Q1 2027 AAR Corp Earnings Call

September 29, 2026

Speaker #1: During the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again.

Speaker #1: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Tillett, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Good morning, everyone, and welcome to the Business Update call covering AAR's fiscal year 2027, first quarter earnings, and the announced acquisition of a controlling interest in MRO Holdings.

Speaker #2: We're joined today by John Holmes, Chairman, President, and Chief Executive Officer, and Dylan Wolin, Chief Financial Officer. The presentation we are sharing today is part of this webcast and can be found under the Investor section on our corporate website.

Speaker #2: Comments made during the call will include forward-looking statements as defined in the private securities litigation reform act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.

Speaker #2: Accordingly, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the company's earnings release and the risk factors section of the company's annual report on Form 10-K for the fiscal year ended May 31, 2026.

Speaker #2: In providing the forward-looking statements, the company assumes no obligation to provide updates to reflect future circumstances or anticipated or unanticipated events. Certain non-GAAP financial information will be discussed during the call today, and reconciliations of these non-GAAP measures to the most comparable GAAP measures are set forth in the company's earnings release and slides.

Speaker #2: At this time, I would like to turn the call over to John Holmes.

Speaker #3: Thank you, Chris. Good morning, everyone. I'm very excited to talk to you today about an important development for AAR. Alongside our earnings release yesterday afternoon, we announced an agreement to acquire a 65% controlling interest in MRO Holdings, a leading airframe heavy maintenance provider with a significant footprint across the Americas, and a blue-chip U.S.

Speaker #3: customer base. This is a combination we have been talking about with MRO Holdings in various ways for about 8 years. The transaction marks a major milestone in AAR's evolution and in building out our parts repair and software aftermarket platform.

Speaker #3: As a result of the highly strategic combination of AAR's aftermarket solutions and MRO Holdings' footprint, we will achieve a scale that accelerates the growth across all of our activities.

Speaker #3: It is a significant step in our executing our strategy, and it will meaningfully strengthen AAR's financial position through higher margins and stronger, more consistent cash flow.

Speaker #3: Before I discuss the transaction in more detail, I want to review our fiscal first quarter 2027 results. We had a strong start to the year, with continued above-market growth, margin expansion, and record first quarter cash flow.

Speaker #3: These results reflect the continued strength of demand across our businesses and the progress we have made against the strategy we have been executing over the last several years.

Speaker #3: Turning to slide 3, total sales were $918 million, up 24% year over year, including 11% organic growth. Importantly, growth was broad-based, with each of our 3 key segments contributing to the increase.

Speaker #3: Sales to commercial customers were up 28%, while sales to government customers increased 14%. Commercial customers represented 73% of total sales in the quarter, with government customers representing the remaining 27%.

Speaker #3: Adjusted EBITDA margin expanded 100 basis points to 12.7%. Excluding legacy commercial programs, adjusted EBITDA margin was 13.3%, already within the 3-year target range that we established at our investor day a few months ago in May.

Speaker #3: Margin expansion was driven by growth in parts supply and the continued makeshift toward newer, higher-margin programs in government solutions. In repair and engineering and software, we continued to see growth and margin improvement in component MRO, partially offset by the expected short-term dilution from the HACO Americas integration.

Speaker #3: We continued to expect that integration to be complete by the first fourth quarter of this fiscal year. Adjusted diluted EPS increased 38% year over year to $1.49 per share, reflecting our strong operating performance.

Speaker #3: We also delivered record first quarter cash flow, with adjusted cash from operations of $57 million, or $48% of adjusted EBITDA, driven by strong operating performance and improved working capital management.

Speaker #3: The strong cash generation helped to reduce our net leverage to $1.81 times by the end of the quarter. With that, I'll turn the call over to Dylan to discuss the segments and our updated outlook and then I'll come back to walk through the MRO Holdings transaction in more detail.

Speaker #2: Thanks, John. Turning to the segment results on slide 4, parts supply had another strong quarter with sales increasing 31% year over year to $414.8 million.

Speaker #2: New parts distribution continued to deliver above-market growth, increasing 23% organically, with commercial distribution of 21% organically and government distribution of 28% organically. Adjusted EBITDA margin expanded 150 basis points to 15.3%, driven by improved performance in use-serviceable material and continued growth in distribution.

Speaker #2: In repair engineering and software, sales increased 31% to $297.5 million, reflecting the year-over-year impact of the HACO Americas acquisition, as well as organic growth across airframe MRO, component MRO, and software.

Speaker #2: Adjusted EBITDA margin was 11.9%, down 120 basis points from the prior year, as expected. The ongoing HACO Americas integration was diluted for this segment, while continued to see growth and margin improvement in component MRO.

Speaker #2: In government solutions, sales increased 4% to $138.8 million, while adjusted EBITDA margin expanded 460 basis points to 15.3%. Growth in mobility systems and in the newer, higher-margin government programs more than offset the decline in WAS activity.

Speaker #2: Importantly, that makeshift also drove to significant improvement in segment margins during the quarter. Finally, in legacy commercial programs, we liquidated $24 million of rotable assets, which contributed approximately $5 million of margin in the quarter.

Speaker #2: We estimate run-rate revenue in that segment today is $35 to $40 million per quarter, and you can expect that we will continue to pursue these rotable asset sales as opportunities become available.

Speaker #2: Turning to our outlook on slide 5, for the second quarter, we expect total sales growth, excluding legacy commercial programs, of 14% to 16%, and adjusted EBITDA margin, also excluding LCP, of 13.0% to 13.4%.

Speaker #2: This outlook implies a higher level of organic growth, excluding LCP, in the second quarter than what we delivered in the first, with similar margin levels.

Speaker #2: I would also note that we will close the pipe associated with the MRO Holdings transaction this week, and issue 2.2 million shares, which will be reflected in our Q2 share count for approximately two-thirds of the quarter, and have associated interest savings from the proceeds.

Speaker #2: For the full year, we are increasing our sales outlook and now expect growth, excluding LCP, in the low teens. This reflects our strong first quarter performance and our continued confidence in the demand environment supported by durable passenger volumes and customer lists that include some of the world's largest airlines.

Speaker #2: Importantly, both our second quarter and full-year fiscal 2027 outlooks exclude any impact from the MRO Holdings acquisition. With that, I will turn the call back to John to walk through the transaction in more detail.

Speaker #3: Thank you, Dylan. Turning to slide 6, I want to start with the key strategic and financial takeaways from the transaction. First, we have agreed to acquire a 65% controlling interest in MRO Holdings, a leading provider of airframe heavy maintenance with facilities across central and South America and the United States, for an implied enterprise value of $4 billion.

Speaker #3: Second, the transaction significantly advances our strategy to become the leading aviation aftermarket platform, creating substantial new avenues for growth across parts, repair, and software.

Speaker #3: Third, the combination represents a step change in AAR's financial profile, significantly increasing our scale while enhancing margins and cash flow. And fourth, we will apply the same disciplined approach to M&A that has guided our prior acquisitions, to integration and de-leveraging.

Speaker #3: We see compelling synergy opportunities across our platform, and the strong cash generation of the combined business will support our path back toward our target leverage range, within the medium term.

Speaker #3: Turning to slide 7, by combining AAR's capability with MRO Holdings' heavy maintenance footprint, we are adding a very well-respected airframe MRO operation and achieving significantly greater scale across our broader parts repair and software platform.

Speaker #3: We will approach the market as one company, and this scale creates tremendous advantages for our customers, as we can offer a broad range of maintenance solutions for more aircraft types, and strategic geographies.

Speaker #3: The scale also creates advantages for the rest of AAR. First, by expanding our airframe MRO presence, we have an opportunity to drive additional volume into our high-margin component MRO facilities and offer customers a single more comprehensive repair solution.

Speaker #3: Second, the combination strengthens our position with existing OEM distribution partners, and creates new opportunities to win additional distribution agreements. With the combined business servicing nearly 3,000 aircraft annually, we will have even greater visibility into parts demand and the needs of airline customers across multiple fleet types.

Speaker #3: That market insight and direct sales channel is a significant competitive advantage in building and expanding long-term OEM distribution relationships. Third, the expanded footprint creates an opportunity to capture substantially more repair and maintenance data that can enhance our software solutions and help us continue to developing tools that address our customers' most critical operational needs.

Speaker #3: Importantly, the structure of the transaction also creates long-term alignment between AAR and MRO Holdings, the sellers bring decades of experience operating and strategically important markets, and their continued ownership provides continuity while AAR continues to preserve financial flexibility.

Speaker #3: The financial benefits are equally compelling. On a pro-forma basis, the transaction increases AAR's revenue by approximately 30% and approves adjusted EBITDA margin from roughly 12% to 16% before synergies.

Speaker #1: And create new opportunities to win additional distribution agreements. With the combined business servicing nearly 3,000 aircraft annually, we will have even greater visibility into parts demand and the needs of airline customers across multiple fleet types.

John M. Holmes: And create new opportunities to win additional distribution agreements. With the combined business servicing nearly 3,000 aircraft annually, we will have even greater visibility into parts demand and the needs of airline customers across multiple fleet types. That market insight and direct sales channel is a significant competitive advantage in building and expanding long-term OEM distribution relationships. Third, the expanded footprint creates an opportunity to capture substantially more repair and maintenance data that can enhance our software solutions and help us continue developing tools that address our customers' most critical operational needs. Importantly, the structure of the transaction also creates long-term alignment between AAR and MRO Holdings. The sellers bring decades of experience operating in strategically important markets, and their continued ownership provides continuity while AAR continues to preserve financial flexibility. The financial benefits are equally compelling.

John Holmes: And create new opportunities to win additional distribution agreements. With the combined business servicing nearly 3,000 aircraft annually, we will have even greater visibility into parts demand and the needs of airline customers across multiple fleet types. That market insight and direct sales channel is a significant competitive advantage in building and expanding long-term OEM distribution relationships. Third, the expanded footprint creates an opportunity to capture substantially more repair and maintenance data that can enhance our software solutions and help us continue developing tools that address our customers' most critical operational needs. Importantly, the structure of the transaction also creates long-term alignment between AAR and MRO Holdings. The sellers bring decades of experience operating in strategically important markets, and their continued ownership provides continuity while AAR continues to preserve financial flexibility. The financial benefits are equally compelling.

Speaker #3: It also meaningfully enhances our cash conversion profile, and we expect the transaction to be accretive to adjusted EPS in the first full fiscal year following close.

Speaker #1: That market insight and direct sales channel is a significant competitive advantage in building and expanding long-term OEM distribution relationships. Third, the expanded footprint creates an opportunity to capture substantially more repair and maintenance data, which can enhance our software solutions and help us continue developing tools that address our customers' most critical operational needs.

Speaker #3: In addition, we expect to generate approximately $75 million of run-rate cost synergies within the next three to four years, consisting of savings in procurement and SG&A, as well as savings generated by the sharing of best practices and systems across the combined footprint.

Speaker #3: And critically, that $75 million does not include the longer-term revenue opportunities we see from the combination, including growth in wide-body maintenance, increased capture of European and Middle Eastern fleets, and service in the Americas, and cross-selling opportunities over a platform, which I will discuss now.

Speaker #1: Importantly, the structure of the transaction also creates long-term alignment between AAR and MRO Holdings. The sellers bring decades of experience operating in strategically important markets, and their continued ownership provides continuity while AAR preserves financial flexibility.

Speaker #3: On slide 8, I want to spend a moment on why we believe this combination makes the entire AAR platform stronger. Parts repair and software are highly complementary businesses.

Speaker #1: The financial benefits are equally compelling. On a pro forma basis, the transaction increases AAR's revenue by approximately 30% and improves adjusted EBITDA margin from roughly 12% to 16% before synergies.

Speaker #3: Each one creates opportunities for the others. In part, our position in distribution gives us deep relationships with OEMs and visibility into parts demands across the aftermarket.

John M. Holmes: On a pro forma basis, the transaction increases AAR's revenue by approximately 30% and improves adjusted EBITDA margin from roughly 12% to 16% before synergies. It also meaningfully enhances our cash conversion profile, and we expect the transaction to be accretive to adjusted EPS in the first full fiscal year following close. In addition, we expect to generate approximately $75 million of run rate cost synergies within the next 3 to 4 years, consisting of savings in procurement and SG&A, as well as savings generated by the sharing of best practices and systems across the combined footprint. And critically, that $75 million does not include the longer-term revenue opportunities we see from the combination, including growth in wide-body maintenance, increased capture of European and Middle Eastern fleets, and service in the Americas, and cross-selling opportunities over our platform, which I will discuss now.

