Heico Corporation
Other securities:
HEI.A
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PART I
Item 1. BUSINESS
The Company
HEICO Corporation through its subsidiaries (collectively, “HEICO,” “we,” “us,” “our” or the “Company”) believes it is the world’s largest manufacturer of Federal Aviation Administration (“FAA”)-approved jet engine and aircraft component replacement parts, other than the original equipment manufacturers (“OEMs”) and their subcontractors. HEICO also believes it is a leading manufacturer of various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries.
The Company was originally organized in 1957 as a holding company known as HEICO Corporation. As part of a reorganization completed in 1993, the original holding company (formerly known as HEICO Corporation) was renamed as HEICO Aerospace Corporation and a new holding corporation known as HEICO Corporation was created. The reorganization did not result in any change in the business of the Company, its consolidated assets or liabilities or the relative interests of its shareholders.
Our business is comprised of two operating segments:
The Flight Support Group. Our Flight Support Group (“FSG”), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support Corp. and their collective subsidiaries, accounted for 70%, 68% and 60% of our net sales in fiscal 2025, 2024 and 2023, respectively. The FSG uses proprietary technology to design and manufacture jet engine and aircraft component replacement parts for sale at lower prices than those manufactured by OEMs. These parts are approved by the FAA and are the functional equivalent of parts sold by OEMs. In addition, the FSG repairs, overhauls and distributes jet engine and aircraft components, avionics and instruments for domestic and foreign commercial air carriers and aircraft repair companies as well as military and business aircraft operators. The FSG also manufactures and sells specialty parts as a subcontractor for aerospace and industrial original equipment manufacturers and the United States ("U.S.") government. Additionally, the FSG is a leading supplier, distributor, and integrator of military aircraft parts and support services primarily to the U.S. Department of Defense, defense prime contractors, and foreign military organizations allied with the U.S. Further, the FSG is a leading manufacturer of advanced niche components and complex composite assemblies for commercial aviation, defense and space applications. The FSG also engineers, designs and manufactures thermal insulation blankets and parts as well as removable/reusable insulation systems for aerospace, defense, commercial and industrial applications; manufactures expanded foil mesh for lightning strike protection in fixed and rotary wing aircraft; distributes aviation electrical interconnect products and electromechanical parts; overhauls industrial pumps, motors, and other hydraulic units with a focus on the support of legacy systems for the U.S. Navy; performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications; and manufactures emergency descent devices ("EDDs") and personnel and cargo parachute products.
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The Electronic Technologies Group. Our Electronic Technologies Group (“ETG”), consisting of HEICO Electronic Technologies Corp. and its subsidiaries, accounted for 30%, 32% and 40% of our net sales in fiscal 2025, 2024 and 2023, respectively. The ETG derived approximately 51%, 51% and 49% of its net sales in fiscal 2025, 2024 and 2023, respectively, from the sale of products and services to U.S. and foreign military agencies, prime defense contractors and both commercial and defense satellite and spacecraft manufacturers. The ETG collectively designs, manufactures and sells various types of electronic, data and microwave, and electro-optical products, including infrared simulation and test equipment, laser rangefinder receivers, electrical power supplies, back-up power supplies, power conversion products, underwater locator beacons, emergency locator transmission beacons, flight deck annunciators, panels, indicators, electromagnetic and radio frequency interference shielding and filters, high power capacitor charging power supplies, amplifiers, traveling wave tube amplifiers, photodetectors, amplifier modules, microwave power modules, flash lamp drivers, laser diode drivers, arc lamp power supplies, custom power supply designs, cable assemblies, high voltage power supplies, high voltage interconnection devices and wire, high voltage energy generators, high frequency power delivery systems; memory products, including three-dimensional microelectronic and stacked memory, static random-access memory (SRAM), and electronically erasable programmable read-only memory (EEPROM); harsh environment electronic connectors and other interconnect products, radio frequency ("RF") and microwave amplifiers, transmitters, and receivers and integrated assemblies, sub-assemblies and components; RF sources, detectors and controllers, wireless cabin control systems, solid state power distribution and management systems, proprietary in-cabin power and entertainment components and subsystems, cockpit displays and other avionics components, crashworthy and ballistically self-sealing auxiliary fuel systems, nuclear radiation detectors, communications and electronic intercept receivers and tuners, fuel level sensing systems, high-speed interface products that link devices, high performance active antenna systems and airborne antennas for commercial and military aircraft, precision guided munitions, other defense applications and commercial uses; silicone material for a variety of demanding applications; precision power analog monolithic, hybrid and open frame components; high-reliability ceramic-to-metal feedthroughs and connectors, technical surveillance countermeasures (TSCM) equipment to detect devices used for espionage and information theft; rugged small-form factor embedded computing solutions; custom high power filters and filter assemblies; test sockets and adapters for both engineering and production use of semiconductor devices; radiation assurance services and products; and high reliability ("Hi-Rel"), complex, passive electronic components and rotary joint assemblies for mostly aerospace and defense applications, in addition to other high-end applications, such as medical and energy uses, including emerging "clean energy" and electrification applications.
