Q1 2025 HEICO Corp Earnings Call
Eric Mendelson, Eric Mendelson, Laurans Mendelson
Speaker Change: Welcome to the Heiko Corporation First Quarter 2025 Financial Results Call.
Samara: My name is Samara and I will be your operator for today's call. Certain statements in this conference call will constitute forward-looking statements which are subject to risks, uncertainties, and contingencies. HICO's actual results may differ materially from those expressed in or implied by those forward-looking statements.
Samara: Factors that could cause such differences include the severity, magnitude, and duration of public health threats, such as the COVID-19 pandemic, HICO's liquidity, and the amount and timing of cash generation.
Samara: Lower commercial air travel, airline fleet changes, or airline purchasing decisions, which could cause lower demand for goods and services.
Samara: Product Specification Costs and Requirements, which could cause an increase to our cost to complete contracts.
Samara: Governmental and Regulatory Demands, Export Policies and Restrictions, Reductions in Defense, Space, or Homeland Security Spending by U.S. and or Foreign Customers, or Competition from Existing and New Competitors, which could reduce our sales.
Samara: 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.
Samara: Cyber security events or other disruptions of our information technology systems could adversely affect our business.
Samara: Customer Credit Risk, Interest, Foreign Currency Exchange, and Income Tax Rates
Samara: 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.
Samara: Parties listening to this call are encouraged to review all of HICO'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.
Samara: 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 Laurans Mendelson, HICO's Chairman and Chief Executive Officer.
Laurans Mendelson: Thank you, Samara, and good morning to everyone on the call. We thank you for joining us, and we welcome you to this HICO First Quarter Fiscal 25 Earnings Announcement Teleconference.
I'm Larry Mendelson, Chairman and CEO of Heiko Corporation.
Laurans Mendelson: I'm joined here this morning by Eric Mendelson and Victor Mendelson, HICO's co-presidents, and Carlos Macal, our executive vice president and CFO.
Laurans Mendelson: I would like to personally thank HICO's incredible team members for their hard work, dedication, and commitment to excellence.
Laurans Mendelson: Their tireless efforts to exceed customer expectations and deliver outstanding results with unique efficiency are the driving force behind our remarkable success.
Your efforts and accomplishments continue to shape HICO's bright future.
Laurans Mendelson: We're very proud of our first quarter results, which reflect consolidated margin expansion, strong cash flows, and record net sales in both of our segments.
Laurans Mendelson: I remain very bullish on Heiko's ability to win new opportunities during fiscal 25.
Laurans Mendelson: As we look ahead to the remainder of Fiscal 25, our team is filled with great optimism.
Laurans Mendelson: The current U.S. administration's pro-business agenda aligns well with our long-term goals, providing an environment for innovation, investment, and expansion.
with our strategic focus on key markets like defense.
space.
and Commercial Aviation.
Laurans Mendelson: and the exceptional talent and drive of our team members, Heiko is uniquely positioned to capitalize on new opportunities and sustain our momentum across diverse industries.
Summarizing our first quarter fiscal 25 results.
Consolidated operating income and net sales
Laurans Mendelson: in the first quarter of fiscal 25 represent record results for HICO, improving by 26 percent and 15 percent respectively as compared to the first quarter of fiscal 24.
Consolidated net income increased 46%.
Laurans Mendelson: to a record $168 million, or $1.20 per diluted share in the first quarter of fiscal 25,
Laurans Mendelson: And that was up from $114.7 million, or $0.82 per diluted share, in the first quarter of fiscal 24.
The tax benefit in the first quarter, fiscal 25.
net of non-controlling interest.
Laurans Mendelson: was $26.5 million or $0.19 per diluted share and that was up from $13.3 million or $0.10 per diluted share in the first quarter of fiscal 24.
Laurans Mendelson: Excluding the impact of this tax benefit in both periods, earnings per share increased $0.29 per diluted share or 40% up.
Laurans Mendelson: The Flight Support Group set all-time quarterly operating income and net sales records in the first quarter of fiscal 25, improving 22% and 15% respectively over the first quarter of fiscal 24.
The increases principally reflect strong 13% organic net sales growth.
Laurans Mendelson: and the impact from our profitable fiscal 24 and 25 acquisitions.
Laurans Mendelson: The electronic technologies group operating income and net sales improved 38% and 16%, respectively, over the first quarter of fiscal 24.
Laurans Mendelson: These increases principally reflect strong 11% net sales growth, organic sales growth, mainly attributable to increased defense
Laurans Mendelson: Space and Aerospace Product Deliveries, and the positive impact from our fiscal 2024 and 2025 acquisitions.
Cash flow provided by operating activities increased 82%.
Laurans Mendelson: to $203 million in the first quarter of fiscal 25, and that was up from $111.7 million in the first quarter of fiscal 24.
Laurans Mendelson: We continue to forecast strong cash flow from operations for the entire fiscal 25.
Consolidated EBITDA increased 22%.
Laurans Mendelson: to $273.9 million in the first quarter of Fiscal 25, and that was up from $224.4 million in the first quarter of Fiscal 24.
Laurans Mendelson: Our net debt to EBITDA ratio was 2.08 times as of January 31, 2025 and that compared to 2.06 times as of October 31, 2024.
Laurans Mendelson: Acquisition opportunities and M&A diligence efforts within both of our operating segments remain highly active, reflecting a robust pipeline of potential targets.
Laurans Mendelson: We consistently seek complementary acquisitions that meet our strategic and financial goals.
Laurans Mendelson: This is guided by a disciplined approach that we pursue acquisitions that make financial sense and are accretive to our earnings while enhancing long-term shareholder value.
Laurans Mendelson: In January 25, we paid our regular semiannual cash dividend of 11 cents per share, which was our 93rd consecutive semiannual cash dividend since 1979.
Laurans Mendelson: We were also very busy with acquisitions, having completed several key acquisitions in fiscal 25's first quarter.
In November
Laurans Mendelson: Passive components and subsystems primarily serving the healthcare and industrial and markets.
Laurans Mendelson: In December, we secured an exclusive license and purchased key assets from Honeywell International.
Laurans Mendelson: in order to support the Boeing 777 Ames and the 737 NGP 8E-7 via product lines.
In January, we acquired a 90% interest in Millennium International.
Laurans Mendelson: a business jet avionics repair company which complements HICO's growing avionics repair capabilities.
