Name: HEICO CORP Q2 2025 Earnings Call
Start: 2025-05-28T13:00:00.000Z

Executive Summary

HEICO delivered record net sales and operating income; Q2 revenue was $1.10B and diluted EPS $1.12, both above Wall Street consensus, with EBITDA up 18% YoY and operating margin expanding to 22.6% .
Flight Support Group (FSG) posted 19% net sales growth and 24% operating income growth on 14% organic growth; Electronic Technologies Group (ETG) grew sales 7% with operating margin at 22.8% amid mixed product demand .
Cash from operations rose 45% YoY to $204.7M; net debt/EBITDA improved to 1.86x, reflecting strong cash generation and disciplined balance sheet management .
Management reiterated confidence in net sales growth across both segments and highlighted acquisition momentum (e.g., Rosen Aviation) as an incremental growth driver .
Stock reaction catalysts: sustained aftermarket strength, margin expansion, and clear beat vs. consensus; medium-term upside tied to defense content and cross-selling synergies with Wencor .

What Went Well and What Went Wrong

Record Q2 net sales ($1,097.8M, +15% YoY) and operating income ($248.2M, +19% YoY); diluted EPS $1.12 (+27% YoY) with consolidated operating margin 22.6% (+70 bps YoY) .
FSG strength: net sales +19% to $767.1M; operating income +24% to $185.0M; 14% organic growth across product lines; “cash margin” (EBITA) ~27% with ~290 bps amortization drag (strategic quote: “cash margin… approximately 27%”) .
Cash flow and leverage: CFO $204.7M (+45% YoY); net debt/EBITDA improved to 1.86x; management emphasized continued strong cash generation .

ETG margin compression YoY: operating margin 22.8% vs. 23.6% YoY; lower gross margin from decreased defense and medical sales partially offset by space .
Ongoing supply constraints at suppliers limiting upside; management flagged continued difficulty sourcing product despite dual-sourcing initiatives .
Tariff and mix headwinds: management expects tariffs to be largely pass-through but acknowledged timing lags and mix impacts; ETG defense was flattish YoY on tough comps .

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue (Net Sales, $USD Millions)	$955.4	$1,030.2	$1,097.8
Operating Income ($USD Millions)	$209.2	$226.8	$248.2
EBITDA ($USD Millions)	$252.4	$273.9	$297.7
Net Income Attrib. to HEICO ($USD Millions)	$123.1	$168.0 (incl. $26.5M discrete tax benefit)	$156.8
Diluted EPS ($USD)	$0.88	$1.20 (incl. $0.19 from discrete tax benefit)	$1.12
Operating Margin (%)	21.9%	22.0%	22.6%

Segment Breakdown

Segment	Q2 2024	Q1 2025	Q2 2025
FSG Net Sales ($USD Millions)	$647.2	$713.2	$767.1
FSG Operating Income ($USD Millions)	$148.9	$166.1	$185.0
ETG Net Sales ($USD Millions)	$319.3	$330.3	$342.2
ETG Operating Income ($USD Millions)	$75.3	$76.5	$77.9

Key KPIs

KPI	Q2 2024	Q1 2025	Q2 2025
Cash from Operations ($USD Millions)	$141.1	$203.0	$204.7
Net Debt / EBITDA (x)	2.06 (as of 10/31/2024)	2.08 (as of 1/31/2025)	1.86 (as of 4/30/2025)
DSOs (Days)	—	~48	~48

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales (both segments)	FY 2025	Expect growth	Maintain confidence in growth	Maintained
Cash Flow from Operations	FY 2025	Strong CFO expected	Continue to forecast strong CFO	Maintained
FSG Operating Margin Range	Ongoing	23–24% range target	Reiterated; Q2 at high end (24.1% for FSG)	Maintained
Leverage (Net Debt/EBITDA)	Ongoing	~2x target post-Wencor	Improved to 1.86x; maintaining disciplined balance sheet	Improved
Numerical Revenue/EPS Guidance	FY 2025	Not provided	Not provided	N/A

