Ladies and gentlemen, thank you for standing by, and welcome to the HEICO's Fiscal Year 2021 First Quarter Earnings Results Call. Certain statements in today's call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. HEICO's actual results may differ materially from those expressed and/or implied by those forward-looking statements as a result of factors including the severity, magnitude, and duration of the COVID-19 pandemic, HEICO's liquidity and amount and timing of cash generation, lower commercial air travel caused by COVID-19 pandemic and its aftermath, airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services, product specification costs and requirements, which could cause an increase or costs to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, space or homeland security spending by U.S. and/or foreign customers or competition from existing and new competitors, which could reduce our sales, our ability to introduce new products and services at profitable pricing levels. Wh ich could reduce our sales or sales growth, product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales, our ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest, foreign currency exchange, and income tax rates, economic conditions within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries, which could negatively impact our costs and revenues, and defense spending or budget cuts, which could reduce our defense-related revenue. Parties receiving, listening to this call or are reading a transcript of this call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, including, but not limited to filings on Form 10-K, Form 10-Q, and Form 8-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required by applicable law. I now turn the call over to Mr. Laurans A. Mendelson, HEICO's Chairman and CEO. Thank you, sir. Thank you very much, and good morning to everyone on the call. We thank you for joining us, and we welcome you to HEICO's First Quarter Fiscal 2021 Earnings Announcement Teleconference. I'm Larry Mendelson, Chairman and CEO of HEICO Corporation, and I'm joined here this morning by Eric Mendelson, HEICO's Co-President and President of HEICO's Flight Support Group, Victor Mendelson, HEICO's Co-President and President of HEICO's Electronic Technologies Group, and Carlos Macau, our Executive Vice President and CFO. Before I get into some of the detail, I would like to thank all of HEICO's extraordinary team members who have really performed in the most admirable way during this pandemic, which is now into about a year. I can tell you, senior management and the board holds these people in the highest regard. I thank them, and our hats are off to the entire team. Before reviewing our operating results in detail, I'd like to take a few minutes to discuss the impact on HEICO's operating results from the COVID pandemic. Results of operations in the first quarter of fiscal 2021 continued to reflect adverse impact from COVID-19. Most notably, demand for commercial aviation products and services continues to be moderated and impacted negatively by ongoing depressed commercial aerospace markets. We continue to focus on health and safety measures at our facilities in accordance with the CDC guidelines in order to protect the global team members and mitigate the spread of COVID-19 while serving our customer's needs. Keep in mind that almost all of our facilities were open continually since the start of the COVID pandemic, and very few members of our teams came down with this miserable disease. That was because of the safety measures and health measures that we employed throughout the company. Consolidated net sales for businesses that operate within the commercial aerospace industry decreased by about 43% in the first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020. As we move further into fiscal 2021, we acknowledge that factors such as the duration, spread, and severity of the pandemic, the emergence of new corona strain variants, and distribution and effectiveness of COVID-19 vaccines will largely determine the timing and pace at which commercial aerospace will recover. As we mentioned in prior calls, we anticipate that as the pandemic vaccine becomes more widely available, consumer interest in commercial air travel should begin to reemerge. As such, we cautiously anticipate improved demand for our commercial aerospace products to slowly recover towards the second half of fiscal 2021. Summarizing the highlights of our first quarter of fiscal 2021 results, I will tell you that despite the continuing difficult operating environment created by the pandemic, HEICO continues to generate excellent cash flow. The cash flow provided by operating activities was very strong, increasing 32% to $107.2 million in the first quarter of fiscal 2021, and that was up from $81.1 million in the first quarter of fiscal 2020. We are encouraged by the second consecutive quarter of sequential improvement in net sales and operating income at our Flight Support Group. Operating income and net sales at Flight Support increased 20% and 3% respectively in the first quarter of fiscal 2021 as compared to the fourth quarter of fiscal 2020. Clearly, an improvement that's obvious. Net sales for ETG, Space, and Electronics Products grew organically by a very strong 19% and 14% respectively in the first quarter of fiscal 2021, while the ongoing pandemic's impact resulted in softer demand for its commercial aerospace products. In January 2021, we paid our regular semiannual cash dividend of $0.08 per share, and this represented our 85th consecutive semiannual cash dividend since 1979. HEICO's strength in the face of ongoing challenging conditions, coupled with our optimism for HEICO's future, gave our board the confidence to continue paying a cash dividend through the current health pandemic. Total debt to shareholders equity improved to 32.2% as of January 31, 2021, and that compares to 36.8% as of October 31, 2020. Our net debt, which is total debt less cash and cash equivalents of $270.3 million as of January 31, 2021 to shareholders equity ratio improved to 13% as of January 31, 2021, and that was down from 16.6% as of October 31, 2020. Our net debt to EBITDA ratio improved to 0.62x as of January 31, 2021, and that was down from 0.71x on October 31, 2020. We have no significant debt maturities until fiscal 2024. We plan to utilize our financial strength and flexibility to aggressively pursue high-quality acquisitions of various sizes to accelerate the growth and maximize shareholder return. Last week, we publicly and proudly extended our congratulations to both NASA and Jet Propulsion Laboratory, or known as JPL, on their successful Mars Perseverance Rover landing. Our Apex Microtechnology, Sierra Microwave, 3D PLUS, and VPT subsidiaries supplied mission-critical hardware for the mission. Once again, NASA and JPL demonstrated remarkable talent and capabilities despite a year of great challenges for the world's population. They remain a beacon of optimism for all people. We are extremely proud of HEICO companies and team members who contributed to this effort. I think we want to focus on the extreme technical ability and unbelievable quality that our subsidiaries built into the electronics that they supplied for that Mars Perseverance Rover landing. At this time, I would like to introduce Eric Mendelson, Co-President of HEICO and President of HEICO's Flight Support Group, and he will discuss the results of the Flight Support Group. Thank you. The Flight Support Group's net sales were $199.3 million in the first quarter of fiscal 2021 as compared to $301.1 million in the first quarter of fiscal 2020. The net sales decrease is principally organic and reflects lower demand for the majority of our commercial aerospace products and services, resulting from the significant decline in global commercial air travel attributable to the pandemic. The Flight Support Group's operating income was $25.8 million in the first quarter of fiscal 2021, as compared to $62 million in the first quarter of fiscal 2020. The operating income decrease principally reflects the previously mentioned decrease in net sales, as well as a lower gross profit margin and the impact from lost fixed cost efficiencies stemming from the pandemic. The lower gross profit margin principally reflects the impact from lower net sales of commercial aerospace products and services across all of its product lines. The Flight Support Group's operating margin was 13.0% in the first quarter of fiscal 2021, as compared to 20.6% in the