Welcome to the HEICO Corporation Fourth Quarter 2024 Financial Results Call. My name is Samara, and I will be your operator for today's call. Certain statements in this conference call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. HEICO's actual results may differ materially from those expressed in or implied by those forward-looking statements. Factors that could cause such differences include the severity, magnitude, and duration of public health threats, such as the COVID-19 pandemic. HEICO's liquidity and the amount and timing of cash generation. Lower commercial air travel. Airline fleet changes or airline purchasing decisions, which could cause lower demand for goods and services. Product specification costs and requirements, which could cause an increase to our 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, which could reduce our sales or sales growth, product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales, cybersecurity events or other disruptions of our information technology systems could adversely affect our business, our ability to make acquisitions, including obtaining any applicable domestic and/or foreign governmental approvals, and achieve operating synergies from acquired businesses, customer credit risk, interest, foreign currency exchange and income tax rates, and economic conditions, including the effects of inflation within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries, which could negatively impact our costs and revenues. Parties listening to 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 Lawrence Mendelson, HEICO's Chairman and Chief Executive Officer. And Mr. Mendelson, please go ahead. I'm sorry. Thank you and good morning to everyone on this call. We thank you for joining us, and we welcome you to this HEICO Fourth Quarter Fiscal 2024 Earnings Announcement Teleconference. I'm Larry Mendelson, Chairman and CEO of HEICO Corporation. I am joined here this morning by Eric Mendelson, Eric is 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. Now, before discussing our record operating results, I want to sincerely thank HEICO's talented team members for their exceptional contribution to our success. Your dedication to exceeding customer expectations and achieving operational excellence has driven outstanding results and reinforces my confidence in HEICO's future. Over the past several years, we have achieved extraordinary growth in commercial aviation, emerging stronger than ever from a very challenging period in the aerospace industry. Our team members' resilience and adaptability during this time of rapid recovery and expansion have been remarkable. Equally commendable is the agility shown by our recent acquisitions, which have seamlessly integrated into our operations and enhanced our collective success. I'm also encouraged by our progress in expanding our presence in key markets such as defense and space. These sectors are critical to long-term strategy, and our team members' commitment to delivering innovative, reliable, and best-cost solutions has strengthened HEICO's reputation as a trusted partner. This focus for us for continued growth and success across diverse markets. I'll now summarize the highlights of our fourth quarter fiscal 2024 record results. Consolidated operating income and net sales in the Fourth Quarter of Fiscal 24 represent record results for HEICO and improved by 15% and 8%, respectively, as compared to the Fourth Quarter of Fiscal 23. Consolidated net income increased 35% to a record $139.7 million, or $0.99 per diluted share, in the Fourth Quarter of Fiscal 24, and that was up from $103.4 million, or $0.74 per diluted share, in the Fourth Quarter of Fiscal 23. The Flight Support Group set all-time quarterly net sales and operating income records in the Fourth Quarter of Fiscal 24, improving 15% and 35%, respectively, over the Fourth Quarter of Fiscal 23. The increases principally reflect strong 12% organic growth, mainly attributable to increased demand for Flight Support Group's commercial aviation products and services, as well as the impact from our profitable Fiscal 23 and 24 acquisitions. Consolidated EBITDA increased 13% to $264 million in the fourth quarter of fiscal 2024, and that was up from $234.2 million in the fourth quarter of fiscal 2023. Our net debt-to-EBITDA ratio was 2.06 times as of October 31, 2024, and that was down from 3.04 times as of October 31, 2023. Our excellent operating results have allowed us to early achieve the forecast we made a year ago that our net debt-to-EBITDA ratio would return to a historical level of about two times within roughly one year to 18 months following the Wencor acquisition, and that excluded the impact of any additional acquisitions. Our acquisition pipeline is extremely robust, with opportunities in both Flight Support and ETG, and we intend to follow our time-tested strategy of opportunistic acquisitions that continue to expand the cash-generating ability of HEICO. Cash flow provided by operating activities increased 39% to $205.6 million in the fourth quarter of fiscal 2024, and that was up from $148.4 million in the fourth quarter of fiscal 2023. Yesterday, HEICO's Board of Directors declared an $0.11 per share cash dividend payable in January 2025, and this represents our 93rd consecutive dividend, and this reflects their continued confidence in the strong cash flow generation of HEICO. Now, let me talk about acquisition activity. Over the past few months, our ETG Group made several strategic acquisitions: one, acquiring 70% of SVM Private Limited in November 2024; they acquired 87.9% of Mid-Continent Controls in October 2024; and they acquired 92.5% of Marway Power Solutions in September 2024. In addition, in August 2024, our Flight Support Group acquired the Aerial Delivery and Descent Devices Division of Capewell Aerial Systems. All of these acquisitions were funded by using cash provided by operating activities, except for Capewell, which was principally funded using proceeds from our revolving credit facility. We expect each of these acquisitions to be accretive to our earnings within the following year of acquisition. 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 Fourth Quarter results of the Flight Support Group. Eric. Thank you very much. The Flight Support Group's net sales increased 15% to a record $691.8 million in the Fourth Quarter of Fiscal 2024, up from $601.7 million in the Fourth Quarter of Fiscal 2023. The net sales increase reflects the impact from our Fiscal 2023 and 2024 acquisitions and very strong 12% organic growth. The organic net sales growth mainly reflects increased demands across all of our product lines. The Wencor operations continue to exceed our expectations, and we are convinced this was an excellent acquisition for HEICO. Our customers continue to find great value in our larger aftermarket product offerings for their aerospace parts and component repair and overhaul needs, which has translated into excellent growth opportunities and success for both our legacy businesses and Wencor. We continue to operate Wencor as a standalone business operation. I have defined our strategy as cooperation, cash, capabilities, and consistency without consolidation. The sales, earnings, and margins prove this was the perfect strategy. As I have mentioned before, we continue to make good progress working together in serving our customers in a combined, seamless fashion. Some examples of how we are working together include: