Kevin Stein
President, Chief Executive Officer and Director at TransDigm Group
Good morning, and thanks for calling in today. First, I'll start off with the usual quick overview of our strategy and then a few comments about the quarter and a discussion of our fiscal 2022 outlook, then Jorge and Mike will give additional color on the quarter. To reiterate, we are unique in the industry in both the consistency of our strategy in good and bad times, as well as our steady focus on intrinsic shareholder value creation through all phases of the aerospace cycle.
To summarize, here are some of the reasons why we believe this. About 90% of our net sales are generated by proprietary products and over three quarters of our net sales come from products, which we believe we are the sole source provider. Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and over any extended period have typically provided relative stability in the downturns. We follow a consistent long-term strategy specifically, we own and operate proprietary aerospace businesses with significant aftermarket content. We utilize a simple well-proven value-based operating methodology. We have a decentralized organization structure and unique compensation system closely aligned with shareholders.
Next, we acquire businesses that fit this strategy where we see a clear path to PE-like returns. And finally, our capital structure and allocations are a key part of our value creation methodology. Our long-standing goal is to give our shareholders private equity-like returns with the liquidity of a public market. To do this, we stay focused on both the details of value creation, as well as careful allocation of our capital.
As you saw from our earnings release, we had a good quarter considering the market environment. We continue to see recovery in the commercial aerospace market and are encouraged by the trends in air traffic among other factors. Our Q1 fiscal results show positive growth in comparison to the same period in fiscal 2021, as we are lapping the first quarter of 2021, which was heavily impacted by the pandemic and prior to the widespread availability of vaccines. Although our results have improved, they continue to be unfavorably affected in comparison to pre-pandemic levels as the demand for air travel remains depressed.
However, the continued improvement in global air traffic despite emergence of a new COVID-19 variant in late 2021 is encouraging. It further illustrates the pent-up demand for air travel and bodes well for the momentum of the commercial aerospace recovery in 2022. To-date, the recovery has remained primarily driven by domestic leisure travel, although we are optimistic for recovery of international travel as many governments across the world have softened travel restrictions. Even the travel restrictions reimposed by certain governments during the month of December, due to the Omicron variant are now starting to ease, which is again an encouraging sign.
In our business, we saw another quarter of sequential improvement in our commercial markets with total commercial aftermarket revenues, up 10% over Q4 of fiscal 2021 and bookings, up more than 15%, compared to Q4. Commercial OEM bookings came in even stronger with almost 20% sequential improvement over Q4.
I am also very pleased that despite the challenging commercial environment our EBITDA As Defined margin was 47.3% in the quarter. Contributing to this better-than-expected margin is the continued recovery in our commercial aftermarket revenues, as well as the careful management of our cost structure and focus on our operating strategy. This was achieved despite the emergence of the Omicron variant during the quarter.
Additionally, we continue to generate significant cash in Q1, we had strong operating cash flow generation of almost $280 million and closed the quarter with a little over $4.8 billion of cash. We expect to steadily generate significant additional cash throughout the remainder of 2022.
Next, an update on our capital allocation activities and priorities. We are now at a decision point with regard to our sizable cash balance, which is now approaching $5 billion. Consistent with our history, when we have a significant amount of cash available we aim to get that back to the shareholders in one form or another. At this time, we are still in the process of evaluating our capital allocation options with regard to any significant acquisitions, share buybacks, and dividends. All three options are on the table, each individually, but then also potentially in some combination over the next 12 months.
Any significant M&A, share buyback, and/or dividend activity will still leave the company with substantial liquidity and the financial flexibility to deal with any currently anticipated capital requirements or other opportunities in the readily foreseeable future. We continue to look at possible M&A opportunities and are always attentive to our capital allocation. Both the M&A and capital markets are always difficult to predict, but especially we saw in these times.
