Noah Poponak: Okay. Thanks very much. I appreciate it.
Mike Lisman: [Indiscernible] at least as good as we thought it was when we set out to buy probably a little better based on seven months of ownership or so.
Noah Poponak: Okay. Thank you.
Operator: Our next question will come from the line of Robert Stallard with Vertical Research.
Robert Stallard: Thanks so much good morning.
Kevin Stein: Good morning.
Sarah Wynne: Good morning.
Robert Stallard: Just a couple from me. First of all, on the CPI business. You mentioned that it does have some sort of non-aerospace defense exposure here. Are you intending to keep that within TransDigm? Or would you be looking to sell it on?
Kevin Stein: We would keep that within TransDigm. We have a non-aerospace industrial section of the company now as pieces come along with M&A. Absolutely encouraged by that part of the business. I think the Medtronic medical device is a very interesting market, and one that we wouldn’t mind learning more about through exposure through this business.
Robert Stallard: Okay. And then on the aftermarket guidance for fiscal 2024 in the mid-teens, that’s roughly half where you ended up for fiscal 2023. How do you expect that to progress as the year goes by? Are we going to see an abrupt step down here? Or is it going to be a sort of gradual process and by the end of fiscal 2024 below that to full-year guidance?
Mike Lisman: Yes. We don’t want to start giving anything that sounds too much like quarterly guidance, but a little bit of color on what we expect. We’d expect the gradual ramp up throughout the course of the year. As you know, Q1 for us just because of the way the working day step work out. That is a lower percentage of the total year’s revenue forecast because of the 10% working days. But we expect the March up to sort of track the takeoffs and landings, largely speaking, over the course of next year. It increases the year goes on with some sequential ramp ups throughout fiscal 2024. It doesn’t always happen that way, right? I could see some lumps here and there, but that’s pretty much what we expect and consistent with prior years.
Robert Stallard: Okay. So the actual number progresses through the year, but the percentage growth rate year-on-year will be coming down as the year progresses, right?
Mike Lisman: That’s fair. That’s a fair assumption and obvious result of the mass and the comps the way they work. Correct.
Robert Stallard: Exactly. Okay. Thanks so much.
Operator: Our next question will come from the line of David Strauss with Barclays.
David Strauss: Thanks. Good morning.
Kevin Stein: Good morning.
David Strauss: Probably a question for Sarah. I think you talked about $2 billion in cash flow as you define it. What should we assume from work, in terms of working capital on top of that? I think this past year, you had like a $400 million drag from working capital.
Sarah Wynne: Yes. On the working capital going forward, I’d probably assume about a neutral. Like you said, you saw we defined working capital as accounts receivable inventory less payables, and we added about $500 million this year. That was more than our peak to trough of the COVID downside where we took out about $400 million. And obviously, we also put some of that back in fiscal 2022. I think now we’re in pretty good shape, and I would assume neutral going forward.
David Strauss: Okay. And Kevin, a question, I guess, two parter on the aftermarket. Are your aftermarket volumes now back about in line with pre-pandemic levels? That’s the first question. And then the second question, in terms of the mid-teens growth guidance. Is it fair to think of that being roughly half price, half volume in terms of what you’re thinking? Thanks.
Mike Lisman: It’s Mike. I’ll take that one. First, on the volume and where we stand now across our whole commercial aftermarket in FY2023, we’re probably down in the volume space, something like 15% or so. That varies by submarket. The passenger piece is down, obviously, 15%, sorry, I should have highlighted that, passengers down 15%. The interior stuff is probably off a little bit more. Freight is up more from where it was pre-COVID and Biz Jet, Heli is up a bit too in the aggregate across all commercial aftermarket in FY 2023. We’re not quite back to 100, if 100 was FY2019, but we’re close. And then in FY2024, what we expect to see on the volume side within passenger going to that submarket is basically to get back to pretty much close to 100.
That’s how our plans came in, which is what you’d expect, consistent with where the takeoffs and landings and RPMs are trending. And then the freight and Biz Jet both sort of trending along as well, but probably not up as big as the passenger subsegment. And then in the aggregate, what that means for FY2024 across our whole commercial aftermarket bucket is that we’re probably up a little bit in the volume space, above 100 if FY2019 is, again, defined as 100. The second part of your question on price and volume trends, first on price and commercial aftermarket, we aim to, as you guys know, across our business, get a slightly positive amount of real price every year. So price a little bit ahead of inflation. In this environment, that sort of implies the direction you were heading on a 15% aftermarket guide, roughly half and half.
That’s not miles off, sort of directionally accurate, but the price will aim to get real price ahead of inflation, but you’re not too far off. We don’t give the exact amount of price and volume trends, but it’s directionally accurate.
David Strauss: Perfect. Thanks Mike.
Operator: Our next question will come from the line of Ron Epstein with Bank of America.
Ronald Epstein: Hey, hello. Hey. Good morning.
Kevin Stein: Good morning.
Ronald Epstein: So one of the things we’ve been hearing is given the move in kind of interest rates and what’s going on in the financial world, that there’s just less competition out there for deals from financial sponsors and private equity and so on and so forth. Is that the case? And is that giving you guys a tailwind in your potential things you could do?
Kevin Stein: I don’t – I haven’t found that to be the case. We see lots of competition. In fact, CPI was a competitive deal. I haven’t seen anything that wasn’t in a competitive process. So I have not noticed that. I think in the aerospace and defense sector, there may be deeper pockets. So I’m not seeing that there’s no one bidding on businesses. I think if that was the case, there wouldn’t be many things coming to market. So we’re seeing a lot of competitive processes.
