Welcome to the HEICO Corporation Fourth Quarter Year End 2023 Financial Results Call. My name is Samara, and I’ll be today’s operator. 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 or health emergencies; HEICO’s liquidity and the amount and timing of cash generation; lower commercial air travel caused by health emergencies and their aftermath, 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 cost 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; 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 Laurans Mendelson, HEICO’s Chairman and Chief Executive Officer..

Thank you, Samara. Good morning to everyone on this call, and we thank you very much for joining us, and we welcome you to the HEICO fourth quarter fiscal ‘23 earnings announcement teleconference.

I am Larry Mendelson, Chairman and CEO of HEICO Corporation, and I’m joined here this morning by Eric Mendelson, HEICO’s Co-President and President of HEICO’s Flight Support Group; Victor Mendelson, HEICO’s Co-President and President of HEICO’s Electronic Technologies Group; and Carlos Macau, our Executive Vice President and CFO.

Before reviewing our operating results in detail, I would like to take a moment to thank all of HEICO’s talented team members for delivering another strong quarter and strong year. Your continued focus on exceeding customer expectations and operational excellence has translated into superb results for the shareholders.

I would also like to congratulate and thank the Wencor team for a terrific quarter within the HEICO family. We could not be more pleased with their performance and their results. I personally continue to be very optimistic about the future for HEICO. And as a matter of fact, I have never been more optimistic about HEICO’s future than I am today.

I will now summarize the highlights of our fourth quarter fiscal ‘23 record results.

Consolidated fourth quarter fiscal ‘23 operating income and net sales represent record results for HEICO, driven principally by record net sales within the Flight Support Group and Electronic Technologies Group, mainly arising from continued strong demand for our commercial aerospace products and services and the contributions from our fiscal ‘23 and ‘22 acquisitions.

Consolidated operating income and net sales in the fourth quarter of fiscal ‘23 improved by 29% and 54% respectively as compared to the fourth quarter of fiscal ‘22. These results mainly reflect 14% quarterly consolidated organic net sales growth as well as the impact from the acquisitions.

Consolidated net income increased 6% to $103.4 million or $0.74 per diluted share in the fourth quarter of fiscal ‘23 and that was up from $97.2 million or $0.70 per diluted share in the fourth quarter of fiscal ‘22.

In connection with the Wencor acquisition, HEICO incurred acquisition cost during the fourth quarter of fiscal ‘23 and they decreased net income attributable to HEICO by approximately $13.6 million or $0.10 per diluted share.

Our consolidated operating margins before the Wencor related non-recurring deal expenses remain strong and are consistent with the expectations we have previously communicated. These margins are extremely healthy, even though our product mix this year has meant lower overall margins than in prior year.

In the fourth quarter of fiscal ‘23, excluding the Wencor acquisition cost, consolidated net income increased 20% to $117 million or $0.84 per diluted share. Our net debt to EBITDA ratio was 3.04x as of October 31, ‘23 and that compares to 0.25x as of October 31, ‘22.

The net debt to EBITDA ratio increased in the fiscal year ending October 31, ‘23 principally reflects our successful offering of $1.2 billion in senior unsecured notes and increased borrowings on our revolving credit facility.

We used the net proceeds from the sale of the notes and additional borrowings on our revolving credit facility to fund the acquisition of Wencor. Cash flow provided by operating activities improved to $148.4 million in the fourth quarter of fiscal ‘23 and that was up from $143.9 million in the fourth quarter of fiscal ‘22.

Cash flow provided by operating activities in the fourth quarter of fiscal ‘23 reflects an increase in working capital, principally driven by an increase in inventories to support our increased consolidated backlog.

The continued excellent cash flow generation by HEICO permitted our Board of Directors to recently declare a $0.10 per share semiannual dividend, which represents our 91st consecutive dividend payment.

At this time, I would like to introduce Eric Mendelson, Co-President of HEICO and President of HEICO’s Flight Support Group, and he will discuss the fourth quarter results of the Flight Support Group..

Thank you very much. I would like to take a moment to recognize and welcome the Wencor team members to the HEICO family. The Wencor team is a perfect and highly complementary fit with the HEICO culture and I am extremely optimistic about the future of Wencor’s contributions to the Flight Support Group’s future.

I must say that over the last number of months, I have gotten the chance to visit most of the Wencor facilities. And I’ve been incredibly impressed with the caliber of team members that Wencor has. We had very high expectations for them prior to closing the acquisition, but they continue to amaze everyone and really perform outstandingly well.

It really is a privilege and an honor to have gotten to know these people. And also I’d like to thank the HEICO team members for being so welcoming to their new Wencor brothers and sisters and bringing them into the board, because as a team, we can accomplish so much more than we can individually.

The HEICO team members have been phenomenally excited about the Wencor acquisitions. We have done about 100 acquisitions, but I can say that this one really has generated incredible enthusiasm and excitement. And I am just absolutely honored to work with both the HEICO and the Wencor team members. We have got a phenomenal group.

And I think the results really speak for themselves with a lot more to come. So, again, thank you very much to all of our HEICO Flight Support team members for an incredible performance in the fourth quarter and full 2023. On to the results.

The Flight Support Group’s net sales increased 74% to a record $601.7 million in the fourth quarter of fiscal ‘23, up from $346 million in the fourth quarter of fiscal ‘22. The net sales increase in the fourth quarter of fiscal ‘23 reflects $185.7 million from Wencor and strong organic growth of 20%.

The Flight Support Group’s operating income increased 47% to a record $114.6 million in the fourth quarter of fiscal ‘23, up from $77.8 million in the fourth quarter of fiscal ‘22. Wencor’s operating income in the fourth quarter of fiscal ‘23 was $29.3 million.

The operating income increase principally reflects the previously mentioned net sales growth and an improved gross profit margin, partially offset by $12.7 million of Wencor acquisition costs and $11.8 million of Wencor’s intangible asset amortization expense and higher performance-based compensation expense.

The improved gross profit margin principally reflects higher net sales within our aftermarket replacement parts and repair and overhaul parts and services product lines. The Fight Support Group’s operating margin was 19% in the fourth quarter of fiscal ‘23 as compared to 22.5% in the fourth quarter of fiscal ‘22.

