AAR Corp.

Good day, and thank you for standing by. Welcome to the AAR Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to AAR. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to AAR's fiscal 2022 fourth quarter earnings call. We're joined today by John Holmes, President and Chief Executive Officer, and Sean Gillen, Chief Financial Officer. Before we begin, I would like to remind you that the comments made during the call may 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. Accordingly, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the company's earnings release and the risk factor sections of the company's Form 10-K for the fiscal year ended May 31, 2021, and Form 10-Q for the fiscal quarter ended February 28, 2022. 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 on the call today. A reconciliation of these non-GAAP measures with most comparable GAAP measures is set forth in the company's earnings release. At this time, I'd like to turn the call over to AAR's President and CEO, John Holmes.

Thank you, and good morning, everyone. I appreciate you joining us today to discuss our fourth quarter and four-year fiscal 2022 results. Before I comment on the results, I would like to take a moment to reflect on the last fiscal year. We entered the year with optimism that the increasing demand for domestic leisure travel we saw in early summer last year would be a leading indicator for business and international travel. Shortly thereafter, the Delta and Omicron variants emerged, and those markets did not rebound at nearly the same rate. In addition, the U.S. withdrawal from Afghanistan, as well as the natural conclusion of certain of other of our government programs, created headwinds in our government business, which had been an important source of strength during the pandemic. Finally, in the macro environment, labor has been in short supply, inflation has been running high, and there is uncertainty about economic growth. In light of this backdrop, I'm incredibly proud of the results that we delivered this year. It was not inevitable that AAR would be able to navigate the pandemic in the way that we have. And that's a credit to our team for finding a way and to our customers for recognizing the value that we deliver. And I want to thank them both. Turning to the results for the full year, sales increased 10% from $1.65 billion to $1.8 billion and adjusted diluted earnings per share from continuing operations increased 82% from $1.31 per share to $2.38 per share. We were able to more than offset a 13% decline in sales to the government customers with a 34% increase in sales to commercial customers. Even more importantly, we were able to continue to drive efficiency improvement and cost discipline to deliver significant earnings growth. For the quarter, sales were up 9% from $438 million to $476 million, and adjusted diluted earnings per share from continuing operations were up 53% from $0.47 per share to $0.72 per share. Our sales to commercial customers increased 28%, and our sales to government and defense customers decreased 13%. Sequentially, our total sales growth was 5%, and our adjusted EPS growth was 14%. Our operating margin was 7% for the quarter on an adjusted basis, from 5.2% last year and 6.7% in the third quarter. We continue to see strong performance in our MRO operations as our hangers remain nearly full, and we continue to benefit from the efficiency initiatives that we implemented across the company during the pandemic. In our parts activities, we saw further recovery in the quarter, but demand remains inconsistent and the availability of used serviceable material to support our trading operations remains in short supply for certain platforms. Turning to our government business, While we saw a decrease in revenue, it is important to note that despite this decline, we were able to expand margins during the quarter. Just taking a step back, I would like to highlight that in this quarter, we delivered adjusted operating margin and EPS that exceeded pre-COVID levels despite our sales being down 15% from their pre-COVID high. This was a goal we established early in the pandemic, and I'm proud of the work we have done to deliver against that commitment. Regarding cash flow, it was another strong quarter as we generated $40.2 million from operating activities from continuing operations. We also repurchased $22 million of stock in the quarter under our share repurchase program. Even after the share repurchase, we reduced our net debt leverage to 0.3 times EBITDA, and we continue to be exceptionally well-positioned to fund our growth. Turning to new business, during the quarter, we announced a marketing partnership with Provener Technologies, which has developed a digital solution that uses proprietary algorithms to analyze and dynamically generate back-to-birth trace history for aircraft parts. This is a capability that we are using in our own operations, and this partnership allows us to bring this emerging digital solution to our customers as well. In addition, we announced our relationship with AeroDesign Labs, which is a company that has developed an aerodynamic drag reduction system kit for the 737NG. This kit has the potential to reduce fuel burn by 1.5% for the 737-700, which equates to over 40 tons of CO2 reduction per aircraft per month, and the benefits are expected to be even larger for the 737-800 and 737-900. We will be providing distribution services to the company on an exclusive basis and have also invested in the company to help fund its growth. Finally, earlier this week, we announced that we became the first non-OEM to be awarded a Captains of Industry contract by the Defense Logistics Agency. This is a distinction that establishes a long-term strategic supply chain relationship with the U.S. Department of Defense and will provide us with access to unique opportunities to support the U.S. and its allies. With that, I'll turn the call over to our CFO, Sean Gillen, to discuss more results in more detail.