact more you with outlook to a to generation our if relatively view little until this might cash the for is

Ken Herbert

sounds you very That reasonable. Thank much.

Carlos Macau

Ken. Thanks,

Operator

Cowen. with comes the Your Gautam next of line question Khanna from

Gautam Khanna

I a have of couple questions.

First, I at flow. million? $X.X the was wondering, it Just contingent could you was quantify looking the year-over-year, cash benefit consideration accrued

Carlos Macau

expense FSG guess. earn-out the Yes, have in contingent about pretty had, to of we – a the XXXX, it’s on right. didn’t of companies. of $X.X million had payment made QX Yes. in earnout that close subsidiary. was we about darn that last that’s fact, good had on one year, That’s of we We million And particular to take that any we that. And this X

– you from no what hence, ultimately, So expense. the year, is happening less last expense up wind issues

Your to guess at X.X% it is what pretty close was.

Gautam Khanna

starting out? And we’re of where things in you you parts roll maybe, process? And parts on you to see will? a the CFM bit if if about talk going the Kind get how some in and actually are are Okay. could approved little system, that

Eric Mendelson

we that directionally, And Yes. comment would business. on space. said was good that in is there competitive that say we for I so that came We with opportunity – customers, it I imagine, encouraged that particular would that do as careful help that out can when could us – felt I’ve would it we while not products, that for it anything as mentioned, the you that I say very reasons, seen are us and only for like far. that, I’m I think to regions, what settlement

Gautam Khanna

you on you? I us? big you look you lot can or but fewer like maybe a I pipeline M&A a last the does are have more big one, what targets, as this promise last can year, And for was little a – year did Okay. rich midsize valuations mean mean, more mention but targets, characterize the the a or characterize pipeline, of

Eric Mendelson

Flight I the amount Support happy in aftermarket interest would that Eric. we’re in a and the is of There’s tell side. This in what side. newbuild in, tremendous you market. to we’re the There’s over businesses be seeing particular, about Support a Flight

prices, we businesses. there deals While we’ve level, are an that would I I are host also at are, not seeing lesser of quality many say, elevated say, would seen And printing. a

some I bit that past that people And either in frankly, starting able no certain down have is pricing businesses the quality – out sign to businesses. to little have not traded lower that’s confused. a higher or that, pass buyers longer that, or off in perhaps gotten the are a as come are quality And think think, of businesses there hadn’t not I differentiated.

folks if I’m prices the really all long work say the the, model, great door. our the jack-up HEICO We business hear those will, the this not, who run we and a dry, remains very that whereby want of in would opinion, time. from be part think appreciate equity choice. hard entrepreneurs you we wring And those entrepreneurial I businesses. to for of private buyer-friendly, for the And a people the encouraged. it’s I our term. have out HEICO And quick buyer to So a home remain for culture,

Gautam Khanna

Victor, do on you say anything have that? And to

Victor Mendelson

Board, of equally. HEICO all across the applies that think I Well, to

Gautam Khanna

one And one for last Carlos.

to update Any rate. today? in tax that guidance update Just the

Carlos Macau

the for estimate interest still XX% a non-controlling we so Certainly, of somewhere give full rate kind and year, tax XX%. we of Yes. and between

statement guidance I in gave same we I just now made December, when December. that think the was statement made in I

that rate. we’ve bring of least You the to that XX.X% the My and neighborhood, to for with somewhere normalize. And of at for will that in the modeled the our guess it remainder should quarters. XX% is us overall line way year rate XX% out next XX% will three NCI the tax assume tax in

Gautam Khanna

guys. Appreciate Perfect, you, thank it.

Carlos Macau

welcome. You’re

Operator

the Your Instructions] line from with question Louis UBS. next [Operator comes of Raffetto

Louis Raffetto

Good morning, gentlemen.

Victor Mendelson

Good morning.

Eric Mendelson

Good morning.

Louis Raffetto

want spending. I over given next in. over OEM, side, years of sort the the the obviously, talking on current the several to there’s depending just election, of aerospace that then you the of follow-up uncertainty we there, The aftermarket, a are term, are environment And defense, sort M&A, defense in of about the lot maybe So, on what if Democrats to happens near switch some uncertainty. with the the cutting a lot

that roll how So, you that right environment sort sort and of into M&A? now, prices taking with just of up changing are really potential maybe that aren’t

Victor Mendelson

is started short-term, we doing to think we uncertainty the out the changes and very strategy had changes It’s we’ve something it’s go. and we we’ve in since acquisitions in used Victor. then. for program since the we this that the four we’ve and we had defense had commercial And Louis, both in us doing every XXXX, buy times, elections that when long-term and and and appropriate aviation acquisition companies we as during we’ve well. for look been and look the the at the budget worked dealing with are now adjust those years transactions, companies, at And and spending, our we

manage the way to the very So, do it. we’re to going we’ve that same to And that. confident continue on done in always our ability we’re business