HEICO has continuously operated in the aerospace industry for over 65 years. Since assuming control in 1990, our current management has achieved significant sales and profit growth through a broadened line of product offerings, an expanded customer base, increased research and development expenditures and the completion of many acquisitions. As a result of internal growth and acquisitions, our net sales from continuing operations have grown from $26.2 million in fiscal 1990 to $4,485.0 million in fiscal 2025, representing a compound annual growth rate of approximately 16%. During the same period, we improved our net income from
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$2.0 million to $690.4 million, representing a compound annual growth rate of approximately 18%.
Disciplined Acquisition Strategy
Acquisitions have been an important element of our growth strategy over the past thirty-five years, supplementing our organic growth. Since 1990, we have completed approximately 107 acquisitions complementing the niche segments of the aviation, defense, space, medical, telecommunications and electronics industries in which we operate. We typically target acquisition opportunities that allow us to broaden our product offerings, services and technologies while expanding our customer base and geographic presence. Even though we have historically pursued an active acquisition policy, our disciplined acquisition strategy involves limiting acquisition candidates to businesses that we believe will continue to grow, offer strong cash flow and earnings potential, and are available at fair prices. See Note 2, Acquisitions, of the Notes to Consolidated Financial Statements for further information regarding our recent acquisitions.
Flight Support Group
The Flight Support Group serves a broad spectrum of the aviation industry, including (i) commercial airlines and air cargo carriers; (ii) repair and overhaul facilities; (iii) OEMs; and (iv) U.S. and foreign governments.
The FSG competes with the leading industry OEMs and, to a lesser extent, with a number of smaller, independent parts distributors. Historically, the three principal jet engine OEMs, General Electric (including CFM International), Pratt & Whitney and Rolls Royce, have been the sole source of substantially all jet engine replacement parts for their jet engines. Other OEMs have been the sole source of replacement parts for their aircraft component parts. We believe that we are the largest independent supplier of non-OEM jet engine and aircraft component replacement parts, and in recent years and inclusive of acquisitions, we are now adding new products to our line at a rate of approximately 400 to 550 Parts Manufacturer Approvals (“PMA” or “PMAs”) per year. We have developed for our customers approximately 20,000 parts for which PMAs have been received from the FAA.
Jet engine and aircraft component replacement parts can be categorized by their ongoing ability to be repaired and returned to service. The general categories in which we participate are as follows: (i) rotable; (ii) repairable; and (iii) expendable. A rotable is a part which is removed periodically as dictated by an operator’s maintenance procedures or on an as needed basis and is typically repaired or overhauled and re-used an indefinite number of times. An important subset of rotables is “life-limited” parts. A life-limited rotable has a designated number of allowable flight hours and/or cycles (one take-off and landing generally constitutes one cycle) after which it is rendered unusable. A repairable is similar to a rotable except that it can only be repaired a limited number of times before it must be discarded. An expendable is generally a part which is used up and replaced as opposed to being repaired for further use.
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Jet engine and aircraft component replacement parts are classified within the industry as (i) factory-new; (ii) new surplus; (iii) overhauled; (iv) repairable; and (v) as removed. A factory-new or new surplus part is one that has never been installed or used. Factory-new parts are purchased from FAA-approved manufacturers (such as HEICO or OEMs) or their authorized distributors. New surplus parts are purchased from excess stock of airlines, repair facilities or other redistributors. An overhauled part is one that has been completely repaired and inspected by a licensed repair facility such as ours. An aircraft spare part is classified as “repairable” if it can be repaired by a licensed repair facility under applicable regulations. A part may also be classified as “repairable” if it can be removed by the operator from an aircraft or jet engine while operating under an approved maintenance program and is airworthy and meets any manufacturer or time and cycle restrictions applicable to the part. A “factory-new,” “new surplus” or “overhauled” part designation indicates that the part can be immediately utilized on an aircraft. A part in “as removed” or “repairable” condition requires inspection and possibly functional testing, repair or overhaul by a licensed facility prior to being returned to service in an aircraft.
FAA Approvals and Product Design. Non-OEM manufacturers of jet engine and aircraft component replacement parts must receive a PMA from the FAA to sell the replacement part. The PMA approval process includes the submission of sample parts, drawings and testing data to one of the FAA’s Aircraft Certification Offices where the submitted data are analyzed. We believe that an applicant’s ability to successfully complete the PMA process is limited by several factors, including (i) the agency’s confidence level in the applicant; (ii) the complexity of the part; (iii) the volume of PMAs being filed; and (iv) the resources available to the FAA. We also believe that companies such as HEICO that have demonstrated their advanced design engineering and manufacturing capabilities, including an established favorable track record with the FAA, generally receive a faster turnaround time in the processing of PMA applications. Finally, we believe that the PMA process creates a significant barrier to entry in this market niche through both its technical demands and its limits on the rate at which competitors can bring products to market.
Factory-New Jet Engine and Aircraft Component Replacement Parts. The FSG engages in the research and development, design, manufacture and sale of FAA-approved replacement parts that are sold to domestic and foreign commercial air carriers and aircraft repair and overhaul companies. Our principal competitors are aircraft engine and aircraft component manufacturers. The FSG's factory-new replacement parts include various jet engine and aircraft component replacement parts. A key element of our growth strategy is the continued design and development of an increasing number of PMA replacement parts in order to further penetrate our existing customer base and obtain new customers. We select the jet engine and aircraft component replacement parts to design and manufacture through a selection process which analyzes industry information to determine which replacement parts are suitable candidates.