The operating margin decrease in the fourth quarter of fiscal ‘23 principally reflects the previously mentioned Wencor acquisition cost and intangible asset amortization expense.

Excluding the Wencor acquisition cost and intangible asset amortization expense, the Flight Support Group’s operating income increased 79% to $139.1 million in the fourth quarter of fiscal ‘23 and the operating margin was 23.1%.

Now I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO’s Electronic Technologies Group, to discuss the fourth quarter results of the Electronic Technologies Group..

Thank you, Eric. The Electronic Technologies Group’s net sales increased 28% to a record $342.5 million in the fourth quarter of fiscal ‘23, up from $268.5 million in the fourth quarter of fiscal ‘22. The net sales increase principally reflects the impact from our fiscal ‘23 and ‘22 acquisitions as well as 6% organic growth.

The organic net sales increase in the fourth quarter of fiscal ‘23 mainly resulted from increased net sales of defense, space and commercial aviation products, partially offset by lower net sales of other electronics products.

We are pleased to see 26% sequential growth in defense product net sales in the fourth quarter of fiscal ‘23 over the prior quarter, which now marks our third consecutive quarter of defense-related net sales growth.

The Electronic Technologies Group’s operating income increased 8% to a record $86.4 million in the fourth quarter of fiscal ‘23, up from $79.9 million in the fourth quarter of fiscal ‘22.

The operating income increase in the fourth quarter of fiscal ‘23 principally reflects the previously mentioned higher net sales volume, partially offset by higher costs from the Exxelia acquisition, higher performance-based compensation expense and unfavorable changes in the estimated fair value of accrued contingent compensation.

The Electronic Technologies Group’s operating margin was 25.2% in the fourth quarter of fiscal ‘23 as compared to 29.7% in the fourth quarter of fiscal ‘22.

As acquisitions intangible amortization is equal to approximately 400 basis points from our sales, we view that our ETG businesses achieved a roughly 29% margin from their, what we consider to be their true operational activities, which is excellent by any measure. And we are very happy with it even if it is not as high as it was before.

I also note that in last year’s fourth quarter, we recorded a $3 million gain from contingent consideration reversal.

So last year’s fourth quarter operating income included that gain, while this year, we had the opposite effect, which reduced the operating margin in total between the 2 years by around 140 basis points from last year’s fourth quarter.

All of this is why I look at what we consider to be the businesses’ actual performance before non-cash acquisition accounting. And that, as I said before, is excellent in absolute terms.

The lower operating margin in the fourth quarter of fiscal ‘23, as we said, principally reflects the previously mentioned higher costs from the Exxelia acquisition, the unfavorable changes in the estimated fair value of contingent compensation and higher performance-based compensation. I turn the call back over to Larry Mendelson..

Thank you, Victor. Now for the outlook. As we look ahead to fiscal ‘24, we anticipate net sales growth in both the Flight Support Group and the Electronic Technologies Group and that will be driven by contributions from our fiscal ‘23 acquisitions as well as the demand for the majority of our products.

Additionally, continued inflationary pressures may lead to higher material and labor costs. We plan to actively work on Wencor’s ongoing integration into our business and operations, continue our commitment to developing new products and services and further market penetration while maintaining our financial strength and flexibility.

Our operating margins, especially before non-recurring acquisition expenses remain extremely healthy and reflect our strong business operations.

We believe that our ongoing conservative policies and strong cash flow enable us to continuously invest in new research and development and to take advantage of strategic acquisition opportunities, which collectively position HEICO for success in the markets that we serve.

In closing, I would like to again thank our incredible team members for their continued support and commitment to HEICO. Their persistent drive and determination to win in the marketplace has resulted in another quarter of outstanding results. Thank you all team members for everything you do to make HEICO a great company.

And now, Samantha, I’d like to open the floor for questions..

Thank you. [Operator Instructions] And we’ll take our first question from Robert Spingarn with Melius Research. Please go ahead..

Hi, good morning everybody..

Good morning, Rob..

You put up a terrific quarter. You’re so far ahead of 2019 where everybody else is trying to get even on an organic basis.

I’d like to start there with Victor and just talk about this 26% sequential growth, Victor, if you could and characterize what’s behind that? Is that across defense? Is it a few specific programs that have started to move forward?.

Yes, hey, Rob, it’s good to talk with you. And it’s a good question as always. So I think our strongest market right now and what’s the biggest driver has been commercial aviation. And we have a few businesses in the ETG that have been particularly strong as a result of multiple factors. Some of it is the recovery in air travel.

Some of it is new products that we have introduced. Some of it is also some efficiency initiatives and some of it is acquisition related. So it’s a broad mix there. Defense is definitely moving in the right direction for us as well. The – and commercial space is holding in pretty nicely overall for us. There are pockets of weakness here and there.

But overall, it’s pretty good for us. I would say the headwind for us and I mentioned this before, I think over the last year, I signaled this probably a year or more ago that I thought some of our high-end non-aerospace and defense markets would start to turn down this year. And those have been more difficult.

So, those markets that serve some high-end electronics, medical and markets like those are definitely trending in the opposite direction. And I would expect that will continue for some time.

And I think we will see the effects of that over the next few quarters, actually, first quarter in particular and as we go on into the year before that starts to reverse. And that’s principally a result of probably overly aggressive ordering by customers during the supply chain crunch dealing with the same kinds of things that we were dealing with.

They wanted to get out ahead of it. And now the deliveries are coming in and some of their orders maybe slower, so they have to correct their inventory levels..

Okay. Understood. And then the next one moves over to FSG. So Eric, this is either for you, it could be for Carlos. But if we look at the 8-K that you filed back in mid-October, it looks like Wencor sales outgrew overall organic sales for FSG. I mean the numbers look like they could be 40% or more.

It’s not an exact comparison, because it’s an October quarter versus the December quarter. But I wanted to ask if that math is correct.

And if so, what’s driving that strong performance and can it continue for Wencor?.

Hi, good morning, Rob, This is Eric. So I’ll start out answering that question, and then Carlos will fill in with some of the details. Wencor has performed exceptionally well as have, frankly, all of the HEICO Flight Support businesses. They are ahead of plan.