one, utilization of all HEICO and Wencor PMAs and DERs at all repair stations; two, commercial and defense aftermarket sales cooperation; three, Wencor e-commerce platform lists all HEICO non-competitive PMAs; four, Wencor is utilizing HEICO's manufacturing base to quote many new products; five, engineering and regulatory cooperation; six, sharing our best-in-class vendors; and seven, various back-office synergies, such as insurance, payroll, retirement benefits, and export compliance, that will help offset additional regulatory compliance costs, such as SOX and our FAA ODA. In addition, the FSG's defense sales continue to grow and offer an excellent opportunity. Many people have asked us what the U.S. presidential administration change will mean for HEICO. In short, we are very excited about it. Whether it's the chance to sell more of our much lower-cost alternative aircraft replacement parts to save the government and taxpayers significant money or other opportunities, the possibilities are many. HEICO has always been about finding cost savings or best-cost solutions for our customers, whether they're defense or commercial customers, and not about getting the highest price out of them. Another example of the opportunity set is the components we make for missile defense systems, which is a strong and growing business for us. Missile defenses are increasingly important to the United States and our allies, with sales of these products growing dramatically amidst what is effectively a shortage of defense missiles and a very large backlog stretching over years. We expect meaningful growth from this existing backlog alone. Moving on to operating income. The Flight Support Group's operating income increased 35% to $154.5 million in the Fourth Quarter of Fiscal 2024, up from $114.6 million in the Fourth Quarter of Fiscal 2023. The operating income increase principally reflects the previously mentioned net sales growth, a decrease in acquisition costs, and an improved gross margin. The improved gross profit margin principally reflects higher net sales within our aftermarket parts and repair and overhaul parts and services product lines. The Flight Support Group's operating margin improved to 22.3% in the Fourth Quarter of Fiscal 2024, up from 19% in the Fourth Quarter of Fiscal 2023. Given that acquisition-related intangible amortization expense consumed approximately 270 basis points of our operating margin in the Fourth Quarter of Fiscal 2024, the FSG's cash margin before amortization, or what we call EBITA in the way we measure our businesses internally, was approximately 25.0%, which has been consistently excellent during 2024. It is 300 basis points higher than the comparable FSG cash margin of 22% in the Fourth Quarter of Fiscal 2023. I am extremely pleased with these results. The increased operating margin principally reflects the previously mentioned lower acquisition costs and improved gross profit margin, as well as a higher level of SG&A efficiencies resulting from the previously mentioned net sales growth. Now, I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO's Electronic Technologies Group, to discuss the Fourth Quarter results of the Electronic Technologies Group. Thank you, Eric. The Electronic Technologies Group's net sales were $336.2 million in the Fourth Quarter of Fiscal 2024, as compared to $342.5 million in the Fourth Quarter of Fiscal 2023. The net sales decrease in the Fourth Quarter principally reflects lower defense and other electronics net sales, partially offset by increased space products net sales and the impact from our Fiscal 2024 acquisitions. This is in line with our expectations, as we've commented on earnings calls over the past few quarters, and is consistent with inventory destocking at some customers, particularly those in the non-aerospace and defense markets. Our defense sales growth was nicely healthy in the Fiscal 2024 year, though this growth varied highly by quarter, which, as you know, has historically been the case, and we anticipate the ETG's quarterly defense sales volatility will continue, but the overall trend remains positive. As expected, other electronic net sales were lower during the Fourth Quarter of Fiscal 2024 compared to the Fourth Quarter of Fiscal 2023 due to customer restocking. The low single-digit organic net sales decline was a much lower decline than in prior quarters, and I believe recent better order flow and backlog indicate the destocking trends are improving. I continue to expect a return to growth in these and other electronic end markets and businesses during the first half of Fiscal 2025. The ETG's Fourth Quarter record backlog and strong overall orders support our optimism, and as the non-A&D markets improve, we continue to anticipate growth into our next fiscal year. The Electronic Technologies Group's operating income was $81.8 million in the Fourth Quarter of Fiscal 2024, as compared to $86.4 million in the Fourth Quarter of Fiscal 2023. The operating income change principally reflects a less favorable gross profit margin, mainly from the previously mentioned decreased defense and other electronics net sales, partially offset by the previously mentioned increased space products and net sales. The Electronic Technologies Group's operating margin was 24.3% in the Fourth Quarter of Fiscal 2024, as compared to 25.2% in the Fourth Quarter of Fiscal 2023. Importantly, before acquisition-related intangibles amortization expense, our operating margin was above 28%, as intangibles amortization consumes around 400 basis points of our margin. Now, that's how we judge our businesses, as that most closely correlates to cash. So, on what we think of as a true operating basis, these are excellent margins, and we are very pleased with them. The operating margin change principally reflects the previously mentioned less favorable gross profit margin and a lower level of SG&A efficiencies. I turn the call back over to Larry Mendelson. Thank you. Victor, thank you. Now, as for the outlook, as we look ahead to fiscal 2025, we do anticipate net sales growth in both Flight Support and Electronic Technologies, driven primarily by organic growth supported by strong demand for the majority of our products. In addition, we plan to drive growth through our recently completed acquisitions while positioning ourselves to capitalize on potential opportunities from future acquisitions and to provide new cost savings and best-cost opportunities to our government in the new administration's efficiency efforts. Our priorities include continued strong new products and services development, further expanding market penetration, and maintaining our financial strength and flexibility, all with a strong emphasis on delivering long-term value to our shareholders. In closing, I would like to reiterate my heartfelt appreciation to our exceptional team members for their steadfast support and commitment to HEICO. Our strategy of cultivating a diverse portfolio of outstanding businesses continues to yield positive results for our shareholders. With strong key markets, Fiscal 2025 is poised to be another successful year. We thank you for your continued confidence in HEICO, and as I've shared before, I remain highly positive about HEICO's future. Thank you all, and now I will turn the call over to the operator for questions. 