Q4 2025 Heico Corp Earnings Call

December 19, 2025

Operator: Hello, and welcome to the meeting. Please wait for the next available operator.

Carlos L. Maury: Thank you for holding. May I have the pass code of the conference you would like to join?

[Analyst]: Thank you for holding. May I have the pass code of the conference you would like to join?

Jason Gursky: Hi. I'm going for HEICO Corp.

David Brown: Hi. I'm going for HEICO Corp.

Carlos L. Maury: Your name?

[Analyst]: Your name?

Jason Gursky: David Brown.

David Brown: David Brown.

Carlos L. Maury: David, what is your company name?

[Analyst]: David, what is your company name?

Jason Gursky: IERA.

David Brown: IERA.

Carlos L. Maury: I'm sorry, that was IERA?

[Analyst]: I'm sorry, that was IERA?

Jason Gursky: That's correct, yes.

David Brown: That's correct, yes.

Carlos L. Maury: Thank you. I'll place your line in.

[Analyst]: Thank you. I'll place your line in.

Jason Gursky: Thank you.

David Brown: Thank you.

Carlos L. Maury: You're welcome.

[Analyst]: You're welcome.

Sheila Kahyaoglu: This conference will be recorded.

Operator: This conference will be recorded.

Eric Mendelson: From our fiscal 2024 and 2025 acquisitions. The net sales growth reflects increased demand across all of our product lines. HEICO's operations continue to exceed our expectations, underscoring our highly successful combination with Wencor. Customers increasingly recognize the value of our expanded aftermarket parts, repair, and overhaul offerings, which has driven strong growth opportunities and continued success across the company. The Flight Support Group's defense business remains a compelling opportunity, particularly as both the US administration and our foreign allies emphasize defense readiness and cost efficiency. HEICO is extremely well positioned to support these priorities by delivering high-quality, lower-cost alternative aircraft parts that help reduce costs for the government and taxpayers while expanding our addressable markets. Our missile defense manufacturing business is also experiencing very significant growth, fueled by rising demand from the United States and our allies.

The Flight Support Group's defense business remains a compelling opportunity, particularly as both the US Administration and our foreign allies emphasize defense readiness and cost efficiency.

HEICO is extremely well positioned to support these priorities by delivering high-quality, lower-cost alternative aircraft parts that help reduce costs for the government and taxpayers, while expanding our addressable markets.

Eric Mendelson: We have substantial orders and backlog to support the continued expansion of this business, and we are committed to providing cost-effective solutions in industry-leading quality to our US military and our foreign allies. The Flight Support Group's operating income increased 30% to a record $201 million in Q4 of fiscal 2025, up from $154.5 million in Q4 of fiscal 2024. The operating income increase reflects the previously mentioned net sales growth, an improved profit margin, and SG&A expense efficiencies realized from the net sales growth. The improved profit margin principally reflects net sales growth within our repair and overhaul parts and services product line and a more favorable product mix within our specialty products product line. The Flight Support Group's operating margin improved to 24.1% in Q4 of fiscal 2025, up from 22.3% in Q4 of fiscal 2024.

We have substantial orders and backlog to support the continued expansion of this business, and we are committed to providing cost-effective solutions in industry-leading quality to our US military and our foreign allies. The Flight Support Group's operating income increased 30% to a record $201 million in Q4 of fiscal 2025, up from $154.5 million in Q4 of fiscal 2024. The operating income increase reflects the previously mentioned net sales growth, an improved profit margin, and SG&A expense efficiencies realized from the net sales growth. The improved profit margin principally reflects net sales growth within our repair and overhaul parts and services product line and a more favorable product mix within our specialty products product line. The Flight Support Group's operating margin improved to 24.1% in Q4 of fiscal 2025, up from 22.3% in Q4 of fiscal 2024.

Our missile defense manufacturing business is also experiencing very significant growth, fueled by rising demand from the United States and our allies.

We have substantial orders and backlog to support the continued expansion of this business. And we are committed to providing cost-effective solutions in industry-leading quality to our U.S. military and our foreign allies.

The Flight Support Group's operating income increased 30% to a record $201.1 million in the fourth quarter of fiscal '25, up from $154.5 million in the fourth quarter of fiscal '24. The operating income increase reflects the previously mentioned net sales growth and improved profit margin in SG&A. Expense efficiencies were realized from the...

The net sales growth.

The improved profit margin principally reflects net sales growth within our Repair and Overhaul Parts and Services product line and a more favorable product mix within our Specialty Products product line.

Eric Mendelson: The increased operating margin principally reflects the previously mentioned improved gross profit margin. Since acquisition-related intangible amortization expense consumed approximately 250 basis points of our operating margin in the fourth quarter of fiscal 2025, the Flight Support Group's cash margin, which is before amortization or what we also call EBITA, was approximately 26.6%, which has been consistently excellent and is 160 basis points higher than the comparable Flight Support Group cash margin of 25.0% in the fourth quarter of 2024. As I have previously discussed, we are laser-focused on cash generation at each of our businesses. I am very happy with the continued expansion of our cash margins and believe the decentralized operating structure has permitted us to expand these margins while simultaneously delivering high-quality products and services to our customers at substantial cost savings with lightning-quick turnaround times.

The increased operating margin principally reflects the previously mentioned improved gross profit margin. Since acquisition-related intangible amortization expense consumed approximately 250 basis points of our operating margin in the fourth quarter of fiscal 2025, the Flight Support Group's cash margin, which is before amortization or what we also call EBITA, was approximately 26.6%, which has been consistently excellent and is 160 basis points higher than the comparable Flight Support Group cash margin of 25.0% in the fourth quarter of 2024. As I have previously discussed, we are laser-focused on cash generation at each of our businesses. I am very happy with the continued expansion of our cash margins and believe the decentralized operating structure has permitted us to expand these margins while simultaneously delivering high-quality products and services to our customers at substantial cost savings with lightning-quick turnaround times.

The Flight Support Group's operating margin improved to 24.1% in the fourth quarter of fiscal '25, up from 22.3% in the fourth quarter of fiscal '24.

The increased operating margin principally reflects the previously mentioned improved gross profit margin.

Since acquisition-related intangible amortization expense consumed approximately 250 basis points of our operating margin in the fourth quarter of fiscal '25.

The Flight Support Group's cash margin, which is before amortization—what we also call EBITDA—was approximately 26.6%, which has been consistently excellent, and is 160 basis points higher than the comparable Flight Support Group cash margin of 25.0% in the fourth quarter of '24.

As I have previously discussed, we are laser-focused on cash generation at each of our businesses.

Eric Mendelson: Now I will discuss the fourth quarter results of the Electronic Technologies Group. The Electronic Technologies Group's net sales increased 14% to a record $384.8 million in the fourth quarter of fiscal 2025, up from $336.2 million in the fourth quarter of fiscal 2024. The net sales increase reflects strong organic growth of 7% and the impact from our fiscal 2025 and 2024 acquisitions. The organic net sales growth is mainly attributable to increased demand for our other electronics, defense, aerospace, and space products. The Electronic Technologies Group's operating income increased 10% to a record $89.6 million in the fourth quarter of fiscal 2025, up from $81.8 million in the fourth quarter of fiscal 2024. The operating income increase principally reflects the previously mentioned net sales growth and an improved gross profit margin, partially offset by higher SG&A expenses, mainly reflecting increased share-based compensation expense.

Now I will discuss the fourth quarter results of the Electronic Technologies Group. The Electronic Technologies Group's net sales increased 14% to a record $384.8 million in the fourth quarter of fiscal 2025, up from $336.2 million in the fourth quarter of fiscal 2024. The net sales increase reflects strong organic growth of 7% and the impact from our fiscal 2025 and 2024 acquisitions. The organic net sales growth is mainly attributable to increased demand for our other electronics, defense, aerospace, and space products. The Electronic Technologies Group's operating income increased 10% to a record $89.6 million in the fourth quarter of fiscal 2025, up from $81.8 million in the fourth quarter of fiscal 2024. The operating income increase principally reflects the previously mentioned net sales growth and an improved gross profit margin, partially offset by higher SG&A expenses, mainly reflecting increased share-based compensation expense.

I am very happy with the continued expansion of our cash margins and believe the decentralized operating structure has permitted us to expand these margins while simultaneously delivering high-quality products and services to our customers at substantial cost savings, with lightning-quick turnaround time.

Now, I will discuss the fourth quarter results of the Electronic Technologies Group.

14%, to a record $384.8 million in the fourth quarter of fiscal '25.

Up from $336.2 million in the fourth quarter of fiscal '24.

The net sales increase reflects strong, organic growth of 7%, and the impact from our fiscal 2025 and 2024 acquisitions.

The organic net sales growth is mainly attributable to increased demand for our other electronics, defense, aerospace, and space products.

The Electronic Technology Group's operating income increased 10% to a record $89.6 million in the fourth quarter of fiscal 2025.

Up from $81.8 million in the fourth quarter of fiscal '24.

The operating income increase principally reflects the previously mentioned net sales growth.

Eric Mendelson: The improved gross profit margin principally reflects a more favorable mix of our medical and other electronics products. The Electronic Technologies Group's operating margin was 23.3% in Q4 of fiscal 2025, as compared to 24.3% in Q4 of fiscal 2024. The operating margin change principally reflects an increase in SG&A expenses as a percentage of net sales, primarily from the previously mentioned higher share-based compensation expense, partially offset by the previously mentioned improved gross profit margin. Importantly, before acquisition-related intangible amortization expense, our operating margin was a very healthy 27.3%, as intangible amortization consumed around 400 basis points of our operating margin. This is how we judge our business, as that most closely correlates to cash. On a true operating basis, these are excellent margins, and we are very pleased with them. And now I turn the call back to Victor Mendelson to discuss our outlook.

The improved gross profit margin principally reflects a more favorable mix of our medical and other electronics products. The Electronic Technologies Group's operating margin was 23.3% in Q4 of fiscal 2025, as compared to 24.3% in Q4 of fiscal 2024. The operating margin change principally reflects an increase in SG&A expenses as a percentage of net sales, primarily from the previously mentioned higher share-based compensation expense, partially offset by the previously mentioned improved gross profit margin. Importantly, before acquisition-related intangible amortization expense, our operating margin was a very healthy 27.3%, as intangible amortization consumed around 400 basis points of our operating margin. This is how we judge our business, as that most closely correlates to cash. On a true operating basis, these are excellent margins, and we are very pleased with them. And now I turn the call back to Victor Mendelson to discuss our outlook.

And an improved gross profit margin, partially offset by higher SG&A expenses, mainly reflecting increased share-based compensation expense.

The improved gross profit margin principally reflects a more favorable mix of our medical and other electronics products.

The Electronic Technology Group's operating margin was 23.3% in the fourth quarter of fiscal '25, as compared to 24.3% in the fourth quarter of fiscal '24.

The operating margin change principally reflects an increase in SG&A expenses as a percentage of net sales, primarily from the previously mentioned higher share-based compensation expense, partially offset by the previously mentioned improved gross profit margin.

Importantly.

Before acquisition-related intangible amortization expense, our operating margin was a very healthy 27.3%. As intangibles amortization consumed around 400 basis points of our operating margin.

This is how we judge our business, as that most closely correlates to cash.

On a true operating basis, these are excellent margins, and we are very pleased with them.

Victor Mendelson: Thank you, Eric. Looking ahead to fiscal 2026, we anticipate net sales growth across both the Flight Support Group and the Electronic Technologies Group, driven by organic growth from increased demand for the majority of our products, as well as growth through our recent acquisitions. We'll continue to pursue selective acquisition opportunities to complement this growth, and our disciplined financial management remains dedicated to creating long-term shareholder value through a balanced combination of organic growth and strategic acquisitions while maintaining financial resilience and flexibility. Acquisition activity, of course, continues to be robust across both operating segments, supported by a healthy pipeline of potential acquisition opportunities currently under evaluation. And as such, we remain focused on identifying high-quality businesses that complement HEICO's existing operations and, of course, further strengthen our strategic positioning.

And now, I turn the call back to Victor Mendelson to discuss our outlook.

Thank you, Eric.

Looking ahead to fiscal 2026, we anticipate net sales growth across both the Flight Support Group and the Electronic Technologies Group, driven by our organic growth from increased demand for the majority of our products, as well as growth through our recent acquisitions. We will continue to pursue selective acquisition opportunities that complement this growth, and our disciplined financial management remains dedicated to creating long-term shareholder value through a balanced combination of organic growth and strategic acquisitions, while maintaining financial resilience and flexibility.

Acquisition activity, of course, continues to be robust. Both operating segments are supported by a healthy pipeline of potential acquisition opportunities currently under evaluation.

Victor Mendelson: Consistent with our long-standing acquisition philosophy, we will only pursue acquisitions and opportunities that meet our strict financial and strategic criteria that are accretive and have the potential to generate durable long-term value for HEICO and for our shareholders. So thank you very much for attending our call. Those are our prepared remarks, and we ask Samara, the operator, to please open the line for questions.

Consistent with our long-standing acquisition philosophy, we will only pursue acquisitions and opportunities that meet our strict financial and strategic criteria that are accretive and have the potential to generate durable long-term value for HEICO and for our shareholders. So thank you very much for attending our call. Those are our prepared remarks, and we ask Samara, the operator, to please open the line for questions.

And as such, we remain focused on identifying high-quality businesses that complement those existing operations and, of course, further strengthen our strategic positioning.

Consistent with our longstanding acquisition philosophy, we will only pursue acquisitions and opportunities that meet our strict financial and strategic criteria, that are accretive, and have the potential to generate durable, long-term value for HEICO and for our shareholders.

So, thank you very much for attending our call.

Those are our prepared remarks, and we ask Samara, the operator, to please open the line for questions.

Operator: Thank you. If you would like to ask a question, please signal by pressing star one 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. Again, press star one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Larry Solow with CJS Securities.

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. Again, press star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions.

And we'll take our first question from Larry Solo with CJS Securities.

Ken Herbert: Great. Good morning, and I appreciate the comments on Larry. I'm sure he's smiling down on the really strong free cash flow this quarter, so congrats on that.

Larry Solow: Great. Good morning, and I appreciate the comments on Larry. I'm sure he's smiling down on the really strong free cash flow this quarter, so congrats on that.

Victor Mendelson: Thank you, Larry.

Ken Herbert: Absolutely. First question, Eric, I guess for you, just on the growth and as we look at it at FSG. I think we used to view you as sort of a high single, low double-digit grower, and growth has been mid-teens plus on the core business for about five-plus years. Maybe the first couple were COVID recovery, but just trying to, as we look out, it feels like all the positives continue to align in your direction. But can you just help us just kind of bucket these drivers? Clearly, the market's growing nicely, but I don't know if growth has accelerated above historical levels where we are today. But is it just your expanded parts offering? Is it a market share? Is it just more acceptance of your parts? Just trying to, if you could just bucket those multiple positives, I think, driving your business.

Larry Solow: Absolutely. First question, Eric, I guess for you, just on the growth and as we look at it at FSG. I think we used to view you as sort of a high single, low double-digit grower, and growth has been mid-teens plus on the core business for about five-plus years. Maybe the first couple were COVID recovery, but just trying to, as we look out, it feels like all the positives continue to align in your direction. But can you just help us just kind of bucket these drivers? Clearly, the market's growing nicely, but I don't know if growth has accelerated above historical levels where we are today. But is it just your expanded parts offering? Is it a market share? Is it just more acceptance of your parts? Just trying to, if you could just bucket those multiple positives, I think, driving your business.

Great. Uh, good morning and appreciate the the comments on Larry and I'm sure he's uh smiling down on the the real strong. Free cash flow of this quarter. So congrats on that. Thank you. Absolutely. Uh, first question, um, Eric I guess for you just on the, you know, the growth in um, as we look at it at, uh, the FSG, you know, I think we used to view you as sort of a high single low, double digit grower and growth in mid teens, Plus on on the core business for about 5 plus years. You know, maybe the first couple were Co recovery but just trying to you know, I as we look at it, it feels like all the the positives continue to align, you know, in your direction. Um, but just could you just help us just kind of bucket what, you know, these drivers uh clearly the Market's growing nicely but I I don't know if the growth is accelerated above historical levels um where we are today, but is it just your expanded Parts offering um, is it a market share? Is it just more acceptance of your part?

Let's just try to—if you could just, you know, those...