They are doing very well, working incredibly hard and very similar in culture to the HEICO Group in terms of being conservative in what they predict and frankly, outperforming. I am not sure that the numbers that you state are let’s see what Carlos has to say about it.

My sense is the Wencor is growing at a similar rate to the HEICO Flight Support aftermarket businesses, but I’ll let Carlos fill in on that..

Yes, Rob, this is Carlos. I would say that you have to remember that when we put the 8-K out, we had pro forma sales in there, which, as you know, Wencor has some acquisitions early in ‘23 and so that’s probably why you are seeing sort of exponential growth. I really, to be honest, haven’t gone back and calculated the organic as we just bought them.

I will tell you that we were counting on about $724 million in pro forma sales. I mean if you just divide that before, we would expect at $181 million, they delivered almost $186 million. So we are pleased with the sales growth. I would say that Q4 is typically a little bit more richer than some of the other quarters when it comes to aerospace sales.

So, none of this is unexpected. But no, they had a great year. And to Eric’s point, they are performing at the same rate that the overall FSG is, particularly in the parts business..

Okay. That’s super helpful.

And just on all of this growth and on the complementary nature of the two groups, Eric, how are you doing with the cross-selling effort? Has that started to get traction and what might we expect from that?.

Yes, I would say that we have started the effort and its borne fruit. There are a number of projects that the companies are cooperating on. The HEICO style is very much to let our new acquisitions to continue to run as they have. So we can really make sure that we fully understand.

I can tell you that a lot of the businesses are cooperating, figuring out product rationalization, how to maximize sales opportunities. There are number of projects that are moving forward. But I would say that, that’s something that we are going to be getting into more heavily in 2024..

Great. Thank you so much..

Thank you, Rob..

And our next question comes from Pete Skibitski with Alembic Global. Please go ahead..

Good morning, everyone. Happy holidays..

Good morning..

Maybe another one for Eric or Carlos. But Eric, I think what you called out for kind of the adjusted FSG margin was over 23%, which is really strong.

And I don’t know how much seasonality factored in there, but I would also think you’d have some pricing power in ‘24 because some of the bigger suppliers, I think have called out high single-digit pricing increases for ‘24.

So it seems like you have got some bigger room there or even though I know you guys don’t want to be too aggressive, but – so is something approaching 23% reasonable all-in for 2024 at FSG or are there other factors that we should – I know Laurans called out inflation and that sort of thing.

So how do you think it nets out next year?.

Let me take that one, Eric. So hey, Pete, this is Carlos. You have to remember that we have a pretty big amortization flow coming in from the Wencor acquisition. So that’s going to temper some of the, just going to temper the GAAP margin a little bit.

I think that it’s going to be a little lumpy throughout the quarters, but I wouldn’t get too proud over your skis. I’ve been talking about the segment doing around 21% margins when things settle when we sort of settle into our footprint. And I think as we are looking forward, that might be a good barometer.

We haven’t given guidance, but that’s kind of what I am thinking that the ‘24 is going to look like right now..

Okay and just curious. Go ahead....

I am sorry. And Pete, this is Eric to add, you had asked about pricing. Yes, there is no question that we’ve got pricing upside potential. However, it’s really been our philosophy to pass along our cost increases.

And so that’s what we’ve been focused on doing to be able to maintain our margins and to continue to provide a lot of opportunities for our customers. So I think that there is a very large potential there.

One of the things is as – if someone’s not buying a part and the OEM has raised the price on the part, then as new customers come in and start buying that part, they pay higher prices.

So in a sense, we do get some pricing that way, but we are being very good to our existing customers, and we’re looking very much at our cost increases and cost increases have been significant in a number of areas. I don’t need to tell you about labor and material.

And we have been successful in passing along those cost increases because it’s something that we’ve got to do in order to maintain our margins. As far as the overall operating margin before intangible amortization, I think that we will continue to perform as we have in the past that I’m quite pleased with our performance in the past.

And we’ve got a lot of very, very good things in the hopper, a lot of projects where HEICO and Wencor can work together on a number of things. So I’m very optimistic about the future..

I appreciate it guys. And just overall, clear on the amortization, I think you called out $11.8 million in the fourth quarter.

What’s kind of the run rate you’re expecting in ‘24 that flows through FSG?.

That would be the quarterly run.

Are you talking about for just one quarter or for the whole segment?.

Well, I think the $11.8 million you referred to was Wencor purchase intangibles amortization. So I’m just wondering that number, how that runs through ‘24..

So it should be about that much each quarter. I will caution you that we’re in the middle of purchase accounting and valuations and all that kind of stuff. So it could move a few ticks to the right or left, but that’s what we’re counting on for next year, each quarter about $11.8 million..

Okay. Appreciate it. Thanks, guys..

We will take our next question from Bert Subin with Stifel. Please go ahead..

Hey, good morning. And thanks for the question..

Good morning..

Maybe just to follow-up on that margin question. If we look at FSP margins being dilutive to HEICO, just given where ETG margins are, you noted last quarter, Wencor was in-line with FSG, excluding the amortization piece, which seems to be the case based on your prepared comments, Eric.

When you put that together with the synergy opportunity and the broader parts pricing opportunity that we’ve seen on the OEM side, do you think there is a path to overall operating margins getting back to or above FY ‘22 levels in the next, let’s say, 3 years?.

Well, so when we look at this past year for the Flight Support Group, in ‘23, our operating margin even after the one-time expenses was about roughly 22%. So we are going to have some additional headwinds as a result of the intangible amortization.

But I think that when you add back the intangible amortization, you get into around the 23% area within the Flight Support Group. So I do think that we yes, when you add back the intangible amortization and M&A expense, you get back to the 23%. So I do think that there is additional opportunity for us.

But again, as I said, we want to be very protective and make sure we take care of our existing customers who have been buying the existing parts. But there is no question that there is a pricing opportunity.

I mean if somebody has not purchased a part from us, our list price would escalate and they would not be able to pay the same price for that part as somebody who had been buying it for a long time. So yes, I think that we do have pricing opportunity on the upside.

I want to be careful not to get too far over my skis here because again, we are very customer-friendly, but I do think there is pricing opportunity..

Okay. Great. And then just as, I guess, a higher-level follow-up, you’ve called out commercial aviation in that end market as being strong. Boeing and Airbus is clearly talking about driving towards target production rates, that are much higher than today’s rates over the next couple of years.