first quarter of fiscal 2020. The operating margin decrease principally reflects the previously mentioned lower gross profit margin and an increase in SG&A expenses as a percentage of net sales, mainly from the previously mentioned lost fixed cost efficiencies and the effect of higher intangible asset amortization expense. I would like to point out that the full impact of the pandemic began to affect the FSG operating segment at the beginning of our third quarter of fiscal 2020. Through practical and disciplined cost management, we have delivered sequential quarterly improvements in our FSG operating margin. The FSG operating margin was just 6.7% in the third quarter of fiscal 2020, and has since steadily increased to 11.1% in the fourth quarter of fiscal 2020, and to 13% in the first quarter of fiscal 2021. Our team members and assembled workforce is our most valuable asset. Our team members, engaged primarily in commercial aviation, sacrificed greatly during the pandemic through limited layoffs, moderate furloughs, and wage reductions for nearly all others not impacted by layoffs or furloughs. These team members sacrificed a tremendous amount, and we owe our loyalty to them as we held on to a much higher percentage of our workforce than most others. Thus, we decided to operate with higher overhead, which reduced our gross margin and increased our SG&A. A lot of companies speak about how their team members are important, but HEICO demonstrates it through actions, including by maintaining our 401(k) matching contributions and granting our team members their maximum potential 401(k) profit-sharing contributions, even though we missed our budgets due to the pandemic. We could have sacrificed the future in order to have better current period results, but that is not what HEICO is about. That's the luxury of being part of the HEICO family, as we don't feel pressured to make short-term decisions that hurt future performance. We also treated our customers, suppliers, principals, partners, and acquisitions extremely well and truly believe this helps us grow faster than the industry, as people prefer dealing with us due to our culture. We are confident that our motivated and assembled workforce will propel us to new heights as the pandemic passes. Now I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO's Electronic Technologies Group, to discuss the results of the Electronic Technologies Group. Eric, thank you. I would also like to echo my gratitude to all of HEICO's team members, including those at the Electronic Technologies Group, for their remarkable efforts during this difficult time. About 90% of our people cannot work from home and have to come in, our businesses have been operating as essential businesses throughout this pandemic very carefully and very safely and taking care of each other. I'm very proud of the job that our people have done throughout this entire difficult period as well as the many years before. I know that they'll continue to do the excellent work that they've carried out. As for the Electronic Technologies Group's performance, our net sales increased 7% to $223.6 million in the first quarter of fiscal 2021, up from $208.4 million in the first quarter of fiscal 2020. The increase is principally attributable to the favorable impact from our fiscal 2020 acquisitions. The Electronic Technologies Group's operating income increased 5% to $60.1 million in the first quarter of fiscal 2021, up from $57.5 million in the first quarter of fiscal 2020. This increase principally reflects the previously mentioned net sales growth. The Electronic Technologies Group's operating margin was 26.9% in the first quarter of fiscal 2021 as compared to 27.6% in the first quarter of fiscal 2020. The lower operating income as a percent of net sales principally reflects a lower gross profit margin, partially offset by a decrease in SG&A expenses as a percentage of net sales, mainly from certain efficiencies gained from the previously mentioned net sales growth. The lower gross profit margin mainly reflects a decrease in net sales of commercial aerospace products and lower net sales and a less favorable product mix of certain defense products, partially offset by an increase in net sales of certain electronics products. Turn the call back over to Larry Mendelson. Thank you, Victor. Moving on to earnings per share. Consolidated net income per diluted share was $0.51 in the first quarter of fiscal 2021, and that compared to $0.89 in the first quarter of fiscal 2020. The decrease principally reflects the previously mentioned lower operating income of the Flight Support Group and higher income tax expense, partially offset by less net income attributable to non-controlling interests as well as lower interest expense. Depreciation and amortization expense totaled $23 million in the first quarter of 2021. That was up from $21.6 million in the first quarter of fiscal 2020. The increase in the first quarter of fiscal 2021 principally reflects the incremental impact of higher intangible asset amortization expense from our fiscal 2020 acquisitions. Significant new product development efforts are continuing at both ETG and Flight Support. R&D expense was $16.2 million in the first quarter of fiscal 2021, or about 3.9% of sales. That compared to $17.1 million in the first quarter of fiscal 2020, or 3.4% of sales. Consolidated SG&A expense decreased by 10% to $78.1 million in the first quarter of fiscal 2021 as compared to $87.1 million in the first quarter of fiscal 2020. The decrease in consolidated SG&A expense reflects a decrease in performance-based compensation expense, a reduction in other selling expenses, including outside sales commission, marketing, and travel, and a reduction in other G&A expenses. Consolidated SG&A expense as a percentage of net sales was 18.7% in the first quarter of fiscal 2021. That compared to 17.2% in the first quarter of fiscal 2020. The increase in the consolidated SG&A expense as a percentage of net sales principally reflects higher other G&A expenses as a percentage of net sales and the impact from higher intangible asset amortization expense. Interest expense decreased to $2.4 million in the first quarter of fiscal 2021, that was down from $4.3 million in the first quarter of fiscal 2020. The decrease was principally due to lower weighted average interest rates, partially offset by a higher weighted average balance of borrowings under our revolving credit facilities. Other income in the first quarter of fiscal 2021 and 2020 was really not significant. HEICO's income tax expense was $2.3 million in the first quarter of fiscal 2021, that compared to an income tax benefit of $22.9 million in the first quarter of fiscal 2020. HEICO recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2021 and 2020 of $13.5 million and $47.6 million, respectively. The tax benefit from stock option exercises in both periods was the result of the strong appreciation in HEICO stock price during the option use holding period, and the $34.1 million larger benefit recognized in the first quarter of fiscal 2020 was the result of more stock options which were exercised. Net income attributable to non-controlling interest was $5.7 million in the first quarter of fiscal 2021, and that compared to $7.9 million in the first quarter of fiscal 2020. The decrease principally reflects a decrease in operating results of certain subsidiaries of Flight Support in which non-controlling interests are held. For the full fiscal year 2021, we now estimate a combined effective tax rate and non-controlling interest rate of approximately 24%-26% of pre-tax income. Moving over to the balance sheet and cash flow. The financial position of HEICO and forecasted cash flow remain very strong. As we mentioned earlier, cash flow provided by operating activities was very strong and increased 32% to $107.2 million in the first quarter of fiscal 2021. Up from $81.1 million in the first quarter of fiscal 2020. Our working capital ratio was strong and consistent at 4.9x as of January 31, 2021, and that compared to 4.8x as of October 31, 2020. Days sales outstanding of receivables, DSOs, improved to 45 days as of January 31, 2021, and that compared to 46 days as of January 31, 2020. Of course, we continue to closely monitor all receivable collection efforts in order to limit our credit exposures. No one customer accounted for more than 10% of net sales. Our top five customers represented about 24% and 22% of consolidated net sales in the first quarter of fiscal 2021 and 2020 