Aar Corp (AIR) September 2026 Conference Transcript

Good morning, everyone. I think it's still the morning. My name is Sheila Kaialu with the Jeffries Aerospace Defense and Airlines Equity Research Team for those on the webcast. And we have AAR here with us. We have John Holmes, who's Chairman, President, and CEO of AAR. We'll start off with a few slides, and then we'll go into Q&A. Thanks, John.

Great. Thanks, Sheila. Great to be here with everybody. And just a few slides, just a quick overview. I'll read this to you word by word. So not everybody here may be familiar with the AAR story, so I thought I'd just level set, and then we'll go into Q&A. So AAR, been around for about 70 years, about three, three and a half billion dollars in revenue, obviously publicly traded, about 400 million in EBITDA. And we report in different segments. We're not going to dwell on those segments today. We'll talk about the three main areas of business, parts, repair, and software. But one important thing to note is that we have a nice balance between government and commercial. We're about 30% government, 70% commercial. So AAR, even though we've been around for a long time. And I think there's still certain, I would call it legacy impressions of what we do. We've gone through a lot of changes in the last several years. So from 2018 to today, we've done a lot of portfolio reshaping. And AAR years ago was a much smaller, much more complex business, which is not a very good combination. We were in lots of different businesses in different markets. We weren't necessarily leaders in any of them. And we were lots of different businesses that most importantly were not very well connected. And so the team and I have been focused over the last several years on bringing a lot more focus to the portfolio. We've engaged in a number of divestitures, we've closed down facilities, we've exited product lines, we've exited businesses, and we've also been making some acquisitions along the way. We've made six acquisitions in the last three years. We expect to continue to perform M&A, but those things have been designed to bring more focus to the portfolio, build and leadership positions in different areas in aviation services, and drive more reliable growth, more consistency in our cash flow, and most importantly, margin expansion. These moves have been working. If you look at our results over the last several years, we've posted above market growth in terms of revenue, significant EBITDA margin expansion, as well as corresponding EPS expansion. And with all of those portfolio moves, the three areas that we're focused on now as a company are parts, repair, and software, offering these services to both the commercial aftermarket and the government aftermarket. So we sell parts, we sell repairs, and we sell software that allows our customers, more than 100 airlines around the world, to buy and plan for the parts and repairs that we sell. It's a unique ecosystem or platform in the market. Just to go into a tiny bit more detail in each of those three areas. First, in parts, two main activities in our parts area. One is new parts, new parts distribution. We are a factory new distributor for OEM partners around the world. We have a unique model in this area. It's focused on two-way exclusive distributorships only, meaning if we work with an OEM these are long-term agreements, five to 10-year agreements, we will not represent in a given market competing product for that OEM, and they will not use a competing distributor. There's a lot of people out there that have had exclusive agreements, but no one in our market has leaned into it in quite the same way as we have. Almost 100% of our agreements are exclusive. We've had a 100% renewal rate on these agreements over the last 10 years. And what this allows us to do is become technically proficient in an OEM's products as we represent them in the aftermarket. Most of our competitors buy inventory every quarter, they stock that inventory around the world, and they essentially act as a call center. That is not us. We are active participants out there in the market helping our OEM partners take chair. This is now the largest business inside of AAR of our roughly three and a half billion in revenue. This is about 1.1 and 1.2 billion. It's been growing significantly. We've been putting up 20 to 30 percent organic growth numbers over the last five years. We expect that above market growth to continue. And this is something we are now known for in the industry. We have an incredible pipeline of opportunities. And again, we expect that growth and new parts to distribute. I know we'll talk more about that later or to continue. The other area inside of parts is used serviceable material. This is historically what AAR