of Strategic and Corporate Development. It's my pleasure to welcome you to AAR's 2023 Investor Day. Before we begin, I'd like to remind you that comments made during the presentation may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the Risk Factors section of the company's Form 10-K for the fiscal year ended May 31st, 2023. In providing the forward-looking statements, the company assumes no obligation to provide updates to reflect future circumstances or anticipated or unanticipated events. Certain non-GAAP financial information will be discussed during the presentation today. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in the appendix to the presentation slides. We have an exciting agenda for you today. First, our Chairman and CEO, John Holmes, will take you through the company and our growth strategy and targets. Our Chief Commercial Officer, Chris Jessup, will go through our markets and positioning. You'll hear from four of our business leaders, Sal Marino on used serviceable material, Frank Landrio on distribution. We'll take about a 10-minute break, come back, and you'll hear from Tom Hofer on repair and engineering, and then Nick Gross on integrated solutions. We are thrilled to have one of TRAX's cofounders, Jose Almeida, with us today, and he and Andy Schmidt will take you through TRAX and the power of the AAR TRAX combination. Our Chief Financial Officer, Sean Gillen, will discuss financial performance, capital allocation. John will wrap up, then we will take questions. Before we jump in, we have a short video that we would like to share with you. It's a feel-good movie for the whole family. I'm just happy it worked. Okay. All right, thanks, Dylan. You did an amazing job reading the forward-looking statements and introducing us all. I'm gonna kick us off here and talk a little bit about the company, the strategy, and then you'll hear from the rest of the team. I've been at AAR for 22 years, and I've been CEO for about five years, and one of the things, of course, that I've loved doing is spending time with our employees all over the world. We do town halls, we do different events, et cetera, but one of the things I do like to do the most is have lunch with brand-new employees that have just started with the company. I did one of these lunches, week before last, and of course, there's lots of questions, and one of the questions that a woman asked me was: "So, John, what do you think your legacy is gonna be?" My first reaction was, "Okay, whoa, whoa. It's way too early to start talking about legacy. I feel like we're just getting started." As I thought about it, one of the things I'm most proud of when I think about the time as CEO is, the focus that we have brought to the company, the focus around our portfolio. We're gonna talk about our three new segments a lot today, but the focus on those three segments, Parts Supply, Repair and Engineering, and Integrated Solutions. The focus in each one of those segments, deciding which parts we're gonna repair, which parts we're not gonna repair, getting out of certain product lines, getting into certain product lines, getting deeper with a smaller group of OEMs, so that we can really become extension of theirs in the aftermarket. AAR has meant, for those of you that have followed the company for years, AAR has meant a lot of different things to a lot of people over the years, but we are now more focused than ever. Anything we do, any investment that we make for organic growth or inorganic expansion, is going to be around these three areas of focus: Parts Supply, Repair & Engineering, and Integrated Solutions. We wanna underpin all of that with investments in digital technology that's gonna drive more efficiency, make us stickier with the customer, and ultimately continue to improve our margins. We're excited about that. By the way, I gave you essentially the entire strategy presentation on my bio slide, and by the way, yeah, I'm John Holmes. Let's talk about the vision. We wanna be the most respected, independent, I'll come back to that word independent in a minute, provider of aviation parts and repair services in the world, we wanna create value for customers through differentiated capabilities, offerings, and we want these to result in a sustainable, unique, competitive advantage. You're gonna hear that word independent a few times throughout the day. When we say independent, we mean we are not part of an OEM, like an Airbus or a Boeing, and we're not part of an airline, like a Lufthansa Technik. Many of our competitors are not independent, and we are the largest for what we do in that regard, and we think that independence is an asset. Again, most of you are familiar with the AAR story, but just to put it on one slide in one place, a quick overview. We were founded in 1951, so we've been around for decades. We've been profitable, almost that entire time, and we've grown considerably. We've seen lots of cycles, and each time we go through a cycle, we come out stronger on the other side. Market cap today is around $2 billion. Our sales are around $2 billion. Of course, we're publicly traded on the New York Stock Exchange. We have about 5,000 employees. This group of businesses, that focused group of businesses I just described, have never been more profitable. Operating margin is 7.5%, and we believe we can expand from there. We have an amazing group of customers in multiple markets. We service the commercial market, the cargo market, regional, government, and we're really proud of our customer base. Again, four main areas of business. I'm going to focus on three of them today: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. To start this slide, I want to kick off with actually Expeditionary Services in the lower right. Expeditionary services is our legacy manufacturing business, and we have a leadership position in that business, where we make cargo pallets, shelters, and containers. It's a good business. We've been in it a long time, but it is not the area of future investment and focus. What we're gonna do is focus on the other three segments today: Parts Supply, Integrated Solutions, and Repair & Engineering. I'll come back to Parts Supply. Parts Supply, two main areas inside of Parts Supply, used material and new parts distribution. Used material, we're leaders in the world in this regard. We tear down dozens of aircraft and engines, and we resell the parts in the market. This has been an area of a lot of focus, and you'll hear more about that today. In distribution, we're the largest independent supplier or distributor of factory new parts. We've got a unique strategy in this business. We focus on a narrower group of OEMs. For the most part, we only do exclusive distribution of relationships. When we sign up with an OEM, we are the only distributor out there selling their products in any given market. Our offering in return for that is we do not offer competing parts or competing product in a market as well. If we represent one manufacturer of pumps, we're not gonna represent another manufacturer of pumps in a given market. This strategy has served us very, very well and allows us to get closer and deeper with our OEM partners of distribution to truly become an extension of theirs in the aftermarket. We have an online parts store. This is an increasing, growing channel for us in terms of where we sell parts. You'll hear more about that later. We are 24/7. We provide AOG coverage around the world to the extent that one of our airlines needs a part in an important situation. Repair and engineering. We're very well known for this. We're one of the largest in the world for outsourced heavy maintenance. We've got six facilities here in North America. We've got a concentration on narrow body, and we're very proud of the network that we've built, and we work on average between 700 and 1,000 aircraft a year through our facilities, and you'll hear more about that later. We also do component repair. We have two facilities for component repair, and we also have one of the most comprehensive offerings as it relates to landing gear overhaul in our facility in Miami. We also provide engineering services. We don't really talk a lot about that, but it is an important offering. When airlines go out, and they want to reconfigure their business class cabin or change something on the aircraft, they come to us. We do the engineering work. We essentially develop the blueprints. We get them certified, and we either do that as a fee for service, or in some cases, we'll actually perform the touch labor to do the mod ourselves. We are entering the PMA space. We have a small but growing PMA effort that you'll hear more tomorrow or later on today. Integrated Solutions. We service both the government and the commercial market in Integrated Solutions. Integrated Solutions, as the name implies, basically takes our parts and inventory sourcing expertise and combines it with our repair and repair management expertise. We put these two things under long-term contracts, like I said, both for government customers and for commercial customers. In the government world, they're PBL, 3 PL programs. In the commercial world, we call them Power-by-the-Hour programs. Those are the three segments that we're gonna talk about today. Before I go into more detail about the business, I want to touch on our culture and our values. We are extremely focused on our entrepreneurial culture. We're really proud of our culture. That culture is underpinned by our values. I'm not gonna go through every one of these up here, but I'll start with the first, and that is quality first, safety always. We know that everything we do is ultimately involved in safety of flight, so quality and safety are top of mind for us all the time. The last value I'll mention is at the end there, own it. Everything we do, big or small, any small task, big task, You know, regardless of who you are in the company, you own your decisions, you own your actions, and, of course, you can see what's in what's in the other values in the middle there. If you go to any one of our facilities, whether it's a hangar, whether it's our headquarters, whether it's a sales office in Singapore, whether it's here in this room, you will see these values everywhere. It's how we hire people, it's how we train people, it's how we evaluate people, and ultimately, we pay people in terms of their performance against these values. Very, very important to the culture of the company. Speaking of the culture of the company, I want to take just a second and talk about our corporate citizenship. We were here four years ago, we, you know, ESG wasn't as focused as it is now, but we've been doing a lot of great things for years and years and years in our communities, and I'm really proud of the things that we do today and the things that we'll continue to do. We've reported on these activities in two ESG reports that we've put out over the last four years. I'm sure you've seen them. We're proud of what's in there. We're evaluating ourselves against all the proper standards for ESG. We intend to put out a new ESG report every two years. The other thing we focused on in the last four years is compliance. We do business all over the world. We do business with flag carriers, state-owned enterprises, in dozens and dozens of countries, compliance and making sure we are doing things right is incredibly important. The cool thing is, it's a differentiator for us in the market. Meaning, when we go to a big OEM, and we're gonna represent them on an exclusive basis, around the world, they wanna make sure that our compliance standards are world-class, and they are. That is actually a differentiator for us in the marketplace when we compete against others who don't operate in the same way, particularly in distribution. Last thing I wanna mention here is that these efforts around ESG, and our culture, and the way we hire and treat our employees, have been recognized through repeated awards, many of which just in the last year, and we're really proud of that. You're gonna hear a few key messages from the team throughout the day, and I wanna just give you a preview of what those are. The first, we're gonna focus on the actions that we have taken since we were last here in 2019, particularly during COVID, to streamline the business. We've exited underperforming assets, underperforming contracts, we've consolidated facilities, we developed proprietary labor pipelines that we'll talk more about, and we've improved our efficiency, particularly in our hangars, and all that's adding up to improved profitability. We are operating in multiple growth areas. You'll hear from Chris Jessup in a minute about the markets that we're operating in. They're large and growing in many areas that we are still recovering from the pandemic. By definition, there's recovery growth built in that we're excited about. We're participating in that. You are seeing increased user adoption of USM. It's been around for decades. We're actually the original company that started offering used material to the commercial marketplace, but because of the OEM supply chain issues, because of the desire for airlines to look for different sources of savings, USM is achieving the broadest user adoption that we've seen. We expect to continue to take share in distribution. Our two largest competitors, Boeing and Airbus, are focused on other things, and we are taking share in that market and plan to deploy capital to continue to build out distribution. We wanna continue to expand our maintenance footprint. You saw the Miami expansion announcement two days ago. We're excited about that and working on others, and you'll hear more about the commercial value that we believe we can bring to our government customers. We want to drive continued differentiation in everything we do, most notably through investments in digital technology. We have software solutions that we've been working on ourselves, now with the addition of TRAX, we're pretty excited about what we can do there. We wanna continue to raise the bar on shareholder transparency. We wanna make AAR easier to understand, that's why we announced the new segments that we did two days ago. Basically, what we did here is we took aviation services that represented about 90% of the company, and we split it up into three: Parts Supply, Repair & Engineering, and Integrated Solutions. As you see here, Parts Supply is the largest and most profitable area. It's also the area, if we think about organic growth, that we probably have the most opportunity. Repair & Engineering, we expect to continue to grow that segment through facility expansions like the one we just announced in Miami. We also expect to be able to improve margins there through the use of technology. Whether that's going paperless, whether that's employing drones and other technologies to help bring more efficiency to aircraft inspection, et cetera, we believe we can continue to expand our margins in Repair & Engineering. Integrated Solutions. Integrated Solutions, again, commercial Power-by-the-Hour programs, that's been a challenge for the company over the last few years. We made great progress this past fiscal year in improving that operation. We expect to make more progress this coming year, what will help margins there. We believe growth in this business can come from not only Power-by-the-Hour programs in the commercial market, but also securing more government wins. We've got a very large pipeline of government opportunities that we'll talk more about. Again, those three segments are the focus: Parts Supply, Repair & Engineering, and Integrated Solutions. What's so unique about AAR is not just our scale, because, as I mentioned, we're largest in the world for many of the things that we do, or our independence, which we believe is an asset, but the way that these three businesses work together. I want to give you a couple of examples. Our USM business, we are out in the market every day. It's a highly transactional business. We've got our finger on the pulse, literally, of what's going on in the parts business, what's coming available, what's breaking, what are the needs of the airline community? We can use those parts internally to support our airline operations and get aircraft out of the hangars on time. We can utilize our distribution relationships to supply parts at a more cost effective basis to certain of our repair operations. If you're working on 700 to 1,000 aircraft a year in your hangars, again, you can collect a lot of data about what's breaking, what's in demand, and that helps us inform what parts are gonna go on the shelf. Similarly, going the other way, if we're pitching a new OEM on a distribution agreement on an exclusive basis, OEMs always wanna focus on selling the next upgraded part, to an operator or even better, displacing a competitive product. The fact that we're gonna see hundreds of aircraft in our hangar, the best time to make that upgrade or displace competitive product is when the aircraft is in maintenance. Since we're seeing hundreds of aircraft, that's another channel to market that we can offer for our OEMs. Repair & Engineering helps drive OEM distribution. Again, being in the market, seeing what's repaired, et cetera, it helps develop a great source of data that we can use to inform PMA part development decisions. Integrated solutions, by definition, as I said before, brings these things together. It's an outlet for repairs, and it's an outlet for parts. We'll have a version of this when we go through each one of the slides, for each of the business units, but I wanna highlight some of the key things at the company level that has changed since we were last together in 2019. First, again, focus. We exited non-core assets, underperforming businesses, we consolidated facilities, and that's coming through in our market and our margins. We've also developed some very important relationships with schools. We've started programs, Do you need to take that? I'm kidding. We've started programs in different schools, and we really have developed proprietary sources of talent that our competitors have not. We were doing this before the pandemic. Other people pulled back from this during pandemic. We actually leaned forward and doubled down on our efforts and have expanded the number of partnerships with schools, and we now have access to talent that our competitors don't. This has really served us well as we've gone into this highly competitive labor environment. I talked about technology in terms of driving improved margins and efficiency inside of our hangars, one of the other things we've done in the last 4 years is bring more focus to what we do. We are now focused on narrow body maintenance for a smaller group of customers. Why is this important? It's important because if you have thousands of mechanics coming to work every day, they need to know what they're working on and who they're working for. If you're gonna go in and you're gonna work on a 737 one day, and you're gonna work on a 757 the next day, that drives inefficiency. If you're gonna work one customer over here that has a different set of expectations versus another customer over here that has another set of expectations, that drives inefficiency. We want our people to be working on the same assets for the same customer, so that they get to know, again, that customer's expectations. This drives quality, and it drives efficiency, and you've seen that in our margin improvement. Again, on the USM side, we've added multiple sources of USM. We're gonna talk about the Fortress relationship that I believe many of you are familiar, but having proprietary access and assured access to USM material, like through the partnership with Fortress, is really important. What's also important is signing up exclusive supply agreements with major customers, like certain engine shops around the world. Now we've got assured supply from certain sources like Fortress, and we've got assured sales as we've expanded the exclusive supply agreements that we have with used parts buyers, like engine shops around the world. This not only allows us to go out in the market and buy with confidence, 'cause we know we have a home for it, if we make an acquisition, we know we have a home to support an exclusive contract, but it also provides more predictability to the USM business. Of course, we wanna continue to take share in our exclusive distribution business. We signed up a number of agreements in the last four years: Unison, Arkwin, Ontic, Northrop, and Collins, and we're gonna keep going. Finally, we've expanded our digital capabilities, both internally with paperless initiatives, our online parts store, but also with the acquisition of TRAX, and I'm excited that you'll hear more about TRAX later. All of that, of course, has added up to improved profitability. We just finished a record year. I wanna make sure we just finished a record year. Did everybody get that? $2.86 in adjusted EPS. We are at the highest margin we've ever been for this group of businesses, over 2% higher than we were the last time we were together. We're delivering stronger cash flow and more predictable cash flow and better cash conversion. Just in general, we have a better capability and a more focused set of offerings. Again, as we think about growth drivers, and you'll hear a bit of this from each of the individual presentations, it's