HEICO Corporation (HEI) Q4 2021 Earnings Call Transcript

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HEICO Corporation (HEI -1.06%)
Q4 2021 Earnings Call
Dec 16, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the HEICO Corporation Fourth Quarter and Full Year Fiscal 2021 Financial Results Call. My name is Renz, and I'll be your operator for today's call.

Certain statements in today's call will constitute forward-looking statements, which are subject to risks, uncertainties and contingencies. HEICO's actual results may differ materially from those expressed in or implied by those forward-looking statements as a result of factors, including: the severity, magnitude and duration of the COV19 pandemic, HEICO's liquidity and the amount and timing of cash generation; lower commercial air travel caused by the COVID-19 pandemic and its aftermath; airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services; product specification costs and requirements, which could cause an increase of our cost to complete contracts, governmental and regulatory demands, export policies and restrictions; reductions in defense, space or homeland security spending by U.S. and our foreign customers or competition from existing and new competitors, which could reduce our sales our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth; product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales; our ability to make acquisitions and achieve operating synergies from acquired businesses; customer credit risk, interest, foreign currency exchange and income tax rates; economic conditions, including the effects of inflation within and outside of the aviation, defense space, medical, telecommunications and electronics industries, which could negatively impact our costs and revenues; and defense spending or budget cuts, which could reduce our defense-related revenue.

Parties listening to this call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, including but not limited to filings on Form 10-K, Form 10-Q and Form 8-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

As we begin the call now, I turn the call over to Laurans Mendelson, HEICO's Chairman and Chief Executive Officer.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Thank you, Renz, and good morning to everybody on this call. We thank you for joining us, and we welcome you to HEICO's fourth quarter and full year fiscal '21 earnings announcement teleconference. I'm Larry Mendelson, Chairman and CEO of HEICO Corporation, and I'm joined here this morning by Eric Mendelson, 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.

Before reviewing operating results in detail, I'd like to take a moment to thank all of HEICO's talented team members for delivering another outstanding year. Your continued focus on exceeding customer expectations and operational excellence has translated into another year of outstanding results for shareholders. I am encouraged that our success will continue into the next fiscal year and that will be driven by the confidence and respect that I have for all of HEICO's exceptional team members.

Now summarizing the highlights of our fourth quarter and full year fiscal results, we are pleased to report much improved quarterly operating results within both Flight Support and Electronic Technologies. Consolidated operating income and net sales in the fourth quarter of fiscal '21 improved 29% and 20%, respectively, as compared to the fourth quarter of fiscal '20. Our performance principally reflects quarterly consolidated organic net sales growth of 16%, and the favorable impact from our fiscal '21 and '20 acquisitions.

The Flight Support Group reported quarterly increases of 126% and 34% in operating income and net sales, respectively, as compared to the fourth quarter of fiscal '20. These substantial increases principally reflect increased demand for the majority of our commercial aerospace products and services, resulting from some recovery in global commercial air travel as compared with the prior year. This marks the fifth consecutive quarter of sequential growth in net sales and operating income at the Flight Support Group.

ETG reported quarterly increases of 7% and 4% in net sales and operating income, respectively, compared to the fourth quarter of fiscal '20. These record results principally reflect the impact from our profitable fiscal '21 and '20 acquisitions as well as strong organic net sales growth for the majority of our products.

Our total debt to shareholders' equity improved to 10.3% as of October 31, '21, and that compared to 36.8% as of October 31, '20. Our net debt, which is total debt less cash and cash equivalents, of $128.2 million, as of October 31, '21, compared to shareholders' equity ratio improved to a very low 5.6% and as of October 31, '21, and that was down from 16.6% as of October 31, '20. Our net debt-to-EBITDA ratio improved to 0.2 6times as of October 31, '21, and that was down from 0.71 times as of October 31, '20. During fiscal '21, we successfully completed six acquisitions, and we have no significant debt maturities until fiscal '24. We plan to utilize our financial strength and flexibility to aggressively pursue high-quality acquisitions of various sizes to accelerate growth and to maximize shareholder returns.

Cash flow provided by operating activities remained strong, totaling about $110 million in both the fourth quarter of fiscal '21 and '20. Cash flow provided by operating activities increased 9% and to $444.1 million in fiscal '21, and that was up from $409.1 million in fiscal '20.

I'd like to now discuss recent acquisition activity. In October 21, we acquired all of the outstanding stock of Passive Wave, which is a designer and manufacturer of radio frequency and microwave components and integrated assemblies, specializing particularly in pin diode switches, pin attenuators, pin limiters, switching assemblies, an integrated subsystem found in defense and other complex electronic applications. Passive Wave is part of the ETG Group, and we expect this acquisition to be accretive to our earnings per share within the first 12 months following closing.

In September 21, we acquired 80.1% of the stock of RH Labs, which designs and manufactures state-of-the-art radio frequency and microwave integrated assemblies, subassemblies and components used in a broad range of demanding defense applications, operating in harsh environments, including space. The remaining 19.9% interest continues to be owned by certain members of RH Lab's management team. RH is part of the ETG group, and we expect this acquisition to be accretive to our earnings per share within the first 12 months following and closing.

As I discussed during the third quarter earnings teleconference, in August '21, we acquired 89% of the equity interest of Ridge Holding holdco which owns all of Ridge engineering and Becton company. They performed tight tolerance machining and raising of large-sized parts in mission-critical defense and aerospace applications. Becton provides machining, fabricating and welding services for aerospace, defense and other industrial applications. The remaining 11% interest continued to be owned by certain members of Ridge's and Becton's management teams. These companies are part of Flight Support Group and we expect the acquisitions of these companies to be accretive to our earnings per share within the first 12 months following closing. Later on, we will comment on the pipeline for acquisitions, which, at this moment, I can tell you, is very strong, and we're optimistic on that score and the outlook for additional acquisitions. We cannot predict with certainty when they will be closed because we are in substantial due diligence.

At this time, I'd like to introduce Eric Mendelson, Co-President of HEICO and President of HEICO's Flight Support Group, and he will discuss the results of the Flight Support Group.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thank you. The Flight Support Group's net sales increased 34% to $260.4 million in the fourth quarter of fiscal '21, up from $193.6 million in the fourth quarter of fiscal '20. The net sales increase in the fourth quarter of fiscal '21 is principally from organic growth of 28% as well as the impact from our profitable fiscal '21 acquisitions. The organic growth is mainly attributable to increased demand for our commercial aerospace products across all of our product lines.

The Flight Support Group's net sales increased to $927.1 million in fiscal year '21, up from $924.8 million in fiscal year '20. The net sales increase in fiscal year '21 principally reflects the impact from our profitable fiscal '21 and '20 acquisitions, partially offset by lower demand for the majority of our commercial aerospace products and services resulting from a decline in global commercial air travel attributable to the pandemic.

The Flight Support Group's operating income increased 126% to $48.6 million in the fourth quarter of fiscal '21 and up from $21.5 million in the fourth quarter of fiscal '20. The operating income increase in the fourth quarter of fiscal '21 principally reflects the previously mentioned net sales growth and an improved gross profit margin. The improved gross profit margin principally reflects the higher net sales, a more favorable product mix across all of our product lines and a decrease in inventory obsolescence expense. The Flight Support Group recognized higher inventory obsolescence expense in the fourth and third quarters of fiscal 2020, following the announced retirement of certain aircraft types and engine platforms by our commercial aerospace customers due to the pandemic's financial impact.

The Flight Support Group's operating income increased 6% to $151.9 million in fiscal year '21, up from $143.1 million in fiscal year '20. The operating income increase in fiscal year '21 principally reflects lower bad debt expense due to certain commercial aviation customers filing for bankruptcy protection in fiscal '20. As a result of the pandemic financial impact, the previously mentioned decrease in inventory obsolescence expense and an improved gross profit margin, partially offset by higher performance-based compensation expense.

