StandardAero, Inc. ((SARO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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StandardAero, Inc. recently held its earnings call, revealing a generally positive sentiment driven by significant revenue and EBITDA growth. The company demonstrated strong performance across its commercial aerospace, military, and component repair services sectors. The LEAP program, in particular, showed promising momentum, and the company raised its 2025 guidance. However, some concerns were noted regarding cash flow challenges and the dilutive impact of ramp programs.
Strong Revenue and EBITDA Growth
StandardAero reported a 13.5% increase in revenue, reaching $1.53 billion, with adjusted EBITDA rising by 20% to $205 million compared to the prior year period. The adjusted EBITDA margins expanded by 80 basis points to 13.4%, highlighting the company’s robust financial performance.
Commercial Aerospace Sales Increase
The company experienced a 14% year-over-year growth in commercial aerospace sales. This increase was driven by strong performances in CF34, LEAP, CFM56, and Turboprop platforms, showcasing the company’s competitive edge in the aerospace market.
Military Sales Growth
Military sales saw a 12% increase year-over-year, bolstered by the Aero Turbine acquisition and growth in the AE1107 and J85 programs. This growth underscores StandardAero’s strategic expansion in the military sector.
Component Repair Services Segment Performance
The Component Repair Services segment reported a 31% increase in revenue, with adjusted EBITDA growing by 50% and margins expanding to 29%. This segment’s performance highlights its critical role in the company’s overall growth strategy.
LEAP Program Momentum
The LEAP program demonstrated significant momentum, with sales tripling sequentially. Total LEAP bookings exceeded $1.5 billion, up from $1 billion at the end of the previous year, indicating strong market demand and future growth potential.
Increased 2025 Guidance
StandardAero has increased its 2025 guidance, with expectations of continued double-digit revenue growth and adjusted EBITDA margin expansion. The company anticipates robust growth in the LEAP program, CF34, and CFM56 platforms, with LEAP bookings expected to reach $1 billion in annual revenue by the end of the decade.
Cash Flow Challenges
The company faced cash flow challenges, with a $31 million use in free cash flow during the quarter. This was attributed to ongoing growth investments, higher working capital, and CapEx driven by growth in the LEAP, CFM56, and CF34 platforms.
Dilutive Impact of Ramp Programs
The ramping of LEAP and CFM56 programs had a dilutive effect on margins. However, these programs are expected to become profitable late this year or early next year, which should alleviate some of the current financial pressures.
Forward-Looking Guidance
Looking ahead, StandardAero expects continued double-digit revenue growth and further adjusted EBITDA margin expansion. The company is focusing on key growth areas, including the LEAP program and CF34 and CFM56 platforms. Additionally, StandardAero is expanding its capabilities in component repair services and plans to bring its newly expanded business aviation facility in Augusta, Georgia, online by the third quarter of 2025.
In summary, StandardAero’s earnings call conveyed a positive outlook with significant growth across various segments. Despite some challenges with cash flow and ramp program impacts, the company remains optimistic about its future, supported by strong guidance and strategic expansions.