HEI - NYSE

Welcome to the HEICO Corporation Second Quarter 2025 Financial Results Call. My name is Samara, and I will be your operator for today's call. Certain statements in this conference call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. HEICO's actual results may differ materially from those expressed in or implied by those forward-looking statements. Factors that could cause such differences include the severity, magnitude, and duration of public health threats, such as the COVID-19 pandemic, HEICO's liquidity and the amount and timing of cash generation, lower commercial air travel, airline fleet changes, or airline purchasing decisions, which could cause lower demand for our goods and services, product specification costs and requirements, which could cause an increase to our costs to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, space, or homeland security spending by U.S. and or foreign customers, or competition from existing and new competitors, which could reduce our sales. Our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth, product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales, cybersecurity events or other disruptions of our information technology systems could adversely affect our business. Our ability to make acquisitions, including obtaining any applicable domestic and or foreign governmental approvals, and achieve operating synergies from acquired businesses, customer credit risk, interest, foreign currency exchange, and income tax rates, and economic conditions, including the effects of inflation within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries, which could negatively impact our costs and revenues. Parties listening to this call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, including but not limited to filings on Form 10-K, Form 10-Q, and Form 8-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required by applicable law. I now turn the call over to Victor Mendelson, HEICO's Co-Chief Executive Officer.

Thank you very much, Samara, and good morning, and thank you all for joining us on the call today. We welcome you to HEICO's second quarter fiscal 2025 earnings announcement teleconference. As you heard, I am Victor Mendelson, HEICO's Co-Chief Executive Officer, and I am joined here this morning by Eric Mendelson, HEICO's Co-Chief Executive Officer, and Carlos Macau, our Executive Vice President and Chief Financial Officer. Before we get into the details and the discussion on our call today, we thought we would take a moment to remember some people who we lost recently. One is Tom Irwin. Many of you know Tom Irwin. He was our Senior Executive Vice President. He served as our CFO for about 30 years and was a very important part of our business for many years, though he was mostly retired at this point. He was still a very good friend to us and an advisor and someone we will miss. Tom was, of course, a family man, a wonderful husband, father, and grandfather, and he's somebody who was really very instrumental in the earlier years as we were building the company. The other person we remember, sadly, is Rob Spingarn. Rob was a Securities Analyst with a number of firms over the years. He covered HEICO. We know he was a believer, of course, in the HEICO story. Many of us knew him personally. He, too, was a family man, father, husband, and just a really wonderful person, and we all feel better for having known both of them. We can also comment, I think, that we are guessing that they would be smiling on us today, proud of the results we're about to discuss, and proud of the place to which HEICO has grown. So as we get into it, let's also thank, from the bottom of our hearts, all of HEICO's outstanding team members for their devotion to our company and their continued focus on exceeding customer expectations. Your efforts contributed to another strong quarter, and we remain very optimistic about HEICO's future. We also thank the brave men and women who have served or are currently serving in the United States Armed Forces, as well as those who serve or have served in Allied Armed Forces, including HEICO team members, customers, vendors, and family members. With Memorial Day just behind us, we pause to honor those who made the ultimate sacrifice in service to our country and our allies. We are deeply grateful for their courage, commitment, and the freedom they protect. HEICO is proud of the role we play in supporting the United States and our allies' defense needs. Needless to say, we are very pleased with our second quarter results, which continue to demonstrate our core business's strength and the positive impact of our recent acquisitions. As we look ahead to the remainder of fiscal 2025, we are filled with deep optimism. The current administration's anticipated pro-business direction aligns well with our long-term goals, providing a fertile environment for innovation, investment, and expansion. With our key focus on markets like defense, space, and commercial aviation, and our team members' exceptional talent and drive, HEICO is uniquely positioned to capitalize on new opportunities and to sustain our momentum across diverse industries. In summarizing our second quarter fiscal 2025 record results, we note that consolidated operating income and net sales in the second quarter of fiscal 2025 were record results for HEICO, increasing by 19% and 15% respectively, compared to the second quarter of fiscal 2024. The flight support group set all-time quarterly operating income and net sales records in the second quarter of fiscal 2025, improving 24% and 19%, respectively over the second quarter of fiscal 2024. The increases principally reflect strong 14% organic growth from increased demand across all of our product lines and the impact from our profitable fiscal 2025 and 2024 acquisitions. The Electronic Technologies Group's strong second quarter results reflect an improved demand for the majority of its products, including double-digit organic net sales growth of space and aerospace products. Consolidated net income increased 27% to $156.8 million, or $1.12 per diluted share, in the second quarter of fiscal 2025, up from $123.1 million, or $0.88 per diluted share, in the second quarter of fiscal 2024. Cash flow provided by operating activities increased 45% to $204.7 million in the second quarter of fiscal 2025, up from a $141.1 million in the second quarter of fiscal 2024. Consolidated EBITDA increased 18% to $297.7 million in the second quarter of fiscal 2025, up from $252.4 million in the second quarter of fiscal 2024. Notably, our net debt-to-EBITDA ratio improved to 1.86 times as of April 30, 2025, down from 2.06 times as of October 31, 2024. We continue to be very busy with acquisitions, and we completed our fourth acquisition of fiscal 2025 in the second quarter. In April, our Electronic Technologies Group acquired 100% of Rosen Aviation LLC, a designer and manufacturer of in-flight entertainment products, principally in cabin displays and control panels, for the business and aviation markets. The purchase price was paid in cash, using cash provided by operating activities. We expect the acquisition to be accretive to our earnings within the first year following the acquisition. I turn the call over to Eric Mendelson, HEICO's Co-Chief Executive Officer, who will discuss the results of both our Flight Support and Electronic Technologies Groups in greater detail.

