Carlos Macau: Michael, are you talking about just Wencor or the segment?
Michael Ciarmoli: The first question was just on Wencor. The second was the segment in total at that 23%.
Carlos Macau: So I think that percent of sales are going to run 2%, 2.5%, I believe, is the number for amortization in the segment and Wencor is part of that. And like I said, you’re close to $12 million a quarter for Wencor in amortization. So that’s what we’re looking at next year.
Michael Ciarmoli: Okay. Got it. And then any thoughts on where you could take those Wencor margins, like just that, from that 15.8% level as you guys integrate and kind of go through the process?
Eric Mendelson: So Michael, this is Eric. Let me see if I can help you out with that a little bit. If you take the Wencor operating income for the quarter, of $29.3 million and then you add back the $11.8 million of intangible amortization, then you get to a number of about $41 million for the quarter. So when you divide that $41 million by the $186 million approximately of Wencor sales get to about 22% margin adding back the intangible amortization. So if we’re saying that HEICO is, Flight Support Group is going to be in the 23% area for this coming year. Wencor based on the fourth quarter was just a tick below that. To just, but I would say it’s very similar, very similar to HEICO.
Michael Ciarmoli: Okay. That’s helpful. Prefect. Thanks, guys. I will jump back in the queue.
Eric Mendelson: Thank you.
Operator: We will take our next question from Gautam Khanna with TD Cowen. Please go ahead.
Gautam Khanna: Hey. Good morning, guys.
Eric Mendelson: Good morning, Gautam.
Gautam Khanna: A couple of questions. First, Eric, I was wondering if you’ve seen any differences in demand by channel? Wencor, I think you guys said sells more to the MRO, whereas HEICO on the PMA side directly to the airlines. Was there any discernible differences or changes in customer pager between the two channels?
Eric Mendelson: No, I would say there really hasn’t been thus far. I think that, that is an opportunity for us to mine, as we go forward. And I think that, that will be very much an opportunity. Again, Wencor has operated basically as a stand-alone business. Yes, we’re coordinating some activities, but it continues to operate with its own leadership and its own P&L. And, but I think there will be opportunities, such as the ones you’re alluding to.
Gautam Khanna: Okay. And Airlines appear to be in some financial distress incrementally. I’m just curious, has that, have you seen any increase in the number of inquiries from non-PMA buying customers that are now looking to switch over? Or just you’re seeing more volume among certain customers than you would expect at the airlines given some of the challenges?
Eric Mendelson: Yes, it’s a great question. And they are, I mean, pretty much everybody uses PMAs, but there has been an increase in using parts that using HEICO parts that they haven’t purchased in the past. And what is it the old saying Necessity is the motherhood of invention. And sometimes people can’t get apart from the OEM, then they’ll go ahead and then they’ll buy it from HEICO. And we certainly have seen that happen. And as a matter of fact, it’s particularly gratifying when you see OEMs do that. So, and that’s been, I’m not going to get into specifics, obviously, but it’s very nice when we see OEMs purchasing the HEICO and the Wencor alternative parts in order to meet their demand because we know the quality is outstanding.
Gautam Khanna: Appreciate it. And then, Victor, just quickly on some of the earlier questions related to the defense improvement that you saw sequentially. What, is this a letup of past due backlog? Or is there, is that not really a driver? And what can you say about maybe book-to-bill or any sort of discernible change in order trends among those customers?
Victor Mendelson: Yes. On defense, I think our book-to-bill is positive on defense, and moving in the right direction. For our defense businesses, I would say, very little of it, if any, would be supply chain catch up. In fact, quarter, in the whole quarter, we, our companies estimate that maybe approximately $10 million worth of shipments moved to the right, right? So compare that to where we were, I don’t know, roughly a year ago, I think we reached up in the $40 million range or even higher. So that’s definitely trended in the right direction for us and overall optimistic on our defense business throughout the year. Again, as Carlos emphasized, it will be lumpy. And the mix sensitivity is important, because we have some products, some subsidiaries, which have a much higher margin than others and how that backlog falls out is very important. So, I would expect, for example, the first quarter on margin side to be tougher for us than the following quarters.
Gautam Khanna: Last one, if I may, just back to Eric. On the number of PMA parts you expect to introduce between the two entities, legacy HEICO and Wencor, can you just update us on that over the next year.
Eric Mendelson: Yes. I think HEICO has been running in that 300 to 500 area, roughly 400 parts a year, and Wencor has been running in about 150 area, so I would anticipate those numbers continuing that way.
Gautam Khanna: Great. Thanks a lot guys. Happy holidays.
Eric Mendelson: Thank you. Wish you happy holidays.
Gautam Khanna: Thank you.
Operator: And we will take our next question from Louie DiPalma with William Blair. Please go ahead.
