Transdigm Group Inc. · NYSE:TDG
Transdigm — Investor Day (June 2024)
114 slides from Transdigm's investor day presentation, Jun 26, 2024
Slide 1: 2024 TransDigm Analyst Day
2024 TransDigm Analyst Day June 26, 2024 1
Slide 2: Agenda
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 Rec
Slide 3: Forward Looking Statements
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,” “expe
Slide 4: 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
Slide 5: Opening Remarks
Opening Remarks Nick Howley– Chairman of the Board
Slide 6: Opening Remarks - Welcome
-WELCOME 2024 ANALYST DAY ,
Slide 7: Consistent Value Compounder
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 Co
Slide 8: Consistent Value Compounder
Consistent Value Compounder TransDigm has returned nearly 3,300x its initial invested equity, reflecting a remarkably evenly distributed 36% IRR1 for over three decades 8
Slide 9: Organizational Philosophy - Decentralized
Organizational Philosophy - Decentralized CORPORATE Corporate Local Control Autonomy Value Generation Strategy OPERATING UNIT Economy Mgmt Central Local of Scale Resources Control Autonomy Employees Owners Structure Execution Motivation 9
Slide 10: Unique Compensation Concept – Think/act like an owner
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 10
Slide 11: Consistent Strategy & Value Creation
Consistent Strategy & Value Creation Proprietary Aerospace and Aftermarket Value Based Operating Strategy “Private Equity- Decentralized Organization / Aligned Like” Returns with with Shareholders Liquidity of a Public Market Disciplined Acquisition Strategy Efficient Capital Structure 11
Slide 12: TransDigm Overview
TransDigm Overview Kevin Stein – President & CEO
Slide 13: Experienced Senior Management Team with Proven Track Record
Experienced Senior Management Team with Proven Track Record EXECUTIVE TITLE Officers & Executives: Kevin Stein President & CEO Mike Lisman Co-COO Proven Track Record Joel Reiss Co-COO Sarah Wynne CFO Alex Feil Executive VP Pete Palmer Executive VP Experienced with a Leveraged Capital Structure P
Slide 14: Superior Stock Performance
Superior Stock Performance Historical TDG Returns vs. S&P 500 90% 79% 80% 70% 60% 50% 40% 30% 30% 27% 27% 20% 15% 12% 10% 0% 10 YR Return CAGR 5 YR Return CAGR 1 YR Return CAGR (1) (2) TDG S&P 500 (1) TransDigm returns are adjusted for special dividends paid of $187.00 in 10-year period, $116.00 in
Slide 15: Our Objective
Our Objective “Private Equity-Like Growth in Value with Liquidity of a Public Market” + 15% - 20% / year on average 15
Slide 16: Unique & Consistent Business Strategy Private & Public
Unique & Consistent Business Strategy Private & Public TransDigm’s Consistent Goal – “Private Equity-Like” Returns to Shareholders Proprietary Aerospace Products with Significant Aftermarket 3-Part Value-Based Operating Strategy Decentralized, Organization/ Aligned with Shareholders Focused
Slide 17: Company Overview
Company Overview Business Snapshot ($ in millions) % Change FY2024 FY24 Guidance Guidance Mid-Point v. FY2022 FY2023 Mid-Point (2) 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% (4) FYE Share Price $525 $843 $
Slide 18: Consistent Record of Growth and Margin Expansion
Consistent Record of Growth and Margin Expansion ($ in millions) ($ in millions) Revenues EBITDA As Defined Margin (1) $9,000 $4,500 (2) (2) $4,045 $7,740 $8,000 $4,000 $7,000 $3,500 $6,000 $3,000 $5,000 $2,500 $4,000 $2,000 $3,000 $1,500 $2,000 $1,000 $1,000 $500 $0 $0 1993 1998 2003 2008 2013 2018
Slide 19: 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) 19
Slide 20: Strong Focus on High-Margin Aftermarket
Strong Focus on High-Margin Aftermarket FY 2023 Pro Forma Revenues (1) EBITDA As Defined (2) Commercial Defense Aftermarket OEM 38% 35% Aftermarket Commercial OEM 27% Aftermarket: 56% OEM: 44% (1) Pro forma revenue is for the fiscal year ended 9/30/2023. Includes full year impact of the Calspan Corp
Slide 21: 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 21 Note: Based on management estimates of pro forma TransDigm sales for FY2023. Please see the Special Notice Regarding Pro Forma a