Repair and Overhaul Services. The FSG provides repair and overhaul services on selected jet engine and aircraft component parts, as well as on avionics, instruments, composites and flight surfaces of commercial aircraft operated by domestic and foreign commercial airlines. The FSG also provides repair and overhaul services including avionics and navigation systems as well as subcomponents and other instruments utilized on military aircraft operated by the U.S.
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government and foreign military agencies and for aircraft repair and overhaul companies. Our repair and overhaul operations require a high level of expertise, advanced technology and sophisticated equipment. Services include the repair, refurbishment and overhaul of numerous accessories and parts mounted on gas turbine engines and airframes. Components overhauled include fuel pumps, generators, fuel controls, pneumatic valves, starters and actuators, turbo compressors and constant speed drives, hydraulic pumps, valves and actuators, wheels and brakes, composite flight controls, electro-mechanical equipment, auxiliary power unit accessories and thrust reverse actuation systems. Some of the repair and overhaul services provided by the FSG are proprietary repairs approved by an FAA-qualified designated engineering representative (“DER”) and/or by the owner/operator. Such proprietary repairs typically create cost savings or provide engineering flexibility. The FSG also provides commercial airlines, regional operators, asset management companies and Maintenance, Repair and Overhaul (“MRO”) providers with high quality and cost-effective niche accessory component exchange services as an alternative to OEMs’ spares services.
Distribution. The FSG distributes FAA-approved parts including hydraulic, pneumatic, structural, interconnect, mechanical and electro-mechanical components for the commercial, regional and general aviation markets. The FSG also is a leading supplier, distributor, and integrator of military aircraft parts and support services primarily to the U.S. Department of Defense, defense prime contractors, and foreign military organizations allied with the U.S. Further, we believe the FSG is a leading provider of products and services necessary to maintain up-to-date F-16 fighter aircraft operational capabilities.
Manufacture of Specialty Aircraft/Defense Related Parts and Subcontracting for OEMs. The FSG engineers, designs and manufactures thermal insulation blankets and parts as well as renewable/reusable insulation systems primarily for aerospace, defense, commercial and industrial applications. The FSG also manufactures specialty components and assemblies for sale as a subcontractor for aerospace and industrial original equipment manufacturers and the U.S. government. Additionally, the FSG manufactures advanced niche components and complex composite assemblies for commercial aviation, defense and space applications; manufactures expanded foil mesh, which is integrated into composite aerospace structures for lightning strike protection in fixed and rotary wing aircraft; performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications; produces and sells missile hardware and components; and designs, manufactures and distributes emergency descent devices ("EDDs"), personnel and cargo parachute products, heavy airdrop platforms, and other highly-engineered products.
As part of our growth strategy, we have continued to increase our research and development activities. Research and development expenditures by the FSG were $43.7 million in fiscal 2025, $36.7 million in fiscal 2024 and $26.4 million in fiscal 2023. We believe that the FSG's research and development capabilities are a significant component of our historical success and an integral part of our growth strategy. In recent years, the FAA granted us PMAs for approximately 400 to 550 new parts and we develop numerous new proprietary repairs per year; however, no assurance can be given that the FAA will continue to grant PMAs or DER-
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approved repairs or that we will achieve acceptable levels of net sales and gross profits on such parts or repairs in the future.
We benefit from our proprietary rights relating to certain design, engineering and manufacturing processes and repair and overhaul procedures. Customers often rely on us to provide initial and additional components, as well as to redesign, re-engineer, replace or repair and provide overhaul services on such aircraft components at every stage of their useful lives. In addition, for some products, our unique manufacturing capabilities are required by the customer’s specifications or designs, thereby necessitating reliance on us for production of such designed products.
We have no material patents for the proprietary techniques, including software and manufacturing expertise, we have developed to manufacture jet engine and aircraft component replacement parts and instead, we primarily rely on trade secret protection. Although our proprietary techniques and software and manufacturing expertise are subject to misappropriation or obsolescence, we believe that we take appropriate measures to prevent misappropriation or obsolescence from occurring by developing new techniques and improving existing methods and processes, which we will continue on an ongoing basis as dictated by the technological needs of our business.
We believe that, based on our competitive pricing, reputation for high quality, short lead time requirements, strong relationships with domestic and foreign commercial air carriers and repair stations (companies that overhaul aircraft engines and/or components), and successful track record of receiving PMAs and DER repair approvals from the FAA and commercial air carriers, we are uniquely positioned to continue to increase the products and services offered and gain market share.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
This discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes thereto included herein. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates if different assumptions were used or different events ultimately transpire.
Our critical accounting policies, which require management to make judgments about matters that are inherently uncertain, are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended October 31, 2025. There have been no material changes to our critical accounting policies during the six months ended April 30, 2026.
Our business is comprised of two operating segments: the Flight Support Group (“FSG”), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support Corp. and their respective subsidiaries; and the Electronic Technologies Group (“ETG”), consisting of HEICO Electronic Technologies Corp. and its subsidiaries.
