TransDigm : Q2 2024 Transdigm Group Inc Earnings Presentation

FY 2024 Q2 Earnings Call

May 7, 2024

Agenda

 TransDigm Overview, Highlights and Outlook	Kevin Stein
	President and CEO

 Market Review	Mike Lisman
	Co‐COO

	Operating Performance and Financial Results	Sarah Wynne
		CFO
	Q&A

1

Forward Looking Statements & Special Notice

Regarding Pro Forma and Non‐GAAP Information

FORWARD LOOKING STATEMENTS

This presentation contains forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including information regarding our guidance for future periods. These forward‐looking statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events, many of which are outside of our control. Consequently, such forward looking statements should be regarded solely as our current plans, estimates and beliefs. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward‐looking statement. The Company does not undertake, and specifically declines, any obligation, to publicly release the results of any revisions to these forward‐looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. All forward‐looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. These risks and uncertainties include but are not limited to: the sensitivity of our business to the number of flight hours that our customers' planes spend aloft and our customers' profitability, both of which are affected by general economic conditions; supply chain constraints; increases in raw material costs, taxes and labor costs that cannot be recovered in product pricing; failure to complete or successfully integrate acquisitions; our indebtedness; current and future geopolitical or other worldwide events, including, without limitation, wars or conflicts and public health crises; cybersecurity threats; risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability‐related voluntary goals or regulatory requirements; our reliance on certain customers; the United States ("U.S.") defense budget and risks associated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; risks related to changes in laws and regulations, including increases in compliance costs; potential environmental liabilities; liabilities arising in connection with litigation; risks and costs associated with our international sales and operations; and other factors. Further information regarding the important factors that could cause actual results to differ materially from projected results can be found in TransDigm Group's most recent Annual Report on Form 10‐K and other reports that TransDigm Group or its subsidiaries have filed with the Securities and Exchange Commission.

You are cautioned not to place undue reliance on our forward‐looking statements. TransDigm Group Incorporated assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise.

SPECIAL NOTICE REGARDING PRO FORMA AND NON‐GAAP INFORMATION

This presentation sets forth certain pro forma financial information. This pro forma financial information gives effect to certain recently completed acquisitions. Such pro forma information is based on certain assumptions and adjustments and does not purport to present TransDigm's actual results of operations or financial condition had the transactions reflected in such pro forma financial information occurred at the beginning of the relevant period, in the case of income statement information, or at the end of such period, in the case of balance sheet information, nor is it necessarily indicative of the results of operations that may be achieved in the future.

This presentation also sets forth certain non‐GAAP financial measures. A presentation of the most directly comparable GAAP measures and a reconciliation to such measures are set forth in the appendix.

2

TransDigm Overview

Distinguishing Characteristics

 Highly engineered aerospace components		Significant aftermarket content
 Proprietary products		High free cash flow

Proprietary Revenues (1)	Pro Forma Revenues (1)	Pro Forma EBITDA
		As Defined (1)
Non‐	Comm OEM
Proprietary
27%	OEM
	Defense
	38%

Proprietary

Comm	Aftermarket
Aftermarket
35%

(1) Pro forma revenue is for the fiscal year ended 9/30/2023. Includes full year impact of the Calspan Corporation acquisition completed May 2023. Please see the Special Notice Regarding Pro	3
Forma and Non‐GAAP Information.

2024 Q2 Financial Performance by Markets - Pro Forma

Highlights

Commercial OEM:	30% Biz
Jet/Heli

• Q2 '24 Commercial Transport Revenue Up 25%
• Q2 '24 Business Jet/Helicopter Revenue Up 15%
• Strong Bookings Continue to Support FY24 Commercial OEM Guidance

Q2 Review - Pro Forma Revenues⁽¹⁾

Actual vs. Prior Year

Q2 YTD

70% Com

Transport

Commercial OEM:

Up 21%

Up 22%

Commercial Aftermarket:

20% Biz

 Q2 '24 Commercial Transport Revenue Up 12% Jet/Heli80% Com

Transport

• • Q2 '24 Passenger Transport Revenue Up ∼20%
  • Q2 '24 Freight Revenue Down ∼15%
• Q2 '24 Business Jet/Helicopter Revenue Down 5%
• Strong Bookings Continue to Support FY24 Commercial Aftermarket Guidance

Commercial	Up 8%	Up 15%
Aftermarket:

Defense:

 Q2 '24 Defense Aftermarket Growth Outpaced Defense OEM	Defense:	Up 21%	Up 25%
 Revenue Growth Well Distributed Across Businesses
 Improvements in U.S. Government Defense Spend Outlays

(1) Pro forma revenue for all periods includes the impact of the Calspan Corporation acquisition completed May 2023. Please see the Special Notice Regarding Pro Forma and Non‐GAAP	4
information.