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 take our first question from Larry Solow with CJS Securities. Great. Good morning. Congratulations on another good quarter, good year. I guess the first question, maybe a couple for Eric. You gave us a lot of good detail on the Wencor acquisition. Sounds like things are really going well there. Just curious, you mentioned some of obviously, this is one of the bigger acquisitions I think you've ever done, and you spoke about a lot of things there. Curious, as we look at going forward, are there still opportunities to gain even more revenue synergies? Are there things now that you've had this under the hood for a little more than a year, under your umbrella, excuse me, things that maybe you didn't think were available or sort of positive surprises that you could work on going forward on that side of the business? Good morning, Larry, and thanks for your question. First of all, as you pointed out, we're very happy with the Wencor acquisition. It has been immensely successful and exceeded all of our wildest expectations. Number one, starting with the people, they are outstanding. They really fit the HEICO culture. The companies are very similar, and the businesses are working extremely well together. We're in a unique situation that all of our aftermarket businesses are running, of course, at record numbers, performing exceptionally well. And they are so busy just trying to accomplish what they've each got in their backlog in terms of getting the parts out the door and developing all this new stuff that we've just left them alone right now. I do think that there is additional opportunity in further cooperation and going to the customers with a bigger basket. But as of now, I mean, you can see with these kinds of results, 12% organic growth, 13% in the aftermarket following a tremendous deal like that, that beats what anybody thought was possible. So we're very, very happy with that. But we do think that there are additional opportunities. Our teams are working very closely together in the parts and repair side to harvest those opportunities. We've already been very successful by putting all of the HEICO and the Wencor PMAs, as well as the HEICO and Wencor DER repairs together, so our repair stations can focus on particular units and really drive costs down and service levels up to the customer. And we've been very successful in that, and we anticipate continued success in that area. So yes, I think, as I said internally, I think Wencor is going to be the gift that keeps on giving, not only because of Wencor, but because of the HEICO legacy businesses and really being the perfect fit there, and it's just going so well. Got it. And Eric, you mentioned that you touched on it briefly, just on your opportunities, maybe increasing on the military side of the business under the new administration, whether it be through DOGE or whatever. It just does seem like there are a lot of opportunities solely on the military side rather than the government side. Just any more color there? Is that something we should look forward to near term? Is that more of a mid- to longer-term opportunity? I know you've always been kind of focused, obviously, getting more into the military aircraft side, I guess, right, where I think there's not much on the PMA side there. So any more color there would be great. That's a great question, and we are extremely excited about this opportunity. I mean, this is real simple low-hanging fruit. I mean, DOGE is something I think everybody in the country realizes that we've got to spend our dollars more wisely. And HEICO offers various solutions without getting into the specifics because we have our competitors on the call, and I welcome them to it. But of course, we can't lay out a roadmap for them of what we're going to do. But needless to say, I think there is a tremendous amount of low-hanging fruit. HEICO was working on all of this before the election, and so we were very hopeful that there would be a number of breakthroughs. We are still hopeful of that. And DOGE just pours more fuel on the fire. When you look at the budget deficit and the amount of money that has to be cut, there are tremendous cost savings opportunities, and we think that it's not only cost, but there's also, and without, I have to be very careful because, of course, I don't want to provide a roadmap to our competitors, but there are a number of areas whereby, in particular, in the development of new products where HEICO can offer increased quality, and by the way, that's not just a tagline. That's proven through various ring tests: increased quality, better development timelines, and lower cost, so I think DOGE is going to be outstanding for us. Now, having said that, you asked, is this going to be short, medium, or long-term? I think it's going to be more medium-term. I mean, in the short term, the government has its money committed, so that's going to be what it is. But I do feel that this is just additional clarity and legs for HEICO as we move forward. But I expect the opportunities to be very, very substantial because it's just not only about price. Got it. Great. I appreciate all that call. Maybe just last question for Carlos. Just margins. I know you don't guide specifically, but just sort of the high-level outlook for the coming year. FSG, looking back, was pretty consistent in Fiscal 2024. And ETG, I know, was a little bit more mixed dependent. So just any thoughts as we look into Fiscal 2025? Thanks. I think as we look at the Flight Support Group, it's performing as expected. We're posting 23%-24% operating margins pretty consistently. I think our build on that will be slight improvements as we continue to grow the base of the business. We'll get SG&A leverage on some of our fixed costs, which should be added into the margin. Very similar to what we did the decade prior to COVID. It'll be small steps. It's not going to be ratcheted moves, and look, in the ETG, I've been saying for a while that when the mix settles out, I would expect that segment on a GAAP basis to come around the 24% margin range, and this quarter, I was very pleased to see them exceed that, so as I look into 2025, I would expect the business to continue to be lumpy as it always has been. We'll have quarters that are higher and lower, but my baseline is around that 24% range. Got it. Great. Thanks, Lawrence. Appreciate it. Thanks, Larry. We'll take our next question from Robert Spingarn with Melius Research. Good morning. This is Scott Mikus for Rob Spingarn. Good morning. Hi, Scott. Eric, you brought up DOGE and saving money across the federal government. So I was just wondering, could you quantify right now what percentage of FSG sales are directly to the DOD? And then for programs other than the commercial derivatives like the P-8, have you already started the process of aggregating a list of potential parts that could be sold to the DOD? Yeah. So as far as what percentage goes to the DOD, I don't have that information in front of me, but I can tell you that defense is approximately— A quarter. A quarter of the FSG sales. So you get an idea there. In terms of the opportunity, the opportunity is not only in the areas that you mentioned, but yes, we have come up with a list. We are aware of what the opportunities could be. Of course, I don't want to - I can't outline it on the call, but it is quite substantial, and the government really should be saving these dollars. Okay. And then also going back to Wencor, they used a lot of build-to-print shops in the past to manufacture parts. You talked about insourcing some of that manufacturing. Can