Our results of operations for the six and three months ended April 30, 2026 have been affected by the fiscal 2025 acquisitions as further detailed in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended October 31, 2025 and the fiscal 2026 acquisitions as further detailed in Note 2, Acquisitions, of the Notes to the Condensed Consolidated Financial Statements of this quarterly report.
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Results of Operations
The following table sets forth the results of our operations, net sales and operating income by segment and the percentage of net sales represented by the respective items in our Condensed Consolidated Statements of Operations (in thousands):
| Six months ended April 30, | Three months ended April 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net sales | $2,554,295 | $2,128,042 | $1,375,713 | $1,097,820 | ||||||||||||||||||
| Cost of sales | 1,529,806 | 1,284,576 | 806,188 | 660,016 | ||||||||||||||||||
Selling, general and administrative expenses | 414,153 | 368,509 | 219,088 | 189,652 | ||||||||||||||||||
| Total operating costs and expenses | 1,943,959 | 1,653,085 | 1,025,276 | 849,668 | ||||||||||||||||||
| Operating income | $610,336 | $474,957 | $350,437 | $248,152 | ||||||||||||||||||
| Net sales by segment: | ||||||||||||||||||||||
| Flight Support Group | $1,749,427 | $1,480,244 | $929,427 | $767,070 | ||||||||||||||||||
| Electronic Technologies Group | 830,207 | 672,482 | 459,532 | 342,167 | ||||||||||||||||||
| Intersegment sales | (25,339) | (24,684) | (13,246) | (11,417) | ||||||||||||||||||
| $2,554,295 | $2,128,042 | $1,375,713 | $1,097,820 | |||||||||||||||||||
| Operating income by segment: | ||||||||||||||||||||||
| Flight Support Group | $443,797 | $351,096 | $243,064 | $184,980 | ||||||||||||||||||
| Electronic Technologies Group | 195,055 | 154,336 | 121,809 | 77,880 | ||||||||||||||||||
| Other, primarily corporate | (28,516) | (30,475) | (14,436) | (14,708) | ||||||||||||||||||
| $610,336 | $474,957 | $350,437 | $248,152 | |||||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||
| Gross profit | 40.1 | % | 39.6 | % | 41.4 | % | 39.9 | % | ||||||||||||||
Selling, general and administrative expenses | 16.2 | % | 17.3 | % | 15.9 | % | 17.3 | % | ||||||||||||||
| Operating income | 23.9 | % | 22.3 | % | 25.5 | % | 22.6 | % | ||||||||||||||
| Interest expense | (2.5 | %) | (3.1 | %) | (2.5 | %) | (3.0 | %) | ||||||||||||||
| Other income | .1 | % | .1 | % | .1 | % | .1 | % | ||||||||||||||
| Income tax expense | 3.7 | % | 2.8 | % | 4.9 | % | 4.1 | % | ||||||||||||||
Net income attributable to noncontrolling interests | 1.2 | % | 1.3 | % | 1.2 | % | 1.3 | % | ||||||||||||||
| Net income attributable to HEICO | 16.6 | % | 15.3 | % | 17.0 | % | 14.3 | % | ||||||||||||||
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Comparison of First Six Months of Fiscal 2026 to First Six Months of Fiscal 2025
Net Sales
Our consolidated net sales in the first six months of fiscal 2026 increased by 20% to a record $2,554.3 million, up from net sales of $2,128.0 million in the first six months of fiscal 2025. The increase in consolidated net sales principally reflects an increase of $269.2 million (an 18% increase) to a record $1,749.4 million in net sales of the FSG and an increase of $157.7 million (a 23% increase) to a record $830.2 million in net sales of the ETG. The net sales increase in the FSG reflects robust organic growth of 16% and net sales of $36.1 million contributed by fiscal 2025 and 2026 acquisitions. The FSG's organic net sales growth reflects increased demand within its aftermarket replacement parts, repair and overhaul parts and services, and specialty products product lines resulting in net sales increases of $161.9 million, $40.3 million, and $30.5 million, respectively. The net sales increase in the ETG reflects very strong organic growth of 12% and net sales of $79.8 million contributed by fiscal 2025 and 2026 acquisitions. The ETG's organic net sales growth is mainly attributable to increased demand for its other electronics, aerospace, and defense products resulting in net sales increases of $30.7 million, $21.8 million, and $19.9 million, respectively. Sales price changes were not a significant contributing factor to the change in net sales of the FSG and ETG in the first six months of fiscal 2026.
Gross Profit and Operating Expenses
Our consolidated gross profit margin improved to 40.1% in the first six months of fiscal 2026, up from 39.6% in the first six months of fiscal 2025, principally reflecting a .6% increase in the FSG’s gross profit margin. The increase in the FSG's gross profit margin principally reflects a more favorable product mix within its aftermarket replacement parts product line. Total new product research and development expenses included within our consolidated cost of sales were $68.4 million in the first six months of fiscal 2026, up from $56.3 million in the first six months of fiscal 2025.
