What Management Said
Read the full Q2 2026 transcript ↗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 31, 2025. The reconciliation of these non-GAAP measures to the most comparable GAAP measure is set forth in the company's earnings release and slides. 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 quarter.
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. 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.
Both expansions are progressing well and will come online in calendar 2026, adding approximately $60 million in annual revenue. Turning now to slide five with more detail, I'll provide more detail on our recent acquisition of ADI. 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.
- Sales growth across all segments led by Parts Supply (+29%) and 32% organic new-parts-distribution growth (~50% commercial, ~50% defense)
- Closed ADI ($138M; leading electronic-components distributor, ~$150M sales, 400 employees) and HAECO Americas ($77M), extending airframe heavy-maintenance leadership
- Announced Aircraft Reconfig Technologies (ART, $35M) for cabin-reconfiguration engineering and certification
- Renewed key exclusive distribution contracts with Collins Aerospace and Arkwin Industries (a TransDigm unit); Eaton named AAR's Amsterdam facility an authorized service center; 100% distribution renewal rate
- Trax wins (Thai Airways selected eMRO/e-mobility/cloud) and an Aeroxchange partnership; ~$850M of new HAECO contract awards over five years
- Integrated Solutions adjusted EBITDA up 50% (op income +82%) on favorable mix and government program milestones
- Net leverage returned to target range after the equity offering
- HAECO Americas is margin-dilutive near term (low-single-digit EBITDA margin initially); integration will take 12-18 months and pressures Q3 and Q4 margins
- Repair & Engineering adjusted operating margin fell to 11.2% from 12.0% on work mix, one-time component-repair costs and only one month of HAECO
- Exiting the high-cost Indianapolis heavy-maintenance site (highest-cost location; persistent labor-availability challenges) over ~18 months
- USM activity was flat/status quo versus the prior quarter with no material change in supply
Guidance Changes
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Performance Breakdown
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Earnings Call Themes & Trends
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Q&A Summary
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