UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 26, 2024
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||||||||
(216 ) 706-2960
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol: | Name of each exchange on which registered: | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 7.01. | Regulation FD Disclosure. | ||||
On June 26, 2024 at 9:00 a.m., Eastern Time, TransDigm Group Incorporated (the “Company”) will host an Investor Conference. The Company’s Investor Conference presentation is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Company’s Investor Conference presentation is also available in the Investor Relations section of the Company’s website, https://www.transdigm.com/investor-relations/presentations/.
The information in this Item 7.01, including the Exhibit 99.1 attached hereto, is being furnished and shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, unless such subsequent filing specifically references this Current Report on Form 8-K.
| Item 9.01. | Financial Statements and Exhibits. | ||||
(d) Exhibits
Exhibit No. | Description | ||||||||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||||||||||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TRANSDIGM GROUP INCORPORATED | |||||||||||
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Title: | General Counsel, Chief Compliance Officer and Secretary | ||||||||||
Dated: June 26, 2024
2024 TransDigm Analyst Day June 26, 2024 1 Exhibit 99.1
Agenda Time Event Presenter 8:30 Registration 9:00 Start Opening Remarks Nick Howley TDG Overview Kevin Stein Consistent Operating Model & Customer Value Overview Mike Lisman Management Process & Value Creation Joel Reiss Financial Review Sarah Wynne Mergers & Acquisitions Process Blake Kelleher Recent Acquisitions & Integration Patrick Murphy M&A Wrap‐up & Product Presentations Introduction Kevin Stein Break Operating Unit Presentations Breakout: Recent Acquisitions ‐ Calspan, Chelton, DART Greg Campbell, Jason Abbott, Ryan Williamson Esterline Operating Units ‐ Kirkhill, Korry, TA Aerospace Kevin McHenry, Kevin Hanson, Joe Llanes New Business ‐ Airborne Systems, Champion Chris Blackburn, Jason Marlin Productivity Improvements ‐ AeroControlex, AeroFluid, Hartwell Chris Swartz, Mike Hargas, Ron Kato Lunch Q&A Panel 2:00 End 2
Forward Looking Statements Statements in this presentation that are not historical facts, including statements under the heading “2024E,” are forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” or “continue” and other words and terms of similar meaning may identify forward‐looking statements. All forward‐looking statements involve risks and uncertainties that could cause TransDigm Group’s actual results to differ materially from those expressed or implied in any forward‐looking statements made by, or on behalf of, TransDigm Group. 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. Except as required by law, TransDigm Group undertakes no obligation to revise or update the forward‐looking statements contained in this presentation. 3
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. 4
Opening Remarks Nick Howley– Chairman of the Board
6 Opening Remarks
7 Consistent Value Compounder In its 18 years under public ownership, TransDigm has outperformed the S&P 500 by 26x and its peer group by 12x Source: CapIQ 1. Return calculation assumes dividends are reinvested and accounts for share dilution 2. Peer Group consists of HEICO, Woodward, L3Harris, AAR Corp., and Triumph
8 Consistent Value Compounder TransDigm has returned nearly 3,300x its initial invested equity, reflecting a remarkably evenly distributed 36% IRR1 for over three decades
Corporate Control Local Autonomy Economy of Scale Mgmt Resources Value Generation Strategy Structure Execution Motivation Central Control Local Autonomy Employees Owners CORPORATE OPERATING UNIT Organizational Philosophy ‐ Decentralized 9
Unique Compensation Concept – “Think/act like an owner” Low ` High Cash Compensation 100% Performance Vesting TDG Ownership Low ` High Equity Based Compensation Very High Shareholder Alignment 10
11 Consistent Strategy & Value Creation “Private Equity‐ Like” Returns with Liquidity of a Public Market Decentralized Organization / Aligned with Shareholders Disciplined Acquisition Strategy Efficient Capital Structure Proprietary Aerospace and Aftermarket Value Based Operating Strategy
TransDigm Overview Kevin Stein – President & CEO
Experienced Senior Management Team with Proven Track Record 13 EXECUTIVE TITLE Officers & Executives: Kevin Stein President & CEO Mike Lisman Co-COO Joel Reiss Co-COO Sarah Wynne CFO Alex Feil Executive VP Pete Palmer Executive VP Paula Wheeler Executive VP Patrick Murphy Executive VP Marko Enderlein Executive VP Kevin McHenry Executive VP Jessica Warren General Counsel & CCO Chris Swartz President, AeroControlex Mike Hargas President, AeroFluid Products Chris Blackburn President, Airborne Systems Greg Campbell President, Calspan Corporation Jason Marlin President, Champion Aerospace Jason Abbott President, Chelton Ryan Williamson President, DART Aerospace Ron Kato President, Hartwell Kevin Hanson President, Korry Joe Llanes President, TA Aerospace Operating Unit Management Participating In Analyst Day: Proven Track Record Experienced with a Leveraged Capital Structure Deep Bench Shared Values and Operating Strategies Management is a Significant Owner
Superior Stock Performance 14(1) TransDigm returns are adjusted for special dividends paid of $187.00 in 10‐year period, $116.00 in 5‐year period and $35.00 in 1‐year period. All returns measured as of 5/31/24. (2) S&P adjusted for dividends estimated to be 1%. 27% 30% 79% 12% 15% 27% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 10 YR Return CAGR 5 YR Return CAGR 1 YR Return CAGR TDG S&P 500 (2)(1) Historical TDG Returns vs. S&P 500
“Private Equity‐Like Growth in Value with Liquidity of a Public Market” + 15% ‐ 20% / year on average Our Objective 15
Unique & Consistent Business Strategy Private & Public Proprietary Aerospace Products with Significant Aftermarket 3‐Part Value‐Based Operating Strategy Decentralized, Organization/ Aligned with Shareholders Focused Discipline Acquisition Strategy “Private Equity‐Like” Capital Structure & Culture TransDigm’s Consistent Goal – “Private Equity‐Like” Returns to Shareholders 16
Company Overview % Change FY2024 Guidance Mid-Point (2) FY24 Guidance Mid-Point v. FY22 Revenue 5,429$ 6,585$ 7,740$ + 43% EBITDA as Defined (1) 2,646$ 3,395$ 4,045$ + 53% EBITDA as Defined margin 48.7% 51.6% 52.3% FYE Share Price $525 $843 $1,354 (4) + 158% FY2022 FY2023 ($ in millions) Enterprise Value (3) ≈ $92 Billion (1) EBITDA as Defined is a non‐GAAP financial measure. For a historical reconciliation of EBITDA as Defined to Net Income, please see the appendix. (2) Revenue and EBITDA As Defined information under FY24 Guidance Mid‐Point reflect the mid‐point of the guidance range for the fiscal year ending 9/30/24 that was issued on 5/7/24. TransDigm only updates guidance quarterly and this presentation does not confirm or update guidance now. (3) Enterprise value calculated as of 6/17/24 equals equity value (shares outstanding as of 3/30/24 multiplied by the TDG closing stock price on 6/17/24) plus pro forma total net debt (total debt less cash). (4) TDG closing stock price on 6/17/24 plus $35 dividends paid in fiscal 2024. Business Snapshot 17
