HEI Earnings Call

SamaraWelcome to the HEICO Corporation Third Quarter 2026 Financial Results Call. My name is Samara, and I will be your operator for today's call. Certain statements in this conference call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. HEICO's actual results may differ materially from those expressed in or implied by those forward-looking statements. Factors that could cause such differences include, among others, the severity, magnitude, and duration of public health threats, our liquidity and the amount and timing of cash generation, lower commercial air travel, airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services, product specification costs and requirements, which could cause an increase in our cost to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, space, or homeland security spending by U.S. and/or foreign customers, or competition from existing and new competitors, which could reduce our sales.

SamaraOur ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth. Product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales. Cybersecurity events or other disruptions of our information technology systems could adversely affect our business and our ability to make acquisitions, including obtaining any applicable domestic and/or foreign governmental approvals and achieve operating synergies from acquired businesses. Customer credit risk, interest, foreign currency exchange and income tax rates, and economic conditions, including the effects of inflation within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries, which could negatively impact our costs and revenues. Parties listening to this call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, including but not limited to filings on Form 10-K, Form 10-Q, and Form 8-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required by applicable law.

SamaraI now turn the call over to Eric Mendelson, HEICO's co-chairman and co-chief executive officer.

Eric MendelsonThank you and good morning to everyone on this call. Thank you for joining us and we welcome you to this HEICO third quarter fiscal '26 earnings announcement teleconference. I'm Eric Mendelson, HEICO's co-chairman and co-CEO. I'm joined here this morning by Victor Mendelson, HEICO's other co-chairman and co-CEO, and Carlos Macau, our Executive Vice President and CFO. Before getting into our results, I would first like to thank HEICO's nearly 13,000 outstanding team members around the world. Once again, your dedication to our company, our customers, and your fellow team members produced yet another exceptional quarter for HEICO. We are tremendously grateful for everything you do and remain excited about HEICO's future and the opportunities ahead. One of the most asked questions by investors and analysts is, what is HEICO's secret sauce and how does HEICO continue to report exceptional earnings growth, not only quarter over quarter and year over year, but decade over decade?

Eric MendelsonFor nearly 37 years?

Eric MendelsonAnd the answer is always simple: good markets, solid businesses, and even greater people. HEICO succeeds because we simply try harder, and our customers don't have to come to us in general because they have no other alternative. Customers buy from HEICO because they want to buy from HEICO.

Eric MendelsonFor our highest quality, with the shortest turn times, at the most competitive price, and most importantly, from who we believe are the best people in our industry. HEICO team members who possess a certain HEICO DNA developed over decades, not just the last upcycle. So when you want to thank Victor, Carlos, or me, Please know that we're just simply the proverbial tip of the iceberg, and we in turn will thank Team Heico for all of their hard work, technical excellence, and most importantly, Heico camaraderie. And of course, there's Heico's team members' never-ending focus on cash flow. As one of our close friends told us many years ago, and as we always say at Heico, Earnings are opinion, cash flow is fact. And this quarter, I'm proud to announce there was $345 million of it. $345 Million of cash generated from operations, which is almost 150% of our net income. Thank you, Team HEICO. We are immensely proud of our third quarter results, which shows continued margin expansion.

Eric MendelsonRobust organic growth and strong cash generation. We remain very bullish and optimistic about HEICO's opportunities and our ability to continue our long-term growth and profitability. To summarize the highlights of our third quarter fiscal '26 results, consolidated net income, operating income and net sales in the third quarter of fiscal '26 represent record results for HEICO, increasing by 33%, 34%, and 23% respectively compared to the third quarter of fiscal '25. Consolidated net income increased 33% to a record $235.4 million, or $1.67 per diluted share, in the third quarter of fiscal '26, up from $177.3 million, or $1.26 per diluted share, in the third quarter of fiscal '25. Consolidated operating income increased 34% to a record $355.2 million in the third quarter of fiscal '26, up from $265 million in the third quarter of fiscal '25. Consolidated net sales increased 23% to a record $1,413.1 million in the third quarter of fiscal '26, up from $1,147.6 million in the third quarter of fiscal '25.

Eric MendelsonThe Electronic Technologies Group set all-time quarterly operating income and net sales records in the third quarter of fiscal '26, increasing 55% and 36% respectively over the third quarter of '25. Wow. These increases principally reflect strong 18% organic growth driven by an improved demand for most of the Electronic Technologies Group's products. As well as contributions from our fiscal '26 and '25 acquisitions. The Flight Support Group also set all-time quarterly operating income and net sales records in the third quarter of fiscal '26, improving 24% and 18%, respectively, over the third quarter of fiscal '25. These increases principally reflect strong 12% organic growth from increased demand across all of our product lines, as well as the contributions from our fiscal '26 acquisitions. Consolidated EBITDA increased 31% to $415.2 million in the third quarter of fiscal '26, up from $316.4 million in the third quarter of fiscal '25.

Eric MendelsonOur net debt-to-EBITDA ratio improved to 1.57 times as of July 31, '26, down from 1.6 times as of October 31, '25.

Eric MendelsonCash flow provided by operating activities increased 49% to $345.3 million in the third quarter of fiscal '26, up from $231.2 million in the third quarter of fiscal '25. During the third quarter, we issued $1.2 billion of senior unsecured notes, further strengthening our balance sheet, and used the proceeds to repay outstanding borrowings under our revolving credit facility. At the same time, we entered into an agreement to amend and extend the maturity date of our revolving credit agreement by 3 years to June 2031 and to increase the committed capital to $2.2 billion. Furthermore, our credit facility now includes a feature to increase the capacity by $800 million to become a $3 billion facility through increased lender commitments and can be extended for 2 additional 1-year periods. We are very pleased with the execution of the bond offering and credit facility amendments, which further enhances our liquidity and financial flexibility and positions HEICO to continue pursuing our long-term growth objectives.

Eric MendelsonWe would like to thank Truist, Bank of America, PNC, Wells Fargo, Credit Agricole, TD, Huntington, JPMorgan, M&T, and RBC for their long-term support of our growth capital needs. In July 2026, we paid our 96th consecutive semiannual cash dividend since 1979 at the rate of 13 cents per share, representing an 8% increase over the prior dividend paid in January of 2026. And then in June, we completed 2 acquisitions. Our Flight Support Group, through an 80% owned subsidiary, acquired 100% of the stock of Cook Defence Systems Limited, William Cook Stanhope Limited, and William Cook Intermodal Limited. Collectively, we call Cook Defence. Cook Defence designs and manufactures track systems, mobility solutions, and armored steel components for military fighting vehicles. The purchase price was paid in cash, principally using proceeds from our revolving credit facility. And then the Electronic Technologies Group, Exxelia subsidiary, acquired 90% of the membership interests in CalRamic Technologies LLC.