important to note that we are in large and growing markets, and we're an important segment of large and growing markets. The recovery in the airline industry is still occurring in various places around the world, and we're participating in that. There again, you're seeing increased USM adoption. We're the largest provider of USM in the world, and that's benefiting from us. I mentioned that we're gonna continue to take share in distribution, which is great. We wanna continue to expand our MRO footprint and get more efficient inside our hangars. The government world. The government continues to focus on utilizing commercial best practices to help support the current fleet in a constrained budget environment, and this is really good news for us. A great example of that is in the past year, the government passed a law as part of the NDAA, and we worked with our friends in Congress to get this done, that requires elements of the DoD to consider USM along with buying new parts. Anytime the government goes out to buy a part, they're now gonna consider USM. You're gonna see more adoption of, again, commercial offerings like USM, but in the government. TRAX, of course. You'll hear more about TRAX later. I think that everybody in the room and on the line is gonna be really impressed with the breadth of capabilities offered by TRAX and the customers that they already serve. TRAX literally does every single thing that an airline needs to run its maintenance operation. We'll go through examples of that, it's incredibly important and powerful software. If you think about the possibilities that that opens up for AAR and what we do, it gets really exciting. We'll talk about one specific example and idea that we have there today. Addition to that, we wanna continue to use technology inside of our hangars, and we're gonna go paperless, partnership with TRAX, but also part of our own initiatives, wearables, drones, et cetera. There's a lot of opportunity to drive efficient on the maintenance floor through technology, and that'll translate into market margins. Finally, PMA. We do believe that PMA has a place in our portfolio, and you'll hear that we've started some early efforts there. This adds up to. Again, I wanna emphasize, these are long-term growth targets. We've defined that as three to five years, but we think, we believe that we will be in the 5% to 10% on average annual revenue growth rate. We believe organically, that as we shift the mix towards parts and continue to drive efficiency in the operations, that we will see operating margin north of 10%. This will add up to annual EPS growth rate of 10% to 15%, and we wanna be good stewards of capital and continue to improve our ROIC. What's coming next? Chris Jessup is gonna talk about the markets in which we operate. Sal Marino, as you heard, is gonna talk about our USM leadership position. Frank Landrio is going to talk about the distribution model that is resonating with OEMs and the unique elements that we offer there. After Frank Landrio, you guys are going to need a break, so we'll take a 10-minute break. We're going to talk about the efficiencies. Tom Hofer is going to talk about the efficiencies that we're driving inside our Repair & Engineering business. We'll talk about the Integrated Solutions programs offering. You'll hear from Andy and Jose about TRAX. Sean will talk about our financial performance, then we'll take Q&A. With that, I'm going to turn it over to Chris Jessup. Thank you, John. Morning, everyone. My name is Chris Jessup, Chief Commercial Officer of AAR. My tenure with AAR dates back over 21 years. I officially joined the company through the acquisition of what is now today our Miami Airframe MRO facility. Oh, sorry. 21 years, joined the company with the acquisition of our Miami Airframe MRO facility in March of 2008. Heavy MRO tenured background, grew up through the parts segments of AAR from there and have been in the current role as Chief Commercial Officer now for the past 6 years. Going to start with a few slides on the commercial offerings and kind of how we're positioned, then we'll go into a few government slides. When we look at where we sit today, commercially speaking, with the recovery of COVID and the pandemic, you can see that the ASMs are heavily correlated to our commercial sales. The chart on the left overlays both our commercial top line numbers for the past six years with Available Seat Miles, so you can see that tight correlation that is ongoing there. With all that being said, air travel recovery still has not fully recovered. You've got the latest published reports from IATA showing at the end of May that we're at 96% of pre-COVID levels when you look in May of 2019 to May of 2023. Domestic markets are up close to 10% at 9.4%. However, international markets are still lagging in the 11% range, down year-over-year. While we've seen some really nice, strong recovery, in the kind of air travel, yeah, capacity globally, there still is more recovery to come in the next one to two years. When you look on the right-hand side, it's an important thing to point out that there is a very resilient market when it comes to the overall air travel industry. You can see dating back to 1978 all the way through 2023, the chart here shows global available seat kilometers. You can see, even with the impacts of 9/11, financial crisis of 2008, and even what we went through in the COVID industry, there's been very strong rebounds. The key there is the aftermarket, where we're heavily correlated to, we're very resilient. We typically bounce back much faster than if we were heavily tied to the new aircraft OEM production cycle. When we look at what's going on in the deliveries and the aircraft retirements market, it's no surprise that the deliveries have been heavily impacted with the COVID environment. Whether you're OEMs who have been struggling with supply chain constraints, labor constraints, or there's been ongoing regulatory issues that have impacted OEMs from time to time in the last few years. You see that it's going to take till 2025 for the industry, as it currently sits today with what we know, to get back to kind of 2018 peak delivery run rates on an annualized basis. Those impacts have driven the need for an increased aftermarket parts and heavy maintenance and modification requirements on those aircraft. John touched on it briefly, but we have seen as OEMs have been challenged to keep up with the supply of new parts, typical airlines who were heavy OEM going into COVID, they opened up their eyes to Used Serviceable Material. During that time, we've been able to kind of leverage both our new distribution offerings, where parts were available, but we also were able to show the benefits of Used Serviceable Material, which has been very helpful from that perspective. The other thing to keep in mind on the delivery chart is, as we look at going forward, while there's strong backlog and OEMs are doing their hardest to kind of recover everything, 75% of the aircraft that are going to be delivered over the next 10 years are going to be in that narrow-body market. Which is a strong offering that you'll see resonate through all the different business unit PNL leaders as they get up here and explain all of our overview and positioning. On the right-hand side, you see how retirements have been trending. You know, in 2020, we peaked out at a little over 800 aircraft that were retired. The originally predicted tsunami wave of aircraft retirements did not materialize when COVID hit and everyone thought we were going to be putting down a bunch of aircraft, they never see the light of day. As you can see, the lowest point there was in 2021 with retirements, just a little over 400 aircraft, and that was the lowest time since 2007, this industry had seen that little of retirements happen. Again, assuming deliveries will scale back up in 24 and 25 to pre-COVID run rate levels, we expect retirements will also scale up to pre-COVID run rates as well, in that 2.5%-3% retirement range compared to the total number of aircraft in service fleets. That will help loosen up that supply of USM material, which you will see and hear from Sal Marino when he gets up here to talk about that part of our business. When you look at the commercial market overall and kind of how we're positioned, we are very excited about where we are currently sitting with our diversified portfolio of service offerings and the opportunities that are ahead of us. You can see in this chart, we finished as a global MRO industry at about $84 billion market size. When you look at what was going on pre-COVID, back in 2019, this market was $87 billion. You're pretty much close to recovered in 2022. As we get through 2023, the latest forecast has us finishing as an industry around $88 billion. When you look at over the next kind of three years, growing close to $20 billion in market size, and our commercial positioning only represents $1.3 billion of that, you know, $85-ish million today, growing $20 billion, combined with the fact that these numbers are in real U.S. 2022 calendar year dollars, doesn't take into account inflation, there's plenty of opportunities for us to continue to grow, especially when you look at the air from heavy maintenance and modification segment, components, and the engine maintenance areas, which is really where, when you look at, Repair & Engineering, Integrated Solutions, and Parts Supply, we are very strong positioned in all of those areas. Line maintenance doesn't really apply too much to us. While we will help out our airline customers in the MRO space when they've got some urgent line maintenance needs, we don't play big in the kind of scheduled day-to-day line maintenance, overnight check type support. Again, the market set that we're really strong positioned in, 5%+ CAGR over the next few years, it has us very excited about what's to come. When we transition from the commercial space over into the government space, you know, you just look at the global market in total, over a $2 trillion adjustable market. It grew a little over 3% in 2022. You've got a combination of a lot of your foreign militaries looking to increase defense funding to deal with what's going on in today's kind of global environment, whether it's what's going on in the European region or the increasing concerns growing in the Asia Pacific region. There's a lot of increased foreign military spend happening. You take that and you combine it with what's going on with our U.S. government spending, where there's challenges at times to continue to increase that spending, but it's still an $875 billion, roughly, addressable market with our U.S. government. When you look at all of that, you find the U.S. government in particular, having to reallocate funds. There's a lot of money being spent towards developing new technologies. As the government is focused on those new technologies, we still have a lot of these legacy platforms still in operation. Lives are being extended. You'll hear more from Nick Gross talking about all of this. Again, it's just a very, very large market, and it's similar narrative to the commercial space. When you look at AAR at kind of $650 million-$700 million in global government sales, as we finish FY23 with a market of over $2 trillion, we're extremely excited about the opportunities ahead and how we're positioned in areas of growth that we see coming forward. The chart on the right-hand side, speaking to how the U.S. government is finding themselves challenged with keeping up with kind of legacy fleets and the overall readiness of those platforms, you can see an unfortunate, steady decline in both our Department of Navy and Air Force when it comes to some legacy fighter aircraft. Sitting in the 40%-50% readiness levels versus goals north of 80%. Again, we feel we're very strongly positioned to help the government out in those areas, leveraging our experience in supporting commercial legacy platforms. We're very excited there. Specifically, to extend on that, just with a few bullet points, and again, you'll hear this come out from a lot of our business unit leaders. First and foremost, the governments heavily will contract on a programmatic basis. While there is some transactional activities, a large majority of how our U.S. government and foreign militaries go about their business is contract and multi-year source programs. We feel, as the largest independent in this space, our decades of commercial experience supporting programmatic programs, whether it's in Repair & Engineering, Integrated Solutions or Parts Supply, uniquely positions us to leverage that knowledge to be able to compete on those offerings and kind of have the experience of lessons learned over the years on multiple platforms, whether it's airframe, engines, or parts, to be able to offer a strong value proposition to the government. Second, there, you'll hear Sal Marino talk about this when we get to the used serviceable material piece. We're very excited about the recent change with the Department of Defense when they're looking at those tightening budgets. They're currently in the middle of writing policy on how the various armed forces will look to utilize used serviceable material for equivalent commercial platforms that are out there today flying for U.S. airlines. So we feel we're very well positioned to be able to expand on that as well. The third bullet talks about the Captains of Industry. AAR, in the last year, was very successful in becoming the first independent company to achieve the status of Captains of Industry. You'll hear Nick Gross go into a lot more about that, as well as Frank Landrio. The key there is taking our new piece parts distribution and doing more with our OEM partners, not only for the U.S. government, but for a lot of the expanded foreign militaries that are looking to grow the spend in those areas globally. From there, this is an overview of the map of our global expertise and reach. As you can see, we've got dots across the globe here. No surprise that within North America, you've got a heavy concentration of dots. When you hear Tom Hofer come up and speak about our repair and engineering segment, we've got a fairly large concentration of brick-and-mortar operations with our airframe MRO facilities and our landing gear facilities. As we expand outside of the North America market, you know, we leverage decades of AAR's DNA in the parts business, where we've had to build a global sales team to support all that parts supply, and throughout our growth, we've leveraged that for our new distribution as well as our integrated solution offerings as we've looked to expand globally. I won't go through all the dots, but as you can see, we've pretty much got every part of the world covered with representation from AAR. Last but not least, we are very proud of our diversified customer base globally. You can see some of our key customers, whether you're commercial, cargo, regional, OEMs, and/or the governments that we support, we again span the globe when it comes to this. When you look at our top 10 customers as an example, we've got over 15 years of tenured experience supporting these customers, and we've got a lot more examples above and beyond that as well. What we typically find is when we get into a customer, a customer might know us for parts, one customer might know us for repair and engineering, one might know us integrated solutions. As we get into an account, we do a very good job marketing our overall portfolio of offerings and looking to expand the activities that we do with those customers across all those segments. I will now turn it over to Sal Marino, who heads up our Used Serviceable Material parts supply part of the company. Thank you. Thank you, Chris, for that introduction. Appreciate that. Good morning, New York, and all those on the phone. I'm Sal Marino, responsible for our parts supply business in that arena for Used Serviceable Material, as you've heard a lot about it already. Very excited to talk in depth, a little bit more thorough on it. I've been with the company for 28 years. Started working in the engine business within AAR, and then in 2014, took over the engine airframe and our aircraft sales and leasing business. Very honored to and excited to represent this business. This is, as John mentioned earlier, one of the founding businesses of the company, which we refer to it a lot of times as trading as well. It's an honor to represent the business and how we go move forward. We'll take a look at, you know, our offerings that we have. You know, as John mentioned earlier on our parts business, a lot of it is going out, acquiring aircraft, acquiring engines, dismantling them, refurbishing the parts, and reselling them to operators, lessors, MROs, either parts companies as well. It's a significant amount of savings that we provide compared to buying parts from the new manufacturers. We also, when we do some of these acquisitions, we will take some of these assets, whether it's the aircraft itself, the engine itself, landing gears, and we'll refurbish it, and we'll sell them as whole assets. We'll put them on lease and sell them. There's a lot of flexibility there, it's a big piece of our business as well. A lot of operators or smaller, for instance, like a cargo operator, looking for someone to help them manage their fleets a little bit better and maximizing the USM, will have us manage their engines. We'll contract with the operator. We will contract with, say, an engine shop. We will manage that engine on their behalf. Again, the goal there is to provide as much as possible from the USM side of things to keep the costs down. Those are focused platforms on the bottom with the aircraft and the respective engine types. Talk a little bit more about it as we get into it and what that significance means when it comes to the volumes that we see. You can see the breakdown there as you'll hear from Frank later, in the distribution and the USM side of things are fairly close when it comes to our revenues. Again, our trading business or the USM business is heavily concentrated on the engine side of things. On the engine side of things, for those that aren't technically advanced on it, you know, there's only so much you can do on the engine side in certain parts to repair them, versus on the airframe, it becomes a lot of cases of how much you want to spend to repair that part. Again, the replacement need for parts is really heavy on the engine side of things. You know, we're really proud to have a nice mix of focus on cargo operators, passenger operators, as well as having dual roles. Some airlines have, I'm sure you've read about all the conversions that are going on. They both have passenger campaigns as well as cargo. We do take a lot of pride. It's been said a couple of times, we do believe we're the largest independent USM globally. Here's some of our signature customers that we have. You'll hear some more about some of these as we do, as Chris mentioned, across the board. These are significant in the respects to not just the USM part of things, but the MRO distribution and et cetera. When we talk about what we do, and we're kind of taking a little bit of a different angle here and just to understand exactly what the USM side of things and how we do things. There is kind of this bubble chart here that we're looking at, and if you look at that square in the middle there, this is the sweet spot. This is represents pretty much from an engine perspective, about 75% of the fleet. There, the sweet spot's about 10-25 years of age, and these are the focused assets and really kind of leads into, you know, how do you figure out what you want to buy? How do you figure out what's striking in the marketplace? It's, it's really kind of three things. It's, you know, robust markets. You've got over 15,000 aircraft that were produced on A320s and 737NGs, which represents. You'll hear from me talk about the CFM56 engine, 5B, 7B, quite a bit, as well as the V2500s. 30,000 engines. Right there you can see that's a very large market. When you look at that as well, about 60% of those aircraft are 2010 and younger. Again, they're 13 years old to new, and, like, that's gonna be a marketplace for many, many, many years to come. You're talking about estimates are over 20,000 shop visits for those engines in the next 10 years. Again, robust markets, that's where to play in, and that's one of our sweet spots. We have exclusive customers as well. Again, as John mentioned on that side of things, it's really key to lock up customers that you get, basically, you know, first right, you're on the hook for making sure that you provide the parts. Engine goes in the shop, parts are required. Customer comes to you and says, "I need a part," you provide it or you go out and find it. For the most part, we already have, you know, things in the pipeline to be able to deliver those parts when they need them. There's some, you know, nice extensions on those contracts, you know, especially the PW2000. It's on the 757. It's a cargo operator, we've been doing that for, I think, over 10+ years, we're gonna be going on for another five or six more. Legacy products as well, are specialty. The PW4000, again, this goes on 767, 747s, largely the cargo markets. There's still aircraft being converted, and when an aircraft's being converted, you're talking another 15, 20 years that