Transdigm Group Incorporated

Thank you for standing by and welcome to the second quarter 2001 TransTime Group Incorporated Earnings Conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Jimmy Steinman, Director of Investor Relations. Please go ahead.

Thank you and welcome to Transdime's fiscal 2021 second quarter earnings conference call. Presenting on the call this morning are Transdime's Executive Chairman, Nick Hawley, President and Chief Executive Officer, Kevin Stein, and Chief Financial Officer, Mike Listman. Please visit our website at transdime.com to obtain a supplemental slide deck and call replay information. Before we begin, the company would like to remind you that statements made during the 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 available through the investor section of our website or at sec.gov. The company would 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 reconciliation. I will now turn the call over to Nick.

Good morning. Thanks, everybody, for calling in. As usual, I'll start off with a quick overview of our strategy, a few comments about the quarter, and then Kevin and Mike will expand and give more color. To reiterate, we're unique in the industry in both the consistency of our strategy in good and bad times, as well as our steady focus on intrinsic shareholder value creation through all phases of the aerospace cycle. To summarize, here are some of the reasons why we believe this. About 90% of our 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 generally have significantly higher margins and over any extended period of time have typically provided relative stability in the downturns. 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 closely aligned with our shareholders. Fourth, we acquire businesses that fit this strategy and where we see a clear path to PE-like returns. And lastly, our capital structure and allocation of our capital are key parts of our value creation methodology. 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 careful allocation of our capital. As you saw from our earnings release, we had another decent quarter, considering the environment. We see a bit more light at the end of the tunnel, but are still in a pretty tough commercial aerospace market environment. On a positive note, we saw another significant sequential increase in quarterly commercial aftermarket bookings in Q2. This is the second quarter in a row with a significant step-up. The stalling of the air travel recovery that concerned us last quarter, though still spotty, looks somewhat better now, but may have pushed a ramp up a quarter or so out. The two most important operating items we have focused on through this downturn are on the things we can to some degree control. One, tightly managing our costs, and I think we have this well in hand. Second, assuring substantial liquidity, and this also seems well in hand. Absent some large additional dislocation or shutdown, we should come out of this with substantial firepower. We continue to look at possible M&A opportunities and are always attentive to our allocation. Both the M&A and the capital markets are always difficult to predict, and especially so in times like these, But in Q2, we acquired the Cobham Aero Connectivity business for an enterprise value of $965 million. On the divestiture front, in the last 60 days, we signed agreements to sell three additional less proprietary and mostly defense businesses for about $240 million. Collectively, these businesses have revenues of roughly $180 and EBITDA margins in the low 20%. We expect to receive all the proceeds in Q3. We still have one primarily defense business that we are currently considering for sale. At this time, I do not anticipate that we will make any significant dividend or share buybacks for the next three or four quarters, or at least until the commercial market shows stronger signs of a rebound and our leverage level settles down a bit. But we'll keep watching. and see if our view changes over time. We believe we are about as well positioned as we can be right now, and we'll watch for market developments and react accordingly. And now let me hand it over to Kevin to review our performance.