Good day, and thank you for standing by. Welcome to the Q2 2023 TransDigm Group Incorporated earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Jaimie Stemen, the Director of Investor Relations for TransDigm. Please go ahead. Thank you. Welcome to TransDigm's fiscal 2023 second quarter earnings conference call. Presenting on the call this morning are TransDigm's President and Chief Executive Officer, Kevin Stein; Chief Operating Officer, Jorge Valladares; and Chief Financial Officer, Mike Lisman. Please visit our website at transdigm.com to obtain a supplemental slide deck and call replay information. Before we begin, the company would like to remind you that statements made during this call which are not historical in fact are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statement, please refer to the company's latest filings with the SEC available through the Investors section of our website or at sec.gov. The company would also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA As Defined, adjusted net income, and adjusted earnings per share, all of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliation. I will now turn the call over to Kevin. Good morning. Thanks for calling in today. First, I'll start off with the usual quick overview of our strategy, a few comments about the quarter, and discuss our fiscal 2023 outlook. Jorge and Mike will give additional color on the quarter. To reiterate, we believe we are unique in the industry in both the consistency of our strategy in good times and bad, as well as our steady focus on intrinsic shareholder value creation through all phases of the aerospace cycle. To summarize, here are some of the reasons why we believe this. About 90% of our net sales are generated by unique proprietary products. Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins, and over any extended period have typically provided relative stability in the downturns. We follow a consistent long-term strategy, specifically: First, we own and operate proprietary aerospace businesses with significant aftermarket content. Second, we utilize a simple, well-proven, value-based operating methodology. Third, we have a decentralized organizational structure and unique compensation system closely aligned with shareholders. Fourth, we acquire businesses that fit this strategy where we see a clear path to PE-like returns. Lastly, our capital structure and allocations are a key part of our value creation methodology. Our long-standing goals is to give our shareholders private equity-like returns with the liquidity of a public market. To do this, we stay focused on both the details of value creation as well as careful allocation of our capital. As you saw from our earnings release, we had another strong quarter. Our Q2 results ran ahead of our expectations. We once again raised our guidance for the year. We continue to see recovery in the commercial aerospace market, trends are still favorable as demand for travel remains robust. Global domestic air traffic continues to lead the recovery, international travel is also moving forward. China's air traffic has expanded significantly since its reopening in January, especially domestic air travel. However, there is still progress to be made for the industry as all results continue to be adversely affected in comparison to pre-pandemic levels since the demand for air travel is still slightly depressed from pre-COVID levels. In our business, we saw another quarter of substantial growth in our total commercial revenues and bookings. Revenues sequentially improved in all three of our major market channels: commercial OEM, commercial aftermarket, and defense. Also, bookings outpaced revenues for each of these market channels. EBITDA As Defined margin improved to 51.3% in the quarter. Contributing to this strong margin is our strict focus on our operating strategy and the ongoing recovery in our commercial aftermarket revenues. We generated about $130 million of operating cash flow in Q2 and ended the quarter with over $3.4 billion of cash. We expect to steadily generate significant additional cash throughout the remainder of 2023. An update on our capital allocation activities and priorities. During the quarter, we agreed to acquire Calspan Corporation for approximately $725 million in cash. The acquisition, we are happy to report, closed yesterday, May 8th. Calspan has established positions across a diverse range of aftermarket-focused aerospace and defense development and testing services. Calspan has a state-of-the-art transonic wind tunnel that it utilizes to perform testing for both the commercial and defense aerospace markets. Calspan's unique service offerings exhibit the earnings stability and growth potential that are consistent with our aerospace component-centered businesses. We are excited about the acquisition of Calspan and expect the business to meet or exceed our long-term value objectives. We expect the Calspan acquisition to contribute just over $100 million to our FY 2023 revenue and for the Calspan EBITDA As Defined margin in FY 2023 to be just less than half of the TransDigm total company margin. Regarding the current M&A pipeline, we continue to actively look for M&A opportunities that fit our model. As we look out over the next 12 to 18 months, we have a slightly stronger than typical pipeline of potential targets. As usual, the potential targets are mostly in the small and mid-size range. I cannot predict or comment on possible closings, but we remain confident that there is a long runway for acquisitions that fit our portfolio. The capital allocation priorities at TransDigm are unchanged. Our first priority is to reinvest in our