Transdigm Group Inc. · NYSE:TDG

Transdigm — Investor Presentation (February 2017)

37 slides from Transdigm's investor presentation, February 2017

  1. Slide 1: Investor Presentation February 2017

    Investor Presentation February 2017

  2. Slide 2: Forward Looking Statements

    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 expectation

  3. Slide 3: Special Notice Regarding Pro Forma and Non-GAAP Information

    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 a

  4. Slide 4: Our Objective: Private Equity-Like Growth in Value

    Our Objective “Private Equity-Like Growth in Value with Liquidity of a Public Market” + 15% - 20% /year on average 3

  5. Slide 5: Unique & Consistent Business Strategy Private & Public

    Unique & Consistent Business Strategy Private & Public TransDigm’s Consistent Goal – “Private Equity-Like” Returns to Shareholders  Proprietary Aerospace Products with Significant Aftermarket  3-Part Value-Based Operating Strategy  Decentralized, Organization/ Aligned with Shareholders  Focused

  6. Slide 6: Company Overview Enterprise Value ≈ $24 Billion

    Company Overview Business Snapshot FY 2017 ($ in millions) Guidance FY 2015 FY 2016 Mid-point (2) Revenue $ 2,707 $ 3,171 $ 3,545 EBITDA as Defined (1) $ 1,234 $ 1,495 $ 1,698 EBITDA as Defined margin 46% 47% 48% Formed 1993 Enterprise Value ≈ $24 Billion (3) (1) EBITDA as Defined is a non-GAAP fina

  7. Slide 7: Diverse Products, Platforms and Markets

    Diverse Products, Platforms and Markets 6

  8. Slide 8: Consistent Record of Growth and Margin Expansion

    Consistent Record of Growth and Margin Expansion ($ in millions) ($ in millions) $1,698 (1) Revenue $3,545 (1) EBITDA as Defined and Margin $1,495 $3,171 $2,707 $1,234 $2,373 $1,073 $900 $1,924 $809 $1,700 $590 $1,206 $412 $828 $375 $762 $333 $714 $593 $275 $435 $194 $374 $164 $249 $293$301 $124$139

  9. Slide 9: Steady Long Term Growth in Total Enterprise Value

    Steady Long Term Growth in Total Enterprise Value ($ in millions) $24,000 $17,000 $11,000 $5,000 $3,000 $2,000 $450 $1,200 $50 9/93 12/98 Recap 7/03 Recap 3/06 IPO 9/08 9/10 9/12 9/14 2/17 Current Original Note: Total Enterprise Value is an approximate value calculated as equity value plus total net

  10. Slide 10: Ownership History

    Ownership History Event Date Major Shareholders Formation 1993 & Management Equity Recap 1998 & Management Equity Recap 2003 & Management IPO 2006 / /Management NYSE 2007/2008 Public & Management Current 2017 Public & Management 9

  11. Slide 11: TransDigm – Expanding Global Footprint

    TransDigm – Expanding Global Footprint 10

  12. Slide 12: Significant Barriers to Entry

    Significant Barriers to Entry  Selection / Qualification Process  FAA Certification  Niche Markets  Risk / Reward Trade-Off 11

  13. Slide 13: Recurring Stream of Profitable Aftermarket Revenue

    Recurring Stream of Profitable Aftermarket Revenue Profitability % Aftermarket OE Production 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Airframe Program Life Cycle (Years) 12

  14. Slide 14: Strong Focus on High-margin Aftermarket Pro Forma with DDC

    Strong Focus on High-margin Aftermarket Pro Forma with DDC FY 2016 Pro Forma Revenues(1) EBITDA As Defined (1) Defense Commercia OEM 32% l aftermarket 37% Aftermarket Commercia l OEM 31% Aftermarket: 55% OEM: 45% (1) Pro forma revenue is for the fiscal year ended 9/30/16. Includes the full year impa

  15. Slide 15: Significant Proprietary and Sole Source Revenue Base

    Significant Proprietary and Sole Source Revenue Base Pro Forma with DDC Proprietary Revenue Sole Source Revenue Non- proprietary ~10% Non-sole source ~20% Proprietary ~90% Sole source ~80% Results in strong market positions and a stable, recurring revenue stream Note: Based on management estimates o