Victor Mendelson: Sure, Larry, I'd be happy to do that. And thank you very much for your kind comments. Yes, for sure. Dan would be very, very happy with these results. I'm sure he has that.

Eric Mendelson: Sure, Larry, I'd be happy to do that. And thank you very much for your kind comments. Yes, for sure. Dan would be very, very happy with these results. I'm sure he has that.

Multiple positives, I think, driving your business.

Ken Herbert: Absolutely.

Larry Solow: Absolutely.

Victor Mendelson: So you're right. The organic growth has been tremendous. Frankly, it's even surprised us and me. I've always been optimistic, and I've always thought that we would continue to outgrow the market, but we continue to do so in a much more meaningful way. You're right. Why is that? I think it's a number of things. Number one, of course, we want to be grateful for the rising tide environment in the industry. That's been terrific, and that's been very strong for us. But I think the other thing that's been really good is the value proposition that HEICO offers our customers. The thing that perhaps I'm most proud about is that we've had 16% organic growth in this quarter and another 5% acquired on top of that for a total of 21% sales growth, but operating income increased 30%.

Eric Mendelson: So you're right. The organic growth has been tremendous. Frankly, it's even surprised us and me. I've always been optimistic, and I've always thought that we would continue to outgrow the market, but we continue to do so in a much more meaningful way. You're right. Why is that? I think it's a number of things. Number one, of course, we want to be grateful for the rising tide environment in the industry. That's been terrific, and that's been very strong for us. But I think the other thing that's been really good is the value proposition that HEICO offers our customers. The thing that perhaps I'm most proud about is that we've had 16% organic growth in this quarter and another 5% acquired on top of that for a total of 21% sales growth, but operating income increased 30%.

Sure where I'd be happy to do that and and thank you very much for your kind comments. Yes, for sure a damn would be great. Very, very happy uh, with these results. You know, I'm sure he has absolutely fine on his face. Um, so you you're right. The organic growth has been tremendous. And frankly, it's even surprise us and me, uh, I I, you know, I've always been optimistic and I've always thought that we would

Victor Mendelson: And at the same time, our customers are incredibly happy in getting huge value from us. So we've been able to drive operating income, if you will, primarily off of the organic sales growth. And our customers are still very happy. So I think that speaks to a tremendous sales opportunity that we have really in all of our businesses, whether it's in the PMA parts, repair, distribution, specialty manufacturing, defense, and I'm talking over on the Flight Support Group side, and then, of course, on the ETG side, more growth opportunity there. But I really think it's the value proposition that we offer combined with our decentralized and very entrepreneurial structure. I get emails after we announce the earnings from a number of different people within HEICO, and basically thanking me for the incredible results.

And at the same time, our customers are incredibly happy in getting huge value from us. So we've been able to drive operating income, if you will, primarily off of the organic sales growth. And our customers are still very happy. So I think that speaks to a tremendous sales opportunity that we have really in all of our businesses, whether it's in the PMA parts, repair, distribution, specialty manufacturing, defense, and I'm talking over on the Flight Support Group side, and then, of course, on the ETG side, more growth opportunity there. But I really think it's the value proposition that we offer combined with our decentralized and very entrepreneurial structure. I get emails after we announce the earnings from a number of different people within HEICO, and basically thanking me for the incredible results.

Uh, continue to outgrow the market, but we continue to do so in in a much more meaningful way. So you're right, what why is that? I, I think it's a number of things. Number 1, of course, we want to be grateful for the rising tide environment in the industry. So, uh, uh, that that's been terrific. And, um, that's been very strong for us. But I think the other thing that's been really good, um, is the value proposition that hiko offers our customers. You know, the thing that perhaps I'm most proud about is that we've had 16% organic growth in this quarter, and another 5% acquired, on top of that, for a total of 21, uh, sales growth. But operating income increased 30%. And at the same time, our customers are incredibly happy in getting huge value from us. So we've been able to, you know, Drive operating income,

Um, if you will, primarily off of the organic, uh, sales growth,

Victor Mendelson: I turn around and say, "No, yes, we've been very good on capital allocation, but they're the ones who really deliver these results. We're just reporting the results that they deliver." And it's as a result of being very intimate with their product line, understanding their customers, the whole competitive dynamic. So I think that as there are more aircraft out there and there's increased demand in both commercial aircraft as well as defense product and Missile Interceptors, I think that we are just incredibly well positioned. So look, the organic growth has surprised me. That's one of the reasons why we don't give guidance because we don't know where it's going to be. We just know at HEICO that we've got 11,000 people come to work every day, put their heads down, and work as hard as they possibly can, and frankly, the results are the results.

I turn around and say, "No, yes, we've been very good on capital allocation, but they're the ones who really deliver these results. We're just reporting the results that they deliver." And it's as a result of being very intimate with their product line, understanding their customers, the whole competitive dynamic. So I think that as there are more aircraft out there and there's increased demand in both commercial aircraft as well as defense product and Missile Interceptors, I think that we are just incredibly well positioned. So look, the organic growth has surprised me.

And our customers are still very happy. So I think that speaks to a tremendous, uh, sales opportunity that we have really in all of our businesses, whether it's in the PMA Parts, repair, distribution specialty, manufacturing defense, the same. And I'm talking over on the, the flight support group side. And then, of course, on the EtG stuff more growth opportunities there, but I really think it's the value proposition that we offer combined with our decentralized and very entrepreneurial structure. Um, you know, I get uh, emails before, you know, after we announced the earnings from a number of different people within Hico and basically thanking me for the incredible results and I turn around and say, no, it it's yes, we've been very good on Capital allocation but they're the ones who really deliver these results. We're just reporting the results that they deliver.

And it's as a result of being very intimate with their product line, understanding their customers, the whole competitive Dynamic. So, I think that as there are more aircraft out there, uh, and there's increased demand in, you know, both commercial aircrafts as well as defense products and, uh, you know, um, missile interceptors.

That's one of the reasons why we don't give guidance because we don't know where it's going to be. We just know at HEICO that we've got 11,000 people come to work every day, put their heads down, and work as hard as they possibly can, and frankly, the results are the results. But I do think that the value proposition is tremendous. And I guess lastly, one of the other things that I think we've seen over the last number of years is that other manufacturers are increasing their prices substantially. And I think that just further supports the HEICO value proposition. So I think we're just in a great place right now.

Victor Mendelson: But I do think that the value proposition is tremendous. And I guess lastly, one of the other things that I think we've seen over the last number of years is that other manufacturers are increasing their prices substantially. And I think that just further supports the HEICO value proposition. So I think we're just in a great place right now.

I think that we are just incredibly well positioned. So um look the organic growth is surprised me. Um that that's 1 of the reasons why why we don't give guidance because it it is you know we we we don't know where it's going to be, we just know at Howe that we we've got 11,000 people come to work every day. Put their heads down and work as hard as they possibly can and frankly the results of the results. So but I do think that the value proposition is tremendous and I, I, I guess, lastly, 1 of the other things that I think we've seen over the last number of years

Ken Herbert: No, no. I appreciate all that color. Yeah. No, that was great. Victor, how about a question for you? Just, I think you obviously had a little sluggishness last year, but a good year this year. Feels like most of your end markets, or if not all of them now, are kind of pointing up and to the right, obviously led by defense. I know the National Defense Authorization Act was just passed recently. Feels like that was positive. So, any just general thoughts on state of the union on your outlook?

Increasing their prices substantially, and I think that just further supports the HEICO value proposition. So, where I—I think we're just in a great, uh, we're in a great place right now.

Victor Mendelson: Yeah. We're projecting growth next year in ETG. As I always do, I guide people to look for, on an organic basis, mid to low single digits organic growth. If we do better, that's great. We'll see where everything shakes out a year from now and over the quarters, but we feel very good about our businesses. We did our budget reviews, our subsidiary annual reviews. As a rule of thumb, our companies are feeling good. Not every company is going to march ahead next year in the way we'd like to see, but overall, very pleased.

So and no, no, I appreciate all that color. Yeah. No that was great. Uh, Victor. How about you know, question for you just, you know, I think you obviously you had a little sluggishness last year, but a good year this year. Feels like most of your end markets or if not all of them now are kind of pointing up into the right. Obviously, led by defense, I know the National Defense authorization act, it was just passed recently, it feels like that was positive. So, you know, any just general thoughts on on, you know, State of the Union on on your, you know, Outlook.

Ken Herbert: Great. All right. Great. I appreciate it. Thanks for the call.

Larry Solow: Great. All right. Great. I appreciate it. Thanks for the call.

You know, we are, we're projecting growth next year, in EtG is as I always do. I, I guide people to look for on an organic basis, mid to low single digits organic growth, if we do better, that's great. Um, uh, you know what, we'll see where everything shakes out um, uh, a year from now and over the quarters, but we feel very good about our businesses. We did our budget reviews, our subsidiary annual reviews. Um, and as a rule of thumb our our companies are feeling good. Not not every company is going to March ahead next year and the way we'd like to see. But overall I'm very

Victor Mendelson: Thank you.

Great. All right, great. I appreciate it. Thanks for the call. Thank you.

Operator: We'll take our next question from Ron Epstein with Bank of America.

We'll take our next question.

With bank.

Ron Epstein: Hey, guys. Good morning. And again, my condolences to your father. On the quarter itself, just a couple of quick things. How are things looking for M&A as we go into 2026?

Ronald Epstein: Hey, guys. Good morning. And again, my condolences to your father. On the quarter itself, just a couple of quick things. How are things looking for M&A as we go into 2026?

Hey guys, good morning. And again, you know, my condolences about your father. Um, the

On the quarter itself, um, but a couple—couple quick things.

How are things looking for, you know, M&A, as we go into 2026?

Victor Mendelson: Very strong. I mean, we're working on a lot of opportunities. I would say each quarter, we seem to feel like it can't get any busier. Our pipeline is busier and busier, but that's exactly what happened in this past quarter and actually in recent weeks since the quarter ended. So we've got a lot we're working on, a lot that we're looking at. Of course, as you know, Ron, it doesn't happen until it closes. There's a lot of work, a lot of diligence. We're extraordinarily discerning in what we'll buy. But we're fortunate in that we are known as a great home for sellers, particularly entrepreneur founder managers and others who are really going to take care of the businesses, not only honor the legacy, but keep the entrepreneurial environment. So there's a lot of opportunity for us.

Very, very strong. I mean, we're we're working on a lot of opportunities. I would say each quarter we seem to to feel like you can't get any busier. Our pipeline is busier and busier. But uh that's exactly what happened at uh, at in this past quarter and actually in in recent weeks uh since the quarter ended. Uh, so we've got a lot, we're working on a lot that we're looking at. Of course, as you know, Ron, uh, it doesn't happen until it closes um and uh, uh, there's a lot of work. A lot of diligence, we're extraordinarily Discerning and what we'll buy but their we're fortunate in that. We are known as a great home.

Victor Mendelson: We'll see what we're able to mine out, but we're cautiously optimistic. And Ron, I would also just add to that. So we started really our acquisition program in earnest about 27 years ago. And we really acquired, I don't know, 110 companies. And we really have a track record. It's not just one, two, three, five, 10-year track record. It's a very, very long track record in DNA, which is embedded in the company. So when we talk to sellers, I think we're viewed in a very, very different light. And as a result, we've got just a tremendous, we've got a lot of bandwidth, and we also have a lot of different sellers who really view us as the buyer of choice. So I think we're in a really good position there.

Victor Mendelson: We'll see what we're able to mine out, but we're cautiously optimistic.

Eric Mendelson: And Ron, I would also just add to that. So we started really our acquisition program in earnest about 27 years ago. And we really acquired, I don't know, 110 companies. And we really have a track record. It's not just one, two, three, five, 10-year track record. It's a very, very long track record in DNA, which is embedded in the company. So when we talk to sellers, I think we're viewed in a very, very different light. And as a result, we've got just a tremendous, we've got a lot of bandwidth, and we also have a lot of different sellers who really view us as the buyer of choice. So I think we're in a really good position there.

For sellers for, you know, the particularly entrepreneur founder managers, and others who are really going to take care of the businesses, not only honor the Legacy, but keep the entrepreneurial environment. So, there's a lot of opportunity for us. We'll see what what we're able to mine out. But we're, we're cautiously optimistic and and Ron, I would also just add to that. So we, we started really our acquisition program in Earnest about 27 years ago and we really have, you know, required on. I don't know, 110 companies and we really have a track record, you know, it's it's it's not just 1, 2 3 5, 10 year track record. It's a very, very long track record in DNA, which is embedded in the company. So, when we talk to sellers, I think we're, we're viewed in a very, very different light. And, uh, as a result we've got, you know, just the tremendous, uh, we got a lot of bandwidth, and we also have a lot of different, uh, sellers who really

Ken Herbert: Got it. Got it. And how comfortable are you guys leveraging up to do a deal given the balance sheet's so strong?

Ronald Epstein: Got it. Got it. And how comfortable are you guys leveraging up to do a deal given the balance sheet's so strong?

Give us as the buyer of choice. So I, I think we're in really good position there.

Carlos L. Maury: Hey, Ron, this is Carlos. So I would say, similar to history, we're not afraid of leverage. For the right transaction, for the right deal for our shareholders, we would take on additional leverage. I don't think that our company, the culture, and the way we do business would suggest we'd like to have permanent leverage in the five or six range. But if we had to spike up to four, five, six times to do a deal, and I felt comfortable that within 12 to 18, 24 months, we could get that leverage back down to a manageable number, we would certainly do that if it was good for our shareholders. I think as a sort of status quo, we like leverage to be somewhere around two times. That's a comfortable spot for us.

Carlos Macau: Hey, Ron, this is Carlos. So I would say, similar to history, we're not afraid of leverage. For the right transaction, for the right deal for our shareholders, we would take on additional leverage. I don't think that our company, the culture, and the way we do business would suggest we'd like to have permanent leverage in the five or six range. But if we had to spike up to four, five, six times to do a deal, and I felt comfortable that within 12 to 18, 24 months, we could get that leverage back down to a manageable number, we would certainly do that if it was good for our shareholders. I think as a sort of status quo, we like leverage to be somewhere around two times. That's a comfortable spot for us. Right now, our permanent debt, if you would, or our bonds are sitting at about 1x EBITDA. That's very comfortable. I think we could probably carry 2x debt in permanent sort of financing posture and be very comfortable with HEICO with the cash generation that we have.

Got it, and like, how comfortable are you? How comfortable are you guys? As I've heard, it's enough to do a deal, given, you know, the balance sheet is so strong.

Hey Ron, this is Carlos. Um, so I would say, similar to history, we—we're not afraid of leverage for the right transaction, for the right deal for our shareholders. We would take on additional leverage. I don't think that our company, the culture, and the way we do business would suggest we'd like to have permanent leverage in the 5 or 6 range. But if we had to spike up,

You know, to 4, 5, 6 times to do a deal, and I felt comfortable that within, you know, 12 to 18, 24 months, we could get that leverage back down to a manageable number. We would certainly do that if it was good for our shareholders. I think as a sort of status quo, we like leverage to be somewhere around 2 times.

Carlos L. Maury: Right now, our permanent debt, if you would, or our bonds are sitting at about 1x EBITDA. That's very comfortable. I think we could probably carry 2x debt in permanent sort of financing posture and be very comfortable with HEICO with the cash generation that we have.

You know, that's a comfortable spot for us right now. We're, you know, our permanent

I think we could probably carry two turns of, you know.

Ken Herbert: Got it. Got it. Got it. And then maybe just one last one for me. And how's it working out? You guys had mentioned last year about doing PMA parts for defense. And how's that going? Is there any progress on that front?

Ronald Epstein: Got it. Got it. Got it. And then maybe just one last one for me. And how's it working out? You guys had mentioned last year about doing PMA parts for defense. And how's that going? Is there any progress on that front?

Of debt in permanent, you know, sort of financing posture and be very comfortable of higher with the, uh, cash generation that we have.

Got it, got it, got it. And then maybe just one last one for me. And that, how's it working on? You guys had mentioned last year about doing, um, um,

Victor Mendelson: Ron, this is Eric. So yes, there has been progress on that front. But as we always said, it was really going to be more of a medium-term project. As you know, it takes a little bit of time for the government to do all the stuff that they got to do. But we think that there's a very, very big opportunity there for us, and we're quite excited about it.