has been known for, were the used parts guys. So we buy aircraft and engines each year. We tear them down, we repair them, and we resell the parts. This is still an important business for us. It's shrinking. It's less than 15% of the company now as we're mixing it down. I should say it's shrinking as a percentage. The business itself is actually experiencing modest growth. But as a percentage of total, it's been mixing down. It's an important business for us because it's highly transactional, keeps us in touch with the market, keeps us in touch with asset values, and there is connection between what we do in USM to what we do in elsewhere in the business, and I'll talk about that later. But in terms of growth, the focus for us in the parts segment is around new parts distribution. That's where we see quite a lot of runway for us. Moving on to repair, two activities in repair. One, heavy maintenance. We're the largest, third largest in the world, largest in North America, providing heavy maintenance to airlines. When we say heavy maintenance, this is work that's being done in hangars. The aircraft comes in, we take it apart, we repair it, we put it back together. These are time-based checks. These checks, if you own an aircraft and you're operating an aircraft, these checks have to be done every two, three, five, and ten years. And so it's a captive market in a way. And when I say captive market, I mean we work primarily on narrow-body aircraft. These are 737s and A320s. These aircraft can't travel to Europe. They can't travel to Asia, they have to be done here. And so we've become the largest. Our performance is exceptional. We turn aircraft faster than anybody else in our sector, and the airlines are increasingly turning to us for this service for these narrow-body aircraft. Because of that performance over the last few years, we've been expanding our margins, and we've seen meaningful EBITDA growth in this segment over the last several years, and we expect that to continue. So that's heavy maintenance. Elsewhere in repair, we perform repairs on individual aircraft components. This is component MRO. We made a big acquisition of Triumph Group's repair operation about two and a half years ago. That acquisition has gone well. It gave us a meaningful position in the component repair world. And part of our strategy now is to leverage our leadership position in heavy maintenance to drive more volume to component repair. Heavy maintenance today is a low-teens EBITDA margin business. Component repair is high-teens, and a couple of our facilities are low-20s EBITDA. And so we want to leverage our position to drive more volume to our component repair facilities, and we have the capacity to take that on. And finally, the third area of the company is software. This has got a lot of attention recently. We made an acquisition in this space about three years ago, which is going very well. We've since made another acquisition and have launched a new product that I'll talk about later. but software, the core of our software offering came to us through the acquisition three years ago of a company called Trax. Trax is a maintenance ERP system. A maintenance ERP system tracks every single element and supports every single element of an airline's maintenance organization. Trax, the company has been around for 25 years. They support more than 110 airlines and the combined fleet is about 6,000 aircraft. So you've got a very, very large fleet supported. A maintenance ERP system for an airline, as I mentioned, supports every element of their maintenance operation. Every piece, every part that's installed on an aircraft, every part that's on a shelf, where it was purchased, how much they paid, how long it took them to get it, every part that's out for repair, every part that breaks, all of that is managed through tracks. If you're cutting purchase orders, if you're cutting repair orders, chances are you're cutting them through tracks. So that data and the data managed by the airlines over 100 around the world is literally the holy grail of data for us as parts and repair providers. And so by combining those things, we're building what we believe is a pretty unique platform in the aftermarket. I'll talk more about those connections later, but again, kind of a unique mix. And I should mention that we've got some very good customers. We're doing business with the largest airlines in the world, around the world. We also have a number of great OEM relationships with our new parts distribution business and the government business. We're pretty well ensconced with a number of governments around the world as well, so a snapshot of our customer base. I wanted to keep it brief because I know we've got a lot of questions, and that's the thumbnail.

