TransDigm Group Inc Stock

TransDigm Group Incorporated (TD Group), through its wholly-owned subsidiary, TransDigm Inc., operates as a global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service.

The company's business is well diversified due to the broad range of products the company offers to its customers. Most of the company's products generate significant aftermarket revenue. Once the company's parts are designed into and sold on a new aircraft, the company generates net sales from aftermarket consumption over the life of that aircraft, which is generally estimated to be approximately 25 to 30 years.

Products

The company primarily designs, produces and supplies highly engineered proprietary aerospace components with significant aftermarket content. The company seeks to develop highly customized products to solve specific needs for aircraft operators and manufacturers.

The company's major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, databus and power controls, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, advanced sensor products, switches and relay panels, thermal protection and insulation, lighting and control technology, parachutes, high performance hoists, winches and lifting devices, cargo loading, handling and delivery systems and specialized flight, wind tunnel and jet engine testing services and equipment. Each of the company's product offerings is composed of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer.

Segments

The company's businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.

The Power & Control segment includes operations that primarily develop, produce and market systems and components that predominately provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. Major product offerings include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, and cargo loading, handling and delivery systems. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.

The Airframe segment includes operations that primarily develop, produce and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. Major product offerings include engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation, lighting and control technology, parachutes and specialized flight, wind tunnel and jet engine testing services and equipment. Primary customers of this segment are airframe manufacturers and cabin system suppliers and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.

The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets. Major product offerings include seat belts and safety restraints for ground transportation applications, mechanical/electromechanical actuators and controls for space applications, hydraulic/electromechanical actuators and fuel valves for land-based gas turbines, and refueling systems for heavy equipment used in mining, construction and other industries and turbine controls for the energy and oil and gas markets. Primary customers of this segment are off-road vehicle suppliers and subsystem suppliers, child restraint system suppliers, satellite and space system suppliers, manufacturers of heavy equipment used in mining, construction and other industries and turbine original equipment manufacturers, gas pipeline builders and electric utilities.

Sales and Marketing

Consistent with the company's overall strategy, the company's sales and marketing organization is structured to continually develop technical solutions that meet customer needs. In particular, the company attempts to focus on products and programs that will lead to high-margin, repeatable sales in the aftermarket.

The company has structured its sales efforts along its major product offerings, assigning a business unit manager to certain products. Each business unit manager is expected to grow the sales and profitability of the products for which he or she is responsible and to achieve the targeted annual level of bookings, net sales, new business and profitability for such products. The business unit managers are assisted by account managers and sales engineers who are responsible for covering major OEM and aftermarket accounts. Account managers and sales engineers are expected to be familiar with the personnel, organization and needs of specific customers to achieve total bookings and new business goals for each account and, together with the business unit managers, to determine when additional resources are required at customer locations. Most of the company's sales personnel are evaluated, in part, on their bookings and their ability to identify and obtain new business opportunities.

The company also uses a number of distributors to provide logistical support, as well as serve as a primary customer contact with certain smaller accounts. Boeing Distribution Services, Inc. and Satair A/S (a subsidiary of Airbus S.A.S.) among others, are the company's major distributors.

Customers

The company predominantly serves customers in the commercial, regional, business jet and general aviation aftermarket, which accounted for approximately 32% of the company's net sales for the year ended September 30, 2023 (fiscal year 2023); the commercial aerospace OEM market, comprising large commercial transport manufacturers and regional and business jet manufacturers, which accounted for approximately 22% of the company's net sales for fiscal year 2023; and the defense market (which includes defense OEMs and aftermarket sales to the U.S. and friendly foreign governments), which accounted for approximately 39% of the company's net sales for fiscal year 2023. Non-aerospace net sales comprised approximately 7% of the company's net sales for fiscal year 2023.

The company's customers include: (1) distributors of aerospace components; (2) worldwide commercial airlines, including national and regional airlines; (3) large commercial transport and regional and business aircraft OEMs; (4) various armed forces of the United States and friendly foreign governments; (5) defense OEMs; (6) system suppliers; and (7) various other industrial customers.

The markets in which the company sells its products are, to varying degrees, cyclical and have experienced upswings and downturns.

Governmental Regulation

The commercial aircraft component industry is highly regulated by the Federal Aviation Administration ('FAA') in the United States and by the European Union Aviation Safety Agency in Europe and other agencies throughout the world, while the military aircraft component industry is governed by military quality specifications. The company, and the components the company manufactures, is required to be certified by one or more of these entities or agencies, and, in many cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models.

Seasonality

The company's net sales have generally been lower in the first quarter of the company's fiscal year (year ended September 2023) compared to the subsequent quarters due to fewer working days resulting from the observance of various holidays.

Research and Development Costs

The company's research and development costs were approximately $105 million for the year ended September 30, 2023.

History

TransDigm Group Incorporated was founded in 1993. The company was incorporated in 2003.