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 19 93 19 98 20 03 20 08 20 13 20 18 20 23 20 24 E $7,740 Consistent Record of Growth and Margin Expansion ($ in millions) ($ in millions) EBITDA As Defined Margin % (1) 19.2% 39.6% 42.3% 46.6% 46.8% 49.3% 51.6% 52.3% (1) EBITDA as Defined is a non‐GAAP financial measure. For a historical reconciliation of EBITDA as Defined to Net Income, please see the appendix. (2) Revenue and EBITDA As Defined information for FY24 reflects the mid‐point of the guidance range for the fiscal year ending 9/30/24 that was issued on 5/7/24. The Company only updates guidance quarterly and this presentation does not confirm or update guidance now. (2) (2) $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 19 93 19 98 20 03 20 08 20 13 20 18 20 23 20 24 E $4,045 18 Revenues EBITDA As Defined Margin (1)
Recurring Stream of Profitable Aftermarket Revenue 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Profitability % Airframe Program Life Cycle (Years) Aftermarket OE Production 19
Strong Focus on High‐Margin Aftermarket 20 Commercial Aftermarket 35% Commercial OEM 27% Defense 38% Aftermarket OEM Aftermarket: 56% OEM: 44% (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. Excludes impact of any fiscal year 2024 acquisitions. Please see the Special Notice Regarding Pro Forma and Non‐ GAAP Information. (2) EBITDA As Defined is the primary measurement used by management to review and assess the operating performance of each segment. EBITDA As Defined (2)FY 2023 Pro Forma Revenues (1)
Note: Based on management estimates of pro forma TransDigm sales for FY2023. Please see the Special Notice Regarding Pro Forma and Non‐GAAP Information. 21 Proprietary ~90% Non‐proprietary ~10% Results in strong market positions and a stable, recurring revenue stream Significant Proprietary Revenue Base Proprietary Revenue
1993 – 2006 2006 – 2010 2011 – 2014 Adel Aeroproducts Wiggins Controlex Marathon Adams Rite Aerospace Christie Champion Honeywell Lube Pump Fuelcom Norco Avionic Instruments Skurka Fluid Regulators Eaton Motors Talley Actuation Schneller Harco AmSafe Passenger Restraints AmSafe Commercial Products AmSafe Cargo Restraints & Specialty Devises Aero‐Instruments Beams Aerosonic Arkwin Whippany Actuation Airborne Systems – North America Airborne Systems – Europe Elektro‐Metall Export Sweeney Electra‐Motion CDA InterCorp. Avtech ADS/Transicoil Bruce CEF Unison/GE APC/GE Acme Woodward HRT Dukes Semco Hartwell Electromech Tyee TAC (7) Linread Valley‐Todeco AQS Privately Held NYSE (1) Divested in Q2 and Q3 of FY2011 (2) Divested in Q2 FY2018 (1) Telair International AAR Cargo Systems Nordisk Aviation Franke Aquarotter Pexco PneuDraulics Breeze‐Eastern DDC Young & Franklin (Tactair) Schroth (2) North Hills Cablecraft Aerospace Preece Kirkhill Extant Skandia M cKechnie Am Safe Telair (1) (1) 2019 – 20202015 – 2018 Advanced Input Systems(3) Armtec Auxitrol Weston Avista (5) CMC Electronics Darchem Gamesman(3) Hytek Korry Leach International Leach NA LRE Medical(3) Mason NMC Palomar Racal(6) Scioteq (7) Souriau Sunbank(4) TA Aerospace Treality SVS (7) Esterline TransDigm has acquired 92 businesses since 1993, including 77 since its IPO. Proven Record of Acquisition and Integration 2021 – 2024 Chelton Ltd. Canyon AeroConnect DART Aerospace Calspan Corporation GKN – FPT Industries SEI Industries CPI – Electron Device Business (5) Divested in Q1 FY2021 (6) Divested in Q2 FY2021 Cobham Aero Connectivity 22(3) Divested in Q4 FY 2019 (4) Divested in Q1 FY 2020 (7) Divested in Q3 FY2021
TransDigm Deleverage Profile Net Debt / Pro Forma EBITDA as Defined Note: EBITDA as Defined is a non‐GAAP financial measure. For a reconciliation of EBITDA as Defined to Net Income, please see the appendix. 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x 5.5x 6.0x 6.5x 7.0x Special Dividend Warburg Pincus Recap IPO Recap & Dividend McKechnie Acquisition AmSafe Acquisition Special Dividend Special Dividend Refi & Dividend Telair, Franke and Pexco DDC Acquisition & GCP Special dividend Special dividend Refinancing Esterline Acquisition Special Dividend COVID-19 Downturn Special Dividend 23
24 Consistent Strategy & Value Creation “Private Equity‐ Like” Returns with Liquidity of a Public Market Decentralized Organization / Aligned with Shareholders Disciplined Acquisition Strategy Efficient Capital Structure Proprietary Aerospace and Aftermarket Value Based Operating Strategy
Our Markets & Customer Value Overview Mike Lisman – Co‐COO
TDG Organization 26 Kevin Stein President & CEO Mike Lisman Co-COO Joel Reiss Co-COO Jes Warren General Counsel Sarah Wynne CFO Scalable Organization Structure EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units
Diverse Products, Platforms and Markets 27
TransDigm – Expanding Global Footprint 28 50 Operating Units; ≈110 Manufacturing Locations
Steady Growth in Passenger Traffic and Installed Base Drives Stable Aftermarket Sales 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Worldwide Installed Base Growth Worldwide Installed Base Growth 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Worldwide RPK Growth Worldwide RPK Growth Source: IATA, Aerodynamic Advisory, CAPA, ICAO 29 2023 – 2029E CAGR +6.5% 2023 – 2029E CAGR +3% Worldwide Inst lled Base Worldwide RPK’s
Commercial OEM Market Environment 30 Commercial Transport (Boeing & Airbus) Source: Analysts/ Management Estimates Commercial Transport – Total Deliveries 50+ Year History 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 13 14 15 16 17 18 19 20 21 22 23E 24E 25E 26E 27E 28E 29E Commercial Transport Deliveries 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 19 65 19 67 19 69 19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 20 17 20 19 20 21 20 23 E 4 years 7 years 5 years 7 years 20 24 E 15 years ` Note: Boeing, Airbus, and regional aircraft manufacturer deliveries. Note: Boeing, Airbus deliveries `
Fleet Age Remains Elevated Source: Aerodynamic Advisory 31 Age of Commercial Aircraft Fleet Over Time 10.0 10.5 11.0 11.5 12.0 12.5 13.0 13.5 14.0 14.5 15.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Average Aircraft Age (in years) (1) Includes Passenger & Cargo Active Fleet (Narrowbody Jets, Regional Jets, Turboprops & Widebody Jets) 14.2 yrs
Defense Market Environment 32 $500 $550 $600 $650 $700 $750 $800 $850 $900 $950 $1,000 2023 2024E 2025E 2026E 2027E 2028E U.S. Defense Base Budget ($Bn) CAGR + LSD% Source: U.S. DOD Defense Budgets (excludes supplementals), Aerodynamic Advisory, Aviation Week $500 $700 $900 $1,100 $1,300 $1,500 $1,700 $1,900 $2,100 $2,300 2023 2024E 2025E 2026E 2027E 2028E International Defense Spending ($Bn) CAGR + MSD%
