A：The main focus of AAR's first quarter fiscal year 2027 Business Update call is on the company's earnings and the announced acquisition of a controlling interest in MRO Holdings.

A：The expected financial benefits of the acquisition for AAR include accelerated growth across all of AAR's activities, a significant step in executing AAR's strategy, and a meaningful strengthening of AAR's financial position through higher margins and stronger, more consistent cash flow.

A：AAR's key financial results for the first quarter include total sales of $918 million, up 24% year over year with 11% organic growth; an expanded sales margin to 12.7%; and adjusted diluted EPS increased 38% year over year to $1.49 per share. Record first-quarter cash flow with adjusted cash from operations of $50 million was also reported.

A：AAR's sales composition for the quarter was 73% to commercial customers and 27% to government customers. Margins performed well with an overall margin expansion of 100 basis points and adjusted EBITDA margins of 13.3% excluding legacy commercial programs. The segment results showed growth and margin improvement in parts supply, engineering software, and component MRO, partially offset by short-term dilution from the Heico Americas integration.

A：AAR's updated outlook for the second quarter includes total sales growth excluding legacy commercial programs of 14% to 16%, and adjusted EBITDA margin of 13.0% to 13.4%. For the full year, AAR is increasing its sales outlook to expect growth excluding LCP in the low teens, supported by strong first quarter performance and confidence in the demand environment.

A：Strategic advantages for AAR include an extended airframe MRO presence which can drive additional volume into high-margin component MRO facilities, enhanced position with existing OEM distribution partners, potential for new distribution agreements, improved market insight into parts demand, and increased opportunities to capture repair and maintenance data to enhance software solutions.

A：The AAR and MRO Holdings combination is expected to increase AAR's revenue by approximately 30% and meaningfully enhance Adjusted EBITA. Additionally, the transaction is expected to generate approximately $75 million of run-rate cost synergies within the next few years.

A：The combination of AAR and MRO Holdings benefits the software and parts repair business by creating a stronger platform with enhanced market insight, deeper relationships with Oems, access to a broader pool of maintenance and repair data, and the potential for increased operational efficiency and cost savings.

A：Heavy maintenance is a recurring, mission-critical service required throughout an aircraft's usable life, involving inspection, repair, overhaul, and modifications regardless of flight utilization. It provides a durable and recurring revenue source and requires skilled labor, hangar capacity, and efficient return-to-service processes.

A：AAR's acquisition of MRO Holdings strengthens its position in the heavy maintenance market, which is a critical point in customer relationships. It provides visibility into the repair needs, parts requirements, and maintenance activity, extending beyond airframe MRO and into the broader platform and creating opportunities for growth.

A：MRO Holdings operates with five locations across El Salvador, Mexico, Colombia, and the United States, with the potential for expansion in each location. It has comprehensive capabilities across narrow and select widebody aircraft and serves a blue-chip customer base including major Americas' airlines. MRO Holdings has a strong track record of growth with a double-digit compounded annual growth rate, significant profitability, and is expected to generate approximately $1 billion in adjusted sales and $285 million in adjusted EBITDA on a pro forma basis in calendar 2026.

A：Following the close of the acquisition and cost synergies, AAR now expects adjusted EBITDA margins to reach 19% to 20% over the next 3 to 4 years. This projection does not include long-term revenue synergies, such as cross-selling and broader growth opportunities.

A：The combination is expected to create significant long-term revenue synergies from cross-selling and broader growth opportunities. The business combination reinforces AAR's mission-critical role in the aviation aftermarket and strengthens its parts repair and software platform. This enables AAR to serve customers more effectively, expand above-market growth avenues, and increase margins and cash generation. The enhanced scale and integrated operations provide AAR with a stronger foundation for the future and a more valuable platform as it increases in size.

A：AAR is targeting a fragmented and growing market with an addressable market size of more than $50 billion across component maintenance, heavy maintenance, and modifications. The combination of these market dynamics, AAR's leading capabilities, and the expanded scale of the combined platform position AAR well to capture more work over time, particularly in the component MRO space.

A：The acquisition will be financed through a combination of debt and equity, leading to AAR issuing approximately $1 billion of equity, including $780 million to current MRO Holdings shareholders. Post-closure, AAR expects net leverage to be approximately 3.6 times, including the full amount of the run-rate synergies. AAR has a clear path to reduce this leverage and aims to return to a 2.0 to 2.5 target range within 24 months while maintaining a double B credit rating profile. The financing structure is meant to balance funding the transaction, rapid deleveraging, and preserving financial flexibility.

A：The acquisition will acquire an initial controlling interest in MRO Holdings at an implied enterprise value of approximately $1.1 billion, representing a 7.5x multiple of adjusted EBITDA net of the tax benefit and synergies. The acquisition will be financed through AAR equity issuance and new debt. AAR will also provide an inter-company IOU loan to MRO Holdings, which will be repaid using the excess cash flow from MRO Holdings. AAR will have the option to acquire an additional 5% at any time and the remaining 30% in three equal tranches on the second, third, and fourth anniversary of the initial closing. The exercise price for future purchases is based on AAR's current LTM EBITDA multiple, with floors and caps outlined.

A：After the acquisition, Aar represents roughly 12% of the commercial aircraft market, which could enable the company to better serve European and Asian customers with its expanded footprint.

A：Aar plans to expand into wide body maintenance by leveraging MRO Holdings' capacity for such work. This could allow Aar to bring wide body maintenance work back to the US, potentially attracting narrow body work from European markets as well, by offering a cost profile competitive with European heavy maintenance costs.

A：The projected increase in Aar's business margin is attributed to synergies from combining Aar and MRO Holdings, savings from integrated procurement, and improved sourcing. The acquisition also offers the potential for additional revenue capture, network effects, and growth through new OEM partnerships and data-driven insights. However, some network effects and potential growth from additional MRO software applications are not yet factored into the model.

A：The acquisition of MRO Holdings led to a step-down in repair and engineering software segment margins due to expected dilution from the HECO acquisition. A meaningful restructuring effort is underway to address the underperformance of the HECO operation. The goal is to align its EBITDA margins with those of other North American facilities. A significant reduction in costs is expected once the exit from the Indianapolis facility is completed by the end of the year, which should improve margin trends.

A：The key factors contributing to the MRO operation's margin profile include significant labor cost advantages, industry leading turnaround times, and performance metrics that have allowed them to grow.

A：The Creté family's decision to retain a 35% stake in the combined entity was influenced by their desire to continue participating in value creation through ownership and by becoming shareholders of the combined entity, which allowed them to share in the upside potential of the deal.

A：There is no significant concern about integrating the recent acquisitions as the management bandwidth is not overextended. The company has been active in acquisitions and the deals have been performed well, giving them the confidence to pursue larger transactions. They are disciplined in financial capital allocation and operational approach to acquisitions.

A：The company plans to focus on delevering first and then look for potential deals in the medium term once they are back to their target leverage range.

A：The acquisition has an exceptionally well-performing business, and the company's focus is on bringing two high-performing companies together to grow from that point. The maintenance profile of the aircraft can differ between the company and the acquisition, impacting turnaround times. However, there are opportunities to share best practices and make each entity stronger.

A：The revenue growth forecast does not suggest a deceleration in demand. The company continues to see strong demand, which is reflected in their bookings and customer feedback. The outlook for Q2 and the raised full-year guide imply growth, and there is no indication of a slowdown in bookings or demand for maintenance services.