Laurans Mendelson: All of these acquisitions were funded principally using proceeds from our revolving credit facility and cash provided by our operating activities.
Laurans Mendelson: In addition, we expect each of these acquisitions to be accretive to our earnings within the year following the acquisition.
Eric Mendelson, Eric Mendelson, Laurans Mendelson
Speaker Change: At this time, I would like to introduce Eric Mendelson, co-president of HICO and president of HICO's flight support group, and he will discuss the first quarter results of the flight support group.
Eric, thank you very much.
Speaker Change: The Flight Support Group's net sales increased 15% to a record $713.2 million in the first quarter of Fiscal 25, up from $618.7 million in the first quarter of Fiscal 24. The net sales increase in the first quarter of Fiscal 25 reflects strong 13% organic growth.
Speaker Change: in the impact from our profitable fiscal 24 and 25 acquisitions.
Speaker Change: The organic net sales growth mainly reflects increased demand for our aftermarket replacement parts and repair and overhaul parts and services.
Speaker Change: Wencore continues to exceed our expectations and this was an excellent acquisition for Heiko.
Speaker Change: Our customers continue to find great value in our larger aftermarket product offerings.
Speaker Change: for their Aerospace Parts and Component Repair and Overhaul Needs, which has translated into excellent growth opportunities and success for both our legacy businesses.
We continue to operate Wincor as a stand-alone business operation.
Speaker Change: I have defined our strategy as cooperation, cash, capabilities, and consistency without consolidation.
Speaker Change: The results have proven this to be the absolutely correct strategy.
Speaker Change: As I've mentioned before, we continue to make good progress working together and serving our customers in a combined, seamless fashion.
Speaker Change: Some examples of how we are working together include, one, utilization of all HEICL and WENCORP PMAs and DERs at all repair stations, two, commercial and defense aftermarket sales
3. Wencore e-commerce platform lists all Heiko non-competitive PMAs
Speaker Change: Four, Glencore is utilizing Heiko's manufacturing base to quote and build many new products.
5. Engineering and Regulatory Cooperation
Six, sharing our best in-class vendors.
Speaker Change: And seven, our back office synergies, such as payroll, insurance, retirement benefit plans, cybersecurity, and export compliance.
Speaker Change: that will help offset additional regulatory compliance causes such as SOX and our FAA ODA.
Speaker Change: Flight Support Group's defense sales continue to grow, presenting a strong opportunity, especially as the current U.S. presidential administration prioritizes defense in cost efficiency.
Speaker Change: building upon our efforts over the past two years and frankly the decade before.
Speaker Change: For competitive reasons, I can't get into further detail on these efforts, but I can say that serious work is going into making this happen.
Speaker Change: Our missile defense components business is experiencing significant growth as well, driven by increasing demand from the U.S. and its allies.
Speaker Change: With a substantial backlog of defense missile orders and ongoing shortages, we anticipate meaningful expansion from this firm pipeline, reinforcing our commitment to delivering cost-effective solutions without compromising quality.
Speaker Change: The operating income increase principally reflects the previously mentioned net sales growth, SG&A expense efficiencies realized from the net sales growth, and an improved gross profit margin.
The improved gross profit margin principally reflects
The previously mentioned higher aftermarket replacement parts net sales.
The Fight Support Group's Operating Margin.
Speaker Change: The increased operating margin principally reflects the previously mentioned lower SG&A expenses as a percentage of net sales, an improved gross profit margin mainly reflecting efficiencies realized from the previously mentioned net sales growth.
Speaker Change: Acquisition related intangible amortization expense consumed approximately 270 basis points of our operating margin in the first quarter of fiscal 25.
The FSG's cash margin.
Speaker Change: before amortization, or what we refer to as EBIT A, was approximately 26%.
Speaker Change: which has been consistently excellent and is 120 basis points higher than the comparable flight support group cash margin of 24.8% in the first quarter of fiscal 24.
Speaker Change: I am very happy with the continued expansion of our cash margin and believe our efficient, decentralized operating structure has permitted us to expand these margins.
coupled with undisputed industry-leading quality and turnaround times.
Speaker Change: This is an incredible accomplishment, which is truly unique in our industry.
Speaker Change: Now, I would like to introduce Victor Mendelson, co-president of HICO and president of HICO's Electronic Technologies Group, to discuss the first quarter results of the Electronic Technologies Group.
Victor Mendelson: Thank you, Eric. The Electronic Technologies Group's net sales increased 16% to $330.3 million in the first quarter of Fiscal 25, up from $285.9 million in the first quarter of Fiscal 24.
Victor Mendelson: The net sales increase reflects strong 11% organic net sales growth and the impact from our fiscal 24 and 25 acquisitions.
Victor Mendelson: The organic net sales growth mainly reflects increased deliveries of our defense, space, and aerospace products.
Victor Mendelson: Our non-aerospace and defense markets witnessed sequential order improvement in the first quarter, which we believe bodes well for a sales recovery in those markets later this year, as customers continue working off their excess inventory.
Victor Mendelson: The Electronic Technology Group's operating income increased 38% to $76.5 million in the first quarter of Fiscal 25, up from $55.3 million in the first quarter of Fiscal 24.
The Operating Income Increase
Victor Mendelson: principally reflects the previously mentioned net sales growth, SG&A expense efficiencies realized from the net sales growth, and an improved gross profit margin. The improved gross profit margin principally reflects the previously mentioned favorable mix
Victor Mendelson: The Electronic Technology Group's operating margin improved to 23.1% in the first quarter fiscal 25, up from 19.3% in the first quarter fiscal 24.
Victor Mendelson: The improved operating margin principally reflects lower SG&A expenses as a percentage of net sales, mainly due to the previously mentioned efficiencies and the previously mentioned improved gross profit margin due to the favorable product mix.
Importantly, before acquisition related intangibles amortization expense.
Victor Mendelson: This is, you will recall, is how we judge our businesses, as it most closely correlates to cash. On a true operating basis, these are excellent cash margins and we are very pleased with them.
I turn the call back over to Larry Mendelson.
Thank you, Victor.
As for the outlook
We look ahead to the remainder of fiscal 25
Victor Mendelson: and continue to anticipate net sales growth in both the FSG and ETG divisions primarily driven by strong organic growth supported by increased demand for most of our products.
Victor Mendelson: In addition, we plan to accelerate growth through our recently completed acquisitions while positioning ourselves to capitalize on our cost-saving solutions for customers.