‐50.0% ‐40.0% ‐30.0% ‐20.0% ‐10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Global Long‐Term Avg Annual Growth (RPKs) Installed Base Avg Annual Long‐Term Growth TransDigm Growth Rolling 4 Qtr Peer Group Growth Rolling 4 Qtr Commercial Aftermarket Trends 5 Year Average TDG 11.9% Peer Group 9.0% Commercial Aftermarket Growth 33 Sources: Peer Group: component parts growth rate from Canaccord and respective company filings (average of Crane CAM, Heico FSG, Honeywell CAM, Meggitt CAM prior to Parker Hannifin acquisition, ROC CAM prior to UTX acquisition and Raytheon Technologies CAM (formerly UTC); RPK growth and installed base as reported by Airline Monitor
47% Others 53% TDG Addressed $57B 14% Fuel 32% Labor & Benefits 23% Other 31% Global Maintenance $122B TransDigm’s Addressed Market for Commercial Aftermarket Global Airline Operating Expenses 2023 Total = $855B Source: IATA / AeroDynamic Advisory Analysis / TDG Global Maintenance Spend 2023 Total = $122B TDG Addressed Market 2023 Total = $57B 3% Others 97% TDG Air Transport Aftermarket ≈ $1.7B TransDigm’s Addressed Market for Air Transport Aftermarket is $57B of Which We Hold a ≈ 3% Market Share 34Addressed market refers to the material market where TDG currently has content on by aircraft model and part type
< $3 million Sales per year ≈ 80% to 85% TransDigm’s Diverse Commercial Aftermarket Revenue Base Total FY 2023 Commercial Aftermarket Worldwide Revenue by Annual Sales $ Per Part United Airlines Delta Airlines American Airlines IAG Air France‐KLM Emirates Lufthansa China Southern Airlines Southwest Airlines Air China Qatar Airways Turkish Airlines China Eastern Airlines Ryanair Singapore Airlines Air Canada Aeroflot IndiGo LATAM Airlines easyJet ≈ 50% Worldwide RPKs (1) Top 20 Airlines > $3 million Sales per year ≈ 15% to 20% High SKU Count being Sold Across a Diverse Customer Base 35(1) Source: AeroDynamic Advisory Analysis
Strong Positions on Diverse and Growing Platforms Note: Based on Management estimates of total revenue for 2023. Top 5 Commercial Platforms ≈ 20% Sales B737 A320 B777 B757/767 A350 Top 5 Defense Platforms ≈ 8% Sales Blackhawk C130 F35 F16 A400M TOP PLATFORMS 36
No Significant PMA Threat – At or Below Market Exposure Levels PMA Market Penetration 3rd Party PMA ≈ 1½% to 2½% 3rd Party PMA Less than 2% Total INDUSTRY Commercial Aftermarket $ 37 Source: AeroDynamic Advisory Analysis / TDG Management Analysis Total TDG Commercial Aftermarket $
Surplus Parts Minimal TDG Impact 7 to 10% Surplus Below 4% Surplus Surplus Sales Market Penetration TDG Below Market %Industry No Significant Surplus Market Threat – Though Continue to Monitor TDG Parts Tend to be Consumables, Below $10K Average Sale Price and Away from the Engine – These are Not Typical Surplus Parts Targets 38Source: AeroDynamic Advisory Analysis / TDG Management Analysis
Proven Operating Strategy Profitable New Business Productivity and Cost Improvements Value Based Pricing 3 Value Drivers 39
TDG Operating System: A Detailed Process Investment Highly Engineered Products Require Resourcing ≈ 8‐10% of Total Cost Spent on Engineering Organization Decentralized Execution Business Unit Team Concept Succession Planning Execution Relentless Drive to Create Value Strong Track Record 40
Customer Value Proposition 41 Highest Value to Customers Provide Reliable, Well Engineered Products & Deliver Them On‐Time 41
Prior Platforms 777XPrior Platforms A350Prior Platforms B787 Major New Business Content: Commercial Aircraft “New Designs” 42 B787 A350 777X Strong “New Design” $ / Shipset Growth Over Prior Platforms – “Same Store Basis” Representative Products: • Composite Components • Clamps & Fasteners • Audio System/Software • CPA/Module for Utility Control Systems • Interior Thermo Plastics • Nacelle & Other Latches • Numerous Others Representative Products: • Onboard Cargo System • Cockpit Security System • Cabin/APU Electrical System Interconnect • Decorative Laminates • Engine sensors & GSP Indicators • Numerous Others Representative Products: • Composite Components • Communication Boards/Software • Fuselage Latches • Flight Control Actuators • Numerous Others + Over 35% + Over 45% + Over 5% 42
Prior Platforms A220, A320neo & B737Max Major New Business Content: Single Aisle Commercial Aircraft 43 $ / Shipset Growth Over Prior Platforms – “Same Store Basis” Representative Products: • Airframe Seals • Power Distribution Contactors & Relays • Air System Valving • Nacelle/Fuselage & Other Latches • Decorative Laminates • Flight Control Valving • Cargo Loading System + ≈ 30% Continued Growth in Content on Single Aisle Commercial Aircraft Strong Position & Content Wins on the A220 platform (robust double‐digit growth) For Non “New Designs” (B737Max, A320neo): “Modest Design Change” = “Modest Content Change” • Fire Seals & Engine Duct Seals • Audio Control Panel • Interior Thermo Plastics • Fuel Line Connectors • Numerous Others (1) (1) Represents the Average of the $ / Shipset Growth for the A220, A320neo & B737Max. A220, A320neo & B737Max 43
New Defense Platforms – New Designs – “Same Store Basis” JSF A400M KC46 (767) Representative Products: • Airframe Seals • Hydraulic Actuators/Valves • Engine Clamps • Grommets & Line Supports • Data Management Processing Boards/Software • Electric Motors • Elastomers • Numerous Others Representative Products: • Refueling Connectors • Main Deck Barrier Nets • Nacelle & Other Latches • Power Distribution Contactors & Relays • Ram Air Actuator • Numerous Others Prior Platforms JSF Prior Platforms A400M Prior Platforms KC46 (767) Representative Products: • Cargo Loading System • Composite Components • Winch/Retrieval System • Power Distribution Contactors & Relays • Main Barrier Nets • Engine Sensors • Control Panels & Displays • Numerous Others + ≈ 2X + Over 20 % + ≈ 2X $ / Shipset Growth Over Prior Platforms – “Same Store Basis” 44
Consistent Value Creation Strategy Product Line Detail Focus Active Talent Growth Disciplined Acquisition Integration Performance Stability Consistent Value Creati Strategy Business Unit Detail Focus Active Talent Growth Disciplined Acquisition Integration Solid Value Growth Process 45
Management Process & Value Creation Joel Reiss – Co‐COO
47 Kevin Stein President & CEO Mike Lisman Co-COO Joel Reiss Co-COO Jes Warren General Counsel Sarah Wynne CFO Scalable Organization Structure EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units EVP 6-7 Op Units TDG Organization
Value Creation Driver & Culture Carrier Op Unit Business Guidance President “Coaching” Value Driver Emphasis Quarterly Reviews Talent Development President and Staff Weed & Feed Acquisition Value Creation Assist Due Diligence Guide Integration Process Assess & Revise Management EVP Op Unit 1 Op Unit 2 Op Unit 3 New President Last Year Acquisition Recent Acquisition 48 Executive Vice President (EVP) Role