Eric MendelsonCalRamic designs and manufactures high-voltage ceramic capacitors for high-reliability applications, primarily serving the aerospace and defense markets as well as select industrial niches. The purchase price was paid in cash using cash provided by operating activities. We expect both of these acquisitions to be accretive to our earnings within the year following the acquisition. In addition, we have an excellent acquisition pipeline consisting of great potential transactions, both large and small. I now turn the call over to Victor Mendelson, HEICO's co-chairman and co-CEO, to discuss the third quarter results of our Flight Support and Electronic Technologies groups in greater detail.

Victor MendelsonEric, thank you very much. Um, before getting into the details, I'd also like to recognize and thank our outstanding team members around the world. You know, the results we're discussing today reflect your continued dedication, your discipline, and your commitment to serving our customers and to strengthening our company. We are incredibly grateful for everything you do, and we are as excited as ever about Heico's future and the opportunities ahead for all of us. Turning now to details of the operations, the Flight Support Group's net sales increased 18% to a record $947.8 million in the third quarter fiscal '26, up from $802.7 million in the third quarter fiscal '25. That sales increase resulted from strong organic growth of 12%, as well as the impact from our fiscal '26 acquisitions. Of course, the organic sales growth reflects increased demand across all, I emphasize all of our product lines.

Victor MendelsonAnd the Flight Support Group's operating income increased 24% to a record $245.3 million in the third quarter of fiscal '26, up from $198.3 million in the third quarter of fiscal '25. That operating income increase was principally derived from that previously mentioned net sales growth as well as an improved gross profit margin and SG&A expense efficiencies that were realized from the net sales growth. The improved gross profit margin principally reflects a more favorable product mix within our specialty products and our aftermarket replacement parts product lines. Flight Support Group's operating margin improved to 25.9%, in the third quarter of fiscal '26, up from 24.7% in the third quarter of fiscal '25. And that operating margin increase arose chiefly from the previously mentioned improved gross profit margin. Given, by the way, that acquisition-related intangible amortization expense consumed approximately 200 basis points of our operating margin in the FSG in the third quarter of fiscal '26, the FSG's cash margin, which is the way, by the way, we judge businesses and we believe businesses should be judged.

Victor MendelsonSo before amortization, we call it EBITA, was approximately 28.5%, which has been consistently excellent and in absolute terms is, as far as I'm concerned, Spectacular. And that is 110 basis points higher than the comparable FSG cash margin of 27.4% in the third quarter of fiscal '25. To achieve these margins at these levels while continuing to deliver meaningful cost savings, outstanding service, and exceptionally fast turnaround times to our customers is a strong reflection of the value our team members continue to deliver. And turning to the ETG, uh, the Electronic Technologies Group net sales increased 36% to a record $483.5 million in the third quarter of fiscal '26, up from $355.9 million in the third quarter of fiscal '25. And that reflects robust organic growth of 18% and the impact from our fiscal '26 and '25 acquisitions. The organic net sales growth is mainly attributable to increased demand for, and I'll add, sales of, our other electronics, defense, and aerospace products.

Victor MendelsonThe Electronic Technologies Group operating income increased 55% as you heard earlier, to a record $125.6 million in the third quarter fiscal '26. That is up from $81 million in the third quarter fiscal '25. Operating income increase principally reflects the previously mentioned net sales growth, our SG&A expense efficiencies realized from the sales growth, and an improved gross profit margin. That improved gross profit margin, by the way, was mainly fueled by the previously mentioned higher net sales of our aerospace products. The Electronic Technologies Group's operating margin improved to 26% in the third quarter of fiscal '26, up from 22.8% in the third quarter of fiscal '25. That margin increase resulted from decreased SG&A expenses as a percent of net sales, primarily driven by the previously mentioned SG&A expense efficiencies as well as the improved gross margin that I mentioned before.

Victor MendelsonImportantly, just like with the discussion in the FSG, before acquisition-related intangible expense, our operating margin was 29.9%, virtually 30%. As intangibles amortization consumed about 390 basis points of the margin. This compares to 26.6% ETG cash margin in the third quarter fiscal '25, an improvement of 330 basis points. Again, I can't emphasize enough, this is how we judge our businesses, as that most closely correlates to cash generation. And I think you know, and have known for many years, our predominant focus is on cash and cash generation. HEICO's a real company that generates real cash. It's not just accounting figures coming out of a machine. We make money. And on a true operating basis, no matter how you look at it, those are great margins, and we are very pleased with the continued expansion of these margins. Of course. So at this point, I will turn the call back over to our operator, Samara, to entertain the questions that we may have.

SamaraThank you. And if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press *1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions.

SamaraAnd we'll take our first question from Larry Solow with CJS Securities.

Larry SolowGreat. Thanks. Good morning, and congrats on a really great quarter. And like you said, Victor, you Printing money there. I guess question for you, Victor, just on the really strong organic growth, 18%, I think back-to-back quarters and year-to-date mid-teens. Maybe this level's not sustainable, but certainly much better than it was a couple years back. Just curious, can you help us just, is it, you know, it sounds like all your categories are really hitting on all cylinders between defense, aerospace, and electronics. Is there any one particular category that's really just, you know, I know defense is almost half your revenue, so is that really driving this exceptional growth or just any more color there would be great.

Victor MendelsonThank you for asking, Larry. Yes, it is very broad-based. I mean, I guess our highest percentage growth increase came out of our, you know, what people now seem to be calling industrial technology. Markets, but I can say that defense and commercial aviation or aerospace were also extremely strong. I mean, in fact, every one of our verticals, if you look at it that way, every one of the markets, the verticals showed positive signs this quarter. But, you know, there were ones that were more standouts than others, but I'm certainly proud of all of them.

Larry SolowHow about just trends in bookings behind these categories? Any color there?