Eric Mendelson: Ron, this is Eric. So yes, there has been progress on that front. But as we always said, it was really going to be more of a medium-term project. As you know, it takes a little bit of time for the government to do all the stuff that they got to do. But we think that there's a very, very big opportunity there for us, and we're quite excited about it.

PMA parts for defense, and, you know, how's it going? Is there any progress on that front?

Ken Herbert: Got it. Great. Thank you all.

Ronald Epstein: Got it. Great. Thank you all.

Ron, this is Eric. So yes, there has been progress on that front. Um, but as we always said, it was really going to be more of a medium-term, uh, you know, project. Um, you know, as you know, it takes a little bit of time for the government to do all the stuff that they’ve got to do, but we think that there’s a very, very big opportunity there for us and we’re quite excited about it.

Carlos L. Maury: Thanks, Ron.

Carlos Macau: Thanks, Ron.

Victor Mendelson: Thank you, Ron.

Got it. Great. Thank you all.

Thanks Ron. Thank you, Ron.

Operator: We'll take our next question from Peter Arment with Baird.

Ron Epstein: Yeah. Good morning, Eric. Victor, Carlos. Nice results.

Peter Arment: Yeah. Good morning, Eric. Victor, Carlos. Nice results.

I'll take our next question from Peter Armet with Baird.

Carlos L. Maury: Good morning.

Eric Mendelson: Good morning.

Ron Epstein: Eric, you talked a little bit about defense and missile defense. If I remember correctly, defense and space is roughly about a quarter of the FSG segment. Do you see that mix changing much, just given all the growth you're highlighting?

Peter Arment: Eric, you talked a little bit about defense and missile defense. If I remember correctly, defense and space is roughly about a quarter of the FSG segment. Do you see that mix changing much, just given all the growth you're highlighting?

Victor Mendelson: I think, actually, it's going to probably remain pretty consistent because we have so much growth over on the commercial side that they're doing a great job keeping up with the huge growth over on defense. So I think it's probably going to be somewhat consistent going forward. But I do think that there are massive opportunities for us over on the defense side. As our customers become more familiar with our broad capabilities, and, by the way, not only our long-time large defense customers who we continue to support and have a great relationship with, but also the defense tech community. We're doing a lot of work for those guys as well, and delivering huge value. We've got design capability, manufacturing capability across a very wide array of products. We're able to solve all sorts of complex problems for them.

Eric Mendelson: I think, actually, it's going to probably remain pretty consistent because we have so much growth over on the commercial side that they're doing a great job keeping up with the huge growth over on defense. So I think it's probably going to be somewhat consistent going forward. But I do think that there are massive opportunities for us over on the defense side. As our customers become more familiar with our broad capabilities, and, by the way, not only our long-time large defense customers who we continue to support and have a great relationship with, but also the defense tech community. We're doing a lot of work for those guys as well, and delivering huge value. We've got design capability, manufacturing capability across a very wide array of products. We're able to solve all sorts of complex problems for them.

Victor Mendelson: And so I think that that's just going to continue to be a big opportunity for us along with the launch business. We've grown. We're very careful at HEICO. We don't talk about specific programs, specific customers, because frankly, we don't want to give a roadmap to our competitors on what we're doing. And we say, "Just look at our results." But I can tell you that there have been very well-known companies coming into HEICO, into our specialty products group, and into our other manufacturing businesses, asking to help solve some of this country's major, major problems. And I'm super proud of our team. So I think there's a big opportunity there.

And so I think that that's just going to continue to be a big opportunity for us along with the launch business. We've grown. We're very careful at HEICO. We don't talk about specific programs, specific customers, because frankly, we don't want to give a roadmap to our competitors on what we're doing. And we say, "Just look at our results." But I can tell you that there have been very well-known companies coming into HEICO, into our specialty products group, and into our other manufacturing businesses, asking to help solve some of this country's major, major problems. And I'm super proud of our team. So I think there's a big opportunity there.

Uh, I think actually it's going to probably remain pretty consistent because we have so much growth over on the commercial side that they're doing a great job. Keeping up with the huge growth over on defense. Um so I I think it's probably going to be, you know, somewhat somewhat consistent going forward. But I, I I do think that there are massive opportunities for us over on the defense side and as these uh, you know, as our customers become more familiar with our broad capabilities. And, and by the way, not only are long time, you know, large, uh, defense customers. So we continue to support and have a great relationship with, but also the defense Tech Community. We're doing a lot of work for those guys as well, and delivering huge value. We've got design capability, manufacturing capability, across a very wide array of products. We're able to solve all sorts of complex problems for them. And

And, um, so I I think that that's just going to continue to be, uh, a big big opportunity for us along with the launch business. We we've grown, you know, we don't we're very careful about Hico. We don't talk about specific programs specific customers. Because frankly, we don't want to give a road map to our competitors on, uh, on what we're doing. And we say, you know, just look at our results, but I can tell you that there have been, you know, very well-known companies coming into Hico

Into our Specialty Products group.

Ken Herbert: Appreciate the color. Maybe Eric and Victor, you can both comment on maybe Golden Dome, just how you see HEICO's business kind of positioned. Obviously, there's been a lot in the classified circles and behind the scenes, not much public. How do you view the opportunity set for HEICO? Thanks.

Peter Arment: Appreciate the color. Maybe Eric and Victor, you can both comment on maybe Golden Dome, just how you see HEICO's business kind of positioned. Obviously, there's been a lot in the classified circles and behind the scenes, not much public. How do you view the opportunity set for HEICO? Thanks.

Into our other manufacturing businesses, uh, asking to help solve, you know, some of this country's major, major problems. And we've really—I'm super proud of our team. So I, I, I think there's a big opportunity there.

Carlos L. Maury: Yeah. This is Victor. It's a good question. Obviously, we're excited by it. Golden Dome consists of a number of existing programs. From what we understand, because it's not, I think, intentionally so, it's not entirely publicly defined or maybe not entirely that we can discuss on a public call. But you have the existing programs on which we have great presence and have had for years, some of which Eric was alluding to in his comments, but the same in both, by the way, both ETG and FSG within the business. Then there's a lot of reconnaissance, surveillance, tracking that's being added to it and networking it together. A number of our businesses have been told that some of the things they're working on, some of the development contracts they've been getting are related to that.

Victor Mendelson: Yeah. This is Victor. It's a good question. Obviously, we're excited by it. Golden Dome consists of a number of existing programs. From what we understand, because it's not, I think, intentionally so, it's not entirely publicly defined or maybe not entirely that we can discuss on a public call. But you have the existing programs on which we have great presence and have had for years, some of which Eric was alluding to in his comments, but the same in both, by the way, both ETG and FSG within the business. Then there's a lot of reconnaissance, surveillance, tracking that's being added to it and networking it together. A number of our businesses have been told that some of the things they're working on, some of the development contracts they've been getting are related to that.

Appreciate the caller maybe um Eric and Victor you could both comment on maybe golden dome, just how you see how it goes business. Kind of positioned obviously. There's been a lot in the classified circles and behind the scenes not much public. Uh you know, how do you how do you view the opportunity set for for like go thanks?

Carlos L. Maury: Without being able to go into the specifics on each one of those programs, of course, and the subsidiaries, we'll take our customers at their word. There is no order that comes in at the top that says Golden Dome Department, right? So we'll have to judge as we go down the road how much it'll be. But it's definitely additive, and we're definitely excited about it. And we, of course, think it's the right thing to do for the country given the success, for example, of Iron Dome. And a number of our companies have components on a number of the Iron Dome constituent parts.

Without being able to go into the specifics on each one of those programs, of course, and the subsidiaries, we'll take our customers at their word. There is no order that comes in at the top that says Golden Dome Department, right? So we'll have to judge as we go down the road how much it'll be. But it's definitely additive, and we're definitely excited about it. And we, of course, think it's the right thing to do for the country given the success, for example, of Iron Dome. And a number of our companies have components on a number of the Iron Dome constituent parts.

Yeah, this is Victor. It's a it's a good question. Obviously, we're, we're excited by it. You know, golden dome consists of a number of existing programs and from what we understand uh because it's you know, it's not I I think intentionally so it's not entirely publicly defined um or maybe not entirely that we can discuss on a, on a public call. But um, you have the existing programs on which we have great presence and have had for years, some of which, you know, Eric was alluding to in his comments but the same in both, by the way, both EtG and FSG within the business and then there's uh a lot of reconnaissance surveillance tracking. Um that's being added to it and networking it together and a number of our businesses have been told that some of the things they're working on. Uh, some of the development contracts they've been getting are related to that. Um

Ken Herbert: Terrific. Thanks again, guys. Happy holidays.

Peter Arment: Terrific. Thanks again, guys. Happy holidays.

Companies have components on, uh, a number of the, uh, Iron Dome constituent parts.

Victor Mendelson: Thank you.

Eric Mendelson: Thank you.

Carlos L. Maury: Thank you and likewise.

Carlos Macau: Thank you and likewise.

Terrific. Thanks again, guys. Happy holidays. Thank you.

Operator: We'll take our next question from Ken Herbert with RBC Capital Markets.

And we'll take our next question from Ken Herbert with RBC Capital Markets.

Ken Herbert: Yes, hi. Good morning and very nice results. Maybe Eric, yeah, just to start, you've grown FSG margins pretty substantially, about 300 basis points from 2021 to 2022 to 2025. I can appreciate part of that's been mixed with Wencor. You've also seen some opportunities on pricing in other areas. How do we think about FSG margins into fiscal 2026 and beyond? And is there any reason we don't see continued pace of improvement?

Yes, hi. Good morning, and very nice results. Um,

Victor Mendelson: Hey, Ken. So thank you for your question. And yeah, I would, while we don't give guidance, you're right. We've grown margins substantially. And at the same time, the thing that I'm really proud about is we've kept our customers very happy while doing that simultaneously. I do think there's continued margin opportunity for us, continued margin expansion as we have basically greater absorption of what I'll call our fixed costs, whether it's in cost of sales or SG&A. I do think that we've got additional leverage there. We've made a number of significant investments over the last number of years to broaden our manufacturing, design, and distribution capabilities. And so I think we'll continue to see improved margins there. It's hard for me to guess what that is because the truth is I really don't know.

Eric Mendelson: Hey, Ken. So thank you for your question. And yeah, I would, while we don't give guidance, you're right. We've grown margins substantially. And at the same time, the thing that I'm really proud about is we've kept our customers very happy while doing that simultaneously. I do think there's continued margin opportunity for us, continued margin expansion as we have basically greater absorption of what I'll call our fixed costs, whether it's in cost of sales or SG&A. I do think that we've got additional leverage there.

Maybe Eric just just as, yeah, just to start. Um, you've grown, uh, FSG margins pretty substantially, by about 300 basis points from 21 to 20 or 22 to 25. I can appreciate part of that. It's been mixed with Wayne core. You've also seen some opportunities on on pricing, you know, their areas. How do we think about FSG margins into 20 fiscal, 26 and Beyond? And is there any reason we don't see continued pace of improvement?

Thank you for your question, and

Yeah, I would—you know, while we don't give guidance, you know, you're right, we've grown margins, uh, substantially. And at the same time, you know, the thing that I'm really proud about is we've kept our customers very happy, uh, at that—you know, while doing that simultaneously. Um, I do think there's continued margin opportunity, uh, for us—continued margin expansion as we have, you know, basically greater absorption of our, what I'll call, our fix.

We've made a number of significant investments over the last number of years to broaden our manufacturing, design, and distribution capabilities. And so I think we'll continue to see improved margins there. It's hard for me to guess what that is because the truth is I really don't know. As I mentioned, I think before, we've got this great decentralized organization, and they all submit budgets, which tend to be on, let's just say, the very conservative side. So it's very hard for me to predict going forward what it's going to be. But I just know that at the end of the day, they end up outperforming. So I think Carlos may have some additional thoughts on that.

Victor Mendelson: As I mentioned, I think before, we've got this great decentralized organization, and they all submit budgets, which tend to be on, let's just say, the very conservative side. So it's very hard for me to predict going forward what it's going to be. But I just know that at the end of the day, they end up outperforming. So I think Carlos may have some additional thoughts on that.

Costs, whether it's in cost of sales or sgna. Uh, I do think that we've got additional leverage their. We've made a number of significant Investments over the last number of years, to broaden, our manufacturing and design, uh, and, uh, distribution, uh, capabilities. And so, I I think we'll continue to see, uh, you know, improved margins there. It's it's hard for me to guess what that is, because the truth is, I really don't know. You know, as I mentioned I think before

Carlos L. Maury: You like in the football, Tammy?

Carlos Macau: You like in the football, Tammy?

Victor Mendelson: I am.

Eric Mendelson: I am.

Carlos L. Maury: Hey, Ken. So here's the deal. I continue to believe that the FSG is going to play between 23.5% and 24.5% GAAP operating margins. The reason that I have kind of a wide sort of vector there is because we have noticed and talked about some mixed impacts on the margin, particularly in specialty products, and repair and overhaul. Historically, the FSG margin story has always been about volume. So until that mix sort of settles down a little bit, it's kind of hard to tighten that up. But I think you could expect between those ranges. And hopefully, it will be towards the high end of that. There'll be reasons that are quarter-specific if we're not. But I think that's the range you should expect.

Carlos Macau: Hey, Ken. So here's the deal. I continue to believe that the FSG is going to play between 23.5% and 24.5% GAAP operating margins. The reason that I have kind of a wide sort of vector there is because we have noticed and talked about some mixed impacts on the margin, particularly in specialty products, and repair and overhaul. Historically, the FSG margin story has always been about volume. So until that mix sort of settles down a little bit, it's kind of hard to tighten that up. But I think you could expect between those ranges. And hopefully, it will be towards the high end of that. There'll be reasons that are quarter-specific if we're not. But I think that's the range you should expect.

We get, um, you know, we've got this great decentralized organization and they all submit budgets which tend to be on the let's just say the very conservative side so it's very hard for me to predict going forward, what it's going to be but I just know that at the end of the day they end up outperforming. So I think Carlos may have some additional thoughts on that. Yes. See. Hi, can the football team me? I am. Hey Ken. Um, so here. Here's, here's the deal. I I continue to believe that the FSG is going to play between 23 and 12 and 24/2 GAP. Operating margins. Um, and the reason that I have kind of a wide sort of vector, there is because we have noticed and talked about uh some mixed impacts on the margin particularly especially products and repair and overhaul. So and you know historically the

FSG margin store has always been about volume. So until that mix sort of settles down a little bit, it's kind of hard to tighten that up, um, but I think you could expect between those those ranges and, you know, hopefully it'll be towards the high end of that and and they'll be reasons that are um, you know, quarter specific if we're not. But I think that's the range you should expect.

Ken Herbert: Well, that's helpful, Carlos. Thank you. And if I could, Eric, just one other question. It seems like each time this year we have a debate around better deliveries out of Boeing and Airbus and the implications of what that could mean for aftermarket spending. Can you just comment on what you're seeing at airlines today as they think about 2026 around aircraft retirements? Obviously, fuel prices are low, continued use of legacy or older assets. Just what's your view on aftermarket fundamentals into 2026?

Victor Mendelson: Yeah, it's a great question. And look, we've got the utmost respect for Boeing and Airbus. And we think that as well, of course, Embraer. And we think that they're going to get a lot of the supply chain issues worked out. These are phenomenal companies that put out the best products, unbelievable products. And the world really needs them. And they will get all their situation worked out. So then the question is, what happens to the rest of the aftermarket there on the older aircraft? And we think that the older aircraft will continue to be in very good demand. You can see what the retirement rates have been. And again, you've got this older fleet that is a very large fleet, which is continuing to age one year per year and consume a massive amount of parts. So we think that we're in very good position.

Eric Mendelson: Yeah, it's a great question. And look, we've got the utmost respect for Boeing and Airbus. And we think that as well, of course, Embraer. And we think that they're going to get a lot of the supply chain issues worked out. These are phenomenal companies that put out the best products, unbelievable products. And the world really needs them. And they will get all their situation worked out. So then the question is, what happens to the rest of the aftermarket there on the older aircraft? And we think that the older aircraft will continue to be in very good demand. You can see what the retirement rates have been. And again, you've got this older fleet that is a very large fleet, which is continuing to age one year per year and consume a massive amount of parts. So we think that we're in very good position.