John Holmes: On a pro forma basis, the transaction increases AAR's revenue by approximately 30% and improves adjusted EBITDA margin from roughly 12% to 16% before synergies. It also meaningfully enhances our cash conversion profile, and we expect the transaction to be accretive to adjusted EPS in the first full fiscal year following close. In addition, we expect to generate approximately $75 million of run rate cost synergies within the next 3 to 4 years, consisting of savings in procurement and SG&A, as well as savings generated by the sharing of best practices and systems across the combined footprint. And critically, that $75 million does not include the longer-term revenue opportunities we see from the combination, including growth in wide-body maintenance, increased capture of European and Middle Eastern fleets, and service in the Americas, and cross-selling opportunities over our platform, which I will discuss now.

Speaker #3: Expanding our airframe MRO footprint puts AAR closer to the point of consumption for a greater number of aircraft, strengthening our market insight, and value proposition to existing and prospective OEM partners.

Speaker #1: It also meaningfully enhances our cash conversion profile, and we expect the transaction to be accretive to adjusted EPS in the first full fiscal year following close.

Speaker #1: In addition, we expect to generate approximately $75 million of run-rate cost synergies within the next three to four years, consisting of savings in procurement and SBNA, as well as savings generated by the sharing of best practices and systems across the combined footprint.

Speaker #3: In repair, airframe MRO is one of the most visible activities we perform for airline customers. Increasing the number of aircraft flowing through our network creates opportunities to capture additional high-margin component MRO work, while also providing valuable insight into parts requirements and maintenance trends.

Speaker #1: And critically, that $75 million does not include the longer-term revenue opportunities we see from the combination, including growth in wide-body maintenance, increased capture of European and Middle Eastern fleets, and service in the Americas, along with cross-selling opportunities over a platform which I will discuss now.

Speaker #3: And in software, thousands of parts buyers and repair planners use our software every day. The addition of MRO Holdings gives us access to an even broader pool of maintenance and repair data, which can help us enhance our software solutions on their own, but also data available across our platform will help us perform maintenance more efficiently and allow us to provide our OEM partners more insight into their distribution channels.

Speaker #1: On slide 8, I want to spend a moment on why we believe this combination makes the entire AAR platform stronger. Parts repair and software are highly complementary businesses.

John M. Holmes: On slide 8, I want to spend a moment on why we believe this combination makes the entire AAR platform stronger. Parts repair and software are highly complementary businesses. Each one creates opportunities for the others. In parts, our position in distribution gives us deep relationships with OEMs and visibility into parts demands across the aftermarket. Expanding our airframe MRO footprint puts AAR closer to the point of consumption for a greater number of aircraft, strengthening our market insight and value proposition to existing and prospective OEM partners. In repair, airframe MRO is one of the most visible activities we perform for airline customers. Increasing the number of aircraft flowing through our network creates opportunities to capture additional high-margin component MRO work while also providing valuable insight into parts requirements and maintenance trends. And in software, thousands of parts buyers and repair planners use our software every day.

John Holmes: On slide 8, I want to spend a moment on why we believe this combination makes the entire AAR platform stronger. Parts repair and software are highly complementary businesses. Each one creates opportunities for the others. In parts, our position in distribution gives us deep relationships with OEMs and visibility into parts demands across the aftermarket. Expanding our airframe MRO footprint puts AAR closer to the point of consumption for a greater number of aircraft, strengthening our market insight and value proposition to existing and prospective OEM partners. In repair, airframe MRO is one of the most visible activities we perform for airline customers. Increasing the number of aircraft flowing through our network creates opportunities to capture additional high-margin component MRO work while also providing valuable insight into parts requirements and maintenance trends. And in software, thousands of parts buyers and repair planners use our software every day.

Speaker #3: That is the self-reinforcing nature of our platform. Parts supports repair, repair supports parts, and the data generated across both markets makes our software business stronger.

Speaker #1: Each one creates opportunities for the others. In part, our position in distribution gives us deep relationships with OEMs and visibility into parts demands across the aftermarket.

Speaker #1: Expanding our airframe MRO footprint puts AAR closer to the point of consumption for a greater number of aircraft, strengthening our market insight and value proposition to existing and prospective OEM partners.

Speaker #3: With the addition of MRO Holdings, we will we are materially increasing the scale of that ecosystem, strengthening our leadership in heavy maintenance, while creating additional opportunities for growth across the entire company.

Speaker #1: In repair, airframe MRO is one of the most visible activities we perform for airline customers. Increasing the number of aircraft flowing through our network creates opportunities to capture additional high-margin component MRO work, while also providing valuable insight into parts requirements and maintenance trends.

Speaker #3: Turning to slide 9, I want to provide some more context on why heavy maintenance is such an important part of the aviation aftermarket. Heavy maintenance is a recurring, mission-critical service that aircraft require throughout their useful lives.

Speaker #3: This extensive events are time-based, meaning they often happen regardless of how much an aircraft has flown, and involve inspection, repair, overhaul, and modifications. Because the work is required regardless of utilization, it provides a durable and recurring source of demand.

Speaker #1: And in software, thousands of parts buyers and repair planners use our software every day. The addition of MRO Holdings gives us access to an even broader pool of maintenance and repair data, which can help us enhance our software solutions on their own, but also data available across our platform will help us perform maintenance more efficiently and allow us to provide our OEM partners more insight into their distribution channels.

John M. Holmes: The addition of MRO Holdings gives us access to an even broader pool of maintenance and repair data, which can help us enhance our software solutions on their own, but also data available across our platform will help us perform maintenance more efficiently and allow us to provide our OEM partners more insight into their distribution channels. That is the self-reinforcing nature of our platform. Parts supports repair supports parts, and the data generated across both markets makes our software business stronger. With the addition of MRO Holdings, we are materially increasing the scale of that ecosystem, strengthening our leadership in heavy maintenance while creating additional opportunities for growth across the entire company. Turning to slide 9, I want to provide some more context on why heavy maintenance is such an important part of the aviation aftermarket.

John Holmes: The addition of MRO Holdings gives us access to an even broader pool of maintenance and repair data, which can help us enhance our software solutions on their own, but also data available across our platform will help us perform maintenance more efficiently and allow us to provide our OEM partners more insight into their distribution channels. That is the self-reinforcing nature of our platform. Parts supports repair supports parts, and the data generated across both markets makes our software business stronger. With the addition of MRO Holdings, we are materially increasing the scale of that ecosystem, strengthening our leadership in heavy maintenance while creating additional opportunities for growth across the entire company. Turning to slide 9, I want to provide some more context on why heavy maintenance is such an important part of the aviation aftermarket.

Speaker #3: It is also highly specialized business with barriers to entry. Heavy maintenance capacity, and the systems to return aircraft to service quickly and efficiently. AAR has built a strong position in this market through our operating model digital and technical capabilities, and industry-leading turnaround times, and so is MRO Holdings.

Speaker #1: That is the self-reinforcing nature of our platform. Parts supports repair, repair supports parts, and the data generated across both markets makes our software business stronger.

Speaker #1: With the addition of MRO holdings, we are materially increasing the scale of that ecosystem, strengthening our leadership in heavy maintenance, while creating additional opportunities for growth across the entire company.

Speaker #3: Just as important, heavy maintenance puts us at a critical point in the customer relationship. It provides visibility into the repair needs, parts requirements, and maintenance activity of the aircraft we service.

Speaker #1: Turning to slide 9, I want to provide some more context on why heavy maintenance is such an important part of the aviation aftermarket. Heavy maintenance is a recurring, mission-critical service that aircraft require throughout their useful lives.

Speaker #3: Creating opportunities that extend beyond airframe MRO and into our broader platform. In the long-term demand environment remains very attractive. The global fleet is expected to grow significantly over the next decade, while stronger passenger demand and the existing installed fleet continue to support the need for heavy maintenance.

John M. Holmes: Heavy maintenance is a recurring, mission-critical service that aircraft require throughout their useful lives. These extensive events are time-based, meaning they often happen regardless of how much an aircraft is flown, and involve inspection, repair, overhaul, and modifications. Because the work is required regardless of utilization, it provides a durable and recurring source of demand. It is also a highly specialized business with barriers to entry. Heavy maintenance requires skilled labor, scaled hangar capacity, and the systems to return aircraft to service quickly and efficiently. AAR has built a strong position in this market through our operating model, digital and technical capabilities, and industry-leading turnaround times, and so has MRO Holdings. Just as important, heavy maintenance puts us at a critical point in the customer relationship.

John Holmes: Heavy maintenance is a recurring, mission-critical service that aircraft require throughout their useful lives. These extensive events are time-based, meaning they often happen regardless of how much an aircraft is flown, and involve inspection, repair, overhaul, and modifications. Because the work is required regardless of utilization, it provides a durable and recurring source of demand. It is also a highly specialized business with barriers to entry. Heavy maintenance requires skilled labor, scaled hangar capacity, and the systems to return aircraft to service quickly and efficiently. AAR has built a strong position in this market through our operating model, digital and technical capabilities, and industry-leading turnaround times, and so has MRO Holdings. Just as important, heavy maintenance puts us at a critical point in the customer relationship.

Speaker #1: This extends to these extensive events are time-based, meaning they often happen regardless of how much an aircraft has flown, and involve inspection, repair, overhaul, and modifications.

Speaker #3: Against that backdrop, adding MRO Holdings meaningfully expands our position in this attractive, strategically important markets. Slide 10. Turning to slide 10, MRO Holdings is a scaled, highly differentiated heavy maintenance provider with five locations across El Salvador, Mexico, Colombia, and the United States.

Speaker #1: Because the work is required regardless of utilization, it provides a durable and recurring source of demand. It is also a highly specialized business with barriers to entry.

Speaker #1: Heavy maintenance requires skilled labor, scaled hangar capacity, and the systems to return aircraft to service quickly and efficiently. AAR has built a strong position in this market through our operating model, digital and technical capabilities, and industry-leading turnaround times. MRO maintenance puts us at a critical point in the customer relationship.

Speaker #3: And room to expand further in each location as demand requires. For example, MRO Holdings recently opened its seventh hangar in El Salvador, which is actually the largest hangar in the world.

Speaker #3: The business has comprehensive capabilities across narrow-body and select wide-body aircraft, and serves a blue-chip customer base that includes some of the largest airlines in the Americas.

Speaker #1: It provides visibility into the repair needs, parts requirements, and maintenance activity of the aircraft we service, creating opportunities that extend beyond airframe MRO and into our broader platform.

John M. Holmes: It provides visibility into the repair needs, parts requirements, and maintenance activity of the aircraft we service, creating opportunities that extend beyond airframe MRO and into our broader platform. The long-term demand environment remains very attractive. The global fleet is expected to grow significantly over the next decade, while stronger passenger demand and the existing installed fleet continue to support the need for heavy maintenance. Against that backdrop, adding MRO Holdings meaningfully expands our position in this attractive, strategically important market. Slide 10. Turning to slide 10, MRO Holdings is a scaled, highly differentiated heavy maintenance provider with five locations across El Salvador, Mexico, Colombia, and the United States, and room to expand further in each location as demand requires. For example, MRO Holdings recently opened its seventh hangar in El Salvador, which is actually the largest hangar in the world.

John Holmes: It provides visibility into the repair needs, parts requirements, and maintenance activity of the aircraft we service, creating opportunities that extend beyond airframe MRO and into our broader platform. The long-term demand environment remains very attractive. The global fleet is expected to grow significantly over the next decade, while stronger passenger demand and the existing installed fleet continue to support the need for heavy maintenance. Against that backdrop, adding MRO Holdings meaningfully expands our position in this attractive, strategically important market. Slide 10. Turning to slide 10, MRO Holdings is a scaled, highly differentiated heavy maintenance provider with five locations across El Salvador, Mexico, Colombia, and the United States, and room to expand further in each location as demand requires. For example, MRO Holdings recently opened its seventh hangar in El Salvador, which is actually the largest hangar in the world.

Speaker #3: Across approximately 90% of its sales are to US customers, demonstrating the important role the strategically located facilities play in supporting the US aviation market.

Speaker #1: And the long-term demand environment remains very attractive. The global fleet is expected to grow significantly over the next decade, while stronger passenger demand and the existing installed fleet continue to support the need for heavy maintenance.

Speaker #3: MRO Holdings also has an impressive track record of growth and profitability. Over the last 12 years, sales have had double-digit compounded annual growth rate, while adjusted EBITDA has grown even faster.