you talk about where you are in that journey, and is there more cost savings to gain from insourcing even more of that work? Absolutely. Yeah. We've got very broad manufacturing capabilities at HEICO, and we are focusing on Wencor's robust new product development in terms of manufacturing that stuff within various HEICO businesses. There is an opportunity to resource some of the existing business. As long as our vendors treat us right and are fair with us, we're very loyal to them. So they have nothing to worry about. And frankly, the new pipeline is so robust that it will really keep our shops very busy. But again, we think the opportunity is really very, very strong in that area. Okay. Thanks for taking the questions and happy holidays. Thank you, and happy holidays to you too, Scott. Our next question comes from Ken Herbert with RBC Capital Markets. Yeah. Hi, good morning. Thanks for taking the question. Maybe Eric, just to start, as you look at FSG organic growth within the fiscal 2025, I know you're probably not going to get too specific, but is there any reason we shouldn't see double-digit organic growth again across FSG in fiscal 2025? Yeah. No, I don't think there's any reason you shouldn't see it. We're very optimistic on our three disaggregated revenue buckets of parts, repair, and specialty products. They are all very strong. And so I think that that is a double-digit expectation is reasonable. I mean, of course, we're only 45 days into the year, so we always want to be a little circumspect and always at the end of the year between Thanksgiving and the New Year. Volumes can be skewed one way or the other depending on shipments from our vendors to us and then what the customers want and the way they manage their inventory. So I don't like to take the months of November and December in order to prognosticate the rest of the year. But yeah, our internal numbers are for double-digit organic growth within the flight support and, again, very strong in all three of our segments. [Crosstalk] This is Carlos. Just keep in mind, while we don't really have seasonality to our business, one thing Eric just pointed out is very important. Our first quarter, typically with the holidays, tends to be a little lighter than the second, third, and fourth quarter. So just keep that in mind when you're thinking about what he just said. Yeah. And always November and December, I mean, for the 35 years I've been at the company, November and December are historically lower types of months, and January is always the month that drives the first quarter. So of course, we're not yet in January, so it's hard to say. But our internal numbers are very optimistic, and our business heads are extremely optimistic and, frankly, more optimistic than I've ever seen them. Okay. That's very helpful. And just one more, if I could. There's obviously been a lot of commentary recently around greater confidence in sort of execution in terms of new aircraft deliveries and new engine deliveries out of the OEMs. What's your view on if things do start to perform better there? How quickly can fleets really start to sort of turn around to become younger? How quickly do you think spending on some of the legacy assets would actually start to slow and the legacy aircraft would start to slow as that tide does ideally get better in 2025 and 2026 in terms of just sort of the execution on the airframe and the engine OEM side, if that makes sense? Yeah. So number one, I have tremendous respect for the airframe and the engine OEMs. They're phenomenal companies. They build incredible products. But unfortunately, they are dependent on their supply chains. And those supply chains, as we know, got terribly beat up through COVID as many companies slashed their orders. And the people are just not at the suppliers. So they talk about increasing the production rates, and I think that's the intent. And marginally, they have in some areas. But I think they've had a lot of challenges. And I can tell you, I go around to our businesses, and I see the supply chain challenges that exist, and they are still tremendous. So I personally am not putting any money down that the supply from the OEM suppliers is going to turn around substantially. I have not seen evidence of that. So I expect the aftermarket to continue to remain very strong. And I think airlines have been bitten so badly by the deferrals that they don't want to get in the situation where they don't have the legacy assets to be able to complete their routes and their schedules. So I expect them to continue to spend money. I mean, not foolishly, but they've got to always have a backup plan. And that's why I think the aftermarket is going to be strong. In addition, if you look, even with the OEM deliveries increasing, if you look at the available seat miles and what IATA predicted, I mean, 8% available seat miles increasing in 2025. This is a huge number. And frankly, it would be very easy to absorb the additional seats and keep the older aircraft in service. So based on the order trends that we see, it remains very, very strong for the legacy aircraft. So I, at this moment, don't see a change there. Great. Thanks, Eric. Thank you. Next question comes from Gautam Khanna with TD Cowen. Yeah. Thanks. Good morning, guys. Good morning. Good morning. Hey, I was wondering, DOD and PMA parts, what historically has been the disconnect there on their willingness to entertain buying those? I'm just curious, do they require OEM parts, or is it just culture? I'm just curious what actually has prevented PMA becoming a bigger player? Yeah. They don't have a process. As Carlos says, they don't have a box to check. And what the airlines had to have, and this is what we worked on 35 years ago, when I first went into the airlines and showed them what we could do and said we could develop all this additional stuff, they said to me, "That's a great idea, but we can't buy PMA parts." And I said, "Well, what do you mean? You're already buying our combustion chambers where the fuel and air is mixed and burned, and we've supplied those parts to you for 20 years with a flawless service record. You should be able to buy these additional parts. And this is the process that we're going to use with the FAA. And frankly, this is the box that you have to check." And that's been immensely successful. So I think the government must change. This cannot be business as usual. The United States cannot continue to irresponsibly run at these budget deficits. And there is no reason if a part is good enough for the president or the vice president or senators or representatives or the secretary of defense to fly on when they fly commercially. Maybe the president doesn't, but everybody else certainly does when they fly commercially. But it can't be used for the DOD. That is nonsense. It's a relic of the past. And I think the government recognizes this is low-hanging fruit. This must change. And frankly, HEICO is the one to do it. And we've got a lot of opportunities. I need to be very careful. And obviously, you know us well, and I don't want to get into details on specifically what, but you don't have to be a rocket scientist to figure out the opportunity here. And we think it's very substantial. And I just want to add that we still think that the current providers are going to continue to do very well. And HEICO provides product to the DOD. And there's still a tremendous number of products out there, and not everything lends itself to what we can