StandardAero, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• 2025 started strongly with revenue growing 16% year-over-year and adjusted EBITDA growing 20%. Performance across engine services and component repair, with demand across commercial aerospace, business aviation, military, and helicopter.
• Commercial aerospace grew 18%, Business Aviation 13%, Military 10%. Adjusted EBITDA margins expanded 40 basis points.
• Focus areas: Ramp of LEAP program, capitalizing on CFM56 and CF34 investments, expanding component repair capabilities, and active M&A with a pipeline of targets.

Segment Performance

• Engine Services: Revenue increased to $1.3 billion in the first quarter, a 16% year-over-year growth. Driven by robust demand in the commercial aftermarket, including strong performance in turboprop engines and the CF34 regional jet platform, as well as growth in the business aviation market. Adjusted EBITDA grew 16%, but margins were flat due to mix headwinds from LEAP and CFM56 growth programs.
• Component Repair Services: First quarter revenue increased 21% to $167 million, supported by the ATI acquisition and strong performance in land and marine aeroderivative programs. Adjusted EBITDA grew 32% to 28% margin, driven by productivity improvements, pricing, and synergy realization at ATI.

Guidance

• Raised 2025 revenue guidance to $5.825 billion to $5.975 billion and adjusted EBITDA to $775 million to $795 million.
• Expect strong revenue growth with double-digit growth and continued adjusted EBITDA margin expansion.
• Incorporates an estimated $15 million net tariff impact.

Risks

• Geopolitical and macroeconomic uncertainty.
• Tariff impact on business, but mitigation actions in place.
• Uncertainty regarding the Section 232 investigation and its potential impact on MRO.

Question and Answer

Q: Concern about U.S. airlines' slower capacity and CF34 visibility A: Engine MRO is nondiscretionary; not impacted by short-term passenger traffic volatility as airlines prioritize engine maintenance over discretionary spending Q: M&A environment and capital deployment A: Still active on M&A hunt with balance sheet capacity, attractive targets in the pipeline Q: Engine Services growth, LEAP and CFM56 margin headwinds A: Military business steady; LEAP and CFM56 margin dilutive now but will improve with learning curve and site build-out Q: Free cash flow and major platform investments A: $36 million in major platform investments in Q1, on track to spend $90 million full year on accretive programs Q: Widebody engines and Section 232 investigation A: Watching widebody market; Section 232 impact too early to speculate Q: Noncore business exit and ATI acquisition integration A: Exited noncore hydraulics business; ATI integration going well, contributing to J85 program Q: LEAP supply chain and backlog A: No significant supply chain holds; backlog over $1 billion, continuing to win LEAP contracts Q: Component repair capabilities and milestones A: Methodical with OEs; working on repairs to relieve supply chain constraints, potential upside from repair authorizations Q: Revenue seasonality and LEAP/CFM56 contribution A: Seasonality builds from first to second half; LEAP and CFM56 on track as top revenue drivers