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HEICO Corporation Reports Record Operating Income for the Second Quarter and First Six Months of Fiscal 2022

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2nd Quarter of Fiscal 2022 Net Income up 20% on Record Operating Income, which Increased 27%, and Net Sales, which Increased 15%

HOLLYWOOD, FL and MIAMI, FL / ACCESSWIRE / May 23, 2022 / HEICO CORPORATION (NYSE:HEI.A) (NYSE:HEI) today reported an increase in net income of 20% to $85.0 million, or $.62 per diluted share, in the second quarter of fiscal 2022, up from $70.7 million, or $.51 per diluted share, in the second quarter of fiscal 2021. Net income increased 22% to $171.9 million, or $1.25 per diluted share, in the first six months of fiscal 2022, up from $141.3 million, or $1.03 per diluted share, in the first six months of fiscal 2021.

Improvement in the commercial aerospace market has resulted in seven consecutive quarters of sequential growth in net sales and operating income at the Flight Support Group.

Net sales increased 15% to $538.8 million in the second quarter of fiscal 2022, up from $466.7 million in the second quarter of fiscal 2021. Operating income increased 27% to a record $122.8 million in the second quarter of fiscal 2022, up from $96.7 million in the second quarter of fiscal 2021. The Company's consolidated operating margin improved to 22.8% in the second quarter of fiscal 2022, up from 20.7% in the second quarter of fiscal 2021.

Net sales increased 16% to a record $1,029.2 million in the first six months of fiscal 2022, up from $884.6 million in the first six months of fiscal 2021. Operating income increased 25% to a record $221.6 million in the first six months of fiscal 2022, up from $177.0 million in the first six months of fiscal 2021. The Company's consolidated operating margin improved to 21.5% in the first six months of fiscal 2022, up from 20.0% in the first six months of fiscal 2021.

EBITDA increased 22% to $146.6 million in the second quarter of fiscal 2022, up from $120.0 million in the second quarter of fiscal 2021. EBITDA increased 20% to $268.8 million in the first six months of fiscal 2022, up from $224.0 million in the first six months of fiscal 2021. See our reconciliation of net income attributable to HEICO to EBITDA at the end of this press release.

Consolidated Results

Laurans A. Mendelson, HEICO's Chairman and CEO, commented on the Company's second quarter results stating, "We are very pleased to report record quarterly consolidated operating income driven mainly by record quarterly operating income at the Flight Support Group. These results principally reflect 9% consolidated organic growth in our net sales principally arising from a continued rebound in demand for our commercial aerospace products and services.

Our total debt to shareholders' equity ratio was 11.0% as of April 30, 2022, as compared to 10.3% as of October 31, 2021. Our net debt (total debt less cash and cash equivalents) of $148.6 million as of April 30, 2022 to shareholders' equity ratio was 6.1% as of April 30, 2022, as compared to 5.6% as of October 31, 2021.

Our net debt to EBITDA ratio was .28x and .26x as of April 30, 2022 and October 31, 2021, respectively. We have no significant debt maturities until fiscal 2025 and plan to utilize our financial strength and flexibility to aggressively pursue high quality acquisitions of various sizes to accelerate growth and maximize shareholder returns.

As we look ahead to the remainder of fiscal 2022, we expect global commercial air travel to continue growing despite the potential for additional COVID-19 global pandemic ("the Pandemic") variants. We remain cautiously optimistic that the ongoing worldwide rollout of Pandemic vaccines, including boosters, will continue to positively influence global commercial air travel and benefit the markets we serve. But, it still remains very difficult to predict the Pandemic's path and effect, including factors like new variants and vaccination rates, potential supply chain disruptions and inflation, which can impact our key markets. Therefore, we feel it would not be responsible to provide fiscal 2022 net sales and earnings guidance at this time. However, we believe our ongoing conservative policies, strong balance sheet, and high degree of liquidity enable us to continuously invest in new research and development, take advantage of periodic strategic inventory purchasing opportunities, and execute on our successful acquisition program, which collectively position HEICO for market share gains."