provide. But I think what we can provide is very significant for HEICO. That makes sense. And just to follow up on that, is the opportunity biggest on the commercial derivatives like Tanker and P-8, where you may have comparable products on the commercial aircraft that they're built on, or is there a big opportunity beyond that? I think that there is a very large opportunity in both. On the commercial derivatives, this is a no-brainer. I mean, this is just. It's a no-brainer. And again, they already use some of the parts. So it's not that they're fundamentally opposed. It's just they need that box to check. And then when you go outside of the commercial derivatives, there are also significant savings opportunities that can occur. And we think that there are very large opportunities there as well. But again, I don't want to overcommit on this because these are not short-term. This is not a fiscal 2025 impact. This obviously comes later, but I think it's a very nice add-on to all of the good stuff that we're currently doing. That makes sense. And last one, Carlos, I was wondering if you could give us some framework for the inorganic contribution in the upcoming fiscal year based on what you've already acquired? Yeah. Sure. So I don't want to give subsidiary outlooks. I think that the contributions will be, they're not going to be material, if that's helpful. I've been careful because we've done some recent acquisitions, and I don't want to get into the subsidiary details. But on the FSG side, Wencor lapsed this quarter, and we'll have Capewell next year in the inorganic bucket for the first three quarters. It won't be material to the segment. And of course, in the ETG, we had three recent acquisitions that, again, I don't think it's going to be material to the quarter. So it's pretty much mostly organic next year. Great. Thanks. Happy holidays, guys. Same to you. Our next question comes from Sheila Kahyaoglu with Jefferies. Good morning, guys. Thank you for the time. Eric, if I could start with you, if that's okay, please. If we could just talk about the organic growth within FSG of 12% and then just the different parts of the business. Right? Aftermarket parts is up 13%, slightly down from 17% last quarter. How do you think about the parts business trending into 2025? Can it still grow double digits? And what are you seeing with MROs versus airlines, the demand there? First of all, good morning, Sheila, and thank you for your questions. We are very optimistic on the continued growth, as I mentioned, in all of the segments. In breaking down our organic growth, the parts side definitely had the highest organic growth in 2024. The area with the lowest organic growth was our specialty products. We think that in 2025, based on backlogs that we already have in the specialty products area, that our organic growth is going to accelerate in that area. It will remain a strong double digits within the parts side. Component repair is probably going to be somewhat in between those. But we also anticipate, I would say, strong. I said double-digit growth, and I am expecting double-digit growth, frankly, in all three of our disaggregated areas. The parts, component repair, and specialty products. Sure. Maybe if we could talk about Wencor for a minute. Any way to quantify the revenue synergies, how you think about their 6,000 SKUs relative to your 15,000 or so, how many have penetrated into your customer base? And then maybe a PMA question unrelated to the defense side of the business, but do you see PMA becoming easier under the new administration? Yeah. So specifically with regard to Wencor, if you take a look at our organic growth within parts and component repair, you'll see that there's over $60 million, approximately $62 million, of organic growth in the fourth quarter in just parts and repair. That's all organic. And remember, we owned Wencor basically for pretty much the entire fourth quarter of last year. For HEICO and Wencor to grow $60 million organically, no acquisitions. I mean, that's huge. And frankly, far beyond anything that I thought was ever possible. We've got incredible teams, incredible leaders in these businesses. I think HEICO's competitive advantage is the way that we have these businesses structured, where we have them as individual business units, each with its own business head and its own leadership team, combined with central sales forces to be able to help them get out there. There is a tremendous amount of unsold potential. There is so much more help that we can give our customers, and it's just a matter of getting out there, getting in front of them, and making sure that they switch from their old legacy solution into a new HEICO solution, so I expect the future to be very strong, and I'm very encouraged, and when I go out and talk to our folks, so are they. When I look also into the specialty products, when we look at what our backlogs are in these areas, they're tremendous, and now really the challenge is executing and getting product from the vendors out there in the field and subcontractors because the market is incredibly tight. I don't go to any businesses where they say, "Oh, yeah, we're all caught up. Everything is back to 2019." Not a prayer. I mean, the labor force has changed. It's very difficult to be able to ramp. And so that's why I'm very bullish in all of our areas. You had asked about the military side. I think that's just added opportunity. You know because we've spoken about it, that for years, HEICO has operated in that area, and we've had limited success. But as a result of the comments that I made in the prior couple of questions, I think this is really low-hanging fruit for HEICO. And the government got to make cost savings an imperative. And the new administration certainly is doing that to a degree that we've never seen before in the history of this country. And it's wise that they do so because, as a country, we're running out of money. HEICO can provide, again, not only the cost savings as a result of using our parts or using our technology, but also when these systems are developed by the government, there's a tremendous approach which slows things down. I'm really very excited for DOGE because I think they can accelerate a lot of these processes. HEICO is going to be, I think, a tremendous beneficiary across our flight support as well as our electronic technologies business because we are smaller businesses that are competitively focused in various areas, lower cost, higher quality. We can get it done quickly. If the government wants it fast, I believe it's a huge opportunity for us. Eric, I'm sorry. I meant more on the commercial side. Do you think the administration makes it easier to PMA commercial parts as well? Yeah. I mean, look, the administrations have always been supportive. The FAA has been, frankly, outstanding to work with over the last 35 years. I expect that to continue. I don't expect a change there. I mean, if you will, the civilian workforce has been great to work with. So I expect everything continuing and no change in our ability to get PMAs. I mean, we've gotten more PMAs than ever, and I expect that to continue. Thank you. Thanks, Sheila. Our next question comes from Scott Deuschle with Deutsche Bank. Hey, good morning. Hey, Scott. Good morning. Eric, can you give us any sense for what the growth acceleration at specialty products could look like next year? Because it sounds like you've got a lot of tailwinds there between the OE ramp and