John Holmes: Hey, Steve.
Steve Strackhouse: Hey, John. So I just wanted to double click on margins one more time. I realize we kind of asked about it a couple of times, but kind of ex-Triumph, it looks like margins were doing really well kind of in the quarter. And just even thinking back to your investor day, it would take nine months to go. It sounds like you guys are on kind of a better run rate than you might’ve anticipated. Is there may be just a couple of things within the Parts Supply or Repair & Engineering that’s kind of driving those margins higher?
John Holmes: Yeah. I would say that, overall the team is executing ahead of the plan that we originally envisioned. You’re seeing nice growth out of Parts Supply, which by definition is higher and really, really strong execution in the Repair & Engineering group. And I’d like to add that, once those, again, we’re a little ways away, but once those facility expansions come online in the Repair & Engineering group, the expansion in Oklahoma City and Miami, we’re going to take advantage of the fixed cost basis that’s already existing, leverage that fixed cost base and so those expansions should drive further margin improvement in R&D as well.
Steve Strackhouse: Great. And then just one more maybe on the Triumph update. I realized that you guys have maybe not even had it for a full month in-house, but is there any change in how you’re thinking about the growth in terms of high single digits there or is there any change in kind of the margin profile that you’re now thinking about internally?
John Holmes: No. I would say it’s consistent with what we described when we announced the acquisition. The only other color I would give there is that, as we’ve gotten to know the team, as we’ve gotten to know the business even more since closing, we’re really, really excited about where we can take this business. There’s a lot of opportunity and a lot of areas where we can cross out what AAR offers with what Triumph offers. So they’ve got a great set of capability and a great team, and we’re excited that we’re now together.
Steve Strackhouse: All right. I’ll leave it there. Thanks, guys.
John Holmes: Thank you.
Operator: And one moment for our next question. And that will come from the line of Louie DiPalma with William Blair. Your line is open.
Louie DiPalma: John, Sean and Dylan, good afternoon.
John Holmes: Hey, Louie.
Louie DiPalma: John, you mentioned this a little bit in the answer to your last question, but how should we think about revenue synergies for the Triumph deal? When the deal was originally announced, there was a focus on the cost aspect, but what are the opportunities with the Triumph deal to make the sum of the parts a lot better than each of the individual components?
John Holmes: Sure. I would just talk about synergies in general. The $10 million that we’ve described, those are hard cost synergies that come from footprint rationalization and we feel very, very good about that number at a minimum. Over and above that, you’d have a couple of buckets. The first, before I get to revenue, the first is the opportunity to insource repair. AAR, we spend a lot of money with other repair vendors today to support our commercial Power-by-the-Hour programs. We send out a lot of work that we’re in charge of managing and we also spend a lot of money, millions in repair of — to repair assets that we acquire through our trading business and most of that repair goes to repair parties that are not Triumph.
So there’s a synergy opportunity to insource those repairs, both for commercial programs, as well as trading that would be over and above the $10 million. And then to your point on revenues in general, I really believe that we’ve got the best aftermarket commercial sales team in the world. And many times in Singapore, in February, in Europe earlier this month, as well as having a number of meetings here in North America, our sales team is extremely excited to sell the higher margin, higher engineered capability that we get with Triumph to our existing customer base. And so, while we haven’t quantified it yet, the early returns from our internal sales team, as well as the initial conversations that we’ve had with some of AAR’s largest customers would suggest that there’ll be a lot of opportunity to put Triumph volume through our sales channels.
Louie DiPalma: Great. And yesterday, I believe, was the one-year anniversary of…
John Holmes: It was.
Louie DiPalma: … when you acquired Trax.
John Holmes: It was. Yes. We had a — yes. We had a little celebration in the morning.
Louie DiPalma: Yeah. I was wondering, has the deal met your expectations? If you had to grade the deal on a report card, would it be an A plus? And how were — and how are the Trax bookings and what does the pipeline look like?
John Holmes: I would say overall, definitely meeting or exceeding expectations as we think about the deal. The only mistake we made yesterday was not celebrating in Miami versus Chicago where it’s 28 degrees, but the Trax deal has gone very, very well. And I highlight a couple of things. First, the deal that we announced in Singapore with SIA, that’s a big airline with a big, complicated fleet and ultimately will be a very large customer for Trax. That deal would not have happened in the speed at which it happened if it weren’t for the AAR relationships that we had with SIA. So the thesis of putting a smaller enterprise Trax with a great product together with a bigger company, AAR, with great relationships, certainly played out there.
