The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: John, I appreciate the commentary on sort of the full year '23 outlook and, I guess, lack of visibility. But can you help at all or provide any more
granularity on the commercial business? You said MRO is largely full. So it sounds like that business is maybe flat to up slightly, but what's the
growth expectation specifically on the parts side in fiscal '23, if you could provide any more detail around that?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: Okay. That's helpful. And you've got a, obviously, very low leverage. It sounds like from your commentary that there might be some investment
opportunities you're looking at -- you've talked in the past about attractiveness of PMA. Is that something you're continuing to look at?
And organically, are there -- is there an expectation that there's significant opportunities to invest in either engines or airframe or other feedstock
as you think about the surplus marketplace here in the near term?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: Okay. That's great. And if I could just -- one final question. As I look at then the investments, you had some nice growth in cash from obviously '21
through '22. How do we think about -- and you've got a lot of money tied up in working capital. So how do we think about free cash in '23 on top
of just the growth in income? Is working capital maybe some opportunity to unlock some cash there? Or do we see limited growth of '22?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: John, what should we assume for any kind of labor rate relief you might be getting in the MRO business in fiscal '23, considering the inflated labor
costs?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: Okay. That's helpful. And in the past, you've talked about the need to see a sort of a more material inflection in demand for surplus material in the
revenues associated with the surplus parts market to really see a step change in the margin profile. It sounds like, from your comments, that we're
maybe not there, at least in the first half of fiscal '23.
What should we be watching out in order to maybe get a little bit of visibility on that margin step change? And barring that, how should we think
about the margin progression for fiscal '23?
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JULY 21, 2022 / 12:30PM, AIR.N - Q4 2022 AAR Corp Earnings Call
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