Assuming that plays out based on sort of what you know today, how would you expect your Commercial Air end market to change? Do you think they remain fairly similar over that period?.

Yes. I think they remain fairly similar. One of the things that happened for us during the COVID crisis is we got rid of a lot of old aircraft at one-time. So instead of having those headwinds, those headwinds as those older aircraft would have been retired over time, we got rid of them all.

So if you look at our sales today, there is been a significant upgrade in the improvement in our fleet age and distribution. So I think that the aircraft that we’re servicing today are going to be out there for a long time. They continue to age 1-year per year, and their price points are very positive for HEICO.

So I think that we’re going to have the wind to our backs for many years..

Thank, so much..

Thank you..

We will take our next question from Ken Herbert with RBC. Please go ahead..

Yes. Hi, good morning, everybody..

Good morning, Ken..

Maybe a question, Eric, for you to start off. If you look at HEICO now with Wencor in the combined business.

Can you talk organically perhaps how much you’d expect your PMA portfolio, for instance, to grow into ‘24 or ‘25? I guess I’m just curious about what kind of share gain or opportunities you’re seeing in PMA in particular and how you’re investing to support that?.

Yes. We, both HEICO and Wencor performed very well in terms of new PMA generation. We’re continuing to invest, continuing to find new opportunities. So I mean without doubt, this is going to be a record year in terms of PMA generation and the number of parts that we can come out with.

I can tell you that I’ve met with a number of customers since Wencor has closed, and they are really excited and enthusiastic unlike I’ve ever seen, concerning our product line. They want us to do more Again, there is going to be plenty of business for the OEMs. There is more than enough business to go around.

But they clearly have seen after going through a supply chain constraint like we’ve seen over the last couple of years, not only does HEICO bring cost savings, but we also bring availability. And that is a very, very key part of our value proposition. So that is driving them to want to continue to develop more parts with us.

And why I’m so bullish on it. I mean, obviously, we’re not going to HEICO-Wencor won’t develop the same parts and we can have each of the business units focused in areas where they have a competitive advantage, and that is our plan to be able to broaden the amount of product that we can bring to our customers..

Okay. That’s very helpful, thanks, Eric. And maybe, Carlos, if you look at the Wencor business, to the extent to which it’s still sort of stand-alone or independent somewhat.

How is the cash generation profile of that business relative to legacy HEICO? And is there an opportunity to maybe see some better cash generation out of the Wencor business?.

Ken, it was a little hard to hear that, but it sounds like you’re wondering how we might be able to squeeze more money out of Wencor? Is that essentially your question?.

Exactly. Yes, sort of the cash profile and the outlook there. Thank you..

Sure. So I think that on a cash flow for basis from an EBITDA perspective, they are doing quite nicely. They are ahead of our expectations. I think that as we coordinate operations and coordinate our sort of consolidation of some back office things, there may be some savings there.

As I mentioned to you before, we’re not going to, we’re not going to disrupt operations right now with any consolidation moves because our end markets are too hot and candidly, they are doing great. And I think that if they continue to do what they did this quarter, we will be very happy. They are not consuming a lot of working capital at the moment.

So that’s all a positive going forward in ‘24..

Great. Thank you very much..

We will take our next question from Scott Deuschle with Deutsche Bank. Please go ahead..

Hey, good morning..

Good morning, Scott..

Eric, can you talk a little bit about the munitions growth at FSG? Maybe kind of what the growth has looked like over the last year than what the outlook is going forward into 2024?.

I’m sorry, can you just – the growth of which product line?.

The munitions product line, I think, in Specialty Products, I think it was a big driver of growth in the first half of the year. I’m just curious a little more granularity there? Thank you..

Got it. Yes. I think what you’re speaking about is the Missile Defense products that we’re doing. And there is a lot of, there is been a tremendous amount of growth as you can imagine in that area. Everybody has been significantly under-invested in it. And for that reason, we’re very optimistic on it.

Within our Specialty Products business, we are adding capabilities and space and people to a number of those businesses. So there is a fair amount of, I would say, one-time costs that we’re anticipating in 2024, but we’re going to be able to cover it within our normal margins. But the business is very strong.

And I think that we’ve really carved out a niche for ourselves in many areas in the defense products..

Okay. And then Eric, you talked earlier about price and availability being two of the differentiators for what allows you to get the sale on a PMA part. But it seems like another one is that the PMA part is often just a better part.

So I’m curious if you could talk a bit about that and how frequently the product itself and the capabilities of the product are what drives the sale? As opposed to just the price and availability piece that you mentioned earlier..

Sure, Scott. I’d be happy to. So in order to get PMA, it’s got, the part has got to be the same in terms of form, fit and function. So therefore, yes, the way that we are able to differentiate ourselves with respect to quality, is we typically have tighter tolerances so we produce more consistent parts.

And we also have an extremely robust quality inspection program.

So when parts come in from vendors, whether they are HEICO vendors or outside vendors, there is a very robust material analysis, whether the part’s metal or not metal to confirm grain size, microstructure, hardness, coatings, all of those various constituents to ensure that the part that we ship out is exactly what was designed.

Likewise, we have a very robust inspection process to review the dimensions. So I would say that with regard to basically shipping the part according to the design intent, HEICO scores incredibly high in that area. So the parts are more consistent.

Airlines are able to basically use them and install them right away and the fallout or rejection rate with HEICO parts, we believe, is significantly lower than with other companies’ parts. So they are improved in that regard. We do offer some parts that are improvements where material or dimensions can be changed.

But that is a smaller part of our business, but that’s also an area of opportunity for us..

Okay. Great. And then last question, Carlos. Can you give any kind of framework for how to best think about ETG margins for next year? Is something in the range of 24% to 25%, a good kind of base case framework to think about ‘24? Thank you..

Well, I can tell you this for the ETG. I think it’s going to be lumpy. I think the defense sales look like they have turned to our benefit. But we have, as Victor mentioned earlier, we have a lot of high-end reliable parts that are going to non-aerospace defense and space areas. That business, we believe, will calm down a little bit.

