Q1 2024 HEICO Corporation Earnings Call

Welcome to the HEICO Corporation first quarter 'twenty 'twenty four financial results call.

Operator: Welcome to the HEICO Corporation first quarter 2024 financial results call. My name is Samara, and I'll be today's operator.

Tamara: My name is Tamara and I'll be today as the operator.

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. Factors that could cause such differences include the severity, magnitude, and duration of public health threats, such as the COVID-19 pandemic, HEICO's liquidity and the amount and timing of cash generation, lower commercial air travel, 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 costs to complete contracts. Governmental and regulatory demands, export policies, and restrictions.

Tamara: 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.

Tamara: Factors that could cause such differences include the severity magnitude and duration of public health threats, such as the COVID-19, pandemic heico's liquidity and the amount and timing of cash generation lower commercial air travel airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods.

Tamara: In services.

Tamara: Product specification costs and requirements, which could cause an increase to our costs 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.

Operator: Reductions in defense, space, or homeland security spending by U.S. and 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, including obtaining any applicable domestic and or foreign governmental approvals, and achieve operating synergies from acquired businesses.

Tamara: Listing and new competitors, which could reduce our sales.

Tamara: 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 are.

Tamara: Our ability to make acquisitions, including obtaining any applicable with domestic and foreign governmental approvals and achieve operating synergies from acquired businesses.

Operator: Customer credit risk, interest, foreign currency exchange, and income tax rates, and 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 costs and revenues. Parties listening to 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. I now turn the call over to Lawrence Mendelson, HEICO's Chairman and Chief Executive Officer. Thank you, Samara, and welcome to everybody on this call.

Tamara: Customer credit risk interest foreign currency exchange and income tax rates and economic conditions, including the effects of inflation within and outside.

Tamara: Of the aviation defense space medical telecommunications, and electronics industries, which could negatively impact our costs and revenues.

Tamara: He is listening to 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.

Tamara: Of new information future events, or otherwise except to the extent required by applicable law.

Tamara: Now I'll turn the call over to Laurens, Mendelson, Heico's, Chairman and Chief Executive Officer.

Laurens Mendelson: Thank you Tamara and welcome to everybody on this call.

Lawrence Mendelson: Thank you for joining us, and we welcome you to the HEICO First Quarter Fiscal 24 Earnings Announcement Teleconference. I am Larry Mendelson, Chairman and CEO of HEICO Corporation. I'm joined here this morning by Eric Mendelson, HEICO's co-president and president of HEICO's Flight Support Group; Victor Mendelson, HEICO's co-president and president of HEICO's Electronic Technologies Group; and Carlos Macau, our executive vice president and CFO.

Laurens Mendelson: Thank you for joining us and we welcome you to the HEICO first quarter fiscal 'twenty four earnings announcement teleconference.

Laurens Mendelson: I'm, Larry Mendelson, Chairman and CEO of HEICO Corporation, and I'm joined here. This morning by Eric Mendelson, Heico's co President and President of Heico's flight support group.

Laurens Mendelson: Victor Mendelson Heico's co President and President of Heico's, Electronic technologies group, and Carlos Macau, Our executive Vice President and CFO.

Laurens Mendelson: Before reviewing our operating results in detail I would like to take a moment and thank all of heico's talented team members for delivering another very very strong quarter.

Lawrence Mendelson: Before reviewing our operating results in detail, I would like to take a moment and thank all of HEICO's talented team members for delivering another very, very strong quarter. Your continued focus on exceeding customer expectations and operating at peak performance levels continues to fuel our excellent financial results. I personally have never been more optimistic about the future of HEICO.

Laurens Mendelson: Your continued focus on exceeding customer expectations and operating at peak performance level.

Laurens Mendelson: Turning to fuel our excellent financial results.

Laurens Mendelson: I personally have never been more optimistic about the future of HEICO.

Laurens Mendelson: I would now like to summarize the highlights of our first quarter fiscal 'twenty four record results.

Lawrence Mendelson: I would now like to summarize the highlights of our first quarter fiscal 24 record results. Consolidated operating income and net sales in the first quarter of fiscal 24 improved by 39% and 44%, respectively, as compared to the first quarter of fiscal 23. These results reflect mainly a 12 percent organic net sales growth in flight support, commercial aerospace products, and services, as well as the impact from our profitable fiscal 23 and 24 acquisitions. Consolidated net income increased 23% to $114.7 million, or $0.82 per diluted share in the first quarter of fiscal 24, and that was up from $93 million, or $0.67 per diluted share in the first quarter of fiscal 23. Net income attributable to HEICO in the first quarter of fiscal 24 and 23 were both favorably impacted by a discrete income tax benefit from stock option exercise. The benefit in the first quarter of fiscal 24, net of controlling interest, was $13.3 million, and that was up from $6.1 million in the first quarter of fiscal 23. Consolidated EBITDA increased 43% to $224.4 million in the first quarter of fiscal 24.

Consolidated operating income and net sales in the first quarter of fiscal 'twenty four.

Laurens Mendelson: Crude by 39% and 44%, respectively as compared to the first quarter of fiscal 'twenty three.

Laurens Mendelson: These results reflect mainly a 12% organic net sales growth.

Laurens Mendelson: In flight support commercial aerospace products and services as well as the impact from our profitable fiscal 'twenty three 'twenty four acquisitions.

Laurens Mendelson: Consolidated net income increased 23% to $114 7 million or 82 cents per diluted share in the first quarter of fiscal 2004, and that was up from $93 million or 67 cents per diluted.

Laurens Mendelson: Diluted share in the first quarter of fiscal 'twenty three.

Laurens Mendelson: Net income attributable to HEICO in the first quarter of fiscal 'twenty, four and 'twenty three.

Laurens Mendelson: Both favorably impacted by a discrete income tax benefit from stock option exercises.

Laurens Mendelson: Yeah.

Laurens Mendelson: The benefit in the first quarter of fiscal 'twenty four net of controlling interest was $13 $3 million and that was up from $6 1 million in the first quarter of fiscal 'twenty three.

Laurens Mendelson: Consolidated EBITDA increased 43% to $224.4 million in the first quarter of fiscal 'twenty four.

Lawrence Mendelson: And that was up from $157.1 million in the first quarter of fiscal 23. I mean, that is an enormous increase, if I say so myself. The flight support group set an all-time quarterly net sales and operating income record in the first quarter of fiscal 24, improving 67% and 63%, respectively, over the first quarter of fiscal 23. The increases principally reflect the impact from our fiscal 23 acquisition of WEN Corp and 12% organic growth, mainly attributable to increased demand within our aftermarket replacement parts and repair and overhaul parts and services. Our net debt to EBITDA was 2.79 times as of January 31, 2024, and that was down from 3.04 times as of October 31, 2023. When we acquired Wencor, our pro-forma leverage ratio was slightly above three times, and we had projected pro-forma leverage to be two times within 12 to 18 months post-acquisition.

Laurens Mendelson: That was up from 157 1 million in the first quarter of fiscal 'twenty three.

Speaker Change: That is an enormous increase if I say so myself.

Speaker Change: The flight support group set an all time quarterly net sales and operating income record in the first quarter of fiscal 'twenty for <unk>.

Speaker Change: Proving 67% and 63% respectively over the first quarter of fiscal 2003.

Speaker Change: The increases principally reflect the impact from our fiscal 'twenty three acquisition of when core.

Speaker Change: And 12% organic growth, mainly attributable to increased demand within our aftermarket replacement parts and repair and overhaul parts and services.

Speaker Change: Our net debt to EBITDA was $2 seven nine times as of January 31, 2004, and that was down from 3.04 times as of October $31 23 when.

Speaker Change: When we acquired <unk>, our pro forma leverage ratio was slightly above three times and we had projected pro forma leverage to be two times within 12 to 18 months post acquisition.

Lawrence Mendelson: At this time, I am pleased to report that we continue to remain on track to achieve this target. Cash flow provided by operating activities increased 46 percent to $111.7 million in the first quarter of fiscal 24, and that was up from $76.7 million in the first quarter of fiscal 23. We continue to forecast strong cash flow from operations for Fiscal 24. On January 24, we paid our regular semiannual cash dividend of 10 cents per share, and this represented our 91st consecutive semiannual cash dividend since 1979. On January 24, we were honored to announce that I received the Ken Rickey Lifetime Aviation Entrepreneur Award from the Living Legends of Aviation organization. The Living Legends of Aviation recognition is given to remarkable people of extraordinary accomplishment in aviation, including entrepreneurs, innovators, industry leaders, astronauts, record breakers, pilots who've become celebrities, and celebrities who have become pilots.

Speaker Change: At this time I am pleased to report that we continued to remain on track to achieve this target.

Speaker Change: Cash flow provided by operating activities increased 46% to $111 $7 million in the first quarter of fiscal 'twenty four and that was up from $76 7 million in the first quarter of fiscal 'twenty three.

Speaker Change: We continue to forecast strong cash flow from operations for fiscal 'twenty four.

Speaker Change: In January 24, we paid our regular semiannual cash dividend of <unk> 10 per share and this represented our 90 <unk> consecutive send new semiannual cash dividend since 1979.

Speaker Change: In January 24, we were honored to announce that I received the Ken Ricky Lifetime Aviation Entrepreneur award from the living legends of Aviation organization.

Speaker Change: The living legends of aviation recognition is given to remarkable people are extraordinary accomplishment in aviation, including entrepreneurs innovators industry leaders astronauts record breakers.

Speaker Change: Pilot to become celebrities and celebrities who have become pilots.

Lawrence Mendelson: I was profoundly humbled and honored that this storied and unique organization would include me with such aviation and space pioneers for this special honor. However, in my opinion, the honor really belongs to HEICO's 10,000 plus team members, who are the ones that make HEICO the great company that it is. Now let me discuss our recent acquisition activity. On December 23, we entered into an exclusive license and acquired certain assets for the capability to support Boeing 737NG-777 cockpit display and legacy display products line from Honeywell International. We do expect the exclusive license and asset acquisition to be accretive to our earnings in the year following close. The acquisition broadens our avionics capability and is another example of ways that HEICO has grown into adjacent markets to increase our overall value proposition to customers and the industry. At this time, I would now like to introduce Eric Mendelson, who is co-president of HEICO and president of HEICO's flight support group. He will discuss the first quarter results of the flight support group. Eric.

Speaker Change: I was profoundly humbled and honored that this story in a unique organization would include me with such aviation and space pioneers for this special honor.

Speaker Change: However in my opinion the on a really belongs to Heico's 10000, plus team members, who are the ones that make HEICO the great company that it is.

Speaker Change: Now, let me discuss our recent acquisition activity.

Speaker Change: In December 'twenty, three we entered into an exclusive license and acquired certain assets for the capability to support Boeing 737, Mg Slash Triple seven.

Speaker Change: Pit display and legacy display products line from Honeywell International.

Speaker Change: We do expect the exclusive license and asset acquisition to be accretive to our earnings in the year. Following closing the acquisition broadens our avionics capability and it's another example of ways that HEICO has grown into adjacent markets to increase our <unk>.

Speaker Change: Overall value proposition to customers and the industry.

Speaker Change: At this time I would now like to introduce Eric Mendelson, who is co president of HEICO and President of Heico's flight soon.

Eric Mendelson: <unk> group he will discuss the first quarter results of the flight support group's Eric Thanks.

Eric Mendelson: Thank you very much. The Flight Support Group's net sales increased 67% to a record $618.7 million in the first quarter of fiscal 24, up from $371.3 million in the first quarter of fiscal 23. The net sales increase in the first quarter of Fiscal 24 reflects the impact of our profitable Fiscal 23 acquisition of OneCorp, which continues to perform above our expectations, as well as strong 12% organic growth. The organic growth mainly reflects high teens.

Eric Mendelson: Very much the flight support group's net sales increased 67% to a record $618 7 million in the first quarter of fiscal 'twenty four.

Eric Mendelson: Up from 371 3 million in the first quarter of fiscal 2003.

Eric Mendelson: The net sales increase in the first quarter of fiscal 'twenty four reflects the impact from our profitable fiscal 'twenty three acquisition of one quarter, which continues to perform above our expectations as well as strong 12% organic growth.

Eric Mendelson: The organic net sales growth mainly reflects high teens.

Eric Mendelson: Organic Net Sales Growth from both our aftermarket replacement parts and repair and overhaul parts and services product lines. The Flight Support Group's operating income increased 63% to a record $136.1 million in the first quarter of Fiscal 24, up from $83.6 million in the first quarter of Fiscal 23. The operating income increase in the first quarter of Fiscal 24 principally reflects the previously mentioned net sales growth, partially offset by higher, as expected, intangible asset amortization expenses due to the Wencore acquisition, as well as increased inventory obsolescence expense. The Flight Support Group's operating margin was 22% in the first quarter of Fiscal 24, as compared to 22.5% in the first quarter of Fiscal 23.