Victor MendelsonYeah, listen, the trends in bookings are very strong. We have a record backlog again, both organically and with acquisitions in the ETG, just very strong backlog, extremely strong orders, particularly in that kind of industrial tech space. A lot of customers are coming in and asking us to expedite where possible in a number of instances, and then they're following up with orders beyond that, filling up the backlog. You know, it doesn't so far seem to be, all right, we're, you know, pull this forward for us and then, you know, it creates a gap somewhere later. We do everything we can, by the way, to satisfy our customers, to do it cost-effectively and to honor their requests where we can. It's not always possible, but it just seems there's very strong orders there. And I will say, it's a similar situation in defense. There's a lot of requests for pull-forward, the same in commercial aviation and some of the other markets.

Victor MendelsonIt's—. Right now seems to be a moment where customers are saying, how quickly can you get this to us? Can you get it to us faster?

Larry SolowRight. Okay. Great. Because that last question, just question just for Carlos, just on the margins. Obviously Victor discussed the EBITA margins above 28% now, 2 consecutive quarters consolidated. Yeah. Don't want to get ahead of you, but just any thoughts as we wrap up the year and then as we look out over the next couple of years?

Carlos MacauI mean, from my perspective, you know, we still expect in that segment, the 22% to 24% GAAP margins, which really equate to something like, you know, 26% to 28% EBITA margins. We've had a strong couple quarters. Of course, our first quarter was a little light on the operating margin side. So, you know, for the full year, we still expect that range. I, you know, we're still in the process now of doing budgets and thinking about next year. And we'll see how things play out, Larry. I don't want to get too far out ahead of us on that topic. But right now, the tailwind that we're getting from aerospace, defense, space, really all the verticals, as Victor mentioned, is very positive. And as long as that mix holds in, the segment always surprises us to the upside. So that's kind of how I'd like to answer that and rather not elevate expectations at this point.

Larry SolowFair enough. Fair. Appreciate it.

Victor MendelsonThanks, guys.

SamaraAnd we'll take our next question from Noah Poponak with Goldman Sachs.

Noah PoponakHey, good morning, everyone.

Eric MendelsonHi, Noah.

Noah PoponakCarlos, maybe just to quickly follow up there on the ETG margin. Um, the, the two— the, the last two quarters, '26 and change, versus that '22 to '24. Is that entirely mix? Because it sounds like you're also referencing SG&A efficiencies, which I think would be longer lasting. And then presumably just as you continue to grow revenue, there's an overhead absorption impact as well.

Carlos MacauYep. No, you're 100% right, Noah. I mean, this segment, you've noticed for a long time, the segment is quite mix sensitive and the challenges particularly in the ETG with our fourth quarter going into, you know, what are most calendar year filers' last quarter, the mix can get a little chaotic. And so I don't want to set expectations too high. I don't feel like there's— I can't give you a good or bad reason why the margins would not remain strong given the setup with our end markets. But at this moment, I don't want to I don't want to plant a flag and sort of change our internal expectations or what we talk about publicly related to margins until we get another quarter or two under our belts.

Carlos MacauOkay.

Noah PoponakMakes sense. You guys have talked about the cash flow strength.

Noah PoponakYou know, it's looking like it'll be a second year where the free cash conversion from EBITDA is around 70%.

Noah PoponakI don't know if you could talk about where you expect the year to wrap up around the billion-dollar mark on free cash. And just is there something that's changed structurally in the business to have a little bit higher conversion from the P&L than you've had in the past?

Carlos MacauNo, there hasn't been any structural changes. I think that I think that what happens here at HEICO is, as we incrementally add sales to the business and grow, we don't have a commensurate growth in what I would call is corporate overhead and BS, right? It truly is the dollars we spend to grow the business are done at the subsidiary levels. And that is the most efficient way to spend our money to grow the business. It's not a big corporate overhead monster. So we do get a lot of lift to your point, in our cash flow through the sales growth. There's nothing structural that changes. I do expect this year to be quite high in cash, free cash generation. And so nothing— no, there's no leaves to add to that tree for you as far as any structural changes.

Noah PoponakOkay. And then lastly, on its deployment, since, since Wencor, it's been, you know, many quarters of, you know, a few hundred million dollars deployed towards smaller acquisitions. As we, as we look to year '27 and '28, are, are we more likely to see that continue, or are we more likely to see something closer to the size of Wencor again?

Carlos MacauSo I'll let Eric and Victor jump on that one, but I will point out that, you know, we spent a lot of time during the third quarter redoing somewhat of our capital structure to sort of reshuffle a deck and create liquidity so that we could— so I could make sure that when Eric and Victor go to the grocery store and buy their businesses, they have plenty of cash to do it with. So right now, as Eric mentioned in the opening remarks, we got— with our accordion, we got close to $3 billion in capacity right now off our line that we could deploy. And so we're set up to continue a nice string of acquisitions here. Now the question for you two guys, I'm talking to Eric and Victor at the table here, do we have those opportunities to do it?

Eric MendelsonYes, so our, Noah, our pipeline is incredibly full. We've got an incredible M&A team and they are out beating the bushes, looking at all sorts of proprietary deals, various processes. As you know, we've worked very hard to be the buyer of choice, and I really believe that we are the best home in the industry for businesses, the way we treat people, what the expectations are going forward, the network that they're plugged into. And I would say Victor and I are very optimistic on, you know, continuing our track record. With regard to smaller medium-sized businesses versus larger businesses, I would say that HEICO is very comfortable with all of those. You know, we, we're comfortable with small acquisitions. We understand how the small deals work, small businesses work, and we provide a great home. Likewise with the medium and likewise with the large. The Wencor combination has been an absolute home run for HEICO as well as for Wencor.

Eric MendelsonIt's gone exceptionally well. We've got a phenomenal team there, and it's given us a lot of confidence to execute on larger deals should they become available. You know, the issue is not whether there are targets out there, that it's more whether the culture really fits like it did with Wencor, and if the price works for everybody. So I can promise you we're very busy on all fronts.

Victor MendelsonAnd I just might add to that, that, you know, Wencor was our largest acquisition, but we have also done some of considerable size as well, and all of those have performed exceedingly well. We've been very happy, so the deals of all sizes have worked nicely.

Carlos MacauI think just to put a fine point on all of that, Noah, just remember our goal is to grow the company 15— the net income growth in the company goal is to continue to grow 15% to 20% annually. And I think between our organic growth and the capacity we have to fund deals, we should be in a good position to continue that track record.