businesses. Second, do accretive M&A. Third, return capital to our shareholders via share buybacks or dividends. A fourth option, paying down debt, seems unlikely at this time, though we do still take this into consideration. We are currently evaluating all of our capital allocation options, both M&A and capital markets are always difficult to predict. We continue to maintain significant liquidity and financial flexibility to meet any likely range of capital requirements or other opportunities in the readily foreseeable future. Moving to our outlook for fiscal year 2023. As noted in our earnings release, we are increasing our full fiscal year 2023 sales and EBITDA As Defined guidance to reflect our strong second quarter results, the recent acquisition of Calspan, and our current expectations for the remainder of the year. Please note that as the Calspan acquisition just closed on May 8th, we utilized the limited information currently available to include Calspan within our guidance. Our preliminary expectations for Calspan will be refined as necessary over the coming months. At the midpoint, sales guidance was raised $300 million and EBITDA As Defined guidance was raised $150 million. The guidance assumes the continued recovery in our primary commercial end markets throughout the remainder of fiscal 2023 and no additional acquisitions or divestitures. Our current year guidance is as follows and can be found on slide six in the presentation. The midpoint of our revenue guidance is now $6.455 billion or up approximately 19%. In regards to the market channel growth rate assumptions that this revenue guidance is based on, for the commercial OEM market and commercial aftermarket, we are updating the full year growth rate assumptions as a result of our strong second quarter results and current expectations for the remainder of the year. We now expect commercial OEM revenue growth in the range of 20%-25%, which is an increase from our previous guidance of mid-teens percentage range, and expect commercial aftermarket revenue growth in the range of 25%-30%, which is an increase from our previous guidance of high teens percentage range. The commercial aftermarket has been progressing well in our fiscal 2023, and we hope that continues. We aim to be conservative with this guidance as the commercial aftermarket is harder to predict, with many orders being book and ship and the advanced bookings only going out a few months or so into the future. Defense revenue guidance is still based on the previously issued market channel growth rate assumptions. We are not updating the full year market channel growth rate for defense at this time, as underlying market fundamentals have not meaningfully changed. We expect defense revenue growth in the low to mid-single digit percentage range. The midpoint of our EBITDA As Defined guidance is now $3.26 billion or up approximately 23% with an expected margin of around 50.5%. This guidance includes about a 50 basis point of margin dilution from the DART Aerospace acquisition and just over 50 basis points of margin dilution from the recent Calspan acquisition. The pro forma margin dilution from Calspan, meaning if we had owned Calspan for all of fiscal year 2023, is just over 100 basis points. The midpoint of our adjusted EPS is increasing primarily due to the higher EBITDA As Defined guidance and is now anticipated to be $23.75 or up approximately 39%. Mike will discuss in more detail shortly some other fiscal 23 financial assumptions and updates. We believe we are well positioned for the second half of fiscal year 2023. We will continue to closely watch how the aerospace and capital markets continue to develop and react accordingly. Let me conclude by stating that I am very pleased with the company's performance. This quarter and throughout the recovery of the commercial aerospace industry, we remain committed to driving value for our stakeholders. Let me hand it over to George to review our recent performance and a few other items. Thanks, Kevin. Good morning, everyone. I'll start with our typical review of results by key market category. For the balance of the call, I'll provide commentary on a pro forma basis compared to the prior year period in 2022. That is, assuming we own the same mix of businesses in both periods. The market discussion includes the May 2022 acquisition of DART Aerospace in both periods. DART has been included in this market discussion since the third quarter of fiscal 2022. The recent May 2023 acquisition of Calspan Corporation is excluded from this market discussion. In the commercial market, which typically makes up close to 65% of our revenue, we'll split our discussion into OEM and aftermarket. Our total commercial OEM revenue increased approximately 25% in Q2 compared with the prior year period. Sequentially, total commercial OEM revenues grew by 17%, and bookings improved over 15% compared to Q1. Bookings in the quarter were robust compared to the same prior year period and significantly outpaced sales. We're encouraged by the increase in commercial OEM production rates. While risks remain towards achieving the ramp-up across the broader aerospace sector, we are cautiously optimistic that our operating units are well-positioned to support the higher production targets. Moving on to our commercial aftermarket business discussion. Total commercial aftermarket revenue increased by approximately 38% in Q2 when compared with the prior year period. Growth in commercial aftermarket revenue was primarily driven by the continued strength in our passenger sub-market, which is our largest sub-market, although all of our commercial aftermarket sub-markets were up significantly compared