HEICO (HEI) 20 Dec 222022 Q4 Earnings call transcript

Company Profile

Participants

Laurans Mendelson	Chairman, Chief Executive Officer
Eric Mendelson	Co-President, President Flight Support Group
Victor Mendelson	Co-President, President, Electronic Technologies Group
Carlos Macau	Executive Vice President, Chief Financial Officer
Rob Spingarn	Melius Research
Larry Solow	CJS Securities
Pete Skibitski	Alembic Global
Peter Arnett	Baird
Scott Deuschle	Credit Suisse
Ken Herbert	RBC Capital Markets
Sheila Kahyaoglu	Jefferies
Michael Ciarmoli	Truist Securities
Josh Sullivan	The Benchmark Company
Gautam Khanna	Cowen & Co.
Louis Raffetto	Wolfe Research
Colin Ducharme	Sterling Capital
Kristine Liwag	Morgan Stanley
Mike Hanson	private investor

Call transcript

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Operator

Welcome to the Heico Corporation fourth quarter and full year fiscal 2022 financial results call. My name is Samara and I’ll be today’s operator. Certain statements in today’s 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 but not limited to the COVID-19 pandemic, Heico’s liquidity and the amount of and timing of cash generation, lower commercial air travel caused by the pandemic and its aftermath, 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 to 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 and manufacturing 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 including the effects of inflation within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries which could negatively impact our cost and revenues, and defense spending or budget cuts which could reduce our defense-related revenue. Form call the to including Securities limited filings this Heico’s all but to and to with XX-Q filings and on listening are review encouraged of not Form Parties X-K. Form XX-K, Exchange Commission, or extent obligation as statements law. required of information, by update result otherwise, or any future forward-looking applicable We undertake events publicly except revise no new to whether a to the Laurans Mendelson, I Heico’s and now over turn Officer. the Chief to call Executive Chairman ahead. go Please

Laurans Mendelson

on flight the to XXXX Thank quarter We good comments President and quarter Eric and you Mendelson, group; technologies CEO CFO. to everyone for and co-President Corporation, Victor Carlos I and I’m of President you from a and for by President of co-Presidents. address of you our Mendelson, will the and welcome fiscal teleconference. and Victor our Today by group; us Mendelson, segment and presentation am Eric the call. Heico’s and fourth and Heico’s results Executive joining Mendelson, announcement results, fiscal morning thank fourth Vice Chairman joined acquisitions co-President Larry Heico electronic Macau, accomplishments, followed morning my XXXX here we earnings Heico Heico’s support Heico’s Heico’s consolidated this

our moment another reviewing strong operating to before quarter. exceptional record like members a would delivering for Now thank results, Heico’s to take I team all of

will support results our and net driven mainly year arising flight the for quarter fourth within services. results rebound fiscal into represents operating consolidated and improvement that record continued focus commercial Summarizing from and that our continue was trend principally on in results, translated ’XX ’XX aerospace and Heico, demand during income fiscal excellence the outstanding our I’m highlights for businesses of ’XX. very I sales results fiscal continued encouraged Your exceeding in ’XX group into optimistic for fourth and the expectations the our customer shareholders. by fiscal this has am by quarter steady record operational products

per exempt ’XX net in the acquisitions. net flight the XX.X% and Consolidated fiscal Consolidated fourth ’XX, ’XX from XX% In ninth our the is margin up matter, it complicated that the a of here addition, quarter compensation real recognized leadership and operating fourth fourth this in no as about fourth to The of in and able for this explain he operating the the ’XX, detail, ’XX fourth rate in XX% in Carlos ’XX ’XX. operating the These $X.XX will marks and improved on fourth group. diluted tax to fourth X.X% improved fiscal per XX% to sales XX% compared plan, in was the in a share net sales of income reflect quarter losses the of surrender of of to diluted to mainly of compared from of ’XX. of sequential consolidated income the was sales and quarter fiscal tax policies organic or of income this fourth be as unrealized effective has quarter growth the Truthfully, that for from on ’XX. recognized tax compared the in increased if million anyone the to Macau ’XX in Heico’s the fiscal to consecutive fiscal quarter tax impact ’XX. the and in respectively Consolidated is quarter quarter principally effective gains fourth the in fiscal fourth growth fiscal million quarter you. life ’XX. quarter of support from $XX.X results fourth quarter XX% of our fiscal was and and impact impact fiscal quarterly reflects that $X.XX exempt fiscal unfavorable up XX.X% the the has ’XX favorable in XX% the to of $XX.X share quarter fiscal increase and in or that call, net was quarter Heico questions values cash Later related as rate operations. insurance unrealized

manufacturer France. test are in is engineering and ’XX and completed activity acquisition radiation in and group nuclear recent ’XX, September adaptors Electronics a use In and acquisitions, semiconductor Eagan, field high our of leading fields. of highly and located medical Our the in completed a acquisition Ironwood in and of leader our performance production engineering, sockets Test group space, their in Radiation ETG services of the used September in the ETG Minnesota. primarily both specialized of designer Trad Ironwood products located is Labege, devices. and Trad for

conditions, all closings. of design, acquisition ETG per into acquisitions, introduce and of fiscal Heico’s rotary quarter previously revenues. the assemblies mostly will be and fourth As transactions’ remains I to group, this and defense Heico’s purchase them terms leader At closing, entered year he the to The of support which approval International, of These closing components manufacture earnings of expected would of government a support in of Eric electronic would flight passive and headquartered and ever sale within joint reported, ’XX of is be acquire expected the Mendelson, Heico’s Heico group. to France. are our flight share results purchase Exxelia Exxelia still discuss agreement and President to in of complex time, occur the and approximately group to reliability, Eric? accretive largest co-President is a quarter for is high a price like and first to global Paris, customary applications. XX% in which transaction’s aerospace subject the in

Eric Mendelson

quarter The the improved of demand XX.X% from fiscal aerospace reflects sales, the global of very growth, lines, support organic ’XX. the principally percentage the to income flight improved efficiencies in in net million in reflects of improved XX% from well quarter ’XX sales growth gross the reflects fourth air of profitable ’XX, growth mentioned fiscal record to the support previously up group’s ’XX, for previously ’XX to fiscal and well fourth increased quarter ’XX, The fourth ’XX increase The quarter decreased group’s in of within you a XX% well operating $XX.X efficiencies from income the fourth strong quarter margin the fiscal the higher quarter net increase gross replacement fourth impact to reflects the quarter SG&A a products sales in sales of of flight XX.X% fourth fourth from fiscal product The fiscal as sales mentioned in commercial in profit from the acquisitions. as operating XX% realized commercial fiscal specialty ’XX. operating compared resulting our The in the and fourth margin in from margin. of quarter majority net The volume. as mainly net of fourth organic ’XX. mentioned parts of in million record as fiscal margin as Thank million the much. from record expenses an fiscal increase ’XX ’XX. a and previously principally aftermarket million reflecting quarter sales our support travel $XXX up fiscal recovery net group’s continued flight of as the increased mainly as services the increased of $XXX.X profit our the The fourth ’XX $XX.X operating mainly fiscal a products up increased quarter as

and Heico would technologies electronic like co-President group, results of I electronics Now to group. Victor of technologies discuss fourth President of the Mendelson, to introduce the quarter Heico’s