Eric Mendelson: Organic net sales growth from both our aftermarket replacement parts and repair and overhaul parts and services product lines.

Eric Mendelson: The flight support group's operating income increased 63% to a record $136 1 million in the first quarter of fiscal 'twenty four up from $83 6 million in the first quarter of fiscal 2003.

Eric Mendelson: The operating income increase in the first quarter of fiscal 'twenty four principally reflects the previously mentioned net sales growth, partially offset by higher as expected intangible asset amortization expenses due to the <unk> acquisition as well as increased inventory absolutely.

Eric Mendelson: <unk> expense.

Eric Mendelson: The flight support group's operating margin was 22% in the first quarter of fiscal 2004 as compared to 22, 5% in the first quarter of fiscal 'twenty three.

Eric Mendelson: The Flight Support Group's operating margin before intangible amortization expense was 24.8% in the first quarter of fiscal 24, versus 24.3% in the first quarter of fiscal 23. The Small Decrease in Operating Margin principally reflects a slightly lower gross profit margin due to the previously mentioned higher expected intangible asset amortization expense due to the Wincor acquisition, partially offset by lower performance-based compensation expense. Now I would like to introduce Victor Mendelson, co-president of HEICO and president of HEICO's electronic technologies group, to discuss the first quarter results of the electronic technologies group. Thank you, Eric. The Electronic Technologies Group's operating income was $55.3 million in the first quarter of Fiscal 24.

Eric Mendelson: The flight support group's operating margin before intangible amortization expense was 24, 8% in the first quarter of.

Eric Mendelson: Fiscal 'twenty four versus 24, 3% in the first quarter of fiscal 2003.

Eric Mendelson: The small decrease in operating margin.

Eric Mendelson: Principally reflects a slightly lower gross profit margin and the previously mentioned higher expected intangible asset amortization expense due to the <unk> acquisition, partially offset by lower performance based compensation expense.

Eric Mendelson: Now I would like to introduce Victor Mendelson co president of HEICO and President of Heico's Electronic technologies group to discuss the first quarter results of the electronic technologies group.

Victor Mendelson: Thank you Eric the electronic technologies groups operating income was $55 3 million in the first quarter of fiscal 'twenty four.

Speaker Change: Excuse me.

Victor Mendelson: The Electronic Technologies Group's net sales increased 12% to $285.9 million in the first quarter of Fiscal 24, up from $255.1 million in the first quarter of Fiscal 23. The net sales increase is mainly attributable to the impact of our Fiscal 23 acquisitions and a double-digit increase in organic net sales of our aerospace products, partially offset by lower organic net sales of our other electronics, medical, and space products. We continue to forecast strong net sales and earnings growth for the remainder of Fiscal 24. The Electronic Technologies Group's operating income was $55.3 million in the first quarter of Fiscal 24, as compared to $56.5 million in the first quarter of Fiscal 23.

Speaker Change: Jumped ahead the.

Victor Mendelson: The electronic technologies group's net sales increased 12% to $285 9 million in the first quarter of fiscal 'twenty four up from $255 $1 million in the first quarter fiscal 'twenty three the net sales increase is mainly attributable to the impact from our fiscal 'twenty three acquisitions.

Victor Mendelson: And a double digit increase in organic net sales of our aerospace products, partially offset by lower organic net sales of our other electronics medical and space products. We continue to forecast strong net sales and earnings growth for the remainder of fiscal 'twenty four.

Victor Mendelson: The electronic technologies group's operating income was $55 $3 million in the first quarter of fiscal 2004 as compared to $56 $5 million in the first quarter of fiscal 'twenty three.

Victor Mendelson: We expect higher net sales and profit margins in the quarters ahead and over the long term. This is due to our shipment schedule, supported by our near-record backlog, combined with the revenues we expect because of our new product research and development activities. The slight operating income decrease principally resulted from our subsidiary shipment schedules of our record backlogs, with fewer shipments in the first quarter than scheduled in future quarters, something that was scheduled prior to the quarter's start and is in line with our internal plan. For those familiar with our last earnings call and our public interaction since then, you will remember that we said to expect high results variability quarter to quarter this year, with the first quarter being our weakest quarter So this proceeded just as expected. However, naturally, the less favorable product-sales mix resulted in lower SG&A efficiency.

Victor Mendelson: We expect higher net sales and profit margins in the quarters ahead and over the long term. This is due to our shipment schedule all supported by our near record backlog combined with the revenues, we expect because of our new product research and development activities.

Victor Mendelson: The slight operating income decreased principally resulted from our subsidiary shipment schedules of our record backlogs with fewer shipments in the first quarter than scheduled in future quarters.

Victor Mendelson: Something that was scheduled prior to the quarter start and is in line with our internal plan for those familiar with our last earnings call and our public interactions. Since then you will remember that we said to expect high results variability quarter to quarter. This year with the first quarter being our weakest quarter. So this proceed.

Victor Mendelson: Just as expected naturally the less favorable product sales mix resulted in lower SG&A efficiencies also recognizing our large record backlogs and our forward growth potential we increased new product research and development investment, which increased expenses in the quarter.

Victor Mendelson: Also, recognizing our large record backlogs and our forward growth potential, we increased new product research and development investment, which increased expenses in the quarter so that we can gain revenue in future quarters. As I sit here today, I am very pleased that we made those investments and that we continue to fully fund these activities, which provide important forward growth. Importantly, our net sales increase in acquisition costs in the first quarter, fiscal 23, related to the closing of an acquisition, was beneficial to our results. The ETG's operating margin was 19.3% in the first quarter of fiscal 24 as compared to 22.2% in the first quarter of fiscal 23.

Victor Mendelson: So that we can gain revenue in future quarters as I sit here today I am very pleased that we made those investments and that we continue to fully fund these activities, which provide important forward growth importantly, our net sales increase in acquisition costs in the first quarter of fiscal 'twenty three.

Victor Mendelson: Related to the closing of an acquisition were beneficial to our results.

Victor Mendelson: <unk> operating margin was 19, 3% in the first quarter of fiscal 'twenty four as compared to 22, 2% in the first quarter fiscal 'twenty. Three is acquisition related amortization was around 400 basis points, what we and others to be considered to be our true margin was closer to 23.

Victor Mendelson: As acquisition-related amortization was around 400 basis points, what we and others consider to be our true margin was closer to 23.5%. Again, we expect the margin, both before and after amortization, to improve materially in the quarters ahead. The lower margin principally reflects what I just discussed, namely the product sales mix due to the shipment schedule, higher new product research and development expenses, as well as increased selling, general, and administrative expenses as a percent of net sales, which supports our forecasted strong net sales and earnings growth for the remainder of fiscal 24, partially offset by the previously mentioned lower acquisition costs. For the full year, we expect SG&A expenses to decrease as a percentage of net sales I now turn the call back over to Larry Memlin.

Victor Mendelson: 5%.

Victor Mendelson: Again, we expect the margin both before and after amortization to improve materially in the quarters ahead, the lower margin principally reflects what I just discussed, namely the product sales mix due to the shipment schedule higher new product research and development expenses as well as increased selling general.

Victor Mendelson: And administrative expenses as a percent of net sales, which supports our forecasted strong net sales and earnings growth for the remainder of fiscal 'twenty four partially offset by the previously mentioned lower acquisition costs for the full year, we expect SG&A expenses to decrease as a percentage of net sales.

Victor Mendelson: As our net sales increase.

Victor Mendelson: Now turn the call back over to Larry Mendelson.

Lawrence Mendelson: Thank you, Victor. I think it should be clear to everyone on this call that Victor and I are expecting a quite different result from ETG from the second quarter through the end of the year. And in the first quarter, some people, I think, misunderstood, and they said, oh, ETG is not doing well. And I think Victor explained it very well.

Larry Solow: Thank you Victor.

Larry Solow: I think it should be clear to everyone on this call.

Larry Solow: Victor and we are expecting a quite different result from atg.

Larry Solow: From the second quarter through the end of the year.

Larry Solow: In the first quarter some people I think misunderstood and they said Oh atg is not doing well and I think Victor explained it very well. So you understand that it is a lumpy business and the sales and earnings should come through from the second.

Lawrence Mendelson: So you understand that it is a lumpy business and the sales and earnings should come through from the second to the fourth quarter. As we look ahead to the remainder of fiscal 24, we continue to anticipate net sales growth in both the flight support and ETG, principally driven by contributions from our fiscal 23 and 24 acquisitions, as well as demand for the majority of our products. Notably, we fully expect future ETG quarters to be materially stronger than the first quarter. In addition, we plan to continue our commitment to developing new products and services with further market penetration, as well as maintaining our financial strength and our flexibility. In closing, I would again like to thank our incredible team members for their continued support and commitment to HEICO.

Larry Solow: For the fourth quarter.

Larry Solow: As we look ahead to the remainder of fiscal 'twenty four.

Larry Solow: We continue to anticipate net sales growth in both the flight support in Atg, principally driven by contributions from our fiscal 'twenty, three and 'twenty four acquisitions as well as demand for the majority of our products, notably we fully expect future E G.

Larry Solow: Quarters to be materially stronger than the first quarter. In addition, we plan to continue our commitment to developing new products and services with further market penetration as well as.

Maintaining our financial strength and our flexibility.

Speaker Change: In closing I would again like to thank our incredible team members for their continued support and commitment to HEICO our strategy of growing a highly diversified portfolio of excellent businesses continues to produce favorable results for all shareholders.

Lawrence Mendelson: Our strategy of growing a highly diversified portfolio of excellent businesses continues to produce favorable results for all shareholders. Our end markets are very healthy, and fiscal 24 is looking to be another great year. Thank you for your continued confidence, and as I said before, I have never been more bullish about HEICO's future. One other comment. We do not now give... any guidance.

Speaker Change: Our end markets are very healthy in fiscal 'twenty four is looking to be another great year. Thank you for your continued confidence and as I said before I have never been more bullish.

Speaker Change: About heico's future one.

Speaker Change: One other comment we do not know give.

Speaker Change: Any guidance.

Lawrence Mendelson: Some analysts have asked us to give guidance, but we prefer not to. However, I have said publicly that our goal is to grow net income 15 to 20 percent annually compounded. Over the last 30 to 33 years, I think we have achieved that, and the actual growth has been somewhere around 18 or 19 percent. I can tell you that based on everything that I know at this moment... And based upon what we expect for the future of this year, I am clearly and highly confident that we will attain that 15% to 20% growth in the current year. And that without any future acquisitions, which we might make. So with that, I would like to turn the call back to our operator, Samara, and open the call to questions from listeners. I thank you again very much.

Speaker Change: Some analysts have asked us to give guidance, we prefer not to however, I have said publicly that our goal is to grow net income 15% to 20% annually compounded over the last 30 to 33 years I think we have done that.

Speaker Change: And the actual growth has been somewhere around 18 or 19%.

Speaker Change: I can tell you that based on everything that I know at this moment.

Speaker Change: And based upon our.

Speaker Change: What we expect for the future of this year.

Speaker Change: Clearly and highly confident that we will attain that 15% to 20% growth in the current year and that without any future acquisitions, which we might make.

Speaker Change: So with that I would like to turn the call back to our operators tomorrow.

Speaker Change: And open the call for questions from listeners. Thank you again very much.

Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Tomorrow.

Speaker Change: If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question.

Operator: Again, press star 1 to ask a question. And we'll take our first question from Robert Spingarn with Mellius Research. Please go ahead. Morning, this is Scott Mikason for Rob Spingarn.

Speaker Change: And we will take our first question from Robert Spingarn with Melius research.

Robert Spingarn: Please go ahead good morning.

Robert Spingarn: Good morning. This is Scott my guess on for Rob Spingarn.

Scott: Good morning.

Eric Mendelson: Good morning. Eric, I wanted to ask you some of the U.S. airlines have readjusted their capacity growth plans for the year. Some of that's due to aircraft delivery delays or the GTF issues, but some of it's just concerns related to the U.S. domestic market being overcapacitized. So are you seeing any change in order patterns from customers where maybe the low-cost carriers are slowing down their orders, but the large network carriers like United and Delta are accelerating their orders? So, we see, good morning, and thanks for your question Scott. With regard to what we see in the market, the market continues to be extremely strong across the board. I think yes, the large commercial carriers are particularly strong. There has been a little bit of weakness with some of the lower cost carriers, but nothing really pronounced at this point. You know there are natural order patterns where things can get a little lumpy and shift around, so I don't want to, I wouldn't want to predict, you know, any weakness there.

Scott: Eric I wanted to ask you some of the U S Airlines they have readjusted their capacity growth plans for the year. Some of that's due to aircraft delivery delays or the GTS issues, but some of it's just over concerns related to the U S domestic market being overcapacity.

