HEICO (HEI) - 2025 Q3 - Quarterly Report

General Information Provides an overview of HEICO Corporation's Form 10-Q filing, registration, stock information, and shares outstanding Company and Filing Details HEICO Corporation's Form 10-Q filing details its registration, stock information, and shares outstanding - HEICO Corporation filed a Quarterly Report on Form 10-Q for the period ended July 31, 2025[1] - The company's Common Stock (HEI) and Class A Common Stock (HEI.A) are registered on the New York Stock Exchange[3] - HEICO Corporation is classified as a large accelerated filer[4] Shares Outstanding as of August 25, 2025 | Class of Stock | Shares Outstanding | | :--------------- | :----------------- | | Common Stock | 55,053,674 shares | | Class A Common Stock | 84,152,807 shares | Part I. Financial Information Presents HEICO's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and detailed notes Item 1. Financial Statements This section presents HEICO's unaudited condensed consolidated financial statements and detailed notes for the periods ended July 31, 2025, and October 31, 2024 Condensed Consolidated Balance Sheets Presents HEICO's condensed consolidated balance sheets as of July 31, 2025, and October 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Item | July 31, 2025 | October 31, 2024 | | :--------------------------------- | :------------ | :--------------- | | ASSETS | | | | Total current assets | $2,386,027 | $2,062,292 | | Property, plant and equipment, net | 437,635 | 339,034 | | Goodwill | 3,646,106 | 3,380,295 | | Intangible assets, net | 1,513,525 | 1,334,774 | | Total assets | $8,531,623| $7,592,822 | | LIABILITIES AND EQUITY | | | | Total current liabilities | 711,316 | 663,851 | | Long-term debt, net | 2,443,898 | 2,225,267 | | Total liabilities | 3,881,583 | 3,529,260 | | Total shareholders' equity | 4,212,453 | 3,697,406 | | Total liabilities and equity | $8,531,623| $7,592,822 | Condensed Consolidated Statements of Operations Presents HEICO's condensed consolidated statements of operations for the nine and three months ended July 31, 2025, and 2024 Condensed Consolidated Statements of Operations (in thousands, except per share data) | Item | Nine months ended July 31, 2025 | Nine months ended July 31, 2024 | Three months ended July 31, 2025 | Three months ended July 31, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :------------------------------- | :------------------------------- | | Net sales | $3,275,633 | $2,844,004 | $1,147,591 | $992,246 | | Operating income | 739,976 | 605,809 | 265,019 | 216,446 | | Net income attributable to HEICO | $502,089 | $374,421 | $177,341 | $136,577 | | Net income per share attributable to HEICO shareholders: | | | | | | Basic | $3.61 | $2.71 | $1.27 | $.99 | | Diluted | $3.57 | $2.67 | $1.26 | $.97 | Condensed Consolidated Statements of Comprehensive Income Presents HEICO's condensed consolidated statements of comprehensive income for the nine and three months ended July 31, 2025, and 2024 Condensed Consolidated Statements of Comprehensive Income (in thousands) | Item | Nine months ended July 31, 2025 | Nine months ended July 31, 2024 | Three months ended July 31, 2025 | Three months ended July 31, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :------------------------------- | :------------------------------- | | Net income from consolidated operations | $542,769 | $408,200 | $190,680 | $147,817 | | Total other comprehensive income | 27,167 | 11,611 | 888 | 6,967 | | Comprehensive income attributable to HEICO | $529,047 | $385,656 | $178,634 | $143,309 | Condensed Consolidated Statements of Shareholders' Equity Presents HEICO's condensed consolidated statements of shareholders' equity for the nine months ended July 31, 2025, and 2024 - Total HEICO shareholders' equity increased to $4.14 billion as of July 31, 2025, from $3.64 billion as of October 31, 2024[14] - Comprehensive income attributable to HEICO for the nine months ended July 31, 2025, was $502.1 million, contributing significantly to the equity increase[14] - Cash dividends of $0.23 per share were paid during the nine months ended July 31, 2025, totaling $32.0 million[14] Condensed Consolidated Statements of Cash Flows Presents HEICO's condensed consolidated statements of cash flows for the nine months ended July 31, 2025, and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine months ended July 31, 2025 | Nine months ended July 31, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $638,940 | $466,747 | | Net cash used in investing activities | (697,694) | (112,150) | | Net cash provided by (used in) financing activities | 155,249 | (324,047) | | Net increase in cash and cash equivalents | 99,785 | 31,892 | | Cash and cash equivalents at end of period | $261,888 | $202,940 | Notes to Condensed Consolidated Financial Statements Provides detailed notes to HEICO's condensed consolidated financial statements, covering accounting policies, acquisitions, and other disclosures Note 1. Summary of Significant Accounting Policies Outlines HEICO's significant accounting policies and the basis of financial statement preparation - The unaudited condensed consolidated financial statements are prepared in conformity with GAAP for interim financial information and Form 10-Q instructions, and should be read with the annual Form 10-K[18] - HEICO operates with two segments: the Flight Support Group (FSG) and the Electronic Technologies Group (ETG)[19] - New FASB ASUs (2023-07, 2023-09, 2024-03) on segment reporting, income taxes, and expense disaggregation are being evaluated for disclosure impact but are not expected to affect consolidated results, financial position, or cash flows[20][22][23] Note 2. Acquisitions Details HEICO's acquisitions completed in fiscal 2025, including consideration and asset allocation - In fiscal 2025, HEICO completed several acquisitions, including SVM Private Limited (70%), exclusive license/assets from Honeywell International for Boeing 777 AIMS and 737NG/P-8/E-7 VIA, Millennium International, LLC (90%), Rosen Aviation, LLC (100%), and Gables Engineering, Inc. (100%)[24][25][27][28][29] Aggregate Total Consideration for Fiscal 2025 Acquisitions (in thousands) | Item | Amount | | :-------------------------- | :------- | | Cash paid, net | $629,890 | | Issuance of common stock | 10,123 | | Contingent consideration | 11,509 | | Additional purchase consideration | (129) | | Total consideration | $651,393 | Allocation of Aggregate Total Consideration for Fiscal 2025 Acquisitions (in thousands) | Assets Acquired | Amount | | :------------------------ | :------- | | Goodwill | $252,172 | | Customer relationships | 157,487 | | Property, plant and equipment | 91,530 | | Intellectual property | 90,125 | | Inventories | 81,353 | | Trade names | 29,946 | | Other assets | 31,516 | | Liabilities assumed | (54,786) | | Noncontrolling interests | (27,950) | | Net assets acquired, excluding cash | $651,393 | Note 3. Selected Financial Statement Information Provides selected financial statement information, including accounts receivable, inventories, and redeemable noncontrolling interests Selected Financial Statement Information (in thousands) | Item | July 31, 2025 | October 31, 2024 | | :----------------------------------- | :------------ | :--------------- | | Accounts receivable, net | $597,622 | $538,487 | | Inventories, net | $1,310,393 | $1,170,949 | | Property, plant and equipment, net | $437,635 | $339,034 | | Accrued customer rebates and credits | $29,400 | $24,300 | | R&D expenses (9 months) | $88,275 | $82,810 | | Redeemable noncontrolling interests | $437,587 | $366,156 | | Accumulated other comprehensive income (loss) | $882 | ($26,076) | - The company has various Put Rights with noncontrolling interest holders, which may require the company to purchase their equity interests through fiscal 2034[38] Note 4. Goodwill and Other Intangible Assets Details changes in goodwill by segment and the net carrying amount of identifiable intangible assets Goodwill by Operating Segment (in thousands) | Segment | October 31, 2024 | Goodwill Acquired (FY25) | July 31, 2025 | | :------ | :--------------- | :----------------------- | :------------ | | FSG | $1,882,558 | $110,301 | $1,995,261 | | ETG | $1,497,737 | $141,871 | $1,650,845 | | Consolidated Totals | $3,380,295 | $252,172 | $3,646,106| Identifiable Intangible Assets (Net Carrying Amount, in thousands) | Asset Type | July 31, 2025 | October 31, 2024 | | :-------------------- | :------------ | :--------------- | | Customer relationships | $792,103 | $706,316 | | Intellectual property | 396,254 | 334,328 | | Trade names | 324,563 | 293,263 | | Other | 605 | 867 | | Total Net Carrying Amount | $1,513,525| $1,334,774 | - Amortization expense for intangible assets was $101.7 million for the nine months ended July 31, 2025, up from $91.5 million in the prior year[50] Note 5. Long-Term Debt Provides details on HEICO's long-term debt, including revolving credit facilities and senior unsecured notes Long-Term Debt (in thousands) | Item | July 31, 2025 | October 31, 2024 | | :----------------------------------- | :------------ | :--------------- | | Borrowings under revolving credit facility | $1,235,000 | $1,015,000 | | 2028 senior unsecured notes | 600,000 | 600,000 | | 