[Management View]
AAR Corp. reported record revenue for Q4 and FY2025, driven by strong organic growth and margin expansion. Key strategic priorities included portfolio optimization, cost synergies from acquisitions, and significant contributions from digital investments like Trax.

[Outlook]
Management expects organic sales growth in FY2026 to approach the prior year’s 9% growth rate, with adjusted operating margins expected to improve from 9.6% in FY2025. Q1 FY2026 sales are projected to grow 6%-11%, with adjusted operating margins of 9.6%-10%.

[Financial Performance]
- Q4 FY2025 adjusted sales: $736 million, up 12% YoY
- Full-year FY2025 revenue: $2.8 billion, up 20% YoY
- Q4 FY2025 adjusted EBITDA: $90.9 million, up 19% YoY
- Q4 FY2025 adjusted diluted EPS: $1.16, up 32% YoY
- Government sales grew 21% YoY in Q4 FY2025; commercial sales rose 12% YoY

[Q&A Highlights]
Question 1: The first quarter guidance for revenue growth implies a fairly wide range. Can you discuss the factors that could influence this range?
Answer: The range is influenced by the USM environment and larger transactions that may vary. We anticipate growth in Q1, following a strong Q4.

Question 2: Can you explain the step down in adjusted EBITDA margins in the repair and engineering segment and the expected improvement in FY2026?
Answer: The margin decline was due to the closure of the New York facility, with fixed costs remaining. Improvement is expected as these costs are eliminated.

Question 3: What is the long-term revenue potential for Trax, considering recent wins and the supplier portal launch?
Answer: Trax revenue has doubled to $50 million since acquisition. With new wins and upgrades, we aim to double it again.

Question 4: Are there significant costs associated with the supplier market launch, and will it occur this year?
Answer: Yes, there are costs, and we expect to incur them this fiscal year as we roll out the supplier portal.

Question 5: What was the most recent growth rate for the Triumph business, and how will it be included in organic growth?
Answer: The Triumph business contributed to the 8% growth in the repair and engineering segment, and it will now be part of organic growth.

Question 6: What is the expectation for filling the Oklahoma City and Miami hangars?
Answer: The capacity is already sold out, with Oklahoma City coming online in Q1 2026 and Miami in Q3 2026.

Question 7: Did you see any airlines over-ordering parts to get ahead of tariffs?
Answer: No significant over-ordering was observed. There was a decline in shipments to Chinese customers due to tariffs.

Question 8: What is the long-term vision for the USM business relative to other segments?
Answer: USM is expected to decrease as a percentage of total sales, with a focus on new parts distribution.

Question 9: Can you frame the size of the Delta agreement for Trax relative to its current customer base?
Answer: The Delta agreement will significantly increase Trax revenue, with potential license fee increases for existing customers upgrading to new systems.

Question 10: Can you provide more detail on the Kira JV and its potential scale?
Answer: The JV allows access to certain DOD markets, with modest growth potential.

Question 11: Have you seen any signs of reduced demand for maintenance services from airlines?
Answer: Core customers have reaffirmed their demand, and AAR is well-positioned in the heavy maintenance market.

[Sentiment Analysis]
Analysts were positive, focusing on growth opportunities and strategic initiatives. Management was confident about future growth and margin improvements.

[Quarterly Comparison]
| Metric | Q4 FY2025 | Q4 FY2024 | YoY Change |
|----------------------------|-----------|-----------|------------|
| Adjusted Sales | $736M | $657M | +12% |
| Adjusted EBITDA | $90.9M | $76.4M | +19% |
| Adjusted Diluted EPS | $1.16 | $0.88 | +32% |
| Government Sales Growth | 21% | - | - |
| Commercial Sales Growth | 12% | - | - |

[Risks and Concerns]
- Higher costs at the New York facility impacted margins, expected to improve post-closure.
- Near-term headwinds in Integrated Solutions due to Department of State cost efforts affecting the WAS contract in Iraq.

[Final Takeaway]
AAR Corp. delivered record financial performance in FY2025, driven by strategic growth initiatives and portfolio optimization. The company is well-positioned for continued growth in FY2026, with strong demand for its services and significant contributions from digital investments like Trax. Management remains focused on improving margins and leveraging new business opportunities.