Scott: So are you seeing any change in order patterns from customers.

Scott: There may be the low cost carriers are slowing down their orders, but the large network carriers like United and Delta are accelerating their orders.

Eric Mendelson: So we see good morning, and thanks for your question Scott.

Eric Mendelson: With regard to what we see in the market the market continues to be extremely strong across the board.

Eric Mendelson: I think yes, the large commercial carriers are particularly strong there has been a little bit of weakness.

Eric Mendelson: In with it.

Eric Mendelson: Some of the lower cost carriers, but nothing really pronounced at this point there are natural order patterns, where things can get a little lumpy shipped around so I don't want to I wouldn't want to predict.

Eric Mendelson: Any weakness there right now there continues to be a shortage of parts airlines are still.

Eric Mendelson: Right now, there continues to be a shortage of parts. Airlines are still, you know, in need of parts or still trying to grow their inventory, so we see the market as very strong. Okay.

Eric Mendelson: In need of parts are still trying to grow their inventories. So we see the market is very strong.

Speaker Change: Okay got it and then I wanted to ask you've owned <unk> for about a little more than half a year. So I was just wondering if you could share some of the best practices that <unk> learned from hike out and what are some of the best practices that HEICO has learned from <unk> so far.

Eric Mendelson: And then I wanted to ask you've owned WEN Corp for about a little more than half a year now, so I was just wondering if you could share some of the best practices that WEN Corp has learned from HEICO. And what are some of the best practices that HEICO has learned from WEN Corp so far? Yeah, that's a good question.

Speaker Change: Yes, that's a good question.

Speaker Change: The <unk> acquisition has been exceeding expectations in every single area.

Eric Mendelson: The OneCore acquisition has exceeded expectations in every single area. The business, the people, the strategy, it's incredibly strong, and we had very high expectations for it, and they're even beating those numbers. Specifically, looking at areas of best practices.

Speaker Change: The business the people the strategy.

Speaker Change: <unk> been incredibly strong and we had very high expectations for it.

Speaker Change: They're even beating those numbers.

Speaker Change: Specifically.

Speaker Change: Looking at areas of best practices.

Speaker Change: I would say that HEICO is particularly strong in the technical Arena <unk> is also strong and the technical arena, but I think there are some things where <unk> been able to benefit from that as well as HEICO benefiting from one quarter in other areas.

Eric Mendelson: I would say that HEICO is particularly strong in the technical arena. WENCOR is also strong in the technical arena, but I think there are some things where WENCOR has been able to benefit from that, as well as HEICO benefiting from WENCOR in other areas. And then, in particular, in the e-commerce area, I think WENCOR has been able to benefit HEICO in that area. So we see continued synergies without integration. So, our plan is to continue to operate WEN Corp for the time being or, you know, for the foreseeable future as an independent business. And, you know, that's the DNA of HEICO.

Speaker Change: And then in particular in the ecommerce area I think.

Speaker Change: <unk> has been able to benefit heiko.

Speaker Change: In that area.

Speaker Change: So we see continued synergies without integration.

So we our plan is to continue to operate when core for the time being.

The foreseeable future.

Speaker Change: As an independent.

Speaker Change: Business and.

Speaker Change: That's the DNA of HEICO, that's how we operate all of the <unk> businesses.

Eric Mendelson: That's how we operate all of the HEICO businesses. And we want WEN Corp. to continue, obviously, to have its own P&L, its own strategy, its own team members. And HEICO is strongest when each of the individual business units takes care of itself and coordinates with the other ones.

Speaker Change: <unk> core to continue obviously to have its own P&L done strategy its own team members and.

Speaker Change: HEICO is strongest when each of the individual business unit to take care of themselves and coordinate with the other ones. So I would say that I look at the cooperation between.

Eric Mendelson: So, I would say that, you know, I look at the cooperation between HEICO and Wing Corp. It's somewhat analogous to that cooperation if you look at a number of European airline groups. You look at Lufthansa in Switzerland or Air France in KLM or British Airways in Iberia, and they maintain their independence, their separate touch and feel and relationships with the customers, separate people, but they coordinate some of the activities behind the scenes, making sure that their, you know, schedules and the product offerings are supportive of each other.

Speaker Change: <unk> is somewhat analogous between the cooperation if you look at a number of the European airline group, you look at Lufthansa and Swiss or Air, France, and KLM are British Airways, and Iberia and they maintain their independence, they are separate <unk> and relationships with the customers separate.

People, but they coordinate.

Speaker Change: Some of the activities behind the scenes, making sure that they're the schedules and the product offerings are supportive of each other and that's what we've been able to do very successfully.

Eric Mendelson: And that's what we've been able to do very successfully. So WENCOR continues as an individual autonomous business; no plan to change that. And we are making sure that we provide tremendous value to our customers as a result of making sure we don't have, for example, a product development overlap where we rationalize some of the repair offerings in various centers of excellence focused on different products and technologies. So our customers have been very happy as a result of the acquisition and are really excited about where we're headed. And I think they really want to reward us with a significant addition to the business. They view HEICO in a very different light as a result of the WENCOR merger. I'll stop there.

Speaker Change: So when core continues as an individual autonomous business no plan to change that.

Speaker Change: And we are making sure that we provide tremendous value to our customers as a result of making sure. We don't have for example, a product development overlap.

Speaker Change: We rationalized some of the repair offerings in various centers of excellence at centers of excellence focused on different products and technology. So our customers have been very happy as a result of the acquisition and are really excited about where we are where we're headed there and I think they are.

Speaker Change: <unk>.

Speaker Change: They really want to reward us with significant additional new business. They view HEICO in a very different light as a result of the.

Speaker Change: One quarter merger.

Speaker Change: I'll stop there thanks for taking the questions.

Eric Mendelson: Thanks for taking the question. Thanks, Scott. Thank you. And we'll take our next question from Noah Poponak with Goldman Sachs. Please go ahead. Hey, good morning, everyone. Good morning, Noah.

Speaker Change: Thanks, Scott Thank you.

Speaker Change: And we will take our next question from Noah <unk> with Goldman Sachs. Please go ahead.

Noah: Hey, good morning, everyone.

Noah: Good morning Noah.

Noah: So last quarter, you had talked about the <unk> margin for the full year being around 24%.

Operator: The last quarter you talked about the ETG margin for the full year being around 24%, that segment operating margin. Does that stand such that you'd have one or two quarters above that? And I know you don't give quarterly guidance, but, you know, given the variability here, I don't know if it makes sense to just speak to the shape of that over the remaining three quarters of the year. Sure, Noah, this is Victor.

Noah: <unk> operating margin.

Noah: Does that stand such that you would have one or two quarters above that.

Noah: I know you don't give quarterly guidance, but.

Noah: Given the variability here I don't know if it makes sense to just speak to the.

Noah: Shape of that over the remaining three quarters of the year.

Noah: Sure Noah this is Victor the answer to your question is yes.

Victor Mendelson: The answer to your question is yes, and as to its shape over the remaining quarters, I think the year should build. I'm not sure yet that the fourth quarter is a little far out, whether the fourth quarter finishes above or a little less than the third quarter. The third is our high point, or our fourth is our high point, not sure about that, but at this point, based on the shipment schedules, that's how we think it will play out. OK. And, Eric, on the FSG margin, you know, the full-year look was around 21 on the GAP segment operating margin, and I think you guys had also said you expected the first quarter to be the low point of the year.

Noah: And as to the shape of it over the remaining quarters.

Victor Mendelson: I I think that the year should build.

Speaker Change: I'm not sure yet the fourth quarter is a little far out whether the fourth quarter finishes above or a little less than the third quarter and the third is our high point of our fourth is our high point not sure about that but at this point based on the shipment schedules.

We think it will play out.

Okay.

Speaker Change: And Eric on the FSD margin.

Speaker Change: <unk> full year look was around 21 on the GAAP segment operating margin and I think you guys had also said you expected the first quarter to be the low point of the year.

Victor Mendelson: So, I don't know, maybe you could update us on how you see that playing out through the rest of the year or if there's a new number for the full year, given what you did in the first quarter. Well, the first quarter was very strong at 22%, and when you add back the intangible amortization, we get to about 24.8%, so extremely strong. We anticipate continued strength. I think I want to be a little bit more conservative going forward.

Eric Mendelson: So I don't know maybe you could update us on how you see that.

Eric Mendelson: Playing out through the rest of the year. There is a new number for the full year given what you did in the first quarter.

Speaker Change: Well the first quarter.

Speaker Change: It was very strong at 22%.

Speaker Change: And when you add back the intangible amortization, we get to about 24, 8% so extremely strong.

Speaker Change: We anticipate continued strength I think I want to be a little bit conservative.

Speaker Change: Going forward.

Speaker Change: We often go ahead and.

Eric Mendelson: We often go ahead and we come up with our budgets and our numbers, and our folks end up beating those numbers, but maybe Carlos wants to shed some light specifically on that. Sure. Hey, Noah. It's Carlos.

Speaker Change: We come out with our budget and our numbers and our folks end up beating those numbers, but maybe Carlos wants shed some light specifically on that sure.

Speaker Change: It's Carlos I don't think my view on this segments can you hear me Okay now.

Carlos Macau: I don't think my view on this segment... Can you hear me okay? I don't think my mind has changed on what this segment should produce this year. Back in December, when we were sort of looking out, and I got the margin question, I felt like the FSG was probably between 21 and 22% OI margin. That's what I felt the company would do for the year. We could always do better than that, but that's what we planned, and we did plan on having a strong first quarter in the FSG. So I think that that thesis continues to hold up, of course, as we get into the second quarter and get to the next call. I'll see if I can tighten that range for you.

Carlos Macau: Yes, yes, okay sorry.

Carlos Macau: I was going to say I don't think my mind has changed on what the segment should produce this year back in December when we were sort of looking out and I got the margin question I felt like the SSG was probably between 'twenty, one and 22% Oi margin that that's what I felt the company would do for the year.

Carlos Macau: We could always do better than that but that's what we planned itself and we did plan on having a strong first quarter and the SSG. So I think that that thesis continues to hold up but of course is because we get into the second quarter and get to the next call.

Speaker Change: I'll see if I could tighten that range up for you.

Speaker Change: Okay I appreciate that.

Carlos Macau: Okay, appreciate that. One other thing I wanted to ask, I guess it's kind of for everyone, but you're in this, you know, unique position now vis-a-vis PMA and pricing in the aftermarket. That's maybe more unique than we've seen in a long time because your peers that build and sell spare parts have had such strong pricing for two plus years now. We don't really know exactly how you've priced PMA. Presumably, that gap has widened. Maybe it's widened a lot, and so you have the opportunity to take more price than you normally do or take more share than you normally do, or both. And I'm curious to hear you talk about how you will strategically manage which of those you want to go after and how you will look to triangulate that over the medium term. Noah, that's a great and insightful question.

Speaker Change: One other thing I wanted to ask I guess, it's kind of for everyone but.

Speaker Change: Youre in this.

Speaker Change: Our unique position now visa the PMA in pricing in the aftermarket.

Speaker Change: That's maybe more unique than we've seen in a long time, because your peers in the.

Speaker Change: Build and sell spare parts have had such strong pricing.

Speaker Change: For two plus years now.

Speaker Change: We don't really know exactly how you price.

Speaker Change: Presumably that gap has widened maybe its widened a lot.

Speaker Change: And so you have the opportunity to take more price than you normally do or take more share than you normally do or both.

Speaker Change: And I'm curious to hear you talk about how you will strategically manage which of those you want to go after and how you will look to triangulate that over the medium term here.

Speaker Change: No.

Speaker Change: Great and insightful question.

Eric Mendelson: The short answer is I think we need to do both. We need to adjust pricing to reflect our increased costs, and we also need to grow market share. So that is the strategy. We have a number of customers who have been purchasing parts at, you know, fairly old prices before there was cost inflation. So we need to make sure that we pass along our cost increases, and I think our customers are very understanding of that. Some customers get it and are just fine and go ahead and incorporate the new pricing. Other customers want to have a discussion about it, and obviously, we don't show them what our costs are, but we explain what's happened to our costs, and, you know, this is only reasonable.

Speaker Change: The short answer is I think we need to do both.

Speaker Change: We need to.

Speaker Change: Just pricing to reflect our increased costs and we also need to grow market share. So that is the strategy. We have a number of customers who have been purchasing cards at.

Speaker Change: Fairly old prices.

Speaker Change: Before there was.

Speaker Change: Cost inflation, so we need to make sure that we pass along our cost increases and I think our customers are very understanding of that customers get it and.

Speaker Change: Are just fine and go ahead and incorporate the other the new pricing other customers want to have a discussion over it and we obviously, we don't show them, what our costs are but we explain what's happened to our costs and this is only reasonable so.