Perfect. Thank you. Maybe, John, thank you so much for that overview, and I'm glad everybody gets to hear.

Yeah, it's not bad.

When it's three, it's a little bit snug, but two, we're comfortable. And I'm glad more people are getting to hear about the AAR story. We just finally got more in tune in December when we launched coverage. So I think as you think about 14% organic growth in 26, fiscal 26, and roughly, you know, double digits, 12% that you're looking to deliver in fiscal 27, how do you think about that excluding your legacy business? Can you bridge us to some of the drivers, whether it's new distribution wins, recently awarded programs, and cross-selling initiatives?

I don't know if this is on our agenda.

It should be on. There we go.

Okay. You know, thanks for the question. So, I would say the growth, and we've been proud of our above-market organic growth the last several quarters, the last couple of years, and we expect that to continue. The growth actually is coming from all three of those areas, parts repair and software. In the parts supply area, as you mentioned, absolutely being led by new parts distribution. We've been putting up 25 to 30 percent organic growth numbers and new parts distribution over the last five years, and we expect above-market growth to continue. We're also seeing more and more growth out of our hangers. We have recently added 15 percent capacity. That capacity is coming online over the next 6 to 12 months, so that will drive growth in the hangar business, the heavy maintenance business. And as I mentioned, we've got this strategy to leverage the leadership position that we have on heavy maintenance to drive more growth in the component world. And that is working as well. So we're seeing growth there. In software, the growth percentages are very high. We don't break out software. What I would say is Trax, when we bought it, was a $25 million revenue business. We now have a clear line of sight to quadrupling that to $100 million. And we see growth beyond that from the software group. So even though it's small as a percentage of total, we do see growth coming out of software. So the answer is all three of those main areas are experiencing meaningful growth, and we expect that to continue.

And I guess you laid out plans for looking beyond fiscal 27 of long-term growth of 8% to 12%. How do you think about that algorithm? I think it's all the things you mentioned, just continued heavy maintenance growth, 15% increase in capacity, and new relationships in parts and distribution.

Yeah, great question. One of the questions we've been asked is, you know, the recent growth rates. For example, you just mentioned FY26 was 14 percent organic growth as compared to the medium-term targets of 8 to 12. Things are going well. The markets are cooperating with us. And I would say that, you know, obviously that's a multi-year target. But if the markets stay the way they are today, those targets would, you know, look conservative.

Can you talk about your maintenance business, maybe level set it for folks, how you think about your heavy maintenance business, how the 15% increase in hangar capacity expands that, and how do you think about a component repair element? I think you've mentioned $100 million of annual revenues are from certain customers, but only a small amount of component repair work.

So we have a significant market position on heavy maintenance. Um, and, uh, we are a much, even though we're a large player, we are a much smaller player in total on the component maintenance, but the component maintenance, um, opportunity for us is quite large. And I'll give you an example. Our largest heavy maintenance customer, we do close to $200 million a year of business with, uh, with one of the largest airlines. Um, and we are their largest heavy maintenance provider. They send out, um, uh, you know, and that, and that 200 million represents, you know, a little bit less than half of the component repair of the heavy maintenance that they send out. They send out twice as much. The same customer sends out twice as much component repair work every year. So if they're sending out $500 million on the heavy maintenance side, they're sending out a billion dollars a year on the component side, and we're less than 3%. So we've got a 40% share with that customer on the heavy maintenance side, and we've got a 3% share with that customer on the component side. So by leveraging the position that we have with that customer, which is one, one of many, we believe that we can cross-sell and drive more component volume to our component facilities. We've got five component shops. Today we're running roughly one and a quarter shifts across those shops. You can go up to three shifts across the network so we could double the throughput in our component shops. And then as it relates to heavy maintenance growth alone so that 15 percent capacity will is coming online as we speak so that will ramp throughout this year we are exiting our highest cost facility which is in indianapolis will actually be out of there by the end of this calendar year which is ahead of schedule and we were also in the middle of restructuring a heavy maintenance business that we bought called hako we closed back in november as all of those things happen it will lead to net more capacity in the hangers, as well as better margins as we leverage our fixed cost space to support the 15 percent expansions, as well as exit our highest cost site in Indianapolis and move that work to other lower cost sites throughout the network. So you've got growth and component where we've got a lot of runway and a big opportunity, and you've got opportunities for growth as well as margin expansion in the heavy maintenance facilities.

I guess, can you talk about some of that component repair work, those five facilities, where are they, and how do you think about what kind of component repairs you're looking to specialize in and grow?