the missile defense growth. And I was just looking at my model, and there was a period of time in 2022 and 2023 where specialty products was growing over 50% pretty regularly. So I'm not trying to get too excited here, but just trying to get a sense for whether something like that could perhaps repeat itself. Thank you. Yeah. I mean, the internal numbers that I've got are really strong over in specialty products. As I mentioned, really, the key is being able to get product out of certain suppliers. But I think from what we're seeing and based on what the budgets are and everything, at least 10% organic growth seems to be very reasonable. And when you think of it, I know that on a spreadsheet, and I think everybody appreciates this, on a spreadsheet, it's easy. You put in point one, and it's easy to type that in. But when you think about this, when a business grows organically by 10% a year, it doubles in seven years, quadruples in 14 years. And these businesses, to accomplish a 10% growth rate, I mean, I think that's just tremendous and incredible in this market that we've got with constrained material and constrained labor. So I'm very optimistic in those areas. Okay. Great. And then just one follow-up, Eric. I think it seems like there's a number of airlines that have built up some inventory of spare aftermarket parts. I think United is one of them. I guess, have you seen any evidence of customer inventory build for your specific parts, or are airlines generally pretty hand-to-mouth for HEICO parts? Yeah. I think on HEICO parts, they're pretty hand-to-mouth. I mean, they certainly don't tell us when they have a surplus. I'm not aware of any material oversupplies at the airlines. I mean, they're all wanting these parts very badly. There are always puts and takes with that, but I think it's all very strong. Also, since HEICO's got a really good delivery program and we're able to supply so many of these parts in the month of order, airlines, they don't typically have to overstock our parts because they can rely on us pretty well. Right. Okay. Thank you. Happy holidays. Thanks. And happy holidays to you too. Our next question comes from Noah Poponak with Goldman Sachs. Hey. Good morning, everyone. Good morning, Noah. How's it going? Good. Good. Good. Happy holidays. Likewise. You too. Hey, I wanted to ask about the FSG margin. We were fielding some questions on that last night and this morning. I think the final full year is probably a decent amount higher than what you were projecting at the beginning of the year, but it also kind of outperformed through the year. And then in the fourth quarter, it's down sequentially. So I guess, is the non-cash piece higher, or can you just give me those numbers, 4Q versus 3Q? Or is there anything else abnormal, whether it's a cost or mix in that fourth quarter margin? And then if you could speak to where you think those margins can go next year, that'd be helpful. No. This is Carlos. Let me take a stab at that, so you're digging deep in my brain here, so we're down about 20 basis points Q3 to Q4. I'd almost consider that a little noise. There is a little bit more amortization in the fourth quarter this year than last year, which probably contributed to that blip. There's not a lot of noise in either quarter for unusual things like that. I will tell you that I've been pretty open and vocal that my expectation on the FSG is that the margins go between 22% and 23%, and that's what we've done, and we're basically at 22.5% for the year, so it pretty much did what I thought it would do. And I think that as we move forward, the things that I can count on other than mixed shifts or something like that would be some incremental gains in that margin due to leverage on our costs. The one thing the FSG has done very well is that as the revenue base has grown, they've done that without, in a very efficient manner. The SG&A spend has been down as a% of revenue consistently all year. I expect that trend to continue. And that's really where we're going to eke out these little incremental margin gains. Again, absent any big shift in mix, that's what my expectations are going into next year. Yeah. Carlos, I guess it makes sense in a way that you referenced that range over time, but I guess that makes it sound like you expect it to be kind of flat over time. But I would think that you would have—I mean, historically, you've had a pretty consistent 25%-30% incremental margin in that business as you're able to—when you're in an environment where you're growing revenue double digits or even mid to high single, you're probably not growing cost as quickly as you're growing revenue, right? Oh, that's absolutely correct. And no, I don't think they're going to be flat. No, I hope I didn't mean to insinuate that. What I'm insinuating is that I expect margin improvement. It's going to be, if you look back historically, pre-COVID, over the decade prior to that, our margins were growing 20-30 basis points a year. And it was based on volume growth in the business. As we grew, to your point, the cost base isn't growing as fast as revenues. I expect that to continue. And absent any big swings in mix, then that should be the cadence that we see moving forward. Okay. Great. That makes a lot of sense, and then wanted to ask about the other industries outside of the defense space aero within ETG. I think that was down in the quarter, that being the fifth quarter in a row where it's down. So I guess, can you talk about what's behind that and then what it would take to get that piece to stabilize and start to grow again? Yeah. This is Victor, Noah. So it's not necessarily a one-year event to wash out the over-ordering, which took place over, I think, a longer period of time. It probably took place over two, two and a half years, but as I said in the comments, my general sense is that that reverses, starts to reverse sometime in the first half of our year, and we see signs of that in a number of businesses where basically it looks like the order rate has started to turn up in some instances. In others, it's kind of bouncing along the bottom, and sometimes we get an occasional positive surprise. We end the month doing better than we expected in both sales and orders in a couple of cases recently. And just our experience has been when this happens that sometime in the neighborhood of half a year later, it could be a little more. It could be a little less, but somewhere in that neighborhood, it starts to show up with rising sales sequentially. And so I would expect that that would play out like it typically does, barring, of course, any unforeseen events. But that's what I would expect. Okay. That's helpful, Victor. Appreciate it. Just one last quick one. The corporate in the quarter is fairly high compared to where it had been running. You guys don't strike me as big corporate expense guys. Is there something abnormal in that, or how should we think about the run rate moving forward? No. I think we typically run about 1.5% of sales or something like that in corporate expenses. I mean, as you can imagine, over the last four years, we've had tremendous inflation. Things like insurance and benefits and all those things rise. We also have a little noise with FX. As the dollar weakened, we had some FX challenges, but nothing extraordinary. I mean, I think the trend going forward, we should continue to be 1.4%-1.5% of sales in that. As the company grows, we don't have lavish expenditures, but we do need arms and