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    SARO
    Earnings call· Mar 2026(Q1 FY26)

    StandardAero Q1 FY26 earnings call SARO

    May 7, 2026 Source

    Executive summary

    StandardAero Q1 FY26 — Double-Digit Growth Across All End Markets and Raised Full-Year Guidance

    StandardAero delivered a solid first quarter with robust organic revenue growth across all key end markets, leading to raised full-year guidance. Despite some transitory margin pressures from growth program ramps and inventory burn-down, the underlying business strength and demand drivers remain strong. The company continues to execute on strategic priorities, including the LEAP and CFM56 DFW ramps, CF34 investments, and expanding component repair capabilities, while maintaining a disciplined approach to capital deployment.

    Highlights

    5

    • Revenue grew organically by 13.3% year-over-year to $1.63 billion, with double-digit growth across all three major end markets.

    • Full-year 2026 guidance for revenue, adjusted EBITDA, and adjusted EPS was raised, with adjusted EPS now projected to grow 22% year-over-year at the midpoint.

    • Repurchased $60 million of shares in Q1 under the $450 million repurchase program.

    • Announced the acquisition of Unified Turbines, adding critical repair capability and supporting in-sourcing strategy.

    • Component Repair Services segment adjusted EBITDA margin expanded 90 basis points year-over-year to 29.2%.

    Concerns

    5

    • Adjusted EBITDA increased only 2.5% year-over-year to $203 million, and adjusted EBITDA margin compressed to 12.5% from 13.8% in the prior year period.

    • The ramp of LEAP and CFM56 DFW growth programs, still on the learning curve, partially offset benefits.

    • Earlier-than-anticipated inventory burn down of existing low-margin pass-through material impacted margins.

    • Nonrecurring costs from the closeout of a military program and timing of engine shipments affected mix and profitability.

    • Residual impact of the U.S. government shutdown is progressing slower than expected in the Component Repair Services business.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $6.325 billion to $6.45 billion
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $875 million to $905 million
    high materiality
    High
    Full-year 2026 Adjusted EPS
    $1.40 to $1.50
    high materiality
    High
    Full-year 2026 Free Cash Flow
    $270 million to $300 million
    high materiality
    High
    Military and Helicopter end market growth
    low double-digit growth year-over-year
    medium materiality
    High
    Business Aviation end market growth
    high single-digit to low double-digit percentage growth year-over-year
    medium materiality
    High
    Engine Services segment adjusted EBITDA margin
    over 14%
    medium materiality
    High
    LEAP and CFM56 DFW program profitability
    profitability
    medium materiality
    High
    Elimination of low-margin pass-through revenue
    $300 million to $400 million
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Engine Services
    Growth driven by commercial aerospace platforms (LEAP, CF34, CFM56, turboprop), business aviation (HTF7000), and military ramp. Results affected by timing of engine shipments and contract closeout costs. Excluding these, adjusted EBITDA grew above 12% YoY and margin was over 14%.
    Adjusted EBITDA: $179 millionAdjusted EBITDA growth YoY: 3%Adjusted EBITDA margin YoY change: -140 bps
    		$1.45 billion14.1%—12.3%
    Component Repair Services
    Growth driven by underlying demand, particularly narrowbody aircraft components (CFM56, GTF). Partially offset by impact of Phoenix facility fire and residual impact from U.S. government shutdown. Phoenix facility fully operational by end of Q1.
    Adjusted EBITDA: $52 millionAdjusted EBITDA growth YoY: 11%Adjusted EBITDA margin YoY change: +90 bps
    		$180 million7.4%—29.2%

    Operational metrics

    15
    Adjusted EBITDA
    $203 millionup 2.5% YoY
    Q1 FY26

    Benefits partially offset by ramp of LEAP/CFM56, inventory burn-down, engine shipment mix, and nonrecurring military program closeout costs.

    Adjusted EBITDA Margin
    12.5%vs 13.8% prior year
    Q1 FY26

    Year-over-year margin compression due to transitory and one-time items.

    Net Income
    $80 millionvs $63 million prior year
    Q1 FY26

    Driven by higher operating earnings and lower interest expense.

    Adjusted EPS
    $0.33up 14% YoY
    Q1 FY26

    Higher than the year-ago period.