Slide 22: Proven Record of Acquisition and Integration
Proven Record of Acquisition and Integration Privately Held NYSE 1993 – 2006 2006 – 2010 2011 – 2014 2015 – 2018 2019 – 2020 2021 – 2024 Cobham Aero Connectivity Sweeney Talley Actuation Telair International Advanced Input Chelton Ltd. Adel Telair Electra-Motion Schneller AAR Cargo Sys
Slide 23: TransDigm Deleverage Profile
TransDigm Deleverage Profile Net Debt / Pro Forma EBITDA as Defined COVID-19 Downturn Special Special Refi & Dividend dividend 7.0x Dividend Special Telair, dividend Special Franke Esterline Dividend and Pexco Refinancing Acquisition 6.5x DDC Special Acquisition McKechnie Dividend & GCP Warburg Acqu
Slide 24: Consistent Strategy & Value Creation
Consistent Strategy & Value Creation Proprietary Aerospace and Aftermarket Value Based Operating Strategy “Private Equity- Decentralized Organization / Aligned Like” Returns with with Shareholders Liquidity of a Public Market Disciplined Acquisition Strategy Efficient Capital Structure 24
Slide 25: Our Markets & Customer Value Overview
Our Markets & Customer Value Overview Mike Lisman – Co-COO
Slide 26: TDG Organization
TDG Organization Kevin Stein President & CEO Mike Lisman Joel Reiss Jes Warren Sarah Wynne Co-COO Co-COO General CFO Counsel 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 Units Units Units Units Units Units Units Scalable Organization Structure 26
Slide 27: Diverse Products, Platforms and Markets
Diverse Products, Platforms and Markets 27
Slide 28: TransDigm – Expanding Global Footprint
TransDigm – Expanding Global Footprint 50 Operating Units; ≈110 Manufacturing Locations 28
Slide 29: Steady Growth in Passenger Traffic and Installed Base
Steady Growth in Passenger Traffic and Installed Base Drives Stable Aftermarket Sales Worldwide Installed Worldwide Base Growth Installed Base 45,000 40,000 35,000 30,000 2023 – 2029E 25,000 CAGR +3% 20,000 15,000 10,000 Worldwide Installed Base Growth Worldwide RPK Growth Worldwide RPK’s 14,000 12,
Slide 30: Commercial OEM Market Environment
Commercial OEM Market Environment Commercial Transport Commercial Transport – Total Deliveries (Boeing & Airbus) 50+ Year History 2,200 15 years 2,000 2,000 1,800 1,800 1,600 1,600 ` 1,400 7 years 1,400 ` 1,200 7 years 1,200 1,000 5 years 1,000 800 4 years 800 600 400 600 200 400 13 14 15 16 17 18 1
Slide 31: Fleet Age Remains Elevated
Fleet Age Remains Elevated Age of Commercial Aircraft Fleet Over Time 15.0 14.2 yrs 14.5 14.0 13.5 13.0 12.5 12.0 11.5 11.0 10.5 10.0 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, Re
Slide 32: Defense Market Environment
Defense Market Environment U.S. Defense Base Budget ($Bn) International Defense Spending ($Bn) $1,000 $2,300 CAGR + LSD% CAGR + MSD% $950 $2,100 $900 $1,900 $850 $1,700 $800 $1,500 $750 $1,300 $700 $1,100 $650 $900 $600 $550 $700 $500 $500 2023 2024E 2025E 2026E 2027E 2028E 2023 2024E 2025E 2026E 20
Slide 33: Commercial Aftermarket Trends
Commercial Aftermarket Trends Commercial Aftermarket Growth 5 Year Average TDG 11.9% 50.0% Peer Group 9.0% 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 Gr
Slide 34: TransDigm’s Addressed Market for Commercial Aftermarket
TransDigm’s Addressed Market for Commercial Aftermarket Global Airline Operating Expenses Global Maintenance Spend TDG Addressed Market 2023 Total = $855B 2023 Total = $122B 2023 Total = $57B Global TDG TDG Air Transport Other Maintenance Addressed Aftermarket 31% $122B $57B ≈ $1.7B Labor & Others O
Slide 35: TransDigm’s Diverse Commercial Aftermarket Revenue Base
TransDigm’s Diverse Commercial Aftermarket Revenue Base Total FY 2023 Commercial Top 20 Airlines Aftermarket Worldwide Revenue by Annual Sales $ Per Part United Airlines Delta Airlines American Airlines > $3 million Sales IAG per year Air France-KLM ≈ 15% to 20% Emirates Lufthansa China Southern Air
Slide 36: Strong Positions on Diverse and Growing Platforms
Strong Positions on Diverse and Growing Platforms TOP PLATFORMS Top 5 Commercial Platforms ≈ 20% Sales B737 A320 B777 B757/767 A350 Top 5 Defense Platforms ≈ 8% Sales Blackhawk C130 F35 F16 A400M 36 Note: Based on Management estimates of total revenue for 2023.