So the margin is going to go all over the place. I would say if you’re at 24%, you’re probably in the right ballpark for the year. But I would let us get a couple of quarters underneath this before we before we commit to a margin. Because, again, I think based on backlog and what we see right now, it’s going to be a little lumpy going into next year..

Great. Thank you..

You are welcome..

We will take our next question from Sheila Kahyaoglu with Jefferies. Please go ahead..

Good morning, guys. And thank you. Maybe just continuing on that line of questioning with ETG profitability.

Victor, can you talk about Exxelia, just to provide us with an update there, the performance of what you’re seeing in terms of the underlying profitability profile of the business and kind of how that tempers into your fiscal ‘24 expectations as just Carlos just said as well as beyond that period..

Sure, Sheila. So Exxelia has been doing pretty much exactly what we expected it to do, more or less right on plan. The business has been growing. And I, as we’ve said before, that penalizes our operating margin by about 200 basis points. And I would expect that to probably continue to be the case.

I would expect their margins will march up a bit over time, but not to the level of the rest of the ETG. So we’re very happy to have the business. They have mined out a lot of new opportunities. They are working on other opportunities beyond that. Continuing good product development, producing out their backlog, which has been very strong.

So overall, very happy and very happy with the people there..

Okay. Thans for that color. And maybe, Eric, one for you. I know you got lots of questions on price.

Any way you could quantify cumulative price over the last, since 2019 for us? And also, any thoughts on the GTF issues and how you think that will potentially benefit HEICO’s PMA portfolio?.

Hi, good morning, Sheila. Great question. With regard to price action, I don’t have that information in front of me. And due to HEICO’s decentralized nature, it would be very difficult to pull all of that together. But I would say that in general, we have not, as I said before, we have not pushed price beyond our cost increases.

So therefore, customers who have been purchasing the parts for a long time have been treated very well and it’s our plan to continue doing that. But of course new people buy the parts, and they haven’t purchased the parts in the past, they pay the newer price, and that would reflect increased prices as our labor and material costs have gone up.

So, and then with regard to the GTF, I assume that will keep the existing fleet in great demand for a long time. It’s going to take a while to work through the GTF problems. And I have no question that they’ll ultimately get through them. But in the meantime, that should be really a very strong indicator, I would say, for the aftermarket.

And fortunately, these aircraft are able to pick up the slack. So I think that, that’s working out quite nicely. Originally, we always said that whenever you got a recovery, there is always a little bit of an overshoot.

Well, it looks like perhaps as a result of the GTF issue that overshoot may either be delayed or won’t happen, because there is just increased demand. Our backlogs are tremendous.

Our suppliers are challenged to keep up I think we’re doing better than most in that regard, but there is tremendous, there continues to be tremendous demand for our products and services..

Great. Thank you..

Thank you..

We will take our next question from Michael Ciarmoli with Truist Securities. Please go ahead..

Hey. Good morning, guys. Nice results. And thanks for taking the questions here.

Carlos, just can you give us any more maybe clarity or direction on the revenue growth outlook for ‘24? I mean, I know you called out in the press release, you expect growth in FSG and ETG, assuming FSG will be lapping a tough comp on the 20% organic, so maybe unlikely to see acceleration there.

But I would think with ETG and defense kind of showing that sequential improvement. We get some acceleration of this 1%.

Can you maybe give us a little bit more detail on kind of the top line growth expectations?.

Well, I mean, as we’re sitting here today, our growth is going to be solid next year from acquisition revenue. If you’re referring to organic, you are right. We’re lapping 20% plus growth quarters for 2 years now. So I think what, in the FSG, I think that will be, I don’t think it will continue at that rate, Michael.

I mean it could, but I’m not anticipating that. I do think it peels back a little bit. Not a ton, but it will peel back, I think the ETG’s growth is going to be quite lumpy based on what we see in backlog right now. And I think with the ETG, if you’re counting on the organic side, look to the low to mid-single digits.

FSG should be high single to double digits, something like that. It should continue a nice growth next year..

Okay. That’s helpful. And then just back to the FSG margins, I guess, as you guys think about kind of the integration plans, Wencor had been running at 15.8%, give or take. Where do you think you can take those margins? And I know, Carlos, you called out a couple of times the amortization from Wencor to $11.8 million flowing through.

But what was the other amortization as well that flows through there to kind of get to that 23%? Just want to make sure we’ve got all the math correct..

Michael, are you talking about just Wencor or the segment?.

The first question was just on Wencor. The second was the segment in total at that 23%..

So I think that percent of sales are going to run 2%, 2.5%, I believe, is the number for amortization in the segment and Wencor is part of that. And like I said, you’re close to $12 million a quarter for Wencor in amortization. So that’s what we’re looking at next year..

Okay. Got it.

And then any thoughts on where you could take those Wencor margins, like just that, from that 15.8% level as you guys integrate and kind of go through the process?.

So Michael, this is Eric. Let me see if I can help you out with that a little bit. If you take the Wencor operating income for the quarter, of $29.3 million and then you add back the $11.8 million of intangible amortization, then you get to a number of about $41 million for the quarter.

So when you divide that $41 million by the $186 million approximately of Wencor sales get to about 22% margin adding back the intangible amortization. So if we’re saying that HEICO is, Flight Support Group is going to be in the 23% area for this coming year. Wencor based on the fourth quarter was just a tick below that.

To just, but I would say it’s very similar, very similar to HEICO..

Okay. That’s helpful. Prefect. Thanks, guys. I will jump back in the queue..

Thank you..

We will take our next question from Gautam Khanna with TD Cowen. Please go ahead..

Hey. Good morning, guys..

Good morning, Gautam..

A couple of questions. First, Eric, I was wondering if you’ve seen any differences in demand by channel? Wencor, I think you guys said sells more to the MRO, whereas HEICO on the PMA side directly to the airlines.

Was there any discernible differences or changes in customer pager between the two channels?.

No, I would say there really hasn’t been thus far. I think that, that is an opportunity for us to mine, as we go forward. And I think that, that will be very much an opportunity. Again, Wencor has operated basically as a stand-alone business. Yes, we’re coordinating some activities, but it continues to operate with its own leadership and its own P&L.

And, but I think there will be opportunities, such as the ones you’re alluding to..

Okay. And Airlines appear to be in some financial distress incrementally.