Eric Mendelson: So I honestly think that our pricing has been a lot more conservative and gentle than it could be, while our competitors are substantially raising prices. I just received an email last night from a, I don't want to call out the OEM, but it's an OEM that everybody knows, and they increased the price twice last year, once 10 and another time 18 percent. And by the way, I will mention it was not trans time. I know these people are very interested in the trans time story, but it was not trans time.

Speaker Change: Honestly I think that.

Speaker Change: Our pricing has been a lot more conservative and gentle then.

Speaker Change: It could be our competitors are substantially raising price I just received an E mail last night.

Speaker Change: I don't want to call out the OEM, but it's an OEM that everybody knows.

Speaker Change: And they increased price twice last year, once 10, and another time, 18%.

Speaker Change: And.

Speaker Change: And by the way I will mention it was not transcon.

Speaker Change: No.

Speaker Change: I know people are very interested in the transcon story, but it was not transact so it shows how pervasive.

Eric Mendelson: So it shows how pervasive, you know, the price increases are. So I think that we've been very mild, and I think, frankly, with costs going up and the need to spend additional dollars on new product development, that it would be reasonable to have additional increases. And I think we'll be able to capture market share at the same time. So I don't think those two are mutually exclusive. If you talk to the airlines, I think nobody wants a price increase, obviously, but the airlines all recognize that HEICO has been extremely gentle with regard to price increases.

Speaker Change: The price increases are so I think that.

Speaker Change: We've been very mild.

Speaker Change: I think frankly with costs going up and the need to spend additional dollars on new product development that it would be reasonable to have additional increases and I think we'll be able to capture market share at the same time so.

Speaker Change: I don't think those two are mutually exclusive.

Speaker Change: <unk>.

Speaker Change: Can you talk to the airlines I think nobody wants to price increase obviously, but.

Speaker Change: The airlines all recognize that HEICO has been extremely gentle.

Speaker Change: With regard to price increase and frankly in areas, where we have been more restrictive on price increase we anticipate significant share gains as well.

Eric Mendelson: And frankly, in areas where we have been more restrictive on price increases, we anticipate significant share gains as well. Okay, super interesting, and I appreciate all the detail. Thank you. Thanks, Noah.

Speaker Change: Okay.

Speaker Change: Super interesting and I appreciate all the detail. Thank you.

Speaker Change: Thanks Noah.

Speaker Change: And we'll take our next question from Scott Vishal.

Operator: And we'll take our next question from Scott Disholtz with Deutsche Bank. Please go ahead. Hey, good morning. Good morning.

Scott Vishal: Which bank. Please go ahead.

Scott Vishal: Hey, good morning.

Scott Vishal: Good morning.

Scott Vishal: Hey, Eric did boeing's challenges in January have any impact to SSG specialty products growth in the quarter.

Eric Mendelson: Hey Eric, did Boeing's challenges in January have any impact on FSG specialty products growth in the quarter? Yes, I would say they did. You know, Boeing has had some challenges, and as a result, you know, the new bill has been impaired. So that definitely had an impact on specialty products. I would also like to point out that while specialty product sales were a little soft, they caused the reported organic growth rate to be, if you will, understated because the aftermarket growth rate was very high in the teens. A lot of the, you know, we're very bullish on the future. And a lot of what specialty products does is on the defense side. And as you know, in a lot of missile defense and space programs, rocket motor programs, these are very long lead time items.

Scott Vishal: Yes, I would say they did Boeing has had some challenges and as a result, the new bill has been.

Scott Vishal: Impaired.

Eric Mendelson: So that definitely had an impact on specialty products I would also like to point out that while specialty product sales were a little softening cause the reported organic growth rate to be if you will understated.

Eric Mendelson: Because the aftermarket growth rate was very high teens.

Eric Mendelson: <unk>.

Eric Mendelson: A lot of the we're very bullish on the future and a lot of our specialty products does is on the defense side and as you know in a lot of missile defense and <unk>.

Eric Mendelson: Space programs rocket Motor program. These are very long lead time items.

Eric Mendelson: So our order book is extremely strong. We're very, very bullish on the future. We feel that we're well-entrenched.

Eric Mendelson: Our order book is extremely strong we're very very bullish on what future. We feel that we're well embedded we've got some great secular trends, where the low cost high quality sole source producer on most of this stuff and we think that the future will be very good so I'm not at all.

Eric Mendelson: We've got some great secular trends. We're the low-cost, high-quality, sole source producer for most of this stuff, and we think that the future will be very good. So I'm not at all concerned about the specialty products being down.

Eric Mendelson: <unk> about the.

Eric Mendelson: Specialty products being down and I think Boeing also will get their act together I mean, obviously, they've got some challenges that we've all read about but.

Eric Mendelson: And I think Boeing will also get their act together. Obviously, they've got some challenges that we've all read about, but Boeing is still a great company.

Eric Mendelson: Boeing is still a great company and I think that they will get that all figured out and.

Eric Mendelson: And I think that they'll get that all figured out, and it will permit our specialty products to grow at a more historic rate. Okay, so it would be fair to think that maybe some of that Boeing-related weakness probably lingered in February, but the growth in the space and defense side allows you to return to growth overall, especially for products next quarter. I need to look specifically with regard to next quarter, but what you're saying sounds logical. Okay.

Eric Mendelson: It will permit our specialty products to grow at sort of more historic rates.

Speaker Change: Okay. So it would be fair to think that maybe some of that Boeing related weakness, it's probably lingered into February but the growth in the space and defense side allows you to return to growth overall in specialty products next quarter.

Speaker Change: I need to look at.

Speaker Change: Typically with regard to next quarter, but what youre, saying sounds logical.

Speaker Change: Okay.

Victor Mendelson: And then Victor, are you able to quantify how much R&D was up at ETG in the quarter? And then if there's any specific areas of investment you can talk about, I think that'd be pretty interesting to hear. Thank you. It was pretty broad-based.

Speaker Change: And then Victor are you able to quantify how much R&D was up in <unk> in the quarter. Then if there's any specific areas of investment you can talk about I think that'd be a pretty interesting to hear thank you.

Victor Mendelson: It was pretty broad based.

Victor Mendelson: There were places I think we're somewhere I know that that we invested more than in the past, but I would say, it's a pretty broad base.

Victor Mendelson: There were places, I think, where I know that we invested more than in the past, but I would say it's a pretty broad-based scenario, which is good because I like to see, and we like to see, that all of our companies are investing in R&D. R&D was up by about, I believe, in the quarter, about 25 percent, 24 percent, something like that. So it was a, you know, a significant increase for us. Okay, and then last question, Victor. Were there any changes in your F-35 content with the shift to TR-3?

Victor Mendelson: Scenario, which is good because I'd like to see and we like to see that all of our companies are investing in R&D R&D was up by about I believe in.

Victor Mendelson: In the quarter about 25%, 24% something like that so it was a.

Victor Mendelson: It's significant.

Victor Mendelson: Increase for us.

Victor Mendelson: Okay and then last question Victor were there any changes in your F 35 content with the shift to tier three thank you by the way it's closer to 22% I think was the net increase for <unk> alone in accordingly.

Victor Mendelson: Thank you. By the way, it's closer to 22%, I think, was the net increase for ETG alone in the quarter. Yeah, about that, for ETG in the quarter.

Victor Mendelson: For the <unk> in the quarter I'm sorry. The question you just asked could you repeat that please yes. It was whether there were any changes in F 35 content with the shift to tier three.

Victor Mendelson: I'm sorry, the question you just asked, could you repeat that, please? Yeah, it was whether there were any changes in F-35 content with the shift to TR-3. But I don't think it's material to us.

Victor Mendelson: I don't think it's material to us we do have in a few of our business is F 35 content, but overall, it's not a material change.

Victor Mendelson: We do have F-35 content in a few of our businesses, but overall, it's not material. All right. Thanks, guys. Thank you. And we'll take our next question from Larry Solow with CJS Securities. Please go ahead. Great. Good morning, everybody.

Speaker Change: Alright, thanks, guys.

Speaker Change: Thank you.

Speaker Change: And we'll take our next question from Larry Solow with CJS Securities. Please go ahead.

Larry Solow: Great Good morning, everybody.

Eric Mendelson: Eric, thanks for the color on OneCore and also just the segment. Just a couple of follow-ups on that. So the high-teens growth you're experiencing, I think it's relative or compared to mid-20s growth last year. So pretty remarkable.

Larry Solow: Alright, thanks for the color on one color and also just.

Larry Solow: And then just on just a couple of follow ups on that.

Larry Solow: <unk> growth youre experiencing relative.

Larry Solow: Relative comping mid twenty's growth last year or so.

Larry Solow: Pretty pretty remarkable congrats to that is.

Eric Mendelson: Congratulations on that. Yeah, obviously, and market demand sounds like it's still growing, but can you help us give us a little more color on where else those gains are coming from? Just kind of bucking market share gains; are there obviously some of those still occurring? The inventory levels you mentioned are still low, but are they building back up? Is some of that still creating some of the differences between 2M market demand and the growth you're reporting? You catch up on maintenance, maybe. I'm just trying to figure out why, trying to gather the difference.

Larry Solow: Is it obviously in the end market demand it sounds like it's still growing but could you help us give us a little more color.

Larry Solow: Where else those gains are coming from.

Larry Solow: Kind of bucket any market share gains are there obviously some of that still calling the inventory levels. You mentioned still low but are they building back up at some of that so.

Larry Solow: Creating some of the difference between two end market demand and the growth you're reporting.

Larry Solow: You can catch up in maintenance, maybe I'm, just trying to figure out the trying to gap or the difference there.

Larry Solow: Yes.

Eric Mendelson: Yeah, Larry, I'd be happy to answer that. The strength within flight support on the aftermarket side has really been across the board. I would say, in general, a little more strength on the parts side as compared to the repair side.

Speaker Change: We'd be happy to answer that.

Speaker Change: The strength within flight support on the aftermarket side has really been across the board I would say in general a little more strength in the parts side as compared with the repair side.

Eric Mendelson: You know, airlines are flying the equipment hard, it's more difficult to get things repaired, but in general, I would say the parts side is a little bit stronger, but the repair side is also doing very well as well. As far as market share gains go, we continue to grow market share. Our customers are really happy with us, and speaking with our sales heads yesterday, I have specific information from a number of customers that they are really very, very happy as a result of the Wincor acquisition. While HEICO was always a significant player in the space, and so was Wincor, the fact that we've come together and we can offer a broader product line, a broader suite of products is really significant. And a fair amount of energy was, you know, spent by each business focusing on capturing as much as it could.

Speaker Change: Yes.

Speaker Change: Airlines are buying the equipment hard.

Speaker Change: More difficult to get things repaired, but in general I would say the part side is a little bit stronger for the repair side is also doing very well.

Speaker Change: As well.

Speaker Change: As far as market share gains, we continue to grow market share.

Speaker Change: Our customers are really happy with us and in speaking with our.

Speaker Change: Sales heads yesterday.

Speaker Change: Specific.

Speaker Change: Formation from a number of customers that they really are very very happy as a result of the <unk> acquisition.

Speaker Change: While HEICO was always a significant player in the space and so it was linked quarter. The fact that we've come together and we can offer a broader product line a broader suite of products is really significant.

Speaker Change: And a fair amount of energy was.

Speaker Change: Yes.

Speaker Change: Spend in.

Speaker Change: Each business focusing on capturing as much has occurred and now by creating more of these centers of excellence, where each business focus is on where it has a true competitive advantage and doesn't need to if you will reinvent the wheel makes a lot of sense and our customers are really.

Eric Mendelson: And now creating more of these centers of excellence where each business focuses on where it has a true competitive advantage and doesn't need to, if you will, reinvent the wheel makes a lot of sense. And our customers are really happy about that because we're able to provide a much fuller suite of offerings to the customers, and they recognize that this is a true structural advantage that they can benefit from as opposed to a more niche-oriented strategy. So market share gains; we have had some pricing gains. I don't have a breakout between the two, but I would say that market share is definitely the leading number there. I got it, and I appreciate that.

Speaker Change: Happy about that because we're able to provide a much fuller suite of offering to the customers and they recognize that this is true structural advantage that they can benefit from as opposed to more niche oriented strategy so market share gains.

Speaker Change: We have had some pricing gains I don't have a breakout between the two but I wouldn't say that market share is definitely the leading.

Speaker Change: The meeting.

Speaker Change: Number there.

Speaker Change: Got it I appreciate that and then just switching gears.

