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Laurans Mendelson

I'm sorry. Thank you, and good morning to everyone on this call. We thank you for joining us, and we welcome you to this HEICO fourth-quarter fiscal '20 earnings announcement teleconference. I'm Larry Mendelson, Chairman and CEO of HEICO Corporation. I am joined here this morning by Eric Mendelson, Eric is HEICO's Co-President and President of HEICO's Flight Support Group; Victor Mendelson, HEICO's Co-President and President of HEICO's Electronic Technologies Group, and Carlos Macau, our Executive Vice President and CFO.
Now before discussing our record operating results, I want to sincerely thank HEICO's talented team members for their exceptional contribution to our success. Your dedication to exceeding customer expectations and achieving operational excellence has driven outstanding results and reinforces my confidence in HEICO's future.
Over the past several years, we have achieved extraordinary growth in Commercial Aviation, emerging stronger than ever from a very challenging period in the aerospace industry. Our team members resilience and adaptability during this time of rapid recovery and expansion have been remarkable. Equally commendable is the agility shown by our recent acquisitions which have seamlessly integrated to our operations and enhanced our collective success.
I'm also encouraged by our progress in expanding our presence in key markets such as defense and space. These sectors are critical to long-term strategy and our team members' commitment to delivering innovative, reliable and best cost solutions has strengthened HEICO reputation as a trusted partner. This focus for us for continued growth and success across diverse markets.
I'll now summarize the highlights of our fourth quarter fiscal '24 record results. Consolidated operating income and net sales in the fourth quarter of fiscal '24, represent record results for HEICO and improved by 15% and 8%, respectively, as compared to the fourth quarter of fiscal '23. Consolidated net income increased 35% to a record $139.7 million or $0.99 per diluted share in the fourth quarter of fiscal '24, and that was up from $103.4 million or $0.74 per diluted share in the fourth quarter of fiscal '23.
The Flight Support Group set all-time quarterly net sales and operating income records in the fourth quarter of fiscal '24, improving 15% and 35%, respectively, over the fourth quarter of fiscal '23. The increases principally reflect strong 12% organic growth, mainly attributable to increased demand for flight support group's commercial aviation products and services as well as the impact from our profitable fiscal '23 and '24 acquisitions. Consolidated EBITDA increased 13% and to $264 million in the fourth quarter of fiscal '24, and that was up from $234.2 million in the fourth quarter of fiscal '23.
Our net debt-to-EBITDA ratio was 2.06 times as of October 31, '24, and that was down from 3.04 times as of October 31, '23. Our excellent operating results have allowed us to early achieve the forecast we made a year ago that our net debt-to-EBITDA ratio would return to a historical level of about 2 times within roughly one year to 18 months following the Wenconr acquisition, and that excluded the impact of any additional acquisitions.
Our acquisition pipeline is extremely robust with opportunities in both Light Support and ETG, and we intend to follow our time-tested strategy of opportunistic acquisitions that continue to expand the cash-generating ability of HEICO. Cash flow provided by operating activities increased 39% to $205.6 million in the fourth quarter of fiscal '20, and that was up from $148.4 million in the fourth quarter of fiscal '23.
Yesterday, HEICO's Board of Directors declared an $0.11 per share cash dividend payable in January 2025, and this represents our 93rd consecutive dividend and this reflects their continued confidence in the strong cash flow generation of HEICO. Now let me talk about acquisition activity. Over the past few months, our ETG Group made several strategic acquisitions, one, acquiring 70% of SVM Private Limited, in November '24.
They acquired 87.9% of Mid-Continent controls in October '24, and they acquired 92.5% of Marwa Power Solutions in September 2024. In addition, in August '24, our Flight Support Group acquired the aerial delivery and decent Devices division of [Kquell Aerial Systems]. All of these acquisitions were funded by using cash provided by operating activities, except for Kquell, which was principally funded using proceeds from our revolving credit facility. We expect each of these acquisitions to be accretive to our earnings within the following year of acquisition.
At this time, I would like to introduce Eric Mendelson, Co-President of HEICO and President of HEICO's Flight Support Group, and he will discuss the fourth quarter results of the Flight Support Group. Eric?