Slide 37: PMA Market Penetration
PMA Market Penetration 3rd Party PMA 3rd Party PMA ≈ 1½% to 2½% Less than 2% Total INDUSTRY Commercial Total TDG Commercial Aftermarket $ Aftermarket $ No Significant PMA Threat – At or Below Market Exposure Levels 37 Source: AeroDynamic Advisory Analysis / TDG Management Analysis
Slide 38: 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 39: Proven Operating Strategy 3 Value Drivers
Proven Operating Strategy Profitable New Productivity and Value Based Pricing Business Cost Improvements 3 Value Drivers 39
Slide 40: 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 Organization Decentralized Execution Business Unit Team Concept Succession Planning Execution Relentless Drive to Create Value Strong Track Recor
Slide 41: Highest Value to Customers
Customer Value Proposition Provide Reliable, Well Engineered Products & Deliver Them On-Time Highest Value to Customers 41 41
Slide 42: 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 777X + Over 35% + Over 45% + Over 5% Prior Platforms B787 Prior Platforms A350 Prior Platforms 777X Representative Products: Representative Product
Slide 43: Major New Business Content: Single Aisle Commercial Aircraft
Major New Business Content: Single Aisle Commercial Aircraft $ / Shipset Growth Over Prior Platforms – “Same Store Basis” A220, A320neo & B737Max Continued Growth in Content on Single Aisle Commercial Aircraft (1) + ≈ 30% Strong Position & Content Wins on the A220 platform (robust double-digit g
Slide 44: 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 45: Performance Stability Solid Value Growth Process
Performance Stability Consistent Value Business Unit Detail Creation Value Creation Focus Strategy Consistent Strategy Product Line Detail Focus Solid Value Growth Process Active Talent Growth Disciplined Disciplined Acquisition Integration Active Talent Growth Acquisition Integration 45
Slide 46: Management Process & Value Creation
Management Process & Value Creation Joel Reiss – Co-COO
Slide 47: TDG Organization
TDG Organization Kevin Stein President & CEO Mike Lisman Joel Reiss Jes Warren Sarah Wynne Co-COO Co-COO General CFO Counsel 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 Units Units Units Units Units Units Units Scalable Organization Structure 47
Slide 48: Executive Vice President (EVP) Role
Executive Vice President (EVP) Role Value Creation Driver & Culture Carrier EVP Op Unit Business Guidance Op Unit 1 President “Coaching” Value Driver Emphasis Quarterly Reviews Op Unit 2 Op Unit 3 Talent Development New President President and Staff Weed & Feed Last Year Acquisition Acquis
Slide 49: Organizational Philosophy
Organizational Philosophy Structure Execution Motivation Significant Local Autonomy Think and Act Like Owner Small Operating Units Local Decisions Create Value Focus on Products and Customers Lower Cash Compensation & Front Line Value Generation Higher Equity Few Management Layers Business Unit Disc
Slide 50: Operating Unit Organization
Operating Unit Organization President VP of VP of VP of VP of Sales Operations Engineering Finance Business Unit Business Unit Manager Team Business Unit Business Unit Manager Team Business Unit Business Unit Manager Team Business Unit Value Focus 50
Slide 51: 50 Operating Units 115+ Business Units ≈ 16,000 Employees
Autonomous Operating Units 50 Operating Units Electron Device Business 115+ Business Units ≈ 16,000 Employees 51
Slide 52: Proven Operating Strategy 3 Value Drivers
Proven Operating Strategy Profitable New Productivity and Value Based Pricing Business Cost Improvements 3 Value Drivers 52
Slide 53: Business Unit Value Creation
Business Unit Value Creation Business Unit Teams Grouping of Related Products Co-located, Cross Functional Team Business Unit Manager Drives Performance Value Driver Focus Profitable New Business Productivity and Cost Improvements Value-based Pricing Accountability Standardized Busines
Slide 54: New Business
New Business Drives Organic Growth Customer-Driven Business Opportunities Focus on Profitable New Business Highly Engineered & Innovative Responsive Development 54
Slide 55: New Business – How we do it