respectively. Our inventory turnover rate increased to 164 days for the period ending January 31, 2021. That compared to a pre-pandemic 132 days for the period ended January 31, 2020. The increase in the turnover rate principally reflects lower net sales volume, mainly resulting from the pandemic impact on demand for certain of our products and services. Despite the increased turnover rate, our subsidiaries really have done an excellent job controlling inventory levels in the first quarter of fiscal 2021, which we believe are appropriate to support expected future net sales. In consideration of HEICO's consolidated backlog, which has increased by $62 million since October 31, 2020, the backlog was $96 million as of January 31, 2021. As we look ahead to the remainder of fiscal 2021, the pandemic will likely continue to negatively impact commercial aerospace and HEICO. Given this uncertainty, we cannot provide fiscal 2021 net sales and earnings guidance at this time. However, we believe that our ongoing fiscal conservative policies, healthy balance sheet, and increased liquidity will permit us to invest in new research and development and gain market share as the industry recovers. In addition, our time-tested strategy of maintaining low debt and acquiring and operating high cash-generating businesses across a diverse base of industries beyond commercial aviation, such as defense, space, and other high-end markets, including electronics and medical, puts us in a good financial position to weather this uncertain economic period. We are cautiously optimistic that the vaccine progress may generate increased commercial air travel and will result in gradual recovery and demand for our commercial aerospace parts and services businesses, and we expect that to commence primarily in the second half of fiscal 2021, although we do expect it to increase gradually until we get there. In closing, I again want to thank our incredible team members for their continued support and commitment to HEICO during these professionally and personally challenging times. That strength will manifest from our culture of ownership, our mutual respect for each other, and the unwavering pursuit of exceeding customers' expectations. We thank you for all you do to make HEICO an exceptional company. I also would like to point out that in spite of the pandemic, and in spite of decreased sales, HEICO wanted to look and reward our team members. Again, this year, we continued to make the 5% match to team members' 401(k) investments. As you know, most team members invest 6%. HEICO matches it with 5% of their salary in HEICO shares. We would never cut that back because we respect and we want to reward our outstanding team. Thank you. Now I'd like to open the floor for any questions. Thank you. Thank you, sir. At this time, we would like to take any questions you might have for us today. As a reminder, if you would like to ask a question over the phone, simply press star then the number one on your telephone keypad. Again, that would be star then the number one on your telephone keypad. We have your first question from the line of Robert Spingarn from Credit Suisse. Please go ahead. Hi. Good morning. Good morning, Rob. Hi. Good set of numbers today. Larry, could I start with you on M&A? I think you said earlier that the company will continue to pursue a strong M&A policy. What are you seeing trend-wise in the market as the pandemic has evolved? Are sellers more or less willing to sell at this point? Well, we see a lot of product coming out. Some are coming out of private equity, sellers are willing to sell. In the Flight Support Group, it's a little tougher because their profits have gone down, and a lot of them are pulling their sales activity, hoping for a recovery, which I know will be coming. However, in looking at our backlog of potential M&A possibilities, it's probably business as usual. Probably the difficulty here, Rob, is the logistics of getting out, kicking the tires, checking and doing all these things. That really has slowed us down a little bit. Particularly when you're dealing with private equity guys, they have the information, and they're more up to speed. When you're dealing with private sellers who have never sold a company before, it becomes much more difficult. The bottom line is we are seeing many opportunities, some at very reasonable prices, and we're kicking the tires. Others are at the 14x, and 16x EBITDA multiples, which price us out of the game. We are also looking at small companies that we traditionally buy, size-wise, and we're looking at larger companies. Of course, as you know, we are not fiscally constrained. We've been asked many times, "Would you use your currency, which is selling at a high multiple, for acquisition?" The answer is yes. As a matter of fact, there's one transaction, I don't know if it'll ever close, but where the seller wants HEICO shares. Our currency, we have cash. I said this in the last call, we have cash, we have stock, and we have wampum. We're ready to give the sellers whatever they would like. I guess we can give them Bitcoin, too. That was my next question. In terms of the end markets, historically, you've been a little more active on Victor's side of the business, with the defense and the space types of acquisitions. Are we seeing any more opportunity or less opportunity in commercial aero M&A? Yes. Rob, this is Eric. We are seeing opportunity in commercial, but as my dad pointed out, the current level of earnings are depressed, so it's a little difficult to nail down prices there. We are still seeing plenty of opportunity. Okay. Just a couple other ones. Victor, wanted to just ask you a couple things about ETG. You have this very strong 19% and 14% growth in space and other electronics. Could you talk a little bit about what's driving that? Then separately, how defense did, and clearly, I guess commercial aero was a factor as it's been across the industry. Yes. Thank you, Rob. Those are good questions. On space, I think you heard us talk about throughout last year that we felt it would strengthen and would continue to strengthen into this year for us. We saw our backlogs building and orders increasing. That was really the follow-through on that. I would expect that to continue for some period of time and then flatten out at some point. That really has been fairly broad-based for us on the space side, which has been very nice. In terms of the other electronics markets, we started to see those firm up really in the fourth quarter a bit, and that followed through in the first quarter. We did see weaknesses as I talked about before, as the pandemic wore on. I think perhaps inventories, there was call it a de-stocking effect, or inventories weren't built at all. That's reversed, and I think we're seeing much more order inquiry out of our customers as well. At the moment, that feels like it's continuing to move in the right direction. Commercial aero is still down, but looking better kind of bit by bit. I think the same general tone as you see with our Flight Support Group, I would say it should follow that same trajectory. Defense at this point, we had some things that wound up getting delayed and moving out into the second quarter. Not as a result really so much of our actions, but supply chain as well as actually on the customer side with inspection and delivery on their end, things that have been built and are waiting for delivery. We saw a little bit of that. I would say, I would expect as a rule of thumb, as we've talked about, to see defense generally flatten out as we move forward. I don't think that's any surprise to anybody. I would expect us to see medical markets firm up as we move out. I think we all know they tended to be softer last year because of the cessation of elective procedures and doctor visits and things like that, and I think that's beginning to reverse as people feel more comfortable returning to doctors offices and so on. Right. Just quickly on your margins. Your margins are always up there in the mid to high 20%, but they dipped a little bit here in the quarter. I assume that's mix. Does that reflect commercial being down? Is there anything different this quarter about the level or magnitude of commercial, or maybe it's something else? I just wanted to ask about that. Yeah. Our commercial business is a very strong kind of business, therefore, it's a high margin business. When that trails off, it tends to hit our margins. It was also mix on the defense side, definitely mix on the defense side. I'll point out that the