Thank you, Victor, and good morning to everyone. Wow. Before I begin the FSG and ETG segment reviews, on behalf of all of our shareholders, I'd like to thank all of HEICO's incredible team members for achieving results that years ago we could have only dreamed of. Our results were absolutely phenomenal, and our team members literally hit the ball out of the park. Thank you for your well-known energy and passion, and thank you for your incredible effort, dedication, and friendship, which makes these results even more enjoyable. It's one thing for a small company to achieve numbers like this, but it's quite another to do it quarter after quarter, year after year, decade after decade at our scale. Congratulations to everyone. And now on to the Flight Support Group. The Flight Support Group's net sales increased 19% to a record $767.1 million in the second quarter of fiscal 2025, up from $647.2 million in the second quarter of fiscal 2024. The net sales increase in the second quarter of fiscal 2025 reflects strong organic growth of 14% and the impact from our profitable fiscal 2025 and 2024 acquisitions. The organic net sales growth reflects increased demand across all of our product lines, including 16% organic growth in our aftermarket parts and distribution businesses. The Wencor and Legacy HEICO operations continue to exceed our expectations, and obviously this was an excellent combination. Our customers continue to find great value in our larger aftermarket product offerings for their aerospace parts and component repair and overhaul needs, which is translated into excellent growth opportunities and success for both our Legacy businesses and Wencor. We continue to operate Wencor as a standalone business operation, and our strategy is cooperation, cash, capabilities, and consistency without consolidation. The sales, earnings, and margins prove this strategy to be optimal. As I've mentioned before, we continue to make good progress working together and serving our customers. Some examples of how we are working together include, one, utilization of all HEICO and Wencor PMAs and DERs at all repair stations. Two, commercial and defense aftermarket sales cooperation. Three, Wencor e-commerce platform lists all HEICO noncompetitive PMAs. Four, Wencor utilizing HEICO's manufacturing base to quote and build many new products. Five, engineering and regulatory cooperation. Six, sharing best-in-class vendors. Seven, back-office synergies such as payroll, insurance, retirement benefit plans, cybersecurity, and export compliance that will help offset additional regulatory compliance costs such as SOX and our FAA ODA. And finally eight, sharing various IT applications and strategies. The Flight Support Group's organic defense net sales increased by 18% during the second quarter and continue to present an excellent opportunity, especially as the current U.S. presidential administration prioritizes defense and cost efficiency. HEICO is well positioned to support these efforts by providing lower cost alternative aircraft replacement parts, helping the government and taxpayers save money while expanding our market reach. Our missile defense manufacturing business is experiencing significant growth driven by increasing demand from the U.S. and its allies. With a substantial backlog of defense missile orders and ongoing shortages, we anticipate meaningful expansion from this firm pipeline, reinforcing our commitment to delivering cost-effective solutions with industry-best quality. The Flight Support Group's operating income increased 24% to a record $185 million in the second quarter of fiscal 2025, up from $148.9 million in the second quarter of fiscal 2024. The operating income increase principally reflects the previously mentioned net sales growth and an improved gross profit margin, partially offset by the impact from changes in the estimated fair value of accrued contingent consideration. The improved gross profit margin principally reflects the previously mentioned higher net sales within our repair and overhaul parts and services product line and higher net sales in a more favorable mix of defense products within our specialty products product line. The Flight Support Group's operating margin improved to 24.1% in the second quarter of fiscal 2025, up from 23% in the second quarter of fiscal 2024. The operating margin increase principally reflects the previously mentioned improved gross profit margin, partially offset by the impact from the previously mentioned changes in the estimated fair value of accrued contingent consideration. Given that acquisition-related intangible amortization expense consumed approximately 290 basis points of our operating margin in the second quarter of fiscal 2025, the FSG's cash margin before amortization, or EBIT A as we call it, was approximately 27%, which has been consistently excellent and is 110 basis points higher than the comparable FSG cash margin, or EBIT A, of 25.9% in the second quarter of fiscal 2024. I am very happy with the continued expansion of our cash margin and believe our efficient and decentralized operating structure has permitted us to expand these margins as we simultaneously delight our customers with cost savings and lightning quick turnaround times. Now I will discuss the first quarter results of the Electronic Technologies Group. The Electronic Technologies Group's net sales increased 7% to $342.2 million in the second quarter of fiscal 2025, up from $319.3 million in the second quarter of fiscal 2024. The net sales increase reflects organic growth of 4% in the impact from our fiscal 2024 and 2025 acquisitions. The organic net sales growth is mainly attributable to increased demand for our space, aerospace, and other electronics products, partially offset by decreased demand for our medical and defense products. The ETG's defense net sales are expected to be robust during the second half of the fiscal year as we have significant backlogs in order volumes. The ETG's other electronics organic net sales increased mid-single digits during the quarter, following multiple quarters of lower demand due to inventory destocking at our customers for high-end industrial components. While one quarter of growth is not typically considered a trend, we are pleased with our order volumes and backlog in the business and are optimistic for the remainder of 2025. The Electronic Technologies Group’s operating income increased 3% to $77.9 million in the second quarter of fiscal 2025, up from $75.3 million in the second quarter of fiscal 2024. The operating income increase principally reflects the previously mentioned net sales growth and SG&A expense efficiencies realized from the net sales growth partially offset by a lower gross profit margin. The lower gross profit margin principally reflects the decreased defense and medical products net sales partially offset by the increased space product net sales. The Electronic Technologies Group’s operating margin was 22.8% in the second quarter of fiscal 2025, as compared to 23.6% in the second quarter of fiscal 2024. The lower operating margin principally reflects the previously mentioned lower gross profit margin partially offset by a decrease in SG&A expenses as a percentage of net sales, mainly due to the previously mentioned efficiencies. Importantly, before acquisition-related intangibles amortization expense, our operating margin was 26.7%, as intangibles amortization consumed about 390 basis points of our operating margin. This is how we judge our businesses, as that most closely correlates to cash. On a true operating business basis, these are excellent margins, and we are very pleased with them. And now, I will turn the call back to Victor Mendelson, to discuss the outlook for 2025.

Eric, thank you very much. As we look ahead to the remainder of fiscal 2025, we remain confident in achieving net sales growth in both the Flight Support and Electronic Technologies Groups, driven primarily by strong organic demand for most of our products. In addition, we aim to accelerate growth for our recently completed acquisitions while positioning ourselves to capitalize on future acquisition opportunities. Our disciplined financial strategy continues to focus on maximizing long-term shareholder value through a balanced approach of strategic acquisitions and organic growth initiatives aimed at gaining market share while maintaining a strong financial position and preserving flexibility. As part of this strategy, acquisition opportunities within both segments continue to be highly active, supported by a strong pipeline of potential targets, and we're committed to pursuing complementary acquisitions that align strategically and financially with our objectives. Guided by our disciplined approach, we prioritize transactions that are financially prudent, accretive to earnings, and enhance long-term value for HEICO and for our shareholders. And with that, that concludes our prepared remarks, and we turn the call over now for questions. We ask the operator, Samara, to please read the names of each caller and their affiliation, please.