Our priorities remain focused on providing excellent career opportunities
for our team members while advancing new products and services.
Victor Mendelson: development, expanding market penetration, and maintaining our fiscal strength and flexibility, all with a commitment to delivering long-term value to our shareholders.
We believe the future is extremely bright.
for HICO.
balance of 25 is going to be very strong.
Victor Mendelson: and we feel that we have a tremendous opportunity to grow HICO larger than what it is today and we will continue to do so.
offer the opportunity for any of you to call.
Victor Mendelson: or if you have some questions or comments now, but if your comments are not taken today, please call Carlos or me or Eric or Victor, and we will be happy to give you the outlook.
Victor Mendelson: Keep in mind that ETG has the largest backlog in its history.
Speaker Change: Thank you very much. And we now open the floor for questions. Sumer, you can open the floor for questions.
Sumer: Thank you, and if you would like to ask a question, please signal by pressing star 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question.
Speaker Change: And our first question comes from Larry Zolo with CJS Securities.
Speaker Change: Yes, hi, good morning. Pete Lucas for Larry this morning. You guys covered a lot and I do appreciate that.
Speaker Change: I guess just starting with Flight Support Group, a very impressive mid-teen sales growth on top of mid-20s in the first quarter last year. You talked about the growth drivers being organic demand for aftermarket repair services.
Speaker Change: I guess maybe if you could just give us a little more color, is that penetration of existing customers or expansion with newer customers? How should we think about that?
Speaker Change: Hi, this is Eric. I'd be happy to answer the question. So I think that most of the growth is coming from expansion with existing customers. We pretty much sell to everybody in the industry.
So it's just deeper market penetration.
about 12% organic growth last year.
Speaker Change: So, that really is, I think, an outstanding accomplishment and speaks to the increased market penetration and the fact that we're hanging on to this market, we're continuing to grow, our customers want additional cost savings, products and services, and it's really taking hold very well.
Speaker Change: But how should we think about that going forward? With sales expected to grow sequentially,
Speaker Change: what keeps margins what looked to be kind of flat for the rest of the year.
Is that simply a question of mix?
It's funny you ask that. So we...
Speaker Change: You know, we get budgets and updated forecasts from all our subsidiaries.
Speaker Change: And somebody, one of our investors commented to me that on the last call I said something about our, you know, while our people are phenomenal, they also tend to sandbag quite well.
Speaker Change: So, they turn in their numbers, they turn in their budgets, and it really, I don't think it's sandbagging, I think it's truly what they think that they can accomplish. You know, mildly conservative.
Speaker Change: are able to develop the products, get the products in, get them sold, and we're able to perform and do much better.
Speaker Change: While I'm very happy with our roughly 26% EBITDA margin in the first quarter, I'm reluctant to, you know, predict anything higher. Now if you look at the trend and what happens...
Speaker Change: We continue to move up and, you know, we've gone on an EBITDA basis from, I don't know, roughly 18% to now 26% over the last approximately 10 years.
Speaker Change: and we've just gradually taken that up and I think that as a result of having a team that has been working together for a very long time, they understand each other, they trust each other, they like each other.
Speaker Change: And they're able, as a result, to make, you know, if you will, make bets, take risks.
Speaker Change: that the results are going to be very good and everybody's going to do their job. So, while we are not forecasting increasing margins, I mean, that has been our trend and our people are working very hard to make that happen.
Extremely helpful. Thanks. I'll jump back in the queue.
Thank you.
And our next question comes from Sheila Kayalu with Jefferies
Sheila Kayalu: Good morning, guys, and great quarter. So I guess my first question, just a little bit of fun here, margins are 23% in both segments for the first time. So how do we think about the expansion from there? Eric, Victor, you both mentioned.
Sheila Kayalu: EBDA margins well above that in the 27% range. So how do we think about margin expansion for both segments from here and longer term, but near term, how price contributed to each segment?
Hi Sheila, this is Victor.
Sheila Kayalu: For the electronic technologies group, as you've probably heard me say, I feel comfortable with that EBIT A range.
in the 26% to 28% range, right?
Sheila Kayalu: You know we never Forecasted we never predicted that the margins would end up being where they are Our style Tycho is as you know you know for following us and getting to know us over the last
Sheila Kayalu: decade or two, has been just to keep our heads down, work very hard.
Sheila Kayalu: Execute on the details. Everything is in the details and making sure that we minimize the obsolete inventory, that we make sure technically the parts are where they need to be, we understand the pricing, what makes our customers happy.
Sheila Kayalu: And when you look at, you know, flight support group is not an OEM. We don't have typically proprietary products where we are the only.
Sheila Kayalu: Authorized supplier, you know, we go to sleep every night knowing that the vast majority, you know, 90 Plus percent of our product line is also offered by somebody else
Sheila Kayalu: and yet we're able to turn out this 26% EBITDA, which we think is the most important margin because depreciation and CapEx are roughly equivalent. And if you're gonna be in business long term, EBITDA is the correct way to look at it. But even on an EBITDA basis, because that's what our peers do, we're 27%.
Sheila Kayalu: So, to be an independent business doing 27% EBITDA margins, I think is frankly phenomenal and honestly, I never thought that we would get here.
Sheila Kayalu: So having said that, our people are working really hard in order to continue to improve efficiency. This is not done through pricing. This is done through watching our costs.
Sheila Kayalu: increasing our product line, absorbing more fixed overhead, so I think
Sheila Kayalu: I think it shows, if you will, the uniqueness of the franchise and the fact that
Sheila Kayalu: Most others in the space, in the independent space, don't operate at those types of margins. So I'm nervous to predict that they're going to go higher, but I would say I'm optimistic and hopeful that they will.
Speaker Change: Sure, maybe Eric if I could get ask one on PMA since we didn't get to chat about this I know you don't want to talk about defense a PMA opportunities But overall PMA adoption has become a hot topic as MRO facilities are pretty tight. What are you thinking about? penetration into the market adoption and
Sheila Kayalu: You know, any new product opportunities that you're seeing and thinking about in 25.
Sheila Kayalu: Yes, so we're, you know, we continue to focus on broadening our product line, developing more parts. We're really very excited about the new acquisitions that we've had in flight support in the first quarter. One is the Honeywell AIMS and VIA product lines for, basically, which is the avionics brains.
