AAR Corp. Jefferies Global Industrials Conference 2026

Thanks, John. Great. Thanks, Sheila.

Great to be here with everybody, and just a few slides. Just a quick overview. I'll read this to you word by word. Not everybody here may be familiar with the AAR story, so I thought I'd just level set, and then we'll go into Q&A. AAR, been around for about 70 years, about $3.5 billion in revenue, obviously publicly traded, about $400 million in EBITDA. We report in different segments. We're not going to dwell on those segments today. We'll talk about the three main areas of business, parts, repair, and software. One important thing to note is that we have a nice balance between government and commercial. We're about 30% government, 70% commercial. AAR, even though we've been around for a long time, and I think there's still certain, I would call it, legacy impressions of what we do.

We've gone through a lot of changes in the last several years. From 2018 to today, we've done a lot of portfolio reshaping. AAR, years ago, was a much smaller, much more complex business, which is not a very good combination. We were in lots of different businesses in different markets. We weren't necessarily leaders in any of them. We were in lots of different businesses that, most importantly, were not very well connected. The team and I have been focused over the last several years on bringing a lot more focus to the portfolio. We've engaged in a number of divestitures. We've closed down facilities, we've exited product lines, we've exited businesses. We've also been making some acquisitions along the way. We've made six acquisitions in the last three years, and expect to continue to perform M&A.

Those things have been designed to bring more focus to the portfolio, build in leadership positions in different areas in aviation services, and drive more reliable growth, more consistency in our cash flow, and most importantly, margin expansion. These moves have been working. If you look at our results over the last several years, we've posted above-market growth in terms of revenue, significant EBITDA margin expansion, as well as corresponding EPS expansion. With all of those portfolio moves, the three areas that we're focused on now as a company are parts, repair, and software, offering these services to both the commercial aftermarket and the government aftermarket. We sell parts, we sell repairs, and we sell software that allows our customers, more than 100 airlines around the world, to buy and plan for the parts and repairs that we sell.

It's a unique ecosystem or platform in the market. Just to go into a tiny bit more detail in each of those three areas. First, in parts, two main activities in our parts area. One is new parts, new parts distribution. We are a factory-new distributor for OEM partners around the world. We have a unique model in this area. It's focused on two-way exclusive distributorships only, meaning if we work with an OEM, these are long-term agreements, 5- to 10-year agreements, we will not represent, in a given market, competing product for that OEM, and they will not use a competing distributor. There's a lot of people out there that have had exclusive agreements, but no one in our market has leaned into it in quite the same way as we have. Almost 100% of our agreements are exclusive.

We've had 100% renewal rate on these agreements over the last 10 years. What this allows us to do is become technically proficient in an OEM's products as we represent them in the aftermarket. Most of our competitors buy inventory every quarter. They stock that inventory around the world, and they essentially act as a call center. That is not us. We are active participants out there in the market, helping our OEM partners take share. This is now the largest business inside of AAR. Of our roughly $3.5 billion in revenue, this is about $1.1 billion or $1.2 billion. It's been growing significantly. We've been putting up 20%-30% organic growth numbers over the last five years. We expect that above-market growth to continue, and this is something we are now known for in the industry.

We have an incredible pipeline of opportunities, and again, we expect that growth in new parts to distribute to continue. The other area inside of parts is used serviceable material. This is historically what AAR has been known for. We're the used parts guys. We buy aircraft and engines each year. We tear them down, we repair them, and we resell the parts. This is still an important business for us. It's shrinking. It's less than 15% of the company now as we've mixing it down. I should say shrinking as a percentage. The business itself is actually experiencing modest growth, but as a percentage of total, it's been mixing down.

It's an important business for us because it's highly transactional, keeps us in touch with the market, keeps in touch with asset values, and there is connection between what we do in USM to what we do elsewhere in the business, and I'll talk about that later. But in terms of growth, the focus for us in the parts segment is around new parts distribution. That's where we see quite a lot of runway for us. Moving on to repair, two activities in repair. One, heavy maintenance. We're the third largest in the world, largest in North America, providing heavy maintenance to airlines. When we say heavy maintenance, this is work that's being done in hangars. The aircraft comes in, we take it apart, we repair it, we put it back together. These are time-based checks. These checks, if you own an aircraft and you are operating an aircraft, these checks have to be done every 2, 3, 5, and 10 years.

It is a captive market in a way. When I say captive market, I mean we work primarily on narrow-body aircraft. These are 737s and A320s. These aircraft cannot travel to Europe. They cannot travel to Asia. They have to be done here. We have become the largest. Our performance is exceptional. We turn aircraft faster than anybody else in our sector, and the airlines are increasingly turning to us for this service for these narrow-body aircraft. Because of that performance over the last few years, we have been expanding our margins, and we have seen meaningful EBITDA growth in this segment over the last several years, and we expect that to continue. That is heavy maintenance. Elsewhere in repair, we perform repairs on individual aircraft components.

This is component MRO. We made a big acquisition of Triumph Group's repair operation about 2 and a half years ago. That acquisition has gone well. It gave us a meaningful position in the component repair world. Part of our strategy now is to leverage our leadership position in heavy maintenance to drive more volume to component repair. Heavy maintenance today is a low teens EBITDA margin business. Component repair is high teens, and a couple of our facilities are low 20s EBITDA. We want to leverage our position to drive more volume to our component repair facilities, and we have the capacity to take that on. Finally, the third area of the company is software. This has got a lot of attention recently.

We made an acquisition in this space about 3 years ago, which is going very well. We have since made another acquisition and have launched a new product that I will talk about later. Software, the core of our software offering came to us through the acquisition 3 years ago of a company called Trax. Trax is a maintenance ERP system. A maintenance ERP system tracks every single element and supports every single element of an airline's maintenance organization. Trax, the company, has been around for 25 years. They support more than 110 airlines, and the combined fleet is about 6,000 aircraft. You have a very large fleet supported.

A maintenance ERP system for an airline, as I mentioned, supports every element of their maintenance operation, every part that is installed on an aircraft, every part that is on a shelf, where it was purchased, how much they paid, how long it took them to get it, every part that is out for a repair, every part that breaks. All of that is managed through Trax. If you are cutting purchase orders, if you are cutting repair orders, chances are you are cutting them through Trax. That data and the data managed by the airlines, over 100 around the world, is literally the holy grail of data for us as parts and repair providers. By combining those things, we are building what we believe is a pretty unique platform in the aftermarket. I will talk more about those connections later, but again, kind of a unique mix.

I should mention that we have some very good customers. We are doing business with the largest airlines in the world, around the world. We also have a number of great OEM relationships with our new parts distribution business and the government business. We are pretty well ensconced with a number of governments around the world as well. So a snapshot of our customer base. I wanted to keep it brief because I know we got a lot of questions, and that is the thumbnail.