[Management View]
AAR Corp delivered record fourth-quarter and full-year results, with a 12% YoY increase in total sales to $736 million. Key strategic priorities included the integration of Product Support, divestiture of the landing gear business, and significant cost synergies. The Trax software business achieved a major win with Delta Airlines, supporting management's goal to double Trax revenue through high-value contracts.

[Outlook]
The company anticipates maintaining solid organic growth rates and improved adjusted operating margins, supported by hangar expansions and increasing demand for parts distribution and integrated solutions. FY2026 guidance includes sales growth of 6%-11% for Q1, excluding landing gear, with adjusted operating margin projected at 9.6%-10%.

[Financial Performance]
AAR Corp reported a 19% YoY increase in adjusted EBITDA to $90.9 million, with a margin expansion to 12.4%. Adjusted diluted EPS rose 32% to $1.16. The Parts Supply segment saw a 17% increase in sales, while Repair and Engineering sales grew 3% YoY. Integrated Solutions adjusted sales increased by 10%.

[Q&A Highlights]
Question 1: The first quarter guidance for revenue growth implies a wide range. Can you discuss the factors influencing this range?
Answer: The range is influenced by the USM environment and larger transactions that may fluctuate. We anticipate growth in Q1, despite some variability.

Question 2: Can you explain the step down in adjusted EBITDA margins in the Repair and Engineering segment?
Answer: The margin decline was due to the closure of the New York facility, resulting in stranded fixed costs. Improvement is expected as these costs are eliminated.

Question 3: What is the long-term view of Trax's revenue potential?
Answer: Trax's revenue has doubled to $50 million, with significant growth expected from new contracts and upgrades. The goal is to double revenue again.

Question 4: Are there significant costs associated with the launch of the supplier market?
Answer: Yes, there are costs, but Trax remains high margin. The supplier portal is expected to launch this fiscal year.

Question 5: What is the expectation for filling the Oklahoma City and Miami hangars?
Answer: The capacity is already sold, with Oklahoma City coming online in Q1 2026 and Miami in Q3 2026.

[Sentiment Analysis]
Analysts expressed positive sentiment, acknowledging strong performance and strategic execution. Management conveyed confidence in growth prospects and operational improvements.

[Quarterly Comparison]
| Metric | Q4 FY2025 | Q4 FY2024 |
|-------------------------------|-----------|-----------|
| Total Sales | $736M | N/A |
| Adjusted EBITDA | $90.9M | N/A |
| Adjusted EBITDA Margin | 12.4% | 11.6% |
| Adjusted Diluted EPS | $1.16 | $0.88 |
| Parts Supply Sales | $306M | N/A |
| Repair and Engineering Sales | $223M | N/A |
| Integrated Solutions Sales | $181.5M | N/A |

[Risks and Concerns]
Risks include near-term headwinds from Department of State cost efforts impacting Iraq operations and potential cash use in Q1 due to seasonality and investment opportunities.

[Final Takeaway]
AAR Corp's record financial performance in FY2025 reflects successful strategic initiatives, including portfolio optimization and cost synergies. The company's focus on expanding its parts distribution and integrated solutions segments, along with the Trax software business, positions it well for continued growth. Despite some near-term challenges, AAR's strong market position and strategic investments provide a solid foundation for future success.