Kevin Stein
President, Chief Executive Officer, and Director at TransDigm Group
Good morning. Thanks for joining us on the call today. First, I'll start off with the usual quick overview of our strategy, a few comments about the quarter, and discuss our fiscal '24 outlook. Then Joel and Sarah will give additional color on the quarter.
To reiterate, we believe we are unique in the industry in both the consistency of our strategy in good times and bad, 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 unique proprietary products. 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: first, we own and operate proprietary aerospace businesses with significant aftermarket content; second, we utilize a simple, well-proven, value-based operating methodology; third, we have a decentralized organizational structure and unique compensation system closely aligned with our shareholders; fourth, we acquire businesses that fit this strategy and where we see a clear path to PE-like returns; and lastly, 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 strong quarter. Our Q1 results ran ahead of our expectations and we've raised our sales and EBITDA as defined guidance for the year.
Commercial aerospace market trends remain favorable, as the industry continues to recover and progress towards normalization. Global air traffic is closing in on pre-pandemic levels and demand for travel remains high. Airline demand for new aircraft also remains high and the OEMs are working to increase aircraft production. However, total air travel demand remains slightly below pre-COVID levels and OEM aircraft production rates remain well below pre-pandemic levels. There is still progress to be made for the industry and our results continue to be adversely affected in comparison to pre-pandemic levels.
In our business, during the quarter, we saw a healthy growth in our revenues and bookings for all three of our major market channels, Commercial OEM, Commercial Aftermarket and Defense. Our EBITDA as defined margin was 51% in the quarter. Contributing to this strong Q1 margin is the continued recovery in our Commercial Aftermarket revenues, along with diligent focus on our operating strategy. Additionally, we had strong operating cash flow generation in Q1 of over $630 million and ended the quarter with over $4.1 billion of cash. We expect to steadily generate significant additional cash throughout the remainder of 2024.
Next, an update on our capital allocation activities and priorities. As we discussed on our last earnings call, we agreed on November 9 to acquire the Electron Device Business of Communications & Power Industries, also known as CPI, for approximately $1.385 billion in cash. CPI's Electron Device Business is a leading global manufacturer of electronic components and sub-systems, primarily serving the aerospace and defense market. The products manufactured by this business are highly engineered proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. Our team is working diligently through the approval process in the U.S. and U.K. and the acquisition is expected to close this fiscal year. We remain very excited about adding this proprietary business as one of our TransDigm operating units.
Regarding the current M&A pipeline, we continue to actively look for M&A opportunities that fit our model. As we look out over the next 12 months to 18 months, we continue to see a target-rich environment for our focused acquisition strategy. As usual, the potential targets are mostly in the small- and mid-size range. I cannot predict or comment on possible closings, but we remain confident there is a long runway for acquisitions that fit our portfolio.
The capital allocation priorities at TransDigm are unchanged. Our first priority is to reinvest in our business; second, do accretive disciplined M&A; and third, return capital to our shareholders via share buybacks or dividends. A fourth option, paying down debt, seems unlikely at this time, though we do still take this into consideration. We are continually evaluating all of our capital allocation options, but both M&A and capital markets are difficult to predict. As always, we continue to closely monitor the capital markets and remain opportunistic.
As mentioned earlier, we ended the quarter with a sizable cash balance of over $4.1 billion, which includes the $2 billion of cash from the new debt issued during our first quarter. Sarah will comment on this in more detail later. We have significant liquidity and financial flexibility to meet any likely range of capital requirements or other opportunities in the readily foreseeable future.
Moving to our outlook for fiscal '24. As noted in our earnings release, we are increasing our full fiscal year '24 sales and EBITDA as defined guidance to reflect our strong first quarter results and our current expectations for the remainder of the year. At the midpoint, sales guidance was raised $85 million and EBITDA as defined guidance was raised $45 million. The guidance assumes no additional acquisitions or divestitures and is based on current expectations for a continued recovery in our primary commercial end markets throughout fiscal year '24.
Our current guidance for fiscal '24 is as follows and can also be found on Slide 6 in the presentation. Note that the pending acquisition of CPI's Electron Device Business is excluded from this guidance until acquisition close. The midpoint of our fiscal '24 revenue guidance is now $7.665 billion, or up approximately 16% in regards to the market channel growth rate assumptions that this revenue guidance is based on. For the Defense market, we are updating the full-year growth rate assumptions as a result of our strong first quarter results and current expectations for the remainder of the year. For Defense, we now expect revenue growth in the high-single-digit to low-double-digit percentage range. This is an increase from our previous guidance of mid- to high-single-digit percentage range.
We are not updating the full-year market channel growth rate assumptions for Commercial OEM and Commercial Aftermarket, as underlying market fundamentals have not meaningfully changed. Commercial OEM and Commercial Aftermarket revenue guidance is still based on our previously issued market channel growth rate assumptions. We expect Commercial OEM revenue growth around 20% and Commercial Aftermarket revenue growth in the mid-teens percentage range.
The midpoint of our EBITDA as defined guidance is now $3.985 billion, or up approximately 17%, with an expected margin of around 52%. This guidance includes about 100 basis points of margin dilution from our recent Calspan acquisition. We anticipate EBITDA margins will move up throughout the remainder of the year. The midpoint of our adjusted EPS is decreasing versus our prior guide, primarily due to the higher interest expense associated with the incremental debt we took on to fund CPI. The midpoint of adjusted EPS is now expected to be $30.85, or up approximately 19% over prior year. Sarah will discuss in more detail shortly the factors impacting EPS, along with some other fiscal '24 financial assumptions and updates.
We believe we are well-positioned for the remainder of fiscal '24. We'll likely continue to closely watch how the aerospace and capital markets continue to develop and react accordingly. Let me conclude by stating that I am very pleased with the Company's performance this quarter and throughout the recovery of the commercial aerospace industry. We remain focused on our value drivers, cost structure and operational excellence.
Now, let me hand it over to Joel Reiss, our TransDigm Group Co-COO, to review our recent performance and a few other items.