Victor Mendelson: And then just switching gears to your question, Victor, just on the quarter and the outlook, it sounds like aerospace had some good follow-through, and I know it was a little slow last year, at least on deliveries, but that obviously sounds like it's continuing to return to growth mode. Just in terms of the other categories, I know it sounds like you mentioned a few that were just slower due to timing, electronics, medical, and consumer space. And those sound like they're all higher-margin categories. I think on the last call, you guys had mentioned that there would be some. I think maybe the electronics piece would be slower. Is that still the case?

Speaker Change: Taking your question Victor just on the quarter and the outlook it sounds like aerospace.

Speaker Change: <unk> had some good follow through.

Speaker Change: It was a little slow last year at least on deliveries, but that obviously it sounds like that's continuing to return to growth mode.

Victor Mendelson: Just in terms of the other categories I know it sounds like you mentioned a few of them. There was just slower due to timing of electronics medical consumer space.

Victor Mendelson: It sounds like they're all higher margin category I think on the last call. You guys had mentioned that there would be some of those I think maybe electronics piece would be slower.

Victor Mendelson: Is that still the case has anything changed in terms of your sort of full year outlook for <unk> in terms of revenue.

Victor Mendelson: Has anything changed in terms of your full-year outlook for ETG in terms of revenue composition and growth? So overall, all in for the year right now, I think our expectations are pretty much what they were during our last call. It is the general markets that gave up ground in the quarter as we expected they would.

Competition and growth.

Victor Mendelson: So overall all in four.

Victor Mendelson: The year right now I think.

Victor Mendelson: Our expectations are pretty much what they were at the during our last call.

Victor Mendelson: It is the general markets that all in.

Victor Mendelson: Dave up ground in the quarter as we expected they would.

Victor Mendelson: We are beginning to see some what I would call the proverbial green shoots.

Victor Mendelson: We're beginning to see some what I'd call, you know, the proverbial green shoots in a few of the businesses, but we're still not running at order levels higher than last year. And I, as I kind of talked about before, I expect that sometime over the next couple of quarters orders will start to reverse overall. And then, and then,

Victor Mendelson: In a few of the businesses.

Victor Mendelson: But were still not running at order levels higher than prior year.

Victor Mendelson: <unk>.

Victor Mendelson: <unk> talked about before I expect that sometime over the next couple of quarters orders to start.

Victor Mendelson: To reverse overall and then.

Victor Mendelson: And then.

Victor Mendelson: Excuse me for one second. Thank you. The computer went off here in the room.

Speaker Change: Excuse me one second.

Thank you Peter went off here in the room.

Speaker Change: <unk>.

Speaker Change: And then I would expect that.

Victor Mendelson: And then I would expect that if you factor in lead times onto the backlog, onto the orders, and so on, as we get later in the year, that starts to turn overall in the right direction in terms of revenue. Gotcha. Okay, great.

Speaker Change: If you factor in lead times onto the backlog onto the orders and so on as we get later in the year that starts to turn overall in the right direction in terms of revenue.

Speaker Change: Got you Okay, Great and then just lastly, Carlos I think the tax rate a little lower this quarter I know you usually get those.

Carlos Macau: And just lastly, Carl, is the tax rate a little lower this quarter? I know you usually get those stock benefits in Q1. And any change to the four-year outlook? No, for the full year, I continue to think we'll run between 20% and 21%, Larry. I think the effective tax rate we have in the first quarter here is about what I expected. I thought we'd catch about half our effective rate for the year this quarter, and then we'd make it up, you know, a more normalized rate in Qs 2, 3, and 4. But no real surprises. It played out the way I thought it would.

Speaker Change: The benefits in Q1.

Speaker Change: Change to the full year outlook.

Speaker Change: No.

Carlos Macau: For the full year I continue to think we will run between 20 and 21% Larry I think the if.

Carlos Macau: <unk> tax rate, we have in the first quarter here is about what I expected I thought would catch about half our effective rate for the year. This quarter and then we can make it up more normalized rate in Qs two three and four but no real surprises as it played out the way I thought it was slightly better than last year's benefit, but still aligned with history and what we've seen in the <unk>.

Carlos Macau: Slightly better than last year's benefit, but still in line with history and what we've seen in the past. God, I thank God, I appreciate all the calls. And we'll take our next question from Peter Arment with Baird. Please go ahead.

Carlos Macau: Past.

Speaker Change: Got it thanks, guys I appreciate all the color.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: We will take our next question from Peter Arment with Baird. Please go ahead.

Victor Mendelson: Yeah, good morning, everyone. Thanks for all the details. Hey, Victor, maybe just a quick one on, you know, if you're still seeing lingering impacts from the supply chain, and that's also a factor that's kind of impacting you on the top line. Thanks for asking. It's a good question.

Peter Arment: Yes, good morning, everyone. Thanks for all the details.

Peter Arment: Victor maybe just a quick one on.

Peter Arment: If youre still seeing lingering impacts from the supply chain and that's also a factor that's kind of impacting you on the on the top line.

Peter Arment: Thanks for asking it's a good question, we're not seeing much of it has really improved whether it's exactly back to normal I'm not sure because I'm not sure what the new normal will be in fact.

Victor Mendelson: We're not seeing much of it. It has really improved. Whether it's exactly back to normal, I'm not sure because I'm not sure what the new normal will be, in fact. But I would say that, at this point, the supply chain is almost back to where it was. The labor market has been challenging for a while and continues to be, and so I would say that that impacts us as much, if not more, probably these days than supply chain, just getting good, qualified people into the business. And maybe you could just update us on how you're, you know, how Xilia is doing after owning the business now for, I guess, almost a year, right? Yes, thank you.

Speaker Change: But I wouldn't I would say that at this point.

Speaker Change: Supply chain is.

Speaker Change: Almost back to where it was.

Speaker Change: And.

Speaker Change: The labor market is has been challenging for a while and continues to be.

Speaker Change: And so I would say that that impacts us as much if not more probably these days than the.

Speaker Change: Supply chain, just getting good qualified people.

Speaker Change: Into the businesses.

Speaker Change: And maybe if you could just update us on how your how <unk> is doing.

Speaker Change: After owning the business now for I guess, almost a year right.

Speaker Change: Yes. Thank you, yes, we're very happy we own it it's doing essentially as we expected.

Victor Mendelson: Yeah, we're very happy. We own it. It's doing essentially as we expected, and it has a lot of good potential ahead. Also, they're looking at a number of acquisitions we've been able to bring to them. They already have some.

Speaker Change: And a.

Speaker Change: A lot of good potential ahead.

Speaker Change: Also they are looking at a number of <unk>.

Speaker Change: Acquisitions.

Speaker Change: We've been able to bring to them. They brought some we'll see whether they transpire, but a lot of good things happening there and so far so good.

Victor Mendelson: We'll see whether they transpire, but a lot of good things are happening there, and so far, so good. Great. And a quick one for Carlos.

Speaker Change: Great and quick one for Carlos Carlos just rough expectations of how Youre thinking about interest expense for the year I know the goal is obviously to continue to delever.

Carlos Macau: Carlos, just rough expectations of how you're thinking about interest expense for the year. I know the goal is obviously to continue to de-lever. Yeah, I mean, right now, if everything plays out, I'm expecting our interest expense quarterly to run about 38 million. If we catch a break on a few rate cuts, you never know. I have it sort of tailing off a little bit. But that also is a function, Peter, of how quickly I can pay the debt down. And depending on how many businesses Eric, Victor, and Larry want to buy will certainly influence that during the year. Got it. I appreciate all the details. And Larry, congrats on the award.

Speaker Change: Yes.

Carlos Macau: So right now.

Carlos Macau: Everything plays out I am expecting our interest expense quarterly to run.

35% to Sept $37 million Thats pretty much what we booked this quarter about $38 million. So I think as we pay some debt down.

Carlos Macau: If we catch a break on a few rate cuts you never know.

Carlos Macau: I haven't sort of tailing off a little bit but.

Carlos Macau: Dallas is a function theater of how quickly that can pay the debt down depending how many businesses, Eric Victor and Larry I want to buy will certainly influence that during the year.

Speaker Change: Got it I appreciate all the details and Larry Congrats on the award.

Lawrence Mendelson: Thanks. Thank you. And I just might add something to what Victor and Carlos had to say.

Speaker Change: Thank you.

Speaker Change: Just might add something to what this is Victor what Carlos had to say we continue to look at acquisitions.

Lawrence Mendelson: We continue to look at acquisitions. Most are overwhelmingly in our historical size, and we have an excellent acquisition pipeline, very strong. Again, whether we do them remains to be seen. But we will continue to pursue those acquisitions that would fit the right way while being mindful of the importance of reducing debt in the capital structure.

Speaker Change: Most are in our historic overwhelmingly in our historical size.

Speaker Change: And.

Speaker Change: We have an excellent pipeline acquisition pipeline very strong again, whether we do them remains to be seen.

Speaker Change: But we will continue to pursue those acquisitions that would fit the right way, while being mindful of the importance of reducing debt and capital structure.

Speaker Change: It's really just to further expand on what Victor said is completely correct.

Lawrence Mendelson: Just to further expand on what Victor says, which is completely correct, it's a balancing act. We are in the business of expanding, creating cash flow, and bottom-line income. And if we see an outstanding acquisition, we will make it. But at the same time, we have to watch our debt level, and we're trying to reduce it. So, as you saw, we made a Honeywell acquisition recently because we believe it will be very accretive and very positive cash flow. So we made the decision to Acquire it by using debt, which reduces our ability to reduce our debt to overall debt.

Speaker Change: It's a balancing act.

Speaker Change: We are in the business of expanding creating cash flow bottom line income.

Speaker Change: And if we see an outstanding acquisition, we will make it.

Speaker Change: At the same time, we have to watch our debt level and we're trying to reduce it. So as you saw we made our Honeywell acquisition recently, because we believe it will be very accretive and very positive cash flow. So we made the decision to.

Speaker Change: Acquire it by using debt, which reduced our ability to reduce our debt to overall debt, but on the bottom line. It was helpful to HEICO and actually where you get more income and debt. So the balance actually benefits the ratio of debt to EBITDA, but any.

Lawrence Mendelson: But on the bottom line, it was helpful to HEICO and actually where you get more income and debt. So the balance actually benefits the ratio of debt to EBITDA. But anyway, this is all a balancing act, and we watch it very, very carefully because, as you know, we are focused on bottom-line cash flow. So we will make these acquisitions when they are very, very desirable, and we might have to use some debt, but we'll take each one as it comes.

Speaker Change: This is all a balancing act and we watch it very very carefully because as you know we are focused on bottom line cash flow. So we will make these acquisitions when they are very very desirable and we might have to use some debt.

Speaker Change: But we'll take each one as it comes.

Lawrence Mendelson: We're here to grow HEICO's bottom-line cash flow. Again, it's a balancing act, and we're very careful with it. And we'll take our next question from Sheila Kahyaoglu with Jefferies. Please go ahead. Good morning.

Speaker Change: We are here I appreciate it.

Speaker Change: We are here to grow HEICO bottom line cash flow again, it's a balancing act and we're very careful with it.

Speaker Change: Yes.

Speaker Change: And we will take our next question from Sheila <unk> with Jefferies. Please go ahead.

Speaker Change: Okay.

Sheila: Good morning, and thanks, guys Victor ominous start with you if that's okay, given the Eagle Ford Martin Spotlight.

Victor Mendelson: Thanks, guys. Victor, I'm going to start with you, if it's okay, given the EPG margin spotlight. You gave us some color on R&D up 20%, so it implies about 100 basis points of margin pressure. Can you maybe talk about the less favorable sales mix, how much it was, maybe even pricing into the mix as well, just on the bridge and how we think about that improvement. As you said, Q3 and Q4 are headed to be better. And should we expect a similar sub 20% rate in Q2? Sure. Sheila, a couple of things.

Sheila: Give us some color on R&D up 20%. So it implies about 100 basis points of margin pressure.

Speaker Change: Maybe talk about.

Sheila: The less favorable sales mix, how much it was maybe even pricing into the mix as well.

Sheila: On the branch and how we think about that improvement as you said Q3 and Q4.

Or are headed to be better and should we expect a similar about 20% right. Thank you Ken.

Ken: Sure Sheila couple of things, one I would be surprised to see a sub 20% rate in Q2.

Victor Mendelson: One, I would be surprised to see a sub-20% rate in Q2. Number two, the sales difference was not based on pricing. It was based on the shipment schedule. So I would call it a fairly normal pricing environment, which means that in some instances, customers can accept prices that recognize our costs, which may be higher.

Ken: Number two.

Ken: The sales difference.

Ken: It was not based on pricing.

Ken: It was based on the shipment schedules so we.

Ken: I would call it a fairly normal pricing environment, which means.

Ken: That in some instances the customers can.

Ken: Can accept.

Ken: Prices that recognize our cost than.

Ken: And then may be higher.