Victor Mendelson

fiscal quarter the fourth impact X% our mainly is net ’XX sales decreased sales technologies a in and increasing profitable and elevated, ’XX. compensation reflecting in group’s net attributable profit of XX.X% out estimated impact accrued defense from delays mentioned sales attributable sales. reflects fourth $XXX.X quarter income volume, space to fair changes and the previously lower a to fair ’XX. slight group’s in decreased aerospace fiscal The net and backlog changes value our net mainly gross increased technologies up expect in the million of other contingent partially ’XX, quarter mainly over to like ’XX lower group’s $XX.X fiscal ’XX, commercial that we from of estimated fourth expense, The ship. the electronic higher offset quarter increased point These of The fourth quarter organic the decrease a to by gross net medical the previously by million accrued the components increase of fiscal performance-based and from Larry have principally operating in from sales by and Thank electronics, previously fiscal record compared consideration materials the and strong the in million electronic you from to orders million sales. margin to fourth income sales. suppliers. margin the expense. some but is operating net technology $XX.X fiscal Eric. record remained a during I’d principally partially increased I reflects in compensation ’XX organic lower receiving decreased products margin turn offset products the by should The of up ’XX The and us decline the space technologies was mentioned partially delays quarter Mendelson. offset group’s fiscal decrease ’XX. in operating impacted partially offset production in increase performance-based contingent shipment planned net The benefit fourth of favorable a in adversely $XXX of in sales a X% in raw defense of back XX.X% from and they operating ’XX, some electronic mentioned margin fiscal these electronic call that to net the The acquisitions products as fiscal in products the consideration value as

Laurans Mendelson

Thank you Victor.

and ahead anticipate by our As the majority both demand as fiscal to of we sales for for principally ’XX, we driven outlook, net in products. growth the look FSG ETG

Our during the to commercial fiscal market into ’XX, and largest ’XX. fiscal end grow continued which expect to is continue growth strong aerospace, trends we

disputes schedules. The prefer equipment unrest were end fiscal for more defense. essentially matters electronic is markets global defense ’XX. delivery suppliers. and is environment favorable largest would components means in we defense fiscal by Though a impacted certain all required, peace, that for negatively defense chain second were and in supply Heico for delayed market Our principally providing We flat ’XX,

external the our in growth defense orders but we our however, we supports expect mitigate to and optimistic when; these very our have industry’s and factors remain optimism. fiscal that seen predict and can’t We in on ’XX future backlog,

on culture looks Heico. Heico from and sales commitment listening. entrepreneurial ’XX promising, I strong degree We guidance to extent beyond. their our continued and net new to provide We prepared ’XX and questions I invest in is and of ownership successful our make will I incredible research balance Fiscal ongoing which and That to our the ’XX open at sheet program, and for in this would that earnings growth enable excellence team continued do Thank and and great Heico and the conservative fiscal you time. all you thank us closing, that like for comments providing all will liquidity are policies, and not your gains. be detailed all fiscal remarks, very company. acquisition believe continuously people career collectively to a growth high opportunities and members In for line positions now our market success and for to believe execute would like share excellent our again who support development of for of that

Operator

first [Operator question Please instructions] ahead. Spingarn take Melius Rob with We’ll the go Research. from

Rob Spingarn

good everybody, morning. Hi

Laurans Mendelson

Good morning Rob.

Rob Spingarn

numbers nice Nice to very year, finish the today.

what culture, and have all over high question, would operational outperformance? this so the time, so any maintain warrants the can time a talk you’ve of for to You think the and to over been the mentioned essentially, how the for able in I consistency drives the you. think change many of culture expected about excellence, company With investors know, and I Larry acquisitions you just level Heico, inevitably

Laurans Mendelson

posed of basic Rob. you decentralized give is don’t Eric I organization Well, tremendous since respond. will anybody’s culture where the a to to duck operating I to is but question, me, authority dying answer question, one Heico to The that of we want level. it

no mid-level have operating to Carlos. that As you everything we from myself, know, Eric, filter and presidents the corporate up that group Victor vice to comes and

means and of example, company workforce, he impressive, That know is understand way say--they his if go awful and culture. good, the they The works, he first between Rob. do meaning you a is that’s us, say, - selling the and people how long lot, people get through team the and stop the sees relationship this everything Charlie, thing that as This and to manages. Charlie years. who these how scrutinize, If an is here, treats to the - through goes are Anne, this analyze, all a understand owner the is and members. company oh, that’s his We acquisition, and machine not family well that’s and most Heico the long the machine the have factory for, that, okay, we us tell some how important wife, his somebody Mendelsons, and at we factory a these that’s been the he in important person XX working his a really he goes operator, an very very of but he how

as what stock give tremendous most The people our the building on talented very are has being being to do the is are they shareholders. person you with are plan they X% not you a I’m that that his I’m being if very in in that somebody given people though, over-supervising where members, Talented of that compensated by corporate respect labor it, them, his everything Heico’s we understand hate and rewarded having multi-millionaires a we not in think manufacturers, to given a thousand Heico Also, millionaires, our that’s stock I or his two by responsibility organization about we neck for their other take working - well. his Again, They away. XXX-K factory down them somebody person. about believe many team psychological call a so that like and match give breathing with workers, thing thousand doing, my the benefit their people the Heico are somebody that member that of job. company, a employee. all some his running office Heico - people a we than of I and We pride fact X%, who them normally employees, we shares have as give to think worked It’s team it’s clerks, There’s else, an and so all a what in a doing, help we working aligned stock. to pay didn’t and shipping Many, brings more talking member. of part that secretarial They hey, of authority are them. they result them a exceptional customers, operating authority. are it normally and the team. focused We team interest opposed put give Heico personal miles as authority force, very knows the

member, a call are think you’re work Heico is all the and of success. employee, you things you Eric, I for part are that our what you so work my we these do lot for we a all want responsible of add? team to together, if me; of If culture,

Eric Mendelson

every think or that be company When it decided and create for decisions be that Frankly, to long to a every maintaining low for multiple on single cash going long to short for built wanted I expenditures, good about we’ve we single to I I has we Yes, I that’s focused generation we any and growth also customer performance. and people, as our when make build wasn’t a got done years basic term, sustained, drive decade, than take relationships, XX able was thinking the a long culture explanation drives that was to decision everything more Rob, built inventory, of and focus. term it’s term going designed it is opposed from this, decades. this result debt mean, capital as think but of which been business It’s to we acquisitions everything a as think something on to that. being thing of ago, culture, I came we’ve our even to term the years

has--you People night and that that of of matter fiscal last to are don’t Eddies. reviewing if and the in after, to normal result will, were goose and the steady long result and what’s of we’re for in turnaround culture, that, don’t very than think, they’re quick very, made economic If a who ’XX, that of and XX it everything today, ’XX because, you going capital do culture a and all the as I in a that long it me structure a decisions really our in which the short a as some term. and over industry, is corporate short have expenditure approach, time, frankly, or sudden focus, realized that, term was is saw not fact, write-offs, result ’XX, been and ones far of XX They’re a ago, flash really earnings, drives you the the obviously were ’XX compensation great in above results but who I why we a frankly all of XX the I came people ago, results different businesses pan. know, I years today, a the set success, Heico positions the or at are short are who ones designed term running cycle, term showing I so benefiting in which happen earnings going are our make their importance, years of can’t typical equity, has As private things think which was ago, are that ahead one-time years as which buying for I of equipment the term, performs? that impact want ones of length a some we had ask our the wasn’t Heico plans be. to impact the positions ’XX subsidiaries we the frankly, and out frankly, out look our are at to you get call

we performance which a it’s decades, that Our today. worked out, to call our steady want that year to results hard most rigor after year the driven frankly, Eddies just has hard really this have people decades people, happen. and that have over our in, year that work and I out, of continue make of all result who discipline incredible year over just and and

really I unique. think that’s what makes us

Rob Spingarn

for that. very the Thanks answer, comprehensive appreciate much

Eric Mendelson

welcome. You’re

Operator

take from CJS Larry We’ll our next Please at Securities. go ahead. Solow question