  16. Slide 16: Steady Growth in Passenger Traffic and Installed Base Drives Aftermarket Sales

    Steady Growth in Passenger Traffic and Installed Base Drives Stable Aftermarket Sales Worldwide Installed Base Growth 33,000 30,000 27,000 24,000 21,000 18,000 4.1% CAGR 15,000 12,000 9,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

  17. Slide 17: Commercial Aftermarket Trends

    Commercial Aftermarket Trends Commercial Aftermarket Growth Last Six Years 6 Yr Avg 5 Yr Avg 2 Yr Avg 25.0% TDG 9.7% 7.6% 6.8% Peer Group 7.2% 5.0% 3.0% (A) 20.0% 15.0% 10.0% 5.0% (A) 0.0% Global Long-Term Avg Annual Growth (RPM's) Installed Base Avg Annual Long-Term Growth Peer Group Growth Rolling

  18. Slide 18: TransDigm’s Addressed Market for Commercial Aftermarket

    TransDigm’s Addressed Market for Commercial Aftermarket Global Airline Operating Expenses Global Maintenance Spend TDG Addressed Market 2015 Total = $660B 2015 Total = $64.3B 2015 Total = $30.6B Global TDG Other 33% TDG Commercial Maintenance Addressed Aftermarket $64.3B Others $30.6B ≈ $1.1B 52% Ot

  19. Slide 19: TransDigm’s Diverse Commercial Aftermarket Revenue Base

    TransDigm’s Diverse Commercial Aftermarket Revenue Base Total FY 2015 Commercial Top 15 Airlines Aftermarket Worldwide Revenue by Annual Sales $ Per Part American Airlines > $2 Delta Airlines million United Continental Sales per year Air France-KLM ≈ 10% Emirates Airlines British Airways/Iberia Luft

  20. Slide 20: Commercial OEM Market

    Commercial OEM Market (units delivered) Trough to Commercial Transport Deliveries Commercial Transport Deliveries Current ≈12 (Boeing, Airbus & Regionals) (55 Year History) Years 1800 Forecast Range 1600 Trough to 1400 Peak ≈7 Years 2,000 Trough to 1200 Peak Trough to ≈7 Years 1,800 Peak 1000 ≈5 Yea

  21. Slide 21: Military Outlook – Flat to Modestly Up

    Military Outlook – Flat to Modestly Up 2016 - 2021 TransDigm Base Military Revenue Forecast* $ Millions (Constant $) 1,000 900 800 700 600 500 400 Aftermarket 300 OEM 200 100 0 2015 2016 2017 2018 2019 2020 2021 A400M and F-35 are Major Military Growth Platforms *Excludes price increase and initial

  22. Slide 22: Strong Positions on Diverse and Growing Platforms

    Strong Positions on Diverse and Growing Platforms TOP PLATFORMS B737 A320 B777 ≈30% Sales A330/A340 B787 B757/B767 A380 C130 B747 ≈18% Sales Blackhawk A400M A350 Gulfstream Series Note: Based on Management estimates of sales for 2015. 21

  23. Slide 23: Major New Business Content: Commercial New Aircraft

    Major New Business Content: Commercial New Aircraft $ / Shipset Growth Over Prior Platforms B787 A350 A380 C-Series Prior Platforms B787 Prior Platforms A350 Prior Platforms A380 Prior Platforms C-Series 22 22

  24. Slide 24: Major New Business Content: Commercial Re-Engining

    Major New Business Content: Commercial Re-Engining $ / Shipset Growth Over Prior Platforms B777X A320neo B737Max E2 Prior Platforms B777X Prior Platforms A320neo Prior Platforms B737max Prior Platforms E2 23

  25. Slide 25: Proven Operating Strategy

    Proven Operating Strategy Profitable Productivity Value Based New and Cost Pricing Business Improvements 3 Value Drivers 24

  26. Slide 26: Organizational Philosophy

    Organizational Philosophy CORPORATE Corporate Local Control Autonomy Value Generation Strategy OPERATING UNIT Economy Mgmt Local Emp- Central loyees of Scale Resources Control Autonomy Owners Structure Execution Motivation 25