Our consolidated selling, general and administrative ("SG&A") expenses were $414.2 million in the first six months of fiscal 2026, as compared to $368.5 million in the first six months of fiscal 2025. The increase in consolidated SG&A expenses reflects $19.3 million attributable to our fiscal 2025 and 2026 acquisitions, an $11.3 million increase in share-based compensation expense, and costs incurred to support the previously mentioned net sales growth, which resulted in increases of $11.8 million and $3.2 million in other selling expenses and other general and administrative expenses, respectively.
Our consolidated SG&A expenses as a percentage of net sales improved to 16.2% in the first six months of fiscal 2026, down from 17.3% in the first six months of fiscal 2025. The decrease in consolidated SG&A expenses as a percentage of net sales principally reflects efficiencies realized from the previously mentioned net sales growth.
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Operating Income
Our consolidated operating income increased by 29% to a record $610.3 million in the first six months of fiscal 2026, up from $475.0 million in the first six months of fiscal 2025. The increase in consolidated operating income principally reflects a $92.7 million increase (a 26% increase) to a record $443.8 million in operating income of the FSG and a $40.7 million increase (a 26% increase) to a record $195.1 million in operating income of the ETG. The increase in operating income of the FSG principally reflects the previously mentioned net sales growth, SG&A expense efficiencies realized from the net sales growth, and the previously mentioned improved gross profit margin. The increase in operating income of the ETG principally reflects the previously mentioned net sales growth and SG&A expense efficiencies realized from the net sales growth.
Our consolidated operating income as a percentage of net sales improved to 23.9% in the first six months of fiscal 2026, up from 22.3% in the first six months of fiscal 2025. The increase in consolidated operating income as a percentage of net sales principally reflects an increase in the FSG’s operating income as a percentage of net sales to 25.4% in the first six months of fiscal 2026, up from 23.7% in the first six months of fiscal 2025, and an increase in the ETG's operating income as a percentage of net sales to 23.5% in the first six months of fiscal 2026, up from 23.0% in the first six months of fiscal 2025. The increase in the FSG's operating income as a percentage of net sales reflects a 1.1% impact from a decrease in SG&A expenses as a percentage of net sales, mainly due to the previously mentioned SG&A expense efficiencies and the previously mentioned improved gross profit margin. The increase in the ETG's operating income as a percentage of net sales principally reflects the previously mentioned SG&A expense efficiencies.
Interest Expense
Interest expense decreased to $63.6 million in the first six months of fiscal 2026, down from $65.3 million in the first six months of fiscal 2025. The decrease in interest expense was principally due to a lower weighted-average interest rate on outstanding borrowings under our revolving credit facility, partially offset by an increase in the amount of debt outstanding.
Other Income
Other income in the first six months of fiscal 2026 and 2025 was not material.
Income Tax Expense
Our effective tax rate was 17.1% in the first six months of fiscal 2026, as compared to 14.4% in the first six months of fiscal 2025. The increase in our effective tax rate principally reflects a smaller tax benefit from stock option exercises recognized in the first quarter of fiscal 2026. We recognized a discrete tax benefit from stock option exercises in the first quarter of fiscal 2026 and 2025 of $22.3 million and $27.2 million, respectively.
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Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests relates to the 20% noncontrolling interest held by Lufthansa Technik AG in HEICO Aerospace Holdings Corp. and the noncontrolling interests held by others in certain subsidiaries of the FSG and ETG. Net income attributable to noncontrolling interests was $31.1 million in the first six months of fiscal 2026, as compared to $27.3 million in the first six months of fiscal 2025. The increase in net income attributable to noncontrolling interests principally reflects improved operating results of certain subsidiaries in which noncontrolling interests are held.
Net Income Attributable to HEICO
Net income attributable to HEICO increased by 31% to a record $424.0 million, or $3.01 per diluted share, in the first six months of fiscal 2026, up from $324.7 million, or $2.31 per diluted share, in the first six months of fiscal 2025, principally reflecting the previously mentioned higher consolidated operating income.
Comparison of Second Quarter of Fiscal 2026 to Second Quarter of Fiscal 2025
Net Sales
Our consolidated net sales in the second quarter of fiscal 2026 increased by 25% to a record $1,375.7 million, up from net sales of $1,097.8 million in the second quarter of fiscal 2025. The increase in consolidated net sales principally reflects an increase of $162.4 million (a 21% increase) to a record $929.4 million in net sales of the FSG and an increase of $117.4 million (a 34% increase) to a record $459.5 million in net sales of the ETG. The net sales increase in the FSG reflects strong organic growth of 19% and net sales of $17.4 million contributed by fiscal 2026 acquisitions. The FSG's organic net sales growth reflects increased demand within its aftermarket replacement parts, specialty products, and repair and overhaul parts and services product lines resulting in net sales increases of $102.4 million, $22.7 million, and $19.7 million, respectively. The net sales increase in the ETG reflects strong organic growth of 17% and net sales of $58.3 million contributed by fiscal 2026 and 2025 acquisitions. The ETG's organic net sales growth is mainly attributable to increased demand for its other electronics, defense, aerospace, and space products resulting in net sales increases of $22.6 million, $16.5 million, $13.8 million, and $4.0 million, respectively. Sales price changes were not a significant contributing factor to the change in net sales of the FSG and ETG in the second quarter of fiscal 2026.