The Flight Support Group's operating margin improved to 18.7% in the fourth quarter of fiscal '21, up from 11.1% in the fourth quarter of fiscal '20. The operating margin increase in the fourth quarter of fiscal '21 principally reflects the previously mentioned higher net sales, improved gross profit margin and lower inventory obsolescence expense. The Flight Support Group's operating margin improved to 16.4% in fiscal year '21 and up from 15.5% in fiscal year '20. The operating margin increase in fiscal year '21 principally reflects the previously mentioned lower bad debt expense in inventory obsolescence expense, partially offset by higher performance-based compensation expense.

Now, I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO's Electronic Technologies Group, to discuss the results of the Electronic Technologies Group.

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Right, thank you. The Electronic Technologies Group's net sales increased 7% to a record $253 million in the fourth quarter of fiscal '21, up from $236.7 million in the fourth quarter of fiscal '20. The net sales increase in the fourth quarter of fiscal '21 principally resulted from organic growth of 5% as well as the impact from our fiscal '21 and '20 acquisitions. The organic growth principally reflects increased demand for our other specialized electronic, medical and commercial aerospace products, partially offset by lower defense products net sales in some subsidiaries.

The Electronic Technologies Group's net sales increased 10% to a record $959.2 million in fiscal '21, up from $875 million in fiscal '20. The net sales increase in fiscal '21 principally reflects our fiscal '20 and '21 acquisitions as well as organic growth of 3%. The organic growth was mostly driven by increased demand for our other specialized electronic and medical products, partially offset by decreased commercial aerospace products net sales.

The Electronic Technologies Group's operating income increased 4% to a record $76.9 million in the fourth quarter of fiscal '21, up from $73.9 million in the fourth quarter of fiscal '20. The operating income increase in the fourth quarter of fiscal '21 principally reflects the previously mentioned net sales growth, partially offset by a lower gross profit margin, mainly from lower net sales of defense products, partially offset by an increase in net sales of other specialized electronic commercial aerospace and medical products.

The Electronic Technologies Group's operating income increased 7% to a record $277.3 million in fiscal year '21, up from $258.8 million in fiscal '20. The operating income increase in full fiscal year '21 principally reflects the previously mentioned net sales growth, partially offset by a lower gross profit margin, mainly from a decrease in defense and space products net sales, partially offset by the increase in other specialized electronic products net sales.

The Electronic Technologies Group's operating margin was a very strong 30.4% in the fourth quarter of fiscal '21 as compared to 31.2% in the fourth quarter of fiscal '20. The operating margin decreased in the fourth quarter of fiscal '21 principally reflects the previously mentioned lower gross profit as well as higher performance-based compensation expense. The Electronic Technologies Group's operating margin was 28.9% in fiscal year '21 as compared to 29.6% in fiscal '20. The operating margin decrease in fiscal '21 full year principally reflects the previously mentioned lower gross profit margin.

I'll turn the call back over to Larry Mendelson.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Thank you, Victor. Moving on to earnings per share. Consolidated net income per diluted share increased 38% to $0.62 in the fourth quarter of fiscal '21, and that was up nicely from $0.45 in the fourth quarter of fiscal '20. The increase in the fourth quarter of fiscal '21 principally reflects previously mentioned higher operating income at both operating segments.

Consolidated net income per diluted share was $2.21 in fiscal '21, and that compared to $2.29 in fiscal '20. The decrease in fiscal '21 principally reflects higher income tax expense, partially offset by previously mentioned increase in the operating income of ETG and Flight Support, and lower interest expense.

Depreciation and amortization expense totaled $24.2 million in the fourth quarter of fiscal '21. That was up slightly from $23.3 million in the fourth quarter of fiscal '20, and totaled $93 million in fiscal '21, which was up slightly from $88.6 million in fiscal '20. The increase in fourth quarter and fiscal '21 principally reflects incremental impact from our fiscal '20 and fiscal '21 acquisitions.

Research and development expense increased to $16.7 million or 3.3% of net sales in the fourth quarter of fiscal '21, and that was up slightly from $16.6 million or 3.9% of net sales in the fourth quarter of fiscal '20. R&D expense increased to $68.9 million or 3.7% of net sales in fiscal '21, and that was up from $65.6 million or again, 3.7% of net sales in fiscal '20. As traditionally has been the case, significant ongoing new product development efforts are continuing at both Electronic Technologies and the Flight Support Group.

SG&A Expense was $89.5 million in the fourth quarter of fiscal '21, and that compared to $72.6 million in the fourth quarter of fiscal '20. The increase in consolidated SG&A expense in the fourth quarter of fiscal '21 principally reflects higher performance-based compensation, higher other SG&A expenses, higher selling expenses as well as the impact from our fiscal '20 and '21 acquisitions, partially offset by lower bad debt expense.

Our consolidated SG&A expenses were $334.5 million in fiscal '21, and that compared to $305.5 million in fiscal '20. The increase in consolidated SG&A expense in fiscal '21 principally reflects higher performance-based compensation expense as well as the impact from our fiscal '20 and '21 acquisitions, again, partially offset by a reduction in bad debt expense.

The Company recognized higher bad debt expense in fiscal '20 due to potential collection difficulties from certain commercial aviation customers that filed bankruptcy protection during fiscal '20, and that was a result of the pandemic's financial impact on those airlines. Consolidated SG&A expense as a percentage of net sales was 17.6% in the fourth quarter of fiscal '21, and that was up slightly from 17% in the fourth quarter of fiscal '20.

Again, consolidated SG&A expense as a percentage of net sales was 17.9% in fiscal '21 compared to 17.1% in fiscal '20. The increase in consolidated SG&A expense, as a percentage of net sales in the fourth quarter and fiscal '21, principally reflects the previously mentioned higher performance-based compensation expense partially offset by lower bad debt expenses.

Interest expense decreased to $1 million in the fourth quarter of fiscal '21. That was down from $2.5 million in the fourth quarter of fiscal '20. That decrease was principally due to a lower weighted average balance of borrowings outstanding under our revolving credit facility. Interest expense decreased to $7.3 million in the fiscal year '21, down from $13.2 million in fiscal '20. That decrease was principally due to lower weighted average interest rate as well as a lower weighted average balance of borrowings outstanding under our revolving credit facility. Other income in the fourth quarter of fiscal '21 and fiscal year '21 was not significant.

Moving on to comments about income taxes. Our effective rate in fiscal '21 was 14.8% as compared to 7.9% in fiscal '20. As previously discussed in prior quarterly teleconferences, HEICO recognized a larger discrete tax benefit from stock option exercises in the first quarter of fiscal '20 compared to '21. And that accounted for a majority of the increase in the effective tax rate. Furthermore, our effective tax rate in fiscal '21 reflects the favorable impact of higher tax-exempt unrealized gains in the cash surrender values of life insurance policies related to the HEICO Corporation leadership compensation plan.

Our effective tax rate was 18.3% in the fourth quarter of fiscal '21, down from 22.3% in the fourth quarter of fiscal '20, and the decrease principally reflects the favorable impact of higher tax-exempt unrealized gain and capture under values of life insurance policies, again, related to the HEICO Corporation leadership compensation plan.

Income attributable to non-controlling interest was $7.3 million in the fourth quarter of fiscal '21, and that compared to $5.3 million in the fourth quarter of fiscal '20. The increase in net income attributable to non-controlling interest in the fourth quarter of fiscal '21, principally reflects an increase in the operating results of certain subsidiaries of the Flight Support Group in which non-controlling interests are held.

Net income attributable to non-controlling interest was $25.5 million in fiscal '21. That compared to $21.9 million in fiscal '20. That increase in net income attributable to non-controlling interest in fiscal '21, principally reflects higher allocations of net income to non-controlling interest as a result of certain fiscal '20 and '21 acquisitions as well as an increase in the operating results of certain subsidiaries of Flight Support and ETG, in which non-controlling interests are held. For the full fiscal year '22, we anticipate a combined tax and non-controlling interest rate as a percentage of net income to be approximately 25% to 27%.