Well, that's helpful, Carlos, thank you. And if I could, Eric, just one other question. It seems like each time this year we have a debate around better deliveries out of, going in Airbus, and the implications of what that could mean for aftermarket spending. Can you just comment on what you're seeing at airlines today as they think about 2026, around aircraft retirements? Obviously, fuel prices are low, continued use of, you know, legacy or older assets. Just what's your view on aftermarket fundamentals in 2026?

Yeah, it's a great question. And look, we've got the utmost respect for Boeing and Airbus, um, and we think that, you know, as well, of course, um, uh, Embraer, and we think that they're going to get a lot of the supply chain issues worked out. These are phenomenal companies that put out, you know, the best products—unbelievable products—and the world really needs them, and that they will get all those, their, their situation, worked out.

Victor Mendelson: Again, we're long-term investors, if you will, citizens, residents in this stock. And so if there's a dip, things move up and down a little bit, it doesn't change our view on it. So for us, we don't really look at the, if you will, the quarter to quarter and sort of the micro moves. We're looking out saying the airlines recognize that there's this massive need coming down the road. They need more suppliers. We're there to fill that opportunity on both the independent side as well as the OEM-aligned side. It's whatever our customers want. And so I think we're in good position, but it should remain quite strong to answer your question.

Again, we're long-term investors, if you will, citizens, residents in this stock. And so if there's a dip, things move up and down a little bit, it doesn't change our view on it. So for us, we don't really look at the, if you will, the quarter to quarter and sort of the micro moves. We're looking out saying the airlines recognize that there's this massive need coming down the road. They need more suppliers. We're there to fill that opportunity on both the independent side as well as the OEM-aligned side. It's whatever our customers want. And so I think we're in good position, but it should remain quite strong to answer your question.

Ken Herbert: Great. Thanks, Eric. Happy holidays, everybody.

Again you know we're long-term uh investors. Um you know if you will citizens residents in the stock and so if there's a dip you know things move up and down a little bit, it doesn't change our view on it. So we're for us we don't really look at the. If you will the quarter to quarter and sort of the micro moves, we're looking at saying, you know, the airlines recognize that there's this massive need coming down the road, they need more suppliers. We're there to fill that that opportunity on both the independent side as well as the OEM align side. It's whatever our customers want. And so I think we're in, we're in good position but it, it, it should remain quite strong to answer your question.

Victor Mendelson: Thanks. And you too.

Eric Mendelson: Thanks. And you too.

Carlos L. Maury: And you, Ken.

Carlos Macau: And you, Ken.

Great, thanks. Eric, happy holidays, everybody. Thanks, you too, you.

Operator: We'll take our next question from Sheila Kahyaoglu with Jefferies.

And we'll take our next question from Sheila Kayalu with Jefferies.

Sheila Kahyaoglu: Good morning, guys. Thank you so much for the time.

Carlos L. Maury: Amazing.

Carlos Macau: Amazing.

Sheila Kahyaoglu: Maybe if I could start, and I want to give you guys condolences on Larry, because I think we're also lucky to have known him, and he's impacted all of our lives in some way, so.

Um, good morning, guys. And thank you so much for the time.

Victor Mendelson: Thank you.

Eric Mendelson: Thank you.

Sheila Kahyaoglu: Maybe going back to the performance for 2025, it's been stellar the quarter as well. Eric, I wanted to ask you. I know everybody's harped on FSG growth, and just because it's accelerated in the quarter, if you could give us any detail on maybe the parts of the business that you think will outperform as we head into fiscal 2026. And also, you've announced some pretty neat transactions like EthosEnergy recently and another transaction. So can you talk about how those fit into the broader both Wencor and the broader FSG?

Um, maybe if I could start, uh, and I want to give you guys condolences on Larry, because I think we're all so lucky to have known him, and he's impacted all of our lives in some way. So, um, thank you, uh,

Maybe going back to the performance for '25. It's been stellar the quarter as well. Eric, I wanted to ask you—I know everybody's harped on FSG growth, and just because it's accelerated in the quarter, if you could give us any detail on maybe the parts of the business that you think will outperform as we head into fiscal '26. And also, you've announced some pretty neat transactions like EthosEnergy recently, and another transaction. So, can you talk about how those fit into—

Victor Mendelson: Sure. I would be happy to. And Sheila, thank you also for the very nice comments about Dad. And he always respected you and your fellow analysts, and really enjoyed his time very much with you all. And so thank you for that. As far as for the subsectors within Flight Support that are going to outperform, I mean, I'm sorry to sound like a broken record, but I think it's really across the board. It's in everything that we're doing. We're seeing strength across the board. So I wouldn't say that there's one area in particular. We are very excited. You bring up Ethos, and we're very excited about that because they're strong in the IGT market. And of course, you've got all these industrial gas turbines, of which some are aeroderivatives, supporting the AI power demand.

Eric Mendelson: Sure. I would be happy to. And Sheila, thank you also for the very nice comments about Dad. And he always respected you and your fellow analysts, and really enjoyed his time very much with you all. And so thank you for that. As far as for the subsectors within Flight Support that are going to outperform, I mean, I'm sorry to sound like a broken record, but I think it's really across the board. It's in everything that we're doing. We're seeing strength across the board. So I wouldn't say that there's one area in particular. We are very excited. You bring up Ethos, and we're very excited about that because they're strong in the IGT market. And of course, you've got all these industrial gas turbines, of which some are aeroderivatives, supporting the AI power demand.

Um, the broader, uh, both 1 Core and the broader FSG.

Sure, I I I I would be happy to and Sheila. Thank you also, for the very nice comments about that. And he always respected you and uh, your uh, you know, fellow analysts and really enjoy this time. Very much with you all and

Um, so thank you for—thank you for that. Um, as far as for the air, you know, the sub-sectors within Flight Support that are going to outperform.

I mean, I'm I'm sorry to sound like a broken record but I I think it's really across the board. I I it's in everything that we're doing, we're seeing strength uh, across the board. Um so I wouldn't say that there's 1 area in particular. Uh, we are very excited, you bring up ethos and we're very excited about that because they're strong in the IGT market and

Victor Mendelson: And as you know, there's a massive amount of power that has to be created. And these IGTs, industrial gas turbines, are expected to play a major role there. So we think that we're in very, very good position to help EthosEnergy continue to support their program. And we think that there's just a tremendous amount of opportunity. We like the people very much. They have three different facilities. It's a very decentralized organization, very entrepreneurial. I think there is going to be a big increase in demand on the various components that they overhaul. And we think that it's just a great addition to Wencor. Wencor has been, as HEICO has been, Wencor has been very successful in their markets. And we allocate out the acquisitions according to bandwidth and who's got time and capacity to be able to take on these acquisitions.

And as you know, there's a massive amount of power that has to be created. And these IGTs, industrial gas turbines, are expected to play a major role there. So we think that we're in very, very good position to help EthosEnergy continue to support their program. And we think that there's just a tremendous amount of opportunity. We like the people very much. They have three different facilities. It's a very decentralized organization, very entrepreneurial. I think there is going to be a big increase in demand on the various components that they overhaul. And we think that it's just a great addition to Wencor. Wencor has been, as HEICO has been, Wencor has been very successful in their markets. And we allocate out the acquisitions according to bandwidth and who's got time and capacity to be able to take on these acquisitions. But we're really happy that Wencor has got the talent and the technical ability to help drive that business forward. And we think that there'll be very good performance out of it.

Of course, you've got all these industrial gas turbines of, which some are arridy derivatives, uh, supporting the AI power demand. And there's a, you know, as you know, there's a massive amount of power that has to be created and these igt's are, you know, industrial gas turbines are expected to play a major role there. So we think that we're in very, very good position to help ethos continue to support their um, you know, their their program. Uh, and we think that there's, you know, just a tremendous amount of opportunity. We like the people very much. They have 3, different facilities. It's a very decentralized organization. Very entrepreneurial. I think there are going to be big increase in demand on the various components that they uh overhaul and we think that it's just a great addition to wcor. Wcor has been you know as haiko has been when KO has been very successful.

successful in their markets and

Victor Mendelson: But we're really happy that Wencor has got the talent and the technical ability to help drive that business forward. And we think that there'll be very good performance out of it.

We allocate out the acquisitions according to bandwidth, and who's got, uh, you know, time and, uh, capacity to be able to take on these acquisitions. But we're really happy that, uh, when Courtice got the talents and the, uh, the technical ability to help drive that business forward, and we—we think that there'll be very good, uh, performance out of it.

Sheila Kahyaoglu: Thank you for that, Carlos. Can you maybe also talk about the Axelon fuel containment business? Does that work with Robertson? How do you think about how that'll fit into the framework? And can we think about annual revenues in the $125 million range for that one?

Victor Mendelson: Well, so this is Victor. The business is separate from Robertson. It's a supplier to Robertson. So Robertson has been a customer. I think working together, they can bring additional benefits to our customers and to the marketplace and make things, in fact, even more competitive for our customers. There's opportunity there. In terms, we didn't break out the revenue from the business. So I'm being careful, of course, on that. And of course, when it closes, of course, if it closes, right, no deal is ever certain. But that timing issues and approvals and things like that that we've got to go through will also influence the amount of revenue that we recognize in fiscal 2026.

Can you, Eric? Thank you for that color. Can you maybe also talk about the Axelon fuel containment business? Does that work with Robertson? How do you think about, um, how that all fits into the framework? And can we think about annual revenues in the $125 million range for that one?

Sheila Kahyaoglu: Got it. Sure. Sorry, Victor. I forgot Robertson was an ETG. Thank you.

Even more competitive, uh, for our customers, uh, there's opportunity there, um, you know, we'll, we'll in terms. We, we didn't break out, uh, the revenue from the, from the business. So, so I'm being careful, of course, on that. Um, and of course, when it closed—of course, if it closes, right, no deal is ever certain. Um, but, uh, um, you know, that timing issues and approvals and things like that that we've got to go through will, will also influence the amount of revenue that we recognize in fiscal '26.

Victor Mendelson: Thank you.

Sure. Sorry, Victor. I forgot Robertson was an ATG. Thank you. Thank you.

Operator: We'll take our next question from Jason Gursky with Citigroup.

We'll take our next question from John Gooden with Citigroup.

Jason Gursky: Hey, guys. Thanks for taking my question. I wanted to. I completely appreciate that we've gone away from annual guidance a long time ago on HEICO. But at the same time, every few years, you guys reiterate this 15% to 20% net income growth kind of multi-year target. And we've had a couple of years of amazing net income growth. And I just kind of offer the observation that consensus expectations are for a very sharp deceleration over the next few years. And I just wanted to kind of revisit this idea, take the temperature. How do you feel about 15% to 20% as sort of a multi-year growth number from here, a target? And is there anything that you're seeing that suggests a sharp deceleration in growth rates is likely?

Hey guys, thanks for taking my question. Um,

I wanted to um, I I completely appreciate that. We've gone away from, you know, annual guidance uh, a long time ago on Howe, but at the same time, every few years you guys reiterate this 15 to 20% net income growth kind of multi-year Target and we've had a couple years of uh amazing net income growth and and I just kind of you know offer the observation that consensus expectations are for a very sharp deceleration over the next few years and and I just wanted to kind of revisit this idea, take the temperature. How do you feel

Victor Mendelson: So Jason, first of all, thank you very much for your question. This is Eric. I'd be happy to answer that. As you know, the 15% to 20% has always been an aspirational number. The company is designed in a decentralized way, but rolling up into groups. So we can harness the individual and entrepreneurial efforts of our people in the businesses and combine them with technology, market access, and capital that the larger groups bring. So I can tell you that all of the subsidiaries have organic growth targets that are consistent with the numbers that you mentioned. And we believe that on the acquisition side, we are in a very good position and continue to be the buyer of choice.

Eric Mendelson: So Jason, first of all, thank you very much for your question. This is Eric. I'd be happy to answer that. As you know, the 15% to 20% has always been an aspirational number. The company is designed in a decentralized way, but rolling up into groups. So we can harness the individual and entrepreneurial efforts of our people in the businesses and combine them with technology, market access, and capital that the larger groups bring. So I can tell you that all of the subsidiaries have organic growth targets that are consistent with the numbers that you mentioned. And we believe that on the acquisition side, we are in a very good position and continue to be the buyer of choice.

About 15% to 20% as a sort of multi-year growth number from here—a target. And is there anything that you're seeing that suggests a sharp deceleration in growth rates is likely?

So, uh, John, first of all, thank you very much for your question. This is Eric, I'd be happy to answer that. Uh, as you know, the 15% to 20% has always been an aspirational number. Um, the company is designed in a decentralized way, but rolling up into groups so we can harness the individual and entrepreneurial efforts of our people in the businesses and combine them with technology, market access, and capital that the larger groups bring.

So, I can tell you that all of the subsidiaries have, uh, organic growth targets that—

Victor Mendelson: Obviously, the important metric for us is EBITDA, which is really operating income plus intangibles amortization due to purchase accounting because that's really a made-up number, if you will. But I think in terms of growing our EBITDA, nothing has changed going forward. Obviously, as you get bigger, it may become more difficult. But of course, as we've gotten bigger, we've hit the numbers, and it's become easier. So all I can tell you is we remain very focused. And I think we're in a good position going forward. As far as giving guidance, for us to give guidance, as I've mentioned, is very difficult because our subsidiaries tend to give very conservative guidance to us. And then we have to add a number on top of that, and who knows what that number is going to be.

Obviously, the important metric for us is EBITDA, which is really operating income plus intangibles amortization due to purchase accounting because that's really a made-up number, if you will. But I think in terms of growing our EBITDA, nothing has changed going forward. Obviously, as you get bigger, it may become more difficult. But of course, as we've gotten bigger, we've hit the numbers, and it's become easier. So all I can tell you is we remain very focused. And I think we're in a good position going forward. As far as giving guidance, for us to give guidance, as I've mentioned, is very difficult because our subsidiaries tend to give very conservative guidance to us. And then we have to add a number on top of that, and who knows what that number is going to be. But I can tell you, Victor and I spend a lot of time out in the field with our businesses. We're aware of all the technology they're developing. Carlos is out there as well. And I think the future is going to be very good, is going to be very good for us. And we're going to continue to outgrow the market. So nothing has changed with our focus on outgrowing the market, so.

Are consistent with the numbers that you mentioned. Uh, and we believe that on the acquisition side. We are uh in a in a very good position and continue to be the buyer of choice, you know, the important obviously, the important metric for us is ibid. Uh, which is really operating income plus intangibles, amortization, due to purchase accounting, because that's really, uh, uh, you know, a made up number, if you will

But I think in terms of growing our IBD, uh, you know, nothing has changed going forward. Obviously, as you get bigger, uh, you know, it may become more difficult, but of course, as we've gotten bigger, we've hit the numbers and it's become easier.

Victor Mendelson: But I can tell you, Victor and I spend a lot of time out in the field with our businesses. We're aware of all the technology they're developing. Carlos is out there as well. And I think the future is going to be very good, is going to be very good for us. And we're going to continue to outgrow the market. So nothing has changed with our focus on outgrowing the market, so.

So, all I can tell you is we remain— we remain very focused. Um, and uh, I think we're— we're in a good position going forward as far as giving guidance. You know, for us to get guidance, as I've mentioned, is very difficult because our subsidiaries tend to give very conservative guidance to us. And then we have to add a number on top of that— and who knows what that number is going to be. But I can tell you, Victor and I spend a lot of time out in the field with our businesses. We're aware of all the technology they're developing. Um, you know, Carlos is out there as well. And I think, uh, you know, the future is going to be very good— is going to be very good for us, and we're going to continue to outgrow the market.

Jason Gursky: Right. So despite a few great years above that range, it sounds like you don't see it likely that we're below that range for a number of years going forward. It sounds like the algorithm is still intact as far as you can tell.

Victor Mendelson: Well, as I mentioned, look, those numbers are aspirational numbers. I think 15% is a great aspirational number. And we're working very hard to make that happen. Again, we don't provide guidance, so I want to be very careful what I say. But everything here at HEICO is structured to continue this growth.

Eric Mendelson: Well, as I mentioned, look, those numbers are aspirational numbers. I think 15% is a great aspirational number. And we're working very hard to make that happen. Again, we don't provide guidance, so I want to be very careful what I say. But everything here at HEICO is structured to continue this growth.

So nothing has changed with our focus on on out growing the market. So right? So so despite uh a few great years, you know, above that range, it sounds like you don't see it likely that we're below that range for a number of years. Come coming forward, it sounds like you know the algorithm is still intact as far as you can tell.

