Josh Sullivan: Great. Thank you for the time.
Steve Griffin: Thank you.
John Cuomo: Thanks, Josh.
Operator: Our next question comes from Louie DiPalma with William Blair. Please go ahead.
Louie DiPalma: John, Steve, and Michael, good morning, and happy Thursday, and congrats on closing the Federal and Defense sale; I know that’s been a long time coming.
John Cuomo: Thank you. And I agree.
Louie DiPalma: For John, geographic expansion is obviously a big driver for you. You referenced how you’ve had solid contributions from your Asia-Pacific expansion. I think Pratt & Whitney Canada was one of your anchored customers in that region. Are you still in the early innings in Asia? And are your other OEM partners looking to also give you distribution business over there?
John Cuomo: The answer is yes to both. We’re in our early innings outside the U.S. in general. During COVID, when I arrived at the business, we did a complete restructuring. We essentially shut down most of our international operations. And they weren’t in ideal locations or set up with the right team. So, it’s much more of a startup mentality in terms of Asia and Europe today. And we do have a few pilot customers. We have other products as well, some business in general aviation. Honeywell content, that’s more Asia-specific as well. We have tires and distribution that we’ve set up in Australia, and have continued growth opportunities there. So, we have some near-term opportunities. And yes, there’s a pipeline of longer-term international focus as well.
Louie DiPalma: Great. And you also — you mentioned how, for the Turbine Controls acquisition, how it’s involved in several strategic next-gen aircraft platforms. What are some of those platforms?
Steve Griffin: Yes, I mean it’s on the MAX, and it’s on the NEO, meaning they’re supporting the engine types that support both of those narrow-bodies. And then, I’d say, across the board, they’ve got capabilities to support almost every engine product type in the commercial space. So, there are just a few major OEM partners out there, and I’d say their capabilities are able to support all of the most wide-body and narrow-body. They do a little bit of military work, but it seems to be much more commercially oriented.
Louie DiPalma: Thanks, Steve. And another question, from a high level, how do you see Boeing’s issues impacting the aftermarket industry? And related to that, one of the major aftermarket providers has commented that there’s rampant price inflation in the industry right now due to heavy demand. Are you also seeing that?
Steve Griffin: Post-COVID, we saw a tremendous amount of price inflation. We still see aftermarket pricing as a lever that many OEMs continue to utilize. I think there’s an element of stabilization that we’ve seen entering 2024 compared to 2023. And I’d say, with regard to Boeing, I mean, we all want our OEM partners to be successful. It is in all of our best interest. For us, we’re serving the aftermarket. The same supply chain that does work on new build, it does work on aftermarket. So, for us, we’re looking more at two trends, I’d say. Number one is, our aircraft that plan to be retired not going to be retired? And are there any areas of opportunity for us to capitalize on that? And then number two is, how has the supply chain impacted? And would impact — does that have for us? And how do we find opportunity in those areas? So I’d say, that’s where we focus.
Louie DiPalma: Great. And one final one that you may not be able to comment on, but what has been the preliminary buyer interest for the fleet business?
Steve Griffin: Our words that we started an initial process is exactly that. We kicked off 2024 and in seven weeks, we sold the two FDS assets and acquired the TCI business or announced the acquisition of that business. That was all done in seven weeks. We have not started the strategic review process. We’ve announced it. We’ve retained advisor. And we’ll kick off that process and go through a true strategic review over the coming months.
Louie DiPalma: Awesome, sounds good. Thanks. Thanks, everyone.
Steve Griffin: Thank you, Louis.
Louie DiPalma: I appreciate it.
Operator: [Operator Instructions] Our next question comes from Sam Struhsaker with Truist Securities. Please go ahead.
Samuel Struhsaker: Hi. Good morning, guys. On for Mike Ciarmoli, I was curious, you guys give me a little bit of an update on the Southwest [Teardown] (ph) program, how that’s going?
Steve Griffin: Yes, I think the program is going really well. So, we’ve been in a few years of that product or that service that we’ve partnered on with Southwest. Really that’s about bringing a service to that specific customer. It also provides an opportunity for our repair shops to continue to support the 737s that are coming out of service with some of the USM that comes out of those and turn into rotables. I’d say, the program has launched really well and this year was a peak year. I mean, we did more work this year than we did in the year before. And the fourth quarter was another record quarter for that program. But I’d say it’s a great contributor to our business and more than anything, I think it shows the flexibility that we have with some of our key customers to find creative ways to partner with them on a solution that fits for what they need. And that’s what we did for Southwest, and we think it’s an important service that we offer to them.
Samuel Struhsaker: Great, and maybe, is there any additional detail you guys could give on kind of your de-levering trajectory once you close that TCI in 2Q?
Steve Griffin: Absolutely, so you heard us reference, we expect to go just over four times on a net debt to EBITDA basis post the acquisition. Really what we look for in the second-half of this year is, I’ll go through a couple different drivers. First is contributions from growth in EBITDA. So, obviously we’ve got some top line growth expected as well as some, therefore profitability growth expected as well. The second thing that we expect to do is deliver some strong second-half free cash flow. I think we’ve got a pretty good demonstrated track record of doing that over the last couple of years and we project that out into the back half of this year. So, that puts us in a strong position to be in a good point from a net leverage perspective.