Moving on to our balance sheet and cash flow. As we previously mentioned, cash flow provided by operating activities remain strong, at $110 million in both the fourth quarter of fiscal '21 as well as '20. Cash flow provided by operating activities increased 9% to $444.1 million in fiscal '21, and that was up from $409.1 million in fiscal '20. Our working capital ratio, current assets divided by current liabilities, was 3.2% in October 31, '21 compared to 4.8% as of October 31, '20. DSOs of receivables improved to 44 days as of October 31, '21 compared to 45 days October 31, '20. We continue to closely monitor receivable collection efforts in order to limit our credit exposure. No one customer accounted for more than 10% of net sales, and our five customers represented approximately 22% and 24% of consolidated net sales in fiscal '21 and '20, respectively. Inventory turnover rate was 153 days for the year ended October 31, '21 as well as October 31, '20.

The outlook. As we look ahead to fiscal '22, we expect the commercial air travel recovery to continue, particularly in certain domestic travel markets. Well perhaps slightly less so in international markets, even though the pandemic will likely continue to adversely tech commercial aerospace industry as well as HEICO. International markets have not recovered to the extent of domestic markets. And while we are very confident of their future recovery and the potential sales increase, timing at this moment is uncertain.

We said basically the same thing last year, and we were proven correct, and we're predicting the same thing this year. We remain cautiously optimistic that the ongoing worldwide COVID-19 vaccine rollouts, including boosters, will continue to positively influence commercial air travel and benefit the markets we serve. As we have all continued to see and learn, it's difficult to predict the pandemic's path in effect, including new factors such as new variants, vaccination rates, which can all impact our key markets. Also government activities, government shutdowns, travel restrictions and everything under the sun, therefore, we feel it would not be responsible to provide fiscal '22 net sales and earnings guidance at this time. But our ongoing conservative policies, extremely strong balance sheet high degree of liquidity enable us to invest in new research and development, and execute on our successful acquisition program and position HEICO for market share gains.

I would like to end my remarks by again thanking our team members for their continued support and commitment to HEICO during these professionally and personally challenging times. Our executive team continues to be focused on your safety and your professional success. Collectively, we believe we've had great success in '21 and we look forward to all the opportunities ahead in fiscal '22.

That's the extent of our prepared remarks, and I'd like to open the floor for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We have our first question from the line of Pete Skibitski with Alembic. Your line is now open.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Hey, good morning everyone.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Good morning.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Good morning.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Guys, I wanted to ask about supply chain issues. You seem to be avoiding some of the worst case issues that some of your peers are having with regard to things like sourcing semiconductors and even sourcing labor. Are you guys seeing any issues like that at all or if so, how have you been able to kind of mitigate the impact?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Hey Pete, it's Eric speaking. Thanks for your question. With regard to that, we've been able to handle it. I think that HEICO's model of decentralized approach to business where we've got entrepreneurial people running these businesses, running all the functions within the businesses, it's their responsibility to figure out how to get it done. And you can see from the fourth quarter numbers, they've done that. Now, obviously, it's becoming a bigger challenge. We all read about that in the newspaper. And there definitely will be bumps in the road. We've seen prices go up. We've seen shortages in various areas, but we're just dealing with. And frankly, the numbers would have been the sales and the earnings would have been even better had we not had some of this. But I think overall, we are optimistic that we're going to be able to manage it.

And then Victor can update on the Electronic Technologies Group.

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Yeah. Overall, the situation, as you know, we've talked about in prior calls, it's been manageable with very limited shipping delays for us out to our customers. And so I'm very proud of how our customers were prepared for this and have responded to it. And some subsidiaries are seeing minimal to no impact while it's more pronounced than others. So it really varies across the business. Companies generally -- within HEICO, generally entered the shortage with sufficient stock, and we're ordering ahead, which is really, as Eric pointed out, a benefit of our decentralized model, where our subsidiaries decide what to do is as you've heard say on this call before on these calls, we're not a big believer in just-in-time inventory management, we let our companies decide what they need to have and to project, and that's worked out very well.

I would expect maybe it becomes a little more pronounced as we get into '22. But we found that we have a lot of ways to deal with it. Some of our companies have been able to design around with replacement components as well and the lead times vary by subsidiaries. But overall, we've been able to manage those pretty well.

I'll just make a comment, too, because the natural follow-on to that is, well, are you seeing price increases on your components and on your material. And the answer to that, of course, is yes. We're like everybody else, you read in the newspapers, where I think we've managed those pretty well. Sometimes those price increases are fairly low. Sometimes they're much more, again, depending on the product and the subsidiary. But generally speaking, our customers understand that. They're seeing this across their supply chains, and they're doing it with it in their own pricing. So they've accepted where we've adjusted prices, and I expect that we'll have to continue to do that. And that, of course, will continue over the year ahead.

Of course, as a side, it is very important for us to keep offering this great value proposition that we offer. And so what we're not doing is taking advantage of our customers for it. We're making sure that we continue to offer an excellent value, but we do expect to be compensated for our cost increases as well as to sustain our margins on those increases.

Eric A. Mendelson -- Co-President and President of Flight Support Group

And also, Pete, just to close, this is Eric again. We have a number of our team members on the call, and I want to call them out specifically for their outstanding effort and results and dedication in making this happen. HEICO, while we're not afraid to invest in inventory, we've got very acceptable inventory turns. And I think unlike our many other peers and competitors in the industry, HEICO did not take a big one-time inventory reserve in 2020, special inventory reserve like so many other companies did and we are able to support our customers by having proper and, I would say, lean inventories because we buy the right stuff. And I think that is very, very rare in industry today.

Our people work extraordinarily hard to make sure they buy the right stuff. And if you look across the industry, there are plenty of companies who take this big onetime charges and they blame it on all sorts of one 10-year events like a financial crisis or COVID or 9/11 or all sorts of things that happen.

And if you look back at HEICO's history over the last 32 years, never have we taken such a charge. Yes, we do have inventory obsolescence, and we handle that within our normal results. So again, really, I get very emotional and passionate about this because our people really do a phenomenal job by focusing on the details, making sure we've got the right parts on the shelf, and we don't take these big onetime charges, whereas it seems to be standard in the industry outside of FICO.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Yeah. That's very helpful, guys. I really appreciate it. Maybe one last quick one from me. Maybe just one more for Eric. This Omicron variant seems so recent, almost really after the quarter closed. Just can you give us a sense if you've gotten any feedback from your customers yet about how that could impact kind of near-term demand? Is it having any impact at all or it's really kind of a black-box right now, I think. So I would love to get your feedback.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah, I did. It's a great question. I'm sure people -- it's a burning question people want to know what's going on with that. I did my quarterly reviews with our sales heads last week. And as of last week, we did not see an impact. However, I don't think you have to really be a genius to figure out that this is going to impact the industry in some way. I think it's reasonable to assume that it will, and we are prepared for it. But I think things -- we're still very, very optimistic. There's a lot of growth potential because not all of our markets have recovered. So we still have a very big potential in the international markets, in particular, in Asia, and to a lesser extent, in Europe and South America to see recovery.

So I think that we've got plenty of, if you will, green shoots ahead of us. But there's no question that the Omicron will hold back the industry. We'll have to see really what happens over the coming days and weeks due to the severity and [Indecipherable] of the variant. But again, we think that with HEICO's structure of strong capital structure as well as really focusing on the customer, focusing on the details that we're going to be fine, and we're just going to get right through this. And this is really just going to be business as usual. I mean there's no reason to think that this virus is going to disappear anytime soon, and we just got to be ready. And HEICO is resilient, and we'll handle it. And our people are very resilient. So it's not going to hold us back.