Gross Profit and Operating Expenses
Our consolidated gross profit margin improved to 41.4% in the second quarter of fiscal 2026, up from 39.9% in the second quarter of fiscal 2025, principally reflecting a 2.7% increase in the ETG’s gross profit margin and a .8% increase in the FSG's gross profit margin. The increase in the ETG's gross profit margin principally reflects the previously mentioned higher net sales and a more favorable product mix of its aerospace products. The increase in the FSG's
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gross profit margin principally reflects a more favorable product mix within its aftermarket replacement parts product line. Total new product research and development expenses included within our consolidated cost of sales were $36.4 million in the second quarter of fiscal 2026, up from $28.7 million in the second quarter of fiscal 2025.
Our consolidated SG&A expenses were $219.1 million in the second quarter of fiscal 2026, as compared to $189.7 million in the second quarter of fiscal 2025. The increase in consolidated SG&A expenses reflects $11.8 million attributable to our fiscal 2026 and 2025 acquisitions, $4.9 million of higher share-based compensation expense, and costs incurred to support the previously mentioned net sales growth, which resulted in increases of $6.9 million and $5.8 million in other selling expenses and other general and administrative expenses, respectively.
Our consolidated SG&A expenses as a percentage of net sales improved to 15.9% in the second quarter of fiscal 2026, down from 17.3% in the second quarter of fiscal 2025. The decrease in consolidated SG&A expenses as a percentage of net sales principally reflects efficiencies realized from the previously mentioned net sales growth.
Operating Income
Our consolidated operating income increased by 41% to a record $350.4 million in the second quarter of fiscal 2026, up from $248.2 million in the second quarter of fiscal 2025. The increase in consolidated operating income principally reflects a $58.1 million increase (a 31% increase) to a record $243.1 million in operating income of the FSG and a $43.9 million increase (a 56% increase) to a record $121.8 million in operating income of the ETG. The increase in operating income of the FSG principally reflects the previously mentioned net sales growth, SG&A expense efficiencies realized from the net sales growth, and the previously mentioned improved gross profit margin. The increase in operating income of the ETG principally reflects the previously mentioned net sales growth and improved gross profit margin, as well as SG&A expense efficiencies realized from the net sales growth.
Our consolidated operating income as a percentage of net sales improved to 25.5% in the second quarter of fiscal 2026, up from 22.6% in the second quarter of fiscal 2025. The increase in consolidated operating income as a percentage of net sales principally reflects an increase in the ETG’s operating income as a percentage of net sales to 26.5% in the second quarter of fiscal 2026, up from 22.8% in the second quarter of fiscal 2025, and an increase in the FSG's operating income as a percentage of net sales to 26.2% in the second quarter of fiscal 2026, up from 24.1% in the second quarter of fiscal 2025. The increase in the ETG's operating income as a percentage of net sales reflects the previously mentioned improved gross profit margin and a 1.0% impact from a decrease in SG&A expenses as a percentage of net sales, primarily driven by the previously mentioned SG&A expense efficiencies. The increase in the FSG's operating income as a percentage of net sales reflects a 1.3% impact from a decrease in SG&A expenses as a percentage of net sales, primarily driven by the previously mentioned SG&A expense efficiencies, and the previously mentioned improved gross profit margin.
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Interest Expense
Interest expense increased to $34.2 million in the second quarter of fiscal 2026, as compared to $32.9 million in the second quarter of fiscal 2025. The increase in interest expense was principally due to an increase in the amount of outstanding debt, partially offset by a lower weighted-average interest rate on borrowings outstanding under our revolving credit facility.
Other Income
Other income in the second quarter of fiscal 2026 and 2025 was not material.
Income Tax Expense
Our effective tax rate was 21.2% in the second quarter of fiscal 2026, as compared to 21.0% in the second quarter of fiscal 2025.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests relates to the 20% noncontrolling interest held by Lufthansa Technik AG in HEICO Aerospace Holdings Corp. and the noncontrolling interests held by others in certain subsidiaries of the FSG and ETG. Net income attributable to noncontrolling interests was $16.5 million in the second quarter of fiscal 2026, as compared to $13.7 million in the second quarter of fiscal 2025. The increase in net income attributable to noncontrolling interests principally reflects improved operating results of certain subsidiaries in which noncontrolling interests are held.
Net Income Attributable to HEICO
Net income attributable to HEICO increased by 49% to a record $233.8 million, or $1.66 per diluted share, in the second quarter of fiscal 2026, up from $156.8 million, or $1.12 per diluted share, in the second quarter of fiscal 2025 principally reflecting the previously mentioned higher consolidated operating income.
Outlook
For the remainder of fiscal 2026, we expect increased net sales at both the FSG and ETG to continue to be supported by underlying demand for our products and contributions from recent acquisitions. We intend to continue evaluating acquisition opportunities that are consistent with our strategic objectives. Our capital allocation approach remains focused on balancing organic growth and acquisitions while maintaining liquidity and financial flexibility.