Sheila Kayalu: for the 777 and the 737 NG and also includes the new manufacturer of those units for the E-7 and the P-8s that are being delivered. So I like very much the broadening of our capability. We already had a very wide avionics.
Sheila Kayalu: business, broad avionics business, but that's an example of getting into some really critical technology which is coupled with the display units that we acquired over a year ago.
Sheila Kayalu: And then also I'm very excited about our Millennium International Acquisition. So this is really the leading...
BizJet
Sheila Kayalu: avionics repair facility, I think independent facility in the world. You speak to the customers, there is nobody like Millennium.
Sheila Kayalu: not even Heiko who's doing the stuff that Millennium is doing and we are just absolutely overjoyed that they are in the Heiko family and we can offer our customers
Sheila Kayalu: PMA and DER if that's what they want, or if they want OEM, we're happy to do that as well. So it's, you know, whatever the customer wants. So I think that speaks to the broadening and I think there's going to be a lot more potential for us.
Sheila Kayalu: in the BizJet space. We're very, very much focused there. People have asked us to get into it.
Sheila Kayalu: and I'm very excited about it. But, again, we just continue to broaden the capabilities. Ten years ago, nobody would have ever thought that HICO would control the aircraft information management system of the 737 NG or the 777, and we coupled that with our 20,000 PMAs and, you know, whatever it is.
Sheila Kayalu: nearly 10,000 DERs and it's a pretty broad offering which just continues to grow step-by-step every quarter.
Great, thank you.
Thanks.
Speaker Change: And our next question comes from Noah Poponok with Goldman Sachs.
Speaker Change: Hey Noah. Hey, good morning everyone. How are we doing? Good morning.
Speaker Change: Thanks for the time. I wanted to follow up on the pricing question because a few quarters ago
Speaker Change: expanding profitability and creating value, but but it is an industry with pricing power and then your some of your peers and companies in the OEM parts have had price increases well above
Speaker Change: the historical average recently in the inflationary window we've been in.
Speaker Change: And so you had the strategic decision of do you just keep taking even more market share?
Especially via PMA which which is
which has attractive pricing.
Speaker Change: or do you close that price gap or do you close, you know, do you do half and half and I, and you had talked about.
Speaker Change: question. Thank you. You know it's a great question Noah and we clearly have left a lot of money on the table.
Speaker Change: We, you know, our philosophy always has been that we've got to cover our cost increases.
Speaker Change: And we exist because our customers need reasonable prices coupled with
Speaker Change: You know the shortest turn times in the highest quality, and that's really what we've done So the answer is no we have not squeezed the orange in order to deliver these numbers
Speaker Change: We could, you know, frankly, I think our prices could be a lot higher.
Speaker Change: But we don't do that. And, you know, our prices have been, as you know, sort of the increases have been sort of low single digits.
Speaker Change: maybe the high high end of those single digits but really sufficient in order to cover our cost increases.
We do have certain contracted customers.
Speaker Change: where, as a result of fixed prices, for a longer period of time, there could be more substantial price increases. But if you look at it on an annualized basis, it's still that, you know, I would say, low single digits up to the high end of the low single digits.
Speaker Change: So we have not, no, we've not pushed the pricing. We want to make sure that we're very fair. And I think, you know, when you look at the, I know Wall Street looks at organic growth. You know, they want to see the revenue, organic growth rate. That seems to be the metric, and 13% is great.
Speaker Change: operating income increase of which let's just say 90% of that is or 80% of that is organic that's huge and we do that without
Speaker Change: jacking prices inappropriately. So I think we have a good, a very, very good balance, and that's why we have, if you will, a lot of gas in the tank and why people want to work with HICO.
Speaker Change: Okay, great. I appreciate that, Eric. And just one on ETG, I guess the defense, space, and arrow.
Speaker Change: segment of it up 11% in the quarter and that's been
Speaker Change: You know, volatile and I think a watch item for people.
and it did that despite having a fairly tough compare.
Speaker Change: Victor, Carlos, can you just kind of talk about what you're seeing there, how you expect that to trend through the rest of the year?
Um
Speaker Change: Carlos, do you want to? I could take a stab at that. So, Noah, we had tremendous growth in defense space and aerospace in Q1 and it doesn't feel to me
Speaker Change: like that that's going to subside. Now, I would caution you that ETG's characteristics are very lumpy. We have big quarters and down quarters. And I think, broadly speaking, for the year, I see a continuation of growth in defense and aerospace.
Speaker Change: space I see being very lumpy it was good this quarter it next quarter based on shipments it could be down it could be up we don't know yet and we still have
Speaker Change: What I would consider a little bit of a tailwind that's coming back in the other electronics area, which
Speaker Change: So the first quarter was pretty flattish, maybe just a tick down, and so we haven't seen the big recovery yet that we talked about in December, but I do expect as we get into our second quarter here that we should see some life in it, and that will be more tailwinds. So I have some good expectations for the ETD this year.
Speaker Change: Yeah, and I'll add to that This is Victor You know on the other markets the non A&D markets we're seeing orders Moving in the right direction not a bow wave not a huge
Victor Mendelson: amount, but definitely moving in the right direction and as I mentioned in my comments improving a bit.
Victor Mendelson: And sometimes we break out of that and people think we're at a different inflection point, but we tend to look over the course of the year for the overall average.
Okay, great. Thanks so much.
Thank you. You're welcome.
And our next question comes from
Scott Mikes with Melius Research
Good morning
Good morning.
Speaker Change: Larry, Victor, Eric, Carlos, quick question on leverage. You ended with leverage at 2.1x, but you still deployed 255 million of capital for acquisitions in the quarter. Given how big the overall enterprise is and the amount of cash you're generating.
Victor Mendelson: Is there any fundamental shift in how much leverage you want to operate the business with on a go-forward basis?
The answer is no.
Victor Mendelson: And we promised the street that we would drop it to two times within one year, which we did. We like it at two times.
Victor Mendelson: But if we see in a very desirable acquisition, we can go to three times
Because we have such strong cash flow
Victor Mendelson: I mean, our cash flow permits us to go from three times or three and a half times back to two times within, say, 12, 14 months.
Victor Mendelson: So, we want to take advantage of our ability to make an acquisition using cash because people like cash.
And if we get a good opportunity, we will reach.
create strong cash flow itself.
Victor Mendelson: Number two, that it will have increased the earnings per share.
