Transdigm Group Inc. · NYSE:TDG
Transdigm — Non-Deal Roadshow (June 2023)
46 slides from Transdigm's roadshow presentation, June 2023
Slide 1: TransDigm Non-Deal Roadshow June 2023
TransDigm Non‐Deal Roadshow June 2023
Slide 2: Forward Looking Statements & Special Notice Regarding Pro Forma and Non-GAAP Information
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 futur
Slide 3: Our Objective
Our Objective “Private Equity-Like Growth in Value with Liquidity of a Public Market” + 15% - 20% / Year on Average 2
Slide 4: Unique & Consistent Business Strategy
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 D
Slide 5: Company Overview
Company Overview Financial Snapshot FY 2023 Guidance ($ in millions) Mid‐Point (2) Revenue $ 6,455 EBITDA as Defined (1) $ 3,260 EBITDA as Defined Margin 51% Formed 1993 Public 2006 Enterprise Value ≈ $67 Billion (3) (1) EBITDA as Defined is a non‐GAAP financial measure. For a historical reconciliat
Slide 6: Diverse Products, Platforms and Markets
Diverse Products, Platforms and Markets 5
Slide 7: Consistent Record of Growth and Margin Expansion
Consistent Record of Growth and Margin Expansion ($ in millions) ($ in millions) Revenue EBITDA as Defined and Margin (1) (2) $6,455 (2) $3,260 $5,429 $5,223 $5,103 $2,646 $4,798 $2,419 $2,278 $2,189 $3,811 $3,504 $1,877 $1,711 $3,171 $1,495 $2,707 $2,373 $1,234 $1,073 $1,924 $1,700 $900 $809 $1,206
Slide 8: Strong Focus on High-Margin Aftermarket
Strong Focus on High‐Margin Aftermarket FY 22 Pro Forma Revenues (1) EBITDA As Defined (2) Commercial OEM OEM 27% Defense 42% Aftermarket Commercial Aftermarket 31% Aftermarket: ≈ 55% OEM: ≈ 45% (1) Pro forma revenue is for the fiscal year ended 9/30/2022. Excludes impact of the Calspan Corporation
Slide 9: Significant Proprietary Revenue Base
Significant Proprietary Revenue Base Proprietary Revenue Non‐proprietary ~10% Proprietary ~90% Results in strong market positions and a stable, recurring revenue stream Note: Based on management estimates of pro forma TransDigm sales for FY2022. Please see the Special Notice Regarding Pro Forma and
Slide 10: TransDigm – Expanding Global Footprint
TransDigm – Expanding Global Footprint 49 Operating Units; 114 Manufacturing Locations 9
Slide 11: TDG Organization
TDG Organization Kevin Stein CEO Joel Reiss Jes Warren Mike Lisman Sarah Wynne Co‐COO General Co‐COO CFO Counsel & CCO EVP EVP EVP EVP EVP EVP EVP EVP 6‐7 Op 6‐7 Op 6‐7 Op 6‐7 Op 6‐7 Op 6‐7 Op 6‐7 Op 6‐7 Op Units Units Units Units Units Units Units Units Structure Scalable With Future Growth 10
Slide 12: Consistent Operating Model
Consistent Operating Model
Slide 13: 3 Value Drivers
Proven Operating Strategy VALUE PRICE Productivity and Profitable New Value Based Cost Business Pricing Improvements 3 Value Drivers 12
Slide 14: 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 13
Slide 15: Organizational Philosophy
Organizational Philosophy Structure Execution Motivation Small Operating Units Significant Local Think Like Owner Autonomy Focus on Products Create Value and Customers Local Decisions Lower Cash Comp & Higher Equity Few Management Layers Front Line Value Generation Business Unit Discipline Price Pro
Slide 16: TDG Ownership
Unique Compensation Concept – “Think/act like an owner” TDG Ownership Low ` High Low ` High Cash Compensation Equity Based Compensation 100% Performance Vesting Very High Shareholder Alignment 15
Slide 17: Highest Value to Customers
Customer Value Proposition Provide Reliable, Well Engineered Products & Deliver Them On‐Time Highest Value to Customers 16
Slide 18: TDG Operating System: A Detailed Process
TDG Operating System: A Detailed Process Investment Highly Engineered Products Require Resourcing ≈ 8‐10% of total cost spent on Engineering/R&D Organization Decentralized Execution Business Unit Team Concept Succession Planning Execution Relentless Drive to Create Value 17