Thank you. [Operator Instructions] And we'll take our first question from Sheila Kahyaoglu with Jefferies.

Good morning, guys, and thank you for the time. Great quarter again.

Good morning.

Good morning. Maybe, Eric, two for you, if that's okay. The first on FSG growth, and then we'll talk margins, if that's okay. So if you could provide some color on the 14% organic, you know, the strength and defense within specialty products, parts up 16, how is the repair and overhaul business and any color you could provide on conversations with airlines?

Well, so I'll start out by saying we're incredibly happy with the performance. The parts and distribution up 16%. I mean, we're incredibly happy. Organic up 16%. Incredibly happy with those numbers. But that actually only tells part of the story. The way that we measure the businesses is, as you know, based on operating income or EBIT A. And the EBIT A increase is even more significant than the organic growth rate of sales. So that really is what's particularly encouraging for us. And we think that we're on a great trend there right now. The parts and distribution were up 16%. Organic growth component repair was up 11%. And specialty products was up 9% for the quarter. So I think very strong performance across the board there. And we anticipate continued strong performance throughout the rest of the year.

Maybe as it relates to the parts visibility that you have, how long do you anticipate that growth to outperform the other two sub segments? And is that what we could attribute the higher margin level to, whether the 24% or 30% plus drop through? Is it being driven by the higher parts? Or potentially other businesses?

Sheila, this is Carlos. Let me take that one on. The growth in the parts business and the repair business, actually the last several quarters have been relatively comparable. Where we've seen a nice move in the gross margin has been at specialty products. In particular, as Eric mentioned in his prepared remarks, the defense business that has really become a very nice book of business for HEICO is doing extraordinarily well. And they have a lot of backlog to continue that trend. And that had a positive impact on the mix, particularly in the gross margin for the quarter, which is attributable candidly to that lift in the margin.

Great. Thank you so much.

You're welcome.

We'll take our next question from Larry Solow with CJS Securities.

Great. Thank you. My best wishes to Tom and Rob's family. And also, congrats on the succession moves, Victor and Eric. And best wishes to Larry, too. I just want to follow up on the organic growth in the parts business, Eric. Obviously, I think this is on top of like two or three years in a row, it's kind of mid-teens growth. Clearly, you're beating the market. Any update on just share gains? I know that's been a big driver for the last several years. Are you continuing to see these share gains and perhaps they're accelerating in this environment?

Absolutely. Larry, great question. And as a matter of fact, over the last couple of weeks, I've met with our sales heads and various business heads of these companies. And we are seeing accelerated market acceptance of our product, accelerated market share. And we're very optimistic that we are gaining market share and believe that our customers really value, significantly value the products that we've got out there. If you look, I'm particularly excited that these numbers, these organic growth numbers as well as organic growth earnings numbers come on top of huge numbers last year and the year before. I mean, we're well out of COVID, and it really shows in the performance here. We continue to come out with new products that, new products in adjacent white spaces. All of our businesses are very aggressive in new product development, and our customers seem to be showing tremendous support in both the parts as well as the repair areas.

And you mentioned, I know that the specialty defense business very strong this quarter, and it sounds like, I know that business is sometimes a little bit choppy, but it sounds like their visibility is good for the next several quarters. I'm more curious, just anything on the aftermarket in defense, obviously, just anecdotally, probably too early with Doge and all that stuff going on, but just as you look out, are you seeing more interest? Anything, any color you can provide on that side of the business?

People have asked a lot about Doge over the last six months, and we've said that we think that this is going to be very good for HEICO. It's not going to be an immediate benefit, but it's going to be a longer term benefit. There's a tremendous amount of money that the government can save, and we think that we're going to be very, very well positioned to continue to take advantage of that. Our defense sales are doing very well, and we continue to take market share in that space as well. So I'm very optimistic in both the U.S. as well as the foreign international markets. HEICO has a phenomenal business that focuses on the foreign markets by the name of Blue Aerospace that became part of the HEICO family nearly 15 years ago. And Blue has got incredible relationships and reach across, I don't know, well over 30 countries around the world, and is able to support OEMs as well as other independents on selling their products into those militaries. And as we see NATO continuing to increase their spending and other U.S. allies increasing their spending, I think Blue is uniquely positioned to support not only the HEICO businesses that are selling into those markets, but also all of the many OEMs that they support as well. So I think both Doge from a U.S. perspective as well as international is going to be very strong for us.

Got it. I'd like to slip one more in just for Victor. I thought maybe just a nuance in the quarter. I know it sounds like, at least on the other electronics, are finally turning around and growing. Just on the defense piece. I know your bookings have been really strong the last, I think, going back a couple years. A little bit of slower growth this quarter in sales, was that just a tough comp, or is that just a timing-related thing?

Larry, thank you. It's a very good question. Yes, by the way, we do have record backlog again in ETG. Defense backlog is quite healthy as well. And you're right, it was a tough comp over last year. I mean, we were essentially flat down slightly in defense, a small tick. But to me, it's close to flattish, but down slightly, and of course with cost increase and so on, then that has an impact on margins. But we had tough comps last year. It was 20-some-odd percent organic growth last year in the same period. So I think in absolute terms, these are great results, and we're very happy with them. And I think the margins are right sort of in the range of where we've been telling people to expect.

Got you. Great. Thank you. I appreciate the color.

Thank you.

Our next question comes from Kristen Liwag with Morgan Stanley.

Well, hey, good morning, everyone.

Good morning.

Good morning. How are you? Yes, can you hear us?

Yes. So, I mean, the aftermarket strength just continues as a surprise industry, and you guys have done a really good job on managing that business. But I was wondering, was there anything in particular in the quarter that drove the above industry growth? Like, was there or did you introduce more PMA parts as you get more engineering synergies with Wencor? Did you see some sort of customer pull forward in anticipation of tariffs? What's driving that 16% organic growth that's just very strong?