Pete Skibitski -- Alembic Global Advisors -- Analyst

Great. Thanks so much for the context, guys.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thanks.

Operator

Thank you. Our next question comes from the line of Peter Arment with Baird. Your line is now open.

Peter Arment -- Robert W. Baird & Co. -- Analyst

Thanks. Good morning. Larry, Victor, Carlos.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Good morning.

Peter Arment -- Robert W. Baird & Co. -- Analyst

Yeah. Happy holidays, everyone. Hey Carlos, I guess maybe I wanted to start with you, really just if we could talk a little bit just about incremental margins. I know -- but if you look at FSG, I think we finished the year in the kind of the mid-40s percentage-wise, ETG in the low 20%s. Do you expect -- how should we think about kind of what a good normalization rate is for both segments? Do they both trend back to the low 30%s or any puts and takes we should be thinking about?

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Well, I think that as far as '21 was, I was pleasantly surprised with how the segments performed. As we've talked about in the past, the FSG is on a glide path. We're not expecting huge incremental bumps in their OI percentage of revenues. We're expecting more of a glide path back up to pre-pandemic levels. Pre-pandemic levels, we expected the FSG's operating margin to approach 20% and I think that that's our target. That's what we're heading back to. And then from that point forward, we ought to see what history has told us that the segment has growth leverage, if you would, on their cost base and you eke-out little improvements in the margin as you go along and power more sales. So in my opinion, I think that's the direction we're heading with the FSG.

ETG is a very mix sensitive segment, and the margin can bounce around. This year, we posted 30% margins, and I'm tickled to best with our fourth quarter performance. But we could easily have posted less or more. It is that mix sensitive, and it's very acquisition-sensitive. So on an annual basis, it's really hard to predict with great degree of certainty where that margin could be. I would tell you that if it's been 27% to 30% for a long time, I expect it to stay within that bandwidth, but during quarters, it could vacillate and it could be due to things such as acquisitions. For example, if we bought a company with a 22% operating margin. I assume as an investor, you'd be very happy with us, but that would be dilutive to the overall segment margin. As long as we're still on a ton of cash, we would be indifferent to that, but we get questions about the margin, right? So that's how we're approaching it. And by the way, the alternatives could happen. We could buy over 40% margin, and it can pull it up. So that is what I believe the future holds for the ETG. We principally look at it as a cash return segment. The EBITA margin of EBITDA margin in that segment is fantastic. It's in the low 30%s, and I believe that will continue.

Does that help?

Peter Arment -- Robert W. Baird & Co. -- Analyst

Yeah. that's very helpful. I appreciate that. And then maybe just as a quick follow-up, Eric. Maybe you could just talk about maybe any of your, what you're seeing out of your larger customers, I know that FSG, I think the top kind of handful of customers represent at least a-quarter or a-third of your sales. So maybe what you're seeing there and the opportunities for you guys to continue to grow share? Thanks.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. Great question. And so I met with our folks last week. And we're doing extraordinarily well with our top customers. Actually, as a matter of fact, I think we're doing extremely well with all of our customers. They've seen through the pandemic to be more committed than ever to HEICO. I think we've supported them extraordinarily well. We maintained our new product development. We maintained our workforce. We maintained our standard development rates. So we're satisfying them with all sorts of new and product adjacency products. So they're extremely supportive of us. So I feel very good. And I think that we are growing market share with them and with everybody. I don't know if that's sort of the color that you were looking for. I don't know anything else you'd like to know, please let me know.

Peter Arment -- Robert W. Baird & Co. -- Analyst

No. That is helpful. I appreciate. Thanks for all the details guys.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thank you.

Operator

Thank you. The next one, we have the line of Larry Solow with CJS Securities. Please go ahead.

Larry Solow -- CJS Securities -- Analyst

Great. Good morning guys and thanks for -- good quarter and thanks for taking the questions. Just a couple of sort of follow-ups. Obviously, the macro still some cross wins there, but it does look like passenger traffic, as you mentioned, continues to recover on a fairly consistent basis. Just trying to gauge the pace of recovery within HEICO. Obviously, it seems like you guys are certainly a little bit ahead of that. You're still behind 2019 levels, pre-pandemic, but your recovery seems to be a little bit ahead of the general market. So just trying to gauge what you're seeing from customers and your market share gains and your expectations going forward, particularly on the PMA side.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. A great question, Larry. We do continue to see market share gains. I can tell you that our people are extremely bullish. In 32 years of doing this, I've never seen a group more pumped up about the future than the folks I met with last week. We went over things in great detail and they are extraordinarily bullish. They're also bullish because there's plenty of opportunity out there. There are areas that haven't recovered yet. And we're optimistic that we're going to see recovery in some of those areas in 2022. And our customers are really encouraging us to produce more and to do more and develop more. So I would say, the future outlook is very, very good.

I mean, when you go through a crisis like this, there is no logical reason why people shouldn't buy more from us. I mean we're -- we have the best customer service and we've got the most competitive prices. And it's from a company with an $18 billion market cap. So you're not dealing with a little start-up. You're dealing with somebody who can go ahead and invest and put the right inventory on the shelf and pay people and develop products, stand behind that product. So I think, frankly, the wind is to HEICO's back right now. And I would anticipate that that's going to continue. I'm very bullish about that, very bullish for the future. That's specifically with the aftermarket.

With our businesses that are more exposed to the OEM build cycle, we have not seen as much recovery in those areas. And frankly, that provides also a great optimism and potential for the future because those markets have not recovered. If you look narrow-body market isn't expected on the new-build side to recover until pick year 2024, say, and on the wide-body until maybe 2028. And of course, the wide-body peak, the new-build production, I think, peaked back in 2015 area. So I think we've got plenty of upside in those markets as well. Our people have worked extraordinarily hard across all of our businesses. And the ones that are more OEM exposed have not seen the success that the ones that have been more aftermarket exposed have seen. So I know that they're working extremely hard. They're pumped up. They see it's coming down the road, but we got to hang in there. And of course, with HEICO at our strong levels, strong levels of sales and customer relationships and customer service and basically no debt, I think we're in a very good position to take advantage of all this.

Larry Solow -- CJS Securities -- Analyst

All right. I appreciate that color. How about just, Eric, while you got the mic there? Just on the sort of -- I know you're not giving guidance. But near term, I know usually sort of your Q1, you get the seasonal slowdown as it's the peak season, obviously, most points are getting out in the air and getting only the real needed events. Do we see that slow down? Do you expect that this quarter or is it seasonality a little bit skewed because of the overall ramp in spending and whatnot?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah, that's a good question. And it's -- I'm not trying to not answer it, but the truth is I really don't know. I mean my sense is it's going to be fine. But yes, you'll see that traditional seasonality. And of course, the Omicron isn't going to help things. So my guess is that you would see it. But that truly is a guess and not based on sales through 45 days into the quarter, but instead, just based on having done this for so many years, yes, I think you'll see the seasonality and it should be standard in that regard.

Larry Solow -- CJS Securities -- Analyst

Got you. And then just one quickie to Victor. It sounds like just at least this quarter, maybe the last couple of quarters, defense and space sort of flattish and a lot of your growth has been coming from the medical and the other electronics and industrial piece, which I know has been really strong. Is that sort of where you think sort of we really given guidance, but from a high level '22 will kind of shape out with similar trends?

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Yeah. Larry, so you may recall in a couple of the last calls, I'd mentioned that our specialized electronic, high-end electronic and other markets were strong for us, and I expected that to continue. And I would expect that to continue into '22 based on the comments that we -- or the budgets round that we've received from our subsidiaries. In terms of defense, as I've also talked about in a number of the calls, we kind of expected that to flatten out, maybe turned down a little bit and I would expect to see that trend continue at least in the near term. And I think commercial space probably it's a little early to say for sure. But I would say that, that trend is more flattening after we've had a lot of strength there.

