AAR Corp. (NYSE:AIR) Q2 2023 Earnings Conference Call December 20, 2022 4:45 PM ET

Company Participants

John Holmes - President & Chief Executive Officer

Sean Gillen - Chief Financial Officer

Conference Call Participants

Ken Herbert - RBC Capital Markets

Mike Ciarmoli - Truist

Josh Sullivan - Benchmark

Operator

Good afternoon everyone and welcome to AAR's Fiscal 2023 Second Quarter Earnings Call. We're joined today by John Holmes, President and Chief Executive Officer; and Sean Gillen, Chief Financial Officer.

Before we begin, I would like to remind you that the comments made during the call 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 company's earnings release and the Risk Factors sections of the company's Form 10-K for the fiscal year ended May 31, 2022 and Form 10-Q for the fiscal quarter ended August 31, 2022. 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 on the call today. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in the company's earnings release.

At this time, I would like to turn the call over to AAR's President and CEO, John Holmes.

John Holmes

Great. Thank you and good afternoon, everybody. I appreciate you joining us today to discuss our second quarter fiscal year 2023 results.

Sales for the quarter were up 8% from $437 million in the prior year quarter to $470 million and adjusted diluted earnings per share from continuing operations were up 30% from $0.53 per share to $0.69 per share. Our sales to commercial customers increased 21% and our sales to government and defense customers decreased 12%. Sequentially, sales to commercial customers increased 6% [ph] and sales to government customers increased 3%.

I'm pleased that we continue to see progress in the recovery of our commercial volumes, notwithstanding the fact that global flights are still down approximately 20% from 2019 levels. In particular, in our cards activities, we saw sequential improvement in the demand for both USM and new parts distribution. While this is encouraging, we have been more encouraged by the opportunity for further improvement as the volume in these activities is still down over 20% from our FY '20 levels. On top of this, we expect the full ramp-up of our new distribution agreements and the increased adoption of USM to provide growth opportunities beyond the market recovery.