What Management Said

Read the full Q4 2026 transcript ↗

These risks and uncertainties are discussed in the company's earnings release, in the Risk Factors section of the company's annual report on Form 10-K for the fiscal year ended May 31st, 2025. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are set forth in the company's earnings release and slides. Our momentum continued with another strong set of results in the quarter, demonstrating how our connected platform approach to parts, repair, and software is delivering higher, more profitable growth. We delivered 26% growth in adjusted sales, 27% growth in adjusted EBITDA, and 32% growth in adjusted earnings per share for the period.

The adjusted sales increase included 13% organic adjusted sales growth, led by 19% organic growth in our new parts distribution activities and significant growth at Trax. Our adjusted EBITDA margin in the quarter, excluding Legacy Commercial Programs segment, was 13%, already demonstrating our ability to achieve the three-year range provided at our Investor Day event held in May. For the full year, the adjusted EBITDA margin excluding Commercial Programs was 12.7%. Third, we continue to expect double-digit sales growth and further margin expansion as we execute on our plan.

Finally, our strong cash flow in the quarter helped us further reduce our net leverage. We continue to carefully manage our balance sheet in order to support our disciplined approach to capital allocation and preserve financial flexibility. Looking at slide four, total sales in the quarter were a record $928 million and grew 26% year-over-year, including 13% organic growth. We drove revenue growth in each of our four key parts, repair, and software activities in the period.

What went well
  • Record Q4 sales, adjusted EBITDA and adjusted EPS; full-year records across sales, EBITDA and EPS
  • New exclusive distribution agreement with Woodward for LEAP, GEnx and CF34 engine parts, extending the relationship from defense into commercial
  • Component MRO delivered double-digit organic growth with multiple new airline awards (notably Asia/Thailand structures work)
  • Launched Airvoyant, an AI-driven procurement solution, into beta with strong airline interest; Trax reached phase II at Delta (>10,000 users)
  • $305M U.S. Navy/Marine Corps C-40 contractor-logistics follow-on award; Mobility Systems pallet demand strong
  • Government Solutions margin expanded 670bps to 16.0% on mix shift to higher-margin programs
  • Closed the ART acquisition in April (in-house certification and engineering); net leverage at the low end of the target range (2.03x); paperless-hangar rollout at OKC and Greensboro (heading toward ~66% of airframe MRO capacity)
What went wrong
  • Parts Supply EBITDA margin fell 250bps, driven by a $6.5M one-time USM gain in the prior-year quarter and constrained USM margins (tight asset availability, narrower spreads)
  • Repair, Engineering & Software margin down 50bps on ~130bps HAECO integration drag plus ~90bps of one-time component-MRO costs
  • Government Solutions revenue down 8% on the wind-down of the State Department WASS program; government sales grew only 5% against a strong prior-year comp
  • Legacy Commercial Programs to be wound down ratably over the next three to four years

Guidance Changes

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Performance Breakdown

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Earnings Call Themes & Trends

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Q&A Summary

How have commercial and defense distribution orders trended?
Commercial distribution growth was consistently strong (~50% same-store, a bit under 50% new agreements, a little price); government distribution grew 34% organically for the year and is now lapping tougher comps, with encouraging demand (notably the DLA).
Is the FY2027 guide implying a later slowdown?
No - management is not assuming deceleration in 2028/2029 and is encouraged by near-term demand across the platform.
What drove the Parts Supply margin decline?
USM - the prior-year one-time gain plus constrained USM margins from tight asset availability; distribution is higher-margin and should lift the mix as it grows.
Woodward expansion and pipeline?
Woodward deals are still relatively small but expandable; the pipeline of new logos and expansions remains strong as the exclusive model gains traction.
Software incremental margins as it scales to $200M?
Yes - as the software offering (Trax, Airvoyant, Aerostrat) scales, margins should move from ~20% toward 30%-40%.
M&A appetite now that leverage is at the low end?
The pipeline remains full and mostly self-sourced; M&A stays a key part of the growth strategy, funded while maintaining the ability to de-lever.

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Q4 2026 call
Reported 2026-07-21 · figures from the Aar Corp Q4 2026 earnings call.

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