Larry Solow -- CJS Securities -- Analyst

Okay, got you. Great. Thank you so much guys. Appreciate it.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Welcome.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Are there any other questions?

Operator

The next one, we have the line of Kristine Liwag with Morgan Stanley. Your line is now open.

Kristine Liwag -- Morgan Stanley -- Analyst

Hey guys, thank you for the question here. I guess looking at the M&A pipeline, has Omicron affected the opportunities that you're seeing? Are you seeing more opportunities or less opportunities, as we kind of see this uncertain period for long?

Laurans A. Mendelson -- Chairman and Chief Executive Officer

So the answer is, I don't think Omicron has affected this at all. We have a very strong pipeline. As a matter of fact, I would have to say it's almost too strong because we are wrapped-up in doing due diligence constantly. We have a number of transactions that are in the pipeline. As you know, we can't predict if it's going to close. I mean historically, if we go by past experience, we know most of them probably will close, but we can't guarantee it. But I think the ones we are looking at are all well within HEICO's normal pricing and the fact that we would expect them to be accretive in the first year and so forth if they close. And there are plenty of opportunities out there. So I don't think we've seen any change because of this situation.

Kristine Liwag -- Morgan Stanley -- Analyst

Great. Thanks. And maybe a question for Victor. Victor, on space, can you speak to any trends that you're seeing? And then also, we've seen more space companies successfully raise capital and many have leased back in the past few months. Does that increase the addressable market for you, especially now you've got this new pool of customers that could potentially pay their suppliers?

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Kristine, it's a very good question. We think it does increase our potential market, and we are dealing with some of these companies. The key, of course, is to be able to do it profitably and to do it in a production rate that makes sense for our businesses. And that's, in space, that is always the challenge.

And so at this point, I would say, in terms of your question on trends, then the trends overall, I would expect to see more of these smaller start-up businesses addressing newer parts of the market. And hopefully, that gives us some more opportunity on some of our higher end products, in particular. We're not interested really in going down to the lower end of the market just to capture sales.

Kristine Liwag -- Morgan Stanley -- Analyst

Great. Thank you very much. And I hope you guys have a great holidy.

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

You are welcome.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thank you and you too.

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Thank you.

Operator

Thank you. The next one, we have the line of Robert Stallard with Vertical Research. Please go ahead.

Robert Stallard -- Vertical Research -- Analyst

Thanks so much. Good morning.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Good morning, Robert.

Robert Stallard -- Vertical Research -- Analyst

Maybe if you could go back to the market share situation. And I was wondering, if there was any particular product areas or aircraft types, where you're seeing more success than others?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. I would say that it really is pretty much across the board, Rob. We're seeing it in all of our traditional and historic markets. I would just say that it's very broad-based. As you know, we're electing to go into specifics with regard to customers, geography, product types as we've got competitors on the call. And I'm sure you and our investors recognize and appreciate that. But it is very broad-based. I would say, it's across all of our product types and really in all geographies.

Robert Stallard -- Vertical Research -- Analyst

Okay. And then on the M&A pipeline, it sounds like [Technical Issues] but I was wondering if there's any waiting on the Flight Support Group versus the Electronics or are they both seeing a lot of interest?

Eric A. Mendelson -- Co-President and President of Flight Support Group

I think they're both very strong. Both businesses are very strong. We're very busy in each area. And fortunately, HEICO has got the firepower where we can afford to deploy capital in both. So it's not mutually exclusive. It's really more opportunistic.

Robert Stallard -- Vertical Research -- Analyst

Okay. Great. Thank you very much.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thank you.

Operator

Thank you. The next one, we have Ken Herbert with RBC Capital Markets. Please go ahead.

Kenneth Herbert -- RBC Capital Markets -- Analyst

Yes. Hi, good morning, everybody.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Good morning.

Kenneth Herbert -- RBC Capital Markets -- Analyst

Hey, Eric, I wanted to start with you first. I wanted to follow up on the comments and everything we're seeing regarding the faster recovery for domestic travel versus international travel. Is it fair to say that when you look at your airline customers here in the United States or North America and Europe that their maintenance spending with you for their domestic fleet in 2022, your fiscal '22 can be back to sort of pre-COVID levels. I mean how do we think about the business recovery for you and the timing for predominantly the narrow-body versus wide-body or domestic versus international fleets?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. Great question, Ken. I would say, I don't think it's likely that a domestic narrow body will be back to '19 levels in '22. If it is, I think it's more toward the end of '22. We're doing extremely well, but I want to be really careful to not get ahead of ourselves here. There are certain fleets that have been retired. So that's going to be a bit of a headwind. So maybe if it happens, it's by the end of the year. But it's certainly -- I'm at this point, not anticipating that the domestic narrow-body will be back to the levels that it was at in '19. I think 2023 is probably a more reasonable guess. And I think we've got to be conservative, I mean, with regard to Omicron and who knows what comes next. But we're assuming that this virus is going to be here for a while and we're going to have to -- everybody's going to have to live with it. So I think that that's probably a more prudent thing. In terms of the international, Asia is still very low and Europe is likewise also struggling more so than the North American market. So I do think that we've got a good upside potential in those markets.

Kenneth Herbert -- RBC Capital Markets -- Analyst

Okay. Thanks for the detail there. As you look at -- I wanted to ask about your cargo exposure. I mean cargo has clearly been -- air cargo, very strong, obviously, through this downturn. The cargo fleet tends to be older, tends to represent roughly sort of 10% of the total fleet for the larger aircraft. How is your cargo exposure? And can you comment about if that's maybe a nice opportunity where you're seeing greater growth or how do we think about you relative to the cargo markets?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah, another great question. We're doing very well in the cargo market. Very strong for all of the obvious reasons. We anticipate that, that is going to continue. The cargo market should continue to stay strong as a result of the questions going on out there. We've got very good relationships with those customers. We offer a very broad product line. So I have to say I feel really good about the cargo markets.

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

So if you have any friends that are running these cargo companies, make sure they know that they can save a lot of money with HEICO and that if you want to still get free delivery with your purchases, they should come book to HEICO for some solutions.

Kenneth Herbert -- RBC Capital Markets -- Analyst

I'll definitely pass it on. If I could, just one final question for you, Eric. Obviously, the trend line would imply that you sort of get back to 20% EBIT margins at some point in fiscal '22, just looking at the strong performance of the business. Is there any reason at some point this year, you don't hit that level or are there other maybe headwinds we should keep in mind as we think about sort of modeling out segment margins for you?

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

Ken, it's Carlos. Let me take that one. As we're sitting here today, other than time, there's no real headwind that I see. I mean both of the -- all three of the product divisions, if you would, within Flight Support are doing quite nicely. As Eric said, the Specialty Products Group is lagging a bit for the OEM cycle. I do think that once we get back to the '19 levels, and then the key is back to the '19 levels. Once we get to that point, we ought to start approaching that 20% margin. As Eric just mentioned, we're not real sure if we're going to see that in '22. But once we do, I feel very strongly that we ought to be at those levels. So it's a timing issue, Ken, not an impediment to getting there. It's just time.

Kenneth Herbert -- RBC Capital Markets -- Analyst

Perfect. Thanks, Carlos. Nice quarter. Thanks guys.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Ken.

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Thanks, Ken.

Operator

Thank you. The next one, we have the line Michael Ciarmoli with Truist Securities. Please go ahead.