Carlos L. Maury: Hey, John, this is Carlos. Let me refer you to history here. We've done for 35 years, compounded our bottom line at 18%. So we've proven that we can do it. Every year, we sit down, we do our budgets, we look at the performance, the atmospherics in the markets, and we shoot for 15% to 20% bottom line growth. We're capable of doing that. As Eric mentioned, as we grow larger, it becomes more challenging. But as we look out over the next three to five years, I don't see anything impeding those aspirational goals. That's what we target as a group, as a board, and as a company to grow. So I think that's all intact.

Carlos Macau: Hey, John, this is Carlos. Let me refer you to history here. We've done for 35 years, compounded our bottom line at 18%. So we've proven that we can do it. Every year, we sit down, we do our budgets, we look at the performance, the atmospherics in the markets, and we shoot for 15% to 20% bottom line growth. We're capable of doing that. As Eric mentioned, as we grow larger, it becomes more challenging. But as we look out over the next three to five years, I don't see anything impeding those aspirational goals. That's what we target as a group, as a board, and as a company to grow. So I think that's all intact.

Well, you know, as I mentioned, look, those numbers are aspirational numbers. I think 15% is a great, uh, aspirational number. Um, and, you know, we're working very hard to make that happen again. We don't provide guidance, so I want to be very careful what I say, but we are, you know, everything here at HEICO is structured to continue this growth. Hey John, this is Carlos. Let me refer you to history here—you know what we've done for 35 years.

But, um, you know, every year we sit down, we do our budgets, we look at the performance, the atmospherics in the markets, and we shoot for 15 to 20% bottom line growth. And, you know, we're capable of doing that, as Eric mentioned, as we grow larger.

Victor Mendelson: And also, I would just add to what Carlos said. When you look at our leverage out roughly 1.5x, I mean, we've got tremendous ability to make acquisitions. I mean, when you generate, what was the number, $934 million from operations. I mean, the cash is really very, very strong. And we're able then to take that cash and go buy other entrepreneurial businesses where people want to be part of HEICO. So there's no change to our program, so.

Eric Mendelson: And also, I would just add to what Carlos said. When you look at our leverage out roughly 1.5x, I mean, we've got tremendous ability to make acquisitions. I mean, when you generate, what was the number, $934 million from operations. I mean, the cash is really very, very strong. And we're able then to take that cash and go buy other entrepreneurial businesses where people want to be part of HEICO. So there's no change to our program, so.

Um, because more challenging. But as we look out over the next 3, to 5 years, I don't see anything impeding those, those aspirational goals, that's what we target as a group, as a board and as a company to grow. So I think that's all intact. And, and also, I would just add to what Carlos said. When you look at our leverage out roughly 1.5 times, I mean, we've got, you know, tremendous ability to make Acquisitions. I mean, when you generate, what was the number 934 million from operations? I mean we we you know, the cash is really very, very strong and we're able then to take that cash and go by other entrepreneurial businesses where people want to be part of ho. So you know, there's there's no change to our program.

Jason Gursky: Very clear. Thank you, guys.

Victor Mendelson: Thank you.

Eric Mendelson: Thank you.

Carlos L. Maury: Thanks, John.

Carlos Macau: Thanks, John.

Very, very clear. Thank you, guys. Thank you. Thanks, John.

Operator: We'll take our next question from Noah Poponok with Goldman Sachs.

And we'll take our next question from Noah Pappano with Goldman Sachs.

Ken Herbert: Hey, guys. Good morning. Can you hear me okay?

Noah Poponak: Hey, guys. Good morning. Can you hear me okay?

Victor Mendelson: We can. Good morning, Noah.

Eric Mendelson: We can. Good morning, Noah.

Hey, guys. Good morning. Can you hear me? Okay.

Ken Herbert: Great. Yes, good morning. Those were nice comments about your father. It was great to be able to work with him.

Noah Poponak: Great. Yes, good morning. Those were nice comments about your father. It was great to be able to work with him.

We can good morning Noah.

Victor Mendelson: Thank you. Thank you.

Eric Mendelson: Thank you.

Victor Mendelson: Thank you.

Great. Yes, good morning. Um, those were nice comments about your father. It was, uh, it was great to be able to work with him.

Thank you. Um,

Ken Herbert: Just staying on these FSG margins a bit, Carlos, you talked about mix. I guess when we look at the incremental being better in 2025 than 2024, are you able to parse out the pieces of that? How much of it was that mix? And can you tell us what those mix items are and what you expect them to do next year? And how much of it was any change in pricing philosophy?

Noah Poponak: Just staying on these FSG margins a bit, Carlos, you talked about mix. I guess when we look at the incremental being better in 2025 than 2024, are you able to parse out the pieces of that? How much of it was that mix? And can you tell us what those mix items are and what you expect them to do next year? And how much of it was any change in pricing philosophy?

Just staying on these FSG margins a bit. Um, Carlos, you—

you talked about mix, um,

I guess when we look at the incremental being better in '25 than '24,

Are you able to parse out the pieces of that? How much of it was that mix, and can you tell us,

Carlos L. Maury: So the price part of that, we probably get Noah two or three points worth of price in our numbers every year. We're basically covering our labor inflation. I mean, raw materials for us is a lower piece of the overall bill of materials. So the concerns we have around here really are labor inflation, and we seem to be getting enough price out of our customers to cover that and still provide them with great value and make them feel like the value proposition is huge with HEICO to do business with us. The components of the mix, so I would say this. We've noticed a nice increase in the gross margin with our repair and overhaul business. And most of that has been attributed to heavier PMA and DER repairs that we've been doing this year.

Carlos Macau: So the price part of that, we probably get Noah two or three points worth of price in our numbers every year. We're basically covering our labor inflation. I mean, raw materials for us is a lower piece of the overall bill of materials. So the concerns we have around here really are labor inflation, and we seem to be getting enough price out of our customers to cover that and still provide them with great value and make them feel like the value proposition is huge with HEICO to do business with us. The components of the mix, so I would say this. We've noticed a nice increase in the gross margin with our repair and overhaul business. And most of that has been attributed to heavier PMA and DER repairs that we've been doing this year.

Um, what those mix items are, and what you expect them to do next year, and how much of it was any change in pricing philosophy.

um,

So the price part of that, you know, we probably get, Noah.

If?

Two or three points were the price in our numbers every year. You know, we're basically covering our labor inflation. I mean, raw materials for us is a lower piece of the overall build material. So the concerns we have around here really are labor inflation, and we seem to be getting enough price out of our customers to cover that, uh, and still provide them with great value and make them feel like the value proposition is huge with how to do business with us.

Carlos L. Maury: I would say the mix shift there has been a little bit more favorable towards the PMA and DER. We've also expanded our avionics repairs quite a bit this year. So those components there have had a positive lift in the gross margin and repair and overhaul, which has translated into the overall segment margin. I'd also say that within specialty products, the core of that business, if you spun the clock back five or six years or so ago, it was really a commercial OE play, pre-COVID, let's say. It was all about seats, thermal blankets, insulation, and things like that. What we've noticed post-COVID is a real uptick, and Eric's talked about it earlier, in the defense business we have there, whether it's missile hardware, whether it's drone hardware, and things like that, structural pieces that we're making.

I would say the mix shift there has been a little bit more favorable towards the PMA and DER. We've also expanded our avionics repairs quite a bit this year. So those components there have had a positive lift in the gross margin and repair and overhaul, which has translated into the overall segment margin. I'd also say that within specialty products, the core of that business, if you spun the clock back five or six years or so ago, it was really a commercial OE play, pre-COVID, let's say. It was all about seats, thermal blankets, insulation, and things like that. What we've noticed post-COVID is a real uptick, and Eric's talked about it earlier, in the defense business we have there, whether it's missile hardware, whether it's drone hardware, and things like that, structural pieces that we're making.

The, the components of the, um, the mix. So I would say this, you know, we've noticed a nice increase in the gross margin with our repair and overhaul business. And most of that has been attributed to um, heavier, PMA, and deer repairs. That we've been doing this year, I would say the mix shift. There has been a little bit more favorable towards the PMA. And der, we've also expanded our, um, avionics repairs quite a bit this year. So those components there have have have had a positive lift in the gross margin uh and repair and overhaul which is translated into the overall segment margin. I'd also say that within Specialty Products

The.

Carlos L. Maury: That shift towards more of a heavier defense play within specialty products rather than the commercial OE has had a little bit of an improvement on the margin. So I think those two things have helped. Then, of course, our parts business has been off the charts. It's been growing at a tremendous pace, outgrowing the other verticals. And as that business continues to outperform, it absorbs a lot of the fixed costs that Eric's talked about earlier. It does have a little bit of a, I guess, an efficiency play within our SG&A and our fixed cost spend. So those are really the key contributors to the FSG. Most of that is very durable, Noah. I mentioned earlier on the margins; I kind of said 23 and a half, 24 and a half.

That shift towards more of a heavier defense play within specialty products rather than the commercial OE has had a little bit of an improvement on the margin. So I think those two things have helped. Then, of course, our parts business has been off the charts. It's been growing at a tremendous pace, outgrowing the other verticals. And as that business continues to outperform, it absorbs a lot of the fixed costs that Eric's talked about earlier. It does have a little bit of a, I guess, an efficiency play within our SG&A and our fixed cost spend. So those are really the key contributors to the FSG. Most of that is very durable, Noah. I mentioned earlier on the margins; I kind of said 23 and a half, 24 and a half.

You know, the core of that business, if you spun the clock back 5 or 6 years or so ago, it was really a commercial, OE play preco, let's say it was all about seats and and thermal blankets and insulation and things like that. Um, what we've noticed postco is uh, a real uptick in Eric's talked about it earlier in the, um, defense business. We have their whether its missile Hardware, whether it's drone, drone hardware, and things like that, structural pieces that we're making. And that shift towards more of a, um,

Heavier defense play within Specialty Products rather than the commercial OE. It's had a little bit of an improvement on the margins. So I think those two things...

Carlos L. Maury: It's kind of a wide spread on my expectation, but it is because the mix can play heavy or light in any one particular quarter. So I'll be able to narrow that down as we get further into next year and the year after, and then see how the mixed footprint plays out. But no, it's all been positive. I think it's very durable margin improvements. And as we continue to grow, I think we can eke out small improvements just on our leverage and our fixed costs, 20, 30 basis points a year, something like that. So all positive. I don't see anything that's like one-time or not durable.

It's kind of a wide spread on my expectation, but it is because the mix can play heavy or light in any one particular quarter. So I'll be able to narrow that down as we get further into next year and the year after, and then see how the mixed footprint plays out. But no, it's all been positive. I think it's very durable margin improvements. And as we continue to grow, I think we can eke out small improvements just on our leverage and our fixed costs, 20, 30 basis points a year, something like that. So all positive. I don't see anything that's like one-time or not durable.

Ken Herbert: Okay. That's really helpful, Carlos. Yeah. I mean, I think obviously you want to have some conservatism in what you're saying about the forward, but the operating margin is still pretty far below the gross margin. So just all else equal, if you're growing volumes, you would have your normal incrementals and be able to just expand margins over time. Obviously, it's not always all else equal, but okay.

Noah Poponak: Okay. That's really helpful, Carlos. Yeah. I mean, I think obviously you want to have some conservatism in what you're saying about the forward, but the operating margin is still pretty far below the gross margin. So just all else equal, if you're growing volumes, you would have your normal incrementals and be able to just expand margins over time. Obviously, it's not always all else equal, but okay.

You know, the mixed footprint plays out but but no, it's it's all been positive. I think it's very durable margin improvements and as we continue to grow, I think we can eek out, you know, small improvements, just on our on our leverage, on our fixed costs, 2030 bips a year, or something like that. So all positive, I don't see anything that's like, 1 time or or not durable.

Carlos L. Maury: You got it. You got it.

Carlos Macau: You got it. You got it.

Ken Herbert: Can you size how much revenue you generate from missile and missile defense?

Noah Poponak: Can you size how much revenue you generate from missile and missile defense?

Okay, that's, uh, really helpful color. Yeah. I mean, I think, you know, obviously you want to have some conservatism in what you're saying about the forward, but your operating margin is still pretty far below the gross margin. So, just all else equal, if you're growing volumes, you would have your normal incremental and be able to just expand margins over time. Obviously, it's not always all else equal, but okay, you got it. Um,

Carlos L. Maury: Well, we don't size it. We don't size it. If you look in our public filings, you'll see that within the FSG, we do break out specialty products in our defense business. So you can see how that business has grown, but we, for competitive reasons, don't size it.

Carlos Macau: Well, we don't size it. We don't size it. If you look in our public filings, you'll see that within the FSG, we do break out specialty products in our defense business. So you can see how that business has grown, but we, for competitive reasons, don't size it.

Can you size how much revenue you generate from missile and missile defense?

Ken Herbert: Okay. How do you expect capital deployed towards acquisitions in 2026 to compare to 2025, size-wise?

Noah Poponak: Okay. How do you expect capital deployed towards acquisitions in 2026 to compare to 2025, size-wise?

Well, we—we don't size it, we don't size it. If you look in our public filings, you'll see that within the FSG, you know, we do—we do break out, um, Specialty Products in our Defence business. So you can see how that business has grown, but we, for competitive reasons, don't size it.

Carlos L. Maury: I mean, Eric and Victor like to buy every shiny object they can get their hands on. So I expect that we'll continue at a higher pace.

Carlos Macau: I mean, Eric and Victor like to buy every shiny object they can get their hands on. So I expect that we'll continue at a higher pace.

Okay. And then how do you expect capital deployed towards acquisitions in ’26 to compare to ’25 sizewise?

Ken Herbert: I don't believe that.

Carlos L. Maury: But look, we're not capital constrained, Noah, and we have a tremendous opportunity set in front of us. We're able to be very selective at this point in time on what we deploy capital on, which is a good thing. And the basket of opportunities is as big as it's ever been. So I think we probably should have a repeat of what we did last year into 2026 would be my hope and my expectation. But again, you never know. And remember, we are guided by we want to grow 15% to 20% bottom line. It is a controlled growth strategy. So that guides us, but we do not walk away from extraordinarily good opportunities for our shareholders. So in the event that we outgrow that metric, it's because we had great opportunities in the acquisition front that we just couldn't pass on, right?

Carlos Macau: But look, we're not capital constrained, Noah, and we have a tremendous opportunity set in front of us. We're able to be very selective at this point in time on what we deploy capital on, which is a good thing. And the basket of opportunities is as big as it's ever been. So I think we probably should have a repeat of what we did last year into 2026 would be my hope and my expectation. But again, you never know. And remember, we are guided by we want to grow 15% to 20% bottom line. It is a controlled growth strategy. So that guides us, but we do not walk away from extraordinarily good opportunities for our shareholders. So in the event that we outgrow that metric, it's because we had great opportunities in the acquisition front that we just couldn't pass on, right? That will also guide our thinking on how we deploy the capital.

I mean, Eric and Victor like to buy every shiny object they can get their hands on. So I expect that we'll continue it. I don't believe that space.

But um,

But look, we’re not capital constrained, Noah, and we have a tremendous opportunity set in front of us.

You know, we're able to be very selective at this point in time on what we deploy capital on.

Um, which is a good thing. And and the the the basket of opportunities is as big as it's ever been. So I I think, you know, we probably should have a repeat

Of what we did last year into '26, it would be my hope and my expectation. But again, you never know. And remember, we are guided by—you know, we want to grow 15% to 20% bottom line. It is a controlled growth strategy, so you know, that guides us.

Carlos L. Maury: That will also guide our thinking on how we deploy the capital.

Victor Mendelson: Noah, just also to add a little bit of color to why we're so optimistic on the acquisition front. I mean, if you look, we're leveraged at 1.5x, so we've got, we're underleveraged.

Eric Mendelson: Noah, just also to add a little bit of color to why we're so optimistic on the acquisition front. I mean, if you look, we're leveraged at 1.5x, so we've got, we're underleveraged.

But we do not walk away from extraordinarily good opportunities for our shareholders. So, you know, in the event that we outgrow that metric, it's because we had great opportunities on the acquisition front that we just couldn't pass on, right? And so, that will also guide our thinking on how we deploy the capital. And, Noah, just also to add a little bit of color to why we're so optimistic on the

Carlos L. Maury: 1.6, but that's.

