Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliations. Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and over any extended period have typically provided relative stability in the downturns. Lastly, our capital structure and allocation are a key part of our value creation methodology. To do this, we stay focused on both the details of value creation as well as careful allocation of our capital.
As you saw from our earnings release, we delivered a good quarter. Our Q2 results ran ahead of our expectations, and we once again raised our guidance for the year. During the quarter, we saw solid growth in revenue, both sequentially and compared to the prior year in all three of our market channels: commercial OEM, commercial aftermarket, and defense. Through February, commercial aerospace market trends have been favorable, with takeoffs and landings increasing in the 4% ballpark year-over-year and RPM growth trending in the 4%-7% range.
Excluding the Middle East, March RPM growth was 8%, highlighting strong demand in other regions of the world. Note that we are increasing our commercial aftermarket guidance today despite this market uncertainty. As mentioned, and as you saw in our results, commercial aftermarket growth rebounded in Q2 from prior recent quarter growth rates. Our EBITDA as defined margin was 52.6% for the quarter, which includes slightly less than 2 full percentage points of dilution from recent acquisitions.
| Metric | Period | Current guidance |
|---|---|---|
| Sales (full year FY2026) | FY2026 | raised $420 million at the midpoint (raised) |
| EBITDA as defined (full year FY2026) | FY2026 | raised $210 million at the midpoint (raised) |
| Commercial OEM revenue growth | FY2026 | low double-digit to mid-teens percentage growth (increased) |
| Commercial aftermarket revenue growth | FY2026 | high single-digit to low double-digit range (raised) |
| Defense revenue growth | FY2026 | high single-digit growth (updated) |
| Free cash flow | FY2026 | closer to $2.5 billion (increased) |
| Metric | YoY | Note |
|---|---|---|
| Total commercial OEM revenue | +~12% | continued support of higher Boeing and Airbus build rates; commercial transport OEM up 19% |
| Total commercial aftermarket revenue | +~14% | all sub-markets positive, led by engine and passenger; strong direct pull-through (75% of CAM) and absence of prior destocking headwind |
| Defense market revenue | +~11% | new business wins and elevated domestic and international demand, with aftermarket running slightly ahead of OEM |
| Organic growth rate | +~11% | all market channels contributed |
| EBITDA as defined margin | 52.6% | commercial aftermarket growth and operating strategy expanded margins across segments, partly offset by nearly 2 points of acquisition dilution |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Middle East conflict / fuel prices impact on aftermarket | — | no meaningful impact to date but cautious; effect expected to lag and likely sharp then correcting | New/watchful |
| Commercial aftermarket destocking | headwind from distribution destocking in prior quarters | most channel-inventory noise is behind; expected to shift from headwind to tailwind | Improving |
| Aftermarket growth gap vs peers | lagged peer group by ~5-6 points (half engine, half distribution noise) | engine businesses growing nicely toward high end; distribution noise largely resolved | Narrowing |
| M&A pipeline and firepower | — | active small-to-midsize pipeline, balanced commercial/defense mix, >$10 billion firepower pro forma | Active |
| Margin expansion framework | — | expects ~1 to 1.5 points same-store YoY margin improvement, noisy near-term from acquisition dilution | Steady |