margin, and we've talked about this before, we don't really go too hard after people if we're running, let's say, 32%, what I call cash margin. The real margin. We have amortization in there, which is obviously the number, the operating margin that we report. There's about 4-5 points of amortization, and there's probably, this period, an additional beyond that, half a point or so beyond what we saw last year, which was a further headwind. If you take that out, it was actually much more comparable to where we were last year. Even so, if I look at it and I look at how we're doing, you've heard us say this before on many calls and at conferences and so on, I don't really wrap people on the knuckles if they're 100 basis points or 200 basis points lower, and they're giving us 32% as opposed to 33% or 34%. People ask, "Where do you think your margins are going to be?" I generally say, "Look, I think we're comfortable in this range, up or down 10%." I think the up part is always hard. That's consistent with what, to be honest, what we're expecting. Okay. Eric, just quickly, on order flow and customer behavior, are you starting to see any signals of restocking of airlines trying to get set up for potential recovery here in the summer? Yeah. I'll answer that by saying, I think we correctly called the bottom of the market in May, as this was happening. We also, in our fourth quarter, correctly called that destocking was over. Other companies have since come out and said the same thing, but I think we were the first to talk about it. With regard to restocking, I wouldn't say that we've seen restocking so much as we've seen really depletion of inventory. When customers order items, they need it right away. Now, that doesn't mean they're out of all inventory, they're out of all parts. But the parts that they need, they really don't have on the shelf, and there's not a lot of safety stock. No, I don't think that we've seen restocking yet. I think they're being very careful. If you look in particular what's going on in Europe right now, with the passenger miles just cratered and really at the bottom, somewhat similar to what we saw in the spring. Those airlines are not in a position right now to restock. Also, we're seeing it in a whole bunch of other markets as well. No, I think that benefit is yet to come. It's very hard to predict, obviously, with these variants and what's going to happen with the virus, but I don't think you're going to see a restocking until the airlines really start seeing that surge in travel, which we all know is going to come. I think they're going to really hold off on spending the cash until the last possible moment. Okay, excellent. Thank you all. Thank you. Thanks, Rob. Thank you. Your next question comes from the line of Peter Arment from Baird. Your line's now open. Yeah. Thank you. Good morning, Larry, Victor, Eric, Carlos. Good morning, Peter. Eric, good morning. I just wanted to follow up on just what Rob just asked about, Eric. Just, I guess maybe just to ask it a different way, less about the restock, but more about just qualitatively, maybe some of the conversations you're having about potential pickup in share. I know you've talked about that in the past, that coming out of downturns, you've been able to increase share. Maybe any color you could give us there would be helpful. Yeah, we're very optimistic. I've spoken with all of our sales heads to understand where the opportunities are and the color of those discussions. I can tell you that they are extremely optimistic, as well as our business heads are very optimistic in terms of the recovery and in terms of our position with respect to those customers. HEICO is no longer a small company. We're diversified. We're in many different areas. I think our customers trust us. They're relying on us to deliver cost savings, and I think that we're going to be in a very unique position going forward. If you look at most of our colleagues or competitors in the industry, I think that their cuts were far more aggressive. I know that their cuts were far more aggressive than ours. I alluded to in my comments that we held on to a much higher percentage of our workforce and protected a much higher percentage of our workforce than both our smaller and larger competitors. I think we are in position. We don't have to rebuild a workforce, we don't have to re-motivate a workforce. I think we're going to be very strong in mining those opportunities. I can tell you that at the moment, things are difficult. There are some airlines that are working partial days, where they've decided to also try to hang on to their workforce, and they're rotating them where people work a couple of days every other week. It's more complicated getting in touch with people. I think we've got those relationships, and our people are very excited about both the new products that are coming out as well as the comments that we're getting from our customers. I think, after going through a pandemic like this, buying the type of products that HEICO offers is a no-brainer because we generate savings without technical risk. I think people understand that, and that's what specifically gives me the optimism. Yeah. Would you characterize that as just that you expect that maybe your existing customers, you would expand the reach there, and then maybe also you're seeing some new customers show interest in your products? Yes. I would say that is correct. There's not a lot of new customer opportunity because we pretty much deal with everybody. However, you're correct in that the existing, I would say, more penetrated customers are wanting to do more with us, as well as customers where we are less penetrated. They're very focused on a whole variety of products that we offer that we haven't sold them in the past. I think that we will continue to do very well. Also, I want to point out that even though we will take market share, in no means should this be interpreted that OEM businesses will not do well, because we take a minority of the market share. We leave a majority for the OEM. The OEMs have been pretty aggressive with price increases. We're just trying to take our little piece. I think their business models are very much intact. Right. Just two quick ones, Carlos. CapEx was up quite a bit year-over-year, and just wondering what the trend is there or anything to call out. Also just a clarification on what you expect the tax rate to be for the balance of the year. Thanks. Sure. Good morning, Peter. CapEx was up. We had plans in our budgets to have some capital expansion in two of our facilities. Actually, they're both in the ETG Group, where we are expanding their footprint with some new equipment and some more floor space for them to support their growth. That was about half that spend, if you would, was that type of growth expansion for the quarter, which we didn't see last year in the numbers. That's why it's accelerated a bit. On the tax rate? Yeah. The tax rate, I think what we're going to wind up seeing this year for HEICO is, Larry mentioned earlier that we expect a 24%-26% rate. I think that breaks down somewhere 18%-19% on the tax rate for the year, the effective tax rate, and then NCI could be 6%-7%. Both those percentages are of pre-tax income. That's kind of where my head is on those rates. Appreciate it. Nice results, guys. Thanks. Thank you. Thanks. Thank you. Your next question comes from the line of Gautam Khanna from Cowen. You can go ahead. Yeah. Thank you. Good morning, guys. Good morning. Hey, just first for Carlos, was there any bad debt expense at FSG or elsewhere this quarter? We always have a little bit of pluses and minuses on our normal cadence for HEICO. I think that's what we experienced in Q1. There were no bankruptcies, there weren't any large buckets of receivable days or anything like that. On the bad debt side, it was pretty much business as usual under normal times in that regard. No one-timers there or any amplified charges. Okay. It was interesting, if you were to strip out the $1.5 million of bad debt in Q4, the incremental margin sequentially was like 49% at FSG. I just wondered, is that right? That's what it is, right? It's fairly high incremental margin. Yes. The incremental margins are high on the rebound, absolutely. We've seen that two consecutive quarters in a row now. If you look at it sequentially. That's correct. Maybe, Eric, if you could talk about FSG, if you're seeing any differing trends by the sub-markets there, so the PMA products versus the repair and obviously specialized products, but