Eric Mendelson

Thank you very much. The Flight Support Group's net sales increased 15% to a record $691.8 million in the fourth quarter of fiscal '24, up from $601.7 million in the fourth quarter of fiscal '23. The net sales increase reflects the impact from our fiscal '23 and '24 acquisitions and very strong 12% organic growth. The organic net sales growth mainly reflects increased demand across all of our product lines. The Wencor operations continued to exceed our expectations, and we are convinced this was an excellent acquisition for HEICO.
Our customers continue to find great value in our larger aftermarket product offerings for their aerospace parts and component repair and overhaul leads, which is translated into excellent growth opportunities and success for both our legacy businesses and Wencor.
We continue to operate Wencor as a stand-alone business operation. I have defined our strategy as cooperation, cash capabilities and consistency without consolidation. The sales, earnings and margins prove this was the perfect strategy. As I have mentioned before, we continue to make good progress working together in serving our customers in a combined seamless fashion.
Some examples of how we are working together include: one, utilization of all HEICO and Wencor PMAs in DERs at all repair stations; two, commercial and defense aftermarket sales cooperation; three, Wencor e-commerce platform lists all HEICO noncompetitive PMAs; four, Wencor is utilizing HEICO's manufacturing base to quote many new products; five, engineering and regulatory cooperation; sixth, sharing our best-in-class vendors; and seven various back-office synergies, such as insurance, payroll, retirement benefits and export compliance that will help offset additional regulatory compliance costs such as SOX and our FAA ODA. In many -- in addition, the FSG's defense sales continue to grow and offer an excellent opportunity. Many people have asked us what the US presidential administration change will mean for HEICO. In short, we are very excited about it.
Whether it's the chance to sell more of our much lower cost alternative aircraft replacement parts to save the government and taxpayers significant money or other opportunities, the possibilities are many. HEICO has always been about finding cost savings or best cost solutions for our customers, whether they're defense or commercial customers, and not about getting the highest price out of them.
Another example of the opportunity set is the components we make for missile defense systems, which is a strong and growing business for us. Missile defenses are increasingly important to the United States and our allies, with sales of these products growing dramatically amidst what is effectively a shortage of defense missiles in a very large backlog over years. We expect meaningful growth from this existing backlog of loans.
Moving on to operating income. The Flight Support Group's operating income increased 35% to $154.5 million in the fourth quarter of fiscal '24, up from $114.6 million in the fourth quarter of fiscal '23. The operating income increase principally reflects the previously mentioned net sales growth a decrease in acquisition costs and an improved gross margin.
The improved gross profit margin principally reflects higher net sales within our aftermarket parts and repair and overhaul parts and services product line. The Flight Support Group's operating margin improved to 22.3% in the fourth quarter of fiscal '24, up from 19% in the fourth quarter of fiscal '23.
Given that acquisition-related intangible amortization expense consumed approximately 270 basis points of our operating margin in the fourth quarter of fiscal '24. The FSG's cash margin before amortization or what we call EBITDA and the way we measure our businesses internally was approximately 25.0%, which has been consistently excellent during 2024, and it is 300 basis points higher than the comparable FSG cash margin of 22% in the fourth quarter of fiscal '23.
I am extremely pleased with these results. The increased operating margin principally reflects the previously mentioned lower acquisition costs and improved gross profit margin as well as a higher level of SG&A efficiencies, resulting from the previously mentioned net sales growth.
Now I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO's Electronic Technologies Group, to discuss the fourth quarter results of the Electronic Technologies.

Victor Mendelson

Thank you, Eric. The Electronic Technologies Group's net sales were $336.2 million in the fourth quarter of fiscal '24 and as compared to $342.5 million in the fourth quarter of fiscal '23. The net sales decrease in the fourth quarter principally reflects lower defense and other electronics net sales, partially offset by increased space products net sales and the impact from our fiscal '24 acquisitions.
This is in line with our expectations, as we've commented on earnings calls over the past few quarters, and is consistent with inventory destocking at some customers, particularly those in the non-aerospace and defense markets. Our defense sales growth was nicely healthy in the fiscal '24 year though this growth varied highly by quarter, which, as you know, has historically been the case, and we anticipate the ETG's quarterly defense sales volatility will continue.
But the overall trend remains positive. As expected, other electronic net sales were lower during the fourth quarter of fiscal '24 compared to the fourth quarter of fiscal '23 due to customer restocking. The low single-digit organic net sales decline was a much lower decline than in prior quarters. And I believe recent better order flow and backlog indicate the destocking trends are improving. I continue to expect a return to growth in these and other electronic end markets and businesses during the first half of fiscal '25.
The ETG's fourth quarter record backlog and strong overall orders support our optimism and as the non-A&D markets improve, we continue to anticipate growth into our next fiscal year. The Electronic Technologies Group's operating income was $81.8 million in the fourth quarter of fiscal '24 as compared to $86.4 million in the fourth quarter of fiscal '23. The operating income change principally reflects a less favorable gross profit margin, mainly from the previously mentioned decreased defense and other electronics sales, partially offset by the previously mentioned increased products and net sales.
The Electronic Technologies Group's operating margin was 24.3% in the fourth quarter of fiscal '24 as compared to 25.2% in the fourth quarter of fiscal '23. Importantly, before acquisition-related intangibles amortization expense our operating margin was above 28% as in intangibles amortization consumes around 400 basis points of our margin.
Now that's how we judge our businesses as that most closely correlates to cash. So on what we think of as a true operating basis, these are excellent margins, and we are very pleased with it. The operating margin change principally reflects the previously mentioned less favorable gross profit margin and the lower level of SG&A efficiencies.
I turn the call back over to Larry Mendelson. Thank you.

Laurans Mendelson

Victor, thank you. Now as for the outlook, as we look ahead to fiscal '25, we do anticipate net sales growth in both light support and electronic technologies, driven primarily by organic growth, supported by strong demand for the majority of our products.
In addition, we plan to drive growth through our recently completed acquisitions while positioning ourselves to capitalize on potential opportunities from future acquisitions and to provide new cost savings and best cost opportunities to our government in the new administration's efficiency efforts.
Our priorities include continued strong new products and services development, further expanding market penetration, and maintaining our financial strength and flexibility, all with a strong emphasis on delivering long-term value to our shareholders. In closing, I would like to reiterate my heartfelt depreciation to our exceptional team members for their steadfast support and commitment to HEICO.
Our strategy of cultivating a diverse portfolio of outstanding businesses continues to yield positive results for our shareholders with strong key markets fiscal '25 is poised to be another successful year. We thank you for your continued confidence in HEICO. And as I've shared before, I remain highly positive about HEICO's future.
Thank you, all. And now I will turn the call over to the operator for questions.

Question and Answer Session

Operator

(Operator Instructions) Larry Solow, CJS Securities.

Larry Solow

Congratulations on another good quarter, good year. I guess the first question, maybe a couple for Eric. You gave us a lot of good detail on the Wencor acquisition. It sounds like things are really going well there. Just curious, you mentioned some of -- obviously, it was one of the bigger acquisitions that could you've ever done, and you spoke about a lot of things there.
Curious as we look out going forward, are there still opportunities to gain even more revenue synergies? Or are there things on that you've had this the hood for a little more than a year under the -- under the umbrella, excuse me, things that maybe you didn't think were available or sort of positive surprises that you can work on going forward on that side of the business?

