Robert Spingarn

Robert Spingarn posed a strategic question about whether GE Aerospace would consider expanding beyond propulsion through M&A to compete with bundled offerings from peers like RTX.

Answer

CEO H. Culp reaffirmed the company's capital allocation framework, which prioritizes shareholder returns. While not ruling out M&A, he indicated that any deals would likely be small, bolt-on acquisitions, similar to the recently announced North Star deal. He maintained his policy of not commenting on specific M&A situations.

Robert Spingarn asked about the drivers of the Flight Support Group's (FSG) accelerated organic growth, signs of airline overcapacity, the impact of OEM production delays, and the current M&A pipeline.

Answer

Eric Mendelson, Co-President, attributed FSG's 15% organic growth to strong market execution and the broadened product line from the Wencor and Honeywell display acquisitions, noting no signs of an airline-driven slowdown. He confirmed OE build rate softness was offset by defense strength. Laurans Mendelson, Chairman and CEO, described the M&A pipeline as "very full," particularly with non-private equity deals, creating a "buyer's market" for HEICO. CFO Carlos Macau stated the consolidated organic growth was just over 7%.

Inquired about the free cash flow cadence excluding Rivada, how the company plans to handle its year-end EBITDA debt covenant if missed, and whether the fixed-price program delay was solely due to the propulsion supplier.

Answer

Free cash flow is dependent on large programs coming online and expense management. The company has several options to explore for its debt covenant, such as waivers or extensions. The program delay was primarily due to the propulsion subcontractor, which required a redesign, but there were no other testing issues.