Flight Support Group

Eric A. Mendelson, HEICO's Co-President and President of HEICO's Flight Support Group, commented on the Flight Support Group's second quarter results stating, "Continuing our growth trend, we achieved quarterly increases of 87% and 33% in operating income and net sales, respectively, as compared to the second quarter of fiscal 2021. These results principally reflect robust quarterly organic net sales growth of 31% for our commercial aerospace parts and services. The Flight Support Group has now achieved seven consecutive quarters of growth in operating income and net sales.

The Flight Support Group's net sales increased 33% to $306.3 million in the second quarter of fiscal 2022, up from $230.3 million in the second quarter of fiscal 2021. The Flight Support Group's net sales increased 35% to $579.0 million in the first six months of fiscal 2022, up from $429.6 million in the first six months of fiscal 2021. The net sales increase in the second quarter and first six months of fiscal 2022 reflects strong organic growth of 23% and 26%, respectively, as well as the impact from our profitable fiscal 2021 and 2022 acquisitions. The organic growth mainly reflects increased demand for the majority of our commercial aerospace products and services resulting from continued recovery in global commercial air travel as compared to the second quarter and first six months of fiscal 2021.

The Flight Support Group's operating income increased 87% to a record $66.2 million in the second quarter of fiscal 2022, up from $35.5 million in the second quarter of fiscal 2021. The Flight Support Group's operating income increased 93% to a record $118.6 million in the first six months of fiscal 2022, up from $61.3 million in the first six months of fiscal 2021. The operating income increase in the second quarter and first six months of fiscal 2022 principally reflects an improved gross profit margin mainly from the previously mentioned higher net sales across all product lines, and efficiencies realized from the higher net sales volume.

The Flight Support Group's operating margin improved to 21.6% in the second quarter of fiscal 2022, up from 15.4% in the second quarter of fiscal 2021. The Flight Support Group's operating margin improved to 20.5% in the first six months of fiscal 2022, up from 14.3% in the first six months of fiscal 2021. The operating margin increase in the second quarter and first six months of fiscal 2022 principally reflects the previously mentioned improved gross profit margin, as well as a decrease in SG&A expenses as a percentage of net sales mainly reflecting the previously mentioned efficiencies."

Electronic Technologies Group

Victor H. Mendelson, HEICO's Co-President and President of HEICO's Electronic Technologies Group, commented on the Electronic Technologies Group's second quarter results stating, "Improved demand and strong organic net sales growth for our space, medical and other electronics products were achieved during the quarter while we experienced a decrease in defense product net sales. We continue to experience overall elevated backlog and orders within the group.

The Electronic Technologies Group's net sales were $237.4 million in the second quarter of fiscal 2022, as compared to $243.1 million in the second quarter of fiscal 2021. The Electronic Technologies Group's net sales were $459.7 million in the first six months of fiscal 2022, as compared to $466.6 million in the first six months of fiscal 2021. The net sales decrease in both periods is mainly attributable to decreased demand for our defense products, partially offset by increased demand for our space, medical, other electronics and telecommunications products, as well as the impact from our profitable fiscal 2021 and 2022 acquisitions.

The Electronic Technologies Group's operating income was $66.0 million in the second quarter of fiscal 2022, as compared to $71.3 million in the second quarter of fiscal 2021. The Electronic Technologies Group's operating income was $121.6 million in the first six months of fiscal 2022, as compared to $131.4 million in the first six months of fiscal 2021. The operating income decrease in the second quarter and first six months of fiscal 2022 principally reflects a lower level of efficiencies resulting from the previously mentioned defense sales decrease and a lower gross profit margin mainly from the previously mentioned decrease in net sales of defense products and an increase in new product research and development expenses as a percentage of net sales to support ongoing new product research and development activities.

