AAR reports third quarter fiscal year 2026 results

(As compared to Q3 FY2025)

• Sales of $845 million; increased 25%
• GAAP diluted EPS of $1.71
• Adjusted diluted EPS of $1.25; increased 26%
• GAAP Net income of $68 million
• Adjusted EBITDA of $102 million; increased 26%
• Adjusted EBITDA margin increased to 12.1% from 12.0%

"AAR delivered another outstanding quarter, continuing our momentum. Total sales were up 25%, including 14% organic adjusted sales growth," stated John M. Holmes, AAR's Chairman, President and CEO. "We saw growth across each of our parts, repair, and software platform activities in the quarter. Our Parts Supply segment grew 45% led by 36% organic growth in our new parts Distribution activity. Within new parts Distribution we saw 55% organic growth in sales to our government customers. Our Repair & Engineering business also reported strong sales growth in the period on continued volume increases in our hangars and component repair facilities, while Trax results showcased further expansion of its recurring software revenue.

"Our continued strong revenue growth translated to an adjusted EBITDA increase of 26% in the quarter, and we expanded our adjusted EBITDA margins from 12.0% to 12.1% year over year. We expect continued margin expansion as we shift our sales mix to higher margin offerings as well as realize synergies from our recent acquisitions.

"Regarding acquisitions, the execution of our integration and performance improvement plan for HAECO Americas is progressing well and is ahead of schedule. Furthermore, our acquisition of ADI is exceeding our expectations, and we continue to find new opportunities for growth, particularly given its government product lines. Finally, we remain on track to close our acquisition of A-R-T in the fourth quarter of fiscal year 2026.

"We also made solid progress with respect to our leverage. Cash from operations was $75 million in the quarter, which helped us to reduce net leverage to 2.17x. We are now comfortably within our target range of 2.0x to 2.5x, giving us flexibility to continue funding our strategic growth.

Holmes concluded, "We see significant opportunity for continued profitable growth ahead, supported by resilient and growing demand for our aviation aftermarket solutions. We are closely following the conflict in the Middle East and are in constant contact with our customers. Fundamental demand for air travel remains extremely strong, and we are the preferred solution for the markets we serve. We remain extremely well positioned in the market and are committed to delivering for our customers in all environments while executing on our disciplined growth strategy."

RECENT UPDATES

• Commenced exclusive distribution agreement with TRIUMPH for its actuation power line on Boeing and Airbus commercial platforms
• Recently awarded new multi-year contracts with the U.S. Air Force to repair and build new pallets at our Mobility Systems location worth up to $450 million
• Completed Oklahoma City Airframe MRO facility expansion, inducted first aircraft in early March
• Trax signed a multi-year contract expansion with Air Atlanta Icelandic to add eMobility and cloud hosting solutions to its current eMRO platform offering
• Signed a new agreement with Otto Instrument Service to distribute the LASEREF IV inertial reference system product line, further broadening our new parts Distribution activities in the business aviation market

THIRD QUARTER FISCAL YEAR 2026 RESULTS

Consolidated third quarter sales increased 25% to $845.1 million, compared to $678.2 million in the same quarter last year. Sales to commercial customers increased 27%, or $130 million, primarily due to double-digit organic growth across new parts Distribution within the Company's Parts Supply segment and the impact of the Company's acquisitions of HAECO Americas and ADI. Sales to government customers increased 19% over the same period last year, primarily due to increased order volume for new parts Distribution activities and the impact of ADI's sales to government customers. Sales to commercial customers were 73% of consolidated sales, compared to 72% in the prior year quarter.

The Company reported net income of $68.0 million, or $1.71 per diluted share. For the third quarter of the prior year, the Company reported a net loss of $8.9 million, or $0.25 per share. The prior year quarter included a pre-tax charge of $63.7 million associated with the divestiture of the Company's Landing Gear Overhaul business. Adjusted diluted earnings per share in the third quarter of fiscal year 2026 were $1.25, compared to $0.99 in the third quarter of the prior year.

Selling, general, and administrative expenses were $89.8 million in the current quarter, compared to $61.3 million in the prior year quarter. The prior year quarter included the reversal of a legal charge of $11.1 million related to a Russian court judgment, which we successfully appealed. Acquisition, amortization, and integration expenses were $8.7 million in the quarter, compared to $5.3 million in the prior year quarter.

Operating margins were 7.8% in the quarter, compared to 10.5% in the prior year quarter. Adjusted operating margin increased to 10.2% in the current year quarter from 9.7% in the prior year quarter, primarily as a result of increased volume and profitability in the Company's new parts Distribution activities.