Noah PoponakThanks very much.

Eric MendelsonThank you.

SamaraAnd we'll take our next question from Peter Arment with Baird.

Peter ArmentYeah, good morning, Eric, Victor, Carlos. Nice results.

Eric MendelsonThank you.

Peter ArmentVictor, ETG growth kind of accelerating. I wonder if you could maybe just give us an update on kind of what the demand pull is from Europe. Obviously, we know those budgets are firming up and just thinking about Exxelia and some of your other European footprint. Maybe you could give us a little more color on Europe.

Victor MendelsonYeah, that's— thank you for asking. Europe's been very strong for us, both here in the US shipping to Europe, by the way, and from within the European market itself. And Exxelia, I was alluding to that in my answer to Noah's question, Exxelia is doing extremely well, both in Europe and here, I should add. But Europe, you know, our strategy in Europe has been to grow there. We've added some acquisitions you've seen recently over there. I think we have a pretty strong appetite for it, and we're excited about that future. And not just on, not just on defense, you know, for the obvious reasons of their rising defense budgets, but also on commercial aviation as well as the industrial tech.

Peter ArmentGot it. Appreciate that. And then just maybe a high-level one, both for Eric, Victor, just on the, you know, the right-to-repair legislation. A lot of things going on. Obviously there's been things kicking around since the 2024 FAA Reauthorization Act, Section 349. If the language stays in for the fiscal '27 NDAA, you know, just wondering how you're thinking about the tailwinds or how quickly that could impact your business both on the commercial and defense side of things. Thanks.

Eric MendelsonYeah, this is Eric, Peter. I can tell you that Heico's, you know, approximately 100 operating businesses are all very knowledgeable about what's happening out in the field, and they are going to take opportunity of, you know, whatever presents itself. So I think that there are some very good opportunities for HEICO in that area. I don't want to get out in front of it. We'll see what happens, you know, with the final outcome of all this. But I can promise you that our folks are really going to be on top of it, and we think there are a number of areas of opportunity. Without going into specifics, you know, obviously for competitive reasons, we think we're in a very good position to basically help save the government a lot of money.

Peter ArmentAppreciate it. I'll jump back in the queue. Thanks, guys.

Eric MendelsonThank you.

SamaraWe'll take our next question from Sheila Kahyaoglu with Jefferies.

Sheila KahyaogluGood morning, guys, and thank you so much for the time. Lots to chat about. Maybe I'll— Eric, I'll start with you if that's okay. Can we just chat about the different parts of FSG growth to lead to the 12% and what you saw within aftermarket replacement, repair, and then specialty products?

Eric MendelsonSure. So the parts business, you're talking on the organic side, was 15% growth, organic growth. And by the way, I should mention, I know that it's sort of standard for the industry to talk about organic revenue growth. But again, just to focus, at HEICO, the thing that we really care about is operating income growth, organic operating income growth, and that, that's really the key driver for us. And, you know, let me start out by saying that the 12% organic growth, which we're very happy with on revenue, pales in comparison compared to approximately 20% organic operating income growth. And that's what our people are focused on. And if they can trade lower margin sales for higher value-add sales where we can drive margin, I can tell you nobody at HEICO is compensated based on revenue. Revenue doesn't really matter. It's the, you know, obviously the earnings. But to answer your question, the parts and distribution, uh, 15%, the specialty products is 14%, and the component repair was 5%, which obviously is lower and brought down the average.

Eric MendelsonBut you also have to understand that in the component repair business, we have a number of businesses where their value proposition is to develop alternative repairs and use alternative parts, and that brings down the revenue. So it, you know, it increases the value to our customers. It frankly can increase the profitability to HEICO, which is what we all care about, but it can bring down the revenue. So now we do also have a number of businesses within component repair that are OEM-aligned and where there is no use of alternative material and no plans to do that. And there is a market for that on those products with those customers. And, you know, we continue to go ahead and do that, but we do still have a chunk of our business focused on the alternative space, and that does bring down the revenue. But I can tell you that the profitability is definitely higher than the organic revenue growth in that space.

Sheila KahyaogluNo, that's great color. Maybe if I could double-click on those two items then, just on the component repair and also specialty products. How is PMA adoption going? Does the component repair work help in that process? Seems like it does. And then within specialty products, if you could in any way give us color on that 14%, what your defense business is doing relative to commercial. Yeah.

Eric MendelsonSo the— so with regard to component repair, yes, the, the PMA penetration is going extraordinarily well in the, in the markets that want it. Again, we're very careful. We have multiple subsidiaries and multiple product lines whereby We don't even offer alternatives with certain products because, you know, that those are agreements and that's what the customers want. But in the areas where the customers are asking for alternatives and where we're generating them, yes, the PMA penetration is doing extremely well and the Heico proprietary DER penetration is doing equally as well. You know, with regard to specialty products, that is largely driven by defense. And our organic growth in defense is very large. You know, it's probably— I mean, well up in the upper 20s. And we anticipate continued growth in specialty products in the defense area.

Sheila KahyaogluThank you so much for that color.

Victor MendelsonThanks, Sheila. And Sheila, you still there?

Sheila KahyaogluYeah, I'm here.

Victor MendelsonYou didn't add, but scrambled egg whites, avocado toast, and smoked salmon.

Sheila KahyaogluSticking, sticking to healthy, I see. Okay, good, good to see. Thank you very much for that update.

Victor MendelsonThe most important part.

Sheila KahyaogluYep, it was. Thank you.

Victor MendelsonThanks.

SamaraAnd we'll take our next question from John Godyn with Citigroup.

John GodynHey guys, thanks for taking my question. Obviously, Heico has a long heritage in PMA aerospace aftermarket, but more and more the other exposures that the company seem to be expressing themselves and really showing through in the numbers. I was just hoping we could spend an extra minute on the outlook for HEICO's exposure to other fast-growing themes that are out there that are not aerospace aftermarket, things like missiles, space, IGT the last couple of quarters is something that came up around the edges, maybe drone components or anything else you'd flag. It just feels like we're entering a world where some of the other business lines in HEICO that are historically small may be really starting to see dramatic growth that actually moves the needle?

