AIR

Overall Quarterly and Full-Year Performance

• Delivered a strong record quarter with continued momentum from the company's connected platform strategy for parts, repair, and software, driving higher profitable growth. • Q4 FY2026 adjusted sales grew 26% year-over-year (13% organic growth), adjusted EBITDA grew 27%, and adjusted diluted EPS grew 32% to $1.53 per share. • Excluding the legacy commercial program segment, Q4 adjusted EBITDA margin reached 13%, already hitting the lower end of the three-year target range set at the May Investor Day, with management confident of reaching or exceeding the high end of the range. • Full year FY2026 set new records for total sales, adjusted EBITDA, and adjusted EPS. The company successfully closed and integrated four acquisitions in FY2026, completing site consolidation, workforce repositioning, and customer coordination. • Strong quarterly adjusted operating cash flow of $58 million (full year $94 million) drove a reduction in net leverage to 2.03x net debt to adjusted EBITDA, reaching the low end of the company's target leverage range, improving balance sheet flexibility. • Working capital metrics improved: accounts receivable days and inventory turns both improved year-over-year and quarter-over-quarter, with adjusted operating cash flow as a percentage of adjusted EBITDA reaching 24% for the full year, making meaningful progress toward the long-term target of 30%+.

Strategic and Operational Milestones

• Signed an exclusive commercial distribution agreement with Woodward for high-demand parts for LEAP, Gen-X, and CF-34 engines, expanding an existing defense distribution relationship. • Completed the Oklahoma City airframe MRO facility expansion; the Miami expansion is on track to come online after summer 2026. • Won multiple new component MRO awards from leading airlines, driving double-digit organic sales growth in the segment in Q4. • Launched Airvoyant, the company's AI-driven procurement solution for airlines and MROs, which is currently in beta testing with launch partners and has generated strong broad market interest. • Is rolling out paperless hangar technology to Oklahoma City and Greensboro facilities; when complete, ~66% of the company's airframe MRO capacity will use the technology. • Was awarded a $305 million follow-on U.S. Navy and Marine Corps contract for C-40 fleet contractor logistics support. • Integration of HACO Americas is tracking ahead of schedule; margin dilution decreased from 70 basis points last quarter to 40 basis points in Q4, and the acquisition is expected to reach margin parity with other AAR airframe MRO facilities in the second half of FY2027. • TRAX software expanded its relationship with Delta Air Lines to phase two of implementation, with over 10,000 Delta professionals currently using the platform. • Closed the acquisition of Aircraft Reconfig Technologies in April 2026, adding in-house certification capabilities and proprietary engineering solutions to the company's portfolio.

• Management expects continued double-digit sales growth and further margin expansion for fiscal year 2027, supported by favorable demand conditions. Commercial passenger demand remains resilient, and elevated global aircraft fleet ages continue to drive strong demand for core parts and repair offerings, with strong momentum across all segments. • For Q1 FY2027, management guides total sales growth (excluding the legacy commercial program segment) of 21% to 23%, and an adjusted EBITDA margin (excluding legacy commercial programs) of 12.25% to 12.75%. • For full fiscal year 2027, management guides total sales growth (excluding legacy commercial programs) in the range of low double digits to low teens. This guidance is consistent with the three-year growth targets issued at the May Investor Day, and management is confident of meeting or exceeding those targets. • The legacy commercial program segment is expected to wind down ratably over the next three to four years, with the timeline subject to change based on the speed of inventory exit and contract wind-down. • For the Government Solutions segment, continued decline in WASP program activity is expected to be more than offset by growth in newer, higher-margin programs, driving ongoing margin expansion. • Parts supply segment margins are expected to improve in FY2027, as higher-margin new parts distribution continues to outgrow lower-margin used serviceable material (USM).

