A：The purpose of acquiring Heico Americas was to extend the leadership position in airframe heavy maintenance through investments in proprietary systems and processes. The expected outcomes include achieving industry-leading quality and turnaround times, becoming the most sought after airframe heavy maintenance provider in North America, and having airframe heavy maintenance as the largest contributor to margin expansion. The acquisition also aims to improve operational and financial performance of the facilities, with revenue optimization, cost reduction, process improvements, and footprint rationalization as key elements.

A：The acquisition of Heico Americas will lead to an addition of approximately 150 additional capacity to the network, a lowering of fixed costs, and gaining access to a more predictable labor supply. In the short term, margins will be initially margin dilutive, but they are expected to steadily improve over the integration period. The exit from the high-cost site in Indianapolis and the transfer of work to other AAR sites, including the Heico facilities, will further improve the overall margin profile of airframe heavy maintenance.

A：The rationale behind acquiring Aircraft Reconfiguration for $200 million is to expand the company's airframe heavy maintenance capabilities, improve its ability to perform complex aircraft modification work, and bring in a robust intellectual property portfolio. The acquisition is also expected to provide proprietary solutions and engineering and self-certification capability to accelerate parts PMA development efforts.

A：The financial highlights for the recent quarter include total sales growth of 16% year over year, with 12% organic growth, reaching $525 million. Adjusted EBITDA increased by 23% to $96.5 million, and adjusted EBITDA margins improved to 12.1% from 11.4%. Adjusted operating income increased by 28% to $81.2 million, with adjusted operating margins improving 100 basis points to 10.2%. Key drivers of the improved margins were a focus on operating efficiencies and strong performance in the parts supply segment and government programs.

A：The parts supply segment performed well with total sales growth of 29% from the same quarter last year to $354 million. New parts distribution activities saw above-market growth of 32% excluding contributions from AAR. Adjusted EBITDA was higher by 37% at $46.5 million, with adjusted EBITDA margins increasing to 13.2% from 12.4%. Adjusted operating income and margins also increased, driven by increased operating leverage as the company successfully scaled the business while maintaining cost discipline.

A：In the recent quarter, the repair and engineering segment had total sales of $245 million, a year-over-year increase of 1%. Adjusted EBITDA was $31.2 million, which was 1% higher than the same period last year, while adjusted EBITDA margins decreased to 12.8% from 13.5%. Adjusted operating income remained consistent at $27.4 million, with adjusted operating margins decreasing to 11.2% from 12.0%, primarily due to the mix of work within the airframe heavy maintenance network, one-time costs, and a slight impact from the Heico Americas acquisition.

A：The integrated solutions segment saw sales growth of 8% year over year to $176 million, primarily driven by government programs. Adjusted EBITDA increased 50% to $18.5 million, and adjusted operating income rose 82% to $15.1 million, with adjusted operating margins increasing from 5.1% to 8.6%. The higher margins were driven by a favorable mix and certain government contracts, as well as achieving key program milestones during the quarter.

A：The company's capital allocation strategy remains unchanged, with priorities to continue funding organic growth in core areas such as high growth new parts distribution, airframe heavy maintenance, component repair, software, and IP-enabled offerings. Additionally, capital will be allocated to M&A opportunities that meet strategic and financial criteria and support core segments. The recent acquisitions of Heico Americas, Aircraft Reconfiguration, and AAR are aligned with these criteria and are expected to accelerate the company's growth strategy.

A：The anticipated adjusted operating margin for the full fiscal year is expected to be Ed ed to Ed ed, based on strong performance in the first half and recent acquisitions.

A：The 32% growth in parts supply is attributed primarily to volume, with some price escalation from certain OEM partners. The growth includes same store sales from existing distribution contracts, which are in the 20% to 30% range, contributing to the overall growth.

A：There is no evidence of destocking at airline customers. The backlog for the business indicates that the growth rates are expected to continue, and there are no signals implying destocking at this point.

A：The Heico acquisition is expected to be margin accretive in the long term, and it will be even more accretive than initially thought. However, it will take a couple of quarters to complete the integration, during which the impact will be seen in the third and fourth quarters.

A：There are synergies between the heavy maintenance business and the component repair business, and the plan is to leverage the leadership position in airframe heavy maintenance to drive volume through the component shops. This will be achieved by signing long-term commitments for both heavy maintenance and component repair with customers. Additionally, they plan to develop proprietary channels to market for selling parts through Traction and component repair.

A：The announcement of Delta Airlines adopting Traction is seen as a win for the company early on in their journey with Traction, as Delta is one of the largest and most respected airlines. Its adoption of Traction has led to increased interest and adoption by other airlines, with Delta also serving as a reference for Traction with other customers.

A：The company continues to see M&A as a key part of its growth and is actively pursuing acquisitions that meet specific criteria. They are confident in their integration capabilities and are looking for attractive opportunities to close on.

A：The company is approximately two-thirds of the way through the customer upgrades that have been agreed to but not yet implemented. They aim to complete these upgrades by the end of 2028, with the understanding that software upgrade cycles may take longer.

A：The company didn't disclose the revenue from the art acquisition but mentioned that the acquisition is expected to bring significant growth as it allows the company to enter a market with strong demand and to become a major player. The business is anticipated to have substantial margin potential due to the ongoing need for refining airline offerings.

A：The company observed a similar level of activity in USM sales this quarter compared to the last quarter, with no material change in the market's availability. The focus remains on the new parts distribution business, which has significant momentum and wide market acceptance.

A：In the recent quarter, approximately half of the sales growth (50%) came from the commercial sector, and the other half (50%) from the government sector.

A：The speaker does not see the introduction of aero derivative engines as a risk to their USM business in the immediate term. Despite the potential for new demand vectors for the Cfm 56 engine, the USM business is confident in sourcing material from the market where others cannot.

A：The revenue outlook for the year includes a more pronounced positive impact next year, particularly in the FY 27. A slight contribution from the Oklahoma City site is expected in February, while the Miami site will come online fully in July. Both sites are expected to operate at full capacity by the end of the fiscal year.

A：The MRO heavy maintenance segment is often perceived as low-margin, but the company views it as a low double-digit margin business with potential for further expansion. The acquisition has led to a 45-50% market share, customers are approaching the company, and process improvements have enabled selling at premium prices in the market.

A：The company plans to expand margins in the heavy maintenance business through improvements in the fixed cost base and execution of systems. Investments in processes have improved turnaround times and allowed the company to sell at a premium, resulting in misunderstood perceptions about the MRO business.

A：The company anticipates returning to previous levels of margins in the repair and engineering segment, which were low double digits, and plans to expand from there. The current situation is seen as a low point, with heavy lifting ahead related to the HECO acquisition. The company expects to improve profitability as they phase through the acquisition and will exceed previous margins with customer support and multi-year commitments.

A：The HECO acquisition will affect the revenue and cost structure in the heavy maintenance segment through revenue realignment and cost takeout. Revenues are being reduced from HECO's prior operations to align the facility volume with the company's standards. This will involve rightsizing the labor force to match the volume and performance level, with the intention of then building up from that point. This strategy has been successfully implemented in other facilities, and it is being applied in Miami and Oklahoma City as part of the expansion.

A：The expectation for the second half of the year in parts distribution is to maintain organic growth slightly above the current annual run rate of around 20%. The significant growth in the last quarter, with 50% attributed to government customers, suggests a positive outlook for the coming period.