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Liquidity and Capital Resources
Our principal uses of cash include acquisitions, interest payments, capital expenditures, cash dividends, distributions to noncontrolling interests and working capital needs. We now estimate fiscal 2026 capital expenditures to be approximately $85 to $95 million. We finance our activities primarily from our operating and financing activities, including borrowings under our revolving credit facility. The revolving credit facility and senior unsecured notes contain both financial and non-financial covenants. As of April 30, 2026, we were in compliance with all such covenants and our total debt to shareholders’ equity ratio was 53.3%.
Based on our current outlook, we believe that net cash provided by operating activities and available borrowings under our revolving credit facility will be sufficient to fund our cash requirements for at least the next twelve months.
Operating Activities
Net cash provided by operating activities was $470.6 million in the first six months of fiscal 2026 and consisted primarily of net income from consolidated operations of $455.1 million, depreciation and amortization expense of $107.6 million (a non-cash item), $22.5 million in share-based compensation expense (a non-cash item), net changes of $18.4 million included in the "Other" caption (principally the receipt of advance deposits on certain long-term customer contracts), net changes in other long-term liabilities and assets related to the HEICO Corporation Leadership Compensation Plan (the "LCP") of $13.7 million (principally participant deferrals and employer contributions), an $11.8 million deferred income tax provision (a non-cash item), and $10.5 million in employer contributions to the HEICO Savings and Investment Plan (a non-cash item), partially offset by a $173.5 million increase in net working capital. The increase in net working capital is inclusive of a $75.9 million decrease in accrued expenses and other current liabilities, mainly reflecting the payment of fiscal 2025 accrued performance-based compensation, distributions to participants of the LCP, and the payment of payroll taxes arising from withholding requirements on stock option exercises, partially offset by accrued performance-based compensation expense; as well as a $65.1 million increase in accounts receivable resulting from the timing of collections, and a $40.5 million increase in inventories to support an increase in consolidated backlog, partially offset by a $50.0 million increase in trade accounts payable.
Net cash provided by operating activities increased by $62.8 million (a 15% increase) in the first six months of fiscal 2026, up from $407.7 million in the first six months of fiscal 2025. The increase is principally attributable to a $103.0 million increase in net income from consolidated operations and a $29.7 million increase in the deferred income tax provision, partially offset by a $79.8 million increase in net working capital.
Investing Activities
Net cash used in investing activities totaled $851.0 million in the first six months of fiscal 2026 and related primarily to acquisitions of $821.3 million, capital expenditures of $31.5
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million, and LCP funding of $16.8 million, partially offset by $22.7 million in proceeds from corporate-owned life insurance policy withdrawals within the LCP. Further details regarding our fiscal 2026 acquisitions may be found in Note 2, Acquisitions, of the Notes to Condensed Consolidated Financial Statements.
Financing Activities
Net cash provided by financing activities in the first six months of fiscal 2026 totaled $371.9 million. During the first six months of fiscal 2026, we borrowed $830.7 million under our revolving credit facility, which was partially offset by $410.7 million in payments made on our revolving credit facility, $16.7 million of cash dividends paid on our common stock, $16.4 million of distributions to noncontrolling interests, and $12.4 million of payments to acquire certain noncontrolling interests.
Other Obligations and Commitments
There have not been any material changes to our other obligations and commitments that were included in our Annual Report on Form 10-K for the year ended October 31, 2025.
New Accounting Pronouncements
See Note 1, Summary of Significant Accounting Policies - New Accounting Pronouncements, of the Notes to Condensed Consolidated Financial Statements for additional information.
Guarantor Group Summarized Financial Information
On July 27, 2023, we completed the public offer and sale of senior unsecured notes, which consisted of $600 million principal amount of 5.25% Senior Notes due August 1, 2028 (the "2028 Notes") and $600 million principal amount of 5.35% Senior Notes due August 1, 2033 (the "2033 Notes" and, collectively with the 2028 Notes, the "Notes"). The Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of our existing and future subsidiaries that guarantee our obligations under our revolving credit facility ("Credit Facility") (the “Guarantor Group”). We were in compliance with all covenants related to the Notes as of April 30, 2026.
The Notes were issued pursuant to an Indenture, dated as of July 27, 2023 (the “Base Indenture”), between HEICO and certain of its subsidiaries (collectively, the "Subsidiary Guarantors") and Truist Bank, as trustee (the “Trustee”), as supplemented by a First Supplemental Indenture, dated as of July 27, 2023 (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between us, the Subsidiary Guarantors and the Trustee. The Notes are direct, unsecured senior obligations of HEICO and rank equally in right of payment with all of our existing and future senior unsecured indebtedness. Each Subsidiary Guarantor is owned either directly or indirectly by the Company and jointly and severally guarantee our obligations under the Notes. None of the Subsidiary Guarantors are
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organized outside of the U.S. A list of Subsidiary Guarantors is included as Exhibit 22 to this quarterly report.
Under the Indenture, holders of the Notes will be deemed to have consented to the release of a subsidiary guarantee provided by a subsidiary guarantor, without any action required on the part of the Trustee or any holder of the Notes, upon such subsidiary guarantor ceasing to guarantee or to be an obligor with respect to the Credit Facility. Accordingly, if the lenders under the Credit Facility release a subsidiary guarantor from its guarantee of, or obligations as a borrower under, the Credit Facility, the obligations of the subsidiary guarantors to guarantee the Notes will immediately terminate. If any of our future subsidiaries incur obligations under the Credit Facility while the Notes are outstanding, then such subsidiary will be required to guarantee the Notes.