Michael Ciarmoli -- Truist Securities -- Analyst

Hey, good morning guys. Nice results and thanks for taking the questions. Maybe Eric or Carlos, just to stay on Ken's line of question there on the domestic versus international, I think, Carlos, you may have mentioned or maybe it's come up that possibly, you could exit fiscal '22 here in FSG at somewhere close to that quarterly run rate. But if we think about international, where I think we're still down 30% on takeoffs and landings, Omicron is going to have an impact. Do you need that international and that wide-body activity and your customers to start spending on our wide-body fleet to get back to that quarterly run rate in '19 in FSG?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. I think that, that would be a reasonable expectation. I mean when we anticipate the wide-body in the international markets are going to come back and they're going to come back with a vengeance. So I think we're going to do very well. To be honest with you, we have not modeled bifurcated recovery and figuring out all the combinations and permutations of the recovery. We feel strongly we know that it is going to come back. It is an important market for us. But I think we're going to do very well. We continue to develop product for it. So if that gives you any feeling of our confidence in it, we're still very confident in it.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, I would just add to that, that I'm feeling very good about our market share gains in the segment. I think that our sales folks have done a good job of going out and being accessible to our customers, finding new product, helping them find new products that will help them be more successful. So that's a bit of a wildcard because I can't quantify it for you, but it's something that we're seeing. And that could be additive, which could get us there, could get us there a little sooner.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. And Eric, are you hearing anything from your customers? I mean sure, as we sit here today and Omicron, but obviously, these airlines are thinking six, seven, eight months ahead. I mean, do you think there's a scenario where they start to really prep the wide-body fleet for a heavier summer travel season in international markets and could that be a significant tailwind maybe as soon as late 1Q and then into the second quarter where you really see a lot of that prep work being done?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. I think that's entirely possible. My feeling is people are going to travel next summer regardless of Omicron. And yes, I think that, that is reasonable to -- they definitely are going to prepare it in advance.

Michael Ciarmoli -- Truist Securities -- Analyst

Got it. And then I'll just try one on some of the new product development. And we're going to start seeing some of the LEAP engines, GTFs start to come in for shop visits. Do you guys have content on those platforms? Should we expect that that could be sort of accretive business to you as those engines start coming in?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Normally, as you know, we don't develop products, we don't have significant sales of products this soon in the life cycle. So we don't like to comment on specific products, but normally in the life cycle that would not be something material.

Michael Ciarmoli -- Truist Securities -- Analyst

Okay, got it. All right guys. Thanks a lot. I will join back in the queue.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thank you.

Operator

Thank you. We have the line of Gautam Khanna with Cowen. Your line is now open.

Gautam Khanna -- Cowen & Co. -- Analyst

Hey, good morning guys. How are you doing?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Good morning. How are you?

Gautam Khanna -- Cowen & Co. -- Analyst

Doing well. Thanks. Happy holidays in advance.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Likewise.

Gautam Khanna -- Cowen & Co. -- Analyst

Thank you. Just wanted to follow-up on a couple of questions that have been asked. Any sense for -- so first of all, within the sub-segments at FSG, I don't know if you covered this, but kind of the relative sequential growth. So by aftermarket parts versus R&O, component repair versus specialized products, how do those differ, if at all? And what are you seeing kind of where do you have better visibility of how trends are moving into the next quarter or two? Was R&O picking up or what can you say? Thanks.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

So I guess if you're talking about the recent quarter sort of trends or where things are pointing, it's coming off a pretty weak Q4 '20, but the growth has been very strong in our parts of distribution and our repair. They have grown in tandem, one quarter one is a little more strong next quarter that flips, but the trends in those two businesses are very similar. It's very strong. They're coming back. Eric mentioned earlier that Specialty Products, which houses some defense and a lot of our OEM business within the Flight Support Group. That business is doing quite nicely. We had a nice organic growth in Q4. I'd say, for the year, it's lagged a little for the reasons that Eric gave, I think that, that business generally is tied to the new build activity and how those Tier 1s are purchasing to go into the big guys, the Boeings and Airbus and that has been softer. And to Eric's point earlier, that is the part of the FSG that I think we'll see some improvement in '22, on top of all of the continued growth and strength within the parts and repair business.

Does that help, Gautam?

Gautam Khanna -- Cowen & Co. -- Analyst

Yes, it does. So just to be a finer point on it, sequentially, did component repair kind of tracked out of the aftermarket parts for the sequential?

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

Yes.

Gautam Khanna -- Cowen & Co. -- Analyst

That's good to see. All right. Just switching to M&A. You mentioned the pipeline is pretty busy these days. Anything promising that might be more consequential from a size perspective or do you kind of anticipate that it's going to be kind of like last year or the last two years where it's been more smaller tuck-ins or are you seeing bigger opportunities?

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

We look at opportunities of all sizes. And so we are looking at a variety of sizes now and it really remains to be seen which ones. And of course, we have to be careful, frankly, at this point because who we're talking with, we don't want anything -- anybody on this call to start figuring out that kind of thing But we suffice it to say that we'll continue to look at transactions that are small ones and in the hundreds of millions, and frankly, even in the billions, although, again, our criteria remains the same for the acquisition. So we're not going to go buy something just for the sake of putting up revenue that's not accretive. As you know, to us, it's all about the cash generation, the net income.

Gautam Khanna -- Cowen & Co. -- Analyst

Okay. And then -- that's helpful. And then maybe one for Eric, just on -- over the next 12, 18 months, how many new PMA parts do you anticipate adding to the portfolio?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. It would be consistent with what we've done in the past. We're typically in that 400 to 500 area per year. And so I think it's going to be consistent with that. The number -- just you know, the numbers can go up and down a little bit depending on complexity and the type of product and all that. Obviously, more complex products, could they do take longer. So there would be fewer of them, but it moves around in that area.

Gautam Khanna -- Cowen & Co. -- Analyst

Terrific. Thanks a lot.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thanks, Gautam.

Operator

Thank you. The next one, we have the line of Noah Carpenter [Phonetic] with Goldman Sachs.

Noah Poponak -- Goldman Sachs -- Analyst

Hey, good morning. It is Noah. Poponak.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Good morning, Noah.

Noah Poponak -- Goldman Sachs -- Analyst

Nice to hear from you. Where would you pin the likelihood that the cash spent on acquisitions line item on the cash flow statement in fiscal '22 is the highest number that the Company deployed in a given year in its history?

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

I'm not sure I understand the question.

Eric A. Mendelson -- Co-President and President of Flight Support Group

I think what Noah was asking is, are we going to spend more on [Speech Overlap]

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

The answer is, we never know. So I mean, we're open to making acquisitions low, and we want to make very large acquisitions. So it all depends on the opportunities. We are an opportunistic acquirer and we'll spend in the $1 billion, we'll spend in the $100 million. So we don't know. I really don't know the answer.

Eric A. Mendelson -- Co-President and President of Flight Support Group

But I can tell you, we are working very hard, and we would love nothing more than to be able to deploy more capital in 2022 than we've ever done in any single year. As Dave said, estimate on what's going to happen. We've got to do our homework. And we're very careful with HEICO's money because it belongs to the shareholders. Of course, we're -- some of large shareholders. And we want to make sure that we're spending people's money correctly. But we're very much focused, and we would love for it to be the biggest year in our history.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

No, we are -- I think I mentioned before, we are looking at a number of transactions. And the problem is we never know until we get to the closing table, whether they're really going to close. We run into due diligence glitches, data glitches where we ask for material. And since we do a very, very thorough due diligence because again, in my mind, we're spending our money and the shareholders are our partners, and we're spending our money, which is their money, and we don't want to make mistakes.

So on the surface, I would say that we've earmarked -- obviously, we have $1.5 billion revolver, unsecured revolver that we can draw on. And of course, the banks have said to us they will give us many multiples of that should we want it. So it's just very hard to tell, but we would like to do it if the deals that are presented to us fit in our wheelhouse, if they meet the standards. And you know the standards we look at are the cash payback in seven to 10 years, and we don't want to pay 14 times EBITDA with pie in the sky in the future and so forth. So that strategy has served us very well, and we're going to continue that strategy. So it's really impossible to give you the answer. I know you want -- I'd love to know the answer myself, but we're trying to spend as much as we'll possibly be effective for the HEICO program.