Victor Mendelson: and that it will be a strong business. And so far, we have accomplished those objectives. So I think that, you know, we've used our capital in a very, very.
Victor Mendelson: careful way, and you've seen the results. When we made an acquisition of WENCOR, people said, oh my god, you know, you stretched it three times or so, and look at the results. So I think
Victor Mendelson: You're going to see more of the same. The one thing that I think HICO is really good at is managing its capital.
Victor Mendelson: And we have shown that over the last 30 years, and I believe it will continue exactly the same.
Okay, and then switching over to supply chain.
Victor Mendelson: A lot of your peers have talked about seeing meaningful improvement in their supply chain. So I was wondering if you could provide color on how the suppliers are performing at both FSG and ETG. And then, are there any sort of metrics you can provide, whether it's on-time delivery or parts conforming to quality that are coming from your suppliers?
Victor Mendelson: Yeah, so look, this is Victor. I'll start with it. The supply chain issue we had experienced...
a while ago have really improved.
Victor Mendelson: And we've talked about that on some prior calls. And I would call it more or less noise level now across the ETG. There's some businesses that are particularly affected still and others that are not. But to me, it feels fairly normal in that regard. I don't have any specific metrics.
on that, uh, on...
Victor Mendelson: A couple years ago, we felt it was about $50 million or so in total, where we had things shifting out to the right, but it's dramatically less than that now, and I'd call it more in the normal range.
Victor Mendelson: Nicely higher, if all of our suppliers were able to deliver. There's been a massive
Victor Mendelson: You know our suppliers have had a significant issue with regard to labor. I think that that's getting settled out now the answer is yes, we do look at the the on-time metrics
You know by dollars by orders
Victor Mendelson: by quantity in all of the businesses. So we do study it. I'm not prepared to share the details right now, especially since we operate a decentralized business and I don't have a, if you will, a consolidated report, which pulls all that together, but we do review it at each of the businesses. So I would say.
Getting better, but not great.
Victor Mendelson: is obviously going to further constrain the industry and what we'll have to see I think that's going to impact a lot of participants in the industry.
Thanks for taking the questions.
Thank you.
Speaker Change: Good morning Larry, Eric, Victor and Carlos. I'm on for Peter Arment this morning. Thanks for taking the time on the questions and congrats on a really strong quarter. Victor, maybe a question for you on Doge and just defense.
Speaker Change: Just given the constant news flow we're seeing tied to DOJ and they're currently reviewing Pentagon contracts.
Speaker Change: Could you just provide your updated view on ICOS positioning within defense markets?
Speaker Change: Just given the value-based approach that you follow and obviously this aligns really well with the current administration's goals and
Speaker Change: Is there any particular areas maybe within sort of supporting legacy or airborne fleets or defense electronics with radar missile defense platforms that you see as a really strong area to target?
Speaker Change: So I think there's some very nice opportunity for us in there. And to be clear, we believe there will be winners and losers. And this hasn't shaken out yet as to what will win and what will lose. So we can't say with certainty.
They could do otherwise.
Speaker Change: And so that continues to be the case. I think the things that we're excited about in particular are some of the missile defense programs. We have some very good content on those.
some of the newer space-based programs.
where I think we can offer some really great solutions.
Speaker Change: there in the ETG, as well as that basic blocking and tackling that I talked about. And again, we've always, as Eric mentioned, with our
PMA Parts Business
Speaker Change: We've never pushed on the pricing lever. That has been our strategy and approach all along to deliver great value to the customers so they're not looking to go somewhere else or figure out how to go somewhere else. So I think it's definitely in yours to our benefit all the time, but especially at a moment like this.
Speaker Change: You know, for the flight support group, Eric may want to address that, but I do think there's some very nice revenue upside for us, not necessarily this year, but as we get a little further out on commercial parts, equivalent parts for military use.
Speaker Change: Yeah, Victor, I agree with everything that you said. I think there are going to be very good opportunities within the Defense Department.
competitive reasons we never get into specific customers nor products.
But obviously the spend is tremendous.
Speaker Change: And we all know that there's tremendous areas for improvement. Everybody acknowledges that.
Speaker Change: And I really need to, if you will, congratulate the administration on this focus because everybody has known this for a long time and frankly not much or anything has been done about it.
Speaker Change: and even everybody in the industry and all of the AIA members agree that there's you know tremendous opportunity for efficiency gains in terms of process.
cost alternatives.
Speaker Change: So, I think HICO is going to be very well positioned, you're familiar with our product line, whether it's parts, repairs, distribution, defense sustainment, specialty manufacturing, I think we are going to be in the sweet spot here.
Speaker Change: and, you know, that's what HICO has been built to do, you know, to deliver those types of savings, so I'm quite optimistic. But again, this is not going to be a fiscal 25 story, you know, maybe there'll be a little bit of revenue in fiscal 26, but a lot has to be done.
Speaker Change: and you know that that'll take a little bit of time but I think at least we're we're on our way
Speaker Change: Perfect. Thanks, Eric and Victor. That's very helpful. Just a quick follow-up, just...
Speaker Change: Perhaps, Eric, back to your call, there's just some high-level thoughts on commercial aerospace, you know, global travels at record levels, but the OEM build rates are directionally moving higher, specifically at Boeing in 2025. If you just talk about, for FSG, just the impact, if any, on medium-term margins, call it the next one to three years, as the industry makes shifts towards...
aftermarket towards more of a OEM mix.
Speaker Change: Yeah, you know, that's been spoken about now for, you know, a couple of years.
Speaker Change: And yes, Boeing in particular has had more challenges, but if you look, I mean, Airbus has been delivering a lot of new aircraft.
Speaker Change: And if you look at the way the fleet is expanding and how people want to travel, you know, as incomes increase around the world, I...
Speaker Change: spent the first three days of this week reviewing our sales with all of our sales leaders in the various businesses and I can tell you they don't see any slowdown whatsoever.
Speaker Change: So I think things are going to be very strong and I'm really not I'm just not worried about it you know if down the road there's You know
Speaker Change: a reduction then fine we go ahead and handle it we've been through in the last 35 years so many you know phases of this industry but fundamentally you look at the
Speaker Change: age of the fleet out there and how, you know, you've got this
whatever it is, 20,000, 27,000 aircraft aging.
Speaker Change: one year per year. Yes, some of the older ones will come out, but the vast majority of them are going to continue to consume a lot of parts at higher price points.