Structure Small Operating Units Focus on Products and Customers Few Management Layers Business Unit Discipline Execution Significant Local Autonomy Local Decisions Front Line Value Generation Motivation Think and Act Like Owner Create Value Lower Cash Compensation & Higher Equity Value Pricing Productivity New Business VALUE CREATION 49 Organizational Philosophy
President VP of Sales Business Unit Manager Business Unit Manager Business Unit Manager VP of Operations VP of Engineering VP of Finance Business Unit Team Business Unit Team Business Unit Team Business Unit Value Focus 50 Operating Unit Organization
50 Operating Units 115+ Business Units ≈ 16,000 Employees 51 Autonomous Operating Units Electron Device Business
Profitable New Business Productivity and Cost Improvements Value Based Pricing 3 Value Drivers Proven Operating Strategy 52
Grouping of Related Products Co‐located, Cross Functional Team Business Unit Manager Drives Performance Business Unit Teams Profitable New Business Productivity and Cost Improvements Value‐based Pricing Value Driver Focus Standardized Business Metrics Across Operating Units Quarterly Reviews and Mid‐Year Reviews Ownership of Results Accountability 53 Business Unit Value Creation
Drives Organic Growth Focus on Profitable New Business Customer‐Driven Business Opportunities Highly Engineered & Innovative Responsive Development 54 New Business
Profitable New Business New Part with Existing Customer Existing Part with New Customer New Part with New Customer Strong Operational Performance Engineer to Engineer Selling Customer Sponsorship Solve Customer Technical Issues Customer Relationships Highly Engineered New Technology/Processes Rapid Prototype Development Innovation Dedicated Business Unit Teams Concurrent Engineering Phase Gate Process Product Development 55 New Business – How we do it
2024 2025 2026 2027 2028 2029 Annual Data Production Sales NRE $507 $765 $968 $1,318 $1,536 Production COS ($475) ($448) ($656) ($815) ($1,065) ($1,166) Product Margin $59 $109 $153 $253 $370 Margin % 12% 14% 16% 19% 24% SG&A % ‐12% ‐12% ‐12% ‐12% ‐12% EBITDA Margin 0% 2% 4% 7% 12% Spares Sales $116 $263 $837 $1,362 $2,660 Spares COS ($56) ($121) ($360) ($545) ($1,011) Spares Margin $60 $142 $477 $817 $1,649 Spare Margin % 52% 54% 57% 60% 62% SG&A % ‐12% ‐12% ‐12% ‐12% ‐12% EBITDA Margin 40% 42% 45% 48% 50% Total Sales $623 $1,028 $1,805 $2,680 $4,196 Total COS ($504) ($777) ($1,175) ($1,610) ($2,177) Product Margin $119 $251 $630 $1,070 $2,019 Margin % 19% 24% 35% 40% 48% SG&A % ‐12% ‐12% ‐12% ‐12% ‐12% EBITDA Margin 7% 12% 23% 28% 36% Net Cash flow ($475) $45 $128 $413 $749 $1,516 Cum Cash flow ($475) ($430) ($303) $111 $859 $2,375 Return on Investment 6 yrs 56% Data Driven Realistic OEM Production Rates Historical NRE Investment Estimates Actual‐cost Production Cost Estimates Combined OEM & Aftermarket View IRR & Cumulative Cash Flow Analysis No “Must‐Win” Programs Focus on Profitable New Business New Business Model Excerpt Analytical Approach EXAMPLE ONLY 56 New Business Modeling
Annual Productivity Improvements to Offset Inflation Across Total Cost Base 57 Productivity
Monthly Tracking Actual vs. Plan Assigned Owners and Due Dates Offset Unexpected Cost Challenges Not Just for Operations Trust but Validate Note: For Illustration Only 58SAMPLE Productivity – Detailed Cost Reduction Planning
1 2 3 Note: For Illustration Only Sa le s P er E m pl oy ee Av er ag e # of E m pl oy ee s Improving Trend on Constant Dollar Basis “Real” Productivity Savings Productivity focused Capital Expenditures Automation Projects Cross‐Functional Training Cost Savings is not just for Operations 59 Year Productivity ‐ Sales per Employee
60 Processes • Revision Controlled Documentation • Cross‐Training Culture • Open & Honest Communication • VIP Programs • Engaged Management Metrics • Customer Quality & Delivery Ratings • Warranty Returns • Scrap & First Pass Yield • Supplier Quality Verification • Internal Audits • Third Party Audits (AS9100) • FAA Audits • Customer Audits Operational Excellence ‐ Quality
Pe rc en t I nc re as e YTD Business Unit “A” Pricing Results Note: For Illustration Only 61 Operational Excellence and Value Pricing
Prior Year % to Q2 % to YTD % to YTD % to Actual Sls Actual Sls Actual Sls Plan Sls 36,814 100.0% Sales 9,819 100% 26,216 100% 25,974 100% Product Costs: 8,870 24.1% Material 2,326 23.7% 6,229 23.8% 6,284 24.2% 2,812 7.6% Direct Labor 730 7.4% 1,984 7.6% 1,924 7.4% 7,000 19.0% Overhead 1,801 18.3% 4,865 18.6% 4,932 19.0% 947 2.6% Depreciation 215 2.2% 623 2.4% 628 2.4% ‐ 0.0% Other ‐ 0.0% ‐ 0.0% ‐ 0.0% 19,629 53.3% Total Product Costs 5,072 51.7% 13,701 52.3% 13,768 53.0% 17,185 46.7% Gross Profit 4,746 48.3% 12,515 47.7% 12,206 47.0% G&A Costs: 61 0.2% Engineering 16 0.2% 46 0.2% 40 0.2% 681 1.9% Sales 188 1.9% 549 2.1% 562 2.2% 1,249 3.4% Admin 273 2.8% 637 2.4% 641 2.5% (41) ‐0.1% Other ‐ 0.0% ‐ 0.0% ‐ 0.0% 64 0.2% Depreciation 17 0.2% 50 0.2% 20 0.1% 2,015 5.5% Total G&A Costs 494 5.0% 1,282 4.9% 1,263 4.9% 16,181 44.0% Product Line EBITDA 4,485 45.7% 11,906 45.4% 11,591 44.6% 62SAMPLE Business Unit – Income Statement
Consistent Value Generation Value Creation Focus Clear Metrics Detailed Accountability 63 Business Unit Structure – Creating Value
Organic Growth & Management Turnover Talent Demand Growth Requires Talent Acquisitions & Management Transitions 64 Growing Value Requires Growing Talent
Income Statement Balance Sheet Financial Competency Value Pricing New Business Modeling Productivity Management Value Creation Risk Management IP Protection Aftermarket Access Contracting Business Unit Reviews Site Visits & Operational Reviews 65 Talent Development
OR Key Positions President VP of Sales VP of Operations Business Unit Manager Manufacturing Manager New Acquisition President Dir of S&M Dir of Eng Dir of Mfg. Controller Prod Line Mgr Mfg MgrEng Lead HR, QC Other Existing Unit President Dir of S&M Dir of Eng Dir of Mfg. Controller Prod Line Mgr Mfg MgrEng Lead HR, QC Other President VP of Sales VP of Eng VP of Ops VP of Finance Biz Unit Mgr Mfg MgrEng Lead HR, QC Other Development Plans Mentoring Stretch Assignments Job Rotations 66 Succession, Development and Promotion
Executive Development Program Customized Curriculum Team Based Action Learning Projects Individual Development Plan Formal Mentoring Program 2 EVP Sponsors 4 Cohorts, Over 100 Participants 50% Promotion Rate Business Unit Manager Development Program Case Studies Highly Participatory COO Sponsors 30 Participants February 2024 Business Unit Manager (BUM) Bootcamp 67 TransDigm Leadership Development Programs
Recruit smart & energetic future leaders Two‐year rotational program for MBA graduates Three 8‐month rotations at different operating sites Gain experience in Operations, Sales, Product Development and Supply Chain 39 participants over 6 years 68 Management Development Program (MDP)
Leadership Promotions 2019‐2023 Internal 64% External 36% Internal Promotions Culture‐Carriers Smart Energetic Proven‐Track Record of Creating Value Demonstrated Leadership 69 Talent Development ‐ Promotions