Noah Poponak -- Goldman Sachs -- Analyst

No. And I'm looking for that commentary along the spectrum of possible outcomes. So that -- everything you guys provided there is super helpful, and I appreciate it.

Just one other one for me is back to the conversation around international and corporate travel since that's kind of the million-dollar question here for the industry in terms of when that kicks in. I mean it seems to be very much up to government restrictions and policies on cross-border. And I just wondered if you are hearing any way you can help shed here from your teams or your customers on how that plays out? Like what has to happen? Is it Asia going away from zero COVID or is it -- are there cross-border discussions that are taking place with the airlines right now or is it just cases or can you just never know? I mean just given how obviously close you guys are to the industry, I wondered if there was any incremental detail you can provide there on how that can actually play out logistically?

Eric A. Mendelson -- Co-President and President of Flight Support Group

Yeah. I think the airlines are very much focused, obviously, on this matter. They want to do everything they possibly can in order to encourage travel, and encourage vaccinations and testing and all that stuff. So I think they're going to be very flexible. And as different governments come out with different requirements, they're going to -- they need to be resilient and figure out just how to handle it. So I think that the industry is maturing to a point where we're all prepared for COVID to hang around for a while and we've just got to do the best we can to really get through this, but keep everybody traveling. So they're very resilient and creative when it comes to that.

Noah Poponak -- Goldman Sachs -- Analyst

So it sounds like we're still without a lot of specifics on how cross-border can evolve from here and you just have to manage the business across a range of possible outcomes.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Exactly. You got it. Yeah.

Noah Poponak -- Goldman Sachs -- Analyst

Yes, all right. Thank you. Appreciate it.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Thanks, Noah.

Operator

Thank you. The next question, we have the line of Colin Ducharme with Sterling Capital Management.

Colin Ducharme -- Sterling Capital Management -- Analyst

Hi, good morning. Thanks for taking the question. I got a couple for Carlos. Carlos, maybe I'll just start quickly on some of the cash flow deltas. And what I'm trying to do here is just link through the windshield demand environment to what you're hearing at the subsidiary level. And then kind of link that to three kind of deltas on the cash flow statement, AR being one, inventory being two, and then your change in current liabilities being three. And can you maybe just anecdotally tell us what you're hearing from the subsidiary level on the increase in AR, I'm assuming that's just increased -- improved demand environment, specifically on the FSG side. And then, linking that to your change in current liabilities, is that deferred revenue build mapping to that same trend? And then I got a quick follow-up for you.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

All right. So well, there's a lot to unpack there. Let me start with receivables. So as you pointed out, during the fourth quarter, which receivables for us generally is a function of quarters. Sales in the FSG were up 34% over '20. So what you're seeing is you're seeing a little bit of build-in receivables to deal or the growth in receivables to deal with that growth in sales, which, in my judgment is a good thing. When we look at the quality of those receivables, they're in real good shape. And nothing from the subsidiaries is bubbling up, saying there's any problems that I'm very pleased with the quality of the receivables. And I think the growth is attenuated compared to our revenue growth.

Look, the inventory build with sales increasing, again, inventory to a great extent, is also a quarterly function, right? It ebbs and flows kind of in three-month increments. And with 20% growth in the overall business occurring in Q4 on the sales side, the build-in inventory of $10 million or whatever is not so bad year-over-year. I was actually quite pleased with that. And if you heard earlier on the call, we have encouraged our subsidiaries if they need to, to go long on inventory to deal with any potential lead time issues or shortages. So I'm actually -- the working capital management in that regard, I'm very pleased with.

I think the liabilities that you're pointing out, the current liability trend, remember, in fiscal '20, the Company did not have in the FSG, any discernible performance-based compensation. There may have been pockets of it. But for the most part, it was not much to zero. And so this is what you have on top of what I consider the outstanding performance for the segment, you have bonuses, performance base pay plus you have commissions that may not have been around last year for sales growth and you have a lot of that selling activity that gets jammed in accruals at year-end until you pay it out. And so a lot of the movement in that caption is performance-based comp related.

Does that help you?

Colin Ducharme -- Sterling Capital Management -- Analyst

Okay. Yeah. That's very helpful. I appreciate the detail. So I guess, a little bit different than what I was kind of expecting and mapping out here. Maybe I'll just leave you with a quick follow-up, higher level here, cap structure and just conservative posture here. You guys are -- you have a lot of dry powder, arguably more than you've had in many, many years. You talk about a healthy M&A pipeline. Is that an either/or, meaning the healthy M&A pipeline and the ability to put the balance sheet to work there versus getting more aggressive with perhaps a share repurchase program, something along those lines? You're in an EBITDA growth scenario, you're going to naturally delever in the medium term. Why not put the balance sheet -- take a step toward a more aggressive posture, yet still overall, stepping back, be situated very, very conservatively. If you can just speak to cap structure and view on glide path over the medium term, you guys are just very, very underlevered at the moment today here. Thank you.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

So the answer is, we do not work in the short term. HEICO is a long term -- medium, long-term investment. You are correct. We are underlevered and we understand that. Earlier in the call, I mentioned that there are many acquisitions that are in the pipeline. We're looking at many. We do not hope and we do not intend to stay underlevered this way. So we don't have any thoughts about share purchase, repurchase to shrink the Company.

We always believe in growing the Company, and that's the strategy that we have followed for 31 years, which has resulted an extraordinary growth for the shareholders. So we're not going to change the basic policy, the discipline that we use. And we're not going to, again, shrink the Company, shrink the capitalization to please speculators and traders and everything else. We're going to grow this company for long-term shareholders, of which we're probably the largest one and all the shareholders are our partners. So we feel that it's in the best interest.

The other thing is the response of the shareholder community to our shares at the multiple that it sells at apparently, I believe, and after we speak to many of these institutional shareholders, they are very pleased with that policy. So again, we're going to stick to it we're not going to shrink it. And hopefully, we're going to grow it aggressively. I hope that answers your question.

Colin Ducharme -- Sterling Capital Management -- Analyst

Yes, that's very helpful. And I totally respect that posture in the history and all the value you guys have generated. But if I -- in all due respect, my press on you, Larry, we're long-term shareholders as well. And while we totally respect that history, in the view of not an either/or, but putting a balance sheet to work without kind of shrinking the Company, but thinking in the guys of per share ownership and that's essentially what we're talking about in terms of shrinking the denominator, creating value on a per share basis over-time. So that would just be a quick press. And again, I say that with all due respect of all the strategy and value that you've created. Thank you.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Okay. We hear you. And look, we're always running all sort of scenarios, we look at everything. I can promise you, we're very, very thorough in our analysis, but very optimistic on acquisitions at the moment.

Operator

Thank you. The next question, we have the line of Colin Ducharme with Sterling Capital Management.

Colin Ducharme -- Sterling Capital Management -- Analyst

Hi, good morning. Thanks for taking the question. I got a couple for Carlos. Carlos, maybe I'll just start quickly on some of the cash flow deltas. And what I'm trying to do here is just link through the windshield demand environment to what you're hearing at the subsidiary level. And then kind of link that to three kind of deltas on the cash flow statement, AR being one, inventory being two, and then your change in current liabilities being three. And can you maybe just anecdotally tell us what you're hearing from the subsidiary level on the increase in AR, I'm assuming that's just increased -- improved demand environment, specifically on the FSG side. And then, linking that to your change in current liabilities, is that deferred revenue build mapping to that same trend? And then I got a quick follow-up for you.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

All right. So well, there's a lot to unpack there. Let me start with receivables. So as you pointed out, during the fourth quarter, which receivables for us generally is a function of quarters. Sales in the FSG were up 34% over '20. So what you're seeing is you're seeing a little bit of build-in receivables to deal or the growth in receivables to deal with that growth in sales, which, in my judgment is a good thing. When we look at the quality of those receivables, they're in real good shape. And nothing from the subsidiaries is bubbling up, saying there's any problems that I'm very pleased with the quality of the receivables. And I think the growth is attenuated compared to our revenue growth.