I’m just curious, has that, have you seen any increase in the number of inquiries from non-PMA buying customers that are now looking to switch over? Or just you’re seeing more volume among certain customers than you would expect at the airlines given some of the challenges?.

Yes, it’s a great question. And they are, I mean, pretty much everybody uses PMAs, but there has been an increase in using parts that using HEICO parts that they haven’t purchased in the past. And what is it the old saying Necessity is the motherhood of invention.

And sometimes people can’t get apart from the OEM, then they’ll go ahead and then they’ll buy it from HEICO. And we certainly have seen that happen. And as a matter of fact, it’s particularly gratifying when you see OEMs do that.

So, and that’s been, I’m not going to get into specifics, obviously, but it’s very nice when we see OEMs purchasing the HEICO and the Wencor alternative parts in order to meet their demand because we know the quality is outstanding..

Appreciate it. And then, Victor, just quickly on some of the earlier questions related to the defense improvement that you saw sequentially.

What, is this a letup of past due backlog? Or is there, is that not really a driver? And what can you say about maybe book-to-bill or any sort of discernible change in order trends among those customers?.

Yes. On defense, I think our book-to-bill is positive on defense, and moving in the right direction. For our defense businesses, I would say, very little of it, if any, would be supply chain catch up.

In fact, quarter, in the whole quarter, we, our companies estimate that maybe approximately $10 million worth of shipments moved to the right, right? So compare that to where we were, I don’t know, roughly a year ago, I think we reached up in the $40 million range or even higher.

So that’s definitely trended in the right direction for us and overall optimistic on our defense business throughout the year. Again, as Carlos emphasized, it will be lumpy.

And the mix sensitivity is important, because we have some products, some subsidiaries, which have a much higher margin than others and how that backlog falls out is very important. So, I would expect, for example, the first quarter on margin side to be tougher for us than the following quarters..

Last one, if I may, just back to Eric. On the number of PMA parts you expect to introduce between the two entities, legacy HEICO and Wencor, can you just update us on that over the next year..

Yes. I think HEICO has been running in that 300 to 500 area, roughly 400 parts a year, and Wencor has been running in about 150 area, so I would anticipate those numbers continuing that way..

Great. Thanks a lot guys. Happy holidays..

Thank you. Wish you happy holidays..

Thank you..

And we will take our next question from Louie DiPalma with William Blair. Please go ahead..

Larry, Eric, Victor and Carlos, good morning..

Good morning Louie..

When discussing the Wencore deal, Wencor’s e-commerce platform was touted as one of the unique assets with potential synergies. Has HEICO started the process of selling any of the HEICO parts on the Wencor online marketplace? And are there many revenue and cost synergy projects planned for 2024, or is that more of a 2025 event? Thanks..

Yes. This is Eric. I would be happy Louie, to answer that. As I mentioned, the HEICO philosophy when we acquire a business is just to leave it alone and observe what’s going on. We have got our initial view, and then we want to make sure we confirm that first before making substantial changes.

So yes, the ownership period of Wencor has gone extremely well. And we are working on a number of projects in terms of product rationalization, sharing resources between the businesses, sending business to HEICO-Wencor, which used to go outside. So, all of that is going well.

Specifically with regard to the e-commerce platform, we think that that’s going to be an opportunity for 2024. It’s something that we are looking at right now. We continue to believe very much that’s going to be a huge asset. They are studying the best way to go ahead and do that.

But no, we have not done it to-date, not because we don’t want to do it, but because frankly, both businesses are running at such a high percentage of utilization that we don’t have people to be able to focus on all of the projects that we are just sort of taking them as we can handle them.

But we believe that that’s going to be a tremendous benefit for us in 2024..

Great. And a follow-up on that, in terms of the cost synergies, then you said that you plan to let Wencor operate in a standalone mode.

Should we think of synergies more as a 2025 event then? Like how long would you generally plan to let it operate in a standalone mode?.

Well, I think the revenue synergies are going to start accruing quickly. And then as far as some of the cost synergies, the business units are taking it upon themselves to work together and to find areas where they can rationalize product lines. If one business does more of a particular product than another, they are looking at swapping.

So this way, we can maintain the workforces. We have got tremendous volumes and all the businesses are running at a high utilization factor. So, but if we can redirect people to more efficient activities, we want to do that.

So, we are taking advantage of the revenue synergies and of some of the cost synergies, but I would say that that’s going to be something that benefits us in both ‘24 and ‘25..

Excellent. Thanks Eric and thanks everyone..

Thank you..

And we will take our next question from Larry Solow with CJS Securities. Please go ahead..

Great. Thanks. Good morning guys. Happy holidays to everybody. Most of my questions have been answered. Just one, I guess on – just on free cash flow, a couple there.

Sort of you are – without getting specific guidance sort of your general outlook on free cash flow in terms of working capital needs, do you expect maybe have to build a little more inventory? How do you think that’s going to shake out? And then part to that question would be kind of priorities for free cash flow.

A little more leverage than you guys are used to. So, I am just curious, would that number one priority be sort of debt pay down, maybe in front of even strategic acquisitions? Thanks..

So, let me take a stab at that, Larry. It’s Carlos. I think that on the – as you mentioned, the inventories side, we did have a significant investment in ‘23 in inventory. And I suspect that for a few quarters into ‘24, we might have a little bit more inventory build.

Part of that is due to firm commitment orders we place, sometimes as much as 2 years ago, to deal with the supply chain challenges to make sure we had product on the shelf for our customers. But I do think that carrying costs and inventory isn’t free anymore, right. Rates are up, so we are very cognizant of that.

And I do think as we get into ‘24, my hope is, is that towards the back half of the year, we get a little bit more rationalization on the working capital usage. That’s my expectation. As far as free cash flow, I expect the company to continue to have strong free cash flows. And I do think you have hit the nail on the head.

Once the working capital investment to support the growth and some of these firm commitment orders has tempered, I think our conversion will be slightly [Technical Difficulty].

Does that answer your question, Larry?.

Yes. Absolutely. And I guess just priority.

Debt pay down, is that probably the priority or…?.

Yes. Look, I mean our objective right now as we stated before, is to try and de-lever as quick as possible. Our plan after completing the Wencor acquisition within 12 months to 18 months, we set out on a plan to get our debt leverage ratio, something close to normal, around the 2% range, roughly.

