8-K: Air T Reports Q1 FY27 Results: Crestone Acquisition Drives Revenue, But Losses Mount

Air T, Inc. announced first quarter fiscal 2027 results, showing a substantial 63% revenue increase to $115.5 million, but also a significant operating loss of $12.8 million and a 45% drop in Adjusted EBITDA.

Summary

• Air T, Inc. reported its first quarter fiscal 2027 results for the period ending June 30, 2026.
• Total revenues for the quarter reached $115.5 million, a 63% increase ($44.6 million) compared to the prior year's quarter.
• The company incurred an operating loss of $12.8 million, a significant decrease from the $0.8 million operating income in the same quarter last year.
• Adjusted EBITDA was $0.8 million, down 45% from $1.5 million in the prior-year quarter.
• The operating loss was primarily attributed to transaction and integration costs related to Crestone Air Partners' acquisition of Arena Aviation Partners, and non-cash depreciation from the fair-value step-up of the Rex aircraft fleet.
• On a trailing twelve-month basis, revenues were $371.7 million, up 25% ($75.4 million) year-over-year.
• The trailing twelve-month operating loss was $24.9 million, compared to an operating income of $3.3 million in the prior year.
• Trailing twelve-month Adjusted EBITDA increased 19% to $9.5 million from $8.0 million.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to significant operating losses and decreased Adjusted EBITDA, despite revenue growth, largely driven by acquisition costs and non-cash charges.

Positives

• Significant revenue growth of 63% ($44.6 million) in the first quarter of fiscal 2027, reaching $115.5 million.
• Trailing twelve-month revenue increased by 25% ($75.4 million) to $371.7 million.
• Trailing twelve-month Adjusted EBITDA saw a 19% increase to $9.5 million.
• Crestone Air Partners completed the acquisition of Arena Aviation Capital for $33.9 million, creating a platform with $3.0 billion in assets under management and $0.6 billion committed under LOI.
• Rex generated positive Adjusted EBITDA of $1.9 million in the quarter, despite an operating loss.
• Air T ended the quarter with $21.7 million in cash and $42.4 million in available credit lines.
• The company has repurchased 840,855 shares since October 2013, representing 31% of outstanding shares.

Negatives

• Reported an operating loss of $12.8 million for the quarter, a substantial decline from the prior year's operating income of $0.8 million.
• Adjusted EBITDA decreased by 45% to $0.8 million from $1.5 million in the prior-year quarter.
• The operating loss and Adjusted EBITDA loss in the new Aviation Leasing and Asset Management segment were $3.5 million and $0.3 million respectively, for the 21 days post-acquisition.
• Rex incurred an operating loss of $7.7 million, primarily due to $8.8 million in depreciation and amortization from the fleet revaluation.
• The Ground Support Equipment segment saw a revenue decline of 76% and an Adjusted EBITDA decline of $1.6 million.
• The Commercial Aircraft, Engines and Parts segment's Adjusted EBITDA decreased by $1.2 million.

Risks

• Transaction and integration costs related to Crestone Air Partners' acquisition of Arena Aviation Partners are impacting financial results.
• Non-cash depreciation arising from the fair-value step-up of the Rex aircraft fleet recorded in purchase accounting is a significant factor in operating losses.
• Challenges in aircraft availability for Rex due to unscheduled engine removals and third-party MRO turnaround times continue to constrain operations.
• Rex incurs fuel costs without hedging, making it susceptible to fuel price volatility.
• The operating loss in the new Aviation Leasing and Asset Management segment was driven by acquisition-related transaction costs and fixed G&A expenses against limited transaction closings.
• The preliminary purchase price allocation for the Rex acquisition, including bargain purchase gain and tax treatment, may be revised.
• Risks associated with integrating Rex, including financial reporting, systems, and personnel, could adversely affect results.
• Dependence on FedEx for the overnight air cargo segment poses risks if contracts are terminated or modified, or if the number of aircraft operated for FedEx is reduced.

Future Outlook

Management remains confident in the long-term prospects of both Crestone and Rex, despite current challenges. The company's strategy involves investing in high-performing businesses, acquiring new cash-flow generating businesses, funding investment opportunities with third-party capital, and identifying marketable securities or alternative assets.

Management Comments

• "While challenges exist that we must overcome, management remains confident in the long-term prospects of both Crestone and Rex."
• "This acquisition reflects the core of our investment thesis: we seek to empower dynamic, insightful leaders to build on businesses that they know well, and give them the runway and resources to thrive."
• "We see active aircraft growth and network restoration as top Rex priorities. We are committed to growing essential connectivity to remote and rural Australia with our highly-skilled, steadfast and customer-centric management team."

Industry Context

StockSavvy.ai notes that the aviation leasing and asset management sector is experiencing consolidation, as evidenced by the Crestone acquisition of Arena. The challenges faced by Rex, such as aircraft availability and MRO turnaround times, are common issues within the regional airline industry, exacerbated by global supply chain constraints.

Comparison to Industry Standards

• The operating loss at Rex, driven by non-cash D&A from purchase accounting, is a specific accounting impact rather than an operational cash flow issue, but it significantly impacts reported profitability.
• The Adjusted EBITDA loss in the new Aviation Leasing and Asset Management segment is attributed to timing of transaction closings and fixed G&A, a common challenge in integrating new acquisitions.
• The revenue growth in the Overnight Air Cargo segment, driven by improved FedEx maintenance results and higher parts/labor revenue, aligns with stable demand for feeder services.
• The decline in the Ground Support Equipment segment's revenue and EBITDA due to timing of orders is typical for manufacturers reliant on large, infrequent government or fleet orders.

Stakeholder Impact

• Shareholders are impacted by the significant operating loss and decrease in Adjusted EBITDA, which could affect stock valuation.
• Employees of Rex may face uncertainty due to integration challenges and operational constraints.
• Customers of Rex in Australia may experience impacts from aircraft availability issues.
• Suppliers to Rex may face payment uncertainties given the operating loss, although the company has credit lines available.
• Creditors may be concerned about the increased operating losses and the impact on the company's ability to service debt, despite positive LTM Adjusted EBITDA growth.

Next Steps

• Continue to focus on recovering the core operational foundation at Rex.
• Prioritize active aircraft growth and network restoration for Rex.
• Consolidate Crestone and Arena into the new Aviation Leasing and Asset Management segment.
• Address questions submitted through Slido.com at the Annual Meeting and via quarterly written responses.
• Hold the Annual Meeting on Tuesday, August 25, 2026.

Key Dates

Recommendation

While revenue growth is strong, the significant operating loss and decline in Adjusted EBITDA are concerning. The acquisition of Arena is a strategic positive, but its immediate financial impact and the ongoing challenges at Rex warrant a cautious approach. The company's ability to integrate these acquisitions and return to profitability will be key.

Keywords

Air T, Crestone Air Partners, Arena Aviation Partners, Rex, Aviation Leasing, Regional Airline, Financial Results, Acquisition