Slides
Page 1
FY 2025 Q2 Earnings Call May 6, 2025
Page 2
Agenda TransDigm Overview, Highlights and Outlook Kevin Stein President and CEO Market Review Mike Lisman Co-COO Operating Performance and Financial Results Sarah Wynne CFO Q&A 1
Page 3
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 , including information regarding our guidance for future periods. These forward-looking statements are based on management’s current expectations and beliefs, as well as a number of assumptions concerning future events, many of which are outside of our control. Consequently, such forward looking statements should be regarded solely as our current plans, estimates and beliefs. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward- looking statement. The Company does not undertake, and specifically declines, any obligation, to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. These risks and uncertainties include but are not limited to: the sensitivity of our business to the number of flight hours that our customers’ planes spend aloft and our customers’ profitability, both of which are affected by general economic conditions; supply chain constraints; increases in r aw material costs, taxes and labor costs that cannot be recovered in product pricing; failure to complete or successfully integrate acquisitions; our indebtedness; current and future geopolitica l or other worldwide events, including, without limitation, wars or conflicts and public health crises; cybersecurity threats; risks related to the transition or physical impacts of climate cha nge and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; our reliance on certain customers; the United States (“U.S.”) defense budget and risks asso ciated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; risks related to changes in laws and regulations, including increases in compliance costs and potential changes in trade policies and tariffs; potential environmental liabilities; liabilities arising in connection with litigation; risks and costs associated with our international sales and operations; and other factors. Further information regarding the important factors that could cause actual results to differ materially from projected results can be found in TransDigm Group’s most recent Annual Report on Form 10-K and other reports that TransDigm Group or its subsidiaries have filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on our forward-looking statements. TransDigm Group Incorporated assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. SPECIAL NOTICE REGARDING PRO FORMA AND NON-GAAP INFORMATION This presentation sets forth certain pro forma financial information. This pro forma financial information gives effect to certain recently completed acquisitions and divestitures. Such pro forma information is based on certain assumptions and adjustments and does not purport to present TransDigm's actual results of operations or financial condition had the transactions reflected in such pro forma financial information occurred at the beginning of the relevant period, in the case of income statement information, or at the end of such period, in the case of balance sheet information, nor is it necessarily indicative of the results of operations that may be achieved in the future. This presentation also sets forth certain non-GAAP financial measures. A presentation of the most directly comparable GAAP measures and a reconciliation to such measures are set forth in the appendix. Forward Looking Statements & Special Notice Regarding Pro Forma and Non-GAAP Information 2
Page 4
Highly engineered aerospace components Proprietary products Distinguishing Characteristics Proprietary Revenues (1) Pro Forma Revenues (1) Pro Forma EBITDA As Defined (1) Significant aftermarket content High free cash flow (1) Pro forma revenue is for the fiscal year ended 9/30/2024. Includes full year impact of the Raptor Scientific acquisition completed July 2024, CPI Electron Device Business acquisition completed June 2024 and SEI Industries acquisition completed May 2024. Please see the Special Notice Regarding Pro Forma and Non-GAAP Information. TransDigm Overview Non- Proprietary Proprietary OEM Aftermarket Comm OEM 28% Comm Afterma rket 32% Defen se 40% 3
Page 5
