StandardAero, Inc.(SARO) - 2024 Q3 - Quarterly Report

IPO and Financing - The company completed its IPO on October 2, 2024, at a price of $24.00 per share, generating net proceeds of$ 1,202.8 million after deducting underwriting discounts and commissions of approximately $67.1 million and estimated offering expenses of$ 8.1 million[140]. - The company entered into a New Credit Agreement on October 31, 2024, providing for a senior secured dollar term loan B facility of $1,630.0 million and a senior secured multicurrency revolving credit facility of up to$ 750.0 million[143]. - The company has a senior secured dollar term loan B facility due August 24, 2028, with an original aggregate principal amount of $1,802.5 million, which was refinanced in August 2023[207]. - The company redeemed$ 200.0 million of the Senior Notes on March 29, 2024, reducing the outstanding principal amount from $675.5 million[216]. - The company incurred additional 2024 Term Loans of$ 200.0 million on September 6, 2024, partly used to pay down advances under the ABL Credit Facility[208]. - The company is in compliance with the covenants in the Senior Secured Credit Agreements as of September 30, 2024[223]. Revenue and Performance - Revenue increased by $145.2 million, or 13%, to$ 1,244.6 million for the three months ended September 30, 2024, compared to $1,099.4 million for the same period in 2023[172]. - Revenue from the commercial aerospace end market rose by$ 116.7 million, or 19%, to $720.6 million, driven by increased demand for engine and component maintenance[172]. - Revenue from the business aviation end market increased by$ 32.5 million, or 15%, to $253.3 million, attributed to higher demand on serviced platforms[172]. - Revenue for the nine months ended September 30, 2024, increased by 12% to$ 3,827.5 million compared to $3,405.5 million for the same period in 2023[181]. - Engine Services segment revenue increased by 12% to$ 3,399.1 million, with a 22% increase in commercial aerospace revenue driven by higher engine maintenance demand[196]. - Component Repair Services segment revenue rose by 12% to $428.4 million, with a 20% increase in commercial aerospace revenue attributed to higher component usage[198]. Costs and Expenses - Cost of revenue increased by$ 110.4 million, or 12%, to $1,058.4 million, primarily due to growth in volumes leading to higher material and labor expenses[173]. - Cost of revenue rose by 12% to$ 3,275.3 million, driven by increased material and labor expenses due to higher volumes[182]. - Selling, general and administrative (SG&A) expenses rose to $62.9 million, a 19% increase from$ 53.0 million, largely due to increased personnel and professional fees related to the IPO and acquisition[174]. - Selling, general and administrative (SG&A) expenses increased by 16% to $171.7 million, primarily due to higher personnel and professional fees related to growth investments and acquisitions[183]. Profitability - Adjusted EBITDA for the three months ended September 30, 2024, was$ 168.4 million, compared to $133.6 million for the same period in 2023, reflecting a margin increase to 13.5%[172]. - Net income for the three months ended September 30, 2024, was$ 16.4 million, a significant improvement from a net loss of $17.9 million in the same period of 2023[172]. - Operating income for the nine months ended September 30, 2024, increased by 20% to$ 308.6 million compared to $257.5 million in 2023[181]. - Net income for the nine months ended September 30, 2024, was$ 25.0 million, a significant recovery from a net loss of $30.5 million in the same period of 2023[181]. Debt and Liquidity - The company had$ 560.2 million of available liquidity as of September 30, 2024, including $51.3 million in cash and$ 358.9 million available under the ABL Credit Facility[201]. - Total debt outstanding as of September 30, 2024, was $3,072.3 million, including$ 2,947.8 million under the 2024 Term Loan Facilities[202]. - As of September 30, 2024, the company's long-term debt stood at $3,391.4 million, an increase of 6.9% from$ 3,172.1 million as of December 31, 2023[203]. - The total debt agreements as of September 30, 2024, amounted to $3,469.3 million, compared to$ 3,259.3 million at the end of 2023, reflecting a year-over-year increase of 6.4%[203]. Market Trends and Projections - Global commercial air traffic has grown at a rate of 5.6% per annum over the last 40 years, expected to continue driving the number of aircraft in service to increase by a 3.5% CAGR from 2023 to 2042[146]. - The military aviation aftermarket is projected to grow by approximately 2-3% in 2024, with the U.S. accounting for approximately 40% of global military spend[149]. - The LEAP engine platform is expected to represent over 35% of the global fleet by 2033, driving demand for engine aftermarket services as these engines enter maintenance cycles[148]. - The company expects continued growth in revenue driven by demand in commercial aerospace and business aviation markets, despite challenges in military and helicopter segments[180]. Cash Flow - For the nine months ended September 30, 2024, net cash used in operating activities was $32.0 million, a significant improvement compared to$ 95.9 million for the same period in 2023[224][225]. - The net cash used in investing activities for the nine months ended September 30, 2024 was $184.1 million, primarily due to the acquisition of ATI for$ 114.1 million and capital expenditures of $70.4 million[227]. - Net cash provided by financing activities for the nine months ended September 30, 2024 was$ 209.1 million, mainly from the issuance of long-term debt totaling $765.0 million[228]. Foreign Currency and Interest Rate Risks - For the three months ended September 30, 2024, approximately$ 41.2 million, or 3.3%, of revenue was attributable to non-U.S. Dollar currencies, compared to $34.6 million, or 3.1%, for the same period in 2023[243]. - For the nine months ended September 30, 2024, revenue from non-U.S. Dollar currencies was$ 120.7 million, or 3.2%, compared to $112.5 million, or 3.3%, for the same period in 2023[243]. - The company reported a$ 0.8 million loss due to foreign currency transactions for the three months ended September 30, 2024, compared to a $0.4 million gain for the same period in 2023[243]. - Each 0.125% change in interest rates would result in a$ 3.7 million change in annual interest expense on term loan borrowings[234]. - The company entered into interest rate swap contracts to manage interest rate risk, with a notional amount decreasing from $1,000.0 million to$ 500.0 million[241]. - An interest rate cap contract was established to limit exposure to rising interest rates, with a capped SOFR rate of 4.45% on a notional amount of $500.0 million[241]. Inflation and Cost Management - Inflation risks are impacting costs related to labor, equipment, and raw materials, with the company striving to offset these through price increases and operational improvements[242]. - Inflation affects costs of labor, equipment, raw materials, freight, and utilities, with the company striving to offset these through price increases and cost-saving initiatives[242].