to prior year Q2. Sequentially, total commercial aftermarket revenues increased by approximately 14%. Commercial aftermarket bookings were strong this quarter compared to the same prior year period, and Q2 bookings outpaced sales. Turning to broader market dynamics, global revenue passenger miles remain lower than pre-pandemic levels, but have further progressed over the past few months. IATA recently commented that despite uncertain economic signals, demand for air travel continues to be strong across the globe, particularly in the Asia Pacific region. China air traffic specifically has seen a significant rebound after the lifting of COVID restrictions and the reopening of China to travel this past January. The recovery in domestic travel has made great strides over the past several months, primarily due to the sharp uptick in domestic air traffic in China. In the most recently reported IATA traffic data for March, global domestic air traffic was only down 1% compared to pre-pandemic. Similarly, U.S. domestic travel in March was also only 1% below pre-pandemic levels. Domestic travel in China was down about 3% in March compared to pre-pandemic, which is a significant improvement from being down 55% only three months ago in December. International traffic also continues to improve, but at a slower pace than domestic. Approximately a year ago, international travel globally was depressed about 52%, but in the most recently reported IATA traffic data for March, international travel was only down about 18% compared to pre-pandemic levels. International traffic in North America and Europe were within 3% and 14% of pre-pandemic levels, respectively. Asia Pacific international travel was still down about 36%, but should hopefully continue to improve as the China reopening progresses. Global air cargo volumes in the most recent March IATA data continue to be lower year-over-year and versus pre-pandemic levels. With the continued growth in passenger flying, especially the wide-body recovery, there's more belly hold space available for cargo transport. The reopening of China has been positive for the air cargo outlook, global trade signals continue to be mixed. It's too early to determine where air cargo trends stabilize. Business jet utilization is below the pandemic highs in 2021 and continues to moderate. Business jet activity does remain above pre-pandemic levels, business jet OEMs and operators forecast strong demand in the near term. We'll see how this normalizes over the upcoming months. Shifting to our defense market, which traditionally is at or below 35% of our total revenue. The defense market revenue, which includes both OEM and aftermarket revenues, grew by approximately 5% in Q2 when compared with the prior year period. Sequentially, total defense revenues grew by approximately 14%. Defense bookings are up this quarter compared to the same prior year period, and Q2 bookings solidly outpaced sales, which is a positive indicator for future defense order activity. Our defense market revenues continue to be impacted by the lag in U.S. government defense spend outlays. We continue to see steady improvement, but they still remain longer than historical average levels. Overall, our teams have made solid progress with the supply chain, with the primary focus remaining on electronic component availability. As Kevin mentioned earlier, we continue to expect low to mid-single- digit percent range growth this year for our defense market revenues. Lastly, I'd like to wrap up by expressing how pleased I am by our operational performance in the second quarter of fiscal 2023. We remain focused on our value drivers, cost structure, and executing with operational excellence. With that, I'd like to turn it over to our Chief Financial Officer, Mike Lisman. Morning, everyone. I'm going to quickly hit on a few additional financial matters for the quarter and expectations for the full fiscal year. First, on organic growth and liquidity. In the second quarter, our organic growth rate was 17.6%, driven by the continued rebound in our commercial OEM and aftermarket end markets. On cash and liquidity, free cash flow, which we traditionally define at TransDigm as EBITDA less cash interest payments, CapEx, and cash taxes, was roughly $350 million for the quarter. Below that free cash flow line, we saw networking capital consume just over $220 million of cash during the quarter as we built both accounts receivable and inventory to support the ongoing and continuing sales ramp up on both the OEM and aftermarket sides of the business. We ended the quarter with approximately $3.4 billion of cash on the balance sheet, and our net debt-to-EBITDA ratio was 5.6 x, down from 6 x at the end of last quarter. Pro forma for the Calspan acquisition, which just completed yesterday, we have $2.7 billion of cash and a net debt-to-EBITDA ratio of about 5.7 x. On a net debt-to-EBITDA basis, that puts us below the five-year pre-COVID average level of 6 x. Additionally, our cash interest coverage ratios, such as EBITDA to interest expense, are currently in line with where we've historically operated and been comfortable operating the business. As always, we continue to watch the rising interest rate environment and the current state of the debt markets very closely. During the second quarter, we completed refis of two of our nearest maturity term loans, ENF, as well as the $1.1 billion senior secured 8% rate note that we took on at the outset of COVID out of an abundance of caution. The net effect is that we extended these debt maturities out from 2025 into 2028. While we ended up not needing the proceeds of that $1.1 billion insurance policy note, as we called