SARO — StandardAero, Inc.

Summary of StandardAero Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Revenue: Q4 2025 revenue was $1.6 billion, a 13.5% increase from $1.4 billion in Q4 2024. Full-year revenue grew 16% year-over-year to approximately $6.3 billion.
• Adjusted EBITDA: Q4 adjusted EBITDA rose to $210 million (12.7% growth), with full-year adjusted EBITDA at $808 million (17% growth).
• Net Income: Q4 net income was $79 million, a significant improvement from a net loss of $14 million in Q4 2024. Full-year net income reached $277 million.
• Free Cash Flow: Q4 free cash flow improved to $308 million, with full-year free cash flow at $209 million, a turnaround from a $45 million outflow in 2024.
• Leverage Ratio: Improved to 2.4x, down from 3.1x, providing flexibility for capital allocation.

2. Strategic Updates and Business Highlights

• Growth Initiatives: Significant progress in the LEAP program, with 60 engines inducted in 2025 compared to 10 in 2024. Revenues from LEAP in H2 2025 were approximately 2.5x those in H1.
• Facility Expansions: Completed expansion of the Augusta business aviation facility to enhance MRO capacity for large cabin jets and announced expansion of the CF34 facility in Winnipeg.
• Market Demand: Strong growth across segments: 18% in commercial aerospace, 12% in business aviation, and 9% in military despite a government shutdown impacting military revenues.
• Margin Improvement: Continued focus on restructuring contracts to eliminate low-margin pass-through revenue, expected to enhance reported margins.

3. Forward Guidance and Outlook

• 2026 Revenue Forecast: Expected revenue between $6.275 billion and $6.425 billion, with continued strong demand in core markets.
• Adjusted EBITDA Guidance: Forecasted adjusted EBITDA of $870 million to $905 million, implying approximately 10% growth year-over-year.
• Free Cash Flow Projection: Anticipated cash generation of $270 million to $300 million, representing a 36% increase at the midpoint.
• EPS Guidance: Expected adjusted EPS of $1.35 to $1.45, indicating 18% growth from 2025.

4. Bad News, Challenges, or Points of Concern

• Supply Chain Issues: Ongoing challenges with part availability, although improvements were noted in the depth of delays.
• Labor Market Pressures: Competition for skilled mechanics remains a concern, although the company has implemented strategies to mitigate this risk through training and recruitment initiatives.
• Fire Incident: A small fire at the Phoenix CRS facility in December impacted revenue and margins in Q4, although operations resumed in January.
• Government Shutdown Impact: The U.S. government shutdown affected military business growth, which could have lingering effects into 2026.

5. Notable Q&A Insights

• Margin Expectations: Q1 2026 margins in the Component Repair Services segment are expected to be below normal levels due to the fire and government shutdown impacts.
• Military Market Outlook: While there is potential for increased military MRO work due to geopolitical tensions, the company does not expect significant near-term growth from this segment.
• Pricing Environment: The company is experiencing a favorable pricing environment, with customers accepting above-average price increases due to ongoing supply chain constraints.
• In-Sourcing Strategy: The company is actively working to increase in-sourced repairs, which are expected to enhance margins and reduce reliance on external suppliers.

This summary encapsulates StandardAero's performance and outlook, highlighting both achievements and challenges as the company navigates a dynamic market landscape.