Q2 Review – Pro Forma Revenues⁽¹⁾ Commercial OEM: Q2 ’25 Commercial Transport Revenue Down 2% Q2 ’25 Business Jet/Helicopter Revenue Up 4% Commercial Aftermarket: Q2 ’25 Commercial Transport Revenue Up 11% Q2 ’25 Business Jet/Helicopter Revenue Up 23% Defense: Q2 ’25 Defense OEM Growth Outpaced Defense Aftermarket Revenue Growth Well Distributed Across Businesses Highlights Q2 YTD Commercial OEM: Flat Down 2% Commercial Aftermarket: Up 13% Up 11% Defense: Up 9% Up 10% Actual vs. Prior Year 2025 Q2 Financial Performance by Markets – Pro Forma 65% Com Transport 35% Biz Jet/Heli (1) Pro forma revenue for all periods includes full year impact of the Raptor Scientific acquisition completed July 2024, CPI Electron Device Business acquisition completed June 2024 and SEI Industries acquisition completed May 2024. Please see the Special Notice Regarding Pro Forma and Non-GAAP information. 20% Biz Jet/Heli 80% Com Transport 4
Page 6
($ in millions, except per share amounts) Q2 FY 2025 Q2 FY 2024 Revenue $2,150 $1,919 12% Increase Gross Profit $1,274 $1,152 59.3% 60.0% -0.7% SG&A $236 $248 % to Sales 11.0% 12.9% -1.9% Interest Expense - Net $378 $326 16% Increase Refinancing Costs - $28 EBITDA As Defined $1,162 $1,021 14% Increase Margin % 54.0% 53.2% Adjusted EPS $9.11 $7.99 14% Increase GAAP Tax Rate 23.0% 22.2% Adjusted Tax Rate 24.1% 26.0% Second Quarter 2025 Select Financial Results • Application of our value-driven operating strategy • Fixed overhead spread over higher production volumes • Interest on the additional debt raised during fiscal 2024 and lower interest income • Lower non-cash stock and deferred compensation expense • Lower acquisition transaction-related expenses 5
Page 7
28% Commercial OEM 32% Commercial Aftermarket 40% Defense High Single-Digit to Low Double-Digit % Range Market FY 2024 Pro Forma Revenue Mix (1) Low Single Digit to Mid Single-Digit % Range High Single-Digit to Low Double-Digit % Range FY 2025 Expected Growth Market Growth Assumptions Fiscal 2025 Outlook Guidance Summary (1) Pro forma revenue is for the fiscal year ended 9/30/2024. Includes full year impact of the Raptor Scientific acquisition completed July 2024, CPI Electron Device Business acquisition completed June 2024 and SEI Industries acquisition completed May 2024. Please see the Special Notice Regarding Pro Forma and Non-GAAP Information. ($ in millions, except per share amounts) 6 Current Prior ∆ Revenues 8,850$ 8,850$ -$ EBITDA As Defined 4,685$ 4,685$ -$ % of sales 52.9% 52.9% Adj. EPS 36.47$ 36.47$ -$ FY 25 Guidance Midpoint Change Low High Revenues 8,750$ 8,950$ Net Income 1,925$ 2,037$ GAAP EPS 32.27$ 34.19$ EBITDA As Defined 4,615$ 4,755$ % of sales 52.7% 53.1% Adj. EPS 35.51$ 37.43$ FY 25 Guidance
Page 8
Fiscal 2025 Select Financial Assumptions (1) Other EBITDA As Defined Add-Backs primarily include estimates for refinancing costs, foreign currency gains or losses, employer withholding taxes on stock option exercises, acquisition-related expenses and adjustments and other, net. Select Financial Assumptions for Fiscal 2025 Prior Assumptions (Issued February 2025) Updated Assumptions Capital Expenditures $255 to $285 million No change Full Year Net Interest Expense ≈ $1.54 billion (includes $80 million of interest income) No change Full Year Effective Tax Rate ≈ 22% to 24% for GAAP EPS, Adjusted EPS and Cash Taxes No change Depreciation & Amortization Expense (ex backlog) $350 to $360 million No change Backlog Amortization $25 to $30 million No change Non-Cash Stock Compensation and Deferred Compensation Expense $170 to $190 Million No change Other EBITDA As Defined Add- Backs (1) ($15) to ($25) million No change Weighted Average Shares 58.15 million No change 7
Page 9
Guidance Midpoint Net income 1,981$ Adjustments: Depreciation and amortization expense 380 Interest expense - net 1,540 Income tax provision 625 EBITDA 4,526 Adjustments: Acquisition transaction and integration-related expenses (1) 30 Non-cash stock and deferred compensation expense (1) 180 Other, net (1) (51) Gross Adjustments to EBITDA 159 EBITDA As Defined $4,685 EBITDA As Defined Margin (1) 52.9% GAAP earnings per share $33.23 Adjustments to earnings per share: Inclusion of the dividend equivalent payments 0.83 Acquisition transaction and integration-related expenses 0.76 Non-cash stock and deferred compensation expense 2.35 Other, net (0.70) Adjusted earnings per share $36.47 Weighted-average shares outstanding 58.15 GAAP & Adj Tax Rate 22% - 24% Reconciliation of Fiscal 2025 Outlook (1) Refer to tables in Appendix for definitions of Non-GAAP measurement adjustments. ($ in millions, except per share amounts) 8 Includes approx. $30m of backlog amortization
