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

Business overview and strategy

• Focus on generating consistent, reliable cash flow and building equity value since taking control in 1990.

• Core business is FAA-approved PMA parts, expanding from one part to about 20,000, with significant market penetration still ahead.

• Growth through opportunistic acquisitions, with about 100 deals since 1996, mainly from entrepreneurs and founders.

• Decentralized structure with small, focused teams close to customers and engineering.

• Specialty components and electronics for aviation, defense, and space, including missile bodies, antennas, and satellite modules.

Market dynamics and growth drivers

• Electronic Technologies Group (ETG) targets low- to mid-single digit organic growth, with defense as a key driver and recovery in non-aerospace markets expected in early 2025.

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

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

• Aftermarket in ETG is limited due to the durable nature of most products, except in commercial aviation.

PMA parts and industry trends

• PMA parts represent only 1%-2% of the market, with OEMs raising prices 6%-13% annually, expanding the addressable market.

• Airlines show increased interest in PMA parts during periods of financial pressure, leading to faster approvals.

• Barriers to PMA adoption include FAA throughput and airline engineering department capacity.

• Leasing companies are increasingly allowing PMA parts, reversing earlier restrictive policies.