just if you could disaggregate what you're seeing in the various sub-markets. Sure, Gautam. Obviously, the commercial aviation market continues to be down the most, and that would be in our parts business, which includes PMA and distribution, as well as component overhaul, as well as the specialty products that go to commercial applications and primarily new builds. The specialty products area has been down significantly in the commercial area, not in the defense. In the commercial area, because as you see, the build rates have gone down. You'll see our aftermarket replacement parts was down actually a little less than repair and overhaul and specialty products. However, a lot of our military business also goes through there. That's one of the reasons why. I would say in general, commercial is what was hit. Defense and space still are relatively strong, in particular on the products that we provide. If that gives you an indication. Yeah, that's helpful. Is there any discernible difference between what you're seeing demand-wise in the distribution channel that you guys control versus the direct sales? No, I would say it's all in a similar area. Okay. One for Victor, if you wouldn't mind. You're calling defense eventually flattens out. I'm just curious, what do you think the timeframe is for that? When we see the primes guiding kind of low single digit growth for sales in 2021. Do you think that's sort of where we end up tracking on the defense side of ETG and a decline from there? How should we frame it? It's difficult to know, of course, in these early days of the administration, but it sort of feels like that to me. I think they probably have as good a handle on it as anybody, and of course, budgets for 2021 are really pretty set. The direction is fairly well known, although there can be variations for sure in the current government fiscal year. I think they've got a, like I said, a reasonable handle on the situation, as reasonable as anyone has, and I think we're all just waiting to see where it shakes out, and we're all watching certainly, for example, the daily comments now coming out of D.C. and the struggles in between various Democrats, for example, I'll call them the hawks and the doves. We'll just kind of wait and see where it pans out. I think at the very least, one thing it does seem is that there does not appear to be this movement toward the Budget Control Act that we saw in the Obama administration. I think that's a positive. That's helpful. One for you, Larry. I was intrigued by your remark about one of the targets you're looking at would actually prefer stock. Anything you can say about that type of target? Would that be reserved for a large acquisition? In other words, you're not inclined to use stock on some of these $100 million deals, but it would have to be kind of one that moves the needle where you'd actually contemplate stock as the currency parameter. As you know, our preference has always been to pay cash. Occasionally, we will get, and it's very rare, we'll get somebody who prefers stock, probably for tax reasons, number one, and number two, because these people, certain ones, are really long-term believers in HEICO. It doesn't really matter to us. If we want that acquisition and the only way we can make it is by giving stock, we would do it. As you know, we would still want to have it accretive as to earnings and cash, and it will have the same impact. The alternative is we could sell stock and give them cash, but they don't want cash in this case. Again, if we want the deal badly enough, we would give them stock. This is really an unusual case. Got it. No, it can't make any difference from at all. No. Okay. Perfect. Thank you very much, guys. I appreciate all the candor. Thank you, sure. Thanks. Thank you. The next question is from the line of Lawrence Solow from CJS Securities. Please go ahead. Hi, good morning. It's Peter Lukas for Larry. You guys have covered most everything. Just one question, kind of a random one. Any thoughts on the price disparity or lack thereof between the common and the A shares? Discounts waned from over 20% six months ago to close to 5% today, which we think makes sense. Would love to hear your thoughts. We agree with you. We think it makes a lot of sense. We have no idea. Over the years, we've been asked this question many times. We never really have the answer. We think now, and I think I'm speaking for everybody in the corporate office, we think it makes a whole hell of a lot of sense that the difference has shrunk so much. As to what the reason is, I guess a lot of investors realize that they're better off buying the A shares at a discount and then the HEI shares. That's all I can venture. It's just a guess. Maybe I'll add to that. We believe they should be at parity. There should not even be a 5% discount at all, when there have been times originally when the shares were issued, in fact, that they traded at par with each other. Well, actually, they traded originally at a premium to HEI. That was a time. That was very helpful. Thanks. I'll jump back in the queue. Thanks. Thanks. Thank you. The next question is from the line of Ken Herbert from Canaccord. Your line is now open. Hi, good morning. Thank you. Good morning, Ken. Hey. First, Victor, over the last couple of years, you've seen a really nice sequential step-up in margins within the ETG segment from the first to the second quarter. Sorry if I missed it earlier, should we expect a similar step-up here in 2021? How are you thinking about the margin progression off the first quarter? I think we've got to be careful. At this point, there's still a little too much uncertainty. I think I'll stick with what I said before, which is pretty much within 10% or so of where we are feels pretty safe to me in a one way up or down in our margins, and we'll see where it comes out. Not trying to be evasive, but I just don't really know yet. We're still too early into the quarter. Okay, fair enough. What was the amortization headwind in the quarter? Can I take it? Sure. Ken, it's Carlos. Related to the acquisitions we did in the prior year, there's about $1 million roughly in additional amortization expense that we absorbed for those acquisitions that was not around in Q1 of 2020. That would be the incremental uptick in amortization expense of one through the ETGs are why larger. Perfect. Thanks, Carlos. If I could, Eric, just one for you. We're starting to hear about some delays on OEM material and perhaps that risk getting a little greater just because of all the restructuring and cost-cutting we've seen in the industry. As you look at your portfolio, I think clearly that benefits the PMA product line, and that's always been an opportunity for you. Could perhaps be a risk on the distribution side if you're seeing delays from some suppliers. Are you seeing any opportunities emerge potentially yet from the risk of delays from OEM material? How do you think about that as it emerges, potentially presenting opportunities or risks to your segment? Yeah, that's a good question, Ken. We are seeing some opportunities as a result of OEMs cutting back inventory. We were pretty careful to maintain both in all of our businesses, sufficient inventory, because we're not capital constrained. We need happy customers because we have an expansionary view of the market and our position in the market. We want people to be very happy. We don't deal from a view or perspective of scarcity. We are seeing opportunities that you allude to. I think that there are going to be pockets of opportunities. Having said that, I think our OEM competitors are well run, and they will be able to flex up and build the inventory that is required in order to satisfy the demand. Yeah, I think it could help us get, if you will, spec'd out on some products. That is a potential area of opportunity for us. Okay. Just finally, Eric, there's been obviously, unfortunately, some tragedies around the PW4000. I know you typically don't talk about types of engines, but I can imagine that's been a significant market for you over time. Are you seeing any potential incremental risk to the PW4000 if there's any sort of accelerated retirement or discontinuance of some of those engines? I don't think that that's going to be a major impact to us. I will come out because of the unique extenuating circumstances of this and mention, of course, we do have HEICO parts on the PW4000 engine. We, of course, did not have anything on that engine which could have contributed to this kind of fan blade release. We're