Victor MendelsonYeah, John, this is Victor. Absolutely. And, you know, those areas are ones that we've been focused on for quite a long time. And, you know, we talk about drones, for example, and we've been serving in various ways the drone market in a serious way. By the way, in very serious ways, going back to, I don't know, probably before 2008, 2007, before they were kind of a household name. And we've continued to evolve with that in both sides, both the ETG and the FSG, and with both electronic components, electro-optical components, as well as structural components like composites and others. And I'll add, that has expanded. It's, it's not just the historical mainstays of the market, which do remain strong for us, but now we're serving the newer defense tech space, and that is a growing business for us. I would say defense tech represents for us probably what defense tech is a proportion defense tech represents to the overall market in revenues at this point, but we're there and we're on those and we're very proud and excited.

Victor MendelsonObviously, I can't tell you which ones. I don't want to get into that for competitive reasons. In terms of missiles and missile defense, we've seen, I think I mentioned in our last call, we're on a lot of different programs. They are both again in ETG and FSG, have been historically, and we have instances where our customers have come to us and asked us to prepare to 10x our production. In some cases contracted with us already and said, "Okay, you need to double or triple or even 4 times." So it's kind of all over the place, but a lot of growth in those markets. And then adding on the industrial tech side, we're definitely seeing an effect from AI, you know, data center construction, and so on. How long that goes on, our sense is it has legs, that this is not just a 1-year blip. And we have a lot of components that we make in a number of subsidiaries that are used in various quantities there. So we feel like we're participating in that as well.

Victor MendelsonAnd of course, space, Commercial space, defense space is embedded within our defense markets. But just first talking about commercial space, we all read the same things. That market is growing tremendously. There's a great deal that's happening there. Our components are on those. We're staying, I believe, ahead of the curve with that. And even in defense space opportunities like Golden Dome, There are instances where we suspect we're on Golden Dome, it hasn't been confirmed, and in some instances we feel certain that it's Golden Dome related. So if you look at HEICO, final comment, we don't look for the single magic silver bullet. It's— mixing metaphors here— singles and doubles, and it's this very steady growth rate. We're looking for that 15 to 20% bottom line growth each year. And we're not looking— frankly, it's a controlled growth strategy. We're not looking to grow 50% one year and then only 5% the next and have a volatile situation.

Victor MendelsonSo we manage it, we manage it very carefully. Yeah.

Eric MendelsonAnd then also, just to add, with regard to the IGT area, of course, you know, you're aware of the Ethos acquisition that we made earlier this year, and we're very excited about their repair capabilities for the IGT market. And we think that there's a lot of potential there for obvious reasons. And we're also seeing orders, you know, not only in our Ethos IGT repair business, but we're also seeing orders for IGT products within our other parts business.

John GodynThat was great color. And I certainly don't expect you guys to break out organic growth for each of those business lines. But at a high level, is it fair to say that the organic growth of behind those themes is leading HEICO? I'm just trying to understand kind of what you guys are seeing and if we're hitting that S-curve in some of these businesses. It seems like we may be.

Eric MendelsonYeah, I think that, you know, there's a lot of potential. As I mentioned in Sheila's answer, you know, Sheila's question that our defense revenue organic growth, for example, over in the flight support side was extremely strong in the upper 20s. So, you know, that's leading the way right now, but we see strength across all of the markets.

John GodynGreat.

Eric MendelsonThank you.

Carlos MacauSimilar in ETG, defense and aerospace seem to be leading the way on growth.

SamaraAnd we'll take our next question from Ron Epstein with Bank of America.

Ron EpsteinYeah. Hey, good morning, guys. Good morning, Ron. A couple quick ones for you. Everything's kind of coming up roses right now, which is great, but is there anything that worries you? Are there any areas where you're spending a little more time just making sure that, you know, kind of everything's lining up the way you want? How are your supply chains doing? How is, you know, your labor front? Is there anything else, you know, like Canada and what's going on there that you're, you know, just trying to have a strategy around in case something goes awry? So, you know, what are you spending your time on, you know, trying to solve? It seems like everything else is going just great.

Victor MendelsonYeah, you know, Ron, this is Victor, and Eric will answer it as well. But in terms of where we're spending our time, I would say it's in the traditional ways in the traditional places. There's nothing that particularly stands out that's unusual. It's somewhat prosaic, but the basic blocking and tackling in the business and making sure that we're doing all the things we should be doing on taking care of customers and our people and acquisitions and capital structure, et cetera, et cetera. But, you know, the areas that are ones we watch but don't really have much control over, of course, are like the geopolitical ones, right? Where, you know, is there a spike, a short-term spike in oil prices, or is there some short-term issue that we may have to deal with where it's hard really to plan for, and we generally look at it that it's, We're not going to run the business for those short-term interests, and we're going to keep running it for that long-term view.

Victor MendelsonYou know, hiring-wise, I would say it's about the same as it was. It's, you know, it's been challenging hiring great people and bringing great people into an organization, and it hasn't gotten easier, but I don't think it's gotten worse. And right now with AI and things like that. Our anticipation is that labor situation shouldn't be a problem. There is inflation in input costs, and we have to be able to pass those on. And I think a lot of that is, is driven by the AI market. We, we do notice anecdotally that there are just kind of a broad smattering of parts and components and subcomponents and raw materials that are pushing out in lead times and becoming more expensive. So the challenges our companies are facing a little more are planning for those. So they're getting out a little longer on orders for their materials to make sure that doesn't impact them. It's nothing pronounced yet, but I would say that's something at least I'm kind of keeping an eye on because I hear these stories anecdotally, but very proud of the way companies are dealing with.

Eric MendelsonAnd Ron, the other thing that I would add is that we've got a very mature team. You know, we've been doing this for a long time and we've seen a lot of market dislocations and we've learned from that. You know, whether it's 9/11 and SARS or the global financial crisis or COVID, you know, we know what happens. We've seen this movie before, unfortunately, where things can go wrong, where no one expects it. And that's why we work very hard to set up this organization that we've got, which is a decentralized organization where people really understand their markets very well and they're close to their customers. And if you look at any of those dislocations, HEICO has been far more resilient and bounced back quicker than typically others in the industry. And I believe it's again due to the HEICO people, the HEICO structure, our DNA, which causes the business to be very resilient. And Victor spoke about the various geopolitical events.

Eric MendelsonYou know, I think that's the, you know, obviously the greatest risks, which they always are, but I feel very, very confident that the HEICO team is well prepared for whatever the future may bring. And frankly, when we look at the numbers and the projections going forward, we're extremely optimistic.