you'll still be supporting them. Again, those conversions, when they end up with the cargo operators, tend to have a lot more focus and drive on the USM side of things. When we're sourcing assets, you know, to give you an idea, how do we, how do we go out and find things? We have, you know, industry relationships, and obviously, we have our reputation. You know, again, we go from operators to lessors, to MROs, other parts traders that are in the industry. The cross-selling is huge. Like Chris had mentioned, you know, we're talking to some of the large operators. We're always in the back of our minds thinking about how the enterprise can work through the MRO side of things, distribution, as well as USM, and whether that's selling or buying. You know, a lot of our sales folks that are out in the world, and you saw our global map, it's really critical that they always have in their mind not only what to sell to their customer, but what else do they have for sale? Understanding fleet transitions, understanding fleet retirements, knowing the tech teams at these airlines, operators, lessors, especially when some of the lessors are smaller technical teams, that they farm a lot of that work out. I don't know if most of you would know in here, nearly half of the fleet in the world is leased. Every airline owns an airplanes. In fact, you can get out an airplane, and there could be two leased engines from two different companies. The landing gear could be leased from somebody. A lot of dynamics in the world of these aircraft. Digital market platforms, you're hearing a lot about that. We're very excited about the opportunities and things that are, you know, both from a supply standpoint as well as being able to go out and find material. You know, huge, this is, this is one of the biggest things and the biggest strengths I think we have. We have the ability to close, we can close quickly a lot of times. You know, strong balance sheet that they have allows us to do those type of things. You know, from again, you'll hear a common theme here about trust, confidence. When we say we're gonna do something, we're gonna do it, and we make sure that we get those deals over the line. Again, when we're trying to figure out, after we determine, you know, we've got these markets, you've got the engines, the airframes, kind of 3 things that happen at that point. You know, we have somebody kind of negotiating on the front line, trying to get pricing, understand where the market's at, where the customer is looking to, you know, try to strike their target price on a sale. We also have our product line specialists that, you know, we have broken out by, like, Airbus, Boeing, Pratt & Whitney, GE and Rolls-Royce. These people that are in those positions have been in the company for over 20 years in most of those roles, so they really have an understanding of those markets, really can get a good feel for all the engines that are airframes that they've torn down over the last couple of decades, you know, and understanding how the engine performs and behaves. You know, if you're going in and you're doing analysis, we do it by part number. You can look and say, "Yes, we have 100 parts or 100 blades in the engine on this stage." You know, generally what we've seen, we're getting 50% yields if the engine looks like this with the time of usage, the operating conditions that it may have been in. That analysis need taking place from a financial standpoint. Then we have our tech team over here, in-house tech team. We have employees that have been over 40 years in our technical department, that's seen a lot over the years, both on the airframe and engine side. You know, they're doing the records review, they're going out in the field, they're crawling around the airplanes, they're putting borescopes into the engine so they can look at every part in the engine to see how it looks. All three of us come together, and we kind of put analysis together to come up with that number. Once we get that, we acquire the asset. The key is, every month on a monthly basis, in detail, we look how that engine's performing, how that airframe's performing. Is it what we expected to invest? Is it expected to what we would get on the yields from the parts being coming through repair? If there's any types of concerns or whatever, we get right back on track immediately to make sure that the engine or asset performs the way we expected it to and not wait for surprises at the end. Our value proposition, you know, and again, for those that aren't that familiar, used serviceable material, you know, generally a rule of thumb is somewhere in the 30%-50% savings. One part could be over $1 million in some of these engines. You can quickly see just one part that you go out and buy new versus going out and buy USM, saves you half a million dollars, and that's just one part. If you're looking at an engine that's, you know, roughly $7 million-$8 million to repair, and that includes a lot of USM, 60%-65% of that $7 million or $8 million is parts. If you let that get out of control, that $7 million-$8 million engine could be a $12 million engine if you just let someone go fix your engine and put all new parts in it, which at that point, a lot of those engines just become beyond economic repair. BER, as we call it, doesn't make sense. You'll never get out of the asset. It's so critical to make sure when the engines are going through, especially some of these engines, you've got to remember, 30-40 years old, and they're gonna continue to fly for another 20 years. Putting new parts in just doesn't make sense. Again, like China mentioned earlier, we take a lot of pride in our independence. We will work with OEMs on the really high-end side of things when they want specific kind of engines with specific operating conditions. Then, of course, we'll work with those that are very aggressive and like the alternative approach to, "I just need USM." Experience technical side, like I mentioned, the speed, flexibility of our balance sheet as well has just been so key for us. Then, you know, as I said, the common theme here is the confidence and the trust, both whether we're buying or selling. Again, the digital side of things for intelligence and transacting, as we, you know, get to talk about TRAX later on and the exciting things that are going on there. In this business, a lot of times people don't even negotiate price until they see paperwork. The parts are worthless without paperwork. Absolutely worthless. Scrap value. The idea is, you know, when you buy an aircraft, you may have 10 pallets of boxes of paperwork for the airplane. You buy an engine, and you could have 20 boxes, and the manual process of going through all that is it's an old school way, and it's still likely it'll continue for many, many years. However, having these opportunities with the digital solutions that we have and the capabilities and the things that we've been doing, giving availability quickly to our customers with online access to records, instead of having to pile through all that or going physically somewhere, giving them the ability to go through that electronically is key, and it drives in efficiencies for AAR that we can quickly move on to the next buy, and it drives efficiencies for our customers that they can quickly evaluate and make you an offer and transact. Really, really key, and like I said, very excited as to have TRAX bolt onto that as well, to be able to help us move in the future. Man, everything's going so well. Hit the slide, please. Sorry about that. What's happened since 2019? I was excited to be up here in 2019, we talked about one of the biggest things there. Our case study back then was the CFM56-5B/7B market that I think at the time was 22,000 or 24,000 engines. That was really gonna be our driver moving forward, like, how do we get into that marketplace in a bigger way, larger way? You know, one of the things we're really proud of is one of our partners in business, both from a we would sell and as well as buy and support them through aviation company, FTAI Aviation Fortress. You know, their specialty is, they basically have about 350+ CFM56-5B/7B engines in their portfolio. The idea was, how do you maximize the value of those assets? They primarily do leasing. When those assets come off a wing, how do you maximize it? Whether you put it through the shop or you take the parts down or take the engines down for parts, redistribute them. You know, maximize that. I'll talk a little bit more about that. I've got one slide again, just so show you kind of how that flows through. I know it there's generally some questions like: How does that work? We'll hopefully get some clarity for you on that. Cultural change, it's been huge. You know, there's been a lot of discussion on that, from the standpoint of not, you know, the supply chain of things. It's caused USM, again, the pricing. You cannot ignore it. Typically, you know, we still struggle a little bit. The USM side of things, it's, you know, typically in the Middle East, Asia's generally been, you know, always been kind of a new only button in certain areas. You know, the world's changed, right? We all know that, and the OEM's been very helpful with that as well. When you have OEMs price escalations, which some of them did last year, 15%-17%, great marketing tool for AAR. It, you know, it's, you can't ignore it. In some cases, some of the OEMs did two price increases last year. As that continues to develop, and again, I'm talking about in some cases, these are 20 or 30 to 40-year-old engines, it's really hard to say you're buying new parts on something that, you know, that's aging. You know, again, the delay in the aircraft deliveries, like Chris Jessup mentioned on some of the newer platforms, has really helped as well. It's keeping the legacy assets flying. It's good for the MROs, it's good for distribution, it's good for the USM side of things. You know, we've been taking that kind of slides right into taking market share on that. Through the pandemic, we really focused on realigning some of the inventory, making sure that as we come out of the pandemic, as we continue to invest, we generated a lot of cash. We also deployed a lot of capital, too, in certain markets, seeing the supply chain probably not getting any better. In fact, I think, you know, it was starting to get better about six months ago, and it's actually kinda going the other way again. We've continued to make investments. You know, we're buying engines, buying airframes, getting parts refurbished, getting them on the shelf. As you know, a normal turn time for a turbine blade, for instance, used to be 30 to 40 days. It's now maybe 120 days. We've got five, six, seven engines in the pipeline at all times, and you constantly have that material on the shelf, and you have it available for your customer. It goes a long way in being able to close the transaction as well as get good value for the parts that you're having. Then a big one here, you'll hear from Nick Gross in the Integrated Solutions side of things. You know, we're really excited and proud. There's two things that you've heard a little bit already about, that Chris had mentioned on the U.S. government side of things, opening up the avenue for use serviceable material. A lot of aircraft, believe it not, are commercially derivative. If you look like at a KC-46, it's basically a 767. If you look at C-40s, the 737, there's a lot of commonality between frames and engines, and in a lot of cases, it's the exact same engine. We already do some work for Nick and his group on those side of things. That campaign, as well as whole aircraft. We've had tremendous success in the last couple of years. Government agencies need to upgrade some of their older aircraft. They solicit and go out, and generally will be thinking that they're gonna buy a new airplane from the likes of, you know, a Boeing, and we'll go out and take a look at the tender, see what the qualifications are. We'll go out and find an airframe. We'll go out and find engines. We'll refurbish the engines. We'll refurbish the landing gears. We'll do the mods inside the airframe. We'll paint it, put it all together, and it saves them tens of millions of dollars versus the alternative of going out and buying new assets. We've had some really, really good success with Nick and his team. The partnership I mentioned with FTAI, you know, this is, in my opinion, extremely, very powerful marketing tool out there for both companies. You know, we both got together, like I said, understanding as their fleet kept growing and their portfolio, where they're obviously very specialized in the leasing markets and acquiring assets. We're very specialized in knowing the parts and the value behind it all. Put the two together, and it's a powerful solution. Again, the commitment is to for FTAI to be able to provide, as their engines come off a lease, to provide AAR 40 engines for part out. FTAI maintains the ownership of the assets. AAR is contracted to basically evaluate the engines, do the technical analysis, come up with what we believe the values are based on the scenario I told you earlier about the backdrop on technical and commercial side of things. We will contract a tear down facility to disassemble the parts. We actually have people on site at the tear down facility, and we warehouse things there. That as soon as the material comes out of the engine, the key is speed. Within five days, the We call the hot parts, the stuff that really moves quickly, we've got those out of the engines. They're routed right out for repair. Boom, they're into this, you know, the cycle to be to get to marketplace. In the meantime, the organization, Chris Jessup's organization, the sales front, you saw the global footprint. They're out there. They're already getting the mini packs, we call it, which kind of have, like, the high-level details of what the engines look like. They're already hitting the customer forefront and marketing that material, because before the pandemic, it was just-in-time delivery for parts. Everybody wanted a part today. They would never give you a purchase order for something, you know, a couple of months out. Completely changed. We've got some of the airlines out there that, two things, never really used to buy used material, and secondly, never even. If they did, they wanted it, you know, just in time. Now they're like, "Can I have this mini pack, and I'll give you purchase orders three months out. Tell me when the parts come back." "Yeah." "I don't care what scraps. I just want to have my name on it." Again, a very dynamic in the marketplace that has changed. I don't see that changing anytime soon, just because supply chain is still going to be constrained. Even when it does start to come back on, the volumes of the shop visits that are going to take place, that mentality is going to have to stick. Again, we go out, market that, and we invest on the side of the repairs. Again, Fortress keeps the ownership until the end, and when we go ahead and sell the parts, we'll recover our repair investment, as well as a fee that for doing the legwork that we just described. It's been very powerful. It gives us a consistent supply, as John had mentioned earlier, to go into a customer and say, "Yes, we can provide you parts on an ongoing basis, and here's why." The two of us have worked very hard, companies, and both publicly traded, very, you know, well represented in the marketplace, and just going into airlines, lessors, MROs, and winning business to with this program. It's been very successful, and we look for many years of more success. Our growth. The last slide, our growth initiatives here. It is very exciting stuff, as I've mentioned. Some of it's, you know, I've already said, securing long-term contracts, both on the supply side, demand side, key. We've done a few of these already. Very significant one with our FTAI partners, proven to be very, very, productive and, you know, for, especially for our customers. I mean, they really need that support. Driving the OSM, again, we've already talked about that. The OEMs are really helping with that, delayed deliveries and so forth. We talked about the USG side of things with the U.S. government. Very excited. I know Nick's going to talk further about that, give you kind of what that excitement really could look like. Again, there's tremendous opportunities there. It's, it's wonderful what they've done with, Nick and his team have done with the government and opening up that door and, you know, more good things to come the next time hopefully we have these sessions. AOG, I mean, like John mentioned earlier, I mean, it's really key. You know, I think we've all been on an airplane, you're backing off from the gate, you go back to the gate, they're like: "We need a part." All right, well, let's call the hangar. Well, guess what? The hangar's calling us, generally, or somebody in the industry to find that part. Having global warehouses around the world, we've got, you know, large warehouse in Europe, large, obviously, in Chicago area, in Asia, and having that 24/7, somebody actually picking up the phone, somebody, you know, emailing. As we move into some more of this digital side of things, trying to figure out from customer standpoints what we can make, how we can make it even easier for them before somebody has to call the hangar, somebody has to pick up the phone or email. I mean, that instantly being able to have that visibility from an AOG standpoint, again, I'm sure TRAX is going to be able to help with some of those offerings. That kind of ends the thing here. Having the end-to-end customer digital experience is, you know, kind of the ultimate goal here, and making that, again, not only efficient for AAR, but efficient for our customers, that we both can transact in a very quickly way, a very efficient way, as well as being accurate. Having TRAX on board now, you know, there's some great tools that we believe we can use already and that we will be implementing over the years. Thank you for listening to our story. We love what we do. It's a lot of excitement. You know, there's a ton of runway ahead of us here, especially as this market continues to come back strong, and we're looking forward to being a part of that. ... giving you great results. Thank you very much. With that, I will pass it on to my colleague here, Mr. Frank Landrio, that's gonna talk to you about distribution. Good morning. Thank you, Sal, for that great introduction. I'm Frank Landrio. I'm responsible for our distribution business. Quick background for me. I've been with AAR for 17 years, mainly in finance and operational roles. In 2012, I took on the OEM development role, which has actually helped me build the relationships that has aided to some of the distribution deals that we have, as well as helping AAR on the OEM side in total. From a distribution overview, key offerings. We distribute factory new parts on behalf of component OEMs to aircraft operators, government contractors, MROs, and we have also third-party logistics and other kitting and additional services to round out our offering. As Sal mentioned, we are a part of the parts supply segment. We're just a little bit more than half on the distribution side. Distribution sales, commercial's a little bit more than half. Government following that, we have a small percentage of B&GA, which is the business and general aviation. That is a sector that we would like to expand to, and I'll talk more about that in 2 slides. Within the commercial sales, from a fleet makeup standpoint, narrow body is more than half, with the remaining being split between wide body and regional. As for key customers on the military side, the DLA, the Defense Logistics Agency, is our number one customer. Japan Ministry of Defense is not far behind the JMOD. On the commercial side, major airlines like American, Delta, United, as well as some large global MROs. What do we do? We distribute factory new parts on behalf of our OEM partners, that's into the commercial and also the defense market. On the commercial side, we use our global sales force, which is Chris Jessup's team here, our warehousing network that you've seen on the map. It's a global network, makes us close to our customers and close to where the action is. Additional services such as third-party logistics and kitting services on an as-needed basis. On the government side, key supplier with the DLA actually, a step further than that, we have a strategic relationship in the Captains of Industry, which I'll talk about a little bit more in a couple of slides. We also are a direct part supplier to foreign militaries. You saw on Chris's slide about all the foreign military spending that's gone up, that foreign military is a sector also that we want to expand into. As for our approach, we are an extension. We look at ourselves as an extension to the OEM. What does that really mean? That means our goals are aligned with them, our KPIs are defined. That knowledge that the OEMs, and that a lot of airlines and customers believe that only the OEM possesses, comes over to us. We are trained, our product line people are trained, our salespeople are trained. We know when parts fail, how they fail, and what the replacement factor is on. We work with our USM counterparts to make sure that we are delivering what the OEM is expecting, not overselling and not