Sure. We've got four here in the U.S., places like Dallas, Kansas, et cetera, Arkansas, and then we have a very large facility over in Thailand. The types of components that we repair are predominantly engine accessories, engine components. So these are starters, generators, things like that. We also have a fair amount of mechanical components around valves pneumatics etc and these are on good platforms these are cfm platforms we have leap capability but then we also do work on structures so these are structures like thrust reversers nose cows those larger components that go around the engines and that's a important and growing business for us and there again we've got capability on current gen platforms like the 737 ng but we also have a joint venture with air france where we are working on next-generation platforms, particularly around wide-body like A350, 787, et cetera. So we've got solid capability on current-gen platforms as well as increasing capability on the next-gen.

That's great to hear. Maybe I have to ask with oil where it is today, how do you think about just demand trends that are going on? You're a fairly short-cycle business. Maybe can you talk about how much visibility you have in your heavy maintenance and component repair business and what you're seeing?

Yeah, heavy maintenance is a longer-term visibility. So our hangers are essentially sold out through the end of the decade. The customers that we have are very focused on making sure that they have capacity for that heavy maintenance because many of them don't have it themselves, and those that do were a much lower cost option than what they have internally. So they want to make sure they've got access to our hangers. So all of our major customers have signed up long-term agreements. So we've got longer-term visibility into that business. The component of business is shorter cycle. But as we mentioned, or as I mentioned, we want to tie that increasingly to the heavy maintenance business so that we've got longer-term visibility there, too. Generally speaking, though, demand for everything we do has been very strong. We've, you know, seen this volatility in terms of oil, et cetera, in the market now for, you know, several months. But we have not seen any slowdown in demand for what we have been providing. and you know the airlines uh you know as well as i do they've all discovered that they have a pricing power in many cases that they didn't necessarily know that they have and so they've been able to uh to pass much of the fuel bill on and you know fortunately customers are willing to pay it um how large is your component repair business and as you think about tagging some of that along with the heavy maintenance work how is that working out is it as yeah an aircraft comes in for a heavy overhaul that you also are looking to repair some work there? So a component in total is about $400 million today. And again, we've got the capacity to double that if we think about shifts in our shops. The component work isn't necessarily tied to the heavy maintenance visit itself. Sometimes it is. Sometimes you will actually pull a component off the aircraft when you're doing a heavy maintenance visit and send it to one of our shops. But most of the time, those components are repaired separately. Our goal is to just tie the agreements together, meaning customer, you know, X, you've got, you know, you want a five-year agreement for our hangers. We've got the best turnaround times in the market, and you want this price. Okay, we'll give you the deal that you want on our price, or one in price, and we'll give you the slots that you want for the next five years. But in exchange for that, we want to consolidate $25 to $50 million a year of component work that you're sending elsewhere. You're sending to lots of other providers. We can match the quality. We can match the turnaround time. We can match the price. Consolidate that and send it to us, and we'll give you the heavy maintenance deal that you want. We are still at the early stages of executing that strategy. We have had a couple wins. We can't announce all the things that we win, but we have seen that proof. We've seen proof of that concept, and we're having some encouraging conversations with other of our heavy maintenance customers. So, I'm confident that'll yield results.

That's great. If we could talk about new parts distribution, you mentioned it's grown 25 to 30 percent, I think 19 percent total growth in fiscal 26. How do we think about how you're attracting customers in the portfolio and demand trends heading into fiscal 27?