it, to withstand the COVID downturn, we felt it was prudent to have the excess cash as we headed into those tough times. We'll continue to operate the business with that kind of conservatism when it comes to our capital structure in good times and bad, and expect to remain proactive and prudent. Pro forma for this note refinancing and term loan extension, our nearest maturity is now 2026. As a result of these various refinancings, we had some puts and takes on interest expense, the net impact of which is that our interest expense estimate for FY 2023 ticked up slightly, as you can see in today's update, updated guidance. Over 75% of our total $20 billion gross debt balance is fixed or hedged through fiscal 2026, and this is achieved through a combination of fixed rate notes, interest rate caps, swaps, and collars. This provides us adequate cushion against any rise in rates, at least in the immediate term. Specifically, on the interest rate hedging point, you'll see some detail in the 10-Q on new hedges that we put in place during this past quarter to extend our coverage out another year through fiscal 2026. One special note on the cash mechanics of the debt refi. Due to the way the timing worked, we had $1.1 billion of restricted cash on our balance sheet at quarter end, but that cash was dispersed just after quarter end in the first couple days of April, when we successfully completed the retirement of the 8% bond I mentioned. As of today, as it pertains to our balance sheet, the restricted cash balance as well as the amount due on that 8% debt note are both zero. As we sit here today, from an overall cash liquidity and balance sheet standpoint, we think we remain in good position with adequate flexibility to pursue M&A or return cash to our shareholders via buybacks or dividends during fiscal 2023. I'll turn it back to the operator to kick off the Q&A. Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Robert Spingarn of Melius Research. Your line is now open. Hey, good morning. Good morning. Good morning. Kevin, I noticed you said something that seemed a little different this time about the M&A pipeline, and that it's perhaps a little bit better than it's been. I'm wondering, is that because more properties are for sale or there's fewer competitors out there bidding against you because of the financing environment? What's going on there? Yeah. I think there's more properties available, more coming available. Things that have long been rumored, have come to market or we now know are definitively coming. That certainly sets up favorably for us. How about the pricing environment within that? I've not noted any difference in pricing. Maybe things have come down ever so slightly, but they're still going for high multiples. People remember, you know, what they can command or what they could and are still expecting that. Okay. Thanks so much, Kevin. Yep. Please stand by for our next question. Our next question comes from the line of Myles Walton of Wolfe Research. Your line is now open. Thanks. Good morning. I was wondering. Good morning. Kevin, if you can comment on the source of the OEM upside in the guidance, being raised. I can follow the aftermarket, but what's getting better on the OEM side? I'll give you my thoughts and Jorge can chime in, but build rates are improving, deliveries are improving, and we're finally starting to see the order book build on the OEM side. That's really the genesis of it. Yeah, I'd echo Kevin's comments. Generally, there's some level of offset from the OE production rate increases to when the sub tiers in our business sees that demand. You know, we're cautiously optimistic that they are moving the rates up and will continue to produce more aircraft as we go forward in the future. Okay. One, one for Mike. Working capital consumption, $220 million in the quarter, and I think it was a slight source in the first quarter. What's the expectation for the full year at this point? It's hard to say exactly how it plays out over the course of the year. From peak to trough during COVID, about $400 million came out. If you look at the math around that, we're close to all of that having gone back in. Not quite there, but pretty close. It's hard to give exact guidance by quarter, but I think we're getting closer to, you know, the max amount should be back that should be back in there. We don't expect to see a sizable uptick of the type we saw this past quarter in future quarters. Okay. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of David Strauss of Barclays. Your line is now open. Thanks. Good morning. Morning. Morning. Kevin, it looks like, you know, if we just look on revenue, that, you know, your aftermarket revenues are now back to, you know, 120, you know, 20% to 25% above pre-pandemic levels. Where do you think volumes are at this point on the aftermarket side relative to pre-pandemic levels? Yeah, I think, you know, you're right in what you're saying about the percentage up. I still think we're 10%-15% volume light in our numbers that still has the potential to come in as people fly more. That gets us back to really where we were pre-COVID. Okay. Any comments on supply chain? I know you've pointed out, some issues in the past. You know, how would you characterize your supply chain, you know, three months further on now? Yeah. I think our supply chain has done a nice job recovering and trying to support the ramp-up. I think in general terms, we've seen more stable and predictable performance out of the suppliers. Electronic components, as I mentioned, continue to be a little bit of a minor pain point. I'd say generally, that's getting better as well. Okay. What about your ability to hire and