HEICO Corporation 2026 Q3 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- HEICO Corporation reported record third quarter fiscal 26 results with consolidated net income increasing 33% to $235.4 million, or $1.67 per diluted share, compared to $177.3 million, or $1.26 per diluted share, in the third quarter of fiscal 25.
- Consolidated operating income rose 34% to $355.2 million, and net sales increased 23% to $1,413.1 million year over year.
- The Electronic Technologies Group set all-time quarterly operating income and net sales records, increasing 55% and 36%, respectively, driven by 18% organic growth and acquisitions.
- The Flight Support Group also set records with operating income up 24% and net sales up 18%, reflecting 12% organic growth and acquisitions.
- Consolidated EBITDA increased 31% to $415.2 million, and net debt to EBITDA ratio improved to 1.57 times as of July 31, 2026.
- Cash flow from operations increased 49% to $345.3 million, nearly 150% of net income.
- HEICO issued $1.2 billion of senior unsecured notes and amended its revolving credit facility, increasing committed capital to $2.2 billion with potential to expand to $3 billion.
- HEICO paid its 96th consecutive semi-annual cash dividend with an 8% increase to $0.13 per share.
- In June 2026, HEICO completed acquisitions of Cook Defense Systems Limited and Calrec Technologies LLC, both expected to be accretive within a year.
- Organic growth was broad-based across defense, aerospace, electronics, and industrial technology markets with strong bookings and record backlog.
- Margins improved with Flight Support Group operating margin at 25.9% and Electronic Technologies Group operating margin at 26%, both reflecting efficiencies and favorable product mix.
- Component repair revenue growth was slower due to supply chain bottlenecks and increased use of PMA products, which reduce revenue but increase profitability.
- HEICO's defense-related organic growth was strong, particularly in specialty products with upper 20% growth.
- The company highlighted participation in emerging markets such as drones, missile defense, industrial gas turbines, AI-related data centers, and commercial and defense space.
- Capital expenditures remain steady at about 1.5% of sales with some incremental investments to support customer demand and backlog.
- HEICO's acquisition pipeline is robust with opportunities for small, medium, and large deals, maintaining a disciplined approach focused on strategic fit and financial criteria.
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Transcript
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Welcome to the HEICO Corporation third quarter 2026 financial results call. My name is Samara, and I will be your operator for today's call. Certain statements in this conference call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. HEICO's actual results may differ materially from those expressed in or implied by those forward-looking statements.
Factors that could cause such differences include, among others, the severity, magnitude, and duration of public health threats, our liquidity and the amount and timing of cash generation, lower commercial air travel, airline fleet changes, or airline purchasing decisions, which could cause lower demand for our goods and services, product specification costs and requirements, which could cause an increase in 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, cybersecurity events or other disruptions of our information technology systems could adversely affect our business and 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 Eric Mendelson, HEICO's Co-Chairman and Co-Chief Executive Officer.
Thank you, and good morning to everyone on this call. Thank you for joining us, and we welcome you to this HEICO third quarter fiscal 2026 earnings announcement teleconference. I'm Eric Mendelson, HEICO's Co-Chairman and Co-CEO. I'm joined here this morning by Victor Mendelson, HEICO's other Co-Chairman and Co-CEO, and Carlos Macau, our Executive Vice President and CFO. Before getting into our results, I would first like to thank HEICO's nearly 13,000 outstanding team members around the world. Once again, your dedication to our company, our customers, and your fellow team members produced yet another exceptional quarter for HEICO. We are tremendously grateful for everything you do and remain excited about HEICO's future and the opportunities ahead.
One of the most asked questions by investors and analysts is: What is HEICO's secret sauce, and how does HEICO continue to report exceptional earnings growth, not only quarter-over-quarter and year-over-year, but decade over decade for nearly 37 years? The answer is always simple: good markets, solid businesses, and even greater people. HEICO succeeds because we simply try harder, and our customers don't have to come to us, in general, because they have no other alternative. Customers buy from HEICO because they want to buy from HEICO for our highest quality, with the shortest turn times at the most competitive price, and most importantly, from who we believe are the best people in our industry. HEICO team members who possess a certain HEICO DNA developed over decades, not just the last upcycle.
When you want to thank Victor, Carlos, or me, please know that we're just simply the proverbial tip of the iceberg, and we, in turn, will thank Team HEICO for all of their hard work, technical excellence, and most importantly, HEICO camaraderie. Of course, there's HEICO's team members' never-ending focus on cash flow. As one of our close friends told us many years ago, and as we always say at HEICO, "Earnings are opinion. Cash flow is fact." This quarter, I'm proud to announce there was $345 million of it. $345 million of cash generated from operations, which is almost 150% of our net income. Thank you, Team HEICO. We are immensely proud of our third quarter results, which shows continued margin expansion, robust organic growth, and strong cash generation.
We remain very bullish and optimistic about HEICO's opportunities and our ability to continue our long-term growth and profitability. To summarize the highlights of our third quarter fiscal 2026 results, consolidated net income, operating income, and net sales in the third quarter of fiscal 2026 represent record results for HEICO, increasing by 33%, 34%, and 23%, respectively, compared to the third quarter of fiscal 2025. Consolidated net income increased 33% to a record $235.4 million, or $1.67 per diluted share in the third quarter of fiscal 2026, up from $177.3 million or $1.26 per diluted share in the third quarter of fiscal 2025.