The Electronic Technologies Group's operating margin was 27.8% in the second quarter of fiscal 2022, as compared to 29.3% in the second quarter of fiscal 2021. The Electronic Technologies Group's operating margin was 26.4% in the first six months of fiscal 2022, as compared to 28.2% in the first six months of fiscal 2021. The lower operating margin in the second quarter and first six months of fiscal 2022 principally reflects an increase in SG&A expenses as a percentage of net sales mainly from the previously mentioned lower level of efficiencies as well as the previously mentioned lower gross profit margin."

Non-GAAP Financial Measures

To provide additional information about the Company's results, HEICO has discussed in this press release its EBITDA (calculated as net income attributable to HEICO adjusted for depreciation and amortization expense, net income attributable to noncontrolling interests, interest expense and income tax expense), its net debt (calculated as total debt less cash and cash equivalents), its net debt to shareholders' equity ratio (calculated as net debt divided by shareholders' equity) and its net debt to EBITDA ratio (calculated as net debt divided by EBITDA), which are not prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

These non-GAAP measures are included to supplement the Company's financial information presented in accordance with GAAP and because the Company uses such measures to monitor and evaluate the performance of its business and believes the presentation of these measures enhance an investor's ability to analyze trends in the Company's business and to evaluate the Company's performance relative to other companies in its industry. However, these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for analysis of the Company's financial results as reported under GAAP.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These measures should only be used to evaluate the Company's results of operations in conjunction with their corresponding GAAP measures. Pursuant to the requirements of Regulation G of the Securities and Exchange Act of 1934, the Company has provided a reconciliation of these non-GAAP measures in the last table included in this press release.

(NOTE: HEICO has two classes of common stock traded on the NYSE. Both classes, the Class A Common Stock (HEI.A) and the Common Stock (HEI), are virtually identical in all economic respects. The only difference between the share classes is the voting rights. The Class A Common Stock (HEI.A) carries 1/10 vote per share and the Common Stock (HEI) carries one vote per share.)

There are currently approximately 81.5 million shares of HEICO's Class A Common Stock (HEI.A) outstanding and 54.5 million shares of HEICO's Common Stock (HEI) outstanding. The stock symbols for HEICO's two classes of common stock on most websites are HEI.A and HEI. However, some websites change HEICO's Class A Common Stock trading symbol (HEI.A) to HEI/A or HEIa.

As previously announced, HEICO will hold a conference call on Tuesday, May 24, 2022 at 9:00 a.m. Eastern Daylight Time to discuss its second quarter results. Individuals wishing to participate in the conference call should dial: U.S. and Canada (833) 377-4220, International (206) 596-9903, wait for the conference operator and provide the operator with the Conference ID 7661773. A digital replay will be available two hours after the completion of the conference for three days. To access, dial: (404) 537-3406, and enter the Conference ID 7661773.

HEICO Corporation is engaged primarily in the design, production, servicing and distribution of products and services to certain niche segments of the aviation, defense, space, medical, telecommunications and electronics industries through its Hollywood, Florida-based Flight Support Group and its Miami, Florida-based Electronic Technologies Group. HEICO's customers include a majority of the world's airlines and overhaul shops, as well as numerous defense and space contractors and military agencies worldwide, in addition to medical, telecommunications and electronics equipment manufacturers. For more information about HEICO, please visit our website at www.heico.com.

Certain statements in this press release 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 as a result of factors including: the severity, magnitude and duration of the Pandemic; HEICO's liquidity and the amount and timing of cash generation; lower commercial air travel caused by the Pandemic and its 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 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; our ability to make acquisitions and achieve operating synergies from acquired businesses; customer credit risk; interest, foreign currency exchange and income tax rates; 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; and defense spending or budget cuts, which could reduce our defense-related revenue. Parties receiving this material 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.