Speaker Change: And I think HICO is very well positioned. If a customer wants OEM material, we've got it for them. If a customer wants alternative material, we've got it for them.
Speaker Change: then Seal Dynamics and Wincor. I mean they knock the ball out of the park continually and they are able to grow their principal's business because you know once you're locked out of a particular program you can't access it.
Speaker Change: as a result of the connection with, you know, all of the other HYCO and Wincore PMA and repair opportunities. But we're able to deliver a product and a service that nobody else in the industry can, bar none.
Speaker Change: So, I'm quite optimistic that regardless of what happens with, you know, Boeing starting to deliver more aircraft, that HICO's got a lot of tailwinds here.
Great. Thanks for taking my question.
Thank you.
Our next question comes from Tony Bancroft with Gabelli Funds.
Tony Bancroft: Thank you so much, gentlemen. Very well done, as always. Any update? Just interested in the previous acquisition you made a little while ago on Honeywell, and I apologize, I got on late on another call, but on Honeywell's avionics businesses that you guys did. Any update with that? Is there any more, anything out there that you're interested in? Do you still like that area? Maybe just what your appetite is there?
Speaker Change: Yeah, we, Tony, great question. You know, Honeywell is a phenomenal company. They put out incredible products.
Speaker Change: and we're very happy to be partnered with them and now we have purchased three product lines from them in the last 18 months and I think it's worked out extraordinarily well.
Speaker Change: because they are able to take their limited floor space and their limited number of team members and allocate them to higher value activities.
Speaker Change: and Heiko is a great partner when it comes to buying these product lines. We execute extremely well. We're very knowledgeable about the products and we are very well-liked by the customers.
So...
Speaker Change: You know, I think, you know, not only Honeywell, but all, you know, many different manufacturers out there we've now purchased product lines from.
Speaker Change: And we have really a very successful time-tested process where we're able to buy, you know, whether it's from Northrop or Triumph or Honeywell or others that we don't even talk about.
Speaker Change: We've been able to buy product lines, get them integrated, make sure that the customers are happy, and it works out very well. So I'm overjoyed with the product lines that we bought in terms of the display units and the aircraft information management system and the ELT, the emergency locator, transmitters for customers.
Speaker Change: commercial aircraft and I think that there continues to be very good opportunity because we're known as a very reliable partner.
and then
Speaker Change: New position for them and would ever be possible that they were just I mean, you know We want to buy your entire company you guys have done so well and it sort of falls in line with You know essentially all their all their values just just want to get your thoughts on that
Speaker Change: Yes, so I mean we're obviously overjoyed that Berkshire has become an investor in Heiko and you know we think that definitely as you point out our cultures align and there's a lot of similarities in the business. We didn't, if you will, set out
Speaker Change: to sort of copy Berkshire's culture we just set out on on this path 35 years ago and it was a small 25 million dollar company to do what made sense.
Speaker Change: And what we saw was that by operating this decentralized model with incredible operators, you're able to produce phenomenal results. And, you know, Warren Buffett is the father and the genius behind, you know, originally behind that whole strategy. And he does it, obviously, in a significantly larger scale than we do it.
Speaker Change: So, we're very happy, you know, as far as your comment about Berkshire wanting to, or, you know, possibly buying Heiko. Heiko's not interested in, you know, in selling the business, we're
Speaker Change: I'm very happy with the continued growth. Berkshire has been absolutely phenomenal, a great shareholder, and frankly, we can learn a lot from them.
Speaker Change: So, I think Warren Buffett's got an incredible team and it's a very deep organization and we will continue to, I think, grow our relationship with them.
Speaker Change: Great job, gentlemen. Awesome to get out on the wall of fame there. Well done.
Thank you.
Our next question comes from Scott Ducholle with Deutsche Bank.
Hey, good morning and great results.
Thank you. Good morning.
Speaker Change: And if not, is that a business you could ever see the company getting into, particularly given the recent events at PCC?
Speaker Change: Yeah, PCC, they operate a phenomenal business, you know, whether you look at their castings, their forging, their fasteners.
Speaker Change: You know, I think for HICO to get into business trying to compete with PCC would be foolish. You know, they have got it so ground in and they know exactly what they're doing and they're phenomenal.
Speaker Change: So, look, you know, there could be little opportunity here and there, but no, in the mainstream, I don't see it.
Speaker Change: you know get into you know to try to do what PCC what they do. You know the whole fire thing is a very unfortunate thing but that's an incredibly well-run company and knowing PCC and you know the way that we do I think that they will figure out very quickly how to get those products resourced built elsewhere to get their facility up and running. So I've got a lot of confidence they're
Thank you.
Speaker Change: Okay, and then Eric, do you think PMA parts are fully penetrated and auxiliary power units at this point relative to where it can go or is there still meaningful opportunity there?
Speaker Change: And I'm focused less in terms of customer adoption and more in terms of whether you think the business has PMA'd all the SKUs that you think represent, you know, the opportunity on APUs, or if you think there's still more SKUs that the company can go after.
Speaker Change: You know, I don't really, you know, it's our policy to not comment on particular, particular products.
Speaker Change: Honeywell does a great job on their APUs and they've got big market share that has not been historically a huge area for HICO.
Speaker Change: provided details just in order to be consistent with what we do with other products. I'd rather not I'd rather not comment, but it has not been a big part of our business
Okay, thank you
Our next question comes from David Strauss with Barclays.
Hi, good morning. This is Josh Korn on for David.
Speaker Change: You've done about $400 million in acquisitions over the last two quarters. Could you give us an idea of how much those deals add in annualized revenue? Thanks.
Speaker Change: They've not been individually materials so we don't really want to discuss the financial operations of each one of those deals to be consistent with the way we report them in our public filings.
Speaker Change: Okay, and then to follow up I think on an earlier question, could you talk about how you see the sustainability of each of the 15% organic parts growth and then the 11% organic MRO growth in the quarter? Thanks.
Speaker Change: I'm very happy with the growth that we've had. I mean, obviously, we're gaining market share. We're doing very well. I've been reluctant to predict those numbers. The thing that we, as I mentioned earlier, that we really focus on is the earnings growth.
Speaker Change: because you know at the end of the day revenue is honestly meaningless. It's all about the earnings because that's the money that we can reinvest in the business and continue to grow our inventories and our footprints and everything else.