When we think about customers in that business, we think about OEMs. So, we're focused on that, if you have that one recycle chart I had up here earlier, using all of the channels to market that we have to help our OEM partners, our OEM customers in the distribution business, sell more of their parts. And this is working. We were not known for this a few years ago. We were known as the used parts guy. That goes in the industry, as well as the investor community thought of us as used parts, but we're increasingly becoming known for new parts distribution. And because of that, we, you know, see more and more opportunities. We've also been at this two-way exclusive strategy now for coming up on 10 years. And we've developed a number of case studies where we can go into a new OEM and say, hey, listen, this, when we took on, you know, for example, GE Unison is a great partner of ours, a long-term partner. Or Eaton, for example. We go in and we help them take share from their competitors in given markets. And we've got a fair amount of data now that we can use when we're pitching a new OEM to demonstrate how we've been able to do that. But since we were talking about heavy maintenance, one interesting connection there. So let's just – I'll stay with the Eaton example. So Eaton manufactures pumps, all right? And there are other manufacturers of pumps out there. Let's say it's Parker. And Parker's a great OEM, but in this case, we're going to pick Eaton. So let's say that Eaton has a campaign to upgrade one of their – a pump from a Parker pump. So they say, all right, on a 737, we have, I'm making up numbers here, on a 737, we have four pumps. Today, there's Parker pumps, but we think that the Eaton pump is better. We want to pull the Eaton pump off and put the Parker pump on, and this is for a 737. If we're talking to an OEM, we can say, that's great. We're going to work on, we, AAR, are going to work on 800 737s in our hangars this year. We're going to work on more, but of 737s, we'll see 800 of them. That's 800 opportunities for us to, at the time of overhaul, pull off the competitive product and put on yours. That's a unique channel to market that our OEMs love. And so leveraging things like that is an important part of the sell. One other connection there, software. I mentioned tracks being used by 110 airlines or more than 110 airlines around the world. We have done a great job of growing tracks since we bought it. We've gotten them into Virgin Atlantic. We've gotten them into Thai Airways to Cathay Pacific to Singapore Airlines, and we got them into Delta last year, and we're in the middle of that implementation now. And so, again, when we're talking to an OEM about how we can help them take market share, the software element becomes important as well because you say, listen, our software is being used by tens of thousands of buyers and planners and more than 100 airlines around the world to cut the purchase orders for the products that you sell. We are literally on the desktop when that decision is made. We can be on the floor in the hangar to help actually do the install, but we're on the desktop when that purchase decision is made inside the airline buying your product, OEM. And so that, again, is a unique connection that we can sell as we're looking for new distributorships.

Can we talk about the recent Woodward agreement you signed? You're expanding your relationship into LEAP-related applications. How do you think about the significance of that partnership and, you know, your go-forward position on the broader engine aftermarket?

We're extremely excited about the second agreement that we've now signed with Woodward on the distribution side. So the first deal that we did with Woodward was on the government side. And it's important to note that our distribution business, like all of AAR, covers both commercial and government. We've found that OEMs often like to start with government because it's a particular pain point for them. and it's a good way for us to get in. So a little over a year ago, we signed our first agreement with Woodward on the government side. That's gone very, very well, and they've said, okay, great, that's going well on the government side. We'll start you out with a small group of products on the commercial side. And we're off to a good start. As you mentioned, it's Leap, so we like the market, we like the product, and we expect that there's much more commercial business behind that with Woodward when we're successful. There's a great chart, if you go to our May investor deck, there's a great chart that looks at our distribution business over the last 10 years. And it shows the growth, which has been substantial. But there's OEM logos that appear over and over again. And that either means we've renewed or expanded an agreement with an OEM. And, for example, the Unison deal that I talked about when we signed that deal about 12 years ago was about a $10 million a year deal. Today it's over $100. And, you know, we see the same opportunity with companies like Woodward's and others.

And a recurring theme, I think, has been parts availability, customers just understanding customer patterns to help them keep their market share or gain market share, as you mentioned with the Eden example. You know, how do you kind of demonstrate that to the airlines that using your solutions, whether it's component repair or its distribution, helps you position the OEM better or the airline better?

Sure. One of the things that we increasingly look to get for from the software business, as well as all of our other maintenance activities, is data. Data on parts consumption, data on demand trends. And that helps us become much, much smarter in terms of how we forecast demand. And we can provide our OEM partners insights into their aftermarket demand that they don't get themselves. And so that, of course, informs our ordering patterns, which informs what we have on the shelf, which allows us to achieve a higher fill rate with the customers, the end customers, the airlines, and buffer some of the supply chain challenges that the OEMs have.

