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StandardAero, Inc.(SARO) - 2025 Q2 - Earnings Call Transcript
2025-08-13 22:02
Financial Data and Key Metrics Changes - For Q2 2025, the company reported revenue of $1.53 billion, a 13.5% increase from $1.35 billion in Q2 2024, with 11.5% of this growth being organic [19][20] - Adjusted EBITDA rose to $205 million, reflecting a 20% increase year-over-year, with adjusted EBITDA margins expanding by 80 basis points to 13.4% [20][29] - Net income increased significantly to $68 million from $5 million in the prior year, driven by higher sales and expanding margins [20] Business Line Data and Key Metrics Changes - Engine Services revenue increased by $139 million to $1.35 billion, representing 11.5% growth, driven by strong aftermarket activity and production ramp-up in commercial aerospace [21] - Component Repair Services revenue grew by 31% year-over-year to $178 million, with adjusted EBITDA increasing by 50% and margins expanding to a record 29% [23][24] Market Data and Key Metrics Changes - Commercial aerospace sales grew 14% year-over-year, with strong demand for engine aftermarket services [7] - Business aviation sales increased by 9%, driven by demand for midsize and super midsize business jets [8] - Military sales grew by 12%, supported by the AeroTurbine acquisition and growth in specific military programs [8] Company Strategy and Development Direction - The company is focused on expanding its LEAP program, enhancing CFM56 and CF34 capacity, and improving component repair services [10][17] - The company aims to maintain a disciplined approach to capital allocation, combining organic investments with strategic M&A opportunities [17][18] - The expansion of the Augusta facility is expected to add 60% capacity and create approximately 100 new jobs [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment and the company's ability to navigate supply chain challenges [31] - The company is increasing its 2025 revenue guidance to between $5.875 billion and $6.025 billion, reflecting continued strong demand across core end markets [28][30] - Adjusted EBITDA guidance has also been raised to a range of $790 million to $810 million, driven by better-than-expected margins [28] Other Important Information - The company expects free cash flow for 2025 to be in the range of $155 million to $175 million, with a strong cash conversion cycle anticipated in the second half of the year [25][30] - The company’s leverage improved to 2.99 times net debt to EBITDA, down from 5.4 times in 2024 [27] Q&A Session Summary Question: Thoughts on revenue cadence in Engine Services - Management confirmed that revenue growth expectations remain strong, particularly for the CF34 program, and expressed confidence in the second half guidance [38] Question: Margin dilution from new programs - Management indicated that margin expansion would have been greater without the ramp programs, but losses are narrowing significantly [41] Question: Growth dynamics for LEAP, CFM56, and CF34 - Management explained that LEAP is being carefully ramped up for precision, while CF34 is expected to see increased work due to aging engines [46][49] Question: Engine exchange program details - Management clarified that the engine exchange program involves a one-time investment and is designed to be self-funding over time [59][112] Question: Cash flow expectations for the second half - Management expects strong free cash flow driven by the unwinding of working capital and improved collections [100][102]
StandardAero, Inc.(SARO) - 2025 Q2 - Earnings Call Transcript
2025-08-13 22:00
Financial Data and Key Metrics Changes - For Q2 2025, the company reported revenue of $1.53 billion, a 13.5% increase from $1.35 billion in Q2 2024, with 11.5% of this growth being organic [18] - Adjusted EBITDA rose to $205 million, reflecting a 20% growth compared to $170 million in the prior year, with adjusted EBITDA margins expanding by 80 basis points to 13.4% [19][28] - Net income increased significantly to $68 million from $5 million year-over-year, driven by higher sales and expanding margins [19] Business Line Data and Key Metrics Changes - Engine Services revenue increased by $139 million to $1.35 billion, representing an 11.5% growth, driven by strong aftermarket activity and production ramp-up on growth programs [20] - Component Repair Services revenue grew by 31% year-over-year to $178 million, with adjusted EBITDA growing 50% and achieving a record margin of 29% [22] Market Data and Key Metrics Changes - Commercial aerospace sales grew by 14% year-over-year, with strong demand for CF34, LEAP, CFM56, and turboprop platforms [6] - Business aviation sales increased by 9%, while military sales grew by 12% due to contributions from the AeroTurbine acquisition [7] Company Strategy and Development Direction - The company is focused on expanding its LEAP program, enhancing CFM56 and CF34 capacity, and improving