Speaker Change: So, you know, when you look, we've had 20, you know, 22% growth in operating income in flight support group of which, you know, most of that was organic.
Speaker Change: We get most of our orders in the month of shipment, so it becomes very difficult to go out on a ledge. Frankly, I think people are used to Heiko performing.
Speaker Change: so that they know that at the end of the day, whatever the industry is going to do, Heiko is going to be right at the top of it.
Speaker Change: and we have a history for 35 years of doing that.
Speaker Change: So I feel, you know, very strongly that there's a lot of tailwinds. We don't see a slowdown. But to predict specific numbers going forward, you know, really isn't what we do and just becomes very difficult because we're very, very quantitative.
Speaker Change: and data-driven and, you know, to sort of make projections, you know, with, it becomes very difficult.
Eric Mendelson, Laurans Mendelson, Laurans Mendelson
Okay, great, thank you.
Thank you.
The next question comes from Joel Santos with UBS.
Speaker Change: Hi guys, this is Juan Santos speaking on behalf of Gavin Parsons from UBS. Thank you for taking my question.
Speaker Change: I know you guys already talked a bit about pricing, but in terms of pricing are you able to share with us how much of your portfolio is on long-term agreements versus how much you can reprice annually?
Speaker Change: We can reprice, I would say, you know, if it's not annually within the next couple of years but, you know, there's a split there in terms of the long-term agreements and the repricing annually. You know, I don't have in front of me what that is and again because it's decentralized.
Speaker Change: They have to pull all that together from all of the operating subsidiaries But you know my guess is it's in roughly the 50-50 category something like that
Speaker Change: Great. And in terms of aftermarket, how should we think about the pricing power in this segment, given the current supply chain and competitive dynamics?
Speaker Change: We think that frankly we're leaving a lot of money on the table. We're making our customers very happy. We started out very small. I'm sure you know the history of the company but we started out very small and you know when in particular when you're small you have to treat people right in order to get business.
and we've maintained that philosophy.
Speaker Change: for 35 years. Now, having said that, we have to cover our cost increases.
and under no
Speaker Change: it's not possible for us to absorb cost increases and to not pass that along to the customers. We have to do that. And even if there's various catch-ups with customers.
Speaker Change: because they've had fixed pricing for a period of time, we've got to go ahead and do that. And we've been successful in doing that.
Speaker Change: But we stress to our customers that we don't take advantage of them price-wise You know, we only go for a minority market share on all the products that we do So we think that there's a lot of value to these customers
Speaker Change: So I think that there's a lot of pricing opportunity for us, but we have not taken advantage of it.
Thank you very much and congrats on the quarter.
Thank you very much.
Speaker Change: Our next question comes from Ron Epstein with Bank of America.
Hey guys, good morning.
That's right.
Speaker Change: So, just a couple quick questions, maybe following up on your commentary, Eric, about the fleet and the age of the 22,000 airplanes that each get a year older.
Speaker Change: Do you guys have an internal, you know, kind of guesstimate on when the average age of the fleet will actually start to come down? Because it seems like to me that that might not happen until like the early 2030s, but I don't know if you guys agree with that or kind of how you think about that.
Speaker Change: Yeah, we probably wouldn't look at the average. So for us what we would look at is the number of aircraft in each of the age cohorts.
So we think that continues to increase.
Speaker Change: Newer aircraft less attractive But we think you know Also, if you look at the newer generation aircraft, they're very very expensive to maintain I mean these aircraft aren't insane to maintain
Speaker Change: So, you know, the cost per, you know, equivalent unit. So we think that the The tide is rising
Speaker Change: And our market share is so relatively small that we can also grow our market share and then frankly compound it with the acquisition. So you put all that together and the fact that they'll deliver more new aircraft doesn't concern me.
Speaker Change: got it got it got it yeah I mean it does seem like there's a really long runway there and sometimes I just want to make sure we're thinking about right and then another one you to follow up on a question or a comment that you made around
Speaker Change: and the unfortunate fire at SPS. My understanding is that was a pretty darn big facility that made a lot of fasteners. How disruptive do you think it could potentially be, honestly, on the industry? And then I guess, how does that kind of blow back on you guys?
Speaker Change: Yeah, I think it's going to be quite disruptive. However, SPS is incredibly, you know, precision gas parts is incredibly well run.
Speaker Change: and if, you know, God forbid, anybody's going to have that kind of a problem, those guys are the ones who will figure it out, number one. Number two...
Speaker Change: You know, define what that's going to be. But there definitely is going to be an impact in the both the OE as well as the aftermarket. I think everybody is going to be impacted. You know, I want to be careful not to get too far over my skis.
Speaker Change: you know compliments on what they can do but our experience in working with them is those guys are really sharp and they're going to move heaven and earth to get this resolved quickly.
Speaker Change: Got it. And then maybe one last one. How are you guys thinking about...
Tariffs
given how global supply chains are in commercial aero.
to, I guess, to a far lesser extent in defense.
Speaker Change: and commercial areas. It's so global. I mean, how do you guys think about it, what it could mean ultimately?
When you
Speaker Change: When you peel it back, it's not a huge component of the overall cost. So we've done some back-of-the-envelope math. We think it could be anywhere from.
Speaker Change: Net net three to five percent increased our product cost assuming that there was a Tariff on you know half the countries we do business with
Speaker Change: And I think if that was the case, we'd have no problem passing it on to our customers. So from our standpoint, we're not terribly concerned with the outcome of that.
Got it. All right, guys. Thank you very much.
Thank you.
Speaker Change: Our next question comes from Gotham, Ghana, with a TD gallon.
Hey, thanks for extending the call and allowing the questions.
Guys, I was wondering, I was wondering on
Speaker Change: DOD PMA, do you have any sense for what the development timelines would be to get parts qualified and if the process would be much different from what you guys encounter normally with the FAA?
together.
The other right hand. No color.
Speaker Change: Yeah, I would say that there's going to be really, you know, continued work and development in that area. I'm reluctant to get into specifics because we don't want to tell our competitors what we are doing.
Speaker Change: and so therefore we really don't want to get into the details on what we're on you know what our strategy is but we do think that there's a very significant market
Speaker Change: and you know we'll have to see really how that how that develops but again we don't see that as you know that has not been a revenue contributor to date and we're not forecasting it in our 25 numbers
So the government doesn't, um...
You know, they have their own approval process.