2033 senior unsecured notes | 600,000 | 600,000 | | Finance leases and notes payable | 23,034 | 26,133 | | Less: Debt discount and debt issuance costs | (10,411) | (11,759) | | Less: Current maturities of long-term debt | (3,725) | (4,107) | | Total Long-Term Debt, net of current maturities | $2,443,898| $2,225,267 | - The weighted average interest rate on borrowings under the revolving credit facility decreased to 5.7% as of July 31, 2025, from 6.3% as of October 31, 2024[52] Fair Value of Senior Unsecured Notes (in thousands) | Notes | Carrying Value (Jul 31, 2025) | Fair Value (Jul 31, 2025) | Carrying Value (Oct 31, 2024) | Fair Value (Oct 31, 2024) | | :---------- | :---------------------------- | :------------------------ | :---------------------------- | :------------------------ | | 2028 Notes | $596,137 | $612,502 | $595,267 | $609,376 | | 2033 Notes | 593,452 | 612,235 | 592,974 | 605,917 | | Total | $1,189,589 | $1,224,737 | $1,188,241 | $1,215,293 | Note 6. Revenue Details contract balances, remaining performance obligations, and net sales by operating segment Contract Balances (in thousands) | Item | July 31, 2025 | October 31, 2024 | Change | | :-------------------- | :------------ | :--------------- | :----- | | Contract assets, current | $132,963 | $112,235 | $20,728 | | Total contract liabilities | (173,497) | (145,746) | (27,751) | - Remaining performance obligations (backlog) totaled $2.06 billion as of July 31, 2025, with $625.5 million expected to be recognized in the remainder of fiscal 2025 and $1.44 billion thereafter[59] Net Sales by Operating Segment (in thousands) | Segment | 9 months ended July 31, 2025 | 9 months ended July 31, 2024 | 3 months ended July 31, 2025 | 3 months ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Flight Support Group | $2,282,905 | $1,947,574 | $802,661 | $681,626 | | Electronic Technologies Group | $1,028,345 | $927,393 | $355,863 | $322,129 | | Total consolidated net sales | $3,275,633 | $2,844,004 | $1,147,591 | $992,246 | Note 7. Income Taxes Discusses HEICO's effective tax rates and the impact of recent tax law changes - The effective tax rate for the first nine months of fiscal 2025 decreased to 16.0% from 17.3% in the prior year, primarily due to a larger tax benefit from stock option exercises ($27.2 million in 2025 vs. $13.6 million in 2024)[62][95] - The effective tax rate for the third quarter of fiscal 2025 increased to 18.9% from 18.0% in the prior year, mainly due to the prior year's favorable impact from contingent consideration reversal and a larger R&D tax credit[63][107] - The company is evaluating the impact of the recently enacted H.R. 1, 'One Big Beautiful Bill Act,' which introduces significant changes to U.S. tax law[64] Note 8. Fair Value Measurements Details fair value measurements of liabilities, particularly contingent consideration, and valuation inputs Fair Value Measurements of Liabilities (in thousands) | Item | July 31, 2025 | October 31, 2024 | | :------------------------ | :------------ | :--------------- | | Contingent consideration (Level 3) | $42,252 | $30,207 | - The estimated fair values of contingent consideration arrangements are classified within Level 3 and determined using a probability-based scenario analysis approach[70] - Unobservable inputs used for Level 3 contingent consideration liabilities include compound annual revenue growth rates (ranging from -2% to 22%) and discount rates (ranging from 7.2% to 7.8%)[72] Note 9. Net Income Per Share Attributable to HEICO Shareholders Presents basic and diluted net income per share attributable to HEICO shareholders Net Income Per Share Attributable to HEICO Shareholders | Item | Nine months ended July 31, 2025 | Nine months ended July 31, 2024 | Three months ended July 31, 2025 | Three months ended July 31, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :------------------------------- | :------------------------------- | | Basic EPS | $3.61 | $2.71 | $1.27 | $.99 | | Diluted EPS | $3.57 | $2.67 | $1.26 | $.97 | Note 10. Operating Segments Provides financial information by operating segment, including operating income and total assets Operating Income by Segment (in thousands) | Segment | 9 months ended July 31, 2025 | 9 months ended July 31, 2024 | 3 months ended July 31, 2025 | 3 months ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Flight Support Group | $549,422 | $438,561 | $198,326 | $153,594 | | Electronic Technologies Group | $235,334 | $206,379 | $80,998 | $75,788 | | Consolidated Operating income | $739,976 | $605,809 | $265,019 | $216,446 | Total Assets by Operating Segment (in thousands) | Segment | July 31, 