AAR Corp. (NYSE:AIR) Q4 2019 Earnings Conference Call - Final Transcript

Jul 10, 2019 • 04:45 pm ET

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AAR Corp. (NYSE:AIR) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Executive
John M. Holmes

some IT resources. We're making a number of investments around the digital space and we saw some nice returns from those investments in FY '19, so we want to continue to fund that growth, and then additional quality and compliance resources as well.

Analyst
Robert Spingarn

Okay. And then just to finish up, Sean on the cash flow for this coming year, how should we think about either operating cash or free cash, especially off of what looks like a bit of an inventory build in this past year?

Executive
Sean Gillen

Yes. We do expect for this upcoming year to have a nice cash flow year to be cash flow positive. But we're not giving any specific guidance as it relates to either free cash flow or operating cash flow for this upcoming year.

Analyst
Robert Spingarn

What are the moving pieces that prevent you from doing that?

Executive
Sean Gillen

I'd say just the part of our business, if we're going to -- if we see opportunity which we think we will continue to do so to invest either support parts supply in inventory or new business wins in distribution or other programs, we're going to do that. And so we don't want to limit our ability to grow the business by boxing ourself in on cash flow.

Analyst
Robert Spingarn

So you can't even provide a range -- a conversion range?

Executive
Sean Gillen

We're not providing any guidance on cash flow.

Analyst
Robert Spingarn

Okay, all right. Thank you, guys.

Executive
John M. Holmes

Let's say, we expect to be cash flow positive.

Executive
Sean Gillen

Yes.

Executive
John M. Holmes

Yes.

Analyst
Robert Spingarn

All right.

Operator
Operator

Thank you. Our next question comes from the line of Larry Solow of CJS Securities. Your line is open.

Analyst
Larry Solow

Great. Thanks. Good afternoon, guys. Could you -- I don't know if you can maybe give us a little more granularity, just on the Aviation Services 18% growth, maybe just help parse this out; is the WASS contract sort of similar sequentially that's been running out like $50 million plus or minus top-line, I mean, is that fair to say?

Executive
John M. Holmes

Yes. That's a fair range, yes.

Analyst
Larry Solow

Right. So excluding that, you had essentially low-double digit, it looks like growth. And MRO itself in the quarter, was that actually -- it sounds like it recovered sequentially; was it still down year-over-year?

Executive
Sean Gillen

It was down year-over-year, but we did see sequential improvement.

Analyst
Larry Solow

Got it. And for next year, you're looking to continued sequential improvement and a little bit of I guess of growth for the full year basis in MRO you said, right?

Executive
John M. Holmes

That's correct.

Analyst
Larry Solow

And then on the Expeditionary side, obviously, a nice bump up sequentially and year-over-year. And then on a margin basis a little bit of an improvement I guess sequentially. How come -- I guess the pressure year-over-year, is that also labor related? And it's considering Expeditionary is predominantly mobility which I know historically has been a very high margin business, but I realize some high fixed costs in there. So I would think that with a pretty good bump up in revenue; your gross margin would improve there. Any thoughts on that?