AAR Corp Q4 2025 Earnings Call Transcript

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

Question: Ken Herbert - RBC Capital Markets - Analyst : Yeah, hey, good afternoon, John and Sean. Just wanted to first ask, the first quarter guidance for revenue growth implies a fairly wide range, typically larger than what you've given in the past. Can you just talk about the puts and takes in terms of how we should think about what puts you to the lower end of that versus the upper end of that in terms of the revenue growth in the quarter?

Question: Ken Herbert - RBC Capital Markets - Analyst : Okay, thanks. And specifically, within the Repair and Engineering segments, the step down and adjusted the margins in the quarter. Can you just talk about maybe some of the moving pieces there and how we should think about the pace of improvement in that segment in particular as we think about fiscal '26? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 9:00PM, AIR.N - Q4 2025 AAR Corp Earnings Call

Question: Ken Herbert - RBC Capital Markets - Analyst : Okay, that's great. And Sean, just finally on that, as you think about the full year once you sort of normalize for that and considering what you're getting with the added capacity, I know you don't guide with too much granularity here. But as we look across the segments, where could we potentially see the most margin improvement in '26 across the various businesses?

Question: Ken Herbert - RBC Capital Markets - Analyst : Perfect. Thanks. Nice quarter. I'll pass it back there.

Question: Louie DiPalma - William Blair - Analyst : John and Sean, hi, good afternoon. John, you disclosed that Trax has recently crossed the $50 million revenue threshold, and you also announced the marquee win with Delta along with prior wins with Virgin Atlantic Amerijet, and Rolls-Royce. And so my question is with all of this momentum and the plans to launch the supplier portal, what is like the long-term view of like Trax' revenue potential and how do you view the TAM for Trax? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 9:00PM, AIR.N - Q4 2025 AAR Corp Earnings Call

Question: Louie DiPalma - William Blair - Analyst : Great. And for Sean, are there significant costs associated with the launch of the supplier marketplace that you mentioned in the slide presentation? And should that launch take place this year?

Question: Louie DiPalma - William Blair - Analyst : Great, and one final question. I can probably do the math, but what was the most recent growth rate for the Triumph business and now it's going to be included as part of your organic growth? And so what's the most recent growth rate?

Question: Louie DiPalma - William Blair - Analyst : Okay, and one final one, what is the expectation for like the amount of time that it will take to fill the Oklahoma City and Miami hangars, the demand for those facilities? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 16, 2025 / 9:00PM, AIR.N - Q4 2025 AAR Corp Earnings Call

Question: Louie DiPalma - William Blair - Analyst : Sounds good. Thanks, John. Thanks, Sean.

Question: Scott Mikus - Melius Research - Analyst : I wanted to drill down into Parts Supply. The growth is very strong at 17%. I was just kind of wondering if we could parse that out by commercial new parts, commercial USM, and defense. And then also, did you see any airlines potentially overordering parts in the quarter to try and get ahead of tariffs?

Question: Scott Mikus - Melius Research - Analyst : Okay, that's helpful. And then also in Parts Supply margins, you called out some margin benefit from a whole asset sale that came through in the quarter. Was that specific transaction on unusually high margins, or should we assume that parts supply is a low-teens margin business with potential to be mid-high teens if there's a healthy flow of USM?

Question: Scott Mikus - Melius Research - Analyst : Okay, and then a quick one for Sean. Sean, it looks like you're going to get back into your target leverage range relatively soon. So absent any incremental M&A in the back half of your fiscal '26, you're thinking about potentially restarting the dividend or doing more regular share repos?

Question: Scott Mikus - Melius Research - Analyst : Thanks for taking the questions and nice quarter.

Question: Michael Leshock - KeyBanc Capital Markets - Analyst : Good afternoon, everyone. I wanted to ask the long-term vision of the USM business, maybe as we look three to five years down the road. Clearly, it's an important part of the total business. But just looking at the strong growth opportunities within other segments, do you see USM coming down as a percent of sales over the long term or how are you thinking about that relative to the growth of other businesses?

Question: Michael Leshock - KeyBanc Capital Markets - Analyst : Okay, and then on Trax with the Delta agreement, you touched on it a bit, but I'm curious if there's any way to frame the size of this opportunity relative to the current customer base within Trax or any way you're thinking about that outside of what you said. I appreciate it. Thank you.

Question: Michael Leshock - KeyBanc Capital Markets - Analyst : Very helpful. Appreciate it. Thanks guys.

Question: Sam Struhsaker - Truist Securities - Analyst : On for Mike Ciarmoli. I was wondering, could you guys give a little more detail on the KIRA JV and just kind of the potential scale there?

Question: Sam Struhsaker - Truist Securities - Analyst : Got it. Next one, I guess, obviously, you guys called out the capacity in the hangars that are going to come online in the future is already sold out. So it seems like you have a pretty good line of sight there in terms of demand. But we've also seen some of the airlines, Delta, talk about potentially bringing down capacity. And we've seen some declines in outside maintenance spending. So I was just curious if you guys have any change in your view on that or have you seen any signs from that kind of early reads or anything there?