New Business – How we do it Customer Relationships Strong Operational Performance Engineer to Engineer Selling Existing Part with Customer Sponsorship New Customer Solve Customer Technical Issues Innovation New Part with New Part with Existing Customer New Customer Highly Engineered New
Slide 56: New Business Modeling
New Business Modeling Analytical Approach EXAMPLE ONLY Data Driven New Business Model Excerpt 2024 2025 2026 2027 2028 2029 Realistic OEM Production Rates Annual Data Production Sales NRE $507 $765 $968 $1,318 $1,536 Historical NRE Investment Estimates Production COS Product Margin ($475) ($44
Slide 57: Annual Productivity Improvements to Offset Inflation
Productivity Annual Productivity Improvements to Offset Inflation Across Total Cost Base 57
Slide 58: Productivity – Detailed Cost Reduction Planning
Productivity – Detailed Cost Reduction Planning 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 SAMPLE 58
Slide 59: Productivity - Sales per Employee
Productivity - Sales per Employee Improving Trend on “Real” Productivity Savings Constant Dollar Basis Productivity focused Capital Expenditures Automation Projects Average # of Employees Cross-Functional Training Sales Per Employee Cost Savings is not just for Operations 1 2 3 Year Note:
Slide 60: Operational Excellence - Quality
Operational Excellence - Quality Processes Culture Metrics Verification • Revision Controlled • Open & Honest • Customer Quality & • Internal Audits Documentation Communication Delivery Ratings • Third Party Audits • Cross-Training • VIP Programs • Warranty Returns (AS9100) • Engaged • Scrap & First
Slide 61: Operational Excellence and Value Pricing
Operational Excellence and Value Pricing YTD Business Unit “A” Pricing Results Percent Increase Comm Trans OEM Reg Bus Jet OEM Com AM Total YTD FY Plan Inflation Note: For Illustration Only 61
Slide 62: Business Unit – Income Statement
Business Unit – Income Statement 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
Slide 63: Business Unit Structure – Creating Value
Business Unit Structure – Creating Value Consistent Value Generation Detailed Accountability Clear Metrics Value Creation Focus 63
Slide 64: Growing Value Requires Growing Talent
Growing Value Requires Growing Talent Talent Demand Organic Growth & Acquisitions & Management Turnover Management Transitions Growth Requires Talent 64
Slide 65: Talent Development
Talent Development Financial Competency Value Creation Contracting Income Balance Risk Management Statement Sheet IP Protection Value Aftermarket Access New Business Productivity Pricing Modeling Management Business Unit Reviews Site Visits & Operational Reviews 65
Slide 66: Succession, Development and Promotion
Succession, Development and Promotion President HR, QC VP of Sales VP of Eng VP of Ops VP of Finance Other Key Positions Development Plans Biz Unit Mgr Eng Lead Mfg Mgr President VP of Sales Mentoring VP of Operations Business Unit Manager Stretch Assignments Manufacturing Manager Job Rotati
Slide 67: TransDigm Leadership Development Programs
TransDigm Leadership Development Programs Business Unit Manager (BUM) Bootcamp Executive Development Program Business Unit Manager Development Program Customized Curriculum Case Studies Team Based Action Learning Projects Highly Participatory Individual Development Plan COO Sponsors
Slide 68: Management Development Program (MDP)
Management Development Program (MDP) 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
Slide 69: Talent Development - Promotions
Talent Development - Promotions Leadership Promotions 2019-2023 Internal Promotions External Culture-Carriers 36% Smart Energetic Proven-Track Record of Creating Value Demonstrated Leadership Internal 64% 69
Slide 70: Performance Stability
Performance Stability Solid Value Growth Process Consistent Value Creation Strategy Business Unit Detail Focus Active Talent Development 70
Slide 71: Financial Overview
Financial Overview Sarah Wynne – CFO
Slide 72: Historical Financial Highlights
Historical Financial Highlights Revenue EBITDA AS Defined Adjusted Earnings Per Share Enterprise Value ($ in millions) ($ in millions) ($ in billions) $7,740 $92 $4,500 $4,045 $32.42 $6,585 $4,000 $3,395 $25.84 $3,500 $63 $5,429 $5,223 $5,103 $3,000 $50 $4,798 $18.27 $2,646 $17.14 $45 $43 $41 $2,500
Slide 73: TransDigm – How was the Past 5 Years?