Net interest expense for the quarter was $17.1 million, compared to $18.1 million last year. Average diluted share count increased from 35.4 million shares in the prior year quarter to 39.5 million shares in the current year quarter primarily due to the Company's equity offering in the second quarter of fiscal year 2026.

Cash flow provided by operating activities was $74.7 million during the current quarter, compared to cash used in operating activities of $18.7 million in the prior year quarter. As of February 28, 2026, net debt was $816.5 million and net leverage was 2.17x.

FOURTH QUARTER AND FULL YEAR FY2026 GUIDANCE

The Company is providing the following guidance for the fourth quarter and full year fiscal 2026:

Conference call information

On Tuesday, March 24, 2026, at 4 p.m. Central time, AAR will hold a conference call to discuss the results. A listen-only webcast and slides can be accessed at https://edge.media-server.com/mmc/p/8n3xaah2. Participants may join via phone by registering at https://register-conf.media-server.com/register/BI0f6731dbbd854a97a0fbedce9ab66e73. Once registered, participants will receive a dial-in number and a unique PIN that will allow them to access the call. A replay of the conference call will be available for on-demand listening shortly after the completion of the call at the webcast link and will remain available for approximately one year.

The slides are also available on AAR's website at https://www.aarcorp.com/en/investors/quarterly-results/. 

About AAR

AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the Chicago area, AAR supports commercial and government customers through four operating segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. Additional information can be found at aarcorp.com/.

Contact: Chris Tillett – Investor Relations | +1-630-227-5830 | investors@aarcorp.com

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995, which reflect management's expectations about future conditions, including, but not limited to, our fourth quarter and full year FY2026 guidance, execution of strategies, continued demand in the commercial and government aviation markets; market position; anticipated activities and benefits related to new or expanding business relationships; expected contributions and synergies related to acquisitions; expansion of capabilities and operational footprint; opportunities for margin improvement through operations, integration activities and other efficiency initiatives; and continued sales and margin growth, earnings performance, debt management, and capital allocation.

Forward-looking statements often address our expected future operating and financial performance and financial condition, or targets, goals, commitments, and other business plans, and often may also be identified because they contain words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "likely," "may," "might," "plan," "potential," "predict," "project," "seek," "should," "target," "will," "would," or similar expressions and the negatives of those terms.

These forward-looking statements are based on the beliefs of Company management, as well as assumptions and estimates based on information available to the Company as of the dates such assumptions and estimates are made, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including: (i) factors that adversely affect the commercial aviation industry; (ii) adverse events and negative publicity in the aviation industry; (iii) a reduction in sales to the U.S. government and its contractors; (iv) cost overruns and losses on fixed-price contracts; (v) nonperformance by subcontractors or suppliers; (vi) our ability to manage our operational footprint; (vii) a reduction in outsourcing of maintenance activity by airlines; (viii) a shortage of skilled personnel or work stoppages; (ix) competition from other companies; (x) financial, operational and legal risks arising as a result of operating internationally; (xi) inability to integrate acquisitions effectively and execute operational and financial plans related to the acquisitions; (xii) failure to realize the anticipated benefits of acquisitions; (xiii) circumstances associated with divestitures; (xiv) inability to recover costs due to fluctuations in market values for aviation products and equipment; (xv) cyber or other security threats or disruptions; (xvi) a need to make significant capital expenditures to keep pace with technological developments in our industry; (xvii) restrictions on use of intellectual property and tooling important to our business; (xviii) inability to fully execute our stock repurchase program and return capital to stockholders; (xix) limitations on our ability to access the debt and equity capital markets or to draw down funds under loan agreements; (xx) our ability to manage our debt; (xxi) non-compliance with restrictive and financial covenants contained in our debt and loan agreements; (xxii) changes in or non-compliance with laws and regulations related to federal contractors, the aviation industry, international operations, safety, and environmental matters, and the costs of complying with such laws and regulations; and (xxiii) exposure to product liability and property claims that may be in excess of our liability insurance coverage.  Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described. 

For a discussion of these and other risks and uncertainties, refer to our Annual Report on Form 10-K, Part I, "Item 1A, Risk Factors" and our other filings filed from time to time with the U.S. Securities and Exchange Commission.  These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company's control.  The risks described in these reports are not the only risks we face, as additional risks and uncertainties are not currently known or foreseeable or impossible to predict accurately or risks that are beyond the Company's control or deemed immaterial may materially adversely affect our business, financial condition or results of operations in future periods. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law.