Great question, Kristen. In meeting with our folks, I can tell you that I reviewed the sales with in particular the aftermarket sales with all of our sales leaders over the last couple of weeks. And I heard optimism out of them that I, frankly, have never heard to that extent in my history at HEICO. It's a combination of the cost-saving opportunities for the airlines, us having parts on the shelves, customers agreeing that we can develop product at a more rapid pace than we have in the past. HEICO's grown now. And as you know, it's a $33 billion market cap company. And when we walk into an airline and we offer them these products that we've been offering for the last 50 years, they're now buying them from a very different type of HEICO. And I think that gives them a tremendous amount of confidence to accelerate the approval process on our parts and really combine the repair offering that we've got with our parts. I mean, HEICO has got, and it's really important to understand this, we have 21 component repair stations. It is the largest independent component repair network in the world. And we are able, in those component repair stations, to combine the sale of OEM parts, if that's what a customer wants, with HEICO parts, if that's what other customers want. And they're able to achieve cost savings that they've never been able to see in the past, combined with, as you know, our extensive DER repairs that we're well known for, and really offer something that hasn't been in the market. So I think between all of the products that we've got in the repair business, combined with the PMA, combined with the turn times, I mean, frankly, yes, there are still supply chain challenges. But when you decentralize the operations in these 21 units that are really what I refer to as category killers in each of their area, and they are able to focus on their turnaround times, they are really able to capture market share. So I think we've just got a very, very good basket of offerings, combined with the financial strength and credibility of HEICO. So I think we're really sort of, if you will, hitting our stride. And I look forward to continued performance and just watching these folks do great things.

Great. And if I could do a follow-up question. Historically, your customers are very pleased with your performance. You offer pretty good pricing. But what we've seen in the industry is that the OEMs continue to increase aftermarket parts prices to the chagrin of a lot of the airline customers. And now the gap potentially in your pricing versus the OEM just grows, as you guys have historically been more consistent with your pricing, and now you're seeing those surcharges from the OEMs. I guess, in terms of your pricing strategy, is there opportunity for you to increase your pricing a little bit more than history to go more in line with the OEMs, but still providing that discount that your customers enjoy?

In a word, absolutely. HEICO, frankly, gives away money every day to our customers. We are incredibly customer-friendly, and we are very, very protective of our long-term and loyal customers. We have explained to them that we've got to push through and pass through our price increases, you know, our cost increases. And that would include tariffs or anything else. But we've been very, very careful to not use this as a profit grab to raise prices indiscriminately. We remember, you know, I've been with the company 36 years, and I remember going to these airlines and getting them to believe in us when we were just a tiny little $15 million PMA company, and to believe in us that we would take care of them if they took care of us. So if they want to reward us with increased business, they want to remain loyal to us, we are committed to not increasing our prices beyond our cost increases. Now, if somebody is not a long-term customer or, just sort of wants to cherry-pick various opportunities, then what I said wouldn't necessarily apply. I'll just sort of leave it at that. But our -- and again, most of our business is with our long-term committed customers. I mean, these are the folks who are counting on us. I mean, I don't think that there is an airline in the world that could operate its fleet without HEICO today. I mean, we are really well-entrenched. But we want to make sure that we leave all those pricing opportunities out there and that they know the value that we create, and they know we could increase price more than we do, but we intentionally don't. And we believe, if you look, you've been following HEICO for a long time, I think HEICO shareholders have been very well-served by us restraining our pricing ability and generating big opportunities. Because we go to sleep every night knowing that on most of our products we have a competitor. We don't typically have monopolies on most of what we sell. And that's what makes these margins even more satisfying because we're really focused on cost and focused on giving great savings to our customers and creating fair margins for our shareholders. So that continues to be our approach.

Great. Thank you very much.

Thanks, Kristen.

We'll take our next question from Ken Herbert with RBC.

Yeah, hi. Good morning.

Morning, Ken.

Hey, maybe, yeah, Eric or Victor, on ETG, you've obviously with Exxelia and other investments significantly increased your European exposure. I just wonder if you could talk about what you're seeing in Europe today. Are you seeing an uptick in opportunities? Maybe have you seen some of the strength in defense spending there translate to bookings growth? How should we think about your European exposure and growth within that, within ETG?

Ken, this is Victor. The answer is, if I had to use one word or two words, accelerating well. We have seen an increase in orders. We have seen an increase in sales out of our, particularly our European defense businesses. Backlog's growing. But more important than that, design-ins and design possibilities really marching ahead even faster than that. So I think it bodes well, certainly in the near term, obviously with the orders we've seen. But what I'm particularly excited about is the mid and longer term for these businesses, because I think it gives us some really great growth vectors for HEICO, particularly, again, in Europe. And I'm very excited about that. Obviously, the leader in that for us would be Exxelia. But even U.S. business, I mean, even U.S.-based business, we have European destined content that goes to U.S. primes. And as the Europeans are spooling up, they are continuing to buy equipment from U.S. and U.S. primes. And I don't think that's going away so quickly either. So I'm very pleased with how we're setting ourselves up here.

And, Ken, this is Eric. Also, just to add on what Victor said, our approach to operate these decentralized businesses in various regions is really important. And that's why Exxelia is so appreciated in the European market. And, in addition, we have another company, Air Cost Control, which is in the distribution business based in Toulouse. And they are also very excited about the European defense market. So we continue to see a big focus. I mean, when Europe looks to spend 5% of GDP on defense, that's going to bode very well for the domestic European suppliers. And I think we're well positioned on both the ETG in particular, but also the FSG side in Europe.

Oh, that's great. Thanks. And then maybe just one for Carlos. You continue to build sort of inventory levels, and I can appreciate some of the inventory and stocking challenges in a couple parts of the business. But how should we think, Carlos, about maybe some working capital relief or inventory opportunity into the back half of fiscal 2025 and maybe into 2026? And is there a good way we should think about, as the business level sets now, sort of working capital as a percent of sales or working capital intensity?

So that's a good question, Ken. So, the key drivers of working capital for us are receivables and inventory. Receivables, our DSOs have been flat. We're running under 50 days DSOs, 48, something like that. And that's been pretty consistent over the last multiple quarters. I think where we've seen a little bit of improvement is in our inventory turns. We're down about, I don't know, 5% down on turns this quarter, which is good. I think that we'll see, as our revenue base continues to grow, we should see a little bit less investment in inventory because I think coming into the first half of the year, we do a lot of strategic buys. We do a lot of things that set us up for the year. That is, that bleeds off during the first half of the year. We see a little bit of a deceleration, if you would, on spend in the back half, but that all depends on demand. Right now, with backlog strong, we could see a little bit more investment, but I don't think the rate of investment is going to be quite as high. I'd rather not give you a working capital number because it fluctuates, but I don't think we're heading in a direction of investment or working capital. If anything, I think it should be flat to maybe slightly down as we get into the back half of the year.

