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    SARO
    Earnings call· Jun 2026(Q2 FY26)

    StandardAero Q2 FY26 earnings call SARO

    Aug 6, 2026 Source

    Executive summary

    StandardAero Q2 FY26 — Record Margins and Strategic Program Profitability Drive Strong Earnings Growth

    StandardAero delivered a strong second quarter, marked by double-digit earnings growth and record margins, driven by robust commercial and business aviation demand, and the profitability of key growth programs like LEAP and CFM56 DFW. The company continues to strategically deploy capital through license expansions, acquisitions, and share repurchases, while navigating supply chain fluidity with internal capabilities. Management raised full-year guidance, confident in sustained double-digit earnings growth.

    Highlights

    5

    • Adjusted EBITDA grew 12.3% year-over-year to $230 million.

    • Adjusted EBITDA margin expanded 100 basis points to a record 14.4%.

    • Free cash flow was an inflow of $50 million in the quarter, a meaningful improvement.

    • LEAP and CFM56 DFW programs reached profitability in the quarter as promised.

    • Signed a $180 million license expansion expected to add $25 million incremental annual adjusted EBITDA at full run rate.

    Concerns

    4

    • Military and helicopter revenue declined 3% due to input delays on select military platforms.

    • Component Repair Services (CRS) segment adjusted EBITDA was down 0.9% year-over-year to $51 million.

    • CRS segment adjusted EBITDA margin declined 270 basis points to 26.3% due to work migration, labor ramp inefficiency, and negative mix from military delays.

    • Working capital was a $56 million use of cash in the quarter.

    Guidance & targets

    21
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $6.375B-$6.5B
    high materiality
    High
    Full-year 2026 Engine Services Segment Revenue
    Increased
    medium materiality
    High
    Full-year 2026 Adjusted EBITDA
    $885M-$910M
    high materiality
    High
    Full-year 2026 Engine Services Segment Adjusted EBITDA
    $770M-$785M
    medium materiality
    High
    Full-year 2026 Adjusted EPS
    $1.50-$1.57
    high materiality
    High
    Full-year 2026 Commercial Aerospace Growth (normalized)
    low double-digits to mid-teens
    medium materiality
    High
    Full-year 2026 Business Aviation Growth
    high single-digit to low double-digit range
    medium materiality
    High
    Full-year 2026 Military and Helicopters Growth
    low double-digit range
    medium materiality
    High
    Full-year 2026 Component Repair Services (CRS) Segment Revenue
    Reiterated
    medium materiality
    High
    Full-year 2026 Component Repair Services (CRS) Segment Adjusted EBITDA
    Reiterated
    medium materiality
    High
    Full-year 2026 Corporate Expense
    approximately $105M
    low materiality
    High
    Full-year 2026 Interest Expense
    $150M-$160M
    low materiality
    High
    Full-year 2026 Adjusted Effective Tax Rate
    23.5%-25.5%
    low materiality
    High
    Full-year 2026 Average Diluted Shares Outstanding
    approximately 332.5M
    low materiality
    High
    Full-year 2026 Adjusted Free Cash Flow
    $270M-$300M
    high materiality
    Medium
    Full-year 2026 CapEx
    $100M-$110M
    medium materiality
    High
    LEAP annual revenue
    $1B
    high materiality
    High
    LEAP annual revenue
    several billion
    high materiality
    Medium
    License expansion incremental annual adjusted EBITDA
    $10M
    medium materiality
    High
    License expansion incremental annual adjusted EBITDA
    $20M
    medium materiality
    High
    License expansion incremental annual adjusted EBITDA
    $25M
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Engine Services
    Revenue growth impacted by elimination of low to no-margin material pass-through revenues. Underlying demand was meaningfully stronger than headline rate suggests. Growth and margin expansion driven by volume, productivity, pricing, learning curve progress on LEAP and CFM56 DFW, and margin accretion from pass-through revenue elimination.
    Adjusted EBITDA: $204MAdjusted EBITDA margin change: +130 bps YoY
    		$1.405B4.0%—14.5%
    Component Repair Services
    Growth tied to strong commercial aerospace (CFM56, GTF, CF34) and aeroderivative platforms in land/marine power generation. Partially offset by lower revenues on military platforms due to timing. Margin decline driven by migration of work to back shops, temporary inefficiency from ramping new employees, and negative mix from military input delays. Margin pressure expected to dissipate in H2 FY26.
    Adjusted EBITDA: $51MAdjusted EBITDA change: -0.9% YoYAdjusted EBITDA margin change: -270 bps
    		$195M9.2%—26.3%
    Commercial Aerospace
    Excluding impact of pass-through revenue elimination, growth would have been mid-teens year-over-year. Demand remains historically strong, with MRO capacity tight and commercial backlog continuing to grow.
    		—6%——
    Business Aviation
    Supported by continued strong activity on key midsize and super-midsize platforms. Global business jet flight activity and fleet utilization translate into engine MRO demand.
    		—6%——
    Military and Helicopter
    Decline due to input delays on select military platforms. Long-term demand outlook remains confident, with operating tempo and flight hours up, and defense budgets growing. Volumes on fighter and transport platforms ramping into H2.
    		—-3%——