Speaker #3: The strength of these results is also a testament to their reputation for quality and safety. For calendar 2026, MRO is expected to generate approximately $1 billion of adjusted sales and $285 million of adjusted EBITDA on a pro-forma basis, representing 27% adjusted EBITDA margin.

Speaker #1: Against that backdrop, adding MRO Holdings meaningfully expands our position in these attractive, strategically important markets. Turning to slide 10, MRO Holdings is a scaled, highly differentiated heavy maintenance provider with five locations across El Salvador, Mexico, Colombia, and the United States.

Speaker #3: That profitability translates into significant cash flow. The business is expected to generate more than $200 million of adjusted operating cash flow in calendar 2026.

Speaker #1: And room to expand further in each location as demand requires. For example, MRO Holdings recently opened a seventh hangar in El Salvador, which is actually the largest hangar in the world.

Speaker #3: Taken together, MRO Holdings brings AAR significant sale, attractive margins, strong cash generation, and a strategically important footprint serving many of the world's leading airlines.

Speaker #1: The business has comprehensive capabilities across narrow-body and select wide-body aircraft, and serves a blue-chip customer base that includes some of the largest airlines in the Americas.

John M. Holmes: The business has comprehensive capabilities across narrow-body and select wide-body aircraft and serves a blue-chip customer base that includes some of the largest airlines in the Americas. Approximately 90% of its sales are to US customers, demonstrating the important role these strategically located facilities play in supporting the US aviation market. MRO Holdings also has an impressive track record of growth and profitability. Over the last 12 years, sales have had double-digit compounded annual growth rate, while adjusted EBITDA has grown even faster. The strength of these results is also a testament to their reputation for quality and safety. For calendar 2026, MRO is expected to generate approximately $1 billion of adjusted sales and $285 million of adjusted EBITDA on a pro forma basis, representing 27% adjusted EBITDA margin. That profitability translates into significant cash flow.

John Holmes: The business has comprehensive capabilities across narrow-body and select wide-body aircraft and serves a blue-chip customer base that includes some of the largest airlines in the Americas. Approximately 90% of its sales are to US customers, demonstrating the important role these strategically located facilities play in supporting the US aviation market. MRO Holdings also has an impressive track record of growth and profitability. Over the last 12 years, sales have had double-digit compounded annual growth rate, while adjusted EBITDA has grown even faster. The strength of these results is also a testament to their reputation for quality and safety. For calendar 2026, MRO is expected to generate approximately $1 billion of adjusted sales and $285 million of adjusted EBITDA on a pro forma basis, representing 27% adjusted EBITDA margin. That profitability translates into significant cash flow.

Speaker #3: Now on slide 11, you can see the scale and geographic reach of the combined airframe network. Together, AAR and MRO Holdings will create the largest MRO operation in the world, expanding our network from 7 to 12 facilities across five countries, with approximately 19 million service hours and nearly 3,000 aircraft maintained each year.

Speaker #1: Approximately 90% of its sales are to U.S. customers, demonstrating the important role the strategically located facilities play in supporting the U.S. aviation market.

Speaker #1: MRO Holdings also has an impressive track record of growth and profitability. Over the last 12 years, sales have had a double-digit compounded annual growth rate, while adjusted EBITDA has grown even faster.

Speaker #3: Sorry, I get choked up every time I say that. 3,000 number. But the strategic value goes beyond scale. This footprint gives us greater flexibility to serve customers across a broader range of aircraft types, and geographies, and adds cost advantage options to our hangar network, and it creates a more open runway for future capacity additions.

Speaker #1: The strength of these results is also a testament to their reputation for quality and safety. For calendar 2026, MRO is expected to generate approximately $1 billion of adjusted sales and $285 million of adjusted EBITDA on a pro forma basis, representing a 27% adjusted EBITDA margin.

Speaker #3: For example, MRO Holdings already has plans underway to add an additional eighth hangar to its location in El Salvador. We believe the combination of scale, flexibility, and additional capacity creates a highly differentiated offering for our customers and positions us well to capture continued growth.

Speaker #1: That profitability translates into significant cash flow. The business is expected to generate more than $200 million of adjusted operating cash flow in calendar 2026.

John M. Holmes: The business is expected to generate more than $200 million of adjusted operating cash flow in calendar 2026. Taken together, MRO Holdings brings AAR significant sales, attractive margins, strong cash generation, and a strategically important footprint serving many of the world's leading airlines. On slide 11, you can see the scale and geographic reach of the combined airframe network. Together, AAR and MRO Holdings will create the largest MRO operation in the world, expanding our network from seven to 12 facilities across five countries with approximately 19 million service hours and nearly 3,000 aircraft maintained each year. Sorry, I get choked up every time I say that 3,000 number. The strategic value goes beyond scale. This footprint gives us greater flexibility to serve customers across a broader range of aircraft types and geographies.

John Holmes: The business is expected to generate more than $200 million of adjusted operating cash flow in calendar 2026. Taken together, MRO Holdings brings AAR significant sales, attractive margins, strong cash generation, and a strategically important footprint serving many of the world's leading airlines. On slide 11, you can see the scale and geographic reach of the combined airframe network. Together, AAR and MRO Holdings will create the largest MRO operation in the world, expanding our network from seven to 12 facilities across five countries with approximately 19 million service hours and nearly 3,000 aircraft maintained each year. Sorry, I get choked up every time I say that 3,000 number. The strategic value goes beyond scale. This footprint gives us greater flexibility to serve customers across a broader range of aircraft types and geographies.

Speaker #1: Taken together, MRO holdings bring AAR significant sales, attractive margins, strong cash generation, and a strategically important footprint serving many of the world's leading airlines.

Speaker #3: Turning to slide 12, the transaction immediately transforms AAR's financial profile. On a combined basis, AAR will have approximately $4.3 billion in annual sales and nearly $700 million of adjusted EBITDA.

Speaker #1: Now, on slide 11, you can see the scale and geographic reach of the combined airframe network. Together, AAR and MRO Holdings will create the largest MRO operation in the world, expanding our network from 7 to 12 facilities across 5 countries, with approximately 19 million service hours and nearly 3,000 aircraft maintained each year.

Speaker #3: Our adjusted EBITDA margin increases by 400 basis points from roughly 12% to 16% before synergies. The transaction also enhances our cash generation. Pro-forma adjusted operating cash flow increases from approximately $94 million to $272 million reflecting the attractive working capital profile of the MRO Holdings business.

Speaker #1: Sorry, I get choked up every time I say that—3,000 number. But the strategic value goes beyond scale. This footprint gives us greater flexibility to serve customers across a broader range of aircraft types and geographies, adds cost advantage options to our hangar network, and creates a more open runway for future capacity additions.

Speaker #3: That stronger cash generation will be an important driver of our deleveraging following close and help us to preserve financial flexibility over time. Given the significantly improved earnings profile of the combined business, we are also establishing new medium-term adjusted EBITDA margin targets.

John M. Holmes: It adds cost advantage options to our hangar network, and it creates a more open runway for future capacity additions. For example, MRO Holdings already has plans underway to add an additional eighth hangar to its location in El Salvador. We believe the combination of scale, flexibility, and additional capacity creates a highly differentiated offering for our customers and positions us well to capture continued growth. Turning to slide 12, the transaction immediately transforms AAR's financial profile. On a combined basis, AAR will have approximately $4.3 billion in annual sales and nearly $700 million of adjusted EBITDA. Our adjusted EBITDA margin increases by 400 basis points from roughly 12% to 16% before synergies. The transaction also enhances our cash generation. Pro forma adjusted operating cash flow increases from approximately $94 million to $272 million, reflecting the attractive working capital profile of the MRO Holdings business.

John Holmes: It adds cost advantage options to our hangar network, and it creates a more open runway for future capacity additions. For example, MRO Holdings already has plans underway to add an additional eighth hangar to its location in El Salvador. We believe the combination of scale, flexibility, and additional capacity creates a highly differentiated offering for our customers and positions us well to capture continued growth. Turning to slide 12, the transaction immediately transforms AAR's financial profile. On a combined basis, AAR will have approximately $4.3 billion in annual sales and nearly $700 million of adjusted EBITDA. Our adjusted EBITDA margin increases by 400 basis points from roughly 12% to 16% before synergies. The transaction also enhances our cash generation. Pro forma adjusted operating cash flow increases from approximately $94 million to $272 million, reflecting the attractive working capital profile of the MRO Holdings business.

Speaker #1: For example, MRO Holdings already has plans underway to add an additional eighth hangar to its location in El Salvador. We believe the combination of scale, flexibility, and additional capacity creates a highly differentiated offering for our customers and positions us well to capture continued growth.

Speaker #3: At our investor day back in May, we laid out a three-year target of 13 to 14 percent plus, excluding legacy commercial programs. Following the close of the trend of this acquisition and including the cost synergies we have identified, we now expect adjusted EBITDA margins to reach 19 to 20 percent over the next three to four years.

Speaker #1: Turning to slide 12, the transaction immediately transforms AAR's financial profile. On a combined basis, AAR will have approximately $4.3 billion in annual sales and nearly $700 million of adjusted EBITDA.

Speaker #3: Notably, that target does not include the longer-term revenue synergies we see from the combination, including the cross-selling and broader growth opportunities I discussed earlier.

Speaker #1: Our adjusted EBITDA margin increases by 400 basis points, from roughly 12% to 16%, before synergies. The transaction also enhances our cash generation. Pro forma adjusted operating cash flow increases from approximately $94 million to $272 million, reflecting the attractive working capital profile of the MRO Holdings business.

Speaker #3: Turning to slide 13, we see significant opportunities to continue growing in a fragmented repair market. Today, the addressable market across component maintenance, heavy maintenance, and modifications is more than $50 billion, providing substantial room for continued growth across our repair activities.

Speaker #3: Particularly in the component MRO space. The combination of those market dynamics, our industry-leading capabilities, and significantly expanded scale of our combined platform puts AAR in an excellent position to capture more work over time.

Speaker #1: That stronger cash generation will be an important driver of our deleveraging following close and will help us to preserve financial flexibility over time. Given the significantly improved earnings profile of the combined business, we are also establishing new medium-term adjusted EBITDA margin targets.

John M. Holmes: That stronger cash generation will be an important driver of our deleveraging following close and help us to preserve financial flexibility over time. Given the significantly improved earnings profile of the combined business, we are also establishing new medium-term adjusted EBITDA margin targets. At our Investor Day back in May, we laid out a three-year target of 13% to 14% plus, excluding legacy commercial programs. Following the close of this acquisition and including the cost synergies we have identified, we now expect adjusted EBITDA margins to reach 19% to 20% over the next three to four years. Notably, that target does not include the longer-term revenue synergies we see from the combination, including the cross-selling and broader growth opportunities I discussed earlier. Turning to slide 13, we see significant opportunities to continue growing in a fragmented repair market.

John Holmes: That stronger cash generation will be an important driver of our deleveraging following close and help us to preserve financial flexibility over time. Given the significantly improved earnings profile of the combined business, we are also establishing new medium-term adjusted EBITDA margin targets. At our Investor Day back in May, we laid out a three-year target of 13% to 14% plus, excluding legacy commercial programs. Following the close of this acquisition and including the cost synergies we have identified, we now expect adjusted EBITDA margins to reach 19% to 20% over the next three to four years. Notably, that target does not include the longer-term revenue synergies we see from the combination, including the cross-selling and broader growth opportunities I discussed earlier. Turning to slide 13, we see significant opportunities to continue growing in a fragmented repair market.

Speaker #3: With that, I'll turn the call back over to and financing in more detail.

Speaker #1: At our investor day back in May, we laid out a three-year target of 13% to 14%, excluding legacy commercial programs. Following the close of the TRN acquisition and including the cost synergies we have identified, we now expect adjusted EBITDA margins to reach 19% to 20% over the next three to four years.

Speaker #1: Thanks, John. Turning to slide 14, I'll walk through some of the key transaction terms. We are acquiring an initial $65% controlling interest in MRO Holdings at an implied enterprise value of approximately $4 billion, representing a 10.7-times multiple on adjusted EBITDA net of the tax benefits and synergies.

Speaker #1: Notably, that target does not include the longer-term revenue synergies we see from the combination, including the cross-selling and broader growth opportunities I discussed earlier.