underselling, and that's the whole goal setting up front. We take a, sorry, data-driven approach to analyze that demand, that is part of the whole part forecasting. Main thing on forecasting is where to put the inventory, how much inventory to buy, and are we reducing lead times, and again, hitting those goals that we defined upfront. As John mentioned, when we do this, you know, when we partner with an OEM, their competition is our competition. We will not distribute a competing product line. In exchange for all that, we ask for exclusivity. We go all in, to go all in, you can't be competing us either. That's the exclusive agreements we have. We have a high concentration of them. As for our value proposition, some of this crosses over with the approach I just said, basically goals defined. Goals could be anything from market share, gains, global reach, fill rate improvement, whatever it is. We define them upfront. We take the data from our OEMs as well as our own ecosystems and our, whether it's our integrated solutions or whatever the demand looks like, we pull all that together, and we create a profile. We work with our sales teams and our product line teams to make sure that we're not overselling ourselves or underselling ourselves and make sure it's achievable. We work with the OEMs from that standpoint. From there, we build our plans, we build our stocking, our inventory plan, and again, we work with our sales force to make sure that we can execute on that. With that said, independence is probably you've heard it a couple times now. Most of our component OEMs are on every airframe, so they're on all the competing airframes, and because we're not aligned with a particular OEM airframe or an airline, we're able to distribute right across the board without any conflicts. It's a great advantage for us. When it comes down to AAR's flexibility, that's also key, 'cause not every OEM has the same goal in mind. Allowing us to modify our goals and our plans is important. Many of our OEMs, we actually distribute both on the defense side and the commercial side, which is actually an important value add, so that they don't need to go find another distributor to do their defense if we're on the commercial side or vice versa. The overall financial strength of AAR is critical here because they know that when we sign up, we're all in, and we're gonna invest in, and our financial strength is important to accomplishing that. Okay, dig a little deep on the government value proposition. Our largest value add is reducing lead times. How do you reduce lead times? Your stock inventory. Again, data are very important. Getting the data, build the plan, and then strategically buying the inventory and positioning it in the right spot. I'm proud to say that, as we all know, there's a lot of supply chain constraints and the OEM issues that are out there that are public. AAR's on-time delivery rate to our customer is double what the OEMs have been shipping to us. That's confirmation that the plan works and that we're executing. I talked about the non the Captains of Industry. We're the only non-OEM member of that Captains of Industry. What does that mean? There are OEMs that have Captains of Industry contracts and status. What's unique about us is that we're willing to invest in the inventory, add the additional services that are needed, which most OEMs won't. We're willing to work of multi-year pricing, contract that are multiyear, that helps the DLA in many ways because it locks in today's dollars, even though we're shipping two and three, four years from now, so from the inflationary standpoint. Why is this growth for us? With this contract in place, what we're finding is we have OEMs that, again, have a contract in place, but they're not going to do the multi-year pricing. They're not going to invest in inventory, they're actually bidding with us. We also have OEMs that don't have the Captains of Industry, this contract is somewhat unique. We could just add those part numbers and grow that way. We're a conduit to that DLA volume. Okay, I talked about commercial and military distribution. Many of our OEMs are even further widespread than that. They have foreign military, they have BGA. Those are critical markets for us. The reason why we want to expand into these, and we're in these now, but we're not in any meaningful way. The reason why we want to expand to them is, again, be a one-stop shop for those OEMs, right? Sometimes they need us on a BGA side or a foreign military that could lead to the defense or a commercial business. We want to be more of a one-stop shop with them. With that said, on the foreign military side, our focus is on the Asia Pacific region, geopolitical issues, as well as increased budgets. On the BGA side, main focus is USA. We did sign our first exclusive agreement with Collins on the de-ice, so that puts us in that space. It's a fragmented business. It requires us to enhance our parts store, and I'll talk about that in a second. On the electronic side, this is us selling to the OEM. We're actually exploring that. It's a growing business for us, and this is where we can use our inventory capability and our planning and partner with them on a production side and how we ship to them from that standpoint, which actually, in turn, helps ourselves. Key achievements since last Investor Day. We added new production, new distribution lines. There's two ways to add a distribution line, of course. Do more with the existing OEM as well as land new OEMs, okay? We've got a couple examples there. Unison, Raytheon, Parker Transtime. We entered new markets, again, signing the de-ice, Collins product line. That puts us in the BGA market space, and again, looking to expand that. Increased efficiencies. We invested in our digital tools to taken some manual processes, automate them, the parts store that we've talked about, and we're looking to enhance that further for our next leg of growth. Expanded service offerings. We need to be a one-stop shop. We can't afford to source out anything or have an OEM do a piece of what we're looking to do. We have to be all in, and we've added some of these services, and we will add others, if need be, to make it a complete one-stop shop. E-commerce. This investment in digital tools, it starts out as an efficiency play, but very much turns into a growth play. We invested in some of these manual processes that I just mentioned. We get sometimes huge. As an example here, we get sometimes these huge files from quote files from our customers through a third-party data exchange. In the past, it'd be a manual effort between our sales and product line people, take a long time to actually respond. The hit rate was very, very poor. With this auto quote functionality, which is the implementation that we've done and we funded, those auto quotes go out. It cuts down on the response time. Actually, hit rate goes up, there's not a decision for them to go find an alternate part, but to come out and buy ours. What that does for us, it actually frees up our people to do what they should be doing, selling more and working with the OEMs, it makes our customers easier to work with AAR. The last bullet here is the whole BGA customer base. We talked about parts store. We do that today with our distribution business. It's a growing part of how we work with our customer base. We're gonna enhance it even further in order to deal with the small operators that are out there on the BGA market, or even the MROs that are out there, so that they can order parts right online and get delivery from us. We will work on the planning with our OEMs on that. They have a lot of data, we have a lot of data. We will look to add lines and again grow into that space. This is an impressive chart. 300% sales growth over the last 12 years. This is just growing market share. It's everything I've said in basically in a chart. 12 years ago, to give John credit on this one here, we came up with a distribution strategy that was exactly what he said before. Worked with a couple of key OEMs on an exclusive basis, that basically started this. Some of the relationships that we have, you could see the trend here is in a good way. We just finished with a record year. A couple of things I want to point out. You'll see Raytheon listed here numerous times, and that is expanding the base, right? You, you land an OEM, you execute, and you continue to add new production, new distribution lines. You'll see new OEMs like Woodward on here. That's where you take that reputation that you built, everything that we talked about on the value prop, and you bring it to them, and they understand it, then they sign you up. Then we look to now expand that. A lot of these are just one-off, a couple of product lines, so there's a lot of room for growth here. Okay, growth initiatives. We want us to keep working on what we're working on, right? Secure new distribution lines, whether it's expanding the base or new OEMs. Because we aligned with OEMs, or an extension of them, their competition's our competition. I mentioned that earlier, so we will look for retrofit opportunities, whatever. However they want, and this goes back to the goal setting. Whatever they want in order to grow, whether it's retrofit, whatever, we're there to help them out. Expand into foreign military budgets, increasing everything else. We're gonna start with APAC, but that's a, that's an important part of, again, being more connected to our OEM partners. Same with the next one for the BGA, even though that involves a little bit of an investment in, on the, on the tool side of it, on the digital tools. It's a, it's a compelling business case, and there's a lot of room for growth in that segment, too. Expand e-commerce overall. We're excited about this TRAX acquisition. They bring. That's another channel to sell parts. That's what we do. We sell parts, we're going to tap them, work closely with them, and figure out how we could bring that volume and that customer base into our fold here. In conclusion, we had a great 12-year run. I'm actually even more excited about what the future holds and then all the conversations we're having with our OEMs, adding these new markets and adding the e-digital, and especially with TRAX. Okay. Break. Thanks, Frank. With that, we'll take a 10-minute break, and we'll come back, and we'll hear about, Integrated Solutions, Repair and Engineering, and TRAX. Thanks. Okay, we're gonna get started. Everybody who wants to grab their seats. What's that? I'm just keeping track. Yeah. Thanks, Tom, for getting everybody back. Yeah. Okay. Everybody, I think we got a few people out there. Okay, we'll get started. Welcome back from break. I guess I said thank you for coming back from break. It's now the job of me and my colleagues to make sure you're happy with that decision. We'll get going. Repair & Engineering. My name is Tom Hofer. I joined In contrast to my colleagues who have talked about their years of experience at AAR, today is my 2-month anniversary. I wish that meant I was just out of college, but I'm obviously not. 30 years of aviation experience. I came from GE Aerospace. Got to know John, the team, and AAR from the relationship that you've heard Unison mention previously a couple of times. Also did 22 years in the Air National Guard. Again, culminated my GE experience at Unison. Enough about me. Let's get to Repair & Engineering because I got some really cool stuff to talk about. What do we do? First of all, we are the number one independent MRO in North America. We do airframe heavy maintenance. You can see in the pie chart on the right, that's the bulk of our sales, right? About two-thirds of our sales comes from our airframe heavy maintenance. In addition to that, we do landing gear overhaul. We do it in Miami facility, separate from our hangar. We do component repair here, I guess, somewhat locally in Long Island, also in Amsterdam. Interior mods, engineering, design, all the way through certification, STC certification. John talked about our PMA parts, a new business we're starting. Lots to talk about there, and I'll get to that here in a few slides. That's manufacturing, engineering, but beyond that, the other key activity is, you know, the war on talent, right? Managing relationships with our eight EAGLE Career Pathways. Sorry, I'll talk a lot more about that, but this is about bolstering our labor pipeline, right? If we don't have quality, reliable labor that we can retain and keep and continue to grow, we'll be in a really bad place. Labor is very important for us, not unlike anyone else in the aviation industry, but we are leading the industry in several programs that we're running to make sure that doesn't become a bigger problem for us. Okay. You can see this breakdown of commercial and government, and then we are anchored on those key customers to the right. Some really big names in the industry. We're focused on them, and I'll talk a lot more about what that means from an operational standpoint, and then the United States Air Force, United States Navy, of course. What do we do? Airframe MRO, 6 hangars: Miami, Oklahoma City, Indianapolis, Rockford, Illinois, in the United States. We also have two MRO hangar facilities in Canada, Trois-Rivières, that's Three Rivers, no need to use Google Translate, and Windsor, Canada. All in North America. Heavy checks we do roughly every two years for those, for our customers, but we're really nose to tail, right? Things happen in aviation, right? Hail damage, ramp damage. We get quite a bit of drop-in. We're nose to tail, lines of maintenance at all those facilities. We support primarily narrow-body Airbus, right? Focused on Airbus and Boeing, I should say. Narrow-body, and then we also do work on regional aircraft with Embraer 175s. Moving down the screen, landing gear, full-service repair on landing gear, wheels, and brakes on pretty much every commercial government aircraft type you could think of. We also do a lot. Our special processes are in-house, right? That insulates us from the noise, if you will, on supply chain. Also allows us to maintain our cost of those special processes that our competitors have to farm out. Component repair. We do component repair, again, here in Long Island, also in Amsterdam. Over 15,000 components, ranging from APUs to starters to valves, and as you can see, quite the list there. A lot of work being done with component repair. Finally, engineering, which really covers two pieces of engineering. One, engineering services, which you've heard us talk about in the past. That's our team that does design, integration, cabin mods, galley reconfigurations, what have you, and takes that all the way through certification. PMA parts development. Again, this team right now working on candidate identification. As I'm sure you all know, there is not a shortage of ideas, candidates that we and our customers would want to do PMA, but we've always got to balance that with Frank's business, with our OEM customers, right? We're not going to do anything that conflicts or infringes, if you will, on the importance of those OEM relationships. It's key factor in deciding what we're going to do PMA on. This is the facility overview. We talked about the hangar sites. We have over 12 sites, 3,300 employees. I'm not going to bore you with all the small prints on the bottom, but really, the takeaway is this: John talked about focus. I translate that being a kind of a lean guy to standard work, right? Standard work on narrow body aircraft, right? It helps you improve your safety, helps you improve quality, helps you improve delivery, and helps you reduce your cost, right? Those things are all great benefits out of an operation where safety, quality, delivery, and cost are how we are successful. I think John said, "You know, hey, an employee that comes in and knows he or she's going to work on a narrow body day in, day out for that customer, makes things a lot easier," right? It leads to a lean operation. Our value prop, six main tenants of that. Large network. I talked about the network of six hangar sites. Gives us flexibility with our customers. Again, with a smaller group of anchor or strategic customers, we can be responsive to their needs. Again, things happen, right? Customers need different things that weren't planned. We can adjust with them, flex to them. We're doing it today with the increase in demand, with the crazy weather you see in different parts around the country. We can react to that with our flexibility with, again, a smaller group of customers with a focus on narrow-body. Vertical capability is creating one-stop-shop. I talked about how we do that with landing gear, but beyond the landing gear and the special processes that we do in-house, even at hangars, we do our own composite work. Again, insulate us, insulate ourselves from the noise in the supply chain, manage cost. Quality workforce. Again, this is something we think about every day. It is something we got to keep our finger on the pulse of. I'm gonna talk a few slides here about what we're doing in regards to that, but we're proud of the workforce we have. We have about a 75% retention rate. It's good, not great. I'd say it's really good for this MRO, in the MRO world, there's a lot of competition out there for our people. Innovative design, PMA parts solutions. I talked about that with our engineering work in Indianapolis and Singapore, our PMA parts, which I'll talk about a lot more here in a couple slides. Digital. Frank, Sal talked about what they're doing in their business in terms of digital technology. Repair and engineering is no different. I'm gonna share with you a really exciting project that we're doing around paperless MRO. If you've ever been through an airframe MRO, you know it is insanely manual, and there's an insane amount of paper. We're working on a paperless MRO project, the first one in the industry. Share a little more about that here in a couple slides. Then material sourcing from A Parts Supply. Again, my friends Sal Marino and Frank Landrio, we leverage, we leverage our internal colleagues to get parts when we need them. Beyond that, you know, the team's done a really good job in the past, probably a year or so, six months, a year, of consolidating the buy that we do across hangars, right? I know it sounds simple, but if you buy the same widget in Miami, Oklahoma City, and Rockford, you really ought to buy it one time and get that cost benefit, get that delivery benefit from a very stressed supply chain. A lot going on there. Okay, since 2019, the skilled workforce, I talked about our retention rate. Again, this is literally a daily battle, if you will, I make sure we stay focused on this. It is incredibly important to our success. Optimizing the footprint. During COVID, we divested of our Duluth MRO facility and grew Rockford from literally 50 employees to over 300, I think now. That's the optimized footprint. Rationalizing product lines really takes me to bullet 3. Again, back to that, focusing on standard work, narrow-body airframes, and key anchor customers. Fourth, safety. You know, quality first, safety always. John said at the beginning, it is, this is part of our ethos, right? We're really proud of the fact that AAR was the first corporate-level approved safety management system by the FAA and subsequently by EASA TCCA. Following that, we've implemented it at all six hangars. What does that mean? It means that if we have a safety, quality, you know, compliance type issue at any of our sites, that issue is known literally instantaneously within our digital system by everyone. You can contain the issue, and then you drive root cause, corrective action where it happened, but that's all shared with everybody across the entire business. We're not getting repeat safety, quality issues across the business because we're not talking. We're communicating every day, review all the open issues every week, every month. Safety, and nothing more important than that. All right, let's talk about people. Workforce development. I mentioned this EAGLE Career Pathways Program. That's really the center of multiple programs that are going on. I can't take you around the whole circle there, but I will highlight a few. Being a veteran, the military SkillBridge is very important to me. You know, we tap into veterans that are exiting their service and try to get them into AAR, right? Great experience, great background. Legislative initiatives. This is really important. Local, state, federal level, ensuring that our legislators are talking about funding at their respective levels to make sure that we're funding training programs that allow us to go into schools, talk about aviation as a career, you know, get kids interested in it, and create that pipeline. You know, it might not result in someone walking in the door tomorrow or next year, but the reality is, I was listening to an Aviation Week MRO podcast. The average age of the AMT technicians in the United States is 54 years old. That's a problem for all of us, right? You got to create that pipeline now so that we have labor in the next five, 10 years. The other one I'll highlight is our state grant program. We're just finishing up a $5.2 million grant from the state of Illinois, which again, enabled that growth I talked about in our Rockford facility. We're super excited to announce about, maybe two, three weeks ago, that we received a