On July 18, 2024, AAR Corp (AIR, Financial) released its 8-K filing detailing its financial performance for the fourth quarter and fiscal year 2024. AAR Corp is a leading provider of aviation services to commercial and government operators, MROs, and OEMs, operating primarily through its Aviation Services and Expeditionary Services segments.
Quarterly Performance Overview
AAR Corp reported consolidated sales of $656.5 million for Q4 FY2024, a 19% increase from the prior year's $553.3 million. However, the company's income from continuing operations was $9.1 million, or $0.26 per diluted share, significantly lower than the $23.2 million, or $0.66 per diluted share, reported in the same quarter last year. Adjusted diluted earnings per share from continuing operations were $0.88, surpassing the prior year's $0.83 but falling short of the analyst estimate of $0.94.
Annual Performance Highlights
For the full fiscal year 2024, AAR Corp reported consolidated sales of $2.3 billion, a 17% increase from the previous year's $1.99 billion. Income from continuing operations for the year was $46.3 million, or $1.29 per diluted share, compared to $89.8 million, or $2.52 per diluted share, in fiscal year 2023. Adjusted diluted earnings per share from continuing operations were $3.33, up from $2.86 in the previous year.
Segment Performance and Financial Metrics
The Aviation Services segment, which generates the majority of AAR Corp's revenue, saw a 20% increase in sales to commercial customers and a 15% increase in sales to government customers. The company's gross profit margin slightly decreased from 19.5% to 19.4% year-over-year, primarily due to the termination of a commercial programs PBH agreement, partially offset by contributions from the recently acquired Product Support business.
| Metric | Q4 FY2024 | Q4 FY2023 | FY2024 | FY2023 |
|---|---|---|---|---|
| Sales | $656.5M | $553.3M | $2.3B | $1.99B |
| Income from Continuing Operations | $9.1M | $23.2M | $46.3M | $89.8M |
| Diluted EPS | $0.26 | $0.66 | $1.29 | $2.52 |
| Adjusted Diluted EPS | $0.88 | $0.83 | $3.33 | $2.86 |
Financial Achievements and Challenges
Despite the growth in sales, AAR Corp faced challenges with increased selling, general, and administrative expenses, which rose to $94.8 million in Q4 FY2024, including $17.5 million related to acquisition and amortization expenses and $4.8 million related to investigation costs. Operating margins decreased from 6.6% to 5.0% year-over-year, although adjusted operating margins improved from 7.8% to 9.3%.
“We delivered another record quarter driven by both record performance in our new parts distribution activities and the Triumph Product Support acquisition, which exceeded our expectations during the period,” said John M. Holmes, Chairman, President, and Chief Executive Officer of AAR Corp.
Cash Flow and Debt Management
Cash flow provided by operating activities from continuing operations was $24.5 million for the quarter. As of May 31, 2024, AAR Corp's net debt stood at $911.2 million, with a net leverage ratio of 3.30x. The company did not repurchase any shares during the quarter, prioritizing debt repayment and other investment opportunities.
Conclusion
AAR Corp's Q4 and fiscal year 2024 results reflect a mixed performance, with strong sales growth but challenges in maintaining profitability. The company's strategic acquisitions and focus on expanding its market position are expected to drive future growth. Investors will be keen to see how AAR Corp navigates its financial challenges and capitalizes on its growth opportunities in the coming quarters.
Explore the complete 8-K earnings release (here) from AAR Corp for further details.