Carlos Macau: 1.6, but that's.

Victor Mendelson: So we're underleveraged. We've got plenty of firepower. Our businesses generate a lot of cash. Just putting that cash to work is a big task. We've done 110 in our commercial. We've done 110 acquisitions. We are experienced. We know what's important. We know how to motivate people. We've got dozens of entrepreneurs for sellers to speak with to explain why HEICO is the best home that they could possibly imagine. And frankly, we've got an incredible acquisitions team, which is out there pounding the pavement, working really hard, making sure that we're in every process, and we're constantly talking to people. And we're talking to them years in advance of when they want to possibly sell their company. Somebody may be interested in a liquidity event 10 years from now.

Eric Mendelson: So we're underleveraged. We've got plenty of firepower. Our businesses generate a lot of cash. Just putting that cash to work is a big task. We've done 110 in our commercial. We've done 110 acquisitions. We are experienced. We know what's important. We know how to motivate people. We've got dozens of entrepreneurs for sellers to speak with to explain why HEICO is the best home that they could possibly imagine. And frankly, we've got an incredible acquisitions team, which is out there pounding the pavement, working really hard, making sure that we're in every process, and we're constantly talking to people. And we're talking to them years in advance of when they want to possibly sell their company. Somebody may be interested in a liquidity event 10 years from now.

Position front. I mean, if you look where leveraged at 1.5 times, so we've got, you know, we're we're under 116 1.6. So we're we're, we're we're under leopard, we've got, we've got plenty of Firepower our businesses, generate a lot of cash, uh, you know, just putting that cash to work is is a big task. We've done 110, you know, our commercial we've done 110 Acquisitions, we are experienced. We know what's important? We know how to motivate people, we've got dozens of entrepreneurs for sellers, to speak with explain why, Hico is the best home that they could possibly imagine. And frankly we've gotten incredible Acquisitions team uh which is out there. Pounding the pavement, working really hard making sure that uh we're in every process. And we, um, you know, we're we're constantly talking to people and we're talking to them years in advance of when they want to possibly sell their company, you know,

Victor Mendelson: That's no problem because there are so many points of contact at HEICO where we can start working with them and connecting them to the HEICO system and help their businesses, help our businesses. And when they're ready, they're ready. So I think we're in really great position there. And if you look, so many of the businesses that we buy, they're not available to sell to other people, to other people. They were not interested in selling. They were only interested in selling to HEICO. And actually, Gables Engineering is a perfect example of that, where this business was sought after by so many people in the industry, and they only spoke to HEICO.

That's no problem because there are so many points of contact at HEICO where we can start working with them and connecting them to the HEICO system and help their businesses, help our businesses. And when they're ready, they're ready. So I think we're in really great position there. And if you look, so many of the businesses that we buy, they're not available to sell to other people, to other people. They were not interested in selling. They were only interested in selling to HEICO. And actually, Gables Engineering is a perfect example of that, where this business was sought after by so many people in the industry, and they only spoke to HEICO. Of course, they got a very full price, but they only spoke to HEICO, and they wanted to make sure that they were able to continue their growth, and HEICO is able to do that.

If somebody may be interested in a liquidity event, 10 years from now, that's no problem. Because there are so many points of contact at HEICO where we can start working with them and, uh, uh, connecting them to the HEICO system, and help their businesses, help our businesses, and when they're ready, they're ready. So I think we're, we're in great, uh, really great position there,

Victor Mendelson: Of course, they got a very full price, but they only spoke to HEICO, and they wanted to make sure that they were able to continue their growth, and HEICO is able to do that.

And if you look so many of the businesses that we buy, we're not available to sell for other people, you know, to other people, they didn't, they were not interested in selling. They were only interested in selling the heco. And actually Gables engineering is a perfect example of that where, uh, this this business was sought after by so many people in the industry and they only spoke to Hico, of course, they they got a very full price so, um, but they only spoke to Hico. And they wanted to make sure that, uh, you know, they were able to continue their growth, and heco is able to do that.

Ken Herbert: I appreciate all the detail. Thank you so much.

Noah Poponak: I appreciate all the detail. Thank you so much.

Victor Mendelson: Thank you.

Carlos L. Maury: Thanks, Noah.

Carlos Macau: Thanks, Noah.

I appreciate all the detail. Thank you so much.

Thank you. Thanks Noah.

Operator: We'll take our next question from Tony Bancroft with Gabelli Funds.

Ron Epstein: Good morning, gentlemen. Obviously, pass along my condolences to Mr. Mendelson. He really was the best of the best, and he's going to be sorely missed here at Gabelli.

Tony Bancroft: Good morning, gentlemen. Obviously, pass along my condolences to Mr. Mendelson. He really was the best of the best, and he's going to be sorely missed here at Gabelli.

We'll take our next question from Tony Bankroft with Gabelli Funds.

Victor Mendelson: Thanks.

Carlos Macau: Thanks.

Ron Epstein: Yeah. With the Ethos acquisition, like you've discussed, it's sort of in one way, it's sort of going outside your scope of traditional M&A, but another way, obviously, is a lot of adjacencies. With the backdrop of the amount of strong growth looking into going forward, is there maybe sort of a new world order or a new outlook on where you would go across aerospace and defense or maybe other areas of high growth? Maybe you could talk about there's so many opportunities out there, and as a defense budget, you're seeing strength there. Maybe you could talk about anything that could be outside your typical adjacencies.

Ronald Epstein: Yeah. With the Ethos acquisition, like you've discussed, it's sort of in one way, it's sort of going outside your scope of traditional M&A, but another way, obviously, is a lot of adjacencies. With the backdrop of the amount of strong growth looking into going forward, is there maybe sort of a new world order or a new outlook on where you would go across aerospace and defense or maybe other areas of high growth? Maybe you could talk about there's so many opportunities out there, and as a defense budget, you're seeing strength there. Maybe you could talk about anything that could be outside your typical adjacencies.

Uh, good morning, gentlemen, and obviously pass along my condolences to Mr. Mendelson. He really was the best of the best, and he's going to be sorely missed here at HEICO. Um,

Victor Mendelson: Sure. Tony, so first of all, thank you very much for your nice comments about Dad. And he always enjoyed his time with you and Mario, and held you in the highest regard, both of you. And as far as EthosEnergy, we really like the IGT area. We've been in the IGT area through a number of our businesses for a number of years, for decades. And we like growing, as we say, into adjacent white spaces where we understand the technology, whether it's the engineering or the operations of the turbine, whether it's the manufacturing or the repair technology distribution. We think that there's a lot of points of commonality. It's not. Some of them are aeroderivatives, so they're very, very similar to the aero side, but other ones are pure industrial gas turbines, very, very large machines. And we think that we understand that space quite well.

Eric Mendelson: Sure. Tony, so first of all, thank you very much for your nice comments about Dad. And he always enjoyed his time with you and Mario, and held you in the highest regard, both of you. And as far as EthosEnergy, we really like the IGT area. We've been in the IGT area through a number of our businesses for a number of years, for decades. And we like growing, as we say, into adjacent white spaces where we understand the technology, whether it's the engineering or the operations of the turbine, whether it's the manufacturing or the repair technology distribution. We think that there's a lot of points of commonality. It's not. Some of them are aeroderivatives, so they're very, very similar to the aero side, but other ones are pure industrial gas turbines, very, very large machines. And we think that we understand that space quite well.

Yeah, you know, with the with the ethos acquisition like you discussed, you know, it's sort of and in 1 way, it's sort of going outside your scope of traditional m&a, but another way obviously is a lot of adjacencies is, you know, with with the backdrop of the amount of strong growth looking into, you know, going forward, it is there, maybe a sort of, a new world order or a new uh, outlook on where you would go across, uh, Aerospace in the fence or maybe other areas of high growth. Maybe you could talk about, um, you know, there's so many opportunities out there and and uh, as a defense budget, you're seeing a strength there. Maybe you could talk about, um, anything that could be outside your typical agencies.

Sure. Hey Tony. So, first of all, thank you very much for your nice comments about that and, uh, he always enjoyed his time with you and Mario and held you in the highest regard, both of you. Um, and, uh, you know, as far as ethos, we really like the ITT area. We've been in the IGT area through a number of our businesses, uh, for a number of years, for decades. And we like growing, as we say, into adjacent white spaces where we understand the technology, you know, whether it's the engineering or the, you know, the operations of the turbine, whether it's the manufacturing,

Victor Mendelson: There's going to be a lot of tailwinds for a long period of time. We think we can add a lot of value. Our initial approach there is to go into that market with a very much OEM-aligned strategy and try to continue to develop and grow that. But we think it's just another very good business for us to enter. And Tony, this is Victor. Adding to that, that's really been our history. If you look back over time, when we started out, when we took over HEICO, it essentially had one product, right? The combustion chamber and the JT8D engine, a PMA part. That was it for the most part. And it did some machining and milling. And over the years, we've stepped very carefully, but I think very intentionally and successfully into, as Eric would say, these white space adjacencies. And it's worked out very nicely.

There's going to be a lot of tailwinds for a long period of time. We think we can add a lot of value. Our initial approach there is to go into that market with a very much OEM-aligned strategy and try to continue to develop and grow that. But we think it's just another very good business for us to enter.

Repair, technology, distribution—we think that there's a lot of points of commonality. It's not ex—you know, some of them are already derivatives, so they're very, very similar to the aero side. But other ones are pure industrial gas turbines, you know, very, very large machines. And we think that, uh, we understand that space quite well. There's going to be a lot of tailwinds for a long period of time. We think we can add a lot of value. Um, you know, our initial approach there is to go into that market with a very much OEM-aligned strategy. And, um,

Victor Mendelson: And Tony, this is Victor. Adding to that, that's really been our history. If you look back over time, when we started out, when we took over HEICO, it essentially had one product, right? The combustion chamber and the JT8D engine, a PMA part. That was it for the most part. And it did some machining and milling. And over the years, we've stepped very carefully, but I think very intentionally and successfully into, as Eric would say, these white space adjacencies. And it's worked out very nicely. So our product offering today is vastly expanded. It doesn't look anything like it used to, but it's happened over time. The saying about boiling the frog is, in a sense, applicable here, that we just do this carefully, slowly. A lot of singles and doubles, no bet-the-company situations, but we just keep at it. And so I would expect we'll continue doing that. We don't have any other specifics or data that we can share at this point on exactly where we're going, but you can rest assured that they will be sensible, and they will be somehow connected to what we're already doing.

You know, try to continue to develop and and grow that. Um, but we think it's uh it's just another very good business for us to uh to enter.

Victor Mendelson: So our product offering today is vastly expanded. It doesn't look anything like it used to, but it's happened over time. The saying about boiling the frog is, in a sense, applicable here, that we just do this carefully, slowly. A lot of singles and doubles, no bet-the-company situations, but we just keep at it. And so I would expect we'll continue doing that. We don't have any other specifics or data that we can share at this point on exactly where we're going, but you can rest assured that they will be sensible, and they will be somehow connected to what we're already doing.

And and uh, Tony, this is Victor adding to that, that's really been our history. If you look back over time, when we started out and we took over Hico, it essentially had 1 product, right? The combustion chamber and the jt8 the engine, the PMA part. That was it for the most part, and it did some Machining and milling and over the years we've stepped very carefully, but I think very intentionally and successfully into as Eric would say these white space adjacencies, um, and and it's worked out very nicely. So our our product offering today is vastly expanded. Uh, it doesn't look anything like it used to, but

Ron Epstein: That's great. Thanks so much.

Tony Bancroft: That's great. Thanks so much.

It's happened. Uh, over time the, the the saying about boiling the frog is in a sense applicable here that we just do this carefully, slowly a lot of singles and doubles. No bet the company situations, uh but we just keep at it and and so I would expect we'll we'll continue doing that. I we don't have any other specifics, or data that we can share at this point on exactly where we're going, but you can rest assured that they will be sensible and they will be somehow connected to what we're already doing.

Victor Mendelson: Thank you. Thanks, Dennis.

Eric Mendelson: Thank you.

Carlos Macau: Thanks, Dennis.

That's great. Thanks so much.

Thank you. Thanks then

Operator: We'll take our next question from Jonathan Seekman with STEVO.

And we'll take our next question from Jonathan Siekman with Stevil.

Carlos L. Maury: Good morning. Our condolences again to your family and company for your father and chairman. We look forward to you keeping the legacy alive by preserving the culture.

Jonathan Siegmann: Good morning. Our condolences again to your family and company for your father and chairman. We look forward to you keeping the legacy alive by preserving the culture.

Victor Mendelson: Well, thank you. John, we've known you a long time. He always admired you, dealt with you in your fidelity, and we appreciate your confidence and your comments.

Good morning. Uh, Dolan says, again, to your family and company, uh, for your father and Chairman. Uh, we look forward to you keeping the legacy alive by preserving the culture.

Carlos L. Maury: Yeah. I wanted to ask Eric, you've constantly characterized PMA for military as this medium-term opportunity, but there's been lots of executive orders and directives. We had, in particular, a pretty spirited opening statement at AUSA by the Secretary of the Army, specifically about parts. Just could you give us a sense of what's really changing? Is the opportunity for you being pulled forward? Then maybe talk about the difference between qualifying a PMA part for a military aircraft relative to a commercial. Is it longer or more complicated? Thank you very much.

Jonathan Siegmann: Yeah. I wanted to ask Eric, you've constantly characterized PMA for military as this medium-term opportunity, but there's been lots of executive orders and directives. We had, in particular, a pretty spirited opening statement at AUSA by the Secretary of the Army, specifically about parts. Just could you give us a sense of what's really changing? Is the opportunity for you being pulled forward? Then maybe talk about the difference between qualifying a PMA part for a military aircraft relative to a commercial. Is it longer or more complicated? Thank you very much.

Thank you, and, uh, John, we've known you a long time. He—he always admired you, that—with you, when you were at Fidelity, and, uh, uh, we appreciate your confidence and your comments.

Um, so I wanted to ask Eric, um, you've constantly characterized PMA for military as this medium-term opportunity.

Victor Mendelson: So look, the US military operates a lot of commercial derivative aircraft. A lot of these parts and repairs have been approved by the FAA. There's no reason the government shouldn't be taking advantage of them. We think that sort of big picture, that's where the opportunity exists. As you know, the gap between what comes out, as they say, with the senior people in the "building" versus what ends up getting done sometimes can take a fair amount of time. I think this administration is very focused on getting that done. We have to get that done. That's why we're very bullish on the opportunity. I hate to provide super detail into what we're working on because we do have competitors in everything we do.

Eric Mendelson: So look, the US military operates a lot of commercial derivative aircraft. A lot of these parts and repairs have been approved by the FAA. There's no reason the government shouldn't be taking advantage of them. We think that sort of big picture, that's where the opportunity exists. As you know, the gap between what comes out, as they say, with the senior people in the "building" versus what ends up getting done sometimes can take a fair amount of time. I think this administration is very focused on getting that done. We have to get that done. That's why we're very bullish on the opportunity. I hate to provide super detail into what we're working on because we do have competitors in everything we do. I don't like giving them a roadmap, but we do think that there's very good, there continues to be very, very good opportunity. Now it's up to the government to really execute on that. I think that as they execute, the opportunity will be very rewarding for HEICO.

But there's been lots of executive orders and directives, and we had, in particular, a pretty spirited opening statement at USA by the Secretary of the Army specifically about parts. So, could you give us a sense of what's really changing? Is the opportunity for you being pulled forward? And then maybe talk about the difference between qualifying a PMA part for a military aircraft relative to a commercial one. Is it longer or more complicated? Thank you very much.

So, um, you know, look, the—

Victor Mendelson: I don't like giving them a roadmap, but we do think that there's very good, there continues to be very, very good opportunity. Now it's up to the government to really execute on that. I think that as they execute, the opportunity will be very rewarding for HEICO.

Operates a lot of commercial, uh, derivative aircraft and, uh, a lot of these parts and repairs have been approved by the FAA. And there's no reason the government shouldn't be taking advantage of them. So we think, you know, that sort of big picture, that's where the opportunity exists. Um, as you know, the gap between, you know, what comes out at, you know, as they say, in the, uh, with the senior, uh, people in the quote, unquote 'building' versus what ends up getting done sometimes can take a fair amount of time, and I think this administration is very focused on getting that done. We have to get that done. And so that's why we're very bullish on the opportunity. I hate to provide, you know, super detail into what we're working on because we do have competitors in everything we do and I don't like giving them a roadmap, but we do think that there's

Very good, uh, you know, there continues to be very, very good opportunity. And, you know, now it's up to the government to really execute on that. And I think that as they execute, um, you know, the opportunity will be very rewarding for HEICO.