grant from the state of Indiana for $4.5 million. We use those dollars. There's very few dollars left out of that $5.2 million. I'm sure we'll use every bit of that $4.5 million to make sure that we're doing, again, all the right things that we need to continue to grow the future, the future of labor in Indiana, specifically for Indianapolis, but really across the entire business. Super exciting news this week. I think we had maybe two or three press releases on this. We're so excited. Barry couldn't quit typing up press releases. For a good reason, right? Expanding our Miami footprint from nine bays to 12 bays, right? Easy math, 33% up. Most importantly, 250 new jobs in that area and customer commitment. Look, there's an equation to doing this, right? You got to have the local support of the airport, Miami-Dade, in this case. You've got to have support of local legislators. The mayor of Miami was very instrumental in our discussions. Then third, you guys, you have customer commitment, right? We, we as a, I guess, business, can't commit to this kind of investment without knowing we have customers to back it and fill those bays up for years. Chris and his team were able to secure a long-term commitment from United Airlines through 2030 to make sure that when we build these three new bays, there's gonna be planes in them, right? Generating new business for AAR and serving a customer need. United's got the demand for it. So we're gonna break ground here in Q2. It's not a, you know, it's not a small investment of $50 million. Big decision for us to get across the finish line. Most importantly, what I really would like to leave you with is, this is the first.... Right? That equation I talked about, local airports, legislators, customer commitment, stay tuned to your laptops. We're working on a couple more that are coming just like this, and great you to be excited about our growth. It's gonna be awesome. Paperless. Again, I talked about, just the amount of paper in an MRO hangar is ridiculous, so we're working on this. We're running through a couple pilots. As with any software development, digital project, you know, you launch and you learn a ton, right? Then you make changes. That's where we are with this. The complexity of this is, it's new for everybody, right? Again, we're the tip of the spear on this, meaning we're working with, you know, customer quality departments, working with the FAA. This will require us to run dual processes as we launch this, meaning we'll have to continue to be manual while we're showing that we can do digital, right? Moving as fast as we can. It's not easy because this is, changing the industry, right? We're leading it, and we're gonna make this happen because huge opportunities in terms of efficiencies in our shop, as you can imagine, and cost to help us meet our margin expansion goals. PMA. All right, this is a part of our strategy that really, I'd say it's still at the beginning stages, right? This is about us looking at how can we do PMA that helps us reduce our internal cost, okay? That's where we are now. Again, no shortage of a list of ideas or candidates, but we got to make sure we're not doing something in conflict with our other OEM relationships, okay? We've got a team stood up, got a leader of that team, we're resourcing it, we're funding it. Again, balancing it with, you know, a lot of optimism, a lot of bullish behavior from the team of what they want to do. We got to balance it with what makes sense for AAR. Where it wants to go, where we want it to go is to eventually partner with customers who also want PMA, right? Help them help us, right? Or I guess, help me help you. Help me help you. One way or another, we'll do it, we'll do it together. How's that? The, the point is, you know, we want customers to provide that pool of, "Hey, this part is a problem for us, right? The cost is an issue, the delivery is an issue. Can you PMA this?" That will allow us to really take this PMA business to a whole different level, in the next, you know, five, 10 years. Super excited about this opportunity. In more words of TIMBUK3, "The future's so bright, I gotta wear shades." Unbelievably cool stuff going on in Repair & Engineering, right? We're going to keep expanding Airframe MRO. Like I said, Miami is just the beginning of the story. Paperless is just the beginning of our digital investment. John briefly mentioned drones. This is way cool stuff. Drones flying around the airplane, doing the surface inspections, right? EAGLE Career Pathways program, like I said, labor, it's, you know, thinking about, we'll keep working at. We're leading the industry on these programs. We'll continue to stay in the lead. PMA parts initiative, talked about that. Then the final one, amount of component repair. You know, I talked at the very beginning, hopefully you remember, about 15,000 different component repairs we do. The playbook that Frank talked about in terms of distribution, right? Focused on a few or a select group of OEMs. The playbook that we ran for Airframe MRO, focus on a small select group of strategic customers. We're gonna do the same thing on component repair. I don't know that 15,000 repairs is the right number. I don't know if 7,000 is. I know that we got to focus on customers that want our product and where we can be the best at delivering it. That'll help us meet our mission. We're the number one independent MRO today. We're gonna stay that way. Thanks for your time. I will now introduce Nick Gross. Good morning, everyone. I am Nick Gross, and I have the pleasure to lead and present the Integrated Solutions business unit today. You've heard a lot from my colleagues about all the great, vast capabilities that AAR provides, and our group really integrates those into comprehensive solutions for government and commercial customers. Our key offerings on the commercial side are power by the hour and repair by the hour component support. On the government side, it's everything around that term, contract or logistics support, which spans supply chain, maintenance, and even some cases, flight operations. Our business mix is about inverse to total AAR. We're about 70% government and 30% commercial. Across both sets of businesses, we have really focused on a core set of platforms that are globally prevalent and will be relevant for many years to come. Our customers on the government side are, I mean, the government, right? I mean, Department of Defense, Department of State, Department of Energy, many of our allied foreign partners. On the commercial side, we support many of the marquee airlines, Air Canada, Air New Zealand, flydubai, and many other operators globally. One thing I want to point out is kind of how we're contracted. You know, we're called Integrated Solutions. It's a fancy term we came up that sounds better than programs, I guess, but really, we're programs. All of our work is done under that programs. Longer term programs, our average 10 years, about five years or longer. We have some programs that extend past 10 years, and that gives us a tremendous amount of visibility, frankly, and predictability into our business. Realistically, as long as our contracts are performing as expected, this should deliver, this business unit should deliver a known annuity year over year. Again, we integrate or bring together, deliver a comprehensive set of services and solutions to our customers worldwide. All these functions on the slide really integrate and kind of blend together, I'm gonna talk about them a bit more holistically. If we go back to that broad umbrella again of contract logistics support, which is supply chain maintenance and flight operations, everything we do enables some aspect of that. How we go to market, how we support that, the level of support is different amongst the different groups. For example, on the government side, we touch that entire value chain, right? The full continuum of support. We can offer that service or that capability on a very individualized basis, or wrap them together into more comprehensive solutions. In the commercial side, we primarily focus, or really only focus, on supply chain enhancement, again, through our Power-by-the-Hour and repair by the hour solutions. One thing I do want to point out is, while, you know, you'd say, okay, government, commercial, that's kind of different end markets. They are different end markets. We do support different customers, but how we operate is actually pretty similar. If you think about how we would operate a commercial power-by-the-hour contract for a commercial airline, it is very similar to how we would operate a performance-based logistics contract for the DoD. A lot of the functions and operations are similar amongst the group. Supply chain does account for the majority of what we do and the majority of our business, and that ranges from everything from 3PL operations, where we are managing warehouses for customers in accordance with their, you know, SOPs, their systems, whatever it may be, to more advanced, PBLs or PBH-type contracts, where we take over the entire supply chain, and we're responsible for point-of-use availability, basically, to our customers worldwide. I realize we have a lot of acronyms in this business, so please raise your hand if you want me to spell any of those out. We think someone mentioned GOCO and COCO earlier, right? With government, we have a lot of acronyms. We think we're at our best when we can really take control of that entire supply chain, enhance the supply chain over time, and create value for our customers long term. A fantastic example of this is many of you may be aware, if you follow us, we were awarded a landing gear PBL contract a few years back, where we took over responsibility for the entire supply chain for the KC-135, C-130, and E-3 landing gear systems. These are very, very old aircraft. They had a very, very old supply chain with numerous constraints. In the course of our time on that contract, we've been able to reduce MICAPs, which is the military version of an AOG, by 92%, back orders by 93%. We were actually recognized and awarded the Secretary of Defense PBL of the Year Award two years ago for our efforts on that contract. Many of our contracts also include a maintenance component, and that does include line maintenance, where we're working on. The line maintenance side is, I know Chris said we don't really play on the commercial side, but we do on the military side, where we're working on aircraft basically around the world for our customers, up to traditional, depot-level maintenance, which AAR is seriously known for. It's important to note that we do a lot of our work organically. However, the fantastic and great thing about AAR is we're able to tap into other businesses, and in this case, for example, in the depot work, we utilize Tom and his group to do a lot of the depot maintenance as part of our integrated offering to our government customer. At the end of the day, though, all of our solutions work to or aim to increase readiness and decrease the cost for our customers. You know, our mission, at Integrated Solutions is to be the leading independent provider of aftermarket sustainment services, and that's leveraging the full spectrum of AAR's capabilities. Our end goal is not only to provide exceptional service, but it's also to make it as easy as possible for customers to work with us, and that mindset really guides our operating philosophy. Every program's a little bit different, you know, understanding our customers' problems and solving those problems is ultimately how we add value. Again, every program's different, so how that value is created a little bit different is a little bit different, but there are fundamental themes that underline and, or basically contribute to everything we do. The first is our blend of commercial and government. Our position in the commercial and government markets brings us unique perspective and an operating philosophy that very few others have. You know, the word and the term commercial best practice has been around forever, but frankly, it's widely overused in the government space. A lot of people that like to say that term have, frankly, never done any true commercial work. We grew up in the commercial industry. We grew up into that commercial pedigree. Everything we do, every approach we have, is with that commercial mindset. Our ability to tap into the best of both of those worlds and offer our customers, whether it be a government customer or a commercial customer, a unique, tailored solution that blends both of those pieces together is a true competitive advantage. Again, our ability to tap into Sal in the Used Serviceable Material group, or Frank in the Distribution, and Tom in Repair and Engineering, allows us to offer solutions, frankly, that no one else quite can. Our close to the customer, and global presence is a critical component to what we do. At every hour, at every day, one of our employees is supporting our customers. We are time zone agnostic. We routinely pass work off between different offices to make sure that we meet those 24/7 requirements of our customers. Not only do we operate locally, but we stock locally. We forward stock position, or we forward stock close to our customers to meet their changing needs, reduce overall lead times, and improve service levels, and ultimately improve customer satisfaction as well. While every program is a little bit different, our strength is being able to develop tailored, global, deployable, scalable solutions for our customers anywhere they may be. Our role as an independent is important because it allows us to be OEM-agnostic and really deliver the best possible solution for that particular customer's need. Again, if we think about legacy aircraft, we specialize in supporting legacy aircraft through their user or owner-defined end of service life, and this requires us to create innovative and enduring supply chain and engineering solutions to mitigate obsolescence, and at the same make sure that we deliver the right part at the right time. Many times, this is far past when the OEM has decided to shift their focus to new and emerging platforms. If we think and reflect on the last few years since we last met, there are a few achievements I did wanna highlight. You know, AAR has traditionally been known for our support in the commercially-driven market. You know, rightfully so, we do so much of it. We have continued to push further and further into supporting traditional military aircraft. One great example of that is the stand-up of our F-16 depot in Poland, which I'll speak a little bit more about. Here we saw an opportunity to support an underserved market that fit very well with an AAR traditional operating philosophy. Another thing I wanna highlight, and you've heard a lot about the NDAA, but the FY23 National Defense Authorization Act, and the legislation that directed the acquisition and use of Used Serviceable Material, You know, if we go back, and that this is something that I think we've been passionate about for, you know, a decade, if not longer, about trying to encourage the DoD to utilize USM in a more robust fashion. We have worked closely with our elected officials, frankly, in the services, to educate them on the benefits of USM, and we are extremely pleased that that became part of the legislation this last past year. That change in mindset is not only at the part level, but at the whole end system level. You heard Sal talk a little bit about this, but we're seeing this change in mindset, too, where government end users are starting to consider used alternatives. In the last two years, we have sourced, acquired, modified, and sold six whole aircrafts to different government end users. Each one of those is a little bit different, they all demonstrated the power of the aftermarket in the sense that in every single case, the used alternative provided a lifetime or a lifespan longer than customer requirements, delivered significant cost savings, and greatly reduced lead times versus new alternatives. There's very few, if any, other companies out there that can provide that turnkey, and if you think about that, can go out, source, evaluate, acquire aircraft, engines, landing gear systems, can modify those aircraft, maintain those aircraft, and then deliver them or in accordance with very strict government requirements. Again, this is something I think that's unique to AAR. One thing I do wanna point out, too, is we don't believe this is a point in time. We do believe this specific market will be enduring. Finally, like many others on the commercial side, the pandemic really caused us to go and examine how we supported the commercial PVH market. Prior to the pandemic, that market had become hypercompetitive, subsequently driving down prices and ultimately margins as well. As we looked at our portfolio of business, we rationalized our portfolio and book of business around fleets that we knew and customers and contracts that we knew and liked. By rationalizing around a core set of fleets of aircraft that we knew and ones that we had inventory position on, it allowed us to better refine our operational process to support them. Now, we are still one of the largest PVH providers worldwide, but we're much more focused and thus more profitable. As we look to go forward, frankly, we're much more selective on the type of opportunities that we wanna pursue in that market. I did wanna highlight. I mentioned the F-16 depot in Poland. This is a, you know, I think, a great example that ties to exactly, you know, some of the things we've talked about the last few years about pushing more into that, you know, kind of military-specific support. We stood up this depot in support or, you know, to support a contract that we won for the Air Force to support their European fleet of F-16s. If we go back a few years, we saw a gap and frankly, a huge opportunity. As more companies shifted focus to the new and next generation aircraft, at the same time, you had the U.S. government commit to the F-16 well into the 2040s, if not beyond, we saw a supportability gap. That is exactly the type of environment that AAR thrives in. We combined our extensive depot experience with our knowledge on the airframe gained through our component repair facilities. We created an innovative solution that could support the Air Force's need long term. In eight short months, we've stood up full operations there. We currently have, or will have, our seventh aircraft inducted. We expect to be 12 by the end of the year. More importantly, we expect customer demand to be strong for this over the course of that 10-year contract. You know, it, again, this is important because it's tied to our strategy to get into the more military-specific airframes. To support this, we had to build an infrastructure of subject matter experts across a wide variety of technical, engineering, and artisan functions to support these operations. That's important for us because it gave us the capability and capacity to continue to grow, frankly, and add more government work and foreign end users. We believe and our desire is for this location to actually be our regional center for F-16 maintenance and training going forward. A lot of talk about the NDAA. I do think it's important because we've mentioned it and how great it is, but I do think it's important, and I want to add a little bit more color on exactly what this means for us as an opportunity. Well, you've heard Sal and John and, you know, many people talk about used serviceable material. Across the commercial industry, the use of USM in commercial aircraft and engines is commonplace. Sal and his team are market leaders there, unfortunately, it has not been that widespread across the DoD. The FY23 NDAA changes that and directs the services, specifically the Air Force and Navy, to develop policies and procedures for the use of used serviceable material in all commercial derivative aircraft and engines. I put this chart in here so you can see this is not all the linkage between the two, but if you look at the linkage between the commercial derivative and the military, aircraft and engines, I do wanna point out that that whole list right there are products that AAR knows very, very well, and frankly, product lines that Sal and his team support very robustly in the commercial marketplace. We conservatively estimate this to be a $200 million-plus annual market that, because of our leadership in the commercial marketplace, we believe we're very well positioned for. Frankly, we're already seeing some of the impact of this legislation. Someone mentioned the KC-46, the Air Force recently awarded a contract to support the provisioning of the initial spares to support the ramp-up of the KC-46. As part of that, they allowed USM as the source of supply, which was unique. AAR was awarded a seat on that IDIQ, we're now starting to see task orders being released. We also expect the DLA, in some fashion, to be involved either in the procurement and stocking of USM, and because of our operations, our performance of the DLA Frank mentioned, we believe we're also very, very well positioned should that become a reality. You know, as we look to go forward, we are energized and optimistic, frankly, about the opportunities ahead. There are a few key critical components to our growth that I do wanna just briefly discuss. First and foremost, we're