Financial Data and Key Metrics Changes - In Q1, organic sales declined by approximately 3%, with a favorable timing shift contributing to this decline [27][28] - The company expects organic sales growth in the back half of the year to be positive, low single digits, while the front half is anticipated to be negative, low single digits [7][8] - Input costs and inflation are projected to increase by about $70 million for the full year, which is $20 million more favorable than previous estimates [21][22] Business Line Data and Key Metrics Changes - The U.S. retail category is expected to grow at a muted rate of 0-1%, still below historical averages [7] - Innovations are planned in key businesses, including new product launches and expansions of existing platforms, which are expected to drive consumption improvement [8][9] - The trash and cat litter businesses are experiencing increased promotional activity and competitive pressure, impacting market share [41][42] Market Data and Key Metrics Changes - The competitive environment remains rational, with some categories experiencing increased promotions, particularly in trash and cat litter [16][17] - The company has seen a decline in market share due to ERP implementation challenges, but is focused on regaining share through innovation and demand creation [31][32] Company Strategy and Development Direction - The company is focused on reinvigorating category growth and delivering superior value to consumers through a robust demand creation plan [4] - The successful launch of a new ERP system is seen as a foundational step to strengthen the company's digital backbone and unlock new value streams [4] - The company is actively reviewing its portfolio to ensure it aligns with long-term growth objectives, including divesting underperforming segments [56][57] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the stress consumers are under, which is influencing shopping behaviors and category growth [15][16] - The company remains optimistic about the back half of the year, driven by innovation and improved execution plans [81][82] - Management is closely monitoring consumer behavior and market dynamics to adjust strategies as needed [81][82] Other Important Information - The company has largely recovered its inventories post-ERP implementation and is back to normal fill rates with retailers [91] - The promotional environment is expected to remain competitive, with ongoing adjustments to pricing and promotional strategies [20][21] Q&A Session Summary Question: Insights on organic sales cadence and category growth - Management indicated that organic sales growth in the front half would be negative, while the back half is expected to be positive, driven by consumption improvement and market share gains [7][8] Question: Environment for promotions and competitive landscape - The competitive environment is rational, with increased promotions in certain categories, but overall promotional spending remains manageable [16][17] Question: Market share trends and demand creation activities - Management noted a decline in market share due to ERP challenges but is focused on regaining share through innovation and effective demand creation [31][32] Question: Gross margin outlook and inflation impact - The company expects moderate inflation and has adjusted its gross margin outlook to reflect more favorable input costs [21][22] Question: Inventory trends and destocking behavior - Management confirmed that they are not experiencing material destocking and have largely rebuilt inventories post-ERP [62] Question: Future portfolio actions and strategic focus - The company is taking a long-term view on its portfolio, focusing on strengthening core brands and exploring opportunities for growth [54][56]

Core Viewpoint - AAR CORP. has acquired Aerostrat for $15 million, with potential contingent consideration of up to $5 million, enhancing AAR's software offerings and ERP capabilities through its Trax subsidiary [1][4]. Company Overview - AAR CORP. is a leading provider of aviation services, operating in over 20 countries and supporting both commercial and government customers through four segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services [5]. - Aerostrat, founded in 2015, specializes in long-range aviation maintenance planning software, with its flagship tool Aerros supporting over 5,000 aircraft [2][7]. - Trax, a wholly-owned subsidiary of AAR, offers mobile and cloud products for aviation maintenance, focusing on digital solutions and real-time information access [6]. Acquisition Details - The acquisition of Aerostrat is expected to create opportunities for integration and expansion of services for both Trax and Aerostrat customers [3][4]. - Aerros will be integrated into the Trax suite of products while remaining available separately for use on various ERP platforms [3]. Strategic Implications - The acquisition aligns with AAR's strategy to advance next-generation maintenance products and services, enhancing the capabilities of both companies [4].

Financial Data and Key Metrics Changes - The company reported Q1 2025 revenue of $2.1 billion, an increase of 2.2%, with 1.6% organic growth and the remainder from the acquisition of Quality Uptime Services [29] - Adjusted EPS was $0.87, up from $0.86 in the prior year, while adjusted net income increased to $55.3 million from $54.8 million [31] - Adjusted EBITDA rose 3% to $120.6 million, with an adjusted EBITDA margin remaining flat at 5.9% [32] Business Line Data and Key Metrics Changes - **Business & Industry (B&I)**: Revenue was $1 billion, slightly below last year, but operating profit and margin remained consistent due to cost controls [33] - **Aviation**: Revenue grew 8% to $270.1 million, with operating profit up 26% to $12.2 million, reflecting strong travel markets [34] - **Manufacturing & Distribution (M&D)**: Revenue decreased to $394.3 million due to a client exit, but new wins are expected to drive mid-single-digit organic growth later in 2025 [36] - **Education**: Revenue grew 2% to $225.3 million, with operating profit increasing 10% to $14 million [37] - **Technical Solutions**: Revenue surged 22% to $202.3 million, driven by strong microgrid project activity, with operating profit more than doubling to $16.6 million [39] Market Data and Key Metrics Changes - The commercial office leasing activity in the US increased by 24% in Q4 2024, indicating a positive trend for B&I [19] - Strong performance in the semiconductor and data center markets is supporting growth in M&D [22] - The aviation sector is expected to continue its growth trajectory, with strong domestic flight volumes and TSA screenings indicating mid-single-digit market growth [23] Company Strategy and Development Direction - The company is focused on implementing a new ERP system to drive cost efficiencies and improve analytics for commercial growth opportunities [11][12] - A new brand platform was launched to reflect the company's evolution into a tech-enabled solution provider [13][14] - Continued investment in client-facing technology, such as ABM Connect, aims to enhance operational efficiency and user experience [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of commercial real estate markets and anticipates growth in B&I in the latter half of fiscal 2025 [10] - The company is closely monitoring immigration policy changes but remains confident in its talent acquisition strategies [17] - Full-year adjusted EPS guidance has been raised to a range of $3.65 to $3.80, reflecting a strong start to the year [45] Other Important Information - The company expanded its credit facility to $2.2 billion, reflecting strong growth and lender confidence [15][41] - Free cash flow for Q1 was negative $123 million due to increased working capital related to the ERP transition, but normalization is expected in the coming months [42][43] Q&A Session Summary Question: How does the recent improvement in commercial office leasing activity compare to previous quarters? - Management noted that there is no real seasonality in leasing activity, and the recent increase represents a positive trend in net absorption rates [52][54] Question: What is the company's exposure to federal projects? - Management indicated minimal risk from federal projects, as most work is in mission-critical areas that are not being cut [58][59] Question: How does the company plan to manage potential increases in labor costs? - Management stated that half of revenues come from union labor with set rates, and they typically pass labor increases to clients [66][67] Question: What is the expected impact of the new ERP system on cash flow? - Management anticipates a significant increase in cash flow in Q2 as invoicing delays are resolved [73][74] Question: Can you provide insights on the win rates for new business? - Management reported improved win rates due to increased business development efforts and the use of AI in responding to RFPs [84][85] Question: What is the outlook for the Technical Solutions segment? - Management expressed optimism for the microgrid business, supported by a strong backlog and sales pipeline [88][89] Question: How is the company addressing the impact of large client rebalancing in M&D? - Management indicated that the impact has been largely mitigated and expects incremental positive growth in the second half of the year [95][96] Question: What is the strategy for share repurchases? - Management clarified that share repurchases are aimed at offsetting dilution from share-based compensation and will evaluate further opportunities as they arise [108]