Larry Solow

good I Larry, Great, appreciate on totally Thanks guidance. guys. can morning. the

so, anyhow, guys You don’t [indiscernible] necessarily need do appreciate provide successful long have guidance I outlook. sort the but a of to qualitative history,

and for to couple I’m above-average your year Eric, quarter, aftermarket strong I sure, specialty figure margin Just I’m it this bit maybe little think a a but questions Eric obviously just this also is out, are quarter trying good had like strong, Victor. had an parts year. a feels of you

of historical into those out Some settled drivers, year? we range has look more the of that to of coming as a sort back

Carlos Macau

this Carlos. is Hey Larry,

Let me in jump there.

products, through tandem, isn’t a flight little which of bit change the grow the FSG what end in case. which in year, has QX is seeing Normally, a of the amplified, normally that’s in half of and flight some starting our running growth. based think in group say all been volume is in aspects I the the mix disproportionate specialty and support this margin story for we’re growth support it’s and usually back let’s the group, off year, the

margin products is of has--because continue has I the bit. to parts outperforming support little specialty had some group, flight our of think a the an what within on--pulling we and the businesses see which mix impact up

see to happy We’re that.

the all-time XX.X% it’s earlier, record. quarter, for mentioned Eric As a margin

little I we bit, would once that its moderate see but be to expectation. of we’ll a footprint, once back completely very settles margin COVID, think We’re out the that, my happy get mix into see

Larry Solow

just--yes? I Okay, yes, that makes sense.

Eric Mendelson

but frankly the couldn’t know, also those drive know, long a and, just and we reserves, add the result generous that even everything our tremendous also all Larry, and way, margins. more of did--you our everything for out have right I add, that able did want with I the to margin, have And think increases pleased and having to we with margins. to I proper were we still we effort market share was--you those people, just efficiency as bonuses, and frankly, investments people we still of margin seen came that term be of We paying made did the

Larry Solow

good slowing can’t high like you last I in to little sure going feels how you from any Absolutely, a feels The you’re to a to is a it’s be the place seems continue commercial just like grow level, like growth bit, it year color may aviation on again, right slowing. feel have couple Eric, that it but today? industry but assume good obviously, and now. just a years, economy the or for obviously be you did

Eric Mendelson

very, ourselves businesses frankly, those all increase, in and in about a as Heico’s is industry. I of because the Heico share boats, position increase. I’ve our seen tide Yes, very unique no think businesses question well a positioned various we’ve margin feel market good as substantial that I There’s all in, lifts that in but rising position

very and so mean, the all-time to getting call doing at and East XX%, if across just sales PMA look, lesser a are a in whatever America, an down of somewhat But to you’re seen - still the I out interesting record, what’s We’re are I Europe at well. years and market as really picking Asia we is flights that plenty treating in reasonable, customers it take share. matter U.S. and term long that North extent, They are advantage up us made the PMA they that we’re wouldn’t got behind a of and sales but and, and in it an them did we’ve it right. even we’ve still and them, I normally they’ve South result with of as right for did America. this, our that you that think know fact, treated and and rewarded share and full think world don’t haven’t short I so we XX that’s record, Middle power recovery Heico we’re and frankly, us. stuff all-time happen, wasn’t that very trust and we stuff of It fair, us was market term we that

very in I a this. think we’re really much virtuous cycle which is permitting

Larry Solow

just great. been for Then back quickie can I more Absolutely, you’ve one Victor if maybe real I quick, - switch there. know quiet gears

like it the markets favorable maybe larger year obviously all defense, outlook industrial, this quickly, - space, It worse anything by of Just there, a assessment? like chain some supply issues was sounds other macro some else. about fair market, How your impacted your medical? very largest of than the sort Is good. [indiscernible] is feels that and consistently

Victor Mendelson

for as and--still somewhat, think Those strong would way, say the forward, I those the I other flatten this been chains for but point, think year at - high in heard actually end out me some space I They’ve electronics worked Larry. as have you’ve this year excellent out been a before markets other well. some little bit space flatten soften certainly even us star get toward very mean, own questions I as a by expect good would less little little--you particular, deal the in wears us, up on the year, markets you in performers, that mentioned supply out end so their customers channels. and really we I ones expect, or instances. and Yes, last a all with going to a know, softer little--commercial them and really fact markets and of medical, see

Larry Solow

Got appreciate Thanks it, that I color. guys. great.

Victor Mendelson

Thank you.

Operator

Pete our go Please with from Skibitski Alembic next take We’ll question ahead. Global.

Pete Skibitski

Hey, good everyone. morning

Laurans Mendelson

morning Good Pete.

Pete Skibitski

in about DoD but we that to of this high takes growth and that know, I well. as bit, budgets, discussion what’s officer and to at you terms grow spending growth budget contracting a little get a about us have, base puts talked consider--you Victor, and sort puts budget the DoD at also at could Can might delays, know, the in at we you’ve year think and guess and look I the about of single right least it chain way budget people over takes of, maybe if some least time? it just we kind you like some the lot line defense would expectation think least give you all looks supply continue in with those talk Ukraine-related all digit growth, of issues that averaging

Victor Mendelson

items major the directly in us. things green contract. one correlation or certainly in to I should know, little cause--you under budget come you’re being, fourth us work-from-home our specialists tied deferred right on and what getting be delayed two. supply in a from think I some put quarter. think maybe procurement off supply budget. course, Yes, of we’re fourth that for Then I on do. workloads think over they needle of defense The or things have with like quarter, it’s think negative, any that be would given working chain, the chain and a victory negative at think to record dealing early say, I I we right--our quarter and the some the hoping us, knowing and could which definitely let’s was But see time next think I our we’re to period, don’t overwhelmed that view of I you of I starting have they would too the course, would were in DoD defense they bit--seeing mentioned the there. in that budget shoots we to which in are businesses kind it bigger their in exceed but call DoD engagements, benefit for growth, the issues, absolutely that, movers level we just going and the may be necessarily be think to the the foreign been conditions

I I things but cycle just over what are little comments for us. think look and is cycle, think getting in inserted longer order how you and think at that production the the actually those make they’re terms of there, dynamic a I positive we the in if said we burn as

Pete Skibitski

do safety higher supply appreciate for issue one next do issues safety Carlos Thanks and kind guys. year some expect revenue stock from wondering maybe. up growth? year trends--does this capital some if last provide Carlos, a was or chain and of could of Maybe we of Okay, you we reverse there. I to think color me, it. you Just year, think these building if how because itself working the was continue build stocks,

Carlos Macau

we so Sure, inventory we year. invested mean, invested--I Heico, this in

business built a month, we aren’t side because products, most the and shipped aftermarket there’s stocking in there’s that backlog, balance product. same on The most flight ton that, is at look in the don’t investment notice in business you working our lot particularly month, inventory, on I flight not big in most impact the to sheet, Within that world really you’ll we ordered do support the that so the backlog. pretty of of companies impact shipped but of our going of implies of capital, our support ton a defense I for think is around a pointing as suspect that If next the group have of also. a our customers same year, there have done you’re the which specialty and out, us into is

done and to; but some parts come people have ’XX. model because usually want Heico, in going could major on for with they they a our That’s over-supplying customers there’s be in businesses, want there I to our stock that, if that channels to the sort do stuffing I think - we with ’XX fact, particularly early a they think don’t need with of if we’re button? probably it go too support have handle them, and side. I heavy when to they possible cages that, in be where yes, something I think we it, parts, think and We vogue, consignment so inventory globally not buildings our ETG, there not it’s their out in hit and put been or don’t reckon I the where in In ’XX, much we’ll customers, has flight to that stuff for inflection the we’ve pause our do that on electronic don’t impact all believe

Pete Skibitski

Okay, thanks guys.