capabilities in component repair services [9] - The company aims to maintain a disciplined approach to capital allocation, combining organic investments with strategic M&A opportunities [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment and the ability to navigate supply chain challenges, with expectations for continued revenue growth and margin expansion [30][27] - The company has increased its 2025 revenue guidance to between $5.875 billion and $6.025 billion, reflecting strong performance in Engine Services [27] Other Important Information - The company expects free cash flow for 2025 to be in the range of $155 million to $175 million, with a significant cash flow expected in the second half of the year [24] - The company’s leverage improved to 2.99 times net debt to EBITDA, down from 5.4 times in 2024 [26] Q&A Session Summary Question: Thoughts on revenue cadence in Engine Services - Management confirmed that revenue growth expectations remain strong, particularly for the CF34 program, and expressed confidence in the second half guidance [35][36] Question: Margin dilution from new programs - Management indicated that while margins expanded by 80 basis points, they would have been higher without the ramp programs, and profitability is expected to improve as revenue increases [38][39] Question: Growth dynamics for LEAP, CFM56, and CF34 - Management explained that LEAP is being carefully ramped up for precision, while CF34 is expected to see increased work due to aging engines coming due for major overhauls [45][46] Question: Engine exchange program details - Management clarified that the engine exchange program involves a one-time investment for an exchange engine, which is then overhauled and reused, maintaining an asset-light structure [47][56] Question: M&A pipeline and organic growth opportunities - Management stated that the M&A pipeline remains robust, with a focus on disciplined capital deployment, while also highlighting strong organic growth opportunities [86][89]
StandardAero, Inc.(SARO) - 2025 Q2 - Earnings Call Presentation
2025-08-13 21:00
Financial Performance Highlights - Q2 2025 revenue reached $1,529 million, a 13.5% year-over-year increase compared to $1,347 million in Q2 2024[15] - Adjusted EBITDA for Q2 2025 was $205 million, representing a 20.1% year-over-year increase from $170 million in Q2 2024[15] - Adjusted EBITDA margin improved to 13.4% in Q2 2025, an increase of 80 bps year-over-year[15] - For the first half of 2025, revenue totaled $2,965 million, a 14.8% increase compared to $2,583 million in the first half of 2024[18] - First half 2025 Adjusted EBITDA reached $403 million, a 19.9% increase year-over-year from $336 million[18] Segment Performance - Engine Services revenue for Q2 2025 was $1,351 million, up 11.5% year-over-year from $1,211 million in Q2 2024[34] - Engine Services Adjusted EBITDA for Q2 2025 was $179 million, a 16.2% increase year-over-year from $154 million[34] - Component Repair Services revenue for Q2 2025 was $178 million, a 31.3% increase year-over-year from $136 million in Q2 2024[39] - Component Repair Services Adjusted EBITDA for Q2 2025 was $52 million, a 49.6% increase year-over-year from $35 million[39] Updated Guidance - The company raised its full-year 2025 revenue guidance to $5,875 - $6,025 million, representing a 12% to 15% year-over-year increase[21] - Full-year 2025 Adjusted EBITDA guidance was raised to $790 - $810 million, with an approximate 13.4% margin[21]
StandardAero, Inc.(SARO) - 2025 Q2 - Quarterly Results
2025-08-13 20:19
[Financial Highlights & CEO Commentary](index=1&type=section&id=Financial%20Highlights%20%26%20CEO%20Commentary) StandardAero achieved strong Q2 2025 results with double-digit revenue growth, improved net income and Adjusted EBITDA margins, and raised full-year targets Q2 2025 Financial Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $1,528.9 million | +13.5% | | Net Income | $67.7 million | +$62.3 million | | Net Income Margin | 4.4% | +400 bps | | Adjusted EBITDA | $204.6 million | +20.1% | | Adjusted EBITDA Margin | 13.4% | +80 bps | - The CEO attributed the strong results to solid execution, a robust commercial aerospace aftermarket, and significant milestones in the LEAP engine program, which now has bookings exceeding **$1.5 billion**[3](index=3&type=chunk)[8](index=8&type=chunk) [Second Quarter 2025 Performance Analysis](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Analysis) Q2 2025 performance saw broad growth across segments and markets, with net income surging due to higher operating income and reduced interest expenses, improving the leverage ratio [Consolidated Financial Results](index=1&type=section&id=Consolidated%20Financial%20Results) Consolidated revenue grew **13.5% to $1.53 billion**, with net income surging to **$67.7 million** due to improved operating income and lower interest expense, while Adjusted EBITDA margin expanded and leverage improved - Revenue growth