Great, thanks, and nice cash flow in the quarter. Congratulations, everybody.

Thank you.

Thank you.

Our next question comes from Scott Mikus with Melius Research.

Good morning, Scott.

Good morning, Scott. Maybe not.

Scott, your line is open. We'll take the next question then from Noah Poponak with Goldman Sachs.

Thank you.

Hey, guys, good morning. I wondered if you could just comment on what you're expecting from ETG growth in the back half. Just, it sounds like the order activity is better. The flow from backlog to revenue is maybe a little faster, and then just the year-over-year compares are quite easy looking at the back half of last year. Should we expect ETG growth to accelerate, the rate of growth to accelerate in the back half versus what you just reported?

I think, Carlos, I think I'll let you take that because you're the manager.

Yes. Hike me to the hot potato. Yeah, manager of predictions. Hey, Noah, it's Carlos. From my standpoint, we've always said that we'd like to see that business continue. It's a low to mid-single-digit grower organically. I think as we go into the next two quarters, it feels to me based on our current internal numbers that the other quarters should look very similar to this quarter. I don't think we're going to get the 11% organic growth we had in Q1. Was very happy with the 4% this quarter. The dynamics, we're going to have a little bit of a moving around in mix, I think, as we get into Q3 and Q4, but I do expect that we should be in the mid- to maybe high-single-digits absolute growth for the segment for the year. And between Q3 and Q4, it'll vacillate a little bit. I think you see defense going to be strong the rest of the year. The other electronics, which has been down, should continue follow-through. Space is always going to be lumpy. We've had some really stellar, the first and second quarter this year for space have been off the charts for us, but we don't, you know, we've got enough history with that vertical that we know it's up, it's down, it's sideways, it's kind of a lumpy business. And commercial aerospace in the ETG has been really strong, and I expect that to continue. So at the moment, it doesn't feel like a lot of impediments. The only business that I think is industry-wide down is medical. It's not down a lot for us, and it's not a big part, it's not a big vertical within ETG, but I do expect that as we get towards the back half of the year that that business should see some green shoots. So that's kind of the setup right now, Noah.

That's super helpful. Appreciate that. Any incremental update on your defense PMA effort and when we get to start to see that actually hit revenue?

Yeah, that's a great question. I mean, Doge has got a lot of things that they're working. You know, frankly, we were working this project well before Doge, and but we think that there is still a lot of opportunity there. Things are very busy in Washington right now, as, you know, we all read. But we always said that this would not be a 2025 story. It would come after, and I think we still need to evaluate really where that is. So I'd rather not make a prediction now other than to say we do think it will be meaningful, and we're working very hard at it. But due to competitive reasons, I'd rather sort of hold off for the moment on supplying details.

Okay. And then just at FSG, the markets have been somewhat volatile, different opinions on the macro out there. We've heard some softer commentary from airlines. That's obviously been pretty U.S. centric. But you accelerated the rate of growth in FSG. I guess just temperature-checking what you're hearing from airlines, it's a little hard to bifurcate. The seat-mile growth has decelerated, but aftermarket growth has not and to what extent are the airlines actually doing much better than we hear versus there was just a lot of pent-up demand that's still flowing through because supply demand's been so tight in the end market?

Yeah, it's a great question, Noah. And in reading the -- my own feeling is reading the newspapers and seeing what's going on. I mean, when Liberation Day happened and the tariffs came out, there was a lot of concern about travel. And people took down, I would say analysts and investors got very concerned about what that could mean. And there were some reductions in various travel numbers and forward bookings. But now if you look at it, it's pretty strong. And so I think that there is a fair amount of pent-up travel demand. If you look at travel as a percentage of GDP, it's still relatively small. If you're on flights, you see how busy they are. We know from the order demand and speaking with our customers that, it's sort of a very good setup for us because they're worried, the customers are worried about the future, so they're focused on savings, yet things are still very hot. And from what we see, the gas is, the pedal is pretty much to the floor. And then on top of it, you've got older assets out there, which we've always said that the newer equipment is far more expensive to maintain than the older equipment. And I think anybody with an airplane absolutely knows that's the case, and this stuff is crazy expensive. And that's why I think we may be in a little bit of a unique position because we're all about cost savings. And they can go back. If airlines want to do the old legacy way, they can do that. Or if they want to go create savings through PMA and DER repair and our very efficient distribution where we get to understand exactly what they need, we can procure this stuff in advance, offer very good pricing. I think we're just very well positioned with our decentralized approach to capturing markets. So I think that's probably why we're a bit more optimistic in I think turning in numbers that are frankly, industry leading, especially when you strip out pricing. I mean, we're not jamming it to our customers and we're able to get these numbers.

Yeah. Okay. Super interesting. I appreciate the time and recognize your comments at the front end of the call. That was nice of you to say. Thanks a lot, guys.

Thank you.

Our next question comes from Ron Epstein with Bank of America.

Hey, good morning. This is Jordan Lyonnais on for Ron.

Good morning.

On the defense business, I appreciate you guys gave the color on how strong the missile defense segment is. Is there another part of that backlog that is growing as strong or seeing as much interest or you guys would expect would in the coming quarters?

Yeah. I mean, I would say the launch business has been very good. You know, launch, drones. I think it's very – actually, there's a lot of breadth in it. It's not in every aspect of what we do in defense, which will always be the case. We're always going to have laggards and we're always going to have shiners, so to speak, in the mix. But remember, our strategy is to make components or subcomponents that go into larger assemblies, and those can be found on a broad array of systems and platforms. They could be on launch vehicles. Sometimes they are. Other times they're on missiles. Other times it's precision-guided munitions, targeting systems, avionics, and that moves around. So right now, missile defense is probably the most common meeting point and the confluence of all of those different products, and that's probably where they're meeting most commonly, whether it's the actual vehicle itself or it's a radar system that's tied to it that allows it to operate. But missile defense, if I had to pick one that would be the standout that would be it. But the others are pretty strong too.

They're growing.

I would say there's – yeah. I'm not really complaining about any segments that we're in right now.

Got it. Thank you so much. Thank you.

Thank you.

We'll take our next question from Peter Arment with Baird.