Ron EpsteinGotcha. Yeah. Gotcha. We're very—. Maybe just— Go ahead. Yeah, maybe just another follow-on. How are you guys thinking about— or do you not at all? Just curious if you do, be it that you've been so good at traditional M&A. How do you think about corporate venture capital? So given what's going on in, you know, call it aerospace tech and defense tech and otherwise, have you guys thought of making bets there or not? Is that kind of outside of what you normally do? Have you thought about it? Just curious what you think.

Victor MendelsonYeah, this is Victor. You know, as an overarching observation, we're— I don't I don't see us setting up a venture fund, you know, having a kind of a venture tech arm as other companies do, because we don't see that in being in our remit broadly at this point. But having said that, we have invested in a handful of companies for strategic reasons that were that are venture tech investments and that have worked out very well. We didn't do it just for the return. You know, it wasn't sort of like we're betting on Anthropic or something like that. It was because we needed something they were making or we wanted the relationship and we wanted to be part of it. So I think we'll continue to do that very carefully, very strategically. Without becoming a VC fund.

Ron EpsteinGot it. Got it. All right, guys. Thank you very much and have a good day. Thank you.

Victor MendelsonYou too.

SamaraAnd we'll take our next question from Jonathan Siegmann with Stifel.

Sebastian RiveraHey, good morning, guys. This is Sebastian Rivera on for John today. Maybe just quickly, last quarter you had mentioned these DoD framework agreements were still being worked out and not sure where they'd land and that capacity investments around that would be anchored on kind of having those concrete LTAs in hand. Is there any update you can maybe note there?

Victor MendelsonYeah, so we're beginning to see some of those come to fruition. I think there's a lot more to go, but we've definitely seen some POs and contracts appearing for the multiplier effect that I mentioned earlier in one of my other answers. And I would expect that to continue for some time.

Sebastian RiveraAnd then maybe to kind of piggyback on Sheila's question, can you maybe just quantify how much Wencor has kind of enabled the margin step-up year-to-date in FSG and kind of what inning you guys are in in terms of kind of like that PMA content replacement opportunity?

Eric MendelsonYeah, I don't know specifically that Wencor has, you know, created the margin step-up opportunity. You know, we always thought that there were synergies that could be achieved and we've been able to get them and, you know, that certainly has helped. I think there's a lot more that the businesses can do together and, you know, to guess what inning we're in, you know, that's hard to say, but, you know, maybe the 5th inning. You know, I think we still have got Plenty more to go. And depending on if certain plans and objectives and thoughts come into play, it could be the second inning. So, but we're working on all that now, but it's been a phenomenal combination and I'm very excited about the future for the combined company.

Sebastian RiveraI'll turn it over. Congrats on the strong quarter.

Eric MendelsonThank you.

Victor MendelsonThank you.

SamaraAnd we'll take our next question from Pete Skibitsky with Alembic Global.

Pete SkibitskyHey, good morning, everyone. Nice quarter. A little bit of a follow-on to the last question, guys. You know, with one quarter left in fiscal '26, I'm just trying to think about the levers still available to you to drive organic growth in FSG. Specifically in commercial, when we think about kind of maybe, you know, kind of slowing global air traffic growth, you know, I was wondering if you can kind of walk through maybe, you know, the opportunity still available in market share gains, you know, new product introductions, maybe even pricing and whatever other levers you feel like are available to you to kind of drive organic growth in commercial at FSG in kind of a flattening traffic environment. Thanks.

Eric MendelsonWell, there's a lot of, I would say, unsold potential throughout the entire our entire business. And there's a lot more revenue, I think, that we can get. You know, frankly, our customers are very excited about what we are offering, both on the independent as well as the OEM-aligned side. I think that there is a tremendous amount of opportunity in those areas. And I can tell you, in speaking with our business leadership and our sales leadership, they're very, very excited excited going forward. So we've got customers with all sorts of big ideas, and we're going to be here to— we're going to be here to support them. So I, I would say it's just the standard Heico playbook, nothing different than it's been for the last decade.

Pete SkibitskyOkay, great. Maybe just one follow-up, Eric. Um, I'm curious, it's kind of like global air traffic kind of shifts to Asia. It's been going in that direction, obviously, but continues to— do you guys have any thought about opening more repair stations in Asia to capture some of the demand there, or is, is location not really as relevant to commercial aftermarket as, you know, with your positioning?

Eric MendelsonYeah, we, we, we've been able to do very well in, uh, commercial aftermarket with our positioning. Um, you know, we're always looking at, at various opportunities. Um, But I'd sort of rather not get into the specifics of that, but we've been highly successful in our approach. You know, we've got multiple sales offices over there, very deep relationships, and I think our customers are very happy with what we got— you know, what we've got. We also have operations in Asia, not component overhaul, but other operations in Asia which are very helpful. So I think we're, you know, time will tell what we end up doing in that area.

Pete SkibitskyOkay. Thanks, guys.

Eric MendelsonThank you.

Pete SkibitskyThank you.

Carlos MacauThanks, Pete.

SamaraAnd we'll take our next question from Scott Mikus with Melius Research.

Scott MikusMorning, Eric and Victor. Very good results. Seems like there's a lot of demand across all your verticals. We also saw Deputy Secretary of Defense Stephen Feinberg issue a memo asking defense companies to accelerate production of various defense programs. So just curious how you're thinking about organic investments within the business and particularly CapEx, given that your customers are asking you to expedite shipments, but your backlog continues to grow.

Victor MendelsonYeah. So as a general rule of thumb, this is not leading to a material change in our CapEx. Fortunately, the things we make and the way we make them, they tend to be smaller incremental items, you know, like a spectrum analyzer or a few pieces of test equipment or a paint booth or something like that. There are some instances where we will invest more, but, you know, if you look at our CapEx, we're spending, what, about 1.5% on CapEx, I don't see that rising materially. And if it got up to 2%, that would still be pretty manageable or extremely manageable for us. We are committed to making the investments that are needed. We will do that. We've made that very clear to our customers. And at this point, I still, as I said, I emphasize that I don't see that being a Herculean task. If there are ones that do require a much larger investment and we feel like our customers or somebody should contribute to that, then of course we won't have any reservations about seeking that.