    Net Debt to Adjusted EBITDA
    2.6xvs 3.1x prior year
    Q1 FY26

    Leverage remains within the long-term target range.

    Share Repurchases
    $60 million
    Q1 FY26

    Executed under the $450 million repurchase program.

    Commercial Aerospace Revenue Growth
    11%YoY
    Q1 FY26

    Benefited from robust global aftermarket demand and tight MRO capacity.

    Business Aviation Revenue Growth
    20%YoY
    Q1 FY26

    Supported by strong demand on key midsized and super-midsized platforms, including HTF7000.

    Military and Helicopter Revenue Growth
    10%YoY
    Q1 FY26

    Strong rebound in activity across several military platforms after U.S. government shutdown impact.

    LEAP Revenue Growth
    4xYoY
    Q1 FY26

    Program continues to scale rapidly.

    Low to No Margin Material Pass-Through Revenue Elimination
    $300 million to $400 million
    FY26

    Expected elimination from restructured commercial contracts in Engine Services, with subsequent margin benefit.

    Engine Services Adjusted EBITDA Margin (excluding transitory items)
    over 14%
    Q1 FY26

    Underlying margin strength when excluding mostly transitory and one-time items.

    Component Repair Services Adjusted EBITDA Margin (excluding transitory items)
    above 14%
    Q1 FY26

    Underlying margin strength when excluding mostly transitory and one-time items.

    Working Capital Build
    $247 million
    Q1 FY26

    Primarily driven by billed accounts receivable and contract assets related to CF34 growth.

    Inventory Change
    $65 million improvement
    Q1 FY26

    Inventory dropped in the quarter.

    Industry KPIs

    3
    MetricValueDetails
    Defense program awards80%%
    Program segment backlogExpanded
    Unit deliveries by programFirst LEAP 1A full overhaul

    Orderbook & backlog

    1
    Expanded BacklogExpandedQ1 FY26

    All major end markets experiencing expanded backlog.

    Deals & partnerships

    1
    Unified TurbinesSpecialty provider of hot section component repair and overhaul services for Pratt & Whitney and Honeywell engines.

    Adds critical repair capability on important engines (PT6A, PW100) and supports faster component repair turnaround times. Highly synergistic with Component Repair Services segment, aligning with strategy to expand repair capabilities and increase in-sourcing capture. Unified Turbines has been a trusted supplier since 2001.

    Capital programs

    1
    Winnipeg Expansionon track
    Funding: Canadian and Manitoba governments
    Start: Q4 2025

    Benefit: Expanded CF34 capacity, freed up military capacity

    Expansion launched in Q4 2025, supported by Canadian and Manitoba governments, on track for completion in H2 2026. Additional capacity already booked due to significant CF34 growth.

    Risks & headwinds

    8
    LEAP and CFM56 DFW program rampQ1 FY26, H1 FY26 for profitability

    Partially offset benefits, still coming down the learning curve

    Mitigation: Focused execution, improving throughput, productivity, and component repair capability; on track for profitability in H1 2026.

    Inventory burn down of low-margin pass-through materialQ1 FY26, next 3 quarters for elimination

    Earlier-than-anticipated, drawing more through P&L, impacting margins

    Mitigation: Expect to eliminate $300M-$400M of this revenue in FY26, with subsequent margin benefit over next 3 quarters.

    Timing of engine shipments and mix impactQ1 FY26

    Impacted mix, affected Engine Services adjusted EBITDA and margin

    Mitigation: Expect to return to double-digit EBITDA growth in Q2 with productivity improvements and better mix.

    Nonrecurring costs from military program closeoutQ1 FY26

    Impacted Q1 results, anticipated in full-year guidance

    Mitigation: Cost was anticipated in full-year guidance, preparing for next contract.

    Phoenix facility fire impactQ1 FY26

    Closed facility during first few weeks of Q1, partially offset CRS growth

    Mitigation: Facility up and running at full capacity by end of Q1, no impact expected in Q2.

    Residual impact of U.S. government shutdown on CRSQ1 FY26, fading through Q2 FY26

    Progressing at a slower rate than previously expected in CRS business

    Mitigation: Expect residual impact to fade through Q2.