legs to keep track of everything. So that's principally the zip code we'll run in. Got it. Great. Thank you so much. You're welcome. We'll take our next question from Michael Ciarmoli with Truist Securities. Hey. Yeah. Good morning, guys. Thanks for taking the questions and happy holidays here. Good morning. Eric, I mean, we've talked a lot about FSG and the trajectory, but I guess just looking at the sequential growth, one of the lowest sequential growth rates that we've seen in several quarters, was there anything unusual in this quarter versus last quarter? I mean, it sounds like all business lines, all capabilities are running at record levels. Any notable changes or behavioral changes from customers that maybe kicked that sequential FSG revenue down a bit? Yeah. I mean, a couple of things. Number one, I should state that one of the metrics that we never look at at HEICO in any of the businesses is sequential growth rate because things can move around. They can bounce around, and that can exaggerate it. The number that we always look at is the annual growth rate compared to what we've done in the prior. And when I look at our FSG organic growth, I mean, basically, it was approximately in the first quarter, 12%. Second quarter, 12%. Third quarter, 15%. And fourth quarter, 12%. I mean, as far as I'm concerned, that's out of the park. That is phenomenal and is so far above what anybody else does in this industry with regard to organic growth. So I'm super happy with it. And we just don't look, I mean, compared one quarter to the next. I mean, we didn't get overly excited when between basically the second quarter to the third quarter, we had a big sequential growth. I mean, that can be due to various deals or all sorts of things. I mean, what's more important is the comparison to the annual, and we think that that is incredibly strong, and sometimes these moves, the numbers move in various jumps, so it's really dangerous to look at it in a sequential basis like that. Got it. No, that's helpful. And then just one other housekeeping one for Eric or sorry, for Victor. Victor, did you give the ETG organic growth rate for the quarter at the consolidated level? Did we? Pretty sure we did. Provide that? I mean, the ETG, I can do it. ETG was down low single digits. It was like approximately 4% down for the quarter organically. And contributing to that was what we talked about earlier, the other electronics in defense offset by space. That's pretty much what happened. I think in total for the quarter, we were up 3%, which is about acquired growth in there, but the organic side was down roughly 4%. Got it. Perfect. Thanks, guys. I'll jump off. Thank you. Thanks, guys. We'll take our next question from Pete Skibitski with Alembic Global Advisors. Hey, good morning, guys. Good morning, Pete. Just a couple of quick ones maybe for Carlos. Carlos, just because D&A is a pretty big add-back for you guys in cash flow. Do you have an expectation for D&A for 2025? And then also was just wondering, sort of post-COVID, post-Wencor, the use of working capital, especially in inventory, has been larger. I'm just wondering if that was kind of a short-term thing or if we should expect a greater build in inventory going forward. Thanks. Sure. So actually, I think our D&A. I expect it to be very similar next year to this year. Depending on how many acquisitions we do next year, it could flux up on the A side. But as a percentage, I expect it to be roughly the same as it was this year. As far as working capital use, it's interesting. We came into this year with a lot of commitments on products that our guys purchased multiple years ago because of some of the supply chain challenges we had. And we took delivery on that stuff towards the end of last year, the beginning of this year. And we talked a little bit about how that would probably skew our annual inventory being a little higher than what we might normally expect as far as spend-wise goes. I do expect that to moderate a tad as we get into 2025 because a lot of those firm commitments we had made on inventory coming out of COVID where some of these deals had two-year lead times and we had to commit two years in advance. A lot of that stuff we sort of took our last deliveries on as we got into the beginning of this fiscal year. So we should see a little bit of a calm down in inventory. As we grow the business organically, we got to support it with more inventory spend. But I don't know that the slope of that spend will be as high as it had been the prior few years. Our receivable management is impeccable. We have very little consumption of working capital for receivables, which given our growth is amazing to me. So I think our guys and we as a management team are highly focused on working capital. And going forward, I expect we're going to probably return to more consumption of working capital like you've seen historically versus over the last two or three years. Great. Thanks for the call. Then our next question comes from David Strauss with Barclays. Thanks. Good morning. Good morning. Good morning, David. Want to follow up, I think it was on Noah's question. So the FSG margin, I guess either for Carlos or Eric, in terms of I think, Eric, you gave some relative growth parameters around the individual kind of subsegments between parts, repair, and specialty products. How do you see those relative growth rates within there influencing the margin for FSG in 2025? I think it would help it. So I think it'll help it. I think the FSG margin story has been, I think, one of the least reported and yet most important things that's frankly happened to this company. I mean, when we look at what our operating margin basically from roughly 2015 to 2019 was in the 18%-19% area. Now the operating margin is up in the 22%-23% area. So we've gone up about 500 basis points over that period of time after making a number of lower margin acquisitions and going through COVID and all the turmoil that happened there. So I think the HEICO and the HEICO businesses are exceptionally good at just continuing to wring efficiencies out of their operations year by year. We don't make a thing over it, but they just increase the amount of volume. They focus on efficiency. They get the cost down. We don't have programs here at the corporate office like HEICO 2025 or HEICO 2026 or 2027 or something like that, but instead, we just work with them, and they do this as a matter of course, and we just continually grind higher on the operating margin, so I think that there's no change from our perspective and what we want to continue to do. Obviously, it bounces around year over year and depends on various investments that we have to make, but I would anticipate the operating margins to continue heading north while still providing huge cost savings and benefits to our customers and doing that not via price, but via cost and volume and to what you were alluding to. Okay. Terrific. And I don't think you specifically said on ETG, but would you expect ETG to grow revenue organically next year in 2025? And if so, is it more low single digit or mid-single digit? Thanks. Sure. This is Victor. So we expect in our budgeting for growth in the ETG next year organically. I think we're being careful and putting it in the lower single digits range organically with acquisitions, hopefully more than that. And we've got some great acquisitions in the pipeline as well. And look, I don't know where we'll wind up, to be clear. I mean, we're