Executive Summary / Key Takeaways

• StandardAero is positioned as the world's largest independent provider of aerospace engine aftermarket services, benefiting from robust, non-discretionary demand across commercial, military, and business aviation markets, underpinned by a diversified portfolio of over 40 engine platforms.
• The company is executing on key strategic initiatives, including the industrialization and ramp-up of the multi-decade LEAP engine program, expansion of CFM56 capacity, and leveraging an expanded CF34 license, supported by significant capital investments expected to drive future growth and profitability.
• Financial performance is strong, with Q1 2025 revenue increasing 16.2% year-over-year to $1.44 billion and Adjusted EBITDA growing 19.7% to $198.2 million, demonstrating continued momentum and margin expansion, particularly in the higher-margin Component Repair Services segment.
• A recent debt refinancing significantly improved the capital structure, reducing annual interest expense by over $130 million and lowering net leverage to 3.09x, providing enhanced financial flexibility for strategic investments and potential accretive M&A.
• Management has raised its full-year 2025 guidance, projecting revenue between $5.825 billion and $5.975 billion and Adjusted EBITDA between $775 million and $795 million, reflecting confidence in sustained demand and operational execution despite incorporating an estimated $15 million net impact from tariffs.

Powering the Aftermarket: StandardAero's Strategic Ascent

StandardAero, Inc. stands as a cornerstone in the global aerospace aftermarket, operating as the world's largest independent, pure-play provider of essential services for fixed and rotary wing aircraft engines and auxiliary power units (APUs). With a history spanning over a century, the company has cultivated a deep expertise in maintenance, repair, and overhaul (MRO), serving a diverse customer base across commercial aerospace, military, and business aviation markets. This established presence and comprehensive service suite, which also includes airframe and avionics support for business aviation and helicopters, position StandardAero as a critical link between engine OEMs and aircraft operators. The company's strategic focus is centered on capitalizing on the non-discretionary nature of engine maintenance, driven by flight hours and regulatory requirements, which provides a degree of insulation from short-term economic volatility.

The competitive landscape in aerospace MRO is dynamic, featuring large, vertically integrated OEM service divisions like GE Aerospace (GE), Rolls-Royce (RR), and RTX (RTX) (including Pratt & Whitney), alongside other independent providers and specialized component repair shops. StandardAero differentiates itself through its independence, offering flexibility and potentially faster turnaround times compared to OEM-tied services. Its extensive network and ability to service over 40 different engine platforms across major OEMs provide a broad market reach. While OEMs benefit from proprietary technology and integrated supply chains, StandardAero leverages its specialized repair development expertise and strategic relationships with OEMs to access critical repair authorizations, particularly for high-demand or constrained components. The company's Component Repair Services (CRS) segment, in particular, represents a key area of competitive advantage, offering specialized piece part and accessory repairs that drive higher margins and support both internal engine services needs and third-party customers. This capability is crucial in mitigating supply chain challenges by extending the life of components and reducing reliance on new parts.

StandardAero's strategic journey has been marked by significant investments aimed at solidifying its market position and capturing future growth. The acquisition of StandardAero Holding Corp. in 2018 by Dynasty Acquisition Co., Inc., backed by Carlyle and GIC, set the stage for a period of focused expansion. A major pillar of this strategy has been the proactive development of capabilities for next-generation engine platforms, most notably the CFM International LEAP engine family (LEAP-1A and LEAP-1B), which powers the Airbus (AIR) A320neo and Boeing (BA) 737 MAX aircraft. The company has invested significantly in industrializing a state-of-the-art MRO line at its San Antonio facility, achieving critical milestones like test cell correlations for both LEAP variants in 2024. Complementing this, the CRS segment has industrialized over 260 LEAP component repairs, a capability management believes positions them as the first independent provider outside the OEMs to achieve this breadth. This technological and operational readiness is designed to provide a competitive edge by enabling better control over costs and turn times for LEAP overhauls. The company inducted its first LEAP engines in 2024, including a performance restoration shop visit induction in December, and completed its first lighter work scope (CTAMS) delivery in Q1 2025, remaining on track for the first full performance restoration delivery in the second half of 2025.

Beyond LEAP, StandardAero has strategically invested in expanding capacity for current-generation workhorse engines. The opening of a dedicated CFM56 Center of Excellence in Dallas-Fort Worth in August 2024 more than doubles capacity for this widely used engine, positioning the company to capture share in a market with a large installed base and significant remaining maintenance cycles. Furthermore, a new 10-year license agreement with GE for the CF34 regional jet platform, involving a $50 million investment ($20 million paid in Q4 2024, $30 million expected in 1H 2025), is projected to generate over $10 million of incremental annual EBITDA starting in 2025, leveraging an already strong position on this platform. These investments, totaling $116 million in major platforms in 2024, including $43 million in start-up costs, underscore the company's commitment to building long-term growth drivers.

The company's recent transition to a public entity via an IPO in October 2024 and subsequent debt refinancing in the same month have fundamentally reshaped its financial structure. The IPO generated $1.2 billion in net proceeds from primary share sales used to pay down debt. The new credit agreement refinanced remaining debt at significantly lower interest rates (weighted average interest rate decreased from 9.50% in Q1 2024 to 6.60% in Q1 2025), resulting in expected annual interest savings exceeding $130 million. This deleveraging reduced net leverage to 3.09x as of March 31, 2025, and earned the company a multi-notch credit rating upgrade to the BB category. This enhanced financial flexibility is crucial for funding ongoing strategic investments and pursuing accretive M&A opportunities, which management continues to actively explore, particularly within the high-margin CRS segment.