Yeah, good morning, Victor, Eric, Carlos. Nice results.

Thank you.

A lot of questions have been asked. So maybe, Victor and Eric, could you give us maybe your updated thoughts on tariffs? I think a couple quarters back you made some commentary about maybe a low single-digit impact to your product costs. Maybe what's the latest that you're seeing?

Yeah, and I will caveat it by saying the obvious. I'm a Captain Obvious here. Nobody knows what's going to happen with tariffs, I believe, at this point, and we're all aware of the volatility on decision-making on tariffs. With that said, we have been talking with our companies and surveying them regularly, and our thinking remains the same. There's really no change in that. A high number of our companies think that tariffs will have some impact, but some of those are positive, where the businesses are producing only in the U.S., and they're serving in particular the non-A&D markets. As a rule of thumb, we feel that the majority of tariffs will be something that our customers will accept. It may not be. There may be lag and timing on that, right. You have things under P.O. for which maybe you haven't procured all the materials, and you have fixed pricing on the sale, and so on. But again, we think fairly immaterial on that. And we've gone through company by company, and I don't think we have a single company that has told us they even expect on their business a material impact. So that's our current thinking on tariffs.

Got it. That's helpful. And then, Eric, you mentioned you gave some nice details on kind of the collaboration efforts that's going on between HEICO, Legacy, if you will, and Wencor. Can you talk a little bit about maybe have you been able to increase the output in terms of number of PMAs, or is it still kind of on that same trajectory of what you want to add to the catalog on an annual basis?

Yeah, I mean, we have been able to increase the number. But the most important thing for us is really to make sure that we increase the penetration. So I think that the number of PMAs makes sense from a HEICO and Wencor perspective, and we've got to make sure that we can, in fact, procure and inspect and support whatever we put out there. So I think I'm very comfortable with the number where it is, and we've been able to achieve these kinds of numbers with these kinds of results with that kind of new product development output. So I think it's very, very well balanced.

Got it. Super helpful, and nice results, and thanks for the opening monologue comments. Appreciate it. Thanks.

Thank you.

And our next question comes from Pete Skibitski with Olympic Global.

Hey, good morning, everyone. I just want to say, hopefully he's listening, but congrats to Laurans on a long and successful and storied career as he moves into the next phase. So congrats there.

Thank you.

And I'll try to maybe put Carlos on the spot again on FSG margin. I think what I heard, Carlos, is that specialty products had a good quarter, but that also the backlog there is really strong, and it was positive for mix. So I feel like I didn't hear a good reason why FSG margins could potentially decline from here. I feel like I should be inclined to keep them above 24% on an operating basis going forward, unless you've got other reasons, other factors.

Well, look, so I appreciate the question. What we've consistently said is that the FSG optimal margin range is anywhere from 23 to 24. That was sort of our guidepost going into this fiscal year. Now, we were 10 basis points above the high end of that this quarter. I don't know that I would read into that as saying margins are going north of that anytime soon. What I do think will happen is they should stabilize in the high end of our range, and I do think that as we move forward, we'll continue to get efficiencies, if you would, on our fixed cost spending. As a sales growth, we don't have a lot of capital investments, so we do get a lot of leverage on our fixed costs, and I think we can continue to eke out on an annual basis 20, 30 BIPs a year, typical to what we had done historically over the past decade. That's how I would view it, Pete. If we have quarters where it bounces up or bounces down, I wouldn't get too ruffled at that. There will always be reasons. I do think that for the quarter, we had great mix in the FSG. We did have that nice tailwind for some growth in the defense business. That should continue, but it's already in this margin we've produced, so I wouldn't at this moment extrapolate that too far in the future too quickly. Okay.

Yep. That's fair enough. Fair enough. I appreciate the color. And then just one last one for me, maybe for Victor on ETG defense, just as we think about this reconciliation bill and what it could mean for U.S. defense spending. If we get, and I think there's different ways to maybe score the defense spending by year and whatnot, but, if we get 10% plus type of defense spending growth, how do we think about that translating to ETG defense sales growth?

You know, look, it's got to benefit us, I would say. It all depends where the money is spent and how it's deployed. When I look at the priorities the government's talking about, I think we're in a pretty, like they say, the sweet spot for that. But I would be lying to you if I told you I knew with certainty, and I think, as I said, it really is going to be contingent on what they're spending on, when they're buying, and how they're laying out the funds. But I think if we have that 10%, it's going to bode extremely well for us.

Okay, great. Thank you, guys.

Thank you.

Our next question comes from Scott Deuschle with Deutsche Bank.

Hey, good morning. Eric, is growth at FSG broadly demand constrained or are there many product lines that are supply constrained, either in terms of your own suppliers or your own ability to ramp up capacity and fill demand? I'm just trying to better understand what the current limiter on your aftermarket growth is. Thank you.

Yeah, great question, Scott. We are definitely supply constrained. You know, as a matter of fact, I spoke to one of our group presidents this morning who was lamenting, difficulty getting product. There's still plenty of supply constraint. So I would say that's probably the – that's definitely the bigger area right now.

And is it supply constraint in terms of getting material in the door from suppliers or your own ability to hire labor to then work that material?

Oh, no, I'm sorry. Yeah, I'm sorry. I meant from outside suppliers, you know, very difficult, continuing to be difficult to get product from suppliers. We have made a lot, obviously you can see the numbers, so we're doing quite well getting product in from suppliers. We've got other suppliers up and going, and we've dual sourced on a bunch of stuff. So I feel that we are definitely overcoming a lot of this. But definitely, there's a – there continues to be a shortage of supply in general in the industry. It is getting better, but it definitely still exists out there.

Okay. And, Eric, can you give an update on the level of demand you're currently seeing in Asia for your product lines, just broadly looking for some sense of how the growth rate in that region is tracking, and also just an update on how large Asia is as a percentage of FSG aftermarket sales at this point? Thank you.

Yeah. I don't have the breakdown in front of me in terms of Asia as a percentage, but I can tell you that we're doing quite well in Asia. Demand is very strong across all of our businesses. China, there was a little bit of pre-buying, before the tariff, and then there were periods where it was lower. I think things are coming back now to a more stabilized rate. So, I mean, we continue to be very, very bullish on Asia.

Thank you.

And have tremendous market reach and penetration in that region.

And we'll take our next question from Josh Sullivan with The Benchmark Company.

Hey, good morning.

