first quarter fiscal year 2027
Filed Sep 28, 2026AAR reported first-quarter fiscal 2027 sales of $918.0 million, GAAP diluted EPS of $1.00, and adjusted diluted EPS of $1.49.
Sales increased 24%, adjusted diluted EPS increased 38%, adjusted EBITDA increased 34%, and adjusted EBITDA margin increased from 11.7% to 12.7%. All three core segments recorded sales growth, while net leverage was 1.81x.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| SalesGAAP | $918M | – | 24% |
| Cost of salesGAAP | $741.7M | – | – |
| Gross profitGAAP | $176.3M | – | – |
| Selling, general and administrative expensesGAAP | $107M | – | – |
| Earnings from joint venturesGAAP | $2.8M | – | – |
| Operating incomeGAAP | $72.1M | – | – |
| Operating marginGAAP | 7.9% | – | – |
| Adjusted operating incomenon-GAAP | $97M | – | – |
| Adjusted operating marginnon-GAAP | 10.6% | – | – |
| Net interest expenseGAAP | $16.2M | – | – |
| Income tax expenseGAAP | $15.3M | – | – |
| Net incomeGAAP | $40.1M | – | – |
| Earnings per share – BasicGAAP | $1.01 | – | – |
| Earnings per share – DilutedGAAP | $1.00 | – | – |
| Adjusted net incomenon-GAAP | $60M | – | – |
| Adjusted diluted earnings per sharenon-GAAP | $1.49 | – | 38% |
| Weighted average shares outstanding – BasicGAAP | 39.6M | – | – |
| Weighted average shares outstanding – DilutedGAAP | 39.9M | – | – |
| Organic sales growthnon-GAAP | 10.8% | – | – |
| Adjusted EBITDAnon-GAAP | $116.5M | – | 34% |
| Adjusted EBITDA marginnon-GAAP | 12.7% | – | – |
| Cash flows provided by operating activitiesGAAP | $55.8M | – | – |
| Adjusted cash flows provided by operating activitiesnon-GAAP | $56.5M | – | – |
| Property, plant, and equipment expendituresGAAP | −$11.8M | – | – |
| Cash and cash equivalentsGAAP | $104.5M | – | – |
| Long-term debtGAAP | $879.6M | – | – |
| Total debtnon-GAAP | $885M | – | – |
| Net debtnon-GAAP | $780.5M | – | – |
| Net debt to Adjusted EBITDAnon-GAAP | 1.81 | – | – |
| Commercial customer sales mixother | 73% of consolidated sales | – | – |
| Parts Supply operating incomeGAAP | $55.3M | – | – |
| Repair, Engineering, and Software operating incomeGAAP | $16M | – | – |
| Government Solutions operating incomeGAAP | $19.1M | – | – |
| Legacy Commercial Programs operating incomeGAAP | $2.9M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Parts SupplyTotal growth of 31% was led by 23% organic growth in new parts Distribution on strength in both Commercial and Government end markets. | $414.8M | – | 31% |
| Repair, Engineering, and SoftwareSales growth was driven by Airframe MRO, Component MRO, and software activities. | $297.5M | – | 31% |
| Government SolutionsGrowth was driven by strength in Mobility Systems. | $138.8M | – | 4% |
| Legacy Commercial ProgramsNo segment driver was provided. | $66.9M | – | – |
Second quarter FY 2027 and full year FY 2027 outlook
- RevenueSecond quarter FY 2027 Sales growth (ex. LCP): 14% - 16%; Full year FY 2027 Sales growth (ex. LCP): Low teens
- NoteSecond quarter FY 2027 Adjusted EBITDA margin (ex. LCP): 13.0% - 13.4%
- NoteGuidance does not include any impact of the MRO Holdings acquisition.
What drove it
- Consolidated sales increased 24% to $918.0 million.
- Commercial-customer sales increased 28%, or $147.5 million, primarily due to acquisition contributions combined with continued above-market Commercial Distribution sales.
- Government-customer sales increased 14%, or $30.9, primarily due to increased volumes in new parts distribution activities.
- Adjusted operating margin increased to 10.6% from 9.7%, primarily as a result of Parts Supply growth and increased profitability in Government Solutions.
- The Company announced an agreement to acquire a 65% controlling interest in MRO Holdings. Guidance does not include any impact from the acquisition.
Concerns
- GAAP operating margin was 7.9%, compared to 8.8% in the prior year quarter.
- Selling, general and administrative expenses were $107.0 million, compared to $71.8 million in the prior year quarter.
- Acquisition, amortization, and integration expenses were $19.6 million, compared to $4.4 million in the prior year quarter.
- Repair, Engineering, and Software operating income was $16.0 million, compared to $20.0 million in the prior year quarter.