Speaker #1: The acquisition will be financed through a combination of debt and equity. We will issue approximately $1 billion of AAR equity, including approximately $780 million issued to the current MRO Holdings shareholders at a $135 per share price and approximately $230 million through the pipe transaction.

Speaker #1: Turning to slide 13, we see significant opportunities to continue growing in a fragmented repair market. Today, the addressable market across component maintenance, heavy maintenance, and modifications is more than $50 billion, providing substantial room for continued growth across our repair activities.

John M. Holmes: Today, the addressable market across component maintenance, heavy maintenance, and modifications is more than $50 billion, providing substantial room for continued growth across our repair activities, particularly in the component MRO space. The combination of those market dynamics are industry-leading capabilities and significantly expanded scale of our combined platform, puts AAR in an excellent position to capture more work over time. With that, I'll turn the call back over to Dylan to discuss the transaction structure and financing in more detail.

John Holmes: Today, the addressable market across component maintenance, heavy maintenance, and modifications is more than $50 billion, providing substantial room for continued growth across our repair activities, particularly in the component MRO space. The combination of those market dynamics are industry-leading capabilities and significantly expanded scale of our combined platform, puts AAR in an excellent position to capture more work over time. With that, I'll turn the call back over to Dylan to discuss the transaction structure and financing in more detail.

Speaker #1: Collectively, the current MRO Holdings shareholders will hold approximately 12% of AAR shares. We also expect to raise approximately $2.1 billion of new debt with fully committed financing in place to support the transaction.

Speaker #1: Particularly in the component MRO space. The combination of those market dynamics, our industry-leading capabilities, and the significantly expanded scale of our combined platform puts AAR in an excellent position to capture more work over time.

Speaker #1: At closing, substantially all existing MRO Holdings debt will be repaid and AAR will provide an intercompany loan to MRO Holdings. For the first two years following close, 100% of the excess cash flow from MRO Holdings will be used to repay that loan, supporting our deleveraging objectives.

Speaker #1: With that, I'll turn the call back over to Dylan to discuss the transaction structure and financing in more detail.

Speaker #2: Thanks, John. Turning to slide 14, I'll walk through some of the key transaction terms. We are acquiring an initial 65% controlling interest in MRO Holdings at an implied enterprise value of approximately $4 billion, representing a 10.7 times multiple on adjusted EBITDA, net of the tax benefits and synergies.

Dylan Wolin: Thanks, John. Turning to slide 14, I'll walk through some of the key transaction terms. We are acquiring an initial 65% controlling interest in MRO Holdings at an implied enterprise value of approximately $4 billion, representing a 10.7 times multiple on adjusted EBITDA net of the tax benefit and synergies. The acquisition will be financed through a combination of debt and equity. We'll issue approximately $1 billion of AAR equity, including approximately $780 million issued to the current MRO Holdings shareholders at a $135 per share price and approximately $230 million through the PIPE transaction. Collectively, the current MRO Holdings shareholders will hold approximately 12% of AAR shares. We also expect to raise approximately $2.1 billion of new debt with fully committed financing in place to support the transaction. At closing, substantially all existing MRO Holdings debt will be repaid, and AAR will provide an intercompany loan to MRO Holdings.

Speaker #1: The transaction also provides AAR with a clear path to increase our ownership over time. We will have the option to acquire an additional 5% at any time, as well as the remaining 30% in equal tranches on the second, third, and fourth anniversaries of the initial closing.

Speaker #2: The acquisition will be financed through a combination of debt and equity. We will issue approximately $1 billion of AAR equity, including approximately $780 million issued to the current MRO Holdings shareholders at a $135 per share price, and approximately $230 million through the PIPE transaction.

Speaker #1: The exercise price for those future purchases will be based on AAR's then-current LTM EBITDA multiple subject to the floor and cap outlined on slide.

Speaker #1: AAR will control the MRO Holdings board. We expect to close the transaction in our fiscal third quarter ending February 2027, subject to customary regulatory approvals.

Speaker #2: Collectively, the current MRO Holdings shareholders will hold approximately 12% of AAR shares. We also expect to raise approximately $2.1 billion of new debt, with fully committed financing in place to support the transaction.

Speaker #1: Following close, MRO Holdings will be fully consolidated into the AAR financial results. Turning to slide 15, we expect net leverage to be approximately $3.6 times at closing, including the full amount of the run rate synergies.

Speaker #2: At closing, substantially all existing MRO Holdings debt will be repaid, and AAR will provide an intercompany loan to MRO Holdings. For the first two years following close, 100% of the excess cash flow from MRO Holdings will be used to repay that loan, supporting our deleveraging objectives.

Speaker #1: We have a clear path to reduce that leverage through the strong cash generation of the combined business and the receipt of all MRO Holdings cash flow during the first two years following close in order to pay down the intercompany loan as I described in the previous slide.

Dylan Wolin: For the first 2 years following close, 100% of the excess cash flow from MRO Holdings will be used to repay that loan, supporting our deleveraging objectives. The transaction also provides AAR with a clear path to increase our ownership over time. We will have the option to acquire an additional 5% at any time, as well as the remaining 30% in equal tranches on the second, third, and fourth anniversaries of the initial closing. The exercise price for those future purchases will be based on AAR's then current LTM EBITDA multiple, subject to the floor and cap outlined on the slide. AAR will control the MRO Holdings board. We expect to close the transaction in our fiscal Q3 ending February 2027, subject to customary regulatory approvals. Following close, MRO Holdings will be fully consolidated into the AAR financial results. Turning to slide 15.

Speaker #1: We expect net leverage to decline to approximately three times on a realized synergies basis within 24 months following close, and to return to our 2 to 2 and a half times target range over the medium term, including the assumed exercise of the options.

Speaker #2: The transaction also provides AAR with a clear path to increase our ownership over time. We'll have the option to acquire an additional 5% at any time, as well as the remaining 30% in equal tranches on the second, third, and fourth anniversaries of the initial closing.

Speaker #1: Importantly, we expect to maintain a double B category credit rating profile following close. Overall, we believe the financing structure provides an appropriate balance between funding the transaction, rapidly reducing leverage, and preserving financial flexibility.

Speaker #2: The exercise price for those future purchases will be based on AAR's then-current LTM EBITDA multiple, subject to the floor and cap outlined on the slide.

Speaker #2: AAR will control the MRO Holdings board. We expect to close the transaction in our fiscal third quarter, ending February 2027, subject to customary regulatory approvals.

Speaker #1: With that, I'll turn it back to John.

Speaker #2: Great. Thank you, Dylan. Our close by coming back to our strategy. Our ambition is to build the leading aviation aftermarket platform, and we believe this transaction represents a major step forward in achieving that vision.

Speaker #2: Following close, MRO Holdings will be fully consolidated into the AAR financial results. Turning to slide 15, we expect net leverage to be approximately 3.6 times at closing, including the full amount of the run-rate synergies.

Dylan Wolin: We expect net leverage to be approximately 3.6x at closing, including the full amount of the run rate synergies. We have a clear path to reduce that leverage through the strong cash generation of the combined business and the receipt of all MRO Holdings cash flow during the first 2 years following close in order to pay down the intercompany loan, as I described in the previous slide. We expect net leverage to decline to approximately 3x on a realized synergies basis within 24 months following close and to return to our 2x to 2.5x target range over the medium term, including the assumed exercise of the options. Importantly, we expect to maintain a double B category credit rating profile following close. Overall, we believe the financing structure provides an appropriate balance between funding the transaction, rapidly reducing leverage, and preserving financial flexibility.

Speaker #2: By bringing AAR and MRO Holdings together, we are adding significant scale to a mission-critical part of the aftermarket and, in doing so, strengthening our entire parts repair and software platform.

Speaker #2: We have a clear path to reduce that leverage through the strong cash generation of the combined business and the receipt of all MRO Holdings' cash flow during the first two years following close, in order to pay down the intercompany loan, as I described in the previous slide.

Speaker #2: The opportunity creates more the combination creates more opportunities to serve our customers, expands our avenues for above-market growth, meaningfully increases our margins and cash generation, and creates an even stronger foundation for the future.

Speaker #2: We expect net leverage to decline to approximately 3 times on a realized synergies basis within 24 months following close, and to return to our 2 to 2 and a half times target range over the medium term, including the assumed exercise of the options.

Speaker #2: And what makes this combination particularly powerful is that these business reinforce one another. Our strength is repair, repair strengthens parts, and software both contributes to and benefits from the data and insights generated across the platform.

Speaker #2: Importantly, we expect to maintain a double-B category credit rating profile following close. Overall, we believe the financing structure provides an appropriate balance between funding the transaction, rapidly reducing leverage, and preserving financial flexibility.

Speaker #2: As we increase scale, we believe that model becomes even more valuable. We are incredibly excited about what we are building and the opportunities ahead, as demand for our services remains extremely strong.

Speaker #2: I want to thank the teams at AAR and MRO Holdings whose hard work has brought us to this point, and we look forward to bringing these two organizations together.

Speaker #2: With that, I'll turn it back to John.

Dylan Wolin: With that, I will turn it back to John.

Speaker #1: Great, thank you, Dylan. I'll close by coming back to our strategy. Our ambition is to build the leading aviation aftermarket platform, and we believe this transaction represents a major step forward in achieving that vision.

John M. Holmes: Great. Thank you, Dylan. I will close by coming back to our strategy. Our ambition is to build the leading aviation aftermarket platform, and we believe this transaction represents a major step forward in achieving that vision. By bringing AAR and MRO Holdings together, we are adding significant scale to a mission-critical part of the aftermarket, and in doing so, strengthening our entire parts repair and software platform. The combination creates more opportunities to serve our customers, expands our avenues for above-market growth, meaningfully increases our margins and cash generation, and creates an even stronger foundation for the future. What makes this combination particularly powerful is that these businesses reinforce one another. Parts strengthens repairs strengthens parts, and software both contributes to and benefits from the data and insights generated across the platform. As we increase scale, we believe that model becomes even more valuable.

John Holmes: Great. Thank you, Dylan. I will close by coming back to our strategy. Our ambition is to build the leading aviation aftermarket platform, and we believe this transaction represents a major step forward in achieving that vision. By bringing AAR and MRO Holdings together, we are adding significant scale to a mission-critical part of the aftermarket, and in doing so, strengthening our entire parts repair and software platform. The combination creates more opportunities to serve our customers, expands our avenues for above-market growth, meaningfully increases our margins and cash generation, and creates an even stronger foundation for the future. What makes this combination particularly powerful is that these businesses reinforce one another. Parts strengthens repairs strengthens parts, and software both contributes to and benefits from the data and insights generated across the platform. As we increase scale, we believe that model becomes even more valuable.

Speaker #2: And I want to particularly congratulate the AAR team on such a strong start to our fiscal year 2027. With that, I'll turn it back over to the operator for questions.

Speaker #1: By bringing AAR and MRO Holdings together, we are adding significant scale to a mission-critical part of the aftermarket and, in doing so, strengthening our entire parts, repair, and software platform.

Speaker #3: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker #3: Please stand by while we compile the Q&A roster. Our first question comes from the line of Louis DiPalma. With William Blair, your line is now open.

Speaker #1: The opportunity creates more, the combination creates more opportunities to serve our customers, expands our avenues for above-market growth, meaningfully increases our margins and cash generation, and creates an even stronger foundation for the future.

Speaker #4: John, Dylan, and Chris, good morning and congrats on the proposed deal and another strong quarter.

Speaker #1: And what makes this combination particularly powerful is that these businesses reinforce one another. Our strength is repairs; repairs strengthen parts; and software both contributes to and benefits from the data and insights generated across the platform.

Speaker #2: Thank you, Laurie.

Speaker #1: Thanks, Laurie.

Speaker #4: And John, to summarize the main rationale for the deal, I know you got choked up when you were describing the $3,000 aircraft parts in your hangars, but would you say with these $3,000 aircraft parts that it mainly comes down to the network effects and you guys becoming a one-stop shop for airlines in that it's not only now cross-selling the distribution, but it's also cross-selling the component repairs.

Speaker #1: As we increase scale, we believe that the model becomes even more valuable. We are incredibly excited about what we are building and the opportunities ahead, as demand for our services remains extremely strong.

John M. Holmes: We're incredibly excited about what we're building and the opportunities ahead as demand for our services remains extremely strong. I want to thank the teams at AAR and MRO Holdings, whose hard work has brought us to this point, and we look forward to bringing these two organizations together. I want to particularly congratulate the AAR team on such a strong start to our fiscal year 2027. With that, I'll turn it back over to the operator for questions.

