StandardAero, Inc. Q3 FY2025 earnings call

Strong Performance

• Third quarter revenue was $1.5 billion, up 20% year over year, and adjusted EBITDA was $196 million, up 16% year over year.

End Market Performance

• Commercial aerospace revenue grew 18%, led by LEAP, CF34, CFM56, and turboprop engine platforms.
• Business aviation revenue up 28% driven by mid and super midsize aircraft, with strong growth in HTF-7000 program.
• Military and helicopter revenue grew 21% fueled by AE1107 engine volumes, C-130 programs, J85 engine, and AeroTurbine acquisition.

Strategic Priorities

• LEAP industrialization progressing, with LEAP revenues scaling rapidly and long-term demand outlook robust.
• CFM56 expansion at DFW facility progressing, with strong bookings.
• Business aviation facility expansion in Georgia operational, aiding HTF-7000 program.
• MRO facility expansion in Winnipeg, Canada announced, to increase footprint and CRS in-sourcing opportunities.
• Component repair business executing well, delivering record margins, with expanded portfolio of OEM-authorized LEAP repairs.

Engine Services revenue increased 21% to $1.32 billion in Q3 2025, driven by LEAP, CFM56, CF34, turboprop, and HTF7000 platforms. Adjusted EBITDA for Engine Services increased 12% year over year with margins of 12.5%. Component Repair Services (CRS) revenue was $154 million in Q3 2025, up 14%, with adjusted EBITDA growing 32% year over year to $54 million. CRS was driven by select military platforms, land and marine aero derivative engines, and the ATI acquisition.

Revenue

• Raised full-year 2025 revenue guidance to $5.97 billion to $6.03 billion.

Adjusted EBITDA

• Raised full-year 2025 adjusted EBITDA guidance to $795 million to $815 million.

Free Cash Flow

• Raised full-year 2025 free cash flow outlook to $170 million to $190 million, expecting strong Q4 cash generation.

Leverage

• Net debt to adjusted EBITDA leverage ratio improved to 2.9 times, expecting continued deleveraging through organic growth.

Specific constrained parts (forgings and castings) causing delays in engine shipments and impacting working capital. Depth of delay on these parts was an issue but is improving.

Q: Michael Ciarmoli asked about LEAP revenue target and cash flow choke points.

A: Russell Ford said LEAP revenues are targeting $1 billion in the next few years, and cash flow issues are due to constrained parts with improving depth of delay.

Q: Ken Herbert asked about contract adjustments and LEAP backlog.

A: Russell Ford said contract adjustments will reduce revenue by $300 to $400 million in 2026, and LEAP backlog is over $1 billion with 5% growth.

Q: Gavin Parsons asked about supply chain unlocking and DSO.

A: Russell Ford said supply chain depth of delay is improving, and DSO is not the main issue; it's related to specific constrained parts.

Q: Myles Walton asked about CRS revenue outlook.

A: Russell Ford said CRS is growing strongly with insourcing activity, and no deterioration in core outlook.

Q: Kristine Liwag asked about supply chain visibility and LEAP process learning.

A: Russell Ford said visibility is strong for Q4, and LEAP is coming down the learning curve with fuller work scopes.

Q: Seth Seifman asked about contract adjustment impact and LEAP margin.

A: Russell Ford said contract adjustments will feather in starting 2026, and LEAP margins will turn positive in early 2026.

Q: Sheila Kahyaoglu asked about Business Aviation growth.

A: Russell Ford said Business Aviation is growing due to increasing flight hours in larger aircraft, with expanded facility in Georgia aiding growth.

Q: Jordan Lyonnais asked about M&A pipeline.

A: Alexander Trapp said M&A pipeline is robust with many opportunities, waiting for the right fit.