01—Abstract
Summary
Summary of the 10-K filed December 20, 2023. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation reported record fiscal 2023 results for the year ended October 31, 2023, with net sales of $2,968.1 milliona, up 34% from $2,208.3 million in fiscal 2022, and net income attributable to HEICO of $403.6 million, or $2.91 per diluted share, compared with $351.7 million, or $2.55 per diluted share.
Operating income rose 26% to a record $625.3 millionb. The Flight Support Group (FSG) generated $1,770.2 million in net sales, up 41%, with organic growth of 21% driven by continued recovery in commercial air travel, while the Electronic Technologies Group (ETG) generated $1,225.2 million, up 26%, with organic growth of 1%. Growth was also driven by acquisitions, most notably Wencor Group (acquired August 4, 2023, for $1.9 billion in cash plus 1,137,628 Class A shares) and Exxelia International SAS (acquired January 5, 2023).
The acquisitions significantly changed the balance sheet and financing profile. Total debt rose to $2,478.1 millionc at October 31, 2023, from $290.3 million a year earlier, and total debt to total capitalization increased to 44% from 10%. Goodwill grew to $3,274.3 million and intangible assets to $1,357.3 million.
Interest expense increased to $73.0 milliond from $6.4 million, reflecting $1,200 million of senior unsecured notes issued in July 2023 and higher revolver borrowings. Operating cash flow was $448.7 million, and cash and cash equivalents were $171.0 million. The company stated that unused committed availability under its revolving credit facility was approximately $739 million as of December 18, 2023.
The filing also discloses several items for investors to monitor: a grand jury subpoena received in April 2021 by an indirect subsidiary, which the company is cooperating with and for which it cannot estimate a range of loss; put rights held by noncontrolling interest holders with an aggregate Redemption Amount of approximately $364.8 million; and a backlog of $1,863 million at October 31, 2023, up from $1,383 million. Management expects net sales growth in both segments in fiscal 2024 and plans to continue integrating Wencor.
02—Key points
Key Highlights
- Record fiscal 2023 net sales of $2,968.1 million, up 34% from $2,208.3 million, and record operating income of $625.3 million, up 26%.
- Net income attributable to HEICO rose 15% to a record $403.6 million, or $2.91 per diluted share, versus $2.55 in fiscal 2022.
- Flight Support Group net sales increased 41% to $1,770.2 million, with organic growth of 21%; Electronic Technologies Group net sales increased 26% to $1,225.2 million, with organic growth of 1%.
- Acquisitions drove a major balance sheet shift: total debt rose to $2,478.1 million from $290.3 million, and total debt to total capitalization increased to 44% from 10%.
- Interest expense increased to $73.0 million from $6.4 million, following $1,200 million of 5.25% and 5.35% senior unsecured notes issued in July 2023 and higher revolver borrowings.
- Total backlog increased 35% to $1,863 million as of October 31, 2023, from $1,383 million.
- Quarterly cash dividends were increased, with aggregate fiscal 2023 cash dividends of $.20 per share versus $.18 in fiscal 2022, and a 91st consecutive semi-annual dividend of $.10 declared in December 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Heico kept $0.14.
- Revenue$2.97B100.0%
- Cost of revenue−$1.81B61.1%
- Gross profit$1.15B38.9%
- Operating costs−$528.1M17.8%
- Operating income$625.3M21.1%
- Interest, other & tax−$221.7M7.5%
- Net income$403.6M13.6%
04—Financials
Financial Highlights
Figures from 10-KFY2023filed December 20, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $2.97B$2.21B | +34.4% |
| Cost of Revenue | $1.81B$1.35B | +34.9% |
| Gross Profit | $1.15B$862.76M | +33.7% |
| R&D Expenses | $95.77M$76.06M | +25.9% |
| SG&A Expenses | $528.15M$365.92M | +44.3% |
| Operating Expenses | $2.34B$1.71B | +36.9% |
| Operating Income | $625.34M$496.84M | +25.9% |
| Interest Expense | $72.98M$6.39M | +1042.9% |
| Net Income | $403.60M$351.68M | +14.8% |
| EPS (Basic) | $2.94$2.59 | +13.5% |
| EPS (Diluted) | $2.91$2.55 | +14.1% |
| Shares Outstanding (Basic) | 137.19M136.01M | +0.9% |
| Shares Outstanding (Diluted) | 138.91M138.04M | +0.6% |
05—Questions
Frequently Asked Questions
What drove HEICO's revenue growth in fiscal 2023?
Net sales rose 34% to $2,968.1 million. The Flight Support Group grew 41%, with 21% organic growth from continued recovery in global commercial air travel and aftermarket replacement parts, plus $251.0 million from fiscal 2023 and 2022 acquisitions. The Electronic Technologies Group grew 26%, with $232.8 million from acquisitions and only 1% organic growth, as defense product sales declined $28.2 million.
How did the Wencor and Exxelia acquisitions affect HEICO's financial position?
The Wencor acquisition, completed August 4, 2023, had an aggregate purchase price of $1.9 billion in cash plus 1,137,628 shares of Class A Common Stock, and contributed approximately $185.7 million of net sales. The Exxelia acquisition, completed January 5, 2023, was paid in cash and contributed approximately $179.0 million of net sales. Goodwill increased to $3,274.3 million and total debt rose to $2,478.1 million, leaving total debt at 44% of total capitalization.
What are the main risks to HEICO's business highlighted in the filing?
Key risks include the ability to execute the acquisition strategy and integrate acquired businesses, dependence on the aviation industry and commercial air travel, reductions in defense, space or homeland security spending (approximately 35% of fiscal 2023 net sales), supply chain disruption and cost inflation, international sales risks (approximately 34% of net sales to foreign customers), and goodwill and intangible assets representing 64% of total assets at October 31, 2023.
Is HEICO facing any legal or regulatory proceedings?
An indirect subsidiary of HEICO Flight Support Corp. received a grand jury subpoena on April 20, 2021, from the U.S. District Court for the Southern District of California related to the subsidiary's employment of an individual and its work on certain Navy vessels from December 2017 through February 2019. The company is cooperating with the investigation, has completed its document production, and cannot predict the outcome or reasonably estimate a possible range of loss. Management believes other legal actions will not have a material adverse effect.
What are HEICO's capital needs and liquidity sources for fiscal 2024?
Capital expenditures in fiscal 2024 are anticipated to be approximately $65 million. Management believes net cash from operating activities and available revolving credit borrowings will be sufficient for at least the next twelve months. As of December 18, 2023, approximately $739 million of unused committed availability remained under the revolving credit facility, which was increased to $2.0 billion in July 2023 and extended to July 2028. Put Rights held by noncontrolling interests could require approximately $152.9 million of purchases, of which approximately $92.4 million would be payable in fiscal 2024 if all eligible holders exercise.
06—Continue