What are you seeing in terms of global demand, particularly any behavior changes or slowdowns in the Middle East?

All regions remain very strong, with a slight slowdown in Middle East sales due to the war, though this is a relatively small percentage of total sales. This impact is being offset by strength elsewhere, as airlines globally look to cut costs, which benefits HEICO's products. “nothing significant in the Middle East, but tremendous knock-on effect around the world where people realize that they got to cut cost.”

Are ETG margins purely timing-related or structural, and what are the trends in defense bookings across segments?

ETG margins are volatile, with Q1 being weaker and Q2 strong, averaging 23.5% for the first half. The full-year GAAP operating margin guidance remains 22-24%. Defense bookings are very strong across all areas, with ongoing conversations for additional business. Consolidated defense sales are just under 30% of total sales. “I think for the 6-month period, the margins in the segment were 23.5%.”

What is HEICO's involvement in missile defense, including new emerging players, and how does this rank as a growth vector?

HEICO supplies components to defense tech firms for various programs, including missile defense and unmanned missile businesses. This is a growing business alongside legacy programs, and the company is well-positioned to serve this evolving market. “In addition to the missile defense in the new tech area, we also are very active in the drone and the -- the Unmanned missile business.”

HEI

HEICO (HEI) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Apr 2026 (Q2 FY26)· Industrials· May 28, 2026

Source: earnings call transcript

Executive summary

HEICO Q2 FY26 — Record Results Driven by Strong Organic Growth and Acquisitions

HEICO delivered record Q2 FY26 results, driven by robust organic growth across both Flight Support and Electronic Technologies segments, complemented by strategic acquisitions. The company is experiencing strong demand in commercial aviation, defense, and space, with orders at record levels. Management remains optimistic about future growth, supported by a healthy acquisition pipeline and strong cash generation, despite a slight increase in leverage from recent deals.

Highlights

Consolidated net income increased 49% to a record $233.8 million.
Consolidated operating income increased 41% and net sales increased 25%.
Electronic Technologies Group (ETG) set all-time quarterly operating income and net sales records, up 56% and 34% respectively, driven by 17% organic growth.
Flight Support Group (FSG) set all-time quarterly operating income and net sales records, up 31% and 21% respectively, driven by 19% organic growth.
Cash flow from operating activities increased 43% to $292 million.

Concerns

Net debt-to-EBITDA ratio increased to 1.74x from 1.6x due to successful completion of 4 acquisitions.
FSG operating margin was boosted by approximately 60 basis points due to a pull-forward of $15 million to $20 million in defense sales.
Component repair organic growth was impacted by significant supply chain issues and parts delays.
Middle East sales were slightly lower due to geopolitical conflict, though offset by strength elsewhere.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year sales growth	Increased sales in both Flight Support and Electronic Technologies Group medium materiality	FY26	High
Electronic Technologies Group GAAP operating margins	between 22% and 24% medium materiality	FY26	Medium
Flight Support Group margin potential	24% to 26% medium materiality	Ongoing	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Flight Support Group Set all-time quarterly operating income and net sales records. The operating income increase reflects net sales growth, SG&A expense efficiencies, and an improved gross profit margin due to a more favorable product mix and higher net sales volume in aftermarket replacement parts. Operating margin was boosted by approximately 60 basis points due to pull-forward defense sales. Operating Margin: 26.2%Operating Margin YoY Change: +210 bps (from 24.1%)Organic Growth: 19%EBITA (cash margin before amortization): 28.6%EBITA YoY Change: +160 bps (from 27.0%)Organic Growth - Parts: ~20%Organic Growth - Specialty Products: 21%Organic Growth - Component Repair: ~10%	$929.4 million	21%	—	$243.1 million
Electronic Technologies Group Set all-time quarterly operating income and net sales records. The increase reflects net sales growth, improved gross profit margin, and SG&A expense efficiencies. Improved gross profit margin principally reflects higher net sales and a more favorable product mix of aerospace products. The stated revenue of $45.5 million in the transcript is an ASR error; calculated as $342.2 million * 1.34 = $458.5 million. Operating Margin: 26.5%Operating Margin YoY Change: +370 bps (from 22.8%)Organic Growth: 17%EBITA (cash margin before amortization): 30.6%EBITA YoY Change: +390 bps (from 26.7%)	$458.5 million	34%	—	$121.8 million

Orderbook & backlog

Orders record or near-record levels Q2 FY26

Defense orders record or near-record levels Q2 FY26

Defense backlog record or near-record levels Q2 FY26

ETG order book very strong Q2 FY26

continues to grow

ETG backlog record Q2 FY26

FSG FA-approved repair stations backlog massive backlogs Q2 FY26

Many waiting on parts due to supply chain issues.

