AAR reports first quarter fiscal year 2025 results

Download full earnings release, including financial statements and tables.

• First quarter sales of $662 million, up 20% over the prior year 
• First quarter GAAP diluted earnings per share of $0.50 compared to a loss per share of $0.02 in Q1 FY2024
• First quarter adjusted diluted earnings per share of $0.85, up 9% from $0.78 in Q1 FY2024
• Sales growth of 20% in both our commercial and government businesses

Wood Dale, Illinois, September 23, 2024 — AAR CORP. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, today reported first quarter fiscal year 2025 consolidated sales of $661.7 million and net income of $18.0 million, or $0.50 per diluted share. For the first quarter of the prior year, the Company reported sales of $549.7 million and a net loss of $0.6 million, or $0.02 per diluted share. Our adjusted diluted earnings per share in the first quarter of fiscal year 2025 were $0.85, compared to $0.78 in the first quarter of the prior year. 

Consolidated first quarter sales increased 20% over the prior year quarter. Our consolidated sales to commercial customers and to government customers both increased 20% over the prior year quarter.  These increases were primarily due to the acquisition of the Product Support business and organic growth.  Sales to commercial customers were 71% of consolidated sales in both the current and prior year quarters.

“During the quarter, we continued to execute well across the company. We drove 26% organic growth in our new parts distribution activities, had strong operational performance in our hangars and saw a return to growth in our government business. The quarter also included meaningful contributions from Trax, and the recent Product Support acquisition continues to exceed our expectations,” said John M. Holmes, Chairman, President and Chief Executive Officer of AAR CORP.

Selling, general, and administrative expenses were $75.9 million in the current quarter, compared to $74.7 million in the prior year quarter.  Acquisition, amortization, and integration expenses were $7.1 million in the current quarter compared to $2.9 million in the prior year quarter.

Operating margins were 6.6% in the current quarter, compared to 4.6% in the prior year quarter. Adjusted operating margin increased from 7.3% in the prior year quarter to 9.1% in the current year quarter. The improved adjusted margin over the prior year is primarily driven by the favorable contribution from the recently acquired Product Support business as well as improved execution. 

During and subsequent to the quarter, we received multiple new contract awards, including:

• Five-year firm fixed price IDIQ contract with an aggregate ceiling value of approximately $1.2 billion from the U.S. Navy’s Naval Air Systems Command (NAVAIR) to perform engine depot maintenance and repair for its P-8A Poseidon Aircraft fleet
• Five-year firm fixed price IDIQ contract with an aggregate ceiling value of approximately $1.2 billion by NAVAIR to perform P-8A Poseidon depot airframe maintenance and depot field team support for the U.S. Navy, government of Australia, and foreign military sales customers
• Multiple, long-term distribution agreements with Ontic that expand our support across various government and commercial platforms

Net interest expense for the quarter was $18.3 million, compared to $5.4 million last year, primarily due to increased debt levels as a result of funding the Product Support acquisition. Average diluted share count increased from 35.1 million shares in the prior year quarter to 35.6 million shares in the current year quarter. From a capital deployment perspective, we are prioritizing debt repayment but will evaluate share repurchases along with other attractive investment opportunities to deploy our capital.  We have $52.5 million remaining on our $150 million share repurchase program.

Cash flow used in operating activities was $18.6 million during the current quarter compared to $18.7 million in the prior year quarter. As of August 31, 2024, our net debt was $942.7 million and our net leverage, pro forma for the last twelve months adjusted EBITDA of the Product Support business was 3.31x. Excluding our accounts receivable financing program, our cash flow used in operating activities was $33.9 million in the current quarter. 

Holmes concluded, “We have been expanding our adjusted operating margin each quarter over the past three years and I am proud of our team’s strong execution.  As we continue to drive growth in our higher margin activities as well as fully integrate the Product Support business, we expect further margin expansion.  Demand remains exceptionally strong for our services and we expect continued growth across both our commercial and government businesses.”

Conference call information
On Monday, September 23, 2024, at 4 p.m. Central time, AAR will hold a conference call to discuss the results. A listen-only webcast and slides can be accessed at https://edge.media-server.com/mmc/p/4zxrgath/. Participants may join via phone by registering at https://register.vevent.com/register/BI842bfc6277834251b3d46d91d48ddae4. Once registered, participants will receive a dial-in number and a unique PIN that will allow them to access the call.  The slides are also available on AAR’s website at https://www.aarcorp.com/f1q25investor.pdf.

A replay of the conference call will be available for on-demand listening shortly after the completion of the call at the webcast link and will remain available for approximately one year.

About AAR
AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the Chicago area, AAR supports commercial and government customers through four operating segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. Additional information can be found at aarcorp.com.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995, which reflect management’s expectations about future conditions, including, but not limited to, continued demand in the commercial and government aviation markets, anticipated activities and benefits under extended, expanded and new services, supply and distribution agreements, opportunities for capital deployment and margin improvement, earnings performance, contributions from our recent acquisitions, and expectations for our new parts distribution activities.

Forward-looking statements often address our expected future operating and financial performance and financial condition, or sustainability targets, goals, commitments, and other business plans, and often may also be identified because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.

These forward-looking statements are based on the beliefs of Company management, as well as assumptions and estimates based on information available to the Company as of the dates such assumptions and estimates are made, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including: (i) factors that adversely affect the commercial aviation industry; (ii) adverse events and negative publicity in the aviation industry; (iii) a reduction in sales to the U.S. government and its contractors; (iv) cost overruns and losses on fixed-price contracts; (v) nonperformance by subcontractors or suppliers; (vi) a reduction in outsourcing of maintenance activity by airlines; (vii) a shortage of skilled personnel or work stoppages; (viii) competition from other companies; (ix) financial, operational and legal risks arising as a result of operating internationally; (x) inability to integrate acquisitions effectively and execute operational and financial plans related to the acquisitions; (xi) failure to realize the anticipated benefits of acquisitions; (xii) circumstances associated with divestitures; (xiii) inability to recover costs due to fluctuations in market values for aviation products and equipment; (xiv) cyber or other security threats or disruptions; (xv) a need to make significant capital expenditures to keep pace with technological developments in our industry; (xvi) restrictions on use of intellectual property and tooling important to our business; (xvii) inability to fully execute our stock repurchase program and return capital to stockholders; (xviii) limitations on our ability to access the debt and equity capital markets or to draw down funds under loan agreements; (xix) non-compliance with restrictive and financial covenants contained in our debt and loan agreements; (xx) changes in or non-compliance with laws and regulations related to federal contractors, the aviation industry, international operations, safety, and environmental matters, and the costs of complying with such laws and regulations; and (xxi) exposure to product liability and property claims that may be in excess of our liability insurance coverage.  Should one or more of those risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described.  Those events and uncertainties are difficult or impossible to predict accurately and many are beyond our control.

For a discussion of these and other risks and uncertainties, refer to our Annual Report on Form 10-K, Part I, “Item 1A, Risk Factors” and our other filings from time to time with the U.S Securities and Exchange Commission.  These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company’s control.  The risks described in these reports are not the only risks we face, as additional risks and uncertainties are not currently known or foreseeable or impossible to predict accurately or risks that are beyond the Company’s control or deemed immaterial may materially adversely affect our business, financial condition or results of operations in future periods. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Contact
Investor Relations
+1-630-227-2017
investors@aarcorp.com

Download full earnings release, including financial statements and tables.