Carlos Macau

Does that question? answer thanks. your Pete, right, All

Operator

Arnett Our with Please go Baird. comes Peter next from question ahead.

Peter Arnett

Larry, good Happy Yes, Eric, morning Victor, holidays. Carlos.

Laurans Mendelson

Good morning Peter.

Peter Arnett

I quarter kind supply around sales. quantified it million last Victor, think chain of $XX push-out Hey the you - was of

that exceeding quantify kind You you it that’d just record a us of just you maybe or helpful. mentioned at can little--if levels, could so if it, give number, was be

Victor Mendelson

more Yes, $XX sure. estimate quarter, We that to million that around rose fourth number little the by than million. a actually in $XX

couple there ’XX. one had Now, I actually half the it quite About broadly In came a time. long they ship number was of in little we actually a not was over won’t that distributed. whereas a fiscal of ways, period because it’d numbers identify that in high then the others They’re been too, experiencing, subsidiary, past issues one were some but in which for and improvement their a subsidiary. shrink, particular avoided of so--which saw some had more supply other that been on will the had chain higher companies estimating and side, in prior the

Peter Arnett

could Then about tax talk us a to little expectations rate helpful. bit maybe you Carlos, that’s just about thinking fiscal ’XX. we’re when Okay,

Carlos Macau

or result was team a most insurance either market grow, similar leadership I but typically normally tax our the plan deferred called will in on those tax policies don’t amplify year that year, about our our recognize markets what When pretty market, compensation rate tax you’ll trends, of that. and that could on life the earlier Larry market what so the I lower. which is items, our except the target, rate employees, this losses on the that $XX XX%, so run QX rate our cash it members. rate is the bogey which a and of if see for in recognize in in our losses markets sometimes think overall, and year insignificant. a occur, our to what’s tax mentioned a comp driver If tax rate in the back movement value This plan, rate. rate, have is have million stable, would investments amplified year, on loss general by is which losses could deferred a as a is it we due we that tax point big in have This better impact tax had be much gains as our XX% our impact a our for impacted little stay off move material losses Heico, we do P&L two. to surrender call, not what we permanently the we so That than if next had or and our XX%, we for can year, the rate

Peter Arnett

helpful. Okay, that’s super

traffic got if Asia. we PMA, from your levels base. you’re be record quantify could have FSG. I already terms of of mentioned player know we but in lot Just lastly wondering kind still when reopens Eric, know, in how you see--you customer impact on China down global me, of of you the a you’ve I fully, a just what was

Eric Mendelson

think That not if and that mean, have their mean, it of infected, spreads. china a as rates everybody getting else chilling doing thing. question I to natural in millions we’re immunities on are China, is is should of with the result well think doing a XX to world how are is expectation, in well of rest doesn’t effect air virus. the cases think, share, position market of they continue China, lot regardless But experience I where travel. that on Whether very very reported currently. couple that get therapeutics does, we a to feel they we’re real Yes, months, to very a I The very going as ago but tough China fits in strongly, and a of travel down. and various in that’s COVID. Based world, and but we our wired vaccination with my of They’re we’re result a now strong hopefully and the days whether come it’s for China China see be speaking impact I already why and is around another of do a available The hundreds take domestic presumably--I to well going went the and to the up or starts. are going experts, we’re

Peter Arnett

Appreciate all Thanks guys. the details.

Eric Mendelson

Thank you.

Operator

from next take Scott Please Deuschle Suisse. ahead. Credit with our go We’ll question

Scott Deuschle

morning good everyone. Hey,

Laurans Mendelson

Scott. morning Good

Scott Deuschle

more shoots you Pete’s talk supply following things what shoots, talking this just talked minute some bit at about trends quarter, of also worse that, Victor, about and on just seeing a you what ETG? could about gotten maybe the so green so been. up Thank you. got details behind but a know spend some some chain question, the mentioned green that I worse have you have

Victor Mendelson

is delivery This they’re on in Victor. we’re in, is components been of have programmable particularly FPGAs, slow side. finding schedules. answer lot I and a The behind are gate it’s field that - example the arrays companies our come mean, finding to for

make, those I extended in used some also cost for of been--I subsidiaries, make, been for kind very are things guess We’ve that’s the and are some products, we silicones complex used which some mixed other microwave a world out. we boards make, products out--push circuit as schedule. for more that other into so been but the Where has lower some components designed better of have has We vendors common that some there it’s and some as enough the behind well polymer-related lead of of seen some products, and in interestingly a that well some bag. products we are times pull electronic for, and been things are so are where it’s out that the it’s few in on go and only that specifically won’t they polymer-related that components

Scott Deuschle

helpful, that’s about Okay, is X.X% for you. think capex right super the still sales thank to of next Carlos, way year?

Carlos Macau

I think so.

targeting roughly, year about $XX math your probably in somewhere that’s should We’re next produce. so capex million around what

Scott Deuschle

that on Okay, for QX-weighted, we anything like that cadence should Exxelia and Is there terms the models, then in important Thank reflect into as more to just to mindful of be question incorporate you, you. anything seasonality of? we business, last that there?

Carlos Macau

Exxelia, that is often very those Sure. that known a The the to the would on I’ve But flexes markets, think can’t factors perform wouldn’t nothing it said so electronic there are and technology paper. as ETG. business impact a overall that will the but I like Exxelia caveat differently so ETG. can European-based things see in they read mirrors--it’s I any--there’s mini we mean, would cause no, table the year, the be same that Europe that much I similar there’s as think throughout strategy well impact here I external that in group us perform It’s that States, don’t - you’ll the only company, them control, got be business almost macro than to way. look you think the so

Operator

next question go our with Please from take ahead. We’ll Herbert Ken RBC.

Ken Herbert

quarter. Thank Hi, and you, nice morning. good

Laurans Mendelson

you. Thank

Ken Herbert

wanted revisions that work scopes, think on your risk a you you’re in you impact and inventory that potential and risk, seeing to anything yet terms hit, potential customers. to through should impact some on about slowdown that, that Which how anything think you’re is would for within recession or that or initially I delayed States, like may downward adjustments, business? if amongst Eric, be anything here there flow the the would instance if in Maybe if potential of United your spending, segment? how parts I’m about off--I lead the maintenance airline of start wanted to recession believe seeing see FSG, yet curious we

Eric Mendelson

order new a hitting any fact, of have economic Things in most patterns as Yes, seen a good and question on highs. out, customers not we the from start we matter are continuing be of just result as change Ken. strong, data. recent our no, extremely keep To to

know all an be recession comes will there if is that we curtailed, ultimately However, travel impact. a and air

would industry will in air the Now, so other for clearly it. that the the goes, I travel factors cargo products of could a on certainly impacted, far curtailed. anticipate less position, But I aircraft cargo air because starved a for be that than we’ve a may it’s of definitely you perhaps only be travel little about Heico we impact be that little because dedicated bit were see But in as two sort and could and we’re load years, of that mitigate developed. those it think would believe I unique flying, as periods, been in

part on even don’t products that new this offer is I that part frankly, of hadn’t call can want large of didn’t and has been that, a sold I pre-COVID. a pre-COVID, been to large tell that cite Although rebound they products you our what are, new we

that industry down our of that mitigate is we’re able a at know, to the number whereas upside us. to that and is imply record results in a flights XX%, is--you be PMA unique why are think that, the to I position still so would

