AAR reports fourth quarter and fiscal year 2025 results

AAR reports fourth quarter and fiscal year 2025 results

WOOD DALE, Ill., July 16, 2025 /PRNewswire/ -- AAR CORP. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, reported today financial results for the fourth quarter and fiscal year 2025 ended May 31, 2025.

FOURTH QUARTER FISCAL YEAR 2025 HIGHLIGHTS
(As compared to Q4 FY2024)

• Sales of $755 million; increased 15%
• GAAP EPS of $0.95
• Adjusted diluted EPS of $1.16; increased 32%
• GAAP Net income of $34 million
• Adjusted EBITDA of $91 million; increased 19%
• Adjusted EBITDA margin increased to 12.4% from 11.6%

FISCAL YEAR 2025 HIGHLIGHTS
(As compared to FY2024)

• Sales of $2.8 billion; increased 20%
• GAAP EPS of $0.35
• Adjusted diluted EPS of $3.91; increased 17%
• GAAP Net income of $13 million
• Adjusted EBITDA of $324 million; increased 34%
• Adjusted EBITDA margin increased to 11.8% from 10.4%

"In Fiscal Year 2025, we delivered record sales and profitability and made meaningful progress against our strategic objectives," said John M. Holmes, AAR's Chairman, President and Chief Executive Officer.  "We substantially completed the integration of the Product Support acquisition and continued to optimize our portfolio with the divestiture of our Landing Gear Overhaul business.  We further invested in our fast growing new parts Distribution activities, launched two hangar expansions, and announced several key new business wins for our Trax software solution.  We continued to reduce our net leverage, ending the fiscal year at 2.72x.  Our optimized portfolio, combined with our strengthened balance sheet, is delivering higher growth, higher margins, and stronger returns."

Holmes continued, "Our fiscal fourth quarter was an extremely strong finish to a record year.  We delivered double-digit sales and earnings growth over the prior year quarter.  Adjusted sales were up 12% organically due to strong demand across both our commercial and government end-markets.  Our new parts Distribution activities continue to lead with an over 20% organic increase in sales driven by both market growth and market share gains.  Our Adjusted EBITDA growth of 19% during the quarter reflects continued margin improvement, expanding 80 basis points year-over-year to 12.4%. We see additional opportunities for further margin improvement from sales mix, synergy realization, and other efficiency initiatives."

RECENT UPDATES

            NEW BUSINESS

• Implementation of Trax's eMRO and eMobility solutions across Delta TechOps line maintenance network.
• License agreements for Trax software with Amerijet International Airlines and with SIA Engineering Company's heavy maintenance facility in Malaysia.
• Our joint venture with KIRA Aviation Services was awarded an E-6B Mercury pilot training contract from the U.S. Navy.
• Signed a new parts Distribution Supply Chain Alliance charter with the U.S. Defense Logistics Agency (DLA).

            PORTFOLIO UPDATE

• Substantially completed the integration and site consolidation of the Product Support acquisition.
• Completed the sale of our Landing Gear Overhaul business for $48 million.

FOURTH QUARTER FISCAL YEAR 2025 RESULTS

Consolidated fourth quarter sales increased 15% to $754.5 million, compared to $656.5 million in the same quarter last year.  Sales in the fourth quarter of fiscal year 2025 included the sale of certain rotable assets to a significant regional airline customer for $18.7 million in conjunction with the termination of a power-by-the-hour program, which has been excluded from our adjusted sales.  Consolidated sales to commercial customers increased 12%, or $56.5 million, primarily due to strong demand for new parts Distribution activities and the rotable asset sale. Sales to government customers increased 21% from the same period last year, primarily due to increased order volume for new parts Distribution activities and double-digit growth in our Integrated Solutions segment. Sales to commercial customers were 69% of consolidated sales, compared to 70% in the prior year quarter.

The Company reported net income of $34.0 million, or $0.95 per share. For the fourth quarter of the prior year, the Company reported net income of $9.1 million, or $0.26 per diluted share. Adjusted diluted earnings per share in the fourth quarter of fiscal year 2025 were $1.16, compared to $0.88 in the fourth quarter of the prior year.

Selling, general, and administrative expenses were $77.4 million in the current quarter, compared to $94.8 million in the prior year quarter.  Acquisition, amortization, and integration expenses were $0.3 million in the quarter, compared to $17.1 million in the prior year quarter primarily due to the closing of the Product Support acquisition in the prior year quarter.