was strong across all end markets: **commercial aerospace (+13.7%)**, **business aviation (+8.9%)**, and **military/helicopter (+11.7%)**, with the latter boosted by the ATI acquisition[4](index=4&type=chunk) Consolidated Financial Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $1,528.9 M | $1,347.2 M | | Net Income | $67.7 M | $5.4 M | | Adjusted EBITDA | $204.6 M | $170.4 M | | Net Debt | $2,262.5 M | $3,266.0 M | | Net Debt to Adj. EBITDA | 3.0x | 5.4x | [Segment Performance](index=1&type=section&id=Segment%20Performance) Both Engine Services and Component Repair Services segments achieved strong revenue growth and margin expansion, with Component Repair notably boosted by the ATI acquisition and **31.3%** revenue growth Engine Services Segment Performance | Engine Services Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $1,350.7 M | $1,211.5 M | | Adjusted EBITDA | $178.5 M | $153.7 M | | Adjusted EBITDA Margin | 13.2% | 12.7% | Component Repair Services Segment Performance | Component Repair Services Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $178.3 M | $135.7 M | | Adjusted EBITDA | $51.6 M | $34.5 M | | Adjusted EBITDA Margin | 29.0% | 25.4% | - The Component Repair Services segment's revenue growth included a **$27.3 million** contribution from the ATI acquisition[10](index=10&type=chunk) [Full Year 2025 Guidance](index=2&type=section&id=Full%20Year%202025%20Guidance) StandardAero raised its full-year 2025 guidance, projecting higher revenue and Adjusted EBITDA with improved segment margins, driven by strong first-half performance and sustained market demand FY 2025 Financial Guidance | FY 2025 Guidance | Updated | Prior | | :--- | :--- | :--- | | Revenue | $5,875 - $6,025 M | $5,825 - $5,975 M | | Adjusted EBITDA | $790 - $810 M | $775 - $795 M | | Engine Services Margin | 13.3% | ~13% | | Comp. Repair Services Margin | 28.3% | ~27% | | Free Cash Flow | $155 - $175 M | Unchanged | End Market Revenue Growth Assumptions | End Market Revenue Growth Assumptions | | | :--- | :--- | | Commercial Aerospace | Mid-Teens Growth | | Military & Helicopter | High Single Digit Growth | | Business Aviation | High Single Digit Growth | - The company expects compounding benefits in the coming years from its growth initiatives, including key platform programs and capacity expansion, which are anticipated to drive revenue growth, margin expansion, and attractive free cash flow[12](index=12&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) This section presents StandardAero's unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Statements of Cash Flows [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$6.48 billion** as of June 30, 2025, with total stockholders' equity growing to **$2.51 billion** due to increased paid-in capital and reduced accumulated deficit Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,769,014 | $2,485,134 | | Total Assets | $6,482,711 | $6,213,601 | | Total Current Liabilities | $1,285,227 | $1,273,544 | | Long-Term Debt | $2,295,131 | $2,207,977 | | Total Liabilities | $3,969,428 | $3,840,197 | | Total Stockholders' Equity | $2,513,283 | $2,373,404 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 net income significantly increased to **$67.7 million**, driven by **13.5%** revenue growth and reduced interest expense, resulting in diluted EPS of **$0.20** Condensed Consolidated Statements of Operations (in thousands) | Income Statement (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenue | $1,528,943 | $1,347,198 | | Operating Income | $135,570 | $105,077 | | Interest Expense | $43,835 | $78,051 | | Net Income | $67,713 | $5,404 | | Diluted EPS | $0.20 | $0.02 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities was **$21.1 million**, with **$72.4 million** used in investing and **$81.7 million** provided by financing, ending with **$91.5 million** in cash Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(21,103) | $(18,154) | | Net cash used in investing activities | $(72,371) | $(44,776) | | Net cash provided by financing activities | $81,714 | $65,912 | | Net (decrease) increase in cash | $(11,068) | $2,292 | | Cash at end of the period | $91,513 | $60,274 | [Supplemental Financial Information & Reconciliations](index=10&type=section&id=Supplemental%20Financial%20Information%20%26%20Reconciliations) This section details financial breakdowns by segment and reconciles GAAP measures to non-GAAP metrics such as Adjusted EBITDA, Net Debt, and Free Cash Flow [Segment Financial Details](index=10&type=section&id=Segment%20Financial%20Details) In Q2 2025, Engine Services generated **$1.35 billion** revenue and **$178.5 million** Adjusted EBITDA, while Component Repair Services achieved **$178.3 million** revenue and **$51.6 million** Adjusted EBITDA, with both segments showing growth Q2 2025 Segment Results (in thousands) | Q2 2025 Segment Results (in thousands) | Revenue | Segment Adjusted EBITDA | Margin | | :--- | :--- | :--- | :--- | | Engine