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StandardAero (SARO) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· May 7, 2026

Source: earnings call transcript

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

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

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%

Orderbook & backlog

Expanded Backlog Expanded Q1 FY26

All major end markets experiencing expanded backlog.

Deals & partnerships

Unified Turbines Specialty 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

Winnipeg Expansion on 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

LEAP and CFM56 DFW program ramp Q1 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 material Q1 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 impact Q1 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 closeout Q1 FY26

Impacted Q1 results, anticipated in full-year guidance

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

Phoenix facility fire impact Q1 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 CRS Q1 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 constraints Ongoing

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

LEAP and CFM56 DFW program profitability

H1 FY26
Current Still on learning curve, impacting Q1 margins
Target Achieve 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.

Find out whether SARO delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.