Trax, as you mentioned, has quadrupled and has about $100 million of revenue today.

Run rating, yeah.

Run rating, sorry. How do you think about just airlines that have adopted it, how you look at broader adoption, and how should investors think about the revenue and margin opportunity?

Sure. So going back to the reason we acquired Trax, one, as I mentioned, was to open doors for tracks to get them into new customers and i mentioned uh several of them that where we've been successful in getting tracks into a new customer um there are many more that are on legacy systems if you look at the world's fleet about 50 of the world's fleet is still supported by legacy systems these are 30 40 year old systems like the one we're replacing at delta that have been around obviously for for decades those systems need to be upgraded So 50% of the world's fleet is still an upgrade opportunity to a next-gen system like Trax. Trax really has two competitors today. We've been successful, significantly successful in all of the recent competitions. So Trax is being – they've got the best product, and what they needed was a big backer like AAR to get them into the best airlines, and that's exactly what we're doing. So we've still got 50% of the world's fleet that is an opportunity to deploy Trax. Beyond that, though, the Tracks' existing customer base, many of them, still about 50% of those customers, are on legacy Tracks. And legacy Tracks is on-prem, so it's not in the cloud, and it's much cheaper than the current generation of Tracks, which is called EMRO. EMRO is a much more robust offering, much more capability. It is fully SaaS-based and in the cloud, and the revenue per customer on EMRO is much higher than Legacy Tracks. So as we penetrate the market and win new customers like Delta, and as we upgrade Legacy Tracks customers to new EMRO, both of those provide revenue growth. And I've said this before, you know, we were here a year and a half ago, and I said, you know, we wanted to go from 25 to 50, now from 50 to 100. it, and I think there's opportunities to further, you know, to potentially double the software business again.

You launched Airvoyant, I think, at MRO Americas back in April of this year. What is, is it still in beta testing? What has been customer acceptance there?

Still in beta testing, still a tremendous amount of interest. We, an Airvoyant, just so everybody knows, is a AI-driven procurement model. Airlines have spent a lot of money in terms of inventory planning and how to plan inventory to make sure they have the right amount of inventory on their shelf. But they haven't spent, there hasn't been a good solution for airlines to actually physically buy parts. It's insane how manual it is. Some of you have heard me say this before, but we know this because we own tracks and we know this because we sell a lot of parts and we're on the other side of it. They're emailing out spreadsheets, spreadsheets with hundreds, thousands of line items to brokers like us, vendors like us, to quote parts back to them. We manually respond, and they manually review the pricing. It's horrifically inefficient, and it leads to poor decision-making because oftentimes the airlines are making the buy decision based on who got back to them first, who filled out the most lines in the spreadsheet, who do they like the best. It's not a way to buy parts. And airlines are spending $60 billion a year on parts, so this is a huge market. We want to bring AI to that and help bring efficiency to the airlines and drive better decision-making. So we launched this product called Airvoy in April. It's a beta version. It's the enthusiasm by the airlines is significant. Not one airline, and we've presented it to dozens so far, has argued that this is a problem. They're all like, yes, this is a problem. We need to fix it. but can it also do this? And could it also do this? And could it also do this? So we're working with a number of airlines right now on continuing to refine the product. Uh, we've invested a lot of money in it. Um, we're not receiving revenue from it to date. Our goal is to just get it out there. Um, and once we do, uh, uh, we see it as a potential revenue source. We see it as a potential way to drive data that will inform what we put on the shelf as well as what customers buy.

Maybe one thing that's transitioning to margins and execution for a bit, it surprised me since I've launched coverage is the level of margin expansion we've seen. You know, how do you think about the right range for the margin profile and the long-term growth rate for margins?