AAR Corp operates four core reporting segments, with the following Q4 FY2026 performance:

1. Parts Supply: Total sales grew 39% year-over-year to $424 million, contributing 45.7% of total quarterly revenue. Organic new parts distribution grew 19% (28% organic growth for commercial distribution, 7% for government distribution). Adjusted EBITDA increased 18% year-over-year to $61.7 million, with an adjusted EBITDA margin of 14.6% (down 250 basis points, driven by a $6.5 million one-time gain in used parts activities in the prior year quarter).
2. Repair Engineering and Software: Total sales increased 35% year-over-year to $314 million, contributing 33.8% of total quarterly revenue. Growth was driven by the HACO Americas acquisition, record component MRO growth, higher airframe MRO volumes, and increased recurring revenue at TRACS. Adjusted EBITDA grew 29% year-over-year to $36 million, with an adjusted EBITDA margin of 11.5% (down 50 basis points, due to 130 basis points of dilution from ongoing HACO Americas integration and 90 basis points of temporary non-recurring component MRO costs).
3. Government Solutions: Sales decreased 8% year-over-year to $130 million, contributing 14.0% of total quarterly revenue. The revenue decline was driven by reduced activity on the legacy WASP program supporting the State Department, partially offset by expansion of newer government programs and strong pallet sales in the mobility operation. Adjusted EBITDA increased 58% year-over-year to $20.8 million, with an adjusted EBITDA margin expanding 670 basis points to 16.0%.

For full year FY2026, total adjusted sales grew 20% to $3.3 billion, with 14% organic adjusted sales growth. Adjusted EBITDA grew 24% year-over-year to 12.1% (12.7% excluding the legacy commercial program segment), an expansion of 30 basis points. Adjusted diluted EPS grew 29% to $5.05, marking the fifth consecutive year of mid-teens or higher adjusted EPS growth.

• Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from projected outcomes, as detailed in the company's Form 10-K and earnings release risk factor disclosures. The company assumes no obligation to update forward-looking statements. • Used serviceable material (USM) margins are constrained by limited asset availability, which has compressed purchase-sell spreads in the segment. • HACO Americas integration continues to create temporary near-term margin dilution, though dilution is decreasing as integration progresses. • The legacy commercial program wind-down timeline may shift depending on the speed of exiting inventory positions and customer contracts. • Integration of new software products like Airvoyant requires custom integration with customer systems, which extends the timeline for customer onboarding and revenue recognition.

Q: After seeing strong but then normalizing GE commercial spare parts orders in recent months, how have AAR's commercial new parts orders trended since end of May, and have increased Middle East hostilities created tailwinds for government new parts distribution? / A: AAR's commercial new parts distribution growth has remained consistently strong across recent quarters, with ~50% of growth coming from same-store sales at existing agreements, under 50% from ramp-up of new agreements, and a small portion from price increases. Government organic distribution growth hit 34% for FY2026, and while the company is now lapping strong year-ago growth, demand from government customers (most notably DLA) remains encouraging. (278 characters)

Q: Your FY2027 guidance is at the high end of your previously issued 8-12% three-year growth target. Does this imply an expected slowdown in 2028 or 2029, or is it just conservative multi-year planning? / A: Management does not expect a slowdown in 2028 or 2029. End market demand remains strong across all core lines of business, including new parts distribution, component repair, and software, all of which continue to gain market traction. The company expects a strong first year of the three-year plan and sees no reason for deceleration in the out years. (271 characters)

Q: Now that net leverage is at the low end of your target range, what is your appetite for organic vs inorganic growth, and how does the current M&A pipeline look? / A: The improved balance sheet gives the company both capacity and confidence to continue investing in growth, starting with organic investments to support the fast-growing parts supply business. The M&A pipeline remains full, with multiple opportunities the company has tracked for years (all six acquisitions of the last three years were long-tracked opportunities). M&A will continue to be a core part of AAR's growth strategy going forward. (282 characters)

Q: What has early adoption and customer feedback been like for the newly launched Airvoyant AI procurement platform, and why would competitors use the product? / A: Airvoyant launched at an industry conference in April and generated unexpectedly strong broad interest from airlines, with all customers acknowledging the industry need for the tool. It is currently in beta testing with partner airlines; integration with customer procurement systems takes time, but multiple airlines are progressing through onboarding. Airvoyant is built to serve the entire market, sitting on top of AAR's existing AeroExchange network of 5,000 vendors to let airlines source broadly via AI, so vendors across the market have incentive to participate. (383 characters)

Q: As software sales grow from ~$50 million FY2026 to a target of $200 million long-term, will incremental margins reach ~40% to drive company-wide margin expansion? / A: Yes, that expectation is correct. Trax has already grown from $25 million at acquisition to $50 million, with a clear path to $100 million, and Aerostrat (acquired in FY2026) is already exceeding performance expectations. There is a clear path to $100 million in software revenue in the near to medium term, and $200 million long-term. As the software business scales, incremental margins are expected to rise from the current ~20% to 30-40%, driving positive mix shift. (341 characters)