TransDigm – How was the Past 5 Years? $3,500 51.6% (1) $3,300 $3,100 $2,900 Last 5 Year $2,700 EBITDA Growth $2,500 Welcome ESL! $2,300 $2,100 $1,900 $1,700 49.3% (1) $1,500 2018 1 2019 2 2020 3 2021 4 2022 5 2023 6 (1) EBITDA as Defined is a non-GAAP financial measure. See the appendix for a histor
Slide 74: Significant Free Cash Flow
Significant Free Cash Flow Free Cash Flow Before Working Capital Exceeds 50% of EBITDA As Defined 100% 90% 80% 70% 60% 50% 40% 30% 51% 55% 51% 54% 54% 20% 45% 45% 47% 10% 0% 2017 2018 2019 2020 2021 2022 2023 2024 LTM 3/30/24 Free Cash Flow Cash Interest Cash Taxes Cap Ex 74 Note: Free Cash Flow bef
Slide 75: Private Equity-Like Capital Structure
“Private Equity-Like Capital Structure" Strong Free Cash Flow Allows TransDigm to be Highly Levered 8.0x 7.0x 6.0x Range 5.0x 4.0x 3.0x 2.0x FY'18 FY'19 FY'20 Q1 Q2 Q3 FY'21 Q1 Q2 Q3 FY'22 Q1 Q2 Q3 FY'23 Q1 Q2 Note: Fiscal year ending 30-Sep. Net leverage defined as Net Debt / EBITDA As Defined. EBI
Slide 76: Fiscal 2024 Financing Activity
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 ‘
Slide 77: Debt Maturity Profile and Interest Rates
Debt Maturity Profile and Interest Rates $8,000 Secured Term Loans Prior Debt Maturity Profile $7,000 Secured Notes $6,000 Sr Sub Notes Weighted Average $5,000 Interest Rate $4,000 $3,000 Pre-Financing $1,496 6.3% $2,000 $1,000 $0 Calendar Year 2024 2025 2026 2027 2028 2029 2030 2031 2032 $8,000 Sec
Slide 78: Pro Forma Capitalization Structure
Pro Forma Capitalization Structure (1) Pro forma capitalization Actual Pro Forma ($ in millions) 3/30/24 Adj. 3/30/24 Rate Maturity Cash $4,288 – $4,288 (1) Includes ~$1.5B Restricted Cash $550 (550) – Total Cash $4,838 $4,288 paid out in Q3 FY24 $910mm revolver – – S + 2.250% Feb-29 for acquisition
Slide 79: Shareholder Return
Shareholder Return Operational Performance Financial Leverage 79
Slide 80: Superior Results
Superior Results Historical TDG Returns vs. S&P 500 90% 79% 80% 70% “Private Equity- 60% Like” Returns with Liquidity of a 50% Public Market 40% 30% 30% 27% 27% 20% 15% 12% 10% 0% 10 YR Return CAGR 5 YR Return CAGR 1 YR Return CAGR (1) (2) TDG S&P 500 (1) TransDigm returns are adjusted for special d
Slide 81: Mergers & Acquisitions
Mergers & Acquisitions Blake Kelleher – VP Mergers & Acquisitions
Slide 82: Focused Acquisition Strategy
Focused Acquisition Strategy Aerospace Products Proprietary Engineered Products Significant Aftermarket Content 82
Slide 83: Acquisition History
Acquisition History Fiscal Year $ Invested FY ‘14 $298M FY ‘15 $1,621M FY ‘16 $1,435M CPI – Electron Device Business FY ‘17 $105M SEI Industries FY ‘18 $659M GKN – FPT Industries FY ‘19 $4,133M Small product lines FY ‘20 $0 FY ‘21 $965M FY ‘22 $448M FY ‘23 $749M FY ‘24* $1,684M Annual Averag
Slide 84: M&A Organizational Structure
M&A Organizational Structure Kevin Stein Strong and Stable Team President & CEO Rotational Director Roles Utilize Brokers to Assist in US Blake Kelleher & Europe VP – M&A Director Director Director M&A M&A M&A Brokers (Senior) (Junior) (Commercial) 84
Slide 85: Lead Generation is a Systematic Approach
Lead Generation is a Systematic Approach Visit, Visit, Privately Held / Family-Owned Visit! Conferences / Private Equity Shows Ownership Networking Strategic Owners 85
Slide 86: Active Acquisition Process
Active Acquisition Process Typical Results Current Multiple(s): 14 – 16x EBITDA Post Acquisition: 50%+ Multiple Reduction 86
Slide 87: Acquisition Sourcing – Since IPO
