HEICO Corporation Q4 FY2025 earnings call

• Acknowledged the legacy of Larry Mendelson, HEICO's former Chairman and CEO, who instilled values of fairness, excellence, and focus on cash flow. - Fourth quarter fiscal '25 results: Consolidated net income increased 35% to $188.3 million; consolidated operating income and net sales were record results, improving 28% and 19% respectively. EBITDA increased 26% to $331.4 million. Net debt-to-EBITDA ratio improved to 1.60. - Completed 5 acquisitions in fiscal '25, with three in Electronic Technologies Group and two in Flight Support Group. Recently announced acquisitions of Ethos and another business expected to close in Q1 '26. - Flight Support Group had record net sales and operating income, driven by 16% organic growth and acquisitions. Electronic Technologies Group also had record net sales and operating income, driven by 7% organic growth and acquisitions.

Flight Support Group: In the fourth quarter of fiscal '25, net sales reached a record $834.4 million, a 21% increase from $691.8 million in the same period of fiscal '24. Operating income was a record $201 million, a 30% increase from $154.5 million. The growth reflects 16% organic growth and impact from acquisitions. Revenue contribution from Flight Support Group was significant. Electronic Technologies Group: Net sales in the fourth quarter of fiscal '25 were a record $384.8 million, a 14% increase from $336.2 million in fiscal '24. Operating income was a record $89.6 million, a 10% increase from $81.8 million. This growth reflects 7% organic growth and impact from acquisitions. Revenue contribution from Electronic Technologies Group was also notable.

• Anticipate net sales growth in fiscal '26 for both Flight Support Group and Electronic Technologies Group, driven by organic growth and recent acquisitions. - Continue to pursue selective acquisition opportunities that complement growth and maintain disciplined financial management to create long-term shareholder value through organic growth and strategic acquisitions while maintaining financial resilience and flexibility. - Acquisition activity remains robust across both segments with a healthy pipeline of potential opportunities under evaluation.

• Factors such as the severity, magnitude, and duration of public health threats like COVID-19. - Liquidity and cash generation issues. - Lower commercial air travel, airline fleet changes, or purchasing decisions affecting demand. - Product specification costs and requirements increasing completion costs. - Governmental and regulatory demands, export policies and restrictions. - Reductions in defense, space, or homeland security spending by U.S. and foreign customers or competition from existing and new competitors. - Ability to introduce new products and services at profitable pricing levels. - Product development or manufacturing difficulties causing increased costs and delays. - Cybersecurity events or IT system disruptions. - Customer credit risk, interest, foreign currency exchange, and income tax rates. - Economic conditions including inflation affecting costs and revenues.

Q: Larry Solow asked Eric Mendelson about the drivers of growth in the Flight Support Group, specifically bucketting the positives driving the business.

A: Eric Mendelson responded that organic growth has been tremendous, driven by a favorable industry environment, strong value proposition for customers, decentralized and entrepreneurial structure, and other manufacturers increasing prices which supports HEICO's value proposition.

Q: Ron Epstein asked about M&A outlook for 2026.

A: Victor Mendelson stated that M&A activity is very strong with a busy pipeline, and Eric Mendelson added that HEICO has a long track record of acquisitions, is viewed as a great home for sellers, and has a strong acquisitions team.

Q: Peter Arment asked about the mix of defense and commercial in the Flight Support Group.

A: Eric Mendelson said the mix is likely to remain consistent as commercial growth keeps up with defense growth, and there are massive opportunities in defense including with defense tech community.

Q: Ken Herbert asked about FSG margins into fiscal '26 and beyond.

A: Eric Mendelson said there is continued margin opportunity due to absorption of fixed costs, and Carlos Macau mentioned FSG is expected to play between 23.5% and 24.5% GAAP operating margins with mix impacts to consider.

Q: John Godyn asked about the multi-year net income growth target.

A: Eric Mendelson and Carlos Macau stated that the 15%-20% net income growth target is aspirational, the company is structured to continue growth, and they remain focused on outgrowing the market.