HEICO's Q4 2025 Earnings Call: Contradictions in Defense Sales Growth, Wencor Integration, and M&A Strategy Emerge

Date of Call: December 19, 2025

Financials Results

• Revenue: $1,219.2M, up 19% YOY
• EPS: $1.33 per diluted share, up 35% YOY (from $0.99)

Guidance:

• Expect net sales growth in fiscal '26 across Flight Support and Electronic Technologies driven by organic demand and recent acquisitions.
• ETG organic growth targeted at mid- to low-single digits on an organic basis.
• FSG GAAP operating margin expected roughly 23.5%–24.5%.
• M&A pipeline remains robust; acquisitions expected to be accretive within year of close.
• CapEx expected around ~1.5%–1.6% of revenue.
• Targeted leverage ~2x (current net debt-to-EBITDA ~1.6x); willing to use temporary incremental leverage for the right deals.

Business Commentary:

• Revenue and Earnings Growth:
• HEICO reported record net income of $188.3 million for the fourth fiscal quarter of 2025, up from $139.7 million in the previous year's fourth quarter, marking a 35% increase.

• The growth was driven by strong organic growth across all of the company's product lines and profitable acquisitions.

• Flight Support Group Performance:

• The Flight Support Group achieved record net sales of $834.4 million, up from $691.8 million in the previous year's fourth quarter, representing a 21% increase.

• The growth was attributed to strong organic growth of 16% and the impact from recent acquisitions, reflecting increased demand across all product lines and defense sector opportunities.

• Electronic Technologies Group Growth:

• The Electronic Technologies Group reported record net sales of $384.8 million, up from $336.2 million in the previous year's fourth quarter, reflecting a 14% increase.

• This growth was primarily due to strong organic growth for most of the group's products and contributions from recent acquisitions.

• Acquisition Strategy and Outlook:

• HEICO completed five acquisitions in fiscal '25 and has two more lined up for fiscal '26, with a focus on adding complementary capabilities and enhancing strategic positioning.
• The acquisitions are expected to be accretive within the year of each transaction's closing, reflecting the company's disciplined approach to financial management and strategic growth.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted "record" Q4 results (net income $188.3M, +35%), consolidated EBITDA up 26% to $331.4M, strong cash flow (+44% to $295.3M), improved leverage (net debt/EBITDA 1.60) and repeated optimism on continued organic growth and a robust M&A pipeline.

Q&A:

• Question from Lawrence Solow (CJS Securities, Inc.): Can you bucket the drivers of FSG's accelerated growth — market growth, expanded parts offering, market share, acceptance of your parts?
  Response: Growth is a mix of a strong industry tailwind plus HEICO's expanded aftermarket parts/repair offerings and value proposition; 16% organic FSG growth this quarter (21% including acquisitions) and a decentralized, entrepreneurial structure enabling outperformance.

• Question from Lawrence Solow (CJS Securities, Inc.): Any general thoughts on the state of the union for HEICO's end markets heading into fiscal 2026?
  Response: Overall positive — ETG guided to mid/low-single-digit organic growth as a rule of thumb; subsidiaries feel good after budget reviews but results will vary by company.

• Question from Ronald Epstein (BofA Securities, Research Division): How are things looking for M&A into 2026 and how comfortable are you leveraging given the strong balance sheet? Any progress on PMA parts for defense?
  Response: Pipeline is very active; HEICO is buyer of choice and will use leverage opportunistically (comfortable with ~2x permanent leverage; could temporarily spike higher for the right deal); PMA-for-defense progress is ongoing but remains a medium-term opportunity.

• Question from Peter Arment (Robert W. Baird & Co., Research Division): Given growth in missile/defense, do you see defense mix changing materially within FSG? Also views on Golden Dome opportunity?
  Response: Defense mix likely stays roughly consistent because commercial is also growing fast; Golden Dome is additive with multiple existing programs involved but details are limited and largely non-public.

• Question from Kenneth Herbert (RBC Capital Markets, Research Division): How should we think about FSG margins into fiscal '26 and beyond? Any reason improvements won't continue?
  Response: Expect FSG GAAP operating margins in a ~23.5%–24.5% range; further modest improvement possible from fixed-cost absorption, but mix variability (specialty vs R&O) can widen quarter-to-quarter.

• Question from Kenneth Herbert (RBC Capital Markets, Research Division): What are aftermarket fundamentals heading into 2026 given OEM deliveries and fleet dynamics?
  Response: Management expects older fleet demand and aftermarket fundamentals to remain strong — airlines continue to need parts for aging fleets and HEICO is well positioned to serve both independent and OEM-aligned needs.

• Question from Sheila Kahyaoglu (Jefferies LLC, Research Division): Which parts of FSG may outperform in fiscal 2026 and how do recent acquisitions like Ethos fit into Wencor/FSG?
  Response: Strength is broad-based across FSG; Ethos adds IGT capabilities (industrial gas turbines / aero-derivatives) that complement Wencor and are expected to see rising component overhaul demand.

• Question from Sheila Kahyaoglu (Jefferies LLC, Research Division): How does Axillon fuel containment fit with Robertson and revenue expectations (~$125M)?
  Response: Axillon is separate from Robertson and is a supplier to them; no revenue breakout provided and recognition/timing depend on customary closing conditions.

• Question from John Godyn (Citigroup Inc., Research Division): Is the 15%–20% multi-year net income growth aspiration still valid? Any signs of sharp deceleration?
  Response: 15%–20% remains an aspirational target; management and CFO cite historical compounding (~18% over 35 years) and see nothing today that impedes those goals, though they avoid specific guidance.