Page 10
Full Year Guidance Mid-Point GAAP earnings per share 8.24$ 6.97$ 15.86$ 11.83$ 33.23$ Adjustments to earnings per share: Dividend equivalent payments - - 0.83 1.75 0.83 Acquisition transaction and integration- related expenses 0.14 0.21 0.40 0.25 0.76 Non-cash stock and deferred compensation expense 0.62 0.77 0.95 1.44 2.35 Refinancing costs - 0.37 - 0.37 - Tax adjustment on income from continuing operations before taxes (0.11) (0.33) (0.48) (0.52) - Other, net 0.22 - (0.62) 0.03 (0.70) Adjusted earnings per share 9.11$ 7.99$ 16.94$ 15.15$ 36.47$ Thirteen Week Periods Ended Twenty-Six Week Periods Ended September 30, 2025March 30, 2024March 29, 2025March 30, 2024March 29, 2025 Reconciliation of GAAP EPS to Adjusted EPS - Guidance 9
Page 11
Capital Structure Capital Structure ($ in millions) 10 Actual 3/29/25 Rate Cash $2,426 $910mm revolver – S + 2.250% $650m m A R se curitization facility 650 S + 1.450% First lien term loan I due 2028 1,866 S + 2.750% First lien term loan J due 2031 3,623 S + 2.500% First lien term loan K due 2030 1,695 S + 2.750% Fi rst l i en term l oan L due 2032 1,496 S + 2.500% Senior secured notes due 2028 2,100 6.750% Senior secured notes due 2029 2,750 6.375% Senior secured notes due 2030 1,450 6.875% Senior secured notes due 2031 1,000 7.125% Senior secured notes due 2032 2,200 6.625% New Seni or secured notes due 2033 1,500 6.000% Total secured debt $20,330 4.6x Total net secured debt $17,904 4.0x Senior subordinated notes due 2027 2,650 5.500% Senior subordinated notes due 2029 1,200 4.625% Senior subordinated notes due 2029 750 4.875% Fi nance Lease Obl i gati ons (Gross) 277 Total debt $25,207 5.6x Total net debt $22,781 5.1x FY25 Forecasted Weighted Average Interest Rate 6.1%
Page 12
Interest Rate Sensitivity • Interest rates on TDG’s $25Bn of gross Debt is ~ 75% hedged/fixed rate through fiscal year 2027 • Achieved via a combination of interest rate caps, swaps and collars • Significantly reduces near-term exposure to any variable rate increases 11 (1) FY 25 Weighted Average Variable rate is the average Term SOFR for TDG's 2025 fiscal year based on current consensus and management estimates. (2) Interest expense shown includes $40M amortization of debt issuance costs and fees and $80M of Interest income. $ in millions Current FY 25 Assumptions Average Variable Rate (1) ~ 4.4% 5.0% 6.0% 7.0% Interest Expense - Pre-Tax (2) $1,540 $1,575 $1,635 $1,695 Interest Rate - Pre-Tax 6.1% 6.2% 6.5% 6.7%
Page 13
Debt Maturity Profile Debt Maturity Profile ($MM) 12 Note 1: $910M Revolver matures in February 2029 Note 2: $650M AR Securitization renews annually in July $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2025 2026 2027 2028 2029 2030 2031 2032 2033 Secured Term Loans Secured Notes Sr Sub NotesCalendar Year
Page 14
March 29, 2025 March 30, 2024 March 29, 2025 March 30, 2024 Net Income 479$ 404$ 972$ 786$ Adjustments: Depreciation and amortization expense 89 74 179 143 Interest expense - net 378 326 756 626 Income tax provision 143 115 269 222 EBITDA 1,089 919 2,176 1,777 Adjustments: Acquisition transaction and integration-related expenses (1) 9 14 22 16 Non-cash stock and deferred compensation expense (2) 48 60 73 111 Refinancing costs (3) - 28 - 28 Other, net (4) 16 - (47) 1 Gross Adjustments to EBITDA 73 102 48 156 EBITDA As Defined 1,162$ 1,021$ 2,224$ 1,933$ EBITDA As Defined, Margin (5) 54.0% 53.2% 53.5% 52.1% (3) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. (5) The EBITDA As Defined Margin represents the amount of EBITDA As Defined as a percentage of net sales. Thirteen Week Periods Ended Twenty-Six Week Periods Ended (1) Represents costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and v aluation-r elated c osts for ac quisitions c ompr ising deal fees, legal, financ ial and tax due diligenc e ex penses; and amor tization