Operating margins were 9.7% in the quarter, compared to 5.0% in the prior year quarter. Adjusted operating margin increased to 10.5% in the current year quarter from 9.3% in the prior year quarter, primarily as a result of strong growth and favorable mix in Parts Supply.  Sequentially, our adjusted operating margin increased from 9.7% to 10.5%, also driven by the profitability in Parts Supply.

Net interest expense for the quarter was $18.4 million, compared to $18.7 million last year.  Average diluted share count increased from 35.4 million shares in the prior year quarter to 35.6 million shares in the current year quarter.  We repurchased 0.2 million shares for $10.1 million during the quarter and have $42.5 million remaining on our share repurchase program.

Cash flow provided by operating activities was $51.4 million during the current quarter, compared to $24.5 million in the prior year quarter.  Excluding the accounts receivable financing program, cash flow provided by operating activities was $50.3 million in the current quarter. As of May 31, 2025, net debt was $880.5 million and net leverage was 2.72x.

Holmes continued, "We are pleased to finish the year with a strong quarter of cash flow generation.  We have delivered on our commitment to reduce leverage following the Product Support acquisition. Since the acquisition, our net leverage has decreased from 3.58x to 2.72x.  Our financial position is strong and we have a solid foundation for continued capital allocation to drive growth."

FISCAL YEAR 2025 RESULTS

Full fiscal year 2025 consolidated sales were $2.8 billion, an increase of 20% over fiscal year 2024 with growth resulting from our Product Support acquisition and increased volumes in our new parts distribution activities.

Operating margins were 6.7% for the full year, compared to 5.6% in fiscal year 2024. Adjusted operating margin increased to 9.6% in fiscal year 2025 from 8.3% in fiscal year 2024.  The improved adjusted margins are primarily driven by the favorable contribution from the Product Support business and growth in Parts Supply.

Full fiscal year 2025 net income was $12.5 million, or $0.35 per diluted share. Fiscal year 2025 results included after-tax charges of $115.0 million associated with the sale of our Landing Gear Overhaul business and our FCPA settlement and related costs.  In fiscal year 2024, net income was $46.3 million, or $1.29 per share. Our adjusted diluted earnings per share was $3.91 in the current year, compared to $3.33 last year, reflecting the impact of our improved operating efficiency on higher sales volumes.

Sales to commercial customers were 71% of consolidated sales in both the current and prior year. Cash flow provided by operating activities was $36.1 million in fiscal year 2025. Excluding our accounts receivable financing program, our cash flow provided by operating activities was $28.5 million in fiscal year 2025.

Holmes concluded, "As we enter our fiscal year 2026, we are excited about the opportunities ahead of us.  We expect to continue to gain market share in Parts Supply and expand both our capabilities and footprint in Repair & Engineering.  We expect Trax to continue its growth trajectory as we win more business and upgrade existing Trax customers to our latest offerings.  Additionally, we remain focused on converting our large pipeline of government opportunities to new business wins.  We are well-positioned within our markets and expect to drive further growth and margin expansion in our fiscal 2026."

Conference call information

On Wednesday, July 16, 2025, at 4 p.m. Central time, AAR will hold a conference call to discuss the results. A listen-only webcast and slides can be accessed athttps://edge.media-server.com/mmc/p/wmgmvczc. Participants may join via phone by registering at https://register-conf.media-server.com/register/BIba14a44bd46347d0859eb66582d4e484. Once registered, participants will receive a dial-in number and a unique PIN that will allow them to access the call.

A replay of the conference call will be available for on-demand listening shortly after the completion of the call at the webcast link and will remain available for approximately one year.

The slides are also available on AAR's website at https://www.aarcorp.com/en/investors/events-and-presentations/.

About AAR

AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the Chicago area, AAR supports commercial and government customers through four operating segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. Additional information can be found at aarcorp.com/.

Contact: Investor Relations | +1-630-227-5830 | investors@aarcorp.com

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995, which reflect management's expectations about future conditions, including, but not limited to, continued demand in the commercial and government aviation markets; market position; anticipated activities and benefits related to new or expanding business relationships; contributions from acquisitions; expansion of capabilities and operational footprint; opportunities for margin improvement through operations, integration activities and other efficiency initiatives; and continued sales growth, earnings performance, debt management, and capital allocation.

Forward-looking statements often address our expected future operating and financial performance and financial condition, or targets, goals, commitments, and other business plans, and often may also be identified because they contain words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "likely," "may," "might," "plan," "potential," "predict," "project," "seek," "should," "target," "will," "would," or similar expressions and the negatives of those terms.