I them over-buying, time right XXX XX asked the the get occurs. of XX XX now, parts though, that but one consider would want shortage they question think all also get extra a shelf those you’ve for I’ve that need be only of things, tells destocking I do can’t restocking really are a shelf, historically to Nobody no all because because normal to is and the hey, the ordered on you, of the it question over-buy, and that I behavior afraid they’re when of and them. that, they and in the is--and you about hit question recoveries to period have there’s think

question. I for impacted to aircraft the then second, answers be industry, think Heico’s impacted repair got risk ability natural would build ultimately and I the be think new rates mitigate. but that’s that your first and if a parts Clearly would

Ken Herbert

very much. That’s very you helpful. Thank

scenario, think margins as you incremental about in had seeing mid like the should on know, sequentially sounded incremental strongest how for maybe all year moderation you’re segment think the Just based Carlos, about margins be comments about--it or today? FSG fourth How of from should in as margins maybe but a think just we what within seen the we quarter you - a could we the this some for on we’ve ’XX mix XXs. follow-up, were potentially the Eric and ’XX ’XX,

Carlos Macau

once so XX% talked in XX%. Ken, about us run once should down and That fixed get that’s would the in quarter into at for we Heico, past, can around that they’re but I’ve what I normal would--you be what’s be or normal would the the on a we kind growth. Hey you expect. depending on a would footprint, a will I again, businesses ’XX, cost expect happening, growing That plus expect as see. settle settled that as tandem know, and to in Hopefully have what I our all of in events think put into our normal that XX% should margin, around run vacillate you

Ken Herbert

all Thank very Great, you right, well I’ll much. stop there.

Carlos Macau

Ken. Thanks

Operator

from Sheila Please Jefferies. Your comes Kahyaoglu from next go ahead. question

Sheila Kahyaoglu

Good in thoughts time. think it question, on your morning and wanted I you China. I FSG was the on guys, thank for start you that the to to off, Peter’s recovery Eric, question

China, really How your of do about has in of between well China. FSG and You much we recovered doing were said that split geographically? think international, and ETG, your sales FSG of how business XX% you and of in

Eric Mendelson

Yes, good questions.

into in flight are China group support record. sales Our at the all-time an

numbers, doing our well so We’re frankly XXXX well of there. we’re ahead very

body narrow frankly, year or you said I fact, would U.S. and I it it by for a did whole I be think thought in know me is but, us. about think not remember--I and I the the in be upside so, of think asked didn’t ago from here. world did it But I I U.S., would body recovered, there and hard. was obviously end recovered narrow overall the only ’XX, recover

our I out in going to XX exactly over say all months next position to very a lay of of what’s happen, It’s hard the markets. in to in sort we’re think China. good

and think I on the in it, gaining and China. I like all starts. we’re of think great it’s lot weekly fits reading our grow I a your be got going there to and share time in positioned market we’re flights, that’s market share data of to number report well but

Sheila Kahyaoglu

much Sure, and thank that shout-out. so you for

people dilutive I XXX about skirted been XXXX margins we think do were basis ETG to they strong very I you’ve how a but and that yourself, going opportunity? year. we margins, long very little have and is around about that term know forward, In at to terms think points bit, How of--Victor, think busy do Exxelia end the

Victor Mendelson

Exxelia a things. does lower couple a Well, carry the average. than margin ETG

I at--and what Exxelia Exxelia, me I as depreciation. without think on but couple flow think what is--you We might the points is, of sort this after what I before I look heard a excluding said intangibles haven’t say when cash so you’ve we’re margin which right, can operating that amortization comment think can’t within but I a of that real on be, it margin, call of before,

of somewhere it, I gross on the I’ve margins or with There a to point of down us I Exxelia the always or I and XX%, pretty will that, we’ll et you’ve continue up and don’t are think instead a that’s if come club basis, before, and on XX%, case. on and I of healthy people giving a within - somewhat. or XX% is think consistent two a XX%, think XX% tailwinds, cetera. them. running basis, been remain a our headwinds should that to XX% as overall or proud right people, down on either believe I so me it heard pretty an be instead continue change that level really businesses, course of the a our I margin look of they’re at say

Sheila Kahyaoglu

much. so Great, thank you

Victor Mendelson

You’re welcome.

Operator

Securities. Truist go with Ciarmoli Michael from comes Please question next Our ahead.

Michael Ciarmoli

on normalize. Thanks Obviously Hey, higher ’XX? pick well, margins, mode you where the as we we you’re It like so the one just guess to press the question not detailed sounds or covered ETG guys. for still here. think Then side liner recovery FSG know, material should in, I good from know are into taking called labor you in we may and release costs, have the results. the I FSG that you up. do in here guess the out they seasonality, pre-Exxelia Nice could but maybe that expect giving dig guidance, morning do I - about the we revenue COVID? already potentially Carlos, normal how

Carlos Macau

guidance, is the has company but our we answer history to question just industry, aren’t do I do than expect the perform, the giving expect say been. to like let’s We in way growth sales. think better we our that

XX%, goal that when I management the think to out company you think is the bottom the for see pretty done so grew team’s reverse year for be years, the year XX% bottom line, the it. consistently come the can we of box stated could goal engineer will it our grow and we to line and every XX of year. on you XX% I We’ve this

line get you’re to If we’re thinking of with guidance XX% about your time. detailed to and pieces at that this up up XX% numbers, expectation how give from pie, to but reverse bottom going not that the engineer come just

Michael Ciarmoli

have--you’re $XX only growth you’re expect like it - pick-up That’s at relates to just off in should then normal ’XX and potential ETG, be to fair. that million you would but from organic mean, other pick it you up of think guidance, chain ETG of had, lost going the look almost seems if a I points kind start one kind give I recovery, we good if that The supply to a to because here. sales easing, going there, we of about of five a

Carlos Macau

year that expectations the improve, disruptions the a and greater so least to little we know, what we nice have get we ETG Heico, is Well, chain I which be at in will from million ’XX, you’re referring don’t out, for into expect total say think overall is But tailwind could to to, as right, market should down that Michael, into $XX was do what pushes. defense so in the that that relates are I our defense we going as when ’XX. it a have bleed than supply did fully more we

Michael Ciarmoli

perfect. Thanks guys. a Got it, lot,

Carlos Macau

right, thank you All Michael.

Operator

from comes go with The next question Sullivan Josh The Company. Please Benchmark ahead

Josh Sullivan

morning. good Hey,

Laurans Mendelson

Good morning Josh.

