Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliations. Second, make a few comments about the quarter, and third, discuss our fiscal 2026 outlook. Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and over any extended period have typically provided relative stability in the downturns. Lastly, our capital structure and allocation are a key part of our value creation methodology.
To do this, we stay focused on both the details of value creation as well as careful allocation of our capital. As you saw from our earnings release, we delivered another solid quarter with Q3 results exceeding expectations. During the quarter, we saw healthy growth in revenue, both sequentially and compared to the prior year in all three of our market channels, commercial OEM, commercial aftermarket, and defense. Further, given the strong performance seen to date as well as our current expectations for Q4, we raised our commercial aftermarket guidance for the year.
Note that we are seeing this healthy growth despite the overall decline in RPMs arising from the conflict in the Middle East, from which we have yet to see any material impact. Lastly, our defense end market saw a double-digit revenue increase this quarter and continues to build backlog that will drive growth as we finish fiscal 2026 and head into our fiscal 2027. Our EBITDA As Defined margin was 52.8% in the quarter, which includes more than full two percentage points of dilution from recent acquisitions. The sequential margin improvement is in spite of margin headwind of about half a percentage point in the quarter related to the newly acquired Jet Parts Engineering and Victor Sierra Aviation Holdings operating units.
| Metric | Period | Current guidance |
|---|---|---|
| Full-year revenue | FY2026 | $10.51B midpoint (+$150M; ~19% growth) |
| Full-year EBITDA As Defined | FY2026 | $5.52B midpoint (+$100M; ~16% growth; ~52.5% margin) |
| Full-year adjusted EPS | FY2026 | $41.04 midpoint |
| Commercial OEM growth | FY2026 | mid-teens percentage range |
| Commercial aftermarket growth | FY2026 | low double-digit percentage range |
| Defense revenue growth | FY2026 | high single digit to low double digit (maintained/backed by bookings) |
| Full-year free cash flow | FY2026 | ~$2.6B |
| Metric | YoY | Note |
|---|---|---|
| Organic growth | ~13% | All market channels contributed. |
| Commercial OEM revenue | ~+17% | Rising Boeing and Airbus production rates; commercial transport OEM up 25%. |
| Commercial aftermarket revenue | ~+17% | Broad-based demand; commercial transport aftermarket up 18% led by engine, passenger and interiors, with freight roughly flat. |
| Defense revenue | ~+11% | New business wins and strong operational execution; well distributed with aftermarket slightly ahead of OEM. |
| EBITDA As Defined margin | 52.8% (sequential improvement) | Higher volumes and strong performance across channels, despite >2 points of acquisition dilution and ~0.5 point from Jet Parts/Victor Sierra. |
| Free cash flow | ~$870M in Q3 ($2.1B YTD) | Strong earnings; working capital consumed ~$160M in the quarter. |
| Net debt-to-EBITDA | 5.8x (slightly up) | Within the target 5-7x operating range; ~75% of $33.7B gross debt fixed through FY2029. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| M&A strategy after Stellant withdrawal | Active pipeline; Stellant pending | Withdrew from Stellant after DOJ challenge (viewed as a one-off HSR market-definition disagreement, not indicative of future deal ability); Jet Parts Engineering and Victor Sierra approvals cleared after Stellant's filing; >$3B of deals year-to-date once Prince & Izant closes; over $10B of M&A firepower remaining. | — |
| Prince & Izant acquisition | — | Agreed to buy the Cleveland-based brazing-alloy and specialty-metal maker for ~$1.1 billion (~$360M of 2026 revenue), highly engineered, mostly aftermarket, serving A&D engine platforms (fuel nozzles, rocket engines), aeroderivative turbine and transportation. | — |
| Commercial OEM ramp (Boeing/Airbus) | Rising build rates | Commercial transport OEM up 25% on steadily rising Boeing/Airbus rates; bookings outpacing sales; management expects continued strength into Q4 and fiscal 2027 as OEMs march along communicated ramp paths, with a reasonably solid supply chain. | — |
| Commercial aftermarket resilience | Steady growth | Commercial transport aftermarket up 18% with strength across engine, passenger and interiors; distributor POS up double digits; no material impact yet from Middle East conflict, higher jet-fuel prices or RPM/capacity changes; ~50% of aftermarket books and ships in the same quarter. | — |
| Defense demand | Building backlog | Defense up ~11% with bookings up year-over-year and sequentially, outpacing sales; positive global defense-spending environment supporting growth into next year; several innovation-driven new-business wins (touchless lavatory suite, fighter-aircraft battery, UCAV landing-gear actuator, audio control system). | — |
| Margin drivers / mix | ~1-1.5 pt constant-mix improvement offset by dilution | Constant-mix improvement target of ~1 to 1.5 points unchanged; modest (couple tenths) mix headwind from OEM growing slightly faster than aftermarket; >2 points of acquisition dilution the main year-over-year drag; conservatism embedded in Q4 margin guide given early ownership of Jet Parts/Victor Sierra. | — |
| Capital allocation priorities | Reinvest, M&A, return capital, (debt paydown unlikely) | Priorities unchanged; $980M of buybacks in Q3 ($1.8B YTD) meeting IRR criteria; special dividend under continual evaluation given comfortable midpoint of the 5-7x leverage range. | — |
| Right to Repair / branching beyond A&D | — | Declined to assess still-evolving defense Right-to-Repair legislation (defense is tens/hundreds of thousands of SKUs, mostly commercial-derived); remains focused on aerospace and defense (~95% of revenue) while acknowledging potential to branch into other proprietary/aftermarket industrial markets in the fullness of time. | — |