HEICO Corporation Q1 FY2024 earnings call

• Thanked HEICO's team for strong Q1 results. Consolidated operating income and net sales improved 39% and 44% respectively vs Q1 2023. Net income increased 23% to $114.7 million. EBITDA increased 43% to $224.4 million. Flight Support Group set record net sales and operating income. Acquired exclusive license and assets from Honeywell in Dec 2023, expected to be accretive. Discussed best practices between HEICO and Wencor acquisition, with Wencor continuing as autonomous business. ETG expects stronger quarters ahead with backlog and new product R&D.

Flight Support Group: Net sales in Q1 2024 were $618.7 million, up 67% from $371.3 million in Q1 2023. Operating income was $136 million, up 63% from $83.6 million. Electronic Technologies Group: Net sales in Q1 2024 were $285.9 million, up 12% from $255.1 million in Q1 2023. Operating income was $55.3 million, down slightly from $56.5 million in Q1 2023.

• Goal is to grow net income 15% to 20% annually compounded. Confident of achieving 15%-20% growth in FY 2024 without future acquisitions. No specific quarterly guidance provided.

• Factors like COVID-19, liquidity, airline demand, cost pressures, regulatory issues, defense spending, acquisitions, credit risk, currency, taxes, and economic conditions could impact results.

Q: Robert Spingarn with Melius Research asked about U.S. airlines' capacity growth plans and Wencor best practices A: Eric Mendelson said market is strong, large carriers are particularly strong; Wencor continues as autonomous business with synergies Q: Noah Poponak with Goldman Sachs asked about ETG margin shape and FSG margin outlook A: Victor Mendelson said ETG year should build; Eric Mendelson and Carlos Macau discussed FSG margin expectations Q: Scott Deuschle with Deutsche Bank asked about Boeing's challenges impact on FSG Specialty Products and ETG R&D A: Eric Mendelson said Boeing challenges impacted specialty products but space/defense order book is strong; Victor Mendelson said ETG R&D was up ~25% in the quarter Q: Larry Solow with CJS Securities asked about FSG growth sources and ETG category outlooks A: Eric Mendelson discussed FSG growth from aftermarket and market share gains; Victor Mendelson talked about ETG category outlooks and R&D investment Q: Peter Arment with Baird asked about supply chain impacts and ETG acquisition A: Victor Mendelson said supply chain is almost back to normal; Victor Mendelson discussed positive outlook for the acquired ETG business Q: Sheila Kahyaoglu with Jefferies asked about ETG margin improvement and Wencor revenue synergy A: Victor Mendelson expected ETG margin to improve; Eric Mendelson discussed Wencor revenue synergy through complementary product sets and business autonomy Q: Mariana Perez Mora with Bank of America asked about ETG R&D trends and M&A opportunities A: Victor Mendelson discussed ETG R&D driven by customer needs and business expertise; Eric Mendelson talked about M&A opportunities with Honeywell license Q: Gautam Khanna with TD Cowen asked about order patterns in direct vs indirect channels A: Eric Mendelson said distribution and direct channels are strong, with supply chain tightness issues Q: Bert Subin with Stifel asked about new customer strategy and earnings growth drivers A: Eric Mendelson discussed new customer pricing and earnings growth drivers from FSG, ETG, and debt paydown Q: Louis Raffetto with Wolfe Research asked about FSG mix and defense performance in ETG A: Carlos Macau discussed FSG mix performance; Victor Mendelson said defense in ETG is growing as expected Q: Larry Solow asked about leverage and M&A limits A: Laurans Mendelson said would consider above 3x leverage for super sensational deals but very careful with debt