AAR (AIR) investor relations material

Executive summary

• Announced acquisition of a 65% controlling interest in MRO Holdings, a leading airframe heavy maintenance provider, for an implied enterprise value of $4 billion, significantly expanding scale and capabilities in the aviation aftermarket sector, with closing targeted for fiscal Q3 2027.

• Q1 FY27 sales rose 24% year-over-year to $918 million, with strong growth across all core segments and commercial demand.

• Adjusted EBITDA for Q1 was $117 million (12.7% margin, up 100 bps YoY), and adjusted diluted EPS increased 38% to $1.49.

• Record Q1 adjusted cash from operations of $57 million, representing 48% of adjusted EBITDA.

• Four acquisitions completed in the past year, including ADI, HAECO Americas, ART, and Aerostrat, expanding product and service offerings.

Financial highlights

• Q1 FY27 sales: $918 million (+24% YoY); adjusted EBITDA: $117 million (12.7% margin, +100 bps YoY); adjusted operating income: $97 million (10.6% margin, +90 bps YoY).

• Adjusted diluted EPS: $1.49 (+38% YoY); GAAP diluted EPS: $1.00.

• Gross profit increased 31.9% to $176.3 million; gross margin improved to 19.2%.

• Cash from operations was $55.8 million, a $100.7 million improvement year-over-year.

• Net leverage reduced to 1.81x by quarter-end; net debt at $780.5 million.

Outlook and guidance

• Q2 FY27 sales growth (excluding Legacy Commercial Programs) expected at 14%-16%, with adjusted EBITDA margin of 13.0%-13.4%.

• Full-year FY27 sales growth (excluding LCP) projected in the low teens, reflecting strong demand and performance.

• Both Q2 and full-year outlooks exclude any impact from the MRO Holdings acquisition.

• Updated long-term target for adjusted EBITDA margin to 19%-20% within 3-4 years post-acquisition.

• Approximately 70% of $866 million backlog expected to convert to revenue in the next 12 months.