HEICO Corporation (HEI) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended April 30, 2026, and the six months ended on that date. HEICO Corporation operates through two primary segments: the Flight Support Group (FSG), providing aerospace aftermarket parts and repair services, and the Electronic Technologies Group (ETG), manufacturing electronic components for defense, space, and aerospace applications. The company is a large accelerated filer incorporated in Florida.
Key Financial Metrics
| Metric | Six Months Ended April 30, 2026 |
Six Months Ended April 30, 2025 |
Three Months Ended April 30, 2026 |
Three Months Ended April 30, 2025 |
|---|---|---|---|---|
| Net Sales | $2,554.3 million | $2,128.0 million | $1,375.7 million | $1,097.8 million |
| Operating Income | $610.3 million | $475.0 million | $350.4 million | $248.2 million |
| Net Income (HEICO) | $424.0 million | $324.7 million | $233.8 million | $156.8 million |
| Diluted EPS | $3.01 | $2.31 | $1.66 | $1.12 |
| Operating Margin | 23.9% | 22.3% | 25.5% | 22.6% |
| Effective Tax Rate | 17.1% | 14.4% | 21.2% | 21.0% |
| Cash from Operations | $470.6 million | $407.7 million | N/A | N/A |
| Total Debt | $2,587.3 million | $2,167.9 million | N/A | N/A |
| Cash & Equivalents | $210.3 million | $217.8 million | N/A | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated net sales increased 20% year-over-year (YoY) for the six-month period and 25% for the quarter. FSG sales grew 18% (six months) driven by 16% organic growth, while ETG sales grew 23% (six months) driven by 12% organic growth.
- Profitability: Operating income rose 29% YoY for the six months and 41% for the quarter. Gross margins improved to 40.1% (six months) and 41.4% (quarter) due to favorable product mix in both segments.
- Acquisitions: The company completed four acquisitions in fiscal 2026 (Rockmart, Ethos, Sherwood, and Southwest Antennas) with total consideration of approximately $859.5 million. These contributed to revenue growth and increased goodwill by $542.4 million.
- Debt Levels: Total debt increased by approximately $420 million, primarily due to borrowings under the revolving credit facility used to fund acquisitions. The debt-to-equity ratio stands at 53.3%.
- Working Capital: Accounts receivable increased by $97.3 million and inventories by $115.2 million compared to the prior fiscal year-end, reflecting higher backlog and sales volume.
Guidance, Outlook, and Risks
- Outlook: Management expects increased net sales at both FSG and ETG for the remainder of fiscal 2026, supported by underlying demand and recent acquisitions. Capital expenditures for fiscal 2026 are estimated at $85–$95 million.
- Backlog: As of April 30, 2026, remaining performance obligations (backlog) totaled $2,622.6 million. The company expects to recognize $1,177.0 million in the remainder of fiscal 2026.
- Risks: Key risks include public health threats, reduced commercial air travel, government spending cuts in defense/space, cybersecurity events, and the ability to integrate acquisitions successfully.
- Subsequent Event: The company entered an agreement to acquire 80% of a manufacturer of track systems and armored steel components for military vehicles, expected to close in Q3 2026.
Investor Verification Checklist
- Acquisition Integration: Verify the revenue contribution and margin accretion of the four fiscal 2026 acquisitions (Rockmart, Ethos, Sherwood, SWA) in subsequent quarters.
- Debt Servicing: Monitor the impact of increased debt levels ($2.59 billion) on interest expense, noting the weighted average interest rate on the revolving facility was 5.0%.
- Noncontrolling Interests: Review the $536.7 million in redeemable noncontrolling interests and the associated "Put Rights" that may require future cash outflows.
- Working Capital Trends: Track the $173.5 million increase in net working capital to ensure it aligns with sales growth and does not signal collection or inventory obsolescence issues.
- Tax Rate Volatility: Observe the effective tax rate, which rose to 17.1% (six months) due to a smaller discrete tax benefit from stock option exercises compared to the prior year.