retain relative to maybe three, six months ago? Sure. Yeah, I don't think we've really run into any significant retention issues, through this process. Definitely, we've seen the overall labor market improve, at most of our locations, in terms of the production labor. Still a little bit tight on the higher technical and engineering expertise, but again, a little bit of signs of improvement there as well. All right. Thanks very much, guys. Sure. Thank you. Please hold for our next question. Our next question comes from the line of Robert Stallard of Vertical Research. Your line is now open. Thanks so much. Good morning. Good morning. Morning. Kevin, I'll start with you. First of all, on the aftermarket, clearly very strong growth here, and in the most recent quarters. Just looking forward, how sustainable do you think this is, particularly as you start to lap that price increase towards the end of the year and also given these very low rates of old aircraft retirement? Well, I guess we'll have to see how the order book continues to evolve. Of course, as we. It all depends on takeoff and landings. If the flight activity continues to increase, then we'll see continued strength. I think we're just seeing the opening innings really of China coming back. You know, it's good to see that in the numbers, but it's hard to put any parameters on it from here, except, you know, we do expect things to continue to improve for the year. It will have to slow down at some point, as OEMs start to ship more. We'll have to see how that unfolds. Okay. Then, a follow-up for Mike on the interest rates. On the debt market, there's been some what might be optimistic chat about interest rates actually coming down, going forward from here. I was wondering what your thoughts might be on that and what sort of flexibility TransDigm has, to adjust, interest rates if that does occur. We generally with regards to capital structure and interest rates, we don't take a strong position on where they're gonna go. You know, as we've said before, we're in the business of focusing on keeping on time delivery and quality of our parts as high as we can rather than trying to predict where rates might go. That said, this past quarter, we did take a bit of a different approach, and when we did the new hedges, we did collars rather than swaps, so that if rates do float down a bit, we'll get some of that benefit down to about a 2% SOFR rate. You'll see some of that detail in the 10-Q when it's filed later this week. As always, I mean, we can say overall market rates did step back by 2 percentage points -3 percentage points, you can go in and refi, right? We can reprice our bank debt, of which we've still got, you know, $6 billion or so, and bring down the rate on that. We can also, if it makes sense, take out some of the fixed notes. There's a breakage cost on the latter, but, you know, it's just math. If the rates come down enough, you could take out those notes early or pay the prepayment penalty so that you get the benefit of the lower rates going forward. That's great. Thanks so much. Thank you. Please stand by for our next question. Our next question comes from the line of Ron Epstein with Bank of America. Your line is now open. Hey, good morning. This is Jordan [Levine] on to Ron. I just had a question on Calspan. I know you guys said that the financial profile fit the M&A targets that you guys pursue, but the company being services based, should we view it as a departure in your strategy or a shift? Also should we expect more services to be in your pipeline? I don't think we expect any change in our approach. Our approach is always to deliver private equity-like returns to our shareholders. When we find businesses that are highly proprietary, highly engineered, and produce a highly engineered product, in this case, you know, a testing report, I think it absolutely lends itself to our products. You know, we'll see how successful we are with this acquisition. It certainly opens us up to other markets we might explore within aerospace and defense. You shouldn't interpret this as any new direction for us. We find that this business should produce the same types of returns as we've come to expect from our components businesses. Jorge, you have anything to comment on that? Yeah. I would add, you know, as we're very excited about the acquisition, I'd first say, excited that we closed it yesterday. As we evaluated the opportunity, we saw many of the characteristics and attributes that we've seen in other businesses that we've acquired. They do very highly engineered proprietary testing. They are a great partner with their customer base, primarily Aerospace and Defense, which we like as well. There was no, you know, fudging the numbers or changing any type of criteria as we evaluated it. We expect it to perform as other acquisitions, past acquisitions have performed, and generate the typical returns that we'd expect. We're very excited about it. Awesome. Thank you so much. Sure. Please stand by for our next question. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is now open. Good morning, guys. It's Sheila. On the last call... Good morning. Good morning. Usually people mess up my last name, but, I thought she was great, though, I have to tell you. On the last call, you pointed out volumes were 85% below 2019 levels, implying price of about 25% since 2019, Kevin. I think in response to Strauss's question, you implied price is another 10 points-15 points of plus up this quarter. Is that just rounding or is the shortage of new planes? Well, that's not, that's exactly, I think, what I was referring to, and I apologize if I confused. I was simply saying there's still 10%-15% of missing volume if you look back to the pre-COVID levels. We don't comment on price to that extent. You know, I'm just looking at from a volume point of view. There are still flight activity that has not returned that we anticipate will over the coming year or so. We don't anticipate all the volume to return in 2023. Some of it will fall into 2024, we fully anticipate. Okay. No, that's helpful. Maybe just post 2023, and as you think about 2024 and 2025, what's like the normalized aftermarket outlook you guys are thinking about on a volume basis and then, you know, opportunities beyond that? Go ahead, Mike. I think, Sheila, on that point, you know, we'll give the guidance when we give it. We're just getting started with our detailed bottom up op unit forecast here for the next 12 months, this coming month or so. I think we, you know, we don't wanna get out over our skis in terms of predicting where commercial aftermarket volumes could go from here. You know, things are still changing quickly, and as we've said all along, the recovery could be lumpy here. Again, Sheila, as you know, we do a bottoms-up forecasting, so we don't give our teams expectations. We allow them to tell us, and I think that has proven to be more accurate than announcements from on high. Yep. Sure. Thank you. Thank you, Sheila. Please hold for our next question. Our next question comes from the line of Ken Herbert of RBC CM. Your line is now open. Yeah. Hi, good morning. Good morning. Good morning. Hey, hey, Kevin. When you look at the sort of the update and the increase to the full-year aftermarket guide for fiscal 2023, it sounds like it's pretty broad-based in China and some other tailwinds there. Is it possible as you look at that increase to maybe rank order or prioritize for us maybe what drove the increase or where you're seeing the greatest impact? I'll let Jorge take that one. Yeah. I think, you know, as you guys know, we have no visibility into the inventory or, you know, specific trends in a particular region per se. Our largest sub-market, which is the passenger sub-market, you know, is seeing that bounce back and that growth, and we're seeing it across multiple operating units. While cargo is down, we are seeing some improvement in terms of the belly cargo on some of those businesses as well. I would say generally all of our operating units that support the commercial aftermarket are seeing the rebound and the recovery. Great. Within that, are you seeing anything in particular on the interior side? When I think of some of the businesses there, and I think about maybe retrofit opportunities on wide-body aircraft, is that doing better than the passenger trend or how is that looking? I would say interiors are following a similar trend. We're seeing a nice recovery there. You know, we've probably seen that over the last few quarters, generally, but you know, obviously as they continue to utilize the existing fleet, that's beneficial for potential down the road modifications and refurbs, et cetera. Great. Thank you. Sure. Thank you. Please stand by for our next question. Our next question comes from the line of Gautam Khanna of TD Cowen. Your line is now open. Hey, good morning, guys. Morning. Morning. Just to follow up on the last couple questions on, are you seeing any differences in aftermarket demand across, you know, kind of traditionally discretionary products versus, you know, flight critical, or, you know, any sub-markets, whether it be helos or what have you, that are weaker or stronger than others? Any sort of flavor you can give us. No, I think in general, the majority across operating units are participating in the recovery. You know, there could be some puts and takes across any given quarter, but we're not seeing any significant differences in the commercial aftermarket there. Okay. I think- Maybe- To add to that, commercial transport is stronger than the business jet and helicopter, but business jet and helicopter aftermarket is very strong as well. A small portion of our-. Thank you. ... overall aftermarket revenue, as you know. Yeah. Maybe Kevin, could you speak to your comfort with leverage in this environment? Like how much for the right deal, how much would you be willing to take up the debt-to-EBITDA ratio? You know, I think we're comfortable operating in the same range as we have historically. As Mike said, we don't get into forecasting. We run our business. We make sure we have enough available cash and, you know, for any available opportunity that we see on the horizon and that we can go after it. I don't see any limitations. I think we're comfortable operating within the same range as we historically have, you know, 5x to 7 x. You know, we're right in that sweet spot. I think this is where we would like to continue to operate. As you heard, there's probably some forecast that rates will start to go down in the not too distant future. This is good. We have successfully, you know, navigated this so far, and we will continue to come out the other side stronger. I feel like we're comfortable where we are. Mike, do you have anything you wanna add to that? I think that's right. You know, as we've said many times before, we feel comfortable in sort of the 6 x area. It's always dependent on not just the leverage level, right? How far out to the right can you kick the maturities? That's as important a part of the equation as just what the overall leverage level is. We always try to manage that. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Peter Arment of Baird. Your line is now open. Yeah, thanks. Good morning, everyone. Good morning. A lot of questions been answered. Kevin, maybe just a quick one on just price, your ability to kind of still pass along price. Any changes that you've seen as kind of volumes and overall activity has picked up, just curious in this inflationary environment? This is still an inflationary environment. I don't see any changes. Our goal is to, as always, to pass along inflation. That's what we try to do. I think we've all seen reports from the airlines of, you know, ticket price increases and the like. I would say all of the market has been successful in passing this along as we have needed to perform. Okay. just a follow-up, quick follow-up. On China, overall, less than 10% or around 10% of your overall mix, in terms of revenue? We don't give geographic splits. We don't actually know. We sell a lot of that through distribution and OEM. We don't actually know. I think the way to model it is to look at what is missing from the flight activity from pre-COVID to now, and that gives you an idea of what's still missing from our business. There's still a, you know, as Jorge alluded to in his remarks, there's still a chunk of China flying activity that hasn't materialized yet, but certainly looks like it will. Yeah. Appreciate all the color. The international obviously is still lagging considerably compared to the domestic, but it's moving in the right direction. Thanks so much. Thank you for your question. Please hold for our next question. Scott Deuschle with Credit Suisse, your line is now open. Hey, good morning. Good morning. Morning. Jorge, does your pricing model move at all in response to airline profitability, given the value-based approach? Meaning if airlines continue to become more profitable, you know, kind of on their current course, could we see you exercise your pricing power in a manner that's perhaps greater than what you've historically done relative to inflation, but which is consistent with your value-based model since the airlines are generating more profit per takeoff and landing cycle? Yeah. I'd say, you know, airline profitability doesn't really come into play. As we've always stated, our pricing objectives is to market base the price and do better than inflation. Obviously with the higher inflationary environment, you know, we're trying to get real price on top of the inflationary pressures that we're seeing and some of the costs that are flowing through the business. We don't start looking at the profitability of the customer base or anything like that. Okay. Just following up on Calspan, do you have a sense for which of the three value drivers will have the most impact on driving accretion there? On the price side, is there an ability to achieve price realizations at Calspan quickly, or does that company have a lot of backlog you need to work through before you can start to get price? Thanks. Yeah. I would say, you know, our view on value creation is it's a three-legged stool, right? We're trying to make sure that we're getting the price to reflect the value of the products that we see. We're always trying to make sure we're managing the cost structures and pulling costs out of the business. Then we wanna be able to provide innovative, profitable solutions to the customer base. That's not gonna change with Calspan, frankly, that's not gonna change across any of the portfolio of companies that we own. You know, obviously we just closed on the acquisitions, we're going to be looking to leverage all three in the process. It's a great business. It's been well managed and run and, you know, our hope is to be able to optimize it like we've been able to do with past acquisitions. Okay. Last question, Kevin. Just a clarification. You said the M&A pipeline is stronger than typical. As you define typical here, are you referring to the past few years as your reference period, or are you saying the M&A pipeline is stronger than it's typically been across the longer-term experience of TransDigm? Yeah. I would take me at face value there. It's typical than what we've traditionally experienced and more so than the last couple of years. There's a lot in the pipeline right now, and the team is busy. You know, that doesn't linearly project closings, of course, but we're very busy right now. Right. Okay. Thanks, guys. Thank you for your question. Please hold for our next question. Our next question comes from the line of Seth Seifman of JPMorgan. Your line is now open. Hey, thanks very much. Good morning, everyone. Good morning. Wanted to ask about the, you know, obviously very strong profitability in the quarter, and I believe, you know, not necessarily a guidance for any specific year, but as a framework, you know, the company has a philosophy that, you know, in a normal year, it's possible to have, you know, roughly 100 basis points of margin expansion, you know, with the same set of businesses. Is there any reason to think that that shouldn't be the case for next year? Off of wherever 2023 comes out? I think that, you know, when things stabilize, when we get back to normality, whatever that looks like, I think 100 basis points to 150 basis points expansion per year on margin, apples to apples, is always what we have modeled and tried to achieve, and I think that's a fantastic target. Okay. Okay, great. Maybe just as a follow-up with regard to the M&A pipeline, you know, we see some pretty, you know, solid valuations in the public markets these days. A lot of activity in the private market, obviously. You know, to what extent do you see that being driven by valuation and, you know, does that, kind of, inhibit things at all, or is there still kind of plenty of value out there? I think there's plenty of value out there. I don't, you know, given our ability to generate value, I think, you know, we