Eric Mendelson

Larry, and thanks for your question. First of all, we -- as you pointed out, we're very happy with the Wencor acquisition. It has been immensely successful and exceeded all about our wildest expectations. Number one, starting with the people. They are outstanding.
They really fit the HEICO culture. The companies are very similar, and the businesses are working extremely well together. We're in a unique situation that all of our aftermarket businesses are running, of course, at record numbers, performing exceptionally well. And they are so busy just trying to accomplish what they've each got in their backlog in terms of getting the parts out of the door and developing all this new stuff that we've just left them alone right now.
I do think that there is additional opportunity in further cooperation and going to the customers with a bigger basket. But as of now, I mean, you can see with these kinds of results, 12% organic growth, 13% in the aftermarket. Following a tremendous deal like that, that beats what anybody thought was possible. So we're very, very happy with that. But we do think that there are additional opportunities.
Our teams are working very closely together in the parts and repair side to harvest those opportunities. We've already been very successful by putting all of the HEICO and the Wencor PMAs as well as the HEICO and Wencor DER pairs together. So our repair stations can focus in particular unit and really drive costs down and service levels up to the customer. And we've been very successful in that, and we anticipate continued success in that area.
So yes, I think as I said internally, I think Wencor is going to be the gift that keeps on giving, not only because of Wencor, but because of the HEICO legacy businesses and really being the perfect fit there and just going so well.

Larry Solow

Got it. And Eric, you mentioned that you touched on it briefly just on your opportunities maybe increasing on the military side of the business under the new administration, whether it be through dose or whatever, it just seem like there are a lot of opportunities on the military side and the government side.
Just any more color there? Is that something we should look forward to near term? Is that more of a mid- to longer-term opportunity? I know you've always been kind of focused obviously getting more into the military aircrafts on, I guess, right, where I think there's not much on the PMA side there. So any more color there would be great.

Eric Mendelson

We -- that's a great question, and we are extremely excited about this opportunity. and this is real simple, low-hanging fruit. I mean dose is something I think everybody in the country realizes that we've got to spend our dollars more wisely.
And HEICO offers various solutions without getting into the specifics because we have our competitors on the call, and I welcome them to it. But of course, we can't lay out a road map for them of what we're going to do.
But needless to say, I think there is a tremendous amount of low-hanging fruit. HEICO was working on all of this before the election. And so we were very hopeful that there would be a number of breakthroughs. We are still hopeful of that. And those just pour more fuel on the fire.
When you look at the budget deficit and the amount of money that has to be cut, there are tremendous cost savings opportunities. And we think that it's not only cost, but there's also an without -- I have to be very careful because, of course, I don't want to provide a road map to our competitors.
But there are a number of areas whereby, in particular, in the development of new products, where HEICO can offer increased quality. And by the way, that's not just the tagline that proven and through various rig tests, increased quality, better development time lines and lower cost. So I think dose is going to be outstanding for us.
Now having said that, US is going to be short, medium or long term, I think it's going to be more medium term. I mean, in the short term, the government has money committed. So that's going to be what it is. But I do feel that this is just additional clarity and legs for HEICO as we move forward. But I expect the opportunities to be very, very substantial because it's just not only about price.

Larry Solow

Got it. Great. I appreciate all that color. And maybe just lastly a question for Carlos. Just margins. I know you guide specifically but just sort of a high-level outlook for the coming year. FSG was looking back was pretty consistent in fiscal '24. And ETG, I know it was a little bit more mix dependent. So just any thoughts as we look into fiscal '21?

Carlos Macau

I think as we look at the Flight Support Group, it's performing as expected. We're posting -- we're posting between 23% and 24% operating margins pretty consistently. I think our build on that will be slight improvement as we continue to grow the base of the business. We'll get SG&A leverage on our -- on some of our fixed costs, which should be additive to the margin.
Very similar to what we did the decade prior to COVID. It will be small steps. It's not going to ran, you get lose. And look, in the ETG, I've been saying for a while that when the mix settles out, I would expect that segment on a GAAP basis to come around the 24% margin range. And this quarter, I was very pleased to see them exceed that.
So as I look into '25, I would expect the business to continue to be lumpy as it always has been. We'll have quarters that are higher and lower. And but my baseline is around that 24% range.

Operator

Robert Spingarn, Melius Research.

Scott Mikus

This is Scott Mikus on for Rob Spingarn. You brought up the (inaudible) in saving money across the federal government. So I was just wondering, could you quantify right now what percentage of FSG sales are directly to the DoD? And then for programs other than the commercial derivatives like the P8. Have you already started the process of aggregating a list of potential parts that could be sold to the DoD?

Eric Mendelson

Yes. So as far as what percentage goes to the DoD, I don't have that information in front of me. But I can tell you that defense is approximately 1/4 of the FSG sales. So you get an idea there. In terms of the opportunity. We -- the opportunity is not only in the areas that you mentioned. But yes, we have come up with a list. We are aware of what the opportunities could be. Of course, I don't want to -- I can't outline it on the call, but we are -- it is quite substantial. And the government really should be saving these dollars.

Scott Mikus

Okay. And then also going back to Encore -- they use a lot of build to print shops in the past, the manufactured parts. You talked about in-sourcing some of that manufacturing. Can you talk about where you are in that journey? And is there more cost savings to gain from in-sourcing even more of that work?

Eric Mendelson

Absolutely, yes. We've got very broad manufacturing capabilities at HEICO. And we are focusing on Wencor's robust new product development in terms of manufacturing that stuff within various HEICO businesses.
There is an opportunity to resource some of the existing business as long as our vendors treat us right and pair with us, we're very loyal to them. So there's -- they have nothing to worry about. And frankly, the new pipeline is so robust that it will really keep our shops very busy. But again, we think the opportunity is really very, very strong in that area.

