AAR Corp.

Hello, and thank you for standing by. Welcome to AAR Corp second quarter fiscal year 2026 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 the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Chris Tillett, Vice President of Investor Relations. You may begin.

Good afternoon, everyone, and welcome to AAR's fiscal year 2026 second quarter earnings call. We're joined today by John Holmes, Chairman, President, and Chief Executive Officer, and Sarah Flanagan, Interim Chief Financial Officer. The presentation we are sharing today as part of this webcast can be found under the Investor Relations section on our corporate website. Before we begin, I'd like to remind you that the comments made during the call 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 section of the company's annual report on Form 10-K, for the fiscal year ended May 31st, 2025. 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. The reconciliation of these non-GAAP measures to the most comparable GAAP measure is set forth in the company's earnings release and slides. A transcript of this conference call will be available shortly after the webcast on AAR's website. At this time, we'd like to turn the call over to AAR's Chairman, President, and CEO, John Holmes.

Great. Thank you, Chris. And welcome, everyone, to our second quarter fiscal year 2026 earnings call. This was another outstanding quarter for AAR as we generated strong results across all areas of our business. We also completed two key strategic acquisitions and announced the third, which is expected to close in our fiscal fourth quarter. We are excited about these acquisitions as they enable us to accelerate our strategic objectives in two key areas of our business, our high-growth parts supply business segment, specifically new parts distribution, and in our repair and engineering segment. Turning to slide three, I would like to start with the key takeaways from the quarter. First, we delivered strong financial results with sales growth across all segments. Our 16% total sales growth was led by our parts supply business, which was up 29% in the quarters. This growth was driven by above-market organic sales growth of 32% in our new parts distribution activities. This has been our fastest-growing activity, averaging more than 20% organic growth in each of the last four years. Our two-way exclusive distribution model resonates with OEMs and is helping to drive continued market share gains. Second, we strengthened our portfolio with two strategic acquisitions. We previously shared that we are committed to enhancing our offerings with targeted acquisitions that advance our strategy, and we are delivering on that promise. Third, we continue to capture new business across the company, including the renewal of key exclusive new parts distribution agreements, as well as new customers for tracks. In addition, we are continuing to enhance our digital capabilities, including through our newly announced partnership with AeroExchange, the premier commercial aviation supply chain secure network provider. Fourth, we are carefully managing our balance sheet to maintain strategic flexibility, and we ended the quarter with lower leverage, which is now within our long-term target range. Turning to slide four, we have a number of accomplishments within the quarter regarding our four strategic objectives, which are new business wins, operational efficiency, software and IP-enabled offerings, and disciplined portfolio management. I will highlight two of the objectives on this slide, new business wins as well as software and IP-enabled offerings, with additional items to be discussed later in the presentation. First, our distribution model is unique in the industry in that nearly all of our distribution contracts, which typically range from five to ten years, are two-way exclusive, meaning we do not represent competing product in a given market and our OEM partners do not use a competing distributor. This model allows us to develop deeper relationships with our OEM partners, become technically proficient in their products, and help them take market share. This differs from a traditional distribution model where you acquire inventory and essentially act as a call center. We developed this approach more than 10 years ago, and over the last several years have seen a 100% renewal rate in our contracts. Speaking of renewals, during the quarter we announced the renewal of two key exclusive contracts with Collins Aerospace and Arquin Industries, which is a unit of Transdyn. We are also leveraging synergies between our repair offering and our distribution activities. During the quarter, Eaton, one of our key new parts distribution OEM partners, named our Amsterdam facility as an authorized service center to support their hydraulic components across Europe, the Middle East, and Africa. This is a great example of the critical role our parts supply and repair and engineering businesses play in the aviation value chain and the synergies that exist within our operating activities. Within our repair and engineering business, we continue to make progress on our Oklahoma City and Miami airframe heavy maintenance expansions. Both expansions are progressing well and will come online in calendar 2026, adding approximately $60 million in annual revenue. During the quarter, TRACS announced an agreement with AeroExchange. AeroExchange is a leading provider of secure commercial aviation supply