TransDigm Group Incorporated (NYSE:TDG) Q4 2019 Earnings Conference Call - Final Transcript

Nov 19, 2019 • 11:00 am ET


TransDigm Group Incorporated (NYSE:TDG) Q4 2019 Earnings Conference Call - Final Transcript


Loading Event

Loading Transcript


Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2019 TransDigm Group Inc. Earnings Conference Call. [Operator Instructions].

I will now hand the conference over to your speaker today, Liza Sabol, Investor Relations.

Liza Sabol

Thank you and welcome to TransDigm's Fiscal 2019 Fourth Quarter Earnings Conference Call. Presenting this morning are TransDigm's, Executive Chairman, Nick Howley; President and Chief Executive Officer, Kevin Stein; and Chief Financial Officer, Mike Lisman. Please visit our website at to obtain a supplemental slide deck and call replay information.

Before we begin, we'd like to remind you that statements made during this call which are not historical in fact, are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the company's latest filings with the SEC. We'd also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA As Defined, adjusted net income and adjusted earnings per share all of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliations.

I will now turn the call over to Nick.

W. Nicholas Howley

Good morning and thanks for calling in. Today, as usual, I'll start with some summary comments on our consistent business strategy, a few comments on the operating performance and outlook and capital allocation. To reiterate, we are unique in the industry, due to both our consistency in our ability to create intrinsic shareholder value through all phases of the aerospace cycle.

To summarize some of the reasons why we believe this, about 90% of our net sales are generated by proprietary products, and over three quarters of our net sales come from products for which we believe we are the sole source provider.

Most of our EBITDA comes from aftermarket revenues, which typically have significantly higher margins and provide relative stability in the downturns. Our longstanding goal is to give our shareholders private equity like returns, with the liquidity of a public market. To do this, we have to stay focused on both the details of value creation, as well as the careful allocation of our capital.

We follow a consistent long-term strategy. Specifically, we own and operate proprietary aerospace businesses with significant aftermarket content. Second, we utilize a simple well proven value based operating methodology. Third, we have a decentralized organization structure, and a unique compensation system that closely aligns our management team with the shareholders' interest. Fourth, we acquire businesses that fit our strategy, and we see a clear simple path to PE like returns. And lastly, our capital structure and our allocations are a key part of our value creation methodology.

As you saw from our press release, we had a solid operating performance in fiscal year '19, where the revenue is up 37% and EBITDA as defined, up about 29% on