Consistent Value Creation Strategy Business Unit Detail Focus Active Talent Development Solid Value Growth Process 70 Performance Stability
Financial Overview Sarah Wynne – CFO
TransDigm Continues to Grow and Generate Significant Cash Enterprise ValueAdjusted Earnings Per ShareEBITDA AS DefinedRevenue $5,223 $5,103 $4,798 $5,429 $6,585 $7,740 2019 2020 2021 2022 2023 2024E ($ in millions) $2,419 $2,278 $2,189 $2,646 $3,395 $4,045 46.3% 44.6% 45.6% 48.7% 51.6% 52.3% $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 2019 2020 2021 2022 2023 2024E ($ in millions) $43 $41 $50 $45 $63 $92 2019 2020 2021 2022 2023 2024 ($ in billions) $18.27 $14.47 $12.13 $17.14 $25.84 $32.42 2019 2020 2021 2022 2023 2024E EBITDA % margin Note: EBITDA as Defined is a non‐GAAP financial measure. See the appendix for a historical reconciliation of Income from Continuing Operations to EBITDA as Defined. (1) Revenue, EBITDA As Defined and Adjusted Earnings Per Share information under 2024E reflects the mid‐point of the guidance range for the fiscal year ending 9/30/24 that was issued on 5/07/24. TransDigm only updates guidance quarterly and this presentation does not confirm or update guidance for Analyst Day. (2) 2024 Enterprise value calculated as of 6/17/24 equals equity value (shares outstanding as of 3/30/24 multiplied by the TDG closing stock price on 6/17/24) plus pro forma total net debt (total debt less cash). (2)(1) Historical Financial Highlights 72 (1) (1)
TransDigm – How was the Past 5 Years? $1,500 $1,700 $1,900 $2,100 $2,300 $2,500 $2,700 $2,900 $3,100 $3,300 $3,500 1 2 3 4 5 6 49.3% (1) Last 5 Year EBITDA Growth Welcome ESL! 2018 2019 2020 2021 2022 2023 73 51.6% (1) (1) EBITDA as Defined is a non‐GAAP financial measure. See the appendix for a historical reconciliation of Income from Continuing Operations to EBITDA as Defined.
Significant Free Cash Flow 74 Note: Free Cash Flow before Working Capital is a non‐GAAP financial measure. Please see appendix for a reconciliation of Free Cash Flow before Working Capital. 51% 55% 51% 45% 45% 47% 54% 54% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2017 2018 2019 2020 2021 2022 2023 2024 LTM 3/30/24 Free Cash Flow Cash Interest Cash Taxes Cap Ex Free Cash Flow Before Working Capital Exceeds 50% of EBITDA As Defined
2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x FY'18 FY'19 FY'20 Q1 Q2 Q3 FY'21 Q1 Q2 Q3 FY'22 Q1 Q2 Q3 FY'23 Q1 Q2 Strong Free Cash Flow Allows TransDigm to be Highly Levered Note: Fiscal year ending 30‐Sep. Net leverage defined as Net Debt / EBITDA As Defined. EBITDA As Defined is a non‐GAAP financial measure. Please see the appendix for a reconciliation from Income from Continuing Operations to EBITDA As Defined. “Private Equity‐Like Capital Structure" 75 Range
Fiscal 2024 Financing Activity November 2023 Raised ≈ $2B of newly issued debt primarily for CPI Electron Device Business Acquisition February 2024 Completed refinancing of $4.4B Senior Secured Notes Increased and extended Revolver, Increased capacity by $100M to $910M March 2024 Completed ‘Amend & Extend’ of $1.7B Term Loan H Completed repricing of $4.5B Term Loan I Completed $550M Senior Secured Note tack‐on and refinancing June 2024 Completed repricing of $1B Term Loan J Completed ‘Amend & Extend’ of $2.6B of Term Loan I Entered into additional hedges to align with the new term loans & extended maturities on existing debt 76
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 2024 2025 2026 2027 2028 2029 2030 2031 2032 Secured Term Loans Secured Notes Sr Sub Notes Calendar Year Weighted Average Interest Rate Pre‐Financing 6.3% Debt Maturity Profile and Interest Rates 77 $1,496 Weighted Average Interest Rate Post‐Financing 6.0% Fixed Debt 75% FY27 Post‐Financing Current Debt Maturity Profile $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 2024 2025 2026 2027 2028 2029 2030 2031 2032 Secured Term Loans Secured Notes Sr Sub Notes Calendar Year Prior Debt Maturity Profile
Pro Forma Capitalization Structure 78 (1) (1) Pro forma cash, total debt and net debt reflect the April 2024 redemption of the $550M 7.50% senior subordinated notes due 2027. Actual cash includes the $550M classified as restricted cash on the Company’s consolidated balance sheet as of March 30, 2024. Also includes the term loan refinancing that was completed on June 4, 2024. Note: EBITDA as Defined is a non‐GAAP financial measure. See the appendix for a historical reconciliation of Income from Continuing Operations to EBITDA and EBITDA as Defined. Pro forma capitalization Actual Pro Forma ($ in millions) 3/30/24 Adj. 3/30/24 Rate Maturity Cash $4,288 – $4,288 Restricted Cash $550 (550) – Total Cash $4,838 $4,288 $910mm revolver – – S + 2.250% Feb-29 $450mm AR securitization facility 450 450 S + 1.600% Jul-24 First lien term loan I due 2028 4,525 (2,644) 1,881 S + 2.750% Aug-28 First lien term loan J due 2031 997 (997) – S + 3.250% Feb-31 Repriced First lien term loan J due 2031 – 3,641 3,641 S + 2.500% Feb-31 First lien term loan K due 2030 1,708 1,708 S + 2.750% Mar-30 Senior secured notes due 2028 2,100 2,100 6.750% Aug-28 Senior secured notes due 2029 2,750 2,750 6.375% Mar-29 Senior secured notes due 2030 1,450 1,450 6.875% Dec-30 Senior secured notes due 2031 1,000 1,000 7.125% Dec-31 New senior secured notes due 2032 2,200 2,200 6.625% Mar-32 Total secured debt $17,180 $17,180 4.5x Total net secured debt $12,892 $12,892 3.4x Senior subordinated notes due 2027 550 (550) – 7.500% Mar-27 Senior subordinated notes due 2027 2,650 2,650 5.500% Nov-27 Senior subordinated notes due 2029 1,200 1,200 4.625% Jan-29 Senior subordinated notes due 2029 750 750 4.875% May-29 Capital Lease Obligations (Gross) 259 259 Total debt $22,589 $22,039 5.8x Total net debt $18,301 $17,751 4.6x (1) Includes ~$1.5B paid out in Q3 FY24 for acquisitions
Shareholder Return 79 Operational Performance Financial Leverage
Superior Results 80(1) TransDigm returns are adjusted for special dividends paid of $187.00 in 10‐year period, $116.00 in 5‐year period and $35.00 in 1‐year period. All returns measured as of 5/31/24. (2) S&P adjusted for dividends estimated to be 1%. 27% 30% 79% 12% 15% 27% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 10 YR Return CAGR 5 YR Return CAGR 1 YR Return CAGR TDG S&P 500 (2)(1) Historical TDG Returns vs. S&P 500 “Private Equity‐ Like” Returns with Liquidity of a Public Market
Mergers & Acquisitions Blake Kelleher – VP Mergers & Acquisitions
Focused Acquisition Strategy 82 Aerospace Products Proprietary Engineered Products Significant Aftermarket Content
Acquisition History 83 Fiscal Year $ Invested FY ‘14 $298M FY ‘15 $1,621M FY ‘16 $1,435M FY ‘17 $105M FY ‘18 $659M FY ‘19 $4,133M FY ‘20 $0 FY ‘21 $965M FY ‘22 $448M FY ‘23 $749M FY ‘24* $1,684M Annual Average = ≈$1.1B / Year (≈$800M excl‐ESL) * As of June 26, 2024 CPI – Electron Device Business SEI Industries GKN – FPT Industries Small product lines