Carlos L. Maury: Thank you. Good luck with the new year.

Jonathan Siegmann: Thank you. Good luck with the new year.

Victor Mendelson: Thanks. Thank you.

Eric Mendelson: Thanks. Thank you.

Operator: Thank you.

Victor Mendelson: Thank you.

Thank you. Good luck with the new year.

Carlos L. Maury: Thanks.

Carlos Macau: Thanks.

Thanks. Thank you guys.

Operator: We'll take our next question from Scott Deuschle with Deutsche Bank.

We'll take our next question.

Scott with Deutsche Bank.

Scott Deuschle: Hey, good morning. Carlos, just to clarify your response to Noah's question, are the specialty products' gross margins generally higher or lower than the gross margins in the other sub-markets at FSG?

Carlos L. Maury: It's a good question. We don't get into vertical margin profiles. I would say that obviously, we've said over the years, obviously, our PMA business is our highest margin business, but the other verticals within the FSG all float around the average margin of the segment. So that's about the best I could do for you.

Carlos Macau: It's a good question. We don't get into vertical margin profiles. I would say that obviously, we've said over the years, obviously, our PMA business is our highest margin business, but the other verticals within the FSG all float around the average margin of the segment. So that's about the best I could do for you.

Hey, good morning, Carlos. Just to clarify your response to Noah's question, are the Specialty Products gross margins generally higher or lower than the gross margins in the other cell markets at FSG? It's just a good question. We don't get into vertical margin profiles. I would say that, um,

Scott Deuschle: Okay. Then Eric, if we were to think about the largest and most established customers for FSG's PMA and repair solutions, firms like United, Delta, or Lufthansa, are those customers generally running flat out in terms of buying essentially everything from FSG that they can? Or is there still a lot of white space with those existing big customers for FSG to be doing even more for them?

You know, obviously our we said over the years, obviously our PMA business, is our highest margin business, but the other the other verticals are in the FSG all float around, the average margin of the segment. So you know, um, that's about the best I could do for you.

Okay. As in, Eric, if we were to think about the largest and most established customers for FSG’s PMA and Repair Solutions—firms like United, Delta, or Lufthansa.

Are those customers generally running flat out, in terms of buying essentially everything from FSG that they can? Or is there still a lot of white space with those existing big customers?

Victor Mendelson: Yeah. I mean, without commenting on who the largest customers are, they're buying a lot of our product, but there still remains tremendous potential at each of them. And you may ask, well, why is that? Why is it, if they're such big customers and they're buying most of your product or a lot of your product, why don't they buy all of your product? And I agree with you. That's very frustrating and something that we talk about all the time. Sometimes they have an arrangement, a contract with somebody else. Other times, it's the time, the inertia that it takes to get these parts approved within the organizations. But I can tell you that we continue to have very big opportunities in many areas, and we are conquering those opportunities quarter by quarter.

Eric Mendelson: Yeah. I mean, without commenting on who the largest customers are, they're buying a lot of our product, but there still remains tremendous potential at each of them. And you may ask, well, why is that? Why is it, if they're such big customers and they're buying most of your product or a lot of your product, why don't they buy all of your product? And I agree with you. That's very frustrating and something that we talk about all the time. Sometimes they have an arrangement, a contract with somebody else. Other times, it's the time, the inertia that it takes to get these parts approved within the organizations. But I can tell you that we continue to have very big opportunities in many areas, and we are conquering those opportunities quarter by quarter. I continue to learn of great wins with major airlines and products, whether they're parts or repair services, that they had not done with us in the past. So that's why I remain very bullish.

For FSG to be doing even more for them. Yeah, I mean, without commenting on, you know, who the largest customers are, um, you know, they're buying a lot of our product, but there still remains tremendous potential at each of them.

Victor Mendelson: I continue to learn of great wins with major airlines and products, whether they're parts or repair services, that they had not done with us in the past. So that's why I remain very bullish.

And you you may ask well, why is that, you know why is it if they're uh if they're such big customers and they're buying, you know, most of your product or a lot of your product, why don't they buy all of your product. And I I agree with you. That's very frustrating and something that we talk about all the time. Sometimes they have an arrangement, a contract with somebody else. Um, you know, other times it's uh, you know, the time the inertia that it takes to get these parts approved within the organizations. But, um, I can tell you that we continue to have very big opportunities in many areas and we are conquering those opportunities, uh, quarter by quarter. You know, I I I continue to learn a great wins with major airlines and products you know, whether they're

Scott Deuschle: Thank you very much.

Uh, parts or repair services that they had not done with us in the past, so that's why I remain very bullish.

Victor Mendelson: Thanks.

Eric Mendelson: Thanks.

Thank you very much.

Thanks.

Operator: We'll take our next question from Scott Mikus with Melius Research.

Scott Deuschle: Eric, Victor, condolences.

Scott Mikus: Eric, Victor, condolences.

Scott micas with melas research,

Victor Mendelson: Thank you. Thank you very much.

Victor Mendelson: Thank you.

Eric Mendelson: Thank you very much.

Scott Deuschle: I wanted to ask, so you operate a decentralized operating structure with many disparate operating units. When it comes to pursuing new business opportunities, whether it be for Golden Dome or other programs, do you ever find situations where your operating units are competing against each other for the same work package? Do you force them to collaborate, or do you let them pursue those business opportunities independently just to give the overall organization as many shots and goals you can get? Just your thoughts on that.

Um, thank you. Thank you very much.

I wanted to ask—so you operate a decentralized operating structure with many disparate operating units. When it comes to pursuing new business opportunities, whether it be for Golden Dome or other programs,

Victor Mendelson: Sure. It's extremely rare that we find our businesses in competitive situations. It's far more common that they actually have cooperative situations. They can help each other out, or sometimes they'll go to a customer together occasionally with a package or something like that. We don't, as a rule of thumb, police our businesses. We don't tell them what they can sell or they should sell. We encourage them to work together. And they're very practical, and they do. And I think they find a way to rationalize things where they should. They're always, I'll tell you the truth, always most focused on finding the most cost-effective solutions for our customers because that's what we're known for, and the best solution for the customer.

You ever find situations where your operating units are competing against each other? For the same work package, do you force them to collaborate or do you let them pursue those business opportunities independently? Just to give the overall organization as many shots and goals as you can get—just your thoughts on that.

Victor Mendelson: So, I have seen it in the rare case where there is something that's a dual offering that they're just happy to let the customer make the decision. And what we don't do is curtail dual offerings. We're very careful to not do that. Right. And we also, I can tell you, in some of our businesses whereby we have multiple locations, customers may want to deal with the location or the business that's physically closest to them because it's more convenient. And they may get competing offers from different HEICO businesses, and we're fine with them deciding where they want to send the business. I mean, we want to make the customer happy. And likewise, if the customer wants an independent solution with PMA or DER, we do that. If they want an OEM solution, we do that too. So we're really agnostic.

So, I have seen it in the rare case where there is something that's a dual offering that they're just happy to let the customer make the decision. And what we don't do is curtail dual offerings. We're very careful to not do that.

Eric Mendelson: Right. And we also, I can tell you, in some of our businesses whereby we have multiple locations, customers may want to deal with the location or the business that's physically closest to them because it's more convenient. And they may get competing offers from different HEICO businesses, and we're fine with them deciding where they want to send the business. I mean, we want to make the customer happy. And likewise, if the customer wants an independent solution with PMA or DER, we do that. If they want an OEM solution, we do that too. So we're really agnostic. We want to make sure that we're serving the customer in whatever way they want to be served. We think that it works out quite well to have multiple businesses in the space constantly striving for lower cost, better turnaround, and better quality. That's what makes HEICO such a strong competitor out there.

We don't, as a rule of thumb, police our businesses—uh, we don't tell them what they can sell or what they should sell. We encourage them to work together, and they're very practical, uh, and they do. And I think they find the way, uh, to rationalize things where they should. They're always—I'll tell you the truth—always most focused on finding the most cost-effective solutions for our customers, because that's what we're known for, and the best solution for the customer. So, um, I have seen it in the rare case where there is something that's a dual offering, um, that they're just happy to let the customer make the decision. And, uh, what we don't do is curtail dual offerings. We're— we're very careful to not do that, right? And, and, and, and we also, um... You know, I can tell you in some of our businesses whereby we have multiple locations, uh, customers may want to deal with the location or the business that's physically close to—

Victor Mendelson: We want to make sure that we're serving the customer in whatever way they want to be served. We think that it works out quite well to have multiple businesses in the space constantly striving for lower cost, better turnaround, and better quality. That's what makes HEICO such a strong competitor out there.

Them, uh, because it's more convenient and they may get, uh, you know, competing offers from, you know, different HEICO businesses, and we're fine with them deciding where they want to send the business. I mean, we want to make the customer happy and, uh, likewise, if the customer wants an independent solution with PMA or DER, we do that. If they want an OEM solution, we do that too. So we're really agnostic. We want to make sure that we're

Scott Deuschle: Okay. I'll stick with one question, but wanted to wish you and your families happy holidays. And Victor, a happy belated birthday as well. And from Eric, I think your birthday was on the 11th.

Scott Mikus: Okay. I'll stick with one question, but wanted to wish you and your families happy holidays. And Victor, a happy belated birthday as well. And from Eric, I think your birthday was on the 11th.

Serving the customer and you know, whatever way they they want to be served and we think that it it it works out quite well to have multiple businesses, uh, in the space. You know, constantly striving for a lower cost better turnaround better quality and and that's what makes iiko such a, a strong competitor out there.

Okay, I'll stick with one question. But I wanted to wish you and your families happy holidays, and Victor, a happy belated birthday as well—if I'm correct, your birthday was on the 11th.

Victor Mendelson: Thank you, Scott. I appreciate it. And we wish you happy holidays as well.

Victor Mendelson: Thank you, Scott. I appreciate it. And we wish you happy holidays as well. I'm going to have to bind your birthday. Wish you the same. Thank you.

Scott Deuschle: I'm going to have to bind your birthday.

Victor Mendelson: Wish you the same. Thank you.

Thank you, Scott. I appreciate it, and we wish you happy holidays as well. I'm going to have to find your birthday. Wish you the same.

Thank you.

Operator: We'll take our next question from Gavin Parsons with UBS.

And we'll take our next question from Gavin Parsons with UBS.

Jason Gursky: Thanks, guys. Good morning.

Gavin Parsons: Thanks, guys. Good morning.

Carlos L. Maury: Good morning, Gavin.

Carlos Macau: Good morning, Gavin.

Jason Gursky: Good morning. I guess maybe sort of along those similar lines, how integrated are the HEICO and Wencor parts and repair catalogs? And how long can that be a growth tailwind from cross-selling?

Gavin Parsons: Good morning. I guess maybe sort of along those similar lines, how integrated are the HEICO and Wencor parts and repair catalogs? And how long can that be a growth tailwind from cross-selling?

Thanks guys. Good morning.

Good morning. Good morning morning.

I guess maybe it's sort of along those similar lines. How integrated are the HEICO and Wencor part and repair catalogs, and how long can that be a, uh, a growth tailwind from cross-selling?

Victor Mendelson: Well, there we offer a lot of different products across the businesses. There is some overlap. And it's whatever the customer wants. If they want to buy it from one business or the other, that's fine. If they want to work new development projects with one business or the other, that's fine. As I've said, there's. I always use the analogy. There are many different types of food out there. And some people may want Italian food, American food, or French food, whatever. And at HEICO, we really don't care as long as we're selling them the product. So I think that there are a lot of additional opportunities to work together, but we've already really taken advantage of those, and we've really helped the various businesses forward. And I think you can see in the results, it's really worked out quite well.

Eric Mendelson: Well, there we offer a lot of different products across the businesses. There is some overlap. And it's whatever the customer wants. If they want to buy it from one business or the other, that's fine. If they want to work new development projects with one business or the other, that's fine. As I've said, there's. I always use the analogy. There are many different types of food out there. And some people may want Italian food, American food, or French food, whatever. And at HEICO, we really don't care as long as we're selling them the product. So I think that there are a lot of additional opportunities to work together, but we've already really taken advantage of those, and we've really helped the various businesses forward. And I think you can see in the results, it's really worked out quite well.

Well, it, uh, they are, uh, you know, we offer a lot of different products across the businesses. Uh, there is some overlap and it, you know, whatever the customer wants. If they want to buy it from one business or the other, that's fine. If they want to, uh, work new development projects with one business or the other, that's fine. Um, you know, as I've said, there's, uh, you know, I always use the analogy: there are many different types of food out there. And, you know, some people may want Italian food or American food or French food, whatever. And, you know, at HEICO we really don't care, uh, as long as we're selling them the product. Uh, so I think that there are a lot of, um, a lot of additional opportunities to, uh, work together, but we've already really taken advantage of those. And we've really helped, uh, the various businesses forward. And I, I, I think you can see in the results, it's really worked out quite well.

Jason Gursky: Great. Thanks. Also love a diverse diet. Thanks.

Gavin Parsons: Great. Thanks. Also love a diverse diet. Thanks.

Victor Mendelson: Thank you. Thanks, Gavin.

Eric Mendelson: Thank you.

Victor Mendelson: Thanks, Gavin.

Great, thanks. Also, love a diverse diet. Thanks. Thank you. Thank you.

Operator: We'll take our next question from Alexandra Namdiri with Truist Securities.

I will take our next question from Alexandra Nandor with Truist Securities.

Operator: Hi. This is Alexandra Namdiri. I'm from Michael Ciarmoli with Truist Securities. And thanks for taking my question. In terms of your PMA portfolio, what is the exposure like in terms of new engines, including the LEAP, GTF, GEnx? And do you see that as an opportunity, including first-time shop visits on the PMA front?

Alexandra Mandery: Hi. This is Alexandra Namdiri. I'm from Michael Ciarmoli with Truist Securities. And thanks for taking my question. In terms of your PMA portfolio, what is the exposure like in terms of new engines, including the LEAP, GTF, GEnx? And do you see that as an opportunity, including first-time shop visits on the PMA front?

Victor Mendelson: Yeah. So we normally don't get into details about specific product types or competitors. But in general, I can tell you that when an engine is new, it tends to be under warranty. And that's not a big opportunity for us over on the PMA side. It may be more so over on the repair side. And it's as those platforms age and customers want alternatives, that that's when it sort of comes into focus with us. So I would just sort of leave it at that. But I can tell you that our technology that we use to be able to engineer parts is consistent across all engines, all components. And we're very confident about our ability to technically develop the current generation and next generation. It's, as far as we're concerned, all within our wheelhouse.

Eric Mendelson: Yeah. So we normally don't get into details about specific product types or competitors. But in general, I can tell you that when an engine is new, it tends to be under warranty. And that's not a big opportunity for us over on the PMA side. It may be more so over on the repair side. And it's as those platforms age and customers want alternatives, that that's when it sort of comes into focus with us. So I would just sort of leave it at that. But I can tell you that our technology that we use to be able to engineer parts is consistent across all engines, all components. And we're very confident about our ability to technically develop the current generation and next generation. It's, as far as we're concerned, all within our wheelhouse.

Hi, this is Alexandra Mandrian from Michael Termoli with Tourist Security, and thanks for taking my question. In terms of your PNI portfolio, what is the exposure like in terms of new engines, including the LEAP, GTF, GNX, and do you see that as an opportunity, including first-time shop visits? On the PMA front...

I can tell you that our technology that we use to be able to engineer parts is consistent across, you know, all engines, all components, and we're very confident about our ability to technically develop, um, you know, the current generation, the next generation. It's, as far as we're concerned, all within our wheelhouse.

Operator: Great. That makes sense. Can you provide any additional color on general trends in ETG, given the portfolio being well-suited for space and defense tech, including next-gen systems and where you see bookings going?

Alexandra Mandery: Great. That makes sense. Can you provide any additional color on general trends in ETG, given the portfolio being well-suited for space and defense tech, including next-gen systems and where you see bookings going?