Good morning, Josh.

In the opening remarks, you mentioned your optimism around the pro-business direction of the current administration. Just curious if you could just give us some highlights on practices you're seeing on the ground at this point to that end.

Yeah. At this point, Josh, I don't know that we're seeing any implementation so much as the announcement of plans, right, and executive orders coming out of the government, reducing ordering, reduced bureaucracy, and things like that. So our reference there was a comment of forward optimism. And just what we have noticed historically has been that when we have administrations that are very regulatory heavy and have an anti-business mentality, that it slows things down and adds costs. And when the inverse happens, that is to say when we have administrations that believe in less government interference, that the velocity of business as well as the cost of doing the velocity increases and the cost of business decrease. So that's what we're referring to there. I think that was a general sort of high-level comment as opposed to one that we think we will be able to quantify at this point. I think we'll have to look back in four years or eight years or 12 or whatever the number is and quantify that.

But also, Josh, I can tell you in going out to the businesses and talking to the folks on the ground, there's tremendous optimism now about expanding, getting bigger facilities, adding equipment, adding people, adding capabilities, and I think, frankly, the new administration has gotten the animal spirits going. And, of course, the general support for space and defense, that's obvious. But even in the commercial area, there's just tremendous enthusiasm and support. And really to echo on what Victor spoke about, when you get a regulatory heavy environment, that just gets people down. They have to spend a lot of time on, if you will, lower-value added activities. And when they feel that the country and the world wants to expand and they want good, positive things, they're much more motivated, much more intrinsically motivated to deliver. So I think that's broadly what we were talking about.

Got it. And maybe you touched on it a bit there, but your focus on missile defense manufacturing, your position as a low-cost manufacturer, what you just mentioned there about expanding capacity potentially or at least the ability to do it, and the world moves towards more of a need for mass volume of missile needs. How are you looking at that position, expanding capacity? Do you compete with some of these new defense tech early-stage players, or are you more of complementing what they're doing?

I think, if anything, those would be potential customers, because, again, the strategy of being a component and subcomponent supplier. And, in fact, some of them are customers already, and I would expect that to expand over time.

Great. Thank you for the time.

Thank you.

We'll take our next question from Tony Bancroft with Gabelli Funds.

Good morning, gentlemen, and congratulations, as usual. You guys have done a very good job of doing accretive M&A, and you spoke about it this morning, about the market being, I think, pretty strong for that. You have quite a wide breadth of M&A from displays to essentially every type of part to National Defense, drones, et cetera. If you had your druthers, all else being equal, and you sort of could go out and pick and choose, where do you think you want to do the most? Where is the best M&A for you? Maybe not so much on accretion, but just on sticky business, all the things you've talked about, why you've done so well, and maybe sort of discuss a little bit more why your thought process. Thank you.

Well, you know, Tony, I think we've always been opportunistic, and that's been part of our success, is that we're willing to look in places where others aren't willing to look, or that may not fit perfectly with some grand strategy, but are just great businesses and acquisitions. And then we learn those businesses, we learn those product lines, adjacencies, if you will, as we go, and we add. So while we always have a preferred target list, which makes sense in a pure strategic sense, we recognize that we may not be able to fulfill those, so we go to other things that are available. And that's worked extremely well. I mean, obviously, we would like to add to everything that we're already doing and add more to that, and sometimes that happens, and we've done that extremely successfully, and sometimes those are consolidations, like the recent ones that we've done, or semi-consolidations that fit extremely well with something that we already do. The good news is we have so many different businesses now doing so many excellent high-end things that they are touching increasingly more space, and they are able to handle and even source acquisitions and bring them into their sphere. Eric, do you want to add to that?

Yeah, and then I think you, Victor, you expressed that extremely well. The other thing that we've got, as HEICO grows into adjacent white spaces, we now have a pretty big footprint, and we're able to evaluate companies. We have experts, and we're able to evaluate companies, evaluate technology, and I think get to a point far quicker than we ever were in our past with a far more accurate and informed thesis. So I think that that's really helping our acquisitions team source these businesses and be able to allocate capital relatively quickly. And then, of course, once these businesses are purchased, we're able, since we understand the space, we're able to very quickly get on board with our leadership teams, the newly acquired acquisitions, and encourage them to invest and support their investment plans into all sorts of new technologies. And that's been incredibly powerful and successful. And then I would say lastly, as a result of our deconsolidated and decentralized business structure, that is extremely valuable and rewarding to sellers and to people who want to come into the HEICO family because they're dealing with people who fundamentally understand the market and the business but recognize that we are not experts in the technology that we're buying, and that's why we're buying these businesses. And we rely on these people and ensure that they're intrinsically motivated to knock the ball out of the park. And I truly believe there is no better acquirer than HEICO for these companies. If somebody wants to stay with the business, wants to continue to build, grow it, have the autonomy and the independence, you can see from the results. So that's obviously a commercial, but we are, as Victor said, we cast a wide net. We really like all of the businesses that we're in. We're fully committed to them. And we even look outside. We want to approach with beginner's mind and not assume we have the answer to everything. So we're going to continue to go very broadly.

Yeah, that makes a lot of sense, Eric and Victor. Thank you and thanks for all your hard work and keep posting great scores. Thank you.

Thank you very much.

And we'll take our next question from Louis Raffetto with Wolfe Research.

Hey, good morning, guys.

Morning, Louis.

I'll echo the earlier comments on the succession plan to Larry and yourself, so congrats on that.

Thank you. Thank you very much.

I guess you kind of both commented on sort of the activity and acquisitions. Just wonder if you could provide any additional color what you're seeing from a competitive standpoint.

Yeah, I'd say the market is very competitive. Unfortunately, I think HEICO's greatest impediment, frankly, has been our success because people look at HEICO and they emulate to be like us. They want to have the organic growth, the acquired growth, and they enter the market. And obviously, we don't appreciate that. But it's something that we've got to contend with. And I think it's something that makes us even better because we're an even better acquirer. It is a fully competitive market out there. If people, in my opinion, in our opinion, really want the best home, there is only one that would qualify in that category. And I really do believe it's HEICO for the reasons that I just enumerated in the answer to Tony's question just a couple minutes ago. But it is fully competitive. And we -- we've got to -- we're very capable of making decisions, committing capital, moving quickly. And I'm very confident that we're going to be able to reinvest our free cash as we have and continue our compounding. As I said earlier, it's one thing to do it for a small company or to do it over a short period of time. But to do it for a longer sustained period of time, I think is really a very different a very different situation. And we've been able to do that. And frankly, we have the culture. And it's not just a handful of people asking the right questions. It's having the right culture across the entire enterprise, a 100 different businesses. And that really is the real value of HEICO and why I'm so confident in the future.