    Complex operating environment (Iran conflict, fuel prices, airline pressure)Ongoing

    Elevated jet fuel prices, selected capacity adjustments, global airline profitability under near-term pressure

    Mitigation: Structural tightness of MRO market, diversified portfolio, differentiated positions on fuel-efficient platforms, robust supply chain, energy costs small portion of cost base, pricing structures protect against input cost inflation.

    Industry-wide supply chain constraintsOngoing

    Parts availability and supplier delivery remain persistent

    Mitigation: Close engagement with suppliers, multiple sourcing strategies, long-term agreements, asset management, USM sourcing, repair development.

    What to watch in Q2 FY26

    5

    LEAP and CFM56 DFW program profitability

    H1 FY26
    CurrentStill on learning curve, impacting Q1 margins
    TargetAchieve profitability

    Why it matters

    Confirmation of profitability for these key growth platforms is crucial for overall margin expansion and validates strategic investments.

    We are on track to achieve profitability in the first half of 2026 while pursuing additional long-term customer awards.

    Q&A highlights

    6

    Why was Q1 working capital outflow significantly higher than typical, and what are the full-year assumptions?

    The Q1 working capital build of $247 million was primarily due to movement into billed accounts receivable and an increase in contract assets related to the growing CF34 business and Winnipeg facility expansion. Inventory actually dropped by $65 million. The full-year cash flow guidance remains unchanged, with expectations for working capital to decline in the second half.

    “A lot of that was movement into billed accounts receivable, which is really great. That gets -- we've got great collections performance typically within 30 days. And inventory actually dropped in the quarter, a $65 million improvement.”

    asked by David Strauss · answered by Daniel Satterfield

    2 min read5 chapters

    Detailed Narrative

    01

    Strong End Market Performance and Strategic Positioning

    StandardAero achieved double-digit revenue growth across its commercial aerospace (11% YoY), business aviation (20% YoY), and military and helicopter (10% YoY) end markets. The company highlighted its strategic diversification across these markets, which provides resilience against macro volatility🌐 and allows for resource reallocation. The military business is experiencing a powerful tailwind from increased global defense spending, with recent awards securing 80% of OEM-directed MRO work for AE1107 and AE2100 engines globally into the next decade.

    02

    LEAP and CFM56 DFW Program Ramps

    The LEAP program continues to scale rapidly, with revenues growing 4x year-over-year in Q1. The company delivered its first LEAP 1A full overhaul early in the quarter and is on track to achieve profitability in the first half of 2026. Similarly, the CFM56 DFW Center of Excellence is ramping up and is also expected to reach profitability in the first half of the year, demonstrating effective execution on these key growth platforms.

    03

    Component Repair Services Growth and In-Sourcing

    The Component Repair Services (CRS) segment saw revenue increase by 7.4% year-over-year and adjusted EBITDA grow by 11%, with margin expansion of 90 basis points to 29.2%. This growth was driven by strong demand for narrowbody aircraft components, particularly CFM56 and GTF, and expanded repair content. The company continues to accelerate new repair initiatives and increase in-sourcing capture, with the acquisition of Unified Turbines further enhancing these capabilities.

    04

    Navigating Macroeconomic Headwinds

    Despite elevated jet fuel prices and geopolitical complexities, StandardAero has not observed a material impact on its commercial business, with bookings momentum remaining positive. Management attributes this resilience to the structural tightness of the MRO market, the company's diversified portfolio, differentiated positions on fuel-efficient new-generation platforms like LEAP, and robust supply chain management. Historically, the lag from oil price shocks to MRO revenue impact is measured in years, not quarters, due to the nature of engine MRO driven by accumulated flight cycles.

    05

    Capital Allocation and Balance Sheet Strength

    The company maintains a disciplined approach to capital deployment, balancing high-return organic investments, strategic M&A, and opportunistic share repurchases. In Q1, StandardAero repurchased $60 million of shares and announced the acquisition of Unified Turbines. The net debt to adjusted EBITDA ratio improved to 2.6x, remaining within the long-term target range of 2x to 3x, providing significant balance sheet flexibility.

    AI-generated summary of the company’s earnings call. Not investment advice.