That’s the goal of the 12 months to 18 months, I would say that, that is not a goal that prohibits us from doing acquisitions. I would say that for smaller acquisitions we will draw on our line to do what we need to do to complete those if they are good for our shareholders.

I think if they are larger deals, we might have to get creative, but I don’t expect that over the next 12 months to 18 months, something as large as Wencor probably would be very unique. I don’t know that we have got something on the horizon right now.

And I do think, to your point, that deleveraging is sort of our highest and best use of free cash right now..

Excellent. Okay. Great. Thanks guys. I appreciate it..

Yes..

And we will take our next question from Ron Epstein with Bank of America. Please go ahead..

Good morning everyone. This is Mariana Perez Mora on for Ron today. I am going to ask a big picture question. Larry, in your prepared remarks you highlighted, you have never been more optimistic about HEICO’s future than you are today.

When you think about the year ahead, what are you most excited about, if the industry is a particular end market, it’s HEICO competitive position?.

I think all of the above and other areas, too. I think that the Wencor acquisition puts us in a very unique spot. As we have told you today, it’s actually working out better than we anticipated. To HEICO, the culture of a company is critical.

And I can tell you, as a large acquisition like Wencor, having that excellent culture is really a wonderful thing. We have learned – I am a financial person, originally started as a CPA long ago, and finance is very important. And we key on that, of course, in cash.

But when I look at our cash flow and I look at our culture, the culture is what ultimately drives the bottom line. So, this is very, very good. On the other hand, the Exxelia acquisition has come off almost exactly what we expected. So and we expected it to be good, and it is good.

So, when I look at all these things and the size of the company, I also believe that, as a matter of fact, I have said many times that we have a goal of growing 15% to 20% bottom line.

And in ‘23, if you add back those non-recurring expenses that we incurred, the legal investment banking and so forth for the acquisition, we grew about 20% over the prior year ‘22. I feel very confident that in the current year, we will be able to grow 15% or 20%.

We don’t give guidance, but clearly, we focus on our budgets and where we think we will wind up. But I feel knowing everything I know now that we will be able to repeat a 15%, 20% growth. So – and then that’s after making these sizable acquisitions and digesting them. So, HEICO is a much stronger, bigger company than it has ever been.

I mean it’s a major factor today in this, in the industries we operate. So, for all those reasons, I would say HEICO has become a powerhouse, and for those reasons, I feel extremely confident of the future for HEICO.

Does that answer your question?.

Yes. Thanks so much.

And then when you think about potential challenges, what keeps you up at night, gets you up at night? Like where are you like paying close attention to?.

Well, the only thing that I worry about is exogenous events, which we can’t control or strange things like this. But as far as the operation of HEICO, I am highly confident because we have great depth in management. In other words, since we are a company that’s not consolidated.

We are diversified and we leave the decision-making down at the level where we believe it belongs. So, corporate doesn’t tell the operating entities, what they have to do. We say to them, what do you think we should do, and how will you accomplish it in your budget. And to that extent, I have great confidence.

These are people who have been running these businesses for many years. Nobody, in my opinion, nobody knows their market, their labor market, their customer market better than the people operating the businesses. So and they have done it over and over and over again.

So, it’s not as though, well, this is something new, can they do it, can they accomplish it, no. They have been doing this for many years. I mean HEICO has a record of growing over 30-some years, the bottom line close to 20% compounded growth. So, because of that, I have great, great confidence in what they are doing.

I mean Eric and Victor run those companies, and they go out and they meet with the business unit leaders constantly. They speak to them by phone. Carlos has an extremely detailed financial report weekly. So, we keep track of the receivables of growth, the backlog, cash flows, everything.

So, for all those reasons, I really don’t worry about the operation of our company. I just worry about, but I don’t worry about it because I can’t control it. The things like COVID, wars and things like that, which might impact us. But I can’t change that.

I think we have done as well, Eric, Victor and our team members have done as well as can be done with the company in terms of operations and control, so none of those things worry me..

Perfect. Thanks so much. And then if I may, one last question for Carlos. Could we please dig deeper on M&A? I am curious if you could discuss the two sides of it, like, number One, like pipeline of opportunities and like how – any color on pricing there? But also you mentioned deleveraging.

What is the targeted leverage? And I am curious how and if the an easing interest rate environment influences that target?.

Well, clearly, higher interest rates causes me to want to pay down debt quicker, right. I mean that’s kind of our motor operation here. Within the next 12 months to 18 months, I am targeting somewhere in the low 2x, and that gets us close to historic norms, which have been somewhere slightly lower than 2x.

That was the goal when we set out, and that’s what our objectives are. As far as our – as far as M&A backlog goes, we have a very active process, both segments have teams that are focused on markets and opportunities. It’s very opportunistic.

And as I mentioned earlier, there will be those handful of deals that we see every year, which I would probably categorize a smaller, $100 million spend and less and things like that. We will find deals like that all day long, and if it makes sense for our shareholders, we will pull the trigger. That won’t damage our plan to de-lever.

But as far as larger deals, such as Wencor where we spent over $2 billion, I would think over the next 12 months to 18 months that, that would be unlikely that we would pursue something like that until we have de-levered a bit….

Perfect. Thanks so much and yes that’s perfect. Thanks so much and happy holidays to everyone..

Thank you..

Thank you. You too..

And we will take our next question from Ian Franz Engelberg [ph] with Baird. Please go ahead..

Good morning Larry, Eric, Victor and Carlos. Thanks for taking the question..

Good morning..

Eric, if I can just sort of a high-level question, just over the next 12 months, in terms of flight activity across narrow-body, wide-body and then sort of North America, Europe and China.

If you can just let us know how you are thinking about sort of potential areas of strength and potential regions where there is a watch item for your business for the aftermarket?.

Yes. We are seeing strength, frankly, across the board. So, we dive down into the part number level. So, it’s just very, very broad-based strength straight across the board. So, I wouldn’t want to call out one area or another. It’s really just very strong across the board..

No, that makes sense. Thank you. And if I could just have a quick follow-up, Victor, I think you may have answered just with ETG. But if you could just talk about sort of the supply chain outlook in 2024 and beyond, so there is less of an impact. I think you guys mentioned $10 million.