  27. Slide 27: Proven Record of Acquisition & Integration

    Proven Record of Acquisition & Integration Privately Held NYSE 1993 – 2006 2006 – 2010 2011 – 2012 2013 - 2016  Adel  Sweeney  Hartwell  Beams  Aeroproducts  Electra-Motion  Electromech  Aerosonic McKechnie  Wiggins  CDA InterCorp.  Tyee  Arkwin  Controlex  Avtech  TAC  Whippany Actu

  28. Slide 28: Significant Opportunities to Complete Accretive Acquisitions

    Significant Opportunities to Complete Accretive Acquisitions OPPORTUNITY TO CREATE VALUE(1) FRAGMENTED BASE(2) Distribution Distribution 35% 70% 30% 60% 25% 50% 20% 40% 15% 30% 10% 20% 5% 10% 0% 0% 0-5% 6-10% 11-15% 16-20% 21-25% 26-30% 31-35% 36-40% < $25M $25-$100M > $100M EBITDA Margin Companies

  29. Slide 29: How Do We Get 15% - 20% /yr Return?

    How Do We Get 15% - 20% /yr Return? %/yr 20% 18% Acquisition  Acquisition Strategy 16% 14% Leverage  Capital Structure 12% 10% 8% 6% Organic EBITDA  Market Growth Growth  Value Drivers 4%  Culture 2% 0% Consistent Strategy 28

  30. Slide 30: Performance Vesting Formula – EXAMPLE ONLY

    Performance Vesting Formula – EXAMPLE ONLY Year 0 Year 1 Pro Forma EBITDA $ 600 $ 700 (A) x Adjusted Multiple 10 10 Total Enterprise Value 6,000 7,000 Less: Net Debt 1,000 975 (B) Intrinsic Equity Value 5,000 6,025 Fully Diluted Shares 50 51 Share Value $100 / share $118 / share (Intrinsic Share Pri

  31. Slide 31: Supplemental Information

    Supplemental Information 30

  32. Slide 32: 2017 Q1 Financial Performance by Markets – Pro Forma

    2017 Q1 Financial Performance by Markets – Pro Forma Highlights⁽¹⁾ Q1 Market Review – Pro Forma Revenues⁽¹⁾ Actual vs. Prior Year Q1 Commercial OEM Commercial OEM: Down 4%  Commercial transport bookings up modestly Commercial Aftermarket Commercial Aftermarket: Up 3.5%  Commercial transport bookin

  33. Slide 33: Fiscal 2017 Outlook

    Fiscal 2017 Outlook FY 2016 Pro Forma Sales Mix (1) Market FY 2017 Expected Growth 31% Commercial OEM Up Low to Mid Single-Digit % 37% Commercial Aftermarket Up Mid to High Single-Digit % 32% Defense Flat to Slightly Up Assumptions Guidance Summary ($ in millions)  Full year interest expense ≈ $588

  34. Slide 34: TransDigm delevering profile

    TransDigm delevering profile (Net Debt / PF EBITDA as Defined) Refi & Dividend 7.0x Telair, Special Franke and dividend Pexco DDC 6.5x Acquisition Special & GCP McKechnie Dividend Warburg 6.0x Pincus Acquisition Recap 5.5x IPO Special 5.0x Recap & AmSafe Dividend Dividend Acquisition 4.5x 4.0x 3.5x

  35. Slide 35: Pro Forma Capitalization Structure

    Pro Forma Capitalization Structure Capitalization Net Debt to Pro Forma EBITDA As Actual 12/31/16 Defined Multiple Rate Cash $972 $600m revolver – L + 3.00% $250m AR securitization facility 200 L + 0.90% First lien term loan C due 2020 1,225 L + 3.00% First lien term loan D due 2021 804 L + 3.00% Fi

  36. Slide 36: Consistent Strategy & Value Creation

    Consistent Strategy & Value Creation Proprietary Aerospace and Aftermarket Value Based Operating Strategy “Private Equity- Like” Returns with Decentralized Organization / Aligned with Public Liquidity Shareholders Disciplined Acquisition Strategy Efficient Capital Structure 35

  37. Slide 37: Reconciliation of EBITDA and EBITDA As Defined to Net Income

    APPENDIX: Reconciliation of EBITDA and EBITDA As Defined to Net Income ($ in millions) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Income from continuing ops. ($5) $0 $1 $3 $14 ($17) $11 $14 $31 ($76) $14 $35 $25 $89 $133 $163 $1

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