Victor Mendelson: And in other instances, we have longer-term contracts where pricing is locked in. So it's kind of a normal scenario on the pricing side. So really, on the revenue side, it was all about the shipment schedule and when things were supposed to ship. It's not necessarily, by the way, the production rate. So we try to keep the facilities level-loaded.

Ken: And in other instances, we have longer term contracts, where pricing is locked in so it's kind of a normal scenario on the pricing side. So really on the revenue side. It was all about the shipping schedule.

Ken: And when things were supposed to ship it is not necessarily by the way the production rate.

We try to keep the facilities level loaded our business is try to stay level loaded in production.

Victor Mendelson: Our businesses try to stay level-loaded in production, but it depends upon when the order is due for delivery or acceptance and testing by the customer. That dictates a lot of how it works for us. So again, just to emphasize, I would expect north of 20% gap margin, operating margin for the quarter, which would, of course, be north of 24%, the true margin, excluding intangibles amortization.

Ken: But it depends upon when the order is due for delivery or acceptance and test by the customer that dictates a lot of a lot of how it works for us.

Ken: So again just to emphasize I would expect north of 20%.

Ken: <unk>.

Ken: GAAP margin operating margin on the quarter, which of course would be north of 24% the true margin.

Ken: Excluding intangibles amortization.

Ken: Got it any sort of color on the mix impact in the quarter in terms of margin headwind.

Victor Mendelson: Any sort of color on the mix impact in the quarter in terms of margin headwinds? You know, not really other than the shipment schedules in our higher margin businesses were lower than they had been in the prior period, and that brings down the margin. But I don't want to break out, you know, which business is which at what margin, but I think our business is huge on it. No, no, no.

Ken: Not really other than the shipment schedules in our higher margin businesses were lower than they had been in the prior period and.

Ken: That.

Ken: And that brings down the margin.

Ken: But I don't want to Gal, which business is what margins.

Ken: Because I think our business.

Speaker Change: Hi, Bob.

Speaker Change: Yes.

Eric Mendelson: No problem. Well, hopefully not. Eric, one for you, if it's OK. You know, WENCOR, how do we think about this revenue synergy is the best? Is the best way to look at it based on the number of PMA parts, and the sales per part are about four times greater at HEICO than they are at WENCOR. So if you have that marketing channel, is that a potential way to think about the sales opportunity, or how are you thinking about it? You know, that is, that's one way to think about it. I'm also really looking at it as, you know, how the product sets are very complementary. Number one.

Bob: Well hopefully not.

Speaker Change: Eric one for you if that's okay.

<unk> core how do we think about.

Eric: Revenue synergies, but that is the best way to look at it based on number of PMA parts and the C.

Eric: Sales per part is about four times greater at HEICO than it is that when cornerstones. If you have that marketing channel is that a potential way to think about the sales opportunity or how are you thinking about it.

Speaker Change: That is that's one way to think about it.

Speaker Change: I'm also really looking at it as how the product sets are very complementary.

Speaker Change: Number one number two.

Eric Mendelson: Number two, without getting into specific customers, I would say there are a number of extremely strong relationships, sales relationships on the OneCorp side as well as on the HEICO side, and I think that we can help each other. The businesses can help each other by sharing those relationships and just basically one hand helping the other. If you look historically, we've increased our margins over the last decade that you covered us quite significantly and, frankly, have even beat where I thought they would be, and I think that there's more potential in that regard. There's a lot of sharing that also can occur over on the repair side in terms of DER repairs as well as they're already using the PMA parts, so I think that that's an advantage.

Speaker Change: Without getting into specific customers I would say there are a number of extremely strong relationships.

Speaker Change: Sales relationships on the <unk> side as well as the <unk> side and I think that we can help each other.

Speaker Change: The businesses can help each other with sharing those relationships and you're just basically one hand, helping the other.

Speaker Change: If you look historically, we've taken up our margins over the last decade that you covered us.

Speaker Change: Quite significantly and frankly have even be where I thought they would be.

Speaker Change: And I think that there is more potential in that regard.

Speaker Change: There is some.

Speaker Change: There's a lot of sharing that also can occur over on the repair side in terms of the repairs as well.

Speaker Change: They're already using the PMA parts, so I think that that's an advantage.

Eric Mendelson: On the defense side, we're already cooperating and working together, whereas orders used to go out to third-party companies, they're now being placed internally, and that's very strong. Likewise, in our specialty manufacturing, there's a lot of products that our specialty manufacturing group can build for our other businesses, including OneCorp, and we're really pushing that as well. So I think it's just a very broad level of cooperation, as I said, without integration. When you've got really talented people who are running these businesses, who have really mastered their businesses, we find that by giving them autonomy, that's a very intrinsically motivating feature, and that's not something that exists in many companies. If you look at HEICO overall, across all of HEICO, we've got roughly 100 business heads, and for a company of our size to have 100 people of just talent and skill, where they perform so well, and they really enjoy what they do because of the way that they're treated, I think that's the real synergy here. It won't be from knocking out little costs here and there. Yes, there's an opportunity to do that. For example, at trade shows, at a number of trade shows, Paris, Farmboro, and others will have booths together, so HEICO and Lincor will be together.

Speaker Change: In the defense side, we're already cooperating and working together, whereas.

Speaker Change: Orders used to go out to third party companies. They are now being placed internally and thats very strong.

Requires over in our specialty manufacturing there is a lot of our product that our specialty manufacturing group can build for our other businesses, including <unk> and we're really pushing that as well. So I think it's just a very broad base level.

Speaker Change: Cooperation as I said without integration.

When <unk> got really talented people, who are running these businesses, who have really mastered their businesses, we find that by giving them autonomy.

Speaker Change: That's very intrinsically motivating.

Speaker Change: Feature and Thats not something that exists in many companies.

Speaker Change: Look at HEICO overall across all of HEICO, We've got roughly 100 business heads and for a company of our size to have 100 people.

Speaker Change: Talent and skill set where they perform so well and they really enjoy what they do because of the way that theyre treated I think that that's the real synergy here.

Speaker Change: It's not going to be from.

Speaker Change: Knocking out little costs here and there I mean, yes, there is an opportunity to do that in for example in Tradeshows.

Speaker Change: And a number of the Tradeshows, Paris, Farnborough and others will have.

Speaker Change: Our booths together, so Idaho linked quarter, we'll be together there'll be certain other trade shows where they can be separate and we want the businesses to each had their own strategy and to really take responsibility for their results. So I think thats why were getting these benefits.

Eric Mendelson: There'll be certain other trade shows where they can be separate. We want the businesses to each have their own strategy and to really take responsibility for their results. I think that's why we're getting these benefits. Great, thank you. Thank you, Shoa.

Speaker Change: Great. Thank you.

Speaker Change: Thank you sure.

Speaker Change: And we'll take our next question from Mariana for Rosemont.

Operator: And we'll take our next question from Mariana Perot, with Bank of America. Please go ahead. Thank you so much.

Mariana: With Bank of America. Please go ahead.

Thank you so much so first of all congratulations Larry on the award.

Lawrence Mendelson: So first of all, congratulations, Larry, on the award. Thank you very much. My first question is about R&D, a follow-up to ETG R&D. What are the main trends? Because you said it's a pretty much across the board increase, but what are the main trends that are driving this increase in R&D? What are the opportunities that you guys are seeing that actually are calling for this increase in R&D? Is this a particular technology?

Mariana: Thank you very much first question.

Mariana: Youre Welcome My first question is about.

Mariana: Follow up on Atg R&D.

Mariana: What are the main trends because you said like it's pretty much across the board.

Speaker Change: But what are the main trends that are driving this increase in R&D. What are the opportunities that you guys are seeing that actually are calling for Jason Grace R&D is this particular technology.

Victor Mendelson: Is it a trend? Is this, I don't know, an end market? Could you please discuss that? Sure, this is Victor.

Speaker Change: The trend is this I don't know.

Speaker Change: End markets could you please discuss that.

Speaker Change: Sure. This is Victor it's a very good question and.

Victor Mendelson: It's a very good question. And by the way, when I say across the board, it doesn't mean in every business, but it's kind of what I should clarify what I mean by that is the majority of the businesses or, you know, sort of a super majority of the businesses. It is what I would call the trend. There's a tremendous amount of opportunity for our businesses to focus on newer and evolved products. Sometimes it's not just what you would consider revolutionary change, right? It's not necessarily developing something that's wholly new. In our case, it is more typically evolutionary.

Victor Mendelson: And by the way when I say across the board doesn't mean in every business, but its kind of what I should clarify what I mean by that is the majority of the businesses or sort of a supermajority of the businesses.

Victor Mendelson: It is what I would call the trend there is a tremendous amount of opportunity.

Victor Mendelson: For our businesses on newer and evolved products, sometimes it's not just what you would consider revolutionary change right, it's not necessarily developing something thats wholly new in our case. It is more typically evolutionary and it is an improvement on <unk>.

Victor Mendelson: And it is an improvement on an earlier version or iteration of a product. And so what we're seeing with a high number of our customers is demand for what you would consider sort of our next generation of products. So it's not just technology-based. It's not, for example, as though there is a new design that has been developed, you know, like Bluetooth many years ago, and everybody was implementing Bluetooth. It's not like that.

Victor Mendelson: Earlier version of iteration.

Victor Mendelson: Of a product and so what we're seeing in a high number of our customers is demand for what you would consider sort of our next generation of products. So it's not just technology based its not for example.

Victor Mendelson: As though there is a new design that has been developed like Bluetooth.

Many years ago, when everybody was implementing Bluetooth.

Victor Mendelson: It's not like that it's more responsive to the individual needs of our customers.

Victor Mendelson: It's more responsive to the individual needs of our customers. And are usually customers calling for this improvement? How is this like R&D, how do you pick what's in it, what specific products you'll do R&D on?

Victor Mendelson: And are usually customers, calling for this improvement how does like R&D how are you.

Victor Mendelson: What are you guys what specific products.

Victor Mendelson: Two R&D auction, so we leave it to each one of our businesses to make those choices.

Victor Mendelson: So we leave it to each one of our businesses to make those choices. In some cases, it's customer initiated. In other cases, it's initiated by our subsidiaries or somewhere in between.

Victor Mendelson: In some cases, it's customer initiated in other cases, it's initiated by our subsidiaries or somewhere in between I mean, our businesses have regular meetings and visits and calls with.

Victor Mendelson: I mean, our businesses have regular meetings and visits and calls with customers, and so they're aware of new programs the customer may be on, new designs that they might need. And that's probably the most common.

Victor Mendelson: Customers and so there they are aware of new programs the customer may beyond new designs that they might need.

Victor Mendelson: And that's probably the most typical but it runs the gamut depend upon depending on the architecture of the that particular business.

Victor Mendelson: But it runs the gamut depending on the architecture of the particular business, as well as the products. But the key to it is one, a willingness to always invest in and respond to customer needs, depending upon the history and relationship with the customer, and the likelihood that they will, in fact, turn into orders. I mean, let's be honest; there are companies who will always ask their suppliers, their vendors, partners to develop something on their dime, and then they may not buy it.

Well as the products, but the key to it is one and willingness to always invest in respond to the customer needs depending upon the history and relationship with the customer the likelihood that they will in fact turn into orders I mean, let's be honest there are companies.

Victor Mendelson: Who will always ask that.

Victor Mendelson: Their suppliers their vendors partners to develop something.

Victor Mendelson: On their dime and then.

Victor Mendelson: They may not buy it so that that is a factor that we consider is what is the history with the customer are they likely to in fact convert to orders is there a po standing behind it are they on a program of record for example, if its defense and where do they stand with.

Victor Mendelson: So that is a factor that we consider is what is the history with the customer? Are they likely to in fact convert to orders? Is there a PO standing behind it? Are they on a program of record, for example, if it's defense?

Victor Mendelson: And where do they stand with that program? What intel are we getting from the broader community? What do we hear from our other partners, customers, even trade shows, government people, things like that? So each business, though, is responsible for that. And to be honest, the beauty, I think, of our company is that it's not from on high. It is experts talking with experts.

Victor Mendelson: That program, what Intel are we getting in the broader community what do we hear from our other partners customers.

Victor Mendelson: Even tradeshows government people things like that so each business, though is responsible for that and thats to be honest. The beauty I think of our company is that it's not from on high is experts talking with experts, we believe and devolving those decisions down at the lowest level.

Victor Mendelson: We believe in delegating those decisions down at the lowest level to be able to understand the customer best. Thank you. And my last one is in M&A.

Victor Mendelson: <unk>.

Victor Mendelson: To be able to understand the customer best.

Speaker Change: Thank you and my last one is on M&A.

