TransDigm Group Incorporated Q4 FY2025 earnings call

• Strategy: Believes in unique position with 90% of net sales from unique proprietary products, ~90% EBITDA from aftermarket with higher margins, consistent long-term strategy including owning proprietary air businesses with aftermarket content, simple value-based operating methodology, decentralized structure, strategic acquisitions, and focused capital allocation. • Quarter performance: Fourth quarter had healthy growth in commercial aftermarket, robust defense market growth, and commercial OEM returned to growth. Full year fiscal 2025 revenue and EBITDA as defined margin exceeded guidance. • Fiscal 2026 outlook: Midpoint of fiscal 2026 revenue guidance is $9.85B (+~12% yoy), with commercial OEM growth in high single-digit to mid-teens, commercial aftermarket in high single-digit, and defense in mid-single to high single-digit. Midpoint of EBITDA as defined guidance is $5.15B (+~8%) with margin ~52.3%, including 200 basis points margin dilution from recent acquisitions. • Capital allocation: Allocated ~$7B in aggregate across M&A and return of capital in fiscal 2025, including acquisitions of Servotronics, Simmons Precision Products, and small tuck-in acquisitions, plus special dividend and share repurchases. Continues to assess capital allocation options and look for M&A opportunities fitting the model.

In the fourth quarter, commercial aftermarket channel revenue showed healthy growth, commercial OEM revenues returned to growth after prior destocking, and defense market channel had robust growth. For the full year, fiscal 2025 revenue and EBITDA as defined margin surpassed guidance. Commercial aerospace market trends were favorable with air traffic growing 3%-4% year over year. Commercial aftermarket revenue in Q4 increased ~11% and 10% for the full year. Commercial OEM revenue in Q4 was up 7% but down 1% for fiscal 2025 full year. Defense market revenue in Q4 2025 grew ~16%, driven by new business wins and strong performance in domestic and international markets.

• Fiscal 2026 revenue midpoint is $9.85B, up ~12% yoy. • EBITDA as defined midpoint is $5.15B, up ~8% with margin ~52.3%, including 200 basis points margin dilution from recent acquisitions. • Adjusted EPS midpoint is $37.51. • Revenue growth assumptions: Commercial OEM in high single-digit to mid-teens, commercial aftermarket in high single-digit, defense in mid-single to high single-digit. • Q1 2026 revenues, EBITDA, and margins anticipated to be lower due to fewer working days.

• Aerospace market trends can be bumpy, especially for commercial OEM production rates which affect results. • M&A activities are hard to predict and execution risks exist. • Defense sales and bookings can be lumpy, making accurate forecasting difficult. • Interest rate and market conditions could impact capital allocation and financial metrics.

Q: Could TransDigm take a more serious look at acquisitions outside of aerospace and defense?

A: Currently focus is on aerospace and defense components businesses, but in fullness of time could potentially branch out.

Q: Any noticeable trends in aftermarket submarkets?

A: Interiors picked up more this year, engine has been strong, freight was solid, bizjet and helicopter had more stable performance.

Q: Clarity on defense slowdown in 2026?

A: Defense is lumpy, bookings and sales can be difficult to forecast accurately, but guidance is for mid-single to high single-digit revenue growth.

Q: Ability to get acquisitions up to TransDigm margins?

A: Simmons and Servotronics are great products, and over time margins can be marched upward, though timeline varies.

Q: Color on F-47 contract?

A: Teams have been working to win content, it's a good program but specific details on which operating units won't be disclosed.

Q: CapEx and headcount comments?

A: CapEx includes automation for productivity and capacity, headcount is expected to be flat despite growth in commercial and defense OEM work.

Q: Working capital investment in 2026?

A: Expected to be similar to prior years, around 2-3% of sales.

Q: Sell-in vs sell-through in aftermarket?

A: Point of sale at distributors was up more than underlying commercial aftermarket, with mix of products and inventory changes impacting it.

Q: Bidding process for F-47 and impact of DOD reforms?

A: Bidding process was similar to past, and TransDigm is well positioned to create value with its products.

Q: Position on new defense programs like missiles and drones?

A: Has solid wins and is well positioned to participate in new programs with its engineered products and focus on solving customer problems.