Great, thank you very much.

Thanks, Louis.

We'll take our next question from Gavin Parsons with UBS.

Thanks, guys. Good morning and congrats on the new rules.

Thank you, Gavin.

Can you talk a little bit about just the trends in FSG and purchasing behavior that you saw kind of March, April, May? You know, obviously, we've got the 90-day tariff pause coming up and wondering if that might introduce some more visibility. Sorry, volatility.

Yeah, that's a great question. I mean, look, after, I think it's pretty well known that after the tariffs came out in early April, in particular in China, there was an order, I think, by the government to reduce or eliminate purchases. And they did that for a period of time. I don't think that that was necessarily designed to be a long-term strategy. It was meant to send a message, which it did. And the administration is negotiating and trying to come up with something that's equitable and reasonable. So purchases have continued. And I'd say the market is strong. It'll be interesting to see what the administration is able to do. It looks like Europe is coming to the table, and, of course, the UK has come up with something, I think, that's fair for everyone. And I'm very hopeful that they'll have the same kind of outcome with China. So purchasing practices are very strong. No one wants to be able to not complete their flight. There is still a shortage of a lot of product out there. And I think airlines are very wise to make sure that they've got plenty of spares on the shelf, because there's not a tremendous depth, if you will, to the inventory supply chain out there. So, our folks anticipate things to continue to be very strong. And that's really how we see it.

Great. Appreciate it.

Thank you.

We'll take our next question from Gautam Khanna with TD Cowen.

Hey, good morning, guys.

Hey, Gautam.

And, yeah, I appreciate your kind words about Tom and Rob. And congrats to Larry. Guys, I was wondering, with respect to the Wencor acquisition, at the onset of it, you'd mentioned the opportunity for cross-selling, introducing HEICO's PMA products to Wencor's customers and vice versa. I'm curious, like, how far along you are in that cross-selling journey. Is it pretty mature at this point? And maybe if you could just expand on that.

Yeah, I think that we've made progress. You know, frankly, I think there's a lot more. As I mentioned many times, I think that combination is going to be the gift that keeps on giving. I think there is a lot more that can be done together. Frankly, both businesses are performing exceptionally well. And I'm just so proud of the teams in all of our businesses. And frankly, they have more business than they can handle in many cases. But I do believe that there's going to be a lot more continued cross-selling opportunities, opportunities to help each other. We find things every single day that the businesses can do together. And I think it's going to continue along very well. So I anticipate continued progress. And I'd have to say there's a lot more to come to specifically answer your question.

Okay, that's promising. And also just curious on the PMA product development velocity. I don't know how else to phrase it. But just given we hear a lot of things about the FAA these days, has there been any change in the new administration to the pace at which these product certifications are happening? Do you see anything with respect to that?

No, we're doing very well. I would say there has not been any change. Separately I have to mention that actually last week Victor and I were up at the AIA Aerospace Industries Association Board of Governors meeting. Secretary Duffy was speaking about changes and developments with regard to air traffic control and other FAA folks as well. I think the FAA is really focused very much on delivering for the American people. And we've always had an excellent working relationship with the FAA. I think that they are extremely focused, pointed in the right direction. And I would say I'm optimistic on where things are going. But for us, really no change. We've always had an excellent relationship with professionals with whom we've worked at the FAA.

And last one for me, we've heard some relative pockets of strength in the aftermarket. For example, engine components being in higher demand than some of the airframe materials. Can you characterize how that's, if you've seen the same kind of pattern in your own business? And it may be also then if you could talk about CFM and if you're seeing greater penetration there. Thanks.

Yeah, I mean, sure. Look, I mean, there are times where the non-engine components are stronger than the engine components and vice versa. They're definitely over the last couple of years, engine has been very strong. And that's partly because engine underperformed coming out of COVID, for a variety of reasons. So, I'm very bullish on the entire market, both engine and non-engine. And we continue to invest in both. I wouldn't want to get into specifics with regard to various engine types for competitive reasons. But I'd say the market across the board is quite strong.

Appreciate it, guys. Thanks and good luck.

Thank you.

And we'll take our next question from Michael Ciarmoli with Truist.

Hey, good morning, guys. Really nice results. And thanks for the prepared commentary in your opening remarks. I don't know if this is Eric or Victor, but yeah, I always thought ETG had a lot more breadth and defense. It's obviously lagging the growth in FSG. Is the biggest difference there just the missile exposure in FSG? I think it's been a bit since you guys have really spoke about that. But it's still just fins and casings and composites. Are there any other sort of component categories with that exposure? And then I guess, maybe dovetailing in, Carlos, is that the biggest driver of margin strength in FSG, that missile exposure?

Well, let me take the last part of the question. The missile defense and the launch business and drone UAVs and all the stuff that we're doing over in specialty products. I mean, yes, that's very helpful. But no, I mean, I wouldn't say that our success is due to that. If you look at the parts and distribution and component repair, those guys are literally hitting the ball out of the park as well. So I think it's really we're doing very well in many areas. Our defense business is very strong in the areas that I mentioned, but also in the defense aftermarket, we're doing extraordinarily well. Blue Aerospace, AeroGlen, all of these companies are really performing exceptionally well. And I think also when you look at ETG, ETG is overall doing well in defense. When you look at the year-to-date total sales change in defense, it was 9%, which is quite good. The product that ETG makes in defense has to be manufactured, whereas over in the -- manufactured by us, typically, whereas over in the flight support side, we've got a variety of places where we're able to source this product. We manufacture a lot of it ourselves too, but, part of it is procured elsewhere. So I think the ETG defense market holds very good potential, and we're anticipating a strength and improvement in that area.

Okay, helpful. Thanks, guys. Appreciate it.

Thank you.

And at this time, I'll turn the conference back to Victor Mendelson for any additional or closing remarks.

We thank everybody for being on the call today. We look forward to talking with you in our next earnings call, and of course, as always, are available to answer questions you may have, reach out to us, and we wish you all well. Thank you very much.