Eric Mendelson: Could you please discuss when you do acquisitions like the recent Honeywell licenses for Navionics, and there are adjacent opportunities for you, but I could imagine that a company like this or a license could be able to unlock more upside opportunities in terms of revenues under the HEICO ecosystem compared to if this license ends up in another third-party MRO shop. Like, can you please discuss how you think about those upside opportunities and how long it could take to actually see them? Sure, Mariana, this is Eric.

Speaker Change: Can you. Please discuss when you do acquisitions like the recent Honeywell licenses on maybe on the other adjacent opportunities for you, but I could imagine that a company like days already license good be able to a lot more upside opportunity in terms of revenues under the high call ecosystem compared to.

Speaker Change: License and other.

Speaker Change: Third party MRO shop like can you. Please discuss how you think about those upside opportunities.

Speaker Change: How long it could take to Anthony Steve Adam.

Speaker Change: Sure Mary.

Speaker Change: This is Eric I'd be happy to answer about that so HEICO has done a number of licensing deals over the last decade. So we're very well experienced on doing those licensing deals.

Eric Mendelson: I'd be happy to answer that. HEICO has done a number of licensing deals over the last decade. So we're very well experienced in doing those licensing deals. And in particular, when you look at the component repair folks, HEICO has got 19 individual MRO businesses just within flight support, and then over in ETG, there are another, you know, number of them there as well.

Eric: And in particular, when you look at the component repair footprint HEICO has got 19.

Eric: Individual.

Eric: MRO businesses, just within flight support and then over in Atg there. Another a number of them there as well so we've been able to buy these licenses and basically take that technology and put it into a business that's already in.

Eric Mendelson: So we've been able to buy these licenses and basically take the technology and put it into a business that's already incredibly experienced in that market niche and really understands the technology. So when we buy a life, We're able then to go out to the customer with people who can hit the ground running, and in many cases are already working with the customer on other items, and it's really a seamless experience. So, I think that there's plenty of opportunity for HEICO in this area to continue to grow in adjacent white spaces. I can tell you that our reception at customers for the Honeywell product has been extremely strong. They've been very happy about that.

Accretively experienced in that market niche and really understand the technology.

Eric: When we buy a license we're able then to go out to the customer with people who can hit the ground running in many cases are already working with the customer on other items and it's really a seamless.

Eric: Our experience.

Eric: So I think that there is plenty of opportunity for HEICO in this area to continue to grow in adjacent white spaces I can tell you that our reception at the customers.

Eric: For the Honeywell product has been extremely strong they have been very happy about that they are used to our experience with regard to quality and turn time in price. So the reception has been very strong. So I think that it was a great move for both Honeywell.

Eric Mendelson: They're used to our experience with regard to quality, turn time, and price, so the reception has been very strong. So, I think that it was a great move for both Honeywell and HEICO, as well as for our customers. There's just a net benefit and increase to the industry here, so I think that there is additional opportunity. Great, thank you so much.

Eric: As well as for HEICO as well as for our customers. There is just a net benefit and an increase to the industry here. So I think that there is additional.

Eric: The opportunity for us.

Speaker Change: Great. Thank you so much.

Operator: Thank you. And we'll take our next question from Gautam Khanna with T.D. Cohen.

Speaker Change: Thank you.

Speaker Change: And we'll take our next question from Gautam Khanna with TD Cowen. Please go ahead.

Operator: Please go ahead. Hey, good morning and congratulations on the award. Thank you very much. Of course. Hey, a lot of questions have been asked and answered. I was wondering if you guys are seeing any difference in activity levels in the direct channel versus the indirect.

Gautam Khanna: Hey, good morning, Congrats on the award.

Gautam Khanna: Thank you very much.

Gautam Khanna: Of course.

Gautam Khanna: A lot of questions have been asked and answered I was wondering if you guys are seeing any difference in <unk>.

Gautam Khanna: Activity level in.

Gautam Khanna: In the direct channel versus the indirect.

Eric Mendelson: And maybe you could just talk by market, you know, whether it be aftermarket, whether it be OE, if you're seeing anything. Discernibly different, restocking, and destocking in the distributor channel. Yeah, we're Gautam, this is Eric.

Gautam Khanna: And maybe you could just talk by market, whether it be aftermarket with their poa.

Gautam Khanna: If youre seeing anything.

Considerably different any restocking destocking in the distributor channel and alike.

Gautam Khanna: Yes.

Gautam Khanna: And this is Eric you want to know how we're doing with regard to aftermarket and OE on order patterns are.

Eric Mendelson: So you want to know how we're doing with regard to aftermarket and OE order patterns, or what would you like to comment on? Maybe just distributors, Defense and Aero like there? Are you seeing any differences in those order patterns versus selling direct outside of the distribution?

Gautam Khanna: What.

Gautam Khanna: <unk>.

Eric: So maybe maybe just distributors.

Eric: Defense and Aero like is there.

Eric: Are you seeing any differences in those order patterns versus selling direct.

Eric: <unk>.

Eric: Outside of the distribution.

Eric: Channel.

Eric: Well so our.

Eric Mendelson: Well, our, uh... Our distribution businesses are doing extremely well. They're continuing to gain market share. They have the right inventories. I think our customers are very happy as a result of working with them. You know, likewise, over in the PMA area where we in the repair area where we sell the rest, it's likewise the same thing. So I would say we have very good strength in both.

Eric: Yeah.

Eric: Our distribution businesses are doing extremely well.

Eric: They are continuing to gain market share they have the right inventories I think our customers are very happy as a result of working with them likewise over in the PMA area, where we in the repair area, where we sell direct.

Eric: Likewise, the same thing so I would say a very good strength in both with regard to product availability on the flight support side.

Eric Mendelson: With regard to product availability on the site support side, things are tough. We're, you know, frankly, our vendors are quite behind. And I think our results could be even better if, you know, they were able to shift the overdue backlog. And this is really across the board in the parts area, I would say both the PMA as well as distribution.

Speaker Change: Things are tough.

Speaker Change: Frankly, our vendors are quite behind.

Speaker Change: And.

Speaker Change: I think our results could be even better if.

Speaker Change: They were able to ship the overdue backlog and this is really across the board in the parts area I would say, both the PMA as well as the distributions.

Eric Mendelson: I think there have been some raw material challenges as a result of the sanctions. And then, of course, as Victor alluded to, with regard to labor, that continues to be a challenge. But definitely, the supply chain is tight. There really isn't, there's no excess capacity. Things are very tight.

Speaker Change: I think there have been some raw material challenges as a result of the sanctions.

Then of course as Victor alluded to with regard to labor that continues to be a challenge.

Speaker Change: But definitely the supply chain is tight.

Speaker Change: There really isn't.

Speaker Change: There is no excess capacity thing.

Speaker Change: These are very tight.

Eric Mendelson: And, you know, we're hoping that by the end of 24, things will normalize. Frankly, I would have thought by now things would have normalized more. But unfortunately, our vendors are really struggling. Things will get better after November. Hotel, in a lot of ways.

Speaker Change: And we're hoping that by the end of 'twenty four things normalized frankly, I would've thought by now.

Speaker Change: James would have normalized more but unfortunately, our vendors are they are really struggling things will get better after November.

Speaker Change: And a lot of ways.

Speaker Change: Yes.

Carlos Macau: Yeah. And Carlos, you mentioned you talked about the 21 to 22% flight support margins being sort of the right ballpark. And I think previously you said the cycle would be somewhere in that range as well. I mean, is there any, like, what is the, it sounds like Wencor is going better.

Carlos you mentioned, you've talked about the 21% to 22% flight support.

Speaker Change: Margins as sort of the right ballpark.

Speaker Change: And I think previously you said the cycle would be somewhere in that range as well I mean is there any like what is the.

Speaker Change: It sounds like one quarters going better there is some pricing opportunity as you mentioned in response to a no.

Carlos Macau: There is some pricing opportunity, as you mentioned in response to Noah's question. You know, I'm just curious, like, what is your confidence long term of maybe doing better than that? Forget fiscal 24, but just look at highly confident. I mean, I think if you looked back over the last decade, just if you wanted to do a history lesson, go back from pre-COVID and just look back 10 years, and you'll see a pattern of where the FSG continually ekes out. 20, 30, 40 basis points a year. Do you know what I mean?

Speaker Change: <unk> question.

Speaker Change: I'm just.

Speaker Change: Like what is it.

Speaker Change: Your confidence longer term, but maybe doing better than forget fiscal 'twenty four but just sure looking out.

Speaker Change: Highly confident.

Speaker Change: If you look back over the last decade, just just if you wanted to do a history lesson.

Speaker Change: Back from pre Covid, and just look back 10 years, and you'll see a pattern of where the SSG continually X out.

Speaker Change: 2030, 40 basis points, a year, you know what I mean, sometimes its a little flatter, but if you look at that trend I think we are returning to that I think that's on an annual basis by the way I think we're heading in that direction, we can't continue.

Carlos Macau: Sometimes it's a little flatter, but if you look at that trend, I think we're returning to that. I think we, and that's on an annual basis, by the way. I think we're heading in that direction. We can't continue to grow at a breakneck pace.

To grow at a breakneck pace I think we're at a pretty high growth level right now and at some point, we get back to what I'll call a normal business cycle and Thats when youll see our margin take those nice incremental jumps up until then.

Carlos Macau: I think we're at a pretty high growth level right now, and at some point, we get back to what I'll call a normal business cycle, and that's when you'll see our margin take those nice incremental jumps up. Until then, with our end markets being as hot as they are, you know the margin can fluctuate a little bit based on volumes, what we're selling. But I do think at some point when this hypergrowth scenario we're in softens and gets back to, I don't wanna say business as usual, but the more customary demand in the market, I would say that that incremental eke out of growth north, small increments is Thank you very much, guys. By the way, as far as the 21 to 22%, I mean, I feel very confident that we're going to wind up in there. You know, we could always do better, but, you know, for modeling and thinking about the business, that's where I decided to keep your focus in that area. Appreciate it, guys. Thank you so much.

Speaker Change: With our end markets being as hard as they are you know the margin can fluctuate a little bit based on volumes, what we're selling but I do think at some point when this hyper growth scenario, we're in softens and gets back to I don't want to say business as usual with a more customary.

And in the market I would say that that incremental eke out of growth north small increments as what we would expect to see.

Speaker Change: And as far as very much guys.

Speaker Change: By the way as far as the 21, 2% I mean.

Speaker Change: I feel very confident that we're going to wind up in there, we always could do better but.

Speaker Change: For modeling and thinking about the business, that's where I'd say keep your focus on that in that area.

Speaker Change: Appreciate it guys. Thank you so much.

Lawrence Mendelson: Thank you. And as a reminder, it's star number one if you'd like to ask a question, and we'll take our next question from Bert Subin with Stiefel. Please go ahead. Hey, good morning, and thank you for the question. Good morning.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: As a reminder, its star one if you'd like to ask a question and we will take our next question from Bert <unk> with Stifel. Please go ahead.

Bert: Hey, good morning, Thank you for the question.

Bert: Good morning.

Eric Mendelson: Maybe Eric, first question for you. You talked about pricing being a primary growth driver when it comes to new customers, just relative to existing customers where it is more a function of inflation pass through. Can you just talk about what your new customer strategy is? And maybe what percent of sales come from new customers in a given year?

Bert: Maybe Eric first question for you you talked about pricing being a primary growth driver when it comes to new customers just relative to existing customers where it's.

Bert: More of a function of inflation pass through can you just talk about what your new customer strategy is and maybe what percent of sales come from new customers in a given year.

Eric Mendelson: And also, is the new customer increasingly an internationally based one? Yeah, that's a good question, Bert. You know, we don't have that many new customers. And that's pretty much because we deal with everybody.

Bert: Also as the new customer increasingly internationally based customer.

Eric: Yes, it's a good question Bert.

Eric: We don't have that many new customers and thats pretty much because we deal with everybody.

Eric Mendelson: So, you know, occasionally, when an airline gets formed, there can be a new one. I would say that our biggest opportunity is to continue to increase our market penetration with our existing customers. So that really is where the big opportunity is, as opposed to new ones. I mean, we do get new ones, but, you know, we're pretty much dealing with everybody in the world.

Eric: So occasionally when an airline gets farm there can be a new one.

Speaker Change: I would say that our biggest opportunity is to continue to increase our market penetration with our existing customers. So that really is where the where the big opportunity is.

Speaker Change: As opposed to new ones I mean, we do get new ones, but we're pretty much dealing with everybody in the world.

Eric Mendelson: So unless a new airline gets created, you know, there wouldn't be that type of opportunity. And just a clarification there, Eric, just in terms of the pricing, if you're having sort of greater market share gains or market penetration, is that a different sort of function? Like if you're selling an existing product to an existing customer, you know, you're pricing that, I guess, more gently in terms of just passing through inflation instead of maybe marketing to the market. But if you're selling them a new product, is that an opportunity when you think about margin? The answer is yes. So if a customer is buying a product and, you know, it's under contract, then obviously they would have price protection for the terms of the contract, you know, the duration of the contract, if that's what it's provided for.