programs. We have to continue to secure long-term commercial and government contracts. On the commercial side, the market for PBH services remains high. Frankly, we didn't know how that would be with the pandemic, but coming out of it, that market is still extremely high, and we still remain a key player in that market. While we have rationalized our portfolio of business around, you know, a core group of fleets, the fleets that we are supporting are some of the most relevant, most prevalent, excuse me, currently in service, and our role as an independent is important because it allows us to aggregate without restriction. On the government side, we continue to maintain a market-leading position, supporting commercially derivative aircraft, and continue to push further and further into military-specific airframes. While we have been successful, such as the F-16 and some others, we need to continue to add size and scale and leverage the capabilities and the experience that we're gaining on that program and others to really springboard us to other platforms and other capability sets. Spoke a lot about USM, you know, now that the legislation is passed, now we have to make sure this becomes a reality, and all the great things that we believe will happen, will happen. We've been working very hard, and the teams are working very hard with our government stakeholders and service members to educate them on what exactly USM is and how best to use USM. You'd be amazed at how many people don't even understand what that means and how best to use it. We've been educating them on where, you know, there are opportunities, frankly, to use USM and how to implement that as a source of supply. A lot of my colleagues talked about government, right? I think Sal had a piece on... You know, one of his key growth items is try to expand more on what he's doing on all airframes. Tom's talking about his piece of the government. Frankly, no one brings together all the pieces of aviation quite like AAR does, and our ability to combine those into comprehensive offerings to support government and commercial programs or government commercial end users is something that no one else can do. That is a true competitive advantage for us, and if we look over the last few years, what we've been able to do to bring these other pieces of AAR, which have traditionally not played in the government mark, has been pretty remarkable. Frankly, we see tremendous opportunity for that going forward. That not only creates obviously opportunities for integrated solution, but broader internal opportunities, which creates a more competitive and profitable total AAR. I will digress one piece here and say that for me, you know. That's okay. John listed all those awards that we had in the front, and I think they're great, but as a leader of this organization and leader of the business, I don't think I've ever worked for a place where we've had such a cohesive leadership team. A lot is due to John and the culture he's created, that every day comes in, does not worry about their individual P&Ls, but was always concerned about what is best for AAR, and that is such a refreshing place to work, and I truly appreciate it. Finally. That's good. Yeah, that's good. Finally, one thing I will say is that. I will say, too, it's funny because we all have this TRAX piece on here, and I swear this was not planned, but, you know, we are really excited about the TRAX acquisition. On the government side, you may have, you will see, sorry, because they're gonna come up next, the AAR logo. We've actually used TRAX in a couple of our government CLS programs, and in fact, we believe their functionality is very well suited for what we do on the government side. In fact, even prior to the acquisition, we have been working with TRAX, like, a partnership to help enhance their product to be more suited for that traditional government-type work. At the end of the day, we'll continue to invest on both commercial and government, in products and services that give our customers the access to real-time data and enhanced visibility, to give them, frankly, unparalleled visibility into our operations and their operations. The client-facing products that we've created are and will continue to be a differentiator for AAR. Again, I'm excited. You know, I believe we built a very strong foundation of key contracts, marquee customers, and top talent to propel us forward. Thank you for your time, and I'd like to introduce Andy and Jose from TRAX. Thanks. I'm interchangeable. Yeah. Maybe the only one. Yeah. It's competition. It's always been our way. Well, good morning, everybody. My name is Andrew Schmidt, and before I introduce myself, I'd like to introduce Jose. By the way, Jose is the cool-looking guy. If I can get this to work, on the left side of the page. I'm the boring-looking guy on the right side of the page. Jose is the founder of and CEO of TRAX. Delighted, elated to have him here. This is a courtship that has been going on for about 10 years. We've talked. This is John, myself, and Jose have had many dinners, we've had many meetings, we've had many outings, and have gotten to know each other. A lot of our conversations, of course, center around software, mobile computing, and AI, and the transformative power that the three of them have in aviation aftermarket services. We've also, and this is the fun conversation, really talked about the transformative power that a combination of AAR and TRAX, could have on both AAR's customers, TRAX's customers, in the industry together. The synergy being the combination of software, TRAX, and hardware, AAR. It's something we're gonna talk about here is: Why does this make sense? What's the synergy, between the two companies? Delighted to have you here. Thank you very much. We're here. A little bit of background on Jose. He founded the company in 1997. That was a long time ago. At that time, computers were run on green screens. There were no graphics. Can you believe that? No graphics. It was just a screen and a bunch of text. Jose, being the innovator that he was, back then, actually tried to convince somebody else to do this. They wouldn't do it. Jose said: "Why don't we come up with Windows-based software for aircraft maintenance?" Way ahead of his time. Jose, thinking that was a good idea, quit his day job. He was a programmer. Went off, he formed TRAX, and he started coding. He still codes to this day. He was showing me code yesterday, which was a little bit scary. He's quite good at this. He does the debugging for the company. Jose founded the company, actually did roll out in 1998, the first version of TRAX. It was fully Windows-based, was ahead of its time. He quickly built a customer base, for the bankers in the room, he did not require any external capital. He funded the company from the beginning. Well, it didn't require much funding, since they live in a very small place. Anyways, the company formed, gained momentum very quickly. Everybody liked the intuitive user interface, particularly small and mid-sized airlines as well, who found his software much easier to implement, much more economical to implement than some of the other bigger solutions that were out there today. Continuing to innovate, after releasing the 12th version of TRAX, Jose began working on the industry's first 100% cloud-based MRO ERP. Meaning, you didn't need to have a big data center, you didn't need to store your information in a proprietary center. You could basically store all the information associated with doing maintenance on the cloud. You could access it readily, you can access the software readily. We launched that product in 2015. While building eMRO, he began pursuing building complementary apps, mobile apps, that would work with eMRO. As he started building those apps, he kept coming up with new ideas. "We need an app for a mechanic. We need an app for somebody in the storeroom. We need an app for somebody in QA." Ended up designing 16... What's, what's that? 16 different apps today that are role-based. Now, a mechanic comes in, they don't need to go through six screens on a laptop or a desktop to figure out what they need to do. They fire up the device, it tells them exactly what they need to do for the day. If they're working in a storeroom, they don't need to print out a list of things that they need to pick. They fire up the, you know, in that case, the iPhone, and it tells them exactly what parts they need to pick and where they need to go. That innovative product came out in 2016. Started off, I think, with about 12 different apps, up to 16 today, and building an app today. So his latest innovation, and this is something he started working on, before we purchased the company, is automating maintenance. So taking AI machine learning and not making that the product, but taking that and embedding it into the software. So he's working on a suite of new products that are AI-based. It'll be a pro series of products that we hope to be enrolling out later in AAR's fiscal year, and again, probably roll them out one at a time. They'll bolt on to eMRO, they'll bolt on and work with eMobility. Not sure if they're gonna bolt on to TRAX, legacy TRAX or not, at this point in time. An innovator in terms of myself, we'll do this very quickly. I started off as a flight test engineer, went to business school, like many people did, who wanted to transition careers. The first half of my postgraduate school career was spent in consulting. Was a partner with A.T. Kearney, was also a partner with Oliver Wyman. The second half of my career is when I got into investment banking and private equity and working with John Holmes at AAR. I was at AAR from 2010 to 2018, and then recently came back after the acquisition of TRAX. In terms of the company, John mentioned this earlier, but just important to note the breadth of what TRAX does. TRAX's software supports 100% of what an airline, an MRO, a government and defense aircraft operator needs to do to maintain their aircraft and maintain all of the components that are required to fly and support those aircraft. Software does 100% of what an airline needs to do to maintain its aircraft. The reason I say this is big, customized legacy ERP systems will do this. There are a couple of TRAX's competitors that can do pretty much everything, maybe one or two, but there are a lot of different software companies out there today, and what we are beginning to see is a consolidation in this marketplace. To be a player, you have to be able to do everything. Just doing one thing or two things isn't going to cut it anymore. The integration cost is too high. Moving on here. That's the quick overview of TRAX's software, and Jose is gonna go through that in more detail. Looking specifically at TRAX. It supports commercial airlines. It does have some government and defense customers. It's working with the FAA today. It does have some OEM customers that support government programs. And it, of course, works with MROs. AAR is a customer, Sabena technics is a customer, SIAC is a customer, Turkish Technic is a customer. 138 customers, 35 countries. Average tenure of its customer is 10 years. Its products, of course, ensure that an airline is compliant, and they can get their work done, and that an MRO can get their work done, but they also increase the efficiency of maintenance processes, increase the efficiencies of the mechanics, the storeroom clerks, the engineers, and so on. In addition, the software helps maximize the utilization of assets. Could be aircraft, inventory, people. Helps maximize the utilization of people, and ground support equipment, and so on. The software creates the system of record for an airline. For anybody who owns the aircraft, this is key. It's the system of record. It's important that you know where all your parts are, where they came from, what their history is. TRAX's system allows their customers to do that. Based in Miami, 110 employees. Over on the right, talked a lot about this already. Three core products, eMRO, eMobility, and TRAX, which is the initial product. eMRO, 21 modules. eMobility, as I mentioned, 16 apps and growing. In addition to those three core products, TRAX offers services to help their customers implement, to help their customers get the most out of the software. They support the software 24/7. Customer has a question, they can write it in a log, they can email, they can call, get in touch with TRAX in a whole bunch of different ways, and they also customize the application for a customer if they have a special process that they wanna support or a special look and feel that they wanna have. Last service to note here is hosting. TRAX started hosting its software in 2014. This has been a high growth product for the company, and the reason is, as TRAX's customers have moved off and out of their data centers and into the cloud, some of them have used third-party cloud hosting services. It hasn't gone well. In addition to hosting the software, you have to maintain all the interfaces with other software applications that interface with TRAX. It's like SAP. For finance, you might have an HR application that needs to interface with TRAX. What customers have found is when TRAX hosts them, they also take care of those interfaces. If something happens with an interface where it's upgraded, et cetera, TRAX can handle it a little bit better. Over the last three years, in particular, it's been a high growth item for us. Looking at competitive advantages, it's web-based. You can access it anywhere. Your data is stored in the cloud, secure, easily accessible. It's mobile and role-based. Makes your workers more efficient. Supports paperless operations. We've talked about that a couple of different time. TRAX implemented its first paperless operation at an MRO in 2016. 2016. It implemented its first paperless airline, Breeze, 100% paperless. Didn't have any printers in the hangars, didn't have any printers with the engineers. 100%. That was implemented in 2018. It's installed its mobile apps at 26 different customers. Not all of those customers are a 100% paperless, but many of them are. It has offline capabilities. A key part of being paperless is this needs to work when you're not connected to the Internet. It's used on aircraft by pilots. It's used on aircraft by flight attendants. It has to work if their Internet service goes down. Same thing with mechanics. If mechanics are in an airplane, if you're a storeroom clerk and you don't have access, you can still use your app. You do your work. When it gets back online, everything syncs up. That's the product. Jose? Well, thank you, Andy, for your introduction. Again, I'm very, very excited about our partnership. We call it a partnership because we know each other for so long that it's a good feeling to be here between AAR and TRAX. Again, we call it when hardware meets software, this is how we always talked about this, hardware, software. Again, normally, I apologize because my presentation is gonna be a little bit boring. It's a techy presentation. I brought it in. There are two groups of people that normally don't find me boring, the programmers and financial people, because they know the profit margins that software leaves behind. I do get that today I won the jackpot, because normally I go, "Go to sleep," I'll wake you up. Again, I'm gonna make it very painless for you today. Again, like Andy had said, eMRO, the center of our universe, 21 modules. Modern. Since day one, this is what I always wanna be, ahead of my competition, and as you'll hear a little bit, way ahead as we are today. From EDI purchasing, material management, technical records, engineering, planning, QA, production, financial management, we do it all. When an airline or an MRO comes to us, we are everything in that organization, which makes us extremely sticky. That's why we're there for so many years. Development time, as you know, on any of products, takes time, but once you get it out to the field, it becomes. You know, we become the heart of that organization. You will hear names, as we're going in the next slide, and what our future and how we see our partnership with an AAR benefiting, not just them, us, because as being an enormous player in the industry, we needed that to take us to the next level. As we see here, all of those 21 modules in eMRO also interact with something that nobody has in the industry even today. We started 6 years ago with mobility, offline capabilities. We were the first ones to do this in the industry. We thought, hey, our competitors are gonna come back after us. It happened the same thing as our eMobility, eMRO platform. When we said we're going 100% cloud, we thought the major competitors are gonna do that. No, they're still doing what I did 20 years ago, Windows-based systems, and they're trying to patch it up. Again, this gives us the advantage. We are the only standalone software in this industry. You guys, AAR, we're the only standalone company. It made perfect sense, our synergies between both companies and our people work great together. Second, all our apps are optimized for paperless operation. Like John's, Andy said, "Hey, we've been doing this for a long time," and we are embedded in 138 airlines worldwide, 35 countries, as you'll see in the next slide. Third, like I said, our competitors are now promising this type of software in the future. We've been at it already. The next generation of projects, six years. six years ahead on all of those areas. I'm gonna talk a little bit about all of this side of there because we're very proud. Why? Nobody has this suite today in this industry. This is what we are today. This is how it's been TRAX, innovation. Starting on AI now. Starting with this Task Control, the paperless task card tool that a mechanic will use in the hangar. Basically, they can be offline. We have case studies where Sabena does military work, no internet, no place to do anything, but they need to be offline while they're working in that stealth network, in that stealth hangar. Again, mechanic can do all his work. When they get out of that hangar, we'll connect. That's what offline/online technology will do for our customers. Again, that mechanic has all access to materials, tools, documentation, engineering support, everything on there. Aerodox, again, documentation offline, to be able to bring not just one vendor, all the vendors, all the OEMs, component aircraft under one app. This is what we do today. The ability to just press a button and look at, hey, this is what my IPC parts are, hit another button and request that part. All within the manual. Nobody else does that. Visual Check. The ability to do With RFID technology, check our emergency equipments on our aircraft. That used to take hours. Somebody would go check all your life vests, your all the emergency equipment. Now, we can do that with RF technology in minutes. Line Control, ability to manage all aspects of maintenance for line maintenance and all offline capability. The one that Sal talked about, tons of paper, Content Control. Content Control is what we're doing in the background. Since we are the center of everything, when an 8130 comes in, we have it. When an EASA Form 1 comes in, we have it. When a task card gets accomplished, we have it. What does this do? Well, all of that electronic data, at a certain time, you're going to return that aircraft, we have all that electronic data, and we put it out on ATA spec standards. The leasing company will now transfer this information to the next operator very easily. eZStock, warehouse management using RFID technology. Production Control, able to manage all your hangar operations automatically in the system, materials, mechanic, inspectors, any non-routines. Shop Control, the ability to go and do all of those repairs real-time and communicate to your Production Control, "Hey, that component you have out there, is it gonna be on time or not?" You can reschedule your work or not. Customer Portal. Again, our MRO customers wanna be able to see automatically, "Hey, I'm a customer. I wanna be able to look at what's going on with my aircraft. Is it on time? Do I require to authorize any additional work, any additional material?" All of that is captured electronically, so later on, if there's a delay in the process, "Hey, you did not go and authorize this component to be bought." All of those processes are being captured. In the cockpit, hey, we go now to the pilot, and we know all the logbook automatically. We take that electronically, and electronically, we send it to our eMRO system. The same thing with cabin. What does this help? Hey, I'm on the air. I send this out. By the time that aircraft lands, I have a crew there waiting with the right parts, the right skill to be able to fix that problem. The same thing with a cabin. I may have an RF something wrong in the cabin. I will have that person with that particular part already waiting before that aircraft even lands. Again, this is where our entire suites of mobility is ahead of the game. No one has it today, and that's why we're very proud of it. Again, I cut it down, so I would not bore you guys, but again, you see what we can do with it. Now, in a software company, as some people say, I don't go with that. Our profit margins, of course, it, since we're copying, we only develop it once, now we're able to sell it multi times. Our profit margins, every time we sell this, increase. Someone said to me one day: "You're printing money." No, we're not. It is, it is, but the concept is of all of this. Again, all of this information all in one source of data. Keep that in mind. For the customer, you don't have to go to 10 different systems. Everything you see is there. Again. These are my achievements. This is what I wanna get into. Again, 38, 138 customers in 35 countries. This is what we've done by ourselves. Again, I will end up at that graph pretty fast because it is amazing what we can do together with AAR. As we have here, My eyes are going. 