Look, the inventory build with sales increasing, again, inventory to a great extent, is also a quarterly function, right? It ebbs and flows kind of in three-month increments. And with 20% growth in the overall business occurring in Q4 on the sales side, the build-in inventory of $10 million or whatever is not so bad year-over-year. I was actually quite pleased with that. And if you heard earlier on the call, we have encouraged our subsidiaries if they need to, to go long on inventory to deal with any potential lead time issues or shortages. So I'm actually -- the working capital management in that regard, I'm very pleased with.

I think the liabilities that you're pointing out, the current liability trend, remember, in fiscal '20, the Company did not have in the FSG, any discernible performance-based compensation. There may have been pockets of it. But for the most part, it was not much to zero. And so this is what you have on top of what I consider the outstanding performance for the segment, you have bonuses, performance base pay plus you have commissions that may not have been around last year for sales growth and you have a lot of that selling activity that gets jammed in accruals at year-end until you pay it out. And so a lot of the movement in that caption is performance-based comp related.

Does that help you?

Colin Ducharme -- Sterling Capital Management -- Analyst

Okay. Yeah. That's very helpful. I appreciate the detail. So I guess, a little bit different than what I was kind of expecting and mapping out here. Maybe I'll just leave you with a quick follow-up, higher level here, cap structure and just conservative posture here. You guys are -- you have a lot of dry powder, arguably more than you've had in many, many years. You talk about a healthy M&A pipeline. Is that an either/or, meaning the healthy M&A pipeline and the ability to put the balance sheet to work there versus getting more aggressive with perhaps a share repurchase program, something along those lines? You're in an EBITDA growth scenario, you're going to naturally delever in the medium term. Why not put the balance sheet -- take a step toward a more aggressive posture, yet still overall, stepping back, be situated very, very conservatively. If you can just speak to cap structure and view on glide path over the medium term, you guys are just very, very underlevered at the moment today here. Thank you.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

So the answer is, we do not work in the short term. HEICO is a long term -- medium, long-term investment. You are correct. We are underlevered and we understand that. Earlier in the call, I mentioned that there are many acquisitions that are in the pipeline. We're looking at many. We do not hope and we do not intend to stay underlevered this way. So we don't have any thoughts about share purchase, repurchase to shrink the Company.

We always believe in growing the Company, and that's the strategy that we have followed for 31 years, which has resulted an extraordinary growth for the shareholders. So we're not going to change the basic policy, the discipline that we use. And we're not going to, again, shrink the Company, shrink the capitalization to please speculators and traders and everything else. We're going to grow this company for long-term shareholders, of which we're probably the largest one and all the shareholders are our partners. So we feel that it's in the best interest.

The other thing is the response of the shareholder community to our shares at the multiple that it sells at apparently, I believe, and after we speak to many of these institutional shareholders, they are very pleased with that policy. So again, we're going to stick to it we're not going to shrink it. And hopefully, we're going to grow it aggressively. I hope that answers your question.

Colin Ducharme -- Sterling Capital Management -- Analyst

Yes, that's very helpful. And I totally respect that posture in the history and all the value you guys have generated. But if I -- in all due respect, my press on you, Larry, we're long-term shareholders as well. And while we totally respect that history, in the view of not an either/or, but putting a balance sheet to work without kind of shrinking the Company, but thinking in the guys of per share ownership and that's essentially what we're talking about in terms of shrinking the denominator, creating value on a per share basis over-time. So that would just be a quick press. And again, I say that with all due respect of all the strategy and value that you've created. Thank you.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Okay. We hear you. And look, we're always running all sort of scenarios, we look at everything. I can promise you, we're very, very thorough in our analysis, but very optimistic on acquisitions at the moment.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Louis Raffetto with UBS. Your line is now open.

Louis Raffetto -- UBS -- Analyst

Hey, good morning guys.

Eric A. Mendelson -- Co-President and President of Flight Support Group

Good morning.

Louis Raffetto -- UBS -- Analyst

So I want to sort of come back to this M&A from two points. First, can I just confirm, it looks like for 2021, acquired sales is about $70 million. And as we looked at '22 based on what's already closed, is it going to be sort of about that, maybe a little bit less?

Eric A. Mendelson -- Co-President and President of Flight Support Group

You're asking what the acquired sales are for the year, Louis.

Louis Raffetto -- UBS -- Analyst

Yes. I think '21 was about $70 million. And I think based on what you've already completed, now what you might or might not complete, just again, it looks like maybe it will be a little bit less than that already for '22?

Eric A. Mendelson -- Co-President and President of Flight Support Group

You're right on the number. And I think that if things go according to plan, we would hope to have more. Again, what we've been saying is we plan on deploying capital, so hopefully we can do that and have larger acquired sales next year.

Louis Raffetto -- UBS -- Analyst

I mean, I'm just looking for what's done because to Larry's point, you don't know when you'll be able to close things, but if we sort of do step to that side of the M&A side. For the deals that you haven't been able to sort of complete, what has been, at the end of the day, is it just that the due diligence comes back? Is it somebody else outbids you? Any color you can provide there?

Eric A. Mendelson -- Co-President and President of Flight Support Group

There are all kinds of reasons for this, Louis. We can't give you one single reason. Lots of different things happen things you discover and due diligence, terms, all kinds of reasons.

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Business can change.

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Business can change. Projection. All kinds of things had happened.

Eric A. Mendelson -- Co-President and President of Flight Support Group

I can say this. We don't have many that it's very few that we get to serious due diligence and contract negotiations that don't close. That's pretty rare for us, not unheard of. But once we usually get to a certain point, the deals tend to close.

Louis Raffetto -- UBS -- Analyst

Okay. Great. That's awesome Eric. And then Carlos, just one for you around cash flow. So obviously, cash flow in fiscal '21 was actually, I think, the highest it's ever been. Understanding you're not giving guidance for '22, but any reason that it wouldn't necessarily grow in '22? And then any idea around the capex? I know you've given -- you tend to give that in the past.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

We like to grow the Company every year, 15% to 20% in normal times. And so next to that would be growth in operating cash flow. We really don't want to have earnings and no cash flow, right? So that growth we like to see work in tandem, which is a function of good management on the working capital side, right? So that all that net income earning falls to cash in the cash provided by operating activities. So I would expect that to continue. In my judgment right now, there's no impediments to that occurring next year.

What was your second question?

Louis Raffetto -- UBS -- Analyst

Just around capex. Next year -- I know in the past, you have at least -- I mean, we -- this year was up a little bit, but.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah. We just finished our capex budgets a while ago. I think we could be somewhere around $45 million next year is kind of my guess right now. But that could ebb and flow, but that's kind of the peg we have on the ground at the moment.

Louis Raffetto -- UBS -- Analyst

All right, great. Thank you very much.

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

You are welcome.

Duration: 92 minutes

Call participants:

Laurans A. Mendelson -- Chairman and Chief Executive Officer

Eric A. Mendelson -- Co-President and President of Flight Support Group

Victor H. Mendelson -- Co-President and President of Electronic Technologies Group

Carlos L. Macau, Jr. -- Executive Vice President, Chief Financial Officer and Treasurer

Pete Skibitski -- Alembic Global Advisors -- Analyst

Peter Arment -- Robert W. Baird & Co. -- Analyst

Larry Solow -- CJS Securities -- Analyst

Kristine Liwag -- Morgan Stanley -- Analyst

Robert Stallard -- Vertical Research -- Analyst

Kenneth Herbert -- RBC Capital Markets -- Analyst

Michael Ciarmoli -- Truist Securities -- Analyst

Gautam Khanna -- Cowen & Co. -- Analyst

Noah Poponak -- Goldman Sachs -- Analyst

Colin Ducharme -- Sterling Capital Management -- Analyst

Louis Raffetto -- UBS -- Analyst

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