#USA #AAR CORP #Wood Dale #Aviation Services #Fiscal Year 2025

AAR Corp's Impressive Third Quarter Results for FY 2025

On March 27, 2025, AAR Corp (NYSE: AIR), a prominent player in the aviation services sector, released its financial results for the third quarter of fiscal year 2025, concluding on February 28, 2025. The numbers highlight a substantial growth trajectory and strong operational performance, underscoring AAR's strategic advantage in a competitive market.

Financial Highlights

In comparison to the same quarter last year, AAR reported an impressive 20% increase in sales, reaching $678 million, up from $567 million. However, the company did face some setbacks, including a GAAP net loss of $9 million and a GAAP EPS of $(0.25). Adjusted for various factors, the diluted EPS stood at $0.99, reflecting a 16% increase from the previous year. Additionally, adjusted EBITDA surged to $81 million, marking a remarkable 39% growth compared to Q3 FY 2024.

AAR's EBITDA margin improved significantly, climbing from 10.3% to 12.0%, showcasing the company's effective cost management and integration measures.

Management's Perspective

John M. Holmes, the Chairman, President, and CEO of AAR Corp, expressed his satisfaction with this quarter's performance, attributing the growth to elevated demand in their aftermarket services. He noted that Parts Supply sales rose by 12%, attributed to boosts in both commercial and government contracts. Furthermore, the Repair Engineering segment experienced a staggering 53% year-over-year sales increase due to the Product Support acquisition and enhanced throughput in their Airframe Maintenance Repair and Overhaul (MRO) facilities.

Holmes emphasized AAR's focus on efficiency improvements, which played a critical role in expanding profit margins. He highlighted their commitment to maintaining this upward trajectory as the company integrates its latest acquisitions into its operational structure.

New Business Developments

AAR has also successfully secured several new business agreements. Notably, they signed an exclusive long-term agreement with Chromalloy to distribute BELAC PMA turbine blades, and a renewable contract with Cebu Pacific Air for CFM56 engine nacelle maintenance services. These agreements validate AAR's position as a leading independent distributor in the aviation aftermarket and reflect their strategic intent to deepen market penetration.

Portfolio Adjustments

AAR disclosed plans to optimize its business portfolio by selling its Landing Gear Overhaul segment for $51 million, projecting completion in the fourth quarter of FY 2025. This divestiture aligns with AAR’s long-term strategy to concentrate on high-growth segments and enhance overall company performance.

Operational Insights

Despite recording a net loss, AAR's operational metrics demonstrate resilience. Consolidated sales to commercial customers constituted 72% of total sales, showing a 22% increase from the previous year, while government sales rose by 15%. The reduction in selling, general, and administrative expenses, coupled with a notable reversal of legal charges, significantly contributed to operational efficiency.

AAR's operating margin was reported at 10.5%, a substantial rise from 5.8% compared to last year. The adjusted operating margin advanced to 9.7%, bolstered by the growth observed in its Repair Engineering segment and enhanced profit from Integrated Solutions.

Future Outlook

Looking ahead, Holmes remains optimistic about continued sales growth fueled by demand within both commercial and government aviation markets. There's an expectation for further margin enhancement through leveraging efficiencies in new parts distribution and realizing synergies from the Product Support acquisition.

The company aims to lower its net leverage from 3.58x to 3.06x within a year, reflecting their focus on disciplined capital allocation and shareholder value creation.

AAR will hold a conference call later today to provide further insights into these results and discuss future strategies. A replay of the call will be accessible for on-demand listening for those unable to attend live.

AAR Corp, headquartered in the Chicago area, operates in over 20 countries, serving commercial and government markets with a range of services spanning from parts supply to integrated solutions, ensuring its continuing status as a key player in the aviation industry.