5,000 aircraft we manage just for airlines. For MRO/CAMO, it's probably double that. Again, 62,000 users worldwide. 85 of those deal just with purchasing and logistics that deal with that type of business. Again, we have names there that you may recognize, even. By the way, AAR has been our customer since 2009. We have, like I said, very sticky customers. There's some there, they've been there, Qatar, over 26 years with us. Again, very sticky software in the business. What I want you to look at is the diagram on your right. Well, yes, your left. That particular item, the gray area, is where we are combining our efforts with AAR. Over 50%, although we are the leaders in this segment today, as you can see, but 50% of those customers are today, they all have legacy system. The great thing about them is they're Tier 1 organizations. They're the Americans, they're the Deltas, they're the United, they're the BAs, they're the Air France. They're all using technology from the 1980s, and they have gotten to the end of their life. They've been using Sceptre, they've been using Merlin, they've been using SAP. All of those softwares are outdated. Today I just went through a couple of names. 50% of those customers will need software. Again, Tier 1 organizations need Tier 1 backing to be able to do all of this. Again, looking at what we are going to do together and bring both ecosystems, we need that for those type of organizations to be able to look at their services and hit a button like we do today, and be able to purchase, buy services, all in one click. We'll talk a little bit more about that in the next couple of slides. Okay. Thanks, Jose. You can feel the energy. By the way, they just did a webinar on all 16 of their mobility apps about a week. It's, by the way, stop. The emails are coming in within the thousands. That's why I get excited about it, is nobody has it. I saw the future. I didn't know. I thought everybody was following. Now we know, no one was following us, so I got six years advantage on everyone. All right. So, through the transaction, the key here is, right, combining the software of TRAX, with what we're terming the hardware of AAR, and use that to transform in industry. There are precedents where software and hardware have been combined, to create something new- By the way, I was the one. This is where hardware meets software. That was something I came up with when we were talking about it. It's not something new, but in this industry, it's the first time that it's done. It makes sense, and being a leader in this software business, it makes sense to tie yourself up with a leader in the spares and components and service area. What that means for us is what we wanna do is on the TRAX software, on the TRAX desktop, seamlessly integrate parts distribution, seamlessly integrate specific maintenance services. When an airline, somebody in the airline goes to buy a part today, they have to issue RFQs in many cases. They'll go to somebody like an Aeroxchange. They'll go to somebody like a PartsBase, to somebody like an ILS. They'll send out a request for quote. By the way, we do this today using Spec 2000, because we use all of those EDI. It's a hit or miss. They send this out, it may come back in an hour, it may come back in a day or not come back at all. This is not where we wanna be. This is where the next generation of bringing AAR's hardware and our software together, there's no reason to do this archaic or old technology ways of doing business today. Right. What we wanna do is have it all integrated on the TRAX desktop. When a buyer comes in, today they have a screen of things that they need to do. These are the parts that you need to procure. In some of the mock-ups that we've already done, over on the right side is a little button that says, "Push on this if you wanna find out who the suppliers are that have the part." You click on it, and the price could be there, or there could be a button to request a quote. The idea is how those suppliers earn their way on the screen is key. This is where the hardware part comes in. What we want to do is build a trusted supplier network, so any supplier that's on that button has to earn their way there. They actually have to have the part. They actually have to, if they're going to promise a delivery time, which is gonna be required for an AOG product, they actually have to have a track record of delivering the parts on time. Documentation. Keep in mind that this is one of the things that came up here. You need to see the electronic FAA Form 8130-3 or EASA Form 1. If not, that part is worthless to that airline. You got it there, that paperwork ain't there, you might as well just throw it away. It does not meet approval. Keep that in mind. We need to do all of those checklists. We need to see it before I hit, "I'm going to buy that part." If I buy that part, all of those items, I expect it. If I don't get that expectation, it, are met, I'm going to do rate you. Again, everyone in the marketplace, again, starting with those 138 airlines that are using this system, will know what happened. Right. The next piece of this is pricing. In some cases, and Sal knows this well, you can price your part, you can publish it. In some cases, suppliers don't want to do that. They want you to request a quote. The other part of this is just the responsiveness to the quote. The suppliers are going to be related or rated on how quickly they respond to a quote. Key to point out, we'll build the infrastructure for the ecosystem. However, it's TRAX's customers that decide who's in the ecosystem, which suppliers do they want to have in the ecosystem. It comes back to what Jose was saying about the ratings. If they have the parts, when they say they have the parts, they get a high rating. If they deliver when they say they deliver, they're gonna get a high rating. If they're responsive with pricing, they get a high rating. It's the suppliers or TRAX's customers who decide what ratings are high enough to earn their way on. A key part of this also is a little bit of curation. To build a trusted supplier network, we will curate the network. We'll curate it. Certainly it's the customers, TRAX's customers' decision, who is in, who is out, but we wanna make sure the quality of the ratings, the quality of the data is positive. That's kind of the vision for what we want to build, enhances an end-to-end solution. It's powerful. Again, the key is curation. The key is integrating into the software, all the power of a supply chain. We do that through using the knowledge and the expertise of AAR. Other key point here is it's open. It's open, so it's not just for AAR parts and services, it's for other OEM and MRO parts and services. That's kind of what we're doing. That's sort of the vision for building it. Okay. One example of this parts new ecosystem. By the way, this is just one, because AAR does not just sell parts, they do services. One example is of this ecosystem is fewer cross, fewer delays for aircraft, giving the airline and MRO real accurate part information, like he said, price, lead time, all of those things, paperwork. We need all of that for a part to be a good transaction. This is where AAR working as a partner will make this a reality. This is something that now we can do, create that ecosystem, and of course, working with the hardware, the software, everything will be integrated. It will become a reality. Our customers have been asking for this for years, but now this is the possibility to do. We're doing Amazon. Okay. Again, very simple. We're doing a Buy Now button, that all of that information will come through. We call it the easy button or no more AOG. We know when an AOG desk comes in, what do they do? They start calling, they start sending emails. Hey, how great would it be that you're in a software and you can say, "Hey, yes, this." I can see the vendor's rating and say: Hey, this guy has done this so many times, and he has delivered on this. Or not. Why am I going to take my, you know, this AOG risk on somebody that has not performed? Price is not an issue today, it's performance. Again, seeing all that concept and bringing this to life, again, is bringing what we do today in Amazon and Apple Store, bringing it to the aviation industry, bringing real time buying of materials and real information for that end user. With the power of 138 airlines and MROs that use TRAX today, this is something that is very easy to do for us because now we have the marriage of the hardware. Before, we could do it, we could create it, guess what? If we don't have this synergy, it would not happen. Okay. Okay, good. All right, to wrap things up, thanks, Jose. Growth initiatives. First one, somewhat boring, but it's critical to grow TRAX. TRAX, privately held company, has grown very rapidly. We're investing in infrastructure. Key investments are in quality, customer support, and accounting. Boring stuff, been working on that since actually prior to the closure of the transaction. The second key thing that we're working on is actually building the products that we just talked to you about today. We just gave you one example of the trusted supplier network and the Buy Now button. We have some other things that we're going to co-create over the next year. In addition, talked about AI. We actually wanna finish some of those products. Again, it's gonna be a TRAX Pro series of products focused on specific activities in maintenance that can be safely automated using AI and machine learning. We hope to be rolling those out at the end of AAR's fiscal year. The last thing that we want to do is look at expanding into services. As I've been talking with TRAX customers, as, you know, we've talked internally about this, going paperless, going digital is hard. It's hard. There are consulting firms out there that can help some of these customers go paperless, at the end of the day, it's the guys who built the software who can best help them go digital and be paperless. What we're looking to do is expand in the service areas that will help TRAX's customers go paperless and be digital a little bit quicker.... That's it. Appreciate it. Turn this over to Sean. All right. Thanks, guys. Good morning. My name is Sean Gillen. I'm the CFO at AAR. Been with the company for a little over four years, and I'm excited to talk about our financial results in some more detail today. Jumping in, on this slide, you see our financial performance over the most recent six fiscal years from a sales, operating margin, EPS, and net debt to adjusted EBITDA. Two things to call out on this page. Number one, you can see the impact that COVID had on our financial results in the middle of this period, specifically in FY 2020 and FY 2021, a decline in the top line and a corresponding decline in profitability. Number two, and more importantly, what you see on this page is how we've performed since coming out of COVID. I'll call out is that you see the sales recovery, which has been relatively modest in an overall basis. It's a 5% CAGR from COVID FY 2021 to our most recent fiscal year. On that 5% CAGR in top line, we have more than doubled our operating profit and more than doubled our EPS. How have we done that? It's by driving improvement in margin that you see on this page, finishing last year at 7.5% operating margin. More on that in another page. Last on this page, net debt to adjusted EBITDA. Tend to manage the company from a conservative standpoint on leverage, and I think we're very proud of how we were able to perform in COVID. Even though the significant decline in profitability you see on the page, we were able to reduce our net debt to adjusted EBITDA over that period, putting the company in a really strong position as we pursue all the growth opportunities that we've talked about here today. At 1.1x the fiscal year we just closed out, and that's after the TRAX acquisition, which closed in Q4. Let's go into a little bit more detail on this. What you see on this page is our quarterly operating margin and adjusted EPS over the past four years. To me, the headline says it all: actions taken have yielded consistent financial improvement. What actions did we take? You can see that on the right side of the page. We consolidated our footprint. We did close two facilities during this time period. We exited underperforming product lines and contracts, took COVID as an opportunity to accelerate actions that were, you know, already in the works or would have taken longer to complete. We did sell a loss-making, unprofitable business during this time period as well, again, exiting businesses that aren't core and are underperforming. We had a series of overhead reductions over this time period. Importantly, you know, we used this market dislocation and our relative strength to take share. We did this in USM, we did this in distribution, and we did this in MRO. We've also added differentiated capability, both organically as well as through the acquisition of TRAX. All that together comes together on the, on the left side of the page, and you can see this consistent improvement in operating margin, which flows down to an improvement in EPS. Take a step back, and to me, again, this is the proof point of all of that work and all of those actions. What you see on this page are our FY 2019 financial results compared to our FY 2023 financial results. On sales that are still 3% below pre-COVID, our operating profit is up 30%, and our EPS is up 17%, again, driven by the expansion in operating margin. You see the 190 basis point expansion in operating margin, even though sales are still below pre-COVID levels. Where do we think this can go? You heard John talk about, at the beginning of the presentation, our, you know, long-term, three-to-five-year financial goals. From a sales perspective, we're seeking to drive 5%-10% per year sales growth. We're looking to get our operating margin from the 7.5% up to 9% or 10%+. All of that, both of those together will drive EPS of 10%-15% growth per year. How will we achieve that? How we allocate capital will help us achieve those financial targets. This is our framework for how we think about allocating capital. Number one, maintaining that flexible balance sheet, which will enable us to drive organic investment, pursue acquisitions, and return capital to shareholders. Pausing a moment on each. Flexible balance sheet, you know, maintain that conservative leverage that we have, kind of target net leverage ratio of 1-2x EBITDA. You know, a max leverage ratio of 3.5x on the back of an acquisition. If that were to happen, we would seek to get back to that target net leverage of 1- 2x. Investing in the business. You've heard a lot of opportunity today from each of the businesses on investing in the business to drive growth, we're gonna support new business win and Parts Supply, specifically via inventory, as we source used serviceable material, and as we win new distribution lines, the investment in those comes in inventory. In the MRO, we're looking to expand the airframe. Very excited about the Miami expansion we announced today, we see additional opportunity to expand the footprint in airframe. Additionally, new component repair capabilities in the other parts of MRO. Lastly, developing PMA products. We're in the early innings. We have put resources behind that. There's a team in place, there's a pipeline they're working against. We're excited about them, you know, taking that portfolio and starting to deliver results. Looking through opportunistic acquisitions. In the next page, I'll go into a little bit more on those strategic filters and financial criteria, but anything we do will be in the core of what AAR is: parts, repair, and integrated solutions, and always looking to increase the intellectual property in the portfolio, like we did with TRAX. Finally, on return of capital to shareholders, we did initiate a $150 million share repurchase back in December of 2021. We've been active on that share repurchase program. We've deployed $92 million of the $150 million, leaving $58 million remaining, and we'll continue to evaluate the usage of that and potential expansion of the share repurchase based on alternative opportunities. I will say, based on where leverage is and the cash flow profile of the company, we do have the flexibility to allocate capital across all three of these areas. Pausing on M&A, what are the strategic focus areas, and what are the financial criteria we put against that? You shouldn't be surprised to hear that the strategic focus areas are in the core. It's parts, it's MRO, and it's integrated solutions. Specifically, what does that mean? In parts, we're looking to add, you know, value-added or IP-enabled platforms, and in distribution, if we can expand our relationship with customers, our product lines, and our OEM relationships via acquisition, we would look to do that. In MRO, it's doing one of two things, or both. It's adding differentiation to our offering, higher margin offering, and it's potentially increasing the scale of our offering across airframe and component repair. In integrated solutions, it'd be looking to add to our government past performance, and what that means is not only if you were to acquire a business, does it come with the contracts that it brings, but you also get that past performance, which allows you to have a higher win rate on things that we're bidding, and as we've talked about, we have an active pipeline, so any M&A would just be additive to that. Lastly, similar to TRAX, if we can acquire new digital or data tools that are specific to the aviation aftermarket, that's an area of interest to us. The criteria we put against those strategic areas. One, can we accelerate our strategic priorities versus organic tactics? Said differently, can we move quicker via acquisition than we can organically? Anything we buy will be growth and/or margin accretive to the core business, improving the overall portfolio, and the after-tax rate of return will exceed the cost of capital. As I mentioned, from a balance sheet perspective, you know, flexibility to go up to 3.5x net debt to EBITDA would seek to de-lever after that. You know, we have a fair amount of financial flexibility. If something fit the bill, we have the flexibility to pursue it. Bringing that together, finally, key messages. You've heard a lot of this here today, but number one, we got a focused portfolio. It's focused on the aviation aftermarket, which Chris just had talked about, is a very good place to be. We expect that market to continue to grow, and we expect to continue to take market share in that market. Our operating margin is significantly improved, as I've talked about, and as I just mentioned, the strong balance sheet enables capital allocation across high return organic investments, acquisitions, and allocating capital to share repurchase. You bring all that together, what does it mean? Continued growth, margin expansion, and capital allocation, we expect will drive improving and continuing to improve shareholder value. With that, I'll turn it over to our Chairman and CEO, John Holmes. Okay, wrap it up here with some Q&A. Key takeaways, I'm not gonna belabor these. I think you've got the points. I just, again, wanna highlight and say how proud I am of the team to have delivered the margin expansion and the profitability expansion that you've seen over the last couple of years, which is particularly remarkable in an inflationary environment. To continue to drive margin expansion when you've got costs going up, is really a testament to the execution ability of the team. As you've heard, large and growing markets, we've got multiple levers to continue to take share. we wanna continue that margin expansion, and you've heard a number of ways that we intend to do that. the overall market that we're in has a history of being resilient. you're seeing that now. Never before has there been a better example of going through a very difficult time in aviation like we went through in COVID, and now you're hearing from every airline, including those that announced yesterday, just the demand is stronger than ever. Finally, as you heard from Sean, we've got a very strong balance sheet. We manage this company conservatively, and we're one of few aviation companies that emerged from COVID with actually less net debt and better flexibility than we did before. We're proud of all of that, and like I said, we intend to keep going. With that, we will roll to questions. All right, Rob, you told me you had a pile of questions. Let's go. Thanks. Thanks, Rob. 104 slides, we didn't answer them all? Okay. Whatever it is. Sean, a quick question for you, when we think about this margin target, this 9%-10%, how does that look for each of the businesses? Yeah, I will also mention that we, you know, just yesterday, we put an 8-K out showing our new segmentation, we are now reporting this financial detail by segment. I think what it means from a margin expansion is we're gonna have a couple things. We're gonna have a mix shift towards parts. That really is the fastest growing part of the business, and it's the highest margin part of the business. As that grows, we'll see a natural benefit to parts, which will help drive that margin expansion. Within MRO, as you talked about here today, the digital initiatives around paperless, increasing the efficiency of the hangars, that will help us drive margin improvement. PMA, which is still in the early stages, as that ramps up, which will take a little bit of time, you know, we would expect that, of course, comes with a much higher margin profile. The other piece, obviously, is TRAX. You heard it here today, you know, a growing business and the highest margin activity within the company. I don't mean to try to get specific, and you did say, you know, revenues will grow at different rates, but simplistically, should we be adding 200 basis points to each segment to get to the target, something like that? You know, 7.5, yeah. I was gonna say, I, again, would slightly weight towards parts in that regard. Yeah. Again, as the TRAX and digital offerings expand, TRAX, we announced it when we acquired the business, 35% operating margin business, so as we build it out, and obviously between Andy and Jose, you can tell there's a lot of enthusiasm there about the opportunities that exist. That sits in Integrated Solutions, so that would have a disproportionate impact to just Integrated Solutions over time. Okay. John, I don't know if this is for you or for someone else, when do the LEAP and GTF parts start to come into the system, and what happens there? Is that accretive? Is it dilutive? What's the timeframe? That's a great question for Sal Marino. Oop! yeah, that's a great question, actually. I mean, obviously, those engines have teething problems still today. Some of those parts that are still being replaced with new material. You know, you look out in the future, and when you start to see the curve start to decrease on what the current NEO and the CEO today on the A320s is somewhere around 2028, and you start to see more of the inputs on the LEAP and the GTF, so to say. You know, as things continue with those assets, we still look at them as, you know, more of an airframe maybe play right now, just because of all the teething issues with the engines. Later in the '20s is when it maybe start to see opening up with where we'd be playing that market. Just I'll stop after this one, and... Frank, for you in chart 44, I don't think you bring it up, but this is the 300% growth... Yeah. chart. When I think about the distribution business, and you did talk about, Sean just talked about maybe M&A gets you bigger, but what is the constraint on that growth? Is it the customer? Is it the capital deployment on your end? How do we think? 