Josh Sullivan

But around parts think this grows dynamic. the the know chain two, demand Are it then looking the process set? opportunity like how up a value XXX Heico’s of better? you looking PMA is at the with PMA one, the as per I to at Just getting Is look what for all? duration move you work-from-home and PMAs, point? are the approval developing about little at year, you’ve you’re I FAA talked bit

Eric Mendelson

we Hi going value great, we’re as the regard very all. portfolio. in after doesn’t We’ve to FAA, as With wide Josh, it’s is parts to set, to what us continue we’ve continue grow we by outstanding, up so well to Eric. With the regard go in industry our I’ll at the and past, done across what so time this hold call grow. cycle to well think far, really is adjacent the largest that to to the group, very white spaces, a so we’re portfolio very, continue the diversified I product similar got

Our customers more we’re us spaces, that. into are to asking continuing to go so do

been grow we’ve a very and market know, over frankly, much been and in decades we’re continue to they treated they’ve so us unique You so greatly appreciate us that, think rewarding regards them with and pricing, position very reasonable I to more well to business, with, there share. we’ve encouraging the

Josh Sullivan

between the the number looking space in growth to Then market to over up programs M&A versus there’s legacy in and ramping the exposure, just exposure programs gaining are new that you that markets? evolving. and balance the some are been maybe programs moving a areas space transactions Got How LEO like market lunar at it. of on these

Victor Mendelson

Victor. is this Thanks,

parts careful reliability GEO for strongly time, of business been satellites be and if LEO We’ve would now carefully, business market will, pricing, stability, there’s very course in risk good the market about we We’re a in you very of think that opportunity still is satellite more experimental, as doing in of looking and a the the But always. we successfully market. and partner, to some GEO we’re very market so are some margins, and more us. even where at long avoid we on. in the smaller There where the financial concerned the opportunity of LEO for

teaser opportunities have or the taken because highly companies buy--I they’re also We are on, customers it’s deal We’ve but we’re historically, the been and proceed we buying and We be that so we space resistant as serious going about pun to bait to count number good to we long number a ones a our speculative, been ones carefully. value that out the our well the of a we about, term. intended, who proceed new very think as serving get and want the of those to products know hear straight to haven’t of book exciting moon. really go can’t to we just,

Josh Sullivan

Great, thank you for the time.

Victor Mendelson

welcome. You’re

Operator

Khanna from comes go with ahead. Please Gautam question next Cowen. Our

Gautam Khanna

good Hey, guys. morning. holidays Happy

Laurans Mendelson

Thank you Gautam.

Gautam Khanna

so was to. was estimated accrued Sorry, late, contingent big that I wondering and ETG, the did joined was that what how consideration? a at guys value little just the of fair I describe I in changes related curious you

Carlos Macau

earn-outs that the as risk-free result or liability ultimately moving longer something expense interest rates the interest liabilities as Fed’s the reduce what term up, you million year, to because earn-out maybe Sure. earn-outs. and now contingent noise we of Carlos. units so quarter but things: or In did bridge on balance obligations, the that fair We run what to you as liabilities, intermediate to be; go for fourth roughly we’re dealing Gautam, does going $XX throughout for winds impacted $XX up, year, this when up of fair earn-out and particular, the have sellers. the we each would, contingent the numbers rates. shrink, quarter What rate, through these the is with fourth to gaps those some Right happening, have end sheet, a us This if may is value credits deal that couple what the those value one, fiscal to you use term rates throughout million evaluate and value of have right, we was re-compute, a really had have $X in to year of performance the million.

Gautam Khanna

of versus Got if flight little bit I a ETG the just that, very trending of defense you demand on just about terms within difference come back it, the trends. supply support, how piece or okay. could that’s in products defense and a quarters of and discernible piece I any there’s curious, chain to was helpful. couple talk That’s you know, specialized think started ago if

Eric Mendelson

area, With well value in Eric. doing to also to as those continue going we’re grow defense, to businesses exposure particular, time, regard we doing a they’re as think commercial is gain particularly to specialty we’re well. and of got I lot and that aircraft--the the In proposition This but market build aviation. products, rates frankly, missile Again, have unique we’ve in a over very to, share increase. and as especially commercial well aircraft

Gautam Khanna

side? and one how has how what just one the I’m Victor over maybe is ETG, have on speaking far year? for the defense through, that changed do and you last broadly Okay, orders out me, visibility just maybe your curious, and on last like space

Victor Mendelson

now, throughout Right backlog, typical. the every at in by and fairly record of I it backlog the one, ETG exception so year, be strong. percent had record way, revenue, seems a for very is fact to we’ve of It’s the a as the backlog, looking month was year through the had backlog we with Sure. record

that future chain it, some little is because issues, small those part backlog. slippage of supply in bit into have pretty visibility a actually, a - fraction, of our overall, although that’s right of the additional shipments, We

of generally say the there, would on our moment, typical lead situation. our which would given at starts typical typically, probably months for say next sort good so then deteriorate and from defense a at and a is situation are not six we flavor short it’s fairly terms we’re to it least In in any products, time I of outlook, I now.

Gautam Khanna

thanks lot, Great, a guys.

Carlos Macau

Thank you.

Operator

Louis Raffetto next The comes with Wolfe question Please go ahead. from Research.

Louis Raffetto

morning guys. Good

Laurans Mendelson

morning Good Louis.

Louis Raffetto

you this the but Larry, I past Obviously mixed year, are on heard of there busy guess you been haven’t the think now. take let’s have you marketplace right opportunity, what some things recently. so right I had seeing out kind now? M&A guys I’ve get your

Laurans Mendelson

I think I would say it’s normal.

so support. in strange in the flight would saw interest they see little with a I I are of closing, to in sellers want having trying up. lot long looking areas, that private as a a time raising rates money, think Exxelia now because down rates, The is work of both more of prices to for--at spending prices coming high We’re low acquisitions buyers, as and expect and interest are with market is particularly but equity, number a struggle we ETG

very good know, and opportunities. hopeful as buyers, that disciplined are we think--I’m will some see We I you

We’re looking at many now.

were honestly, rejected, those and were we’ve either, made go the the things not people company. the offers accepted, of and they that so didn’t Some some and companies overpriced, well overpriced, sell we’re seen deals the didn’t we recently but offers

to We have happen. what’s to see going

know, we’re we change times when it, can’t going never years, XX to our money not not market to our EBITDA, never our back, see investment X do will. and we pay - look flow in you somewhere and strong as We’re between playing did, we cash we in and want you you discipline, for so XX to that

overall This past think of investments. will how Carlos - I we fair that make six? our I’m optimistic year, we many, share concluded

Carlos Macau

eight deals. was It

Laurans Mendelson

properly, deals company, on we you of deals, eight so that know, your Eight answers force enough When that’s that’s when don’t are a we in type question. the year, have it. will we are I move priced opportunistic, Deals, transactions. we deals. right what hope

Louis Raffetto

like great that’s deals Carlos, for you. but color, whereabouts? guidance, closed $XXX FYXX? that million, or look on far understand maybe No, thank growth acquired no so is just it the sales Is based I what one,

Carlos Macau

next talking you about acquired Are for year?

Louis Raffetto

Yes, exactly.

Carlos Macau

XXX. about to be it range, that’s it’s look but think know I will a that’s XXX I and Yes, like. wide between going what

Louis Raffetto

very great. Okay, Thank you much.

Carlos Macau

Sure.

Laurans Mendelson

Thank you.

