Financial Data and Key Metrics Changes - The company reported a Q3 EBITDA margin of 54.4%, supported by growth in the commercial aftermarket and a focus on operating strategy [13][39] - Operating cash flow for Q3 exceeded $630 million, with a cash balance of nearly $2.8 billion at the end of the quarter [13][40] - Full fiscal year 2025 sales guidance was decreased by $60 million to a midpoint of $8.79 billion, while EBITDA guidance was raised by $40 million to a midpoint of $4.725 billion, reflecting a 13% increase [14][17] Business Line Data and Key Metrics Changes - Commercial OEM revenue decreased by 7% year-over-year in Q3, attributed to lower production rates at Boeing and Airbus [25][26] - Commercial aftermarket revenue increased by approximately 6% compared to the prior year, with growth across all submarkets [28][29] - Defense market revenue grew by approximately 13% year-over-year, with healthy bookings supporting continued growth [30][31] Market Data and Key Metrics Changes - The commercial OEM market is expected to see revenue growth in the flat to low single-digit percentage range, down from previous expectations [15][16] - The commercial aftermarket and defense revenue growth guidance remains unchanged, with expectations of high single-digit to low double-digit percentage growth [16][31] - The company noted that supply chain issues remain a bottleneck for OEM production ramp-up, but improvements are being observed [28][78] Company Strategy and Development Direction - The company aims to provide private equity-like returns with the liquidity of a public market, focusing on proprietary aerospace businesses with significant aftermarket content [10][11] - Recent acquisitions, including Servotronics and Simmons Precision, align with the company's strategy to enhance its portfolio [21][22] - The company maintains a disciplined approach to capital allocation, prioritizing reinvestment in businesses and accretive M&A [23][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the commercial OEM market, despite current challenges, and expects a return to positive growth in Q4 [62][63] - The company remains focused on operational excellence and efficient cost structures to navigate uneven demand in the commercial OEM market [19][39] - Management highlighted the importance of monitoring the aerospace and capital markets for future adjustments [18] Other Important Information - The company announced leadership transitions, with Mike Lisman set to take over as CEO on October 1 [38][39] - The company is approximately 75% hedged on its total gross debt balance, providing protection against interest rate fluctuations [41][42] Q&A Session Summary Question: About the aftermarket performance and future expectations - Management indicated that the commercial aftermarket growth is in line with expectations, and they anticipate continued growth in the high single-digit to low double-digit range [47][49] Question: Visibility into fourth-quarter growth rates - Management expressed confidence in achieving the guidance for the year, with expectations for a return to positive growth in the commercial OEM segment [60][63] Question: Supply chain improvements and potential headwinds - Management noted that supply chain conditions are improving, although some issues remain, and they are hopeful for a quick resolution to any disruptions [78][81] Question: Competitive landscape and second sourcing - Management reported no significant changes in the competitive landscape regarding second sourcing or PMA competition, maintaining a strong position in the market [102][104] Question: Insights on recent acquisitions and future opportunities - Management expressed optimism about the acquisition of Simmons and the potential for more carve-outs in the aerospace and defense sector [107][108]

Financial Data and Key Metrics Changes - The company reported a strong Q2 with an EBITDA margin of 54% driven by growth in the commercial aftermarket and a focus on operational strategy [15][22] - The midpoint of fiscal '25 revenue guidance is $8,850 million, reflecting an approximate 11% increase [21] - The midpoint of fiscal '25 EBITDA guidance is $4,685 million, up approximately 12%, with an expected margin of around 52.9% [22][23] Business Line Data and Key Metrics Changes - Commercial aftermarket revenue increased by approximately 13% compared to the prior year, with all submarkets experiencing positive growth [27][28] - Commercial OEM revenue was flat year-over-year but grew by about 17% sequentially [25][26] - Defense market revenue grew by approximately 9% compared to the prior year, with growth evenly distributed across OEM and aftermarket components [35][36] Market Data and Key Metrics Changes - Global revenue passenger kilometers (RPKs) were up 3.3% year-over-year, indicating a recovery in air travel demand [32] - Domestic air traffic was up about 1% compared to 2024 and up about 8% compared to 2019, while international travel was up 4.9% compared to 2024 [34] Company Strategy and Development Direction - The company focuses on proprietary aerospace businesses with significant aftermarket content, aiming for private equity-like returns with public market liquidity [10][12] - Capital allocation priorities include reinvesting in businesses, disciplined M&A, and returning capital to shareholders through share repurchases or dividends [16][17] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the commercial aerospace market, despite challenges in the OEM sector due to production rates and supply chain issues [14][18] - The company does not anticipate significant headwinds from tariffs and is largely insulated due to its domestic manufacturing focus [20][42] Other Important Information - The company ended the quarter with a strong cash balance of over $2,400 million and a net debt to EBITDA ratio of 5.1, down from 5.3 [40] - A leadership transition is underway, with Mike Lisman set to become the new CEO effective October 1, 2025 [8][9] Q&A Session Summary Question: Comments on the Jefferson acquisition situation - Management confirmed interest in the Jefferson business but emphasized a disciplined approach to valuation, stating that sometimes it is necessary to say no to deals [48][49] Question: Impact of tariffs on pricing - Management indicated that the impact from tariffs is currently insignificant, and they do not foresee needing to pass on costs to customers [51] Question: Capital deployment strategy - Management reiterated that returning capital to shareholders through share repurchases or special dividends is part of their capital allocation strategy, alongside M&A [54][55] Question: Margin expectations for the second half of the year - Management acknowledged conservatism in margin guidance, with expectations for fluctuations due to a mix shift in revenue sources [60][72] Question: Performance of aftermarket submarkets - Management reported strong performance across all aftermarket submarkets, with no signs of weakness in discretionary spending [128]