Eric Mendelson

I be sophisticated we’re other this the and be think and fooled, and is buyers whereas – not this all supply also in that business would a products their extremely go understand and customers, they educated well. buyer. their we is that we knowledgeable long time. can may HEICO frankly the When chains, add the due And do on, very I we for in understand We as diligence, haul. see HEICO this are

of a we’re of like XX to to any proven then something. don’t the and not think I we in quick type scheme the XX-year right when period. it’s for or acquisitions with of We’re feel business up in they’re pressure number it flip a acquisitions. to act. under And We nearly get hurry find specific type seller, right and rich we to And meet over – be true

Laurans Mendelson

is we – be the that just wonderful in. for and if Larry Look, believe run that a not industry day aerospace in to long this to day, is commercial industry from we’re the

don’t from and be XX buy expect So do the do today, We years. understand what’s normally for we our if we diligence the now that to due understanding. next and something in we going around

go got defense whether buyers. defense, budget to matter the of you’re you of When you a I we away. you So pretty products not kind elected, is that when It situation. sophisticated aware about similar shrink. focus, guns. type to components who’s going supply peace may the I we’re think supply hope But No talk there that the industry. And very at of the out bombs, and war don’t enemy need, high-tech at on listening supply every or we like we’re things which electronic make defense to they field. just We tanks, and that’s

a something you Democrats really if the get affects buffeted in see delve defense business may little in, that that So, will believe we’re be to that whether it’s we’re there into little we a not that going is the but weaker, or It stronger, us. something kind be of that not the by you Republicans.

at have XX companies done I think grow look You XX% in continue at We’ve we the bottom have line at our on years. that. focus don’t last to XX%. pattern I to to that growth able somewhere many to XX%, at And grown being know

worried that. not I’m So, about

Louis Raffetto

very other That’s what right. appreciated jumped and non-current specific? Or for that just assets Anything All just Carlos. the one was? one color. up. curious I And liabilities quick noticed

Carlos Macau

leases. to on the standard new had accounting implement We

and XX, both had that as We also. liabilities worth on up probably gross the So It’s up other books, basically of you’ve – to $XX about seen balance million December a every sheet. our company, leases put just assets. mostly and to

Louis Raffetto

right. All

So right, Thank Carlos. you, just lease perfect. the up. All

Carlos Macau

You’re welcome.

Operator

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

Colin Ducharme

indicators over outbreak for context of looking Good most impact deem and relevant or both the have easy already. things monitor remind the Thanks are my all answered for if This you in Most of, what, that I’m one potential and others asking time? on Thanks. patterns to being may been order you of – try desk be taking Can as to your just quick that question. Victor. the morning. at? of assess we perhaps us you coronavirus, linked the have Eric a important macro your any, and

Victor Mendelson

comes course, where very is Yes. sorts it will This spread that is to it country you and I further And we’re, difficult this of believe will the personally, to just Victor. not-too-distant watching When be the going. my press in mean, future. as deeper it the I We it things. that’s of in and it it��s know, the anticipate coronavirus, read closely. opinion. all same read But

how the does your them for How question deal our it? with – week So business? companies seeing. surveyed you affect do We’ve this how How do asked it? and becomes, it they’re you they’re what prepare

had they’ve where in across had a companies the said far, really company. been We’ve has maybe cases, a fact, of they’ve de so effect Board. or couple one And almost immaterial the minimis, few

really people on fact, immaterial more that’s do what HEICO chains they effect. In and they’ve of things of material to to think extra hand, have supply might good out kind be so like said plant. to in diversify But with they more When had if that, is they up it’s do at. been going fairly basically, stock have trying that people far. some which the about flexibility, their talk it’s They material, what I they’re to safe

basis go and running deal how being no known just when to this And industry. bobbing of and for at this is on kind and telling have We’re that’s it. with any flexible weaving where thing anyway, going to in to ordinary we’re an point anybody for we’re going there’s

is going to key. be flexibility So the

Eric Mendelson

Eric. And this is

that in market great support, life brings the with correlation. capacity that there’s point shortage flexibility be certain job in little increased. the the, only pretty strong the aftermarket available to I has specifically done space, general, ASM, got figure get and regardless a maintenance you out closest the clearly, we is been, seat economy The a Victor think making been would up to and bit has miles, careful I of sure in thing say, how of conditions, a is travel as on the

So, you analysts maintenance. period are as will, if mentioned, perform in some this the other taking needed airlines opportunity, some to the of lower

for it any the think virus. will really With I the defense specialty in and the potential ASMs the newbuild. aftermarket. regard So, term, of that product, But long mitigate, impact are short least is term, our both driver at to spending

are are as very well However, say, we very the various area newbuild I defense good would programs as that in much on, missile programs. narrow-body needed

that should as well in we area pretty think So, I well. do that

Okay. Any questions? further

Operator

this now for management there I At would to time, closing any to no are the back further questions. call like over turn remarks.

Laurans Mendelson

very later conference you in you And quarter for listening Thank Thank the and of interest extent all much a call, be all speaking little our and will we conference year. at HEICO. for and that bit to which you participating is second call. look the this forward to your

Operator

and today’s you for call. Ladies participating. gentlemen, this Thank concludes conference

disconnect. now may You

HEICO (HEI) 26 Feb 202020 Q1 Earnings call transcript