only finished one month of the new fiscal year. But it's my belief, based on talking to our companies and hearing from them, that the ones who felt that they came up a little short this year are being very conservative in their projection for next year. Some people call that sandbagging. I'm not going to say that or accuse them because I think it's good that our companies are conservative and they plan to spend money according to what they think they're going to see on the revenue side. But as I sit here at this moment, I'm hopeful that we'll do better than our internal budgets. But we'll see, and I don't want to commit to that at this point. And of course, just to point out that as it always has been throughout our existence in the ETG, it will be lumpy throughout the year. We're going to have bigger quarters than others. Some may be up. And in fact, the budgets have that. Some up much more than others. That is based upon what their expected production rates are as a result of many factors, including when the customer wants the product shipped and a variety of other factors. I would expect that to continue in multiple ways, by the way, not just in sales and income, but as well as by end market, which we've seen historically. Terrific. Thanks very much and happy holidays. Thank you. Thank you. We'll take our next question from Ron Epstein with Bank of America. Hey. Hey. Good morning, guys. Good morning, Ron. Yeah. Yeah. A lot's been asked, but nobody really asked this one yet. So what's your expectation for maybe the change in the M&A environment with the new administration? As you know, we've been very strong in the acquisitions area. And we bought this fiscal year five different businesses. Our teams, by the way, are busier than they've ever been looking at a whole variety of deals in both segments, all sizes. So for HEICO, it's been a strong market. I would anticipate, obviously, people expect less scrutiny, more pro-business evaluation going forward. But I think for HEICO, we're very much a preferred buyer because we don't have some of the complications that other folks have. So I think the regulatory environment improves, but it will still remain very good for HEICO. Yeah. One of the things to point out, of course, is that we have always been, as we said earlier in the call, a sort of a price and value-preferred supplier to our customers. We've never pushed on the pricing button. We've never pushed on the monopoly buttons and things of that sort. And as a consequence, we've never had any issues to begin with in regulatory approvals. And of course, I think people generally expect, as Eric said, the regulatory environment to be more favorable to business and to companies like ours. Got it. Got it. And then if I kind of keep pulling on the string a little bit, what's your appetite for doing another big one? You guys have gotten bigger. And then maybe two, if you can say, it's no secret that Boeing's been shopping some stuff around. Is there anything there that you guys would be interested in? Yeah. Our appetite for acquisitions of all sizes, including larger ones, remains the same. And we do larger deals. We've done them when they make sense. We won't do them just for the sake of doing them or adding revenue. It's all to us about the bottom line. So that appetite is the same as well as for smaller acquisitions, as you've seen, including small bolt-ons or fold-in acquisitions for our companies. And the opportunities, by the way, are spread out across the board. Historically, we've been an opportunistic buyer, buying everything that makes sense to buy and nothing that doesn't make sense to buy. I think, Ron, if you look at Wencor, which was, of course, our largest acquisition to date, it's been an absolute home run. So I think we've proven to the market that we can execute and win and execute and assimilate these businesses and continue to generate the cash to basically get our leverage ratio back down so we can reload and do more. So I feel 100% confident in our ability to continue to do larger acquisitions. Got it. Got it. Great. Thanks, guys. Yeah. Happy holidays. Thank you. Thank you. Happy holidays. You too. Thank you. The next question comes from Louis Raffetto with Tigress Financial Partners. Hey. Good morning, guys. Good morning. Morning, Louis. Eric, just to make sure I'm level set here. So 13% organic growth in aftermarket repair parts. Do you have MRO and specialty products for the quarter? I know MRO had been a little bit lighter. It seemed like maybe that did accelerate in the fourth quarter. Yes. So MRO is about 11% in the fourth quarter. And specialty products was 11% in the fourth quarter. Okay. Perfect. Thank you for that. You're welcome. And then maybe Carlos, for you. Looks like there was another small impairment and a contingency adjustment in the quarter. Just didn't know. It looks like that actually may have negatively weighed. Don't know if that was in either or both segments or ran through corporate. Just any color there? Yeah. We had a small impairment to a trade name in the fourth quarter. It was about $1.5 million. Just normal course of business stuff, wrapping up the year. Not a big deal there. And I guess you're talking about what? Contingency adjust, contingent earnout adjustments, Louis? Yeah. It looks like there was $1 million. Again, both of those, I think, would be, again, a negative to the earnings. So I think margins would have been sort of better ex these. I'll call them sort of one-timers or you and I have talked about the contingencies. I know it's like if it's a negative, it's actually a positive long term. So just trying to get squared on where that may have been. Yep. Okay. So the trade name was in the ETG. And the roughly net $1 million increase in the contingent earnout liability was split pretty much evenly between the two segments. And it's just relating to accreting that liability to terminal value. It's just the normal noise that we have every quarter for the discounted liability getting accreted to payout value. Nothing unusual there. Yeah. No. Makes sense. But again, might explain some of the questioning or look at the sequential step down in the FSG margins. If you got even $500,000, I'm not sure what that works out to. But just was curious. All right. That wraps it for me. Thank you very much. Yeah. Just as a reminder, Louis, we have those adjustments every quarter because you can't. I wish I could put the full earnout value on the balance sheet on day one, but you have to fair value it and then accrete it up to payout value. So every quarter, we're going to have a little noise like that. And the fourth quarter was just normal. There was nothing unusual about those adjustments. Thank you. You're welcome. Thank you. Thanks. At this time, I will turn the conference back to Lawrence Mendelson for any additional or closing remarks. I would like to thank everybody on this call for their interest in HEICO. We look forward to our next earnings call, which would be for the first quarter of 2025. Personally, I'm very optimistic about the outlook for HEICO. I see opportunity in acquisition and internal growth. I feel that the company is doing extremely well, and it will continue to do so. So let us know if you have any other questions that we haven't answered during this call. Otherwise, we stand ready to speak to you at the end of the first quarter 2025. Thank you very much. This concludes today's call. Thank you for your participation. You may now disconnect.