Operator

Ken Herbert, RBC Capital Markets.

Ken Herbert

Maybe, Eric, to start. As you look at FSG organic growth within to fiscal '25, I know you're probably not going to get too specific, but is there any reason we shouldn't see double-digit organic growth again across FSG in fiscal '25?

Eric Mendelson

Yes. I -- no, I don't think there's any reason you shouldn't see it. We're very optimistic on our three disaggregated revenue bucket of parts repair and specialty products, they're all very strong. And so I said that is a double-digit expectation is reasonable. I mean, of course, we're only 45 days into the year.
So we always want to be a little circumspect and always at the end of the year between Thanksgiving and the New Year, volumes can be skewed one way or the other depending on shipments from our vendors to us and then what the customers want and the way they manage their inventory.
So I don't like to take the months of November and December in order to prognosticate the rest of the year. But yes, our internal numbers are for double-digit organic growth within the Flight Support and again, very strong in all three of our segments.

Carlos Macau

This is Carlos. Just keep in mind, while we don't really have seasonality to our business, one thing Eric just pointed out is very important. Our first quarter typically with the holidays tends to be a little lighter than the second, third and fourth quarter. So just keep that in mind when you're thinking about what he just said.

Eric Mendelson

Yes. And always November and December, I mean, for the 35 years I've been at the company. November and December are historically lower types of months. And January is always the month that drives the first quarter. So of course, we're not in January, so it's hard to say. But our internal numbers are very optimistic, and our business heads are extremely optimistic and frankly, more optimistic than I've ever seen them.

Scott Mikus

Okay. That's very helpful. And just one more, if I could. The -- there's obviously been a lot of commentary recently around greater confidence in sort of execution in terms of new aircraft deliveries and new engine deliveries out of the OEMs. What's your view on if things do start to perform better there how quickly can fleets really start to sort of turn around to become younger?
How quickly do you think spending on some of the legacy assets would actually start to slow -- and legacy aircraft would start to slow as that tide does ideally get better in 2025 and '26 in terms of just sort of the execution on the airframe and the engine OEM side, if that makes sense?

Eric Mendelson

Yes. So number one, I have tremendous respect for the airframe and the engine OEMs. They're phenomenal companies. They build incredible products. But unfortunately, they are at the they're dependent on their supply chains.
And those supply chains, as we know, got terribly beat up through COVID, as many companies slash their orders, and the people are just not at the suppliers. So they talk about increasing the production rates, and I think that's the intent. And marginally, they have in some areas, but I think they've had a lot of challenges.
And I can tell you, I go around to our businesses, and I see the supply chain challenges that exist, and they are still tremendous. So I personally are not putting any money down that the supply from the OEM suppliers is going to turn around substantially.
I have not seen evidence of that. So I expect the aftermarket to continue to remain very strong. And I think airlines have been bitten so badly by the deferrals that they don't want to get in the situation where they don't have the legacy assets to be able to complete their routes and their schedule. So I expect them to continue to spend money, I mean not foolishly, but they've got to always have a backup plan. And that's why I think the aftermarket is going to be strong.
In addition, if you look even with the OEM deliveries increasing. If you look at the available seat miles and what IATA predicted, I mean 8% available seat miles increasing in 2025. This is a huge number. And frankly, it would be very easy to absorb the additional seats and keep the older aircraft in service. So we -- based on the order trends that we see, it remains very, very strong for the legacy aircraft. So at this moment, don't see a change there.

Operator

Gautam Khanna, TD Cowen.

Gautam Khanna

Yes. I was wondering, COD and PMA parts, what historically has been the disconnect there on their ability -- on their willingness to entertain buying those? Is it -- is it -- I'm just curious like do they require OEM parts? Or is it just culture? Or I'm just curious like what actually has prevented (inaudible) Yes.

Eric Mendelson

They don't have a process. As Carlos says, they don't have a box to check. And what the airlines had to have, and this is what we worked on 35 years ago. When I first went into the airlines and showed them what we could do and said we could develop all these additional stuff. They said to me, that's a great idea, but we can't buy PMA parts.
And I said, well, what do you mean, you're already buying our combustion chambers where the fuel and air is mixed and burned, and we've supplied those parts to you for 20 years with a follow service record, why can't you should be able to buy these additional parts.
And this is the process that we're going to use with the FAA. And frankly, this is the box that you have to check, and that's been immensely successful. So I think the government must change. This cannot be business as usual.
The United States cannot continue to irresponsibly run at these budget deficits. And there is no reason if a part is good enough for the President or the Vice President or senators or representatives or the Secretary of Defense to fly on when they fly commercially, maybe the President doesn't, but everybody else certainly does when they fly commercially, but it can't be used for the DoD. That is nonsense. It's a relic of the past. And I think the government recognizes this is low-hanging fruit.
This must change. And frankly, HEICO is the one to do it. And we've got a lot of opportunities. I need to be very careful. And obviously, you know us well, and I don't want to get into details on specifically what but you don't have to be a rocket scientist to figure out the opportunity here.
And we think it's very substantial. And I just want to add that we still think that the current providers are going to continue to do very well. And HEICO provides products to the DoD, and there's still tremendous number of products out there and not everything lends itself to what we can provide. But I think what we can provide is very significant for HEICO.

Gautam Khanna

That makes sense. And just to follow up on that, is there opportunity biggest on the commercial derivatives like Tanker and PA with where you may have comparable products on the commercial aircraft that they're built on? Or is there a big opportunity beyond that?

Eric Mendelson

I think that there is a very large opportunity in both. On the commercial derivatives, this is a no-brainer. I mean, this is just -- it's a no-brainer. And again, they already use some of the parts. So it's not that they're fundamentally opposed, it's just they need that box to check.
And then when you go outside of the commercial derivatives, there are also significant savings opportunities that can occur. And we think that there are very large opportunities there as well. But again, I don't want to over commit because these are not short term -- this is not a fiscal 2025 impact. This obviously comes later, but I think it's a very nice add-on to all of the good stuff that we're currently doing.