    Operational metrics

    14
    Adjusted EBITDA
    $230Mup 12.3% YoY
    Q2 FY26

    Driven by strong demand, productivity, pricing, LEAP/CFM56 DFW profitability, and margin uplift from pass-through revenue elimination.

    Adjusted EBITDA margin
    14.4%expanded 100 bps YoY
    Q2 FY26

    Record level, reflecting operating leverage.

    Adjusted EPS
    $0.40up 24% YoY
    Q2 FY26

    Reflecting higher earnings and lower share count from repurchases.

    Net debt to adjusted EBITDA
    2.6xdown from 3.0x a year ago
    Q2 FY26

    Within long-term target range of 2x-3x. Improvement driven by adjusted EBITDA growth and cash flow.

    Share repurchases
    $40M
    Q2 FY26

    Part of broader capital allocation framework, viewed as valuable when shares trade below intrinsic value.

    Low to no-margin material pass-through revenue eliminated
    $300M-$400M
    FY26

    On track for this elimination, which was a contract-by-contract effort. Has a material impact on margins and working capital.

    Working capital
    $56M
    Q2 FY26

    Despite being a use of cash, significant progress made in materials management helped drive strong positive FCF.

    Major growth CapEx
    $7M
    Q2 FY26

    LEAP and CFM56 Dallas-Fort Worth CapEx and startup costs are winding down.

    Maintenance CapEx
    1%
    long-term

    Consistent long-term expectation for maintenance CapEx. Expected to be 1.3% in FY26.

    CapEx
    $134M
    FY25

    Reference point for prior year CapEx, which is significantly higher than current year.

    License expansion cost
    $180M
    Q2 FY26

    Significant investment for new applications, platforms, and improved economics.

    License expansion incremental annual adjusted EBITDA
    $25M
    annual at full run rate

    Expected impact from the $180M license expansion.

    Net income
    $97M43.7% growth YoY
    Q2 FY26

    Driven by higher operating earnings, lower interest expense, and lower tax rate.

    Adjusted EPS raise from amortization move
    5%
    FY26

    Most of the EPS raise is from increased earnings, with only a small portion from the amortization move.

    Orderbook & backlog

    3
    Commercial backlogcontinued to growQ2 FY26
    CFM56 Center of Excellence backloggrowingQ2 FY26
    LEAP shop visit slotsfilling out into next decadeQ2 FY26

    Deals & partnerships

    2
    Key OEM partnerLicense expansion spanning multiple turbofan and turboprop platforms$180M

    Broadens authorizations, adds new engine variants at several locations, improves economics on existing work, and adds component repair authorizations benefiting both segments. Increases strategic and financial benefits of Unified Turbines acquisition.

    Unified TurbinesAcquisition of component repair business

    Announced in May, completed in Q2. Targeted strategic addition to CRS, enhancing hot section repair capabilities on engines already supported and advancing in-sourcing strategy across both segments. Integration is underway and progressing as planned.

    Capital programs

    1
    CF34 Winnipeg expansionon track

    Benefit: additional capacity

    Additional capacity is effectively sold out and further solidifies leadership in the CF34 market. Expected to begin to scale throughout 2027.

    Risks & headwinds

    4
    Military and helicopter input delaysQ2 FY26, expected to dissipate in H2 FY26

    Revenue declined 3% YoY in Q2 FY26

    Mitigation: Volumes on fighter and transport platforms are ramping into the second half. Long-term military demand outlook remains confident due to increased operating tempo, growing defense budgets, and constrained MRO capacity.