2025 | October 31, 2024 | | :-------------------------- | :------------ | :--------------- | | Flight Support Group | $4,605,036 | $4,264,360 | | Electronic Technologies Group | $3,447,101 | $2,981,326 | | Other, Primarily Corporate | $479,486 | $347,136 | | Consolidated Total assets | $8,531,623| $7,592,822 | Note 11. Commitments and Contingencies Details HEICO's outstanding commitments, product warranty liabilities, and legal contingencies - As of July 31, 2025, the Company had $6.7 million in outstanding standby letters of credit and guarantees[77] - The product warranty liability increased to $4.8 million as of July 31, 2025, from $4.0 million at the beginning of the fiscal year[78] - Management believes that the outcome of current legal actions will not have a material adverse effect on the Company's financial position or results of operations[79] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes HEICO's financial performance, condition, liquidity, and outlook for the nine and three months ended July 31, 2025 Overview Provides an overview of HEICO's two operating segments and the impact of recent acquisitions on results - HEICO's business is comprised of two operating segments: the Flight Support Group (FSG) and the Electronic Technologies Group (ETG)[82] - Results of operations for the reported periods have been affected by fiscal 2024 and 2025 acquisitions[83] Results of Operations Presents consolidated financial highlights for the nine and three months ended July 31, 2025, and 2024 Consolidated Financial Highlights (9 months ended July 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | % of Net Sales (2025) | % of Net Sales (2024) | | :----------------------------------- | :------------------ | :------------------ | :-------------------- | :-------------------- | | Net sales | $3,275,633 | $2,844,004 | 100.0% | 100.0% | | Gross profit margin | 39.7% | 39.0% | | | | Selling, general and administrative expenses | 17.1% | 17.7% | | | | Operating income | $739,976 | $605,809 | 22.6% | 21.3% | | Net income attributable to HEICO % of net sales | 15.3% | 13.2% | | | Consolidated Financial Highlights (3 months ended July 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | % of Net Sales (2025) | % of Net Sales (2024) | | :----------------------------------- | :------------------ | :------------------ | :-------------------- | :-------------------- | | Net sales | $1,147,591 | $992,246 | 100.0% | 100.0% | | Gross profit margin | 39.8% | 39.2% | | | | Selling, general and administrative expenses | 16.7% | 17.4% | | | | Operating income | $265,019 | $216,446 | 23.1% | 21.8% | | Net income attributable to HEICO % of net sales | 15.5% | 13.8% | | | Comparison of First Nine Months of Fiscal 2025 to First Nine Months of Fiscal 2024 Compares HEICO's consolidated financial performance for the first nine months of fiscal 2025 and 2024 - Consolidated net sales increased 15% to a record $3.28 billion, driven by strong organic growth in both FSG (13%) and ETG (7%), supplemented by acquisitions[85] - Consolidated gross profit margin improved to 39.7% from 39.0%, primarily due to a 1.4% increase in FSG's gross profit margin[86] - Consolidated SG&A expenses as a percentage of net sales improved to 17.1% from 17.7%, reflecting efficiencies from net sales growth[88] - Consolidated operating income increased 22% to a record $740.0 million, with FSG operating income up 25% and ETG operating income up 14%[90] - Net income attributable to HEICO increased 34% to a record $502.1 million, or $3.57 per diluted share[97] Comparison of Third Quarter of Fiscal 2025 to Third Quarter of Fiscal 2024 Compares HEICO's consolidated financial performance for the third quarter of fiscal 2025 and 2024 - Consolidated net sales increased 16% to a record $1.15 billion, with FSG sales up 18% and ETG sales up 10%[98] - Consolidated gross profit margin improved to 39.8% from 39.2%, mainly due to a 1.4% increase in FSG's gross profit margin[99] - Consolidated SG&A expenses as a percentage of net sales improved to 16.7% from 17.4%, driven by efficiencies from net sales growth[101] - Consolidated operating income increased 22% to a record $265.0 million, with FSG operating income up 29% and ETG operating income up 7%[102] - Net income attributable to HEICO increased 30% to a record $177.3 million, or $1.26 per diluted share[109] Outlook Discusses HEICO's expectations for future net sales growth and long-term financial strategy - HEICO is confident in achieving net sales growth across both FSG and ETG segments, driven by continued organic demand and recently completed acquisitions[110] - The company's financial strategy