networks, and this agreement will enhance our integration capabilities with our customers. TRAX customers will gain access to AeroExchange's extensive networks of parts, repair, inventory pool, and consignment service suppliers through TRAX applications. This collaboration advances our strategy to make it easier for TRAX customers to buy parts and repairs. One more thing on TRAX. We were excited to announce yesterday that TRAX has been selected by Thai Airways, one of the most important Asian carriers, to provide its eMRO enterprise resource planning system, suite of eMobility apps, and a cloud hosting solution. Turning now to slide five with more detail, I'll provide more detail on our recent acquisition of ADI. We acquired ADI in September for $138 million. ADI is a leading distributor of electronic components and assemblies, and it closely aligns with our strategic objective to expand our rapidly growing new parts distribution activities within our parts supply segment. As mentioned, new parts distribution has been growing at over 20% for the last four years, and ADI will add a new growth vector to this activity. The addition of ADI moves AAR up the supply chain through ADI's production-facing distribution channels. This means we will now supply parts to our OEM partners for use in their own manufacturing. We plan to leverage our OEM relationships to grow ADI's business. With approximately $150 million in sales over the last 12 months and a team of 400 skilled employees, we are increasing our access to a substantial and rapidly growing total addressable market. Additionally, over time, we see opportunities to improve margins through higher volumes and operational efficiencies. ADI has performed above expectations in the first few months, and the integration is progressing as planned. Turning now to slide six, I would like to provide an overview of our acquisition of HACO Americas. We acquired HACO Americas in November for $77 million. extending our leadership position in airframe heavy maintenance. Through our investments in proprietary systems and processes, we've achieved industry-leading quality and turnaround times and have become the most sought-after airframe heavy maintenance provider in North America. While new parts distribution has been our fastest-growing business, airframe heavy maintenance has been the largest contributor to our margin expansion over the last four years. This acquisition builds on that success. HACO Americas operates facilities in Greensboro, North Carolina, and Lake City, Florida. As part of the integration process, we will be applying our successful operating model to these facilities to improve their operational and financial performance. This process will take 12 to 18 months and has three key elements, revenue optimization, cost reduction and process improvements, and footprint rationalization. With respect to optimizing revenue, as part of the acquisition, we announced approximately $850 million of new contract awards with several customers over five years. These contracts will replace the existing revenue base at HACO and more closely match the key terms we have with our current other airframe heavy maintenance customers. With respect to cost reduction and process improvements at the HACO facilities, our actions to adjust the cost structure to match the new revenue base are already well underway. Additionally, over time, we will deploy our proprietary processes and systems to the facilities to achieve the same quality and efficiency levels we have achieved at our other airframe heavy maintenance facilities. Regarding footprint rationalization, we will be exiting our heavy maintenance site in Indianapolis over the next 18 months and transferring that work to other AAR sites with much of it moving to the HACO facilities. As a result of our lease agreement with the airport, Indianapolis is our highest cost location. Additionally, labor availability has been a persistent challenge. By exiting this high cost location when the lease expires and redistributing the work throughout the rest of our network, we will further improve the overall margin profile of our airframe heavy maintenance activities. As mentioned, all of these actions will take 12 to 18 months to complete and will initially be margin dilutive. However, we expect the margins to steadily improve as we move through the integration process. Once this work is complete, we will have added approximately 40% additional capacity to our network, lowered our fixed costs, and gained access to a more predictable labor supply. Most importantly, we have the support and contractual commitments from our customers to execute this plan. Turning now to slide seven, we also recently announced an agreement to acquire Aircraft Reconfig Technologies, or ART, for $35 million. ART specializes in reconfiguring passenger aircraft interiors, providing project management, engineering, and certification solutions. This is an exciting addition to our airframe heavy maintenance capabilities that expands our ability to perform complex aircraft modification work while bringing proprietary solutions and a robust IP portfolio. It also brings engineering and self-certification capability that can accelerate our parts TMA development efforts. We expect this acquisition to close in the fourth quarter of this fiscal year, and we look forward to welcoming the skilled team to AAR. With that, I'll turn it over to Sarah to discuss the results in more detail.