Slide 19: Operating Unit Organization
Operating Unit Organization President VP Sales & VP VP Operations VP Finance Marketing Engineering Business Unit Business Unit Manager Team Business Unit Business Unit Manager Team Business Unit Teams Co‐Located Business Unit Business Unit Detail Value Focused Manager Team New Business Develop
Slide 20: Business Unit Value Creation
Business Unit Value Creation Business Unit Teams Grouping of Related Products Integrated Cross Functional Team Business Unit Manager Drives Performance Value Driver Focus Profitable New Business Productivity and Cost Improvement Value‐based Pricing Accountability Standardized Business
Slide 21: Business Unit Structure – Driving Value Creation
Business Unit Structure – Driving Value Creation Consistent Value Generation Detailed Accountability Clear Metrics Value Creation Focus 20
Slide 22: Commercial Aerospace & Defense Market Updates
Commercial Aerospace & Defense Market Updates
Slide 23: TransDigm's Addressed Market for Commercial Aftermarket
TransDigm’s Addressed Market for Commercial Aftermarket Global Airline Operating Expenses Global Maintenance Spend TDG Addressed Market 2022 Total = $737B 2022 Total = $101B 2022 Total = $47B Global TDG Air Other TDG Maintenance Transport 33% Addressed $101B Aftermarket $47B ≈ $1.2B Others Labor & 5
Slide 24: TransDigm's Diverse Commercial Aftermarket Revenue Base
TransDigm’s Diverse Commercial Aftermarket Revenue Base Total FY 2022 Commercial Top 15 Airlines Aftermarket Worldwide Revenue by Annual Sales $ Per Part American Airlines > $3 million United Airlines Sales per year Delta Airlines ≈ 10% to 15% Lufthansa IAG AF-KLM Ryanair ≈ 50% Emirates Worldwide So
Slide 25: PMA Market Penetration
PMA Market Penetration 3rd Party PMA 3rd Party PMA ≈ 1½% to 2½% Less than 2% Total INDUSTRY Total TDG Commercial Commercial Aftermarket $ Aftermarket $ No Significant PMA Threat – At or Below Market Exposure Levels 24
Slide 26: Surplus Parts Minimal TDG Impact
Surplus Parts Minimal TDG Impact TDG Parts Tend to be Consumables, Below $10K Average Sale Price and Away from the Engine – These are Not Typical Surplus Parts Targets Surplus Sales Market Penetration 7 to 10% Surplus Below 4% Surplus Industry TDG Below Market % No Significant Surplus Market Threat
Slide 27: Strong Positions on Diverse and Growing Platforms
Strong Positions on Diverse and Growing Platforms TOP PLATFORMS Top 5 Commercial Platforms ≈ 17% Sales A320 B737 B747 B757/767 B777 Top 5 Defense Platforms ≈ 8% Sales Blackhawk C130 F35 F16 A400M Note: Based on Management estimates of total revenue for 2022. 26
Slide 28: Major New Business Content: Commercial Aircraft New Designs
Major New Business Content: Commercial Aircraft “New Designs” Strong “New Design” $ / Shipset Growth Over Prior Platforms – “Same Store Basis” B787 A350 A220 + Over 35% + Over 45% + ≈ 2X Prior Platforms B787 Prior Platforms A350 Prior Platforms A220 Representative Products: Representative Products:
Slide 29: New Defense Platforms – New Designs
New Defense Platforms – New Designs – “Same Store Basis” $ / Shipset Growth Over Prior Platforms – “Same Store Basis” JSF A400M KC46 (767) + Over 20 % + ≈ 2X + ≈ 2X Prior Platforms JSF Prior Platforms A400M Prior Platforms KC46 (767) Representative Products: Representative Products: Representative P
Slide 30: Mergers & Acquisitions
Mergers & Acquisitions
Slide 31: Focused Acquisition Strategy
Focused Acquisition Strategy Aerospace Products Proprietary Engineered Products Significant Aftermarket Content 30
Slide 32: Proven Record of Acquisition and Integration
Proven Record of Acquisition and Integration Privately Held NYSE Cobham Aero Connectivity 1993 – 2006 2006 – 2010 2011 – 2014 2015 – 2018 2019 – 2020 2021 – 2023 Sweeney Talley Actuation Telair International Advanced Input Chelton Ltd. Telair Adel Systems(3) Electra‐Motion Schneller