Well, we put out 14% plus, you know, 13 to 14% plus ex-legacy commercial programs at the investor day in terms of, I think it was a three-year target for EBITDA. In the fourth quarter that we announced, we were at 13 percent, so we've already achieved the low end of that range. And again, as I mentioned, if conditions remain the way we are today, we think we can do better, which is why we put the plus. So we're focused on mid-teens EBITDA over time. And then growth at the same conference we put out, 8 to 12 percent growth. And again, to the extent that conditions remain the way we are, I think we can do better.

That's great. Can you update us on the HACO acquisition? Where are you today in terms of margins, and how do you think about the revenue profile of that business?

Yeah. So just to remind everybody, HACO was our largest heavy maintenance competitor that we acquired last year. It is a restructuring process. We're a very low margin provider of heavy maintenance, and we are bringing revenue down and deploying our systems. We've signed up multiple customer agreements for those facilities, and we expect to bring revenue or margins up to the level of all of our other facilities by the end of this fiscal year. We are actually, in a lot of ways, ahead of schedule on that acquisition. So you saw two quarters of, I would say, margin dilution. Q3 was the low point. Q4 was better. We expect to continue to climb out of that and be, you know, at run rate by the end of this fiscal year.

You know, can you talk about maybe some of the transformation and productivity efforts you have within the business internally? Indianapolis, you're exiting. You're also looking at paperless to improve productivity. How do we think about that benefit, if you could size it in fiscal 27, as we think about the 13% in the last quarter?

Sure. I don't know that I could break it out specifically, but you've seen the most margin expansion in any of our businesses inside of heavy maintenance. And that's as a result of becoming very focused on the platforms that we work on, dedicating facilities to customers so that you turn yourself into a production environment. You're not working on lots of different types of aircraft. You're focused on single assets with single customers. But then, as you point out, systems, and I would say the most beneficial system that we have is paperless. There is an enormous amount of paperwork that goes with maintaining aircraft, and we are in the business of selling labor hours. We're in the business of selling time, and so our focus with all of these systems is to reduce the time it takes to complete a task. That all translates to lower turnaround time for the customers. And just to size that for you, a C-check, which is like a medium maintenance visit that might be done after three or five years, an average check might take 30 to 35 days that's kind of the industry standard we're in the high 20s which is faster than anybody else and customers will pay us a premium for that performance because if they get that aircraft back one week sooner that's one additional week they can have that aircraft in revenue service which is worth a lot to them so the systems etc that we've that we put in allow us to get greater throughput for the hangars but it also in some cases allows us to charge a premium because we've got that faster turnaround time. Both of those things contribute to margins.

Your leverage is at 2.5 times. You've actually been quite acquisitive. How do you think about deploying capital from acquisitions to internal investment and just balancing shareholder returns as well?

I think at the end of Q4, we're actually a little bit lower on that. We were right at two times. So we've made great progress in the last couple minutes. I think, you know, our target is to be within, you know, two to two and a half times. Would we stretch above that for the right acquisition? Absolutely, we have in the past. But we continue to think about organic investment first, inorganic investment second, as we look to grow. But everybody should expect that M&A will continue to be part of the growth story at AAR. We've done six acquisitions in the last three years. They're all working very, very well. We've got a healthy pipeline. We've got that muscle moving inside the company. And we expect to continue to deploy capital for inorganic growth opportunities, but they have to fit. And I say that because historically we were less disciplined in M&A and made acquisitions that were, you know, kind of left turns here and there. Anything we do will absolutely sit in that parts repair and software. It has to be in one of those three areas, and it has to be connected to one of the businesses that we're in. So full pipeline, balance sheet is in a great spot, and we have, you know, much more confidence than we did historically in terms of the cash flow generation of the company.

Maybe last one to close with 15 seconds left. In three to five years, how do you envision AAR – what do you envision AAR becoming?

We want to become the largest and leading independent provider of these aftermarket services, and we've got the platform to do that.

That's great.

Thank you so much, John.