Eric MendelsonAnd I would also add, without going into specifics, that we are, you know, big supporters of what the administration is trying to do and get more product out there, and we're working very hard We've got a number of teams very much focused on this. And there are certain areas where we are going ahead and making the capital expenditure where we have a very high degree of confidence of the level of business. And we're, if you will, taking the risk to make sure that we're able to supply the product when the customer needs it. And I think that, you know, our Customers are extremely happy about that.

Scott MikusOkay. And then to follow up on Noah's question earlier on acquisitions and the potential size of deals, you've seen a lot of aerospace defense IPOs break their IPO prices. Does that cause any shift in the M&A pipeline for sponsors that were thinking about taking assets public or maybe thinking about pursuing a sale to a company like HEICO? That is usually an acquirer of choice?

Victor MendelsonYeah, listen, I, I, um, I don't think it's had a material impact on the number of companies we're seeing and the desires of sellers. Um, most don't want to, uh, get into sort of with the private equity situations. Um, but it certainly has influenced valuations, uh, and valuations, as you know, have increased in the sector. And that's something that we deal with. We've dealt with it successfully. But I would say that would probably be the most pronounced impact.

Eric MendelsonAnd also my sense is that if some of these don't go well or don't go as well as expected, that could be future opportunity for HEICO.

Scott MikusAll right. Thank you.

Eric MendelsonThank you.

SamaraAnd we'll take our next question from David Strauss with Wells Fargo.

Joshua KornHi, good morning. This is Joshua Korn for David. Wanted to ask if you could speak a little bit about what the margins look like on some of the revenues from the recent acquisitions. Thanks.

Carlos MacauYou want me to take—. Yeah. We generally don't. Disaggregate down to the sub-level margins. I will tell you that when we make acquisitions, our expectations are that most of the deals we close, the EBITDA margin needs to be 20% or greater. That's sort of a gating factor in our thesis or our analysis of acquisitions. So, and that's about as far down the food chain as we get on discussing margins at the subsidiary level, our starting point anyhow.

Eric MendelsonBut one of the things we can tell you is that typically, you know, acquisitions have intangible amortization attached to it. So obviously that, that can typically push down sometimes the reported margin.

Eric MendelsonYeah, yeah, not on the EBITDA or EBITA level, but, you know, the operating income margin.

Joshua KornOkay. Thank you. I'll stick to just one.

Eric MendelsonThank you.

Joshua KornThank you.

SamaraAnd we'll take our next question from Renee Plessner with Renee Plessner Associates.

Renee PlessnerHello. Hello.

Eric MendelsonGood morning, Renee.

Renee PlessnerGood morning. Good morning. How are you? Excellent, excellent results. I just wanted to call in because I did a little homework. Um, in all of 1995, HEICO earned $2.7 million.

Renee PlessnerIn the latest 9 months, it earned $659 million. That's 244 times as much profit, and the year isn't finished. Um, I bought it in 1995. Cash flow was $7 million versus today $816 million in only 9 months. So, if the future is going to follow the same playbook, Eric, that you referred to, I hope I live another 30 years. That's my statement for the day.

Victor MendelsonWell, we hope you live another 30 years as well.

Victor MendelsonAnd I hope for the same thing for me at least. But for the rest of the people on the— thank you very much. And for the rest of the people on this call who don't know Mr. Plessner, Mr. Plessner is an individual investor who in 1994 '94, really started learning about the company, invested in '95, and added to his holdings over the years despite the advice from a lot of financial experts who said you need to diversify and diversify and diversify. He is actually a very large shareholder in the company and has always been committed to it, and he's made his money in it. I won't say how much, but it's obviously huge sum. Sorry for saying that, Rene, but obviously a huge sum. But he's made it by believing in the business and following this, the same approach, the same way we do it, believing in the people and the business, the long term, and not getting too wrapped up in any momentary movement in either direction.

Victor MendelsonSo we thank you for being one of the smartest investors I've ever met.

Eric MendelsonAnd Renee, this is Eric. I add my thanks and gratitude as well for your support and confidence and friendship over many, many decades. And to answer, you know, specifically your question, I remember talking to you about it 30-something years ago, and we had a dream on what we could do, and we thought we were responsive and and we found some opportunities where we could really help the airlines that we could build something. And it turned out to be, you know, obviously even more successful than we had dreamt at the time. But I can tell you that our customers universally want to buy more from HEICO. And the reason they don't they aren't currently buying more from HEICO is we only have so much to offer them. And, you know, frankly, you know, we had a sales meeting last week and somebody stood up and said, people aren't buying from our competitors because they want to buy from our competitors. Nobody, you know, starts out their day saying they want to buy from HEICO's competitors.

Eric MendelsonThe vast majority of our customers start their day wanting to buy more from us. And it's because of our people, our quality, our pricing, and, you know, frankly, the vision that we had to build a long-term business, not a one-and-done, or, you know, where you run up the stock and run out the door, that kind of thing. We wanted to build a serious industrial company that was going to last for generations. And I can tell you we're well on the way. Who knows what the future holds? But I can tell you that the 3 of us at this table and our leadership and the 13,000 people at HEICO are really, really excited about the future. So I thank you for your support and comment and friendship.

Renee PlessnerThank you. Thank you, and go on to your next caller. And today's a great day.

Victor MendelsonThank you.

Eric MendelsonThank you, Renee.

Renee PlessnerYou're welcome. You're welcome. Thank you.

Eric MendelsonThanks.

SamaraAnd we'll take our next question from Gavin Parsons with UBS.

Gavin ParsonsGood morning.

Eric MendelsonThat's a tough one to follow.

Gavin ParsonsI guess in a more trivial pursuit, it sounds like repair is still growing a good amount slower. Eric, is that the supply chain bottlenecks you talked about last quarter? Any color there would be great.

Gavin ParsonsYeah, that—.

Eric MendelsonI'm glad you mentioned that, Gavin. That is also a big issue for us, the ability to get parts in various areas. You know, when you've got a component and you could have 99 parts but you're waiting for the final part, you can't ship it. And there is definitely a backlog about that, you know, throughout our businesses, and that also has definitely had an impact on the component repair space. Thank you for highlighting that.

Gavin ParsonsIs that improving or has that actually gotten worse?

Eric MendelsonI would say it's consistent, you know, not materially better. It's gotten better in some areas. The, you know, the problems that we had a year ago in general are not problems today. But other things have popped up. And so as a result, it remains definitely a major headache for the industry and definitely has impacted those revenues.

