AAR Corp Q2 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ken Herbert - RBC Capital Markets Inc - Analyst : John and Sarah, really nice quarter. John, maybe just to start. On the Parts Supply, how do we think about with the 32% growth, is it possible to parse that out a little bit more by, say, volume versus price? And if you're seeing anything unique on the price side from an airline perspective? And then within volume, how we think about maybe sort of same-store sales of that versus sort of new contract wins or expansions to the portfolio in the quarter?

Question: Ken Herbert - RBC Capital Markets Inc - Analyst : That's helpful. And as you think about moving here to calendar '26, the second half of your fiscal year, are there any concerns or are you seeing any risk about destocking at your airline customers after, obviously, several years of what seems to be maybe some buffer inventory level building there?

Question: Ken Herbert - RBC Capital Markets Inc - Analyst : Perfect. And just finally, if I could, the implied third-quarter margin represents a bit of a step down sequentially. I'm guessing this is really mixed as you think about the acquisitions, but anything else going on besides mixed in terms of sequentially second to third quarter on the margins?

Question: Louie DiPalma - William Blair Capital Partners - Analyst : John, Sarah, and Christopher, good afternoon, and happy 2026. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. JANUARY 06, 2026 / 10:00PM, AIR.N - Q2 2026 AAR Corp Earnings Call

Question: Louie DiPalma - William Blair Capital Partners - Analyst : John, you became the heavy maintenance industry leader with the HAECO Americas deal. Do you see synergies with heavy maintenance and your other businesses, such as your component repair business and also with Trax?

Question: Louie DiPalma - William Blair Capital Partners - Analyst : Excellent. And also, you announced the win yesterday with Thai Airways. And I'm wondering, has the landmark win with Delta Airlines that you announced over the summer, has that stimulated the pipeline? As many airlines, they often follow Delta's lead, given Delta's role as one of the largest MROs in addition to one of the largest airlines.

Question: Ken Herbert - RBC Capital Markets Inc - Analyst : John, on the USM front, one of your major partners, FTAI, has announced an aero-derivative IGT offering for the CFM56. It sounds like overall activity for you on that engine with FTAI may have been trending down. But do you see this potentially as a risk longer term to engine volumes, perhaps, for your USM business as we maybe see more traction of aeroderivative engines into non-aerospace markets?

Question: Michael Ciarmoli - Truist Securities - Analyst : Thanks for getting me in there, guys. Not sure what was going on, but real nice results. John, just how should we think, you know, you've given sort of the annual guidance in terms of revenues. You know, we've got some dilution on the margins. Any thoughts on how we should think about that adjusted operating margin and maybe call it a 10% ceiling when you can kind of firmly punch through that? It does seem like, I guess, with more of a full quarter, you kind of talked about it, you get a little bit of that dilution from HAECO. It's going to take a little bit. Anything in terms of how we should think about those adjusted margins going forward, you know, taking into account the synergies, the cost out, and some of the other benefits? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. JANUARY 06, 2026 / 10:00PM, AIR.N - Q2 2026 AAR Corp Earnings Call

Question: Michael Ciarmoli - Truist Securities - Analyst : Okay, okay. And then just on the revenue outlook for the year, do you have any contributions from the new capacity coming online in this current fiscal '26 guidance? Or is it going to be a more pronounced positive impact next year?

Question: Michael Ciarmoli - Truist Securities - Analyst : Perfect. And then I'm going to ask you this one anyway. I get this question a lot from clients and have gotten it. Just from the rationale to expand that lower margin MRO heavy maintenance, you know, it often gets perceived as the wrench-turning aspect of the business. I mean, to me it makes a lot of sense, but, you know, you're kind of adding to the lowest margin portion of your business. I know you talked about the synergy.

Question: Michael Ciarmoli - Truist Securities - Analyst : Just the thoughts on maybe skewing more towards that higher-margin Parts business or how should we think about it? How should investors really think about that when they see you deploying capital there?