Kevin Stein: I think on a quarterly basis, you can always see a little bit of lumpiness, as we said here before, I’m not sure exactly to follow the math on the 2% drag, but as we said today, we saw really strong bookings across our whole business. It can be lumpy. We feel really good about the outlook for the full year with the mid-teens percentage growth there.
Mike Lisman: Yes. I mean, we sequentially booked more in aftermarket. We’re seeing robust bookings in aftermarket on the commercial side; I think we feel optimistic, right?
Kevin Stein: That’s right. Yes.
Sheila Kahyaoglu: Okay. Great. And then, Kevin, I had to buy myself some time to do that math on the headcount productivity you just gave us. So I think headcount is 15% below 2019 levels, while sales are up significantly above 2019. So with that productivity benefit in mind, how do we think about EBITDA margins decelerating 100 bps half over half in the second half?
Kevin Stein: Yes, I take your point. Again, we hopefully aim to be conservative in our forecasting. We’re trying to stick to our yearly forecast on EBITDA. We had a very strong Q2. We’ll see how the back half of the year unfolds. We certainly don’t have any large negatives that we’re aware of. So I think it’s just our standard conservatism. We don’t have any concerning trends that we’re trying to peanut butter over here or anything. This is strong bookings across all of our segments, and really a good tailwind both on the OEM, commercial OEM, commercial aftermarket. And clearly on the defense side, we remain optimistic.
Operator: One moment for the next question. Next question comes from Kristine Liwag with Morgan Stanley. Your line is open.
Kristine Liwag: Hey, good morning, everyone. Kevin, in previous Investor Days, you’ve talked about how TransDigm had about 400,000 — excuse me, 400,000 PMA SKUs. And I think there was a point in time you were averaging something like 20,000 new SKUs per year. I guess this has been a few years ago since you’ve disclosed this. I was wondering if you could size PMA today as a percent of your portfolio and also in an environment where the supply chain is still struggling and you’re clearly able to produce parts. Can you provide more color on where that is, that market and how attractive you think it is?
Kevin Stein: So I think we can give more update and color on this topic at our Investor Day coming up at the end of June. But just from a top level, we don’t consider PMAs to be a significant impact of our business. We have somewhere around 500,000 part numbers that we sell across commercial and defense. We do monitor it regularly. We are the largest creator of PMA parts in our space that we sell into on our products, that’s how you sell into the aftermarket. So I think the — it’s much similar situation to what we’ve seen in the past. The opportunities exist for us to replace other struggling suppliers. We certainly see that. We — again, PMA and used and serviceable materials aren’t a significant impact to our business on a regular day-to-day basis. It doesn’t mean that there aren’t some parts that are more impacted. But on a go-forward basis, it’s a very, very small leak in our business, if you will.
Kristine Liwag: Thanks, Kevin. And Sarah, if I could follow-up on leverage. I mean, you guys are clearly investing in your M&A team with the head count add. But if there are no incremental deals to fund in the near and medium-term, how do you think about the split between paying a special dividend versus doing more share buybacks?
Sarah Wynne: Yes. I mean, obviously, we look at both of those, obviously, the first and foremost is to invest the capital in our businesses and do M&A, and then we look at those two, and we look at them all the time. And obviously, we’re sitting on plenty of cash, as you know. So at some point in the future, we look to make a decision on which one makes sense and what best to do with the cash.
Kevin Stein: I think we — to add to that, I think we just — we paid a dividend in Q1. I think we’ll be able to make a decision in Q4 probably this year about our plans.
Operator: One moment for the next question. The next question comes from Michael Leshock with KeyBanc. Your line is now open.
Michael Leshock: I think — I think you had previously alluded to volume growth within aftermarket in 2025. And if we look ahead a bit further, is that still your view? And is there anything you could callout that needs to happen to meet the strong demand within aftermarket that we’re seeing? And continue to grow volumes, just given some of the constraints that we’re seeing out there right now?
Kevin Stein: Sorry, is the question about whether 2025 commercial aftermarket volume growth will continue?
Michael Leshock: Yes, that’s right.
Kevin Stein: I think, generally, as you look at the forecast from IATA, the investment bank forecasts that are out there, generally folks are expecting RPMs and takeoffs and landings to continue to tick up next year. That said, it’s at a moderating pace relative to what it’s been in the past couple of years as we come out of COVID. So there’s still growth but maybe not quite as high as it was in, say, 2022. We’ve already seen some of that moderation. But yes, of course, if you look at IATA forecast, other forecasts, the world is flying a lot. People continue to fly. That’s reflected in takeoffs and landings and expected RPM growth. So we very much expect as a result of that continued volume growth in commercial aftermarket.
Michael Leshock: And then just on capital allocation on your priority of reinvesting in the business. Could you talk to what areas of the business you expect to invest the most or anything you’re targeting, whether it be bottlenecks or just any way to frame the organic investments you’re making? Thanks.
Mike Lisman: Yes, the biggest investment and use of our capital has been to the productivity comment Kevin made earlier, it’s automation projects. We have said — as we said before, when we were in the depths of COVID will not add costs back ratably as we come out of it, and we haven’t done that. That’s reflected in the head count we have today. And the operating unit teams have done an exceptional job of finding good automation projects, whether it’s cobots or material movers or new machining centers to basically increase the amount of automation in their facilities and reduce the headcount, reduce the cost footprint that’s why you’re seeing the better margins that we delivered this quarter.
Operator: Please standby for the next question. The next question comes from Pete Osterland with Truist Securities. Your line is now open.