Second Quarter 2024 Select Financial Results

($ in millions, except per	Q2 FY		Q2 FY
share amounts)
	2024		2023
Revenue	$1,919	$1,592	21%	Increase
Gross Profit	$1,152	$929
	60.0%	58.4%	1.6%
SG&A	$248	$199
% to Sales	12.9%	12.5%	0.4%
Interest Expense ‐ Net	$326	$295	11%	Increase
Refinancing Costs	$28	$5
EBITDA As Defined	$1,021	$817	25%	Increase
Margin %	53.2%	51.3%
Adjusted EPS	$7.99	$5.98	34%	Increase
GAAP Tax Rate	22.2%	23.4%
Adjusted Tax Rate	26.0%	25.5%

• Application of our value‐driven operating strategy

• Fixed overhead spread over higher production volumes

• Continued cost mitigation efforts

• Higher non‐cash stock and deferred compensation expense
• Interest on new debt and increase in rates on variable rate debt, partially offset by higher interest income
• Due to the completed refinancing of one senior secured note, one senior subordinated note and the refinancing of Tranche H & I term loans

5

Fiscal 2024 Outlook

Market Growth Assumptions

FY 2023	Pro
Forma Sales Mix (1)	Market	FY 2024 Expected Growth
27%		Commercial OEM	Around 20%
35%		Commercial Aftermarket	Mid-Teens % Range
38%		Defense	Mid-Teens % Range

Guidance Summary

($ in millions, except per share amounts)
		FY 24 Guidance		FY 24 Guidance Midpoint Change
								Current			Prior			∆
		Low			High
Revenues	$	7,680	$	7,800	Revenues	$	7,740	$	7,665	$	75
Net Income	$	1,608	$	1,686
GAAP EPS	$	26.06	$	27.40
EBITDA As Defined	$	3,995	$	4,095	EBITDA As Defined	$	4,045	$	3,985	$	60
% of sales		52.3%			52.0%
% of sales		52.0%			52.5%
Adj. EPS	$	31.75	$	33.09	Adj. EPS	$	32.42	$	30.85	$	1.57

(1) Pro forma revenue is for the fiscal year ended 9/30/2023. Includes full year impact of the Calspan Corporation acquisition completed May 2023. Please see the Special Notice Regarding	6
Pro Forma and Non‐GAAP Information.

Fiscal 2024 Select Financial Assumptions

Select Financial Assumptions for Fiscal 2024

	Prior Assumptions (Issued February 2024)	Updated Assumptions
Capital Expenditures	$185 to $215 million	No change
Full Year Net Interest Expense	≈ $1.38 billion (includes $60 million of	≈ $1.32 billion (includes $110 million of
	interest income)	interest income)
Full Year Effective Tax Rate	≈ 22% to 24% for GAAP EPS, Adjusted EPS and	No change
	Cash Taxes
Depreciation & Amortization	$290 to $295 million	No change
Expense
(ex backlog)
Non‐Cash Stock	$175 to $195 Million	$205 to $225 Million
Compensation and Deferred
Compensation Expense
Other EBITDA As Defined	$30 to $35 million	$75 to $80 million
Add‐Backs (1)
Weighted Average Shares	57.8 million	57.85 million

1. Other EBITDA As Defined Add‐Backs primarily include estimates for refinancing costs, foreign currency gains or losses, employer withholding taxes on stock option exercises,

acquisition‐related expenses and adjustments and other, net.	7

Reconciliation of Fiscal 2024 Outlook

($ in millions, except per

share amounts)

	Guidance
Net income	Midpoint
$	1,647
Adjustments:
Depreciation and amortization expense		294
Interest expense - net		1,320
Income tax provision		491
EBITDA		3,752
Adjustments:
Acquisition transaction-related expenses and adjustments (1)		41
Non-cash stock and deferred compensation expense (1)		215
Refinancing costs (1)		29
Other, net (1)		8
Gross Adjustments to EBITDA		293
EBITDA As Defined		$4,045
EBITDA As Defined, Margin (1)		52.3%
GAAP earnings per share		$26.73
Adjustments to earnings per share:
Inclusion of the dividend equivalent payments		1.75
Non-cash stock and deferred compensation expense		2.87
Acquisition transaction-related expenses and adjustments		0.60
Refinancing costs		0.38
Other, net		0.09
Adjusted earnings per share		$32.42
Weighted-average shares outstanding		57.85
GAAP & Adj Tax Rate	22% - 24%

(1) Refer to tables in Appendix for definitions of Non-GAAP measurement adjustments.	8

Reconciliation of GAAP EPS to Adjusted EPS ‐ Guidance

														Full Year Guidance
		Thirteen Week Periods Ended			Twenty‐Six Week Periods Ended			Mid‐Point
		March 30, 2024			April 1, 2023		March 30, 2024			April 1, 2023			September 30, 2024
GAAP earnings per share from continuing
operations	$	6.97	$	5.32	$	11.83	$	8.65	$	26.73
Adjustments to earnings per share:
Dividend equivalent payments		‐			‐			1.75			0.67			1.75
Acquisition and divestiture transaction‐
related expenses and adjustments		0.21			0.05			0.25			0.10			0.60
Non‐cash stock and deferred compensation
expense		0.77			0.55			1.44			1.01			2.87
Refinancing costs		0.37			0.07			0.37			0.12			0.38
Tax adjustment on income from continuing		(0.33)			(0.15)			(0.52)			(0.23)			‐
operations before taxes
Other, net		‐			0.14			0.03			0.23			0.09
Adjusted earnings per share	$	7.99	$	5.98	$	15.15	$	10.55	$	32.42

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