AAR Agrees to Buy 65% of MRO Holdings
The aviation aftermarket platform posted $918.0 million of first-quarter sales, up 24%, and lifted full-year fiscal 2027 sales-growth guidance to low teens.
AAR Corp. (AIR), a parts, repair, and software platform in the aviation aftermarket, entered a definitive agreement to acquire a 65% controlling interest in MRO Holdings as it reported a 24% year-over-year sales increase in the fiscal 2027 first quarter ended August 31, 2026.
Chairman, President, and CEO John M. Holmes said airline customers continued to experience strong demand for air travel, which in turn drove demand for the company’s services, and that growth appeared across all three core segments. The deal would give the company scale to accelerate its strategy, as heavy maintenance helps drive revenue to other areas. The structure lets it partner with a team experienced in a strategically important region while preserving financial flexibility. Guidance does not include any impact of the acquisition.
Consolidated sales were $918.0 million, compared with $739.6 million a year earlier. Organic sales growth was 10.8% after a 13.3% contribution from acquisitions in the last twelve months. Sales to commercial customers increased 28%, or $147.5 million, primarily due to acquisition contributions combined with continued above-market Commercial Distribution sales. Sales to government customers increased 14%, or $30.9 million, primarily due to increased volumes in new parts distribution. Commercial customers were 73% of consolidated sales.
Parts Supply, the largest reportable segment, posted third-party sales of $414.8 million, up 31% from $317.8 million a year earlier. Holmes said total Parts Supply growth of 31% was led by 23% organic growth in new parts Distribution on strength in both Commercial and Government end markets. Operating income in the segment was $55.3 million.
Repair, Engineering, and Software sales were $297.5 million, up 31% from $226.4 million a year earlier. Growth was driven by Airframe MRO, Component MRO, and software activities. Operating income in RE&S was $16.0 million. Government Solutions sales were $138.8 million, up 4% from $133.9 million a year earlier, driven by strength in Mobility Systems; operating income there was $19.1 million. Legacy Commercial Programs, which the company had said it intended to wind down, posted sales of $66.9 million.
GAAP net income was $40.1 million, or $1.00 a share. Adjusted diluted earnings per share were $1.49, up 38% from $1.08 a year earlier. Adjusted EBITDA was $116.5 million, up 34% from $86.7 million a year earlier, and the adjusted EBITDA margin expanded to 12.7% from 11.7%. Total adjusted EBITDA margin from Parts Supply, RE&S, and Government Solutions was 13.3%. Operating margin was 7.9%; adjusted operating margin rose to 10.6% from 9.7%, primarily due to growth in Parts Supply and increased profitability in Government Solutions. Selling, general, and administrative expenses were $107.0 million. Acquisition, amortization, and integration expenses were $19.6 million.
Cash flow provided by operating activities was $55.8 million. Net debt was $780.5 million as of August 31, 2026, and net leverage was 1.81x, down from 2.03x at May 31, 2026. Cash and cash equivalents were $104.5 million.
For the second quarter of fiscal 2027, the company guided to sales growth excluding Legacy Commercial Programs of 14% to 16% and an adjusted EBITDA margin excluding that segment of 13.0% to 13.4%. For the full year, it raised sales-growth guidance excluding Legacy Commercial Programs to low teens from a prior range of low double-digits to low teens. Holmes said the company remains confident in its ability to deliver another year of strong performance in fiscal 2027.