01—Abstract
Summary
Summary of the 10-Q filed August 28, 2024. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation's third-quarter fiscal 2024 Form 10-Q (quarter ended July 31, 2024) shows strong top-line and profit growth.
Net sales for the nine months rose to a record $2,844.0 milliona from $2,031.7 million, with the Flight Support Group up to $1,947.6 million and the Electronic Technologies Group up to $927.4 million. Operating income increased to a record $605.8 million, and net income attributable to HEICO reached a record $374.4 million, or $2.67 per diluted share, versus $2.17 a year earlier. For the third quarter alone, net sales were $992.2 million and net income attributable to HEICO was $136.6 million, or $.97 per diluted share.
Interest expense rose sharply to $113.9 millionb for the nine months from $29.6 million, reflecting debt taken on for fiscal 2023 acquisitions. Total debt includes $1,045.0 million outstanding under the revolving credit facility and $1.2 billion of senior unsecured notes. Cash flow from operations was $466.7 million for the nine months, up from $300.4 million, while cash used in investing activities was $112.2 million, including $55.2 million for acquisitions.
Inventories increased $102.2 millionc to support higher backlog, which stood at $1,862.7 million of remaining performance obligations. Management stated it remains optimistic about net sales growth in both segments in the remainder of fiscal 2024, largely fueled by fiscal 2023 and 2024 acquisitions.
The company also recorded a $6.0 milliond impairment on an Electronic Technologies Group trade name and reported a total debt to shareholders' equity ratio of 62.8%. Subsequent to quarter-end, HEICO acquired the Aerial Delivery and Descent Devices divisions of Capewell Aerial Systems, which the filing describes as not material.
02—Key points
Key Highlights
- Record nine-month net sales of $2,844.0 million, up from $2,031.7 million; Flight Support Group net sales rose to $1,947.6 million, while Electronic Technologies Group net sales rose to $927.4 million.
- Nine-month operating income reached a record $605.8 million versus $435.9 million; consolidated operating margin was 21.3% compared with 21.5% a year earlier.
- Net income attributable to HEICO was a record $374.4 million, or $2.67 per diluted share, compared with $2.17 per diluted share in the prior-year nine months.
- Interest expense increased to $113.9 million from $29.6 million, principally due to higher outstanding debt related to fiscal 2023 acquisitions.
- Operating cash flow was $466.7 million for the nine months, up from $300.4 million, while the revolving credit facility balance decreased to $1,045.0 million from $1,250.0 million.
- Remaining performance obligations (backlog) totaled $1,862.7 million, with $542.8 million expected to be recognized in the remainder of fiscal 2024.
- A $6.0 million impairment was recorded on a trade name in the Electronic Technologies Group during the third quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Heico kept $0.14.
- Revenue$992.2M100.0%
- Cost of revenue−$603.0M60.8%
- Gross profit$389.3M39.2%
- Operating costs−$172.8M17.4%
- Operating income$216.4M21.8%
- Interest, other & tax−$79.9M8.0%
- Net income$136.6M13.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed August 28, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $992.25M$722.90M | +37.3% |
| Cost of Revenue | $602.98M$444.17M | +35.8% |
| Gross Profit | $389.27M$278.73M | +39.7% |
| R&D Expenses | $29.78M$25.36M | +17.4% |
| SG&A Expenses | $172.82M$129.37M | +33.6% |
| Operating Expenses | $775.80M$573.53M | +35.3% |
| Operating Income | $216.45M$149.37M | +44.9% |
| Interest Expense | $36.79M$12.12M | +203.5% |
| Net Income | $136.58M$102.02M | +33.9% |
| EPS (Basic) | $0.99$0.74 | +33.8% |
| EPS (Diluted) | $0.97$0.74 | +31.1% |
| Shares Outstanding (Basic) | 138.52M137.01M | +1.1% |
| Shares Outstanding (Diluted) | 140.31M138.67M | +1.2% |
05—Questions
Frequently Asked Questions
How did HEICO perform in the third quarter of fiscal 2024?
Third-quarter net sales rose to a record $992.2 million from $722.9 million, operating income increased to a record $216.4 million from $149.4 million, and net income attributable to HEICO rose to $136.6 million, or $.97 per diluted share, from $.74 per diluted share. The Flight Support Group drove most of the growth, while Electronic Technologies Group net sales declined slightly to $322.1 million.
What drove the increase in interest expense?
Interest expense for the nine months increased to $113.9 million from $29.6 million, principally due to an increase in outstanding debt related to fiscal 2023 acquisitions. The filing shows senior unsecured notes of $600 million due 2028 and $600 million due 2033, with a weighted average revolving credit facility interest rate of 6.9% as of July 31, 2024.
What is management's outlook for the rest of fiscal 2024?
Management said it remains optimistic about achieving net sales growth in both the Flight Support Group and Electronic Technologies Group. Growth is expected to be largely fueled by contributions from fiscal 2023 and 2024 acquisitions, along with sustained demand for most products. Capital expenditures for fiscal 2024 are estimated at approximately $60 to $65 million.
Is HEICO generating enough cash to fund its needs?
Management believes net cash provided by operating activities and available revolving credit facility borrowings will be sufficient to fund cash requirements for at least the next twelve months. Operating cash flow for the nine months was $466.7 million, though working capital rose by $133.0 million, including a $102.2 million increase in inventories. The total debt to shareholders' equity ratio was 62.8%.
Were there any significant acquisitions or subsequent events?
During fiscal 2024, HEICO completed two arrangements with Honeywell International for licenses and assets related to Boeing 737NG/777 cockpit and legacy display product lines; the filing describes these as not material. In August 2024, the company acquired the Aerial Delivery and Descent Devices divisions of Capewell Aerial Systems, paid in cash principally from its revolving credit facility, which the filing also describes as not material.
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