'Cause I would've thought that might hockey stick a little bit more. Well, that was historical. Obviously, that was historical. Understand. I think you've seen growth accelerating in that business in recent years. Frank, tell me if I'm wrong here, I mean, the constraint to growth is really the customer. The OEMs, you've got net new business that could come on the market, so OEMs that do everything themselves, that realize the value of consolidating with a distributor, and then it's agreements that are coming up for renewal out of our larger competitors for us to take share. I mean, that, it's really the timing of that is a constraint. We're out there. You know, the more we win, the more we can win. We're building a better and better franchise in this business, and so, you know, obviously, we're getting deeper with certain OEMs, as you saw on the chart. Really, we're moving at the pace of these larger companies and the decisions that they make. We are not the pacing item. Yeah. Hey, John or Sean, Kenneth Herbert with RBC. Appreciate all the detail today. Can you talk about, with all the investments, is there a point in time at which free cash flow really starts to inflect, and some of these investments sort of mature, so to speak? Are you comfortable with giving some sort of framework here in this setting around what we should think about as a, as a, as a conversion rate of either adjusted operating profit or EPS, in terms of free cash? Sure. Maybe I'll take the first part, Sean, you can talk about the framework. I mean, hopefully, you've seen in the last few years, more predictable and more consistent cash flow out of the company. That's a result of building more predictability into the USM business, as well as those contracts on the distribution contracts starting to mature. Having said so, we are, that business, USM and distribution, that's certainly the organically, the area where we intend to deploy the most capital in the coming years. We're very much in growth mode. While we, you know, we plan to be cash flow positive every year, to the extent that Sal has an incredible opportunity, like those nine 757s we bought out of American, or, we have an amazing deal like, we have a couple of times now with Unison, that require upfront capital investment to secure ourselves a 10-year contract, we're not gonna be afraid to make that investment. Fortunately, we've got a balance sheet to do it. I would just add to that, you know, one of the other, you know, checks we use is just ROIC on new deals, new money spent, looking for 15%-20%+ ROIC to make sure we're getting a good return on the capital deployed. Then just one other piece, kind of, specifically on cash flow. You know, CapEx was a bit higher this past year than usual for us 'cause we are already putting money to work on some of these digital initiatives, paperless and the like. You know, those are projects that are in flight and will end, and I think you see CapEx come down, which will help improve the cash flow conversion. Okay, that's helpful. You've talked a lot about sort of organic investment opportunities within the parts business, both within USM and distribution. Can you talk about what the guidance implies in terms of how much those investments are really gonna grow over the next two to three years or three to four years? Maybe level setting us with sort of the investments you made in fiscal 2023, but should we see 15%, 20% growth, greater growth? How does those investments grow over the next three to four years? Maybe I'll focus on parts supply specifically, 'cause that's where the investments will go. You know, it would typically take. Let's say the average exclusive distribution deal, they vary between five to seven years. Obviously, we wanna get, or five to 10 years, we wanna get them on the 10-year side. It typically takes us about two years to completely convert over. The cash will go out at once. The cash goes out, there's usually a cash component for the rights to the exclusive rights to the agreement, and then there's the initial inventory buy. It takes us a little while to convert the channel, as well as often there's inventory that's out there from prior distributors or from the OEM that needs to drain itself out, so that we can fully take over. Cash goes out, and then it's usually two and a half years before we achieve full run rate on those distribution agreements. They come in chunks, right? I mean, you can do a deal that's worth $5 million a year, or you can do a deal that's worth $25 million a year. They come in chunks, two and a half years is typically the ramp-up. I don't know if there's more you want to add to that. Okay, just one final question: As we look at Integrated Solutions, is commercial a growth opportunity there? I know you've cleaned that portfolio up quite a bit. Yeah. Should we expect incremental investments there, or is that just sort of steady state and a lot of the growth within that business on the government side? Selectively. Selectively. We've learned a lot in that business. We've, you've seen over the last 18 months, we've renewed and expanded a number of the contracts we were already on. Those renewals were at significant price increases versus where we were before. We've learned a lot about the business. The customers that we're serving right now, they like the service, which is why they're expanding at a higher price. Selectively, where we have infrastructure in current markets, and we really know the platform, we will expand, and if that expansion comes with inventory investment, we would do that, too. Yes, sir. Hey, Drew with Truist Securities. Thank you. Hey. First, I had a question for you on Parts Supply. Do you have an operating margin or IRR target that you could share specifically related to the USM business? How does it compare to the segment average? Yeah, you want to. I mean, I would just say the USM business is ROIC accretive for the company, and on new money, we look for 20%+ ROIC. You know, Sal talked about how they source and then how we financially evaluate deals. A really good track record in that business. Anything we do in the USM part of our business is accretive to margins and ROIC. Okay. If I could ask just on your plans to enter the PMA market, if you could just talk a little bit about the competitive landscape there and what you see as your competitive advantages as you try to take share in that market. I think, first of all, it's a very large market. We see that there's a lot of opportunities. Obviously, you've got HEICO and Wencor that are coming together. They're by far, you know, now together, the largest player. There's lots and lots of. As that market continues to mature, and similar to USM, you're seeing broader user adoption of PMA, we think there's absolutely space for us to play there. There's HEICO/Wencor, and then there's a really big gap before you get to the next largest player. There's a lot of opportunity there. You know, as you heard from Tom, we've got to be really respectful of the OEM relationships that we have in distribution, so we've got to pick and choose our spots. Again, there's lots and lots of parts and lots and lots of OEMs where we wouldn't run afoul of an existing agreement by going after PMA. We are in a heavy maintenance business in a way that the largest competitor is not, and therefore, we are seeing things in the market that they may not see. They're not working on 1,000 aircraft a year in their hangars, and therefore, they don't have the access to data that we do as a result of that repair activity. That's just a different segment that we can attack in PMA that may not be a focus of theirs. Great. Thanks for all the detail today. Great. Thanks. Yes, sir. Thanks for taking my question. I guess, on the Miami expansion, that's obviously been announced, you mentioned in the presentation that there was other opportunities that you're working on. Yeah. Could you contextualize, though, the market opportunity for MRO expansion in terms of how much additional? Opportunity there is? Yeah, how much? Yeah. How much by airlines. I mean, you know, think about, you obviously got roughly the size of our heavy maintenance business now that we've resegmented. We've got six facilities. Some are bigger than others, but you can, you know, do the math and say, "Okay, that size divided by six facilities." We're expanding one by a third. I think that in order for it to make sense for the amount of effort, kind of that one-third expansion by site is how we would is the lens by which we would view things to make sure that the juice is worth the squeeze, so to speak. You know, as we look at, as we look at our North American market, and that's the focus, you know, there's a, you know, there's an opportunity to, you know, to take our capacity up by, you know, I would say, roughly that amount. We're only gonna do that in areas where we know we've got assured supply of labor, we've got a supported, supportive government, and it's really important to note that with the Miami deal, I just want to make sure everybody's clear, it's a $50 million investment, but Miami-Dade is gonna reimburse us for that. We've got the government that's underwriting that investment for us. We will expand only when those things are true, where we've got a supportive government, long-term customer commitment, and access to labor. It's not true in every site that we operate in, but where it is true, we're gonna look to expand. Thank you. Yes, sir. Byron Callan, Capital Alpha Partners. A couple of defense questions. First, generally, in your sales growth projections, I assume commercial is gonna be growing faster than the defense in that, within the guidance that you provided? In the near term, I would say that's true. We see a lot of, a lot of runway on the, on the commercial side, given what's going on in that market. Having said that, in the defense, in the defense market, our largest opportunities there are with the larger programs that you heard Nick talk about, and those come in chunks. Those are typically bigger. You know, they're $10 million-$50 million or more. Loss is over $100 million in revenue for us. They take a long time to secure, but when they do, most of the time, they ramp up pretty quickly, and then you're on those contracts for a long time. Many of them require little to no capital investment, so they're ROIC accretive. Is there any way to quantify what the pipeline of those opportunities might look like? I'm really thinking about the PBL programs that Nick might be pursuing. If you look at total contract value, of each individual pursuit that we're looking on and add them all up, it's in the billions. Okay. On the parts business, particularly for the F-16s, you know, there's been a lot of movement around the Ukraine war. Yeah. with what's happening with the European fleets of F-16s. I know you talk about passenger miles flown, but just given the activity that you're seeing in military aircraft fleets, is there any way to quantify how that might be changing? Frank, your visibility on what, not just your U.S. Air Force or Navy customer, about using, but what your international customers might be looking at it. You know, in that pipeline number I just gave you, I'm kind of thinking about all of those things. But to your point on our visibility, we are now included on solicitations that we were not included on five years ago. We are being thought of in the same breath as some of the larger primes that have been there for years. We're still, quite frankly, you know, getting educated on certain of those markets. These proposals that we make to the government are very complicated proposals, and the pricing is very complex. Getting smarter and smarter about how to write those things and compete effectively on the front end with the when responding to the RFP, that's still a learning curve that we're going through. The other thing that's helping us, and you heard Nick say this, is past performance. The more programs we're on, the more programs we can bid, because most of these things, you're not allowed to bid unless you have qualifying past performance. We're achieving that organically by continuing to grow that business. We also, the more we win, the more other companies want to partner with us to help weave together a past performance story. That's why that pipeline is about the largest it's ever been. There again, these things take a long time to win, and the pursuit is complex, and we're still, you know, in some cases, learning how to participate in that market. My last question: Any opportunities on the F-35 program, given the sales that they've seen? Is that within your horizon, or is that just beyond the realm of reach in this decade? You're gonna get Nick going. Is it on? Okay. Yeah, I mean, obviously OEMs have done a very fantastic job of, I think, locking up that total supply chain. I think our role in that could be more on the logistics side, helping make sure, you know, helping move things around warehouse, those sort of things. We are starting to do maybe some parts repair and work with some of the OEMs to try to do on the component side and try to push into that a little bit more. I don't wanna say we don't support new generation, 'cause we do, you know, obviously, I think it's gonna take a little bit to substantiate, like some of the other programs have for us. Thank you. All right, any other questions? All right, Rob, back to your pile. Thanks. I got a couple for Nick, although one of those might be for Sean, and then a couple for Sal. Sort of following up on what Byron. Fire break. Asked about, with Ukraine and, you know, your e-expansion in the military side, are there opportunities there, I guess, maybe on U.S. assets, but for allies? It's funny that, you know, obviously we stood up a depot in a very, you know, unique place, considering everything happened. Full disclosure, that was well before Ukraine happened, right? This whole Polish award, the award and the stand-up was kind of before that all happened. I will say, and Chris had it on his chart, if you look at defense spending overall, especially with some of our NATO partners, they're at an all-time high. Germany's spending, their forecasts for spending is high. Where we really see a value is on the we currently support. P-8's a great example, right? Obviously, we have a lot of our NATO partners that are fielding P-8s. We have almost become, outside of the OEM, the expert on P-8s because of what we do on the depot side and parts side. F-16s are great. You have a lot of maybe not, you know, more Eastern European providers that are flying those. Because of what we've done in F-16, we've not only won the F-16 depot contract, but we've also been awarded other global maintenance differences training, where we're doing support for other, you know, allied partners as well. I think where there's a U.S. fleet component of it, we have a tremendous opportunity to support those allied partners. Obviously, Middle East is still a big opportunity because they're very big, heavy users of American assets or American-type technology. We're actually pretty bullish on the international market, purely because the spending that we're seeing is something we've never frankly seen before. If it's an airframe we currently support, great opportunity. If it's a new airframe, then I think it's anything like else. How do we break into those markets if we see a longer term opportunity? This one is either for you or for Sean, 'cause on margins in your business. How much runway is there from continued roll-off of the underperforming contracts, or is that pretty much handled? there's still runway from kind of the commercial PBH standpoint. I mean, the heavy lifting's been done in terms of kind of exiting and restructuring, but I think you'll see continued improvement because now they've really got those operations working better, and so net new business will be accretive to those margins, and there's some incremental opportunity on the existing portfolio. It won't be to the magnitude we've seen over the past two years, but, you know, that's one of the areas when we think about kind of improving the margin of the company, that there's still opportunity. Okay. Just switching to Sal. I think Sal, I think you were the one who were talking about the supply chain maybe getting a little bit worse again. Was that turbine blades or anything other? Could you add some color? Yeah, sure. I think as the shops have... You know, six months ago, there was still probably quite a bit of capacity, especially around the CFM arena. When China came back on board, it was kind of one of these inevitable things because everyone's using the same repair shops a lot on the engine side, turbine blades, like you mentioned, you know, life-limited parts, you know, the key parts that everyone wants to get repaired. Once that flood came back in, when things were getting better a few months back, it's, you know, kind of backtracked a bit again. You know, I think the, the current kind of thought behind that is hopefully by the end of the calendar year, that some of that will start to improve again, but in the meantime, you know, there was actually certain repair shops that stopped having inductions of any material that would come out. Asking you not to send parts in for two, three months just so they can catch up. Again, a lot of that was driven by what happened in China and coming back on board earlier in the year, and the shops being that flooded. Okay. Then my last one for you. It's a high-level question. When we think about the profitability in USM, is the spread between what you pay, how you buy and sell, better in an inflationary environment or a non-inflationary environment? I- Is it just static? It's static. I mean, you should think about our business. Somebody was asking this earlier, you know: Hey, is inventory you bought back in 2019, now that prices have gone so much on new part, are you making a disproportionate spread on the parts today? The answer is no. We are market in, market out. We get into assets, we turn them, we get out of those assets. Sal's mantra to his team is: Don't fall in love with your inventory. We're market in, market out. The short answer to your question is that the spreads on assets are pretty consistent. Any other questions? Okay. Well, once again, really appreciate the time and interest today, and we look forward to being back with you in the future. Thank you.