- The MRO Holdings acquisition remains subject to closing conditions, including required regulatory approvals, and the Company identified financing, integration, leverage, and credit-rating risks related to the transaction.
What to watch
- Second-quarter FY 2027 sales growth guidance excluding Legacy Commercial Programs of 14% - 16%.
- Second-quarter FY 2027 adjusted EBITDA margin guidance excluding Legacy Commercial Programs of 13.0% - 13.4%.
- Full-year FY 2027 sales growth guidance excluding Legacy Commercial Programs of Low teens.
- The closing, financing, integration, and anticipated benefits of the acquisition of a 65% controlling interest in MRO Holdings.
- Cash conversion, following $55.8 million of cash flows provided by operating activities and $(11.8) million of property, plant, and equipment expenditures.
Balance sheet and cash flow
- Cash and cash equivalents were $104.5 million as of August 31, 2026, compared to $84.0 million as of May 31, 2026.
- Long-term debt was $879.6 million as of August 31, 2026, compared to $893.9 million as of May 31, 2026.
- Net debt was $780.5 million as of August 31, 2026, and net leverage was 1.81x.
- Cash flows provided by operating activities were $55.8 million, compared to $(44.9) million of cash used in the prior year quarter.
- Net cash used in investing activities was $(25.6) million, compared to $(23.8) million.
- Net cash used in financing activities was $(24.9) million, compared to $51.1 million provided by financing activities.
Analysis
AAR opened fiscal 2027 with sales of $918.0 million, up 24% from $739.6 million. Commercial-customer sales increased 28%, or $147.5 million, with acquisition contributions and continued above-market Commercial Distribution sales identified as the primary factors. Government-customer sales increased 14%, or $30.9, on increased new-parts-distribution volumes. Commercial customers represented 73% of consolidated sales, compared with 71% in the prior-year quarter.
All three core segments grew. Parts Supply sales were $414.8 million and management cited 31% total growth, including 23% organic growth in new parts Distribution. Repair, Engineering, and Software sales were $297.5 million, with 31% growth attributed to Airframe MRO, Component MRO, and software activities. Government Solutions sales were $138.8 million, up 4% on Mobility Systems strength. Segment operating-income results were uneven: Parts Supply and Government Solutions increased to $55.3 million and $19.1 million, respectively, while Repair, Engineering, and Software was $16.0 million compared with $20.0 million.
GAAP net income was $40.1 million, or $1.00 per diluted share, compared with $34.4 million, or $0.95 per diluted share. Adjusted net income was $60.0 million and adjusted diluted EPS was $1.49, compared with $39.0 million and $1.08. Adjusted EBITDA increased to $116.5 million from $86.7 million, and adjusted EBITDA margin increased to 12.7% from 11.7%. GAAP operating margin declined to 7.9% from 8.8%, while adjusted operating margin increased to 10.6% from 9.7%. The divergence coincided with selling, general and administrative expenses of $107.0 million and acquisition, amortization, and integration expenses of $19.6 million.
Cash flows provided by operating activities were $55.8 million, compared with $(44.9) million of cash used in the prior-year quarter. Property, plant, and equipment expenditures were $(11.8) million. Cash and cash equivalents were $104.5 million, long-term debt was $879.6 million, and net debt was $780.5 million as of August 31, 2026. Net leverage was 1.81x. The Company also announced an agreement to acquire a 65% controlling interest in MRO Holdings.
For the second quarter, AAR guided to sales growth excluding Legacy Commercial Programs of 14% - 16% and adjusted EBITDA margin excluding Legacy Commercial Programs of 13.0% - 13.4%. For full-year fiscal 2027, it guided to sales growth excluding Legacy Commercial Programs of Low teens. The guidance excludes the impact of the MRO Holdings acquisition, making the transaction's closing, financing, integration, and subsequent contribution central items for investors to monitor.
Management, verbatim
This was a very strong start to our fiscal year.
John M. Holmes, Chairman, President and CEO
Our sales growth resulted in an adjusted EBITDA increase of 34% in the quarter and adjusted EBITDA margins of 12.7%, up 100 basis points year over year.
John M. Holmes, Chairman, President and CEO
Given our solid first quarter results and continued demand for our solutions, we remain confident in our ability to deliver another year of strong performance in fiscal 2027.
John M. Holmes, Chairman, President and CEO
Not in the filing
stated, not guessed- GAAP gross margin was not reported.
- Free cash flow was not reported.
- Share repurchases were not reported.
- Dividends were not reported.
- A prior outlook document was not provided for formal actual-versus-prior-guidance comparison.
- Absolute sales guidance was not reported.
- Full-year adjusted EBITDA margin guidance was not reported.
- Forward guidance for operating expenses and tax rate was not reported.
- Purchase price, financing amount, expected closing date, and quantified synergies for the MRO Holdings acquisition were not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.