Gautam Khanna

That makes sense. And last one, Carlos, I was wondering if you could give us some framework for the inorganic contribution in the opening fiscal year based on what you've already acquired?

Carlos Macau

Yes, sure. So I don't want to give subsidiary outlook. I think that the contributions will be they're not going to be immaterial, if that's helpful. I'm being careful because we've not -- we've done recent some recent acquisitions, and I don't want to get into the subsidiary details.
But on the FSG side, Wencor lapse this quarter, and we'll have cable next year in the inorganic bucket the first three quarters. It won't be material to the segment. And of course, in TG, we had three recent acquisitions that -- again, I don't think it's going to be material for the quarter. So it's pretty much mostly organic next year.

Operator

Sheila Kahyaoglu, Jefferies.

Sheila Kahyaoglu

Good morning and thank you for the time. Eric, if I could start with you, if that's okay, please. If you could just talk about the organic growth within FSG up 12% and then just the different parts of the business, right, aftermarket price is up 13%, slightly down from 17% last quarter. How do you think about the parts business trending into '25? Can it still grow double digits? And what is the -- what are you seeing with MROs versus airlines the demand there?

Eric Mendelson

Well, first of all, hi, and thank you for your questions. We are very optimistic on the continued growth, as I mentioned, in all of the segments. In breaking down our organic growth, the parts side definitely had the highest organic growth in 2024.
And the area with the lowest organic growth was our specialty products. We think that in 2025, based on backlog that we already have in the specialty products area, that our organic growth is going to accelerate in that area.
And it will remain a strong double digits within the parts side. Component repair is probably going to be somewhat in between those. But we also anticipate, I would say, strong -- I said double-digit growth, and I am expecting double-digit growth, frankly, in all three of our disaggregated areas.

Sheila Kahyaoglu

Okay. Sure. Maybe if we could talk about one core for a minute. Any way to quantify the revenue synergies, how you think about their 6,000 SKUs relative to our 15,000 or so. How many have penetrated into your customer base? And then maybe a PMA question unrelated to the defense side of the business, but do you see PMA becoming easier under the new administration?

Eric Mendelson

Yes. So specifically with regard to Wencor, if you take a look at our organic growth within parts and component repair, you'll see that there is a -- there's over $60 million, approximately $62 million of organic growth in the fourth quarter in just parts and repair. That's all organic. And remember, we own Wencor, basically, for the -- pretty much the entire fourth quarter of last year. For HEICO and Wencor to grow $60 million organically, no acquisitions.
I mean, that's huge and frankly, far beyond anything that I thought was ever possible. We've got incredible teams, incredible leaders in these businesses. I think HEICO's competitive advantage is the way that we have these businesses structured, where we have them as individual business units, each with its own business had its own leadership team, combined with central sales forces to be able to help them get out there. There is a tremendous amount of unsold potential. There is so much more help that we can give our customers.
And it's just a matter of getting out there, getting in front of them and making sure that they switch from their old legacy solution into a new HEICO solution. So I expect the future to be very strong. And I'm very encouraged when I go out and talk to our folks, so are they.
When I look also into the specialty products, when we look at what our backlogs are in these areas, they're tremendous. And now really, the challenge is executing and getting products from the vendors out there in the field and subcontractors because the market is incredibly that I don't go to any businesses where they say, oh, yes, we're all caught up. Everything is back to 2019. Not a prayer. I mean the labor force has changed. The it's very difficult to be able to ramp. And so that's why I'm very bullish in all of our areas. You had asked about the military side.
I think that's just added opportunity. You know because we've spoken about it that for years, HEICO has operated in that area, and we've had limited success. But as a result of the comments that I made in the prior couple of questions, I think this is really low-hanging fruit for HEICO.
And the government has got to make cost savings and imperative, and the new administration certainly is doing that to a degree that we've never seen before in the history of this country, and it's wise that they do so because as a country, we're running out of money. And HEICO can provide, again, not only the cost savings as a result of using our parts or using our technology.
But also when these systems are developed by the government, there's a tremendous approach, which slows things down. And I'm really very excited for dose because I think they can accelerate a lot of these processes and HEICO is going to be, I think, a tremendous beneficiary across our Flight Support as well as our Electronic Technologies business because we are smaller businesses that are competitively focused in various areas, lower cost, higher quality, we can get it done quickly. And if the government wants it fast, I believe it's a huge opportunity for us.

Sheila Kahyaoglu

Eric, I'm sorry, I meant more on the commercial side. Do you think the administration makes it easier to PMA commercial parts as well?

Eric Mendelson

Yes. I think -- I mean, with the administrations have always been supportive. The FAA has been, frankly, outstanding to work with over the last 35 years. I expect that to continue. I don't expect a change there. I mean, if you will, the civilian workforce has been great to work with. So I expect everything continuing and no change in our ability to get PMAs. So I mean we've gotten more PMAs than ever, and I expect that to continue.

Operator

Scott Deuschle, Deutsche Bank.

Scott Deuschle

Eric, can you give us any sense for what the growth acceleration of specialty products could look like next year? Because it sounds like you've got a lot of tailwinds there between the OE ramp and the missile defense growth. And I was just looking at my model, and there was a period of time in 2022 and 2023 where specialty products was growing over 50% pretty regularly. So I'm not trying to get too excited here but just trying to get a sense of whether something like that could perhaps repeat itself.