• Question from Noah Poponak (Goldman Sachs Group, Inc., Research Division): Can you parse margin improvement drivers in FSG — mix vs pricing — and how do you expect capital deployed to acquisitions in 2026 vs 2025?
  Response: Margin gains driven by mix shifts toward higher-margin PMA/DER repairs and avionics plus strong parts volume absorbing fixed costs; pricing contributes ~1–3 points annually to cover labor; expect similar or higher M&A cadence in 2026 and will remain selective.

• Question from Scott Deuschle (Deutsche Bank AG, Research Division): Do large airline customers (e.g., legacy carriers) still have meaningful white space to buy more from FSG?
  Response: Yes — major customers buy a lot but substantial white space remains due to contracts, inertia and approval processes; HEICO continues to win incremental scope.

• Question from Alexandra Eleni Mandery (Truist Securities, Inc., Research Division): Exposure to new engines (LEAP, GTF, GEnx) and PMA opportunity including first-time shop visits?
  Response: New engines are typically under warranty so PMA opportunities emerge as platforms age; HEICO states its engineering capability spans current and next-gen platforms and is prepared when opportunities arise.

• Question from Cashen Keeler (BNP Paribas, Research Division): Has FAA approval timing impacted PMA pipeline?
  Response: No material impact — HEICO reports a strong, ongoing relationship with the FAA and says approvals/pipeline are progressing normally.

• Question from Gautam Khanna (TD Cowen, Research Division): Any plans to collapse Class A and common shares? Thoughts on Class A valuation?
  Response: Status quo for now; collapsing classes would require an exchange value and has trade-offs; management views Class A as a relative value and expects convergence over time but no change announced.

Contradiction Point 1

Defense Product Sales Growth

It involves the explanation of growth trends in the defense segment, which affects investor perceptions of the company's strategic direction and financial performance.

Which factors—expanded parts offering, market share, or customer acceptance—are driving FSG's growth, considering historically low double-digit growth? - Larry Solow (CJS Securities, Inc.)

2025Q4: The growth is stronger than anticipated... Factors include the rising tide in the industry, HEICO's value proposition, and customer acceptance. - Eric Mendelson(Co-CEO, Co-President & Co-Chairman)

What drove the 26% sequential growth in defense product sales, and is this growth broad-based or concentrated in specific programs? - Robert Spingarn (Melius Research)

2023Q4: The strength in defense is driven by multiple factors, including recovery in commercial aviation, new products, efficiency initiatives, and acquisition-related benefits. - Victor Mendelson(Co-President and President of HEICO's Electronic Technologies Group)

Contradiction Point 2

Wencor's Performance and Integration

It affects understanding of the integration progress and financial impact of the Wencor acquisition, which is crucial for investor expectations of future performance.

Which parts of the business are performing better, specifically related to the Ethos acquisition? - Sheila Kahyaoglu (Jefferies LLC, Research Division)

2025Q4: Ethos plays well in the IGT market and is expected to increase demand for components overhaul. HEICO is confident in integrating Ethos effectively with Wencor. - Eric Mendelson(Co-CEO, Co-President & Co-Chairman)

Have Wencor sales grown significantly compared to FSG's organic growth, and if so, what's driving this strong performance? - Robert Spingarn (Melius Research)

2023Q4: Wencor's growth aligns with the performance of the HEICO Flight Support Group. Wencor's organic growth is similar to HEICO's parts business. - Eric Mendelson(Co-President of HEICO and President of HEICO's Flight Support Group)

Contradiction Point 3

M&A Pipeline and Strategy

It impacts investor perceptions of the company's growth strategy and ability to execute on acquisitions, which are crucial for future revenue growth.

What are M&A opportunities expected to look like in 2026? - Ronald Epstein (BofA Securities, Research Division)

2025Q4: M&A pipeline is robust, with increased activity and a strong pipeline. HEICO is known for being a good home for sellers, particularly entrepreneur-founder managers. - Victor Mendelson(Co-CEO, Co-President & Co-Chairman)

How will the supply chain recover in 2024, and what challenges might arise? - Gautam Khanna (TD Cowen)

2023Q4: We don't buy companies because we like them. We buy companies because they fit our business model. - Victor Mendelson(Co-President and President of HEICO's Electronic Technologies Group)

Contradiction Point 4

Defense and Space Growth in ETG

It impacts the company's growth strategy and market focus, which are vital for long-term planning and investor confidence.

Can you compare defense and electronics growth within the ETG segment? - Louis Raffetto (Wolfe Research, LLC)

2025Q4: No public breakdown is provided. Defense and space, along with technologies like Golden Dome, offer opportunities. - Victor Mendelson(Co-CEO, Co-President & Co-Chairman)

What are missile defense opportunities and potential M&A in the sector? - George Anthony Bancroft (Gabelli Funds, LLC)

2025Q3: Defense and space, along with technologies like Golden Dome, offer opportunities. - Victor Mendelson(Co-CEO, Co-President & Director)

Contradiction Point 5

Defense Business Growth and Market Position

It reflects differing perspectives on the growth trajectory and market positioning of HEICO's defense business, which is crucial for investor expectations and strategic planning.

Does FSG growth pose a challenge to defense work? - Peter Arment (Robert W. Baird & Co. Incorporated)

2025Q4: The defense business remains compelling, with missile defense and launch business expansion opportunities. HEICO's capabilities drive cost efficiencies and expand addressable markets. - Eric Mendelson(CEO)

Can you discuss parts business growth and Doge's impact on defense sales? - Larry Solow (CJS Securities)

2025Q2: The defense business is expected to continue to grow, and the U.S. and international markets are anticipated to be positive. - Victor Mendelson(CEO)