ex pense of inv entor y step-up r ec or ded in connection with the purchase accounting of acquired businesses. (2) Represents the compensation expense recognized by TD Group under our stock option plans and deferred compensation plans. (4) P r imar ily r epr esents for eign c ur r enc y tr ansac tion (gains) or losses, pay r oll withholding tax es r elated to div idend equiv alent pay ments and stoc k option ex er c ises, non-ser v ic e related pension costs, deferred compensation payments and other miscellaneous (income) expense, such as gain on sale of business. Appendix: Reconciliation of Net Income to EBITDA and EBITDA As Defined ($ in millions) 13
Page 15
Reported Earnings Per Share March 29, 2025 March 30, 2024 March 29, 2025 March 30, 2024 Net income 479$ 404$ 972$ 786$ Less: Net income attributable to noncontrolling interests - (1) - (1) Net income attributable to TD Group 479 403 972 785 Less: Dividends paid on participating securities - - (49) (101) Net income applicable to TD Group common stockholders - basic and diluted 479$ 403$ 923$ 684$ Weighted-average shares outstanding under the two-class method: Weighted-average common shares outstanding 56.1 55.7 56.2 55.6 Vested options deemed participating securities 2.0 2.1 2.0 2.2 Total shares for basic and diluted earnings per share 58.1 57.8 58.2 57.8 Earnings per share -- basic and diluted 8.24$ 6.97$ 15.86$ 11.83$ Adjusted Earnings Per Share Net income 479$ 404$ 972$ 786$ Gross adjustments to EBITDA 73 102 48 156 Purchase accounting backlog amortization 2 3 8 3 Tax adjustment (1) (25) (47) (42) (70) Adjusted net income 529$ 462$ 986$ 875$ Adjusted diluted earnings per share under the two-class method 9.11$ 7.99$ 16.94$ 15.15$ Thirteen Week Periods Ended Twenty-Six Week Periods Ended (1) For the thirteen and twenty-six week periods ended March 29, 2025 and March 30, 2024, the Tax adjustment represents the tax effect of the adjustments at the applicable effective tax rate, as well as the impact on the effective tax rate when excluding the excess tax benefits on stock option exercises. Stock compensation expense is excluded from adjusted net income and therefore we have excluded the impact that the excess tax benefits on stock option exercises have on the effective tax rate for determining adjusted net income. Appendix: Reconciliation of Reported EPS to Adjusted EPS ($ in millions, except per share amounts) 14
Page 16
March 29, 2025 March 30, 2024 Net cash provided by operating activities 900$ 865$ Adjustments: Changes in assets and liabilities, net of effects from acquisitions and sales of businesses 289 215 Interest expense - net (1) 737 604 Income tax provision - current 271 223 Amortization of inventory step-up (7) (3) Loss contract amortization 30 17 Refinancing Costs (2) - (28) Gain on sale of businesses, net 19 - Non-cash stock and deferred compensation expense (3) (73) (111) Foreign currency exchange gains (losses) 10 (5) EBITDA 2,176 1,777 Adjustments: Acquisition transaction and integration-related expenses (4) 22 16 Non-cash stock and deferred compensation expense (3) 73 111 Refinancing costs (2) - 28 Other, net (5) (47) 1 EBITDA As Defined 2,224$ 1,933$ (5) Primarily represents foreign currency transaction (gains) or losses, payroll withholding taxes related to dividend equivalent payments and stock option exercises, non- service related pension costs, deferred compensation payments and other miscellaneous (income) expense, such as gain on sale of business. (4) Represents costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and v aluation-r elated c osts for ac quisitions c ompr ising deal fees, legal, financ ial and tax due diligenc e ex penses; and amor tization ex pense of inv entor y step-up r ec or ded in connection with the purchase accounting of acquired businesses. (1) Represents interest expense, net of interest income, excluding the amortization of debt issuance costs and discount on debt. (2) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. (3) Represents the compensation expense recognized by TD Group under our stock option plans and deferred compensation plans. Twenty-Six Week Periods Ended Appendix: Reconciliation of Net Cash Provided by Operating Activities to EBITDA and EBITDA As Defined ($ in millions) 15