SARO

Business Context and Reporting Period

Company: StandardAero, Inc. (formerly Dynasty Parent Co., Inc.)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: StandardAero is the world's largest independent, pure-play provider of aerospace engine aftermarket services for fixed and rotary wing aircraft. The company operates through two reportable segments: Engine Services (maintenance, repair, and overhaul) and Component Repair Services (engine piece part and accessory repair). The company serves commercial, military, and business aviation end markets globally.

Key Financial Metrics (Year Ended Dec 31, 2025)

Note: Available liquidity includes cash on hand and $735.9 million available under the New 2024 Revolving Credit Facility.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 15.8% to $6.06 billion, driven by growth in commercial aerospace (17.6%) and business aviation (12.1%) end markets, as well as the acquisition of Aero Turbine, Inc. in August 2024.
• Profitability Surge: Net income increased 2,427.9% to $277.4 million. This was primarily due to a significant reduction in interest expense (down 38.3% to $174.2 million) following the refinancing of debt in late 2024, and the absence of one-time costs incurred in 2024 such as IPO-related costs ($26.9 million), refinancing costs ($23.7 million), and loss on debt extinguishment ($15.3 million).
• Segment Performance:
  • Engine Services: Revenue up 15.3% to $5.35 billion; Adjusted EBITDA margin stable at 13.2%.
  • Component Repair Services: Revenue up 19.6% to $708.6 million; Adjusted EBITDA margin expanded to 28.6% from 26.1%.
• Debt Refinancing: In October 2024, the company entered into a New Credit Agreement, replacing prior facilities. This reduced the weighted average interest rate on borrowings from 8.7% in 2024 to 6.8% in 2025.

Guidance, Outlook, Risks, and Unusual Items

Management Commentary and Outlook

Management expects continued demand growth driven by an aging installed base of engines entering prime maintenance periods and geopolitical tensions driving defense investment. The company is ramping up volumes on new LEAP and CFM56 platforms, which are currently on a learning curve and impacting margins. The company maintains a $450 million stock repurchase program approved in December 2025.

Material Risks and Contingencies

• Internal Control Material Weaknesses: The company identified material weaknesses in internal control over financial reporting as of December 31, 2025. These relate to the control environment, monitoring controls, period-end financial reporting, and IT general controls. While remediation efforts are underway, the auditor issued an adverse opinion on internal controls.
• Customer Concentration: The top four OEM customers accounted for approximately 36% of revenue in 2025. Loss of these customers could materially impact results.
• Supply Chain Disruptions: The company relies on OEMs for parts; supply chain delays or loss of key suppliers could adversely affect throughput and margins.
• Indebtedness: With total indebtedness of $2.25 billion, the company faces risks related to interest rate fluctuations (variable rate debt) and the ability to generate sufficient cash flow to service debt obligations.
• Regulatory and Cybersecurity: Risks include loss of OEM authorizations, changes in government procurement laws, and potential cybersecurity incidents affecting critical IT systems.

Unusual Items

• Acquisition: Acquired Aero Turbine, Inc. for approximately $132 million in August 2024, contributing to revenue and Adjusted EBITDA growth in 2025.
• Secondary Offerings: Selling stockholders (Carlyle and GIC) completed secondary offerings in March and May 2025. The company did not receive proceeds from these sales.
• Stock Repurchase: In January 2026 (subsequent event), the company repurchased 1.6 million shares from a GIC affiliate for approximately $50 million.

Investor Verification Checklist

• Internal Control Remediation: Verify the progress and timeline for remediation of the identified material weaknesses in internal controls, as this impacts financial reporting reliability.
• Debt Covenants: Review the "springing" financial covenant in the New Credit Agreement (maximum consolidated first lien net leverage ratio) to ensure compliance as leverage ratios fluctuate.
• Customer Concentration: Monitor the stability of contracts with the top four OEM customers, which represent over one-third of revenue.
• Platform Ramp-up: Assess the margin trajectory of the new LEAP and CFM56 programs as they move down the learning curve.
• Interest Rate Exposure: Evaluate the impact of rising interest rates on the variable-rate portion of the $2.25 billion debt portfolio.