very knowledgeable about the incident, and it's for that reason that HEICO does not produce parts that are susceptible to this kind of issue. I think the FAA AD that they've come out with to mandate the thermal imaging of the hollow composite fan blade is sufficient and is appropriate. I would feel entirely comfortable flying on a PW4000 powered 777. I think that they're going to get this under control quickly. If you look, none of the incidents caused a crash. I think it shows that Pratt & Whitney did a great job and really designed a very high-quality product to be able to withstand such an event. I do think that there will be opportunity for us to sell our parts as those engines do come in for service. As you know, roughly half of them have been grounded due to the pandemic. I think that those are perfectly good aircraft, and Pratt is more than capable of resolving this issue. Great. Well, thanks for all the color. Thank you. Thank you. Your next question comes from the line of Noah Poponak from Goldman Sachs. Please go ahead. Hello, everyone. Morning. Morning. Carlos, back to that discussion of the FSG margin and some of the moving pieces in there. Last quarter, you had quantified the bad debt expense, even though it was only $1.5 million. The lack of quantification this quarter, can I interpret that to assume that is now pretty close to zero? No. Well, I wouldn't say it's zero. It's just more in the normal run rate. It's certainly less than the $1.5 million we had in Q1. It's not something, Noah, that sticks out or there was a flux in any of the numbers this quarter. It wasn't zero, but it certainly wasn't $1 million. Okay. Got it. You had also, over the last few quarters, spoke to the inventory obsolescence reserves in addition to that bad debt expense, and it was a somewhat sizable number in the back half of last year. Did you have that again in the fiscal first quarter? I guess the answer to that question is we have a little bit of that right now. The bigger hits were taken last year because if you recall, last year we had some specific reserves that we took for fleet retirements and aircraft that were being put down. We took 100% reserve on some of that stuff that we had in stock. With the lower sales volumes that we're experiencing in FSG, you do get into this situation when you project demand over the near term, you do wind up with a little bit of a kick to your slow-moving reserve. We have a little bit of that, but nothing that is noteworthy to call out as being any different than it maybe would've been, let's say, in Q1 of 2020. It was about the same pace. Okay. Those items are now kind of getting pretty close to normal or at normal. Right. Your one Q is usually seasonally the lower margin of the year. Okay. Presumably, there's some volume pickup in the back half of the year. I guess, how much of a margin lift through the year at FSG should we be looking at with what we know today? Well, I would say this, we've demonstrated the ability, or the market has allowed us to participate in having sequential growth in the margin. I don't foresee, even though we're not giving guidance, so we're real careful, I don't see a scenario right now where we wouldn't continue that cadence. I don't think it's going to be a cliff up, if you would. I think it's going to be a steady progression back towards normal at some point. We're not going to get there in 2021 in my judgment. I do think we'll see marginal improvements as we play out the year and as our volumes pick up. It's logical if you think about the cost structure of the FSG, it is highly variable. We have very little fixed cost components. As the volumes kick up, we do get lift in our margins. You'll see that throughout 2021. Got it. On the ETG margin, Carlos or Victor, you guys have spoken in the past to the lumpiness quarter-to-quarter from mix or other items. You have specified that that segment margin should be in the 28%-30% range over time. I just want to make sure that still holds and nothing has changed there. This is Carlos. Noah, I think on an annual basis, because as we've talked about in the past, and I know you're aware of the quarter-by-quarter margins are a little tough, because you have pushes and pulls, and it's a lumpy business. I think on a normal year, and I'm not so sure I would call 2021 a normal year yet, you know what I mean? A normal year, I do see that segment in the 20%-30% range. Could it be a tick lower or even a tick higher? Of course it could. I think expectation-wise, if you're thinking about a normal year, that's the range, and we'll see how 2021 plays out. I wouldn't necessarily call 2021 a normal year yet. You know what I mean? Sure. Hopefully get in there. Yeah. Okay. On the ETG organic revenue growth rate, that's been chopping around a bit in recent quarters with the non-defense pieces in there going against you. Looking at the model, starting next quarter, in your fiscal second quarter, you will be annualizing the start of the decline. Can that give us reason to expect the organic growth rate of the segment to start to consistently get back to a definitively positive territory? The answer to that question is, I think our second quarter, it straddles this pandemic, right? Yeah. We kind of have half the quarter is good, half the quarter is shell-shocked. Bow wave that came in from this whole pandemic. We got still kind of a lumpy Q2 to deal with. Yes, to answer your question, as we get into the back half of the year, the comps get easier, and as the business and the vaccine kicks in and people start traveling, we expect that the ETG's commercial aerospace business will pick up, and that will be helpful to the margin, because that was the one area that drug us down this quarter, comparative to Q1 of 2020. Okay. I just lastly wanted to dig a little further into free cash flow. Carlos, your fiscal 2020 free cash flow is only down 5%, despite all of the challenges. Your 1Q free cash is up again year-over-year, despite comparing to a normal period of time. I guess, where does that go from here? Is there anything that is abnormally helping fiscal 2020 that reverses on you, or should we be thinking that just grows 2021 versus 2020? I know you have the higher CapEx, but you still have it up in 1Q versus last year. Just any further thoughts on where you go from here with free cash flow of the business? I think our free cash flow, if I think in terms of operating cash flow, I do think that as the year plays out, we should run on a conversion rate of, let's say, around 130% on net income. Okay. That's traditionally about where we ran. I believe we'll convert at that rate, which will help our free cash flow numbers that you're talking about. The problem is with, and I want to be very careful because it is an uncertain time for us, but predicting a net income number right now is hard to do. Okay. Until we get to a point. I know when the numbers flush out, we'll probably see it converted 130%+. I want to be careful not to give you some kind of guidance here that we have certainty on net income, because right now it's still in flux. Yeah. Sorry, go ahead. I was just going to say, as our subsidiaries get more confident in their own markets, we'll start talking a little bit more about guidance and things like that, but right now that's not on the table. That's helpful. The capital expenditure piece, I think last quarter you had discussed approximately $40 million for the year. Right. Which that would put the expansion effort pretty loaded into the number you just had for 1Q. Is that. That's correct. Is that the case? Okay. Yeah, that's exactly the case. We did. This was no surprise. We had planned on this and it was part of the $40 million. That moves back kind of sub $10 million a quarter, 2022 or beyond 2021, this is sort of a one-time thing. Beyond 2021, it goes back down. Yeah. Look, every year we have the potential for one of our facilities graduating and having needs for bigger facilities or expansion. We always have growth capital that's planned. This year, to your point, in Q1, it's a little bit more amplified, I think that if you're thinking about modeling or you're thinking about 2022 and things like that, I think if you think along terms of our CapEx being somewhere around 1.5% of sales, that's generally where we've trended, and that's kind of a conservative way to think about it and put your model together. Excellent. Okay. Thanks so much. You're more than welcome. Thank you. Your next question comes from the line of Michael Ciarmoli from Truist Securities. Please