Victor Mendelson: Yeah. So this is Victor. I think that the trends that we talked about a little bit earlier in the call and the optimism for our various markets is intact, and for some of the reasons that you mentioned. By the way, not all of every market is good, and not all of every market offers opportunities. So in space, there's a lot of opportunity, but there's a lot of profitless opportunity there. And I think we've been pretty good at avoiding those situations and really going where we can add particular value to our customers and get recognized or be recognized for that in terms of profitability, market position, and so on. And the same applies in defense. There's opportunity, which we take advantage of in the more established segments of the market, as well as some of the newcomers in the defense tech sector.

If that makes sense, can you provide any additional color on general trends in ETG given the portfolio being well-suited for space and defense tech, including next-gen systems, and where you see bookings going?

There's opportunity, which we take advantage of in the more established segments of the market, as well as some of the newcomers in the defense tech sector. So we sell to both and are proud to do so. And we also believe that the market will continue to evolve such that there will be very important places for both, that one won't necessarily just replace the other. So it's important for us, in a sense, to be everywhere. And I think our business is not—I think I know our businesses have been particularly successful at doing that for a long time. One other note on defense.

Uh, yeah, so this is Victor. Um, I, you know, I think that, uh, the trends that we talked about a little bit earlier in the call and the optimism for our various markets, uh, is intact and, and for some of the reasons that you mentioned. Uh, not by the way, not all of every market is good and not all of every market offers opportunities. So, in space, um, there's a lot of opportunity, but there's a lot of profitless opportunity there. And I, I think we've been pretty good at avoiding those situations and really going where we can add particular value to our customers and get recognized, uh, or be recognized for that, uh, in terms of profitability and market positions, so on. And the same applies in defense; there's opportunity which we take advantage of in the more.

Victor Mendelson: So we sell to both and are proud to do so. And we also believe that the market will continue to evolve such that there will be very important places for both, that one won't necessarily just replace the other. So it's important for us, in a sense, to be everywhere. And I think our business is not—I think I know our businesses have been particularly successful at doing that for a long time. One other note on defense. As we look at the government's focus on cost and we look at the government's focus on speed, and particularly somebody earlier in the call mentioned the comments from the army secretary, HEICO has always been based on speed. We're not a cost-plus-fixed-fee company. Overwhelmingly, we have very little, a tiny amount of revenue in the cost-plus-fixed-fee column. It's all on our dime. We develop it.

As we look at the government's focus on cost and we look at the government's focus on speed, and particularly somebody earlier in the call mentioned the comments from the army secretary, HEICO has always been based on speed.We're not a cost-plus-fixed-fee company. Overwhelmingly, we have very little, a tiny amount of revenue in the cost-plus-fixed-fee column. It's all on our dime. We develop it. It may be developed to specification. It may be developed to something else, but we develop it on our dime and sell it. And it's based on doing it and doing it quickly and responding very quickly to our customers. So we are used to doing that, and we are extremely well-situated for the environment should it evolve to more of that.

Victor Mendelson: It may be developed to specification. It may be developed to something else, but we develop it on our dime and sell it. And it's based on doing it and doing it quickly and responding very quickly to our customers. So we are used to doing that, and we are extremely well-situated for the environment should it evolve to more of that.

Established segments of the market as well as some of the newcomers, uh, in the defense Tech sector. So we sell to both and are proud to do so. Uh, and we also believe that the market will continue, uh, to evolve such that, there will be very important places for both that 1 necessarily just replace the other. Um, so it's important for us in a sense to be everywhere. And I, I think our business is not, I think, I know our businesses have been particularly successful at doing that for a long time. 1 other note on defense, uh, as as we look at the government's focus on cost and we look at the government's focus on speed and particularly somebody uh, earlier in the call mentioned, uh, the comments from the, uh, Army secretary. Ho has always been based on speed. We are, we're not a Cost Plus fixed fee company. Uh, overwhelmingly we have very, very little tiny amount of Revenue in the Cost Plus fixed fee column. It's all on our dime. We develop it. Uh,

It may be developed to specification, it may be developed to something else, but, uh, we develop it on our dime and sell it, and it's based on doing it and doing it quickly, and responding very quickly to our customers. So we are used to doing that. Uh, and we are extremely well situated for the environment. Uh, should it evolve to more of that?

Operator: Great. Thank you so much.

Alexandra Mandery: Great. Thank you so much.

Victor Mendelson: Thank you.

Great. Thank you so much. Thank you.

Operator: We'll take our next question from Gautam Khanna with TD Cowen.

We'll take our next question from Gotham Cana with TD Cowen.

Jason Gursky: Hey, thanks. Good morning. My condolences. Larry was a fantastic kind of a legend in the industry and always very generous with his time to us.

Gautam Khanna: Hey, thanks. Good morning. My condolences. Larry was a fantastic kind of a legend in the industry and always very generous with his time to us.

Victor Mendelson: Thank you, Gavin.

Eric Mendelson: Thank you, Gavin.

Hey, thanks. Good morning. And my condolences—Larry was a fantastic, uh, kind of a legend in the industry and always very generous with his time to us. Thank you. Kevin.

Jason Gursky: I just had a couple of quick ones. One, I remember asking Larry probably like seven years ago on an earnings call how he viewed the Class A stock and just if there's ever going to be a desire to remove it and just get the common. What are your opinions on that?

Gautam Khanna: I just had a couple of quick ones. One, I remember asking Larry probably like seven years ago on an earnings call how he viewed the Class A stock and just if there's ever going to be a desire to remove it and just get the common. What are your opinions on that?

Victor Mendelson: At the moment, I believe it's status quo. We've talked about the issues over time with that. Of course, the idea of collapsing them requires an exchange value. Were we to do that at one-to-one, then we'd have perhaps upset common holders. If we did that at current market prices, we'd have upset Class A holders. As you know, the two classes are identical in all respects except for voting. So identical, the dividends, the economic benefits, the share of earnings, everything. They really belong ultimately at the same price. There have been times over the years where they've converged. We do believe at some point they will converge and that the Class A is really sort of a screaming value. In fact, you may notice that when we recently bought shares, our directors purchase shares every year equal to a certain portion of their retainer. When they bought the shares, they all bought, I think, all bought Class A common shares. So that really is a screaming value. I think over time, a rational market will recognize that and push them together.

Um I I just had a couple quick ones 1, you know? I remember asking Larry, probably like 7 years ago, on an earnings call, um, how he viewed the class A stock and just what the if there's ever going to be a desire to um remove it and just get, you know, the common. What are your opinions on that?

I, at the moment, I, I believe it's status quo, we we've talked about the issues over time, uh, with that. And, of course, uh, the idea of collapsing them requires an exchange value and, uh, we're we to do that at 1 to 1. Um, then we'd have perhaps upset, common holders and if we did that at current market prices, we'd have upset Class A holders. And as, you know, the 2 classes, identical in all respects, except for voting so identical. The dividends the economic benefits, the share of earnings everything. Uh, so they really belong ultimately at, at the same price, there have been times over the years where they've converted

Victor Mendelson: In fact, you may notice that when we recently bought shares, our directors purchase shares every year equal to a certain portion of their retainer. When they bought the shares, they all bought, I think, all bought Class A common shares. So that really is a screaming value. I think over time, a rational market will recognize that and push them together.

Jason Gursky: Gotcha. Okay. I wanted to ask also just in terms of demand by region, other companies in the sector have said China may have bought spare parts, pulled forward some purchases. Have you seen any sort of trends that would suggest anything to that of pre-buying or of the PMA parts?

Gautam Khanna: Gotcha. Okay. I wanted to ask also just in terms of demand by region, other companies in the sector have said China may have bought spare parts, pulled forward some purchases. Have you seen any sort of trends that would suggest anything to that of pre-buying or of the PMA parts?

Gotcha. Okay, I wanted to ask also, just in terms of demand by region, that other companies in the sector have said, like, China may have bought spare parts, you know, pulled forward some purchases. Have you seen any sort of—

trends that would suggest anything related to pre-buying or

Victor Mendelson: No. We see strength in all of our areas. So I would not say that we've seen that. It can be lumpy a little bit because people may buy parts a couple of times a year for each part number, and therefore it can be a little lumpy. But no, I wouldn't say that we've seen any region particularly stronger than the others.

Eric Mendelson: No. We see strength in all of our areas. So I would not say that we've seen that. It can be lumpy a little bit because people may buy parts a couple of times a year for each part number, and therefore it can be a little lumpy. But no, I wouldn't say that we've seen any region particularly stronger than the others.

of the PMA parts.

Jason Gursky: Okay. And then just my last one. In terms of pipeline of new PMA parts that are going to be introduced, typically you guys have given a range. It could be as many as 500 in a given year. What does the pipeline look like for 2026 in terms of what you're introducing to the market?

Gautam Khanna: Okay. And then just my last one. In terms of pipeline of new PMA parts that are going to be introduced, typically you guys have given a range. It could be as many as 500 in a given year. What does the pipeline look like for 2026 in terms of what you're introducing to the market?

No, we, you know, we we see strength in all of our areas so I I I would not say that we've seen that, you know. It it can be lumpy a little bit because you know that people may buy parts a couple times a year for each part number and therefore it can be a little lumpy but no, I I wouldn't say that we've seen uh any region uh particularly stronger uh than the than the others.

Okay, and then just my last one in terms of, uh, pipeline of new PMA parts that are going to be introduced. Typically, you guys have given a range, you know, to be as many as 500 in a given year. What does the pipeline look like?

Victor Mendelson: I would say it's consistent with what we've done historically. Really no change there. We're very happy with the number of parts that we've come out with. We've been at a similar number for a number of years. It went up when we bought Wencor. But I think you can see from the numbers that I think our decision has been quite good in that regard. And so I wouldn't see any substantive change.

Eric Mendelson: I would say it's consistent with what we've done historically. Really no change there. We're very happy with the number of parts that we've come out with. We've been at a similar number for a number of years. It went up when we bought Wencor. But I think you can see from the numbers that I think our decision has been quite good in that regard. And so I wouldn't see any substantive change.

For 26, in terms of what you're introducing to the market, I would say it's consistent with, uh, what we've done historically, uh, really no change there. We're very happy with the, uh, with the number of parts that we've come out with, you know, we we've been at a similar, you know, number for a number of years, it went up but we bought windoor. Um, but uh, you know,

Jason Gursky: All right. Thanks a lot, guys, and happy holidays.

Gautam Khanna: All right. Thanks a lot, guys, and happy holidays.

Victor Mendelson: Thank you. Likewise.

Jason Gursky: Thank you.

Gautam Khanna: Thank you.

All right, thanks a lot, guys, and happy holidays. Appreciate it. Thank you. You too. Likewise.

Operator: We'll take our next question from Khashayar Keeler with BNP.

Thank you.

Take our next question.

With BMP.

Sheila Kahyaoglu: Hey, guys. This is Khashayar on behalf of Matt today. I guess just going off that last question, just wanted to ask on PMA, how supportive has the FAA been regarding parts approvals there? It seems like everything related to FAA approvals, whether it be interiors or new aircraft, has just taken longer. So has that had any impact on your pipeline of new parts?

[Analyst] (BNP): Hey, guys. This is Khashayar on behalf of Matt today. I guess just going off that last question, just wanted to ask on PMA, how supportive has the FAA been regarding parts approvals there? It seems like everything related to FAA approvals, whether it be interiors or new aircraft, has just taken longer. So has that had any impact on your pipeline of new parts?

Victor Mendelson: No. We've got a great relationship with the FAA, and we interface with them in many different ways. I would say it's really business as usual for us. No change there. Always progressing very well for us.

Eric Mendelson: No. We've got a great relationship with the FAA, and we interface with them in many different ways. I would say it's really business as usual for us. No change there. Always progressing very well for us.

Yeah. Hey guys, this is Cash on behalf of Matt today. Um, I guess just going off that last question, just wanted to ask on PMA—how supportive has the FAA been regarding parts approvals there? It seems like, you know, everything related to FAA approvals, whether it be interiors or new aircraft, is just taking longer. So, has that had any impact on your pipeline of new parts?

No, we we've got a great relationship with the FAA and, you know, we interface with them and you know, many different, uh, ways. And uh, I would say it's really business. As usual for us, we know no change there. Always always progressing very well for us.

Sheila Kahyaoglu: Okay. Thanks.

[Analyst] (BNP): Okay. Thanks.

Victor Mendelson: Thank you.

Eric Mendelson: Thank you.

Operator: We'll take our next question from Louis Raffetto with Wolfe Research.

Okay, thanks. Thank you.

Operator: We'll take our next question from Louis Raffetto with Wolfe Research.

And we'll take our next question from Luis Rafetto with Wolfe Research.

Sheila Kahyaoglu: Hey, good morning. Thank you, guys.

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

Victor Mendelson: Morning, Louis.

Eric Mendelson: Morning, Louis.

Sheila Kahyaoglu: Victor, maybe for you, maybe I missed this, but could you give the end market growth within ETG for the quarter? I don't know how defense versus electronics.

Louis Raffetto: Victor, maybe for you, maybe I missed this, but could you give the end market growth within ETG for the quarter? I don't know how defense versus electronics.

Um, uh, Victor, maybe if you—maybe I missed this—but could you give the end market growth within ETG for the quarter?

Victor Mendelson: We did not break that out publicly, Lou.

Eric Mendelson: We did not break that out publicly, Lou.

I don't know how defense versus Electronics.

Sheila Kahyaoglu: Okay. All right. I'll take a look in the 10K. Maybe Carlos, for you, CapEx, you guys aren't one to really spend, but you spent a little bit more in the fourth quarter. Anything you could sort of point to what that extra spending went to?

Louis Raffetto: Okay. All right. I'll take a look in the 10K. Maybe Carlos, for you, CapEx, you guys aren't one to really spend, but you spent a little bit more in the fourth quarter. Anything you could sort of point to what that extra spending went to?

We, we did not break that out, uh, publicly, Lou.

Okay.

Carlos L. Maury: No, I think it was sort of business as usual, Lou. We had around year-end, you wind up getting projects accelerated sometimes because you get year-end deals as the calendar year closes out. So we still spent around, I think, one and a half, maybe 1.6% of our revenues on CapEx. That's about where we've been historically on the CapEx spend side. And I think as we look into 2026, it should be in a similar range, one and a half, 1.6 times revenues or something like that.

Carlos Macau: No, I think it was sort of business as usual, Lou. We had around year-end, you wind up getting projects accelerated sometimes because you get year-end deals as the calendar year closes out. So we still spent around, I think, one and a half, maybe 1.6% of our revenues on CapEx. That's about where we've been historically on the CapEx spend side. And I think as we look into 2026, it should be in a similar range, one and a half, 1.6 times revenues or something like that.

In the 10-K... Uh, maybe, uh, Carlos, for you—CapEx—you guys aren't wanting to really spend, uh, but you spent a little bit more in the fourth quarter. Anything you could sort of point to, what that extra spending went to?

No, I think it was, uh, sort of business as usual we had. Um,

You know around here and you you wind up getting, you know, projects accelerated sometimes because you get year end deals as you know, the calendar year closes out. So we still spend around, I think 1 and a half, maybe 1.6% of our revenues on capex. That's about where we've been historically, uh, on on the capital expense side. And I think as we look into 26, it should be in a similar range, you know, 1 and a half 1.6 times for revenues or something like that.

Sheila Kahyaoglu: All right. Thank you very much.

Louis Raffetto: All right. Thank you very much.

Victor Mendelson: You're more than welcome.

Carlos Macau: You're more than welcome.

Carlos L. Maury: Thank you.

Eric Mendelson: Thank you.

Operator: At this time, I will turn the conference back to the management team for any additional or closing remarks.

All right. Thank you very much. You're more than welcome. Thank you.

Operator: At this time, I will turn the conference back to the management team for any additional or closing remarks.

At this time, I will turn the conference back to the

Victor Mendelson: Thank you very much, Samara. We appreciate your coverage of the call for us. We wish everybody on the call a wonderful holiday season, and we thank you for listening today. We look forward to talking with you on the next call or if not sooner. Thank you very much.

for any additional or closing remarks.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

Thank you very much, Samara. We appreciate your, uh, coverage of the, uh, the call for us. Uh, we wish everybody on the call a wonderful holiday season, and we thank you for listening today. We look forward to talking with you on the next call, or if not sooner. Thank you very much.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

This concludes today's call. Thank you for your participation. You may now disconnect.

Q4 2025 Heico Corp Earnings Call

Request a DemoDemo

HEI

Heico

Earnings