M&A Organizational Structure 84 Kevin Stein President & CEO Blake Kelleher VP – M&A Director M&A (Senior) Director M&A (Junior) Director M&A (Commercial) Brokers Strong and Stable Team Rotational Director Roles Utilize Brokers to Assist in US & Europe
Lead Generation is a Systematic Approach Conferences / Shows Networking Visit, Visit, Visit! Privately Held / Family‐Owned Private Equity Ownership 85 Strategic Owners
Active Acquisition Process 86 Current Multiple(s): 14 – 16x EBITDA Post Acquisition: 50%+ Multiple Reduction Typical Results
Acquisition Sourcing – Since IPO 87 31% 40% 29% Number of Acquisitions Note: Statistics include businesses acquired but later divested. 36% 15% 49% Strategic Privately Held Private Equity Acquired EBITDA at Time of Acquisition ~65% is Esterline Acquisition
1993 – 2006 2006 – 2010 2011 – 2014 Adel Aeroproducts Wiggins Controlex Marathon Adams Rite Aerospace Christie Champion Honeywell Lube Pump Fuelcom Norco Avionic Instruments Skurka Fluid Regulators Eaton Motors Talley Actuation Schneller Harco AmSafe Passenger Restraints AmSafe Commercial Products AmSafe Cargo Restraints & Specialty Devises Aero‐Instruments Beams Aerosonic Arkwin Whippany Actuation Airborne Systems – North America Airborne Systems – Europe Elektro‐Metall Export Sweeney Electra‐Motion CDA InterCorp. Avtech ADS/Transicoil Bruce CEF Unison/GE APC/GE Acme Woodward HRT Dukes Semco Hartwell Electromech Tyee TAC (7) Linread Valley‐Todeco AQS Privately Held NYSE (1) Divested in Q2 and Q3 of FY2011 (2) Divested in Q2 FY2018 (1) Telair International AAR Cargo Systems Nordisk Aviation Franke Aquarotter Pexco PneuDraulics Breeze‐Eastern DDC Young & Franklin (Tactair) Schroth (2) North Hills Cablecraft Aerospace Preece Kirkhill Extant Skandia M cKechnie Am Safe Telair (1) (1) 2019 – 20202015 – 2018 Advanced Input Systems(3) Armtec Auxitrol Weston Avista (5) CMC Electronics Darchem Gamesman(3) Hytek Korry Leach International Leach NA LRE Medical(3) Mason NMC Palomar Racal(6) Scioteq (7) Souriau Sunbank(4) TA Aerospace Treality SVS (7) Esterline TransDigm has acquired 92 businesses since 1993, including 77 since its IPO. Proven Record of Acquisition and Integration 2021 – 2024 Chelton Ltd. Canyon AeroConnect DART Aerospace Calspan Corporation GKN – FPT Industries SEI Industries CPI – Electron Device Business (5) Divested in Q1 FY2021 (6) Divested in Q2 FY2021 Cobham Aero Connectivity 88(3) Divested in Q4 FY 2019 (4) Divested in Q1 FY 2020 (7) Divested in Q3 FY2021
What We Don’t Look For 89 Synergy Market Share Fill Out Product Line Excess Capacity Access to Markets Blah, Blah, Blah… • Name in Paper • Increase Salary • Get Promoted • Be Fun • Bigger Boss • Bragging Rights Bigger is Better Globalization Diversify Consolidating Industry Spend $ to Make $ Blah, Blah, Blah… • Get Fee • Get Promoted
What We Do Look For 90 (1) (1) EBITDA as Defined is a non‐GAAP financial measure. See the appendix for a historical reconciliation of Income from Continuing Operations to EBITDA as Defined.
Investment Evaluation 91 SAMPLE Investment Year 1 Year 2 Year 3 Year 4 Year 5 ($76,000) EBITDA $18,405 $22,530 $26,426 $30,161 $34,243 Multiple 10.0 10.0 10.0 10.0 10.0 TEV $184,053 $225,304 $264,265 $301,608 $342,430 Less debt (91,631)$ (89,571)$ (86,086)$ (81,439)$ (75,399)$ Market Value $92,422 $135,732 $178,179 $220,170 $267,031 ($76,000) 0 0 0 $0 $267,031 IRR 28.6% Debt & Equity EBITDA 16,500$ Multiple 10.0 Purchase Price $165,000 Fees $1,750 Total Purchase Price $166,750 Leverage Multiple 5.5 Debt 5.5x Current Year EBITDA $90,750 Equity Required $76,000 Total $166,750 Purchase Price / Capital Structure Investments Must Generate ≈20% IRR for Our Shareholders
Common Issues Identified During Due Diligence 92 Misunderstood Aftermarket Wasteful Spending Misunderstood Value of Products Unfocused New Business Process Lack of Business Unit Structure Investment / Capital Starved
Acquisition Integration Patrick Murphy ‐ EVP
Acquisition Integration Process Now That We Own It ‐ What Do We Do With It!? Why Does this Fit with TransDigm? Focused on Aerospace Proprietary Products, Process or Technologies Significant Aftermarket Content Generally Good Businesses Misunderstood or Mismanaged Our Job: Unlock Shareholder Value 94
Acquisition Integration Process – Keys to Success Assess the Unique Risks and Opportunities of each New Acquisition Which aspects of value generation model are needed most Varying Degrees of Operational Improvement Operations and Supply Chain Contractual Opportunities & Constraints New Business Pipeline Standard Work Culture, Value Drivers, Customer Focus & Key Personnel Control Working Capital and Financial Plan 95 Significant Commonality in Our Actions All Acquisitions are Different
Acquisition Integration Process ‐ Timeline Present TransDigm, Our Culture and Value Generation Strategy ………………………..…. 0 ‐ 15 Control Working Capital and Establish Financial Plan …………………………………………….. 0 ‐ 90 Evaluate Key Staff Personnel Competency …………………………………………………………….. 0 ‐ 90 Review OE/AM Contracts and Effect Actions ……………………………………………………….… 15 ‐ 45 Implement Productivity Plan (Business Wide) and Ongoing Production Improvement Processes ……………………………………………………. 0 ‐ 90 Organize Company into Business Units ……………………………………………………………..…... 30 ‐ 180 Review New Business Projects – Weed & Focus ………………………………………………........ 30 ‐ 60 Various HR, Legal & Accounting Reviews/Activities ……………………………..................... 0 ‐ 120 96 Actions ‐ General Time After Acquisition (Days) Integration Activities First 180 Days
CPI’s Electron Device Business 97 Acquisition Date: June 2024 Purchase Price: ≈ $1.385B Splitting into Two Operating Units Post‐Acquisition EBITDA Margin Profile As of Acquisition Date: 25% ‐ 30% EBITDA Margin Expect to create private equity‐like returns Products – Electronic Components & Systems used in the generation, amplification, transmission and reception of microwave signals Defense 75% OEM 30% Aftermarket 70% Revenues Revenues Commercial 25% Electron Device Business
Calspan Corporation 98 Acquisition Date: May 2023 Purchase Price: ≈ $725M EBITDA Margin Profile As of Acquisition Date: ≈ 25% EBITDA Margin Expect to create private equity‐like returns Services & Products – Wind Tunnel & Flight Testing and Jet Engine Test Cells Defense 35% Commercial Aerospace 50% Automotive 15% Revenues
DART Aerospace 99 Acquisition Date: May 2022 Purchase Price: ≈ $360M EBITDA Margin Profile As of Acquisition Date: ≈ 25% EBITDA Margin Expect to create private equity‐like returns Products – Unique Helicopter Mission Solutions for Aerial Firefighting, Cargo Expansion and Flotation Defense 20% OEM 20% Aftermarket 80% Revenues Revenues Commercial 80%
Bolt‐on Acquisitions 100 Acquisition Date: March 2024 Purchase Price: ≈ $55M EBITDA Margin Profile As of Acquisition Date: ≈ 20% EBITDA Margin Expect to create private equity‐like returns Products – Helicopter Fuel & Flotation Systems Defense 40% Commercial 60% Revenues Products for Aerial Firefighting and Other Liquid Transportation Solutions Acquisition Date: May 2024 Purchase Price: ≈ $170M EBITDA Margin Profile As of Acquisition Date: ≈ 40% EBITDA Margin Expect to create private equity‐like returns OEM 15% Aftermarket 85% RevenuesFPT Industries