Speaker Change: So, in general, just because somebody has a PMA doesn't mean that, you know, the government would use it. But the answer is yes. We sell a large amount to the government on various businesses that we're in, so we're pretty familiar with the government process and what it takes to get stuff done. You know, clearly this...
Speaker Change: focus on cost and readiness is going to be, I believe, very helpful for HICO.
Speaker Change: Yeah, I know it's an awkward, because you guys don't want to discuss it, but I'm more curious about, obviously you guys sell a lot of defense products.
Speaker Change: But I was wondering if, specifically, are you, have you been selling PMA defense products? Or are they, you know, OEM branded components via ETG and specialty products?
Speaker Change: No, we sell HEICO proprietary parts, yes, to the DOD. We sell parts...
Speaker Change: There are many examples of it, and yes, so we're not a stranger to it if that's what you're getting to.
Speaker Change: That's what I was wondering, if there's precedent for it already. It sounds like there is.
What do you think the...
What do you think the...
The constraint on broader adoption has been historically.
Speaker Change: I don't really want to speculate on it, but I think a large part of it probably was no one was concerned about cost.
Speaker Change: and you know now we're in a new world and we've got you know we have this massive budget deficit we've got to cut our cost we have to increase the defense output and I think that you know this is just a little hanging fruit
Thank you for your attention.
Speaker Change: And then Eric, I was curious, on the WENCOR, the aerospace integration, you mentioned a number of the initiatives you guys have...
already implemented.
Speaker Change: to make sure there's cross-selling. I was curious, how well penetrated do you think that cross-sell
Thrust has been, or do you feel like you're.
Far along in that journey, or is it early?
You know how much opportunity there is.
Speaker Change: I think we've done well. I mean, look, we operate the businesses independently but clearly, you know, when you put the two product lines together you've got, you know, much more compelling savings.
Speaker Change: So I think we're early in the you know, definitely in the first half
Speaker Change: I think that there is a lot more opportunity, a lot more opportunity out there. Look, I'm very happy with the progress that we've made to date, but I think our sales folks have a lot more potential out there, significant.
Speaker Change: And last one, I'm sorry, Victor, on the defense demand strength, you mentioned some product areas.
Speaker Change: Maybe if you could just broaden it or is this pretty broad-based or is it you're seeing the demand strength in the missiles
specifically, and that's kind of disproportionate or...
I'm just curious how broad the demand is.
improvement across the portfolio.
Speaker Change: You know, it certainly varies by subsidiary, and some have a greater uptake than others, and some are actually negative. So, on balance...
Speaker Change: It works out to how it's done. I would say it's pretty
Speaker Change: Fortunately, it's been fairly broadly based for us on defense, particularly in some of our larger lines, so we're excited about that. And of course, you know, in addition to that,
proven to be the correct thesis.
Speaker Change: And that's worked out extremely well. By the way, Excelli is doing very well for us. We are very happy with it.
It's been a very nice acquisition.
Speaker Change: and we are anticipating more growth and more interest there from our customers.
Speaker Change: Overall, feeling good about defense, again with the caveats that I mentioned earlier, the caveats that I mentioned earlier, but overall it has the right feel for the moment. And again, one of those caveats being it will remain volatile by quarter. That will always be the case in my opinion.
Thanks a lot guys. Appreciate it.
Our next question comes from Lewis Rivetto with Wolf Research.
Hey, good morning guys. Thanks for taking the question.
Warning!
Speaker Change: Hey Eric, maybe one for you. You said before that you guys offer OE parts if customers want more alternatives. I guess just to clarify that, are you selling like a PMA part and an OE part or is that more of an OE part and a DER repair or that sort of more not on the same product I guess?
Speaker Change: so it would typically not be on the same product over on the part side so it
Speaker Change: You know, we represent a number of OEs on the distribution side.
And so we sell OE parts.
Speaker Change: Typically, if we're doing the distribution on something, we don't also offer a PMA, although sometimes we do, but
Speaker Change: Most of the time, it's just the straight representation of the OE, and we are able, for those OEs,
to develop additional PMAs for them.
Speaker Change: So, an OE, let's just say that they got on the 737, but they didn't get on the A320 on the particular product that they make.
Speaker Change: So what we can do is go out to the A320 customers and through our PMA network, get those
Speaker Change: parts, get those customers to support the development of and commit to purchase those parts and then we can have the OE for whom we distribute manufacture those PMA parts.
Speaker Change: And that's been a very successful part of our strategy. But then also, separate from that, I was talking about
really referring to the repair business.
Speaker Change: that we're the largest independent component overhaul firm, I believe, in the world. Non-OEM, non-airline, non-government.
Speaker Change: And although we're a lot bigger than a lot of OEMs here at the government, but, you know, it's a very significant
Speaker Change: component repair business. And there we do what our customers want. If they want OE parts, then we use OE parts. If they want
Speaker Change: alternatives, PMA or DER, then we'll use those. It's really customer-driven on what they want. So in that case we stock both.
Speaker Change: You know, the ICO PMA parts as well as the OE parts, and they make the decision.
Speaker Change: Great, thank you. Any way you can size how big distribution is within flight support just now with WinCore, a little less easy to tell?
Speaker Change: Yeah, no, we don't, you know, due to all the disaggregation rules, we don't get into that. So we do disaggregate into parts, repair, and specialty. You know, the repair business now, I'm looking at
Speaker Change: Roughly what we did in the first quarter, I mean, it's over a $600 million business. So, you know, it's become quite a large enterprise.
Okay, thank you Carlos. Oh, sorry about that.
No, no, no, and then just looking at parts.
Speaker Change: For the first quarter, we did over $450 million in aftermarket replacement parts, so that's roughly $1.8 billion.
in sales. So that's a very significant business as well.
Speaker Change: Similar metrics to what we've had in the past, but I think that's where we kind of fall out for the year.
Effective rate for the year should be somewhere between...
18 and 19% is what I'm estimating.
Great. I appreciate it. Thank you.
Thanks, Louis.
Speaker Change: And at this time, I will turn the conference back to Laurans Mendelson for any additional or closing remarks.
Unknown caller. Thank you very much.
Speaker Change: to everybody on this call. We appreciate your interest, and we are available for any kind of conference that you may want to have in the future. So, thank you, and we will speak to you in the next second quarter.
Speaker Change: Thank you and this ends the conference. And this concludes today's call. Thank you for your participation. You may now disconnect.
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