Joel Reiss: I’d say it continues to get better. Not back to where it was in 2019 yet, but better than where it was 12 months ago, 24 months ago. Continue to have issues with items like certain electronics, castings, certain chemicals or materials, but continued progress.
Peter Arment: Appreciate the color. Thanks, guys. I’ll stick to one. Thanks.
Operator: One moment for the next question. The next question comes from Robert Stallard with Vertical Research. Your line is open.
Robert Stallard: This might be for Kevin. Your comments on the Boeing situation on commercial OEM. Let’s say given to what you said three months ago, I was wondering if you did actually reduce your Boeing expectations this quarter. And if you did, aren’t they being offset? It must be offset by something else, right?
Mike Lisman: I’ll take that one, Rob. I think the commercial OEM; our first half ran a little bit better than the full year guidance at something like plus 23%. I think we’re cautious on the outlook here in commercial OEM overall. And the OEM forecast incorporates an appropriate level of risk around a potential Boeing rate change. Our forecast is a reminder, and I think, as you know, it’s a bottoms-up forecast from our op units based on what they’re seeing, what they’re hearing from their op units. It’s not a corporate top down mandate on, hey; the build rate you should assume for MAX is, say, 38 or so. It’s a bottoms-up bill based on what they’re seeing at their specific op unit. And as a reminder, we, a lot of our content on those aircraft, it doesn’t go direct to Boeing.
It often goes into sub tiers just given the nature of the components we’re selling, who could be taking actions independently based on what they’re seeing hearing as well. But in a nutshell, we feel good about the guide for the year of around 20% and any potential reductions we’ve baked into the guidance we’re given today for the year.
Robert Stallard: Okay. And then as a follow-up —
Kevin Stein: I think it’s also fair to say that Airbus is continuing to do better. So that’s going to continue to backfill some of the possible hole created by Boeing in the short-term.
Robert Stallard: Yes. And then just as a follow-up, Kevin, on your comment on your M&A tracker, and it being as busy as you can remember, what do you think is driving that? And is there any sort of change, given the amount of target, any change to the pricing that you’re seeing being discussed?
Kevin Stein: Yes. I wish I knew that. It would help me when things slow down to better understand. It just seems to be a busy time right now whether that’s expectations around the market segment, I don’t know, and it’s difficult for me to speculate. It’s just a busier time. We haven’t changed our standards or our expectations at all. We still view businesses the same way we have since the beginning. So you can only swing at the pitches that get thrown, as Nick used to say, years ago, and that’s still true today.
Operator: One moment for the next question. The next question comes from Noah Poponak with Goldman Sachs. Your line is open.
Noah Poponak: I was curious if you could help me better understand. If you are assuming that freight is a drag inside of the aerospace aftermarket in the back half, how does the total aftermarket growth rate accelerate in the back half? Is biz jet and helicopter in the passenger side faster growth in the back half, or is it just the compares or something else?
Kevin Stein: I think we’re — I’ll take a stab at it. No, and hopefully it addresses what you’re trying to get at. We’ve seen really strong growth in the passenger and we see that continuing based on bookings in the back half of the year. Freight we’ve continued to see a bit softness on the booking side there, which is how we know in the second half that we’re likely to see some continued slight decline there. Biz jet, thus far this year it was up a bit, I think, in Q1, Q2 was down a bit for the year, it’s about flattish. We expect to see something like that maybe a little bit better in the back half, but really what’s driving the commercial aftermarket overall is the continued strength in passenger and interior. That is the vast majority when you lump those two buckets together of that commercial aftermarket bucket. And we’re seeing really good strength there, that’s covering up some of the weakness elsewhere as we look out for the last six months.
Noah Poponak: Okay. Yes, I guess it sounds like you’re qualitatively, directionally saying you expect passenger and freight to do something similar in 3Q and 4Q as they did in 2Q. But for the aggregate segment or end market growth rate to accelerate somewhat significantly. But I guess, if passengers a little better, freight’s a little better, and the compares are easier. Maybe that gets you there.
Kevin Stein: I think that’s right, yes.
Noah Poponak: Okay. Okay. Did the rate of change in price change very much in the aftermarket in the second quarter?
Kevin Stein: Not appreciably, no. I think we always, as you guys know, we seek to price slightly ahead of inflation, and that’s unchanged this quarter. Same expectation as we always have for our operating units and what the teams look to execute on.
Mike Lisman: But I think we should spend enough time talking about or emphasizing the gains we’ve made in productivity. We are down thousands of heads compared to where we were at very much comparable volumes or approaching comparable volumes. That’s real productivity as we have been reluctant to add back and driving engineering productivity projects in our facilities. That is clearly having an impact on our EBITDA.
Kevin Stein: Yes, you can definitely see that in the margins.
Noah Poponak: Okay. Kevin, you mentioned adding people to the M&A team. Can you quantify that? Like how many people relative to the base or what kind of percentage increase you’re making just curious there.
Kevin Stein: Yes, I don’t. We’re looking to add one or two more folks to our M&A team. We are seeing a lot of really interesting smaller size deals, and small deals take as much time to go through as bigger ones, so we need some more help to go through that. So hopefully, this will produce some more opportunity for us as we’re seeing things come across our desks that we haven’t seen before.
Operator: One moment for the next question. The next question comes from Sheila Kahyaoglu with Jefferies. Your line is open.
Sheila Kahyaoglu: Good morning, guys, and thank you. First, I wanted to speed up another aftermarket question. It’s been asked several ways, but up eight. If we take out freight, which is 15% of your aftermarket, just an assumption there, that’s 2 points of a headwind. How do we think about where peers were averaging about 15% on the quarter, and you guys at 10%, and you having more price power, how do we think about what held aftermarket back outside of freight and biz jet?