focuses on maximizing long-term shareholder value through strategic acquisitions, organic growth, market share gains, and maintaining a strong financial position[110] Liquidity and Capital Resources Analyzes HEICO's cash flow activities, capital expenditures, debt, and compliance with covenants - Principal uses of cash include acquisitions, interest payments, capital expenditures, cash dividends, distributions to noncontrolling interests, and working capital needs[111] - Anticipated fiscal 2025 capital expenditures are approximately $65 million to $70 million[111] - The total debt to shareholders' equity ratio was 58.1% as of July 31, 2025, and the company was in compliance with all debt covenants[111] - Net cash provided by operating activities increased 37% to $638.9 million for the first nine months of fiscal 2025, up from $466.7 million in the prior year[114] - Net cash used in investing activities totaled $697.7 million, primarily for acquisitions ($629.9 million) and capital expenditures ($46.0 million)[115] - Net cash provided by financing activities was $155.2 million, including $495.0 million in revolving credit facility borrowings, partially offset by payments, dividends, and distributions[116] Guarantor Group Summarized Financial Information Provides summarized financial information for the Guarantor Group subsidiaries backing HEICO's senior notes - HEICO's $600 million 2028 Senior Notes and $600 million 2033 Senior Notes are fully and unconditionally guaranteed by the 'Guarantor Group' subsidiaries[119] Guarantor Group Summarized Financial Information (in thousands) | Item | July 31, 2025 | October 31, 2024 | | :----------------------------------- | :------------ | :--------------- | | Current assets (excluding net intercompany receivable from non-guarantor subsidiaries) | $1,881,632 | $1,642,341 | | Noncurrent assets | 4,966,866 | 4,627,711 | | Current liabilities (excluding net intercompany payable to non-guarantor subsidiaries) | 594,466 | 546,677 | | Noncurrent liabilities | 3,064,155 | 2,793,193 | | Redeemable noncontrolling interests | 314,394 | 243,277 | | Noncontrolling interests | 60,250 | 49,900 | - Guarantor Group net sales for the nine months ended July 31, 2025, were $2.77 billion[128] Forward-Looking Statements Highlights the inherent risks and uncertainties associated with forward-looking statements in the report - Statements in the report that are not historical facts are forward-looking and involve risks, uncertainties, and contingencies[129] - Factors that could cause actual results to differ materially include public health threats, liquidity, airline purchasing decisions, product costs, governmental demands, competition, new product introduction, manufacturing difficulties, cybersecurity events, acquisitions, and economic conditions[129][130] - The company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by applicable law[130] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in HEICO's market risk sensitivity assessment since the October 31, 2024, Annual Report on Form 10-K - There have been no material changes in HEICO's assessment of sensitivity to market risk since the disclosures in the Annual Report on Form 10-K for the year ended October 31, 2024[131] Item 4. Controls and Procedures Management concluded HEICO's disclosure controls were effective as of July 31, 2025, with no material changes in internal control over financial reporting - Management, with the participation of Co-CEOs and CFO, concluded that HEICO's disclosure controls and procedures were effective as of July 31, 2025[132] - No material changes in internal control over financial reporting occurred during the third quarter ended July 31, 2025[133] Part II. Other Information Presents other information, including details on trading arrangements, exhibits, and report signatures Item 5. Other Events No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the third quarter - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the third quarter ended July 31, 2025[136] Item 6. Exhibits Lists all exhibits accompanying the Form 10-Q, including subsidiary guarantors and various certifications - Exhibits include Subsidiary Guarantors, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Inline XBRL documents[137] Signatures The Form 10-Q report was officially signed by HEICO Corporation's CFO and Chief Accounting Officer on August 27, 2025 - The report was signed by Carlos L. Macau, Jr., Executive Vice President - Chief Financial Officer and Treasurer, and Bradley K. Rowen, Chief Accounting Officer and Assistant Treasurer[142] - The signing date for the report was August 27, 2025[142]