#United States #AAR CORP #Aviation Services #fiscal results #Wood Dale, Illinois

AAR Corp Reports Impressive Q2 Results

Overview
AAR Corp (NYSE AIR), a premier provider of aviation services catering to commercial and government sectors, has recently unveiled its financial performance for the second quarter of fiscal year 2025, ending November 30, 2024. This quarter exhibited remarkable growth with total sales amounting to $686 million, marking a 26% increase compared to the same period last year. This strong performance is attributed to a 12% organic growth rate, which accelerated from 6% in the first quarter.

Financial Highlights

• - Sales: $686.1 million (up 26% YoY)
• - Organic Growth: 12%
• - GAAP Net Loss: $31 million
• - Adjusted EPS: $0.90 (up 11% YoY)
• - Adjusted EBITDA: $78 million (up 42% YoY)
• - Cash Flow from Operations: $22 million

Management Insights

John M. Holmes, AAR's Chairman, President, and CEO, expressed satisfaction with the robust sales growth, particularly highlighting a 20% increase in the Parts Supply segment. This segment benefitted significantly from new distribution agreements and a resurgence in the demand for engine and airframe components. Furthermore, the Repair Engineering segment showcased a remarkable year-over-year growth of 57%, driven by impactful contributions from recent acquisitions.

Holmes highlighted the firm’s commitment to focusing on high-margin activities, referencing the recent divestiture of the Landing Gear Overhaul business, considered an immediate positive for margins and earnings.

Recent Developments

Key business developments include:

• - New Agreements: AAR secured multi-year agreements with both Chromalloy and Whippany Actuation Systems, along with extending its contract with Singapore Airlines.
• - Joint Ventures: AAR is also set to engage in a joint venture with Air France, aimed at supporting next-generation aircraft within the Asia-Pacific region.

Segment Performance

The second quarter revealed strong consolidated sales, particularly in Parts Supply and Repair Engineering, where revenue growth was robust. Total sales to commercial customers surged by 30%, contributing significantly to the overall increase in revenue. Adjustments in sales and margins indicate a strategic focus on enhancing profitability across core segments, which is expected to yield long-term benefits.

Financial Adjustments and Future Outlook

Despite reporting a net loss of $30.6 million due to the recently announced Foreign Corrupt Practices Act (FCPA) settlement costs, the adjusted diluted earnings per share rose to $0.90 from $0.81 year-over-year. Selling, general, and administrative expenses witnessed an increase, heavily influenced by the completion of the settlement costs associated with the FCPA allegations.

Looking ahead, Holmes expressed optimism regarding sustained sales growth in the latter half of FY2025, anticipating further margin expansion due in part to continued growth in the Parts Supply segment and the synergies expected from the Product Support acquisition.

Insights on Future Strategy

AAR is realigning its focus on higher-margin activities while ensuring effective debt management post-acquisition. Investors are keenly awaiting the ongoing optimization of operations and the strategic divestiture of less profitable segments, which are expected to enhance overall business efficiency and financial performance in fiscal year 2026.

Conference Call

AAR Corp will discuss the details further in their upcoming conference call on January 7, 2025, at 4 p.m. Central time, providing a platform for investors and analysts to gain additional insights on the company’s performance and future initiatives.

Conclusion
AAR Corp’s second-quarter results reflect a favorable trajectory bolstered by strategic decisions and market demand, paving the way for potential record financial results in the upcoming periods as the company focuses on sustainable growth and higher profitability.