go ahead. Hey, good morning, guys. Thanks for taking the questions here. Nice results, as always. Maybe, I don't know who wants to field this one, if it's Victor, Eric, Carlos, but maybe just if you could touch on the backlog. I think you called it out as $906 million, so a nice little sequential uptick. Can you give us any more color there in terms of the breakout by segment? Were you seeing disproportionately more strength in ETG or FSG, and maybe some color on product lines there? I'll take a stab, and I'm sure the guys may want to follow up. As you know, Michael, the FSG, for the most part, not everything, because we do have Defense in there that has backlog, but for the most part, the FSG, you kind of eat what you kill, and the month you get the order. Sure. It's a business that doesn't have a ton of backlog by its nature. A lot of the expansion that we're seeing in backlog is coming in through FSG Defense and through the ETG. To parse that out within ETG, we're seeing, as Victor mentioned, we're seeing strength in some of our space backlog in this first half of the year, and general electronics and things like that. I think Defense is pretty stable. It's lumpy, but the backlog is there right now. Commercial aero and ETG is down, so we're not seeing expansion in that backlog at the moment. That's kind of the breakout of it. Okay. No, that's helpful. Just maybe a little bit more on, Eric, on some of the, call it, bookings trends you're seeing from some of the airlines. Obviously there's still pretty significant reduced utilization of older planes. Can you help us or quantify, are you seeing a significant amount of pickup on the parts side in support of the newer, younger fleet? I know you've been pretty guarded in the past on what kind of content you've got on the A320neo and the A350, are you guys positioned, do you think, to support a younger fleet as we emerge through this pandemic, and presumably the fleet age tilts lower given the older retirements? Yes. That's a great question, Mike. Yes, I think, the short answer is we are well positioned on the newer equipment. I think that we're going to do very well on that. A lot of customer interest and customer approvals in those areas. In addition, also to point out, we took the position early in the pandemic that a lot of these aircraft would not be retired as some thought. For the simple reason that they already exist, the lessors and the banks that would end up having to replace them, find a new home for them, would have two options. One is to cut it for parts, or two is to go and lease it out. We think leasing it out makes a lot more sense when you've got life on the aircraft. We thought that the price of the rental rates was going to fall to the point where the new build was not going to make as much sense, and where that was going to have a greater impact. Now, of course, the wild card is the environmental impact of new equipment. To the extent that governments, both in the United States and Europe, help subsidize, if you will, some of the newer equipment, that could have an impact. We haven't really seen much of that, and if you look, a lot of the build rates sort of, they underestimated the amount of the decline, and they're taking that down. I would say that we're a little sanguine on the new build rates coming back to the 2019 levels. I think that a lot of the older, still economic equipment will continue to operate. I think we're going to be well-positioned in both the new equipment as well as the older equipment. Got it. A tough one. You're close enough to the customers, presumably. I think everybody in this industry is watching oil prices, which keep climbing. That could kind of throw a wrench into keeping some of that older equipment for sure with these cash-strapped airlines. I'm sure you guys are watching that indicator as well. We are, and I think a lot of the recent climb was due to the cold snap that we've had here in the U.S. Yeah that should pass. I still think that the older equipment with its lower acquisition cost makes a lot of sense for the airlines. Got it. At this point, who wants to commit to newer equipment where you increase your cost base in the face of what we've just gone through? I think the older equipment is going to hang in there and do well. Actually, the number of aircraft retired was even below what we thought it was going to be, and we were on the low side of the spectrum and the estimates on the retirement. A lot of people spoke of big retirements, and we didn't share that view. We're positioned well, I think, in both sides. Got it. Last one I had, just Carlos, I think you guys called out this quarter, all of commercial aerospace across the entity was down 43%. Did you have that number in the fourth quarter? Just trying to get a sense of the rate of decline there. I think you called it out for 2020 or fiscal 2020 in total, did you have what all of Aero did in fiscal fourth quarter? I don't recall what it was in the fourth quarter off the bat. You're right, we did disclose it for the year. It was, I think, in the mid-30% or something like that for the year. I don't recall off the bat what the fourth quarter was. Okay. No worries. All right, good stuff. Thanks, guys. Thanks, Mike. Thank you. The next question comes from the line of Colleen Ducharme from Sterling Capital. Please go ahead. Hi, good morning. Thanks for taking the question. Most of my questions were answered. Just a quick one for Carlos, perhaps just trying to take a look at the incremental margin progression from a different angle. You guys have kept human resources and capacity, given the culture through the pandemic, totally understandable. Clearly, it seems to me like the business is built and can sustain, with the current expense structure, a higher revenue level, and that's my question for Carlos. If you had to back into how much incremental revenue, perhaps on a percentage basis, your current expense base from a human resource and capacity could sustain, what's your best guess might be? Well, I think that our businesses right now are positioned to handle quite a bit of sales growth in the FSG, which I think is what you're focusing on. Naturally, as that business picks up, we will have some hires to get back up to levels we saw in 2019. That's going to be a slow tick upward. I think what you'll see happen is that as the sales grow, you will see us catching some more leverage in our fixed costs as that expands. We will have some expenditures. I don't have a percentage for you because the problem, Greg, is that we don't have total clarity on what those sales are going to be. We have a sense that they're going to rise, but we don't know the magnitude or the steepness of that rise. We're very nimble, and we will flex as necessary. As we're sitting here today, the current business can handle a pretty sizable jump in sales before we've got to go out and make many hires. Okay, thanks. Then just as a quick follow-up, maybe one for Carlos and one for Eric. Carlos, you talked a little bit about OEMs continuing to push price, somewhat surprising given the health of the customer base through the pandemic. HEICO's franchise poised to take share. Can you talk about the price disparity, i.e., the umbrella? Is that widening over time and therefore better positioning you not just with the recovery, which would normally be a time for you to take share, but is that price umbrella making that opportunity even more, positioning HEICO to be an even more attractive option as the economy recovers here? Then just quickly for Victor, congrats again on the Perseverance landing. Very exciting for the company and for the country. You guys are putting a variety of parts, sensors, memory, et cetera, on electronic vehicles on Mars. Wondering if there's any crossover opportunity to participate in what is still an early but large and growing market for electronic vehicles here on Earth, where share positions are still fluid, if that's even on your radar. Thanks. This is Eric. I'll go ahead and start first. With respect to the pricing umbrella, we treat our committed customers extremely well, we moderate price increases for them if they commit to us for a long period of time. Yes, you're absolutely right. The pricing umbrella does widen over time, and we can get to a point where if somebody's been buying a part from us for 15-20 years, our price could end up being 70%, 80% below the OEM price. Where we're still able to earn a fair margin on it, and we're able to give a very good value, and then we add more products as a