Speaker Change: New airline gets created.

Speaker Change: It wouldn't be that type of opportunity.

Speaker Change: And just a clarification there just in terms of the pricing. If you are having sort of greater market share gains or market penetration is there.

Speaker Change: A different sort of function like if you're selling an existing product to an existing customer you are pricing that I.

Speaker Change: I guess more generally in terms of just passing through inflation instead of marking to market, but if you're selling them a new product is that an opportunity when you think about margins.

Speaker Change: Yes. The answer is yes, so if a customer is buying.

Speaker Change: Our product and its under contract then obviously they would have price protection for the terms of the contract.

Speaker Change: <unk> of the contract.

Speaker Change: If thats what it provided for.

Eric Mendelson: You know, and of course, there are different things that matter to different customers. So we're very accommodating there. However, if a customer, if that customer wants to start buying a part that they haven't purchased, then they would get a price based on the new list price as opposed to the old price. So there's definitely a big incentive to get started and get locked in with us as early as possible.

Speaker Change: And of course, there are different things, which matter to different customers. So were very accommodating there.

Speaker Change: However, if a customer if that customer wants to start buying a part that they haven't purchased then they would get a price based on the new list price as opposed to what the oil price was so there's definitely a big incentive to get started and get locked in with us.

Lawrence Mendelson: Okay, I got it. Super helpful, Eric. Just one follow-up, Larry. Reaffirmed your view toward 15-20% earnings growth that you sort of highlighted last quarter for FY24, at least based on what you're seeing today. If we were to get to the end of the year and you were to outpace, I guess, on the positive side, the 20% mark, I'm just curious if you think that'd be more a function of FSG, ETG, or faster debt paydown. Well, it could be the result of all three.

Speaker Change: As early as possible.

Speaker Change: Okay got it Super helpful. Eric just one follow up Larry you.

Speaker Change: Reaffirmed your view toward 15% to 20% earnings growth that you sort of highlighted last quarter for FY 'twenty for at least based on what Youre seeing today if.

Speaker Change: If we were to get to the end of the year and you were to outpace I guess on the positive side the 20% Mark.

Speaker Change: I'm just curious when you think that'd be more a function of MSG atg or faster debt paydown.

Speaker Change: Well it could be the result of all three.

Lawrence Mendelson: And however, you know, we try to control earnings growth. We really do. And, HEICO, I think investors like consistency. I know we're probably the largest single investor in our company to get a 401k and Carlos. So we like consistency. We don't like to go up one year and down the other.

Speaker Change: And however, you know.

Speaker Change: We try to control earnings growth, we really do and <unk>.

Speaker Change: Tycho I think investors like consistency I know.

Speaker Change: We're probably the largest single investor in our company to get 401, K and Carlos.

Speaker Change: So we like consistency, we don't like to go up one year down the other.

Lawrence Mendelson: In order to do that and to generate cash flow so we don't get over leveraged, we'd like to continue to be within 15 to 20%. It is possible we could go over 20 percent at this point. Everything I know and our own thought projections, we will be within 15 or 20 percent. Would we go over it? It's possible, but at this moment, I wouldn't predict that.

Speaker Change: In order to do that and to generate cash flow. So we don't get over leverage.

Speaker Change: We'd like to continue to be within 15% to 20% so.

Speaker Change: It is possible we could go over 20% at this point.

Speaker Change: Everything I know and my our own thought projections.

Speaker Change: We'll be within 15% 20%.

Speaker Change: Would we go over it it's possible but.

Speaker Change: At this moment I wouldn't predict that again.

Lawrence Mendelson: Again, I am conservative. However, I do say that my own guesstimate is that we will be within 15 or 20 percent. So... I don't know if that answers your question. But the other thing is, I see that both of our businesses are really very strong. You've heard the whole story.

Speaker Change: Am Conservative and however, I do say that my own guesstimate is that we will be within 15% to 20%. So.

Speaker Change: I don't know if that answers your question, but the other thing is.

Speaker Change: I see that both of our businesses are really very strong you've heard the whole story and Victor has described the first quarter BTG is really a weak quarter, because we couldnt ship in these various things the backlog supports a huge increase in from the second to the fourth quarter.

Lawrence Mendelson: And Victor has described the first quarter of ETG as really a weak quarter because we couldn't ship and these various things. But the backlog supports a huge increase from the second to the fourth quarter. So we should see the ETG definitely level out and return to what I would call reasonably normal profitability. Flight support is, similarly, very strong too.

Speaker Change: So we should see the atg definitely level out and return to what I would call reasonably normal profitability.

Speaker Change: Flight support similarly is very strong too and with the one core acquisition and the <unk>.

Lawrence Mendelson: And with the Wencor acquisition and the possibilities of gaining some of the synergies, which we're doing very slowly, and we want to build it in. But it's a long answer to your question. But I really think at this point, we'll be within 15 to 20% growth. And if we go over, I can't predict who might do it.

Speaker Change: <unk> abilities of gaining some of the synergies which were doing very slowly.

Speaker Change: And we want to build it in but.

Speaker Change: It's a long answer to your question, but.

Speaker Change: I really think at this point, we will be within 15% to 20% growth and.

Speaker Change: If we go over.

Speaker Change: Can't predict who might do it.

Lawrence Mendelson: Fair enough. Thank you for the comments. And we'll take our next question from Louis Raffetto with Wolf Research. Please go ahead.

Speaker Change: Fair enough. Thank you for the comments I appreciate it.

Speaker Change: Okay.

Speaker Change: And we'll take our next question from Louis Raffetto with Wolfe Research. Please go ahead.

Carlos Macau: Hey, thank you. Good morning, guys. Good morning. Carlos, you talked about expecting, I guess, FSE to be pretty strong in 1Q. Was there anything specific there on mix?

Louis Raffetto: Hey, Thank you good morning, guys.

Louis Raffetto: Good morning.

Louis Raffetto: Carlos you talked about expecting I guess.

Louis Raffetto: Should it be pretty strong in <unk> was there anything specific there on mix I'm, just trying to bridge sort of the 100 basis point clean margin sequential improvement with sales that weren't sort.

Carlos Macau: I'm just trying to bridge sort of the 100 basis point clean margin sequential improvement with, you know, sales that weren't sort of too dissimilar from last quarter. Uh, there was, I would say that we had strong performance and parts were kind of leading the pack. The repair was a close second, especially products, were soft and went behind.

Louis Raffetto: Two dissimilar from last quarter.

Carlos Macau: There was I would say that the.

Carlos Macau: We had strong performance in parts is kind of leading the pack.

Carlos Macau: Repair was close second specialty products was soft and went behind I think that.

Carlos Macau: I think that, based on shipments, that business is a little more predictable, believe it or not, than the parts and repair business. So, we had anticipated that the specialty products business would slow down slightly in Q1. And it did, and we have expectations that it's going to be fine for the rest of the year. But I don't, there was, if your question is, is there any one offer, strange mix?

Carlos Macau: Based on shipments that business is a little bit more predictable believe it or not then than the parts and repair business are so we had anticipated that the specialty products was slow down slightly in Q1, and it did and we have expectations, it's going to be fine for the rest of the year, but I don't there is if your question is is there any one offer strange mix.

Carlos Macau: No, this has pretty much played out the way I thought it would. All right, great. Thank you. And then Victor, just one for you. You laid out strong aerospace in the quarter and then some of those other markets. I didn't hear anything on defense.

Carlos Macau: Now this is pretty much played out the way I thought it would.

Speaker Change: Alright, great. Thank you and then Victor just one for you you laid out strong aerospace in the quarter and then some of those other markets I didn't hear anything on defense. So I know, it's a big part of the business just wasn't sure how that did in the quarter you've seen I know you've kind of had seen some sequential improvement does that continue this quarter do we step back at all.

Victor Mendelson: So I know it's a big part of the business, but I just wasn't sure how that did in the quarter. I know you kind of saw some sequential improvement. Did that continue this quarter?

Victor Mendelson: Did we step back at all? Yeah, Louis, it's continued to grow overall, all in all, and you know, so what I was segmenting at was the areas that were weakest before, but defenses, as we expected, moving in the right direction. All right, great. Thank you. And then Larry, just one for you.

Victor Mendelson: Yes. Louis it's continued overall all in to grow.

Speaker Change: <unk>.

Victor Mendelson: So what I was segmenting out was the areas that were weak as before but defenses as we expected moving in the right direction.

Speaker Change: Alright, great. Thank you and then just one for you.

Lawrence Mendelson: You kind of talked about bouncing, you know, M&A and leverage. So I guess as we think about the rest of the year, would you be willing to go above three times leverage if you saw a deal that would put you there? Or is that kind of a hard level?

Speaker Change: You kind of talked about balancing M&A and leverage I guess as we think about the rest of the year is would you be willing to go above three times leverage you solid deal that would put you there or is that kind of a hard limit.

Lawrence Mendelson: The answer is, if it was super sensational, and it really added to the bottom line, and we looked at it, and the payback as a result of it would drop us below the three times and back into the two times area, we might consider it. But we're very careful with that. And also, interest rates are very, very high. So to make these acquisitions now, because of interest rates, it's a little bit harder. So to answer your question, it would have to be something sensational to make us go above three times. And so far, I have not seen anything so sensational. So I think it's highly unlikely.

Speaker Change: The answer is if it was super sensational and it really added to the bottom line and we looked at it and the payback is a result of it would drop us below.

Speaker Change: The three times it back into the two times area we.

Speaker Change: We might consider it.

Speaker Change: Very careful with that and also interest rates are very very high so to make these acquisitions now because of interest rates.

Speaker Change: A little bit harder.

Speaker Change: So to answer your question it would have to be something sensational.

Speaker Change: To make us go above three times.

Speaker Change: And so far I have not seen something so sensational so I think it's highly unlikely.

Lawrence Mendelson: But as we get from, say, just under three times, as we head to two times, which we estimate in the press release, we said 12 to 18 months from the time we incurred the debt. And that's what we believe that's accurate. But along the way, we might find, as we did with Honeywell, a very creative cash flow and EPS Acquisition, which would actually make the ratio, if you do the arithmetic, you find that the ratio of debt to EBITDA would go down because of the earnings that it would produce. We would do that. So again, that's why I say it takes a lot of thought process.

Speaker Change: But as we get from <unk>.

Speaker Change: Just under three times as we head to two times, which we estimate in the press release, we said 12 to 18 months from the time, we incurred a debt and Thats, we believe thats accurate, but along the way we might find as we did with Honeywell a very.

Speaker Change: Accretive cash flow in.

Speaker Change: EPS acquisition, which would actually make the ratio. If you do the arithmetic you make the ratio of debt to EBITDA would go down because of the earnings that we produce we would do that.

Speaker Change: So again, that's why I say it takes a lot of thought process. We just don't make acquisitions Willy Nilly and remember one thing.

Lawrence Mendelson: We just don't make acquisitions willy-nilly. And remember one thing, that the Mendelssohns, as a family, and our 401k, we are there to protect that nest egg. And we're going to be very careful in incurring any kind of debt. And we don't want to get into any kind of financial trouble.

Speaker Change: That the medicines.

Speaker Change: Family and our 401K, we are there to protect that next day, and we're going to be very careful and incurring any kind of debt and we don't want to get into any kind of financial problem.

Lawrence Mendelson: We have a great cash flow. We have a great business. It's growing nicely.

Great cash flow, we have a great business, it's growing nicely.

Operator: So we'll be very careful with that debt. I don't know if that answers your question. No, it's perfect, thank you. Thank you. Thanks, Louis. And there are no additional questions. Well, I would like to, again, thank everyone on this call for their interest in HEICO. We're available if you have other questions. You can contact Carlos, Eric, Victor, and myself. And if you don't, we look forward to speaking to you on the second quarter earnings telecom.

Speaker Change: So we'll be very careful with that debt.

Speaker Change: I don't know if that answers I appreciate it no that's perfect. Thank you.

Speaker Change: Thank you.

Speaker Change: And there are no additional questions.

Speaker Change: Well I would like to again, thank everyone on this call for their interest in HEICO.

Speaker Change: We are available if you have other questions you can contact Carlos Eric Victor and myself and if you don't we look forward to speaking to you on the second quarter earnings teleconference, and Thats. The end of this teleconference and again. Thank you have a wonderful day.

Operator: That's the end of this teleconference. And again, thank you. Have a wonderful day. And this concludes today's call. Thank you for your participation. You may now disconnect. Thank you for watching. Thank you for watching! www.heico.co.uk, Copyright 2017 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Speaker Change: And this concludes today's call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].