John Holmes: We're incredibly excited about what we're building and the opportunities ahead as demand for our services remains extremely strong. I want to thank the teams at AAR and MRO Holdings, whose hard work has brought us to this point, and we look forward to bringing these two organizations together. I want to particularly congratulate the AAR team on such a strong start to our fiscal year 2027. With that, I'll turn it back over to the operator for questions.

Speaker #1: I want to thank the teams at AAR and MRO Holdings, whose hard work has brought us to this point, and we look forward to bringing these two organizations together.

Speaker #1: And I want to particularly congratulate the AAR team on such a strong start to our fiscal year 2027. With that, I'll turn it back over to the operator for questions.

Speaker #3: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Louie DiPalma with William Blair. Your line is now open.

Speaker #4: And so for your existing customers and your new airline customers, it can basically just be a one-stop shop. So it's a lot more time efficient versus the airline flying to many different places to receive these services and new parts.

Speaker #3: Please stand by while we compile the Q&A roster. Our first question comes from the line of Louis De Palma with William Blair. Your line is now open.

Speaker #2: Thanks, Laurie. Yeah. It is exciting to think about the scale of the operation as we have 3,000 aircraft, approximately 3,000 aircraft moving through our hangars each year.

Louie DiPalma: John, Dylan, and Chris, good morning, and congrats on the proposed deal and another strong quarter.

Speaker #4: John, Dylan, and Chris, good morning and congrats on the proposed deal and another strong quarter.

Speaker #1: Thank you, Laurie.

John M. Holmes: Thank you, Louie.

John Holmes: Thank you, Louie.

Dylan Wolin: Thanks, Louis.

Speaker #2: Thanks, Louis.

Speaker #2: That's a lot of volume. And as we mentioned, would be the largest maintenance operation in the world. And you're absolutely right. I mean, you definitely would think about it as a network effect.

Louie DiPalma: John, to summarize the main rationale for the deal, I know you got choked up when you were describing the 3,000 aircraft parts in your hangars, but would you say, with these 3,000 aircraft parts, that it mainly comes down to the network effects and you guys becoming a one-stop shop for airlines in that it is not only now cross-selling the distribution, but it is also cross-selling the component repairs, and so for your existing customers and your new airline customers, it can basically just be a one-stop shop, so it is a lot more time efficient versus the airlines flying to many different places to receive these services and new parts?

Speaker #4: And John, to summarize the main rationale for the deal, I know you got choked up when you were describing the 3,000 aircraft parts in your hangars, but would you say, with these 3,000 aircraft parts, that it mainly comes down to the network effects and you guys becoming a one-stop shop for airlines, in that it's not only now cross-selling the distribution, but it's also cross-selling the component repairs?

Speaker #2: We're excited about the opportunities to cross-sell, certainly component MRO. This gives us visibility into demand and aircraft trends that are incredibly valuable to our position as a distributor.

Speaker #2: We are not just a stocking distributor. Our goal is to help our OEM partners take market share and giving them a clear view into the demand channel for the parts that they manufacture and sell is important.

Speaker #2: And heavy maintenance provides a window into that channel. And certainly, the software business. As we scale and collect more data, it allows us to offer more compelling software offerings, which that business continues to grow very, very nicely.

Speaker #4: And so for, you know, your existing customers and your new airline customers, it can basically just be a one-stop shop. So it's a lot more time efficient versus the airline flying to many different places to receive these services and new parts.

Speaker #2: And then the software insights, the data that is collected from the broader software offering helps inform what parts we want to have on the shelves, what OEMs we think can make great distribution partners, and what repairs we decide to develop.

Speaker #1: Thanks, Louis. Yeah, it is exciting to think about the scale of the operation, as we have approximately 3,000 aircraft moving through our hangars each year.

John M. Holmes: Thanks, Louis. Yeah. It is exciting to think about the scale of the operation as we have 3,000 aircraft, approximately 3,000 aircraft, moving through our hangars each year. That is a lot of volume, and as we mentioned, would be the largest maintenance operation in the world. You are absolutely right. You definitely would think about it as a network effect. We are excited about the opportunities to cross-sell, certainly component MRO. This gives us visibility into demand and aircraft trends that are incredibly valuable to our position as a distributor. We are not just a stocking distributor. Our goal is to help our OEM partners take market share and giving them a clear view into the demand channel for the parts that they manufacture and sell is important, and heavy maintenance provides a window into that channel. Certainly the software business.

John Holmes: Thanks, Louis. Yeah. It is exciting to think about the scale of the operation as we have 3,000 aircraft, approximately 3,000 aircraft, moving through our hangars each year. That is a lot of volume, and as we mentioned, would be the largest maintenance operation in the world. You are absolutely right. You definitely would think about it as a network effect. We are excited about the opportunities to cross-sell, certainly component MRO. This gives us visibility into demand and aircraft trends that are incredibly valuable to our position as a distributor. We are not just a stocking distributor. Our goal is to help our OEM partners take market share and giving them a clear view into the demand channel for the parts that they manufacture and sell is important, and heavy maintenance provides a window into that channel. Certainly the software business.

Speaker #1: That's a lot of volume, and as we mentioned, it would be the largest maintenance operation in the world. And you're absolutely right—I mean, you definitely would think about it as a network effect. We're excited about the opportunities to cross-sell, certainly component MRO.

Speaker #2: So you're absolutely right. All these things work together.

Speaker #4: Great. And John, you were already one of the industry leaders for heavy maintenance. Does this acquisition make AAR more of a global player in the market?

Speaker #1: This gives us visibility into demand and aircraft trends that are incredibly valuable to our position as a distributor. We are not just a stocking distributor; our goal is to help our OEM partners take market share, and giving them a clear view into the demand channel for the parts that they manufacture and sell is important.

Speaker #4: I think if you take the 3,000 aircraft and divide it by the 29,000 total commercial aircraft, it's roughly 12% of the market. But could you begin serving European airlines or even some of your Asian customers with the new footprint?

Speaker #1: And heavy maintenance provides a window into that channel. And certainly the software business, you know, as we scale, and collect more data, it allows us to, you know, to offer more compelling software offerings, which, you know, that business continues to grow very, very nicely.

John M. Holmes: As we scale and collect more data, it allows us to offer more compelling software offerings, which that business continues to grow very nicely. The software insights, the data that is collected from the broader software offering, helps inform what parts we want to have on the shelves, what OEMs we think can make great distribution partners, and what repairs we decide to develop. So you are absolutely right. All these things work together.

John Holmes: As we scale and collect more data, it allows us to offer more compelling software offerings, which that business continues to grow very nicely. The software insights, the data that is collected from the broader software offering, helps inform what parts we want to have on the shelves, what OEMs we think can make great distribution partners, and what repairs we decide to develop. So you are absolutely right. All these things work together.

Speaker #2: Yeah, absolutely. And I'm glad you went there. I mean, this really opens up a much the world market to us in terms of heavy maintenance in a few different ways.

Speaker #1: And then the software insights, the data that is collected from the broader software offering, help inform what parts we want to have on the shelves, which OEMs we think can make great distribution partners, and what repairs we decide to develop.

Speaker #2: First of all, we are AAR today is a narrow-body focused operation. With the capability that comes online with MRO Holdings, we they're doing wide-body work today.

Speaker #2: And we see opportunities to expand that. A number of our US customers perform their wide-body maintenance overseas, particularly in Asia. And there's a desire for many of those customers to bring that wide-body work back to the side of the world.

Speaker #1: So you're absolutely right; all these things work together.

Louie DiPalma: Great. John, you were already one of the industry leaders for heavy maintenance. Does this acquisition make AAR more of a global player in the market? I think, if you take the 3,000 aircraft and divide it by the 29,000 total commercial aircraft, it is roughly 12% of the market. Could you begin serving European airlines or even some of your Asian customers with the new footprint?

Speaker #4: Great. And John, you were already one of the industry leaders for heavy maintenance. Does this acquisition make AAR more of a global player in the market?

Speaker #2: And MRO Holdings has the capacity to do that work. And so we would look to expand meaningfully into wide-body maintenance in their facilities. Furthermore, if you think of the cost profile that we can offer relative to the cost of heavy maintenance in European markets, we see an opportunity to attract not just wide-body, but actually narrow-body work over from Europe.

Speaker #4: I think, you know, if you take the 3,000 aircraft and divide it by the 29,000 total commercial aircraft, it's roughly 12% of the market.

Speaker #4: But could you begin serving European airlines or even some of, you know, your Asian customers with the new footprint?

Speaker #2: Over time. So this is really the opportunity to create a global heavy maintenance provider given the combination of our best practices their best practices, and the strategically advantaged locations.

Speaker #1: Yeah, absolutely. And I'm glad you went there. I mean, this really opens up a much larger world market to us in terms of heavy maintenance, in a few different ways.

John M. Holmes: Yeah, absolutely. I am glad you went there. This really opens up the world market to us in terms of heavy maintenance in a few different ways. First of all, AAR today is a narrow body focused operation. With the capability that comes online with MRO Holdings, they are doing wide body work today, and we see opportunities to expand that. A number of our US customers perform their wide body maintenance overseas, particularly in Asia, and there is a desire for many of those customers to bring that wide body work back to this side of the world, and MRO Holdings has the capacity to do that work. So we would look to expand meaningfully into wide body maintenance in their facilities.

John Holmes: Yeah, absolutely. I am glad you went there. This really opens up the world market to us in terms of heavy maintenance in a few different ways. First of all, AAR today is a narrow body focused operation. With the capability that comes online with MRO Holdings, they are doing wide body work today, and we see opportunities to expand that. A number of our US customers perform their wide body maintenance overseas, particularly in Asia, and there is a desire for many of those customers to bring that wide body work back to this side of the world, and MRO Holdings has the capacity to do that work. So we would look to expand meaningfully into wide body maintenance in their facilities.

Speaker #1: First of all, we are a, you know, AAR today is a narrow-body focused operation. With the capability that comes online with MRO Holdings, we, you know, they're doing wide-body work today, and we see opportunities to expand that.

Speaker #4: Good. Thanks, John, Dylan, and Chris. I will jump back in the queue.

Speaker #2: Great. Thanks so much, Louise.

Speaker #3: Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jeffrey. Your line is now open.

Speaker #1: A number of our US customers perform their wide-body maintenance overseas, particularly in Asia. And there's a desire for many of those customers to bring that wide-body work back to this side of the world.

Speaker #5: Great. And thanks so much, John, Dylan, Chris, and congrats on a great quarter and very exciting deal. Maybe just to go from the revenue synergy potential and expansion to margins, John, this transaction transforms your margin profile of your business with 16% proforma and to 19 to 20 percent in three to four years.

Speaker #1: And MRO Holdings has the capacity to do that work, and so we would look to expand meaningfully into wide-body maintenance in their facilities. Furthermore, if you think of the cost profile that we can offer relative to the cost of heavy maintenance in European markets, we see an opportunity to attract not just wide-body, but actually narrow-body work over from Europe over time.

John M. Holmes: Furthermore, if you think of the cost profile that we can offer relative to the cost of heavy maintenance in European markets, we see an opportunity to attract, not just wide-body, but actually narrow-body work over from Europe over time. So this is really the opportunity to create a global heavy maintenance provider, given the combination of our best practices, their best practices, and the strategically advantaged locations.

John Holmes: Furthermore, if you think of the cost profile that we can offer relative to the cost of heavy maintenance in European markets, we see an opportunity to attract, not just wide-body, but actually narrow-body work over from Europe over time. So this is really the opportunity to create a global heavy maintenance provider, given the combination of our best practices, their best practices, and the strategically advantaged locations.

Speaker #5: I guess, what are the major puts and takes now that the business will become almost 50% MRO as you and how you think back to your investor day targets set in May?

Speaker #2: Yeah. Certainly, as you pointed out, the margin profile of MRO Holdings is highly attractive. It moves the combined total up. We get to that 19 to 20 percent by realizing those synergies.

Speaker #1: So, this is really the opportunity to create a global heavy maintenance provider, given the combination of our best practices and their best practices, and the strategically advantaged locations.

Speaker #2: Those synergies come from ISG and A savings. They come from volume discounts on procurement because we're buying a lot of parts to support our maintenance operations.

Louie DiPalma: Good. Thanks, John, Dylan, and Chris. I will jump back in the queue.

Speaker #4: Great, thanks John, Dylan, and Chris. I will jump back in the queue.

Speaker #1: Great. Thanks so much, Louis.