result of that. There's no question that we've got the opportunity, if we wanted to push pricing, that we could, but we've decided that the future is much greater to us, and we would rather continue on our growth path and sort of voluntarily limit those opportunities in order to capture more market share. The OEMs, I would say this year in general, their price increase, they've been across the board. Some have decided to raise price substantially in order to make up all of the lost margin that they've surrendered due to the pandemic. Others have been slightly more moderate in their price increases. I would say it's pretty much across the board business as usual. The HEICO value has even been enhanced during the pandemic. You want me to answer? For Victor. It's a very good question, and I appreciate you are asking it, actually. It's insightful. Thank you, by the way, for the compliment to our people and to our company on Perseverance. The answer is yes. Some of our businesses are working on autonomous vehicles, cars, automobiles. I wouldn't call it a big part of our business. I think it has some potential for us. We'll see how it develops. Part of the question is we tend to be a high-end, higher margin producer, as you know, and we tend not to be in the extreme high volume, low margin end, which is often where automotive lies. We'll have to see how it develops for us. Is it something that turns into an opportunity longer term, or are we really more on the development end? Right now what we're doing there tends to be more in the development end. Unfortunately, I can't tell specifically or disclose specifically the companies we're working with, the programs we're on, because we're subject to some confidentiality agreements on those, and they want it kept secret. By the way, I can say it's not just the automotive companies, but it's the tech companies as well who are involved with automotive applications. Carlos, do you have? I couldn't have said it better, Victor. I couldn't have said it better. Was there one that you were going to answer? I think Eric took care of it. Okay. Thank you. I think so. All right. Thanks, Colleen. Thank you, Colleen Thank you. Your next question is from the line of Greg Konrad from Jefferies. Please go ahead. Good morning. Good morning. Just two quick follow-ups. One on ETG. I think last year, defense and space was about two-thirds of the segment. Any granularity around the breakout? You mentioned space was broad-based in terms of opportunities. Any color around drivers? You mentioned Mars Rover, how much is government versus maybe some of these new commercial space opportunities we hear about? Yeah. Just in terms of giving you a sense of the breakdown, in our sales, it's comparable to where it's been. It's a little better than half is defense, and commercial space is around the 10% range. Other markets, other electronics and government markets, kind of about a quarter. Our medical bounces around 5%-10%, and commercial aviation is sub 10% now, between 5% and 10%. Running between 5% and 10%. I would expect commercial aviation to get back up more toward 10% as the year wears on or as we get into next year, certainly, based on what we know today, and how things are doing. On the space side, you're right. Of course, Perseverance, there was no revenue in the quarter from that, as that launched, of course, in July of last year. It's broad-based. It tends to be more satellites. It's most heavily satellites, and most heavily communication satellites. The space exploration part of the business is nice. It is a profitable business for us, but it is not the bread and butter part, if you will. It tends to be the bragging rights, if you will, for us, and it tends to be the more noteworthy. Obviously, there are not a lot of rovers built each year and launched each year. When you get into Earth observation, there are a number of Earth observation satellites that we're on, that we're getting on, that our companies are supplying components on, and as well as some launch vehicles. That's broadly where we lie. Thank you. Just a quick question on FSG. You mentioned Europe earlier in the call. When we think about the eventual improvement of the aftermarket, should that kind of follow the capacity trends that we're seeing in the regions with certain recovering ahead of others, and is that kind of what we should be looking at in terms of regional trends? Yes. Absolutely. I think you nailed it. There may be a little bit of a recovery slightly before that as airlines get prepared. If they start to see bookings, I think that could drive it, drive an early recovery. They got to make sure that they've got the aircraft ready for, I believe, what's going to be a surge down the road. Thank you. Thanks, Greg. Thank you. We have another question from Louis Raffetto from UBS. Please go ahead. Hey, guys. Thanks for getting me on. I'll just take one from each of you. Carlos, the SG&A trends up a bit in the quarter. Is that some of the performance comp coming back in? Is that also maybe what weighed a little bit on the FSG margins? I think if you add back the bad debt expense and the inventory reserves, sort of the clean margins did tick down, but is that just maybe some of that SG&A coming back? The performance-based comp in the first quarter of 2020 and 2021 was fairly comparable. Remember last year, we had very low bonuses, so this year we're wanting to take care of our folks as we do see some green shoots in the process going forward. I think what we're seeing, to be candid with you, Lou, is that as the sales have started to pick up a little bit, we're still not catching the leverage on our SG&A that we had experienced in Q1 of 2020. We had a great quarter in 2020, and comparatively speaking, it's some of the sys- cost inefficiencies, is the only way I could think to put it, that we're experiencing when compared to Q1 2020. I don't think it has anything to do with performance-based comp. Okay. Eric, the talk of the share taking, I guess, do you see that more on the parts side or the MRO side? Obviously, parts, to your point, you have 70%, 80% lower price in some cases. That's extremely competitive. Are you as competitive on the MRO side? Just trying to get a sense of where you think that share taking could take place. Yeah, I think it's really across the board in all of our businesses. Yes, you're right that First of all, the 70%-80% price benefit would be for, as I mentioned, for a customer who's committed to us and who's been buying something for, say, 15-20 years. That would be the maximum. That's not where we come out of the box. If you look at repair, typically parts as a percentage of repair is, just say roughly 40% of the cost. You're right that the extreme cost benefit would be more in particular on the PMA side. I think we're very competitive across the board in everything that we do. Okay, great. Thank you. Victor, this is for you. To your earlier point, aviation is now 5%-10% of ETG, and correct me if I'm wrong, but I think it's primarily OEM. Where is the uncertainty in ETG? Defense, all defense primes have guidance. Just what else is it that you guys are particularly so uncertain about in that business? Lou, this is Victor. The business is roughly split between OEM and aftermarket in ETG for commercial aviation. That pretty much explains what we're looking at, right? You've got the uncertainty in aftermarket, which is improving, and the uncertainty in new production, which I think is also probably moving in the right direction. There was a lot of disruption in new aircraft production rates and shifting, which seems to be moving again in the right direction. We've got the MAX, which is now resuming production, but then it stopped. That's why I'm generally optimistic about the direction that we're moving in commercial aviation. I just don't know the exact timing. True. Okay. I think that earlier numbers on the MAX, I think it was -49.5% for the fourth quarter. Just so it was there. Thank you, guys. Thank you. There are no further questions at this time. Mr. Mendelson, please continue. Thank you very much. I want to thank everybody on the call for your interest in HEICO. As you know, we remain available. If you have questions, give us a call. Eric, Victor, Carlos, or I will be happy to speak with you. If not, we look forward to speaking to you at the Q2 conference, which will be in about three months. Stay well, stay healthy, hopefully get vaccines, and we'll speak to you real soon. Thank you all. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.