HEICO CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)

Three Months Ended April 30,

2022

2021

Net sales

$

538,813

$

466,651

Cost of sales

327,584

286,878

Selling, general and administrative expenses

88,452

83,025

Operating income

122,777

96,748

Interest expense

(979

)

(2,083

)

Other income

314

306

Income before income taxes and noncontrolling interests

122,112

94,971

Income tax expense

29,000

18,500

Net income from consolidated operations

93,112

76,471

Less: Net income attributable to noncontrolling interests

8,102

5,798

Net income attributable to HEICO

$

85,010

$

70,673

Net Income per share attributable to HEICO shareholders:

Basic

$

.63

$

.52

Diluted

$

.62

$

.51

Weighted average number of common shares outstanding:

Basic

135,891

135,294

Diluted

137,867

137,814


Three Months Ended April 30,

2022

2021

Operating segment information:

Net sales:

Flight Support Group

$

306,313

$

230,280

Electronic Technologies Group

237,393

243,089

Intersegment sales

(4,893

)

(6,718

)

$

538,813

$

466,651

Operating income:

Flight Support Group

$

66,197

$

35,476

Electronic Technologies Group

65,988

71,294

Other, primarily corporate

(9,408

)

(10,022

)


$

122,777

$

96,748

HEICO CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)

Six Months Ended April 30,

2022

2021

Net sales

$

1,029,156

$

884,553

Cost of sales

627,717

546,346

Selling, general and administrative expenses

179,840

161,174

Operating income

221,599

177,033

Interest expense

(1,775

)

(4,531

)

Other income

540

1,017

Income before income taxes and noncontrolling interests

220,364

173,519

Income tax expense

33,000

(a)

20,800

(b)

Net income from consolidated operations

187,364

152,719

Less: Net income attributable to noncontrolling interests

15,433

11,450

Net income attributable to HEICO

$

171,931

(a)

$

141,269

(b)

Net Income per share attributable to HEICO shareholders:

Basic

$

1.27

(a)

$

1.04

(b)

Diluted

$

1.25

(a)

$

1.03

(b)

Weighted average number of common shares outstanding:

Basic

135,763

135,252

Diluted

137,916

137,778

Six Months Ended April 30,

2022

2021

Operating segment information:

Net sales:

Flight Support Group

$

578,994

$

429,614

Electronic Technologies Group

459,729

466,639

Intersegment sales

(9,567

)

(11,700

)


$

1,029,156

$

884,553

Operating income:

Flight Support Group

$

118,573

$

61,298

Electronic Technologies Group

121,576

131,422

Other, primarily corporate

(18,550

)

(15,687

)

$

221,599

$

177,033

HEICO CORPORATION
Footnotes to Condensed Consolidated Statements of Operations (Unaudited)

(a) During the first quarter of fiscal 2022, the Company recognized a $17.8 million discrete tax benefit from stock option exercises, which, net of noncontrolling interests, increased net income attributable to HEICO by $17.5 million, or $.13 per basic and diluted share.

(b) During the first quarter of fiscal 2021, the Company recognized a $13.5 million discrete tax benefit from stock option exercises, which, net of noncontrolling interests, increased net income attributable to HEICO by $13.4 million, or $.10 per basic and diluted share.

HEICO CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)


April 30, 2022

October 31, 2021

Cash and cash equivalents

$

117,318

$

108,298

Accounts receivable, net

269,850

244,919

Contract assets

79,598

80,073

Inventories, net

519,498

478,050

Prepaid expenses and other current assets

46,461

26,045

Total current assets

1,032,725

937,385

Property, plant and equipment, net

193,558

193,638

Goodwill

1,511,466

1,450,395

Intangible assets, net

624,917

582,307

Other assets

322,667

334,682

Total assets

$

3,685,333

$

3,498,407

Current maturities of long-term debt

$

1,781

$

1,515

Other current liabilities

302,411

293,365

Total current liabilities

304,192

294,880

Long-term debt, net of current maturities

264,095

234,983

Deferred income taxes

42,629

40,761

Other long-term liabilities

350,016

378,257

Total liabilities

960,932

948,881

Redeemable noncontrolling interests

303,927

252,587

Shareholders' equity

2,420,474

2,296,939

Total liabilities and equity

$

3,685,333

$

3,498,407

HEICO CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

Six Months Ended April 30,

2022

2021

Operating Activities:

Net income from consolidated operations

$

187,364

$

152,719

Depreciation and amortization

46,707

45,919

Share-based compensation expense

6,855

4,271

Employer contributions to HEICO Savings and Investment Plan

5,364

5,046

Deferred income tax provision (benefit)

2,080

(8,487

)

(Decrease) increase in accrued contingent consideration, net

(1,773

)

659

Increase in accounts receivable

(20,263

)

(3,795

)

Decrease in contract assets

1,778

596

(Increase) decrease in inventories

(42,766

)

2,932

(Decrease) increase in current liabilities, net

(17,152

)

8,748

Other

6,559

1,504

Net cash provided by operating activities

174,753

210,112

Investing Activities:

Acquisitions, net of cash acquired

(105,533

)

(20,226

)

Capital expenditures

(16,211

)

(21,938

)

Investments related to HEICO Leadership Compensation Plan

(11,700

)

(10,900

)

Other

(10,511

)

1,017

Net cash used in investing activities

(143,955

)

(52,047

)

Financing Activities:

Borrowings (payments) on revolving credit facility, net

28,000

(155,000

)

Redemptions of common stock related to stock option exercises

(23,692

)

(3,624

)

Cash dividends paid

(12,227

)

(10,818

)

Distributions to noncontrolling interests

(10,576

)

(13,823

)

Revolving credit facility issuance costs

(1,010

)

(1,468

)

Proceeds from stock option exercises

1,610

3,838

Other

(210

)

(522

)

Net cash used in financing activities

(18,105

)

(181,417

)

Effect of exchange rate changes on cash

(3,673

)

1,944

Net increase (decrease) in cash and cash equivalents

9,020

(21,408

)

Cash and cash equivalents at beginning of year

108,298

406,852

Cash and cash equivalents at end of period

$

117,318

$

385,444

HEICO CORPORATION
Non-GAAP Financial Measures (Unaudited)
(in thousands, except ratios)

Six Months Ended April 30,

EBITDA Calculation

2022

2021

Net income attributable to HEICO

$

171,931

$

141,269

Plus: Depreciation and amortization

46,707

45,919

Plus: Net income attributable to noncontrolling interests

15,433

11,450

Plus: Interest expense

1,775

4,531

Plus: Income tax expense

33,000

20,800

EBITDA (a)

$

268,846

$

223,969

Three Months Ended April 30,

EBITDA Calculation

2022

2021

Net income attributable to HEICO

$

85,010

$

70,673

Plus: Depreciation and amortization

23,485

22,916

Plus: Net income attributable to noncontrolling interests

8,102

5,798

Plus: Interest expense

979

2,083

Plus: Income tax expense

29,000

18,500

EBITDA (a)

$

146,576

$

119,970

Trailing Twelve Months Ended

EBITDA Calculation

April 30, 2022

October 31, 2021

Net income attributable to HEICO

$

334,882

$

304,220

Plus: Depreciation and amortization

93,807

93,019

Plus: Net income attributable to noncontrolling interests

29,521

25,538

Plus: Interest expense

4,529

7,285

Plus: Income tax expense

69,500

57,300

EBITDA (a)

$

532,239

$

487,362

Net Debt Calculation

April 30, 2022

October 31, 2021

Total debt

$

265,876

$

236,498

Less: Cash and cash equivalents

(117,318

)

(108,298

)

Net debt (a)

$

148,558

$

128,200

Net debt

$

148,558

$

128,200

Shareholders' equity

$

2,420,474

$

2,296,939

Net debt to shareholders' equity ratio (a)

6.1

%

5.6

%

Net debt

$

148,558

$

128,200

EBITDA (trailing twelve months)

$

532,239

$

487,362

Net debt to EBITDA ratio (a)

.28

.26

(a) See the "Non-GAAP Financial Measures" section of this press release.

Victor H. Mendelson (305) 374-1745 ext. 7590
Carlos L. Macau, Jr. (954) 987-4000 ext. 7570

SOURCE: HEICO Corporation



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