Cobham Aero Connectivity 101 Acquisition Date: January 2021 Purchase Price: ≈ $965M Split into Two Operating Units Post‐Acquisition Chelton Ltd (Marlow, UK) Canyon AeroConnect (Prescott, AZ) EBITDA Margin Profile As of Acquisition Date: ≈ 25% EBITDA Margin Expect to create private equity‐like returns Products – Highly Engineered Antennas & Radios Defense 75% OEM 30% Aftermarket 70% Revenues Revenues Commercial 25% Aero Connectivity
Esterline Technologies 102 Acquisition Date: March 2019 Purchase Price: ≈ $4B Retained 12 Operating Units ≈ 25% of Esterline was Sold Post‐Acquisition Sold 8 Operating Units for ≈ $1.3B Primarily Non‐Aerospace Operating Units or Aerospace Operating Units that did not fit TDG Criteria EBITDA Margin Profile As of Acquisition Date: ≈ 15% EBITDA Margin Current: EBITDA Margins high 30%’s
M&A Wrap‐Up Kevin Stein – President & CEO
Actual Performance – Example 2018 Price Productivity New Biz & Market (Volume) 2023 2018 Price Productivity New Biz & Market (Volume) 2023 EBITDA hit Year 5 model target in only 1 year of ownership Acquisition Model EBITDA Bridge Actual / FCST EBITDA Bridge 104
Recent M&A – Slightly Opening the Aperture 105 CORE BUSINESS Aerospace & Defense, Components and Aftermarket Source: (1) AeroDynamic Advisory, market for Tier 1 / Tier 2 aerospace components and AMKT; estimated $60B OE and $60B Component AMKT * *On May 28, 2024, TransDigm announced it had entered into a definitive agreement to acquire Raptor Scientific. As of June 26, 2024, the acquisition of Raptor Scientific is not closed. Core Business Total Addressable Market (1) $120B +
106 How Do We Get 15% ‐ 20% /yr Return? 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Acquisition Leverage Organic EBITDA Growth Acquisition Strategy Capital Structure Market Growth Value Drivers Culture %/yr Consistent Strategy
107 Presentations Starting Location Product Presentation Breakout Group – A Ballroom (Main Floor) Group – C Arcade (Downstairs) Group – D Arcade (Downstairs) Group – B Ballroom (Main Floor) Greg Campbell Calspan President, Calspan Jason Abbott Chelton Retiring President, Chelton Ryan Williamson DART Aerospace President, DART Aerospace Kevin McHenry Kirkhill EVP / Former Kirkhill President Kevin Hanson Korry President, Korry Joe Llanes TA Aerospace President, TA Aerospace Chris Blackburn Airborne Systems President, Airborne Systems Jason Marlin Champion Aerospace President, Champion Aerospace Chris Swartz AeroControlex President, AeroControlex Mike Hargas AeroFluid Products President, AeroFluid Products Ron Kato Hartwell Corporation President, Hartwell Corporation
Appendix
APPENDIX: Non‐GAAP Supplemental Information 109 EBITDA, EBITDA As Defined, EBITDA As Defined Margin, Adjusted Net Income and Adjusted Earnings Per Share are non‐GAAP financial measures presented in this presentation as supplemental disclosures to income from continuing operations and reported results. TransDigm Group defines EBITDA as earnings before interest, taxes, depreciation and amortization and defines EBITDA As Defined as EBITDA plus certain non‐operating items recorded as corporate expenses, including non‐cash compensation charges incurred in connection with TransDigm Group's stock incentive or deferred compensation plans, foreign currency gains and losses, acquisition‐integration costs, acquisition and divestiture transaction‐related expenses, and refinancing costs. Acquisition and divestiture‐related costs represent accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold; costs incurred to integrate acquired businesses and product lines into the Company’s operations, facility relocation costs and other acquisition‐related costs; transaction‐related costs for both acquisitions and divestitures comprising deal fees; legal, financial and tax diligence expenses and valuation costs that are required to be expensed as incurred and other acquisition accounting adjustments. TransDigm Group defines Adjusted Net Income as net income plus purchase accounting backlog amortization expense, effects from the sale on businesses, non‐cash compensation charges incurred in connection with TransDigm Group's stock incentive or deferred compensation plans, foreign currency gains and losses, acquisition‐integration costs, acquisition and divestiture transaction‐related expenses, and refinancing costs. EBITDA As Defined Margin represents EBITDA As Defined as a percentage of net sales. TransDigm Group defines Adjusted Earnings Per Share as Adjusted Net Income divided by the total outstanding shares for basic and diluted earnings per share. For more information regarding the computation of EBITDA, EBITDA As Defined, Adjusted Net Income and Adjusted Earnings Per Share, please see the appendix.
APPENDIX: Non‐GAAP Supplemental Information (Continued) 110 TransDigm Group presents these non‐GAAP financial measures because it believes that they are useful indicators of its operating performance. TransDigm Group believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to measure operating performance among companies with different capital structures, effective tax rates and tax attributes, capitalized asset values and employee compensation structures, all of which can vary substantially from company to company. In addition, analysts, rating agencies and others use EBITDA to evaluate a company’s ability to incur and service debt. EBITDA As Defined is used to measure TransDigm Inc.’s compliance with the financial covenant contained in its credit facility. TransDigm Group’s management also uses EBITDA As Defined to review and assess its operating performance, to prepare its annual budget and financial projections and to review and evaluate its management team in connection with employee incentive programs. Moreover, TransDigm Group’s management uses EBITDA As Defined to evaluate acquisitions and as a liquidity measure. In addition, TransDigm Group’s management uses adjusted net income as a measure of comparable operating performance between time periods and among companies as it is reflective of changes in pricing decisions, cost controls and other factors that affect operating performance. None of EBITDA, EBITDA As Defined, EBITDA As Defined Margin, Adjusted Net Income or Adjusted Earnings Per Share is a measurement of financial performance under U.S. GAAP and such financial measures should not be considered as an alternative to net income, operating income, earnings per share, cash flows from operating activities or other measures of performance determined in accordance with U.S. GAAP. In addition, TransDigm Group’s calculation of these non‐GAAP financial measures may not be comparable to the calculation of similarly titled measures reported by other companies.
