StandardAero, Inc. (SARO) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended March 31, 2026. StandardAero, Inc. is the world's largest independent provider of aftermarket services for fixed and rotary wing aircraft gas turbine engines and auxiliary power units (APUs), serving commercial, business, and military markets. The company operates through two segments: Engine Services and Component Repair Services.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $1,626.9 million | $1,435.6 million |
| Net Income | $79.9 million | $62.9 million |
| Diluted EPS | $0.24 | $0.19 |
| Operating Income | $143.1 million | $128.9 million |
| Adjusted EBITDA | $203.2 million | $198.2 million |
| Adjusted EBITDA Margin | 12.5% | 13.8% |
| Cash and Cash Equivalents | $89.2 million | $140.8 million |
| Total Debt (Principal) | $2,241.0 million | $2,247.2 million |
| Available Liquidity | $825.2 million | N/A |
Note: Available liquidity includes $89.2 million cash on hand and $736.0 million available under the 2024 Revolving Credit Facility.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 13.3% year-over-year, driven by strong demand across all end markets. Business Aviation grew 19.6%, Commercial Aerospace grew 11.4%, and Military & Helicopter grew 10.3%.
- Profitability: Net income rose 27.0% to $79.9 million. Operating income increased 11.0%.
- Margin Compression: Adjusted EBITDA margin decreased to 12.5% from 13.8% in Q1 2025. This was primarily due to a higher mix of lower-margin platforms (LEAP and CFM56) ramping up and increased material costs as a percentage of revenue.
- Interest Expense: Interest expense decreased 12.9% to $38.2 million, driven by a lower weighted average interest rate (5.7% in Q1 2026 vs. 6.6% in Q1 2025).
- Cash Flow: Net cash used in operating activities was $119.6 million, compared to $24.0 million in the prior year, largely due to a $249.0 million increase in working capital (specifically accounts receivable and contract assets) driven by business growth.
Guidance, Outlook, and Risks
- Share Repurchases: The company repurchased $60.1 million of common stock in Q1 2026 under a $450 million program approved in December 2025. Approximately $389.9 million remains available.
- Secondary Offerings: Selling stockholders (Carlyle and GIC) completed a secondary offering in January 2026. As of March 31, 2026, Carlyle owns ~25.5% and GIC owns ~5.8% of outstanding stock.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of March 31, 2026, due to material weaknesses in the control environment, period-end reporting, and IT general controls. Remediation efforts are ongoing.
- Tariffs and Trade: The company is monitoring tariff impacts. While a recent Supreme Court ruling invalidated certain IEEPA-based tariffs, the administration intends to pursue alternative mechanisms. The company expects to pass cost increases to customers where possible.
- Outlook: Management expects demand to increase through the decade due to aging fleets and upcoming shop visits. Supply chain disruptions remain a risk to engine throughput.
Investor Verification Checklist
- Internal Control Remediation: Verify the timeline and progress of remediation for the material weaknesses in internal controls over financial reporting.
- Working Capital Trends: Monitor the sustainability of the significant increase in accounts receivable and contract assets relative to revenue growth.
- Margin Mix: Assess the long-term impact of the ramp-up in LEAP and CFM56 platforms on overall Adjusted EBITDA margins.
- Debt Covenants: Confirm continued compliance with the springing financial covenant on the 2024 Revolving Credit Facility (triggered if utilization exceeds 40%).
- Tariff Exposure: Evaluate the potential financial impact of reinstated or new tariffs on raw material costs and pricing power.