Does that keep on improving for the remainder of ‘24?.

I would expect that to be the case. I think it’s improved dramatically, but there is still room to go. Lead times have improved. Of course, there are some products. There are some components particularly when the realm one would think of as “Chips”, that’s still elevated and a little complicated.

And I would say even in ordinary times, as I reflect on it, I would expect that there will always be products and vendors that are delayed, but we wouldn’t categorize it as a supply chain crunch like the world experienced before. And so I think it will return to normal at some time, I would expect within calendar 2024..

Perfect. Thank you. Thanks, and happy holidays and congrats on a good quarter. I will jump back..

Thank you..

And we will take our next question from Louis Raffetto with Wolfe Research. Please go ahead..

Thank you, and good morning guys..

Good morning..

Victor, so it’s great to see defense up again. I guess have we lapped year-over-year growth yet? I know it was down high-single digits last year or last quarter for defense.

I guess, was it up this quarter?.

Yes, it was up this quarter..

Okay. Great. Thank you.

And then, Eric, just can you help baseline $186 million of sales for Wencor between sort of the sub-segments within FSC? Any way you could help us out there?.

I can’t. I don’t have that actually in front of me right now. But it would fall broadly into parts and into MRO in terms of the disaggregation of revenue. But I don’t have that information in front of me at the moment. But I would say that we are doing very well in both of those areas..

Alright. Great. Appreciate it. And then Carlos, just to make sure we are all based on, I guess on the interest cost in the quarter.

Was there anything one-time, or should we think of this $40 million level as sort of going into fiscal year ‘24 as the right level?.

And Louis, that’s a good question. So, within the interest line this quarter, we had a $3.8 million worth of one-time costs in there related to the commitment letter to fund the Wencor deal. So, going into there, we basically had to pay about $3.8 million to get a bank to write a letter to say that we are good for the purchase price.

That’s the one-timer, that won’t repeat. So, as you are looking forward next year, if you pull that out, you are looking at roughly $38 million and then decreasing as we de-lever..

Okay.

And then I guess, just taxes, any way to think about taxes for next year?.

Yes. I hope they remain. I am planning on them to remain similar to what they were this year. I always kind of count on a 20% to 21% rate, this year, we have did a little better.

It’s because, frankly, we have that leadership compensation plan where we have some tax deferred earnings that has a positive impact on our rate and because the market was generally up through ‘23 for our fiscal year, that did help us as opposed to hurting us last year.

So, I think if you are in the 20% to 21% range, you are going to be in good shape..

Okay.

And then just last clean-up on the intangible amortization, was there no sort of one-time step-ups or anything like that, that $11.8 million was, to your point, sort of the go-forward rate?.

Yes, it was. The one thing about, Wencor doesn’t have what I will call a manufacturing base like we do. They outsource a lot of their manufacturing. So, there wasn’t any manufacturing profit to pull out of the purchase accounting to pull out of the numbers. I mean maybe a little bit on the repair side, but it wasn’t anything notable, Louis.

So, I would say that $11.8 million is a pretty good run rate number..

Alright. Thank you very much..

You bet..

And we will take our next question from Colin Ducharme with Sterling Capital. Please go ahead..

Hi. Good morning and thanks for taking my question. I had actually one clarification for Eric and then one question for Carlos, if I may. Eric, on the GTF question earlier, could you just please clarify your impression of the materiality of that potential demand driver for 2024.

Do you view that as an incremental needle mover for you all? And then do you have any additional certifications, etcetera, that your subsidiaries perhaps need to attain to win that work and then you have the capacity to kind of take that on? And then for Carlos, just stepping back and thinking of the post Wencor and Exxelia balance sheet that you are sitting on now, you are facing one of the most significant de-levering processes in recent memory for HEICO.

And we have just witnessed a significant and favorable change to financial market conditions in the last month or so. And while I am no macroeconomist, things could continue to favorably develop here in 2024. So, I just wanted to ask about your thinking and has it changed at all regarding the cost or pace of this de-levering journey that you are on.

Any change to your thinking and/or steps as you kind of prosecute that playbook? Thanks again..

Yes. Colin, so I will start out. What I was referring to in response to the prior question, concerning the GTF was that as a result of the GTF-powered aircraft being taken out of service in order to have their engines overhauled, that would create additional demand for legacy aircraft. So, I don’t want to call that out as anything more than a tailwind.

But clearly, it’s going to be good for the use of the utilization of non-GTF powered aircraft. With regard to HEICO’s involvement in the GTF campaign, I would say that it is not material. We are not supplying PMAs on the GTF in any material quantity. And frankly, the service that’s being done now is being paid by the manufacturer.

So, that would not be a revenue opportunity for us. If we have got businesses that are supplying parts into the OEM, then there could be a little bit of increased demand for that. But no, I would not call it out as a special one-time item..

Colin, this is Carlos. I don’t know that anything on the horizon is going to change my view on the de-levering. In my mind, we have got almost 10,000 team members and uncountably [ph] number of family members that are attached to those people, and we want to make sure we have a battle hardened company that has a lot of staying power.

And so my objective with that in mind is to try and de-lever as quick as possible, so we could de-risk the balance sheet. I will tell you this, I mean at net leverage at 3x, it’s not like we are highly levered. But for me, I would prefer to be back down to historical norms.

So, that’s kind of the marching orders into the next couple of years, and we will see how it plays out. I can tell you, we will not miss opportunities that are good for our shareholders as a result of that plan. But the stated goals right now are to continue the thoughts of de-levering.

Does that answer your question?.

Yes. Thank you..

You’re welcome..

And we will take our next question from Jordan Lines [ph] with Bank of America. Please go ahead. It appears they have disconnected and we have no additional questions at this time..

Okay. Well, thank you very much. I want to thank everybody who has been listening to this call. I hope we have satisfied you and give you information that you would like, if not, we are available, as you know, give us a call, Eric, Victor, Carlos, myself.

And we look forward to speaking to you in the first quarter call, which will be in a few months from now. And we wish all of you a very happy, healthy holiday season, and New Year. And that’s the end of this call..

Thank you. And this concludes today’s call. Thank you for your participation. You may now disconnect..