Topic	Previous Mentions (Q4 2024 & Q1 2025)	Current Period (Q2 2025)	Trend
Aftermarket demand & pricing	Double-digit FSG organic; restrained pricing to preserve customer value	Parts +16% organic; component repair +11%; continued restrained pricing; margin expansion via mix	Improving
Wencor integration synergies	“Cooperation, cash, capabilities… without consolidation”; cross-listing PMAs, shared vendors	Standalone model validated; e-commerce listing, manufacturing synergies; strong shared pipeline	Improving
Defense exposure & DOGE/PMA	Building path to DoD alternative parts; missile defense backlog strong	Missile defense standout; defense PMA meaningful longer-term; ETG defense flattish YoY on tough comps	Mixed near-term; positive medium-term
ETG other electronics destocking	Destocking headwinds expected to ease into 1H25	Mid-single-digit organic growth in “other electronics” resumed; backlog healthy	Improving
Space demand (lumpiness)	Strong but lumpy; expect volatility	Lumpy; strong 1H; remains volatile	Stable (volatile)
Supply chain constraints	Constraints moderating; still material in places	Supplier constraints persist; dual-sourcing underway	Gradual improvement
Tariffs	Low single-digit cost impact; pass-through expected	Impact expected immaterial; customer acceptance with timing lag	Stable
Working capital discipline	Elevated inventories post-COVID; moderation expected	DSOs ~48 days; inventory turns improving; flatter WC in 2H25	Improving

“The Flight Support Group’s operating margin improved to 24.1%… cash margin before amortization… approximately 27%” .
“Cash flow provided by operating activities increased 45% to $204.7 million in Q2 FY25” .
“We remain confident in achieving net sales growth in both the Flight Support and Electronic Technologies Groups… and aim to accelerate growth through our recently completed acquisitions” .
“ETG defense net sales are expected to be robust during the second half… significant backlogs and order volumes” .

FSG growth drivers: parts +16% organic, component repair +11%, specialty +9%; stronger gross margin from defense mix within specialty products .
Pricing strategy: pass-through cost increases (including tariffs) without opportunistic gouging; focus on long-term customer loyalty and competitive margins .
ETG outlook: mid- to high-single-digit absolute growth for FY25; defense stronger in 2H; space lumpy; “other electronics” improving .
Supply constraints: ongoing supplier shortages; dual-sourcing; upside capped by materials availability .
Regional dynamics: accelerating European defense orders/design-ins via Exxelia; strong Asia demand normalizing post tariff-related pre-buy .

Metric	Consensus (Q2 2025)	Actual (Q2 2025)	Surprise
Revenue ($USD)	$1,061.7M*	$1,097.8M	Beat
EBITDA ($USD)	$281.1M*	$297.7M	Beat
Diluted EPS ($USD)	$1.036*	$1.12	Beat

Values retrieved from S&P Global.*

Aftermarket momentum and mix-driven margin expansion continue; FSG’s operating margin at the high end of the target range, with cash margins ~27% indicating structural strength .
Quality beats vs. consensus (revenue, EBITDA, EPS) supported by broad-based organic growth and disciplined pricing; near-term EPS trajectory underpinned by cost control and favorable mix .
ETG’s margin resilience despite mix headwinds suggests improving 2H setup as defense backlogs convert and destocking abates; expect lumpiness but positive directionality .
Cash generation remains a cornerstone (CFO >$200M in Q2); leverage now sub-2x net debt/EBITDA, preserving M&A optionality (e.g., Rosen Aviation) .
Medium-term upside from defense content (missile defense, European programs) and potential DoD adoption of alternative parts; not a FY25 story but expanding TAM .
Trading lens: sustained aftermarket outperformance and recurring margin gains are likely to drive estimate revisions higher; watch supply chain normalization and “other electronics” recovery for incremental upside .