Carlos MacauI mean, Gavin, this is Carlos. Keep in mind the gross margin on that business has been expanding. And even though the revenue growth You have to remember that as we flood these repairs, component repairs consume a lot of parts, as Eric just pointed out. And as we are able to populate those repairs with more PMA product, the top line revenue does not grow as fast because we're offering a higher value proposition to our customers. The profitability on that job grows. And so one thing that we've been experiencing in our repair business is a little lighter top-line revenue growth because we're not passing through the exorbitant cost of OEM product onto our customers. We're trying to do these repairs as much as we can with PMA, which has a lower sales price, but it's a much more profitable venture for us. And I actually think that this pattern will continue, and if it does, we'll be very happy for that because again, it's an expanded— it's more cash to HEICO shareholders in that relationship versus passing on OEM product through the sales and charging a higher price.

Carlos MacauI don't know if that makes sense, but that's, that's the phenomenon going on right now in that business.

Gavin ParsonsYep. Okay. Thanks. That's very helpful. Appreciate it.

SamaraAnd we'll take our next question from Kristine Liwag with Morgan Stanley.

Victor MendelsonHello, Christine?

Victor MendelsonHi.

Shaina ZuberHi, can you hear me?

Victor MendelsonYes, now we can.

Shaina ZuberSorry about that. This is Shaina Zuber on for Christine. Thanks for taking my question. Just to double-click on air traffic a little bit, there's been a lot of focus this year on how commercial aftermarket would hold up, and obviously this and last quarter's results display significant growth despite these concerns. But in the last couple months of data, we're starting to see RPKs dip a little bit on a year-over-year basis. If we continue to see this, is there a point at which you'd expect to start seeing this flow through to impact the commercial side of the business?

Eric MendelsonYeah, thus far we haven't seen that. And the other thing is, when RPKs do slow down, airlines get even been more serious about cost savings. So that will be a mitigating factor. But, you know, certainly if the number of flights is down, then the demand for parts would follow. But I'd point out we've got so much unsold potential and so much opportunity out there that, you know, we typically mitigate that much better than, you know, most in the industry. So, and again, we, we haven't seen that to date.

Shaina ZuberGreat, thanks. That's it for me.

Eric MendelsonThank you.

SamaraWe'll take our next question from Gautam Khanna with TD Cowen.

Barrett TaylorHi, good morning. This is Barrett Taylor on for Gautam. Thanks for taking my question. I was wondering if the DOD has approached the HEICO team directly regarding the right to repair and build to print initiatives, and then could you provide any insight on how involved industry participants have been in those discussions?

Barrett TaylorThanks.

Eric MendelsonYeah, we— I can say that we're very aware of what's going on. I wouldn't want to get into any, you know, specific conversations, but again, we do think that there's very good opportunity for HEICO in this area. You know, when you know all the reasons why, so I think it's best probably just to leave it at that. But thank you very much.

Barrett TaylorOkay, great. Thank you. Congrats on the quarter.

Eric MendelsonThank you.

SamaraAnd we'll take our next question from Matt Akers with BNP Paribas.

Matt AkersHey, good morning, guys. Thanks for the question. Um, can you touch on working capital? It's, it's been— I mean, to your point, your free cash flow has been very solid even though working capital has been a bit of a drag year to date. Should we expect that to continue as you keep growing here, or is there an opportunity for some more working capital efficiencies there?

Carlos MacauI mean, this is Carlos, Matt. The, you know, working capital at HEICO is going to grow commensurate with our organic growth. It's been kind of the pattern. We do have some strategic investment in inventories to deal with customer demands and backlogs. So you saw that elevated this quarter. I expect working capital will not be any different in Q4 than what we saw this quarter. I think we'll have continued— a little bit of use of cash for working capital to fill backlog and demand and nothing unusual other than that going on.

Matt AkersOkay. Great. Thanks. I'll leave it at that.

Carlos MacauThe only other thing I would point out on our operating cash flows, I've mentioned on prior calls, is that we do have a payment going out to the estate of our past chairman and CEO, and that probably will have a $70 to $75 million drag on operating cash flows in Q4. We've talked about it before. I just point that out. It's not— I don't know if it's working capital related, but it is related to our operating cash flows in the fourth quarter. So please keep that in mind as you're doing your modeling.

Matt AkersGot it. Thank you.

SamaraAnd we'll take our next question from Louis Raffetto with Wolfe Research.

Louis RaffettoHey, good morning, guys. Good morning. Maybe Victor, Eric, just to follow up on John's earlier question on the sort of the other end markets and the, you know, sort of some of the opportunities you see there. Do you see those markets having the same margin opportunity as in aerospace?

Victor MendelsonSome do, and I think some, it's a mix, but they can. It all depends on the products. But we have some very strong margins in the industrial tech segment.

Eric MendelsonAnd also in particular, industrial gas turbine, there's a lot of opportunity for us in that space as well. Basically the same technologies, you know, Louis, and we really don't have the fixed costs associated with it.

Louis RaffettoGreat, thank you. And then maybe Carlos, just one for you. The interest expense in the quarter, did that include incremental costs from the debt issuance?

Carlos MacauIt did. For the, you know, with the debt issuance costs and then the amortization of the costs related to the line of credit, that all went through interest this quarter. All right, perfect.

Louis RaffettoThank you.

Victor MendelsonThank you.

SamaraAnd at this time, I will turn the conference to Victor Mendelson for any additional or closing remarks.

Victor MendelsonThank you very much. We thank everybody for being on the call with us. For the remainder of fiscal '26, we expect increased net sales at both the Flight Support Group and electronic technologies group to continue to be supported by underlying demand for our products and contributions from recent acquisitions. As for those acquisitions, we remain focused on identifying and evaluating the acquisition opportunities that align with our strategic objectives, and our capital allocation strategy will prioritize those investments in organic growth and acquisitions while preserving adequate liquidity and financial flexibility. And as you heard, that acquisition activity remains extremely robust for us. And as always, though, we'll remain disciplined and only pursue acquisitions that meet our strategic and financial criteria that we believe will create meaningful long-term value for our shareholders. And with that, we end the call, and we look forward to talking with you on our next call.

Victor MendelsonAnd should you have questions in the interim, you all know where to reach us. Thank you very much.

SamaraAnd this concludes today's call. Thank you for your participation. You may now disconnect.