Consolidated operating income increased 34% to a record $355.2 million in the third quarter of fiscal 2026, up from $265 million in the third quarter of fiscal 2025. Consolidated net sales increased 23% to a record $1,413.1 million in the third quarter of fiscal 2026, up from $1,147.6 million in the third quarter of fiscal 2025. The Electronic Technologies Group set all-time quarterly operating income and net sales records in the third quarter of fiscal 2026, increasing 55% and 36%, respectively, over the third quarter of 2025. Wow. These increases principally reflect strong 18% organic growth driven by an improved demand for most of the Electronic Technologies Group's products, as well as contributions from our fiscal 2026 and 2025 acquisitions.
The Flight Support Group also set all-time quarterly operating income and net sales records in the third quarter of fiscal 2026, improving 24% and 18%, respectively, over the third quarter of fiscal 2025. These increases principally reflect strong 12% organic growth from increased demand across all of our product lines, as well as the contributions from our fiscal 2026 acquisitions. Consolidated EBITDA increased 31% to $415.2 million in the third quarter of fiscal 2026, up from $316.4 million in the third quarter of fiscal 2025. Our net debt to EBITDA ratio improved to 1.57 times as of July 31, 2026, down from 1.6 times as of October 31, 2025. Cash flow provided by operating activities increased 49% to $345.3 million in the third quarter of fiscal 2026, up from $231.2 million in the third quarter of fiscal 2025.
During the third quarter, we issued $1.2 billion of senior unsecured notes, further strengthening our balance sheet, and used the proceeds to repay outstanding borrowings under our revolving credit facility. At the same time, we entered into an agreement to amend and extend the maturity date of our revolving credit agreement by three years to June 2031, and to increase the committed capital to $2.2 billion. Furthermore, our credit facility now includes a feature to increase the capacity by $800 million to become a $3 billion facility through increased lender commitments and can be extended for two additional one-year periods. We are very pleased with the execution of the bond offering and credit facility amendments, which further enhances our liquidity and financial flexibility and positions HEICO to continue pursuing our long-term growth objectives.
We would like to thank Truist, Bank of America, PNC, Wells Fargo, Crédit Agricole, TD, Huntington, JP Morgan, M&T, and RBC for their long-term support of our growth capital needs. In July 2026, we paid our 96th consecutive semiannual cash dividend since 1979 at the rate of $0.13 per share, representing an 8% increase over the prior dividend paid in January of 2026. In June, we completed two acquisitions. Our Flight Support Group, through an 80%-owned subsidiary, acquired 100% of the stock of Cook Defence Systems Limited, William Cook Stanhope Limited, and William Cook Intermodal Limited, collectively, we call Cook Defence. Cook Defence designs and manufactures track systems, mobility solutions, and armored steel components for military fighting vehicles. The purchase price was paid in cash, principally using proceeds from our revolving credit facility.
The Electronic Technologies Group, Exxelia's subsidiary, acquired 90% of the membership interests in CalRamic Technologies LLC. CalRamic designs and manufactures high voltage ceramic capacitors for high reliability applications, primarily serving the aerospace and defense markets, as well as select industrial niches. The purchase price was paid in cash using cash provided by operating activities. We expect both of these acquisitions to be accretive to our earnings within the year following the acquisition. In addition, we have an excellent acquisition pipeline consisting of great potential transactions, both large and small. I now turn the call over to Victor Mendelson, HEICO's Co-Chairman and Co-CEO, to discuss the third quarter results of our Flight Support and Electronic Technologies Groups in greater detail.
Eric, thank you very much. Before getting into the details, I would also like to recognize and thank our outstanding team members around the world. The results we are discussing today reflect your continued dedication, your discipline, and your commitment to serving our customers and to strengthening our company. We are incredibly grateful for everything you do, and we are as excited as ever about HEICO's future and the opportunities ahead for all of us. Turning now to details of the operations. The Flight Support Group's net sales increased 18% to a record $947.8 million in the third quarter of fiscal 2026, up from $802.7 million in the third quarter of fiscal 2025. That sales increase resulted from strong organic growth of 12%, as well as the impact from our fiscal 2026 acquisitions. Of course, the organic sales growth reflects increased demand across all, I emphasize all, of our product lines.
The Flight Support Group's operating income increased 24% to a record $245.3 million in the third quarter of fiscal 2026, up from $198.3 million in the third quarter of fiscal 2025. That operating income increase was principally derived from that previously mentioned net sales growth, as well as an improved gross profit margin and SG&A expense efficiencies that were realized from the net sales growth. The improved gross profit margin principally reflects a more favorable product mix within our specialty products and our aftermarket replacement parts product lines. Flight Support Group's operating margin improved to 25.9% in the third quarter of fiscal 2026, up from 24.7% in the third quarter of fiscal 2025, and that operating margin increase arose chiefly from the previously mentioned improved gross profit margin.
Given, by the way, that acquisition-related intangible amortization expense consumed approximately 200 basis points of our operating margin in the FSG in the third quarter of fiscal 2026. The FSG's cash margin, which is the way, by the way, we judge businesses and we believe businesses should be judged, so before amortization, we call it EBITA, was approximately 28.5%, which has been consistently excellent, and in absolute terms is, as far as I am concerned, spectacular. That is 110 basis points higher than the comparable FSG cash margin of 27.4% in the third quarter of fiscal 2025. To achieve these margins at these levels while continuing to deliver meaningful cost savings, outstanding service, and exceptionally fast turnaround times to our customers is a strong reflection of the value our team members continue to deliver.
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