Services | $1,350,677 | $178,509 | 13.2% | | Component Repair Services | $178,266 | $51,640 | 29.0% | [Reconciliation of Non-GAAP Measures](index=12&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) The company provides reconciliations for key non-GAAP metrics, including Adjusted EBITDA, Net Debt, and Free Cash Flow, for Q2 2025 and as of June 30, 2025 Reconciliation: Net Income to Adjusted EBITDA (Q2 2025, in thousands) | Reconciliation: Net Income to Adjusted EBITDA (Q2 2025, in thousands) | | | :--- | :--- | | Net income | $67,713 | | Income tax expense | $24,022 | | Depreciation and amortization | $48,547 | | Interest expense | $43,835 | | Other adjustments | $20,520 | | **Adjusted EBITDA** | **$204,637** | Reconciliation: Debt to Net Debt (June 30, 2025, in millions) | Reconciliation: Debt to Net Debt (June 30, 2025, in millions) | | | :--- | :--- | | Total Debt | $2,354.0 | | Less: Cash | $91.5 | | **Net Debt** | **$2,262.5** | Reconciliation: Cash Flow to Free Cash Flow (Q2 2025, in millions) | Reconciliation: Cash Flow to Free Cash Flow (Q2 2025, in millions) | | | :--- | :--- | | Cash Flow from Operations | $2.9 | | Total Capital Expenditures | $(33.7) | | **Free Cash Flow** | **$(30.8)** | [Important Disclosures](index=4&type=section&id=Important%20Disclosures) This section provides important disclosures, including safe harbor statements for forward-looking information and explanations of non-GAAP financial measures like Adjusted EBITDA [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) Forward-looking statements regarding future performance and financial targets are subject to significant risks and uncertainties, and actual results may differ materially - Forward-looking statements are intended to be covered by safe harbor provisions and involve known and unknown risks. The company does not undertake any obligation to update these statements[17](index=17&type=chunk)[21](index=21&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) StandardAero uses non-GAAP financial measures like Adjusted EBITDA, Net Debt to Adjusted EBITDA, and Free Cash Flow to provide greater transparency into core operating results and evaluate performance - The company uses non-GAAP measures to exclude items that may not be indicative of core operating results, allowing for better comparison over time and with peers. A reconciliation of these measures to their most comparable GAAP counterparts is provided[22](index=22&type=chunk)[23](index=23&type=chunk)[26](index=26&type=chunk)
凯雷Q2继续重仓航空维修巨头StandardAero(SARO.US) 清仓文远知行(WRD.US)
Zhi Tong Cai Jing· 2025-08-13 10:55
Core Insights - Carlyle Group Inc reported a total market value of $5.03 billion for its Q2 2025 holdings, reflecting a 32% increase from the previous quarter's $3.80 billion [1][2] - The investment portfolio saw only one new purchase, one addition, two reductions, and four complete sell-offs, indicating a highly concentrated stock holding with the top ten holdings accounting for 99.72% of the total market value [1][2] Holdings Summary - The largest holding is StandardAero Inc, with approximately 152.67 million shares valued at about $4.83 billion, representing 95.06% of the portfolio, and showing a 13.64% increase in shares from the previous quarter [2][5] - Soleno Therapeutics Inc is the second-largest holding, with around 860,980 shares valued at approximately $72.08 million, maintaining its share count from the previous quarter [3][5] - Phathom Pharmaceuticals ranks third, holding about 3.5 million shares valued at approximately $33.53 million, also unchanged from the previous quarter [3][5] - Pony.ai, a Chinese autonomous driving company, is the fourth-largest holding with approximately 2.36 million shares valued at about $31.18 million, showing no change in share count [4][5] - Invitation Homes Inc, focusing on single-family rental properties, is the fifth-largest holding with around 477,500 shares valued at approximately $15.66 million, also unchanged [4][5] Trading Activity - The largest purchase in Q2 was StandardAero Inc, while the only new position established was in Crowdstrike Holdings Inc, with a market value of approximately $6.26 million [5][6] - Major sell-offs included WeRide Inc, SEACOR Marine Holdings Inc, Complete Solaria Inc, and Spruce Biosciences Inc, with WeRide and SEACOR Marine being completely sold out [6][7]
Why StandardAero's Underperformance Doesn't Match Its Operating Strength
Seeking Alpha· 2025-06-03 16:27
Group 1 - StandardAero (NYSE: SARO) is a pure-play provider of aircraft engine MRO services in the aerospace and defense industry [2] - Despite favorable long-term sector tailwinds, SARO stock has underperformed since coverage was initiated with a Buy rating in March [2] - The investing group, The Aerospace Forum, aims to discover investment opportunities in the aerospace, defense, and airline industry [2] Group 2 - The analyst provides context to developments in the aerospace industry, describing how they might affect investment theses [2] - The analysis is driven by data-informed insights, with direct access to data analytics monitors available through the investing group [2]
