AAR Corp.

Total sales in Q4 were a record $928 million, up 26% year over year, including 13% organic growth. Adjusted EBITDA was $116 million, up 27%, and adjusted EBITDA margin was 12.5% versus 12.4% last year. Adjusted diluted EPS was $1.53, up 32% year over year. For the full year, adjusted sales were $3.3 billion, up 20%, adjusted EBITDA grew 24%, adjusted EBITDA margin was 12.1% (or 12.7% excluding legacy Commercial Programs), and adjusted EPS was $5.05, up 29%. Q4 adjusted cash from operations was $58 million and full-year adjusted cash from operations was $94 million. Looking ahead, FY27 guidance calls for total sales excluding legacy commercial programs to grow low double digits to low teens, with Q1 ex-legacy sales growth of 21% to 23% and Q1 adjusted EBITDA margin of 12.25% to 12.75% ex-legacy commercial programs.

John Holmes emphasized that AAR’s connected parts-repair-software platform is driving higher, more profitable growth and said the company is increasingly confident it can reach or exceed the high end of its margin target range over time. He highlighted strength in new parts distribution, Trax, Airvoyant, Aerostrat, and airframe/component MRO, while noting the company is still early in cross-selling opportunities and software monetization. His tone was upbeat and confident, but he repeatedly framed progress as non-linear and execution-dependent.

Dylan Wolin focused on segment detail, cash flow, and balance sheet progress. Parts Supply sales rose 39% to $424 million with adjusted EBITDA of $61.7 million, Repair, Engineering and Software sales increased 35% to $314 million with adjusted EBITDA of $36 million, and Government Solutions sales declined 8% to $130 million while adjusted EBITDA rose 58% to $20.8 million. He noted adjusted cash from operations of $58 million in Q4, improved receivables and inventory turns, and net leverage improving from 2.17x at the end of Q3 to 2.03x at the end of Q4 despite funding the ART acquisition; he also said operating cash flow was 24% of adjusted EBITDA for the full year, moving toward the long-term 30%+ target.

Analysts focused on commercial parts demand trends, government tailwinds from rising geopolitical tensions, margins in Parts Supply, the Woodward expansion, cross-selling into component repair, M&A capacity, Airvoyant adoption, software margin potential, and the pace of HAECO integration. Management said commercial distribution demand has stayed consistently strong, government distribution had a very strong year with 34% organic growth and is now lapping tougher comps, and Parts Supply margin pressure came mainly from USM asset availability and mix, with margins expected to improve as distribution grows. On HAECO, management said rightsizing is largely done, work shifts should finish by the end of calendar 2026, and the site should reach consistent margins by Q4 FY27. On software, management said interest in Airvoyant was significant, Trax is on track toward $100 million, and longer term software margins could rise to 30% to 40% as scale builds.