John M. Holmes: Great. Thanks so much, Louis.

John Holmes: Great. Thanks so much, Louie.

Speaker #2: They're buying a lot of parts to support their maintenance operation. There's great savings by improved sourcing. Across the two. And then ultimately, as I mentioned, we have highly differentiated systems, proprietary systems at AAR that have allowed us to achieve industry-leading margins in our business here.

Speaker #3: Thank you. Our next question comes from the line of Sheila Kayaglu with Jefferies. Your line is now open.

Operator: Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is now open.

Speaker #5: Great, and thanks so much, John, Dylan, Chris, and congrats on a great quarter and very exciting deal. Maybe just to go from the revenue synergy potential and expansion to margins—John, this transaction transforms your margin profile of your business, with 16% pro forma and to 19% to 20% in three to four years.

Sheila Kahyaoglu: Great, thanks so much, John, Dylan, Chris, and congrats on a great quarter and very exciting deal.

John M. Holmes: Thank you.

John Holmes: Thank you.

Sheila Kahyaoglu: Maybe just to go from the revenue synergy potential and expansion to margins. John, this transaction transforms your margin profile of your business with 16% pro forma and to 19% to 20% in 3 to 4 years. I guess, what are the major puts and takes now that the business will become almost 50% MRO, and how you think back to your investor day targets set in May?

Speaker #2: As well as industry-leading turnaround times. And they've got proprietary systems in their operations. And we intended to deploy share best practices which we expect will improve the margin profile of both their business and our business even further.

Speaker #5: I guess, what are the major puts and takes now that the business will become almost 50% MRO? And how do you think back to your investor day targets set in May?

Speaker #2: That's heavy maintenance. What we're not factoring in, even in the targets that we just gave, are the network effects that we see from additional revenue capture, additional revenue capture in components through cost selling.

Speaker #1: Yeah, you know, certainly as you pointed out, the margin profile of MRO Holdings is highly attractive. It moves the combined total up.

John M. Holmes: Yeah. Certainly, as you pointed out, the margin profile of MRO Holdings is highly attractive and moves the combined total up. We get to that 19% to 20% by realizing those synergies. Those synergies come from SG&A savings. They come from volume discounts on procurement, because we're buying a lot of parts to support our maintenance operations. They're buying a lot of parts to support their maintenance operations. There's great savings by improved sourcing across the two. Then, ultimately, as I mentioned, we have highly differentiated systems, proprietary systems at AAR that have allowed us to achieve industry-leading margins in our business here, as well as industry-leading turnaround times. They've got proprietary systems in their operations, and we intend to deploy, share best practices, which we expect will improve the margin profile of both their business and our business even further. That's heavy maintenance.

John Holmes: Yeah. Certainly, as you pointed out, the margin profile of MRO Holdings is highly attractive and moves the combined total up. We get to that 19% to 20% by realizing those synergies. Those synergies come from SG&A savings. They come from volume discounts on procurement, because we're buying a lot of parts to support our maintenance operations. They're buying a lot of parts to support their maintenance operations. There's great savings by improved sourcing across the two. Then, ultimately, as I mentioned, we have highly differentiated systems, proprietary systems at AAR that have allowed us to achieve industry-leading margins in our business here, as well as industry-leading turnaround times. They've got proprietary systems in their operations, and we intend to deploy, share best practices, which we expect will improve the margin profile of both their business and our business even further. That's heavy maintenance.

Speaker #1: We get to that 19% to 20% by realizing those synergies. Those synergies come from ISG and A savings. They come from volume discounts on procurement because we're buying a lot of parts to support our maintenance operations.

Speaker #2: We see very clear connection there. That's not factored into the model right now. We also see significant appeal to additional OEM partners for distribution.

Speaker #2: This scale, this visibility, this data that we're collecting is incredibly valuable to OEMs and our pitch to them as an exclusive distribution partner. Growth in that business as a result of this acquisition is not factored into that model.

Speaker #1: They're buying a lot of parts to support their maintenance operation. There's great savings by improved sourcing across the two. And then, ultimately, as I mentioned, we have highly differentiated, proprietary systems at AAR that have allowed us to achieve industry-leading margins in our business here.

Speaker #2: And additionally, we think about the software business. The data that we collect, the improvements we can make further improvements we can make to the software offering given we've got we sell MRO software and now we've got a much greater window to the MRO world can help make that software solution set even more exciting and growth there.

Speaker #1: As well as industry-leading turnaround times. They have proprietary systems in their operations, and we intend to deploy and share best practices, which we expect will improve the margin profile of both their business and our business even further.

Speaker #2: I mean, obviously, we're counting on growth there, but the potential acceleration of that growth isn't factored into the model either. So it's exciting on its own.

Speaker #1: That's heavy maintenance. You know, what we're not factoring in, even in the targets that we just gave, are the network effects that we see from additional revenue capture—additional revenue capture in components through cost selling.

John M. Holmes: What we're not factoring in, even in the targets that we just gave, are the network effects that we see from additional revenue capture. Additional revenue capture in components through cross-selling. We see very clear connection there. That's not factored into the model right now. We also see significant appeal to additional OEM partners for distribution. This scale, this visibility, this data that we're collecting is incredibly valuable to OEMs and our pitch to them as an exclusive distribution partner. Growth in that business as a result of this acquisition is not factored into that model. Additionally, we think about the software business. The data that we collect, the improvements we can make, further improvements we can make to the software offering, given we sell MRO software and now we've got a much greater window to the MRO world, can help make that software solution set even more exciting.

John Holmes: What we're not factoring in, even in the targets that we just gave, are the network effects that we see from additional revenue capture. Additional revenue capture in components through cross-selling. We see very clear connection there. That's not factored into the model right now. We also see significant appeal to additional OEM partners for distribution. This scale, this visibility, this data that we're collecting is incredibly valuable to OEMs and our pitch to them as an exclusive distribution partner. Growth in that business as a result of this acquisition is not factored into that model. Additionally, we think about the software business. The data that we collect, the improvements we can make, further improvements we can make to the software offering, given we sell MRO software and now we've got a much greater window to the MRO world, can help make that software solution set even more exciting.

Speaker #2: The cost synergies get us to that 19 to 20 percent over time. But the network effect we think can be very powerful beyond that.

Speaker #1: We see a very clear connection there. That's not factored into the model right now. We also see significant appeal to additional OEM partners for distribution.

Speaker #5: No, that's super helpful. And then maybe if I could just follow up on repair and engineering software margins in the quarter. Down 100 bips.

Speaker #5: Can you talk about the puts and takes there? What's going on with the HACO acquisition and how we should think about adjusted EBITDA margins for the business unit in 2027?

Speaker #1: This scale, this visibility, and this data that we're collecting is incredibly valuable to OEMs and our pitch to them as an exclusive distribution partner. Growth from that business, as a result of this acquisition, is not factored into that model.

Speaker #2: Yeah. Yeah. That's a step down. It is due to the expected HACO dilution. It's two quarters ago, you saw the most meaningful impact from the dilution of the HACO acquisition.

Speaker #1: And additionally, we think about the software business. You know, the data that we collect, the improvements we can make, further improvements we can make to the software offering. You know, given we've got—we sell MRO software, and now we've got a much greater window to the MRO world, we can help make that software solution set even more exciting, and there's growth there.

Speaker #2: And just remind everybody, I mean, that is a meaningful restructuring effort where we bought a business that was significantly underperforming in terms of margin.

Speaker #2: We're restructuring the business. We're taking the revenue down. We're executing work that was not profitable and bringing in contracts that make a lot more sense.

John M. Holmes: Growth there, obviously we're counting on growth there, but the potential acceleration of that growth isn't factored into the model either. It's exciting on its own. The cost synergies get us to that 19% to 20% over time, but the network effects we think can be very powerful beyond that.

John Holmes: Growth there, obviously we're counting on growth there, but the potential acceleration of that growth isn't factored into the model either. It's exciting on its own. The cost synergies get us to that 19% to 20% over time, but the network effects we think can be very powerful beyond that.

Speaker #1: I mean, obviously, we're counting on growth there, but you know, the potential acceleration of that growth isn't factored into the model either. So, it's exciting on its own.

Speaker #2: And the goal is to get the HACO operation EBITDA-wise to be margin consistent with the other facilities that we have in North America. So you saw the biggest impact from that exercise.

Speaker #1: And the cost synergies get us to that, you know, 19% to 20% over time. But the network effect, we think, can be very powerful beyond that.

Speaker #2: Two quarters ago, we saw an improvement from that low point last quarter. This quarter was relatively even with last quarter in terms of the dilution.

Sheila Kahyaoglu: That is super helpful. Then maybe if I could just follow up on repair and engineering software margins in the quarter, down 100 bps. Can you talk about the puts and takes there, what is going on with the HAECO acquisition, and how we should think about adjusted EBITDA margins for the business unit in 2027?

Speaker #5: You know, that's super helpful. And then maybe if I could just follow up on repair and engineering software margins in the quarter—you know, down 100 basis points.

Speaker #2: And that's because the next big step is the full exit of our Indianapolis facility. Just as a reminder, that's our highest cost facility. We will exit it by the end of this calendar year.

Speaker #5: Can you talk about the puts and takes there? What's going on with the HACO acquisition, and how should we think about adjusted EBITDA margins for the business unit and for Q1?

Speaker #1: Yeah, that's a step down. It is due to the expected HACO dilution. Two quarters ago, you saw the most meaningful impact from the dilution of the HACO acquisition.

Speaker #2: And once we complete that exit, you'll start to see the margin trend back up towards where it was before we completed HACO. And we're on track to achieve that by the end of this fiscal year.

John M. Holmes: Yeah. That step down is due to the expected HAECO dilution. Two quarters ago, you saw the most meaningful impact from the dilution of the HAECO acquisition. Just to remind everybody, that is a meaningful restructuring effort where we bought a business that was significantly underperforming in terms of margin. We are restructuring the business. We are taking the revenue down. We are exiting work that was not profitable and bringing in contracts that make a lot more sense. The goal is to get the HAECO operation, EBITDA-wise, to be margin consistent with the other facilities that we have in North America. So you saw the biggest impact from that exercise two quarters ago. We saw an improvement from that low point last quarter.

John Holmes: Yeah. That step down is due to the expected HAECO dilution. Two quarters ago, you saw the most meaningful impact from the dilution of the HAECO acquisition. Just to remind everybody, that is a meaningful restructuring effort where we bought a business that was significantly underperforming in terms of margin. We are restructuring the business. We are taking the revenue down. We are exiting work that was not profitable and bringing in contracts that make a lot more sense. The goal is to get the HAECO operation, EBITDA-wise, to be margin consistent with the other facilities that we have in North America. So you saw the biggest impact from that exercise two quarters ago. We saw an improvement from that low point last quarter.

Speaker #1: And just to remind everybody, I mean, that is a meaningful restructuring effort where we bought a business that was significantly underperforming in terms of margin.

Speaker #5: That's super helpful. Thank you.

Speaker #2: Thank you, Sheila.

Speaker #3: Our next question comes from the line of Michael Ciarmoli with Guggenheim Security. Your line is now open.

Speaker #1: We're restructuring the business. We're taking the revenue down. We're executing work that was not profitable and bringing in contracts that make a lot more sense.

Speaker #6: Hey, good morning, guys. Congrats on the results and the transaction. Pretty exciting stuff.

Speaker #2: Thank you, Mike.

Speaker #1: And the goal is to get the HACO operation, EBITDA-wise, to be margin consistent with the other facilities that we have in North America. So, you saw the biggest impact from that exercise.

Speaker #6: John, just to maybe think about the margins that this business is generating. I mean, sort of best in class when we think about some of the other aerospace aftermarket companies.

Speaker #6: And I'm just curious, how you ended up getting this asset for such a reasonable multiple? And then just the other one I had, the labor difference and the labor arbitrage.

Speaker #1: Two quarters ago, we saw an improvement from that low point last quarter. This quarter was relatively even with last quarter in terms of the dilution.

John M. Holmes: This quarter was relatively even with last quarter in terms of the dilution, and that is because the next big step is the full exit of our Indianapolis facility. Just as a reminder, that is our highest cost facility. We will exit it by the end of this calendar year. Once we complete that exit, you will start to see the margin trend back up towards where it was before we completed HAECO. We are on track to achieve that by the end of this fiscal year.