In addition, a subsidiary guarantor will be released and relieved from all its obligations under its subsidiary guarantee in the following circumstances, each of which is permitted by the indenture:
•upon the sale or other disposition (including by way of consolidation or merger), in one transaction or a series of related transactions, of a majority of the total voting stock of such subsidiary guarantor (other than to us or any of our affiliates); or
•upon the sale or disposition of all or substantially all the property of such subsidiary guarantor (other than to any of our affiliates or another subsidiary guarantor);
provided, however, that, in each case, such transaction is permitted by the Credit Facility and after giving effect to such transaction, such subsidiary guarantor is no longer liable for any subsidiary guarantee or other obligations in respect of the Credit Facility. The subsidiary guarantee of a subsidiary guarantor also will be released if we exercise our legal defeasance, covenant defeasance option or discharge the Indenture.
We conduct our operations almost entirely through our subsidiaries. Accordingly, the Guarantor Group’s cash flow and ability to service any guaranteed registered debt securities will depend on the earnings of our subsidiaries and the distribution of those earnings to the Guarantor Group, including the earnings of the non-guarantor subsidiaries, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities will have a direct claim only against the Guarantor Group.
The following tables include summarized financial information for the Guarantor Group (in thousands). The information for the Guarantor Group is presented on a combined basis, excluding intercompany balances and transactions between us and the Guarantor Group and excluding investments in and equity in the earnings of non-guarantor subsidiaries. The Guarantor Group’s amounts due from, amounts due to, and transactions with non-guarantor subsidiaries have been presented in separate line items. The consolidating schedules are provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and guarantor subsidiaries.
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| As of | As of | |||||||||
| April 30, 2026 | October 31, 2025 | |||||||||
| Current assets (excluding net intercompany receivable from non-guarantor subsidiaries) | $2,123,657 | $1,927,805 | ||||||||
| Noncurrent assets | 5,762,109 | 5,280,470 | ||||||||
| Net intercompany receivable from/ (payable to) non-guarantor subsidiaries | 261,747 | 260,672 | ||||||||
| Current liabilities (excluding net intercompany payable to non-guarantor subsidiaries) | 803,528 | 721,365 | ||||||||
| Noncurrent liabilities | 3,168,916 | 2,751,782 | ||||||||
| Redeemable noncontrolling interests | 336,344 | 337,818 | ||||||||
| Noncontrolling interests | 72,558 | 63,792 | ||||||||
| Six months ended | |||||||||
| April 30, 2026 | |||||||||
| Net sales | $2,167,061 | ||||||||
| Gross profit | 850,380 | ||||||||
| Operating income | 522,163 | ||||||||
| Net income from consolidated operations | 429,763 | ||||||||
| Net income attributable to HEICO | 405,799 | ||||||||
| Six months ended | |||||||||
| April 30, 2026 | |||||||||
| Intercompany net sales | $7,397 | ||||||||
| Intercompany management fee | 1,969 | ||||||||
| Intercompany interest income | 4,566 | ||||||||
| Intercompany dividends | 42,504 | ||||||||
Forward-Looking Statements
Certain statements in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained herein that are not clearly historical in nature may be forward-looking and the words “anticipate,” “believe,” “expect,” “estimate” and similar expressions are generally intended to identify forward-looking statements. Any forward-looking statement contained herein, in press releases, written statements or other documents filed with the Securities and Exchange Commission or in communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, concerning our operations, economic performance and financial condition are subject to risks, uncertainties and contingencies. We have based these forward-looking statements on our current expectations and projections about future events. All forward-looking statements involve risks and uncertainties, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Also, forward-looking statements are based upon management’s estimates of fair values and of future
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costs, using currently available information. Therefore, 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 to our costs 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;
•Our 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.
For further information on these and other factors that potentially could materially affect our financial results, see Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the year ended October 31, 2025. 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.
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Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-06-10 | Rowen Bradley K | Chief Accounting Officer | Sell | -1,326 | $241.63 | -$320,401 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-08-26 10-Q expected by 2026-09-07 (in 31 days)
- ~2026-12-21 10-K expected by 2026-12-31 (in 148 days)
- ~2027-02-26 10-Q expected by 2027-03-10 (in 215 days)
- ~2027-05-28 10-Q expected by 2027-06-09 (in 306 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-07-16 8-K Material Agreement Entered; Material Financial Obligation; Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2026-07-15 424B5 Prospectus Supplement
- 2026-07-13 S-3ASR S-3ASR
- 2026-06-17 8-K Material Agreement Entered; Financial Statements and Exhibits
- 2026-05-29 10-Q Quarterly Report
- 2026-05-27 8-K Earnings Release; Financial Statements and Exhibits
- 2026-02-27 10-Q Quarterly Report
- 2026-02-25 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-22 10-K Annual Report
- 2025-12-22 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-12-18 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-29 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-08-27 10-Q Quarterly Report
- 2025-08-25 8-K Earnings Release; Financial Statements and Exhibits
- 2025-08-08 8-K Officer/Director Change; Financial Statements and Exhibits