凯雷Q1坚定押注StandardAero(SARO.US) 清仓Robinhood(HOOD.US)
智通财经网· 2025-05-16 09:25
Core Insights - Carlyle Group Inc reported a total market value of $3.80 billion for Q1 2025, down from $4.15 billion in the previous quarter, representing an 8% decrease [1][2] - The firm made no new stock purchases, increased its position in one stock, reduced holdings in five stocks, and completely exited four stocks [1][2][5] - The top ten holdings accounted for 99.33% of the total market value [2] Holdings Summary - StandardAero remains the largest holding with approximately 134 million shares valued at about $3.6 billion, making up 92.44% of the portfolio, with a significant increase in shares by 1912.52% [3][4] - Soleno Therapeutics is the second largest holding with around 860,980 shares valued at approximately $61.4 million, representing 1.59% of the portfolio, showing a decrease of 37.41% in shares [3][4] - WeRide (文远知行) holds the third position with about 3.42 million shares valued at approximately $46.5 million, maintaining its share count from the previous quarter [3][4] - Phathom Pharmaceuticals and Pony.ai are the fourth and fifth largest holdings, with values of approximately $21.9 million and $20.8 million, respectively, both maintaining their share counts [3][4] Sell and Exit Activities - Carlyle Group completely exited positions in Ramaco Resources-A, Riley Exploration Permian, Robinhood, and Spyre Therapeutics during the first quarter [3][5] - The top sold stocks included Getty Images, Riley Exploration Permian, Robinhood, Spyre Therapeutics, and Ramaco Resources, with minimal changes in portfolio percentage [5][7]
StandardAero (SARO) 2025 Conference Transcript
2025-05-14 19:55
Summary of Standard Aero Conference Call Company Overview - **Company**: Standard Aero - **Industry**: Aerospace Maintenance, Repair, and Overhaul (MRO) - **Position**: Largest independent manufacturer of maintenance, repair, and overhaul for jet engines, operating in over 50 countries with a high degree of contracted work [5][6] Core Business Segments - **Primary Segment**: Engine services overhaul, covering commercial aerospace, military aircraft, helicopters, and private jets [5][6] - **Secondary Segment**: Proprietary component repair for engine components, which has grown from $100 million to over $500 million in revenue [26][29] Market Dynamics - **Market Size**: The aircraft engine aftermarket is over $100 billion annually, with approximately half attributed to engine maintenance [7] - **Growth Drivers**: - Aging global fleet of aircraft, leading to increased demand for maintenance [9] - Rising airline flight demand outpacing new aircraft deliveries [10][11] - **Ecosystem**: The aerospace ecosystem includes OEMs, operators, and maintenance providers, with Standard Aero positioned as a critical bridge between OEMs and operators [12][14] Competitive Advantages - **Market Position**: Holds number one or two market share across multiple engine platforms [5][6] - **Regulatory Compliance**: The engine segment is highly regulated, creating high barriers to entry [8][9] - **Test Cells**: Significant investment in engine test cells, which are crucial for safety and operational efficiency, with costs ranging from $40 million to $60 million each [22][24] - **Labor Efficiency**: High labor margins due to a skilled workforce and continuous improvement initiatives [46][48] Financial Performance - **Recent Growth**: Achieved 16% revenue growth and 20% EBITDA growth in the last quarter [30] - **Long-term Growth**: Consistent growth rates over the past decade, with expectations for continued expansion through new engine platforms and acquisitions [31][32] Future Outlook - **Investment in New Programs**: Over $100 million invested in the LEAP engine program, expected to be the largest commercial airplane engine program by the mid-2030s [33] - **Component Repair Growth**: Anticipated growth in component repair due to new engine repairs and acquisitions [43][44] - **Market Expansion**: Opportunities identified in underrepresented regions like Asia and South America, with plans to enter these markets through strong local partnerships [55][57] Risks and Challenges - **Tariff Impacts**: Ongoing review of contracts to mitigate tariff exposure, with a focus on maintaining pricing power [73][74] - **Labor Market**: The need to attract and retain skilled labor in a competitive aerospace industry [50][52] Conclusion Standard Aero is well-positioned in the aerospace MRO industry, benefiting from a strong market position, significant growth opportunities, and a robust operational framework. The company is focused on leveraging its competitive advantages to sustain growth while navigating potential risks associated with tariffs and labor market dynamics.