    Component Repair Services (CRS) margin pressureQ2 FY26, expected to dissipate in H2 FY26

    Adjusted EBITDA margin down 270 bps to 26.3% in Q2 FY26

    Mitigation: Driven by work migration to back shops, temporary inefficiency from ramping new employees, and negative mix from military delays. Management expects margin pressure to dissipate in H2 FY26, implying a return to high 20% margin profile.

    Fluid supply chain environmentOngoing

    Working capital was a $56 million use of cash in Q2 FY26

    Mitigation: All planning and guidance assume no recovery in supply chain from OEMs. Company uses Component Repair business to work around disruptions. Significant progress made in materials management, particularly for constrained parts (castings, forgings). Any improvements would be upside.

    Elevated jet fuel pricesOngoing

    Jet fuel prices remain elevated

    Mitigation: No reduction in demand observed to date. MRO market remains constrained, aircraft retirements low, and customers reluctant to give up induction slots. 40% of business not sensitive to jet fuel prices. Airlines typically pass on costs, optimize routes, and only as a last resort adjust maintenance schedules.

    What to watch in Q3 FY26

    4

    CRS segment margin recovery

    H2 FY26
    Current26.3% in Q2 FY26
    TargetReturn to high 20% margin profile

    Why it matters

    Indicates successful integration of new employees and work migration, crucial for segment profitability.

    We are reiterating our full year CRS revenue and adjusted EBITDA guidance, which implies a return to our expected high 20% margin profile in the second half.

    Q&A highlights

    7

    How is the fluid supply chain environment impacting StandardAero, especially given GE's reported delinquencies, and what is the path to a more normalized throughput?

    StandardAero's planning and guidance assume no recovery in the supply chain from OEMs. The company uses its Component Repair business to work around disruptions, and any improvements would be upside. They do not see deterioration and have ways to manage it, so guidance is not dependent on supply chain improvements.

    “all of our planning and our guidance assumes that there is no recovery in the supply chain from the OEMs. We have the ability to work around any types of supply chain disruptions through our Component Repair business.”

    asked by Seth Seifman · answered by Russell Ford

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Program Progress and Profitability

    StandardAero achieved significant milestones with its LEAP and CFM56 DFW programs, both reaching profitability in Q2 FY26 as planned. The LEAP program continues to ramp, win new awards, and is expected to reach $1 billion in annual revenue by the end of the decade, growing to several billion by the mid-2030s as work scopes shift to heavier performance restoration visits. The CFM56 Center of Excellence in Dallas-Fort Worth is also growing its backlog and adding new customers, solidifying its market position.

    02

    License Expansion and Component Repair Services Growth

    The company signed a significant $180 million license expansion with a key OEM partner, broadening authorizations across multiple turbofan and turboprop platforms. This agreement is expected to generate $25 million in incremental annual adjusted EBITDA at full run rate by FY29, with margins accretive to the company average. Component Repair Services (CRS) is experiencing strong growth in commercial aerospace and land/marine volumes, industrializing new repairs, and migrating work across its network to meet demand, despite temporary margin pressures from this expansion.

    03

    Capital Deployment and M&A Activity

    StandardAero remains active in capital deployment, completing the acquisition of Unified Turbines, a component repair business that enhances hot section repair capabilities and advances in-sourcing strategy. This acquisition's benefits are further amplified by the new license expansion. The company also repurchased $40 million of shares in Q2, bringing year-to-date repurchases to $100 million, viewing it as a valuable tool when shares trade below intrinsic value.

    04

    End Market Demand and Supply Chain Management

    Customer demand remains strong across commercial aerospace and business aviation, with revenue growth of 6% in both segments. Military and helicopter revenue declined 3% due to input delays, but the long-term outlook remains positive with increased operating tempo and defense budgets. The company's guidance assumes no recovery in the fluid supply chain, leveraging its Component Repair business to work around disruptions and focusing on materials management to mitigate constrained parts issues, particularly in castings and forgings.

    05

    Financial Performance and Outlook

    StandardAero delivered strong Q2 FY26 results with 4.6% revenue growth, 12.3% adjusted EBITDA growth, and a record 14.4% adjusted EBITDA margin. Free cash flow was a positive $50 million, driven by supply chain initiatives. The company raised its full-year 2026 guidance for revenue, adjusted EBITDA, and adjusted EPS, reflecting increased confidence in continued double-digit earnings growth and strategic investments.

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