APPENDIX: Non‐GAAP Supplemental Information (Continued) 111 Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of these non‐GAAP financial measures as analytical tools has limitations, and you should not consider any of them in isolation, or as a substitute for analysis of our results of operations as reported in accordance with U.S. GAAP. Some of these limitations are: neither EBITDA nor EBITDA As Defined reflects the significant interest expense, or the cash requirements, necessary to service interest payments on our indebtedness; although depreciation and amortization are non‐cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor EBITDA As Defined reflects any cash requirements for such replacements; the omission of the substantial amortization expense associated with our intangible assets further limits the usefulness of EBITDA and EBITDA As Defined; neither EBITDA nor EBITDA As Defined includes the payment of taxes, which is a necessary element of our operations; and EBITDA As Defined excludes the cash expense we have incurred to integrate acquired businesses into our operations, which is a necessary element of certain of our acquisitions.
APPENDIX: Reconciliation of Income from Continuing Operations to EBITDA and EBITDA As Defined 112 ($ in mi l l ions) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Revenue 52$ 57$ 63$ 78$ 111$ 131$ 151$ 201$ 249$ 293$ 301$ 374$ 435$ 593$ 714$ 762$ 828$ Income (Loss ) from continuing operations (5) ‐ 1 3 14 (17) 11 14 31 (76) 14 35 25 89 133 163 163 Depreciation and amortization expense 7 7 7 6 7 6 7 9 13 10 18 17 16 24 25 28 30 Interest expense, net 5 5 5 3 3 23 28 32 37 43 75 80 77 92 93 84 112 Income tax provis ion (benefi t) (2) ‐ 2 5 13 (2) 8 9 17 (45) 6 23 16 53 74 88 88 Warrant put va lue adjustment 1 1 2 5 7 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Extraordinary i tem ‐ ‐ ‐ 2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ EBITDA, excluding discontinued operations 6 13 17 24 44 10 54 64 98 (68) 113 155 134 258 325 $363 $393 Merger expense ‐ ‐ ‐ ‐ ‐ 40 ‐ ‐ ‐ 176 ‐ ‐ ‐ ‐ ‐ ‐ ‐ Acquis i tion and divesti ture‐related costs 4 ‐ ‐ 1 ‐ 1 ‐ 8 ‐ 15 20 2 1 9 2 6 12 Non‐cash comp and def comp expense ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1 6 7 1 6 6 6 7 One‐time specia l bonus ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6 ‐ ‐ ‐ ‐ Publ ic offering cos ts ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3 2 ‐ ‐ ‐ Refinancing costs ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 49 ‐ ‐ ‐ ‐ EBITDA As Defined $10 $13 $17 $25 $44 $51 $54 $72 $98 $124 $139 $164 $194 $275 $333 $375 $412 EBITDA As Defined Margin 19.2% 22.8% 27.0% 32.1% 39.6% 38.9% 35.8% 35.8% 39.4% 42.3% 46.2% 43.9% 44.6% 46.4% 46.6% 49.2% 49.8% Please see the Special Notice Regarding Pro Forma and Non – GAAP Information.
(1) APPENDIX: Reconciliation of Income from Continuing Operations to EBITDA and EBITDA As Defined 113 LTM ($ in mi l l ions) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 3/30/24 2024E Revenue 1,206$ 1,700$ 1,924$ 2,373$ 2,707$ 3,171$ 3,504$ 3,811$ 5,223$ 5,103$ 4,798$ 5,429$ 6,585$ 7,304$ 7,740$ Income (Loss ) from continuing operations 152 325 303 307 447 586 629 962 841 653 681 866 1,299 1,552 1,647 Depreciation and amortization expense 61 68 73 96 94 122 141 129 226 283 253 253 268 282 294 Interest expense, net 185 212 271 348 419 484 602 663 859 1,029 1,059 1,076 1,164 1,209 1,320 Income tax provis ion (benefi t) 77 163 146 142 189 182 209 24 222 87 34 261 417 475 491 EBITDA, excluding discontinued operations $475 $768 $793 $893 $1,149 $1,374 $1,581 $1,778 $2,148 $2,052 $2,027 $2,456 $3,148 $3,518 $3,752 Acquis i tion and divesti ture‐related costs 30 19 26 21 37 57 31 29 169 31 35 18 18 28 41 Non‐cash comp and deferred comp expense 13 22 49 26 32 48 46 59 93 93 130 184 157 191 215 Refinancing cos ts 72 ‐ 30 132 18 16 40 6 3 28 37 1 56 75 29 COVID‐19 pandemic restructuring costs ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 54 40 ‐ ‐ ‐ ‐ Gain on sa le of bus inesses ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (69) (7) ‐ ‐ ‐ Other ‐ ‐ 2 1 (2) ‐ 13 5 6 20 (11) (6) 16 ‐ 8 EBITDA As Defined $590 $809 $900 $1,073 $1,234 $1,495 $1,711 $1,877 $2,419 $2,278 $2,189 $2,646 $3,395 $3,812 $4,045 EBITDA As Defined Margin 48.9% 47.6% 46.8% 45.2% 45.6% 47.1% 48.8% 49.3% 46.3% 44.6% 45.6% 48.7% 51.6% 52.2% 52.3% (1) EBITDA As Defined information under 2024E reflects the mid‐point of the guidance range for the fiscal year ending 9/30/24 that was issued on 5/7/24. TransDigm only updates guidance quarterly and this presentation does not confirm or update guidance for Analyst Day. Please see the Special Notice Regarding Pro Forma and Non – GAAP Information.
APPENDIX: Reconciliation of Adjusted Net Income to Net Income and Free Cash Flow Summary 114 ($ and shares in mi l l ions) 2019 2020 2021 2022 2023 2024E Net income from continuing operations 841$ 653$ 681$ 866$ 1,299$ 1,647$ Gross adjustments from EBITDA to EBITDA as Defined 271 226 162 190 247 293 Purchase accounting backlog amorti zation 38 53 11 7 4 4 Tax adjus tment (122) (103) (146) (65) (73) (69) Adjusted net income 1,028$ 829$ 708$ 998$ 1,477$ 1,875$ Weighted‐avg shs o/s under the two‐class method 56.3 57.3 58.4 58.2 57.2 57.85 Adjusted earnings per share 18.27$ 14.47$ 12.13$ 17.14$ 25.84$ 32.42$ Fiscal year ended September 30, LTM ($ in mi l l ions ) 2017 2018 2019 2020 2021 2022 2023 3/30/24 EBITDA as Defined $1,711 $1,877 $2,419 $2,278 $2,189 $2,646 $3,395 $3,812 Capex (71) (73) (102) (105) (105) (119) (139) (157) Cash interest expense (588) (635) (878) (923) (1,008) (1,057) (1,160) (1,160) Cash taxes (185) (129) (215) (223) (83) (220) (260) (456) Free cash flow $867 $1,040 $1,224 $1,027 $993 $1,250 $1,836 $2,039 % of EBITDA as Defined 50.7% 55.4% 50.6% 45.1% 45.4% 47.2% 54.1% 53.5%