StandardAero, Inc.(SARO) - 2025 Q1 - Quarterly Report
2025-05-13 20:17
PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Presents StandardAero's unaudited condensed consolidated financial statements for Q1 2025, covering balance sheets, income, equity, cash flows, and key accounting notes [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Q1 2025 saw revenue rise to **$1.44 billion** and net income to **$62.9 million**, with total assets reaching **$6.50 billion** and improved operating cash flow Condensed Consolidated Statements of Operations (Q1 2025 vs Q1 2024) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | **Revenue** | $1,435.6 | $1,235.7 | | Operating income | $128.9 | $105.5 | | Interest expense | $43.8 | $77.5 | | **Net income** | **$62.9** | **$3.2** | | **Basic EPS** | **$0.19** | **$0.01** | | **Diluted EPS** | **$0.19** | **$0.01** | Condensed Consolidated Balance Sheet Highlights | Metric | As of March 31, 2025 (in billions) | As of December 31, 2024 (in billions) | | :--- | :--- | :--- | | Cash | $0.141 | $0.103 | | Total current assets | $2.795 | $2.485 | | **Total assets** | **$6.496** | **$6.214** | | Long-term debt | $2.314 | $2.208 | | **Total liabilities** | **$4.058** | **$3.840** | | **Total stockholders' equity** | **$2.438** | **$2.373** | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | $(24.0) | $(83.6) | | Net cash used in investing activities | $(40.1) | $(18.0) | | Net cash provided by financing activities | $102.4 | $77.5 | | **Net increase (decrease) in cash** | **$38.2** | **$(23.8)** | [Note 1: Nature of Operations and Basis of Presentation](index=12&type=section&id=Note%201%3A%20Nature%20of%20Operations%20and%20Basis%20of%20Presentation) StandardAero offers aircraft engine aftermarket services, completed a **$1.2 billion** IPO in October 2024, and as of March 2025, Carlyle and GIC hold **54.1%** and **12.2%** of common stock respectively - The company is an independent provider of aftermarket services for fixed and rotary wing aircraft gas turbine engines and APUs for commercial, business, and military markets[33](index=33&type=chunk) - Completed its IPO on October 2, 2024, at **$24.00 per share**, generating net proceeds of **$1.203 billion** after deducting underwriting discounts and offering expenses[37](index=37&type=chunk) - Following a secondary offering on March 26, 2025, affiliates of The Carlyle Group and GIC Private Limited own approximately **54.1%** and **12.2%** of the company's common stock, respectively[38](index=38&type=chunk) [Note 3: Revenue Recognition](index=13&type=section&id=Note%203%3A%20Revenue%20Recognition) Q1 2025 total revenue reached **$1.436 billion**, primarily from Engine Services and Commercial Aerospace, with **$1.9 billion** in remaining performance obligations Revenue by Segment (Q1 2025 vs Q1 2024) | Segment | Q1 2025 Revenue (in millions) | Q1 2024 Revenue (in millions) | | :--- | :--- | :--- | | Engine Services | $1,268.3 | $1,097.4 | | Component Repair Services | $167.3 | $138.3 | | **Total revenue** | **$1,435.6** | **$1,235.7** | Revenue by End Market (Q1 2025 vs Q1 2024) | End Market | Q1 2025 Revenue (in millions) | Q1 2024 Revenue (in millions) | | :--- | :--- | :--- | | Commercial Aerospace | $853.0 | $722.5 | | Military & Helicopter | $249.5 | $227.1 | | Business Aviation | $283.3 | $250.9 | | Other | $49.7 | $35.2 | | **Total** | **$1,435.6** | **$1,235.7** | - As of March 31, 2025, the company has approximately **$1.9 billion** of remaining performance obligations, primarily from engine utilization contracts. About **30%** is expected to be recognized as revenue over the next two years[46](index=46&type=chunk) [Note 8: Long-Term Debt](index=17&type=section&id=Note%208%3A%20Long-Term%20Debt) As of March 31, 2025, total long-term debt was **$2.314 billion**. The company secured **$2.25 billion** in new term loan facilities and a **$750 million** revolving credit facility in October 2024, significantly reducing the weighted average interest rate to **6.6%** from **9.5%** Long-Term Debt Composition | Debt Component | As of March 31, 2025 (in billions) | As of December 31, 2024 (in billions) | | :--- | :--- | :--- | | New 2024 Term Loan Facilities | $2.244 | $2.250 | | New 2024 Revolving Credit Facility | $0.110 | — | | Finance leases & Other | $0.019 | $0.020 | | **Total Debt (Gross)** | **$2.374** | **$2.270** | | Less: Current portion, discounts, etc. | $(0.060) | $(0.062) | | **Long-term debt (Net)** | **$2.314** | **$2.208** | - On October 31, 2024, the company entered a New Credit Agreement, including **$2.25 billion** in term loans due 2031 and a **$750 million** revolving credit facility due 2029. Proceeds were used to repay prior debt facilities[57](index=57&type=chunk) - The weighted average interest rate of borrowings under senior credit agreements was **6.6%** for Q1 2025, a significant decrease from **9.5%** for Q1 2024[70](index=70&type=chunk) [Note 18: Segment Information](index=27&type=section&id=Note%2018%3A%20Segment%20Information) StandardAero operates in Engine Services and Component Repair Services. Q1 2025 saw Engine Services revenue at **$1.27 billion** and Segment Adjusted EBITDA at **$174.0 million**, while Component Repair Services reported **$167.3 million** revenue and **$47.4 million** Segment