These forward-looking statements are based on the beliefs of Company management, as well as assumptions and estimates based on information available to the Company as of the dates such assumptions and estimates are made, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including: (i) factors that adversely affect the commercial aviation industry; (ii) adverse events and negative publicity in the aviation industry; (iii) a reduction in sales to the U.S. government and its contractors; (iv) cost overruns and losses on fixed-price contracts; (v) nonperformance by subcontractors or suppliers; (vi) our ability to manage our operational footprint; (vii) a reduction in outsourcing of maintenance activity by airlines; (viii) a shortage of skilled personnel or work stoppages; (ix) competition from other companies; (x) financial, operational and legal risks arising as a result of operating internationally; (xi) inability to integrate acquisitions effectively and execute operational and financial plans related to the acquisitions; (xii) failure to realize the anticipated benefits of acquisitions; (xiii) circumstances associated with divestitures; (xiv) inability to recover costs due to fluctuations in market values for aviation products and equipment; (xv) cyber or other security threats or disruptions; (xvi) a need to make significant capital expenditures to keep pace with technological developments in our industry; (xvii) restrictions on use of intellectual property and tooling important to our business; (xviii) inability to fully execute our stock repurchase program and return capital to stockholders; (xix) limitations on our ability to access the debt and equity capital markets or to draw down funds under loan agreements; (xx) our ability to manage our debt; (xxi) non-compliance with restrictive and financial covenants contained in our debt and loan agreements; (xxii) changes in or non-compliance with laws and regulations related to federal contractors, the aviation industry, international operations, safety, and environmental matters, and the costs of complying with such laws and regulations; and (xxiii) exposure to product liability and property claims that may be in excess of our liability insurance coverage.  Should one or more of those risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described. 

For a discussion of these and other risks and uncertainties, refer to our Annual Report on Form 10-K, Part I, "Item 1A, Risk Factors" and our other filings filed from time to time with the U.S Securities and Exchange Commission.  These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company's control.  The risks described in these reports are not the only risks we face, as additional risks and uncertainties are not currently known or foreseeable or impossible to predict accurately or risks that are beyond the Company's control or deemed immaterial may materially adversely affect our business, financial condition or results of operations in future periods. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law.

Adjusted net income, adjusted diluted earnings per share, adjusted operating margin, adjusted cash flow provided by operating activities, adjusted EBITDA, adjusted EBITDA margin, net debt, and net debt to adjusted EBITDA (net leverage) are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We believe these non-GAAP financial measures are relevant and useful for investors as they illustrate our core operating performance, cash flows, and leverage unaffected by the impact of certain items that management does not believe are indicative of our ongoing and core operating activities. When reviewed in conjunction with our GAAP results and the accompanying reconciliations, we believe these non-GAAP financial measures provide additional information that is useful to gain an understanding of the factors and trends affecting our business and provide a means by which to compare our operating performance and leverage against that of other companies in the industries we compete.  These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. 

Our non-GAAP financial measures reflect adjustments for certain items including, but not limited to, the following:

• Costs associated with U.S. Foreign Corrupt Practices Act ("FCPA") matters that we self-reported to the U.S. Department of Justice and other agencies, including investigation costs and settlement charges.
• Expenses associated with recent acquisition activity, including professional fees for legal, due diligence, and other acquisition activities, bridge financing fees, intangible asset amortization, integration costs, and compensation expense related to contingent consideration and retention agreements.
• Pension settlement charges associated with the settlement and termination of our frozen defined benefit pension plan.
• Legal judgments related to or impacted by the Russia/Ukraine conflict.
• Contract termination/restructuring costs comprised of gains and losses that are recognized at the time of modifying, terminating, or restructuring certain customer and vendor contracts, including the impact from the U.S. government exercising their termination for convenience in the first quarter of fiscal year 2025 for our Mobility Systems business's new-generation pallet contract.
• Losses related to our exit from our Indian joint venture, our Landing Gear Overhaul business, and our Composites manufacturing business, including legal fees for the performance guarantee associated with the Composites' A220 aircraft contract.

Adjusted EBITDA is net income before interest income (expense), other income (expense), income taxes, depreciation and amortization, stock-based compensation, and items of an unusual nature including but not limited to business divestitures and acquisitions, FCPA investigation, settlement and remediation compliance costs, pension settlement charges, certain legal judgments, acquisition, integration, and amortization expenses from recent acquisition activity, and significant customer contract terminations.

Pursuant to the requirements of Regulation G of the Exchange Act, we are providing the following tables that reconcile the above-mentioned non-GAAP financial measures to the most directly comparable GAAP financial measures:

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SOURCE AAR CORP.