Heico (NYSE:HEI) reported record first-quarter fiscal 2026 results, highlighted by double-digit growth in net income, operating income and net sales, alongside margin expansion at the consolidated level. Management also outlined an active acquisition environment, discussed temporary margin pressure at its Electronic Technologies Group, and pointed to sustained demand across commercial aerospace, defense and select space and power-generation-adjacent markets.
Quarterly results: record net income, higher sales and operating profit
Co-CEO Eric Mendelson said consolidated net income rose 13% to a record $190.2 million, or $1.35 per diluted share, compared with $168.0 million, or $1.20 per diluted share, in the prior-year quarter. Consolidated operating income increased 15% year over year, while net sales rose 14%.
Consolidated EBITDA increased 14% to $312.0 million versus $273.9 million a year earlier. Operating cash flow was $178.6 million, though the company emphasized reported operating cash flow was negatively impacted by Leadership Compensation Plan (LCP) distributions. Mendelson said approximately $22.7 million in distributions were made during the quarter to a long-tenured participant, and the company expects another distribution of about $73 million later in fiscal 2026. He said the LCP is fully funded via investments in corporate-owned life insurance policies—classified as investing cash inflows—making the distributions “net cash neutral” to Heico.
Flight Support Group: 15% sales growth and margin improvement
Co-CEO Victor Mendelson said the Flight Support Group (FSG) posted net sales of $820.0 million, up 15% from $713.2 million, driven by 12% organic growth and contributions from fiscal 2025 acquisitions. Operating income increased 21% to $200.7 million from $166.1 million, supported by higher sales, improved gross margin and SG&A efficiencies.
FSG operating margin rose to 24.5% from 23.3%. Mendelson said acquisition-related intangible amortization reduced operating income by roughly 260 basis points. On a cash basis before amortization (which the company referred to as EBITDA for the segment), FSG’s margin was approximately 27.1%, up 110 basis points from 26.0% a year earlier.
During Q&A, management said organic growth remained strong despite difficult comparisons. Eric Mendelson also said the company “didn’t stuff the channel,” adding that while inventory could have shipped, Heico was “very careful” to align deliveries with customer requirements.
Electronic Technologies Group: sales up, margins pressured by mix
The Electronic Technologies Group (ETG) reported net sales of $370.7 million, up 12% from $330.3 million. Management attributed the increase to 6% organic growth and contributions from fiscal 2025 and fiscal 2026 acquisitions. Organic growth was driven by increased aerospace and defense and other electronics product sales, partially offset by lower space product sales.
Operating income declined to $73.2 million from $76.5 million, which management tied to a lower gross profit margin from an “unfavorable product mix,” including a decrease in space shipments and a less favorable mix of defense products. ETG operating margin fell to 19.8% from 23.1% a year earlier. Mendelson said intangible amortization consumes more than 410 basis points of margin, and described ETG’s underlying margin before amortization as approximately 24%.
Executives repeatedly characterized ETG’s margin performance as temporary and consistent with historical quarter-to-quarter variability based on shipment schedules. Mendelson said that, based on backlogs and shipment plans, the company expects ETG margins to improve as the year progresses, “particularly in the second half.” In response to analyst questions, management also said space organic sales were down in the high single digits year over year, attributing it to timing of shipments rather than demand, and pointed to record backlog and increasing order volumes.
On cost pressures, Mendelson said ETG is seeing elevated inflation in certain microelectronic components, but the group generally can pass higher costs to customers with some lag, calling it a headwind “more in the noise level” on a consolidated basis. He also said supply chain conditions are largely “normal,” with occasional late items but no broad constraint.
Acquisitions and capital structure: active pipeline, recent deals
Management highlighted a robust M&A pipeline across both segments and emphasized a disciplined approach focused on strategic fit, accretion and cash-flow support.
- Rockmart Fuel Containment: In January, ETG acquired 100% of Axillon Aerospace’s fuel containment business, renamed Rockmart Fuel Containment, which designs and manufactures fuel containment solutions primarily for military fixed- and rotary-wing aircraft. The purchase was funded with cash from Heico’s revolving credit facility.
- EthosEnergy Accessories and Components Limited: Earlier in the month of the call, FSG acquired 100% of EthosEnergy Accessories and Components Limited, which provides repair solutions for engine components and accessories across industrial gas turbine, aeroderivative gas turbine, aerospace and defense engine platforms. Management tied the acquisition to rising power demand associated with AI and large language models. The purchase price was paid using a combination of cash from the revolver and shares of Heico Class A common stock; management said more than 80% of the consideration was cash and the equity component was at the seller’s request.
- Pending 80% acquisition: The company said FSG entered into an agreement that week to acquire 80% of a company providing services for commercial aviation and defense component platforms, with closing expected in the second quarter of fiscal 2026, subject to government approval and customary conditions. The remaining 20% would remain with seller management.
Management said it expects the acquisitions to be accretive within the year following completion. On valuation, executives said sector multiples have risen over time, making discipline critical, and argued Heico’s reputation as a “preferred buyer” can be an advantage in winning deals without overpaying. They also said they avoid paying “extremely high multiples” for businesses that do not generate cash.
Heico ended the quarter with a net debt-to-EBITDA ratio of 1.79x as of January 31, 2026, up from 1.6x at October 31, 2025, which management attributed to acquisition financing. CFO Carlos Macau said he is comfortable with leverage under 2x and described the company’s approach of using the revolver to fund acquisitions and then paying it down to “reload” for future deals. Macau added the company is not “capital constrained” and could temporarily move to higher leverage for an exceptional opportunity if there is a clear path back toward the low-2x range.
The company also paid a regular semiannual cash dividend of $0.12 per share in January, marking its 95th consecutive semiannual dividend since 1979.
Market commentary: PMA, defense visibility, and AI
In Q&A, Eric Mendelson reiterated Heico’s commitment to the parts manufacturer approval (PMA) business, describing a catalog of roughly 20,000 parts and noting that about three-quarters of PMA sales are non-engine and roughly 25% are engine-related. He said the engine PMA business is at a record level and that airlines are asking the company to develop more engine parts, while also emphasizing that PMA demand is increasingly tied to availability and turn time, not just price.
Executives also addressed defense contracting and budget dynamics, saying multi-year framework agreements can provide better visibility for planning and capacity. Management said it has seen progress in Pentagon efforts to adopt alternative parts to reduce costs and improve readiness, while reiterating the process is medium-term. On technology, Mendelson said Heico is already using AI in operational processes and sees potential for AI to improve efficiency and accelerate parts development and customer adoption.
About Heico (NYSE:HEI)
HEICO Corporation is an aerospace, defense and electronics company that designs, manufactures, and sells a range of products and provides repair and aftermarket services. Headquartered in Hollywood, Florida, HEICO supplies replacement components, repair services and engineered systems for commercial and business aviation, military and space markets as well as for selected industrial and medical customers. The company’s offerings are focused on sustaining and improving the reliability and availability of complex equipment across its end markets.
HEICO operates through two principal business areas.