Adjusted EBITDA Segment Performance (Q1 2025 vs Q1 2024) | Segment | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | :--- | | **Engine Services** | Segment Revenue | $1,268.3 | $1,097.4 | | | Segment Adjusted EBITDA | $174.0 | $150.0 | | **Component Repair Services** | Segment Revenue | $167.3 | $138.3 | | | Segment Adjusted EBITDA | $47.4 | $35.8 | | **Total Segments** | **Total Segment Revenue** | **$1,435.6** | **$1,235.7** | | | **Total Segment Adjusted EBITDA** | **$221.4** | **$185.8** | - The company's performance is evaluated based on segment Revenue and segment Adjusted EBITDA, defined as net income before interest, taxes, depreciation, amortization, and other specified non-recurring or non-cash items[118](index=118&type=chunk)[119](index=119&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial results, noting a **16.2%** revenue increase to **$1.44 billion** and net income surge to **$62.9 million**, driven by growth and lower interest expense post-refinancing [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q1 2025 revenue grew **16.2%** to **$1.436 billion**, with operating income up **22.2%** to **$128.9 million**, and net income surged to **$62.9 million** due to a **43.5%** decrease in interest expense Comparison of Operations (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($M) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,435.6 | $1,235.7 | $199.9 | 16.2% | | Cost of revenue | $1,217.9 | $1,054.3 | $163.6 | 15.5% | | Operating income | $128.9 | $105.5 | $23.4 | 22.2% | | Interest expense | $43.8 | $77.5 | $(33.8) | (43.5)% | | **Net income** | **$62.9** | **$3.2** | **$59.8** | **1,875.0%** | - The increase in revenue was driven by continued strength across the commercial aerospace and business aviation end markets, which grew **18.1%** and **12.9%** respectively[160](index=160&type=chunk) - Interest expense decreased by **$33.8 million (43.5%)** due to the repayment of Prior Senior notes post-IPO and entering into the New Credit Agreement with more favorable terms[164](index=164&type=chunk) [Segment Results](index=36&type=section&id=Segment%20Results) Engine Services revenue grew **15.6%** to **$1.27 billion** and Component Repair Services revenue increased **20.9%** to **$167.3 million**, boosted by the Aero Turbine acquisition Segment Performance Summary (Q1 2025) | Segment | Revenue (in millions) | Segment Adjusted EBITDA (in millions) | Segment Adjusted EBITDA Margin | | :--- | :--- | :--- | :--- | | Engine Services | $1,268.3 | $174.0 | 13.7% | | Component Repair Services | $167.3 | $47.4 | 28.3% | - Engine Services revenue growth was driven by high engine aftermarket demand in commercial aerospace and business aviation[170](index=170&type=chunk) - Component Repair Services revenue growth was primarily attributable to increased demand and **$21.9 million** of revenue from the acquisition of Aero Turbine[172](index=172&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company had **$764.9 million** in available liquidity and **$2.34 billion** in total debt, with improved operating cash flow Liquidity Summary | Metric | As of March 31, 2025 (in millions) | | :--- | :--- | | Cash | $140.8 | | Available under New 2024 Revolving Credit Facility | $624.1 | | **Total Available Liquidity** | **$764.9** | Cash Flow Summary (Q1 2025 vs Q1 2024) | Cash Flow Activity | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | $(24.0) | $(83.6) | | Net cash used in investing activities | $(40.1) | $(18.0) | | Net cash provided by financing activities | $102.4 | $77.5 | - As of March 31, 2025, the company was in compliance with all covenants in the New Credit Agreement[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk on variable-rate debt via swaps and caps, addresses inflation through pricing, and considers foreign currency risk limited - Interest rate risk on floating-rate debt is mitigated using a **$400.0 million** interest rate swap (fixing SOFR at **3.71%**) and interest rate caps on a notional amount of **$1.5 billion** (capping SOFR at **4.45%** until Sep 2025, then **5.00%** until Dec 2026)[194](index=194&type=chunk) - Inflation impacts costs of labor, materials, and utilities. The company aims to pass these increases to customers through contractual provisions and price adjustments[195](index=195&type=chunk) - Foreign currency risk is limited, with only **2.4%** of revenue in Q1 2025 attributable to non-U.S. Dollar currencies. A hypothetical **10%** change in the U.S. dollar value would not have a material effect[196](index=196&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of March 31, 2025, due to material weaknesses in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to existing material weaknesses[199](index=199&type=chunk) - Material weaknesses identified include deficiencies in the control environment (insufficient personnel with accounting knowledge), risk assessment, monitoring controls, and information/communication controls[203](index=203&type=chunk) - Remediation efforts are underway, including hiring more accounting and IT staff, developing better monitoring protocols, and improving the design and testing of IT controls[202](index=202&type=chunk)[204](index=204&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the normal course of