Acquisition Sourcing – Since IPO Number of Acquisitions Acquired EBITDA at Time of Acquisition ~65% is Esterline 29% 31% Acquisition 36% 49% 40% 15% Strategic Privately Held Private Equity Note: Statistics include businesses acquired but later divested. 87
Slide 88: Proven Record of Acquisition and Integration
Proven Record of Acquisition and Integration Privately Held NYSE 1993 – 2006 2006 – 2010 2011 – 2014 2015 – 2018 2019 – 2020 2021 – 2024 Cobham Aero Connectivity Sweeney Talley Actuation Telair International Advanced Input Chelton Ltd. Adel Telair Electra-Motion Schneller AAR Cargo Sys
Slide 89: What We Don’t Look For
What We Don’t Look For Synergy Bigger is Better Market Share Globalization Fill Out Product Line Diversify Excess Capacity Consolidating Industry Access to Markets Spend $ to Make $ Blah, Blah, Blah… Blah, Blah, Blah… • Get Fee • Name in Paper • Get Promoted • Increase Salary
Slide 90: What We Do Look For
What We Do Look For (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. 90
Slide 91: Investment Evaluation
Investment Evaluation Purchase Price / Capital Structure 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 Debt & Equity Investment Year 1 Year 2 Year 3 Ye
Slide 92: Common Issues Identified During Due Diligence
Common Issues Identified During Due Diligence Misunderstood Aftermarket Wasteful Spending Misunderstood Value of Products Unfocused New Business Process Lack of Business Unit Structure Investment / Capital Starved 92
Slide 93: Acquisition Integration
Acquisition Integration Patrick Murphy - EVP
Slide 94: Acquisition Integration Process
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
Slide 95: Acquisition Integration Process – Keys to Success
Acquisition Integration Process – Keys to Success All Acquisitions are Different 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 Opportun
Slide 96: Acquisition Integration Process - Timeline
Acquisition Integration Process - Timeline Time After Actions - General Acquisition (Days) Present TransDigm, Our Culture and Value Generation Strategy ………………………..…. 0 - 15 Control Working Capital and Establish Financial Plan …………………………………………….. 0 - 90 Evaluate Key Staff Personnel Competency …
Slide 97: CPI’s Electron Device Business
CPI’s Electron Device Business Revenues Acquisition Date: June 2024 Commercial 25% Purchase Price: ≈ $1.385B Electron Device Business Defense Splitting into Two Operating Units Post-Acquisition 75% Revenues EBITDA Margin Profile OEM 30% As of Acquisition Date: 25% - 30% EBITDA Margin Exp
Slide 98: Calspan Corporation
Calspan Corporation Revenues Automotive 15% Acquisition Date: May 2023 Defense 35% Purchase Price: ≈ $725M Commercial EBITDA Margin Profile Aerospace 50% As of Acquisition Date: ≈ 25% EBITDA Margin Expect to create private equity-like returns Services & Products – Wind Tunnel & Flight Test
Slide 99: DART Aerospace
DART Aerospace Revenues Acquisition Date: May 2022 Defense Commercial 20% 80% Purchase Price: ≈ $360M Revenues OEM EBITDA Margin Profile 20% As of Acquisition Date: ≈ 25% EBITDA Margin Expect to create private equity-like returns Aftermarket 80% Products – Unique Helicopter Mission Solutio
Slide 100: Bolt-on Acquisitions
Bolt-on Acquisitions FPT Industries Revenues Revenues Defense OEM Acquisition Date: March 2024 40% Acquisition Date: May 2024 15% Purchase Price: ≈ $55M Purchase Price: ≈ $170M Commercial Aftermarket EBITDA Margin Profile 60% EBITDA Margin Profile 85% As of Acquisition Date: ≈ 20% EBIT
Slide 101: Cobham Aero Connectivity