Eric Mendelson

Yes. I mean, the internal numbers I've got are really strong over in specialty products. As I mentioned, really, the key is being able to get products out of certain suppliers. But I think from what we're seeing and based on what the budgets are and everything, at least 10% organic growth seems to be very reasonable. And when you think of it, I know that on a spreadsheet, and I think everybody appreciates it's on a spreadsheet.
It's easy. You put in point one, and it's easy to type that in. But when you think about this, when a business grows organically by 10% a year, it doubles in 7 years. quadruples in 14 years. And these businesses to accomplish a 10% growth rate. I mean, I think that's just tremendous and incredible in this market that we've got with constrained material and trained labor. So I'm very optimistic in those areas.

Scott Deuschle

Okay. Great. And then just one follow-up, Eric. I think it seems like there's a number of airlines that have built up some inventory of spare aftermarket parts. I think United is one of them. I guess have you seen any evidence of customer inventory build for your specific parts or airlines generally pretty hand to mouth for HEICO parts.

Eric Mendelson

Yes. I think on HEICO parts they're really hand to mouth. I mean they certainly don't tell us when they have a surplus. I'm not aware of any material oversupplies at the airlines. I mean they're all (inaudible) parts very bad way.
There are always puts and takes with that, but I think it's all very strong. Also, since HEICO has got a really good delivery program, and we're able to supply so many of these parts in the month of order, airlines are -- they don't typically have to overstock our parts because they can rely on us pretty well.

Operator

Noah Poponak, Goldman Sachs.

Noah Poponak

I wanted to ask about the FSG margin, fielding some questions on that last night and this morning. I think the final full year is probably a decent amount higher than what you were projecting at the beginning of the year, but also kind of outperformed through the year.
And then in the fourth quarter, it's down sequentially. So I guess, is the noncash piece higher? Or can you just give me those numbers 4Q versus 3Q? Or is there anything else abnormal whether it's a cost or mix in that fourth quarter margin? And then if you could speak to where you think those margins can go next year? That would be helpful.

Carlos Macau

No, this is Carlos. Let me take a stab at that. So you're digging deep in my brain here. So we're down about 20 bps Q3 to Q4. I'd almost consider that a little noise.
There is a little bit more amortization in the fourth quarter this year than last year. which probably contributed to that blip. There isn't a lot of -- there's not a lot of noise in either quarter for unusual things like that. I will tell you that I've been pretty open and vocal that my expectation on the FSG is that the margins go between 22% and 23%. And that's what we've done.
And we're basically for the year. So pretty much did what I thought it would do. And I think that as we move forward, the things that I can count on other than mix shifts or something like that, would be some incremental gains in that margin due to leverage on our costs. So one thing the FSG has done very well as the revenue base has grown. They've done that without in a very efficient manner.
The SG&A spend has been down as a percent of revenue consistently all year. I expect that trend to continue, and that's really where we're going to eke out these little incremental margin gains. Again, absent any big shift in mix, that's what my expectations are going to the next year.

Noah Poponak

Yes. Carlos, I guess it makes sense in a way that you referenced that range over time, but there's no -- I guess that makes it sound like you expect it to be kind of flat over time.
But I would think that you would have -- I mean, historically, you've had a pretty consistent 25%, 30% incremental margin in that business as you're able to -- when you're in an environment where you're growing revenue double digits or even mid- to high single you're probably not growing cost as quickly as you're growing revenue, right?

Carlos Macau

That's absolutely correct. And no, I don't think they're going to be flat. No, I hope I didn't mean to insinuate that. What I'm insinuating is that I expect margin improvement. It's going to be -- if you look back historically, pre-COVID over the decade prior to that, our margins were growing 20, 30 bps a year, and it was based on volume growth in the business.
As we grow, to your point, we're not the cost base isn't growing as fast as revenues. I expect that to continue. And absent any big swings in mix, then that should be the cadence that we see moving forward.

Noah Poponak

Okay. Great. That makes a lot of sense. And then I wanted to ask about the other industries outside of the defense space are within ETG. I think that down in the quarter that being the fifth quarter in a row where it's down.
So it was the first quarter where you were lapping the easier compare, but it's down again. So I guess, can you talk about what's behind that? And then what it would take to get that piece to stabilize and start to grow again?

Victor Mendelson

Yes. This is Victor, Noah. So it's not necessarily a one-year event to wash out the overordering, which took place over, I think, a longer period of time. It probably took place over 2, 2.5 years. But as I said in the comments, my general sense is that we start -- that reverses starts to reverse sometime in the first half of our year.
And we see signs of that in a number of businesses where basically, it looks like the order rate has started to turn up in some instances and others, it's kind of bouncing along the bottom. And sometimes we get an occasional positive surprise, we end the month doing better than we expected in both sales and orders in a couple of cases recently.
And just our experience has been when this happens, that sometime in the neighborhood of half a year later, it could be a little more. It could be a little less, but somewhere in that neighborhood. It starts to show up with rising sales sequentially.
And so I would expect that, that would play out like it typically does barring, of course, any unforeseen events, but that's what I would expect.

Noah Poponak

Okay. That's helpful. Victor, appreciate it. Just one last quick one. The corporate in the quarter is fairly high compared to where it had been running. You guys don't strike me as big corporate expense guys. Is there something abnormal in that? Or how should we think about the run rate moving forward?

Carlos Macau

No, I think we typically run about 1.5% of sales or something like that in corporate expenses. I mean, as you can imagine, over the last four years, we've had tremendous inflation, things like insurance and benefits and all those things rise. We also have a little noise with FX. As the dollar weakened, we had some FX challenges. But nothing -- noting out of the extraordinary.
I mean I think the trend going forward, we should continue to be 1.4%, 1.5% of sales in that. As the company grows, we don't have lavish expenditures, but we do need arms and legs to keep track of everything. So that's principally, the Zip code will run in.

Operator

Michael Ciarmoli, Truist Securities.