Slide 33: Active Acquisition Process
Active Acquisition Process FY2022 Results Current Multiple(s): 12 – 15x EBITDA Post Acquisition: 50%+ multiple reduction 32
Slide 34: Acquisition of Esterline
Acquisition of Esterline 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 EBI
Slide 35: Actual Performance – Esterline Acquisition
Actual Performance – Esterline Acquisition Model EBITDA Bridge Actual / FCST EBITDA Bridge 2019 Price Productivity New Biz & 2024 2019 Price Productivity New Biz & 2023 Fcst Market Market (Volume) (Volume) EBITDA hit Year 5 model target in only 1 year of ownership EBITDA continues to be well ahead o
Slide 36: Acquisition of Cobham Aero Connectivity
Acquisition of Cobham Aero Connectivity Acquisition Date: January 2021 Revenues Commercial Purchase Price: ≈ $945M 25% Split into Two Operating Units Post‐Acquisition Defense 75% Chelton Ltd (Marlow, UK) Revenues Canyon AeroConnect (Prescott, AZ) OEM 30% EBITDA Margin Profile As of Acq
Slide 37: ESG Initiatives
ESG Initiatives 36
Slide 38: TransDigm ESG Highlights
TransDigm ESG Highlights Greenhouse Gas Emissions In March 2022, TransDigm Established Greenhouse Gas Emissions Reduction Goal of 50% Reduction in Scope 1 and Scope 2 Emissions by 2031 Diversity Initiatives BOD Diversity improved to 33% in 2023 versus 9% in 2017 Executive Diversity (includ
Slide 39: TransDigm Greenhouse Gas Emissions
TransDigm Greenhouse Gas Emissions TransDigm is actively investigating options for pursuing the implementation of additional energy efficiency projects at our operations, considering sourcing renewable energy and other solutions that would lower our emissions footprint and achieve our goal of 50% re
Slide 40: Financial Topics
Financial Topics 39
Slide 41: Capital Structure
Capital Structure Pro Forma Capital Structure ($ in millions) Actual Pro forma (1) 4/1/23 Adj. 4/1/23 Rate Cash $3,418 – $3,418 (1) Restricted Cash 1,100 (1,100) – Total Cash $4,518 $3,418 (2) $810mm revolver – – – L + 2.50% $350mm AR securitization facility 350 – 350 S + 1.30% First lien term loan
Slide 42: Debt Maturity Profile
Debt Maturity Profile Debt Maturity Profile ($MM) $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2023 2024 2025 2026 2027 2028 2029 Secured Term Loans Secured Notes Sr Sub Notes Note: $350M AR Securitization renews annually in July 41
Slide 43: Interest Rate Sensitivity
Interest Rate Sensitivity • Interest rates on TDG’s $20Bn of gross Debt is over 75% hedged/fixed rate through fiscal year 2026 • Achieved via a combination of interest rate caps, swaps and collars • Significantly reduces near-term exposure to any variable rate increases $ in millions Current FY 23 A
Slide 44: TransDigm Deleverage Profile
TransDigm Deleverage Profile Esterline COVID-19 Downturn Net Debt / PF EBITDA as Defined (1) Special Acquisition Refi & dividend Dividend Special Special Dividend 7.0x dividend Telair, Special Franke and Refinancing Dividend Pexco 6.5x DDC Special Acquisition McKechnie Dividend & GCP Warburg 6.0x Ac
Slide 45: APPENDIX: Reconciliation of EBITDA and EBITDA As Defined to Income from Continuing Operations
APPENDIX: Reconciliation of EBITDA and EBITDA As Defined to Income from Continuing Operations ($ i n mill ions) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Income (los s) from continuing ops . ($5) $0 $1 $3 $14 ($17) $11 $14 $31 ($76) $14 $35 $25 $89 $133 Depreci ation
Slide 46: APPENDIX: Reconciliation of Fiscal 2023 Outlook
APPENDIX: Reconciliation of Fiscal 2023 Outlook FY 2023 ($ in millions) Guidance Midpoint Income from continuing operations $ 1,166 Adjustments: Depreciation and amortization expense 277 Interest expense - net 1,185 Income tax provision 388 EBITDA 3,016 Adjustments: Acquisition-related expenses and