Cobham Aero Connectivity Acquisition Date: January 2021 Revenues Commercial 25% Aero Connectivity Purchase Price: ≈ $965M 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
Slide 102: Esterline Technologies
Esterline Technologies 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 EBITD
Slide 103: M&A Wrap-Up
M&A Wrap-Up Kevin Stein – President & CEO
Slide 104: Actual Performance – Example
Actual Performance – Example Acquisition Model EBITDA Bridge Actual / FCST EBITDA Bridge 2018 Price Productivity New Biz & 2023 2018 Price Productivity New Biz & 2023 Market Market (Volume) (Volume) EBITDA hit Year 5 model target in only 1 year of ownership 104
Slide 105: Recent M&A – Slightly Opening the Aperture
Recent M&A – Slightly Opening the Aperture * Core Business CORE BUSINESS Total Addressable Market (1) Aerospace & Defense, Components and Aftermarket $120B + Source: (1) AeroDynamic Advisory, market for Tier 1 / Tier 2 aerospace components and AMKT; estimated $60B OE and $60B Component AMKT *On May
Slide 106: How Do We Get 15% - 20% /yr Return?
How Do We Get 15% - 20% /yr Return? %/yr 20% 18% 16% Acquisition Acquisition Strategy 14% 12% Leverage Capital Structure 10% 8% Market Growth 6% Organic EBITDA Value Drivers Growth Culture 4% 2% 0% Consistent Strategy 106
Slide 107: Product Presentation Breakout
Product Presentation Breakout Presentations Starting Location Greg Campbell Calspan President, Calspan Group – A Jason Abbott Chelton Retiring President, Chelton Ballroom Ryan Williamson DART Aerospace President, DART Aerospace (Main Floor) Kevin McHenry Kirkhill EVP / Former Kirkhill President Grou
Slide 108: Appendix
Appendix
Slide 109: APPENDIX: Non-GAAP Supplemental Information
APPENDIX: Non-GAAP Supplemental Information EBITDA, EBITDA As Defined, EBITDA As Defined Margin, Adjusted Net Income and Adjusted Earnings Per Share are non-GAAP financial measures presented in this presentation as supplemental disclosures to income from continuing operations and reported results. T
Slide 110: APPENDIX: Non-GAAP Supplemental Information (Continued)
APPENDIX: Non-GAAP Supplemental Information (Continued) TransDigm Group presents these non-GAAP financial measures because it believes that they are useful indicators of its operating performance. TransDigm Group believes that EBITDA is useful to investors because it is frequently used by securities
Slide 111: APPENDIX: Non-GAAP Supplemental Information (Continued)
APPENDIX: Non-GAAP Supplemental Information (Continued) Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of these non-GAAP financial measures as analytical tools has limitations, and you should not
Slide 112: APPENDIX: Reconciliation of Income from Continuing Operations to EBITDA As Defined
APPENDIX: Reconciliation of Income from Continuing Operations to EBITDA and EBITDA As Defined ($ in millions) 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
Slide 113: APPENDIX: Reconciliation of Income from Continuing Operations to EBITDA As Defined
APPENDIX: Reconciliation of Income from Continuing Operations to EBITDA and EBITDA As Defined LTM (1) ($ in millions) 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
Slide 114: APPENDIX: Reconciliation of Adjusted Net Income and Free Cash Flow Summary
APPENDIX: Reconciliation of Adjusted Net Income to Net Income and Free Cash Flow Summary ($ a nd s ha res i n mi l l i ons ) 2019 2020 2021 2022 2023 2024E Net i ncome from conti nui ng opera ti ons $ 841 $ 653 $ 681 $ 866 $ 1,299 $ 1,647 Gros s a djus tments from EBITDA to EBITDA a s Defi ned 271 2