business, with no expected material adverse effect on financial position - The company is involved in legal proceedings such as commercial claims, product liability, and personal injury claims, which are considered part of the normal course of business[207](index=207&type=chunk) - Reserves are established when a liability is probable and can be reasonably estimated. The company does not anticipate these proceedings will have a material adverse effect[207](index=207&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the 2024 Form 10-K[208](index=208&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or purchases of equity securities by the issuer or affiliated purchasers during the period - None[209](index=209&type=chunk) [Item 3. Defaults Upon Senior Securities](index=43&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[210](index=210&type=chunk) [Item 4. Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[211](index=211&type=chunk) [Item 5. Other Information](index=43&type=section&id=Item%205.%20Other%20information) The company reports no other material information required to be disclosed - None[215](index=215&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents and officer certifications - Exhibits filed include corporate governance documents and required officer certifications under the Sarbanes-Oxley Act[217](index=217&type=chunk)
StandardAero, Inc.(SARO) - 2025 Q1 - Earnings Call Transcript
2025-05-12 22:02
Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $1.4 billion, a 16% increase from $1.2 billion in Q1 2024, with 14.4% being organic growth [19] - Adjusted EBITDA rose to $198 million, up 20% from $166 million in the prior year [19] - Adjusted EBITDA margin improved to 13.8%, a 40 basis point increase compared to Q1 2024 [20] Business Line Data and Key Metrics Changes - Engine Services revenue increased by $171 million to $1.3 billion, representing 16% growth, driven by strong demand in the commercial aftermarket [21] - Component Repair Services revenue grew by 21% to $167 million, supported by the ATI acquisition, contributing $22 million [22] - Adjusted EBITDA for Component Repair Services grew 32%, with a margin expansion of 240 basis points to 28% [22] Market Data and Key Metrics Changes - Commercial aerospace grew 18% year over year, driven by strong demand across major platforms [9] - Business Aviation Group increased 13% compared to Q1 last year [10] - Military business grew 10%, aided by the AeroTurbine acquisition and growth in the J85 program [10] Company Strategy and Development Direction - The company is focused on ramping up the LEAP program and has secured additional regulatory approvals to support a broader set of airlines globally [14] - Continued investment in CFN56 and CF34 platforms, with a record quarter on the CF34 platform [15] - The company is actively pursuing M&A opportunities, with a growing pipeline of targets [17] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the strong demand in the engine aftermarket and is increasing revenue and adjusted EBITDA guidance for 2025 [18] - The estimated net impact of tariffs for 2025 is projected to be around $15 million, which has been incorporated into the updated guidance [13] - The company is well-positioned to navigate macroeconomic uncertainties and trade environment challenges [12] Other Important Information - Free cash flow was a use of $64 million in Q1, which was expected due to working capital seasonality [23] - The company’s leverage improved to 3.09 times, down from 5.7 times at the end of Q1 2024 [24] - The company exited a non-core hydraulics business to focus on higher-margin product lines [71][72] Q&A Session Summary Question: Confidence in CF34 platform growth despite U.S. Airlines' slower capacity - Management noted that maintenance activity has not seen a pullback, as engine MRO is typically the last area airlines cut back on during weak demand [33] Question: M&A environment and opportunities - Management expressed confidence in pursuing M&A opportunities, stating that the environment has become more robust with attractive targets available [36] Question: Growth drivers in Engine Services - Management highlighted military and CF34 as key drivers, with expectations for LEAP and CFM56 to contribute significantly in the future [39] Question: Margin headwinds from LEAP and CFM56 - Management confirmed that while there are margin headwinds due to initial lower margins on LEAP and CFM56, both programs are expected to be accretive long-term [48] Question: Update on ATI acquisition - The integration of ATI is progressing well, with strong revenue and margins, and it is enhancing the existing J85 program work [75][76] Question: Supply chain for LEAP parts - Management reported no significant supply chain issues for LEAP parts, as they are still in the early stages of industrialization [81] Question: Revenue seasonality - Management indicated a typical trend of revenue building from Q1 to Q2 and further into the second half of the year, supported by a diverse platform portfolio [100] Question: Repair capabilities and market potential - Management emphasized the ongoing development of repair capabilities in close coordination with OEMs, indicating a strong runway for growth in the component repair business [88]