Michael Ciarmoli

Happy holidays here. Eric, just -- I mean, we've talked a lot about FSG and the trajectory and -- but I guess, just looking at the sequential growth, one of the lowest sequential growth rates that we've seen in several quarters. Was there anything unusual in this quarter versus last quarter? I mean, it sounds like all business lines, all capabilities are running up record levels, any notable changes or behavioral changes from customers that maybe pick that sequential FSG revenue down a bit?

Eric Mendelson

Yes. I mean a couple of things. Number one, I should state that one of the metrics that we never look at HEICO in any of the businesses is sequential growth rate. Because things can move around, they can bounce around and that can exaggerate it. The number that we always look at is the annual growth rates are compared to what we've done in the prior year.
And when I look at our FSG organic growth, I mean, basically, it was approximately in the first quarter, 12%. Second quarter, 12%. Third quarter, 15%. And fourth quarter, 12%. I mean, as far as I'm concerned, that's out of the park, that is phenomenal and is so far above what anybody else does in this industry with regard to organic growth.
So I'm super happy with it. And we just don't look and compare one quarter to the next. I mean if we didn't get overly excited when between basically the second quarter to the third quarter, we had big sequential growth. I mean that can be due to various deals or all sorts of stuff. I mean, what's more important is the comparison to the annual.
And we think that, that is incredibly strong. And sometimes these moves and the numbers move in various jumps. So it's really dangerous to look at it in a sequential basis like that.

Michael Ciarmoli

Got it. No, that's helpful. And then just one other housekeeping one for Eric -- or sorry, for Victor. Victor, did you give the ETG organic growth rate for the quarter at the consolidated level?

Victor Mendelson

Did we provide that?

Carlos Macau

I mean ATG, I can do it. BTG was down low single digits, it's like approximately 4% down for the quarter organically. And contributing to that was what we talked about earlier, the other electronics and defense offset by space. That's pretty much what happened. I think in total for the quarter, we were up 3% with some acquired growth in there, but the organic side was down roughly 4%.

Operator

Pete Skibitski, Alembic Global.

Peter Skibitski

Just a couple of quick ones maybe for Carlos. Carlos, just because DNA is a pretty big add-back for you guys in cash flow. Do you have an expectation for DNA for '25? And then also I was just wondering sort of post COVID, post-Wencor, the use of working capital, especially in inventory has been larger. I'm just wondering if that was kind of a short-term thing or if we should expect to a greater build in inventory going forward?

Carlos Macau

Sure. So actually, I think our D&A expected to be very similar next year to this year. Depending on how many acquisitions we do next year, it could flex up on the A side. But as a percentage, I expect it to be roughly the same as it was this year. As far as working capital, it's interesting.
We came into this year with a lot of commitments on products that our guys purchased multiple years ago because of some of the supply chain challenges we had. And we took delivery on that stuff towards beginning of last year and the beginning of this year.
And we talked a little bit about how that would probably skew our annual inventory being a little higher than what we normally expect as far as spend line goes. I do expect that to moderate that as we get into because a lot of those firm commitments we had made on inventory coming out of COVID where some of these deals had two-year lead times and we had to commit two years in advance. A lot of that stuff we sort of took our last deliveries on as we got into the beginning of this fiscal year.
So we should see a little bit of a calm down in inventory as we grow the business organically, we've got to support it with more in-store spend. But I don't know that the slope of that spend will be as high as it had been in the prior few years.
Our receivable management is impeccable. We have we had very little consumption of working capital for receivables, which given our growth is amazing at least. So I think our guys and we as a management team are highly focused on working capital and going forward, I expect we're going to probably return to more consumption of working capital like you've seen historically versus over the last two or three years.

Operator

David Strauss, Barclays.

David Strauss

Thanks. Good morning. I wanted to follow up, I think there was a NOS question. So the FSG margin, I guess, either for Carlos or Eric, in terms of -- I think, Eric, you gave some relative growth parameters around the individual kind of subsegments between parts, repair and especially in cost. How do you see that those relative growth rates within their influencing the margin for FSG in '25?

Eric Mendelson

I think it would help. So I think it will help. I think the FSG margin story has been, I think, one of the least reported and yet most important things that frankly happened to this company. I mean when we look at what our operating margin basically from roughly 2015 to 2019 was in the 18% to 19% area. Now the operating margin is up in the 22% to 23% area.
So we've gone up about 500 basis points over that period of time after making a number of lower margin acquisitions and going through COVID and all the turmoil that happened there. So I think the HEICO businesses are exceptionally good at just continuing to wring efficiencies out of their operations year by year. We don't make a thing over it but they just increased the amount of volume. They focus on efficiency. They get the cost down.
We don't have programs here at the corporate office like HEICO '25 or HEICO '26 or '27 or something like that. Instead, we just work with them and they do this as a matter, of course. And we just continually grind higher on the operating margin. So I think that, that there's no change from our perspective and what we want to continue to do.
Obviously, it bounces around year-over-year, and it depends on various investments that we have to make. But I would anticipate the operating margins to continue heading north while still providing huge cost savings and benefits to our customers. and doing that not via price, but via cost and volume to what you were alluding to.

David Strauss

Okay. Terrific. And I don't think -- I don't think you specifically said on ETG, but would you expect ETG to grow revenue organically next year into 25? And if so, is it more low single digit or mid-single digit?

