Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliation. First, I'll start off with the usual quick overview of our strategy, a few comments about the quarter, and discuss our fiscal 2025 outlook. TransDigm is an exceptional company, and it has been incredibly rewarding to witness its growth and the value it has created for shareholders. Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and, over any extended period, have typically provided relative stability in the downturns.
Lastly, our capital structure and allocation are a key part of our value creation methodology. To do this, we stay focused on both the details of value creation as well as careful allocation of our capital. As you saw from our first earnings release, we had a decent Q3. During the quarter, we saw healthy growth in the revenues for both our commercial aftermarket and defense market channels.
Commercial OEM revenues were down this quarter compared to prior year, which Mike will discuss further in his market segment commentary. Suffice it to say, OEM revenue was a limiter for our quarterly performance, but this is only transitory and a lingering effect of the Boeing strike and continued rate ramp challenges at Airbus. Airline demand for new aircraft remains high, and the OEMs have long backlogs. Contributing to the strong Q3 margin is the continued growth in our commercial aftermarket, along with diligent focus on our operating strategy, which is allowing margin performance to expand across all segments.
| Metric | Period | Current guidance |
|---|---|---|
| Revenue (midpoint) | FY2025 | $8.79 billion, up ~11% over prior year (Sales midpoint lowered ~$60 million) |
| EBITDA as defined (midpoint) | FY2025 | $4.725 billion, up ~13%, margin ~53.8% (Midpoint raised ~$40 million) |
| Adjusted EPS (midpoint) | FY2025 | $36.74, up ~8% (Updated) |
| Commercial OEM revenue growth | FY2025 | Flat to low single-digit % (Lowered) |
| Commercial aftermarket revenue growth | FY2025 | High single-digit to low double-digit % (Unchanged) |
| Defense revenue growth | FY2025 | High single-digit to low double-digit % (Unchanged) |
| Free cash flow | FY2025 | ~$2.3 billion (Unchanged) |
| Metric | YoY | Note |
|---|---|---|
| Commercial OEM revenue | -7% | Lower-than-expected OEM production rates from the Boeing strike and Airbus ramp difficulties, plus customer realignment, backlog, and destocking; sequentially about flat versus Q2. |
| Commercial aftermarket revenue | +6% | Positive growth across all submarkets; freight and interiors above the 6% rate, passenger and biz jet slightly below; engine-content units up double digits. |
| Defense market revenue | +13% | Broad-based growth across businesses and customers, with OEM running slightly ahead of aftermarket. |
| Organic growth rate | +6.3% | Driven by the commercial aftermarket and defense market channels. |
| Net debt to EBITDA | 4.9x (down from 5.1x prior quarter) | Strong cash generation; ~$800 million of cash reserved for the anticipated Siemens Precision closing. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Commercial OEM destocking and production rates | — | OEM softness viewed as transitory; Q4 guidance implies a return to positive growth as Boeing/Airbus rates and easier comps recover. | Rising |
| Commercial aftermarket normalization | — | Growth has moderated post-COVID; volume now sits about where it should be given takeoffs/landings, well above pre-COVID levels. | Steady |
| Defense strength | — | Revenue up ~13% with strong bookings well ahead of shipments, though U.S. government outlay growth moderated. | Rising |
| M&A and capital deployment | — | Two deals signed (Servotronics, Siemens Precision); pipeline active in small/mid-size targets; priorities unchanged with debt paydown unlikely. | Rising |
| CEO leadership transition | — | Kevin Stein retiring September 30; Mike Lisman to become CEO, with Patrick Murphy joining Joel Reiss as Co-COO. | Rising |
| Supply chain conditions | — | Continuing to improve versus 12-24 months ago though not back to 2018-2019 levels; castings and certain electronic components remain pain points. | Rising |