Operator

star, from ahead. a one We’ll to question a Colin Sterling ask next it’s take go our As reminder, Capital. with Ducharme question. Please

Colin Ducharme

XXXX, comment you’re wage had Hi, muted good also from I and into throw from talk all actually inflation, a could as past roll just if briefly maybe here. the particularly what year. question hearing you’re speak Carlos, pressure morning. and on feeling have just this once may the what a what much expected and the forward capex, Thank very you in and subsidiaries now about little couple, them the wondered for table I’ll time. the to--just at you you out I

XX forward FSG. more about margin little money look Eric, we with months. in Then you the talk bit of where that as maybe a expansion Can you for step-up the is going? how mentioned addressed You just terms

You you two there, components kind through different of maybe talk pause I’ll thanks. but demand in little why in why Larry, terms are specialty not the tandem particular got customers Can bit about specialty a strength. - the pulling you here? about I’ve moving Then of together, in talked for follow-ups know, and one or

Carlos Macau

your hit it questions hand I’ll to then first and two Eric. Colin,

On pressures that. The the wage that and each over very are sensitive front, to spread We we’re closely. allow general with managers best marketplace, watch market. to labor with businesses is over them all those material really, margins. are their with We’ve wage found side. in country also relates different Because world, deal highly to material our all the pricing, pressures we the it it way to in folks that told running dynamics protect deal we our our there the dynamics with and local and the to to deal field, have our work to out, the as to try to the raw on customers

don’t want be our strategy far, us. wood, guys help we input costs that We to we - know, guys to do fairly that worked on go course out those is as of asking indiscriminately. be are and customers our to known and to paid prices you objective us do, very protect has that our margins well what if in to for we jacking so knock not the get for are regard Our up, want

our the and a it our then for piece frugal, dollars. what if I’m and side, in aggregate will decade. feel put capex wasn’t and the and million spend as but record, It refurbish another That’s a it’s a folks go year. dealing on needed. did they’ll equipment, are brand-new like light a because dollar they This in next buy of capex $XX,XXX drop next we a to use we with. used machine, that that was million didn’t into little out I $XX,XXX discuss what machine request around On need for generally year it $XX a number it’s broken I because guys

not by and it our conduct I’d you didn’t a that’s not past, because give is while be plan business capex the number will need but high answer next for including like year, that businesses core in future. way, there Our probability, just the today, that Colin? Does to question, under-spend the $XX get Exxelia exactly our budgets, for million your that we that, of folks what they

Colin Ducharme

thank Helpful, Yes. you.

Eric Mendelson

starts you to terms you it have develop the decisions then on creating When to you that crisis know, these value. we spend with look just a I members and to because on people treat the had advance our eye of through, well of to went why parts, asked our our their When our do we and very And term. decentralized inventory, customers sales extremely well - make permits result to well plenty at business. that, as Colin, in and, energy continued we we low our always economic are we that able true the why debt That really you continued critical long us team and frankly, they were treat results the do of earnings, believe in culture. keep

sorts build go In haul. games the all we very way down way and the shop the all sorts that significantly it for running to short continues customers business people that different that the to the We to to price the are management team that honestly the we and but inventory, know with of we why that’s level I that’s can’t you we a I for give them the often been but why people can reason we people. to to it’s the where sure term on away the I want This it. only want make of there know fits many you because metrics tongue, There can in all long plays pricing, short don’t can’t cases to of here think games, but on and why long and that that is floor. in not is and do can term; specialty I the charge we of the play the we so really jack have in do management we to term, that and who each we do how trust, just build and who that, there this like incentivize been Victor has not term, in people whole the and longer, if visit, people we a with our repair sorts it it’s all frankly on think bunch can’t parts retain Heico so. of do understand term market outperform, businesses of departments, plan also have We culture long has products years with years the in way and happens. for business. who and regard certainly being you of teams, XX just in tip get and doing, the think of only this don’t have things we XX any I see share of my that - decades off and long we’re

Colin Ducharme

call we’re Okay, peers have central Maybe their mean, digging terms comments. a some of the expansion, deal meaning made share on there? in continent you’ve we mature you’ve and critical value-added flow your much. your in string private types a quick strategy, just Maybe deal quarters to done on a--you funnel maybe guys M&A those that final and in width you’ve why. muscle, has now and that got business this of U.S. I quasi-exclusive you role segments Typically I’m you link cetera. on you North on that playing you several share to distribution The price are today back quarters just the relationships round to and very largest M&A et with gains umbrella that the Exxelia maturity are Can you prior all? has from seeing guys, you of your your for into wondering distribution, helpful. with as which Thank continent, Eric wallet distribution of what, smaller wallet a that buy-and-build yourselves wide know, added--bolstered and deals for your--the great with versus question of value-added a as to out, factors other role today’s deals trying and in to the perceive Is for the go just I OEMs, if American Larry, you, businesses, satisfied for potential ago follow-up in along to be like just funnel here, area. appreciate got particular the ever, to the there, any, you with did particular model the is it were, speak comments it as I’m of relative be all.

Eric Mendelson

I’ll asked is first - the me that Eric. the on this question Colin, the you of your part you know, distribution. take why

the entrepreneurial industry. of Heico but are run in Our the are, realistic distribution to the the distribution in successful value my value very They’ve opinion, continue we makes inventory and the single behind companies they sense, them most small buy so companies muscle out that started and we’re on as companies of also got They the inventory table. able to financial that we way. very, to the bring that

cycle it financial and is order They there their a of until the to they write-offs. big X/XX, you’ve and you companies space look mentioned margin see a one-time are becoming saying, throughout You is what throw business interesting because if other and number it’s very in you’ll global the whatever I’m careful be COVID off I is to they is understand and distribution a space that economic getting an out into that into what companies have in inventory. report got we crisis, very, this very others, a for you know, the write would wait then often,

businesses on Heico, economic decisions If of those done geared the flow there’s reason that because cash single time that, drive you the and at look people to a rigorous or in to else the that we and industry we’ve of sure not is differentiates debt are we all inventory; if in not thing is nobody make correct which rigorous, it off permits low Heico number focusing are comes and earnings. that books start and to to don’t We aware t it not we take spend long a that can we’ve got not got hold do, and inventory, The that. incredibly management to the in inventory. with, we’ve time and short which as us value when make as I’m We is us his the and distribution frankly our problem, us create wrong two, term one, things the final permits do business, term else people’s PMA the number that reach. correct time anybody

very, anything a XXX in you a on We’re the largest we unique of else the airlines, they’re widget if able and - is do for in can position AXXX, There group nobody to so a none, all distributing call industry get you’ve a said unbeatable business that and that Heico products, at these are is with leverage, and very approach entrepreneurial we’re folks is PMA that in and second correct all things I the seen, a ever that, broad remarkable to into the have combined it’s details I I so who them an is the absolutely out, combine Dynamics, and the the think stuff in led Aerospace, and Heico somebody, so be to low in inventory, not in the this PMA, that but example, when distribution on Control market. the Cost there, it Air Seal in particular do. because they that our by want just companies Blue to really in are and unlike phenomenal

Laurans Mendelson

Hello, are there? you still

Colin Ducharme

you. thank Yes,

Laurans Mendelson

Europe. you asked our me so Okay, in reach about

buyer. opportunistic We’re an

We Europe. throughout reach have we the U.S., in have reach

We’ve number expanded like in economic very in very We operations, successful, the They the multiple how people times. like year and throughout put invest actually have and a our years. us and development in have been what we in increased often performed. they’ve were When the France to want successful operations we’ve they and companies toe seen in France. us operating visit for of our and employment, France started, they number of we and a we France in we’ve water France

and it’s Europe, Europe, we looked do for reach. five We it; U.K. taxpayer take had it, a not knew we that, that looking opportunity there been but company or years. U.S., big a forth. when Yes, a will so have the over discussed four we we and big The good yes, and it, at have that Exxelia your transaction, just reach it’s in there, so Does we’re we we Europe, question? too. answer see We’re employer, at the

Colin Ducharme

Happy Yes, you. thank holidays.

Laurans Mendelson

Thank you.