John Holmes: This quarter was relatively even with last quarter in terms of the dilution, and that is because the next big step is the full exit of our Indianapolis facility. Just as a reminder, that is our highest cost facility. We will exit it by the end of this calendar year. Once we complete that exit, you will start to see the margin trend back up towards where it was before we completed HAECO. We are on track to achieve that by the end of this fiscal year.

Speaker #1: And that's because the next big step is the full exit of our Indianapolis facility. Just as a reminder, that's our highest-cost facility. We will exit it by the end of this calendar year.

Speaker #6: I mean, I guess I could go one of two ways. I mean, I think Louie called out how much scale and breadth and presence you have, which kind of begs the question.

Speaker #1: And once we complete that exit, you'll start to see the margin trend back up towards where it was before we completed HACO. And we're on track to achieve that by the end of this fiscal year.

Speaker #6: Maybe you can get even more pricing and have some pricing power to kind of drive that one-stop shop and convenience for the airlines. And on the flip side, just if we're trying to think about from a modeling standpoint, do we have to worry any bit about those kind of wages, maybe creeping up?

Speaker #5: That's super helpful. Thank you.

Sheila Kahyaoglu: That is super helpful. Thank you.

Speaker #1: Thank you, Sheila.

John M. Holmes: Thank you, Sheila.

John Holmes: Thank you, Sheila.

Speaker #3: Our next question comes from the line of Michael Sharmali with Guggenheim Securities. Your line is now open.

Operator: Our next question comes from the line of Michael Ciarmoli with Guggenheim Securities. Your line is now open.

Speaker #6: Can you offset kind of price increases and maybe that goes to what I was just asking about the pricing power?

Speaker #6: Hey, good morning, guys. Congrats on the results and the transaction. Pretty exciting stuff.

Michael Ciarmoli: Hey. Good morning, guys. Congrats on the results and the transaction. Pretty exciting stuff.

Speaker #2: Hey, thanks, Mike. Great set of questions. First of all, I would say kind of go back to what I said at the beginning. I mean, we've got tremendous respect for the Creed family and the others that have built this incredible, as you said, best in class MRO operation.

Speaker #1: Thank you, Michael.

John M. Holmes: Thank you, Michael.

John Holmes: Thank you, Michael.

Speaker #6: John, just to maybe think about the margins that this business is generating—I mean, sort of best in class when we think about some of the other aerospace aftermarket companies.

Michael Ciarmoli: John, just to maybe think about the margins that this business is generating. Sort of best in class when we think about some of the other aerospace aftermarket companies. I am just curious how you ended up getting this asset for such a reasonable multiple. Then, just the other one I had, the labor difference and the labor arbitrage. I guess I could go one of two ways. I think Louis called out how much scale and breadth and presence you have, which kind of begs the question, maybe you can get even more pricing and have some pricing power to drive that one-stop shop and convenience for the airlines. On the flip side, just if we are trying to think about from a modeling standpoint, do we have to worry any bit about those kind of wages maybe creeping up? Can you offset price increases?

Speaker #6: And I'm just curious, how did you end up getting this asset for such a reasonable multiple? And then just the other one I had—you know, the labor difference and the labor arbitrage.

Speaker #2: Down south. And we've known them now for many, many years. It's an amazing business. And they have a really impressive reputation. And yes, they do have a significant labor cost advantage, which is a key contributor to their margin profile.

Speaker #6: I mean, I guess I could go one of two ways. I think Louie called out how much scale and breadth and presence you have, which kind of begs the question.

Speaker #2: But similar to us, they've got great systems. They turn aircraft very quickly with industry-leading turnaround time. And that etc., is what has allowed them to grow.

Speaker #6: Maybe you can get even more pricing and have some pricing power to kind of drive that one-stop shop and convenience for the airlines. And on the flip side, just if we're trying to, you know, think about it from a modeling standpoint, do we have to worry any bit about, you know, those kinds of wages maybe creeping up?

Speaker #2: And since we've gotten to know them, they've always had a attractive margin profile and we expect that to continue. So with respect to different wage pressure etc., we don't see that in these markets.

Speaker #6: Can you offset the kinds of price increases? And maybe that goes to what I was just asking about: the pricing power.

Michael Ciarmoli: Maybe that goes to what I was just asking about the pricing power.

Speaker #2: They've been there for decades. We've obviously spent a lot of time talking to them and understanding those dynamics. And so we don't see any sort of meaningful wage differential in the future that would impact that margin profile.

Speaker #1: Hey, thanks, Mike. Great set of questions. You know, first of all, I would say, kind of go back to what I said at the beginning.

John M. Holmes: Hey, thanks, Mike. Great set of questions. First of all, I would say, go back to what I said at the beginning. We have got tremendous respect for the Creed family and the others that have built this incredible, as you said, best-in-class MRO operation down south. We have known them now for many, many years. It is an amazing business, and they have a really impressive reputation. Yes, they do have a significant labor cost advantage, which is a key contributor to their margin profile. But similar to us, they have got great systems. They turn aircraft very quickly, with industry-leading turnaround time, and that performance, safety, quality, et cetera, is what has allowed them to grow. Since we have gotten to know them, they have always had an attractive margin profile, and we expect that to continue.

John Holmes: Hey, thanks, Mike. Great set of questions. First of all, I would say, go back to what I said at the beginning. We have got tremendous respect for the Creed family and the others that have built this incredible, as you said, best-in-class MRO operation down south. We have known them now for many, many years. It is an amazing business, and they have a really impressive reputation. Yes, they do have a significant labor cost advantage, which is a key contributor to their margin profile. But similar to us, they have got great systems. They turn aircraft very quickly, with industry-leading turnaround time, and that performance, safety, quality, et cetera, is what has allowed them to grow. Since we have gotten to know them, they have always had an attractive margin profile, and we expect that to continue.

Speaker #1: I mean, we've got tremendous respect for, you know, the Creed family and the others that have built this incredible—as you said—best-in-class MRO operation.

Speaker #7: Mike, maybe I just add as it relates to your question on value. I think transaction structure was an important part of the overall equation.

Speaker #1: Down south, and, you know, we've known them now for many, many years. It's an amazing business, and they have a really impressive reputation. And yes, they do have a significant labor cost advantage, which is a key contributor to their margin profile.

Speaker #7: It was important to the sellers to continue to participate here in value creation through their stake as well as the ownership in AAR going forward.

Speaker #2: Yeah. I'm glad you said that, Dylan. They were not for sale. We approached them. And it took us some time to convince them that they've got a great business that's been performing really well.

Speaker #1: But, you know, similar to us, they've got great systems. They turn aircraft very quickly with industry-leading turnaround time. And that performance, safety, and quality, et cetera, is what has allowed them to grow.

Speaker #2: And it took us some time to convince them. But as Dylan pointed out, they're retaining the 35% stake. I'm becoming shareholders of AAR. And participating in the combined upside.

Speaker #1: And since we've gotten to know them, they've always had an attractive margin profile, and we expect that to continue. So with respect to different, you know, wage pressure, et cetera, we don't see that in these markets.

Speaker #2: Was a big part of the reason they agreed to do the deal.

John M. Holmes: With respect to different wage pressure, et cetera, we do not see that in these markets. They have been there for decades. We have obviously spent a lot of time talking to them and understanding those dynamics. So we do not see any sort of meaningful wage differential in the future that would impact that margin profile.

John Holmes: With respect to different wage pressure, et cetera, we do not see that in these markets. They have been there for decades. We have obviously spent a lot of time talking to them and understanding those dynamics. So we do not see any sort of meaningful wage differential in the future that would impact that margin profile.

Speaker #3: Thank you. As a reminder, to ask a question at this time, please press star 11 on your touchstone telephone. Our next question comes from the line of Scott Mikus with Melius Research.

Speaker #1: You know, they've been there for decades. We've obviously spent a lot of time talking to them and understanding those dynamics, and so we don't see any sort of meaningful wage differential in the future that would impact that margin profile.

Speaker #3: Your line is now open. Scott, your line is open. Please check your mute button.

Speaker #2: Mike, maybe I'll just add, as it relates to your question on value, I think transaction structure was an important part of the overall equation.

Dylan Wolin: Mike, maybe I just add, as it relates to your question on value, I think transaction structure was an important part of the overall equation. It was important to the sellers to continue to participate here in value creation through their stake as well as the ownership in AAR going forward.

Speaker #8: Hi. Yes, can you hear me?

Speaker #2: It was important to the sellers to continue to participate in value creation through their stake, as well as the ownership in AAR going forward.

Speaker #2: Hey, Scott. Morning.

Speaker #8: Oh. Good morning. And congrats on the deal. John, you did four acquisitions in fiscal 26. This is AAR's largest ever acquisition. I'm just is there any concern about trying to digest all these deals at once?

Speaker #1: Yeah, I'm glad you said that, Dylan. They were not for sale; we approached them, and it took us some time to convince them that they've got a great business that's been performing really well.

John M. Holmes: Yeah, I am glad you said that, Dylan. They were not for sale. We approached them, and it took us some time to convince them that they have got a great business. It has been performing really well, and it took us some time to convince them. But as Dylan pointed out, they are retaining the 35% stake, becoming shareholders of AAR, and participating in the combined upside was a big part of the reason they agreed to do the deal.

John Holmes: Yeah, I am glad you said that, Dylan. They were not for sale. We approached them, and it took us some time to convince them that they have got a great business. It has been performing really well, and it took us some time to convince them. But as Dylan pointed out, they are retaining the 35% stake, becoming shareholders of AAR, and participating in the combined upside was a big part of the reason they agreed to do the deal.

Speaker #8: Do you feel like the management bandwidth might be a little bit stretched? And Dylan, you talked about how the financing structure provides the company with financial flexibility.

Speaker #1: And it took us some time to convince them that, as Dylan pointed out, you know, they're retaining the 35% stake—becoming shareholders of AAR.

Speaker #8: Should we just assume the path going forward now is delevering and then deals could pop up in the medium term once you're back in your target leverage range?

Speaker #1: And participating in the combined upside was a big part of the reason they agreed to do the deal.

Speaker #2: Yeah, great set of questions. And glad you asked about the bandwidth. Yes, we've been very active in the M&A world over the last several years.

Speaker #3: Thank you. As a reminder, Tess, if you have a question at this time, please press *11 on your touch-tone telephone. Our next question comes from the line of Scott Meekus with Melius Research.

Operator: Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from the line of Scott Mikus with Melius Research. Your line is now open. Scott, your line is open.

Speaker #2: And the deals have gone very well. And the fact that we've performed so well on the transactions, we've done over the last four years gave us the confidence to go and pursue something like this.

Speaker #3: Your line is now open. Scott, your line is open. Please check your mute button.

Speaker #2: But I wouldn't necessarily conflate the value of the transaction with the integration difficulty. HACO, for example, that's a big turnaround project. That's a lot of intensive effort moving sites around, restructuring operations, massive deployment of systems, restructuring customer contracts, etc.

John M. Holmes: Hey, Scott.

John Holmes: Hey, Scott.

Operator: Please check your mute button.

Speaker #7: Hi, yes. Can you hear me?

Scott Mikus: Yes. Can you hear me?

Speaker #1: Hey, Scott. Morning.

John M. Holmes: Hey, Scott. Morning.

John Holmes: Hey, Scott. Morning.

Scott Mikus: Well, good morning, and congrats on the deal. John, you did four acquisitions in fiscal 2026. This is AAR's largest-ever acquisition. Is there any concern about trying to digest all these deals at once? Do you feel like the management bandwidth might be a little bit stretched? Dylan, you talked about how the financing structure provides the company with financial flexibility. Should we just assume the path going forward now is de-levering, and then deals could pop up in the medium-term once you are back in your target leverage range?

Speaker #7: Oh, good morning. And congrats on the deal. John, you did four acquisitions in fiscal ’26. This is AAR’s largest-ever acquisition. Is there any concern about trying to digest all these deals at once?

Speaker #2: That was a real effort. A small purchase price, but a lot of integration effort. MRO Holdings is very different. I mean, this is a business that is performing exceptionally well.

Speaker #7: Do you feel like the management bandwidth might be a little bit stretched? And Dylan, you talked about how the financing structure provides the company with financial flexibility.

Speaker #2: This is about bringing two high-performing companies together and growing from here. And so we're very confident in our ability to do that. The other thing I would point out is even though we've done a number of acquisitions, they've been in different areas of AAR.

Speaker #7: Should we just assume the path going forward now is deleveraging, and then deals could pop up in the medium term once you're back in your target leverage range?

Speaker #1: Yeah, great set of questions. And glad you asked about the bandwidth. Yes, we've been very active in the M&A world over the last several years.

