AAR (AIR) 46th Annual William Blair Growth Stock Conference summary

Strategic Transformation and Business Focus

• Portfolio streamlined through exits and acquisitions, focusing on parts, repair, and software as core growth areas.

• Four business segments: Parts Supply, Repair and Engineering (including Software), Government Solutions, and Legacy Commercial Programs, with the latter being wound down.

• Emphasis on a high-performance, values-driven culture centered on quality, safety, accountability, and innovation.

• Balanced business mix: 70% commercial and 30% government, with global reach and geographic concentration in North America.

• New leadership team with deep industry experience and disciplined capital allocation.

Growth Drivers and Operational Performance

• Achieved $3.1 billion in LTM sales, 8,000 employees, and 12% EBITDA margins, with margins expanding about one point per year.

• Adjusted sales grew at a 15% CAGR, adjusted EBITDA at 26% CAGR, and adjusted EPS at 19% CAGR over four years.

• New parts distribution is the primary growth engine, growing at 25–30% CAGR organically over four years, now less than 15% of sales from used parts.

• Two-way exclusive distribution model with OEMs and 100% renewal rate on long-term OEM agreements, with ~90% exclusivity.

• Heavy maintenance business is a North American leader, recently expanded through the HAECO acquisition, with nearly 50% market share and sold out through the decade.

Software and Technology Integration

• Trax, a maintenance ERP system, supports over 130 customers and 6,000+ aircraft, transitioning to a SaaS-based model (eMRO) by end of 2028.

• Trax provides real-time data access, enhancing parts and repair business decisions and OEM partnerships.

• Delta Air Lines is a major Trax customer, with a three-year rollout plan underway and over 11,000 users onboarded.

• Aerostrat acquisition adds heavy maintenance planning; Airvoyant, an AI-driven procurement tool, automates airline parts purchasing.

• High-margin SaaS-based recurring revenue from software segment.