Regarding the current M&A pipeline, we are still actively looking for M&A opportunities that fit our model. We continue to see a pickup in acquisition opportunity activity, but it's still slower than pre-COVID. We have a decent pipeline of possibilities as usual, mostly in the small and mid-size range. I cannot predict or comment on possible closings. We remain confident that there's a long runway for acquisitions that fit our portfolio.
Now moving to our outlook for 2022. We are still not in a position to provide full financial guidance as a result of the continued disruption in our primary commercial end markets. We continue to be encouraged by the recovery we have seen in our commercial aftermarket revenues and the strong bookings received for both commercial OEM and aftermarket in Q1. We will look to reinstate guidance -- reinstitute guidance when we have a clearer picture of the future.
We continue to expect COVID-19 to have an adverse impact on our financial results, compared to pre-pandemic levels throughout the remainder of fiscal 2022 under the assumption that both our commercial OEM and aftermarket customer demand will remain depressed, due to lower worldwide air travel. Although recent positive trends in commercial air traffic could impact us favorably.
To reiterate what we said on the Q4 earnings call, our teams are still planning for our commercial aftermarket revenue to grow in the 20% to 30% range. We expect our commercial OEM revenue to grow significantly as well, but any rate slightly less than the commercial aftermarket. As you know, we aim to be conservative and we'd be happy to have both of these end markets rebound more strongly.
To reiterate, these are planning assumptions for organizational purposes and not guidance. As for the defense market, we still expect defense revenue growth in the low single-digit percent range from fiscal 2022 versus prior year, despite the slow start to the year. George will provide more color on our defense end market.
We now expect full-year fiscal 2022 EBITDA margin to be slightly north of 47%, due to the rate of commercial aftermarket recovery. Please note that our Q1 EBITDA margin was stronger than anticipated and we may see less year-over-year margin improvement for Q2 and expect margins to move up throughout the second half of the fiscal year.
As a final note, this margin guidance includes the unfavorable headwind of our Cobham acquisition of about 0.5%. We believe we are well positioned for the remainder of fiscal 2022. As usual, we'll closely watch the aerospace and capital markets as they develop and we'll react accordingly. Mike will provide details on other fiscal 2022 financial assumptions and updates.
Now shifting gears for a moment to non-financial matters. I'd like to touch on our DoD IG audit report, which was released in mid-December. As we expected and communicated, the audit scope and results were similar to prior audits. The report found no legal wrongdoing on behalf of TransDigm or any of our employees. The report asked for a purely voluntary refund of approximately $21 million. We disagree with many of the implications contained in the report, as well as the methodology used to arrive at many of the report's conclusions. We also disagree with the use of arbitrary standards and analysis, which render many areas of the report inaccurate and misleading.
Additionally, at the request of the House Oversight and Reform Committee, we participated in a hearing on January 19th to discuss the results of the audit. Going forward, we will continue to work with the IG, the DLA, and any other relevant parties to evaluate the results of this audit. The US government and the US warfighter remain top priorities for TransDigm. At this time, we are engaged directly with the DLA and do not have any further update on whether or not we expect to pay all or a portion of the $21 million voluntary refund requests.
Finally, I wanted to announce the retirement of our Vice Chairman, Bob Henderson. He retired at the end of first fiscal quarter. Bob has been a key member of the TransDigm management team for over 25-years and a significant partner in the Company's growth during the entire period. He served in a range of roles over his years with TransDigm, including as President of several operating units, Executive Vice President, COO of TransDigm's Airframe Business Group, and most recently, Vice Chairman, where he oversaw the integration of the operating units acquired as part of the Esterline transaction. We wish Bob well in his retirement.
Let me conclude by stating that I'm pleased with the Company's performance in this challenging time for the commercial aerospace industry and with our commitment to driving value for our stakeholders. As always, we remain focused on executing our operating strategy and managing our cost structure as we continue on this journey to a full recovery of the commercial aerospace industry. We look forward to the remainder of our fiscal 2022 and expect that our consistent strategy will continue to provide the value you have come to expect from us.
Now, let me hand it over to Jorge to review our performance and a few other items.