John M. Holmes: Yeah, great set of questions. Glad you asked about the bandwidth. Yes, we have been very active in the M&A world over the last several years, and the deals have gone very well. The fact that we have performed so well on the transactions we have done over the last four years gave us the confidence to go and pursue something like this. But I would not necessarily conflate the value of the transaction with the integration difficulty. HAECO, for example, that is a big turnaround project. That is a lot of intensive effort, moving sites around, restructuring operations, massive deployment of systems, restructuring customer contracts, et cetera. That was a real effort. A small purchase price, but a lot of integration effort. MRO Holdings is very different. This is a business that is performing exceptionally well. This is about bringing two high-performing companies together, and growing from here.

John Holmes: Yeah, great set of questions. Glad you asked about the bandwidth. Yes, we have been very active in the M&A world over the last several years, and the deals have gone very well. The fact that we have performed so well on the transactions we have done over the last four years gave us the confidence to go and pursue something like this. But I would not necessarily conflate the value of the transaction with the integration difficulty. HAECO, for example, that is a big turnaround project. That is a lot of intensive effort, moving sites around, restructuring operations, massive deployment of systems, restructuring customer contracts, et cetera. That was a real effort. A small purchase price, but a lot of integration effort. MRO Holdings is very different. This is a business that is performing exceptionally well. This is about bringing two high-performing companies together, and growing from here.

Speaker #2: Obviously, you've seen acquisitions in parts. You've seen acquisitions in software. And now in repair. And we are very disciplined in terms of the financial capital allocation and are disciplined approach to capital allocation here.

Speaker #1: And the deals have gone very well. The fact that we've performed so well on the transactions we've done over the last four years gave us the confidence to go and pursue something like this.

Speaker #2: But we're certainly also very disciplined in terms of what we can take on operationally. And we feel very comfortable with the spacing here and the deal that we just announced.

Speaker #1: But I wouldn't necessarily conflate the value of the transaction with the integration difficulty. You know, HACO, for example, that's a big turnaround project. That's a lot of intensive effort moving sites around, you know, restructuring operations, you know, massive you know, deployment of systems, restructuring customer contracts, et cetera.

Speaker #8: Okay. Got it. And then you mentioned the turnaround times previously. I think at a recent conference, you mentioned you guys can do a C check at your hangars.

Speaker #1: That was a real effort. A small, you know, purchase price, but a lot of integration effort. MRO Holdings is very different. I mean, this is a business that is performing exceptionally well.

Speaker #8: In the high 20s of days. I'm just curious, what are the turnaround times at MRO Holdings right now? And then as you implement your paperless hangar initiatives and their hangars, can you also get their turnaround times in line with AAR's turnaround times?

Speaker #1: This is about bringing two, you know, high-performing companies together and growing from here. And so we're very confident in our ability to do that.

Speaker #2: Yeah. Yes, you're correct. And we're very proud of the industry-leading turnaround times that we've built. MRO Holdings also performs exceptionally well in terms of their turnaround times.

John M. Holmes: We are very confident in our ability to do that. The other thing I would point out is, even though we have done a number of acquisitions, they have been in different areas of AAR. Obviously, you have seen acquisitions in parts, you have seen acquisitions in software, and now in repair. We are very disciplined in terms of the financial capital allocation, and a disciplined approach to capital allocation here. But we are certainly also very disciplined in terms of what we can take on operationally, and we feel very comfortable with the spacing here and the deal that we just announced.

John Holmes: We are very confident in our ability to do that. The other thing I would point out is, even though we have done a number of acquisitions, they have been in different areas of AAR. Obviously, you have seen acquisitions in parts, you have seen acquisitions in software, and now in repair. We are very disciplined in terms of the financial capital allocation, and a disciplined approach to capital allocation here. But we are certainly also very disciplined in terms of what we can take on operationally, and we feel very comfortable with the spacing here and the deal that we just announced.

Speaker #1: The other thing I would point out is, even though we've done a number of acquisitions, they've been in different areas of AAR. You know, obviously, you've seen acquisitions in parts.

Speaker #1: You've seen acquisitions in software. And now in repair. And I, you know, we are very disciplined in terms of, you know, the financial, you know, capital allocation and are disciplined approach to capital allocation here.

Speaker #2: I think it's important to note that actually the maintenance profile of the aircraft, they work on can be different than the maintenance profile of the aircraft we work on.

Speaker #2: So for example, they are in a lower-cost labor environment. And therefore, they will see more labor-intensive work as a result of that. And so it's a little bit of apples and oranges in terms of comparing our turnaround times and their turnaround times.

Speaker #1: But we're certainly also very disciplined in terms of, you know, what we can take on operationally. And we feel very comfortable with the spacing here.

Speaker #2: So I would look at us as we're best in class for the type of maintenance work that we do. And they are best in class for the type of maintenance work that they do.

Speaker #1: And the deal that we just announced.

Speaker #7: Okay, got it. And then you mentioned the turnaround times previously. I think at a recent conference, you mentioned you guys can do a C check at your hangars.

Scott Mikus: Okay. Got it. You mentioned the turnaround times previously. I think, at a recent conference, you mentioned you guys can do a C check at your hangars in the high 20s of days. I am just curious, what are the turnaround times at MRO Holdings right now? As you implement your paperless hangar initiatives in their hangars, can you also get their turnaround times in line with AAR's turnaround times?

Speaker #2: And as you mentioned, we'll be opportunities to share best practices across both organizations. And make each other stronger.

Speaker #7: In the high 20s of days. I'm just curious, what are the turnaround times at MRO Holdings right now? And then, as you implement your paperless hangar initiatives in their hangars, can you also get their turnaround times in line with AAR's turnaround times?

Speaker #8: Okay. And then one last question for Dylan. The F1Q revenue growth was very good. You provided the outlook for the second quarter. The full-year guide kind of implies that growth decelerates to roughly 8% in the back half of fiscal 27.

Speaker #1: Yeah, yes, you're correct. And we're very proud of the industry-leading turnaround times that we've built. MRO Holdings also performs exceptionally well in terms of their turnaround times.

John M. Holmes: Yeah. You are correct, and we are very proud of the industry-leading turnaround times that we have built. MRO Holdings also performs exceptionally well in terms of their turnaround times. I think it is important to note that actually, the maintenance profile of the aircraft they work on can be different than the maintenance profile of the aircraft we work on. So for example, they are in a lower cost labor environment, and therefore they will see more labor-intensive work as a result of that. So it is a little bit of apples and oranges in terms of comparing our turnaround times and their turnaround times. So I would look at us as we are best in class for the type of maintenance work that we do, and they are best in class for the type of maintenance work that they do.

John Holmes: Yeah. You are correct, and we are very proud of the industry-leading turnaround times that we have built. MRO Holdings also performs exceptionally well in terms of their turnaround times. I think it is important to note that actually, the maintenance profile of the aircraft they work on can be different than the maintenance profile of the aircraft we work on. So for example, they are in a lower cost labor environment, and therefore they will see more labor-intensive work as a result of that. So it is a little bit of apples and oranges in terms of comparing our turnaround times and their turnaround times. So I would look at us as we are best in class for the type of maintenance work that we do, and they are best in class for the type of maintenance work that they do. And there, as you mentioned, will be opportunities to share best practices across both organizations and make each other stronger.

Speaker #8: Does that kind of just conservatism, or are you seeing any changes in demand signals from customers?

Speaker #7: Yeah. Scott, I would not think about a deceleration generally in growth or demand. We are continuing to see strong demand that's been reflected in our bookings and what we're hearing from our customers.

Speaker #1: I think it's important to note that, actually, the maintenance profile of the aircraft they work on can be different than the maintenance profile of the aircraft we work on.

Speaker #1: So, for example, you know, they are in a lower-cost labor environment, and therefore, they will see more labor-intensive work as a result of that.

Speaker #7: So yeah, I don't think you're hearing anything that would suggest we're decelerating.

Speaker #2: Yeah. And if you look at the guidance that we just provided for Q2, it actually implies an increase in organic growth from Q1 to Q2.

Speaker #1: And so it's a little bit of apples and oranges in terms of comparing our turnaround times and their turnaround times. So, I would look at us as we're best in class for the type of maintenance work that we...

Speaker #2: And obviously, we've just raised the guide for the full year. And just on that point, just to amplify what Dylan said, we are not seeing a slowdown anywhere in our bookings in parts.

Speaker #8: We do, and they are best in class for the type of maintenance work that they do. And there, as you mentioned, will be opportunities to share best practices across both organizations and make each other stronger.

John M. Holmes: And there, as you mentioned, will be opportunities to share best practices across both organizations and make each other stronger.

Speaker #2: And more importantly, we're not hearing from any of our customers that we should expect a slowdown on the maintenance side. So we continue to feel very good about the demand environment that we're in.

Speaker #9: Okay, and then one last question for Dylan. The Q1 revenue growth was very good. You provided the outlook for the second quarter. The full-year guide kind of implies that growth decelerates to roughly 8% in the back half of fiscal '27.

Scott Mikus: Okay, then one last question for Dylan. The F1Q revenue growth was very good. You provided the outlook for the second quarter. The full year guide kind of implies that growth decelerates to roughly 8% in the back half of fiscal 2027. Is that kind of just conservatism, or are you seeing any changes in demand signals from customers?

Speaker #8: Got it. Thank you.

Speaker #2: Thanks, Scott.

Speaker #3: Thank you. And I'm currently shown no further questions at this time. I now like to hand the call back over to John Holmes for closing remarks.

Speaker #9: Is that kind of just conservatism, or are you seeing any changes in demand signals from customers? Yeah, Scott, I would not think about, you know, a deceleration generally in growth or demand.

Speaker #2: All right, everybody. We really appreciate the time and flexibility given the change in the conference call time here. And we look forward to providing another update on next quarter.

Dylan Wolin: Yeah, Scott, I would not think about a deceleration generally in growth or demand. We are continuing to see strong demand that is been reflected in our bookings and what we are hearing from our customers. So yeah, I do not think you are hearing anything that would suggest we are decelerating.

Speaker #2: Thank you.

Speaker #9: We are continuing to see strong demand, and that's been reflected in our bookings and what we're hearing from our customers. So yeah, I don't think you're hearing anything that would suggest we're

Speaker #8: We're decelerating. Yeah, and if you look at the guidance that we just provided for Q2, it actually implies an increase in organic growth from Q1 to Q2.

John M. Holmes: Yeah, if you look at the guidance that we just provided for Q2, it actually implies an increase in organic growth from Q1 to Q2, and obviously we have just raised the guide for the full year. Just on that point, just to amplify what Dylan said, we are not seeing a slowdown anywhere in our bookings in parts, and more importantly, we are not hearing from any of our customers that we should expect a slowdown on the maintenance side. So, we continue to feel very good about the demand environment that we are in.

John Holmes: Yeah, if you look at the guidance that we just provided for Q2, it actually implies an increase in organic growth from Q1 to Q2, and obviously we have just raised the guide for the full year. Just on that point, just to amplify what Dylan said, we are not seeing a slowdown anywhere in our bookings in parts, and more importantly, we are not hearing from any of our customers that we should expect a slowdown on the maintenance side. So, we continue to feel very good about the demand environment that we are in.

Speaker #8: And, obviously, we've just raised the guidance for the full year. And, just on that point, you know, just to amplify what Dilip said, we are not seeing a slowdown anywhere.

Speaker #8: In our bookings and parts, and more importantly, we're not hearing from any of our customers that we should expect a slowdown on the maintenance side.

Speaker #8: So, we continue to feel very good about the demand environment that we're in. Got it. Thank you. Excellent.

Scott Mikus: Got it. Thank you.

John M. Holmes: Thanks, Scott.

John Holmes: Thanks, Scott.

Operator: Thank you. I am currently showing no further questions at this time. I would now like to hand the call back over to John Holmes for closing remarks.

Speaker #10: Thank you. I am currently showing no further questions at this time. I would now like to hand the call back over to John Holmes for closing remarks.

Speaker #8: All right, everybody, we really appreciate your time and flexibility given the change in the conference call time here, and we look forward to providing another update next quarter.

John M. Holmes: All right, everybody. We really appreciate the time and flexibility given the change in the conference call time here, and we look forward to providing another update on next quarter. Thank you.

John Holmes: All right, everybody. We really appreciate the time and flexibility given the change in the conference call time here, and we look forward to providing another update on next quarter. Thank you.

Speaker #8: Thank you.

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.