Victor Mendelson

Sure. This is Victor. So we expect in our budgeting for growth in the ETG next year. Organically, I think we're being careful and putting it in the lower single digits range. organically with acquisitions, hopefully more than that.
And we've got some great acquisitions in the pipeline as well. And look, I don't know where we'll wind up to be clear. I mean, we're all only -- we've only finished one month of the new fiscal year. But it's my belief, based on talking to our companies and hearing from them that the ones who felt that they came up a little short this year, are being very conservative in their projection for next year.
Some people call that sandbagging. I'm not going to say that or accuse them because I think it's good that our companies are conservative and they plan to spend money according to what they think they're going to see on the revenue side.
But as I sit here at this moment, I'm hopeful that we'll do better than our internal budget. But we'll see, and I don't want to commit to that at this point. And of course, just to point out, that as it always has been throughout our existence in the ETG, it will be lumpy throughout the year. We're going to have bigger quarters than others. Some may be up. And in fact, the budgets have that some up much more than others.
And that is based upon what their expected production rates are as a result of many factors, including when the customer wants the product shipped and a variety of other factors. But I would expect that to continue in multiple ways, by the way, not just in sales and income, but -- as well as by end market, which we've seen historically.

Operator

Ron Epstein, Bank of America.

Ronald Epstein

Yes. A lot has been asked, but nobody really asked this one yet. So what's your expectation for maybe the change in the M&A environment with the new administration?

Eric Mendelson

Well, as you know, we've been very strong in the acquisitions area, and we bought this fiscal year five different businesses. Our teams, by the way, are busier than they've ever been looking at a whole variety of deals in both segments, all sizes.
So for HEICO, it's been a strong market. I would anticipate, obviously, people expect less scrutiny, more pro business evaluation going forward. But I think for HEICO, we're very much a preferred buyer because we don't have some of the complications that other folks have. So I think the regulatory environment improves, but it will still remain very good for HEICO.

Ronald Epstein

(inaudible)

Victor Mendelson

One of the things to point out, of course, is that we have always been, as we said earlier in the call, sort of a price and value preferred supplier to our customers. We've always never pushed on the pricing button. We never pushed on like the monopoly buttons and things of that sort.
And as a consequence, we've never had any issues to begin with in regulatory approvals. And of course, I think people generally expect, as Eric said, the regulatory environment to be more favorable to business into companies like ours.

Ronald Epstein

Got it. Got it. And then if I kind of keep pulling on the string a little bit, what's your appetite for doing another big one. You guys have gotten bigger. And then maybe two, if you can say, it's no secret that Boeing has been shopping some stuff around. Is there anything there that you guys would be interested in?

Victor Mendelson

Yes. Our appetite for acquisitions of all sizes, including larger ones remains the same. And we do larger deals. We've done them when they make sense. We won't do them just for the sake of doing them or adding revenue.
It's all to us about the bottom line. So that appetite is the same as well as for smaller acquisitions, as you've seen, including small bolt-ons or fold-in acquisitions for our companies. And the opportunities, by the way, are spread out across the board. Historically, we've been an opportunistic buying everything that makes sense to buy and nothing that doesn't make sense to buy.

Eric Mendelson

And I think, Ron, if you look at Wencor, which was, of course, our largest acquisition to date, it's been an absolute home run. So I think we've proven to the market that we can execute and win and execute and assimilate these businesses and continue to generate the cash to basically get our leverage ratio back down so we can reload and do more. So I feel 100% confident in our ability to continue to do larger acquisitions.

Operator

Louis Raffetto, Wolfe Research.

Louis Raffetto

Eric, just to make sure I'm levels here. So 13% organic growth in aftermarket repair parts, do you have MRO and specialty products for the quarter? I know MRO had been a little bit lighter. It seemed like maybe that did accelerate in the fourth quarter?

Eric Mendelson

Yes. So MRO looks -- is about 11% in the fourth quarter, and specialty products was 11% in the fourth quarter.

Louis Raffetto

And then maybe, Carlos, for you, it looks like there was another small impairment and a contingency adjustment in the quarter. I just didn't know -- it looks like that actually may be waived. I don't know if that was in either or both segments or ran through corporate? Just any color there?

Carlos Macau

Yes. We had a small impairment to a trade name in the fourth quarter. It was about $1.5 million. It's just normal course of business stuff, wrapping up the year. not a big deal there. And any -- I guess you're talking about what contingency adjust, contingent earn-out adjustments, Louis?

Louis Raffetto

Yes, look at there's $1 million. Again, both of those, I think, would be again a negative to the earnings. So I think margins would have been sort of better ex these, I'll call them sort of one-timers or you and I have talked about the contingencies. I know it's like if it's a negative, it's actually a positive long term. So just trying to square the where that may have been?

Carlos Macau

Yes. So okay. So the trade name was in -- and the roughly net $1 million increase in the contingent earn-out liability was split pretty much evenly between the two segments, and it's just relating to accreting that liability to terminal value. It's just the normal noise that we have every quarter for the discounted liability getting accretive to payout value, nothing usual there.

Louis Raffetto

Yes, no, makes sense. But again, I might explain some of the questioning or look at the sequential step down in the FSG margins, if you got even $0.5 million. I'm not sure what that works out to. But just was curious. All right, that wraps up for me.

Carlos Macau

Yes. Just as a reminder, is, we have those adjustments every quarter because you can't -- I wish I could put the full earn-out value on the balance sheet on day 1, but you have to fair value it and then accrete it up to pay out value. So every quarter, we're going to have a little noise like that. And the fourth quarter was just normal. There was nothing unusual about those adjustments.

Operator

At this time, I will turn the conference back to Laurans Mendelson for any additional or closing remarks.

Laurans Mendelson

I would like to thank everybody on this call for their interest in HEICO. And we look forward to our next earnings call, which would be for the first quarter of $25 million. Personally, I'm very optimistic about the outlook for HEICO. We see opportunity in acquisition and internal growth. And I feel that the company is doing extremely well, and it will continue to do so.
So let us know if you have any other questions that we haven't answered during this call. And otherwise, we stand ready to speak to you at the end of the first quarter '25. Thank you very much.

Operator

This concludes today's call. Thank you for your participation. You may now disconnect.