don't, you know, turn away when prices go up necessarily, as long as we remain convicted with, you know, the individual property products. So, you know, the value, what we have to pay doesn't factor in too much. So we're not concerned if prices stay high, go higher. When you find a business that matches, you know, the criteria that we look for, highly engineered products, you're going to have a successful run with those kinds of products over their lifetime. Great. Thanks very much. Thank you for your question. Please stand by for our next question. Our next question comes from the line of Michael Ciarmoli of Truist Securities. Your line is now open. Hey, good morning, guys. Thanks for taking the question. Good morning. Morning. Morning. Kevin, maybe just to go back to Scott's question on Calspan. I think you said the EBITDA margins were about half of what you're doing now. Just given that these are more services, is there a path do you think to get these margins up to kind of TransDigm historical levels? Is there anything with the type of services and testing that they provide that would prevent you from driving that margin? I think we're in the early innings here and difficult to comment too much. I don't know if this business gets to the average of TransDigm, but I would, I guess, argue that it doesn't have to, as long as we continue to find pathways to private equity-like returns. I don't know if the business has to get to TransDigm average margins, but there's no reason to believe any business in the aerospace sector that is highly engineered, produces a technical product like what we specialize in, that it couldn't get there. Right now we're not modeling it that it definitely will, but we'll have to see. There's lots of room for value generation. Okay. Perfect. Just on the defense market, can you give any additional color there, maybe parse out OEM growth, aftermarket growth? You know, I know you might have some more of the consumable exposure there, but any noticeable or discernible trends within defense marketplace? Yeah, I'll take that. As you know, we really don't separate out the defense OE from the aftermarket. I think both are performing relatively equally in terms of how they're tracking. You know, it's a difficult environment as the government continues to do its best to support Ukraine and figure out how they're gonna spend funds. I think, you know, the general commentary that I provided in the opening in terms of we're seeing a slow but steady improvement in the outlays, but the fact remains the outlays are still a little bit slow in terms of solicitations closing into orders as we look at the historical time frames. Got it. Just last one on that topic. Are you able to get real pricing in your defense markets, or are you grappling with some of the same issues we're seeing and hearing about, you know, firm fixed prices just not being able to pass through those costs until the contracts reopen or you get new task orders? I really don't wanna comment or get into specific contract terms. As you know, each of our operating units, independently negotiates the contracts with the government, and I would be speaking out of turn. Okay. Fair enough. Thanks, guys. Thank you for your question. Please stand by for our next question. Our next question comes from the line of Kristine Liwag of Morgan Stanley. Your line is now open. Hey, you guys. Good morning. Hello? Um. Good morning. Hey, how are you guys doing? Great. How are you? Wonderful to hear. You know, hearing from some of the MRO facilities, we're hearing that aircraft turnaround times are extending from, you know, three months to maybe even as long as six months, and part of that is still from some part shortages and then some from labor. Can you talk about how this environment is benefiting your pricing power? Is that something that you could sustain for longer? I don't know that we'd have any comments specific to that environment benefiting pricing. Again, as I've stated many times, our pricing philosophy remains unchanged. It's based on a market-based value for the products that we deliver and design and produce. We look to realize real pricing on top of inflation. I think that has been something that's been very consistent in the history of the company, and that's how we continue to approach it. Great. If I could just tack on a second question here. When you think about, available parts, you know, when you think about the order activity that you have in the market, what% of those orders do you, are you able to deliver on? And are there any specific shortages that you're facing, in terms of providing to the market? Yeah. You know, each business and each operating unit has its own stated lead times that they provide to the end users and the airline customers when they come in for any particular demand, and those lead times can vary based on operating units. In general, given the recovery that we've seen in the aftermarket, in the commercial transport aftermarket specifically, you know, we've tried to invest in some inventory to be able to support the customer base. I'm, you know, offhand, I'm not aware of any specific pain points in terms of supplying airlines or turning around spares activity. Again, as a general comment, electronic component availability is still a little bit tight, but the teams have been doing a nice job managing through that. Great. Thank you, guys. Sure. Thank you for your question. At this time, I would now like to turn it back to Jaimie Stemen for closing remarks. Thank you all for joining us today. This concludes the call. We appreciate your time, and have a good rest of your day. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.