Deals & partnerships

Sherwood Avionics and Accessories acquisition combination of mostly cash and some HEICO Class A common stock

Flight Support Group acquired 80% of the stock of Sherwood Avionics and Accessories, an FAA and EASA Part 145 repair station specializing in MRO of complex mechanical and electromechanical components for defense and select commercial aviation platforms.

Southwest Antennas Inc. acquisition cash

Electronic Technologies Group acquired 90% of the stock of Southwest Antennas Inc., a designer and manufacturer of high-performance, rugged, and mission-critical antennas, primarily for ground-based defense and law enforcement applications.

Risks & headwinds

Geopolitical conflict impacting Middle East sales Q2 FY26, ongoing

Middle East sales slightly lower; Middle East as a percentage of total sales is relatively small.

Mitigation:Strength in other regions and market share gains have largely offset the impact.

Supply chain issues impacting component repair growth Q2 FY26, ongoing

Component repair organic growth was about 10%, would have been higher without parts delays.

Mitigation:Massive backlogs in FA-approved repair stations, but waiting on parts from suppliers.

Increased net debt-to-EBITDA ratio Q2 FY26

Net debt-to-EBITDA ratio increased to 1.74x as of April 30, 2026, from 1.6x as of October 31, 2025.

Mitigation:Resulted from successful completion of 4 acquisitions in fiscal '26, indicating strategic investment rather than operational distress.

Q&A highlights

Can you provide a breakdown of FSG's organic growth by product line and comment on its sustainability, especially given the strong commercial aviation parts growth?

FSG's organic growth was approximately 20% in parts, 21% in specialty products, and 10% in component repair. Component repair growth was lower due to supply chain issues. Overall demand is very strong, driven by market share gains, and a pull-forward of $15 million to $20 million in defense sales boosted Q2 results.

“breaking down organic growth by product line. When you look at parts, it's around 2% specialty products is 21%, and component repair is about 10%.”

asked by Larry Solow · answered by Eric Mendelson

2 min read 6 chapters

Detailed narrative

Record Quarterly Performance Across Segments

HEICO achieved record consolidated net income, operating income, and net sales in Q2 FY26, increasing by 49%, 41%, and 25% respectively. Both the Electronic Technologies Group (ETG) and Flight Support Group (FSG) contributed significantly, setting all-time quarterly records for operating income and net sales.

This strong performance was underpinned by impressive organic growth of 17% in ETG and 19% in FSG, alongside contributions from recent acquisitions.

Robust Demand and Market Share Gains

The company is experiencing very strong business conditions across its key markets: commercial aviation, defense, and space, with orders continuing at record or near-record levels. Management highlighted that customers are 'clamoring for more parts,' indicating strong demand for HEICO's cost-effective and high-quality products. Market share gains are a significant driver, particularly in commercial aviation, as airlines seek cost efficiencies.

Strategic Acquisitions and Pipeline Strength

HEICO completed two accretive acquisitions in April: Sherwood Avionics and Accessories for the FSG, and Southwest Antennas Inc. for the ETG. The company maintains an 'excellent potential acquisition pipeline' with opportunities across both operating segments. HEICO's long-term acquisition strategy focuses on high-quality businesses that complement existing operations, strengthen market positions, and meet strategic and financial criteria, with a preference for long-term ownership over short-term flips.

Strong Cash Generation and Capital Allocation

Cash flow provided by operating activities increased 43% to $292 million in Q2 FY26, underscoring HEICO's robust cash generation capabilities. This strong cash flow permits investment in organic growth and acquisitions while maintaining liquidity and financial flexibility. The net debt-to-EBITDA ratio stood at 1.74x as of April 30, 2026, reflecting the capital deployed for recent acquisitions.

Defense Market Tailwinds and Production Scaling

Management anticipates a multi-year tailwind in defense sales, orders, and backlog, driven by increased investment from the U.S. and its allies to replace depleted stocks. The company is receiving significant inquiries from customers regarding the ability to '6x, 4x, 10x' production of components, indicating strong future demand and potential for capacity expansion in this sector.

Aeroderivative Engine Market and AI Boom

The recent acquisition of Ethos, now part of Encore, positions HEICO strongly in the aeroderivative and industrial gas turbine markets. Management expressed excitement about this vertical, noting its potential to benefit from the increasing demand for power generation, particularly driven by the 'AI boom.' This strategic move aligns with HEICO's focus on growing markets.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.