Financial Performance and Outlook

StandardAero's financial results reflect the strength of its market position and the execution of its strategic initiatives. For the three months ended March 31, 2025, revenue increased 16.2% to $1.44 billion compared to $1.24 billion in the prior year period. This growth was broad-based, driven by both the Engine Services and Component Repair Services segments. Commercial aerospace revenue grew 18.1%, and business aviation increased 12.9%, while the military and helicopter market saw a 9.9% increase, benefiting from the Aero Turbine acquisition and J85 program growth, partially offset by V-22 timing. Cost of revenue increased 15.5% to $1.22 billion, primarily due to higher volumes, material, labor, and overhead costs, including the impact of the Aero Turbine acquisition. Selling, general, and administrative expenses rose 22.5% to $64.5 million, influenced by the acquisition, stock compensation, and professional fees. Amortization of intangible assets increased 4.5% to $24.3 million, mainly due to the Aero Turbine customer relationships intangible.

Operating income for Q1 2025 grew 22.2% to $128.9 million. The significant reduction in interest expense, down 43.5% to $43.8 million, primarily due to the debt refinancing, dramatically improved the bottom line. Income before income taxes surged 323.6% to $85.1 million, leading to net income of $62.9 million, a substantial increase from $3.2 million in Q1 2024.

Segment performance highlights the drivers of profitability. The Engine Services segment saw revenue increase 15.6% to $1.27 billion in Q1 2025. Segment Adjusted EBITDA grew 16.0% to $174.0 million, maintaining a stable margin of 13.7%. Management noted that while core programs saw efficiency gains, initial lower margins on the ramping LEAP and CFM56 Dallas programs created a mix headwind, resulting in flat segment margins year-over-year. The Component Repair Services segment demonstrated robust growth, with revenue increasing 20.9% to $167.3 million in Q1 2025, including a $22 million contribution from the Aero Turbine acquisition. Segment Adjusted EBITDA soared 32.4% to $47.4 million, expanding margins by 240 basis points to 28.3%. This margin expansion was attributed to increased revenue, favorable pricing and component mix, and synergy realization from the ATI acquisition. Management indicated that temporary headwinds from a facility consolidation and the exit of a low-margin hydraulics business were offset by strong underlying performance and strategic actions.

Looking ahead, StandardAero is optimistic about its trajectory. Management has raised its full-year 2025 guidance, projecting revenue between $5.825 billion and $5.975 billion and Adjusted EBITDA between $775 million and $795 million. This updated outlook incorporates an estimated $15 million net impact from potential tariffs, demonstrating confidence in the company's ability to mitigate these costs through contractual pass-throughs, pricing, and operational efficiencies. The guidance is underpinned by expected continued strong demand, with commercial aerospace projected to grow low double-digit to mid-teens, and business aviation and military/helicopter markets anticipated to see high single-digit growth. Free cash flow for 2025 is projected to be significantly improved, in the range of $155 million to $175 million, benefiting from increased earnings and lower interest expense, despite planned capital investments of $90 million in major platform initiatives and facility expansions.

Risks and Challenges

Despite the positive momentum, StandardAero faces several key risks and challenges. Supply chain disruptions remain a significant concern, impacting the availability of parts and potentially delaying engine throughput. While the company is actively working to mitigate this through inventory management, sourcing used serviceable material, and expanding component repair capabilities, prolonged disruptions could adversely affect operations and financial results. The implementation of tariffs also presents a potential headwind, although management believes its contractual mechanisms and operational footprint (with significant USMCA-compliant operations) position it well to manage the estimated $15 million net impact in 2025.

As a newly public company, StandardAero is also navigating the requirements of public reporting and internal controls. The company has identified material weaknesses in its internal control over financial reporting, for which it is implementing remediation plans, including hiring personnel and improving processes. Failure to effectively remediate these weaknesses could impact financial reporting reliability and investor confidence. Furthermore, while the debt refinancing improved the capital structure, the company still carries substantial indebtedness, which could impact financial flexibility in adverse market conditions. The temporary grounding of platforms like the V-22 Osprey highlights the potential for unforeseen events to impact specific segments, although the company's diversified portfolio helps to mitigate the overall impact of such occurrences.

Conclusion

StandardAero is executing a clear strategy to capitalize on the robust and growing demand in the aerospace aftermarket. Its position as the leading independent provider, coupled with strategic investments in next-generation platforms like LEAP and expansions on established workhorses like CFM56 and CF34, positions the company for continued growth. The high-margin Component Repair Services segment provides a valuable operational and financial differentiator, enhancing control over costs and turn times while offering significant expansion potential. The recent debt refinancing has substantially improved the company's financial health, providing the flexibility needed to fund its growth initiatives and pursue accretive M&A. While supply chain risks and potential tariff impacts warrant monitoring, management's ability to raise guidance despite these headwinds underscores the underlying strength of the business and confidence in its operational execution. For investors, StandardAero represents an opportunity to participate in the durable aerospace aftermarket, driven by a diversified portfolio, strategic investments in future growth, and an improving financial profile. The focus on operational excellence and expanding high-value repair capabilities provides a compelling narrative for compounding returns.