HEICO (HEI) Gabelli Funds 30th Annual Aerospace & Defense Symposium summary

Business overview and strategy

• Focus on generating cash and building equity value through consistent, reliable performance since 1990.

• Core business is FAA-approved PMA parts, growing from 1 to about 20,000 parts, with significant market penetration opportunity remaining.

• Expanded into accessory component repair, specialty distribution, and niche electronics through about 100 acquisitions since 1996.

• Operates with decentralized, entrepreneurial structure, keeping businesses close to customers and engineering.

• Specialty components include missile bodies, aircraft antennas, laser rangefinder receivers, and satellite products.

Growth drivers and market dynamics

• Electronic Technologies Group (ETG) targets low- to mid-single digit organic growth, with defense expected to propel growth into fiscal 2025.

• Commercial aviation remains strong, with a mix of new production and aftermarket demand.

• Space segment expected to grow at lower single digits, while commercial aviation and defense could see mid to higher single-digit growth.

• Aftermarket in ETG is limited due to product durability, but meaningful in commercial aviation.

• FSG targets upper single-digit organic growth, with acquisitions potentially doubling growth.

PMA parts and industry trends

• PMA parts offer significant cost savings, with OEMs raising prices 6%-13% annually; PMA market share is only 1%-2%.

• Airlines show increased interest in PMA parts during financial stress, accelerating approval processes.

• Main constraints on PMA growth are FAA and airline engineering throughput, not production or engineering capacity.

• Leasing companies' resistance to PMA parts is declining as cost advantages become clear.