Operator

ahead. Our go comes Kristine Liwag Stanley. Morgan next question from Please with

Kristine Liwag

good Hey, everyone. morning

Laurans Mendelson

Kristine. morning Good

Kristine Liwag

know, You attractiveness guys, the market PMA of the is clear.

have guys You very that made lucrative. industry

that enter, part another market of would of the expand that you of jet think the do ripe section to seeing company aircraft? Now that and you hot pressure we’re - like is for going How engine, PMA high into PMA blades. into consider turbine the

Eric Mendelson

this Kristine, Hey Eric. is

market really spots, participate picked decision. that all very think market would familiar market what with about. we’re we’re that I decided a sense spaces the also and We from we speaking it potential risk with Heico to that but know, and that and succeed, the of really in in they know, and not very this but been everybody say, PMA in we’ve not market, a in with enter you’re You focus happy carefully. has makes operate know exactly and the happy we’ve has That as very that our It hope lot which to manufacturing, high get along in. well, certification, we a just--you we’re very of reward a is high is potential so customer that to acceptance, decided we very it provide and companies complementary I products

Kristine Liwag

be certified, that that how get and these you evaluate Thanks industry? to Eric. company were actually that If parts change would successful

Eric Mendelson

No, it not. would

Laurans Mendelson

add is growth. world earnings flow, little on our controlled on the much just line and want is color think We strategy, I Our look we focused want hit growth. and a flow, what I you Kristine, we per cash which to our as to share. strong, so strategy how at really everything We is on XX% XX, know, not is? can do We very don’t focus home runs. control cash bottom

some going many PMA, we a section we at to of is offering diversified. that’s be looking that have from but including mean, the spectacular stands we get it’s the diversified have flow thing, highly do As that it we and used We intentional. into it’s company other across particular at want I to and have altogether, these how make nobody businesses, have but don’t guess and or have section was of of out; long in our but We accomplish to of to want parts spectacular don’t type broad sell XXX,XXX--I that part discontinued, that’s objectives. making hot we’re don’t if and general to don’t we to to one and section a our hot highly the wouldn’t going one of that strong know want idea so, in as XX,XXX, our is in and get words, highly we would it. even product one very Heico spread notice all, diversified, goes one we We for. cash have remember I’m parts, forth, affect any parts blades to product number combustors, but failed or That and make and what thing to course parts. wide parts we It to bottom make line strategy. so the hot

Eric Mendelson

you Dad, I’m that. glad mentioned

can part One rest gather as the know, is, that’s the very from so reputation. that lots better to things of performance important many portfolio. you years, when want of us impact We and very doesn’t offer knowing very, you on to--you the our one is of very, parts, you be of other the for comments call us careful our don’t the

relationship customers, right the unique for which profile decisions a competitors, to benefits for bring our are made and customers. I believe to we’ve our and right with our with have that therefore we’ve Heico We our FAA, the even risk for made that the and want we and

Kristine Liwag

appreciate the Great, thanks color, helpful. Really very Eric. thanks that’s Larry,

Laurans Mendelson

Thank you Kristine.

Operator

Please Mike investor. from take go private We’ll question ahead. our next Hanson [ph],

Mike Hanson

ETG, should you. have sort thank the the time? at margin, you maybe X% de-emphasize Victor. minorities, of you According are A your that off to marginal end for parts decrease there increase the really worth wasn’t or question sales of the a that company investment of of maybe one and in I’m day and your when and spin

Victor Mendelson

into majority the there’s make are the something or or business economic, that. related it to go we’re the that. purely or selling all is What because lower the time, there to loss we our something that but and the they something part we’ll than something don’t rest need when low or and there’s look the making good if that do feel, subsidiaries a is feels because offer are making margin It’s very making into a of we get margin always obviously positions, wouldn’t you contribution say of XX% and to although it’s running question at decisions the appropriateness margin profitable, not overwhelming of it’s a is to i.e. XX%, a not business a a and or business that It’s XX% so There away we XX%. lot continue not maybe still turn very economics are will if times it. of which at is part it’s part, of make the

wouldn’t part make enemy good the sense time. it. we a and a You a do question, of in so the excellence, It’s phenomenal of all business that’s that’s how the

Laurans Mendelson

we’ll ETG, it I’d like margin, thing. and we ETG lower a other operating overall margin that company has XX% in of Why XX%, discover an a company buy XX% one If we group. because the margin, XX% might margin operating that you company, to a we increased of Because operating want on and have absolute buy XX% get hell good there the we’re add would focused running careful. operating have is will we that so and can’t--we don’t and we it? be that to reasons margin margin, a of very are reduced margin, or a that margin

if we me you at not good cash overall of talking, a heard profitability, We’re get hell flow, our XX%, earlier, cash flow, and about it’s XX%, a cash so. even though

margin, take little than all important flow help that have margin, more high you flow. to have cash think bit? a is understand You but to that--when brings cash you about Does margin

Mike Hanson

time, Okay, an I’ve you, acquisition Over are there the probably mistake? same times the that you spun that’s I’ve say, off. I been look the made always and that you’ve count at or with really and you’ve years we maybe at perfect. bought-bought-bought, can dozen two that companies read But a three

Victor Mendelson

better forever, We’ve try with where something we and jobs don’t be. than do it? acquisition to jobs buy we do never had time if disasters, that We do any we well We of back, we right historically, performs, even others want make so to that performance view as to not off of period question, we it’s all blowouts we ourselves improve an eventually the as sure to get some make decisions. are as our perform without analyze Yes, them ones our in that, for we then buy we time what they and and it look as else. good Mike, this the to We’ve is own - are ask those, acquisitions. - to as had a they

Laurans Mendelson

that the way, companies. you we spin mentioned off By

business. that was in companies to out that of sold profitable-- have we’ve we run XX-some medical only was - the two wanted industry a entire be We years company which the it One

Victor Mendelson

business. Services

Laurans Mendelson

a it highly sold so in we was business, labor related It forth, or was XXXX, believe services ’XX-- and and that business, I to

Victor Mendelson

Yes, ’XX.

Laurans Mendelson

years, something how $XX The million for other it $X about, many Victor? a million honestly, sold like and that, business for in was one we bought we

Victor Mendelson

Four.

Laurans Mendelson

the a had It operating business is on That four much it it XX% margin to margin. was wasn’t we But it we using that operating the interesting was up was it a it focused to own X business low. we company reason that about About to so business, bad sucking we margin business. operating in liked so paid sold cash, sold cash years, and that--wanted wasn’t and and that day. sold it was make be didn’t an that a for sense it XX, and the

not we any have Aside a or had thank eliminated we’ve from as never Victor bust. and God businesses, out, that, pointed any sold other

think businesses been performance critical Heico, cash you but some I so been bust. our acquisition businesses that the putting acquisitions, not those strategy we’re as see, and is us, Some you has generated if all you together, which XXX a better, have diversification - close good flow again performed overall pretty at take fabulous about a to package, they having for good, talking have not know,

well. done I think we’ve pretty

Eric Mendelson

I note this But from thank you but will Mike, over years, you. from I’ve got note can that have are the gone time, questions. so a the I’ll actually the but minutes in XX Operator I’m for Operator, by now, our just--I getting comment, five part unfortunately, we a tell we we’ve that business sold over not time

Operator

additional I’ll turn speakers for to closing back conference the remarks. any or the

Laurans Mendelson

if a season, want I This is Larry available and you for to healthy Heico. if this you happy or call to We in interest want participating Mendelson. a you wish have call your for Eric, thank holiday remain Victor, Carlos to want all to on anything. any I everybody myself, in clarification you you questions one. want Otherwise,

February be safe, with in late driving and sometime you If This is forward first to speaking ’XX our you’re of mid to all. quarter or traveling, results. look end Thank you our the we teleconference. to

Operator

This you concludes Thank today’s call. participation. for your

disconnect. now may You

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